Estimated annual savings of $2,500,000 to operating costs for the combined
companies fall into the following general categories for savings related to
WellTech and Clint Hurt:
WellTech Clint Hurt
Insurance $775,000 150,000
Purchasing savings 500,000 75,000
Fuel savings 75,000 --
Salaries and wages 250,000 25,000
Capitalization policy differences 500,000 50,000
Other 75,000 25,000
Totals $2,175,000 $325,000
Savings in insurance costs relate to contract rates for coverage and contracted
administrative fees to be in effect for the combined companies. Purchasing
savings have been calculated by applying product prices available to Key to
purchases made by WellTech during the prior fiscal year and for Clint Hurt by
calculating the savings achieved since the acquisition. Salary and wage savings
will result from elimination of certain field support positions. As result of
implementing the interim operating agreement with WellTech, many of the expected
cost savings are being currently realized.
The above savings in general and administrative and operating costs are
reasonably assured and such savings are not expected to be offset by cost
increases in the expense categories described above.
Not included is any additional compensation under the 1995 Stock Option Plan or
the Outside Directors' Stock Option Plan, if any. The Company would have
recorded deferred compensation of approximately $1,200,000 to be recognized as
expense over a four-year period under the 1995 Stock Option Plan and $187,500
under the Outside Directors' Stock Option Plan to be recognized over a two-year
period had such plans gone into effect on December 31, 1995. (See "Management of
Key - Executive Compensation; - 1995 Stock Option Plan; - Outside Directors'
(g) To adjust income tax expense for each tax jurisdiction.