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Original Source: FD (FAIR DISCLOSURE) WIRE
. Dan Murphy, Fidelity National Financial, Director of Investor Relations . Bill Foley II, Fidelity National Financial, Chairman and Chief Executive Officer . Randy Quirk, Fidelity National Financial, President . Al Stinson, Fidelity National Financial, Chief Financial Officer and Executive Vice President . Peter Sodowsky [ph], Fidelity National Financial, General Council
FNF reported 3Q04 revenues of nearly $2.2b, earnings of $194m, and cash flow from operations of $402m. The company closed three acquisitions in the quarter and has one pending that should close in November. The proposed IPO of FIS has been postponed until at least 1Q05. Q&A Focus: acquisition of InterCept, new customers, item processing business.
A. Key Data From Call 1. 3Q04 Total Revenue = nearly $2.2b. 2. Title Closing Percentage = 69%. 3. Earnings = $194m. 4. Cash Flow from Operations = $402m. 5. Pre-tax Margin = 13.9%. 6. Fee for File = $1300. 7. Net Organic Growth = 4.2%. 8. Interest and Investment Income = $19m. 9. Interest Expense = $11m. 10. Debt-to-Cap ratio = 18%. 11. Tax rate = 35%.
S1. Strategic Overview (B.F.) 1. Revenue: 1. Total revenue nearly $2.2b for 3Q04 2. More than $6.2b for first nine months of year.
3. On track to exceed 2003's record revenue of $7.7b. 4. 30% of revenue came from non-title operations. 1. Cordova acquisition that closed on September 30th and pending Intercept acquisition should move percentage higher in 4Q04 and into FY05. 2. Acquisitions:
1. Closed three in quarter and announced fourth expected to close
in Nov. 2. Geotrac: 1. Nation's third-largest provider of flood determination and life of loan monitoring services.
2. Provides services to over 2000 customers, strong in Midwest.
3. Should solidify FNF's position as country's second-largest
provider of flood determination and life of loan monitoring services.
4. Geotrac's digitized flood plain maps allows FNF to increase
the percentage of automatic determinations and reduce manual exception processing providing the opportunity for greater operating margins in flood business. 3. Covansys: 1. Publicly-held provider of application management and development in offshore outsourcing.
2. Purchased 11m shares or 29% of common stock, for $121m.
3. Prior to this investment, FNF global outsourcing activities
consisted of project-based contractual relationships with offshore service providers. 4. Currently have 300 dedicated offshore resources at Covansys working on more than 30 FIS development projects.
4. Kordoba: 1. Closed on Sept. 30. 2. Provider of core processing software and outsourcing solutions to the German banking markets with approx. $100m in revenue. 3. Provides FNF with a significant foundation in Germany to assist in expansion plans throughout Europe. 5. InterCept: 1. Will pay $18.90 per share for total of $410m. 1. Hart Scott Rodino filed on October 4th and proxy was mailed to shareholders last week. 2. Acquisition continues strategy of building critical mass in technology solutions for the domestic community banking and credit union marketplaces, and provides FNF with an incremental 425 core processing customers and more than 700 additional item processing customers. 3. Confident in ability to realize $25m in cost synergies in personnel and corporate overhead, core operations and item processing. 1. Ten instances of overlap in item capture centers between FNF and InterCept that will yield synergies. 2. Will implement item processing software acquired in the Bankware acquisition into the InterCept centers. 6. Orem and Sanchez: 1. Orem and Sanchez acquisitions have been integrated into operations. 2. Orem has been integrated into the financial solutions division, and Miser and Mercury platforms are marketed under the Fidelity name. 3. Exceeded target of $25m in cost synergies from Orem; recognized $27m in run rate synergies with an additional $6m identified but not yet realized. 4. Renewed 14 core Orem customers, and successful in migrating 12 additional Orem customers from either the Orem banking system or Bemis [phonetic] platform to FNF's Horizon platform. 5. Have only seen one situation since the acquisition where a customer left. 6. Now have nearly a $500m revenue base in financial solutions group alone and platforms to cover the needs of the credit union, thrift and community bank markets. 1. Core bank pack platform for de novo community banks. 2. Premier for small community banks. 3. Horizon for larger community banks. 4. Mercury for small credit unions. 5. Miser for mid-sized credit unions and thrifts. 6. Profile for larger thrifts. 7. Sanchez domestic operations have been integrated into the large bank group enterprise banking solutions. 8. International operations have been combined with existing international business under the leadership of Mike Sanchez. 1. Recognized $9m in cost synergies from the Sanchez acquisition and confident of obtaining original goal of $10m in cost synergies. 7. Webster: 1. Announced a contract with Webster bank in September. 1. Largest independent bank in Southern New England with more than $17b in assets. 2. Signed a 10-year Info technology services agreement for an enterprise-wide integrated suite of loan processing solutions, including deposits, retail and consumer loans, mortgages, mortgage origination, commercial loan
origination and servicing, and customer management and interaction. 3. Webster realizes leveraging a single vendor for its needs will enable it to realize significant efficiencies and focus on its core business while enhancing the ability to serve customers and increase shareholder value. 8. IPO: 1. On Sept. 9, announced postponement of IPO of FIS until at least 1Q05, due to equity market and InterCept acquisition.
S2. Business Conditions in Title Industry (R.Q.) 1. Order volumes:
1. 3Q04 daily order volumes picked up momentum as the quarter
progressed. 2. Increased from 280,100 in July to 295,500 in August to 298,300 in September. 3. Opened 13,400 orders in July, 13,500 in August and 14,200 in September. 4. Averaging more than 13,600 open orders per day so far in October. 5. Closing percentage for 3Q04 was 69% versus 105% in 3Q03 and
83% in 2Q04. 6. Environment and inventory should provide good closed order volume in 4Q04. 7. 75-80% is normal. 8. Seasonal slowdown in purchase open orders in the latter part of 4Q04 especially between Thanksgiving and Christmas holidays.
2. Fee for File: 1. Fee for file for 3Q04 was $1300 versus $1177 in 2Q04 and $940 in the 3Q03. 2. Premium on the resale …