10-Q 1 intl1231201910-qq1.htm 10-Q Document

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________ 
FORM 10-Q
 ____________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From              to             
Commission File Number 000-23554
INTL FCStone Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
59-2921318
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
155 East 44th Street, Suite 900
New York, NY 10017
(Address of principal executive offices) (Zip Code)
(212) 485-3500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
INTL
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
  
Accelerated filer
x
 
 
 
 
 
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
 
 
 
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No  x
As of February 3, 2020, there were 19,301,552 shares of the registrant’s common stock outstanding.
 
 
 
 
 


INTL FCStone Inc.
Quarterly Report on Form 10-Q for the Quarterly Period Ended December 31, 2019
Table of Contents
 
 
Page
Part I. FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
Part II. OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INTL FCStone Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions, except par value and share amounts)
December 31,
2019
 
September 30,
2019
ASSETS
 
 
 
Cash and cash equivalents
$
338.9

 
$
471.3

Cash, securities and other assets segregated under federal and other regulations (including $306.4 and $306.0 at fair value at December 31, 2019 and September 30, 2019, respectively)
1,380.4

 
1,049.9

Collateralized transactions:
 
 
 
Securities purchased under agreements to resell
1,603.1

 
1,424.5

Securities borrowed
1,427.7

 
1,423.2

Deposits with and receivables from broker-dealers, clearing organizations and counterparties, net (including $630.8 and $626.9 at fair value at December 31, 2019 and September 30, 2019, respectively)
2,380.0

 
2,540.5

Receivable from clients, net
329.0

 
422.3

Notes receivable, net
5.8

 
2.9

Income taxes receivable
4.7

 
5.2

Financial instruments owned, at fair value (includes securities pledged as collateral that can be sold or repledged of $577.9 and $478.8 at December 31, 2019 and September 30, 2019, respectively)
2,177.4

 
2,175.2

Physical commodities inventory, net (including $200.5 and $151.9 at fair value at December 31, 2019 and September 30, 2019, respectively)
249.7

 
229.3

Deferred income taxes, net
18.6

 
18.0

Property and equipment, net
43.3

 
43.9

Operating right of use assets
33.1

 
—

Goodwill and intangible assets, net
71.5

 
67.9

Other assets
66.1

 
62.0

Total assets
$
10,129.3

 
$
9,936.1

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities:
 
 
 
Accounts payable and other accrued liabilities (including $1.8 million at fair value at December 31, 2019 and September 30, 2019)
$
128.9

 
$
157.5

Operating lease liabilities
36.2

 
—

Payables to:
 
 
 
Clients
3,703.7

 
3,589.5

Broker-dealers, clearing organizations and counterparties (including $4.2 and $5.6 at fair value at December 31, 2019 and September 30, 2019, respectively)
280.6

 
266.2

Lenders under loans
138.7

 
202.3

Senior secured term loan, net
186.7

 
167.6

Income taxes payable
10.8

 
10.4

Collateralized transactions:
 
 
 
Securities sold under agreements to repurchase
2,931.6

 
2,773.7

Securities loaned
1,430.8

 
1,459.9

Financial instruments sold, not yet purchased, at fair value
666.4

 
714.8

Total liabilities
9,514.4

 
9,341.9

Commitments and contingencies (Note 13)
 
 
 
Stockholders' equity:
 
 
 
Preferred stock, $0.01 par value. Authorized 1,000,000 shares; no shares issued or outstanding
—

 
—

Common stock, $0.01 par value. Authorized 30,000,000 shares; 21,514,595 issued and 19,282,730 outstanding at December 31, 2019 and 21,297,317 issued and 19,075,360 outstanding at September 30, 2019
0.2

 
0.2

Common stock in treasury, at cost - 2,231,865 shares at December 31, 2019 and 2,221,957 shares at September 30, 2019
(50.5
)
 
(50.1
)
Additional paid-in-capital
280.9

 
276.8

Total retained earnings
419.1

 
402.1

Accumulated other comprehensive loss, net
(34.8
)
 
(34.8
)
Total stockholders' equity
614.9

 
594.2

Total liabilities and stockholders' equity
$
10,129.3

 
$
9,936.1

See accompanying notes to condensed consolidated financial statements.

1

INTL FCStone Inc.
Condensed Consolidated Income Statements
(Unaudited)
 
Three Months Ended December 31,
(in millions, except share and per share amounts)
2019
 
2018
Revenues:
 
 
 
Sales of physical commodities
$
10,978.0

 
$
6,295.8

Principal gains, net
112.5

 
94.9

Commission and clearing fees
87.2

 
97.4

Consulting, management, and account fees
21.3

 
19.1

Interest income
46.0

 
45.0

Total revenues
11,245.0

 
6,552.2

Cost of sales of physical commodities
10,968.2

 
6,287.5

Operating revenues
276.8

 
264.7

Transaction-based clearing expenses
46.3

 
50.1

Introducing broker commissions
26.2

 
32.6

Interest expense
33.8

 
33.0

Net operating revenues
170.5

 
149.0

Compensation and other expenses:
 
 
 
Compensation and benefits
104.0

 
89.1

Trading systems and market information
10.4

 
9.2

Occupancy and equipment rental
5.0

 
4.4

Professional fees
6.0

 
5.3

Travel and business development
4.5

 
3.8

Non-trading technology and support
6.0

 
4.2

Depreciation and amortization
3.9

 
2.9

Communications
1.6

 
1.3

Bad debts
—

 
0.3

Recovery of bad debt on physical coal
—

 
(2.4
)
Other
7.5

 
6.5

Total compensation and other expenses
148.9

 
124.6

Other gain
0.1

 
—

Income before tax
21.7

 
24.4

Income tax expense
5.4

 
6.2

Net income
$
16.3

 
$
18.2

Earnings per share:
 
 
 
Basic
$
0.85

 
$
0.96

Diluted
$
0.84

 
$
0.94

Weighted-average number of common shares outstanding:
 
 
 
Basic
18,750,270

 
18,659,748

Diluted
19,074,562

 
18,993,046

See accompanying notes to condensed consolidated financial statements.

2

INTL FCStone Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

 
Three Months Ended December 31,
(in millions)
2019
 
2018
Net income
$
16.3

 
$
18.2

Other comprehensive income:
 
 
 
Foreign currency translation adjustment
0.7

 
0.3

Other comprehensive income
0.7

 
0.3

Comprehensive income
$
17.0

 
$
18.5

See accompanying notes to condensed consolidated financial statements.

3

INTL FCStone Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended December 31,
(in millions)
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
16.3

 
$
18.2

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
3.9

 
2.9

Bad debts
—

 
0.3

Recovery of bad debt on physical coal
—

 
(2.4
)
Deferred income taxes
(0.6
)
 
—

Amortization of debt issuance costs
0.4

 
0.2

Amortization of share-based compensation
2.6

 
1.9

Changes in operating assets and liabilities, net:
 
 
 
Securities and other assets segregated under federal and other regulations
299.0

 
330.3

Securities purchased under agreements to resell
(178.6
)
 
(320.5
)
Securities borrowed
(4.5
)
 
(737.9
)
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties, net
281.1

 
(225.5
)
Receivables from clients, net
93.3

 
(63.7
)
Notes receivable, net
(2.9
)
 
2.2

Income taxes receivable
0.5

 
0.1

Financial instruments owned, at fair value
(2.2
)
 
0.3

Physical commodities inventory, net
(20.4
)
 
—

Operating right of use assets
1.5

 
—

Other assets
(4.1
)
 
(6.1
)
Accounts payable and other accrued liabilities
(25.8
)
 
(15.7
)
Operating lease liabilities
(1.3
)
 
—

Payables to clients
114.2

 
(361.2
)
Payables to broker-dealers, clearing organizations and counterparties
14.4

 
133.6

Income taxes payable
0.4

 
1.0

Securities sold under agreements to repurchase
157.9

 
302.6

Securities loaned
(29.1
)
 
753.1

Financial instruments sold, not yet purchased, at fair value
(48.4
)
 
(26.7
)
Net cash provided by (used in) operating activities
667.6

 
(213.0
)
Cash flows from investing activities:
 
 
 
Cash paid for acquisitions, net
(5.1
)
 
(0.7
)
Purchase of property and equipment
(1.8
)
 
(4.5
)
Net cash used in investing activities
(6.9
)
 
(5.2
)
Cash flows from financing activities:
 
 
 
Net change in payables to lenders under loans with maturities 90 days or less
(106.0
)
 
80.4

Proceeds from payables to lenders under loans with maturities greater than 90 days
180.5

 
—

Repayments of payables to lenders under loans with maturities greater than 90 days
(138.0
)
 
—

Proceeds from issuance of senior secured term loan
21.5

 
—

Repayments of senior secured term loan
(2.5
)
 
—

Repayments of note payable
(0.1
)
 
(0.2
)
Repurchase of common stock
(0.4
)
 
—

Debt issuance costs
(0.2
)
 
(0.9
)
Exercise of stock options
1.5

 
0.3

Net cash (used in) provided by financing activities
(43.7
)
 
79.6

Effect of exchange rates on cash, segregated cash, cash equivalents, and segregated cash equivalents
0.7

 
0.3

Net increase (decrease) in cash, segregated cash, cash equivalents, and segregated cash equivalents
617.7

 
(138.3
)
Cash, segregated cash, cash equivalents, and segregated cash equivalents at beginning of period
2,451.3

 
2,190.1

Cash, segregated cash, cash equivalents, and segregated cash equivalents at end of period
$
3,069.0

 
$
2,051.8

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
33.0

 
$
33.7

Income taxes paid, net of cash refunds
$
5.2

 
$
5.3

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Identified intangible assets and goodwill on acquisitions
$
4.4

 
$
—

Acquisition of business:
 
 
 
Assets acquired
$
296.5

 
$
3.1

Liabilities assumed
(295.8
)
 
(0.9
)
Total net assets acquired
$
0.7

 
$
2.2

See accompanying notes to condensed consolidated financial statements.

4

INTL FCStone Inc.
Condensed Consolidated Statements of Cash Flows - Continued
(Unaudited)

The following table provides a reconciliation of cash, segregated cash, cash equivalents, and segregated cash equivalents reported within the condensed consolidated balance sheets.
 
December 31,
(in millions)
2019
 
2018
Cash and cash equivalents
$
338.9

 
$
358.2

Cash segregated under federal and other regulations(1)
1,073.9

 
707.3

Securities segregated under federal and other regulations(1)
299.5

 
—

Cash segregated and deposited with or pledged to exchange-clearing organizations and other futures commission merchants (“FCMs”)(2)
993.0

 
959.5

Securities segregated and pledged to exchange-clearing organizations(2)
363.7

 
26.8

Total cash, segregated cash, cash equivalents, and segregated cash equivalents shown in the condensed consolidated statements of cash flows
$
3,069.0

 
$
2,051.8


(1) Represents segregated client cash held at third-party banks. Excludes segregated commodity warehouse receipts, segregated United States (“U.S.”) Treasury obligations with original or acquired maturities of greater than 90 days, and other assets of $7.0 million and $312.9 million as of December 31, 2019 and 2018, respectively, included within ‘Cash, securities and other assets segregated under federal and other regulations’ on the condensed consolidated balance sheets.

(2) Represents segregated client cash and U.S. Treasury obligations on deposit with, or pledged to, exchange clearing organizations and other FCMs. Excludes non-segregated cash, segregated securities pledged to exchange-clearing organizations with original or acquired maturities greater than 90 days, and other assets of $1,023.3 million and $1,377.7 million as of December 31, 2019 and 2018, respectively, included within ‘Deposits with and receivables from broker-dealers, clearing organizations, and counterparties, net’ on the condensed consolidated balance sheets.

See accompanying notes to condensed consolidated financial statements.


5

INTL FCStone Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)


 
Three Months Ended December 31, 2018
(in millions)
Common Stock
 
Treasury Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss, net
 
Total
Balances as of September 30, 2018
$
0.2

 
$
(46.3
)
 
$
267.5

 
$
317.0

 
$
(33.1
)
 
$
505.3

Net income
 
 
 
 
 
 
18.2

 
 
 
18.2

Other comprehensive income
 
 
 
 
 
 
 
 
0.3

 
0.3

Exercise of stock options
 
 
 
 
0.3

 
 
 
 
 
0.3

Share-based compensation
 
 
 
 
1.9

 
 
 
 
 
1.9

Balances as of December 31, 2018
$
0.2

 
$
(46.3
)
 
$
269.7

 
$
335.2

 
$
(32.8
)
 
$
526.0


 
Three Months Ended December 31, 2019
(in millions)
Common Stock
 
Treasury Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss, net
 
Total
Balances as of September 30, 2019
$
0.2

 
$
(50.1
)
 
$
276.8

 
$
402.1

 
$
(34.8
)
 
$
594.2

ASU 2018-02 cumulative transition adjustment
 
 
 
 
 
 
0.7

 
(0.7
)
 
—

Adjusted Balances as of September 30, 2019
0.2

 
(50.1
)
 
276.8

 
402.8

 
(35.5
)
 
594.2

Net income
 
 
 
 
 
 
16.3

 
 
 
16.3

Other comprehensive income
 
 
 
 
 
 
 
 
0.7

 
0.7

Exercise of stock options
 
 
 
 
1.5

 
 
 
 
 
1.5

Share-based compensation
 
 
 
 
2.6

 
 
 
 
 
2.6

Repurchase of common stock
 
 
(0.4
)
 
 
 
 
 
 
 
(0.4
)
Balances as of December 31, 2019
$
0.2

 
$
(50.5
)
 
$
280.9

 
$
419.1

 
$
(34.8
)
 
$
614.9

See accompanying notes to condensed consolidated financial statements.


6

INTL FCStone Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Basis of Presentation and Consolidation and Accounting Standards Adopted
INTL FCStone Inc., a Delaware corporation, and its consolidated subsidiaries (collectively “INTL” or “the Company”), is 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. The Company’s services include comprehensive risk management advisory services for commercial clients; execution of listed futures and options on futures contracts on all major commodity exchanges; structured over-the-counter (“OTC”) products in a wide range of commodities; physical trading and hedging of precious metals and select other commodities; trading of more than 140 foreign currencies; market-making in international equities; fixed income; debt origination and asset management.
The Company provides these services to a diverse group of more than 20,000 predominantly wholesale organizations located throughout the world, including producers, processors and end-users of nearly all widely-traded physical commodities to manage their risks and enhance margins; to commercial counterparties who are end-users of the Company’s products and services; to governmental and non-governmental organizations; and to commercial banks, brokers, institutional investors and major investment banks.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated balance sheet as of September 30, 2019, which has been derived from the audited consolidated balance sheet of September 30, 2019, and the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the condensed consolidated financial statements for the interim periods presented have been reflected as required by Rule 10-01 of Regulation S-X.
Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019 filed with the SEC.
These condensed consolidated financial statements include the accounts of INTL FCStone Inc. and all other entities in which the Company has a controlling financial interest. All material intercompany transactions and balances have been eliminated in consolidation.
The Company’s fiscal year end is September 30, and the fiscal quarters end on December 31, March 31, June 30 and September 30. Unless otherwise stated, all dates refer to fiscal years and fiscal interim periods.
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant of these estimates and assumptions relate to fair value measurement for financial instruments and investments, revenue recognition, the provision for bad debts, valuation of inventories, valuation of goodwill and intangible assets, incomes taxes, and contingencies. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.
In the condensed consolidated income statements, the total revenues reported combine gross revenues for the physical commodities business and net revenues for all other businesses. The subtotal ‘operating revenues’ in the condensed consolidated income statements is calculated by deducting cost of sales of physical commodities from total revenues. The subtotal ‘net operating revenues’ in the condensed consolidated income statements is calculated as operating revenues less transaction-based clearing expenses, introducing broker commissions and interest expense. Transaction-based clearing expenses represent variable expenses paid to executing brokers, exchanges, clearing organizations and banks in relation to transactional volumes. Introducing broker commissions include commission paid to non-employee third parties that have introduced clients to the Company. Net operating revenues represent revenues available to pay variable compensation to risk management consultants and traders and direct non-variable expenses, as well as variable and non-variable expenses of operational and administrative employees.


7

Accounting Standards Adopted
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842) Targeted Improvements. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements. Among other things, this updated guidance provides an optional transition method, which allows for the initial application of the new accounting standard at the adoption date and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the period of adoption. The Company adopted the new ASUs on October 1, 2019, using the effective date modified retrospective transition approach and has not restated comparative periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to not reassess contracts to determine if they contain leases, lease classification and initial direct costs. The Company’s application of the new standard resulted in changes to the condensed consolidated balance sheet but did not have an impact on the condensed consolidated income statement. See Note 2 for more information.
In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this updated standard allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The Company adopted this standard on October 1, 2019 and, as a result, recorded a $0.7 million reclassification between accumulated other comprehensive loss, net and retained earnings.
Note 2 – Leases
The Company currently leases office space under non-cancelable operating leases with third parties as of December 31, 2019. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Certain office space leases include one or more options to renew, with renewal terms that can extend the lease term from three to ten years, and some of which include the Company’s option to terminate the leases within two years of the balance sheet date. The Company has not considered any renewal options in the lease terms of its office space leases as the Company does not believe it is reasonably certain that any of the rights will be exercised. In determining the term of certain office space leases, the Company has not included the periods covered by an option to terminate if the Company believes it is reasonably certain to do so.
As the office space leases do not provide an implicit rate, the Company applies a collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company applied a collateralized incremental borrowing rate as of October 1, 2019 for operating leases that commenced prior to that date. For office space leases executed by subsidiaries, including foreign subsidiaries, the Company has applied the incremental borrowing rate of the parent company. The Company believes this is a reasonable approach as its subsidiaries either do not have their own treasury functions or the credit facilities available to its subsidiaries do not permit the financing of right-of-use assets. Additionally, in certain instances, the parent company provides a guarantee of the lease payments to the lessor under office space leases executed by its subsidiaries. As such, the Company believes that the pricing of subsidiary leases is more significantly influenced by the credit standing of the parent company than that of its subsidiaries.
Certain office space leases contain variable lease payments related to fair market rent adjustments and local inflation index measures. The Company estimates variable lease payments based upon information available at the lease commencement date in determining the present value of lease payments. The Company applied information available as of October 1, 2019 for operating leases that commenced prior to that date.
The Company has elected to not separate lease components from nonlease components for all office space leases. The Company does not have any financing leases as of December 31, 2019. Operating lease expense is recognized on a straight-line basis over the lease term and is reported within ‘occupancy and equipment rental’ on the condensed consolidated statement of income.
As of December 31, 2019, the Company recorded operating lease right-of-use assets and operating lease liabilities of $33.1 million and $36.2 million, respectively.

8

The following table presents operating lease costs and other information as of and for the three months ended December 31, 2019 (in millions, except as stated):
Operating lease costs (1)
$
3.5

 
 
Lease term and discount rate information:
 
Weighted average remaining lease term (years)
4.39

Weighted average discount rate
5.1
%
 
 
Supplemental cash flow information and non-cash activity:
 
Cash paid for amounts included in the measurement of operating lease liabilities
$
2.7

Right-of-use assets obtained in exchange for operating lease liabilities
$
34.6

(1) Includes short-term leases and variable lease costs, which are immaterial.
The maturities of the lease liabilities are as follows as of December 31, 2019 (in millions):
Remainder of 2020
$
8.5

2021
10.4

2022
7.7

2023
6.2

2024
4.4

After 2024
3.0

Total lease payments (1)
40.2

Less: interest
4.0

Present value of lease liabilities
$
36.2

(1) Total lease payments excludes $80.9 million of legally binding lease payments for leases signed and that will commence after December 31, 2019.
In accordance with the disclosure requirements for the adoption of Topic 842, the Company is presenting its operating lease commitment table as of September 30, 2019, which was previously disclosed in Note 12 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019 (in millions):
2020
11.2

2021
9.9

2022
7.5

2023
6.2

2024
5.8

Thereafter
2.6

 
43.2

Note 3 – Revenue from Contracts with Clients
The Company accounts for revenue earned from contracts with clients for services such as the execution, clearing, brokering, and custody of futures and options on futures contracts, OTC derivatives, and securities, investment management, and underwriting services under FASB Accounting Standards Codification (“ASC”) 606, Revenues from Contracts with Customers (Topic 606). As such, revenues for these services are recognized when the performance obligations related to the underlying transaction are completed.
Revenues are recognized when control of the promised goods or services are transferred to clients, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Revenues are analyzed to determine whether the Company is the principal (i.e. reports revenue on a gross basis) or agent (i.e., reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the good or service before control is transferred to a client. The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred, and discretion in establishing the price.

9

Topic 606 does not apply to revenues associated with dealing, or market-making, activities in financial instruments or contracts in the capacity of a principal, including derivative sales contracts which result in physical settlement and interest income.
The Company’s revenues from contracts with clients subject to Topic 606 represent approximately 1.0% and 1.8% of the Company’s total revenues for the three months ended December 31, 2019 and 2018, respectively.
The Company’ revenues from contracts with clients subject to Topic 606 represent approximately 39.2% and 44.8% of the Company’s operating revenues for the three months ended December 31, 2019 and 2018, respectively.
This includes all of the Company’s commission and clearing fees and consulting, management, and account fees revenues. Revenues within the scope of Topic 606 are presented within ‘Commission and clearing fees’ and ‘Consulting, management, and account fees’ on the condensed consolidated income statements. Revenues that are not within the scope of Topic 606 are presented within ‘Sales of physical commodities’, ‘Principal gains, net’, and ‘Interest income’ on the condensed consolidated income statements.
The following table represents a disaggregation of the Company’s total revenues separated between revenues from contracts with clients and other sources of revenue for the three months ended December 31, 2019 and 2018 (in millions):

10

 
Three Months Ended December 31,
 
2019
 
2018
Revenues from contracts with clients:
 
 
 
Commission and clearing fees:
 
 
 
Sales-based:
 
 
 
Exchange-traded futures and options
$
32.4

 
$
39.1

OTC derivative brokerage
5.5

 
8.9

Equities and fixed income
4.3

 
1.1

Mutual funds
1.3

 
2.6

Insurance and annuity products
2.1

 
1.5

Other
0.3

 
0.2

Total sales-based commission
45.9

 
53.4

Trailing:
 
 
 
Mutual funds
3.1

 
3.2

Insurance and annuity products
3.7

 
3.7

Total trailing commission
6.8

 
6.9

 
 
 
 
Clearing fees
29.5

 
32.6

Trade conversion fees
1.5

 
1.6

Other
3.5

 
2.9

Total commission and clearing fees:
87.2

 
97.4

 
 
 
 
Consulting, management, and account fees:
 
 
 
Underwriting fees
0.2

 
0.3

Asset management fees
7.5

 
6.2

Advisory and consulting fees
5.6

 
5.0

Sweep program fees
4.0

 
3.8
Client account fees
3.0

 
2.7

Other
1.0

 
1.1

Total consulting, management, and account fees
21.3

 
19.1

Total revenues from contracts with clients
$
108.5

 
$
116.5

 
 
 
 
Method of revenue recognition:
 
 
 
Point-in-time
$
84.6

 
$
94.6

Time elapsed
23.9

 
21.9

Total revenues from contracts with clients
108.5

 
116.5

Other sources of revenues
 
 
 
Physical precious metals trading
10,658.0

 
5,955.6

Physical agricultural and energy product trading
320.0

 
340.2

Principal gains, net
112.5

 
94.9

Interest income
46.0

 
45.0

Total revenues
$
11,245.0

 
$
6,552.2

 
 
 
 
Primary geographic region:
 
 
 
United States
$
512.3

 
$
527.0

Europe
111.6

 
53.3

South America
15.2

 
11.4

Middle East and Asia
10,605.5

 
5,958.7

Other
0.4

 
1.8

Total revenues
$
11,245.0

 
$
6,552.2

The substantial majority of the Company’s performance obligations for revenues from contracts with clients are satisfied at a point in time and are typically collected from clients by debiting their accounts with the Company.
Commission and clearing fees revenue is primarily related to the Commercial Hedging and Clearing and Execution Services reportable segments. Consulting, management, and accounts fees are primarily related to the Commercial Hedging, Clearing and Execution Services, and Securities reportable segments. Principal gains, net is primarily related to the Commercial Hedging, Global Payments, and Securities reportable segments. Interest income is primarily related to the Commercial

11

Hedging, Securities, and Clearing and Execution Services reportable segments. Physical precious metals trading and physical agricultural and energy product trading revenues are primarily related to the Physical Commodities reportable segment.
Commission and Clearing Fees
Commission revenue represents sales and brokerage commissions generated by internal brokers, introducing broker-dealers, or registered investment advisors of introducing-broker dealers for their clients’ trading activity in futures, options on futures, OTC derivatives, fixed income securities, equity securities, mutual funds, and annuities. The Company views the selling, distribution, and marketing, or any combination thereof, of mutual funds and insurance and annuity products to clients on the Company’s registered investment advisor (“RIA”) platform as a single performance obligation to the product sponsors.
The Company is the principal for commission revenue, as it is responsible for the execution of the clients’ purchases and sales, and maintains relationships with product sponsors for trailing commission. Introducing broker dealers and registered investment advisors assist the Company in performing its obligations. Accordingly, total commission revenues are reported on a gross basis.
The Company primarily generates commission revenue on exchange-traded derivatives, OTC derivatives, and securities. Exchange-traded and OTC derivative commissions are recognized at a point in time on the trade date when the client, either directly or through the use of an internal broker or introducing broker, requests the clearance and execution of a trade. Securities commissions are either sale-based commissions that are recognized at a point in time on the trade date or trailing commission that are recognized over time as earned. Sales-based securities commissions are typically a flat fee per security transaction and in certain instances are based on a percentage of the trade date transaction value.
Trailing commission revenue is generally based on a percentage of the periodic fair value of clients’ investment holdings in trail-eligible assets, and is recognized over the period during which services, such as on-going support, are performed. As trailing commission revenue is based on the fair value of clients’ investment holdings in trail-eligible assets, this variable consideration is constrained until the fair value of trail-eligible assets is determinable.
Clearing fees generally represent transactional based fees charged by the various exchanges and clearing organizations for which the Company or one of its clearing organizations is a member for the privilege of executing and clearing trades through them. Clearing fees are generally passed through to the clients’ accounts and are reported gross as the Company maintains control over the clearing and execution services provided, maintains relationships with the exchanges or clearing brokers, and has ultimate discretion in whether the fees are passed through to the clients and the rates at which they are passed through. As clearing fees are transactional based revenues, they are recognized at a point in time on the trade date along with the related commission revenue when the client requests the clearance and execution of a trade.
Trade Conversion Fees
Trade conversion fees include revenue earned from converting foreign ordinary equities into an American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) and fees earned from converting an ADR or GDR into foreign ordinary equities on behalf of clients. Trade conversion revenue is recognized at a point in time on the trade date.
Underwriting Fees
Revenues from investment banking consists of revenues earned from underwriting fixed income securities, primarily municipal and asset-backed securities, and are recognized in revenues upon completion of the underlying transaction, which is generally the trade date, based upon the terms of the assignment as the performance obligation is to successfully broker a specific transaction.
Asset Management Fees
The Company earns asset management fees on Company sponsored and managed mutual funds and on the advisory accounts of independent registered investment advisors on the Company’s RIA platform. The Company provides ongoing investment advice and acts as a custodian, providing brokerage and execution services on transactions, and performs administrative services for these accounts. This series of performance obligations transfers control of the services to the client over time as the services are performed. This revenue is recognized ratably over time to match the continued delivery of the performance obligations to the client over the life of the contract. The asset management revenue generated is based on a percentage of the fair value of the eligible assets in the clients’ accounts. As such, the consideration for this revenue is variable and this variable consideration is constrained until the fair value of eligible assets in the clients’ accounts is determinable.

12

Advisory and Consulting Fees
Advisory and consulting fees are primarily related to risk management consulting fees which are billed and recognized as revenue on a monthly basis when risk management services are provided. Such agreements are generally for one year periods but are generally cancelable by either party upon providing thirty days’ written notice to the other party and the amounts are not variable based on client trading activities. This revenue is generally recognized ratably over time to match the continued delivery of the performance obligation to the client over the life of the contract.
Sweep Program Fees
The Company earns fees generated in lieu of interest income from a multi-bank sweep program with unaffiliated banks and money market funds. Pursuant to contractual arrangements with clients and their introducing-brokers, available cash balances in client accounts are swept into either Federal Deposit Insurance Corporation (“FDIC”) insured cash accounts at unaffiliated banks or unaffiliated Securities Investor Protection Corporation (“SIPC”) insured money market funds for which the Company earns a portion of the interest income generated by the client balances for administration and recordkeeping. The fees generated by the Company’s multi-bank sweep program are reported net of the balances remitted to the introducing-brokers and clients. These fees are paid and recognized over time to match the continued delivery of the administration and recordkeeping performance obligations to the life of the contract. The fees earned under this program are generally based upon the type of sweep account, prevailing interest rates, and the amount of client balances invested.
Client Account Fees
Client account fees represent fees earned for custodial, recordkeeping, and administrative functions performed for the securities clearing accounts of clients. These include statement delivery fees, account transfer fees, safekeeping fees, errors and omission insurance fees, platform fees, and other fees. Client account fees that are transactional based, such as account transfer fees, are recognized at a point in time when the related performance obligation is satisfied. Client account fees that are related to ongoing services, such as statement delivery fees and errors and omission insurance fees, are recognized over time. Client account fees that relate to ongoing services are typically billed to clients’ accounts on a monthly or quarterly basis.
Physical Precious Metals Trading
The Company principally generates revenue from trading physical precious metals on an OTC basis. Revenues from the sale of physical precious metals are recorded on a trade date basis and generally settle on an unallocated basis. Substantially all of the Company’s sales of precious metals are conducted using sales contracts that meet the definition of derivative instruments in accordance with ASC 815 - Derivatives and Hedging (“Topic 815”). The contracts underlying the Company’s commitment to deliver precious metals are referred to as fixed price forward commodity contracts because the price of the commodity is fixed at the time the order is placed. Although the contracts typically are executed on a spot basis and settle on unallocated account, the client has the option to request delivery of the precious metals, the option to net settle out of the position by executing an offsetting trade, or the option to roll the transaction to a subsequent maturity date. Thus, the sales contracts contain embedded option derivatives that are subject to Topic 815. As the contracts are subject to the guidance in Topic 815, the fixed price derivative sales contracts are outside the scope of Topic 606. The Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606.
Physical Agricultural and Energy Product Trading
The Company principally generates revenue from merchandising and originating physical agricultural and energy commodities from forward firm sales commitments accounted for in accordance with Topic 815. The fixed and provisionally-priced derivative sales contracts that result in physical delivery are outside the scope of Topic 606. The Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606.
Principal Gains, Net
Principal gains, net includes revenues on financial transactions or contracts for which the Company acts as principal that is reported on a net basis and is outside the scope of ASC 606. Principal gains, net includes margins generated from OTC derivative trades, equities, fixed income, and foreign exchange executed with clients and other counterparties and are recognized on a trade-date basis. Principal gains, net, also includes realized and unrealized gains and losses derived principally from market making activities in OTC derivatives, equities, fixed income, and foreign exchange. Net dealer inventory and investment gains are recognized on a trade-date basis and include realized gains or losses and changes in unrealized gains or losses on investments at fair value. Principal gains, net also includes dividend income on long equity positions and dividend expense on short equity positions, which are recognized on the ex-dividend date.

13

Interest Income
Interest income is generated from client funds deposited with the Company to satisfy margin requirements which is held by third-party banks or on deposit with or pledged to exchange-clearing organizations or other FCMs. Interest income is also generated from the investment of client funds in allowable securities, primarily U.S. Treasury obligations. Interest income is also generated from trading fixed income securities that the Company holds in its market-making businesses. Interest income also includes interest generated from collateralized transactions, including securities borrowed and securities purchased under agreements to resell, and from extending margin loans to clients. Interest income is recognized on an accrual basis and is not within the scope of Topic 606.
Remaining Performance Obligations
Remaining performance obligations are services that the Company has committed to perform in the future in connection with its contracts with clients. The Company’s remaining performance obligations are generally related to its risk management consulting and asset management contracts with clients. Revenues associated with remaining performance obligations related to these contracts with clients are not material to the overall consolidated results of the Company. For the Company’s asset management activities, where fees are calculated based on a percentage of the fair value of eligible assets in client’s accounts, future revenue associated with remaining performance obligations cannot be determined as such fees are subject to fluctuations in the fair value of eligible assets in clients’ accounts.
Note 4 – Earnings per Share
The Company presents basic and diluted earnings per share (“EPS”) using the two-class method which requires all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends and therefore participate in undistributed earnings with common stockholders be included in computing earnings per share. Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating security. The remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends. Restricted stock awards granted to certain employees and directors contain non-forfeitable rights to dividends at the same rate as common stock and are considered participating securities. Basic EPS has been computed by dividing net income by the weighted-average number of common shares outstanding.
The following is a reconciliation of the numerator and denominator of the diluted earnings per share computations for the periods presented below.
 
Three Months Ended December 31,
(in millions, except share amounts)
2019
 
2018
Numerator:
 
 
 
Net income
$
16.3

 
$
18.2

Less: Allocation to participating securities
(0.3
)
 
(0.3
)
Net income allocated to common stockholders
$
16.0

 
$
17.9

Denominator:
 
 
 
Weighted average number of:
 
 
 
Common shares outstanding
18,750,270

 
18,659,748

Dilutive potential common shares outstanding:
 
 
 
Share-based awards
324,292

 
333,298

Diluted weighted-average common shares
19,074,562

 
18,993,046

The dilutive effect of share-based awards is reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense required under the Compensation – Stock Compensation Topic of the ASC.
Options to purchase 1,022,350 and 178,958 shares of common stock for the three months ended December 31, 2019 and 2018, respectively, were excluded from the calculation of diluted earnings per share as they would have been anti-dilutive.
Note 5 – Assets and Liabilities, at Fair Value
Fair value is defined by U.S. GAAP as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants on the measurement date.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company is required to develop a set of assumptions that reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods

14

of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
The Company has designed independent price verification controls and periodically performs such controls to ensure the reasonableness of such values.
In accordance with FASB ASC 820, Fair Value Measurement, the Company groups its assets and liabilities measured at fair value in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 - Valuation is based upon unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 1 consists of financial assets and liabilities whose fair values are estimated using quoted market prices.
Level 2 - Valuation is based upon quoted prices for identical or similar assets or liabilities in markets that are less active, that is, markets in which there are few transactions for the asset or liability that are observable for substantially the full term. Included in Level 2 are those financial assets and liabilities for which fair values are estimated using models or other valuation methodologies. These models are primarily industry-standard models that consider various observable inputs, including time value, yield curve, volatility factors, observable current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures.
Level 3 - Valuation is based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Level 3 comprises financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are not readily observable from objective sources. Level 3 includes contingent liabilities that have been valued using an income approach based upon management developed discounted cash flow projections, which are an unobservable input. The Company had $1.8 million of contingent liabilities classified within Level 3 of the fair value hierarchy as of December 31, 2019 and September 30, 2019. The Company had no Level 3 assets as of December 31, 2019 and September 30, 2019.
Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A market is active if there are sufficient transactions on an ongoing basis to provide current pricing information for the asset or liability, pricing information is released publicly, and price quotations do not vary substantially either over time or among market participants. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity.
The guidance requires the Company to consider counterparty credit risk of all parties of outstanding derivative instruments that would be considered by a market participant in the transfer or settlement of such contracts (exit price). The Company’s exposure to credit risk on derivative financial instruments principally relates to the portfolio of OTC derivative contracts as all exchange-traded contracts held can be settled on an active market with a credit guarantee from the respective exchange. The Company requires each counterparty to deposit margin collateral for all OTC instruments and is also required to deposit margin collateral with counterparties. The Company has assessed the nature of these deposits and used its discretion to adjust each based on the underlying credit considerations for the counterparty and determined that the collateral deposits minimize the exposure to counterparty credit risk in the evaluation of the fair value of OTC instruments as determined by a market participant.
Fair value of financial and nonfinancial assets and liabilities that are carried on the Condensed Consolidated Balance Sheets at fair value on a recurring basis
Cash and cash equivalents reported at fair value on a recurring basis includes certificates of deposit and money market mutual funds, which are stated at cost plus accrued interest, which approximates fair value.
Cash, securities and other assets segregated under federal and other regulations reported at fair value on a recurring basis include the value of pledged investments, primarily U.S. Treasury obligations and commodities warehouse receipts.
Deposits with and receivables from broker-dealers, clearing organizations and counterparties and payable to clients and broker-dealers, clearing organizations and counterparties include the value of pledged investments, primarily U.S. Treasury obligations and foreign government obligations. These balances also include the fair value of exchange-traded options on futures and OTC derivative financial instruments.
Financial instruments owned and sold, not yet purchased include the fair value of equity securities, which includes common, preferred, and foreign ordinary shares, ADRs, GDRs, and exchange-traded funds (“ETFs”), corporate and municipal bonds, U.S. Treasury obligations, U.S. government agency obligations, foreign government obligations, agency mortgage-backed obligations, asset-backed obligations, derivative financial instruments, commodities warehouse receipts, exchange firm common

15

stock, and mutual funds and investments in managed funds. The fair value of exchange firm common stock is determined by quoted market prices.
Cash equivalents, debt and equity securities, commodities warehouse receipts, physical commodities inventory, derivative financial instruments, and contingent liabilities are carried at fair value, on a recurring basis, and are classified and disclosed into three levels in the fair value hierarchy.
The following section describes the valuation methodologies used by the Company to measure classes of financial instruments at fair value and specifies the level within the fair value hierarchy where various financial instruments are classified.
The Company uses quoted prices in active markets, where available, and classifies such instruments within Level 1 of the fair value hierarchy. Examples include U.S. Treasury obligations, foreign government obligations, commodities warehouse receipts, certain equity securities traded in active markets, physical precious metals held by a regulated broker-dealer subsidiary, exchange firm common stock, investments in managed funds, as well as options on futures contracts traded on national exchanges. The fair value of exchange firm common stock is determined by recent sale transactions and is included within Level 1.
When instruments are traded in secondary markets and observable prices are not available for substantially the full term, the Company generally relies on internal valuation techniques or prices obtained from third-party pricing services or brokers or a combination thereof, and accordingly, classified these instruments as Level 2. Examples include corporate and municipal bonds, U.S. government agency obligations, agency-mortgage backed obligations, asset-backed obligations, certain equity securities traded in less active markets, and OTC derivative contracts, which include purchase and sale commitments related to the Company’s agricultural and energy commodities.
Certain derivatives without a quoted price in an active market and derivatives executed OTC are valued using internal valuation techniques, including pricing models which utilize inputs observable to market participants. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest yield curves, foreign exchange rates, commodity prices, volatilities and correlation. These derivative instruments are included within Level 2 of the fair value hierarchy.
Physical commodities inventory includes precious metals that are a part of the trading activities of a regulated broker-dealer subsidiary and is recorded at fair value using exchange-quoted prices. Physical commodities inventory also includes agricultural commodities that are a part of the trading activities of a non-broker dealer subsidiary and are recorded at net realizable value using exchange-quoted prices. The fair value of precious metals physical commodities inventory is based upon unadjusted exchange-quoted prices and is, therefore, classified within Level 1 of the fair value hierarchy. The fair value of agricultural physical commodities inventory and the related OTC firm sale and purchase commitments are generally based upon exchange-quoted prices, adjusted for basis or differences in local markets, broker or dealer quotations or market transactions in either listed or OTC markets. Exchange-quoted prices are adjusted for location and quality because the exchange-quoted prices for agricultural and energy related products represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis or local market adjustments are observable inputs or have an insignificant impact on the measurement of fair value and, therefore, the agricultural physical commodities inventory as well as the related OTC forward firm sale and purchase commitments have been included within Level 2 of the fair value hierarchy.
With the exception of certain derivative instruments where the valuation approach is disclosed above, financial instruments owned and sold are primarily valued using third-party pricing sources. Third-party pricing vendors compile prices from various sources and often apply matrix pricing for similar securities when market-observable transactions for the instruments are not observable for substantially the full term. The Company reviews the pricing methodologies used by third-party pricing vendors in order to evaluate the fair value hierarchy classification of vendor-priced financial instruments and the accuracy of vendor pricing, which typically involves the comparison of primary vendor prices to internal trader prices or secondary vendor prices. When evaluating the propriety of vendor-priced financial instruments using secondary prices, considerations include the range and quality of vendor prices, level of observable transactions for identical and similar instruments, and judgments based upon knowledge of a particular market and asset class. If the primary vendor price does not represent fair value, justification for using a secondary price, including source data used to make the determination, is subject to review and approval by authorized personnel prior to using a secondary price. Financial instruments owned and sold that are valued using third party pricing sources are included within either Level 1 or Level 2 of the fair value hierarchy based upon the observability of the inputs used and the level of activity in the market.
The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2019 and September 30, 2019. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these condensed consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

16

The following tables set forth the Company’s financial and nonfinancial assets and liabilities accounted for at fair value, on a recurring basis, as of December 31, 2019 by level in the fair value hierarchy.
 
December 31, 2019
(in millions)
Level 1
 
Level 2
 
Level 3
 
Netting (1)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Certificates of deposit
$
6.9

 
$
—

 
$
—

 
$
—

 
$
6.9

Money market mutual funds
7.9

 
—

 
—

 
—

 
7.9

Cash and cash equivalents
14.8

 
—

 
—

 
—

 
14.8

Commodities warehouse receipts
6.7

 
—

 
—

 
—

 
6.7

U.S. Treasury obligations
299.7

 
—

 
—

 
—

 
299.7

Securities and other assets segregated under federal and other regulations
306.4

 
—

 
—

 
—

 
306.4

U.S. Treasury obligations
548.0

 
—

 
—

 
—

 
548.0

"To be announced" (TBA) and forward settling securities
—

 
5.9

 
—

 
(0.5
)
 
5.4

Foreign government obligations
10.3

 
—

 
—

 
—

 
10.3

Derivatives
1,620.1

 
38.1

 
—

 
(1,591.1
)
 
67.1

Deposits with and receivables from broker-dealers, clearing organizations and counterparties, net
2,178.4

 
44.0

 
—

 
(1,591.6
)
 
630.8

Equity securities
178.9

 
15.3

 
—

 
—

 
194.2

Corporate and municipal bonds
—

 
69.8

 
—

 
—

 
69.8

U.S. Treasury obligations
226.6

 
—

 
—

 
—

 
226.6

U.S. government agency obligations
—

 
273.3

 
—

 
—

 
273.3

Foreign government obligations
0.6

 
—

 
—

 
—

 
0.6

Agency mortgage-backed obligations
—

 
1,253.1

 
—

 
—

 
1,253.1

Asset-backed obligations
—

 
16.5

 
—

 
—

 
16.5

Derivatives
1.7

 
449.3

 
—

 
(363.8
)
 
87.2

Commodities leases
—

 
29.9

 
—

 
—

 
29.9

Commodities warehouse receipts
12.2

 
—

 
—

 
—

 
12.2

Exchange firm common stock
12.1

 
—

 
—

 
—

 
12.1

Mutual funds and other
1.9

 
—

 
—

 
—

 
1.9

Financial instruments owned
434.0

 
2,107.2

 
—

 
(363.8
)
 
2,177.4

Physical commodities inventory, net
24.1

 
176.4

 
—

 
—

 
200.5

Total assets at fair value
$
2,957.7

 
$
2,327.6

 
$
—

 
$
(1,955.4
)
 
$
3,329.9

Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and other accrued liabilities - contingent liabilities
—

 
—

 
1.8

 
—

 
1.8

TBA and forward settling securities
—

 
4.4

 
—

 
(0.5
)
 
3.9

Derivatives
1,556.1

 
67.2

 
—

 
(1,623.0
)
 
0.3

Payable to broker-dealers, clearing organizations and counterparties
1,556.1

 
71.6

 
—

 
(1,623.5
)
 
4.2

Equity securities
164.2

 
2.0

 
—

 
—

 
166.2

Foreign government obligations
2.2

 
—

 
—

 
—

 
2.2

Corporate and municipal bonds
—

 
31.8

 
—

 
—

 
31.8

U.S. Treasury obligations
219.5

 
—

 
—

 
—

 
219.5

U.S. government agency obligations
—

 
38.9

 
—

 
—

 
38.9

Derivatives
—

 
463.9

 
—

 
(384.3
)
 
79.6

Commodities leases
—

 
128.2

 
—

 
—

 
128.2

Financial instruments sold, not yet purchased
385.9

 
664.8

 
—

 
(384.3
)
 
666.4

Total liabilities at fair value
$
1,942.0

 
$
736.4

 
$
1.8

 
$
(2,007.8
)
 
$
672.4

 
(1)
Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.


17

The following table sets forth the Company’s financial and nonfinancial assets and liabilities accounted for at fair value, on a recurring basis, as of September 30, 2019 by level in the fair value hierarchy.
 
September 30, 2019
(in millions)
Level 1
 
Level 2
 
Level 3
 
Netting (1)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Certificates of deposit
$
4.9

 
$
—

 
$
—

 
$
—

 
$
4.9

Money market funds
8.9

 
—

 
—

 
—

 
8.9

Cash and cash equivalents - certificates of deposit
13.8

 
—

 
—

 
—

 
13.8

Commodities warehouse receipts
6.2

 
—

 
—

 
—

 
6.2

U.S. Treasury obligations
299.8

 
—

 
—

 
—

 
299.8

Securities and other assets segregated under federal and other regulations
306.0

 
—

 
—

 
—

 
306.0

U.S. Treasury obligations
593.9

 
—

 
—

 
—

 
593.9

TBA and forward settling securities
—

 
9.8

 
—

 
(1.5
)
 
8.3

Foreign government obligations
9.9

 
—

 
—

 
—

 
9.9

Derivatives
3,131.2

 
43.2

 
—

 
(3,159.6
)
 
14.8

Deposits with and receivables from broker-dealers, clearing organizations and counterparties, net
3,735.0

 
53.0

 
—

 
(3,161.1
)
 
626.9

Equity securities
159.5

 
9.0

 
—

 
—

 
168.5

Corporate and municipal bonds
—

 
80.0

 
—

 
—

 
80.0

U.S. Treasury obligations
248.7

 
—

 
—

 
—

 
248.7

U.S. government agency obligations
—

 
447.1

 
—

 
—

 
447.1

Foreign government obligations
0.5

 
—

 
—

 
—

 
0.5

Agency mortgage-backed obligations
—

 
1,045.0

 
—

 
—

 
1,045.0

Asset-backed obligations
—

 
29.1

 
—

 
—

 
29.1

Derivatives
1.0

 
486.3

 
—

 
(420.8
)
 
66.5

Commodities leases
—

 
28.6

 
—

 
—

 
28.6

Commodities warehouse receipts
48.4

 
—

 
—

 
—

 
48.4

Exchange firm common stock
12.7

 
—

 
—

 
—

 
12.7

Mutual funds and other
0.1

 
—

 
—

 
—

 
0.1

Financial instruments owned
470.9

 
2,125.1

 
—

 
(420.8
)
 
2,175.2

Physical commodities inventory, net
7.1

 
144.8

 
—

 
—

 
151.9

Total assets at fair value
$
4,532.8

 
$
2,322.9

 
$
—

 
$
(3,581.9
)
 
$
3,273.8

Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and other accrued liabilities - contingent liabilities
$
—

 
$
—

 
$
1.8

 
$
—

 
$
1.8

TBA and forward settling securities
—

 
6.8

 
—

 
(1.5
)
 
5.3

Derivatives
3,079.1

 
38.3

 
—

 
(3,117.1
)
 
0.3

Payable to broker-dealers, clearing organizations and counterparties
3,079.1

 
45.1

 
—

 
(3,118.6
)
 
5.6

Equity securities
147.3

 
10.8

 
—

 
—

 
158.1

Corporate and municipal bonds
—

 
39.2

 
—

 
—

 
39.2

U.S. Treasury obligations
272.3

 
—

 
—

 
—

 
272.3

U.S. government agency obligations
—

 
43.8

 
—

 
—

 
43.8

Agency mortgage-backed obligations
—

 
29.6

 
—

 
—

 
29.6

Derivatives
—

 
480.3

 
—

 
(422.2
)
 
58.1

Commodities leases
—

 
113.7

 
—

 
—

 
113.7

Financial instruments sold, not yet purchased
419.6

 
717.4

 
—

 
(422.2
)
 
714.8

Total liabilities at fair value
$
3,498.7

 
$
762.5

 
$
1.8

 
$
(3,540.8
)
 
$
722.2

(1)
Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.
Realized and unrealized gains and losses are included in ‘principal gains, net’, ‘interest income’, and ‘cost of sales of physical commodities’ in the condensed consolidated income statements.

18

Additional disclosures about the fair value of financial instruments that are not carried on the Condensed Consolidated Balance Sheets at fair value
Many, but not all, of the financial instruments that the Company holds are recorded at fair value in the Condensed Consolidated Balance Sheets. The following represents financial instruments in which the ending balance at December 31, 2019 and September 30, 2019 was not carried at fair value in accordance with U.S. GAAP on the Condensed Consolidated Balance Sheets:
Short-term financial instruments: The carrying value of short-term financial instruments, including cash and cash equivalents, cash segregated under federal and other regulations, securities purchased under agreements to resell and securities sold under agreements to repurchase, and securities borrowed and loaned are recorded at amounts that approximate the fair value of these instruments due to their short-term nature and level of collateralization. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. Under the fair value hierarchy, cash and cash equivalents and cash segregated under federal and other regulations are classified as Level 1. Securities purchased under agreements to resell and securities sold under agreements to repurchase, and securities borrowed and loaned are classified as Level 2 under the fair value hierarchy as they are generally overnight or short-term in nature and are collateralized by equity securities, U.S. Treasury obligations, U.S. government agency obligations, agency mortgage-backed obligations, and asset-backed obligations.
Receivables and other assets: Receivables from broker-dealers, clearing organizations, and counterparties, receivables from clients, net, notes receivables, and certain other assets are recorded at amounts that approximate fair value due to their short-term nature and are classified as Level 2 under the fair value hierarchy.
Payables: Payables to clients and payables to brokers-dealers, clearing organizations, and counterparties are recorded at amounts that approximate fair value due to their short-term nature and are classified as Level 2 under the fair value hierarchy.
Lenders under loans: Payables to lenders under loans carry variable rates of interest and are relatively short-term in duration and, thus, approximate fair value and are classified as Level 2 under the fair value hierarchy.
Senior secured term loan: The senior secured term loan carries a variable rate of interest and thus approximates fair value and is classified as Level 2 under the fair value hierarchy.
Note 6 – Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk
The Company is party to certain financial instruments with off-balance sheet risk in the normal course of its business. The Company has sold financial instruments that it does not currently own and will therefore be obliged to purchase such financial instruments at a future date. The Company has recorded these obligations in the condensed consolidated financial statements as of December 31, 2019 and September 30, 2019 at the fair values of the related financial instruments. The Company will incur losses if the fair value of the underlying financial instruments increases subsequent to December 31, 2019. The total financial instruments sold, not yet purchased of $666.4 million and $714.8 million as of December 31, 2019 and September 30, 2019, respectively, includes $79.6 million and $58.1 million for derivative contracts, respectively, which represented a liability to the Company based on their fair values as of December 31, 2019 and September 30, 2019.
Derivatives
The Company utilizes derivative products in its trading capacity as a dealer in order to satisfy client needs and mitigate risk. The Company manages risks from both derivatives and non-derivative cash instruments on a consolidated basis. The risks of derivatives should not be viewed in isolation, but in aggregate with the Company’s other trading activities. The majority of the Company’s derivative positions are included in the condensed consolidated balance sheets in ‘Deposits with and receivables from broker-dealers, clearing organizations and counterparties, net’, ‘Financial instruments owned, at fair value’, ‘Financial instruments sold, not yet purchased, at fair value’ and ‘Payables to broker-dealers, clearing organizations and counterparties’.

19

Listed below are the fair values of the Company’s derivative assets and liabilities as of December 31, 2019 and September 30, 2019. Assets represent net unrealized gains and liabilities represent net unrealized losses.
 
December 31, 2019
 
September 30, 2019
(in millions)
Assets (1)
 
Liabilities (1)
 
Assets (1)
 
Liabilities (1)
Derivative contracts not accounted for as hedges:
 
 
 
 
 
 
 
Exchange-traded commodity derivatives
$
1,109.3

 
$
1,122.6

 
$
1,437.1

 
$
1,463.4

OTC commodity derivatives
219.5

 
284.0

 
84.2

 
106.2

Exchange-traded foreign exchange derivatives
5.9

 
11.3

 
36.9

 
33.5

OTC foreign exchange derivatives
235.2

 
212.8

 
403.2

 
368.8

Exchange-traded interest rate derivatives
309.6

 
292.8

 
900.1

 
882.0

OTC interest rate derivatives
32.7

 
34.3

 
42.1

 
43.6

Exchange-traded equity index derivatives
197.0

 
129.4

 
758.1

 
700.2

TBA and forward settling securities
5.9

 
4.4

 
9.8

 
6.8

Gross fair value of derivative contracts
2,115.1

 
2,091.6

 
3,671.5

 
3,604.5

Impact of netting and collateral
(1,955.4
)
 
(2,007.8
)
 
(3,581.9
)
 
(3,540.8
)
Total fair value included in 'Deposits with and receivables from broker-dealers, clearing organizations, and counterparties, net'
$
72.5

 
 
 
$
23.1

 
 
Total fair value included in 'Financial instruments owned, at fair value
$
87.2

 
 
 
$
66.5

 
 
Total fair value included in 'Payables to broker-dealers, clearing organizations and counterparties
 
 
$
4.2

 
 
 
$
5.6

Fair value included in 'Financial instruments sold, not yet purchased, at fair value'
 
 
$
79.6

 
 
 
$
58.1

(1)
As of December 31, 2019 and September 30, 2019, the Company’s derivative contract volume for open positions were approximately 8.1 million and 10.6 million contracts, respectively.
The Company’s derivative contracts are principally held in its Commercial Hedging and Clearing and Execution Services segments. The Company assists its Commercial Hedging segment clients in protecting the value of their future production by entering into option or forward agreements with them on an OTC basis. The Company also provides its Commercial Hedging segment clients with option products, including combinations of buying and selling puts and calls. The Company mitigates its risk by offsetting the client’s transaction simultaneously with one of the Company’s trading counterparties or with a similar but not identical exchange-traded position. The risk mitigation of these offsetting trades is not within the documented hedging designation requirements of Topic 815. These derivative contracts are traded along with cash transactions because of the integrated nature of the markets for these products. The Company manages the risks associated with derivatives on an aggregate basis along with the risks associated with its proprietary trading and market-making activities in cash instruments as part of its firm-wide risk management policies. In particular, the risks related to derivative positions may be partially offset by inventory, unrealized gains in inventory or cash collateral paid or received.
The Company has derivative instruments, which consist of TBA securities and forward settling transactions that are used to manage risk exposures in the trading inventory of the Company’s domestic institutional fixed income business. The fair value on these transactions are recorded in ‘deposits with and receivables from or payables to broker-dealers, clearing organizations and counterparties, net’. Realized and unrealized gains and losses on securities and derivative transactions are reflected in ‘principal gains, net’.

20

As of December 31, 2019 and September 30, 2019, these transactions are summarized as follows:
 
December 31, 2019
 
September 30, 2019
(in millions)
Gain / (Loss)
 
Notional Amounts
 
Gain / (Loss)
 
Notional Amounts
Unrealized gain on TBA securities purchased within deposits with and receivables from broker-dealers, clearing organizations and counterparties, net and related notional amounts
$
2.5

 
$
1,283.0

 
$
3.7

 
$
1,778.4

Unrealized loss on TBA securities purchased within deposits with and receivables from broker-dealers, clearing organizations and counterparties, net and related notional amounts
$
(0.1
)
 
$
174.1

 
$
(0.6
)
 
$
234.5

Unrealized gain on TBA securities sold within payables to broker-dealers, clearing organizations and counterparties and related notional amounts
$
0.4

 
$
(280.1
)
 
$
0.9

 
$
(451.6
)
Unrealized loss on TBA securities sold within payables to broker-dealers, clearing organizations and counterparties and related notional amounts
$
(3.7
)
 
$
(2,182.9
)
 
$
(5.9
)
 
$
(2,788.0
)
Unrealized loss on forward settling securities purchased within payables to broker-dealers, clearing organizations and counterparties and related notional amounts
$
(0.6
)
 
$
406.7

 
$
(0.3
)
 
$
1,243.5

Unrealized gain on forward settling securities sold within deposits with and receivables from broker-dealers, clearing organizations and counterparties, net and related notional amounts
$
3.0

 
$
(294.4
)
 
$
5.2

 
$
(581.2
)
(1) The notional amounts of these instruments reflect the extent of the Company's involvement in TBA and forward settling securities and do not represent risk of loss due to counterparty non-performance.
 
 
 
 
 
 
 
The following table sets forth the Company’s net gains from derivative contracts for the three months ended December 31, 2019 and 2018 in accordance with Topic 815. The net gains set forth below are included in ‘Cost of sales of physical commodities’ and ‘principal gains, net’ in the condensed consolidated income statements.
 
Three Months Ended December 31,
(in millions)
2019
 
2018
Commodities
$
18.2

 
$
8.1

Foreign exchange
2.2

 
1.9

Interest rate and equity
(0.4
)
 
(3.3
)
TBA and forward settling securities
(0.9
)
 
(9.3
)
Net gains from derivative contracts
$
19.1

 
$
(2.6
)
Credit Risk
In the normal course of business, the Company purchases and sells financial instruments, commodities and foreign currencies as either a principal or agent on behalf of its clients. If either the client or counterparty fails to perform, the Company may be required to discharge the obligations of the nonperforming party. In such circumstances, the Company may sustain a loss if the fair value of the financial instrument, commodity, or foreign currency is different from the contract value of the transaction.
The majority of the Company’s transactions and, consequently, the concentration of its credit exposure are with commodity exchanges, clients, broker-dealers and other financial institutions. These activities primarily involve collateralized and uncollateralized arrangements and may result in credit exposure in the event that a counterparty fails to meet its contractual obligations. The Company’s exposure to credit risk can be directly impacted by volatile financial markets, which may impair the ability of counterparties to satisfy their contractual obligations. The Company seeks to control its credit risk through a variety of reporting and control procedures, including establishing credit and/or position limits based upon a review of the counterparties’ financial condition and credit ratings. The Company monitors collateral levels on a daily basis for compliance with regulatory and internal guidelines and requests changes in collateral levels as appropriate.
The Company is a party to financial instruments in the normal course of its business through client and proprietary trading accounts in exchange-traded and OTC derivative instruments. These instruments are primarily the result of the execution of orders for commodity futures, options on futures, OTC swaps and options and spot and forward foreign currency contracts on behalf of its clients, substantially all of which are transacted on a margin basis. Such transactions may expose the Company to significant credit risk in the event margin requirements are not sufficient to fully cover losses which clients may incur. The Company controls the risks associated with these transactions by requiring clients to maintain margin deposits in compliance with individual exchange regulations and internal guidelines. The Company monitors required margin levels daily, and therefore may require clients to deposit additional collateral or reduce positions when necessary. The Company also establishes credit limits for clients, which are monitored daily. The Company evaluates each client’s creditworthiness on a case by case basis. Clearing, financing, and settlement activities may require the Company to maintain funds with or pledge securities as collateral with other financial institutions. Generally, these exposures to both clients and exchanges are subject to master

21

netting, or client agreements, which reduce the exposure to the Company by permitting receivables and payables with such clients to be offset in the event of a client default. Management believes that the margin deposits held as of December 31, 2019 and September 30, 2019 were adequate to minimize the risk of material loss that could be created by positions held at that time. Additionally, the Company monitors collateral fair value on a daily basis and adjusts collateral levels in the event of excess market exposure. Generally, these exposures to both clients and counterparties are subject to master netting or client agreements which reduce the exposure to the Company.
Derivative financial instruments involve varying degrees of off-balance sheet market risk whereby changes in the fair values of underlying financial instruments may result in changes in the fair value of the financial instruments in excess of the amounts reflected in the condensed consolidated balance sheets. Exposure to market risk is influenced by a number of factors, including the relationships between the financial instruments and the Company’s positions, as well as the volatility and liquidity in the markets in which the financial instruments are traded. The principal risk components of financial instruments include, among other things, interest rate volatility, the duration of the underlying instruments and changes in foreign exchange rates. The Company attempts to manage its exposure to market risk through various techniques. Aggregate market limits have been established and market risk measures are routinely monitored against these limits.
Note 7 – Allowance for Doubtful Accounts
The allowance for doubtful accounts related to deposits with and receivables from broker-dealers, clearing organizations, and counterparties was $36.9 million as of December 31, 2019 and September 30, 2019. The allowance for doubtful accounts related to receivables from clients was $11.6 million and $11.7 million as of December 31, 2019 and September 30, 2019, respectively. The Company had no allowance for doubtful accounts related to notes receivable as of December 31, 2019 and September 30, 2019.
During the three months ended December 31, 2019, the Company recorded bad debt expense of less than $0.1 million.
During the three months ended December 31, 2018, the Company recorded bad debt expense of $0.3 million. Additionally, during the three months ended December 31, 2018, the Company reached settlements with clients, paying $8.4 million related to demurrage, dead freight, and other penalty charges regarding coal supplied during fiscal 2017. The settlement amount paid was less than the accrued liability for the transactions recorded during fiscal 2017 and fiscal 2018, and accordingly the Company recorded a recovery on the bad debt on physical coal of $2.4 million in the three months ended December 31, 2018.
Note 8 – Physical Commodities Inventory
The Company’s inventories consist of finished physical commodities. Inventories by component of the Company’s Physical Commodities segment are shown below.
(in millions)
December 31,
2019
 
September 30,
2019
Physical Ag & Energy(1)
$
176.4

 
$
144.8

Precious metals - held by broker-dealer subsidiary(2)
24.1

 
7.1

Precious metals - held by non-broker-dealer subsidiaries(3)
49.2

 
77.4

Physical commodities inventory
$
249.7

 
$
229.3

(1) Physical Ag & Energy consists of agricultural commodity inventories, including corn, soybeans, wheat, dried distillers grain, canola, sorghum, coffee, cocoa, cotton, and others. The agricultural commodity inventories are carried at net realizable value, which approximates selling prices in the ordinary course of business, less disposal costs, with changes in net realizable value included as a component of ‘cost of sales of physical commodities’ on the condensed consolidated income statements. The agricultural inventories have reliable, readily determinable and realizable market prices, have relatively insignificant costs of disposal and are available for immediate delivery. Physical Ag & Energy also maintains energy related inventory which is valued at the lower of cost or net realizable value.
(2) Precious metals held by the Company’s subsidiary, INTL FCStone Ltd, a United Kingdom based broker-dealer subsidiary, is measured at fair value, with changes in fair value included as a component of ‘principal gains, net’ on the condensed consolidated income statements, in accordance with U.S. GAAP accounting requirements for broker-dealers.
(3) Precious metals inventory held by subsidiaries that are not broker-dealers are valued at the lower of cost or net realizable value.
The Company has recorded lower of cost or net realizable adjustments for certain precious metals inventory of $1.2 million and $0.5 million as of December 31, 2019 and September 30, 2019, respectively. The adjustments are included in ‘cost of sales of physical commodities’ in the condensed consolidated income statements.

22

Note 9 – Goodwill
The carrying value of goodwill is allocated to the Company’s operating segments as follows:
(in millions)
December 31,
2019
 
September 30,
2019
Commercial Hedging
$
30.3

 
$
30.3

Global Payments
7.6

 
7.6

Securities
8.7

 
8.7

Physical Commodities
4.6

 
4.6

Clearing and Execution
4.3

 
—

Goodwill
$
55.5

 
$
51.2

The Company recorded additional goodwill of $4.3 million during the three months ended December 31, 2019 within the Clearing and Execution operating segment related to the initial purchase price allocation for the acquisition of UOB Bullion and Futures Limited as further discussed in Note 18.
Note 10 – Intangible Assets
The gross and net carrying values of intangible assets as of the balance sheet dates, by major intangible asset class are as follows (in millions):
 
December 31, 2019
 
September 30, 2019
 
Gross Amount
 
Accumulated
Amortization
 
Net Amount
 
Gross Amount
 
Accumulated
Amortization
 
Net Amount
Intangible assets subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
Software programs/platforms
$
5.3

 
$
(3.1
)
 
$
2.2

 
$
5.3

 
$
(3.0
)
 
$
2.3

Client base
22.1

 
(13.1
)
 
9.0

 
22.1

 
(12.5
)
 
9.6

Total intangible assets subject to amortization:
27.4

 
(16.2
)
 
11.2

 
27.4

 
(15.5
)
 
11.9

 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets not subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
Website domains
2.1

 
—

 
2.1

 
2.1

 
—

 
2.1

Business licenses
2.7

 
—

 
2.7

 
2.7

 
—

 
2.7

Total intangible assets not subject to amortization:
4.8

 
—

 
4.8

 
4.8

 
—

 
4.8

Total intangible assets
$
32.2

 
$
(16.2
)
 
$
16.0

 
$
32.2

 
$
(15.5
)
 
$
16.7

Amortization expense related to intangible assets was $0.7 million and $0.6 million for the three months ended December 31, 2019 and 2018, respectively.
As of December 31, 2019, the estimated future amortization expense was as follows:
(in millions)
 
Fiscal 2020 (remaining nine months)
$
2.2

Fiscal 2021
2.9

Fiscal 2022
1.6

Fiscal 2023
1.4

Fiscal 2024 and thereafter
3.1

Total intangible assets subject to amortization
$
11.2


23

Note 11 – Credit Facilities
Committed Credit Facilities
The Company has four committed credit facilities, including a senior secured term loan, under which the Company and its subsidiaries may borrow up to $769.0 million, subject to the terms and conditions for these facilities. The amounts outstanding under these credit facilities carry variable rates of interest, thus approximating fair value. The Company’s committed credit facilities consist of the following:
•
$384.0 million facility available to INTL FCStone Inc. for general working capital requirements. During the three months ended December 31, 2019, additional members were added to the lending syndication increasing the committed amount to $393.0 million. The amended facility is comprised of a $196.5 million revolving credit facility and a $196.5 million Term Loan facility. The Company is required to make quarterly principal payments against the Term Loan equal to 1.25% of the original balance with the remaining balance due on the maturity date. Amounts repaid on the Term Loan may not be reborrowed.
•
$75.0 million facility available to the Company’s wholly owned subsidiary, INTL FCStone Financial Inc., for short-term funding of margin to exchange-clearing organizations. The facility is subject to annual review and guaranteed by INTL FCStone Inc.
•
$260.0 million facility available to the Company’s wholly owned subsidiary, FCStone Merchant Services, LLC, for financing traditional commodity financing arrangements and commodity repurchase agreements. The facility is guaranteed by INTL FCStone Inc.
•
$50.0 million facility available to the Company’s wholly owned subsidiary, INTL FCStone Ltd, for short-term funding of margin to exchange-clearing organizations. The facility is subject to annual review and is guaranteed by INTL FCStone Inc.
Uncommitted Credit Facilities
The Company has a secured, uncommitted loan facility under which INTL FCStone Financial Inc. may borrow up to $75.0 million, collateralized by commodities warehouse receipts, to facilitate U.S. commodity exchange deliveries of its clients, subject to certain terms and conditions of the credit agreement. There were no borrowings outstanding under this credit facility as of December 31, 2019, and September 30, 2019.
The Company has a secured, uncommitted loan facility under which INTL FCStone Financial Inc. may borrow for short term funding of proprietary and client securities margin requirements, subject to certain terms and conditions of the agreement. The uncommitted amount available to be borrowed is not specified, and all requests for borrowing are subject to the sole discretion of the lender. The borrowings are secured by first liens on Company owned marketable securities or client owned securities which have been pledged to the Company. The amounts borrowed under the facilities are payable on demand. There were $16.7 million and zero in borrowings outstanding under this credit facility as of December 31, 2019, and September 30, 2019, respectively.
The Company has secured, uncommitted loan facilities under which INTL FCStone Financial Inc. may borrow up to $100.0 million for short term funding of proprietary and client securities margin requirements, subject to certain terms and conditions of the agreement. The borrowings are secured by first liens on Company owned marketable securities or client owned securities which have been pledged to the Company. The amounts borrowed under the facilities are payable on demand. There were no borrowings outstanding under this credit facility as of December 31, 2019 and September 30, 2019.
The Company has a secured, uncommitted loan facility under which FCStone Merchant Services, LLC can borrow up to $20.0 million to facilitate the financing of inventory of commodities and other products or goods approved by the lender in its sole discretion, subject to certain terms and conditions of the loan facility agreement. The loan facility is collateralized by a first priority security interest in goods and inventory of FCStone Merchant Services, LLC that is (a) either located outside of the U.S. and Canada or in transit to a destination outside the U.S. or Canada and (b) acquired with any extension of credit (whether in the form of a loan or by the issuance of a letter of credit) under the loan facility. The amounts borrowed under the facilities are payable on demand. There were $0.7 million and $3.4 million in borrowings outstanding under this credit facility as of December 31, 2019, and September 30, 2019, respectively.
Note Payable to Bank
The Company has a loan from a commercial bank, secured by equipment purchased with the proceeds. The note is payable in monthly installments, ending in March 2020. The note bears interest at a rate per annum equal to LIBOR plus 2.00%.

24

The following table sets forth a listing of credit facilities, the current committed amounts as of the report date on the facilities, and outstanding borrowings on the facilities as well as indebtedness on a promissory note as of the periods indicated:
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts Outstanding
 
Borrower
Security
Renewal/Expiration Date
 
Total Commitment
 
December 31,
2019
 
September 30,
2019
Committed Credit Facilities
 
 
 
 
 
 
 
 
 
Term Loan
(1)
February 22, 2022
 
$
187.5

 
$
186.7

(2)
$
167.6

 
Revolving Line of Credit
(1)
February 22, 2022
 
196.5

 
—

 
70.0

 
INTL FCStone Inc.
 
 
 
384.0

 
186.7

 
237.6

 
INTL FCStone Financial Inc.
None
April 3, 2020

75.0


—

 
—

 
FCStone Merchants Services, LLC
Certain commodities assets
January 29, 2022
 
260.0

 
121.0

 
128.5

 
INTL FCStone Ltd.
None
April 14, 2020
 
50.0

 
—

 
—

 
 
 
 
 
$
769.0

 
$
307.7

 
$
366.1

 
 
 
 
 
 
 
 
 
 
Uncommitted Credit Facilities
 
 
 
 
 
 
 
 
 
INTL FCStone Financial Inc.
Commodities warehouse receipts and certain pledged securities
n/a
 
n/a

 
16.7

 
—

 
FCStone Merchant Services, LLC
Certain commodities assets
n/a
 
n/a

 
0.7

 
3.4

 
 
 
 
 
 
 
 
 
 
Note Payable to Bank
 
 
 
 
 
 
 
 
 
Monthly installments, due March 2020 and secured by certain equipment