Fidelity National Financial, Inc. Reports First Quarter 2006 EPS of $0.5928 April 2006
Fidelity National Financial, Inc. (NYSE: FNF), a Fortune 500 provider of outsourced products and services to a variety of industries, today reported operating results for the three-month period ended March 31, 2006.
1st Quarter 2006 1st Quarter 2005
Total revenue $2.36 billion $2.27 billion
Gain on sale of minority interest
in FIS -- ($318.2 million)
Adjusted Total Revenue $2.36 billion $1.95 billion
Earnings per diluted share $0.59 $2.51
Net earnings $106.4 million $444.5 million
Gain on sale of minority interest
in FIS -- ($318.2 million)
Adjusted net earnings $106.4 million $126.3 million
Adjusted earnings per share $0.59 $0.71
Cash flow from operations $16.4 million $121.1 million
Income tax paid on FNT
distribution $108.8 million --
Adjusted cash flow from
operations $125.2 million $121.1 million
The first quarter of 2006 operating results include $26.2 million in pre- tax expense related to the accelerated vesting of performance-based FIS options and merger related costs as a result of the FIS/Certegy merger. This expense reduced diluted net earnings per share by $0.05 in the first quarter of 2006.
"This quarter was a good start to another important year in the evolution of FNF," said Chairman and Chief Executive Officer William P. Foley, II. "We successfully closed the merger of FIS and Certegy on February 1st and the FIS results that we reported include two months of the combined entity. We are encouraged by the early results of the merger, including tremendous organic growth, the formation of a joint venture that will make FIS the largest card processor in Brazil by generating approximately $2 billion in revenue over the next twelve years and some early, tangible examples of revenue synergies".
"FNT delivered solid results in a difficult seasonal environment and, most importantly, enters the second quarter with some nice momentum. We also raised the FNT dividend by 16%, to $1.16 per share annually, in January as we have said before that we intend to meaningfully increase that dividend on an annual basis and approach our trough annual FNT earnings expectations of approximately $2 per share. We paid the $109 million in taxes associated with the October 2005 distribution of FNT stock, which impacted FNF's cash flow from operations for the quarter."
"Our specialty insurance businesses continue to grow significantly, generating 41% revenue growth, with more than 565,000 flood insurance policies and nearly 200,000 personal lines policies in-force at March 31st. Finally, we completed the Sedgwick acquisition on January 31. Our intent is to see Sedgwick continue to grow at its historic organic growth rate of as high as 20% on its $400 million revenue base and pursue further acquisitions in the Third Party Administration, or TPA space. Our goal is to build a TPA vehicle with $1 billion in revenue over the next eighteen to twenty-four months and determine the optimal means to generate significant value for our shareholders from that vehicle."
The following are summary financial results for the operating subsidiaries of FNF for the three-month periods ending March 31, 2006 and 2005:
Fidelity National Title Group ("FNT")
1st Quarter 2006 1st Quarter 2005
Total revenue $1.393 billion $1.265 billion
Pre-tax margin 8.8% 10.4%
Net earnings $79.1 million $82.3 million
Net earnings per share - $0.46 per diluted $0.47 per diluted
diluted share share
Cash flow from operations $80.2 million $62.1 million
Return on average equity 12.7% 12.2%
Fidelity National Information Services ("FIS")
1st Quarter 2006 1st Quarter 2005
Total revenue $903.7 million $653.1 million
Pro forma organic
growth rate 8.7% N/A
Net earnings $39.4 million $44.6 million
EBITDA $201.6 million $162.8 million
Free cash flow $66.9 million $78.3 million
Cash earnings $63.9 million $66.6 million
Specialty Insurance
1st Quarter 2006 1st Quarter 2005
Total revenue $110.4 million $76.9 million
Pre-tax margin 29.4% 17.6%
Pre-tax earnings $32.5 million $13.5 million
FNF presents its financial results in accordance with Generally Accepted Accounting Principles ("GAAP"). However, in order to provide the investment community with a more thorough means of evaluating the operating performance of its operations, FNF also reports several non-GAAP measures, including earnings before interest, taxes, depreciation and amortization ("EBITDA"), net earnings plus depreciation and amortization less capital expenditures ("Free Cash Flow") and net earnings plus other intangible amortization, net of income tax ("Cash Earnings"). Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings.
Fidelity National Financial, Inc. (NYSE: FNF), number 248 on the Fortune 500, is a provider of outsourced products and services to a variety of industries. Through its majority-owned, publicly traded subsidiary, Fidelity National Title Group, Inc. (NYSE: FNT), FNF is the nation's largest title insurance company, with nearly 31 percent national market share. Through its majority-owned, publicly traded subsidiary, Fidelity National Information Services, Inc. (NYSE: FIS), FNF provides an industry leading suite of data processing, payment and risk management services to financial institutions and retailers. Through its wholly-owned subsidiaries, FNF is also a leading provider of specialty insurance products, including flood insurance, homeowners insurance and home warranty insurance. Through its minority-owned subsidiary, Sedgwick CMS, FNF is a leading provider of outsourced insurance claims management services to large corporate and public sector entities. More information about the FNF family of companies can be found at http://www.fnf.com , http://www.fntg.com , http://www.fidelityinfoservices.com and http://www.sedgwickcms.com .
This press release contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future economic performance and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to: changes in general economic, business and political conditions, including changes in the financial markets; adverse changes in the level of real estate activity, which may be caused by, among other things, high or increasing interest rates, a limited supply of mortgage funding or a weak U. S. economy; our potential inability to find suitable acquisition candidates, acquisitions in lines of business that will not necessarily be limited to our traditional areas of focus, or difficulties in integrating acquisitions; our dependence on operating subsidiaries as a source of cash flow; significant competition that our operating subsidiaries face; compliance with extensive government regulation of our operating subsidiaries; and other risks detailed in the "Statement Regarding Forward-Looking Information," "Risk Factors" and other sections of the Company's Form 10-K and other filings with the Securities and Exchange Commission.
FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY OF EARNINGS
(In thousands, except per share amounts and order information)
Three months ended
March 31,
2006 2005
(Unaudited)
Direct title premiums $468,922 $477,820
Agency title premiums 606,054 510,780
Total title premiums 1,074,976 988,600
Escrow and other title-related fees 253,527 242,154
Total title and escrow 1,328,503 1,230,754
Transaction processing services 843,199 606,565
Specialty insurance 106,743 75,508
Interest and investment income 47,930 26,424
Realized gains and losses 16,635 3,883
Gain on sale of minority interest in
FIS 0 318,209
Other 12,761 10,295
Total revenue 2,355,771 2,271,638
Personnel costs 877,931 747,077
Other operating expenses 494,616 393,817
Agent commissions 469,707 391,466
Depreciation and amortization 124,631 97,327
Claim loss expense 114,492 87,164
Interest expense 54,645 24,507
Total expenses 2,136,022 1,741,358
Earnings before income taxes 219,749 530,280
Income tax expense 81,747 80,335
Minority interest 31,631 5,448
Net earnings $106,371 $444,497
Net earnings per share - basic $0.61 $2.57
Net earnings per share - diluted $0.59 $2.51
Weighted average shares - basic 173,845 173,124
Weighted average shares - diluted 179,251 177,327
Direct operations orders opened 831,400 876,900
Direct operations orders closed 526,700 559,400
FIDELITY NATIONAL FINANCIAL, INC.
SEGMENT INFORMATION
(In thousands)
Three Months
Ended
March 31, 2006 Consoli- Elimina- Specialty Corporate
dated tions FNTG FIS Insurance and Other
Gross operating
revenue $2,291,206 ($57,736) $1,340,746 $900,935 $106,743 $518
Interest and
investment
income 47,930 0 38,012 1,709 3,656 4,553
Realized gains
and losses 16,635 0 14,506 1,023 (4) 1,110
Total revenue 2,355,771 (57,736) 1,393,264 903,667 110,395 6,181
Personnel costs 877,931 0 452,435 413,220 11,315 961
Other operating
expenses 494,616 (39,121) 210,893 286,064 31,027 5,753
Agent commissions 469,707 (18,615) 488,368 0 0 (46)
Depreciation 41,322 0 17,619 23,454 147 102
Amortization 83,309 0 8,618 73,341 1,323 27
Claim loss
expense 114,492 0 80,721 65 33,869 (163)
Interest expense 54,645 0 11,326 43,268 256 (205)
Total
expenses 2,136,022 (57,736) 1,269,980 839,412 77,937 6,429
Pretax earnings 219,749 0 123,284 64,255 32,458 (248)
Pretax margin 9.3% -- 8.8% 7.1% 29.4% --
Open orders 831,400 -- 683,800 147,600 -- --
Closed orders 526,700 -- 436,300 90,400 -- --
Three Months
Ended Specialty Corporate
March 31, 2005 Consoli- Elimina- FNTG FIS Insurance and Other
dated tions
Gross operating
revenue $1,923,122 ($40,544) $1,240,930 $651,580 $75,508 ($4,352)
Interest and
investment
income 26,424 0 20,854 2,762 1,379 1,429
Realized gains
and losses 322,092 0 3,436 (1,288) (4) 319,948
Total
revenue 2,271,638 (40,544) 1,265,220 653,054 76,883 317,025
Personnel costs 747,077 0 424,660 312,095 8,425 1,897
Other operating
expenses 393,817 (21,604) 209,735 176,656 31,025 (1,995)
Agent
commissions 391,466 (18,940) 409,901 0 0 505
Depreciation 33,382 0 17,694 15,652 17 19
Amortization 63,945 0 7,172 60,089 1,002 (4,318)
Claim loss
expense 87,164 0 64,226 75 22,905 (42)
Interest expense 24,507 0 303 13,421 0 10,783
Total
expenses 1,741,358 (40,544) 1,133,691 577,988 63,374 6,849
Pretax earnings 530,280 0 131,529 75,066 13,509 310,176
Pretax margin 23.3% -- 10.4% 11.5% 17.6% --
Open orders 876,900 -- 747,700 129,200 -- --
Closed orders 559,400 -- 488,500 70,900 -- --
FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY BALANCE SHEET INFORMATION
(In thousands, except per share amounts)
March 31, December 31,
2006 2005
Unaudited
Cash and investment portfolio $4,945,415 $5,077,583
Goodwill 4,720,473 2,873,861
Capitalized software 693,010 530,341
Other intangible assets 1,260,988 641,420
Total assets 14,090,857 11,104,617
Notes payable 3,578,094 3,217,019
Reserve for claim losses 1,144,981 1,113,506
Secured trust deposits 839,117 882,602
Total stockholders' equity 4,230,645 3,279,775
Book value per share 24.21 18.84
FIDELITY NATIONAL FINANCIAL, INC.
FIS SEGMENT NET EARNINGS TO EBITDA RECONCILIATIONS
(In thousands)
For the Three Months Ended For the Three Months Ended
March 31, 2006 March 31, 2005
Net Earnings $39,358 Net Earnings $44,596
+ Interest Expense 43,268 + Interest Expense 13,421
+ Income Taxes 24,586 + Income Taxes 28,825
+ Depreciation 23,454 + Depreciation 15,652
+ Amortization 73,341 + Amortization 60,089
+ Minority Interest 311 + Minority Interest 1,645
- Other Income (2,713) - Other Income (1,475)
EBITDA $201,605 EBITDA $162,753
FIDELITY NATIONAL FINANCIAL, INC.
FIS SEGMENT NET EARNINGS TO FREE CASH FLOWS RECONCILIATIONS
(In thousands)
For the Three Months Ended For the Three Months Ended
March 31, 2006 March 31, 2005
Net Earnings $39,358 Net Earnings $44,596
+ Depreciation 23,454 + Depreciation 15,652
+ Amortization 73,341 + Amortization 60,089
- Capital - Capital
Expenditures (69,264) Expenditures (42,013)
Free Cash Flow $66,889 Free Cash Flow $78,324
FIDELITY NATIONAL FINANCIAL, INC.
FIS SEGMENT NET EARNINGS TO CASH EARNINGS RECONCILIATIONS
(In thousands)
For the Three Months Ended For the Three Months Ended
March 31, 2006 March 31, 2005
Net Earnings $39,358 Net Earnings $44,596
+ Amortization of + Amortization of
Intangibles, Intangibles,
Net of Income Tax 24,520 Net of Income Tax 21,970
Cash Earnings $63,878 Cash Earnings $66,566
Source: prnewswire
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