-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AV9FxVdwuqMyKhRsu98xI6/Q6RXRJdgM6Q7QZhCW5argwDs2NIemcvecg5EGbRhW +tTVtzUNnWaKhEOZrUrOAw== 0000892569-96-002361.txt : 19961118 0000892569-96-002361.hdr.sgml : 19961118 ACCESSION NUMBER: 0000892569-96-002361 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY NATIONAL FINANCIAL INC /DE/ CENTRAL INDEX KEY: 0000809398 STANDARD INDUSTRIAL CLASSIFICATION: TITLE INSURANCE [6361] IRS NUMBER: 860498599 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09396 FILM NUMBER: 96662768 BUSINESS ADDRESS: STREET 1: 17911 VON KARMAN AVE STREET 2: STE CITY: IRVINE STATE: CA ZIP: 92714 BUSINESS PHONE: 7148529770 MAIL ADDRESS: STREET 2: 17911 VON KARMAN AVE STE 500 CITY: IRVINE STATE: CA ZIP: 92714 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 1996 Commission File Number 1-9396 FIDELITY NATIONAL FINANCIAL, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 86-0498599 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 17911 Von Karman Avenue, Irvine, California 92614 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (714) 622-5000 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. $.0001 par value common 12,497,060 shares as of November 11, 1996 Exhibit Index appears on page 10 of 11 sequentially numbered pages. 1 2 FORM 10-Q QUARTERLY REPORT Quarter Ended September 30, 1996 TABLE OF CONTENTS -----------------
Page Number ----------- Part I: FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements A. Condensed Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 3 B. Condensed Consolidated Statements of Earnings for the three-month and nine-month periods ended September 30, 1996 and 1995 4 C. Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 1996 and 1995 5 D. Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II: OTHER INFORMATION Items 1.-5. of Part II have been omitted because they are not applicable with respect to the current reporting period Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIDELITY NATIONAL FINANCIAL, INC. --------------------------------- (Registrant) By: /s/ CARL A. STRUNK ----------------------------- Carl A. Strunk Executive Vice President, Chief Financial Officer and Treasurer Date: November 11, 1996 2 3 Part I: FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
September 30, December 31, 1996 1995 ------------ ----------- (Unaudited) ASSETS Investments: Fixed maturities available for sale, at fair value $168,381 $129,236 Equity securities, at fair value 39,159 31,412 Other long-term investments, at cost, which approximates fair value 3,500 2,627 Short-term investments, at cost, which approximates fair value 849 8,148 Investments in real estate and partnerships, net 13,168 8,659 -------- -------- Total investments 225,057 180,082 Cash and cash equivalents 56,007 47,431 Trade receivables, net 56,065 39,801 Notes receivable, net 17,038 15,926 Prepaid expenses and other assets 47,790 43,908 Title plants 52,399 41,725 Property and equipment, net 33,086 33,740 Deferred income tax assets, net 4,328 -- Income taxes receivable -- 2,450 -------- -------- $491,770 $405,063 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities $ 52,621 $ 44,549 Notes payable 146,659 136,047 Reserve for claim losses 188,914 146,094 Deferred income tax liabilities, net -- 33 Income taxes payable 4,274 -- -------- -------- 392,468 326,723 Minority interest 445 393 Stockholders' equity: Preferred stock, $.0001 par value; authorized, 3,000,000 shares; issued and outstanding, none -- -- Common stock, $.0001 par value; authorized, 55,000,000 shares in 1996 and 1995; issued, 17,485,658 as of September 30, 1996 and 17,439,263 as of December 31, 1995 2 2 Additional paid-in capital 58,505 58,098 Retained earnings 86,052 70,273 -------- -------- 144,559 128,373 Net unrealized gains on investments 8,481 5,866 Less treasury stock, 4,992,853 shares as of September 30, 1996 and 5,168,853 shares as of December 31, 1995, at cost 54,183 56,292 -------- -------- 98,857 77,947 -------- -------- $491,770 $405,063 ======== ========
See Notes to Condensed Consolidated Financial Statements. 3 4 FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data)
Three months ended Nine months ended September 30, September 30, ------------------- -------------------- 1996 1995 1996 1995 -------- -------- -------- -------- (Unaudited) (Unaudited) REVENUE: Title insurance premiums $126,757 $ 76,992 $346,543 $202,907 Escrow fees 16,414 14,349 50,242 35,017 Other fees and revenue 19,824 15,648 56,009 41,676 Interest and investment income, including realized gains and losses 3,697 6,482 11,924 12,424 -------- -------- -------- -------- 166,692 113,471 464,718 292,024 -------- -------- -------- -------- EXPENSES: Personnel costs 52,851 44,978 159,735 119,302 Other operating expenses 38,184 34,306 110,574 88,251 Agent commissions 53,429 19,124 131,773 59,579 Provision for claim losses 9,273 5,016 25,048 13,643 Interest expense 2,332 2,216 6,908 6,833 -------- -------- -------- -------- 156,069 105,640 434,038 287,608 -------- -------- -------- -------- Earnings before income taxes and extraordinary item 10,623 7,831 30,680 4,416 Income tax expense (benefit) 4,306 1,958 12,272 (31) -------- -------- -------- -------- Earnings before extraordinary item 6,317 5,873 18,408 4,447 Extraordinary item -- loss on early retirement of Senior Notes, net of applicable income tax benefit of $437 -- -- -- (813) -------- -------- -------- -------- Net earnings $ 6,317 $ 5,873 $ 18,408 $ 3,634 ======== ======== ======== ======== Primary earnings per share before extraordinary item $ .49 $ .46 $ 1.42 $ .34 Extraordinary item -- loss on early retirement of Senior Notes, net of applicable income tax benefit -- -- -- (.06) -------- -------- -------- -------- Primary earnings per share $ .49 $ .46 $ 1.42 $ .28 ======== ======== ======== ======== Fully diluted earnings per share $ .42 $ .40 $ 1.22 $ .28 ======== ======== ======== ======== Primary weighted average shares outstanding 13,019 12,748 12,954 13,068 ======== ======== ======== ======== Fully diluted weighted average shares outstanding 17,015 16,751 16,948 13,068 ======== ======== ======== ======== Cash dividends per share $ .07 $ .06 $ .21 $ .19 ======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements. 4 5 FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine months ended September 30, ------------------------ 1996 1995 -------- -------- (Unaudited) Cash flows from operating activities: Net earnings $ 18,408 $ 3,634 Reconciliation of net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 8,478 9,825 Net decrease in reserve for claim losses (1,277) (6,545) Provision for possible losses on real estate and notes receivable 363 295 Gain on sales of investments (2,600) (4,011) Amortization of LYONs original issue discount and debt issuance costs 3,899 3,661 Other 127 (148) Change in assets and liabilities, net of effects from acquisition of subsidiaries: Net increase in trade receivables (8,740) (8,388) Net (increase) decrease in prepaid expenses and other assets 2,573 (7,058) Net decrease in accounts payable and accrued liabilities (1,788) (3,074) Net increase in income taxes 7,294 5,864 --------- -------- Net cash provided by (used in) operating activities 26,737 (5,945) --------- -------- Cash flows from investing activities: Proceeds from sales of property and equipment 1,521 3,243 Proceeds from sales of title plants -- 24 Proceeds from sales and maturities of investments: Held to maturity -- 2,310 Available for sale 143,627 183,350 Collections of notes receivable 9,353 2,397 Additions to title plants (695) (4,826) Additions to property and equipment (8,340) (13,708) Additions to investments: Held to maturity -- (1,941) Available for sale (148,939) (99,075) Additions to notes receivable (8,225) (5,393) Investments in real estate and partnerships (700) (100) Acquisition of subsidiaries, net of cash acquired (10,544) -- --------- -------- Net cash provided by (used in) investing activities (22,942) 66,281 --------- --------
See Notes to Condensed Consolidated Financial Statements. (continued) 5 6 FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands)
Nine months ended September 30, -------------------------- 1996 1995 -------- -------- (Unaudited) Cash flows from financing activities: Borrowings $ 10,897 $ 46,284 Debt service payments (6,030) (55,884) Reissue (repurchase) of treasury stock 2,109 (15,831) Dividends paid (2,602) (2,701) Stock options exercised 407 1,209 -------- -------- Net cash provided by (used in) financing activities 4,781 (26,923) -------- -------- Net increase in cash and cash equivalents 8,576 33,413 Cash and cash equivalents at beginning of period 47,431 34,689 -------- -------- Cash and cash equivalents at end of period $ 56,007 $ 68,102 ======== ======== Supplemental cash flow information: Income taxes paid (refunded) $ 10,493 $ (6,335) ======== ======== Interest paid $ 3,355 $ 4,810 ======== ======== Noncash investing and financing activities: Dividends declared and unpaid $ 888 $ 778 ======== ======== Acquisition of Nations Title Inc.: Assets acquired, net $ 54,907 Liabilities assumed (52,777) -------- Value of stock issued $ 2,130 ========
See Notes to Condensed Consolidated Financial Statements. 6 7 FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note A - Basis of Financial Statements - -------------------------------------- The financial information included in this report includes the accounts of Fidelity National Financial, Inc. and its subsidiaries (collectively, the "Company") and has been prepared in accordance with generally accepted accounting principles and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included. This report should be read in conjunction with the Company's 1995 Annual Report on Form 10-K for the year ended December 31, 1995, as amended. Certain reclassifications have been made in the 1995 Condensed Consolidated Financial Statements to conform to the classifications used in 1996. Note B - Dividends - ------------------ On October 8, 1996, the Company's Board of Directors declared a cash dividend of $.07 per share, payable on November 1, 1996, to stockholders of record on October 18, 1996. Note C - Proposed Acquisition of Giant Group, Ltd. - -------------------------------------------------- In February of 1996, the Company proposed a merger with Giant Group, Ltd. ("Giant"). The Company had purchased 705,489 shares (or 14.8%) of Giant's outstanding common stock. The Company's intent in acquiring Giant was to utilize its liquid assets to take advantage of investment opportunities in non-interest rate sensitive businesses. On April 26, 1996, the parties reached a settlement agreement pursuant to which Giant repurchased its shares from Fidelity. In addition, as part of the settlement, Fidelity acquired 767,807 shares of Rally's Hamburgers, Inc. ("Rally's") stock from Giant for $.83 per share, as well as an option to purchase additional shares of Rally's common stock. Note D - Acquisitions - --------------------- On April 1, 1996, the Company completed its acquisition of Nations Title Inc. The acquisition positioned Fidelity National Financial, Inc. as the nation's fourth largest title insurance underwriter. Nations Title Inc. and its three wholly-owned underwriting subsidiaries, Nations Title Insurance Company, Nations Title Insurance of New York Inc. and National Title Insurance of New York Inc., expanded the Company's national agency network and increased its market share in the more traditional agency driven states. The Company acquired one hundred percent of the outstanding stock of Nations Title Inc. for an adjusted purchase price of $19.3 million plus 176,000 shares ($2.1 million) of Fidelity National Financial, Inc.'s common stock. This transaction has been accounted for as a purchase. Selected unaudited pro forma combined results of operations for the nine-month periods ended September 30, 1996 and 1995, assuming the acquisition occurred on January 1, 1996 and 1995, are presented as follows:
1996 1995 ------------ ------------- Total revenue $509,447,000 $426,211,000 Earnings before extraordinary item 18,349,000 4,270,000 Net earnings 18,349,000 3,457,000 Earnings per share $1.41 $.26
On April 4, 1996, the Company purchased 17% of the outstanding common stock of National Alliance Marketing Group, Inc. ("National"), a California corporation, for $566,667; together with a warrant to acquire an additional 14% of National common stock. In addition, the Company loaned $1,200,000 to National at closing at a rate of prime plus one percent. Subsequently, the Company agreed to increase the credit facility from $1,200,000 to $1,700,000. In consideration for the increase in the credit facility National agreed to increase the warrant shares which the Company can purchase. If the entire $1,700,000 is borrowed the Company may purchase an additional 34% of the outstanding shares of National. After receiving approval of the transaction from the California Department of Insurance, the transaction closed on July 12, 1996. National is the parent company of Alliance Home Warranty Company, a California insurance company. Alliance sells home warranty plans to buyers of resale homes, primarily in the Central and Southern California markets. A home warranty contract generally promises the repair or replacement of major operating systems and built-in appliances inside a home for a period of one year. 7 8 On May 29, 1996, the Company acquired 19.8% of the outstanding common stock of Smith/Norris Corporation ("Smith/Norris"), a California corporation, together with a warrant to acquire an additional 20% of Smith/Norris common stock. Smith/Norris is a privately held software development corporation which focuses on a family of image-enabled records systems including imaging, indexing, reporting, cashiering and accounting software for county and city government departments. As an additional part of the transaction, the Company established a credit facility in an amount up to $2,000,000 to finance future growth. On November 1, 1996, the Company acquired 80% of the outstanding stock of CRM, Inc. ("CRM") for a purchase price of $3,520,000, payable $1,000,000 in cash and $2,520,000 in Fidelity National Financial, Inc. common stock. CRM provides real estate information services with a heavy concentration in the areas of tax service and flood certification. The Company intends to combine its current tax service business with that of CRM. Under certain circumstances the Company can purchase the remaining 20% of CRM. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Total revenue for the third quarter of 1996 increased 46.9% to $166.7 million from $113.5 million in the third quarter of 1995. Total revenue for the nine-month period ended September 30, 1996 increased 59.1% to $464.7 million from $292.0 for the comparable 1995 period. The increase in the quarter and nine-month revenue amounts can be attributed to favorable order counts and increased closings, both resulting from stability in interest rates, the related positive impact on the real estate market and the Company's expanded presence in the market, including the Company's acquisition of Nations Title Inc., on April 1, 1996. Interest and investment income decreased 43.1% to $3.7 million in the third quarter of 1996 from $6.5 million in the third quarter of 1995. For the nine-month period ended September 30, 1996, interest and investment income was $11.9 million, a 4.0% decrease from the $12.4 million of interest and investment income earned in the comparable 1995 period. The decrease in interest and investment income earned during the 1996 periods is primarily due to a decrease in net realized gains compared to the same periods in 1995, offset by an increased invested asset base during the 1996 periods. Net realized gains from the sale of investments were $601,000 in the third quarter of 1996 as compared to net realized gains of $3.9 million in the corresponding 1995 period. Net realized gains for the nine-month periods ended September 30, 1996 and 1995 were $2.6 million and $4.0 million, respectively. Included in the third quarter and nine-month results of 1995 is a net realized gain of $3.4 million related to the disposition of the Company's investment in US Facilities Corporation. The Company's operating expenses consist primarily of personnel costs and other operating expenses which are incurred as title insurance orders are received and processed by the Company's operations. Title insurance premiums and escrow fees are recognized as income at the time the underlying real estate transaction closes. As a result, revenue lags approximately 60-90 days behind expenses and therefore gross margins may fluctuate. Personnel costs include both base salaries and commissions paid to employees and are the most significant operating expense incurred by the Company. These costs generally fluctuate with the level of orders opened and closed and with the mix of revenue between direct and agency operations. Personnel costs, as a percentage of total revenue, have decreased to 31.7% for the three-month period ended September 30, 1996 from 39.6% for the corresponding period in 1995. Personnel costs as a percentage of total revenue for the nine-month period ended September 30, 1996 have decreased to 34.4% from 40.9% for the corresponding 1995 period. Other operating expenses consist primarily of facilities expenses, title plant maintenance, premium taxes (which insurance underwriters are required to pay on title premiums in lieu of franchise and other state taxes), escrow losses, courier services, computer services, professional services, general insurance, trade and notes receivable allowances and depreciation. Other operating expenses decreased as a percentage of total revenue to 22.9% in the third quarter of 1996 from 30.2% in the third quarter of 1995. As a percentage of total revenue, other operating expenses for the nine-month period ended September 30, 1996 decreased to 23.8% from 30.2% for the same period in 1995. The period over period decreases are primarily the result of the increase in total revenue, as well as the change in the direct operation and agency operation title premium mix. The addition of Nations Title Inc. title premiums, which are primarily agency related, has provided a balance to direct operation and agency revenue. In previous periods the majority of title premiums and total revenue were generated by direct operations, which results in higher personnel costs and other operating expenses. 8 9 The Company has also implemented and remains committed to stringent cost control measures which are designed to reduce expenses and maximize efficiency by maintaining expenses, including personnel costs and other operating expenses, at levels consistent with revenue production and business mix. Agent commissions represent the portion of policy premiums retained by agents pursuant to the terms of their respective agency contracts. Agent commissions were 78.7% of agent policy premiums in the third quarter of 1996 compared to 76.7% of agent policy premiums in the third quarter of 1995, and 78.6% and 76.2% of agency premiums for the nine-month periods ended September 30, 1996 and 1995, respectively. The period over period increases in agent commissions as a percentage of agency premiums are attributable to the fact that the average commissions paid to agents acquired in the Nations Title Inc. acquisition exceed those paid to the former agent base. The combination of higher agency commission rates and the significant agency revenue generated by the Nations Title Inc. acquisition have resulted in higher overall commissions as a percentage of agency premiums. The provision for claim losses includes an estimate of anticipated title claims and major claims. The estimate of anticipated title claims is accrued as a percentage of title premium revenue based on the Company's historical loss experience and other relevant factors. The Company monitors its claims experience on a continual basis and adjusts the provision for claim losses accordingly. Based on recently completed loss development studies, the Company believes that as a result of its underwriting and claims handling practices, as well as the refinancing business of prior years, the Company will maintain a trend of favorable claim loss experience. The Company has provided for claim losses at 7.0% of title insurance premiums prior to the impact of major claim expense, recoupments and premium rates and Company loss experience in the state of Texas. (Premiums are generally higher in Texas for similar coverage than in other states, while loss experience is comparable. As a result, losses as a percentage of premiums are lower.) Application of these factors resulted in a net provision for claim losses as a percentage of premiums of 7.3% and 6.5% for the three-month periods ended September 30, 1996 and 1995, respectively, and 7.2% and 6.7% for the nine-month periods ended September 30, 1996 and 1995, respectively. Interest expense is incurred by the Company in financing its capital asset purchases and certain acquisitions. Interest expense consists of interest related to the Company's outstanding debt and the amortization of original issue discount and debt issuance costs related to the Liquid Yield Option Notes ("LYONs"). Interest expense of "non-LYONs" debt totaled $1.0 million and $979,000 for the three-month periods ended September 30, 1996 and 1995, respectively; and $3.0 million and $3.2 million for the nine-month periods ended September 30, 1996 and 1995, respectively. The LYONs related component of interest expense amounted to $1.3 million for the third quarter of 1996 and $1.2 million for the third quarter of 1995; and $3.9 million and $3.6 million for the nine-month periods ended September 30, 1996 and 1995, respectively. Although notes payable have increased slightly, interest rates being paid by the Company in 1996 are lower than those paid in 1995 as a result of debt refinancing and decreases in certain rates (i.e., prime rate and LIBOR) to which certain of the interest rates being paid by the Company are indexed. Income tax expense for the three-month periods ended September 30, 1996 and 1995, as a percentage of earnings before income taxes, was 40.5% and 25.0%, respectively. Income tax expense (benefit) for the nine-month periods ended September 30, 1996 and 1995, as a percentage of earnings before income taxes, including the extraordinary loss on the early retirement of debt in 1995, was 40.0% and (14.8%), respectively. The fluctuations in income tax expense (benefit) can be attributed to the income (loss) mix, operating income versus investment income and the characteristics of investment income, taxable versus tax exempt. In order to reduce interest expense incurred and interest rates paid, the Company determined that prepayment of the Senior Secured Notes (the "Senior Notes") issued in March 1993 would be in the best interests of the Company. Pursuant to the terms and conditions of the Senior Note Agreement, the Company provided for the Make Whole Provision, as defined, and related expenses in the first quarter of 1995. This prepayment amount of $1.25 million, before related income taxes, has been reflected as an extraordinary item in the Condensed Consolidated Statement of Earnings for the nine-month period ended September 30, 1995. Liquidity and Capital Resources The Company's insurance subsidiaries and wholly-owned underwritten title companies (the "UTCs") collect premiums and pay claims and operating expenses. Fluctuations in operating cash flows are primarily the result of increases or decreases in revenue. The insurance subsidiaries also have cash flow sources derived from investment income, repayments of principal and proceeds from sales and maturities of investments and dividends and distributions from subsidiaries. Positive cash flow from the insurance subsidiaries is invested primarily in short term investments, medium term bonds and certain equity securities. Cash, cash equivalents and short term investments held by the Company's insurance subsidiaries and UTCs 9 10 provide liquidity for projected claims and operating expenses. As a holding company, the Company receives cash from its subsidiaries as reimbursement for operating and other administrative expenses it incurs. The reimbursements are executed within the guidelines of various management agreements between the holding company and its subsidiaries. The Company's cash requirements include debt service, operating expenses, taxes and dividends on its common stock. The Company believes that all anticipated cash requirements for current operations will be met from internally generated funds and short term bank borrowings through existing credit facilities. One of the additional significant sources of the Company's funds is dividend distributions from its insurance subsidiaries and UTCs. The insurance subsidiaries and UTCs ability to pay dividends and make distributions is restricted by state regulations. Each state of domicile regulates the extent to which the Company's title underwriters and UTCs can pay dividends or make other distributions to the Company. The short and long term liquidity requirements of the Company and its subsidiaries are monitored regularly to match cash inflows with cash requirements. The Company and subsidiaries forecast their daily cash needs and periodically review their short and long term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying these projections. Part II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11 -- Computation of Primary and Fully Diluted Earnings Per Share Exhibit 27 -- Financial Data Schedule (b) Reports on Form 8-K: None. 10 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE (In thousands, except per share amounts)
Three months ended Nine months ended September 30, September 30, --------------------- -------------------- 1996 1995 1996 1995(1) ------- ------- ------- ------- (Unaudited) (Unaudited) Earnings before extraordinary item $ 6,317 $ 5,873 $18,408 $ 4,447 Extraordinary item -- loss on early retirement of Senior Notes, net of applicable income tax benefit of $437 -- -- -- (813) ------- ------- ------- ------- Primary earnings 6,317 5,873 18,408 3,634 Add: Amortization of original issue discount and debt issuance costs, net of income tax effect, applicable to LYONs 785 804 2,322 -- ------- ------- ------- ------- Fully diluted earnings $ 7,102 $ 6,677 $20,730 $ 3,634 ======= ======= ======= ======= Weighted average shares outstanding during the period 12,476 12,252 12,404 12,638 Common stock equivalent shares - primary 543 496 550 430 ------- ------- ------- -------- Common and common stock equivalent shares for purpose of calculating primary earnings per share 13,019 12,748 12,954 13,068 Incremental shares to reflect full dilution 3,996 4,003 3,994 -- ------- ------- ------- -------- Total shares for purpose of calculating fully diluted earnings per share 17,015 16,751 16,948 13,068 ======= ======= ======= ======== Primary earnings per share before extraordinary item $ .49 $ .46 $ 1.42 $ .34 Extraordinary item, loss on early retirement of Senior Debt, net of income tax benefit -- -- -- (.06) ------- ------- ------ -------- Primary earnings per share $ .49 $ .46 $ 1.42 $ .28 ======= ======= ======= ======== Fully diluted earnings per share $ .42 $ .40 $ 1.22 $ .28 ======= ======= ======= ========
(1) The impact of the assumed conversion of fully dilutive securities is antidilutive, and is therefore excluded from the computation. 11 EX-27 3 FINANCIAL DATA SCHEDULE
7 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 168,381 0 0 39,159 0 13,168 225,057 56,007 0 0 491,770 188,914 0 0 0 146,659 2 0 0 98,855 491,770 346,543 9,324 2,600 106,251 25,048 0 408,990 30,680 12,272 18,408 0 0 0 18,408 1.42 1.22 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----