Coastworks Pty Ltd v Perpetual Trustee Australia Ltd [2004] RSLT 27

1 [2004] RSLT 27 THE RETAIL SHOP LEASES ACT In the matters of Dispute No 93/02 COASTWORKS PTY LTD T/A SURF SKATE AUSTRALIA - Claimant - and – PERPETUAL TRUSTEE AUSTRALIA LIMITED - Respondent Coram: A Forbes (Chair) R Hourigan (Lessee’s Representative) A Cole (Lessor’s Representative) DECISION Given in Brisbane on Tuesday 31 August, 2004. -- 1 of 14 -- Coastworks-v-Perpetual 2 31.8.2004 - Decision The claimant (Surfskate) was a retail tenant of the Respondent (the Landlord) in the Myer Centre, a major retail shopping complex in the central business district of Brisbane. Surfskate traded on the lowest level (level A) as a specialty clothing shop, selling casual beach and surfing wear, mainly to teenagers and young adults, from mid-1988 until May 2003. For most of that period the “anchor tenant” on Level A was a cinema complex. In January 2001 the landlord began extensive renovations, which continued until early 2003. They included construction of a Coles supermarket on Level E, immediately above level A. An amusement area on the top floor was demolished and the cinema complex was moved there from Level A. Subsequently a branch of Target, a national discount store selling a wide variety of home products and clothing opened on the former cinema site. Then for several months from late 2002 or early 2003 the landlord progressively refurbished the “Food Court” on Level E. Surfskate seeks compensation under ss 43(1)(c)(ii) and 43(1)(d) of the Retail Shop Leases Act 1994 (“the Act”) for consequent disruption of its business. It claims that the renovations restricted customer access, and changed the “customer profile” of Level A to its detriment. The claim includes an alleged loss on sale of Surfskate’s business. The amount of compensation sought has varied since the original notice of dispute was filed in December 2002. By the time of the hearing some 18 months later it had increased to $284,955 consisting of $ 244,990 loss of profit, $26,000 loss on the sale of the business, and reports prepared by Surfskate’s accountant and a retail consultant $14,056. However, Surfskate waives any amount in excess of the Tribunal’s jurisdiction. The landlord admits liability for disruption to the claimant’s business in the amount of $33,341, limited to the period December 2001 to July 2002. Chronology The following facts are not in dispute: • October 1996: City Beach (a store selling goods similar to Surfskate’s) opened a shop on the Queen Street Mall • July 1997 – June 1998: Surfskate’s sales fell by 4.4%. Patronage of the Level A cinemas also declined. • August-October 1998: Surfskate renewed its lease of premises 33% larger, with 80% more stock. Meanwhile its shop was closed for about 2 months. • July 1998-June 1999: Surfskate’s trade increased by 27%. • December 1998: Patronage of the Level A cinemas continued to decline. • July 2000: The Goods and Services tax came into effect. -- 2 of 14 -- Coastworks-v-Perpetual 3 31.8.2004 - Decision • August – November 2000: A Coles supermarket opened on Level E. • October/November 2000: Major renovations began on the top level of the centre to accommodate the cinema complex. Barricades and scaffolding extended down to level E. • July 2000 – June 2001: Surfskate’s sales fell 11.1% below the previous year’s. • July-November 2001: The patronage of cinemas on level A improved as a result of the closure of nearby Hoyts and Forum cinemas in June 2002. Surfskate’s sales remained stable. • 1 November 2001: The cinemas closed on level A and opened on the top level. Barricades were erected on Level A and the construction of the Target store began. • November 2001: City Beach opened a larger store in the Queen Street Mall. • December 2001-June 2002: Decline in Surfskate’s sales became more pronounced. • July 2002 Sunday suburban trading began. • August 2002: Work on Level A is completed and Target store opened. • September 2002: Vanworld Pty Ltd, a tenant of the “Food Court” on Level E departed. The Landlord progressively refurbished Level E. • 4 July 2003: The Surfskate business is sold. Counsel for the landlord places these events in three time periods, as follows: (a) Period 1: January 2001 to November 2001 – demolition of the entertainment area and construction of new cinemas on the top level; (b) Period 2: December 2001 to August 2002 – demolition of the cinemas on Level A and construction of the Target store there; and (c) Period 3: September 2002 to May 2003 – progressive refurbishment of shops in the “Food Court” on Level E. SURFSKATE’S CASE - LIABILITY According to Surfskate building disruptions adversely affected its trade from January 2001 to May 2003. In July-August 1998, after a new lease was negotiated, Surfskate itself made renovations. -- 3 of 14 -- Coastworks-v-Perpetual 4 31.8.2004 - Decision It had taken a larger floor area and abandoned sales of surfing equipment to concentrate on ‘upmarket’ lines of casual clothing. It shop was closed for two months, during which the landlord waived the rent. Surfskate says that it spent $130,000 on its renovations, relying on statements by the landlord’s manager that the cinemas would remain on level A for the duration of its new lease. However, that aspect of the claim has been abandoned. 1 The alleged disruption to its trade at intervals from 2001 is summarised in Surfskate’s Further and Better Particulars: 7. …the work involved jack-hammering, steel and concrete sawing, grinding, hammering and other building work. [It] produced offensive dust and odours. [It] required the erection of internal and external scaffolding and dust sheeting. There is an atrium which extends from the top level of the centre down to Level E. It is undisputed that at various times between November 2001 and July-August 2002 there were barricades and hoardings on level A near Surfskate’s shop, presenting a physical barrier to potential customers. At one stage barriers partially restricted pedestrian traffic at an important street entrance to Level A. Naturally enough, says Surfskate, pedestrian traffic on Level A dropped considerably at this time, as did the number of people buying its merchandise. Gordon Wilson, a witness for Surfskate, said that from May 2002 he complained verbally and in writing to the landlord’s manager (Andrew Benjamin) and to the landlord about adverse effects on Surfskate’s business. Copies of relevant letters are in evidence. According to Wilson the response was unsympathetic and no assistance was forthcoming, other than an offer of an inferior alternative site. A vital part of Surfskate’s case that its business was aimed mainly at older teenagers and people in their early twenties attending the cinemas on Level A. With this in mind the shop stayed open until 9pm several nights a week. But its fortunes changed when the cinemas moved upstairs and the Target store opened and sold similar stock. While pedestrian traffic increased substantially for several weeks thereafter, Surfskate’s business remained static. According to Wilson, there were significantly fewer young passers-by. However, he conceded that fast food outlets in the immediate vicinity continued to trade during the reconstruction work. In September 2002 Vanworld Pty Ltd, which leased a major part of the “Food-Court” on Level E abandoned its lease. The landlord then took the opportunity to refurbish various sub-tenants’ premises on that floor. Barricades were erected on Level E and around an important entrance from the Mall to Levels A and E. Several tenants ceased to trade, lunch time traffic diminished, and Surfskate’s sales declined until March/April 2003. Alleged Loss of Trade 1 Letter Pender & Whitehouse to Corrs Chambers Westgarth 1 December 2003. -- 4 of 14 -- Coastworks-v-Perpetual 5 31.8.2004 - Decision As an expert witness Surfskate tendered a “retail business consultant”, Donald Gilbert, who had prepared spreadsheets of monthly trading figures for the years 1998-1999 to 2002-2003. Mr John Anning, Surfskate’s accountant, had produced profit and loss statements for tax purposes. Also before the Tribunal are monthly sales figures delivered by Surfskate to the landlord in accordance with the terms of its lease. Anning’s figures include some additional income derived from market tables in common areas of the centre. Gilbert’s figures are confined to shop sales. Gilbert’s evidence, in round figures, is that Surfskate’s average monthly gross sales rose from $96,000 in 1998-1999 to $103,700 in 1999-2000. Thereafter, he says, they fell steadily – to $93,100 in 2000-2001 and then to $83,700 in 2001-2002. There was a sharp decline for a few months after the introduction of the GST in July 2000. Sales remained stable for a few months after the Hoyts and Forum cinemas (outside the centre) closed in June 2001, during which time the level A cinemas did better. But Surfskate’s decline in turnover accelerated from November 2001 when the Level A cinemas closed and building work proceeded on that floor. There were signs of recovery in April 2003, which no doubt assisted the sale of the business a few months later. Calculation of compensation under section 43 of the Act The witness Gilbert refined his calculations several times in the months before the hearing. He took 1999-2000 as his “base year” 2 . In his opinion normal trading patterns returned about nine months after the re-opening of Surfskate’s shop, before the impact of the GST was felt. Gilbert assumed a notional growth rate of 3% in line with the consumer price index and a gross profit margin of 41.5% on that year’s trading. The average gross profit margin for five years trading to June 2001, in Gilbert’s estimation, is 41.5%. He calculates loss of gross profit in the period January 2001 - May 2003 at $244,990. Other Causes of Loss of Trade? A business known as City Beach, which also specialised in casual and beach wear, was located in nearby Albert Street during the early years of the claimant’s original lease. In 1996 City Beach moved to the Queen Street Mall. According to Surfskate’s witnesses the two businesses co-existed, and City Beach did not stock the same merchandise as Surfskate. However, in November 2001 City Beach opened a larger store in the Mall, not far from Surfskate. The latter’s co-director, Mr Smith, conceded in cross examination that competition from City Beach at that stage could have cost Surfskate between 10% and 13% of its trade. Loss on sale of Business In July 2003 Surfskate sold its business for $77,000. It alleges that, but for the conduct and events complained of, the price would have been at least $103,000. That claim is based on the evidence of Mr Anning, who arrived at that opinion by capitalising the average of Surfskate’s trading for the years 1997-1998, 1998-1999 and 1999-2000 (prior to the trading period affected by closure of the cinemas on Level A) at a rate of 33%, 2 i.e. a year when trading was unaffected by building work or other abnormal influences. -- 5 of 14 -- Coastworks-v-Perpetual 6 31.8.2004 - Decision taking the average pre-tax profit in those years as $34,048. Anning explained that he chose a capitalization rate of 33% to reflect the risk in the retail clothing business, and that it is a rate consistent with benchmark returns for investments of that kind. However, he conceded in cross-examination that his exercise was “an indication of value” rather than as a formal valuation. THE LANDLORD’S CASE The landlord accepts liability for disturbances over a period of eight months during demolition and construction work on Level A between 1 July 2001 and 31 July 2002 (Period 2, above) but denies any further liability. The Respondent’s comprehensive submissions may be summarised as follows: (a) Surfskate’s business was declining before the alleged disruption began. Its expansion in September 1998 was followed by a temporary improvement, but a decline set in again from October-November 1999. Surfskate adduced no evidence of disturbance caused by the construction of Coles’ supermarket on Level E in 1999. (b) Concerning Period 1 (February 2001–November 2001): There is no basis for compensation for the construction of the cinema complex on the top level of the centre. Indeed, the witness Wilson stated that trading was steady during this period. Mr Blackwood of Ernst and Young (the landlord’s expert) found a decline (in this period) of between 0.6% (on the basis of information given by Surfskate to the landlord) and 1.5% (on the basis of figures selected by Mr Gilbert. In the previous year, however, the claimant’s sales declined by no less than 10%, when it reduced its advertising budget from $6000 to $4000. Besides, movements in sales may be simply be due to general economic conditions. (c) Concerning Period 2 (December 2001 – August 2002): As noted above, the landlord admits liability in the amount of $33,341 for disruption of Surfskate’s business during the demolition of the cinemas on Level A and the construction of the Target store. However, the landlord submits that in August 2002, immediately after that store opened, there was no discernible loss. Ernst and Young have provided a range of potential gross trading losses, based alternatively on Gilbert’s figures and sales reports by Surfskate to the landlord, and on gross profit margins of 30.9% (according to Ernst and Young) and 41.5% (preferred by Gilbert). On those bases the Ernst and Young estimate of losses is $35, 349, and Gilbert’s is $55,964. (d) Concerning Period 3 (September 2002–May 2003): Survey data obtained by the landlord from an independent expert, whose report is in evidence, show that traffic flow counts and customer demographics in this period contradict the Claimant’s anecdotal evidence of reduced public access, particularly in relation to the age group “targeted” by the claimant. According to this evidence the relevant trend was towards increases over corresponding months in previous -- 6 of 14 -- Coastworks-v-Perpetual 7 31.8.2004 - Decision years. Furthermore, Gordon Wilson, a witness for Surfskate, noted a recovery in pedestrian traffic numbers once the barricades came down. The fast food outlets – notoriously attractive to young customers - remained open at all times. A probable cause of any decline in this period was the reduction in Surfskate’s advertising budget. (e) The Evidence of Surfskate’s Expert, Gilbert: Counsel for the landlord devotes three pages of his lengthy written submissions to trenchant criticism of Gilbert’s lack of formal accounting qualifications, his use of intemperate language, and conclusions that often depend on unexplained assumptions. Gilbert’s role (so it is said) was more akin to that of advocate than reliable expert, and should be rejected in favour of the evidence of Ernst and Young. (f) Gilbert’s choice of a “base year” 3 to calculate expected annual growth: Gilbert chose a single year (1999-2000) in which, as it happens, Surfskate achieved its best results in trade since 1995. This choice, it is submitted, is tendentious, and assumes a pattern that was unlikely to be sustained. Indeed, Surfskate’s trading entered a long period of decline one year after it refurbished its premises in 1998. A more reliable guide is to be found in the evidence of Ernst and Young, which compares Surfskate’s actual monthly sales from December 1999 to June 2000 to those of December 2001 to June 2002. (g) Hypothetical annual growth: Gilbert’s projection of sustained annual growth of 3% (compounded) has no support in Surfskate’s trading figures in any period or in such external data as the retail analyses of Monash University or of IBIS. Any growth in the claimant’s business was confined to the year immediately following its renovations in 1998. (h) Other causes of decline: Gilbert used no data after the introduction of the GST, and treated the new tax as an external event that distorted trading patterns. The correct approach is to treat the GST as a normal factor in the “retail landscape”, and to view data post-July 2000 as no less valid, for present purposes, than earlier results. There is no evidence to support Gilbert’s treatment of the GST factor. (i) Gross profit margin (“GPM”): According to Ernst and Young the appropriate percentage by which to calculate loss in any compensable year is the actual GPM of 30.9% in the financial year ending July 2003. Gilbert’s estimate, based on averaging, should be rejected. (j) Loss on Sale of Business: Mr Blackwood (Ernst and Young) accepts the methodology used by Mr Anning, but would adjust his conclusion to reflect, inter alia, the decrease in Surfskate’s nett profit in 2000-2001. Blackwood is uncertain whether Anning’s valuation includes stock or an estimate of goodwill (a notoriously “rubbery” item). In Blackwood’s opinion – which the Tribunal is asked to accept without qualification – Surfskate incurred no loss on sale. 3 As to the meaning of this term see note 2, above. -- 7 of 14 -- Coastworks-v-Perpetual 8 31.8.2004 - Decision (k) Quantum of Compensation: On the basis of financial data supplied by Surfskate to the landlord Blackwood estimates its probable loss due to building work between December 2001 and July 2002 (the period for which the landlord accepts liability) at $35,349. However, counsel for the landlord arrives at a lower figure, namely $33, 341. He does so by taking the total notional loss of sale in the period of 8 months from December 2001 to August 2003 as $134,853. He then applies a discount rate of 20% to account for factors beyond his client’s control (e.g. competition and reduced advertising) to arrive at the figure of $107,882. Then applying to that figure the GPM factor of 30.9% he submits that the proper amount of compensation for the period for which liability is accepted is $33,341. THE LEGISLATION Section 43(1) of the Act, so far as is now material, provides that compensation is payable to a lessee for loss or damage suffered by the lessee where the lessor – (c)…takes action that substantially restricts or alters …(i) access by customers to the leased shop; or… (ii) the flow of potential customers past the shop; or… (d) causes significant disruption to the lessee’s trading … or does not take all reasonable steps to prevent or stop significant disruption within the lessor’s control; … or (e) does not have rectified as soon as practicable –(i) any breakdown of plant or equipment …; or (ii) any defect…. In paragraph 114 of his written submissions counsel for the landlord submits that compensation under this section is limited to direct physical interference with the conduct of a lessee’s business. During oral argument the Chairman invited him to consider whether liability may arise where a lessee, absent any suggestion of compensable misrepresentation, removes an “anchor tenant” on whose presence a claimant lessee’s business more or less depends. However, neither counsel addressed the Tribunal on the point, and it is not one that we need now consider.4 As noted above, Surfskate abandoned its allegation of misrepresentation based on section 43(2)(a)(i). FINDINGS (1) Concerning Surfskate’s business from September 1998 until the alleged disruption began: 4 The question is moot: the explanatory note to the 1994 Bill merely observes that compensable situations include physical circumstances”. (Emphasis added.) -- 8 of 14 -- Coastworks-v-Perpetual 9 31.8.2004 - Decision According to Blackwood, using monthly sales figures provided to the landlord by the claimant, the latter’s sales declined by 4.4% in the financial year 1997-1998. It is fair to note that patronage of the Level A cinemas also began to decline in that period (apart from a brief reprieve when competitors near the Myer Centre close their doors) and continued to decline until they moved from Level A in November 2001. It is undisputed that Surfskate spent $130,000 on renovations when it received a new lease in the second half of 1998. We are satisfied that turnover rose 27% in 2001-2002. The claimant’s records show that the increase occurred in the nine months or so immediately after the renovations. However, we find that the claimant’s sales fell by 7.5% in 1999-2000, and according to Ernst and Young there was a further decline of 11.1% in 2000-2001. The claimant’s witness Gilbert concedes that there was a decline of 11.1% between February 2000 and January 2001. The graphic projections of Gilbert and Ernst and Young respectively show a marked fall in turnover from July 2000. Coles supermarket was then under construction on Level E and it opened later in the year. However, no disruption is alleged to have been caused by that project. We accept that the introduction of the GST in July 2000 adversely affected the claimant’s trade (and many other retailers) for several months thereafter. We cannot determine an exact figure so far as Surfskate is concerned but on the available evidence we are satisfied that that the retail sector in general took up to a year to recover from the effects of the new tax. We also accept that the terrorist incident in New York on 11 September 2001 contributed to a decline in consumer spending for some time afterwards. Notwithstanding criticism, on behalf of the landlord, of Gilbert’s choice of 1999-2000 as the “base year”, we consider that it provides the most reliable foundation for assessing the claimant’s loss in Period 2 (above). That year commences towards the end of the artificial boost to sales following renovations to the claimant’s shop, and is not subject to abnormal fluctuations attributable to external factors including the GST. How, then, should we calculate compensation for Period 2, the period in which the landlord accepts liability in principle? The figures employed by Mr Anning, which are reflected in Surfskate’s tax returns, include “market table” takings from occasional sales outside the shop, in common areas of the centre. Again, the figures supplied by the claimant to centre management appear, on some occasions, to have been compiled somewhat casually. While we treat Mr Gilbert’s conclusions with considerable caution, no serious faults in his basic data have been exposed. Where necessary we rely on the monthly sales figures supplied to him by Surfskate. (2) With respect to Period 1 (January-February 2001 to November 2001) we accept the propositions in paragraph 114 of the submissions of counsel for the landlord, as follows: An understanding of [sections 43(1)(c) and (d)] will indicate a balance to be -- 9 of 14 -- Coastworks-v-Perpetual 10 31.8.2004 - Decision struck between management decisions which overall are taken to improve trading within a centre as a whole (such as opening a particular style of tenancy), and matters which understandably may impact on trading conditions and flows of potential customers. We accept that the decision of the landlord and the proprietor of the cinema complex to relocate it to the top level of the centre was made in good faith to improve the profitability of a major tenant, and of the centre as a whole. Although scaffolding extended for some time from the top level to Level A we are not satisfied that it had any significant effect upon access by customers to the subject shop, or the flow of potential customers past it, within the meaning of section 43(1)(c). Accordingly we hold that the claimant is not entitled to any compensation with respect to Period 1 (January-February 2001 to November 2001). (3) With respect to Period 3 (August-September 2002–May 2003) we find that the landlord’s decision to refurbish the premises of parts of the “Food Court” after the departure of Vanworld was a commercial decision made reasonably and in good faith and without any contravention of section 43. We accept the evidence of the centre manager (Benjamin) that the work on level E which began in February 2003 was carried out progressively and with no substantial disturbance of tenants on Level A. Accordingly, in our judgment, Surfskate is not entitled to any compensation for events in Period 3. Further Consideration of Period 2 We return to the question of the proper amount of compensation for admitted disruption of the claimant’s business in Period 2 (December 2001-August 2002). The cinemas on Level A closed in November 2001. We accept the evidence of Surfskate’s directors that the consequent building work affected their shop from that time until the end of July 2002. Growth factor Mr Blackwood would make no allowance for a growth factor, on the ground that sales were in decline before Period 2. 5 However, as counsel for the claimant pointed out, the more dramatic turndown occurred in several months immediately following the introduction of the GST in July 2000. We find that the comparative monthly totals for February to June 2000 show a decline in takings of 5.74% compared with a fall of 13.95% in the period July 2000 to January 2001. We are satisfied that a nexus between the advent of the GST and an accelerated decline in the claimant’s takings has been sufficiently shown. Accordingly we have decided to apply a modest growth factor of 1.5% to the base year once only, but not to compound it in the year 2000- 2001. The next question concerns the probable gross profit margin – absent the subject 5 There was a slump of 11.1% from February 2000 to January 2001(as Gilbert conceded) compared with the corresponding months in the previous year. -- 10 of 14 -- Coastworks-v-Perpetual 11 31.8.2004 - Decision disturbances – in Period 2. The claimant’s witness Gilbert suggests 41.5%; Blackwood, the landlord’s expert, says that appropriate factor is 30.9%. 6 In our view, doing the best we can with the available evidence, Mr Gilbert’s estimate is over-generous, in view of falling sales in the years after 1999-2000, while Mr Blackwood’s is unduly conservative. To the extent that the evidence of Gilbert is at variance with Mr Anning’s on this aspect of the case we prefer the latter’s evidence, and on the issue of gross profit margin we prefer the evidence of Anning to that of Blackwood. Financial statements prepared by Mr Anning show a gross profit margin of 34.66%, calculated as an average over the period 1998-2002. In our view that is a fair and proper estimate to apply, in assessing compensation in Period 2: see Schedule A hereto. Assuming, for reasons already given, a growth rate of 1.5% in the compensable year (only) and a probable gross profit margin of 34.6% (in the absence of the admitted interference) we find that the claimant Surfskate is entitled to compensation in the amount of $54,924.00, as calculated in Schedule B hereto. We are not disposed to reduce that amount for any estimated effects of competition or reduction of expenditure on advertising. We accept that Surfskate’s cash flow in Period 2 was insufficient to permit expenditure on advertising, and that such expenditure would, in any event, have been futile while its shop was beset by barriers, hoardings and builders’ dust and debris. With respect to competition, we accept the evidence that Surfskate and City Beach normally co-existed, rather than competed, although their premises were in close proximity. It may be that City Beach gained some advantage during Period 2, but we find no evidence to establish that, if the admitted interference with the claimant’s business had not occurred, City Beach would have taken over a significant portion of the claimant’s trade. We note Surfskate’s apparent recovery in early 2003. Loss on sale of the business: The evidence is insufficient to satisfy us that any loss was suffered. The terms of sale, nature of the pre-sale advertising, price offered, negotiations over sale price, and the length of time the business was on the market are all unknown to the Tribunal. The claimant’s application for costs is dismissed. We see no basis for such an award, within the limited terms of section 91. IT IS ORDERED THAT: The respondent do pay to the claimant within 14 days of this Order, the sum of $54,924.00 [fifty four thousand nine hundred and twenty four dollars] as compensation for loss and damage suffered by the claimant. -- 11 of 14 -- Coastworks-v-Perpetual 12 31.8.2004 - Decision A Forbes Chairman -- 12 of 14 -- Coastworks-v-Perpetual 13 31.8.2004 - Decision COASTWORKS T/a SURFSKATE v PERPETUAL TRUSTEES AUST LTD SCHEDULE A: AVERAGE GROSS PROFIT MARGIN of SURFSKATE GPM on BASE YEAR AND CLAIM YEARS SALES COGS GP $ GP% 30/06/1999 947749.11 718697.63 229051.48 24.17% 30/06/2000 1082772.93 664194.99 418577.94 38.66% 30/06/2001 960057.04 561923.59 398133.45 41.47% 30/0602002 892041.73 616123.74 275917.99 30.93% 30/06/2003 840101.08 520327.87 319773.21 38.06% 173.29% AVERAGE 34.66% FIGURES TAKEN FROM Mr Gilbert’s schedule. -- 13 of 14 -- Coastworks-v-Perpetual 14 31.8.2004 - Decision COASTWORKS t/a SURFSKATE v PERPETUAL TRUSTEES AUST LTD SCHEDULE B CLAIM NOVEMBER 2001 TO JULY 2002 INCLUSIVE CALCULATION USING MR GILBERT’S FIGURES: ASSUMING JULY 1999 - 2000 AS THE BASE YEAR. BASE MONTH SALES 1.5% Growth CLAIM YEAR ACTUAL DIFFERENCE 1999-2000 2001-2002 Nov-99 81481 82703 Nov-01 69219 13484 Dec-99 160481 162888 Dec-01 119583 43305 Jan-00 91812 93189 Jan-02 71491 21698 Feb-00 57327 58187 Feb-02 48603 9584 Mar-00 62448 63385 Mar-02 61177 2208 Apr-00 77836 79004 Apr-02 63721 15283 May-00 68505 69533 May-02 58115 11418 Jun-00 85460 86742 Jun-02 57261 29481 Jul-00 71377 72448 Jul-02 60442 12006 158466 Gross Profit 34.66% $54,924.00 -- 14 of 14 --