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) July 22, 1999
THE FIRST AMERICAN FINANCIAL CORPORATION
(Exact Name of the Registrant as Specified in Charter)
California 0-3658 95-1068610
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
114 East Fifth Street, Santa Ana, California 92701-4642
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code (714) 558-3211
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
See the attached Exhibit.
Item 7. Exhibits.
99 Press Release of The First American Financial Corporation dated July
22, 1999.
<PAGE>
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 FINANCIAL CORPORATION
Date: July 22, 1999 By: /s/Thomas A. Klemens
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Name: Thomas A. Klemens
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT 99
Contact:
Thomas A. Klemens
Executive Vice President & Chief Financial Officer
(714) 558-3211 Ext. 7442
FIRST AMERICAN FINANCIAL REPORTS STRONG
OPERATING RESULTS FOR THE SECOND QUARTER 1999
- Results Exceed Analysts' Estimates -
SANTA ANA, Calif., July 21, 1999 - The First American Financial Corporation
(NYSE: FAF), the leading provider of business information and related products
and services, announced today earnings and revenues for the second quarter and
six months ended June 30, 1999.
Earnings for the second quarter, excluding the results of operations
and other effects of the merger of National Information Group (NAIG), were $35.8
million, or 57 cents per diluted share, which exceeded the analysts' consensus
estimate of 55 cents per diluted share.
These results include the effects of a previously reported revenue
recognition accounting change for the company's tax service contracts, which
became effective Jan. 1, 1999, on a prospective basis. This accounting change
resulted in a decrease of $7.2 million on an after-tax basis, or 11 cents per
diluted share. Thus, earnings for the second quarter of 1999 would have been
$43.0 million, or 68 cents per diluted share, under the former accounting rules.
These results compare to the record setting second quarter 1998 net income of
$45.7 million, or 79 cents per diluted share. Earnings for the quarter ended
June 30, 1999, including NAIG, which was acquired in April 1999 in a transaction
accounted for as a pooling of interests, were $29.2 million, or 44 cents per
diluted share. These results included the issuance of 3.0 million shares and a
pretax nonrecurring merger-related charge of $10.8 million, or 10 cents per
diluted share.
Earnings for the six-month period were $53.1 million, or 80 cents per
diluted share, compared to $71.8 million, or $1.19 per diluted share, for the
same period 1998. Earnings and weighted average shares outstanding for both
periods have been adjusted to reflect the merger of NAIG. Revenues for the
second quarter of 1999 were $770.4 million, an 11.0 percent increase when
compared with the same period last year. Revenues for the first half of 1999
totaled $1.49 billion, an increase of 12.9 percent when compared with revenues
of $1.32 billion for the first half of 1998. (1998 excludes an investment gain
of $32.4 million relating to the joint venture agreement with Experian.) Had it
not been for the previously mentioned tax service accounting change, the company
would have reported additional revenues for the second quarter and first half of
1999 of $14.6 million and $29.6 million, respectively.
"Rising mortgage interest rates have led to a significant decline in
refinance transactions during the second quarter, although the residential
resale and commercial markets remain robust," commented Parker S. Kennedy,
president of First American Financial. "As a company, we continually monitor our
labor efficiencies, measured as the ratio between new orders and personnel, and
adjust headcount where necessary in order to maximize profitability.
"Additionally, we continued our progress toward the scheduled
completion of our Year 2000 program initiatives. To date, the company has
expensed approximately $15 million, of which $6 million was incurred during the
second quarter of 1999 in connection with the substantial completion of the
implementation phase of the plan. We expect to expense an additional $2 million
by September in order to complete the plan."
Kennedy continued, "We recently restructured our business segments to
more accurately reflect our current operating structure. This will help
investors to better understand our business and to recognize that First American
should be valued at a higher multiple, similar to other business information
services providers. We continue to focus on enhancing our technological
capabilities in order to improve our efficiencies and expand the new consumer
information and services business segment to provide noncyclical, high-margin
revenues and significant opportunities for steady growth for the future. We will
continue to invest in technology solutions to accomplish our goal of becoming
the single-source provider for all real estate-related information and services
and to leverage our infrastructure and technology to deliver a broader base of
products and services to a larger and more diversified customer base."
The First American Financial Corporation, based in Santa Ana, Calif.,
is the nation's leading provider of business information and related products
and services. The corporation's three primary business segments include: title
insurance; real estate information and services, which includes mortgage
origination, mortgage servicing and database products and services; and consumer
information and services, which provides home warranties; automotive, subprime
and direct-to-consumer credit reporting; insurance and automotive tracking
services; resident screening; pre-employment screening; lender-placed flood and
hazard insurance; investment advisory; and trust and banking services. Through
its family of companies, First American Financial has nearly 20,000 employees in
more than 600 branch offices in the United States and abroad. Information about
the company and an archive of its press releases can be found on the Internet at
www.firstam.com.
Any statements in this document that look forward in time involve risks
and uncertainties, including but not limited to the following: the
effect of interest rate fluctuations; changes in the performance of the
real estate markets; the effect of changing economic conditions;
general volatility in the capital markets; the demand for and the
acceptance of the company's products; changes in applicable government
regulations; consolidation among the company's customers; and
contingencies associated with the Year 2000 issue. The company's actual
results, performance or achievement could differ materially from those
expressed in, or implied by, any forward-looking statements, and,
accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or occur
or, if any of them do, what impact they will have on the results of
operations or financial condition of the company.
<TABLE>
<CAPTION>
Quarter ended June 30: 1999 1998
- ---------------------- ---- ----
<S> <C> <C>
Revenues $ 770,398,000 $ 726,420,000
Income before income taxes and minority interests $ 51,553,000 $ 84,636,000
Income taxes $ 18,300,000 $ 30,100,000
Minority interest $ 4,027,000 $ 8,418,000
Net income $ 29,226,000 $ 46,118,000
Net income per share
Basic $ .45 $ .78
Diluted $ .44 $ .75
Average shares outstanding:
Basic 64,763,000 59,048,000
Diluted 66,325,000 61,180,000
Six months ended June 30:
Revenues $ 1,492,440,000 $ 1,354,636,000
Income before income taxes and minority interests $ 95,414,000 $ 167,404,000
Income taxes $ 33,200,000 $ 59,800,000
Minority interest $ 9,115,000 $ 16,171,000
Net income $ 53,099,000 $ 91,433,000
Net income per share
Basic $ .83 $ 1.57
Diluted $ .80 $ 1.51
Average shares outstanding:
Basic 64,202,000 58,407,000
Diluted 66,322,000 60,432,000
All periods presented include the operating results of NAIG accounted for under
the pooling-of-interests method of accounting.
(Additional Financial Data on Following Page)
</TABLE>
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<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30 June 30
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1999 1998 1999 1998
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Revenues
Operating revenues $ 758,153,000 $ 717,141,000 $ 1,468,515,000 $ 1,301,492,000
Investment and other income 12,245,000 9,279,000 23,925,000 53,144,000*
----------------- ---------------- ----------------- -----------------
770,398,000 726,420,000 1,492,440,000 1,354,636,000
----------------- ---------------- ----------------- ----------------
Expenses
Salaries and other personnel costs 259,603,000 229,240,000 515,015,000 439,110,000
Premiums retained by agents 228,212,000 194,982,000 438,780,000 335,027,000
Other operating expenses 174,443,000 157,810,000 332,606,000 301,957,000
Provision for title losses and other 28,420,000 33,793,000 55,441,000 63,094,000
claims
Depreciation and amortization 19,148,000 14,955,000 36,067,000 28,972,000
Premium taxes 5,987,000 5,327,000 11,296,000 9,575,000
Interest 3,032,000 5,677,000 7,821,000 9,497,000
----------------- ---------------- ----------------- ----------------
718,845,000 641,784,000 1,397,026,000 1,187,232,000
----------------- ---------------- ----------------- ----------------
Income before income taxes and minority $ 51,553,000 $ 84,636,000 $ 95,414,000 $ 167,404,000
interests ================= ================ ================= ================
OPERATING REVENUES
Title Insurance:
Direct operations $ 280,007,000 $ 274,827,000 $ 540,330,000 $ 500,546,000
Agency operations 284,852,000 243,519,000 545,513,000 420,055,000
----------------- ---------------- ----------------- ----------------
564,859,000 518,346,000 1,085,843,000 920,601,000
Real Estate Information 144,082,000 157,112,000 287,727,000 298,960,000
Consumer Information 49,212,000 41,683,000 94,945,000 81,931,000
----------------- ---------------- ----------------- ----------------
Total operating revenues $ 758,153,000 $ 717,141,000 $ 1,468,515,000 $ 1,301,492,000
================= ================ ================= ================
INCOME BEFORE INCOME TAXES AND MINORITY
INTERESTS
Title Insurance $ 49,075,000 $ 56,395,000 $ 84,236,000 $ 86,656,000
Real Estate Information 11,949,000 31,184,000 21,238,000 53,730,000
Consumer Information 8,933,000 7,794,000 17,144,000 14,047,000
----------------- ---------------- ----------------- ----------------
Total before corporate expenses and
minority interests 69,957,000 95,373,000 122,618,000 154,433,000
Corporate expenses 18,404,000 10,737,000 27,204,000 (12,971,000)
----------------- ---------------- ----------------- -----------------
Income before income taxes and minority $ 51,553,000 $ 84,636,000 $ 95,414,000 $ 167,404,000
interest
TITLE INSURANCE ORDER COUNTS FROM
DIRECT OPERATIONS
Title orders opened 379,100 386,400 746,500 784,200
Title orders closed 319,000 302,000 614,100 562,600
* Includes an investment gain of $32.4 million relating to the joint venture
agreement with Experian.
All periods presented include the operating results of NAIG accounted for under
the pooling-of-interests method of accounting.
</TABLE>
