INTL FCStone 2012 Annual Report Download - page 53
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Please find page 53 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 37
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
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, including provision
increases primarily related to credit losses recognized on consigned
gold transactions, within the C&RM segment and a clearing
customer de cit account within the CES segment. A portion of
the loss on consigned gold related to a customer for a which a
partial provision was recorded during Q4 2010. During 2011,
negotiation e orts with the customer resulted in settlement of the
loss in excess of the amount previously estimated, and a charge
to bad debt expense for the incremental uncollectible portion.
During 2011, the Company recorded recoveries of $3.7 million
of bad debt expense related to collection of a previous customer
account de cit, within the C&RM segment and collection
following a settlement relating to a disputed trade, within the CES
segment, that was “given-up” to FCStone in Q3 2010. During
2010, FCStone had recorded a charge to bad debt expense of
$2.3 million related to this disputed trade that was “given-up” to
FCStone. Additionally in 2010, the Company recorded a $2.5
million provision against a receivable from a Dubai customer to
whom INTL Commodities DMCC had consigned gold, and an
impairment charge of $1.1 million related to our investment in
INTL Sieramet, a consolidated subsidiary.
Additionally, within ‘other’ expense, the Company recorded $3.2
million in expense during 2011 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. e Company also accrued
additional contingent consideration during 2011 related to
FCStone, LLC’s pre-merger acquisitions of Downes& O’Neill,
LLC and Globecot, Inc., in the amount of $1.6 million, which is
also included within ‘other’ expense. Also within ‘other’ expense,
as a result of the acquisitions made in the last eighteen months
and expansion of our o ces in Australia, London, Singapore
and South America, employee travel expenses increased $2.1
million in 2011 as compared to the prior year.
Provision for Taxes: e e ective income tax rate on a U.S.
GAAP basis was 38%, in 2011, compared with 36% in 2010.
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 2011, 46% of the income from continuing
operations, before tax was attributable from U.S. jurisdictions,
compared to 25% in 2010. Generally, when the percentage of
pretax earnings generated from the U.S. increases, our e ective
income tax rate increases.
Variable vs. Fixed Expenses
(in millions)
Year Ended September 30,
2012 % of Total 2011 % of Total 2010 % of Total
VARIABLE VS. FIXED EXPENSES
Variable compensation and bene ts $ 97.9 23% $ 99.9 28% $ 51.3 21%
Variable clearing and related expenses 104.3 24% 74.8 21% 66.4 28%
Introducing broker commissions 31.0 8% 24.9 8% 18.9 8%
Total variable expenses 233.2 55% 199.6 57% 136.6 57%
Fixed expenses 192.1 44% 146.6 41% 98.8 41%
Bad debts and impairments 1.5 —% 6.2 2% 5.8 2%
Total non-variable expenses 193.6 45% 152.8 43% 104.6 43%
TOTAL NONINTEREST EXPENSES $ 426.8 100% $ 352.4 100% $ 241.2 100%
e Company seeks to make its non-interest expenses variable
to the greatest extent possible, and to keep its xed costs as low
as possible. e table above shows an analysis of the Company’s
total non-interest expenses for the years ended September 30,
2012, 2011 and 2010, respectively.
Historically, the Company’s variable expenses have consisted
of variable compensation paid to traders and risk management
consultants, bonuses paid to operational employees, clearing
and related expenses and introducing broker commissions.
Accrued administrative and executive bonuses have historically
been shown as xed expenses. As administrative and executive
bonuses accruals are either directly or indirectly determined by
pro tability of the Company, we have included these accruals as
variable expenses in the table above. e amounts related to these
accruals which had previously been reported as xed expenses for
the years ended September 30, 2010 was $5.0 million.
As a percentage of total non-interest expenses, variable expenses
were 55% in 2012 and 57% in 2011 and 2010, respectively.