INTL FCStone 2011 Annual Report Download - page 57

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INTL FCSTONE INC.Form10K 43
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
pay U.S. taxes to repatriate these funds, up to the amount of
undistributed earnings of $75.7million. However, our intent is
to inde nitely reinvest these funds outside of the U.S., and our
current plans do not demonstrate a need to repatriate them to
fund our U.S. operations.
As of September30,2011, approximately $9.8million of the
Company’s nancial instruments owned and $23.8million of
nancial instruments sold, not yet purchased, are exchangeable
foreign equities and ADRs.
As of September30,2011, the Company had four committed
bank credit facilities and an uncommitted forward contract
for commodities agreement, totaling $375.0million and
$50.0million, respectively, of which $77.4million was
outstanding. e credit facilities include:
•
A one-year revolving syndicated loan facility, committed until
September20,2012, under which the Company’s subsidiary,
INTL Commodities,Inc. (“INTL Commodities”) is entitled
to borrow up to $140million, subject to certain conditions.
e loan proceeds are used to fi nance the activities of INTL
Commodities.
•
A three-year syndicated loan facility, committed until
October1,2013, under which INTLFCStoneInc. is entitled
to borrow up to $85million, subject to certain conditions. e
loan proceeds are used to fi nance working capital needs of the
Company and certain subsidiaries.
•
A one-year unsecured syndicated line of credit, committed
until June18,2012, under which FCStone,LLC is entitled
to borrow up to $75million. is line of credit is intended to
provide short-term funding of margin to commodity exchanges
as necessary.
•
A one-year syndicated borrowing facility, committed until
October9,2012, under which the Company’s subsidiary,
FCStone Financial,Inc. is entitled to borrow up to $75million,
subject to certain conditions. e loan proceeds are used to
fi nance traditional commodity fi nancing arrangements or the
purchase of eligible commodities from sellers who have agreed
to sell and later repurchase such commodities from FCStone
Financial,Inc.
•
An uncommitted forward contract for commodities agreement
established on June23,2011, under which the Company’s
subsidiary, FCStone Merchant Services,LLC (“FCStone
Merchant Services”) is entitled to borrow up to $50million to
fund forward contracts on specifi ed commodities. e forward
contract commodity transactions include a simultaneous
agreement from the lender to purchase specifi ed commodities
from FCStone Merchant Services and to sell the same specifi ed
commodities to FCStone Merchant Services, on a forward
sale basis.
e Company’s facility agreements contain certain fi nancial
covenants relating to fi nancial measures on a consolidated basis,
as well as on a certain stand-alone subsidiary basis, including
minimum net worth, minimum working capital, minimum
regulatory capital, minimum net unencumbered liquid assets,
minimum equity, minimum interest coverage and leverage
ratios and maximum net loss. Failure to comply with any such
covenants could result in the debt becoming payable on demand.
e Company and its subsidiaries are in compliance with all
of its fi nancial covenants under the outstanding facilities. e
three-year syndicated loan facility agreement also includes a
negative covenant prohibiting consolidated capital expenditures
to exceed $3.5million annually. e Company’s consolidated
capital expenditures during fi scal2011 exceeded $3.5million,
and the Company requested and was granted a waiver from
the lenders, dated September27,2011, waiving the limitation
on consolidated capital expenditures for the fi scal year ended
September30,2011. e Company intends to discuss amendment
of the consolidated capital expenditures covenant with the lender
in fi scal2012.
In September,2006, the Company completed a private placement
of $27.0million of subordinated convertible notes (the “Notes”).
As of September30,2010, $16.7million in principal amount of
the Notes remained outstanding. During 2011, the holders in
the outstanding principal amounts of the Notes converted the
remaining principal and accrued interest into 778,703shares of
common stock of the Company.
In April2009, the Company acquired Compania Inversora
BursatilS.A. Sociedad de Bolsa, a leading securities broker-dealer
based in Argentina. e Company paid $1.7million on the date of
purchase and was obligated to make additional payments over the
following two years, depending on the level of revenues achieved.
e Company paid an additional $0.8million in May2010, based
on the level of revenues achieved, as additional consideration
and recorded additional goodwill on the consolidated balance
sheets. e net revenues for the twelve-month period ended
March31,2011 were below the minimum target, so there is no
further consideration related to the acquisition.
In April,2010, the Company acquired the RMI Companies.
e purchase price consists of an initial payment in 2010 of
$6.0million, a payment in 2011 of $3.1million, based on the
net income of the RMI Companies for the twelve month period
ended March31,2011, and two contingent payments which
will be based on the net income of the RMI Companies for each
of the next two twelve-month periods ending March31,2012
and 2013. e present value of the estimated total purchase
price, including contingent consideration, is $15.2million as of
September30,2011, of which $6.1million has not been paid
and is included within ‘accounts payable and other liabilities’
in the consolidated balance sheets.
In July,2010, the Company acquired the Hanley Companies. e
purchase price consists of payments in 2010 of $25.7million,
two payments in 2011 equaling $12.4million, two additional
payments equal to 15% of the adjusted earnings before interest and
taxes (the “Adjusted EBIT”) of the soft commodities derivatives
business of the Hanley Companies and INTL Hanley,LLC (the
“Derivatives Division” ) for each of the next two twelve-month