XNYS:FNF Fidelity National Financial Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012
Commission File Number 1-32630
FIDELITY NATIONAL FINANCIAL, INC.
______________________________________________________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware
 
16-1725106
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
 
 
601 Riverside Avenue, Jacksonville, Florida
 
32204
(Address of principal executive offices)
 
(Zip Code)
(904) 854-8100
___________________________________________________________________
(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 þ NO o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES þ NO o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
   Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO R
     As of June 30, 2012, there were 224,239,162 shares of the Registrant’s Common Stock outstanding.
 
 
 
 
 
 
 
 
 
 



FORM 10-Q
QUARTERLY REPORT
Quarter Ended June 30, 2012
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


i



Part I: FINANCIAL INFORMATION

Item 1.
Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
 
June 30,
2012
 
December 31,
2011
 
(Unaudited)
 
 
ASSETS
Investments:
 
 
 
Fixed maturity securities available for sale, at fair value, at June 30, 2012 and December 31, 2011 includes $279.0 and $274.2, respectively, of pledged fixed maturity securities related to secured trust deposits
$
3,213.0

 
$
3,200.2

Preferred stock available for sale, at fair value
122.8

 
71.4

Equity securities available for sale, at fair value
112.0

 
105.7

Investments in unconsolidated affiliates
512.0

 
546.5

Other long-term investments
96.5

 
77.5

Short-term investments
63.7

 
50.4

Total investments
4,120.0

 
4,051.7

Cash and cash equivalents, at June 30, 2012 and December 31, 2011 includes $305.4 and $161.3, respectively, of pledged cash related to secured trust deposits
908.5

 
665.7

Trade and notes receivables, net of allowance of $19.3 and $22.6, respectively, at June 30, 2012 and December 31, 2011
368.2

 
321.5

Goodwill
1,568.9

 
1,452.2

Prepaid expenses and other assets
461.7

 
653.6

Capitalized software, net
29.1

 
28.1

Other intangible assets, net
229.3

 
130.7

Title plants
386.6

 
386.7

Property and equipment, net
440.7

 
166.1

Income taxes receivable

 
5.8

Total assets
$
8,513.0

 
$
7,862.1

LIABILITIES AND EQUITY
Liabilities:
 
 
 
Accounts payable and accrued liabilities
$
857.3

 
$
857.1

Accounts payable to related parties
4.3

 
5.6

Notes payable
952.4

 
915.8

Reserve for title claim losses
1,868.9

 
1,912.8

Secured trust deposits
561.7

 
419.9

Income taxes payable
16.4

 

Deferred tax liability
199.2

 
95.0

Total liabilities
4,460.2

 
4,206.2

Equity:
 
 
 
Common stock, Class A, $0.0001 par value; authorized 600,000,000 shares as of June 30, 2012 and December 31, 2011; issued 258,567,562 as of June 30, 2012 and 254,868,454 as of December 31, 2011

 

Preferred stock, $0.0001 par value; authorized 50,000,000 shares; issued and outstanding, none

 

Additional paid-in capital
3,866.0

 
3,798.6

Retained earnings
532.3

 
373.4

Accumulated other comprehensive earnings (loss)
8.0

 
(7.1
)
Less: treasury stock, 34,328,400 shares and 34,190,969 shares as of June 30, 2012 and December 31, 2011, respectively, at cost
(534.8
)
 
(532.2
)
Total Fidelity National Financial, Inc. shareholders’ equity
3,871.5

 
3,632.7

Noncontrolling interests
181.3

 
23.2

Total equity
4,052.8

 
3,655.9

Total liabilities and equity
$
8,513.0

 
$
7,862.1

See Notes to Condensed Consolidated Financial Statements

1


FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In millions, except per share data)

Three months ended June 30,
 
Six months ended June 30,
 
2012
 
2011
 
2012
 
2011
 
(Unaudited)
 
(Unaudited)
Revenues:
 
 
 
 
 
 
 
Direct title insurance premiums
$
427.5

 
$
357.2

 
$
781.5

 
$
680.1

Agency title insurance premiums
518.5

 
484.7

 
932.4

 
908.0

Escrow, title related and other fees
434.9

 
353.8

 
816.5

 
686.3

Restaurant revenue
252.9

 

 
252.9

 

Interest and investment income
37.0

 
37.3

 
73.4

 
71.0

Realized gains and losses, net
66.1

 
0.7

 
70.1

 
20.2

Total revenues
1,736.9

 
1,233.7

 
2,926.8

 
2,365.6

Expenses:
 
 
 
 
 
 
 
Personnel costs
450.0

 
389.2

 
857.6

 
772.8

Agent commissions
395.9

 
379.1

 
711.5

 
706.8

Other operating expenses
334.3

 
266.6

 
609.5

 
525.3

Cost of restaurant revenue
215.4

 

 
215.4

 

Depreciation and amortization
25.9

 
18.4

 
42.9

 
38.1

Provision for title claim losses
77.0

 
57.4

 
130.8

 
108.2

Interest expense
15.4

 
13.8

 
30.5

 
28.1

Total expenses
1,513.9

 
1,124.5

 
2,598.2

 
2,179.3

Earnings from continuing operations before income taxes and equity in earnings of unconsolidated affiliates
223.0

 
109.2

 
328.6

 
186.3

Income tax expense
81.3

 
40.4

 
118.2

 
68.4

Earnings from continuing operations before equity in earnings of unconsolidated affiliates
141.7

 
68.8

 
210.4

 
117.9

Equity in earnings of unconsolidated affiliates
2.0

 
12.6

 
7.8

 
4.0

Net earnings from continuing operations
143.7

 
81.4

 
218.2

 
121.9

Net earnings from discontinued operations, net of tax
3.2

 
1.6

 
5.9

 
5.2

Net earnings
146.9

 
83.0

 
224.1

 
127.1

Less: Net (losses) earnings attributable to noncontrolling interests
(0.1
)
 
3.0

 
2.7

 
4.6

Net earnings attributable to Fidelity National Financial, Inc. common shareholders
$
147.0

 
$
80.0

 
$
221.4

 
$
122.5

Earnings per share
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Net earnings from continuing operations attributable to Fidelity National Financial, Inc. common shareholders
$
0.66

 
$
0.35

 
$
0.98

 
$
0.54

Net earnings from discontinued operations attributable to Fidelity National Financial, Inc. common shareholders
0.01

 
0.01

 
0.03

 
0.02

Net earnings attributable to Fidelity National Financial, Inc. common shareholders
$
0.67

 
$
0.36

 
$
1.01

 
$
0.56

Diluted
 
 
 
 
 
 
 
Net earnings from continuing operations attributable to Fidelity National Financial, Inc. common shareholders
$
0.64

 
$
0.35

 
$
0.96

 
$
0.53

Net earnings from discontinued operations attributable to Fidelity National Financial, Inc. common shareholders
0.01

 
0.01

 
0.03

 
0.02

Net earnings attributable to Fidelity National Financial, Inc. common shareholders
$
0.65

 
$
0.36

 
$
0.99

 
$
0.55

 
 
 
 
 
 
 
 
Weighted average shares outstanding, basic basis
220.5

 
220.7

 
219.6

 
220.7

Weighted average shares outstanding, diluted basis
225.4

 
224.5

 
224.3

 
224.0

Cash dividends paid per share
$
0.14

 
$
0.12

 
$
0.28

 
$
0.24

Amounts attributable to Fidelity National Financial, Inc., common shareholders
 
 
 
 
 
 
 
Basic and diluted net earnings from continuing operations attributable to FNF common shareholders
$
143.8

 
$
78.4

 
$
215.5

 
$
117.3

Basic and diluted net earnings from discontinued operations attributable to FNF common shareholders
3.2

 
1.6

 
5.9

 
5.2

Basic and diluted net earnings attributable to FNF common shareholders
$
147.0

 
$
80.0

 
$
221.4

 
$
122.5

See Notes to Condensed Consolidated Financial Statements

2


FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In millions)
 
Three months ended June 30,
 
Six months ended June 30,
 
 
 
2012
 
2011
 
2012
 
2011
 
(Unaudited)
 
(Unaudited)
Net earnings
$
146.9

 
$
83.0

 
$
224.1

 
$
127.1

Other comprehensive earnings:
 
 
 
 
 
 
 
Unrealized (loss) gain on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) (1)
(2.5
)
 
16.2

 
24.9

 
13.9

Unrealized (loss) gain on investments in unconsolidated affiliates (2)
(2.3
)
 
4.0

 
(1.9
)
 
10.1

Unrealized (loss) gain on foreign currency translation (3)
(1.6
)
 
0.4

 
(0.6
)
 
1.0

Reclassification adjustments for change in unrealized gains and losses included in net earnings (4)
(6.1
)
 
(3.7
)
 
(7.3
)
 
(14.8
)
Other comprehensive (loss) earnings
(12.5
)
 
16.9

 
15.1

 
10.2

Comprehensive earnings
134.4

 
99.9

 
239.2

 
137.3

Less: Comprehensive (loss) earnings attributable to noncontrolling interests
(0.1
)
 
3.0

 
2.7

 
4.6

Comprehensive earnings attributable to Fidelity National Financial, Inc. common shareholders
$
134.5

 
$
96.9

 
$
236.5

 
$
132.7

_______________________________________
 
(1)
Net of income tax (benefit) expense of $(1.5) million and $9.9 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $14.6 million and $8.5 million for the six-month periods ended June 30, 2012 and 2011, respectively.
(2)
Net of income tax (benefit) expense of $(1.4) million and $2.5 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $(1.2) million and $6.2 million for the six-month periods ended June 30, 2012 and 2011, respectively.
(3)
Net of income tax (benefit) expense of $(0.9) million and $0.2 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $(0.2) million and less than $0.6 million for the six-month periods ended June 30, 2012 and 2011, respectively.
(4)
Net of income tax expense of $3.5 million and $2.3 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $4.3 million and $9.1 million for the six-month periods ended June 30, 2012 and 2011, respectively.
See Notes to Condensed Consolidated Financial Statements



3


FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(In millions)
(Unaudited)
 
Fidelity National Financial, Inc. Common Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
Other
 
 
 
 
 
 
 
Common Stock
 
Paid-in
 
Retained
 
Comprehensive
 
Treasury Stock
 
Noncontrolling
 
 
 
Shares
 
Amount
 
Capital
 
Earnings
 
Earnings (Loss)
 
Shares
 
Amount
 
Interests
 
Total Equity
Balance, December 31, 2011
254.9

 
$

 
$
3,798.6

 
$
373.4

 
$
(7.1
)
 
34.2

 
$
(532.2
)
 
$
23.2

 
$
3,655.9

Acquisition of O'Charley's

 

 
0.4

 

 

 

 

 

 
0.4

Exercise of stock options
3.7

 

 
51.1

 

 

 

 

 

 
51.1

Treasury stock repurchased

 

 

 

 

 
0.1

 
(2.6
)
 

 
(2.6
)
Tax benefit associated with the exercise of stock options

 

 
4.7

 

 

 

 

 

 
4.7

Other comprehensive earnings — unrealized gain on investments and other financial instruments (excluding investments in unconsolidated affiliates)

 

 

 

 
17.6

 

 

 

 
17.6

Other comprehensive earnings — unrealized loss on investments in unconsolidated affiliates

 

 

 

 
(1.9
)
 

 

 

 
(1.9
)
Other comprehensive earnings — unrealized loss on foreign currency translation

 

 

 

 
(0.6
)
 

 

 

 
(0.6
)
Stock-based compensation

 

 
11.2

 

 

 

 

 

 
11.2

Dividends declared

 

 

 
(62.5
)
 

 

 

 

 
(62.5
)
Consolidation of previous minority-owned subsidiary

 

 

 

 

 

 

 
160.7

 
160.7

Subsidiary dividends paid to noncontrolling interests

 

 

 

 

 

 

 
(5.3
)
 
(5.3
)
Net earnings

 

 

 
221.4

 

 

 

 
2.7

 
224.1

Balance, June 30, 2012
258.6

 
$

 
$
3,866.0

 
$
532.3

 
$
8.0

 
34.3

 
$
(534.8
)
 
$
181.3

 
$
4,052.8



See Notes to Condensed Consolidated Financial Statements



4


FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Six months ended June 30,
 
 
2012
 
2011
 
(Unaudited)
Cash flows from operating activities:
 
 
 
Net earnings
$
224.1

 
$
127.1

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
            Depreciation and amortization
43.0

 
39.8

            Equity in earnings of unconsolidated affiliates
(7.8
)
 
(4.0
)
Gain on sales of investments and other assets, net
(7.9
)
 
(21.8
)
 Gain on consolidation of O'Charley's, Inc. and American Blue Ribbon Holdings, LLC
(71.4
)
 

Stock-based compensation cost
11.2

 
13.2

Tax benefit associated with the exercise of stock options
(4.7
)
 

Changes in assets and liabilities, net of effects from acquisitions:
 
 
 
Net increase in pledged cash, pledged investments, and secured trust deposits
(7.0
)
 
(3.2
)
Net (increase) decrease in trade receivables
(36.5
)
 
11.5

Net decrease in prepaid expenses and other assets
(13.1
)
 
3.5

Net decrease in accounts payable, accrued liabilities, deferred revenue and other
(17.3
)
 
(120.0
)
Net decrease in reserve for title claim losses
(37.6
)
 
(117.9
)
Net change in income taxes
117.5

 
58.7

Net cash provided by (used in) operating activities
192.5

 
(13.1
)
Cash flows from investing activities:
 
 
 
Proceeds from sales of investment securities available for sale
257.1

 
426.5

Proceeds from sale of Sedgwick CMS

 
32.0

Proceeds from calls and maturities of investment securities available for sale
158.0

 
297.4

Proceeds from sale of other assets
2.3

 
3.8

Cash received as collateral on loaned securities, net
0.9

 
0.7

Additions to property and equipment
(26.6
)
 
(17.4
)
Additions to capitalized software
(3.1
)
 
(4.1
)
Purchases of investment securities available for sale
(470.5
)
 
(762.2
)
Net (purchases of) proceeds from short-term investment securities
(13.3
)
 
66.4

Contributions to investments in unconsolidated affiliates

 
(26.0
)
Distributions from unconsolidated affiliates
3.0

 
0.9

Net other investing activities

 
(5.0
)
Acquisition of O'Charley's, Inc. and American Blue Ribbon Holdings, LLC, net of cash acquired
(122.2
)
 

Proceeds from sale of personal lines insurance business
119.0

 

Other acquisitions/disposals of businesses, net of cash acquired
(14.6
)
 
(0.3
)
Net cash (used in) provided by investing activities
(110.0
)
 
12.7

Cash flows from financing activities:
 
 
 
Borrowings
235.0

 

Debt service payments
(200.0
)
 
(0.3
)
Dividends paid
(61.5
)
 
(53.0
)
Subsidiary dividends paid to noncontrolling interest shareholders
(5.3
)
 
(1.0
)
Exercise of stock options
51.1

 
3.3

Debt issuance costs
(5.2
)
 

Tax benefit associated with the exercise of stock options
4.7

 

Purchases of treasury stock
(2.6
)
 
(11.2
)
Net cash provided by (used in) financing activities
16.2

 
(62.2
)
Net increase (decrease) in cash and cash equivalents, excluding pledged cash related to secured trust deposits
98.7

 
(62.6
)
Cash and cash equivalents, excluding pledged cash related to secured trust deposits at beginning of period
504.4

 
434.6

Cash and cash equivalents, excluding pledged cash related to secured trust deposits at end of period
$
603.1

 
$
372.0

Supplemental cash flow information:
 
 
 
Income taxes paid
$
6.6

 
$
13.5

Interest paid
$
26.0

 
$
26.2

See Notes to Condensed Consolidated Financial Statements

5


FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A — Basis of Financial Statements
The unaudited financial information in this report includes the accounts of Fidelity National Financial, Inc. and its subsidiaries (collectively, “we,” “us,” “our,” or “FNF”) prepared in accordance with generally accepted accounting principles and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments considered necessary for a fair presentation have been included. This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011.
Certain reclassifications have been made in the 2011 Condensed Consolidated Financial Statements to conform to classifications used in 2012. In addition, we have corrected an immaterial prior period error in the Statement of Cash Flows. The correction was between cash flows from operating activities and cash flows from investing activities for the six months ended June 30, 2011 and resulted in a decrease in cash used in operating activities and an increase in cash provided by investing activities of $22.3 million. There was no impact on our other Condensed Consolidated Financial Statements presented.
Description of Business
We are a leading provider of title insurance, mortgage services and restaurant and other diversified services. FNF is the nation's largest title insurance company. Through our title insurance underwriters, Fidelity National Title, Chicago Title, Commonwealth Land Title and Alamo Title, we collectively issue more title insurance policies than any other title company in the United States. We also hold a 55% ownership interest in American Blue Ribbon Holdings, LLC ("ABRH"), the owner and operator of the O'Charley's, Ninety Nine Restaurants, Max & Erma's, Village Inn, Bakers Square, and Stoney River Legendary Steaks concepts. In addition, among other operations, FNF owns minority interests in Ceridian Corporation ("Ceridian"), a leading provider of global human capital management and payment solutions and Remy International, Inc. ("Remy"), a leading designer, manufacturer, remanufacturer, marketer and distributor of aftermarket and original equipment electrical components for automobiles, light trucks, heavy-duty trucks and other vehicles.

Discontinued Operations
On May 1, 2012, we completed the sale of an 85% interest in our remaining subsidiaries that write personal lines insurance to WT Holdings, Inc. for $119.0 million. Accordingly, the results of this business (which we refer to as our "at-risk" insurance business) for all periods presented are reflected in the Condensed Consolidated Statements of Earnings as discontinued operations. The at-risk insurance business sale resulted in a pre-tax loss of $15.1 million, which was recorded in the fourth quarter of 2011. Total revenues from the at-risk insurance business included in discontinued operations are $20.9 million and $43.1 million for the three months ending June 30, 2012 and 2011, respectively, and $57.1 million and $85.0 million for the six months ending June 30, 2012 and 2011, respectively. Pre-tax earnings (losses) from the at-risk insurance business included in discontinued operations are $6.4 million and $(8.2) million for the three months ending June 30, 2012 and 2011, respectively, and $10.4 million and $(8.0) million for the six months ending June 30, 2012 and 2011, respectively.
On October 31, 2011, we completed the sale of our flood insurance business to WRM America Holdings LLC (“WRM America”) for $135.0 million in cash and dividends, and a $75.0 million seller note included in Trade and Notes Receivable on the Condensed Consolidated Balance Sheet as of June 30, 2012. The seller note has an 8.0% annual interest coupon, with interest payable quarterly and principal payable in full eighteen months subsequent to closing on April 30, 2013. The flood insurance business sale resulted in a pre-tax gain of approximately $154.1 million ($94.9 million after tax), which was recorded in the fourth quarter of 2011. Total revenues from the flood business included in discontinued operations were $47.7 million and $82.1 million for the three and six months ending June 30, 2011, respectively. Pre-tax earnings from the flood business included in discontinued operations were $9.0 million and $14.0 million for the three and six months ended June 30, 2011, respectively.
Transactions with Related Parties
Agreements with Fidelity National Information Services ("FIS")
A summary of the agreements that were in effect with FIS through June 30, 2012, is as follows:
Technology (“IT”) and data processing services from FIS. These agreements govern IT support services provided to us by FIS, primarily consisting of infrastructure support and data center management. Subject to certain early termination provisions (including the payment of minimum monthly service and termination fees), the agreement expires on or about June 30, 2013 with an option to renew for one or two additional years.
Administrative corporate support and cost-sharing services to FIS. We have provided certain administrative corporate

6

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


support services such as corporate aviation and other administrative support services to FIS.
Real estate management and lease agreements. Included in our revenues are amounts received related to leases or subleases of certain office space and furnishings to FIS.
A detail of net revenues and expenses between us and FIS that were included in our results of operations for the periods presented is as follows:
 
Three months ended
June 30, 2012
 
Three months ended
June 30, 2011
 
Six months ended
June 30, 2012
 
Six months ended
June 30, 2011
 
(In millions)
Corporate services and cost-sharing revenue
$
1.2

 
$
1.3

 
$
2.4

 
$
2.4

Data processing expense
(7.6
)
 
(9.1
)
 
(16.6
)
 
(18.5
)
Net expense
$
(6.4
)
 
$
(7.8
)
 
$
(14.2
)
 
$
(16.1
)
We believe the amounts earned by us or charged to us under each of the foregoing arrangements are fair and reasonable. The information technology infrastructure support and data center management services provided to us are priced within the range of prices that FIS offers to its unaffiliated third party customers for the same types of services. However, the amounts we earned or were charged under these arrangements were not negotiated at arm’s-length, and may not represent the terms that we might have obtained from an unrelated third party. The amounts due to FIS as a result of these agreements were $4.3 million as of June 30, 2012 and $5.6 million as of December 31, 2011.
Included in equity securities available for sale are 1,603,860 shares of FIS stock which were purchased during the fourth quarter of 2009 in connection with a merger between FIS and Metavante Technologies, Inc. The fair value of our investment was $54.7 million and $42.6 million as of June 30, 2012 and December 31, 2011, respectively.
Also included in fixed maturities available for sale are FIS bonds with a fair value of $51.6 million and $23.6 million as of June 30, 2012 and December 31, 2011, respectively.

Note B — Acquisitions
Acquisition of O'Charley's Inc. and Merger with ABRH
The results of operations and financial position of the entities acquired during any year are included in the Condensed Consolidated Financial Statements from and after the date of acquisition.

On April 9, 2012, we successfully closed a tender offer for the outstanding common stock of O'Charley's Inc. ("O'Charley's"). We have consolidated the results of O'Charley's as of April 9, 2012. On May 11, 2012, we merged O'Charley's with our investment in ABRH in exchange for an increase in our ownership position in ABRH from 45% to 55%. As of June 30, 2012, there were 322 company-owned restaurants in the O'Charley's group of companies and 222 company-owned restaurants in the legacy ABRH group of companies. Total consideration paid was $122.2 million in cash, net of cash acquired of $35.0 million. Our investment in ABRH, prior to the merger was $37.0 million and was included in investments in unconsolidated affiliates on the Condensed Consolidated Balance Sheets. Our investment in O'Charley's prior to the tender offer of $13.8 million was included in equity securities available for sale on the Condensed Consolidated Balance Sheets. We have consolidated the operations of ABRH, with the O'Charley's group of companies, beginning on May 11, 2012. Restaurant revenue on the Condensed Consolidated Statements of Earnings consists of restaurant sales and, to a lesser extent, franchise revenue and other revenue. Restaurant sales include food and beverage sales and are net of applicable state and local sales taxes and discounts.

The total purchase price has been initially allocated to the restaurant group assets acquired and liabilities assumed based on our best estimates of the fair value of the assets acquired and liabilities assumed as of the respective acquisition dates. In the case of ABRH, goodwill has been recorded based on the amount that the purchase price exceeded the fair value of the net assets acquired. A realized gain of $65.8 million was recognized in the three months ending June 30, 2012 for the difference between our basis in our equity method investment of ABRH prior to consolidation and the fair value of ABRH at the date of consolidation. In regards to O'Charley's, a realized gain of $6.7 million was recognized in the three months ending June 30, 2012 for the difference in the basis of our existing holdings in O'Charley's common stock and the fair value of O'Charley's at the date of consolidation.




7

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


The initial purchase price is as follows (in millions):
Fair value of our investment in O'Charley's and ABRH prior to consolidation
$
123.3

Net cash paid for majority ownership in O'Charley's and ABRH
122.2

 
$
245.5


The purchase price has been initially allocated to the O'Charley's and ABRH assets acquired and liabilities assumed based on our best estimates of their fair values as of the acquisition dates. Goodwill has been recorded based on the amount that the purchase price exceeds the fair value of the net assets acquired. This estimate is preliminary and subject to adjustments as we complete our valuation process over property and equipment, other intangible assets, deferred taxes and goodwill, which we expect to have substantially complete by the end of the third quarter of 2012. The initial purchase price allocation is as follows (in millions):

Trade and notes receivables, net of allowance for doubtful accounts
$
11.3

Prepaid expenses and other assets
79.9

Property and equipment
283.2

Other intangible assets
98.4

Goodwill
106.9

Total assets
579.7

Total liabilities
173.5

Net assets acquired
406.2

Less: noncontrolling interest
(160.7
)
 
$
245.5


For comparative purposes, selected unaudited pro forma consolidated results of operations of FNF for the three months and six months ending June 30, 2012 and 2011 are presented below. Pro forma results presented assume the consolidation of ABRH and O'Charley's occurred as of the beginning of each respective period. Amounts reflect our 55% ownership interest in the two companies and were adjusted to exclude transaction costs related to the acquisition of O'Charley's and merger with ABRH and earnings attributable to our prior investment in ABRH.
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2012
 
2011
 
2012
 
2011
 
 
(in millions)
Total revenues
 
$
1,700.4

 
$
1,523.2

 
$
3,288.5

 
$
3,044.8

Net earnings attributable to FNF common shareholders
 
106.5

 
80.2

 
185.3

 
122.6


Acquisition of J. Alexander's Corporation
On June 25, 2012, we entered into a definitive agreement to merge J. Alexander's Corporation ("J. Alexander's") with ABRH in a transaction which values the equity of J. Alexander's at approximately $72.0 million. In addition to approvals by the J. Alexander's shareholders, the consummation of the transaction is subject to certain closing conditions. The transaction is targeted to close in the fourth quarter of 2012. J. Alexander's Corporation operates 33 J. Alexander's restaurants in 13 states.

Note C — Earnings Per Share
Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding during the period. In periods when earnings are positive, diluted earnings per share is calculated by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding plus the impact of assumed conversions of potentially dilutive securities. For periods when we recognize a net loss, diluted earnings per share is equal to basic earnings per share as the impact of assumed conversions of potentially dilutive securities is considered to be antidilutive. We have granted certain options and shares of restricted stock which have been treated as common share equivalents for purposes of calculating diluted earnings per share for periods in which positive earnings have been reported.

8

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


  
The following table presents the computation of basic and diluted earnings per share:
 
Three months ended June 30,
 
Six months ended June 30,
 
2012
 
2011
 
2012
 
2011
 
(In millions, except per share amounts)
Basic and diluted net earnings from continuing operations attributable to FNF common shareholders
$
143.8

 
$
78.4

 
$
215.5

 
$
117.3

Basic and diluted net earnings from discontinued operations attributable to FNF common shareholders
3.2

 
1.6

 
5.9

 
5.2

Basic and diluted net earnings attributable to FNF common shareholders
$
147.0

 
$
80.0

 
$
221.4

 
$
122.5

 
 
 
 
 
 
 
 
Weighted average shares outstanding during the period, basic basis
220.5

 
220.7

 
219.6

 
220.7

Plus: Common stock equivalent shares assumed from conversion of options
4.9

 
3.8

 
4.7

 
3.3

Weighted average shares outstanding during the period, diluted basis
225.4

 
224.5

 
224.3

 
224.0

 
 
 
 
 
 
 
 
Basic net earnings per share from continuing operations attributable to FNF common shareholders
$
0.66

 
$
0.35

 
$
0.98

 
$
0.54

Basic net earnings per share from discontinued operations attributable to FNF common shareholders
0.01

 
0.01

 
0.03

 
0.02

Basic earnings per share attributable to FNF common shareholders
$
0.67

 
$
0.36

 
$
1.01

 
$
0.56

 
 
 
 
 
 
 
 
Diluted net earnings per share from continuing operations attributable to FNF common shareholders
$
0.64

 
$
0.35

 
$
0.96

 
$
0.53

Diluted net earnings per share from discontinued operations attributable to FNF common shareholders
0.01

 
0.01

 
0.03

 
0.02

Diluted earnings per share attributable to FNF common shareholders
$
0.65

 
$
0.36

 
$
0.99

 
$
0.55

Options to purchase shares of our common stock that are antidilutive are excluded from the computation of diluted earnings per share. Antidilutive options totaled 3.1 million shares and 7.5 million shares for the three months ended June 30, 2012 and 2011, respectively, and 3.3 million shares and 8.6 million shares for the six months ended June 30, 2012 and 2011, respectively.


9

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


Note D — Fair Value Measurements
The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011, respectively:
 
June 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In millions)
Fixed maturity securities available for sale:
 
 
 
 
 
 
 
U.S. government and agencies
$

 
$
154.6

 
$

 
$
154.6

State and political subdivisions

 
1,297.9

 

 
1,297.9

Corporate debt securities

 
1,544.0

 

 
1,544.0

Mortgage-backed/asset-backed securities

 
170.7

 

 
170.7

Foreign government bonds

 
45.8

 

 
45.8

Preferred stock available for sale
42.6

 
80.2

 

 
122.8

Equity securities available for sale
112.0

 

 

 
112.0

Other long-term investments

 

 
39.2

 
39.2

Total
$
154.6

 
$
3,293.2

 
$
39.2

 
$
3,487.0

 
December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In millions)
Fixed maturity securities available for sale (1):
 
 
 
 
 
 
 
U.S. government and agencies
$

 
$
174.6

 
$

 
$
174.6

State and political subdivisions

 
1,439.5

 

 
1,439.5

Corporate debt securities

 
1,569.1

 

 
1,569.1

Mortgage-backed/asset-backed securities

 
226.7

 

 
226.7

Foreign government bonds

 
47.1

 

 
47.1

Preferred stock available for sale (2)
14.2

 
71.4

 

 
85.6

Equity securities available for sale
105.7

 

 

 
105.7

Other long-term investments

 

 
40.8

 
40.8

Total
$
119.9

 
$
3,528.4

 
$
40.8

 
$
3,689.1

_________________________
(1) Includes $256.7 million relating to the at-risk insurance business that have been reclassed into prepaid and other assets on the Condensed Consolidated Balance Sheet as they are considered held for sale as of December 31, 2011.
(2) Includes $14.2 million relating to the at-risk insurance business that have been reclassed into prepaid and other assets on the Condensed Consolidated Balance Sheet as they are considered held for sale as of December 31, 2011.
Our Level 2 fair value measures for fixed-maturities available for sale are provided by third-party pricing services. We utilize one firm for our taxable bond and preferred stock portfolio and another for our tax-exempt bond portfolio. These pricing services are leading global providers of financial market data, analytics and related services to financial institutions. We rely on one price for each instrument to determine the carrying amount of the assets on our balance sheet. The inputs utilized in these pricing methodologies include observable measures such as benchmark yields, reported trades, broker dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data including market research publications. We review the pricing methodologies for all of our Level 2 securities by obtaining an understanding of the valuation models and assumptions used by the third-party as well as independently comparing the resulting prices to other publicly available measures of fair value and internally developed models. The pricing methodologies used by the relevant third party pricing services are:

U.S. government and agencies: These securities are valued based on data obtained for similar securities in active markets and from inter-dealer brokers.


10

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


State and political subdivisions: These securities are valued based on data obtained for similar securities in active markets and from inter-dealer brokers. Factors considered include relevant trade information, dealer quotes and other relevant market data.

Corporate debt securities: These securities are valued based on dealer quotes and related market trading activity. Factors considered include the bond's yield, its terms and conditions, or any other feature which may influence its risk and thus marketability, as well as relative credit information and relevant sector news.
 
Mortgage-backed/asset-backed securities: These securities are comprised of commercial mortgage-backed securities, agency mortgage-backed securities, collaterized mortgage obligations, and asset-backed securities. They are valued based on available trade information, dealer quotes, cash flows, relevant indices and market data for similar assets in active markets.

Foreign government bonds: These securities are valued based on a discounted cash flow model incorporating observable market inputs such as available broker quotes and yields of comparable securities.

Preferred stock: Preferred stocks are valued by calculating the appropriate spread over a comparable U.S. Treasury security. Inputs include benchmark quotes and other relevant market data.
Our Level 3 investments consist of structured notes that were purchased in the third quarter of 2009. The structured notes had a par value of $37.5 million and fair value of $39.2 million at June 30, 2012 and a par value of $37.5 million and fair value of $40.8 million at December 31, 2011. The structured notes are held for general investment purposes and represent approximately one percent of our total investment portfolio. The structured notes are classified as other long-term investments and are measured in their entirety at fair value with changes in fair value recognized in earnings. The fair value of these instruments represents exit prices obtained from a broker-dealer. These exit prices are the product of a proprietary valuation model utilized by the trading desk of the broker-dealer and contain assumptions relating to volatility, the level of interest rates, and the value of the underlying commodity indices. We reviewed the pricing methodologies for our Level 3 investments to ensure that they are reasonable and believe they represent an exit price for the securities as of June 30, 2012.
The following table presents the changes in our investments that are classified as Level 3 for the period ended June 30, 2012 (in millions):
Balance, December 31, 2011
$
40.8

Net realized loss
(1.6
)
Balance, June 30, 2012
$
39.2

The carrying amounts of short-term investments, accounts receivable and notes receivable approximate fair value due to their short-term nature. Additional information regarding the fair value of our investment portfolio is included in Note E. Additional information regarding the fair value of our notes payable is included in Note F.










11

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


Note E — Investments
The carrying amounts and fair values of our available for sale securities at June 30, 2012 and December 31, 2011 are as follows:
 
June 30, 2012
 
Carrying
 
Cost
 
Unrealized
 
Unrealized
 
Fair
 
Value
 
Basis
 
Gains
 
Losses
 
Value
 
(In millions)
Fixed maturity securities available for sale:
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
154.6

 
$
144.3

 
$
10.3

 
$

 
$
154.6

State and political subdivisions
1,297.9

 
1,233.5

 
64.5

 
(0.1
)
 
1,297.9

Corporate debt securities
1,544.0

 
1,506.0

 
58.9

 
(20.9
)
 
1,544.0

Foreign government bonds
45.8

 
44.4

 
1.4

 

 
45.8

Mortgage-backed/asset-backed securities
170.7

 
161.3

 
9.4

 

 
170.7

Preferred stock available for sale
122.8

 
118.6

 
4.8

 
(0.6
)
 
122.8

Equity securities available for sale
112.0

 
75.3

 
38.6

 
(1.9
)
 
112.0

Total
$
3,447.8

 
$
3,283.4

 
$
187.9

 
$
(23.5
)
 
$
3,447.8

 
December 31, 2011
 
Carrying
 
Cost
 
Unrealized
 
Unrealized
 
Fair
 
Value
 
Basis
 
Gains
 
Losses
 
Value
 
(In millions)
Fixed maturity securities available for sale:
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
159.1

 
$
148.2

 
$
10.9

 
$

 
$
159.1

State and political subdivisions
1,330.1

 
1,266.1

 
64.1

 
(0.1
)
 
1,330.1

Corporate debt securities
1,463.4

 
1,442.7

 
48.3

 
(27.6
)
 
1,463.4

Foreign government bonds
46.0

 
44.2

 
1.8

 

 
46.0

Mortgage-backed/asset-backed securities
201.6

 
191.8

 
9.8

 

 
201.6

Preferred stock available for sale
71.4

 
74.8

 
0.4

 
(3.8
)
 
71.4

Equity securities available for sale
105.7

 
83.2

 
25.5

 
(3.0
)
 
105.7

Total
$
3,377.3

 
$
3,251.0

 
$
160.8

 
$
(34.5
)
 
$
3,377.3

The cost basis of fixed maturity securities available for sale includes an adjustment for amortized premium or discount since the date of purchase.
The following table presents certain information regarding contractual maturities of our fixed maturity securities at June 30, 2012:
 
 
June 30, 2012
 
 
Amortized
 
% of
 
Fair
 
% of
Maturity
 
Cost
 
Total
 
Value
 
Total
 
 
(Dollars in millions)
One year or less
 
$
351.9

 
11.4
%
 
$
355.6

 
11.1
%
After one year through five years
 
1,510.5

 
48.9

 
1,564.9

 
48.7

After five years through ten years
 
1,034.0

 
33.5

 
1,088.9

 
33.9

After ten years
 
31.8

 
1.0

 
32.9

 
1.0

Mortgage-backed/asset-backed securities
 
161.3

 
5.2

 
170.7

 
5.3

Total
 
$
3,089.5

 
100.0
%
 
$
3,213.0

 
100.0
%
Subject to call
 
$
1,483.8

 
48.0
%
 
$
1,528.5

 
47.6
%

12

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Included above in amounts subject to call are $1,098.5 million and $1,126.8 million in amortized cost and fair value, respectively, of fixed maturity securities with make-whole call provisions as of June 30, 2012.
The balance of equity securities includes an investment in FIS stock. The fair value of our investment in the FIS stock was $54.7 million and $42.6 million at June 30, 2012 and December 31, 2011, respectively.
Included in our other long-term investments are various cost-method investments and fixed maturity structured notes purchased in the third quarter of 2009. The structured notes are carried at fair value (see Note D) and changes in the fair value of these structured notes are recorded as realized gains and losses in the Condensed Consolidated Statements of Earnings. The carrying value of the structured notes was $39.2 million and $40.8 million as of June 30, 2012 and December 31, 2011, respectively; and we recorded a net loss of $2.2 million and $1.6 million related to the structured notes in the three-month and six-month periods ended June 30, 2012, respectively, and recorded a net (loss) gain of $(0.9) million and $2.2 million in the three-month and six-month periods ended June 30, 2011, respectively.
    Net unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012 and December 31, 2011, were as follows (in millions):
June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
State and political subdivisions
$
9.3

 
$
(0.1
)
 
$

 
$

 
$
9.3

 
$
(0.1
)
Corporate debt securities
195.8

 
(14.5
)
 
35.2

 
(6.4
)
 
231.0

 
(20.9
)
Preferred stock available for sale

 

 
9.8

 
(0.6
)
 
9.8

 
(0.6
)
Equity securities available for sale
7.4

 
(1.9
)
 

 

 
7.4

 
(1.9
)
Total temporarily impaired securities
$
212.5

 
$
(16.5
)
 
$
45.0

 
$
(7.0
)
 
$
257.5

 
$
(23.5
)
December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
State and political subdivisions
$
10.6

 
$
(0.1
)
 
$

 
$

 
$
10.6

 
$
(0.1
)
Corporate debt securities
339.0

 
(26.6
)
 
7.3

 
(1.0
)
 
346.3

 
(27.6
)
Preferred stock available for sale
52.9

 
(3.8
)
 

 

 
52.9

 
(3.8
)
Equity securities available for sale
16.1

 
(3.0
)
 

 

 
16.1

 
(3.0
)
Total temporarily impaired securities
$
418.6

 
$
(33.5
)
 
$
7.3

 
$
(1.0
)
 
$
425.9

 
$
(34.5
)
During the three-month and six-month periods ended June 30, 2012, we determined that no investments in our portfolio were considered other-than-temporarily impaired. We expect to recover the entire amortized cost basis of our temporarily impaired fixed maturity securities as we do not intend to sell these securities and we do not believe that we will be required to sell the fixed maturity securities before recovery of the cost basis. As of June 30, 2012 , we held $5.1 million of fixed maturity securities for which other-than-temporary impairment had been previously recognized. It is possible that future events may lead us to recognize potential future impairment losses related to our investment portfolio and that unanticipated future events may lead us to dispose of certain investment holdings and recognize the effects of any market movements in our condensed consolidated financial statements.





13

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


The following table presents realized gains and losses on investments and other assets and proceeds from the sale or maturity of investments and other assets for the three-month and six-month periods ending June 30, 2012 and 2011, respectively:
 
 
Three months ended
June 30, 2012
 
Six months ended
June 30, 2012
 
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains (Losses)
 
Gross Proceeds from Sale/Maturity
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains (Losses)
 
Gross Proceeds from Sale/Maturity
 
 
(Dollars in millions)
 
(Dollars in millions)
Fixed maturity securities available for sale
 
$
2.7

 
$
(0.1
)
 
$
2.6

 
$
163.6

 
$
4.9

 
$
(0.1
)
 
$
4.8

 
$
409.9

Preferred stock available for sale
 
0.2

 

 
0.2

 
5.2

 
0.2

 

 
0.2

 
5.2

Other long-term investments
 
 
 
 
 
(2.2
)
 

 
 
 
 
 
(1.9
)
 

Gain on consolidation of O'Charley's and ABRH
 
 
 
 
 
72.5

 

 
 
 
 
 
72.5

 

Other assets
 
 
 
 
 
(7.0
)
 

 
 
 
 
 
(5.5
)
 
2.3

Total
 
 
 
 
 
$
66.1

 
$
168.8

 
 
 
 
 
$
70.1

 
$
417.4

 
 
Three months ended
June 30, 2011
 
Six months ended
June 30, 2011
 
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains (Losses)
 
Gross Proceeds from Sale/Maturity
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains (Losses)
 
Gross Proceeds from Sale/Maturity
 
 
(Dollars in millions)
 
(Dollars in millions)
Fixed maturity securities available for sale
 
$
5.2

 
$
(0.4
)
 
$
4.8

 
$
296.8

 
$
21.1

 
$
(0.6
)
 
$
20.5

 
$
686.6

Preferred stock available for sale
 
0.1

 
(0.1
)
 

 
16.0

 
0.1

 
(0.1
)
 

 
21.0

Equity securities available for sale
 

 

 

 

 
1.9

 

 
1.9

 
16.3

Other long-term investments
 
 
 
 
 
(0.9
)
 
32.0

 
 
 
 
 
2.2

 
32.0

Other assets
 
 
 
 
 
(3.2
)
 
2.1

 
 
 
 
 
(4.4
)
 
3.8

Total
 
 
 
 
 
$
0.7

 
$
346.9

 
 
 
 
 
$
20.2

 
$
759.7

Investments in unconsolidated affiliates are recorded using the equity method of accounting. As of June 30, 2012 and December 31, 2011, investments in unconsolidated affiliates consisted of the following (in millions):
 
Current Ownership
 
June 30, 2012
 
December 31, 2011
Ceridian
33
%
 
$
350.9

 
$
352.8

Remy
46
%
 
142.6

 
141.8

Other
Various

 
18.5

 
51.9

     Total
 
 
$
512.0

 
$
546.5

In addition to our equity method investment in Remy, we held $28.8 million and $29.7 million in par value of a Remy term loan as of June 30, 2012 and December 31, 2011, respectively. The fair value of the term loan was $28.8 million and $29.3 million as of June 30, 2012 and December 31, 2011, respectively, and is included in our fixed maturity securities available for sale.
We account for our equity in Ceridian and Remy on a three-month and one-month lag, respectively. Accordingly, our net earnings for the three-month and six-month periods ended June 30, 2012, include our equity in Ceridian’s earnings for the three-month and six-month periods ended March 31, 2012, and our net earnings for the three-month and six-month periods ended June 30, 2011, include our equity in Ceridian’s earnings for the three-month and six-month periods ended March 31, 2011. Our net earnings for the three-month and six-month periods ended June 30, 2012, include our equity in Remy's earnings for the three-month and six-month periods ended May 31, 2012, and our net earnings for the three-month and six-month periods ended June 30, 2011, include our equity in Remy's earnings for the three-month and six-month periods ended May 31, 2011. During the three-

14

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


month periods ended June 30, 2012 and 2011, we recorded an aggregate of $0.7 million and $11.3 million, respectively, in equity in earnings and $3.4 million and $1.4 million, respectively, for the six-month periods ended June 30, 2012 and 2011 of Ceridian and Remy. Equity in earnings of other unconsolidated affiliates was $1.3 million for each of the three-month periods ended June 30, 2012 and 2011, and $4.4 million and $2.6 million for the six-month periods ended June 30, 2012 and 2011, respectively.
Summarized financial information for Ceridian for the relevant dates and time periods included in our condensed consolidated financial statements is presented below.
 
March 31, 2012
 
September 30, 2011
 
(In millions)
 
(In millions)
Total current assets
$
1,250.6

 
$
1,154.0

Goodwill and other intangible assets, net
4,551.0

 
4,577.6

Other assets
6,570.0

 
4,259.6

Total assets
$
12,371.6

 
$
9,991.2

Current liabilities
$
980.4

 
$
892.0

Long-term obligations, less current portion
3,441.8

 
3,451.4

Other long-term liabilities
6,875.0

 
4,566.0

Total liabilities
11,297.2

 
8,909.4

Equity
1,074.4

 
1,081.8

Total liabilities and equity
$
12,371.6

 
$
9,991.2


 
Three Months Ended March 31, 2012
 
Three Months Ended March 31, 2011
 
Six Months Ended March 31, 2012
 
Six Months Ended March 31, 2011
 
(In millions)
Total revenues
$
368.1

 
$
377.7

 
$
767.2

 
$
771.5

Loss before income taxes
(9.3
)
 
(14.0
)
 
(32.4
)
 
(18.8
)
Net loss
(7.2
)
 
(10.5
)
 
(29.1
)
 
(10.4
)


15

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


Note F — Notes Payable
Notes payable consists of the following:
 
June 30, 2012
 
December 31, 2011
 
(In millions)
Unsecured convertible notes, net of discount, interest payable semi-annually at 4.25%, due August 2018
$
280.8

 
$
279.5

Unsecured notes, net of discount, interest payable semi-annually at 6.60%, due May 2017

299.8

 
299.8

Unsecured notes, net of discount, interest payable semi-annually at 5.25%, due March 2013

236.5

 
236.4

Revolving Credit Facility, unsecured, unused portion of $750.0 at June 30, 2012, due April 2016 with interest payable monthly at LIBOR + 1.45% (1.69% at June 30, 2012)
50.0

 
100.0

Restaurant Group Term Loan, interest payable monthly at LIBOR + 3.50% (3.74% at June 30, 2012), due May 31, 2017
85.0

 

Other

0.3

 
0.1

 
$
952.4

 
$
915.8


At June 30, 2012, the fair value of our long-term debt was $999.4 million and the carrying amount was $952.4 million. The fair value of our unsecured notes payable was $862.2 million as of June 30, 2012, based on established market prices for the securities on June 30, 2012 and are considered Level 2 financial liabilities. The fair value of our Revolving Credit Facility is $51.9 million, estimated using a discounted cash flow analysis based on current market interest rates and comparison of interest rates being paid to our current incremental borrowing rates for similar types of borrowing arrangements and is considered a Level 3 financial liability. The fair value of our Restaurant Group Term Loan is $85.0 million, estimated using a discounted cash flow analysis based on current market interest rates and comparison of interest rates being paid to our current incremental borrowing rates for similar types of borrowing arrangements and is considered a Level 3 financial liability.

On May 31, 2012, ABRH entered into a credit agreement (the “ABRH Credit Facility”) with Wells Fargo Capital Finance, LLC as administrative agent and swing lender (the “ABRH Administrative Lender”) and the other financial institutions party thereto. The ABRH Credit Facility provides for a maximum revolving loan of $80.0 million with a maturity date of May 31, 2017. Additionally, the ABRH Credit Facility provides for a maximum term loan ("Restaurant Group Term Loan") of $85.0 million with quarterly installment repayments through December 25, 2016 and a maturity date of May 31, 2017 for the outstanding unpaid principal balance and all accrued and unpaid interest. On May 31, 2012, ABRH borrowed the entire $85.0 million under such term loan. Pricing for the ABRH Credit Facility is based on an applicable margin between 300 basis points to 375 basis points over LIBOR. The ABRH Credit Facility is subject to affirmative, negative and financial covenants customary for financings of this type, including, among other things, limits on ABRH's creation of liens, sales of assets, incurrence of indebtedness, restricted payments, transactions with affiliates, and certain amendments. The covenants addressing restricted payments include certain limitations on the declaration or payment of dividends by ABRH to its parent, Fidelity Newport Holdings, LLC (“FNH”), and by FNH to its members, and one such limitation restricts the amount of dividends that ABRH can pay to its parent (and that FNH can in turn pay to its members) to $5.0 million in the aggregate (outside of certain other permitted dividend payments) in fiscal year 2012 (with varying amounts for subsequent years). The ABRH Credit Facility includes customary events of default for facilities of this type (with customary grace periods, as applicable), which include a cross-default provision whereby an event of default will be deemed to have occurred if (a) ABRH or any of its guarantors, which consists of FNH and certain of its subsidiaries, (together, the “Loan Parties”) or any of their subsidiaries default on any agreement with a third party of $2.0 million or more related to their indebtedness and such default (1) occurs at the final maturity of the obligations thereunder or (2) results in a right by such third party to accelerate such Loan Party's or its subsidiary's obligations or (b) a default or an early termination occurs with respect to certain hedge agreements to which a Loan Party or its subsidiaries is a party involving an amount of $0.75 million or more. The ABRH Credit Facility provides that, upon the occurrence of an event of default, the ABRH Administrative Lender may (i) declare the principal of, and any and all accrued and unpaid interest and fees in respect of, the loans immediately due and payable, (ii) terminate loan commitments and (iii) exercise all other rights and remedies available to the ABRH Administrative Lender or the lenders under the loan documents. As of June 30, 2012, the balance of the term loan was $85.0 million and there was no balance in the revolving loan.

16

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


On April 16, 2012, we entered into an agreement to amend and extend our credit agreement dated September 12, 2006, as amended and restated as of March 5, 2010 (the “ Revolving Credit Facility”) with Bank of America, N.A. as administrative agent and swing line lender (the “Administrative Agent”), and the other financial institutions party thereto, and an agreement to change the aggregate size of the credit facility under the Revolving Credit Facility. These agreements reduced the total size of the credit facility from $925.0 million to $800.0 million, with an option to increase the size of the credit facility to $900.0 million, and established an extended maturity date of April 16, 2016. Pricing for the new agreement is based on an applicable margin between 132.5 basis points to 160.0 basis points over LIBOR, depending on the senior debt ratings of FNF. The Revolving Credit Facility remains subject to affirmative, negative and financial covenants customary for financings of this type, including, among other things, limits on the creation of liens, sales of assets, the incurrence of indebtedness, restricted payments, transactions with affiliates, and certain amendments. The Revolving Credit Facility prohibits us from paying dividends to our stockholders if an event of default has occurred and is continuing or would result therefrom. The Revolving Credit Facility requires us to maintain certain financial ratios and levels of capitalization. The Revolving Credit Facility includes customary events of default for facilities of this type (with customary grace periods, as applicable). These events of default include a cross-default provision that, subject to limited exceptions, permits the lenders to declare the Revolving Credit Facility in default if: (i) (A) we fail to make any payment after the applicable grace period under any indebtedness with a principal amount (including undrawn committed amounts) in excess of 3.0% of our net worth, as defined in the Revolving Credit Facility, or (B) we fail to perform any other term under any such indebtedness, or any other event occurs, as a result of which the holders thereof may cause it to become due and payable prior to its maturity; or (ii) certain termination events occur under significant interest rate, equity or other swap contracts. The Revolving Credit Facility provides that, upon the occurrence of an event of default, the interest rate on all outstanding obligations will be increased and payments of all outstanding loans may be accelerated and/or the lenders' commitments may be terminated. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the Revolving Credit Facility shall automatically become immediately due and payable, and the lenders' commitments will automatically terminate.

Principal maturities of notes payable at June 30, 2012, are as follows (in millions):
2012
$
3.5

2013
243.9

2014
8.5

2015
8.5

2016
58.5

Thereafter
629.5

 
$
952.4


Note G — Commitments and Contingencies

Legal and Regulatory Contingencies

In the ordinary course of business, we are involved in various pending and threatened litigation matters related to our title operations, some of which include claims for punitive or exemplary damages. This customary litigation includes but is not limited to a wide variety of cases arising out of or related to title and escrow claims, for which we make provisions through our loss reserves. Additionally, like other insurance companies, our ordinary course litigation includes a number of class action and purported class action lawsuits, which make allegations related to aspects of our insurance operations. We believe that no actions, other than the matter discussed below, depart from customary litigation incidental to our insurance business.
        
Our restaurant group companies are a defendant from time to time in various legal proceedings arising in the ordinary course of business, including claims relating to injury or wrongful death under “dram shop” laws that allow a person to sue us based on any injury caused by an intoxicated person who was wrongfully served alcoholic beverages at one of the restaurants; and claims from guests or employees alleging illness, injury or other food quality, health or operational concerns.

We review lawsuits and other legal and regulatory matters (collectively “legal proceedings”) on an ongoing basis when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, management bases its decision on its assessment of the ultimate outcome assuming all appeals have been exhausted. For legal proceedings where it has been

17

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued


determined that a loss is both probable and reasonably estimable, a liability based on known facts and which represents our best estimate has been recorded. None of the amounts we have currently recorded is considered to be individually or in the aggregate material to our financial condition. Actual losses may materially differ from the amounts recorded and the ultimate outcome of our pending cases is generally not yet determinable. While some of these matters could be material to our operating results or cash flows for any particular period if an unfavorable outcome results, at present we do not believe that the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows.

On November 24, 2010, plaintiffs filed a purported class action in the United States District Court, Northern District of California, Oakland Division titled Vivian Hays, et al. vs. Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation. Plaintiffs seek to represent a class of all persons who deposited their exchange funds with LandAmerica 1031 Exchange Service (“LES”) and were not able to use them in their contemplated exchanges due to the alleged illiquidity of LES caused by the collapse of the auction rate security market in early 2008. Plaintiffs allege Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation (which was merged into Fidelity National Title Insurance Company) knew of the problems at LES and had an obligation of disclosure to exchangers, but did not disclose and instead recommended exchangers use LES in order to fund prior exchangers' transactions with money from new exchangers. In the initial complaint, plaintiffs sued our subsidiaries Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation for negligence, breach of fiduciary duty, constructive fraud and aiding and abetting LES. Plaintiffs ask for compensatory and punitive damages, prejudgment interest and reasonable attorney's fees. On March 29, 2012, the LES liquidation trust, the LFG liquidation trust, the Companies affiliated with FNF and certain underwriters at Lloyd's of London entered into a Settlement Agreement and Release (the “Settlement”). The Settlement contemplates an $11.0 million payment being made by the Companies to settle the purported class action; $3.2 million of which will be paid by the Lloyd's of London underwriters. Class counsel and the Companies' counsel have finalized a Class Settlement Agreement and it has been fully executed.  A “Motion for Preliminary Approval" of the settlement agreement was approved on July 6, 2012. Class counsel and the companies' counsel have requested a final fairness hearing on November 12, 2012. We anticipate that this matter will be resolved by the fourth quarter of 2012. If the Settlement is not approved, we intend to continue to vigorously defend the action.

From time to time we receive inquiries and requests for information from state insurance departments, attorneys general and other regulatory agencies about various matters relating to our business. Sometimes these take the form of civil investigative demands or subpoenas. We cooperate with all such inquiries and we have responded to or are currently responding to inquiries from multiple governmental agencies. Also, regulators and courts have been dealing with issues arising from foreclosures and related processes and documentation. Various governmental entities are studying the title insurance product, market, pricing, and business practices, and potential regulatory and legislative changes, which may materially affect our business and operations. From time to time, we are assessed fines for violations of regulations or other matters or enter into settlements with such authorities which may require us to pay fines or claims or take other actions.

Escrow Balances
In conducting our operations, we routinely hold customers’ assets in escrow, pending completion of real estate transactions. Certain of these amounts are maintained in segregated bank accounts and have not been included in the accompanying Condensed Consolidated Balance Sheets. We have a contingent liability relating to proper disposition of these balances for our customers, which amounted to $5.8 billion at December 31, 2011.
Operating Leases
Future minimum lease payments are as follows (in millions):
2012 remaining
 
$
94.4

2013
 
158.0