Kimberly Kashevarof | April 2019 Chair of the Board Report
2018 turned into a year of transition for SNAI. After nearly 15 years in the government construction arena, the board decided to sell those subsidiaries and leave that business. Operating under the “Red Mountain” name, the three “8(a)” eligible companies were sold and the remaining non 8(a) company finished up its final major project. Contracting saw some good years and some bad years. However, in the end, the board decided that trying to expand into the business while government contracting was coming under more scrutiny and contracts were being delayed was not the best business decision for SNAI . Also contributing to the decision was the direct costs and management challenges of overseeing operations and employees in 5 states. In addition to ending our government contracting, SNAI also transitioned our management, hiring one of our own shareholders as CEO to provide history, continuity, and experience to our management team.
These decisions paid off in 2018. A loss was predicted for 2018, however, due to the changes mentioned above SNAI produced a profit under our new CEO. The construction companies were able to limit losses while awaiting their sale and able to reduce costs. The last project in California came in under budget and produced more profit than expected. This, combined with the changes made at the hotel, boosted revenues and customer satisfaction, as well as gave SNAI a $367,305 Net Income before the contribution to the Shareholder Trust and taxes.
The final transition was the creation of the Shareholder Trust. SNAI now has a way to pass dividends and other future benefits to our shareholders tax free. In addition, the funds put into the Shareholder Trust are taxed at just 10% for the trust verses 28% (SNAI’s usual corporate rate). To help explain this a bit more, see the attached table showing the tax impacts.
The table shows that by contributing $150,000 to the Trust, SNAI and the Trust saved $27,280 in combined taxes. This allowed the Trust to pay a bigger distribution than SNAI could have given alone. And the distribution is now tax free to the shareholders. Now that makes a good transition year!
Chair of the Board