Vitamin Village, Inc. - Page 22

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          were 8.7 percent and 7.0 percent, respectively,28 exceeding the             
          guideline companies’ average net margins of 1.68 and -0.92,                 
               Fifth, Mr. Hakala did not evaluate companies like                      
          petitioner, whose operations during FYE June 30, 1995, included             
          advertising, indoor tanning services, and the sale of tanning               
               Sixth, Mr. Hakala stated that publicly held companies have             
          additional costs of up to 5 percent as compared to privately held           
          companies.  As a result, petitioner would have fewer expenses and           
          more income available to compensate its employees.29                        
               In conclusion, the Court adopts three of the four methods30            
          Mr. Hakala used to compute reasonable compensation.  After taking           
          into consideration the six circumstances not considered in his              
          report, the Court finds that the table below sets out the ranges            
          for reasonable compensation more accurately:                                

               28 In his report, Mr. Hakala indicated that in FYE 1996 the            
          guideline companies exhibited increased sales, whereas                      
          petitioner’s sales decreased by over 50 percent during the same             
               29 In Mr. Hakala’s report and trial testimony he stated that           
          he reserved the right to amend the report to reflect                        
          consideration of additional information.                                    
               30 Because the Court could not determine how Mr. Hakala                
          computed reasonable compensation under the regression analysis,             
          the Court did not consider the regression analysis method to                
          determine petitioner’s compensation of Mr. Reeves.                          

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