National Association for the Specialty Food Trade, Inc.

Transcription

1 Contents Audited Financial Statements NATIONAL ASSOCIATION FOR THE SPECIALTY FOOD TRADE, INC. December 31, 2008

2 Contents Independent Auditor s Report 1 Financial Statements Statements of financial position 2 Statements of activities 3 Statements of cash flows 4 Notes to financial statements 5-10

3 Independent Auditor s Report on the Financial Statements To the Board of Directors National Association for the Specialty Food Trade, Inc. We have audited the accompanying statements of financial position of the National Association for the Specialty Food Trade, Inc. (the Association) as of December 31, 2008 and 2007, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Association s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 the National Association for the Specialty Food Trade, Inc., at December 31, 2008 and 2007, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Washington, DC March 31,

4 NATIONAL ASSOCIATION FOR THE SPECIALTY FOOD TRADE, INC. Statements of Financial Position December 31, Assets Cash and cash equivalents - Note I $ 4,228,313 $ 7,242,975 Receivables 413, ,124 Due from employees Prepaid trade show and other expenses 1,659,240 1,485,701 Investments - Notes C & I 27,315,576 19,703,896 Cash surrender value - officers' life insurance - Note G 730, ,739 Deferred costs, net of accumulated amortization 5,809 8,881 Property and equipment, net - Note D 293, ,384 Total assets $ 34,646,825 $ 30,339,875 Liabilities and Net Assets Liabilities Accounts payable and accrued expenses $ 1,134,558 $ 1,158,912 Deferred membership dues 338, ,300 Deferred trade show revenue 9,886,231 10,532,752 Deferred compensation - Note F 1,498,523 1,065,859 Total liabilities 12,858,112 13,423,823 Commitments - Note H - - Net assets - Note B Unrestricted - Undesignated 19,120,482 14,102,305 Unrestricted - Board designated 1,300,000 1,300,000 Temporarily restricted 1,368,231 1,513,747 Total net assets 21,788,713 16,916,052 Total liabilities and net assets $ 34,646,825 $ 30,339,875 See notes to financial statements. 2

5 NATIONAL ASSOCIATION FOR THE SPECIALTY FOOD TRADE, INC. Statements of Activities Year Ended December 31, Unrestricted activities Revenue Trade show exhibition $ 21,351,860 $ 20,612,125 Media 2,314,244 2,174,888 Communication & Education 441, ,215 Membership 857, ,345 Other 23,283 - Net assets released from restriction 145,516-25,133,548 24,113,573 Expense Trade show exhibition 8,229,897 7,899,621 Media programs 2,890,887 2,962,504 Communication & Education 1,843,617 1,369,058 Member services 306, ,757 13,271,318 12,571,940 Supporting services Administrative expenses 6,480,426 6,315,167 Total expenses 19,751,744 18,887,107 Change in unrestricted net assets before investment income 5,381,804 5,226,466 Interest & dividend income 1,165,416 1,052,350 Net investment gains/(losses) (1,529,043) 160,751 Change in unrestricted net assets 5,018,177 6,439,567 Temporarily restricted net assets Contributions revenue - - Net assets released from restriction (145,516) - Change in temporarily restricted net assets (145,516) - Change in net assets 4,872,661 6,439,567 Net assets, beginning of year 16,916,052 10,476,485 Net assets, end of year $ 21,788,713 $ 16,916,052 Certain 2007 amounts have been reclassified for comparative purposes. See notes to financial statements. 3

6 NATIONAL ASSOCIATION FOR THE SPECIALTY FOOD TRADE, INC. Statements of Cash Flows Year Ended December 31, Cash Flows From Operating Activities Change in net assets $ 4,872,661 $ 6,439,567 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 198, ,354 Net realized/unrealized (gain)/loss on investments 1,529,043 (160,751) Changes in assets and liabilities: Receivables 140,858 5,842 Due from employees (246) 2,415 Prepaid trade show and other expenses (173,539) 117,188 Cash surrender value - officers' life insurance 166,079 (175,672) Accounts payable and accrued expenses (24,354) (65,003) Deferred membership dues (327,500) 67,189 Deferred trade show revenue (646,521) 550,263 Deferred compensation 432, ,906 Total adjustments 1,295, ,731 Net cash provided by operating activities 6,167,761 7,193,298 Cash Flows From Investing Activities Purchases of investments, net (9,140,723) (5,258,164) Purchases of property and equipment (41,700) (42,669) Net cash used in investing activities (9,182,423) (5,300,833) Net increase (decrease) in cash and cash equivalents (3,014,662) 1,892,465 Cash and cash equivalents, beginning of year 7,242,975 5,350,510 Cash and cash equivalents, end of year $ 4,228,313 $ 7,242,975 See notes to financial statements. 4

7 Notes to the Financial Statements A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: The National Association for the Specialty Food Trade, Inc. (NASFT) is a not-forprofit business trade association established in 1952 to foster trade, commerce and interest in the specialty food industry. The Association is an organization composed of domestic and foreign manufacturers, importers, distributors, brokers, retailers, restaurants, caterers and others in the specialty food business. Currently, the Association has over 2,700 member companies throughout the U.S. and overseas. Income tax status: The Association is exempt from income taxes on its exempt activities under Section 501(c)(6) of the Internal Revenue Code. Dues and other payments to the Association are not deductible as charitable donations. Basis of accounting: The Association prepares its financial statements on the accrual basis of accounting. As such, revenues are recognized when earned and expenses are recognized when the underlying obligations are incurred. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Reclassifications: Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements. Cash and cash equivalents: For financial statement purposes, the Association considers all liquid assets held outside of operating commercial bank accounts to be other than cash equivalents. Property and equipment: Property and equipment is stated at purchase cost, or fair value at the date of contribution. Purchases over $4,000 are capitalized and depreciated over the estimated useful lives of the assets. Depreciation is calculated using the straight-line method over the following useful lives of the various classes of assets: Leasehold improvements Software Furniture and equipment remaining lease term 3 years 3-7 years Deferred revenue: Deferred revenue principally consists of trade shows and membership dues revenues received in advance. Membership dues are recognized as revenue over the related membership period. Trade show registration and exhibit fees are recognized as revenue in the year that the related show has taken place. Grants: Grants are recorded as unrestricted or temporarily restricted support depending upon the existence and/or nature of any donor restrictions. Grants that are not restricted by the donor are reported as an increase in unrestricted net assets. Donor-restricted grants are reported as an increase in temporarily restricted net assets and then reclassified to unrestricted net assets when the restriction is fulfilled. 5

8 Notes to the Financial Statements - Continued B. NET ASSETS Net assets: For financial statement purposes, net assets are as follows: Unrestricted: Unrestricted net assets, which consist of both undesignated and designated funds, are as follows: Undesignated: Undesignated net assets are available for general operations. Board designated: In 1988, the Board of Directors of the Association passed a resolution to establish an investment reserve of $1,300,000. This reserve cannot be drawn on without the Board's approval, and is shown as an Unrestricted Boarddesignated fund on the statement of financial position. Temporarily restricted: As part of its dissolution in 2002, the Board of Directors of the Specialty Food Distributors and Manufacturers Association (SFDMA), approved a grant to the Association, to be used to support and finance efforts for research, education, training and information dissemination related to Direct Store Door ("DSD") specialty food distribution, provided such uses are recommended by the NASFT Distributors' Advisory Council, are approved by the NASFT Board of Directors prior to disbursement, and are not in conflict with the NASFT's Articles of Incorporation or By-laws. C. INVESTMENTS The Association s investments are recorded at fair value and consist of the following as of December 31,: Bank Certificates of Deposit and Money Market Funds $21,302,644 $15,318,835 Life insurance policy cash surrender value 2,909,507 2,794,730 Equity Mutual Funds 2,470,714 1,590,331 International Equity Mutual Fund 632,711 - $27,315,576 $19,703,896 The Association elected to maintain in force a life insurance policy on a former President after the former President retired. The policy is currently being held as an investment by the NASFT. Monthly premiums are funded from the policy's accumulated cash value and earnings. The death benefit of this policy as of December 31, 2008 was approximately $6,384,000. The policy is recorded at cash surrender value which is deemed to approximate fair value. 6

9 Notes to the Financial Statements - Continued C. INVESTMENTS - CONTINUED The Association has implemented Statement of Financial Accounting Standards No. 157 (FAS 157), Fair Value Measurements. FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FAS 157 uses the following prioritized input levels to measure fair value. The input levels used for valuing investments are not necessarily an indication of risk. Level 1 Observable inputs that reflect quoted prices for identical assets or liabilities in active markets such as stock quotes; Level 2 Includes inputs other than level 1 inputs that are directly or indirectly observable in the marketplace such as yield curves or other market data; Level 3 Unobservable inputs which reflect the reporting entity s assessment of the assumptions that market participants would use in pricing the asset or liability including assumptions about risk such as bid/ask spreads and liquidity discounts. The following table summarizes the Association s investments as of December 31, 2008 and 2007, based on the inputs used to value them: Level 1 Quoted prices $ 3,322,904 $2,008,497 Level 2 Other significant observable inputs 23,992,672 17,695,399 Level 3 Significant unobservable inputs - - Total investments $27,315,576 $19,703,896 Investment income consisted of the following for the year ended December 31,: Interest and dividend income $ 1,165,416 $1,052,350 Net realized and unrealized gains/(losses) (1,529,043) 160,751 $ (363,627) $1,213,101 For the years ended 2008 and 2007 the bulk of the net investment gains and losses are unrealized. Statement of Financial Accounting Standards 124 (SFAS 124) requires organizations to value their investments carried on the books at the current market value as of the date of the end of a fiscal reporting period (called "marking to market"). This must be done even if the organization still holds the investment(s) and has no immediate plans to liquidate the investment(s). As a result, subsequent fluctuations in investment market value will increase or decrease the recognized gain or loss. The NASFT's traditional policy has been to hold investments (the bulk of which are in certificates of deposit and money market instruments) until maturity. However, the NASFT's policy notwithstanding, SFAS 124 nevertheless requires any unrealized loss (and likewise gain) to be recorded at the end of the fiscal period as expense/income. The impact is on the financial statements only; there is no effect on cash flow. 7

10 Notes to the Financial Statements - Continued D. PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of December 31,: Furniture and equipment $1,485,890 $ 1,478,625 Software 403, ,827 Leasehold improvements 862, ,271 2,751,423 2,709,723 Less: accumulated depreciation (2,457,883) (2,262,339) $ 293,540 $ 447,384 E. EMPLOYEE RETIREMENT PLAN The Association maintains a defined contribution retirement plan that covers all employees. Contributions charged to operations were $542,375 and $535,861 for the years ended December 31, 2008 and 2007, respectively. F. DEFERRED COMPENSATION The Association has entered into employment agreements with its President and four Staff Vice Presidents (key employees). These agreements provide for deferred compensation plans under Internal Revenue Code Sections 457(b) and 457(f). Amounts to be paid under the 457(f) plan are calculated in accordance with terms stipulated in the employment agreements. The 457(f) amounts are payable upon the occurrence of certain events as specified in each key employee's employment agreement. It is the intent of the NASFT to substantially fund any future payments required under the 457(f) plan with the cash surrender value or death benefits of key employee life insurance policies (see Note G). However, amounts due under the deferred compensation plans will exceed insurance coverage in certain situations. It is the Association's policy to fully accrue a liability for the vested amounts due under the 457(b) plan. In addition, beginning in 2006, the Association has begun accruing, on a straight-line basis, a liability for the projected lump sum payments due under the 457(f) plan. Deferred compensation expense for the years ended December 31, 2008 and 2007 was $432,664 and $413,498, respectively. The Association s total liability under these deferred compensation agreements is estimated to be $1,498,523 and $1,065,859 at December 31, 2008 and 2007, respectively. 8

11 Notes to the Financial Statements - Continued G. CASH SURRENDER VALUE - STAFF OFFICERS' LIFE INSURANCE The Association is the sole owner and sole beneficiary of insurance policies protecting its interests and obligations in the event of the death of its current staff officers (key employees). The cash surrender value of these policies as of December 31, 2008 and 2007 was $730,660 and $896,739 respectively. Officers' life insurance expense was computed for the year ended December 31, as follows: Life insurance premiums paid $ 138,224 $ 166,257 Less: increase in surrender value, officers' life insurance (106,745) (175,672) Officers' life insurance expense (benefit) $ 31,479 $ (9,415) H. COMMITMENTS Operating Lease: The Association is obligated under a non-cancelable operating lease for its office space in New York, New York. The lease term runs through February Office lease rental expenses, including real estate taxes, for the years ended December 31, 2008 and 2007 were $456,495 and $472,845, respectively. Show services: The Association has cancelable agreements with vendors to provide support services for its tradeshows through the year The cost of certain portions of these contracts is fixed in advance. However, many of the amounts to be paid under these contracts are dependent on the actual net square exhibit footage at each tradeshow. Other Contracts: In the ordinary course of business, the Association has entered into various other cancelable operating contracts with vendors for goods and services. The Association s management actively reviews all such contracts and believes that the Association s exposure to significant future liabilities from such contracts is remote. Future fixed minimum payments to be made under the office lease and show service agreements, as of December 31, 2008, are as follows: Year Ending December 31, 2009 $ 743, , ,000 $ 1,425,063 9

12 Notes to the Financial Statements - Continued I. CREDIT RISK, FLUCTUATIONS IN FAIR VALUE, AND CONCENTRATIONS Credit risk: The Association maintains demand deposits with commercial banks and mutual fund companies. At times, certain balances held within these accounts may not be fully guaranteed or insured by the U.S. federal government. The uninsured portion of cash and money market accounts are backed solely by the assets of the underlying institution. As such, the failure of an underlying institution could result in financial loss to the Association. Investments: The Association also invests funds in a professionally managed portfolio that contains various types of investment securities. Such investments are exposed to market and credit risks. Given the current turmoil in world financial markets, the Association's financial investments may be subject to significant fluctuations in fair value. As a result, the investment balances reported in these financial statements may not be reflective of the portfolio's value during subsequent periods. Revenue concentration: Approximately 85% of the Association's operating revenue is generated through activities related to two major annual tradeshows. Thus, any future declines in tradeshow activity could have a significant impact on the Association's financial condition. J. ACCOUNTING PRONOUNCEMENT FASB Staff Position FIN 48-3 (FSP FIN 48-3), Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Entities, grants nonpublic organizations the option to defer the effective date of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes until the year ended December 31, As permitted by FSP FIN 48-3, the Association has elected to delay the implementation of FIN 48 until the year ended December 31, The Association records a liability for income taxes when it believes that such an accrual is warranted based on current law or guidance from the appropriate taxing authorities. 10