INTL FCStone 2012 Annual Report Download

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2012
ANNUAL REPORT
INTL FCSTONE INC.

Table of contents

  • Page 1
    2012 ANNUAL R E P ORT I N T L F C STONE INC .

  • Page 2
    1 | 2012 INTL FCStone Annual Report FINANCIAL HIGHLIGHTS ADJUSTED ...International Monetary Market, bringing financial futures to the forefront of the industry. 1978 A new entity called Farmers Commodities Corporation was formed to accommodate the grain hedging brokerage services. 1981 International...

  • Page 3
    ... $18.5 million extraordinary gain related to the FCStone transaction. 1983 Farmers Commodities Corporation (FCC) became a clearing member of the Kansas City Board of Trade in 1983 and in 1985 purchased its first seat on the Chicago Board of Trade. 1994 International Assets was listed on NASDAQ...

  • Page 4
    ... INTL FCStone Annual Report EXECUTION, CLEARING AND ADVISORY SERVICES IN COMMODITIES, CAPITAL MARKETS AND CURRENCIES INTL FCStone Inc. is a Fortune 500 company, providing customers across the globe with execution and advisory services in commodities, capital markets, currencies, asset management...

  • Page 5
    4 | 2012 INTL FCStone Annual Report $328.7 $3.0 BILLION FAST FACTS • MILLION Ranked #30 on the 2012 Fortune 500 list of the largest U.S. corporations Executive management has significant ownership 1,074 Employees as of September 30, 2012 More than 20,000 customers in more than 100 countries ...

  • Page 6
    ... every financial services organization worldwide. More specifically, the FCM (Futures Commission Merchant) component of INTL FCStone's business has, like all FCMs, been affected by low interest rates, declining commodity trading volumes, the increasing use of technology to connect customers directly...

  • Page 7
    6 | 2012 INTL FCStone Annual Report I never forget that the principal asset of our business is its people, and I can assure you that your company has a team second to none and that therefore I have every confidence that the business will continue to grow and prosper. I can also assure you that ...

  • Page 8
    7 | 2012 INTL FCStone Annual Report CHIEF EXECUTIVE'S REPORT In fiscal year 2012, INTL FCStone experienced a second consecutive ...significant shortfall in customer funds. While the demise of MF Global in particular removed a substantial competitor of ours from the playing field, it also contributed ...

  • Page 9
    ...clearing firm for commercial coffee and cocoa customers that also offered energy and financial products. Tradewire, a Miami-based securities business with deep and broad institutional relationships throughout Latin America and Europe. The transaction was closed in mid-December, 2012. As part of our...

  • Page 10
    9 | 2012 INTL FCStone Annual Report With an emphasis on customized, hands-on customer service on behalf of under-served, under-banked and mostly middle-market companies in all industries in emerging markets and developed economies alike, INTL FCStone has created a resilient and effective service ...

  • Page 11
    10 | 2012 INTL FCStone Annual Report terms as well as in terms of Compound Annual Growth (CAG). Over the last five years, the CAG of adjusted operating revenues increased 46%, the CAG of net income from continuing operations before tax ...

  • Page 12
    11 | 2012 INTL FCStone Annual Report WE USE OUR EXPERTISE, TECHNOLOGY AND CAPITAL TO REDUCE RISK, PROTECT AND ENHANCE OUR CUSTOMERS' BOTTOM LINES, AND PROVIDE EFFICIENT SOLUTIONS IN MORE COMPLEX FINANCIAL MARKETS.

  • Page 13
    12 | 2012 INTL FCStone Annual Report OUR LOCATIONS HEADQUARTERS New York (US) 708 Third Avenue, Suite 1500 New York, NY 10017, USA Tel: +1 212 485 3500 Fax: +1 212 485 3505 www.intlfcstone.com US Offices Kansas City (MO) +1 800 255 6381 West Des Moines (IA) +1 800 422 3087 Chicago (IL) +1 800 504 ...

  • Page 14
    ... regulatory requirements. The Company has instituted a Code of Ethics that demands honest and ethical conduct from all employees. Specific topics covered are conflicts of interest, fair dealing, compliance with regulations and accurate financial reporting. EXECUTIVES The roles of Chairman and CEO...

  • Page 15
    ... Number 000-23554 INTL FCSTONE INC. (Exact name of registrant as specified in its charter) DELAWARE 59-2921318 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 708 Third Avenue, Suite 1500 New York, NY 10017 (Address of principal executive offices...

  • Page 16
    ..., Executive Officers and Corporate Governance...113 Executive Compensation...113 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...114 Certain Relationships and Related Transactions, and Director Independence...114 Principal Accountant Fees and Services...

  • Page 17
    ... about Forward-Looking Statements Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are...

  • Page 18
    ...risk management needs that could be effectively met by our services. We plan to expand our services into new business product lines and new geographic regions, particularly in Asia, Europe, Australia, Latin America and Canada. In executing this plan, we intend to both target new geographic locations...

  • Page 19
    ... and press releases are available in the Investor Relations section of this website. The Company's website also includes information regarding the Company's corporate governance, including the Company's Code of Ethics, which governs the Company's directors, officers and employees. Capabilities...

  • Page 20
    ... of Commodity and Risk Management Services, Foreign Exchange, Securities, Clearing and Execution Services, and Other. Commodity and Risk Management Services ("C&RM") We serve our commercial customers by providing high valueadded-service that differentiates the Company from our competitors and...

  • Page 21
    ...: the Chicago Board of Trade, the New York Mercantile Exchange and the COMEX Division; InterContinental Exchange, Inc. ("ICE") Futures US, formerly known as the New York Board of Trade, the Kansas City Board of Trade and the Minneapolis Grain Exchange ("MGEX"). As of September 30, 2012, FCStone, LLC...

  • Page 22
    ... of MF Global UK Limited On November 2011, the Company arranged with the trustee of MF Global's UK operations to hire more than 50 professionals from MF Global's metals trading business based in London. This business serves institutional investors and financial services firms in the Americas, Europe...

  • Page 23
    ... In October 2012, the Company reached an agreement in which Tradewire Securities, LLC, a Miami-based securities brokerdealer servicing customers throughout Latin America and a wholly-owned subsidiary of Tradewire Group Ltd., has agreed to transfer its institutional accounts to INTL FCStone Inc...

  • Page 24
    ...through a global network of partners. With its experienced team, Tradewire Securities, LLC services a wide range of customers, including hedge funds, pension funds, broker-dealers and banks located in Latin America, Caribbean, North America and Europe. Competition The international commodities and...

  • Page 25
    ...'s divisions: the Chicago Board of Trade, the New York Mercantile Exchange and COMEX, ICE Futures US, ICE Europe Ltd, the Minneapolis Grain Exchange and the Kansas City Board of Trade. These regulatory bodies are charged with protecting customers by imposing requirements relating to capital adequacy...

  • Page 26
    ... subject to a capital adequacy requirement. FCStone Commodity Services (Europe), Ltd. is domiciled in Ireland and subject to regulation by the Financial Regulator of Ireland, and is subject to a net capital requirement. INTL FCStone DTVM Ltda. ("INTL FCStone DTVM") is a registered broker-dealer and...

  • Page 27
    ..., Brazil, Uruguay, Paraguay, Mexico, Nigeria, Dubai, China, Australia and Singapore. INTL has established wholly-owned subsidiaries in Mexico and Nigeria but does not have offices or employees in those countries. FCStone Commodity Services (Europe) Ltd. is domiciled in Ireland and subject to...

  • Page 28
    ...ITEM 1A Risk Factors Employees As of September 30, 2012, we employed 1,074 people globally: 715 in the U.S., 2 in Canada, 63 in Argentina, 85 in Brazil, 13 in Uruguay, 6 in Paraguay, 112 in the United Kingdom, 8 in Ireland, 13 in Dubai, 27 in Singapore, 12 in China and 18 in Australia. None of our...

  • Page 29
    ..., including the Metals Division of MF Global UK Limited, TRX Futures Limited and Aporte DTVM. Additionally, subsequent to September 30, 2012 the Company has acquired Tradewire Securities, LLC. We will need to meet challenges to realize the expected benefits and synergies of these acquisitions...

  • Page 30
    ... the extent that we are 14 INTL FCSTONE INC. - Form 10-K The global financial crisis that started in 2008 has heightened many of the risks to which the Company is exposed. These risks have been further exacerbated by the current sovereign debt crisis in Europe. The financial crisis that started in...

  • Page 31
    ... volumes in our Commodity & Risk Management Services and Clearing and Execution Services segments. Substantial changes in commodities prices may affect the levels of business in the precious and base metals product lines. On October 31, 2011 MF Global Holdings Ltd. ("MF Global"), the parent company...

  • Page 32
    ... to address present credit concerns, default risk may arise from events or circumstances that are difficult to detect or foresee including rapid changes in securities, commodity and foreign exchange price levels. Some of our risk management methods depend upon the evaluation of information regarding...

  • Page 33
    ..., in large part, upon our management team who possess extensive knowledge and management skills with respect to securities, commodities and foreign exchange businesses operated by the Company. The unexpected loss of services of any of our executive officers could adversely affect our ability to...

  • Page 34
    ... filing of MF Global and actions taken by the CFTC on July 10, 2012 to freeze assets of Peregrine Financial Group, a futures 18 INTL FCSTONE INC. - Form 10-K commission merchant. Both matters resulted from potential deficiencies in customer segregated futures accounts. New or revised legislation...

  • Page 35
    ... data reporting obligations. Increased regulatory oversight could also impose administrative burdens on us related to, among other things, responding to regulatory examinations or investigations. We currently expect to register our subsidiary, INTL Hanley LLC, as a swap dealer on December 31, 2012...

  • Page 36
    ...also derive a significant portion of our revenues from commodities risk management services. The commodity risk management industry is very competitive and we expect competition to continue to intensify in the future. Our primary competitors in this industry include both large, diversified financial...

  • Page 37
    ...these services. In addition, the bankruptcy filing of MF Global and its disclosure of a potential deficiency in customer segregated futures accounts may ... relating to strategic relationships or acquisitions; and • risk factors and uncertainties set forth elsewhere in this Form 10-K. INTL FCSTONE ...

  • Page 38
    ... be adversely affected. ITEM 1B Unresolved Staff Comments We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our fiscal year 2012 that remain unresolved. 22 INTL FCSTONE INC. - Form 10-K

  • Page 39
    ... The Company maintains offices in New York, New York; Winter Park, Florida; West Des Moines, Iowa; Chicago, Illinois; Kansas City, Missouri; St. Louis, Missouri; Omaha, Nebraska; Minneapolis, Minnesota; Bloomington, Illinois; Miami, Florida; New Smyrna Beach, Florida; Indianapolis, Indiana; Spirit...

  • Page 40
    ... its investigation. During the quarter ended March 31, 2012, the Company was informed that the Staff of the SEC had closed its investigation of FCStone, and was not taking enforcement action against FCStone or any of its current or former officers. In February 2011, the Company's Board of Directors...

  • Page 41
    ...account on August 17, 2007, pursuant to the "safe harbor" provisions of Section 546(e) of the U.S. Bankruptcy Code. On April 17, 2012, FCStone... during October 2012. Judgment is expected during the first calendar quarter of 2013. ITEM 4 Mine Safety Disclosures Not applicable. INTL FCSTONE INC. -...

  • Page 42
    ... years of $100 invested on September 30, 2007 in each of the company's stock ("INTL"), S&P 500 Index and NYSE/Arca Securities Broker/Dealer Index 140 120 100 80 60 40 20 2007 INTL 2008 S&P 500 Index 2009 2010 NYSE/Arca Securities Broker/Dealer Index 2011 2012 26 INTL FCSTONE INC. - Form 10-K

  • Page 43
    ...Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 of our Annual Report...attributable to noncontrolling interests Net income attributable to INTL FCStone Inc. common stockholders $ 2012 457.7 $ 11.6 202.4 107.2 31...

  • Page 44
    ... - $ 296.3 $ ADJUSTED NONGAAP FINANCIAL INFORMATION UNAUDITED (in millions, except Employees) 2012 $ $ $ $ 457.7 19.3 15.0 ...related to the FCStone transaction. (c) The number of employees listed in 2009 includes the number of employees of FCStone as of September 30, 2009. 28 INTL FCSTONE...

  • Page 45
    ... Operations The following discussion should be read together with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Annual Report on Form 10-K. Certain statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward...

  • Page 46
    ... of MF Global UK Limited (in special administration). The Company has hired more than 50 professional staff based in London, New York, and Sydney from this metals trading business based in London. This business serves institutional investors and financial services firms in the Americas, Europe and...

  • Page 47
    ... of the LME metals team from MF Global in the first quarter of fiscal 2012. OTC contract volumes in our soft commodities product line increased 38% compared to 2011, driven by growth in Brazil, Mexico, Latin America and Europe. Despite the dampening effect of global economic conditions and the...

  • Page 48
    ..., which was renamed INTL FCStone (Europe) Limited, and the Company's subsequent acquisition of the LME metals team discussed above. These initiatives included the build out of our C&RM, CES, foreign exchange prime brokerage, and OTC derivative trading capabilities in London. While these initiatives...

  • Page 49
    ... prior year, resulting from drought related agricultural commodity volatility as well as strong volume growth in Mexico, Latin America and Europe. Operating revenues in the Foreign Exchange segment in 2012 increased primarily as a result of higher volumes in the global payments business and higher...

  • Page 50
    ... was due to increases in the average borrowings on our credit facilities, primarily related to base metals activities, during 2012. The increase was partially offset by a decrease in interest paid to customers, impact from the interest rate swaps discussed below and the result of the conversion of...

  • Page 51
    ... of our London offices, in conjunction with the acquisitions of Ambrian Commodities Limited, the LME metals team and TRX Futures Limited. Depreciation and amortization increased $2.5 million, primarily due to the increase in depreciation of additional information technology INTL FCSTONE INC. - Form...

  • Page 52
    ... over the last two years and expansion of our offices, primarily in London, Singapore and South America, business development and employee travel expenses increased $2.3 million in 2012 as compared to the prior year. Provision for Taxes: The effective income tax rate on a U.S. GAAP basis was 21%, in...

  • Page 53
    ...related to this disputed trade that was "given-up" to FCStone. Additionally in 2010, the Company recorded a $2.5 million provision against a receivable from a Dubai customer to whom INTL Commodities DMCC... of our offices in Australia, London, Singapore and South America, employee travel expenses ...

  • Page 54
    ... reports its operating segments based on services provided to customers. The following table shows information concerning the Company's principal business segments. (in millions) 2012 % Change Year Ended September 30, 2011 % Change 2010 SEGMENT RESULTS Commodity and Risk Management Services...

  • Page 55
    ... development, professional fees, bad debt expense, trade errors and direct marketing expenses. Commodity and Risk Management Services - Operating revenues under U.S. GAAP decreased from $252.6 million in 2011 to $246.0 million in 2012. Adjusted operating revenues INTL FCSTONE INC. - Form 10-K 39

  • Page 56
    ... $2.9 million to $123.1 million in 2012, compared to the prior year. This increase was a result of the agricultural commodity volatility noted above as well as strong growth in overall OTC contract volumes, particularly in Mexico, Latin America and Europe, which was partially offset by lower...

  • Page 57
    ... trader base compensation and benefits, operational employee compensation and benefits, communication and data services, business development, professional fees, bad debt expense, trade errors and direct marketing expenses. Commodity and Risk Management Services - Operating revenues under U.S. GAAP...

  • Page 58
    ...%, year-over-year. Segment income in 2011 was affected by increases in non-variable compensation and 42 INTL FCSTONE INC. - Form 10-K benefits and communications and data services primarily resulting from the acquisitions discussed above. Segment income in 2011 was also affected by bad debt expense...

  • Page 59
    ... in 2011. Segment income for 2010 includes the effect of a $2.3 million bad debt provision related to a disputed trade that was "given-up" to FCStone by another futures commission merchant for a customer that held an account with us, while 2011 includes a $1.3 million recovery of bad debt expense...

  • Page 60
    ...taxes, in connection with its class A shares of the KCBT held as of September 30, 2012, during the first quarter of fiscal year 2013. A ...limited basis, we provide credit thresholds to certain customers, based on internal evaluations and monitoring of customer creditworthiness. 44 INTL FCSTONE...

  • Page 61
    ...75 million. This line of credit is intended to provide short-term funding of margin to commodity exchanges as necessary. • A syndicated borrowing facility, committed until May 31, 2013, under which the Company's subsidiary, FCStone Merchant Services, LLC ("FCStone Merchants") is entitled to borrow...

  • Page 62
    ..., and is subject to a capital adequacy requirement. FCStone Commodity Services (Europe), Ltd. is domiciled in Ireland and subject to regulation by the Financial Regulator of Ireland, and is subject to a net capital requirement. INTL FCStone DTVM is a registered broker-dealer and regulated by the...

  • Page 63
    ...by authorities of the countries in which they operate. Excluding INTL FCStone DTVM, all other subsidiaries of the Company are in compliance with all of their capital regulatory requirements as of September 30, 2012. Additional information on these net capital and minimum net capital requirements can...

  • Page 64
    ...the consolidated financial statements at fair value or amounts that Critical Accounting Policies The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and 48 INTL FCSTONE INC...

  • Page 65
    ... losses related to...rates in effect at the close of business at the end of the accounting period. For foreign currency transactions completed during each reporting period, the foreign exchange rate... management... that new information becomes ...global income tax strategies. INTL FCSTONE INC. - Form 10-K 49

  • Page 66
    ... The Company's commodity trading activities are managed as one consolidated book for each commodity encompassing both cash positions and derivative instruments. The Company monitors the aggregate position for each commodity in equivalent physical ounces or metric tons. 50 INTL FCSTONE INC. - Form...

  • Page 67
    ... Consolidated Financial Statements for information on the interest rate swap transactions. The debt instruments are carried at their unpaid principal balance which approximates fair value. All of the Company's outstanding debt as of September 30, 2012, has a variable interest rate. INTL FCSTONE INC...

  • Page 68
    ... as the accompanying financial statement schedule. Our report dated December 12, 2012 expressed an unqualified opinion on those consolidated financial statements and the accompanying financial statement schedule. /s/ KPMG LLP Kansas City, Missouri December 12, 2012 52 INTL FCSTONE INC. - Form 10...

  • Page 69
    ...Sponsoring Organizations of the Treadway Commission (COSO), and our report dated December 12, 2012 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. /s/ KPMG LLP Kansas City, Missouri December 12, 2012 INTL FCSTONE INC. - Form 10-K 53

  • Page 70
    ... commodities inventory...Accounts payable and other accrued liabilities (including $14.8 and $22.3 at fair value at September 30, 2012...INTL FCStone Inc. stockholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY See accompanying notes to consolidated financial statements...

  • Page 71
    ... and management fees Interest income Other income Total revenues Cost of sales of physical commodities Operating revenues Interest expense Net revenues Non-interest expenses: Compensation and benefits Clearing and related expenses Introducing broker commissions Communication and data services...

  • Page 72
    ...Supplementary Data Consolidated Cash Flows Statements (in millions) 2012 $ Year Ended September 30...FCStone Impairment of INTL Sieramet Deconsolidation and impairment of Agora-X subsidiary Gain on acquisition of INTL... fair value Physical commodities inventory Other assets Accounts payable and other ...

  • Page 73
    ... ADDITIONAL CONSIDERATION PAYABLE RELATED TO ACQUISITIONS See accompanying notes to consolidated financial statements. $ $ $ 140.8 (9.6) - (4.0) (0.3) 1.9 0.2 129.0 (1.2) 15.7 220.6 236.3 $ 7.9 6.1 $ $ $ $ $ - 1.8 2.1 $ $ $ 16.7 4.9 5.4 $ $ $ - 39.8 26.3 INTL FCSTONE INC. - Form 10...

  • Page 74
    ...stock options Stock-based compensation Disposition or de-consolidation Repurchase of stock BALANCES AS OF SEPTEMBER 30, 2012 $ Total $ 240.5 5.1 (0.1) ...5.9 (4.0) (4.1) $ 0.2 $ 213.2 $ 112.0 $ (2.2) $ See accompanying notes to consolidated financial statements. 58 INTL FCSTONE INC. - Form 10-K

  • Page 75
    ... estimates. INTL FCStone Inc., a Delaware corporation, and its consolidated subsidiaries (collectively "INTL" or "the Company"), form a financial services group focused on domestic and select international markets. The Company's services include comprehensive risk management advisory services for...

  • Page 76
    ... $1.3 billion and $0.5 billion as of September 30, 2012 and 2011, respectively. Management has considered guidance required by the Transfers and Servicing Topic of the ASC as it relates to securities pledged by customers to margin their accounts. Based on a review of the agreements with the...

  • Page 77
    ... payable to customers with no impact recognized on the consolidated income statements. Payables to customers represent the total of customer accounts with credit or positive balances. Customer accounts are used primarily in connection with commodity transactions and include gains and losses on open...

  • Page 78
    ... each reporting period. The Company has classified certain U.S. government obligations, corporate debt ...statements. The Company utilizes derivative instruments to manage exposures to foreign currency, commodity price and interest rate risks for the Company and its customers. The Company's objectives...

  • Page 79
    ... contracts are accounted for as free-standing derivatives and reported in the ...statements as a component of 'trading gains, net' for the fiscal years ended 2012, 2011 and 2010. The Company does elect to value all of their commodities...Chicago Board of Trade INTL FCSTONE INC. - Form 10-K 63

  • Page 80
    ... Statements and Supplementary Data ("CBOT"), the Board of Trade of Kansas City, Missouri, Inc. ("KCBT"), the Minnesota Grain Exchange, the New York Mercantile Exchange ("NYMEX"), the COMEX Division of the New York Mercantile Exchange, Mercado de Valores de Buenos Aires S.A. ("MERVAL"), the Chicago...

  • Page 81
    ... various rates based on the type of account, the...salaries, incentive compensation, commissions, related payroll taxes and employee benefits. The Company classifies employees as either traders / risk management consultants, operational or administrative personnel, which includes the executive officers...

  • Page 82
    ...01 per share, in one or more classes or series to be established by the Company's board of directors. As of September 30, 2012 and 2011, no preferred shares were outstanding and the Company's board of directors had not yet established any class or series of shares. 66 INTL FCSTONE INC. - Form 10-K

  • Page 83
    ... under U.S. GAAP, the new standard requires disclosures to allow investors to better compare and understand significant quantitative differences in financial statements prepared under U.S. GAAP. The new standard is effective for annual periods beginning after January 1, 2013, and interim periods...

  • Page 84
    ... year ended September 30, 2013. It is expected that the adoption of this guidance will not have a material impact on the Company's consolidated financial statements. NOTE 2 Earnings per Share rights to receive dividends. Restricted stock awards granted to certain employees and directors and shares...

  • Page 85
    ...Exchanges & Clearing Limited. Notes payable and subordinated debt carry variable rates of interest and thus approximate fair value. The fair value estimates presented herein are based on pertinent information available to management as of September 30, 2012 and 2011. Although management is not aware...

  • Page 86
    ... based on internally developed models or methodologies utilizing significant inputs that are not readily observable from objective sources. Included in Level 3 are common stock and ADRs, some corporate and municipal bonds, some other investments and contingent liabilities. 70 INTL FCSTONE INC...

  • Page 87
    ...and American Depositary Receipts ("ADRs") Exchangeable foreign ordinary equities and ADRs Corporate and municipal bonds U.S. government obligations Foreign government obligations Derivatives Commodities leases Commodities warehouse receipts Exchange firm common stock Mutual funds and other Financial...

  • Page 88
    ... bonds U.S. government obligations Foreign government obligations Derivatives Commodities leases Commodities warehouse receipts Exchange firm common stock Mutual funds and other Investment in managed funds Financial instruments owned TOTAL ASSETS AT FAIR VALUE LIABILITIES: Accounts payable and...

  • Page 89
    ... funds and other Investment in managed funds $ LIABILITIES: Contingent liabilities $ 1.2 $ 8.0 0.4 0.6 10.2 $ - $ - - 0.2 0.2 $ (0.1) $ (1.7) - - (1.8) $ - (2.7) - $ 1.1 3.6 0.4 - 5.1 (0.8) (3.5) $ 32.3 $ - $ (2.9) $ 2.3 $ (9.4) $ - $ 22.3 INTL FCSTONE INC. - Form 10-K 73

  • Page 90
    ...actions taken in its capacity as a debenture holder. Judgment in the lawsuit filed by the previous owner is expected during the first quarter of 2013...on a recurring basis in accordance 74 INTL FCSTONE INC. - Form 10-K with ... downward limit price movements during the year ended September 30, 2012 and ...

  • Page 91
    ... 8 Financial Statements and Supplementary Data The Company has recorded unrealized gains of $90 thousand, net of income tax expense of $53 thousand related to U.S. government obligations and corporate bonds classified as available-for-sale securities in OCI as of September 30, 2012. The following...

  • Page 92
    ... gain in earnings in the first quarter of fiscal year 2013. The Company has recorded unrealized losses of $0.3 million, net of income tax benefit of $0.1 million in OCI related to remaining equity investments in exchange firms as of September 30, 2012. The Company has recorded unrealized losses of...

  • Page 93
    ...2012 and 2011, respectively. The Company's derivative contracts are principally held in its Commodities and Risk Management Services...rate swap contracts were entered into in order to hedge potential changes in cash flows resulting from the Company's variable rate LIBOR based borrowings. INTL FCSTONE...

  • Page 94
    ... consolidated income statements. reporting and control procedures, including establishing credit limits based upon a review of the counterparties' financial condition and credit ratings. The Company monitors collateral levels on a daily basis for compliance with regulatory and internal guidelines...

  • Page 95
    ...account deficit. Additionally, the Company recorded a $2.5 million charge to bad debt expense related to a Dubai customer to whom INTL Commodities DMCC had consigned gold. As a result of the acquisition of FCStone...million credit reserve as of September 30, 2010 were closed, and the deficit account ...

  • Page 96
    ... parties. See discussion of notes receivable related to commodity repurchase agreements in Note 13. NOTE 6 Physical Commodities Inventory credit facilities, as detailed further in Note 10. The carrying values of the Company's inventory as of September 30, 2012 and 2011 are shown below. September...

  • Page 97
    ... (in millions) Commodity and Risk Management Services Foreign Exchange Securities GOODWILL September 30, 2012 September 30, 2011 32.0 $ 30.9 6.3 6.3 5.3 5.3 $ 43.6 $ 42.5 $ NOTE 9 Intangible Assets Intangible assets acquired during the fiscal year ended September 30, 2012 relate to acquisitions...

  • Page 98
    ...financial covenants related to tangible net worth, as defined. FCStone Merchants was in compliance with this covenant as of September 30, 2012. FCStone Merchants paid minimal debt issuance costs in connection with this credit facility. The facility is guaranteed by the Company. 82 INTL FCSTONE INC...

  • Page 99
    ...8 Financial Statements and Supplementary Data Credit facilities and outstanding borrowings as of September 30, 2012 and 2011 were as follows: (in millions) Borrower Security Renewal/Expiration Date INTL FCStone Inc. Certain pledged shares October 1, 2013 INTL Commodities Certain commodities assets...

  • Page 100
    ... its investigation. During the quarter ended March 31, 2012, the Company was informed that the Staff of the SEC had closed its investigation of FCStone, and was not taking enforcement action against FCStone or any of its current or former officers. In February 2011, the Company's Board of Directors...

  • Page 101
    ... as of September 30, 2012, of which $9.3 million has not been paid and is included within 'accounts payable and other accrued liabilities' in the INTL FCSTONE INC. - Form 10-K Contractual Commitments Contingent Liabilities - Acquisitions Under the terms of the purchase agreements, related to the...

  • Page 102
    ... million, for fiscal years ended 2012, 2011 and 2010, respectively. The expenses associated with the operating leases and service obligations are reported in the consolidated income statements within occupancy and equipment rental, clearing and related and other expenses. Future aggregate minimum...

  • Page 103
    ... subject to a capital adequacy requirement. FCStone Commodity Services (Europe), Ltd. is domiciled in Ireland and subject to regulation by the Financial Regulator of Ireland, and is subject to a net capital requirement. INTL FCStone DTVM Ltda. ("INTL FCStone DTVM") is a registered broker-dealer and...

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    ... INTL FCStone DTVM, all other subsidiaries of the Company are in compliance with all of their regulatory requirements as of September 30, 2012, as follows: (in millions) Subsidiary FCStone, LLC FCStone, LLC FCStone, LLC INTL FCStone (Europe) INTL FCStone (Europe) INTL Global Currencies Limited...

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    ... inventory at a future date at either a fixed or floating rate, as of September 30, 2012 and 2011 was $92.5 million and $24.3 million, respectively. The obligations outstanding related to commodities sold under repurchase agreements that are recorded within 'broker-dealers, clearing organizations...

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    PART II ITEM 8 Financial Statements and Supplementary Data The following is a summary of stock option activity for the year ended September 30, 2012: Shares Available for Grant 750,481 1,000,000 (925,000) 46,500 49,431 921,412 Number of Options Outstanding 1,344,646 Weighted Weighted Average ...

  • Page 107
    ...million and $4.6 million as of September 30, 2012 and 2011, respectively. The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic pension cost during fiscal 2013 is $0.8 million. INTL FCSTONE INC. - Form 10-K 91

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    ... pension cost for the years ended September 30, 2012 and 2011: 2012 Weighted average assumptions: Discount rate Expected return on assets 4.80% 7.30% Year Ended September 30, 2011 5.30% 7.30% 2010 5.90% 8.25% To account for the defined benefit pension plans in accordance with the guidance in the...

  • Page 109
    ...manager, but should recognize the need to satisfy both the volatility and the rate of return objectives for equity exposure and satisfy the objective... reporting date. Equity securities did not include any INTL FCStone Inc. common stock as of September 30, 2012 and 2011, respectively. INTL FCSTONE ...

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    ... basis (at least annually) as of September 30, 2012 and 2011. For additional information and a detailed description...markets, benchmark yields and securities, reported trades, issuer spreads, and/...relating to those instruments were held as of September 30, 2011. 94 INTL FCSTONE INC. - Form 10-K

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    ....5 Defined Contribution Retirement Plans Effective December 31, 2009, the Company discontinued its Savings Incentive Match Plan for Employees IRA ("SIMPLE IRA"), which allowed participating U.S. employees of INTL FCStone to contribute up to 100% of their salary, but not more than statutory limits...

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    ...: (in millions) 2012 $ (5.7) 0.5 10.1 4.9 (0.5) 4.4 Year Ended September 30, 2011 $ 9.1 1.7 9.9 20.7 1.8 22.5 $ 2010 - 0.4 4.8 5.2 1.2 6.4 Current taxes: U.S. Federal U.S. State and local International Total current taxes Deferred taxes INCOME TAX EXPENSE $ $ $ 96 INTL FCSTONE INC. - Form...

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    ...2012 $ $ U.S. International INCOME FROM CONTINUING OPERATIONS, BEFORE TAX Year Ended September 30, 2011 (13.7) $ 27.3 $ 33.0 32.2 19.3 $ 59.5 $ 2010 4.4 13.5 17.9 Items accounting for the difference between income taxes computed at the federal statutory rate.... INTL FCSTONE INC. - Form 10-K 97

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    ... tax benefits is as follows: (in millions) 2012 $ Balance, beginning of year Gross increases for tax positions related to current year Gross increases for tax positions related to prior years Gross decreases for tax positions of prior years Settlements Lapse of statute of limitations Balance...

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    ... portal for the global coffee industry. Coffee Network provides up-to-the-minute news and in-depth analysis to subscribers around the globe from a network of correspondents and commodity analysts located in key coffee producing and consuming regions. These services provide a unique information...

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    ... 8 Financial Statements and Supplementary Data Aporte DTVM In February 2012, the Company's subsidiaries, INTL Participacoes LTDA and FCStone do Brasil, acquired 100% of the shares of Aporte DTVM. Following the acquisition, Aporte DTVM was renamed INTL FCStone DTVM Ltda. INTL FCStone DTVM is based...

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    ...Asset Management, LLC; HGC Advisory Services, LLC; Hanley Alternative Trade Group, LLC and HGC Office Services, LLC (the "Hanley Companies"). The Hanley Companies were engaged in the business of acting as market makers and dealers in exchange traded options and futures on soft commodities; executing...

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    ... II ITEM 8 Financial Statements and Supplementary Data the exercise of the Option is 187,500 shares. The restricted shares will be subject to restrictions on transfer which will lapse at the rate of one-third per year over the three year period commencing on June 30, 2013. The Option Agreement was...

  • Page 119
    .... The subsidiary operated an asset management business in Dubai. Subsequent to the sale of its subsidiary, the Company liquidated its position in the INTL Trade Finance Fund Limited, a fund managed by INTL Capital. This fund invested primarily in global trade finance-related assets. For 2010, the...

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    ...Geographic Information The Company reports its operating segments based on services provided to customers. The Company's activities are divided into the following five functional areas: • Commodity and Risk Management Services • Foreign Exchange • Securities • Clearing and Execution Services...

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    ... operating segments to a centralized corporate treasury function in exchange for an intercompany receivable asset. The intercompany receivable asset is eliminated during consolidation, and therefore this practice may impact reported total assets between segments. INTL FCSTONE INC. - Form 10-K 105

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    ..., 2012 $ As of September 30, 2011 1,540.8 146.1 104.8 734.4 43.4 66.2 2,635.7 Total assets: Commodity and Risk Management Services Foreign Exchange Securities Clearing and Execution Services Other Corporate unallocated TOTAL $ 1,449.2 $ 124.5 88.7 1,090.9 110.8 94.8 2,958.9 $ 106 INTL FCSTONE...

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    ...individual investors directly and through a global network of partners. With its experienced team, Tradewire Securities, LLC services a wide range of customers, including hedge funds, pension funds, broker-dealers and banks located in Latin America, Caribbean, North America and Europe. INTL FCSTONE...

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    ...at September 30, 2012 and 11,557 shares at September 30, 2011 Additional paid-in capital Retained earnings (1) Total INTL FCStone Inc. (Parent...Condensed Balance Sheets and Condensed Statements of Operations of INTL FCStone Inc. - Parent Company Only, the Company has accounted for its investment in ...

  • Page 125
    ... I INTL FCStone Inc. Condensed Statements of Operations Parent Company Only (in millions) Revenues: Trading gains, net Commission and clearing fees Interest income Other income (2) Total revenues Interest expense Net revenues Non-interest expenses: Compensation and benefits Clearing and related...

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    ...INTL FCStone Inc. Condensed Statements of Cash Flows SCHEDULE I INTL FCStone Inc. Condensed Statements...of stock options Income tax benefit on stock options and awards ...and financing activities: Conversion of subordinated notes to common stock, net 2012 $ (14.5) Year Ended September 30, 2011 $ (10.0) ...

  • Page 127
    ...the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures were effective as of September 30, 2012. Management's Report on Internal Control Over Financial Reporting The management of INTL FCStone Inc. is responsible...

  • Page 128
    ...the Company's internal controls over financial reporting that occurred during the quarter ended September 30, 2012 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. ITEM 9B Other Information None. 112 INTL FCSTONE INC...

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    ...of the code to our Chief Executive Officer, Chief Financial Officer, or Chief Accounting Officer, we will disclose the nature of the amendment or waiver on that website or in a report on Form 8-K. ITEM 11 Executive Compensation Information relating to our executive officer and director compensation...

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    ... in the 2013 Proxy Statement and is incorporated herein by reference. ITEM 14 Principal Accountant Fees and Services Information regarding principal accountant fees and services will be included in the 2013 Proxy Statement and is incorporated herein by reference. 114 INTL FCSTONE INC. - Form...

  • Page 131
    ... the Company's Proxy Statement on Form 14A filed with the SEC on January 13, 2012). Chief Executive Officer Employment Agreement, effective September 1, 2007, between FCStone Group, Inc. and Paul G. Anderson (incorporated by reference from the Current Report on Form 8-K filed by FCStone Group, Inc...

  • Page 132
    ... USA LLC, as an additional Issuing Bank (incorporated by reference from the Company's Current Report on Form 8-K filed with the SEC on September 20, 2012). Credit Agreement, effective on October 29, 2010, by and between International Assets Holding Corporation and INTL Global Currencies Limited...

  • Page 133
    ... and Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTL FCStone Inc. /S/ SEAN M. O'CONNOR Sean M. O'Connor Chief Executive Officer December 12, 2012 Dated: Pursuant to the requirements of the Securities and...

  • Page 134
    ...Global Services Ltd. INTL Capital S.A. INTL CIBSA Sociedad de Bolsa S.A. INTL Commodities DMCC INTL Commodities Mexico S de RL de CV INTL Commodities, Inc. INTL FCStone Capital Assessoria Financeira Ltda. INTL FCStone DTVM Ltda. INTL FCStone (Europe) Ltd. INTL FCStone (Netherlands) B.V. INTL FCStone...

  • Page 135
    ...and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of September 30, 2012, which reports appear in the September 30, 2012 annual report on Form 10-K of the Company. /s/ KPMG LLP Kansas City, Missouri December 12, 2012 INTL FCSTONE INC...

  • Page 136
    ... and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 12, 2012 /S/ SEAN M. O'CONNOR Sean M. O'Connor Chief Executive Officer...

  • Page 137
    ... report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 12, 2012 /S/ WILLIAM J. DUNAWAY William J. Dunaway Chief Financial Officer...

  • Page 138
    ...-Oxley Act of 2002 In connection with the Annual Report of INTL FCStone Inc. (the Company) on Form 10-K for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Sean M. O'Connor, Chief Executive Officer of the Company, certify...

  • Page 139
    ...-Oxley Act of 2002 In connection with the Annual Report of INTL FCStone Inc. (the Company) on Form 10-K for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, William J. Dunaway, Chief Financial Officer of the Company, certify...

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    Designed and Published by Labrador-company.com

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    ... Street New York, NY 10019 COMPANY INFORMATION To receive Company material, including additional copies of this annual report, Forms 10-K or 10-Q, or to obtain information on other matters of investor interest, please contact Chief Financial Officer Bill Dunaway at the Shareholder Relations address...

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    708 Third Avenue, Suite 1500 New York, NY 10017, USA Tel: +1 212 485 3500 www.intlfcstone.com