INTL FCStone 2014 Annual Report Download - page 55

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INTL FCSTONE INC. Form 10K 39
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
OTC
Year Ended September 30,
2014 % Change 2013 % Change 2012
Transactional revenues (in millions):
Agricultural $ 54.9 —% $ 54.9 (43)% $ 97.0
Energy and renewable fuels 32.4 50% 21.6 —% 21.7
Other 7.6 (39)% 12.4 97% 6.3
$ 94.9 7% $ 88.9 (29)% $ 125.0
Selected data:
Volume (contracts, 000’s) 1,342.1 8% 1,245.1 (23)% 1,619.6
Average rate per contract(1) $ 68.25 —% $ 68.35 (9)% $ 74.96
(1) Cash brokerage revenues included in OTC transactional revenues have been excluded from the calculation of OTC 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 revenues increased 11% to $224.0 million in fiscal
2014 compared to $202.0 million in fiscal 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. e LME metals revenue growth was
driven by increased customer activity and expansion activities in
the Far East. Overall exchange-traded contract volume increased
9% and the average rate per contract increased to $6.04 primarily
driven by an increase in business from introducing brokers, as
evidenced by the $3.2 million increase in introducing broker
commission expense and overall business mix.
OTC revenues increased 7% to $94.9 million in fiscal 2014,
with growth in energy and renewable fuels revenues offset by
declines in foreign exchange hedging revenues, while agricultural
commodity hedging revenues were flat. OTC volumes increased
8% to 1.3 million contracts in fiscal 2014 compared to
1.2 million in fiscal 2013.
Consulting and management fees increased 4% to $15.7 million in
fiscal 2014 compared to fiscal 2013 while interest income, which
remains constrained by low short-term interest rates, declined
2%, to $4.1 million in fiscal 2014 compared to $4.2 million in
fiscal 2013, driven by a 3% decrease in average customer equity
as a result of lower exchange-traded margin requirements.
Segment income increased 18% to $67.3 million in fiscal 2014
compared to $57.1 million in fiscal 2013, driven by the increase
in operating revenues, partially offset by a $3.8 million increase
in bad debt expense. Variable expenses expressed as a percentage
of operating revenues remained unchanged at 41% in fiscal 2014
and fiscal 2013.
Year Ended September 30, 2013 Compared to
Year Ended September 30, 2012
Operating revenues decreased 12% to $202.0 million in fiscal 2013
compared to $230.7 million in fiscal 2012. Exchange-traded
revenues increased 9% to $93.7 million in fiscal 2013, driven
primarily by a $8.0 million increase in LME metals revenues,
which was partially offset by a decline in agricultural exchange-
traded revenues as a result of significantly lower customer stocks
following the consecutive droughts of 2011 and 2012 as well as
the effect of inverted prices on customer trading activity. e
LME metals revenue growth resulted from increased customer
activity and expansion activities in the Far East. Overall exchange-
traded contract volume increased 23% and the average rate per
contract decreased 12% to $5.61 per contract.
OTC revenues decreased 29% to $88.9 million in fiscal 2013,
primarily driven by a 43% decrease in agricultural OTC revenues
as a result of a decline of customer activity in the Latin American
and Brazil markets as well as the inverted prices noted above.
e decline in agricultural OTC revenues was partially offset by
increased in foreign exchange hedging and cash grain brokerage
revenues. Overall OTC volumes decreased 23% to 1.2 million
contracts in fiscal 2013 compared to 1.6 million contracts in
fiscal 2012.
Consulting and management fees increased 2% to $15.1 million
in fiscal 2014, while interest income, which remained constrained
by low short-term interest rate, declined 9%, to $4.2 million in
fiscal 2013 compared to $4.6 million in fiscal 2012, driven by
a 2% decrease in average customer equity.
Segment income decreased 15% to $57.1 million in fiscal 2013
compared to $75.2 million in fiscal 2012, driven by the decrease
in operating revenues. Variable expenses expressed as a percentage
of operating revenues were 41% in fiscal 2013 compared to
40% in fiscal 2012.