NEW YORK, Sept. 30, 2016 /PRNewswire/ -- BGC Partners, Inc.
(NASDAQ: BGCP) ("BGC Partners," "BGC," or the "Company"), a leading
global brokerage company servicing the financial and real estate
markets, today updated its outlook with respect to its consolidated
financial results for the third quarter of 2016.
The Company now expects its revenues for the period to be
slightly below the low end of the range of its previously stated
guidance, and for its pre-tax distributable earnings to be around
the mid-point of the range.
BGC plans to issue an advisory press release regarding the
availability of its consolidated quarterly financial results by
8:00 a.m. ET on Thursday, October 27, 2016. Please visit
http://ir.bgcpartners.com for more details regarding this planned
release and the subsequent conference call.
Distributable Earnings Defined
BGC Partners uses
non-GAAP financial measures including, but not limited to, "pre-tax
distributable earnings before noncontrolling interest in
subsidiaries and taxes" and "post-tax distributable earnings",
which are supplemental measures of operating performance that are
used by management to evaluate the financial performance of the
Company and its consolidated subsidiaries. BGC believes that
distributable earnings best reflect the operating earnings
generated by the Company on a consolidated basis and are the
earnings which management considers available for, among other
things, distribution to BGC Partners, Inc. and its common
stockholders, as well as to holders of BGC Holdings partnership
units during any period.
As compared with "income (loss) from operations before income
taxes and noncontrolling interest in subsidiaries", and "net income
(loss) per fully diluted share", all prepared in accordance with
GAAP, distributable earnings calculations primarily exclude certain
non-cash compensation and other expenses that generally do not
involve the receipt or outlay of cash by the Company and/or which
do not dilute existing stockholders, as described below. In
addition, distributable earnings calculations exclude certain gains
and charges that management believes do not best reflect the
ordinary operating results of BGC.
Adjustments Made to Calculate Pre-Tax Distributable
Earnings
Pre-tax distributable earnings are defined as GAAP
income (loss) from operations before income taxes and
noncontrolling interest in subsidiaries excluding items, such
as:
- Non-cash equity-based compensation charges related to limited
partnership unit exchange or conversion.
- Non-cash asset impairment charges, if any.
- Non-cash compensation charges for items granted or issued
pre-merger with respect to certain mergers or acquisitions by BGC
Partners, Inc. To date, these mergers have only included those with
and into eSpeed, Inc. and the back-end merger with GFI Group
Inc.
Distributable earnings calculations also exclude certain
unusual, one-time or non-recurring items, if any.
These charges are excluded from distributable earnings because
the Company views excluding such charges as a better reflection of
the ongoing, ordinary operations of BGC.
In addition to the above items, allocations of net income to
founding/working partner and other limited partnership units are
excluded from calculations of pre-tax distributable earnings.
Such allocations represent the pro-rata portion of pre-tax earnings
available to such unit holders. These units are in the fully
diluted share count, and are exchangeable on a one-to-one basis
into common stock. As these units are exchanged to common shares,
unit holders become entitled to cash dividends rather than cash
distributions. The Company views such allocations as
intellectually similar to dividends on common shares. Because
dividends paid to common shares are not an expense under GAAP,
management believes similar allocations of income to unit holders
should also not be included when calculating distributable earnings
performance measures.
BGC's definition of distributable earnings also excludes certain
gains and charges with respect to acquisitions, dispositions, or
resolutions of litigation. This exclusion includes the
one-time gains related to the Nasdaq and Trayport
transactions. Management believes that excluding such gains
and charges also best reflects the ongoing operating performance of
BGC.
However, the payments associated with BGC's expected annual
receipt of Nasdaq stock and related mark-to-market gains or losses
are anticipated to be included in the Company's calculation of
distributable earnings for the following reasons:
- Nasdaq is expected to pay BGC in an equal amount of stock on a
regular basis for a 15 year period beginning in 2013 as part of
that transaction;
- The Nasdaq earn-out largely replaced the generally recurring
quarterly earnings BGC generated from eSpeed; and
- The Company intends to pay dividends and distributions to
common stockholders and/or unit holders based on all other income
related to the receipt of the earn-out.
To make period-to-period comparisons more meaningful,
one-quarter of each annual Nasdaq contingent earn-out amount, as
well as gains or losses with respect to associated mark-to-market
movements and/or hedging, will be included in the Company's
calculation of distributable earnings each quarter as "other
income."
The calculation of distributable earnings from the fourth
quarter of 2015 through the second quarter of 2016 has also
excluded the realized and unrealized mark-to-market gains or losses
related to the shares of Intercontinental Exchange, Inc. received
in connection with the Trayport sale. Beginning with the
third quarter of 2016, the Company intends to treat gains or losses
related to mark-to-market movements and/or hedging with respect to
any remaining ICE shares in a consistent manner with that of the
treatment of Nasdaq shares when calculating distributable
earnings.
Investors and analysts should note that, due to the large gain
recorded with respect to the Trayport sale in December, 2015, and
the closing of the back-end merger with GFI in January, 2016,
non-cash charges related to the amortization of intangibles with
respect to acquisitions will be excluded from the calculation of
pre-tax distributable earnings.
Adjustments Made to Calculate Post-Tax Distributable
Earnings
Since distributable earnings are calculated on a
pre-tax basis, management intends to also report post-tax
distributable earnings to fully diluted shareholders.
Post-tax distributable earnings to fully diluted shareholders are
defined as pre-tax distributable earnings, less noncontrolling
interest in subsidiaries, and reduced by the provision for taxes as
described below.
The Company's calculation of the provision for taxes on an
annualized basis starts with GAAP income tax provision, adjusted to
reflect tax-deductible items. Management uses this non-GAAP
provision for taxes in part to help it to evaluate, among other
things, the overall performance of the business, make decisions
with respect to the Company's operations, and to determine the
amount of dividends paid to common shareholders.
The provision for taxes with respect to distributable earnings
adjusts the GAAP equivalent figure to reflect tax-deductible items
including limited partnership unit exchange or conversion, employee
loan amortization, and certain other tax deductions taken or
expected to be taken.
BGC incurs income tax expenses based on the location, legal
structure and jurisdictional taxing authorities of each of its
subsidiaries. Certain of the Company's entities are taxed as
U.S. partnerships and are subject to the Unincorporated Business
Tax ("UBT") in New York City. Any U.S. federal and state
income tax liability or benefit related to the partnership income
or loss, with the exception of UBT, rests with the unit holders
rather than with the partnership entity. The Company's
consolidated financial statements include U.S. federal, state and
local income taxes on the Company's allocable share of the U.S.
results of operations. Outside of the U.S., BGC operates
principally through subsidiary corporations subject to local income
taxes. For these reasons, taxes for distributable earnings
are presented to show the tax provision the consolidated Company
would expect to pay if 100 percent of earnings were taxed at global
corporate rates.
Calculations of Pre-tax and Post-Tax Distributable Earnings
per Share
BGC's distributable earnings per share
calculations assume either that:
- The fully diluted share count includes the shares related to
any dilutive instruments, such as the Convertible Senior Notes, but
excludes the associated interest expense, net of tax, when the
impact would be dilutive; or
- The fully diluted share count excludes the shares related to
these instruments, but includes the associated interest expense,
net of tax.
The share count for distributable earnings excludes shares
expected to be issued in future periods but not yet eligible to
receive dividends and/or distributions.
Each quarter, the dividend to BGC's common stockholders is
expected to be determined by the Company\'s Board of Directors with
reference to a number of factors, including post-tax distributable
earnings per fully diluted share. In addition to the
Company's quarterly dividend to common stockholders, BGC Partners
expects to pay a pro-rata distribution of net income to BGC
Holdings founding/working partner and other limited partnership
units, as well as to Cantor for its non-controlling interest.
The amount of this net income, and therefore of these payments, is
expected to be determined using the above definition of pre-tax
distributable earnings per share.
Other Matters with Respect to Distributable Earnings
The term "distributable earnings" should not be considered in
isolation or as an alternative to GAAP net income (loss). The
Company views distributable earnings as a metric that is not
indicative of liquidity or the cash available to fund its
operations, but rather as a performance measure.
Pre- and post-tax distributable earnings are not intended to
replace the Company's presentation of GAAP financial results.
However, management believes that they help provide investors with
a clearer understanding of BGC Partners' financial performance and
offer useful information to both management and investors regarding
certain financial and business trends related to the Company's
financial condition and results of operations. Management
believes that distributable earnings and the GAAP measures of
financial performance should be considered together.
BGC anticipates providing forward-looking quarterly guidance for
GAAP revenues and for certain distributable earnings measures from
time to time. However, the Company does not anticipate
providing a quarterly outlook for other GAAP results. This is
because certain GAAP items, which are excluded from distributable
earnings, are difficult to forecast with precision before the end
of each quarter. The Company therefore believes that it is
not possible to forecast quarterly GAAP results or to
quantitatively reconcile GAAP results to non-GAAP results with
sufficient precision unless BGC makes unreasonable
efforts.
The items that are difficult to predict on a quarterly basis
with precision and which can have a material impact on the
Company's GAAP results include, but are not limited, to the
following:
- Allocations of net income and grants of exchangeability to
limited partnership units and FPUs, which are determined at the
discretion of management throughout and up to the period-end.
- The impact of certain marketable securities, as well as any
gains or losses related to associated non-cash mark-to-market
movements and/or hedging. These items are calculated using
period-end closing prices.
- Non-cash asset impairment charges, which are calculated and
analyzed based on the period-end values of the underlying assets.
These amounts may not be known until after period-end.
- Acquisitions, dispositions and/or resolutions of litigation
which are fluid and unpredictable in nature.
For more information on this topic, please see certain tables in
the most recent BGC financial results press release including
"Reconciliation of GAAP Income (Loss) to Distributable
Earnings". These tables provide summary reconciliations
between pre- and post-tax distributable earnings and the
corresponding GAAP measures for the Company.
About BGC Partners, Inc.
BGC Partners is a leading
global brokerage company servicing the financial and real estate
markets. BGC owns GFI Group Inc., a leading intermediary and
provider of trading technologies and support services to the global
OTC and listed markets. The Company's Financial Services
offerings include fixed income securities, interest rate swaps,
foreign exchange, equities, equity derivatives, credit derivatives,
commodities, futures, and structured products. BGC provides a
wide range of services, including trade execution, broker-dealer
services, clearing, trade compression, post trade, information, and
other services to a broad range of financial and non-financial
institutions. Through brands including FENICS, BGC Trader,
and BGC Market Data, BGC offers financial technology solutions,
market data, and analytics related to numerous financial
instruments and markets. Real Estate Services are offered
through brands including Newmark Grubb
Knight Frank, Newmark Cornish
& Carey, ARA, Computerized Facility Integration, Landauer
Valuation & Advisory, and Excess Space. Under these
names, the Company provides a wide range of commercial real estate
services, including leasing and corporate advisory, investment
sales and financial services, consulting, project and development
management, and property and facilities management. BGC's
customers include many of the world's largest banks,
broker-dealers, investment banks, trading firms, hedge funds,
governments, corporations, property owners, real estate developers,
and investment firms. BGC's common stock trades on the NASDAQ
Global Select Market under the ticker symbol (NASDAQ: BGCP).
BGC also has an outstanding bond issuance of Senior Notes due
June 15, 2042, which trade on the New
York Stock Exchange under the symbol (NYSE: BGCA). BGC
Partners is led by Chairman and Chief Executive Officer Howard W.
Lutnick. For more information, please visit
http://www.bgcpartners.com.
BGC, BGC Trader, GFI, FENICS, FENICS.COM, Capitalab,
Swaptioniser, Newmark, Grubb & Ellis, and Grubb are trademarks,
registered trademarks and/or service marks of BGC Partners, Inc.
and/or its affiliates. Knight Frank is a service mark of
Knight Frank (Nominees) Limited.
Discussion of Forward-Looking Statements about BGC
Partners
Statements in this document regarding BGC's
businesses that are not historical facts are "forward-looking
statements" that involve risks and uncertainties. Except as
required by law, BGC undertakes no obligation to release any
revisions to any forward-looking statements. For a discussion
of additional risks and uncertainties, which could cause actual
results to differ from those contained in the forward-looking
statements, see BGC's Securities and Exchange Commission filings,
including, but not limited to, the risk factors set forth in its
public filings, including the most recent Form 10-K and any updates
to such risk factors contained in subsequent Forms 10-Q or Forms
8-K.
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SOURCE BGC Partners, Inc.