REGISTRATION NO. 333-66431
FILED PURSUANT TO RULE 424(B)(3)
PROSPECTUS
3,000,000 COMMON SHARES
THE FIRST AMERICAN CORPORATION
Acquisition Consideration [THE FIRST AMERICAN CORPORATION LOGO]
o This prospectus covers up to 3,000,000 of our common shares.
o We may offer these shares from time to time as full or partial
consideration for our acquisition of the assets or ownership interests of
businesses which primarily provide financial information and services.
o We will negotiate the terms of each acquisition transaction with the owners
of the assets or ownership interests being acquired at the time the
particular acquisition transaction is undertaken.
Share Price
o We will value the shares issued in a particular acquisition transaction at
a price reasonably related to the market value of the shares at one of the
following times:
o When the terms of the particular acquisition transaction are agreed
upon.
o When the particular acquisition transaction closes.
o During the period or periods prior to the delivery of the shares.
An Investment in Our Company Entails Risk
o Before making an investment in our shares, you should consider carefully
the "Risk Factors" set forth beginning on page 1.
Our Business
o We are a leading provider of business information and related products and
services.
Listing
o The shares offered by this prospectus will be listed for trading on the New
York Stock Exchange.
o The trading symbol for our shares on the New York Stock Exchange is "FAF."
o On December 20, 2000, the closoing price of our shares on the New York
Stock Exchange was $29.38.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is December 21, 2000.
<PAGE>
(outside back cover page)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Where You Can Find More Information; Incorporation by Reference............................ (i)
Risk Factors............................................................................... 1
Special Note of Caution Regarding Forward-Looking Statements............................... 2
The First American Corporation............................................................. 4
Summary Historical Consolidated Financial Data............................................. 5
Selling Shareholders....................................................................... 7
Plan of Distribution....................................................................... 8
Legal Matters.............................................................................. 9
Experts.................................................................................... 10
</TABLE>
------------------------------------
WHERE YOU CAN FIND MORE INFORMATION;
INCORPORATION BY REFERENCE
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy, upon payment of a fee set by the SEC, any document that we file with the
SEC at any of its public reference rooms in the following locations:
450 Fifth Street, N.W.
Washington, D.C. 20549
Seven World Trade Center
13th Floor, Suite 1300
New York, New York 10048
Citicorp Center
500 West Madison Street
14th Floor, Suite 1400
Chicago, Illinois 60661
You may also call the SEC at 1-800-432-0330 for more information on the
public reference rooms. Our filings are also available to the public on the
internet through the SEC's EDGAR database. You may access the EDGAR database at
the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important business and financial
information about our company, including information concerning its financial
performance.
(inside cover page continued)
o Our annual report on form 10-K for the fiscal year ended December
31, 1999.
o Our quarterly reports on form 10-Q for the fiscal quarters ended
March 31, 2000, June 30, 2000 and September 30, 2000.
o Our amended quarterly report on form 10-Q/A for the quarter ended
March 31, 2000.
o Our current reports on form 8-K filed January 18, 2000, February
18, 2000, June 13, 2000, August 3, 2000, on which date two
current reports were filed, August 4, 2000 and November 2, 2000.
o The description of our common shares, $1.00 par value, contained
in our registration statement on form 8-A, dated November 19,
1993, which registers the shares under Section 12(b) of the
Exchange Act.
o The description of Rights to Purchase Series A Junior
Participating Preferred Shares, which may be transferred with our
common shares, contained in our registration statement on form
8-A, dated November 7, 1997, which registers the rights under
Section 12(b) of the Exchange Act.
o Any additional documents that we file with the SEC between the
date of this prospectus and the earlier of the following dates:
o The date on which all of the shares offered by this
prospectus are resold by the persons or entities who or
which acquire them from us; and
o The date that is one year after the last date on which
shares offered by this prospectus are issued by us.
This prospectus is part of a registration statement on Form S-4 which
we have filed with the SEC. As permitted by SEC rules, this prospectus does not
contain all of the information contained in the registration statement, any
amendments, and accompanying exhibits and schedules filed with the SEC. You may
refer to the registration statement, any amendments, and the exhibits and
schedules for more information about us and our common shares. The registration
statement, exhibits and schedules are also available at the SEC's public
reference rooms or through its EDGAR database on the Internet.
You may obtain a copy of these filings at no cost by writing to us at
The First American Corporation, 1 First American Way, Santa Ana, California
92707-5913, Attention: Mark R Arnesen, or by telephoning us at (714) 800-3000.
In order to obtain timely delivery, you must submit your request no later than
five days prior to the date you make your investment decision.
<PAGE>
RISK FACTORS
In addition to the other information contained in this prospectus, any
supplement to this prospectus and the registration statement of which this
prospectus is a part, you should carefully consider the following risk factors
before investing in our company.
Revenues may decline during periods when the demand for our products decreases
Our revenues decrease as the number of real estate transactions in
which our products are purchased decreases. We have found that the number of
real estate transactions in which our products are purchased decreases in the
following situations.
o When mortgage rates are high.
o When the mortgage fund supply is limited.
o When the United States economy is weak.
We believe that this trend will recur.
Earnings may be reduced if acquisition projections are inaccurate
Our earnings have improved since 1991 in large part because of our
acquisition and integration of non-title insurance businesses. These businesses
generally have higher margins than our title insurance businesses. The success
or failure of each of these acquisitions has depended in large measure upon the
accuracy of our projections. Our projections are not always accurate. Inaccurate
projections have historically led to lower than expected earnings.
Changes in government regulation could prohibit or limit our operations
Our title insurance, property and casualty insurance, home warranty,
thrift, trust and investment businesses are regulated by various governmental
agencies. Many of our other businesses operate within statutory guidelines.
Changes in the applicable regulatory environment or statutory guidelines could
prohibit or restrict our existing or future operations. Such restrictions may
adversely affect our financial performance.
Current legal proceedings may have a material adverse affect on our financial
condition or results of operations
On May 19, 1999, the controller and insurance commissioner of the State
of California filed a class action suit in the Sacramento state court. The
action seeks to certify as a class of defendants all title and escrow companies
doing business in California from 1970 to the present, including certain of our
subsidiaries. The plaintiffs allege that the defendants:
o failed to give unclaimed property to the State of California on a
timely basis;
o charged California home buyers and other escrow customers fees
for services that were never performed or which cost less than
the amount charged; and
o devised and carried out schemes, known as earnings credits, with
financial institutions to receive interest on escrow funds
deposited by defendants with financial institutions in demand
deposits.
In February 2000, we entered into an administrative settlement with the
California Department of Insurance, known as the DOI. The DOI released us from
any further claim of liability as to our receipt of earnings credits or any
alleged overcharges for miscellaneous escrow fee items, such as courier or wire
service fees. The DOI further agreed to direct the California attorney general
to dismiss the insurance commissioner as a plaintiff from the lawsuit. In the
settlement with the DOI, we were directed by the insurance commissioner and
agreed to make a contribution to a consumer education fund and accept a new
regulation in the form drafted by the DOI, whereby earnings credit programs will
be authorized and regulated by the DOI and rate filings will be required for
escrow fees. In July 2000, then insurance commissioner Chuck Quackenbush, who
had approved the administrative settlement, resigned. The new insurance
commissioner has not yet indicated whether he will re-examine the previously
agreed upon administrative settlement. We do not believe our settlement will be
affected.
Subsequent to the filing of this lawsuit, our subsidiary First American
Title Insurance Company was named and served as a defendant in two private class
actions in California courts. The allegations in those actions include some, but
not all, of the allegations contained in the lawsuit discussed above. The
private class actions independently seek injunctive relief, attorneys' fees,
damages and penalties in unspecified amounts. One of the private class actions
has been dismissed. The remaining private class action was stayed by court order
pending settlement negotiations relating to the class action filed by the
California controller and insurance commissioner. The stay was recently lifted.
An adverse decision in these lawsuits may have a material adverse
effect on our financial condition or results of operations.
SPECIAL NOTE OF CAUTION REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus, any applicable
supplement to this prospectus and the documents incorporated by reference into
this prospectus, may constitute "forward-looking statements" within the meaning
of the federal securities laws. The following or similar words are intended to
identify forward-looking statements in our documents.
o "anticipate" o "forecast"
o "believe" o "goal"
o "estimate" o "objective"
o "expect" o "projection"
Forward-looking statements are based on our management's expectations
regarding our future economic performance and take into account only the
information currently available. These statements are not statements of
historical fact. Various factors could cause our actual results, performance or
financial condition to differ materially from the expectations expressed or
implied in any forward-looking statements. Some of these factors are listed
below.
o General volatility of the capital markets and the market price of
our shares.
o Changes in the real estate market, interest rates or the general
economy.
o Our ability to identify and complete acquisitions and
successfully integrate businesses we acquire.
o Our ability to employ and retain qualified employees.
o Changes in government regulations that are applicable to our
regulated businesses.
o Changes in the demand for our products.
o Degree and nature of our competition.
o Consolidation among our customers or competitors.
o The impact of the legal proceedings commenced by the California
attorney general and related litigation;
We qualify all forward-looking statements contained in our documents
by these cautionary factors.
<PAGE>
THE FIRST AMERICAN CORPORATION
We are a leading provider of business information and related products
and services. Our principal executive office is located at 1 First American Way,
Santa Ana, California 92707-5913, and our telephone number is (714) 800-3000.
You can visit our website at www.firstam.com.
The following is a list of our three business segments and the
products and services which we now offer through our subsidiaries:
<TABLE>
<CAPTION>
Title Insurance Real Estate Information Consumer Information
& Services & Services & Services
<S> <C> <C>
o aircraft and vessel title -mortgage information services -consumer information
insurance
o equity loan services o credit reporting and information o pre-employment screening
o lender services management o resident screening
o national/commercial title o default management services o specialized credit reporting
insurance o field inspections o sub-prime consumer
o residential title insurance o flood determination and information
o subdivision title insurance compliance o vehicle information and
o 1031 tax-deferred exchange o mortgage document services insurance tracking
services o mortgage origination software
o title and escrow systems systems -consumer services
o mortgage servicing software
systems o banking services
o residential and commercial real o consumer credit reports
estate tax reporting o home comparable reports
o tax valuation services o home warranty
o investment services
-database information services o property and casualty insurance
o trust services
o appraisal and property
valuation
o database management services and
document imaging
o property information and map
image products
o title plant and document
imaging services
</TABLE>
<PAGE>
Summary Historical Consolidated Financial Data
The following table sets forth summary historical consolidated
financial and other data for the five years ended December 31, 1999 and for the
nine-month periods ended September 30, 1999 and 2000. The summary is qualified
in its entirety by reference to the financial statements and other information
contained in our annual report on form 10-K for the year ended December 31, 1999
and our quarterly report on form 10-Q for the quarter ended September 30, 2000,
each of which is incorporated by reference in this prospectus. All data are in
thousands except percentages and per share data.
<TABLE>
<CAPTION>
Year Ended Nine Months
December 31 Ended September 30
----------------------------------------------------------------- ---------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Operating revenue........... $1,270,179 $1,621,124 $1,932,905 $2,867,107 $2,936,196 $2,246,526 $2,126,571
Investment and other
income.................... 23,031 33,852 29,096 76,773 51,973 41,250 45,788
------------ ------------ ------------ ------------- ------------ ------------ --------------
1,293,210 1,654,976 1,962,001 2,943,880 2,988,169 2,287,776 2,172,359
------------ ------------ ------------ ------------- ------------ ------------ --------------
Expenses:
Salaries and other
personnel costs.......... 452,057 558,933 682,452 945,513 1,034,772 779,824 773,513
Premiums retained by
agents................... 420,567 518,547 563,137 773,030 871,036 668,746 585,398
Other operating expenses.... 274,669 340,988 437,676 633,417 678,856 502,600 511,994
Provision for title losses
and other claims......... 96,941 90,489 96,805 124,178 116,218 85,549 104,327
Depreciation and
amortization............. 20,357 29,261 40,025 62,263 77,031 55,574 61,112
Premium Taxes............... 13,627 16,676 17,238 21,335 22,897 17,125 16,318
Interest.................... 6,270 5,808 10,291 19,093 17,387 11,822 18,709
------------ ------------ ------------ ------------- ------------ ------------ --------------
1,284,488 1,560,702 1,847,624 2,578,829 2,818,197 2,121,240 2,071,371
------------ ------------ ------------ ------------- ------------ ------------ --------------
Income before income taxes,
minority interest and
cumulative effect of a
change in accounting
principle................ 8,722 94,274 114,377 365,051 169,972 166,536 100,988
Income taxes................ 3,641 35,884 42,936 128,512 62,300 57,466 39,200
------------ ------------ ------------ ------------- ------------ ------------ --------------
Income before minority
interest and cumulative
effect of a change in
accounting principle..... 5,081 58,390 71,441 236,539 107,672 109,070 61,788
Minority interest........... 2,147 2,624 3,676 35,012 19,029 18,183 11,355
------------ ------------ ------------ ------------- ------------ ------------ --------------
Income before cumulative
effect of a change in
accounting principle..... 2,934 55,766 67,765 201,527 88,643 90,887 50,433
Cumulative effect of a
change in accounting
principle................ - - - - (55,640) (55,640) -
------------ ------------ ------------ ------------- ------------- ------------ -------------
Net Income $ 2,934 $ 55,766 $ 67,765 $201,527 $ 33,003 $ 35,247 $ 50,433
============ ============ ============ ============= ============ ============ ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Nine Months
December 31 Ended September 30
----------------------------------------------------------------- ---------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings per share:
Basic:
Income before cumulative
effect of a change in
accounting principle..... $0.05 $0.98 $1.19 $3.35 $1.37 $1.41 $0.79
Cumulative effect of a
change in accounting
principle................ - - - - (0.86) (0.86) -
------------ ------------ ------------ ------------- ------------ ------------ --------------
Net Income $0.05 $0.98 $1.19 $3.35 $0.51 $0.55 $0.79
------------ ------------ ------------ ------------- ------------ ------------ --------------
Diluted:
Income before cumulative
effect of a change in
accounting
principle................ $0.05 $0.98 $1.16 $3.21 $1.34 $1.37 $0.77
Cumulative effect of a
change in accounting
principle................ - - - - (0.84) (0.84) -
------------ ------------ ------------ ------------- ------------ ------------ --------------
Net Income.................. $0.05 $0.98 $1.16 $3.21 $0.50 $0.53 $0.77
------------ ------------ ------------ ------------- ------------ ------------ --------------
At December 31 At September 30
----------------------------------------------------------------- ---------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
Balance Sheet Data:
Cash and invested assets.... $377,424 $ 398,397 $ 441,679 $ 752,218 $ 734,556 $ 662,161 $ 650,599
Total assets................ $907,252 $1,010,556 $1,220,377 $1,852,731 $2,116,414 $2,116,414 $2,184,499
Notes and contracts
payable.................. $ 77,430 $ 72,761 $ 51,720 $143,466 $ 196,815 $ 148,350 $ 216,720
Guaranteed preferred
beneficial interests in
our junior subordinated
deferrable interest
debentures............... - - $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000
Total stockholders' equity.. 338,659 $ 384,931 $ 442,783 $ 762,265 $ 815,991 $ 861,270 $ 837,228
Other Data:
Loss ratio.................. 7.6% 5.6% 5.0% 4.3% 4.0% 3.8% 4.9%
Cash dividends per share.... $0.12 $0.14 $0.25 $0.23 $0.24 $0.18 $0.18
Ratio of debt to total
capitalization(1)........ 17.6% 15.2% 8.3% 13.0% 16.4% 12.3% 17.1%
</TABLE>
--------------------------------
[FN]
(1) Capitalization includes minority interests and mandatorily redeemable
preferred securities of the Company's subsidiary trust.
</FN>
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth, as of the date of this prospectus, the
following information.
o The name of each holder of shares that may currently be sold
pursuant to this prospectus.
o The number of our common shares that each selling shareholder
owns as of such date.
o The number of our common shares owned by each selling shareholder
that may be offered for sale from time to time pursuant to this
prospectus.
o The number of our common shares to be held by each selling
shareholder assuming the sale of all the shares offered hereby.
o By footnote, any position or office held or material relationship
with The First American Corporation or any of its affiliates
within the past three years, other than that of being a
shareholder.
We may amend or supplement this prospectus from time to time to update
the disclosure set forth herein.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Number of Shares
to be Offered
for the Selling Shares Owned of Record
Shares Owned of Record Shareholder's After Completion of the
Prior to the Offering Account Offering
Name of Selling Shareholder Number % Number %
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
David Kennedy(1) 0 0 62,500 0 0
--------------------------------------------------------------------------------------------------------------------
Ezra Schneier(2)(3) 100 <1 62,500 100 <1
====================================================================================================================
Total: 100 <1 125,000 100 <1
--------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------------
[FN]
(1) Mr. Kennedy is a Vice President of CIC, Inc., a wholly-owned subsidiary.
(2) Mr. Schneier is a Vice President of CIC, Inc., a wholly-owned subsidiary.
(3) Assumes Mr. Schneier will retain ownership of shares owned prior to
commencement of the offering of shares under this prospectus.
</FN>
<PAGE>
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time
to time during the effectiveness of the registration statement by the selling
shareholders. The selling shareholders will act independently of us 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. The sale price may be the then prevailing market price
or a price related thereto, a price set by formula, which may be subject to
change, or a negotiated price. The shares may be sold, without limitation, by
one or more of the following means of distribution.
o 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.
o Purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus.
o A distribution in accordance with the rules of the New York Stock
Exchange.
o Ordinary brokerage transactions and transactions in which the
broker solicits purchasers.
o 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 a hedging transaction,
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 of the Securities Act may,
at the option of the holder thereof, be sold under Rule 144 of the Securities
Act rather than pursuant to this prospectus.
Any broker-dealer participating in such transactions as agent may
receive commissions from the selling shareholders and/or purchasers of the
shares offered hereby. Usual and customary brokerage fees will be paid by the
selling shareholders. Broker-dealers may agree with the selling shareholders 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
shareholders, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer commitment to the selling shareholders.
Broker-dealers who acquire shares as principal may thereafter resell the 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.
We have 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, we will make copies of this prospectus and any supplement available
to the selling shareholders and have informed them of the need for delivery of
copies of this prospectus and any supplement 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 liabilities resulting therefrom. Among these liabilities
for which indemnification may be provided are those arising under the Securities
Act.
At the time a particular offer of shares offered pursuant to this
prospectus is made, if required, a supplement to this prospectus 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.
We have agreed to keep the registration statement of which this
prospectus constitutes a part effective in respect of shares issued pursuant
thereto until the first to occur of the following dates.
o The date one year from the date of issuance of such shares.
o Such date as all of the shares offered by the selling shareholders
listed above have been sold.
We intend to de-register any of the shares not sold by the selling
shareholders after such time.
LEGAL MATTERS
The validity of the shares offered by this prospectus will be passed
upon for us 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, 1999 have been
so incorporated 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)
o We have not authorized anyone to give you any information that
differs from the information in this prospectus. If you receive
any different information, you should not rely on it.
o The delivery of this prospectus shall not, under any
circumstances, create an implication that The First American
Corporation is operating under the same conditions that it was
operating under when this prospectus was written. Do not assume
that the information contained in this prospectus is correct at
any time past the date indicated.
o 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.
o This prospectus does not constitute an offer to sell, or the
solicitation of an offer to buy, the securities to which it
relates in any circumstances in which such offer or solicitation
is unlawful.
--------------------------------------------
<PAGE>
Prospectus
3,000,000 Common Shares
[THE FIRST AMERICAN CORPORATION LOGO]
THE FIRST AMERICAN
CORPORATION
Dated December 21, 2000
