INTL FCStone 2014 Annual Report Download - page 102

INTL FCSTONE INC.  Form 10K86
PART II
ITEM 8 Financial Statements and Supplementary Data
Illinois. e case was subsequently reassigned to the United
States District Court, for the Northern District of Illinois.
In the complaint, the trustee is seeking avoidance of alleged
transfers or withdrawals of funds received by FCStone, LLC
and other FCMs within 90 days prior to the filing of the
Sentinel bankruptcy petition, as well as avoidance of post-
petition distributions and disallowance of the proof of claim
filed by FCStone, LLC. e trustee seeks recovery of pre- and
post-petition transfers totaling approximately $15.5 million.
In April 2009, the trustee filed an amended complaint adding
a claim for unjust enrichment. FCStone, LLC answered the
complaints and all parties entered into the discovery phase
of the litigation. In January 2011, the trustee filed a motion
for summary judgment on various counts in the adversary
proceedings filed in August 2008 against FCStone, LLC and a
number of other FCMs. In January 2012, FCStone, LLC filed
a motion for summary judgment in its favor with respect to the
transfer of approximately $1.1 million to its customer segregated
account on August 17, 2007, pursuant to the “safe harbor”
provisions of Section 546(e) of the U.S. Bankruptcy Code. In
April 2012, FCStone, LLC filed a motion to dismiss a portion of
the trustee’s claims set forth in its amended complaint. e trial
of this matter took place, as a test case, during October 2012.
e 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, FCStone, LLC was
required to post an appeal cash deposit of $8.0 million with
the court, which was deposited on January 18, 2013. e oral
arguments in the appeal were heard on December 10, 2013. On
March 19, 2014, the appeal court ruled in favor of FCStone,
LLC. On April 16, 2014, the trustee filed a petition for rehearing
of the appeal. On May 19, 2014, the U.S. Court of Appeals for
the Seventh Circuit denied the petition. On June 5, 2014, the
Company’s cash deposit with the court was returned. e trustee
did not file a writ for certiorari with the U.S. Supreme Court
during the time allotted to do so. e Company continues to
be involved in litigation against the trustee to recover its share
of the cash held in reserve accounts under Sentinel’s Fourth
Amended Chapter 11 Plan of Liquidation.
Our assessments are based on estimates and assumptions that
have been deemed reasonable by 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.
Contractual Commitments
Contingent Liabilities - Acquisitions
Under the terms of the purchase agreements, related to the
acquisitions listed below, the Company has obligations to pay
additional consideration if specific conditions and earnings
targets are met. In accordance with the Business Combinations
Topic of the ASC, the fair value of the additional consideration is
recognized as a contingent liability as of the acquisition date. e
contingent liability for these estimated additional purchase price
considerations of $5.5 million and $9.6 million are included in
‘accounts payable and other accrued liabilities’ in the consolidated
balance sheets as of September 30, 2014 and 2013, respectively.
e acquisition date fair value of additional consideration is
remeasured to its fair value each reporting period, with changes
in fair value recorded in current earnings. e change in fair
value during the years ended September 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,
which may result in the payment of additional purchase price
consideration. The contingent liability recorded represents
the fair value of the expected consideration to be paid, based
on the forecasted adjusted pre-tax net earnings during the
twelve-month period following the closing of the acquisition.
The estimated total purchase price, including contingent
consideration, was $0.5 million, of which $0.3 million
remains outstanding as of September 30, 2014, and is included
in ‘accounts payable and other accrued liabilities’ in the
consolidated balance sheet.
e Company has a contingent liability relating to the December
2012 acquisition of the accounts of Tradewire Securities, LLC,
as described in Note 18, which may result in the payment of
additional purchase price consideration. e contingent liability
recorded represents the fair value of the expected consideration
to be paid, based on the forecasted adjusted pre-tax net earnings
during three annual periods and a six month period, after the
third annual period, following the closing of the acquisition,
for a total of four payments, with a discount rate being applied
to those future payments. e present value of the estimated
total purchase price, including contingent consideration, is
$3.3 million as of September 30, 2014, of which $1.8 million
remains outstanding and is included in ‘accounts payable and
other accrued liabilities’ in the consolidated balance sheet.
e Company recorded a contingent liability relating to the
October 2010 acquisition of Hencorp Becstone Futures, L.C.,
subsequently reorganized as a division of FCStone, LLC, which
could have resulted in the payment of additional purchase price
consideration. e remaining contingent liability recorded
represented the fair value of the expected consideration to
be paid, based on the adjusted pre-tax net earnings during
the fourth fiscal year following the closing of the acquisition
plus an additional final estimated contingent payment and
a discount rate being applied to the future payments.e
present value of the estimated total purchase price, including
contingent consideration, is $8.3 million as of September 30,
2014, of which $3.3 million has not been paid and is included in
‘accounts payable and other accrued liabilities’ in the consolidated
balance sheet.