UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2004
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: 000-50285
FIRST ADVANTAGE CORPORATION
(Exact name of registrant as specified in its charter)
| Incorporated in Delaware | 61-1437565 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
One Progress Plaza, Suite 2400
St. Petersburg, Florida 33701
(Address of principal executive offices, including zip code)
(727) 214-3411
(Registrant’s telephone number, including area code)
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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
There were 5,614,497 shares of outstanding Class A Common Stock of the registrant as of August 2, 2004.
There were 16,027,286 shares of outstanding Class B Common Stock of the registrant as of August 2, 2004.
| Item 1. | Financial Statements |
First Advantage Corporation
Consolidated Balance Sheets (Unaudited)
| June 30, 2004 |
December 31, 2003 | |||||
| Assets |
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| Current assets: |
||||||
| Cash and cash equivalents |
$ | 6,065,000 | $ | 5,637,000 | ||
| Accounts receivable (less allowance for doubtful accounts of $1,914,000 and $1,327,000 in 2004 and 2003, respectively) |
43,055,000 | 23,672,000 | ||||
| Income taxes receivable |
503,000 | 1,282,000 | ||||
| Due from affiliates |
637,000 | — | ||||
| Prepaid expenses and other current assets |
2,635,000 | 2,512,000 | ||||
| Total current assets |
52,895,000 | 33,103,000 | ||||
| Property and equipment, net |
20,615,000 | 19,719,000 | ||||
| Goodwill |
263,553,000 | 204,710,000 | ||||
| Intangible assets, net |
31,066,000 | 18,528,000 | ||||
| Database development costs, net |
7,797,000 | 7,162,000 | ||||
| Other assets |
1,575,000 | 678,000 | ||||
| Total assets |
$ | 377,501,000 | $ | 283,900,000 | ||
| Liabilities and Stockholders’ Equity |
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| Current liabilities: | ||||||
| Accounts payable |
$ | 6,746,000 | $ | 4,211,000 | ||
| Accrued compensation |
10,526,000 | 9,373,000 | ||||
| Accrued liabilities |
14,745,000 | 6,327,000 | ||||
| Due to affiliates |
— | 992,000 | ||||
| Current portion of long-term debt and capital leases |
9,046,000 | 7,231,000 | ||||
| Total current liabilities |
41,063,000 | 28,134,000 | ||||
| Long-term debt and capital leases, net of current portion |
64,335,000 | 13,473,000 | ||||
| Convertible notes |
8,722,000 | — | ||||
| Deferred income taxes |
4,061,000 | — | ||||
| Other liabilities |
1,990,000 | 1,957,000 | ||||
| Total liabilities |
120,171,000 | 43,564,000 | ||||
| Commitments and contingencies |
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| Stockholders’ equity: |
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| Preferred stock, $.001 par value; 1,000,000 shares authorized, no shares issued or outstanding |
— | — | ||||
| Class A common stock, $.001 par value; 75,000,000 shares authorized; 5,612,962 and 4,866,362 shares issued and outstanding as of June 30, 2004 and December 31, 2003, respectively |
6,000 | 5,000 | ||||
| Class B common stock, $.001 par value; 25,000,000 shares authorized; 16,027,286 shares issued and outstanding as of June 30, 2004 and December 31, 2003 |
16,000 | 16,000 | ||||
| Additional paid-in capital |
246,236,000 | 233,101,000 | ||||
| Retained earnings |
11,061,000 | 7,214,000 | ||||
| Accumulated other comprehensive income |
11,000 | — | ||||
| Total stockholders’ equity |
257,330,000 | 240,336,000 | ||||
| Total liabilities and stockholders’ equity |
$ | 377,501,000 | $ | 283,900,000 | ||
The accompanying notes are an integral part of these consolidated financial statements.
1
First Advantage Corporation
Consolidated Statements of Income (Unaudited)
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
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| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Service revenue |
$ | 58,032,000 | $ | 30,144,000 | $ | 103,991,000 | $ | 54,328,000 | ||||||||
| Reimbursed government fee revenue |
10,887,000 | 7,287,000 | 22,361,000 | 14,644,000 | ||||||||||||
| Total revenue |
68,919,000 | 37,431,000 | 126,352,000 | 68,972,000 | ||||||||||||
| Cost of service revenue |
16,558,000 | 7,531,000 | 30,539,000 | 13,993,000 | ||||||||||||
| Government fees paid |
10,887,000 | 7,287,000 | 22,361,000 | 14,644,000 | ||||||||||||
| Total cost of service |
27,445,000 | 14,818,000 | 52,900,000 | 28,637,000 | ||||||||||||
| Gross margin |
41,474,000 | 22,613,000 | 73,452,000 | 40,335,000 | ||||||||||||
| Salaries and benefits |
21,006,000 | 11,312,000 | 38,718,000 | 21,837,000 | ||||||||||||
| Other operating expenses |
11,292,000 | 6,101,000 | 21,596,000 | 10,816,000 | ||||||||||||
| Depreciation and amortization |
3,145,000 | 1,791,000 | 5,785,000 | 3,570,000 | ||||||||||||
| Total operating expenses |
35,443,000 | 19,204,000 | 66,099,000 | 36,223,000 | ||||||||||||
| Income from operations |
6,031,000 | 3,409,000 | 7,353,000 | 4,112,000 | ||||||||||||
| Other (expense) income: |
||||||||||||||||
| Interest expense |
(498,000 | ) | (36,000 | ) | (729,000 | ) | (55,000 | ) | ||||||||
| Interest income |
4,000 | 10,000 | 15,000 | 21,000 | ||||||||||||
| Total other (expense), net |
(494,000 | ) | (26,000 | ) | (714,000 | ) | (34,000 | ) | ||||||||
| Income before income taxes |
5,537,000 | 3,383,000 | 6,639,000 | 4,078,000 | ||||||||||||
| Provision for income taxes |
2,329,000 | 1,332,000 | 2,792,000 | 1,697,000 | ||||||||||||
| Net income |
$ | 3,208,000 | $ | 2,051,000 | $ | 3,847,000 | $ | 2,381,000 | ||||||||
| Per share amounts: |
||||||||||||||||
| Basic |
$ | 0.15 | $ | 0.10 | $ | 0.18 | $ | 0.12 | ||||||||
| Diluted |
$ | 0.15 | $ | 0.10 | $ | 0.18 | $ | 0.12 | ||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
21,502,035 | 20,002,126 | 21,328,629 | 20,002,126 | ||||||||||||
| Diluted |
22,104,455 | 20,122,023 | 21,625,147 | 20,122,023 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
First Advantage Corporation
Consolidated Statement of Changes in Stockholders’ Equity
For the Six Months Ended June 30, 2004 (Unaudited)
| Common Shares |
Common Stock Amount |
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive |
Total | ||||||||||||
| Balance at December 31, 2003 |
20,893,648 | $ | 21,000 | $ | 233,101,000 | $ | 7,214,000 | $ | — | $ | 240,336,000 | ||||||
| Net income |
— | — | 3,847,000 | — | 3,847,000 | ||||||||||||
| Class A Shares issued in connection with acquisitions |
522,825 | 1,000 | 9,704,000 | — | — | 9,705,000 | |||||||||||
| Class A Shares issued in connection with stock option plan and employee stock purchase plan |
223,775 | — | 3,431,000 | — | — | 3,431,000 | |||||||||||
| Other comprehensive income |
— | — | — | 11,000 | 11,000 | ||||||||||||
| Balance at June 30, 2004 |
21,640,248 | $ | 22,000 | $ | 246,236,000 | $ | 11,061,000 | $ | 11,000 | $ | 257,330,000 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
First Advantage Corporation
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2004 and 2003 (Unaudited)
| For the Six Months Ended June 30, |
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| 2004 |
2003 |
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| Cash flows from operating activities: |
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| Net income |
$ | 3,847,000 | $ | 2,381,000 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization |
5,785,000 | 3,570,000 | ||||||
| Change in operating assets and liabilities, net of acquisitions: |
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| Accounts receivable |
(11,070,000 | ) | (3,675,000 | ) | ||||
| Prepaid expenses and other current assets |
59,000 | 134,000 | ||||||
| Other assets |
(3,172,000 | ) | 178,000 | |||||
| Accounts payable |
1,068,000 | (2,081,000 | ) | |||||
| Accrued liabilities |
4,173,000 | 1,433,000 | ||||||
| Due (from) to affiliates |
(1,673,000 | ) | 747,000 | |||||
| Income taxes |
3,552,000 | (988,000 | ) | |||||
| Accrued compensation and other liabilities |
291,000 | 1,409,000 | ||||||
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