REGISTRATION NO. 333-56521
FILED PURSUANT TO RULE 424(B)(3)
PROSPECTUS
335,832 COMMON SHARES
THE FIRST AMERICAN FINANCIAL CORPORATION
This Prospectus relates to the public offering and sale of up to
335,832 Common shares, $1.00 par value (the "Shares"), of The First American
Financial Corporation (the "Company"), by certain shareholders of the Company
identified herein under the caption "Selling Shareholders" or by pledgees,
donees, transferees or other successors in interest that receive such shares as
a gift, partnership distribution or other non-sale related transfer
(collectively, the "Selling Shareholders"). The Company will receive no part of
the proceeds of such sales. None of the Shares offered pursuant to this
Prospectus have been registered prior to the filing of the Registration
Statement of which this Prospectus is a part.
The Shares may be offered by the Selling Shareholders from time to time
in one or more transactions on the New York Stock Exchange, in negotiated
transactions or otherwise. See "Plan of Distribution." The price at which any of
the Shares may be sold, and the commissions, if any, paid in connection with any
such sale, are unknown and may vary from transaction to transaction. The Company
will pay all expenses incident to the offering and sale of the Shares to the
public other than any commissions and discounts of underwriters, dealers or
agents and any transfer taxes. See "Selling Shareholders" and "Plan of
Distribution."
The Securities and Exchange Commission (the "Commission") may take the
view that, under certain circumstances, the Selling Shareholders and any
broker-dealers or agents that participate with the Selling Shareholders in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933, as amended. Commissions, discounts or concessions
received by any such broker- dealer or agent may be deemed to be underwriting
commissions under the Securities Act. See "Plan of Distribution."
The Company has informed the Selling Shareholders that the
anti-manipulation provisions of Rules 10b-6 and 10b-7 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") may apply to the public
offering and sale of the Shares included in this Prospectus. The Company also
has advised the Selling Shareholders of the requirements for delivery of this
Prospectus in connection with any sale of the Shares.
THE SHARES ARE TRADED ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL
"FAF." ON JUNE 10, 1998, THE CLOSING PRICE OF THE SHARES ON THE NEW YORK STOCK
EXCHANGE WAS $71-3/4 PER SHARE.
SEE "RISK FACTORS" BEGINNING ON PAGE 1 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS BEFORE MAKING AN INVESTMENT IN THE
SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 18, 1998.
<PAGE>
(inside cover page)
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549; and at the following Regional Offices of the Commission: New York
Regional Office, Seven World Trade Center, 13th Floor, Suite 1300, New York, New
York 10048; and Chicago Regional Office, Citicorp Center, 500 West Madison
Street, 14th Floor, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission also maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding the Company. In addition, such reports, proxy statements
and other information can also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, on which the Shares
listed.
This Prospectus constitutes part of a Registration Statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act. In accordance with the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained in
the Registration Statement and the exhibits and schedules thereto. For further
information concerning the Company and the Shares offered hereby, reference is
hereby made to the Registration Statement and the exhibits and schedules filed
therewith which may be obtained at the Commission's offices whose addresses are
listed above. The Registration Statement has been filed electronically and may
be obtained at the Commission's Web site listed above. Any statements contained
herein concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF DOCUMENTS BY REFERENCE
The documents listed in (1), (2), (3), (4), (5), (6), (7), (8) and (9)
below are incorporated by reference in this Prospectus, and all documents filed
by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of any offering of securities made by this Prospectus, shall
be deemed to be incorporated by reference in this Prospectus and to be part
hereof from the date of filing of such documents. Any statement contained
herein, or in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement.
<PAGE>
(inside cover page continued)
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998.
(3) The Company's Report on Form 8-K dated January 23, 1998.
(4) The Company's Report on Form 8-K dated January 27, 1998.
(5) The Company's Report on Form 8-K dated March 18, 1998.
(6) The Company's Report on Form 8-K dated March 31, 1998.
(7) The Company's Report on Form 8-K dated April 7, 1998.
(8) The description of the Shares contained in the Company's Registration
Statement on Form 8-A registering its Common shares, par value $1.00
per share, under Section 12(b) of the Exchange Act, dated November 23,
1993.
(9) The description of certain Rights to Purchase Series A Junior
Participating Preferred Shares which may be transferred with the
Company's Common shares, which description is contained in the
Company's Registration Statement on Form 8-A, under Section 12(b) of
the Exchange Act, dated November 7, 1997.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED UPON FIVE BUSINESS
DAYS' WRITTEN OR ORAL REQUEST OF MARK R ARNESEN, VICE PRESIDENT AND SECRETARY,
THE FIRST AMERICAN FINANCIAL CORPORATION, 114 EAST FIFTH STREET, SANTA ANA,
CALIFORNIA 92701-4642; TELEPHONE NUMBER (714) 558-3211.
FORWARD-LOOKING STATEMENTS
Except for historical information contained in this Prospectus and in
the documents incorporated in this Prospectus by reference, the matters
discussed herein and therein contain forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those suggested in the forward- looking statements, including, without
limitation, the effect of economic conditions, interest rates, market demand,
competition and other risks detailed herein and in the Company's other filings
with the Commission.
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should consider carefully the following risk factors before making an
investment in the Shares. To the extent any of the information contained or
incorporated by reference in this Prospectus constitutes a "forward-looking
statement" as defined in Section 21E(i)(1) of the Exchange Act, the risk factors
set forth below are cautionary statements identifying important factors that
could cause actual results to differ materially from those in the
forward-looking statement. See "Forward-Looking Statements."
VOLATILITY OF SHARE PRICE
The market price of the Shares could be subject to significant
fluctuations in response to variations in financial results or announcements of
material events by the Company or its competitors. Regulatory changes,
developments in the real estate services industry or changes in general
conditions in the economy or the financial markets could also adversely affect
the market price of the Shares.
CYCLICAL NATURE OF REAL ESTATE MARKET
Substantially all of the Company's title insurance, tax monitoring,
credit reporting, flood zone determination and property information business
results from resales and refinancings of real estate, including residential and
commercial properties, and from the construction and sale of new properties. The
Company's home warranty business results from residential resales and does not
benefit from refinancings or commercial transactions. Resales and refinancings
of residential properties constitute the major source of the Company's revenues.
Real estate activity is cyclical in nature and is affected greatly by the cost
and availability of long term mortgage funds. Real estate activity and, in turn,
the Company's revenue base, can be adversely affected during periods of high
interest rates and/or limited money supply. However, this adverse effect is
mitigated in part by the continuing diversification of the Company's operations
into areas outside of its traditional title insurance business.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
As a key component of its growth strategy, the Company has pursued and
is pursuing acquisitions in the real estate-related financial services industry.
Certain risks are inherent in an acquisition strategy, such as increasing
leverage and debt service requirements and combining disparate company cultures
and facilities, which could adversely affect the Company's financial position
and operating results. The success of any completed acquisition will depend in
part on the Company's ability to integrate effectively the acquired businesses
into the Company. This process may involve unforeseen difficulties and may
require a disproportionate amount of management's attention and the Company's
financial and other resources. No assurance can be given that additional
suitable acquisition candidates will be identified, financed and purchased on
acceptable terms, or that recent acquisitions or future acquisitions, if
completed, will be successful.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon the continued services of
the Company's senior management, particularly its President, Parker S. Kennedy,
its Chairman and Director, D.P. Kennedy, and its Executive Vice President and
Chief Financial Officer, Thomas A. Klemens. The loss of the services of any of
these individuals could have a material adverse effect on the Company's
financial position and results of operations. The Company's success also depends
on its ability to attract and retain other highly qualified managerial
personnel.
YEAR 2000 COSTS
Currently, many computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. The Company and third parties with which the Company does business
rely on numerous computer programs in their day to day operations. The Company
is evaluating the Year 2000 issue as it relates to the Company's internal
computer systems and third party computer systems with which the Company
interacts. The Company expects to incur internal staff costs as well as
consulting and other expenses related to these issues; these costs will be
expensed as incurred. In addition, the appropriate course of action may include
replacement or an upgrade of certain systems or equipment at a substantial cost
to the Company. There can be no assurance that the Year 2000 issues will be
resolved in 1998 or 1999. The Company may incur significant costs in resolving
its Year 2000 issues. If not resolved, this issue could have a significant
adverse impact on the Company's operations.
GOVERNMENT REGULATION
The title insurance industry is subject to extensive governmental
regulation. Applicable laws and their interpretation vary from state to state
and are enforced with broad discretion. There can be no assurance that any
review of the Company's operations and business relationships by courts or other
regulatory authorities will not result in determinations that could adversely
affect the Company or that the regulatory environment will not change to
restrict the Company's existing or future operations.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. All proceeds from the sale of the Shares will be for the account of the
Selling Shareholders, as described below. See "Selling Shareholders" and "Plan
of Distribution."
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth as of the date of this Prospectus, the
name of each of the Selling Shareholders, the number of Shares that each such
Selling Shareholder owns as of such date, the number of Shares owned by each
Selling Shareholder that may be offered for sale from time to time by this
Prospectus, the number of Shares to be held by each such Selling Shareholder
assuming the sale of all the Shares offered hereby and, by footnote, any
position or office held or material relationship with the Company or any of its
affiliates within the past three years other than as a result of the ownership
of Shares. The Company may amend or supplement this Prospectus from time to time
to update the disclosure set forth therein.
<TABLE>
<CAPTION>
- -------------------------------------- --------------------------------- ---------------- --------------------------------
NUMBER OF
SHARES TO BE SHARES OWNED OF RECORD
SHARES OWNED OF RECORD OFFERED FOR AFTER COMPLETION OF THE
PRIOR TO THE OFFERING THE SELLING OFFERING
SHAREHOLDER'S
NAME OF SELLING SHAREHOLDER NUMBER PERCENTAGE ACCOUNT NUMBER PERCENTAGE
- -------------------------------------- ------------------------------ ---------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Scott Cooley(1) 242,188 1.3% 242,188 0 0.00%
Stephen Evans(2) 43,020 * 41,925 1,095 *
Florida Title & Abstract Company 37,013 * 37,013 0 0.00%
The First American Financial
Foundation(3) 14,742 * 14,742 0 0.00%
</TABLE>
- ------------------------------------------
* Less than one percent.
(1) Mr. Cooley is the President of Contour Software, Inc., an indirectly
wholly-owned subsidiary of the Company.
(2) Mr. Evans is the President of Evans Title Companies, Inc., an indirect
wholly-owned subsidiary of the Company.
(3) D.P. Kennedy, Parker S. Kennedy and Thomas A. Klemens, Chairman, President
and Executive Vice President and Chief Financial Officer, respectively, of the
Company serve as three of the five directors of The First American Financial
Foundation. D.P. Kennedy and Parker S. Kennedy are also directors of the
Company.
<PAGE>
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from time
to time by the Selling Shareholders. The Selling Shareholders will act
independently of the Company 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, at prices and
under terms then prevailing or at prices related to the then current market
price, at varying prices or at negotiated prices. The Shares may be sold,
without limitation, by one or more of the following means of distribution: (a) 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; (b) purchases by a broker-dealer as principal and
resale by such broker-dealer for its own account pursuant to this Prospectus;
(c) a distribution in accordance with the rules of the New York Stock Exchange;
(d) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and (e) 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 such transactions,
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 may, at the
option of the holder thereof, be sold under Rule 144 rather than pursuant to
this Prospectus.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Shareholder and/or purchasers of the Shares
offered hereby (and, if it acts as agent for the purchaser of such Shares, from
such purchaser). Usual and customary brokerage fees will be paid by the Selling
Shareholder. Broker-dealers may agree with the Selling Shareholder 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
Shareholder, to purchase as principal any unsold Shares at the price required to
fulfill the broker-dealer commitment to the Selling Shareholder. Broker-dealers
who acquire Shares as principal may thereafter resell such 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.
The Company has 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, the Company will make copies of this
Prospectus available to the Selling Shareholders and has informed them of the
need for delivery of copies of this Prospectus 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 certain liabilities, including liabilities arising under
the Securities Act.
At the time a particular offer of Shares is made, if required, a
Prospectus Supplement 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.
The Company has agreed with the Selling Shareholders to keep the
Registration Statement of which this Prospectus constitutes a part effective
until the first to occur of (i) June 10, 1999 and (ii) such time as all of
Shares offered by the Selling Shareholders listed above have been sold. The
Company intends to de-register any of the Shares not sold by the Selling
Shareholders by June 10, 1999.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by White & Case LLP, Los Angeles, California.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 1997, have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
* * *
<PAGE>
(outside back cover page)
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR ANY OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES, IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER
OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
Prospectus
335,832 COMMON SHARES
THE FIRST AMERICAN
FINANCIAL CORPORATION
Dated June 18, 1998
TABLE OF CONTENTS
Available Information............................(i)
Incorporation of Documents by Reference..........(i)
Forward-Looking Statements.......................(ii)
Risk Factors.....................................1
Use of Proceeds..................................2
Selling Shareholders.............................3
Plan of Distribution.............................4
Legal Matters....................................5
Experts ........................................5
