INTL FCStone 2013 Annual Report Download - page 65

INTLFCSTONEINC.Form10K44
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results ofOperations
e following table provides the nancial performance for this segment.
(in millions)
Year Ended September 30,
2013 % Change 2012 % Change 2011
Operating revenues $ 61.1 53% $ 39.9 31% $ 30.5
Transaction-based clearing expenses 16.0 51% 10.6 45% 7.3
Introducing broker commissions 3.8 153% 1.5 200% 0.5
Interest expense 1.9 533% 0.3 (25)% 0.4
Net operating revenues 39.4 43% 27.5 23% 22.3
Variable direct compensation and benets 8.9 16% 7.7 33% 5.8
Net contribution 30.5 54% 19.8 20% 16.5
Non-variable direct expenses 16.6 8% 15.3 5% 14.6
Segment income $ 13.9 209% $ 4.5 137% $ 1.9
For information about the assets of this segment, see Note 22
to the Consolidated Financial Statements.
Year Ended September 30, 2013 Compared to
Year Ended September 30, 2012
Operating revenues increased 53% from $39.9 million in
scal2012 to $61.1 million in scal 2013. Operating revenues
in the Securities segment are driven by equity market-making
and debt capital markets product lines. Operating revenues in
the equities market-making product line increased 56% from
$25.1 million in scal 2012 to $39.0 million in scal 2013,
primarily as a result of the late rst quarter 2013 transfer
of accounts from Tradewire Securities, which contributed
$9.0 million in operating revenues in scal 2013. Equity market-
making operating revenues include the trading prots we earn
before the related expense deduction for ADR conversion fees.
ese ADR fees are included in the consolidated income statements
as ‘transaction-based clearing expenses’.
Operating revenues in our debt capital markets product line
increased from $14.9 million in scal 2012 to $22.1 million
in scal 2013. Our debt capital markets product line primarily
focuses on debt trading in the international markets as well as
debt origination, including a wide range of services, such as the
arranging and placing 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 scal 2012 to $12.8 million in scal 2013, driven
by strong growth in Argentina and in the Latin American trade
nance business. Operating revenues in our debt origination
product line increased from $6.4 million in scal 2012 to
$9.3 million in scal 2013.
Segment income increased 209%, from $4.5 million in scal2012
to $13.9 million in scal 2013, primarily as a result of increase
in operating revenues noted above. Variable expenses expressed
as a percentage of operating revenues decreased from 50% in
scal 2012 to 48% in scal 2013.
Year Ended September 30, 2012 Compared to
Year Ended September 30, 2011
Operating revenues increased 31% from $30.5 million in scal
2011 to $39.9 million in scal 2012. Operating revenues in
our equities market-making product line increased 23% from
the prior year to $25.1 million. Operating revenues in our debt
capital markets product line increased from $10.4 million in
scal 2011 to $14.9 million in scal 2012.
Operating revenues in our equities market-making product line
are largely dependent on overall volume and volatility, and with
the increased levels of activity in the global equity markets in
scal 2012, the retail customer business which drives our equity
market-making activities increased as compared to scal 2011.
Equity market-making operating revenues include the trading
prots we earn before the related expense deduction for ADR
conversion fees. ese ADR fees are included in the consolidated
income statements as ‘transaction-based clearing expenses’.
Our debt capital markets product line, primarily focuses debt
origination, including a wide range of services, such as the
arranging and placing of debt issues, merger and acquisition
advisory services and asset backed securitization as well as debt
trading in the international markets. e debt origination activities
continue to be constrained due to global economic conditions,
increasing 5% from $6.1 million in scal 2011 to $6.4 million
in scal 2012. Operating revenues in our debt trading business
doubled from $4.2 million in scal 2011 to $8.4 million in scal
2012, driven by increased activity in our Argentina operations.
Segment income increased 137%, from $1.9 million in scal
2011 to $4.5 million in scal 2012, primarily as a result of
increase in operating revenues in our equity market-making and
debt trading businesses. Segment income for scal 2011 includes
a $1.7 million loss related to the fair value adjustment of our
investment in debentures of the single asset owning company
of Suirwongse Hotel located in Chiang Mai, ailand. Variable
expenses expressed as a percentage of operating revenues increased
from 45% to 50%.