SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------
Date of report (Date of earliest event reported) February 16, 2000
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.)
1 First American Way, Santa Ana, California 92707
(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)
<PAGE>
Item 5. Other Events.
See the attached Exhibit.
Item 7. Exhibits.
99 Press Release of The First American Financial Corporation dated
February 16, 2000.
<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: February 17, 2000 By:/s/ Thomas A. Klemens
-------------------------------------
Name: Thomas A. Klemens
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT 99
[The First American Financial Corporation Logo]
The First American Financial Corporation
1 First American Way o Santa Ana, California o (714) 800-3000 o (800) 854-3643
Contact:
Tom Klemens NEWS FOR IMMEDIATE RELEASE
Executive Vice President
& Chief Financial Officer
(714) 800-4402
FIRST AMERICAN FINANCIAL REPORTS OPERATING RESULTS
FOR THE FOURTH QUARTER AND FULL YEAR 1999
SANTA ANA, Calif., - Feb. 16, 2000 - The First American Financial
Corporation (NYSE: FAF), the leading provider of business information and
related products and services, announced today operating results for the fourth
quarter and 12 months ended Dec. 31, 1999.
Losses for the fourth quarter of 1999 were $2.2 million, or 3 cents per
diluted share. These results include the effects of a previously announced
revenue recognition accounting change for the company's tax service contracts,
which became effective Jan. 1, 1999. This accounting change resulted in a
decrease of $2.9 million on an after-tax basis, or 4 cents per diluted share.
Thus, the company would have reported earnings for the fourth quarter of 1999 of
$692,000, or 1 cent per diluted share, under the former revenue recognition
policy. These results compare with record-setting fourth quarter 1998 net income
of $53.9 million, or 82 cents per diluted share. Revenues for the fourth quarter
of 1999 were $700.4 million, a decrease of 14 percent when compared with record
revenues of $814.2 million reported for the same period last year. Had it not
been for the tax service accounting change, the company would have reported
additional revenues for the fourth quarter of 1999 of $6.1 million.
The company's full-year 1999 operating earnings were $88.6 million, or
$1.34 per diluted share. These results include the effects of the accounting
change mentioned above which resulted in a decrease of $10.9 million on an
after-tax basis, or 16 cents per diluted share. Thus, earnings for the 12 months
ended Dec. 31, 1999, would have been $99.5 million, or $1.50 per diluted share,
under the former revenue recognition policy. These results compare with the
record-breaking 1998 results of $181.7 million, or $2.89 per diluted share.
Revenues in 1999 totaled $2.99 billion, an increase of 3 percent when compared
with last year's revenues of $2.91 billion. (1998 results exclude an investment
gain of $32.4 million, $19.8 million on an after-tax basis, or 32 cents per
diluted share, relating to the company's joint venture with Experian.) Had it
not been for the tax service accounting change, the company would have reported
additional revenues for the 12 months ended Dec. 31, 1999, of $22.7 million.
Results for 1998 have been restated to reflect the current year acquisition
accounted for as a pooling of interests. Full-year and quarterly 1999 results
have been restated to include the new transition rules for the tax service
contracts which were finalized by the Securities and Exchange Commission in
December 1999.
"The last half of 1999 was marked by higher mortgage interest rates which
resulted in lower mortgage transaction activity, especially lower mortgage
refinance business," stated Parker S. Kennedy, president of First American
Financial. "Company-wide refinance transactions declined approximately 60
percent during the fourth quarter of this year versus the fourth quarter of
1998. This decline significantly reduced revenue in our direct title operations
and our real estate information services segment. This, coupled with the fourth
quarter seasonal slowdown in residential resale activity nationwide, has caused
a deep reduction in our inventory of open orders going into the first quarter of
2000. While we have been diligent in reducing staff levels and expenses and
adjusting our infrastructure to match the decreasing order volumes, we
anticipate that the drop in business volume will result in reporting an
operating loss in the first quarter of 2000."
Kennedy added, "We continue to enhance our technological capabilities and
e-commerce initiatives and are extremely proud of our recent number-two ranking
on this year's PC Week Financial Services FAST@TRACK 100 list. Our focus remains
on productivity gains via technology, market share gains by cross-selling our
multiple mortgage products and services and expansion of our consumer
information services segment which will provide noncyclical steady growth for
the future."
The company also reported that in connection with its stock repurchase
program, which was announced on Dec. 10, 1999, to date 1,115,900 shares have
been repurchased at an average market price of $12.28 per share.
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 and services; real estate information and services, which includes
mortgage information services and database information and services; and
consumer information and services, which provides home warranties; automotive,
subprime and direct-to-consumer credit reporting; property and casualty
insurance; property and automotive insurance tracking services; resident
screening; pre-employment screening; lender-placed flood and hazard insurance;
investment advisory; and trust and banking services. 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; continued consolidation among the
company's significant customers; consolidation among significant competitors:
the impact of the legal proceedings commenced by the California attorney general
and related litigation; the continued ability to identify businesses to be
acquired; and changes in the company's ability to integrate businesses which it
acquires. 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.
<PAGE>
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues $700,393,000 $814,216,000 $2,988,169,000 $2,943,880,000
Income before income taxes, minority interests and
cumulative effect of a change in accounting principle $ 3,436,000 $ 95,887,000 $ 169,972,000 $ 365,051,000
Income taxes $ 4,834,000 $ 33,112,000 $ 62,300,000 $ 128,512,000
Minority interests $ 846,000 $ 8,849,000 $ 19,029,000 $ 35,012,000
Net income (loss) before cumulative effect of a change
in accounting principle $ (2,244,000) $ 53,926,000 $ 88,643,000 $ 201,527,000
Cumulative effect of a change in accounting for tax
service contracts, net of income taxes and minority
interests -- -- $ (55,640,000) --
Net income (loss) $ (2,244,000) $ 53,926,000 $ 33,003,000 $ 201,527,000
Per share amounts:
Basic:
Income (loss) before cumulative effect of a change in
accounting for tax service contracts $ (0.03) $ 0.86 $ 1.37 $ 3.35
Cumulative effect of a change in accounting for tax
service contracts -- -- $ (0.86) --
Net income (loss) $ (0.03) $ 0.86 $ 0.51 $ 3.35
Diluted:
Income (loss) before cumulative effect of a change in
accounting for tax service contracts $ (0.03) $ 0.82 $ 1.34 $ 3.21
Cumulative effect of a change in accounting for tax
service contracts -- -- $ (0.84) --
Net income (loss) $ (0.03) $ 0.82 $ 0.50 $ 3.21
Average shares outstanding:
Basic 65,210,000 62,692,000 64,669,000 60,194,000
Diluted 66,357,000 65,578,000 66,351,000 62,720,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
For the Three Months Ended For the Twelve Months Ended
December, 3l December 3l
1999 1998 1999 1998
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Revenues
Operating revenues $689,670,000 $801,457,000 $2,936,196,000 $2,867,107,000
Investment and other income 10,723,000 12,759,000 51,973,000 76,773,000
700,393,000 814,216,000 2,988,169,000 2,943,880,000
Expenses
Salaries and other personnel costs 254,948,000 263,450,000 1,034,772,000 945,513,000
Premiums retained by agents 202,290,000 220,416,000 871,036,000 773,030,000
Other operating expenses 176,256,000 175,356,000 678,856,000 633,417,000
Provision for title losses and other claims 30,669,000 30,246,000 116,218,000 124,178,000
Depreciation and amortization 21,457,000 17,988,000 77,031,000 62,263,000
Premium taxes 5,772,000 6,005,000 22,897,000 21,335,000
Interest 5,565,000 4,868,000 17,387,000 19,093,000
696,957,000 718,329,000 2,818,197,000 2,578,829,000
Income before income taxes, minority interests and
cumulative effect of a change in accounting principle $ 3,436,000 $ 95,887,000 $ 169,972,000 $ 365,051,000
OPERATING REVENUES
Title Insurance:
Direct operations $253,493,000 $311,178,000 $1,067,133,000 $1,097,989,000
Agency operations 255,156,000 275,190,000 1,086,746,000 965,228,000
508,649,000 586,368,000 2,153,879,000 2,063,217,000
Real Estate Information 123,556,000 171,451,000 574,784,000 630,510,000
Consumer Information 57,465,000 43,638,000 207,533,000 173,380,000
Total operating revenues $689,670,000 $801,457,000 $2,936,196,000 $2,867,107,000
INCOME BEFORE INCOME TAXES, MINORITY INTERESTS AND
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
Title Insurance $ 12,555,000 $ 73,547,000 $ 128,738,000 $ 227,906,000
Real Estate Information (2,224,000) 23,438,000 54,914,000 110,069,000
Consumer Information 10,026,000 6,977,000 38,080,000 28,455,000
20,357,000 103,962,000 221,732,000 366,430,000
Corporate expenses 16,921,000 8,075,000 51,760,000 1,379,000
Income before income taxes, minority interests and
cumulative effect of a change in accounting principle $ 3,436,000 $ 95,887,000 $ 169,972,000 $ 365,051,000
TITLE INSURANCE ORDER COUNTS FROM DIRECT OPERATIONS
Title orders opened 264,700 410,000 1,334,100 1,585,400
Title orders closed 229,100 336,700 1,119,900 1,210,200
</TABLE>
