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October 26, 1988, shows that petitioner's compensation of its
officers exceeds the average amount paid by similar firms.
However, this does not establish that the compensation of
petitioner's officers was unreasonable because the SMACNA survey
also shows petitioner performed considerably better financially
than the SMACNA survey respondents.
SMACNA sent each member a questionnaire asking for financial
information, such as gross profit, gross sales, and executive
compensation. Forty-one SMACNA survey respondents had sales of
more than $8.2 million. The following chart compares the SMACNA
survey results for these respondents with data for petitioner for
the year in issue.
SMACNA survey respondents
with sales over $8.2 Million
Net income SMACNA
before tax as a -- average Petitioner
Percent of sales 3.5 10.3
Percent of assets 9.3 22.5
Percent of net worth 25.0 33.0
The 41 respondents had an average gross profit margin of
18.8 percent of sales; petitioner had 41 percent in the year in
issue. Petitioner's financial performance was superior to that
of SMACNA survey respondents which had sales exceeding $8.2
million.
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