Annual Report 2011 - SNL Financial

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Annual Report 2011 - SNL Financial

Consolidated net income (loss), basic shares outstanding, diluted shares outstanding, basic earnings per share, diluted

earnings per share and cash dividends per share for the years ended December 31, 2011, 2010 and 2009 were as follows (in

thousands, except share and per share data):

2011 2010 2009

Net income (loss) for basic and diluted earnings per share ..................... $ 7,722 $ (9,185) $ 8,401

Less: Dividends declared—common and unvested restricted share units .......... (2,176) (2,489) (2,540)

Undistributed earnings ................................................. 5,546 (11,674) 5,861

Percent allocated to common shareholders ................................. 99.3% 98.8% 98.3%

5,507 (11,534) 5,763

Add: Dividends declared—common shares ................................. 2,161 2,459 2,497

$ 7,668 $ (9,075) $ 8,260

Denominator for basic earnings per share .................................. 7,860,207 8,458,731 8,984,644

Effect of dilutive securities .............................................. 121,723 73,966 67,057

Denominator for diluted earnings per common share ......................... 7,981,930 8,532,697 9,051,701

Basic earnings per share:

Continuing operations ............................................. $ 0.93 $ 0.36 $ 0.64

Discontinued operations ............................................ $ 0.05 $ (1.43) $ 0.28

Diluted earnings per share:

Continuing operations ............................................. $ 0.91 $ 0.36 $ 0.64

Discontinued operations ............................................ $ 0.05 $ (1.43) $ 0.27

Cash dividends per share ............................................... $ 0.28 $ 0.28 $ 0.28

6. Exercise of Outstanding Warrants

As of January 1, 2009, contingent warrants to purchase 306,099 common shares of EIHI stock at an exercise price of

$1.63 were outstanding. These warrants were awarded in 1999 as compensation to a Director of the Company who acted as

the insurance broker for premium production in the Company’s run-off specialty reinsurance segment. The number of

warrants ultimately earned was contingent upon achievement of predetermined direct premiums written thresholds. As of

January 1, 2009, 244,879 warrants were earned. The remaining 61,220 warrants will not be earned because the specialty

reinsurance segment was placed into run-off on July 1, 2008 and, therefore, there is no additional premium production. On

March 10, 2009, the Director notified the Company that he was exercising the 244,879 earned warrants. Furthermore, as

provided in the terms of the warrant, the Director instructed the Company to retain 64,588 shares in payment of the exercise

price. Accordingly, on March 31, 2009, 180,291 shares of EIHI common stock were issued to the Director in full satisfaction

of the 244,879 warrants earned. This was a non-cash transaction that had no impact on cash flows from operating or

financing activities.

7. Share Repurchase

As of December 31, 2011, the Company has repurchased 3,850,568 shares of its common stock and can repurchase up

to an additional 1,086,567 shares, as authorized by the Company’s Board of Directors. The share repurchases will be held as

treasury stock and are available for issuance in connection with the Company’s Stock Incentive Plan.

For the years ended December 31, 2011, 2010 and 2009, the Company repurchased 1,030,398, 728,413 and 1,400

shares, respectively, at a cost of $13,274, $8,169 and $11, respectively, representing a weighted average cost of $12.88,

$11.21 and $8.03 per share, respectively.

8. Stock-Based Compensation

Awards under the Stock Incentive Plan may be made in the form of incentive stock options, nonqualified stock options,

restricted stock or any combination to employees and non-employee directors. The Stock Incentive Plan limits the number of

shares that may be initially awarded as restricted stock to 299,000, and the number of shares for which incentive stock

options may be granted to 500,000. The total number of shares initially authorized in the Stock Incentive Plan was

1,046,500 shares, with an annual increase equal to 1% of the shares outstanding at the end of each year. The Stock Incentive

Plan provides that stock options and restricted stock awards may include vesting restrictions and performance criteria at the

discretion of the Compensation Committee of the Board of Directors. The stock options and restricted stock awards vest over

a five year period and are not subject to performance criteria. The term of options may not exceed ten years for incentive

stock options, and ten years and one month for nonqualified stock options, and the option price may not be less than fair

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