At December 31, 2002, Vidler owned or had the right to acquire approximately 49,559 acre-feet of transferable ground water in the HARQUAHALA VALLEY, approximately 75 miles northwest of metropolitan Phoenix, Arizona. Vidler owns 35,795 acre-feet, and we have the option to purchase a further 13,764 acre-feet. We believe that Vidler's water rights in the Harquahala Valley represent the most practical and competitive source of water to support the growth of greater metropolitan Phoenix, which is one of the fastest growing areas in the nation.
- - in May 2002, Vidler sold 480 acre-feet of water rights and 240 acres of land. This transaction added $1 million to revenues and $556,000 to gross margin in 2002.
The Vidler Arizona Recharge Facility is the first privately owned water storage facility for the Colorado River system, which is a primary source of water for the Lower Division States of Arizona, California, and Nevada. The water storage facility is strategically located adjacent to the Central Arizona Project ("CAP") aqueduct, a conveyance canal running from Lake Havasu to Phoenix and Tucson. The water to be recharged will come from surplus flows of CAP water. We believe that proximity to the CAP is a competitive advantage, because it minimizes the cost of water conveyance.
We use the equity method to account for the common shares. HyperFeed contributed an equity loss of $2 million to the Business Acquisitions and Financing segment in 2002. The equity loss and other events affecting equity recorded in 2002 reduced our carrying value of the HyperFeed common shares to $498,000.
Citation's independent actuary has assumed that the reporting of new artisan/contractors claims has peaked, and that new claims
- - comprehensive income of $13 million in 2002, primarily consisting of the $5.9 million net income and movements of $4.5 million in net unrealized appreciation in investments and $2.6 million in foreign currency translation;
Our interests in Swiss public companies are held by Global Equity SA, a wholly owned subsidiary which is incorporated in Switzerland. Part of Global Equity SA's funding comes from a loan from PICO, which is denominated in Swiss Francs. During accounting periods when the Swiss Franc appreciates relative to the US dollar -- such as the 2002 year -- under GAAP we are required to record a benefit through the statement of operations to reflect the fact that Global Equity SA owes PICO more US dollars. In Global Equity SA's financial statements, an equivalent debit is included in the foreign currency translation component of shareholders' equity (since it owes PICO more dollars); however, this does not go through the statement of operations. During accounting periods when the Swiss Franc depreciates relative to the US dollar, opposite entries are made and an expense is recorded in the statement of operations. Accordingly, we were required to record a benefit of $2.7 million in our statement of operations in 2002, even though there was no net impact on shareholders' equity.
Our cash flow position fluctuates depending on the requirements of our operating subsidiaries for capital, and activity in our insurance company investment portfolios. Our primary sources of funds include cash balances, cash flow from operations, the sale of holdings, and -- potentially -- the proceeds of borrowings or offerings of equity and debt. We endeavor to ensure that funds are always available to take advantage of new opportunities.
- - At this stage of "run off", investment income more than covers Citation Insurance Company's operating expenses. The funds required to pay claims are coming from the maturity of fixed-income investments in the company's investment portfolio, and recoveries from reinsurance companies;
Financing Activities used $1.8 million of cash in 2001. Vidler paid off approximately $2.9 million in non-recourse borrowings collateralized by the farm properties in the Harquahala Valley Irrigation District which it sold during the year. Global Equity SA took on an additional $1.9 million of Swiss Franc-denominated borrowings to help finance the acquisition of investments in Swiss public companies.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". FIN 45 requires that a liability be recorded in the guarantor's balance sheet upon issuance of a guarantee at its fair value. In addition, FIN 45 requires certain disclosures about each of the entity's guarantees. The Company will apply the recognition provisions of FIN 45 prospectively to guarantees issued after December 31, 2002. The disclosure provisions of FIN 45 are included herein.
On September 8, 2000, the Company sold its investment in Conex for nominal consideration, and recorded a pretax loss on the sale of $4.6 million ($1.8 million after tax). The reported results in 2000 include Conex as a consolidated subsidiary until September 8, 2000. Conex's primary asset was a 60% joint venture that manufactures wheeled and tracked excavators in the People's Republic of China.
At December 31, 2002 and 2001, the book value of Vidler's interest in the Semitropic Water Storage facility was $1.5 million and $1.2 million, respectively. Through November 2008, Vidler is required to make a minimum annual payment. These 11 payments are being capitalized and the asset is being amortized over its useful life of thirty-five years. In 2001, Vidler sold approximately 84% of its right, title and interest under the lease for a gain of $5.7 million As a result, at December 31, 2002 and 2001, Vidler owns the right to store 30,000 acre-feet of water and is required to make a minimum annual payment of $373,000. The amortization expense in 2002 and 2001 was $102,000 and $438,000, respectively. In addition, Vidler is required to pay annual operating and maintenance charges and for the years ended December 31, 2002, 2001 and 2000, the Company expensed a total of $152,400, $146,000, and $889,000, respectively.
On February 9, 2000, PICO registered on Form S-3 with the U. S. Securities and Exchange Commission to offer 6,546,497 shares of PICO stock at a price of $15 per share through a rights offering. Shareholders were offered 1 right to buy 1 new share at $15 for every 2 common shares held at March 1, 2000.
In the normal course of business, the Company's insurance subsidiaries have entered into various reinsurance contracts with unrelated reinsurers. The Company's insurance subsidiaries participate in such agreements for the purpose of limiting their loss exposure and diversifying their risk. Reinsurance contracts do not relieve the Company's insurance subsidiaries from their obligations to policyholders. All reinsurance assets and liabilities are shown on a gross basis in the accompanying consolidated financial statements. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Such amounts are included in "reinsurance receivables" in the consolidated balance sheets at December 31 is as follows:
the first day of the earliest period presented, the net loss and loss per share for 1999 and 1998 would have been reduced by $995,000 and $0.11 per share and $643,000, and $0.11 per share, respectively.