Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): July 28, 2008

 

 

FIRST ADVANTAGE CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

Delaware   001-31666   61-1437565

(State or Other Jurisdiction

of incorporation)

  (Commission File Number)  

(IRS Employer

Identification Number)

12395 First American Way

Poway, CA 92064

(Address of principal executive offices)

(727) 214-3411

(Registrant’s telephone number)

Not Applicable.

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On July 28, 2008, First Advantage Corporation, a Delaware corporation, (the “Company”) announced financial results for the first quarter month ended June 30, 2008. 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 for income taxes, interest expense, depreciation and amortization.

Although EBITDA is not a financial measure prepared in accordance with generally accepted accounting principles (“GAAP”), they are 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 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 2.02 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.

 

Item 9.01. Financial Statements and Exhibits

 

  (c) Exhibits

 

99.1    Earnings Press Release dated July 28, 2008

 

2


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 28, 2008     By:   /s/ John Lamson
      Name:   John Lamson
      Title:   Executive Vice President and Chief Financial Officer

 

3

Earnings Press Release

LOGO

EXHIBIT 99.1

NEWS FOR IMMEDIATE RELEASE

 

Contacts:

  

Henri Van Parys

   Cindy Williams
Corporate Communications Manager    Investor Relations Manager

727.214.1072

   727.214.3438

henri.vanparys@FADV.com

   clwilliams@FADV.com

FIRST ADVANTAGE CORPORATION REPORTS

OPERATING RESULTS FOR THE SECOND QUARTER OF 2008

POWAY, Calif., July 28, 2008—First Advantage Corporation (NASDAQ: FADV) (“the Company”), a global risk mitigation and business solutions provider, today announced operating results for the second quarter ended June 30, 2008.

First Advantage reported income from continuing operations of $13.7 million (23 cents per diluted share) for the quarter ended June 30, 2008, compared to $18.2 million (31 cents per diluted share) for the quarter ended June 30, 2007. Results of operations for the quarter ended June 30, 2008 include a restructuring charge of $1.7 million ($1 million after tax or 2 cents per diluted share) primarily relating to consolidation of facilities in the Employer Services and Lender Services segments. Earnings were negatively impacted by $1.8 million in the Employer Services segment due to a portion of the restructuring charge, and the expiration in the third quarter of 2007 of the Hurricane Katrina tax credit legislation. This reduced operating margins in this segment by approximately 3 percentage points. The Dealer Services, Multifamily Services and Investigative and Litigation Support Services segments all reported increased earnings and margins.

Total revenue for the company was $195.5 million and $210.1 million for the quarters ended June 30, 2008 and 2007, respectively.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $35.3 million and $44 million for the quarters ended June 30, 2008 and 2007, respectively.

“Earnings in the Lender Services, Employer Services and Data Services segments declined primarily due to the challenging economic environment in the mortgage industry and a weakening U.S. labor market. We are in the midst of aggressive cost reduction initiatives that will improve efficiencies in future quarters,” stated Anand Nallathambi, president and chief executive officer.

 

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First Advantage Corporation Reports Operating Results for the Second Quarter of 2008

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In the quarter ended June 30, 2008, the Company completed the previously announced sale of Credit Management Solutions, Inc., its automotive consumer credit software business, and of First Advantage Investigative Services, its investigative and surveillance business. Loss from discontinued operations for the quarter ended June 30, 2008 was $1.3 million, net of tax (2 cents per diluted share). Income from discontinued operations for the quarter ended June 30, 2007, also includes the results of operations for US SEARCH.com, the Company’s consumer location business which was sold in the fourth quarter of 2007. “Now that the strategic repositioning and disposition of non-strategic assets are almost over, we remain committed to generating long-term shareholder value by focusing on product expansion and enhancing operational efficiencies,” stated Mr. Nallathambi.

First Advantage’s second quarter 2008 results will be discussed in more detail on Monday, July 28, 2008, at 5:00 p.m. EDT, via teleconference and webcast. The teleconference dial-in number is 888.889.1652 within the U.S. and 210.795.9764 outside the U.S. The teleconference pass code is “Advantage”. The live audio webcast of the call will be accessible from the Investor Relations section of First Advantage’s Web site at www.FADV.com. An audio replay of the teleconference call will be available through August 11, 2008, by dialing 800.839.3420 within the U.S., or 402.998.1036 outside the U.S. An audio archive of the webcast will also be available for replay on First Advantage’s Web site following the call.

 

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First Advantage Corporation Reports Operating Results for the Second Quarter of 2008

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Summary Consolidated Income Statement (Unaudited)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
(In thousands, except per share amounts)    2008     2007     2008     2007  

Service revenue

   $ 182,423     $ 196,641     $ 370,677     $ 387,828  

Reimbursed government fee revenue

     13,122       13,470       27,147       27,544  
                                

Total revenue

     195,545       210,111       397,824       415,372  

Cost of service revenue

     53,487       58,461       107,203       117,300  

Government fees paid

     13,122       13,470       27,147       27,544  
                                

Total cost of sales

     66,609       71,931       134,350       144,844  

Gross margin

     128,936       138,180       263,474       270,528  
                                

Salaries and benefits

     62,927       62,745       129,376       133,386  

Facilities and telecommunications

     8,084       7,800       16,284       15,518  

Other operating expenses

     22,909       23,787       45,743       46,374  

Depreciation and amortization

     11,023       9,825       20,919       19,362  
                                

Income from operations

     23,993       34,023       51,152       55,888  
                                

Interest (expense) income:

        

Interest expense

     (1,075 )     (3,097 )     (1,500 )     (6,323 )

Interest income

     172       309       591       641  
                                

Interest (expense) income, net

     (903 )     (2,788 )     (909 )     (5,682 )

Equity in earnings of investee

     —         670       —         1,450  
                                

Income from continuing operations before income taxes and minority interest

     23,090       31,905       50,243       51,656  

Provision for income taxes

     9,676       13,241       20,650       21,279  
                                

Income from continuing operations before minority interest

     13,414       18,664       29,593       30,377  

Minority interest

     (238 )     469       (325 )     1,029  
                                

Income from continuing operations

     13,652       18,195       29,918       29,348  

(Loss) income from discontinued operations, net of tax

     (1,264 )     152       (4,241 )     242  
                                

Net income

   $ 12,388     $ 18,347     $ 25,677     $ 29,590  
                                

Per share amounts:

        

Basic earnings per share

        

Income from continuing operations

   $ 0.23     $ 0.31     $ 0.50     $ 0.50  

Loss from discontinued operations, net of tax

     (0.02 )     —         (0.07 )     —    
                                

Net income

   $ 0.21     $ 0.31     $ 0.43     $ 0.50  

Diluted earnings per share

        

Income from continuing operations

   $ 0.23     $ 0.31     $ 0.50     $ 0.50  

Loss from discontinued operations, net of tax

     (0.02 )     —         (0.07 )     —    
                                

Net income

   $ 0.21     $ 0.31     $ 0.43     $ 0.50  

Basic weighted-average shares outstanding

     59,435       58,954       59,297       58,665  

Diluted weighted-average shares outstanding

     59,617       59,445       59,374       59,130  

EBITDA calculation:

        

Net income

   $ 12,388     $ 18,347     $ 25,677     $ 29,590  

Provision for income taxes

     9,676       13,241       20,650       21,279  

Interest expense

     903       2,788       909       5,682  

Income (loss) from discontinued operations, net of tax

     1,264       (152 )     4,241       (242 )

Depreciation and amortization

     11,023       9,825       20,919       19,362  
                                

Earnings before interest, taxes, depreciation and amortization (EBITDA)*

   $ 35,254     $ 44,049     $ 72,396     $ 75,671  
                                

 

* 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 2008

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Segment Financial Information (Unaudited)

 

      Three Months Ended June 30,     Six Months Ended June 30,  
(In thousands, except percentages)    2008     2007     2008     2007  

Service revenue

        

Lender Services

   $ 33,680     $ 43,682     $ 72,994     $ 90,294  

Data Services

     27,882       32,615       56,511       66,312  

Dealer Services

     24,955       27,489       50,881       54,825  

Employer Services

     55,511       57,971       109,198       112,796  

Multifamily Services

     19,986       19,676       38,335       37,281  

Investigative & Litigation Support Services

     21,178       15,752       44,681       28,075  

Corporate

     (769 )     (544 )     (1,923 )     (1,755 )
                                

Consolidated

   $ 182,423     $ 196,641     $ 370,677     $ 387,828  
                                

Income (Loss) from operations

        

Lender Services

   $ 5,518     $ 11,686     $ 14,983     $ 24,342  

Data Services

     5,561       9,976       11,694       20,661  

Dealer Services

     4,646       3,743       9,165       7,411  

Employer Services

     3,004       6,799       6,475       11,910  

Multifamily Services

     6,569       5,866       11,341       10,180  

Investigative & Litigation Support Services

     7,535       5,027       17,060       7,948  

Corporate

     (8,840 )     (9,074 )     (19,566 )     (26,564 )
                                

Consolidated

   $ 23,993     $ 34,023     $ 51,152     $ 55,888  
                                

Operating margin percentage of service revenue

        

Lender Services

     16.38 %     26.75 %     20.53 %     26.96 %

Data Services

     19.94 %     30.59 %     20.69 %     31.16 %

Dealer Services

     18.62 %     13.62 %     18.01 %     13.52 %

Employer Services

     5.41 %     11.73 %     5.93 %     10.56 %

Multifamily Services

     32.87 %     29.81 %     29.58 %     27.31 %

Investigative & Litigation Support Services

     35.58 %     31.91 %     38.18 %     28.31 %

Corporate

     N/A       N/A       N/A       N/A  
                                

Consolidated

     13.15 %     17.30 %     13.80 %     14.41 %
                                

 

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First Advantage Corporation Reports Operating Results for the Second Quarter of 2008

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About First Advantage Corporation

First Advantage Corporation (NASDAQ: FADV) combines industry expertise with information to create products and services that organizations worldwide use to make smarter business decisions. First Advantage is a leading provider of consumer credit information in the mortgage, automotive and specialty finance markets; business credit information in the transportation industry; lead generation services; motor vehicle record reports; employment background verifications; occupational health services; applicant tracking systems; recruiting solutions; skills and behavioral assessments; business tax consulting services; corporate and litigation investigations; computer forensics; electronic discovery; data recovery; due diligence reporting; resident screening; property management software and renters insurance. First Advantage ranks among the top companies in all of its major business lines. First Advantage is headquartered in Poway, Calif., and more than 4,700 employees in offices throughout the United States and abroad. More information about First Advantage can be found 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 America’s largest provider of business information, supplying businesses and consumers with valuable information products to support 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 cost reduction initiatives and impact on improved efficiencies in the future quarters, product expansion and enhanced operational efficiencies are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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; interest rate fluctuations; changes in the real estate market; changes in employment trends; limit on access to public records; 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; heightened regulations and regulatory scrutiny; the degree and nature of the company’s competition; increases in the company’s expenses; inability to realize the benefits of offshore strategy; 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 made. Investors are advised to consult the company’s filings with the SEC, including its 2007 Annual Report on Form 10-K, 2008 First Quarter Report on Form 10-Q and any subsequent amendments, for a further discussion of these and other risks.

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