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Discontinued Operations | 12 Months Ended
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Dec. 31, 2019
Divestitures |
5. | Divestitures
During the year ended December 31, 2019, the Company completed the sale of CSC, which was part of its energy and commodities businesses. As a result of this sale, the Company recognized a $18.4 million gain, which is included in “Gain (loss) on divestiture and sale of investments” in the Company’s consolidated statements of operations. The Company had no gains or losses from divestitures or sale of investments during the years ended December 31, 2018 and 2017.
Newmark [Member] |
Divestitures |
2 7. | Discontinued Operations
On November 30, 2018, the Company completed the Spin-Off, and distributed to its stockholders all of the shares of Newmark Class A common stock and Newmark Class B common stock that the Company then owned in a manner that is intended to qualify as generally tax-free for U.S. federal income tax purposes. The shares of Newmark Class A common stock held by the Company were distributed to the holders of shares of BGC Class A common stock, and the shares of Newmark Class B common stock held by the Company were distributed to the holders of shares of BGC Class B common stock. Therefore, the Company no longer consolidates Newmark within its financial results subsequent to the Spin-Off. The Company has determined that the Spin-Off met the criteria for reporting the financial results of Newmark as discontinued operations within BGC’s consolidated results for all periods through the Distribution Date. Newmark’s results are presented in “Consolidated net income (loss) from discontinued operations, net of tax” and the related noncontrolling interest in Newmark and its subsidiaries is presented in “Net income (loss) from discontinued operations attributable to noncontrolling interest in subsidiaries” in the Company’s consolidated statements of operations for the years ended December 31, 2018 and 2017. The following table provides the components of “Consolidated net income (loss) from discontinued operations, net of tax” and “Net income (loss) from discontinued operations attributable to noncontrolling interest in subsidiaries” for the years ended December 31, 2018 and 2017 (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |
Revenues: |  |  |  |  |  |  |  |
Commissions |  | $ | 1,116,935 |  |  | $ | 1,014,741 |
Gains from mortgage banking activities/originations, net |  |  | 160,688 |  |  |  | 205,999 |
Real estate management and other services |  |  | 375,428 |  |  |  | 233,063 |
Servicing fees |  |  | 119,587 |  |  |  | 110,441 |
Fees from related parties |  |  | 1,055 |  |  |  | 1,373 |
Interest income |  |  | 35,238 |  |  |  | 36,546 |
Other revenues |  |  | 607 |  |  |  | 242 |
Total revenues |  |  | 1,809,538 |  |  |  | 1,602,405 |
Expenses: |  |  |  |  |  |  |  |
Compensation and employee benefits |  |  | 1,052,487 |  |  |  | 1,007,173 |
Equity-based compensation and allocations of net income to limited partnership units and FPUs |  |  | 141,965 |  |  |  | 111,917 |
Total compensation and employee benefits |  |  | 1,194,452 |  |  |  | 1,119,090 |
Occupancy and equipment |  |  | 69,368 |  |  |  | 62,448 |
Fees to related parties |  |  | 15,999 |  |  |  | 13,208 |
Professional and consulting fees |  |  | 31,699 |  |  |  | 34,270 |
Communications |  |  | 11,328 |  |  |  | 11,809 |
Selling and promotion |  |  | 54,650 |  |  |  | 52,443 |
Commissions and floor brokerage |  |  | 1,087 |  |  |  | 956 |
Interest expense |  |  | 79,732 |  |  |  | 25,546 |
Other expenses |  |  | 197,144 |  |  |  | 128,417 |
Total expenses |  |  | 1,655,459 |  |  |  | 1,448,187 |
Other income (losses), net: |  |  |  |  |  |  |  |
Gains (losses) on equity method investments |  |  | 2,759 |  |  |  | 1,562 |
Other income (loss) |  |  | 110,145 |  |  |  | 72,081 |
Total other income (losses), net |  |  | 112,904 |  |  |  | 73,643 |
Income (loss) from operations before income taxes |  |  | 266,983 |  |  |  | 227,861 |
Provision (benefit) for income taxes |  |  | 90,814 |  |  |  | 57,496 |
Consolidated net income (loss) from discontinued operations, net of tax |  |  | 176,169 |  |  |  | 170,365 |
Less: Net income (loss) from discontinued operations attributable to noncontrolling interest in subsidiaries |  |  | 52,353 |  |  |  | (5,913 | )
Net income (loss) from discontinued operations available to common stockholders1 |  | $ | 123,816 |  |  | $ | 176,278 |
1 | This amount excludes EPU payable-in-kind dividends, which is a reduction to “Net income (loss) from discontinued operations available to common stockholders” for the calculation of the Company’s “Basic earnings (loss) per share and Fully diluted earnings (loss) per share from discontinued operations.”
Total net cash provided by (used in) operating activities from discontinued operations was $(748.2) million and $895.9 million for the years ended December 31, 2018 and 2017, respectively. Total net cash provided by (used in) investing activities from discontinued operations was $18.3 million, and $(41.0) million for the years ended December 31, 2018 and 2017, respectively. Through the Distribution Date, exchangeability was granted on 8.4 million and 3.9 million LPUs in BGC Holdings and Newmark Holdings, respectively, held by Newmark employees, and Newmark incurred compensation expense related to the grant of exchangeability of $111.1 million for the year ended December 31, 2018. During the year ended December 31, 2017, exchangeability was granted on 6.5 million LPUs in BGC Holdings held by Newmark employees, for which Newmark incurred compensation expense of $89.4 million. For the year ended December 31, 2017, there was no expense related to grants of exchangeability on LPUs in Newmark Holdings. These expenses are recorded as part of “Equity-based compensation and allocations of net income to limited partnership units and FPUs” in the table above, and are included in “Consolidated net income (loss) from discontinued operations, net of tax” in the Company’s consolidated statements of operations. Certain LPUs and FPUs generally receive quarterly allocations of net income, which are cash distributed on a quarterly basis and generally contingent upon services provided by the unit holder. Newmark’s allocation of income through the Distribution Date to Newmark Holdings LPUs and FPUs held by Newmark employees was $37.0 million for the year ended December 31, 2018. For the year ended December 31, 2017, there was no such expense. This expense was recorded as part of “Equity-based compensation and allocations of net income to limited partnership units and FPUs” in the table above, and is included in “Consolidated net income (loss) from discontinued operations, net of tax” in the Company’s consolidated statements of operations. In connection with the Separation, on December 13, 2017, Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations under the 2042 Promissory Note in relation to the 8.125% Senior Notes and the 2019 Promissory Note in relation to the 5.375% Senior Notes. Newmark repaid the $112.5 million outstanding principal amount under the 2042 Promissory Note on September 5, 2018, and repaid the $300.0 million outstanding principal amount under the 2019 Promissory Note on November 23, 2018. In addition, as part of the Separation, Newmark assumed the obligations of BGC as borrower under the Term Loan and Converted Term Loan. Newmark repaid the outstanding balance of the Term Loan as of March 31, 2018, and repaid the outstanding balance of the Converted Term Loan on November 6, 2018. For the years ended December 31, 2018 and 2017, $46.1 million and $2.7 million, respectively of interest expense on the obligations assumed as part of the Separation was included as part of discontinued operations in the table above. In addition, on March 19, 2018, the Company borrowed $150.0 million under the BGC Credit Agreement from Cantor, and loaned Newmark $150.0 million under the Intercompany Credit Agreement on the same day. All borrowings outstanding under the Intercompany Credit Agreement were repaid on November 7, 2018. The interest expense for the year ended December 31, 2018 related to the $150.0 million borrowed under the BGC Credit Agreement was $3.5 million and was allocated to discontinued operations in the table above. There was no such expense for the year ended December 31, 2017 to allocate to discontinued operations in the Company’s consolidated statements of operations.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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