EX-99.1 2 dex991.htm PRESS RELEASE DATED OCTOBER 26, 2005 Press Release dated October 26, 2005

EXHIBIT 99.1

 

Contact:

          

Thomas A. Klemens

    

NEWS

  FOR

Sr. Executive Vice President &

       IMMEDIATE

Chief Financial Officer

       RELEASE

(714) 800-4401

          

 

THE FIRST AMERICAN CORPORATION REPORTS

RECORD RESULTS FOR THE THIRD QUARTER 2005

 

SANTA ANA, Calif., Oct. 26, 2005 – The First American Corporation (NYSE: FAF), the nation’s largest data provider, today announced results for the third quarter ended Sept. 30, 2005:

 

     Three Months Ended
September 30


   Nine Months Ended
September 30


     2005

   2004

   2005

   2004

Total revenues

   $ 2.17 billion    $ 1.72 billion    $ 5.86 billion    $ 4.92 billion

Income before income taxes and minority interests

   $ 275.4 million    $ 202.0 million    $ 694.6 million    $ 532.3 million

Net income

   $ 149.1 million    $ 107.2 million    $ 367.8 million    $ 278.7 million

Net income per diluted share

     $1.51      $1.17      $3.79      $3.07

 

Summary of Operations

 

“The company posted record revenue and profits for the third quarter,” stated Parker S. Kennedy, chairman and chief executive officer of The First American Corporation. “The company’s positive performance was affected by strong mortgage origination volume, particularly from purchase activity, as well as our ongoing commitment to maximize operating efficiencies, reduce costs and improve market share.”

 

“During the third quarter, we contributed First American’s Credit Information Group (CIG) to First Advantage Corporation (NASDAQ: FADV). First American now owns 80 percent of First Advantage. With the addition of CIG, First Advantage’s market capitalization has grown to more than $1.4 billion, with an estimated $600 million in annual revenue. CIG also provides First Advantage with opportunities to grow through larger acquisitions and, organically, through new markets and cross-selling opportunities.”

 

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First American Reports Record Results for the Third Quarter 2005

Page 2-2-2

 

Quarterly Financial Highlights

 

Financial Services Group:

 

    Revenues for the third quarter 2005 were $1.70 billion, an increase of 30.3 percent when compared with revenues of $1.30 billion for the third quarter of 2004.

 

    Pretax income was $209.2 million, an increase of 58.6 percent when compared with $131.8 million in the prior year quarter.

 

    Pretax margins increased to 12.3 percent compared with 10.1 percent for the third quarter 2004.

 

Information Technology Group:

 

    Revenues for the third quarter 2005 were $466.1 million, an increase of 12.2 percent compared with revenues of $415.3 million for the third quarter of 2004.

 

    Pretax income was $104.2 million, a decrease of 1.1 percent when compared with third quarter 2004 income of $105.3 million.

 

    Pretax margins decreased to 22.3 percent compared with 25.4 percent for the third quarter 2004.

 

    The current quarter included $9.1 million of pretax costs related to the company’s default division, which is included in the Mortgage Information Segment. These costs include expenses associated with relocating and consolidating operations, the write-down of certain software and other related expenses. The prior year quarter included a one-time benefit of $13.0 million for the Mortgage Information Segment.

 

Strategic Focus and Outlook

 

Kennedy added: “We will continue our strategic initiatives of technology, centralization, bundling, offshore processing and analytics to maintain strong margins, particularly in title insurance. We will pursue strategic acquisitions that will enhance production efficiencies, increase market share and create opportunities to leverage our expansive real estate data to create unique products and services.”

 

Teleconference/Webcast

 

First American’s third quarter results will be discussed in more detail on Wednesday, Oct. 26, 2005, at 11 a.m. EDT, via teleconference. The dial-in number is (888) 955-3516 and the pass code is “FIRST AMERICAN.” The live audio webcast of the call will be available on First American’s Web site at www.firstam.com/investor. An audio replay of the conference call will be available through Nov. 2, 2005, by dialing (203) 369-1008. An audio archive of the call will also be available for replay on First American’s Web site.

 

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First American Reports Record Results for the Third Quarter 2005

 

Page 3-3-3

 

First American Investor Day

 

First American will also host a full-day Company Update and Technology Expo at its office in New York City on Tuesday, Nov. 8, 2005, to provide analysts and investors with the opportunity to hear management’s strategy for continued growth and margin improvement. Attendance is by registration only; however, the media and general public are invited to listen via webcast beginning at 8:30 a.m. EST from the Investor Relations section of the company’s Web site at www.firstam.com/investor. A replay of the webcast will also be made available on the company’s Web site shortly after the conclusion of the live presentation.

 

About First American

 

The First American Corporation (NYSE: FAF), a FORTUNE 500® company that traces its history to 1889, is the nation’s largest data provider. First American combines advanced analytics with its vast data resources to supply businesses and consumers with valuable information products to support the major economic events of people’s lives, such as getting a job, renting an apartment, buying a car or house, securing a mortgage and opening or buying a business. The First American Family of Companies, many of which command leading market share positions in their respective industries, operate within six primary business segments, including: Title Insurance and Services, Specialty Insurance, Mortgage Information, Property Information, Credit Information and Screening Information. With revenues of $6.72 billion in 2004, First American has approximately 2,000 offices throughout the United States and abroad. More information about the company and an archive of its press releases can be found at www.firstam.com.

 

Forward Looking Statements

 

Certain statements made in this press release, including those related to First Advantage’s revenues, strategic initiatives and strategic acquisitions, are forward looking. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements include: interest rate fluctuations; changes in the performance of the real estate markets; limitations on access to public records and other data; general volatility in the capital markets; changes in applicable government regulations; consolidation among the company’s significant customers and competitors; the company’s continued ability to identify businesses to be acquired; changes in the company’s ability to integrate businesses which it acquires; and other factors described in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2004, as filed with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made. The company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

(Additional Financial Data Follows)

 

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First American Reports Record Results for the Third Quarter 2005

 

Page 4-4-4

 

Summary of Earnings

(in thousands, except per share amounts)

 

     Three Months Ended
September 30


   Nine Months Ended
September 30


     2005

   2004

   2005

   2004

Total revenues

   $ 2,168,182    $ 1,721,485    $ 5,856,641    $ 4,919,309

Income before income taxes and minority interests

   $ 275,361    $ 202,005    $ 694,623    $ 532,326

Income taxes

   $ 101,100    $ 70,800    $ 255,600    $ 187,500

Minority interests

   $ 25,139    $ 23,990    $ 71,246    $ 66,129

Net income

   $ 149,122    $ 107,215    $ 367,777    $ 278,697

Net income per share:

                           

Basic

   $ 1.56    $ 1.21    $ 3.92    $ 3.27

Diluted

   $ 1.51    $ 1.17    $ 3.79    $ 3.07

Weighted average shares outstanding:

                           

Basic

     95,341      88,595      93,852      85,330

Diluted

     98,768      91,594      97,307      91,431

 

Summary Balance Sheet Information

(in thousands, except per share amounts)

 

     September 30

   December 31

     2005

   2004

Total stockholders’ equity

   $ 2,951,879    $ 2,463,564

Book value per share

   $ 30.84    $ 27.36

 

Summary Title Insurance Order Counts

From Direct Operations

 

     Three Months Ended
September 30


     2005

   2004

Title orders opened:

         

July

   236,400    214,500

August

   257,300    219,200

September

   231,300    217,800
    
  

Third quarter total

   725,000    651,500
    
  

Title orders closed:

         

July

   177,300    164,100

August

   199,900    167,700

September

   178,400    162,300
    
  

Third quarter total

   555,600    494,100
    
  

 

(Additional Financial Data Follows)

 

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First American Reports Record Results for the Third Quarter 2005

Page 5-5-5

 

Selected Financial Data

(unaudited, in thousands)

 

     Three Months Ended
September 30


   Nine Months Ended
September 30


     2005

   2004

   2005

   2004

RESULTS OF OPERATIONS

                           

Revenues

                           

Operating revenues

   $ 2,103,153    $ 1,680,887    $ 5,691,610    $ 4,811,518

Investment and other income

     58,196      35,541      152,527      98,685

Net realized investment gains

     6,833      5,057      12,504      9,106
    

  

  

  

       2,168,182      1,721,485      5,856,641      4,919,309
    

  

  

  

Expenses

                           

Salaries and other personnel costs

     628,559      545,294      1,778,531      1,553,691

Premiums retained by agents

     607,239      458,750      1,632,863      1,341,486

Other operating expenses

     460,366      358,694      1,237,713      1,071,971

Provision for title losses and other claims

     126,186      97,975      316,820      255,082

Depreciation and amortization

     38,049      32,981      110,998      93,677

Premium taxes

     16,954      13,324      45,897      38,954

Interest

     15,468      12,462      39,196      32,122
    

  

  

  

       1,892,821      1,519,480      5,162,018      4,386,983
    

  

  

  

Income before income taxes and minority interests

   $ 275,361    $ 202,005    $ 694,623    $ 532,326
    

  

  

  

OPERATING REVENUES

                           

Financial Services

                           

Title Insurance and Services:

                           

Direct operations

   $ 820,186    $ 645,203    $ 2,172,406    $ 1,820,654

Agency operations

     756,868      569,956      2,037,969      1,661,104
    

  

  

  

       1,577,054      1,215,159      4,210,375      3,481,758

Specialty Insurance

     74,678      61,617      198,972      159,956
    

  

  

  

       1,651,732      1,276,776      4,409,347      3,641,714
    

  

  

  

Information Technology

                           

Mortgage Information

     150,117      171,698      443,089      494,282

Property Information

     132,994      100,181      371,421      291,683

Credit Information

     83,854      60,322      228,549      185,686

Screening Information

     84,456      71,910      239,204      198,153
    

  

  

  

       451,421      404,111      1,282,263      1,169,804
    

  

  

  

Total operating revenues

   $ 2,103,153    $ 1,680,887    $ 5,691,610    $ 4,811,518
    

  

  

  

INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS

                           

Financial Services

                           

Title Insurance and Services

   $ 195,549    $ 123,509    $ 467,490    $ 322,583

Specialty Insurance

     13,605      8,334      36,463      32,431
    

  

  

  

       209,154      131,843      503,953      355,014
    

  

  

  

Information Technology

                           

Mortgage Information

     34,933      52,690      107,158      131,029

Property Information

     42,698      30,309      120,288      90,782

Credit Information

     21,000      15,172      60,431      42,192

Screening Information

     5,544      7,177      14,450      13,816
    

  

  

  

       104,175      105,348      302,327      277,819
    

  

  

  

Total before corporate expenses and
minority interest

     313,329      237,191      806,280      632,833

Corporate expense

     37,968      35,186      111,657      100,507
    

  

  

  

Income before income taxes and minority interests

   $ 275,361    $ 202,005    $ 694,623    $ 532,326
    

  

  

  

 

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First American Reports Record Results for the Third Quarter 2005

Page 6-6-6

 

Segment Margins

(unaudited)

(in thousands, except percentages)

 

     Three Months Ended September 30

 
     Total revenues

   Pretax (A)

   Margins

 
     2005

   2004

   2005

   2004

   2005

    2004

 

Financial Services

                                        

Title Insurance and Services

   $ 1,618,340    $ 1,237,763    $ 195,549    $ 123,509    12.1 %   10.0 %

Specialty Insurance

     78,873      64,838      13,605      8,334    17.2 %   12.9 %
    

  

  

  

  

 

     $ 1,697,213    $ 1,302,601    $ 209,154    $ 131,843    12.3 %   10.1 %
    

  

  

  

  

 

Information Technology

                                        

Mortgage Information

   $ 153,616    $ 174,508    $ 34,933    $ 52,690    22.7 %   30.2 %

Property Information

     142,269      106,396      42,698      30,309    30.0 %   28.5 %

Credit Information

     85,264      62,450      21,000      15,172    24.6 %   24.3 %

Screening Information

     84,984      71,936      5,544      7,177    6.5 %   10.0 %
    

  

  

  

  

 

     $ 466,133    $ 415,290    $ 104,175    $ 105,348    22.3 %   25.4 %
    

  

  

  

  

 

     Nine Months Ended September 30

 
     Total revenues

   Pretax (A)

   Margins

 
     2005

   2004

   2005

   2004

   2005

    2004

 

Financial Services

                                        

Title Insurance and Services

   $ 4,316,718    $ 3,542,755    $ 467,490    $ 322,583    10.8 %   9.1 %

Specialty Insurance

     210,421      170,556      36,463      32,431    17.3 %   19.0 %
    

  

  

  

  

 

     $ 4,527,139    $ 3,713,311    $ 503,953    $ 355,014    11.1 %   9.6 %
    

  

  

  

  

 

Information Technology

                                        

Mortgage Information

   $ 450,277    $ 501,214    $ 107,158    $ 131,029    23.8 %   26.1 %

Property Information

     396,813      310,266      120,288      90,782    30.3 %   29.3 %

Credit Information

     234,236      192,709      60,431      42,192    25.8 %   21.9 %

Screening Information

     240,735      198,295      14,450      13,816    6.0 %   7.0 %
    

  

  

  

  

 

     $ 1,322,061    $ 1,202,484    $ 302,327    $ 277,819    22.9 %   23.1 %
    

  

  

  

  

 

 

(A) - Income before income tax, minority interest and corporate expenses

 

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