(5) Common Stock-
In January 1994, the Certificate of Incorporation of WellTech was
amended and restated in its entirety to provide for only one class of stock,
common stock $1 par value. In addition, pursuant to the 1994 Recapitalization,
WellTech's Board of Directors authorized a ten-for-one reverse stock split
effective January 18, 1994.
(6) Income Taxes -
WellTech adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes", effective January 1, 1993. The adoption of
SFAS No. 109 changed WellTech's method of accounting for income taxes from the
deferred approach to an asset and liability approach. The asset and liability
approach requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the financial
reporting basis and tax basis of assets and liabilities. The cumulative effect
of the change in accounting principle on prior years at January 1, 1993, the
date of adoption, was not material to the results of operations or financial
position of WellTech.
During the years ended December 31, 1994 and 1993, WellTech incurred
pre-tax losses and had available net operating loss (NOL) carryforwards.
Consequently, for financial reporting purposes WellTech did not record income
tax expense. In connection with the conversion of debt to equity in the 1994
Recapitalization discussed in Note 4 above, WellTech recognized an approximately
$18 million taxable gain, and recorded as a direct charge to capital in excess
of par value an accrual of $360,000 for alternative minimum taxes.
At December 31, 1994 and 1993, WellTech had a net deferred tax asset of
approximately $69 million and $77 million, respectively, and has provided an
equal amount for a valuation allowance at each date. Deferred tax (assets)
liabilities are comprised of the following (in thousands):
Net tax operating loss carryforwards $(57,493) $(66,262)
General business credits (11,335) (12,144)
AMT credits ( 433) -
Depreciation differences on PP&E 2,470 2,227
Prepaid Expenses 266 1,221
Accrued insurance losses and other liabilities ( 1,563) ( 2,114)
Allowance for doubtful accounts ( 338) ( 130)
Differences between book and tax basis
of partnership interests ( 236) ( 119)
Other, net ( 189) 224
Valuation Allowance 68,851 77,097
Net Deferred Tax Asset $ - $ -