SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 2013
BGC Partners, Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction
499 Park Avenue, New York, NY 10022
(Address of principal executive offices)
Registrants telephone number, including area code: (212) 610-2200
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On August 1, 2013, BGC Partners, Inc. (the Registrant, we, us, BGC Partners, BGC, or the Company) issued a press release announcing its financial results for the quarter ended June 30, 2013. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Except as indicated below, the information in Item 2.02 of this Current Report on Form 8-K and the Exhibit attached to this Current Report on Form 8-K are being furnished under Item 2.02 of Form 8-K. Such information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 (the Securities Act) or the Exchange Act, except as expressly set forth by specific reference in such filing and as set forth below.
In the press release, the Registrant uses non-GAAP financial measures, including revenues for distributable earnings, pre-tax distributable earnings 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 subsidiaries. BGC Partners 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 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, net income (loss) for fully diluted shares, and fully diluted earnings (loss) per share, all prepared in accordance with GAAP, distributable earnings calculations primarily exclude certain non-cash compensation and other expenses which generally do not involve the receipt or outlay of cash by the Company, which do not dilute existing stockholders, and which do not have economic consequences, 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.
Revenues for distributable earnings are defined as GAAP revenues excluding the impact of BGC Partners, Inc.s non-cash earnings or losses related to its equity investments, such as in Aqua Securities, L.P. and ELX Futures, L.P., and its holding company general partner, ELX Futures Holdings LLC. Revenues for distributable earnings include the collection of receivables which would have been recognized for GAAP other than for the effect of acquisition accounting. Revenues for distributable earnings also exclude certain one-time or unusual gains that are recognized under GAAP, because the Company does not believe such gains are reflective of its ongoing, ordinary operations.
Pre-tax distributable earnings are defined as GAAP income (loss) from operations before income taxes excluding items that are primarily non-cash, non-dilutive, and non-economic, such as:
Non-cash stock-based equity compensation charges for REUs granted or issued prior to the merger of BGC Partners, Inc. with and into eSpeed, as well as post-merger non-cash, non-dilutive equity-based compensation related to partnership unit exchange or conversion.
Allocations of net income to founding/working partner and other limited partnership units, including REUs, RPUs, PSUs, LPUs, and PSIs.
Non-cash asset impairment charges, if any.
Distributable earnings calculations also exclude charges related to purchases, cancellations or redemptions of partnership interests and certain unusual, one-time or non-recurring items, if any.
Compensation and employee benefits expense for distributable earnings will also include broker commission payouts relating to the aforementioned collection of receivables.
BGCs definition of distributable earnings also excludes certain gains and charges with respect to acquisitions, dispositions, or resolutions of litigation. This exclusion pertains to the one-time gain related to the NASDAQ OMX transaction. Management believes that excluding these gains and charges best reflects the operating performance of BGC. However, because NASDAQ OMX is expected to pay BGC in an equal amount of stock on a regular basis for 15 years as part of the transaction, the payments associated with BGCs receipt of such stock are expected to be included in the Companys calculation of distributable earnings. To make quarter-to-quarter comparisons more meaningful, one-quarter of the annual contingent earn-out amount will be included in the Companys calculation of distributable earnings each quarter as other revenues.
Since distributable earnings are calculated on a pre-tax basis, management intends to also report post-tax distributable earnings and post-tax distributable earnings per fully diluted share:
Post-tax distributable earnings are defined as pre-tax distributable earnings adjusted to assume that all pre-tax distributable earnings were taxed at the same effective rate.
Post-tax distributable earnings per fully diluted share are defined as post-tax distributable earnings divided by the weighted-average number of fully diluted shares for the period.
BGCs distributable earnings per share calculations assume either that:
The fully diluted share count includes the shares related to the 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.
Each quarter, the dividend to common stockholders is expected to be determined by the Companys Board of Directors with reference to post-tax distributable earnings per fully diluted share. In addition to the Companys 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, including REUs, RPUs, LPUs, PSUs and PSIs, and to Cantor for its noncontrolling interest. The amount of all of these payments is expected to be determined using the above definition of pre-tax distributable earnings per share.
Certain employees who are holders of RSUs are granted pro-rata payments equivalent to the amount of dividends paid to common stockholders. Under GAAP, a portion of the dividend equivalents on RSUs is required to be taken as a compensation charge in the period paid. However, to the extent that they represent cash payments made from the prior periods distributable earnings, they do not dilute existing stockholders and are therefore excluded from the calculation of distributable earnings.
Distributable earnings is not meant to be an exact measure of cash generated by operations and available for distribution, nor should it be considered in isolation or as an alternative to cash flow from operations or GAAP net income (loss). The Company views distributable earnings as a metric that is not necessarily indicative of liquidity or the cash available to fund its operations.
Pre- and post-tax distributable earnings are not intended to replace the Companys 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 Companys financial condition and results of operations. Management believes that distributable earnings and the GAAP measures of financial performance should be considered together.
Management does not anticipate providing an outlook for GAAP revenues, income (loss) from operations before income taxes, net income (loss) for fully diluted shares, and fully diluted earnings (loss) per share, because the items previously identified as excluded from pre-tax distributable earnings and post-tax distributable earnings are difficult to forecast. Management will instead provide its outlook only as it relates to revenues for distributable earnings, pre-tax distributable earnings and post-tax distributable earnings.
For more information on this topic, please see the tables in the attached press release entitled Reconciliation of Revenues Under GAAP and Distributable Earnings, and Reconciliation of GAAP Income to Distributable Earnings which provides a summary reconciliation between pre- and post-tax distributable earnings and the corresponding GAAP measures for the Company in the periods discussed in the attached press release.
Adjusted EBITDA Defined
BGC also provides an additional non-GAAP financial measure, adjusted EBITDA, which it defines as GAAP income from operations before income taxes, adjusted to add back interest expense as well as the following non-cash items:
Employee loan amortization;
Fixed asset depreciation and intangible asset amortization;
Non-cash impairment charges;
Charges relating to grants of exchangeability to limited partnership interests;
Charges related to redemption of units;
Charges related to issuance of restricted shares; and
Non-cash earnings or losses related to BGCs equity investments, such as in Aqua Securities, L.P. and ELX Futures, L.P., and its holding company general partner, ELX Futures Holdings LLC.
The Companys management believes that this measure is useful in evaluating BGCs operating performance compared to that of its competitors, because the calculation of adjusted EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which would include impairment charges of goodwill and intangibles created from acquisitions. Such items may vary for different companies for reasons unrelated to overall operating performance. As a result, the Companys management uses these measures to evaluate operating performance and for other discretionary purposes. BGC believes that adjusted EBITDA is useful to investors to assist them in getting a more complete picture of the Companys financial results and operations.
Since adjusted EBITDA is not a recognized measurement under GAAP, when analyzing BGCs operating performance, investors should use adjusted EBITDA in addition to GAAP measures of net income. Because not all companies use identical EBITDA calculations, the Companys presentation of adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow, because adjusted EBITDA does not consider certain cash requirements such as tax and debt service payments.
For a reconciliation of adjusted EBITDA to GAAP income from operations before income taxes, the most comparable financial measure calculated and presented in accordance with GAAP, see the section of the attached press release entitled Reconciliation of GAAP Income to Adjusted EBITDA (and Comparison to Pre-Tax Distributable Earnings).
The information set forth under the heading Dividend Declaration and Repurchase Authorization set forth in Exhibit 99.1 to this Current Report on Form 8-K is being filed under Item 2.02 of Form 8-K and shall be deemed incorporated by reference in any filing under the Securities Act, except as expressly set forth by specific reference in such filing. All other information set forth in Exhibit 99.1 is being furnished.
ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
On July 30, 2013, at a meeting of the Board of Directors (the Board) of the Company, Dr. Linda A. Bell was unanimously appointed to serve as a member of the Board for a term to expire at the 2014 Annual Meeting of the Stockholders of the Company, or until her successor is earlier elected and qualified. Dr. Bell was also appointed to the Audit and Compensation Committees of the Board.
Dr. Bell, age 54, has served as the Provost and Dean of the Faculty at Barnard College, Columbia University since 2012, where she is also a Professor of Economics. Previous to joining Barnard, Dr. Bell was the Provost and John B. Hurford Professor of Economics at Haverford College from 2007 to 2012 and a member of the faculty since 1992. Prior to her tenure at Haverford, Dr. Bell held visiting faculty appointments at Stanford University, the University of California, San Diego, the John F. Kennedy School of Government at Harvard University, the Woodrow Wilson School of Public Administration at Princeton University, and the Stern School of Business Administration at New York University.
Dr. Bell has also served as a research fellow at the Institute for the Study of Labor (IZA) in Bonn, Germany since 2003 and as a senior consultant for the labor practice group of the National Economic Research Associates since 2006. In addition, she served on the Board of Directors and Regulatory Oversight Committee of ELX Futures, LLC from 2009 to July 2013. Previously, Dr. Bell was a senior economist in the research department of the Federal Reserve Bank of New York and project faculty on a Danish Research Council funded initiative at the Aarhus Business School in Denmark. Dr. Bell has also served as a consultant to the World Bank and the US Department of Labor. In addition to her academic work and teaching, she has been active in the American Association of University Professors, first in the capacity as Chair of the Committee on Faculty Compensation, where she authored the Associations Annual Faculty Compensation Report from 1997-2001, and as a National Council Representative from 2003-2006.
Dr. Bell received a Ph.D. in Economics from Harvard University and a Bachelors of Arts degree in Economics from the University of Pennsylvania, where she was a University Scholar.
|FINANCIAL STATEMENTS AND EXHIBITS
|BGC Partners, Inc. press release dated August 1, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
|BGC Partners, Inc.
|Date: August 1, 2013
|Howard W. Lutnick
|Chairman and Chief Executive Officer
[Signature Page to Form 8-K, dated August 1, 2013, regarding the Companys second quarter 2013 Earnings Release, and the Appointment of a New Director]
|BGC Partners, Inc. press release dated August 1, 2013