10-Q/APeriod: Q1 FY2004

CBRE GROUP, INC. Quarterly Report (Amendment) for Q1 Ended Mar 31, 2004

Filed June 28, 2004For Securities:CBRE

Summary

CBRE GROUP, INC. (CBRE) filed this Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, primarily to address comments from the Securities and Exchange Commission related to its Form S-1 registration statement. The report includes financial statements reflecting a 3-for-1 stock split effective May 4, 2004, and a 1-for-1.0825 reverse stock split effective June 7, 2004, with all prior period data adjusted accordingly. The company reported a net loss of $16.6 million for the first quarter of 2004, compared to a net loss of $1.3 million in the same period of 2003. Revenue increased significantly by 67.2% to $441.0 million, largely driven by the acquisition of Insignia Financial Group, Inc. However, operating expenses also rose substantially, leading to the increased net loss. The company continued to manage a significant debt load, with total long-term debt exceeding $790 million.

Key Highlights

  • 1The company reported a net loss of $16.6 million for the three months ended March 31, 2004, a significant increase from the $1.3 million net loss in the prior year's comparable period.
  • 2Revenue for the quarter grew by 67.2% to $441.0 million, largely attributed to the acquisition of Insignia Financial Group, Inc., which was completed in July 2003.
  • 3Operating expenses, including cost of services and operating, administrative, and other expenses, also increased substantially, outpacing revenue growth and contributing to the wider net loss.
  • 4Depreciation and amortization expense increased by 172.7%, largely due to amortization of intangibles acquired in the Insignia Acquisition.
  • 5The company's total assets decreased from $2.21 billion at the end of 2003 to $1.92 billion at March 31, 2004, primarily due to a reduction in cash and cash equivalents and receivables.
  • 6Total liabilities decreased from $1.87 billion to $1.60 billion, mainly driven by a significant decrease in total short-term borrowings.
  • 7The report reflects a 3-for-1 stock split effective May 4, 2004, and a 1-for-1.0825 reverse stock split effective June 7, 2004, with historical data adjusted accordingly.

Frequently Asked Questions

The primary reason for the increased net loss of $16.6 million in the first quarter of 2004, compared to $1.3 million in the prior year, is the substantial increase in operating expenses. While revenue grew significantly due to the Insignia acquisition, costs such as cost of services, operating, administrative, and other expenses, and merger-related charges also rose considerably, outpacing revenue growth.

The acquisition of Insignia, completed in July 2003, was a major driver of the significant increase in revenue, which grew by 67.2% to $441.0 million. However, it also led to higher operating expenses, including increased payroll-related costs, integration costs, amortization of acquired intangibles, and merger-related charges, which collectively contributed to the wider net loss for the quarter.

CBRE Group, Inc. has a substantial debt load. As of March 31, 2004, total long-term debt was approximately $790.5 million. The company is subject to various restrictive covenants in its debt agreements that limit its flexibility. The company is also actively managing its debt through refinancing and selective repayment, with plans to use proceeds from its recent IPO to redeem certain senior notes.

The financial results are not directly comparable because the Insignia Acquisition, which significantly impacts operations, was completed on July 23, 2003. Therefore, the first quarter of 2004 includes a full quarter of Insignia's results, while the first quarter of 2003 does not include any of Insignia's activity.