
3.	BUSINESS SEGMENTS

We manage and report our operations as four business segments:

The three geographic regions of RES including:

(1) Americas,

(2) Europe, Middle East and Africa ("EMEA"), and

(3) Asia Pacific;

and

(4) LaSalle, which offers investment management services on a global basis.

Each geographic region offers our full range of real estate services, including agency leasing and tenant representation, capital markets and hotels, property management, facilities management, project and development management, energy management and sustainability, construction management, and advisory, consulting and valuation services. We define "property management" to mean services we provide to non-occupying property investors and "facilities management" to represent services we provide to owner-occupiers. LaSalle provides investment management services to institutional investors and high-net-worth individuals.

Operating income represents total revenue less direct and allocated indirect expenses. We allocate all indirect expenses to our segments, other than interest and income taxes, as nearly all expenses incurred benefit one or more of the segments. Allocated expenses primarily consist of corporate global overhead, which we allocate to the business segments based on the budgeted operating expenses of each segment.

For segment reporting, (a) gross contract costs and (b) net non-cash mortgage servicing rights ("MSR") and mortgage banking derivative activity are both excluded from revenue in determining "fee revenue". Gross contract costs are excluded from operating expenses in determining "fee-based operating expenses." Excluding these costs from revenue and expenses results in a net presentation which we believe more accurately reflects how we manage our expense base, operating margins, and performance. In addition, our measure of segment results excludes Restructuring and acquisition charges.

We have reclassified certain prior year amounts to conform to the current presentation. Specifically during the first quarter of 2017, we revised our methodology for allocating overhead expenses and certain costs associated with our facilities management platform in EMEA to our reporting segments. Prior year amounts have been reclassified to conform to the current presentation. Reclassifications have not been material and have not affected reported net income or consolidated results.

The Chief Operating Decision Maker of JLL measures and evaluates the segment results excluding (a) gross contract costs, (b) net non-cash MSR and mortgage banking derivative activity, and (c) Restructuring and acquisition charges. As of September 30, 2017, we define the Chief Operating Decision Maker collectively as our Global Executive Board, which is comprised of the following:


•	Global Chief Executive Officer


•	Global Chief Financial Officer


•	Chief Executive Officers of each of our four business segments


•	Global Chief Executive Officer of Corporate Solutions


•	Global Head of Capital Markets


•	Global Chief Human Resources Officer

Summarized financial information by business segment is as follows.



	Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)	2017			2016		2017			2016
Real Estate Services
Americas
Revenue	$	796.7		771.1		$	2,311.3		2,047.5
Gross contract costs	(40.4		)	(52.6	)	(131.4		)	(144.8	)
Net non-cash MSR and mortgage banking derivative activity	(7.1		)	(2.9	)	(11.1		)	(2.3	)
Total fee revenue	749.2			715.6		2,168.8			1,900.4
Operating expenses:
Compensation, operating and administrative expenses	699.1			686.0		2,054.0			1,842.2
Depreciation and amortization	24.2			21.3		71.4			58.4
Total segment operating expenses	723.3			707.3		2,125.4			1,900.6
Gross contract costs	(40.4		)	(52.6	)	(131.4		)	(144.8	)
Total fee-based segment operating expenses	682.9			654.7		1,994.0			1,755.8
Segment operating income	$	73.4		63.8		$	185.9		146.9
Equity earnings	0.1			0.1		0.5			0.8
Total segment income	$	73.5		63.9		$	186.4		147.7

EMEA
Revenue	$	635.2		522.7		$	1,727.1		1,373.4
Gross contract costs	(171.6		)	(146.2	)	(464.7		)	(407.3	)
Total fee revenue	463.6			376.5		1,262.4			966.1
Operating expenses:
Compensation, operating and administrative expenses	621.4			513.9		1,712.3			1,348.9
Depreciation and amortization	11.6			9.6		33.0			25.6
Total segment operating expenses	633.0			523.5		1,745.3			1,374.5
Gross contract costs	(171.6		)	(146.2	)	(464.7		)	(407.3	)
Total fee-based segment operating expenses	461.4			377.3		1,280.6			967.2
Segment operating income (loss)	$	2.2		(0.8	)	$	(18.2	)	(1.1	)
Equity losses	—			—		—			(0.1	)
Total segment income (loss)	$	2.2		(0.8	)	$	(18.2	)	(1.2	)

Continued: Summarized financial information by business segment is as follows.



	Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)	2017			2016		2017			2016
Real Estate Services
Asia Pacific
Revenue	$	413.0		331.1		$	1,095.4		916.9
Gross contract costs	(103.3		)	(59.2	)	(272.5		)	(183.4	)
Total fee revenue	309.7			271.9		822.9			733.5
Operating expenses:
Compensation, operating and administrative expenses	383.6			309.3		1,033.7			869.0
Depreciation and amortization	5.2			4.2		15.7			12.4
Total segment operating expenses	388.8			313.5		1,049.4			881.4
Gross contract costs	(103.3		)	(59.2	)	(272.5		)	(183.4	)
Total fee-based segment operating expenses	285.5			254.3		776.9			698.0
Segment operating income	$	24.2		17.6		$	46.0		35.5
Equity earnings	0.9			0.5		2.3			0.5
Total segment income	$	25.1		18.1		$	48.3		36.0

LaSalle
Revenue	$	102.1		80.3		$	263.1		307.8
Operating expenses:
Compensation, operating and administrative expenses	79.6			71.1		216.6			236.8
Depreciation and amortization	0.8			0.8		2.2			2.1
Total segment operating expenses	80.4			71.9		218.8			238.9
Segment operating income	$	21.7		8.4		$	44.3		68.9
Equity earnings	11.6			4.9		29.9			26.5
Total segment income	$	33.3		13.3		$	74.2		95.4

Segment Reconciling Items
Total fee revenue	$	1,624.6		1,444.3		$	4,517.2		3,907.8
Gross contract costs	315.3			258.0		868.6			735.5
Net non-cash MSR and mortgage banking derivative activity	7.1			2.9		11.1			2.3
Total revenue	$	1,947.0		1,705.2		$	5,396.9		4,645.6
Total segment operating expenses before restructuring and acquisition charges	1,825.5			1,616.2		5,138.9			4,395.4
Operating income before restructuring and acquisition charges	$	121.5		89.0		$	258.0		250.2
Restructuring and acquisition charges	3.4			18.0		13.3			35.9
Operating income	$	118.1		71.0		$	244.7		214.3