For the transition period from ________ to Commission file number: 001-31666 |
For the transition period fromto
Commission file number: 001-31666
Incorporated in Delaware | ||
(State or other jurisdiction of incorporation or organization) | 61-1437565 (I.R.S. Employer Identification Number) |
(Address
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12b-2 of the Exchange Act (check one):
Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ] |
Smaller reporting company [ ] |
[X]
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Signatures | 32 |
March 31,
(in thousands) | March 31, 2009 | December 31, 2008 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 59,246 | $ | 52,361 | |||
Accounts receivable (less allowance for doubtful accounts of $10,649 and $8,345 in 2009 and 2008, respectively) | 122,871 | 121,531 | |||||
Prepaid expenses and other current assets | 9,616 | 9,032 | |||||
Due from affiliates | 1,284 | — | |||||
Deferred income tax asset | 18,193 | 22,719 | |||||
Total current assets | 211,210 | 205,643 | |||||
Property and equipment, net | 80,487 | 81,807 | |||||
Goodwill | 749,562 | 731,369 | |||||
Customer lists, net | 51,120 | 53,813 | |||||
Other intangible assets, net | 16,283 | 17,245 | |||||
Database development costs, net | 11,970 | 11,837 | |||||
Marketable equity securities | 33,455 | 30,365 | |||||
Other assets | 3,482 | 3,684 | |||||
Total assets | $ | 1,157,569 | $ | 1,135,763 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 36,652 | $ | 38,404 | |||
Accrued compensation | 24,033 | 32,423 | |||||
Accrued liabilities | 12,339 | 11,379 | |||||
Deferred income | 7,946 | 7,381 | |||||
Income tax payable | 838 | 2,609 | |||||
Due to affiliates | — | 714 | |||||
Current portion of long-term debt and capital leases | 9,386 | 9,891 | |||||
Total current liabilities | 91,194 | 102,801 | |||||
Long-term debt and capital leases, net of current portion | 45,849 | 22,938 | |||||
Deferred income tax liability | 69,541 | 67,676 | |||||
Other liabilities | 5,004 | 5,300 | |||||
Total liabilities | 211,588 | 198,715 | |||||
Equity: | |||||||
First Advantage Corporation’s stockholders’ equity: | |||||||
Preferred stock, $.001 par value; 1,000 shares authorized, no shares issued or outstanding | — | — | |||||
Class A common stock, $.001 par value; 125,000 shares authorized; 12,022 and 11,772 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively | 12 | 12 | |||||
Class B common stock, $.001 par value; 75,000 shares authorized; 47,727 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively | 48 | 48 | |||||
Additional paid-in capital | 499,218 | 502,600 | |||||
Retained earnings | 401,216 | 390,602 | |||||
Accumulated other comprehensive income (loss) | 637 | (412 | ) | ||||
Total First Advantage Corporation’s stockholders’ equity | 901,131 | 892,850 | |||||
Noncontrolling interests | 44,850 | 44,198 | |||||
Total equity | 945,981 | 937,048 | |||||
Total liabilities and equity | $ | 1,157,569 | $ | 1,135,763 | |||
(in thousands) | June 30, | December 31, | |
2009 | 2008 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 60,478 | $ 52,361 | |
Accounts receivable (less allowance for doubtful accounts | |||
of $11,977 and $8,345, respectively) | 118,702 | 121,531 | |
Prepaid expenses and other current assets | 9,634 | 9,032 | |
Due from affiliates | 2,908 | - | |
Deferred income tax asset | 16,846 | 16,695 | |
Total current assets | 208,568 | 199,619 | |
Property and equipment, net | 78,982 | 81,807 | |
Goodwill | 752,491 | 731,369 | |
Customer lists, net | 48,507 | 53,813 | |
Other intangible assets, net | 15,311 | 17,245 | |
Database development costs, net | 12,191 | 11,837 | |
Marketable equity securities | 43,389 | 30,365 | |
Other assets | 3,300 | 3,684 | |
Total assets | $ 1,162,739 | $ 1,129,739 | |
Liabilities and Equity | |||
Current liabilities: | |||
Accounts payable | $ 37,346 | $ 38,404 | |
Accrued compensation | 22,367 | 32,423 | |
Accrued liabilities | 13,511 | 11,379 | |
Deferred income | 6,755 | 7,381 | |
Income tax payable | 1,037 | 2,609 | |
Due to affiliates | - | 714 | |
Current portion of long-term debt and capital leases | 8,807 | 9,891 | |
Total current liabilities | 89,823 | 102,801 | |
Long-term debt and capital leases, net of current portion | 29,357 | 22,938 | |
Deferred income tax liability | 68,429 | 61,652 | |
Other liabilities | 4,971 | 5,300 | |
Total liabilities | 192,580 | 192,691 | |
Equity: | |||
First Advantage Corporations Stockholders' Equity: | |||
Preferred stock, $.001 par value; 1,000 shares authorized, no shares issued or outstanding | - | - | |
Class A common stock, $.001 par value; 125,000 shares authorized; | |||
12,061 and 11,772 shares issued and outstanding as of | |||
June 30, 2009 and December 31, 2008, respectively | 12 | 12 | |
Class B common stock, $.001 par value; 75,000 shares authorized; 47,727 shares issued | |||
and outstanding as of June 30, 2009 and December 31, 2008, respectively | 48 | 48 | |
Additional paid-in capital | 501,324 | 502,600 | |
Retained earnings | 414,187 | 390,602 | |
Accumulated other comprehensive income (loss) | 10,124 | (412) | |
Total First Advantage Corporation's stockholders' equity | 925,695 | 892,850 | |
Noncontrolling interests | 44,464 | 44,198 | |
Total equity | 970,159 | 937,048 | |
Total liabilities and equity | $ 1,162,739 | $ 1,129,739 |
-2-
(in thousands, except per share amounts) | For the Three Months Ended March 31, | |||||||
2009 | 2008 | |||||||
Service revenue | $ | 190,040 | $ | 188,254 | ||||
Reimbursed government fee revenue | 12,978 | 14,025 | ||||||
Total revenue | 203,018 | 202,279 | ||||||
Cost of service revenue | 81,340 | 53,716 | ||||||
Government fees paid | 12,978 | 14,025 | ||||||
Total cost of service | 94,318 | 67,741 | ||||||
Gross margin | 108,700 | 134,538 | ||||||
Salaries and benefits | 53,167 | 66,449 | ||||||
Facilities and telecommunications | 6,659 | 8,200 | ||||||
Other operating expenses | 19,347 | 22,834 | ||||||
Depreciation and amortization | 10,686 | 9,896 | ||||||
Total operating expenses | 89,859 | 107,379 | ||||||
Income from operations | 18,841 | 27,159 | ||||||
Other (expense) income: | ||||||||
Interest expense | (375 | ) | (425 | ) | ||||
Interest income | 213 | 419 | ||||||
Total other (expense), net | (162 | ) | (6 | ) | ||||
Income from continuing operations before income taxes | 18,679 | 27,153 | ||||||
Provision for income taxes | 7,846 | 10,974 | ||||||
Income from continuing operations | 10,833 | 16,179 | ||||||
Loss from discontinued operations, net of tax | — | (2,977 | ) | |||||
Net income | 10,833 | 13,202 | ||||||
Less: Net income (loss) attributable to noncontrolling interest | 219 | (87 | ) | |||||
Net income attributable to First Advantage Corporation (“FADV”) | $ | 10,614 | $ | 13,289 | ||||
Basic income per share: | ||||||||
Income from continuing operations attributable to FADV shareholders | $ | 0.18 | $ | 0.27 | ||||
Loss from discontinued operations attributable to FADV shareholders, net of tax | — | (0.05 | ) | |||||
Net income attributable to FADV shareholders | $ | 0.18 | $ | 0.22 | ||||
Diluted income per share: | ||||||||
Income from continuing operations attributable to FADV shareholders | $ | 0.18 | $ | 0.27 | ||||
Loss from discontinued operations attributable to FADV shareholders, net of tax | — | (0.05 | ) | |||||
Net income attributable to FADV shareholders | $ | 0.18 | $ | 0.22 | ||||
Weighted-average common shares outstanding: | ||||||||
Basic | 59,585 | 59,159 | ||||||
Diluted | 59,612 | 59,234 | ||||||
Amounts attributable to FADV shareholders: | ||||||||
Income from continuing operations, net of tax | $ | 10,614 | $ | 16,266 | ||||
Loss from discontinued operations, net of tax | — | (2,977 | ) | |||||
Net income | $ | 10,614 | $ | 13,289 | ||||
(in thousands, except per share amounts) | For the Three Months Ended | For the Six Months Ended | ||||||||||
June 30, | June 30, | |||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||
Service revenue | $ | 164,668 | $ | 182,423 | $ | 354,708 | $ | 370,677 | ||||
Reimbursed government fee revenue | 13,341 | 13,122 | 26,319 | 27,147 | ||||||||
Total revenue | 178,009 | 195,545 | 381,027 | 397,824 | ||||||||
Cost of service revenue | 58,261 | 53,487 | 139,601 | 107,203 | ||||||||
Government fees paid | 13,341 | 13,122 | 26,319 | 27,147 | ||||||||
Total cost of service | 71,602 | 66,609 | 165,920 | 134,350 | ||||||||
Gross margin | 106,407 | 128,936 | 215,107 | 263,474 | ||||||||
Salaries and benefits | 48,130 | 62,927 | 101,297 | 129,376 | ||||||||
Facilities and telecommunications | 6,865 | 8,084 | 13,524 | 16,284 | ||||||||
Other operating expenses | 18,597 | 22,909 | 37,944 | 45,743 | ||||||||
Depreciation and amortization | 10,895 | 10,726 | 21,581 | 20,622 | ||||||||
Impairment loss | - | 297 | - | 297 | ||||||||
Total operating expenses | 84,487 | 104,943 | 174,346 | 212,322 | ||||||||
Income from operations | 21,920 | 23,993 | 40,761 | 51,152 | ||||||||
Other (expense) income: | ||||||||||||
Interest expense | (294 | ) | (1,075 | ) | (669 | ) | (1,500 | ) | ||||
Interest income | 71 | 172 | 284 | 591 | ||||||||
Total other (expense), net | (223 | ) | (903 | ) | (385 | ) | (909 | ) | ||||
Income from continuing operations before income taxes | 21,697 | 23,090 | 40,376 | 50,243 | ||||||||
Provision for income taxes | 9,112 | 9,676 | 16,958 | 20,650 | ||||||||
Income from continuing operations | 12,585 | 13,414 | 23,418 | 29,593 | ||||||||
Loss from discontinued operations, net of tax | - | (1,264 | ) | - | (4,241 | ) | ||||||
Net income | 12,585 | 12,150 | 23,418 | 25,352 | ||||||||
Less: Net loss attributable to noncontrolling interest | (386 | ) | (238 | ) | (167 | ) | (325 | ) | ||||
Net income attributable to First Advantage Corporation ("FADV") | $ | 12,971 | $ | 12,388 | $ | 23,585 | $ | 25,677 | ||||
Basic income per share: | ||||||||||||
Income from continuing operations attributable to FADV shareholders | $ | 0.22 | $ | 0.23 | $ | 0.40 | $ | 0.50 | ||||
Loss from discontinued operations attributable to FADV shareholders, net of tax | - | (0.02 | ) | - | (0.07 | ) | ||||||
Net income attributable to FADV shareholders | $ | 0.22 | $ | 0.21 | $ | 0.40 | $ | 0.43 | ||||
Diluted income per share: | ||||||||||||
Income from continuing operations attributable to FADV shareholders | $ | 0.22 | $ | 0.23 | $ | 0.39 | $ | 0.50 | ||||
Loss from discontinued operations attributable to FADV shareholders, net of tax | - | (0.02 | ) | - | (0.07 | ) | ||||||
Net income attributable to FADV shareholders | $ | 0.22 | $ | 0.21 | $ | 0.39 | $ | 0.43 | ||||
Weighted-average common shares outstanding: | ||||||||||||
Basic | 59,776 | 59,435 | 59,681 | 59,297 | ||||||||
Diluted | 59,898 | 59,617 | 59,764 | 59,374 | ||||||||
Amounts attributable to FADV shareholders: | ||||||||||||
Income from continuing operations, net of tax | $ | 12,971 | $ | 13,652 | $ | 23,585 | $ | 29,918 | ||||
Loss from discontinued operations, net of tax | - | (1,264 | ) | - | (4,241 | ) | ||||||
Net income | $ | 12,971 | $ | 12,388 | $ | 23,585 | $ | 25,677 |
-3-
For the Three Months Ended March 31, 2009 and 2008 (Unaudited)
Three Months Ended March 31, | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Net income | $ | 10,833 | $ | 13,202 | ||||
Other comprehensive (loss) income, net of tax: | ||||||||
Foreign currency translation adjustments | (769 | ) | 2,750 | |||||
Unrealized gain (loss) on investment, net of tax | 1,818 | (20,489 | ) | |||||
Total other comprehensive income (loss) , net of tax | $ | 1,049 | $ | (17,739 | ) | |||
Comprehensive income (loss) | $ | 11,882 | $ | (4,537 | ) | |||
Comprehensive income (loss) attributable to the noncontrolling interest | 219 | (87 | ) | |||||
Comprehensive income (loss) attributable to FADV | $ | 12,101 | $ | (4,624 | ) | |||
Three Months Ended | Six Months Ended | |||||||||||||||
(in thousands) | June 30, | June 30, | ||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income | $ | 12,585 | $ | 12,150 | $ | 23,418 | $ | 25,352 | ||||||||
Other comprehensive income (loss) , net of tax: | ||||||||||||||||
Foreign currency translation adjustments | 3,572 | (670 | ) | 2,803 | 2,080 | |||||||||||
Unrealized gain (loss) on investment, net of tax | 5,915 | (9,230 | ) | 7,733 | (29,719 | ) | ||||||||||
Total other comprehensive income (loss) , net of tax | $ | 9,487 | $ | (9,900 | ) | $ | 10,536 | $ | (27,639 | ) | ||||||
Comprehensive income (loss) | $ | 22,072 | $ | 2,250 | $ | 33,954 | $ | (2,287 | ) | |||||||
Comprehensive loss attributable to the noncontrolling interest | (386 | ) | (238 | ) | (167 | ) | (325 | ) | ||||||||
Comprehensive income (loss) attributable to FADV | $ | 21,686 | $ | 2,012 | $ | 33,787 | $ | (2,612 | ) |
-4-
(in thousands) | Common Stock Shares | Common Stock Amount | Additional Paid- in Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Noncontrolling Interests | Total | ||||||||||||||||
Balance at December 31, 2008 | 59,499 | $ | 60 | $ | 502,600 | $ | 390,602 | $ | (412 | ) | $ | 44,198 | $ | 937,048 | |||||||||
Net income | — | — | — | 10,614 | — | 219 | 10,833 | ||||||||||||||||
Purchase of subsidiary shares from noncontrolling interest | — | — | (5,506 | ) | — | — | 433 | (5,073 | ) | ||||||||||||||
Class A Shares issued in connection with share-based compensation | 250 | — | 175 | — | — | — | 175 | ||||||||||||||||
Share-based compensation | — | — | 1,949 | — | — | — | 1,949 | ||||||||||||||||
Foreign currency translation | — | — | — | — | (769 | ) | — | (769 | ) | ||||||||||||||
Unrealized gain on investment, net of tax | — | — | — | — | 1,818 | — | 1,818 | ||||||||||||||||
Balance at March 31, 2009 | 59,749 | $ | 60 | $ | 499,218 | $ | 401,216 | $ | 637 | $ | 44,850 | $ | 945,981 | ||||||||||
Accumulated | |||||||||||||||||||||||
(in thousands) | Common | Common | Additional | Other | |||||||||||||||||||
Stock | Stock | Paid-in | Retained | Comprehensive | Noncontrolling | ||||||||||||||||||
Shares | Amount | Capital | Earnings | (Loss) Income | Interests | Total | |||||||||||||||||
Balance at December 31, 2008 | 59,499 | $ | 60 | $ | 502,600 | $ | 390,602 | $ | (412 | ) | $ | 44,198 | $ | 937,048 | |||||||||
Net income | - | - | - | 23,585 | - | (167 | ) | 23,418 | |||||||||||||||
Purchase of subsidiary shares from | |||||||||||||||||||||||
noncontrolling interest | - | - | (5,506 | ) | - | - | 433 | (5,073 | ) | ||||||||||||||
Class A Shares issued in | |||||||||||||||||||||||
connection with share | |||||||||||||||||||||||
based compensation | 289 | - | 310 | - | - | - | 310 | ||||||||||||||||
Share based compensation | - | - | 3,920 | - | - | - | 3,920 | ||||||||||||||||
Foreign currency translation | - | - | - | - | 2,803 | - | 2,803 | ||||||||||||||||
Unrealized gain on investment, | |||||||||||||||||||||||
net of tax | - | - | - | - | 7,733 | - | 7,733 | ||||||||||||||||
Balance at June 30, 2009 | 59,788 | $ | 60 | $ | 501,324 | $ | 414,187 | $ | 10,124 | $ | 44,464 | $ | 970,159 | ||||||||||
-5-
(in thousands) | For the Three Months Ended March 31, | |||||||
2009 | 2008 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 10,833 | $ | 13,202 | ||||
Loss from discontinued operations | — | (2,977 | ) | |||||
Income from continuing operations | $ | 10,833 | $ | 16,179 | ||||
Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 10,686 | 9,896 | ||||||
Bad debt expense | 3,600 | 1,322 | ||||||
Share based compensation | 1,949 | 2,256 | �� | |||||
Deferred income tax | 5,182 | 7,309 | ||||||
Change in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (5,993 | ) | (2,855 | ) | ||||
Prepaid expenses and other current assets | (508 | ) | 477 | |||||
Other assets | (175 | ) | 696 | |||||
Accounts payable | (1,750 | ) | (3,132 | ) | ||||
Accrued liabilities | 1,009 | (599 | ) | |||||
Deferred income | 566 | (176 | ) | |||||
Due from affiliates | (1,998 | ) | (1,401 | ) | ||||
Income tax accounts | (1,769 | ) | (56,022 | ) | ||||
Accrued compensation and other liabilities | (8,699 | ) | (9,681 | ) | ||||
Net cash provided by (used in) operating activities—continuing operations | 12,933 | (35,731 | ) | |||||
Net cash provided by operating activities—discontinued operations | — | 502 | ||||||
Cash flows from investing activities: | ||||||||
Database development costs | (919 | ) | (957 | ) | ||||
Purchases of property and equipment | (5,014 | ) | (10,356 | ) | ||||
Cash paid for acquisitions | (18,143 | ) | (36,140 | ) | ||||
Cash balance of companies acquired | — | 331 | ||||||
Net cash used in investing activities—continuing operations | (24,076 | ) | (47,122 | ) | ||||
Net cash used in investing activities—discontinued operations | — | (279 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from long-term debt | 45,000 | 75,197 | ||||||
Repayment of long-term debt | (22,581 | ) | (3,326 | ) | ||||
Cash contributions from First American to Leadclick Holdings, LLC | — | 2,402 | ||||||
Proceeds from class A shares issued in connection with stock option plan and employee stock purchase plan | 175 | 1,854 | ||||||
Cash paid for acquisition of noncontrolling interests | (5,073 | ) | (8,008 | ) | ||||
Distribution to noncontrolling interests | — | (700 | ) | |||||
Tax expense related to stock options | — | (204 | ) | |||||
Net cash provided by financing activities | 17,521 | 67,215 | ||||||
Effect of exchange rates on cash | 507 | 424 | ||||||
Increase (decrease) in cash and cash equivalents | 6,885 | (14,991 | ) | |||||
Cash and cash equivalents at beginning of period | 52,361 | 76,060 | ||||||
Change in cash and cash equivalents of discontinued operations | — | 39 | ||||||
Cash and cash equivalents at end of period | $ | 59,246 | $ | 61,108 | ||||
(in thousands) | For the Six Months Ended | |||||||
June 30, | ||||||||
2009 | 2008 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 23,418 | $ | 25,352 | ||||
Loss from discontinued operations | - | (4,241 | ) | |||||
Income from continuing operations | $ | 23,418 | $ | 29,593 | ||||
Adjustments to reconcile income from continuing operations to net | ||||||||
cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 21,581 | 20,919 | ||||||
Bad debt expense | 6,483 | 3,464 | ||||||
Share based compensation | 3,920 | 4,974 | ||||||
Deferred income tax | 1,324 | 7,676 | ||||||
Change in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (3,826 | ) | 13,603 | |||||
Prepaid expenses and other current assets | (547 | ) | (535 | ) | ||||
Other assets | 126 | (116 | ) | |||||
Accounts payable | (1,117 | ) | (2,322 | ) | ||||
Accrued liabilities | 1,905 | (1,962 | ) | |||||
Deferred income | (604 | ) | (477 | ) | ||||
Due from affiliates | (3,622 | ) | (6,782 | ) | ||||
Income tax accounts | (1,475 | ) | (59,400 | ) | ||||
Accrued compensation and other liabilities | (10,390 | ) | (11,157 | ) | ||||
Net cash provided by (used in) operating activities - continuing operations | 37,176 | (2,522 | ) | |||||
Net cash provided by operating activities - discontinued operations | - | 754 | ||||||
Cash flows from investing activities: | ||||||||
Database development costs | (1,939 | ) | (2,092 | ) | ||||
Purchases of property and equipment | (9,826 | ) | (17,479 | ) | ||||
Cash paid for acquisitions | (19,465 | ) | (51,152 | ) | ||||
Proceeds from sale of assets | 850 | - | ||||||
Cash balance of companies acquired | - | 331 | ||||||
Net cash used in investing activities - continuing operations | (30,380 | ) | (70,392 | ) | ||||
Net cash provided by investing activities - discontinued operations | - | 1,721 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from long-term debt | 50,396 | 90,000 | ||||||
Repayment of long-term debt | (45,139 | ) | (52,033 | ) | ||||
Cash contributions from First American to LeadClick Holdings, LLC | - | 2,402 | ||||||
Proceeds from class A shares issued in connection with stock option | ||||||||
plan and employee stock purchase plan | 310 | 4,365 | ||||||
Cash paid for acquisition of noncontrolling interests | (5,073 | ) | (8,008 | ) | ||||
Distribution to noncontrolling interests | - | (949 | ) | |||||
Tax expense related to stock options | - | (204 | ) | |||||
Net cash provided by financing activities | 494 | 35,573 | ||||||
Effect of exchange rates on cash | 827 | (146 | ) | |||||
Increase (decrease) in cash and cash equivalents | 8,117 | (35,012 | ) | |||||
Cash and cash equivalents at beginning of period | 52,361 | 76,060 | ||||||
Change in cash and cash equivalents of discontinued operations | - | 540 | ||||||
Cash and cash equivalents at end of period | $ | 60,478 | $ | 41,588 |
-6-
continued
For the Three Months Ended March 31, | |||||||
(in thousands) | 2009 | 2008 | |||||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for interest | $ | 334 | $ | 365 | |||
Cash received for income tax refund | $ | 529 | $ | — | |||
Cash paid for income taxes | $ | 4,717 | $ | 56,890 | |||
Non-cash investing and financing activities: | |||||||
Class A shares issued for compensation | $ | 4,321 | $ | 2,594 | |||
Unrealized gain (loss) on investment, net of tax | $ | 1,818 | $ | (20,489 | ) | ||
For the Six Months Ended | ||||||||
(in thousands) | June 30, | |||||||
2009 | 2008 | |||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 432 | $ | 1,467 | ||||
Cash received for income tax refund | $ | 982 | $ | 987 | ||||
Cash paid for income taxes | $ | 17,580 | $ | 69,125 | ||||
Non-cash investing and financing activities: | ||||||||
Notes issued in connection with acquisitions | $ | - | $ | 3,026 | ||||
Class A shares issued for compensation | $ | 4,997 | $ | 2,767 | ||||
Unrealized gain (loss) on investment, net of tax | $ | 7,733 | $ | (29,719 | ) |
-7-
SFAS No. 165, "Subsequent Events," and FASB Staff Position FAS 107-1, "Interim Disclosures about Fair Value of Financial Instruments."
-8-
June 30, 2009 | December 31, 2008 | |||||||||||||
(in thousands) | Carrying | Estimated | Carrying | Estimated | ||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||
Cash and cash equivalents | $ | 60,478 | $ | 60,478 | $ | 52,361 | $ | 52,361 | ||||||
Accounts receivable | 118,702 | 118,702 | 121,531 | 121,531 | ||||||||||
Marketable equity securities | 43,389 | 43,389 | 30,365 | 30,365 | ||||||||||
Long-term debt and capital leases | (38,164 | ) | (38,201 | ) | (32,829 | ) | (32,699 | ) |
Acquisitions
The additional consideration related to earnout provisions was recorded to goodwill and the purchase of noncontrolling interests was recorded to additional paid in capital when paid.
(in thousands) | Balance at December 31, 2008 | Acquisitions and Earnouts | Adjustments to net assets acquired | Balance at March 31, 2009 | |||||||||
Credit Services | $ | 107,578 | $ | — | $ | — | $ | 107,578 | |||||
Data Services | 218,505 | — | — | 218,505 | |||||||||
Employer Services | 272,461 | 944 | 53 | 273,458 | |||||||||
Multifamily Services | 49,174 | — | — | 49,174 | |||||||||
Investigative and Litigation Support Services | 83,651 | 17,199 | (3 | ) | 100,847 | ||||||||
Consolidated | $ | 731,369 | $ | 18,143 | $ | 50 | $ | 749,562 | |||||
Acquisitions, | ||||||||||||
Balance at | (Disposals) | Adjustments to net | Balance at | |||||||||
(in thousands) | December 31, 2008 | and Earnouts | assets acquired | June 30, 2009 | ||||||||
Credit Services | $ | 107,578 | $ | - | $ | - | $ | 107,578 | ||||
Data Services | 218,505 | (611 | ) | - | 217,894 | |||||||
Employer Services | 272,461 | 2,266 | 2,245 | 276,972 | ||||||||
Multifamily Services | 49,174 | - | - | 49,174 | ||||||||
Investigative and Litigation Support Services | 83,651 | 17,199 | 23 | 100,873 | ||||||||
Consolidated | $ | 731,369 | $ | 18,854 | $ | 2,268 | $ | 752,491 |
-9-
past periods.
Notes to Consolidated Financial StatementsDiscontinued Operations
(in thousands, except per share amounts) | For the Three Months Ended March 31, 2008 | |||
Total revenue | $ | 4,845 | ||
Loss from discontinued operations before income taxes | $ | (1,104 | ) | |
Loss on sale of discontinued operations before income taxes | (3,910 | ) | ||
Income tax benefit | (2,037 | ) | ||
Loss from discontinued operations, net of tax | $ | (2,977 | ) | |
Loss per share: | ||||
Basic | $ | (0.05 | ) | |
Diluted | $ | (0.05 | ) | |
Weighted-average common shares outstanding: | ||||
Basic | 59,159 | |||
Diluted | 59,234 |
Three months ended | Six months ended | |||||||
June 30, | June 30, | |||||||
(in thousands, except per share amounts) | 2008 | 2008 | ||||||
Total revenue | $ | 2,826 | $ | 7,671 | ||||
Loss from discontinued operations before income taxes | $ | (2,141 | ) | $ | (3,245 | ) | ||
Loss on sale of discontinued operations before income taxes | - | (3,910 | ) | |||||
Income tax benefit | (877 | ) | (2,914 | ) | ||||
Loss from discontinued operations, net of tax | $ | (1,264 | ) | $ | (4,241 | ) | ||
Loss per share: | ||||||||
Basic | $ | (0.02 | ) | $ | (0.07 | ) | ||
Diluted | $ | (0.02 | ) | $ | (0.07 | ) | ||
Weighted-average common shares outstanding: | ||||||||
Basic | 59,435 | 59,297 | ||||||
Diluted | 59,617 | 59,374 |
-10-
First Advantage Corporation
Notes to Consolidated Financial Statements
fourth quarter of 2009 or prior to that, if any such change constitutes a triggering event in other than the quarter in which the annual goodwill impairment test is performed. It is not possible at this time to determine if any such future impairment loss would result or, if it does, whether such charge would be material.
(in thousands) | March 31, 2009 | December 31, 2008 | ||||||
Goodwill | $ | 749,562 | $ | 731,369 | ||||
Customer lists | $ | 95,424 | $ | 95,446 | ||||
Less accumulated amortization | (44,304 | ) | (41,633 | ) | ||||
Customer lists, net | $ | 51,120 | $ | 53,813 | ||||
Other intangible assets: | ||||||||
Noncompete agreements | $ | 10,159 | $ | 11,783 | ||||
Trade names | 21,660 | 21,631 | ||||||
31,819 | 33,414 | |||||||
Less accumulated amortization | (15,536 | ) | (16,169 | ) | ||||
Other intangible assets, net | $ | 16,283 | $ | 17,245 | ||||
(in thousands) | June 30, 2009 | December 31, 2008 | ||||||
Goodwill | $ | 752,491 | $ | 731,369 | ||||
Customer lists | $ | 95,556 | $ | 95,446 | ||||
Less accumulated amortization | (47,049 | ) | (41,633 | ) | ||||
Customer lists, net | $ | 48,507 | $ | 53,813 | ||||
Other identifiable intangible assets: | ||||||||
Noncompete agreements | $ | 10,186 | $ | 11,783 | ||||
Trade names | 21,664 | 21,631 | ||||||
31,850 | 33,414 | |||||||
Less accumulated amortization | (16,539 | ) | (16,169 | ) | ||||
Other identifiable intangible assets, net | $ | 15,311 | $ | 17,245 |
(in thousands) | ||||
Remainder of 2009 | $ | 7,252 | ||
2010 | 13,926 | |||
2011 | 11,307 | |||
2012 | 10,213 | |||
2013 | 8,812 | |||
Thereafter | 12,308 | |||
$ | 63,818 |
(in thousands) | |||
Remainder of 2009 | $ | 10,916 | |
2010 | 13,895 | ||
2011 | 11,285 | ||
2012 | 10,202 | ||
2013 | 8,798 | ||
Thereafter | 12,307 | ||
$ | 67,403 | ||
-11-
First Advantage Corporation
Notes to Consolidated Financial Statements
The changes in the carrying amount of identifiable intangible assets are as follows for the threesix months ended March 31,June 30, 2009:
(in thousands) | Other Intangible Assets | Customer Lists | ||||||
Balance, at December 31, 2008 | $ | 17,245 | $ | 53,813 | ||||
Adjustments | 29 | (13 | ) | |||||
Amortization | (991 | ) | (2,680 | ) | ||||
Balance, at March 31, 2009 | $ | 16,283 | $ | 51,120 | ||||
Other | ||||||||
Identifiable | ||||||||
Intangible | Customer | |||||||
(in thousands) | Assets | Lists | ||||||
Balance, at December 31, 2008 | $ | 17,245 | $ | 53,813 | ||||
Adjustments | 33 | 58 | ||||||
Amortization | (1,967 | ) | (5,364 | ) | ||||
Balance, at June 30, 2009 | $ | 15,311 | $ | 48,507 |
(in thousands, except percentages) | |||
Acquisition notes: | |||
Weighted average interest rate of 3.70% with maturities through 2011 | $ | 14,173 | |
Bank notes: | |||
$225 million Secured Credit Facility, interest at 30-day LIBOR plus 1.13% (1.67% at March 31, 2009) matures September 2010 | 40,000 | ||
Capital leases and other debt: | |||
Various interest rates with maturities through 2011 | 1,062 | ||
Total long-term debt and capital leases | $ | 55,235 | |
Less current portion of long-term debt and capital leases | 9,386 | ||
Long-term debt and capital leases, net of current portion | $ | 45,849 | |
(in thousands, except percentages) | ||||
Acquisition notes: | ||||
Weighted average interest rate of 3.65% with maturities | ||||
through 2011 | $ | 11,699 | ||
Bank notes: | ||||
$225 million Secured Credit Facility, interest at 30-day LIBOR | ||||
plus 1.13% (1.44% at June 30, 2009) matures September 2010 | 25,000 | |||
Capital leases and other debt: | ||||
Various interest rates with maturities through 2011 | 1,465 | |||
Total long-term debt and capital leases | $ | 38,164 | ||
Less current portion of long-term debt and capital leases | 8,807 | |||
Long-term debt and capital leases, net of current portion | $ | 29,357 | ||
-12-
Earnings Per Share
(in thousands, except per share amounts) | Three Months Ended March 31, | ||||||
2009 | 2008 | ||||||
Income from continuing operations attributable to FADV shareholders | $ | 10,614 | $ | 16,266 | |||
Loss from discontinued operations attributable to FADV shareholders, net of tax | — | (2,977 | ) | ||||
Net income attributable to FADV shareholders | $ | 10,614 | $ | 13,289 | |||
Denominator: | |||||||
Weighted-average shares for basic earnings per share | 59,585 | 59,159 | |||||
Effect of restricted stock | 25 | 46 | |||||
Effect of dilutive securities - employee stock options and warrants | 2 | 29 | |||||
Denominator for diluted earnings per share | 59,612 | 59,234 | |||||
Earnings per share: | |||||||
Basic | |||||||
Income from continuing operations attributable to FADV shareholders | $ | 0.18 | $ | 0.27 | |||
Loss from discontinued operations attributable to FADV shareholders, net of tax | — | (0.05 | ) | ||||
Net income attributable to FADV shareholders | $ | 0.18 | $ | 0.22 | |||
Diluted | |||||||
Income from continuing operations attributable to FADV shareholders | $ | 0.18 | $ | 0.27 | |||
Loss from discontinued operations attributable to FADV shareholders, net of tax | — | (0.05 | ) | ||||
Net income attributable to FADV shareholders | $ | 0.18 | $ | 0.22 | |||
Three Months Ended | Six Months Ended | |||||||||||
(in thousands, except per share amounts) | June 30, | June 30, | ||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||
Income from continuing operations attributable to FADV shareholders | $ | 12,971 | $ | 13,652 | $ | 23,585 | $ | 29,918 | ||||
Loss from discontinued operations attributable to FADV shareholders, net of tax | - | (1,264 | ) | - | (4,241 | ) | ||||||
Net income attributable to FADV shareholders | $ | 12,971 | $ | 12,388 | $ | 23,585 | $ | 25,677 | ||||
Denominator: | ||||||||||||
Weighted-average shares for basic earnings per share | 59,776 | 59,435 | 59,681 | 59,297 | ||||||||
Effect of restricted stock | 117 | 75 | 79 | 47 | ||||||||
Effect of dilutive securities - employee stock options and warrants | 5 | 107 | 4 | 30 | ||||||||
Denominator for diluted earnings per share | 59,898 | 59,617 | 59,764 | 59,374 | ||||||||
Earnings per share: | ||||||||||||
Basic | ||||||||||||
Income from continuing operations attributable to FADV shareholders | $ | 0.22 | $ | 0.23 | $ | 0.40 | $ | 0.50 | ||||
Loss from discontinued operations attributable to FADV shareholders, net of tax | - | (0.02 | ) | - | (0.07 | ) | ||||||
Net income attributable to FADV shareholders | $ | 0.22 | $ | 0.21 | $ | 0.40 | $ | 0.43 | ||||
Diluted | ||||||||||||
Income from continuing operations attributable to FADV shareholders | $ | 0.22 | $ | 0.23 | $ | 0.39 | $ | 0.50 | ||||
Loss from discontinued operations attributable to FADV shareholders, net of tax | - | (0.02 | ) | - | (0.07 | ) | ||||||
Net income attributable to FADV shareholders | $ | 0.22 | $ | 0.21 | $ | 0.39 | $ | 0.43 |
For the six months ended June 30, 2009 and 2008, options and warrants totaling 3,376,872 and 3,599,011, respectively, were excluded from the weighted average diluted shares outstanding, as they were antidilutive.
-13-
(in thousands, except exercise prices)
| Number of Shares | Weighted Average Grant-Date Fair Value | ||||
Nonvested restricted stock outstanding at December 31, 2008 | 632 | $ | 21.93 | |||
Restricted stock granted | 367 | $ | 10.35 | |||
Restricted stock forfeited | (30 | ) | $ | 17.99 | ||
Restricted stock vested | (232 | ) | $ | 23.21 | ||
Nonvested restricted stock outstanding at March 31, 2009 | 737 | $ | 15.91 | |||
Weighted | ||||||||
(in thousands, except exercise prices) | Average | |||||||
Number of | Grant-Date | |||||||
Shares | Fair Value | |||||||
Nonvested restricted stock outstanding at December 31, 2008 | 632 | $ | 21.93 | |||||
Restricted stock granted | 406 | $ | 10.61 | |||||
Restricted stock forfeited | (30 | ) | $ | 17.99 | ||||
Restricted stock vested | (253 | ) | $ | 23.06 | ||||
Nonvested restricted stock outstanding at June 30, 2009 | 755 | $ | 15.61 |
Three Months Ended March 31, | ||||||
(in thousands) | 2009 | 2008 | ||||
Stock options | $ | 633 | $ | 1,374 | ||
Restricted stock | 1,287 | 839 | ||||
Employee stock purchase plan | 29 | 43 | ||||
$ | 1,949 | $ | 2,256 | |||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) | 2009 | 2008 | 2009 | 2008 | |||||||||
Stock options | $ | 487 | $ | 1,326 | $ | 1,120 | $ | 2,700 | |||||
Restricted stock | 1,459 | 1,349 | 2,746 | 2,188 | |||||||||
Employee stock purchase plan | 24 | 42 | 54 | 86 | |||||||||
$ | 1,970 | $ | 2,717 | $ | 3,920 | $ | 4,974 |
(in thousands, except exercise prices)
| Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||
Options outstanding at December 31, 2008 | 3,492 | $ | 23.06 | $ | 24 | ||||
Options exercised | — | — | |||||||
Options forfeited | (55 | ) | $ | 28.03 | |||||
Options outstanding at March 31, 2009 | 3,437 | $ | 23.01 | $ | 24 | ||||
Options exercisable, end of the quarter | 3,158 | $ | 22.88 | $ | 24 | ||||
-14-
First Advantage Corporation
Notes to Consolidated Financial Statements
Weighted | Aggregate | |||||||||||
(in thousands, except exercise prices) | Number of | Average | Intrinsic | |||||||||
Shares | Exercise Price | Value | ||||||||||
Options outstanding at December 31, 2008 | 3,492 | $ | 23.06 | $ | 71 | |||||||
Options forfeited | (106 | ) | $ | 28.31 | ||||||||
Options outstanding at June 30, 2009 | 3,386 | $ | 22.93 | $ | 68 | |||||||
Options exercisable, end of the quarter | 3,137 | $ | 22.81 | $ | 68 |
(in thousands, except for exercise prices, years and weighted average amounts) | ||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Weighted Avg | Weighted | |||||||||||||||||||||
Range of | Remaining Contractual | Weighted Average | Average | |||||||||||||||||||
Exercise Prices | Shares | Life in Years | Exercise Price | Shares | Exercise Price | |||||||||||||||||
$ | 7.00 - $ 12.50 | 9 | 2.2 | $ | 11.13 | 9 | $ | 11.13 | ||||||||||||||
$ | 12.51 - $ 25.00 | 2,254 | 4.6 | $ | 20.85 | 2,167 | $ | 20.89 | ||||||||||||||
$ | 25.01 - $ 50.00 | 1,118 | 6.2 | $ | 27.04 | 956 | $ | 27.09 | ||||||||||||||
$ | 50.01 - $242.25 | 5 | 1.7 | $ | 60.50 | 5 | $ | 60.50 | ||||||||||||||
3,386 | 3,137 |
Options Outstanding | Options Exercisable | |||||||||||
Range of Exercise Prices | Shares | Weighted Avg Remaining Contractual Life in Years | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||
$7.00 - $ 12.50 | 9 | 2.4 | $ | 11.13 | 9 | $ | 11.13 | |||||
$12.51 - $ 25.00 | 2,287 | 4.8 | $ | 20.87 | 2,181 | $ | 20.88 | |||||
$25.01 - $ 50.00 | 1,135 | 6.5 | $ | 27.04 | 962 | $ | 27.10 | |||||
$50.01 - $242.25 | 6 | 1.6 | $ | 88.92 | 6 | $ | 88.92 | |||||
3,437 | 3,158 | |||||||||||
The Company had outstanding warrants to purchase up to 41,462 shares of its common stock at exercise prices of $12.05 per share as of March 31,June 30, 2009. The weighted average remaining contractual life in years for the warrants outstanding is 2.18.
1.93.
-15-
Notes to Consolidated Financial Statements Segment Information
-16-
First Advantage Corporation
Notes to Consolidated Financial Statements
(in thousands) | Service | Depreciation | Income (Loss) | |||||||||||
Revenue | and Amortization | From Operations | Assets | |||||||||||
Three Months Ended March 31, 2009 | ||||||||||||||
Credit Services | $ | 64,419 | $ | 1,449 | $ | 14,747 | $ | 186,604 | ||||||
Data Services | 59,100 | 2,505 | 5,646 | 303,154 | ||||||||||
Employer Services | 37,451 | 3,515 | (500 | ) | 387,395 | |||||||||
Multifamily Services | 17,903 | 1,502 | 5,674 | 83,843 | ||||||||||
Investigative and Litigation Support Services | 11,726 | 725 | 1,146 | 123,591 | ||||||||||
Corporate and Eliminations | (559 | ) | 990 | (7,872 | ) | 72,982 | ||||||||
Consolidated | $ | 190,040 | $ | 10,686 | $ | 18,841 | $ | 1,157,569 | ||||||
Three Months Ended March 31, 2008 | ||||||||||||||
Credit Services | $ | 74,902 | $ | 1,187 | $ | 16,347 | $ | 214,306 | ||||||
Data Services | 18,967 | 2,497 | 3,770 | 315,908 | ||||||||||
Employer Services | 53,687 | 3,079 | 3,471 | 404,525 | ||||||||||
Multifamily Services | 18,349 | 1,369 | 4,772 | 86,334 | ||||||||||
Investigative and Litigation Support Services | 23,503 | 765 | 9,525 | 132,125 | ||||||||||
Corporate and Eliminations | (1,154 | ) | 999 | (10,726 | ) | 63,100 | ||||||||
Consolidated (excluding assets for discontinued operations) | $ | 188,254 | $ | 9,896 | $ | 27,159 | $ | 1,216,298 | ||||||
-17-
(in thousands) | Depreciation | Income (Loss) | ||||||||||||||
Three Months Ended June 30, 2009 | Service Revenue | and Amortization | From Operations | Assets | ||||||||||||
Credit Services | $ | 67,705 | $ | 1,488 | $ | 17,584 | $ | 200,797 | ||||||||
Data Services | 28,842 | 2,427 | 2,153 | 300,290 | ||||||||||||
Employer Services | 40,168 | 3,772 | 2,681 | 391,370 | ||||||||||||
Multifamily Services | 19,685 | 1,509 | 7,579 | 85,018 | ||||||||||||
Investigative and Litigation Support Services | 8,694 | 727 | 270 | 120,482 | ||||||||||||
Corporate and Eliminations | (426 | ) | 972 | (8,347 | ) | 64,782 | ||||||||||
Consolidated | $ | 164,668 | $ | 10,895 | $ | 21,920 | $ | 1,162,739 | ||||||||
Three Months Ended June 30, 2008 | | |||||||||||||||
Credit Services | $ | 66,984 | $ | 1,565 | $ | 11,961 | $ | 190,311 | ||||||||
Data Services | 19,533 | 2,534 | 3,764 | 313,651 | ||||||||||||
Employer Services | 55,511 | 3,295 | 3,004 | 410,989 | ||||||||||||
Multifamily Services | 19,986 | 1,429 | 6,569 | 89,342 | ||||||||||||
Investigative and Litigation Support Services | 21,178 | 858 | 7,535 | 115,539 | ||||||||||||
Corporate and Eliminations | (769 | ) | 1,045 | (8,840 | ) | 64,152 | ||||||||||
Consolidated | $ | 182,423 | $ | 10,726 | $ | 23,993 | $ | 1,183,984 | ||||||||
Six Months Ended June 30, 2009 | ||||||||||||||||
Credit Services | $ | 132,124 | $ | 2,937 | $ | 32,331 | $ | 200,797 | ||||||||
Data Services | 87,942 | 4,932 | 7,799 | 300,290 | ||||||||||||
Employer Services | 77,619 | 7,287 | 2,181 | 391,370 | ||||||||||||
Multifamily Services | 37,588 | 3,011 | 13,253 | 85,018 | ||||||||||||
Investigative and Litigation Support Services | 20,420 | 1,452 | 1,416 | 120,482 | ||||||||||||
Corporate and Eliminations | (985 | ) | 1,962 | (16,219 | ) | 64,782 | ||||||||||
Consolidated | $ | 354,708 | $ | 21,581 | $ | 40,761 | $ | 1,162,739 | ||||||||
Six Months Ended June 30, 2008 | ||||||||||||||||
Credit Services | $ | 141,886 | $ | 2,752 | $ | 28,308 | $ | 190,311 | ||||||||
Data Services | 38,500 | 5,031 | 7,534 | 313,651 | ||||||||||||
Employer Services | 109,198 | 6,374 | 6,475 | 410,989 | ||||||||||||
Multifamily Services | 38,335 | 2,798 | 11,341 | 89,342 | ||||||||||||
Investigative and Litigation Support Services | 44,681 | 1,623 | 17,060 | 115,539 | ||||||||||||
Corporate and Eliminations | (1,923 | ) | 2,044 | (19,566 | ) | 64,152 | ||||||||||
Consolidated | $ | 370,677 | $ | 20,622 | $ | 51,152 | $ | 1,183,984 |
-18-
First Advantage Corporation (Nasdaq: FADV) (“First Advantage” or the “Company”) provides global risk mitigation, screening services and credit reporting to enterprise and consumer customers. The Company operates in five primary business segments: Credit Services, Data Services, Employer Services, Multifamily Services, and Investigative & Litigation Support Services. TheIn the first quarter of 2009, the Company consolidated the previous Lender Services and Dealer Services segments and moved the consumer credit business from the Data Services segment to create the Credit Services segment. The prior periods have been recast to reflect the changed segments. First Advantage is headquartered in Poway, California and has approximately 3,8003,700 employees in offices throughout the United States and abroad.
Operating income decreased $10.4 million for the six months ended June 30, 2009 in comparison to the same period in 2008.
-19-
(in thousands, except percentages) | ||||||||||||||||||||||||||||
Three Months Ended March 31, 2009 | Credit Services | Data Services | Employer Services | Multifamily Services | Invest/Litigation Support Services | Corporate | Total | |||||||||||||||||||||
Service revenue | $ | 64,419 | $ | 59,100 | $ | 37,451 | $ | 17,903 | $ | 11,726 | $ | (559 | ) | $ | 190,040 | |||||||||||||
Reimbursed government fee revenue | — | 11,748 | 2,102 | — | — | (872 | ) | 12,978 | ||||||||||||||||||||
Total revenue | 64,419 | 70,848 | 39,553 | 17,903 | 11,726 | (1,431 | ) | 203,018 | ||||||||||||||||||||
Cost of service revenue | 29,057 | 40,983 | 10,050 | 1,487 | 345 | (582 | ) | 81,340 | ||||||||||||||||||||
Government fees paid | — | 11,748 | 2,102 | — | — | (872 | ) | 12,978 | ||||||||||||||||||||
Total cost of service | 29,057 | 52,731 | 12,152 | 1,487 | 345 | (1,454 | ) | 94,318 | ||||||||||||||||||||
Gross margin | 35,362 | 18,117 | 27,401 | 16,416 | 11,381 | 23 | 108,700 | |||||||||||||||||||||
Salaries and benefits | 12,176 | 5,378 | 17,118 | 6,316 | 6,655 | 5,524 | 53,167 | |||||||||||||||||||||
Facilities and telecommunications | 1,749 | 548 | 2,084 | 763 | 585 | 930 | 6,659 | |||||||||||||||||||||
Other operating expenses | 5,241 | 4,040 | 5,184 | 2,161 | 2,270 | 451 | 19,347 | |||||||||||||||||||||
Depreciation and amortization | 1,449 | 2,505 | 3,515 | 1,502 | 725 | 990 | 10,686 | |||||||||||||||||||||
Income (loss) from operations | $ | 14,747 | $ | 5,646 | $ | (500 | ) | $ | 5,674 | $ | 1,146 | $ | (7,872 | ) | $ | 18,841 | ||||||||||||
Operating margin percentage | 22.9 | % | 9.6 | % | -1.3 | % | 31.7 | % | 9.8 | % | N/A | 9.9 | % | |||||||||||||||
Three Months Ended March 31, 2008 | Credit Services | Data Services | Employer Services | Multifamily Services | Invest/Litigation Support Services | Corporate | Total | |||||||||||||||||||||
Service revenue | $ | 74,902 | $ | 18,967 | $ | 53,687 | $ | 18,349 | $ | 23,503 | $ | (1,154 | ) | $ | 188,254 | |||||||||||||
Reimbursed government fee revenue | — | 12,309 | 2,805 | — | — | (1,089 | ) | 14,025 | ||||||||||||||||||||
Total revenue | 74,902 | 31,276 | 56,492 | 18,349 | 23,503 | (2,243 | ) | 202,279 | ||||||||||||||||||||
Cost of service revenue | 32,758 | 5,120 | 14,737 | 1,555 | 581 | (1,035 | ) | 53,716 | ||||||||||||||||||||
Government fees paid | — | 12,309 | 2,805 | — | — | (1,089 | ) | 14,025 | ||||||||||||||||||||
Total cost of service | 32,758 | 17,429 | 17,542 | 1,555 | 581 | (2,124 | ) | 67,741 | ||||||||||||||||||||
Gross margin | 42,144 | 13,847 | 38,950 | 16,794 | 22,922 | (119 | ) | 134,538 | ||||||||||||||||||||
Salaries and benefits | 15,794 | 5,109 | 20,232 | 7,252 | 9,253 | 8,809 | 66,449 | |||||||||||||||||||||
Facilities and telecommunications | 2,205 | 639 | 2,496 | 934 | 782 | 1,144 | 8,200 | |||||||||||||||||||||
Other operating expenses | 6,611 | 1,832 | 9,672 | 2,467 | 2,597 | (345 | ) | 22,834 | ||||||||||||||||||||
Depreciation and amortization | 1,187 | 2,497 | 3,079 | 1,369 | 765 | 999 | 9,896 | |||||||||||||||||||||
Income (loss) from operations | $ | 16,347 | $ | 3,770 | $ | 3,471 | $ | 4,772 | $ | 9,525 | $ | (10,726 | ) | $ | 27,159 | |||||||||||||
Operating margin percentage | 21.8 | % | 19.9 | % | 6.5 | % | 26.0 | % | 40.5 | % | N/A | 14.4 | % |
(in thousands, except percentages) | ||||||||||||||||||||||
Invest/Litigation | Corporate | |||||||||||||||||||||
Three Months Ended June 30, 2009 | Credit Services | Data Services | Employer Services | Multifamily Services | Support Services | and Eliminations | Total | |||||||||||||||
Service revenue | $ | 67,705 | $ | 28,842 | $ | 40,168 | $ | 19,685 | $ | 8,694 | $ | (426 | ) | $ | 164,668 | |||||||
Reimbursed government fee revenue | 391 | 11,570 | 2,243 | - | - | (863 | ) | 13,341 | ||||||||||||||
Total revenue | 68,096 | 40,412 | 42,411 | 19,685 | 8,694 | (1,289 | ) | 178,009 | ||||||||||||||
Cost of service revenue | 30,544 | 15,404 | 10,666 | 1,751 | 526 | (630 | ) | 58,261 | ||||||||||||||
Government fees paid | 391 | 11,570 | 2,243 | - | - | (863 | ) | 13,341 | ||||||||||||||
Total cost of service | 30,935 | 26,974 | 12,909 | 1,751 | 526 | (1,493 | ) | 71,602 | ||||||||||||||
Gross margin | 37,161 | 13,438 | 29,502 | 17,934 | 8,168 | 204 | 106,407 | |||||||||||||||
Salaries and benefits | 12,063 | 4,367 | 15,615 | 5,792 | 5,050 | 5,243 | 48,130 | |||||||||||||||
Facilities and telecommunications | 1,633 | 659 | 2,128 | 730 | 725 | 990 | 6,865 | |||||||||||||||
Other operating expenses | 4,393 | 3,832 | 5,306 | 2,324 | 1,396 | 1,346 | 18,597 | |||||||||||||||
Depreciation and amortization | 1,488 | 2,427 | 3,772 | 1,509 | 727 | 972 | 10,895 | |||||||||||||||
Income (loss) from operations | $ | 17,584 | $ | 2,153 | $ | 2,681 | $ | 7,579 | $ | 270 | $ | (8,347 | ) | $ | 21,920 | |||||||
Operating margin percentage | 26.0 | % | 7.5 | % | 6.7 | % | 38.5 | % | 3.1 | % | N/A | 13.3 | % | |||||||||
Invest/Litigation | Corporate | |||||||||||||||||||||
Three Months Ended June 30, 2008 | Credit Services | Data Services | Employer Services | Multifamily Services | Support Services | and Eliminations | Total | |||||||||||||||
Service revenue | $ | 66,984 | $ | 19,533 | $ | 55,511 | $ | 19,986 | $ | 21,178 | $ | (769 | ) | $ | 182,423 | |||||||
Reimbursed government fee revenue | - | 11,906 | 2,226 | - | - | (1,010 | ) | 13,122 | ||||||||||||||
Total revenue | 66,984 | 31,439 | 57,737 | 19,986 | 21,178 | (1,779 | ) | 195,545 | ||||||||||||||
Cost of service revenue | 30,392 | 5,710 | 16,070 | 1,759 | 440 | (884 | ) | 53,487 | ||||||||||||||
Government fees paid | - | 11,906 | 2,226 | - | - | (1,010 | ) | 13,122 | ||||||||||||||
Total cost of service | 30,392 | 17,616 | 18,296 | 1,759 | 440 | (1,894 | ) | 66,609 | ||||||||||||||
Gross margin | 36,592 | 13,823 | 39,441 | 18,227 | 20,738 | 115 | 128,936 | |||||||||||||||
Salaries and benefits | 14,916 | 5,010 | 20,339 | 6,386 | 8,442 | 7,834 | 62,927 | |||||||||||||||
Facilities and telecommunications | 2,136 | 640 | 2,554 | 896 | 713 | 1,145 | 8,084 | |||||||||||||||
Other operating expenses | 6,014 | 1,875 | 9,952 | 2,947 | 3,190 | (1,069 | ) | 22,909 | ||||||||||||||
Depreciation and amortization | 1,565 | 2,534 | 3,295 | 1,429 | 858 | 1,045 | 10,726 | |||||||||||||||
Impairment loss | - | - | 297 | - | - | - | 297 | |||||||||||||||
Income (loss) from operations | $ | 11,961 | $ | 3,764 | $ | 3,004 | $ | 6,569 | $ | 7,535 | $ | (8,840 | ) | $ | 23,993 | |||||||
Operating margin percentage | 17.9 | % | 19.3 | % | 5.4 | % | 32.9 | % | 35.6 | % | N/A | 13.2 | % |
Invest/Litigation | Corporate | |||||||||||||||||||||
Six Months Ended June 30, 2009 | Credit Services | Data Services | Employer Services | Multifamily Services | Support Services | and Eliminations | Total | |||||||||||||||
Service revenue | $ | 132,124 | $ | 87,942 | $ | 77,619 | $ | 37,588 | $ | 20,420 | $ | (985 | ) | $ | 354,708 | |||||||
Reimbursed government fee revenue | 391 | 23,318 | 4,345 | - | - | (1,735 | ) | 26,319 | ||||||||||||||
Total revenue | 132,515 | 111,260 | 81,964 | 37,588 | 20,420 | (2,720 | ) | 381,027 | ||||||||||||||
Cost of service revenue | 59,601 | 56,387 | 20,716 | 3,239 | 871 | (1,213 | ) | 139,601 | ||||||||||||||
Government fees paid | 391 | 23,318 | 4,345 | - | - | (1,735 | ) | 26,319 | ||||||||||||||
Total cost of service | 59,992 | 79,705 | 25,061 | 3,239 | 871 | (2,948 | ) | 165,920 | ||||||||||||||
Gross margin | 72,523 | 31,555 | 56,903 | 34,349 | 19,549 | 228 | 215,107 | |||||||||||||||
Salaries and benefits | 24,239 | 9,745 | 32,733 | 12,108 | 11,705 | 10,767 | 101,297 | |||||||||||||||
Facilities and telecommunications | 3,382 | 1,207 | 4,212 | 1,493 | 1,310 | 1,920 | 13,524 | |||||||||||||||
Other operating expenses | 9,634 | 7,872 | 10,490 | 4,484 | 3,666 | 1,798 | 37,944 | |||||||||||||||
Depreciation and amortization | 2,937 | 4,932 | 7,287 | 3,011 | 1,452 | 1,962 | 21,581 | |||||||||||||||
Income (loss) from operations | $ | 32,331 | $ | 7,799 | $ | 2,181 | $ | 13,253 | $ | 1,416 | $ | (16,219 | ) | $ | 40,761 | |||||||
Operating margin percentage | 24.5 | % | 8.9 | % | 2.8 | % | 35.3 | % | 6.9 | % | N/A | 11.5 | % | |||||||||
Invest/Litigation | Corporate | |||||||||||||||||||||
Six Months Ended June 30, 2008 | Credit Services | Data Services | Employer Services | Multifamily Services | Support Services | and Eliminations | Total | |||||||||||||||
Service revenue | $ | 141,886 | $ | 38,500 | $ | 109,198 | $ | 38,335 | $ | 44,681 | $ | (1,923 | ) | $ | 370,677 | |||||||
Reimbursed government fee revenue | - | 24,215 | 5,031 | - | - | (2,099 | ) | 27,147 | ||||||||||||||
Total revenue | 141,886 | 62,715 | 114,229 | 38,335 | 44,681 | (4,022 | ) | 397,824 | ||||||||||||||
Cost of service revenue | 63,150 | 10,830 | 30,807 | 3,314 | 1,021 | (1,919 | ) | 107,203 | ||||||||||||||
Government fees paid | - | 24,215 | 5,031 | - | - | (2,099 | ) | 27,147 | ||||||||||||||
Total cost of service | 63,150 | 35,045 | 35,838 | 3,314 | 1,021 | (4,018 | ) | 134,350 | ||||||||||||||
Gross margin | 78,736 | 27,670 | 78,391 | 35,021 | 43,660 | (4 | ) | 263,474 | ||||||||||||||
Salaries and benefits | 30,710 | 10,119 | 40,571 | 13,638 | 17,695 | 16,643 | 129,376 | |||||||||||||||
Facilities and telecommunications | 4,341 | 1,279 | 5,050 | 1,830 | 1,495 | 2,289 | 16,284 | |||||||||||||||
Other operating expenses | 12,625 | 3,707 | 19,624 | 5,414 | 5,787 | (1,414 | ) | 45,743 | ||||||||||||||
Depreciation and amortization | 2,752 | 5,031 | 6,374 | 2,798 | 1,623 | 2,044 | 20,622 | |||||||||||||||
Impairment loss | - | - | 297 | - | - | - | 297 | |||||||||||||||
Income (loss) from operations | $ | 28,308 | $ | 7,534 | $ | 6,475 | $ | 11,341 | $ | 17,060 | $ | (19,566 | ) | $ | 51,152 | |||||||
Operating margin percentage | 20.0 | % | 19.6 | % | 5.9 | % | 29.6 | % | 38.2 | % | N/A | 13.8 | % |
-20-
truck sales.
efficiencies.
temporary labor.
-21-
2008.
expenses have increased offset by an increase in revenue.
2009.
Loss
-22-
screening business due to the current economic conditions.
employees.
The expense decrease is a direct effect of office consolidations.
The decrease is due to reduced leased equipment, marketing and travel expenses.
The operating margin percentage increased from 26.0% to 31.7% due to increased revenue from the renter’s insurance program and cost containment with revenue growth.
The operating margin percentage increased from 32.9% to 38.5% primarily due to reduced operating expenses. The increase in operating margin is primarily due to management’s cost containment initiatives.
Facilities and telecommunication expenses decreased $0.2 million.
The decrease in expense is primarily due to a reduction in bad debt expense, travel expenses and professional fees.
-23-
expenses.
slowdown, offset by the increase in the Data Services segment.
-24-
shares.
-25-
(in thousands) | 2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | ||||||||||||||
Advertising commitments | $ | 173 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 173 | |||||||
Minimum contract purchase commitments | 1,945 | 1,381 | 363 | — | — | — | 3,689 | ||||||||||||||
Operating leases | 10,545 | 10,169 | 8,016 | 6,591 | 6,562 | 13,056 | 54,939 | ||||||||||||||
Debt and capital leases | 7,149 | 47,661 | 425 | — | — | — | 55,235 | ||||||||||||||
Interest payments related to debt (1) | 1,112 | 304 | 4 | — | — | — | 1,420 | ||||||||||||||
Total (2) | $ | 20,924 | $ | 59,515 | $ | 8,808 | $ | 6,591 | $ | 6,562 | $ | 13,056 | $ | 115,456 | |||||||
(In thousands) | 2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | |||||||||||||||
Minimum contract purchase commitments | $ | 2,042 | $ | 2,618 | $ | 902 | $ | 41 | $ | 41 | $ | 26 | $ | 5,670 | ||||||||
Advertising commitments | 167 | - | - | - | - | - | 167 | |||||||||||||||
Operating leases | 7,161 | 12,222 | 8,849 | 7,029 | 6,963 | 13,402 | 55,626 | |||||||||||||||
Debt and capital leases | 4,548 | 32,921 | 492 | 72 | 78 | 53 | 38,164 | |||||||||||||||
Interest payments related to debt (1) | 768 | 549 | 4 | - | - | - | 1,321 | |||||||||||||||
Total (2) | $ | 14,686 | $ | 48,310 | $ | 10,247 | $ | 7,142 | $ | 7,082 | $ | 13,481 | $ | 100,948 |
(1) | Estimated interest payments are calculated assuming current interest rates over minimum maturity periods specified in debt agreements. |
(2) | Excludes FIN 48 tax liability of |
-26-
Risk Factors |
a) | The annual meeting of the shareholders (the “Meeting”) of First Advantage Corporation (the “Company”) was held on April 28, 2009. |
b) | The names of the persons who were nominated to serve as directors of the Company for the ensuing year are listed below, together with a tabulation of the results of the voting with respect to each nominee. Each of the persons named was recommended by the Board of Directors and Nominating Committee of the Company and all such nominees were elected. |
Name of Nominee | Votes For | Votes Withheld | ||
Parker Kennedy | 9,947,340 | 442,683 | ||
Anand Nallathambi | 9,999,555 | 390,468 | ||
J. David Chatham | 9,708,958 | 681,065 | ||
Barry Connelly | 9,953,281 | 436,742 | ||
Frank McMahon | 9,742,635 | 647,388 | ||
Donald Nickelson | 7,769,680 | 2,620,343 | ||
Donald Robert | 10,324,492 | 65,531 | ||
Jill Kanin-Lovers | 10,187,926 | 202,097 | ||
D. Van Skilling | 9,708,902 | 681,121 | ||
David Walker | 9,092,155 | 1,297,868 |
Other Information |
-28-
Date: | By: | /s/ ANAND NALLATHAMBI | |||
| |||||
Company Name | ||||
Date: July 30, 2009 | By: | /s/ JOHN LAMSON | ||
| ||||
Third Amended and Restated Services Agreement between The First American Corporation and First Advantage Corporation, effective January 1, 2009. |
-29-
EXHIBIT INDEX
|
| |
31.1 | Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| ||
| 32.1 | Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |