INTL FCStone 2012 Annual Report Download - page 62
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Please find page 62 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.Form10K46
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
In November 2011, INTL FCStone (Europe) Ltd, the Company’s
wholly owned subsidiary in the United Kingdom (“UK”),
arranged with the administrator of MF Global’s UK operations
to acquire certain assets of the Metals Division of MF Global UK
Limited (in special administration). As part of the arrangement,
the Company received an assignment of customer accounts
and customer account documentation and hired more than 50
professionals from MF Global’s metals trading business based in
London. e purchase price of the acquisition of certain assets
from MF Global was $1.0 million. ere was no contingent
consideration associated with this transaction. e total purchase
price of this transaction was not material to the consolidated
nancial statements.
In November 2011, the Company acquired 100% of the ownership
interests in Co ee Network LLC (“Co ee Network”). Following
the acquisition, the activities of Co ee Network were reorganized
as a division of FCStone, LLC. e purchase price for the
Co ee Network acquisition consists of an initial payment of
$0.2 million, three additional annual contingent payments
and a nal contingent payment. e total purchase price for
the acquisition of Co ee Network was not material to the
consolidated nancial statements.
In April 2012, the Company’s wholly-owned subsidiary in
the UK, INTL Holding (UK) Limited, acquired 100% of the
outstanding shares of TRX Futures Limited (“TRX”) from
Neumann Gruppe GmbH. e purchase price was equal to the
tangible net asset value (“NAV”) of TRX, which was approximately
$12.9 million. ere are no additional payments remaining for
this acquisition. e total purchase price for this acquisition
was not considered to be material to the consolidated nancial
statements. Subsequent to September 30, 2012, the activities of
TRX have been reorganized within INTL FCStone (Europe),
and TRX is in the process of dissolution.
In February 2012, the Company’s subsidiaries, INTL Participacoes
LTDA and FCStone do Brasil, acquired 100% of the shares
of Aporte DTVM. Following the acquisition, Aporte DTVM
was renamed INTL FCStone DTVM Ltda. (“INTL FCStone
DTVM”). Based in Brazil, its activities consist of equity brokerage
and trustee services. e purchase price for the acquisition of the
shares of Aporte DTVM was $1.5 million. ere are no additional
payments remaining for this acquisition. e total purchase price
for this acquisition was not considered to be material.
e Company has contingent liabilities relating to several
acquisitions it has completed since April 2010. See Note 11 to
the Consolidated Financial Statements for additional information
on these contingent liabilities. Under the terms of the purchase
agreements, the Company has obligations to pay additional
consideration if speci c conditions and earnings targets are met.
In accordance with the Business Combinations Topic of the ASC,
the fair value of the additional consideration is recognized as a
contingent liability as of the acquisition date. e acquisition
date fair value of additional consideration is remeasured to its fair
value each reporting period, with changes in fair value recorded
in current earnings. e contingent liabilities for these estimated
additional discounted purchase price considerations totaled
$14.8 million as of September30, 2012, and are included within
‘accounts payable and other accrued liabilities’ in the consolidated
balance sheets. e Company estimates cash payments during
scal 2013, 2014 and 2015 related to these contingent liabilities,
to be $13.4 million, $0.4 million and $2.3 million, respectively.
e Company contributed $1.5 million to its de ned bene t
pension plans during the year ended September30, 2012, and
expects to contribute $2.5 million to the plans during scal
2013, which represents the minimum funding requirement.
Other Capital Considerations
Our FCM subsidiary, FCStone, LLC, is subject to various
regulations and capital adequacy requirements. Pursuant to the
rules, regulations, and requirements of the CFTC and other self-
regulatory organizations, FCStone, LLC is required to maintain
certain minimum net capital as de ned in such rules, regulations,
and requirements. Net capital will uctuate on a daily basis.
INTL FCStone (Europe) and INTL Global Currencies Limited
are regulated by the Financial Services Authority, the regulator
of the nancial services industry in the United Kingdom, and
each subject to a net capital requirement.
INTL FCStone Securities, a broker-dealer subsidiary, is subject to
the net capital requirements of the SEC relating to liquidity and
net capital levels. e Company’s ability to receive distributions
from INTL FCStone Securities is restricted by regulations of
the SEC. e Company’s right to receive distributions from
its subsidiaries is also subject to the rights of the subsidiaries’
creditors, including customers of INTL FCStone Securities.
FCC Investments, Inc., a broker-dealer subsidiary, is subject
to the net capital requirements of the SEC relating to liquidity
and net capital levels.
FCStone Australia Pty, Ltd (“FCStone Australia”) is regulated
by the Australian Securities and Investment Commission and
is subject to a net tangible asset capital requirement. FCStone
Australia is also regulated by the New Zealand Clearing Limited,
and is subject to a capital adequacy requirement.
FCStone Commodity Services (Europe), Ltd. is domiciled in
Ireland and subject to regulation by the Financial Regulator of
Ireland, and is subject to a net capital requirement.
INTL FCStone DTVM is a registered broker-dealer and regulated
by the Brazilian Central Bank and Securities and Exchange
Commission of Brazil, and is subject to a capital adequacy
requirement of $0.7 million. e recently acquired INTL FCStone
DTVM, a shell company with no signi cant operations, had net
capital lower than the minimum required amount by less than
$0.1 million as of September 30, 2012. e Company expects
to remediate this shortfall in net capital of INTL FCStone
DTVM for the semi-annual regulatory ling prepared as of
December 31, 2012.