INTL FCStone 2012 Annual Report Download - page 52
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Please find page 52 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.Form10K36
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
software and infrastructure and leasehold improvements placed
into service during 2012 and 2011.
Partially o setting the increase in other non-interest expenses,
bad debts and impairments decreased $4.7 million year over year.
During 2012, bad debts and impairments were $1.5 million
and included $0.8 million of impairment charges on intangible
assets, previously determined to have inde nite lives, and $0.7
million of bad debt expense, net of recoveries of $0.1 million.
During 2011, bad debts and impairments were $6.2 million and
included an impairment loss of $1.7 million related to the fair
value adjustment of its investment in debentures for the single
asset owning company of Suriwongse Hotel located in Chiang
Mai, ailand, originally issued in August 2008, as more fully
described in both Note 3 - Assets and Liabilities, at Fair Value
to the Consolidated Financial Statements and in the Securities
section of our 2011 vs. 2010 Segment Analysis. Additionally,
during 2011, the Company recorded bad debt expense, net of
recoveries, of $4.5 million, as more fully discussed in our 2011
vs 2010 Non-Interest Expense Analysis.
Within ‘other’ expense, the Company recorded $2.0 million in
expense during 2012 related to the revaluation of contingent
liabilities related to potential additional consideration to be
paid for the acquisitions of the RMI Companies, the Hanley
Companies and Hencorp Futures, compared to $3.2 million
during 2011. e Company also accrued additional contingent
consideration during 2012 and 2011 of $0.4 million and $1.6
million, respectively, related to FCStone, LLC’s pre-merger
acquisitions of Downes& O’Neill, LLC and Globecot, Inc.
Also, as a result of the acquisitions made over the last two years
and expansion of our o ces, primarily in London, Singapore
and South America, business development and employee travel
expenses increased $2.3 million in 2012 as compared to the
prior year.
Provision for Taxes: e e ective income tax rate on a U.S.
GAAP basis was 21%, in 2012, compared with 38% in 2011.
e e ective income tax rate can vary from period to period
depending on, among other factors, the geographic and business
mix of our earnings. In 2012, we have a loss from continuing
operations, before tax attributable from U.S. jurisdictions,
compared to 2011, where 46% of the income from continuing
operations, before tax was attributable from U.S. jurisdictions.
Generally, when the percentage of pretax earnings generated
from the U.S. decreases, our e ective income tax rate decreases.
2011 Non-Interest Expenses vs. 2010 Non-
Interest Expenses
Total Non-Interest Expenses: Non-interest expenses increased
by 46% from $241.2 million in 2010 to $352.4 million in 2011.
Compensation and Bene ts: Compensation and bene ts expense
increased by 69% from $104.2 million to $176.6 million, and
represented 50% and 43% of total non-interest expenses in 2011
and 2010, respectively. Total compensation and bene ts were 42%
of operating revenues and adjusted operating revenues in 2011,
respectively, compared to 39% and 38% in 2010, respectively.
e variable portion of compensation and bene ts increased
by 95% from $51.3 million in 2010 to $99.9 million in 2011,
mainly as a result of the 57% increase in operating revenues as
compared to the prior year. Administrative and executive bonuses
were $15.7 million, compared with $6.0 million in 2010.
e xed portion of compensation and bene ts increased 43%
from $52.9 million in 2010 to $75.7 million in 2011. Stock-
based compensation includes stock option expense and restricted
stock expense. Stock option expense was $0.6 million in 2011,
compared with $0.5 million in 2010. Restricted stock expense
includes a proportion of the 2011, 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 $1.7 million in 2011, compared
with $1.4 million in 2010. e number of employees increased
24%, from 729 at the end of scal 2010 to 904 at the end of
scal 2011, primarily as a result of acquisitions of the Provident
Group, Hencorp Futures, Ambrian Commodities Limited, as well
as certain assets purchased from Hudson Capital Energy, LLC.
Clearing and Related Expenses: Clearing and related expenses
increased by 13% from $68.2 million in 2010 to $77.4 million
in 2011. is increase was primarily due to a 2% increase in
exchange-traded customer volume, a 126% increase in OTC
trading volumes in the C&RM segment following the acquisition
of the Hanley Companies in Q4 2010, as well as an increase in
trading volume in our equities market-making business.
Introducing Broker Commissions: Introducing broker
commissions increased by 27% from $18.9 million in 2010
to $24.0 million in 2011. is increase was primarily due to
an increase in exchange-traded volumes from our introducing
brokers as well as increased volumes in our foreign exchange
global payments business.
Other Non-Interest Expenses: Other non-interest expenses
increased by 49% from $49.9 million in 2010 to $74.4 million in
2011. As a result of the acquisitions of the RMI Companies, the
Hanley Companies, Provident Group and Hencorp Futures and
the relocation of o ce space, communications and data services
and occupancy and equipment rental increased $4.4 million and
$2.7 million, respectively. Depreciation and amortization increased
$3.1 million, primarily due to the $1.6 million increase in the
amortization of identi able intangible assets from the acquisitions
made in 2010 and from depreciation of additional technology
infrastructure placed into service during 2011.
Other non-interest expenses include bad debt expense, net of
recoveries, and impairments of $6.2 million and $5.8 million for
the years ended 2011 and 2010, respectively. During 2011, the
Company recorded an impairment loss of $1.7 million related
to the fair value adjustment of its investment in debentures for
the single asset owning company of Suriwongse Hotel located
in Chiang Mai, ailand, originally issued in August 2008, as
more fully described in both Note 3 - Assets and Liabilities,