- 25 -
petitioner's Forms 1120 for sales figures of $5.4 million in 1995
and $6.1 million in 1996.
Mr. Reilly reviewed the "Almanac of Business and Industrial
Financial Ratios" for the period from July 1995 to June 1996,
which uses data from the Federal income tax returns of businesses
included in the various categories. Mr. Reilly determined that
of the nearly 21,000 businesses included in the highway and heavy
construction contractor category, 71 percent had total assets of
less than $1 million, fewer than 10 percent had total assets in
excess of $5 million, 62 percent had a positive net income, and
38 percent of the companies showed a loss in 1995 and 1996.
Mr. Reilly concluded that petitioner's Forms 1120 showed a
profit every year from 1986 to 1996. Mr. Reilly viewed
petitioner's financial record over 10 years because, in his
opinion, examining only 2 years would not take into account prior
undercompensation of executives. Further, in his opinion, a
company's historical record is the best way to determine whether
a company has provided a fair return to its stockholders.
Mr. Reilly, using the "CFMA's 1996 Construction Industry
Annual Financial Survey" (the CFMA survey), calculated that
highway and heavy construction contractors with revenue under $10
million reported a net income (or after-tax profit margin)
percentage of 2.3 percent for 1995 and 0.3 percent for 1996. The
record does not indicate whether the CFMA survey used data from
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011