THE FIRST AMERICAN CORPORATION REPORTS
RESULTS FOR THE SECOND QUARTER 2004
SANTA ANA, Calif., July 27, 2004 - The First American Corporation (NYSE: FAF),
the nation's largest data provider, today announced results for the second
quarter ended June 30, 2004:
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------- -----------------------------------
2004 2003 2004 2003
--------------- ---------------- ---------------- ---------------
Total revenues $ 1.72 billion $ 1.54 billion $ 3.20 billion $ 2.88 billion
Income before income taxes
and minority interests $219.2 million $239.8 million $330.3 million $403.2 million
Net income $116.5 million $127.5 million $171.5 million $215.1 million
Net income per diluted share $1.27 $1.47 $1.90 $2.53
Summary of Operations
"The company posted strong second quarter results," stated Parker S.
Kennedy, president of The First American Corporation. "Second quarter earnings
benefited from a 26 percent increase in closed title orders, compared with first
quarter closings. A quarter point hike in interest rates in the second quarter,
which was the first interest rate increase since May of 2000, slowed
refinancings, but residential and commercial property purchase transactions
remained solid, which resulted in steady real estate activity for the quarter.
Traditionally, First American's real estate-related businesses benefit from the
seasonally stronger home purchase market in the second and third quarters."
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Quarterly Financial Highlights
Financial Services Group:
o Revenues for the second quarter 2004 were $1.31 billion, an increase of 12
percent when compared with $1.17 billion for the second quarter of 2003.
o Pretax income was $152.1 million, an increase of 1 percent when compared
with $151.3 million in the prior year quarter.
o Pretax margins for the second quarter 2004 were 11.6 percent compared with
13.0 percent for the second quarter 2003.
Information Technology Group:
o Revenues for the second quarter 2004 were $411.4 million, an increase of
10 percent when compared with $375.2 million for the second quarter of
2003.
o Pretax income was $98.5 million, a 15 percent decrease when compared with
$116.2 million in the prior year quarter.
o Pretax margins for the second quarter 2004 were 23.9 percent compared with
31.0 percent for the second quarter 2003.
2004 Strategic Focus and Outlook
Kennedy continued: "During the second half of 2004, production and cost
efficiency strategies--such as technology solutions and operational
consolidation--will be put to the test. Our goal is to keep profit margins
steady in our real estate-related businesses. Additionally, many of the
company's non-real estate-related businesses, such as subprime credit
information, screening information, auto and consumer credit, and our
subscription-based data products, are less sensitive to interest rate changes
and should continue to experience stronger revenues as the national economy
improves. We will continue to implement strategies for growth, profitable
acquisitions, bundling and cross-selling products and services, and finding new
ways to package and sell our data."
Teleconference/Webcast
First American's second quarter results will be discussed in more detail on
Wednesday, July 28, 2004, at 10 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 August 5, 2004, by dialing (402) 998-0584. An audio archive of
the call will also be available for replay on First American's Web site.
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About First American
The First American Corporation is a Fortune 500 company that traces its
history to 1889. As the nation's largest data provider, 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 six primary business segments including: Title Insurance and Services,
Specialty Insurance, Mortgage Information, Property Information, Credit
Information and Screening Information. With revenues of $6.21 billion in 2003,
First American has 29,000 employees in approximately 1,800 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 revenues in the company's non-real estate-related businesses, 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, 2003,
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)
Summary of Earnings
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
-------------------------------- ---------------------------------
2004 2003 2004 2003
------------- ------------- ------------- --------------
Total revenues $1,724,053 $1,542,931 $3,197,824 $2,884,906
Income before income taxes and minority interests $ 219,191 $ 239,753 $ 330,321 $ 403,246
Income taxes $ 79,300 $ 83,100 $ 116,700 $ 139,100
Minority interests $ 23,365 $ 29,177 $ 42,139 $ 49,090
Net income $ 116,526 $ 127,476 $ 171,482 $ 215,056
Net income per share:
Basic $1.32 $1.67 $2.05 $2.86
Diluted $1.27 $1.47 $1.90 $2.53
Weighted average shares outstanding:
Basic 88,071 76,420 83,697 75,289
Diluted 92,083 87,915 91,350 86,506
Summary Balance Sheet Information
(in thousands, except per share amounts)
June 30 December 31
--------------- ---------------
2004 2003
--------------- ---------------
Total stockholders' equity $2,290,092 $1,879,520
Book value per share $25.76 $23.84
Summary Title Insurance Order Counts
From Direct Operations
Three Months Ended
June 30
--------------- ---------------
2004 2003
--------------- ---------------
Title orders opened:
April 216,100 228,700
May 200,800 253,100
June 218,600 288,200
------------ ---------------
Second quarter total 635,500 770,000
============ ===============
Title orders closed:
April 167,500 178,200
May 168,800 174,700
June 182,200 180,200
------------ ---------------
Second quarter total 518,500 533,100
============ ===============
(Additional Financial Data Follows)
Selected Financial Data
(unaudited)
(in thousands)
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------ --------------------------------------
2004 2003 2004 2003
---------------- --------------- ----------------- ---------------
RESULTS OF OPERATIONS
Revenues
Operating revenues $ 1,685,098 $ 1,503,352 $ 3,130,631 $ 2,798,310
Investment and other income 36,237 37,992 63,144 72,464
Net realized investment gains 2,718 1,587 4,049 14,132
---------------- --------------- ----------------- ---------------
1,724,053 1,542,931 3,197,824 2,884,906
---------------- --------------- ----------------- ---------------
Expenses
Salaries and other personnel costs 534,622 439,769 1,008,397 846,986
Premiums retained by agents 458,502 408,784 882,736 774,493
Other operating expenses 372,438 327,804 713,277 621,191
Provision for title losses and other claims 85,686 79,403 157,107 146,642
Depreciation and amortization 31,326 26,555 60,696 52,570
Premium taxes 13,090 12,010 25,630 22,466
Interest 9,198 8,853 19,660 17,312
---------------- ---------------- ---------------- ----------------
1,504,862 1,303,178 2,867,503 2,481,660
---------------- ---------------- ----------------- ----------------
Income before income taxes and minority interests $ 219,191 $ 239,753 $ 330,321 $ 403,246
================ ================ ================= ================
OPERATING REVENUES
Financial Services
Title Insurance and Services:
Direct operations $ 659,945 $ 581,965 $ 1,175,451 $ 1,066,273
Agency operations 574,338 508,758 1,091,148 957,754
---------------- ---------------- ----------------- ----------------
1,234,283 1,090,723 2,266,599 2,024,027
Specialty Insurance 51,847 50,889 98,339 97,033
---------------- ---------------- ----------------- ----------------
1,286,130 1,141,612 2,364,938 2,121,060
---------------- ---------------- ----------------- ----------------
Information Technology
Mortgage Information 167,649 157,256 322,584 296,364
Property Information 99,525 98,022 191,502 180,302
Credit Information 62,912 69,116 125,364 131,644
Screening Information 68,882 37,346 126,243 68,940
---------------- ---------------- ----------------- ----------------
398,968 361,740 765,693 677,250
---------------- ---------------- ----------------- ----------------
Total operating revenues $ 1,685,098 $ 1,503,352 $ 3,130,631 $ 2,798,310
================ ================ ================= ================
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS
Financial Services
Title Insurance and Services $ 140,497 $ 143,037 $ 199,074 232,244
Specialty Insurance 11,653 8,241 24,097 14,080
---------------- ---------------- ----------------- ----------------
152,150 151,278 223,171 246,324
---------------- ---------------- ----------------- ----------------
Information Technology
Mortgage Information 47,992 62,653 78,339 108,450
Property Information 32,955 32,390 60,473 55,833
Credit Information 12,022 17,971 27,020 44,578
Screening Information 5,537 3,218 6,639 3,733
---------------- ---------------- ----------------- ----------------
98,506 116,232 172,471 212,594
---------------- ---------------- ----------------- ----------------
Total before corporate expenses and
minority interest 250,656 267,510 395,642 458,918
Corporate expense 31,465 27,757 65,321 55,672
---------------- ---------------- ----------------- ----------------
Income before income taxes and minority interests $ 219,191 $ 239,753 $ 330,321 $ 403,246
================ ================ ================= ================
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Segment Margins
(unaudited)
(in thousands, except percentages)
Three Months Ended June 30
-------------------------------------------------------------------------------------------
Total revenues Pretax (A) Margins
------------------------------ ----------------------------- -----------------------
2004 2003 2004 2003 2004 2003
------------- ------------- ------------- ------------ ---------- --------
Financial Services
Title Insurance and Services $ 1,257,070 $ 1,111,186 $ 140,497 $ 143,037 11.2% 12.9%
Specialty Insurance 54,992 54,062 11,653 8,241 21.2% 15.2%
------------- ------------- ------------- ------------ ---------- --------
$ 1,312,062 $ 1,165,248 $ 152,150 $ 151,278 11.6% 13.0%
============= ============= ============= ============ ========== ========
Information Technology
Mortgage Information $ 170,081 $ 160,937 $ 47,992 $ 62,653 28.2% 38.9%
Property Information 106,577 105,157 32,955 32,390 30.9% 30.8%
Credit Information 65,867 71,781 12,022 17,971 18.3% 25.0%
Screening Information 68,916 37,374 5,537 3,218 8.0% 8.6%
------------- ------------- ------------- ------------ ---------- --------
$ 411,441 $ 375,249 $ 98,506 $ 116,232 23.9% 31.0%
============= ============= ============= ============ ========== ========
Six Months Ended June 30
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Total revenues Pretax (A) Margins
------------------------------ ----------------------------- -----------------------
2004 2003 2004 2003 2004 2003
------------- ------------- ------------- ------------ ---------- --------
Financial Services
Title Insurance and Services $ 2,304,992 $2,065,428 $ 199,074 $ 232,244 8.6% 11.2%
Specialty Insurance 105,718 102,646 24,097 14,080 22.8% 13.7%
------------- ------------- ------------- ------------ ---------- --------
$ 2,410,710 $2,168,074 $ 223,171 $ 246,324 9.3% 11.4%
============= ============= ============= ============ ========== ========
Information Technology
Mortgage Information $ 326,706 $ 302,814 $ 78,339 $ 108,450 24.0% 35.8%
Property Information 203,870 192,598 60,473 55,833 29.7% 29.0%
Credit Information 130,259 149,827 27,020 44,578 20.7% 29.8%
Screening Information 126,359 68,992 6,639 3,733 5.3% 5.4%
------------- ------------- ------------- ------------ ---------- --------
$ 787,194 $ 714,231 $ 172,471 $ 212,594 21.9% 29.8%
============= ============= ============= ============ ========== ========
(A) - Income before income tax, minority interest and corporate expenses