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Article Excerpt
OPERATOR: Hello. This is the chorus call operator. Welcome to the FCStone second quarter 2009 earnings conference call. As a reminder, all participants will be in a listen-only mode. There will be an opportunity for to you ask questions at the end of today's presentation. (Operator Instructions). The conference is being recorded. At this time, I would like to turn the conference over to FCStone's Chief Financial Officer, Bill Dunaway. Sir, please begin.
BILL DUNAWAY, CFO, EVP, FCSTONE GROUP, INC.: Great. Thank you, operator and good morning everyone. I would like to welcome you to FCStone's fiscal second quarter 2009 earnings conference call.
Shortly before the market opened today, FCStone issued a press release reporting its earnings for the fiscal second quarter of 2009. Press release is available on our website at www.fcstone.com. Additionally we're conducting a live Webcast of this call, which will also be available on our website after the call's conclusion. During today's call Pete Anderson our President and CEO will first provide an overview of our results and commentary on our business in the current market environment. I will then provide details on the financial performance of the second quarter and we will then open the call up for some Q&A. Please note that today's conference call is copyrighted material of FCStone and cannot be rebroadcast without the Company's express written consent.
I would also like to remind you that during the course of this call management will make projections and other forward-looking remarks regarding the future events or the future financial performance of the Company. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we may believe or that we believe may affect our financial condition, results of operations, business strategy and financial needs. It's important to note that such statements about FCStone's estimated or anticipated future results, prospects or other non-historical facts are forward-looking statements, may reflect FCStone's current perspective of the existing trends, and information as of today's date.
FCStone disclaims any intent or obligation to update these forward-looking statements except as expressly written and required by law. Actual results can be affected by inaccurate assumptions including the risks, uncertainties and assumptions in the Company's filings with the Securities and Exchange Commission. In light of these risks, uncertainties and assumptions, the forward-looking statements in this earnings call may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. When you consider these forward-looking statements, you should keep in mind these risk factors and other cautionary statements during the earnings call.
I would now like to turn the call over to Pete Anderson, our President and CEO.
PETE ANDERSON, PRESIDENT AND CEO, FCSTONE GROUP, INC.: Thank you, Bill. I would first like to welcome and thank everyone for joining our call this morning. I'm happy to be representing FCStone for its fiscal 2009 second quarter results conference call. The second quarter was an important one for FCStone in pointing the way forward for the Company. Our underlying core commodity risk management consulting business is still performing well despite the difficult commodity market environment. That environment is characterized by the liquidation of physical inventories, reduction of credit capacity to carry forward financial positions and inventories, and significantly lower prices and volumes.
As we work through this period, our customer relationships are sound and FCStone's capital base is healthy with adequate capital to meet all regulatory requirements and still maintain excess capital capacity greater than the same period a year ago. Also, we recently brought a final resolution to an energy trading account loss with the transfer of the position and associated economic risk to a third party. This loss was recorded within our clearing and execution segment and I'll have a few comments on that later and Bill will cover the financial details.
Revenue net of commodities sold for the second quarter of fiscal 2009 was $53.5 million, which was down 41% from $91.2 million in the second quarter of fiscal 2008. Including the recognized loss from the energy account, the loss for the second quarter of fiscal 2009 is $50.2 million or $1.80 per diluted share. That compares to second quarter fiscal 2008 net income of $12.1 million or $0.42 per diluted share. Excluding the loss from the liquidation of the energy trading account, the net earnings for the second quarter of fiscal 2009 would have been $200,000 net of tax or $0.01 per diluted share.
As you look at FCStone's performance now and into the future, it's important to recognize that our core business of commodity risk management has historically represented 75% of our profits. The driving force generating these profits has been and continues to be our team of risk management consultants who are truly the foundation upon which our success is built. These consultants are responsible for developing customer relationships, analyzing the commodity risk of our customers, developing strategies to mitigate this risk, and executing these strategies at the direction of the customers. It is this network of risk management consultants and their unique brand of expertise that drives the relationship of our customer base and the reputation of FCStone.
While the current market conditions and the market limit some customer's access to credit and restrict overall market liquidity, the fact is that the need to manage the risk of price, position, logistics and execution and production and consumption is as great in our traditional market segments of agriculture and energy as we have ever experienced. For perspective, 2008 corn production was the second largest crop produced in history at over 12 billion bushels. The second largest crop was 2007's 13 billion bushel corn crop. The 2008 figure will reflect in FCStone's volumes in the remainder of fiscal 2009 and serves as evidence that some of these markets continue to operate at near historic levels of production.
Meanwhile, the energy division of FCStone also has seen continued growth, particularly in liquid fuels, as reflected in energy OTC derivative volumes. In these verticals our focus is to provide our traditional mid-tier core grain and energy clientele with the most appropriate instruments, strategies and platforms for them to manage their risk. And we're also doing the same in newer markets beyond our traditional four. These include renewable energy, international markets, food service, weather, livestock, forest products, carbon credits, and foreign exchange.
Internationally, we're just beginning to see some encouraging signs in some key markets. In Latin America we continue to expand our presence with our consumption clientele as well as throughout Brazil on the production side of the market in grain, sugar, renewable energy and foreign exchange. Brazil in particular...
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