REGISTRATION NO. 333-66431
FILED PURSUANT TO RULE 424(B)(3)
PROSPECTUS
3,000,000 COMMON SHARES
THE FIRST AMERICAN CORPORATION
Acquisition Consideration [Logo of
The First American Corporation]
o This prospectus covers up to 3,000,000
of our common shares. Our Business
o We may offer these shares from time to o We are a leading provider of
time as full or partial consideration business information and
for our acquisition of the assets or related products and services.
ownership interests of businesses which
primarily provide financial and Listing
information services.
o The shares offered by this
o We will negotiate the terms of each prospectus will be listed for
acquisition transaction with the owners trading on the New York Stock
of the assets or ownership interests Exchange.
being acquired at the time the
particular acquisition transaction is o The trading symbol for our
undertaken. shares on the New York Stock
Exchange is "FAF."
Share Price o On September 28, 2001, the
closing price of our shares on
o We will value the shares issued in a the New York Stock Exchange
particular acquisition transaction at a was $20.25.
price reasonably related to the market
value of the shares at one of the
following times:
o When the terms of the particular
acquisition transaction are
agreed upon.
o When the particular acquisition
transaction closes.
o During the period or periods prior
to the delivery of the shares.
An Investment in Our Company Entails Risk
o Before making an investment in our
shares, you should consider carefully
the "Risk Factors" set forth beginning
on page 1.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October 2, 2001.
(inside front cover page)
TABLE OF CONTENTS
Where You Can Find More Information; Incorporation by Reference.............(i)
Risk Factors................................................................1
Special Note of Caution Regarding Forward-Looking Statements................2
The First American Corporation..............................................4
Summary Historical Consolidated Financial Data..............................5
Selling Shareholders........................................................7
Plan of Distribution........................................................9
Legal Matters...............................................................10
Experts.....................................................................11
.................
WHERE YOU CAN FIND MORE INFORMATION;
INCORPORATION BY REFERENCE
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy, upon payment of a fee set by the SEC, any document that we file with the
SEC at any of its public reference rooms in the following locations:
450 Fifth Street, N.W.
Washington, D.C. 20549
Citicorp Center
500 West Madison Street
14th Floor, Suite 1400
Chicago, Illinois 60661
You may also call the SEC at 1-800-432-0330 for more information on the
public reference rooms. Our filings are also available to the public on the
internet through the SEC's EDGAR database. You may access the EDGAR database at
the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed
(i)
with the SEC. These documents contain important business and financial
information about our company, including information concerning its financial
performance:
o our annual report on form 10-K for the fiscal year ended December 31,
2000;
o our quarterly reports on form 10-Q for the quarters ended March 31,
2001 and June 30, 2001;
o our current reports on form 8-K filed January 31, 2001, February 21,
2001, April 11, 2001, April 16, 2001, May 7, 2001, May 8, 2001, May
10, 2001, May 17, 2001 and August 1, 2001;
o the description of our common shares, $1.00 par value, contained in
our registration statement on form 8-A, dated November 19, 1993, which
registers the shares under Section 12(b) of the Exchange Act;
o the description of Rights to Purchase Series A Junior Participating
Preferred Shares, which may be transferred with our common shares,
contained in our registration statement on form 8-A, dated November 7,
1997, which registers the rights under Section 12(b) of the Exchange
Act; and
o any additional documents that we file with the SEC between the date of
this prospectus and the earlier of the following dates:
o the date on which all of the shares offered by this prospectus
are resold by the persons or entities who or which acquire them
from us; and
o the date that is one year after the last date on which shares
offered by this prospectus are issued by us.
This prospectus is part of a registration statement on Form S-4 which
we have filed with the SEC. As permitted by SEC rules, this prospectus does not
contain all of the information contained in the registration statement, any
amendments, and accompanying exhibits and schedules filed with the SEC. You may
refer to the registration statement, any amendments, and the exhibits and
schedules for more information about us and our common shares. The registration
statement, exhibits and schedules are also available at the SEC's public
reference rooms or through its EDGAR database on the Internet.
You may obtain a copy of these filings at no cost by writing to us at
The First American Corporation, 1 First American Way, Santa Ana, California
92707-5913, Attention: Mark R Arnesen, or by telephoning us at (714) 800-3000.
In order to obtain timely delivery, you must submit your request no later than
five days prior to the date you make your investment decision.
(ii)
RISK FACTORS
In addition to the other information contained in this prospectus, any
supplement to this prospectus and the registration statement of which this
prospectus is a part, you should carefully consider the following risk factors
before investing in our company.
Revenues may decline during periods when the demand for our products decreases
Our revenues decrease as the number of real estate transactions in
which our products are purchased decreases. We have found that the number of
real estate transactions in which our products are purchased decreases in the
following situations:
o when mortgage rates are high;
o when the mortgage fund supply is limited; and
o when the United States economy is weak.
We believe that this trend will recur.
Earnings may be reduced if acquisition projections are inaccurate
Our earnings have improved since 1991 in large part because of our
acquisition and integration of non-title insurance businesses. These businesses
generally have higher margins than our title insurance businesses. The success
or failure of each of these acquisitions has depended in large measure upon the
accuracy of our projections. Our projections are not always accurate. Inaccurate
projections have historically led to lower than expected earnings.
Changes in government regulation could prohibit or limit our operations
Our title insurance, property and casualty insurance, home warranty,
thrift, trust and investment businesses are regulated by various governmental
agencies. Many of our other businesses operate within statutory guidelines.
Changes in the applicable regulatory environment or statutory guidelines could
prohibit or restrict our existing or future operations. Such restrictions may
adversely affect our financial performance.
Current legal proceedings may have a material adverse affect on our financial
condition or results of operations
On May 19, 1999, the State of California and the controller and
insurance commissioner of the State of California filed a class action suit in
the state court in Sacramento. Initially, the action sought to certify as a
class of defendants all title and escrow companies doing business in California
from 1970 to the present, including certain of our subsidiaries. The plaintiffs
allege that the defendants:
o failed to give unclaimed property to the State of California on a
timely basis;
o charged California home buyers and other escrow customers fees
for services that were never performed or which cost less than
the amount charged; and
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o devised and carried out schemes, known as earnings credits, with
financial institutions to receive interest on escrow funds
deposited by defendants with financial institutions in demand
deposits.
Since the initial filing of the suit, the California Attorney General's
Office, on behalf of the State, the controller and the insurance commissioner,
indicated that it would not seek to certify a class of defendants, but would
instead amend its suit to name an unspecified number of title underwriters and
underwritten title companies. To date, the attorney general has neither amended
the suit, nor to our knowledge taken steps to progress with it, including the
service of process on any party. The attorney general, however, has entered into
settlement discussions with various title insurance underwriters, including
certain of our subsidiaries. Additionally, the attorney general indicated that
it will address issues pertaining to escheat obligations through routine audits
conducted by the controller's office, rather than through litigation.
Subsequent to the filing of this lawsuit, the First American Title
Insurance Company, a subsidiary of ours, was named and served as a defendant in
two private class actions in California courts. The allegations in those actions
include some, but not all, of the allegations contained in the lawsuit discussed
above. The private class actions independently seek injunctive relief,
attorneys' fees, damages and penalties in unspecified amounts. One of the
private class actions has been dismissed. The remaining private class action has
not progressed beyond limited document production.
An adverse decision in these lawsuits may have a material adverse
effect on our financial condition or results of operations.
SPECIAL NOTE OF CAUTION REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus, any applicable
supplement to this prospectus and the documents incorporated by reference into
this prospectus, may constitute "forward-looking statements" within the meaning
of the federal securities laws. The following or similar words are intended to
identify forward-looking statements in our documents:
o "anticipate" o "forecast"
o "believe" o "goal"
o "estimate" o "objective"
o "expect" o "projection"
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:
o interest rate fluctuations;
o changes in the performance of the real estate markets;
o general volatility in the capital markets;
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o changes in applicable government regulations;
o consolidation among our significant customers and competitors;
o legal proceedings commenced by the California attorney general
and related litigation;
o our continued ability to identify businesses to be acquired;
o changes in our ability to integrate businesses which we acquire;
and
o other factors described in our annual report on form 10-K for the
year ended December 31, 2000 filed with the SEC.
The forward-looking statements speak only as of the date they are made.
We do 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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THE FIRST AMERICAN CORPORATION
We are a leading provider of business information and related products
and services. Our principal executive office is located at 1 First American Way,
Santa Ana, California 92707-5913, and our telephone number is (714) 800-3000.
You can visit our website at www.firstam.com.
The following is a list of our three business segments and the products
and services which we now offer through our subsidiaries:
Title Insurance Real Estate Information Consumer Information
& Services & Services & Services
o aircraft and vessel title o credit reporting and information management -consumer information
insurance o default management services
o equity loan services o field inspections o pre-employment screening
o lender services o flood determination and compliance o resident screening
o national/commercial title insurance o mortgage document services o specialized credit reporting
o residential title insurance o mortgage origination software systems o sub-prime consumer information
o subdivision title insurance o mortgage servicing software systems o vehicle information and insurance
o 1031 tax-deferred exchange services o residential and commercial real estate tax tracking
o title and escrow systems reporting -consumer services
o tax valuation services
o appraisal and property valuation o banking services
o database management services and document o consumer credit reports
imaging o home comparable reports
o property information and map image products o home warranty
o title plant and document imaging services o investment services
o property and casualty insurance
o trust services
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Summary Historical Consolidated Financial Data
The following table sets forth summary historical consolidated
financial and other data for the five years ended December 31, 2000. The summary
is qualified in its entirety by reference to the financial statements and other
information contained in our annual report on form 10-K for the year ended
December 31, 2000, which is incorporated by reference into this prospectus. All
data are in thousands except percentages, per share data and employee data.
Year Ended
December 31
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1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Revenues....................... $1,654,976 $1,962,001 $2,943,880 $2,988,169 $2,934,255
Income before cumulative effect
of a change in accounting for
tax service contracts (1)... 55,766 67,765 201,527 88,643 82,223
Cumulative effect of a change
in accounting for tax
service contracts (1)....... -- -- -- (55,640) --
Net income..................... 55,766 67,765 201,527 33,003 82,223
Total assets................... 1,010,556 1,220,377 1,852,731 2,116,414 2,199,737
Notes and contracts payable.... 72,761 51,720 143,466 196,815 219,838
Mandatorily redeemable
preferred securities........ -- 100,000 100,000 100,000 100,000
Stockholders' equity........... 384,931 442,783 762,265 815,991 870,237
Return on average stockholders'
equity (2)................. 15.4% 16.4% 33.4% 10.9% 9.8%
Cash dividends on common
shares...................... 7,928 14,035 13,894 15,840 15,256
Per share of common stock (3)
Basic:
Income before cumulative
effect of a change in
accounting for tax
service contracts......... .98 1.19 3.35 1.37 1.29
Cumulative effect of a change
in accounting for tax
service contracts......... -- -- -- (.86) --
-------------------------------------------------------------------------------------------------------------------
Net income................... $ .98 $ 1.19 $ 3.35 $ .51 $ 1.29
-------------------------------------------------------------------------------------------------------------------
Diluted:
Income before cumulative effect
of a change in accounting for
tax service contracts..... $ .98 $ 1.16 $ 3.21 $ 1.34 $ 1.24
Cumulative effect of a change in
accounting for tax service
contracts................. -- -- -- (.84) --
-------------------------------------------------------------------------------------------------------------------
Net income................... $ .98 $ 1.16 $ 3.21 $ .50 $ 1.24
-------------------------------------------------------------------------------------------------------------------
Stockholders' equity......... $ 6.76 $ 7.74 $ 12.08 $ 12.54 $ 13.62
Cash dividends............... $ .14 $ .25 $ .23 $ .24 $ .24
Number of common shares outstanding:
Weighted average during the year:
Basic..................... 56,652 57,092 60,194 64,669 63,680
Diluted................... 57,112 58,482 62,720 66,351 66,050
End of year................. 56,965 57,186 63,120 65,068 63,887
Title orders opened (4)........ 1,027 1,173 1,585 1,334 1,241
Title orders closed (4)........ 775 886 1,210 1,120 975
Number of employees............ 11,611 13,156 19,669 20,065 20,346
_______________
All consolidated results reflect the 1999 acquisition of National Information
Group accounted for under the pooling-of-interests method of accounting.
(1) In December 1999, First American adopted Staff Accounting Bulletin No. 101
(SAB), "Revenue Recognition in Financial Statements." The SAB, which became
effective January 1, 1999, applies to First American's tax service
operations and requires the deferral of the tax service fee and the
recognition of that fee as revenue ratably over the expected service
period. The amortization
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rates applied to recognize the revenues assume a 10-year contract life and
are adjusted to reflect prepayments. First American periodically reviews
its tax service contract portfolio to determine if there have been changes
in contract lives and/or changes in the number and/or timing of
prepayments. Accordingly, First American may adjust the rates to reflect
current trends. The SAB finalizes a series of changes instituted by the
Securities and Exchange Commission concerning revenue recognition policies.
As a result of adopting the SAB, in 1999, First American reported a charge
of $55.6 million, net of income taxes and minority interests, as a
cumulative change in accounting principle, reduced net income by $10.9
million, or $0.16 per diluted share and restated its quarterly information.
During the year ended December 31, 2000, First American recognized $38.6
million in revenues that were included in the cumulative effect adjustment.
Revenues earned by the other products in the real estate information
segment are recognized at the time of delivery, as First American has no
significant ongoing obligation after delivery.
(2) Return on average stockholders' equity for 1999 excludes the cumulative
effect of a change in accounting for tax service contracts from both net
income and stockholders' equity.
(3) Per share information relating to net income is based on weighted-average
number of shares outstanding for the years presented. Per share information
relating to stockholders' equity is based on shares outstanding at the end
of each year.
(4) Title order volumes are those processed by the direct title operations of
First American and do not include orders processed by agents.
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SELLING SHAREHOLDERS
The table on the following page sets forth, as of the date of this
prospectus, the following information:
o the name of each holder of shares that may currently be sold
pursuant to this prospectus;
o the number of our common shares that each selling shareholder
owns as of such date;
o the number of our common shares owned by each selling shareholder
that may be offered for sale from time to time pursuant to this
prospectus;
o the number of our common shares to be held by each selling
shareholder assuming the sale of all the shares offered hereby;
and
o by footnote, any position or office held or material relationship
with The First American Corporation or any of its affiliates
within the past three years, other than that of being a
shareholder.
We may amend or supplement this prospectus from time to time to update
the disclosure set forth herein.
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--------------------------------------------------------------------------------------------------------------------
Number of Shares
Shares Owned of to be Offered for Shares Owned of Record
Record Prior to the the Selling After Completion of the
Offering Shareholder's Offering
Name of Selling Shareholder Number % Account Number %
--------------------------------------------------------------------------------------------------------------------
Robert Davies 0 0 9,024 0 0
--------------------------------------------------------------------------------------------------------------------
Henry M. Goldberg 0 0 73,300 0 0
--------------------------------------------------------------------------------------------------------------------
Rhea Hill, as Trustee under the Rhea Hill
Revocable Trust(1) 435 <1 8,829 435 <1
--------------------------------------------------------------------------------------------------------------------
Equity Holding Corporation 0 0 40,662 0 0
--------------------------------------------------------------------------------------------------------------------
Kuo Huang and San L. Huang 0 0 11,953 0 0
--------------------------------------------------------------------------------------------------------------------
G.N. Hutton, IV, as custodian for G.N.
Hutton, V 0 0 1,133 0 0
--------------------------------------------------------------------------------------------------------------------
Warren Hutton 0 0 636 0 0
--------------------------------------------------------------------------------------------------------------------
Warren Hutton, as custodian for E.A. Hutton 0 0 1,133 0 0
--------------------------------------------------------------------------------------------------------------------
Warren Hutton, as custodian for B.S. Hutton 0 0 2,266 0 0
--------------------------------------------------------------------------------------------------------------------
Warren Hutton, as custodian for M.A. Hutton 0 0 2,266 0 0
--------------------------------------------------------------------------------------------------------------------
J.W. Hutton, as custodian for James W.
Hutton 0 0 1,133 0 0
--------------------------------------------------------------------------------------------------------------------
J.W. Hutton, as custodian for B.J. Hutton 0 0 2,266 0 0
--------------------------------------------------------------------------------------------------------------------
Gary Kanipe, as General Partner of the
Kanipe Family Limited Partnership 0 0 17,883 0 0
--------------------------------------------------------------------------------------------------------------------
Paulina D. Kanode and Jesse F. Kanode, as
joint tenants 0 0 1,607 0 0
--------------------------------------------------------------------------------------------------------------------
Gary McManus, Sr. 0 0 3,605 0 0
--------------------------------------------------------------------------------------------------------------------
Michael Penley 0 0 3,557 0 0
--------------------------------------------------------------------------------------------------------------------
The Reynolds and Reynolds Company 0 0 70,792 0 0
--------------------------------------------------------------------------------------------------------------------
William Shillito 0 0 12,168 0 0
--------------------------------------------------------------------------------------------------------------------
David Sinclair 0 0 40,482 0 0
--------------------------------------------------------------------------------------------------------------------
David Weksel 0 0 1,363 0 0
--------------------------------------------------------------------------------------------------------------------
Michael Weksel 0 0 4,006 0 0
--------------------------------------------------------------------------------------------------------------------
William Weksel 0 0 6,379 0 0
--------------------------------------------------------------------------------------------------------------------
Total: 435 <1 316,443 435 <1
--------------------------------------------------------------------------------------------------------------------
_______________
(1) Assumes Ms. Hill will not sell our common shares previously owned.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time during the effectiveness of the registration statement by the selling
shareholders. The selling shareholders will act independently of us in making
decisions with respect to the timing, manner and price of each sale. The selling
shareholders may sell the shares being offered hereby on the New York Stock
Exchange, or otherwise. The sale price may be the then prevailing market price
or a price related thereto, a price set by formula, which may be subject to
change, or a negotiated price. The shares may be sold, without limitation, by
one or more of the following means of distribution:
o a block trade in which the broker-dealer so engaged will attempt to
sell shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
o a distribution in accordance with the rules of the New York Stock
Exchange;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o in privately negotiated transactions.
To the extent required, this prospectus may be amended and supplemented
from time to time to describe a specific plan of distribution.
In connection with distributions of the shares or otherwise, the selling
shareholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with a hedging transaction, broker-dealers
or other financial institutions may engage in short sales of the shares in the
course of hedging the positions they assume with selling shareholders. The
selling shareholders may also sell the shares short and deliver the shares
offered hereby to close out such short positions. The selling shareholders may
also enter into option or other transactions with broker-dealers or other
financial institutions which require the delivery to such broker-dealer or other
financial institution of shares offered hereby, which shares such broker-dealer
or other financial institution may resell pursuant to this prospectus, as
supplemented or amended to reflect such transaction. The selling shareholders
may also pledge shares to a broker-dealer or other financial institution, and,
upon a default, such broker-dealer or other financial institution may effect
sales of the pledged shares pursuant to this prospectus, as supplemented or
amended to reflect such transaction. In addition, any shares that qualify for
sale pursuant to Rule 144 of the Securities Act may, at the option of the holder
thereof, be sold under Rule 144 of the Securities Act rather than pursuant to
this prospectus.
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling shareholders and/or purchasers of the shares
offered hereby. Usual and customary brokerage fees will be paid by the selling
shareholders. Broker-dealers may agree with the selling shareholders to sell a
specified number of shares at a stipulated price per share, and, to the extent
such a broker-dealer is unable to do so acting as agent for the selling
shareholders, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer commitment to the selling shareholders.
Broker-dealers who acquire shares as principal
-9-
may thereafter resell the shares from time to time in transactions, which may
involve cross and block transactions and which may involve sales to and through
other broker-dealers, including transactions of the nature described above, in
the market, in negotiated transactions or otherwise at market prices prevailing
at the time of sale or at negotiated prices, and in connection with such resales
may pay to, or receive from, the purchasers of such shares, commissions computed
as described above.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only though registered
or licensed brokers or dealers. In addition, in certain states the shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling shareholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling shareholders and their affiliates.
In addition, we will make copies of this prospectus and any supplement available
to the selling shareholders and have informed them of the need for delivery of
copies of this prospectus and any supplement to purchasers at or prior to the
time of any sale of the shares offered hereby. The selling shareholders may
indemnify any broker-dealer that participates in transactions involving the sale
of the shares against liabilities resulting therefrom. Among these liabilities
for which indemnification may be provided are those arising under the Securities
Act.
At the time a particular offer of shares offered pursuant to this
prospectus is made, if required, a supplement to this prospectus will be
distributed that will set forth the number of shares being offered and the terms
of the offering, including the name of any underwriter, dealer or agent, the
purchase price paid by any underwriter, any discount, commission and other item
constituting compensation, any discount, commission or concession allowed or
re-allowed or paid to any dealer, and the proposed selling price to the public.
We have agreed to keep the registration statement of which this prospectus
constitutes a part effective in respect of shares issued pursuant thereto until
the first to occur of the following dates:
o the date one year from the date of issuance of such shares; and
o such date as all of the shares offered by the selling shareholders
listed above have been sold.
We intend to de-register any of the shares not sold by the selling
shareholders after such time.
LEGAL MATTERS
The validity of the shares offered by this prospectus will be passed upon
for us by White & Case LLP, Los Angeles, California.
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EXPERTS
The financial statements incorporated in this prospectus by reference to
the annual report on form 10-K for the year ended December 31, 2000 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
* * *
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--------------------------
o We have not authorized anyone to
give you any information that
differs from the information in Prospectus
this prospectus. If you receive any
different information, you should
not rely on it.
3,000,000 Common Shares
o The delivery of this prospectus
shall not, under any circumstances,
create an implication that The
First American Corporation is
operating under the same conditions
that it was operating under when
this prospectus was written. Do not
assume that the information
contained in this prospectus is [Logo of
correct at any time past the date The First American
indicated. Corporation]
o This prospectus does not constitute
an offer to sell, or the
solicitation of an offer to buy, Dated October 2, 2001
any securities other than the
securities to which it relates.
o This prospectus does not constitute
an offer to sell, or the
solicitation of an offer to buy,
the securities to which it relates
in any circumstances in which such
offer or solicitation is unlawful.
--------------------------