Fidelity hopes to launch Black Knight IPO this week

  • By
  • | 12:00 p.m. May 11, 2015
Bill Foley
Bill Foley
  • Columnists
  • Share

Fidelity National Financial Inc.’s latest spinoff is almost ready to go.

During the company’s conference call last week to discuss first-quarter earnings, Executive Chairman Bill Foley said the company hopes to launch the initial public offering of Black Knight Financial Services Inc. this week.

The company was awaiting final approval of its prospectus from the Securities and Exchange Commission, Foley said.

“We’re really right at the finish line on the IPO,” he said.

Black Knight is a mortgage technology and analytics company that was formerly part of Lender Processing Services Inc., another company that was once spun off from Fidelity as an independent company. Fidelity reacquired LPS last year.

Black Knight will not be an independent company. Fidelity has not said how many Black Knight shares will be sold to the public, but it has said it will retain a majority ownership after the IPO.

Black Knight reported last week in an SEC filing that it had revenue of $227.2 million and net income of $14.5 million in the first quarter.

Fidelity, which is mainly a title insurance company, reported adjusted core first-quarter earnings of 37 cents a share, up from 22 cents last year. Revenue rose 15.3 percent to $1.58 billion.

“First quarter was a great start to 2015. While this was a strong first quarter in our title business, we expect higher pre-tax margins as we enter the second and third quarters,” Foley said.

“We also believe that a publicly traded Black Knight can be a source of further value creation for all of our FNF shareholders,” he said.


Fidelity looks to spin off J. Alexander’s

Black Knight is not the only Fidelity spinoff in the works. It is also working to complete the spin-off of restaurant company J. Alexander’s in the third quarter this year, company officials said last week.

Fidelity last year created a tracking stock called Fidelity National Financial Ventures, or FNFV, to represent the non-real estate-related investments held by the company.

As Foley said in FNFV’s quarterly conference call last week, the company is constantly looking to “monetize” those investments. That includes the plan to spin off J. Alexander’s by issuing shares in the restaurant company to FNFV stockholders.

Fidelity owns another restaurant company called American Blue Ribbon Holdings that owns several chains, including O’Charley’s and Village Inn. While management is currently focused on the J. Alexander’s deal, “we’re considering similar types of options for ABRH,” Fidelity President Brent Bickett said in the conference call.

Besides a spinoff, a private equity buyout is another possibility for ABRH, Bickett said.

FNFV reported adjusted earnings of 3 cents a share in the first quarter, with revenue rising 24.8 percent to $478 million.


Deals bring big payday for Foley

Because of incentive payments tied in part to Fidelity’s various deals, Foley earned a total compensation package valued at $80.4 million in 2014, according to Fidelity’s proxy statement filed last week.

His package included $35.2 million in stock awards and $42.7 million in non-equity incentive payments.

Fidelity CEO Raymond Quirk’s compensation package totaled $9.1 million last year.


FIS updates growth targets

Another company that was spun off from Fidelity several years ago, Fidelity National Information Services Inc. (FIS), gave updated long-term growth targets at an “Investor Day” presentation in New York last week.

According to Robert W. Baird analyst David Koning, FIS projected annual organic revenue growth of 5 percent to 8 percent a year, up from its previous target of 4 percent to 7 percent. Earnings per share growth is projected at 10 percent to 15 percent annually, compared with a previous target of 12 percent to 15 percent.

“The analyst day was encouraging, though investors seemed to expect the 5-8 percent long-term revenue guidance,” Koning said in his research report.


Patriot, FRP report first earnings after split

In other spinoff-related news, Patriot Transportation Holding Inc. and FRP Holdings Inc. last week issued their first earnings reports since those companies split into two.

Commercial real estate developer FRP reported earnings from continuing operations fell 36 percent in the second quarter ended March 31 to $845,000, or 9 cents a share.

Executive Chairman John Baker said in FRP’s conference call that the decrease was due in part to accounting charges related to the separation of the two companies.

Trucking company Patriot’s adjusted earnings rose 44 percent to $914,000, or 28 cents a share. However, after a write-off of intangible assets, Patriot had a final net loss of $351,000, or 11 cents a share.

The write-off was related to a loss of business from two customers, said Tom Baker, CEO of both Jacksonville-based companies, in Patriot’s conference call.

“In both cases, management was not willing to lower our rates to retain the business and chose instead to use our assets and manpower to find and service new business,” he said.

John Baker (Tom’s uncle) said the split of the two companies, which occurred at the end of January, has gone well. It had been difficult running two companies together that were in different industries.

“We’ve been gratified by the acceptance of our shareholders and are more convinced than ever that the spinoff will create two easily understood companies, instead of the awkward mixed industry organization that we had before,” he said.


Rayonier earnings increase over last year

Rayonier Inc. reported first-quarter earnings of 14 cents a share, up from adjusted earnings of 8 cents a share last year.

The Jacksonville-based timber and real estate company said prices and volumes for its Southern timber rose, but weaker demand from China hurt prices for its timber from the Pacific Northwest and New Zealand.

Rayonier also said the timing of several large property sales helped its real estate division. That included a sale of 217 acres in St. Johns County at $17,000 per acre to homebuilder Toll Brothers.

During its conference call with analysts last week, Rayonier executives touted its 285-acre mixed-use community under development in Nassau County called East Nassau.

“We’re excited about our strategy to unlock value within our coastal corridor properties and believe that the East Nassau project will be an important catalyst in this regard,” said CEO David Nunes.

Nunes said Rayonier expects continued improvement in Southern timber prices as the housing market recovers, and he is hoping that market conditions in China will improve in the latter part of this year.

“Long term, we continue to believe China will remain an important source of additional demand for our logs in the Pacific Northwest and New Zealand, and we like our exposure to these markets and the optionality that they provide,” he said.


Regency’s metrics rise in first quarter

Regency Centers Corp. last week reported its core funds from operations were 74 cents a share in the first quarter, up from 69 cents in the first quarter of 2014.

Funds from operations are basically earnings excluding depreciation and amortization expenses and are considered the key metric for evaluating real estate companies.

The Jacksonville-based shopping center developer said its portfolio of 321 properties was 95.5 percent leased as of March 31, up from 94.5 percent a year earlier. Net operating income at properties that have been run by the company for more than a year grew by 4.4 percent.

In Regency’s conference call last week, Chief Financial Officer Lisa Palmer said earnings benefited from lower than usual move-out levels of tenants in the first quarter and strong base rent growth.


Jacksonville Bancorp improves earnings

Jacksonville Bancorp Inc. last week reported first-quarter earnings of $914,000, or 16 cents a share, compared with a basically break-even quarter a year earlier.

The parent company of The Jacksonville Bank also said its level of non-performing assets (overdue loans and property acquired through foreclosure) fell to 2.64 percent as of March 31, down from 4.05 percent a year earlier.

“The first quarter results are reflective of executing our loan and deposit growth strategies, as well as the ongoing improvement in asset quality and the benefits reaped from our 2014 re-engineering initiatives,” CEO Kendall Spencer said in a news release.


St. Joe reports loss

The St. Joe Co. last week reported a first-quarter net loss of $1.7 million, or 2 cents a share.

The real estate developer formerly headquartered in Jacksonville reported $17.1 million in revenue in the quarter. The revenue consisted of $5.4 million in residential real estate sales, $7.8 million from resorts and leisure operations, $2.1 million from leasing operations and $1.8 million from timber sales.


Analyst upgrades rating

After an encouraging earnings report the previous week, Roth Capital Partners analyst Jeff Martin Tuesday raised his rating for Group Inc. from “neutral” to “buy.”

“We believe is showing signs of strengthening fundamentals,” Martin said in a research note.

“We expect average revenue per user gains throughout the year to drive sequential revenue growth each quarter, with a rebound to historically high adjusted earnings before interest, taxes, depreciation and amortization margins of 29 percent possible by year end,” he said.

Jacksonville-based’s stock fell from a high of $36.50 last year to a low of $14.52 this year after several disappointing earnings reports, but the stock began to rebound with the positive first-quarter 2015 report.

Martin raised his price target for the stock from $17 to $27.


Landstar System downgraded by analyst

Wells Fargo Securities analyst Casey Deak last week downgraded Jacksonville-based trucking company Landstar System Inc. from “outperform” to “market perform.”

Deak cited “softening fundamentals” in Landstar’s flatbed trucking business and pressure on profit margins as the company relies more on brokers to arrange shipments of freight.

“Based on our checks, shippers also appear to be acting more rationally in finding capacity, a contrast to the substantial premiums they were paying in 2014 as capacity was constrained by both a driver shortage and tough winter weather,” Deak said in his report.


Stein Mart sales up in two-month period

After a big increase in pre-Easter sales in March, Stein Mart Inc. last week reported lower comparable-store sales in the post-Easter period in April.

However, the Jacksonville-based fashion retailer’s combined comparable-store sales (sales at stores open more than one year) for March and April rose by 5.6 percent.

Stein Mart has always said that because of the shifting Easter holiday, it is generally more relevant to look at March and April sales combined than to look at each month separately.

Total sales for March and April rose 8.4 percent to $264.9 million.

Stein Mart had 270 stores in operation at the end of April, up from 263 a year earlier.


Publix earnings rise

Publix Super Markets Inc. last week said that first-quarter earnings rose 11.2 percent to $548.9 million, or 71 cents a share.

Total sales for the Lakeland-based supermarket chain rose 6.8 percent to $8.3 billion, and comparable-store sales rose 5.3 percent.

Publix also said that, based on the most recent appraisal, its stock price increased from $39.10 on March 1 to $42.10 on May 1.

Publix’s stock is made available for sale only to employees and its price is determined by an independent appraisal.

[email protected]

(904) 356-2466