INTL FCStone 2012 Annual Report Download - page 49
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Please find page 49 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 33
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
2012 Operating Revenues vs. 2011
Operating Revenues
e Company’s operating revenues under U.S. GAAP for 2012
and 2011 were $457.7 million and $423.2 million, respectively.
is 8% increase in operating revenue was primarily driven by
42% and 31% increases in the CES and Securities segments,
respectively. In addition, there were increases in operating
revenues of 6% in the Foreign Exchange segment and 9% in
the Other segment, which were partially o set by a 3% decrease
in the operating revenues in the C&RM segment compared to
the prior year.
e Company’s adjusted operating revenues were $ 464.5 million
in 2012, compared with $414.8 million in 2011, an increase of
$49.7 million, or 12%. e only di erence between operating
revenues and adjusted operating revenues, a non-GAAP measure,
is the gross marked-to-market adjustment of $6.8 million and
$(8.4) million for 2012 and 2011, respectively. e gross marked-
to-market adjustment only a ects the adjusted operating revenues
in the C&RM and Other segments. Adjusted operating revenues
increased 3% and 15% in the C&RM and Other segments,
respectively, compared to the prior year.
Adjusted operating revenues are identical to operating revenues
in all other segments.
Operating revenues decreased slightly in the C&RM segment
in 2012, primarily due to $14.4 million decrease in operating
revenues in the precious metals product line due to a tightening
of spreads and a decrease in the number of ounces traded caused
by low market volatility. Adjusted operating revenues in the
precious metals product line decreased $7.3 million in 2012
compared to the prior year. Operating revenues and adjusted
operating revenues in our base metals product line increased $7.6
million and $14.8 million, respectively, primarily as a result of
the addition of the LME metals team in the rst quarter of 2012.
e LME metals team added $21.8 million in both operating
and adjusted operating revenues in 2012.
Within the C&RM segment, operating revenues in the soft
commodity product line were relatively unchanged in 2012
compared to the prior year at $206.9 million, as a $1.8 million
decline in exchange traded commission and clearing fee revenue
and a $2.8 million decline in interest income were nearly o set by
increases in both OTC and consulting fee revenues. e decline
in exchange traded commission and clearing fee revenues was
primarily related to lost revenues from clients introduced to MF
Global during the rst quarter of 2012, while interest income
continued to be constrained by slightly lower customer deposits
and lower short term interest rates. OTC volumes increased 38%
over the 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 commercial hedging activity, most
notably in Brazil, as well as increased trading activity in our
speculative customer prime brokerage business. ese increases
were partially o set by a 30% decrease in operating revenues in
the foreign exchange arbitrage business.
Operating revenues in the Securities segment in 2012 bene ted
from an increase in demand from customers of our international
equities market-making product line, as the overall equities
markets volumes recovered, as well as a $4.5 million increase in
operating revenues in the debt capital markets product line driven
by increased activity in the Company’s Argentina operations.
Operating revenues in the CES segment increased 42%, driven by
a 67% increase in exchange traded volumes primarily attributable
to accounts transferred from MF Global. However, operating
revenues in this segment continue to be constrained by low
short-term interest rates.
Operating revenues and adjusted operating revenues in the Other
segment increased by 9% and 15%, respectively. ese increases
were primarily caused by the expansion of our grain nancing
and physical commodity origination product lines, which were
partially o set by lower asset management revenues. See 2012
vs. 2011 Segment Analysis below for additional information on
activity in each of the segments.
In 2012, operating revenues include realized gains of $2.5 million
and unrealized losses of $1.1 million on interest rate swap derivative
contracts used to manage a portion of our aggregate interest rate
position. In 2011, operating revenues included realized gains of
$4.2 million and unrealized losses of $0.2 million on interest
rate swap derivative contracts. ese interest rate swaps are not
designated for hedge accounting treatment, and changes in the
fair values of these interest rate swaps, which are volatile and
can uctuate from period to period, are recorded in earnings on
a quarterly basis. As of September30, 2012, $765 million in
notional principal of interest rate swaps were outstanding with
a weighted-average life of 6 months months.
2011 Operating Revenues vs. 2010
Operating Revenues
e Company’s operating revenues under U.S. GAAP for 2011
and 2010 were $423.2 million and $269.0 million, respectively.
is 57% increase in operating revenue was primarily driven by a
95% increase in the operating revenues in the C&RM segment.
In addition, there were increases in operating revenues of 25% in
the Foreign Exchange segment, 47% in the Securities segment,
7% in the CES segment and 61% in the Other segment over
the prior year.
Operating revenues increased signi cantly in the C&RM segment
in 2011, due to increases in exchange-traded and OTC volumes in
our soft commodities product line of 4% and 126%, respectively
over the prior year, resulting from an increase in volatility in
agricultural commodities, as well as an expanded customer
base, a bene t of recent acquisitions and geographic expansion.