REGISTRATION NO. 333-66431
FILED PURSUANT TO RULE 424(B)(3)
PROSPECTUS
3,000,000 COMMON SHARES
THE FIRST AMERICAN CORPORATION
[Logo of The First American
ACQUISITION CONSIDERATION Corporation]
o This prospectus covers up to 3,000,000 OUR BUSINESS
of our common shares.
o We are a leading provider
of business information and
o We may offer these shares from time to related products and services.
time as full or partial consideration
for our acquisition of the assets or LISTING
ownership interests of businesses
which primarily provide financial and o The shares offered by this
information services. prospectus will be listed
for trading on the New York
Stock Exchange.
o We will negotiate the terms of each
acquisition transaction with the o The trading symbol for our
owners of the assets or ownership shares on the New York Stock
interests being acquired at the time Exchange is "FAF."
the particular acquisition transaction
is undertaken. o On March 12, 2001, the closing
price of our shares on the
SHARE PRICE New York Stock Exchange was
$28.97.
o We will value the shares issued in a
particular acquisition transaction at
a price reasonably related to the
market value of the shares at one of
the following times:
o When the terms of the particular
acquisition transaction are agreed
upon.
o When the particular acquisition
transaction closes.
o During the period or periods prior
to the delivery of the shares.
AN INVESTMENT IN OUR COMPANY ENTAILS RISK
o Before making an investment in our
shares, you should consider carefully
the "RISK FACTORS" set forth beginning
on page 1.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 15, 2001.
(inside front cover page)
TABLE OF CONTENTS
Where You Can Find More Information; Incorporation by Reference..............(i)
Risk Factors..................................................................1
Special Note of Caution Regarding Forward-Looking Statements..................2
The First American Corporation................................................4
Summary Historical Consolidated Financial Data................................5
Selling Shareholders..........................................................7
Plan of Distribution..........................................................8
Legal Matters.................................................................9
Experts......................................................................10
____________________________________
WHERE YOU CAN FIND MORE INFORMATION;
INCORPORATION BY REFERENCE
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy,
upon payment of a fee set by the SEC, any document that we file with the SEC at
any of its public reference rooms in the following locations:
450 Fifth Street, N.W.
Washington, D.C. 20549
Seven World Trade Center
13th Floor, Suite 1300
New York, New York 10048
Citicorp Center
500 West Madison Street
14th Floor, Suite 1400
Chicago, Illinois 60661
You may also call the SEC at 1-800-432-0330 for more information on the
public reference rooms. Our filings are also available to the public on the
internet through the SEC's EDGAR database. You may access the EDGAR database at
the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important business and financial
information about our company, including information concerning its financial
performance.
(i)
(inside cover page continued)
o Our annual report on form 10-K for the fiscal year ended December 31,
1999.
o Our quarterly reports on form 10-Q for the fiscal quarters ended March
31, 2000, June 30, 2000 and September 30, 2000.
o Our amended quarterly report on form 10-Q/A for the quarter ended
March 31, 2000.
o Our current reports on form 8-K filed January 18, 2000, February 18,
2000, June 13, 2000, August 3, 2000, on which date two current reports
were filed, August 4, 2000, November 2, 2000, January 31, 2001 and
February 21, 2001.
o The description of our common shares, $1.00 par value, contained in
our registration statement on form 8-A, dated November 19, 1993, which
registers the shares under Section 12(b) of the Exchange Act.
o The description of Rights to Purchase Series A Junior Participating
Preferred Shares, which may be transferred with our common shares,
contained in our registration statement on form 8-A, dated November 7,
1997, which registers the rights under Section 12(b) of the Exchange
Act.
o Any additional documents that we file with the SEC between the date of
this prospectus and the earlier of the following dates:
o The date on which all of the shares offered by this prospectus
are resold by the persons or entities who or which acquire them
from us; and
o The date that is one year after the last date on which shares
offered by this prospectus are issued by us.
This prospectus is part of a registration statement on Form S-4 which we
have filed with the SEC. As permitted by SEC rules, this prospectus does not
contain all of the information contained in the registration statement, any
amendments, and accompanying exhibits and schedules filed with the SEC. You may
refer to the registration statement, any amendments, and the exhibits and
schedules for more information about us and our common shares. The registration
statement, exhibits and schedules are also available at the SEC's public
reference rooms or through its EDGAR database on the Internet.
YOU MAY OBTAIN A COPY OF THESE FILINGS AT NO COST BY WRITING TO US AT THE
FIRST AMERICAN CORPORATION, 1 FIRST AMERICAN WAY, SANTA ANA, CALIFORNIA
92707-5913, ATTENTION: MARK R ARNESEN, OR BY TELEPHONING US AT (714) 800-3000.
IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST SUBMIT YOUR REQUEST NO LATER THAN
FIVE DAYS PRIOR TO THE DATE YOU MAKE YOUR INVESTMENT DECISION.
(ii)
RISK FACTORS
In addition to the other information contained in this prospectus, any
supplement to this prospectus and the registration statement of which this
prospectus is a part, you should carefully consider the following risk factors
before investing in our company.
REVENUES MAY DECLINE DURING PERIODS WHEN THE DEMAND FOR OUR PRODUCTS DECREASES
Our revenues decrease as the number of real estate transactions in which
our products are purchased decreases. We have found that the number of real
estate transactions in which our products are purchased decreases in the
following situations.
o When mortgage rates are high.
o When the mortgage fund supply is limited.
o When the United States economy is weak.
We believe that this trend will recur.
EARNINGS MAY BE REDUCED IF ACQUISITION PROJECTIONS ARE INACCURATE
Our earnings have improved since 1991 in large part because of our
acquisition and integration of non-title insurance businesses. These businesses
generally have higher margins than our title insurance businesses. The success
or failure of each of these acquisitions has depended in large measure upon the
accuracy of our projections. Our projections are not always accurate. Inaccurate
projections have historically led to lower than expected earnings.
CHANGES IN GOVERNMENT REGULATION COULD PROHIBIT OR LIMIT OUR OPERATIONS
Our title insurance, property and casualty insurance, home warranty,
thrift, trust and investment businesses are regulated by various governmental
agencies. Many of our other businesses operate within statutory guidelines.
Changes in the applicable regulatory environment or statutory guidelines could
prohibit or restrict our existing or future operations. Such restrictions may
adversely affect our financial performance.
CURRENT LEGAL PROCEEDINGS MAY HAVE A MATERIAL ADVERSE AFFECT ON OUR FINANCIAL
CONDITION OR RESULTS OF OPERATIONS
On May 19, 1999, the State of California and the controller and insurance
commissioner of the State of California filed a class action suit in the state
court in Sacramento. Initially, the action sought to certify as a class of
defendants all title and escrow companies doing business in California from 1970
to the present, including certain of our subsidiaries. The plaintiffs allege
that the defendants:
o failed to give unclaimed property to the State of California on a
timely basis;
o charged California home buyers and other escrow customers fees for
services that were never performed or which cost less than the amount
charged; and
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o devised and carried out schemes, known as earnings credits, with
financial institutions to receive interest on escrow funds deposited
by defendants with financial institutions in demand deposits.
Since the initial filing of the suit, the California Attorney General's
Office, on behalf of the State, the controller and the insurance commissioner,
indicated that it would not seek to certify a class of defendants, but would
instead amend its suit to name an unspecified number of title underwriters and
underwritten title companies. To date, the attorney general has neither amended
the suit, nor to our knowledge taken steps to progress with it, including the
service of process on any party. The attorney general, however, has entered into
settlement discussions with various title insurance underwriters, including
certain of our subsidiaries. Additionally, the attorney general indicated that
it will address issues pertaining to escheat obligations through routine audits
conducted by the controller's office, rather than through litigation.
Subsequent to the filing of this lawsuit, the First American Title
Insurance Company, a subsidiary of ours, was named and served as a defendant in
two private class actions in California courts. The allegations in those actions
include some, but not all, of the allegations contained in the lawsuit discussed
above. The private class actions independently seek injunctive relief,
attorneys' fees, damages and penalties in unspecified amounts. One of the
private class actions has been dismissed. The remaining private class action has
not progressed beyond limited document production.
An adverse decision in these lawsuits may have a material adverse effect on
our financial condition or results of operations.
SPECIAL NOTE OF CAUTION REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus, any applicable supplement
to this prospectus and the documents incorporated by reference into this
prospectus, may constitute "forward-looking statements" within the meaning of
the federal securities laws. The following or similar words are intended to
identify forward-looking statements in our documents:
o "anticipate" o "forecast"
o "believe" o "goal"
o "estimate" o "objective"
o "expect" o "projection"
Risks and uncertainties exist which may cause results to differ materially
from those set forth in these forward-looking statements. Factors that could
cause the anticipated results to differ from those described in the
forward-looking statements include:
o interest rate fluctuations;
o changes in the performance of the real estate markets;
o general volatility in the capital markets;
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o changes in applicable government regulations;
o consolidation among our significant customers and competitors;
o legal proceedings commenced by the California attorney general and
related litigation;
o our continued ability to identify businesses to be acquired;
o changes in our ability to integrate businesses which we acquire;
and
o other factors described in our annual report on form 10-K for the
year ended December 31, 1999 filed with the SEC.
The forward-looking statements speak only as of the date they are made. We
do not undertake to update forward-looking statements to reflect circumstances
or events that occur after the date the forward-looking statements are made.
-3-
THE FIRST AMERICAN CORPORATION
We are a leading provider of business information and related products and
services. Our principal executive office is located at 1 First American Way,
Santa Ana, California 92707-5913, and our telephone number is (714) 800-3000.
You can visit our website at www.firstam.com.
The following is a list of our three business segments and the products
and services which we now offer through our subsidiaries:
TITLE INSURANCE REAL ESTATE INFORMATION CONSUMER INFORMATION
& SERVICES & SERVICES & SERVICES
o aircraft and vessel -mortgage information -consumer information
title insurance services
o equity loan services o pre-employment
o lender services o credit reporting and screening
o national/commercial information management o resident screening
title insurance o default management o specialized credit
o residential title services reporting
insurance o field inspections o sub-prime consumer
o subdivision title o flood determination and information
insurance compliance o vehicle information
o 1031 tax-deferred o mortgage document and insurance tracking
exchange services services
o title and escrow o mortgage origination -consumer services
systems software systems
o mortgage servicing o banking services
software systems o consumer credit
o residential and reports
commercial real o home comparable
estate tax reporting reports
o tax valuation services o home warranty
o investment services
-database information o property and casualty
services insurance
o trust services
o appraisal and property
valuation
o database management
services and document
imaging
o property information and
map image products
o title plant and document
imaging services
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated financial
and other data for the five years ended December 31, 1999 and for the nine-month
periods ended September 30, 1999 and 2000. The summary is qualified in its
entirety by reference to the financial statements and other information
contained in our annual report on form 10-K for the year ended December 31, 1999
and our quarterly report on form 10-Q for the quarter ended September 30, 2000,
each of which is incorporated by reference in this prospectus. All data are in
thousands except percentages and per share data.
Year Ended Nine Months
December 31 Ended September 30
----------------------------------------------------------------- ---------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
INCOME STATEMENT DATA:
Revenues:
Operating revenue........... $1,270,179 $1,621,124 $1,932,905 $2,867,107 $2,936,196 $2,246,526 $2,126,571
Investment and other income.
23,031 33,852 29,096 76,773 51,973 41,250 45,788
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
1,293,210 1,654,976 1,962,001 2,943,880 2,988,169 2,287,776 2,172,359
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
Expenses:
Salaries and other
personnel costs.......... 452,057 558,933 682,452 945,513 1,034,772 779,824 773,513
Premiums retained
by agents................ 420,567 518,547 563,137 773,030 871,036 668,746 585,398
Other operating expenses.... 274,669 340,988 437,676 633,417 678,856 502,600 511,994
Provision for title losses
and other claims......... 96,941 90,489 96,805 124,178 116,218 85,549 104,327
Depreciation and
amortization............. 20,357 29,261 40,025 62,263 77,031 55,574 61,112
Premium Taxes............... 13,627 16,676 17,238 21,335 22,897 17,125 16,318
Interest.................... 6,270 5,808 10,291 19,093 17,387 11,822 18,709
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
1,284,488 1,560,702 1,847,624 2,578,829 2,818,197 2,121,240 2,071,371
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
Income before income taxes,
minority interest and
cumulative effect of a
change in accounting
principle................ 8,722 94,274 114,377 365,051 169,972 166,536 100,988
Income taxes................ 3,641 35,884 42,936 128,512 62,300 57,466 39,200
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
Income before minority
interest and cumulative
effect of a change in
accounting principle..... 5,081 58,390 71,441 236,539 107,672 109,070 61,788
Minority interest........... 2,147 2,624 3,676 35,012 19,029 18,183 11,355
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
Income before cumulative
effect of a change in
accounting principle..... 2,934 55,766 67,765 201,527 88,643 90,887 50,433
Cumulative effect of a
change in accounting
principle................ - - - - (55,640) (55,640) -
------------ ------------ ------------ ------------- ------------- -- ------------ -------------
Net Income $ 2,934 $ 55,766 $ 67,765 $201,527 $ 33,003 $ 35,247 $ 50,433
============ ============ ============ ============= ============ == ============ ==============
-5-
Year Ended Nine Months
December 31 Ended September 30
----------------------------------------------------------------- ---------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
EARNINGS PER SHARE:
Basic:
Income before cumulative
effect of a change in
accounting principle..... $0.05 $0.98 $1.19 $3.35 $1.37 $1.41 $0.79
Cumulative effect of a
change in accounting
principle................ - - - - (0.86) (0.86) -
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
Net Income $0.05 $0.98 $1.19 $3.35 $0.51 $0.55 $0.79
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
Diluted:
Income before cumulative
effect of a change in
accounting
principle................ $0.05 $0.98 $1.16 $3.21 $1.34 $1.37 $0.77
Cumulative effect of a
change in accounting
principle................ - - - - (0.84) (0.84) -
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
Net Income.................. $0.05 $0.98 $1.16 $3.21 $0.50 $0.53 $0.77
------------ ------------ ------------ ------------- ------------ -- ------------ --------------
At December 31 At September 30
----------------------------------------------------------------- ------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
BALANCE SHEET DATA:
Cash and invested assets.... $377,424 $ 398,397 $ 441,679 $ 752,218 $ 734,556 $ 662,161 $ 650,599
Total assets................ $907,252 $1,010,556 $1,220,377 $1,852,731 $2,116,414 $2,116,414 $2,184,499
Notes and contracts payable.
$ 77,430 $ 72,761 $ 51,720 $143,466 $ 196,815 $ 148,350 $ 216,720
Guaranteed preferred
beneficial interests in
our junior subordinated
deferrable interest
debentures............... - - $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000
Total stockholders' equity.. 338,659 $ 384,931 $ 442,783 $ 762,265 $ 815,991 $ 861,270 $ 837,228
OTHER DATA:
Loss ratio.................. 7.6% 5.6% 5.0% 4.3% 4.0% 3.8% 4.9%
Cash dividends per share $0.12 $0.14 $0.25 $0.23 $0.24 $0.18 $0.18
Ratio of debt to total
capitalization(1)........ 17.6% 15.2% 8.3% 13.0% 16.4% 12.3% 17.1%
(1) Capitalization includes minority interests and mandatorily redeemable
preferred securities of the Company's subsidiary trust.
-6-
SELLING SHAREHOLDERS
The following table sets forth, as of the date of this prospectus, the
following information.
o The name of each holder of shares that may currently be sold
pursuant to this prospectus.
o The number of our common shares that each selling shareholder owns
as of such date.
o The number of our common shares owned by each selling shareholder
that may be offered for sale from time to time pursuant to this
prospectus.
o The number of our common shares to be held by each selling
shareholder assuming the sale of all the shares offered hereby.
o By footnote, any position or office held or material relationship
with The First American Corporation or any of its affiliates within
the past three years, other than that of being a shareholder.
We may amend or supplement this prospectus from time to time to update the
disclosure set forth herein.
-------------------------------------------------------------------------------
NUMBER OF
SHARES TO
BE OFFERED SHARES OWNED OF
SHARES OWNED OF FOR THE RECORD AFTER
RECORD PRIOR TO SELLING COMPLETION OF THE
NAME OF SELLING SHAREHOLDER THE OFFERING SHAREHOLDER'S OFFERING
NUMBER % ACCOUNT NUMBER %
-------------------------------------------------------------------------------
American Financial Title 0 0 190,700 0 0
Company
===============================================================================
TOTAL: 0 0 190,700 0 0
-------------------------------------------------------------------------------
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PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time during the effectiveness of the registration statement by the selling
shareholders. The selling shareholders will act independently of us in making
decisions with respect to the timing, manner and price of each sale. The selling
shareholders may sell the shares being offered hereby on the New York Stock
Exchange, or otherwise. The sale price may be the then prevailing market price
or a price related thereto, a price set by formula, which may be subject to
change, or a negotiated price. The shares may be sold, without limitation, by
one or more of the following means of distribution.
o A block trade in which the broker-dealer so engaged will attempt to sell
shares as agent, but may position and resell a portion of the block as
principal to facilitate the transaction.
o Purchases by a broker-dealer as principal and resale by such broker-dealer
for its own account pursuant to this prospectus.
o A distribution in accordance with the rules of the New York Stock
Exchange.
o Ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
o In privately negotiated transactions.
To the extent required, this prospectus may be amended and supplemented
from time to time to describe a specific plan of distribution.
In connection with distributions of the shares or otherwise, the selling
shareholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with a hedging transaction, broker-dealers
or other financial institutions may engage in short sales of the shares in the
course of hedging the positions they assume with selling shareholders. The
selling shareholders may also sell the shares short and deliver the shares
offered hereby to close out such short positions. The selling shareholders may
also enter into option or other transactions with broker-dealers or other
financial institutions which require the delivery to such broker-dealer or other
financial institution of shares offered hereby, which shares such broker-dealer
or other financial institution may resell pursuant to this prospectus, as
supplemented or amended to reflect such transaction. The selling shareholders
may also pledge shares to a broker-dealer or other financial institution, and,
upon a default, such broker-dealer or other financial institution may effect
sales of the pledged shares pursuant to this prospectus, as supplemented or
amended to reflect such transaction. In addition, any shares that qualify for
sale pursuant to Rule 144 of the Securities Act may, at the option of the holder
thereof, be sold under Rule 144 of the Securities Act rather than pursuant to
this prospectus.
Any broker-dealer participating in such transactions as agent may
receive commissions from the selling shareholders and/or purchasers of the
shares offered hereby. Usual and customary brokerage fees will be paid by the
selling shareholders. Broker-dealers may agree with the selling shareholders
to sell a specified number of shares at a stipulated price per share, and, to
the extent such a broker-dealer is unable to do so acting as agent for
the selling shareholders, to purchase as principal any unsold shares at
the price required to fulfill the broker-dealer commitment to the
selling shareholders. Broker-dealers who acquire shares as principal may
-8-
thereafter resell the shares from time to time in transactions, which may
involve cross and block transactions and which may involve sales to and through
other broker-dealers, including transactions of the nature described above, in
the market, in negotiated transactions or otherwise at market prices prevailing
at the time of sale or at negotiated prices, and in connection with such resales
may pay to, or receive from, the purchasers of such shares, commissions computed
as described above.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only though registered
or licensed brokers or dealers. In addition, in certain states the shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling shareholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling shareholders and their affiliates.
In addition, we will make copies of this prospectus and any supplement available
to the selling shareholders and have informed them of the need for delivery of
copies of this prospectus and any supplement to purchasers at or prior to the
time of any sale of the shares offered hereby. The selling shareholders may
indemnify any broker-dealer that participates in transactions involving the sale
of the shares against liabilities resulting therefrom. Among these liabilities
for which indemnification may be provided are those arising under the Securities
Act.
At the time a particular offer of shares offered pursuant to this
prospectus is made, if required, a supplement to this prospectus will be
distributed that will set forth the number of shares being offered and the terms
of the offering, including the name of any underwriter, dealer or agent, the
purchase price paid by any underwriter, any discount, commission and other item
constituting compensation, any discount, commission or concession allowed or
re-allowed or paid to any dealer, and the proposed selling price to the public.
We have agreed to keep the registration statement of which this prospectus
constitutes a part effective in respect of shares issued pursuant thereto until
the first to occur of the following dates.
o The date one year from the date of issuance of such shares.
o Such date as all of the shares offered by the selling shareholders listed
above have been sold.
We intend to de-register any of the shares not sold by the selling
shareholders after such time.
LEGAL MATTERS
The validity of the shares offered by this prospectus will be passed upon
for us by White & Case LLP, Los Angeles, California.
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EXPERTS
The financial statements incorporated in this prospectus by reference to
the annual report on form 10-K for the year ended December 31, 1999 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-10-
(outside back cover page)
--------------------------
o We have not authorized anyone to give
you any information that differs from
the information in this prospectus. If
you receive any different information, PROSPECTUS
you should not rely on it.
o The delivery of this prospectus shall
not, under any circumstances, create
an implication that the First American 3,000,000 COMMON SHARES
Corporation is operating under the
same conditions that it was operating
under when this prospectus was
written. Do not assume that the [Logo of the First American
information contained in this Corporation]
prospectus is correct at any time past
the date indicated.
o This prospectus does not constitute an
offer to sell, or the solicitation of Dated March 15, 2001
an offer to buy, any securities other
than the securities to which it
relates.
o This prospectus does not constitute an
offer to sell, or the solicitation of
an offer to buy, the securities to
which it relates in any circumstances
in which such offer or solicitation is
unlawful.
--------------------------