INTL FCStone 2011 Annual Report Download - page 107

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INTL FCSTONE INC.Form10K 93
PART II
ITEM 8 Consolidated Financial Statements and Supplementary Data
Services Authority granted its approval of the change of control
of Ambrian. e transaction was eff ective on August31,2011,
subsequently, Ambrian was renamed INTLFCStone (Europe)Ltd.
(“INTLFCStone Europe”). INTLFCStone Europe, a non-clearing
LME member, specializes in the development and execution of
risk-management programs designed to hedge price fl uctuations
in base metals for a wide variety of producers, manufacturers and
fabricators. INTLFCStone Europe has a niche focus on smaller
industrial clients, including lead recyclers, brass producers, zinc
galvanizers, metal refi neries and copper foil producers that use LME
futures and options for hedging raw material costs or output prices.
At closing, the Company paid $7.1million, representing the
net asset value of Ambrian less certain intercompany balances
due to Ambrian from its affi liates. ere was no contingent
consideration associated with this transaction.
e Company has allocated the purchase costs among tangible
assets. ere were no intangible assets or goodwill recognized
in this transaction.
Acquisitions in 2010
During fi scal year2010, the Company acquired three separate
business groups, Risk Management Incorporated and RMI
Consulting, Inc, Hanley Group and Provident Group, which were
not considered signifi cant on an individual or aggregate basis.
e Company’s consolidated fi nancial statements include the
operating results of each business from the dates of acquisition.
Risk Management Incorporated and
RMI Consulting, Inc.
In April2010, the Company acquired all of the outstanding
capital stock of Risk Management Incorporated and RMI
Consulting,Inc. (the “RMI Companies”). e RMI Companies
provides execution and consulting services to some of the largest
natural gas consumers in North America, including municipalities
and large manufacturing fi rms, as well as major utilities. In
addition to the risk-management and brokerage services, the
RMI Companies also off er a wide range of other programs,
including a proprietary on-line energy procurement platform.
e acquisition adds extensive and proven expertise in the
natural gas, electricity and related energy markets where the
RMI Companies have a leading presence, as well as a broad
range of long-term relationships with some major organizations.
e purchase price for the acquisition of the RMI Companies
consisted of an initial payment of $6.0million, which was
paid during the year ended September30,2010, a payment of
$3.1million, based on the net income of the RMI Companies for
the twelve-month period ended March31,2011, which was paid
during the year ended September30,2011 and two contingent
payments. See Note14 for discussion of the contingent payments.
e present value of the estimated total purchase price, including
contingent consideration, is $15.2million.
e Company obtained a third-party valuation of the intangible
assets and contingent liabilities, and allocated the purchase
costs among tangible assets, identifi ed intangible assets, with
determinable useful lives, intangible assets with indefi nite lives
and goodwill. Purchase costs allocated to intangible assets with
determinable useful lives are amortized over the remaining
useful lives of the assets. e intangible assets and goodwill
recognized in this transaction were assigned to the Consulting
and Risk Management (“C&RM”) segment. e intangible assets
recognized included customer relationships of $7.0million (20
year useful life); software programs and platforms of $0.8million
(5 year useful life) and trade name of $1.2million (indefi nite
useful life). e goodwill is calculated as the excess of the fair
value of the consideration transferred over the fair value of the
identifi ed net assets acquired and liabilities assumed. Purchase
costs allocated to goodwill were $7.7million. e Company’s
consolidated fi nancial statements include the operating results
of the RMI Companies from the date of acquisition.
Hanley Group
In July2010, the Company entered into a Purchase Agreement
to acquire all of the outstanding membership interests in HGC
Tr a d i n g , L L C ; H G C A s s e t M a n a g e m e n t , L L C ; H G C A d v i s o r y
Services,LLC; Hanley Alternative Trade Group,LLC and HGC
Offi ce Services,LLC (the “Hanley Companies”). e Hanley
Companies are engaged in the business of acting as market
makers and dealers in exchange traded options and futures on
soft commodities; executing and trading derivatives on soft
commodities in the over the counter market; and providing
related advisory services.
e purchase price for the acquisition of the Hanley Companies
consisted of an initial payment of $7.5million, which was paid
during the year ended September30,2010, two payments equaling
$24.3million, for the adjusted net asset value of the Hanley
Companies as of June30,2010, of which $18.2million and
$6.1million was paid during the year ended September30,2011
and 2010, respectively, a payment of $6.3million, based on
specifi c results of the Hanley Companies for the twelve-month
period ended June30,2011, which was paid during the year
ended September30,2011, two annual contingent payments
and a fi nal contingent payment. See Note14 for discussion of
the contingent payments. e present value of the estimated total
purchase price, including contingent consideration is $51.6million.
At the closing under the Purchase Agreement, the Company
and the sellers of the Hanley Companies entered into an option
agreement (the “Option Agreement”), pursuant to which the
sellers of the Hanley Companies have the right to elect, in their
discretion, to receive up to thirty percent (30%) of the fi nal
contingent EBIT Payment in the form of restrictedshares of the
common stock of the Company. e Option may be exercised
by the sellers of the Hanley Companies at any time during the
twenty day period commencing on June30,2013. e option
price will be equal to the greater of: (i) $16.00 per share, or (ii)