INTL FCStone 2011 Annual Report Download - page 25

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INTL FCSTONE INC.Form10K 11
PARTI
ITEM 1A Risk Factors
Business Risks
e Company seeks to mitigate the market and credit risks
arising from its fi nancial trading activities through an active risk
management program. e principal objective of this program
is to limit trading risk to an acceptable level while maximizing
the return generated on the risk assumed.
e Company has a defi ned risk policy which is administered by
the Company’s risk committee, which reports to the Company’s
audit committee. e Company has established specifi c exposure
limits for inventory positions in every business, as well as specifi c
issuer limits and counterparty limits. ese limits are designed
to ensure that in a situation of unexpectedly large or rapid
movements or disruptions in one or more markets, systemic
fi nancial distress, the failure of a counterparty or the default of an
issuer, the potential estimated loss will remain within acceptable
levels. e audit committee reviews the performance of the risk
committee on a quarterly basis to monitor compliance with the
established risk policy.
Employees
As of September30,2011, we employed 904people globally:
660 in the U.S., 4 in Canada, 56 in Argentina, 68 in Brazil,
10 in Uruguay, 46 in the UnitedKingdom, 7 in Ireland, 16 in
Dubai, 20 in Singapore, 4 in China and 13 in Australia. None of
our employees operate under a collective bargaining agreement,
and we have not suff ered any work stoppages or labor disputes.
Many of our employees are subject to employment agreements,
certain of which contain non-competition provisions.
ITEM 1A Risk Factors
e Company faces a variety of risks that could adversely impact
its fi nancial condition and results of operations.
e risks faced by the Company include the following:
Our ability to achieve consistent profi tability is
subject to uncertainty due to the nature of our
businesses and the markets in which we operate
During the fi scal year ended September30,2011 we recorded net
income of $37.3million, compared to net income of $5.4million
in 2010, which included a $7.0million extraordinary loss
related to purchase price adjustments and the correction of
immaterial errors on the FCStone transaction, and net income
of $27.6million in 2009, which included an $18.5million
extraordinary gain related to the FCStone transaction in 2009.
Our revenues and operating results may fl uctuate signifi cantly
in the future because of the following factors:
•
Market conditions, such as price levels and volatility in the
securities, commodities and foreign exchange markets in
which we operate;
•
Changes in the volume of our market making and trading
activities;
•
Changes in the value of our fi nancial instruments, currency and
commodities positions and our ability to manage related risks;
• e level and volatility of interest rates;
• e availability and cost of funding and capital;
•
Our ability to manage personnel, overhead and other expenses;
•Changes in execution and clearing fees;
• e addition or loss of sales or trading professionals;
•Changes in legal and regulatory requirements; and
•General economic and political conditions.
Although we are continuing our eff orts to diversify the sources
of our revenues, it is likely that our revenues and operating
results will continue to fl uctuate substantially in the future and
such fl uctuations could result in losses. ese losses could have
a material adverse eff ect on our business, fi nancial condition
and operating results.
e manner in which we account for our
commodities inventory and forward commitments
may increase the volatility of our reported earnings
Our net income is subject to volatility due to the manner in
which we report our commodities inventory. is inventory is
stated at the lower of cost or fair value. e Company generally
mitigates the price risk associated with its commodities inventory
through the use of derivatives. is price risk mitigation does not
generally qualify for hedge accounting under U.S. GAAP. In such