INTL FCStone 2012 Annual Report Download - page 28
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Please find page 28 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.Form10K12
PART I
ITEM 1A Risk Factors
Employees
As of September30, 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 employees operate under a collective
bargaining agreement, and we have not su ered any work
stoppages or labor disputes. Many of our employees are subject
to employment agreements, certain of which contain non-
competition provisions.
ITEM 1A Risk Factors
e Company faces a variety of risks that could adversely impact
its nancial condition and results of operations.
e risks faced by the Company include the following:
Our ability to achieve consistent pro tability is
subject to uncertainty due to the nature of our
businesses and the markets in which we operate.
During the scal year ended September30, 2012 we recorded
net income of $15.0 million, compared to net income of $37.3
million in 2011, net income of $5.4 million in 2010 (which
included a $7.0 million extraordinary loss related to purchase
price adjustments and the correction of immaterial errors on the
FCStone transaction), and net income of $27.6 million in 2009
(which included an $18.5 million extraordinary gain related to
the FCStone transaction in 2009 ).
Our revenues and operating results may uctuate signi cantly
in the future because of the following factors:
•
Market conditions, such as price levels and volatility in the
commodities, securities and foreign exchange markets in
which we operate;
•
Changes in the volume of our market making and trading
activities;
•
Changes in the value of our nancial instruments, currency and
commodities positions and our ability to manage related risks;
• e level and volatility of interest rates;
• e availability and cost of funding and capital;
•
Our ability to manage personnel, overhead and other expenses;
•Changes in execution and clearing fees;
• e addition or loss of sales or trading professionals;
•Changes in legal and regulatory requirements; and
•General economic and political conditions.
Although we are continuing our e orts to diversify the sources
of our revenues, it is likely that our revenues and operating
results will continue to uctuate substantially in the future and
such uctuations could result in losses. ese losses could have
a material adverse e ect on our business, nancial condition
and operating results.
e manner in which we account for
our commodities inventory and forward
commitments may increase the volatility of our
reported earnings.
Our net income is subject to volatility due to the manner in
which we report our commodities inventory. is inventory is
stated at the lower of cost or fair value. e Company generally
mitigates the price risk associated with its commodities inventory
through the use of derivatives. is price risk mitigation does
not generally qualify for hedge accounting under U.S. GAAP.
In such situations, any unrealized gains in inventory are not
recognized under U.S. GAAP, but unrealized gains and losses
in related derivative positions are recognized under U.S. GAAP.
Additionally, in certain circumstances, U.S. GAAP does not require
us to re ect changes in estimated values of forward commitments
to purchase and sell commodities. e forward commitments to
purchase and sell commodities, which the Company does not
re ect within the consolidated balance sheets, do not qualify as a
derivative under the Derivatives and Hedging Topic of the ASC.
As a result, the Company’s reported earnings from these business
segments are subject to greater volatility than the earnings from
our other business segments.
Our indebtedness could adversely a ect our
nancial condition.
As of September30, 2012, our total consolidated indebtedness
to lenders was $218.2 million, and we expect to increase our
indebtedness in the future as we continue to expand our business.
Our indebtedness could have important consequences, including:
•
increasing our vulnerability to general adverse economic and
industry conditions;
•
requiring that a portion of our cash ow from operations be
used for the payment of interest on our debt, thereby reducing