Record Annual Operating Revenues of
$784.0 million - up 17%
INTL FCStone Inc. (the ‘Company’) (NASDAQ:INTL), a diversified
global financial services organization providing execution, risk
management and advisory services, market intelligence, and clearing
services across asset classes and markets around the world, today
announced its financial results for the fiscal fourth quarter and
full fiscal year ended September 30, 2017.
Pre-tax earnings from operations for the fiscal 2017 fourth
quarter of $24.5 million were reduced to a loss of $22.5 million by
a bad debt expense of $47.0 million incurred in the physical coal
business, conducted solely in our Singapore subsidiary, INTL Asia
Pte. Ltd. The after tax loss for the quarter was $23.6 million, or
$1.27 per share.
The Company’s fourth quarter operating performance, excluding
the bad debt expense, was the best of the fiscal year. Highlights
of our fourth quarter include:
- Record operating revenues of $205.1 million, including interest
income of $22.0 million as we continue to benefit from
the rising interest rate environment;
- Financial Agriculture and Energy OTC derivative transaction
revenues were the highest in five quarters;
- Strong growth in number payments made in our Global Payments
segment, increasing 29% over prior year period.
The Company produced operating revenues of 784.0 million in
fiscal 2017, an increase of 17% over fiscal 2016. Pre-tax earnings
from operations for fiscal 2017 of $62.2 million were reduced to
$15.2 million by the $47.0 million bad debt expense in the physical
coal business.
Sean M. O’Connor, CEO of INTL FCStone Inc., stated
“Unfortunately, in the fourth quarter we recorded a bad debt charge
in our physical coal business based in Singapore. We have
exited this business and are taking a full write down of all
amounts due to us. We have been conducting an extensive
review of what happened and have introduced new policies requiring
controls and monitoring activities for new business start-ups. We
believe this is an isolated event that does not impact our business
on a go forward basis, as the physical coal business has not
contributed significantly to income from operations. The net
impact of this charge was $2.13 per share, however we recorded
positive net earnings for the 2017 fiscal year. Our return on
equity, before the coal business bad debt, for the fourth quarter
was over 13%.”
“Excluding the impact of this charge, the fourth quarter was our
strongest of the fiscal year and we are well placed for continued
positive momentum as interest rates and volatility continue to
increase as central banks withdraw. Additionally, we continue
to see growth in customers as consolidation in our industry
continues and we believe we are increasingly seen as an attractive
partner for clearing and execution in all major markets
globally.”
The bad debt expense in the coal business includes amounts due
to us from our coal supplier related to: coal paid for but not
delivered; reimbursement of charges paid by INTL Asia Pte. Ltd. to
its customers; and losses incurred related to the cancellation of
open sales contracts. All remaining open sales contracts have been
canceled. During our first quarter ending December 31, 2017, we
expect to record additional bad debt expense of $1.0 million
related to reimbursement due to us from the supplier for demurrage
and other charges relating to contracts with delivery dates
subsequent to September 30, 2017. We do not anticipate any
additional bad debt expense in connection with the physical coal
business. We have received an acknowledgment of debt and a note
from the supplier, however, there is substantial uncertainty as to
whether the supplier will be able to meet its financial obligations
and the timing of any recovery. We are continuing our investigation
into this matter and will pursue all legal avenues available to
us.
On November 30, 2017, we amended the terms of our holding
company three year syndicated committed loan facility to amend the
calculation of certain covenants, allowing us to add back a portion
of the bad debt on physical coal discussed above. This amendment
was deemed effective as of September 30, 2017 and as a result
of this amendment, we were in compliance with all covenants under
our loan facilities as of September 30, 2017.
INTL FCStone Inc. Summary Financials
Consolidated financial statements for the Company will be
included in our Annual Report on Form 10-K to be filed with the
SEC. The Annual Report on Form 10-K will also be made available on
the Company’s website at www.intlfcstone.com.
|
Three Months Ended September 30, |
|
Fiscal Year Ended September 30, |
|
|
|
|
|
% |
|
|
|
|
|
% |
(Unaudited) (in
millions, except share and per share amounts) |
2017 |
|
2016 |
|
Change |
|
2017 |
|
2016 |
|
Change |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Sales of
physical commodities |
$ |
12,187.0 |
|
|
$ |
2,608.2 |
|
|
367 |
% |
|
$ |
28,673.3 |
|
|
$ |
14,112.0 |
|
|
103 |
% |
Trading
gains, net |
85.3 |
|
|
77.4 |
|
|
10 |
% |
|
332.2 |
|
|
321.2 |
|
|
3 |
% |
Commission and clearing fees |
70.9 |
|
|
64.9 |
|
|
9 |
% |
|
283.4 |
|
|
224.3 |
|
|
26 |
% |
Consulting and management fees |
17.3 |
|
|
14.7 |
|
|
18 |
% |
|
64.8 |
|
|
42.0 |
|
|
54 |
% |
Interest
income |
22.0 |
|
|
12.4 |
|
|
77 |
% |
|
69.7 |
|
|
55.2 |
|
|
26 |
% |
Other
income |
— |
|
|
— |
|
|
— |
% |
|
0.2 |
|
|
0.2 |
|
|
— |
% |
Total revenues |
12,382.5 |
|
|
2,777.6 |
|
|
346 |
% |
|
29,423.6 |
|
|
14,754.9 |
|
|
99 |
% |
Cost of
sales of physical commodities |
12,177.4 |
|
|
2,599.0 |
|
|
369 |
% |
|
28,639.6 |
|
|
14,083.9 |
|
|
103 |
% |
Operating revenues |
205.1 |
|
|
178.6 |
|
|
15 |
% |
|
784.0 |
|
|
671.0 |
|
|
17 |
% |
Transaction-based clearing expenses |
35.1 |
|
|
32.0 |
|
|
10 |
% |
|
136.3 |
|
|
129.9 |
|
|
5 |
% |
Introducing broker commissions |
26.9 |
|
|
28.1 |
|
|
(4 |
)% |
|
113.0 |
|
|
68.9 |
|
|
64 |
% |
Interest
expense |
12.0 |
|
|
7.5 |
|
|
60 |
% |
|
42.1 |
|
|
28.3 |
|
|
49 |
% |
Net operating
revenues |
131.1 |
|
|
111.0 |
|
|
18 |
% |
|
492.6 |
|
|
443.9 |
|
|
11 |
% |
Compensation and other
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
73.0 |
|
|
66.2 |
|
|
10 |
% |
|
295.7 |
|
|
263.9 |
|
|
12 |
% |
Communication and data services |
9.8 |
|
|
9.6 |
|
|
2 |
% |
|
39.4 |
|
|
32.7 |
|
|
20 |
% |
Occupancy
and equipment rental |
4.1 |
|
|
3.6 |
|
|
14 |
% |
|
15.2 |
|
|
13.3 |
|
|
14 |
% |
Professional fees |
3.3 |
|
|
5.1 |
|
|
(35 |
)% |
|
15.2 |
|
|
14.0 |
|
|
9 |
% |
Travel
and business development |
3.7 |
|
|
3.1 |
|
|
19 |
% |
|
13.3 |
|
|
11.5 |
|
|
16 |
% |
Depreciation and amortization |
2.6 |
|
|
2.0 |
|
|
30 |
% |
|
9.8 |
|
|
8.2 |
|
|
20 |
% |
Bad
debts |
0.4 |
|
|
(0.2 |
) |
|
n/m |
|
|
4.3 |
|
|
4.4 |
|
|
(2 |
)% |
Bad debt
on physical coal |
47.0 |
|
|
— |
|
|
n/m |
|
|
47.0 |
|
|
— |
|
|
n/m |
|
Other |
9.7 |
|
|
8.6 |
|
|
13 |
% |
|
37.5 |
|
|
29.4 |
|
|
28 |
% |
Total compensation and
other expenses |
153.6 |
|
|
98.0 |
|
|
57 |
% |
|
477.4 |
|
|
377.4 |
|
|
26 |
% |
Gain on
acquisition |
— |
|
|
6.2 |
|
|
(100 |
)% |
|
— |
|
|
6.2 |
|
|
(100 |
)% |
(Loss) income before
tax |
(22.5 |
) |
|
19.2 |
|
|
(217 |
)% |
|
15.2 |
|
|
72.7 |
|
|
(79 |
)% |
Income
tax expense |
1.1 |
|
|
2.4 |
|
|
(54 |
)% |
|
8.8 |
|
|
18.0 |
|
|
(51 |
)% |
Net (loss) income |
$ |
(23.6 |
) |
|
$ |
16.8 |
|
|
(240 |
)% |
|
$ |
6.4 |
|
|
$ |
54.7 |
|
|
(88 |
)% |
(Loss) earnings per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(1.27 |
) |
|
$ |
0.91 |
|
|
(240 |
)% |
|
$ |
0.32 |
|
|
$ |
2.94 |
|
|
(89 |
)% |
Diluted |
$ |
(1.27 |
) |
|
$ |
0.90 |
|
|
(241 |
)% |
|
$ |
0.31 |
|
|
$ |
2.90 |
|
|
(89 |
)% |
Weighted-average number
of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
18,485,150 |
|
|
18,063,665 |
|
|
2 |
% |
|
18,395,987 |
|
|
18,410,561 |
|
|
— |
% |
Diluted |
18,485,150 |
|
|
18,330,747 |
|
|
1 |
% |
|
18,687,354 |
|
|
18,625,372 |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Control over Financial Reporting:
We will disclose material weaknesses in our internal controls
over financial reporting regarding the design, effectiveness and
documentation of a continuous risk assessment process related to
new business lines and certain ineffective process level controls
related to our physical coal trading activities in Singapore. We
believe these material weaknesses were isolated to the coal
business and to our Singapore subsidiary, INTL Asia Pte. Ltd.
Gain on acquisition:
In our fiscal fourth quarter of 2016, we acquired the
correspondent clearing and independent wealth management businesses
of Sterne Agee and recognized a $6.2 million bargain purchase gain
on the transaction in net income.
Interest Income/Expense:
Overall interest income increased $9.6 million to $22.0 million
in the fourth quarter, as a result of both an increase in short
term interest rates as well as the prior year quarter including
unrealized losses on investments held in our interest rate
management strategy. Average customer equity in the Financial Ag
& Energy and Exchange-traded Futures & Options components
of our Commercial Hedging and Clearing and Execution Services
(“CES”) segments was $2.0 billion, increasing 1% in the fourth
quarter compared to the prior year, which combined with an increase
in short-term interest rates resulted in an aggregate $3.1 million
increase in interest income in these businesses. Our domestic
institutional fixed income business increased interest income $2.6
million in the fourth quarter over the prior year. In addition,
interest income in the correspondent clearing business increased
$0.3 million compared to the prior year.
In the fourth quarter, we recorded a minimal pre-tax realized
loss on the closeout of our remaining U.S. Treasury notes held as
part of our interest rate management strategy. The prior year
period included a $3.6 million pre-tax unrealized loss on interest
rate swaps and U.S. Treasury notes held as part of the strategy.
These unrealized gains/losses are recorded in our Corporate
unallocated segment. During the first quarter of fiscal 2017, we
liquidated all of our interest rate swap positions held as part of
the strategy. During the second quarter of fiscal 2017, we sold
$865.0 million of U.S. Treasury notes. During the third quarter of
fiscal 2017, we recorded a minimal pre-tax unrealized loss on the
remaining U.S. Treasury notes held as part of the interest rate
management strategy, and during the fourth quarter of fiscal 2017
we sold the remaining $290.0 million of U.S. Treasury notes held
under this strategy. We also maintain interest earning cash
deposits with banks, clearing organizations and counterparties.
The unrealized gains/losses on U.S. Treasury notes were
reflected in interest income on the Condensed Consolidated Income
Statements, while the unrealized gains/losses on interest rate
swaps were included in trading gains, net. On a segment basis,
these unrealized losses are reported in the Corporate unallocated
segment, while the amortized earnings on these investments were
included in the Commercial Hedging and CES segments. Under this
strategy, we did not actively trade in such instruments and
generally intended to hold these investments to their maturity
dates, however as a broker-dealer, fluctuations in the unrealized
marked-to-market (“MTM”) valuations of these investments are
included in operating revenues in the period to which they relate.
The table below reflects the after-tax impact on net income of
these MTM fluctuations for the last eight fiscal quarters.
|
Three Months Ended |
(in
millions) |
September 30, 2017 |
|
June 30, 2017 |
|
March 31, 2017 |
|
December 31, 2016 |
|
September 30, 2016 |
|
June 30,2016 |
|
March 31, 2016 |
|
December 31, 2015 |
MTM (loss) gain on
interest rate swaps |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1.0 |
) |
|
$ |
(1.5 |
) |
|
$ |
0.6 |
|
|
$ |
2.3 |
|
|
$ |
(2.7 |
) |
MTM (loss) gain on U.S.
Treasury notes |
(0.1 |
) |
|
— |
|
|
(0.2 |
) |
|
(4.6 |
) |
|
(2.1 |
) |
|
2.1 |
|
|
4.6 |
|
|
(4.0 |
) |
Gross MTM
(loss) gain |
(0.1 |
) |
|
— |
|
|
(0.2 |
) |
|
(5.6 |
) |
|
(3.6 |
) |
|
2.7 |
|
|
6.9 |
|
|
(6.7 |
) |
Tax effect (estimated
at 39%) |
— |
|
|
— |
|
|
0.1 |
|
|
2.2 |
|
|
1.4 |
|
|
(1.0 |
) |
|
(2.7 |
) |
|
2.6 |
|
After tax
MTM (loss) gain on above |
$ |
(0.1 |
) |
|
$ |
— |
|
|
$ |
(0.1 |
) |
|
$ |
(3.4 |
) |
|
$ |
(2.2 |
) |
|
$ |
1.7 |
|
|
$ |
4.2 |
|
|
$ |
(4.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense increased 60% to $12.0 million in the fourth
quarter compared to $7.5 million in the prior year. The increase in
interest expense is primarily related to $3.3 million of higher
expense from our domestic institutional fixed income business as
well as increased activity and short-term rates resulting in higher
costs in our Exchange-Traded Futures & Options and Equity
Market-Making businesses. Additionally, increased credit line
capacity and higher average borrowings outstanding on our corporate
credit facility, available for working capital needs, and our
physical commodity financing facility resulted in increased
expense.
Non-interest Expenses and Key Operating
Metrics:
The following table reflects a breakout of total non-interest
expenses by variable and non-variable components, which is used by
management in evaluating our non-interest expenses, for the periods
indicated.
|
Three Months Ended September 30, |
|
Fiscal Year Ended September 30, |
(in
millions) |
2017 |
|
2016 |
|
% Change |
|
2017 |
|
2016 |
|
% Change |
Variable compensation
and benefits |
$ |
34.0 |
|
|
$ |
32.2 |
|
|
6 |
% |
|
$ |
138.7 |
|
|
$ |
137.4 |
|
|
1 |
% |
Transaction-based
clearing expenses |
35.1 |
|
|
32.0 |
|
|
10 |
% |
|
136.3 |
|
|
129.9 |
|
|
5 |
% |
Introducing broker
commissions |
26.9 |
|
|
28.1 |
|
|
(4 |
)% |
|
113.0 |
|
|
68.9 |
|
|
64 |
% |
Total
variable expenses |
96.0 |
|
|
92.3 |
|
|
4 |
% |
|
388.0 |
|
|
336.2 |
|
|
15 |
% |
Fixed compensation and
benefits |
39.0 |
|
|
34.0 |
|
|
15 |
% |
|
157.0 |
|
|
126.5 |
|
|
24 |
% |
Other fixed
expenses |
33.2 |
|
|
32.0 |
|
|
4 |
% |
|
130.4 |
|
|
109.1 |
|
|
20 |
% |
Bad debts |
0.4 |
|
|
(0.2 |
) |
|
(300 |
)% |
|
4.3 |
|
|
4.4 |
|
|
(2 |
)% |
Bad debt on physical
coal |
47.0 |
|
|
— |
|
|
n/m |
|
|
47.0 |
|
|
— |
|
|
n/m |
|
Total
non-variable expenses |
119.6 |
|
|
65.8 |
|
|
82 |
% |
|
338.7 |
|
|
240.0 |
|
|
41 |
% |
Total non-interest
expenses |
$ |
215.6 |
|
|
$ |
158.1 |
|
|
36 |
% |
|
$ |
726.7 |
|
|
$ |
576.2 |
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reflects key operating metrics used by
management in evaluating our product lines, for the periods
indicated.
|
Three Months Ended September 30, |
|
Fiscal Year Ended September 30, |
|
2017 |
|
2016 |
|
% Change |
|
2017 |
|
2016 |
|
% Change |
Volumes and
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded - futures and options (contracts, 000’s) |
25,385.4 |
|
|
22,600.6 |
|
|
12 |
% |
|
99,148.4 |
|
|
99,667.4 |
|
|
(1 |
)% |
OTC
(contracts, 000’s) |
374.6 |
|
|
301.4 |
|
|
24 |
% |
|
1,410.0 |
|
|
1,380.8 |
|
|
2 |
% |
Global
Payments (# of payments, 000’s) |
172.8 |
|
|
134.3 |
|
|
29 |
% |
|
648.9 |
|
|
444.9 |
|
|
46 |
% |
Gold
equivalent ounces traded (000’s) |
49,113.1 |
|
|
22,275.7 |
|
|
120 |
% |
|
137,235.3 |
|
|
92,073.7 |
|
|
49 |
% |
Equity
Market-Making (gross dollar volume, millions) |
$ |
20,505.1 |
|
|
$ |
21,241.3 |
|
|
(3 |
)% |
|
$ |
87,789.8 |
|
|
$ |
88,518.8 |
|
|
(1 |
)% |
Debt
Trading (gross dollar volume, millions) |
$ |
30,701.1 |
|
|
$ |
28,489.3 |
|
|
8 |
% |
|
$ |
133,352.3 |
|
|
$ |
107,747.4 |
|
|
24 |
% |
FX Prime
Brokerage volume (U.S. notional, millions) |
$ |
133,772.3 |
|
|
$ |
152,173.4 |
|
|
(12 |
)% |
|
$ |
620,917.8 |
|
|
$ |
580,426.9 |
|
|
7 |
% |
Average
assets under management in Argentina (U.S. dollar, millions) |
$ |
547.6 |
|
|
$ |
544.3 |
|
|
1 |
% |
|
$ |
564.9 |
|
|
$ |
562.4 |
|
|
— |
% |
Average
customer equity - futures and options (millions) |
$ |
2,031.1 |
|
|
$ |
2,019.1 |
|
|
1 |
% |
|
$ |
2,015.9 |
|
|
$ |
1,878.7 |
|
|
7 |
% |
Balance Sheet Summary:
The following table below provides a summary of asset,
liability, and stockholders’ equity information for the periods
indicated.
(in millions,
except for per share amounts) |
September 30, 2017 |
|
September 30, 2016 |
Summary asset
information: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
314.9 |
|
|
$ |
316.2 |
|
Cash,
securities and other assets segregated under federal and other
regulations |
$ |
518.8 |
|
|
$ |
1,136.3 |
|
Securities purchased under agreements to resell |
$ |
406.6 |
|
|
$ |
609.6 |
|
Securities borrowed |
$ |
86.6 |
|
|
$ |
— |
|
Deposits
and receivables from broker-dealers, clearing organizations and
counterparties, net |
$ |
2,625.1 |
|
|
$ |
1,761.4 |
|
Receivables and notes receivable from customers, net |
$ |
243.3 |
|
|
$ |
213.4 |
|
Financial
instruments owned, at fair value |
$ |
1,731.8 |
|
|
$ |
1,606.1 |
|
Physical
commodities inventory, net |
$ |
124.8 |
|
|
$ |
123.8 |
|
Goodwill
and intangible assets, net |
$ |
59.4 |
|
|
$ |
56.6 |
|
Other |
$ |
132.1 |
|
|
$ |
126.9 |
|
|
|
|
|
Summary liability and
stockholders’ equity information: |
|
|
|
Payables
to customers |
$ |
3,072.9 |
|
|
$ |
2,854.2 |
|
Payables
to broker-dealers, clearing organizations and counterparties |
$ |
125.7 |
|
|
$ |
260.1 |
|
Payables
to lenders under loans and senior unsecured notes |
$ |
230.2 |
|
|
$ |
227.3 |
|
Accounts
payable and other accrued liabilities |
$ |
135.6 |
|
|
$ |
161.3 |
|
Securities sold under agreements to repurchase |
$ |
1,393.1 |
|
|
$ |
1,167.1 |
|
Securities loaned |
$ |
111.1 |
|
|
$ |
— |
|
Financial
instruments sold, not yet purchased, at fair value |
$ |
717.6 |
|
|
$ |
839.4 |
|
Other |
$ |
7.3 |
|
|
$ |
7.1 |
|
Stockholders’ equity |
$ |
449.9 |
|
|
$ |
433.8 |
|
|
|
|
|
Net asset value per
share |
$ |
24.02 |
|
|
$ |
23.53 |
|
Segment Results
The following table reflects operating revenues by segment for
the periods indicated.
|
Three Months Ended September 30, |
|
Fiscal Year Ended September 30, |
(in
millions) |
2017 |
|
2016 |
|
% Change |
|
2017 |
|
2016 |
|
% Change |
Segment
operating revenues represented by: |
|
|
|
|
|
|
|
|
|
|
|
Commercial Hedging |
$ |
67.3 |
|
|
$ |
54.1 |
|
|
24 |
% |
|
$ |
244.6 |
|
|
$ |
236.1 |
|
|
4 |
% |
Global
Payments |
22.1 |
|
|
19.1 |
|
|
16 |
% |
|
89.2 |
|
|
73.2 |
|
|
22 |
% |
Securities |
36.4 |
|
|
39.2 |
|
|
(7 |
)% |
|
151.7 |
|
|
175.2 |
|
|
(13 |
)% |
Physical
Commodities |
11.8 |
|
|
15.1 |
|
|
(22 |
)% |
|
44.8 |
|
|
36.6 |
|
|
22 |
% |
Clearing
and Execution Services |
66.6 |
|
|
54.7 |
|
|
22 |
% |
|
259.8 |
|
|
151.1 |
|
|
72 |
% |
Corporate
unallocated |
0.9 |
|
|
(3.6 |
) |
|
n/m |
|
|
(6.1 |
) |
|
(1.2 |
) |
|
408 |
% |
Operating revenues |
$ |
205.1 |
|
|
$ |
178.6 |
|
|
15 |
% |
|
$ |
784.0 |
|
|
$ |
671.0 |
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reflects segment income by segment for the
periods indicated.
|
Three Months Ended September 30, |
|
Fiscal Year Ended September 30, |
(in
millions) |
2017 |
|
2016 |
|
% Change |
|
2017 |
|
2016 |
|
% Change |
Segment income
(loss) represented by: |
|
|
|
|
|
|
|
|
|
|
|
Commercial Hedging |
22.4 |
|
|
$ |
14.5 |
|
|
54 |
% |
|
$ |
72.8 |
|
|
$ |
68.7 |
|
|
6 |
% |
Global
Payments |
12.8 |
|
|
10.6 |
|
|
21 |
% |
|
50.6 |
|
|
39.8 |
|
|
27 |
% |
Securities |
9.1 |
|
|
14.9 |
|
|
(39 |
)% |
|
46.6 |
|
|
69.4 |
|
|
(33 |
)% |
Physical
Commodities |
(42.6 |
) |
|
9.1 |
|
|
(568 |
)% |
|
(31.4 |
) |
|
13.3 |
|
|
(336 |
)% |
Clearing
and Execution Services |
10.3 |
|
|
4.4 |
|
|
134 |
% |
|
30.4 |
|
|
14.8 |
|
|
105 |
% |
Total segment
income |
12.0 |
|
|
53.5 |
|
|
(78 |
)% |
|
169.0 |
|
|
206.0 |
|
|
(18 |
)% |
Reconciliation of
segment income to income before tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income |
12.0 |
|
|
53.5 |
|
|
(78 |
)% |
|
169.0 |
|
|
206.0 |
|
|
(18 |
)% |
Costs,
net not allocated to operating segments |
34.5 |
|
|
34.3 |
|
|
1 |
% |
|
153.8 |
|
|
133.3 |
|
|
15 |
% |
(Loss) income before
tax |
(22.5 |
) |
|
$ |
19.2 |
|
|
(217 |
)% |
|
$ |
15.2 |
|
|
$ |
72.7 |
|
|
(79 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Hedging
In our Commercial Hedging segment we provide risk management
consulting services in which we assist our customers in the
execution of their hedging strategies through a wide range of
products from listed exchange-traded futures and options on futures
contracts, to basic over-the-counter (“OTC”) instruments that offer
greater flexibility and structured OTC products designed for
customized solutions. These services span virtually all traded
commodity markets, with the largest concentrations in agricultural
and energy commodities (consisting primarily of grains, energy and
renewable fuels, coffee, sugar, cotton, and food service) and base
metals products listed on the LME.
Operating revenues increased 24% to $67.3 million in the fourth
quarter compared to $54.1 million in the prior year.
Exchange-traded revenues increased 3%, to $31.4 million in the
fourth quarter, resulting primarily from increases in Ag, Energy
and Renewable Fuels revenues which were partially offset by lower
LME metals revenues. The increase in Ag, Energy and Renewable Fuels
revenues were driven by a 15% increase in volumes, while the
decline in LME revenues were driven by lower spreads in that
business. Overall exchange-traded contract volumes increased 7%,
with Ag, Energy and Renewable Fuels growth noted above, while LME
volumes were flat with the prior year period. The average rate per
contract was $5.13, an 5% decline versus the prior year
quarter.
OTC revenues increased 59%, to $27.9 million in the fourth
quarter with OTC volumes increasing 24% and the average rate per
contract increasing 29%, to $71.56 compared to the prior year.
These increases were primarily the result of increased customer
volumes and a widening of spreads in the global grain and energy
markets.
Consulting and management fees increased $0.2 million versus the
prior year, while interest income, increased 77%, to $4.4 million
compared to the prior year. The increase in interest income was
primarily driven by an increase in short-term rates, as average
customer equity declined 7% versus the prior year period.
Segment income increased to $22.4 million in the fourth quarter
compared to $14.5 million in the prior year, primarily as a result
of the increase in operating revenues which was partially offset by
a $0.2 million increase in non-variable direct expenses, primarily
compensation and benefits, clearing and related expenses and
operations charges. Variable expenses, excluding interest,
expressed as a percentage of operating revenues declined to 42%
compared to 43% in the prior year, primarily as the result of a
decline in introducing broker commissions.
Global Payments
Our Global Payments segment provides global payment solutions to
banks and commercial businesses as well as charities,
non-governmental organizations (“NGOs”) and government
organizations. We offer payments services in more than 175
countries and 140 currencies, which we believe is more than any
other payments solution provider, and provide competitive and
transparent pricing.
Operating revenues increased 16% to $22.1 million in the fourth
quarter compared to $19.1 million in the prior year. The volume of
payments made increased 29% as we continued to benefit from an
increase in financial institutions and other customers utilizing
our electronic transaction order system, however this was partially
offset by a 10% decrease in the average revenue per trade.
Segment income increased 21% to $12.8 million in the fourth
quarter compared to $10.6 million in the prior year. This increase
was a result of the increase in operating revenues, partially
offset by a $0.7 million increase in non-variable direct
expenses versus the prior year period, primarily compensation and
benefits and trade system costs. Variable expenses, excluding
interest, expressed as a percentage of operating revenues decreased
to 25% compared to 29% in the prior year.
Securities
In our Securities segment we provide value-added solutions that
facilitate cross border trading in the equity markets as well as
act as an institutional dealer in fixed income securities,
including U.S. Treasuries, Federal Agency, Mortgage-Backed and
Asset-Backed Securities to a customer base including asset
managers, commercial bank trust and investment departments,
broker-dealers, and insurance companies. In addition, we also
originate, structure and place debt instruments in the
international and domestic capital markets as well as operate an
asset management business in Argentina.
Operating revenues decreased 7% to $36.4 million in the fourth
quarter compared to $39.2 million in the prior year. Operating
revenues in our Securities segment are comprised of activities in
four product lines, Equity Market-Making, Debt Trading, Investment
Banking and Asset Management.
Operating revenues in Equity Market-Making decreased 9% in the
fourth quarter, to $12.9 million compared to the prior year. Gross
dollar volume traded decreased 3%, while the average revenue per
$1,000 traded declined 12% as volatility remained relatively low in
the fourth quarter, leading to a tightening of spreads. Equity
Market-Making operating revenues include the trading profits we
earn before the related expense deduction for ADR conversion fees.
These ADR fees are included in the consolidated income statements
as ‘transaction-based clearing expenses’.
Operating revenues in Debt Trading declined 7%, to $20.1 million
in the fourth quarter compared to the prior year due to declines in
our domestic institutional fixed income business.
Operating revenues in Investment Banking increased 80%, to $0.9
million compared to the prior year, led by the performance in our
Argentina operations. Asset Management operating revenues decreased
3%, to $3.0 million in the fourth quarter compared to the prior
year. Assets under management increased 1% to $547.6 million in the
fourth quarter compared to $544.3 million in the prior year.
Segment income decreased 39% to $9.1 million in the fourth
quarter compared to $14.9 million in the prior year, as a result of
the decline in operating revenues as well as a $3.3 million
increase in interest expense in our debt trading business. Variable
expenses, excluding interest, expressed as a percentage of
operating revenues decreased to 32% in the fourth quarter compared
to 34% in the prior year, primarily as the result of a decline in
variable clearing and related expenses and introducing broker
commissions due to product mix.
Physical Commodities
In our Physical Commodities segment we provide a full range of
trading and hedging capabilities, including OTC products, to select
producers, consumers and investors in precious metals, provide
financing to commercial commodity-related companies against
physical inventories, including grain, lumber, meats, energy
products and renewable fuels and act as a principal to facilitate
inputs to the renewable fuels and feed ingredient industries.
Operating revenues for Physical Commodities decreased 22% to
$11.8 million in the fourth quarter compared to $15.1 million in
the prior year.
Precious Metals operating revenues decreased 25% to $7.7 million
in the fourth quarter compared to a record $10.3 million in the
prior year. Operating revenues decreased from the prior year period
despite a 120% increase in the number of ounces traded as a result
of a 65% decrease in the average revenue per ounce traded.
Operating revenues in Physical Ag & Energy decreased 15% to
$4.1 million in the fourth quarter compared to the prior year. The
decrease in operating revenues is primarily due to a decline in
feed ingredients and fats & oils operating revenues.
Physical Commodities recorded a segment loss of $42.6 million in
the fourth quarter compared to $9.1 million of segment income in
the prior year, primarily as a result of a $47.0 million bad debt
charge in our Physical Ag & Energy business related to our
Singapore physical coal business in INTL Asia Pte. Ltd. as well as
the decline in operating revenues.
Clearing and Execution Services
Our Clearing and Execution Services (“CES”) segment provides
competitive and efficient clearing and execution in all major
futures and securities exchanges globally as well as prime
brokerage in all major foreign currency pairs and swap
transactions. Following our acquisition of the Sterne Agee’s
correspondent securities clearing business, we are an independent
full service provider to introducing broker-dealers (“IBD’s”) of
clearing, custody, research, syndicated and security-based lending
products and services, including a proprietary technology platform
which offers seamless connectivity to ensure a positive customer
experience through the clearing and settlement process. Also as
part of this transaction, we acquired Sterne Agee’s independent
wealth management business which offers a comprehensive product
suite to retail customers nationwide.
Operating revenues increased 22% to $66.6 million in the fourth
quarter compared to $54.7 million in the prior year.
Operating revenues in our Exchange-traded Futures & Options
business increased 18% to $30.1 million in the fourth quarter
compared to $25.6 million in the prior year due to a 14% increase
in exchange-traded volumes and as the average rate per contract
increased 2% compared to the prior year period. Interest income in
the Exchange-traded Futures & Options business increased $1.2
million to $2.8 million in the fourth quarter primarily as a result
of an increase in short-term rates and a 9% increase in average
customer equity to $1.1 billion.
Operating revenues in our FX Prime Brokerage business decreased
14% to $4.3 million in the fourth quarter compared to $5.0 million
in the prior year due to a 12% decrease in foreign exchange
volumes.
Operating revenues in our Correspondent Clearing business
increased 32% to $7.4 million in the fourth quarter compared to
$5.6 million in the prior year. Included within these operating
revenues, Correspondent Clearing had interest income of $1.2
million in the fourth quarter compared to $0.9 million in the prior
year.
Operating revenues in our Independent Wealth Management business
decreased 5% to $17.6 million in the fourth quarter compared to
$18.5 million in the prior year.
On October 1, 2016, we acquired ICAP plc’s London-based EMEA oil
voice brokerage business. In the fourth quarter, the
Derivative Voice Brokerage business contributed $6.9 million in
operating revenues.
Segment income increased 134% to $10.3 million in the fourth
quarter compared to $4.4 million in the prior year, primarily as a
result of the increase in operating revenues in the Exchange-traded
Futures & Options and Correspondent Clearing businesses as well
as the acquisition of the Derivative Voice Brokerage business.
Segment income in the fourth quarter includes a $0.9 million
quarterly charge to compensation and benefits per the terms of the
acquisition of the oil voice brokerage business which will continue
to be expensed through the end of fiscal 2018 based upon the
employees’ continued employment. Variable expenses, excluding
interest, as a percentage of operating revenues were 67% in the
fourth quarter compared to 71% in the prior year.
Conference Call & Web Cast
A conference call will be held tomorrow, Thursday,
December 14, 2017 at 9:00 a.m. ET. A live webcast of the
conference call as well as additional information to review during
the call will be made available in PDF form on-line on the
Company’s corporate web site at http://www.intlfcstone.com.
Participants can also access the call by dialing 1-844-466-4112
(within the United States and Canada), or 1-408-337-0136
(international callers) approximately ten minutes prior to the
start time.
A replay of the call will be available at
http://www.intlfcstone.com approximately two hours after the
call has ended and will be available through December 21,
2017. To access the replay, dial 1-855-859-2056 (within the United
States and Canada), or 1-404-537-3406 (international callers) and
enter the replay passcode 6298765.
About INTL FCStone Inc.
INTL FCStone Inc., through its subsidiaries, is a leading
provider of execution, risk management and advisory services,
market intelligence, and clearing services across asset classes and
markets around the world.
Serving more than 20,000 customers in 130 countries on five
continents, the company provides products and services across five
market segments: commercial hedging, global payments, securities,
physical commodities, and clearing and execution services. Our
customers include the producers, processors and end users of
virtually every major traded commodity, as well as asset managers,
introducing broker-dealers, insurance companies, brokers,
institutional and retail investors, commercial and investment
banks, and governmental, non-governmental and charitable
organizations. A Fortune 500 company headquartered in New York
City, the company is listed on the Nasdaq under the ticker symbol
“INTL”.
Further information on INTL is available at
www.intlfcstone.com.
Forward Looking Statements
This press release includes forward-looking statements including
statements regarding the combined company. All statements other
than statements of current or historical fact contained in this
press release are forward-looking statements. The words “believe,”
“expect,” “anticipate,” “should,” “plan,” “will,” “may,” “could,”
“intend,” “estimate,” “predict,” “potential,” “continue” or the
negative of these terms and similar expressions, as they relate to
INTL FCStone Inc., are intended to identify forward-looking
statements.
These forward-looking statements are largely based on current
expectations and projections about future events and financial
trends that may affect the financial condition, results of
operations, business strategy and financial needs of the company.
They can be affected by inaccurate assumptions, including the
risks, uncertainties and assumptions described in the filings made
by INTL FCStone Inc. with the Securities and Exchange Commission.
In light of these risks, uncertainties and assumptions, the
forward-looking statements in this press release may not occur and
actual results could differ materially from those anticipated or
implied in the forward-looking statements. When you consider these
forward-looking statements, you should keep in mind these risk
factors and other cautionary statements in this press release.
These forward-looking statements speak only as of the date of
this press release. INTL FCStone Inc. undertakes no obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Accordingly,
readers are cautioned not to place undue reliance on these
forward-looking statements.
INTL FCStone Inc. Investor inquiries: Bruce Fields
1-866-522-7188 bruce.fields@intlfcstone.com
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