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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the fiscal year
ended December 31, 2000 Commission File Number 1-13145
JONES LANG LASALLE INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland 36-4150422
(State of organization) (I.R.S. Employer Identification No.)
200 East Randolph Drive, Chicago, IL 60601
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/782-5800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock ($.01 par value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ ]
As of March 28, 2001, there were outstanding 29,774,135 shares of the
Registrant's Common Stock. The aggregate market value of the Registrant's
Common Stock held for non-affiliates on March 28, 2001 was approximately
$293,243,183 based on the closing price of $12.28 per share. The aggregate
market value of all of the Registrant's 29,774,135 shares of Common Stock
outstanding on such date was approximately $365,626,378.
Portions of the Registrant's Proxy Statement for its 2001 Annual Meeting of
Stockholders to be held on May 14, 2001 are incorporated by reference in
Part III of this report.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . 21
Item 3. Legal Proceedings. . . . . . . . . . . . . . 22
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . 22
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters. . . . . . . 23
Item 6. Selected Financial Data. . . . . . . . . . . 24
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 28
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk. . . . . . . . . . . . . . 42
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 43
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . 102
PART III
Item 10. Directors and Executive Officers
of the Registrant. . . . . . . . . . . . . . 102
Item 11. Executive Compensation . . . . . . . . . . . 102
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 102
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 102
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 103
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS. . . . . 103
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 105
i
PART I
ITEM 1. BUSINESS
COMPANY OVERVIEW
Jones Lang LaSalle Incorporated ("Jones Lang LaSalle", formerly
LaSalle Partners Incorporated), founded in 1968, is a leading full-service
real estate services firm that provides investment management, hotel
acquisition and disposition, strategic advisory and valuation, property
management, corporate property services, development services, project
management, tenant representation, agency leasing, investment disposition
and acquisition, financing and capital placement services on a local,
regional and global basis. Jones Lang LaSalle manages approximately 700
million square feet of property, provides investment management services
for approximately $22.5 billion of assets, and operates a business with
more than 12,000 employees, including over 5,000 directly reimbursable
property maintenance employees, across more than 100 markets on five
continents. Jones Lang LaSalle has grown by expanding both its client base
and its range of services and products in anticipation of client needs, as
well as through a series of strategic acquisitions and a merger. By
offering a broad range of real estate products and services, and through
its extensive knowledge of domestic and international real estate markets,
Jones Lang LaSalle is able to serve as a single source provider of
solutions for its clients' full range of real estate needs. The ability to
provide this network of services around the globe was solidified effective
March 11, 1999 with the merger of the businesses of the Jones Lang Wootton
companies ("JLW") with those of LaSalle Partners Incorporated ("LaSalle
Partners") (see Organization section below for discussion). In connection
with this merger, the name of the company was changed from LaSalle Partners
Incorporated to Jones Lang LaSalle Incorporated.
ORGANIZATION
Prior to its incorporation in Maryland on April 15, 1997 and its
initial public offering (the "Offering") of 4,000,000 shares of common
stock on July 22, 1997, Jones Lang LaSalle transacted business as LaSalle
Partners Limited Partnership and LaSalle Partners Management Limited
Partnership (collectively, the "Predecessor Partnerships"). Immediately
prior to the Offering, the general and limited partners of the Predecessor
Partnerships contributed all of their partnership interests in the
Predecessor Partnerships in exchange for an aggregate of 12,200,000 shares
of common stock.
On March 11, 1999, Jones Lang LaSalle (at the time known as LaSalle
Partners Incorporated) merged its businesses with those of JLW and changed
its name to Jones Lang LaSalle Incorporated. JLW was an employee owned
international real estate services firm with approximately 4,000 employees
with operations in 32 countries. It provided a wide range of real estate
advisory, transactional and asset management services to local, national
and international clients in both the private and public sectors and had
approximately 280 million square feet under management and approximately
$6.3 billion in assets under management. The operations, headquartered in
London, were managed geographically with four main regions in Europe, Asia,
Australasia and the United States. JLW had a culture, long-term strategy
and service capability which were compatible with those of LaSalle
Partners. In accordance with the purchase and sale agreements related to
the merger, Jones Lang LaSalle issued 14.3 million shares of common stock
and paid cash consideration of $6.2 million (see Management's Discussion
and Analysis of Financial Condition and Results of Operations and Notes to
Consolidated Financial Statements provided elsewhere herein for further
discussion regarding this transaction).
In October 1998, Jones Lang LaSalle acquired all of the common stock
of the following real estate service companies (collectively referred to as
"COMPASS") formerly owned by Lend Lease Corporation Limited ("Lend Lease"):
COMPASS Management and Leasing, Inc. and its wholly owned subsidiaries, The
Yarmouth Group Property Management, Inc., ERE Yarmouth Retail, Inc.
(formerly COMPASS Retail, Inc.), and COMPASS Management and Leasing
(Australia) Pty Limited. The acquisition of COMPASS elevated Jones Lang
LaSalle's position in the property management and corporate property
services industry to that of the largest management services company in the
United States and expanded its international presence into Australia and
South America.
BUSINESS SEGMENTS
Jones Lang LaSalle manages its business along a combination of
functional and geographic lines. In the fourth quarter of 2000, Jones Lang
LaSalle consolidated its Hotel Services segment into its respective Owner
and Occupier Services segments. Accordingly, operations are now classified
into four business segments: the three geographic regions of Owner and
Occupier Services, (i) Americas, (ii) Europe and (iii) Asia Pacific, and
(iv) the global business of Investment Management. The Owner and Occupier
Services business is operated on a geographic basis and consists primarily
of tenant representation and agency leasing, capital markets and valuation
services (collectively, "implementation services") and property management,
corporate property services, development services and project management
services (collectively, "management services"). The Investment Management
segment provides real estate investment management services to
institutional investors, corporations, and high net worth individuals. For
financial information and a discussion of the operating performance of each
segment refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations and Notes to Consolidated Financial
Statements provided elsewhere herein.
OWNER AND OCCUPIER SERVICES
To effectively address the local, regional and global needs of real
estate owners and occupiers, Jones Lang LaSalle provides a full spectrum of
integrated transaction, property management and corporate property
services. These services can be grouped into two types: implementation
services and management services. Operations are managed geographically in
three regions: the Americas, Europe and Asia Pacific. In addition, the
Global Services Management unit supports the regions of Owner and Occupier
services on a global basis for marketing, consulting and delivery of best
practices to multi-national clients. Set forth below is a discussion of
the primary services provided, as well as Global Services Management:
IMPLEMENTATION SERVICES
Implementation services consist primarily of tenant representation,
agency leasing, capital markets and valuation services. Implementation
services produced 59.0%, 59.4%, and 40.2% of Jones Lang LaSalle's total
revenue for 2000, 1999 and 1998, respectively.
TENANT REPRESENTATION SERVICES. Jones Lang LaSalle's Tenant
Representation Services units assist clients by defining space
requirements, identifying suitable alternatives, recommending appropriate
occupancy solutions and negotiating lease and ownership terms with third
parties. Jones Lang LaSalle seeks to assist its clients in lowering real
estate costs, minimizing real estate occupancy risks, improving occupancy
flexibility and control and creating more productive office environments.
A multi-disciplined approach is used to develop occupancy strategies that
are linked to its clients' core business objectives. In 2000, Jones Lang
LaSalle completed over 2,800 tenant representation transactions involving
approximately 34.0 million square feet.
The tenant representation industry includes a large number of service
providers offering a wide range of service quality and capabilities. The
Tenant Representation Services units, particularly in the United States,
direct their marketing efforts toward developing "strategic alliances" with
clients whose real estate requirements include on-going assistance in
meeting their real estate needs and also toward clients who have the need
to consider multiple real estate options and to execute large complex
transactions. The term "strategic alliance" is used in the real estate
services industry to refer to longer-term relationships with large owners
or occupiers of real estate that, in many cases, require a number of
different property services.
In many cases, Jones Lang LaSalle develops a strategic alliance with
clients to deliver fully integrated real estate services, including
comprehensive on-going strategic planning and transaction execution
services across multiple office locations via the assignment of dedicated
client teams. Jones Lang LaSalle views its strategic alliances as a
competitive advantage since these long-term relationships lower business
development costs for Jones Lang LaSalle and create recurring revenue
sources. Through these relationships, Jones Lang LaSalle gains a better
understanding of its clients' portfolio and occupancy requirements since
the same professionals service the client's needs nationwide. Jones Lang
LaSalle believes that these relationships enable it to deliver more
consistent services and better results than single-transaction,
commissioned brokerage service providers.
In addition to its strategic alliances, Jones Lang LaSalle also
represents clients in large, complex transaction assignments that typically
involve relocations of headquarters facilities or major office
consolidations. In such assignments, Jones Lang LaSalle draws on its broad
depth of other capabilities to assist its clients with development, buy or
lease decisions and the evaluation of long-term financing options.
Jones Lang LaSalle intends to further the growth of this business by
continuing to increase its strategic alliance relationships and by
expanding the relationships to cover multinational clients that have
occupancy needs around the world and are looking for a single source
provider.
Jones Lang LaSalle is generally compensated for Tenant Representation
Services on a negotiated fee basis. Although fees are generated by lease
commissions, they are often also determined by performance related to
targets set by Jones Lang LaSalle and the client prior to Jones Lang
LaSalle's engagement and, in the case of strategic alliances, at annual
intervals thereafter. Quantitative and qualitative measurements assess
performance relative to these goals, and Jones Lang LaSalle is compensated
accordingly, with incentive fees often awarded for superior performance.
Jones Lang LaSalle's Tenant Representation Services professionals do not
earn commissions, but are compensated by means of a base salary and
performance bonus that is determined primarily by their contribution to
achieving predetermined client performance objectives.
AGENCY LEASING SERVICES. Jones Lang LaSalle's Agency Leasing
Services units create and execute marketing and leasing programs to
identify tenants and negotiate leases with terms in the best interests of
its clients. Clients are typically investors, property companies,
developers or public bodies. In 2000, Jones Lang LaSalle completed
approximately 12,000 agency leasing transactions representing approximately
120.0 million square feet of space.
Agency leasing fees are typically based on a percentage of the value
of the lease revenue commitment for leases consummated.
CAPITAL MARKETS SERVICES. Jones Lang LaSalle's Capital Markets
Services include real estate finance, private equity placements, portfolio
advisory activities, corporate finance and institutional property sales and
acquisitions. In 2000, Jones Lang LaSalle completed institutional property
sales and acquisitions, debt financings, equity placements and portfolio
advisory activities on assets and portfolios valued at over $21.0 billion.
Jones Lang LaSalle believes that its Capital Markets Services units
have a number of competitive strengths, including their broad accumulated
base of real estate investment banking knowledge and an ability to draw on
Jones Lang LaSalle's access to global capital sources. Jones Lang LaSalle's
Agency Leasing, Property Management and Investment Management units are
valuable resources for the Capital Markets Services units in providing
local market and property information and local capital markets expertise.
As a result of Jones Lang LaSalle's global presence, the Capital Markets
Services units have access to international market and property information
which creates a platform necessary for these business units to offer their
expertise to multinational clients.
The Capital Markets Services units are integral to the business
development efforts of Jones Lang LaSalle's other businesses by
researching, developing and introducing innovative new financial products
and strategies.
Jones Lang LaSalle is typically compensated for Capital Markets
Services on the basis of the value of transactions completed or securities
placed, but in certain circumstances Jones Lang LaSalle receives retainer
fees for portfolio advisory services.
VALUATION SERVICES. Jones Lang LaSalle's Valuation Services units
provide clients with professional valuation services, helping them to
determine accurate values for office, retail, industrial and mixed-use
properties. Such services may involve valuing a single property or a
worldwide portfolio of multiple property types. Valuations typically
involve commercial property, investment grade residential property and land
for a variety of purposes including acquisition, disposition, debt and
equity financing, mergers and acquisitions, securities offerings and
privatization. Clients include occupiers, investors and financing sources
from the public and private sectors. Jones Lang LaSalle has valuation
specialists capable of providing valuation advice to clients in nearly
every developed country. During 2000, Jones Lang LaSalle performed over
28,500 valuations of properties valued in the aggregate at approximately
$166.0 billion.
Compensation for valuation services is generally negotiated for each
assignment based on its scale and complexity and will typically relate in
part to the value of the underlying assets.
MANAGEMENT SERVICES
Management services include property management, corporate property
services, development and project management services. With a portfolio of
approximately 700 million square feet of property under management
worldwide, Jones Lang LaSalle is the world's largest property manager.
Revenue from management services was 28.7%, 27.6% and 27.3% of total
revenue for 2000, 1999 and 1998, respectively.
PROPERTY MANAGEMENT SERVICES. Jones Lang LaSalle's Property
Management Services units provide on-site management services to real
estate investors for office, industrial, retail and specialty properties,
leveraging their market share and buying power to deliver superior service
for clients. Jones Lang LaSalle's goal, as a pioneer in the development of
value-creating property management services, is to enhance its clients'
property values through aggressive day-to-day management focused on
maintaining high levels of occupancy and tenant satisfaction, while
lowering the operating costs of such properties. During 2000, Jones Lang
LaSalle provided on-site Property Management Services for office, retail,
mixed-use and industrial properties totaling approximately 500.0 million
square feet.
Jones Lang LaSalle's property management services are typically
provided by an on-site general manager and staff supported through regional
supervisory teams as well as central resources in areas such as training,
technical and environmental services, accounting, marketing and human
resources. Property general managers assume full responsibility for
property management activities, client satisfaction and financial results
and are compensated, not by fees or commissions, but through a combination
of base salary and performance bonus that is directly linked to results
produced for clients.
Increasingly, management agreements provide for incentive compensation
relating to operating expense reductions, gross revenue or occupancy
objectives or tenant satisfaction levels. As is customary in the industry,
management contract terms typically range from one to three years, but are
cancelable at any time upon a short notice period, usually 30 to 60 days.
Jones Lang LaSalle's acquisition of COMPASS and the recent investment
in a new property information system in the Americas provide opportunities
for Jones Lang LaSalle to leverage its size to offer high quality, low cost
services over a wider geographic area. The marketing efforts of the
Property Management Services business are directed toward expanding Jones
Lang LaSalle's relationships with existing clients, pursuing new third-
party management assignments and capitalizing on new business opportunities
which may arise from Jones Lang LaSalle Investment Management's
initiatives, such as the continuation of its co-investment strategy. In
addition, the merger with JLW has provided an opportunity to combine best
practices around the globe to enhance current client satisfaction and
margin objectives as well as to serve new multinational clients.
CORPORATE PROPERTY SERVICES. Jones Lang LaSalle was a pioneer in the
corporate property services business. Jones Lang LaSalle's Corporate
Property Services units provide comprehensive portfolio and property
management services to corporations and institutions that outsource the
management of their occupied real estate. The properties under management
range from corporate headquarters to industrial complexes. Jones Lang
LaSalle's target clients typically have large portfolios (usually over one
million square feet) with significant opportunities to reduce costs and
improve service delivery. Performance measures are generally developed to
quantify progress made toward the goals and objectives that are set
mutually with clients.
Jones Lang LaSalle's Corporate Property Services units also serve as
an important "port of entry" for Jones Lang LaSalle's other business units.
Depending on client needs, the Corporate Property Services units, either
alone or through Jones Lang LaSalle's other business units, provide
services such as portfolio planning, property management, leasing, tenant
representation, acquisition, finance, disposition, project management,
development management and land advisory services.
The Corporate Property Services units are compensated on the basis of
negotiated fees, which are typically structured to include a base fee and a
performance bonus. The performance bonus compensation is based on a
quantitative evaluation of progress toward performance measures and
regularly scheduled client satisfaction surveys. Corporate Property
Services agreements are typically three to five years in duration but are
cancellable at any time upon a short notice period, usually 30 to 60 days,
as is typical in the industry.
Jones Lang LaSalle believes that the global corporate trend of
outsourcing non-core business functions represents an important long-term
business opportunity. Jones Lang LaSalle also believes that its broad-
based service capabilities will become an increasingly valuable competitive
advantage in pursuing Corporate Property Services assignments. Jones Lang
LaSalle believes that its demonstrated experience in improving clients'
operating expense levels and client satisfaction also provide it with an
important competitive advantage. In order to efficiently provide all
services required to manage and operate large corporate property
portfolios, Jones Lang LaSalle partners with major building services and
architecture firms. The Corporate Property Services units have been
actively pursuing, and have had success with obtaining new business
opportunities with universities, health care institutions and government
agencies.
DEVELOPMENT SERVICES. Jones Lang LaSalle's Development Services units
manage all aspects of the development, redevelopment and renovation of
commercial projects, principally on a fee basis. Jones Lang LaSalle
prepares feasibility studies, negotiates contracts, develops and monitors
budgets and coordinates and manages the architects, engineers and attorneys
related to the project. Jones Lang LaSalle also undertakes entitlement,
zoning and a variety of other development-related responsibilities.
Clients are generally corporations with significant office space needs.
Jones Lang LaSalle has extensive experience in ground-up development in the
office, retail, industrial and special-purpose sectors. The Development
Services units frequently manage development initiatives for clients of
Jones Lang LaSalle's Corporate Property Services and Tenant Representation
Services units, as well as for clients of the Jones Lang LaSalle Investment
Management segment which are pursuing development-related investment
strategies.
The Development Services units generate development and advisory fees,
which are negotiated based upon the cost of the developments or
improvements. In addition, the units generate performance fees based on
investment returns generated for clients. Assignments are typically multi-
year in nature.
PROJECT MANAGEMENT SERVICES. Jones Lang LaSalle's Project Management
Services units provide a variety of services, including interior build-out
and conversion management, move management and strategic occupancy planning
services to tenants of leased space, owners in self-occupied buildings and
owners of real estate investments. The Project Management Services units
frequently manage the relocation and build-out initiatives for clients of
Jones Lang LaSalle's Property Management Services, Corporate Property
Services and Tenant Representation Services units.
Jones Lang LaSalle is one of the largest providers of project
management services in the United States. Jones Lang LaSalle intends to
grow its Project Management Services business by expanding into additional
markets and by increasing the number of Jones Lang LaSalle's current
clients to which the business provides services.
The Project Management Services units are typically compensated on the
basis of negotiated fees. Client contracts are typically multi-year in
duration and may govern a number of discrete projects, with individual
projects being completed in less than one year.
GLOBAL SERVICES MANAGEMENT
The Global Services Management unit was created to support the
geographic segments of Owner and Occupier Services. It is composed of two
management functions: Global Client Services and Global Consulting.
Global Client Services is a dedicated firm-wide marketing
organization, which acts as a catalyst in assisting Jones Lang LaSalle
professionals in all groups in marketing multiple services of the firm to
existing and prospective clients. The Global Consulting team of senior
real estate consultants provides clients with specialized, value-added real
estate consulting services and strategies in seven areas: mergers and
acquisitions, ports and transit, development, public institutions, e-
commerce, occupier portfolio and organizational strategy and work process
design.
The Global Services Management unit performs a global support function
for the regional Owner and Occupier Services businesses, and therefore, for
purposes of segment reporting, the revenue and expenses of this unit are
allocated back to the regions.
INVESTMENT MANAGEMENT
Jones Lang LaSalle's Investment Management business, which operates
under the name of LaSalle Investment Management, provides real estate
investment management services to institutional investors, corporations and
high net-worth individuals. As of December 31, 2000, Jones Lang LaSalle
managed approximately $22.5 billion of real estate assets, making it one of
the largest managers of institutional capital invested in real estate
assets and securities. Of this total of $22.5 billion of real estate
assets, $18.0 billion consisted of direct investment in real estate
properties, and $4.5 billion consisted of investment in real estate related
securities. Investment Management revenue was 11.8%, 11.2% and 29.0% of
total revenue in 2000, 1999 and 1998, respectively. The reduction in the
business's contribution to total revenue from 1998 to 1999 was principally
the result of increased Owner and Occupier Services revenue during this
period as a result of business acquisitions and the JLW merger, which were
primarily Owner and Occupier Services businesses.
LaSalle Investment Management serves its clients through a broad range
of real estate investment products and services in the public and private
capital markets to meet various strategic, risk/return and liquidity
requirements, with a wide variety of equity and debt products. This
business is organized along two functional lines, private equity and debt
investments and public equity and debt investments. LaSalle Investment
Management offers its clients a range of investment alternatives, including
private direct investments in multiple real estate property types (e.g.,
office, retail, industrial, residential, land and parking) and indirect
investments, primarily in publicly traded REITs and other real estate
equities. The success of LaSalle Investment Management is built on the
foundation of fully integrated research, innovative investment strategies
and a strong client focus. LaSalle Investment Management's strategy is
focused on three fundamentals: (i) developing and executing tailored
investment strategies to meet a variety of client objectives, (ii)
providing superior performance for its clients and (iii) delivering a high
level of service.
The investment and capital origination activities of the Investment
Management business are becoming increasingly non-U.S. based. As of
December 31, 2000, 52% of LaSalle Investment Management's assets under
management were invested outside of the United States. Jones Lang LaSalle
expects its Investment Management activities outside of the United States,
both fund raising and investing, to continue to increase as a proportion of
total capital raised and invested and sees a growing trend of cross border
capital movement. In 1999, LaSalle Investment Management's application for
Approved Fund Manager status was approved by the Monetary Authority of
Singapore. This approval marked the first major step in the plan to build
an investment management operation to service clients in the Asia Pacific
region. In 2000, LaSalle Investment Management opened offices in Singapore
and Japan.
Investment Management activities generate significant additional
business for other parts of Jones Lang LaSalle's operations, particularly
in the areas of Agency Leasing, Property Management, Development Services
and Capital Markets Services.
Jones Lang LaSalle maintains an extensive real estate research
department, which monitors real estate and capital market conditions around
the world to enhance investment decisions and identify future
opportunities. In addition to drawing on public sources for information,
the research department utilizes the extensive local presence of Jones Lang
LaSalle's professionals throughout the world to gain proprietary insight
into local market conditions.
DIRECT INVESTMENTS IN REAL ESTATE PROPERTIES. On behalf of its
investment management clients, LaSalle Investment Management oversees the
acquisition, management, leasing, financing and divestiture of real estate
investments across a broad range of real estate property types. LaSalle
Investment Management introduced its first institutional investment fund in
1979 and currently has a series of commingled investment funds, including
three funds which invest in properties in the United States and two funds
that are fully invested in assets located in continental Europe. LaSalle
Investment Management also has single client account relationships
("separate accounts") with investors for whom LaSalle Investment Management
manages private real estate investments. As of December 31, 2000, Jones
Lang LaSalle had over $18.0 billion in assets under management in these
funds and separate accounts.
To take advantage of the trend toward globalization of real estate
capital sources, LaSalle Investment Management strengthened and extended
its international investment activities with the acquisition, in October
1996, of CIN Property Management. This acquisition made LaSalle Investment
Management one of the largest managers of pension fund real estate
investments in the United Kingdom, and it provided the basis for LaSalle
Investment Management to expand its investment activities and capital
raising in the United Kingdom and continental Europe. LaSalle Investment
Management currently has approximately $11.3 billion in assets under
management in Europe. LaSalle Investment Management is leveraging its
organizational strength and access to global capital to take advantage of
the accelerating interest in international investment, to expand investment
activity to new countries within Europe and Asia Pacific and to strengthen
its position as a leading investment manager for real estate capital in the
United States.
In 2000, LaSalle Investment Management completed raising capital for
two new commingled funds, Income & Growth II Fund and Euro 5 Fund, which
were launched late in 1999, and launched Industrial Development Partner-
ship II.
The Euro 5 Fund is a diversified value-added investment vehicle which
focuses on office, business park, retail and industrial properties in areas
with above-average growth in France, Italy, Portugal, Spain and Germany.
$282 million of capital has been raised for this fund, which together with
debt leverage has given the fund approximately $800 million of spending
power. The Industrial Development Partnership II has approximately $150
million in committed capital with the ability to leverage by an additional
$150 million of debt. This fund will invest in industrial property in the
United Kingdom.
Some investors continue to favor investment managers that co-invest
their own funds in newly formed investment vehicles in order to more
closely align the interests of the investor and the investment manager.
Jones Lang LaSalle believes that its ability to co-invest its funds
alongside the investments of clients' funds will continue to be important
in certain regions of the world as a factor in retaining and expanding its
competitive position. Jones Lang LaSalle also believes that its co-
investment strategy will greatly strengthen its ability to raise capital
for new investment funds. By creating new investment funds and thereby
increasing assets under management, Jones Lang LaSalle also gains the
opportunity to provide additional services related to the acquisition,
financing, property management, leasing and disposition of such assets.
LaSalle Investment Management's operations are conducted with teams of
professionals dedicated to achieving client objectives. All investment
decisions for private market investments must be approved by LaSalle
Investment Management's five-member investment committee. The investment
committee approval process is utilized for both LaSalle Investment
Management's investment funds and for all of its separate account clients.
LaSalle Investment Management is generally compensated for investment
management services for private equity and debt investments based on
initial capital invested, with additional fees tied to investment
performance above benchmark levels. The terms of LaSalle Investment
Management's contracts vary by the form of investment vehicle involved and
the type of service provided. LaSalle Investment Management's investment
funds have various lifespans, typically ranging between three and seven
years. Separate account advisory agreements generally have three year terms
with "at will" termination provisions.
INVESTMENTS IN PUBLIC EQUITY AND DEBT SECURITIES. LaSalle Investment
Management offers its clients the ability to invest in separate accounts
focused on public real estate equity and debt securities. LaSalle
Investment Management principally invests its clients' capital in publicly
traded securities of Real Estate Investment Trusts ("REITs") and property
company equities but is also active in private placement investments in
publicly traded real estate companies and selected investments in private
real estate companies seeking capital to ultimately gain access to the
public markets. As of December 31, 2000, LaSalle Investment Management had
over $4.5 billion of assets under management in these types of investments,
of which over $0.4 billion was invested in equities outside of the United
States. LaSalle Investment Management is typically compensated by its
securities investment clients on the basis of the market value of assets
under management with increasing use of incentive fees tied to performance
of investments above benchmark levels.
COMPETITIVE ADVANTAGES
Jones Lang LaSalle believes that it has several competitive advantages
which have established it as a leader in the real estate services and
investment management industries. Jones Lang LaSalle believes that it is
one of the few companies in these industries that possess all of these
competitive advantages, which include the following:
RELATIONSHIP ORIENTATION. Jones Lang LaSalle's client-driven focus
enables Jones Lang LaSalle to develop long-term relationships with owners
and users of real estate. By developing such relationships, Jones Lang
LaSalle generates repeat business and creates recurring revenue sources.
In many cases, Jones Lang LaSalle develops a strategic alliance with
clients who have on-going service needs to deliver fully integrated real
estate services across multiple business units and office locations. Jones
Lang LaSalle's relationship orientation is supported by an employee
compensation system, which it believes is unique in the real estate
industry. Jones Lang LaSalle compensates its professionals with a salary
and bonus plan designed to reward client relationship building, teamwork
and quality performance, rather than on a commission basis which is typical
in the industry.
FULL RANGE OF SERVICES. By offering a wide range of high quality,
complementary services, Jones Lang LaSalle can combine its services to
develop and implement real estate strategies that meet the increasingly
complex needs of its clients. In addition, business units are able to
develop revenue sources for other business units within Jones Lang LaSalle.
WORLD-CLASS RESEARCH. Jones Lang LaSalle invests in and relies on
comprehensive top-down and bottom-up research to support and guide the
development of real estate and investment strategy. The Global Research
Committee oversees and coordinates the activities of more than 180 research
professionals who cover market and economic conditions in 36 countries
around the world. Jones Lang LaSalle produces more than 100 research
publications annually. Research will also play a key role in the new,
company-wide intranet, keeping colleagues throughout Jones Lang LaSalle
attuned to important events and changing conditions in world markets.
GEOGRAPHIC REACH. Jones Lang LaSalle believes it has established a
business presence in the principal real estate markets and that it can
build its revenues without a substantial increase in infrastructure costs.
With approximately 123 corporate offices on five continents, Jones Lang
LaSalle possesses in-depth knowledge of local and regional markets and can
provide its full range of real estate services around the globe. This
geographic coverage positions the firm to serve its multinational clients
and manage investment capital on a global basis.
REPUTATION. Based on its industry knowledge, commissioned marketing
surveys, industry publications and its number of long-standing client
relationships, Jones Lang LaSalle believes that it is widely recognized by
large corporations and institutional owners and users of real estate as a
provider of high quality, professional real estate services and investment
management products. Jones Lang LaSalle believes its name recognition and
reputation for quality services are significant advantages when pursuing
new business opportunities.
INDUSTRY TRENDS
INCREASING DEMAND FOR GLOBAL SERVICES; GLOBALIZATION OF CAPITAL FLOWS.
Many corporations, both those based in the United States and those based in
other countries, have pursued growth opportunities in international
markets. This pursuit has increased the demand for global real estate
services, such as corporate property services, tenant representation and
leasing and property management. Jones Lang LaSalle believes that this
trend will favor those real estate service providers with the capability to
provide services in many markets around the world. Additionally, real
estate capital flows have become more global as more investors seek real
estate investment opportunities beyond their existing borders. This trend
has created new markets for investment managers that can facilitate
international real estate capital flows and execute cross-border real
estate transactions.
CONSOLIDATION. The real estate services industry has gone through a
significant degree of consolidation in recent years, although the pace of
consolidation has slowed in the last year. Many large real estate service
firms engaged in the property management business, including Jones Lang
LaSalle, believe that, as a result of substantial existing infrastructure
investments and the ability to spread fixed costs over a broader base of
business, it is possible to recognize incrementally higher margins on
property management and corporate property services assignments as the
amount of square footage under management increases.
Large users of commercial real estate services continue to demonstrate
a desire for a single source service provider across local, regional and
global markets. The ability to offer a full range of services on this
scale requires significant corporate infrastructure investment, including
information technology and personnel training. Smaller regional and local
real estate service firms, with limited resources, are less able to make
such investments.
GROWTH OF OUTSOURCING. In recent years, outsourcing of professional
real estate services on a global level has increased substantially as
corporations have focused corporate resources, including capital, on their
core competencies. In addition, public and other non-corporate users of
real estate, such as government agencies and health and educational
institutions, have begun outsourcing real estate activities as a means of
reducing costs. As a result, there are significant growth opportunities for
firms that can provide integrated real estate services across many
geographic markets.
ALIGNMENT OF INTERESTS OF INVESTORS AND INVESTMENT MANAGERS.
Institutional investors continue to allocate significant portions of their
investment capital to real estate, and many investors have shown a desire
to commit their capital to investment managers willing to co-invest their
own funds with them on specific real estate investments or in real estate
funds. In addition, investors are increasingly requiring that the fees paid
to investment managers be more closely aligned with investment performance.
As a result, Jones Lang LaSalle believes that those investment managers
with co-investment capital will have an advantage in attracting real estate
investment capital. Co-investment typically brings with it the opportunity
to provide additional services related to the acquisition, financing,
property management, leasing and disposition of such investments.
GROWTH STRATEGY
Jones Lang LaSalle intends to capitalize on its competitive advantages
and the opportunities created by its new global platform to pursue the
following growth strategy:
EXPANDING CLIENT RELATIONSHIPS. Based on its ability to deliver high
quality real estate services, Jones Lang LaSalle has been able to
successfully leverage discrete client assignments into more comprehensive
relationships utilizing some or all of its business groups. Current
industry trends, particularly the globalization of corporate clients and
the increased outsourcing of real estate services on a global basis,
provide a favorable environment for Jones Lang LaSalle to increase the
scope of its current client relationships and to develop new relationships
through its broad array of services. Jones Lang LaSalle intends to expand
the strategic alliance approach it has applied in its Tenant Representation
Services unit to the rest of its business units worldwide. Jones Lang
LaSalle's business groups identify new clients and markets and pursue
opportunities to sell the products and services of many of Jones Lang
LaSalle's business units. Jones Lang LaSalle's Global Client Services
group, created in 1999, acts as a catalyst in assisting Jones Lang LaSalle
professionals in all groups in marketing multiple services of the firm to
existing and prospective clients.
STRENGTHENING INTERNATIONAL PRESENCE. To take advantage of the
increasing globalization of real estate capital sources and investment
opportunities and the international business expansion of many of its
corporate clients, Jones Lang LaSalle intends to focus its near term
efforts on further developing and strengthening the global platform which
was created by the merger of the LaSalle Partners and JLW businesses. In
December 1999, Jones Lang LaSalle combined its former Australasia and Asia
regions into the Asia Pacific region. This combination is intended, among
other things, to position the firm to use its talent and expertise in the
relatively mature market in Australia to pursue growth opportunities in
Asia. Similarly, Jones Lang LaSalle plans to leverage its talent and
expertise in the United States and Western Europe to pursue growth
opportunities in Latin America and Central and Eastern Europe,
respectively. In Jones Lang LaSalle's Investment Management business, it
intends to take advantage of its global platform to increase activities
outside the United States and capitalize on the growing trend of cross-
border capital movement. In order to serve its clients' increasingly
global real estate needs and to pursue new business opportunities, the firm
will pursue selective acquisitions in product categories and geographic
niches. In 2000, the Investment Management business has established a
presence in Germany, Japan and Singapore.
PROVIDING CONSISTENT, HIGH QUALITY SERVICE. The firm has created a
Global Services Management unit designed to ensure the worldwide operations
work and interact at the consistently high levels clients have grown to
expect. Through the delivery of consistent, high quality service, the firm
aims to expand its current client relationships, grow the business
organically and further strengthen the firm's name recognition and
reputation.
PURSUING CO-INVESTMENT OPPORTUNITIES. Jones Lang LaSalle intends to
continue its strategy of co-investing with its investment management
clients. As of December 31, 2000, Jones Lang LaSalle had a total net
investment of $74.6 million in 28 separate property or fund co-investments
with additional capital commitments of $15.7 million for future fundings of
co-investments. The acquisition cost of the properties acquired through
these co-investments exceeds $2.0 billion. Existing co-investments consist
primarily of direct investments in office properties, land and development
properties purchased within the last five years; investments in commingled
investment funds; and, as of December 31, 2000, the investment in LaSalle
Hotel Properties ("LHO"), the public real estate investment trust advised
by Jones Lang LaSalle. See Note 7 to the financial statements which
discusses Jones Lang LaSalle's divestiture of its investment in LHO in
2001.
Jones Lang LaSalle's co-investment strategy is supported by its broad
fundamental real estate research capabilities, which include identifying
trends in geographic regions and property types. Jones Lang LaSalle's
extensive knowledge of local markets drawn from its presence and work in
these markets facilitates the identification and evaluation of specific
investment opportunities. Co-investments provide Jones Lang LaSalle with
the opportunity both to participate in returns generated by such
investments and to provide services related to the acquisition, financing,
property management, leasing and disposition of such investments. As a
result of the JLW merger, the combined firm has an increased access to
international market knowledge, positioning the firm to take advantage of
recovering markets in various regions throughout the world.
DEVELOPING A TECHNOLOGY AND E-BUSINESS STRATEGY. Jones Lang LaSalle's
technology strategy is to create an open, advanced technology platform that
increases the efficiency of its professionals and enables its clients to
achieve their real estate and broader business objectives.
This strategy includes utilizing the Internet to enhance existing
services provided to clients and to develop entirely new services via e-
commerce. Jones Lang LaSalle is in the final stages of implementing a
global data network, a reliable, high-speed system that will enable clients
and employees around the world to efficiently communicate with each other.
In addition, Jones Lang LaSalle plans to utilize the Internet to aggregate
purchases in its managed property portfolio, to invest in software
applications for the Project Management and Development Management
businesses, to expand the use of electronic auction sites and to offer
clients online access to portfolio performance data.
Jones Lang LaSalle is also working with several external technology
service providers. This element of the firms strategy is focused on
investments in relevant companies to shape the products and services they
deliver. The investments include entering into consulting and advisory
agreements in addition to making cash equity investments.
During 2000 Jones Lang LaSalle evaluated a number of e-business
opportunities. On April 26, 2000, the formation of Octane, an e-commerce
alliance with two other leading U.S. real estate services firms was
announced. This alliance will develop e-business solutions for the real
estate services industry and will focus on procurement, transaction
execution, support services and other business-to-business activities. On
April 26, 2000, Jones Lang LaSalle announced its involvement in a
consortium to develop a vertically integrated property portal called
propbuzz.com. Propbuzz.com, based in Singapore, will be a one-stop
complete property resource portal with a wide range of residential and
commercial property listings, current property transacted prices, premier
research information and a host of supporting services in the property
transaction chain. On May 5, 2000, the members of Octane announced their
intent to join 11 other leading North American real estate firms to form
Constellation, a real estate e-business company. This company will form,
incubate and sponsor real estate-related Internet, e-commerce and broadband
enterprises; acquire interests in existing leading companies on a
synergistic basis; and act as an opportunistic consolidator across property
sectors in the emerging real estate technology area. On June 29, 2000,
Jones Lang LaSalle announced that, together with two other leading
international property services firms and an international business to
business publisher, Jones Lang LaSalle would be reviewing the opportunity
to develop a pan-European commercial property listing service, information
and data research portal. The venture, if formed, is intended to be an
independently managed company with its own brand and may ultimately include
other content and technology partners.
On July 12, 2000, it was announced that Jones Lang LaSalle, together
with two other leading U.S. real estate services firms, had participated in
a $30 million preferred stock financing for SiteStuff.com, Inc., an e-
marketplace for owners and operators of commercial and multi-family real
estate properties. The $10.0 million participation was funded on July 19,
2000. SiteStuff will enable Jones Lang Lasalle to aggregate the purchase
of property management maintenance, repair and operations products and
services for the benefit of clients in the U.S.
Jones Lang LaSalle will continue to seek e-commerce opportunities
which enhance its product and service offerings. However, the current
capital markets related to e-commerce and technology companies create
substantial risk to the viability of the investments made, and as a result,
Jones Lang LaSalle is carefully analyzing and reviewing each investment and
taking a cautious approach to further external e-commerce and technology
investments. Jones Lang LaSalle will continue its focus on alternatives
that will enhance the efficiency and productivity of its employees and
clients.
EMPLOYEES
Jones Lang LaSalle employs over 5,000 professional staff members,
2,000 support personnel and over 5,000 directly reimbursable property
maintenance workers. Approximately 4,700 of Jones Lang LaSalle's
professional staff and support personnel, and over 2,200 of its directly
reimbursable property maintenance workers are based in countries other than
the United States. None of Jones Lang LaSalle's employees are members of
any labor union with the exception of approximately 550 of its directly
reimbursable property maintenance employees. Satisfactory relations have
generally prevailed between Jones Lang LaSalle and its employees.
RISKS INHERENT IN THE INDUSTRY OR PARTICULAR TO JONES LANG LASALLE
DETERIORATION IN ECONOMIC CONDITIONS AND THE REAL ESTATE MARKETS COULD
HARM JONES LANG LASALLE'S BUSINESS. Jones Lang LaSalle is negatively
impacted by periods of economic slowdown or recession in a given region,
rising interest rates or declining demand for real estate. These economic
conditions could have a number of effects which could have a material
adverse impact on certain segments of the business, including the
following:
.
a decline in acquisition, disposition and leasing activity;
.
a decline in the supply of capital invested in commercial real estate; and
.
a decline in the value of real estate and in rental rates (which would
cause Jones Lang LaSalle to realize lower revenue from (1) investment
management fees (typically based upon the performance of managed
investments), (2) property management fees (which in certain cases are
calculated as a percentage of the revenue of the property under management)
and (3) commissions or fees derived from property valuation, sales and
leasing (which are typically based on the value, sale price or lease
revenue commitment, respectively).
The real estate market tends to be cyclical and related to the
condition of the economy as a whole or, at least, to the perceptions of
investors and users as to the economic outlook. For example, if property
owners believe that an economic downturn is likely to occur in the near
future, some may sell their properties in anticipation. This activity
could result in the new owners changing property and investment management
firms, which could cause Jones Lang LaSalle to lose some assignments or to
make the retained clients or assignments less profitable. Jones Lang
LaSalle operates in markets throughout the world. An economic downturn in
several of them or in significant markets could have a material adverse
effect on Jones Lang LaSalle's business, results of operations and
financial condition.
JONES LANG LASALLE'S BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION ARE SUBJECT TO RISKS ARISING FROM THE INTERNATIONAL SCOPE OF ITS
OPERATIONS. For the year ended December 31, 2000, Jones Lang LaSalle
derived approximately 59.5% of its total revenue from outside the United
States. After giving pro forma effect to the merger with JLW, Jones Lang
LaSalle derived approximately 57.8% of its total revenue from sales outside
the United States in the fiscal year ended December 31, 1999. The
increased scope of international operations may lead to more volatile
financial results and difficulties in managing the combined businesses
because of, but not limited to, the following:
.
political instability in the nature of what has occurred in recent years in
Indonesia, the Philippines and Russia, but which may arise in any
particular region;
.
greater difficulty in collecting accounts receivable in certain geographic
regions such as Asia, where many countries have underdeveloped insolvency
laws and clients often are slow to pay, and Europe, where clients in some
countries, particularly Spain, Italy and France, also tend to delay
payments;
.
unexpected changes in regulatory requirements;
.
currency restrictions and exchange rate fluctuations, such as the recent
behavior of the exchange rate of the U.S. dollar relative to the euro, the
pound sterling and the Australian dollar;
.
difficulties and costs of staffing and managing international operations;
.
potentially adverse tax and tariff consequences;
.
foreign ownership restrictions with respect to operations in certain
countries such as Indonesia, India and China;
.
the burden of complying with multiple and potentially conflicting laws;
.
the impact of regional or country-specific business cycles and economic
instability; and
.
the geographic, time zone, language and cultural differences between
personnel in different areas of the world.
Jones Lang LaSalle has committed additional resources to expand its
worldwide sales and marketing activities, to globalize its service
offerings and products and to develop local sales and support channels. If
Jones Lang LaSalle is unable to implement successfully these plans, to
maintain adequate long-term strategies which successfully manage the risks
associated with its global business or to adequately manage operational
fluctuations, its business, operating results and financial condition could
be materially and adversely affected.
JONES LANG LASALLE'S BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION ARE SUBJECT TO PARTICULAR RISKS IN CERTAIN REGIONS OF THE WORLD.
Jones Lang LaSalle may experience an operating loss in one or more regions
of the world for one or more periods, which could have a material adverse
effect on its business, operating results and financial condition. Jones
Lang LaSalle's ability to manage such operational fluctuations and to
maintain adequate long-term strategies in the face of such developments
will be critical to its continued growth and profitability. For the year
ended December 31, 2000, Jones Lang LaSalle generated 42.0% of its revenue
in the Americas, of which 40.5% is generated in the United States, 43.2% in
Europe and 14.8% in Asia Pacific. For the year ended December 31, 1999,
after giving pro forma effect to the merger with JLW, Jones Lang LaSalle
generated 43.3% of its revenue in the Americas (42.2% in the United
States), 40.0% in Europe and 16.7% in Asia Pacific. See the Notes to
Consolidated Financial Statements included herein for further geographical
financial information.
During 1998 and 1997, Southeast and East Asia were impacted by
financial turmoil which was initially reflected in rapidly falling exchange
rates relative to the U.S. dollar. This development led to falling stock
market indices and asset values and reduced economic growth prospects.
Additionally, some property markets were affected by speculative
developments resulting in an oversupply of completed or partially completed
space. Property prices fell along with prices of other investments and
asset values. Although there is evidence of recovery in economic
conditions in many Asian markets, the pace of recovery has been generally
slow and uneven among various countries. The recovery of property markets
in various countries will depend upon both economic conditions as well as
the level of oversupply in the particular market. Although current
evidence suggests that most markets in Asia have bottomed out and are
recovering, there can be no assurance that conditions will not again
worsen. Additionally, although sound conditions currently prevail in most
of the significant markets in which Jones Lang LaSalle operates, there can
be no assurance that this will continue. A worsening of conditions in Asia
or in other markets in which Jones Lang LaSalle operates could have a
material adverse effect on its business, operating results and financial
condition.
JONES LANG LASALLE IS EXPOSED TO LOSSES FROM CURRENCY FLUCTUATIONS.
Due to the constantly changing currency exposures to which it is subject
and the volatility of currency exchange rates, Jones Lang LaSalle is
exposed to currency losses in the future. It cannot predict the effect of
exchange rate fluctuations upon future operating results. For the year
ended December 31, 2000, on an adjusted basis excluding the effect of stock
compensation expense related to the merger with JLW, 38% of Jones Lang
LaSalle's adjusted net earnings was attributable to operations with U.S.
dollars as their functional currency, and 62% was attributable to
operations having other functional currencies. Fluctuations in the value
of the US dollar relative to the other currencies in which Jones Lang
LaSalle generates earnings could materially adversely affect its business,
operating results and financial condition. Fluctuations in currencies
relative to the US dollar may make it more difficult to perform period-to-
period comparisons of the reported results of operations.
Jones Lang LaSalle is authorized to use currency hedging instruments,
including foreign currency forward contracts, purchased currency options
and borrowings in foreign currency. Economic risks associated with these
hedging instruments include: (i) unexpected fluctuations in interest rates
impacting Jones Lang LaSalle's future buying power for purchasing foreign
currencies; and (ii) unexpected changes in the timing and collection of
funds related to the hedging instruments, both of which can cause hedging
instruments to be ineffective. An ineffective hedging instrument may
expose Jones Lang LaSalle to currency losses, which could have an adverse
effect on Jones Lang LaSalle's business, financial condition and results of
operations. There can be no assurance that such hedging will be effective.
REAL ESTATE SERVICES MARKETS ARE HIGHLY COMPETITIVE. Jones Lang
LaSalle competes across a variety of business disciplines within the
commercial real estate industry, including investment management, tenant
representation, corporate property services, construction and development
management, property management, agency leasing, valuation and capital
markets. In general, with respect to each of Jones Lang LaSalle's business
disciplines, it cannot assure that it will be able to continue to compete
effectively, will be able to maintain current fee arrangements or margin
levels or will not encounter increased competition. Each of the business
disciplines in which Jones Lang LaSalle competes is highly competitive on
an international, regional and local level. Depending on the industry
segment, Jones Lang LaSalle faces competition from other real estate
service providers, institutional lenders, insurance companies, investment
banking firms, investment managers and accounting firms (any of which may
be a global, regional or local firm). Many of Jones Lang LaSalle's
competitors are local or regional firms, which are substantially smaller in
size, but which may be larger than Jones Lang LaSalle in a specific local
or regional market.
The advent of the internet has introduced new ways of providing real
estate services, as well as new competitors to the industry. Jones Lang
LaSalle cannot currently predict which competitors will remain in the
industry nor can it predict what its response to them will be. This
response could require significant capital resources, changes in Jones Lang
LaSalle's organization or technological changes. If Jones Lang LaSalle is
not successful in developing and implementing a strategy to address the
risks and to capture the related opportunities presented by technological
changes on the emergence of e-business, the business, financial condition
or results of operations could be materially adversely affected.
JONES LANG LASALLE MAY LOSE SERVICE AGREEMENTS OR CLIENT
RELATIONSHIPS. As a result of the strong, long-term client relationships,
many of Jones Lang LaSalle's clients use its services consistently for new
assignments and many also use a variety of different services. If Jones
Lang LaSalle fails to maintain existing relationships or fails to develop
and maintain new client relationships, it could experience a material
adverse effect on its business, financial condition or results of
operations. Jones Lang LaSalle is substantially dependent on long-term
client relationships and on revenue received for services under various
service agreements. Many of these agreements are cancellable by the client
for any reason on as little as 30 to 60 days' notice, as is typical in the
industry. These contracts may be cancelled prior to their expiration or
not renewed when their respective terms expire.
A DECLINE IN THE PERFORMANCE OF PROPERTY JONES LANG LASALLE MANAGES
COULD DEPRESS ITS REVENUE GROWTH AND COULD CAUSE ITS REVENUE TO DECLINE.
Jones Lang LaSalle's revenue from property management services is generally
based upon percentages of the revenue generated by the properties that it
manages, and its leasing commissions typically are based on the value of
the lease revenue commitments. Jones Lang LaSalle's revenue would be
adversely affected by decreases in the performance of the properties it
manages. Property performance typically depends upon:
.
the ability to attract and retain creditworthy tenants;
.
the ability to manage operating expenses, which in some cases Jones Lang
LaSalle cannot control;
.
financial and economic conditions generally and in the specific areas where
properties are located; and
.
the real estate market generally.
JONES LANG LASALLE'S CO-INVESTMENT ACTIVITIES SUBJECT IT TO REAL
ESTATE INVESTMENT RISKS. An important part of Jones Lang LaSalle's
investment strategy includes investing its capital in real estate
investments with its investment management clients. Jones Lang LaSalle's
participation in real estate transactions through co-investment activity
could increase fluctuations in its earnings and cash flow. Other risks
associated with such activities include:
.
loss of investments;
.
difficulties associated with international co-investment described in
"Jones Lang LaSalle's Business, Operating Results and Financial Condition
are Subject to Risks Arising from the International Scope of its
Operations" and "Jones Lang LaSalle is Exposed to Losses from Currency
Fluctuations"; and
.
the potential lack of control over the disposition of any co-investments or
the timing of the recognition of gains, losses or potential incentive
participation fees.
THE CONCENTRATION OF JONES LANG LASALLE'S INCOME IN THE FOURTH QUARTER
MAY CAUSE A LOSS IN OTHER QUARTERS. Jones Lang Lasalle's operating income
and earnings have historically been substantially lower during the first
three calendar quarters than in the fourth quarter. The reasons for the
concentration of income and earnings in the fourth quarter include a
general, industry-wide focus on completing transactions by calendar year
end, as well as the constant nature of its non-variable expenses throughout
the year versus the seasonality of its revenues. This fact has
historically resulted in a small loss in the first quarter, a small profit
or loss in the second quarter, a profit in the third quarter and a larger
profit in the fourth quarter, excluding the recognition of investment
generated performance fees.
JONES LANG LASALLE MAY INCUR LIABILITIES RELATED TO ITS SUBSIDIARIES
BEING GENERAL PARTNERS OF NUMEROUS GENERAL AND LIMITED PARTNERSHIPS. Jones
Lang LaSalle has subsidiaries which are general partners in numerous
general and limited partnerships which invest in or manage real estate
assets. Any subsidiary which is a general partner is potentially liable to
its partners and for obligations of its partnership. If Jones Lang
LaSalle's exposure as a general partner is not limited, or if its exposure
as a general partner is expanded in the future, any resulting losses may
have a material adverse effect on its business, results of operations and
financial condition. Jones Lang LaSalle owns its general partnership
interests through special purpose subsidiaries. Jones Lang LaSalle
believes this structure will limit its exposure to the total amount it has
invested in and the amount of notes from or advances and commitments to
such special purpose subsidiaries. However, this limited exposure may be
expanded in the future based upon, among other things, changes in Jones
Lang LaSalle's operating practices, changes in applicable laws or the
application of additional laws to its business.
JONES LANG LASALLE MAY INCUR ENVIRONMENTAL LIABILITY IN ITS ROLE AS
ON-SITE PROPERTY MANAGER. Various national, state and local laws and
regulations impose liability on current or previous real property owners or
operators for the cost of investigating, cleaning up or removing
contamination caused by hazardous or toxic substances at the property.
Jones Lang LaSalle may be held liable as an operator for such costs in its
role as an on-site property manager. In addition, Jones Lang LaSalle could
be held liable for liability incurred at the properties managed by JLW
prior to the merger. The liability may be imposed even if the original
actions were legal and Jones Lang LaSalle did not know of, or was not
responsible for, the presence of such hazardous or toxic substances. Jones
Lang LaSalle may also be solely responsible for the entire payment of the
liability if it is subject to joint and several liability with other
responsible parties who are unable to pay. Jones Lang LaSalle may be
subject to additional liability if it fails to disclose environmental
issues to a buyer or lessee of property or if a third party is damaged or
injured as a result of environmental contamination emanating from the site
(including the presence of asbestos containing materials). Additionally,
some environmental laws create a lien on the site in favor of the
government for damages and costs it incurs in connection with the
contamination. Jones Lang LaSalle may also be liable under common law to
third parties for damages and injuries resulting from environmental
contamination emanating from a site, including the presence of asbestos
containing materials. Jones Lang LaSalle cannot be sure that any of such
liabilities to which it or any of its affiliates may become subject will
not have a material adverse effect upon its business, results of operations
or financial condition.
JONES LANG LASALLE HAS A SUBSTANTIAL AMOUNT OF DEBT, WHICH IT MAY NOT
BE ABLE TO SATISFY AND WHICH COULD IMPEDE ITS OPERATIONS AND FLEXIBILITY.
Jones Lang LaSalle has a substantial amount of debt and debt service
obligations. At December 31, 2000, Jones Lang LaSalle had $249.9 million
of indebtedness on a consolidated basis. Jones Lang LaSalle needs euros
14.9 million, or $14.0 million, annually to make required interest payments
on the 9.0% Senior Euro Notes (the "Euro Notes"). Approximately $9.3
million is needed on an annual basis to make required interest payments
under the revolving portion of the multicurrency credit facility, based on
expected average outstanding borrowings for the year under the
multicurrency credit facility of $132.0 million and assuming an interest
rate of 7.0%. If Jones Lang LaSalle is unable to generate sufficient cash
flow or otherwise obtain funds necessary to make required payments on the
notes or under the multicurrency credit facility, including from cash and
cash equivalents on hand, it will be in default under the terms of the
indenture or the multicurrency credit agreement, as the case may be, which
could, in turn, cause defaults under other existing and future debt
obligations.
Even if Jones Lang LaSalle is able to meet its debt service
obligations, the amount of debt it has could adversely affect it in a
number of other ways, including the following:
.
Jones Lang LaSalle may be unable to obtain additional financing for working
capital, capital expenditures, acquisitions and general corporate purposes;
.
a significant portion of cash flow from operations must be dedicated to
debt service, which reduces the amount of cash available for other
purposes.
.
Jones Lang LaSalle may be disadvantaged as compared to its competitors as a
result of the significant amount of debt it owes; and
.
Jones Lang LaSalle's ability to adjust to changing market conditions may be
hampered by the amount of debt it owes.
BECAUSE BORROWINGS UNDER THE MULTICURRENCY CREDIT FACILITY ARE SUBJECT
TO VARIABLE RATES OF INTEREST, A RISE IN MARKET INTEREST RATES OR JONES
LANG LASALLE'S DEBT RATIO COULD INCREASE BORROWING COSTS SIGNIFICANTLY.
The loans under the multicurrency credit facility bear interest at a base
rate plus a margin that varies according to the ratio of debt to
consolidated net income before interest, taxes, depreciation, amortization
and specified other costs. The base rate is either the then-applicable
prime commercial rate, the Federal Funds rate plus 50 basis points or, in
the case of eurocurrency loans, the British Bankers' Association Interest
Settlement Rate. Jones Lang LaSalle is vulnerable to increases in interest
rates as a result of either increases in the base rate or the variable
margin. For the twelve months ended December 31, 2000, the weighted
average interest rate for the loans under the revolving portion of the
multicurrency credit facility was 8.25%, and interest expense associated
with the revolving portion of the multicurrency credit facility was $13.6
million. An increase of 50 basis points in the effective interest rate
under the revolving portion of the multicurrency credit facility for the
same period would have resulted in $14.4 million of interest expense, a
$0.8 million increase.
THE TERMS OF JONES LANG LASALLE'S DEBT CONTAIN A NUMBER OF RESTRICTIVE
COVENANTS, WHICH RESTRICT ITS FLEXIBILITY AND WHICH, IF BREACHED, COULD
RESULT IN ACCELERATION OF THE EURO NOTES AND THE DEBT UNDER THE
MULTICURRENCY CREDIT FACILITY. The indenture governing the Euro Notes and
the multicurrency credit agreement contain covenants that limit actions.
These covenants could materially and adversely affect Jones Lang LaSalle's
ability to finance its future operations or capital needs or to engage in
other business activities that may be in its best interest. The covenants
limit Jones Lang LaSalle's ability to, among other things:
.
engage in new lines of business;
.
encumber assets;
.
enter into sale and leaseback transactions;
.
merge, consolidate or dispose of a substantial part of assets;
.
dispose of stock in subsidiaries or have subsidiaries issue stock;
.
engage in acquisitions, make loans, extend guarantees or enter into other
investments;
.
incur indebtedness;
.
pay dividends and make other distributions to shareholders; and
.
enter into transactions with affiliates.
The multicurrency credit agreement also contains covenants concerning
the maintenance of maximum debt to EBITDA ratios and a minimum liquidity
ratio.
Jones Lang LaSalle's ability to comply with these covenants may be
affected by events beyond its control, and it cannot be sure that it will
be able to comply. A breach of any of these covenants could result in a
default under the indenture and/or the multicurrency credit agreement and,
potentially, an acceleration of the obligation to repay the Euro Notes
and/or the indebtedness under the multicurrency credit agreement. An event
of default under the indenture and/or the multicurrency credit agreement
could also cause other debt to become immediately due and payable under
cross-default and cross-acceleration provisions.
THE STOCKHOLDER AGREEMENTS, THE DEL STOCKHOLDER AGREEMENTS, THE
CHARTER AND THE AMENDED BYLAWS OF JONES LANG LASALLE AND THE MARYLAND
GENERAL CORPORATE LAW COULD DELAY, DEFER OR PREVENT A CHANGE OF CONTROL.
The Stockholder Agreements and the DEL Stockholder Agreements entered into
in connection with the merger and the charter and bylaws of Jones Lang
LaSalle include provisions that may discourage, delay, defer or prevent a
takeover attempt that may be in the best interest of stockholders of Jones
Lang LaSalle and may adversely affect the market price of its common stock.
The Stockholder Agreements and the DEL Stockholder Agreements require each
of the parties thereto to vote all shares of Jones Lang LaSalle common
stock owned or controlled by such stockholder:
.
for persons nominated by the Jones Lang LaSalle board of directors pursuant
to the amended bylaws; and
.
in accordance with the recommendations of a majority of the Jones Lang
LaSalle board of directors on all matters (1) submitted to the vote of the
stockholders of Jones Lang LaSalle which have been proposed by any
stockholder as to which the Jones Lang LaSalle board of directors has
recommended against approving and (2) relating to any merger, sale of all
or substantially all of Jones Lang LaSalle's assets, or any similar
transactions as to which the Jones Lang LaSalle board of directors has
recommended against approving.
Additionally, the Stockholder Agreements and DEL Stockholder
Agreements require the persons bound by them to take reasonable actions to
assure that they do not transfer shares to a person which is, or would as a
result of the transfer become, the owner of 5% or more of the outstanding
Jones Lang LaSalle common stock. This requirement does not apply to the
extent shares are sold in accordance with certain securities regulations.
As a result, during the term of the Stockholder Agreements and the DEL
Stockholder Agreements, as long as persons who hold a majority of the
issued and outstanding common stock of Jones Lang LaSalle continue to be
bound by these agreements, the Jones Lang LaSalle board of directors will
be composed of individuals nominated in accordance with the procedures set
forth in the amended bylaws, and stockholders of Jones Lang LaSalle will
have a limited influence on the outcome of votes of the stockholders of
Jones Lang LaSalle on the matters covered by such agreements. The persons
bound by the Stockholder Agreements and DEL Stockholder Agreements hold, as
of March 28, 2001, approximately 50% of the issued and outstanding shares
of Jones Lang LaSalle common stock.
In addition, pursuant to the charter of Jones Lang LaSalle, Jones Lang
LaSalle has a classified board of directors, pursuant to which directors
are divided into three classes, with three-year staggered terms. The
classified board provision could increase the likelihood that, in the event
an outside party acquired a controlling block of Jones Lang LaSalle's
capital stock or initiated a proxy contest, incumbent directors
nevertheless would retain their positions for a substantial period, which
may have the effect of discouraging, delaying or preventing a change in
control of Jones Lang LaSalle. In addition, the charter and bylaws provide
for:
.
the ability of the Jones Lang LaSalle board of directors to establish one
or more classes and series of capital stock including the ability to issue
up to 10,000,000 shares of preferred stock, and to determine the price,
rights, preferences and privileges of such capital stock without any
further stockholder approval;
.
a requirement that any stockholder action taken without a meeting be
pursuant to unanimous written consent; and
.
certain advance notice procedures for Jones Lang LaSalle stockholders
nominating candidates for election to the Jones Lang LaSalle board of
directors.
Under the Maryland General Corporate Law (the "MGCL"), certain
"Business Combinations" (including a merger, consolidation, share exchange
or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland corporation and
any person who beneficially owns 10% or more of the voting power of the
corporation's shares or an affiliate of the corporation who, at any time
within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting stock of the corporation (an "Interested Stockholder") or an
affiliate of the Interested Stockholder are prohibited for five years after
the most recent date on which the Interested Stockholder became an
Interested Stockholder. Thereafter, any such Business Combination must be
recommended by the board of directors of such corporation and approved by
the affirmative vote of at least (1) 80% of the votes entitled to be cast
by holders of outstanding voting shares of the corporation and (2) 66-2/3%
of the votes entitled to be cast by holders of outstanding voting shares of
the corporation other than shares held by the Interested Stockholder with
whom the Business Combination is to be effected, unless, among other
things, the corporation's stockholders receive a minimum price (as defined
in the MGCL) for their shares and the consideration is received in cash or
in the same form as previously paid by the Interested Stockholder for its
shares. Pursuant to the MGCL, these provisions also do not apply to
Business Combinations which are approved or exempted by the board of
directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder.
The provisions of the agreements described above, as well as Jones
Lang LaSalle's charter and bylaws, and the MGCL, could discourage bids for
common stock as well as adversely affect the market price of common stock.
ITEM 2. PROPERTIES
Jones Lang LaSalle's principal holding company headquarters is located
at 200 East Randolph Drive, Chicago, Illinois, where Jones Lang LaSalle
currently occupies over 100,000 square feet of office space pursuant to a
lease that expires in February 2006. Jones Lang LaSalle's principal
operational headquarters is located at 22 Hanover Square, London, England
where approximately 83,000 square feet are leased under a lease expiring in
June 2004. Regional headquarters are located in Chicago, London and
Singapore. Jones Lang LaSalle has approximately 123 local offices
worldwide located in most major cities and metropolitan areas as follows:
40 offices in the Americas (including 32 in the United States), 52 offices
in 19 countries in Europe and 31 offices in 10 countries in Asia Pacific.
Jones Lang LaSalle's offices are each leased pursuant to agreements with
terms ranging from month-to-month to ten years. In addition, Jones Lang
LaSalle has property and other offices located throughout the world. On-
site property management offices are generally located within properties
under management and are provided without cost.
ITEM 3. LEGAL PROCEEDINGS
Jones Lang LaSalle is a defendant in various litigation matters
arising in the ordinary course of business, some of which involve claims
for damages that are substantial in amount. Many of these matters are
covered by insurance. In the opinion of Management, the ultimate resolution
of such litigation is not expected to have a material adverse effect on the
financial position, results of operations and liquidity of Jones Lang
LaSalle.
On March 16, 2001, Jones Lang LaSalle became aware that HIH Insurance
Ltd. ("HIH") and its subsidiaries, an Australian insurance group, had
entered provisional liquidation on the previous evening and thus had ceased
writing new business and was to be placed in run-off mode. HIH had
provided public liability coverage to the Australian operations of JLW for
the years from 1994 to 1997, which coverage would typically provide
protection against, among other things, personal injury claims arising out
of accidents occurring in properties that Jones Lang LaSalle had property
management responsibilities for. Under the terms of the policies, Jones
Lang LaSalle's deductible on these claims was $0, and therefore, HIH had
responsibility for "day-to-day" management of claims and potential claims
once they had been notified of them. Given the nature of these claims,
there are a large number of claims that have yet to be resolved and it is
possible that further claims will be made.
It is likely that a "Scheme of Arrangement" will be put in place to
deal with outstanding claim payments, and it is unclear at this stage the
extent to which claims will be paid. In addition, given the difficult
nature of estimating liabilities for this type of insurance company, it is
unlikely that there will be sufficient certainty as to allow any claim
payments to be paid by HIH for at least twelve months. Jones Lang LaSalle
is currently working with its professional advisors to better understand
and quantify (1) the claims which remain open and may be made, (2) the
ongoing exposures related to these claims, (3) the likelihood that HIH will
be able to fund these exposures, and (4) the potential for these claims to
be covered by other insurance policies with other insurance companies.
In the opinion of management, the ultimate resolution of the HIH run-
off is not expected to have a material adverse effect on the financial
condition or liquidity of Jones Lang LaSalle.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of Jones Lang LaSalle's
stockholders during the fourth quarter of 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Jones Lang LaSalle's Common Stock is listed for trading on the New
York Stock Exchange under the symbol "JLL."
As of March 28, 2001, there were approximately 4,300 beneficial
holders of Jones Lang LaSalle's Common Stock.
The following table sets forth the high and low sale prices of the
Common Stock as reported on the New York Stock Exchange.
2000 High Low
------ ------
First Quarter . . . . . . . . . . . . . . . . $15.50 $10.06
Second Quarter. . . . . . . . . . . . . . . . $16.00 $13.38
Third Quarter . . . . . . . . . . . . . . . . $15.13 $11.63
Fourth Quarter. . . . . . . . . . . . . . . . $14.00 $12.25
1999 High Low
------ ------
First Quarter . . . . . . . . . . . . . . . . $36.50 $27.56
Second Quarter. . . . . . . . . . . . . . . . $32.00 $25.94
Third Quarter . . . . . . . . . . . . . . . . $30.00 $12.63
Fourth Quarter. . . . . . . . . . . . . . . . $16.69 $ 9.19
Jones Lang LaSalle has not paid cash dividends on its common stock to
date. Jones Lang LaSalle intends to retain its earnings to support the
expansion of the business and therefore does not intend to pay cash
dividends for the foreseeable future. Any payment of future dividends and
the amounts thereof will be at the discretion of the Board of Directors and
will depend upon Jones Lang LaSalle's financial condition, earnings and
other factors deemed relevant by the Board of Directors.
TRANSFER AGENT
Computershare Investor Services
2 North LaSalle Street
Chicago, Illinois 60602
ITEM 6. SELECTED FINANCIAL DATA (UNAUDITED)
The following table sets forth summary historical consolidated financial data for Jones Lang LaSalle. The
information should be read in conjunction with Jones Lang LaSalle's consolidated financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included
elsewhere herein.
Year Ended December 31,
---------------------------------------------------------------------------
2000
Adjusted
2000 1999 1998 1997 1996 Actual
---------- --------- ------------------- ------------------------------
(in thousands, except share data)
Statement of Operations Data:
Total revenue (1) . . . . . . . $ 925,823 755,439 304,464 224,773 159,453 925,823
---------- --------- ---------- --------- ---------- ----------
Operating income (loss) (1). . . 6,403 (71,303) 37,842 35,114 26,901 6,403
Interest expense . . . . . . . . 27,182 18,211 4,153 3,995 5,730 27,182
---------- --------- ---------- --------- ---------- ----------
Earnings (loss) before
provision for income taxes
and minority interest. . . . . (20,779) (89,514) 33,689 31,119 21,171 (20,779)
Net provision for income taxes . 22,053 5,328 13,224 5,279 1,207 22,053
Minority interest in losses
of subsidiaries. . . . . . . . (21) -- -- -- -- (21)
---------- --------- ---------- --------- ---------- ----------
Earnings (loss) before
cumulative effect of change
in accounting principle. . . . (42,811) (94,842) 20,465 25,840 19,964 (42,811)
Cumulative effect of change
in accounting principle. . . . (14,249) -- -- -- -- (14,249)
---------- --------- ---------- --------- ---------- ----------
Net earnings (loss). . . . . . . $ (57,060) (94,842) 20,465 25,840 19,964 (57,060)
========== ========= ========== ========== ========== ==========
Basic earnings (loss) per
common share before cumulative
effect of change in accounting
principle (2). . . . . . . . . $ (1.72) (4.20) 1.26 1.50
Cumulative effect of change in
accounting principle . . . . . (0.58) -- -- --
---------- ---------- ---------- ----------
Basic earnings (loss) per
common share (2) . . . . . . . $ (2.30) (4.20) 1.26 1.50
========== ========== ========== =========
Year Ended December 31,
---------------------------------------------------------------------------
2000
Adjusted
2000 1999 1998 1997 1996 Actual
---------- --------- ------------------- ------------------------------
(in thousands, except share data)
Basic weighted average
shares outstanding . . . . . . 24,851,823 22,607,350 16,215,478 16,200,000
========== ========== ========== ==========
Diluted earnings (loss)
per common share before
cumulative effect of
change in accounting
principle (2). . . . . . . . . $ (1.72) (4.20) 1.25 1.49
Cumulative effect of change in
accounting principle . . . . . (0.58) -- -- --
---------- ---------- ---------- ----------
Diluted earnings (loss) per
common share (2) . . . . . . . . $ (2.30) (4.20) 1.25 1.49
========== ========== ========= ==========
Diluted weighted average
shares outstanding . . . . . . 24,851,823 22,607,350 16,387,721 16,329,613
========== ========== ========== ==========
Adjustments (3):
Merger related non-recurring
charges. . . . . . . . . . . . 85,795
Tax benefit associated with
merger related non-recurring
charges. . . . . . . . . . . . (2,513)
Cumulative effect of change in
accounting principle. . . . . . 14,249
----------
Adjusted net earnings (4) . . . . 40,471
==========
Year Ended December 31,
---------------------------------------------------------------------------
2000
Adjusted
2000 1999 1998 1997 1996 Actual
---------- --------- ------------------- ------------------------------
(in thousands, except share data)
Other Data:
Adjusted EBITDA (5) . . . . . . . $ 135,345 116,774 61,318 44,207 32,317 135,345
Ratio of earnings to fixed
charges (6) . . . . . . . . . . 0.19X -- 5.54X 5.88X 3.73X 2.50X
========== ========== ========== ========== ========= ==========
Cash flows provided by (used in):
Operating activities . . . . . . 140,340 (18,227) 23,000 40,577 13,964 140,340
Investing activities . . . . . . (66,590) (80,867) (239,096) (14,126) (32,478) (66,590)
Financing activities . . . . . . (78,215) 105,461 202,377 (3,128) 17,189 (78,215)
Investments under management (7). 22,500,000 21,500,000 14,200,000 14,700,000 15,200,000 22,500,000
Total square feet under
management (8). . . . . . . . . 700,000 700,000 400,500 202,700 131,600 700,000
========== ========== ========== ========== ========= ==========
Balance Sheet Data:
Cash and cash equivalents. . . . $ 18,843 23,308 16,941 30,660 7,207
Total assets . . . . . . . . . . 914,045 924,800 490,921 219,887 156,614
Total debt . . . . . . . . . . . 249,947 322,386 202,923 -- 55,551
Total liabilities. . . . . . . . 581,707 600,864 321,349 72,990 132,367
Total partners' capital/
stockholders' equity . . . . . 332,338 323,936 169,572 146,897 24,247
(1) Historical revenue and operating expenses in the amount of $16.5
million for the year ended December 31, 1996 has been reclassified to
reflect personnel cost reimbursements received on property management or
specific client assignments on a net rather than gross basis. There was no
effect on operating income or net earnings as historically reported.
(2) Basic and diluted earnings per common share for 1997 are calculated
based on net earnings for the period from conversion to corporate form,
July 22, 1997, through December 31, 1997. No earnings per share data
exists for 1996, as Jones Lang LaSalle was not operating under the
corporate form.
(3) Adjustments include (i) the removal of merger related non-recurring
charges consisting of compensation expense associated with the issuance of
shares of Jones Lang LaSalle Incorporated's common stock to former
employees of Jones Lang Wootton, and (ii) the cumulative effect of change
in accounting principle in connection with the adoption of SAB 101.
(4) Management believes that Adjusted Net Earnings is useful to investors
as a measure of operating performance, cash generation and ability to
service debt. However, Adjusted Net Earnings should not be considered as
an alternative either to: (i) net earnings (determined in accordance with
GAAP); (ii) operating cash flow (determined in accordance with GAAP); or
(iii) liquidity.
(5) Adjusted EBITDA represents earnings before interest expense, income
taxes, depreciation and amortization and merger related non-recurring
charges. Management believes that Adjusted EBITDA is useful to investors as
a measure of operating performance, cash generation and ability to service
debt. However, Adjusted EBITDA should not be considered as an alternative
either to: (i) net earnings (determined in accordance with GAAP); (ii)
operating cash flow (determined in accordance with GAAP); or (iii)
liquidity.
(6) For purposes of computing the ratio of earnings to fixed charges,
earnings represents net earnings (loss) before income taxes plus fixed
charges, less capitalized interest. Fixed charges consist of interest
expense, including amortization of debt discount and financing costs,
capitalized interest and one-third of rental expense which Jones Lang
LaSalle believes is representative of the interest component of rental
expense. Due to the merger related non-recurring charges, earnings were
insufficient to cover fixed charges by $89.5 million for the year ended
December 31, 1999.
(7) Investments under management represent the aggregate fair market
value or cost basis of assets managed by the Jones Lang LaSalle Investment
Management segment as of the end of the periods reflected.
(8) Represents the total square footage of properties for which Jones
Lang LaSalle provided property management and leasing or corporate property
services as of the end of the periods reflected.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis is presented in four sections.
The first section discusses certain items affecting the comparability of
results and certain market and other risks that Jones Lang LaSalle faces.
The second section analyzes the Results of Operations, first on a
consolidated basis and then for each of the business segments of Jones Lang
LaSalle. The final two sections address Consolidated Cash Flows and
Liquidity and Capital Resources.
INTRODUCTION TO THE BUSINESS
ITEMS AFFECTING COMPARABILITY
ACQUISITIONS AND MERGER
Jones Lang LaSalle has grown by expanding its client base and the
range of services and products it offers. In addition, Jones Lang LaSalle
has made a series of strategic acquisitions since the Initial Public
Offering of LaSalle Partners Incorporated in 1997 and also entered into the
merger with the Jones Lang Wootton companies ("JLW").
The most significant acquisition was that of COMPASS in October 1998
(described more fully in Note 4 to the financial statements), which made
Jones Lang LaSalle the largest real estate management services company in
the United States. This acquisition added approximately 200 million square
feet of property and corporate property services assignments to Jones Lang
LaSalle's portfolio. Jones Lang LaSalle incurred transition and
integration costs related to the acquisition of $5.2 million in 1998 and
$4.8 million in 1999, on an after-tax basis. No transition and integration
costs were incurred in 2000 with regard to this acquisition.
On March 11, 1999, LaSalle Partners Incorporated and JLW merged their
businesses. JLW was an employee-owned international real-estate services
firm with approximately 4,000 employees with operations in 32 countries.
The JLW operations had approximately 280 million square feet and $6.3
billion in assets under management. Jones Lang LaSalle incurred merger
related transition and integration costs of $0.9 million in 1998 and $27.0
million in 1999, on an after-tax basis. No merger related transition and
integration costs were incurred in 2000. Approximately 48% of the shares
issued to employees of the former JLW operations as part of the merger were
accounted for as compensation expense or deferred compensation expense to
the extent they were subject to forfeiture or vesting provisions. Jones
Lang LaSalle incurred non-cash, merger-related stock compensation expense
of $99.8 million in 1999 and $83.3 million in 2000, on an after-tax basis.
As of December 31, 2000, all merger-related stock compensation has been
expensed and all forfeiture and vesting provisions have been removed.
The financial statements of Jones Lang LaSalle include the results of
COMPASS and the JLW businesses on a consolidated basis from the transaction
dates above.
ADOPTION OF STAFF ACCOUNTING BULLETIN 101, REVENUE RECOGNITION IN FINANCIAL
STATEMENTS ("SAB 101")
Jones Lang LaSalle adopted the provisions of SAB 101 in the fourth
quarter of 2000, effective as of January 1, 2000. This adoption is
described more fully in Note 15 to the financial statements. As a result
of implementing SAB 101, Jones Lang LaSalle recorded an after-tax charge to
earnings representing a cumulative change in accounting principle effective
January 1, 2000 of $14.2 million. During calendar year 2000, the net
impact of SAB 101 was to increase the after-tax net loss by $2.9 million.
The adoption of SAB 101 does not impact the amount of earnings that
are ultimately recognizable, nor does it impact the timing or amount of
cash flow.
GAIN ON SALE OF CONSTRUCTION MANAGEMENT BUSINESS
In 1999, Jones Lang LaSalle recognized a gain of $7.5 million on the
1996 sale of its Construction Management business to a former employee.
This transaction is described more fully in Note 5 to the financial
statements.
INVESTMENT IN LASALLE HOTEL PROPERTIES ("LHO")
LHO, a real estate investment trust that focuses on owning hotel
properties, completed its initial public offering in April 1998. LHO was
formed with 10 hotels, in nine of which Jones Lang LaSalle had a nominal
co-investment and for which Jones Lang LaSalle acted as investment advisor.
In accordance with the individual investment advisory agreements, Jones
Lang LaSalle earned and received performance fees totaling $15.2 million on
the disposition of certain of the assets. Jones Lang LaSalle contributed
its ownership interests in the hotels as well as the related performance
fees to LHO for an effective ownership of approximately 6.4%. As more
fully discussed in Note 7 to the financial statements, subsequent to
December 31, 2000, Jones Lang LaSalle disposed of its equity holdings in
LHO.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133, as
amended by SFAS 137 and SFAS 138, is effective for Jones Lang LaSalle in
the fiscal year beginning January 1, 2001. The effect of implementing
SFAS 133 did not have a material impact on the consolidated financial
statements.
On February 14, 2001, the FASB issued for public comment its tentative
decisions on the accounting for goodwill in a limited Exposure Draft,
"Business Combinations and Intangible Assets - Accounting for Goodwill".
Among the tentative decisions included in this Exposure Draft is the
decision that goodwill should not be amortized but instead should be tested
for impairment when events or circumstances occur indicating that an
impairment might exist. The FASB plans to issue a final Statement on the
accounting for goodwill in June 2001 which would become effective in the
Third Quarter (beginning July 1, 2001) of 2001 for Jones Lang LaSalle. The
anticipated annual goodwill amortization expense in 2001 for Jones Lang
LaSalle is $16.0 million, or $4.0 million per quarter, as it is recognized
in a straight-line manner through the year.
MARKET AND OTHER RISK FACTORS
MARKET RISK
The principal market risks (i.e., the risk of loss arising from
adverse changes in market rates and prices) to which Jones Lang LaSalle is
exposed are:
. Interest rates on the multi-currency debt facility
. Foreign exchange risks
In the normal course of business, Jones Lang LaSalle manages these
risks through a variety of strategies, including the use of hedging
transactions using various derivative financial instruments such as
interest rate swap agreements. Jones Lang LaSalle does not enter into
derivative or interest rate transactions for trading or speculative
purposes.
INTEREST RATES
Jones Lang LaSalle centrally manages its debt, considering investment
opportunities and risks, tax consequences and overall financing strategies.
Jones Lang LaSalle is primarily exposed to interest rate risk on the $250
million three-year revolving multi-currency credit facility that is
available for working capital, co-investments, capital expenditures and
acquisitions. This facility bears a variable rate of interest based on
market rates. The interest rate risk management objective is to limit the
impact of interest rate changes on earnings and cash flows and to lower the
overall borrowing costs. To achieve this objective, Jones Lang LaSalle
will enter into derivative financial instruments such as interest rate swap
agreements when appropriate.
As of December 31, 2000, Jones Lang LaSalle had no interest rate swap
agreements outstanding.
Including the effect of interest rate swap agreements the effective
interest rate on Jones Lang LaSalle's debt was 8.42% in 2000 compared with
6.48% in 1999. The increase is a combination of the higher debt levels,
the rate of 9.0% on the Euro Notes and generally increasing market rates of
interest during 2000.
A one percentage point increase, to 9.42%, in the effective interest
rate would have increased net interest expense by $3.3 million in 2000.
FOREIGN EXCHANGE
Revenues outside of the United States totaled 59.5% of the total
revenues of Jones Lang LaSalle in 2000. Operating in international markets
means that Jones Lang LaSalle is exposed to movements in these foreign
exchange rates, primarily the British pound (20.7% of 2000 revenues) and
the euro (20.0% of 2000 revenues). Changes in these foreign exchange rates
would have the largest impact on translating the operating profit of Jones
Lang LaSalle's international operations into U.S. dollars.
The British pound expenses incurred as a result of both the worldwide
operational headquarters and the Europe regional headquarters being located
in London act as a partial operational hedge against Jones Lang LaSalle's
translation exposure to the British pound. A 10% change in the average
exchange rate for the British pound in 2000 would have impacted pre-tax net
operating income by approximately $1.2 million.
The interest on the euro 165 million of notes issued by Jones Lang
LaSalle during 2000 acts as a partial hedge against the translation
exposure on the euro denominated earnings. A 10% change in the average
exchange rate for the euro in 2000 would have impacted pre-tax net
operating income by approximately $5.1 million. This impact was mitigated
by the interest expense on the Euro Notes, which is payable in euros. The
net impact on earnings before tax of a 10% change in the average exchange
rate for the euro in 2000 would have been $3.5 million.
Jones Lang LaSalle enters into forward foreign currency exchange
contracts to manage currency risks. At December 31, 2000, Jones Lang
LaSalle had forward exchange contracts in effect with a notional value of
$74.9 million with a market value and carrying value of $2.4 million.
SEASONALITY
Historically, Jones Lang LaSalle's revenue, operating income and net
earnings in the first three calendar quarters are substantially lower than
in the fourth quarter. Other than for Investment Management, this
seasonality is due to a calendar-year-end focus, primarily in the U.S., on
the completion of real estate transactions. This focus is generally
consistent with the real estate industry in the U.S. The Investment
Management segment earns performance fees on clients' returns on their real
estate investments. Such performance fees are generally earned when the
asset is disposed of, the timing of which Jones Lang LaSalle does not have
complete discretion over. Non-variable operating expenses, which are
treated as expenses when they are incurred during the year, are relatively
constant on a quarterly basis.
INFLATION
Jones Lang LaSalle's operations are directly affected by various
national and local economic conditions, including interest rates,
inflation, the availability of credit to finance real estate transactions
and the impact of tax laws. To date, Jones Lang LaSalle does not believe
that general inflation has had a material impact on operations, as revenue,
bonuses and other variable costs related to revenue are primarily impacted
by real estate supply and demand rather than general inflation.
EURO CONVERSION ISSUES
On January 1, 1999, certain member countries of the European Union
fixed conversion rates between their existing currencies ("legacy
currencies") and one common currency - the euro. For a three-and-one-half-
year transition period, non-cash transactions may be denominated in either
the euro or in the old national currencies. After July 1, 2002 the euro
will be the sole legal tender for these countries.
Jones Lang LaSalle is currently evaluating the potential impact of
euro related issues on information systems, currency exchange rate risk and
other business activities, but it does not expect the impact of euro
conversion to be material to Jones Lang LaSalle. There can be no assurance
that external factors will not have a material adverse impact on
operations.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
CONSOLIDATED REVIEW
GENERAL
Operating results in 2000 include the results of the acquired COMPASS
businesses and JLW for a full twelve months.
Operating results in 1999 include the results of the acquired COMPASS
businesses for a full twelve months and the results of JLW effective from
the merger in March 1999.
REVENUE
In 2000, reported revenues at $925.8 million increased by $170.4
million or 22.6% from 1999 revenues of $755.4 million. The impact of
including a full 12 months of the JLW revenues in 2000 as against ten
months in 1999 was responsible for $58.5 million of this increase.
Additionally, the Skandia joint venture, which began operations in January
2000 and which is accounted for on a consolidated basis, had revenues of
$13.7 million. There was a negative impact on 2000 revenues of $4.8
million as a result of the implementation of SAB 101. Strong, broad-based
underlying performance in the Americas, Europe and Investment Management
segments was responsible for the majority of the growth, delivering $94.1
million in increased revenues. Europe, which overcame the adverse impacts
on reported revenues of the strong U.S. dollar against the euro and the
British pound, had a record breaking year with revenue growth of $46.5
million. The Investment Management segment, on the strength of exceptional
advisory fees, grew its revenues by 26.4%, or $22.7 million.
OPERATING EXPENSES
In 2000, the reported operating expenses before merger related
expenses increased by $158.3 million to $833.6 million, 23.4% more than the
1999 operating expenses before merger related expenses of $675.3 million.
Approximately $66.2 million of this increase resulted from including a full
12 months of the JLW operating expenses in 2000 as against ten months in
1999. There were increased personnel and occupancy costs to generate and
support the strong underlying growth in the business segments together with
increased incentive compensation expense in 2000 to reflect the
significantly better business performance. Additionally, the Skandia joint
venture, which began operations in January 2000 and which is accounted for
on a consolidated basis, had expenses of $13.7 million. In both America
and Europe, a very competitive labor market resulted in increased
compensation costs through 2000. Finally, 2000 results included the full
year impact of the increases in personnel and office occupancy costs
related to the global infrastructure added to support the larger size of
the combined company, as well as the increased global management and
coordination costs associated with managing a global organization.
The merger related expenses represent primarily non-cash compensation
expense recorded as a result of shares issued to certain former employees
of JLW in connection with the merger as well as non-recurring transition
and integration costs. The transition and integration costs represent non-
capitalizable expenses such as rebranding, office consolidations and
information technology initiatives. There was a significant reduction in
merger related expenses from $151.4 million in 1999 to $85.8 million in
2000. This reduction resulted from the combination of two factors: (1)
1999 results included $49.8 million of integration and transition expense
whereas 2000 had none, and (2) 1999 results included $101.6 million of
stock compensation expense whereas 2000 included $85.8 million.
OPERATING INCOME
In 2000, the operating income before merger related expenses was $92.2
million as compared to operating income before merger related expenses of
$80.1 million in 1999, an increase of $12.1 million, or 15.1%. The
operating income before merger related expenses in 1999 included a one-time
gain of $7.5 million relating to the disposal of a construction management
subsidiary. In addition, the impact of including only ten months of the
JLW business increased 1999 operating income by $7.7 million as January and
February are loss making months. Finally, the impact of the adoption of
SAB 101 was to reduce 2000 operating income by $4.7 million. Excluding the
impact of the one-time gain and the adoption of SAB 101, and including a
full twelve months of JLW in 1999, operating income before merger related
expenses increased $32.0 million in 2000. Operating income, excluding
merger related charges, as a percentage of total revenue was 10.0% in 2000
compared to 10.6% in 1999. This is a function of the non-recurring items
discussed above.
Including the effect of merger related non-recurring charges, the
operating income in 2000 was $6.4 million as compared to an operating loss
in 1999 of $71.3 million.
INTEREST EXPENSE
Interest expense, net of interest income, increased by $9.0 million to
$27.2 million in 2000 from $18.2 million in 1999. This increase was a
result of an increase in the average level of debt outstanding, generally
increasing interest rates and the refinancing of a portion of the debt by
the Euro Notes at a fixed rate of interest of 9.0%. In particular, the
average debt level for 2000 was $325.6 million as compared to $301.7
million in 1999 which reflects additional borrowings made in the latter
half of 1999 to fund the integration and transition expenses incurred with
respect to the COMPASS acquisition and the JLW merger. The effective
average interest rate on borrowings in 2000 was 8.42% compared to 6.48% in
1999.
Jones Lang LaSalle successfully increased its focus on working capital
management during 2000, and this focus, together with strong operating
results, enabled Jones Lang LaSalle to reduce debt at December 31, 2000 by
$72.4 million. Interest expense is expected to be lower in 2001 as a
result of continued focus on efficient working capital management and
strong operating results continuing to reduce average debt levels, combined
with an expectation of generally declining interest rates.
PROVISION FOR INCOME TAXES
The provision for income taxes increased by $16.8 million in 2000 to
$22.1 million, from $5.3 million in 1999. The increase is primarily
attributable to the improved operating performance in 2000 together with
the lack of any merger-related integration and transition expenses. The
merger-related compensation expense associated with the issuance of shares
to certain former JLW employees is largely non-deductible for tax purposes.
Excluding the impact of merger-related compensation expense and non-
recurring transition and integration expense, the effective tax rate on
recurring operations reduced from 40.5% in 1999 to 37.8% in 2000. The
reduction in the effective tax rate is primarily due to ongoing tax
planning activities and the impact of earnings in jurisdictions with
marginal tax rates below the U.S. marginal rate.
NET EARNINGS (LOSS)
Net earnings, excluding the effect of merger related non-recurring
charges and a charge in 2000 for the cumulative effect of a change in
accounting principle related to the adoption of SAB 101, increased by $3.7
million from $36.8 in 1999 to $40.5 million in 2000. This increase
reflected better operational performance in 2000. The 1999 net earnings
included $4.5 million on an after-tax basis related to the one-time gain on
the disposal of a construction management subsidiary of Jones Lang LaSalle.
Additionally the 1999 net earnings were favorably impacted by $4.5 million
as a result of the inclusion of the JLW business for only ten months
(January and February are loss making months). Finally the 2000 net
earnings have been reduced by $2.9 million on an after-tax basis by the
implementation of SAB 101 in 2000. The increase in net earnings after
adjusting for these one-time items is $15.6 million, from $27.8 million in
1999 to $43.4 million in 2000.
Including the effect of merger related non-recurring charges and a
charge in 2000 of $14.2 million, on an after-tax basis, for the cumulative
effect of a change in accounting principle related to the adoption of SAB
101, the net loss in 2000 was $57.1 million. This figure compares to a net
loss of $94.8 million in 1999.
BUSINESS SEGMENTS
Jones Lang LaSalle manages its business along a combination of
functional and geographic lines. In the fourth quarter of 2000, Jones Lang
LaSalle consolidated its Hotel Services segment into its respective Owner
and Occupier Services segments. Accordingly, operations are now classified
into four business segments: the three geographic regions of Owner and
Occupier Services, (i) Americas, (ii) Europe and (iii) Asia Pacific, and
(iv) the global business of Investment Management. The Owner and Occupier
Services business is operated on a geographic basis and consists primarily
of tenant representation and agency leasing, capital markets and valuation
services (collectively, "implementation services") and property management,
corporate property services, development services and project management
services (collectively, "management services"). The Investment Management
segment provides real estate investment management services to
institutional investors, corporations, and high net worth individuals.
Results for 1999 and 1998 have been realigned based upon the current
business segments.
OWNER AND OCCUPIER SERVICES
AMERICAS
Revenue for the Americas region increased $28.6 million, or 9.7%, to
$324.3 million in 2000 compared to $295.7 million in 1999, which figure
included a gain of $7.5 million relating to the sale of a construction
management subsidiary in a leveraged buyout in December 1996. The region
experienced strong revenue performance across all its business units with
the Tenant Representation and Project Development Management units
significantly increasing revenues (by $15.3 million and $11.9 million,
respectively) as they expanded the success of the strategic alliance model.
New product offerings in the Retail group also resulted in revenue
increases. In July 2000, Jones Lang LaSalle exercised its option to
repurchase LPI Service Corporation for a nominal amount. LPI Service
Corporation provides the services of approximately 2,800 janitorial,
engineering and property maintenance employees for certain properties
managed by Jones Lang LaSalle in the United States. The costs of these
employees are directly reimbursed by the properties. This direct
reimbursement has been netted against the costs of these employees, and the
remaining net fees received are recorded as revenue. For the twelve months
ended December 31, 2000, $7.6 million has been recorded as revenue related
to this business. The exception to the strong performance in the region
was the Capital Markets Group, where transaction volumes, and therefore
revenues, were adversely impacted by the general economic environment, and
in particular rising interest rates. Through 2000, this group experienced
a general slow down in the number and pace of transaction closings and an
increase in transaction breakups leading to increased remarketing
initiatives and an increase in the time to complete transactions. Finally,
$3.7 million of the increase in revenue was due to the inclusion of a full
12 months of the JLW business in 2000.
Operating expenses for the Americas region increased by $31.4 million,
or 11.8%, to $297.4 million in 2000 from $266.0 million in 1999. This
increase is attributable to an increase of $19.5 million in personnel costs
across the region and an increase of $8.3 million due to the inclusion of a
full 12 months of the JLW business in 2000. The increase in personnel
costs is primarily a result of increased incentive compensation and is
reflective of a return to more normalized incentive compensation levels for
the region in 2000 from the very low levels earned in 1999. This is due to
the substantial improvement in underlying business performance across the
region in 2000. In addition, compensation costs have been impacted by the
very tight labor market experienced in 2000. The cost reduction program
initiated in the second half of 1999 was successfully implemented during
2000 and has resulted in annualized cost savings in excess of $15.0
million.
EUROPE
The Europe region reported revenues of $356.4 million in 2000, an
increase of $98.2 million, or 38%, on 1999 revenue of $258.2 million. The
inclusion of only ten months of the JLW business in the 1999 revenues was
the reason for $38.0 million of this increase in revenue. Another key
contributor to the increase was the commencement on January 1, 2000 of a
property management venture with Skandia Fastighet AB, the real estate
subsidiary of Sweden's leading insurance company (the "Skandia joint
venture"). This venture, of which Jones Lang LaSalle owns 55%, established
Jones Lang LaSalle as one of the leading real estate services firms in the
Nordic region. This entity had revenues of $13.7 million in 2000 versus
none in 1999 and is accounted for on a consolidated basis.
Overall, the Europe region experienced strong, broad based business
growth with particularly strong growth in the United Kingdom, France,
Germany and Belgium. The Capital Markets Group had a very strong year with
several exceptional transactions including advising on the UK's largest
property investment portfolio sale for Aegon UK and Belgium's largest
single real estate company transaction for the AXA Group. The effect of
the strong transaction flow was partially offset by the strength of the US
dollar against the euro and the British pound.
Operating expenses for the region totaled $315.4 million in 2000, an
increase of $86.9 million, or 38.0% on 1999 operating expenses of $228.5
million. The inclusion of only ten months of the JLW business in the 1999
operating expenses was responsible for $38.8 million of the increase in
operating expenses. The Skandia joint venture discussed above had operating
expenses of $13.7 million in 2000 versus none in 1999. This entity is
accounted for on a consolidated basis. The balance of the increase in
operating expenses is a result of higher personnel and office occupancy
costs. These costs are related to infrastructure and personnel added
during the course of 1999 to build a pan-European business infrastructure
and in anticipation of strong business prospects throughout Europe,
together with increased compensation levels as a result of a competitive
labor market and increased incentive compensation costs as a result of the
strong performance in 2000.
ASIA PACIFIC
Revenue for Asia Pacific totaled $138.2 million in 2000, an increase
of $17.8 million, or 14.8% on reported revenues of $120.4 million in 1999.
The majority of this increase ($15.7 million) was due to the impact of
including a full 12 months of the JLW business in 2000. The strength of
the U.S. dollar against the Australian dollar has meant that revenue growth
in Australia, a key market in the Asia Pacific region, has not been
reflected in the reported U.S. dollar revenues. The impact of the weak
Australian dollar has been to reduce U.S. dollar reported revenues for the
12 months by $7.3 million when compared to the rates in effect during the
same period last year. In addition, the Australian real estate market
experienced a slowdown in the latter half of 2000 as a result of a Goods
and Service Tax ("GST") introduced mid-year and the impact of the Sydney
Olympics on transaction activity. Within Asia, the pace of economic
recovery continues to vary from country to country with political
instability in Indonesia, Thailand and the Philippines also impacting
market conditions. The Hong Kong and Singapore businesses enjoyed strong
revenue performance, and there were also increased contributions from Japan
and India. During 2000, Japan increased revenue by $2.3 million as a
result of investments in building a Tenant Representation business and the
acquisition of a small property management company mid-year. India
reported increased revenues of $1.4 million.
Asia Pacific had operating expenses of $138.1 million in 2000, as
compared to $111.2 million in 1999, an increase of $26.9 million, or 24.2%.
The impact of including a full 12 months of the JLW business in 2000
increased operating expenses by $18.6 million. Operating expenses for the
region have increased by $4.9 million due to the development and
implementation of a regional business infrastructure for the Capital
Markets, Corporate Property Services and Tenant Representation business
units to support the long-term growth potential for this region. Finally
the expansion of activities in Japan, Korea and India has increased the
operating cost base by $3.5 million compared to 1999. The cost base in
Australia was impacted by increased costs in connection with both preparing
for the introduction of the GST and a reorganization of the business onto a
national basis from a state structure. The impact of the weak Australian
dollar has been to reduce U.S. dollar reported operating expenses for the
12 months by $6.9 million when compared to the rates in effect during the
same period last year.
INVESTMENT MANAGEMENT
The Investment Management segment reported revenues of $108.8 million
in 2000, an increase of $23.8 million, or 28.0%, on the $85.0 million
reported in 1999. Important contributors to this increase were the
performance fees and equity earnings received in relation to the partial
liquidation of the segment's French investment fund. Fees and equity
earnings recognized from the partial liquidation of this fund in 2000
totaled $10.3 million. This fund was structured in such a manner that the
performance incentive fee is received as a preferred distribution of
earnings. Consequently for financial reporting purposes, the fee is
classified as equity earnings rather than advisory fees. There were also
advisory fees and equity earnings of $4.6 million from the Euro 5 and
Income & Growth II Funds launched during the final part of 1999. Finally,
there were other incentive fees incremental to 1999 of $11.5 million.
Operating expenses for Investment Management increased by $11.2
million, or 15.3%, to $84.6 million from $73.4 million. The increases were
primarily attributable to increased incentive compensation consistent with
performance, together with an increase in personnel and occupancy costs
related to new hires for various product launches. In particular, in 2000,
the segment incurred costs of approximately $1.0 million in opening and
maintaining offices in Singapore, Japan and Germany. Compensation costs
were also impacted by the very tight labor market experienced in 2000.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Operating results in 1999 include the results of the acquired COMPASS
businesses for a full twelve months (the acquisition was completed in
October 1998) and the results of JLW effective March 1, 1999.
Operating results in 1998 include the results of COMPASS effective
October 1, 1998.
REVENUE
Total revenue, after elimination of intersegment revenue, increased
$450.9 million, or 148.1%, to $755.4 million in 1999 from $304.5 million in
1998, primarily as a result of the acquisition of COMPASS and the merger
with JLW. In addition, a $7.5 million gain was recognized in 1999 relating
to the disposition of Jones Lang LaSalle's former construction subsidiary,
which was sold in a leveraged buyout in 1996. The increase in revenue was
partially offset by lower management fees and leasing commissions, as well
as lower performance fees generated on the disposition of assets under
management during 1999 as compared to 1998.
OPERATING EXPENSES
Total operating expenses, after elimination of intersegment expenses
and excluding the effect of merger related non-recurring charges, increased
$418.7 million, or 163.2%, to $675.3 million in 1999 as compared with
$256.6 million in 1998, substantially as a result of the acquisition of
COMPASS and the JLW merger. These two transactions also resulted in
increases in personnel and office occupancy costs related to the global
infrastructure added to support the larger size of the combined company, as
well as increased global management and coordination costs associated with
a global organization. In addition, operating expenses increased as a
result of additional goodwill amortization expense relating to the
acquisition of COMPASS and the merger with JLW.
Merger related non-recurring charges totaled $151.4 million in 1999.
$101.6 million of these charges represent non-cash compensation expense
recorded as a result of shares issued to certain former employees of JLW in
connection with the merger. $49.8 million of these charges represent non-
recurring transition and integration costs, of which approximately $8.1
million is attributable to the completion of the integration of the
acquired COMPASS businesses in 1999. The remaining transition expense
relates to the merger with JLW and represents non-capitalizable expenses
such as rebranding, office consolidations and information technology
initiatives.
OPERATING INCOME
The resulting operating income in 1999, excluding the effect of merger
related non-recurring charges, totaled $80.1 million compared to $47.9
million in 1998, an increase of $32.2 million, or 67.2%. Operating income
as a percentage of total revenue, exclusive of merger related charges, was
10.6% for 1999 as compared to 15.7% in 1998. The operating results for 1999
were negatively affected by four primary factors: (i) management's focus on
the integration of the COMPASS and JLW operations instead of the generation
of new business, (ii) increased infrastructure costs associated with the
acquisition of COMPASS and the merger with JLW, (iii) a delay in the
realization of anticipated cost savings from the JD Edwards property
accounting and information system and (iv) lower performance fees generated
on the disposition of certain assets under management.
Including the effect of the merger related non-recurring charges, the
operating loss in 1999 totaled $71.3 million compared to operating income
in 1998 of $37.8 million.
INTEREST EXPENSE
Interest expense, net of interest income, increased $14.0 million to
$18.2 million in 1999 as compared to 1998, primarily as a result of the
acquisition of COMPASS and the related borrowings on the acquisition credit
facility. To a lesser extent, additional borrowings on the revolving credit
facilities as a result of the transition and integration expenses
associated with the acquisition of COMPASS and the merger with JLW,
contributed to the increase in interest expense. In addition, on
October 27, 1999, Jones Lang LaSalle replaced its five-year unsecured
$150.0 million revolving credit facility, $175.0 million term credit
facility and $30.0 million short-term facility with a new $380.0 million
unsecured credit agreement which bears a higher rate of interest.
PROVISION FOR INCOME TAXES
The provision for income taxes decreased $7.9 million, or 59.8%, to
$5.3 million in 1999 as compared to $13.2 million in 1998. The decrease is
primarily attributable to the generally lower level of earnings before
provision for income taxes, exclusive of the compensation expense
associated with the issuance of shares to former JLW employees in
connection with the merger, which is largely nondeductible for tax
purposes. Excluding the impact of merger related compensation expense and
non-recurring transition and integration expense, the effective tax rate on
recurring operations increased from 39.3% in 1998 to 40.5% in 1999. The
increase in the effective tax rate is primarily due to an increase in
nondeductible goodwill amortization related to the merger with JLW and to
the provision of valuation allowances on the tax benefits of certain
foreign net operating loss carryforwards.
NET EARNINGS (LOSS)
Net earnings, excluding the effect of merger related non-recurring
charges, totaled $36.8 million for 1999 as compared to $26.6 million for
1998, an increase of $10.2 million or 38.3%. This increase was primarily
the result of the acquisition of COMPASS and the merger with JLW, partially
offset by the decline in the operating results of the Americas Owner and
Occupier Services segment as discussed previously.
Including the effect of the merger related non-recurring charges, the
net loss for 1999 was $94.8 million compared to net earnings of $20.5
million for 1998.
SEGMENT OPERATING RESULTS
OWNER AND OCCUPIER SERVICES
AMERICAS
Revenue for the Americas region increased $80.6 million, or 37.5%, to
$295.7 million in 1999 compared to $215.1 million in 1998. Increased
revenues were driven substantially by the acquisition of COMPASS and the
merger with JLW, and to a lesser extent by an increased volume of
transactions completed by the Project Management and Tenant Representation
business units, which posted a $7.6 million increase in revenue from
strategic alliance clients. In addition, the Americas region recognized a
gain of $7.5 million associated with the disposition of Jones Lang
LaSalle's former construction subsidiary, which was sold in a leveraged
buyout in December 1996. U.S. GAAP accounting requirements governing the
accounting for this transaction did not permit the recognition of the gain
in prior years.
These revenue gains were partially offset by a reduction in management
fees and leasing commissions generated by the region's Leasing & Management
unit. The reductions are primarily a function of the timing of property
dispositions by clients, as compared to the timing of start dates for new
assignments, in addition to slower new business generation in late 1998 and
early 1999 as a result of management's integration efforts on the COMPASS
acquisition and JLW merger. Leasing commissions have been further impacted
by the high occupancy rates of properties within the portfolio coupled with
a lack of new construction or existing large blocks of office space. This
has resulted in more lease renewals, which generate lower fees than new
leases, than in prior years. To a lesser extent, the revenue for the
Americas region decreased as a result of performance fees generated during
1998 related to the LHO initial public offering.
Operating expenses for the Americas region increased $81.0 million, or
43.8% to $266.0 million in 1999 from $185.0 million in 1998. This increase
is primarily attributable to the acquisition of COMPASS and the merger with
JLW and the resulting increase in personnel, office occupancy and goodwill
amortization costs, in addition to added infrastructure to support the
increased size of the combined company. Operating expenses increased, to a
lesser extent, as a result of the continued expansion into South America
and Canada, resulting in investments in personnel and infrastructure for
those units. Operating expenses also increased due to incremental
depreciation and infrastructure costs associated with the implementation
and rollout of the JD Edwards property accounting and information system.
These costs were partially offset by a cost reduction program which was
initiated in the second half of 1999 and expanded in early 2000 that is
anticipated to yield annualized savings of up to $20 million beginning in
2001. In conjunction with this cost reduction program, the Americas region
recorded employee termination costs of approximately $4.7 million in 1999.
These costs were reflected as integration and transition expenses in the
Consolidated Statement of Earnings.
EUROPE
Revenue for the Europe region, which was substantially a new
reportable segment as a result of the JLW merger and the acquisition of
COMPASS, totaled $258.2 million in 1999. The revenue generated by the
region primarily reflects robust activity within the United Kingdom in the
form of tenant and agency leasing activities and investment sales and
acquisition transactions. In addition, property management, corporate
property services and agency leasing activity in Germany and France, as
well as investment sales and acquisition transactions in Germany, and
valuation transactions in France, were strong in 1999, particularly in the
latter half of the year. The effect of a strong transaction flow was
partially offset by a weakening of both the British pound and the euro
during 1999. Activity in Central and Eastern Europe remained flat due to a
lack of substantial economic growth.
Operating expenses for the region totaled $228.5 million in 1999.
These expenses are composed primarily of personnel and office occupancy
costs, as well as added infrastructure to support the increased size of the
combined company. In addition, these expenses include amortization of
goodwill associated with the merger with JLW.
ASIA PACIFIC
The Asia Pacific region was formed in the last quarter of 1999 through
a consolidation of the Asia and Australasia regions of the Owner and
Occupier Services segment in order to capitalize on efficiencies in the
regional infrastructure, to promote sharing of best practices throughout
the region and to improve the delivery of products and services to clients.
Revenue for the Asia Pacific region, also substantially a new reportable
segment for Jones Lang LaSalle as a result of the JLW merger, totaled
$120.4 million in 1999. This revenue was primarily generated by strong
activity within Hong Kong, representing property management, agency leasing
activity, consulting and valuation services, as well as management and
leasing activity in Australia and investment sales transactions in
Singapore. This region continues to benefit from several positive trends in
the Australian real estate market, including continued economic growth
funded by strong consumer spending and the outsourcing of property
management functions by corporations and the Australian government. A
revival in Asia's real estate activity was boosted by a gradual economic
recovery within the Asian markets in 1999, including a renewed interest
from international investors, primarily in the latter half of the year.
However, conditions vary from country to country, and the benefits from the
recovery in the areas noted above were partially offset by the stagnant
market conditions in other areas of Asia. The currency valuation throughout
most of Asia remained stable for the period, inflation remained low, and
property prices and rents in a number of the Asia markets have begun to
stabilize.
Operating expenses totaled $111.2 million in 1999. These expenses
mainly represent personnel costs and office occupancy costs, as well as
added infrastructure to support the increased size of the combined company.
In addition, these expenses include amortization of goodwill associated
with the merger with JLW.
INVESTMENT MANAGEMENT
Investment Management revenue decreased $3.3 million, or 3.7%, to
$85.0 million in 1999 from $88.3 million in 1998. The decrease for 1999 is
primarily attributable to strong performance fees generated in 1998 on the
disposition of certain assets under management in which Jones Lang LaSalle
had co-investments, including certain hotel properties in connection with
the formation of LHO. In addition, for a portion of 1998, advisory fees
were earned in relation to $1.0 billion in assets under management related
to the CalPERS portfolio. These assets were transferred to the client's new
investment advisor during the third quarter of 1998 and thus no fees were
earned on these assets in 1999. This decline was partially offset by
increased revenue resulting from the merger with JLW and, to a lesser
extent, from a significant acquisition fee earned in 1999, and increased
equity earnings related to co-investments.
Operating expenses increased $3.7 million, or 5.3%, to $73.4 million
in 1999 as compared with $69.7 million in 1998, primarily as a result of
the merger with JLW and added infrastructure to support the increased size
of the combined company. The increase was partially offset by lower levels
of incentive bonuses in 1999, as compared to 1998, as a result of the lower
performance fees generated.
CONSOLIDATED CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
During 2000, cash flows provided by operating activities totaled
$140.3 million compared to cash flows used in operating activities in 1999
of $18.2 million, an improvement of $158.5 million. The cash flows
provided by operating earnings in 2000 can be further divided into cash
generated from operations of $100.9 million (compared to $45.7 million in
1999) and cash provided by balance sheet movements (primarily working
capital management) of $39.4 million (compared to a use of $63.9 million in
1999). The improvement of cash generated from operating earnings of $55.2
million reflects the improved business performance in 2000, together with
the fact that 1999 included significant merger-related integration and
transition expenses. During 2000, Jones Lang LaSalle made considerable
efforts to improve its working capital management, particularly in the area
of receivables. The improvement of $103.3 million in the balance sheet
changes is primarily the result of that focus together with the impact of
the collection in 2000 of the U.S. Federal Tax refund of $13.5 million.
For 1999, cash flows used in operating activities were $18.2 million
compared to cash flows provided by operations in 1998 of $23.0 million.
This difference resulted from an increase in working capital in 1999, as
well as the significant merger-related integration and transition expenses.
CASH FLOWS USED IN INVESTING ACTIVITIES
Jones Lang LaSalle used $66.6 million in investing activities in 2000,
a reduction of $14.3 million from 1999's figure of $80.9 million. This
reduction was as a result of the JLW merger net cash use of $37.3 million
in 1999 offset by increased investment in fixed assets in 2000 of $9.0
million, and an increase in 2000 in other investments (primarily e-
commerce) of $10.3 million. Finally, the net investment in real estate
ventures in 2000 was $7.4 million compared to $3.7 million in 1999.
In 1998 cash used in investing activities was $239.1 million,
primarily reflecting the purchase of COMPASS and significant co-investment
activity (including the investment in LHO) totaling a net $44.5 million.
CASH FLOWS USED IN / PROVIDED BY FINANCING ACTIVITIES
In 2000, Jones Lang LaSalle used $78.2 million in financing activities
as it used the cash generated by its operating activities to fund both the
repayment of debt and the costs of issuing the Euro Notes. In both 1999
and 1998, cash was provided by financing activities to meet the operational
and investment needs of the business, as well as the costs of the COMPASS
acquisition and the JLW merger.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Jones Lang LaSalle has financed its operations,
acquisitions and co-investment activities with internally generated funds,
the common stock of Jones Lang LaSalle and borrowings under its credit
facilities. During the first half of 2000, Jones Lang LaSalle increased
its unsecured credit agreement from $380.0 million to $425.0 million
through the addition of five banks to its credit group. This credit
agreement was comprised of a $250.0 million revolving facility maturing in
October 2002 and a $175.0 million term facility that was scheduled to
mature on October 15, 2000. On July 26, 2000, Jones Lang LaSalle closed
its offering of the Euro Notes, receiving net proceeds of $148.6 million,
which were used to paydown the term facility. On August 29, 2000, the
remaining borrowings under the term facility were fully repaid using
proceeds from the revolving credit facility, and the term facility was
terminated.
As of December 31, 2000, Jones Lang LaSalle has a $250.0 million
revolving credit facility for working capital needs, investments and
acquisitions. Jones Lang LaSalle also had the Euro Notes of euro 165
million and, under the terms of the revolving credit facility, the
authorization to borrow up to $50.0 million under local overdraft
facilities. As of December 31, 2000, there was $85.6 million outstanding
under the revolving credit facility, euro 165.0 million ($155.5 million) of
borrowings under the Euro Notes and short-term borrowings of $8.8 million.
Certain of Jones Lang LaSalle's subsidiaries guarantee the revolving
credit facility and the Euro Notes (the "Facilities"). With respect to the
revolving credit facility, Jones Lang LaSalle must maintain a certain level
of consolidated net worth and a ratio of funded debt to EBITDA. Jones Lang
LaSalle must also meet a minimum interest coverage ratio and minimum
liquidity ratio. Additionally, Jones Lang LaSalle is restricted from,
among other things, incurring certain levels of indebtedness to lenders
outside of the Facilities and disposing of a significant portion of its
assets. Lender approval is required for certain levels of co-investment.
The revolving credit facility bears variable rates of interest based on
market rates. Jones Lang LaSalle sometimes uses interest rate swaps to
convert a portion of the floating rate indebtedness to a fixed rate. The
effective interest rate on the Facilities was 8.42% for 2000 (versus 6.48%
in 1999), including the effect of interest rate swap agreements. There
were no interest rate swap agreements outstanding at December 31, 2000.
Jones Lang LaSalle has additional access to liquidity via various
interest-bearing overdraft facilities and short-term credit facilities of
subsidiaries in Europe and Asia Pacific. Of the $50.0 million authorized
under the revolving credit facility for local overdraft borrowings, Jones
Lang LaSalle has facilities totaling $36.2 million, of which $2.7 million
was outstanding as of December 31, 2000.
Management believes that the revolving credit facility, together with
the Euro Notes, local borrowing facilities and cash flow generated from
operations will provide adequate liquidity and financial flexibility to
meet working capital requirements.
Jones Lang LaSalle expects to continue to pursue co-investment
opportunities with investment management clients in the Americas and Europe
with expansion into Asia Pacific via an Asia Recovery Fund product that is
currently being developed. Co-investment remains very important to the
continued growth of Investment Management, which would likely be negatively
impacted if a substantial decrease in co-investment activity were to occur.
However, the future commitment to co-investment is completely discretionary
(other than with respect to the $15.7 million discussed below) and can be
increased or decreased based on the availability of capital and other
factors. As of December 31, 2000, there were total investments of $74.6
million in 28 separate property or fund co-investments, with additional
capital commitments of $15.7 million for future fundings of co-investments.
The net co-investment funding for 2001 is anticipated to be $11.0 million
(planned co-investment less return of capital from liquidated co-
investments).
Capital expenditures are anticipated to be $47.0 million for 2001,
primarily for ongoing improvements to computer hardware and information
systems, office renewals and expansions and the scheduled replacement of
fleet cars in Europe.
Jones Lang LaSalle had originally allocated up to $10.0 million for
investments in e-commerce opportunities in 2001. This allocation is
currently being re-evaluated given ongoing developments in the high
technology and e-commerce sectors and the capital markets supporting those
sectors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information included in Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations under the caption "Market
and Other Risk Factors" and incorporated by reference herein.
DISCLOSURE OF LIMITATIONS
As the information presented above includes only those exposures that
exist as of December 31, 2000, it does not consider those exposures or
positions which could arise after that date. The information represented
herein has limited predictive value. As a result, the ultimate realized
gain or loss with respect to interest rate and foreign currency
fluctuations will depend on the exposures that arise during the period, the
hedging strategies at the time and interest and foreign currency rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
JONES LANG LASALLE INCORPORATED
CONSOLIDATED FINANCIAL STATEMENTS
Report of KPMG LLP, Independent Auditors. . . . . . . . . . . . 44
Consolidated Balance Sheets as of
December 31, 2000 and 1999. . . . . . . . . . . . . . . . . . 45
Consolidated Statements of Earnings
For the Years Ended December 31, 2000, 1999 and 1998. . . . . 47
Consolidated Statements of Stockholders'
Equity For the Years Ended December 31,
2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . 49
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2000, 1999 and 1998. . . . . 52
Notes to Consolidated Financial Statements. . . . . . . . . . . 55
Quarterly Results of Operations (Unaudited) . . . . . . . . . . 98
SCHEDULES SUPPORTING THE CONSOLIDATED FINANCIAL STATEMENTS:
II - Valuation and Qualifying Accounts. . . . . . . . . . . . . 101
All other schedules have been omitted since the required information
is presented in the financial statements and related notes or is not
applicable.
INDEPENDENT AUDITORS' REPORT
The Stockholders and
Board of Directors of
Jones Lang LaSalle Incorporated:
We have audited the accompanying consolidated financial statements of
Jones Lang LaSalle Incorporated and subsidiaries as listed in the
accompanying index. In connection with our audits of the consolidated
financial statements, we have also audited the financial statement schedule
as listed in the accompanying index. These consolidated financial
statements and financial statement schedule are the responsibility of the
Jones Lang LaSalle's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Jones Lang LaSalle Incorporated and subsidiaries as of December 31, 2000
and 1999, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in note 15 to the consolidated financial statements, Jones
Lang LaSalle Incorporated and subsidiaries changed their method of
accounting for certain lease commission revenue in 2000.
/S/ KPMG LLP
Chicago, Illinois
January 26, 2001,
except as to note 3
which is as of March 16, 2001
JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
($ in thousands, except share data)
2000 1999
--------- ---------
ASSETS
- ------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 18,843 23,308
Trade receivables, net of allowances of $9,261 and $9,871 in
2000 and 1999, respectively . . . . . . . . . . . . . . . . . . . 244,201 270,593
Notes receivable and advances to real estate ventures . . . . . . . 4,286 4,519
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . 6,655 7,045
Income tax refund receivable. . . . . . . . . . . . . . . . . . . . 976 14,500
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 10,811 9,598
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . 23,959 13,673
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,330 5,446
-------- --------
Total current assets. . . . . . . . . . . . . . . . . . . . . 321,061 348,682
Property and equipment, at cost, less accumulated
depreciation of $76,427 and $55,943
in 2000 and 1999, respectively. . . . . . . . . . . . . . . . . . . 90,306 76,470
Intangibles resulting from business acquisitions and JLW merger,
net of accumulated amortization of $43,028 and $27,515
in 2000 and 1999, respectively. . . . . . . . . . . . . . . . . . . 350,129 367,215
Investments in real estate ventures . . . . . . . . . . . . . . . . . 74,565 67,305
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . 12,884 --
Long-term receivables, net. . . . . . . . . . . . . . . . . . . . . . 23,136 27,962
Prepaid pension asset . . . . . . . . . . . . . . . . . . . . . . . . 18,730 23,956
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . 12,317 5,270
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . 4,848 2,279
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . 6,069 5,661
-------- --------
$914,045 924,800
======== ========
JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS - CONTINUED
2000 1999
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities. . . . . . . . . . . . . . $111,738 88,257
Accrued compensation. . . . . . . . . . . . . . . . . . . . . . . . 170,323 142,960
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . 8,836 162,643
Deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . 226 --
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 16,583 26,259
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . 307,706 420,119
Long-term liabilities:
Credit facilities . . . . . . . . . . . . . . . . . . . . . . . . . 85,565 159,743
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,546 --
Deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . 9,547 7,535
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,776 12,878
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 581,140 600,275
Commitments and contingencies
Minority interest in consolidated subsidiaries. . . . . . . . . . . . 567 589
Stockholders' equity:
Common stock, $.01 par value per share,
100,000,000 shares authorized;
30,700,150 and 30,285,472 shares issued and
outstanding as of December 31, 2000 and 1999, respectively. . . . 307 303
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . 461,272 442,699
Unallocated ESOT shares . . . . . . . . . . . . . . . . . . . . . . -- (7)
Deferred stock compensation . . . . . . . . . . . . . . . . . . . . (4,322) (70,106)
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . (107,110) (50,050)
Stock held in trust . . . . . . . . . . . . . . . . . . . . . . . . (397) --
Accumulated other comprehensive income. . . . . . . . . . . . . . . (17,412) 1,097
-------- --------
Total stockholders' equity. . . . . . . . . . . . . . . . . 332,338 323,936
-------- --------
$914,045 924,800
======== ========
See accompanying notes to consolidated financial statements.
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
($ in thousands, except share data)
2000 1999 1998
------------ ------------ ------------
Revenue:
Fee based services. . . . . . . . . . . . . . . . $903,959 736,042 298,296
Equity in earnings from unconsolidated
ventures. . . . . . . . . . . . . . . . . . . . 16,693 6,218 3,911
Gain on sale of business. . . . . . . . . . . . . -- 7,502 --
Other income. . . . . . . . . . . . . . . . . . . 5,171 5,677 2,257
-------- -------- --------
Total revenue . . . . . . . . . . . . . . . 925,823 755,439 304,464
Operating expenses:
Compensation and benefits . . . . . . . . . . . . 581,322 477,658 172,982
Operating, administrative and other . . . . . . . 209,177 161,007 70,164
Depreciation and amortization . . . . . . . . . . 43,126 36,676 13,455
Merger related non-recurring charges:
Stock compensation expense. . . . . . . . . . . . 85,795 101,579 --
Integration and transition expenses . . . . . . . -- 49,822 10,021
-------- -------- --------
Total operating expenses. . . . . . . . . . 919,420 826,742 266,622
Operating income (loss) . . . . . . . . . . . . . 6,403 (71,303) 37,842
Interest expense, net of interest income. . . . . . 27,182 18,211 4,153
-------- -------- --------
Earnings (loss) before provision for
income taxes and minority interest. . . . . . . (20,779) (89,514) 33,689
Net provision for income taxes. . . . . . . . . . . 22,053 5,328 13,224
Minority interest in losses of subsidiaries . . . . (21) -- --
-------- -------- --------
Earnings (loss) before cumulative effect of
change in accounting principle. . . . . . . . . . (42,811) (94,842) 20,465
Cumulative effect of change in accounting principle,
net of tax. . . . . . . . . . . . . . . . . . . . (14,249) -- --
-------- -------- --------
Net earnings (loss) . . . . . . . . . . . . . . . . $(57,060) (94,842) 20,465
======== ======== ========
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments. . . . . $(18,509) 23 444
-------- -------- --------
Comprehensive income (loss) . . . . . . . $(75,569) (94,819) 20,909
======== ======== ========
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS - CONTINUED
2000 1999 1998
------------ ------------ ------------
Basic earnings (loss) per common share before
cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . $ (1.72) (4.20) 1.26
Cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . $ (0.58) -- --
Basic earnings (loss) per common share. . . . . . . $ (2.30) (4.20) 1.26
========== ========== ==========
Basic weighted average shares outstanding . . . . . 24,851,823 22,607,350 16,215,478
========== ========== ==========
Diluted earnings (loss) per common share before
cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . $ (1.72) (4.20) 1.25
Cumulative effect of change in accounting principle $ (0.58) -- --
Diluted earnings (loss) per common share. . . . . . $ (2.30) (4.20) 1.25
========== ========== ==========
Diluted weighted average shares outstanding . . . . 24,851,823 22,607,350 16,387,721
========== ========== ==========
See accompanying notes to consolidated financial statements.
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
($ in thousands, except share data)
Accumu-
lated
Other
Additi- Unallo- Deferred Compre-
Common Stock tional cated Stock Retained Shares hensive
------------------- Paid-In ESOT Compen- Earnings Held in Income
Shares Amount Capital Shares sation (Deficit) Trust (Loss) Total
---------- ------ -------- ------- -------- --------- -------- ------- -------
Balances at
December 31,
1997 . . . . . . 16,200,000 $162 121,778 -- -- 24,327 -- 630 146,897
Net earnings . -- -- -- -- -- 20,465 -- -- 20,465
Shares issued
under stock
purchase plan 64,176 1 1,765 -- -- -- -- -- 1,766
Cumulative
effect of
foreign
currency
translation
adjustments . -- -- -- -- -- -- -- 444 444
---------- ----- ------- -------- -------- -------- -------- -------- --------
Balances at
December 31,
1998 . . . . . . 16,264,176 163 123,543 -- -- 44,792 -- 1,074 169,572
Net loss . . . -- -- -- -- -- (94,842) -- -- (94,842)
Shares issued in
connection with:
Stock option
plan. . . . 21,292 -- 495 -- -- -- -- -- 495
Stock purchase
programs. . 199,587 2 3,695 -- -- -- -- -- 3,697
Share activity
related to JLW
merger:
Shares issued
at closing. 14,254,116 143 355,233 (9) (160,253) -- -- -- 195,114
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Accumu-
lated
Other
Additi- Unallo- Deferred Compre-
Common Stock tional cated Stock Retained Shares hensive
------------------- Paid-In ESOT Compen- Earnings Held in Income
Shares Amount Capital Shares sation (Deficit) Trust (Loss) Total
---------- ------ -------- ------- -------- --------- -------- ------- -------
Adjustment
shares sub-
sequently
retained. . (453,699) (5) (8,462) -- -- -- -- -- (8,467)
ESOT shares
allocated . -- -- 1,597 2 -- -- -- -- 1,599
Stock compensa-
tion adjust-
ments. . . . -- -- (33,402) -- 27,906 -- -- -- (5,496)
Amortization of
deferred stock
compensation -- -- -- -- 62,241 -- -- -- 62,241
Cumulative
effect of
foreign
currency
translation
adjustments. -- -- -- -- -- -- -- 23 23
---------- ----- ------- -------- -------- -------- -------- -------- --------
Balances at
December 31,
1999 . . . . . . 30,285,472 303 442,699 (7) (70,106) (50,050) -- 1,097 323,936
Net loss . . . -- -- -- -- -- (57,060) -- -- (57,060)
Shares issued in
connection with:
Stock option
plan. . . . 461,250 5 5,674 -- (5,679) -- -- -- --
Amortization of
shares issued
in connection
with stock
option plan -- -- -- -- 1,357 -- -- -- 1,357
Stock purchase
programs. . 255,237 2 4,379 -- -- -- -- -- 4,381
Shares held
in trust . . -- -- -- -- -- -- (397) -- (397)
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Accumu-
lated
Other
Additi- Unallo- Deferred Compre-
Common Stock tional cated Stock Retained Shares hensive
------------------- Paid-In ESOT Compen- Earnings Held in Income
Shares Amount Capital Shares sation (Deficit) Trust (Loss) Total
---------- ------ -------- ------- -------- --------- -------- ------- -------
Share activity
related to JLW
merger:
Adjustment
shares sub-
sequently
retained. . (372) -- (141) -- -- -- -- -- (141)
ESOT shares
allocated . -- -- 9,900 7 -- -- -- -- 9,907
Shares repur-
chased for
payment of
taxes on
ESOT shares
allocated . (301,437) (3) (4,037) -- -- -- -- -- (4,040)
Stock compensa-
tion adjust-
ments. . . -- -- 2,798 -- (2,375) -- -- -- 423
Amortization
of deferred
stock com-
pensation. -- -- -- -- 72,481 -- -- -- 72,481
Cumulative
effect of
foreign
currency
translation
adjustments. -- -- -- -- -- -- -- (18,509) (18,509)
---------- ---- ------- -------- -------- -------- -------- -------- -------
Balances at
December 31,
2000 . . . . . . 30,700,150 $307 461,272 -- (4,322) (107,110) (397) (17,412) 332,338
========== ==== ======= ======== ======== ======== ======== ======== =======
See accompanying notes to consolidated financial statements.
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
($ in thousands)
2000 1999 1998
------------ ------------ ------------
Cash flows from operating activities:
Cash flows from earnings:
Net earnings (loss) . . . . . . . . . . . . . . . $(57,060) (94,842) 20,465
Reconciliation of net earnings (loss)
to net cash provided by earnings:
Cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . 14,249 -- --
Depreciation and amortization . . . . . . . . . 43,126 36,676 13,455
Equity in earnings and gain on sale from
unconsolidated ventures . . . . . . . . . . . (16,693) (6,218) (3,911)
Operating distributions from real estate
ventures. . . . . . . . . . . . . . . . . . . 18,126 4,140 3,731
Provision for loss on receivables and
other assets. . . . . . . . . . . . . . . . . 5,464 2,744 4,009
Stock compensation expense. . . . . . . . . . . 85,795 101,143 --
Amortization of deferred compensation . . . . . 6,474 2,070 229
Amortization of debt issuance costs . . . . . . 1,444 -- --
---------- ---------- ----------
Net cash provided by earnings . . . . . . 100,925 45,713 37,978
Cash flows from changes in working capital:
Receivables . . . . . . . . . . . . . . . . . . 9,548 (49,962) (28,504)
Prepaid expenses and other assets . . . . . . . (7,305) (10,442) (3,760)
Deferred tax assets and income tax
refund receivable . . . . . . . . . . . . . . 7,991 (19,479) --
Accounts payable, accrued liabilities
and accrued compensation. . . . . . . . . . . 29,181 15,943 17,286
---------- ---------- ----------
Net cash flows from changes in
working capital . . . . . . . . . . . . 39,415 (63,940) (14,978)
---------- ---------- ----------
Net cash provided by (used in)
operating activities. . . . . . . . . . 140,340 (18,227) 23,000
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
2000 1999 1998
------------ ------------ ------------
Cash flows used in investing activities:
Net capital additions--property and equipment . (45,804) (36,848) (15,592)
Cash balances assumed in Jones Lang Wootton
merger, net of cash paid and transaction
costs . . . . . . . . . . . . . . . . . . . . -- (37,288) --
Other acquisitions and investments,
net of cash acquired and transaction costs. . (13,333) (3,030) (178,919)
Investments in real estate ventures:
Capital contributions and advances to
real estate ventures. . . . . . . . . . . . (15,214) (25,491) (51,347)
Distributions, repayments of advances
and sale of investments . . . . . . . . . . 7,761 21,790 6,762
---------- ---------- ----------
Net cash used in investing activities . . (66,590) (80,867) (239,096)
Cash flows provided by (used in) financing
activities:
Proceeds from borrowings under credit
facilities. . . . . . . . . . . . . . . . . . 262,581 326,004 356,929
Repayments of borrowings under credit
facilities. . . . . . . . . . . . . . . . . . (490,566) (223,479) (154,552)
Proceeds from issuance of bonds, net of
financing costs . . . . . . . . . . . . . . . 148,596 -- --
Shares repurchased for payment of taxes on
ESOT distribution . . . . . . . . . . . . . . (816) -- --
Common stock issued under stock option plan
and stock purchase programs . . . . . . . . . 1,990 2,936 --
---------- ---------- ----------
Net cash provided by (used in)
financing activities. . . . . . . . . . (78,215) 105,461 202,377
---------- ---------- ----------
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
2000 1999 1998
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . . . . . (4,465) 6,367 (13,719)
Cash and cash equivalents, January 1. . . . . . . 23,308 16,941 30,660
---------- ---------- ----------
Cash and cash equivalents, December 31. . . . . . $ 18,843 23,308 16,941
========== ========== ==========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . $ 28,548 20,448 3,215
Taxes, net of refunds . . . . . . . . . . . . . 5,620 20,763 2,881
Non-cash investing and financing activities:
Acquisitions and merger:
Shares issued in connection with
merger and acquisition. . . . . . . . . . . $ -- 141,918 --
Fair value of assets acquired . . . . . . . . (13,599) (218,514) (23,257)
Fair value of liabilities assumed . . . . . . 20,162 187,972 22,652
Goodwill. . . . . . . . . . . . . . . . . . . (7,012) (151,694) (178,314)
---------- ---------- ----------
Cash paid, net of cash balances
assumed . . . . . . . . . . . . . . . . $ (449) (40,318) (178,919)
========== ========== ==========
See accompanying notes to consolidated financial statements.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except where otherwise noted)
(1) ORGANIZATION
Jones Lang LaSalle Incorporated ("Jones Lang LaSalle") is a leading
full-service real estate services firm that provides investment management,
hotel acquisition and disposition, strategic advisory and valuation,
property management, corporate property services, development services,
project management, tenant representation, agency leasing, investment
disposition and acquisition, financing and capital placement services on a
local, regional and global basis. With more than 12,000 employees,
including over 5,000 directly reimbursable property maintenance employees,
in more than 100 markets on five continents, Jones Lang LaSalle is able to
satisfy local, regional and international service needs. The ability to
provide this network of services around the globe was solidified effective
March 11, 1999 with the merger of the business of the Jones Lang Wootton
companies ("JLW") with those of LaSalle Partners Incorporated ("LaSalle
Partners"). In connection with this merger, the name of the company was
changed from LaSalle Partners Incorporated to Jones Lang LaSalle
Incorporated (see Note 4).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Jones
Lang LaSalle and their majority-owned-and-controlled partnerships and
subsidiaries. All material intercompany balances and transactions have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
CASH HELD FOR OTHERS
Jones Lang LaSalle controls certain cash and cash equivalents as
agents for its investment and property management clients. Such amounts are
not included in the accompanying Consolidated Balance Sheets.
STATEMENT OF CASH FLOWS
Cash and cash equivalents include demand deposits and investments in
U.S. Treasury instruments (generally held available for sale) with
maturities of three months or less. The combined carrying value of such
investments of $1.6 million and $5.6 million at December 31, 2000 and 1999,
respectively, approximates their market value.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or a change in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying value of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell.
INVESTMENTS IN REAL ESTATE VENTURES AND OTHER CORPORATIONS
Jones Lang LaSalle has limited partner, general partner and limited
liability company interests in various real estate ventures with interests
generally ranging from less than 1% to 49.5% which are accounted for using
the equity method. In instances where Jones Lang LaSalle exercises
temporary control over co-investments, such investments are accounted for
under the equity method.
Jones Lang LaSalle has made investments in certain high technology and
e-commerce related private corporations. The carrying value of these
investments at December 31, 2000 is $12.9 million. These investments are
for less than 20% of the voting stock of the corporations and Jones Lang
LaSalle is not able to exercise significant influence over the operating
and financial policies of these corporations. Such investments are
accounted for under the cost method.
INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS AND JLW MERGER
Intangibles resulting from business acquisitions and the JLW merger
are amortized on a straight-line basis over the estimated lives (generally
eight to 40 years) of the related assets. Jones Lang LaSalle periodically
evaluates the recoverability of the carrying amount of intangibles
resulting from business acquisitions and mergers by assessing whether any
impairment indications are present, including substantial recurring
operating deficits or significant adverse changes in legal or economic
factors that affect the businesses acquired. If such analysis indicates
impairment, the intangible asset would be adjusted in the period such
changes occurred based on its estimated fair value, which is derived from
expected cash flow of the businesses.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Jones Lang LaSalle's financial instruments include cash and cash
equivalents, receivables, accounts payable, notes payable, interest rate
swap agreements and foreign currency exchange contracts. The estimated
fair value of cash and cash equivalents, receivables and payables
approximates their carrying amounts due to the short maturity of these
instruments. The estimated fair value of Jones Lang LaSalle's revolving
credit facility and short-term borrowings approximates their carrying value
due to their variable interest rate terms. The fair value of the Euro
Notes was euro 175.7 million, or $165.7 million which was the mid-market
value as of December 31, 2000. The fair value of interest rate swaps is
estimated, using third-party quotes, as the amount that Jones Lang LaSalle
would receive or pay to execute a new agreement with terms identical to
those remaining on the current agreement, considering current interest
rates. The fair value of forward foreign currency exchange contracts is
estimated by valuing the net position of the contracts using the applicable
spot rates and forward rates as of the reporting date.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries located outside the United
States, except those subsidiaries located in highly inflationary economies,
are generally measured using the local currency as the functional currency.
The assets and liabilities of these subsidiaries are translated at the
rates of exchange at the balance sheet date with the resulting translation
adjustments included in the balance sheet as a separate component of
stockholders' equity (accumulated other comprehensive income) and in the
statement of earnings (other comprehensive income - foreign currency
translation adjustments). Income and expense are translated at average
monthly rates of exchange. Gains and losses from foreign currency
transactions are included in net earnings. For subsidiaries operating in
highly inflationary economies, the associated gains and losses from balance
sheet translation adjustments are included in net earnings.
DERIVATIVE INSTRUMENTS
Jones Lang LaSalle has entered into interest rate swap agreements as a
hedge against a portion of its credit facilities in order to manage
interest rate risk. Fees, if any, related to these agreements are
amortized using the effective interest method over the life of the
agreements. As of December 31, 2000, Jones Lang LaSalle had no interest
rate swap agreements outstanding.
Interest rate swap agreements are contracts that represent an exchange
of interest payments, and the underlying principal balances of the assets
or liabilities are not affected. Net settlement amounts are reported as
adjustments to interest income or interest expense. Gains and losses from
the termination of interest rate swaps are deferred and amortized over the
remaining terms of the interest rate swap agreements. If the balance of
the liability falls below that of the notional amount of the derivative,
the excess portion of the derivative is marked-to-market with a
corresponding effect on current earnings.
Jones Lang LaSalle also enters into forward foreign currency exchange
contracts to hedge currency risks and reduce its exposure resulting from
fluctuations in the designated foreign currency associated with existing
commitments, assets or liabilities. At December 31, 2000, Jones Lang
LaSalle had forward foreign currency exchange contracts in effect with a
notional value of $74.9 million and a market and carrying value of $2.4
million.
Jones Lang LaSalle does not enter into derivative financial
instruments for trading or speculative purposes.
EARNINGS PER SHARE
The basic and diluted losses per common share for the years ended
December 31, 2000 and 1999 were calculated based on basic weighted average
shares outstanding of 24,851,823 and 22,607,350, respectively. As a result
of the net loss incurred during these the periods, diluted weighted average
shares outstanding for the years ended December 31, 2000 and 1999 do not
give effect to common stock equivalents as to do so would be anti-dilutive.
These common stock equivalents consist principally of outstanding stock
options whose exercise price was less than the average market price of
Jones Lang LaSalle's stock during these periods and shares to be issued
under employee stock compensation programs. Basic earnings per share for
the year ended December 31, 1998 was based on weighted average shares
outstanding of 16,215,478. Diluted earnings per share for the year ended
December 31, 1998 was based on weighted average shares outstanding of
16,387,721. This reflects an increase of 172,243 shares which primarily
represents the dilutive effect of outstanding stock options whose exercise
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
price was less than the average market price of Jones Lang LaSalle's stock
for the period and the dilutive effect of shares to be issued under
employee stock compensation programs.
REVENUE RECOGNITION
Advisory and management fees are recognized in the period in which the
services are performed. Transaction commissions are recorded as income at
the time the related services are provided unless future contingencies
exist. Development services fees are generally recognized as billed, which
approximates the percentage of completion method of accounting. Incentive
fees are recorded in accordance with specific terms of each compensation
agreement and are typically tied to performance that is measured at
contractual milestones, such as the disposition of an asset, or at the
conclusion of a given project. Fees recognized in the current period that
are expected to be received beyond one year have been discounted to the
present value of future expected payments. During the final quarter of
2000, Jones Lang LaSalle implemented Staff Accounting Bulletin 101 -
Revenue Recognition in Financial Statements ("SAB 101") effective
January 1, 2000. This is discussed further in Note 15. Pursuant to
contractual arrangements, accounts receivable includes unbilled amounts of
$36.8 million and $70.9 million at December 31, 2000 and 1999,
respectively. This decrease is primarily due to the adoption of SAB 101.
DEPRECIATION
Depreciation and amortization is calculated for financial reporting
purposes primarily using the straight-line method based on the estimated
useful lives of the assets. Furniture, fixtures and equipment totaling
$37.7 million and $34.4 million at December 31, 2000 and 1999,
respectively, are generally depreciated over seven years. Computer
equipment and software totaling $84.7 million and $59.7 million at
December 31, 2000 and 1999, respectively, are generally depreciated over
two to seven years. Leasehold improvements totaling $29.7 million and
$26.2 million at December 31, 2000 and 1999, respectively, are amortized
over the lease periods which generally range from one to ten years.
Automobiles totaling $14.6 million and $12.1 million at December 31, 2000
and 1999 are generally depreciated using a declining balance method over
three to six years.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
STOCK-BASED COMPENSATION
Jones Lang LaSalle grants stock options for a fixed number of shares
to employees with an exercise price equal to the fair value of the shares
at the date of grant. Jones Lang LaSalle follows the requirements of the
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees" in accounting for stock-based compensation, and
accordingly, recognizes no compensation expense for stock option grants,
but provides the pro forma disclosures required by the Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-
Based Compensation."
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Jones Lang LaSalle has also established stock compensation programs
for certain of its employees pursuant to which they are awarded Jones Lang
LaSalle common stock if they are employed at the end of the vesting period.
These stock compensation programs meet the definition of fixed awards as
defined in SFAS No. 123, and therefore, Jones Lang LaSalle recognizes
compensation expense, based on the market value of awards on the grant
date, over the vesting period.
See note 12 for additional information on stock-based compensation.
RECLASSIFICATIONS
Certain 1999 and 1998 amounts have been reclassified to conform with
the 2000 presentation.
(3) SUBSEQUENT EVENTS
On February 6, 2001, Jones Lang LaSalle announced that its Board of
Directors approved a share repurchase program. On March 8, 2001, Jones
Lang LaSalle repurchased and cancelled 473,962 shares of its own common
stock at a price of $14.65 per share.
On March 16, 2001, Jones Lang LaSalle became aware that HIH Insurance
Ltd. ("HIH") and its subsidiaries, an Australian insurance group, had
entered provisional liquidation on the previous evening and thus had ceased
writing new business and was to be placed in run-off mode. HIH had
provided public liability coverage to the Australian operations of JLW for
the years from 1994 to 1997, which coverage would typically provide
protection against, among other things, personal injury claims arising out
of accidents occurring in properties that Jones Lang LaSalle had property
management responsibilities for. Under the terms of the policies, Jones
Lang LaSalle's deductible on these claims was $0, and therefore, HIH had
responsibility for "day-to-day" management of claims and potential claims
once they had been notified of them. Given the nature of these claims,
there are a large number of claims that have yet to be resolved and it is
possible that further claims will be made.
It is likely that a "Scheme of Arrangement" will be put in place to
deal with outstanding claim payments, and it is unclear at this stage the
extent to which claims will be paid. In addition, given the difficult
nature of estimating liabilities for this type of insurance company, it is
unlikely that there will be sufficient certainty as to allow any claim
payments to be paid by HIH for at least twelve months. Jones Lang LaSalle
is currently working with its professional advisors to better understand
and quantify (1) the claims which remain open and may be made, (2) the
ongoing exposures related to these claims, (3) the likelihood that HIH will
be able to fund these exposures, and (4) the potential for these claims to
be covered by other insurance policies with other insurance companies.
In the opinion of management, the ultimate resolution of the HIH run-
off is not expected to have a material adverse effect on the financial
condition or liquidity of Jones Lang LaSalle.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(4) ACQUISITION AND MERGER
COMPASS ACQUISITION
On October 1, 1998, Jones Lang LaSalle acquired all of the common
stock of the following real estate service companies formerly owned by Lend
Lease Corporation ("Lend Lease"): Compass Management and Leasing, Inc. and
its wholly owned subsidiaries; The Yarmouth Group Property Management,
Inc.; and ERE Yarmouth Retail, Inc. (formerly Compass Retail, Inc.). On
October 31, 1998, Jones Lang LaSalle also acquired Compass Management and
Leasing (Australia) Pty Limited, the Lend Lease property management and
corporate property services business in Australia. Atlanta-based Compass
Management and Leasing, Inc. was a global real estate management firm, with
operations across the United States, United Kingdom, South America and
Australia. Jones Lang LaSalle paid $180.0 million in cash for all of the
acquired companies ("COMPASS"). The purchase of the companies also
includes provisions for an earnout payment of up to $77.5 million over five
years. Jones Lang LaSalle does not anticipate that the provisions for
earnout payment will be met, and therefore, does not anticipate making
payment under the provisions. The acquisition was accounted for as a
purchase and, accordingly, operating results of this business subsequent to
the date of acquisition are included in the accompanying Consolidated
Statements of Earnings. The excess purchase price over the fair value of
the identifiable assets and liabilities acquired was $175.6 million,
including transaction costs, of which $35.1 million was allocated to
management contracts and is being amortized on a straight-line basis over
eight years, and $140.5 million was allocated to goodwill and is being
amortized on a straight-line basis over 40 years based on Jones Lang
LaSalle's estimate of useful lives.
JONES LANG WOOTTON MERGER
On March 11, 1999, LaSalle Partners merged its business with that of
JLW and changed its name to Jones Lang LaSalle Incorporated. In accordance
with the purchase and sale agreements, Jones Lang LaSalle issued 14.3
million shares of its common stock on March 11, 1999, plus $6.2 million in
cash (collectively, the "Consideration") in connection with the acquisition
of the property and asset management, advisory and other real estate
businesses operated by a series of JLW partnerships and corporations in
Europe, Asia, Australia, North America and New Zealand. Approximately 12.5
million of the shares were issued to former JLW equity owners (having both
direct and indirect ownership) and 1.8 million of the shares were placed in
an employee stock ownership trust ("ESOT") to be distributed by
December 31, 2000 to selected employees of the former JLW entities.
Included in the total ESOT shares are .9 million shares that were allocated
on March 11, 1999 and .2 million that were allocated on December 31, 1999,
with the remaining .7 million shares allocated by December 31, 2000.
Issuance of the shares was not registered under the U.S. securities laws,
and the shares are generally subject to a contractual one-year restriction
on sale.
Included in the 14.3 million shares originally issued were 1.2 million
shares which were subject to a post-closing net worth adjustment. The
procedures related to the post-closing net worth calculation were completed
during the third quarter of 1999 and resulted in 0.5 million shares being
retained by Jones Lang LaSalle and an additional $0.5 million in cash
consideration being due to certain of the former JLW owners.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The transaction, which was principally structured as a share exchange,
has been treated as a purchase and is being accounted for using both APB
Opinion No. 16, "Business Combinations" and APB Opinion No. 25, "Accounting
for Stock Issued to Employees" as reflected in the following table.
Accordingly, JLW's operating results have been included in Jones Lang
LaSalle's results as of March 1, 1999, the effective date of the merger for
accounting purposes.
Accounting Method No. of % of Shares
(shares in millions) Shares Issued
-------------------- -------- -----------
APB Opinion No. 16 7.2 52%
APB Opinion No. 25 -
Fixed Award 5.3 38%
Variable Award 1.3 10%
---- ----
Net Shares Issued 13.8 100%
==== ====
As noted in the previous table, 7.2 million shares, or 52% of the
shares issued, are subject to accounting under APB Opinion No. 16. The
value of those shares totaled $141.8 million for accounting purposes based
on the five-day average closing stock price surrounding the date the
financial terms of the merger with JLW were substantially complete,
discounted at a rate of 20% for transferability restrictions. The value of
the shares, in addition to a cash payment of approximately $6.2 million and
capitalizable transaction costs of approximately $15.8 million were
allocated to the identifiable assets acquired and liabilities assumed,
based on management's estimate of fair value, which totaled $247.5 million
and $245.9 million, respectively. Included in the assets acquired was
$32.2 million in cash. Included in the liabilities assumed was $47.4
million of obligations to former partners for undistributed earnings, of
which none remains unpaid at December 31, 2000. The resulting excess
purchase price of $162.2 million was allocated to goodwill which is being
amortized on a straight-line basis over 40 years based on management's
estimate of useful lives.
The remaining 6.6 million shares, or 48% of the shares issued, and $.5
million in cash paid are subject to accounting under APB Opinion No. 25.
Accordingly, shares issued are being accounted for as compensation expense
or deferred compensation expense to the extent they are subject to
forfeiture or vesting provisions. Included in the 6.6 million shares are
1.3 million shares that are subject to variable stock award plan
accounting. The remaining 5.3 million shares and the $.5 million in cash
paid are subject to fixed stock award plan accounting. Compensation expense
incurred for the year ended December 31, 2000 and 1999 totaled $85.8
million and $101.6 million, respectively, inclusive of the compensation
expense recognized at closing and the amortization of deferred compensation
for the periods.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MERGER RELATED INTEGRATION AND TRANSACTION EXPENSES
As a result of the acquisition of Compass in late 1998 and the JLW
merger in 1999, Jones Lang LaSalle has incurred substantial non-recurring
integration and transition expenses. These expenses can be grouped into
the following categories:
Twelve Months
Ended
December 31,
1999
-------------
Severance and other payroll costs . . $24.7 million
Marketing and branding initiatives. . 8.7 million
Professional fees . . . . . . . . . . 7.9 million
Travel/meeting costs. . . . . . . . . 4.7 million
Office closures . . . . . . . . . . . 3.8 million
-------------
Total . . . . . . . . . . . . . . $49.8 million
=============
The severance and other payroll costs primarily relate to the
redundancy costs associated with the costs of reengineering the back-office
service delivery model in the United States, former LaSalle Partners
employees who were made redundant as a result of these transactions and
redundancies across the three former companies that were not anticipated or
planned at the original transaction dates. The integration efforts post
the JLW merger resulted in certain excess LaSalle Partners offices in the
United States being identified. The closure of these offices incurred
expense including the write off of leasehold improvements, furniture and
equipment together with an estimate of the lease obligation from the date
that the office was vacated. The former JLW legal entities incurred
significant audit, legal and other professional fees related to the ongoing
regulatory process that could not be capitalized under APB 16.
Professional fees were also incurred with regard to both the integration of
technology and communication systems and the back-office review discussed
above.
As a result of the JLW Merger, a significant and aggressive global re-
branding initiative was launched to better communicate the strengths of the
new business and its global platform. This included logo design, creation
and installation of new signage on all office buildings, purchase of new
letterhead and business cards and creation of new marketing materials. The
complexity of the JLW merger and the importance to the merged business of
employee retention meant that it was essential there was proper
communication and understanding of the merger and the one firm concept
within the respective firms. To facilitate this, a number of meetings were
held with global attendees. In addition, senior management held a number
of meetings around the world to better inform clients, analysts and
investors on the benefits of the JLW merger.
(5) DISPOSITION
Effective December 31, 1996, Jones Lang LaSalle sold its Construction
Management business and certain related assets to a former member of
management for a $9.1 million note. The note, which is secured by the
current and future assets of the business, is due December 31, 2006 and
bears interest at rates of 6.8% to 10.0%, with interest payments due
annually. Annual principal repayments began in January 1998. The
outstanding balance of this loan as of December 31, 2000 is $7.3 million.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Under the terms of the Asset Purchase Agreement, Jones Lang LaSalle
agreed to provide certain financial assistance and administrative and
financial services, at cost, beginning in January 1997. The nature of
these arrangements prohibited Jones Lang LaSalle from recognizing the sale
as a divestiture prior to December 31, 1999. Jones Lang LaSalle accounted
for the results of operations, including principal and interest received on
the note, in a method similar to the equity method of accounting. As such,
principal and interest received under the note were treated as a reduction
of such net assets and as a reserve, if necessary, for any anticipated
financial exposure under the terms of the Asset Purchase Agreement with the
remainder recognized as income. Revenue recognized for the years ended
December 31, 1999 and 1998 was $1.8 million and $1.3 million, respectively,
and has been reflected in Fee Based Services in the accompanying
Consolidated Statements of Earnings.
As of December 31, 1999, Jones Lang LaSalle had received substantial
principal payments on its note receivable and is no longer obligated to
provide financial assistance to the Construction Management business under
the Asset Purchase Agreement. Accordingly, Jones Lang LaSalle recognized
the disposition as a divestiture at December 31, 1999 and has recognized a
resulting gain of $7.5 million in the Consolidated Statement of Earnings.
(6) BUSINESS SEGMENTS
Jones Lang LaSalle manages its business along a combination of
functional and geographic lines. In the fourth quarter of 2000, Jones Lang
LaSalle consolidated its Hotel Services segment into its respective Owner
and Occupier Services segments. Accordingly, operations are now classified
into four business segments: the three geographic regions of Owner and
Occupier Services, (i) Americas, (ii) Europe and (iii) Asia Pacific, and
(iv) the global business of Investment Management. The Owner and Occupier
Services business is operated on a geographic basis and consists primarily
of tenant representation and agency leasing, capital markets and valuation
services (collectively, "implementation services") and property management,
corporate property services, development services and project management
services (collectively, "management services"). The Investment Management
segment provides real estate investment management services to
institutional investors, corporations, and high net worth individuals.
Results for 1999 and 1998 have been realigned based upon the current
business segments.
Total revenue by industry segment includes revenue derived from
services provided to other segments. Operating income represents total
revenue less direct and indirect allocable expenses. Jones Lang LaSalle
allocates all expenses, other than interest and income taxes, as nearly all
expenses incurred benefit one or more of the segments. Merger related non-
recurring charges are not allocated to the segments.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Summarized financial information by business segment for 2000, 1999
and 1998 are as follows ($ in thousands):
2000 1999 1998
-------- -------- --------
OWNER AND OCCUPIER SERVICES -
AMERICAS
Revenue:
Implementation services . . . $181,777 164,293 119,928
Management fees . . . . . . . 139,292 117,395 82,330
Equity earnings . . . . . . . 478 873 369
Other services. . . . . . . . 847 1,970 10,168
Gain on sale of business. . . -- 7,502 --
Intersegment revenue. . . . . 1,898 3,661 2,353
-------- -------- --------
324,292 295,694 215,148
Operating expenses:
Compensation, operating and
administrative expenses . . 275,881 246,047 176,184
Depreciation and
amortization. . . . . . . . 21,505 19,905 8,787
-------- -------- --------
Operating income. . . . $ 26,906 29,742 30,177
======== ======== ========
EUROPE
Revenue:
Implementation services . . . $273,093 200,939 831
Management fees . . . . . . . 81,087 54,217 755
Other services. . . . . . . . 2,227 2,997 168
-------- -------- --------
356,407 258,153 1,754
Operating expenses:
Compensation, operating and
administrative expenses . . 303,716 220,427 1,243
Depreciation and
amortization. . . . . . . . 11,713 8,106 47
-------- -------- --------
Operating income. . . . $ 40,978 29,620 464
======== ======== ========
ASIA PACIFIC
Revenue:
Implementation services . . . $ 91,196 83,359 1,543
Management fees . . . . . . . 44,968 36,617 81
Other services. . . . . . . . 2,069 437 6
-------- -------- --------
138,233 120,413 1,630
Operating expenses:
Compensation, operating and
administrative expenses . . 131,956 106,221 2,883
Depreciation and
amortization. . . . . . . . 6,102 5,004 107
-------- -------- --------
Operating income
(loss). . . . . . . . $ 175 9,188 (1,360)
======== ======== ========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
2000 1999 1998
-------- -------- --------
INVESTMENT MANAGEMENT
Revenue:
Implementation services . . . $ 7,228 11,630 6,402
Advisory fees . . . . . . . . 85,261 67,560 77,140
Equity earnings . . . . . . . 16,215 5,447 3,542
Other services. . . . . . . . 85 203 1,201
Intersegment revenue. . . . . -- 136 --
-------- -------- --------
108,789 84,976 88,285
Operating expenses:
Compensation, operating and
administrative expenses . . 80,844 69,767 65,189
Depreciation and
amortization. . . . . . . . 3,806 3,661 4,514
-------- -------- --------
Operating income. . . . $ 24,139 11,548 18,582
======== ======== ========
Total segment revenue . . . . . . $927,721 759,236 306,817
Intersegment revenue
eliminations. . . . . . . . . . (1,898) (3,797) (2,353)
-------- -------- --------
Total revenue . . . . . 925,823 755,439 304,464
-------- -------- --------
Total segment operating
expenses. . . . . . . . . . . . 835,523 679,138 258,954
Intersegment operating
expense eliminations. . . . . . (1,898) (3,797) (2,353)
-------- -------- --------
Total operating
expenses before
merger related
non-recurring
charges. . . . . . . . 833,625 675,341 256,601
-------- -------- --------
Merger related non-
recurring charges. . . 85,795 151,401 10,021
-------- -------- --------
Operating income
(loss) . . . . . . . . $ 6,403 (71,303) 37,842
======== ======== ========
Identifiable assets by segment are those assets that are used by or
are a result of each segment's business. Corporate assets are principally
cash and cash equivalents, office furniture and computer hardware and
software.
The following table reconciles segment identifiable assets to
consolidated assets, investments in real estate ventures to consolidated
investments in real estate ventures and fixed asset expenditures to
consolidated fixed asset expenditures.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
2000 1999 1998
----------------------------- ----------------------------- --------
Invest- Invest-
ments Fixed ments Fixed Fixed
Identi- in Real Asset Identi- in Real Asset Asset
($ in fiable Estate Expen- fiable Estate Expen- Expen-
thousands) Assets Ventures ditures Assets Ventures ditures ditures
------- -------- -------- -------- -------- -------- ---------
Owner and
Occupier
Services:
Americas . . .$459,563 $ 13,522 $14,819 $429,534 $ 9,604 $ 19,294 $14,022
Europe . . . . 238,690 -- 16,964 227,757 -- 10,328 --
Asia Pacific . 147,948 -- 9,590 152,028 -- 5,887 30
Investment
Management . . 47,218 61,043 1,976 107,000 57,701 3,999 1,540
Corporate . . . 20,626 -- 2,757 8,481 -- 763 --
-------- -------- -------- -------- ------- ------- -------
Consolidated. .$914,045 $ 74,565 $ 46,106 $924,800 $ 67,305 $ 40,271 $15,592
======== ======== ======== ======== ======== ======== =======
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Jones Lang LaSalle conducts business in two countries which
individually comprise over 10% of total revenue and total assets in 2000.
Geographic segment information is as follows ($ in thousands):
Total Total
Revenue Assets
-------- --------
United States . . . . . . . . $375,277 480,017
United Kingdom. . . . . . . . 189,314 176,926
Other foreign countries . . . 361,232 257,102
-------- --------
$925,823 914,045
======== ========
(7) INVESTMENTS IN REAL ESTATE VENTURES
Jones Lang LaSalle has invested in certain real estate ventures that
own and operate commercial real estate. These investments include
noncontrolling general partnership, limited partnership and limited
liability company ownership interests generally ranging from less than 1%
to 49.5% of the respective ventures. Jones Lang LaSalle has made initial
capital contributions to the ventures and had remaining commitments to
certain ventures for additional capital contributions of approximately
$15.7 million as of December 31, 2000. Substantially all venture interests
are held by corporate subsidiaries of Jones Lang LaSalle. Accordingly,
Jones Lang LaSalle's exposure to liabilities and losses of the ventures is
limited to its initial and remaining commitments. To the extent Jones Lang
LaSalle's investment basis differs from its share of the equity of an
unconsolidated investment, such difference is amortized over the
depreciable lives of the investee's investment assets.
Included in investment in real estate ventures is an investment in
LaSalle Hotel Properties ("LHO"), a real estate investment trust, which
completed its initial public offering in April 1998. LHO was formed to own
hotel properties and to continue and expand the hotel investment activities
of Jones Lang LaSalle by investing principally in upscale and luxury full-
service hotels located primarily in major business and urban, resort and
convention markets. Jones Lang LaSalle provides advisory, acquisition and
administrative services to LHO for which it receives a base advisory fee
calculated as a percentage of net operating income, as well as performance
fees based on growth in funds from operations on a per share basis. Such
performance fees, if any, are paid in the form of LHO common stock or
units, at Jones Lang LaSalle's option. LHO was formed with 10 hotels, in
nine of which Jones Lang LaSalle had a nominal co-investment and for which
Jones Lang LaSalle acted as investment advisor. In accordance with the
individual investment advisory agreements, Jones Lang LaSalle earned and
received performance fees totaling $15.2 million on the disposition of
certain of the assets. Jones Lang LaSalle contributed its ownership
interests in the hotels as well as the related performance fees to LHO for
an effective ownership interest of approximately 6.4%. Effective January
1, 2001, LHO terminated its service agreement with Jones Lang LaSalle and
became a self-managed real estate investment trust. As a result of the
terminated service agreement, Jones Lang LaSalle changed its method of
accounting for LHO to the cost method. On February 1, 2001, Jones Lang
LaSalle sold its investment in LHO and will recognize a gain of $2.7
million in the first quarter of 2001.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Except as otherwise noted, investment in real estate ventures have
been accounted for under the equity method of accounting in the
accompanying Consolidated Financial Statements. As such, Jones Lang LaSalle
recognizes its share of the underlying profits and losses of the ventures
as revenue in the accompanying Consolidated Statements of Earnings. Jones
Lang LaSalle generally is entitled to operating distributions in accordance
with its respective ownership interests.
The following table summarizes the combined financial information for
the above unconsolidated ventures accounted for under the equity method of
accounting ($ in thousands):
2000 1999 1998
---------- --------- ---------
Balance Sheet:
Investments in real estate. .$2,661,699 2,081,747 2,021,372
Total assets. . . . . . . . .$3,010,544 2,603,815 2,513,483
========== ========= =========
Mortgage indebtedness . . . .$1,019,752 695,442 614,349
Total liabilities . . . . . .$1,509,112 1,327,824 977,194
========== ========= =========
Total equity. . . . . . . . .$1,501,432 1,275,991 1,536,289
========== ========= =========
Investments in real estate
ventures. . . . . . . . . . . .$ 74,565 66,538 52,083
Statements of Operations:
Revenues. . . . . . . . . . .$ 671,713 403,557 298,886
Net earnings. . . . . . . . .$ 225,529 115,571 104,095
========== ========= =========
Equity in earnings from
real estate ventures. . . . . .$ 16,693 6,218 3,911
========== ========= =========
During 2000, 1999 and 1998, Jones Lang LaSalle made loans to certain
of these real estate ventures, of which $5.7 million, $6.7 million and
$15.5 million were outstanding at December 31, 2000, 1999 and 1998,
respectively, and is included in notes and other receivables in the
accompanying Consolidated Balance Sheets. These notes, which bear interest
rates of 7.25% to 8.0%, are to be repaid by 2007.
(8) DEBT
CREDIT FACILITIES
During the first half of 2000, Jones Lang LaSalle increased its
unsecured credit agreement from $380.0 million to $425.0 million through
the addition of five banks to its credit group. This total was comprised
of a $250.0 million revolving facility maturing in October 2002 and a
$175.0 million term facility, which was scheduled to mature on October 15,
2000.
On July 26, 2000, Jones Lang LaSalle closed its offering of euro 165
million aggregate principal amount of 9.0% Senior Notes, due 2007 (the
"Euro Notes"). The net proceeds of $148.6 million were used to repay
borrowings under the $175.0 million term facility that matured on
October 15, 2000. The Euro Notes were issued by Jones Lang LaSalle Finance
B.V. ("JLL Finance"), a wholly owned subsidiary of Jones Lang LaSalle. On
August 29, 2000, the remaining borrowings under the term facility were
fully repaid using proceeds from the revolving credit facility and the term
facility was terminated.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As of December 31, 2000, Jones Lang LaSalle had $250 million
available under the revolving credit facility for working capital needs,
investments and acquisitions. Jones Lang LaSalle also had the Euro Notes
of euro 165.0 million and, under the terms of the revolving credit
facility, the authorization to borrow up to $50.0 million under local
overdraft facilities. As of December 31, 2000, there was $85.6 million
outstanding under the revolving credit facility, euro 165.0 million, which
equated to $155.5 US dollars, of borrowings under the Euro Notes, and
short-term borrowings of $8.8 million.
The revolving credit facility and the Euro Notes (the "Facilities")
are guaranteed by certain of Jones Lang LaSalle's subsidiaries. With
respect to the revolving credit facility, Jones Lang LaSalle must maintain
a certain level of consolidated net worth and a ratio of funded debt to
earnings before interest expense, taxes, depreciation and amortization
("EBITDA"). Jones Lang LaSalle must also meet a minimum interest coverage
ratio and minimum liquidity ratio. Additionally, Jones Lang LaSalle is
restricted from, among other things, incurring certain levels of
indebtedness to lenders outside of the Facilities and disposing of a
significant portion of its assets. Lender approval is required for certain
levels of co-investment. The revolving credit facility bears variable
rates of interest based on market rates. Jones Lang LaSalle sometimes uses
interest rate swaps to convert a portion of the floating rate indebtedness
to a fixed rate. The effective interest rate on the Facilities, including
the term facility during the period outstanding, was 8.42% for the year
ended December 31, 2000, including the effect of interest rate swap
agreements. As of December 31, 2000, Jones Lang LaSalle had no interest
rate swap agreements outstanding.
Jones Lang LaSalle has various interest-bearing overdraft facilities
and short-term credit facilities of subsidiaries in Europe and Asia
Pacific. Of the $50.0 million authorized under the revolving credit
facility for local overdraft borrowings, Jones Lang LaSalle has facilities
totaling $36.2 million, of which $2.7 million was outstanding as of
December 31, 2000.
(9) LEASES
Jones Lang LaSalle leases office space in various buildings for its
own use. The terms of these non-cancelable operating leases provide for
Jones Lang LaSalle to pay base rent and a share of increases in operating
expenses and real estate taxes in excess of defined amounts. Jones Lang
LaSalle also leases equipment under both operating and capital lease
arrangements.
Minimum future lease payments (e.g., base rent for leases of office
space) due in each of the next five years ending December 31 and thereafter
are as follows ($ in thousands):
Operating Capital
Leases Leases
--------- --------
2001 . . . . . . . . . $ 37,050 $ 1,165
2002 . . . . . . . . . 32,989 804
2003 . . . . . . . . . 27,567 609
2004 . . . . . . . . . 22,664 308
2005 . . . . . . . . . 15,815 155
Thereafter . . . . . . 28,910 74
-------- --------
$164,995 $ 3,115
======== ========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Assets recorded under capital leases in the Consolidated Balance Sheet
at December 31, 2000 and 1999 are as follows ($ in thousands):
2000 1999
-------- --------
Furniture, fixtures and equipment $ 2,862 2,244
Computer equipment and software 2,044 2,492
Automobiles 2,901 455
Leasehold improvements 3,213 1,775
-------- --------
11,020 6,966
Less accumulated depreciation
and amortization (7,035) (3,557)
-------- --------
Net assets under capital leases $ 3,985 3,409
======== =========
Rent expense was $44.0 million, $45.0 million and $9.8 million, during
2000, 1999 and 1998, respectively.
(10) INCOME TAXES
For the year ended December 31, 2000, 1999 and 1998, Jones Lang
LaSalle's provision for income taxes consisted of the following ($ in
thousands):
Year Ended December 31,
---------------------------------------
2000 1999 1998
-------- -------- --------
U.S. Federal:
Current . . . . . . . $ -- $(11,762) $ 11,843
Deferred tax. . . . . 498 2,570 (1,970)
-------- -------- --------
498 (9,192) 9,873
-------- -------- --------
State and Local:
Current . . . . . . . -- (2,979) 2,819
Deferred tax. . . . . 32 901 (144)
-------- -------- --------
32 (2,078) 2,675
-------- -------- --------
Foreign:
Current . . . . . . . 25,220 17,959 1,506
Deferred tax. . . . . (3,697) (1,361) (830)
-------- -------- --------
21,523 16,598 676
-------- -------- --------
Total . . . . . . . . . $ 22,053 $ 5,328 $ 13,224
======== ======== ========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Income tax expense for 2000, 1999 and 1998 differed from the amounts
computed by applying the U.S. federal income tax rate of 35% to earnings
before provision for income taxes (a loss of $20.8 million for the year
ended December 31, 2000, a loss of $89.5 million for the year ended
December 31, 1999, income of $33.7 million for the year ended December 31,
1998) as a result of the following ($ in thousands):
2000 1999 1998
---------------- ---------------- ----------------
Computed "expected"
tax expense
(benefit). . . . . .$(7,273) 35.0% $(31,330) 35.0% $11,791 35.0%
Increase (reduction)
in income taxes
resulting from:
Nondeductible
stock compensa-
tion expense . . . 27,433(132.0%) 34,078 (38.1%) -- --
State and local
income taxes,
net of federal
income tax benefit 20 (0.1%) (1,350) 1.5% 1,739 5.2%
Amortization of
goodwill and
other intangibles. 1,020 (4.9%) 76 (0.1%) (1,182) (3.5%)
Nondeductible
expenses . . . . . 1,606 (7.7%) 2,402 (2.7%) 807 2.4%
Foreign earnings
taxed at varying
rates. . . . . . . (3,655) 17.6% (1,022) 1.1% -- --
Valuation
allowances . . . . 1,296 (6.2%) 1,552 (1.7%) -- --
Other, net. . . . . . 1,606 (7.7%) 922 (1.0%) 69 0.2%
------- ------ ------- ------ ------- ------
$22,053(106.0%) $ 5,328 (6.0%) $13,224 39.3%
======= ====== ======= ====== ======= ======
For the years ended December 31, 2000, 1999 and 1998, Jones Lang
LaSalle's income (loss) before taxes from domestic and international
sources are as follows ($ in thousands):
Year Ended December 31,
---------------------------------------
2000 1999 1998
-------- -------- --------
Domestic. . . . . . $ 3,316 (35,620) 29,857
International . . . (24,095) (53,894) 3,832
-------- -------- --------
Total . . . . $(20,779) (89,514) 33,689
======== ======== ========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below ($ in thousands):
December 31,
---------------------------------------
2000 1999 1998
-------- -------- --------
Deferred tax assets:
Accrued expenses. . . $ 12,154 $ 13,525 $ 3,957
Revenue deferred
per SAB 101. . . . . 10,505 -- --
U.S. Federal and
state loss
carryforwards. . . . 5,311 -- --
Allowances for
uncollectible
accounts . . . . . . 2,864 3,983 3,238
Foreign tax credit
carryforwards. . . . 4,410 3,634 3,800
Foreign loss carry-
forwards . . . . . . 6,156 3,326 830
Property and
equipment. . . . . . 2,437 2,233 1,644
Investments in real
estate ventures. . . -- 1,208 --
Other . . . . . . . . 529 1,389 355
-------- -------- --------
44,366 29,298 13,824
Less valuation
allowances. . . . . (3,255) (2,020) --
-------- -------- --------
$ 41,111 $ 27,278 $ 13,824
======== ======== ========
Deferred tax liabilities:
Prepaid pension
asset. . . . . . . . $ 5,360 $ 6,978 $ --
Intangible assets . . 4,242 3,743 --
Income deferred for
tax purposes . . . . 2,850 3,329 --
Investments in real
estate ventures. . . 1,161 -- 2,483
Other . . . . . . . . 995 1,820 716
-------- -------- --------
$ 14,608 $ 15,870 $ 3,199
======== ======== ========
In connection with the merger with JLW, Jones Lang LaSalle recorded
deferred tax assets of $14.4 million and deferred tax liabilities of $8.2
million as part of its purchase price allocation. In connection with the
COMPASS acquisition, Jones Lang LaSalle recorded deferred tax assets of
$2.6 million as part of its purchase price allocation.
A deferred U.S. tax liability has not been provided on the unremitted
earnings of foreign subsidiaries because it is the intent of Jones Lang
LaSalle to permanently reinvest such earnings.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As of December 31, 2000, Jones Lang LaSalle has available U.S. Federal
net operating loss carryforwards of $10.0 million which begin to expire in
2019, U.S. state net operating loss carryforwards of $40.0 million which
expire in 2003 through 2019, foreign net operating loss carryforwards of
$19.0 million which begin to expire in 2003, and foreign tax credit
carryforwards for U.S. federal income tax purposes of $4.4 million which
expire in 2002 through 2004.
The net deferred tax asset of $26.5 million at December 31, 2000 is
considered realizable given past income and estimates of future income.
These considerations include, but are not limited to, net operating losses,
earnings trends and tax planning strategies. Valuation allowances have
been provided with regard to the tax benefit of certain foreign net
operating loss carryforwards for which utilization is not probable.
(11) RETIREMENT PLANS
DEFINED CONTRIBUTION PLANS
Jones Lang LaSalle has a qualified profit sharing plan that
incorporates IRC Section 401(k) for its eligible U.S. employees.
Contributions under the qualified profit sharing plan are made via a
combination of employer match and an annual contribution on behalf of
eligible employees. Included in the accompanying Consolidated Statements
of Earnings for the years ended December 31, 2000, 1999 and 1998 are
contributions of $1.6 million, $2.5 million and $1.8 million, respectively.
Additionally, in 1999, Jones Lang LaSalle expensed $1.7 million of
nonrecurring contributions to COMPASS employees as a result of this
acquisition. Related trust assets of the Plan are managed by trustees and
are excluded from the accompanying Consolidated Financial Statements.
Jones Lang LaSalle maintains several defined contribution retirement
plans for its eligible non-U.S. employees. Contributions to these plans
were approximately $2.5 million and $2.0 million for the years ended
December 31, 2000 and 1999, respectively.
DEFINED BENEFIT PLANS
Jones Lang LaSalle maintains several contributory defined benefit
pension plans to provide retirement benefits to eligible employees in
certain countries. It is Jones Lang LaSalle's policy to fund the minimum
annual contributions required by applicable regulations.
Net periodic pension cost consisted of the following ($ in thousands):
2000 1999
-------- --------
Employer service cost - benefits earned
during the year. . . . . . . . . . . . $ 6,716 $ 5,902
Interest cost on projected benefit
obligation . . . . . . . . . . . . . . 5,130 3,680
Expected (return) loss on plan assets. . (7,924) (5,332)
Net amortization/deferrals . . . . . . . -- (1,224)
-------- --------
Net periodic pension cost. . . . . . . . $ 3,922 $ 3,026
======== ========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The change in benefit obligation and plan assets and reconciliation of
funded status as of December 31, 2000 and 1999 are as follows ($ in
thousands):
2000 1999
-------- --------
Change in benefit obligation:
Projected benefit obligation at
beginning of year. . . . . . . . . . $ 89,163 $ --
Merger with JLW. . . . . . . . . . . . -- 85,311
Service cost . . . . . . . . . . . . . 6,716 5,902
Interest cost. . . . . . . . . . . . . 5,130 3,680
Plan participants' contributions . . . 136 --
Benefits paid. . . . . . . . . . . . . (2,482) (1,631)
Actuarial loss . . . . . . . . . . . . 2,144 (4,309)
Changes in foreign exchange rates. . . (6,953) 210
-------- --------
Projected benefit obligation at
end of year. . . . . . . . . . . . $ 93,854 $ 89,163
======== ========
Change in plan assets:
Fair value of plan assets at
beginning of year. . . . . . . . . . $114,724 --
Merger with JLW. . . . . . . . . . . . -- 111,197
Actual return on plan assets . . . . . 15,998 5,729
Plan contributions . . . . . . . . . . 470 --
Benefits paid. . . . . . . . . . . . . (2,482) (2,610)
Changes in foreign exchange rates. . . (8,947) 408
-------- --------
Fair value of plan assets
at end of year . . . . . . . . . . $119,763 $114,724
======== ========
Reconciliation of funded status:
Funded status. . . . . . . . . . . . . $ 25,909 $ 25,561
Unrecognized actuarial loss. . . . . . (7,582) (2,153)
-------- --------
Net amount recognized. . . . . . . . $ 18,327 $ 23,408
======== ========
The amounts recognized in the accompanying Consolidated Balance Sheet
as of December 31, 2000 and 1999 are as follows ($ in thousands):
2000 1999
-------- --------
Prepaid pension asset. . . . . . . . . . $ 18,730 $ 23,956
Accrued pension liability. . . . . . . . (403) (548)
-------- --------
Net amount recognized. . . . . . . . . . $ 18,327 $ 23,408
======== ========
For one of the plans, the accumulated benefit obligation exceeded the
fair value of the plan assets at December 31, 2000. The related aggregate
benefit obligation was $2.5 million and the aggregate fair value of the
plan assets was $2.0 million.
Weighted average assumptions used in developing the projected benefit
obligation as of December 31 were generally as follows:
2000 1999
-------- --------
Discount rate used in determining
present values . . . . . . . . . . . . 6.25% 6.25%
Annual increase in future compensation
levels . . . . . . . . . . . . . . . . 4.00% 4.00%
Expected long-term rate of return
on assets. . . . . . . . . . . . . . . 7.50% 7.50%
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Plan assets consist of a diversified portfolio of fixed-income
investments and equity securities.
(12) STOCK OPTION AND STOCK COMPENSATION PLANS
STOCK AWARD AND INCENTIVE PLAN
In 1997, Jones Lang LaSalle adopted a stock award and incentive plan
that provides for the granting of options to purchase a specified number of
shares of common stock and other stock awards to eligible participants of
Jones Lang LaSalle. Under the plan, the total number of shares of common
stock available to be issued is 4,160,000. The options are granted at the
market value of common stock at the date of grant. The options vest at
such times and conditions as the Compensation Committee of the Board of
Directors of Jones Lang LaSalle determines and sets forth in the award
agreement. Such options granted in 2000, 1999 and 1998 vest over a period
of zero to five years. At December 31, 2000, 1999 and 1998, there were
310,378, 2,127,662 and 973,100 shares, respectively, available for grant
under the stock award and incentive plan.
The per share weighted-average fair value of options granted during
2000, 1999 and 1998 was $7.42, $17.63 and $16.44 on the date of grant using
the Black Scholes option-pricing model with the following weighted-average
assumptions:
2000 1999 1998
-------------- ------------- -------------
Expected dividend yield . 0.00% 0.00% 0.00%
Risk-free interest rate . 5.20% 6.90% 4.95%
Expected life . . . . . . 6 to 9 years 6 to 9 years 6 to 9 years
Expected volatility . . . 49.17% 47.34% 41.50%
Contractual terms . . . . 7 to 10 years 7 to 10 years 7 to 10 years
Jones Lang LaSalle accounts for its stock option and compensation
plans under the provisions of SFAS No. 123, which allows entities to
continue to apply the provisions of APB No. 25 and provide pro forma net
income and net income per share disclosures for employee option grants as
if the fair-value-based method defined in SFAS No. 123 had been applied.
Jones Lang LaSalle has elected to apply the provisions of APB No. 25 in
accounting for its stock award and incentive plan, and, accordingly, no
compensation cost has been recognized for its stock award and incentive
plan in the Consolidated Financial Statements. Had Jones Lang LaSalle
determined compensation cost based upon the fair value at the date of grant
for its options as set forth under SFAS No. 123, Jones Lang LaSalle's net
earnings (loss), basic earnings (loss) per common share and diluted
earnings (loss) per common share would have been as follows ($ in
thousands, except share data):
2000 1999 1998
-------- -------- --------
Net earnings (loss) . . . . . . . $(61,931) $(98,767) $ 15,689
Basic earnings (loss) per
common share. . . . . . . . . . (2.49) (4.37) 0.97
Diluted earnings (loss) per
common share. . . . . . . . . . (2.49) (4.37) 0.96
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Stock option activity is as follows (shares in thousands):
2000 1999 1998
----------------- ----------------- -----------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ --------- ------ --------- ------ ---------
Outstanding
at beginning
of year. . . . 2,011.0 $ 28.67 1,241.9 $26.75 738.0 $23.29
Granted . . . . 1,188.7 12.77 997.6 31.45 524.9 31.71
Exercised . . . (4.9) -- (21.3) 23.25 -- --
Forfeited . . . (233.1) 27.07 (207.2) 31.39 (21.0) 29.56
------- ------- -------
Outstanding
at end of
year . . . . . 2,961.7 $22.46 2,011.0 $28.67 1,241.9 $26.75
======= ======= =======
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following table summarizes information about fixed stock options outstanding at December 31, 2000:
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------
Number Weighted-Average Number
Range of Outstanding at Remaining Exercisable at
Exercise December 31, Contractual Weighted-Average December 31, Weighted-Average
Prices 2000 Life Exercise Price 2000 Exercise Price
- -------------------------- ---------------- ----------------- ------------ ----------------
$ 9.31-$14.75 1,019,666 6.17 years $12.26 3,166 $12.83
$15.00-$21.95 157,548 6.90 years $16.17 24,298 $21.95
$23.00-$35.06 1,771,487 5.46 years $28.78 945,196 $27.64
$38.00-$43.88 13,000 5.27 years $38.23 7,866 $38.15
---------- ----------
$ 9.13-$43.88 2,961,701 5.78 years $22.46 980,526 $27.54
========== ==========
The following table summarizes information about fixed stock options outstanding at December 31, 1999:
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------
Number Weighted-Average Number
Range of Outstanding at Remaining Exercisable at
Exercise December 31, Contractual Weighted-Average December 31, Weighted-Average
Prices 1999 Life Exercise Price 1999 Exercise Price
- -------------------------- ---------------- ----------------- ------------ ----------------
$ 9.31-$14.75 9,500 6.75 years $12.83 -- --
$23.00-$35.06 1,984,546 6.45 years $28.65 640,067 $24.90
$38.00-$43.88 17,000 6.09 years $39.56 5,266 $39.60
---------- ----------
$ 9.31-$43.88 2,011,046 6.45 years $28.67 645,333 $25.02
========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following table summarizes information about fixed stock options outstanding at December 31, 1998:
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------
Number Weighted-Average Number
Range of Outstanding at Remaining Exercisable at
Exercise December 31, Contractual Weighted-Average December 31, Weighted-Average
Prices 1998 Life Exercise Price 1998 Exercise Price
- -------------------------- ---------------- ----------------- ------------ ----------------
$23.00-$32.50 1,197,900 7.60 years $26.39 531,375 $23.03
$34.06-$43.88 44,000 6.78 years $36.57 3,666 $35.05
---------- ----------
$23.00-$43.88 1,241,900 7.57 years $26.75 535,041 $23.12
========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
OTHER STOCK COMPENSATION PROGRAMS
In March of 2000, Jones Lang LaSalle awarded 472,500 restricted shares
of Jones Lang LaSalle common stock with a weighted-average grant-date
market value of $12.31 to certain of its employees. These shares vest 50%
at thirty-four months from the date of grant, with the remaining 50%
vesting at fifty-eight months from the date of grant. The related
compensation cost is amortized to expense over the vesting period. Total
compensation expense recognized under this program during 2000 was $1.4
million.
In 1999, Jones Lang LaSalle established a stock compensation program
for certain of its employees pursuant to which they were paid a portion of
their annual bonus in the form of restricted shares of Jones Lang LaSalle
common stock. Jones Lang LaSalle enhanced the number of shares by 20% with
respect to the 1999 plan year, and by 25% with respect to the 2000 plan
year. Early in 2000, 513,233 total shares, having a weighted-average
grant-date market value of $11.31 were paid into the program with respect
to 1999 bonuses. Early in 2001, approximately 700,000 total shares, having
a weighted-average grant-date market value of $13.50 were paid into the
program with respect to 2000 bonuses. The shares vest 50% at eighteen
months from the date of grant, and the remaining 50% vest at thirty months
from the date of grant. The related compensation cost is amortized to
expense over the vesting period. Total compensation expense recognized
with respect to this program for the years ending December 31, 2000 and
1999 was $5.1 million and $1.8 million, respectively.
In 1997 and 1998, Jones Lang LaSalle maintained a Stock Compensation
Program ("SCP") for eligible employees. Under this program, employee
contributions for bonuses for stock purchases were enhanced by Jones Lang
LaSalle through an additional contribution of 15%. Employee contributions
vested immediately while Jones Lang LaSalle contributions were subject to
various vesting periods. The related compensation cost is amortized to
expense over the vesting period. 187,172 total shares were paid into this
program. Total compensation expense recognized under the program during
2000, 1999 and 1998 was $179,600, $193,700 and $228,600, respectively. As
of December 31, 2000, 105,187 shares have been distributed under this
program with the remaining to be distributed in the future. This program
was suspended in 1999, therefore no further contributions will be made.
In 1998, Jones Lang LaSalle adopted an Employee Stock Purchase Plan
("ESPP") for eligible employees. Under this plan, employee contributions
for stock purchases will be enhanced by Jones Lang LaSalle through an
additional contribution of 15%. Employee contributions and Jones Lang
LaSalle contributions vest immediately. As of December 31, 2000, 417,624
shares have been purchased under this plan. During 2000 and 1999, 191,459
shares and 161,989 shares, having weighted-average grant-date market values
of $10.40 and $15.07 were purchased under the program. No compensation
expense is recorded with respect to this program.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(13) TRANSACTIONS WITH AFFILIATES
Certain officers of Jones Lang LaSalle are trustees for real estate
funds that were organized by a subsidiary. Jones Lang LaSalle earns
advisory and management fees for services rendered to the funds. Included
in the accompanying Consolidated Financial Statements are revenues of $0.5
million, $0.2 million and $2.3 million for 2000, 1999 and 1998,
respectively, as well as receivables of $0.2 million, $0.0 million and $0.1
million at December 31, 2000, 1999 and 1998, respectively, related to such
services.
Jones Lang LaSalle also earns fees and commissions for services
rendered to affiliates of Dai-ichi Life Property Holdings, Inc., Galbreath
Holdings, LLC and Gothaer Lebensversicherung A.G., three significant
stockholders, and real estate ventures in which Jones Lang LaSalle has an
equity interest. Included in the accompanying Consolidated Financial
Statements are revenues from such affiliates of $34.8 million, $39.0
million and $45.9 million for 2000, 1999 and 1998, respectively, as well as
receivables for reimbursable expenses and revenues as of December 31, 2000,
1999 and 1998 of $10.3 million, $8.7 million and $9.3 million,
respectively.
(14) COMMITMENTS AND CONTINGENCIES
At December 31, 2000, Jones Lang LaSalle has several completion and
budget guarantees relating to development projects. Management does not
expect to incur any material losses under these guarantees.
Jones Lang LaSalle is a defendant in various litigation matters
arising in the ordinary course of business, some of which involve claims
for damages that are substantial in amount. Many of these litigation
matters are covered by insurance. In the opinion of Management, the
ultimate resolution of such litigation matters is not expected to have a
material adverse effect on the financial position, results of operations or
liquidity of Jones Lang LaSalle.
(15) IMPLEMENTATION OF SAB 101
During December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," ("SAB 101"), which provides guidance on various revenue
recognition matters. Historically, Jones Lang LaSalle and certain other
real estate service companies have recorded the full amount of lease
commissions as revenue upon the completion of leasing services and the
closing of the transaction, when invoicing for a portion of the commission
was to be delayed until actual tenant occupancy. This policy was based
upon the fact that Jones Lang LaSalle had fulfilled all of its contractual
obligations and the likelihood of the tenant defaulting under the lease was
extremely remote. Jones Lang LaSalle understood that the SEC staff
believed that under SAB 101, such lease commission revenue should be
deferred until the parties to the lease contract have fulfilled their
respective obligations. However, in late June, the SEC issued an amendment
to SAB 101 that permitted companies to delay implementation until the
fourth quarter of 2000 while the SEC sought to provide increased
interpretive guidance. In late October of 2000, the SEC issued additional
interpretive guidance. After reviewing this interpretive guidance and
discussing it with the SEC, Jones Lang LaSalle adopted the provisions of
SAB 101, retroactively applying them as of January 1, 2000.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As a result, revenue recognition will now be deferred until all
parties to the lease contract have fulfilled their respective lease
obligations if the fee income is dependent upon those contingencies being
removed. This change in accounting policy does not impact the timing or
amount of cash flow, or the amount of earnings that Jones Lang LaSalle will
ultimately recognize.
Effective January 1, 2000, Jones Lang LaSalle recorded a one-time,
non-cash, after-tax cumulative effect of change in accounting principle of
$14.2 million, net of taxes of $8.7 million. This adjustment represents
revenues of $22.9 million that had been recognized prior to January 1, 2000
that would not have been recognized if the new accounting policy had been
in effect in prior years. These revenues will be recognized as the
underlying contingencies are satisfied. Jones Lang LaSalle recognized
$16.2 million of these revenues in 2000 and expects to recognize the
balance of $6.7 million in 2001 and 2002.
The new revenue recognition policy has meant that revenue associated
with 2000 transactions that would have been recognized in 2000 under the
old policy has now been deferred until 2001 or later. In 2000, Jones Lang
LaSalle has deferred $20.9 million of revenue associated with current year
transactions that will now be recognized in 2001 or later.
The net impact of the implementation of SAB 101 on the 2000 operating
income of Jones Lang LaSalle was to reduce reported current year operating
income by $4.7 million.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The impact of adopting SAB 101 by quarter is as follows ($ in thousands):
Three Months Ended
As of ---------------------------------------------------
January 1, March 31, June 30, September 30, December 31, Full Year
2000 2000 2000 2000 2000 2000
----------- --------- -------- ------------- ------------ ----------
Cumulative effect of
change in accounting
principle:
Net deferral of
2000 revenue . . . (2,461) (6,428) (3,039) (8,978) (20,906)
Cumulative catch-up
adjustment charge
effective Jan-
uary 1, 2000 . . . (22,982) (22,982)
Recognition of
cumulative catch-
up adjustment. . . 5,768 4,978 2,521 2,974 16,241
Tax effect . . . . . (8,733) 1,257 (551) (197) (2,282) (10,506)
-------- -------- -------- -------- -------- --------
Net earnings
impact . . . . . . (14,249) 2,050 (899) (321) (3,722) (17,141)
======== ======== ======== ======== ======== ========
As of As of As of
As of As of Septem- Decem- Decem-
March 31, June 30, ber 30, ber 31 , ber 31,
2000 2000 2000 2000 2000
-------- -------- -------- -------- --------
Note:
Remaining cumulative
catch-up adjustment
to be recognized. . (17,214) (12,236) (9,715) (6,741) (6,741)
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Jones Lang LaSalle is unable to estimate the pro-forma impact that the
change in accounting principle would have had on either 1999 or 1998 on a
standalone basis, or on each of the individual quarters within 1999 or
1998. This is because the underlying books and records were not maintained
in such a manner as to facilitate the subsequent identification of those
transactions where such contingencies existed, or when such contingencies
were removed.
(16) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
On July 26, 2000, Jones Lang LaSalle Finance B.V. ("JLL Finance"), a
wholly-owned subsidiary of Jones Lang LaSalle, issued 9% Senior Notes with
an aggregate principal amount of Euro 165 million, due 2007 (the "Euro
Notes"). The payment obligations under the Euro Notes are fully and
unconditionally guaranteed by Jones Lang LaSalle Incorporated and certain
of its wholly-owned subsidiaries; Jones Lang LaSalle America's Inc.,
LaSalle Investment Management, Inc., Jones Lang LaSalle International,
Inc., Jones Lang LaSalle Co-Investment, Inc., LaSalle Hotel Advisors, Inc.,
and Jones Lang LaSalle Ltd. (the "Guarantor Subsidiaries"). All of Jones
Lang LaSalle Incorporated's remaining subsidiaries (the "Non-Guarantor
Subsidiaries") are owned by the Guarantor Subsidiaries. The following
supplemental Condensed Consolidating Balance Sheets as of December 31, 2000
and December 31, 1999, Condensed Consolidating Statement of Earnings and
Condensed Consolidating Statement of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 present financial information for (i)
Jones Lang LaSalle Incorporated (carrying any investment in subsidiaries
under the equity method), (ii) Jones Lang LaSalle Finance B.V. (the issuer
of the Euro Notes), (iii) on a combined basis the Guarantor Subsidiaries
(carrying any investment in Non-Guarantor Subsidiaries under the equity
method) and (iv) on a combined basis the Non-Guarantor Subsidiaries
(carrying its investments in JLL Finance under the equity method).
Separate financial statements of the Guarantor Subsidiaries are not
presented because the guarantors are jointly, severally, and
unconditionally liable under the guarantees, and Jones Lang LaSalle
Incorporated believes that separate financial statements and other
disclosures regarding the Guarantor Subsidiaries are not material to
investors. In general, historically, Jones Lang LaSalle Incorporated has
entered into third party borrowings, financing its subsidiaries via
intercompany accounts that are then converted into equity on a periodic
basis. Certain Guarantor and Non-Guarantor Subsidiaries also enter into
third party borrowings on a limited basis. All intercompany activity has
been included as subsidiary activity in investing activities in the
Condensed Consolidating Statements of Cash Flows. Cash is managed on a
consolidated basis and there is a right of offset between bank accounts in
the different groupings of legal entities in the condensed consolidating
financial information. Therefore, in certain cases, negative cash balances
have not been reallocated to payables as they legally offset positive cash
balances elsewhere in Jones Lang LaSalle Incorporated. In certain cases,
taxes have been calculated on the basis of a group position that includes
both Guarantor and Non-Guarantor Subsidiaries. In such cases, the taxes
have been allocated to individual legal entities on the basis of that legal
entity's pre-tax income.
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2000
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Eliminations Incorporated
------------ ---------- ------------ ------------- ------------ ------------
ASSETS
- ------
Cash and cash
equivalents . . . . $ 3,689 152 (3,665) 18,667 -- 18,843
Trade receivables,
net of allowances . 124 -- 98,120 145,957 -- 244,201
Other current assets. 9,285 -- 26,881 21,851 -- 58,017
---------- ---------- ---------- ---------- ---------- ----------
Total current
assets. . . . . 13,098 152 121,336 186,475 -- 321,061
Property and equipment,
at cost, less accumu-
lated depreciation. 3,093 -- 51,566 35,647 -- 90,306
Intangibles resulting
from business acquisi-
tions and JLW merger,
net of accumulated
amortization. . . . -- -- 249,586 100,543 -- 350,129
Other assets, net . . 12,270 -- 74,254 66,025 -- 152,549
Investment in
subsidiaries. . . . 278,523 -- 262,888 213 (541,624) --
---------- ---------- ---------- ---------- ---------- ----------
$ 306,984 152 759,630 388,903 (541,624) 914,045
========== ========== ========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING BALANCE SHEET - CONTINUED
As of December 31, 2000
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Eliminations Incorporated
------------ ---------- ------------ ------------- ------------ ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
- --------------------
Accounts payable and
accrued liabilities $ 19,553 954 29,351 61,880 -- 111,738
Short-term borrowings -- -- 5,174 3,662 -- 8,836
Other current
liabilities . . . . (49,618) (242,126) 434,720 44,156 -- 187,132
---------- ---------- ---------- ---------- ---------- ----------
Total current
liabilities . . (30,065) (241,172) 469,245 109,698 -- 307,706
Long-term liabilities:
Credit facilities . -- 85,565 -- -- -- 85,565
Notes . . . . . . . -- 155,546 -- -- -- 155,546
Other . . . . . . . 4,711 -- 11,862 15,750 -- 32,323
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities (25,354) (61) 481,107 125,448 -- 581,140
Commitments and
contingencies
Minority interest in
consolidated
subsidiaries. . . . -- -- -- 567 -- 567
Stockholders' equity. 332,338 213 278,523 262,888 (541,624) 332,338
---------- ---------- ---------- ---------- ---------- ----------
$ 306,984 152 759,630 388,903 (541,624) 914,045
========== ========== ========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1999
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Eliminations Incorporated
------------ ---------- ------------ ------------- ------------ ------------
ASSETS
- ------
Cash and cash
equivalents . . . . $ (615) -- 1,027 22,896 -- 23,308
Trade receivables,
net of allowances . 2,070 -- 128,599 139,924 -- 270,593
Other current assets. 23,379 -- 15,223 16,179 -- 54,781
---------- ---------- ---------- ---------- ---------- ----------
Total current
assets. . . . . 24,834 -- 144,849 178,999 -- 348,682
Property and equipment,
at cost, less accumu-
lated depreciation. 749 -- 48,491 27,230 -- 76,470
Intangibles resulting
from business acquisi-
tions and JLW merger,
net of accumulated
amortization. . . . -- -- 287,848 79,367 -- 367,215
Other assets, net . . 3,010 -- 38,147 91,276 -- 132,433
Investments in
subsidiaries. . . . 357,593 -- 348,702 -- (706,295) --
---------- ---------- ---------- ---------- ---------- ----------
$ 386,186 -- 868,037 376,872 (706,295) 924,800
========== ========== ========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING BALANCE SHEET - CONTINUED
As of December 31, 1999
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Eliminations Incorporated
------------ ---------- ------------ ------------- ------------ ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
- --------------------
Accounts payable and
accrued liabilities $ (4,847) -- 30,516 62,588 -- 88,257
Short-term borrowings 156,471 -- 959 5,213 -- 162,643
Other current
liabilities . . . . (250,272) -- 485,978 (66,487) -- 169,219
---------- ---------- ---------- ---------- ---------- ----------
Total current
liabilities . . (98,648) -- 517,453 1,314 -- 420,119
Long-term liabilities:
Credit facilities . 159,743 -- -- -- -- 159,743
Other long-term
liabilities . . . 1,155 -- (7,009) 26,856 -- 21,002
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities 62,250 -- 510,444 28,170 -- 600,864
Commitments and
contingencies
Stockholders' equity. 323,936 -- 357,593 348,702 (706,295) 323,936
---------- ---------- ---------- ---------- ---------- ----------
$ 386,186 -- 868,037 376,872 (706,295) 924,800
========== ========== ========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the year ended December 31, 2000
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Eliminations Incorporated
------------ ---------- ------------ ------------- ------------ ------------
Revenue . . . . . . . $ -- -- 433,890 491,933 -- 925,823
Equity earnings (loss)
from subsidiaries . 49,064 -- 55,832 110 (105,006) --
---------- ---------- ---------- ---------- ---------- ----------
Total revenue . . 49,064 -- 489,722 492,043 (105,006) 925,823
Operating expenses
before merger re-
lated non-recurring
charges . . . . . . 17,565 2 408,690 407,368 -- 833,625
Merger related non-
recurring charges . 79,908 -- 3,433 2,454 -- 85,795
---------- ---------- ---------- ---------- ---------- ----------
Operating income
(loss). . . . . (48,409) (2) 77,599 82,221 (105,006) 6,403
Interest expense, net
of interest income. 7,931 (209) 16,245 3,215 -- 27,182
---------- ---------- ---------- ---------- ---------- ----------
Earnings (loss)
before provision
for income taxes
and minority
interest. . . . (56,340) 207 61,354 79,006 (105,006) (20,779)
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS - CONTINUED
For the year ended December 31, 2000
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Eliminations Incorporated
------------ ---------- ------------ ------------- ------------ ------------
Net provision for
income taxes. . . . 720 97 2,479 18,757 -- 22,053
Minority interests in
earnings of
subsidiaries. . . . -- -- -- (21) -- (21)
---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss),
before cumulative
effect of change in
accounting principle (57,060) 110 58,875 60,270 (105,006) (42,811)
Cumulative effect of
change in accounting
principle, net
of tax. . . . . . . -- -- (9,811) (4,438) -- (14,249)
---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss) . $ (57,060) 110 49,064 55,832 (105,006) (57,060)
========== ========== ========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the year ended December 31, 1999
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Eliminations Incorporated
------------ ---------- ------------ ------------- ------------ ------------
Revenue . . . . . . . $ -- -- 342,871 412,568 -- 755,439
Equity earnings (loss)
from subsidiaries . 8,970 -- 53,410 -- (62,380) --
---------- ---------- ---------- ---------- ---------- ----------
Total revenue . . 8,970 -- 396,281 412,568 (62,380) 755,439
Operating expenses
before merger re-
lated non-recurring
charges . . . . . . 13,816 -- 341,276 320,249 -- 675,341
Merger related non-
recurring charges . 100,054 -- 41,536 9,811 -- 151,401
---------- ---------- ---------- ---------- ---------- ----------
Operating income
(loss). . . . . (104,900) -- 13,469 82,508 (62,380) (71,303)
Interest expense, net
of interest income. 1,979 -- 16,325 (93) -- 18,211
---------- ---------- ---------- ---------- ---------- ----------
Earnings (loss)
before provision
(benefit) for
income taxes. . (106,879) -- (2,856) 82,601 (62,380) (89,514)
Net provision (benefit)
for income taxes. . (12,037) -- (11,826) 29,191 -- 5,328
---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss) . $ (94,842) -- 8,970 53,410 (62,380) (94,842)
========== ========== ========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Year ended December 31, 1998
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Eliminations Incorporated
------------ ---------- ------------ ------------- ------------ ------------
Revenue . . . . . . . $ 859 -- 157,047 146,558 -- 304,464
Equity earnings (loss)
from subsidiaries . 26,723 -- 55,283 -- (82,006) --
---------- ---------- ---------- ---------- ---------- ----------
Total revenue . . 27,582 -- 212,330 146,558 (82,006) 304,464
Operating expenses
before merger re-
lated non-recurring
charges . . . . . . 6,943 -- 166,531 83,127 -- 256,601
Merger related non-
recurring charges . -- -- 10,021 -- -- 10,021
---------- ---------- ---------- ---------- ---------- ----------
Operating income
(loss). . . . . 20,639 -- 35,778 63,431 (82,006) 37,842
Interest expense, net
of interest income. (2,471) -- 5,484 1,140 -- 4,153
---------- ---------- ---------- ---------- ---------- ----------
Earnings (loss)
before provision
for income
taxes . . . . . 23,110 -- 30,294 62,291 (82,006) 33,689
Net provision for
income taxes. . . . 2,645 -- 3,571 7,008 -- 13,224
---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss) . $ 20,465 -- 26,723 55,283 (82,006) 20,465
========== ========== ========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Twelve Months Ended December 31, 2000
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Incorporated
------------ ---------- ------------ ------------- ------------
Cash flows provided by
operating activities $ 11,070 1,064 45,913 82,293 140,340
Cash flows provided by
(used in) investing
activities:
Net capital additions-
property and equip-
ment . . . . . . . (2,433) -- (19,695) (23,676) (45,804)
Cash balances assumed
in Jones Lang Wootton
merger, net of cash
paid and transaction
cost . . . . . . . -- -- -- -- --
Other acquisitions and
investments, net of
cash acquired and
transaction costs. -- -- (12,418) (915) (13,333)
Subsidiary activity 311,876 (238,787) (17,018) (56,071) --
Investments in real
estate ventures. . -- -- (3,144) (4,309) (7,453)
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in) investing
activities . . . 309,443 (238,787) (52,275) (84,971) (66,590)
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - CONTINUED
For the Twelve Months Ended December 31, 2000
($ in thousands)
Jones Lang Consoli-
LaSalle Jones Lang dated
Incorporated LaSalle Jones Lang
(Parent and Finance Guarantor Non-Guarantor LaSalle
Guarantor) B.V. Subsidiaries Subsidiaries Incorporated
------------ ---------- ------------ ------------- ------------
Cash flows provided by
(used in) financing
activities:
Net borrowings under
credit facility. . (316,214) 85,565 4,215 (1,551) (227,985)
Net proceeds from
issuance of the
Euro Notes . . . . (1,169) 152,310 (2,545) -- 148,596
Common stock issued
under stock option
plan and stock
purchase programs. 1,174 -- -- -- 1,174
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities . . . (316,209) 237,875 1,670 (1,551) (78,215)
---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents . . . . 4,304 152 (4,692) (4,229) (4,465)
Cash and cash equiva-
lents, beginning
of period . . . . . (615) -- 1,027 22,896 23,308
---------- ---------- ---------- ---------- ----------
Cash and cash equiva-
lents, end of period $ 3,689 152 (3,665) 18,667 18,843
========== ========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Twelve Months Ended December 31, 1999
($ in thousands)
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
Cash flows provided by (used in)
operating activities . . . . . . . . $ (26,609) (76,843) 85,225 (18,227)
Cash flows provided by (used in)
Investing activities:
Net capital additions - property
and equipment . . . . . . . . . (734) (24,517) (11,597) (36,848)
Cash balances assumed in Jones Lang
Wootton merger, net of cash paid
and transaction costs . . . . . -- 19,388 (56,676) (37,288)
Other acquisitions and investments,
net of cash acquired and
transaction costs . . . . . . . -- (1,022) (2,008) (3,030)
Subsidiary activity . . . . . . . (91,893) 93,929 (2,036) --
Investments in real estate
ventures. . . . . . . . . . . . -- (4,835) 1,134 (3,701)
---------- ---------- ---------- ----------
Net cash provided by (used in)
investing activities. . . . (92,627) 82,943 (71,183) (80,867)
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - CONTINUED
For the Twelve Months Ended December 31, 1999
($ in thousands)
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
Cash flows provided by (used in)
financing activities:
Net borrowings under credit facility 113,982 (7,233) (4,224) 102,525
Common stock issued under stock
option plan . . . . . . . . . . . 2,936 -- -- 2,936
---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities. . . . 116,918 (7,233) (4,224) 105,461
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents . . . . . (2,318) (1,133) 9,818 6,367
Cash and cash equivalents, January 1. 1,703 2,160 13,078 16,941
---------- ---------- ---------- ----------
Cash and cash equivalents, December 31 $ (615) 1,027 22,896 23,308
========== ========== ========== ==========
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Twelve Months Ended December 31, 1998
($ in thousands)
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
Cash flows provided by (used in)
operating activities . . . . . . . . $ 1,823 (28,691) 49,868 23,000
Cash flows provided by (used in)
Investing activities:
Net capital additions - property
and equipment . . . . . . . . . (49) (11,518) (4,025) (15,592)
Cash balances assumed in Jones Lang
Wootton merger, net of cash paid
and transaction costs . . . . . -- -- -- --
Other acquisitions and investments,
net of cash acquired and
transaction costs . . . . . . . -- (178,919) -- (178,919)
Subsidiary activity . . . . . . . (202,253) 213,938 (11,685) --
Investments in real estate
ventures. . . . . . . . . . . . -- (11,072) (33,513) (44,585)
---------- ---------- ---------- ----------
Net cash provided by (used in)
investing activities. . . . (202,302) 12,429 (49,223) (239,096)
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - CONTINUED
For the Twelve Months Ended December 31, 1998
($ in thousands)
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
Cash flows provided by financing
activities:
Net borrowings under credit facility 202,377 -- -- 202,377
Common stock issued under stock
option plan . . . . . . . . . . . -- -- -- --
---------- ---------- ---------- ----------
Net cash provided by
financing activities. . . . 202,377 -- -- 202,377
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents . . . . . 1,898 (16,262) 645 (13,719)
Cash and cash equivalents, January 1. (195) 18,422 12,433 30,660
---------- ---------- ---------- ----------
Cash and cash equivalents, December 31 $ 1,703 2,160 13,078 16,941
========== ========== ========== ==========
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth certain unaudited consolidated
statements of earnings data for each of Jones Lang LaSalle's last eight
quarters. In the opinion of Management, this information has been presented
on the same basis as the audited consolidated financial statements
appearing elsewhere in this report, and includes all adjustments,
consisting only of normal recurring adjustments and accruals, that Jones
Lang LaSalle considers necessary for a fair presentation. The unaudited
consolidated quarterly information should be read in conjunction with Jones
Lang LaSalle's Consolidated Financial Statements and the notes thereto.
The operating results for any quarter are not necessarily indicative of the
results for any future period.
JONES LANG LASALLE INCORPORATED
QUARTERLY INFORMATION
(UNAUDITED)
2000
-------------------------------------------------------
($ in thousands, except share data) March 31 June 30 Sept. 30 Dec. 31 Year
-------- -------- -------- -------- --------
Revenue:
Owner & Occupier Services:
Americas. . . . . . . . . . . . . . . . . . . . $ 53,822 67,405 80,156 122,909 324,292
Europe. . . . . . . . . . . . . . . . . . . . . 82,095 91,412 81,269 101,631 356,407
Asia Pacific. . . . . . . . . . . . . . . . . . 31,538 34,540 32,576 39,579 138,233
Investment Management . . . . . . . . . . . . . . 23,227 30,759 30,501 24,302 108,789
Less: intersegment revenue . . . . . . . . . . . . (395) 17 (412) (1,108) (1,898)
-------- -------- -------- -------- --------
Total revenue . . . . . . . . . . . . . . . $190,287 224,133 224,090 287,313 925,823
Operating expenses:
Owner & Occupier Services:
Americas. . . . . . . . . . . . . . . . . . . . 65,613 63,526 72,011 96,236 297,386
Europe. . . . . . . . . . . . . . . . . . . . . 76,421 86,262 68,747 83,999 315,429
Asia Pacific. . . . . . . . . . . . . . . . . . 30,943 36,039 34,457 36,619 138,058
Investment Management . . . . . . . . . . . . . . 19,834 20,871 21,234 22,711 84,650
Less: intersegment expenses. . . . . . . . . . . . (395) 17 (412) (1,108) (1,898)
Merger related non-recurring charges. . . . . . . . 18,326 18,865 18,191 30,413 85,795
-------- -------- -------- -------- --------
Total operating expenses. . . . . . . . . . . . . . 210,742 225,580 214,228 268,870 919,420
Operating income (loss) . . . . . . . . . . . . . . $(20,455) (1,447) 9,862 18,443 6,403
Earnings (loss) before cumulative effect of
change in accounting principle . . . . . . . . . . $(22,922) (12,392) (5,656) (1,841) (42,811)
Net earnings (loss) . . . . . . . . . . . . . . . . $(37,171) (12,392) (5,656) (1,841) (57,060)
Basic earnings (loss) per common share before
cumulative effect of change in accounting principle $ (0.94) (0.50) (0.22) (0.07) (1.72)
Basic earnings (loss) per common share. . . . . . . $ (1.52) (0.50) (0.22) (0.07) (2.30)
Diluted earnings (loss) per common share before
cumulative effect of change in accounting principle $ (0.94) (0.50) (0.22) (0.07) (1.72)
Diluted earnings (loss) per common share. . . . . . $ (1.52) (0.50) (0.22) (0.07) (2.30)
JONES LANG LASALLE INCORPORATED
QUARTERLY INFORMATION - CONTINUED
1999
-------------------------------------------------------
($ in thousands, except share data) March 31 June 30 Sept. 30 Dec. 31 Year
-------- -------- -------- -------- --------
Revenue:
Owner & Occupier Services:
Americas. . . . . . . . . . . . . . . . . . . . $ 44,592 55,058 74,676 121,368 295,694
Europe. . . . . . . . . . . . . . . . . . . . . 27,994 69,525 69,521 91,113 258,153
Asia Pacific. . . . . . . . . . . . . . . . . . 9,951 34,560 32,955 42,947 120,413
Investment Management . . . . . . . . . . . . . . 18,981 20,044 18,639 27,312 84,976
Less: intersegment revenue . . . . . . . . . . . . (97) (43) (1,619) (2,038) (3,797)
-------- -------- -------- -------- --------
Total revenue . . . . . . . . . . . . . . . $101,421 179,144 194,172 280,702 755,439
Operating expenses:
Owner & Occupier Services:
Americas. . . . . . . . . . . . . . . . . . . . 62,234 66,456 67,393 69,869 265,952
Europe. . . . . . . . . . . . . . . . . . . . . 22,280 63,728 69,322 73,203 228,533
Asia Pacific. . . . . . . . . . . . . . . . . . 12,127 33,183 29,285 36,630 111,225
Investment Management . . . . . . . . . . . . . . 17,167 18,695 17,041 20,525 73,428
Less: intersegment expenses. . . . . . . . . . . . (97) (43) (1,619) (2,038) (3,797)
Merger related non-recurring charges . . . . . . . 54,043 35,587 25,742 36,029 151,401
-------- -------- -------- -------- --------
Total operating expenses. . . . . . . . . . . . . . 167,754 217,606 207,164 234,218 826,742
Operating income (loss) . . . . . . . . . . . . . . $(66,333) (38,462) (12,992) 46,484 (71,303)
Net earnings (loss) . . . . . . . . . . . . . . . . $(55,415) (37,704) (16,937) 15,214 (94,842)
Basic earnings (loss) per common share. . . . . . . $ (3.09) (1.62) (0.70) 0.63 (4.20)
Diluted earnings (loss) per common share. . . . . . $ (3.09) (1.62) (0.70) 0.63 (4.20)
JONES LANG LASALLE INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
($ in thousands)
Additions
Balance at -------------------------- Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- ---------- ---------- ---------- ---------- ---------
2000
Accounts Receivable
Reserves. . . . . . . . . $ 9,871 5,464 -- 6,074(C) $9,261
1999
Accounts Receivable
Reserves. . . . . . . . . $ 3,978 2,744 8,722(A) 5,573(C) $9,871
1998
Accounts Receivable
Reserves. . . . . . . . . $ 2,679 4,009 107(B) 2,817(C) $3,978
(A) Represents reserve acquired as a result of the merger with JLW.
(B) Represents reserve acquired as a result of the COMPASS acquisition.
(C) Includes primarily write-offs of uncollectible accounts.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to
the material in Jones Lang LaSalle's Proxy Statement for the 2001 Annual
Meeting of Stockholders (the "Proxy Statement") under the captions
"Election of Directors," "Management" and "Section 16(a) Beneficial
Ownership Reporting Compliance."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the material in the Proxy Statement under the caption "Executive
Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
the material in the Proxy Statement under the caption "Security Ownership."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the material appearing in the Proxy Statement under the caption "Certain
Relationships and Related Transactions."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements
See Index to Consolidated Financial Statements in Item 8
of this report.
2. Financial Statement Schedule:
See Index to Consolidated Financial Statements in Item 8
of this report.
3. Exhibits
A list of exhibits is set forth in the Exhibit Index
which immediately precedes the exhibits and is incorporated by reference
herein.
(b) Reports on Form 8-K:
On January 29, 2001, Jones Lang LaSalle filed a Report on
Form 8-K announcing that a wholly-owned subsidiary had extended the
expiration date for the exchange offer for its euro 165,000,000, 9% Senior
Notes, due 2007.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this filing and elsewhere (such as in reports,
other filings with the Securities and Exchange Commission, press releases,
presentations and communications by Jones Lang LaSalle or its management
and written and oral statements) may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause Jones Lang LaSalle's
actual results, performance, achievements, plans and objectives to be
materially different from any future results, performance, achievements,
plans and objectives expressed or implied by such forward-looking
statements. Such factors are discussed in (i) this Report in Item 1.
"Business," Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations," Item 7A. "Quantitative and
Qualitative Disclosures About Market Risk," and elsewhere, (ii) Jones Lang
LaSalle's Proxy Statement dated April 6, 2001, and (iii) in other reports
filed with the Securities and Exchange Commission. Jones Lang LaSalle
expressly disclaims any obligation or undertaking to update or revise any
forward-looking statements to reflect any changes in events or
circumstances or in its expectations or results.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Jones Lang LaSalle
Incorporated, a Maryland corporation, and the undersigned Directors and
officers of Jones Lang LaSalle Incorporated, hereby constitutes and
appoints Stuart L. Scott, Christopher A. Peacock, Peter C. Roberts and
Nicholas J. Willmott its, his or her true and lawful attorneys-in-fact and
agents, for it, him or her and in its, his or her name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
amendments to this report, and to file each such amendment to this report,
with all exhibits thereto, and any and all documents in connection
therewith, with the Securities and Exchange Commission, hereby granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as it, he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Chicago, State of Illinois, on the 28th day of March, 2001.
JONES LANG LASALLE INCORPORATED
/S/ STUART L. SCOTT
__________________________
By: Stuart L. Scott
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 28th day of March, 2001.
SIGNATURE TITLE
- --------- -----
/S/ STUART L. SCOTT
_____________________________
Stuart L. Scott Chairman of the Board of Directors, and
Chief Executive Officer and Director
(Principal Executive Officer)
/S/ CHRISTOPHER A. PEACOCK
____________________________
Christopher A. Peacock President, Deputy Chief Executive
Officer, Chief Operating Officer
and Director
/S/ PETER C. ROBERTS
____________________________
Peter C. Roberts Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
/S/ MICHAEL J. SMITH
____________________________
Michael J. Smith Deputy Chairman and Director
/S/ CHRISTOPHER M.G. BROWN
____________________________
Christopher M.G. Brown Executive Chairman of Asia Pacific and
Director
/S/ CLIVE J. PICKFORD
____________________________
Clive J. Pickford Chairman of Europe and Director
SIGNATURE TITLE
- --------- -----
/S/ M.G. ROSE
____________________________
M.G. Rose Chief Executive Officer of
Global Services
Management and Director
/S/ LYNN C. THURBER
____________________________
Lynn C. Thurber Chief Executive Officer of
LaSalle Investment Management and
Director
/S/ EARL E. WEBB
____________________________
Earl E. Webb Chief Executive Officer
of the Americas and Director
______________________________
Henri-Claude de Bettignies Director
/S/ DARRYL HARTLEY-LEONARD
____________________________
Darryl Hartley-Leonard Director
/S/ DEREK A. HIGGS
____________________________
Derek A. Higgs Director
____________________________
David K.P. Li Director
/S/ THOMAS C. THEOBALD
____________________________
Thomas C. Theobald Director
____________________________
John R. Walter Director
/S/ NICHOLAS J. WILLMOTT
____________________________
Nicholas J. Willmott Senior Vice President and
Global Controller
(Principal Accounting Officer)
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Subscription Agreement (Incorporated by reference to
Exhibit 2.01 to the Registrant's Registration Statement No. 333-25741).
2.2 Purchase and Sale Agreement, dated as of October 21, 1998, as
amended, with respect to the acquisition by the Registrant of the JLW
Parent Companies operating in Europe and the U.S.A. (the "Europe/USA
Agreement") (Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.3 Purchase and Sale Agreement, dated as of October 21, 1998, as
amended, with respect to the acquisition by the Registrant of the JLW
Parent Companies operating in Australia and New Zealand (the "Australasia
Agreement") (Incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.4 Purchase and Sale Agreement, dated as of October 21, 1998, as
amended, with respect to the acquisition by the Registrant of the JLW
Parent Companies operating in Asia (the "Asia Agreement") (Incorporated by
reference to Exhibit 10.3 to the Current Report on Form 8-K dated October
22, 1998 (filed December 9, 1998)).
2.5 Form of Purchase and Sale Joinder Agreement, dated as of
October 21, 1998, by and among the Registrant and each of the shareholders
selling equity interests in the JLW Parent Companies under the Europe/USA
Agreement (Incorporated by reference to Exhibit 10.4 to the Current Report
on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.6 Form of Purchase and Sale Joinder Agreement, dated as of
October 21, 1998, by and among the Registrant and each of the shareholders
selling equity interests in the JLW Parent Companies under the Australasia
Agreement (Incorporated by reference to Exhibit 10.5 to the Current Report
on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.7 Form of Purchase and Sale Joinder Agreement, dated as of
October 21, 1998, by and among the Registrant and each of the shareholders
selling equity interests in the JLW Parent Companies under the Asia
Agreement (Incorporated by reference to Exhibit 10.6 to the Current Report
on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.8 Form of Indemnity and Escrow Agreement, dated as of October 21,
1998, by and among the Registrant, certain subsidiaries of the Registrant
and each of the shareholders selling equity interests in the JLW Parent
Companies under the Europe/USA Agreement, the Australasia Agreement and the
Asia Agreement (Incorporated by reference to Exhibit 10.7 to the Current
Report on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.9 Form of Stockholder Agreement, dated as of October 21, 1998, by
and among the Registrant and each of the persons receiving shares of common
stock under the Europe/USA Agreement, the Australasia Agreement and the
Asia Agreement (Incorporated by reference to Exhibit 10.8 to the Current
Report on Form 8-K dated October 22, 1998 (filed December 9, 1998)).
2.10 Form of Stockholder Agreement, dated as of October 21, 1998, by
and among the Registrant and each of the partners of DEL-LPL Limited
Partnership and DEL-LPAML Limited Partnership who was an employee of the
Registrant in October 1998 and who received shares of Common Stock in
connection with the dissolution of DEL-LPL Limited Partnership and DEL-
LPAML Limited Partnership (Incorporated by reference to Exhibit 10.9 to the
Current Report on From 8-K dated October 22, 1998 (filed December 9,
1998)).
3.1 Charter of Jones Lang LaSalle Incorporated (incorporated by
reference to Exhibit 3.1 to Jones Lang LaSalle Incorporated's Registration
Statement on Form S-4 (File No. 333-48074-01)).
3.2 Second Amended and Restated Bylaws of the Registrant
(Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K
dated March 11, 1999 (filed March 24, 1999)).
3.3 Articles of Association of Jones Lang LaSalle Finance B.V.
(English Translation of Dutch Original) (incorporated by reference to Jones
Lang LaSalle Incorporated's Registration Statement on Form S-4 (File No.
333-48074-01)).
3.4 Charter of Jones Lang LaSalle Americas, Inc. (incorporated by
reference to Exhibit 3.4 to Jones Lang LaSalle Incorporated's Registration
Statement on Form S-4 (File No. 333-48074-01)).
3.5 Bylaws of Jones Lang LaSalle Americas, Inc. (incorporated by
reference to Exhibit 3.5 to Jones Lang LaSalle Incorporated's Registration
Statement on Form S-4 (File No. 333-48074-01)).
3.6 Charter of LaSalle Investment Management, Inc. (incorporated by
reference to Exhibit 3.6 to Jones Lang LaSalle Incorporated's Registration
Statement on Form S-4 (File No. 333-48074-01)).
3.7 Bylaws of LaSalle Investment Management, Inc. (incorporated by
reference to Exhibit 3.7 to Jones Lang LaSalle Incorporated's Registration
Statement on Form S-4 (File No. 333-48074-01)).
3.8 Certificate of Incorporation of Jones Lang LaSalle
International, Inc. (incorporated by reference to Exhibit 3.8 to Jones Lang
LaSalle Incorporated's Registration Statement on Form S-4 (File No. 333-
48074-01)).
3.9 Bylaws of Jones Lang LaSalle International, Inc. (incorporated
by reference to Exhibit 3.9 to Jones Lang LaSalle Incorporated's
Registration Statement on Form S-4 (File No. 333-48074-01)).
3.10 Charter of Jones Lang LaSalle Co-Investment, Inc. (incorporated
by reference to Exhibit 3.10 to Jones Lang LaSalle Incorporated's
Registration Statement on Form S-4 (File No. 333-48074-01)).
3.11 Bylaws of Jones Lang LaSalle Co-Investment, Inc. (incorporated
by reference to Exhibit 3.11 to Jones Lang LaSalle Incorporated's
Registration Statement on Form S-4 (File No. 333-48074-01)).
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.12 Articles of Incorporation of LaSalle Hotel Advisors, Inc.
(incorporated by reference to Exhibit 3.12 to Jones Lang LaSalle
Incorporated's Registration Statement on Form S-4 (File No. 333-48074-01)).
3.13 Bylaws of LaSalle Hotel Advisors, Inc. (incorporated by
reference to Exhibit 3.13 to Jones Lang LaSalle Incorporated's Registration
Statement on Form S-4 (File No. 333-48074-01)).
3.14 Memorandum of Association of Jones Lang LaSalle Limited
(incorporated by reference to Exhibit 3.14 to Jones Lang LaSalle
Incorporated's Registration Statement on Form S-4 (File No. 333-48074-01)).
3.15 Articles of Association of Jones Lang LaSalle Limited
(incorporated by reference to Exhibit 3.15 to Jones Lang LaSalle
Incorporated's Registration Statement on Form S-4 (File No. 333-48074-01)).
4.1 Form of certificate representing shares of Jones Lang LaSalle
Incorporated common stock (Incorporated by reference to Exhibit 4.3 to the
Current Report on Form 8-K dated March 11, 1999 (filed March 24, 1999)).
4.2 Indenture, dated July 26, 2000, among Jones Lang LaSalle
Finance B.V., Jones Lang LaSalle Incorporated, as parent Guarantor, Jones
Lang LaSalle Americas, Inc., LaSalle Investment Management, Inc., Jones
Lang LaSalle International, Inc., Jones Lang LaSalle Co-Investment, Inc.,
LaSalle Hotel Advisors, Inc. and Jones Lang LaSalle Limited, as Guarantors,
and The Bank of New York, as trustee (incorporated by reference to Exhibit
4.1 to Jones Lang LaSalle Incorporated's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2000).
4.3 Form of Note (included in Exhibit 4.2).
4.4 Registration Rights Agreement, dated July 19, 2000, among Jones
Lang LaSalle Finance B.V., Jones Lang LaSalle Incorporated, Jones Lang
LaSalle Americas, Inc., LaSalle Investment Management, Inc., Jones Lang
LaSalle International, Inc., Jones Lang LaSalle Co-Investment, Inc.,
LaSalle Hotel Advisors, Inc., Jones Lang LaSalle Limited, Morgan Stanley &
Co. International Limited, Bank of America International Limited, BMO
Nesbitt Burns Corp., and Chase Manhattan International Limited
(incorporated by reference to Exhibit 4.1 to Jones Lang LaSalle
Incorporated's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2000).
10.1 Second Amended and Restated Multicurrency Credit Agreement,
dated as of July 26, 2000 (Incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
10.2 Contribution and Exchange Agreement, dated as of April 21,
1997, by and among DEL-LPL Limited Partnership, DEL-LPAML Limited
Partnership, LaSalle Partners Limited Partnership, LaSalle Partners
Management Limited Partnership, The Galbreath Company, The Galbreath
Company of California, Inc., Galbreath Holdings, LLC and the Stockholders
of The Galbreath Company (Incorporated by reference to Exhibit 10.08 to the
Registrant's Registration Statement No. 333-25741).
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.3 Asset Purchase Agreement, dated as of December 31, 1996, by and
among LaSalle Construction Limited Partnership, LaSalle Partners Limited
Partnership, Clune Construction Company, L.P. and Michael T. Clune
(Incorporated by reference to Exhibit 10.10 to the Registrant's
Registration Statement No. 333-25741).
10.4 1997 Stock Award and Incentive Plan (Incorporated by reference
to Exhibit 99.2 to the Registrant's Registration Statement No. 333-42193).
10.5 Amendment to the Registrant's 1997 Stock Award and Incentive
Plan (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998).
10.6 Second Amendment to the 1997 Stock Award and Incentive Plan
(Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1999).
10.7 Third Amendment to the 1997 Stock Award and Incentive Plan
(Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1999).
10.8 Fourth Amendment to the 1997 Stock Award and Incentive Plan.
10.9 Employee Stock Purchase Plan (Incorporated by reference to
Exhibit 99.1 to the Registrant's Registration Statement No. 333-42193).
10.10 First Amendment to the Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form
10-Q for the quarter ended June 30, 1998).
10.11 Second Amendment to the Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1998).
10.12 Third Amendment to the Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.2 to Jones Lang LaSalle
Incorporated's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2000).
10.13 Amended and Restated Stock Compensation Program (incorporated
by reference to Exhibit 10.11 to Jones Lang LaSalle Incorporated's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999).
10.14 Description of Management Incentive Plan (Incorporated by
reference to Exhibit 10.8 to the Annual Report on Form 10-K for the year
ended December 31, 1997).
10.15 Registration Rights Agreement, dated as of April 22, 1997, by
and among the Registrant, DEL-LPL Limited Partnership, DEL-LPAML Limited
Partnership, DSA-LSPL, Inc., DSA-LSAM, Inc. and Galbreath Holdings, LLC
(Incorporated by reference to Exhibit 10.14 to the Registrant's
Registration Statement No. 333-25741.)
10.16 Form of Indemnification Agreement with Executive Officers and
Directors (Incorporated by Reference to Exhibit 10.14 to the Annual Report
on Form 10-K for the year ended December 31, 1998).
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.17 Severance Pay Plan (incorporated by reference to Exhibit 10.15
to Jones Lang LaSalle Incorporated's Annual report on Form 10-K for the
fiscal year ended December 31, 1999).
10.18 Senior Executive Services Agreement with Christopher A. Peacock
(incorporated by reference to Exhibit 10.16 to Jones Lang LaSalle
Incorporated's Annual report on Form 10-K for the fiscal year ended
December 31, 1999).
10.19 Senior Executive Service Agreement with Robert Orr
(incorporated by reference to Exhibit 10.17 to Jones Lang LaSalle
Incorporated's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999).
10.20 Consent Agreement, dated as of April 15, 1997, by and among
DSA-LSPL, Inc., DSA-LSAM, Inc., DEL-LPL Limited Partnership, DEL-LPAML
Limited Partnership, DEL/LaSalle Finance Company, L.L.C., LaSalle Partners
Limited Partnership and LaSalle Partners Management Limited Partnership
(Incorporated by reference to Exhibit 10.16 to the Registrant's
Registration Statement No. 333-25741.)
10.21 Consent Agreement, dated as of April 22, 1997, by and among the
Stockholders of The Galbreath Company and The Galbreath Company of
California, Inc., Galbreath Holdings, LLC, DEL-LPL Limited Partnership,
DEL-LPAML Limited Partnership, DEL/LaSalle Finance Company, L.L.C., LaSalle
Partners Limited Partnership and LaSalle Partners Management Limited
Partnership (Incorporated by reference to Exhibit 10.17 to the Registrant's
Registration Statement No. 333-25741.)
10.22 Purchase Agreement by and among Jones Lang LaSalle Incorporated
and Lend Lease Corporation Limited, and the subsidiaries of Lend Lease
Corporation Limited named herein dated August 31, 1998 (Incorporated by
reference to Exhibit 2(a) to the Current Report on Form 8-K dated October
1, 1998).
12.1 Computation of Ratio of Earnings to Fixed Charges.
21.1 List of Subsidiaries
23.1 Consent of KPMG LLP, independent auditors
24.1 Power of Attorney (Set forth on page preceding signature page
of this report.)
99.1 Jones Lang LaSalle press release announcing 2000 earnings