Good day, everyone, and welcome to the INTL FCStone Inc. Third Quarter 2013 Earnings Call. Today's call is being recorded. At this time, I'd like to turn the call over to Mr. Bill Dunaway. Please go ahead, sir.

Good morning. My name is Bill Dunaway, CFO of INTL FCStone. Welcome to our earnings conference call for the fiscal third quarter ending June 30, 2013. After the market closed yesterday, we issued a press release reporting our results for the fiscal third quarter. This release is available on our website at www.intlfcstone.com, as well as a slide presentation, which we will refer to on this call in our discussions of the quarterly and year-to-date results. You'll need to sign on to the live webcast in order to view the presentation. Both presentation and an archive of the webcast will be available on our website after the call's conclusion. Before getting underway, I'd like to cover a couple of housekeeping items. On these conference calls and in the management discussion portions of our SEC filings, we present financial information on a non-GAAP basis in order to take into account mark-to-market adjustments in our physical commodity product lines, which are included in both our CRM and Other segments. As discussed on previous conference calls and in our filings, the requirements of accounting principles generally accepted in the U.S., which I'll refer to as GAAP, to carry derivatives at fair market value but physical commodities inventory at the lower of cost or market value may have a significant temporary impact on our reported earnings. Under GAAP, gains and losses on commodities inventory and derivatives, which the company intends to be offsetting, are often recognized in different periods. Additionally, in certain circumstances, GAAP does not require us to reflect changes in estimated values of forward commitments to purchase and sell commodities. For this reason, we believe that the GAAP numbers do not reflect the commercial results of our physical commodity product lines, and therefore, the company as a whole. Instead, we assess all…

Thanks, Bill, and good morning, everyone. Q3 2013 was unfortunately, again, a difficult quarter for us with disappointing results overall. We were pleased with the revenue gains in our Securities, Foreign Exchange, Clearing and Execution and Other segments business, but this was more than offset by a decline in revenues from our largest Commodity segment. The decline in revenues in the Commodity segment was due to lower activity levels in our ags business and the exit of -- from our physical base metals business. Our operating costs remained stable. First of all, we are pleased to see double-digit growth in our global payments and FX business, as well as our Securities business. Our Other segment consisting primarily of our physical ags business and our asset management activities in Argentina nearly doubled with its revenues for the quarter. In aggregate, these segments grew quarterly revenues of 37% or $11 million compared to a year ago and for the 9-month period, the increase was 27% or $24 million. On the other hand, this good performance was more than offset by a reduction of 22% or $15 million in the quarterly revenues of our Commodity segment. For the 9 months to date, the Commodity segment was down 13% or $23 million. There were 2 major reasons for this decline in our Commodity segment. First of all, as we usually discuss the last quarter, the drought conditions that have persisted in the U.S. for the last year have -- year or so have resulted in very lower inventories being held, which required hedging. Additionally, low prices and in some instances, backwardations, have not induced producers to lock in longer-term pricings. The result of this has been a reduction in overall customer activity in these segments, both on the exchange rate of products and even…

Thank you, Sean. I'd like to start my discussion with the review of the quarterly results, and we'll refer to the fifth page of the slide presentation, entitled Quarterly Financial Dashboard. This slide lays out the quarterly operating results, as well as some related balance sheet information in comparison to the prior year period, as well as in some cases, the internal target, which management has for our operating results. Adjusted operating revenues were $119.7 million for the current period, which represents a 4% decrease from the $124.7 million in the third quarter of 2012. Adjusted operating revenues increased 3% from the $116.6 million recorded in the second quarter of 2013. Adjusted operating revenues declined in the core CRM segment. However, all of the segments of the company experienced growth in adjusted operating revenues in the third quarter as compared to the prior year. Looking at revenues on a segmental basis, adjusted operating revenues in our Commodity and Risk Management Services segment decreased 22% from $67.9 million in the prior year period to $53 million in the third quarter of 2013. Adjusted operating revenues decreased 4% as compared to the second quarter revenues of $55 million. Our CRM segment is further broken down into 3 product lines: soft commodities, precious metals and base metals. Starting with soft commodities, operating revenues decreased 18% from $54.6 million in the third quarter of 2012 to $44.5 million in the current period. Second quarter 2013 revenues were $42.8 million. Exchange traded contract volumes decreased 7% and OTC contract volumes decreased 27%, respectively, over the prior year period. Despite the decrease in exchange traded contract volumes, primarily driven by diminished hedging volume from our domestic grain customers, as well as a result of lower industry volumes following the drought of 2012, commissioning and clearing fee…

Thanks, Bill. Overall, we're pleased with the strong growth we are seeing in all of our business units with the exception of the grains business, which is being subject to unusual cyclical factors. We believe that these drought-related factors will reverse, and we should see a more normal revenue pattern in the coming year for our core grains business. We have now built out our unique global platform that allows us to provide high-quality execution to midsized customers and list the futures, options, swaps, structured products, foreign exchange, global payments and securities. Having essentially completed the bulk of this build out over the last 3 to 5 years, we are now seeing our costs flattened and even decline in certain areas, while our core revenues continue to grow, notwithstanding the cyclical factors mentioned earlier. Our businesses' margins in excess of 50%, and we should start to see some real operational leverage as we continue to push for incremental revenue growth and maintain tight controller costs. With that, I'd like to turn it back to the operator to open for the question-and-answer session, if there are any questions, please.

[Operator Instructions] We'll go first to Bill Jones of Singular Research.

I wanted to ask -- you have mentioned the negative impact from the base metals business that was closed? And I was wondering if you could quantify that at all in terms of the results.

Yes. I think we did it at -- and it is in our queue. So I'll hand over to Bill to give you the exact number.

Yes, for the quarter, it was $5.4 million pretax loss in the base metals business -- the physical base metals business, and that's a little over $8 million for the full 9 months fiscal year.

On a pretax basis.

On a pretax basis.

Okay, okay. I can do the math there on a EPS basis. You also have mentioned how the corn, the drought had impacted results and that I think we all -- you had mentioned how the corn crop is supposedly much better this year. When do we start seeing -- when does that start impacting aggregately the business?

Yes. Well, just to be clear, there are, I guess, 2 parts to the revenue source we get in the grains business. The first part is when the grain hits the elevator network, they have to hedge -- and so they buy all the grain then they're sitting on it, and then they kind of sell it over time. So at the moment, the inventory levels in the grain elevators are at kind of historic lows. So there's just nothing to hedge, right? The timing of when that comes in is obviously normally around the harvest season, which is the fall. But the farmers often can sit on the crop if they don't like where current prices are. So if they are not desperate for the cash, they can sometimes hold that corn back a little bit. So there is a fair amount of variability as to that exact timing. All things being equal, if the farmers do not have a lot of liquidity and the prices are at the high side, they would basically deliver all that corn in pretty quickly in the fall. If the farmers are very flush and they don't like the prices, they may hold on to that through winter time. So that's kind of the timing on that part of it. Additionally, through the grain elevator network, the end producers will sometimes hedge forward their prices even though they haven't delivered in, and that's the second source of hedging revenue for us. So irrespective of what the kind of inventory levels are, the grain elevator just can do some hedging with us that they in turn are doing with the end farmers. And that is typically induced by forward prices. So the farmer may start to hedge even this next year's production if he…

Yes. All indications are for a record crop, as you mentioned. So I mean, generally speaking, that should reverse that backwardation, which is certainly a positive for the coming year.

And that could be, for us, the big swing factor. You've gone from a situation where you've had the lowest inventory of all time to potentially as having the highest inventory of all time, potentially so...

Right, makes sense. And then finally, in terms of -- I know with just overall volatility impacts the business, are you seeing more or less volatility currently, say, than the last quarter?

I would say first, it's sporadic by market. I would say, I mean, softs have the -- with the run our structured products and swaps business. But I'd say, generally, commodity levels are probably a bit higher than they were [indiscernible].

Looking at the third fiscal quarter, certainly, April and May, from a volatility perspective, were relatively quiet. And June, there was across-the-board, in most markets, more volatility. And we saw that coming through in our revenue stream. I mean, June was by far the best month of the quarter for us. So you're right about that correlation. The market volatilities have probably continued in July to be better than April and May, but not as strong as June. And nobody knows what it looks like in the next couple of months. It's part of the business.

The part of the volatility that helped our grains business, and I mentioned this in my part of the call, was the exchange rate movement down in Brazil. That's become a very volatile market for us, and a weakening of the Brazilian currency has helped our producers in Brazil because they're effectively achieving a higher price. So they have now started to lock in to some forward pricing. So that was helpful to us.

All right. Operator, let's take any other questions, are there?

We have no other questions.

Okay. So let's wrap it up then. So thanks very much for calling in. We appreciate it, and we will speak to you again in 3 months or so. Thanks.

This does conclude today's conference. We thank you for your participation.