FCStone 10Q 2006 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2006

¨	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 000-51099

FCStone Group, Inc.

(Exact name of registrant as specified in its charter)

Iowa

42-1091210

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

(515) 223-3788

(Address of Principal Executive Offices, including zip code; registrant’s telephone number, including area code)

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) with the Commission, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one:)

Large accelerated filer ¨ Accelerated Filer ¨ Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There is currently no public market for the registrant’s securities. As of April 13, 2006, the registrant had 4,829,679 shares of common stock outstanding.


		Page
PART I –FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Statements of Financial Condition – February 28, 2006 and August 31, 2005		3
Consolidated Statements of Operations – Three and Six Months Ended February 28, 2006 and 2005		4
Consolidated Statements of Cash Flows – Six Months Ended February 28, 2006 and 2005		5
Notes to Consolidated Financial Statements		6
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3.Quantitative and Qualitative Disclosures About Market Risk		22
Item 4.Controls and Procedures		23

PART II –OTHER INFORMATION
Item 1.Legal Proceedings		24
Item 6.Exhibits		25

SIGNATURES		26

Part I

EXPLANATORY NOTE

On April 17, 2006, the Company’s management advised the Audit Committee of the Company’s Board of Directors that it believed the Company was using an incorrect accounting method for the classification of common stock held by the FCStone Group Employee Stock Ownership Plan. Management and representatives of KPMG LLP discussed with the Company’s Audit Committee the application of the accounting methods and, as a result, the Audit Committee determined that pursuant to §210.5-02 (28) of Regulation S-X, shares of its common stock held by the FCStone Group Employee Stock Ownership plan should be classified as “Redeemable common stock held by employee stock ownership plan (ESOP)” on the Company’s Consolidated Statements of Financial Condition as of (i) August 31, 2005, together with the Condensed Statements of Financial Condition as of such date (included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on November 29, 2005, referred to as the “Fiscal Year 2005 Form 10-K”), (ii) November 30, 2005 (included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 13, 2006, referred to as the “First Quarter 2006 Form 10-Q”), and (iii) February 28, 2006 (to be included in the Company’s Quarterly Report on Form 10-Q for the quarter then ended, referred to as the “Second Quarter 2006 Form 10-Q”). Pursuant to §210.5-02 (28), “Redeemable common stock held by employee stock ownership plan (ESOP)” will not be presented as permanent capital with “Stockholders’ equity.”

The reclassification has no impact on the Company’s Consolidated and Condensed Statements of Operation, including net income and earnings per share, and has no impact on assets or liabilities on the Company’s Consolidated and Condensed Statements of Financial Condition. On April 17, 2006, the Audit Committee also concluded that the Company’s previously issued financial statements for the year ended August 31, 2005, the independent registered public accountants’ report thereon, and the financial statements for the quarter ended November 30, 2005 should no longer be relied upon. The Company’s Audit Committee discussed with KPMG LLP the matters referred to in this note.

The Company intends to amend as soon as practicable the Fiscal Year 2005 Form 10-K and the First Quarter 2006 Form 10-Q to restate the applicable Consolidated Statements of Financial Condition to reclassify the redemption value of such shares of approximately $4.5 million from “Stockholders’ equity” to “Redeemable common stock held by employee stock ownership plan (ESOP)”.

Part I. Financial Information

Item 1. Financial Statements

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share amounts)


	February 28 2006			August 31 2005
	(Unaudited)			(Restated)
ASSETS
Cash and cash equivalents
Unrestricted	$	44,282		$	25,145
Restricted		1,449			1,410
Segregated		17,140			10,509
Commodity accounts receivable
Commodity exchanges and clearing organizations – customer segregated, including United States treasury bills and notes		391,172			396,446
Proprietary commodity accounts		23,982			18,028
Customer regulated accounts in deficit secured by U.S. treasury bills and notes		17,730			6,351

Total commodity deposits and accounts receivable		432,884			420,825

Marketable securities, at fair value – customer segregated and other		216,882			192,328
Accounts receivable and advances on grain		127,258			110,246
Notes receivable		23,666			9,632
Inventories – grain, fertilizer, and fuel		38,614			14,605
Exchange memberships and stock, at cost		2,166			1,797
Furniture, equipment, and improvements, net		8,058			8,206
Deferred income taxes		4,413			4,013
Investments in affiliates		1,666			1,726
Investments in other organizations		1,847			1,843
Other assets		8,437			3,237

Total Assets	$	928,762		$	805,522

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Checks written in excess of bank balance	$	—		$	4,880
Commodity and customer regulated accounts payable		605,359			549,200
Trade accounts payable and advances		146,000			129,715
Accrued expenses		22,759			20,764
Notes payable		88,435			36,911
Subordinated debt		3,500			5,500
Obligations under capital leases		3,850			4,125

Total Liabilities		869,903			751,095

Minority interest		4,752			4,755
Redeemable common stock held by employee stock ownership plan (ESOP) (notes 2 and 8)		5,869			4,487
Stockholders’ equity:
Common stock, no par value, authorized 20,000,000, issued and outstanding 4,829,679 shares at February 28, 2006 and 4,828,279 at August 31, 2005		21,538			21,524
Accumulated other comprehensive loss		(4,555	)		(4,555	)
Retained earnings		37,124			32,703

		54,107			49,672
Less maximum cash obligation related to ESOP shares (notes 2 and 8)		(5,869	)		(4,487	)

Total stockholders’ equity		48,238			45,185

Commitments and contingencies (note 7)
Total liabilities and stockholders’ equity	$	928,762		$	805,522

See notes to unaudited consolidated financial statements.

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)


	Three Months Ended February 28				Six Months Ended February 28
	2006		2005		2006		2005
Revenues:
Commissions – commodity futures and options	$	15,569	$	12,143	$	31,046	$	25,662
Service, consulting and brokerage fees		8,444		5,032		15,428		8,029
Clearing and transaction fees		7,950		5,192		15,443		10,264
Interest		4,972		1,684		9,244		2,927
Other		686		1,372		1,166		2,025
Sales of commodities		230,977		320,667		546,192		742,672

Total revenues		268,598		346,090		618,519		791,579

Costs and expenses:
Cost of commodities sold		226,320		315,463		536,935		732,915
Employee compensation and broker commissions		9,983		8,205		19,649		15,959
Pit brokerage and clearing fees		10,877		7,718		21,009		15,500
Introducing broker commissions		4,776		3,002		9,202		6,164
Employee benefits and payroll taxes		2,483		2,109		4,684		3,842
Office, equipment and facilities rent and expenses		1,727		1,448		3,482		3,084
Communications and marketing information		858		861		1,687		1,673
Interest		1,566		755		2,734		1,355
Travel and related		719		586		1,525		1,084
Depreciation		398		369		790		757
Bad debt expense		150		317		405		1,030
Other operating expenses		2,185		2,035		4,490		3,422

Total costs and expenses		262,042		342,868		606,592		786,785

Income before income tax expense and minority interest		6,556		3,222		11,927		4,794
Minority interest		60		416		8		468

Income after minority interest and before income tax expense		6,496		2,806		11,919		4,326
Income tax expense		2,560		1,060		4,600		1,650

Net income	$	3,936	$	1,746	$	7,319	$	2,676

Basic and diluted shares outstanding (note 4)		4,829		4,309		4,829		4,309

Basic and diluted earnings per share	$	0.82	$	0.41	$	1.52	$	0.62

See notes to unaudited consolidated financial statements.

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Six months ended February 28
	2006			2005
Cash flows from operating activities:
Net income	$	7,319		$	2,676
Depreciation and amortization		790			757
Minority interest, net of distributions		(3	)		468
Equity in earnings of affiliates		54			—
Change in commodity accounts receivable/payable, marketable securities and customer segregated funds, net		12,915			(4,265	)
Increase in accounts receivable and advances on grain		(17,012	)		(12,848	)
Increase in inventory – grain, fertilizer, and fuel		(24,009	)		(19,889	)
Increase in other assets		(5,604	)		(91	)
Increase in accounts payable		16,285			34,797
Increase (decrease) in accrued expenses		1,995			(1,103	)

Net cash (used in) provided by operating activities		(7,270	)		502

Cash flows from investing activities:
Purchase of furniture, equipment, and improvements		(642	)		(391	)
Issuance of notes receivable, net		(14,034	)		(9,235	)
Purchase of exchange membership and stock		(369	)		(925	)
Distributions from affiliates		6			—

Net cash used in investing activities		(15,039	)		(10,551	)

Cash flows from financing activities:
(Decrease) increase in checks written in excess of bank balance		(4,880	)		1,689
Proceeds from notes payable, net		51,524			24,518
Proceeds from issuance of redeemable common stock held by ESOP		14			—
Payment for redemption of stock		—			(8	)
Dividends paid		(2,898	)		—
Payment of prior year patronage		—			(1,869	)
Payments under capital lease		(275	)		(275	)
Monies deposited in escrow		(39	)		—
Proceeds from subordinated debt		500			2,000
Payments on subordinated debt		(2,500	)		(2,250	)

Net cash provided by financing activities		41,446			23,805

Net increase in cash and cash equivalents – unrestricted		19,137			13,756
Cash and cash equivalents – unrestricted – beginning of period		25,145			7,943

Cash and cash equivalents – unrestricted – end of period	$	44,282		$	21,699

Supplemental disclosures of cash flow information:
Interest paid	$	2,238		$	1,404

Income taxes paid	$	5,084		$	1,219

Noncash financing activities:
Increase in maximum cash obligation related to ESOP shares	$	1,368			—

See notes to unaudited consolidated financial statements.

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of FCStone Group, Inc. and subsidiaries (the Company) included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and represent the consolidation of all companies in which the Company has a controlling interest. The Company also has minority holdings in three other entities, all of which are carried under the equity method. Certain information and disclosures normally included in comprehensive financial statements, prepared in accordance with U.S. generally accepted accounting principles (US GAAP), have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto to be included in the Company’s amended annual report on Form 10-K/A for the Company’s fiscal year ended August 31, 2005, to be filed with the Securities and Exchange Commission as soon as practicable.

USE OF ESTIMATES

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain amounts, as reported in the prior year’s financial statements, have been reclassified to conform with the current year presentation.

2. RESTATEMENT

The Consolidated Statements of Financial Condition, Stockholders’ Equity and Comprehensive Income, and Cash Flows as of August 31, 2005 and November 30, 2005 and for the periods then ended have been restated to reclassify 448,692 of shares of common stock, owned by the ESOP separate from permanent stockholders’ equity. Management determined that the redemption features for shares held by the ESOP, as of those dates, with a value of $4,486,920, respectively, are not solely within the control of the Company, thus requiring presentation as temporary equity. This restatement has no impact on the Company’s results of operations or compliance with covenants related to any credit facilities for the fiscal year ended August 31, 2005 or three month period ended November 30, 2005.

The following table summarizes the impact of the restatements on the financial statements:


	As previously reported			As restated
	August 31, 2005			August 31, 2005
	(In thousands)
Consolidated Statement of Financial Condition:
Redeemable common stock held by ESOP	$	—		$	4,487

Stockholders’ Equity:
Common stock, no par value		21,524			21,524
Accumulated other comprehensive loss		(4,555	)		(4,555	)
Retained earnings		32,703			32,703
Maximum cash obligation related to ESOP shares		—			(4,487	)

Total stockholders’ equity	$	49,672		$	45,185


	As previously reported			As restated
	November 30, 2005			November 30, 2005
	(In thousands)
Consolidated Statement of Financial Condition:
Redeemable common stock held by ESOP	$	—		$	4,487

Stockholders’ Equity:
Common stock, no par value		21,524			21,524
Accumulated other comprehensive loss		(4,555	)		(4,555	)
Retained earnings		36,086			36,086
Maximum cash obligation related to ESOP shares		—			(4,487	)

Total stockholders’ equity	$	53,055		$	48,568

3. PENSION PLANS

The Company has a noncontributory retirement plan, which is a defined benefit plan that covers substantially all employees. Effective April 1, 2006, such plan was closed to new employees hired subsequent to the April 1, 2006 date. Additionally, the Company has a nonqualified noncontributory retirement plan covering certain executive employees. The Company’s policy is to fund amounts that are intended to provide for benefits attributed to service to date. Pension expense for the three and six month periods ended February 28, 2006 and 2005 for the defined benefit plans consists of the following components:


	Three months ended February 28				Six months ended February 28,
	2006		2005		2006		2005
Service cost	$	510,882	$	427,232	$	1,021,764	$	854,464
Interest cost		328,755		285,950		657,510		571,900
Less expected return on plan assets		306,231		243,076		612,462		486,152
Net amortization and deferral		229,776		109,733		459,552		219,466

Net periodic pension expense	$	763,182	$	579,839	$	1,526,364	$	1,159,678

4. INVENTORIES

Grain inventories are carried at market value, which is net realizable value (NRV). NRV is determined by estimating selling prices in the applicable market location and related costs of disposal in the ordinary course of business. Realized and unrealized gains and losses on futures contracts are credited or charged to current cost of sales.

Fertilizer inventory is recorded at the lower of cost or market using the first-in, first-out method.

Fuel inventory is recorded at the lower of cost or market using the weighted average method. The Company has moved towards offering traditional brokerage services, rather than serving as a principal in fuel sales; as a result the Company held no fuel inventory at February 28, 2006, and does not intend to do so in the future.

A summary of inventories as of February 28, 2006 and August 31, 2005 are as follows:


	February 28, 2006		August 31, 2005
Grain	$	36,558,593	$	13,507,493
Fertilizer		2,055,273		633,293
Fuel		—		464,315

	$	38,613,866	$	14,605,101

5. EARNINGS PER SHARE

Earnings per share has been presented in the accompanying Consolidated Statement of Operations. The calculation of the basic and diluted shares outstanding for the three-month period and six-month period ended February 28, 2005, assumes the shares issued as a result of the restructuring (see Note 8) had been issued and outstanding for the full year.

6. OPERATING SEGMENT INFORMATION

The Company reports its operating segments based on services provided to customers, which includes Commodity and Risk Management Services, Clearing and Execution Services, Grain Merchandising, and Financial Services. The Commodity and Risk Management Services segment offers commodity services to its customers, with an emphasis on risk management using futures, options and other derivative instruments traded on exchanges and through over-the-counter markets. The Clearing and Execution Services segment offers low-cost clearing and direct execution services to commodities firms, fund operators, commodities traders and others. The Grain Merchandising segment acts as a dealer in, and manager of, physical grain and fertilizer in the United States and international markets. The Financial Services segment offers financing and facilitation for customers to finance the purchase of commodities.

Reconciling Amounts represent the elimination of interest income and expense, and commission income and expense between segments. Such transactions are conducted at market prices to more accurately evaluate the profitability of the individual business segments. Additionally, certain assets consisting primarily of commodity deposits and accounts receivable, notes receivable, and amounts due from affiliates between segments have been eliminated.

The following table presents the significant items by operating segment for the results of operations for the three and six month periods ended February 28, 2006 and 2005, respectively, and the balance sheet data as of those dates (in thousands):


	Commodity & Risk Management Services		Clearing & Execution Services		Grain Merchandising		Financial Services			Corporate & Other			Reconciling Amounts			Total
Three Months Ended:

February 28, 2006
Total Revenues	$	19,629	$	18,630	$	223,352	$	7,852		$	(12	)	$	(853	)	$	268,598
Interest Revenue		1,676		2,501		212		1,122			43			(582	)		4,972
Interest Expense		20		73		1,020		946			89			(582	)		1,566
Income (loss) before minority interest and income taxes		5,253		2,822		284		3			(1,806	)		—			6,556
Total Assets		321,891		492,534		106,595		55,807			10,370			(58,435	)		928,762

February 28, 2005
Total Revenues	$	15,500	$	11,892	$	309,026	$	10,096		$	23		$	(447	)	$	346,090
Interest Revenue		530		869		29		395			21			(160	)		1,684
Interest Expense		8		45		516		295			51			(160	)		755
Income (loss) before minority interest and income taxes		2,056		869		807		630			(1,140	)		—			3,222
Total Assets	$	188,942	$	294,194	$	128,222	$	30,703		$	7,221		$	(32,967	)	$	616,315

Six Months Ended:

February 28, 2006
Total Revenues	$	39,378	$	35,880	$	532,312	$	12,403		$	25		$	(1,479	)	$	618,519
Interest Revenue		3,343		4,726		233		1,787			80			(925	)		9,244
Interest Expense		37		154		1,797		1,509			162			(925	)		2,734
Income (loss) before minority interest and income taxes		9,675		5,202		282		(101	)		(3,131	)		—			11,927
Total Assets		321,891		492,534		106,595		55,807			10,370			(58,435	)		928,762

February 28, 2005
Total Revenues	$	38,497	$	23,755	$	711,877	$	18,188		$	42		$	(780	)	$	791,579
Interest Revenue		943		1,589		79		466			40			(190	)		2,927
Interest Expense		24		131		929		370			91			(190	)		1,355
Income (loss) before minority interest and income taxes		3,616		1,725		1,057		564			(2,168	)		—			4,794
Total Assets	$	188,942	$	294,194	$	128,222	$	30,703		$	7,221		$	(32,967	)	$	616,315

7. CONTINGENCIES

Arbitrators Association of London, England, alleging a breach by FGDI, LLC (“FGDI”) of charter party agreements regarding five vessels and seeking to recover damages of $242,655, $230,863, $769,302, $649,031 and $403,167, respectively. Euro-Maritime Chartering alleges that these damages arise from detention and demurrage encountered at China ports with respect to cargos that FGDI sold to Chinese buyers. FGDI does not dispute the demurrage claims, which are estimated to total approximately $690,000. FGDI claims that, under the sales contracts with the Chinese buyers, any detention and demurrage charges were for the account of the buyers. FGDI has collected deposits from the Chinese buyers in the total amount of $669,436, which are being held pending resolution of the detention claims. FGDI intends to vigorously defend the detention claims and believes that it has meritorious defenses. If the claimant prevails on any of the detention claims, or otherwise in amounts above the corresponding deposit, FGDI expects to seek collection of such amounts from the buyers.

On December 13, 2003, Liaoyang Edible Oils filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong alleging a breach of a sales contract by FGDI and seeking to recover damages of $1,125,000, of which $55,475 was not disputed as due under the contract. Liaoyang Edible Oils alleged that these damages arose out of disputes related to the final pricing of the contract. On December 15, 2005 the arbitration panel rendered a decision, dismissing the claim for pricing damages, but also doing its own accounting under the contract, and making an award to claimant of approximately $175,000. Additionally, the award bears interest and arbitration costs of approximately $100,000. A partial award of attorneys’ fees and costs was also rendered in the decision, although this amount is yet to be quantified. FGDI has accrued $250,000 related to this claim, during the current six-month period ending February 28, 2006. On January 3, 2006, the claimant filed an appeal, which under the arbitration rules governing this dispute, is deemed to be a request for a new hearing. FGDI intends to cross appeal as to the amount awarded to the claimant by the arbitration panel.

On December 9, 2004, Xiamen Zhonge Industry Co., Ltd. (Xiamen) filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong. Xiamen’s claim alleges that FGDI breached its duty to accept pricing instructions provided by Xiamen to FGDI. FGDI has submitted a statement of defense and counterclaim. Xiamen has subsequently rescinded its original claim and FGDI expects to receive a modified claim. FGDI intends to vigorously defend this claim.

Management is currently unable to predict the outcome of these claims and, with the exception of the claim in which an arbitration panel has rendered a decision, believes their current status does not warrant accrual under the guidance of Statement on Financial Accounting Standards No. 5,Accounting for Contingencies, since the amount of any liability is not probable. As such, with the exception of the amount recorded as a result of the arbitration panel’s decision, no amounts have been accrued in the financial statements. Management intends to vigorously defend these claims and will continue to monitor the results of arbitration and assess the need for future accruals.

From time to time and in the ordinary course of its business, we are a plaintiff or are a defendant in other legal proceedings related to various issues, including worker’s compensation claims, tort claims and contractual disputes. With the exception of the matters discussed above, we are not aware of other potential claims that could result in the commencement of material legal proceedings. We carry insurance that provides protection against certain types of claims, up to the policy limits of our insurance. In the opinion of management, liabilities, if any, arising from existing litigation and claims will not have a material effect on the Company’s earnings, financial position or liquidity.

8. RESTRUCTURING AND EMPLOYEE STOCK OWNERSHIP PLAN

On March 1, 2005, the voting stockholder/members of the Company approved the restructuring of the Company by terminating the Company’s cooperative status and ending the patronage-based rights accruing to the Company’s members. Pursuant to the restructuring, stockholders and subscribers received on April 15, 2005, 500 shares of new common stock for each fully-paid share of Class A common stock, $5,000 par value, 10,000 shares of new common stock for each fully-paid share of Class B common stock, $100,000 par value, one share of new common stock for each $10.00 of paid subscription and one share of new common stock for each $10.00 par value of preferred stock held. Membership interests in the Company represented by patronage-based rights as of August 31, 2004, were converted on April 15, 2005 into (i) shares of new common stock based on an appraised value and relative patronage; and (ii) subscription rights exercisable at a purchase price of $10.00 per share within 60 days after the distribution of new common stock and subscription rights. The Company distributed 4,310,237 shares of new common stock on April 15, 2005 pursuant to the restructuring. The Company commenced the subscription rights offering on April 15, 2005 and the offering continued until June 29, 2005 with 174,372 shares sold and $1,743,720 of equity raised.

In June 2005, the Company formed an employee stock ownership plan (ESOP) and filed a Form S-8 Registration Statement in order to provide employee incentives and an additional capital infusion to the Company. Generally, employees of the Company or any participating affiliates who meet the criteria defined in the ESOP are eligible. Eligible participants were able to elect to make a one-time irrevocable transfer of a portion of their 401(k) Plan to the ESOP. The amount of the transfer was limited to no more than one-third (1/3) of the eligible participant’s 401(k) Plan account balance. The ESOP intends to operate on a plan year which

corresponds to the calendar year. For plan years beginning after December 31, 2005, the Company will make matching contributions to the ESOP in an amount equal to 50% of each participant’s eligible elective deferral contribution to the 401(k) Plan. Dividends received with respect to shares of Company Stock allocated to participants’ accounts in the ESOP will be credited to such participants’ accounts annually on the basis of the number of shares of Company Stock allocated to each such participant’s account. The initial ESOP stock sale was consummated as of August 26, 2005, with the ESOP purchasing from the Company 448,692 shares of common stock at a purchase price of $10.00 per share, for an aggregate of $4,486,920. An additional 1,400 shares were purchased in the quarter ending February 28, 2006. In the event a terminated plan participant, whether by death, disability, retirement or other termination, desires to sell his or her shares of Company stock, the Company may be required to purchase the shares from the participant at their appraised value. To the extent that shares of common stock held by the ESOP are not readily tradeable, a sponsor must reflect the maximum cash obligation related to those securities outside of stockholders’ equity as a liability. On March 14, 2006, the Company and the ESOP received from Stern Brothers Valuation Advisors the valuation of the Company’s Common Stock as of December 31, 2005, which valued the Common Stock at $13.04 per share for ESOP purposes. The Company and the ESOP obtain an annual valuation in connection with the administration of the ESOP. The annual valuation will have the effect of increasing or decreasing the maximum cash obligation related to ESOP shares. This change in the value of ESOP shares is adjusted through stockholders’ equity, and therefore has no impact on net income in the Consolidated Statement of Operations.

As of February 28, 2006, the shares held by the ESOP, fair value and maximum cash obligation were as follows:


Shares held by the ESOP		450,092
Fair value per share	$	13.04
Maximum cash obligation	$	5,869,200

9. SUBSEQUENT EVENTS

On March 9, 2006, the Company sent a redemption notice to Sowood Commodity Partners Fund LP (Sowood), informing them of our intention to redeem their minority ownership interest in FCStone Merchant Services, LLC, in accordance with the Limited Liability Company Agreement. On April 7, 2006, the Company received acknowledgment from Sowood regarding the acceptance of the redemption. The effective time of the redemption is the close of business on March 31, 2006, with the payment of the redemption price to be made on April 28, 2006. The Company estimates the redemption price, which will equal Sowood’s book value at March 31, 2006, to be approximately $900,000.

On March 28, 2006, FGDI entered into a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with CoBank, ACB (as lender and agent) (“CoBank”). The Credit Agreement amends and restates the Master Loan Agreement, dated March 25, 2005, between FGDI and CoBank, and the related Revolving Credit Supplement and Revolving Term Loan Supplement in their entirety. The Credit Agreement provides a revolving credit line and term loan advances in the aggregate not to exceed $68.0 million. The revolving credit line terminates on March 28, 2007 and the term loan advance line terminates on March 28, 2008. Amounts due under the Credit Agreement are secured by all of FGDI’s present and future assets, including inventories, accounts receivable, equipment, real property, fixtures, farm products and intangible assets. The Credit Agreement requires FGDI to comply with certain financial covenants, including compliance with minimum net worth, working capital, financial ratios, and base borrowing limits. Advances under the Credit Agreement will be used to finance FGDI’s working capital requirements in the ordinary course of business.

On April 19, 2006, the Company was informed that a grain merchandising customer located in Montgomery, Alabama, with whom we have outstanding current receivables of approximately $900,000, filed Chapter 11 bankruptcy on April 18, 2006. The Company is currently reviewing our legal alternatives and position in the bankruptcy proceedings, and consequently, a reasonable estimate of the potential loss cannot be made at this time. No provision has been recorded at this time and the Company will continue to assess this as additional information becomes available.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a commodities risk management and trading company headquartered in West Des Moines, Iowa. Risk management is designed to identify and then limit and control the potential factors that could negatively impact the success of a business. Our chief function is to research, recognize and quantify the potential commodity risks involved in our customers’ operations, then plan and execute programs that effectively mitigate those risks by capping operational expenses and maximizing margin opportunities. While the Company’s initial business was centered on the risks of grain marketing of domestic elevators, today’s programs are designed to serve a much broader commodity spectrum including grain and livestock, dairy, the entire energy complex, ingredient users, food processors, and other commodity end-users. The Company utilizes all of the tools of the commodities marketplace, including exchange-traded futures and options, cash and physical commodity trades, and over-the-counter (“OTC”) derivatives to provide risk management services to our customers for their businesses. We also offer direct execution clearing services to commodities firms, traders, fund operators and others. Our grain merchandising operations facilitate the movement of grain from an originator to fill the demand of an end-user. This approach offers opportunities to add value for our customers by merchandising their inventories as far into the marketing pipeline as possible. We also offer financing and facilitation for customers to carry energy, grain and other commodities through sale/repurchase agreements, transactional commodity finance arrangements and processing and tolling arrangements.

Our revenues are derived from: (1) commissions for futures and option trades, (2) service and consulting fees, (3) brokerage mark-ups on over-the-counter and commodities trades, (4) fees for clearing customers’ direct trades, (5) the sale of grain, fuel and other commodities, (6) interest income on margin funds deposited with the various commodity exchanges, and (7) interest and other income from commodity finance transactions. As a service company, our expenses primarily consist of employee compensation and broker commissions and their related fringe benefits and payroll taxes. As commission expenses are directly related to revenues, they are for the most part a variable expense, as are the pit brokerage and clearing fees expense as they are directly related to the number of futures exchange trades. Other significant operating expenses consist of communications, marketing information, travel, office and equipment rent and marketing and promotion.

Recent Developments, Market Trends and Capital

Prior to our conversion from a cooperative, we realized a significant increase in our “nonmember” business revenues, especially over the five years prior to the conversion. This increase is a result of the Company expanding our risk management services into other commodities in addition to our traditional grain marketing base. We expect this trend to continue, as we offer more risk management programs and services to other industries and companies to help them manage their commodity risks. We have also seen a consolidation in the commodity exchange clearing business, which has allowed us to capture additional customers and business.

Customer deposits and accounts receivable related to our Commodity and Risk Management Services and Clearing and Execution Services segments have grown from $127 million at the beginning of FY 2001 to $433 million at February 28, 2006. As these segments continue to grow, we anticipate needing additional regulatory capital to meet Commodity Futures Trading Commission (CFTC) requirements. Because of the need to finance our continued growth, in FY2005 we restructured our company to no longer operate on a cooperative basis (as described in the Registration on Form S-4 filed with the Commission on August 18, 2004, as amended). We exchanged new common stock for the then outstanding common and preferred stock and patronage-based rights of our members. The Company then commenced a subscription rights offering on April 15, 2005, and the offering continued until June 29, 2005, with approximately 174,000 shares sold and $1.7 million of equity raised. In June 2005, the Company formed an employee stock ownership plan (ESOP) in order to provide employee incentives and an additional capital infusion to the Company. The initial ESOP stock sale was consummated in August 2005, raising approximately $4.5 million in new capital. As a result of the exercise of member subscription rights and the initial ESOP investment, the Company raised approximately $6.2 million of new capital. On March 14, 2006, the Company and the ESOP received from Stern Brothers Valuation Advisors the valuation of the Company’s Common Stock as of December 31, 2005, which valued the Common Stock at $13.04 per share.

Although the expansion of our services to other industries and to foreign markets does require additional personnel and related expenses, it does not generally require any significant capital expenditures. Our primary capital concern is meeting CFTC regulatory requirements arising from our anticipated increased business. We expect our new business structure to alleviate most of these concerns. In addition, with the ESOP in place, we also expect to raise an additional $1 million annually in equity capital from ESOP common stock purchases. This amount, plus our ability to better control annual dividends based upon net earnings, should provide the Company with significant annual additions to capital resources. With our new structure in place, we have the flexibility to raise capital in a more timely manner through a stock or debt offering to our current stockholders or others approved by our board of directors. Although we have no current plans for such an offering, management believes that the availability of such capital raising mechanisms will allow the Company to be more flexible and competitive in the future. With such flexibility and with the additional capital from sources noted above and the expected capital resources generated annually through the ESOP and operations, we anticipate meeting our expected capital needs for the next several years.

Sowood Commodity Partners Fund LP (Sowood) owns a minority interest in FCStone Merchants Services, LLC (Merchants). On March 9, 2006, the Company sent a redemption notice to Sowood Commodity Partners Fund LP (Sowood), informing them of our intention to redeem their minority ownership interest in Merchants, in accordance with the Limited Liability Company Agreement. On April 7, 2006, the Company received acknowledgment from Sowood regarding the acceptance of the redemption. The effective time of the redemption is the close of business on March 31, 2006, with the payment of the redemption price to be made on April 28, 2006. The Company estimates the redemption price to be approximately $900,000.

Results of Operations

Three Months Ended February 28, 2006 Compared to Three Months Ended February 28, 2005

Revenues

Revenues totaled $268.6 million for the three month period ended February 28, 2006 compared to $346.1 million for the three-month period ended February 28, 2005, a decrease of $77.5 million or 22.4%. This decrease was primarily a result of a 6.2 million or 9.6% decrease in grain bushels handled, which accounted for a revenue decrease of $85.9 million. Although the $85.9 million decrease in grain sales was a significant amount when compared to total revenues, the cost of grain sold also decreased $85.2 million. The decreased grain sales and cost of sales results from the decline in bushels handled, and had little effect on net income, as the gross profit from grain merchandising remained relatively consistent. As indicated in prior periods, the Company no longer serves as a principal in the direct purchase and sale of physical fuel and has moved towards offering traditional brokerage services. As a result, related physical fuel sales were down $1.4 million as the Company sold 2.0 million fewer gallons than in the prior comparative period. Additionally, transactional commodity revenues in our Financial Services segment were down $2.4 million, as result of the decrease in the number of transactions financed. Commissions were up $3.4 million due to higher trade volume, and clearing and transaction fees were up $2.8 million on higher trade volume in the clearing and execution services segment. Service, consulting and brokerage fees were $3.4 million higher primarily due to increased volume from energy, ethanol, and grain risk management brokerage and fees from both new and existing customers. Interest income was up $3.3 million due to higher short term interest rates, additional customer margin deposits, and increased activity in the grain inventory financing program.

Costs and Expenses

Cost of Commodities Sold. Cost of commodities sold totaled $226.3 million for the three month period ended February 28, 2006 compared to $315.5 million for the three month period ended February 28, 2005, a decrease of $89.2 million or 28.3%. This decrease was primarily a result of lower grain and fuel volumes sold as noted above, with minimal effect on operating income.

Employee Compensation and Broker Commissions. Employee compensation and broker commissions were $10.0 million for the three month period ended February 28, 2006 compared to $8.2 million for the three month period ended February 28, 2005, an increase of $1.8 million or 22.0%. This increase was primarily a result of volume related increased broker commissions due to the higher revenues at both the Company’s commodity and risk management services and clearing and execution services segments and higher incentive compensation due to higher net income.

Pit Brokerage and Clearing Fees. The increase of pit brokerage and clearing fees from $7.7 million for the three month period ended February 28, 2005 to $10.9 million for the three month period ending February 28, 2006 is entirely related to increased commissions and clearing and transaction fee revenues.

Introducing Broker Commissions. Introducing Broker (IB) commissions’ expenses are directly related to the commission income generated by the introducing broker customers of the Company. Such expenses increased from $3.0 million for the three month period ended February 28, 2005 to $4.8 million for the three month period ended February 28, 2006 due primarily to increased commissions from IB customers in the clearing and execution services segment.

Interest. Interest expense increased to $1.6 million for the three month period ended February 28, 2006 from $0.8 million for the three month period ending February 28, 2005 due primarily to higher short term interest rates and higher borrowings as a result of increased activity in the grain inventory financing program and in our grain merchandising operations.

Other Operating Expenses. Other operating expenses were $8.5 million for the three month period ended February 28, 2006 compared to $7.7 million for the three month period ended February 28, 2005, an increase of $0.8 million. This increase was primarily a result of an increase in the Company’s employee benefits and payroll taxes of $0.4 million, office, equipment, and facilities rent and expenses of $0.3 million, travel expense of $0.1 million, and insurance costs of $0.2 million. Offsetting these increases was a $0.2 million decrease in bad debt expense.

Income Tax Expense. Our provision for income taxes for the three-month period ended February 28, 2006 increased over 2005, due to higher income before income tax expense in the three month period ended February 28, 2006. The effective tax rate was 39.4% in 2006 and 37.8% in 2005.

Operations by Segment

Three Months Ended February 28, 2006 Compared to Three Months Ended February 28, 2005.

Our reportable operating segments consist of Commodity and Risk Management Services, Clearing and Execution Services, Grain Merchandising, Financial Services and Corporate and Other. We include the earnings of equity affiliates that are closely associated with our operating segments in the respective segment’s net income. Segment amounts exclude revenues, expenses and equity earnings not specifically identifiable to segments. These amounts are included in the Corporate and Other segment.

We prepared the financial results for our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We have allocated certain common expenses among segments differently than we would for stand-alone financial information prepared in accordance with U.S. generally accepted accounting principles (GAAP). Segment income before income taxes may not be consistent with measures used by other companies. The accounting policies of our operating segments are the same as those applied in the consolidated financial statements.

The following table and discussion provides a summary of each segment’s revenues, costs and expenses, and income before taxes; and compares the operating results for the three months ended February 28, 2006 and 2005 (in thousands):


	Commodity & Risk Management Services		Clearing & Execution Services		Grain Merchandising		Financial Services			Corporate & Other			Reconciling Amounts			Total
Three Months Ended:
February 28, 2006
Revenues	$	19,629	$	18,630	$	223,352	$	7,852		$	(12	)	$	(853	)	$	268,598
Costs and Expenses		14,376		15,808		223,068		7,849			1,794			(853	)		262,042
Income (loss) before minority interest and income taxes		5,253		2,822		284		3			(1,806	)		—			6,556
Minority interest		—		—		85		(25	)		—			—			60
Income (loss) before income taxes		5,253		2,822		199		28			(1,806	)		—			6,496
Grain bushels sold						58,042
Gross profits on grain sales						4,230

February 28, 2005
Revenues	$	15,500	$	11,892	$	309,026	$	10,096		$	23		$	(447	)	$	346,090
Costs and expenses		13,444		11,023		308,219		9,466			1,163			(447	)		342,868
Income (loss) before minority interest and income taxes		2,056		869		807		630			(1,140	)		—			3,222
Minority interest		—		—		242		174			—			—			416
Income (loss) before income taxes		2,056		869		565		456			(1,140	)		—			2,806
Grain bushels sold						64,238
Gross profit on grain sales						4,894

Commodity and Risk Management Services. Our Commodity and Risk Management Services segment offers commodity services to our customers, with an emphasis on risk management using futures, options and other derivative instruments.

Revenues totaled $19.6 million for the three-month period ended February 28, 2006 compared to $15.5 million for the three month period ended February 28, 2005, an increase of $4.1 million or 26.5%. This increase was despite lower fuel sales of approximately $1.4 million as the Company is moving more towards traditional brokerage services, rather than serving as a principal in fuel sales. Service, consulting and brokerage fees were up $3.6 million due to increased energy, ethanol, and grain related risk management brokerage and additional customers on our fee based risk management program. Commissions were up $0.8 million as a result of increased volume from both new and existing customers primarily as a result of a larger fall 2005 grain crop and higher grain prices. Interest income increased by $1.1 million due to higher short term interest rates and higher customer margin deposits over the prior year period.

Operating expenses of $14.4 million for the three month period ended February 28, 2006, increased compared to $13.4 million for the three month period ended February 28, 2005, an increase of $1.0 million. The reduced volume of fuel sold of 2.0 million gallons caused a $1.4 million decrease. This was offset by increases in employee compensation and broker commissions and related benefits of $1.6 million due primarily to higher broker commissions on increased futures commissions and service, consulting and brokerage fees. Introducing broker commissions also increased $0.3 million due to higher commission revenue.

Clearing and Execution Services. The Clearing and Execution Services segment offers low-cost clearing and direct execution services to commodities firms, fund operators, commodities traders and others.

Revenues totaled $18.6 million for the three month period ended February 28, 2006 compared to $11.9 million for the three month period ended February 28, 2005, an increase of $6.7 million or 56.3%. This increase was primarily due to higher commissions of $2.3 million and higher transaction fees of $2.8 million due to volume increases as a result of volatility in the energy related commodities. Trade volume increased from 8.1 million contracts in 2005 to 10.5 million contracts in 2006. Interest income also increased $1.6 million due to higher short term interest rates and much higher customer margin deposits for this segment.

Operating expenses were higher at $15.8 million for the three month period ended February 28, 2006 compared to $11.0 million for the three month period ended February 28, 2005, an increase of $4.8 million. The increase was primarily a result of volume related additional pit brokerage and clearing fees of $3.2 million and introducing broker commissions of $1.3 million, and increased salaries, wages and related benefits of $0.2 million.

Grain Merchandising. The Grain Merchandising segment acts as a dealer in, and manager of, physical grain and fertilizer through a majority interest in FGDI, LLC. FGDI acts as a grain dealer in the United States and international markets, primarily in Canada, Latin America and the Far East and also manages a pool of grain originated by a group of elevators in Texas.

Gross profit was $4.2 million and $4.9 million for the three-month periods ended February 28, 2006 and 2005, respectively. The gross profit was lower, primarily due to the decrease in bushels merchandised from 64.2 million for the three month period ended February 28, 2005 to 58.0 million for the three-month period ended February 28, 2006.

Operating expenses were $4.5 million for the three month period ended February 28, 2006 and $4.4 million for the three month period ended February 28, 2005 an increase of $0.1 million. The increase in operating expenses was a net result of an increase in the Company’s office, equipment, and facilities rent and expenses of $0.2 million and interest expense of $0.5 million, offset by the decrease in the Company’s bad debt expense of $0.3 million, and legal and professional fees of $0.3 million.

Financial Services. The Financial Services segment offers financing and facilitation for customers to carry commodities through the use of sale/repurchase agreements whereby we purchase grain evidenced by warehouse receipts subject to a simultaneous agreement to resell such grain to the seller at a later date. Additionally, we offer clients specialized financing through transactional commodity finance arrangements and processing and tolling arrangements. Historically, this segment was primarily entering into sale/repurchase agreements whereby it purchased grain evidenced by warehouse receipts. In late 2004, this segment, through the recently formed subsidiary FCStone Merchant Services, LLC (Merchants), began engaging in similar transactions in energy, grain and other commodities, as well as transactions where it shares in commodity profits with customers in exchange for financial support.

Revenues totaled $7.9 million for the three month period ended February 28, 2006 compared to $10.1 million for the three month period ended February 28, 2005, a decrease of $2.2 million. This decrease is primarily the result of a $2.4 million decrease in revenue from financing arrangements the Company offers through Merchants, initiating transactional commodity financing arrangements in energy, grain and other commodities. Although this decrease in revenue from financing arrangements was significant amount when compared to total revenues, the cost of commodities sold also decreased $2.4 million, resulting in a minimal effect on net income. Additionally, Merchants had a $0.7 million decrease in revenue from commodity profit sharing transactions during the three month period ended February 28, 2006. Offsetting this decrease was a $0.7 million increase in interest revenue from increased activity in the grain inventory financing program, and a $0.1 million increase in rental income from subleased railcars.

Operating expenses totaled $1.5 million for the three month period ended February 28, 2006 compared to $0.8 million for the three month period ended February 28, 2005, an increase of $0.7 million. This increase is primarily the result of a $0.7 million increase in interest expense from increased activity in the grain inventory financing program.

Corporate and Other. The Corporate and Other segment generated insignificant amounts of revenue, comprised of interest income for the three month period ended February 28, 2006 and 2005. Operating expenses increased $0.6 million for the three month period ended February 28, 2006 over the three months ended February 28, 2005 primarily due to higher employee incentive compensation and additional staff and related benefits.

Six Months Ended February 28, 2006 Compared to Six Months Ended February 28, 2005

Revenues

Revenues totaled $618.5 million for the six-month period ended February 28, 2006 compared to $791.6 million for the six-month period ended February 28, 2005, a decrease of $173.1 million or 21.9%. This decrease was primarily a result of a 17.8 million or 12.5% decrease in grain bushels handled, which accounted for a revenue decrease of $179.5 million. Although the $179.5 million decrease in grain sales was a significant amount when compared to total revenues, the cost of grain sold also decreased $178.7 million. The decreased grain sales and cost of sales results from the decline in bushels handled, and had little effect on net income, as the gross profit from grain merchandising remained relatively consistent. As indicated in prior periods, the Company no longer serves as a principal in the direct purchase and sale of physical fuel and has moved towards offering traditional brokerage services. As a result, related physical fuel sales were down $5.8 million as the Company sold 6.6 million fewer gallons than in the prior comparative period. Additionally, transactional commodity revenues in our Financial Services segment were down $6.6 million, as result of the decrease in the number of transactions financed. Commissions were up $5.4 million due to higher trade volume, and clearing and transaction fees were up $5.2 million on higher trade volume in the clearing and execution services segment. Service, consulting and brokerage fees were $7.4 million higher primarily due to increased volume from energy, ethanol, and grain risk management and brokerage fees from both new and existing customers. Interest income was up $6.3 million due to higher short term interest rates, additional customer margin deposits, and increased activity in the grain inventory financing program.

Costs and Expenses

Cost of Commodities Sold. Cost of commodities sold totaled $536.9 million for the six month period ended

February 28, 2006 compared to $732.9 million for the six month period ended February 28, 2005, a decrease of $196.0 million or 26.7%. This decrease was primarily a result of lower grain and fuel volumes sold as noted above, and had minimal effect on net income.

Employee Compensation and Broker Commissions. Employee compensation and broker commissions were $19.6 million for the six month period ended February 28, 2006 compared to $16.0 million for the six month period ended February 28, 2005, an increase of $3.6 million or 22.5%. This increase was primarily a result of volume related increased broker commissions due to the higher revenues at both the Company’s commodity and risk management services and clearing and execution services segments and higher incentive compensation due to higher net income.

Pit Brokerage and Clearing Fees. The increase of pit brokerage and clearing fees from $15.5 million for the six month period ended February 28, 2005 to $21.0 million for the six month period ending February 28, 2006 is entirely related to increased commissions and clearing and transaction fee revenues.

Introducing Broker Commissions. Introducing Broker (IB) commissions’ expenses are directly related to the commission income generated by the introducing broker customers of the Company. Such expenses increased from $6.2 million for the six month period ended February 28, 2005 to $9.2 million for the six month period ended February 28, 2006 due primarily to increased commissions from IB customers in the clearing and execution services segment.

Interest. Interest expense increased to $2.7 million for the six month period ended February 28, 2006 from $1.4 million for the six month period ending February 28, 2005 due primarily to higher short term interest rates and higher borrowings as a result of increased activity in the grain inventory financing program and in our grain merchandising operations.

Other Operating Expenses. Other operating expenses were $17.1 million for the six month period ended February 28, 2006 compared to $14.9 million for the six month period ended February 28, 2005, an increase of $2.2 million. This increase was primarily a result of an increase in the Company’s employee benefits and payroll taxes of $0.8 million, office, equipment and facilities rent and expenses of $0.4 million, travel and related expenses of $0.4 million, advertising and promotion costs of $0.5 million, insurance costs of $0.2 million, railcar lease costs of $0.2 million, and professional fees of $0.1 million. Offsetting these increases was a $0.6 million decrease in bad debt expense.

Income Tax Expense. Our provision for income taxes for the six-month period ended February 28, 2006 increased over 2005, due to higher income before income tax expense in the six month period ended February 28, 2006. The effective tax rate was 38.6% in 2006 and 38.1% in 2005.

Operations by Segment

Six Months Ended February 28, 2006 Compared to Six Months Ended February 28, 2005.

The following table and discussion provides a summary of each segment’s revenues, costs and expenses, and income before taxes; and compares the operating results for the six month period ending February 28, 2006 with the six month period ended February 28, 2005 (in thousands) :


	Commodity & Risk Management Services		Clearing & Execution Services		Grain Merchandising		Financial Services			Corporate & Other			Reconciling Amounts			Total
Six Months Ended:
February 28, 2006
Revenues	$	39,378	$	35,880	$	532,312	$	12,403		$	25		$	(1,479	)	$	618,519
Costs and Expenses		29,703		30,678		532,030		12,504			3,156			(1,479	)		606,592
Income (loss) before minority interest and income taxes		9,675		5,202		282		(101	)		(3,131	)		—			11,927
Minority interest		—		—		85		(77	)		—			—			8
Income (loss) before income taxes		9,675		5,202		197		(24	)		(3,131	)		—			11,919
Grain bushels sold						124,697
Gross profits on grain sales						8,496

February 28, 2005
Revenues	$	38,497	$	23,755	$	711,877	$	18,188		$	42		$	(780	)	$	791,579
Costs and expenses		34,881		22,030		710,820		17,624			2,210			(780	)		786,785
Income (loss) before minority interest and income taxes		3,616		1,725		1,057		564			(2,168	)					4,794
Minority interest		—		—		317		151			—			—			468
Income (loss) before income taxes		3,616		1,725		740		413			(2,168	)		—			4,326
Grain bushels sold						142,505
Gross profit on grain sales						9,275

Commodity and Risk Management Services. Revenues increased $0.9 million between the comparative periods, despite the company’s much lower fuel sales of $4.7 million, as the company is moving more towards brokering fuel rather than acting as a principal. Although fuel sales declined $10.4 million from 2005, the margin on such fuel sales increased $0.2 million. Service, consulting and brokerage fees were up $7.5 million due to increased energy, ethanol, and grain risk management brokerage and additional customers on our fee based risk management program. Commission revenues increased $1.3 million as higher grain commodity prices and a larger fall 2005 crop year resulted in increased volume in 2006. As a result of higher short-term interest rates and customer margin deposits, interest income increased $2.4 million in 2006.

Costs and expenses decreased $5.2 million between the comparative periods. As noted above, much lower fuel volume accounted for $10.6 million of such decreased costs and expenses, offset by a $3.9 million increase in employee compensation and broker commissions, due primarily to the volume related increased commission revenues and service, consulting, and brokerage fee revenues.

Clearing and Execution Services. Revenues increased $12.1 million between comparative periods. Commission revenues were up $3.8 million and transaction fees were $5.2 million higher on increased volume due primarily to energy commodities price volatility. Trade volume increased from 16.0 million contracts in 2005 to 21.1 million contracts in 2006. Interest income increased by $3.1 million as a result of higher short-term interest rates and customer margin deposits.

Costs and expenses increased $8.6 million between comparative periods. This increase was primarily due to volume-related clearing fees of $5.6 million, pit brokerage of $0.2 million, introducing broker commissions of $2.1 million, and related increased employee compensation of $0.3 million.

Grain Merchandising. Grain sales decreased $179.5 million, primarily as a result of a 12.5% decrease in the volume of grain bushels sold during the first six months of fiscal 2006. Additionally, the lower volumes resulted in a decrease in gross profit on the sales of $0.8 million. Directly related to the decrease in the volume of bushels sold, the cost of grain sales decreased $178.7 million

Operating expenses were $8.9 million for the six month period ended February 28, 2006 compared to $9.0 million for the six month period ended February 28, 2005, a decrease of $0.1 million. This decrease was primarily due to a decrease in bad debt expense of $1.0 million, offset by a $0.9 million increase in interest costs.

Please see additional disclosure under the heading “Liquidity and Capital Resources.”

Financial Services. Revenues totaled $12.4 million for the six month period ended February 28, 2006 compared to $18.2 million for the six month period ended February 28, 2005, a decrease of $5.8 million. The decrease is primarily the result of a $6.6 million decrease in revenue from purchase and sales financing arrangements, the Company offers through FCStone Merchant Services, LLC, in energy and other commodities. Although this decrease in revenue from financing arrangements was a significant amount when compared to total revenues, the cost of commodities sold also decreased $6.5 million, resulting in a minimal effect on net income. Additionally, there was a $0.7 million decrease in revenues earned as a profit-share in financing arrangements. These decreases in revenues were offset by increased interest income of $1.3 million, resulting from increased activity in the grain inventory warehouse receipts program and higher short term interest rates.

Costs and expenses also decreased between the comparative periods by $5.1 million, primarily as a result of the decrease in the cost of commodities sold discussed above. Offsetting the decrease in the cost of commodities sold, is the increase in interest expense of $1.1 million, resulting from additional borrowings related to the increased activity in the grain inventory warehouse receipts program and higher short term interest rates. Additionally, railcar lease costs have increased $0.2 million.

Corporate and Other. The Corporate and Other segment generated insignificant amounts of revenue, comprised of interest income for the six month periods ended February 28, 2006 and 2005. Operating expenses were $3.2 million for the six month period ended February 28, 2006 and $2.2 million for the comparable six month period ended February 29, 2005, an increase of $1.0 million primarily a result of increased employee incentive plan accruals due to the higher net income and additional staff.

Liquidity and Capital Resources

The following table presents a summary of cash flows for the six months ended February 28, 2006 compared to the six months ended February 28, 2005.


	Six months ended February 28,
	2006			2005
	(dollars in thousands)
Cash Flows provided by (used in):
Operating Activities	$	(7,270	)	$	502
Investing Activities		(15,039	)		(10,551	)
Financing Activities		41,446			23,805

Net Increase in cash and cash equivalents - unrestricted	$	19,137		$	13,756

Our principal sources of liquidity are from internally generated funds from operations and from borrowings under various credit facilities. We expect that cash on hand, internally generated cash flow, and available credit from third-party financing agreements will provide sufficient funds for current operating and recurring cash needs (including working capital, capital expenditures and debt repayments) into the foreseeable future. We have approximately $419 million available under current credit agreements. While there is no guarantee that we will be able to replace current credit agreements when they expire, we expect to be able to do so.

Cash and cash equivalents increased $19.1 million in the six months ended February 28, 2006 and $13.8 million in the six months ended February 28, 2005.

Cash Flows from Operations

In the commodities industry, companies’ trading activities are reported in the operating section of the statement of cash flows. Due to the potential volatility in the commodities market, wide fluctuations in the balance of customer segregated funds may exist from day-to-day. As a result of this volatility, cash flows from operations may fluctuate positively or negatively at the end of a reporting period.

The Company used in its operations, cash of $7.3 million for the six-month period ended February 28, 2006, as compared to generating cash of $0.5 million from operations for the six-month period ended February 28, 2005, primarily due to changes in the following:

•

Commodity accounts receivable/payable and marketable securities for customer segregated funds and other decreased by $12.9 million during the six-month period ended February 28, 2006, primarily due to slightly reduced customer margin deposits with the company as a result of lower margin requirements on grain commodities by the exchanges. In contrast, commodity accounts receivable/payable and marketable securities for customer segregated funds and other increased by $4.3 million during the six-month period ended February 28, 2005.

•

Accounts receivable and advances on grain increased by $17.0 million during the six-month period ended February 28, 2006 primarily due to increases in receivables on our OTC transactions and receivables in our grain merchandising segment. Accounts receivable and advances on grain increased by $12.8 million during the six-month period ended February 28, 2005, also primarily due to increases in receivables on our OTC transactions and receivables in our grain merchandising segment.

•

Inventories of grain, fertilizer, and fuel increased by $24.0 million during the six-month period ended February 28, 2006. Inventories of grain, fertilizer, and fuel increased by $19.9 million during the six-month period ended February 28, 2005. The variance is primarily due to the increase in grain bushels held in inventory. During the six-month period ended February 28, 2006, grain inventory bushels increased by 3.6 million to 7.4 million bushels. During the six-month period ended February 28, 2005, grain inventory bushels increased by 3.5 million to 6.4 million bushels. Additionally, fertilizer inventory increased by $1.4 million to $2.1 million during the six-month period ended February 28, 2006, whereas fertilizer inventory was minimal in the prior comparative period. The Company held no fuel inventory at February 28, 2006, as it has moved towards offering traditional brokerage services, rather than serving as a principal in fuel sales, compared to fuel inventory of $3.1 million at February 28, 2005.

•

Accounts payable increased by $16.3 million during the six-month period ended February 28, 2006, primarily due to increased customer deposits on OTC transactions, offset by a decrease in payables related to grain merchandising, primarily due to the timing of inventory purchases and related freight costs. Accounts payable increased by $34.8 million during the six-month period ended February 28, 2005, primarily due to increased customer deposits on OTC transactions, as well as, the timing of payments for commodity purchases and freight costs within our grain merchandising and financial services segments;

Cash Flows from Investing Activities

The Company used in its investing activities, cash of $15.0 million and $10.6 million for the six-month periods ended February 28, 2006 and 2005, respectively, primarily due to the issuance of notes receivable associated with the increased activity of the grain inventory financing program within the financial services segment.

Cash Flows from Financing Activities

The Company had cash provided by financing activities of $41.4 million for the six-month period ended February 28, 2006 primarily due to drawing down on our lines of credit available within our grain merchandising and

financing services segments, offset by dividend payments and partial repayment of subordinated debt. The Company had cash provided by financing activities of $23.8 million for the six-month period ended February 28, 2005 primarily due to drawing down on our lines of credit available within our grain merchandising and financing services segments, offset by patronage payments.

The Company has substantial lines of credit available and annual cash flow from operations to support continued additional growth in each segment of our operations. See, “—Financing Activities.” In addition, the Company generated $4.5 million in additional capital as a result of the initial sale of stock to the ESOP, which was consummated in August 2005. The Company’s subscription offering, which was commenced on April 15, 2005 and continued until June 29, 2005, raised an additional $1.7 million. These transactions have provided substantial capital expected to be used primarily to meet expected CFTC regulatory capital requirements as a result of our increased growth in the Commodity and Risk Management Services and the Clearing and Execution Services segments of our business. Such additional capital also enabled us to increase our lines of credit above previous levels.

An expansion of the grain facility located in Mobile, Alabama was placed in partial service in October 2004. This facility is reported under a capital lease with the Alabama State Docks. The expansion was constructed under a design/build type of contract and is financed by an offering of $5.5 million in industrial development revenue bonds. On October 15, 2004, after major construction was complete, but before acceptance of the project, the foundation of one of the four bins subsided during initial bin filling operations, causing significant damage to the affected bin, its foundation and other structures. Negotiations for recovery and remediation with potentially responsible parties have been undertaken. In November 2005, a claim for certain resulting damage to the facility against FDGI’s own insurer was settled for $570,500. The Company expects to use these funds to cover expected costs in repairing equipment that was damaged. Such settlement does not cover the damage to the underlying foundation, the costs of remediating any foundation defects, or loss of use or other consequential damages. Negotiation has failed to resolve the issues with other responsible parties, and a lawsuit to recover remediation costs, loss of use damages and other damages has been commenced in state court in Mobile, Alabama. FGDI intends to vigorously pursue such litigation to seek a full recovery of all of its damages.

In view of the subsidence incident, FGDI delayed placing the directly affected bin and two of the other new bins, which were of similar construction, into service. The fourth bin, which was constructed on a pre-existing foundation, has been in full service without known problem. Engineering investigations have been undertaken into the cause of the problem and proposals for alternative forms of remediation have been obtained. After considering available information, FGDI has proceeded with additional testing which involves partial use of the three affected binds. This testing is being conducted under controlled engineering conditions designed to limit the risk of another subsidence incident. Such testing has been successful to date yielding data that will be used to help confirm the causes of the problem.

Financing Activities. The Company maintains a number of lines of credit to support operations. A summary of such lines is noted in the following table:


Creditor	Renewal/Expiration Date	Use	Amount Available			Amount Outstanding at February 28, 2006
Deere Credit, Inc.	March 1, 2007	Margin Calls	$	40.8		$	—
Deere Credit, Inc.	March 1, 2007	Repurchase Agreements		96.0			35.6
Deere Credit, Inc.	December 1, 2006	Subordinated Debt for Regulatory Capital		7.0			2.0
Deere Credit, Inc.	October 1, 2006	General Corporate		6.2			5.2

Total Deere			$	150.0		$	42.8
CoBank, ACB	March 28, 2007	Grain Merchandising	$	68.0	*	$	28.3
CoBank, ACB	March 28, 2008	Grain Merchandising		8.0	*		—
CoBank, ACB	June 30, 2006	OTC & Fuel Operations		15.0			—
CoBank, ACB	May 1, 2006	Repurchase Agreements		75.0			4.0

Total CoBank			$	158.0		$	32.3
Harris Bank	January 1, 2007	Margin Calls	$	15.0		$	—
AFG Trust Finance Limited	May 25, 2006	Grain Merchandising	$	20.0		$	5.5
Industrial Revenue Bonds (Capitalized Lease Obligations)	Annual payments to 2013	Mobile, Alabama facility additional storage	$	5.5		$	3.9
Sowood Commodity Partners Fund, LP.	March 4, 2006	Junior, secured revolving credit facility—Financial Services operations	$	30.0		$	—
Fortis Capital Corp.	Demand	Financial Services operations	$	20.0		$	6.9
RZB Finance, LLC	Demand	Financial Services operations	$	8.0		$	2.6
UFJ Bank Limited	Demand	Financial Services operations	$	10.0		$	—
Subordinated Debt	June 30, 2006	Regulatory Capital	$	1.8		$	1.5
Long-term Note	Monthly payments for 8 years	NYMEX seat	$	0.5		$	0.3

*	Grain merchandising’s CoBank revolving credit line and term loan advances in the aggregate cannot exceed $68.0 million.

All of our credit facilities include financial covenants and the failure to comply with any such covenants could result in the debt becoming payable on demand. The Company was in compliance with all debt covenants at February 28, 2006 and expects to remain in compliance in the future.

We carry significant open futures positions on behalf of our customers in the Commodity and Risk Management Services and the Clearing and Execution Services segments of our business. The above lines of credit in place of margin calls are rarely used, but necessary to cover any abnormal commodity market fluctuations and the margins calls they may produce. With the Company and customer funds on deposit and the available credit lines noted above, management believes we have adequate capital reserves to meet any foreseeable market fluctuations based upon current commodity market activities.

Our Grain Merchandising segment has a $68.0 million line of credit with CoBank and a $20.0 million line of credit with AFG Trust Finance available to finance its operations. The segment can also utilize part of the Deere Credit repurchase agreement line to carry inventories when considered appropriate. As this segment of our business carries significant accounts receivable and inventory, the CoBank line is utilized to a great extent.

Our Financial Services segment has a $96.0 million line of credit with Deere Credit, Inc. as of March 1, 2006, an increase of $50.0 million subsequent to February 28, 2006, and a $75.0 million line of credit with CoBank, ACB available to finance its grain inventory repurchasing program. This program’s demand tends to fluctuate, therefore, these lines of credit are utilized to a great extent.

Seasonality and Fluctuations in Operating Results

We generally experience seasonality in our operations with the first quarter typically being our strongest period as a result of the U.S. grain harvest, however with lower commodities prices this fall our volume was not as strong as in prior years. Also, with global political factors and their effect on the commodities markets, we are seeing more frequent trading volume spikes throughout the year.

Other Matters

Critical Accounting Policies and Estimates.In preparing its most recent annual report on Form 10-K, the Company disclosed information about critical accounting policies and estimates the Company makes in applying its accounting policies. We have made no changes to the methods of application or the assumptions used in applying these policies from those as disclosed in the most recent annual report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk

As part of our trading activity, we utilize futures and option contracts offered through regulated commodity exchanges to reduce risk. The Company follows the policy of hedging its grain transactions and physical fuel through the use of cash and futures contracts in order to minimize risk due to market fluctuations. Inventories and purchases and sales contracts are hedged to the extent practical so as to arrive at a net commodity position within the formal position limits set by the Company and deemed prudent for each commodity. The Company is exposed to risk of loss in the market value of net open commodity positions, which are calculated by aggregating grain inventories and grain subject to contract for purchase and sale. The following table presents the number of bushels in inventory, under purchase and sales contracts, and in futures positions by commodity at February 28, 2006:


	Bushels (in thousands)
	Corn		Soybeans		Wheat		Oats & Barley
Inventory	1,848		1,939		3,543		59
Purchase Contracts	32,238		9,458		10,256		883
Sale Contracts	(11,427	)	(7,501	)	(2,874	)	(692	)
Futures Long	487		—		—		—
Futures Short	(23,287	)	(4,019	)	(10,550	)	(65	)

Net Open Position	(141	)	(123	)	375		185

Bushel information is used to calculate the net open commodity position, which is sensitive to changes in commodity prices. Open cash and futures contracts for the purchase and sale of grain are reported at market value; therefore the net open commodity position multiplied by the year-end market price approximates fair value.

A hypothetical 10% increase (or decrease) in the market price of corn from the February 28, 2006 level of $2.40 per bushel would result in a gain (or loss) to future earnings of $(34,000).

A hypothetical 10% increase (or decrease) in the market price of soybeans from the February 28, 2006 level of $5.99 per bushel would result in a gain (or loss) to future earnings of $(74,000).

A hypothetical 10% increase (or decrease) in the market price of wheat from the February 28, 2006 level of $4.53 per bushel would result in a gain (or loss) to future earnings of $170,000.

A hypothetical 10% increase (or decrease) in the market price of oats and barley from the February 28, 2006 level of $1.91 per bushel would result in a gain (or loss) to future earnings of $35,000.

Interest Rate Risk

The Company manages interest expense using fixed and floating rate debt. The debt instruments are carried at amounts approximating estimated fair value. Of our normal borrowing, greater than 90% of the outstanding balance at February 28, 2006 has a variable interest rate, and except for the industrial revenue development bonds associated with the Mobile facility, practically all of our borrowing is on a short-term basis.

Short-term debt used to finance inventories and receivables is represented by notes payable within thirty days or less so that the blended interest rate to the Company for all such notes approximates current market rates.

In the financing of grain, as interest rates increase, the spread between future option months generally becomes wider, allowing larger incomes in grain margins to offset the potential increases in interest expense. A portion of the outstanding balance of variable rate debt is used to finance certain notes receivable to customers in the financial services segment. The interest charged on the notes receivable is also at a variable rate, therefore eliminating the interest rate risk on that debt. Of the variable rate debt, the average outstanding balance subject to interest rate risk of the past year was $43.7 million. A hypothetical 100 basis point increase (or decrease) in interest rates would result in a (loss) or gain to future earnings of $437,000, assuming a similar debt level throughout FY2006.

The risk on variable rate long-term debt associated with the capital lease obligation in the amount of $3.9 million is not material to the financial statements. We believe the risk associated with these borrowings will not have an adverse effect on our financial position, results of operations or cash flows.

Foreign Currency Risk

The Company conducts most of its business in U.S. dollars but does have minor risk regarding foreign currency fluctuations. The Company hedges foreign currency risk using futures contracts on U.S. exchanges to the extent practicable on those transactions involving foreign currency. Foreign currency fluctuations do, however, impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by the Quarterly Report (the “Evaluation Date’). They have concluded that, as of the Evaluation Date, these disclosure controls and procedures were effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities and would be disclosed on a timely basis.

Changes in internal control over financial reporting. As of the end of the period covered by this Quarterly Report on Form 10-Q, there were no changes in the Company’s internal control over financial reporting that occurred during the three months ended February 28, 2006 that have materially affected or are reasonable likely to materially affect the Company’s internal control over financial reporting.

Limitations on the effectiveness of controls. The Company’s management, including the CEO and CFO, does not expect that the Company’s disclosure controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Institution of internal controls in compliance with Section 404 of Sarbanes-Oxley. As a result of the restructuring described above, the Company will be subject to Section 404 of the Sarbanes-Oxley Act of 2002 and regulations promulgated thereunder. We are currently in the process of instituting an internal controls program that will meet the requirements of Section 404 and the applicable regulations. Our CEO and CFO currently believe that the internal controls program will be implemented by the SEC’s extended compliance deadline, which will require the Company to meet the requirements of Section 404 by the end of its 2007 fiscal year. We believe, however, that any deficiencies uncovered by our 404 compliance process will not affect the accuracy of our financial statements included in this report.

Part II. Other Information

Item 1. Legal Proceedings

On August 21, 2003, August 21, 2003, September 23, 2003, October 16, 2003, and July 16, 2004, Euro-Maritime Chartering, Inc. filed five separate claims under the arbitration facility established by the London Maritime Arbitrators Association of London, England, alleging a breach by FGDI, LLC of charter party agreements regarding five vessels and seeking to recover damages of $242,655, $230,863, $769,302, $649,031 and $403,167, respectively. Euro-Maritime Chartering alleges that these damages arise from detention and demurrage encountered at China ports with respect to cargos that FGDI sold to Chinese buyers. FGDI does not dispute the demurrage claims, which are estimated to total approximately $690,000. FGDI claims that, under the sales contracts with the Chinese buyers, any detention and demurrage charges were for the account of the buyers. FGDI has collected deposits from the Chinese buyers in the total amount of $669,436, which are being held pending resolution of the detention claims. FGDI intends to vigorously defend the detention claims and believes that it has meritorious defenses. If the claimant prevails on any of the detention claims, or otherwise in amounts above the corresponding deposit, FGDI expects to seek collection of such amounts from the buyers.

On December 9, 2004, Xiamen Zhonge Industry Co., Ltd. (Xiamen) filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong. Xiamen’s claim alleges that FGDI breached its duty to accept pricing instructions provided by Xiamen to FGDI. FGDI has submitted a statement of defense and counterclaim. Xiamen has subsequently rescinded its original claim, and FGDI expects to receive a modified claim. FGDI intends to vigorously defend this claim.

Management is currently unable to predict the outcome of these claims and, with the exception of the claim in which an arbitration panel has rendered a decision, believes their current status does not warrant accrual under the guidance of Statement on Financial Accounting Standards No. 5,Accounting for Contingencies, since the amount of any liability is neither probable nor reasonably estimable. As such, with the exception of the amount recorded as a result of the arbitration panel’s decision, no amounts have been accrued in the financial statements. Management intends to vigorously defend these claims and will continue to monitor the result of arbitration and assess the need for future accruals.

Item 1A. Risk Factors

Not applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3. Defaults upon Senior Securities

Not applicable

Item 4. Submission of Matters to a Vote of Security Holders

At the Company’s Annual Meeting of Stockholders held on January 5, 2006, Bruce Krehbiel, Tom Leiting and Doug Derscheid were re-elected as Class I directors and Brent Bunte was re-elected as the Class II director, each to hold office until the Annual Meeting of Stockholders to be held after the Company’s fiscal year 2008 and until their respective successors are duly elected and qualified. The terms of the directorships held by Jack Friedman, Eric Parthemore, Dave Reinders, Rolland Svoboda, David Andresen and Kenneth Hahn did not expire this year, and these individuals continued as directors after the meeting. At the Annual Meeting of Stockholders, the selection of KPMG LLP as independent registered public accounting firm of the Company for fiscal year 2006 was ratified by the stockholders. Votes cast on these issues were as follows:


	For	Against/Withheld	Abstain
Bruce Krehbiel	2,161,376	16,455	26,517
Tom Leiting	2,161,177	16,924	26,517
Doug Derscheid	2,161,177	16,924	26,517
Brent Bunte	2,161,177	16,924	26,517
	For	Against/Withheld	Abstain
KPMG LLP	2,078,527	5,045	120,776

Item 5. Other Information

None


Item 6.		Exhibits

10.1		Revolving Credit, Term Loan and Security Agreement, dated March 28, 2006, by and between FGDI, L.L.C. and CoBank ACB, as lender and agent.

10.2		Amended and Restated Revolving Statused Operating Note, dated February 23, 2006 between FCStone Financial, Inc. and Deere Credit, Inc.

31.1		Certification of Paul G. Anderson, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Robert V. Johnson, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	FCStone Group, Inc.
	Registrant

April 19, 2006	By:	/s/ Paul G. Anderson
		Paul G. Anderson
		Chief Executive Officer

April 19, 2006	By:	/s/ Robert V. Johnson
		Robert V. Johnson
		Chief Financial Officer

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. sophomore Avg

FCStone (FCSX) Inactive 10-Q2006 Q2 Quarterly report

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