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 March 31, 2003
OR
| ¨ | 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 x No ¨
Indicate by check mark if the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes x No ¨
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 ¨ No ¨
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 - 76,231,151 shares as of May 6 , 2003
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 6. |
Exhibits and Reports on Form 8-K | |
| Items 1-5 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
(Unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ |
942,874,000 |
|
$ |
900,863,000 |
| ||
| Accounts and accrued income receivable, net |
|
345,773,000 |
|
|
299,040,000 |
| ||
| Investments: |
||||||||
| Deposits with savings and loan associations and banks |
|
26,104,000 |
|
|
38,328,000 |
| ||
| Debt securities |
|
320,251,000 |
|
|
309,864,000 |
| ||
| Equity securities |
|
36,219,000 |
|
|
36,931,000 |
| ||
| Other long-term investments |
|
186,618,000 |
|
|
142,392,000 |
| ||
|
|
569,192,000 |
|
|
527,515,000 |
| |||
| Loans receivable, net |
|
108,111,000 |
|
|
108,162,000 |
| ||
| Property and equipment, at cost: |
||||||||
| Land |
|
43,237,000 |
|
|
43,185,000 |
| ||
| Buildings |
|
181,332,000 |
|
|
183,045,000 |
| ||
| Furniture and equipment |
|
267,044,000 |
|
|
270,004,000 |
| ||
| Capitalized software |
|
288,434,000 |
|
|
284,537,000 |
| ||
|
|
780,047,000 |
|
|
780,771,000 |
| |||
| Less—accumulated depreciation and amortization |
|
(352,103,000 |
) |
|
(347,695,000 |
) | ||
|
|
427,944,000 |
|
|
433,076,000 |
| |||
| Title plants and other indexes |
|
381,686,000 |
|
|
375,401,000 |
| ||
| Deferred income taxes |
|
14,089,000 |
|
|
20,951,000 |
| ||
| Goodwill, net |
|
559,269,000 |
|
|
563,991,000 |
| ||
| Other assets |
|
189,035,000 |
|
|
169,046,000 |
| ||
| $ |
3,537,973,000 |
|
$ |
3,398,045,000 |
| |||
| Liabilities and Stockholders' Equity |
||||||||
| Demand deposits |
$ |
84,888,000 |
|
$ |
84,473,000 |
| ||
| Accounts payable and accrued liabilities |
|
470,710,000 |
|
|
539,069,000 |
| ||
| Deferred revenue |
|
375,312,000 |
|
|
358,747,000 |
| ||
| Reserve for known and incurred but not reported claims |
|
367,812,000 |
|
|
360,305,000 |
| ||
| Income taxes payable |
|
45,913,000 |
|
|
1,518,000 |
| ||
| Notes and contracts payable |
|
431,011,000 |
|
|
425,705,000 |
| ||
| Minority interests in consolidated subsidiaries |
|
172,739,000 |
|
|
163,639,000 |
| ||
| 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—75,937,000 and 73,636,000 shares |
|
75,937,000 |
|
|
73,636,000 |
| ||
| Additional paid-in capital |
|
405,891,000 |
|
|
359,644,000 |
| ||
| Retained earnings |
|
1,067,752,000 |
|
|
987,768,000 |
| ||
| Accumulated other comprehensive loss |
|
(59,992,000 |
) |
|
(56,459,000 |
) | ||
|
|
1,489,588,000 |
|
|
1,364,589,000 |
| |||
| $ |
3,537,973,000 |
|
$ |
3,398,045,000 |
| |||
See notes to condensed consolidated financial statements.
3
THE FIRST AMERICAN CORPORATION
AND SUBSIDIARY COMPANIES
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
| For the Three Months Ended March 31 |
||||||||
| 2003 |
2002 |
|||||||
| Revenues |
||||||||
| Operating revenues |
$ |
1,304,863,000 |
|
$ |
1,023,340,000 |
| ||
| Investment and other income |
|
24,567,000 |
|
|
18,803,000 |
| ||
| Net realized investment gains |
|
12,545,000 |
|
|
59,000 |
| ||
|
|
1,341,975,000 |
|
|
1,042,202,000 |
| |||
| Expenses |
||||||||
| Salaries and other personnel costs |
|
407,217,000 |
|
|
345,325,000 |
| ||
| Premiums retained by agents |
|
365,709,000 |
|
|
284,294,000 |
| ||
| Other operating expenses |
|
293,387,000 |
|
|
237,358,000 |
| ||
| Provision for policy losses and other claims |
|
67,239,000 |
|
|
47,099,000 |
| ||
| Depreciation and amortization |
|
26,015,000 |
|
|
24,148,000 |
| ||
| Premium taxes |
|
10,456,000 |
|
|
7,199,000 |
| ||
| Interest |
|
8,459,000 |
|
|
8,220,000 |
| ||
|
|
1,178,482,000 |
|
|
953,643,000 |
| |||
| Income before income taxes and minority interests |
|
163,493,000 |
|
|
88,559,000 |
| ||
| Income taxes |
|
56,000,000 |
|
|
31,000,000 |
| ||
| Income before minority interests |
|
107,493,000 |
|
|
57,559,000 |
| ||
| Minority interests |
|
19,913,000 |
|
|
13,484,000 |
| ||
| Net income |
|
87,580,000 |
|
|
44,075,000 |
| ||
| Other comprehensive loss, net of tax |
||||||||
| Unrealized loss on securities |
|
(433,000 |
) |
|
(535,000 |
) | ||
| Minimum pension liability adjustment |
|
(3,100,000 |
) |
|
(2,275,000 |
) | ||
|
|
(3,533,000 |
) |
|
(2,810,000 |
) | |||
| Comprehensive income |
$ |
84,047,000 |
|
$ |
41,265,000 |
| ||
| Net income per share (Note 2): |
||||||||
| Basic |
$ |
1.18 |
|
$ |
0.63 |
| ||
| Diluted |
$ |
1.05 |
|
$ |
||||