INTL FCStone 2012 Annual Report Download - page 51
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PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Non-Interest Expenses
e following table shows a summary of our non-interest expenses.
(in millions)
Year Ended September 30,
2012 % Change 2011 % Change 2010
NONINTEREST EXPENSES
Compensation and bene ts $ 202.4 15% $ 176.6 69% $ 104.2
Clearing and related expenses 107.2 39% 77.4 13% 68.2
Introducing broker commissions 31.0 29% 24.0 27% 18.9
Other non-interest expenses:
Communication and data services 22.6 46% 15.5 40% 11.1
Occupancy and equipment rental 11.0 24% 8.9 44% 6.2
Professional fees 12.9 22% 10.6 31% 8.1
Depreciation and amortization 7.2 53% 4.7 194% 1.6
Bad debts and impairments 1.5 (76)% 6.2 7% 5.8
Other expense 31.0 9% 28.5 67% 17.1
86.2 16% 74.4 49% 49.9
TOTAL NONINTEREST EXPENSES $ 426.8 21% $ 352.4 46% $ 241.2
2012 Non-Interest Expenses vs. 2011 Non-
Interest Expenses
Total Non-Interest Expenses: Non-interest expenses increased
by 21% from $352.4 million in 2011 to $426.8 million in 2012.
Compensation and Bene ts: Compensation and bene ts expense
increased by 15% from $176.6 million to $202.4 million, and
represented 47% and 50% of total non-interest expenses in 2012
and 2011, respectively. Total compensation and bene ts were 44%
of operating revenues and adjusted operating revenues in 2012,
respectively, compared to 42% and 43% in 2011, respectively.
e variable portion of compensation and bene ts decreased
2% from $99.9 million in 2011 to $97.9 million in 2012, as
an 8% increase in operating revenues as compared to the prior
year, was more than o set by a decrease in administrative and
executive variable incentive compensation. Administrative and
executive bonuses were $14.1 million, compared with $15.7
million in 2011.
e xed portion of compensation and bene ts increased 36%
from $76.7 million in 2011 to $104.5 million in 2012, primarily
as a result of the acquisition of Ambrian Commodities Limited,
the LME metals team of MF Global and TRX Futures Limited,
as well as an expansion of investment banking and administrative
departments, including information technology development,
credit and risk, compliance and accounting departments. Stock-
based compensation includes stock option and restricted stock
expense. Stock option expense was $1.4 million in 2012, compared
with $0.6 million in 2011. Restricted stock expense includes a
proportion of the current year, as well as the previous two years,
bonuses allocated to restricted stock awards, as the awards are
deferred and expensed ratably over their three year vesting period.
Restricted stock expense was $4.5 million in 2012, compared
with $1.7 million in 2011. e number of employees increased
19%, from 904 at the end of scal 2011 to 1,074 at the end
of scal 2012, primarily as a result of acquisitions of the LME
metals team and TRX Futures Limited.
Clearing and Related Expenses: Clearing and related expenses
increased by 39% from $77.4 million in 2011 to $107.2 million
in 2012. is increase was primarily due to a 59% increase in
exchange-traded customer volume, a 38% increase in OTC trading
volumes in the C&RM segment within the Hanley Companies,
as well as an increase in trading volume in our equities market-
making business and activity from the acquisitions of Ambrian
Commodities Limited and TRX Futures Limited.
Introducing Broker Commissions: Introducing broker
commissions increased by 29% from $24.0 million in 2011 to
$31.0 million in 2012. is increase was primarily due to an
increase in exchange-traded volumes from our introducing brokers,
particularly in our CES segment as several new introducing broker
relationships were opened following the bankruptcy ling of MF
Global in October 2011.
Other Non-Interest Expenses: Other non-interest expenses
increased by 16% from $74.4 million in 2011 to $86.2 million
in 2012. Communication and data services expenses increased
$7.1 million, primarily due to increases in market information
expenses and trading software costs following the acquisitions of
Hudson Capital Energy, Ambrian Commodities Limited, the LME
metals team and TRX Futures Limited, as well as expansion of
our soft commodities and foreign exchange activities. Occupancy
and equipment rental increased $2.1 million, primarily as a
result of the relocation of our London o ces, 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