INTL FCStone 2013 Annual Report Download - page 59

INTLFCSTONEINC.Form10K38
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results ofOperations
and expansion of our oces, primarily in London, Singapore
and South America, business development and employee travel
expenses increased $2.3 million in scal 2012 compared to the
prior year.
Provision for Taxes: e eective income tax rate on a U.S.
GAAP basis was 18%, in scal 2012, compared to 38% in
scal 2011. 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 scal 2012, we had a loss
from continuing operations, before tax attributable from U.S.
jurisdictions, compared to 2011, where 42% of the income
from continuing operations, before tax was attributable from
U.S. jurisdictions. Generally, when the percentage of pretax
earnings generated from the U.S. decreases, our eective income
tax rate decreases.
Variable vs. Fixed Expenses
(in millions)
Year Ended September 30,
2013 % of Total 2012 % of Total 2011 % of Total
VARIABLE COMPENSATION AND BENEFITS $ 88.2 20% $ 97.9 23% $ 100.8 29%
Transaction-based clearing expenses 110.1 25% 105.4 25% 75.6 21%
Introducing broker commissions 40.5 9% 31.0 7% 24.0 7%
Total variable expenses 238.8 54% 234.3 55% 200.4 57%
Fixed compensation and benets 113.4 26% 104.5 25% 75.8 22%
Other xed expenses 90.3 20% 86.5 20% 70.0 20%
Bad debts and impairments 0.8 —% 1.5 —% 6.2 1%
Total non-variable expenses 204.5 46% 192.5 45% 152.0 43%
TOTAL NONINTEREST EXPENSES $ 443.3 100% $ 426.8 100% $ 352.4 100%
We seek to make our non-interest expenses variable to the greatest
extent possible, and to keep our xed costs as low as possible. e
table above shows an analysis of our variable expenses and non-
variable expenses as a percentage of total non-interest expenses
for the years ended September 30, 2013, 2012 and 2011.
Our variable expenses consist of variable compensation
paidto traders and risk management consultants, bonuses
paid to operational, administrative and 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 provided
to customers. Net contribution is one of the key measures used
by management to assess the performance of each segment
and for decisions regarding the allocation of our resources.
Net contribution is calculated as revenue less direct cost of
sales, interest expense, transaction-based clearing expenses,
introducing broker commissions and variable compensation.
Variable compensation paid to risk management consultants and
traders generally represents a xed percentage of an amount equal
to revenues generated, and in some cases, revenues produced
less transaction-based clearing expense and related charges, base
salaries and an overhead allocation.
Segment income is calculated as net contribution less non-
variable direct expenses of the segment. ese non-variable
direct expenses include trader base compensation and benets,
operational employee compensation and benets, communication
and data services, business development, professional fees, bad
debt expense, trade errors and direct marketing expenses.