PAGE 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ========= (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended . . . . . . .June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . . . . . . . . . .to Commission file number: 0-8641 SELECTIVE INSURANCE GROUP, INC. ------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-2168890 ---------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No,) of incorporation or organization) 40 Wantage Avenue, Branchville, New Jersey 07890 ------------------------------------------ ----- (Address of principal executive offices) (Zip Code) 201-948-3000 ------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: Common stock, par value $2 per share, outstanding as of July 31, 1996: 14,603,058 PAGE 2 PART I FINANCIAL INFORMATION ============================== Item 1. Financial Statements. - - ----------------------------- SELECTIVE INSURANCE GROUP, INC. =============================== Consolidated Balance Sheets --------------------------- (dollars in thousands) (unaudited) ASSETS June 30 Dec. 31 - - ------ 1996 1995 Investments: -------- -------- Debt securities, held-to-maturity - at amortized cost(fair value of $464,036-1996; $460,444-1995) $ 454,517 439,585 Debt securities, available-for-sale - at fair value (amortized cost of $922,875-1996; $902,375-1995) 931,145 949,004 Equity securities, available-for-sale - at fair value (cost of $95,235-1996; $76,858-1995) 147,842 117,522 Short-term investments (at cost which approximates fair value) 33,067 47,306 Other investments (at cost which approximates fair value) 10,721 10,721 --------- --------- Total investments 1,577,292 1,564,138 Interest and dividends due or accrued 23,885 23,619 Premiums and other receivables 167,453 165,194 Reinsurance recoverable on paid losses and loss expenses 7,091 5,169 Reinsurance recoverable on unpaid losses and loss expenses 128,326 121,369 Prepaid reinsurance premiums 36,970 39,952 Deferred Federal income tax 41,155 32,202 Real estate, furniture and equipment 48,888 49,373 Deferred policy acquistion costs 82,100 82,200 Excess of cost over fair value of net assets acquired 10,128 10,362 Other assets 19,736 19,499 --------- --------- Total assets $ 2,143,024 2,113,077 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY - - ------------------------------------ Liabilities: - - ----------- Reserve for losses $ 984,996 953,251 Reserve for loss expenses 173,023 166,801 Unearned premiums 336,357 343,887 Convertible subordinated debentures 7,282 7,292 Notes payable 104,000 104,000 Current Federal income tax 3,174 1,993 Other liabilities 95,122 99,104 --------- --------- Total liabilities 1,703,954 1,676,328 --------- --------- Stockholders' Equity: - - -------------------- Common stock of $2 par value per share: Authorized shares: 90,000,000 Issued: 17,816,669 - 1996; 17,647,178 - 1995 35,633 35,294 Additional paid-in capital 51,131 46,071 Net unrealized gains on available-for-sale securities, net of deferred income tax effect 39,570 56,740 Retained earnings 363,654 347,318 Treasury stock - at cost (shares: 3,249,136 - 1996; 3,247,189 - 1995) (46,497) (46,429) Notes receivable from stock sales and deferred compensation expense (4,421) (2,245) --------- --------- Total stockholders' equity 439,070 436,749 --------- --------- Total liabilities and stockholders' equity $ 2,143,024 2,113,077 ========= ========= See accompanying notes to unaudited consolidated financial statements. PAGE 3 SELECTIVE INSURANCE GROUP, INC. =============================== Consolidated Statements of Income --------------------------------- (unaudited) (in thousands, except per share data) Quarter ended Six months ended June 30 June 30 Revenues: 1996 1995 1996 1995 - - --------- ------- ------- ------- ------- Net premiums written $ 174,767 193,426 348,214 384,993 Net increase (decrease) in unearned premiums and prepaid reinsurance premiums 1,307 (7,459) 4,547 (20,460) ------- ------- ------- ------- Net premiums earned 176,074 185,967 352,761 364,533 Net investment income earned 23,783 22,464 47,794 44,188 Net realized gains (losses) on investments 934 (313) 1,363 (400) Other income 767 906 1,525 1,732 ------- ------- ------- ------- Total revenues 201,558 209,024 403,443 410,053 ------- ------- ------- ------- Expenses: - - --------- Losses incurred 105,399 112,847 220,795 218,678 Loss expenses incurred 19,072 20,186 38,844 40,986 Policy acquisition costs 52,513 55,402 105,219 109,132 Dividends to policyholders 1,317 1,769 2,745 3,633 Interest expense 2,323 2,324 4,646 4,649 Other expenses 1,085 1,814 1,806 2,845 ------- ------- ------- ------- Total expenses 181,709 194,342 374,055 379,923 ------- ------- ------- ------- Income before Federal income tax 19,849 14,682 29,388 30,130 ------- ------- ------- ------- Federal income tax expense (benefit): Current 3,569 3,765 4,636 7,332 Deferred 710 (1,388) 292 (2,352) ------- ------- ------- ------- Total Federal income tax expense 4,279 2,377 4,928 4,980 ------- ------- ------- ------- Net income $ 15,570 12,305 24,460 25,150 ======= ======= ======= ======= Earnings per share: - - ------------------- Net income-primary $ 1.07 .86 1.69 1.77 Net income-fully diluted $ 1.04 .84 1.64 1.72 Dividends to stockholders $ .28 .28 .56 .56 See accompanying notes to unaudited consolidated financial statements PAGE 4 SELECTIVE INSURANCE GROUP, INC. =============================== Consolidated Statements of Cash Flows ------------------------------------- (unaudited) Six months ended June 30 (in thousands) 1996 1995 Operating Activities ---- ---- - - -------------------- Net income $ 24,460 25,150 Adjustments to reconcile net income to net cash provided by operating activities: Increase in reserves for losses and loss expenses 37,967 54,185 Increase (decrease) in unearned premiums (7,530) 14,858 Increase (decrease) in Federal income taxes 1,474 (6,936) Depreciation and amortization 2,501 2,731 Increase in premiums and other receivables (2,259) (21,715) Decrease (increase) in deferred policy acquisition costs 100 (4,600) Increase in interest and dividends due or accrued (266) (496) Increase in reinsurance recoverable on paid losses and expenses (1,922) (964) Increase in reinsurance recoverable on unpaid losses and expenses (6,957) (3,305) Decrease in prepaid reinsurance premiums 2,982 5,602 Net realized losses (gains) on investments (1,364) 400 Other - net (16,273) 5,078 ------- ------- Net adjustments 8,453 44,838 ------- ------- Net cash provided by operating activities 32,913 69,988 ------- ------- Investing Activities - - -------------------- Purchase of debt securities, held-to-maturity (56,968) (58,838) Purchase of debt securities, available-for-sale (51,841) (47,963) Purchase of equity securities, available-for-sale (20,905) (3,079) Sale of debt securities, available-for-sale 11,200 14,696 Redemption and maturities of debt securities, held-to-maturity 41,792 20,783 Redemption and maturities of debt securities, available-for-sale 20,819 4,443 Sale of equity securities, available-for-sale 3,639 574 Proceeds from other investments 63 33 Increase in net payable from security transactions not settled 12,430 2,379 Net additions to real estate, furniture and equipment (1,919) (1,734) ------- ------- Net cash used in investing activities $ (41,690) (68,706) ------- ------- See accompanying notes to unaudited consolidated financial statements. PAGE 5 SELECTIVE INSURANCE GROUP, INC. =============================== Consolidated Statements of Cash Flows, continued ------------------------------------------------ (unaudited) Six months ended June 30 (in thousands) 1996 1995 Financing Activities ---- ---- - - -------------------- Dividends to stockholders $ (8,124) (7,966) Acquisition of treasury stock (68) (110) Net proceeds from dividend reinvestment plan 579 586 Net proceeds from employee, agent and director stock plans 4,810 3,010 Proceeds from notes receivable from stock sale and additions to deferred compensation expense (2,659) (832) ------- ------- Net cash used in financing activities (5,462) (5,312) ------- ------- Net decrease in short-term investments (14,239) (4,030) Short-term investments at beginning of year 47,306 30,631 ------- ------- Short-term investments at end of period $ 33,067 26,601 ======= ======= Supplemental disclosures of cash flow information - - ------------------------------------------------- Cash paid during the period for: Interest $ 4,966 4,507 Federal income tax 3,455 11,915 Supplemental schedule of non-cash financing activity: Conversion of convertible subordinated debentures 10 40 See accompanying notes to unaudited consolidated financial statements. PAGE 6 Notes to Unaudited Consolidated Financial Statements - - ---------------------------------------------------- 1. Basis of Presentation --------------------- The interim financial statements are unaudited but reflect all adjustments which, in the opinion of management, are necessary to provide a fair statement of the results of Selective Insurance Group, Inc. and its consolidated subsidiaries (collectively, the "Company") for the interim periods presented. References herein to "Selective" are to the Parent Company, Selective Insurance Group, Inc. All such adjustments are of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 2. Reinsurance ----------- The following is a table of assumed and ceded amounts by income statement caption: - - ----------------------------------------------------------------------------- Quarter ended Six months ended June 30 June 30 (in thousands) 1996 1995 1996 1995 - - ----------------------------------------------------------------------------- Net premiums written: Assumed $ 6,897 8,205 14,647 13,006 Ceded (24,484) (23,407) (47,453) (46,272) Net premiums earned: Assumed $ 8,186 12,581 16,635 21,353 Ceded (25,065) (24,182) (50,435) (48,874) Losses incurred: Assumed $ 4,081 9,713 7,476 18,583 Ceded(1) (11,130) (12,410) (41,165) (22,284) Loss expenses incurred: Assumed $ 521 699 1,039 1,091 Ceded (706) (433) (2,122) (1,054) - - ----------------------------------------------------------------------------- (1) The significant increase in ceded losses incurred for the six months ended June 30, 1996 reflected flood and weather-related winter storm claims which generated reinsurance loss recoveries of $13.4 million and $5.0 million, respectively. The flood business is ceded 100% to the National Flood Insurance Program and, therefore, the Company is a servicer and not an underwriter of this type of insurance and bears no risk of policyholder loss. PAGE 7 Item 2. Management's Discussion and Analysis of Financial Condition and - - ------ --------------------------------------------------------------- Results of Operations --------------------- The following discussion relates to the Company's results of operations, financial condition and liquidity for the interim periods indicated. Results of Operations - - --------------------- Comparison of Second Quarter and Six Months Ended June 30, 1996 to Second - - ------------------------------------------------------------------------- Quarter and Six Months Ended June 30, 1995 - - ------------------------------------------ Revenues - - -------- Net premiums written for the quarter and six months ended June 30, 1996 decreased by 9.6%, or $18.7 million, and 9.6%, or $36.8 million, respectively, compared to the same periods in 1995. Most of the premium decline occurred in the Strategic Business Units ("SBUs") writing commercial lines insurance, where net premiums written decreased by 12.6%, or $17.2 million for the quarter and 12.8%, or $35.3 million for the six months ended June 30, 1996. The decrease in premiums written for the quarter and six months ended June 30, 1996, coupled with the higher premium volume recorded during the corresponding 1995 periods, translated into an overall decrease in total net premiums earned of 5.3%, or $9.9 million, for the quarter and 3.2%, or $11.8 million, for the six months ended June 30, 1996, compared to the same periods in 1995. The decrease in net premiums written for the quarter and six months ended June 30, 1996 compared to the same periods in 1995 was in all commercial lines SBUs, except for bonds, and primarily reflected: (i) higher premiums recorded in the corresponding 1995 periods due to the reduction in premium processing backlog of approximately $9 million and $18 million, respectively; (ii) a reduction in premium volume of approximately $7 million and $11 million, respectively, due to agency terminations; (iii) a reduction in retention business (renewals) attributable to a highly competitive commercial lines marketplace and the Company's reunderwriting (re-evaluating) of certain business classes, resulting in non-renewals, offset by an increase in new business; and (iv) recent rate decreases, mainly in the workers' compensation line of insurance. In addition, both commercial and personal lines SBUs net premiums written were reduced by higher ceded premiums recorded for the New Jersey Unsatisfied Claim and Judgment Fund for the quarter and six months ended June 30, 1996 of $0.6 million and $1.9 million, respectively, over the same periods in 1995. The personal lines SBU net premiums written remained relatively consistent for the quarter and six months ended June 30, 1996 compared to the same periods in 1995. Additional premiums generated from rate increases in New Jersey personal automobile ($1.6 million for the quarter and $3.1 million for the six months ended June 30, 1996) were offset by a reduction in the number of policies in-force in the personal automobile line of insurance of approximately 2,000 policies. The property and casualty industry is presently very competitive. In these current conditions, the Company's position is to maintain its pricing discipline and commitment to long-term profitability by rejecting underpriced risks without regard to premium volume considerations. However, as a result of price competition, the Company is reducing rates in certain lines of commercial insurance, which is expected to impact, when fully implemented, net premiums written and earned by approximately $9 million. In addition to price competition, alternative self-insurance mechanisms have become more prevalent which reduces the demand for traditional insurance, but creates the opportunity to service self-insured entities. In 1993, the Company organized Selective Technical Administrative Resources, Inc. ("SelecTech") to provide third-party administrative services for public entities that self-insure. These services include claims administration, loss control and risk management. In its third year of operation, SelecTech continues to expand its operations in the self-insurance market in an effort to attract customers that choose alternative methods of insurance. In addition to the aforementioned factors which are expected to impact the Company's future net premiums written, the Company revised some of its reinsurance agreements during the third quarter of 1996, which will enable the Company to retain more of its premiums. (For further discussion on reinsurance, see page 10 for the section entitled, "Reinsurance.") Net investment income earned for the quarter and six months ended June 30, 1996 increased 5.9%, or $1.3 million, and 8.2%, or $3.6 million, respectively, PAGE 8 over the same periods in 1995. The increases were due to the income generated from investments acquired from cash provided by operating activities during 1995 and 1996. The growth in investment income was partially offset by redemptions and maturities during 1995 of higher yielding debt securities reinvested at lower fixed income yields currently available in the marketplace. These factors, coupled with the increase in fair value of both the available-for-sale debt and equity securities recognized during 1995, reduced the Company's overall annualized investment yield for the six month period to 6.1% for 1996, down from 6.5% for the same period one year ago. Expenses - - -------- The ratio of losses and loss expenses incurred to net premiums earned for the quarter ended June 30, 1996 was 70.7%, a decrease from 71.5% for the same period in 1995. The 0.8 point decrease in the net loss and loss expense ratio reflected an overall improvement in the contractors and habitational and recreational SBUs. Contractors, habitational and recreational, along with the public entity SBUs reflected improvement in the general liability and workers' compensation lines of insurance due to rate increases obtained during 1995. Partially offsetting the improvement are less favorable results primarily in the property and commercial automobile lines of insurance, effecting the habitational and recreational, mercantile and service, and public entity SBUs. The ratio of losses and loss expenses incurred to net premiums earned for the six months ended June 30, 1996 was 73.6%, an increase from 71.2% for the same period in 1995. The 2.4 point increase in the loss and loss expense ratio, for the most part, reflected numerous winter storm claims primarily in the personal lines, mercantile and service, public entities, as well as the habitational and recreational SBUs. These weather-related claims for the six months ended June 30, 1996 amounting to $10.6 million (net of $5.1 million of reinsurance), increased the six months loss and loss expense ratio by 3.0 points. Absent the claims from weather-related winter storms, the loss and loss expense ratio improved 0.6 points. The 0.6 point decrease in the net loss and loss expense ratio reflected an overall improvement in the personal lines, contractors, and habitational and recreational SBUs. Contractors, habitational and recreational, along with the public entity SBUs reflected favorable loss experience in both the general liability and workers' compensation lines of insurance due to rate increases obtained during 1995. Partially offsetting the improvement are less favorable results primarily in the property and commercial automobile lines of insurance, effecting the habitational and recreational, mercantile and service, and the public entity SBUs. The increase in the loss and loss expense ratio in property insurance was due to the higher level of claim severity and the increase in commercial automobile insurance was due to claim frequency within the current accident year. The ratio of policy acquisition costs to net premiums earned for the quarter and six months ended 1996 was 29.8% remaining consistent compared to the same periods in 1995. The consistency in the ratio reflected the reduction in the New Jersey Fair Automobile Insurance Reform Act assessment offset by higher labor costs expressed as a percentage of net premiums earned. While labor costs remained stable, the lower levels of premiums earned impacted this ratio. Total Federal income tax expense increased $1.9 million to $4.3 million for the quarter ended June 30, 1996, compared to $2.4 million for the same period in 1995. For the six months ended June 30, 1996, the Federal income tax expense decreased slightly to $4.9 million, compared to $5.0 million for the first six months in 1995. The Company's effective tax rates for the six months ended June 30, 1996 and 1995 were 16.8% and 16.5%, respectively. The Company's effective tax rate differs from the Federal corporate tax rate of 35% primarily as a result of the tax-exempt investment income. Income - - ------ The table on page 9 shows operating income, net realized gains(losses), and net income, including per share amounts for the quarter and six months ended June 30, 1996. PAGE 9 - - ----------------------------------------------------------------------------- ($ in thousands, Quarter ended June Six months ended June except for per share data) 1996 1995 1996 1995 - - ----------------------------------------------------------------------------- Operating income, excluding net realized gains (net of tax) (1) $14,963 12,509 23,574 25,410 Net realized gain (loss), net of tax 607 (204) 886 (260) Net income (1) 15,570 12,305 24,460 25,150 Per Primary Share: Operating income (1) 1.03 .88 1.63 1.79 Net realized gain (loss) .04 (.02) .06 (.02) Net income (1) 1.07 .86 1.69 1.77 - - ----------------------------------------------------------------------------- (1) Operating and net income for the six months ended June 30, 1996, include $6.9 million of weather-related winter storm losses, or $.48 per primary share. Financial Condition, Liquidity and Capital Resources - - ---------------------------------------------------- Selective is an insurance holding company whose principal assets are its investments in its insurance subsidiaries. As an insurance holding company, Selective meets its cash requirements through proceeds from the sale of Selective's common stock and dividends from its insurance subsidiaries, the payments of which are subject to state regulatory requirements. Total assets increased 1.4%, or $29.9 million from December 31, 1995 to June 30, 1996. The growth in assets was primarily due to: (i) an increase in total investments of $13.2 million, which included cash provided by operating activities of $32.9 million partially offset by a decrease in net unrealized gains of $26.4 million on available-for-sale securities; (ii) an increase of $7.0 million in reinsurance recoverable on unpaid losses and expenses due in part to flood claims ($2.1 million) as well as claims from weather related winter storms ($1.2 million) during the six months ended June 30, 1996; and (iii) an increase of $9.0 million in deferred Federal income taxes, mainly due to tax benefits related to the decrease in net unrealized gains recognized on the available-for-sale securities. The rise in total liabilities of 1.6%, or $27.6 million, from December 31, 1995 to June 30, 1996 was mainly composed of increases in reserves for losses and loss expenses of $38.0 million due to: (i) outstanding reserves for 1996 winter storm losses of $3.4 million; (ii) outstanding reserves for 1996 flood losses of $2.1 million; and (iii) normal reserve increases. This increase was partially offset by a $7.5 million decrease in unearned premiums due to the lower level of premiums written. The overall obligations and cash outflow of the Company include: claim settlements; commissions; labor costs; premium taxes; general and administrative expenses; investment purchases; interest expenses; capital expenditures with respect to the Company's automation program; principal payments on the senior notes; and dividends to policyholders and Selective's stockholders. The insurance subsidiaries satisfy their obligations and cash outflow through premium collections, interest and dividend income and debt securities maturities. The Company has authorized a share repurchase program under which Selective may repurchase up to one million of its common stock, depending on market conditions, through available cash and a $10 million line of credit. For the six months ended June 30, 1996 and 1995, cash provided by operating activities amounted to $32.9 million and $70.0 million, respectively. The decrease in cash provided by operating activities for the first six months of 1996 was in part due to: (i) increased loss and loss expenses paid of approximately $20 million, which includes $8.5 million due to the weather-related winter storm claims; (ii) an increase in the 1996 UCJF assessment payment of approximately $5 million; (iii) an increase in 1995 incentives and profit sharing amounts totaling approximately $4 million paid during the PAGE 10 six months ended June 30, 1996; and (iv) lower levels of premiums. The Company expects to continue to generate cash from operations over the balance of the year. Reinsurance - - ----------- Effective July 1, 1996, the Company revised certain reinsurance agreements from a surplus share and facultative arrangement to a treaty excess of loss arrangement. Under the new arrangement, property lines are reinsured for each occurrence in excess of $0.4 million up to $10.0 million. In certain instances where greater capacity is needed for larger property risks,facultative reinsurance will be purchased. There was no change to the current property catastrophe reinsurance arrangement. Casualty lines are reinsured for each occurrence in excess of $1.0 million up to $50.0 million except commercial umbrella which is reinsured for each occurrence up to $10.0 million. Facultative reinsurance is purchased for any casualty risks requiring greater capacity. The revised reinsurance agreements will result in the Company retaining approximately $15 million of additional annual net premiums written and the related loss exposure. During the third quarter of 1996, the Company will also realize a one-time increase in net premiums written of approximately $8 million which is represented by the Company's buyout of the June 30, 1996 surplus reinsurance unearned premium reserve. PAGE 11 Part II OTHER INFORMATION -------------------------- Item 5. Other Information - - -------------------------- (a) On July 29, 1996, Selective's Board of Directors authorized a repurchase program under which Selective may repurchase up to one million shares of its common stock, depending on market conditions, available cash and alternative investment opportunities. This program expires on December 31, 1997. Item 6. Exhibits and Reports on Form 8-K - - ----------------------------------------- (a) Exhibits Exhibit Number - - ------ 11 Statement Re Computation of Per Share Earnings 27 Financial Data Schedule (b) Reports on Form 8-K None PAGE 12 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SELECTIVE INSURANCE GROUP, INC. ------------------------------- Registrant Date August 14, 1996 /s/James W. Entringer - - --------------------- James W. Entringer President, Chairman and Chief Executive Officer Date August 14, 1996 /s/Gregory E. Murphy - - -------------------- Gregory E. Murphy Senior Vice President and Chief Financial Officer PAGE 13 SELECTIVE INSURANCE GROUP, INC. ------------------------------- INDEX TO EXHIBITS ----------------- Form 10-Q Exhibit No. Page - - ----------- ---- 11 Statement re Computation of per Share Earnings 14 27 Financial Data Schedule 15 PAGE 14 EXHIBIT 11 SELECTIVE INSURANCE GROUP, INC. ------------------------------- STATEMENT RE COMPUTATION OF PER SHARE EARNINGS ---------------------------------------------- - - ----------------------------------------------------------------------------- Quarter ended Six months ended ($ in thousands, June 30 June 30 except per share data) 1996 1995 1996 1995 - - ----------------------------------------------------------------------------- Primary earnings per share: Net income $ 15,570 12,305 24,460 25,150 Weighted average number of shares of common stock outstanding 14,531,303 14,255,420 14,496,228 14,230,651 Net income per share of common stock $ 1.07 .86 1.69 1.77 ========== ========== ========== ========== Fully diluted earnings per share: Income applicable to common stock on a fully diluted basis: Net income $ 15,570 12,305 24,460 25,150 Interest on convertible debentures 159 160 318 321 Amortization of other debt expenses 2 2 4 4 Tax effect on interest and debt expenses (56) (56) (113) (113) ---------- ---------- ---------- ---------- $ 15,675 12,411 24,669 25,362 ========== ========== ========== ========== Weighted average number of shares outstanding on a fully diluted basis: Weighted average number of common shares outstanding 14,531,303 14,255,420 14,496,228 14,230,651 Additional shares assuming conversion of debentures 513,907 518,221 514,000 518,804 ---------- ---------- ---------- ---------- 15,045,210 14,773,641 15,010,228 14,749,455 ========== ========== ========== ========== Fully diluted income per share of common stock $ 1.04 .84 1.64 1.72 ========== ========== ========== ========== - - -----------------------------------------------------------------------------