In September 1999, the Company moved its executive offices to one of the newly constructed office buildings at MacArthur Place in Santa Ana, California. The Orange County branch and certain other operations of the Company’s title insurance segment moved into the two other buildings constructed on the site later in 1999. The three new buildings are in a campus environment and total approximately 210,000 square feet. In the first quarter of 2004, the Company began the expansion of its office campus. This expansion will add two 4-story office buildings totaling 225,000 square feet, and a two-story, free standing, 50,000 square foot technology center. The construction is estimated to be completed by the third quarter of 2005.
The Company continues to own the two adjacent buildings in Santa Ana, California, which previously housed its executive offices. That location, comprising approximately 105,000 square feet of floor space, continues as the home of the company’s trust and banking division and the Company’s property and casualty insurance division. The Company also owns an 18,000 square foot building located across the street from that complex. This building is currently used primarily for storage.
Cash provided by operating activities amounted to $830.1 million, $540.6 million and $388.2 million for 2003, 2002 and 2001, respectively, after net claim payments of $269.5 million, $193.1 million and $153.4 million, respectively. The principal nonoperating uses of cash and cash equivalents for the three-year period ended December 31, 2003, were for the $375 million acquisition of Transamerica’s flood determination and tax reporting businesses, other company acquisitions, capital expenditures, additions to the investment portfolio, dividends, distributions to minority shareholders and the repayment of debt. The most significant nonoperating sources of cash and cash equivalents were proceeds from the issuance of the Company’s $210.0 million senior convertible debentures in 2001 (see Note 8 to the consolidated financial statements), proceeds from the issuance of other debt and proceeds from the sales and maturities of certain investments. The net effect of all activities on total cash and cash equivalents was an increase of $212.7 million for 2003, $255.6 million for 2002 and $344.3 million for 2001.
A summary, by due date, of the Company’s total contractual obligations at December 31, 2003, is as follows:
The carrying value of the passbook accounts approximates fair value due to the short-term nature of this liability. The fair value of investment certificate accounts was $57.1 million and $65.1 million at December 31, 2003 and 2002, respectively, and was estimated based on the discounted value of future cash flows using a discount rate approximating current market for similar liabilities.
The Company has $210.0 million of senior convertible debentures due in 2008. The debentures are convertible into common shares of the Company at $28 per share. The Company may redeem some or all of the debentures at any time on or after April 15, 2004. The Company has also issued debt that is convertible into shares of its common stock to finance certain acquisitions. This debt, which is included in “Other notes and contracts payable,” is convertible at the option of each note holder at a conversion price of $30 per share. The balance of this convertible debt was $24.5 million and $28.9 million at December 31, 2003 and 2002, respectively.
On April 22, 1997, the Company issued and sold $100.0 million of 8.5% trust preferred securities, due in 2012, through its wholly owned subsidiary, First American Capital Trust. In connection with the subsidiary’s issuance of the preferred securities, the Company issued to the subsidiary trust 8.5% subordinated interest notes due in 2012. The sole assets of the subsidiary are and will be the subordinated interest notes. The Company’s obligations under the subordinated interest notes and related agreements, taken together, constitute a full and unconditional guarantee by the Company of the subsidiary’s obligations under the preferred securities. Distributions payable on the securities are included as interest expense in the Company’s consolidated income statements.