INTL FCStone 2012 Annual Report Download - page 101
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Please find page 101 of the 2012 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.INTL FCSTONE INC.Form10K 85
PART II
ITEM 8 Financial Statements and Supplementary Data
to Sentinel’s sale of certain assets, Sentinel led for bankruptcy
protection and $15.5 million of FCStone, LLC’s $21.9 million
in invested funds were returned to it.
In August2008, the bankruptcy trustee of Sentinel led adversary
proceedings against FCStone, LLC and a number of other FCMs
in the Bankruptcy Court for the Northern District of Illinois.
e case was subsequently reassigned to the United States District
Court, for the Northern District of Illinois. In the complaint, the
trustee is seeking avoidance of alleged transfers or withdrawals
of funds received by FCStone, LLC and other FCMs within 90
days prior to the ling of the Sentinel bankruptcy petition, as
well as avoidance of post-petition distributions and disallowance
of the proof of claim led by FCStone, LLC. e trustee seeks
recovery of pre- and post-petition transfers totaling approximately
$15.5 million. In April2009, the trustee led an amended
complaint adding a claim for unjust enrichment. FCStone, LLC
answered the complaints and all parties entered into the discovery
phase of the litigation. On January21, 2011 the trustee led a
motion for summary judgment against FCStone, LLC on various
counts in the adversary proceedings led in August2008 against
FCStone, LLC and a number of other FCMs. On January13,
2012, FCStone, LLC led a motion for summary judgmentin
its favor with respect tothe transferof approximately $1.1
million to its customer segregated account on August17, 2007,
pursuant to the “safe harbor” provisions of Section546(e) of the
U.S. Bankruptcy Code.On April17, 2012, FCStone, LLC and
all other FCM Defendants led a motion to dismiss a portion
of the Trustee’s claims set forth in its amended complaint. e
trial of this matter took place during October2012. Judgment
is expected during the rst calendar quarter of 2013.
Contractual Commitments
Contingent Liabilities - Acquisitions
Under the terms of the purchase agreements, related to the
acquisitions listed below, the Company has obligations to pay
additional consideration if speci c conditions and earnings
targets are met. In accordance with the Business Combinations
Topic of the ASC, the fair value of the additional consideration
is recognized as a contingent liability as of the acquisition date.
e contingent liability for these estimated additional purchase
price considerations are included within ‘accounts payable and
other accrued liabilities’ in the consolidated balance sheets as of
September30, 2012 and 2011. e acquisition date fair value
of additional consideration is remeasured to its fair value each
reporting period, with changes in fair value recorded in current
earnings.
The Company has a contingent liability relating to the
November2011 acquisition of Co ee Network, LLC, subsequently
reorganized as a division of FCStone, LLC, which may result
in the payment of additional purchase price consideration, see
Note18 for discussion of the acquisition. e acquisition date
fair value of additional consideration was estimated to be less
than $0.1 million. e contingent liability recorded represents
the fair value of the expected consideration to be paid, based
on the forecasted adjusted pre-tax net earnings during the three
annual periods following the closing of the acquisition plus a
nal contingent payment, and a discount rate being applied to
those future payments.
The Company has a contingent liability relating to the
October2010 acquisition of Hencorp Becstone Futures, L.C.,
subsequently reorganized as a division of FCStone, LLC,
(“Hencorp Futures”), which may result in the payment of
additional purchase price consideration, see Note18 for discussion
of the acquisition. e acquisition date fair value of additional
consideration was estimated to be $2.3 million. e contingent
liability recorded represents a contingent payment of $0.3 million
based on adjusted pre-tax net earnings of Hencorp Futures for
scal 2012 and the fair value of the expected consideration to
be paid, based on the forecasted adjusted pre-tax net earnings
during the third and fourth scal years following the closing of
the acquisition and a discount rate being applied to those future
payments. e Company expects to make cash payments of $0.3
million, $0.4 million and $2.3 million in scal 2013, 2014 and
2015, respectively, related to this contingent liability. e change
in fair value during the years ended September30, 2012 and
2011 were increases of $0.1 million and $0.5 million, respectively,
included within ‘other’ in the consolidated income statements.
e present value of the estimated total purchase price, including
contingent consideration, is $6.5 million as of September30,
2012, of which $2.5 million has not been paid and is included
within ‘accounts payable and other accrued liabilities’ in the
consolidated balance sheets. e present value of the estimated
total purchase price, including contingent consideration, was
$6.4 million as of September30, 2011.
e Company has a contingent liability relating to the July2010
acquisition of the Hanley Companies, which may result in the
payment of additional purchase price consideration, see Note18
for discussion of the acquisition. e acquisition date fair value
of additional consideration was estimated to be $15.6 million.
e contingent liability recorded represents contingent payments
equal to 15% of the adjusted earnings before interest and taxes
of the soft commodities derivatives business of the acquired
Hanley Companies and INTL Hanley, LLC (the “Derivatives
Division”) for the twelve-month period ending June30, 2013
and a nal contingent payment based on the cumulative adjusted
earnings before interest and taxes of the Derivatives Division
for the three year period commencing on July1, 2010, with
a discount rate being applied to those future payments. e
Company expects to make a cash payment of $10.0 million in
scal 2013 related to this contingent liability. e change in
fair value for the years ended September30, 2012 and 2011
were increases of $2.0 million and $4.2 million, respectively,
included within ‘other’ in the consolidated income statements.
e present value of the estimated total purchase price, including
contingent consideration, is $53.5 million as of September30,
2012, of which $9.3 million has not been paid and is included
within ‘accounts payable and other accrued liabilities’ in the