TCC

Trammell Crow Company (NYSE: TCC), one of the nation's largest diversified commercial real estate services companies, today announced financial results for the third quarter and first nine months of 2006. As announced on Tuesday, October 31, the Company has agreed to be acquired by CB Richard Ellis Group, Inc. in a transaction whereby shareholders will receive $49.51 per share in cash. Completion of the transaction is conditioned on, among other things, regulatory review and approval by the Company�s stockholders. The transaction is expected to close in late 2006 or early 2007. Consolidated Results For the third quarter of 2006, revenues totaled $247.1 million, a 13% increase from revenues of $218.8 million for the corresponding quarter of 2005. Net income for the third quarter of 2006 was $15.9 million, up 10% from net income of $14.5 million for the third quarter of 2005. Earnings per share for the quarter were $0.43, compared with $0.40 for the third quarter of 2005. For the nine months ended September 30, 2006, revenues were $702.1 million, up 16% from revenues of $605.5 million for the nine months ended September 30, 2005. Net income for the nine months ended September 30, 2006, was $28.3 million, up 14% from net income of $24.8 million for the first nine months of 2005. For the year to date through September 30, 2006, the company reported diluted earnings per share of $0.77, compared with diluted earnings per share of $0.68 for the first nine months of 2005. Revenue information reflects a change in income statement presentation. Beginning with the third quarter of 2006, gains on disposition of real estate will no longer be shown as revenues but will be shown separately as another component of operating income. This change in presentation has no impact on operating income, income from continuing operations or net income; its impact is solely to reduce reported revenues. The change will also be made to prior period information shown for comparative purposes. Commenting on the consolidated results, the Company�s Chairman and Chief Executive Officer, Robert E. Sulentic, stated �With Global Services� 2006 year-to-date earnings up 33% and our expectation that the Development and Investment segment will make a strong contribution to full-year profit growth, concentrated in the fourth quarter, we are pleased with where we sit through nine months. A year ago, in the third quarter of 2005, we posted earnings per share growth of 167%, increasing earnings per share from $0.15 in the third quarter of 2004 to $0.40 in the third quarter of 2005. A year later, our more modest third quarter 2006 increase in earnings per share, from $0.40 to $0.43, is in part a function of last year�s extremely strong third quarter.� Segment Results � Global Services Global Services segment income before income taxes increased 24% from $13.2 million in the third quarter of 2005 to $16.4 million in the third quarter of 2006. Revenues for this segment increased 12%, from $209.5 million in the third quarter of 2005 to $234.0 million in the third quarter of 2006. The revenue increase was fueled by services provided to user customers, as total revenues from the three user services lines � facilities management, corporate advisory services and project management � grew 19% from quarter to quarter. For the first nine months of 2006, Global Services income before income taxes was $47.5 million, up from income before income taxes of $35.6 million for the nine months ended September 30, 2005. Year-to-date Global Services revenues increased 15% from $581.3 million for the first nine months of 2005 to $670.6 million for the nine months ended September 30, 2006, with user services revenues again leading the way, up 22% for the year-to-date period. Commenting on the segment�s third quarter and year-to-date performance, Mr. Sulentic noted, �Our success in the outsourcing space � both new contract awards and expansions with existing customers � continues to fuel the growth in user services revenues, as expected. An increase in equity earnings from our investment in Savills has contributed nicely to segment profit growth. In the third quarter we saw a modest decline in investor services revenues including a 3% decline in brokerage revenues from investor clients. While total brokerage revenues � from both corporate advisory services and investor brokerage � increased only 8% for the quarter, that growth is on top of the exceptionally strong third quarter in 2005, during which total brokerage revenues increased by 41%. We continue to be encouraged by the rate of growth of total brokerage revenues for the year to date, up 24%.� Segment Results � Development and Investment Development and Investment segment income before income taxes decreased from $9.7 million for the third quarter of 2005 to $8.5 million for the third quarter of 2006. With regard to the segment�s year-to-date performance, Mr. Sulentic said, �As noted in our second quarter earnings release, we expected this segment�s earnings to be concentrated in the fourth quarter and for the Development and Investment segment to be a strong contributor to this year�s profit growth. Our expectations are unchanged in that regard. We are very pleased with the continuing build-up of our Development and Investment inventories. At September 30, 2006, our in process inventory had risen to $5.3 billion in total project costs, a new record, up $1.7 billion from year-end 2005, and our combined in process and pipeline inventories of $8.0 billion was also a new record.� Balance Sheet Consistent with the growth of the company�s in process development activity, its investment in real estate increased during the quarter. Consolidated real estate increased $73.6 million during the quarter to $519.0 million at September 30, 2006. Consolidated real estate debt increased $31.1 million during the quarter to $364.4 million, yet the portion of this indebtedness that is recourse to the company, together with company guarantees of obligations of unconsolidated subsidiaries, remained low, at $31.4 million. Consistent with historical patterns, the company expects that fourth quarter sales activity will result in net reductions to real estate and related debt. Borrowings under the company�s $175 million line of credit were $140.1 million at September 30, 2006, but have since been reduced to $104.0 million at October 31, 2006. Significant further reductions in borrowings under the line are expected to be made from fourth quarter cash flow. Outlook Commenting on the state of the company�s business and the pending sale of the company to CB Richard Ellis, Mr. Sulentic noted, �I am extremely proud of the tremendous strides we have made in our business since our 2001 reorganization, when we tackled necessary change in the face of a tough market. In our Global Services business, our focus on client service, capitalizing on the outsourcing opportunity and growing our brokerage ranks has pushed the segment�s pre-tax profits from their 2002 low of $14.7 million to 2005�s $68.4 million, on top of which we�ve posted 33% year-to-date growth. Client satisfaction is high. In our Development and Investment business, we have put in place specialty product initiatives and capital programs with scale to leverage our legacy field network of talented developers. That, along with an improving market, has enabled us to build the business to record activity levels, evidenced by the inventory levels reported today. We have built an infrastructure � in IT, HR, legal, finance and accounting � that provides exceptional support to our operations. �This tremendous progress, of which all our people can be proud, has not gone unnoticed. As a result, we�ve secured for our shareholders an opportunity to realize what we believe is a very attractive price for the company. And we have done so with a company that is a perfect complementary fit, one whose preeminent brokerage platform, broad range of other products and industry leading global footprint will provide enhanced solutions for our clients and greater opportunities for our people.� With regard to the company�s earnings for the remainder of the year, Mr. Sulentic stated, �Having entered into an agreement for the sale of our company, targeting a closing late this year or early next year, we are declining to give any earnings guidance from this point forward.� At 11:00 a.m., Eastern Standard Time, today, Mr. Sulentic and other members of company management will host a Webcast conference call to review the company�s third quarter results. The call may be accessed via the Investor Relations section of Trammell Crow Company�s Web site at www.trammellcrow.com. A replay of the call will also be accessible in the same manner through November 9, 2006. Founded in 1948, Trammell Crow Company is one of the largest diversified commercial real estate services companies in the world. The company provides brokerage, project management, building management, and development and investment services to both investors in and users of commercial real estate. In addition to its full service offices located throughout the United States, the company has offices in Canada, Europe, Asia and Latin/South America focused on the delivery of real estate services to user clients. The company delivers brokerage services outside the United States through strategic alliances with leading providers - in Europe and Asia, through Savills, plc, a leading property services company based in the United Kingdom; and in Canada, through JJ Barnicke, a leading Canadian real estate services provider. The company delivers building management, brokerage, and project management services in India through Trammell Crow Meghraj, India�s leading property services company jointly owned by the company and certain international partners. Trammell Crow Company is traded on the New York Stock Exchange under the ticker symbol �TCC� and is located on the World Wide Web at www.trammellcrow.com. Certain statements contained in this press release, including without limitation statements containing the words �believe,� �anticipate,� �attainable,� �forecast,� �will,� �may,� �expect(ation),� �envision,� �project,� �budget,� �objective,� �goal,� �target(ing),� �estimate,� �could,� �should,� �would,� �conceivable,� �intend,� �possible,� �prospects,� �foresee�, �look(ing) for,� �look to� and words of similar import, are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other matters which may cause the actual results, performance or achievements of the company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other matters include, but are not limited to (i) the ability of the Company to complete the proposed transaction with CB Richard Ellis Group, Inc. due to a number of factors, including but not limited to, the ability of the Company and CB Richard Ellis Group, Inc. to satisfy the various conditions contained in the merger agreement between the parties, including Trammell Crow stockholder approval, regulatory approvals and other customary conditions, (ii) the ability of the company to retain its major customers and renew its contracts, (iii) the ability of the company to attract new user and investor customers, (iv) the ability of the company to manage fluctuations in net earnings and cash flow which could result from the company�s participation as a principal in real estate investments, (v) the company�s ability to continue to pursue its growth strategy, (vi) the company�s ability to pursue strategic acquisitions on favorable terms and manage challenges and issues commonly encountered as a result of those acquisitions, (vii) the company�s ability to compete in highly competitive national and local business lines, (viii) the company�s ability to attract and retain qualified personnel in all areas of its business (particularly senior management), (ix) the timing of individual transactions, (x) the ability of the company to identify, implement and maintain the benefit of cost reduction measures and achieve economies of scale and (xi) the ability of the company to compete effectively in the international arena and manage the risks of operating in the international arena (including foreign currency exchange risk). In addition, the company's ability to achieve certain anticipated results will be subject to other factors affecting the company's business that are beyond the company's control, including but not limited to general economic conditions (including interest rates, the cost and availability of capital for investment in real estate, clients' willingness to make real estate commitments and other factors impacting the value of real estate assets), the effect of government regulation on the conduct of the company's business and the threat of terrorism and acts of war. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The company disclaims any obligation to update any such statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein to reflect any change in the company�s expectation with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements. Reference is hereby made to the disclosures contained under in �Item 1A. Risk Factors� of the company�s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2006. Trammell Crow Company Statements of Income (in thousands, except share and per share data) (UNAUDITED) � For the Nine Months For the Three Months Ended September 30, Ended September 30, 2006� 2005� 2006� 2005� (A) (A) (A) Revenues: User Services: Facilities management $ 198,305� $ 173,604� $ 67,105� $ 59,076� Corporate advisory services 155,241� 114,287� 57,584� 49,498� Project management � 101,595� � 85,503� � 38,133� � 28,216� 455,141� 373,394� 162,822� 136,790� Investor Services: Property management 100,521� 102,801� 33,730� 34,246� Brokerage 105,785� 96,752� 34,274� 35,296� Construction management � 9,144� � 8,381� � 3,134� � 3,207� 215,450� 207,934� 71,138� 72,749� � Development and construction � 31,551� � 24,168� � 13,130� � 9,223� Total Revenues 702,142� 605,496� 247,090� 218,762� � Costs and expenses: Salaries, wages and benefits 451,382� 399,089� 160,173� 140,787� Commissions 119,907� 98,790� 43,705� 41,834� General and administrative 118,586� 100,763� 39,301� 35,736� Depreciation and amortization 8,419� 6,870� 3,500� 2,335� Interest � 6,405� � 3,270� � 2,976� � 1,320� Total Expenses 704,699� 608,782� 249,655� 222,012� � Gain on disposition of real estate � 19,370� � 9,759� � 16,132� � 7,285� Operating income 16,813� 6,473� 13,567� 4,035� Interest and other income � 3,710� � 2,073� � 1,765� � 672� Income from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries 20,523� 8,546� 15,332� 4,707� Income tax expense (7,714) (3,111) (5,667) (1,726) Minority interest, net of income taxes (B) (256) 1,321� (388) (1,930) Income from investments in unconsolidated subsidiaries, net of income taxes (B) � 11,569� � 6,064� � 5,463� � 1,497� Income from continuing operations 24,122� 12,820� 14,740� 2,548� Income from discontinued operations, net of income taxes (B) � 3,207� � 12,014� � 1,133� � 11,969� Income before cumulative effect of a change in accounting principle 27,329� 24,834� 15,873� 14,517� Cumulative effect of a change in accounting principle, net of income taxes (B) � 1,011� � -� � -� � -� Net income $ 28,340� $ 24,834� $ 15,873� $ 14,517� � Diluted income per share: Income from continuing operations $ 0.65� $ 0.35� $ 0.40� $ 0.07� Income from discontinued operations 0.09� 0.33� 0.03� 0.33� Cumulative effect of a change in accounting principle � 0.03� � -� � -� � -� Net income $ 0.77� $ 0.68� $ 0.43� $ 0.40� � Weighted average common shares outstanding � 36,778,640� � 36,292,969� � 36,668,451� � 36,679,610� � Net income $ 28,340� $ 24,834� $ 15,873� $ 14,517� Depreciation and amortization (C) 9,445� 7,975� 3,794� 2,609� Interest (D) 7,564� 5,672� 3,486� 1,992� Income tax expense � 17,144� � 14,218� � 9,067� � 8,397� EBITDA (E) $ 62,493� $ 52,699� $ 32,220� $ 27,515� � (A) In accordance with the discontinued operations provisions of FAS 144, certain revenues and expenses for the six months ended June 30, 2006, and for the three and nine months ended September 30, 2005, have been reclassified to conform to the presentation for the three months ended September 30, 2006. These reclassifications did not have any impact on net income or EBITDA. � (B) Income tax expense has been calculated using an effective tax rate applicable to these line items. � (C) Includes depreciation and amortization related to discontinued operations of $294 and $1,026 for the three and nine months ended September 30, 2006, respectively, and $274 and $1,105 for the three and nine months ended September 30, 2005, respectively. � (D) Includes interest related to discontinued operations of $510 and $1,159 for the three and nine months ended September 30, 2006, respectively, and $672 and $2,402 for the three and nine months ended September 30, 2005, respectively. � (E) EBITDA represents earnings before interest, income taxes and depreciation and amortization. The Company believes that EBITDA is a meaningful measure of the Company's operating performance, cash generation and ability to service debt. However, EBITDA should not be considered as an alternative to: (1) net earnings (determined in accordance with accounting principles generally accepted in the United States ("GAAP")); (2) operating cash flow (determined in accordance with GAAP); or (3) liquidity. The Company also believes that EBITDA is sometimes useful to compare the operating results of companies within an industry due to the fact that it eliminates the effects of certain financing and accounting decisions. The Company's calculation of EBITDA may, however, differ from similarly titled items reported by other companies. Trammell Crow Company Balance Sheet (in thousands) � September 30, 2006 December 31, 2005 (UNAUDITED) (A) Assets: Current assets Cash and cash equivalents $ 70,523� $ 76,919� Restricted cash 3,024� 1,416� Accounts receivable, net of allowance for doubtful accounts 143,477� 127,784� Receivables from affiliates 2,915� 2,146� Notes and other receivables 27,871� 15,922� Deferred income taxes 3,855� 3,935� Real estate under development (B) 98,684� 120,697� Real estate and other assets held for sale (C) 144,171� 55,434� Marketable securities 1,356� 542� Other current assets � 29,903� � 26,870� Total current assets 525,779� 431,665� � Furniture and equipment, net 20,386� 19,787� Deferred income taxes 12,175� 16,270� Real estate under development (B) 162,640� 106,659� Real estate held for investment (B) 116,208� 76,145� Investments in unconsolidated subsidiaries (D) 207,230� 175,411� Goodwill 75,246� 75,239� Receivables from affiliates 7,227� 7,458� Marketable securities 18,719� 18,089� Other assets � 30,774� � 21,444� $ 1,176,384� $ 948,167� � Liabilities and Stockholders' Equity: Current liabilities Accounts payable $ 36,840� $ 31,698� Accrued expenses 147,141� 155,294� Income taxes payable 6,551� 16,313� Current portion of long-term debt 21� 1,302� Current portion of notes payable on real estate 134,418� 122,932� Liabilities related to real estate and other assets held for sale (E) 120,455� 40,916� Other current liabilities � 8,542� � 5,842� Total current liabilities 453,968� 374,297� Notes payable - other 140,126� 35,034� Notes payable on real estate, less current portion 115,857� 94,389� Other liabilities � 18,671� � 13,448� Total liabilities 728,622� 517,168� Minority interest 37,144� 29,528� � Stockholders' equity Preferred stock -� -� Common stock 379� 379� Paid-in capital 182,761� 205,084� Retained earnings 265,666� 240,887� Accumulated other comprehensive income 4,927� 1,713� Less: Treasury stock (43,115) (32,776) Unearned stock compensation, net � -� � (13,816) Total stockholders' equity � 410,618� � 401,471� $ 1,176,384� $ 948,167� � (A) In accordance with FAS 144, certain assets and liabilities at December 31, 2005, have been reclassified to conform to the presentation at September 30, 2006. � (B) Total real estate owned was $518,952 and $357,613 at September 30, 2006 and December 31, 2005, respectively. � (C) Real estate and other assets held for sale consist of the following: September 30, 2006 December 31, 2005 Real estate (B) $ 141,420� $ 54,112� Other assets � 2,751� � 1,322� $ 144,171� $ 55,434� � (D) Investments in unconsolidated subsidiaries consist of the following: September 30, 2006 December 31, 2005 Real estate development $ 63,539� $ 44,496� Other � 143,691� � 130,915� $ 207,230� $ 175,411� � (E) Liabilities related to real estate and other assets held for sale consist of the following: September 30, 2006 December 31, 2005 Notes payable on real estate $ 114,140� $ 38,837� Other liabilities � 6,315� � 2,079� $ 120,455� $ 40,916� Trammell Crow Company Summarized Operating Data by Segment (in thousands) (UNAUDITED) � For the Nine Months For the Three Months Ended September 30, Ended September 30, 2006� 2005� 2006� 2005� (A) (A) (A) Global Services: Total revenues $ 670,591� $ 581,328� $ 233,960� $ 209,539� Operating costs and expenses (640,790) (555,226) (224,135) (200,237) Gain on disposition of real estate � 53� � 1,264� � 10� � 1,264� Operating income 29,854� 27,366� 9,835� 10,566� Interest and other income � 2,368� � 1,590� � 1,028� � 440� Income from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries 32,222� 28,956� 10,863� 11,006� Minority interest, before income taxes 442� 282� 163� (260) Income from investments in unconsolidated subsidiaries, before income taxes � 13,175� � 5,755� � 5,194� � 1,856� Income from continuing operations, before income taxes 45,839� 34,993� 16,220� 12,602� Income from discontinued operations, before income taxes � 673� � 565� � 209� � 565� Income before cumulative effect of a change in accounting principle 46,512� 35,558� 16,429� 13,167� Cumulative effect of a change in accounting principle, before income taxes � 984� � -� � -� � -� Income before income taxes 47,496� 35,558� 16,429� 13,167� Depreciation and amortization 6,476� 5,856� 2,428� 1,953� Interest � 2,653� � 940� � 1,291� � 344� EBITDA (B) $ 56,625� $ 42,354� $ 20,148� $ 15,464� � Development and Investment: Total revenues $ 31,551� $ 24,168� $ 13,130� $ 9,223� Operating costs and expenses (63,909) (53,556) (25,520) (21,775) Gain on disposition of real estate � 19,317� � 8,495� � 16,122� � 6,021� Operating income (loss) (13,041) (20,893) 3,732� (6,531) Interest and other income � 1,342� � 483� � 737� � 232� Income (loss) from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries (11,699) (20,410) 4,469� (6,299) Minority interest, before income taxes (853) 1,795� (792) (2,748) Income from investments in unconsolidated subsidiaries, before income taxes � 5,393� � 3,781� � 3,313� � 537� Income (loss) from continuing operations, before income taxes (7,159) (14,834) 6,990� (8,510) Income from discontinued operations, before income taxes � 4,474� � 18,328� � 1,521� � 18,257� Income (loss) before cumulative effect of a change in accounting principle (2,685) 3,494� 8,511� 9,747� Cumulative effect of a change in accounting principle, before income taxes � 673� � -� � -� � -� Income (loss) before income taxes (2,012) 3,494� 8,511� 9,747� Depreciation and amortization (C) 2,969� 2,119� 1,366� 656� Interest (D) � 4,911� � 4,732� � 2,195� � 1,648� EBITDA (B) $ 5,868� $ 10,345� $ 12,072� $ 12,051� � Total: Total revenues $ 702,142� $ 605,496� $ 247,090� $ 218,762� Operating costs and expenses (704,699) (608,782) (249,655) (222,012) Gain on disposition of real estate � 19,370� � 9,759� � 16,132� � 7,285� Operating income 16,813� 6,473� 13,567� 4,035� Interest and other income � 3,710� � 2,073� � 1,765� � 672� Income from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries 20,523� 8,546� 15,332� 4,707� Minority interest, before income taxes (411) 2,077� (629) (3,008) Income from investments in unconsolidated subsidiaries, before income taxes � 18,568� � 9,536� � 8,507� � 2,393� Income from continuing operations, before income taxes 38,680� 20,159� 23,210� 4,092� Income from discontinued operations, before income taxes � 5,147� � 18,893� � 1,730� � 18,822� Income before cumulative effect of a change in accounting principle 43,827� 39,052� 24,940� 22,914� Cumulative effect of a change in accounting principle, before income taxes � 1,657� � -� � -� � -� Income before income taxes 45,484� 39,052� 24,940� 22,914� Depreciation and amortization (C) 9,445� 7,975� 3,794� 2,609� Interest (D) � 7,564� � 5,672� � 3,486� � 1,992� EBITDA (B) $ 62,493� $ 52,699� $ 32,220� $ 27,515� � (A) In accordance with the discontinued operations provisions of FAS 144, certain revenues and expenses for the six months ended June 30, 2006, and for the three and nine months ended September 30, 2005, have been reclassified to conform to the presentation for the three months ended September 30, 2006. These reclassifications did not have any impact on net income or EBITDA. � (B) EBITDA represents earnings before interest, income taxes and depreciation and amortization. The Company believes that EBITDA is a meaningful measure of the Company's operating performance, cash generation and ability to service debt. However, EBITDA should not be considered as an alternative to: (1) net earnings (determined in accordance with accounting principles generally accepted in the United States ("GAAP")); (2) operating cash flow (determined in accordance with GAAP); or (3) liquidity. The Company also believes that EBITDA is sometimes useful to compare the operating results of companies within an industry due to the fact that it eliminates the effects of certain financing and accounting decisions. The Company's calculation of EBITDA may, however, differ from similarly titled items reported by other companies. � (C) Includes depreciation and amortization related to discontinued operations of $294 and $1,026 for the three and nine months ended September 30, 2006, respectively, and $274 and $1,105 for the three and nine months ended September 30, 2005, respectively. � (D) Includes interest related to discontinued operations of $510 and $1,159 for the three and nine months ended September 30, 2006, respectively, and $672 and $2,402 for the three and nine months ended September 30, 2005, respectively. Trammell Crow Company Other Data (UNAUDITED) � September 30, 2006 December 31, 2005 � Development Inventory (in millions): In process inventory $ 5,325� $ 3,597� Pipeline inventory � 2,701� � 2,706� Total Inventory $ 8,026� $ 6,303� Trammell Crow Company (NYSE: TCC), one of the nation's largest diversified commercial real estate services companies, today announced financial results for the third quarter and first nine months of 2006. As announced on Tuesday, October 31, the Company has agreed to be acquired by CB Richard Ellis Group, Inc. in a transaction whereby shareholders will receive $49.51 per share in cash. Completion of the transaction is conditioned on, among other things, regulatory review and approval by the Company's stockholders. The transaction is expected to close in late 2006 or early 2007. Consolidated Results For the third quarter of 2006, revenues totaled $247.1 million, a 13% increase from revenues of $218.8 million for the corresponding quarter of 2005. Net income for the third quarter of 2006 was $15.9 million, up 10% from net income of $14.5 million for the third quarter of 2005. Earnings per share for the quarter were $0.43, compared with $0.40 for the third quarter of 2005. For the nine months ended September 30, 2006, revenues were $702.1 million, up 16% from revenues of $605.5 million for the nine months ended September 30, 2005. Net income for the nine months ended September 30, 2006, was $28.3 million, up 14% from net income of $24.8 million for the first nine months of 2005. For the year to date through September 30, 2006, the company reported diluted earnings per share of $0.77, compared with diluted earnings per share of $0.68 for the first nine months of 2005. Revenue information reflects a change in income statement presentation. Beginning with the third quarter of 2006, gains on disposition of real estate will no longer be shown as revenues but will be shown separately as another component of operating income. This change in presentation has no impact on operating income, income from continuing operations or net income; its impact is solely to reduce reported revenues. The change will also be made to prior period information shown for comparative purposes. Commenting on the consolidated results, the Company's Chairman and Chief Executive Officer, Robert E. Sulentic, stated "With Global Services' 2006 year-to-date earnings up 33% and our expectation that the Development and Investment segment will make a strong contribution to full-year profit growth, concentrated in the fourth quarter, we are pleased with where we sit through nine months. A year ago, in the third quarter of 2005, we posted earnings per share growth of 167%, increasing earnings per share from $0.15 in the third quarter of 2004 to $0.40 in the third quarter of 2005. A year later, our more modest third quarter 2006 increase in earnings per share, from $0.40 to $0.43, is in part a function of last year's extremely strong third quarter." Segment Results - Global Services Global Services segment income before income taxes increased 24% from $13.2 million in the third quarter of 2005 to $16.4 million in the third quarter of 2006. Revenues for this segment increased 12%, from $209.5 million in the third quarter of 2005 to $234.0 million in the third quarter of 2006. The revenue increase was fueled by services provided to user customers, as total revenues from the three user services lines - facilities management, corporate advisory services and project management - grew 19% from quarter to quarter. For the first nine months of 2006, Global Services income before income taxes was $47.5 million, up from income before income taxes of $35.6 million for the nine months ended September 30, 2005. Year-to-date Global Services revenues increased 15% from $581.3 million for the first nine months of 2005 to $670.6 million for the nine months ended September 30, 2006, with user services revenues again leading the way, up 22% for the year-to-date period. Commenting on the segment's third quarter and year-to-date performance, Mr. Sulentic noted, "Our success in the outsourcing space - both new contract awards and expansions with existing customers - continues to fuel the growth in user services revenues, as expected. An increase in equity earnings from our investment in Savills has contributed nicely to segment profit growth. In the third quarter we saw a modest decline in investor services revenues including a 3% decline in brokerage revenues from investor clients. While total brokerage revenues - from both corporate advisory services and investor brokerage - increased only 8% for the quarter, that growth is on top of the exceptionally strong third quarter in 2005, during which total brokerage revenues increased by 41%. We continue to be encouraged by the rate of growth of total brokerage revenues for the year to date, up 24%." Segment Results - Development and Investment Development and Investment segment income before income taxes decreased from $9.7 million for the third quarter of 2005 to $8.5 million for the third quarter of 2006. With regard to the segment's year-to-date performance, Mr. Sulentic said, "As noted in our second quarter earnings release, we expected this segment's earnings to be concentrated in the fourth quarter and for the Development and Investment segment to be a strong contributor to this year's profit growth. Our expectations are unchanged in that regard. We are very pleased with the continuing build-up of our Development and Investment inventories. At September 30, 2006, our in process inventory had risen to $5.3 billion in total project costs, a new record, up $1.7 billion from year-end 2005, and our combined in process and pipeline inventories of $8.0 billion was also a new record." Balance Sheet Consistent with the growth of the company's in process development activity, its investment in real estate increased during the quarter. Consolidated real estate increased $73.6 million during the quarter to $519.0 million at September 30, 2006. Consolidated real estate debt increased $31.1 million during the quarter to $364.4 million, yet the portion of this indebtedness that is recourse to the company, together with company guarantees of obligations of unconsolidated subsidiaries, remained low, at $31.4 million. Consistent with historical patterns, the company expects that fourth quarter sales activity will result in net reductions to real estate and related debt. Borrowings under the company's $175 million line of credit were $140.1 million at September 30, 2006, but have since been reduced to $104.0 million at October 31, 2006. Significant further reductions in borrowings under the line are expected to be made from fourth quarter cash flow. Outlook Commenting on the state of the company's business and the pending sale of the company to CB Richard Ellis, Mr. Sulentic noted, "I am extremely proud of the tremendous strides we have made in our business since our 2001 reorganization, when we tackled necessary change in the face of a tough market. In our Global Services business, our focus on client service, capitalizing on the outsourcing opportunity and growing our brokerage ranks has pushed the segment's pre-tax profits from their 2002 low of $14.7 million to 2005's $68.4 million, on top of which we've posted 33% year-to-date growth. Client satisfaction is high. In our Development and Investment business, we have put in place specialty product initiatives and capital programs with scale to leverage our legacy field network of talented developers. That, along with an improving market, has enabled us to build the business to record activity levels, evidenced by the inventory levels reported today. We have built an infrastructure - in IT, HR, legal, finance and accounting - that provides exceptional support to our operations. "This tremendous progress, of which all our people can be proud, has not gone unnoticed. As a result, we've secured for our shareholders an opportunity to realize what we believe is a very attractive price for the company. And we have done so with a company that is a perfect complementary fit, one whose preeminent brokerage platform, broad range of other products and industry leading global footprint will provide enhanced solutions for our clients and greater opportunities for our people." With regard to the company's earnings for the remainder of the year, Mr. Sulentic stated, "Having entered into an agreement for the sale of our company, targeting a closing late this year or early next year, we are declining to give any earnings guidance from this point forward." At 11:00 a.m., Eastern Standard Time, today, Mr. Sulentic and other members of company management will host a Webcast conference call to review the company's third quarter results. The call may be accessed via the Investor Relations section of Trammell Crow Company's Web site at www.trammellcrow.com. A replay of the call will also be accessible in the same manner through November 9, 2006. Founded in 1948, Trammell Crow Company is one of the largest diversified commercial real estate services companies in the world. The company provides brokerage, project management, building management, and development and investment services to both investors in and users of commercial real estate. In addition to its full service offices located throughout the United States, the company has offices in Canada, Europe, Asia and Latin/South America focused on the delivery of real estate services to user clients. The company delivers brokerage services outside the United States through strategic alliances with leading providers - in Europe and Asia, through Savills, plc, a leading property services company based in the United Kingdom; and in Canada, through JJ Barnicke, a leading Canadian real estate services provider. The company delivers building management, brokerage, and project management services in India through Trammell Crow Meghraj, India's leading property services company jointly owned by the company and certain international partners. Trammell Crow Company is traded on the New York Stock Exchange under the ticker symbol "TCC" and is located on the World Wide Web at www.trammellcrow.com. Certain statements contained in this press release, including without limitation statements containing the words "believe," "anticipate," "attainable," "forecast," "will," "may," "expect(ation)," "envision," "project," "budget," "objective," "goal," "target(ing)," "estimate," "could," "should," "would," "conceivable," "intend," "possible," "prospects," "foresee", "look(ing) for," "look to" and words of similar import, are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other matters which may cause the actual results, performance or achievements of the company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other matters include, but are not limited to (i) the ability of the Company to complete the proposed transaction with CB Richard Ellis Group, Inc. due to a number of factors, including but not limited to, the ability of the Company and CB Richard Ellis Group, Inc. to satisfy the various conditions contained in the merger agreement between the parties, including Trammell Crow stockholder approval, regulatory approvals and other customary conditions, (ii) the ability of the company to retain its major customers and renew its contracts, (iii) the ability of the company to attract new user and investor customers, (iv) the ability of the company to manage fluctuations in net earnings and cash flow which could result from the company's participation as a principal in real estate investments, (v) the company's ability to continue to pursue its growth strategy, (vi) the company's ability to pursue strategic acquisitions on favorable terms and manage challenges and issues commonly encountered as a result of those acquisitions, (vii) the company's ability to compete in highly competitive national and local business lines, (viii) the company's ability to attract and retain qualified personnel in all areas of its business (particularly senior management), (ix) the timing of individual transactions, (x) the ability of the company to identify, implement and maintain the benefit of cost reduction measures and achieve economies of scale and (xi) the ability of the company to compete effectively in the international arena and manage the risks of operating in the international arena (including foreign currency exchange risk). In addition, the company's ability to achieve certain anticipated results will be subject to other factors affecting the company's business that are beyond the company's control, including but not limited to general economic conditions (including interest rates, the cost and availability of capital for investment in real estate, clients' willingness to make real estate commitments and other factors impacting the value of real estate assets), the effect of government regulation on the conduct of the company's business and the threat of terrorism and acts of war. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The company disclaims any obligation to update any such statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein to reflect any change in the company's expectation with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements. Reference is hereby made to the disclosures contained under in "Item 1A. Risk Factors" of the company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2006. -0- *T Trammell Crow Company Statements of Income (in thousands, except share and per share data) (UNAUDITED) For the Nine Months For the Three Months Ended September 30, Ended September 30, ------------------------- ------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ (A) (A) (A) Revenues: User Services: Facilities management $ 198,305 $ 173,604 $ 67,105 $ 59,076 Corporate advisory services 155,241 114,287 57,584 49,498 Project management 101,595 85,503 38,133 28,216 ------------ ------------ ------------ ------------ 455,141 373,394 162,822 136,790 Investor Services: Property management 100,521 102,801 33,730 34,246 Brokerage 105,785 96,752 34,274 35,296 Construction management 9,144 8,381 3,134 3,207 ------------ ------------ ------------ ------------ 215,450 207,934 71,138 72,749 Development and construction 31,551 24,168 13,130 9,223 ------------ ------------ ------------ ------------ Total Revenues 702,142 605,496 247,090 218,762 Costs and expenses: Salaries, wages and benefits 451,382 399,089 160,173 140,787 Commissions 119,907 98,790 43,705 41,834 General and administrative 118,586 100,763 39,301 35,736 Depreciation and amortization 8,419 6,870 3,500 2,335 Interest 6,405 3,270 2,976 1,320 ------------ ------------ ------------ ------------ Total Expenses 704,699 608,782 249,655 222,012 Gain on disposition of real estate 19,370 9,759 16,132 7,285 ------------ ------------ ------------ ------------ Operating income 16,813 6,473 13,567 4,035 Interest and other income 3,710 2,073 1,765 672 ------------ ------------ ------------ ------------ Income from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries 20,523 8,546 15,332 4,707 Income tax expense (7,714) (3,111) (5,667) (1,726) Minority interest, net of income taxes (B) (256) 1,321 (388) (1,930) Income from investments in unconsolidated subsidiaries, net of income taxes (B) 11,569 6,064 5,463 1,497 ------------ ------------ ------------ ------------ Income from continuing operations 24,122 12,820 14,740 2,548 Income from discontinued operations, net of income taxes (B) 3,207 12,014 1,133 11,969 ------------ ------------ ------------ ------------ Income before cumulative effect of a change in accounting principle 27,329 24,834 15,873 14,517 Cumulative effect of a change in accounting principle, net of income taxes (B) 1,011 - - - ------------ ------------ ------------ ------------ Net income $ 28,340 $ 24,834 $ 15,873 $ 14,517 ============ ============ ============ ============ Diluted income per share: Income from continuing operations $ 0.65 $ 0.35 $ 0.40 $ 0.07 Income from discontinued operations 0.09 0.33 0.03 0.33 Cumulative effect of a change in accounting principle 0.03 - - - ------------ ------------ ------------ ------------ Net income $ 0.77 $ 0.68 $ 0.43 $ 0.40 ============ ============ ============ ============ Weighted average common shares outstanding 36,778,640 36,292,969 36,668,451 36,679,610 ============ ============ ============ ============ Net income $ 28,340 $ 24,834 $ 15,873 $ 14,517 Depreciation and amortization (C) 9,445 7,975 3,794 2,609 Interest (D) 7,564 5,672 3,486 1,992 Income tax expense 17,144 14,218 9,067 8,397 ------------ ------------ ------------ ------------ EBITDA (E) $ 62,493 $ 52,699 $ 32,220 $ 27,515 ============ ============ ============ ============ (A) In accordance with the discontinued operations provisions of FAS 144, certain revenues and expenses for the six months ended June 30, 2006, and for the three and nine months ended September 30, 2005, have been reclassified to conform to the presentation for the three months ended September 30, 2006. These reclassifications did not have any impact on net income or EBITDA. (B) Income tax expense has been calculated using an effective tax rate applicable to these line items. (C) Includes depreciation and amortization related to discontinued operations of $294 and $1,026 for the three and nine months ended September 30, 2006, respectively, and $274 and $1,105 for the three and nine months ended September 30, 2005, respectively. (D) Includes interest related to discontinued operations of $510 and $1,159 for the three and nine months ended September 30, 2006, respectively, and $672 and $2,402 for the three and nine months ended September 30, 2005, respectively. (E) EBITDA represents earnings before interest, income taxes and depreciation and amortization. The Company believes that EBITDA is a meaningful measure of the Company's operating performance, cash generation and ability to service debt. However, EBITDA should not be considered as an alternative to: (1) net earnings (determined in accordance with accounting principles generally accepted in the United States ("GAAP")); (2) operating cash flow (determined in accordance with GAAP); or (3) liquidity. The Company also believes that EBITDA is sometimes useful to compare the operating results of companies within an industry due to the fact that it eliminates the effects of certain financing and accounting decisions. The Company's calculation of EBITDA may, however, differ from similarly titled items reported by other companies. *T -0- *T Trammell Crow Company Balance Sheet (in thousands) September 30, December 31, 2006 2005 -------------- ------------- (UNAUDITED) (A) Assets: Current assets Cash and cash equivalents $ 70,523 $ 76,919 Restricted cash 3,024 1,416 Accounts receivable, net of allowance for doubtful accounts 143,477 127,784 Receivables from affiliates 2,915 2,146 Notes and other receivables 27,871 15,922 Deferred income taxes 3,855 3,935 Real estate under development (B) 98,684 120,697 Real estate and other assets held for sale (C) 144,171 55,434 Marketable securities 1,356 542 Other current assets 29,903 26,870 ------------- ------------- Total current assets 525,779 431,665 Furniture and equipment, net 20,386 19,787 Deferred income taxes 12,175 16,270 Real estate under development (B) 162,640 106,659 Real estate held for investment (B) 116,208 76,145 Investments in unconsolidated subsidiaries (D) 207,230 175,411 Goodwill 75,246 75,239 Receivables from affiliates 7,227 7,458 Marketable securities 18,719 18,089 Other assets 30,774 21,444 ------------- ------------- $ 1,176,384 $ 948,167 ============= ============= Liabilities and Stockholders' Equity: Current liabilities Accounts payable $ 36,840 $ 31,698 Accrued expenses 147,141 155,294 Income taxes payable 6,551 16,313 Current portion of long-term debt 21 1,302 Current portion of notes payable on real estate 134,418 122,932 Liabilities related to real estate and other assets held for sale (E) 120,455 40,916 Other current liabilities 8,542 5,842 ------------- ------------- Total current liabilities 453,968 374,297 Notes payable - other 140,126 35,034 Notes payable on real estate, less current portion 115,857 94,389 Other liabilities 18,671 13,448 ------------- ------------- Total liabilities 728,622 517,168 Minority interest 37,144 29,528 Stockholders' equity Preferred stock - - Common stock 379 379 Paid-in capital 182,761 205,084 Retained earnings 265,666 240,887 Accumulated other comprehensive income 4,927 1,713 Less: Treasury stock (43,115) (32,776) Unearned stock compensation, net - (13,816) ------------- ------------- Total stockholders' equity 410,618 401,471 ------------- ------------- $ 1,176,384 $ 948,167 ============= ============= (A) In accordance with FAS 144, certain assets and liabilities at December 31, 2005, have been reclassified to conform to the presentation at September 30, 2006. (B) Total real estate owned was $518,952 and $357,613 at September 30, 2006 and December 31, 2005, respectively. (C) Real estate and other assets held September 30, December 31, for sale consist of the following: 2006 2005 -------------- -------------- Real estate (B) $ 141,420 $ 54,112 Other assets 2,751 1,322 -------------- -------------- $ 144,171 $ 55,434 ============== ============== (D) Investments in unconsolidated September 30, December 31, subsidiaries consist of the following: 2006 2005 -------------- -------------- Real estate development $ 63,539 $ 44,496 Other 143,691 130,915 -------------- -------------- $ 207,230 $ 175,411 ============== ============== (E) Liabilities related to real estate September 30, December 31, and other assets held for sale consist 2006 2005 of the following: -------------- -------------- Notes payable on real estate $ 114,140 $ 38,837 Other liabilities 6,315 2,079 -------------- -------------- $ 120,455 $ 40,916 ============== ============== *T -0- *T Trammell Crow Company Summarized Operating Data by Segment (in thousands) (UNAUDITED) For the Nine Months For the Three Months Ended September 30, Ended September 30, --------------------- --------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- (A) (A) (A) Global Services: Total revenues $ 670,591 $ 581,328 $ 233,960 $ 209,539 Operating costs and expenses (640,790) (555,226) (224,135) (200,237) Gain on disposition of real estate 53 1,264 10 1,264 ---------- ---------- ---------- ---------- Operating income 29,854 27,366 9,835 10,566 Interest and other income 2,368 1,590 1,028 440 ---------- ---------- ---------- ---------- Income from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries 32,222 28,956 10,863 11,006 Minority interest, before income taxes 442 282 163 (260) Income from investments in unconsolidated subsidiaries, before income taxes 13,175 5,755 5,194 1,856 ---------- ---------- ---------- ---------- Income from continuing operations, before income taxes 45,839 34,993 16,220 12,602 Income from discontinued operations, before income taxes 673 565 209 565 ---------- ---------- ---------- ---------- Income before cumulative effect of a change in accounting principle 46,512 35,558 16,429 13,167 Cumulative effect of a change in accounting principle, before income taxes 984 - - - ---------- ---------- ---------- ---------- Income before income taxes 47,496 35,558 16,429 13,167 Depreciation and amortization 6,476 5,856 2,428 1,953 Interest 2,653 940 1,291 344 ---------- ---------- ---------- ---------- EBITDA (B) $ 56,625 $ 42,354 $ 20,148 $ 15,464 ========== ========== ========== ========== Development and Investment: Total revenues $ 31,551 $ 24,168 $ 13,130 $ 9,223 Operating costs and expenses (63,909) (53,556) (25,520) (21,775) Gain on disposition of real estate 19,317 8,495 16,122 6,021 ---------- ---------- ---------- ---------- Operating income (loss) (13,041) (20,893) 3,732 (6,531) Interest and other income 1,342 483 737 232 ---------- ---------- ---------- ---------- Income (loss) from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries (11,699) (20,410) 4,469 (6,299) Minority interest, before income taxes (853) 1,795 (792) (2,748) Income from investments in unconsolidated subsidiaries, before income taxes 5,393 3,781 3,313 537 ---------- ---------- ---------- ---------- Income (loss) from continuing operations, before income taxes (7,159) (14,834) 6,990 (8,510) Income from discontinued operations, before income taxes 4,474 18,328 1,521 18,257 ---------- ---------- ---------- ---------- Income (loss) before cumulative effect of a change in accounting principle (2,685) 3,494 8,511 9,747 Cumulative effect of a change in accounting principle, before income taxes 673 - - - ---------- ---------- ---------- ---------- Income (loss) before income taxes (2,012) 3,494 8,511 9,747 Depreciation and amortization (C) 2,969 2,119 1,366 656 Interest (D) 4,911 4,732 2,195 1,648 ---------- ---------- ---------- ---------- EBITDA (B) $ 5,868 $ 10,345 $ 12,072 $ 12,051 ========== ========== ========== ========== Total: Total revenues $ 702,142 $ 605,496 $ 247,090 $ 218,762 Operating costs and expenses (704,699) (608,782) (249,655) (222,012) Gain on disposition of real estate 19,370 9,759 16,132 7,285 ---------- ---------- ---------- ---------- Operating income 16,813 6,473 13,567 4,035 Interest and other income 3,710 2,073 1,765 672 ---------- ---------- ---------- ---------- Income from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries 20,523 8,546 15,332 4,707 Minority interest, before income taxes (411) 2,077 (629) (3,008) Income from investments in unconsolidated subsidiaries, before income taxes 18,568 9,536 8,507 2,393 ---------- ---------- ---------- ---------- Income from continuing operations, before income taxes 38,680 20,159 23,210 4,092 Income from discontinued operations, before income taxes 5,147 18,893 1,730 18,822 ---------- ---------- ---------- ---------- Income before cumulative effect of a change in accounting principle 43,827 39,052 24,940 22,914 Cumulative effect of a change in accounting principle, before income taxes 1,657 - - - ---------- ---------- ---------- ---------- Income before income taxes 45,484 39,052 24,940 22,914 Depreciation and amortization (C) 9,445 7,975 3,794 2,609 Interest (D) 7,564 5,672 3,486 1,992 ---------- ---------- ---------- ---------- EBITDA (B) $ 62,493 $ 52,699 $ 32,220 $ 27,515 ========== ========== ========== ========== (A) In accordance with the discontinued operations provisions of FAS 144, certain revenues and expenses for the six months ended June 30, 2006, and for the three and nine months ended September 30, 2005, have been reclassified to conform to the presentation for the three months ended September 30, 2006. These reclassifications did not have any impact on net income or EBITDA. (B) EBITDA represents earnings before interest, income taxes and depreciation and amortization. The Company believes that EBITDA is a meaningful measure of the Company's operating performance, cash generation and ability to service debt. However, EBITDA should not be considered as an alternative to: (1) net earnings (determined in accordance with accounting principles generally accepted in the United States ("GAAP")); (2) operating cash flow (determined in accordance with GAAP); or (3) liquidity. The Company also believes that EBITDA is sometimes useful to compare the operating results of companies within an industry due to the fact that it eliminates the effects of certain financing and accounting decisions. The Company's calculation of EBITDA may, however, differ from similarly titled items reported by other companies. (C) Includes depreciation and amortization related to discontinued operations of $294 and $1,026 for the three and nine months ended September 30, 2006, respectively, and $274 and $1,105 for the three and nine months ended September 30, 2005, respectively. (D) Includes interest related to discontinued operations of $510 and $1,159 for the three and nine months ended September 30, 2006, respectively, and $672 and $2,402 for the three and nine months ended September 30, 2005, respectively. *T -0- *T Trammell Crow Company Other Data (UNAUDITED) September 30, December 31, 2006 2005 --------------- ---------------- Development Inventory (in millions): In process inventory $ 5,325 $ 3,597 Pipeline inventory 2,701 2,706 --------------- ---------------- Total Inventory $ 8,026 $ 6,303 =============== ================ *T