Ladies and gentlemen, thank you for standing by. Welcome to the FNF 2012 Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Dan Murphy. Please go ahead, sir.

Thank you, and good morning, everyone, and thanks for joining us for our Second Quarter 2012 Earnings Conference Call. Joining me today are George Scanlon, our CEO; Randy Quirk, our President; and Tony Park, CFO. George will begin with a brief strategic overview and 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 George Scanlon. This conference call may contain forward-looking statements that involve a number of risk 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 risks 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 through webcast at our website at fnf.com. It will also be available through phone replay beginning at 1 P.M. Eastern time this afternoon through July 31. The replay number is (800) 475-6701 and the access code is 253284. Let me now turn the call over to our CEO, George Scanlon.

Thanks, Dan and good morning, everyone, and thank you for joining us today. Our second quarter results built upon the momentum we generated in the first quarter of this year. Refinance volumes have been very strong, but we're also seeing an improving residential resale market as those purchase orders are up nearly 6% for the first 6 months of 2012 versus the same period in 2011. I will speak more specifically about the title business after a brief strategic overview. During the quarter, we completed the acquisition of O'Charley's and the consolidation of O'Charley's into American Blue Ribbon Holdings. FNF now has a 55% owned restaurant group for a total cash investment of approximately $110 million with $1.25 billion in annual revenue, $65 million in current annual EBITDA and an expected $20 million in additional cost synergies. Our focus is on integrating the various operations, achieving our targeted synergies and moving the O'Charley's margins closer to those of ABRH. To that end, we have closed 14 underperforming O'Charley's locations since the acquisition, made several management changes, switched advertising agencies and are in the process of evaluating several other significant cost savings opportunities. We look forward to reporting on our integration process over the coming quarters. In June, we announced the proposed acquisition of J. Alexander's for $72 million. Last evening, J. Alexander's announced the expiration of their "go shop" period and that 2 written proposals were received for potential alternative transactions. While J. Alexander's completes their process, we remain very interested in consummating the transaction and believe that our offer provides a compelling value for J. Alexander's shareholders. The transaction requires J. Alexander's shareholder approval and should our offer be accepted, we expect to close the acquisition in the fourth quarter of this year. We completed the sale of an…

Thank you, George. FNF generated $1.7 billion in revenue in the second quarter, compared to $1.2 billion in the second quarter of 2011 as title revenue grew by approximately $180 million and the newly consolidated restaurant group contributed approximately $253 million in operating revenue for the quarter. Net earnings were $147 million, compared to net earnings of $80 million in the prior year and cash flow from operations was $238 million versus $53 million in the second quarter of 2011. The title segment generated $1.4 billion in operating revenue for the second quarter, a 16% increase from the second quarter of 2011. Direct title premiums grew by nearly 20%, driven by a 30% increase in closed orders and a 5% decrease in the fee per file. Agency premiums increased by 7% over the prior year, trailing the direct premium increase as the increase in refinanced order volumes is generally more direct than agent driven. Agency profitability grew as the second quarter agent split improved by 185 basis points over the prior year to 76%. The second quarter agent split was virtually identical to the first quarter of this year. Title segment personnel costs increased by $58 million or 15% versus the second quarter of 2011, and other operating expenses grew by $39 million or 16%, while open and closed order volumes grew by 30%. As I just mentioned, the agent split improved by nearly 1.9%. The net effect was a 14.4% pretax title margin, excluding realized gains and asset impairments, an increase of 280 basis points versus the second quarter of 2011 and a sequential increase of 370 basis points versus the first quarter of this year. Both clear reflections of the significant operating leverage in our title business. Debt on our balance sheet decreased sequentially by $114 million from…

[Operator Instructions] Our first question comes from Bose George of KBW. Bose George - Keefe, Bruyette, & Woods, Inc., Research Division: The first question I had was just on the title margin. I was wondering if you could provide some help on how we could think about the potential benefit to the margin as the mix starts shifting towards purchase.

Bose, this is George. We're still in a very heavy refinance mix right now, but we generate twice as much revenue per resale transaction as we do for a refinanced transaction. So we would expect incremental margin growth on those resale transactions as they change. So all else being equal, if you reversed the weighting today to 65% resale, 35% refi, we would expect to achieve higher margins. Bose George - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, great. And then I'll ask just a couple of things, just on the other businesses. After the sale of Cascade, are all the revenues at the corporate segment level going to be gone?

No, we've got some small real estate operations that are included in the corporate segment; not material to the overall results, but they still will be ongoing. Bose George - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And is that just like -- in terms of our modeling, just a few million a quarter or?

Probably, mid teens. Tony is that...

Yes, I would say $10 million to $15 million in revenue, but in terms of operations, it's pretty immaterial. I would say that roughly a run rate of $20 million to $25 million cost associated with that corporate segment per quarter is probably a good way to model it. Bose George - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, great. And then just -- lastly just on the J. Alexander merger. I just wanted to make sure I understood what you're doing with the spin of ABRH on NASDAQ. Just wanted to see if you could walk through that?

Well, essentially, we're offering the J. Alexander shareholders $12 per share of value, 50% payable in cash, 50% in the form of a $3 cash payment, and the balance in equity of the combined entity. And it's a reversed merger effectively and when the transaction is completed, those J. Alexander shareholders would own 6% of a public traded company that would take the J. Alexander revenues from about $150 million, $160 million, up to about $1.4 billion. Bose George - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And at that point, would that entity reflect all your restaurant holdings?

It would and the FNF ownership of that entity would be about 52% in total.

Our next question comes from Mark DeVries of Barclays.

First, I have a follow-up question on the margin. Are you seeing any kind of difference in loan size purchase versus refi that might impact that kind of normal relationship of generating kind of twice the revenue on a purchase that you do on a refi?

No, we're not seeing any meaningful change in that, Mark. It's always been the case that it's been about twice as much. Obviously, that's affected by real estate values, by the size of the loans that are involved. So we think there's upside down the road as real estate stabilizes and begins to even modestly appreciate, but our expectation is that those incremental dollars fall to the bottom line and there's more to fall to the bottom line. So we think we can get into the high teens margins when we do get that rebalancing and obviously in the market today, while it's heavily weighted toward refi, we are encouraged by the 7% pickup in resale transactions that we saw in the second quarter and 6% year-to-date.

Okay.

Still have long ways to go though.

Got it. And I'm sorry I missed it earlier when you -- what percentage of the refi volume did you say is coming from HARP?

Well I think in total, probably about 15%, approximately.

Okay. Is that building momentum right now or...

It is and our expectation for the second half is that it will be stronger than it was in the first half. It's very customer specific, so as the major banks are reaching out to their customers, some have been going faster than others, but I think overall, our expectation is that HARP volumes will increase in the second half versus the first half.

Okay. And then finally assuming you do close J. Alexander, what are your expectations for the revenue and EBITDA contributions from that?

Well, right now, if you look at J. Alexander, they're about $160 million in revenue, round number is about $10 million in EBITDA. Our expectation upon the completion of the acquisition would be to achieve additional synergies, would be to put it in our upscale dining concept segment with the Stoney River Steakhouse business. And it's a well run operation, high-quality food and service. It's got a few underperforming locations, but overall, is a concept that we're excited about and we think would make a nice addition to our portfolio.

Our next question comes from the line of Brett Huff of Stephens.

One, people have been asking about the margin, I want to dig in one more on that. 14.4% is a really nice margin given that we're not really in resale land yet. And as we look to 2Q, presuming that the refis continue to come in nicely and kind of the resale trends continue reasonably the same, is there anything that you see in 3Q that should change our view that the margin should be similar for 3Q versus 2Q?

Brett, this is George. I'll have Randy add some color, but I would say that based on the inventory buildup that we saw in the second quarter, which will convert into revenue in the third quarter, we would see very similar performance. Commercial can be a little unpredictable in the third quarter and deals can slip into the fourth quarter, but outside of that, I think both on the refi and resale side, we feel pretty good about our visibility and think we could have another very good quarter.

Yes, I would agree, George. We had real good openings in the second quarter. So we should have strong closings in the third quarter both on the refi and we should have some pick up on the resale closings also in the third quarter. So in commercial, again, our commercial group has indicated real strong momentum in really all the national markets. So the margins should be in the same ballpark.

Okay. And then I think somebody before asked about restaurant contributions or revenue and EBITDA. When we think about the debt that's going to be on it, et cetera, et cetera, just roughly what kind of contribution do you all see from that on the net income line? I mean is it going to be breakeven? Or kind of give us just a rough ballpark in your view.

Well I would expect it to be positive, Brett. This quarter is not a good indicative quarter because it's a partial quarter on the revenue and EBITDA side and there is still some noise in terms of costs associated with the integration. We'll see some of that noise continue into the third quarter and we should start to see the realization of the synergies end of third quarter into fourth quarter. So I would expect a positive earnings contribution from restaurant, but I think realistically it's probably into next year before we get into more of a normalized financial reporting and a stronger run rate. As we've said, we're targeting $20 million of synergies. Our expectation is to achieve about $8 million of that this year. And clearly the focus in the integration of the 3 different concepts from O'Charley's is on the O'Charley's concept, which represents about $500 million of the $8 million -- $800 million of revenue that we acquired. Stoney River and the Ninety Nine restaurants have had very consistent performance and do not require, frankly, much work on our part, so we're spending disproportionate time on the O'Charley's restaurants, which have been the underperformers. And that's where we see the most upside opportunity. Obviously, in the meantime, the other ABRH concepts continue to move along. We continue to invest in the stores and update the interiors and exteriors and continue to outperform our competition as we see it.

On the recoupment issue, just to make sure I understand, so the timeline on that -- this is really a resolution to something -- a claim that happened many years ago. So it's no real reflection on current claim trends, correct?

That's correct, Brett. It's just -- we took back equity in a failed project and ultimately did not realize what we had hoped to realize in the recovery. And as a result, we took that $10 million hit this quarter.

Are there any other items like that in your portfolio of reserves or is this a fairly unique situation?

This is pretty unique, Brett. We have, I think, one other one that I know of. It's a property that is marked to value, or is supporting or holding its value, but other than that it was unusual. This took place all the way back in late 2006. I think the other one was a similar timeframe. Generally, our recoveries are more in -- we do take some real estate back, generally dispose of that pretty quickly. Most of our recoupments are in cash and then on occasion, we will have an investment like this, but this is pretty unique.

And then last question, just a fee per file outlook. It was a little bit better than we expected this quarter. It sounds like that might have given the refi strength, we're just trying to figure that out. Any thoughts going forward?

Yes, Brett we don't try to guess at the fee per file. As you know, we don't provide guidance. So we would think that over time, obviously as the resale mix improves, that we would see an increased fee per file, but we're very happy with the way it's holding up and hope it continues.

And I guess, last question. Have you guys thought about sort of normalized earnings? And I think you'd sort of laid out a situation where maybe the market is a little bit better overall than this in terms of dollar volumes, but the mix is flipped. You've talked about high teens pretax margins and title in that scenario. Any thoughts on what a more normalized EPS run rate would be in your calculations?

Brett, it's so hard to say what normalized means. I mean, I think we're realistic about the world we live in and we look at the MBA forecast or the Fannie Mae forecast and obviously they're projecting a shift in mix between resale and refi starting next year. What we all need to see is resale to continue to strengthen and in a more meaningful way. What we do know is we don't need a $2 trillion market to make a lot of money. And our EPS will grow as that mix shifts and again, as we get into the high teens margins, that $2-plus per share target is achievable and I think we've worked hard over the last several years to, frankly, position the organization to take incremental profit on a modest uptick in revenue. And I think you're seeing that in the numbers this quarter.

[Operator Instructions] We have no additional questions. Please continue.

Thank you. This quarter clearly highlighted the significant operating leverage in our title business as our 14.4% pretax margin grew by nearly 280 basis points over the prior year and 370 basis points sequentially from the first quarter of this year. We also began consolidating our restaurant group and look forward to reporting on our margin improvement progress over the coming quarters. Thank you for joining us this morning.

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