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8-K - FORM 8-K - Global Brokerage, Inc. | v406704_8-k.htm |
Exhibit 99.1
Unaudited Pro Forma Consolidated Financial Statements
FXCM Inc.
As of December 31, 2014 and For the Years Ended
December 31, 2014, 2013 and 2012
FXCM Inc.
Unaudited Pro Forma Consolidated Financial Statements
On April 1, 2015, FXCM Holdings, LLC ("Holdings"), a majority owned, controlled and consolidated subsidiary of FXCM Inc. (the "Company"), and FXCM Newco, LLC, a wholly-owned subsidiary of Holdings, completed the previously announced sale of FXCM Japan Securities Co., Ltd ("FXCM Japan") to Rakuten Securities, Inc. for a purchase price of approximately $62.0 million (the "Transaction"). The consideration received at closing consisted of approximately $48.0 million in cash. The remaining consideration, as well as the net gain expected to be realized by the Company on the Transaction, is subject to final adjustment based on the finalization of FXCM Japan's balance sheet as of March 31, 2015.
The accompanying unaudited pro forma consolidated financial statements are based on the historical consolidated financial statements of the Company, after giving effect to the Transaction, and reflect the assumptions and adjustments described in the accompanying notes. The Unaudited Pro Forma Consolidated Statement of Financial Condition gives effect to the Transaction as if it had occurred on December 31, 2014. The Unaudited Pro Forma Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 give effect to the Transaction as if it had occurred on January 1, 2012.
The pro forma adjustments are based on information presently available and assumptions that the Company believes are reasonable under the circumstances; however, the actual amounts may differ materially from the information presented. In accordance with the regulations of the Securities and Exchange Commission, the pro forma adjustments are directly attributable to the Transaction, factually supportable and, with respect to the Unaudited Pro Forma Consolidated Statements of Operations, expected to have a continuing impact on the Company's operating results.
The unaudited pro forma consolidated financial statements are presented for informational purposes only and are not necessarily indicative of what the financial position and results of operations actually would have been had the Transaction been completed as of the date or for the periods presented, nor do such financial statements purport to represent the results of future periods.
The unaudited pro forma consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
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FXCM Inc.
Unaudited Pro Forma Consolidated Statement of Financial Condition
As of December 31, 2014
(In thousands)
Historical FXCM Inc. | Pro Forma Adjustments | Pro Forma FXCM Inc. | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 338,814 | $ | 42,867 | (a) | $ | 381,681 | |||||
Cash and cash equivalents, held for customers | 1,331,723 | (265,180 | ) | (b) | 1,066,543 | |||||||
Restricted time deposits | 3,336 | (3,336 | ) | (b) | — | |||||||
Trading securities | 26 | — | 26 | |||||||||
Due from brokers | 37,298 | (111 | ) | (b) | 37,187 | |||||||
Accounts receivable, net | 10,481 | (133 | ) | (b) | 10,348 | |||||||
Deferred tax asset | 9,923 | (837 | ) | (b) | 9,086 | |||||||
Tax receivable | 2,446 | (113 | ) | (b) | 2,333 | |||||||
Total current assets | 1,734,047 | (226,843 | ) | 1,507,204 | ||||||||
Restricted time deposits | 5,005 | (5,005 | ) | (b) | — | |||||||
Deferred tax asset | 179,698 | — | 179,698 | |||||||||
Office, communication and computer equipment, net | 48,194 | (2,891 | ) | (b) | 45,303 | |||||||
Goodwill | 323,887 | (4,700 | ) | (b) | 319,187 | |||||||
Other intangible assets, net | 57,567 | (3,604 | ) | (b) | 53,963 | |||||||
Notes receivable | 9,381 | — | 9,381 | |||||||||
Other assets | 29,648 | (772 | ) | (b) | 28,876 | |||||||
Total assets | $ | 2,387,427 | $ | (243,815 | ) | $ | 2,143,612 | |||||
Liabilities and Stockholders' Equity | ||||||||||||
Current liabilities | ||||||||||||
Customer account liabilities | $ | 1,331,723 | $ | (265,180 | ) | (b) | $ | 1,066,543 | ||||
Accounts payable and accrued expenses | 56,039 | (2,539 | ) | (b) | 53,500 | |||||||
Credit agreement | 25,000 | — | 25,000 | |||||||||
Notes payable | — | — | — | |||||||||
Due to brokers | 16,313 | (330 | ) | (b) | 15,983 | |||||||
Securities sold, not yet purchased | 4,239 | — | 4,239 | |||||||||
Due to related parties pursuant to tax receivable agreement | 5,352 | — | 5,352 | |||||||||
Total current liabilities | 1,438,666 | (268,049 | ) | 1,170,617 | ||||||||
Deferred tax liability | 2,835 | (1,137 | ) | (b) | 1,698 | |||||||
Due to related parties pursuant to tax receivable agreement | 145,224 | — | 145,224 | |||||||||
Senior convertible notes | 151,578 | — | 151,578 | |||||||||
Other liabilities | 6,108 | (76 | ) | (b) | 6,032 | |||||||
Total liabilities | 1,744,411 | (269,262 | ) | 1,475,149 | ||||||||
Stockholders' Equity | ||||||||||||
Class A common stock | 479 | — | 479 | |||||||||
Class B common stock | 1 | — | 1 | |||||||||
Additional paid-in-capital | 273,708 | — | 273,708 | |||||||||
Retained earnings | 22,379 | 1,385 | (c) | 23,764 | ||||||||
Accumulated other comprehensive loss | (11,879 | ) | 10,716 | (c) | (1,163 | ) | ||||||
Total stockholders’ equity, FXCM Inc. | 284,688 | 12,101 | 296,789 | |||||||||
Non-controlling interests | 358,328 | 13,346 | (d) | 371,674 | ||||||||
Total stockholders’ equity | 643,016 | 25,447 | 668,463 | |||||||||
Total liabilities and stockholders’ equity | $ | 2,387,427 | $ | (243,815 | ) | $ | 2,143,612 |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.
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FXCM Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2014
(In thousands, except per share data)
Historical FXCM Inc. | Pro Forma Adjustments | Pro Forma FXCM Inc. | ||||||||||
Revenues | ||||||||||||
Retail trading revenue | $ | 338,035 | $ | (19,900 | ) | (e) | $ | 318,135 | ||||
Institutional trading revenue | 103,199 | — | 103,199 | |||||||||
Trading revenue | 441,234 | (19,900 | ) | 421,334 | ||||||||
Interest income | 2,525 | (71 | ) | (e) | 2,454 | |||||||
Brokerage interest expense | (714 | ) | 1 | (e) | (713 | ) | ||||||
Net interest revenue | 1,811 | (70 | ) | 1,741 | ||||||||
Other income | 20,712 | (289 | ) | (e) | 20,423 | |||||||
Total net revenues | 463,757 | (20,259 | ) | 443,498 | ||||||||
Operating Expenses | ||||||||||||
Compensation and benefits | 111,716 | (4,908 | ) | (e) | 106,808 | |||||||
Allocation of income to Lucid members for services provided | 9,406 | — | 9,406 | |||||||||
Total compensation and benefits | 121,122 | (4,908 | ) | 116,214 | ||||||||
Referring broker fees | 80,850 | (1,055 | ) | (e) | 79,795 | |||||||
Advertising and marketing | 22,666 | (975 | ) | (e) | 21,691 | |||||||
Communication and technology | 48,396 | (366 | ) | (e) | 48,030 | |||||||
Trading costs, prime brokerage and clearing fees | 33,828 | (580 | ) | (e) | 33,248 | |||||||
General and administrative | 62,808 | (4,500 | ) | (e) | 58,308 | |||||||
Depreciation and amortization | 54,945 | (2,609 | ) | (e) | 52,336 | |||||||
Total operating expenses | 424,615 | (14,993 | ) | 409,622 | ||||||||
Operating income | 39,142 | (5,266 | ) | 33,876 | ||||||||
Other Expense | ||||||||||||
Loss on equity method investments, net | 1,308 | — | 1,308 | |||||||||
Interest on borrowings | 12,186 | — | 12,186 | |||||||||
Income before income taxes | 25,648 | (5,266 | ) | 20,382 | ||||||||
Income tax provision | 6,001 | (1,883 | ) | (f) | 4,118 | |||||||
Net income | 19,647 | (3,383 | ) | 16,264 | ||||||||
Net income attributable to non-controlling interest in FXCM Holdings, LLC | 8,960 | (1,648 | ) | (g) | 7,312 | |||||||
Net loss attributable to other non-controlling interests | (6,464 | ) | — | (6,464 | ) | |||||||
Net income attributable to FXCM Inc. | $ | 17,151 | $ | (1,735 | ) | $ | 15,416 | |||||
Weighted average shares of Class A common stock outstanding: | ||||||||||||
Basic | 41,637 | — | 41,637 | |||||||||
Diluted | 44,010 | — | 44,010 | |||||||||
Net income per share attributable to stockholders of Class A common stock of FXCM Inc.: | ||||||||||||
Basic | $ | 0.41 | — | $ | 0.37 | |||||||
Diluted | $ | 0.39 | — | $ | 0.35 |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.
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FXCM Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2013
(In thousands, except per share data)
Historical FXCM Inc. | Pro Forma Adjustments | Pro Forma FXCM Inc. | ||||||||||
Revenues | ||||||||||||
Retail trading revenue | $ | 365,285 | $ | (22,980 | ) | (e) | $ | 342,305 | ||||
Institutional trading revenue | 103,994 | — | 103,994 | |||||||||
Trading revenue | 469,279 | (22,980 | ) | 446,299 | ||||||||
Interest income | 2,614 | (111 | ) | (e) | 2,503 | |||||||
Brokerage interest expense | (258 | ) | 4 | (e) | (254 | ) | ||||||
Net interest revenue | 2,356 | (107 | ) | 2,249 | ||||||||
Other income | 17,953 | — | 17,953 | |||||||||
Total net revenues | 489,588 | (23,087 | ) | 466,501 | ||||||||
Operating Expenses | ||||||||||||
Compensation and benefits | 105,470 | (4,962 | ) | (e) | 100,508 | |||||||
Allocation of income to Lucid members for services provided | 21,290 | — | 21,290 | |||||||||
Total compensation and benefits | 126,760 | (4,962 | ) | 121,798 | ||||||||
Referring broker fees | 84,231 | (1,336 | ) | (e) | 82,895 | |||||||
Advertising and marketing | 27,091 | (481 | ) | (e) | 26,610 | |||||||
Communication and technology | 38,441 | (1,017 | ) | (e) | 37,424 | |||||||
Trading costs, prime brokerage and clearing fees | 30,821 | (324 | ) | (e) | 30,497 | |||||||
General and administrative | 68,230 | (5,635 | ) | (e) | 62,595 | |||||||
Depreciation and amortization | 53,729 | (2,967 | ) | (e) | 50,762 | |||||||
Total operating expenses | 429,303 | (16,722 | ) | 412,581 | ||||||||
Operating income | 60,285 | (6,365 | ) | 53,920 | ||||||||
Other Expense | ||||||||||||
Loss on equity method investments, net | 752 | — | 752 | |||||||||
Interest on borrowings | 7,673 | — | 7,673 | |||||||||
Income before income taxes | 51,860 | (6,365 | ) | 45,495 | ||||||||
Income tax provision | 17,024 | (3,006 | ) | (f) | 14,018 | |||||||
Net income | 34,836 | (3,359 | ) | 31,477 | ||||||||
Net income attributable to non-controlling interest in FXCM Holdings, LLC | 24,850 | (1,659 | ) | (g) | 23,191 | |||||||
Net loss attributable to other non-controlling interests | (4,846 | ) | — | (4,846 | ) | |||||||
Net income attributable to FXCM Inc. | $ | 14,832 | $ | (1,700 | ) | $ | 13,132 | |||||
Weighted average shares of Class A common stock outstanding: | ||||||||||||
Basic | 32,789 | — | 32,789 | |||||||||
Diluted | 33,957 | — | 33,957 | |||||||||
Net income per share attributable to stockholders of Class A common stock of FXCM Inc.: | ||||||||||||
Basic | $ | 0.45 | — | $ | 0.40 | |||||||
Diluted | $ | 0.44 | — | $ | 0.39 |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.
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FXCM Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2012
(In thousands, except per share data)
Historical FXCM Inc. | Pro Forma Adjustments | Pro Forma FXCM Inc. | ||||||||||
Revenues | ||||||||||||
Retail trading revenue | $ | 339,685 | $ | (26,925 | ) | (e) | $ | 312,760 | ||||
Institutional trading revenue | 62,033 | — | 62,033 | |||||||||
Trading revenue | 401,718 | (26,925 | ) | 374,793 | ||||||||
Interest income | 3,571 | (129 | ) | (e) | 3,442 | |||||||
Brokerage interest expense | (277 | ) | 41 | (e) | (236 | ) | ||||||
Net interest revenue | 3,294 | (88 | ) | 3,206 | ||||||||
Other income | 12,303 | (156 | ) | (e) | 12,147 | |||||||
Total net revenues | 417,315 | (27,169 | ) | 390,146 | ||||||||
Operating Expenses | ||||||||||||
Compensation and benefits | 105,779 | (6,196 | ) | (e) | 99,583 | |||||||
Allocation of income to Lucid members for services provided | — | — | — | |||||||||
Total compensation and benefits | 105,779 | (6,196 | ) | 99,583 | ||||||||
Referring broker fees | 76,585 | (2,319 | ) | (e) | 74,266 | |||||||
Advertising and marketing | 30,860 | (654 | ) | (e) | 30,206 | |||||||
Communication and technology | 37,113 | (2,901 | ) | (e) | 34,212 | |||||||
Trading costs, prime brokerage and clearing fees | 16,935 | (68 | ) | (e) | 16,867 | |||||||
General and administrative | 63,043 | (13,038 | ) | (e) | 50,005 | |||||||
Depreciation and amortization | 36,773 | (3,003 | ) | (e) | 33,770 | |||||||
Total operating expenses | 367,088 | (28,179 | ) | 338,909 | ||||||||
Operating income | 50,227 | 1,010 | 51,237 | |||||||||
Other Expense | ||||||||||||
Loss on equity method investments, net | — | — | — | |||||||||
Interest on borrowings | 2,763 | — | 2,763 | |||||||||
Income before income taxes | 47,464 | 1,010 | 48,474 | |||||||||
Income tax provision | 8,986 | (423 | ) | (f) | 8,563 | |||||||
Net income | 38,478 | 1,433 | 39,911 | |||||||||
Net income attributable to non-controlling interest in FXCM Holdings, LLC | 23,131 | 1,302 | (g) | 24,433 | ||||||||
Net income attributable to other non-controlling interests | 6,389 | — | 6,389 | |||||||||
Net income attributable to FXCM Inc. | $ | 8,958 | $ | 131 | $ | 9,089 | ||||||
Weighted average shares of Class A common stock outstanding: | ||||||||||||
Basic | 24,086 | — | 24,086 | |||||||||
Diluted | 24,086 | — | 24,086 | |||||||||
Net income per share attributable to stockholders of Class A common stock of FXCM Inc.: | ||||||||||||
Basic | $ | 0.37 | — | $ | 0.38 | |||||||
Diluted | $ | 0.37 | — | $ | 0.38 |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.
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FXCM Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
Pro Forma Adjustments
Adjustments included in the column under the heading "Pro Forma Adjustments" represent the following:
(a) Estimated cash proceeds of $61.8 million expected to be received from the sale, less transaction costs of $2.5 million, less FXCM Japan cash of $16.4 million held at December 31, 2014.
(b) Adjustments to reflect the elimination of assets and liabilities of FXCM Japan.
(c) The estimated net gain recognized upon the sale of FXCM Japan was calculated as follows:
($ in thousands) | ||||||||
Cash proceeds | $ | 61,756 | ||||||
Less: Carrying value of FXCM Japan | (33,781 | ) | ||||||
Transaction costs | (2,528 | ) | ||||||
Realization of cumulative translation adjustment: | ||||||||
Controlling interest | (10,716 | ) | ||||||
Non-controlling interests | (12,348 | ) | ||||||
Total realization of cumulative translation adjustment | (23,064 | ) | ||||||
Estimated gain before taxes | 2.383 | |||||||
Estimated taxes on gain (1) | — | |||||||
Estimated gain net of taxes | $ | 2,383 | ||||||
Estimated gain attributable to non-controlling interest in FXCM Holdings, LLC | 998 | |||||||
Estimated gain attributable to FXCM Inc. | $ | 1,385 |
(1) For tax purposes, the sale of FXCM Japan is expected to generate a capital loss that is not expected to be realizable. Therefore, a full valuation allowance against the capital loss will be recorded, resulting in no tax impact from the sale.
(d) Adjustment is comprised of the non-controlling interests' portions of the realized cumulative translation adjustment ($12.3 million) and the estimated net gain recognized on the sale ($1.0 million).
(e) Adjustments to reflect the elimination of revenues and expenses of FXCM Japan.
(f) Estimated tax effect of the pro forma adjustments calculated using the local statutory tax rate for FXCM Japan, and the U.S. statutory tax rate for FXCM Inc., reduced by the portion allocated to the non-controlling interests in FXCM Holdings, LLC.
(g) Effect of the pro forma adjustments on Net Income attributable to non-controlling interest in FXCM Holdings, LLC.
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