SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of report (Date of earliest event reported) October 23, 2002
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THE FIRST AMERICAN CORPORATION
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(Exact Name of the Registrant as Specified in Charter)
California 0-3658 95-1068610
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1 First American Way, Santa Ana, California 92707-5913
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (714) 800-3000
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Not Applicable.
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
See the attached Exhibit.
Item 7. Exhibits.
99 Press Release
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE FIRST AMERICAN CORPORATION
Date: October 23, 2002 By:/s/ Thomas A. Klemens
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Name: Thomas A. Klemens
Title: Executive Vice President and
Chief Financial Officer
-3-
EXHIBIT 99
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THE FIRST AMERICAN CORPORATION REPORTS RECORD-BREAKING
OPERATING RESULTS FOR THE THIRD QUARTER 2002
SANTA ANA, Calif., Oct. 23, 2002 - The First American Corporation (NYSE: FAF),
the nation's leading diversified provider of business information and related
products and services, announced today operating results for the third quarter
ended Sept. 30, 2002.
Net income for the third quarter of 2002 was a company record of $67.4
million, or 84 cents per diluted share, which includes a pretax investment loss
of $2.6 million resulting from the previously announced sale of the company's
subsidiary, First American Fastrac Systems, Inc. This item totaled $1.5 million
on an after-tax basis, or 2 cents per diluted share. Excluding this item,
operating net income for the third quarter was $68.9 million, or 86 cents per
diluted share, which compares with operating net income of $45.5 million, or 60
cents per diluted share, for the same quarter of 2001. The prior-year quarter
excludes previously announced one-time charges (net of investment gains)
totaling $3.8 million on an after-tax basis, or 5 cents per diluted share.
Operating revenues for the third quarter of 2002 were a record breaking $1.18
billion, an increase of 24 percent when compared with operating revenues of
$952.8 million for the same period last year.
Net income for the nine-month period of 2002, exclusive of one-time items,
was $161.2 million, or $2.03 per diluted share. This compares with net income of
$120.5 million, or $1.66 per diluted share, for the first nine months of 2001,
excluding one-time items. Operating revenues for the nine-month period of 2002
totaled $3.29 billion, an increase of 26 percent when compared with operating
revenues of $2.61 billion for the same period in 2001.
"We are particularly pleased with the margin improvements across all of our
real estate-related business segments in the third quarter of 2002 versus 2001,"
stated Parker S. Kennedy, president of The First American Corporation. "Third
quarter real estate-related activities, including existing and new home sales,
and refinancing activity, proved very favorable for First American. Recent
record-breaking low mortgage interest rates should further stimulate the demand
for homes and refinancings well into 2003, resulting in a strong fourth quarter
for our company."
- more -
Open orders in the title insurance segment for the past three months were
up 39 percent compared with the same period in 2001and 32 percent compared with
the second quarter of 2002. The company experienced record-setting
refinance-related orders during the third quarter. The Mortgage Bankers
Association of America's measure of mortgage loan applications for purchases and
refinances were the highest ever in the past four weeks.
Kennedy continued: "While enjoying record-breaking transaction volume, we
continue to look for opportunities to improve margins, increase automation and
provide higher valuation for First American. The rollout of the FAST Transaction
System, which will streamline title production and improve margins, will be
substantially complete by year-end. Expense cutting continues as we consolidate
operations and use technology to lower personnel expenses and deliver
information products faster and more economically to our customers."
About The First American Corporation
The First American Corporation is a Fortune 500 company that traces its
history to 1889. As the nation's leading diversified provider of business
information, the company supplies businesses and consumers with the information
resources that affect the major economic events of people's lives, such as
getting a job; renting an apartment; buying a car, house, boat or airplane;
securing a mortgage; opening or buying a business; and planning for retirement.
The First American Family of Companies, many of which command leading market
share positions in their respective industries, operate within seven primary
business segments including: Title Insurance and Services, Specialty Insurance,
Trust and Other Services, Mortgage Information, Property Information, Credit
Information and Screening Information. With revenues of $3.75 billion in 2001,
First American has more than 22,500 employees in approximately 1,300 offices
throughout the United States and abroad. More information about the company and
an archive of its press releases can be found at www.firstam.com.
Certain statements made in this press release, including those relating to
fourth-quarter results and the effects of technology solutions are
forward-looking. 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: interest rate
fluctuations; changes in the performance of the real estate markets;
general volatility in the capital markets; changes in applicable government
regulations; consolidation among the company's significant customers and
competitors; the company's continued ability to identify businesses to be
acquired; changes in the company's ability to integrate businesses which it
acquires; and other factors described in the company's Annual Report on
Form 10-K for the year ended Dec. 31, 2001, filed with the Securities and
Exchange Commission. The forward-looking statements speak only as of the
date they are made. The company does not undertake to update
forward-looking statements to reflect circumstances or events that occur
after the date the forward-looking statements are made.
- more -
Summary of Earnings
For the Three Months Ended For the Nine Months Ended
September 30 September 30
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2002 2001 2002 2001
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Revenues $ 1,197,084,000 $ 983,008,000 $ 3,332,485,000 $ 2,677,791,000
Income before income taxes and minority interests $ 129,022,000 $ 83,355,000 $ 297,635,000 $ 228,885,000
Income taxes $ 42,800,000 $ 30,500,000 $ 100,100,000 $ 83,200,000
Minority interests $ 18,863,000 $ 11,160,000 $ 45,980,000 $ 30,697,000
Net income $ 67,359,000 $ 41,695,000 $ 151,555,000 $ 114,988,000
Net income per share:
Basic $.94 $.61 $2.13 $1.75
Diluted $.84 $.55 $1.91 $1.59
Weighted average shares outstanding:
Basic 71,827,000 67,844,000 71,092,000 65,877,000
Diluted 82,679,000 78,872,000 82,112,000 74,529,000
Cash Provided by Operating Activities
For the Three Months Ended For the Nine Months Ended
September 30 September 30
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2002 2001 2002 2001
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Cash provided by operating activities $ 133,183,000 $ 166,698,000 $ 330,518,000 $ 282,208,000
Summary Balance Sheet Information
September 30 December 31
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2002 2001
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Total stockholders' equity $1,293,234,000 $1,104,452,000
Book value per share $17.92 $16.08
Summary Title Insurance Order Counts
From Direct Operations
For the Three Months Ended
September 30
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2002 2001
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Title orders opened:
July 190,500 145,300
August 222,200 162,600
September 216,700 146,000
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Third quarter total 629,400 453,900
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Title orders closed:
July 131,700 119,200
August 146,000 128,200
September 147,300 106,800
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Third quarter total 425,000 354,200
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(Additional Financial Data Follows)
Selected Financial Data (Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30 September 30
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2002 2001 2002 2001
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RESULTS OF OPERATIONS
Revenues
Operating revenues $ 1,180,114,000 $ 952,776,000 $ 3,289,704,000 $ 2,610,969,000
Investment and other income 22,858,000 22,132,000 61,237,000 58,889,000
Net realized investment gains (losses) (5,888,000) 8,100,000 (18,456,000) 7,933,000
----------------- -------------- ----------------- -------------------
1,197,084,000 983,008,000 3,332,485,000 2,677,791,000
----------------- -------------- ----------------- -------------------
Expenses
Salaries and other personnel costs 381,074,000 331,727,000 1,090,317,000 917,942,000
Premiums retained by agents 322,148,000 255,384,000 915,281,000 661,206,000
Other operating expenses 265,456,000 216,854,000 748,312,000 622,373,000
Provision for title losses and other claims 58,215,000 52,661,000 158,011,000 129,676,000
Depreciation and amortization 23,662,000 27,820,000 72,894,000 77,925,000
Premium taxes 8,889,000 6,758,000 24,481,000 17,470,000
Interest 8,618,000 8,449,000 25,554,000 22,314,000
----------------- ----------------- ----------------- -------------------
1,068,062,000 899,653,000 3,034,850,000 2,448,906,000
----------------- ----------------- ----------------- -------------------
Income before income taxes
and minority interests $ 129,022,000 $ 83,355,000 $ 297,635,000 $ 228,885,000
================= ================= ================= ===================
OPERATING REVENUES
Financial Services
Title Insurance and Services:
Direct operations $ 464,893,000 $ 375,342,000 $ 1,271,670,000 $ 1,050,715,000
Agency operations 393,034,000 317,893,000 1,128,453,000 819,330,000
----------------- ---------------- ----------------- -------------------
857,927,000 693,235,000 2,400,123,000 1,870,045,000
Specialty Insurance 37,426,000 29,156,000 100,318,000 84,248,000
Trust and Other Services 9,647,000 10,419,000 32,341,000 29,305,000
----------------- ---------------- ----------------- -------------------
905,000,000 732,810,000 2,532,782,000 1,983,598,000
----------------- ---------------- ----------------- -------------------
Information Technology
Mortgage Information 119,718,000 104,818,000 336,378,000 295,553,000
Property Information 71,024,000 51,834,000 183,587,000 154,106,000
Credit Information 56,642,000 48,990,000 160,189,000 142,125,000
Screening Information 27,730,000 14,324,000 76,768,000 35,587,000
----------------- ----------------- ----------------- -------------------
275,114,000 219,966,000 756,922,000 627,371,000
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Total Operating Revenues $ 1,180,114,000 $ 952,776,000 $ 3,289,704,000 $ 2,610,969,000
================= ================= ================= ===================
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS
Financial Services
Title Insurance and Services $ 80,026,000 $ 39,102,000 $ 169,788,000 $ 121,263,000
Specialty Insurance 6,014,000 4,638,000 17,855,000 7,755,000
Trust and Other Services 2,443,000 3,421,000 11,255,000 8,423,000
----------------- ---------------- ----------------- -------------------
88,483,000 47,161,000 198,898,000 137,441,000
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Information Technology
Mortgage Information 39,188,000 38,420,000 100,245,000 90,143,000
Property Information 21,405,000 7,491,000 48,070,000 23,803,000
Credit Information 10,943,000 6,559,000 30,827,000 21,181,000
Screening Information 1,120,000 729,000 3,868,000 869,000
----------------- ---------------- ----------------- -------------------
72,656,000 53,199,000 183,010,000 135,996,000
----------------- ---------------- ----------------- -------------------
Total before corporate expenses and
minority interest 161,139,000 100,360,000 381,908,000 273,437,000
Corporate expense 32,117,000 17,005,000 84,273,000 44,552,000
----------------- ---------------- ----------------- -------------------
Income before income taxes and
minority interests $ 129,022,000 $ 83,355,000 $ 297,635,000 $ 228,885,000
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