Exhibit 99.2
Unaudited Pro Forma Consolidated Financial Information
FXCM Inc.
As of and For the Six Months Ended June 30, 2016
and For the Year Ended December 31, 2015
Unaudited Pro Forma Consolidated Financial Information
On September 1, 2016, FXCM Inc. (“FXCM” or the "Company") and Leucadia National Corporation (“Leucadia”) amended the terms of the Amended and Restated Credit Agreement (the "Credit Agreement") and terminated the Amended and Restated Letter Agreement (the "Letter Agreement"), each dated January 24, 2015. Among other amendments, the maturity date of the Credit Agreement has been extended by one year to January 16, 2018. Effective September 1, 2016, the Letter Agreement is replaced with the Amended and Restated Limited Liability Company Agreement of FXCM Group, LLC (the “LLC Agreement”), pursuant to which Leucadia owns a 49.9% membership interest in FXCM Group, LLC ("FXCM Group") and FXCM Holdings, LLC ("FXCM Holdings") owns a 50.1% membership interest in FXCM Group. Concurrently with the execution of the LLC Agreement, (1) FXCM Group and FXCM Holdings entered into a Management Agreement, pursuant to which FXCM Holdings manages the assets and day-to-day operations of FXCM Group, and (2) FXCM Group adopted a 2016 Incentive Bonus Plan for Founders and Executives under which participants are entitled to certain distributions made after Leucadia’s principal and interest under the Credit Agreement are repaid. The events described herein are collectively referred to as the "Restructuring Transaction."
The accompanying unaudited pro forma consolidated financial information is based on the historical consolidated financial statements of the Company (excluding amounts related to discontinued operations in the historical consolidated statements of operations), after giving effect to the Restructuring Transaction, and reflects the assumptions and adjustments described in the accompanying notes. The Unaudited Pro Forma Consolidated Statement of Financial Condition gives effect to the Restructuring Transaction as if it had occurred on June 30, 2016. The Unaudited Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2016 and for the year ended December 31, 2015 give effect to the Restructuring Transaction as if it had occurred on January 1, 2015.
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 Restructuring 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 information is presented for informational purposes only and is not necessarily indicative of what the financial position and results of operations actually would have been had the Restructuring Transaction been completed as of the date or for the periods presented, nor does such financial information purport to represent the results of future periods.
The unaudited pro forma consolidated financial information 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 Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 and its Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Unaudited Pro Forma Consolidated Statement of Financial Condition
As of June 30, 2016
(In thousands)
| | Historical
FXCM Inc. | | Pro Forma
Adjustments | | Pro Forma
FXCM Inc. |
| Assets | | | | | |
| Current assets | | | | | |
| Cash and cash equivalents | $ | 208,707 | | | $ | — | | | $ | 208,707 | |
| Cash and cash equivalents, held for customers | 662,392 | | | — | | | 662,392 | |
| Due from brokers | 2,071 | | | — | | | 2,071 | |
| Accounts receivable, net | 1,468 | | | — | | | 1,468 | |
| Tax receivable | 21 | | | — | | | 21 | |
| Current assets held for sale | 199,730 | | | — | | | 199,730 | |
| Total current assets | 1,074,389 | | | — | | | 1,074,389 | |
| Deferred tax asset | 15 | | | — | | | 15 | |
| Office, communication and computer equipment, net | 35,505 | | | — | | | 35,505 | |
| Goodwill | 25,363 | | | — | | | 25,363 | |
| Other intangible assets, net | 9,670 | | | — | | | 9,670 | |
| Other assets | 12,393 | | | — | | | 12,393 | |
| Total assets | $ | 1,157,335 | | | $ | — | | | $ | 1,157,335 | |
| Liabilities and Stockholders' Deficit | | | | | |
| Current liabilities | | | | | |
| Customer account liabilities | $ | 662,392 | | | $ | — | | | $ | 662,392 | |
| Accounts payable and accrued expenses | 41,597 | | | — | | | 41,597 | |
| Due to brokers | 12,176 | | | — | | | 12,176 | |
| Current liabilities held for sale | 13,690 | | | — | | | 13,690 | |
| Total current liabilities | 729,855 | | | — | | | 729,855 | |
| Deferred tax liability | 280 | | | — | | | 280 | |
| Senior convertible notes | 157,795 | | | — | | | 157,795 | |
| Credit Agreement | 180,153 | | | — | | | 180,153 | |
| Derivative liability — Letter Agreement | 209,458 | | | (209,458 | ) | (a) | — | |
| Other liabilities | 13,543 | | | — | | | 13,543 | |
| Total liabilities | 1,291,084 | | | (209,458 | ) | | 1,081,626 | |
| | | | | | |
| Redeemable non-controlling interest | — | | | 112,653 | | (b) | 112,653 | |
| | | | | | |
| Stockholders' Deficit | | | | | |
| Class A common stock | 56 | | | — | | | 56 | |
| Class B common stock | 1 | | | — | | | 1 | |
| Additional paid-in-capital | 268,112 | | | 65,731 | | (c) | 333,843 | |
| Accumulated deficit | (421,414 | ) | | — | | | (421,414 | ) |
| Accumulated other comprehensive loss | (766 | ) | | — | | | (766 | ) |
| Total stockholders’ deficit, FXCM Inc. | (154,011 | ) | | 65,731 | | | (88,280 | ) |
| Non-controlling interests | 20,262 | | | 31,074 | | (c) | 51,336 | |
| Total stockholders’ deficit | (133,749 | ) | | 96,805 | | | (36,944 | ) |
| Total liabilities, Redeemable non-controlling interest and stockholders’ deficit | $ | 1,157,335 | | | $ | — | | | $ | 1,157,335 | |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial information.
Unaudited Pro Forma Consolidated Statement of Operations
For the Six Months Ended June 30, 2016
(In thousands, except per share data)
| | Historical
FXCM Inc.(1) | | Pro Forma
Adjustments | | Pro Forma
FXCM Inc. |
| Revenues | | | | | |
| Trading revenue | $ | 138,705 | | | $ | — | | | $ | 138,705 | |
| Interest income | 1,109 | | | — | | | 1,109 | |
| Brokerage interest expense | (427 | ) | | — | | | (427 | ) |
| Net interest revenue | 682 | | | — | | | 682 | |
| Other income | 2,684 | | | — | | | 2,684 | |
| Total net revenues | 142,071 | | | — | | | 142,071 | |
| Operating Expenses | | | | | |
| Compensation and benefits | 49,177 | | | — | | | 49,177 | |
| Referring broker fees | 19,579 | | | — | | | 19,579 | |
| Advertising and marketing | 10,284 | | | — | | | 10,284 | |
| Communication and technology | 14,121 | | | — | | | 14,121 | |
| Trading costs, prime brokerage and clearing fees | 1,737 | | | — | | | 1,737 | |
| General and administrative | 38,980 | | | — | | | 38,980 | |
| Bad debt recovery | (141 | ) | | — | | | (141 | ) |
| Depreciation and amortization | 14,193 | | | — | | | 14,193 | |
| Total operating expenses | 147,930 | | | — | | | 147,930 | |
| Operating loss | (5,859 | ) | | — | | | (5,859 | ) |
| Other Income (Expense) | | | | | |
| Gain (loss) on derivative liabilities — Letter & Credit Agreements | 227,360 | | | (239,000 | ) | (d) | (11,640 | ) |
| Loss on equity method investments, net | 338 | | | — | | | 338 | |
| Interest on borrowings | 41,755 | | | (7,258 | ) | (e) | 34,497 | |
| Income (loss) from continuing operations before income taxes | 179,408 | | | (231,742 | ) | | (52,334 | ) |
| Income tax provision | 143 | | | — | | | 143 | |
| Income (loss) from continuing operations | 179,265 | | | (231,742 | ) | | (52,477 | ) |
| Net income (loss) from continuing operations attributable to non-controlling interest in FXCM Holdings, LLC | 57,378 | | | (67,852 | ) | (f) | (10,474 | ) |
| Net loss from continuing operations attributable to redeemable non-controlling interest | — | | | (20,368 | ) | (g) | (20,368 | ) |
| Net income from continuing operations attributable to other non-controlling interests | 122 | | | — | | | 122 | |
| Income (loss) from continuing operations attributable to FXCM Inc. | $ | 121,765 | | | $ | (143,522 | ) | (h) | $ | (21,757 | ) |
| | | | | | |
| Weighted average shares of Class A common stock outstanding — Basic and Diluted | 5,603 | | | | | 5,603 | |
| Income (loss) per share from continuing operations attributable to stockholders of Class A common stock of FXCM Inc. — Basic and Diluted | $ | 21.73 | | | | | $ | (3.88 | ) |
| (1) | Historical FXCM Inc. information has been revised to exclude amounts related to discontinued operations |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial information.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2015
(In thousands, except per share data)
| | Historical
FXCM Inc.(1) | | Pro Forma
Adjustments | | Pro Forma
FXCM Inc. |
| Revenues | | | | | |
| Trading revenue | $ | 250,042 | | | $ | — | | | $ | 250,042 | |
| Interest income | 1,827 | | | — | | | 1,827 | |
| Brokerage interest expense | (818 | ) | | — | | | (818 | ) |
| Net interest revenue | 1,009 | | | — | | | 1,009 | |
| Other income | 151,227 | | | — | | | 151,227 | |
| Total net revenues | 402,278 | | | — | | | 402,278 | |
| Operating Expenses | | | | | |
| Compensation and benefits | 93,413 | | | — | | | 93,413 | |
| Referring broker fees | 54,827 | | | — | | | 54,827 | |
| Advertising and marketing | 14,932 | | | — | | | 14,932 | |
| Communication and technology | 33,545 | | | — | | | 33,545 | |
| Trading costs, prime brokerage and clearing fees | 3,952 | | | — | | | 3,952 | |
| General and administrative | 58,436 | | | — | | | 58,436 | |
| Bad debt expense | 256,950 | | | — | | | 256,950 | |
| Depreciation and amortization | 28,331 | | | — | | | 28,331 | |
| Goodwill impairment loss | 9,513 | | | — | | | 9,513 | |
| Total operating expenses | 553,899 | | | — | | | 553,899 | |
| Operating loss | (151,621 | ) | | — | | | (151,621 | ) |
| Other Expense | | | | | |
| Loss on derivative liability — Letter Agreement | 354,657 | | | (354,657 | ) | (d) | — | |
| Loss on equity method investments, net | 467 | | | — | | | 467 | |
| Interest on borrowings | 126,560 | | | (10,516 | ) | (e) | 116,044 | |
| Loss from continuing operations before income taxes | (633,305 | ) | | 365,173 | | | (268,132 | ) |
| Income tax provision | 181,198 | | | — | | | 181,198 | |
| Loss from continuing operations | (814,503 | ) | | 365,173 | | | (449,330 | ) |
| Net loss from continuing operations attributable to non-controlling interest in FXCM Holdings, LLC | (301,130 | ) | | 159,766 | | (f) | (141,364 | ) |
| Net loss from continuing operations attributable to redeemable non-controlling interest | — | | | (72,352 | ) | (g) | (72,352 | ) |
| Net income from continuing operations attributable to other non-controlling interests | 227 | | | — | | | 227 | |
| Loss from continuing operations attributable to FXCM Inc. | $ | (513,600 | ) | | $ | 277,759 | | (h) | $ | (235,841 | ) |
| | | | | | |
| Weighted average shares of Class A common stock outstanding — Basic and Diluted | 5,087 | | | | | 5,087 | |
| Loss per share from continuing operations attributable to stockholders of Class A common stock of FXCM Inc. — Basic and Diluted | $ | (100.96 | ) | | | | $ | (46.36 | ) |
| (1) | Historical FXCM Inc. information has been revised to exclude amounts related to discontinued operations |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial information.
Notes to Unaudited Pro Forma Consolidated Financial Information
Note 1— Basis of Pro Forma Presentation
On September 1, 2016, FXCM Inc. (“FXCM” or the "Company") and Leucadia National Corporation (“Leucadia”) amended the terms of the Amended and Restated Credit Agreement (the "Credit Agreement") and terminated the Amended and Restated Letter Agreement (the "Letter Agreement"), each dated January 24, 2015. Among other amendments, the maturity date of the Credit Agreement has been extended by one year to January 16, 2018. The Letter Agreement was replaced with the Amended and Restated Limited Liability Company Agreement of FXCM Group, LLC (the “LLC Agreement”), pursuant to which Leucadia owns a 49.9% membership interest in FXCM Group, LLC ("FXCM Group") and FXCM Holdings, LLC ("FXCM Holdings") owns a 50.1% membership interest in FXCM Group. Leucadia will be entitled to receive additional distributions of proceeds that, when added to its 49.9% membership interest, result in the following distribution percentages:
| | Waterfall under the LLC Agreement |
| Amounts due under the Credit Agreement | 100% Leucadia |
| Next $350 million | 45% Leucadia / 45% FXCM / 10.0% FXCM Management |
| Next $500 million | 79.2% Leucadia / 8.8% FXCM / 12.0% FXCM Management |
| All aggregate amounts thereafter | 51.6% Leucadia / 34.4% FXCM / 14.0% FXCM Management |
Concurrently with the execution of the LLC Agreement, (1) FXCM Group and FXCM Holdings entered into a Management Agreement pursuant to which FXCM Holdings will control the significant decisions of FXCM Group by managing the assets and day-to-day operations, and (2) FXCM Group adopted a 2016 Incentive Bonus Plan for Founders and Executives under which participants are entitled to certain distributions made after Leucadia’s principal and interest under the Credit Agreement are repaid. The events described herein are collectively referred to as the "Restructuring Transaction."
The unaudited pro forma consolidated financial information is based on the historical consolidated financial statements of the Company (excluding amounts related to discontinued operations in the historical consolidated statements of operations), after giving effect to the Restructuring Transaction, and reflects the assumptions and adjustments described below. The Unaudited Pro Forma Consolidated Statement of Financial Condition gives effect to the Restructuring Transaction as if it had occurred on June 30, 2016. The Unaudited Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2016 and for the year ended December 31, 2015 give effect to the Restructuring Transaction as if it had occurred on January 1, 2015. 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 Restructuring 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 information is presented for informational purposes only and is not necessarily indicative of what the financial position and results of operations actually would have been had the Restructuring Transaction been completed as of the date or for the periods presented, nor does such financial information purport to represent the results of future periods.
The unaudited pro forma consolidated financial information 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 Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 and its Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Note 2— Pro Forma Adjustments
Adjustments included in the column under the heading "Pro Forma Adjustments" represent the following:
| (a) | Adjustment to reflect the elimination of the derivative liability associated with the Letter Agreement resulting from the termination and exchange of the Letter Agreement for the issuance of a 49.9% non-controlling membership interest in FXCM Group to Leucadia. |
Notes to Unaudited Pro Forma Consolidated Financial Information
Note 2— Pro Forma Adjustments (continued)
| (b) | Adjustment to reflect the issuance of a 49.9% non-controlling membership interest in FXCM Group to Leucadia. The cash distributions from FXCM Group will be allocated between its members based on the contractual waterfall as described in Note 1. The waterfall is deemed to be a substantive profit sharing arrangement and the non-controlling interest is determined on a hypothetical liquidation at book value method (the “HLBV method”) which is based on amounts each member would hypothetically receive at the balance sheet date assuming FXCM Group was liquidated at the recorded amounts in accordance with generally accepted accounting principles and distributed according to such formula. As described in Note 1, actual cash distributions to members of FXCM Group will differ. |
| (c) | As transactions with other non-controlling shareholders are recorded in equity, the difference between adjustments (a) and (b) above is allocated between the controlling and non-controlling shareholders of FXCM Holdings based on their respective ownership interests of FXCM Holdings. |
| (d) | Adjustment to reflect the elimination of the mark-to-market gain/loss on the fair value of the derivative liability associated with the Letter Agreement resulting from the termination and exchange of the Letter Agreement for a 49.9% non-controlling membership interest in FXCM Group held by Leucadia. The loss on the fair value of the derivative liability associated with the Credit Agreement does not impact these pro forma adjustments. |
| (e) | Net adjustment to reflect the changes to the amortization of original issue discount, issuance fee discount, debt issuance costs, deferred financing fee and deferred interest resulting from the extension of the maturity date of the Credit Agreement by one year. |
| (f) | Effect of the pro forma adjustments on net income (loss) from continuing operations attributable to non-controlling interest in FXCM Holdings as a result of the change in (g) below. |
| (g) | Effect of the pro forma adjustments on net income (loss) from continuing operations attributable to the non-controlling interest in FXCM Group held by Leucadia determined using the HLBV method described in (b) above. |
| (h) | Effect of the pro forma adjustments on net income (loss) from continuing operations attributable to FXCM Inc. as a result of the change in (g) above. |
