Net title service revenue and escrow fee revenues are recognized as income at the time the underlying real estate transaction closes. Expenses directly related to the title and escrow process are recognized as they are incurred, throughout the duration of the transaction. As a result, our recognition of revenue lags approximately 45-90 days behind the recognition of the corresponding expenses. Other fees and revenue are generally recognized as income at the time the underlying transaction closes; however, certain other fees and revenue are recognized as income over the period during which the service is provided. These factors may result in fluctuations in gross margins.
each to the buyer and lender) whereas only one is issued in a refinance transaction and (iii) the base rate charged on sale and resale transactions is typically higher than that charged on refinance transactions.
Because title insurance premiums are calculated with regard to the purchase price of the property or the amount of the related mortgage, average fees per file will also increase during periods in which real estate prices and corresponding mortgage loans are increasing.
The following table presents information regarding the components of our revenue:
Escrow Fees. Revenues from escrow fees increased $10.2 million or 46.5% to $32.2 million in 2001 from $22.0 million in 2000. In 2000, escrow fees decreased $3.2 million or 12.8% to $22.0 million compared with $25.2 million in 1999. Escrow fees are primarily related to title insurance activity generated by the Company’s direct operations. The increase in 2001, is primarily the result of the current market conditions relating to
Personnel Costs. Personnel costs totaled $73.9 million, $51.2 million and $54.3 million for the years ended December 31, 2001, 2000 and 1999, respectively. As a percentage of total revenue, exclusive of investment income, personnel costs were 55.3% in 2001, 62.7% in 2000 and 61.4% in 1999. Personnel costs include base salaries, commissions and bonuses paid to employees and are the most significant operating expense incurred. These costs fluctuate with the level of orders opened and closed and the mix of revenue. The decrease in personnel expenses is the result of our ability to handle increased refinance activity without a significant increase in staffing. We continue to take significant measures to maintain appropriate personnel levels and costs relative to the volume and mix of business and revenues. We continue to monitor the prevailing market conditions and will attempt to respond as necessary.
Cash Flows. Our current cash requirements include debt service, debt relating to capital leases, personnel and other operating expenses, taxes and dividends on common stock. We believe that all anticipated cash requirements for current operations will be met from internally generated funds and through cash received from our subsidiaries. Our cash requirements include expenses relating to the development and expansion of National’s business. We presently have in place much of the infrastructure (principally consisting of personnel) that will be used for this development.
On April 14, 1999 we purchased a home office 	building located in Orange, CA for $2.6 million. We 	borrowed $2.1 million, secured by a first trust deed. The 	terms of the note payable require monthly interest payments at 	prime rate and monthly principal payments of $4,000. The note 	matures on April 1, 2004.
The following chronology of transactions had varying impacts on our financial statements. These acquisitions transactions were accounted for under the purchase accounting method. The results of operations were included in earnings from the date of the acquisitions through December 31, 2001.
In May 1999, the Department of Insurance, State 	of New York, approved the acquisition of National Title 	Insurance of New York, Inc. by ATC from FNF. The 	$3.25 million transaction was paid in cash in June 1999.
In February 1999, we completed an Initial Public Offering of 1,925,000 shares at $5.45 per share, resulting in FNF then owning 31.5% of the outstanding shares and management owning 37%. In connection with the offering, the underwriters exercised an option for over allotment to purchase an additional 165,000 shares at $5.45 per share on March 31, 1999. See Note 9.
Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Dilutive earnings per share is calculated by dividing net earnings by the weighted average number of common shares outstanding plus the assumed conversions of potential dilutive securities. We have granted certain options which have been treated as common share equivalents for purposes of calculating diluted earnings per share.
In April 1999, we completed the purchase of a home office building located in Orange, California for $2.6 million. We financed $2.1 million, secured by a first trust deed are required to make monthly interest payments at prime (4.75%) and principal payments of $4,000. As of December 31, 2001 and 2000, the principal balance was $1.9 million and $2.0 million, respectively. The note matures on April 1, 2004.
ATC is required to maintain certain amounts on deposit with the California Insurance Commissioner in order to operate in certain counties. The amount required by the Department of Insurance, State of California and the Department of Insurance, State of New York, is $112,500 and $20,000 at December 31, 2001 and 2000, respectively. Additionally, National is required to maintain certain amounts on deposit for compliance requirements. The amount at December 31, 2001 and 2000 is $1.7 million and $1.3 million, respectively.