REGISTRATION NO. 333-56521
FILED PURSUANT TO RULE 424(B)(3)
PROSPECTUS
3,000,000 COMMON SHARES
THE FIRST AMERICAN FINANCIAL CORPORATION
This prospectus (this "Prospectus") relates to the offering from time to
time by The First American Financial Corporation (the "Company"), a California
corporation, of up to 3,000,000 aggregate amount of its Common shares, $1.00 par
value (the "Shares"), upon terms to be determined at the time of each such
offering.
The Shares are to be offered directly by the Company in connection with the
acquisition from time to time of the assets of, or ownership interests in,
certain entities engaged in the same or similar lines of business as the Company
or any of its subsidiaries. The consideration for such acquisitions will consist
of Shares, cash, notes or other evidences of indebtedness, guarantees,
assumption of liabilities, tangible or intangible property, or a combination
thereof, as determined from time to time by negotiations between the Company and
the owners or controlling persons of the assets or ownership interests to be
acquired.
The Company contemplates that the specific terms of an acquisition will be
determined by negotiations between the Company and the owners or controlling
persons of the assets or ownership interests to be acquired. Factors taken into
account in selecting an acquisition include, among other relevant factors, the
quality and reputation of the business to be acquired, the assets, liabilities,
results of operations and cash flows of the business, the quality of its
management and employees, its earnings potential, the geographic locations of
the business and the current market value of the Shares. The Company anticipates
that Shares issued in any such acquisition will be valued at a price reasonably
related to the market value of the Shares, either at the time the terms of the
acquisitions are tentatively agreed upon, or at or about the time of closing, or
during the period or periods prior to the delivery of the Shares.
The Company does not expect that underwriting discounts or commissions will
be paid, except that finders fees may be paid to persons from time to time in
connection with specific acquisitions. Any person receiving such fees may be
deemed an "underwriter" within the meaning of the Securities Act of 1933 (the
"Securities Act").
Shares issued pursuant to this Prospectus, and any applicable supplement to
this Prospectus (a "Supplement") or post-effective amendment (a "Post-Effective
Amendment") may be reoffered pursuant hereto by the holders thereof (the
"Selling Shareholders") from time to time in transactions on the open market, in
negotiated transactions, through the writing of options on such Shares or
through a combination of such methods of sale, at negotiated prices, fixed
prices which may be changed, market prices prevailing at the time of sale or
prices relating to such prevailing prices. See "Selling Shareholders."
THE SHARES ARE TRADED ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL
"FAF." ON AUGUST 19, 1998, THE CLOSING PRICE OF THE SHARES ON THE NEW YORK STOCK
EXCHANGE WAS $32.1875.
SEE "RISK FACTORS" BEGINNING ON PAGE 1 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS BEFORE MAKING AN INVESTMENT IN THE
SHARES.
(COVER PAGE CONTINUED)
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 AUGUST 21, 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-4
(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), (9), (10)
and (11) 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 Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1998.
(4) The Company's Report on Form 8-K dated January 23, 1998.
(5) The Company's Report on Form 8-K dated January 27, 1998.
(6) The Company's Report on Form 8-K dated March 18, 1998.
(7) The Company's Report on Form 8-K dated March 31, 1998.
(8) The Company's Report on Form 8-K dated April 7, 1998.
(9) The Company's Report on Form 8-K dated June 26, 1998.
(10) 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 19, 1993.
(11) 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.
THE FIRST AMERICAN FINANCIAL CORPORATION
OVERVIEW
The Company was organized in 1894 as Orange County Title Company,
succeeding to the business of two title abstract companies founded in 1889 and
operating in Orange County, California. In 1924, the Company commenced issuing
title insurance policies. In 1986, the Company began a diversification program
by acquiring and developing financial service businesses closely related to the
real estate transfer and closing process. The Company is a California
corporation whose executive offices are located at 114 East Fifth Street, Santa
Ana, California 92701-4642, and its telephone number is (714) 558-3211.
The Company, through its subsidiaries, is engaged in the business of
providing real estate-related financial and informational services to real
property buyers and mortgage lenders. The Company's products and services
include title insurance, tax monitoring, credit reporting, property data
services, flood certification, field inspection services, appraisal services,
mortgage loan servicing systems, mortgage document preparation and home warranty
services. The Company also provides investment, trust and thrift services.
Through growth and acquisitions, the Company believes it has become the
United States' largest provider of real estate-related financial and
informational services. The Company has assembled an array of companies which,
together, provide comprehensive services to the mortgage industry, commercial
and residential real estate developers, home buyers and other customers.
BUSINESS SEGMENTS
TITLE INSURANCE
Title insurance policies are insured statements of the condition of title
to real property, showing priority of ownership as indicated by public records,
as well as outstanding liens, encumbrances and other matters of record, and
certain other matters not of public record. Policies are issued based on a title
report prepared after a search of public records, maps, and documents and are
typically issued when a title is transferred.
Before issuing title policies, title insurers seek to limit their risk of
loss by accurately performing title searches and examinations. The major
expenses of a title company relate to such searches and examinations, the
preparation of preliminary reports or commitments and the maintenance of title
plants, and not from claim losses as in the case of property and casualty
insurers.
As of the date of this Prospectus, the Company, through its subsidiary,
First American Title Insurance Company, and its other subsidiaries, transacts
its title insurance business through a network of more than 300 branch offices
and more than 4,000 independent agents. In 1997, the Company's title insurance
operations generated $1.46 billion in operating revenues.
REAL ESTATE INFORMATION SERVICES
In recent years management has developed a strategy to be a "one-stop" real
estate information service company. To this end, in 1991 the Company acquired
what was believed to be the second largest tax service company, and in 1995
acquired what were believed to be, in each case, the largest mortgage credit
reporting company and the largest flood zone determination company, in the
United States.
In general, the Company's real estate information service products generate
higher margins than its title insurance products. The majority of pre-tax
profits generated by the Company from non-title business is derived from the
real estate services business, which generated $45.3 million in pre-tax profits
in 1997 and $331.4 million in operating revenues. Approximately 29% of the
Company's pre-tax profits in 1997 were derived from its real estate information
services businesses. These businesses are not regulated and hence not
constrained by dividend statutes enforceable by the states in which the Company
operates its title business or by constraints imposed by California on the
Company's trust and banking business.
First American Real Estate Information Services, Inc. ("FAREIS") has grown
from its tax service origins into a diversified mortgage services company.
FAREIS and its subsidiaries serve mortgage originators, mortgage servicers,
title companies, real estate attorneys and consumers as well as non-lending
entities. The business was initially established in 1987 to advise mortgage
lenders as to the status of tax payments on real property securing their loans.
The Company's real estate information services also includes mortgage and other
credit reporting services, flood zone determinations, mortgage loan servicing
systems, property inspections, appraisal services and mortgage document
preparation.
The tax service business includes both real estate tax reporting as well as
tax outsourcing and tax certification. The Company's tax service business
reports on approximately 11 million properties annually and is believed to be
the second largest provider of tax services to the real estate market. The
Company works with over 22,000 taxing authorities nationwide.
First American CREDCO, Inc. ("CREDCO"), the Company's mortgage credit
reporting entity, is believed by the Company to be the largest provider of these
services in the United States and processes over 600,000 credit reports per
month. CREDCO provides residential mortgage credit reports, prequalifying
reports, merged credit data, resident screening services, business reports,
credit scoring tools and personal credit reports. CREDCO has recently branched
into the consumer lending and risk scoring areas, providing credit reporting and
information management services to automobile dealers, consumers and home equity
lenders nationwide. Approximately 25% of CREDCO's 1997 revenues were from
non-real estate related sources.
The Company is the leading provider of flood zone determinations. Flood
reporting services consist of a broad range of information required by
regulatory agencies regarding properties in relation to flood zones. This
business currently processes over 400,000 flood determinations per month.
The property/field services business consists of processing single family
home inspections, conducting field interviews with delinquent mortgagors,
monitoring the condition of properties and assuring timely property
preservation. The Company's acquisition in December 1996 of Ward Associates
places the Company among the leaders in this business.
The appraisal services business utilizes leading technology to provide
national mortgage lenders with property-relative value assessments. The
appraisal services business operates throughout the United States. Electronic
appraisals are supplemented with qualified local appraisers.
In April 1996, the Company acquired the Excelis Mortgage Loan Servicing
System ("Excelis MLS"), now known as Excelis, Inc. Excelis MLS is the only
commercially available real-time on-line servicing system that has been
developed since 1990 to meet increasingly sophisticated market demands. The
software employs rules-based technology, which enables the user to customize the
system to fit its individual servicing criteria and policies.
In May 1997, the Company purchased all of the operations of Strategic
Mortgage Services, Inc. ("SMS"), other than SMS's flood zone determination
business. SMS is a leading provider of real estate information services to the
U.S. mortgage and title insurance industries. The acquired businesses include
SMS's credit division, which the Company believes is the third largest provider
of U.S. mortgage credit information; SMS's property appraisal division, which
the Company believes is the second largest provider of U.S. appraisal services;
SMS's title division, which provides title and closing services throughout the
United States, servicing primarily second mortgage originators; SMS's settlement
services business, which provides title plant systems and accounting services,
as well as escrow closing software, to the title industry; and a controlling
interest in what is believed by the Company to be the largest mortgage document
preparation firm.
On January 1, 1998, the Company and its real estate information service
subsidiaries (other than Excelis Inc.) (the "Real Estate Information
Subsidiaries") consummated a joint venture with Experian Information Solutions,
Inc. ("Experian"), pursuant to which First American Real Estate Solutions LLC
("FARES") was established. Under the joint venture, the Real Estate Information
Subsidiaries contributed substantially all of their assets and liabilities to
FARES in exchange for an 80% ownership interest and Experian transferred
substantially all of the assets and liabilities of its Real Estate Solutions
division ("RES") to FARES in exchange for a 20% ownership interest. The Company
believes that RES is the nation's foremost supplier of core real estate data,
providing, among other things, property valuation information, title
information, tax information and imaged title documents. As a result of this
joint venture, the Company believes that FARES is the nation's largest and most
diverse provider of information technology and decision support solutions for
the mortgage and real estate industries. See the Company's Report on Form 8-K
dated January 27, 1998, which is incorporated by reference herein.
On April 16, 1998, the Company acquired Contour Software, the largest
supplier of mortgage origination software to the mortgage loan industry.
On June 3, 1998, the Company acquired Data Tree Corporation, a supplier of
database management and document imaging systems to county recorders,
governmental agencies and the title industry. See also the Company's Report on
Form 8-K dated March 31, 1998 and incorporated by reference herein.
HOME WARRANTY
The Company currently owns 89.6% of its home warranty business, First
American Home Buyers Protection Corporation ("Home Buyers"), with the remaining
balance owned by current and former management of this subsidiary. The home
warranty business issues one-year warranties which protect homeowners against
defects in household systems and appliances such as plumbing, water heaters, and
furnaces. The warranties issued are for household systems and appliances only,
not for the homes themselves. The Company's home warranty business currently
operates in certain counties of Arizona, California, Nevada, North Carolina,
South Carolina, Texas, Utah and Washington. The Company's home warranty business
is one of the largest in the United States based on contracts under service,
with $46.9 million in operating revenues in 1997.
TRUST AND THRIFT
Since 1960, the Company has conducted a general trust business in Southern
California. In 1985, the Company formed a banking subsidiary into which its
subsidiary trust operation was merged. As of December 31, 1997, the trust
operations were administering fiduciary and custodial assets having a market
value in excess of $1.3 billion.
During 1988, the Company, through a majority owned subsidiary, acquired an
industrial loan corporation (the "Thrift") that accepts thrift deposits and uses
deposited funds to originate and purchase loans secured by commercial properties
in Southern California. The loans made by the Thrift currently range in amount
from $20,000 to $1,105,000, with an average loan balance of $270,500. Loans are
made only on a secured basis, at loan-to-value percentages no greater than 75%.
The Thrift specializes in making commercial real estate loans and financing
commercial equipment leases. In excess of 93% of the Thrift's loans are made on
a variable rate basis. The average yield on the Thrift's loan portfolio as of
December 31, 1997, was 11%. The Thrift's average loan is 60 months in duration.
Current deposits total $62.5 million and the loan portfolio totals $65.5
million.
RECENT DEVELOPMENTS
On April 7, 1998, the Company announced the issuance of $100,000,000
aggregate principal amount of its 7.55% senior debentures due 2028. The terms of
the senior debentures are defined under an indenture dated as of April 7, 1998
between the Company and The Wilmington Trust Company, as trustee. See also the
Company's Report on Form 8-K dated April 7, 1998.
On July 31, 1998, the Company acquired ShadowNet Mortgage Technologies, LLC
("ShadowNet"). In connection therewith, the Company issued 291,666 of the Shares
registered under the Registration Statement. ShadowNet is a provider of
electronic mortgage document delivery systems and will conduct its business
under the First American Nationwide Documents brand name.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated financial
and other data for the Company for the five years ended December 31, 1997 and
for the quarterly periods ended March 31, 1997 and 1998. The summary is
qualified in its entirety by reference to the financial statements and other
information contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, incorporated by reference herein.
[The rest of this page has been intentionally left blank.]
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended
June 30,
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Operating revenues $1,379,781 $1,356,946 $1,227,185 $1,571,168 $1,860,205 $819,872 $1,257,077
Investment and other
income $18,645 $19,447 $23,031 $26,398 $27,256 $13,379 $52,255
------------ ------------- ------------- ------------ ------------ ------------ -----------
$1,398,426 $1,376,393 $1,250,216 $1,597,566 $1,887,461 $833,251 $1,309,332
Expenses:
Salaries and other
personnel costs $397,902 $423,328 $431,984 $531,250 $647,750 $298,599 $418,189
Premiums retained by
agents $504,375 $533,598 $413,444 $516,593 $563,137 $251,155 $335,027
Other operating
expenses $222,934 $232,532 $257,823 $322,709 $411,319 $175,649 $284,336
Provision for title
losses and other claims $125,588 $110,230 $90,387 $86,487 $90,323 $41,049 $59,531
Depreciation and
amortization $16,333 $19,796 $20,790 $27,242 $38,149 $18,141 $28,303
Interest $4,419 $6,267 $6,242 $4,796 $9,994 $3,660 $9,019
Minority interest $5,267 $2,944 $2,132 $2,624 $3,676 $1,294 $16,171
------------ ------------- ------------ ------------ ------------ ------------- ----------
$1,276,818 $1,328,695 $1,222,802 $1,491,701 $1,764,348 $789,547 $1,150,576
Income before premium
and income taxes $121,608 $47,698 $27,414 $105,865 $123,113 $43,704 $158,756
Premium taxes $17,617 $15,453 $13,627 $16,676 $16,904 $8,722 $9,385
--------- ------- ------- --------- ---------- ------ ---------
Income before income
taxes $103,991 $32,245 $13,787 $89,189 $106,209 $34,982 $149,371
Income taxes $41,900 $13,300 $6,200 $35,600 $41,500 $13,600 $59,300
--------- ------- ------ ------- ------- ------- -------
Income before cumulative
effect of a change in
accounting for income $62,091 $18,945 $7,587 $53,589 $64,709 $21,382 $90,071
taxes
Cumulative effect of a
change in accounting for
income taxes $4,200 -- -- -- -- -- --
--------- ------- ------ ------- ------- ------- -------
Net income $66,291 $18,945 $7,587 $53,589 $64,709 $21,382 $90,071
EARNINGS PER SHARE
DATA:
Basic (1)(3) $1.30 $0.37 $0.15 $1.04 $1.24 $0.41 $1.69
Diluted (1)(3) $1.30 $0.37 $0.15 $1.03 $1.21 $0.40 $1.63
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, June 30,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and invested assets $359,127 $368,999 $340,089 $364,620 $411,014 $610,702
Total assets $786,448 $828,649 $873,778 $979,794 $1,168,144 $1,598,282
Notes and contracts payable $85,022 $89,600 $77,206 $71,257 $41,973 $145,032
Guaranteed preferred
beneficial interests in the
Company's junior
subordinated deferrable
interested debenture -- -- -- -- $100,000 $100,000
Total stockholders' equity $283,718 $292,110 $302,767 $352,465 $411,412 $576,926
OTHER DATA:
Loss ratio 9.1% 8.1% 7.4% 5.5% 4.9% 4.7%
Ratio of debt to total
capitalization (2) 21.5% 22.1% 19.1% 16.0% 7.3% 16.0%
Cash dividends per share (3) $0.11 $0.13 $0.13 $0.15 $0.17 $0.05
- -----------------------
</TABLE>
(1) Based upon the weighted average number of common shares outstanding.
(2) Capitalization includes minority interests and junior subordinated
deferrable interest debentures.
(3) Adjusted to reflect the Company's 3-for-1 stock split effected July 17,
1998.
<PAGE>
SELLING SHAREHOLDERS
Shares issued pursuant to this Prospectus, and any applicable Supplement or
Post-Effective Amendment, may be reoffered pursuant hereto by the Selling
Shareholders from time to time in transactions on the open market, in negotiated
transactions, through the writing of options on such Shares or through a
combination of such methods of sale, at negotiated prices, fixed prices which
may be changed, market prices prevailing at the time of sale or prices relating
to such prevailing market prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders, the purchasers of shares for whom
such broker-dealer may act as agent or to whom they may sell as principal or
both. The Company will not receive any part of the proceeds from the resale by
the Selling Shareholders of any Shares pursuant hereto. The Company will bear
all expenses (other than selling discounts and commissions and fees and expenses
of the Selling Shareholders) in connection with the registration of the Shares
being reoffered by the Selling Shareholders.
The identity of the Selling Shareholders, the number of Shares to be sold
by the Selling Shareholders and the price per Share will be determined at the
time of the consummation of the particular transaction. Specific information
regarding the transaction, the identity of the Selling Shareholders and the
number of Shares to be resold may be provided at the time of such transaction by
means of a Supplement or a Post-Effective Amendment hereto, as applicable.
The Selling Shareholders and any broker-dealers who act in connection with
the sale of such Shares hereunder may be deemed to be an "underwriter" within
the meaning of Section 2(11) of the Securities Act, and any commissions received
by them and profit on any resale of such Shares as principal may be deemed to be
underwriting discounts and commissions under the Securities Act. The Company
intends to make available public information concerning itself in compliance
with the Securities Act and the regulations thereunder, and accordingly, Rule
144 or Rule 145 under the Securities Act may be available for use by holders of
Shares to effect transfers of such securities, subject to compliance with the
remaining provisions of such rules.
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 included in reliance on the report of PricewaterhouseCoopers 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
PROSPECTUS OR AN APPLICABLE SUPPLEMENT OR POST
EFFECTIVE AMENDMENT, 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 3,000,000 Common Shares
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.
THE FIRST AMERICAN
--------------------- FINANCIAL CORPORATION
TABLE OF CONTENTS
Available Information......................(i)
Incorporation of Documents by Reference....(i)
Forward-Looking Statements................(ii)
Risk Factors.................................1
The First American Financial Corporation.....2
Selling Shareholders.........................9
Legal Matters................................9
Experts......................................9 Dated August 21, 1998
