INTL FCStone 2012 Annual Report Download - page 95
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Please find page 95 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 79
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 5 Receivables From Customers, net and Notes Receivable, net
Receivables from customers, net and notes receivable, net include
an allowance for bad debts, which re ects the Company’s best
estimate of probable losses inherent in the receivables from
customers and notes receivable. e Company provides for an
allowance for doubtful accounts based on a speci c-identi cation
basis. e Company continually reviews its allowance for bad debts.
e allowance for doubtful accounts related to receivables from
customers was $0.9 million and 11.8 million as of September30,
2012 and 2011, respectively. e allowance for doubtful accounts
related to notes receivable was $0.1 million as of September30,
2012 and 2011, respectively.
During the year ended September30, 2012, the Company recorded
bad debt expense, net of recoveries, of $0.7 million, including
provision increases and direct write-o s of $0.8 million, o set by
recoveries of $0.1 million. e provision increases during 2012
were primarily related to customer de cits within the C&RM
segment. During 2012, the Company charged-o receivables on
consigned gold transactions of $8.5 million and CES customer
de cits of $2.7 million, which were all fully reserved.
During the year ended September30, 2011, the Company
recorded bad debt expense, net of recoveries, of $4.5 million,
including provision increases and direct write-o s of $8.2 million,
o set by recoveries of $3.7 million. e provision increases
during 2011 were 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 which a partial provision was recorded during the fourth
quarter of 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, LLC during the quarter ended June30, 2010
by another FCM, discussed further below.
During the year ended September30, 2010, the Company
recorded bad debt expense, net of recoveries, of $3.5 million,
including provision increases and direct write-o s of $4.2 million,
o set by recoveries of $0.7 million. e provision increases
during 2010 included a recorded charge to bad debt expense
of $2.3 million related to a disputed trade that was “given-up”
to FCStone, LLC by another FCM for a customer that held
an account with FCStone, LLC. Despite expressly informing
the FCM that FCStone, LLC would not accept the “give-up”
trade, the “give-up” trade was submitted through the electronic
clearing process and erroneously cleared, generating a de cit in
the customer’s trading account. e customer lacked the nancial
capacity to cover the account de cit. Additionally, the Company
recorded a $2.5 million charge to bad debt expense related to
a Dubai customer to whom INTL Commodities DMCC had
consigned gold.
As a result of the acquisition of FCStone, the Company acquired
notes receivable of $133.7 million as of September30, 2009
from certain customers and an introducing broker which arose
from previous customer account de cits. At the time of the
acquisition, the Company estimated collectability of these notes
to be $16.7 million. During 2011, the Company recovered $15.6
million as partial payment against these notes, and charged o
$111.5 million of note receivable which was fully reserved.
Since the acquisition of FCStone, total recoveries from these
customers and introducing broker through September30, 2011
is $15.5 million, and remaining notes receivable related to these
customer account de cits is $1.2 million. e Company expects
to collect the remaining amounts from the introducing broker,
by withholding commissions due on future revenues collected
by the Company, although no assurance can be given as to the
timing of collection.
Activity in the allowance for doubtful accounts and notes for the years ended September30, 2012, 2011 and 2010 was as follows:
(in millions)
2012 2011 2010
Balance, beginning of year $ 11.9 $ 119.2 $ 123.4
Provision for bad debts 0.4 7.2 2.3
Transfer in(1) — 2.5 —
Deductions:
Charge-o s (11.2) (113.3) (5.8)
Recoveries (0.1) (3.7) (0.7)
BALANCE, END OF YEAR $ 1.0 $ 11.9 $ 119.2
(1) During the three months ended December31, 2010, certain open position derivative contracts, which had a $2.5 million credit reserve as of September30, 2010 were
closed, and the deficit account balance was reclassified from financial instruments owned to a receivable from customer. Accordingly, the previously established credit
reserve amount was transferred into the allowance for doubtful accounts during the three months ended December31, 2010.