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2008 Revenue of $2.7 Billion Equal to 2007 Despite Global Economic Slowdown
Included in the firm’s 2008 results were 15 acquisitions that closed during the year, the most significant being The Staubach Company and Kemper’s. Full-year results included $18 million of intangible amortization and $7 million of integration costs related to these two acquisitions. Fourth-quarter results included $8 million of intangible amortization and $5 million of integration costs. Full-year results also included severance charges of $23 million, which resulted from the need to reduce staffing levels to reflect lower anticipated revenue in certain businesses related to the global economic slowdown and credit contraction. Integration costs for the acquisitions, as well as severance charges, are reported as Restructuring Charges for the full-year and fourth-quarter periods. Total Restructuring Charges for 2008 were $30 million. These costs are excluded from segment operating results for the full year and fourth quarter, although they are included for consolidated reporting.
Full-year revenue was $2.7 billion in both 2008 and 2007, despite substantial decreases in Capital Markets and Hotels transaction levels. Transaction Services revenue decreased by 8 percent from 2007, to $1.4 billion; however, excluding Capital Markets and Hotels, Transaction Services revenue for the year increased 14 percent over 2007, to $1.1 billion. Management Services revenue increased 22 percent to $882 million in 2008, with all operating regions contributing to the revenue growth. LaSalle Investment Management’s Advisory fees increased 13 percent over the prior year to $278 million, and Incentive fees were $59 million in 2008, compared with $88 million in 2007. Acquisitions completed in 2008 contributed $193 million in revenue for the full year and $104 million for the fourth quarter.
For the fourth quarter of 2008, revenue was $797 million, a decrease of 8 percent from $862 million in the prior year, driven by the impact of foreign currency exchange rates as the U.S. dollar strengthened and a $106 million revenue decrease in Capital Markets and Hotels from the fourth quarter of 2007. On a local currency basis, revenue increased 1 percent over the same period in 2007. Transaction Services revenue, excluding Capital Markets and Hotels, was $365 million in the fourth quarter, an increase of 9 percent over the prior year, and Management Services revenue was $247 million, an increase of 10 percent over the fourth quarter of 2007.
“Through focused execution for our clients, we gained market share and maintained revenues in 2008 while aggressively managing our own costs,” said Colin Dyer, Chief Executive Officer of Jones Lang LaSalle. “With continuing challenges in 2009, we will focus our superior market knowledge and execution skills to create value for our clients. We will remain flexible across our operations to align the company to current market conditions,” Dyer added.
Operating expenses were $2.5 billion for the year, compared with $2.3 billion in 2007, and $725 million for the fourth quarter of 2008, compared with $721 million in the prior year, including Restructuring Charges of $30 million for the year and $20 million in the fourth quarter. Operating expenses from the 15 acquisitions completed in 2008, including integration and intangible amortization, were $192 million for the full year and $92 million for the fourth quarter, which were not reflected in the firm’s 2007 results. Specifically, The Staubach Company and Kemper’s added to the firm’s cost structure and increased operating expenses compared with 2007.
During the fourth quarter, the firm amended its credit agreements with its bank group to provide additional financial flexibility. The amendments increased the maximum allowable Leverage Ratio under the credit agreements from 3.25x to 3.50x through September 2009, provided additions to Adjusted EBITDA for certain non-recurring charges related primarily to expense-management actions and adjusted certain other definitions in the agreements. Our December 19, 2008, Form 8-K filing provides additional information about the terms of the amendments. The total borrowing capacity under the agreements is $870 million and the maturity on both agreements remains June 2012. At December 31, 2008, the firm’s Leverage Ratio as calculated under the amended agreements was 2.24x.
LaSalle Investment Management
The firm has successfully integrated the 15 acquisitions it closed in 2008, enhancing its market share in local markets and the corporate occupier space, and diversifying into the retail and industrial sectors. The firm continues to take aggressive staffing and cost actions in response to the global economic slowdown while adapting its service offerings to the changing needs of clients. The firm remains flexible, innovative and prepared to capitalize on new opportunities to serve clients in the challenging environment that lies ahead. Statements in this press release regarding, among other things, future financial results and performance, achievements, plans and objectives may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance, achievements, plans and objectives of Jones Lang LaSalle to be materially different from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include those discussed under “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk,” and elsewhere in Jones Lang LaSalle’s Annual Report on Form 10-K for the year ended December 31, 2007 and in the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008, June 30, 2008, and September 30, 2008, and in other reports filed with the Securities and Exchange Commission. Statements speak only as of the date of this release. Jones Lang LaSalle expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in Jones Lang LaSalle’s expectations or results, or any change in events.
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