INTL FCStone 2012 Annual Report Download - page 82
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Please find page 82 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.Form10K66
PART II
ITEM 8 Financial Statements and Supplementary Data
Clearing and Related Expenses
Clearing fees and related expenses include expenses for exchange-
traded futures and options-on-futures clearing and settlement
services, including fees the Company pays to the exchanges and
the oor pit brokers. ese fees are based on transaction volume,
and recorded as expense on the trade date. Clearing fees are passed
on to customers and are presented gross in the consolidated
statements of income under the Revenue Recognition Topic of
the ASC, as the Company acts as a principal for these transactions.
Introducing Broker Commissions
Introducing broker commissions include commissions paid to
non-employee third parties that have introduced customers to the
Company. Introducing brokers are individuals or organizations
that maintain relationships with customers and accept futures
and options orders from those customers. e Company directly
provides all account, transaction and margining services to
introducing brokers, including accepting money, securities and
property from the customers. e commissions are determined
and settled monthly.
Income Taxes
Income tax expense includes U.S. federal, state and local and
foreign income taxes. Certain items of income and expense are
not reported in tax returns and nancial statements in the same
year. e tax e ect of such temporary di erences is reported as
deferred income taxes. Tax provisions are computed in accordance
with the Income Taxes Topic of the ASC.
Comprehensive Income
Comprehensive income consists of net income and other gains
and losses a ecting stockholders’ equity that, under U.S. GAAP,
are excluded from net income. Other comprehensive income
(loss) includes net actuarial losses from de ned bene t pension
plans, unrealized gains and losses on available-for-sale securities,
gains and losses on foreign currency translations, and changes in
the fair value of interest rate swap agreements, to the extent they
are, or previously were, e ective as cash ow hedges.
Noncontrolling Interest and Variable Interest
Entities
In accordance with the Consolidation Topic of the Accounting
Standards Codi cation (“ASC”) the Company consolidates any
variable interest entities for which it is the primary bene ciary, as
de ned. e Company applies the equity method of accounting
when the Company does not have a controlling interest in an
entity, but exerts signi cant in uence over the entity.
e Company had a majority interest in and was the general
partner of the Blackthorn Multi-Advisor Fund, LP (the “Blackthorn
Fund”), whose assets, liabilities, income and expenses were
included within the Company’s consolidated nancial statements
as of and for the years ended September 30, 2011 and 2010.
e Blackthorn Fund is a commodity investment pool, which
allocates most of its assets to third-party commodity trading
advisors and other investment managers. e Blackthorn Fund
engages in speculative trading of a wide variety of commodity
futures and options-on-futures contracts, securities and other
nancial instruments.
During 2012, the Company redeemed its remaining investment
in Blackthorn Fund e ective December 31, 2011. As a result
of the nal redemption, the Company no longer retains any
ownership interests in the Blackthorn Fund, has transferred its
rights as general partner and deconsolidated its interest in the
Blackthorn Fund as of December 31, 2011. e aggregate of
the redemption and remaining noncontrolling interest less the
carrying amount of the net assets of the Blackthorn Fund resulted
in a nominal gain and was recorded as a component of ‘trading
gains, net’ in the consolidated income statement for the year
ended September 30, 2012, as a result of the deconsolidation.
e Blackthorn Fund had net assets of $3.2 million as of September
30, 2011. e net assets of the Blackthorn fund consisted of cash
and cash equivalents of $17 thousand, deposits and receivables
from broker-dealers, clearing organizations and counterparties
of $2.6 million, investments in managed funds of $1.3 million,
and accounts payable and other accrued liabilities of $0.7 million
as of September 30, 2011. e noncontrolling interest shown
in the consolidated balance sheet includes the noncontrolling
interest of the Blackthorn Fund of $1.3 million as of September
30, 2011. See Note 3 for discussion of fair value of the nancial
assets and liabilities.
Convertible Subordinated Notes
e Company had $16.7 million in aggregate principal amount
of the Company’s senior subordinated convertible notes due
September 2011 (the “Notes”) outstanding as of September30,
2010. e Notes were general unsecured obligations of the
Company and bore interest at the rate of 7.625% per annum,
payable quarterly in arrears.
During the scal year ended September30, 2011, the Notes
were converted along with accrued interest of $0.2 million into
778,703 shares of common stock of the Company.
Preferred Stock
e Company is authorized to issue one million shares of preferred
stock, par value of $0.01 per share, in one or more classes or
series to be established by the Company’s board of directors.
As of September 30, 2012 and 2011, no preferred shares were
outstanding and the Company’s board of directors had not yet
established any class or series of shares.