INTL FCStone 2014 Annual Report Download - page 28

INTL FCSTONE INC.  Form 10K12
PART I
ITEM 1A Risk Factors
use of derivatives. is price risk mitigation does not generally
qualify for hedge accounting under U.S. GAAP. In such situations,
any unrealized gains in inventory are not recognized under U.S.
GAAP, but unrealized gains and losses in related derivative
positions are recognized under U.S. GAAP. Additionally, in certain
circumstances, U.S. GAAP does not permit us to reflect changes
in estimated values of forward commitments to purchase and sell
commodities. e forward commitments to purchase and sell
commodities, which we do not reflect in our consolidated balance
sheets, do not qualify as a derivative under the Derivatives and
Hedging Topic of the ASC. As a result, our reported earnings
from these business segments are subject to greater volatility than
the earnings from our other business segments.
Our indebtedness could adversely affect our
financial condition.
As of September 30, 2014, our total consolidated indebtedness was
$68.0 million, and we expect to increase our indebtedness in the
future as we continue to expand our business. Our indebtedness
could have important consequences, including:
•
increasing our vulnerability to general adverse economic and
industry conditions;
•
requiring that a portion of our cash flow from operations be
used for the payment of interest on our debt, thereby reducing
our ability to use our cash flow to fund working capital, capital
expenditures, acquisitions and general corporate requirements;
• limiting our ability to obtain additional financing to fund
future working capital, capital expenditures, acquisitions and
general corporate requirements;
•
limiting our flexibility in planning for, or reacting to, changes
in our business and the securities industry; and
•
restricting our ability to pay dividends or make other payments.
We may be able to incur additional indebtedness in the future,
including secured indebtedness. If new indebtedness is added
to our current indebtedness levels, the related risks that we now
face could intensify.
Committed credit facilities currently available
to us might not be renewed.
We currently have four committed credit facilities under which
we may borrow up to $270.0 million, consisting of:
•
a $140.0 million facility available to INTL FCStone Inc.,
for general working capital requirements, committed until
September 20, 2016.
•
a $75.0 million facility available to our wholly owned subsidiary,
FCStone, LLC, for short-term funding of margin to commodity
exchanges, committed until April 9, 2015.
•
a $30.0 million committed facility available 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 of margin to
commodity exchanges, committed until November 5, 2015.
During fiscal 2015, $105 million of our committed credit facilities
are scheduled to expire. ere is no guarantee that we will be
successful in renewing, extending or rearranging these facilities.
It is possible that these facilities might not be renewed at the end
of their commitment periods and that we will be unable to replace
them with other facilities. If our credit facilities are unavailable or
insufficient to support future levels of business activities, we may
need to raise additional funds externally, either in the form of
debt or equity. If we cannot raise additional funds on acceptable
terms, we may not be able to develop or enhance our business, take
advantage of future opportunities or respond to competitive pressure
or unanticipated requirements, leading to reduced profitability.
Our failure to successfully integrate the
operations of businesses acquired by us in the
last twelve months could have a material adverse
effect on our business, financial condition and
operating results.
Since September 30, 2013, we have acquired Forward Insight
Commodities, LLC. Additionally, subsequent to September 30,
2014, we have reached an agreement to acquire G.X. Clarke &
Co. We will need to meet challenges to realize the expected
benefits and synergies of these acquisitions, including:
•
integrating the management teams, strategies, cultures,
technologies and operations of the acquired companies;
•
retaining and assimilating the key personnel of acquired
companies;
•retaining existing clients of the acquired companies;
•
creating uniform standards, controls, procedures, policies and
information systems; and
•
achieving revenue growth because of risks involving (1) the
ability to retain clients, (2) the ability to sell the services and
products of the acquired companies to the existing clients of
our other business segments, and (3) the ability to sell the
services and products of our other business segments to the
existing clients of the acquired companies.
e accomplishment of these objectives will involve considerable
risk, including:
•
the potential disruption of each company’s ongoing business
and distraction of their respective management teams;