Selected financial data for Q2 2010:
The Company's total operating costs and expenses (excluding provision, interest and income tax expenses) increased to $31.2 million for Q2 2010 from $9.6 million in Q2 2009, primarily due to $6.0 million of consolidated costs and expenses from our manufacturing subsidiary in Q2 2010 (refer to discussion above); $13.3 million of costs and expenses from our newly-consolidated coal mine subsidiary (refer to discussion above); and $0.6 million of consolidated foreign currency exchange losses recorded in Q2 2010 compared to $0.9 million of such gains in the same period a year ago – which is a $1.5 million unfavorable swing.
Total interest expense was $3.8 million in Q2 2010 and $3.6 million in Q2 2009. FirstCity's average debt holdings were $310.0 million at an average cost of funds of 4.9% for Q2 2010, compared to its average debt holdings of $302.5 million at an average cost of funds of 4.8% for Q2 2009.
The Company recorded $1.2 million of income tax expense in Q2 2010 compared to $0.4 million of income tax expense in Q2 2009. The $0.8 million of additional income tax expense in Q2 2010 is attributable primarily to income tax expense associated with our foreign consolidated operations.Other Corporate Matters Credit Facilities Renewal with Bank of Scotland and BoS(USA) (collectively, "Bank of Scotland") As reported in our June 30, 2010 news release and in our Current Report on Form 8-K filed with the SEC on July 1, 2010, FirstCity and Bank of Scotland reached agreement and closed on a $268.6 million Reducing Note Facility Agreement ("Reducing Note Facility") that allows for repayment to Bank of Scotland over time as cash flows from the underlying assets securing the loan facility are realized. The Company's outstanding indebtedness and existing letter of credit obligations under its then-existing loan facilities with Bank of Scotland were refinanced into the Reducing Note Facility. The primary terms of this note facility are as follows:
- Scheduled amortization of $268.6 million over 3 years ($43.6 million in the first year, $80.0 million in the second year, $65.0 million in the first nine months of the third year, and $80.0 million at maturity), with interest at LIBOR + 3.5% (LIBOR floor of 1.0%);
- Repayment will be supported by the cash flows from assets and equity investments of the Company's existing subsidiaries that were pledged to secure its then-existing loan facilities with Bank of Scotland when the debt was refinanced into the Reducing Note Facility;
- FirstCity's existing loan facilities with Bank of Scotland are capped and Bank of Scotland has no further obligation to fund, except for draws on outstanding letters of credit in the amount of $22.35 million that are included in the amount of the note facility;
- FirstCity will receive unencumbered cash of 20% of the monthly net cash flows (i.e. cash "leak-through"), up to $25.0 million, after (a) payment to Bank of Scotland of interest and fees; and (b) payment of a scheduled overhead allowance to FirstCity of $38.9 million over 3 years ($1.50 million per month for the first year, $1.03 million per month for the second year, and $0.70 million per month for the third year);
- FirstCity provided a limited guaranty for the repayment of the indebtedness under the note facility to a maximum amount of $75.0 million; and
- FirstCity will be required to maintain a minimum tangible net worth of $60.0 million.