Fidelity National Financial Inc (FNF) 2012 Q3 法說會逐字稿

Ladies and gentlemen thank you for standing by and welcome to the FNF 2012 third-quarter earnings call. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given to you at that time.

(Operator Instructions)

And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Mr. Dan Murphy. Please go ahead.

Thank you. Good morning everyone and thanks for joining us for our third-quarter 2012 earnings conference call. Joining me today are Bill Foley, our Chairman; George Scanlon, CEO; Randy Quirk, President and Tony Park, our CFO. We'll begin with a brief strategic overview from Bill Foley, George Scanlon will provide an update on the title business and our other operating companies, and Tony Park will finish with a review of the financial highlights. We will then open the call for your questions and finish with some concluding remarks from Bill Foley.

This conference call may contain forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts -- including statements about our expectations, hopes, intentions or strategies regarding the future -- are forward-looking statements. Forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future financial and operating results, and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. The risk and uncertainties which forward-looking statements are subject to include but are not limited to, the risks and other factors detailed in our press release dated yesterday, and in the statement regarding forward-looking information, risk factors, and other sections of the company's Form 10-K and other filings with the SEC.

This conference call will be available for replay via webcast at our website at FNF.com. It will also be available through phone replay beginning at 1.00 p.m. Eastern Time today through November 13. The replay number is 800-475-6701 and the access code is 266992. Let me now turn the call over to our Chairman, Bill Foley.

Thanks, Dan. The third quarter was another solid performance from our title insurance business as we generated a 14.4% pre-tax margin for the second consecutive quarter. The last two quarters are evidence of the significant earnings potential we have in a stronger real estate market. We acquired control of J. Alexander's on September 25 and closed the acquisition on October 29. We believe that J. Alexander's and its relative position upscale casual will be a great addition to our casual dining lineup and look forward to its revenue and earnings contribution to our restaurant group.

In August we purchased an additional 1.5 million shares of Remy, giving us a 51% majority ownership stake in the company. Remy is also moving forward with its plan to have its stock listed on NASDAQ, undertaking certain initiatives to increase the number of round lot shareholders to meet the minimum NASDAQ listing requirements. We believe a move to NASDAQ will significantly increase liquidity of the stock and provide future financial flexibility for both Remy and its shareholders. Last quarter we announced that Cascade has signed a definitive agreement to sell its land holdings. This particular transaction will not happen. We continue to look at other transactions but are comfortable holding this investment for the longer-term if attractive alternatives are not presented.

During August, we issued $400 million of 10-year senior notes utilizing the majority of the proceeds to redeem the $236 million of senior notes coming due in March 2013 and to repay $50 million borrowed under our credit facility. We now have no debt maturities until May 2017 and an unused $800 million credit facility providing significant financial flexibility over the next several years. In late July we repurchased 1.015 million shares of stock for a total purchase price of $19 million, including a 1 million share block at a price of $18.80. With the expiration of our current share authorization on July 31, our board authorized a new three-year 15 million share plan that currently has full authority available.

Finally, last week our board approved a 14% increase in our quarterly cash dividend, moving it to $0.16 per share. We believe this dividend is a welcome return of capital for our shareholders as a strong dividend is one of our main priorities in continually seeking to create value for our shareholders. Let me now turn the call over to our CEO, George Scanlon.

Thank you, Bill. This quarter again highlights the strength of our Title business in an environment of steady, consistent order volumes. Open and closed orders were primarily refinance driven and generally similar to the second quarter of this year. And we generated another strong 14.4% pre-tax title margin. Additionally, we also saw a 7% increase in open resale orders versus the third quarter of 2011, continuing the improvement in purchase volume we have seen throughout 2012. Finally, we have also seen a continuing year-over-year decline in claim payments as our claims management initiatives drive lower costs and we work our way through the high-claim years, contributing to a significant improvement in company cash flow. Our company is well-positioned to take advantage of the emerging recovery in real estate.

Title pre-tax earnings of $211 million grew by $73 million, or 53%, over the third quarter of 2011 and our Title pre-tax margin of 14.4% improved by 220 basis points over the prior year period. For the second consecutive quarter we produced a 14.4% pre-tax Title margin in a market that remains weighted toward refinance orders. Our commercial title business continued to perform well despite a 7% decline in third-quarter revenue versus the prior year. Open orders of 18,200 increased 2% and closed orders of 12,000 improved by 3%. The revenue decline was driven by a 10% decline in commercial fee per file, which is solely a function of the size, type and mix of closed orders during the quarter. Overall, the commercial business continues to perform very well for us and we expect another strong fourth-quarter performance.

Open order accounts were very strong during the quarter, growing 18% over the prior year and gaining momentum as the quarter ended and we entered the fourth quarter. Overall, open orders averaged more than 11,200 per day for the third quarter, with July averaging 11,400, August 10,800 and September 11,400. The month of October actually showed an increase to nearly 11,700 open orders per day -- our strongest monthly open order performance of the year. Not surprisingly, the mix of third quarter business was weighted toward refinance orders, as 67% of open orders and 63% of closed orders were refinance related. As I mentioned earlier, we continue to see strength in the purchase market as we experience a 7% increase in purchase order volumes open in the third quarter versus the prior year, continuing the trend we have seen throughout this year.

At ServiceLink, open orders increased 34% sequentially from the second quarter while closed orders declined by 3%. HARP orders constituted approximately 50% of total open orders at ServiceLink in the third quarter. A significant volume of HARP business has caused a backlog at the major centralized lenders and we expect to see a significant increase in closed orders at ServiceLink in the fourth quarter as the backlog is worked through.

We now have two consolidated operations in addition to the Title business. American Blue Ribbon produced operating revenue of $298 million and adjusted EBITDA of more than $10 million. All three restaurant segments -- casual, upscale casual and family dining -- posted positive comparative sales figures for third quarter. Of the six concepts, only one -- O'Charley's -- trailed its competitive benchmarks. We are still in the early stages of the integration of the O'Charley's acquisition and have many specific plans in place to improve the performance of the O'Charley's concept. These include a revamped menu with a focus on everyday value and embarking on a test remodeling program in mid-November. We expect to make significant progress in improving the financial performance of the O'Charley's concept during 2013. We also reported a $48 million pre-tax gain related to tax attributes acquired in the O'Charley's acquisition. On after-tax basis, this added $34 million, or $0.15 per diluted share, to FNF's third-quarter earnings. Overall, ABRH produced pre-tax earnings of $43 million for the third quarter.

Upon achieving majority ownership on August 15, we began consolidating Remy's financial results. So we are reporting about six weeks of operations this quarter and will report our first full quarter of financial results in the fourth quarter. For the partial quarter, Remy generated operating revenue of $143 million and adjusted EBITDA of nearly $20 million for an EBITDA margin of 13.6%. Remy continues to perform well against a challenging global macroeconomic backdrop and remains focused on cost-savings initiatives during the difficult economic environment. We also reported a $79 million pre-tax gain on the consolidation of Remy. As accounting rules require that we mark our formerly minority-owned investment to market. On an after-tax basis this added $55 million, or $0.24 per diluted share, to FNF's third-quarter earnings. Overall, Remy produced pre-tax earnings of $80 million for the third quarter. Additionally, we recognize $5.5 million dollars in earnings from equity investments from Remy for the first half of the third quarter when we still owned a minority stake.

Finally, our minority-owned investment, Ceridian, generated third-quarter revenue of $356 million, a 3% decline from the prior-year quarter. But despite that revenue decline, EBITDA of $88 million actually increased 17%. The EBITDA margin was 25% for the quarter and our 33% share of Ceridian's quarterly loss was $2 million. Let me now turn the call over to Tony Park to review the financial highlights. Tony.

Thank you, George. FNF generated more than $2 billion in revenue in the third quarter, compared to $1.2 billion in the third quarter of 2011, as Title revenue grew by $270 million, or 23%. The consolidations of the restaurant group and Remy, added $441 million in revenue and the realized gains from Remy and ABRH added $127 million in revenue this quarter. Net earnings were $233 million, or $1.03 per diluted share, and net earnings were $144 million, or $0.64 per diluted share, excluding the Remy and American Blue Ribbon gains. Book value per share grew to $20.50.

The Title segment generated more than $1.4 billion in operating revenue for the third quarter, a 23% increase from the third quarter of 2011. Direct title premiums grew by nearly 17%, driven by a 27% increase in closed orders offset somewhat by a 5% decline in the fee per file due to a higher mix of refinance transactions. Agency premiums grew by 34% over the prior year, as our aggressive stance in reducing agency relationships and adjusting splits in New York have now taken place more than 12 months ago. Agency profitability grew as the third quarter agent split improved by nearly 60 basis points to 76%. Title segment personnel costs increased by $53 million, or 14%, versus the third quarter of 2011. And other operating expenses grew by $25 million, or 9.5%. As we would expect, variable-based personnel costs increased more than the higher fixed-base other operating expenses reflecting the operating leverage to improved order counts and a future mix shift toward more purchase transactions. The net effect was a 14.4% pre-tax Title margin, an improvement of 220 basis points versus the third quarter 2011.

As Bill mentioned, we issued $400 million of senior notes during the quarter and we used the majority of those proceeds to redeem $236 million of senior notes that were maturing in March 2013 and repay $50 million borrowed under our credit facility. FNF, excluding ABRH and Remy, has a total of $979 million in debt on the balance sheet at September 30 with no maturities until May 2017. Additionally, there were no borrowings under our credit facility as of September 30. The consolidation of Remy and ABRH added debt of $371 million with $272 million from Remy and $99 million from ABRH. FNF does not provide any corporate guarantee on the debt of either Remy or ABRH. Our debt-to-capital ratio was 23% at September 30 including the Remy and ABRH debt. Total title claims paid were $97.5 million during the third quarter and our reserve position remains within a reasonable range of our actuarial estimates. We will continue to provide for future claims at a 7% provision level for the remainder of 2012 and into 2013. We also continue to see encouraging results from the 2009 through 2012 policy years.

Finally, our investment portfolio totaled $5.1 billion at September 30, an increase of approximately $90 million from June 30. From a regulated standpoint, we have more than $1.8 billion in statutory reserves, $1.7 billion in regulated cash and investments, and $530 million in secured trust deposits for a total of nearly $4.1 billion in regulated cash and investments. From an unregulated perspective, we have $370 million in a minority equity investment in Ceridian and approximately $440 million in unregulated cash and investments for a total of $810 million in unregulated cash and investments. There is also $112 million in consolidated cash at Remy and American Blue Ribbon that is necessary for their operations. Let me now turn the call back to our operator, Cynthia, to allow for any questions.

Thank you.

(Operator Instructions)

Mark Devries, Barclays.

Thanks. Can you talk about any benefit we might expect to see for the title margin in the fourth quarter as you work through that backlog in ServiceLink that presumably had processing expenses upfront but not necessarily revenues?

Yes, Mark. This is George. The ServiceLink performance in the fourth quarter will be better than the third quarter based on that order build-up in the third quarter closing in the fourth quarter. And you noted correctly that we have to maintain a certain level of personnel to handle the order volumes and we saw that build up during the quarter. It varies by bank and they can be sporadic, but when they come in they come in heavy. So I would expect that there is some margin upside in our ServiceLink operations in the fourth quarter.

Okay. And then, more broadly, how much headcount did you add in the quarter?

This is Randy. We added 348 employees in the third quarter.

Okay. I assume that you believe that puts you in a good position for the volume you would expect, given the latest move in rates, to handle anything in the fourth quarter and beyond?

It certainly does. As George mentioned, a little bit of a backlog on the closings, so even as the orders would flatten off potentially, with the seasonal effect as you go through the fourth quarter, we are going to have some real good closing volume. So we are watching it closely. We staff our company to productivity standards and metrics and we use it on the way up and we use it on the way down. So we think we are in actually pretty good shape, but we need to open and close these deals and take care of our customers.

Okay. And then it looks like your agent premiums grew a lot faster year-over-year than direct this quarter. Can you give us a little color on what you attribute that relative strength to?

I would say a lot of it has to do with some of the noise of getting through the changes we made in New York. We talked about split adjustments that we made during the, I think, early second quarter of last year in New York. We have also been through a process, as you are very familiar, with reducing agent relationships that didn't make sense to us. So, really getting through that and having some distance between those decisions and where we are today, I think we are improving relationships with those agents that are still a big part of what we do and we are getting more remittance from them. And so we are seeing a nice improvement year-over-year in agency volume.

Okay. Great. Finally, I think George, you commented that the outlook for commercial volumes is good. Do you expect the normal seasonality in fourth-quarter volume with a pick up there?

Yes, I would expect the fourth quarter to be stronger than the third. As you can appreciate, Mark, commercial deals are large on a relative basis and can slip quarter-to-quarter. So it is hard for us to project exactly what is closing. But traditionally the fourth quarter is the strongest and our inventory coming into the fourth quarter is very strong. So as best as we can tell, we'd expect an up quarter. But it's subject to all those factors that can cause deals to get delayed.

Okay, great. Thanks.

Jordan Heimowitz, Michigan Financial.

Thanks guys. First of all, Dan, I would like to congratulate you on your 9-0 Notre Dame Fighting Irish. Congratulations.

Thank you.

Can you talk about the HARP loans for a minute? Is there any different pricing differential that you guys garner on HARP loans than non-HARP loans?

Jordan, this is George. No it is really the same pricing. They are obviously managed by the banks on a centralized basis and they come into our operation and so there is some efficiencies we realize if the volumes pick up and we are able to leverage the headcount. But the rate is about the same that we get in other refi transactions.

Is the expenses any less, or not really?

No, not really. It all flows for the most part to our ServiceLink operations, and the margins there are comparable to our other field operations. I think the challenge that ServiceLink has to monitor is their headcount levels relative to the order volumes which can be spiky. But as we indicated, there was a build in the third quarter and good momentum coming into the fourth, and so we expect the closings to accelerate based on that build of inventory.

And last question on the topic is what percent of originations in the quarter were HARP and what percent is in the fourth quarter from the backlog, so to speak.

Well out of our total refi orders in the third quarter, 15% to 20%, Randy?

Pretty close to 20%.

20% were HARP-related. So, we've talked about 67% of the orders in the quarter being refi-related, so the 20% of that is the HARP-related order volume.

And is it similar in the backlog?

Yes, I think that's probably about the -- that's a good assumption to use, Jordan, as you project into the fourth quarter.

Okay. Thanks guys.

Geoffrey Dunn, Dowling & Partners.

Thanks, good morning guys. First, could you talk a little bit more about the commercial market -- and it's probably for Randy. Are we seeing any shift in the type of deals being done, meaning are we shifting more back to traditional business versus some of the workout deals we have seeing for the last few years? Is that affecting your fee-per-file on any kind of permanent basis?

You are seeing a lot of multi-family work, multi-family transactions right now. You are still seeing the large commercial properties, known as the [dystrophy] properties, coming through. I think, again, in terms of a fee-per-file it is a little bit of a product of timing, of what transaction closed in which quarter. But, traditional back in the sense that you do have refinances of properties, and how you are seeing multi-state and also just local pure sales.

Okay. And then, extending what we are talking about with ServiceLink, in general, I think the sense in the market is that closing periods, particularly in refis, are extended across the board. So in modeling we would normally think that openings in October would hit December or early January. What is your sense in the market these days? How long is that period been extended out?

As George mentioned, in ServiceLink where you have more of the spikes in volume, you have seen some of this logjam within the lender. So what used to be a refinance transaction that could close potentially in three weeks to four weeks, you are now looking at six weeks and seven weeks. And when you get out into the direct operations it is pretty much the same thing. That there is such high volume right now it is taking longer to get from open to close.

Okay. Last question is on the restaurant side. Obviously, a lot of integration going on right now with a couple significant deals. Can you give us any insight into how we can judge your integration efforts over the next, let's say through '13? I think you talked about getting that EBITDA margin up to peer comps, which I think are probably like 6% or 8%. Is that a fair hurdle to judge you on in the next five quarters?

Yes, I think that is a fair judgment to use. With O'Charley's, which is the major integration effort -- O'Charley's and Stoney River and a little bit of Ninety Nine -- that really kicked off in May and June of this year. And we went through the process of actually moving the ABRH headquarters from Nashville down to -- I'm sorry, from Denver to Nashville. And the key management staff that was involved with ABRH actually have relocated and moved and there's been significant adjustments in personnel already in the ABRH group. We are ahead of schedule and our minimum synergy number was $20 million. But the guys are incented to do better than that and we are confident that we will do significantly better than the $20 million synergy number. But, to date with the restaurant closings -- and there will be a little noise probably in the fourth quarter with regard to a couple of J. Alexander's closings -- and then the booking of negative goodwill and affected income. We've just had noise the first five or six months of this acquisition program. That should be really behind us beginning in January, or the first quarter of next year. And then you are going to start seeing these numbers fall into line and we'll be meeting your expectations as we go forward through 2013.

And Bill, now that you've had these various acquisitions, is there any particular type of restaurant area that is a hole in the portfolio you have established, or are you just continuing to be watching opportunistically for deals that might complement?

No, I believe actually what we are focusing on -- well I know what we're focusing on now is upscale casual. We brought a management team along in terms of the operations group with J. Alexander's that is very skilled. They are going to get involved with our Stoney River chain, which is upscale casual. And we are taking a look in the marketplace for upscale casual chains that could be integrated into that division. So we really have three divisions now of a family dining segment, a casual group -- which would be O'Charley's, Ninety Nine, Max & Erma's -- and upscale casual which is J. Alexander's, Stoney River, and there is a lot of capacity to add to that third leg.

On the O'Charley's leg, or the O'Charley's restaurant chain, I was just out in Nashville a couple of weeks ago. We have an excellent outside image enhancement and inside image enhancement program that will be kicking off with the first one being finished around November 15. And it is exciting the way it's going to redesign the way O'Charley's looks and make it present itself in a different way to the consumer. Plus it is a complete food -- complete menu modification and change and it is a change in terms of the training and the dress and the attitude of the employees. I walked away from that experience in Nashville with a couple of O'Charley's having really a lot of confidence in the direction we are taking with O'Charley's. I would encourage you in the first or second quarter of next year to take a trip to where some of the stores have been remodeled and just take a look and try the food, because it is outstanding. This is going to be not just a fun investment for FNF but a very profitable one.

Okay. Thanks.

Bose George, KBW.

Thanks. Good morning. Going back to the title margin, if we leave aside ServiceLink, do we need the purchase market to come back a little more to see the title margin go up from here?

Bose, it's George. I would say that it's always a function of volume, right? Our margins, as you have seen in the last couple quarters, are in the mid-teens despite an overall market that is still pretty lousy. I would say as we begin the transition to a more normalized mix, where we're maybe 70/30 purchase to refi, along with a continued strong commercial market, you will see our ability to expand margins and obviously the market will be going through a transition next year. But in the meantime we are enjoying the refi volumes and we are able to generate market-leading margins.

Make sense, thanks. And switching over to capital management. You guys obviously raised the dividend nicely, but going forward, shares remain a little bit above book. How do you balance the different uses for your excess capital?

Well, you know, paying a strong dividend is a priority of ours and we have been raising it over the last couple years -- 17% coming into this year and now 14%. And it is a respectable yield on our book value and as you indicated we are trading marginally above book today. We've added, I think, about $4 per share to book value this year so far. As we look at buybacks, we were active in the third quarter. There was an opportunistic situation that allowed us to take out a chunk of shares. We will periodically be back in the market doing buybacks as well.

As Tony indicated, our balance sheet is in great shape. We have got an $800 million revolver that is not drawn on. Targets for growth will probably be to augment the restaurant business. We see opportunities as we complete the integration of O'Charley's to further expand that. And we also look at small niche type transactions in the title business that can strengthen our offerings through our ServiceLink program. So, those are where we are going. We are still mindful of a market that is transitioning, so we want to be on the conservative side. But as you saw from our cash flow, we are encouraged about the directions that claims are going and hopefully we can see a sustainable trend there and over time that will obviously allow us to take down our provision rate and enhance our margins that way as well. Those are probably the order of priority I would place on it.

Okay. Great. Thanks very much.

Brett Huff, Stephens Inc.

Good morning guys.

Hey Brett.

A couple of quick questions. George, just to follow up on your provision comment a minute ago. It sounds like when Tom here -- or maybe Tony can come on this too. Tony you said that 7% through '12 and then into '13, does that imply you guys are thinking about a reduction provision once we get in the back half of '13 or what visibility can you give us on that?

We have seen favorable trends, Brett, as we're starting to get on the other side of the mountain of those high claim years in '06, '07, and '08. And then we've seen favorable loss experience '09, '10, '11 and year-to-date '12. At some point, frankly, we are going to be over-provisioning, and if that trend continues that we have seen over the last few years, then continuing a 7% rate will be inappropriate and too high. As we look into next year, we are going to maintain that 7% rate. You are always subject to some volatility with major claims and so we want to maintain more of a conservative bias. But certainly if we maintain this pace through '13, then as you look at '14 I would say there is likely to be a reduction in that provision rate.

Thanks. In the past year they've talked about what a normalized market and what the earnings power could be. Any revisions to that thought in terms of earnings power for the company looking forward now and in a normalized market, whatever that might be?

It is hard to say what a normalized market is. You know, the outlook for next year is changing and improving. I think as refi is expected to be stronger than it was originally thought and the resale market is improving and we are seeing that in our numbers. You know, I think what we've done is we have adjusted our cost structure to where in a normalized, $1.5 trillion market we are going to do very well. But next year won't be normalized because I think we are still seeing the transition and I don't think we will see until '14 a shift where purchase is outweighing refi.

But we have done the things on the cost side, both in our shared services group as well as in our field operations, to improve our efficiency. We have done some things with technology that are enabling us to be more productive. So our breakeven point is lower and we have consistently shown a discipline on the cost side so that as order volumes pick up, we closely monitor the variable expense. So, getting into the high teens is eminently achievable without getting to a $2 trillion market, which at one point in time would have been average. You know, we are just taking it as it comes. Again, if commercial can continue to maintain its pace, the residential side will take care of itself and you will continue to see margin expansion down the road.

Great. And then two more questions. One is a quick numbers question. On the tax rate -- that moved around a little bit, it seems like the new segments are affecting that. What is a good number to use going forward? And similar to that, as we look on the two new segments -- the restaurant's relatively new and then Remy -- should we just kind of double Remy based on what we saw this quarter and is that a reasonable run rate and then adjust it for any cost savings or operational synergies going forward? And then, restaurants, what can we expect on a run rate either with or without the new Jacks business?

Let me answer a couple of the questions. I will let Tony handle the tax rate. I think using the Remy six weeks, for modeling purposes, is probably a good way to start. They had some softness on the revenue line this quarter. That is probably going to continue for a little while. But I think directionally that is a good start. You know, our restaurant business is running at about $1.5 billion of annualized revenue. The EBITDA measures are going to be still a little noisy as we get through the assimilation of O'Charley's, some additional restructuring expenses, the benefits of synergy coming through and the timing of those. And then obviously the J. Alexander integration. We don't give guidance, Brett, here but I'd say you will see expanding EBITDA margins into 2013 with a better second-half run rate than a first-half run rate as we further the integration and get some of the store closures and cost adjustments behind us.

And Brett, just to follow on the Remy piece, there was one adjustment that was solely related to our acquisition of a majority ownership stake. It was a purchase accounting number of $8.5 million that you can see in the reconciliation. I would factor that in as being a one-time item. And then in terms of the tax rate, the fourth quarter we would expect to see somewhere about the same as what we see year-to-date which is a 30% effective income tax rate. That has been lowered due to the consolidations of ABRH, the consolidation of Remy and losses from our equity investment in Ceridian. If you look toward next year though, I would expect to see that rate somewhere closer to what our historical rate has been, which is about 35%.

Great. Thank you.

(Operator Instructions)

DeForest Hinman, Walthausen & Company.

I had a couple of strategic questions. Can you talk about your performance targets you are using with the Blue Ribbons business and how we should think about you achieving those benchmarks going forward?

I think our first performance target relates to O'Charley's and that is where this image enhancement and the menu change, uniform change and enhanced training. We are really focused on moving the average unit volumes of O'Charley's up from that 2.3 per store average and getting more towards 2.5, 2.6 over the next several years. As you know, as you get that additional revenue it really starts following through into EBITDA and to pre- and after-tax profits because you've already got your fixed expenses in place. I think an earlier question really highlighted where we are trying to get to in terms of this EBITDA margin target. We are targeting the 6.5% to 7% once our synergies are in place in terms of EBITDA and the restaurant group based upon the total revenue of the group. And we should get these synergies and it should be done and out-of-the-way by the middle to the third quarter of next year. Then we will really get back to work on just running the businesses very, very efficiently. Does that help?

That is very helpful. On the Remy business, it is interesting that you increased your ownership in that business. I know in the past you had had the S-1 sitting out there trying to do the IPO, and with this transaction are you saying that you're not looking to do this spend in the near term? If not, what is the strategy with this business being consolidated at this point in time?

We did a lot of work on Remy over the last four or five years. I mean, restructured the balance sheet, got rid of the preferred shares, got rid of some very expensive debt, and now have got the company structured with a modest debt. And on a net basis we have about $100 million of cash, $105 million of cash and $290 million of debt. The goal for Remy now is to start to paying down that debt and move toward a lower debt-to-cap ratio. But on the overall thought process, we've investigated taking Remy public and it just was not -- the timing was just not right for that particular asset to undertake a public offering. We then took a stab at seeing if there were interested parties in acquiring our position in Remy. And that didn't work out. People really either wanted the whole company, or they weren't willing to pay enough money, or they just didn't want our position. So for all the myriad of reasons you always experience in trying to sell a large minority position in the company.

Then we decided well what we should really do is get this company more closely integrated within the Fidelity National Financial organizational structure. Acquire a majority interest and then follow through on a NASDAQ listing by trying to create an employee stock purchase plan or other ways to try to increase the round lot number of shareholders to the 300 minimum required by NASDAQ. And so then at least we have accomplished a mission of getting Remy traded on NASDAQ as a public company, even though the float will be fairly modest. But it will give some of our larger shareholders a chance to dispose of shares through NASDAQ as opposed to pink sheets.

It will also raise the standard for Remy a bit because it will be Sarbanes-Oxley compliant within the next -- I think it's two years for them and one year for -- by the end of '13 for FNF. And then we will see how the market goes for an asset like Remy. There may be some acquisitions. We have a lot of ability on that balance sheet to borrow money to make acquisitions. We have a way to -- if we're on NASDAQ, we have a way to issue stock to a potential seller. So the flexibility for us goes way up. That is the Remy plan. We ended up doing or taking the best alternative that we could come up with, in terms of improving our relative position with our Remy investment, and that is why we went over 50%.

Okay, that's helpful. And then my last question is just on -- can you help us understand how the economics of a foreclosure transaction, like let's say some type of auction, or even a bank sale to a third party. Is there any difference between the fees on that title search relative to business we are seeing now?

Well I think, Randy, you ought to handle that one. Because you'd be more attuned to it.

Virtually the same. You've got the REO that goes from the bank over to the home buyer, the new buyer and potentially a lender. So generally speaking, the fees are the same. You would have a closing fee and a title insurance policy. Pretty much the same as your typical resale transaction.

Okay. So there is no increased instances of like quick claim deeds, in any of these type of transactions? They have to go through a regimented process?

Correct.

Okay. Thank you.

Thank you. And with that I would like to turn it back over to you, Mr. Foley, for any closing comments.

Thank you. This was another great quarter for our title business, primarily driven by refinance transactions. We are particularly excited about our future earnings potential as we begin to see more meaningful, sustained improvement in the residential purchase market. We are also excited to be consolidating ABRH and Remy and we are confident that holding the majority ownership positions in both of these companies will allow us to better create future significant value for our shareholders from both of these investments. Thanks for joining us today. I look forward to talking to you next quarter.

Thank you, and ladies and gentlemen that does conclude your conference call for today. Thank you for participation and for using AT&T executive teleconference service. You may now disconnect.