- 22 -
were 8.7 percent and 7.0 percent, respectively,28 exceeding the
guideline companies’ average net margins of 1.68 and -0.92,
respectively.
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
products.
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
period.
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.
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Next
Last modified: November 10, 2007