November 4, 2004
Mail Stop 0409
Paul G. Anderson
President and Chief Executive Officer
FCStone Group, Inc.
2829 Westown Parkway, Suite 200
West Des Moines, Iowa 50266
Re: FCStone Group, Inc.
Amendment No. 1 to
Registration Statement on Form S-4 Filed October 6, 2004
Registration No. 333-118342
Dear Mr. Anderson:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Pro Forma Financial Information, page 9
1. Include a reconciliation that clarifies how you derived the
"Estimated August 31, 2004 Stock Amounts." Disclose the number of
historical shares and the related value as derived from your
historical financial statements and reconcile to the estimated
amounts presented in this table.
2. Revise to disclose how you allocated the assumed appraisal
value
to each class. It appears the percentages used to allocate the
appraisal value differ from the percentages used to allocate the
estimated additional stock value distributed.
Risk Factors, page 12
Changes in the process for nomination and election of directors
resulting from the restructuring could affect the results of
director
elections.
3. Please specifically reference the change discussed on page 28
to
the nominating procedure whereby results of the nominating ballot
procedure only indicate the preferred candidate of the
stockholders.
Tax-free treatment for the restructuring is not assured.
4. Please revise the first sentence to clarify that McDermott Will
&
Emery has delivered a "will qualify" opinion. The current
disclosure
suggests that they have delivered a "should qualify" opinion.
The Restructuring, page 21
Appraisal, page 33
5. Supplementally, please tell us why you will not obtain a
completed
appraisal prior to the time you mail the proxy statement to your
investors. We may have further comment.
6. Please briefly describe your method of selecting an appraiser.
Refer to Item 1015(b)(3) of Regulation S-K.
7. Please briefly describe the availability of the appraisal to
your
stockholders. Refer to Item 1015(c) of Regulation S-K.
Dividend Policy, page 35
8. Please supplementally provide the analysis relied on by the
board
for its belief that you will pay an annual dividend of at least
$0.50
per share following the reorganization.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 47
Recent Developments, Market Trends and Capital, page 47
9. Please provide supplemental support for your statement that
consolidation in the clearing business has allowed you to capture
additional customers and business.
Liquidity and Capital Resources, page 57
10. Please disclose whether the reduction in your revolving credit
facility will have any impact on your business.
Market Risk Disclosures-Commodity Price Risk, page 60
11. Please confirm that the table reflects data as of August 31,
2004.
Executive Compensation, page 57
Summary Compensation Table, page 65
12. We note the additional disclosure on page 67 regarding your
Long
Term Incentive Plan. Please expand the summary compensation table
to
include any amounts paid under this plan in your most recently
completed fiscal year. Refer to Item 402(b)(2)(iv) of Regulation
S-
K.
Pension Plan, page 66
13. Please briefly describe the material provisions of the
supplementary pension plan for your chief executive officer.
Security Ownership of the Company Before the Restructuring, page
69
14. Please supplementally provide the beneficial ownership table
on a
pro forma basis using the same assumptions used in the
distribution
table on page 10.
Financial Statements
General
15. Update the financial statements in accordance with Rule 3-
12(d)
of Regulation S-X.
Consolidated Statements of Operations, page F-3
16. We do not find your response to comments 64 persuasive. We
remain
of the view that in order to avoid investor confusion, "cost of
grain
and fuel sold" should be presented as a separate line item within
costs and expenses. Refer to Rule 5-03 of Regulation S-X.
Note 1 Summary of Significant Accounting Policies and Related
Matters
Inventories, page F-7
17. We note your response to comment 71. Revise the note to
disclose
the impact of the rescission of EITF 98-10 and application of EITF
02-3 on the financial statements. Also, disclose how you complied
with the implementation guidance of the new consensus.
Open Contracts and Hedge Policy-Grain, page F-7
18. We note your response to comment 73. We were unable to find
the
referenced section in the AICPA Audit and Accounting Guide for
Audits
of Agricultural Producers and Agricultural Cooperatives. Revise
your
response as appropriate.
Note 1 Summary of Significant Accounting Policies and Related
Matters
Organization, page F-20
19. Expand your response to comment 81 to clearly explain your
basis
for consolidating FCStone Merchant Services, LLC, and FGDI as
well,
and how you determined that you control these entities given the
rights held by your joint venture partners. Also clarify how you
determined these were not variable interest entities under FIN
46(R).
Note 6 Sale of Accounts Receivable, page F-23
20. It is unclear why this disclosure is not included in the
audited
financial statements as well. Revise to disclose when you began to
enter into this type of agreement.
21. Given the provisions of your arrangement, explain to us
supplementally why receivables participating in your bank program
qualify for sale treatment rather than as a secured borrowing
under
paragraph 15 of SFAS 140.
22. We note your revised disclosures in response to comment 66.
Further revise the note to explain what "limited recourse" means
and
the circumstances under which you would file claim under the
insurance policies versus exercising your repurchase option
relating
to the defaulted receivables. Also clarify how you account for
the
repurchased assets under paragraph 55 of SFAS 140.
23. We note that you continue to service receivables subsequent to
the sale of these assets. Have you recorded a servicing asset or
liability for this obligation? Why or why not? Refer to
paragraphs
16 and 63 of SFAS 140 and expand your disclosure as appropriate.
In
addition, how are you accounting for the retained interests, if
any?
Refer to paragraph 58 of SFAS 140.
24. It is unclear why you report the discount paid as "interest
expense" rather than gain or loss on sale of receivables. Also, it
is
unclear the specific point in time that you charge the discount
paid
to operations. Refer to paragraph 11 of SFAS 140 and revise the
disclosure as appropriate.
Exhibit 5.1
25. We note that counsel`s opinion assumes that the Articles of
Restatement are duly authorized and approved. This language
suggests
that counsel is assuming authorization and approval by the board
of
directors. It is not appropriate for counsel to assume facts that
are readily ascertainable and are material to the opinion. Please
provide a revised opinion that omits this assumption.
26. It is not appropriate for Dickinson, Mackaman, Tyler & Hagen,
P.C. to assume that the shares are issued in accordance with the
Articles of Restatement (which include your amended and restated
articles of incorporation). Such an assumption substantially
diminishes the value of the opinion. Please revise accordingly.
Exhibit 8.1
27. The limitation on reliance in the next-to-last paragraph is
not
appropriate because stockholders voting on the transaction must be
able to rely on the tax opinion. Please provide a revised tax
opinion that removes this limitation on reliance.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Jorge Bonilla at (202) 942-1993 or Cicely
Luckey, Reviewing Staff Accountant, at (202) 942-1975 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Michael McTiernan, Attorney-Advisor, at
(202) 824-5445, or me at (202) 942-1960 with any other questions.
Sincerely,
Karen J. Garnett
Assistant Director
cc: Craig L. Evans (via facsimile)
Shook, Hardy & Bacon L.L.P.
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FCStone Group, Inc.
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