FIRSTCITY FINANCIAL CORP

CIK:0000828678|SEC Filings

Discontinued Operations

3 Months Ended

Mar. 31, 2013

(3) Discontinued Operations

On January 22, 2013, FirstCity Business Lending Corporation, an indirect wholly-owned subsidiary of the Company, entered into a stock purchase agreement with CS ABL Holdings, LLC to sell all of the common stock and the preferred stock of American Business Lending, Inc. (“ABL”) to CS ABL Holdings, LLC, a direct wholly-owned subsidiary of CapitalSpring Finance Company, LLC, for a total estimated purchase price of approximately $11.2 million. At December 31, 2012, the carrying value of the Company’s investment was $7.5 million. The sale is subject to the approval of the U.S. Small Business Administration, and the satisfaction of other conditions of the stock purchase agreement. ABL is included in the Company’s Portfolio Asset Acquisition and Resolution business segment. The table below represents the carrying amounts of the major classes of ABL’s assets and liabilities:

American Business Lending, Inc.

Balance Sheets

(Dollars in thousands)

	March 31,		December 31,
	2013		2012

Assets
Cash and cash equivalents	$	297	$	594
Restricted cash	1,273		1,154
Loans receivable - SBA held for sale	3,588		1,087
Loans receivable - SBA held for investment, net of allowance for loan losses of $559 and $518	20,392		19,372
Service fees receivable	58		55
Servicing assets - SBA loans	1,122		1,131
Other assets	709		750
Total Assets	$	27,439	$	24,143

Liabilities
Notes payable to bank	$	18,290	$	15,214
Other liabilities	1,606		1,450
Total Liabilities	$	19,896	$	16,664

The major components of income from discontinued operations in the consolidated statements of earnings are as follows:

American Business Lending, Inc.

Statements of Earnings

(Dollars in thousands)

	March 31,		March 31,
	2013		2012

Revenues	$	778	$	1,100
Costs and expenses	666		886
Earnings before income taxes	112		214
Income tax expense	1		1
Income from discontinued operations	$	111	$	213

ABL has a $25 million revolving loan facility with Wells Fargo Capital Finance (“WFCF”) that provides funding for ABL to finance and acquire SBA 7(a) loans. This loan facility is secured by substantially all of ABL’s assets and matures January 31, 2015. Outstanding borrowings bear interest at alternate annual rates equal to (i) LIBOR rate plus 3.50% for LIBOR rate loans; (ii) base rate (higher of LIBOR rate or Wells Fargo prime rate) plus 0.75% for base rate loans; or (iii) base rate plus 0.75%. FirstCity provides WFCF with an unconditional limited guaranty for all of ABL’s obligations under this facility up to a maximum amount of $5.0 million plus enforcement costs.

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net earnings (loss)	$ (1,972)	$ 9,473
Less income from discontinued operations	(111)	(213)
Adjustments to reconcile net earnings to net cash used in operating activities:
Proceeds applied to income from Portfolio Assets	14	347
Income from Portfolio Assets	(1,936)	(8,505)
Provision for loan and impairment losses	58	224
Foreign currency transaction (gains) losses, net	238	(161)
Equity income from unconsolidated subsidiaries	(799)	(4,467)
Depreciation and amortization, net	770	878
Decrease (increase) in other assets	1,455	(3,213)
Increase (decrease) in other liabilities	(9,058)	194
Other, net	416	292
Net cash used in operating activities	(10,925)	(5,151)
Cash flows from investing activities:
Purchases of property and equipment, net	(322)	(423)
Net principal payments on loans receivable	2,472	2,211
Net principal payments on investment securities available for sale	308	413
Purchases of Portfolio Assets	(106)	(30)
Proceeds applied to principal on Portfolio Assets	5,720	25,564
Contributions to unconsolidated subsidiaries	(12,590)	(9,305)
Distributions from unconsolidated subsidiaries	23,641	8,521
Net cash provided by investing activities	19,123	26,951
Cash flows from financing activities:
Borrowings under notes payable to banks and other		350
Principal payments of notes payable to banks and other	(12,822)	(14,158)
Distributions to noncontrolling interests	(1,416)	(2,189)
Other, net	(64)	(40)
Net cash used in financing activities	(14,302)	(16,037)
Effect of exchange rate changes on cash and cash equivalents	(30)	681
Net cash used in continuing operations	(6,134)	6,444
Cash flows from discontinued operations (see Note 3):
Net cash used in operating activities	(2,128)	4,844
Net cash used in investing activities	(1,085)	(634)
Net cash provided by financing activities	3,076	(4,229)
Net cash used in discontinued operations	(137)	(19)
Net increase (decrease) in cash and cash equivalents	(6,271)	6,425
Cash and cash equivalents, beginning of period	39,347	34,326
Cash and cash equivalents, end of period	33,076	40,751
Supplemental disclosure of cash flow information:
Cash paid during the period for interest from continuing operations	261	735
Cash paid during the period for interest from discontinued operations	151	221
Cash paid during the period for income taxes, net of refunds	$ 215	$ 328

CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified

Mar. 31, 2013

Dec. 31, 2012

ASSETS

Cash and cash equivalents

$ 33,076

$ 39,347

Portfolio Assets:

Loan portfolios, net of allowance for loan losses of $417 and $394

39,331

44,904

Real estate held for sale, net

12,133

10,171

Total Portfolio Assets

51,464

55,075

Loans receivable:

Loans receivable - affiliates

6,522

6,584

Loans receivable - other, net of allowance for loan losses of $-0- and $1,083

5,168

7,530

Total loans receivable, net

11,690

14,114

Investment securities available for sale

1,314

1,670

Investments in unconsolidated subsidiaries

67,219

77,466

Service fees receivable ($704 and $793 from affiliates)

721

817

Assets held for sale

27,439

24,143

Other assets

30,234

32,005

Total Assets

223,157

^[1]

244,637

^[1]

Liabilities:

Notes payable to banks and other debt obligations

49,277

61,731

Liabilities associated with assets held for sale

19,896

16,664

Other liabilities

19,803

28,975

Total Liabilities

88,976

^[2]

107,370

^[2]

Commitments and contingencies (Note 17)

Stockholders' equity:

Optional preferred stock (par value $.01 per share; 98,000,000 shares authorized; no shares issued or outstanding)

Common stock (par value $.01 per share; 100,000,000 shares authorized; shares issued: 12,056,197 and 12,056,197, respectively; shares outstanding: 10,556,197 and 10,556,197, respectively)

121

Treasury stock, at cost: 1,500,000 shares

(10,923)

Paid in capital

107,636

107,378

Retained earnings

30,221

32,729

Accumulated other comprehensive loss

(534)

(577)

FirstCity Stockholders' Equity

126,521

128,728

Noncontrolling interests

7,660

8,539

Total Equity

134,181

137,267

Total Liabilities and Equity

$ 223,157

$ 244,637

[1]

Our consolidated assets at March 31, 2013 and December 31, 2012 include the following assets of certain variable interest entities ("VIEs") that can only be used to settle the liabilities of those VIEs: Cash and cash equivalents, $15.7 million and $22.3 million; Portfolio Assets, $39.4 million and $42.1 million; Loans receivable, $10.2 million and $12.7 million; Equity investments, $11.7 million and $21.6 million; Assets held for sale, $27.4 million and $24.1 million; various other assets, $28.5 million and $31.1 million; and Total assets, $132.9 million and $153.8 million, respectively.

[2]

Our consolidated liabilities at March 31, 2013 and December 31, 2012 include the following VIE liabilities for which the VIE creditors do not have recourse to FirstCity: Notes payable, $22.6 million and $26.5 million; Liabilities associated with assets held for sale, $1.5 million and $1.4 million; Other liabilities, $12.2 million and $16.8 million; and Total liabilities, $36.3 million and $44.7 million, respectively.