Vitamin Village, Inc. - Page 23




                                       - 23 -                                         
          Method                                      FYE 1995   FYE 1996             
          Guideline cos. CEO compensation           $1,019,418 $1,124,167             
          Guideline cos. percent of sales           1,175,186    405,388              
          Guideline cos. net margins                2,150,000  1,500,000              
          Average of the methods                    1,448,201  1,009,852              
               In addition, taking into consideration the $547,350 Mr.                
          Reeves was underpaid as of December 31, 1995, the reasonable                
          compensation for petitioner’s FY 1995 is increased to $1,995,551.           
               C. Character and Condition of the Company                              
               This factor requires the Court to focus on petitioner’s                
          size as measured by its sales, net income, or capital value; the            
          complexities of the business; and general economic conditions.              
          See Elliotts, Inc. v. Commissioner, 716 F.2d at 1246.                       
               Petitioner was a relatively small company that had secured             
          itself a market niche enabling it to earn high profit margins on            
          its product sales and services.                                             
               Petitioner’s income was modest until 1993 when it began to             
          experience a substantial increase.  Gross sales grew from                   
          $661,928 in FYE June 30, 1991, to $2,074,682 and $1,936,476 in              
          FYE June 30, 1993 and 1994, respectively, and continued to                  
          increase in the fiscal years at issue to $12,501,980 and                    
          $5,709,686, with net margins of 8.7 and 7 percent, respectively.            
          Petitioner’s net income was substantially higher than the                   
          guideline companies’ average and each guideline company’s                   
          individually, except for NBTY, Inc.’s FY 1996.  Moreover,                   







Page:  Previous  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  Next 

Last modified: November 10, 2007