SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of report (Date of earliest event reported) July 20, 2004
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FIRST ADVANTAGE CORPORATION
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(Exact Name of the Registrant as Specified in Charter)
Delaware 0-50285 61-1437565
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(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification No.)
One Progress Plaza, Suite 2400, St. Petersburg, Florida 33701
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (727) 214-3411
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Not Applicable.
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(Former Name or Former Address, if Changed Since Last Report)
Item 7. Exhibits.
Exhibit No. Description
99.1 Press Release.
Item 12. Results of Operation and Financial Condition.
On July 20, 2004, First Advantage Corporation, a Delaware corporation,
announced financial results for the quarter ended June 30, 2004. The full text
of the press release issued in connection with the announcement is attached
hereto as Exhibit 99.1.
The Company's earnings release contains non-GAAP financial measures.
Pursuant to the requirements of Regulation G, the Company has provided
reconciliations within the press release of the non-GAAP financial measures to
the most directly comparable GAAP financial measures in the text of the press
release.
EBITDA is presented in the earnings release. EBITDA was determined by
adjusting net income (loss) for income tax, interest expense and depreciation
and amortization. Although EBITDA is not a financial measure prepared in
accordance with generally accepted accounting principles ("GAAP"), it is
calculated and communicated by the Company because management believes it is of
interest to investors and lenders in relation to its overall capital structure
and its ability to borrow additional funds.
The Company's calculation of EBITDA may or may not be consistent with the
calculation of this measure by other companies in the same industry. Investors
should not view EBITDA as an alternative to the GAAP measures of net income as a
measure of performance, or cash flows from operating, investing and financing
activities as a measure of liquidity. In addition, EBITDA does not take into
account changes in certain assets and liabilities as well as interest and income
taxes that can affect cash flows. Management does not intend the presentation of
EBITDA to be considered in isolation or as a substitute for results prepared in
accordance with GAAP.
The information in this current report and the exhibit hereto is being
"furnished" pursuant to Item 12 of Form 8-K. As such, this information is not
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934 and is not incorporated by reference into any filings with the SEC
unless it shall be explicitly so incorporated into such filings.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST ADVANTAGE CORPORATION
Date: July 20, 2004 By: /s/ John Lamson
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Name: John Lamson
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT 99.1
FIRST ADVANTAGE CORPORATION REPORTS OPERATING
RESULTS FOR THE SECOND QUARTER OF 2004
ST. PETERSBURG, Fla., July 20, 2004--First Advantage Corporation (NASDAQ: FADV),
a risk mitigation business solutions provider, today announced operating results
for the second quarter of 2004.
First Advantage reported net income of $3.2 million (15 cents per diluted share)
for the quarter ended June 30, 2004, compared to net income of $0.6 million (3
cents per diluted share) for the quarter ended March 31, 2004. Net income for
the quarter ended June 30, 2003, was $2 million (10 cents per diluted share).
Revenues for the company were $68.9 million and $57.4 million for the quarters
ended June 30, 2004, and March 31, 2004, respectively. First Advantage's revenue
was $37.4 million for the quarter ended June 30, 2003.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were
$9.2 million and $3.9 million for the quarters ended June 30, 2004, and March
31, 2004, respectively.
During the second quarter of 2004, First Advantage completed four acquisitions
to continue executing the growth strategy it initiated following the company's
formation in June 2003. These recent acquisitions added three new business lines
- - computer forensics and electronic discovery, enterprise tax credits and
incentives services, and property management software -and created-cross sell
opportunities for First Advantage in both new and existing markets.
"We are very pleased with our second quarter results," said John Long, chief
executive officer and president of First Advantage Corporation. "Our integration
efforts are beginning to bear fruit with strong results from our Enterprise
Screening segment. Resident screening integrations are going extremely well and
our employment background and drug screening companies are benefiting from the
successful integration of smaller acquisitions and an improved hiring
environment. Also contributing to the segment's performance is the recent
acquisition of CIC Enterprises, which mainly provides employment-related tax
credit and incentive services.
"During the remainder of 2004, we will continue to focus significant resources
on operational consolidation to deliver additional cost savings as we move
clients to First Advantage's platforms. We expect to complete the migration of
our Concord, Calif., employment background screening operations to our core
facility in St. Petersburg, Fla., in the fourth quarter, which will benefit our
earnings in 2005. Drug screening consolidations are targeted to be largely
complete by the end of the first quarter of 2005.
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First Advantage Corporation Reports Operating Results for the Second Quarter of
2004
Page 2
"We expect third quarter results to benefit from continued consolidation efforts
and from a full quarter of operating results from the acquisitions closed in the
second quarter. As we look ahead to fourth quarter, volumes in our Enterprise
Screening segment historically decrease due to the holiday season and related
declines in hiring and apartment rental activity. Therefore, we anticipate this
to result in a decrease in earnings in the fourth quarter as compared to third
quarter. For the year ending Dec. 31, 2004, we are estimating diluted earnings
per share to be in the range of 46 to 52 cents and total revenue of
approximately $265 million."
Summary Income Statement (Unaudited)
Three Months Ended June 30 Six Months Ended June 30,
2004 2003 2004 2003
--------------- ----------------- ----------------- -----------------
Service revenues $ 58,032,000 $ 30,144,000 $ 103,991,000 $ 54,328,000
Reimbused 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 revenues 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 sales 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
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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
Impairment loss - - - -
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Income from operations 6,031,000 3,409,000 7,353,000 4,112,000
--------------- ----------------- ----------------- -----------------
Interest (expense) income:
Interest expense (490,000) (36,000) (721,000) (55,000)
Interest income (4,000) 10,000 7,000 21,000
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Total interest 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 earnings per share 0.15 0.10 0.18 0.12
=============== ================= ================= =================
Basic weighted-average shares outstanding 21,502,035 20,002,126 21,328,629 20,002,126
=============== ================= ================= =================
Diluted earnings per share 0.15 0.10 0.18 0.12
=============== ================= ================= =================
Diluted weighted-average shares outstanding 22,104,455 20,122,023 21,625,147 20,122,023
=============== ================= ================= =================
EBITDA calculation:
Net income $ 3,208,000 $ 2,051,000 $ 3,847,000 $ 2,381,000
Provision for income taxes 2,329,000 1,332,000 2,792,000 1,697,000
Interest expense 490,000 36,000 721,000 55,000
Depreciation and amortization 3,145,000 1,791,000 5,785,000 3,570,000
--------------- ----------------- ----------------- -----------------
Earnings before interest, taxes, depreciation
and amortization (EBITDA)* $ 9,172,000 $ 5,210,000 $ 13,145,000 $ 7,703,000
=============== ================= ================= =================
*EBITDA is not a measure of financial performance under generally accepted
accounting principles. EBITDA is used by certain investors to analyze and
compare companies.
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First Advantage Corporation Reports Operating Results for the Second Quarter of
2004
Page 3
Segment Financial Information (Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2004 2003 2004 2003
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Total Revenue
Enterprise Screening $ 47,464,000 $ 27,040,000 $ 83,483,000 $ 49,502,000
Risk Mitigation 19,031,000 9,124,000 36,770,000 18,526,000
Consumer Direct 2,964,000 1,579,000 7,196,000 1,579,000
Corporate and Eliminations (540,000) (312,000) (1,097,000) (635,000)
------------------- ------------------- --------------- ----------------
Consolidated $ 68,919,000 $ 37,431,000 $ 126,352,000 $ 68,972,000
=================== =================== =============== ================
Income (Loss) Before Income Taxes
Enterprise Screening $ 6,587,000 $ 3,054,000 $ 8,470,000 $ 3,507,000
Risk Mitigation 2,048,000 1,358,000 3,171,000 2,758,000
Consumer Direct (126,000) 18,000 (141,000) 18,000
Corporate and Eliminations (2,972,000) (1,047,000) (4,861,000) (2,205,000)
------------------- ------------------- --------------- ----------------
Consolidated $ 5,537,000 $ 3,383,000 $ 6,639,000 $ 4,078,000
=================== =================== =============== ================
About First Advantage Corporation
First Advantage Corporation (NASDAQ: FADV) provides best-in-class single-source
solutions for global risk mitigation and enterprise and consumer screening
needs. Incorporating state-of-the-art technology, proprietary systems and data
resources, First Advantage is a leading provider of employment background
screening, drug-free workplace programs and other occupational health testing,
employee assistance programs, resident screening, motor vehicle records,
investigative services, computer forensics and electronic discovery services,
supply chain security, corporate tax and incentive services, and consumer
location services. First Advantage ranks among the top three companies in all of
its major business lines. First Advantage is headquartered in St. Petersburg,
Fla., and has more than 1,700 employees in offices throughout the United States
and abroad. Further information about the company is available at www.FADV.com.
First Advantage is a majority-owned subsidiary of The First American Corporation
(NYSE: FAF), a Fortune 500 company that traces its history to 1889. First
American is the nation's largest data provider, supplying businesses and
consumers with information resources in connection with the major economic
events of people's lives. Additional information about the First American Family
of Companies can be found at www.firstam.com.
Certain statements in this press release, including those related to anticipated
earnings for the year ending on Dec. 31, 2004, forecasts of future earnings and
earnings per share, anticipated revenue for the year ending Dec. 31, 2004,
integration in the Enterprise Screening segment, integration efforts in the
resident screening businesses and employment background and drug screening
businesses, consolidation effects on platform migration, effects of completion
of platform migration on 2005 earnings, effects of consolidation of operations,
effects of consolidation on future earnings, effects of consolidation on costs
reductions, 2004 acquisition activities, effects of second quarter acquisitions
on operating results for the quarter ending Sept. 30, 2004, cross selling
opportunities, accelerated hiring practices, and decreases in volume for the
Enterprise Screening segment for the quarter ending on Dec.31, 2004 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: general volatility of the capital markets
and the market price of the company's Class A common stock; the company's
ability to successfully raise capital; the company's ability to identify and
complete acquisitions and successfully integrate businesses it acquires; changes
in applicable government regulations; the degree and nature of the company's
competition; increases in the company's expenses; continued consolidation among
the company's competitors and customers; unanticipated technological changes and
requirements; the company's ability to identify suppliers of quality and
cost-effective data, and other risks identified from time-to-time in the
company's SEC filings. 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. Investors are advised to consult the company's
filings with the SEC, including its 2003 Annual Report on Form 10-K, for a
further discussion of these and other risks.
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