FIRST AMERICAN CORP - 10-Q Quarterly Report

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number 0-3658

THE FIRST AMERICAN CORPORATION

(Exact name of registrant as specified in its charter)

Incorporated in California		95-1068610

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 First American Way, Santa Ana, California		92707-5913

(Address of principal executive offices)		(Zip Code)

(714) 800-3000

(Registrant’s telephone number, including area code)



(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports to be filed by Section 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. $1 par value - 72,199,753 shares as of November 6, 2002

INFORMATION INCLUDED IN REPORT

Part I:	Financial Information
Item 1.	Financial Statements
	A. Condensed Consolidated Balance Sheets
	B. Condensed Consolidated Statements of Income and Comprehensive Income
	C. Condensed Consolidated Statements of Cash Flows
	D. Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
Part II:	Other Information
Item 1.	Legal Proceedings
Item 6.	Exhibits and Reports on Form 8-K
	Items 2 – 5 have been omitted because they are not applicable with respect to the current reporting period.

Part I: Financial Information
Item 1: Financial Statements

THE FIRST AMERICAN CORPORATION
AND SUBSIDIARY COMPANIES

Condensed Consolidated Balance Sheets

					September 30, 2002			December 31, 2001

					(Unaudited)
Assets
	Cash and cash equivalents				$	735,764,000		$	645,240,000

	Accounts and accrued income receivable, net					323,735,000			273,090,000

	Investments:
			Deposits with savings and loan associations and banks			40,999,000			27,597,000
			Debt securities			339,173,000			257,045,000
			Equity securities			38,119,000			52,014,000
			Other long-term investments			134,060,000			113,995,000

						552,351,000			450,651,000

	Loans receivable, net					109,032,000			104,264,000

	Property and equipment, at cost:
			Land			43,188,000			43,018,000
			Buildings			180,332,000			173,878,000
			Furniture and equipment			256,735,000			237,354,000
			Capitalized software			293,597,000			246,452,000

						773,852,000			700,702,000
	Less- accumulated depreciation and amortization					(339,196,000	)		(269,237,000	)

						434,656,000			431,465,000

	Title plants and other indexes					373,453,000			354,187,000

	Deferred income taxes					17,997,000			22,221,000

	Goodwill, net					497,778,000			418,649,000

	Other assets					182,938,000			137,496,000

					$	3,227,704,000		$	2,837,263,000

Liabilities and Stockholders’ Equity
	Demand deposits				$	88,136,000		$	91,285,000

	Accounts payable and accrued liabilities					452,949,000			373,170,000

	Deferred revenue					343,536,000			294,227,000

	Reserve for known and incurred but not reported claims					346,240,000			314,777,000

	Income taxes payable					5,252,000			13,342,000

	Notes and contracts payable					438,541,000			415,341,000

	Minority interests in consolidated subsidiaries					159,816,000			130,669,000

	Mandatorily redeemable preferred securities of the Company’s subsidiary trust whose sole assets are the Company’s $100,000,000 8.5% deferrable interest subordinated notes due 2012					100,000,000			100,000,000

	Stockholders’ equity:
		Preferred stock, $1 par value
				Authorized - 500,000 shares; outstanding - none
		Common stock, $1 par value
				Authorized - 180,000,000 shares
				Outstanding - 72,172,000 and 68,694,000 shares		72,172,000			68,694,000
		Additional paid-in capital				330,930,000			271,403,000
		Retained earnings				912,321,000			777,971,000
		Accumulated other comprehensive loss				(22,189,000	)		(13,616,000	)

						1,293,234,000			1,104,452,000

					$	3,227,704,000		$	2,837,263,000

See notes to condensed consolidated financial statements.

THE FIRST AMERICAN CORPORATION
AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)

			For the Three Months Ended September 30						For the Nine Months Ended September 30

			2002			2001			2002			2001

Revenues
	Operating revenues		$	1,180,114,000		$	952,776,000		$	3,289,704,000		$	2,610,969,000
	Investment and other income			22,858,000			22,132,000			61,237,000			58,889,000
	Net realized investment (losses) gains			(5,888,000	)		8,100,000			(18,456,000	)		7,933,000

				1,197,084,000			983,008,000			3,332,485,000			2,677,791,000

Expenses
	Salaries and other personnel costs			381,074,000			331,727,000			1,090,317,000			917,942,000
	Premiums retained by agents			322,148,000			255,384,000			915,281,000			661,206,000
	Other operating expenses			265,456,000			216,854,000			748,312,000			622,373,000
	Provision for policy losses and other claims			58,215,000			52,661,000			158,011,000			129,676,000
	Depreciation and amortization			23,662,000			27,820,000			72,894,000			77,925,000
	Premium taxes			8,889,000			6,758,000			24,481,000			17,470,000
	Interest			8,618,000			8,449,000			25,554,000			22,314,000

				1,068,062,000			899,653,000			3,034,850,000			2,448,906,000

Income before income taxes and minority interests				129,022,000			83,355,000			297,635,000			228,885,000
Income taxes				42,800,000			30,500,000			100,100,000			83,200,000

Income before minority interests				86,222,000			52,855,000			197,535,000			145,685,000
Minority interests				18,863,000			11,160,000			45,980,000			30,697,000

Net income				67,359,000			41,695,000			151,555,000			114,988,000

Other comprehensive loss, net of tax
		Unrealized loss on securities		(313,000	)		(4,152,000	)		(5,323,000	)		(5,071,000	)
		Minimum pension liability adjustment		(875,000	)		(75,000	)		(3,250,000	)

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