3. Income Taxes
Key accounts for income taxes pursuant to the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement 109"). Deferred income taxes have been provided on all significant
difference between the book and tax basis of the assets and liabilities of the
Acquisitions. In accordance with Statement 109, Key prepares separate tax
calculations for each tax jurisdiction in which Key is subject to income taxes.
Income taxes are not reflected in the historical financial information of Clint
Hurt Drilling as it was not a taxable entity.
4. Income (loss) from Operations per Share
Income (loss) from operations per share is calculated based on the weighted
average number of shares and share equivalents, if more than 3% dilutive,
outstanding during the period. Fully diluted income (loss) per common and common
equivalent share is not presented since the effect would be antidilutive. Pro
forma income (loss) per share has been calculated taking into account the
issuance of shares of Key's Common Stock in the Acquisitions as if such shares
were issued on July 1, 1994.