BGC Partners, Inc.
Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Information
On May 26, 2021, Tower Bridge (One) Limited (the “Seller”), an indirect subsidiary of BGC Partners, Inc. (“BGC” or the “Company”), and BGC (as the Seller guarantor) entered into an Agreement (the “Purchase Agreement”) with Ardonagh Specialty Holdings 2 Limited (the “Buyer”) and The Ardonagh Group Limited (as the Buyer guarantor). The Purchase Agreement provides that, at closing, the Buyer will purchase the entire issued share capital of each of Ed Broking Group Limited and Besso Insurance Group Limited (each wholly owned subsidiaries of the Seller), for a purchase price of $500 million, subject to working capital and certain other closing adjustments, in cash to be paid at closing (the “Insurance Business Disposition”). These entities represent BGC’s insurance brokerage business. On November 1, 2021, the Company successfully completed the Insurance Business Disposition and, after closing adjustments, received approximately $535 million in gross cash proceeds from the Buyer, subject to limited post-closing adjustments. In addition, unvested equity and other awards previously granted by BGC to employees of its insurance brokerage business were converted into the right to receive a cash payment from BGC; a significant portion of these awards was 50% vested and paid in cash at closing, with the remaining 50% vesting and to be paid in cash two years after closing. The remaining portion of these awards will have been 100% vested and paid in cash by two years after the closing. The payments after closing are only made if the applicable employee remains an employee of the insurance brokerage business.
The following unaudited pro forma condensed consolidated financial information is presented in accordance with the rules specified by Article 11 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”) and has been prepared subject to the assumptions and adjustments as described in the notes thereto. Specifically, the unaudited pro forma condensed consolidated financial information set forth below reflects the effects of the Insurance Business Disposition on (i) BGC’s statement of financial condition as of June 30, 2021, as if the Insurance Business Disposition had occurred on that date, and (ii) BGC’s statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020, as if the Insurance Business Disposition had occurred on January 1, 2020. Management believes that the assumptions used and adjustments made are reasonable under the circumstances and given the information available.
The following unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not necessarily indicative of the financial condition or results of operations of the Company that would have occurred if the Insurance Business Disposition had occurred on the dates indicated, nor is it indicative of the future financial condition or results of operations of the Company. The unaudited pro forma condensed consolidated statements of operations also do not reflect the gain from the Insurance Business Disposition, the potential use of proceeds, potential actions to reduce corporate overhead, potential tax or hedging strategies in the Insurance Business Disposition. In addition, the unaudited pro forma condensed consolidated statements of operations do not include any adjustments with respect to certain expenses recorded that were related to non-recurring events both related and unrelated to the Insurance Business Disposition.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with:
•The accompanying notes to the unaudited pro forma condensed consolidated financial statements;
•BGC’s unaudited consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for
the period ended June 30, 2021;
the period ended June 30, 2021;
•BGC’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2020; and
year ended December 31, 2020; and
•The risks described under "Special Note on Forward-Looking Information" and under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, and any updates to those risks or new risks contained in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC.
Capitalized terms used and not defined in BGC’s unaudited pro forma condensed consolidated statement of financial condition as of June 30, 2021 and the accompanying notes thereto and in BGC’s unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2021 and the accompanying notes thereto have the meanings ascribed to them in BGC’s Quarterly Report on Form 10-Q for the period ended June 30, 2021 filed with the SEC. Capitalized terms used and not defined in BGC’s unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2020 and the accompanying notes thereto have the meanings ascribed to them in BGC’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
As of June 30, 2021
(in thousands, except per share data)
(unaudited)
BGC Partners, Inc. Historical (a) | Insurance Business Disposition Adjustments (b) | BGC Partners, Inc. Pro Forma | |||||||||||||||
Assets | |||||||||||||||||
Cash and cash equivalents | $ | 420,302 | $ | 497,408 | (1) | $ | 917,710 | ||||||||||
Cash segregated under regulatory requirements | 36,365 | — | 36,365 | ||||||||||||||
Securities owned | 49,222 | — | 49,222 | ||||||||||||||
Marketable securities | 360 | — | 360 | ||||||||||||||
Receivables from broker-dealers, clearing organizations, customers and related broker-dealers | 1,455,333 | — | 1,455,333 | ||||||||||||||
Accrued commissions and other receivables, net | 338,313 | — | 338,313 | ||||||||||||||
Loans, forgivable loans and other receivables from employees and partners, net | 370,800 | — | 370,800 | ||||||||||||||
Fixed assets, net | 204,531 | — | 204,531 | ||||||||||||||
Investments | 33,400 | — | 33,400 | ||||||||||||||
Goodwill | 487,434 | — | 487,434 | ||||||||||||||
Other intangible assets, net | 219,291 | — | 219,291 | ||||||||||||||
Receivables from related parties | 7,890 | — | 7,890 | ||||||||||||||
Other assets | 461,379 | — | 461,379 | ||||||||||||||
Assets held for sale | 1,048,859 | (1,048,859) | (2) (3) | — | |||||||||||||
Total assets | $ | 5,133,479 | $ | (551,451) | $ | 4,582,028 | |||||||||||
Liabilities, Redeemable Partnership Interest, and Equity | |||||||||||||||||
Short-term borrowings | $ | 5,997 | $ | — | $ | 5,997 | |||||||||||
Accrued compensation | 187,166 | 32,891 | (4) | 220,057 | |||||||||||||
Payables to broker-dealers, clearing organizations, customers and related broker-dealers | 1,305,743 | — | 1,305,743 | ||||||||||||||
Payables to related parties | 79,920 | 5,000 | (5) | 84,920 | |||||||||||||
Accounts payable, accrued and other liabilities | 652,366 | 39,700 | (6) | 692,066 | |||||||||||||
Notes payable and other borrowings | 1,243,248 | — | 1,243,248 | ||||||||||||||
Liabilities held for sale | 850,112 | (850,112) | (2) | — | |||||||||||||
Total liabilities | 4,324,552 | (772,521) | 3,552,031 | ||||||||||||||
Redeemable partnership interest | 19,582 | 4,277 | (7) | 23,859 | |||||||||||||
Equity | |||||||||||||||||
Stockholders’ equity: | |||||||||||||||||
Class A common stock, par value $0.01 per share | 4,169 | — | 4,169 | ||||||||||||||
Class B common stock, par value $0.01 per share | 459 | — | 459 | ||||||||||||||
Additional paid-in capital | 2,367,458 | — | 2,367,458 | ||||||||||||||
Treasury stock, at cost | (406,701) | — | (406,701) | ||||||||||||||
Retained deficit | (1,211,870) | 173,934 | (8) | (1,037,936) | |||||||||||||
Accumulated other comprehensive income (loss) | (30,605) | — | (30,605) | ||||||||||||||
Total stockholders’ equity | 722,910 | 173,934 | 896,844 | ||||||||||||||
Noncontrolling interest in subsidiaries | 66,435 | 42,859 | (8) | 109,294 | |||||||||||||
Total equity | 789,345 | 216,793 | 1,006,138 | ||||||||||||||
Total liabilities, redeemable partnership interest, and equity | $ | 5,133,479 | $ | (551,451) | $ | 4,582,028 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2021
(in thousands, except per share data)
(unaudited)
BGC Partners, Inc. Historical (c) | Insurance Business Disposition Adjustments (d) | BGC Partners, Inc. Pro Forma | |||||||||||||||
Revenues: | |||||||||||||||||
Commissions | $ | 824,988 | $ | (106,696) | (1) | $ | 718,292 | ||||||||||
Principal transactions | 180,760 | — | 180,760 | ||||||||||||||
Fees from related parties | 8,030 | — | 8,030 | ||||||||||||||
Data, software and post-trade | 43,588 | — | 43,588 | ||||||||||||||
Interest and dividend income | 14,493 | (155) | (1) | 14,338 | |||||||||||||
Other revenues | 8,167 | — | 8,167 | ||||||||||||||
Total revenues | 1,080,026 | (106,851) | 973,175 | ||||||||||||||
Expenses: | |||||||||||||||||
Compensation and employee benefits | 578,589 | (79,242) | (1) | 499,347 | |||||||||||||
Equity-based compensation and allocations of net income to limited partnership units and FPUs | 91,785 | 543 | (1)(2) | 92,328 | |||||||||||||
Total compensation and employee benefits | 670,374 | (78,699) | 591,675 | ||||||||||||||
Occupancy and equipment | 95,033 | (10,855) | (1) | 84,178 | |||||||||||||
Fees to related parties | 9,743 | (19) | (1) | 9,724 | |||||||||||||
Professional and consulting fees | 33,960 | (6,090) | (1) | 27,870 | |||||||||||||
Communications | 60,578 | (513) | (1) | 60,065 | |||||||||||||
Selling and promotion | 16,104 | (1,036) | (1) | 15,068 | |||||||||||||
Commissions and floor brokerage | 32,237 | (1,005) | (1) | 31,232 | |||||||||||||
Interest expense | 36,533 | (695) | (1) (3) | 35,838 | |||||||||||||
Other expenses | 39,777 | (14,817) | (1) | 24,960 | |||||||||||||
Total expenses | 994,339 | (113,729) | 880,610 | ||||||||||||||
Other income (losses), net: | |||||||||||||||||
Gains (losses) on divestitures and sale of investments | (32) | (60) | (1) | (92) | |||||||||||||
Gains (losses) on equity method investments | 2,789 | 3 | (1) | 2,792 | |||||||||||||
Other income (loss) | 7,270 | (2,188) | (1) | 5,082 | |||||||||||||
Total other income (losses), net | 10,027 | (2,245) | 7,782 | ||||||||||||||
Income (loss) from operations before income taxes | 95,714 | 4,633 | 100,347 | ||||||||||||||
Provision (benefit) for income taxes | 13,748 | (2,520) | (1)(4) | 11,228 | |||||||||||||
Consolidated net income (loss) | $ | 81,966 | $ | 7,153 | $ | 89,119 | |||||||||||
Less: Net income (loss) attributable to noncontrolling interest in subsidiaries | 20,706 | 1,188 | (1)(5) | 21,894 | |||||||||||||
Net income (loss) available to common stockholders | $ | 61,260 | $ | 5,965 | $ | 67,225 | |||||||||||
Per share data: | |||||||||||||||||
Basic earnings (loss) per share | |||||||||||||||||
Net income (loss) available to common stockholders | $ | 61,260 | $ | 67,225 | |||||||||||||
Basic earnings (loss) per share | $ | 0.16 | $ | 0.18 | |||||||||||||
Basic weighted-average shares of common stock outstanding | 379,639 | 379,639 | |||||||||||||||
Fully diluted earnings (loss) per share | |||||||||||||||||
Net income (loss) for fully diluted shares | $ | 88,271 | $ | 96,394 | |||||||||||||
Fully diluted earnings (loss) per share | $ | 0.16 | $ | 0.17 | |||||||||||||
Fully diluted weighted-average shares of common stock outstanding | 560,210 | 560,210 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2020
(in thousands, except per share data)
(unaudited)
BGC Partners, Inc. Historical (e) | Insurance Business Disposition Adjustments (f) | BGC Partners, Inc. Pro Forma | |||||||||||||||
Revenues: | |||||||||||||||||
Commissions | $ | 1,567,668 | $ | (182,709) | (1) | $ | 1,384,959 | ||||||||||
Principal transactions | 351,633 | — | 351,633 | ||||||||||||||
Fees from related parties | 25,754 | — | 25,754 | ||||||||||||||
Data, software and post-trade | 81,920 | — | 81,920 | ||||||||||||||
Interest and dividend income | 12,332 | (671) | (1) | 11,661 | |||||||||||||
Other revenues | 17,413 | — | 17,413 | ||||||||||||||
Total revenues | 2,056,720 | (183,380) | 1,873,340 | ||||||||||||||
Expenses: | |||||||||||||||||
Compensation and employee benefits | 1,131,650 | (155,461) | (1) | 976,189 | |||||||||||||
Equity-based compensation and allocations of net income to limited partnership units and FPUs | 183,545 | (1,359) | (1) | 182,186 | |||||||||||||
Total compensation and employee benefits | 1,315,195 | (156,820) | 1,158,375 | ||||||||||||||
Occupancy and equipment | 189,268 | (19,832) | (1) | 169,436 | |||||||||||||
Fees to related parties | 23,193 | (28) | (1) | 23,165 | |||||||||||||
Professional and consulting fees | 73,470 | (11,223) | (1) | 62,247 | |||||||||||||
Communications | 121,603 | (988) | (1) | 120,615 | |||||||||||||
Selling and promotion | 38,167 | (4,106) | (1) | 34,061 | |||||||||||||
Commissions and floor brokerage | 59,376 | (1,914) | (1) | 57,462 | |||||||||||||
Interest expense | 76,607 | (1,923) | (1) (2) | 74,684 | |||||||||||||
Other expenses | 88,933 | (15,756) | (1) | 73,177 | |||||||||||||
Total expenses | 1,985,812 | (212,590) | 1,773,222 | ||||||||||||||
Other income (losses), net: | |||||||||||||||||
Gains (losses) on divestitures and sale of investments | 394 | (294) | (1) | 100 | |||||||||||||
Gains (losses) on equity method investments | 5,023 | 41 | (1) | 5,064 | |||||||||||||
Other income (loss) | 1,580 | (6,320) | (1) | (4,740) | |||||||||||||
Total other income (losses), net | 6,997 | (6,573) | 424 | ||||||||||||||
Income (loss) from operations before income taxes | 77,905 | 22,637 | 100,542 | ||||||||||||||
Provision (benefit) for income taxes | 21,303 | 5,187 | (1)(3) | 26,490 | |||||||||||||
Consolidated net income (loss) | $ | 56,602 | $ | 17,450 | $ | 74,052 | |||||||||||
Less: Net income (loss) attributable to noncontrolling interest in subsidiaries | 7,694 | 5,802 | (1)(4) | 13,496 | |||||||||||||
Net income (loss) available to common stockholders | $ | 48,908 | $ | 11,648 | $ | 60,556 | |||||||||||
Per share data: | |||||||||||||||||
Basic earnings (loss) per share | |||||||||||||||||
Net income (loss) available to common stockholders | $ | 48,908 | $ | 60,556 | |||||||||||||
Basic earnings (loss) per share | $ | 0.14 | $ | 0.17 | |||||||||||||
Basic weighted-average shares of common stock outstanding | 361,736 | 361,736 | |||||||||||||||
Fully diluted earnings (loss) per share | |||||||||||||||||
Net income (loss) for fully diluted shares | $ | 70,430 | $ | 87,594 | |||||||||||||
Fully diluted earnings (loss) per share | $ | 0.13 | $ | 0.16 | |||||||||||||
Fully diluted weighted-average shares of common stock outstanding | 546,848 | 546,848 |
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. Basis of Presentation
Insurance Business Disposition
On May 26, 2021, Tower Bridge (One) Limited (the “Seller”), an indirect subsidiary of BGC Partners, Inc. (“BGC” or the “Company”), and BGC (as the Seller guarantor) entered into an Agreement (the “Purchase Agreement”) with Ardonagh Specialty Holdings 2 Limited (the “Buyer”) and The Ardonagh Group Limited (as the Buyer guarantor). The Purchase Agreement provides that, at closing, the Buyer will purchase the entire issued share capital of each of Ed Broking Group Limited and Besso Insurance Group Limited (each wholly owned subsidiaries of the Seller), for a purchase price of $500 million, subject to working capital and certain other closing adjustments, in cash to be paid at closing (the “Insurance Business Disposition”). These entities represent BGC’s insurance brokerage business. On November 1, 2021, the Company successfully completed the Insurance Business Disposition and, after closing adjustments, received approximately $535 million in gross cash proceeds from the Buyer, subject to limited post-closing adjustments. In addition, unvested equity and other awards previously granted by BGC to employees of its insurance brokerage business were converted into the right to receive a cash payment from BGC; a significant portion of these awards was 50% vested and paid in cash at closing, with the remaining 50% vesting and to be paid in cash two years after closing. The remaining portion of these awards will have been 100% vested and paid in cash by two years after the closing. The payments after closing are only made if the applicable employee remains an employee of the insurance brokerage business.
Basis of Presentation
BGC's unaudited pro forma condensed consolidated financial information has been compiled from underlying financial statements prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). They reflect the completed Insurance Business Disposition, including the receipt of $500 million of cash consideration, adjusted for working capital and other certain closing adjustments. The unaudited pro forma condensed consolidated financial information should be read in conjunction with:
•The accompanying notes to the unaudited pro forma condensed consolidated financial statements;
•BGC’s unaudited condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q
for the period ended June 30, 2021;
for the period ended June 30, 2021;
•BGC’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2020; and
December 31, 2020; and
•The risks described under "Special Note on Forward-Looking Information" and under "Risk Factors" in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2020 and any updates to those risk or new risks
contained in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the
SEC.
Annual Report on Form 10-K for the year ended December 31, 2020 and any updates to those risk or new risks
contained in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the
SEC.
The unaudited pro forma condensed consolidated financial information is presented in accordance with the rules specified by Article 11 of Regulation S-X promulgated by the SEC and has been prepared subject to the assumptions and adjustments as described in the notes thereto. Specifically, the unaudited pro forma condensed consolidated financial information set forth below reflects the effects of the Insurance Business Disposition on (i) BGC’s statement of financial condition as of June 30, 2021, as if the Insurance Business Disposition had occurred on that date, and (ii) BGC’s statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020, as if the Insurance Business Disposition had occurred on January 1, 2020. Management believes that the assumptions used and adjustments made are reasonable under the circumstances and given the information available.
The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not necessarily indicative of the financial condition or results of operations of the Company that would have occurred if the Insurance Business Disposition had occurred as of the dates indicated, nor is it indicative of the future financial condition or results of operations of the Company. The unaudited pro forma condensed consolidated statements of operations also do not reflect the gain from the Insurance Business Disposition, the potential use of proceeds, potential actions to reduce corporate overhead, or any potential tax or hedging strategies. In addition, the unaudited pro forma condensed consolidated statements of operations do not include any adjustments with respect to certain expenses recorded that were related to non-recurring events both related and unrelated to the Insurance Business Disposition.
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2. Insurance Business Disposition and Related Adjustments
Unaudited pro forma condensed consolidated statement of financial condition as of June 30, 2021
The following notes relate to the unaudited pro forma condensed consolidated statement of financial condition as of June 30,
2021:
(a) Amounts as originally reported by BGC in its Quarterly Report on Form 10-Q for the period ended June 30, 2021.
(b) Adjustments to present the pro forma effects of the Insurance Business Disposition as if it had occurred on the
balance sheet date. These include the following:
(1) Represents the following:
i) BGC’s receipt of $532.4 million gross cash proceeds, as if the Insurance Business Disposition
had occurred on June 30, 2021, after working capital and certain other closing adjustments; and
ii) $35.0 million decrease in Cash and cash equivalents comprising $18.8 million cash paid for
management incentive and termination payments, $12.1 million cash paid for taxes due on the
forgiveness of employee loans, and $4.1 million cash paid for unvested equity and other awards.
(2) The elimination of the insurance brokerage business’ Assets held for sale and Liabilities held for sale of
$1,048.9 million and $850.1 million, respectively.
(3) The elimination of the insurance brokerage business' Assets held for sale includes the forgiveness of $24.7
million in employee loans related to the Insurance Business Disposition.
(4) The $32.9 million increase in Accrued compensation related to the allocations of net income to limited
partnership units, as described in the below note (8).
(5) The $5.0 million increase in Payables to related parties for investment banking charges payable to Cantor
related to the Insurance Business Disposition.
(6) The $39.7 million increase in Accounts payable, accrued and other liabilities comprises $12.3
million in unvested equity and other awards previously granted by BGC to insurance brokerage business
employees which are converted into the right to receive a cash payment from BGC, subject to certain
service conditions, a $11.5 million tax liability associated with the Insurance Business Disposition, and a
$9.8 million liability due to The Ardonagh Group over time related to the insurance brokerage business'
pension obligations. This increase also includes $6.1 million in third-party legal, professional and banking
fees incurred as part of the transaction.
(7) The $4.3 million increase in Redeemable partnership interest for allocations of net income to FPUs, as
described in the below note (8).
(8) Represents the following:
i) The estimated after-tax gain from the Insurance Business Disposition; and
ii) The offsetting impact of the above notes (4), (5) and (6), except where already included in the
estimated after-tax gain from the Insurance Business Disposition.
Each of these items is allocated between limited partnership interests, which include limited partnership
units, FPUs, and Cantor units, and common stockholders. The net income (loss) allocated to Cantor is
reflected as a component of Noncontrolling interest in subsidiaries, while the net income (loss) allocated to
common stockholders is reflected as a component of Retained deficit. Further, in periods in which the
Company has a net loss, the loss allocation for FPUs, LPUs and Cantor units in BGC Holdings is allocated
to Cantor and reflected as a component of Noncontrolling interest in subsidiaries. In subsequent quarters in
which the Company has net income, the initial allocation of income to the limited partnership interests in
BGC Holdings is to Cantor and is recorded as Noncontrolling interest in subsidiaries to recover any losses
taken in earlier quarters, with the remaining income allocated to the limited partnership interests. This
income (loss) allocation process has no impact on the net income (loss) allocated to common stockholders.
Unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2021
The following notes relate to the unaudited pro forma condensed consolidated statement of operations for the six months
ended June 30, 2021:
(c) Amounts as originally reported by BGC in its Quarterly Report on Form 10-Q for the six months ended June 30,
2021.
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(d) Adjustments to present the pro forma effects of the Insurance Business Disposition as if it had occurred on January 1,
2020. These include the following:
(1) The elimination of the insurance brokerage business’ Revenues, Expenses, Other income (losses), net,
Provision for income taxes, and Net income (loss) attributable to noncontrolling interest in subsidiaries.
(2) A $1.2 million increase in Equity-based compensation and allocations of net income to limited partnership
units and FPUs, as described in the below note (5), partially offset by note (1) above.
(3) The elimination of Interest expense excludes $1.3 million of interest expense due from the insurance
brokerage business to BGC.
(4) The corresponding tax effects of the above items.
(5) The impact of the above items is allocated between limited partnership interests, which include limited
partnership units, FPUs, and Cantor units, and common stockholders. The net income (loss) allocated to
limited partnership units and FPUs, Cantor, and common stockholders is reflected as a component of
Equity-based compensation and allocations of net income to limited partnership units and FPUs, Net
income (loss) attributable to noncontrolling interest in subsidiaries, and Net income (loss) available to
common stockholders, respectively. Further, in periods in which the Company has a net loss, the loss
allocation for FPUs, LPUs and Cantor units in BGC Holdings is allocated to Cantor and reflected as a
component of Net income (loss) attributable to noncontrolling interest in subsidiaries. In subsequent
quarters in which the Company has net income, the initial allocation of income to the limited partnership
interests in BGC Holdings is to Cantor and is recorded as Net income (loss) attributable to noncontrolling
interest in subsidiaries to recover any losses taken in earlier quarters, with the remaining income allocated
to the limited partnership interests. This income (loss) allocation process has no impact on the net income
(loss) allocated to common stockholders.
Unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2020
The following notes relate to the unaudited pro forma condensed consolidated statement of operations for the year ended
December 31, 2020:
(e) Amounts as originally reported by BGC in its Annual Report on Form 10-K for the year ended December 31, 2020.
(f) Adjustments to present the pro forma effects of the Insurance Business Disposition as if it had occurred on January
1, 2020. These include the following:
(1) The elimination of the insurance brokerage business’ Revenues, Expenses, Other income (losses), net,
Provision for income taxes, and Net income (loss) attributable to noncontrolling interest in subsidiaries.
(2) The elimination of Interest expense excludes $3.0 million of interest expense due from the insurance
brokerage business to BGC.
(3) The corresponding tax effects of the above items.
(4) The impact of the above items is allocated between limited partnership interests, which include limited
partnership units, FPUs, and Cantor units, and common stockholders. The net income (loss) allocated to
limited partnership units and FPUs, Cantor, and common stockholders is reflected as a component of
Equity-based compensation and allocations of net income to limited partnership units and FPUs, Net
income (loss) attributable to noncontrolling interest in subsidiaries, and Net income (loss) available to
common stockholders, respectively. Further, in periods in which the Company has a net loss, the loss
allocation for FPUs, LPUs and Cantor units in BGC Holdings is allocated to Cantor and reflected as a
component of Net income (loss) attributable to noncontrolling interest in subsidiaries. In subsequent
quarters in which the Company has net income, the initial allocation of income to the limited partnership
interests in BGC Holdings is to Cantor and is recorded as Net income (loss) attributable to noncontrolling
interest in subsidiaries to recover any losses taken in earlier quarters, with the remaining income allocated
to the limited partnership interests. This income (loss) allocation process has no impact on the net income
(loss) allocated to common stockholders.
The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 do not reflect items that are non-recurring and are not expected to have a continuing impact on the Company, which include the following:
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•The expected gain on sale related to the Insurance Business Disposition;
•$18.8 million in compensation expenses with respect to management incentive and termination payments;
•The corresponding tax effects of the above items; and
•The impact of the above items on allocations of net income to limited partnership units, founding/working partner units, noncontrolling interest in subsidiaries and common stockholders.
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