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) February 11, 2004
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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 7. Exhibits.
Exhibit No. Description
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99.1 Press Release.
Item 12. Results of Operations and Financial Condition.
On February 11, 2004, The First American Corporation announced its
financial results for the fourth quarter and year ended December 31, 2003. The
full text of the press release issued in connection with the announcement is
attached hereto as Exhibit 99.1.
The information in this current report and the exhibit hereto is being
"furnished" pursuant to Item 12 of Form 8-K. As such, this information is not
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act and is not incorporated by reference into any filings with the SEC unless it
shall be explicitly so incorporated in such filings.
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: February 11, 2004 By: /s/ Thomas A. Klemens
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Name: Thomas A. Klemens
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT 99.1
THE FIRST AMERICAN CORPORATION REPORTS RECORD RESULTS
FOR THE FOURTH QUARTER AND FULL YEAR 2003
- Net Income for the Quarter Increases 14 Percent -
SANTA ANA, Calif., Feb. 11, 2004 - The First American Corporation (NYSE: FAF),
the nation's largest data provider, today announced all-time record results for
the fourth quarter and year ended Dec. 31, 2003:
Three Months Ended Twelve Months Ended
December 31 December 31
----------------------------------- -----------------------------------
2003 2002 2003 2002
----------------------------------- -----------------------------------
Total revenues $ 1.61 billion $ 1.37 billion $ 6.21 billion $ 4.70 billion
Income before income taxes
and minority interests $174.7 million $152.3 million $838.7 million $449.9 million
Net income $ 94.1 million $ 82.8 million $451.0 million $234.4 million
Net income per diluted share $1.07 $1.01 $5.22 $2.92
Summary of Operations
"2003 was an exceptionally strong year," stated Parker S. Kennedy,
president and chief executive officer of The First American Corporation. "In our
real estate-related businesses, continued low interest rates generated record
home sales and mortgage originations paving the way for First American's record
results in the company's Financial Services and Information Technology groups.
Our other businesses, such as subprime credit information, screening
information, auto credit and other data products, respond to different cycles
and generally will experience strong sales as the national economy improves."
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Quarterly Financial Highlights
Financial Services Group:
o Revenues for the fourth quarter 2003 were $1.21 billion, an increase
of 14.1 percent when compared with $1.06 billion for the fourth
quarter of 2002.
o Pretax income was $109.3 million, a decrease of 1.4 percent when
compared with $110.8 million in the prior year quarter.
o Pretax margins declined to 9.0 percent compared with 10.4 percent for
the fourth quarter 2002.
Information Technology Group:
o Revenues for the fourth quarter 2003 were $394.7 million, an increase
of 26.6 percent when compared with $311.8 million for the prior year
quarter.
o Pretax income was $90.8 million, an increase of 18 percent when
compared with $77.0 million in the prior year quarter.
o Pretax margins declined to 23 percent compared with 24.7 percent for
the fourth quarter 2002.
2004 Outlook
Kennedy continued: "On the real estate side of our company, as our mix of
business has shifted to residential resale and builder business and away from
heavy refi activities, 2004 will follow a typical seasonal pattern not seen in
the past 2 1/2 years. Our first quarter will be slow due to weather conditions,
with improvements beginning in the spring and summer months. Looking ahead, we
believe 2004 in total will be another strong year enhanced by our FAST
technology solutions, off-shore production, data leverage and bundling of
products and services, resulting in opportunities to increase market share and
deliver solid bottom-line results.
"Our recent acquisition of Transamerica's tax and flood businesses
positively impacted our fourth-quarter results. The integration is ahead of
schedule. The combination of the Transamerica businesses with our existing tax
service and flood certification divisions creates the dominant provider in each
product line.
"As First American becomes more widely recognized as the leading provider
of data and information to the real estate, business, automobile and consumer
industries, we expect to fully maximize shareholder value."
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Teleconference/Webcast
First American's fourth-quarter and year-end results will be discussed in
more detail on Wednesday, Feb.11, 2004, at 10 a.m. EST via teleconference. The
dial-in number is (888) 955-3516 and the pass code is FIRST AMERICAN. The live
audio webcast of the call will be available on First American's Web Site at
www.firstam.com/investor. An audio replay of the conference call will be
available through Feb. 17, 2004, by dialing (402) 344-6816. An audio archive of
the call will also be available for replay on First American's Web site. In
addition, a copy of the fourth quarter and 2003 year end earnings release,
including the financial information contained herein, will be available on the
company's Web site at www.firstam.com/news.
About First American
The First American Corporation is a Fortune 500 company that traces its
history to 1889. As the nation's largest data provider, the company supplies
businesses and consumers with information resources in connection with 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 $6.2 billion in 2003, First American has nearly 30,000
employees in approximately 1,400 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.
Forward-Looking Statements
Certain statements made in this press release, including those related to
business in 2004, business in the first quarter of 2004, and shareholder
value are forward looking. Risks and uncertainties exist that 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; access
to public records and other data; 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, 2002, as 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.
(Additional Financial Data Follows)
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Summary of Earnings
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31 December 31
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2003 2002 2003 2002
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Total revenues $1,612,066 $1,374,391 $6,213,714 $4,704,209
Income before income taxes and minority interests $ 174,717 $ 152,272 $ 838,722 $ 449,907
Income taxes $ 60,800 $ 49,800 $ 292,000 $ 149,900
Minority interests $ 19,798 $ 19,660 $ 95,700 $ 65,640
Net income $ 94,119 $ 82,812 $ 451,022 $ 234,367
Net income per share:
Basic $1.20 $1.13 $5.89 $3.27
Diluted $1.07 $1.01 $5.22 $2.92
Weighted average shares outstanding:
Basic 78,288 73,101 76,632 71,594
Diluted 89,690 83,935 87,775 82,567
Cash Provided by Operating Activities
(in thousands)
Three Months Ended Twelve Months Ended
December 31 December 31
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2003 2002 2003 2002
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Cash provided by operating activities $ 172,112 $ 210,089 $ 831,337 $ 540,607
Summary Balance Sheet Information
(in thousands, except per share amounts)
December 31 December 31
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2003 2002
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Total stockholders' equity $1,879,520 $1,364,589
Book value per share $23.84 $18.53
Summary Title Insurance Order Counts
From Direct Operations
Three Months Ended
December 31
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2003 2002
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Title orders opened:
October 182,600 236,400
November 142,500 195,600
December 158,700 174,700
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Fourth quarter total 483,800 606,700
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Title orders closed:
October 162,000 176,500
November 128,800 154,800
December 152,100 165,300
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Fourth quarter total 442,900 496,600
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(Additional Financial Data Follows)
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Selected Financial Data
(Unaudited)
(in thousands)
Three Months Ended Twelve Months Ended
December 31 December 31
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2003 2002 2003 2002
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RESULTS OF OPERATIONS
Revenues
Operating revenues $ 1,572,326 $ 1,346,241 $ 6,072,189 $ 4,633,278
Investment and other income 23,916 28,586 105,808 89,823
Net realized investment gains (losses) 15,824 (436) 35,717 (18,892)
--------------------------------- ---------------------------------
1,612,066 1,374,391 6,213,714 4,704,209
--------------------------------- ---------------------------------
Expenses
Salaries and other personnel costs 462,415 432,878 1,799,553 1,523,195
Premiums retained by agents 477,107 377,016 1,729,104 1,292,297
Other operating expenses 350,156 303,480 1,319,875 1,049,125
Provision for title losses and other claims 88,298 66,578 324,404 224,589
Depreciation and amortization 34,720 23,935 114,424 96,829
Premium taxes 14,721 10,177 51,535 34,658
Interest 9,932 8,055 36,097 33,609
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1,437,349 1,222,119 5,374,992 4,254,302
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Income before income taxes and minority interests $ 174,717 $ 152,272 $ 838,722 $ 449,907
================================= =================================
OPERATING REVENUES
Financial Services
Title Insurance and Services:
Direct operations $ 543,791 $ 532,105 $ 2,264,925 $ 1,803,775
Agency operations 590,673 461,364 2,138,059 1,589,817
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1,134,464 993,469 4,402,984 3,393,592
Specialty Insurance 55,074 42,989 207,287 143,307
Trust and Other Services 8,916 9,396 39,546 41,737
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1,198,454 1,045,854 4,649,817 3,578,636
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Information Technology
Mortgage Information 182,847 142,910 642,684 479,288
Property Information 88,017 75,728 366,271 259,315
Credit Information 53,143 55,148 246,987 215,337
Screening Information 49,865 26,601 166,430 100,702
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373,872 300,387 1,422,372 1,054,642
--------------------------------- ---------------------------------
Total operating revenues $ 1,572,326 $ 1,346,241 $ 6,072,189 $ 4,633,278
================================= =================================
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS
Financial Services
Title Insurance and Services $ 100,667 $ 101,932 $ 494,946 $ 271,720
Specialty Insurance 7,304 6,610 30,125 24,465
Trust and Other Services 1,280 2,293 9,683 13,548
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109,251 110,835 534,754 309,733
--------------------------------- ---------------------------------
Information Technology
Mortgage Information 65,325 46,604 238,508 146,849
Property Information 22,530 23,389 105,339 71,459
Credit Information 4,726 8,439 64,291 39,266
Screening Information (1,753) (1,409) 4,505 2,459
--------------------------------- ---------------------------------
90,828 77,023 412,643 260,033
--------------------------------- ---------------------------------
Total before corporate expenses and
minority interest 200,079 187,858 947,397 569,766
Corporate expense 25,362 35,586 108,675 119,859
--------------------------------- ---------------------------------
Income before income taxes and minority interests $ 174,717 $ 152,272 $ 838,722 $ 449,907
================================= =================================
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Segment Margins
(in thousands, except percentages)
Three Months Ended December 31
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Total revenues Pretax (A) Margins
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2003 2002 2003 2002 2003 2002
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Financial Services
Title Insurance and Services $ 1,147,252 $ 1,010,195 $ 100,667 $ 101,932 8.8% 10.1%
Specialty Insurance 58,667 45,362 7,304 6,610 12.4% 14.6%
Trust and Other Services 9,008 9,266 1,280 2,293 14.2% 24.8%
-------------- -------------- -------------- -------------- -------------- --------------
$ 1,214,927 $ 1,064,823 $ 109,251 $ 110,835 9.0% 10.4%
============== ============== ============== ============== ============== ==============
Information Technology
Mortgage Information $ 199,327 $ 145,398 $ 65,325 $ 46,604 32.8% 32.1%
Property Information 92,552 82,940 22,530 23,389 24.3% 28.2%
Credit Information 52,893 56,793 4,726 8,439 8.9% 14.9%
Screening Information 49,900 26,648 (1,753) (1,409) -3.5% -5.3%
-------------- -------------- -------------- -------------- -------------- --------------
$ 394,672 $ 311,779 $ 90,828 $ 77,023 23.0% 24.7%
============== ============== ============== ============== ============== ==============
Twelve Months Ended December 31
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Total revenues Pretax (A) Margins
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2003 2002 2003 2002 2003 2002
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Financial Services
Title Insurance and Services $ 4,455,238 $ 3,437,726 $ 494,946 $ 271,720 11.1% 7.9%
Specialty Insurance 219,837 153,205 30,125 24,465 13.7% 16.0%
Trust and Other Services 39,645 41,687 9,683 13,548 24.4% 32.5%
-------------- -------------- -------------- -------------- -------------- --------------
$ 4,714,720 $ 3,632,618 $ 534,754 $ 309,733 11.3% 8.5%
============== ============== ============== ============== ============== ==============
Information Technology
Mortgage Information $ 668,765 $ 485,206 $ 238,508 $ 146,849 35.7% 30.3%
Property Information 390,151 279,754 105,339 71,459 27.0% 25.5%
Credit Information 267,074 221,761 64,291 39,266 24.1% 17.7%
Screening Information 166,536 100,888 4,505 2,459 2.7% 2.4%
-------------- -------------- -------------- -------------- -------------- --------------
$ 1,492,526 $ 1,087,609 $ 412,643 $ 260,033 27.6% 23.9%
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(A) - Income before income taxes, minority interests and corporate expenses
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