INTL FCStone 2014 Annual Report Download - page 52

INTL FCSTONE INC.  Form 10K36
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Year Ended September 30, 2014 Compared to
Year Ended September 30, 2013
Total unallocated costs and other expenses decreased $2.1 million
to $94.6 million in fiscal 2014 compared to $96.7 million in
fiscal 2013. Compensation and benefits decreased $2.0 million,
or 4% to $47.0 million in fiscal 2014 compared to $49.0 million
in fiscal 2013. e increase in professional fees is primarily due
to legal costs related to regulatory and employment matters and
service costs related to our restatement of the 2012 and 2011
consolidated financial statements.
Year Ended September 30, 2013 Compared to
Year Ended September 30, 2012
Total unallocated costs and other expenses increased $7.7 million,
or 9%, to $96.7 million in fiscal 2013 compared to
$89.0 million in fiscal 2012. Compensation and benefits increased
$8.1 million, or 20% to $49.0 million in fiscal 2013 compared
to $40.9 million in fiscal 2012, primarily due to a 2% increase
in headcount and an increase in share-based compensation costs.
In fiscal 2012, bad debts and impairments included $0.7 million
related to the impairment of intangible assets.
Variable vs. Fixed Expenses
(in millions)
Year Ended September 30,
2014 % of Total 2013 % of Total 2012 % of Total
Variable compensation and benefits $ 93.9 21% $ 88.0 20% $ 96.4 23%
Transaction-based clearing expenses 108.5 24% 110.1 25% 105.4 25%
Introducing broker commissions 49.9 11% 40.5 9% 31.0 7%
Total variable expenses 252.3 56% 238.6 54% 232.8 55%
Fixed compensation and benefits 108.0 24% 110.7 26% 100.8 24%
Other fixed expenses 88.6 19% 89.0 20% 84.9 20%
Bad debts and impairments 5.5 1% 0.8 —% 1.5 1%
Total non-variable expenses 202.1 44% 200.5 46% 187.2 45%
Total non-interest expenses $ 454.4 100% $ 439.1 100% $ 420.0 100%
We seek to make our non-interest expenses variable to the greatest
extent possible, and to keep our fixed 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, 2014, 2013 and 2012.
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
56% in fiscal 2014, 54% in fiscal 2013 and 55% in fiscal 2012.
Segment Information
Commencing during the quarter ended March 31, 2014, we reorganized our operating segments into reportable segments as follows:
• Commercial Hedging which includes Financial Agricultural
(Ag’s) & Energy (formerly discussed as the soft commodities
product line) and LME metals, previously components of
Commodity and Risk Management Services.
•
Global Payments, which was previously a component, along
with FX Prime Brokerage, of the Foreign Exchange segment
has been broken out as the single component of a segment
named Global Payments.
•
Securities now includes Asset Management, previously a
component of Other, as an additional component along with
Equity market-making, Debt Trading and Investment Banking.
• Physical Commodities includes physical precious metals, previously
a component of Commodity and Risk Management Services
along with Physical Ag’s & Energy (formerly discussed as the
commodity financing and facilitation business), previously a
component of Other. 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 additional component.