Contents - AL-Tax

5.3 Analysis Under Existing Regime 83motocross, etc.). Utilizes patented, engineered optical lens technology. Sells tokey multi-store action sport and youth lifestyle retailers in the United Statesand internationally. Design, marketing and branding handled by in-house staff.Sources finished product inventory from independent contract manufacturers.3. Helen of Troy, Ltd.: A global designer, developer, importer and distributor ofbrand name consumer products. Operates in two segments: Personal Care andHousewares. Personal Care products include straighteners, curling irons, hairsetters,mirrors, footbaths and hair accessories; housewares include kitchen tools,cutlery, tea kettles and trash cans. Relies exclusively on outside manufacturers.Sells products to mass merchandisers, warehouse clubs, drug chains, grocerystores, specialty stores and beauty supply retailers and wholesalers. Utilizes ownand licensed brands.4. CCA Industries: Imports and sells health and beauty aids and cosmeceuticalproducts (skin care, oral care, nail care, hair care and sun care products, depilatories,fragrances, etc.). Sources all products from contract manufacturers. Providesthe latter with formulations and color selections. Markets and sells to majordrug and food chains, mass merchandisers and wholesale beauty-aid distributors.Certain of the company’s products are sold under its own trademarks; othersare sold under licensed marks. CCA Industries also licenses rights to certainmanufacturing technologies from third parties.5. Prestige Brands Holdings, Inc.: Sells well-recognized brand name healthcare,household cleaning and personal care products, including nail polish remover,shampoo, pain relief sprays and liquid bandages. Carries 14 well-known brands.Performs marketing, sales, customer service and product development functions.Relies on external manufacturers and logistics services providers. Sells to massmerchandisers, drug, grocery, dollar and club stores.Clearly, there are significant shortcomings with our sample companies. Mostnotably, they are very few in number, and, in addition to distribution, certain ofthe “comparables” perform product development functions and own valuable trademarks,as distinct from USS. Moreover, our sample distributors sell principally tomass merchants and major drug and food chains, whereas USS sells primarily toindependent retail jewelers. Furthermore, USS carries substantially higher inventories,incurs lower inventory risk, has higher accounts receivables per dollar of sales(due to the extended terms it offers) and pays much higher insurance premiums,relative to the sample companies. It should be noted that the lack of meaningfulfunctional and product comparability in this case is typical of applications of thecomparable profits method. Hence, in addition to lacking a theoretical foundation,this method is generally wanting from an empirical vantage point as well. There issimply a limited number of publicly held distributors operating in the United Statesin total at present.Because the (largely unstated) theory underlying the comparable profits methodis that profit level indicators represent a return on invested capital, and that thisreturn on investment will be equalized across distributors of various stripes, adjustmentsfor some of the differences noted above are generally considered unnecessary.