Mortgage market shift alters FNF’s business
A shift in the mortgage market is producing a shift in operations for Fidelity National Financial Inc.
With the recent increase in interest rates, and a slowly improving housing market, Fidelity's title insurance business is seeing a decrease in refinancings and an increase in mortgage loans for home purchases.
"We responded to that decline in open refinance orders by reducing headcount by nearly 670 positions over the past six weeks," CEO George Scanlon said in Fidelity's quarterly conference call with analysts last week.
"As we have consistently demonstrated in the past, we will closely monitor productivity and operating metrics with discipline and adjust expense levels to current market volumes to mitigate the impact to earnings associated with the transitioning market," he said.
Dan Murphy, senior vice president and treasurer, said by email that fewer than 40 of those jobs were in Jacksonville, but the company is hiring in other areas locally "that will offset (the cuts) and result in an increase in jobs."
Fidelity has about 800 employees in Jacksonville and 60,000 overall, including all of its businesses.
Scanlon said Fidelity's main business, title insurance, may see a decline in order volume because of the shift from refinancings to purchases, but he doesn't expect that to have a big impact on the company's bottom line.
"As our mix changes and becomes more heavily weighted to purchase transactions, it is important to note that on average, we earn twice the revenue on a purchase transaction versus a refinance transaction," he said.
Jacksonville-based Fidelity last week reported second-quarter adjusted earnings of 68 cents a share, 3 cents higher than last year and 6 cents higher than the average forecast of analysts surveyed by Thomson Financial.
Fidelity officials didn't have much to say in the conference call about the company's pending acquisition of Jacksonville-based Lender Processing Services Inc.
"We continue to work through the filing and approval processes toward an expected fourth-quarter closing," Chairman Bill Foley said.
The major remaining items related to the merger include completing required state filings and a required registration statement with the Securities and Exchange Commission, he said.
Fidelity also had to respond to a request from the Federal Trade Commission for more information for its antitrust review of the deal, "which we expected," Foley said.
LPS' earnings drop
LPS last week reported adjusted earnings from continuing operations of 65 cents a share in the second quarter, down from 79 cents the previous year.
Revenue fell 9 percent to $468.9 million. LPS, which provides processing services for mortgage lenders, said the drop in revenue was mainly due to lower revenue from its default services division.
The earnings matched the average forecast of analysts surveyed by Thomson.
Because of its pending acquisition by Fidelity, LPS did not hold a conference call to discuss its quarterly results.
Strong quarter for Patriot
Officials of Patriot Transportation Holding Inc. also aren't saying much about that company's potential big deal, a possible split of its businesses into two separate companies.
Jacksonville-based Patriot operates a trucking company and a commercial real estate business, and it said in June it was exploring the possibility of a split. The company did not give any more details in its quarterly conference call last week.
"That process is underway and we will keep you advised as it progresses," Executive Chairman John Baker said.
Patriot actually has been considering splitting up the business for some time, and first publicly proposed it in 1999 before pulling back the plans.
Chief Financial Officer John Milton did say that it was more stability and liquidity in the credit markets that prompted the company to revisit the idea now.
"It's always been a strategic goal and so we've brought it back up. We're going through the due diligence period of dotting our I's and crossing our T's, and I'm not going to comment further until we get through with that process," he said.
Meanwhile, Patriot reported strong results for the third quarter ended June 30. Net income rose 12 percent to $3 million, or 31 cents a share, despite an after-tax interest expense of $342,000 related to a mortgage prepayment.
Revenue rose 8 percent to $35.7 million.
"For the first time in quite a while, both the transportation segment and the developed property rental segment are performing at a high level at the same time," CEO Tom Baker said.
ParkerVision ready for trial
Everything seemed to be status quo at ParkerVision as Chairman and CEO Jeff Parker talked to investors in the company's quarterly conference call last week. However, ParkerVision's next conference call could be a lot more interesting.
Jacksonville-based ParkerVision's patent infringement lawsuit against Qualcomm Inc. is scheduled for trial in federal court in Orlando beginning Oct. 7, and Parker does not expect the trial to drag out.
"We believe it is likely that the jury will reach a verdict by the time we hold our third-quarter call," he said.
ParkerVision is alleging that Qualcomm illegally used patented wireless technology developed by ParkerVision in its products. The company is seeking hundreds of millions of dollars in damages.
Parker expressed confidence about the trial.
"We feel very strongly about the merits of our case and our ability to present the facts in a manner that helps the judge and members of the jury understand our position with respect to Qualcomm's infringement of our patented technology and many other elements of our case," he said.
Meanwhile, while ParkerVision still works on development of its technology, it again recorded no revenue in the second quarter. The company had a net loss of $7.1 million, or 8 cents a share in the quarter.
ParkerVision also last week completed a private placement of about 3.7 million shares of common stock, generating about $13 million in net proceeds.
Atlantic Coast Financial chairman resigning
Continuing a shakeup that began after a failed merger in June, Atlantic Coast Financial Corp. said in an SEC filing last week that John Linfante is resigning as chairman of the board and as a director.
That means former Chairman Jay Sidhu, who led opposition to the merger, will likely have firm control of the board of directors after the Jacksonville-based banking company's annual meeting this week.
Three new directors supported by Sidhu are up for election to the board at the meeting, with no opposing candidates.
Following the rejection by shareholders of a proposed acquisition by Bond Street Holdings Inc. in June, G. Thomas Frankland resigned as CEO and as a board member.
With Linfante's resignation, only four current board members are continuing in office, including Sidhu and Bhana Choudhrie, who has supported Sidhu. That means that directors aligned with Sidhu will have a 5-2 majority on the board.
St. Joe earnings up
The St. Joe Co. last week reported second-quarter earnings of $2.7 million, or 3 cents a share, compared with earnings of just $200,000, or basically zero cents per share, the previous year.
The Florida Panhandle-based real estate developer, which was formerly headquartered in Jacksonville, said its earnings were helped by an increase in residential lots sold.
"We continue to see positive indicators in Florida's residential real estate market and we remain optimistic about Joe's future," CEO Park Brady said in St. Joe's conference call.
Web.com stock downgraded after run-up
Web.com Group Inc.'s stock has just about doubled in price since the beginning of this year, reaching a record high of $29.48 on Aug. 2 after reporting better-than-expected second-quarter earnings.
That high price prompted two analysts to downgrade their ratings on Web.com's stock.
"We downgrade our rating on Web.com to hold (from buy), as we view the risk/reward as balanced following the recent run-up," Deutsche Bank analyst Lloyd Walmsley in a research note.
Walmsley expects revenue to continue to grow for the Jacksonville-based company, which provides website development services for business. However, his analysis puts Web.com's stock value at about $27.
"As such, we would be more positive on the shares in the low $20s," he said.
Roth Capital Partners analyst Jeff Martin downgraded the company from "buy" to "neutral" for similar reasons.
"We like Web.com's competitive positioning and believe in the company's growth strategy. Management has executed on plan and is seeing results from increased marketing efforts," Martin said in his research note.
However, he downgraded the stock because of the recent price levels. He said the stock has been trading at 12.4 times his estimate of adjusted 2014 earnings before interest, taxes, depreciation and amortization.
"We believe upside is limited at this valuation and find the risk-reward more compelling at the 10 times EBITDA level, or about $23 a share," he said.
Stein Mart sales up again
Stein Mart Inc. reported another strong sales month in July.
The Jacksonville-based fashion retailer said that total sales for the four weeks ended Aug. 3 rose 5.8 percent to $74.6 million, and comparable store sales — sales at stores open for more than one year — rose 3.7 percent.
"Our customers responded well to our merchandise assortment during the first half of the year and we are looking forward to introducing her to our great fall assortment," Chairman and CEO Jay Stein said in a news release.
For the first half of the fiscal year, total sales rose 3.8 percent to $612.3 million and comparable store sales rose 3.6 percent.
Stein Mart had 262 stores across the country at the end of July, compared with 263 a year earlier.
Interline increases sales
Interline Brands Inc. last week reported second-quarter earnings of $1.2 million, down from $9 million the previous year.
Sales rose 21 percent to $405.7 million, but large interest expenses following the company's buyout by two private equity firms last year reduced earnings.
Jacksonville-based Interline, which distributes and markets maintenance, repair and operations products, said growth in its end markets helped sales in the quarter.
"We continue to see growth across our facilities maintenance end-markets, and we are encouraged by current signs of a recovery in the residential market," Chairman and CEO Michael Grebe said in a news release.
Vicar's Landing bond rating affirmed
Fitch Ratings last week affirmed a "BBB" rating on $19 million in revenue bonds issued by the operator of the Vicar's Landing retirement community in Ponte Vedra Beach, and said the recent Chapter 11 bankruptcy filing by a sister company should have no effect on Vicar's Landing.
Life Care St. Johns Inc., which operates the Glenmoor retirement community at the World Golf Village, filed for a Chapter 11 bankruptcy reorganization July 3.
Both that company and Life Care Ponte Vedra, which operates Vicar's Landing, were formed by Life Care Pastoral Services.
"Vicar's maintains a good financial profile that is consistent for the 'BBB' rating level," Fitch said in a news release.
"Fitch expects that Vicar's will continue to generate consistent operating performance, which should support stable balance sheet and pro forma debt service coverage going forward," it said.
Changes for Washington Post Co.
Jacksonville television station WJXT TV-4 will have a new owner soon. Actually, it will have the same owner, but with a different name.
As you undoubtedly know by now, The Washington Post Co. last week announced a deal to sell its most identifiable property, The Washington Post newspaper, to Amazon.com founder Jeff Bezos.
Because of the newspaper sale, the company said it will change its name, but it was not ready to announce the new name.
Strangely enough, the Washington Post's broadcasting division, which consists of WJXT and five other television stations, is still called Post-Newsweek Stations, even though the company sold off Newsweek magazine in 2010. The company never saw a reason to change that name.
The television division was Washington Post's most profitable business in the second quarter, with operating income of $47.4 million. The company also had operating income of $44.7 million from its cable television business and $23.7 million from its education division.
However, the newspaper publishing business was the only one of the company's four major divisions to lose money, with an operating loss of $14.8 million. So the company is getting out.
The announcement of the Washington Post sale came just days after The New York Times Co. announced it was selling the Boston Globe for $70 million. Twenty years earlier, the Times bought the Globe for $1.1 billion.
The Washington Post is being sold for $250 million but since it has been in the hands of the Graham family, who runs the Washington Post Co., for years, it is unknown what the value would have been 20 years ago.
For those of us who have made a career in the newspaper industry, these are troubling times.