(1) The pro forma provision for income taxes gives pro forma effect to the application of federal and state income taxes to the Company as if it had been a C Corporation for tax purposes for all periods presented. Prior to June 1997, the Company and the Predecessors operated as S Corporations for federal and state income tax purposes. In June 1997, the stockholders of the Company and the Predecessors made elections terminating the S Corporation status of the Company and the Predecessors. As a result, the Company became subject to corporate level income taxation following the termination of such elections.
(2) EBITDA represents operating income plus depreciation, amortization and non-cash compensation expense related to the issuance of stock and stock options to employees. EBITDA is not a measure of cash flow, operating results or liquidity as determined by generally accepted accounting principles. The Company has included information concerning EBITDA as supplemental disclosure because management believes that EBITDA is commonly accepted as providing useful information regarding a company's historical ability to incur and service debt.
Management of the Company believes that factors which should be considered by investors in evaluating EBITDA include, but are not limited to, trends in EBITDA as compared to cash flow from operations, debt service requirements, and capital expenditures.
Management of the Company believes that the trends depicted by the Company's historical EBITDA reflect historical fluctuations in the Company's business and the recent increase in the level of the Company's activities. EBITDA as defined and measured by the Company may not be comparable to similarly titled measures of other companies. Further EBITDA should not be considered in isolation or as an alternative to, or more meaningful than, net income or cash flow provided by operations as determined in accordance with generally accepted accounting principles as an indicator of the Company's profitability or liquidity.
