|JONES LANG LASALLE INC filed this Form S-1/A on 07/11/1997|
net of related expenses on the Company's combined statements of earnings, of
$1.3 million. The business was sold in exchange for a note of $9.1 million.
The note, which is secured by the current and future assets of the business,
is due December 31, 2006. For financial reporting purposes, the Company has
not treated the transaction as a divestiture. Principal and interest to be
received under the note will be treated as a reserve, if necessary, for any
anticipated financial exposure under the terms of the asset purchase
agreement, with the remainder recognized as income as principal and interest
payments are received.
Historically, the Company's revenue, operating income and net earnings in
the first three calendar quarters are substantially lower than in the fourth
quarter. This seasonality is due to a calendar year-end focus on the
completion of transactions, which is consistent with the real estate industry
generally. In addition, an increasing percentage of the Company's management
contracts contain clauses providing for performance bonuses to be received if
the Company achieves certain performance targets. Such incentive payments are
generally earned in the fourth quarter. In contrast, the Company's non-
variable operating expenses, which are treated as expenses when incurred
during the year, are relatively constant on a quarterly basis. Therefore, the
Company typically sustains a loss in the first and second quarter of each
calendar year, reports a small profit or loss in the third quarter and records
a substantial majority of the Company's earnings in the fourth calendar
quarter. See "--Quarterly Results of Operations."
The Company's operations are directly affected by various national and
economic conditions, including interest rates, the availability of credit to
finance real estate transactions and the impact of tax laws. To date, the
Company does not believe that general inflation has had a material impact on
its operations, as revenue, commissions and other variable costs related to
revenue are primarily impacted by real estate supply and demand rather than
In connection with the Offering and the Incorporation Transactions, the
Company will become subject to Federal and additional state and local income
taxes as it converts from partnership to corporate form. Concurrently with the
Incorporation Transactions, the Company will record deferred tax assets and
liabilities in accordance with the provisions of SFAS No. 109. Such amounts
are not expected to have a material effect on the Company's Pro Forma
Consolidated Financial Statements.
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