INTL FCStone 2014 Annual Report Download

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2014
ANNUAL REPORT

Table of contents

  • Page 1
    2014 ANNUAL REPORT

  • Page 2
    Financial Highlights OPERATING REVENUES dollars in millions 14 13 12 11 10 $258.5 $398.9 $448.1 $468.2 $490.9 INCOME FROM CONTINUING OPERATIONS, BEFORE TAX dollars in millions 14 13 12 11 10 $15.5 $21.2 $22.5 $48.1 $26.0 TOTAL ASSETS dollars in millions 14 13 12 11 10 STOCKHOLDERS' EQUITY dollars ...

  • Page 3
    ...INTL FCStone Inc. common stockholders (a) Earnings per share: Basic Diluted Number of shares: Basic Diluted Selected Balance Sheet Information...(from continuing operations) (b) EBITDA Employees, end of period Compensation and benefits as a percentage of operating revenues (c) 2014 $ 490.9 108.5 49.9 ...

  • Page 4
    We Open Markets A diversified, global financial services organization, INTL FCStone Inc. provides financial products and advisory and execution services to help our clients access market liquidity, maximize profits and manage risk. Our history and culture of innovation allows us to provide the ...

  • Page 5
    ... Million Net Income, Operations 79 Million Gold Ounces Traded $1.8 Billion Segregated Funds $345 Million Equity $74 Billion Equity Market Making $44 Million EBITDA 1,100 Employees Globally 94 Million Exchange Contracts Traded $491 Million Operating Revenue Managing Business in 135 Countries

  • Page 6
    ... our organization, and in 2014 completed the consolidation of our U.K. subsidiaries into one financial corporation which can provide all financial services to our client base with the exception of deposit taking and fund management. This has clear organizational benefits and also allows a more...

  • Page 7
    Compound Growth 2010-2014: 43% OPERATING REVENUES 14% INCOME FROM CONTINUING OPERATIONS, BEFORE TAX 8% STOCKHOLDERS' EQUITY 6% NET BOOK VALUE PER SHARE

  • Page 8
    ... expand offering as regulations became more complex and our capabilities and range of services. Toward that costly to implement. The INTL FCStone management end, following the conclusion of the fiscal year, team took a different route. We expanded our we completed the acquisition of G.X. Clarke & Co...

  • Page 9
    .... However, markets to manage risks and/or enhance as in recent years, historically low short-term interest returns rates have functioned as a significant constraint on • Efficient execution by providing access to our interest income from customer deposits. global liquidity sources from exchanges...

  • Page 10
    ... growth were double-digit increases in debt trading and asset management revenues, resulting from favorable market conditions both domestically and in South America. Net operating revenues in our Clearing and Execution Services (CES) segment declined $4.4 million versus the previous year. However...

  • Page 11
    ... and our stockholders for entrusting their capital to us. SEAN M. O'CONNOR Chief Executive Officer "We are gratified to say that, unlike some others in our industry, we have successfully weathered the market's headwinds" The executive management team would like to thank all of our colleagues for...

  • Page 12
    INTL FCSTONE PROvIDES CLIENTS GLOBALLy wITh A COMPREhENSIvE RANGE OF CuSTOMIzED FINANCIAL SERvICES AND TOOLS TO hELP ThEM PROTECT ThEIR MARGINS, MANAGE vOLATILITy AND EFFICIENTLy ACCESS GLOBAL MARkETS.

  • Page 13
    Office Locations Headquarters: New York (US) 708 Third Avenue, Suite 1500 New York, NY 10017, USA Tel: +1 212 485-3500 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 Bloomington (IL) +1 800 747-7001 Bowling ...

  • Page 14
    ... activities. The Company seeks to distribute such information as widely as possible through filings on Form 8-K, press releases and postings on its website, www.intlfcstone.com. Forward-Looking Statements This Annual Report contains "forward-looking statements" within the meaning of Section 27A of...

  • Page 15
    ... 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 16
    ... Executive Officers and Corporate Governance...112 Executive Compensation...112 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...113 Certain Relationships and Related Transactions, and Director Independence...113 Principal Accountant Fees and Services...

  • Page 17
    ...from such 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 10...

  • Page 18
    ... around the world. Our leadership positions span markets such as commodity risk management advisory services; global payments; market-making in international equities and other securities; physical trading and hedging of precious metals and select other commodities; execution of listed futures and...

  • Page 19
    ... 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 execution services...

  • Page 20
    ... Hedging, Global Payments, Securities, Physical Commodities and Clearing and Execution Services. Commercial Hedging We serve our commercial clients through our team of risk management consultants, providing a high-value-added service that we believe differentiates us from our competitors and...

  • Page 21
    ...appropriate exchange for execution. We then facilitate the clearing of clients' transactions. Clearing involves the matching of clients' trades with the exchange, the collection and management of client margin deposits to support the transactions, and the accounting and reporting of the transactions...

  • Page 22
    ... professional staff from Tradewire Securities' securities broker-dealer business based in Miami, Florida. These professionals provide global brokerage services to a wide range of customers, including hedge funds, pension funds, broker-dealers and banks located in Latin America, the Caribbean, North...

  • Page 23
    ... 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 24
    ... clearing, 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, New...

  • Page 25
    ...tangible asset capital requirement. New Zealand Clearing Limited, also regulates FCStone Australia. It is subject to a capital adequacy requirement. The Brazilian Central Bank and Securities and Exchange Commission of Brazil regulates INTL FCStone DTVM Ltda. ("INTL FCStone DTVM"). It is a registered...

  • Page 26
    ...Argentina, Brazil, Colombia, 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. INTL FCStone Ltd is domiciled in the United...

  • Page 27
    ... As of September 30, 2014, we employed 1,141 people globally: 754 in the U.S., 1 in Canada, 64 in Argentina, 84 in Brazil, 10 in Paraguay, 160 in the United Kingdom, 13 in Dubai, 25 in Singapore, 9 in China, 17 in Australia, and 4 in Hong Kong. None of our employees operate under a collective...

  • Page 28
    ... to our wholly owned subsidiary, FCStone Merchant Services, LLC, for financing traditional commodity financing arrangements and commodity repurchase agreements, committed until May 1, 2015. • a $25.0 million facility available to our wholly owned subsidiary, INTL FCStone Ltd for short-term funding...

  • Page 29
    ...involve the purchase, sale or short sale for customers and for our own account of financial instruments, including equity and debt securities, commodities and foreign exchange. These activities are subject to a number of risks, including risks of price fluctuations, rapid changes in the liquidity of...

  • Page 30
    ..., including risks related to human error, customer defaults, market movements, fraud and money-laundering, are established and reviewed by the Risk Committee of our Board of Directors. Some of our methods for managing risk are discretionary by nature and are based on internally developed controls...

  • Page 31
    ...to address present credit concerns, default risk may arise from events or circumstances that are difficult to detect or foresee, including rapid changes in securities, commodity and foreign exchange price levels. Some of our risk management methods depend upon the evaluation of information regarding...

  • Page 32
    ...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... number of reasons, including loss of power, acts of war or terrorism, human error...

  • Page 33
    ...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 34
    ... and record keeping 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...

  • Page 35
    ... of the account and tenor of the positions. We are subject to risks relating to litigation and potential securities and commodities law liability. We face significant legal risks in our businesses, including risks related to currently pending litigation involving both the Company and FCStone. Many...

  • Page 36
    ... of our service offerings and the products and markets to which we offer access. We may not be able to continue to offer the pricing, service, speed and reliability of order execution or the service, product and market breadth that customers desire. In addition, once 20 INTL FCSTONE INC. - Form...

  • Page 37
    ... us to new rules and regulations may directly affect our business, results of operations and financial condition. We are reviewing the regulatory changes that will be introduced by the Markets in Financial Instruments Directive ("MIFID 2") INTL FCSTONE INC. - Form 10-K Our international operations...

  • Page 38
    ...2014 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; St. Louis, Missouri; Bloomfield, Nebraska; Omaha, Nebraska; Minneapolis, Minnesota; Bloomington, Illinois; Miami...

  • Page 39
    ... million in full in fiscal 2013. An independent third party reviewer was appointed, and the mandated review was successfully completed. On January 13, 2014, a purported class action was filed in the United States District Court for the Southern District of New York against the Company and certain...

  • Page 40
    ...5, 2014, ...held in reserve accounts under Sentinel's...management, but that may later prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. ITEm 4 mine Safety Disclosures Not applicable. 24 INTL FCSTONE...

  • Page 41
    ...80 60 40 20 2009 INTL Value over 5 years of $100 invested on September 30, 2009 in each of the company's stock ("INTL"), S&P 500 Index and NYSE/Arca Securities Broker/Dealer Index 2010 S&P 500 Index 2011 2012 NYSE/Arca Securities Broker/Dealer Index 2013 2014 INTL FCSTONE INC. - Form 10-K 25

  • Page 42
    ...036,200 August 1, 2014 to August 31, 2014 - - - 1,036,200 September 1, 2014 to September 30, 2014 - - - 1,036,200 Total - $ - - Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 of our Annual Report on Form 10...

  • Page 43
    ...$ 7.9 5.6 8.0 7.2 2.6 5.5 37.1 $ 35.3 $ Net income from continuing operations Plus: interest expense Plus: depreciation and amortization Plus: income taxes EBITDA $ $ 2014 19.6 10.5 7.3 6.4 43.8 $ $ 2011 29.9 $ 6.4 4.7 18.2 59.2 $ 2010 10.0 7.5 1.6 5.5 24.6 INTL FCSTONE INC. - Form 10-K 27

  • Page 44
    ... around the world. Our leadership positions span markets such as commodity risk management advisory services; global payments; market-making in international equities and other securities; physical trading and hedging of precious metals and select other commodities; execution of listed futures and...

  • Page 45
    ... recognized during the first quarter of fiscal 2013 on the sale of our shares in the LME and the Board of Trade of Kansas City, Missouri, Inc. ("KCBT"), following their acquisitions by the Hong Kong Exchanges & Clearing Limited and the Chicago Mercantile Exchange ("CME"), respectively. The increase...

  • Page 46
    ... during the second quarter of fiscal 2014, we reorganized our operating segments into the following reportable segments: Commercial Hedging, Global Payments, Securities, Physical Commodities and Clearing and Execution Services. All segment information has been revised to reflect the operating...

  • Page 47
    ... by growth in the energy and renewable fuels markets. Operating revenues in our Global Payments segment increased $14.5 million to $55.4 million in fiscal 2014, compared to fiscal 2013, driven by a 36% increase in the number of global payments made as we continue to be successful in adding and on...

  • Page 48
    ... 2013. The addition of the accounts of Tradewire Securities added $4.3 million incremental debt-trading revenues, as well as expansion of our export financing business. Investment banking revenues increased $2.9 million, while asset management revenues increased $1.1 million. Physical Commodity...

  • Page 49
    ... 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 resulted in an...

  • Page 50
    ... was $11.5 million in fiscal 2013 compared to $14.1 million in fiscal 2012. The fixed portion of compensation and benefits increased 10% to $110.7 million in fiscal 2013 compared to $100.8 million in fiscal 2012, related to increases in non-variable salaries, 34 INTL FCSTONE INC. - Form 10-K

  • Page 51
    ... employee benefits. Nonvariable salaries increased $3.8 million, or 5%, primarily related to the acquisition of the LME metals team, TRX Futures Limited and the accounts of Tradewire Securities, as well as staffing additions across administrative departments, primarily in compliance, information...

  • Page 52
    ... a component of Commodity and Risk Management Services, is now reported as discontinued operations, and is not part of the Physical Commodities segment information. • Clearing and Execution Services now includes the FX Prime Brokerage component as an additional component. 36 INTL FCSTONE INC...

  • Page 53
    ... October 1, 2011. INTL FCStone Inc. Commercial Hedging Components: - Financial Ag's & Energy - LME metals Global Payments Components: - Global Payments Securities Components: - Equity marketmaking - Debt Trading - Investment Banking - Asset Management Physical Commodities Components: - Precious...

  • Page 54
    .... Our risk management consulting services are designed to quantify and monitor commercial entities' exposure to commodity and financial risk. Upon assessing this exposure, we develop a plan to control and hedge these risks with post-trade reporting against specific client objectives. Our clients...

  • Page 55
    ... 2013. Exchange-traded revenues increased 17% to $109.3 million in fiscal 2014, driven primarily by growth in agricultural commodity and LME metals revenues. Agricultural commodity exchange-traded revenues benefited from improved market conditions in the domestic grain and global coffee markets...

  • Page 56
    ... related to the implementation of our electronic transaction order system. Variable expenses expressed as a percentage of operating revenues increased to 30% in fiscal 2013 compared to 28% in fiscal 2012, primarily as a result of an increase in transactionbased clearing expenses. 40 INTL FCSTONE...

  • Page 57
    ....8 0.68 462.3 56% 51% 45% 14% 47% $ 2012 25.0 8.5 6.4 7.7 47.6 25,553.8 0.98 428.6 $ $ $ $ 74,162.9 $ 0.54 $ 530.9 29% $ (21)% $ 15% $ 126% $ (31)% $ 8% $ For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements. INTL FCSTONE INC. - Form 10-K 41

  • Page 58
    ... in Argentina and the transfer of accounts from Tradewire Securities. Investment banking operating revenues increased 45% to $9.3 million in fiscal 2013 compared to fiscal 2012, while asset management revenues increased 14% in fiscal 2013 compared to fiscal 2012 42 INTL FCSTONE INC. - Form 10-K

  • Page 59
    ... by a 28% decrease in the number of ounces traded primarily in the Far Eastern markets. Operating revenues in the physical agricultural and energy commodity product line increased 51% to $11.9 million in fiscal 2013 compared to $7.9 million in fiscal 2012, primarily INTL FCSTONE INC. - Form 10-K 43

  • Page 60
    ... and clearing fees have been excluded from the calculation of exchange-traded average rate per contract. For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements. Year ended September 30, 2014 Compared to Year ended September 30, 2013 Operating...

  • Page 61
    ... a component of the Commodity and Risk Management Services segment. We continue to operate the portion of our base metals business related to non-physical assets conducted primarily through the LME, which is a component of the ongoing Commercial Hedging segment. INTL FCSTONE INC. - Form 10...

  • Page 62
    ...are prudent and feasible, management believes that it is more likely than not that we will realize the tax benefit of the deferred tax ...2014, 2013 and 2012, we recorded bad debts, net of recoveries of $5.5 million, $0.7 million, and $0.7 million, respectively. During the year ended 46 INTL FCSTONE...

  • Page 63
    ... in our Physical Commodities segment, related to renewable fuels activity, and $0.7 million in our Securities segment related to charge-offs of uncollectible service fees. Additional information related to bad debts, net of recoveries, for the fiscal years ended September 30, 2014, 2013 and 2012 is...

  • Page 64
    ..., INTL FCStone Securities. Tradewire Securities provided global brokerage services to institutions and individual investors directly and through a global network of partners. The consideration to be paid for the acquisition of institutional accounts from Tradewire Securities consists of three annual...

  • Page 65
    ...we paid debt issuance costs of $1.5 million in connection with the issuance of the new three-year credit facility, which are being amortized over the thirty-six...the consolidated financial statements at September 30, 2014 and September 30, 2013, at fair value of the related financial instruments, ...

  • Page 66
    ...our financial position and results of operations. Critical Accounting Policies The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent...

  • Page 67
    PART II Item 7 management's Discussion and Analysis of Financial Condition and Results of Operations in effect at the close of business at the end of the accounting period. For foreign currency transactions completed during each reporting period, the foreign exchange rate in effect at the time of ...

  • Page 68
    ...4 to the Consolidated Financial Statements, 'Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk'. market Risk We conduct.... Our commodity trading activities are managed as one consolidated 52 INTL FCSTONE INC. - Form 10-K book for each commodity encompassing both...

  • Page 69
    ... of our interest rate management strategy discussed above. Refer to Note 4 to 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. As of September 30, 2014, $22...

  • Page 70
    ... Data Item 8 Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders INTL FCStone Inc.: We have audited INTL FCStone Inc.'s (the Company) internal control over financial reporting as of September 30, 2014, based on...

  • Page 71
    ... of Sponsoring Organizations of the Treadway Commission, and our report dated December 10, 2014 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. /s/ KPMG LLP Kansas City, Missouri December 10, 2014 INTL FCSTONE INC. - Form 10-K 55

  • Page 72
    ...Accounts payable and other accrued liabilities (including $5.5 and $9.6 at fair value at September 30, 2014 and September 30, 2013) Payable to: Customers Broker-dealers, clearing...(17.5) 229.6 144.7 (11.6) 345.4 3,039.7 $ 0.2 (7.8) 224.0 125.4 (6.4) 335.4 2,848.0 $ 56 INTL FCSTONE INC. - Form 10-K

  • Page 73
    ...-average number of common shares outstanding: Basic Diluted Amounts attributable to INTL FCStone Inc. common stockholders: Income from continuing operations, net of tax (Loss) income from discontinued operations, net of tax Net income See accompanying notes to consolidated financial statements. 33...

  • Page 74
    ... $ See accompanying notes to consolidated financial statements. Year Ended September 30, 2013 19.3 $ 19.3 $ (4.6) (0.8) 0.2 - 0.2 (0.1) (0.1) - (5.2) 14.1 $ (1.8) 2.9 0.6 (0.1) 0.8 (8.3) 1.7 (5.9) (4.2) 15.1 $ 2012 12.7 (1.1) (1.8) 6.5 - 0.4 - (0.2) 0.2 3.8 16.5 58 INTL FCSTONE INC. - Form 10-K

  • Page 75
    ...Statements (in millions) 2014 $ Year Ended September 30, 2013...commodities inventory Other assets Accounts payable and other accrued liabilities Payable to customers Payable to broker-dealers, clearing...related... - - (8.7) (20.0) 140.8 (9.6) - (4.0) (0.3) 1.9 0.2 129.0 INTL FCSTONE INC. - Form 10-K 59

  • Page 76
    ... related to acquisitions See accompanying notes to consolidated financial statements. $ $ $ $ $ Year Ended September 30, 2013 (4.3) (0.5) 75.2 (80.2) 156.1 236.3 231.3 $ 156.1 $ 9.6 3.0 $ $ 8.9 10.2 5.6 8.2 $ $ $ $ 2012 (1.2) 15.7 220.6 236.3 7.9 6.1 1.8 2.1 0.5 $ (1.8) $ 60 INTL FCSTONE...

  • Page 77
    ...of stock Disposal or de-consolidation Balances as ...of September 30, 2013 Net income Other ...2014 $ 0.2 $ (7.8) $ $ 125.4 $ 19.3 (6.4) $ (5.2) - $ (9.7) 0.2 $ (17.5) $ 1.3 4.3 - 229.6 $ 144.7 $ (11.6) $ - See accompanying notes to consolidated financial statements. INTL FCSTONE...

  • Page 78
    ... income. INTL FCStone Inc., a Delaware corporation, and its consolidated subsidiaries (collectively "INTL" or "the Company"), form a financial services group focused on domestic and select international markets. The Company's services include comprehensive risk management advisory services for...

  • Page 79
    ... $0.7 billion and $0.6 billion as of September 30, 2014 and 2013, 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 the agreements with the customer...

  • Page 80
    ... customers represent the total of customer accounts with credit or positive balances. Customer accounts are used primarily in connection with commodity transactions and include gains and losses on open commodity trades as well as securities and 64 INTL FCSTONE INC. - Form 10-K Notes Receivable The...

  • Page 81
    ... with no impact on the consolidated income 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 for holding derivatives include reducing, eliminating, and...

  • Page 82
    ... of Trade ("CBOT"), the Minneapolis Grain Exchange, the New York Mercantile Exchange ("NYMEX"), the Commodity Exchange, Inc. ("COMEX") Division of the New York Mercantile Exchange, Mercado de Valores de Buenos Aires S.A. ("MERVAL"), the Chicago Mercantile Exchange ("CME") Growth and Emerging Markets...

  • Page 83
    ...shares held in escrow for business combinations. The shares held in escrow for business INTL FCSTONE INC. - Form 10-K Business Combinations Acquisitions during fiscal 2014 and fiscal 2013 are accounted for as business combinations in accordance with the provisions of the Business Combinations Topic...

  • Page 84
    ... 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 85
    ... income statement for the year ended September 30, 2012, as a result of the deconsolidation. transaction-Based Clearing expenses Clearing fees and related expenses include primarily variable expenses for clearing and settlement services, including fees the Company pays to executing brokers...

  • Page 86
    ...its ongoing financial reporting. In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, which changes the accounting for repurchase-to-maturity transactions to secured borrowing 70 INTL FCSTONE INC. - Form 10...

  • Page 87
    ... asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement. For public entities, the ASU is effective for the first interim or annual period beginning after December 15, 2014. Earlier...

  • Page 88
    ... government obligations, corporate debt securities, derivative financial instruments, commodities, mutual funds and investments in managed ...are based on pertinent information available to management as of September 30, 2014 and 2013. Although management is not aware ...INTL FCSTONE INC. - Form 10-K

  • Page 89
    ...30, 2014 and 2013. The ...internally developed models or methodologies utilizing significant inputs that are not readily observable from objective sources. Included in Level 3 are common stock and ADRs, some corporate and municipal bonds, some other investments and contingent liabilities. INTL FCSTONE...

  • Page 90
    ... and ADRs Corporate and municipal bonds U.S. government obligations Foreign government obligations Derivatives Commodities leases Commodities warehouse receipts Exchange firm common stock Mutual funds and other Financial instruments owned Total assets at fair value LIABILITIES: Accounts payable and...

  • Page 91
    ... and ADRs Corporate and municipal bonds U.S. government obligations Foreign government obligations Derivatives Commodities leases Commodities warehouse receipts Exchange firm common stock Mutual funds and other Financial instruments owned Total assets at fair value LIABILITIES: Accounts payable and...

  • Page 92
    ...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, 2014 and 2013... stock and ADRs Corporate and municipal bonds ...INTL FCSTONE INC. - Form 10-K

  • Page 93
    ...Hotel located in Chiang Mai, Thailand. As of September 30, 2014, the Company's investment in the hotel is $3.6 million, and included within the corporate ... in the Board of Trade of Kansas City, Missouri, Inc. ("KCBT"), in connection with the acquisition of the KCBT INTL FCSTONE INC. - Form 10-K 77

  • Page 94
    ...result, no additional realized gains or losses were recorded for the years ended September 30, 2014 and September 30, 2013. The company recognized changes in unrealized gains on available-for-sale securities of $0.2 million during the year ended September 30, 2014. 78 INTL FCSTONE INC. - Form 10-K

  • Page 95
    ... of September 30, 2014 and 2013, the Company's derivative contract volume for open positions was approximately 4.5 million and 4.1 million contracts, respectively. The Company's derivative contracts are principally held in its Commodities and Risk Management Services ("Commercial Hedging") segment...

  • Page 96
    ... and changes in commodity pricing and foreign exchange rates. The Company attempts to manage its exposure to market risk through various techniques. Aggregate market limits have been established and market risk measures are routinely monitored against these limits. 80 INTL FCSTONE INC. - Form 10...

  • Page 97
    ...'s inventory, which consist of all finished commodities, are $40.0 million and $59.0 million as of September 30, 2014 and 2013, respectively. As a result of declining market prices for some commodities towards the end of the fiscal year, the Company has recorded INTL FCSTONE INC. - Form 10-K 81

  • Page 98
    ...to the new Physical Commodities segment. The goodwill reported in the Commodity and Risk Management Services segment was $33.1 million in the prior year presentation. See discussion in Note 22 related to the reorganization of segments. Commencing during the quarter ended March 31, 2014, the Company...

  • Page 99
    ... 30, 2014. FCStone Merchants paid minimal debt issuance costs in connection with this credit facility. A syndicated committed borrowing facility established on November 15, 2013, and amended on November 10, 2014, under which $25.0 million is available to the Company's subsidiary, INTL FCStone, Ltd...

  • Page 100
    ... 2014 2013 $ 140.0 $ 15.0 $ 55.0 75.0 - - 30.0 7.5 6.0 25.0 - - $ 270.0 $ 22.5 $ 61.0 45.5 68.0 $ 45.5 106.5 Borrower INTL FCStone Inc. FCStone, LLC FCStone Merchants INTL FCStone, Ltd Security Renewal/Expiration Date Certain pledged shares September 20, 2016 None April 9, 2015 Certain commodities...

  • Page 101
    ...was paid in full in fiscal 2013. An independent third party reviewer was appointed, and the mandated review was successfully completed. On January 13, 2014, a purported class action was filed in the United States District Court for the Southern District of New York against the Company and certain of...

  • Page 102
    ... 30, 2014, 2013 and 2012 were a decrease of $2.3 million, increases of $2.6 million and $2.0 million, respectively, and are included in 'other' in the consolidated income statements. The Company recorded a contingent liability relating to the April 2014 acquisition of Forward Insight Commodities LLC...

  • Page 103
    ... fiscal years ended September 30, 2014, 2013 and 2012, respectively. The expenses associated with the operating leases and service obligations are reported in the consolidated income statements in 'occupancy and equipment rental', 'transaction-based clearing expenses' and 'other' expenses. Future...

  • Page 104
    ... Australia is also regulated by New Zealand Clearing Limited, and is subject to a capital adequacy requirement. FCStone Commodity Services (Europe), Ltd. is domiciled in Ireland and subject to regulation by the Central Bank of Ireland, and is subject to a net capital requirement. INTL FCStone DTVM...

  • Page 105
    ...compensation and benefits' in the consolidated income statements and totaled $4.3 million, $9.3 million and $5.9 million for the fiscal years ended September 30, 2014, 2013 and 2012, respectively. Stock Option Plans The Company sponsors a stock option plan for its directors, officers, employees and...

  • Page 106
    ... 2014, 2013 and 2012 was $1.8 million, $2.0 million and $3.0 million, respectively. The options outstanding as of September 30, 2014 broken down by exercise price are as follows: Number ...00 $ 45.00 $ 50.00 $ $ n/a 0.18 n/a 1.98 2.22 7.22 n/a n/a n/a n/a 1.80 4.16 90 INTL FCSTONE INC. - Form 10-K

  • Page 107
    ... year ended September 30, 2013. NOte 15 Retirement Plans Defined Benefit Retirement Plans The Company has a qualified and a nonqualified noncontributory retirement plan, which are defined benefit plans that cover certain employees. The plans are closed to new employees and frozen with respect to...

  • Page 108
    ... under the plans. The discount rates as of September 30, 2014, 2013 and 2012 were based on a model portfolio of high-quality fixed-income debt instruments with durations that are consistent with the expected cash flows of the benefit obligations. 92 INTL FCSTONE INC. - Form 10-K Second, the...

  • Page 109
    ...manager, but should recognize the need to satisfy both the volatility and the rate of return objectives for equity exposure and satisfy the objective... reporting date. Equity securities did not include any INTL FCStone Inc. common stock as of September 30, 2014 and 2013, respectively. INTL FCSTONE ...

  • Page 110
    ... contributions, if any, will be made in fiscal 2015. The following benefit payments, which reflect expected future service, are expected to be paid: (in millions) Year ending September 30, 2015 2016 2017 2018 2019 2020 - 2024 $ $ 3.3 3.2 2.9 2.0 2.0 9.5 22.9 94 INTL FCSTONE INC. - Form 10-K

  • Page 111
    ... 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 112
    ...(in millions) U.S. International Income from continuing operations, before tax $ $ Year Ended September 30, 2014 2013 (13.0) $ (23.3) $ 39.0 44.5 26.0 $ 21.2 $ 2012 (10.9) 33.4 22.5 Items accounting for the difference between income taxes computed at the federal statutory rate and the provision...

  • Page 113
    ... within 8 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. INTL FCSTONE INC. - Form 10-K 97

  • Page 114
    ... to September 30, 2013. The Internal Revenue Service commenced an examination of the U.S. income tax return for the fiscal year ended September 30, 2010. Additionally, INTL FCStone is under state examinations for various periods, ranging from September 2010 through September 30, 2014. There are no...

  • Page 115
    ... professional staff from Tradewire Securities' securities broker-dealer business based in Miami, Florida. These professionals provide global brokerage services to a wide range of customers, including hedge funds, pension funds, broker-dealers and banks located in Latin America, the Caribbean, North...

  • Page 116
    ... 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 117
    ... base metals business was previously included in the Commodity and Risk Management Services segment (see Note 22 - Segment and Geographic Information). The Company continues to operate the portion of its base metals business related to nonphysical assets, conducted primarily through the London...

  • Page 118
    .... In addition, physical base metals, previously a component of Commodity and Risk Management Services, is now reported as discontinued operations, and is not part of the Physical Commodities segment information. • Clearing and Execution Services now includes the FX Prime Brokerage component as an...

  • Page 119
    ... and execution Services (CeS) The Company seeks to provide competitive and efficient clearing and execution of exchange-traded futures and options for the institutional and professional trader market segments. Through its platform, customer orders are accepted and directed to the INTL FCSTONE INC...

  • Page 120
    ... appropriate exchange for execution. The Company then facilitates the clearing of clients' transactions. Clearing involves the matching of clients' trades with the exchange, the collection and management of client margin deposits to support the transactions, and the accounting and reporting of the...

  • Page 121
    PART II Item 8 Financial Statements and Supplementary Data Information concerning operations in these segments of business is shown in accordance with the Segment Reporting Topic of the ASC as follows: (in millions) 2014 $ Year Ended September 30, 2013 $ 202.0 40.9 70.0 42,052.0 121.3 7.2 42,493...

  • Page 122
    ... Commercial Hedging Global Payments Securities Physical Commodities Clearing and Execution Services Corporate unallocated Total $ $ $ Information regarding revenues and operating revenues for the years ended September 30, 2014, 2013 and 2012, and information regarding long-lived assets (defined...

  • Page 123
    ... owned subsidiaries were presented under the equity method of accounting, investment in subsidiaries and retained earnings would each increase by $195.1 million as of September 30, 2014, respectively, and $149.6 million, as of September 30, 2013, respectively. INTL FCSTONE INC. - Form 10-K 107

  • Page 124
    ... from investment in subsidiaries of $45.5 million, $43.9 million, and $27.3 million, for the years ended September 30, 2014, 2013 and 2012, respectively. Certain amounts previously reported have been reclassified to conform to the current period presentation. 108 INTL FCSTONE INC. - Form 10-K

  • Page 125
    ...INtL FCStone Inc. Condensed Statements of Cash Flows SCHeDULe I INtL FCStone Inc. Condensed Statements of Cash Flows Parent Company Only (in millions) 2014 $ (26.2) Year Ended September 30, 2013... Other assets Accounts payable and ...notes Payments related to earn-... cash ï¬,ow information: Cash paid ...

  • Page 126
    ... of 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, 2014, based...

  • Page 127
    ...no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2014 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEm 9B Other Information None. INTL FCSTONE INC. - Form 10...

  • Page 128
    ... or 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 2015 Proxy Statement and is incorporated herein by reference. 112 INTL FCSTONE INC...

  • Page 129
    ... in the 2015 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 2015 Proxy Statement and is incorporated herein by reference. INTL FCSTONE INC. - Form 10...

  • Page 130
    ...filed by FCStone Group, Inc. with the SEC on June 12, 2006). INTL FCStone Inc. 2013 Stock Option Plan (incorporated by reference from the Company's Proxy Statement on Schedule 14A filed on January 11, 2013). Employment Agreement, dated October 22, 2002, by and between the Company and Sean O'Connor...

  • Page 131
    ... INTL FCStone Inc., as Guarantor, Bank of America, N.A., as Administrative Agent and a Lender, and with the lenders party thereto (incorporated by reference from the Company's Current Report on Form 8-K filed with the SEC on November 13, 2014). International Assets Holding Corporation Code of Ethics...

  • Page 132
    ... on its behalf by the undersigned, thereunto duly authorized. INTL FCStone Inc. /S/ SEAN M. O'CONNOR Sean M. O'Connor Chief Executive Officer December 10, 2014 Dated: Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on...

  • Page 133
    ...de Inversion Gainvest Uruguay Asset Management S.A. INTL Asia Pte. Ltd. INTL Capital and Treasury Global Services Ltd. INTL Capital S.A. INTL CIBSA S.A. INTL Commodities DMCC INTL Commodities, Inc. INTL FCStone Capital Assessoria Financeira Ltda. INTL FCStone DTVM Ltda. INTL FCStone Ltd INTL FCStone...

  • Page 134
    ...the related financial statement schedule, and the effectiveness of internal control over financial reporting as of September 30, 2014, which reports appear in the September 30, 2014 annual report on Form 10-K of the Company. /s/ KPMG LLP Kansas City, Missouri December 10, 2014 e-2 INTL FCSTONE...

  • Page 135
    ... 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: December 10, 2014 /S/ SEAN M. O'CONNOR Sean M. O'Connor Chief Executive Officer...

  • Page 136
    ... 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: December 10, 2014 /S/ WILLIAM J. DUNAWAY William J. Dunaway Chief Financial Officer...

  • Page 137
    ...-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, 2014 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 138
    ...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, 2014 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...

  • Page 139
    ... Private Investor Company Director Paul G. (Pete) Anderson Retired Company President Corporate Headquarters And Stockholder Relations 708 Third Avenue, Suite 1500 New York, NY 10017, USA Tel: +1 212 485 3500 Stock Listing The Company's common stock trades on NASDAQ under the symbol "INTL".

  • Page 140
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