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expense as a nonrecurring cost. Mr. Heck testified that new
label promotional expenditures are a recurring feature of
Korbel’s business. Although the Brown-Forman agreement relieves
Korbel of any responsibility to pay marketing or selling expenses
(“Brand Expense”) for Korbel champagne or brandy, Korbel incurred
the promotional expenses in question subsequent to the 1991
effective date of the agreement, and Mr. Heck testified that a
similar “spike” in Korbel’s promotional costs could occur at any
time. Projecting the mean annual SG&A costs for a 5-year period
that includes a year of extraordinary promotional expenses
associated with the introduction of a new label does not seem
unreasonable.
Dr. Spiro criticizes Dr. Bajaj for relying on a simple
5-year average in projecting an annual operating margin. Yet for
cost of goods sold, where Dr. Spiro uses a 2-year average to make
projections, he testified, in rebuttal: “The * * * [rate chosen
by Dr. Bajaj] appears reasonable although we once again question
the use of a simple average.” Dr. Spiro, himself, uses a 5-year
average in projecting officers’ compensation and SG&A. Korbel’s
annual operating margins for the 1990-1994 period do not show a
trend, and Dr. Spiro has failed to convince us that Dr. Bajaj’s
use of a 5-year simple average is inappropriate. At least, it
has the virtue of consistency, and for that reason, we prefer it
to Dr. Spiro’s approach, the inconsistency of which he did not
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