**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-K/A**(AmendmentNo. 1)

**(Mark One)**

**x**                               ANNUAL REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For the fiscal year endedDecember 31, 2005**

**OR**

**o**                                  TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For the transition periodfrom             to             **

**Commission file number 1-13531**

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**Trammell Crow Company**

(Exact name of registrantas specified in its charter)

| **Delaware**                                                    | **75-2721454**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) | (IRS Employer  Identification Number) |
| **2001 Ross Avenue  Suite 3400  Dallas, Texas**            | **75201**                             |
| (Address of principal executive offices)                        | (Zip Code)                            |

 

**(214) 863-3000**

(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:

|                               | **Title of each class** | ** **               | ** ** | ** ** | ** ** | **Name of each exchange on  which registered** | ** ** | ** ** |
|-------------------------------|-------------------------|--------------------------|------------|------------|------------|------------------------------------------------|------------|------------|
| Common Stock,  $.01 par value |                    | New York Stock  Exchange |

 

Securitiesregistered pursuant to section 12(g) of the Act:

**None**

(Title of Class)

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes x  No o

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act. Yes o  No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x  No o

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K isnot contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. x

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large acceleratedfiler x          Acceleratedfiler o          Non-acceleratedfiler o

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o  No x

The aggregate market valueof the voting and non-voting common equity held by non-affiliates onJune 30, 2005, was $785,691,072, based on the closing price of theregistrant’s common stock, $24.24 per share, reported on the New York StockExchange on June 30, 2005.

There were 35,991,637****sharesof the registrant’s common stock outstanding as of June 26, 2006.

**DOCUMENTSINCORPORATED BY REFERENCE**

Portions of theregistrant’s Proxy Statement to be furnished to stockholders in connection withits 2006 Annual Meeting of Stockholders are incorporated by reference inPart III of this Report.

 

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**Explanatory Note**

This Form 10-K/A Amendment No. 1 isbeing filed by Trammell Crow Company (the “Company”) to provide certaininformation regarding Savills plc (“Savills”) in Item 7, Management’sDiscussion and Analysis of Financial Condition and Results of Operations. *See “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Information Regarding Savills plc.”*

The Company accounts for its interest in Savills onthe equity method and has included summarized financial information for Savillsas part of the “Other” category in Note 6 of the Company’s consolidatedfinancial statements.  For the year endedDecember 31, 2005, the Company’s share of Savills’ income from continuingoperations before income taxes represented approximately 22% of the Company’sincome from continuing operations before income taxes, calculated in accordancewith Rule 1-02(w) of Regulation S-X.  Asthis exceeds the 20% threshold under Rule 3-09 of Regulation S-X, the Company isrequired to file Savills’ audited financial statements on a Form 10-K/A by June29, 2006.

The Company believes that the use of income fromcontinuing operations as the measure of recurring income by which Savills’significance is calculated overstates Savills’ significance because theCompany’s income from continuing operations does not include a category ofincome that is routinely generated by sales of properties created through itsdevelopment operations – “income from discontinued operations” that iscategorized as such solely as a result of the application of FinancialAccounting Standards Board  Statement No.144, *Accounting for the Impairment or Disposal ofLong-Lived Assets* (“FAS 144”). If this type of recurring income from property sales transactions wereincluded as income from continuing operations, Savills would account for approximately16% of the Company’s 2005 recurring income (measured on this basis), and thefiling of Savills’ financial statements would not be required.

Nonetheless, because the Company’s share of Savills’income from continuing operations calculated in accordance with Rule 1-02(w) ofRegulation S-X exceeds the 20% threshold, the Company has requested Savills totake the actions required of it to facilitate the Company’s filing of Savills’audited financial statements on a Form 10-K/A by June 29, 2006.  Savills has refused to take such actions. Whilethe Company is thus unable to file the required financial statements, theCompany has filed this Form 10-K/A to provide certain information regardingSavills, including summarized unaudited financial information of Savills as ofDecember 31, 2005 and 2004, and for the years then ended and to provide areference to where Savills’ full audited financial statements may be viewed orobtained.

The Company has also updated Management’s Discussionand Analysis of Financial Condition and Results of Operations to announce thecompletion of its previously announced $50.0 million share repurchase program. *See “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Liquidity and Capital Resources.”*Otherportions of Management’s Discussion and Analysis of Financial Condition andResults of Operations have been updated as appropriate.

**ITEM7.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunctionwith the Company’s consolidated financial statements and the notes thereto andthe other information included in Item 15(a)(1) and (2) of thisAnnual Report on Form 10-K/A.

**Overview**

The Company’s Global Services revenue streams consistprimarily of payments pursuant to service contracts and variable transaction-orientedpayments for services provided to both user and investor clients. Revenues forcorporate advisory services provided to user clients are derived primarily fromcommissions based on the value of the underlying real estate transaction (i.e.,rental revenues or sales price). Project management revenues from user clientsinclude fixed management fees, variable fees (based on an hourly rate, apercentage of project costs, square footage, etc.) and incentive fees if certainagreed-upon performance targets are met. Revenues may also includereimbursement of payroll and related costs for personnel providing theservices. Contracts for facilities management services are typically 

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structured so the Companyreceives reimbursement of client-dedicated personnel costs and associatedoverhead expenses plus a monthly base fee and, in some cases, annual incentivesif certain agreed upon performance targets are satisfied. Brokerage revenuesgenerated from investor clients include commissions based on a percentage ofthe value of the lease for project leasing services and the value of the saletransaction for capital markets services. Fees for construction managementservices provided to investor clients are generally calculated as a percentageof project cost. Property management revenues are derived from monthlymanagement fees, generally based upon a specified percentage of the monthlyrental income or rental receipts generated from the property under management,or in certain cases, the greater of such percentage fee or a minimumagreed-upon fee. The Company may also be reimbursed for a portion of itsadministrative and payroll costs, as well as certain out-of-pocket expenses,directly attributable to the properties under management.

The Company’s Development and Investment revenuestreams consist primarily of payments related to real estate developmentprojects. Revenues from the Company’s development activities consist ofdevelopment and construction fees, which are typically based upon a negotiatedpercentage of a project’s budgeted development and investment cost, andincentive development fees for completing a development project under budget,within certain critical time deadlines and/or for achieving specified leasingtargets and value creation. Income from the Company’s investment activitiesprimarily consists of gains on disposition of real estate and income fromunconsolidated subsidiaries that hold real estate assets. Compensationarrangements, including incentives fees and promote structures, allow theCompany to participate in the investment returns on projects it develops forits investor clients. Dispositions of real estate in which the Company has nosignificant continuing involvement in the operations of the asset after itsdisposition are reported as discontinued operations in accordance with FAS 144.The Company’s Development and Investment revenue streams also include rentalrevenue earned by the Company’s consolidated operating real estate properties.The Company has limited control over the timing of the disposition of certainof these investments and the recognition of any related gain or loss. Becausethe disposition or impairment of a single significant investment can impact theCompany’s financial performance in any period, these investment activitiescreate fluctuations in the Company’s revenues. Because the Company’s investmentstrategy often entails making relatively modest investments alongside itsinvestor clients, its ability to conduct these activities depends in part onthe supply of investment capital for commercial real estate and related assets.

The Company’s expenses typically consist of salaries,wages and benefits, commissions, general and administrative expenses,depreciation and amortization expense and interest. Salaries, wages andbenefits and commissions constitute a majority of the Company’s total costs andexpenses.

Over the last three years, an average of 67% of theCompany’s net income was generated in the fourth quarter, due primarily to ademonstrated tendency of participants in the commercial real estate industry tocomplete transactions toward year-end. In addition, certain of the Company’soutsourcing contracts provide for incentive payments if the Company achievescertain performance targets, which are generally recognized in the fourthquarter. In contrast, the Company’s non-variable operating expenses, which aretreated as expenses when incurred during the year, are relatively constant on aquarterly basis. See*“—Quarterly Results of Operations and Seasonality.”*

**Critical Accounting Policies**

Management of the Company is required to make certainestimates and assumptions in connection with the preparation of itsconsolidated financial statements in accordance with GAAP. These estimates andassumptions impact the reported amount of assets and liabilities anddisclosures of contingent assets and liabilities as of the date of theconsolidated financial statements. They also impact the reported amount of netincome during any period. Actual results could differ from those estimates.Certain of the Company’s accounting policies and estimates have a moresignificant impact on its financial statements than others, due to themagnitude of the underlying financial statement elements.

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*Consolidation*

The Company’s consolidated financial statementsinclude the accounts of the Company, variable interest entities (“VIEs”) inwhich the Company is the primary beneficiary and other subsidiaries over whichthe Company has control.

*VariableInterest Entities*

The Company’s determination of the appropriateaccounting method with respect to its variable interests, includingco-investments with its clients, is based on Financial Accounting StandardsBoard (“FASB”) Interpretation No. 46 (revised December 2003), *Consolidation of Variable Interest Entities* (“FIN 46R”).The Company consolidates any VIE of which the Company is the primarybeneficiary and discloses significant variable interests in VIEs of which theCompany is not the primary beneficiary.

The Company determines if an entity is a VIE under FIN46R based on several factors, including whether the entity’s total equityinvestment at risk upon inception is sufficient to finance the entity’sactivities without additional subordinated financial support. The Company makesjudgments regarding the sufficiency of the equity at risk based first on aqualitative analysis, then a quantitative analysis if necessary. In aquantitative analysis, the Company incorporates various estimates, includingestimated future cash flows, asset hold periods and discount rates, as well asestimates of the probabilities of various scenarios occurring. If the entity isa VIE, the Company then determines whether it consolidates the entity as theprimary beneficiary. This determination of whether the Company is the primarybeneficiary includes any impact of an “upside economic interest” in the form ofa “promote” that the Company may have. A promote is an interest built into thedistribution structure of the entity based on the entity’s achievement ofcertain return hurdles.

The Company determines whether an entity is a VIE and,if so, whether it should be consolidated by utilizing judgments and estimatesthat are inherently subjective. If the Company made different judgments orutilized different estimates in these evaluations, it could result in differingconclusions as to whether or not an entity is a VIE and whether or not toconsolidate such entity.

*LimitedPartnerships, Limited Liability Companies and Other Subsidiaries*

The Company’s determination of the appropriateaccounting method with respect to its investments in limited partnerships,limited liability companies and other subsidiaries is based on control. For theCompany’s general partner interests, the Company is presumed to control (and thereforeconsolidates) the entity, unless the other limited partners have substantiverights that overcome this presumption of control. These substantive rightsallow the limited partners to participate in significant decisions made in theordinary course of the entity’s business. The Company accounts for itsnon-controlling general partner investments in these entities under the equitymethod. This treatment also applies to the Company’s managing member interestsin limited liability companies. See *New AccountingPronouncements* below for additional discussion of EITF Issue No. 04-5,*Determining Whether a General Partner, or theGeneral Partners as a Group, Controls a Limited Partnership or Similar EntityWhen the Limited Partners Have Certain Rights*(“EITF 04-5”)regarding the Company’s general partner interests.

The Company’s determination of the appropriateaccounting method for all other investments in subsidiaries is based on theamount of influence the Company has (including its ownership interest) in theunderlying entity. Those other investments where the Company has the ability toexercise significant influence (but not control) over operating and financialpolicies of such subsidiaries (including certain subsidiaries where the Companyhas less than 20% ownership) are accounted for using the equity method. Allremaining investments of the Company are accounted for using the cost method.

The Company’s determination of the appropriateaccounting treatment for an investment in a subsidiary requires judgment ofseveral factors, including the size and nature of the Company’s ownershipinterest and the other owners’ substantive rights to make decisions for theentity. If the Company were to make different judgments or conclusions as tothe level of its control or influence, it could result in a differentaccounting treatment. Accounting for an investment as either consolidated orusing the equity method generally would have no impact on the Company’s netincome or stockholders’ equity in any accounting period, but a differenttreatment would impact individual income statement and balance sheet items, asconsolidation would effectively “gross up” the Company’s income statement andbalance sheet. If 

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the Company’s evaluationof an investment accounted for using the cost method was different, it couldresult in the Company being required to account for an investment byconsolidation or by the equity method. Under the cost method, the investor onlyrecords its share of the underlying entity’s earnings to the extent that itreceives dividends from the investee; when the dividends received by theinvestor exceed the investor’s share of the investee’s earnings subsequent tothe date of the investor’s investment, the investor records a reduction in thebasis of its investment. Under the cost method, the investor does not recordits share of losses of the investee. Conversely, under either consolidation orequity method accounting, the investor effectively records its share of theunderlying entity’s net income or loss, to the extent of its investment or itsguarantees of the underlying entity’s debt. At December 31, 2005,$2.2 million of the Company’s $175.4 million total investment inunconsolidated subsidiaries related to investments that are accounted for usingthe cost method. Accounting for an investment using either the equity or costmethod has no impact on the evaluation of impairment of the underlyinginvestment; under either method, impairment losses are recognized upon evidenceof other-than-temporary losses of value.

*Revenue Recognition*

The Company recognizesrevenue in accordance with Staff Accounting Bulletin No. 104, *Revenue Recognition in Financial Statements*,which has four basic criteria that must be met before revenue is recognized:

·                    existenceof persuasive evidence that an arrangement exists;

·                    deliveryhas occurred or services have been rendered;

·                    theseller’s price to the buyer is fixed and determinable; and

·                    collectibilityis reasonably assured.

The Company’s various revenue recognition policies areconsistent with these criteria. The judgments involved in revenue recognitionare understanding the complex terms of the agreements and determining theappropriate time to recognize revenue for each transaction based on such terms.Each transaction is evaluated to determine: (1) at what point in timerevenues are earned, (2) whether there are contingencies involved thatwould impact the timing of recognition of revenue, and (3) how and whensuch contingencies will be resolved. The actual timing of revenue recognitioncould vary if different judgments were made. The revenues of the Company’sbusiness that are subject to the most judgment are its brokerage commissionrevenues, incentive-based management and development fees and gains ondisposition of real estate (see *Real Estate*,below for additional discussion).

The Company’s brokerage commission revenues arecomprised of commissions earned for investment sales, project leasing andtenant representation transactions. Revenues from investment sales transactionsare recognized upon the closing of a sale and are generally paid to the Companyby the seller out of the sale proceeds; therefore, there is generally noestimation or judgment involved in the recognition of these revenues. Projectleasing and tenant representation commissions are generally recorded half uponexecution of a lease contract, and the remainder upon tenant occupancy. TheCompany performs thousands of project leasing and tenant representationtransactions annually, each of which is typically governed by a separatecommission agreement. While the majority of these agreements generally providethat half of the commission is earned upon execution of a lease contract andhalf upon tenant occupancy, agreements do vary as to their terms and complexity,usually due to negotiation of the commission agreement language with theclient. The portion of commissions that is subject to contingencies isrecognized as revenue when such contingencies are resolved. The unique natureand complexity of each brokerage transaction require the Company to use varyinglevels of judgment in determining timing of revenue recognition.

The Company earns incentive development and managementfees from its development services and certain services provided to userclients in the Company’s Global Services segment, including facilitiesmanagement services, project management services and corporate advisoryservices. These fees are recognized when quantitative criteria have been met(such as specified leasing or budget targets, client service levels, orachieved levels of operating expense savings) or, for those incentive feesbased on qualitative criteria, upon approval of the fee by the clients. Certainincentive development fees allow the Company to share in the fair value of thedeveloped real estate asset above cost. This sharing creates additional revenuepotential to the Company with no exposure to loss other than opportunity cost.The 

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Company’s incentivedevelopment and management fee revenues are not recognized to the extent thatsuch revenues are subject to future performance contingencies, but rather oncethe contingency has been resolved. The unique nature and complexity of eachincentive fee require the Company to use varying levels of judgment indetermining timing of revenue recognition.

*Real Estate*

As of December 31, 2005, the value of the Company’stotal real estate assets was $357.6 million (37.7% of total assets). Thesignificant accounting policies and estimates with regard to the Company’s realestate assets relate to classification and impairment evaluation, costcapitalization and allocation, dispositions of real estate and discontinuedoperations.

*Classificationand Impairment Evaluation*

With respect to the Company’s real estate assets,FAS 144 establishes criteria to classify an asset as “held for sale.”  Assets included in real estate held for saleinclude only completed assets or land for sale in its present condition thatmeet all of the FAS 144 “held for sale” criteria. All other real estateassets are classified in one of the following line items in the Company’sbalance sheet: (i) real estate under development (current), which includesreal estate that the Company is in the process of developing that is expectedto be completed and disposed of within one year of the balance sheet date; (ii) realestate under development (non-current), which includes real estate that theCompany is in the process of developing that is expected to be completed anddisposed of more than one year from the balance sheet date; or (iii) realestate held for investment, which consists of completed assets not expected tobe disposed of within one year of the balance sheet date and land on whichdevelopment activities have not yet commenced. Any asset reclassified from realestate held for sale to real estate under development (current or non-current)or real estate held for investment is recorded individually at the lower of itsfair value at the date of the reclassification or its carrying amount before itwas classified as “held for sale,” adjusted (in the case of real estate heldfor investment) for any depreciation that would have been recognized had theasset been continuously classified as real estate held for investment.

Real estate held for sale is recorded at the lower ofcost or estimated fair value less cost to sell. If an asset’s fair value lesscost to sell, based on discounted future cash flows or market comparisons, isless than its carrying amount, an allowance is recorded against the asset.Determining an asset’s fair value and the related allowance to record requiresthe Company to utilize judgment and estimates.

Real estate under development and real estate held forinvestment are carried at cost less depreciation, as applicable. Whenindicators of impairment are present, real estate under development and realestate held for investment are evaluated for impairment and losses are recordedwhen undiscounted cash flows estimated to be generated by an asset are lessthan the asset’s carrying amount. The amount of the impairment loss iscalculated as the excess of the asset’s carrying value over its fair value,which is determined using a discounted cash flow analysis or marketcomparisons. This determination of fair value and the amount, if any, of theimpairment loss, requires the Company to utilize judgments and estimates.Buildings and improvements included in real estate held for investment aredepreciated using the straight-line method over estimated useful lives,generally 39 years. Tenant improvements included in real estate held forinvestment are amortized using the straight-line method over the shorter oftheir estimated useful life or the terms of the respective leases.

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The Company evaluates eachof its real estate assets on a quarterly basis in order to determine theclassification of each asset in the Company’s balance sheet. This evaluationrequires judgment by the Company in considering certain criteria that must be evaluatedunder FAS 144, such as the estimated time to complete assets that areunder development and the timeframe in which the Company expects to sell itsreal estate assets. The classification of real estate assets determines whichreal estate assets are to be depreciated as well as what method is used toevaluate and measure impairment. Had the Company evaluated its assetsdifferently, the balance sheet classification of such assets, depreciationexpense and impairment losses could have been different.

*Cost Capitalization and Allocation*

When acquiring, developing and constructing realestate assets, the Company capitalizes costs in accordance with Statement ofFinancial Accounting Standards No. 67, *Accounting for Costs andthe Initial Rental Operations of Real Estate Properties*(“FAS 67”).Capitalization begins when the Company has determined that activities relatedto development have begun and ceases when activities are complete, which aretiming decisions that require judgment. Costs capitalized under FAS 67 includepursuit costs, or pre-acquisition/pre-construction costs, taxes and insurance,development and construction costs and costs of incidental operations. Pursuitcosts capitalized in connection with a potential development project that theCompany has determined based on its judgment not to pursue are written off inthe period that such determination is made. A difference in the timing of whenthis determination is made could cause the pursuit costs to be expensed in adifferent period.

The Company often purchases bulk land that it intendsto sell or develop in phases. The land basis allocated to each phase is basedon the relative estimated fair value of the phases before construction. TheCompany allocates construction costs incurred relating to more than one phasebetween the various phases; if the costs cannot be specifically identified to acertain phase or the improvements benefit more than one phase, the Companyallocates the costs between the phases based on their relative estimated sales values.Relative allocations of the costs are changed as the estimates are revised. Ifthe Company used different estimates in these cost allocations, the amount andtiming of the related gain on disposition of real estate for the individualparcels would differ.

When acquiring real estatewith existing buildings, the Company allocates the purchase price between land,building and intangibles related to in-place leases, if any, based on theirrelative fair values. The fair values of acquired land and buildings aredetermined based on an estimated discounted future cash flow model withlease-up assumptions as if the building was vacant upon acquisition. The fairvalue of in-place leases includes the value of net lease intangibles for aboveor below-market rents and tenant origination costs, determined on a lease bylease basis using assumptions for market rates, absorption periods, leasecommissions and tenant improvements. The capitalized values for both net leaseintangibles and tenant origination costs are amortized over the term of theunderlying leases. Amortization related to net lease intangibles is recorded aseither an increase to or a reduction of rental income and amortization fortenant origination costs is recorded to amortization expense. If the Companyused different estimates in these valuations, the allocation of purchase priceto each component could differ, which could cause the amount of amortizationrelated to lease intangibles and tenant origination costs to be different, aswell as depreciation of the related building.

*Dispositions of Real Estate*

Gains on disposition ofreal estate are recognized upon sale of the underlying project in accordancewith Statement of Financial Accounting Standards No. 66, *Accounting for Sales of Real Estate*. The Companyevaluates each real estate sale transaction to determine if it qualifies forgain recognition under the full accrual method. This evaluation requires theCompany to make judgments and estimates in assessing whether a sale has beenconsummated, the adequacy of the buyer’s investment, the subordination orcollectibility of any receivable related to the purchase, and whether theCompany has transferred the 

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usualrisks and rewards of ownership to the buyer, with no substantial continuinginvolvement by the Company. If the transaction does not meet the criteria forthe full accrual method of profit recognition based on the Company’sassessment, the Company accounts for a sale based on an appropriate deferralmethod determined by the nature and extent of the buyer’s investment and theCompany’s continuing involvement. In some cases, a deferral method couldrequire the real estate asset and its related liabilities to remain on theCompany’s balance sheet until the sale qualifies for a different deferral methodor full accrual profit recognition.

*Discontinued Operations*

FAS 144 extends thereporting of a discontinued operation to a “component of an entity,” andfurther requires that a component be classified as a discontinued operation ifthe operations and cash flows of the component have been or will be eliminatedfrom the ongoing operations of the entity in the disposal transaction and theentity will not have any significant continuing involvement in the operationsof the component after the disposal transaction. As defined in FAS 144, a “componentof an entity” comprises operations and cash flows that can be clearlydistinguished, operationally and for financial reporting purposes, from therest of the entity. Because each of the Company’s real estate assets isgenerally accounted for in a discrete subsidiary, almost every real estateasset constitutes a component of an entity under FAS 144, increasing thelikelihood that the disposition of assets the Company holds for sale in theordinary course of business must be reported as a discontinued operation unlessthe Company has significant continuing involvement in the operations of theasset after its disposition. Furthermore, operating profits and losses on suchassets are required to be recognized and reported as operating profits andlosses on discontinued operations in the periods in which they occur. Theevaluation of whether the component’s cash flows have been eliminated and thelevel of the Company’s continuing involvement requires judgment by the Companyand a different assessment could result in items not being reported asdiscontinued operations. The Company has certain real estate assets that areland parcels and may constitute a component of an entity. From time to time,the Company disposes of these land parcels in smaller lots. An individual lotthat is part of a larger land parcel may constitute a component of an entitywithin the meaning of paragraph 41 of FAS 144 when it is either classified asheld for sale in accordance with FAS 144 or sold.

*Carrying Value ofGoodwill*

As of December 31, 2005, the Company’s totalgoodwill was $75.2 million (7.9% of total assets). Goodwill reflects theexcess of the purchase price over the fair value of the net assets of realestate service companies acquired by the Company primarily in 1998 and 1999.The Company accounts for its goodwill in accordance with Statement of FinancialAccounting Standards No. 142, *Goodwilland Other Intangible Assets* (“FAS 142”). This statementrequires the Company to evaluate the carrying value of goodwill based onassumptions and estimates of fair value and future cash flow information. Theseassumptions and estimates developed by the Company may differ from actualresults. If different assumptions and estimates were used, carrying valuescould be adversely impacted, resulting in writedowns that would adverselyaffect the Company’s earnings.

Under FAS 142, theCompany’s reporting units are the basis of its annual goodwill impairmenttests. The required impairment tests are based on a comparison of the fairvalue of each of the Company’s reporting units to the carrying value of suchunit. A writedown of goodwill must be recorded if the fair value of a reportingunit falls below its carrying value. The Company has identified its reporting unitsto mirror its two segments, Global Services and Development and Investment, aseach segment’s underlying business units have similar long-term economiccharacteristics and service deliveries. If the Company defined its reportingunits differently, the results of its annual impairment tests could beimpacted. The Company performed its required annual impairment tests ofgoodwill in 2005, and determined that no impairment of goodwill existed at December 31,2005.

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*Self-Insurance*

The Company is self-insured for portions of its healthand workers’ compensation benefits to employees and general and automotiveliability claims.

The Company self-insures (through a health and welfarebenefit trust) its health insurance benefits provided to substantially all of itsemployees and has purchased stop-loss insurance to cover individual claims inexcess of $250,000. On a quarterly basis, the Company utilizes an independentactuary to evaluate the estimate of incurred but not reported claims under theCompany’s health insurance programs. Each quarter, the Company adjusts itsaccrual to this estimate plus its share of unpaid reported claims. Theactuarial estimate of the Company’s exposure to health insurance claims issubjective, and the amount of claims actually incurred could differ, whichcould result in increased or decreased expense in future periods. As of December 31,2005, the Company’s liability relating to such claims (for both reported andestimated claims) was $2.1 million, included in accrued expenses on the Company’sconsolidated balance sheet.

The Company’s wholly-owned captive insurance company,which is subject to applicable insurance rules and regulations, insuresthe Company’s exposure related to workers’ compensation benefits provided toemployees and purchases excess coverage from an unrelated insurance carrier.The Company purchases general liability and automotive insurance through anunrelated insurance carrier. The captive insurance company reinsures thedeductibles. The captive insurance company also insures deductibles relating toother coverages. Given the nature of these types of claims, it may take severalyears for resolution and determination of the cost of these claims. The Companyis required to estimate the cost of these claims in its financial statements.Exposure to workers’ compensation, general liability and automotive claims isevaluated on an annual basis during the Company’s fourth quarter by anindependent actuary.

The Company adjusts itsannual expense based on this actuarial estimate, and utilizes this estimate asthe basis for the next year’s expense, until the actuary calculates the nextannual estimate. The estimates that the Company utilizes to record itspotential losses on claims are inherently subjective, and actual claims coulddiffer from amounts recorded, which could result in increased or decreasedexpense in future periods. As of December 31, 2005, the Company’s reservefor claims under these insurance programs was $15.1 million, of which $4.3million was included in other current liabilities and the remainder is includedin other liabilities on the Company’s consolidated balance sheet.

*New AccountingPronouncements*

On December 16, 2004, the FASB issued Statementof Financial Accounting Standards No. 123 (revised 2004), *Share-Based Payment* (“FAS 123R”), which is a revision ofStatement of Financial Accounting Standards No. 123, *Accounting for Stock-Based Compensation*(“FAS 123”). Generally, the approachin FAS 123R is similar to the approach described in FAS 123. However, FAS 123Rrequires all share-based payments to employees, including grants of employeestock options, to be recognized in the income statement based on their fairvalues. Pro forma disclosure is no longer an alternative.

FAS 123R became effective for the Company beginning January 1,2006. FAS 123R permits public companies to adopt its requirements using one oftwo methods: a “modified-prospective” method or a “modified-retrospective”method. The Company adopted FAS 123R using the modified-prospective method underwhich it will record compensation expense for all share-based awards grantedafter the effective date and for those unvested awards granted prior to theeffective date.

Prior to FAS 123R becoming effective, as previouslypermitted by FAS 123, the Company accounted for share-based payments toemployees using APB 25’s intrinsic value method and, as such, generallyrecognized no compensation cost for the fair value of employee stock options orfor the difference between the employee’s cost and the market value of stockpurchased under the Company’s employee stock purchase plan. Accordingly, theadoption of FAS 123R’s fair value method could have a significant impact 

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on the Company’s resultsof operations, although it is not expected to impact the Company’s overallfinancial position. The total impact of adoption of FAS 123R cannot bepredicted at this time because it will depend on levels of share-based paymentsgranted in the future. However, the amount of additional expense the Companywill recognize subsequent to adoption related to unvested stock options grantedprior to adoption (net of estimated forfeitures) is not material. FAS 123R alsorequires the Company to estimate forfeitures of share-based payments upongrant. Prior to the adoption of FAS 123R, the Company’s policy was to reverseexpense related to forfeitures of restricted stock as they occurred. In thefirst quarter of 2006, the Company recorded additional income of approximately$1.0 million, net of income taxes, as a cumulative effect of a change inaccounting principle. This cumulative effect represents a reversal of expensetaken for those shares of unvested restricted stock granted prior to adoptionthat the Company estimated will be forfeited before vesting.

FAS 123R also requires the benefits of tax deductionsin excess of recognized compensation cost to be reported as a financing cashflow, rather than as an operating cash flow as required under currentliterature. This requirement will reduce net operating cash flows and increasenet financing cash flows in periods after adoption. While the Company cannotestimate what those amounts will be in the future (because they depend on,among other things, when employees exercise stock options), the amount ofoperating cash flows recognized in prior periods for such excess tax deductionsrelated to the exercise of stock options and vesting of restricted stock was$6.1 million in 2005 and not material in 2004 or 2003.

In June 2005, the FASB ratified the consensus inEITF 04-5, which states that the general partner in a limited partnershipis presumed to control that limited partnership. That presumption may beovercome if the limited partners have either (1) the substantive ability—eitherby a single limited partner or through a simple majority vote—to dissolve(liquidate) the limited partnership or otherwise remove the general partnerwithout cause or (2) substantive participating rights. Substantiveparticipating rights provide the limited partners with the ability toeffectively participate in significant decisions that would be expected to bemade in the ordinary course of the limited partnership’s business and therebypreclude the general partner from exercising unilateral control over thepartnership.

The effective date for applying the guidance in EITF04-5 to the Company’s general partner interests is June 29, 2005,for all new or amended limited partnerships, and January 1, 2006, for allother limited partnerships. The Company has applied EITF 04-5 for new oramended limited partnerships after June 29, 2005, in its December 31,2005, financial statements and in the first quarter of 2006, completed itsevaluation of the impact of EITF 04-5 for all other general partnerinterests. As a result of this evaluation, the Company consolidated two realestate partnerships that had previously been accounted for using the equitymethod. These consolidations as of January 1, 2006 did not impact netincome, net income per share or stockholders’ equity, but did result in certainnon-cash changes to the Company’s balance sheet as described and disclosed inthe Company’s Quarterly Report on Form 10-Q covering the three monthperiod ended March 31, 2006, in Note 1 to the Company’s condensedconsolidated financial statements.

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**Results of Operations Year Ended December 31,2005 Compared to Year Ended December 31, 2004**

In accordance withFAS 144, certain revenues and expenses for the three quarterly periodsended March 31, June 30 and September 30, 2005, and the yearended December 31, 2004, have been reclassified to conform to thepresentation for the quarter ended December 31, 2005. As a result, certainbalances differ from the amounts reported in previously filed documents. See *Income from DiscontinuedOperations, Net of Income Taxes*, below, for additional information.
|                                                                                                                                       | ** ** | **For the Years  Ended  December 31,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                                                                                                            | ** ** | **2005**                                              | ** ** | **2004**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                                                                                                            | ** ** | **(dollars in thousands)**                  | ** ** |
| **REVENUES:**                                                                                                                         |       |                                                  |       |       |       |              |       |   |   |   |   |
| ***User  Services:***                                                                                                                 |       |                                                  |       |       |       |              |       |   |   |   |   |
| Facilities  management                                                                                                                |       | $                                                     | 237,659    |       | $          | 211,062           |       | $ | 26,597 |   |   | 12.6 | % |   |
| Corporate  advisory services                                                                                                          |       | 186,847                                               |       | 143,266    |       | 43,581            |       |   | 30.4 | % |   |
| Project  management services                                                                                                          |       | 118,678                                               |       | 91,599     |       | 27,079            |       |   | 29.6 | % |   |
|                                                                                                                                  |       | 543,184                                               |       | 445,927    |       | 97,257            |       |   | 21.8 | % |   |
| ***Investor  Services:***                                                                                                             |       |                                                  |       |       |       |              |       |   |   |   |   |
| Property  management                                                                                                                  |       | 136,665                                               |       | 137,193    |       | (528              | )          |   | (0.4 | )% |   |
| Brokerage                                                                                                                             |       | 138,416                                               |       | 114,478    |       | 23,938            |       |   | 20.9 | % |   |
| Construction  management                                                                                                              |       | 11,973                                                |       | 11,187     |       | 786               |       |   | 7.0 | % |   |
|                                                                                                                                  |       | 287,054                                               |       | 262,858    |       | 24,196            |       |   | 9.2 | % |   |
| Development and  construction                                                                                                         |       | 47,159                                                |       | 38,346     |       | 8,813             |       |   | 23.0 | % |   |
|                                                                                                                                  |       | 877,397                                               |       | 747,131    |       | 130,266           |       |   | 17.4 | % |   |
| Gain on  disposition of real estate                                                                                                   |       | 18,553                                                |       | 26,742     |       | (8,189            | )          |   | (30.6 | )% |   |
|                                                                                                                                  |       | 895,950                                               |       | 773,873    |       | 122,077           |       |   | 15.8 | % |   |
| **COST AND EXPENSES:**                                                                                                                |       |                                                  |       |       |       |              |       |   |   |   |   |
| Salaries, wages  and benefits                                                                                                         |       | 553,552                                               |       | 493,404    |       | 60,148            |       |   | 12.2 | % |   |
| Commissions                                                                                                                           |       | 151,721                                               |       | 120,345    |       | 31,376            |       |   | 26.1 | % |   |
| General and  administrative                                                                                                           |       | 140,618                                               |       | 127,758    |       | 12,860            |       |   | 10.1 | % |   |
| Depreciation                                                                                                                          |       | 9,257                                                 |       | 9,985      |       | (728              | )          |   | (7.3 | )% |   |
| Amortization                                                                                                                          |       | 738                                                   |       | 1,359      |       | (621              | )          |   | (45.7 | )% |   |
| Interest                                                                                                                              |       | 5,441                                                 |       | 4,195      |       | 1,246             |       |   | 29.7 | % |   |
|                                                                                                                                  |       | 861,327                                               |       | 757,046    |       | 104,281           |       |   | 13.8 | % |   |
| Operating income                                                                                                                      |       | 34,623                                                |       | 16,827     |       | 17,796            |       |   | 105.8 | % |   |
| Interest and  other income                                                                                                            |       | 2,835                                                 |       | 2,797      |       | 38                |       |   | 1.4 | % |   |
| Income from  continuing operations before income taxes, minority interest and income from  investments in unconsolidated subsidiaries |       | 37,458                                                |       | 19,624     |       | 17,834            |       |   | 90.9 | % |   |
| Income tax  expense                                                                                                                   |       | (13,856                                               | )          | (7,452     | )          | (6,404            | )          |   | (85.9 | )% |   |
| Minority  interest, net of income taxes                                                                                               |       | 2,528                                                 |       | (3,006     | )          | 5,534             |       |   | 184.1 | % |   |
| Income from  investments in unconsolidated subsidiaries, net of income taxes                                                          |       | 15,154                                                |       | 10,971     |       | 4,183             |       |   | 38.1 | % |   |
| Income from  continuing operations                                                                                                    |       | 41,284                                                |       | 20,137     |       | 21,147            |       |   | 105.0 | % |   |
| Income from  discontinued operations, net of income taxes                                                                             |       | 18,123                                                |       | 18,982     |       | (859              | )          |   | (4.5 | )% |   |
| **Net income**                                                                                                                        |       | $                                                     | 59,407     |       | $          | 39,119            |       | $ | 20,288 |   |   | 51.9 | % |   |

 

***SegmentPerformance.******  ***TheGlobal Services segment income before income taxes increased 79% from $38.3million in 2004 to $68.4 million in 2005. Revenues for this segment increased17%, from 

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$710.8 million in2004 to $831.7 million in 2005. Significant increases in all of the userservices revenues lines (facilities management up 13%, corporate advisoryservices up 30%, and project management for user customers up 30%) contributedto the increase in income before income taxes, as did the 21% increase inbrokerage revenues from investor customers. The revenue increases reflect theimpact of the Company’s success winning new outsourcing business—both throughnew contract awards and expansions with existing customers—and its continuedefforts to grow its brokerage business.

Development and Investment segment income beforeincome taxes remained relatively flat, increasing 4% from $24.8 million in 2004to $25.9 million in 2005. Segment revenues plus income from unconsolidatedsubsidiaries plus income from discontinued operations (all before income taxes)were up 2% in total during 2005 as compared to 2004. As previously noted, FAS144 requires classification of certain real estate gains as “income fromdiscontinued operations” in those instances where the Company will have nosignificant continuing involvement with the real estate following the sale.Such sales of real estate in part define the business of the Development andInvestment segment and they are expected to be a continuing source of segment(and Company) profitability. In addition, substantial indirect costs ofproducing this income from either source—such as local office salaries andbonuses that are driven by overall local office profitability—are included insegment expenses and not netted against income from unconsolidated subsidiariesor income from discontinued operations.

***Revenues.******  ***The increase in facilitiesmanagement revenue from 2004 was primarily the result of the addition ofseveral new customers. Additionally, the increase reflected the expansion of aclient relationship in the second quarter of 2004. Reimbursement of salaries,wages, benefits and out-of-pocket general and administrative costs, a componentof facilities management revenue, comprised the majority of the revenueincreases from 2004. The composition of facilities management revenue,including management fees and reimbursements, can vary significantly fromperiod to period based on the terms of the underlying management agreements ineffect each period.

Corporate advisory services revenue increased from 2004,primarily due to increased commission revenues and incentive fees in 2005. Thisincrease is in part the result of an increase in the number of tenantrepresentation brokers as the Company has focused on expanding its brokeragenetwork. In addition, transaction volumes have increased as clients continue toshow a willingness to make real estate commitments.

The increase in project management services revenuewas the result of the addition of new clients and the expansion of servicesprovided to existing clients (due to increases in clients’ portfolios, thescope of the Company’s services provided under certain outsourcing contractsand transaction volume).

The slight decrease in property management revenue wasthe result of decreased square footage under management in 2005 as compared to2004. The reduction in square footage primarily resulted from sales ofbuildings in the Company’s management portfolio to REITs or other investorsthat self-manage their properties or use other service providers. In addition,some square footage decreases resulted from clients taking services in-house orto other service providers. These decreases were partially offset by additionsto square footage from new business.

Brokerage revenue increased due to increases in investmentsales commissions and, to a lesser extent, project leasing commissions. Realestate remains a favored asset class among certain investors as a result ofimproving leasing fundamentals and relatively low interest rates. As a result,investment sales activity and the resulting commission revenue have increased.

The increase in construction management revenue from2004 resulted from a higher volume of construction projects as tenant leasingactivity increased and is consistent with the increase in brokerage revenue.Construction management revenue is generated from services including spaceplanning and tenant finish coordination for investor clients in conjunctionwith property management and leasing assignments, and are directly related totenants’ real estate demands.

Development and construction revenue increased from2004 due in part to an increase in development fees. Typically, the impact ofincreases and decreases in the Company’s development starts and investments isnot reflected in financial results until later periods. The Company experiencedan increase in development and construction revenue in 2005 as a consequence ofdevelopment starts and 

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investments trending up in2004, with 2004 starts more than doubling those for 2003. In addition, developmentand construction revenue increased due to an increase in rental revenue fromacquisitions of operating real estate properties during the second half of2004.

Through approximately 1990, the Company focused itscommercial real estate development business on office, industrial and retailprojects primarily for investor clients. Since that time, the Company hasexpanded its focus to include other types of commercial development anddevelopment for user clients. National initiative teams source opportunitieswith both user and investor clients in healthcare, higher education, on-airportdistribution and residential/mixed-use development, and initiative personnelsupport local development teams in their development of the resulting projects.By expanding its focus to include development for user clients and in theseinitiatives, particularly those in the healthcare sector, the Company seeks tomitigate the cyclicality traditionally inherent in the commercial developmentbusiness. The Company seeks to establish funds and programs with capitalpartners and to channel increasing amounts of development and investmentactivity into those funds and programs.

The Company’s gain on disposition of real estatedecreased****in 2005 from 2004. During 2005, theCompany sold seven real estate projects for an aggregate net sales price of$41.7 million. The sales resulted in an aggregate gain on disposition of realestate of $18.6 million, including deferred gain of $0.7 million. In 2004, theCompany sold 17 real estate projects for an aggregate net sales price of $121.4million. The sales resulted in an aggregate gain on disposition of real estateof $26.7 million, including recognition of deferred gain of $0.4 millionrelating to dispositions in previous periods.

In addition, Development and Investment income isgenerated from investments in unconsolidated subsidiaries and from theoperation and/or disposition of real estate classified as “discontinuedoperations.” The impact of Development and Investment project sales accounted foras income from the Company’s unconsolidated subsidiaries or as income fromdiscontinued operations is a regular part of, and can contribute significantlyto, Development and Investment results in any given period. See *Income from Investments in Unconsolidated Subsidiaries, Net of IncomeTaxes*and *Income from DiscontinuedOperations Net of Income Taxes*below.

***Costs and Expenses.******  ***Salaries, wages and benefitsexpense includes all compensation paid to Company employees other thanbrokerage commissions. As such, it includes salaries, benefits and annualincentive bonuses for employees whose compensation is reimbursed by clients (“reimbursedemployees”); salaries, benefits and annual incentive bonuses for employeeswhose compensation is not so reimbursed (“unreimbursed employees”); long-termincentive compensation associated with restricted stock grants to certainemployees; and transaction-related incentive compensation other than brokeragecommissions, primarily paid in connection with development and investmenttransactions, including those transactions recorded as income from discontinuedoperations. Salaries, wages and benefits expense for both reimbursed andunreimbursed employees increased in 2005 from 2004. Salaries, wages andbenefits for reimbursed employees grew as the Company increased its facilitiesmanagement and project management headcount to service client expansions andnew clients. In addition, the Company’s annual incentive bonus expenseincreased due to the Company’s increased headcount and profitability in 2005.

The increase in commission expense for 2005 wasdirectly attributable to the increases in the Company’s corporate advisoryservices and brokerage revenue discussed above.

General and administrative expenses increased in 2005due in part to increased client-reimbursed out-of-pocket general andadministrative expenses due to growth in the Company’s facilities managementand project management service lines. In addition, the acquisition of severaloperating real estate properties in the second half of 2004 led to increasedreal estate operating expenses in 2005. These properties, which the Companyplans to redevelop, lease and sell, include acquisitions made through theCompany’s fifth discretionary development and investment fund (“Fund V”). TheCompany’s insurance expense also increased as a result of higher premium ratesbeing charged by the insurance industry.

Depreciation and amortization expenses decreased in2005 from the prior year. The Company has replaced many of its computer assetsat a lower cost than the assets that were retired, which has reduced theCompany’s depreciation expense. In addition, several intangible asset balancesrelated to acquired 

13

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management contractsbecame fully amortized during 2004, which resulted in a decrease inamortization expense in 2005 as compared to 2004.

The increase in interest expense in 2005 is primarilythe result of higher average outstanding balances and higher interest ratesrelated to the Company’s revolving line of credit as compared to 2004. In 2005,the Company drew amounts under its revolving line of credit to fund the Company’sacquisition of an increased ownership interest in Savills.

***Minority Interest,Net of Income Taxes.******  ***Minorityinterest fluctuated from an expense in 2004 to income in 2005. This changeprimarily relates to operating losses incurred by Fund V, which are shared withoutside partners. Fund V has acquired several operating real estate propertiessince the first half of 2004 that, as expected, generated operating losses inthe current period. The Company plans to redevelop, lease and sell theseproperties. In addition, a portion of the 2005 income relates to the minorityinterest owners’ share of fees earned by the Company related to certain realestate projects.

***Income fromInvestments in Unconsolidated Subsidiaries, Net of Income Taxes.******  ***In the ordinary course ofbusiness, a significant portion of the Company’s development and investmentactivities are conducted, and are expected to be conducted in future periods,through unconsolidated subsidiaries. The Company also has certain investmentsin unconsolidated subsidiaries which are not related to its development andinvestment activities. Income from investments in unconsolidated subsidiariesfluctuates from period to period based on the volume and profitability oftransactions carried out by the underlying unconsolidated subsidiaries. Theoverall increase in 2005 was primarily the result of increased income from theCompany’s investment in Savills, due to the purchase of additional shares ofSavills in 2005, which increased the Company’s ownership interest fromapproximately 10% to approximately 19.6% of the outstanding stock of Savills.In 2005, income from the Company’s investment in Savills was partially offsetby amortization of the portion of the Savills purchase price allocated to certainintangibles. *See “Information Regarding Savills plc.”*

***Income fromDiscontinued Operations, Net of Income Taxes.******  ***Income from discontinuedoperations consisted of the operations of real estate properties and gain ondisposition of real estate properties held for sale or sold, that wereconsidered components of an entity under FAS 144 and in which the Company hadnot retained or did not expect to retain significant continuing involvement.Dispositions of real estate assets have been and continue to be a significantpart of the Company’s activities and, as a result of applying the provisions ofFAS 144, the Company expects a significant amount of these activities to beclassified as discontinued operations in future periods. Because gains on saleof real estate projects accounted for as income from discontinued operationsgive rise to significant incentive compensation expense on account of localoffice and overall Company profitability (which was separately accounted for assalaries, wages and benefits), the portion of the Company’s net incomeattributable to sales was significantly less than the amount shown as income fromdiscontinued operations.

During 2005, the Company sold 22 real estate projectsthat were considered discontinued operations for an aggregate net sales priceof $120.3 million. The sales resulted in an aggregate gain on disposition ofreal estate (before income taxes) of $31.5 million. In 2004, the Company soldfive real estate projects that were considered discontinued operations for anaggregate net sales price of $83.9 million. The sales resulted in an aggregategain on disposition of real estate (before income taxes) of $42.5 million(including interest forgiveness of $0.3 million, and minority interest expenseof $10.8 million).

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**Year Ended December 31, 2004 Compared to YearEnded December 31, 2003**

In accordance withFAS 144, certain revenues and expenses for the years ended December 31,2004 and 2003, have been reclassified to conform to the presentation for theyear ended December 31, 2005. As a result, certain balances differ fromthe amounts reported in previously filed documents. See *Income from DiscontinuedOperations, Net of Income Taxes*, below, for additional information.
|                                                                                                                                       | ** ** | **For the Years Ended  December 31,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                                                                                                            | ** ** | **2004**                                                  | ** ** | **2003**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                                                                                                            | ** ** | **(dollars in thousands)**                      | ** ** |
| **REVENUES:**                                                                                                                         |       |                                                      |       |       |       |              |       |   |   |   |   |
| ***User  Services:***                                                                                                                 |       |                                                      |       |       |       |              |       |   |   |   |   |
| Facilities  management                                                                                                                |       | $                                                         | 211,062    |       | $          | 208,936           |       | $ | 2,126 |   |   | 1.0 | % |   |
| Corporate  advisory services                                                                                                          |       | 143,266                                                   |       | 123,335    |       | 19,931            |       |   | 16.2 | % |   |
| Project  management services                                                                                                          |       | 91,599                                                    |       | 65,500     |       | 26,099            |       |   | 39.8 | % |   |
|                                                                                                                                  |       | 445,927                                                   |       | 397,771    |       | 48,156            |       |   | 12.1 | % |   |
| ***Investor  Services:***                                                                                                             |       |                                                      |       |       |       |              |       |   |   |   |   |
| Property  management                                                                                                                  |       | 137,193                                                   |       | 143,727    |       | (6,534            | )          |   | (4.5 | )% |   |
| Brokerage                                                                                                                             |       | 114,478                                                   |       | 95,593     |       | 18,885            |       |   | 19.8 | % |   |
| Construction  management                                                                                                              |       | 11,187                                                    |       | 10,736     |       | 451               |       |   | 4.2 | % |   |
|                                                                                                                                  |       | 262,858                                                   |       | 250,056    |       | 12,802            |       |   | 5.1 | % |   |
| Development and  construction                                                                                                         |       | 38,346                                                    |       | 43,203     |       | (4,857            | )          |   | (11.2 | )% |   |
|                                                                                                                                  |       | 747,131                                                   |       | 691,030    |       | 56,101            |       |   | 8.1 | % |   |
| Gain on  disposition of real estate                                                                                                   |       | 26,742                                                    |       | 13,199     |       | 13,543            |       |   | 102.6 | % |   |
|                                                                                                                                  |       | 773,873                                                   |       | 704,229    |       | 69,644            |       |   | 9.9 | % |   |
| **COST AND EXPENSES:**                                                                                                                |       |                                                      |       |       |       |              |       |   |   |   |   |
| Salaries, wages  and benefits                                                                                                         |       | 493,404                                                   |       | 452,195    |       | 41,209            |       |   | 9.1 | % |   |
| Commissions                                                                                                                           |       | 120,345                                                   |       | 98,957     |       | 21,388            |       |   | 21.6 | % |   |
| General and  administrative                                                                                                           |       | 127,758                                                   |       | 116,434    |       | 11,324            |       |   | 9.7 | % |   |
| Depreciation                                                                                                                          |       | 9,985                                                     |       | 14,704     |       | (4,719            | )          |   | (32.1 | )% |   |
| Amortization                                                                                                                          |       | 1,359                                                     |       | 1,856      |       | (497              | )          |   | (26.8 | )% |   |
| Interest                                                                                                                              |       | 4,195                                                     |       | 5,953      |       | (1,758            | )          |   | (29.5 | )% |   |
|                                                                                                                                  |       | 757,046                                                   |       | 690,099    |       | 66,947            |       |   | 9.7 | % |   |
| Operating income                                                                                                                      |       | 16,827                                                    |       | 14,130     |       | 2,697             |       |   | 19.1 | % |   |
| Interest and  other income                                                                                                            |       | 2,797                                                     |       | 2,236      |       | 561               |       |   | 25.1 | % |   |
| Income from  continuing operations before income taxes, minority interest and income from  investments in unconsolidated subsidiaries |       | 19,624                                                    |       | 16,366     |       | 3,258             |       |   | 19.9 | % |   |
| Income tax  expense                                                                                                                   |       | (7,452                                                    | )          | (6,636     | )          | (816              | )          |   | (12.3 | )% |   |
| Minority  interest, net of income taxes                                                                                               |       | (3,006                                                    | )          | 1,231      |       | (4,237            | )          |   | (344.2 | )% |   |
| Income from  investments in unconsolidated subsidiaries, net of income taxes                                                          |       | 10,971                                                    |       | 9,839      |       | 1,132             |       |   | 11.5 | % |   |
| Income from  continuing operations                                                                                                    |       | 20,137                                                    |       | 20,800     |       | (663              | )          |   | (3.2 | )% |   |
| Income from  discontinued operations, net of income taxes                                                                        |       | 18,982                                                    |       | 240        |       | 18,742            |       |   | 7,809.2 | % |   |
| **Net income**                                                                                                                        |       | $                                                         | 39,119     |       | $          | 21,040            |       | $ | 18,079 |   |   | 85.9 | % |   |

 

***SegmentPerformance.******  ***TheGlobal Services segment income before income taxes increased 41% from $27.2million in 2003 to $38.3 million in 2004. Revenues for this segment increased9%, from $649.6 million in 2003 to $710.8 million in 2004. Significantincreases in two of the user services revenue lines (corporate advisoryservices up 16% and project management for user customers up 40%) 

15

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contributed to theincrease in income before income taxes, as did the 20% increase in brokeragerevenues from investor customers. The revenue increases reflect the impact ofthe Company’s progress in growing its brokerage force and its strengtheningcapability in the area of outsourcing sales.

Development and Investment segment income beforeincome taxes more than tripled in 2004, increasing from $8.2 million in 2003 to$24.8 million in 2004. Segment revenues plus income from unconsolidatedsubsidiaries plus income from discontinued operations (all before income taxes)were up 53% in 2004 as compared to 2003.

***Revenues.******  ***Facilities management revenueincreased slightly from 2003. This increase primarily resulted from anexpansion of a client relationship in the second quarter of 2004. The overallincrease was offset by the termination of certain client relationships as partof the Company’s wind-down of its centralized call center operations.Reimbursement of salaries, wages, benefits, and out-of-pocket general andadministrative costs, a component of facilities management revenue, increased$7.3 million in 2004, compared to 2003.

Corporate advisory services revenue increased from2003, primarily due to increased commission revenues in 2004. The increase wasthe result of growth in the number of tenant representation brokers as part ofthe Company’s focus on expanding its brokerage network. In addition,transaction volumes had increased, reflecting clients’ willingness to make realestate commitments.

The increase in project management services revenuewas mainly the result of the expansion of services provided to existing clients(due to increases in clients’ portfolios, the scope of the Company’s servicesprovided under certain outsourcing contracts and transaction volume). Also, theCompany added new clients during 2004.

The decrease in property management revenue waspartially the result of decreased square footage under management in 2004 ascompared to 2003. The reduction in square footage primarily resulted from salesof buildings in the Company’s management portfolio to REITs or other investorsthat self-manage their properties or use other service providers. In addition,some square footage decreases resulted from clients taking services in-house orto other service providers. These decreases were partially offset by additionsto square footage from new business.

The increase in brokerage revenue was driven by alarge increase in investment sales commissions, while project leasingcommissions increased slightly. Favorable capital markets fundamentals,including low interest rates, led to increased investment sales transactionvolumes, which contributed to the improvement in investment sales commissions.The addition of investment sales brokers, resulting from the Company’s focus onexpansion of its brokerage network, also contributed to the increase in suchcommissions.

Construction management revenue remained relativelyflat in 2004 as compared to 2003, although the Company did experience anincrease in new projects in the second half of 2004. Construction managementrevenue is generated from services including space planning and tenant finishcoordination for investor clients in conjunction with property management andleasing assignments, and are directly related to tenants’ real estate demands.

Development and construction revenue decreased in 2004primarily due to a decrease in incentive development fees, which was largelydue to the timing of significant transactions in 2004 as compared to 2003. Inaddition, the decrease in 2004 is due to a reduction in the Company’sdevelopment starts and investments (including property acquisitions) in recentyears. Typically, the impact of increases and decreases in the Company’sdevelopment starts and investments is not reflected in financial results untillater periods, and the Company has experienced a reduction in its 2004development and construction revenue as a consequence of reduced 2002 and 2003development starts and investments. However, development starts and investmentsbegan trending up in 2004 with 2004 starts more than doubling those for 2003.

The Company’s gain on disposition of real estate decreasedslightly in 2004 from 2003. During 2004, the Company sold 17 real estateprojects for an aggregate net sales price of $121.4 million. The sales resultedin an aggregate gain on disposition of $26.7 million, including recognition ofdeferred gain of 

16

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$0.4 million relatedto dispositions in previous periods. In 2003, the Company sold 19 real estateprojects for an aggregate net sales price of $67.1 million. The sales resultedin an aggregate gain on disposition of $13.2 million, including recognition ofdeferred gain of $0.3 million related to dispositions in a previous period.

***Costs and Expenses.******  ***The increase in salaries,wages, and benefits expense in 2004 was primarily due to growth in salaries,wages and benefits for reimbursed employees as the Company increased itsproject management headcount to service client expansions and the addition ofnew clients. In addition, the Company’s annual incentive bonus expense andtransaction-related incentive compensation expense increased due to the Company’sincreased profitability in 2004.

The 2004 increase in commission expense was directlyattributable to the increase in the Company’s corporate advisory services andbrokerage revenue discussed above.

General and administrative expenses increased in 2004primarily due to increased client-reimbursed out-of-pocket general andadministrative expenses, largely driven by the growth in the Company’s projectmanagement service line.

Depreciation and amortization expenses decreased in2004 from the prior year. The Company has replaced many of its computer assetsat a lower cost than the assets that were retired, which has reduced theCompany’s depreciation expense. In addition, several intangible asset balancesrelated to acquired management contracts became fully amortized during 2004,which created a decrease in amortization expense as compared to 2003.

The decrease in interest expense is due in part to theexpiration of the Company’s interest rate swap agreement at the end of thefirst quarter of 2003 for which the Company recorded $0.6 million of interestexpense in 2003. The Company also had lower average outstanding balances on itsrevolving line of credit and capital leases during 2004 as compared to 2003.

***Minority Interest,Net of Income Taxes.******  ***Minorityinterest fluctuated from income in 2003 to an expense in 2004. This change isprimarily a result of 2004 gains on dispositions of consolidated real estateprojects in which outside parties have an interest. In addition, the results ofoperations of certain consolidated real estate entities with outside ownersimproved due to lower charges for impairment of real estate held by theseentities in 2004, as compared to 2003.

***Income fromInvestments in Unconsolidated Subsidiaries, Net of Income Taxes.******  ***Income from investments inunconsolidated subsidiaries fluctuates from period to period based on thevolume and profitability of transactions carried out by the underlyingunconsolidated subsidiaries. The overall increase in 2004 was primarily theresult of significant income from an unconsolidated subsidiary that sold itsbuilding portfolio in the first quarter of 2004 and increased income from theCompany’s investment in Savills due to Savills’ improved operating results. *See “Information Regarding Savills plc.”*

***Income fromDiscontinued Operations, Net of Income Taxes.******  ***During 2004, the Company soldfive real estate projects that were considered discontinued operations for anaggregate net sales price of $83.9 million. The sales resulted in anaggregate gain on disposition of real estate (before income taxes) of$42.5 million (including interest forgiveness of $0.3 million), andminority interest expense of $10.8 million. In 2003, the Company sold four realestate projects that were considered discontinued operations for an aggregatesales price of $25.1 million. The sales resulted in an aggregate gain ondisposition of $5.6 million. Income from discontinued operations for 2003included a provision for loss of $1.4 million to reflect a real estate held forsale asset at fair value less cost to sell. Income from discontinued operationsfor 2003 also included $2.1 million of impairment on real estate. Both of thesereal estate assets were sold in 2004.

***Net Income.******  ***Net income increased due tothe fluctuations in revenues and expenses described above, in addition to adecrease in the Company’s effective tax rate driven by favorable results fromstate tax planning.

**Quarterly Resultsof Operations and Seasonality**

The following tablepresents unaudited quarterly results of operations data for the Company foreach of the eight quarters in 2005 and 2004. This quarterly information isunaudited but, in the opinion of 

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management,reflects all adjustments (consisting only of normal recurring adjustments)necessary for a fair presentation of the information for the periods presented.The results of operations for any quarter are not necessarily indicative ofresults for any future period. Revenues and net income during the fourth fiscalquarter historically have been greater than in each of the first three fiscalquarters, primarily because the Company’s clients have demonstrated a tendencyto close transactions toward the end of the fiscal year. The timing andintroduction of new contracts, the disposition of investments in real estateassets and other factors may also cause quarterly fluctuations in the Company’sresults of operations.
|                                                                     | ** ** | **Quarter Ended**  | ** ** |
|---------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                          | ** ** | **March 31**       | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
| ** **                                                          | ** ** | **(in thousands)** | ** ** |
| **2005:**                                                           |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Total revenues                                                      |       | $                       | 178,621    |   | $ | 211,989 |   |   | $ | 226,729 |   |   |   | $ | 278,611 |   |   |
| Income (loss)  from discontinued operations, net of income taxes(1) |       | (325                    | )          | 680 |   |   | 12,181 |   |   |   | 5,587 |   |   |
| Net income                                                          |       | 2,053                   |       | 8,264 |   |   | 14,517 |   |   |   | 34,573 |   |   |
| **2004:**                                                           |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Total revenues                                                      |       | $                       | 158,099    |   | $ | 181,933 |   |   | $ | 188,498 |   |   |   | $ | 245,343 |   |   |
| Income (loss)  from discontinued operations, net of income taxes(1) |       | 397                     |       | (18 | ) |   | (73 | ) |   |   | 18,676 |   |   |
| Net income                                                          |       | 2,099                   |       | 3,214 |   |   | 5,854 |   |   |   | 27,952 |   |   |

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(1)                Discontinuedoperations include the operations of real estate properties and gain ondisposition of real estate properties held for sale or sold in which theCompany retained or expects to retain no continuing involvement, in accordancewith FAS 144.

**InformationRegarding Savills plc**

TheCompany accounts for its interest in Savills on the equity method and hasincluded summarized financial information for Savills as part of the “Other”category in Note 6 of the Company’s consolidated financial statements.  For the year ended December 31, 2005, theCompany’s share of Savills’ income from continuing operations before incometaxes represented approximately 22% of the Company’s income from continuingoperations before income taxes, calculated in accordance with Rule 1-02(w) ofRegulation S-X.  As this exceeds the 20%threshold under Rule 3-09 of Regulation S-X, the Company is required to fileSavills’ audited financial statements on a Form 10-K/A by June 29, 2006.

TheCompany believes that the use of income from continuing operations as themeasure of recurring income by which Savills’ significance is calculatedoverstates Savills’ significance because the Company’s income from continuingoperations does not include a category of income that is routinely generated bysales of properties created through its development operations – “income fromdiscontinued operations” that is categorized as such solely as a result of theapplication of Financial Accounting Standards Board  Statement No. 144, *Accountingfor the Impairment or Disposal of Long-Lived Assets* (“FAS144”).  If this type of recurring incomefrom property sales transactions were included as income from continuingoperations, Savills would account for approximately 16% of the Company’s 2005recurring income (measured on this basis), and the filing of Savills’ financialstatements would not be required.

Nonetheless,because the Company’s share of Savills’ income from continuing operationscalculated in accordance with Rule 1-02(w) of Regulation S-X exceeds the 20%threshold, the Company has requested Savills to take the actions required of itto facilitate the Company’s filing of Savills’ audited financial statements ona Form 10-K/A by June 29, 2006.  Savillshas refused to take such actions. While the Company is thus unable to file the requiredfinancial statements, the Company has filed this Form 10-K/A to provide certaininformation regarding Savills, including summarized unaudited financialinformation of Savills as of December 31, 2005 and 2004, and for the years thenended and to provide a reference to where Savills’ full audited financialstatements may be viewed or obtained.

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Savills’financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (“IFRS”). Savills adopted IFRS effective January 1,2005, and restated its 2004 results from U.K. generally accepted accountingprinciples (“UK GAAP”). Summarized unaudited financial information for Savills,adjusted for differences between IFRS and U.S. generally accepted accountingprinciples (“US GAAP”) to the extent material to the Company’s recognition ofits share of Savills’ earnings, are as follows:

| ** **                                       | ** ** | **December 31,**                | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                       | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| ** **                                       | ** ** | **(unaudited)**                      | ** ** |
| ** **                                       | ** ** | **(dollars in thousands)** | ** ** |
| Current assets                                   |       | $                                    | 486,839    |   | $ | 379,307 |   |
| Non-current  assets                              |       | 195,176                              |       | 122,322 |   |
| Total assets                                     |       | $                                    | 682,015    |   | $ | 501,629 |   |
| Current  liabilities                             |       | $                                    | 334,674    |   | $ | 276,271 |   |
| Non-current  liabilities                         |       | 54,810                               |       | 28,174 |   |
| Minority interest                                |       | 988                                  |       | 303 |   |
| Stockholders’  equity                       |       | 291,543                              |       | 196,881 |   |
| Total liabilities  and stockholders’ equity |       | $                                    | 682,015    |   | $ | 501,629 |   |

 

| ** ** | ** ** | **Years Ended  December 31,** | ** ** |
|------------|------------|-----------------------------------------|------------|
| ** ** | ** ** | **2005**                                | ** ** | **2004** | ** ** |
| ** ** | ** ** | **(unaudited)**                         | ** ** |
| ** ** | ** ** | **(dollars in thousands)**    | ** ** |
| Revenues   |       | $                                       | 688,987    |   | $ | 621,785 |   |
| Expenses   |       | 620,099                                 |       | 558,042 |   |
| Net income |       | $                                       | 68,888     |   | $ | 63,743 |   |

 

Differences between IFRS (and adoption thereof) and USGAAP that materially impacted the Company’s share of Savills’ earnings includeaccounting for:  (i) stock-basedcompensation; (ii) payroll taxes related to stock-based compensation, and (iii) intangibleassets.

***Stock-basedcompensation.******  ***UnderIFRS, stock-based compensation is recorded at the grant-date fair value andrecognized as expense over the vesting period. The impact of service andperformance conditions is estimated at the grant date. These estimates aretrued up for differences between estimated and actual vested awards. As part ofits IFRS transition, Savills elected to continue to account for awards issuedprior to 2003 under UK GAAP. Under UK GAAP, certain awards issued as bonuscompensation to employees based on certain levels of earnings were recognizedas compensation expense in the year that Savills generated the earnings,regardless of vesting provisions related to future service requirements. Inaddition, under UK GAAP, no expense was recognized related to stock-based compensationawarded under Savills’ tax-qualified stock purchase plan.

Under US GAAP, prior to adoption of FAS 123R,compensation expense was measured at intrinsic value and recognized as expenseover the vesting period. Awards with performance conditions were marked tomarket each period until the ultimate number of awards to be issued was fixed. Compensationexpense related to awards that did not ultimately vest were reversed whenforfeitures occured. Under US GAAP, prior to the adoption of FAS 123R, Savills’tax-qualified stock purchase plan was accounted for as a compensatory plan, andthe stock discount was recognized as compensation expense over the vestingperiod. To the extent that awards were offered at a lower price than previouslygranted awards that were cancelable by the holder, such previous awards weremarked to market as repriced options until exercised, forfeited, or expired.

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***Payroll taxesrelated to stock-based compensation.******  ***Under IFRS, payroll taxliabilities related to stock-based compensation are recognized over the sameperiod as the related stock-based compensation expenses are recognized. UnderUS GAAP, payroll tax liabilities related to stock-based compensation are recognizedat the time of the underlying event triggering measurement and payment of thetax to the taxing authority (e.g., the option exercise date, or vesting ofrestricted stock).

***Intangible assets.******  ***Upon adoption of IFRS,Savills elected not to restate any business combinations recorded prior to January 1,2004. As a result, certain finite-lived intangibles related to acquisitionsfrom June 30, 2001 through December 31, 2003, were not separatelyidentified and amortized. Under US GAAP, such intangibles are identifiedseparately and amortized.

*Availability ofAdditional Savills Financial Information*

The Annual Report andAccounts for Savills plc for the year ended December 31, 2005 can be foundon Savills’ website within the investor relations section at www.ir.savills.com.Alternatively, a copy can be obtained from Savills’ Company Secretary’s office,Savills plc, 20 Grosvenor Hill, Berkeley Square, London, W1K 3HQ. Telephone:0207 409 8844.

**Liquidity andCapital Resources**

The Company’s liquidity and capital resourcesrequirements include the funding of working capital needs, primarily costsincurred in providing services to its clients before collection of relatedbillings; the funding of capital investments, including the acquisition of orinvestments in other real estate service companies; the repurchase of itsshares if authorized by the Board of Directors; expenditures for real estateand payments on notes payable associated with its development and investmentactivities; and expenditures related to upgrading the Company’s managementinformation systems. The Company finances its operations with internallygenerated funds and borrowings under the Credit Facility (described below). Theportion of the Company’s development and investment business that includes theacquisition and development of real estate is financed with loans secured byunderlying real estate, external equity, internal sources of funds, or acombination thereof.

Net cash used in operating activities totaled $3.0million in 2005, compared to cash provided of $94.4 million in 2004. Cashprovided by operating activities, excluding the change in real estate andrelated borrowings, totaled $33.6 million in 2005 as compared to $95.7 millionin 2004. This decrease in cash provided by operating activities is partiallydue to higher outstanding accounts receivable balances in 2005, consistent withthe overall growth in the Company’s revenues from 2004 to 2005. In addition,the Company collected a large receivable from an affiliate in 2004 that wasoutstanding at year-end 2003, as compared to no such large receipts in 2005.The Company also made greater incentive compensation and income tax paymentsduring 2005 on account of 2004 activity, as compared to such payments madeduring 2004. Cash used in real estate activities, net of related borrowings,was $36.6 million in 2005, compared to $1.3 million in 2004 as a result ofincreased real estate investment activity in 2005.

Net cash used in investing activities totaled $114.8million in 2005, compared to $37.1 million in 2004. This increase in cash usedis primarily due to investments in unconsolidated subsidiaries, net ofdistributions, of $86.0 million in 2005 as compared to distributions from theCompany’s unconsolidated subsidiaries, net of contributions, of $7.1 million in2004. The increase in investments is attributable to the Company’s purchase ofadditional shares of Savills in 2005. The Company’s wholly-owned captiveinsurance company also made purchases, net of sales proceeds and maturities, of$18.4 million in marketable securities in 2005, as compared to no suchpurchases in 2004. This increase in cash used was offset by a decrease inexpenditures related to real estate classified as “held for investment,” whichwere $39.5 million in 2005, as compared to $105.8 million in 2004. Theseexpenditures were offset by 

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$38.9 million ofproceeds from the dispositions of real estate projects classified as “held forinvestment” at the time of disposition in accordance with FAS 144, as comparedto $67.3 million of such proceeds in 2004.

Net cash provided by financing activities totaled$31.1 million in 2005 as compared to $0.7 million in 2004. The increase in cashprovided in 2005 is due, in part, to borrowings, net of principal debtpayments, under the Company’s line of credit of $36.3 million, compared toprincipal debt payments, net of borrowings, of $13.4 million in 2004. TheCompany used these 2005 borrowings to fund its purchase of additional shares ofSavills. In addition, the Company received proceeds from the exercise ofemployee stock options of $8.2 million in 2005, as compared to $1.7 million in2004. Another factor contributing to the increase in cash provided was that theCompany used less cash in 2005 to repurchase common stock, or $20.1 million in2005 as compared to $37.9 million in 2004. This increase in cash provided wasoffset by a decrease in proceeds from borrowings, net of payments, on notespayable related to real estate held for investment, which were $12.5****million in 2005 as compared to $47.2 million in 2004. Inaddition, the Company made distributions, net of contributions, to minorityinterest holders of $9.1 million in 2005, compared to contributions received,net of distributions, of $0.2 million in 2004.

In June 2005, the Company obtained a$175.0 million revolving line of credit (the “Credit Facility”) arrangedby Bank of America, N.A., as the administrative agent, which replaced theCompany’s previous $150.0 million revolving line of credit. Borrowingsunder the Credit Facility are due in June 2008 and are either Base RateLoans or Eurodollar Rate Loans. Base Rate Loans bear interest at a base rateplus a margin up to 0.25% depending on the Company’s leverage ratio. The baserate is the higher of the prime lending rate or an average federal funds rateplus 0.5%. Eurodollar Rate Loans bear interest at the Eurodollar rate plus amargin, which ranges from 1.75% to 2.0%, depending upon the Company’s leverageratio. The Eurodollar rate is based on the British Bankers Association LIBORrate. The Credit Facility contains various covenants such as the maintenance ofminimum net worth, liquidity, revenues, interest coverage ratios and fixedcharge ratios. The Credit Facility also includes restrictions on recourseindebtedness and total indebtedness, restrictions on liens and certainrestrictions on investments and acquisitions that can be made by the Company.In addition, the Company may not pay dividends, repurchase common shares, ormake other distributions on account of its common stock exceeding 50% of theprevious year’s net income before depreciation and amortization, plus, for theyear ended December 31, 2005 only, an amount equal to $20.0 million. TheCredit Facility is guaranteed by certain significant subsidiaries of theCompany and is secured by a pledge of stock of such significant subsidiariesand a pledge of certain intercompany indebtedness.

The Company’sparticipation in derivative transactions has been limited to risk managementpurposes, and derivative instruments are not held for trading purposes. If acertain interest coverage ratio is not maintained, as defined in the agreement,the Credit Facility requires the Company to enter into one or more interestrate agreements for the Company’s floating rate indebtedness in excess of $30.0 million(other than construction loans under which interest is capitalized inaccordance with GAAP) ensuring the net interest on such excess is fixed, cappedor hedged.

The Company also has a$25.0 million short-term revolving line of credit (the “Swing Line”) withBank of America, N.A. Each loan obtained by the Company under the Swing Linematures in five business days, but no later than June 28, 2008, and bearsinterest at a 30-day LIBOR-based rate (plus an applicable margin asdefined per the agreement). Borrowings under the Swing Line are unsecured andreduce borrowing capacity under the Credit Facility.

At December 31, 2005,the Company had outstanding borrowings of $35.0 million under the CreditFacility. The covenants contained in the Credit Facility and the amount of theCompany’s other borrowings and contingent liabilities may have the effect oflimiting the borrowing capacity available to the Company under the CreditFacility to an amount less than the $175.0 million commitment. The Company’sunused borrowing capacity (taking into account borrowings and letters of creditoutstanding) under the 

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Credit Facility was$133.9 million at December 31, 2005. Since many of the financialcovenants in the Credit Facility are dependent on the Company’s “EBITDA,” asdefined in the Credit Facility agreement and calculated on a trailingfour-quarter basis, a decline in the Company’s overall operations couldadversely impact the Company’s ability to comply with these financial covenantsand, in turn, the Company’s borrowing capacity.

At December 31, 2005,the Company was in compliance with all covenants of the Credit Facility. TheCompany expects to continue to borrow under the Credit Facility to financefuture strategic acquisitions and investments, fund its co-investmentactivities and provide the Company with an additional source of workingcapital.

In December 2005, theCompany entered into an interest rate cap agreement in order to limit itsinterest expense on a construction loan with a 30-day LIBOR-based floatinginterest rate related to a consolidated real estate project. The interest ratecap agreement has a notional amount of $25.7 million at December 31, 2005,and the Company will receive payments if the LIBOR-based interest rate exceeds5.5%. The interest rate cap agreement has not been designated as an effectivehedge, and therefore the interest rate cap agreement was marked to market eachperiod with the change in fair market value recognized in current periodearnings. The interest rate cap agreement expires on January 2, 2008.Through December 31, 2005, amounts recorded by the Company related to thisinterest rate cap agreement were not material.

The Company does notanticipate paying any dividends in the foreseeable future. The Company believesthat funds generated from operations, together with existing cash and availablecredit under the Credit Facility and loans secured by underlying real estatewill be sufficient to finance its current operations, planned capitalexpenditure requirements, payment obligations for development purchases,investments in development and investment funds and programs, sharerepurchases, acquisitions of and investments in service companies, signingbonuses or loans for new employees and internal growth for the foreseeable future.The Company’s need, if any, to raise additional funds to meet its workingcapital and capital requirements will depend upon numerous factors, includingthe success and pace of implementation of its growth strategy. The Companyregularly considers capital raising alternatives to be able to take advantageof available avenues to supplement its working capital, including strategiccorporate partnerships or other alliances, bank borrowings and the sale ofequity and/or debt securities.

In February 2006, theCompany announced that its Board of Directors authorized the purchase of up to$50.0 million of its common stock from time to time in open market purchases orin privately negotiated transactions. The Company also amended its CreditFacility to allow for additional repurchases or other distributions on accountof its common stock in an amount up to $100.0 million from the date of therepurchase announcement through December 31, 2006 and to reduce theminimum required net worth covenant. In June 2006, the Company completedits $50.0 million share repurchase program. A total of 1,487,500 shares wererepurchased at an average price of $33.61 per share. The purchases werefinanced from the Company’s available cash and borrowings under the CreditFacility. The repurchase of shares is intended to be accretive to futureearnings per share for holders who retain their shares. The Company’s intentwith respect to its stock repurchase programs is to reserve the repurchasedshares for issuance in connection with the Company’s equity-based incentiveplans, as well as for other corporate purposes.

In March 2005, theCompany announced that its Board of Directors authorized the purchase of up to$20.0 million of its common stock from time to time in open market purchases orin privately negotiated transactions. In April 2005, the Company completedits $20.0 million share repurchase program. A total of 970,142 shares wererepurchased, at an average price of $20.61 per share, all through open marketpurchases. The purchases were financed from the Company’s available cash, andthe Company placed the repurchased shares in treasury.

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In September 2004,the Company commenced a Modified Dutch Auction tender offer whereby it offeredto purchase up to 4,444,444 shares of its common stock. Under the terms of thetender offer, the Company invited stockholders to tender their shares at a purchaseprice not in excess of $15.75, nor less than $13.50 per share. The tender offerwas completed in October 2004, and as a result, the Company purchased2,354,437 shares of common stock priced at $15.75 per share for a total of$37.9 million, including the costs of the tender offer. The transaction wasfinanced from the Company’s available cash, and the Company placed therepurchased shares in treasury.

**Off-balance SheetArrangements and Contractual Obligations**

The Company has off-balance sheet arrangementsconsisting of certain debt repayment guarantees that have been provided by theCompany as security for the obligations of others (primarily unconsolidatedsubsidiaries of the Company) in the normal course of the Company’s real estatedevelopment business. The Company has not made any material payments under sucharrangements in the years ended December 31, 2003, 2004 or 2005. As of December 31,2005, the Company had guaranteed a maximum of $7.1 million of such notespayable, all of which was outstanding as of December 31, 2005. Paymentsrequired under these arrangements, if any, could be indicative of impairment inthe Company’s investments in the underlying unconsolidated subsidiaries andtherefore could result in additional expense to the Company.

The Companyhad various contractual obligations at December 31, 2005, as summarizedbelow (in millions), that could impact its liquidity: 
|                                                | ** ** | **Payments due by Period** | ** ** |
|------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                     | ** ** | **Total**                                 | ** ** | **Less than  1 year** | ** ** | **1-3  years** | ** ** | **3-5  years** | ** ** | **After  5 years** | ** ** |
| Long-term debt  obligations                    |       | $                                         | 36.3       |   |   | $ | 1.3 |   |   | $ | 35.0 |   | $ | — |   |   | $ | — |   |   |
| Operating lease  obligations                   |       | 67.5                                      |       |   | 20.0 |   |   | 26.8 |   | 14.1 |   |   | 6.6 |   |   |
| Notes payable on  real estate (recourse)(1)(2) |       | 18.6                                      |       |   | 8.1 |   |   | 10.5 |   | — |   |   | — |   |   |
| Notes payable on  real estate (nonrecourse)(1) |       | 237.6                                     |       |   | 24.3 |   |   | 213.3 |   | — |   |   | — |   |   |
| Other long-term  obligations(3)                |       | 10.8                                      |       |   | — |   |   | 10.8 |   | — |   |   | — |   |   |
| **Total Contractual Obligations**              |       | $                                         | 370.8      |   |   | $ | 53.7 |   |   | $ | 296.4 |   | $ | 14.1 |   |   | $ | 6.6 |   |   |

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(1)                Includes notesrelated to the Company’s various real estate projects and excludes future interest.The notes (primarily construction loans) have either fixed or variable interestrates, ranging from 6% to 12% at December 31, 2005. In general, interestis drawn on the underlying construction loan and subsequently paid withprincipal with proceeds upon sale of the real estate project.

(2)                With respect to aproject to which $3.3 million of these obligations relate, the Company has anagreement with an investor client to purchase the project upon completion, theproceeds of which will be used to repay the related note payable.

(3)                Theseobligations, as well as $4.3 million recorded in other current liabilities, arecollateralized by outstanding letters of credit totaling $12.6 million.

**Effects ofInflation**

The Company does notbelieve that inflation has had a significant impact on its results ofoperations in recent years. However, there can be no assurance that the Company’sbusiness will not be affected by inflation in the future.

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**Forward-LookingStatements**

Certain statementscontained or incorporated by reference in this Annual Report on Form 10-K,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,” “forsee,” “look(ing) for,” “lookto” and words of similar import, are forward-looking statements within themeaning of the federal securities laws. Such forward-looking statements involveknown and unknown risks, uncertainties and other matters which may cause theactual results, performance or achievements of the Company or industry resultsto be materially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements. Such risks,uncertainties and other matters include, but are not limited to:

·                    theability of the Company to retain its major clients and renew its contracts,

·                    theability of the Company to attract new user and investor clients,

·                    theability of the Company to manage fluctuations in net earnings and cash flowwhich could result from the Company’s participation as a principal in realestate investments,

·                    theCompany’s ability to continue to pursue its growth strategy,

·                    theCompany’s ability to pursue strategic acquisitions on favorable terms andmanage challenges and issues commonly encountered as a result of thoseacquisitions,

·                    theCompany’s ability to compete in highly competitive national and local businesslines,

·                    theCompany’s ability to attract and retain qualified personnel in all areas of itsbusiness (particularly senior management),

·                    thetiming of individual transactions,

·                    theability of the Company to identify, implement and maintain the benefit of costreduction measures and achieve economies of scale, and

·                    theability of the Company to compete effectively in the international arena andmanage the risks of operating in the international arena (including foreigncurrency exchange risk).

In addition, the Company’s ability to achieve certainanticipated results will be subject to other factors affecting the Company’sbusiness that are beyond the Company’s control, including but not limited togeneral economic conditions (including interest rates, the cost andavailability of capital for investment in real estate, clients’ willingness tomake real estate commitments and other factors impacting the value of realestate assets), the effect of government regulation on the conduct of theCompany’s business and the threat of terrorism and acts of war. Given theseuncertainties, readers are cautioned not to place undue reliance on suchforward-looking statements. The Company disclaims any obligation to update anysuch statements or publicly announce any updates or revisions to any of theforward-looking statements contained herein to reflect any change in theCompany’s expectation with regard thereto or any change in events, conditions,circumstances or assumptions underlying such statements.

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**ITEM 15.**         EXHIBITSAND FINANCIAL STATEMENT SCHEDULES

(a)(1)            Thefollowing consolidated financial statements of Trammell Crow Company andSubsidiaries for the year ended December 31, 2005, were filed as part ofthe Company’s Form 10-K filed on March 15, 2006:

**Reportsof Independent Registered Public Accounting Firm**

ConsolidatedBalance Sheets as of December 31, 2005 and 2004

ConsolidatedStatements of Income for the Years Ended December 31, 2005, 2004 and 2003

ConsolidatedStatements of Stockholders’ Equity for the Years Ended December 31, 2005,2004 and 2003

ConsolidatedStatements of Cash Flows for the Years Ended December 31, 2005, 2004 and2003

ConsolidatedStatements of Comprehensive Income for the Years Ended December 31, 2005,2004 and 2003

Notes toConsolidated Financial Statements

The financial statements and related notes of TFKRetail, Ltd. as of June 30, 2004, filed as part of the Company’s Form 10-Kfiled on March 15, 2006. The financial statements were included as TFKRetail, Ltd. is deemed to be a significant subsidiary pursuant to Rule 3-09of Regulation S-X.

(a)(2)            Thefollowing consolidated financial statement schedule of Trammell Crow Companyand Subsidiaries were filed as part of the Company’s Form 10-K filedon March 15, 2006:

ScheduleIII—Real Estate Investments and Accumulated Depreciation

Note toSchedule III—Real Estate Investments and Accumulated Depreciation

Allother schedules for which provision is made in the applicable accountingregulation of the Securities and Exchange Commission are not required under therelated instructions or are inapplicable and therefore have been omitted.

(a)(3)            Thefollowing documents are filed or incorporated by reference as exhibits to thisReport: 
|   3.1(1)    |   | Certificate of Incorporation of the Company                                                                                                                                               |
|-----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   3.2(1)    |   | Bylaws of the Company                                                                                                                                                                     |
|   3.2.1(5)  |   | First Amendment to Bylaws of the Company                                                                                                                                                  |
|   3.2.2(9)  |   | Second Amendment to Bylaws of the Company                                                                                                                                                 |
|   3.2.3(11) |   | Third Amendment to Bylaws of the Company                                                                                                                                                  |
|   4.1(1)    |   | Form of certificate for shares of Common Stock  of the Company                                                                                                                       |
| 10.1(16)              |   | Credit Agreement, dated June 28, 2005, among  the Company, Bank of America, N.A. as administrative agent, swing line lender  and issuing bank, and the other lender parties thereto. |
| 10.1.1(18)            |   | First Amendment of Credit Agreement dated  February 22, 2006, between the Company and Bank of America, N.A.                                                                          |
| 10.2(1)               |   | Form of License Agreement among the Company and  CF98                                                                                                                                |
| 10.2.1(8)             |   | First Amendment to License Agreement dated  July 31, 2002, between the Company and CF98                                                                                              |
| 10.3(14)              |   | Form of Indemnification Agreement, with  schedule of signatures                                                                                                                      |
| 10.4(1)               |   | Predecessor Company’s 1997 Stock Option Plan                                                                                                                                         |
| 10.5(1)               |   | Company’s Long-Term Incentive Plan                                                                                                                                                   |
| 10.5.1(2)             |   | Amendment No. 1 to Long-Term Incentive  Plan                                                                                                                                         |

25

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| 10.5.2(9)   |   | Second Amendment to Long-Term Incentive Plan                                                                                                                                   |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.6(1)     |   | Company’s 1995 Profit Sharing Plan                                                                                                                                        |
| 10.7(3)     |   | Company’s Employee Stock Purchase Plan                                                                                                                                    |
| 10.7.1(4)   |   | First Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                            |
| 10.7.2(6)   |   | Second Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                           |
| 10.7.3(7)   |   | Third Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                            |
| 10.7.4(10)  |   | Fourth Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                           |
| 10.7.5(10)  |   | Fifth Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                            |
| 10.7.6(15)  |   | Sixth Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                            |
| 10.8(1)     |   | Form of Stockholders’ Agreement among the  Company, Crow Family Partnership L.P., CFH Trade-Names, L.P., J.  McDonald Williams and certain other signatories thereto |
| 10.9(10)    |   | Employment Agreement dated as of October 17,  2003, between the Company and Robert E. Sulentic                                                                            |
| 10.9.1(12)  |   | Amendment to Employment Agreement dated as of  April 6, 2004, between the Company and Robert E. Sulentic                                                                  |
| 10.9.2(17)  |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and Robert E. Sulentic                                                               |
| 10.10(10)   |   | Employment Agreement dated as of October 17,  2003, between the Company and Derek R. McClain                                                                              |
| 10.10.1(12) |   | Amendment to Employment Agreement dated as of  April 6, 2004, between the Company and Derek R. McClain                                                                    |
| 10.10.2(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and Derek R. McClain                                                                 |
| 10.11(10)   |   | Employment Agreement dated as of October 17,  2003, between the Company and James R. Groch                                                                                |
| 10.11.1(12) |   | Amendment to Employment Agreement dated as of  April 6, 2004, between the Company and James R. Groch                                                                      |
| 10.11.2(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and James R. Groch                                                                   |
| 10.12(17)   |   | Amended and Restated Employment Agreement dated as  of October 17, 2005, between the Company and Michael J. Lafitte                                                       |
| 10.13(11)   |   | Employment Agreement dated as of March 2, 2004,  between the Company and John A. Stirek                                                                                   |
| 10.13.1(12) |   | Amendment to Employment Agreement dated as of  April 6, 2004, between the Company and John A. Stirek                                                                      |
| 10.13.2(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and John A. Stirek                                                                   |
| 10.14(17)   |   | Amended and Restated Employment Agreement dated as  of October 17, 2005, between the Company and William F. Concannon                                                     |
| 10.15(12)   |   | Employment Agreement dated as of April 6, 2004,  between the Company and T. Christopher Roth                                                                              |
| 10.15.1(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and T. Christopher Roth                                                              |
| 10.16(12)   |   | Employment Agreement dated as of April 27,  2004, between the Company and Diane Paddison                                                                                  |
| 10.16.1(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and Diane Paddison                                                                   |
| 10.17(13)   |   | Employment Agreement dated as of September 28,  2004, between the Company and Matthew S. Khourie                                                                     |
| 10.17.1(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and Matthew S. Khourie                                                               |

26

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| 14.1(11)  |   | Code of Business Conduct and Ethics                                                                                                                                    |
|-----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 21.1(19)  |   | Subsidiaries of the Company                                                                                                                                            |
| 23.1(19)  |   | Consent of Ernst & Young LLP                                                                                                                                  |
| 23.2(19)  |   | Consent of Ernst & Young LLP                                                                                                                                  |
| 24.1(19)  |   | Power of Attorney for Derek R. McClain                                                                                                                                 |
| 24.2(19)  |   | Power of Attorney for Arlin E. Gaffner                                                                                                                                 |
| 24.3(19)  |   | Power of Attorney for Curtis F. Feeny                                                                                                                                  |
| 24.4(19)  |   | Power of Attorney for Michael A. Moses                                                                                                                                 |
| 24.5(19)  |   | Power of Attorney for J. McDonald Williams                                                                                                                             |
| 24.6(19)  |   | Power of Attorney for William F. Concannon                                                                                                                             |
| 24.7(19)  |   | Power of Attorney for James R. Erwin                                                                                                                                   |
| 24.8(19)  |   | Power of Attorney for Jeffrey M. Heller                                                                                                                                |
| 24.9(19)  |   | Power of Attorney for Rowland T. Moriarty                                                                                                                              |
| 24.10(19) |   | Power of Attorney for Robert E. Sulentic                                                                                                                               |
| 31.1      |   | Certification by the Chief Executive Officer of the  Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                            |
| 31.2      |   | Certification by the Chief Financial Officer of the  Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                            |
| 32.1(19)  |   | Certification by the Chief Executive Officer of the  Company Pursuant to 18 U.S.C. §1350, adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |
| 32.2(19)  |   | Certification by the Chief Financial Officer of the  Company Pursuant to 18 U.S.C. §1350, adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |

----

(1)                Previously filedas an exhibit to the Company’s Registration Statement on Form S-1(File Number 333-34859) filed with the Securities and ExchangeCommission on September 3, 1997 and incorporated herein by reference.

(2)                Previously filedas an exhibit to the Company’s Form S-8 (File Number 333-50585)filed with the Securities and Exchange Commission on June 24, 1999 andincorporated herein by reference.

(3)                Previously filedas an exhibit to the Company’s Form S-8 (File Number 333-50579)filed with the Securities and Exchange Commission on April 21, 1998 andincorporated herein by reference.

(4)                Previously filedas an exhibit to the Company’s Form S-8 (File Number 333-50579)filed with the Securities and Exchange Commission on June 24, 1999 andincorporated herein by reference.

(5)                Previously filedas an exhibit to the Company’s Form 10-Q filed with the Securitiesand Exchange Commission on August 11, 2000 and incorporated herein byreference.

(6)                Previously filedas an exhibit to the Company’s Form 10-K filed with the Securitiesand Exchange Commission on March 29, 2001 and incorporated herein byreference.

(7)                Previously filedas an exhibit to the Company’s Form S-8 (File Number 333-62884)filed with the Securities and Exchange Commission on June 13, 2001 andincorporated herein by reference.

(8)                Previously filedas an exhibit to the Company’s Form 10-Q filed with the Securitiesand Exchange Commission on August 14, 2002 and incorporated herein byreference.

(9)                Previously filedas an exhibit to the Company’s Form 10-K filed with the Securitiesand Exchange Commission on March 31, 2003 and incorporated herein byreference.

(10)           Previously filed as anexhibit to the Company’s Form 10-Q filed with the Securities andExchange Commission on November 14, 2003 and incorporated herein byreference.

 

27

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(11)           Previously filed as anexhibit to the Company’s Form 10-K filed with the Securities andExchange Commission on March 15, 2004 and incorporated herein byreference.

(12)           Previously filed as anexhibit to the Company’s Form 10-Q filed with the Securities andExchange Commission on May 10, 2004 and incorporated herein by reference.

(13)           Previously filed as anexhibit to the Company’s Form 8-K filed with the Securities andExchange Commission on September 29, 2004 and incorporated herein byreference.

(14)           Previously filed as anexhibit to the Company’s Form 10-Q filed with the Securities andExchange Commission on November 9, 2004 and incorporated herein byreference.

(15)           Previously filed as anexhibit to the Company’s Form S-8 (File Number 333-121053)filed with the Securities and Exchange Commission on December 7, 2004 andincorporated herein by reference.

(16)      Previously filed as an exhibit to the Company’s Form 8-Kfiled with the Securities and Exchange Commission on July 1, 2005 andincorporated herein by reference.

(17)      Previously filed as an exhibit to the Company’s Form 8-Kfiled with the Securities and Exchange Commission on October 20, 2005 andincorporated herein by reference.

(18)      Previously filed as Exhibit 10.1 to theCompany’s Form 8-K filed with the Securities and Exchange Commissionon February 23, 2006 and incorporated herein by reference.

(19)           Previously filed as anexhibit to the Company’s Form 10-K filed with the Securities andExchange Commission on March 15, 2006 and incorporated herein by reference.

(b)          The exhibits required byItem 601 of Regulation S-K are filed as part of this Report.

(c)           The required financialstatements and financial schedule are filed as part of this Report.

28

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**SIGNATURE**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|                          | TRAMMELL CROW COMPANY                   |
|--------------------------|-----------------------------------------|
|                     | By:                                     | /s/  ROBERT E. SULENTIC |
| * *                 | Robert E.  Sulentic                     |
| * *                 | *Chairman  of the Board, President and* |
| Date: June 29, 2006 | *Chief  Executive Officer*              |

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesindicated. 
|                         | **Name** | ** **                                       | ** ** | ** **         | **Title** | ** ** | ** ** | ** ** | **Date** | ** ** |
|-------------------------|----------|--------------------------------------------------|------------|--------------------|-----------|------------|------------|------------|----------|------------|
| /s/ ROBERT E.  SULENTIC |     | Chairman of the  Board, President and Chief      |       | June 29, 2006 |
| Robert  E. Sulentic     |     | Executive Officer  (Principal Executive Officer) |       |               |
| *                       |     | Executive Vice  President and                    |       | June 29, 2006 |
| Derek  R. McClain       |     | Chief Financial  Officer                         |       |               |
| *                       |     | Executive Vice  President and                    |       | June 29, 2006 |
| Arlin  E. Gaffner       |     | Chief Accounting  Officer                        |       |               |
| *                       |     | Director                                         |       | June 29, 2006 |
| Curtis  F. Feeny        |     |                                             |       |               |
| *                       |     | Director                                         |       | June 29, 2006 |
| Michael  A. Moses       |     |                                             |       |               |
| *                       |     | Chairman Emeritus                                |       | June 29, 2006 |
| J.  McDonald Williams   |     |                                             |       |               |
| *                       |     | Vice Chairman                                    |       | June 29, 2006 |
| William  F. Concannon   |     |                                             |       |               |
| *                       |     | Director                                         |       | June 29, 2006 |
| James  R. Erwin         |     |                                             |       |               |
| *                       |     | Director                                         |       | June 29, 2006 |
| Jeffrey  M. Heller      |     |                                             |       |               |
| *                       |     | Director                                         |       | June 29, 2006 |
| Rowland T.  Moriarty    |     |                                             |       |               |

 

RobertSulentic, by signing his name hereto, does hereby sign this Annual Report onForm 10-K/A on behalf of each of the above-named directors andofficers of the Company on the date indicated below, pursuant to powers ofattorney executed by each of such directors and officers and contemporaneouslyfiled herewith with the Commission.
| *By:   | /s/ ROBERT E. SULENTIC |   |   |   | June 29,  2006 |
|--------|------------------------|--------|--------|--------|---------------------|
|   | Robert E.  Sulentic    |   |   |   |                |
|   | *Attorney-in-fact*     |   |   |   |                |

 

29

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**Exhibit Index**
|   3.1(1)    |   | Certificate of Incorporation of the Company                                                                                                                                               |
|-----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   3.2(1)    |   | Bylaws of the Company                                                                                                                                                                     |
|   3.2.1(5)  |   | First Amendment to Bylaws of the Company                                                                                                                                                  |
|   3.2.2(9)  |   | Second Amendment to Bylaws of the Company                                                                                                                                                 |
|   3.2.3(11) |   | Third Amendment to Bylaws of the Company                                                                                                                                                  |
|   4.1(1)    |   | Form of certificate for shares of Common Stock  of the Company                                                                                                                       |
| 10.1(16)              |   | Credit Agreement, dated June 28, 2005, among  the Company, Bank of America, N.A. as administrative agent, swing line lender  and issuing bank, and the other lender parties thereto. |
| 10.1.1(18)            |   | First Amendment of Credit Agreement dated  February 22, 2006, between the Company and Bank of America, N.A.                                                                          |
| 10.2(1)               |   | Form of License Agreement among the Company and  CF98                                                                                                                                |
| 10.2.1(8)             |   | First Amendment to License Agreement dated  July 31, 2002, between the Company and CF98                                                                                              |
| 10.3(14)              |   | Form of Indemnification Agreement, with  schedule of signatures                                                                                                                      |
| 10.4(1)               |   | Predecessor Company’s 1997 Stock Option Plan                                                                                                                                         |
| 10.5(1)               |   | Company’s Long-Term Incentive Plan                                                                                                                                                   |
| 10.5.1(2)             |   | Amendment No. 1 to Long-Term Incentive  Plan                                                                                                                                         |
| 10.5.2(9)             |   | Second Amendment to Long-Term Incentive Plan                                                                                                                                              |
| 10.6(1)               |   | Company’s 1995 Profit Sharing Plan                                                                                                                                                   |
| 10.7(3)               |   | Company’s Employee Stock Purchase Plan                                                                                                                                               |
| 10.7.1(4)             |   | First Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                                       |
| 10.7.2(6)             |   | Second Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                                      |
| 10.7.3(7)             |   | Third Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                                       |
| 10.7.4(10)            |   | Fourth Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                                      |
| 10.7.5(10)            |   | Fifth Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                                       |
| 10.7.6(15)            |   | Sixth Amendment to the Company’s Employee Stock  Purchase Plan                                                                                                                       |
| 10.8(1)               |   | Form of Stockholders’ Agreement among the  Company, Crow Family Partnership L.P., CFH Trade-Names, L.P., J.  McDonald Williams and certain other signatories thereto            |
| 10.9(10)              |   | Employment Agreement dated as of October 17,  2003, between the Company and Robert E. Sulentic                                                                                       |
| 10.9.1(12)            |   | Amendment to Employment Agreement dated as of  April 6, 2004, between the Company and Robert E. Sulentic                                                                             |
| 10.9.2(17)            |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and Robert E. Sulentic                                                                          |
| 10.10(10)             |   | Employment Agreement dated as of October 17,  2003, between the Company and Derek R. McClain                                                                                         |
| 10.10.1(12)           |   | Amendment to Employment Agreement dated as of  April 6, 2004, between the Company and Derek R. McClain                                                                               |
| 10.10.2(17)           |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and Derek R. McClain                                                                            |
| 10.11(10)             |   | Employment Agreement dated as of October 17,  2003, between the Company and James R. Groch                                                                                           |
| 10.11.1(12)           |   | Amendment to Employment Agreement dated as of  April 6, 2004, between the Company and James R. Groch                                                                                 |
| 10.11.2(17)           |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and James R. Groch                                                                              |
| 10.12(17)             |   | Amended and Restated Employment Agreement dated as  of October 17, 2005, between the Company and Michael J. Lafitte                                                                  |

30

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| 10.13(11)   |   | Employment Agreement dated as of March 2, 2004,  between the Company and John A. Stirek                                                                           |
|-------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.13.1(12) |   | Amendment to Employment Agreement dated as of  April 6, 2004, between the Company and John A. Stirek                                                              |
| 10.13.2(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and John A. Stirek                                                           |
| 10.14(17)   |   | Amended and Restated Employment Agreement dated as  of October 17, 2005, between the Company and William F. Concannon                                             |
| 10.15(12)   |   | Employment Agreement dated as of April 6, 2004,  between the Company and T. Christopher Roth                                                                      |
| 10.15.1(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and T. Christopher Roth                                                      |
| 10.16(12)   |   | Employment Agreement dated as of April 27,  2004, between the Company and Diane Paddison                                                                          |
| 10.16.1(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and Diane Paddison                                                           |
| 10.17(13)   |   | Employment Agreement dated as of September 28,  2004, between the Company and Matthew S. Khourie                                                             |
| 10.17.1(17) |   | Amendment to Employment Agreement dated as of  October 17, 2005, between the Company and Matthew S. Khourie                                                       |
| 14.1(11)    |   | Code of Business Conduct and Ethics                                                                                                                                    |
| 21.1(19)    |   | Subsidiaries of the Company                                                                                                                                            |
| 23.1(19)    |   | Consent of Ernst & Young LLP                                                                                                                                  |
| 23.2(19)    |   | Consent of Ernst & Young LLP                                                                                                                                  |
| 24.1(19)    |   | Power of Attorney for Derek R. McClain                                                                                                                                 |
| 24.2(19)    |   | Power of Attorney for Arlin E. Gaffner                                                                                                                                 |
| 24.3(19)    |   | Power of Attorney for Curtis F. Feeny                                                                                                                                  |
| 24.4(19)    |   | Power of Attorney for Michael A. Moses                                                                                                                                 |
| 24.5(19)    |   | Power of Attorney for J. McDonald Williams                                                                                                                             |
| 24.6(19)    |   | Power of Attorney for William F. Concannon                                                                                                                             |
| 24.7(19)    |   | Power of Attorney for James R. Erwin                                                                                                                                   |
| 24.8(19)    |   | Power of Attorney for Jeffrey M. Heller                                                                                                                                |
| 24.9(19)    |   | Power of Attorney for Rowland T. Moriarty                                                                                                                              |
| 24.10(19)   |   | Power of Attorney for Robert E. Sulentic                                                                                                                               |
| 31.1        |   | Certification by the Chief Executive Officer of the  Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                            |
| 31.2        |   | Certification by the Chief Financial Officer of the  Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                            |
| 32.1(19)    |   | Certification by the Chief Executive Officer of the  Company Pursuant to 18 U.S.C. §1350, adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |
| 32.2(19)    |   | Certification by the Chief Financial Officer of the  Company Pursuant to 18 U.S.C. §1350, adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |

----

(1)                Previously filedas an exhibit to the Company’s Registration Statement on Form S-1(File Number 333-34859) filed with the Securities and ExchangeCommission on September 3, 1997 and incorporated herein by reference.

(2)                Previously filedas an exhibit to the Company’s Form S-8 (File Number 333-50585)filed with the Securities and Exchange Commission on June 24, 1999 andincorporated herein by reference.

(3)                Previously filedas an exhibit to the Company’s Form S-8 (File Number 333-50579)filed with the Securities and Exchange Commission on April 21, 1998 andincorporated herein by reference.

31

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(4)                 Previously filedas an exhibit to the Company’s Form S-8 (File Number 333-50579)filed with the Securities and Exchange Commission on June 24, 1999 andincorporated herein by reference.

(5)                Previously filedas an exhibit to the Company’s Form 10-Q filed with the Securitiesand Exchange Commission on August 11, 2000 and incorporated herein byreference.

(6)                Previously filedas an exhibit to the Company’s Form 10-K filed with the Securitiesand Exchange Commission on March 29, 2001 and incorporated herein byreference.

(7)                Previously filedas an exhibit to the Company’s Form S-8 (File Number 333-62884)filed with the Securities and Exchange Commission on June 13, 2001 andincorporated herein by reference.

(8)                Previously filedas an exhibit to the Company’s Form 10-Q filed with the Securitiesand Exchange Commission on August 14, 2002 and incorporated herein byreference.

(9)                Previously filedas an exhibit to the Company’s Form 10-K filed with the Securitiesand Exchange Commission on March 31, 2003 and incorporated herein byreference.

(10)           Previously filed as anexhibit to the Company’s Form 10-Q filed with the Securities andExchange Commission on November 14, 2003 and incorporated herein byreference.

(11)           Previously filed as anexhibit to the Company’s Form 10-K filed with the Securities andExchange Commission on March 15, 2004 and incorporated herein byreference.

(12)           Previously filed as anexhibit to the Company’s Form 10-Q filed with the Securities andExchange Commission on May 10, 2004 and incorporated herein by reference.

(13)           Previously filed as anexhibit to the Company’s Form 8-K filed with the Securities andExchange Commission on September 29, 2004 and incorporated herein byreference.

(14)           Previously filed as anexhibit to the Company’s Form 10-Q filed with the Securities andExchange Commission on November 9, 2004 and incorporated herein byreference.

(15)           Previously filed as anexhibit to the Company’s Form S-8 (File Number 333-121053)filed with the Securities and Exchange Commission on December 7, 2004 andincorporated herein by reference.

(16)      Previously filed as an exhibit to the Company’s Form 8-Kfiled with the Securities and Exchange Commission on July 1, 2005 andincorporated herein by reference.

(17)      Previously filed as an exhibit to the Company’s Form 8-Kfiled with the Securities and Exchange Commission on October 20, 2005 andincorporated herein by reference.

(18)      Previously filed as Exhibit 10.1 to theCompany’s Form 8-K filed with the Securities and Exchange Commissionon February 23, 2006 and incorporated herein by reference.

(19)           Previously filed as anexhibit to the Company’s Form 10-K filed with the Securities and ExchangeCommission on March 15, 2006 and incorporated herein by reference.

(b)          The exhibits required byItem 601 of Regulation S-K are filed as part of this Report.

(c)           The required financialstatements and financial schedule were filed as part of the Company’s Form 10-Kfiled on March 15, 2006.

32

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