UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form 10-K/A

(Amendment No. 3)

 

 

Commission file number 033-19694

 

 

FirstCity Financial Corporation

(Exact name of registrant as specified in its charter)

 

 

(254) 761-2800

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $.01		The NASDAQ Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes £     No x

 

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

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  £

 

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

 

 

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

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates, based upon the closing price of the common stock on the NASDAQ Stock Market as of June 30, 2007, was $95,343,164.

 

The number of shares of common stock outstanding at June 23, 2008, was 10,270,707.

 

 

EXPLANATORY NOTE

 

FirstCity Financial Corporation (the “Company”) is filing this Amendment No. 3 on Form 10-K/A (“Amendment No. 3 Filing”) to amend its Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as originally filed with the Securities and Exchange Commission (“SEC”) on March 17, 2008 (“Original Filing”), and subsequently amended by Amendment No. 1 on Form 10-K/A as filed with the SEC on April 29, 2008 and Amendment No. 2 on Form 10-K/A as filed with the SEC on May 12, 2008, for the sole purpose of including the financial statements of PRL Developpement, S.A.S. (“PRL”) in this Amendment No. 3 Filing due to PRL meeting certain tests as a significant subsidiary of the Company under SEC Rule 3-09 under Regulation S-X (“Rule 3-09”). Rule 3-09 requires the Company to file separate company financial statements for its significant subsidiaries that are not consolidated with the Company’s accounts.

 

Except for the additions described above, this Amendment No. 3 Filing speaks as of the filing date of the Original Filing and does not update or discuss any other Company developments after the date of the Original Filing.  Accordingly, this Amendment No. 3 Filing should be read in conjunction with the Company’s filings made with the SEC after the filing of the Original Filing on March 17, 2008.

 

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by our principal executive officer and principal financial officer are filed as exhibits to the Amendment No. 3 Filing under Item 15 of Part IV hereof.

 

PART II

 

Item 8.  Financial Statements and Supplementary Data.

 

Included as Exhibit 99 to this Amendment No. 3 Filing are the consolidated financial statements and related footnotes of PRL, a non-controlled affiliate of the Company, as of and for the years ended December 31, 2007, 2006 and 2005 (collectively, “the financial statements”). The Company is required to include the PRL financial statements in this Amendment No. 3 Filing due to PRL meeting certain tests as a significant subsidiary under Rule 3-09.

 

The financial statements are prepared by PRL in accordance with accounting principles applicable in France. Amounts in the PRL financial statements are expressed in Euros, which is the functional currency of the entity. The management of PRL is solely responsible for the form and content of the PRL financial statements. The Company has no responsibility for the form or content of the PRL financial statements since the Company does not control PRL and is not involved in the management of PRL. The accounting and reporting requirements of the SEC and the Sarbanes-Oxley Act of 2002 do not apply to the PRL financial statements or to PRL’s system of internal accounting controls and control over financial reporting.

 

PRL’s financial statements are prepared in accordance with accounting principles applicable in France, which differ in some instances from the accounting principles used in the United States of America. Following are the primary differences between general accounting principles applicable in France and U.S. generally accepted accounting principles (“U.S. GAAP”):

 

a.               Equity in earnings of investments.  PRL recognizes income from MCS et Associes (“MCS”), a French servicing company in which the Company holds a 19.63% investment, to the extent dividends are received from MCS. Under U.S. GAAP, as required by APB Opinion No. 18, PRL’s investment in MCS would be recorded using the equity method of accounting, in which PRL’s investment in MCS would be increased to reflect PRL’s share of income of MCS and would be reduced to reflect PRL’s share of losses of MCS or dividends received from MCS.

 

b.              Income recognition on non-performing portfolio assets.  MCS, a French servicing company in which the Company holds a 19.63% investment, owns a pool of non-performing loans and recognizes income to the extent that proceeds collected exceed a pro rata portion of allocated cost from the pool. Cost allocation is determined by MCS based on a proration of actual proceeds divided by total estimated proceeds of the pool. Under U.S. GAAP, as required by SOP 03-3, the excess cash flows expected to be collected over the initial investment in the pool is generally recorded as interest income over the life of the pool. This difference between general accounting principles applicable in France and U.S. GAAP impacts the amount of equity in earnings of investments recognized by PRL for MCS under U.S. GAAP as discussed in item a. above.

 

1

 

PART IV

 

Item 15.  Exhibits and Financial Statement Schedules.

 

Item 15 on pages 134 to 137 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed on March 17, 2008, as amended, is amended by the addition of the following exhibits:

 

3.  Exhibits

 

Exhibit Number				Description of Exhibit
23.1*		—		Consent of CAPROGEC AUDIT, SA
31.1*		—		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		—		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		—		Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		—		Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*		—		Financial statements of PRL Developpement, S.A.S. as of and for the years ended December 31, 2007, 2006 and 2005.

 

*                 Filed herewith.

 

2

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

	FIRSTCITY FINANCIAL CORPORATION
Date:  July 31, 2008	By:	/s/   JAMES T. SARTAIN
		James T. Sartain
		President and Chief Executive Officer
		(Duly authorized officer and
		Principal Executive Officer)
		/s/   J. BRYAN BAKER
		J. Bryan Baker
		Senior Vice President and Chief Financial Officer
		(Duly authorized officer and
		Principal Financial Officer)

 

3

Exhibit 23.1

 

Consent of Independent Accounting Firm

 

We consent to the incorporation of our report with respect to the financial statements of PRL Developpement, S.A.S. as of and for the year ended December 31, 2007, which appear in this Annual Report on Form 10-K/A of FirstCity Financial Corporation.

 

 

Bertrand MIQUEL

 

 

CAPROGEC AUDIT, SA

 

Paris, France
June 30, 2008

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, James T. Sartain, certify that:

 

(1)		I have reviewed this amendment to annual report on Form 10-K/A of FirstCity Financial Corporation;
(2)		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and
(3)		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

 

 

Date: July 31, 2008		/s/  JAMES T. SARTAIN
		James T. Sartain
		President and Chief Executive Officer
		(Principal Executive Officer)

 

 Exhibit 31.2

 

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, J. Bryan Baker, certify that:

 

(1)		I have reviewed this amendment to annual report on Form 10-K/A of FirstCity Financial Corporation;
(2)		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and
(3)		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

 

 

Date: July 31, 2008		/s/  J. BRYAN BAKER
		J. Bryan Baker
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, James T. Sartain, President and Chief Executive Officer of FirstCity Financial Corporation (“registrant”), certify, to the best of my knowledge and belief, that:

 

(1)		the Form 10-K/A fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
(2)		the information contained in the Form 10-K/A fairly presents, in all material respects, the financial condition and results of operations of the registrant.

 

 

Date: July 31, 2008	/s/ James T. Sartain
	James T. Sartain
	President and Chief Executive Officer

 

 

The foregoing certification is being furnished as an exhibit to this Form 10-K/A pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-K/A for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, James T. Sartain, President and Chief Executive Officer of FirstCity Financial Corporation (“registrant”), certify, to the best of my knowledge and belief, that:

 

(1)		the Form 10-K/A fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
(2)		the information contained in the Form 10-K/A fairly presents, in all material respects, the financial condition and results of operations of the registrant.

 

 

Date: July 31, 2008	/s/ J. Bryan Baker
	J. Bryan Baker
	Chief Financial Officer

 

 

The foregoing certification is being furnished as an exhibit to this Form 10-K/A pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-K/A for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

Exhibit 99.1

 

PRL Developpement, S.A.S.

 

Consolidated Financial Statements

 

December 31, 2007, 2006 and 2005

 

 

PRL DEVELOPMENT

A simplified business association with capital of EUR 693,000

Head office:  96-98 avenue Raymond Poincaré — 75016 Paris

 

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUDITOR’S SPECIAL REPORT

 

 

CAPROGEG AUDIT

An accounting and auditing firm

RC Paris B 998 165 906 —

 

Head office
47 rue de Courcelles		Tel.: 01 53 89 02 40
75008 Paris		Fax: 01 53 89 02 49
bmiquel@caprogec.com

 

PRL DEVELOPPEMENT

A Simplified Business Association with capital of EUR 693,000

Head Office:  96-98 avenue Raymond Poincaré — 75016 Paris

 

AUDITOR’S SPECIAL REPORT

 

CONCERNING THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

 

Dear Sir:

 

Further to your request and in our capacity as your company’s auditor, we audited the consolidated financial statements for the fiscal year ended on December 31, 2007, as they are appended to this report.

 

We performed our audit in accordance with the professional standards adopted in France; these standards require us to plan and perform out audit in order to obtain a reasonable assurance that the annual financial statements do not comprise any significant misstatements.  An audit consists in analyzing, on a test basis, the audit evidence supporting the data contained in the financial statements.  It also consists in assessing the accounting principles followed and the significant estimates used to draw up the financial statements and to assess their overall representation.  We feel that our audit provides a reasonable basis for the opinion expressed below.

 

We certify that these consolidated financial statements provide a faithful picture in all significant aspects of the financial situation of the entities included in the scope of consolidation as of December 31, 2007, and the result of their operations for the fiscal year that ended on this date.

 

Furthermore, we certify that the audit standards used to audit these financial statements conform to the generally accepted audit standards in the United States of America.

 

Done in Paris on June 30, 2008

 

Bertrand MIQUEL

Statutory Auditor

 

 

PRL DEVELOPPEMENT

 

 

A Simplified Business Association with capital of EUR 693,000

 

Head Office:  96-98, Avenue Raymond Poincaré

75116 PARIS

 

R.C.S. PARIS B 382 312 700

 

 

 

 

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS AS OF 12/31/2007

 

 

 

 

 

 

prl-ubn (€)

 

				(Unaudited)
		Dec. 31, 2007 Totals		Dec. 31, 2006
OPERATING INCOME
Sales of goods		0		0
Provision of services		0		0
Financial income — banking		1,835,896		1,717,001
Financial expenses — banking		-4,463		-5,012
Other income		0		0
Reversals of provisions / transfer of expenses		0		0
Total (1)		1,831,433		1,711,989
OPERATING EXPENSES
Purchases of real estate lots		0		0
Change in inventory		0		0
Other outside purchases and expenses		-722,198		-758,482
Taxes		-5,329		-173
Wages and payroll taxes		-101,396		-123,121
Depreciation/fixes assets		0		0
Depreciation of deferred expenses		0		0
Allocations to provisions for risks and expenses		0		0
Routine management expenses		0		0
Total (2)		-828,923		-881,776
Corrections of receivables
Unrecoverable receivables		-5,010,293		-4,182,289
Allocations to provisions		-177,330		-139,127
Reversals of provisions		6,789,833		6,155,839
Bad debts written off and subsequently collected		145,230		107,167
Total (3)		1,747,440		1,941,590
FINANCIAL INCOME		1,200,000		1,000,000
FINANCIAL EXPENSES		-70,404		-241,746
FINANCIAL EARNINGS		1,129,596		758,254
INCOME BEFORE EXCEPTIONAL ITEMS AND TAXES		3,879,546		3,520,057
NON-RECURRING INCOME
From management operations		3,664		0
Reversals of provisions for securities		-1		0
NON-RECURRING EXPENSES
Net book values assets disposed of		0		0
On management operations		0		0
NON-RECURRING EARNINGS		3,663		0
INCOME TAX		-914,598		-859,817
DEPRECIATION OF CONSOLIDATED GOODWILL		0		0
NET CONSOLIDATED EARNINGS		2,968,611		2,670,241

 

 

PRL

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE FISCAL YEAR ENDED ON DECEMBER 31, 2007

 

Notes to the consolidated financial statements before distribution of the fiscal year ended on December 31, 2007, with a total of EUR 14,942,545 and an income statement showing a (consolidated) profit of EUR 2,968,611.

 

1.             CONSOLIDATION PRINCIPLES AND METHODS

 

1.1.         General principles:

 

The consolidated financial statements for the PRL DEVELOPPEMENT Group were prepared in accordance with the provisions of CRC Regulation 99.02 concerning consolidated financial statements.

 

1.1.1.      Information related to the scope of consolidation

 

a)  Consolidated companies:

 

The scope of consolidation for fiscal year 2007 is as follows:

 

-      UBN

 

96-98 avenue Raymond Poincaré — 75016 PARIS

SIRET No.:  542 037 114 00064

 

b) Percentage of control and consolidation method

 

-      Percentage of control:

 

·      UBN                           100%

 

-      Consolidation method:    full

 

1.1.2.  Accounting principles:

 

                a)  Full method:

 

Elimination of the reciprocal accounts and flows from the items of the balance sheet and from the income statement.

 

b)  Treatment of goodwill on acquisition:

 

Positive goodwill recorded at the time of acquisition of the UBN shares, i.e., EUR 112,813 accounted for as intangible assets was depreciated over two fiscal years. This goodwill was completely depreciated on December 31, 2004.

 

 

PRL

Financial statements s of 12/31/2007

 

CHANGES IN THE NET SITUATION

 

 

 

In thousands of euros

 

		12/31/2006		ALLOCATION RESULT 2006		OTHER MOVEMENTS		12/31/2007
Capital		693				—		693
Reserves		7,208		2,670		—		9,878
Result for the fiscal year		2,670		(2,670	)	—		2,968
TOTAL		10,571		0		—		13,539

 

 

PRL

Financial statements as of 12/31/2007

 

CLIENT CREDIT AND PROVISIONS

 

Credits granted to clients are recorded as assets at their face value, net of provisions and co-participants.

 

If a probable risk of partial or total non-recovery appears for the outstanding amounts plus the balance of the initial credit, provisions are set up through withdrawals from the general fixed provision allocated for this purpose during fiscal year 1995.

 

The balance of this provision must make it possible to cover the residual net risks of any kind adequately.

 

As a result, the net expenses for the fiscal year for these same risks of non-recovery are covered by withdrawal from this fixed general provision.

 

On the other hand, reversals of provisions concern collections or debts written off as losses that were previously covered by provisions.

 

TAX CONSOLIDATION

 

In accordance with the provisions of article 68 of finance act No. 87.1060 of December 30, 1987, UBN opted as of January 1, 2005, for the tax consolidation system and was included in the tax consolidation perimeter of the PRL Developpement Group; since PRL Developpement Group is liable only for the corporate tax for the Group, UBN never recorded any tax expenses for fiscal year 2007.

 

 

PRL

 

Financial statements as of 12/31/2007

 

CHANGE IN DEPRECIATION AND PROVISIONS FOR FIXED ASSETS

 

In thousands of euros

 

		12/31/2007		12/31/2006		CHANGE
Equipment		0		290		-290
Intangible assets excluding operations		0		12		-12
Tangible assets excluding operations		0		0		0
SUBTOTAL		0		302		-302
TOTAL NET FIXED ASSETS		0		0		0

 

CHANGE IN OUTSTANDING CREDITS

 

In thousands of euros

 

		12/31/2006		CANCELLATIONS		COLLECTIONS		12/31/2007
Healthy and outstanding		1.85				-0.42		1.43
Disputed		55.15		0.1		-7.24		48.01
TOTAL		57		0.1		-7.66		49.44

 

 

PRL

 

Financial statements as of 12/31/2007

 

PROVISIONS FOR DOUBTFUL DEBTS AND BANKING RISKS

 

In thousands of euros

 

 

		12/31/2006		CHANGE — FISCAL YEAR										12/31/2007
				TRANSFERS		WITHDRAWALS		ALLOCATIONS		USES		REVERSALS
Capital		44.04		-6.44										37.6
Interest		9.92						0				-0.29		9.63
Fixed		0		6.44		0						-6.44		0
Risks and expenses (Liabilities)		0.96						0.17				-0.06		0.97
TOTAL		54.82		0		0		0.17		0		-6.79		48.2

 

AVERGE WORKFORCE

 

		SALARIED PERSONNEL		PERSONNEL MADE AVAILABLE
Executives		0.5
Supervisors
Employees
WORK FORCE		0.5

 

 

PRL DEVELOPPEMENT

 

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2006

 

 

A business corporation [société anonyme]

with capital of EUR 693,000

Corporate Headquarters:  96-98 avenue Raymond Poincaré

75016 PARIS

 

 

PRL DEVELOPPEMENT

 

CONTENTS

 

· Balance sheet as of December 31, 2006	p. 1 and 2
· Income statement from January 1, 2006 to December 31, 2006	p. 3
· Notes	p. 4 & 5
· Itemized balance sheet accounts	p. 6 to 9
· Itemized income statement	p. 10

 

 

PRL GROUP

 

Balance Sheet – Assets

 

				As of Length				12/31/06		12/31/05
						Deprec. &		12 months		12 months
				Gross		Prov.		Net		Net
Capital, subscribed, not called
FIXED ASSETS
Intangible assets
Setup costs
Research and Development costs
Grants, patents and similar rights				112,813		112,813
Goodwill
Other intangible assets
Advances and installments
Tangible assets
Property
Buildings
Plant and equipment
Other tangible assets				289,675		289,657
Construction work in progress
Advances and installments
Long-term investments
Equity interests				11,750,000				11,750,000		11,750,000
Attached receivables
Other fixed investments
Loans granted
Other long-term investments
TOTAL		(I)		12,152,488		402,488		11,750,000		11.750,000
CURRENT ASSETS
Inventories and production in progress
Goodwill, excluding operations				12,196		12,196
Outstanding credit				57,016,501		53,967,445		3,059,055		4,830,881
Advances and installments paid on orders
Operating receivables
Accounts receivable
Other receivables				29,017				29.017		143,286
Capital subscribed & called, not paid
Investment securities
including own shares
Cash and cash equivalents				192,103				192,103		103,027
ACCRUALS ASSET ACCOUNT
Prepaid expenses				2,755				2,775		3,587
TOTAL		(II)		57,252,572		53,969,641		3,282,931		5,080,780
Deferred expenses		(III)