Fidelity National Financial, Inc. (FNF)

FNF 
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Fidelity National Financial (FNF)

Q1 2013 Earnings Call

May 02, 2013 11:00 am ET

Executives

Daniel Kennedy Murphy - Former Senior Vice President of Finance and Investor Relations of Fidelity National Financial

William P. Foley - Executive Chairman, Chairman of Executive Committee and Chairman of FNF Holding

George P. Scanlon - Chief Executive Officer

Anthony J. Park - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Raymond R. Quirk - President

Analysts

Mark C. DeVries - Barclays Capital, Research Division

Ryan O'Steen - Keefe, Bruyette, & Woods, Inc., Research Division

Brett Huff - Stephens Inc., Research Division

David McKinley West - Davenport & Company LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Fidelity National Financial First Quarter 2013 Earnings Call. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to turn the conference over to our host, Mr. Dan Murphy. Please go ahead.

Daniel Kennedy Murphy

Thanks. Good morning, everyone, and thanks for joining us for this first quarter 2013 earnings conference call. Joining me today are our Chairman, Bill Foley; George Scanlon, our CEO; Randy Quirk, our President; and Tony Park, our CFO.

We'll begin when a brief strategic overview from Bill, a business overview from George, and then Tony will finish with a review of the financial highlights. We'll then open the call for your questions and finish with some concluding remarks from Bill.

This conference call may contain forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about our expectations, hopes, intentions or strategies regarding the future 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 financial and operating results 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 the risks and other factors detailed in our press release dated yesterday and in the statement regarding forward-looking information, risk factors and other sections of the company's Form 10-K and other filings with the SEC.

This conference call will be available for replay via webcast at our website at fnf.com. It will also be available through phone replay beginning at 1:00 p.m. Eastern Time today through May 9. The replay number is (800) 475-6701 and the access code is 287981.

Let me now turn the call over to our Chairman, Bill Foley.

William P. Foley

Thanks, Dan. The first quarter was a great start to the year with the continuation of the momentum we built in 2012. We achieved our strongest first quarter in the title business since 2004, producing pretax earnings of $171 million and a pretax margin of 12.3%. With an improving purchase market, continued low mortgage rates and a stabilizing economy, we are confident in our ability to continue to produce industry-leading earnings in our title business. Remy continues to make significant investments in global growth strategy that are expected to benefit future performance, including improved coverage in the light-duty aftermarket business and the launch of a new plant and engineering center in Wuhan, China, that recently opened. Additionally, the company secured new business with key Asian customers, launched new products across the globe and continues its operational restructuring efforts. We believe Remy has positioned itself to take advantage of both an improving global economy and a growing automotive marketplace.

Our restaurant operations remain focused on continually improving financial performance, most specifically through the continued integration, redesign and update of the O'Charley's concept. We have completed 7 full remodels at an average cost of approximately $250,000. These remodeled locations have averaged 17% in increase in sales. We have also competed 17 exterior-only remodels, at an average cost of $75,000, with those locations averaging a 4% sales increase. We are emphasizing full remodels over exterior-only remodels in the future as we believe that will generate more sustainable improvement in customer counts and sales.

From an earnings perspective, the first quarter was a difficult one for our restaurant business due to extreme weather conditions and the reinstatement of the payroll tax. Additionally, we closed 3 underperforming J. Alexander's restaurants and 1 Max & Erma location. All of the intended changes were taken -- all the intended charges were taken in the first quarter.

From a capital perspective, we continue to be committed to paying a strong dividend as we increased our dividend to $0.16 per quarter in December 2012, a 14% increase. We also continue to consider periodic share repurchases as a use of capital. In the first quarter, we repurchased 1.4 million shares for total proceeds of nearly $34 million at an average price just above $24, a small premium to book value. This included a single block of 1 million shares at a price of $23.83.

We continue to look at acquisition opportunities that will complement our existing upscale dining concepts and augment our capabilities in the title and mortgage services.

Let me now turn the call over to our CEO, George Scanlon.

George P. Scanlon

Thank you, Bill, and good morning, everybody. As Bill mentioned, we had our best first quarter in the title business since 2004, generating a 12.3% pretax title margin and overall operating EPS of $0.42 per share before the negative $0.01 EPS impact from impairments related to the planned closing of 3 unprofitable J. Alexander's locations and 1 Max & Ermas location and a negative $0.02 EPS impact from a onetime $7 million executive separation expense at Remy.

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