EX-99.1 3 exh99_1.txt EXHIBIT 99.1 THE FIRST AMERICAN CORPORATION REPORTS RECORD-BREAKING THIRD QUARTER RESULTS --Third Quarter Revenues, Net Income and EPS Highest in Company's 114-Year History-- SANTA ANA, Calif., Oct. 22, 2003 - The First American Corporation (NYSE: FAF), the nation's leading diversified provider of business information and related products and services, today announced record-breaking results for the third quarter ended Sept. 30, 2003:
Three Months Ended Nine Months Ended September 30 September 30 -------------------------------- ---------------------------------- 2003 2002 2003 2002 -------------------------------- ---------------------------------- Total revenues $ 1.72 billion $ 1.20 billion $ 4.60 billion $ 3.33 billion Income before income taxes and minority interests $260.8 million $129.0 million $664.0 million $297.6 million Net income $141.8 million $67.4 million $356.9 million $151.6 million Net income per diluted share $1.62 $0.84 $4.15 $1.91
Summary of Operations "We again achieved a company milestone with record third quarter results," stated Parker S. Kennedy, president of The First American Corporation. "Our 2003 third quarter revenues, net income and earnings per share were the highest quarterly results in the company's 114-year history, exceeding our record-breaking 2003 second quarter. The third quarter produced relatively strong but declining mortgage applications. Interest rates have increased over the past two months and new order counts have slowed from the record pace of the second quarter. We began to reduce expenses in the third quarter in reaction to the slowdown in refinance activity and will continue to monitor expenses and personnel in relation to new incoming orders." -more- First American Reports Record-Breaking Third Quarter Results Page 2 Quarterly Financial Highlights Financial Services Group: o Record revenues for the third quarter 2003 were $1.33 billion, an increase of 45.1 percent when compared with $918.1 million for the third quarter of 2002. o Pretax income was a record $179.2 million, an increase of 102.5 percent when compared with $88.5 million in the prior year quarter. o Pretax margins improved to 13.5 percent compared with 9.6 percent for the third quarter 2002. Information Technology Group: o Record revenues for the third quarter 2003 were $383.6 million, an increase of 37.1 percent compared with $279.8 million for the third quarter of 2002. o Pretax income was a record $109.2 million, an increase of 50.3 percent when compared with $72.7 million in the prior year quarter. o Pretax margins improved to 28.5 percent compared with 26.0 percent for the third quarter 2002. 2003 Strategic Focus and Outlook Kennedy continued: "Although refinance activity has slowed, purchase activity remains strong. As a result of our continued cost-cutting initiatives, production efficiencies in our Title segment from our FAST technology and benefits from our recently announced transaction with Transamerica, we expect solid results in 2003, despite slowing mortgage activity in the third and fourth quarters. "The Oct. 1 closing of Transamerica's flood certification and tax services will be immediately accretive to fourth quarter earnings. By integrating these businesses, First American expects to benefit from significant cost synergies that will result in additional pretax profits in excess of $50 million on an annualized basis. These synergies will be realized over the next 18 months as integration is completed." Teleconference/Webcast First American's third quarter results will be discussed in more detail on Wednesday, Oct. 22, 2003, at 10 a.m. EDT, via teleconference. The dial-in number is (888) 809-8965 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 Oct. 26, 2003, by dialing (402) 998-0851. An audio archive of the call will also be available for replay on First American's Web site. -more- First American Reports Record-Breaking Third Quarter Results Page 3 About First American The First American Corporation is a Fortune 500 company that traces its history to 1889. As the nation's leading diversified provider of business information, the company supplies businesses and consumers with information resources in connection with the major economic events of people's lives, such as getting a job; renting an apartment; buying a car, house, boat or airplane; securing a mortgage; opening or buying a business; and planning for retirement. The First American Family of Companies, many of which command leading market share positions in their respective industries, operate within seven primary business segments including: Title Insurance and Services, Specialty Insurance, Trust and Other Services, Mortgage Information, Property Information, Credit Information and Screening Information. With revenues of $4.70 billion in 2002, First American has nearly 25,000 employees in approximately 1,400 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 2003 results, and earnings accretion and synergies from the Transamerica transaction 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; 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, 2002, 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) -more- First American Reports Record-Breaking Third Quarter Results Page 4 Summary of Earnings (in thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30 September 30 ------------------------------ ------------------------------- 2003 2002 2003 2002 ------------------------------ ------------------------------- Total revenues $1,716,742 $1,196,086 $4,601,648 $3,329,818 Income before income taxes and minority interests $ 260,759 $ 129,022 $ 664,005 $ 297,635 Income taxes $ 92,100 $ 42,800 $ 231,200 $ 100,100 Minority interests $ 26,812 $ 18,863 $ 75,902 $ 45,980 Net income $ 141,847 $ 67,359 $ 356,903 $ 151,555 Net income per share: Basic $1.83 $0.94 $4.69 $2.13 Diluted $1.62 $0.84 $4.15 $1.91 Weighted average shares outstanding: Basic 77,660 71,827 76,080 71,092 Diluted 88,395 82,679 87,155 82,112
Cash Provided by Operating Activities (in thousands)
Three Months Ended Nine Months Ended September 30 September 30 ------------------------------ ------------------------------- 2003 2002 2003 2002 ------------------------------ ------------------------------- Cash provided by operating activities $ 297,013 $ 134,578 $ 659,225 $ 330,518
Summary Balance Sheet Information (in thousands, except per share amounts)
September 30 December 31 ---------------- ---------------- 2003 2002 ---------------- ---------------- Total stockholders' equity $1,776,135 $1,364,589 Book value per share $22.82 $18.53
Summary Title Insurance Order Counts From Direct Operations
Three Months Ended September 30 ------------------------------------ 2003 2002 ------------------------------------ Title orders opened: July 263,800 190,500 August 188,700 222,200 September 173,600 216,700 --------------- --------------- Third quarter total 626,100 629,400 =============== =============== Title orders closed: July 217,900 131,700 August 197,900 146,000 September 173,500 147,300 --------------- --------------- Third quarter total 589,300 425,000 =============== ===============
(Additional Financial Data Follows) -more- First American Reports Record-Breaking Third Quarter Results Page 5 Selected Financial Data (in thousands)
Three Months Ended Nine Months Ended September 30 September 30 ----------------------------------- ----------------------------------- 2003 2002 2003 2002 ----------------------------------- ----------------------------------- RESULTS OF OPERATIONS Revenues Operating revenues $ 1,681,446 $ 1,179,116 $ 4,499,863 $ 3,287,037 Investment and other income 29,535 22,858 81,892 61,237 Net realized investment gains (losses) 5,761 (5,888) 19,893 (18,456) ---------------- ----------------- ---------------- ----------------- 1,716,742 1,196,086 4,601,648 3,329,818 ---------------- ----------------- ---------------- ----------------- Expenses Salaries and other personnel costs 490,152 381,074 1,337,138 1,090,317 Premiums retained by agents 477,504 322,148 1,251,997 915,281 Other operating expenses 348,528 264,458 969,719 745,645 Provision for title losses and other claims 89,464 58,215 236,106 158,011 Depreciation and amortization 27,134 23,662 79,704 72,894 Premium taxes 14,348 8,889 36,814 24,481 Interest 8,853 8,618 26,165 25,554 ---------------- ----------------- ---------------- ----------------- 1,455,983 1,067,064 3,937,643 3,032,183 ---------------- ----------------- ---------------- ----------------- Income before income taxes and minority interests $ 260,759 $ 129,022 $ 664,005 $ 297,635 ================ ================= ================ ================= OPERATING REVENUES Financial Services Title Insurance and Services: Direct operations $ 654,861 $ 464,893 $ 1,721,134 $ 1,271,670 Agency operations 589,632 393,034 1,547,386 1,128,453 ---------------- ----------------- ---------------- ----------------- 1,244,493 857,927 3,268,520 2,400,123 Specialty Insurance 55,180 37,426 152,213 100,318 Trust and Other Services 10,523 9,647 30,630 32,341 ---------------- ----------------- ---------------- ----------------- 1,310,196 905,000 3,451,363 2,532,782 ---------------- ----------------- ---------------- ----------------- Information Technology Mortgage Information 163,473 119,718 459,837 336,378 Property Information 97,952 71,024 278,254 183,587 Credit Information 62,200 56,642 193,844 160,189 Screening Information 47,625 26,732 116,565 74,101 ---------------- ----------------- ---------------- ----------------- 371,250 274,116 1,048,500 754,255 ---------------- ----------------- ---------------- ----------------- Total operating revenues $ 1,681,446 $ 1,179,116 $ 4,499,863 $ 3,287,037 ================ ================= ================ ================= INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS Financial Services Title Insurance and Services $ 167,478 $ 80,026 $ 394,279 $ 169,788 Specialty Insurance 8,741 6,014 22,821 17,855 Trust and Other Services 2,960 2,443 8,403 11,255 ---------------- ----------------- ---------------- ----------------- 179,179 88,483 425,503 198,898 ---------------- ----------------- ---------------- ----------------- Information Technology Mortgage Information 64,733 39,188 173,183 100,245 Property Information 26,976 21,405 82,809 48,070 Credit Information 14,987 10,943 59,565 30,827 Screening Information 2,525 1,120 6,258 3,868 ---------------- ----------------- ---------------- ----------------- 109,221 72,656 321,815 183,010 ---------------- ----------------- ---------------- ----------------- Total before corporate expenses and minority interest 288,400 161,139 747,318 381,908 Corporate expense 27,641 32,117 83,313 84,273 ---------------- ----------------- ---------------- ----------------- Income before income taxes and minority interests $ 260,759 $ 129,022 $ 664,005 $ 297,635 ================ ================= ================ =================
-more- First American Reports Record-Breaking Third Quarter Results Page 6 Segment Margins (in thousands, except percentages)
Three Months Ended September 30 ---------------------------------------------------------------------------------------- Total revenues Pretax (A) Margins ----------------------------- ------------------------------- ------------------------ 2003 2002 2003 2002 2003 2002 -------------- -------------- --------------- --------------- ------------ ----------- Financial Services Title Insurance and Services $ 1,262,666 $ 868,298 $ 167,478 $ 80,026 13.3% 9.2% Specialty Insurance 58,524 40,156 8,741 6,013 14.9% 15.0% Trust and Other Services 10,529 9,635 2,960 2,444 28.1% 25.4% -------------- -------------- --------------- --------------- ------------ ----------- $ 1,331,719 $ 918,089 $ 179,179 $ 88,483 13.5% 9.6% ============== ============== =============== =============== ============ =========== Information Technology Mortgage Information $ 166,624 $ 120,759 $ 64,733 $ 39,188 38.8% 32.5% Property Information 105,001 76,058 26,976 21,405 25.7% 28.1% Credit Information 64,354 56,214 14,987 10,943 23.3% 19.5% Screening Information 47,644 26,786 2,525 1,120 5.3% 4.2% -------------- -------------- --------------- --------------- ------------ ----------- $ 383,623 $ 279,817 $ 109,221 $ 72,656 28.5% 26.0% ============== ============== =============== =============== ============ ===========
Nine Months Ended September 30 ---------------------------------------------------------------------------------------- Total revenues Pretax (A) Margins ----------------------------- ------------------------------- ------------------------ 2003 2002 2003 2002 2003 2002 -------------- -------------- --------------- --------------- ------------ ----------- Financial Services Title Insurance and Services $ 3,307,986 $ 2,427,531 $ 394,279 $ 169,788 11.9% 7.0% Specialty Insurance 161,170 107,843 22,821 17,855 14.2% 16.6% Trust and Other Services 30,637 32,421 8,403 11,255 27.4% 34.7% -------------- -------------- --------------- --------------- ------------ ----------- $ 3,499,793 $ 2,567,795 $ 425,503 $ 198,898 12.2% 7.7% ============== ============== =============== =============== ============ =========== Information Technology Mortgage Information $ 469,438 $ 339,808 $ 173,183 $ 100,245 36.9% 29.5% Property Information 297,599 196,814 82,809 48,070 27.8% 24.4% Credit Information 214,181 164,968 59,565 30,827 27.8% 18.7% Screening Information 116,636 74,240 6,258 3,868 5.4% 5.2% -------------- -------------- --------------- --------------- ------------ ----------- $ 1,097,854 $ 775,830 $ 321,815 $ 183,010 29.3% 23.6% ============== ============== =============== =============== ============ ===========
(A) - Income before income tax, minority interest and corporate expenses # # #