SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
__X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the Fiscal Year ended 4/30/1996
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ to _________
Commission File Number O-2825
Swiss Chalet, Inc.
(Exact name of Registrant as specified in its charter)
COMMONWEALTH OF PUERTO RICO 66-020-0307
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
105 DE DIEGO AVENUE, SANTURCE, PR 00911
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number (787) 721-1200
Securities registered pursuant to Section 12(b) of the Act :
Title of each class : NONE
Securities registered pursuant to Section 12(g) of the Act :
COMMON STOCK (No Par Value)
Title of Class
Check whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. YES:X NO:
Check that no disclosure of delinquent filers in response to Item 405 of
Regulation SB is contained in this form and no disclosure will be
contained, to the best of the registrant's knowledge, in the Proxy
Statement incorporated by reference in Part III of this Form 10KSB or any
amendment thereto : YES ( ) NO (x) Disclosure
State issuer's revenues for it's most recent fiscal year : $5,150,376.
As of April 30, 1996 the aggregate market value of the voting stock held by
nonaffiliates of the Registrant was : Please refer to Item 5.
As of April 30, 1996 the Registrant had 1,401,162 shares of Common Stock
Issued and Outstanding.
Documents incorporated by reference : NONE
PART I
ITEM 1 - BUSINESS
Swiss Chalet, Inc. (hereinafter referred to as the "Registrant" or the
"Company") was incorporated on April 9 1952 under laws of the Commonwealth
of Puerto Rico. It owns and operates the Hotel Pierre in San Juan, Puerto
Rico. The Hotel consists of 184 rooms and supporting facilities.
Portions of the Registrant's property that are not being utilized for its
Hotel operations are leased to E.H. Shehab Co, Inc. (a womens clothing
store),and an independently owned restaurant which is also operating the
banquet facilities.
The pastry shop is currently leased to The Village Bake Shop and additional
restaurant facilities are being provided in a small space within the main
Hotel building through a concession arrangement.
Since April 1986 the Registrant has operated under a grant of tax
exemption issued pursuant to the Tourism Incentives Act of 1983. The grant
is for a period of ten years and provides partial tax exemption from
Commonwealth of Puerto Rico income and property taxes. The grant also
provides 100% exemption from license taxes imposed by the Municipality of
San Juan. The grant requires the Registrant to invest at least 20% of it's
net income in certain training programs and improvements of the property,
among others. In March of 1993 the Registrant obtained an extension of the
above tax exemptions for a further period of ten years.
See Note 5 to the financial statements included in Item 7.
Some of the Company's employees are represented by the local chapter
of the Union de Tronquistas (Teamsters) and in November of 1994 a new three
year contract was negotiated which expires on 11/30/1997.
The Company has not received any notice of any violation of
regulations from The Environmental Protection Agency.
The hotel business in Puerto Rico is highly competitive, especially
during the summer months. The Registrant has a great deal of competitors
most of which are larger than itself. The Registrant has maintained its
competitive position by upgrading the hotel property while keeping rates at
or below those of the closest competitors in its category. For the past
three fiscal years no single customer has accounted for 10% or more of Net
Sales.
Supplies required by the Registrant in its operations are readily
available from local and mainland U.S. sources.
-1-
The Registrant is not engaged in any research activities related to
the development of new products or services or to the improvement of
existing ones.
The Registrant holds no patents, licenses, franchises or concessions,
except that the Registrant is a member of the Best Western International,
Inc. hotel organization. Registrant is connected to the central
reservations system of Best Western International, Inc.
The Registrant currently employs approximately 65 employees.
ITEM 2 - PROPERTIES
The Registrant owns a parcel of land bounded by De Diego Avenue, Loiza
Street and Del Parque Street of approximately 2.6 acres. This property is
occupied by the Hotel Pierre, E.H. Shehab clothing store, parking areas, an
unoccupied theater building and the location of a restaurant operated by a
lessee. The Company believes that it has sufficient land resources to give
adequate space for any future expansion. The Registrant's administrative
and accounting offices are maintained at this location. There were no
mortgages encumbering this property during the fiscal year.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not involved in any litigation which management
believes will materially and adversely affect its financial condition or
results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of fiscal 1996 to
a vote of security holders through the solicitation of proxies or
otherwise.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is traded over-the-counter, however no
Broker is consistently making a market in the stock. As a result, there is
very little activity in the public trading market and the Company cannot
furnish reliable high or low quotations from any Broker. As previously
reported a series of major stock transactions took place in November 1990
resulting from Mr. Bradley's desire to liquidate the majority of his
holding. The Company purchased for cancellation 293,642 shares from Mr.
Bradley at $5 per share and a further 49,953 from other stockholders all of
whom were offered similar terms as those under which Mr. Bradley had
tendered his shares.
-2-
A further offer to Stockholders was made in October 1991 again at a
price of $5 per share which was held open until January 31, 1992 and the
Company repurchased an additional 45,906 shares. During the year ended
04/30/96 the only material transaction for which the Company had price
information took place at $5 per share in July 1995.
Mr. David C. Baumgarten who was the Chairman of the Board and owner of
449,713 shares of common stock died on April 26, 1995. As of the date of
preparation of the Proxy Statement none of these shares had been
distributed or otherwise disposed of. The Co-Executors of the Estate of
David C. Baumgarten are Mr. Harvey Litwin (currently a director of the
Company) and Mr. Robert Lasky.
As of April 30, 1996 there were 540 holders of record of Common Stock.
The schedule of dividends paid since 1986 is as follows:
Record Date Date Payable Amount
May 1, 1996 Jun 7,1996 .65
Nov 15,1995 Dec 8,1995 .15
May 1, 1995 Jun 2 1995 .55
Dec 1, 1994 Dec 9,1994 .15
May 2, 1994 Jun 3, 1994 .45
Dec 1, 1993 Dec 10,1993 .15
May 3, 1993 Jun 4, 1993 .25
Dec 1, 1992 Dec 11,1992 .15
May 1, 1992 Jun 4, 1992 .25
Dec 2, 1991 Dec 17,1991 .15
May 13,1991 Jun 4, 1991 .35
Nov 30,1990 Dec 15,1990 .15
May 1, 1990 Jun 4, 1990 .50
Dec 1, 1989 Dec 15,1989 .15
May 1, 1989 Jun 1, 1989 .25
Nov 15,1988 Dec 15,1988 .15
May 2, 1988 Jun 1, 1988 .20
Dec 10,1987 Dec 15,1987 .10
May 1, 1987 Jun 1, 1987 .15
May 1, 1986 Jun 2, 1986 .10
-3-
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Revenues over the past two years were $4,663,275 in Fiscal 1995, and
$5,150,376 in Fiscal 1996.
A BREAKDOWN OF SALES FOR THE TWO YEAR PERIOD FOLLOWS :
1996 1995
ROOMS $4,541,302 $4,099,141
TELEPHONE 161,723 155,519
RENTALS 268,103 286,487
OTHER INCOME 179,248 122,128
TOTAL REVENUE $5,150,376 $4,663,275
The Company had an outstanding year with consistently higher occupancy
levels ( especially in September 1995 when Red Cross used the hotel as a
headquarters for hurricane relief in St Thomas and St Croix).Expenses
remained well controlled and much of the increase in payroll costs could be
attributed to profit sharing based on record earnings for the fiscal year.
The drop in rental income was attributable to the closing of the cafeteria
on Company property on Loiza Street by unanimous decision of the Company's
Board of Directors.
On April 24, 1986 the Company was granted a partial tax exemption
grant for ten years which was extended in March of 1993 for a further ten
years. The terms of these exemptions are explained more fully in Note 5 of
the Financial Statements included in this report.
-4-
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of Working Capital is from funds provided
by operations. The Company believes that its excess cash from operations
will be sufficient to finance its long and short-term capital needs as
currently projected, including the payment of accrued dividends.
The Company is studying various alternatives for development of its
available property. As one of the key components in any proposal is the
construction of a multi-floor parking garage the Company is setting aside
cash reserves with the intention of substantiaaly contributing to the
construction cost of this part of the development.
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Financial Statements of the Registrant are included as a part of
this report following Part III Item 13.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
DISCLOSURE
There were no disagreements on accounting or financial disclosure
matters with the Company's independent auditors during the two year period
ended April 30, 1996.
-5-
ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The By-Laws of the Corporation presently provide that the number of
directors shall be not less than (6) six nor more than fifteen (15)
directors. At the present time the Corporation has eight (8) directors all
of whom were elected for one (1) year terms on September 30, 1995, as
follows :
NAME PRINCIPAL OCCUPATION AND DIRECTOR
OTHER INFORMATION SINCE
=================================================================
Patrick D. Baumgarten Mr.Baumgarten, son of the late 1988
David C. Baumgarten is Assistant
Controller of the Agency for
Performing Arts, Inc. (theatrical
agents), which has been his principal
occupation for more than the past five
years.
Age 44
John Bradley Chairman and Secretary of the 1963
Corporation. Mr.Bradley has been
the Chairman of the Corporation
since 1995 and Secretary since 1982.
Mr. Bradley has been Chairman of
T.C.R. Services Inc. since 1994 and
prior to that was President of
Southwire International Corp.
his principal occupations for more
than the past five years.
Age 91
B.Chester Hryniewicz President of the Corporation 1976
Mr.Hryniewicz has been President of
the Corporation since 1982.
Mr.Hryniewicz is an independent
financial consultant, which has
been his principal occupation for
more than the past five years.
Age 65
-6-
NAME PRINCIPAL OCCUPATION AND DIRECTOR
OTHER INFORMATION SINCE
=================================================================
Harvey Litwin Mr.Litwin is the Treasurer 1981
for the Agency for the Performing
Arts,Inc.(theatrical agents),
New York which has been his
principal occupation for more
than the past five years.
Age 65
Jose Ramirez Mr. Ramirez is an architect and 1991
the principal of Jose Ramirez
Associates, a local architectural
firm and acts as design consultant
for the hotel and restaurant industry.
These have been his principal
occupations for the past five years.
Age 41
Peter D. Somech Treasurer of the Corporation. 1988
Mr.Somech has been Treasurer of
the Corporation since 1985, his
principal occupation. From 1983 to
the present time Mr. Somech has also
served as Controller of the Corporation.
Age 52
Wallace Valencia Mr. Valencia is President of 1987
Valencia Shipping Agency,Inc.
(shipping agents) which has been his
principal occupation for the past
five years. He is also Vice President
of Sea Land of Puerto Rico,Inc.
A position he has occupied for more
than the past five years.
Age 68
Gustavo Velez Toro Executive Vice President of the 1977
Corporation. Mr.Velez has been
Executive Vice President of the
Corporation since 1982, his principal
occupation. From 1979 to the present
Mr. Velez has also served as General
Manager of the Hotel.
Age 57
-7-
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
requires the officers, directors, and persons owning more than 10% of the
Company's Common Stock to file reports of ownership and changes in
ownership to the Securities and Exchange Commission and are required to
furnish the Company with copies of such reports.
Based solely on review of the copies of these forms furnished to the
Company, or written representations from its officers and directors, the
Company believes that for the fiscal year ended April 30, 1996, the Company
complied in all respects with the reporting requirements of Section 16(a)
of the Securities and Exchange Act of 1934 with the exception that Mr.
Gustavo Velez inadvertently failed to report an acquisition of
3000 shares in July 1995. This omission has since been corrected.
Mr. David C. Baumgarten, who was Chairman of the Board and owner of 449,713
shares of Common Stock, died on April 26, 1995. The co-executors of the
estate are Mr. Harvey Litwin ( a Director of the Company) and Mr. Robert
Lasky and, until these shares are either distributed or otherwise disposed
of, ownership is shown
in our records as "Estate of David C. Baumgarten".
ITEM 10 EXECUTIVE COMPENSATION
The Chief Executive Officer of the Company is Mr.B.Chester Hryniewicz
who is the Company President. His compensation paid in the fiscal year
ended April 30, 1996 was as follows :
SALARY BONUS STOCK OTHER
====== ===== ===== =====
B.Chester Hryniewicz $16,200 $3,214 NONE -
No employee, executive, or officer received compensation in excess of
$100,000 during the fiscal year.
During the fiscal year ended April 30, 1996 the directors of the
Corporation were paid a fee of $100 for each meeting up to the September
1995 and $200 thereafter for each meeting attended with the exception of
two meetings of the Executive Committee
where fees were waived. Aggregate Directors Fees totalled $2,500.
-8-
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The only persons, to the knowledge of the Corporation, who
beneficially owned more than five per cent (5%) of the outstanding Common
Stock of the Corporation as of June 30, 1996 were the following:
Name & Address Number of Shares Percent of Shares
Beneficially Owned Eligible to vote
============== ================== =================
Estate of David C. Baumgarten 449,713 32.10%
c/o Harvey Litwin APA
888 7th Ave
New York, NY 10106
Pierre Lohner 85,808 6.12%
P.O. Box 6602
Santurce, P.R. 00914
B. Chester Hryniewicz 70,299 5.01%
26 Sol St, Old San Juan
Puerto Rico 00901
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
Name Number of Shares Owned Percent of
(1) Shares
===================== ====================== ==========
Patrick Baumgarten 13,518 .97
John Bradley 11,610 .83
B.Chester Hryniewicz 70,299 5.01
Harvey Litwin 64,345(2) 4.59
Jose Ramirez 8,000 .57
Peter D. Somech 55,465 3.96
Wallace Valencia 28,171 2.01
Gustavo Velez Toro 29,981 2.14
All directors and officers
as a group (8 persons) 281,389 20.08
(1) Includes securities owned by affiliates, parents, wives and
children of certain directors. Each director has voting and
investment power with respect to the shares beneficially owned
by him.
(2) Mr. Litwin is a co-executor of the late Mr. David C.Baumgarten's will
(449,713 shares). As of the date of preparation of this report none of
the shares that form part of the estate have been sold or distributed.
-9-
ITEM 13 - EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON
FORM 8K
(A) (1) Financial Statements
The following Financial Statements of the Registrant, are
included as a part of this report.
Independent Auditors Report
Balance Sheets as of April 30, 1996 and 1995
Statements of Operations for the years ended
April 30, 1996 and 1995
Statement of Shareholders Equity for the years
ended April 30, 1996 and 1995
Statements of Cash Flows for the years ended
April 30, 1996 and 1995
Notes to Financial Statements
(A) (3) Exhibits
(11) Computation of Earnings per share
(22) Subsidiaries of the Company
(24) Consent of Independent Accountants
(B) REPORTS ON FORM 8K
No reports on Form 8K were filed during the three month period ended
April 30, 1996.
-10-
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SWISS CHALET, INC.
_________________________
B.CHESTER HRYNIEWICZ
President and Director
July 17, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
_________________________ _________________________
B.CHESTER HRYNIEWICZ JOHN BRADLEY
President and Director Secretary and Director
July 13, 1996 July 13, 1996
_________________________ _________________________
GUSTAVO VELEZ TORO WALLACE VALENCIA
Executive Vice President and Director
Director
July 13, 1996 July 13, 1996
_________________________
PETER D. SOMECH
Treasurer, Director, & Chief Financial Officer
July 13, 1996
-11-
EXHIBIT 11
SWISS CHALET, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED APRIL 30
1996 1995
Net Income $1,608,149 $1,206,468
Weighted Average Number 1,401,162 1,401,162
of Shares Outstanding
Net Earnings Per $ 1.15 0.86
Common Share
-E1-
EXHIBIT 22
SWISS CHALET, INC. AND SUBSIDIARY
SUBSIDIARY OF THE REGISTRANT
Subsidiary : FRASCATI, INC.
State of Incorporation : PUERTO RICO
Inactive as of April 30, 1996
-E2-
SWISS CHALET, INC.
FINANCIAL STATEMENTS
WITH INDEPENDENT AUDITORS REPORT
YEARS ENDED APRIL 30, 1996 AND 1995
CONTENTS
Page
Independent auditors' report 1
Financial statements:
Balance sheets 2
Statements of operations 3
Statements of shareholders' equity 4
Statements of cash flows 5
Notes to financial statements 6-9
HORWATH VELEZ SEMPRIT & CO
Certified Public Accoutants/Business Advisors
A member of Horwath International
Edif. Royal Bank Center
255 Ave. Ponce de Leon Ste 201
San Juan, Puerto Rico 00917-1992
INDEPENDENT AUDITORS' REPORT
Board of Directors
Swiss Chalet, Inc.
San Juan, Puerto Rico
We have audited the accompanying balance sheets of Swiss Chalet, Inc. as of
April 30,1996 and 1995 ,and the related statements of operations,
shareholders equity and cash flows for the years then ended. These financial
staements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Swiss Chalet, Inc. as of
April 30,1996 and 1995 the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
HORWATH VELEZ SEMPRIT & CO.
June 10, 1996
SWISS CHALET, INC.
BALANCE SHEETS - APRIL 30, 1996 AND 1995
ASSETS
1996 1995
Current assets:
Cash and cash equivalents,
including certificates of deposit
of $2,600,000 in 1996 and
$1,050,000 in 1995 $2,740,386 $1,208,013
Certificates of deposit 96,000 635,000
Accounts receivable, net of allowance
for doubtful accounts of $25,000
in 1996 and $30,000 in 1995 370,474 398,237
0ther receivables 1,750 1,429
Inventories, supplies 36,124 31,597
Prepaid expenses 29,552 55,148
Total current assets 3,274,286 2,329,424
Property, plant and equipment, net 2,881,068 3,135,049
Other assets 48,237 25,787
$6,203,591 $5,490,260
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,931 $ 20,153
Accrued expenses 596,980 566,297
Dividends payable 981,666 829,582
Income tax payable 16,367
Total current liabilities 1,617,944 1,416,032
Other liabilities, deferred compensation
plan liability 37,800 13,600
Shareholders' equity
Common stock, $0.50 stated value; authorized
4,000,000 shares; issued and outstanding
1,401,162 shares in 1996 and 1995 700,581 700,581
Capital in excess of stated value 24,069 24,069
Retained earnings 3,823,197 3,335,978
4,547,847 4,060,628
$6,203,591 $5,490,260
See notes to financial statements.
SWISS CHALET,INC.
STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 1996 AND 1995
1996 1995
Revenues:
Rooms $4,541,302 $4,099,141
Telephone 161,723 155,519
Rentals and other income 447,351 408,615
5,150,376 4,663,275
Expenses:
Departmental:
Cost of sales 88,120 86,038
Payroll and related 1,111,978 1,039,047
Other 502,811 430,782
Administrative and general 762,360 738,686
Marketing 162,135 163,731
Property operation, maintenance and energy 529,700 512,481
Property taxes and insurance 36,546 121,547
Depreciation and amortization 279,112 311,888
3,472,762 3,404,200
Income before income taxes 1,677,614 1,259,075
Income taxes 69,465 52,607
Net income $1,608,149 $1,206,468
Earnings per common share, net income $ 1.15 $ 0.86
See notes to financial statements.
SWISS CHALET,INC
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED APRIL 30, 1996 AND 1995
Capital of
excess of
stated
Common stock value of Retained Shareholders
Shares Amount common stock earnings equity
Balance, May 1,
1994 1,401,162 $700,581 $24,069 $3,110,323 $3,834,973
Dividends on
common stock,
$0.15 per share
declared in
October 1994
and $0.55 per
share declared
in April 1995 ( 980,813) ( 980,813)
Net income 1,206,468 1,206,468
Balance, April
30, 1995 1,401,162 700,581 24,069 3,335,978 4,060,628
Dividends on
common stock,
$0.15 per share
declared in
October 1995
and $0.65 per
share declared
in April 1996 ( 1,120,930) ( 1,120,930)
Net income 1,608,149 1,608,149
Balance, April
30, 1996 1,401,162 $700,581 $24,069 $3,823,197 $4,547,847
See notes to financial statements.
SWISS CHALET,INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1996 AND 1995
Increase (decrease) in cash and cash equivalents
1996 1995
Cash flows from operating activities:
Net income $1,608,149 $1,206,468
Adjustments to reconcile net income to net
cash provided by operating activities:
Change in the fair value of the deferred
compensation plan investment ( 7,000)
Depreciation and amortization 279,112 311,888
Provision for doubtful accounts
receivable 9,691 5,101
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 17,751 ( 37,429)
Inventories ( 4,527)( 4,965)
Prepaid:
Expenses 25,596 ( 16,619)
Income tax ( 10,074)
Operating equipment 13,807 4,835
Increase (decrease) in:
Accounts payable and accrued
expenses 33,461 32,601
Deferred compensation liability 24,200
Income tax payable 16,367 ( 10,574)
Total adjustments 408,458 274,764
Net cash provided by operating
activities 2,016,607 1,481,232
Cash flows from investing activities:
Capital expenditures ( 38,938)( 107,983)
Redemption (acquisition) of certificates of
deposit, net 539,000 ( 362,500)
Funding of deferred compensation plan 17,200)( 13,600)
Principal collection from note receivable 1,750 1,584
Net cash provided by investing
activities 484,612 ( 482,499)
Cash flows used in financing activities,
dividends paid ( 968,846)( 830,428)
Increase in cash and cash equivalents 1,532,373 168,305
Cash and cash equivalents, beginning 1,208,013 1,039,708
Cash and cash equivalents, ending $2,740,386 $1,208,013
Supplemental disclosure of cash flow information
1996 1995
Cash paid during the year for income taxes $ 53,098 $ 73,188
Supplemental schedule of noncash financing activities
Dividends declared but unpaid $ 981,666 $ 829,582
See notes to financial statements.
SWISS CHALET INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1996 AND 1995
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of business:
The Company owns and operates the Hotel Pierre in San Juan, Puerto
Rico. The hotel consists of 184 guest rooms and supporting
facilities.
The food and beverage facilities are leased to unrelated parties.
Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and related disclosures at the date of the financial
statements, and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
Credit concentration:
Financial instruments which potentially subject the Company to
concentration of credit risk consist of cash and cash equivalents,
certificates of deposit, and accounts receivable. The Company places
its cash, cash equivalents and certificates of deposit with high
credit qualified financial institutions and, normally, limits the
amount of credit exposure to any one financial institution. Accounts
receivable result mainly from credit card charges and corporate
accounts, therefore, there is no significant concentration of risk on
these accounts.
Cash equivalents:
The Company considers all certificates of deposit with an original
maturity of three months or less to be cash equivalents.
Inventories:
Inventories are stated at cost. Cost is determined on a first-in,
first-out basis.
Property, plant and equipment:
Property, plant and equipment is stated at cost. Depreciation is
being provided by use of the straight-line method over the estimated
useful lives of the related assets.
Deferred compensation plan:
On April 28, 1994, the Company adopted a nonqualified deferred
compensation plan for the benefit of a select group of management
employees. In order to provide the necessary funds to satisfy its
obligation to make benefit payments pursuant to the Plan, the Company
acquired an annuity contract to invest amounts of deferred
compensation. All rights in this annuity contract rest with the
Company, which is the contract holder.
Income taxes:
Deferred income taxes are recorded to reflect the future tax
consequences of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each fiscal year
and for carryforwards. As of April 30, 1996 and 1995, no transaction
resulted in deferred taxes.
SWISS CHALET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 30, 1996 AND 1995
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED):
Fair value of financial instruments:
During the year ended April 30, 1996, the Company adopted Statement of
Financial Accounting Standards No. 107, Disclosures about Fair Value
of Financial Instruments , which requires disclosure of fair value
information about financial instruments, whether or not recognized in
the statement of financial position. The following is a summary of the
estimated fair values (if determinable) of the Company s financial
instruments.
Cash and short-term investments: The carrying amounts of cash and
short-term investments are a reasonable estimate of fair value.
Deferred compensation plan: The deferred compensation plan liability
and the carrying amount of the funds invested approximate fair value,
as determined by the market value of the investment.
2. PROPERTY AND EQUIPMENT:
1996 1995
Land $1,369,358 $1,369,358
Buildings and improvements 3,148,035 3,131,785
Furniture and equipment 1,358,278 1,642,959
5,875,671 6,144,102
Less accumulated depreciation
and amortization 3,066,354 3,094,611
2,809,317 3,049,491
Operating equipment, net 71,751 85,558
$2,881,068 $3,135,049
3. OTHER ASSETS:
1996 1995
Note receivable $ 10,437 $ 12,187
Deferred compensation plan investment 37,800 13,600
$ 48,237 $ 25,787
4. ACCRUED EXPENSES:
1996 1995
Payroll and related $ 358,590 $ 271,973
Room, property and municipal taxes 57,650 124,523
Rent deposits 20,300 20,300
Professional services 32,600 32,600
Utilities 51,119 38,023
Travel agents commissions 7,835 21,165
Other 68,886 57,713
$ 596,980 $ 566,297
SWISS CHALET INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 30, 1996 AND 1995
5. TAX EXEMPTION GRANT:
The Company has a tax exemption grant that provides for the following
tax exemptions:
Income taxes 90%, effective on May 1, 1994. The Company
has the option to elect the ten specific
years to be covered under the income tax
exemption.
Property taxes 95% for five years commencing on January 1,
1993 and 80% thereafter to December 31,
2002.
Municipal license tax 100% from July 1, 1993 to June 30, 2003.
Prior to obtaining the existing tax exemption grant, the Company had
another tax exemption grant that provided similar benefits.
Under the existing income tax exemption grant, the Company is required
to invest at least 20% of its net income in certain qualified
activities which include marketing and promotion, training programs
and improvement of the property, among others.
The Company's effective tax rate was 4.32% in 1996 and 4.18% in 1995.
Income tax savings related to the tax exemption grants, including the
effect on per share amounts, are as follows:
Year Amount Per share
1996 $635,000 $.45
1995 $476,000 $.34
6. EARNINGS PER COMMON SHARE:
Earnings per common share were computed by dividing the net income by
the weighted average number of shares outstanding, 1,401,162 in 1996
and 1995.
7. PENSION PLAN:
The Company is required to contribute an average of $60 monthly ($55
to November 30, 1994) per union employee to a multiemployer pension
plan maintained by the labor union. For those union employees hired
after November 30, 1994, the pension plan contribution begins at 75%
of the normal contribution, increasing by 5% annually until the
normal contribution is reached. Actuarial present value of the plan s
liability for benefits is not separately determinable, therefore, they
are not presented. Required contributions were as follows:
Year Amount
1996 $ 33,800
1995 29,900
SWISS CHALET INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 30, 1996 AND 1995
8. COMMITMENTS:
A profit sharing plan calls for distribution of profits among all
union and nonunion employees based on certain percentages, varying
from 2% to 15%, applied to different levels of profits, as defined.
Profit sharing expense under this plan amounted to $220,350 in 1996
and $138,500 in 1995.
The Company is a member of the Best Western International, Inc., a
hotel organization that provides for a central reservations network.
Fees paid amounted to $98,200 in 1996 and $100,700 in 1995.
In April 1990, the Company entered into employment contracts with the
two key management members to provide for severance benefits in the
event their employment is terminated under circumstances stated in the
contracts. The contracts are automatically renewed for twenty-four
month periods, at the option of the Company. The Company elected to
renew the contract for an additional twenty-four month period ending
on March 31, 1997. Severance benefits consist basically of six
months' salary plus certain fringe benefits. The management members
are also entitled to receive the monthly base salary multiplied by the
number of completed years of full-time employment with the Company, if
they have not obtained an employment with another employer. In no
event the severance payments shall exceed the equivalent of 18 months
salary, plus the fringe benefits stated in the contracts.
HORWATH VELEZ SEMPRIT & CO.
Certified Public Accoutants/Business Advisors
A member of Horwath International
Edif. Royal Bank Center
255 Ave. Ponce de Leon Ste 201
San Juan, Puerto Rico 00917-1992
Board of Directors
Swiss Chalet, Inc.
Santurce, Puerto Rico
We hereby consent to the use in the Annual Report on Form 10-K under the
Securities Exchange Act of 1934 of Swiss Chalet, Inc. of our report dated
June 10, 1996 insofar as it relates to the financial statements and
schedules of Swiss Chalet, Inc. as of April 30, 1996 and 1995 and for the
years then ended.
HORWATH VELEZ SEMPRIT & CO.
June 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
10KSB REPORT FOR THE YEAR AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 10KSB.
</LEGEND>
<CIK> 0000095898
<NAME> SWISS CHALET , INC.
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