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ANNUAL
2013
INTL FCStone Inc.
REPORT

Table of contents

  • Page 1
    ANNUAL REPORT 2013 INTL FCStone Inc.

  • Page 2
    ... 13 12 (as restated) 11 (as restated) 10 (as restated) 09 $338.1 $322.8 $298.0 $250.7 $245.7 ADJUSTED NET ASSET VALUE PER SHARE OUTSTANDING AT SEPTEMBER 30 (Non-GAAP) 13 12 11 10 09 $17.61 (as restated) (as restated) (as restated) $17.00 $15.98 $14.24 $14.16 1 2013 INTL FCStone Annual Report

  • Page 3
    ... the year ended September 30, 2013, which is included as part of this Annual Report to Stockholders. (a) Return on average adjusted stockholders' equity for 2010 excludes $7.0 million extraordinary loss resulting from purchase price adjustments related to the FCStone transaction. Return on average...

  • Page 4
    ...the UK and Ireland, and have regulated affiliates in Brazil, Argentina, Dubai, Australia and Singapore. Each of our businesses is volatile and their financial performance can change due to a variety of factors that are both outside of management's control and not readily predictable. To address this...

  • Page 5
    ... Ranked #39 on the 2013 Fortune 500 list of the largest U.S. corporations Executive management has significant ownership 1,094 Employees as of September 30, 2013 20,000 accounts representing approximately 11,000 consolidated customers, in more than 100 countries through a network of 33 offices...

  • Page 6
    .... In addition to the declining volumes, the Company faced another year of nearly zero percent interest rates on cash balances. However, we remain optimistic that with the recovery in crop volumes, our client base will increase its hedging activity in fiscal 2014. 5 2013 INTL FCStone Annual Report

  • Page 7
    Compound Growth 2009-2013: 40% ADJUSTED OPERATING REVENUES ADJUSTED INCOME FROM CONTINUING OPERATIONS, BEFORE TAX 2% ADJUSTED STOCKHOLDERS' EQUITY 34% ADJUSTED NET BOOK VALUE PER SHARE 16%

  • Page 8
    ... working for us, with commodity prices hitting multi-year lows and volatility declining. These market headwinds have been exacerbated by historically low interest rates, meaning negligible interest revenue on our customer segregated funds for several years now. A 7 2013 INTL FCStone Annual Report

  • Page 9
    ... of Business Units INTL FCStone has grown dramatically over the last 10 years to a global organization with nearly 1,100 professionals in more than 12 countries serving 20,000 accounts for more than 11,000 separate organizations with a wide spectrum of products, services and capabilities. Our...

  • Page 10
    ... markets, but over time we expanded the business to include large multi-national corporations. We believe that we are the dominant provider of payment services to the charitable and NGO community. More recent development of our proprietary technology, largely 9 2013 INTL FCStone Annual Report

  • Page 11
    ... a of liquidity for financial wide range of execution institutions and services across asset professional traders classes, including fixed income, equities and ETFs through a wide range of market makers for domestic and internationally based financial utilizing technology to provide low-latency...

  • Page 12
    ... and added service to facilitate businesses and further build can provide a high level of execution across asset on our core competencies in objective advice, creativity classes. commodities and emerging and exceptional expertise. We expect this trend to Through INTL FCStone markets." continue...

  • Page 13
    ...2020. • Successfully registered INTL FCStone Markets, LLC as a swap dealer. • Increased capacity of global payments business with a successful migration to a new technology platform. • Successfully transferred the accounts and integrated the operations of Tradewire Securities, LLC. • Reached...

  • Page 14
    ... of the accounts of Tradewire in the first quarter of fiscal 2013, as well as revenue growth in the Argentina and Latin America debt trading businesses. Operating revenues in our Other segment continued to increase, as revenues in both commodity financing and physical commodity origination business...

  • Page 15
    ... executive management team would like to thank all of our colleagues for their exceptional contributions during this extraordinary year, our Board and advisors for their guidance, our bankers for their financial support and our stockholders for entrusting their capital to us. SEAN M. O'CONNOR Chief...

  • Page 16
    As a commodity risk-management firm specializing in helping companies weather volatile and unpredictable marketplaces across the globe, we at INTL FCStone know as well as anyone that the companies that succeed are the ones that focus on the future. 15 2013 INTL FCStone Annual

  • Page 17
    Our Locations Headquarters New York (US) 708 Third Avenue, Suite 1500 New York, NY 10017, USA Tel: +1 212 485 3500 Fax: +1 212 485 3505 www.intlfcstone.com US Offices Kansas City (MO) +1 800 255 6381 West Des Moines (IA) +1 800 422 3087 Chicago (IL) +1 800 504 5633 Orlando (FL) +1 800 541 1977 ...

  • Page 18
    ... Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance. 17 2013 INTL FCStone Annual Report

  • Page 19
    ... Number 000-23554 INTL FCSTONE INC. (Exact name of registrant as specified in its charter) DELAWARE 59-2921318 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 708 Third Avenue, Suite 1500 New York, NY 10017 (Address of principal executive offices...

  • Page 20
    ...this Annual Report on Form 10-K, in connection with the preparation of its consolidated financial statements for the fiscal year ended September 30, 2013, the Company identified errors in the reconciliation of the Company's subsidiary INTL FCStone Markets, LLC's accounting records to its back office...

  • Page 21
    ... and Procedures 114 Other Information 115 PART III ITEM 10 ITEM 11 ITEM 12 ITEM 13 ITEM 14 116 Directors, Executive Officers and Corporate Governance 116 Executive Compensation 116 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 117 Certain...

  • Page 22
    ... forward-looking statements is included in the section entitled "Risk Factors" (refer to Part I, Item 1A)� We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise� INTL FCSTONE INC. - Form...

  • Page 23
    ... in Asia, Europe, Australia, Latin America and Canada� In executing this plan, we intend to both target new geographic locations and expand the services offered in current locations, where there is an unmet demand for our services particularly in areas where commodity price controls have been...

  • Page 24
    ... ownership and press releases are available in the Investor Relations section of this website. Our website also includes information regarding our corporate governance, including our Code of Ethics, which governs our directors, officers and employees. Capabilities Clearing and Execution We provide...

  • Page 25
    ... and base metals, as well as certain other related commodities� For base metals, following the exit of the physical trading business, this will involve acting as a Category One ring dealing member of the London Metals Exchange ("LME") and providing execution, clearing and advisory services in...

  • Page 26
    ...by offering facilities management or outsourcing solutions to other FCMs. FCStone, LLC is a registered FCM and a clearing member of all major U.S. commodity futures exchanges including the Chicago Mercantile Exchange and its divisions: the Chicago Board of Trade, the New York Mercantile Exchange and...

  • Page 27
    ... of MF Global's UK operations to hire more than 50 professionals from MF Global's metals trading business based in London. This business serves institutional investors and financial services firms in the Americas, Europe and the Asia-Pacific region. As part of this transaction, INTL FCStone Ltd...

  • Page 28
    ...operation of Miami-based Hencorp Group, which we renamed INTL Hencorp Futures, LLC ("Hencorp Futures"). Hencorp Futures specializes in the development and execution of risk-management programs designed to hedge price volatility in a number of widely traded commodities, including coffee, sugar, cocoa...

  • Page 29
    ..., internal risk controls, and reporting to government and regulatory entities, corporate managers, risk managers and customers. A third-party service bureau located in Chicago, Illinois maintains our futures and options back office system. It has a disaster recovery site in New York City, New York...

  • Page 30
    ... derivatives on swap execution facilities or exchanges; and registration and comprehensive regulation of new categories of market participants as "swap dealers" and swap "introducing brokers." We registered our subsidiary, INTL FCStone Markets, LLC, as a swap dealer on December 31, 2012. Most of the...

  • Page 31
    .... The Central Bank of Ireland regulates FCStone Commodity Services (Europe), Ltd. which is domiciled in Ireland and is subject to a net capital requirement. The Brazilian Central Bank and Securities and Exchange Commission of Brazil regulates INTL FCStone DTVM Ltda. ("INTL FCStone DTVM"). It is...

  • Page 32
    ..., Uruguay, Paraguay, Mexico, Nigeria, Dubai, China, South Korea, Hong Kong, Australia and Singapore. We established wholly owned subsidiaries in Mexico, Uruguay and Nigeria but do not have offices or employees in those countries. FCStone Commodity Services (Europe) Ltd. is domiciled in Ireland and...

  • Page 33
    ..., FCStone Merchant Services, LLC, for financing traditional commodity financing arrangements and commodity repurchase agreements, committed until May 1, 2014. The manner in which we account for our commodities inventory and forward commitments may increase the volatility of our reported earnings...

  • Page 34
    ... Tradewire Securities, LLC. Additionally, subsequent to September 30, 2013, we have acquired First American Capital and Trading Corp. We will need to meet challenges to realize the expected benefits and synergies of these acquisitions, including: • integrating the management teams, strategies...

  • Page 35
    ... controls. While preparing our financial statements for the fiscal year ended September 30, 2013, Management identified a material weakness in internal control over financial reporting that existed as of September 30, 2013, related to the accurate and timely accounting for certain principal over-the...

  • Page 36
    ... risk management methods depend upon the evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by us. That information may not, in all cases, be accurate, complete, INTL FCSTONE INC. - Form 10-K We are exposed to the credit...

  • Page 37
    ...volume. As prices of commodities rise, especially energy prices, new participants enter the markets to address their growing risk-management needs or to take advantage of greater trading opportunities. Sustained periods of stability in the prices of commodities or generally lower prices could result...

  • Page 38
    ... success depends, in large part, upon our management team who possess extensive knowledge and management skills with respect to securities, commodities and foreign exchange businesses we operate. The unexpected loss of services of any of our executive officers could adversely affect our ability to...

  • Page 39
    ...fines and settlements. In this regard, in May 2013, we settled claims made by the CFTC, that our subsidiary, FCStone LLC, failed to diligently supervise its officers' and employees' activities relating to risks associated with its customers' accounts. The claims of the CFTC arose out of transactions...

  • Page 40
    ... and data reporting obligations. Increased regulatory oversight could also impose administrative burdens on us related to, among other things, responding to regulatory examinations or investigations. We registered our subsidiary, INTL FCStone Markets, LLC, as a swap dealer on December 31, 2012. Most...

  • Page 41
    ...also derive a significant portion of our revenues from commodities risk management services. The commodity risk management industry is very competitive and we expect competition to continue to intensify in the future. Our primary competitors in this industry include both large, diversified financial...

  • Page 42
    ... accounts may negatively affect the perception of our industry and our ability to retain existing customers or attract new customers. Furthermore, our existing customers, including IRMP customers, are not generally obligated to use our services and can switch providers of clearing and execution...

  • Page 43
    ...regulations and that related investigations and similar reviews could result in adverse regulatory requirements, regulatory enforcement actions and/or ...regulated financial institutions. Our regulated U.K. subsidiaries, INTL FCStone Ltd. and INTL Global Currencies Limited, are evaluating the impact of...

  • Page 44
    ... current reports from the staff of the SEC that were issued 180 days or more preceding the end of our fiscal year 2013 that remain unresolved. ITEm 2 Properties The Company maintains offices in New York, New York; Winter Park, Florida; West Des Moines, Iowa; Chicago, Illinois; Kansas City, Missouri...

  • Page 45
    ... CFTC Regulation 166.3 in that it 24 INTL FCSTONE INC. - Form 10-K failed to diligently supervise its officers' and employees' activities relating to risks associated with its customers' accounts, and in particular one account controlled by two of FCStone's customers who traded in natural gas...

  • Page 46
    .... The trial of this matter took place, as a test case, during October 2012. The trial court entered a judgment against FCStone, LLC on January 4, 2013. On January 17, 2013, the trial court entered an agreed order, staying execution and enforcement, pending an appeal of the judgment. By agreement...

  • Page 47
    ... of $100 invested on September 30, 2008 in each of the company's stock (''INTL"), S&P 500 Index and NYSE/Arca Securities Broker/Dealer Index 160 140 120 100 80 60 40 20 2008 INTL 2009 S&P 500 Index 2010 2011 NYSE/Arca Securities Broker/Dealer Index 2012 2013 26 INTL FCSTONE INC. - Form 10-K

  • Page 48
    ... information for fiscal years ended 2012, 2011, and 2010 have been restated to reflect adjustments to our consolidated financial statements which are included in our Annual Report on Form 10-K for the year ended September 30, 2013. The consolidated income statement data for fiscal years 2013, 2012...

  • Page 49
    ... noncontrolling interests Net income attributable to INTL FCStone Inc. common stockholders Earnings per share: Basic Diluted Number of shares: Basic Diluted Selected Balance Sheet Information: Total assets Convertible notes Stockholders' equity 2013 22.6 3.3 - 19.3 - 19.3 - $ $ $ 19.3 $ 1.01 $ 0.97...

  • Page 50
    ... errors related to the FCStone transaction. Return on average adjusted stockholders' equity for fiscal 2009 excludes the effect of an $18.5 million extraordinary gain related to the FCStone transaction. (c) The number of employees listed in fiscal 2009 includes the number of employees of FCStone...

  • Page 51
    ... information for the year ended September 30, 2010, and for each of the quarters in the fiscal year ended September 30, 2012. Management identified a material weakness in internal control over financial reporting that existed as of September 30, 2013, related to the accurate and timely accounting...

  • Page 52
    ...2020. • Successfully registered INTL FCStone Markets, LLC as a swap dealer. • Increased capacity of global payments business with a successful migration to a new technology platform. • Successfully transferred the accounts and integrated the operations of Tradewire Securities, LLC. • Reached...

  • Page 53
    ... of Kansas City, Missouri, Inc. ("KCBT"), following their acquisitions by the Hong Kong Exchanges & Clearing Limited and the Chicago Mercantile Exchange ("CME"), respectively. The performance of the physical base metals activities resulted in pre-tax income of $1.4 million in fiscal 2013, including...

  • Page 54
    ... to MF Global. This decline in soft commodities operating revenues was partially offset by increases in precious metals and physical base metals of $3.8 million and $4.2 million, respectively, driven by higher metals prices. In addition, operating revenues in the ongoing LME metals team increased...

  • Page 55
    ... year, resulting from drought-related agricultural commodity volatility as well as strong volume growth in Mexico, Latin America and Europe. Operating revenues in the Foreign Exchange segment in fiscal 2012 increased primarily as a result of higher volumes in the global payments business and higher...

  • Page 56
    ...the addition of several new introducing broker relationships, particularly in our CES segment, that followed the bankruptcy filing of MF Global in October 2011. Additionally, expanded activities through our acquisitions of the LME metals team and the accounts of Tradewire Securities have resulted in...

  • Page 57
    ... fiscal 2012 to $113.4 million in fiscal 2013, related to increases in non-variable salaries, sharebased compensation and other employee benefits. Non-variable salaries increased $2.9 million, or 4%, primarily related to the 36 INTL FCSTONE INC. - Form 10-K acquisition of the LME metals team...

  • Page 58
    ..., primarily related to international office space rental and related costs. Depreciation and amortization increased $0.8 million, primarily due to the increase in depreciation of additional information technology infrastructure and software placed into service during fiscal 2013 and fiscal 2012. Bad...

  • Page 59
    ... executive employees, transaction-based clearing expenses and introducing broker commissions. As a percentage of total non-interest expenses, variable expenses were 54% in fiscal 2013, 55% in fiscal 2012 and 57% in fiscal 2011. Segment Information We report our operating segments based on services...

  • Page 60
    ... to $232.0 million in fiscal 2012. Total segment income increased 7% to $114.3 million in fiscal 2013 compared to $106.6 million in fiscal 2012. Total adjusted segment income was $103.2 million in fiscal 2013 compared to $113.4 million in fiscal 2012. INTL FCSTONE INC. - Form 10-K 39

  • Page 61
    ...both precious metals and base metals, as well as certain other related commodities. For base metals, following the exit of the physical trading business, our business will involve acting as a Category One ring dealing member of the LME, providing execution, clearing and advisory services in exchange...

  • Page 62
    ...of the clients previously introduced to MF Global have subsequently opened accounts directly with FCStone, LLC. Overall OTC revenues, primarily reflected in 'trading gains, net' in our consolidated income statements, decreased $35.8 million to $83.8 million in fiscal 2013, compared to the prior year...

  • Page 63
    ... income statements, increased $3.5 million to $119.6 million in fiscal 2012, compared to the prior year. This increase was a result of the agricultural commodity volatility noted above as well as strong growth in overall OTC contract volumes, particularly in Mexico, Latin America and Europe...

  • Page 64
    ... by a 17% increase in the volume of trades in our global payments product line as we continued to benefit from an increase in financial institutions and other customers, as well as our ability to offer an electronic transaction order system to our customers. INTL FCSTONE INC. - Form 10-K 43

  • Page 65
    ... of debt issues, merger and acquisition advisory services and asset backed securitization. Operating revenues in the debt trading product line increased from $8.5 million in fiscal 2012 to $12.8 million in fiscal 2013, driven by strong growth in Argentina and in the Latin American trade finance...

  • Page 66
    ... in exchange-traded volumes. This increase was primarily driven by accounts transferred to us from MF Global during the first quarter of fiscal 2012, including a large introducing broker whose clients generally have higher volumes and lower rates per contract than the average client in this segment...

  • Page 67
    ... in both commodity financing arrangements and commodity origination sales. Segment income increased 69% from $5.4 million in fiscal 2012 to $9.1 million in fiscal 2013. Adjusted segment income increased 83% from $6.3 million in fiscal 2012 to $11.5 million in fiscal 2013. 46 INTL FCSTONE INC...

  • Page 68
    ...exchanges is a function of the net open positions of our customers and the required margin per contract. During the third quarter of fiscal 2013, INTL FCStone Ltd, our UK regulated subsidiary, informed the UK authorities that it had reached certain thresholds that require it to be compliant with the...

  • Page 69
    ... on a daily basis. Information related to bad debt expense, net of recoveries, for the fiscal years ended 2013, 2012 and 2011 is set forth in Note 6 of the Consolidated Financial Statements. inventory. FCStone, LLC, our FCM subsidiary, occasionally uses its margin line credit facilities, on a short...

  • Page 70
    ... customers throughout Latin America and a wholly owned subsidiary of Tradewire Group Ltd. These accounts were transferred to our broker-dealer subsidiary, INTL FCStone Securities. Tradewire Securities provided global brokerage services to institutions and individual investors directly and through...

  • Page 71
    ... requirements as of September 30, 2013. Additional information on these net capital and minimum net capital requirements can be found in Note 13 of the Consolidated Financial Statements. The Dodd-Frank Act created a comprehensive new regulatory regime governing the OTC and listed derivatives markets...

  • Page 72
    ... proceeds of the sale of the Notes are being used for general corporate purposes. The Notes were issued under an Indenture dated as of July 22, 2013, between us and The Bank of New York Mellon, as Trustee. The Notes bear interest at a rate of 8.5% per year (payable quarterly on January 30, April 30...

  • Page 73
    ... in our expenses, such as compensation and benefits, transaction-based clearing expenses, occupancy and equipment rental, due to inflation, may not be readily recoverable from increasing the prices of our services. While rising interest rates are generally favorable for us, to the extent that...

  • Page 74
    ... to period based on non-recurring events, such as the settlement of income tax audits and changes in tax law, as well as recurring factors including the geographic mix of income before taxes, state and local taxes, and the effects of various global income tax strategies. INTL FCSTONE INC...

  • Page 75
    ... and options. Our commodity trading activities are managed as one consolidated book for each commodity encompassing both cash positions and derivative instruments. We monitor the aggregate position for each commodity in equivalent physical ounces or metric tons. 54 INTL FCSTONE INC. - Form...

  • Page 76
    ... the Consolidated Financial Statements for information on the interest rate swap transactions. The debt instruments are carried at their unpaid principal balance which approximates fair value. All of our outstanding debt as of September 30, 2013, has a variable interest rate. INTL FCSTONE INC...

  • Page 77
    ...other form of assurance on management's statements referring to corrective actions taken after September 30, 2013, relative to the aforementioned material weakness in internal control over financial reporting. /s/ KPMG LLP Kansas City, Missouri January 15, 2014 56 INTL FCSTONE INC. - Form 10...

  • Page 78
    ... and Supplementary Data Report of Independent Registered Public Accounting Firm We have audited the accompanying consolidated balance sheets of INTL FCStone Inc. and subsidiaries (the Company) as of September 30, 2013 and 2012, and the related consolidated statements of income, comprehensive...

  • Page 79
    PART II Item 8 Financial Statements and Supplementary Data Consolidated Balance Sheets (in millions, except par value and share amounts) September 30, 2013 September 30, 2012 (As Restated) $ 236.3 357.5 ASSETS Cash and cash equivalents Cash, securities and other assets segregated under federal ...

  • Page 80
    ...-average number of common shares outstanding: BASIC DILUTED Amounts attributable to INTL FCStone Inc. common stockholders: Income from continuing operations, net of tax Income from discontinued operations, net of tax NET INCOME See accompanying notes to consolidated financial statements. $ 43...

  • Page 81
    ... (loss) income Comprehensive income Year Ended September 30, 2012 2011 (As Restated) (As Restated) 19.3 $ 12.7 $ 34.7 (1.8) - 3.4 0.6 (0.1) (8.3) 2.0 (6.4) (4.2) 15.1 $ (1.1) - (1.6) 6.5 - - - - 3.8 16.5 (0.4) 1.0 (2.9) (0.6) - - - - (2.9) 31.8 $ $ 60 INTL FCSTONE INC. - Form 10-K

  • Page 82
    ...Statements and Supplementary Data Consolidated Cash Flows Statements (in millions) 2013 Year Ended September 30, 2012 (As Restated) 19.3 $ 12.7 $ 2011 (As Restated... of share-based compensation expense... on acquisition of INTL Provident Changes in operating...commodities inventory Other assets Accounts...

  • Page 83
    ... CONSIDERATION PAYABLE RELATED TO ACQUISITIONS See accompanying notes to consolidated financial statements. $ $ $ (157.2) (12.0) 45.5 - (3.9) (3.7) 1.5 0.1 (129.7) (0.5) (80.2) 236.3 156.1 $ 8.9 10.2 $ $ $ $ $ - 5.6 8.2 $ $ $ - 1.8 2.1 $ $ $ 16.7 4.9 5.4 62 INTL FCSTONE INC. - Form...

  • Page 84
    ...de-consolidation BALANCES AS OF SEPTEMBER 30, 2012, AS RESTATED Net income Other comprehensive loss Exercise of stock options Share-based compensation Repurchase of stock Stock held in escrow for business combination BALANCES AS OF SEPTEMBER 30, 2013... financial statements. INTL FCSTONE INC...

  • Page 85
    ... of precious and base metals and select other commodities; trading of more than 130 foreign currencies; market-making in international equities; debt origination and asset management. The Company provides these services to a diverse group of more than 20,000 accounts, representing approximately 11...

  • Page 86
    ... billion as of September 30, 2013 and 2012, respectively. Management has considered guidance required by the Transfers and Servicing Topic of the ASC as it relates to securities pledged by customers to margin their accounts. Based on a review of INTL FCSTONE INC. - Form 10-K Cash, Securities...

  • Page 87
    ... information on the treatment of derivative contracts. For customer owned derivative contracts, the fair value is offset against the payable to customers with no impact recognized on the consolidated income statements. accounts are reported gross of customer accounts that contain net credit...

  • Page 88
    ...benefit...reviewed at each reporting...2013 and 2012. Physical Commodities Inventory Physical commodities...reporting period. The Company has classified certain U.S. government obligations, corporate...'s risk management program. .... INTL FCSTONE ...related accumulated depreciation are removed from the accounts...

  • Page 89
    ...statements. The Company utilizes derivative instruments to manage exposures to foreign currency, commodity price and interest rate risks for the Company and its customers. The Company's objectives...limiting the Company's risk to performance of 68 INTL FCSTONE INC. - Form 10-K the two offsetting...

  • Page 90
    ... of Trade of Kansas City, Missouri, Inc. ("KCBT"). The Company received proceeds of $1.5 million and recognized a gain of $0.9 million before taxes, in connection with its class A shares of the KCBT held as of September 30, 2012, during the fiscal year ended September 30, 2013. Exchange memberships...

  • Page 91
    ... the futures and cash markets (see additional 70 INTL FCSTONE INC. - Form 10-K Cost of Revenue Cost of sales of physical commodities include finished commodity or raw material and processing costs along with operating costs relating to the receipt, storage and delivery of the physical...

  • Page 92
    ... consists primarily of salaries, incentive compensation, commissions, related payroll taxes and employee benefits. The Company classifies employees as either traders / risk management consultants, operational or administrative personnel, which includes the executive officers. The most significant...

  • Page 93
    ... after September 15, 2012. Early adoption is permitted. The Company adopted this guidance and it did not have a material impact on the Company's consolidated financial statements. In February 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-02, Reporting of Amounts Reclassified...

  • Page 94
    ...September 30, 2012. In connection with the preparation of the consolidated financial statements for the fiscal year ended September 30, 2013, the Company identified errors in the reconciliation of the Company's subsidiary INTL FCStone Markets, LLC's accounting records to its back office system which...

  • Page 95
    ... is summarized as follows: Consolidated Income Statement Information for the Year Ended September 30, 2012 2011 (As Reported) Adjustment (As Restated) (As Reported) Adjustment (As Restated) (in millions, except share and per share amounts) Sales of physical commodities $ 68,812.5 (1,297.8) $ 67,514...

  • Page 96
    ... share amounts) 2013 Year Ended September 30, 2012 2011 (As Restated) (As Restated) 19.3 (0.8) 18.5 - - - 19.3 (0.8) 18.5 $ 12.8 (0.5) 12.3 - - - 12.8 (0.5) 12.3 $ 34.6 (0.9) 33.7 0.2 - 0.2 34.8 (0.9) 33.9 Numerator: Income from continuing operations attributable to INTL FCStone Inc. stockholders...

  • Page 97
    ... liabilities accounted for at fair value, on a recurring basis, as of September 30, 2013 and September 30, 2012 by level in the fair value hierarchy. There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of September 30, 2013 and 2012. 76 INTL FCSTONE...

  • Page 98
    ... Financial Statements and Supplementary Data (in millions) Level 1 September 30, 2013 Netting and Level 2 Level 3 Collateral(1) Total aSSEtS: Money market funds Certificate of deposits Unrestricted cash equivalents Money market funds Commodities warehouse receipts U.S. government obligations...

  • Page 99
    ... equities and ADRs Corporate and municipal bonds U.S. government obligations Foreign government obligations Derivatives Commodities leases Commodities warehouse receipts Exchange firm... are included in 'trading gains, net' in the consolidated income statements. 78 INTL FCSTONE INC. - Form 10-K

  • Page 100
    part II Item 8 Financial Statements and Supplementary Data Information on Level 3 Financial Assets and Liabilities The Company's financial assets at fair value classified within level 3 of the fair value hierarchy as of September 30, 2013 and 2012 are summarized below: (in millions) Total level 3 ...

  • Page 101
    ... by management of the Company. 80 INTL FCSTONE INC. - Form 10-K The Company reports transfers in and out of levels 1, 2 and 3, as applicable, using the fair value of the securities as of the beginning of the reporting period in which the transfer occurred. On March 31, 2013, the commodities...

  • Page 102
    ... ended September 30, 2013, in connection with the sale of these seats. The Company has unrealized losses of $0.5 million, net of income tax benefit of $0.3 million and unrealized gains of $6.2 million, net of income tax expense of $2.0 million in OCI related to U.S. government obligations, mortgage...

  • Page 103
    ... value included in 'Financial instruments sold, not yet purchased, at fair value' $ $ $ (1) As of September 30, 2013 and 2012, the Company's derivative contract volume for open positions was approximately 4.1 million and 4.1 million contracts, respectively. 82 INTL FCSTONE INC. - Form 10-K

  • Page 104
    ..., net' in the consolidated income statements. Year Ended September 30, 2012 (as restated) 84.6 $ 62.3 $ 11.6 10.4 0.1 1.4 96.3 $ 74.1 $ 2013 $ Commodities Foreign exchange Interest rate Net gains from derivative contracts $ 2011 (as restated) 32.8 15.0 3.5 51.3 Credit Risk In the normal course...

  • Page 105
    ...million and 84 INTL FCSTONE INC. - Form 10-K $0.8 million of the insured portion of the notes through nonrecourse participation agreements with other third parties as of September 30, 2013 and 2012, respectively. See discussion of notes receivable related to commodity repurchase agreements in...

  • Page 106
    ... operating segments as of September 30, 2013 and 2012 is as follows: (in millions) September 30, 2013 $ Commodity and Risk Management Services Foreign Exchange Securities GOODWILL $ September 30, 2012 (As Restated) 33.1 $ 33.1 6.3 6.3 8.1 5.3 47.5 $ 44.7 INTL FCSTONE INC. - Form 10-K 85

  • Page 107
    ... are short term borrowings 86 INTL FCSTONE INC. - Form 10-K and carry variable rates of interest, thus approximating fair value. The Company's credit facilities are as follows: A three-year syndicated committed loan facility established on September 20, 2013 under which $140 million is...

  • Page 108
    ... on the facilities as well as indebtedness on senior notes as of September 30, 2013 and 2012: (in millions) Credit Facilities Borrower INTL FCStone Inc. FCStone, LLC FCStone Merchants INTL Commodities Security renewal/Expiration Date Certain pledged shares September 20, 2016 None April 10, 2014...

  • Page 109
    ... short term funding of margin to commodity exchanges as necessary, and for general corporate purposes of INTL FCStone, Ltd (see Note 23). NOte 12 Commitments and Contingencies Legal Proceedings Certain conditions may exist as of the date the financial statements are issued, which may result in...

  • Page 110
    ... 2012. On May 29, 2013, the Company reached a settlement with the CFTC in this matter. The CFTC's findings, neither admitted nor denied by the Company, were that FCStone, LLC violated CFTC Regulation 166.3 in that it failed to diligently supervise its officers' and employees' activities relating...

  • Page 111
    ... years ended 2013, 2012 and 2011, respectively. The expenses associated with the operating leases and service obligations are reported in the consolidated income statements in 'occupancy and equipment rental', 'transactionbased clearing expenses' and 'other' expenses. 90 INTL FCSTONE INC...

  • Page 112
    ... assets. The Company's subsidiary INTL Global Currencies Limited is regulated by the FCA as a Payment Institution under the Payment Services Regulations 2009. The regulations impose regulatory capital (reported annually), and conduct of business requirements. INTL FCSTONE INC. - Form 10-K 91

  • Page 113
    ..., 2013, as follows: (in millions) Subsidiary FCStone, LLC FCStone, LLC FCStone, LLC INTL FCStone Ltd INTL FCStone Ltd INTL Global Currencies Limited INTL FCStone Securities Inc. FCC Investments, Inc. FCStone Australia FCStone Australia FCStone Commodity Services (Europe), Ltd INTL FCStone DTVM Ltda...

  • Page 114
    ...: Stock Option Plans The Company sponsors a stock option plan for its directors, officers, employees and consultants. The Company's Board of Directors approved a new stock option plan ("the 2013 Stock Option Plan"), which was approved by the Company's INTL FCSTONE INC. - Form 10-K 93

  • Page 115
    ... Statements and Supplementary Data 2013 Expected stock price volatility Expected dividend yield Risk free interest rate Average expected life (in years) Year Ended September 30, 2012 2011...00 $ $ n/a 1.18 n/a 2.40 3.10 8.22 n/a n/a n/a n/a 2.45 4.87 94 INTL FCSTONE INC. - Form 10-K

  • Page 116
    ... the executive's retirement from employment, the Company recorded compensation cost, related to the individual's restricted stock, of $2.6 million during the fiscal year ended September 30, 2013. NOte 16 Retirement Plans Defined Benefit Retirement Plans As a result of its acquisition of FCStone on...

  • Page 117
    ... on an annual basis. As a result of the defined benefit plans having a frozen status, no additional benefits will be accrued for active participants under the plan, and accordingly no assumption will be made for the rate of increase in compensation levels in the future. 96 INTL FCSTONE INC...

  • Page 118
    ...stock, U.S. government securities and federal agency obligations, municipal and corporate bonds are stated at estimated fair value based upon quoted ...reporting date. Equity securities did not include any INTL FCStone Inc. common stock as of September 30, 2013 and 2012, respectively. INTL FCSTONE ...

  • Page 119
    ...2013 and 2012. For additional information and a detailed description of each level within the fair value hierarchy, see Note 4. (in millions) Level 1 September 30, 2013 Level 2 Level 3 0.5 0.6 8.1 18.7 1.0 28.9 total 0.5 0.6 8.1 18.7 1.0 28.9 Assets: Cash equivalents Fixed income: Government...

  • Page 120
    ... in the INTL FCStone Inc. 401(k) Plan ("401(k) Plan"), a defined contribution plan providing retirement benefits, to all domestic employees who have reached 21 years of age, and provided four months of service to the Company. Employees may contribute from 1% to 80% of their annual compensation to...

  • Page 121
    ...) 2013 $ U.S. International INCOME FrOM CONtINUING OpEratIONS, BEFOrE taX Year Ended September 30, 2012 (As Restated) (21.7) $ (17.2) $ 44.3 33.0 22.6 $ 15.8 $ 2011 (As Restated) 23.2 32.2 55.4 $ Items accounting for the difference between income taxes computed at the federal statutory rate...

  • Page 122
    ... within 16 years. Based on the tax planning strategies that can be implemented, management believes that it is more likely than not that the Company will realize the tax benefit of the deferred tax assets, net of the existing valuation allowance, in the future. 101 INTL FCSTONE INC. - Form 10...

  • Page 123
    ... institutional customers directly and through a global network of partners. FACT services a wide range of customers, including brokerdealers, investment advisors, and fund managers. The Company completed this transaction in the first quarter of fiscal 2014. 102 INTL FCSTONE INC. - Form 10-K

  • Page 124
    ... accounts from Tradewire Securities, LLC ("Tradewire Securities"), a Miami-based securities brokerdealer servicing customers throughout Latin America and a wholly owned subsidiary of Tradewire Group Ltd. These accounts were transferred to INTL FCStone Inc.'s broker-dealer subsidiary, INTL FCStone...

  • Page 125
    ... of customer accounts and customer account documentation. Additionally, as part of the transaction, the Company hired more than 50 professionals from MF Global's metals trading business based in London. This business serves institutional investors and financial services firms in the Americas, Europe...

  • Page 126
    ...Ambrian Commodities Limited ("Ambrian"), the London Metals Exchange brokerage subsidiary of Ambrian Capital Plc. Ambrian was subsequently renamed INTL FCStone Ltd. ("INTL FCStone Europe"). INTL FCStone Europe, a non-clearing LME member, specializes in the development and execution of risk-management...

  • Page 127
    ... and errors relating to certain intercompany physical sales, as previously discussed in Note 2, to the fiscal 2013 quarterly information is as follows: (in millions, except per share amounts) September 30 $ Total revenues Cost of sales of physical commodities Operating revenues Transaction-based...

  • Page 128
    ..., regional broker-dealers and institutional investors. The Company also provides global execution services for institutional customers, including hedge funds, pension funds, broker-dealers and banks located primarily in Latin America, the Caribbean, North America and Europe. The Company makes...

  • Page 129
    .... Variable compensation paid to risk management consultants / traders generally represents a fixed percentage of an amount equal to revenues generated, and in some cases, revenues produced less transaction-based clearing expenses and related charges, base salaries and an overhead allocation. Segment...

  • Page 130
    ... 30, 2012 (As Restated) $ 1,439.7 $ 124.5 88.7 1,090.9 110.8 98.4 2,953.0 $ Total assets: Commodity and Risk Management Services Foreign Exchange Securities Clearing and Execution Services Other Corporate unallocated tOtaL $ $ 1,105.1 145.0 198.5 1,246.4 37.3 115.7 2,848.0 $ INTL FCSTONE...

  • Page 131
    ... agreement under which $25 million is available to INTL FCStone, Ltd. to provide shortterm funding of margin to commodity exchanges as necessary, and for general corporate purposes of INTL FCStone, Ltd. This line of credit is subject to annual review, and the continued availability of this line of...

  • Page 132
    ... were presented under the equity method of accounting, investment in subsidiaries and retained earnings would each increase by $149.6 million as of September 30, 2013, respectively, and $105.7 million, as restated, as of September 30, 2012, respectively. INTL FCSTONE INC. - Form 10-K 111

  • Page 133
    ... I INtL FCStone Inc. Condensed Statements of Operations Parent Company Only (in millions) Revenues: Trading gains, net Consulting and management fees Interest income Other income(2) Total revenues Interest expense Net revenues Non-interest expenses: Compensation and benefits Clearing and related...

  • Page 134
    ...INtL FCStone Inc. Condensed Statements of Cash Flows SCHeDULe I INtL FCStone Inc. Condensed Statements...based compensation expense Gain on acquisition of INTL...Income tax benefit on ...flow information: ...subordinated notes to common stock, net 2013 $ (24.6) Year Ended September 30, 2012 $ (14.5) $ 2011 (10...

  • Page 135
    ... our annual or interim financial statements will not be prevented or detected on a timely basis. Management (with the participation of our principal executive officer and principal financial officer) evaluated the Company's internal control over financial reporting as of September 30, 2013, based on...

  • Page 136
    part II Item 9B Other Information Management identified a material weakness in internal control over financial reporting that existed as of September 30, 2013, related to the accurate and timely accounting for certain principal over-the-counter derivative trading activities. Specifically, controls ...

  • Page 137
    ... in a report on Form 8-K. Item 11 executive Compensation We will include information relating to our executive officer and director compensation and the compensation committee of our board of directors in the 2014 Proxy Statement and is incorporated herein by reference. 116 INTL FCSTONE INC...

  • Page 138
    ... in the 2014 Proxy Statement and is incorporated herein by reference. Item 14 Principal Accountant Fees and Services Information regarding principal accountant fees and services will be included in the 2014 Proxy Statement and is incorporated herein by reference. INTL FCSTONE INC. - Form 10...

  • Page 139
    ... the Company's Proxy Statement on Form 14A filed with the SEC on January 13, 2012). 2012 Executive Compensation Plan (incorporated by reference from the Company's Proxy Statement on Form 14A filed with the SEC on January 13, 2012). Farmers Commodities Corporation Supplemental Nonqualified Pension...

  • Page 140
    ... thereto (incorporated by reference from the Company's Current Report on Form 8-K filed with the SEC on August 14, 2012). Fifth Amendment to Credit Agreement, made as of July 30, 2013, by and between FCStone Merchant Services, LLC, as Borrower, INTL FCStone Inc., as Guarantor, Bank of Montreal, as...

  • Page 141
    ... and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTL FCStone Inc. /s/ SEAN M. O'CONNOR Sean M. O'Connor Chief Executive Officer January 14, 2014 Dated: Pursuant to the requirements of the Securities...

  • Page 142
    ... Management S.A. INTL Asia Pte. Ltd INTL Capital and Treasury Global Services Ltd. INTL Capital S.A. INTL CIBSA Sociedad de Bolsa S.A. INTL Commodities DMCC INTL Commodities, Inc. INTL FCStone Capital Assessoria Financeira Ltda. INTL FCStone DTVM Ltda. INTL FCStone Ltd. INTL FCStone (Netherlands...

  • Page 143
    ... 333-108332 and 333-142262 on Form S-8) of INTL FCStone Inc. (the Company) of our reports dated January 15, 2014, with respect to the consolidated balance sheets of the Company as of September 30, 2013 and 2012, and the related consolidated statements of income, comprehensive income, cash flows, and...

  • Page 144
    ... and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 15, 2014 /s/ SEAN M. O'CONNOR Sean M. O'Connor Chief Executive Officer...

  • Page 145
    eXHIBIt 31.2 Section 302 Certification I, William J. Dunaway certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of INTL FCStone Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the ...

  • Page 146
    ...-Oxley Act of 2002 In connection with the Annual Report of INTL FCStone Inc. (the Company) on Form 10-K for the period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Sean M. O'Connor, Chief Executive Officer of the Company, certify...

  • Page 147
    ...-Oxley Act of 2002 In connection with the Annual Report of INTL FCStone Inc. (the Company) on Form 10-K for the period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, William J. Dunaway, Chief Financial Officer of the Company, certify...

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    This page intentionally left blank. e-8 INTL FCSTONE INC. - Form 10-K

  • Page 150
    Designed and Published by Labrador-company.com

  • Page 151
    ... Chief Executive Officer Heritage Cooperative, Inc. Diego Veitia Member Audit Committee Member Compensation Committee Private Investor Company Founder Corporate Headquarters 708 Third Avenue, Suite 1500 New York, NY 10017, USA Tel: +1 212 485 3500 1251 NW Briarcliff Parkway Suite 800 Kansas City...

  • Page 152
    708 Third Avenue, Suite 1500 New York, NY 10017, USA Tel: +1 212 485 3500 FOLLOW US Visit our website to learn more: www.intlfcstone.com