Theatre and Arts Foundation of San Diego County dba La Jolla Playhouse

Transcription

1 Theatre and Arts Foundation of San Diego County dba Financial Statements For the Fifteen-Month Period Ended March 31, 2008

2 Theatre and Arts Foundation of San Diego County dba Contents Independent Auditors Report 3 Financial Statements Statement of Financial Position 4 Statement of Activities 5 Statement of Cash Flows

3 MHM Mayer Hoffman McCann RC. An Independent CPA Firm Scripps Summit Court San Diego, California ph fx Independent Auditors Report To the Board of Trustees Theatre and Arts Foundation of San Diego County dba La Jolla, California We have audited the accompanying statement of financial position of the Theatre and Arts Foundation of (the Foundation ) as of March 31, 2008, and the related statements of activities and cash flows for the fifteen-month period then ended. These financial statements are the responsibility of the Foundation s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. 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 audit provides 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 the Theatre and Arts Foundation of San Diego County dba as of March 31, 2008, and the changes in its net assets and cash flows for the fifteen-month period then ended, in conformity with U.S. generally accepted accounting principles. P November 19, 2008

4 Theatre and Arts Foundation of San Diego County dba Statement of Financial Position March 31, 2008 Assets Cash and cash equivalents $ 1,863,053 Certificate of deposit 88,820 Receivables Pledges 4,013,681 Accounts 321,914 Split-interest agreements 1,253,790 Total receivables 5,589,385 Prepaid expenses and other assets 532,839 Fixed Assets, net 16,062,971 Endowment Assets Split-interest agreement 3,631,209 Assets held by others 2,661,280 Investments 1,407,295 Total endowment assets 7,699,784 Total assets $ 31,836,852 Liabilities and Net Assets (Deficit) Liabilities Capital leases payable $ 123,878 Accounts payable and accrued expenses 1,253,506 Line of credit 300,000 Notes payable 3,879,000 Deferred revenue 1,876,091 Total liabilities 7,432,475 Net Assets Unrestricted deficit (387,962) Temporarily restricted 17,106,946 Permanently restricted 7,685,393 Total net assets 24,404,377 Total liabilities and net assets $ 31,836,852 The accompanying notes are an integral part of this financial statement. 4

5 Theatre and Arts Foundation of San Diego County dba Statement of Activities Temporarily Permanently Fifteen-Month Period Ended March 31, 2008 Unrestricted Restricted Restricted Total Revenues Box office receipts $ 3,974,870 $ - $ - $ 3,974,870 Co-production/enhancements 3,913, ,913,666 Royalties 2,876, ,876,571 Investment return 240,385 - (89,881) 150,504 Concessions and gift shop sales 107, ,042 Educational programs 119, ,627 Miscellaneous 77, ,340 Total revenues 11,309,501 - (89,881) 11,219,620 Expenses Production 8,820, ,820,640 Salaries, taxes and benefits-nonproduction 4,731, ,731,994 Administration 1,346, ,346,430 Marketing 973, ,170 Development 461, ,912 Educational programs 412, ,295 Artistic 212, ,126 Concessions and gift shop 53, ,916 Write-off of uncollectible pledges 41, ,739 Total expenses 17,054, ,054,222 Change in net assets before support and other revenues and expenses (5,744,721) - (89,881) (5,834,602) Support Individuals 2,610, ,606-2,859,039 Foundations 743,502 1,450,000-2,193,502 Special events 780, ,308 Government 413, ,187 Corporations 372,025 10, ,025 In-kind 375, ,905 Net assets released from restrictions- future seasons 931,748 (931,748) - - Change in value of split-interest agreements - 296,308 (58,240) 238,068 Total support 6,227,108 1,073,166 (58,240) 7,242,034 Change in net assets from operations 482,387 1,073,166 (148,121) 1,407,432 Other revenue and expense Net assets released from restrictions- depreciation and interest 1,297,991 (1,297,991) - - Depreciation and amortization (1,214,786) - - (1,214,786) Interest expense (283,428) - - (283,428) Net other revenue and expense (200,223) (1,297,991) - (1,498,214) Change in Net Assets 282,164 (224,825) (148,121) (90,782) Net Assets (Deficit) at Beginning of Period (670,126) 17,331,771 7,833,514 24,495,159 Net Assets (Deficit) at End of Period $ (387,962) $ 17,106,946 $ 7,685,393 $ 24,404,377 The accompanying notes are an integral part of this financial statements. 5

6 Theatre and Arts Foundation of San Diego County dba Statement of Cash Flows Fifteen-Month Period Ended March 31, 2008 Cash Flows From Operating Activities Change in net assets $ (90,782) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 1,214,786 Contributions restricted for capital campaign (500,000) Present value adjustment on pledges receivable (420,172) Contribution of stock (289,821) Change in value of split-interest agreements (238,068) Net unrealized and realized loss on investments and assets held by others 92,100 Investment losses on permanently restricted contributions 89,881 Write-off of uncollectible pledges 41,739 (Increase) decrease in operating assets Pledges receivable (354,045) Accounts receivable (18,838) Prepaid expenses and other current assets (273,765) Increase in operating liabilities Accounts payable and accrued expenses 565,143 Deferred revenue 533,757 Net cash provided by operating activities 351,915 Cash Flows From Investing Activities Payments for leasehold improvements in progress (768,831) Proceeds from sales of investments 484,585 Purchases of investments (213,896) Acquistion of property and equipment (120,743) Purchase of certificate of deposit (88,820) Net cash used in investing activities (707,705) Cash Flows From Financing Activities Payments on note payable (1,864,000) Proceeds from note payable 1,750,000 Cash received for capital campaign 1,631,553 Net borrowings on line of credit 300,000 Payments on capital leases (94,357) Investment losses on permanently restricted contributions (92,100) Net cash provided by financing activities 1,631,096 Net Increase in Cash and Cash Equivalents 1,275,306 Cash and Cash Equivalents at Beginning of Period 587,747 Cash and Cash Equivalents at End of Period $ 1,863,053 The accompanying notes are an integral part of this financial statement. 6

7 Theatre and Arts Foundation of San Diego County dba Statement of Cash Flows, Continued Fifteen-Month Period Ended March 31, 2008 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 283,428 The accompanying notes are an integral part of this financial statement. 7

8 1. Summary of Significant Accounting Policies Nature of organization Method of accounting Financial statement presentation A summary of the significant accounting principles for the Theatre and Arts Foundation of which were consistently applied in the preparation of the accompanying financial statements follows. The Theatre and Arts Foundation of La Jolla Playhouse (the Foundation ) is a California not-for-profit corporation formed for the primary purposes of presenting theatrical arts to the public for specified ticket admission prices, providing an extensive range of educational and outreach services and programs to its community, and providing internship programs in the artistic, management, and technical aspects of professional theatre. The accompanying financial statements have been prepared on the accrual basis of accounting. The financial statements of the Foundation have been presented in accordance with Statement of Financial Accounting Standards ( SFAS ) No. 117, Financial Statements of Not-for-Profit Organizations. Under SFAS No. 117 the Foundation reports its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. Unrestricted net assets represent expendable funds available for operations which are not otherwise limited by donor restrictions. Temporarily restricted net assets consist of contributed funds subject to specific donor-imposed restrictions contingent upon specific performance of a future event or a specific passage of time before the Foundation can spend the funds. Permanently restricted net assets are subject to irrevocable donor restrictions requiring that the assets be maintained in perpetuity, usually for the purpose of generating investment income to fund current operations. Cash and cash equivalents The Foundation considers all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. 8

9 Certificate of deposit Revenue recognition At March 31, 2008, the Foundation had a restricted certificate of deposit of approximately $89,000 under its agreement with Actors Equity Association. Box Office Receipts Box office receipts are recorded as revenue on a specific performance basis. Ticket sales for future performances are initially deferred and subsequently recognized as revenue when the performance takes place. Co-production/Enhancements - Co-production enhancement revenue represents funds received from others to expand budgets for specific Foundation productions. Revenue is recognized when the related production is performed. Educational Programs - Educational program revenue is recognized at the time the programs are offered. Any amounts received in advance are deferred until the programs take place. Concessions and Gift Shop Sales - Concessions and gift shop sales revenue is recognized at the time of sale. Royalties - Royalties represent revenue earned under agreements with other performing arts related entities for the use of specific productions created by the Foundation. Revenue is recognized as the productions are performed. Support Contributions - Contributions are recognized as revenue when received or unconditionally pledged. Contributions subject to donor-imposed restrictions for use in a future period or for a specific purpose are reported as either temporarily or permanently restricted depending on the nature of the restrictions. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restriction. Donor restricted contributions whose restrictions are met in the same reporting period are reported as unrestricted contributions. Government Grants - Revenue from grants is recognized to the extent of eligible costs incurred, up to the maximum grant amount. Any amounts received in advance are deferred until the funds are spent. 9

10 Support, cont d In-Kind Donations - The value of services, facilities, and equipment donated are recorded as unrestricted contributions and expensed in the period donated. These contributions are valued at the estimated fair value of similar services and materials. Donated assets are capitalized at fair value on the date of donation and are recorded as unrestricted, temporarily restricted, or permanently restricted in-kind contribution support, depending on the wishes of the donor. Receivables Pledges receivable consist of unconditional promises to give. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts to present value are computed using risk-free rates applicable in the periods in which those promises are received. Amortization of the discounts is included in support. Conditional promises to give are not recorded as revenue until the conditions are substantially met. An allowance for estimated uncollectible pledges is based on past experience and on an analysis of current amounts. Pledges deemed uncollectible are written-off in the period in which they were deemed uncollectible. Management has determined that an allowance for doubtful accounts of approximately $50,000 was necessary at March 31, Accounts receivable are recorded when services are provided and are presented net of any allowance for doubtful accounts. No collateral is obtained. Management has determined that an allowance for doubtful accounts was not necessary at March 31, Purchased property and equipment Donated property and equipment Property and equipment are recorded at cost if purchased. Depreciation and amortization is provided using the straight-line method over the estimated useful lives of the assets, which is generally five years for furniture, equipment, and production equipment, and in the case of leasehold improvements, over the lesser of the useful lives of the related assets or the lease term. It is the Foundation s policy to capitalize fixed assets costing in excess of $2,000. Donations of property and equipment are recorded as contributions at their estimated fair value at the date of donation. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as increases in 10

11 Donated property and equipment, cont d Impairment of long lived assets temporarily restricted net assets. It is the Foundation s policy to imply a time restriction, based on the assets estimated useful lives, on donations of property and equipment that are not restricted as to their use by the donor. Accordingly, those donations are recorded as increases in temporarily restricted net assets. The Foundation reclassifies temporarily restricted net assets to unrestricted net assets each period for the amount of depreciation expense relating to the donated property and equipment. The Foundation evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write-down will be recorded to reduce the related asset to its estimated fair value. To date, no such write-downs have occurred. Investments Investments are accounted for in accordance with SFAS No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations. Under the provisions of SFAS No. 124, investments in equity securities with readily determinable fair market values and all debt securities should be reported at fair value with gains and losses included in the statements of activities. Investments consist of marketable securities and alternative investments and are accounted for as follows: Marketable securities consist of mutual funds, equity and fixed income securities and are recorded at fair market value. The fair value of investments in securities traded on national securities exchanges is valued at the closing price on the last business day of the period. The fair value of alternative investments, for which quoted market prices are not available, are determined by investment managers in good faith using methods considered appropriate, and is subject to oversight and review by management. Realized gains and losses on the sale of investments are calculated using the specific-identification method. Unrealized gains and losses represent the change in the fair market value of the individual investments for the 11

12 Investments, cont d period or since the acquisition date, if acquired during the period, and are recorded as a component of unrestricted net assets, unless restricted by donor. Donated investments are initially recorded at fair value at the date of the gift. It is Foundation s policy to sell donated investments upon receipt. Production costs Advertising Functional allocation of expenses Costs of scenery, costumes, and stage properties are recorded as expenses in the period in which the related production is first performed. Production costs relating to future performances are deferred until the production is presented. Production expenses include all direct costs of the performances. Direct costs include payroll, artist fees, scenery, costumes, and other costs. The Foundation expenses advertising as incurred. Advertising expense was approximately $442,000 for the fifteen-month period ended March 31, 2008 and is included in marketing expenses. The cost of providing the various programs and other activities has been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the program and supporting services benefited. The information below presents all expenses functionally and reflects the allocation of depreciation, amortization and interest generally on the basis of the department for which the assets were purchased or constructed. Fifteen-Month Period Ended March 31, 2008 Programs $ 12,919,049 Management and general 4,337,230 Fundraising 1,296,157 $ 18,552,436 Use of estimates The preparation of financial statements in conformity with U.S. 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 12

13 Use of estimates, cont d Transactions with UCSD estimates. Significant estimates used in preparation of these financial statements include the valuation of split-interest agreements and the functional allocation of expenses. The Foundation conducts a significant amount of transactions with the University of California, San Diego (University). The Foundation has entered into the following transactions with the University: A construction and operation agreement (Note 4); An endowment fund (Note 6); An unsecured note payable to the University (Note 8); and A lease agreement with the University for rental space to construct and operate a restaurant (Note 9). Additionally, for the fifteen-month period ended March 31, 2008, the Foundation paid the University approximately $1,022,600 for joint staff, parking permits and box office operations. The Foundation also provides services for the University during productions performed by the University. For the fifteen-month period ended March 31, 2008, the Foundation received approximately $316,800 from the University related to these services and at March 31, 2008, the Foundation had a receivable of approximately $174,000. Income tax status New accounting standards The Foundation is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. The Foundation, however, may be subject to tax on income which is not related to its exempt purpose. The Foundation had no unrelated business income tax for the fifteen-month period ended March 31, In September 2006 the Financial Accounting Standards Board ( FASB ) issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes a framework for measuring fair value in U.S. generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management has not completed its evaluation of the impact of adopting SFAS No

14 New accounting standards, cont d In February 2007 the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits all entities to choose, at specified election dates, to measure eligible items at fair value (the fair value option ). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. Management has not completed its evaluation of the impact of adopting SFAS No In August 2008, the FASB issued FASB Staff Position ( FSP ) No , Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds. FSP No provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 ( UPMIFA ). The State of California enacted a version of UPMIFA in September 2008 that is effective January 1, FSP No is effective for fiscal years ending after December 15, Concentration of Credit Risk The Foundation maintains its cash and cash equivalents in bank deposit accounts which at times exceed federally insured deposit limits. The Foundation has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its cash and cash equivalents. As of March 31, 2008, approximately 42% of pledges receivable were from two donors. 14

15 3. Pledges Receivable As of March 31, 2008 pledges receivable are: Receivables due in less than one year $ 2,854,889 Receivables due in one to five years 1,335,867 Total pledges receivable 4,190,656 Less allowance for doubtful receivables (50,100) Less discount to net present value (126,975) Net pledges receivable $ 4,013,681 Pledge receivables due in one to five years are discounted using risk-free rates of return ranging from approximately 1.6 to 4.7% per annum. 4. Split-Interest Agreements In 1996 the Foundation received a contribution of an interest in an irrevocable charitable remainder trust. The underlying assets in the trust had a total value of $6.1 million at March 31, 2008, when applying the cost and fair market value basis of accounting, as applicable. The terms of the trust grants the Foundation a minimum of 25% of the trust, approximately $1.5 million, upon the death of the beneficiaries. The use of such funds is unrestricted by the donor. The current value of the gift is approximately $1.1 million. In 2002 the Foundation received a contribution of an interest in an irrevocable charitable remainder trust. The trust had a fair value of approximately $1.2 million at March 31, The terms of the trust grants the Foundation 15% of the trust, approximately $183,000 as of March 31, 2008, upon the death of the beneficiary. The current value of the gift is approximately $118,000. The current value of the gifts has been discounted to their present value using risk-free rate of return of approximately 3.5% per annum over the anticipated life expectancy of the beneficiaries at March 31,

16 5. Fixed Assets, Net Fixed assets at March 31, 2008 are comprised of: Leasehold improvements $ 16,034,007 Furniture and equipment [including $353,673 of assets acquired under capital leases (Note 9)] 1,376,971 Production equipment 318,353 17,729,331 Less accumulated depreciation (including $148,180 of accumulated amortization on assets acquired under capital leases) (3,717,734) Leasehold improvements in progress 2,051,374 $ 16,062,971 The Foundation performs in three theatres: the Mandell Weiss Theatre, the Mandell Weiss Forum Theatre, and the Sheila and Hughes Potiker Theatre located in the Joan and Irwin Jacobs Center. The theatres are located on the campus of the University and are owned by the University. The Foundation has a contractual arrangement, which expires in December 2050, with the University whereby the use of the theatres is shared by the Foundation and the University s Department of Theatre and Dance. In 2000 the Foundation entered into an agreement with the University for the construction and operation of the Joan and Irwin Jacobs Center which houses the Sheila and Hughes Potiker Theatre, the Charmaine and Maury Kaplan administrative offices, an educational center, the Seuss play development center, and related facilities (reflected as leasehold improvements) on the University campus adjacent to the Mandell Weiss Theatre. The Foundation raised approximately $14,800,000 to fund the cost of these facilities and agreed to transfer those funds to the University (Note 7). Additionally, the Foundation raised approximately $1,220,000 to fund capital additions to the facilities, including the completion of a restaurant shell that is reflected as leasehold improvements in progress. The Foundation also secured financing in 2008 to complete leasehold improvements on the restaurant (see Notes 7 and 9). As of March 31, 2008, construction on the restaurant was in progress. It was completed in 16

17 5. Fixed Assets, Net, Cont d June The amounts paid for construction of leasehold improvements have been capitalized and are being depreciated over the useful life of the leasehold improvements. Since the Foundation provided funding to help build the theaters, the University allows the Foundation to use the theaters at no cost. 6. Endowment Assets Assets Held by Others - In 2000 an endowment fund was established at University of California San Diego Foundation (Trustee) with the Foundation named as the beneficiary. The Foundation does not have access to the fund principal. The Foundation receives distributions from the endowment in accordance with the Trustee s standard endowment spending policy with any excess amounts remaining in the endowment fund in perpetuity. Distributions from the endowment fund are recorded as unrestricted income when they become distributable. The assets consist of stocks, fixed income securities, and alternative investments and are recorded at fair value and estimated fair value for the alternative investments. In 2006 the Foundation received a $1.0 million gift that is held in a custodial account at the San Diego Jewish Community Foundation. An annual distribution of 5% of the market value of the endowment is distributed to the Foundation for new play development. Investments Investments consist of the following at March 31, 2008: Equity funds $ 938,334 Bond funds 456,727 Cash surrender value of life insurance 12,234 $ 1,407,295 The Foundation s Board of Trustees has established a policy to annually transfer up to 5% of the fair value of the endowment investments to support operations. In 2003 the Foundation received an endowment contribution of a 100% percent interest in an irrevocable charitable remainder trust. The trust had a current value of approximately $3.6 million at March 31,

18 6. Endowment Assets, Cont d The current value of the gift has been discounted to its present value using a risk free rate of return of approximately 4% per annum over the anticipated life of the beneficiaries as of March 31, The following summarizes the total investment return for the 15-month period ended March 31, 2008: Interest and dividends $ 242,604 Net unrealized and realized losses (92,100) $ 150,504 Included in unrestricted investment return for the fifteen-month period ended March 31, 2008 is approximately $221,000 which represents the spending distribution from assets held by others and endowment investments. 7. Line of Credit The Foundation had a $1,100,000 unsecured line of credit available from a local bank that expired September 1, 2008 and has not been renewed. Interest is payable monthly at prime (5.25% at March 31, 2008). At March 31, 2008, the line of credit had an outstanding balance of $300,000. Interest expense recognized on the line of credit was approximately $6,000 for the fifteen-month period ended March 31, The Foundation paid off the line of credit subsequent to year end. The Foundation had to satisfy certain contractual covenants related to the line of credit. The Foundation was not in compliance with all of the requirements as of March 31, 2008 and has obtained a waiver of noncompliance from the bank. The line of credit agreement has a letter of credit facility that allows for up to $100,000 in letters of credit. The Foundation has no outstanding letters of credit at March 31, Notes Payable The Foundation has an unsecured note payable to the University which is due in December Interest is payable monthly at LIBOR plus 1% (approximately 4% at March 31, 2008). The balance of the note was approximately $2.1 million at March 31, Principal payments on the note payable are due in one lump-sum in December Interest expense of approximately $264,000 was recognized for the fifteen-month period ended March 31,

19 8. Notes Payable, Cont d Subsequent to March 31, 2008 the University agreed to provide an internal loan to the Foundation in the amount of $2.0 million to be repaid over a 5 year period. The Foundation expects to make a payment to the University for the amount of the debt in excess of $2 million prior to December The board is currently negotiating the five-year payment terms. In March 2008 the Foundation entered into an unsecured loan agreement with a Trustee of the Board pursuant to which the Foundation borrowed $1,750,000 to fund the Improvement Allowance (the Loan ) which is discussed in Note 9. The Loan is repayable over a 20-year period from restaurant profits and is due in full in The interest rate on the loan is 4.27% per annum. 9. Capital Leases Payable At March 31, 2008, capital leases were as follows: Capital lease payable; finance company; payable in monthly lease payments of approximately $6,188 at 7.4% per annum through August 2009; secured by the equipment leased. $ 99,608 Capital lease payable; finance company; payable in monthly lease payments of $1,188 at 7.9% per annum through January 2010; secured by the furniture leased. 24,270 $ 123,878 At March 31, 2008, future minimum lease payments and the present value of minimum lease payments under the capital leases are as follows: Year ending March 31, 2009 $ 88, ,820 Total minimum lease payments 131,330 Less amount representing interest (7,452) Net minimum lease payments $ 123,878 19

20 9. Capital Leases Payable, Cont d 10. Commitments and Contingencies Interest expense recognized on the capital leases was approximately $16,000 for the fifteen-month period ended March 31, Amortization expense recognized on the capital leases was approximately $67,000 for the fifteen-month period ended March 31, The Foundation leases certain office equipment under a non-cancelable operating lease, which expires in August The following is a schedule of future minimum payments due: Year Ending March 31, 2009 $ 40, ,825 Total $ 57,205 In April 2007 the Foundation executed a lease agreement with the University for rental space to construct and operate a restaurant. Rent commences on the date that a restaurant operator, subject to a separate management agreement, first opens and operates a restaurant for business. The agreement is for ten years (two successive five-year terms) and the base rent is $2,000 per month. Additional rent will be based on a percentage of gross restaurant sales and will be in addition to the base rent. In June 2007 the Foundation entered into a Management Agreement with Wolfgang Puck Special Events and Catering ( Puck ), pursuant to which Puck will design and operate the restaurant. The Foundation is providing an Improvement Allowance of $1,750,000. The restaurant opened in June Temporarily Restricted Net Assets As of March 31, 2008 temporarily restricted net assets are available for: Purpose restrictions: Capital campaign $14,412,601 Time restrictions: Future seasons expenses 1,440,545 Split-interest agreements 1,253,790 $17,106,946 20

21 12. Permanently Restricted Net Assets Permanently restricted net assets are restricted for investment in perpetuity, the income from which is expendable to support at March 31, 2008: Foundation activities $ 7,673,159 Scholarships 12,234 $ 7,685, Net Assets Released from Restrictions During the fifteen-month period ended March 31, 2008, net assets were released from donor restrictions by incurring expenditures satisfying the restricted purposes as follows: Depreciation and interest $ 1,297,991 Season expenses 931,568 $ 2,229,739 Sources of the releases for season expenses during the fifteen-month period ended March 31: Individual $ 681,568 Foundation 250,000 Total season expenses $ 931, Donated Materials, Facilities, and Services 15. Retirement Plans 16. Collective Bargaining Agreements Materials and facilities donated to the Foundation by individuals and organizations for the fifteen-month period ended March 31, 2008 totaling approximately $352,000 has been included in the accompanying statement of activities. The Foundation also received donated legal services during the period. These services amounted to approximately $24,000 and have been included in the accompanying statement of activities. The Foundation has a 403(b) plan with an employer match of up to 5.5%. During the fifteen-month period ended March 31, 2008, the Foundation contributed approximately $135,000 to the plan. Substantially all actors, directors, choreographers, designers and musicians employed by the Foundation are subject to collective bargaining agreements with various associations expiring in

22 17. Related Parties During the fifteen-month period ended March 31, 2008, the Playhouse utilized the services of a Trustee of the Board to design the restaurant discussed in Note 10. The Foundation paid approximately $117,000 for the design services and owed approximately $11,000 at March 31, Subsequent Event In October 2008, the Foundation entered into an unsecured loan agreement with a Trustee of the Board pursuant to which the Foundation is borrowing $165,000 to fund additional improvements to the restaurant which is discussed in Note 9. The loan is repayable over a 20- year period from restaurant profits and bears interest at 4.24% per annum. Any unpaid balance on the loan is due on December 31,