INTL FCStone 2011 Annual Report Download - page 26

INTL FCSTONE INC.Form10K12
PARTI
ITEM 1A Risk Factors
situations, any unrealized gains in inventory are not recognized
under U.S. GAAP, but unrealized gains and losses in related
derivative positions are recognized under U.S. GAAP. Additionally,
in certain circumstances, U.S. GAAP does not require us to refl ect
changes in estimated values of forward commitments to purchase
and sell commodities.  e forward commitments to purchase and
sell commodities, which the Company does not refl ect within the
consolidated balance sheets, qualify for the normal purchases and
sales exception in the Derivatives and Hedging Topic of the ASC.
As a result, the Company’s reported earnings from this business
segment are subject to greater volatility than the earnings from
our other business segments.
Our indebtedness could adversely aff ect our
fi nancial conditions
As of September30,2011, our total consolidated indebtedness
to lenders was $77.4million, and we expect to increase our
indebtedness in the future as we continue to expand our business.
Our indebtedness could have important consequences, including:
• increasing our vulnerability to general adverse economic and
industry conditions;
• requiring that a portion of our cash fl ow from operations be
used for the payment of interest on our debt, thereby reducing
our ability to use our cash fl ow to fund working capital, capital
expenditures, acquisitions and general corporate requirements;
• limiting our ability to obtain additional fi nancing to fund future
working capital, capital expenditures, acquisitions and general
corporate requirements;
• limiting our fl exibility in planning for, or reacting to, changes
in our business and the securities industry; and
• restricting our ability to pay dividends or make other payments.
We may be able to incur additional indebtedness in the future,
including secured indebtedness. If new indebtedness is added
to our current indebtedness levels, the related risks that we now
face could intensify.
Committed credit facilities currently available to
the Company might not be renewed
We currently have four committed credit facilities under which
we may borrow up to $375.0million, consisting of:
• a $140.0million facility available to our wholly owned subsidiary,
INTL Commodities, for its commodities trading activities,
committed until September20,2012.
• a $75.0million facility available to our wholly owned subsidiary,
FCStone,LLC, for short-term funding of margin to commodity
exchanges, committed until June18,2012.
• an $85.0million facility available to the Company and INTL
Global Currencies, for general working capital requirements,
committed until October1,2013.
• a $75.0million committed facility available to our wholly owned
subsidiary, FCStone Financial, for fi nancing commodity repurchase
agreements, committed until October9,2012.
It is possible that these facilities might not be renewed at the
end of their commitment periods and that we will be unable
to replace them with other facilities. If our credit facilities are
unavailable or insuffi cient to support future levels of business
activities, we may need to raise additional funds externally, either
in the form of debt or equity. If we cannot raise additional funds
on acceptable terms, we may not be able to develop or enhance
our business, take advantage of future opportunities or respond
to competitive pressure or unanticipated requirements, leading
to reduced profi tability.
 e failure of the Company to successfully integrate
the operations of businesses acquired by the
Company in the last twenty-four months could
have a material adverse eff ect on the Company’s
business, fi nancial condition and operating results
Since September30,2009, the Company has acquired several
businesses, including FCStone, the RMI Companies, the Hanley
Companies, Provident, Hencorp Futures and Ambrian. We will
need to meet signifi cant challenges to realize the expected benefi ts
and synergies of these acquisitions.  ese challenges include:
• integrating the management teams, strategies, cultures, technologies
and operations of the acquired companies;
• retaining and assimilating the key personnel of acquired companies;
•retaining existing clients of the acquired companies;
• creating uniform standards, controls, procedures, policies and
information systems; and
• achieving revenue growth because of risks involving (1) the ability
to retain clients, (2) the ability to sell the services and products
of the acquired companies to the existing clients of our other
business segments, and (3) the ability to sell the services and
products of our other business segments to the existing clients
of the acquired companies.
 e accomplishment of these objectives will involve considerable
risk, including:
• the potential disruption of each company’s ongoing business and
distraction of their respective management teams;
•unanticipated expenses related to technology integration; and
•potential unknown liabilities associated with the acquisition.
It is possible that the integration process could result in the loss of
the technical skills and management expertise of key employees, the
disruption of the ongoing businesses or inconsistencies in standards,
controls, procedures and policies due to possible cultural confl icts
or diff erences of opinions on technical decisions and product
road maps that adversely aff ect the Company’s ability to maintain
relationships with clients, software developers, customers and
employees or to achieve the anticipated benefi ts of the acquisition.