<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A NO. 1
(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 March 31, 1999
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, Suite 300, Irvine, California 92614
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(949) 622-4333
- --------------------------------------------------------------------------------
(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 Stock 30,346,116 shares as of May 12, 1999
<PAGE> 2
INTRODUCTORY STATEMENT
We are filing this Amendment No. 1 to our Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1999 to include segment disclosures in
response to comments received from the Securities and Exchange Commission
regarding our Registration Statement on Form S-3 (Registration No. 333-65837).
Please refer to Note E of Notes to Condensed Consolidated Financial Statements
filed herewith.
<PAGE> 3
FORM 10-Q
QUARTERLY REPORT
Quarter Ended March 31, 1999
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Part I: FINANCIAL INFORMATION Page Number
-----------
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements
A. Condensed Consolidated Balance Sheets as of 3
March 31, 1999 and December 31, 1998
B. Condensed Consolidated Statements of Earnings 4
for the three-month periods ended
March 31, 1999 and 1998 (Restated)
C. Condensed Consolidated Statements of 5
Comprehensive Earnings for the three-month
periods ended March 31, 1999 and 1998 (Restated)
D. Condensed Consolidated Statements of Cash Flows 6
for the three-month periods ended
March 31, 1999 and 1998 (Restated)
E. Notes to Condensed Consolidated Financial Statements 8
</TABLE>
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/ Alan L. Stinson
-----------------------------------
Alan L. Stinson
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and Accounting
Officer) Date: December 21, 1999
2
<PAGE> 4
Part I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Investments:
Fixed maturities available for sale, at fair value ............................ $327,906 $330,068
Equity securities, at fair value .............................................. 45,352 50,191
Other long-term investments, at cost, which approximates fair value ........... 41,038 40,278
Short-term investments, at cost, which approximates fair value ................ 43,769 85,305
Investments in real estate and partnerships, net .............................. 3,801 4,673
-------- --------
Total investments ......................................................... 461,866 510,515
Cash and cash equivalents .......................................................... 59,037 51,309
Leases and lease securitization residual interest .................................. 115,614 93,507
Trade receivables, net ............................................................. 80,230 75,940
Notes receivable, net .............................................................. 16,272 10,761
Prepaid expenses and other assets .................................................. 109,340 111,471
Title plants ....................................................................... 59,302 58,932
Property and equipment, net ........................................................ 48,689 46,070
Deferred tax asset ................................................................. 15,104 10,965
-------- --------
$965,454 $969,470
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities ...................................... $112,300 $123,357
Notes payable ................................................................. 150,198 214,624
Reserve for claim losses ...................................................... 232,082 224,534
Income taxes payable .......................................................... 9,704 8,683
-------- --------
504,284 571,198
Minority interests ............................................................ 1,925 1,532
Stockholders' equity:
Preferred stock, $.0001 par value; authorized, 3,000,000 shares;
Issued and outstanding, none ................................................ -- --
Common stock, $.0001 par value; authorized, 50,000,000 shares
in 1999 and 1998; issued, 39,054,118 as of March 31, 1999 and
35,540,036 as of December 31, 1998 .......................................... 4 3
Additional paid-in capital .................................................... 244,676 173,888
Retained earnings ............................................................. 283,416 265,567
-------- --------
528,096 439,458
Accumulated other comprehensive income ........................................ 6,044 11,657
Less treasury stock, 7,883,537 shares as of March 31, 1999 and
6,645,487 shares as of December 31, 1998, at cost ........................... 74,895 54,375
-------- --------
459,245 396,740
-------- --------
$965,454 $969,470
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 5
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1999 1998
-------- --------
(Unaudited)
(Restated)
<S> <C> <C>
REVENUE:
Title insurance premiums ............................................................... $241,874 $182,296
Escrow fees ............................................................................ 32,795 26,311
Other fees and revenue ................................................................. 63,664 46,585
Interest and investment income, including realized gains (losses) ...................... 5,941 7,021
-------- --------
344,274 262,213
-------- --------
EXPENSES:
Personnel costs ........................................................................ 108,545 84,511
Other operating expenses ............................................................... 77,166 56,415
Agent commissions ...................................................................... 106,992 76,024
Provision for claim losses ............................................................. 15,231 13,339
Interest expense ....................................................................... 2,836 3,125
-------- --------
310,770 233,414
-------- --------
Earnings before income taxes ........................................................... 33,504 28,799
Income tax expense ..................................................................... 13,737 12,119
-------- --------
Net earnings ....................................................................... $ 19,767 $ 16,680
======== ========
Basic net earnings ..................................................................... $ 19,767 $ 16,680
======== ========
Basic earnings per share ............................................................... $ .64 $ .62
======== ========
Weighted average shares outstanding, basic basis ....................................... 30,767 26,892
======== ========
Diluted net earnings ................................................................... $ 20,030 $ 17,304
======== ========
Diluted earnings per share ............................................................. $ .60 $ .53
======== ========
Weighted average shares outstanding, diluted basis ..................................... 33,423 32,579
======== ========
Cash dividends per share ............................................................... $ .07 $ .06
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 6
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1999 1998
-------- --------
(Unaudited)
(Restated)
<S> <C> <C>
Net earnings ................................................................................ $ 19,767 $ 16,680
Other comprehensive earnings (loss):
Unrealized gains (losses) on investments, net(1) ....................................... (6,008) 1,663
Reclassification adjustments for gains (losses) included in net income(2) .............. 395 (1,157)
-------- --------
Other comprehensive earnings (loss) ......................................................... (5,613) 506
-------- --------
Comprehensive earnings ...................................................................... $ 14,154 $ 17,186
======== ========
</TABLE>
(1) Net of income tax expense (benefit) of $(4,175) and $1,209 in 1999 and 1998,
respectively.
(2) Net of income tax expense (benefit) of $(274) and $842 in 1999
and 1998, respectively.
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 7
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1999 1998
-------- --------
(Unaudited)
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ........................................................................... $ 19,767 $ 16,680
Reconciliation of net earnings to net cash used in operating activities:
Depreciation and amortization ...................................................... 5,588 4,631
Net increase in reserve for claim losses ........................................... 7,548 179
Net increase in provision for possible losses other than claims .................... 139 129
(Gain) loss on sales of assets ..................................................... 669 (1,999)
Equity in (gains) losses of unconsolidated partnerships ............................ 393 (45)
Amortization of LYONs original issue discount ...................................... 485 1,076
Change in assets and liabilities, net of effects from acquisition of
subsidiaries:
Net increase in leases and lease securitization residual interest .................. (22,107) (20,470)
Net increase in trade receivables .................................................. (4,290) (10,404)
Net increase in prepaid expenses and other assets .................................. (559) (2,015)
Net decrease in accounts payable and accrued liabilities ........................... (11,476) (6,313)
Net decrease in income taxes ....................................................... 816 6,710
-------- --------
Net cash used in operating activities ....................................................... (3,027) (11,841)
-------- --------
Cash flows from investing activities:
Proceeds from sale of real estate ...................................................... 946 --
Proceeds from sales and maturities of investments ...................................... 56,435 43,942
Collections of notes receivable ........................................................ 1,201 1,158
Additions to title plants .............................................................. (415) (96)
Additions to property and equipment .................................................... (6,567) (3,735)
Additions to investments ............................................................... (18,471) (48,584)
Additions to notes receivable .......................................................... (7,174) (1,565)
-------- --------
Net cash provided by (used in) investing activities ......................................... 25,955 (8,880)
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
(Continued)
6
<PAGE> 8
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1999 1998
------- --------
(Unaudited)
(Restated)
<S> <C> <C>
Cash flows from financing activities:
Borrowings ............................................................................. $ 9,635 $ 6,992
Debt service payments .................................................................. (2,754) (3,861)
Dividends paid ......................................................................... (2,064) (2,065)
Purchase of treasury stock ............................................................. (20,520) --
Stock options exercised ................................................................ 503 1,840
-------- --------
Net cash provided by (used in) financing activities ......................................... (15,200) 2,906
-------- --------
Net increase (decrease) in cash and cash equivalents ........................................ 7,728 (17,815)
Cash and cash equivalents at beginning of period ............................................ 51,309 72,887
-------- --------
Cash and cash equivalents at end of period .................................................. $ 59,037 $ 55,072
======== ========
Supplemental cash flow information:
Income taxes paid ...................................................................... $ 12,717 $ 5,850
======== ========
Interest paid .......................................................................... $ 7,216 $ 2,156
======== ========
Noncash investing and financing activities:
Dividends declared and unpaid .......................................................... $ 2,123 $ 1,597
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE> 9
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 Annual Report on Form 10-K for
the year ended December 31, 1998.
Certain reclassifications have been made in the 1998 Condensed Consolidated
Financial Statements to conform to classifications used in 1999.
Note B - Redemption of Liquid Yield Option Notes Outstanding
- ------------------------------------------------------------
On January 13, 1999, the Company announced that it was going to redeem, pursuant
to the terms of the indenture, its outstanding Liquid Yield Option Notes
("LYONs") due 2009 for $581.25 per $1,000 maturity value on February 15, 1999.
Additionally, the LYONs holders had the right to convert the outstanding LYONs
to 28.077 shares of Company common stock per $1,000 maturity value of LYONS at
any time. As of February 15, 1999, $123,681,000 maturity value of LYONs had
converted to 3,473,000 shares of common stock, resulting in an addition of
approximately $70 million to stockholders' equity while reducing outstanding
notes payable by a like amount. The remaining $432,000 of maturity value was
redeemed for cash of approximately $251,000.
Note C - Dividends
- ------------------
On March 17, 1999, the Company's Board of Directors declared a cash dividend of
$.07 per share, payable on May 28, 1999, to stockholders of record on April 9,
1999.
Note D - Stock Purchase Plan and Employee Stock Purchase Loan Plan
- ------------------------------------------------------------------
On March 17, 1999, the Company's Board of Directors approved an increase to the
number of shares of outstanding Company common stock authorized for purchase
under the Company's previously announced purchase program. The new authorization
will permit the Company to purchase up to 4.0 million shares. Through May 12,
1999, the Company has purchased 2,110,515 shares at an average purchase price of
$16.01 per share totaling $33,790,000. Purchases may be made from time to time
by the Company in the open market or in block purchases or in privately
negotiated transactions depending on market conditions and other factors.
Also on March 17, 1999, the Company's Board of Directors approved the adoption
of the Fidelity National Financial, Inc. Employee Stock Purchase Loan Plan
("Loan Plan"). The purpose of the Loan Plan is to provide key employees with
further incentive to maximize shareholder value. The Company intends to offer an
aggregate of $7,750,000 in loans. Loan Plan funds must be used to make private
or open market purchases of Company common stock through a broker-dealer
designated by the Company. All loans will be full recourse and unsecured, and
will have a five-year term. Interest will accrue on the loans at a rate of 5%
per annum due at maturity. Loans may be prepaid any time without penalty.
Through May 12, 1999, loans have been made in the amount of $6,474,000 to
purchase 432,985 shares of Company common stock at an average purchase price of
$14.95 per share.
8
<PAGE> 10
E. SEGMENT INFORMATION
During the first quarter of 1999, the Company restructured its business
segments to more accurately reflect a change in the Company's current operating
structure. All previously reported segment information has been restated to be
consistent with the current presentation.
The Company's Condensed Consolidated Financial Statements as of March 31,
1999 and 1998 and for the three-month periods ended March 31, 1999 and 1998,
respectively, include five reportable segments. Reportable segments are
determined based on the organizational structure and types of products and
services from which each reportable segment derives its revenue.
As of and for the three-month period ended March 31, 1999 (dollars in
thousands):
<TABLE>
<CAPTION>
REAL ESTATE
TITLE INFORMATION MICRO
INSURANCE SERVICES GENERAL LEASING CORPORATE TOTAL
--------- ----------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $293,018 $24,908 $19,353 $ 6,788 $ 207 $344,274
======== ======= ======= ========= ======== ========
Operating earnings
(loss) $ 35,583 $ 2,364 $ 1,112 $ (2,185) $ (887) $ 35,987
Interest and investment
income, including
realized gains (losses) 5,449 84 -- 5 403 5,941
Depreciation and
amortization 4,060 505 456 515 52 5,588
Interest expense 583 4 202 1,262 785 2,836
-------- ------- ------- --------- -------- --------
Earnings (loss) before
income taxes 36,389 1,939 454 (3,957) (1,321) 33,504
Income tax expense
(benefit) 15,379 779 16 (1,671) (766) 13,737
-------- ------- ------- --------- -------- --------
Net earnings (loss) $ 21,010 $ 1,160 $ 438 $ (2,286) $ (555) $ 19,767
======== ======= ======= ========= ======== ========
Assets $687,554 $54,471 $28,042 $ 129,881 $ 65,506 $965,454
======== ======= ======= ========= ======== ========
</TABLE>
As of and for the three-month period ended March 31, 1998 (dollars in
thousands):
<TABLE>
<CAPTION>
REAL ESTATE
TITLE INFORMATION MICRO
INSURANCE SERVICES GENERAL LEASING CORPORATE TOTAL
--------- ----------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $236,101 $19,417 $-- $ 6,032 $ 663 $262,213
======== ======= === ======= ======== ========
Operating earnings
(loss) $ 29,312 $ 2,071 $-- $ 2,644 $ (4,493) $ 29,534
Interest and investment
income, including
realized gains (losses) 6,317 41 -- -- 663 7,021
Depreciation and
amortization 3,149 505 -- 588 389 4,631
Interest expense 619 2 -- 1,068 1,436 3,125
-------- ------- --- ------- -------- --------
Earnings (loss) before
income taxes 31,675 1,791 -- 988 (5,655) 28,799
Income tax expense
(benefit) 8,424 667 -- 396 2,632 12,119
-------- ------- --- ------- -------- --------
Net earnings (loss) $ 23,251 $ 1,124 $-- $ 592 $ (8,287) $ 16,680
======== ======= === ======= ======== ========
Assets $581,943 $42,904 $-- $94,388 $ 51,789 $771,024
======== ======= === ======= ======== ========
</TABLE>
9
<PAGE> 11
The activities of the reportable segments include the following:
TITLE INSURANCE
This segment, consisting of title insurance underwriters and wholly
owned title insurance agencies; provides core title insurance and escrow
services, including document preparation, collection and trust activities and
certain real estate information services. This segment coordinates its
activities with those of the real estate information services segment described
below in order to offer the full range of real estate products and services
required to execute and close a real estate transaction.
REAL ESTATE INFORMATION SERVICES
This segment, consisting of various real estate information
subsidiaries, offers the complementary specialized products and services
required to execute and close a real estate transaction that are not offered by
the title insurance segment described above. These services include document
recording services on a nationwide basis, tax qualifying property exchange
services, property appraisal services, tax monitoring services, credit
reporting, real estate referral services, flood monitoring, and foreclosure
publishing and posting. These services require specialized expertise and have
been centralized for efficiency and management purposes.
MICRO GENERAL CORPORATION
Micro General Corporation is a full service enterprise solutions
provider offering a complete range of information technology and
telecommunication services including systems integration, application
development, real estate industry applications and eCommerce. Micro General
Corporation was not consolidated in the Company's Condensed Consolidated
Financial Statements until the second quarter of 1998.
LEASING
The leasing segment originates, funds, purchases, sells, securitizes and
services equipment leases for a broad range of businesses.
CORPORATE
The corporate segment includes the operations of the parent holding
company. These operations consist of certain investment activities and the
issuance and repayment of corporate debt obligations.
Expenditures for long-lived assets relate primarily to the title
insurance segment.
The accounting policies of the segments are the same as those described
in Note A, Basis of Financial Statements. Intersegment sales or transfers which
occurred in the ordinary course of consolidated operations have been eliminated
from the segment information provided.
10
