-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D9lRByGlxAmh4xqcQmvToa9YbpZ+m8DGo88sua1Kq1CZoHrsa90JJljXEDH4Q6ey SF52OnYOtMNWI2zrAi6xfg== 0001036050-97-000977.txt : 19971114 0001036050-97-000977.hdr.sgml : 19971114 ACCESSION NUMBER: 0001036050-97-000977 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNSYLVANIA MANUFACTURERS CORP CENTRAL INDEX KEY: 0001041665 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 232217932 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22761 FILM NUMBER: 97712877 BUSINESS ADDRESS: STREET 1: THE PMA BLDG STREET 2: 380 SENTRY PKWY CITY: BLUE BELL STATE: PA ZIP: 19422-2328 BUSINESS PHONE: 2156655046 MAIL ADDRESS: STREET 1: THE PMA BLDG STREET 2: 380 SENTRY PARKWAY CITY: BLUE BELL STATE: PA ZIP: 19422-2328 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q | X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1997 | _ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _______________ to _____________________ . Commission File Number: 0-22761 Pennsylvania Manufacturers Corporation -------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-2217932 ------------ ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) The PMA Building 380 Sentry Parkway Blue Bell, Pennsylvania 19422-2328 ---------------------------------- (Address of principal executive offices)(Zip Code) (215) 665-5046 -------------- (Registrant's telephone number, including area code) Indicate by a 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 reports), and (2) has been subject to such filing requirements for the past 90 days. YES | _ | NO | X | There were 14,888,139 shares outstanding of the registrant's Common Stock, $5 par value per share, and 8,982,611 shares outstanding of the registrant's Class A Common Stock, $5 par value per share, as of the close of business on September 30, 1997. Pennsylvania Manufacturers Corporation Table of Contents
Part I. Financial Information Page Number ------ Item 1. Financial statements Condensed consolidated statements of operations for the three and nine months ended September 30, 1997 (unaudited) and 1996 (unaudited) 3 Condensed consolidated balance sheets as of September 30, 1997 (unaudited) and December 31, 1996 4 Condensed consolidated statements of cash flows for the nine months ended September 30, 1997 (unaudited) and 1996 (unaudited) 5 Notes to the condensed consolidated financial statements (unaudited) 6 Item 2. Management's discussion and analysis of financial condition and results of operations 8 Part II. Other Information Item 6. Exhibits and reports on Form 8-K 19
2 Pennsylvania Manufacturers Corporation Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, (dollar amounts in thousands, except per share data) 1997 1996 1997 1996 ---- ---- ---- ---- Revenues: Net premiums written $ 104,487 $ 116,745 $ 352,758 $ 360,525 Change in net unearned premiums (41,517) (10,711) (67,387) (34,328) --------- --------- --------- --------- Net premiums earned 62,970 106,034 285,371 326,197 Net investment income 34,353 32,732 102,812 98,663 Net realized investment gains 5,531 5,972 3,600 5,503 Service revenues 2,674 2,642 7,712 6,654 --------- --------- --------- --------- Total revenues 105,528 147,380 399,495 437,017 --------- --------- --------- --------- Losses and expenses: Losses and loss adjustment expenses 47,785 97,013 240,919 282,468 Amortization of deferred acquisition costs 20,093 19,586 66,562 66,134 Operating expenses 18,765 21,162 55,670 54,936 Dividends to policyholders 3,566 3,566 10,183 9,418 Interest expense 3,803 4,331 12,025 13,161 --------- --------- --------- --------- Total losses and expenses 94,012 145,658 385,359 426,117 --------- --------- --------- --------- Income before income taxes and extraordinary item 11,516 1,722 14,136 10,900 Provision (Benefit) for income taxes: Current (741) (84) (1,094) 2,921 Deferred 4,913 (650) 2,609 (1,222) --------- --------- --------- --------- Total provision (benefit) 4,172 (734) 1,515 1,699 --------- --------- --------- --------- Income before extraordinary item 7,344 2,456 12,621 9,201 Extraordinary loss from early extinguishment of debt (net of income tax benefit of $2,549) -- -- (4,734) -- --------- --------- --------- --------- Net income $ 7,344 $ 2,456 $ 7,887 $ 9,201 ========= ========= ========= ========= Per Share Data: Income before extraordinary item $ 0.30 $ 0.10 $ 0.51 $ 0.37 Extraordinary item -- -- (0.19) -- --------- --------- --------- --------- Net income $ 0.30 $ 0.10 $ 0.32 $ 0.37 ========= ========= ========= ========= Weighted average common and common share equivalents (in thousands) 24,510 24,751 24,480 24,867 ========= ========= ========= =========
See accompanying notes to the condensed consolidated financial statements. 3 Pennsylvania Manufacturers Corporation Condensed Consolidated Balance Sheets
(Unaudited) September 30, December 31, (dollar amounts in thousands, except share data) 1997 1996 ----------- ----------- Assets Investments: Fixed maturities available for sale at fair value (amortized cost: $2,071,763 and $2,164,391) $ 2,060,521 $ 2,126,120 Common stock (cost: $255 and $259) 261 262 Short-term investments, at cost which approximates fair value 141,863 134,971 ----------- ----------- Total investments 2,202,645 2,261,353 Cash 1,895 7,176 Investment income due and accrued 30,581 30,268 Uncollected premiums 295,589 285,982 Reinsurance receivables 294,506 257,983 Other assets 241,145 274,754 ----------- ----------- Total assets $ 3,066,361 $ 3,117,516 =========== =========== Liabilities Unpaid losses and loss adjustment expenses $ 1,989,160 $ 2,091,072 Unearned premiums 239,112 205,982 Dividends to policyholders 10,704 12,524 Long-term debt 203,000 204,699 Other liabilities 178,121 177,411 ----------- ----------- Total liabilities 2,620,097 2,691,688 ----------- ----------- Shareholders' Equity Common stock, $5 par value (40,000,000 shares authorized; 15,323,613 shares issued and 14,888,139 outstanding - 1997; 16,095,416 shares issued and 15,670,052 outstanding - 1996) 76,618 80,477 Class A common stock, $5 par value (40,000,000 shares authorized; 9,019,607 shares issued and 8,982,611 outstanding - 1997; 8,247,804 shares issued and 8,173,023 outstanding - 1996) 45,098 41,239 Retained earnings 338,244 336,921 Unrealized loss on investments available for sale (net of deferred income taxes: $3,933 and $13,394) (7,303) (24,874) Notes receivable from officers (246) (1,162) Treasury stock, at cost: Common stock (shares: 435,474 - 1997 and 425,364 - 1996) (5,572) (5,408) Class A common stock (shares: 36,996 - 1997 and 74,781 - 1996) (575) (1,365) ----------- ----------- Total shareholders' equity 446,264 425,828 ----------- ----------- Total liabilities and shareholders' equity $ 3,066,361 $ 3,117,516 =========== ===========
See accompanying notes to the consolidated financial statements. 4 Pennsylvania Manufacturers Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, (dollar amounts in thousands) 1997 1996 ---- ---- Cash flows from operating activities: Net income $ 7,887 $ 9,201 Adjustments to reconcile net income to net cash flows used by operating activities: Depreciation 7,117 5,733 Amortization 3,832 5,574 Provision (benefit) for deferred income taxes 2,609 (1,222) Extraordinary loss from early extinguishment of debt (4,734) -- Net realized investment gains (3,600) (5,503) Change in uncollected premiums and unearned premiums, net 23,523 2,460 Change in dividends to policyholders (1,820) (2,263) Change in reinsurance receivables (36,523) (13,350) Change in unpaid losses and loss adjustment expenses (101,912) (69,918) Change in investment income due and accrued (313) 2,628 Other, net 14,275 (17,231) ----------- ----------- Net cash flows used by operating activities (89,659) (83,891) ----------- ----------- Cash flows from investing activities: Fixed maturity investments available for sale: Purchases (1,462,705) (994,233) Maturities or calls 122,974 45,671 Sales 1,432,258 961,012 Equity securities: Purchases -- (5,192) Sales 3 15,780 Net (purchases) sales of short-term investments (7,047) 70,046 Proceeds from sale of corporate properties 7,145 -- Net purchases of furniture and equipment (2,245) (2,751) ----------- ----------- Net cash flows provided by investing activities 90,383 90,333 ----------- ----------- Cash flows from financing activities: Dividends paid to shareholders (5,966) (5,911) Proceeds from borrowed money 210,000 -- Repayments of long-term debt (211,699) (7,234) Repayments of notes receivable from officers 1,034 2,396 Treasury stock transactions, net 626 (2,058) ----------- ----------- Net cash flows used by financing activities (6,005) (12,807) ----------- ----------- Net decrease in cash (5,281) (6,365) Cash January 1 7,176 9,170 ----------- ----------- Cash September 30 $ 1,895 $ 2,805 =========== =========== Supplementary cash flow information: Cash (received) paid for income taxes $ (19,312) $ 6,190 Cash paid for interest $ 15,637 $ 12,601
See accompanying notes to the consolidated financial statements. 5 Pennsylvania Manufacturers Corporation Notes to the Condensed Consolidated Financial Statements (dollar amounts in thousands except per share data) 1. General Pennsylvania Manufacturers Corporation (PMC) is an insurance holding company that sells reinsurance and property and casualty insurance through its insurance subsidiaries. PMC's reinsurance subsidiary, PMA Reinsurance Corporation (PMA Re), emphasizes risk-exposed, excess of loss reinsurance and operates in the brokered market. PMA Re's business is predominantly in casualty lines of reinsurance. PMC's property and casualty insurance subsidiaries (the Property and Casualty Group) write workers' compensation and other lines of commercial insurance primarily in the Mid-Atlantic and Southern regions of the United States. The accompanying condensed consolidated financial statements include the accounts of PMC and its wholly and majority owned subsidiaries (the Company), and have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. It is management's opinion that all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Certain reclassifications of prior year amounts have been made to conform with the 1997 presentation. Operating results for the three and nine months ended September 30, 1997, are not necessarily indicative of the results to be expected for the full year. For further information, refer to the December 31, 1996, audited consolidated financial statements and footnotes thereto included in PMC's Registration Statement on Form 10. 2. Per Share Data Earnings per share data are based on weighted average common shares and common share equivalents outstanding during the period. Common stock options are considered common stock equivalents and are included in average share calculations if dilutive. See footnote 3 regarding the impact of SFAS No. 128. 3. Accounting Pronouncements In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125, which is effective for transfers and extinguishments occurring after December 31, 1996, provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Property and Casualty Group's domestic insurance subsidiaries currently participate in a transfer arrangement of certain accounts receivable. Such arrangement has been restructured as a result of the adoption of SFAS No. 125. The restructuring of such arrangement did not have a material impact on the Company's financial condition or results of operations. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share," which supersedes Accounting Principles Board Opinion No. 15, "Earnings Per Share" and related interpretations. SFAS No. 128, which is effective for financial statements for both interim and annual periods ending after December 15, 1997, requires presentation of earnings per share by all entities that have issued common stock or potential common stock if those securities trade in a public market either on a stock exchange or in the over-the-counter market, including securities quoted only locally or regionally. SFAS No. 128 establishes a new calculation for earnings per share showing both basic and diluted earnings per share. Basic earnings per share will be calculated using only weighted average shares outstanding with no dilutive impact from common stock equivalents while diluted earnings per share will be calculated similar to the current fully diluted earnings per share calculation. All prior period earnings per share amounts will be restated to be consistent with the new requirements. If earnings per share had been calculated in accordance with SFAS No. 128, the basic earnings per share for the three and nine months ended September 30, 1997 and 1996, would have been as follows: 6
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ----- ----- ------ ----- Income before extraordinary item $0.31 $0.11 $ 0.53 $0.39 Extraordinary item -- -- (0.20) -- ----- ----- ------ ----- Net income $0.31 $0.11 $ 0.33 $0.39 ----- ----- ------ -----
4. Long-Term Debt On March 14, 1997, the Company refinanced substantially all of its existing credit agreements not already maturing in 1997 through the completion of a new $235,000 revolving credit facility (New Credit Facility). Utilizing the New Credit Facility, the Company refinanced the following obligations:
Senior notes 9.60%, due 2001 $ 46,428 Senior notes 7.62%, due 2001, Series A 71,000 Senior notes 7.62%, due 2000, Series B 36,000 Revolving credit agreement, expiring in 1998 36,000 -------- Total $189,428 ========
The early extinguishment of the senior note agreements resulted in an extraordinary loss of $4,734 ($7,283 pre-tax) recorded in the first quarter of 1997. The New Credit Facility bears interest at LIBOR plus .70% on the utilized portion and carries a .275% facility fee on the unutilized portion. The spread over LIBOR and the facility fee are adjustable downward based upon the Company's debt to capitalization ratios in the future. As of September 30, 1997, the interest rate on the New Credit Facility was 6.23%. The Company entered into an interest rate swap agreement on March 14, 1997, covering $150,000 notional principal of the New Credit Facility. The interest rate swap effectively converts the floating rate to a fixed rate of 7.24% on such portion of the New Credit Facility. At September 30, 1997, the Company had $203,000 outstanding under the New Credit Facility, with $32,000 available for additional borrowings. 7 Management's Discussion and Analysis of Financial Condition and Results of Operations The Company consists of PMC, an insurance holding company, and its subsidiaries. PMC operates in two principal segments, property and casualty reinsurance and property and casualty primary insurance. PMA Reinsurance Corporation (PMA Re), emphasizes risk-exposed, excess of loss reinsurance and operates in the brokered market. PMA Re's business is predominantly in casualty lines of reinsurance. The Property and Casualty Group writes workers' compensation and other lines of commercial insurance primarily in the Mid-Atlantic and Southern regions of the United States, utilizing The PMA Group trade name. Results of Operations The table below presents the major components of net income for the three and nine months ended September 30, 1997, and September 30, 1996, respectively: (dollar amounts in thousands, except per share data)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - -------------------------------------------------------------------------------------------------------------- Pre-tax operating income (loss) $ 5,985 $ (4,250) $ 10,536 $ 5,397 Net realized investment gains 5,531 5,972 3,600 5,503 -------- -------- -------- -------- Income before income taxes and extraordinary item 11,516 1,722 14,136 10,900 Provision (benefit) for income taxes 4,172 (734) 1,515 1,699 -------- -------- -------- -------- Income before extraordinary item 7,344 2,456 12,621 9,201 Extraordinary item, net of related taxes -- -- (4,734) -- -------- -------- -------- -------- Net income $ 7,344 $ 2,456 $ 7,887 $ 9,201 ======== ======== ======== ======== Per Share Data: Income before extraordinary item $ 0.30 $ 0.10 $ 0.51 $ 0.37 Extraordinary item -- -- (0.19) -- -------- -------- -------- -------- Net income $ 0.30 $ 0.10 $ 0.32 $ 0.37 ======== ======== ======== ========
The following table indicates the Company's pre-tax operating income (loss) by principal business segment for the three and nine months ended September 30, 1997, and September 30, 1996, respectively: (dollar amounts in thousands)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - -------------------------------------------------------------------------------------------------------------- PMA Re $ 11,452 $ 10,366 $ 33,546 $ 28,904 The Property and Casualty Group (680) (10,738) (9,092) (9,573) Corporate operations (984) 453 (1,893) (773) -------- -------- -------- -------- Pre-tax operating income before interest expense 9,788 81 22,561 18,558 Interest expense 3,803 4,331 12,025 13,161 -------- -------- -------- -------- Pre-tax operating income (loss) $ 5,985 $ (4,250) $ 10,536 $ 5,397 ======== ======== ======== ========
8 On a consolidated basis, the Company reported pre-tax operating income of $6.0 million and $10.5 million for the three and nine months ended September 30, 1997, respectively, compared to a pre-tax operating loss of $4.3 million for the three months ended September 30, 1996 and pre-tax operating income of $5.4 million for the nine months ended September 30, 1996. The increases in pre-tax operating income for the three and nine month periods ended September 30, 1997, in comparison to the same periods in 1996 are due primarily to increased operating income generated by PMA Re, as well as lower operating costs related to the Property and Casualty Group's operations in the third quarter of 1997. Interest expense decreased $528,000 and $1.1 million for the three and nine months ended September 30, 1997, respectively, compared to the same periods in 1996. These decreases were due to the refinancing of the Company's debt with a new $235.0 million revolving credit facility (the "New Credit Facility"). See "Liquidity and Capital Resources" herein. Net income on a consolidated basis, before extraordinary items, was $7.3 million, or $0.30 per share, and $12.6 million, or $0.51 per share, for the three and nine months ended September 30, 1997, respectively, compared to net income of $2.5 million, or $0.10 per share, and $9.2 million, or $0.37 per share, for the three and nine months ended September 30, 1996, respectively. On March 14, 1997, the Company refinanced substantially all of its outstanding credit agreements not already maturing in 1997 with the New Credit Facility. In connection with this refinancing, the Company recognized an extraordinary loss from the early extinguishment of debt of $4.7 million, or $0.19 per share, net of tax. PMA Re Results of Operations Summarized financial results of PMA Re for the three and nine months ended September 30, 1997, are as follows: (dollar amounts in thousands)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------- Net premiums written $ 45,019 $ 43,113 $141,298 $132,522 -------- -------- -------- -------- Net premiums earned $ 39,208 $ 39,297 $124,295 $116,313 Net investment income 13,460 12,235 38,748 34,882 -------- -------- -------- -------- Operating revenues 52,668 51,532 163,043 151,195 -------- -------- -------- -------- Losses and LAE incurred 28,512 30,755 90,743 86,825 Acquisition and operating expenses 12,704 10,411 38,754 35,466 -------- -------- -------- -------- Total losses and expenses 41,216 41,166 129,497 122,291 -------- -------- -------- -------- Pre-tax operating income $ 11,452 $ 10,366 $ 33,546 $ 28,904 ======== ======== ======== ======== GAAP loss ratio 72.7% 78.3% 73.0% 74.6% GAAP combined ratio 105.1% 104.8% 104.2% 105.1% SAP loss ratio 72.5% 78.3% 72.9% 74.6% SAP combined ratio 102.6% 102.7% 103.2% 104.3%
9 Premium Revenues The following table indicates PMA Re's gross and net premiums written by major category of business: (dollar amounts in thousands)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - --------------------------------------------------------------------------------------- Gross premiums written: Casualty lines $ 34,331 $ 37,270 $117,620 $114,967 Property lines 21,789 16,452 58,705 51,021 Other lines 206 214 707 732 -------- -------- -------- -------- Total $ 56,326 $ 53,936 $177,032 $166,720 ======== ======== ======== ======== Net premiums written: Casualty lines $ 25,576 $ 32,744 $ 93,862 $ 98,271 Property lines 19,258 10,155 46,760 33,526 Other lines 185 214 676 725 -------- -------- -------- -------- Total $ 45,019 $ 43,113 $141,298 $132,522 ======== ======== ======== ========
Net premiums written increased $1.9 million, or 4.4%, and $8.8 million, or 6.6%, for the three and nine months ended September 30, 1997, respectively, compared to the same periods ended September 30, 1996. The main reasons for these increases were new treaties resulting from a marketing program initiated in late 1996 which have resulted in increased participations on reinsurance treaties and new programs with existing clients. These increases were partially offset by the trend toward large ceding companies increasing their retentions, which decreases PMA Re's subject premium, and highly competitive conditions in the U.S. reinsurance market. The majority of the growth in the net premiums written was in the property lines, which increased 89.6% and 39.5% for the three and nine months ended September 30, 1997, respectively, compared to the same periods in 1996. The net increases in property lines primarily relate to an increased number of programs added in the second half of 1996 and during 1997, primarily with existing clients. The net written casualty premiums decreased 21.9% and 4.5% for the three and nine months ended September 30, 1997, respectively, compared to the same periods in 1996 as a result of the continuing competitive pressures. Net premiums earned remained stable for the three months ended September 30, 1997 and increased 6.9% for the nine months ended September 30, 1997, compared to the same periods in 1996. Net premiums earned generally follow growth patterns similar to net premiums written with the earnings lag factored into the process. Losses and Expenses The following table reflects the components of PMA Re's combined ratios, as computed under GAAP:
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - -------------------------------------------------------------------------------------------------- Loss ratio 72.7% 78.3% 73.0% 74.6% ------ ------ ------ ------ Expense ratio: Amortization of deferred acquisition costs 24.5% 20.5% 24.0% 24.8% Operating expenses 7.9% 6.0% 7.2% 5.7% ------ ------ ------ ------ Total expense ratio 32.4% 26.5% 31.2% 30.5% ------ ------ ------ ------ Combined ratio - GAAP (1) 105.1% 104.8% 104.2% 105.1% ------ ------ ------ ------
10 (1) The combined ratio computed on a GAAP basis is equal to losses and loss adjustment expenses, plus amortization of deferred acquisition costs, plus operating expenses, plus policyholders' dividends (where applicable), all divided by net premiums earned. PMA Re's loss ratio decreased 5.6 points and 1.6 points for the three and nine months ended September 30, 1997, respectively, compared to the same periods in 1996. The decrease in the third quarter loss ratio in 1997 compared to the third quarter of 1996 relates to the fact that PMA Re recorded additional favorable development of unpaid losses and loss adjustment expenses in the third quarter of 1997 which reduced the 1997 loss ratio. The ratio of amortization of deferred acquisition costs to net premiums earned (the Acquisition Expense Ratio) increased 4.0 points for the three months ended September 30, 1997 and decreased 0.8 points for the nine months ended September 30, 1997, compared to the same periods in 1996. For the nine months ended September 30, 1997, the ratio of amortization of deferred acquisition costs is comparable to 1996, with a slight decrease related to the change in the mix of business for PMA Re. The ratio of operating expenses to net premiums earned increased 1.9 points and 1.5 points for the three and nine months ended September 30, 1997, respectively, compared to the same periods in 1996. The increases are attributable to increases in operating expenses, such as salaries and facility expenses, in connection with the addition of staff and expansion of office facilities. Net Investment Income Net investment income increased $1.2 million and $3.9 million for the three and nine months ended September 30, 1997, respectively, compared to the three and nine months ended September 30, 1996. The increases are attributable to two factors: (i) increases in the average invested assets, and (ii) changes in portfolio holdings. During the first half of 1997, PMA Re shifted some of its holdings from government securities to high-quality corporate securities, which generally yield higher levels of investment income. The Property and Casualty Group Results of Operations Summarized financial results of the Property and Casualty Group for the three and nine months ended September 30, 1997, are as follows:
(dollar amounts in thousands) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------- Net premiums written: Workers' compensation $ 43,824 $ 51,349 $ 145,611 $ 164,241 Commercial lines 15,644 22,283 65,849 63,762 --------- --------- --------- --------- Total $ 59,468 $ 73,632 $ 211,460 $ 228,003 ========= ========= ========= ========= Net premiums earned: Workers' compensation $ 14,586 $ 45,480 $ 112,578 $ 146,299 Commercial lines 9,176 21,257 48,498 63,585 --------- --------- --------- --------- Total $ 23,762 $ 66,737 $ 161,076 $ 209,884 Net investment income 20,304 19,823 62,206 62,225 Service revenues 2,674 2,642 7,712 6,654 --------- --------- --------- --------- Operating revenues 46,740 89,202 230,994 278,763 --------- --------- --------- ---------
11
(dollar amounts in thousands) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------- Losses and LAE incurred 19,347 66,438 150,317 195,823 Acquisition and operating expenses 24,507 29,936 79,586 83,095 Policyholders' dividends 3,566 3,566 10,183 9,418 --------- --------- --------- --------- Total losses and expenses 47,420 99,940 240,086 288,336 --------- --------- --------- --------- Pre-tax operating loss $ (680) $ (10,738) $ (9,092) $ (9,573) ========= ========= ========= ========= GAAP loss ratio 81.4% 99.6% 93.3% 93.3% GAAP combined ratio 189.3% 144.3% 144.7% 134.1% SAP loss ratio 84.2% 77.9% 84.9% 81.1% SAP combined ratio 120.7% 118.2% 119.3% 118.0%
Premium Revenues Direct premiums written for the Property and Casualty Group decreased $8.3 million and $2.1 million for the three months and nine months ended September 30, 1997, respectively, compared to the same periods ended September 30, 1996. Direct premiums written for commercial lines of business other than workers' compensation, such as commercial auto, general liability, umbrella, multi-peril and commercial property lines (collectively, "Commercial Lines") decreased $2.8 million and increased $12.3 million for the three and nine months ended September 30, 1997, respectively, compared to the same periods ended September 30, 1996. Direct premiums written for workers' compensation decreased $5.5 million and $14.4 million for the three and nine months ended September 30, 1997, respectively, compared to the same periods ended September 30, 1996. For the three and nine months ended September 30, 1997, reinsurance premiums assumed decreased $1.7 million and $2.6 million, respectively, compared to the same periods ended September 30, 1996. Reinsurance premiums ceded increased $4.1 million and $11.8 million for the three and nine months ended September 30, 1997, respectively, compared to the same periods ended September 30, 1996. For the three and nine months ended September 30, 1997, net premiums written decreased $14.1 million and $16.5 million, respectively, compared to the same periods ended September 30, 1996. Earned premiums decreased by $43.0 million and $48.8 million for the three and nine months ended September 30, 1997, respectively, compared to the same periods ended September 30, 1996. Net premiums earned generally follow growth patterns similar to net premiums written with the earnings lag factored into the process, absent any significant earned premium adjustments as occurred in the three months ended September 30, 1997. The primary reason for the decrease in net premiums earned relative to net premiums written was a $37 million reduction of accrued retrospective premiums, primarily due to commutation of claims for accident years 1991 and prior in 1997 and the re-estimation of claims liabilities for more recent accident years. Accrued retrospective premiums were reduced approximately $9.0 million related to policy years 1991 and prior and approximately $28.0 million for policy years 1992 to 1996. The reduction for policy years 1991 and prior primarily relates to the commutation program for such years initiated in late 1996. In July 1997, the Property and Casualty Group completed a formal program where it commuted a large number of claims associated with workers' compensation claims from accident years 1991 and prior, including loss reserves associated with retrospective policies. The commutation program resulted in current payments to claimants which were less than the carried reserves. As a result of the differences between the current commutation payments to claimants and carried reserves on such claims, management reduced its estimate of amounts recoverable under retrospectively rated policies and also recognized a reduction in losses and LAE associated with such policies (see "Losses and Expenses" below). The reduction related to 1992 to 1996 policy years was primarily related to a corresponding amount of favorable development of underlying loss reserves for such years. The effects of the commutations on these prior loss reserves, as well as the intent of the Property and Casualty Group to continue utilizing early intervention techniques such as commutations on claims from more recent accident years, have led to a re-estimation of policy liabilities for these more recent accident years, and a re-estimation of amounts due under retrospectively rated policies for these more recent accident years. The reduction in amounts due under retrospectively rated policies resulting from commutation of the carried loss reserves and re- 12 estimation of more recent accident years acted to reduce the GAAP loss ratio for the three and nine months ended September 30, 1997, as compared to the same periods in 1996. Additionally, the reduction of earned premiums caused both the GAAP expense ratio and the policyholder dividend ratio to increase for the three and nine months ended September 30, 1997, as compared to the same periods in 1996. However, the impact of the reduction of the accrued retrospective premiums (net of the adjustment to underlying loss reserves) on the Company's results of operations was negligible. The decrease in direct premiums written for workers' compensation was due primarily to rate changes in Pennsylvania, the Property and Casualty Group's principal business jurisdiction, continued changes in product mix toward alternative market products and competitive conditions. Workers' compensation reform laws adopted in Pennsylvania (Act 57) resulted in a reduction in manual workers' compensation rates in excess of 25%, effective February 1997 for new and renewal business. Act 57 is also expected to reduce the Property and Casualty Group's loss and loss adjustment expenses for business written after September 1996. The rate decreases resulting from these changes were partially offset by an increase in exposures underwritten by the Property and Casualty Group. The Property and Casualty Group has continued its marketing of alternative market workers' compensation products for larger accounts, including large-deductible policies and providing excess coverage to self-insured groups. Typically, the Property and Casualty Group receives a lower up-front premium for these types of alternative market product plans. However, under this type of business, the insured retains a greater share of the underwriting risk than under rate-sensitive or loss-sensitive products, which reduces the potential for unfavorable claim activity on the accounts and encourages loss control on the part of the insured. A substantial portion of related revenues are recorded as service revenues. Such service revenues increased $32,000 and $1.1 million for the three and nine months ended September 30, 1997, respectively, compared to the same periods in 1996. Direct workers' compensation premiums written were also impacted by changes in the level of premium adjustments, primarily related to audit premiums and retrospective policies. For the three and nine months ended September 30, 1997, such adjustments reduced premiums written by $5.1 million ($3.5 million in audit premiums billed and $8.6 million in retrospective returns) and $6.8 million ($11.8 million in audit premiums billed and $18.6 million in retrospective returns), respectively, while in the comparable 1996 periods, such adjustments decreased premiums written by $3.3 million ($1.2 million in audit premiums billed and $4.5 million in retrospective returns) and $1.2 million ($14.5 million in audit premiums billed and $15.7 million in retrospective returns), respectively. These changes in premium adjustments billed in 1997 compared to the same periods in 1996 were primarily due to the increase in retrospectively rated premiums returned to insureds, resulting from the favorable loss experience in more recent accident years in workers' compensation. These adjustments do not impact earned premiums, as the effects of these changes have been accrued while such policies were in force. The Property and Casualty Group's direct writings of Commercial Lines decreased $2.8 million for the three months ended September 30, 1997, but increased $12.3 million for the nine months ended September 30, 1997, compared to the same periods in 1996. The increase for the nine months was primarily focused in the property lines of business, which increased $12.6 million compared to the same period in 1996, and was primarily due to the timing of policy renewals. The decrease for the quarter was primarily due to a change in product mix emphasizing the workers' compensation line of business. For the three and nine months ended September 30, 1997, ceded premiums increased $4.1 million and $11.8 million compared to the same periods in 1996. In 1997, the Property and Casualty Group entered into a new reinsurance treaty that covers substantially all Commercial Lines casualty business at a $175,000 per risk attachment point, compared to a $500,000 per risk attachment point in 1996. The effect of this new treaty, and the increased direct premiums written in property lines, for which the Property and Casualty Group generally purchases more reinsurance, caused ceded premiums to increase in the three and nine months ended September 30, 1997, compared to the same periods in 1996. 13 Losses and Expenses The following table reflects the components of the Property and Casualty Group's combined ratios, as computed under GAAP:
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------ Loss ratio 81.4% 99.6% 93.3% 93.3% ------ ------ ------ ------ Expense ratio: Amortization of deferred acquisition costs 44.1% 17.3% 22.8% 17.8% Operating expenses 48.8% 22.1% 22.3% 18.5% ------ ------ ------ ------ Total expense ratio 92.9% 39.4% 45.1% 36.3% ------ ------ ------ ------ Policyholders' dividends 15.0% 5.3% 6.3% 4.5% ------ ------ ------ ------ Combined ratio - GAAP 189.3% 144.3% 144.7% 134.1% ------ ------ ------ ------
For the three months ended September 30, 1997, the GAAP loss ratio decreased 18.2 points and for the nine months ended September 30, 1997, remained stable, compared to the same periods in 1996. The commutation of claims from accident years 1991 and prior and the re-estimation of claims liabilities for more recent accident years resulting in favorable loss reserve development of $39 million, as previously discussed, generated a decrease in the GAAP loss ratio of 11.3 points and 1.3 points for the three months and nine months ended September 30, 1997, respectively. Exclusive of the aforementioned changes, and the effect of such changes on earned premiums and the savings on losses and expenses, the GAAP loss ratio decreased by 6.9 points for the three months ended September 30, 1997, and increased by 1.3 points for the nine months ended September 30, 1997, as compared to the same periods in 1996. Excluding such effect from the commutation of claims from accident years 1991 and prior and the re-estimation of claims liabilities for more recent accident years, the increase in the loss ratio of 1.3 points for the nine month period is primarily due to an increase in the accretion of loss reserve discount in the Property and Casualty Group's operations. In December 1996, the Property and Casualty Group designated two of its insurance subsidiaries as run-off companies, for the purpose of reinsuring the domestic property and casualty primary insurance operations (the Pooled Companies) for substantially all of accident years 1991 and prior workers' compensation indemnity reserves and certain medical reserves. The domestic insurance run-off subsidiary, MASCCO, reinsures only established Pennsylvania indemnity claims, while the offshore insurance run-off subsidiary, PMA Cayman, reinsures both medical and indemnity claims. The increase in accretion of discount is primarily due to the reserve strengthening that the Property and Casualty Group recorded in December 1996. Excluding such effect from the commutation of claims from accident years 1991 and prior and the re-estimation of claims liabilities for more recent accident years, the decrease in the loss ratio of 6.9 points for the three month period ended September 30, 1997, compared to the same period in 1996 is due to environmental losses incurred in the third quarter of 1996, which increased the loss ratio of such quarter, partially offset by the aforementioned accretion of loss reserve discount in the Property and Casualty Group's run-off operations. The GAAP expense ratio for the three and nine months ended September 30, 1997 was greater than that in the same periods in 1996 by 53.5 points and 8.8 points, respectively. The aforementioned reduction of earned premiums associated with commutations of and re-estimation of liabilities under retrospective policies caused the expense ratio to increase by 56.6 points and 8.4 points, respectively, for the three and nine months ended September 30, 1997, as compared to the same periods in 1996. Excluding such effect, the GAAP expense ratio decreased by 3.1 points for the three months ended September 30, 1997, and increased by 0.4 points for the nine months ended September 30, 1997, as compared to the same periods in 1996, due primarily to savings associated with expense reduction initiatives 14 implemented throughout 1997, offset by a third quarter charge of $1.0 million and a year-to-date charge of $2.0 million associated with such initiatives through September 1997. The policyholder dividend ratios were 15.0% and 5.3% for the three months ended September 30, 1997, and 1996, respectively, and 6.3% and 4.5% for the nine months ended September 30, 1997, and 1996, respectively. Excluding the effect of the reduction of accrued retrospective premiums previously discussed, the ratios increased by 0.6 points for both the three and nine months ended September 30, 1997, as compared to the same periods in 1996, due to sliding-scale dividend plans. Under such plans, the insured receives a dividend based upon the collective loss experience of the plan. As the loss experience, as measured by such plans, has improved in recent years, the Property and Casualty Group has incurred higher policyholder dividends. Net Investment Income Net investment income was $20.3 million and $62.2 million for the three and nine months ended September 30, 1997, respectively, compared to $19.8 million and $62.2 million for the same periods in 1996. Net investment income remained relatively stable primarily due to higher fixed income yields and lower investment expenses, offset by lower average invested assets resulting from the pay-down of loss reserves from prior accident years and decreasing premium volume. The formal commutation program that the Property and Casualty Group employed through July 1997 is expected to lower average invested asset balances in 1997 relative to 1996. Corporate Operations The corporate segment is primarily comprised of corporate overhead and the operations of the Company's properties. For the three and nine months ended September 30, 1997, corporate operations experienced pre-tax operating losses before interest expense of $1.0 million and $1.9 million, respectively, compared to pre-tax operating income before interest expense of $453,000 for the three months ended September 30, 1996 and pre-tax operating losses before interest expense of $1.0 million for the nine months ended September 30, 1996. The higher operating losses in 1997 compared to the same periods in 1996 relate to increased operating costs related to certain corporate properties disposed of during the third quarter of 1997. No material gain or loss was recorded with the disposal of such properties. Net Realized Investment Gains The Company recorded net realized investment gains of $5.5 million for the three months ended September 30, 1997, compared to net realized investment gains of $6.0 million for the comparable 1996 period. Net realized investment gains for the nine months ended September 30, 1997, were $3.6 million compared to $5.5 million for the 1996 comparable period. Gains and losses on the sale of investments are recognized as a component of net income, but the timing and recognition of such gains and losses are unpredictable and are not indicative of future results. Interest Expense and Income Taxes Interest expense decreased $528,000 and $1.1 million for the three and nine months ended September 30, 1997, respectively, compared to same periods in 1996. These decreases were due to the refinancing of the Company's debt under the New Credit Facility. See "Liquidity and Capital Resources" below. It is expected that interest expense will decline in the fourth quarter of 1997 compared to 1996 due to the New Credit Facility. The Company's effective tax rate was 36.2% and 10.7% for the three and nine months ended September 30, 1997, respectively, compared to (42.6)% and 15.6% for the three and nine months ended September 30, 1996, respectively. In 1997, the tax rate was impacted by the favorable resolution of certain tax issues, resulting in a $3.6 million reduction in the provision for income taxes. 15 Liquidity and Capital Resources Liquidity Liquidity is a measure of an entity's ability to secure enough cash to meet its contractual obligations and operating needs. At the holding company level, the Company requires cash to pay debt obligations and dividends to shareholders, pay taxes to the federal government, as well as to capitalize subsidiaries from time to time. The Company's primary sources of liquidity are dividends from subsidiaries, net tax payments received from subsidiaries, and borrowings. The Company paid interest of $3.5 million and $15.6 million for the three and nine month periods ended September 30, 1997, respectively, compared to $4.2 million and $12.6 million for the three and nine month periods ended September 30, 1996, respectively. During the first three months of 1997, the Company made debt repayments of $8.0 million on the revolving credit agreement before refinancing all of its credit agreements not already maturing in 1997 with the New Credit Facility. See "Capital Resources" below. The Company paid dividends to shareholders of $2.0 million and $6.0 million for the three and nine months ended September 30, 1997, compared to $2.0 million and $5.9 million for the comparable periods in 1996, respectively. Dividends paid from subsidiaries increased to $4.0 million and $12.0 million for the three and nine months ended September 30, 1997, respectively, compared to no dividends paid for the three months ended September 30, 1996, and $8.0 million for the nine months ended September 30, 1996. Net tax cash flows from subsidiaries were $5.5 million and $13.9 million for the three and nine months ended September 30, 1997, respectively, compared to $5.4 million and $13.1 million for the three and nine months ended September 30, 1996, respectively. The Company's domestic insurance subsidiaries' abilities to pay dividends to the holding company is limited by the insurance laws and regulations of Pennsylvania. Under such laws and regulations, dividends may not be paid without prior approval of the Commissioner in excess of the greater of (i) 10% of surplus as regards to policyholders as of the end of the preceding year or (ii) statutory net income for the preceding year. Under this standard, PMA Re and the Pooled Companies can pay an aggregate of $51.9 million of dividends, including the $12.0 million already paid through September 30, 1997, without the prior approval of the Commissioner, during 1997. PMC's dividends to shareholders are restricted by its debt agreements. Based upon the terms of the New Credit Facility, under the most restrictive debt covenant, PMC would be able to pay dividends totaling approximately $11.0 million in 1997, including the $6.0 million already paid in 1997. Management believes that the Company's sources of funds will provide sufficient liquidity to meet its short-term and long-term obligations. Capital Resources The Company's total assets remained stable, decreasing to $3,066.4 million at September 30, 1997, compared to $3,117.5 million at December 31, 1996. Total investments decreased $58.7 million to $2,202.6 million at September 30, 1997. This decrease is primarily attributable to the Property and Casualty Group's pay-down of loss reserves from prior accident years. All other assets increased $7.6 million, mainly due to an increase in reinsurance receivables of $36.5 million related to the new reinsurance treaty entered into by the Property and Casualty Group (see "Premium Revenues" for the Property and Casualty Group above) and increased ceded paid losses as of September 30, 1997, in comparison to December 31, 1996. This increase was partially offset by a decrease in other assets primarily related to the sale of certain corporate properties, the collection of an outstanding federal tax refund receivable, and the reduction of the deferred tax asset in conjunction with the reduction in unrealized depreciation of investments during 1997. Consolidated shareholders' equity at September 30, 1997, totaled $446.3 million or $18.69 per share compared to $425.8 million or $17.86 per share at December 31, 1996. As a result of changes in market interest rates, the unrealized depreciation of investments, net of tax, was $7.3 million at September 30, 1997, compared to an unrealized 16 depreciation of investments of $24.9 million at December 31, 1996, resulting in an increase in shareholders' equity of $17.6 million or $0.74 per share. On March 14, 1997 the Company refinanced its existing credit agreements through the establishment of the New Credit Facility. The Company drew down $196.0 million from the New Credit Facility to pay off the following outstanding balances: (dollar amounts in thousands) Senior notes 9.60% due 2001........................... $ 46,428 Senior notes 7.62% due 2001, Series A................. 71,000 Senior notes 7.62% due 2000, Series B................. 36,000 Revolving credit agreement, expiring 1998............. 36,000 -------- Total................................................. $189,428 ========
The New Credit Facility bears interest at LIBOR plus .70% on the utilized portion, and carries a .275% facility fee on the unutilized portion. The margin over LIBOR is adjustable downward based upon future reductions in the Company's debt to capitalization ratio. The final expiration of the New Credit Facility will be December 31, 2002, with level 25% reductions in availability each year beginning December 31, 1999. At September 30, 1997, the Company had $203.0 million outstanding under the new credit facility, with $32.0 million available for additional borrowings. Management also entered into an interest rate swap agreement which is intended to manage the impact of the potential volatility of the interest rate associated with the floating rates on the New Credit Facility. The interest rate swap covers a notional principal amount of $150.0 million and effectively converts the floating rate on such portion of the New Credit Facility to a fixed rate of 7.24%. The Company's interest rate swap agreement involves the exchange of interest payment obligation without the exchange of underlying principal. The differential to be paid or received is recognized as an adjustment of interest expense. In the event that a counterparty fails to meet the terms of the agreement, the Company's exposure is limited to the interest rate differential on the notional principal amount ($150.0 million). Management believes such credit risk is minimal and any loss would not be significant. New Accounting Pronouncements In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125, which is effective for transfers and extinguishments occurring after December 31, 1996, provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Property and Casualty Group's domestic insurance subsidiaries currently participate in a transfer arrangement of certain accounts receivable. Such arrangement has been restructured as a result of the adoption of SFAS No. 125. The restructuring of such arrangement did not have a material impact on the Company's financial condition or results of operations. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share," which supersedes Accounting Principles Board Opinion No. 15, "Earnings Per Share" and related interpretations. SFAS No. 128, which is effective for financial statements for both interim and annual periods ending after December 15, 1997, requires presentation of earnings per share by all entities that have issued common stock or potential common stock if those securities trade in a public market either on a stock exchange or in the over-the-counter market, including securities quoted only locally or regionally. SFAS No. 128 establishes a new calculation for earnings per share showing both basic and diluted earnings per share. Basic earnings per share will be calculated using only weighted average shares outstanding with no dilutive impact from common stock equivalents while diluted earnings per share will be calculated similar to the current fully diluted earnings per share calculation. All prior period earnings per share amounts will be restated to be consistent with the new requirements. If earnings per share had been calculated in accordance with SFAS No. 128, the basic earnings per share for the three and nine months ended September 30, 1997 would have been as follows: 17
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ----- ----- ------ ----- Income before extraordinary item $0.31 $0.11 $ 0.53 $0.39 Extraordinary item -- -- (0.20) -- ----- ----- ------ ----- Net income $0.31 $0.11 $ 0.33 $0.39 ===== ===== ====== =====
18 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11.1: Statement of computation of earnings per share Exhibit 27: Financial data schedule (b) No reports on Form 8-K were filed during the quarter ended September 30, 1997. 19 Signatures Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Company has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. PENNSYLVANIA MANUFACTURERS CORPORATION Date: 11/12/97 By: /s/ Francis W. McDonnell -------- -------------------------- Francis W. McDonnell, Senior Vice President, Chief Financial Officer and Treasurer 20 EX-11.1 2 STATEMENT OF COMPUTATION OF EARNINGS PER SHARE Pennsylvania Manufacturers Corporation Exhibit 11 Computation of Earnings Per Share (Unaudited)
Three Months Ended Years ended December 31, September 30, (in thousands, except per share data) 1996 1995 1994 1997 1996 ---------------------------------------- ----------------------------- Primary: Weighted average shares outstanding 23,800,791 23,815,871 23,808,847 23,870,089 23,772,718 Net effect of dilutive stock options - based on the treasury stock method using average market price -- 893,160 841,894 639,999 977,962 ---------------------------------------- ----------------------------- Total primary common shares 23,800,791 24,709,031 24,650,741 24,510,088 24,750,680 ======================================== ============================= Net (loss) income before extraordinary item $ (135,334) $ 24,130 $ 57,250 $ 7,344 $ 2,456 Extraordinary loss -- -- -- -- -- ---------------------------------------- ----------------------------- Net (loss) income $ (135,334) $ 24,130 $ 57,250 $ 7,344 $ 2,456 ======================================== ============================= Net (loss) income per common and equivalent share before extraordinary item $ (5.68) $ 0.97 $ 2.32 $ 0.30 $ 0.10 Extraordinary item -- -- -- -- -- ---------------------------------------- ----------------------------- Net (loss) income per common and equivalent share $ (5.68) $ 0.97 $ 2.32 $ 0.30 $ 0.10 ======================================== ============================= Fully diluted: Weighted average shares outstanding 23,800,791 23,815,871 23,808,847 23,870,089 23,772,718 Net effect of dilutive stock options - based on the treasury stock method using average market price or end of period market price -- 1,118,708 841,894 760,566 1,010,357 ---------------------------------------- ----------------------------- Total fully diluted common shares 23,800,791 24,934,579 24,650,741 24,630,655 24,783,075 ======================================== ============================= Net (loss) income before extraordinary item $ (135,334) $ 24,130 $ 57,250 $ 7,344 $ 2,456 Extraordinary loss -- -- -- -- -- ---------------------------------------- ----------------------------- Net (loss) income $ (135,334) $ 24,130 $ 57,250 $ 7,344 $ 2,456 ======================================== ============================= Net (loss) income per common and equivalent share before extraordinary item $ (5.68) $ 0.96 $ 2.32 $ 0.30 $ 0.10 Extraordinary item -- -- -- -- -- ---------------------------------------- ----------------------------- Net (loss) income per common and equivalent share $ (5.68) $ 0.96 $ 2.32 $ 0.30 $ 0.10 ======================================== ============================= Nine Months Ended September 30, 1997 1996 ----------------------------- Primary: Weighted average shares outstanding 23,845,194 23,807,704 Net effect of dilutive stock options - based on the treasury stock method using average market price 634,572 1,058,992 ----------------------------- Total primary common shares 24,479,766 24,866,696 ============================= Net (loss) income before extraordinary item $ 12,621 $ 9,201 Extraordinary loss (4,734) -- ----------------------------- Net (loss) income $ 7,887 $ 9,201 ============================= Net (loss) income per common and equivalent share before extraordinary item $ 0.51 $ 0.37 Extraordinary item (0.19) -- ----------------------------- Net (loss) income per common and equivalent share $ 0.32 $ 0.37 ============================= Fully diluted: Weighted average shares outstanding 23,845,194 23,807,704 Net effect of dilutive stock options - based on the treasury stock method using average market price or end of period market price 760,566 1,058,992 ----------------------------- Total fully diluted common shares 24,605,760 24,866,696 ============================= Net (loss) income before extraordinary item $ 12,621 $ 9,201 Extraordinary loss (4,734) -- ----------------------------- Net (loss) income $ 7,887 $ 9,201 ============================= Net (loss) income per common and equivalent share before extraordinary item $ 0.51 $ 0.37 Extraordinary item (0.19) -- ----------------------------- Net (loss) income per common and equivalent share $ 0.32 $ 0.37 =============================
EX-27 3 FINANCIAL DATA SCHEDULE
7 1,000 12-MOS 9-MOS DEC-31-1996 DEC-31-1997 JAN-01-1996 JAN-01-1997 DEC-31-1996 SEP-30-1997 2,126,120 2,060,521 0 0 0 0 262 261 0 0 0 0 2,261,353 2,202,645 7,176 1,895 257,983 294,506 44,006 49,033 3,117,516 3,066,361 2,091,072 1,989,160 205,982 239,112 0 0 12,524 10,704 204,699 203,000 0 0 0 0 121,716 121,716 304,112 324,548 3,117,516 3,066,361 420,575 285,371 133,936 102,812 2,984 3,600 9,189 7,712 536,623 240,919 90,292 66,562 114,111 65,853 (191,394) 14,136 (56,060) 1,515 0 0 0 0 0 (4,734) 0 0 (135,334) 7,887 (5.68) 0.32 (5.68) 0.32 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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