CIRCUIT PLAYHOUSE, INC. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION JUNE 30,2013

Transcription

1 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION JUNE 30,2013

2 FINANCIAL STATEMENTS

3 CONTENTS Page FINANCIAL STATEMENTS Independent Auditor's Report Statement offinancial Position Statement of Activities Statement of Cash Flows Notes to Financial Statements SUPPLEMENTARY INFORMATION Schedule of Functional Expenses

4 Whitehorn Tankersley & ~ Davis, PLLC CERTIFIED PUBLIC ACCOUNTANTS 670 Oakleaf Office Lane Memphis, TN (901) (901} FAX www. wtdcpa.com INDEPENDENT AUDITOR'S REPORT To the Board of Directors Circuit Playhouse, Inc. Memphis, Tennessee Report on the Financial Statements We have audited the accompanying financial statements of Circuit Playhouse, Inc. (a nonprofit organization) which comprise the statement of financial position as ofjune 30, 2013 and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements. Management,s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor,s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AICPA DIVISION OF FIRMS: PRIVATE COMPANIES PRACTICE SECTIO N TENNESSEE SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

5 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Circuit Playhouse, Inc. as ofjune 30,2013 and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The Schedule of Functional Expenses on page 16 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. 2 January 30, 2014 Memphis, Tennessee

6 3 STATEMENT OF FINANCIAL POSITION JUNE 30,2013 ASSETS CURRENT ASSETS Cash.... Accounts receivable Unconditional promises to give - current portion, net of allowance Prepaid expenses TOTAL CURRENT ASSETS PROPERTY AND EQUIPMENT, net of accumulated depreciation OTHER ASSETS Unconditional promises to give, less current portion above..... Beneficial interest in assets held by Community Foundation of Greater Memphis Investments Deposits $ 991,968 10, , , ,085,702 1,218, ,722 1,107, ,900 TOTAL ASSETS $ LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses $ Deferred revenue Notes payable to bank TOTAL CURRENT LIABILITIES DEFERRED COMPENSATION NET ASSETS Unrestricted Temporarily restricted Permanently restricted TOTAL NET ASSETS , , ,933 1, ,035 13,885, ,260 33, TOTAL LIABILITIES AND NET ASSETS $ See notes to financial statements

7 4 STATEMENT OF ACTIVITIES TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL SUPPORT AND REVENUE Box office $ Subscriptions Underwriting Acting classes.... Special events Federal and state grants Private grants and gifts Investment income Gain (loss) on investments Change in value of beneficial interest in assets held by the Community Foundation of Greater Memphis.... Facilities income Other revenue Change in discount of long-term unconditional promises to give.... In-kind revenue TOTAL SUPPORT AND REVENUE , , , ,065 82,534 90,700 1,005,548 91,633 43,135 65, , , ,733,999 $ 780,809 (41,844) 738,965 $ $ 356, , , ,065 82,534 90,700 1,786,357 91,633 43,135 65, , ,666 (41,844) ,472,964 RECLASSIFICATIONS Net assets released from restrictions.. TOTAL SUPPORT, REVENUE AND RECLASSIFICATIONS ,8 18,929 (84,930) 654,035 3,472,964 EXPENSES Performance Administrative Fundraising TOTAL EXPENSES ,690, , ,437,884 1,690, , ,437,884 CHANGE IN NET ASSETS 381, ,035 1,035,080 NET ASSETS Beginning of year Prior period adjustment ,510,294 (6,225) 160,000 6,225 33,000 13,703,294 End of year, as restated $ 13,885,114 $ 820,260 $ 33,000 $ 14,738,374 See notes to financial statements

8 5 STATEMENT OF CASH FLOWS JUNE 30,2013 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from contributors and grantors Cash received from customers and others Cash paid to suppliers and employees Interest and dividends received Interest paid NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Payments for purchase of furniture and equipment Payments for purchase of investments Proceeds from sale of investments Net transfer to/from beneficial interest in assets held by the Community Foundation of Greater Memphis NET CASH PROVIDED BY INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Payments on line of credit Payments on notes payable NET CASH USED BY FINANCING ACTIVITIES NET CHANGE IN CASH AND EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 1,763,577 1,152,021 (1,971,343) 91,633 (81,187) (3 7,607) (95,517) 138, ,749 (406,752) (520,000) (926,752) 261, CASH AND CASH EQUIVALENTS AT END OF YEAR $ See notes to financial statements

9 6 STATEMENT OF CASH FLOWS - CONTINUED JUNE 30, 2013 RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES CHANGE IN NET ASSETS $ 1,035,080 ADJUSTMENTS TO RECONCILE CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation Net gain on investments Change in value of beneficial interest in assets held by the Community Foundation of Greater Memphis Increase in discount to present value of unconditional promises to give (Increase) decrease in assets: Accounts receivable Unconditional promises to give Prepaid expenses Deposits Increase in liabilities: Accounts payable and accrued expenses Deferred revenue NET CASH PROVIDED BY OPERATING ACTIVITIES ,763 (43,135) (65,615) 41,844 45,268 (464,613) (61,51 7) (41) 9, $ 954,701 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Line of credit paid from proceeds of new note payable $ 588,631 See notes to financial statements

10 7 NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF ACTIVITIES- Circuit Playhouse, Inc. ("Playhouse"), founded in 1969, operates four performing arts theatres and a theatre education program in Memphis, Tennessee. Revenues from ticket sales, subscriptions and donations fund these operations. ACCOUNTING BASIS- The accompanying financial statements have been prepared on the accrual basis of accounting. Under this basis, support and revenue are recognized in the period earned and expenses are recognized when incurred. Cash contributions are recognized as revenue when received. BASIS OF PRESENTATION- Playhouse follows Financial Accounting Standards Board Accounting Standards Codification ("F ASB ASC") , Not-for-Profit Organizations - Presentation of Financial Statements, for the presentation of its financial statements. Under F ASB ASC , Playhouse reports information regarding its financial position according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Playhouse's permanently restricted net assets are comprised of contributions from individuals with the provision that only earnings on the contributions may be spent. Temporarily restricted net assets at year end are generally available for use during the next fiscal year. USE OF ESTIMATES - 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS- For purposes of the statement of cash flows, Playhouse considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. There were no cash equivalents at June 30, ACCOUNTS RECEIVABLE AND PROMISES TO GIVE- Accounts receivable are stated at the amount management expects to collect from outstanding balances. Unconditional promises to give are recognized as revenues or gains in the period received and as assets, decreases of liabilities or expenses depending on the form of benefits received. Any conditional promises to give are recognized when the conditions on which they depend are substantially met. These promises to give are subject to credit risk, since the donor's ability to meet the obligation may be affected by economic developments in a specific geographic region or industry. Playhouse uses the allowance method to determine uncollectible accounts receivable and unconditional promises to give. Management provides for any probable uncollectible amounts through a charge to earnings and a credit to the allowance for doubtful accounts based on its

11 8 NOTES TO FINANCIAL STATEMENTS- CONTINUED NOTE 1 - DESCRIPTION OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- CONTINUED ACCOUNTS RECEIVABLE AND PROMISES TO GIVE - continued- assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable. Playhouse does not assess finance charges on past-due amounts of accounts receivable. Past due accounts receivable are determined based upon contractual terms as defined on customer invoices. The allowances represent estimates by management based upon prior years' experience and management's analysis of specific receivables or promises made, and it is at least reasonably possible that a change in the estimate will occur in the near term. The allowance for accounts receivable was $3,500 at June 30, The allowance for uncollected promises to give was $15,700 at June 30,2013. There was no bad debt expense on accounts receivable or unconditional promises to give for the year ended June 30, INVESTMENTS- Playhouse follows the provisions off ASB ASC , Investments, Debt and Equity Securities. In accordance with F ASB ASC , investments in marketable securities with readily determinable fair values and all investments in debt securities are carried at their fair values in the statement of financial position. Investments received as contributions are recorded at fair value at the date of gift. Realized and unrealized gains or losses on investments are presented in support and revenues in the accompanying Statement of Activities as increases or decreases in unrestricted net assets. Although Playhouse has a policy to maintain a diversified investment portfolio, these investments are subject to market and credit risk, including the issuer's ability to meet their obligations, which may be affected by economic developments in a specific geographic region or industry. PROPERTY AND EQUIPMENT - Property and equipment with an expected life of more than one year are capitalized at cost plus the cost of those additions and improvements which materially increase the useful lives of the assets. Repair and maintenance costs are expensed as incurred. Depreciation for furniture and equipment is computed on the straight-line method with estimated useful lives of 5-10 years. Depreciation for buildings and improvements is computed on the straightline method with estimated useful lives of years. DEFERRED REVENUE - Income collected in advance for season subscriptions are recorded as deferred revenue and recognized as revenue in the period to which they relate. FEDERAL TAX STATUS- The Internal Revenue Service has classified Playhouse as exempt from federal income taxes under Section 50l(c)(3) of the Internal Revenue Code. It has been classified as an organization that is not a private foundation under Section 509(a)(2) of the Internal Revenue Code.

12 9 NOTES TO FINANCIAL STATEMENTS- CONTINUED NOTE 1 - DESCRIPTION OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED FEDERAL TAX STATUS - continued Playhouse follows the provisions of FASB ASC , Accounting for Uncertainty in Income Taxes, which requires the computation of any current income tax assets or liabilities only consider tax positions that are more likely than not (defined as a greater than 50% chance) to be sustained if the taxing authorities examined the positions. Playhouse is subject to income tax examination by taxing authorities for years ending after June 30, REVENUE RECOGNITION- Support received or receivable is recorded as unrestricted, temporarily restricted or permanently restricted, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of Activities as net assets released from restrictions. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. AD VERT! SING - Playhouse expenses advertising costs as incurred. Advertising expense for the year ended June 30, 2013 was approximately $115,000. IN-KIND DONATIONS - In-kind donations of materials or assets are recorded at their estimated fair market value at date of contribution. No significant donated materials were received in Donated services are recognized as contributions in accordance with FASB ASC , Contributions Received, if the services create or enhance nonfinancial assets or require specialized skills, are performed by people with those skills and would otherwise be purchased by the organization. There was $71,998 in donated services in CONCENTRATIONS- Playhouse maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Playhouse has not experienced any losses in such accounts nor does management of the organization believe there is any significant credit risk on cash and cash equivalents.

13 10 NOTES TO FINANCIAL STATEMENTS- CONTINUED NOTE 1 - DESCRIPTION OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED FUNCTIONAL EXPENSES- Indirect expenses of Playhouse are allocated among its three primary functions based upon estimates of time incurred in performing such functions. These estimates are based upon management's review of current functions and past experience in performing such functions. These allocations represent estimates which, it is at least reasonably possible that a change in the estimate will occur in the near term. SUBSEQUENT EVENTS- Playhouse's policy is to evaluate subsequent events through the auditor's report date, which is the date the financial statements are available for issuance. NOTE 2- UNCONDITIONAL PROMISES TO GIVE Unconditional promises to give at June 30, 2013 are comprised of the following: AMOUNT Unrestricted promises Less unamortized discount Less allowance for uncollectible promises $ 1,773,256 (96,152) (15,700) $ 1,661,404 At June 30,2013, gross unconditional promises to give before unamortized discounts and allowances are due as follows: FISCAL YEAR Thereafter AMOUNT $ 458, , , , , ,000 $ 1,773,256 Promises to give with due dates extending beyond one year are discounted using rates between 2% and 3.32%.

14 11 NOTES TO FINANCIAL STATEMENTS- CONTINUED NOTE 3 -PROPERTY AND EQUIPMENT Property and equipment consists ofthe following major classifications: AMOUNT Land $ 528,667 Buildings and improvements ,506,455 Equipment ,583,563 Less accumulated depreciation ,861 $ 12,085,702 Depreciation expense for the year ended June 30, 2013 totaled $365,763. A parking lot owned by Playhouse is leased to an unrelated party under an operating lease agreement. This lease expires June 30, 2017 and allows for an adjustment to the monthly rent every three years based upon increases or decreases in the Consumer Price Index. As of April 1, 2013 the monthly rent was adjusted to $1,128 per month. Included in facilities income on the accompanying statement of activities is approximately $13,000 from this lease. Future minimum rental receipts on this noncancellable operating lease in excess of one year at June 30, 2013 were as follows: AMOUNT $ 13,536 13,536 13,536 13,536 $ 54,144 NOTE 4- BENEFICIAL INTEREST IN ASSETS In prior years, Playhouse transferred, without variance power, funds to the Community Foundation of Greater Memphis (the "Community Foundation") to establish two funds for the benefit of Playhouse. The funds, which are valued at fair value, consist of pooled investments with the Community Foundation. Playhouse may request advances from the Community Foundation. During the year ended June 30,2013, advances totaling $316,052 were requested and received.

15 12 NOTES TO FINANCIAL STATEMENTS -CONTINUED NOTE 5 - INVESTMENTS Investments at June 30, 2013 are summarized as follows: FAIR VALUE Stocks $ 648,577 Bonds ,766 Unit investment trusts ,516 Mutual funds - equities ,740 $ 1,107,599 NOTE 6 - FAIR VALUE MEASUREMENTS F ASB ASC , Fair Value Measurements, establishes a fair value hierarchy that prioritizes the inputs for valuation techniques used to measure fair value. This hierarchy consists of three broad levels. Level 1 inputs are based on unadjusted quoted market prices within active markets. Level2 inputs are based on quoted prices for similar assets in active or inactive markets. Level 3 inputs are all other financial instruments without an active market or inactive market and for which no significant observable inputs are available. Fair values of assets measured on a recurring basis at June 30, 2013 are as follows: Fair Value Measurements at Reporting Date Using Quoted Prices In Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair Value (Levell) (Level 2) (Level 3) June 30, 2013 Stocks Bonds Unit investment trusts... Mutual funds - equities.. Beneficial interest..... Unconditional promises $ 648,577 93, , , ,722 to give ,661,404 $ 648,577 $ $ 93, , , ,722 1,661,404 Total $ 3,386,725 $ 1,107,599 $ $ 2,279,126

16 13 NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE 6- FAIR VALUE MEASUREMENTS- CONTINUED Assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3): Fair Value Measurements Using Significant Unobservable Innuts (Level 3} Unconditional Beneficial Promises Interests to Give Total June 30, $ 780,929 $ 1,238,634 $ 2,019,563 Contributions and collections (net) , , ,844 Change in unamortized discount and allowance for uncollectible promises (included in temporarily restricted support and revenue) (41,844) (41,844) Change in value ofbeneficial interests... 65,615 65,615 Payments from beneficial interest (316,052) (316,052) June 30, $ 617,722 $ 1,661,404 $ 2,279,126 Financial assets valued using Level 1 inputs are based on unadjusted quoted market prices within active markets. The fair value of the beneficial interests (Level 3) as determined by the Foundation was based primarily on the net asset value ("NA V") or its equivalent provided by the fund managers of the underlying investments ofthe investment pools in which Playhouse has its investments. Fair value for unconditional promises to give (Level 3) is determined by calculating the future payments expected to be received, using discount rates when applicable to multi-year promises. NOTE 7- DEFERRED COMPENSATION Playhouse has an employment agreement with its executive director to provide deferred compensation payments to him at the time of his retirement. Such amounts were accrued over his years of service until normal retirement age of 65. There was no expense relating to this arrangement during fiscal Subsequent to June 30,2013, Playhouse began negotiations with the executive director to enter into a new agreement which will replace the current agreement.

17 14 NOTES TO FINANCIAL STATEMENTS- CONTINUED NOTE 8 - INDEBTEDNESS LINE OF CREDIT- Playhouse maintained an agreement with a local bank for a revolving line of credit in connection with the purchase of its main theatre building. The line bore an interest rate of LIBOR plus 1.2 percentage points. During the current year, Playhouse paid this line of credit in full with funds from a new note payable. Interest paid on this loan during 2013 was approximately $12,000. NOTES PAYABLE- During the current year, Playhouse entered into a note with a local bank to refinance the above line of credit. The note bears interest at Prime Rate plus.25 percentage points, but not less than 4.25% and has a maturity date of December 31, The note is collateralized by investments held by Playhouse. There was $588,631 payable on this note at June 30, Interest paid on this note during 2013 was approximately $11,000. Playhouse has a note payable to a local bank which was used to effect the purchase of its main theatre building. The note bears interest at a rate of 6% per annum with monthly payments of accrued interest and unpaid principal payable on August 20, As of June 30, 2013, the note was extended until December 31, The note is collateralized by buildings and pledges held by Playhouse. There was $570,302 payable on this note at June 30, Interest paid on this note during 2013 was approximately $60,000. Subsequent to June 30, 2013, Playhouse entered into a new note with a local bank to refinance its existing notes payable. The new note allows for total borrowings of $900,000. The note bears interest at a rate of 3.75% per annum and requires monthly, interest-only payments with all outstanding principal and interest due at the maturity date of December 31, The note is secured by certain pledges and requires that all amounts received from these pledges be used for either interest payments or principal reduction until the debt is repaid. NOTE 9- PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets of$33,000 at June 30, 2013 consisted of prior year contributions permanently restricted by donors with income used for general operations. NOTE 10- RELATED PARTY TRANSACTIONS Playhouse normally receives contributions from members of its Board of Directors and employees. Included in support and revenue on the accompanying statement of operations are board member and employee contributions of $74,265. Included in promises to give on the accompanying statement of financial position are promises from board members and employees of$76,771.

18 15 NOTES TO FINANCIAL STATEMENTS- CONTINUED NOTE 11 -ACCOUNTING CHANGE Prior to fiscal year 2013, Playhouse's statement of cash flows was presented using the indirect method. For the year ended June 30, 2013, management changed this presentation to the direct method in order to provide more clarity of its annual cash flows. Both methods are acceptable under generally accepted accounting principles in the United States of America. NOTE 12- PRIOR PERIOD ADJUSTMENT The accompanying financial statements have been restated to adjust the classification of net assets at July 1, The result of the restatement decreased unrestricted net assets and increased temporarily restricted assets by $6,225 each. The restatements had no effect on total net assets.

19 SUPPLEMENTARY INFORMATION

20 16 SCHEDULE OF FUNCTIONAL EXPENSES EXPENSES Printing and program 0 Auto and travel Breaking New Ground 0 Concession supplies and fees Costumes $ , , , ,811 PERFORMANCE ADMINISTRATIVE FUND RAISING 96,539 $ $ 8 Credit card fees... 21,040 Depreciation 0 Dues and subscriptions , ,041 Small equipment... 12, ,882 98,493 81,187 13,463 2,125 2,836 20,667 31,742 8,008 11,328 3,732 71, ,477 81,731 70,209 In-kind expenses Insurance Interest expense 0 Lights and sound 0. 0 Miscellaneous Rental Office expense Payroll taxes Postage Professional fees Props Repairs and maintenance Salaries Scripts and royalties Sets ,577 33,116 45,715 1,897 16,314 3,444 7, ,778 66,454 Special events ,498 Telephone ,439 Special projects ,138 Unified Professional Theatre Audition expenses 0 Utilities , TOTAL $ 96,547 16,684 1,638 31,910 28,811 21, ,763 2,041 12,584 71, ,105 81,187 13,463 2,125 2,836 20,667 51,500 8,008 11,328 3,732 79, ,709 81,731 70,209 19,498 26,439 12,138 58, TOTAL EXPENSES $ 1,690,395 $ 654,550 $ 92,939 $ 2,437,884