THE FIRST AMERICAN CORPORATION REPORTS
OPERATING RESULTS FOR THE SECOND QUARTER 2002
-Results Exceed Consensus Estimates-
SANTA ANA, Calif., July 25, 2002 - The First American Corporation (NYSE: FAF),
the nation's leading, diversified provider of business information and related
products and services, announced today operating results for the second quarter
ended June 30, 2002.
Net income for the second quarter of 2002 was $40.1 million, or 51 cents
per diluted share, which includes a previously announced $13.6 million pretax
investment loss relating to the write down of WorldCom bonds. This item totaled
$8.1 million on an after-tax basis, or 10 cents per diluted share. Excluding
this investment loss, net income for the second quarter was $48.1 million, or 61
cents per diluted share, which compares with net income of $54.5 million, or 75
cents per diluted share, for the second quarter of 2001. Revenues for the second
quarter of 2002 were $1.09 billion, representing an increase of 18 percent when
compared with revenues of $928.0 million for the same period last year.
Net income for the first six months of 2002, excluding the investment
losses noted above, was $92.3 million, or $1.17 per diluted share. This compares
with net income of $75.4 million, or $1.03 per diluted share, for the first six
months of 2001, which excludes a previously announced $3.6 million, or 3 cents
per diluted share, pretax charge relating to the company's exit of the
lender-placed homeowner's insurance business. Revenues for the first half of
2002 totaled $2.14 billion, an increase of 26 percent when compared with
revenues of $1.69 billion for the first half of 2001.
"We are pleased with our operating results for the second quarter, as
business continues to be very good for First American, particularly in the
residential resale markets," stated Parker S. Kennedy, president of The First
American Corporation. "Refinance-related orders during the quarter declined from
record-setting levels in the prior year, but were still above normal levels. In
recent weeks, our real estate-related businesses experienced a significant
increase in refi orders, prompted by a further decline in mortgage interest
rates. This activity bodes well for our second-half results.
-more-
"We continue to be on track with our technology initiative of streamlining
the title production process through our FAST Transaction System. Although
expensive to implement in the short term, this
automation process will significantly improve margins in the long run, which
should result in a higher valuation for First American in the years to come."
About The First American Corporation
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 the information
resources that affect 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 $3.75 billion in 2001,
First American has more than 22,500 employees in approximately 1,300 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.
Certain statements made in this press release, including those relating to
second-half results and the effects of technology solutions are
forward-looking. Risks and uncertainties exist which 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;
general volatility in the capital markets; changes in applicable government
regulations; consolidation among the company's significant customers and
competitors; legal proceedings commenced by the California attorney general
and related litigation; 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, 2001, 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.
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Summary of Earnings
For the Three Months Ended For the Six Months Ended
June 30 June 30
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2002 2001 2002 2001
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Revenues $ 1,092,420,000 $ 928,042,000 $ 2,135,401,000 $ 1,694,783,000
Income before income taxes and minority interests $ 80,054,000 $ 106,332,000 $ 168,613,000 $ 145,530,000
Income taxes $ 26,300,000 $ 39,200,000 $ 57,300,000 $ 52,700,000
Minority interests $ 13,633,000 $ 12,615,000 $ 27,117,000 $ 19,537,000
Net income $ 40,121,000 $ 54,517,000 $ 84,196,000 $ 73,293,000
Net income per share:
Basic $.56 $.83 $1.19 $1.13
Diluted $.51 $.75 $1.07 $1.00
Weighted average shares outstanding:
Basic 71,454,000 65,621,000 70,725,000 64,983,000
Diluted 82,672,000 74,960,000 81,829,000 75,167,000
Summary Title Insurance Order Counts
From Direct Operations
For the Three Months Ended
June 30
------------------------------------------------
2002 2001
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Title orders opened:
April 159,900 156,800
May 162,400 160,000
June 155,200 145,900
-------------------- -----------------
Second quarter total 477,500 462,700
==================== =================
Title orders closed:
April 136,400 113,900
May 130,000 123,900
June 115,100 122,200
------------------- -----------------
Second quarter total 381,500 360,000
==================== =================
Summary Balance Sheet Information
June 30 December 31
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2002 2001
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Total stockholders' equity $1,222,081,000 $1,104,452,000
Book value per share $17.08 $16.08
(Additional Financial Data Follows)
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The First American Corporation Reports Operating Results for the Second Quarter
2002 Page 4-4-4
Selected Financial Data
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30 June 30
--------------------------------------------- ---------------------------------------------
2002 2001 2002 2001
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RESULTS OF OPERATIONS
Revenues
Operating revenues $ 1,085,471,000 $ 908,009,000 $ 2,109,590,000 $ 1,658,193,000
Investment and other income 6,949,000 20,033,000 25,811,000 36,590,000
---------------------- ----------------------- ---------------------- -----------------------
1,092,420,000 928,042,000 2,135,401,000 1,694,783,000
---------------------- ----------------------- ---------------------- -----------------------
Expenses
Salaries and other
personnel costs 363,918,000 311,396,000 709,243,000 586,215,000
Premiums retained by agents 308,839,000 216,415,000 593,133,000 405,822,000
Other operating expenses 244,719,000 214,431,000 482,856,000 405,519,000
Provision for title losses
and other claims 52,697,000 40,525,000 99,796,000 77,015,000
Depreciation and
amortization 25,084,000 25,672,000 49,232,000 50,105,000
Premium taxes 8,393,000 5,704,000 15,592,000 10,712,000
Interest 8,716,000 7,567,000 16,936,000 13,865,000
---------------------- ----------------------- ---------------------- -----------------------
1,012,366,000 821,710,000 1,966,788,000 1,549,253,000
---------------------- ----------------------- ---------------------- -----------------------
Income before income taxes
and minority interests $ 80,054,000 $ 106,332,000 $ 168,613,000 $ 145,530,000
====================== ======================= ====================== =======================
OPERATING REVENUES
Financial Services
Title Insurance and Services:
Direct operations $ 419,603,000 $ 386,102,000 $ 806,777,000 $ 675,373,000
Agency operations 378,622,000 267,183,000 735,419,000 501,437,000
---------------------- ----------------------- ---------------------- -----------------------
798,225,000 653,285,000 1,542,196,000 1,176,810,000
Specialty Insurance 33,580,000 28,337,000 62,892,000 55,092,000
Trust and Other Service 11,538,000 9,892,000 22,694,000 18,886,000
---------------------- ----------------------- ---------------------- -----------------------
843,343,000 691,514,000 1,627,782,000 1,250,788,000
---------------------- ----------------------- ---------------------- -----------------------
Information Technology
Mortgage Information 108,530,000 105,094,000 216,660,000 190,735,000
Property Information 57,453,000 51,771,000 112,563,000 102,272,000
Credit Information 50,548,000 48,627,000 103,547,000 93,135,000
Screening Information 25,597,000 11,003,000 49,038,000 21,263,000
---------------------- ----------------------- ---------------------- -----------------------
242,128,000 216,495,000 481,808,000 407,405,000
---------------------- ----------------------- ---------------------- -----------------------
Total operating revenues $ 1,085,471,000 $ 908,009,000 $ 2,109,590,000 $ 1,658,193,000
====================== ======================= ====================== =======================
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS
Financial Services
Title Insurance and Services $ 50,110,000 $ 63,295,000 $ 89,762,000 $ 82,161,000
Specialty Insurance 6,159,000 3,605,000 11,841,000 3,117,000
Trust and Other Services 4,587,000 2,855,000 8,812,000 5,002,000
---------------------- ----------------------- ---------------------- -----------------------
60,856,000 69,755,000 110,415,000 90,280,000
Information Technology
Mortgage Information 29,551,000 34,214,000 61,057,000 51,723,000
Property Information 15,021,000 9,573,000 26,665,000 16,312,000
Credit Information 7,231,000 8,361,000 19,884,000 14,622,000
Screening Information 1,966,000 305,000 2,748,000 140,000
---------------------- ----------------------- ---------------------- -----------------------
53,769,000 52,453,000 110,354,000 82,797,000
---------------------- ----------------------- ---------------------- -----------------------
Total before corporate
expenses and
minority interest 114,625,000 122,208,000 220,769,000 173,077,000
Corporate expense 34,571,000 15,876,000 52,156,000 27,547,000
Income before income taxes ---------------------- ----------------------- ---------------------- -----------------------
and minority interests $ 80,054,000 $ 106,332,000 $ 168,613,000 $ 145,530,000
====================== ======================= ====================== =======================
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