LIFE UNIVERSITY, INC. CERTIFICATE OF COMPLIANCE REQUIRED BY SECTION 8.11 (B) OF THE LOAN AGREEMENT

Transcription

1 LIFE UNIVERSITY, INC. CERTIFICATE OF COMPLIANCE REQUIRED BY SECTION 8.11 (B) OF THE LOAN AGREEMENT Pursuant to Section (b) of the Loan Agreement dated as of August 1, 2008 between Life University, Inc. (the "University") and Wells Fargo Bank, National Association, as dissemination agent, I, William D. Jarr, hereby certify that I am the duly appointed as the Executive Vice President for Finance of the University, and further certify on behalf of the University, that I am familiar with the terms of the Loan Agreement dated as of August 1, 2008 as amended June 1, 2010 and December 1, 2012 (the "Loan Agreement") between the University and the Development Authority of the City of Marietta and to the best of my knowledge after due investigation, that during the period ended or as of June 30, 2017 there did not exist any Event of Default nor did the University have knowledge of any such Event of Default. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as Executive Vice President for Finance of the University this 2nd day of August 17. By: D. Jarr ive Vice President for Finance ATLANT A:

2 LIFE UNIVERSITY, INC. MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED June 30, 2017 Revenues: For the year ended June 30, 2017 tuition and fees including scholarships were approximately $4.69 million less than budget, primarily attributable to the doctorate enrollment being below the budgeted amount for the fiscal year. Tuition and fees including scholarships totaled $57.12 million or approximately $530,890 less the preceding year. The budget shortfall was offset by favorable budget variances related to investment performance and auxiliary enterprise services. Total revenues were less than budget by $2.74 million and $1.10 million over the previous year. Expenses: Operating expenses before depreciation and interest expense were $55.44 million and produced a positive budget variance of approximately $3.74 million at June 30, 2017 which was largely a result of managing replacement positions and expense control. Decrease from Operations: The overall impact of revenue and expense control resulted in a favorable budget variance of $983,336 for the fiscal year end and a $1.09 million decrease in net assets after debt service interest and depreciation. Cash and Investments: Cash and investments (including Title IV funds availability) decreased by approximately $4.05 million over the preceding year primarily attributable to the substantial renovation of the Administration Building into the Harris Assessment Center and other campus improvements undertaken during the fiscal year. Summary of Ratio Analysis at June 30, Days Cash on Hand vs required Debt Service Coverage 1.26 vs required Long-Term Indebtedness.30 vs.15 required Trade Payables Less than 60 Days % vs % required

3 LIFE UNIVERSITY, INC. STATEMENTS OF ACTIVITIES For the Year Ended June 30, 2017 Temporarily Permanently Y-T-D VARIANCE PY-T-D Y-T-D Unrestricted Restricted Restricted BUDGET + (-) Revenues, Gains and Other Support Student tuition and fees: College of Chiropractic 51,299,952 50,981,545 50,981,545 55,650,206 (4,668,661) Non-chiropractic graduate 1,766,956 1,844,940 1,844,940 1,658, ,275 Undergraduate 7,488,536 7,642,109 7,642,109 7,654,576 (12,467) Institutional scholarships and tuition discounts (2,898,967) (3,343,841) (3,343,841) (3,148,770) (195,071) Private contributions 1,196, , , ,677 79, , ,105 Interest and dividend income 188, , ,649 28,892 74, , ,289 Net realized and unrealized gains (losses) from investments 40, , , , ,856 Clinic receipts 485, , , ,108 62,741 Sales and services of auxiliary enterprises 3,675,458 3,729,641 3,729,641 2,841, ,113 Net Assets Release from Restrictions ,439 (274,439) - Total revenues, gains and other support 63,242,665 63,732,494 63,045, , ,383 66,471,313 (2,738,819) 100% Operating Expenses Educational and general: Instructional and Research 19,537,154 19,360,503 19,360,503 23,405,527 4,045,024 Public Service 549, , , , ,404 Academic support 2,895,303 3,093,880 3,093,880 3,872, ,495 Student services 8,368,406 8,322,928 8,322,928 9,524,219 1,201,291 Institutional support 13,998,673 14,278,218 14,278,218 13,299,892 (938,955) Operations and maintenance of plant 4,369,588 4,656,852 4,656,852 4,802, ,944 Scholarships 11,777 67,786 67, , ,030 Auxiliary enterprises expenses 3,604,473 5,082,807 5,082,807 3,271,371 (1,811,436) Total operating expenses 53,334,545 55,481,847 55,481, ,187,272 3,744,796 93% Increase (Decrease) from Operations 9,908,120 8,250,647 7,564, , ,383 7,284,041 1,005, % Other Changes (Gain)/Loss on sale of assets 1,531 (5,035) (5,035) 5,035 Debt Service Interest 4,722,663 4,685,621 4,685,621 4,657,945 (27,676) Change in split interest agreement - - Total other changes 4,724,194 4,680,586 4,680, ,657,945 (22,641) Change in Net Assets 5,183,926 3,570,061 2,883, , ,383 2,626, ,336 Depreciation and Amortization expense 5,457,122 4,701,627 4,701,627 5,300,000 Net Change in Net Assets (273,196) (1,131,566) (1,818,079) 343, ,383 (2,673,904) Changes in cash flow after debt service Capital Expenditures - Prior Year Capital Expenditures - Current Year - (1,371,973) (1,371,973) (2,040,000) Depreciation and Amortization expense 5,457,122 4,701,627 4,701,627 Debt Service Principal - - Changes in cash flow after debt service 5,183,926 2,198,088 1,511, , ,383 (4,713,904) NOTE: June Village activity not included Perkins Allowance adjustment not included ISL Allowance adjustment not included FSL Allowance Adjustment not included Pledge Allowance adjustment not included Pledge PV calculation adjustment not included PTO adjustment not included A/P Accrual (currently have $550,00 recorded)

4 LIFE UNIVERSITY, INC. STATEMENTS OF FINANCIAL POSITION For the Year Ended June 30, 2017 Assets Y-T-D PY-T-D Cash and cash equivalents $ 12,623,263 $ 16,139,279 Investments 6,932,867 7,584,314 Title IV Funds Available 2,186, ,943 Student accounts receivable 88,488 73,111 Pledges receivable 1,511,145 1,989,808 Other receivables 546,782 1,254,195 Other assets 1,644,247 1,360,622 Notes Receivable 1,645,150 2,123,809 Deposits with trustee 107,176 82,539 Deposit with Trustee - Debt Service Reserve 6,309,060 6,304,366 Deposit with Trustee - Repairs 406, ,507 Intangible assets 992,052 1,071,347 CIP 8,301,375 1,078,390 Property and equipment, net 69,355,089 73,889,872 Total Assets $ 112,649,757 $ 114,236,104 Liabilities and Net Assets Accounts payable and accrued expenses $ 5,824,390 $ 5,749,925 Student predeposits and refunds 368, ,678 Deferred revenue 352, ,695 Other payables 40,000 55,000 Notes payable 65,690,888 66,145,174 Total Liabilities $ 72,275,690 $ 72,730,472 Net Assets Unrestricted: 30,997,405 33,081,069 Temporarily restricted 7,234,317 6,631,888 Permanently restricted 2,142,345 1,792,675 Total net assets $ 40,374,067 $ 41,505,632 Total Liabilities and net assets $ 112,649,757 $ 114,236,104 NOTE: June Village activity not included Perkins Allowance adjustment not included ISL Allowance adjustment not included FSL Allowance Adjustment not included Pledge Allowance adjustment not included Pledge PV calculation adjustment not included PTO adjustment not included A/P Accrual

5 Cash Flows From Operating Activities June 30, June 30, Change in net assets $ (1,131,566) $ (273,196) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 4,780,922 5,457,122 Net realized and unrealized (gain) loss on investments 380,288 (40,010) Provision for present value of pledges receivable (128,683) 150,235 Provision for uncollectible pledge receivable 84, ,012 Provision for uncollectible notes receivable 703,642 (50,326) Gifts restricted for long-term investments (343,383) - Decrease (increase) in operating assets: Pledges receivable 179,529 (292,490) Other receivables 692, ,229 Other assets (283,625) (129,605) Increase (decrease) in operating liabilities: Accounts payable and accrued expenses 74,466 1,218,489 Other liabilities (74,961) 174,183 Net cash provided by operating activities 4,933,101 6,693,643 Cash Flows From Investing Activities Purchase of property and equipment (7,389,828) (2,221,558) Purchase of investments (60,576) (1,815,536) Proceeds from sale of investments 478,210 1,679,110 Increase (decrease) in: Cash restricted to investment Deposits with trustee (93,389) (67,112) Notes receivable, net (1,469,537) 264,673 Net cash (used in) investing activities (8,535,120) (2,160,423) Cash Flows From Financing Activities Gifts restricted for long-term investments 343,381 (20,073) Payments on long-term debt (1,239,146) (1,005,092) Proceeds from a note payable 784,860 - Net cash (used in) financing activities (110,905) (1,025,165) Net (Decrease) Increase in Cash (3,712,924) - 3,508,055 Cash and Cash Equivalents, beginning of year 16,336,187 12,828,132 Cash and Cash Equivalents, end of year $ 12,623,263 $ 16,336,187 Supplemental Cash Flow Disclosures Cash paid for interest $ 4,685,621 $ 4,722,663 Non-Cash Investing Activities Assets acquired from capital lease obligation $ -

6 Ratio Analysis: "Days" Cash on Hand Jun-17 Jun-16 Cash and Investments 12,623,263 16,139,279 Title IV Funds Available 2,186, ,943 Investments 6,932,867 7,584,314 21,742,627 24,665,537 Restricted Cash (2,162,648) (2,042,293) 19,579,979 22,623,245 Operating Expenses 64,864,060 63,515,861 Principal 940, ,000 Depreciation and Amortization (4,701,627) (5,014,194) Interest from Cap I Fund Change in PV of Deferred Comp Provision for Doubtful Accounts 61,102,433 59,356, , ,621 Days Cash on Hand Requirement Pass Pass

7 This and the following tabs support calculations related to bond covenant compliance. Debt Service Coverage Ratio Defined as "the ratio of (i) Revenues Available for Debt Service to (ii) the Debt Service Requirement Revenues Available for Debt Service Jun-17 Jun-16 Operating Revenues 63,045,981 62,567,495 Operating Expenses: Total operating expenses 64,864,060 63,515,861 Less: Interest on Long-Term Indebtedness 4,685,621 4,722,663 Amortization of financing charges Depreciation 4,701,627 5,457,122 9,387,249 55,476,812 10,179,785 53,336,076 Revenues Available for Debt Service 7,569,169 9,231,419 Debt Service Requirement Payments of principal and interest on bonds 5,591,300 5,559,738 Payments on other long-term indebtedness 394, ,092 5,985,466 5,709, Requirement 1.20 Requirement 0.06 Pass 0.42 Pass

8 Long-term Indebtedness Coverage Ratio June 30, 2017 Jun-17 Jun-16 Unrestricted Cash and Investments Cash 12,623,263 16,139,279 Title IV Funds Available 2,186, ,943 Investments 6,932,867 7,584,314 Restricted Cash (2,162,648) (2,042,293) 19,579,979 22,623,245 Long-term Indebtedness 65,690,888 66,145, Required 0.15 Required 0.15 Pass 0.19 Pass

9 The Bond Agreement requires that 90% of trade payables be less than 60 days and that this must be tested annually by the auditors Jun-17 Jun-16 A/P greater than 60 days per aging 14,741 52,209 Total A/P (after adjustment) per detail 280,107 1,218,309 % less than 60 days 94.74% 95.71% Minimum Requirement 90.00% 90.00% Difference 4.74% Pass 5.71% Pass

10 Life University Enrollment Report Summer New Students New Students Fall Fall Winter Winter Spring Spring Summer Summer Total Annual Total Annual Headcount: Headcount: Fall Fall Winter Winter Spring Spring Summer Summer Total Annual FTE Students Life University FTE Students College of Chiropractic Fall Fall Winter Winter Spring Spring Summer Summer Total Annual New Students New Students Fall Fall Winter Winter Spring Spring Summer Summer Total Annual Total Annual Headcount: Headcount: Fall Fall Winter Winter Spring Spring Summer Summer Total Annual Total Annual FTE Students Undergraduate FTE Students Graduate Fall Fall Winter Winter Spring Spring Summer Summer Total Annual Total Annual Prepared by OIR Summer 2016 Census Date: Tuesday, July 18, 2017