INTL FCStone 2012 Annual Report Download - page 118
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Please find page 118 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.Form10K102
PART II
ITEM 8 Financial Statements and Supplementary Data
the exercise of the Option is 187,500 shares. e 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 June30, 2013. e Option Agreement was included in
determining the fair value of the contingent consideration.
e Company obtained a third-party valuation of the intangible
assets and contingent liabilities, and allocated the purchase
costs among tangible assets, identi ed intangible assets, with
determinable useful lives, intangible assets with inde nite lives
and goodwill. Purchase costs allocated to intangible assets with
determinable useful lives are amortized over the remaining useful
lives of the assets. e intangible assets and goodwill recognized
in this transaction were assigned to the C&RM segment. e
intangible assets recognized include customer relationships
of $0.2 million ( ve year useful life); software programs and
platforms of $1.2 million ( ve year useful life), non-compete
agreements of $2.9 million (three year useful life) and trade name
of $0.1 million (inde nite useful life). Goodwill is calculated as
the excess of the fair value of the consideration transferred over
the fair value of the identi ed net assets acquired and liabilities
assumed. Purchase costs allocated to goodwill were $18.7 million.
As part of the acquisition of the Hanley Companies, the Company
acquired a majority interest in the Blackthorn Fund. See additional
discussion of the Blackthorn Fund in Note1.
Provident Group
In September2010, the Company acquired certain assets of
Provident Group (“Provident”), a New York-based investment
banking and advisory rm. Under terms of the acquisition
agreement, the Company acquired assets secured the services of
the individual sellers, as set forth in the agreement. Provident is
engaged in the business of providing investment banking services.
Provident will play a critical role in building out a comprehensive
investment banking and advisory platform delivering nancing
solutions to the middle market.
e purchase price for the assets and services of the sellers was
$5.0 million. Subsequent to closing, the individual sellers placed
the entire purchase price into an escrow account and the funds
were used to purchase outstanding shares of the Company on
the open market. ere were 214,325 shares purchased and
placed into escrow as a result of this agreement, with 8,700
shares being purchased during 2010, and 205,625 shares being
purchased during 2011. e entire purchase price was recorded
as a reduction in additional paid in capital as shares held in
escrow for business combinations. e shares held in escrow
for business combinations will be released to the individual
sellers, over a ve year period from the date of closing based on
net pro ts, in accordance with the provisions of the acquisition
agreement. As dividend and voting rights on these shares reside
with the sellers throughout the time they are held in escrow,
they are considered participating securities under the two-class
method. Upon the release of the shares, they will be owned by
the individual sellers free and clear of any further encumbrance
under the acquisition agreement or the custody agreement and
the Company will reduce the shares held in escrow for business
combinations amounts. However, if the terms of the agreement
are not met, the remaining shares will be forfeited and the
remaining shares and balance in the shares held in escrow for
business combinations will be recorded as treasury stock. During
the year ended September30, 2012, 3,255 shares were earned
and subsequently released to the sellers.
e Company obtained a third-party valuation of the intangible
assets and allocated the purchase costs among tangible assets, an
identi ed intangible asset, with a determinable useful life, and an
intangible asset with an inde nite life. Purchase price consideration
of $0.2 million was allocated to customer relationships, an
intangible asset with a determinable useful life of two years,
over which the cost will be amortized. Purchase costs allocated
to intangible assets with inde nite lives were $0.2 million, and
relate to a trade name. e intangible assets recognized in this
transaction were assigned to the Securities segment. Negative
goodwill of $0.4 million was recognized as a gain on bargain
purchase in the consolidated income statement as a result of the
identi cation of intangible assets upon completion of purchase
accounting during the rst quarter of 2011.
NOTE 19 Discontinued Operations
As of December31, 2009, the Company owned 80% of
the shares outstanding of Agora-X, LLC (“Agora”) and the
Company’s consolidated balance sheet and income statement as
of December31, 2009, re ected the Company’s consolidation of
Agora. On February12, 2010, the Company and NASDAQ OMX
(“NASDAQ”), the non-controlling interest holder prior to this
purchase transaction, signed a restructuring agreement, e ective
January1, 2010, whereby NASDAQ acquired an additional 65%
interest in Agora in exchange for an investment of $6.6 million.
In accordance with the Consolidation Topic of the ASC, since
the Company no longer had a controlling nancial interest, it
deconsolidated the subsidiary from the date of the agreement. e
Company retained a 15% noncontrolling ownership interest in
Agora. e Company recorded its retained noncontrolling interest
percentage under the equity method, in accordance with the
guidance in the Investments – Equity Method and Joint Ventures
Topic of the ASC. On June10, 2010, the board of directors
of Agora agreed to discontinue the operations of the entity. In
evaluating the fair value of the Company’s investment in Agora
during the third quarter of scal year 2010, it was determined that
its carrying value would no longer be recoverable and was in fact
impaired. e Company wrote down its investment in Agora to