What changed in this filing

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Item 1. Financial Statements

2009-07-30 compared with 2009-04-30 · 210 added, 511 removed, 287 unchanged (72% of the section changed)

2 unchanged sentences

Consolidated Financial Statements (Unaudited)

the Three Months Ended

March 31, 2009 and 2008

For the Three and Six Months Ended

June 30, 2009 and 2008

First Advantage Corporation

3 unchanged sentences

Cash and cash equivalents

Accounts receivable (less allowance for doubtful accounts of $10,649 and $8,345 in 2009 and 2008, respectively)

Accounts receivable (less allowance for doubtful accounts

of $11,977 and $8,345, respectively)

Prepaid expenses and other current assets

21 unchanged sentences

Total liabilities

First Advantage Corporations stockholders equity:

First Advantage Corporations Stockholders' Equity:

Preferred stock, $.001 par value;

2 unchanged sentences

125,000 shares authorized;

12,022 and 11,772 shares issued and outstanding as of March 31,

2009 and December 31, 2008, respectively

12,061 and 11,772 shares issued and outstanding as of

June 30, 2009 and December 31, 2008, respectively

Class B common stock, $.001 par value;

75,000 shares authorized;

47,727 shares issued and outstanding as of March 31, 2009 and

December 31, 2008, respectively

47,727 shares issued

and outstanding as of June 30, 2009 and December 31, 2008, respectively

Additional paid-in capital

9 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Service revenue

8 unchanged sentences

Depreciation and amortization

Impairment loss

Total operating expenses

8 unchanged sentences

Loss from discontinued operations, net of tax

Net income (loss) attributable to noncontrolling interest

Net loss attributable to noncontrolling interest

Net income attributable to First Advantage Corporation ("FADV")

13 unchanged sentences

First Advantage Corporation

Consolidated Statements of Comprehensive Income (Loss)

For the Three Months Ended March 31, 2009 and 2008

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

Three Months Ended

Six Months Ended

( in thousands)

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss) , net of tax:

Foreign currency translation adjustments

2 unchanged sentences

Comprehensive income (loss)

Comprehensive income (loss) attributable to the noncontrolling interest

Comprehensive loss attributable to the noncontrolling interest

Comprehensive income (loss) attributable to FADV

2 unchanged sentences

Consolidated Statement of Changes in Equity

For the Three Months

Ended March 31, 2009 (Unaudited)

For the Six Months Ended June 30, 2009 (Unaudited)

( in thousands)

Comprehensive

(Loss) Income

Noncontrolling

(Loss) Income

Balance at December 31, 2008

Purchase of subsidiary shares from noncontrolling interest

Class A Shares issued in connection with share-based compensation

Purchase of subsidiary shares from

noncontrolling interest

Class A Shares issued in

connection with share

based compensation

Share based compensation

Foreign currency translation

Unrealized gain on investment, net of tax

Balance at March 31, 2009

Unrealized gain on investment,

Balance at June 30, 2009

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

For the Three Months Ended

March 31, 2009 and 2008 (Unaudited)

For the Six Months Ended June 30, 2009 and 2008 (Unaudited)

( in thousands)

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

1 unchanged sentence

Income from continuing operations

Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:

Adjustments to reconcile income from continuing operations to net

cash provided by (used in) operating activities:

Depreciation and amortization

17 unchanged sentences

Cash paid for acquisitions

Proceeds from sale of assets

Cash balance of companies acquired

Net cash used in investing activities - continuing operations

Net cash used in investing activitiesdiscontinued operations

Net cash provided by investing activities - discontinued operations

Cash flows from financing activities:

2 unchanged sentences

Cash contributions from First American to LeadClick Holdings, LLC

Proceeds from class A shares issued in connection with stock option plan and employee stock purchase plan

Proceeds from class A shares issued in connection with stock option

plan and employee stock purchase plan

Cash paid for acquisition of noncontrolling interests

9 unchanged sentences

First Advantage Corporation

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2009 and 2008 (Unaudited)

For the Three Months Ended

Consolidated Statements of Cash Flows, continued

For the Six Months Ended June 30, 2009 and 2008 (Unaudited)

For the Six Months Ended

(in thousands)

4 unchanged sentences

Non-cash investing and financing activities:

Notes issued in connection with acquisitions

Class A shares issued for compensation

4 unchanged sentences

Organization and Nature of Business

Advantage Corporation (the Company or First Advantage) is a global risk mitigation and business solutions provider and operates in five primary business segments:

Credit Services, Data Services, Employer Services, Multifamily

Services, and Investigative and Litigation Support Services.

The Company consolidated the previous Lender Services and Dealer Services segments and moved the consumer credit business from the Data Services segment to create the Credit Services

First Advantage Corporation (the “Company” or “First Advantage”) is a global risk mitigation and business solutions provider and operates in five primary business segments:

Credit Services, Data Services, Employer Services, Multifamily Services, and Investigative and Litigation Support Services.

quarter of 2009, the Company consolidated the previous Lender Services and Dealer Services segments and moved the consumer credit business from the Data Services segment to create the Credit Services segment.

The prior periods have been recast to reflect the changed segments.

The First American Corporation and affiliates (First

American) own approximately 80% of the shares of capital stock of the Company as of March 31, 2009.

The First American Corporation and affiliates (“First American”) own approximately 80% of the shares of capital stock of the Company as of June 30, 2009.

The Class B common stock owned by First American is entitled to ten votes per share on all matters presented to the stockholders for vote.

As part of the Companys streamlining initiative, in the second quarter of 2008, First Advantage sold First Advantage Investigative

Services (FAIS), which was included in our Investigative and Litigation Support Services segment, and Credit Management Solutions Inc.

On June 29, 2009, the Company received an unsolicited proposal from First American to acquire all of the issued and outstanding shares of the Company's common stock not owned by First American at a fixed exchange ratio of 0.5375 of a share of First American's common stock for each share of the Company's common stock.

First American's proposal is subject to confirmatory due diligence, the negotiation of an acceptable definitive acquisition agreement and the receipt of all necessary stockholder and regulatory approvals.

First American's proposal is under consideration by the Special Committee of the Board of Directors of the Company, which is comprised of directors who are unaffiliated with First American.

As part of the Company’s streamlining initiative, in the second quarter of 2008, First Advantage sold First Advantage Investigative Services (“FAIS”), which was included in our Investigative and Litigation Support Services segment, and Credit Management Solutions, Inc.

(“CMSI”), which was included in our Credit Services segment.

The results of these

businesses operations in the prior period are presented in discontinued operations in the Companys Consolidated Statements of Income.

The results of these businesses’ operations in the prior

period are presented in discontinued operations in the Company’s Consolidated Statements of Income.

Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial information included in this report has been prepared in accordance with

the instructions to Form 10-Q and does not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments are of a normal recurring

nature and are considered necessary for a fair statement of the results for the interim period.

The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted

accounting principles.

The consolidated financial information included in this report has been prepared in accordance with the instructions to Form 10-Q and does not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments are of a normal,

recurring nature and are considered necessary for a fair statement of the results for the interim period.

The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles.

This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission.

Operating results for the three months ended March 31, 2009 and 2008 are not necessarily indicative of the results that may be expected for the

entire fiscal year.

As of March 31, 2009, the Companys significant accounting polices and estimates, which are detailed in the

Companys Annual Report on Form 10-K for the year ended December 31, 2008, have not changed from December 31, 2008, except for the adoption of Statement of Financial Accounting Standards (SFAS) No.

141 (revised 2007),

Business Combinations and SFAS No.

160, Noncontrolling Interests in Consolidated Financial Statements.

Certain amounts for the three and six months ended June 30, 2008 and at December 31, 2008 have been reclassified to conform with 2009 presentation.

Operating results for the three and six months ended June 30, 2009 and 2008 are not necessarily indicative of the results that may be expected for the entire fiscal year.

Subsequent events have been evaluated through July 30, 2009, the date these financial statements were issued.

As of June 30, 2009, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, have not changed from December 31, 2008, except for the adoption of Statement of Financial Accounting Standards (“SFAS”) No.

2007), “Business Combinations,” SFAS No.

160, “Noncontrolling Interest in Consolidated Financial Statements,” SFAS No.

165, "Subsequent Events," and FASB Staff Position FAS 107-1, "Interim Disclosures about Fair Value of Financial Instruments."

Purchase Accounting

In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No.

(revised 2007), Business Combinations (SFAS No.

141(R) retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used

for all business combinations and for an acquirer to be identified for each business combination.

141 (revised 2007), “Business Combinations” (“SFAS 141(R)”).

SFAS 141(R) retains the fundamental requirements in SFAS No.

141 that the acquisition method of accounting (which SFAS No.

141 called the purchase method)

be used for all business combinations and for an acquirer to be identified for each business combination.

In general, the statement 1) broadens the guidance of SFAS No.

141, extending its applicability to all events where one entity obtains control over one

or more other businesses, 2) broadens the use of fair value measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an

acquisition, and 4) increases required disclosures.

141, extending its applicability to all events where one entity obtains control over one or more other businesses, 2) broadens the use of fair value measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition,

and 4) increases required disclosures.

The Company will apply the provisions of this statement prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

First Advantage Corporation

Notes to Consolidated Financial Statements

Noncontrolling Interest

2007, the FASB issued SFAS No.

In December 2007, the FASB issued SFAS No.

160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No.

51” (“SFAS 160”).

SFAS 160 requires that a noncontrolling interest in a subsidiary be reported as

equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be identified in the consolidated financial statements.

It also requires consistency in the manner of reporting changes in the parents

ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation.

The Company has applied the provisions of this statement effective on January 1, 2009 and the adoption did not have a

material effect on its consolidated financial statements.

SFAS 160 requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically

attributable to the noncontrolling interest be identified in the consolidated financial statements.

It also requires consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation.

The Company has applied the provisions of this statement effective beginning on January 1, 2009 and the adoption did not have a material effect on its consolidated financial statements.

Fair Value of Financial Instruments

In April 2009, the FASB issued FASB Staff Position (“FSP”) FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP amends Statement of Financial Accounting Standard (“SFAS”) No.

107, “Disclosures About Fair Value of Financial

Instruments,” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements.

This FSP also amends APB Opinion No.

28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods.

This FSP is effective for interim reporting periods ending after June 15, 2009.

The FSP does not require disclosures for earlier periods presented

for comparative purposes at initial adoption.

In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption.

We adopted this new standard effective April 1, 2009.

The carrying amount of the Company’s financial instruments at June 30, 2009 and December 31, 2008, which includes cash and cash equivalents, marketable equity securities and accounts receivable, approximates fair value because of the short maturity of those instruments.

The Company’s marketable equity

securities are classified as available for sale securities.

Unrealized holding gains and losses for available for sale securities are excluded from earnings and reported, net of taxes, as accumulated other comprehensive (loss) income.

The Company considers its variable rate debt to be representative of current market rates and, accordingly, estimates that the recorded amounts approximate fair market value.

Fair value estimates of its fixed rate debt were determined using discounted

cash flow methods with a discount rate of 3.25% and 3.25%, which are the estimated rates that similar instruments could be negotiated at June 30, 2009 and December 31, 2008, respectively.

The estimated fair values of the Company’s financial instruments, none of which are held for trading purposes, are summarized as follows:

June 30, 2009

December 31, 2008

(in thousands)

Cash and cash equivalents

Accounts receivable

Marketable equity securities

Long-term debt and capital leases

Subsequent Events

In May 2009, the FASB issued SFAS No.

165, “Subsequent Events” (“SFAS 165”).

SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued.

SFAS 165 is effective for reporting periods ending

after June 15, 2009.

First Advantage Corporation

Notes to Consolidated Financial Statements

During the first quarter of 2009, the

Company paid consideration of approximately $18.1 million in cash related to earnout provisions from prior year acquisitions and approximately $5.1 million for the final purchase of a portion of noncontrolling interest in LeadClick Media, Inc.

The changes in the carrying amount of goodwill, by operating segment, are as follows for the three months ended March 31, 2009:

During the first six months of 2009, the Company paid consideration of approximately $19.5 million in cash related to earnout provisions from prior year acquisitions and approximately $5.1 million for the final purchase of a portion of noncontrolling interests in LeadClick Media, Inc.

The additional consideration related to

earnout provisions was recorded to goodwill and the purchase of noncontrolling interests was recorded to additional paid in capital when paid.

The changes in the carrying amount of goodwill, by operating segment, are as follows for the six months ended June 30, 2009:

Acquisitions,

Adjustments to net

(in thousands)

December 31, 2008

Adjustments to net

assets acquired

March 31, 2009

June 30, 2009

Credit Services

3 unchanged sentences

Investigative and Litigation Support Services

The adjustments to net assets acquired represent post acquisition adjustments for those companies

not acquired in the period.

The adjustments to net assets acquired represent post acquisition adjustments for those companies acquired in the past periods.

Discontinued Operations

As discussed in Note 1, as part of the Company’s streamlining initiative, in the second quarter of 2008, the Company sold FAIS, which was included in our Investigative and Litigation Support Services segment, and CMSI, which was included in our Credit Services segment.

The results of these businesses’ operations in

the prior period are presented in discontinued operations in the Company’s Consolidated Statements of Income.

First Advantage Corporation

Notes to Consolidated Financial Statements

Discontinued Operations

As discussed in Note 1, as

part of the Companys streamlining initiative, in the second quarter of 2008, the Company sold FAIS, which was included in our Investigative and Litigation Support Services segment, and CMSI, which was included in our Credit Services segment.

The results of these businesses operations in the prior period are presented in discontinued operations in the Companys Consolidated Statements of Income.

The following amounts have been segregated from continuing operations and are reflected as discontinued operations for the three months ended March 31, 2008.

The following amounts have been segregated from continuing operations and are reflected as discontinued operations for the three and six months ended June 30, 2008.

Three months ended

Six months ended

(in thousands, except per share amounts)

7 unchanged sentences

Goodwill and Intangible Assets

In accordance with

SFAS 142, Goodwill and Other Intangible Assets, the Company will perform the annual goodwill impairment test for all reporting units in the fourth quarter of 2009.

There have been no impairments of goodwill during the three months ended

March 31, 2009.

Given the current economic environment and the uncertainties regarding the impact on the Companys business,

there can be no assurance that the Companys estimates and assumptions regarding the duration of the ongoing economic downturn, or the period or strength of recovery, made for purposes of the Companys goodwill impairment testing during

the year ended December 31, 2008 will prove to be accurate predictions of the future.

If the Companys assumptions regarding forecasted revenue or margin growth rates of certain reporting units are not achieved, the Company may be required

to record additional goodwill impairment losses in future periods, whether in connection with the Companys next annual impairment testing in the

In accordance with SFAS No.

142, “Goodwill and Other Intangible Assets,” the Company will perform the goodwill impairment test for all reporting units in the fourth quarter of 2009.

There have been no impairments of goodwill during the six months ended June 30, 2009.

Given the current economic environment and the uncertainties regarding the impact on the Company’s business, there can be no assurance that the Company’s estimates and assumptions regarding the duration of the ongoing economic downturn, or the period or strength of recovery, made for purposes of the Company’s goodwill impairment

testing during the year ended December 31, 2008 will prove to be accurate predictions of the future.

If the Company’s assumptions regarding forecasted revenue or margin growth rates of certain reporting units are not achieved, the Company may be required to record additional goodwill impairment losses in future periods, whether in connection with the Company’s next annual impairment testing in the fourth quarter of 2009 or prior to that, if any such change constitutes a triggering event in other than

the quarter in which the annual goodwill impairment test is performed.

It is not possible at this time to determine if any such future impairment loss would result or, if it does, whether such charge would be material.

First Advantage Corporation

Notes to Consolidated Financial Statements

fourth quarter of 2009 or prior to that, if any such change constitutes a triggering event in other than the quarter in which the annual goodwill impairment

test is performed.

It is not possible at this time to determine if any such future impairment loss would result or, if it does, whether such charge would be material.

Goodwill and other intangible assets as of March 31, 2009 and December 31, 2008 are as follows:

Goodwill and other identifiable intangible assets as of June 30, 2009 and December 31, 2008 are as follows:

(in thousands)

March 31, 2009

June 30, 2009

December 31, 2008

2 unchanged sentences

Customer lists, net

Other intangible assets:

Other identifiable intangible assets:

Noncompete agreements

Less accumulated amortization

Other intangible assets, net

Amortization of customer lists and other intangible assets totaled approximately $3.7 million and

$4.1 million for the three months ended March 31, 2009 and 2008, respectively.

Estimated amortization expense relating to intangible

asset balances as of March 31, 2009, is expected to be as follows over the next five years:

Three months ending March 31,

Other identifiable intangible assets, net

Amortization of customer lists and other identifiable intangible assets totaled approximately $3.7 million and $4.4 million for the three months ended June 30, 2009 and 2008, respectively, and approximately $7.3 million and $8.5 million for the six months ended June 30, 2009 and 2008, respectively.

Estimated amortization expense relating to intangible asset balances as of June 30, 2009, is expected to be as follows over the next five years:

(in thousands)

Remainder of 2009

First Advantage Corporation

Notes to Consolidated Financial Statements

The changes in the carrying amount of identifiable intangible assets are as follows for the three

months ended March 31, 2009:

The changes in the carrying amount of identifiable intangible assets are as follows for the six months ended June 30, 2009:

(in thousands)

Balance, at December 31, 2008

Balance, at March 31, 2009

Long-term debt consists of the following at

March 31, 2009:

Balance, at June 30, 2009

First Advantage Corporation

Notes to Consolidated Financial Statements

Long-term debt consists of the following at June 30, 2009:

(in thousands, except percentages)

Acquisition notes:

Weighted average interest rate of 3.70% with maturities through 2011

$225 million Secured Credit Facility, interest at 30-day LIBOR plus 1.13% (1.67% at March 31, 2009) matures September

Weighted average interest rate of 3.65% with maturities

$225 million Secured Credit Facility, interest at 30-day LIBOR

plus 1.13% (1.44% at June 30, 2009) matures September 2010

Capital leases and other debt:

3 unchanged sentences

Long-term debt and capital leases, net of current portion

At March 31, 2009, the Company was in compliance with the financial covenants of its loan

At June 30, 2009, the Company was in compliance with the financial covenants of its loan agreement.

First Advantage Corporation

1 unchanged sentence

Earnings Per Share

A reconciliation of earnings

per share and weighted-average shares outstanding is as follows:

(in thousands, except per share amounts)

A reconciliation of earnings per share and weighted-average shares outstanding is as follows:

Three Months Ended

Six Months Ended

(in thousands, except per share amounts)

Income from continuing operations attributable to FADV shareholders

12 unchanged sentences

Net income attributable to FADV shareholders

For the three months ended March 31, 2009 and 2008, options and warrants totaling 3,427,803

and 4,097,041, respectively, were excluded from the weighted average diluted shares outstanding, as they were antidilutive.

For the three months ended June 30, 2009 and 2008, options and warrants totaling 3,376,872 and 3,062,601, respectively, were excluded from the weighted average diluted shares outstanding, as they were antidilutive.

For the six months ended June 30, 2009 and 2008, options and warrants totaling 3,376,872 and 3,599,011, respectively,

were excluded from the weighted average diluted shares outstanding, as they were antidilutive.

Share-Based Compensation

In the first quarter of

2008, the Company changed from granting stock options as the primary means of share-based compensation to granting restricted stock units (RSU).

The fair value of any RSU grant is based on the market value of the Companys shares on

the date of the grant and is recognized as compensation expense over the vesting period.

In the first quarter of 2008, the Company changed from granting stock options as the primary means of share-based compensation to granting restricted stock units (“RSU”).

The fair value of any RSU grant is based on the market value of the Company’s shares on the date of the grant and is recognized as compensation expense

over the vesting period.

RSUs generally vest over three years at a rate of 33.3% for the first two years and 33.4% for last year.

7 unchanged sentences

Restricted stock vested

Nonvested restricted stock outstanding at March 31, 2009

The following table illustrates the share-based compensation expense recognized for the three

months ended March 31, 2009 and 2008.

Nonvested restricted stock outstanding at June 30, 2009

The following table illustrates the share-based compensation expense recognized for the three and six months ended June 30, 2009 and 2008.

Three Months Ended

Six Months Ended

(in thousands)

2 unchanged sentences

Employee stock purchase plan

Stock option activity under the Companys stock plan since December 31, 2008 is

summarized as follows:

Stock option activity under the Company’s stock plan since December 31, 2008 is summarized as follows:

(in thousands, except exercise prices)

1 unchanged sentence

Options outstanding at December 31, 2008

Options exercised

Options forfeited

Options outstanding at March 31, 2009

Options outstanding at June 30, 2009

Options exercisable, end of the quarter

First Advantage Corporation

Notes to Consolidated Financial Statements

The following table summarizes information about stock options outstanding at March 31, 2009:

The following table summarizes information about stock options outstanding at June 30, 2009:

(in thousands, except for exercise prices, years and weighted average amounts)

1 unchanged sentence

Options Exercisable

Range of Exercise Prices

Remaining Contractual

Weighted Average

Exercise Prices

Life in Years

Average Exercise Price

Exercise Price

7.00 - $ 12.50

2 unchanged sentences

50.01 - $242.25

The Company had outstanding warrants to purchase up to 41,462 shares of its common stock at

exercise prices of $12.05 per share as of March 31, 2009.

The Company had outstanding warrants to purchase up to 41,462 shares of its common stock at exercise prices of $12.05 per share as of June 30, 2009.

The weighted average remaining contractual life in years for the warrants outstanding is 1.93.

The Company or one of its

subsidiaries files income tax returns in the U.S.

First Advantage Corporation

Notes to Consolidated Financial Statements

The Company or one of its subsidiaries files income tax returns in the U.S.

federal jurisdiction, various state jurisdictions, and foreign jurisdictions.

With few exceptions, the Company is no longer subject to U.S.

federal examinations by tax authorities for years before

2005, and state and local, and non-U.S.

income tax examinations by tax authorities before 2003.

In April 2009, the Internal Revenue Service (IRS) concluded an examination of First Advantages consolidated 2005 federal income tax

return without any material adjustments.

federal examinations by tax authorities for years before 2005, and state and local, and non-U.S.

income tax examinations

by tax authorities before 2003.

In April 2009, the Internal Revenue Service (“IRS”) concluded an examination of First Advantage’s consolidated 2005 federal income tax return without any material adjustments.

In March 2009, the IRS initiated an examination of First Advantage’s consolidated 2006 and 2007 federal income tax returns, which the Company does not anticipate will result in material adjustments.

As of March 31, 2009, the Company has a $4.0 million total liability recorded for unrecognized tax benefits as well as a $0.4 million

total liability for income tax related interest.

As of June 30, 2009, the Company has a $4.9 million total liability recorded for unrecognized tax benefits as well as a $0.4 million total liability for income tax related interest.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $2.6 million.

The majority of the unrecognized tax benefits that would affect the effective

tax rate and associated interest relates to foreign operations.

The majority of

the unrecognized tax benefits that would affect the effective tax rate and associated interest relates to foreign operations.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

The Company does not currently anticipate that the

total amount of unrecognized tax benefits will significantly increase or decrease by the end of 2009.

First Advantage Corporation

Notes to Consolidated Financial Statements

The Company does not currently anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease by the end of 2009.

Segment Information

The Company operates in five

primary business segments:

The Company operates in five primary business segments:

Credit Services, Data Services, Employer Services, Multifamily Services, and Investigative and Litigation Support Services.

The Company consolidated the previous Lender Services and Dealer Services segments and moved the

consumer credit business from the Data Services segment to create the Credit Services segment.

In the first quarter of 2009, the Company consolidated the previous Lender Services and Dealer Services segments and moved the consumer credit business from the

Data Services segment to create the Credit Services segment.

The prior periods have been recast to reflect the changed segments.

The Credit Services segment includes business lines that offer credit reporting solutions for mortgage and home equity needs, that provide consumer credit reporting services and that serve the automotive dealer

marketplace by delivering consolidated consumer credit reports and automotive lead generation services.

The Data Services segment includes

business lines that provide transportation credit reporting, motor vehicle record reporting, fleet management, supply chain theft and damage mitigation consulting, criminal records reselling, specialty finance credit reporting, and lead generation

Revenue for the Data Services segment includes $1.0 million and $1.5 million of inter-segment sales for the three months ended March 31, 2009 and 2008, respectively.

The Credit Services segment include business lines that offer lenders credit reporting solutions for mortgage and home equity needs, that provide consumer credit reporting services and serve the automotive dealer marketplace by delivering consolidated consumer credit reports and automotive lead generation services.

The Data Services segment includes business lines that provide transportation credit reporting, motor vehicle record reporting, fleet management, criminal records reselling, specialty finance credit reporting, and lead generation services.

Revenue for the Data Services segment includes $1.0 million and $1.4 million of inter-segment

sales for the three months ended June 30, 2009 and 2008, respectively, and $1.9 million and $2.8 million of inter-segment sales for the six months ended June 30, 2009 and 2008, respectively.

The Employer Services segment includes employment background screening, occupational health services, tax incentive services and hiring solutions.

Products and services relating to employment background screening include criminal records searches, employment and education verification, social security number verification and credit reporting.

Occupational health services include drug-free

workplace programs, physical examinations and employee assistance programs.

Products and services relating to employment background screening include criminal records searches, employment and education verification, social security number verification and credit

Occupational health services include drug-free workplace programs, physical examinations and employee assistance programs.

Hiring solutions include applicant tracking software, recruiting services and outsourced management of payroll and human resource functions.

Tax incentive services include

services related to the administration of employment-based and location-based tax credit and incentive programs, sales and use tax programs and fleet asset management programs.

Revenue for the Employer Services segment includes $0.2 million and $0.4

million of inter-segment sales for the three months ended March 31, 2009 and 2008, respectively.

The Multifamily Services segment

includes resident screening and software services.

Tax incentive services include services related to the administration of employment-based and location-based tax credit and incentive programs, sales and use tax programs and fleet asset management programs.

for the Employer Services segment includes $0.1 million of inter-segment sales for the three months ended June 30, 2008, and $0.2 million and $0.5 million of inter-segment sales for the six months ended June 30, 2009 and 2008, respectively.

The Multifamily Services segment includes resident screening and software services.

Resident screening services include criminal background and eviction searches, credit reporting, employment verification and lease performance and payment histories.

Revenue for the Multifamily

Services segment includes $0.1 million and $0.2 million of inter-segment sales for each of the three months ended March 31, 2009 and 2008, respectively.

First Advantage Corporation

Notes to Consolidated Financial Statements

Revenue for the Multifamily Services segment includes $0.2 million of

inter-segment sales for each of the three months ended June 30, 2009 and 2008, and $0.3 million and $0.4 million of inter-segment sales for the six months ended June 30, 2009 and 2008, respectively.

The Investigative and Litigation Support Services segment includes all investigative services.

2 unchanged sentences

These transactions are recorded at cost.

Service revenue for international operations included in the Employer Services segment was $6.5 million and $11.1 million for the three months ended

March 31, 2009 and 2008, respectively.

Service revenue for international operations included in the Investigative and Litigation Support Services segment was $5.4 million and $12.9 million for the three months ended March 31, 2009 and

2008, respectively.

The following table sets forth segment information for the three months ended March 31, 2009 and 2008.

Service revenue for international operations included in the Employer Services segment was $7.0 million and $12.3 million for the three months ended June 30, 2009 and 2008, respectively, and $13.5 million and $23.4 million for the six months ended June 30, 2009 and 2008, respectively.

Service revenue for international operations included

in the Investigative and Litigation Support Services segment was $1.4 million and $11.7 million for the three months ended June 30, 2009 and 2008, respectively, and $6.8 million and $24.6 million for the six months ended June 30, 2009 and 2008, respectively.

First Advantage Corporation

Notes to Consolidated Financial Statements

The following table sets forth segment information for the three and six months ended June 30, 2009 and 2008.

(in thousands)

Income (Loss)

Three Months Ended June 30, 2009

Service Revenue

and Amortization

From Operations

Three Months Ended March 31, 2009

Credit Services

4 unchanged sentences

Corporate and Eliminations

Three Months Ended March 31, 2008

Three Months Ended June 30, 2008

Credit Services

4 unchanged sentences

Corporate and Eliminations

Consolidated (excluding assets for discontinued operations)

Managements Discussion and Analysis of Financial Condition and Results of Operations

Note of Caution Regarding Forward Looking Statements

Certain statements in this quarterly report on Form 10-Q relate

to future results of the Company and are considered forward-looking statements.

These statements, which may be expressed in a variety of ways, including the use of future or present tense language, relate to among other things,

sufficiency and availability of cash flows and other sources of liquidity, current levels of operations, anticipated growth, future market positions, synergies from integration, ability to execute its growth strategy, levels of capital expenditures

and ability to satisfy current debt.

These forward-looking statements, and others forward-looking statements contained in other public disclosures of the Company are based on assumptions that involve risks and uncertainties, and that are subject to

change based on various important factors (some of which are beyond the Companys control).

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 Companys Class A common stock;

the Companys ability to

successfully raise capital;

the Companys ability to identify and complete acquisitions and to successfully integrate businesses it acquires;

changes in applicable government regulations;

the degree and nature of the Companys competition;

increases in the Companys expenses;

continued consolidation among the Companys competitors and customers;

unanticipated technological changes and requirements;

the Companys ability to identify suppliers of quality and

cost-effective data;

and other factors described in this quarterly report on Form 10-Q.

In addition to the risk factors set forth above and in this quarterly report on Form 10-Q, you should carefully consider the risk factors set forth in the

Companys Annual Report on Form 10-K for the year ended December 31, 2008, as well as the other information contained the Companys Annual Report, as updated or modified in subsequent filings.

The Company faces risks other than those

listed in the Annual Report, as updated, including those that are unknown and others of which the Company may be aware but, at present, considers immaterial.

Actual results may differ materially from those expressed or implied as a result of these

risks and uncertainties.

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.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

First Advantage Corporation (Nasdaq:

FADV) (First Advantage or the Company) provides global risk mitigation, screening services

and credit reporting to enterprise and consumer customers.

The Company operates in five primary business segments:

Credit Services, Data Services, Employer Services, Multifamily Services, and Investigative & Litigation Support Services.

Company consolidated the previous Lender Services and Dealer Services segments and moved the consumer credit business from the Data Services segment to create the Credit Services segment.

The prior periods have been recast to reflect the changed

First Advantage is headquartered in Poway, California and has approximately 3,800 employees in offices throughout the United States and abroad.

The current economic downturn has caused decreased service revenue in the Credit Services segment related to the mortgage and auto industries and the Data Services segment related to the transportation and specialty

finance businesses.

Management expects continued weakness in the real estate and mortgage markets to continue impacting the Companys Credit Services segment and the transportation and specialty credit businesses in the Data Services segment.

In addition, the effect of the issues in the real estate and related credit markets together with the other macroeconomic matters has resulted in higher unemployment rates negatively impacting the volumes in the Employer Services segment.

outlook, management is focusing on expense reductions, operating efficiencies, and increasing market share throughout the Company.

the current economic environment and the uncertainties regarding the impact on the Companys business, there can be no assurance that the Companys estimates and assumptions regarding the duration of the ongoing economic downturn, or the

period or strength of recovery, made for purposes of the Companys goodwill impairment testing during the year ended December 31, 2008 will prove to be accurate predictions of the future.

If the Companys assumptions regarding

forecasted revenue or margin growth rates of certain reporting units are not achieved, the Company may be required to record additional goodwill impairment losses in future periods, whether in connection with the Companys next annual

impairment testing in the fourth quarter of 2009 or prior to that, if any such change constitutes a triggering event in other than the quarter in which the annual goodwill impairment test is performed.

It is not possible at this time to determine if

any such future impairment loss would result or, if it does, whether such charge would be material.

Operating results for the three months

ended March 31, 2009 included total service revenue of $190.0 million, representing an increase of 1.0% over the same period in 2008.

Operating income for the three months ended March 31, 2009 was $18.8 million.

Operating income decreased

$8.3 million for the three months ended March 31, 2009 in comparison to the same period in 2008.

As part of the Companys

streamlining initiative, in the second quarter of 2008, First Advantage sold First Advantage Investigative Services (FAIS), which was included in our Investigative and Litigation Support Services segment, and Credit Management Solutions

(CMSI), which was included in our Credit Services segment.

The results of these businesses operations in the prior period are presented in discontinued operations in the Companys Consolidated Statements of Income.

The following is a summary of the operating results by the Companys business segments for the three

months ended March 31, 2009 and March 31, 2008.

(in thousands, except percentages)

Three Months Ended March 31, 2009

Invest/Litigation

Support Services

Service revenue

Reimbursed government fee revenue

Total revenue

Cost of service revenue

Government fees paid

Total cost of service

Salaries and benefits

Facilities and telecommunications

Other operating expenses

Depreciation and amortization

Income (loss) from operations

Operating margin percentage

Three Months Ended March 31, 2008

Invest/Litigation

Support Services

Service revenue

Reimbursed government fee revenue

Total revenue

Cost of service revenue

Government fees paid

Total cost of service

Salaries and benefits

Facilities and telecommunications

Other operating expenses

Depreciation and amortization

Income (loss) from operations

Operating margin percentage

Credit Services Segment

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

revenue was $64.4 million for the three months ended March 31, 2009, a decrease of $10.5 million compared to service revenue of $74.9 million for the three months ended March 31, 2008.

A decrease in transactions due to the decline in the

mortgage and auto industries resulted in an overall decrease in service revenue.

A 40% decrease in revenue at the dealer services division and an approximately 6% decrease in revenue at the lender services division resulted in an overall decrease in

service revenue, which is partially offset by an increase in revenue from the consumer credit division.

The challenging credit markets and overall economy continues to affect our credit reporting businesses, compared to the first quarter of 2008.

Gross margin was $35.4 million for the three months ended March 31, 2009, a decrease of $6.7 million

compared to gross margin of $42.1 million in the same period of 2008.

The impact of the decrease in transactions and an increase in credit data costs resulted in an overall decrease in gross margin.

Gross margin was 54.9% for the three months ended

March 31, 2009 as compared to 56.3% for the three months ended March 31, 2008.

Salaries and benefits decreased by $3.6 million.

Salaries and benefits were 18.9% of service revenue in the first quarter of 2009 compared to 21.1% during the same period in 2008.

Salaries and benefits expense decreased due to operational efficiencies and reduced staffing.

Facilities and telecommunication expenses decreased $0.5 million.

Facilities and telecommunication expense were 2.7% of service revenue in the first

quarter of 2009 compared to 2.9% in the first quarter of 2008.

The decrease is due to the consolidation of operations.

Other operating

expenses decreased by $1.4 million.

Other operating expenses were 8.1% of service revenue in the first quarter of 2009 compared to 8.8% for the same period of 2008.

The decrease in 2009 is due to a decrease in temporary employees, professional

service fees, lease expense, marketing expense, and travel expense, offset by an increase in bad debt expense.

Depreciation and

amortization increased by $0.3 million.

Depreciation and amortization was 2.2% of service revenue during the first quarter of 2009 compared to 1.6% in the same period in 2008.

The increase is primarily due to the rollout of new software projects.

Income from operations was $14.7 million for the three months ended March 2009 compared to $16.3 million in the same period of 2008.

operating margin percentage increased from 21.8% to 22.9% primarily due operational efficiencies gained related to the segments cost reduction measures in 2008.

Data Services Segment

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Total service revenue was $59.1 million for the three months ended March 31, 2009, an increase of $40.1 million compared to

service revenue of $19.0 million in the same period of 2008.

This segment has experienced a significant increase in service revenue primarily due to the lead generation eAdvertising business, offset by reduced volumes in the specialty credit and

transportation businesses as a result of the overall economic downturn.

Gross margin was $18.1 million for the three months ended

March 31, 2009, an increase of $4.3 million compared to gross margin of $13.8 million in the same period of 2008.

Gross margin as a percentage of service revenue was 30.7% for the three months ended March 31, 2009 as compared to 73% for

the three months ended March 31, 2008.

The decrease in the gross margin as a percentage of service revenue is primarily due to the revenue mix.

The lead generation eAdvertising business has relatively lower margins.

Salaries and benefits increased by $0.3 million.

Salaries and benefits were approximately 9.1% of service revenue in the first quarter of 2009 compared

to 26.9% of service revenue in the first quarter of 2008.

The increase in expense is related to the growth of the lead generation business.

The decrease, as a percentage of revenue, is due to the significant increase in service revenue.

Facilities and telecommunication expenses for the first quarter of 2009 were comparable to the same

period in 2008.

Facilities and telecommunication expenses were approximately 0.9% of service revenue in the first quarter of 2009 compared to 3.4% of service revenue in the first quarter of 2008.

Other operating expenses increased by $2.2 million.

Other operating expenses were 6.8% of service revenue in the first quarter of 2009 and 9.7% in the

first quarter of 2008.

The expense increase is primarily due to the increase in bad debt expense at the lead generation business.

Depreciation and amortization for the first quarter of 2009 was comparable to the same period in 2008.

Depreciation and amortization was 4.2% of service revenue during the first quarter of 2009 compared to 13.2% in the same period in 2008.

The operating margin percentage decreased from 19.9% to 9.6% in comparing the first quarter of 2008 to the first quarter of 2009.

decrease in the operating margin is primarily due to a change in the revenue mix of the businesses in the first quarter of 2009 compared to the same period in 2008.

Income from operations was $5.6 million for the first quarter of 2009, an increase of $1.9 million compared to $3.8 million in the first quarter of 2008.

The increase is primarily driven by the lead generation

business where revenue has increased, offset by increased cost of service and operating expenses.

Employer Services Segment

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Total service revenue was $37.5 million for the three months ended March 31, 2009, a decrease of $16.2 million compared to service revenue of $53.7

million in the same period of 2008.

The decrease was a result of a decrease in hiring in the United States and abroad.

The recession has caused increased unemployment, which directly affects this segment.

Salaries and benefits decreased by $3.1 million.

Salaries and benefits were 45.7% of service revenue in the first quarter of 2009 compared to 37.7% in

the same period of 2008.

The expense decrease is a direct effect of office consolidations and reduction in staffing, offset by an increase in expense related to moving technology personnel from Corporate to Employer Services.

Facilities and telecommunication expenses decreased by $0.4 million.

Facilities and telecommunication expenses were 5.6% of service revenue in the first

quarter of 2009 and 4.6% in the first quarter of 2008.

The expense decrease is a direct effect of office consolidations.

Other operating

expenses decreased by $4.5 million.

Other operating expenses were 13.8% and 18.0% of service revenue in the first quarter of 2009 and 2008, respectively.

The expense decrease in other operating expenses is primarily due to moving technology

personnel from Corporate to Employer Services, a decrease in bad debt expense and decreased foreign currency losses.

Depreciation and

amortization increased by $0.4 million primarily due to the rollout of new software projects.

The operating margin percentage decreased

from 6.5% to (1.3)% primarily due to the decline in service revenue.

Loss from operations was $0.5 million for the three months ended

March 31, 2009, a decrease of $4.0 million compared to income from operations of $3.5 million in the same period of 2008.

The decrease is due to the decline in service revenue, offset by a 21% decrease in operating expenses.

Multifamily Services Segment

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Total service revenue was $17.9

million for the three months ended March 31, 2009, a decrease of $0.4 million compared to service revenue of $18.3 million in the same period of 2009.

The decrease is primarily due to a decline in revenue at the software business.

Salaries and benefits cost decreased $0.9 million.

Salaries and benefits were 35.3% of service revenue for the first quarter of 2009 compared to 39.5%

of service revenue in the same period of 2008.

The expense decrease is primarily due to a reduction in employees and an increase in capitalized labor.

Facilities and telecommunication expenses decreased $0.2 million.

Facilities and telecommunication expenses were 4.3% of service revenue in the first quarter of 2009 and 5.1% in the first quarter of 2008.

Other operating expenses decreased $0.3 million.

Other operating expenses were 12.1% of service revenue in the first quarter of 2009 compared to 13.4%

in the same period of 2008.

Depreciation and amortization was flat when compared to the first quarter of 2008.

Depreciation and

amortization was 8.4% of service revenue in the first quarter of 2009 compared to 7.5% in the same period of 2008.

The operating margin

percentage increased from 26.0% to 31.7% due to increased revenue from the renters insurance program and cost containment with revenue growth.

Income from operations was $5.7 million in the first quarter of 2009 compared to income from operations of $4.8 million in the same period of 2008.

Investigative and Litigation Services Segment

Three Months Ended March 31, 2009 Compared to Three Months

Ended March 31, 2008

Total service revenue was $11.7 million for the three months ended March 31, 2009, a decrease of $11.8

million compared to service revenue of $23.5 million in the same period of 2008.

The decrease is primarily due to the case activity level in the Litigation Support Services division.

Salaries and benefits decreased by $2.6 million.

Salaries and benefits were 56.8% of service revenue in the first quarter of 2009 compared to 39.4% in

the same period of 2008.

The expense decrease is mainly due to the decline of compensation related to revenue and profitability.

Facilities and telecommunication expenses decreased $0.2 million.

Facilities and telecommunication expenses were 5.0% of service revenue in the first quarter of 2009 and 3.3% in the first quarter of 2008.

Other operating expenses decreased by $0.3 million.

Other operating expenses were 19.4% of service revenue in the first quarter of 2009 and 11.0% for the

same period of 2008.

Depreciation and amortization was flat when compared to the first quarter of 2008.

Depreciation and amortization was

6.2% of service revenue in the first quarter of 2009 compared to 3.3% in the same period of 2008.

The operating margin percentage

decreased from 40.5% to 9.8%.

The decrease in margin is primarily due to the revenue decline on the higher margin electronic discovery business.

Income from operations was $1.1 million for the first quarter of 2009 compared to $9.5 million for the

same period of 2008.

The decrease is primarily due to the revenue decrease on the higher margin electronic discovery business.

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Corporate costs and expenses represent primarily compensation and benefits for senior management, administrative staff, technology personnel and their

related expenses in addition to an administrative fee paid to First American.

The corporate expenses were $7.9 million in the first quarter of 2009 compared to expenses of $10.7 million in the same period of 2008.

The expense decrease is due to

moving technology personnel from Corporate to Employer Services, decreases in compensation and benefit expenses, and travel expenses

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Consolidated service revenue for the three months ended March 31, 2009 was $190.0 million, an increase of $1.7 million compared to service revenue of

$188.3 million in the same period in 2008.

The increase in service revenue compared to first quarter 2008 is directly related the increase in the Data Services segment, offset by a decrease in service revenue due to the downturn in domestic and

international hiring, the decline in the mortgage industry, weakness in the credit markets, and overall economic slowdown.

benefits decreased $13.3 million.

Salaries and benefits were 28.0% of service revenue for the three months ended March 31, 2009 and 35.3% for the same period in 2008.

The decrease is primarily due to strategic reductions in employees, office

consolidations, and a reduction in the 401(k) match expense.

Facilities and telecommunication decreased by $1.5 million compared to the

same period in 2008.

Facilities and telecommunication expenses were 3.5% of service revenue in the first quarter of 2009 and 4.4% in the first quarter of 2008.

The decrease is primarily due to savings related to office consolidations.

Other operating expenses decreased by $3.5 million compared to the same period in 2008.

Other operating expenses were 10.2% and 12.1% of service revenue

for the three months ended March 31, 2009 and 2008, respectively.

The decrease in expense is due to office consolidations and cost cutting measures at the Employer Services and Credit Services segments.

This is offset by an increase in bad debt

expense at the Data Services segment.

Depreciation and amortization increased by $0.8 million due to fixed asset additions and the roll

out of internally developed software, offset by certain fixed assets and intangibles becoming fully depreciated.

The consolidated

operating margin was 9.9% for the three months ended March 31, 2009, compared to 14.4% for the same period in 2008.

Income from operations was $18.8 million for the three months ended March 31, 2009 compared to $27.2 million for the same

period in 2008.

The decrease of $8.4 million is comprised of a decrease in operating income of $8.4 million in Investigative and Litigation Support Services, $1.6 million in Credit Services, and $4.0 million at Employer Services offset by increases

in operating income of $1.9 million in Data Services, $0.9 million in Multifamily Services and a decrease of corporate expenses of $2.9 million.

Critical Accounting Estimates

Critical accounting policies are those policies used in the preparation of the companys

financial statements that require management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosure of contingencies.

A summary of these policies can be found in

Managements Discussion and Analysis in the Companys Annual Report on Form 10-K for year ended December 31, 2008.

Liquidity and Capital Resources

The Companys principal sources of capital include, but are not limited to, existing

cash balances, operating cash flows and borrowing under its Secured Credit Facility (see Note 6 to the Consolidated Financial Statements).

The Companys short-term and long-term liquidity depends primarily upon its level of net income, working

capital management (accounts receivable, accounts payable and accrued expenses), capital expenditures and bank borrowings.

The Company believes that, based on current forecasts and anticipated market conditions, sufficient operating cash flow will

be generated to meet all operating needs, to make planned capital expenditures, scheduled debt payments, and tax obligations for the next twelve months.

Any material variance of operating results could require us to seek other funding alternatives

including raising additional capital, which may be difficult in the current economic conditions.

In previous years, First Advantage sought

to acquire other businesses as part of its growth strategy.

The Company will continue to evaluate acquisitions in order to achieve economies of scale, expand market share and enter new markets.

While uncertainties within the Companys industry exist, management is not aware of any trends or events likely to have a material adverse effect on

liquidity or the accompanying financial statements.

Management expects continued weakness in the real estate and mortgage markets to continue impacting the Companys Credit Services segment and the transportation and specialty credit businesses

in the Data Services segment.

In addition, the effect of the issues in the real estate and related credit markets and other macroeconomic matters has resulted in higher unemployment rates negatively impacting the volumes in the Employer Services

Given this outlook, management is focusing on expense reductions, operating efficiencies, and increasing market share throughout the Company.

Statements of Cash Flows

The Companys primary source of liquidity is cash flow from operations

and amounts available under credit lines the Company has established with a bank.

As of March 31, 2009, cash and cash equivalents were $59.2 million.

Net cash provided by operating activities of continuing operations was $12.9 million in the first quarter of 2009 compared to cash used in operating activities of continuing operations was $35.7 million for the same

period in 2008.

Cash provided by operating activities of continuing operations increased by $48.6 million from the first quarter of 2008 to the first quarter of 2009 while income from continuing operations was $10.8 million in the first quarter of

2009 and $16.2 million for the same period in 2008.

The increase in cash provided by operating activities was primarily due to the non-recurrence of 2008 income tax payments of $56.9 million related to the sale of DealerTrack shares and a 2008

severance payment of $2.2 million to the former CEO.

Cash used in investing activities of continuing operations was $24.1 million and

$47.1 million for the three months ended March 31, 2009 and 2008, respectively.

In the first quarter of 2009, net cash in the amount of $18.1 million was used for acquisitions compared to $36.1 million in 2008.

Purchases of property and

equipment were $5.0 million in the first quarter of 2009 compared to $10.4 million in the same period of 2008.

Cash provided by financing activities of continuing operations was $17.5 million for the three months

ended March 31, 2009, compared to $67.2 million for the three months ended March 31, 2008.

In the first quarter of 2009, proceeds from existing credit facilities were $45.0 million compared to $75.2 million in 2008.

Repayment of debt was

$22.6 million in the first quarter of 2009 and $3.3 million in the same period of 2008.

Cash used to acquire noncontrolling interest in a consolidated subsidiary was $5.1 million and $8.0 million for the three months ended March 31, 2009 and

2008, respectively.

Debt and Capital

In 2005, the Company executed a revolving credit agreement with a bank syndication (the Credit Agreement).

Borrowings available under the Credit Agreement total up to $225 million.

The Credit Agreement

includes a $10 million sub-facility for the issuance of letters of credit and up to a $5 million swing loan facility.

The credit facility maturity date is September 28, 2010.

The Credit Agreement is collateralized by the stock and accounts

receivable of the Companys subsidiaries.

At March 31, 2009, the Company had available lines of credit of $180.6 million.

March 31, 2009, the Company was in compliance with the financial covenants of its loan agreements.

First Advantage filed a

Registration Statement with the Securities and Exchange Commission for the issuance of up to 5.0 million shares of our Class A common stock, par value $.001 per share, from time to time as full or partial consideration for the acquisition

of businesses, assets or securities of other business entities.

The Registration Statement was declared effective on January 9, 2006.

A total of 1,338,631 shares were issued for acquisitions as of March 31, 2009.

Contractual Obligations and Commercial Commitments

The following is a schedule of long-term contractual commitments, as of March 31, 2009, over the periods in which they are expected to be paid.

(in thousands)

Advertising commitments

Minimum contract purchase commitments

Operating leases

Debt and capital leases

Interest payments related to debt (1)

Estimated interest payments are calculated assuming current interest rates over minimum maturity periods specified in debt agreements.

Excludes FIN 48 tax liability of $4.0 million due to uncertainty of payment period.

Quantitative and Qualitative Disclosures About Market Risk

have been no material changes in the Companys risk since filing its Form 10-K for the year ended December 31, 2008.

Six Months Ended June 30, 2009

Credit Services

Data Services

Employer Services

Multifamily Services

Investigative and Litigation Support Services

Corporate and Eliminations

Six Months Ended June 30, 2008

Credit Services

Data Services

Employer Services

Multifamily Services

Investigative and Litigation Support Services

Corporate and Eliminations

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements