<PAGE>
ENERGY INDUSTRIES
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Energy Industries' provision for income tax expense for the eleven months
ended September 30, 1994, computed on a separate company basis, consisted of
the following (in thousands):
<TABLE>
<S> <C>
Current
State.................................... $ 375
U.S...................................... 311
Deferred...................................
U.S...................................... 1,363
------
$2,049
======
</TABLE>
The provision for deferred taxes results from temporary differences in the
recognition of revenues and expenses for tax and financial reporting purposes.
The sources and income tax effects of these differences for the eleven months
ended September 30, 1994 were as follows (in thousands):
<TABLE>
<S> <C>
Book depreciation less than tax depreciation...................... $1,545
Book reserves not deductible for tax purposes..................... (24)
Changes to tax carryforwards and other............................ (158)
------
$1,363
======
</TABLE>
The following table reconciles the income tax provisions computed using the
U.S. statutory rate of 34% to the provisions reflected in the financial
statements (in thousands):
<TABLE>
<S> <C>
Taxes at statutory rate............................................ $1,647
State taxes, net of federal benefit................................ 247
Other.............................................................. 155
------
$2,049
======
</TABLE>
Temporary differences and tax credit carryforwards that gave rise to
significant portions of deferred tax assets and liabilities as of September 30,
1994 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Book reserves not yet deductible............................... $ 215
Other.......................................................... 97
-------
Total deferred tax assets.................................... 312
-------
Deferred tax liabilities:
Property and equipment......................................... (1,601)
Other.......................................................... (133)
-------
Total deferred tax liabilities............................... (1,734)
-------
Net deferred tax liability................................... $(1,422)
=======
</TABLE>
NOTE 10. COMMITMENTS AND CONTINGENCIES
Sales-Type Lease Receivables
Energy Industries provides a capital lease financing option to its customers.
Future minimum lease payments receivable under sales-type leases are due as
follows: $3,769,000 in 1995, $241,000 in 1996 and $77,000 in 1997; deferred
interest totalling $51,000 is included in these amounts. Energy Industries
periodically sells a portion of its lease receivables to third party
financiers. Certain of these receivables are sold with partial recourse to
Energy Industries. At September 30, 1994, the total amount of recourse to
Energy Industries on the unpaid balance of all previously sold receivables was
$1.7 million. During the eleven
34
