INTL FCStone 2011 Annual Report Download - page 59

Download and view the complete annual report

Please find page 59 of the 2011 INTL FCStone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 142

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142

INTL FCSTONE INC.Form10K 45
PARTII
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
$209.0million was provided by operating activities, $21.5million
was used in investing activities and net cash of $48.4million was
used in nancing activities, of which $37.5million was repaid
on lines of credit and decreased the amounts payable to lenders
under loans and overdrafts, $9.4million was paid out as earn-outs
on acquisitions and $0.5million was repayment of subordinated
debt. Fluctuations in exchange rates had no material e ect on
the Company’s cash and cash equivalents.
e Company is continuously evaluating opportunities to expand
its business. During 2011, the Company paid $9.3million,
included in investing activities, for acquisitions, and $9.4million in
payments, included in fi nancing activities, relating to earn-outs on
acquisitions. See Note18 to the Consolidated Financial Statements
for additional information on acquisitions. Capital expenditures
included in investing activities for property, plant and equipment
totaled $10.1million in 2011, increasing signifi cantly from
$4.7million in 2010. Continuing expansion of the Company’s
activities will require funding and will have an eff ect on liquidity.
Apart from what has been disclosed above, there are no known
trends, events or uncertainties that have had or are likely to have
a material impact on the liquidity, fi nancial condition and capital
resources of the Company.
Contractual Obligations
e following table summarizes our cash payment obligations as of September30,2011:
(in millions)
Total
Payments Due by Period
Less than 1 year 1 - 3 Years 3 - 5 Years After 5 Years
Operating lease obligations $ 43.6 $ 7.3 $ 12.5 $ 10.4 $ 13.4
Purchase obligations(1) 941.2 941.2 — — —
Contingent acquisition consideration 26.1 9.6 14.0 2.5 —
Other 15.9 4.2 6.8 2.2 2.7
$ 1,026.8 $ 962.3 $ 33.3 $ 15.1 $ 16.1
(1) Represents an estimate of contractual purchase commitments in the ordinary course of business primarily for the purchase of precious and base metals. Unpriced
contract commitments have been estimated using September30,2011 fair values.
To ta l c on tr ac t u al ob li ga t i on s e xc l u de d e fi ned benefi t pension
obligations. In 2012, we anticipate making contributions of
$2.0million to defi ned benefi t plans. Additional information
on the funded status of these plans can be found within Note17
of the Consolidated Financial Statements.
Based upon our current operations, we believe that cash fl ow from
operations, available cash and available borrowings under our
credit facilities will be adequate to meet our future liquidity needs.
Off Balance Sheet Arrangements
e Company is party to certain fi nancial instruments with off -
balance sheet risk in the normal course of business as a registered
securities broker-dealer and futures commission merchant and
from its market-making and proprietary trading in the foreign
exchange and commodities trading business. As part of these
activities, the Company carries short positions. For example, it sells
fi nancial instruments that it does not own, borrows the fi nancial
instruments to make good delivery, and therefore is obliged to
purchase such fi nancial instruments at a future date in order to
return the borrowed fi nancial instruments. e Company has
recorded these obligations in the consolidated fi nancial statements
at September30,2011 and September30,2010, at fair value
of the related fi nancial instruments, totaling $390.9million
and $189.6million, respectively. ese positions are held to
off set the risks related to fi nancial assets owned, and reported
in the Company’s consolidated balance sheets within ‘fi nancial
instruments owned, at fair value’, and ‘physical commodities
inventory’. e Company will incur losses if the fair value of the
fi nancial instruments sold, not yet purchased, increases subsequent
to September30,2011, which might be partially or wholly off set
by gains in the value of assets held as of September30,2011. e
total of $390.9million and $189.6million includes a net liability
of $122.9million and $87.6million for derivatives, based on their
fair value as of September30,2011 and September30,2010,
respectively.
In the Company’s foreign exchange and commodities trading
business segments, the Company will hold options and futures
contracts resulting from market-making and proprietary trading
activities in the Company’s foreign exchange/commodities trading
business segment. e Company assists its customers in its
commodities trading business to protect the value of their future
production (precious or base metals) by selling them put options
on an OTC basis. e Company also provides its commodities
trading business customers with sophisticated option products,
including combinations of buying and selling puts and calls.
e Company mitigates its risk by eff ecting off setting options
with market counterparties or through the purchase or sale
of exchange-traded commodities futures. e risk mitigation
of off setting options is not within the documented hedging
designation requirements of the Derivatives and Hedging Topic
of the ASC.
In the Company’s C&RM segment, when transacting OTC and
foreign exchange contracts with our customers, our OTC and
foreign exchange trade desks will generally off set the customer’s
transaction simultaneously with one of our trading counterparties