Goodwill Industries of Dallas, Inc. and Goodwill Industries of Dallas Foundation, Inc.

Transcription

1 and Goodwill Industries of Dallas Foundation, Inc. Audited Combined Financial Statements

2 and Goodwill Industries of Dallas Foundation, Inc. Audited Combined Financial Statements Table of Contents Independent Auditors Report 1 Page Combined Statement of Financial Position, (with comparative totals for 2013) Combined Statement of Activities, For the year ended (with comparative totals for 2013) Combined Statement of Cash Flows, For the year ended (with comparative totals for 2013) Combined Statement of Functional Expenses, For the year ended December 31, 2014 (with comparative totals for 2013) Notes to Combined Financial Statements 8 Supplemental Information: Goodwill Industries of Dallas, Inc., Schedule of Financial Position, December 31, 2014 Goodwill Industries of Dallas, Inc., Schedule of Activities, For the year ended Goodwill Industries of Dallas, Inc., Schedule of Functional Expenses, For the year ended, Schedule of Financial Position,, Schedule of Activities, For the year ended

3 A H S ALBRIGHT, HILL & SUMPTER CERTIFIED PUBLIC ACCOUNTANTS A Professional Corporation Independent Auditors Report Board of Directors Goodwill Industries of Dallas, Inc North Westmoreland Dallas, Texas Report on the Financial Statements We have audited the accompanying combined financial statements of Goodwill Industries of Dallas, Inc. and which comprise the Combined Statements of Financial Position as of and the related Combined Statements of Activities, Cash Flows, Functional Expenses and the related notes to the combined financial statements for the year then ended. The prior year summarized comparative information has been derived from Goodwill Industries of Dallas, Inc. and Goodwill Industries of Dallas Foundation, Inc. s 2013 combined financial statements on which we expressed an unqualified opinion dated June 20, Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these combined 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 error or fraud. Auditors Responsibility Our responsibility is to express an opinion on these combined 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 combined financial statements are free of material misstatements. An audit includes performing procedures to obtain audit evidence about amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s 105 Saint Marys St. Suite 100 Rockwall, Texas Fax

4 Board of Directors Page 2 Goodwill Industries of Dallas, Inc. 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 of the 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 combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Goodwill Industries of Dallas, Inc. and, as of and the changes in their net assets and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Our audit was conducted for the purpose of forming an opinion on the combined financial statements as a whole. The accompanying schedules on pages are presented for purposes of additional analysis and are not a required part of the combined 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. Albright, Hill & Sumpter, PC Certified Public Accountants June 17, 2015

5 Combined Statement of Financial Position (with comparative totals for 2013) Assets Goodwill Goodwill Foundation Total Comparative Totals Current assets Cash and cash equivalents: Cash and money market - operating $ 4,309,558 $ 269,339 $ 4,578,897 $ 2,771,596 Money market - capital reserve 814,206 2,111,021 2,925, ,329 Total cash and cash equivalents 5,123,764 2,380,360 7,504,124 3,559,925 Marketable securities, at fair value: Operating and capital reserve 14,193,403 5,790,611 19,984,014 19,178,610 Accounts receivable 370,807 66, , ,386 Pledges receivable 778, , ,375 Prepaid expenses and deferred charges 194, , ,049 Inventories 1,001,521-1,001,521 1,051,119 Total current assets 21,662,712 8,237,327 29,900,039 24,941,464 Long-term pledges receivable 500, , ,100 Discount to present value (27,556) Discounted pledges receivable 500, , ,544 Prepaid pension obligation ,817 Land, building, equipment and improvements, net 33,429,730-33,429,730 33,962,744 Total assets $ 55,592,442 $ 8,237,327 $ 63,829,769 $ 59,913,569 Liabilities and Net Assets Current liabilities Accounts payable $ 478,387 $ 883 $ 479,270 $ 533,306 Accrued expenses 670, , ,840 Deferred revenue 70,065-70,065 35,015 Total current liabilities 1,219, ,219,964 1,058,161 Long-term liabilities Unfunded accumulated pension benefit obligation 484, ,119 - Total liabilities 1,703, ,704,083 1,058,161 Unrestricted net assets Undesignated 53,389,242 7,236,444 60,625,686 56,921,864 Board designated endowment - 1,000,000 1,000,000 1,000,000 Total unrestricted net assets 53,389,242 8,236,444 61,625,686 57,921,864 Temporarily restricted net assets 500, , ,544 Total net assets 53,889,242 8,236,444 62,125,686 58,855,408 Total liabilities and net assets $ 55,592,442 $ 8,237,327 $ 63,829,769 $ 59,913, The accompanying notes are an integral part of this statement

6 Combined Statement of Activities For the year ended (with comparative totals for 2013) Goodwill Public support and other revenue Public support United Way contributions 810, Goodwill Foundation Total The accompanying notes are an integral part of this statement Comparative Totals $ $ - $ 810,439 $ 918,452 Donated goods 7,877,956-7,877,956 8,173,059 Special events - 216, , ,627 Other contributions 151, , ,908 1,040,641 Total public support 8,839, ,234 9,348,679 10,337,779 Other revenue Retail sales of donated goods 10,154,900-10,154,900 9,223,213 Industrial services 530, , ,348 Workforce development 623, , ,656 Investment income 167, , ,300 1,295,830 Miscellaneous 18,789-18,789 13,730 Total other revenue 11,494, ,379 11,761,085 11,593,777 Net assets released from restrictions 833, ,354 - Total public support and other revenue 21,167, ,613 21,943,118 21,931,556 Expenses Program services Donated goods 12,145,357-12,145,357 12,549,350 Industrial services 622, , ,487 Workforce development 1,289,613-1,289,613 1,381,970 Supporting services and general 3,471, ,806 3,578,261 3,374,063 Total expenses 17,529, ,806 17,636,043 17,828,870 Excess of public support and other revenue over expenses 3,638, ,807 4,307,075 4,102,686 Change in unfunded accumulated pension benefit obligation (603,443) - (603,443) 1,902,127 Increase in unrestricted net assets 3,034, ,807 3,703,632 6,004,813 Change in temporarily restricted net assets Public support and other revenue Contributions 400, , ,000 Net assets released from restrictions (833,354) - (833,354) - Change in temporarily restricted net assets (433,354) - (433,354) 100,000 Increase in net assets 2,601, ,807 3,270,278 6,104,813 Inter-organization transfers 275,870 (275,870) - - Net assets at beginning of year 51,011,901 7,843,507 58,855,408 52,750,595 Net assets at end of year $ 53,889,242 $ 8,236,444 $ 62,125,686 $ 58,855,408

7 Combined Statement of Cash Flows For the year ended (with comparative totals for 2013) Goodwill Goodwill Foundation Total Comparative Totals Cash flows from operating activities Change in net assets $ 2,601,471 $ 668,807 $ 3,270,278 $ 6,104,813 Inter-organization transfers 275,870 (275,870) - - Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 1,407,293-1,407,293 1,187,483 Net loss on disposal of fixed assets (20,176) Net realized and unrealized loss (gain) on investments 275,517 (141,064) 134,453 (1,033,266) Changes in operating assets: interest (137,006) (36,771) (173,777) (39,068) Pledges receivable 273, , ,221 Inventories 49,598-49,598 (94,463) Prepaid expenses and deferred charges (32,049) 7,500 (24,549) 148,699 Changes in operating liabilities: Accounts payable (54,809) 773 (54,036) (31,921) Accrued expenses 180, ,789 13,232 Deferred revenue 35,050-35,050 (2,585) Increase in unfunded accumulated pension obligation of defined benefit plan 659, ,936 (2,368,948) Net cash provided by operating activities 5,535, ,375 5,759,143 4,085,021 Cash flows from investing activities Purchase of land, buildings and equipment (875,087) - (875,087) (1,894,209) Proceeds from sale and maturities of investments 5,531,808 7,256,682 12,788,490 4,059,961 Purchase of investments (7,638,268) (6,090,079) (13,728,347) (7,674,326) Net cash (used in) provided by investing activities (2,981,547) 1,166,603 (1,814,944) (5,508,574) Net increase (decrease) in cash 2,554,221 1,389,978 3,944,199 (1,423,553) Cash and cash equivalents at beginning of year 2,569, ,382 3,559,925 4,983,478 Cash and cash equivalents at end of year $ 5,123,764 $ 2,380,360 $ 7,504,124 $ 3,559,925 Supplemental data: Interest paid $ - $ - $ - $ - The accompanying notes are an integral part of this statement. 5

8 Combined Statement of Functional Expenses For the year ended (with comparative totals for 2013) Goodwill Industries of Dallas, Inc. Program Services Supporting Donated Goods Industrial Contracts Workforce Development Services and General Total Salaries and wages $ 7,269,762 $ 488,045 $ 898,490 $ 1,338,549 $ 9,994,846 Employee health and retirement benefits 861,013 50, , ,626 1,214,214 Payroll taxes 702,651 40,544 88, , ,932 Professional fees and contract labor 153,547 1,870 16, , ,336 Supplies 208,224 24,319 7,824 38, ,396 Telephone 58, ,827 44, ,050 Postage ,495 4,572 Occupancy 705, , ,934 1,228,958 Equipment rental and repair 117,527 2,809 2,425 78, ,952 Printing 127,005 1,322 5,266 88, ,167 Transportation 782,301 10,187 23,651 25, ,227 Depreciation 967,704 1,771 67, ,696 1,407,293 Membership dues , ,277 Awards 10-1, ,424 Conferences and meetings 5, ,065 6,381 14,243 Fund raising activities , ,537 Other 185, ,239 56, ,813 $ 12,145,357 $ 622,812 $ 1,289,613 $ 3,471,455 $ 17,529,237 The accompanying notes are an integral part of this statement. 6

9 Combined Statement of Functional Expenses For the year ended (with comparative totals for 2013) 2013 Goodwill Foundation Total Comparative Totals $ - $ 9,994,846 $ 9,254,474-1,214,214 1,579, , ,976 47, , , , , ,050 87, ,624 25,397-1,228,958 1,153, , ,103 6, , , , ,152-1,407,293 1,187, , , ,336 5,146 51,261 65,504 11, , , , ,897 $ 106,806 $ 17,636,043 $ 17,828,870 The accompanying notes are an integral part of this statement. 7

10 Notes to Combined Financial Statements NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In fulfilling its responsibility for the preparation of Goodwill Industries of Dallas, Inc. and s (collectively Goodwill) combined financial statements and disclosures, management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires estimating, matching and timing of revenue and costs in the determination of support and expenditures. It is also necessary for management to determine, measure, allocate and make certain assumptions regarding resources and obligations within the financial process according to these principles. Below are certain significant accounting policies selected by management. Nature and Purpose of Goodwill Industries of Dallas, Inc. Goodwill Industries of Dallas, Inc. (the Organization) is a not-for-profit organization providing training and employment to persons with disabilities and disadvantages to help them transform their lives through the power of jobs. The Organization s principal services are divided into three programs: the donated goods program, the industrial services program and the workforce development program. The donated goods program provides employment through the collection, sorting and sale of donated merchandise. Revenue from this program is generated from the donated and ultimate sale of the donated merchandise. The industrial services program provides jobs and training opportunities through packaging and light bench work services. Revenue from this program is derived from contracts with local companies. The workforce development program offers employment training and job placement. Revenue from this program is generated from contracts with state and private agencies. Nature and Purpose of (the Foundation) is an independent not-for-profit foundation established to accumulate a permanent board-designated endowment to support the continuing operations of Goodwill Industries of Dallas, Inc. The Foundation derives its revenue from contributions, interest, dividends and capital appreciation from the Foundation s investment portfolio. The Foundation s by-laws provide that distributions to Goodwill Industries of Dallas, Inc. shall be made only from the income of assets held by the Foundation after the market value of the principal of its assets, determined by the directors of the Foundation, exceeds $1,000,000. 8

11 Notes to Combined Financial Statements Basis of Presentation and Principles of Combination The accompanying combined financial statements include the accounts of Goodwill Industries of Dallas, Inc. and (collectively Goodwill). All inter-organization balances and transactions have been eliminated. The combined financial statements have been prepared using the accrual method of accounting and conform to accounting principles generally accepted in the United States of America (GAAP). As required by GAAP, net assets, revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. To help ensure observance of limitations and restrictions placed on the use of resources available to Goodwill, the amounts are maintained in accordance with FASB ASC 958. This is the procedure by which resources are classified for accounting and reporting purposes into net asset categories established according to their nature. In the combined financial statements, accounts that have similar characteristics have been combined into two net asset categories: unrestricted and temporarily restricted. Unrestricted net assets are not restricted by donors or the donor-imposed restrictions have expired. Temporarily restricted net assets contain donor-imposed restrictions that permit Goodwill to use or expend the assets as specified. When the donor restriction expires, that is, when a stipulated time period expires or the purpose of the restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the Combined Statement of Activities as net assets released from restrictions. Cash Equivalents Goodwill considers all highly liquid investments, with a maturity of one year or less when purchased, to be cash equivalents. Goodwill maintains cash balances and certificates of deposit which, at times, may exceed federally insured limits. Goodwill has not experienced any losses in such accounts and believes it is not exposed to any significant risk on cash. Accounts Receivable Accounts receivable is reported in the Combined Statement of Financial Position at net realizable value. An allowance for doubtful accounts is recognized by Goodwill based upon a review of specific customer balances, historical losses (bad debts) 9

12 Notes to Combined Financial Statements incurred and general economic conditions. As of, all accounts receivable balances were considered fully collectable and; accordingly, no allowance for uncollectable accounts receivable has been provided. Pledges Receivable Pursuant to GAAP, when a promise to give is made, a pledge receivable is recorded and reflected as revenue. Pledges to be received over multiple years are discounted to estimated net present value. As of, the carrying amount of pledges receivable approximates estimated net present value. Investments Investments in marketable securities with readily determinable fair values and investments in debt securities are valued at their estimated fair values in the Combined Statement of Financial Position. Inventories Inventories, consisting primarily of donated goods held in store locations, are valued in the combined financial statements using an estimation method. The costs of restoring these items to marketable conditions are expensed as incurred. Land, Buildings, Equipment and Improvements Land, buildings, equipment and improvements are stated at cost at the date of acquisition or fair value at the date of donation in the case of gifts. Goodwill capitalizes land, buildings, equipment and improvements with a cost of over $1,000 and an estimated useful life of 3 to 50 years. Depreciation on fixed assets is calculated using the straight-line method. Depreciation expense for the year ended was $1,407,293. Management evaluates its long-lived assets for financial impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when the estimated undiscounted cash flows from the assets are less than the carrying value of the assets. Assets to be disposed of are reported at the lower of their carrying amount, or fair value, less costs to sell. Donated Assets and Services Donated assets are recorded at estimated fair value at the date of donation. In 2014, no fixed assets were donated. 10

13 Notes to Combined Financial Statements Goodwill receives donations of inventory which are valued based on an estimation method. As of and for the year ended, $7,877,956 was recognized as donated goods, $7,828,358 was recorded as cost of goods sold and the difference of $49,598 represents an increase in inventory which is included in retail sales. In addition, many individuals volunteer time and perform a variety of tasks that assist Goodwill with its programs and fund raising events. No amount has been reflected in the combined financial statements for these donated services since the volunteers time does not meet the criteria for recognition under the Financial Accounting Standards Board (FASB) ASC 958, Accounting for Contributions Received and Contributions Made. Federal Income Tax Goodwill is tax exempt under Section 501(c)(3) of the Internal Revenue Code as a non-profit organization except to the extent that it has unrelated business income. Goodwill had no taxable unrelated business income or debt-financed income for the year ended. Accordingly, no provision has been made for federal income taxes in the accompanying combined financial statements. Credit Risk Concentration Financial instruments that potentially subject Goodwill to concentrations of credit risk are primarily accounts and pledges receivable. As of, approximately 65% of accounts and pledges receivable were due from three donors. Use of Estimates The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. Significant estimates used in these combined financial statements primarily relate to the valuation of investments, pledges and inventories and lives used to depreciate fixed assets. Actual results could differ from these estimates. 11

14 Notes to Combined Financial Statements NOTE 2 INVESTMENTS The following reflects the investment categories and respective cost and estimated fair values as of and 2013: 2014 Estimated Cost Fair Value Fixed income Domestic bonds $ 6,554,865 $ 6,463,223 FNMA, GNMA, REMIC 200, ,805 International bonds 3,352,236 3,283,932 Mutual funds 2,720,900 5,447,694 US Treasury note 50,000 50,182 Total fixed income 12,878,001 15,438,836 Equities U.S. stocks 480,293 1,166,828 Hedges 476, ,055 Electronically traded funds 331, ,876 Unclassified equities 2,725,246 2,751,419 Total equities 4,012,894 4,545,178 Total investments $ 16,890,895 $ 19,984, Estimated Cost Fair Value Fixed income U.S. treasuries $ 49,953 $ 51,252 International bonds 2,744,882 2,687,925 Freddie Mac, Fannie Mae and Ginnie Mae 198, ,190 Other 5,589,320 5,498,918 Hartford world bond fund 500, ,269 Hartford floating rate fund 2,220,900 2,259,918 Total fixed income 11,303,823 11,183,472 Equities U.S. stocks 2,463,884 5,228,362 International stocks 1,095,334 1,443,010 Electronically traded funds 1,592,682 1,323,766 Total equities 5,151,900 7,995,138 Total investments $ 16,455,723 $ 19,178,610 12

15 Notes to Combined Financial Statements The following summarizes the investment income and its classifications in the Combined Statement of Activities for the years ended and 2013: Interest and dividends $ 453,438 $ 323,463 Change in unrealized gains and losses (1,705,350) 1,331,585 Realized gains (losses) 1,570,897 (467,903) Rental income 111, ,120 Other 4,195 (2,435) Investment income, net $ 434,300 $ 1,295,830 Approximate maturities of fixed income investments as of were as follows: Maturity Estimated Fair Value < 1 year and mutual funds $ 6,220, years 3,445, years - > 15 years 220,215 Total $ 9,885,395 Financial Accounting Standards Board (FASB) ASC 820, Fair Value Measurements, establishes a framework for measuring value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives highest priority to unadjusted quoted fair prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1 Level 2 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that Goodwill has the ability to access. Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; 13

16 Notes to Combined Financial Statements Inputs that are derived principally from, or corroborated by, observable market data by correlation or other means. If the asset or liability has a specified contractual term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The assets or liabilities fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value: Money Market Funds: Equity Securities and Mutual Funds with Fixed Income and Equities: Valued at the net asset value (NAV) per unit at year end. Quoted market prices. Debt Securities: Valued using quoted prices for investments with similar yields and bond ratings. The methods described above may produce fair value estimates that may not be indicative of net realized value or reflective of future fair values. Furthermore, although Goodwill believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table sets forth by level, within the fair value hierarchy, Goodwill s investments at estimated fair value as of : Level 1 Level 2 Level 3 Total Fixed income $ 5,497,877 $ 9,747,154 $ 193,805 $ 15,438,836 Equities 4,545, ,545,178 $ 10,043,055 $ 9,747,154 $ 193,805 $ 19,984,014 NOTE 3 PLEDGES RECEIVABLE Pledges receivable represent unconditional promises to give as of December 31, Goodwill reports pledges receivable at book value which approximates fair value as of. 14

17 Notes to Combined Financial Statements Pledges receivable as of were as follows: Pledges Receivable Due in Gross Amount Discount 2015 $ 778,619 - Estimated Present Value $ $ 778, , , , , , ,000 Total $ 1,278,619 $ - $ 1,278,619 NOTE 4 LAND, BUILDINGS, EQUIPMENT AND IMPROVEMENTS Land, buildings, equipment and improvements are recorded at cost and consisted of the following at and 2013: Land $ 8,551,356 $ 8,686,970 Buildings 28,496,576 28,029,189 Building improvements 2,329,776 2,271,162 Machinery and equipment 1,801,767 1,570,594 Furniture and fixtures 2,771,528 2,654,360 Vehicles 2,739,184 2,636,025 Accumulated depreciation (13,269,018) (11,901,325) Net depreciable 33,421,169 33,946,975 Construction in process 8,561 15,769 $ 33,429,730 $ 33,962,744 NOTE 5 AFFILIATIONS Goodwill is affiliated with Goodwill Industries International, Inc. NOTE 6 PENSION PLAN Goodwill sponsors a noncontributory defined benefit plan (the Plan) covering substantially all employees. Benefits under the Plan are based on age, years of service and compensation earned prior to retirement. Goodwill intends to fund the Plan through annual contributions at least equal to the amount required to maintain the minimum funding standards under the Employee Retirement Income Security Act of The Plan s assets consist primarily of fixed interest contracts, common stocks and debt securities held in investment funds managed by the Plan s trustees. 15

18 Notes to Combined Financial Statements The following tables provide a reconciliation of the changes in the Plan s benefit obligations and fair value of the Plan s assets at : Change in benefit obligations: Benefit obligation at beginning of year $ 8,363,082 Service cost 496,912 Interest cost 389,353 Change in assumptions 858,234 Actuarial (gain) loss (52,890) Expense charges (60,448) Benefits paid (1,059,293) Benefit obligation at end of year $ 8,934,950 Change in plan assets: Fair value of plan assets at beginning of year $ 8,538,899 Actual return on plan assets 381,673 Employer contributions 650,000 Benefits and expense charges paid (1,119,741) Fair value of plan assets at end of year $ 8,450,831 Funded status - liability: Projected benefit obligation $ 8,934,950 Fair value of plan assets as of 8,450,831 Unfunded projected pension obligation $ 484,119 The above projected accumulated pension obligation is included as long-term liabilities in the accompanying Combined Statement of Financial Position. The following table provides the components of net periodic retirement costs as determined by independent actuaries for the year ended : Service costs $ 496,912 Interest costs 389,353 Expected return on plan assets (541,905) Recognized actuarial losses 107,985 Amount of loss recognized due to settlement 254,148 Net periodic retirement cost $ 706,493 The projected benefit obligation was determined by using a pre-retirement discount rate of 3.70% and post-retirement interest rate of 5.50% as well as rate of compensation increases of 3.0% and social security wage increases of 4.5%. The expected long-term rate of return on plan assets is 6.5%. 16

19 Notes to Combined Financial Statements The following disclosures are made pursuant to FASB ASC 715: Jan. 1, 2014 Reclassified as Net Periodic Benefit Cost Amounts Arising During Period Dec. 31, 2014 Transition obligation asset $ - $ - $ - $ - Net prior service cost or credit $ - $ - $ - $ - Net (gain) or loss $ 1,540,250 $ (107,985) $ 711,428 $ 2,143,693 Estimated Effect in Next Fiscal Year - Items Not Yet Reflected in Net Periodic Benefit Cost Estimated Amounts to be Reclassified as Net Jan. 1, 2015 Periodic Benefit Cost Transition obligation or asset $ - $ - Net prior service cost or credit $ - $ - Net (gain) or loss $ 2,143,693 $ 168,490 No plan assets are expected to be returned to the employer during the period January 1, 2015 to December 31, Expected Future Benefit Payments The following benefit payments, which reflect expected future service as appropriate, are expected to be paid: Year 2015 $ 2,691, , , , , ,532,000 Total $ 6,212,000 17

20 Notes to Combined Financial Statements Plan Assets by Category As of % Equity $ 3,312, % Fixed income 2,634, % General account 2,503, % Total $ 8,450, % Expected Long-Term Rate of Return on Plan Assets Assumption The expected long-term rate of return on plan assets assumption of 6.5% was selected using the building block approach described by the Actuarial Standards Board in Actuarial Standards of Practice No. 27 Selection Economic Assumptions for Measuring Pension Obligations. Based on Goodwill Industries of Dallas, Inc. s investment policy for the pension plan in effect as of the beginning of the year, a best estimate range was determined for both the real rate of return (net of inflation) and for inflation based on historical 30-year period rolling averages. An average inflation rate within the range equal to 3.75% was selected and added to the real rate of return range to arrive at a best estimate range of 6.04% %. The rate of 6.5% within the best estimate range was selected. NOTE 7 FAIR VALUE MEASUREMENTS FASB 820, Fair Value Measurements, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures regarding fair value measurements. Fair value of investments is as disclosed in Note 2. The fair value of cash and cash equivalents, accounts receivable and accounts payable approximates book value due to the short-term nature of these accounts. The fair value of pledges receivable is the present value of the gross amount of pledges receivable as of and represents Goodwill s Level 3 assets. The table below sets forth the activity in Level 3 assets for the year ended : Level 3 Assets Beginning of the year $ 1,551,919 Additions 500,000 Collections (773,300) Uncollectible - End of the year $ 1,278,619 18

21 Notes to Combined Financial Statements NOTE 8 DISCLOSURES ABOUT UNCERTAINTY IN INCOME TAXES UNDER FASB ASC 740 Goodwill files annual information returns. With few exceptions, Goodwill is no longer subject to U.S. federal income tax examinations by tax authorities for years before Goodwill has adopted the provisions of FASB ASC 740, Accounting for Uncertainty in Income Taxes. As of, there were no unrecognized tax benefits. Goodwill recognizes interest accrued related to unrecognized income tax benefits in interest expense and penalties in administrative expense. There were no such interest and penalties for NOTE 9 SUBSEQUENT EVENTS In June 2015, Goodwill entered into a contract for the purchase of approximately 2.8 acres of land in Lewisville, Texas for a purchase price of $1,140,000. The contract provides that Goodwill may terminate for any reason during the due diligence period. Management has reviewed other events occurring subsequent to December 31, 2014 through the issue date of the financial statements, June 17, Based on this review, no additional events have occurred requiring disclosure. 19

22 Supplemental Schedules 20

23 Schedule of Financial Position Assets Unrestricted Current assets Cash and cash equivalents: Cash and money market - operating 4,309,558 Temporarily Restricted Total $ $ - $ 4,309,558 Money market, capital reserve 814, ,206 Total cash and cash equivalents 5,123,764-5,123,764 Marketable securities, at fair value: Operating and capital reserve 14,193,403-14,193,403 Accounts receivable 370, ,807 Pledges receivable 778, ,619 Prepaid expenses and deferred charges 194, ,598 Inventories 1,001,521-1,001,521 Total current assets 21,662,712-21,662,712 Long-term pledges receivable - 500, ,000 Discount to present value Discounted pledges receivable - 500, ,000 Prepaid pension obligation Land, buildings, equipment and improvements, net 33,429,730-33,429,730 Total assets $ 55,092,442 $ 500,000 $ 55,592,442 Liabilities and Net Assets Current liabilities Accounts payable $ 478,387 $ - $ 478,387 Accrued expenses 670, ,629 Deferred revenue 70,065-70,065 Total current liabilities 1,219,081-1,219,081 Unfunded accumulated pension benefit obligation 484, ,119 Total liabilities 1,703,200-1,703,200 Net assets 53,389, ,000 53,889,242 Total liabilities and net assets $ 55,092,442 $ 500,000 $ 55,592,442 The accompanying notes are an integral part of this schedule. 21

24 Schedule of Activities For the year ended Unrestricted Public support and other revenue Public support United Way contributions 810,439 Temporarily Restricted Total $ $ - $ 810,439 Donated goods 7,877,956-7,877,956 Other contributions 151, , ,050 Total public support 8,839, ,000 9,239,445 Other revenue Retail sales of donated goods 10,154,900-10,154,900 Industrial services 530, ,045 Workforce development 623, ,051 Investment income 167, ,921 Miscellaneous 18,789-18,789 Total other revenue 11,494,706-11,494,706 Net assets released from restrictions 833,354 (833,354) - Total public support and other revenue 21,167,505 (433,354) 20,734,151 Expenses Program services: Donated goods 12,145,357-12,145,357 Industrial services 622, ,812 Workforce development 1,289,613-1,289,613 Supporting services and general 3,471,455-3,471,455 Total expenses 17,529,237-17,529,237 Excess of public support and other revenue over expenses 3,638,268 (433,354) 3,204,914 Change in unfunded accumulated pension benefit obligation (603,443) - (603,443) Change in net assets 3,034,825 (433,354) 2,601,471 Transfers from Foundation 275, ,870 Net assets at beginning of year 50,078, ,354 51,011,901 Net assets at end of year $ 53,389,242 $ 500,000 $ 53,889,242 The accompanying notes are an integral part of this schedule. 22

25 Schedule of Functional Expenses For the year ended Program Services Donated Goods Industrial Contracts Workforce Development Supporting Services and General Total Salaries and wages $ 7,269,762 $ 488,045 $ 898,490 $ 1,338,549 $ 9,994,846 Employee health and retirement benefits 861,013 50, , ,626 1,214,214 Payroll taxes 702,651 40,544 88, , ,932 Professional fees and contract labor 153,547 1,870 16, , ,336 Supplies 208,224 24,319 7,824 38, ,396 Telephone 58, ,827 44, ,050 Postage ,495 4,572 Occupancy 705, , ,934 1,228,958 Equipment rental and repair 117,527 2,809 2,425 78, ,952 Printing 127,005 1,322 5,266 88, ,167 Transportation 782,301 10,187 23,651 25, ,227 Depreciation 967,704 1,771 67, ,696 1,407,293 Membership dues , ,277 Awards 10-1, ,424 Conferences and meetings 5, ,065 6,381 14,243 Fund raising activities , ,537 Other 185, ,239 56, ,813 $ 12,145,357 $ 622,812 $ 1,289,613 $ 3,471,455 $ 17,529,237 The accompanying notes are an integral part of this schedule. 23

26 Schedule of Financial Position Assets Cash and cash equivalents: Cash and money market - operating $ 269,339 Money market, investment 2,111,021 Total cash and cash equivalents 2,380,360 Accounts/pledges receivable 66,356 Marketable securities, at fair value 5,790,611 Total assets $ 8,237,327 Liabilities and Net Assets Accounts payable $ 883 Unrestricted net assets Undesignated 7,236,444 Board designated endowment 1,000,000 Total net assets 8,236,444 Total liabilities and net assets $ 8,237,327 The accompanying notes are an integral part of this schedule. 24

27 Schedule of Activities For the year ended Unrestricted Temporarily Restricted Total Revenue and support Interest and dividends $ 125,315 $ - $ 125,315 Contributions 292, ,858 Special events 216, ,376 Net realized and unrealized gain on marketable securities 141, ,064 Total 775, ,613 Net assets released from restrictions Total revenue and support 775, ,613 Expenses Distribution to Goodwill Industries of Dallas, Inc. 275, ,870 Professional fees 47,335-47,335 Fund raising activities 56,486-56,486 Other expenses 2,985-2,985 Total expenses 382, ,676 Revenue and support over expenses 392, ,937 Net assets at beginning of year 7,843,507-7,843,507 Net assets at end of year $ 8,236,444 $ - $ 8,236,444 The accompanying notes are an integral part of this schedule. 25