- 5 -5
Pursuant to the employment agreement, Ferguson's salary was set
at 2.4 percent of net sales, the same percentage of net sales
that Bell had received prior to his death.
Wood's attempt to gain control of petitioner proved
unsuccessful, and after his defeat, Wood agreed to sell his stock
to petitioner. On August 1, 1990, Wood sold his stock to
petitioner for $2,850,000. After petitioner purchased Wood's
stock, Ferguson remained petitioner's majority shareholder,
owning approximately 75 percent of petitioner's outstanding
stock.
3. Petitioner's Financial Condition
Petitioner's financial statements reflect the following:
FYE Net Gross Net Retained
Aug. 31 Sales Profit Income Earnings
1981 $6,064,513 $1,638,818 $321,150 $1,695,161
1982 7,712,496 2,047,589 351,329 2,046,490
1983 8,180,434 2,313,607 419,665 2,466,156
1984 10,671,010 2,981,037 701,574 3,167,731
1985 11,423,805 3,143,870 563,557 3,731,288
1986 12,456,296 3,115,873 488,573 4,219,862
1987 13,969,335 3,904,553 714,492 4,986,1951
1988 17,394,166 5,053,862 861,683 7,290,7552
1989 20,895,754 5,012,259 1,013,195 6,515,293
1990 25,219,920 6,410,305 1,698,764 8,235,846
1991 24,769,390 6,591,585 1,564,964 6,957,810
1992 25,031,040 7,926,605 2,152,121 9,109,931
1 Due to an accounting adjustment, the 1987 retained
earnings figure was restated from $4,934,355 to $4,986,195.
2 This figure is set forth in the financial statements for
the period Aug. 31, 1987, through Aug. 31, 1988. Subsequent
financial statements show this figure as $7,290,577. This
discrepancy does not affect our analysis.
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