Jones Lang LaSalle Inc (JLL) 2002 Q4 法說會逐字稿

Good day and welcome to the Jones Lang LaSalle incorporated fourth quarter 2002 earnings release conference call. Today's call is being recorded. Any statements made about future results, performance, plans, expectation and objectives are forward-looking statements. Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the company's annual reports on form 10-K for the year ended December 31, 2001 and in our other reports filed with the SEC. The company disclaims any undertaking to update or revise any forward-looking statements. Finally, a transcript of this call will be posted on the company's website within 36 hours of this call.

At this time for opening remarks and introductions, I would like to turn the call over to Mr. Chris Peacock, chief executive officer. Please go ahead, sir.

Thank you for joining us for this review of our fourth quarter 2002 financial results. With me on the call today is Lauralee Martin, our CFO.

Let me begin by briefly summarizing the headlines of our 2002 performance. I am naturally disappointed to report earnings much lower than we originally targeted for the full year. As we noted in our third quarter call, this reflects significant revenue decline as business confidence remained low and transaction activity was substantially reduced, particularly in the leasing and management areas. In this context, I'm pleased that we succeeded in meeting our revised earnings target through disciplined cost actions, particularly in our Americas business and through strong performance by LaSalle Investment Management. Effective cash management ensured we again exceeded our goal of reducing debt for the third consecutive year. Finally, we have taken further action to reduce costs at the end of the year that will enable continued investment in growth initiatives in 2003 to meet our strategic objectives.

In a moment, I will ask Lauralee to talk about our financial results for 2002 and our outlook for the first quarter of 2003. I will then talk about the business highlights of the fourth quarter, and our performance in pursuing our strategic goals during 2002, along with the actions we're taking in 2003. After that, we will be glad to take your questions.

Before I hand over to Lauralee, I want to briefly comment on a key leadership change that took place at the end of the year. On previous calls, we have been joined by Peter Roberts, our chief operating officer. As we announced during the fourth quarter, on the first of January, Peter took on the role of CEO of our Americas region, replacing Earl Webb, who is now CEO, Capital Markets America. I just briefly want to acknowledge Peter's great contribution to the global management of the business in his two years as CFO and COO. The role he has now taken on is a critical business management one, and I'm certain he will bring exemplary leadership to the region and success to the firm.

Let me now hand the call over to Lauralee Martin to talk in detail about our financial performance.

Thank you, Chris.

Net income for the fourth quarter was 17.5 million, or 55 cents per diluted share, bringing the year-to-date net income to 27 million, or 85 cents per diluted share, in line with earnings guidance given at the time we announced our planned fourth quarter restructuring. The results for the fourth quarter include a restructuring charge of 13.3 million for employee severance costs and asset impairments. Year-to-date, adjusted income which excludes after-tax non-recurring and restructuring charges was 34.3 million, or $1.08 per share. These results were slightly above the first call estimate of $1.05 on a comparable basis. Results for the year include the cost of our New York expansion, which negatively impacted the year by 7cents a share. EBIT up for the year was 90.4 million, which compares to the prior year of 59.8 million.

With continued tight controls around capital expenditures, aggressive management of receivables, and strong management of our global tax position, we continue to generate strong cash flow. As a result, we have for the third consecutive year exceeded our debt paydown commitment. Over the past three years, we've paid debt down by over $100 million. Our revolving credit facility ended the year at only 26 million, down more than 34 million from the prior year. Although the senior Euro note saw an increase of 26 million on the balance sheet, this increase is due to the currency translation of the increased strength of the Euro against the dollar, not an increase in our borrowing.

With interest expense continuing to decline, the EBITDA to interest coverage was a strong 5.3 times. We also used cash to repurchase 300,000 shares of our stock under our approved share repurchase program. This repurchase program was used to offset dilution from employee compensation plans. Additionally, we increased our coinvestment capital by a net $9 million over the prior year, as we continue to invest in and grow our investment management business.

Total revenues for the firm were270 million for the quarter, and 840 million for the year, both below the prior-year levels by 3% and 7% respectively, and in comparable currency below 7% and 10%. The benefits of the restructuring in 2001 together with aggressive cost controls throughout 2002 resulted in expense declines for the year of 44 million in U.S. dollars. Removing the foreign exchange impact, the actual cost improvement was 63 million, which included 10 million from the implementation of FAS142, which relates to depreciation and amortization. At the time of the 2001 restructure, we committed to expense savings from those actions at $50 million. So at $53 million of savings, we exceeded that goal.

Turning now to the segments -- in the Americas, year over year operating income improved a significant 22% to $32 million. This performance was driven by cost savings at 43 million of cost reductions, offset revenue declines of 37 million. Although the Americas anticipates revenue in the first quarter of this year, 2003, to be flat to modestly down from the prior year, the pace of the revenue decline has slowed. Fourth quarter revenues were down only 3%, as compared to the total-year decline of 11%. The majority of the revenue decline continues to be in leasing and management, reflecting the lower level of market activity around space occupancy by our clients and the general marketplace as well as shorter term leases.

Although the year saw less activity from existing clients, we successfully continued to grow our corporate solutions business, sourcing 12 new alliances in 2002 compared to 10 in 2001,which brings the total to 57. As it's not possible to have a perfect record, we did lose one alliance client this year. In the third quarter of the year, the Americas expanded their New York City presence at a cost of approximately 7 cents a share for the year. The expanded New York City team is performing solidly, being slightly ahead of the planned expectations. As important as this expansion is for the Americas, strategically, the enhanced New York City market position has already been recognized by our clients, and has increased the opportunities for our global team, particularly in Asia.

Major multinationals continue to seek real estate services performed and delivered by a proven integrated global service provider. Europe continued to experience the challenges of a declining economic environment. Revenues were down 9%, but excluding foreign exchange translation, were down 47 million or 14%. The declines came principally in our key markets of Germany and France, as well as in the English leasing market. In contrast to the Americas, where revenue declines were offset with the cost savings, the lower expense levels in Europe of 22 million excluding foreign exchange impacts were not sufficient to offset the revenue decline.

During the fourth quarter, we acquired the 45% minority interest position of our partner Skandia (ph) in their property management business. Because the acquisition price of approximately 1 million was below the book value of their 45% position, the acquisition generated an after-tax gain of $341,000. We believe that this acquisition will also enhance our Capital Markets business, which offers services to Skandia across the whole European region. Asia-Pacific performed for the year at approximately a break-even, as was the case in 2001. Our expansion and investment in north Asia proved important, as the year over year increases in Japan, Korea and Taiwan offset declines in Hong Kong and Singapore. We expect these north Asian markets to continue to expand in 2003, and, in fact, anticipate that Japan will become our third largest market position in the region. We also continue to see growth in our corporate solutions product offerings as multinationals see this region as opportunities for both low cost operations and business growth.

Although we experienced mixed signs of economic recovery throughout 2002, we now see indications of stability in the core markets while we expect continued growth in north Asia.

Chris will be giving a strategic overview of LaSalle Investment Management, highlighting this segment's strong marketplace success in 2002. I will, however, cover their financial performance. With our emphasis on increasing the predictable advisory fee component of this business, core advisory fees increased by 16% year over year. Included in the 2001 financial performance for this segment was 18 million of one-time revenues from the disposition of LaSalle hotel properties and a significant hotel investment transaction. In 2002, incentive fees of 12.6 million came from a mix of core ongoing separate account relationships, demonstrating the increasing revenue quality being achieved.

For the year, we had modest coinvestment equity earnings of 2.6 million compared to the prior year of 8.2 million. In 2003, with the maturity of investments in several funds, we do anticipate an increase in equity earnings as the performance of assets is realized. Expenses increased for staff additions to service fund growth as well as from increased transactions and specific bonuses. Operating income of $20 million was down slightly from the $21.7 million of the prior year, but as discussed, we are very pleased with the improved quality and predictability of income being achieved.

Let me now turn back to the restructuring charge taken in the fourth quarter. Included in the charge was a net 11.9 million for severance for approximately 325 employees. Of these, approximately 80% are fairly evenly divided between the Americas and Europe with the balance spread across the firm. The focus of our people decisions has been to ensure that our high standards for service continue to be delivered to our clients. Also included in the charge was 1.4 million for the impairment of excess office space, as well as an impairment of a land investment in the business exited in 2001. Anticipated savings from the charge are approximately $20 million in 2003. These savings will be used to offset inflationary increases of our existing staff in operations, as well as continued investment in the identified growth opportunities of LaSalle Investment Management, New York City, Sweden, and north Asia.

Now to look forward. We are a seasonal business with net income generated predominantly in the second half of the year. As a result, we plan to give total year earnings guidance later in the year, when we have a more predictable view of the economy and its impact on our global clients. However, we believe the actions taken with the year-end restructuring will produce improved year over year earnings performance. Quarterly earnings guidance continues to be challenging due to the timing delays that have been occurring with our clients decisions about transactions and the resulting impact on revenues. Subject to this, our guidance for the first quarter, a quarter in which we normally experience a loss, is a loss in the range of 25 to 35 cents a share.

With the conclusion of the financial overview, I'd now like to turn the call over to Chris Peacock, president and CEO.

Thank you, Lauralee.

You've heard from Lauralee the details of our financial performance for the fourth quarter and for the full year in 2002. Although I am disappointed that we were not able to achieve the earnings target that we originally set for the year, our performance in reaching our restated goal in market conditions that severely impacted revenues, underlines our continued focus on tight expense controls. We took substantial action to reduce costs at the end of 2001, and are doing so again at present to ensure that this business remains appropriately sized for the market conditions we are experiencing.

At the same time, it is essential that we preserve the franchise of the firm by maintaining the quality and depth of our client service capability in all of the business areas in which we operate. Jones Lang LaSalle's long term strategjc goals are focused around excellence in client service delivered by the best people in our industry. It is this combination that will provide long-term growth and returns to our shareholders. It is also through action to reduce costs in the mature parts of our business that we're able to resource the growth and investment in areas that offer enormous potential for us to leverage the Jones Lang LaSalle brand and global platform.

For the next few minutes, I want to describe the recent success and exciting prospects of one of our key strategic growth areas, LaSalle Investment Management. As you heard Lauralee describe, our investment management business achieved an excellent performance in 2002, and I'm even more excited by its prospects for growth in the future based on the success achieved in building new business relationships throughout the year. This business is a unique part of the Jones Lang LaSalle business model, among the leaders in its sector, and also a core client for our owner and occupied services businesses across the world.

The LaSalle Investment Management vision is to be the leading global real estate money management firm. Real estate as an asset class is consistently outperforming other assets in both the short term and the long term, and as a result is attracting high levels of capital from global investors, many of whom are seeking the services of specialist investment managers capable of assessing the best real estate opportunities wherever they may occur in the world. With approximately $23 billion of assets under management, LaSalle Investment Management is ideally positioned to service these strong capital flows. Following its highly successful entry into Asia-Pacific in the last two years through the Asia recovery fund, it has now established a worldwide presence through which it's building new client relationships at an impressive rate. A total of 24 were formed during 2002, more than in any single year since our merger.

The increasingly global focus of the business now means that approximately half of the revenue achieved in 2002 came from outside North America. Though the identity and investment strategy of many of these client relationships must remain confidential, we were able in our last call to describe our role advising on the global investment program for Prudential property investment managers. In the fourth quarter, another client for whom we'd recently received a European mandate extended the relationship in the U.S. to cover investment and existing assets totaling $500 million. In the UK, a number of separate account relationships have been successfully renegotiated and extended in 2002,reflecting high client satisfaction with the performance achieved by LaSalle Investment Management.

In addition to growing these separate account relationships, the business has achieved remarkable progress in building its portfolio of indirect fund vehicles to match regional investment opportunities with investor demand. In the fourth quarter, we completed the final close of LaSalle Eurogrowth 2 (ph) with total equity commitments of 335 million euros, equating to approximately 1 billion of euros of investment value on a leveraged basis. This capital raising alone resulted in eight new client relationships, while the participation of five existing investors further demonstrated their confidences. In total, nine closings for three funds were completed in 2002, bringing the portfolio of active funds to11.

As I mentioned a moment ago, LaSalle Investment Management is a core client of the owner and occupied services businesses of the firm in all three regions. The global Jones Lang LaSalle platform provides for sound investment management with access to skilled local resources in 100 markets for transactions and property management services as well as local market knowledge and research. The on-the-ground owner and occupied services platform was the principal reason LaSalle Investment Management was able to enter the Asia-Pacific region so quickly to take advantage of the market conditions for its investors.

In summary, in 2002, LaSalle Investment Management has demonstrated the success that comes from the execution of a clearly targeted strategy and a high performance team culture. The business is focused on delivering superior performance from a broad product offering while building significant relationships with sophisticated cross-border investors. LaSalle Investment Management is an important source of earnings growth and of major client relationships and thought leadership for the whole firm, and I look forward to reporting on continued success for this business through 2003.

Turning to our three regional owner and occupied services businesses, among our key strategic priorities in 2002 was the continued growth of our capital markets and corporate finance business. The resilience of major capital market transaction activity in 2002 was an important counter to the weakened activity levels in other areas of the business, such as leasing. The final quarter of the year saw further capital market success on behalf of clients around the world. For example, in Sweden, we advised (inaudible), Germany's largest open-ended fund manager on their first acquisition in the Nordic region. The landmark -- mixed use City Cronan (ph) building in central Stockholm for 255 million Euro. Deker (ph) intended to make further acquisitions - does intend to make further acquisitions in this region, which is one we regard as an important area of growth in the near term.

As Lauralee mentioned, we aim to leverage this regional opportunity further through the recent acquisition of the minority interest in our asset management services company that has, since 2000, provided management services for all Skandia Life properties in Sweden, totaling 24.8 million square feet. Completing an outstanding year for our retail capital markets business in Europe, we represented HSBC Property Fund Management in one of the largest ever shopping center portfolio transactions in the UK, selling the charter house shopping center funds I and II to private-owned company CIT for more than $522 million. Our capital markets team in Europe advised Lend Lease Global Properties on acquisition of the Belgian property company Banamo (ph) for 217 million Euro.

Our corporate finance team is active in the UK, completing the sale of the RT group developments for RT Group PLC, which was formally Railtrack (ph), 97 million euros to Hammison (ph). To be advising on this quantity of high-value transactions at a time when merger and acquisition market activity is very limited demonstrates the success our team is having in establishing a strong presence in the real estate finance transaction area. The capital markets team in Chicago represented the seller in the second largest investment sale transaction closed in Chicago in 2002 -- 55 East Monroe Street, a 1.6 million square foot class A office tower, was sold to a German closed-end fund in the fourth quarter for approximately $291 million. In Japan, our investment team sold 13 assets involved with Exxon-Mobil, with a total value in excess of $110 million. This was part of an instruction from an international alliance client to dispose of over 50 assets in Asia-Pacific, following an asset restructuring review during which we provided valuation services and advice on disposal strategy.

Our hotels business had another successful year, with the fourth quarter again marked by major cross-border transactions with global clients in all regions. Acting for Walton (ph) Street, the Chicago-based private equity house, we sold the Four Seasons hotel in Milan, one of Europe's finest hotels, to private investors at a price per key that was among the highest ever achieved in Europe. The Brisbane Hilton, a Winter Garden retail complex, the city's second largest property, was sold on behalf of a private Singaporean family to one of Australia's leading super (inaudible) funds for over 150 million Australian dollars. These transactions demonstrate the global flow of investment capital and our ability to serve both ends of the transaction, buy and sell, for our clients.

Our strategic goal to focus on developing core relationships with clients for whom we can provide multiple services saw ongoing success in the fourth quarter. For Microsoft, a global alliance client secured in 2001, we carried out our first assignment in Central Europe, securing premises -- the company has two in Warsaw -- in the city's major prelate (ph) of the year. In the US, we beat significant competition to win leasing and management instructions in Chicago and Miami for one of our larger clients, TIAA Creff (ph) -- one South Wacker (ph),Chicago, that's 1.2 million square foot, and 701 Brickol (ph), Miami, 877,000 square feet, a substantial trophy of office properties.

In recent years, we've sold assets to this client in Virginia and Los Angeles, and we continue to build our relationship with TIAA Creff and are currently in discussions regarding a number of opportunities in US and in Europe.

Finally, Foley and Lardner (ph), one of the largest U.S. law firms, has selected Jones Lang LaSalle as its strategic alliance partner for tenant representation and project management services after a high-intensity selection process. Jones Lang LaSalle's ability to provide strategic solutions for real estate issues was central to our success in winning this client, for whom we've already begun acting in the 225,000 square foot transaction in Milwaukee, the client's largest location.

I would like to conclude by looking forward to 2003. As Lauralee has explained, in the current climate, we have decided to defer our full year guidance until later in the year. We remain committed to achieving earnings growth in 2003, despite continued downward pressure on revenues in Europe and uncertainty across the world. I believe that the quality of long-term client relationship wins that I have just described along with the disciplined expense management we have in place will enable us to continue to grow our share of major business opportunities in the local and cross-border markets in which we operate and are a leader. We've taken steps to reduce costs in markets where growth in the next period will be restricted, and are actively investing in areas such as north Asia, a sound investment management, New York and Scandinavia, where we believe that significant new opportunities exist for our clients and for the firm.

Our strategic focus in 2003 will continue to build on the successful work done in 2002. Excellence in client service, delivered by the best people in the industry, remains at the heart of everything we do. We must and will continue to focus on the attraction and retention of high-performing professionals. This is challenging to achieve at a time with pressure on revenue and expenses, but is central to the long-term success for the firm, it is a primary focus for the senior leaders of the business.

Now, we would like to open the call for your questions. Operator, would you please explain the process?

Certainly, Mr. Peacock. The question and answer session are will be conducted electronically today. If you would like to ask a question, please do so by pressing the star key followed by the digit 1 on your touch-tone telephone. If you're using a speakerphone today, please make sure that your mute function is turned off to allow your signal to reach our equipment. We will proceed in the order you signal us and we'll take as many questions as time permits. Once again, please press "*1" on your touch-tone telephone to ask a question.

We'll pause for just a moment to assemble a roster.

And our first question today will come from Mr. Matt Ostrower with Morgan Stanley.

Morning. Just wanted to ask you a little bit, just to comment if you could, qualitatively if necessary, I know you're not giving full year guidance which sounds very logical at this point, but in terms of the guidance you've given for the first quarter, it's a bigger loss than we've had in the last couple years, I think, in the first quarter, which would sort of imply if you're saying, you know, you think things may actually be flat or up a little bit full year, in general terms, it implies a pretty -- potentially a stronger second half recovery. Could you just sort of comment qualitatively on your thinking on the second half? Just is there anything you see now that might lead you to believe that things could recover in the second half?

Matt, I think I'll start by asking Lauralee to take that one.

First of all, Matt, in the first quarter of last year, there was a number of expense-type items that we benefited from, so what we're really seeing is not the full benefit of those in the first quarter, but we will see those throughout the year. We are looking at, at this point in time, relatively flat to maybe modestly down revenue, which would have a slight impact on that, but as we look at particularly -- I'll exclude Europe for the moment -- Americas and other part of the world, we are seeing that their pipelines give us comfort, that unless there's a major change in the economies or the world events that our prediction for the year of improving throughout should hold true.

Ok. Great. And then I guess on -- and I'm not sure if I missed this -

Matt, also one other comment and I apologize for interrupting you. The impact of the Euro, which obviously has been favorable in the latter half of this year for us actually hurts us when we're in a loss-making mode, because what's going to happen is we're not going to have as much profits. We're still going to have the interest expense, which is going to be translated into dollars because it's predominantly Euro-based and, therefore, it's going to come through as a higher number.

Ok. On the debt front, have you laid out any expectations for what you'd like to see happen in '03?

We have not at this point in time. However, what I would say is we are very focused on having our balance sheet positioned to make whatever decision we determine is economically the smartest in the middle of '04, at which time we can call the Euro debt, which tells you we are going to continue to pay down debt aggressively. At this point in time, we really have nothing outstanding on our revolver, so it shows you that we continue, you know, to see the strong cash flows coming in even through the first quarter.

Right. Any expectation for what debt will look like in the first quarter? Does it typically go up in the first quarter, if I recall correctly?

It will after bonuses, yes, that's correct.

All right. And then last question is just on the sort of corporate investment side, where you might actually put some capital to work. Any expectations for '03 laid out? And in particular, my sense is there's a fair amount of turmoil at Lend Lease right now. Is there the potential for more consolidation activity here? Or are you just staying on the sidelines at this point?

Talking here particularly about coinvestment capital, are we, Matt?

Yes. Well, not coinvestment, but more just are you thinking about buying other businesses at this point in time, or reinvesting more money in your existing businesses in '03?

Well, we've talked about reinvesting money in certain businesses in '03 and that undoubtedly is part of our strategy. Not since the merger took place in '99 has it been part of our strategy to acquire other businesses, but we've always said that we will have an eye for niche operations that do provide value-added in various areas. But actually in this market, we've been successful in doing that by acquiring skilled individuals rather than having to acquire buildings -- businesses.

Ok. Great. Thank you very much.

And our next question today will come from Joel Gomberg with William Blair.

Thank you. Good morning.

Morning, Joel.

Chris, maybe you can drill down a little bit more on Europe and where you see -- or how you perceive the real estate cycle, where we are in Europe. You know, it seems to be getting worse where America seems to be stabilizing a bit. Maybe you can help us there, and then how you view managing your expenses in Europe vis-a-vis the outlook there.

Right. Well, I agree with you that we are witnessing some stabilization here in America, and in particular, we've shown by good cost control here that we can improve the bottom line. It is a simpler thing to do in one country like America when you consider that we operate out of 19 different countries in Europe with all the complexities of running that business. Of course, the underlying cost is greater, and as again, you know, the cost of downsizing is also considerably greater because of the labor laws in Europe. Looking at the markets there, they went into decline obviously after both Asia-Pacific, which has been in that position now for five years, and indeed America. So slower into the decline, and, therefore, there is unpredictability going forward.

I think as you I'm sure are aware, there was particular weakness last year in Germany and then the final quarter again, that came through in France. Predictions are that growth in 2003 is going to be very limited in places like Germany, I mean, it's only just positive as one looks forward. So we've tackled our German business. It did actually make a small profit in 2002, and we've now positioned our business in terms of staffing size and the quality of people we have there to operate successfully in that market.

There is still a great deal of capital coming in for real estate investment in Germany -- invested elsewhere -- in Germany and elsewhere in Europe and indeed here in America. So yes, a tough -- I think a tough year ahead in Europe, and managing our cost space there is obviously one of our key challenges, which we are doing, and just very much hoping and feeling at the moment that the capital markets business, which was, again, very strong in 2002, only very, very slightly down on the 2001 total transactions that took place across Europe. Looking to 2003, there might be some softening there, but nevertheless, the activity that we see in our pipeline is still very encouraging.

Thanks. Other question, in Americas, you noted you had 12 new relationships in 2002. How would you, you know, characterize that opportunity set in '03?

Well, it was -- frankly, 12 new alliance clients in our corporate solutions business was an exciting addition and some excellent business there, more of which we will talk to you on our second quarter call as contracts get signed up, et cetera. Looking forward to this year, I think that the trend is a continuing one of outsourcing. We're still looking at the tip of an iceberg, and when we look at actually the amount of business that we're pitching for at this moment, I think it's going to be even busier potentially this year than last year.

Okay. Lauralee, in terms of '03, the tax rate seems to be bouncing around a lot, what should we assume for effective tax rate in 2003?

The effective tax rate that we ended the year at was 4%. Now, we did have the benefit additionally of the Procon (ph) transaction which we discussed with you, and so we are, therefore, anticipating a 34% tax rate in 2003. We believe we have plans in place that we can manage on a very effective basis with pretty strong consistency on a global basis.

Thank you very much.

Our next question will come from Will Marks representing JMP Securities.

Good morning, Chris and Lauralee. I had actually starting with Joel's, taking the tax rate question, should we assume -- I mean, it was 34% in '02 but it was obviously very different each quarter. Should we just assume a flat 34% or should we kind of use 2002 quarter as guidance?

No, I wouldn't use a flat 34%. What we had at the beginning of the year is we started out with 40%, which was really what we had -- equivalent to what he had the year before after adjusting for FAS 142, and it wasn't until the middle of the year with the new tax director and putting all our plans in place that we really felt comfortable that we could deliver the 34%, you know, for this year, and now we have that on a sustainable basis.

Okay. And can you clarify the number, is 63 million of expense reductions, using American dollars, 10 million of which was FAS 142?

Yes.

And that was reductions in '02?

Correct. That was without foreign exchange impacts.

Without foreign exchange impacts.

Right.

Right. And is the way to look at - and we've talked about this in the past, but the way to look at '03, we can't just obviously slash the 63 million off of '03 expenses, but should we be looking at the operating, administrative and other line to drop a little bit more than the comp and benefit line? Kind of in all those two --

We believe we've done a pretty good job with the operating and administrative expenses when we look at what we've done in terms of taking down travel, taking down any kind of discretionary costs. We did take very modest facility impairment charges with our restructure, but that was only about 5, $600,000. So you'd get a modest amount in terms of space savings in that line. But the challenge is to take the compensation cost, which is really the 325 people that we've, you know, done in the restructuring, those costs out of the system. Now, they will be offset -- just so that you know, we didn't invest in New York, for example, until the third quarter, so now we'll have those expenses in for the full year. You know, other places where we put people in place where you haven't seen the full year impact, and we definitely expect revenues off of those investments, but they will be offset to the cost savings.

How many employees do you have now in the company?

How many total employees?

Yes.

We're just at -- just on the 7,000 mark across the world.

Ok. And let me think here. On bonus levels, do they approximate 2002 levels? Can you comment at all -- I'm sorry -- 2001 levels?

Do you want to take that or should I?

They're modestly up.

And a couple other questions -- on earnings, the $1.08 number -- actually, can you restate the quarterly numbers for me for the year?

Matt, maybe it would be best if we call you back and make sure that -

I just have -- I don't know, maybe it's a glitch in my model, but I'm coming up with it a little bit differently.

Will, we'll call you back and go through that in detail if you like.

That's fine. And I guess finally, just a more global question. On -- it seems like to really get things to turn around here, you need a pickup in basically the sales and leasing business. Is that accurate? I mean, it's the highest margin business, I would guess.

Well, and our investment management business as well. Clearly, leasing is the area in 2002 that's reduced greatest across the world as corporates downsize rather than acquire additional premises. We're seeing that as a continuing trend, frankly, in 2003 and not expecting recovery coming through until 2004 sometime or even beyond. Looking, you know, at someone like Europe for the moment, if you aggregate all vacancy rates right across Europe, you're looking at something like 10% going into 2003. So yes, a pickup in the leasing side would make a marked difference clearly. A continuance of capital market strength in Europe and, frankly, growth in the Asia-Pacific region, limited capital markets transactions in 2002. We see the prospect of that growing in 2003, and indeed here in America, fairly flat year on year. So these are important areas for us. We did highlight during the call where we're investing and where we see new growth opportunities. So, far from despondent about the situation, in truth, Will.

Okay. Well, thank you for your comments.

You know, I might give you some leasing statistics that would give you a little more perspective on really what's happening in the marketplace. Our tenant representation, which is principally in the United States, did 3,300 transactions this year for 40 million square feet. Last year, they did the same number of transactions but for 33 million square feet, and the revenues were roughly comparable. Why? Because the lease terms are shorter, and what you're seeing is that our clients are making careful, cautious decisions. When that marketplace comfort comes back, we definitely have the clients, which is demonstrated by these statistics. They'll make those longer term decisions and there's an immediate pickup in the revenues associated with it. In our agency leasing business, which is principally in Europe, we did 7900 transactions for 76 million square feet. The year before, we did 9100 transactions for 82 million square feet, so there you can see the decline, and if you think about sort of a 20% decline in square feet being leased, we get asked the questions all the time how are you doing relative to the market. Most the major markets had leasing activity in total down more in the 30% range. So we think we have, you know, continued to be very solidly in with our clients and within our markets.

And then the last comment which Chris had referenced in regards to capital markets, which is a growing area of the firm not only in terms of building transactions but in the financing transactions, we did 1500 transactions this year for $18 billion, we did 1300 transactions last year, but it was actually $19 billion. So you can see we're getting more of the market, and as we can also then see the marketplace do more and more of the larger trophy buildings which are moving to us, our positions in these markets are strengthening.

Okay. Thank you very much. I appreciate it, Laura.

Thanks, Will. We'll ring you back on the other.

Okay.

And at this time, I would like to remind our participants that if you do have a question or a comment for our presenters, please signal at this time by pressing star 1 on your touch-tone telephone. And we'll pause for just one moment to give all a final opportunity to signal.

And our question now is from Sonya Vandorf (ph) with Deutsche Bank.

Yes. Good afternoon. My question basically relates to your investments in general for (inaudible) and investments in real estate (inaudible). Can you give us an idea, the breakdown basically for the full year between cap-ex and other investments?

Yes. In terms of our cap-ex activity, it was for the full year just a little over $22 million with the majority of it slightly under 15 million in technology and telecommunications.

All right. Should we use that number going forward? Because in the past, you're traditionally around the 40, 45% mark, so --

We think that sort of the $20-$25 million range for us on an annual basis is sustainable.

Okay.

In regards to other investments, it would be principally our coinvestment capital and although we put out money of, you know, about a little over $26 million, we also receive money back from transactions and so the net moneys, that was about $9 million. We would expect that number to be larger in 2003. We believe on a sort of sustainable basis, that's a $15-$20 million type annual number.

All right. And in terms of acquisitions, is there a budget or is it basically (inaudible) -- if you see anything? (inaudible) actually mentioned the size of the acquisition of the Swedish joint venture.

No, but we can -- we're talking about a $1 million -

One million, so that was small, yeah.

It was $1 million, and we believe that it has a one-year payback, so it was economic for us, but on top of that, very strategic.

All right. But otherwise you're basically - you're open minded about opportunities in the markets, especially in the current conditions? There might be some opportunities for you?

Open-minded, but it's something that is not part of our strategy -- acquisition of other major companies. We believe that our culture is unique, and do not want to dilute it.

Okay. Thank you. And one more question - can you comment on BankOne basically at all?

Well, only to say that no change, no difference from what we've issued before.

All right.

There is -- they're absolutely in our opinion no material claim here, and we will be at the appropriate time defending it rigorously.

Okay. Thanks a lot.

And at this time, there appear to be no further questions in the queue. I would like to advise our audience that a replay of today's conference will be available beginning today at 11:00 a.m. Central time and running through Tuesday, February the 11th by dialing 888-203-1112, or area code 719-457-0820, and entering the confirmation code 297956. Again, those numbers, toll-free 888-203-1112, or area code 719-457-0820, and confirmation code 297956.

At this time, I'd like to turn the conference back over to Mr. Peacock for any additional or closing remarks.

Thank you. Only to say thank you, everybody, for participating today, and we look forward to talking with you again after the first quarter. Thank you.

And this does conclude today's conference call. We do appreciate your participation and I hope that everyone has a wonderful afternoon.