Form 8-K/A GFI Group Inc. For: Dec 11

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

 

(Amendment No. 1)

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of Earliest Event Reported): December 11, 2015

 

 

GFI GROUP INC.

(Exact name of Registrant as specified in its charter)

 

 

 

55 Water Street, New York, NY 10041

(Address of principal executive offices)

 

Registrant’s telephone number, including area code (212) 968-4100

 

 

(Former name or former address, if changed since last report)

 

 

(Explanatory Note: Since June 1, 2015, the registrant has been a voluntary filer not subject to the filing requirements of Section 13 or 15(d) of the Exchange Act of 1934. As a voluntary filer, the registrant filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant would have been required to file such reports) as if it were subject to such filing requirements.)

 

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 (see General Instruction A.2. below):

 

o                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

EXPLANATORY NOTE

 

On December 15, 2015, GFI Group Inc. filed with the Securities and Exchange Commission (the “SEC”) a Current Report on Form 8-K reporting the completion of the disposition of all of the equity interests in the entities that make up the Trayport business to Intercontinental Exchange, Inc.  This Amendment No. 1 to Current Report on Form 8-K/A amends Item 2.01 and Item 9.01 of the Current Report on Form 8-K filed on December 15, 2015 to present certain unaudited pro forma financial information in connection with such transaction, which unaudited pro forma financial information is filed as an exhibit hereto.

 

 

Item 2.01.                                     Completion of Acquisition or Disposal of Assets

 

As previously reported, on December 11, 2015 GFI Group Inc. (the “Company” or “GFI”) completed the disposition of all of the equity interests in the entities that make up the Trayport business to Intercontinental Exchange, Inc. (“ICE”) for 2,527,658 shares of the common stock of ICE with respect to the $650 million purchase price as adjusted at closing (the “Trayport Transaction”).  The Trayport Transaction was pursuant to the previously reported Stock Purchase Agreement, dated as of November 15, 2015, by and among GFINet, Inc., GFI TP Holdings Pte Ltd., ICE, GFI, and BGC Partners, Inc.  The Company has the right to sell the shares of ICE common stock that it received upon completion of the Trayport Transaction pursuant to a registration rights agreement entered into at the closing.  In connection with the completion of the Trayport Transaction, the Company incurred a banking fee from Cantor Fitzgerald & Co., an affiliate, of approximately $5.1 million.

 

Discussion of Forward-Looking Statements by GFI

 

Statements in this report regarding GFI that are not historical facts are forward-looking statements that involve risks and uncertainties. Except as required by law, GFI undertakes no obligation to release any revisions to any forward-looking statements. For a discussion of additional risks and uncertainties, which could cause actual events and results to differ from those contained in the forward-looking statements, see GFI’s SEC filings, including, but not limited to, the risk factors set forth in its public filings, including its most recent Form 10-K and any updates to such risk factors contained in subsequent Form 10-Q or Form 8-K filings. These risks include those related to the possibility that any of the anticipated benefits of the Trayport Transaction will not be realized; the effect of the Trayport Transaction on GFI’s business relationships, operating results and business generally; general competitive, economic, political and market conditions and fluctuations; and actions taken or conditions imposed by regulatory authorities.

 

Item 9.01.                                     Financial Statements and Exhibits.

 

(b) Pro Forma Financial Information

 

The unaudited pro forma condensed consolidated financial information specified in Article 11 of Regulation S-X is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

(d)   Exhibits

 

99.1                       Unaudited pro forma condensed consolidated financial information:

 

·		Unaudited pro forma condensed consolidated statement of financial condition as of September 30, 2015.
·		Unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 31, 2014 and for the nine months ended September 30, 2015.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: December 17, 2015		GFI GROUP INC.
		By:	/s/ Howard W. Lutnick
		Name:	Howard W. Lutnick
		Title:	Chairman and Chief Executive Officer

 

Signature page to Form 8-K/A, filed on December 17, 2015, regarding the Company’s pro forma information with respect to the Trayport Transaction with ICE

 

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EXHIBIT INDEX

 

 

Exhibit Number		Exhibit Title
99.1		Unaudited pro forma condensed consolidated financial information:
		·                  Unaudited pro forma condensed consolidated statement of financial condition as of September 30, 2015.
		·                  Unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 31, 2014 and for the nine months ended September 30, 2015.

 

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Exhibit 99.1

 

GFI Group Inc.

Unaudited Pro Forma Condensed Consolidated Financial Information

 

As previously reported, on December 11, 2015 GFI Group Inc. (the “Company” or “GFI”) completed the disposition of all of the equity interests in the entities that make up the Trayport business to Intercontinental Exchange, Inc. (“ICE”) for 2,527,658 shares of the common stock of ICE with respect to the $650 million purchase price as adjusted at closing (the “Trayport Transaction”).  The Trayport Transaction was pursuant to the previously reported Stock Purchase Agreement, dated as of November 15, 2015, by and among GFINet, Inc., GFI TP Holdings Pte Ltd., ICE, GFI, and BGC Partners, Inc.  The Company has the right to sell the shares of ICE common stock that it received upon completion of the Trayport Transaction pursuant to a registration rights agreement entered into at the closing.  In connection with the completion of the Trayport Transaction, the Company incurred a banking fee from Cantor Fitzgerald & Co., an affiliate, of approximately $5.1 million.

 

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 Securities and Exchange Commission (the “SEC”) and has been prepared subject to the assumptions and adjustments as described in the notes to the unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated statement of financial condition gives effect to the Trayport Transaction, as if it had occurred on September 30, 2015, and includes the elimination of the assets sold as well as the proceeds and other adjustments resulting from the closing of the Trayport Transaction. The unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 31, 2014 and for the nine months ended September 30, 2015 give effect to the Trayport Transaction, as if it had occurred on January 1, 2014, and include the elimination of revenues and expenses associated with the Trayport Transaction as well as other adjustments resulting from the closing of the Trayport Transaction. 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 Trayport Transaction 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 Trayport Transaction, the potential use of proceeds, potential actions to reduce corporate overhead, potential tax or hedging strategies, or any potential change in the value of the shares of ICE common stock received in the Trayport Transaction.

 

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;
·		GFI’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014;
·		GFI’s unaudited condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2015; and
·		The “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and any updates to those risk factors or new risk factors contained in the Company’s subsequent Quarterly Report on Form 10-Q and Current Reports on Form 8-K filed with the SEC.

 

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PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (UNAUDITED)

As of September 30, 2015

(In thousands, except per share amounts)

 

		GFI Group Inc. Historical (a)			Trayport Transaction Adjustments (b)			GFI Group Inc. Pro Forma
Assets
Cash and cash equivalents		$	128,886		$	(4,012	)(1)	$	124,874
Cash segregated under federal and other regulations		145			—			145
Accounts receivable, net of allowance for doubtful accounts of $1,329 at September 30, 2015		79,440			(13,189		)(1)	66,251
Receivables from brokers, dealers and clearing organizations		390,214			—			390,214
Property, equipment and leasehold improvements, net of depreciation and amortization of $209,719 at September 30, 2015		50,806			(6,743		)(1)	44,063
Goodwill		134,434			(121,427		)(1)	13,007
Intangible assets, net		25,688			(21,000		)(1)	4,688
Receivables from related parties		134,047			(257		)(1)	133,790
Financial instruments owned		3,305			629,084		(2)	632,389
Other assets		189,791			(12,345		)(3)	177,446
TOTAL ASSETS		$	1,136,756		$	450,111		$	1,586,867
Liabilities and stockholders’ equity
LIABILITIES
Accrued compensation		$	93,324		$	(3,066	)(4)	$	90,258
Accounts payable and accrued expenses		38,350			(646		)(5)	37,704
Payables to brokers, dealers and clearing organizations		355,170			—			355,170
Short-term borrowings		75,000			—			75,000
Long-term debt		240,000			—			240,000
Payables to related parties		—			5,100		(6)	5,100
Other liabilities		76,962			(14,311		)(4)	62,651
Total liabilities		$	878,806		$	(12,923	)	$	865,883
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; 5,000,000 shares authorized, none outstanding at September 30, 2015		—			—			—
Common stock, $0.01 par value; 400,000,000 shares authorized; 187,509,724 shares issued at September 30, 2015, net of $430 for issuance of common stock for Note receivable		1,444			—			1,444
Additional paid in capital, net of $249,570 for issuance of common stock for Note receivable		379,069			—			379,069
Retained deficit		(41,563		)	458,192			416,629
Treasury stock, 16,694,912 shares of common stock at cost, at September 30, 2015		(73,367		)	—			(73,367		)
Accumulated other comprehensive loss		(9,749		)	4,842			(4,907		)
Total Stockholders’ Equity		255,834			463,034			718,868
Non-controlling interests		2,116			—			2,116
Total Equity		257,950			463,034			720,984
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,136,756		$	450,111		$	1,586,867

 

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 (UNAUDITED)

For the Year Ended December 31, 2014

(In thousands, except per share amounts)

 

		GFI Group Inc. Historical (c)			Trayport Transaction Adjustments  (d)			GFI Group Inc. Pro Forma
Revenues
Agency commissions		$	454,604		$	—		$	454,604
Principal transactions		180,330			—			180,330
Total brokerage revenues		634,934			—			634,934
Clearing services revenues		115,498			—			115,498
Interest income from clearing services		2,229			—			2,229
Equity in net earnings of unconsolidated businesses		7,611			—			7,611
Software, analytics and market data		102,998			(74,811		)(1)(2)	28,187
Other income, net		17,765			(3,523		)(1)	14,242
Total revenues		881,035			(78,334		)	802,701
Interest and transaction-based expenses
Transaction fees on clearing services		108,464			—			108,464
Transaction fees on brokerage services		19,311			—			19,311
Interest expense from clearing services		821			—			821
Total interest and transaction-based expenses		128,596			—			128,596
Revenues, net of interest and transaction-based expenses		752,439			(78,334		)	674,105
Expenses
Compensation and employee benefits		511,532			(30,812		)(1)	480,720
Communications and market data		52,822			2,538		(1)(2)	55,360
Travel and promotion		31,265			(2,167		)(1)	29,098
Rent and occupancy		31,299			(2,679		)(1)	28,620
Depreciation and amortization		34,334			(6,483		)(1)	27,851
Professional fees		41,904			(1,224		)(1)	40,680
Interest on borrowings		32,298			—			32,298
Impairment of goodwill and long-lived assets		125,680			—			125,680
Other expenses		28,121			(1,049		)(1)	27,072
Total other expenses		889,255			(41,876		)	847,379
Loss before benefit from income taxes		(136,816		)	(36,458		)	(173,274		)
Benefit from income taxes		(29,963		)	(7,263		)(3)	(37,226		)
Net loss before attribution to non-controlling stockholders		(106,853		)	(29,195		)	(136,048		)
Less: Net income attributable to non-controlling interests		1,190			—			1,190
GFI’s net loss		$	(108,043	)	$	(29,195	)	$	(137,238	)
Loss per share available to common stockholders
Basic		$	(0.87	)				$	(1.10	)
Diluted		$	(0.87	)				$	(1.10	)
Weighted average shares outstanding
Basic		124,754,651						124,754,651
Diluted		124,754,651						124,754,651
Dividends declared per share of common stock		$	0.10					$	0.10

 

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 (UNAUDITED)

For the Nine Months Ended September 30, 2015

(In thousands, except per share amounts)

 

		GFI Group Inc. Historical (e)			Trayport Transaction Adjustments  (f)			GFI Group Inc. Pro Forma
Revenues
Agency commissions		$	323,796		$	—		$	323,796
Principal transactions		122,357			—			122,357
Total brokerage revenues		446,153			—			446,153
Clearing services revenues		21,338			—			21,338
Interest income from clearing services		297			—			297
Equity in net earnings of unconsolidated businesses		3,072			—			3,072
Software, analytics and market data		77,603			(55,122		)(1)(2)	22,481
Other income, net		25,942			(393		)(1)	25,549
Total revenues		574,405			(55,515		)	518,890
Interest and transaction-based expenses
Transaction fees on clearing services		20,495			—			20,495
Transaction fees on brokerage services		15,487			—			15,487
Interest expense from clearing services		128			—			128
Total interest and transaction-based expenses		36,110			—			36,110
Revenues, net of interest and transaction-based expenses		538,295			(55,515		)	482,780
Expenses
Compensation and employee benefits		373,279			(22,484		)(1)	350,795
Communications and market data		33,172			1,640		(1)(2)	34,812
Travel and promotion		18,562			(1,563		)(1)	16,999
Rent and occupancy		20,284			(2,203		)(1)	18,081
Depreciation and amortization		21,329			(4,700		)(1)	16,629
Professional fees		25,131			(876		)(1)	24,255
Interest on borrowings		22,925			—			22,925
Merger termination fees		24,728			—			24,728
Other expenses		18,752			(789		)(1)	17,963
Total other expenses		558,162			(30,975		)	527,187
Loss before benefit from income taxes		(19,867		)	(24,540		)	(44,407		)
Benefit from income taxes		(9,933		)	(5,107		)(3)	(15,040		)
Net loss before attribution to non-controlling stockholders		(9,934		)	(19,433		)	(29,367		)
Less: Net income attributable to non-controlling interests		579			—			579
GFI’s loss		$	(10,513	)	$	(19,433	)	$	(29,946	)
Loss per share available to common stockholders
Basic		$	(0.07	)				$	(0.20	)
Diluted		$	(0.07	)				$	(0.20	)
Weighted average shares outstanding
Basic		152,068,906						152,068,906
Diluted		152,068,906						152,068,906
Dividends declared per share of common stock		$	0.00					$	0.00

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

1.                     Basis of Presentation

 

GFI Group Inc.’s (the “Company,” or “GFI”) 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 Company’s disposition of all the equity interests in the entities that make up the Trayport business (the “Trayport Business”) to Intercontinental Exchange, Inc. (“ICE”) for 2,527,658 shares of ICE common stock (the “Trayport Transaction”).

 

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 information;
·		GFI’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014;
·		GFI’s unaudited condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2015; and
·		The “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and any updates to those risk factors or new risk factors 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. The unaudited pro forma condensed consolidated statement of financial condition gives effect to the Trayport Transaction, as if it had occurred on September 30, 2015, and includes the elimination of the assets sold as well as the cash proceeds and other adjustments resulting from the closing of the Trayport Transaction. The unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 31, 2014 and for the nine months ended September 30, 2015 give effect to the Trayport Transaction, as if it had occurred on January 1, 2014, and include the elimination of revenues and expenses associated with the Trayport Transaction as well as other adjustments resulting from the closing of the Trayport Transaction. 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 Trayport Transaction 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 Trayport Transaction, the potential use of proceeds, potential actions to reduce corporate overhead, potential tax or hedging strategies, or any potential change in the value of the shares of ICE common stock received in the Trayport Transaction. Actual adjustments may differ from the information presented.

 

2.       Trayport Transaction

 

Unaudited pro forma condensed consolidated statement of financial condition as of September 30, 2015

 

The following notes relate to the unaudited pro forma condensed consolidated statement of financial condition as of September 30, 2015:

 

(a)		Amounts as originally reported by GFI in its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2015.
(b)		Represents the following:

 

		(1)		Elimination of assets sold as a result of the Trayport Transaction;
		(2)		Receipt of 2,527,658 shares of ICE common stock, inclusive of a working capital adjustment;
		(3)		An estimated decrease in Other assets of $12.3 million, including an $8.8 million decrease in GFI’s Deferred tax assets related to the estimated taxes associated with the Trayport Transaction, which assumes no repatriation to the U.S. of the foreign proceeds related to the Trayport Transaction. The majority of the proceeds were received in a foreign jurisdiction. Repatriation of all the foreign proceeds related to the Trayport Transaction to the U.S. would result in a net tax liability of approximately $64.0 million; and

 

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		(4)		A decrease in Accrued compensation of $3.1 million and Other liabilities of $14.3 million assumed by ICE as a result of the Trayport Transaction; and
		(5)		A $3.6 million decrease in Accounts payable and accrued expenses assumed by ICE as a result of the Trayport Transaction. This decrease was partially offset by an increase in accounts payable of $3.0 million related to professional fees as a result of the Trayport Transaction; and
		(6)		An increase in Payables to related parties related to a $5.1 million fee payable to Cantor Fitzgerald & Co. for investment banking services it provided with respect to the Trayport Transaction.

 

Unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2014

 

The following notes relate to the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2014:

 

(c)		Amounts as originally reported by GFI in its Annual Report on Form 10-K for the year ended December 31, 2014.
(d)		Represents the following:

 

		(1)		The elimination of revenues and expenses associated with the Trayport Transaction;
		(2)		The elimination of revenues excludes $3.4 million of intercompany revenues generated by the Trayport Business which were not included in GFI’s consolidated financial results.  As a result of the Trayport Transaction, Communications and market data expense increased by this same amount as these would have been third party expenses if the Trayport Transaction had previously been consummated; and
		(3)		The corresponding tax effects of the above items and other intercompany adjustments.

 

The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2014 does not reflect items that are nonrecurring and are not expected to have a continuing impact on the Company, which include the following:

 

·		The expected gain on sale related to the Trayport Transaction;
·		Professional and consulting fees of approximately $8.1 million incurred as a result of the Trayport Transaction including a $5.1 million fee payable to Cantor Fitzgerald & Co. for investment banking services it provided with respect to the Trayport Transaction; and
·		The corresponding tax effects of the above items.

 

Unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2015

 

The following notes relate to the unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2015:

 

(e)		Amounts as originally reported by GFI in its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2015.
(f)		Represents the following:

 

		(1)		The elimination of revenues and expenses associated with the Trayport Transaction;
		(2)		The elimination of revenues excludes $2.3 million of intercompany revenues generated by the Trayport Business which were not included in GFI’s consolidated financial results.  As a result of the Trayport Transaction, Communications and market data expense increased by this same amount as these would have been third party expenses if the Trayport Transaction had previously been consummated; and
		(3)		The corresponding tax effects of the above items and other intercompany adjustments.

 

The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2015 does not reflect items that are nonrecurring and are not expected to have a continuing impact on the Company, which include the following:

 

·		The expected gain on sale related to the Trayport Transaction;
·		Professional and consulting fees of approximately $8.1 million incurred as a result of the Trayport Transaction, including a $5.1 million fee payable to Cantor Fitzgerald & Co. for investment banking services it provided with respect to the Trayport Transaction ; and
·		The corresponding tax effects of the above items.

 

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