LIFE UNIVERSITY, INC. CERTIFICATE OF COMPLIANCE REQUIRED BY SECTION 8.11 (B) OF THE LOAN AGREEMENT Pursuant to Section 8. 11 (b) of the Loan Agreement dated as of August 1, 2008 between Life University, Inc. (the "University") and Wells Fargo Bank, National Association, as dissemination agent, I, William D. Jarr, hereby certify that I am the duly appointed as the Executive Vice President for Finance of the University, and further certify on behalf of the University, that I am familiar with the terms of the Loan Agreement dated as of August 1, 2008 as amended June 1, 2010 and December 1, 2012 (the "Loan Agreement") between the University and the Development Authority of the City of Marietta and to the best of my knowledge after due investigation, that during the period ended or as of June 30, 2017 there did not exist any Event of Default nor did the University have knowledge of any such Event of Default. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as Executive Vice President for Finance of the University this 2nd day of August 17. By: D. Jarr ive Vice President for Finance ATLANT A:5227906.1
LIFE UNIVERSITY, INC. MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED June 30, 2017 Revenues: For the year ended June 30, 2017 tuition and fees including scholarships were approximately $4.69 million less than budget, primarily attributable to the doctorate enrollment being below the budgeted amount for the fiscal year. Tuition and fees including scholarships totaled $57.12 million or approximately $530,890 less the preceding year. The budget shortfall was offset by favorable budget variances related to investment performance and auxiliary enterprise services. Total revenues were less than budget by $2.74 million and $1.10 million over the previous year. Expenses: Operating expenses before depreciation and interest expense were $55.44 million and produced a positive budget variance of approximately $3.74 million at June 30, 2017 which was largely a result of managing replacement positions and expense control. Decrease from Operations: The overall impact of revenue and expense control resulted in a favorable budget variance of $983,336 for the fiscal year end and a $1.09 million decrease in net assets after debt service interest and depreciation. Cash and Investments: Cash and investments (including Title IV funds availability) decreased by approximately $4.05 million over the preceding year primarily attributable to the substantial renovation of the Administration Building into the Harris Assessment Center and other campus improvements undertaken during the fiscal year. Summary of Ratio Analysis at June 30, 2017. Days Cash on Hand 116.96 vs. 80.00 required Debt Service Coverage 1.26 vs. 1.20 required Long-Term Indebtedness.30 vs.15 required Trade Payables Less than 60 Days 94.74 % vs. 90.00% required
LIFE UNIVERSITY, INC. STATEMENTS OF ACTIVITIES For the Year Ended June 30, 2017 Temporarily Permanently Y-T-D VARIANCE PY-T-D Y-T-D Unrestricted Restricted Restricted BUDGET + (-) Revenues, Gains and Other Support Student tuition and fees: College of Chiropractic 51,299,952 50,981,545 50,981,545 55,650,206 (4,668,661) Non-chiropractic graduate 1,766,956 1,844,940 1,844,940 1,658,665 186,275 Undergraduate 7,488,536 7,642,109 7,642,109 7,654,576 (12,467) Institutional scholarships and tuition discounts (2,898,967) (3,343,841) (3,343,841) (3,148,770) (195,071) Private contributions 1,196,547 967,105 299,362 588,677 79,067 850,000 117,105 Interest and dividend income 188,553 463,289 359,649 28,892 74,748 150,000 313,289 Net realized and unrealized gains (losses) from investments 40,010 569,856 380,288-189,568-569,856 Clinic receipts 485,620 877,849 877,849 815,108 62,741 Sales and services of auxiliary enterprises 3,675,458 3,729,641 3,729,641 2,841,528 888,113 Net Assets Release from Restrictions - - 274,439 (274,439) - Total revenues, gains and other support 63,242,665 63,732,494 63,045,981 343,130 343,383 66,471,313 (2,738,819) 100% Operating Expenses Educational and general: Instructional and Research 19,537,154 19,360,503 19,360,503 23,405,527 4,045,024 Public Service 549,171 618,872 618,872 835,276 216,404 Academic support 2,895,303 3,093,880 3,093,880 3,872,375 778,495 Student services 8,368,406 8,322,928 8,322,928 9,524,219 1,201,291 Institutional support 13,998,673 14,278,218 14,278,218 13,299,892 (938,955) Operations and maintenance of plant 4,369,588 4,656,852 4,656,852 4,802,796 145,944 Scholarships 11,777 67,786 67,786 175,816 108,030 Auxiliary enterprises expenses 3,604,473 5,082,807 5,082,807 3,271,371 (1,811,436) Total operating expenses 53,334,545 55,481,847 55,481,847 - - 59,187,272 3,744,796 93% Increase (Decrease) from Operations 9,908,120 8,250,647 7,564,134 343,130 343,383 7,284,041 1,005,977 176% Other Changes (Gain)/Loss on sale of assets 1,531 (5,035) (5,035) 5,035 Debt Service Interest 4,722,663 4,685,621 4,685,621 4,657,945 (27,676) Change in split interest agreement - - Total other changes 4,724,194 4,680,586 4,680,586 - - 4,657,945 (22,641) Change in Net Assets 5,183,926 3,570,061 2,883,548 343,130 343,383 2,626,096 983,336 Depreciation and Amortization expense 5,457,122 4,701,627 4,701,627 5,300,000 Net Change in Net Assets (273,196) (1,131,566) (1,818,079) 343,130 343,383 (2,673,904) Changes in cash flow after debt service Capital Expenditures - Prior Year Capital Expenditures - Current Year - (1,371,973) (1,371,973) (2,040,000) Depreciation and Amortization expense 5,457,122 4,701,627 4,701,627 Debt Service Principal - - Changes in cash flow after debt service 5,183,926 2,198,088 1,511,575 343,130 343,383 (4,713,904) NOTE: June Village activity not included Perkins Allowance adjustment not included ISL Allowance adjustment not included FSL Allowance Adjustment not included Pledge Allowance adjustment not included Pledge PV calculation adjustment not included PTO adjustment not included A/P Accrual (currently have $550,00 recorded)
LIFE UNIVERSITY, INC. STATEMENTS OF FINANCIAL POSITION For the Year Ended June 30, 2017 Assets Y-T-D PY-T-D Cash and cash equivalents $ 12,623,263 $ 16,139,279 Investments 6,932,867 7,584,314 Title IV Funds Available 2,186,497 941,943 Student accounts receivable 88,488 73,111 Pledges receivable 1,511,145 1,989,808 Other receivables 546,782 1,254,195 Other assets 1,644,247 1,360,622 Notes Receivable 1,645,150 2,123,809 Deposits with trustee 107,176 82,539 Deposit with Trustee - Debt Service Reserve 6,309,060 6,304,366 Deposit with Trustee - Repairs 406,566 342,507 Intangible assets 992,052 1,071,347 CIP 8,301,375 1,078,390 Property and equipment, net 69,355,089 73,889,872 Total Assets $ 112,649,757 $ 114,236,104 Liabilities and Net Assets Accounts payable and accrued expenses $ 5,824,390 $ 5,749,925 Student predeposits and refunds 368,029 354,678 Deferred revenue 352,383 425,695 Other payables 40,000 55,000 Notes payable 65,690,888 66,145,174 Total Liabilities $ 72,275,690 $ 72,730,472 Net Assets Unrestricted: 30,997,405 33,081,069 Temporarily restricted 7,234,317 6,631,888 Permanently restricted 2,142,345 1,792,675 Total net assets $ 40,374,067 $ 41,505,632 Total Liabilities and net assets $ 112,649,757 $ 114,236,104 NOTE: June Village activity not included Perkins Allowance adjustment not included ISL Allowance adjustment not included FSL Allowance Adjustment not included Pledge Allowance adjustment not included Pledge PV calculation adjustment not included PTO adjustment not included A/P Accrual
Cash Flows From Operating Activities June 30, June 30, 2017 2016 Change in net assets $ (1,131,566) $ (273,196) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 4,780,922 5,457,122 Net realized and unrealized (gain) loss on investments 380,288 (40,010) Provision for present value of pledges receivable (128,683) 150,235 Provision for uncollectible pledge receivable 84,435 312,012 Provision for uncollectible notes receivable 703,642 (50,326) Gifts restricted for long-term investments (343,383) - Decrease (increase) in operating assets: Pledges receivable 179,529 (292,490) Other receivables 692,037 167,229 Other assets (283,625) (129,605) Increase (decrease) in operating liabilities: Accounts payable and accrued expenses 74,466 1,218,489 Other liabilities (74,961) 174,183 Net cash provided by operating activities 4,933,101 6,693,643 Cash Flows From Investing Activities Purchase of property and equipment (7,389,828) (2,221,558) Purchase of investments (60,576) (1,815,536) Proceeds from sale of investments 478,210 1,679,110 Increase (decrease) in: Cash restricted to investment Deposits with trustee (93,389) (67,112) Notes receivable, net (1,469,537) 264,673 Net cash (used in) investing activities (8,535,120) (2,160,423) Cash Flows From Financing Activities Gifts restricted for long-term investments 343,381 (20,073) Payments on long-term debt (1,239,146) (1,005,092) Proceeds from a note payable 784,860 - Net cash (used in) financing activities (110,905) (1,025,165) Net (Decrease) Increase in Cash (3,712,924) - 3,508,055 Cash and Cash Equivalents, beginning of year 16,336,187 12,828,132 Cash and Cash Equivalents, end of year $ 12,623,263 $ 16,336,187 Supplemental Cash Flow Disclosures Cash paid for interest $ 4,685,621 $ 4,722,663 Non-Cash Investing Activities Assets acquired from capital lease obligation $ -
Ratio Analysis: "Days" Cash on Hand Jun-17 Jun-16 Cash and Investments 12,623,263 16,139,279 Title IV Funds Available 2,186,497 941,943 Investments 6,932,867 7,584,314 21,742,627 24,665,537 Restricted Cash (2,162,648) (2,042,293) 19,579,979 22,623,245 Operating Expenses 64,864,060 63,515,861 Principal 940,000 855,000 Depreciation and Amortization (4,701,627) (5,014,194) Interest from Cap I Fund Change in PV of Deferred Comp Provision for Doubtful Accounts 61,102,433 59,356,667 365 365 167,404 162,621 Days Cash on Hand 116.96 139.12 Requirement 80.00 80.00 36.96 Pass 59.12 Pass
This and the following tabs support calculations related to bond covenant compliance. Debt Service Coverage Ratio Defined as "the ratio of (i) Revenues Available for Debt Service to (ii) the Debt Service Requirement Revenues Available for Debt Service Jun-17 Jun-16 Operating Revenues 63,045,981 62,567,495 Operating Expenses: Total operating expenses 64,864,060 63,515,861 Less: Interest on Long-Term Indebtedness 4,685,621 4,722,663 Amortization of financing charges Depreciation 4,701,627 5,457,122 9,387,249 55,476,812 10,179,785 53,336,076 Revenues Available for Debt Service 7,569,169 9,231,419 Debt Service Requirement Payments of principal and interest on bonds 5,591,300 5,559,738 Payments on other long-term indebtedness 394,166 150,092 5,985,466 5,709,830 1.26 1.62 1.20 Requirement 1.20 Requirement 0.06 Pass 0.42 Pass
Long-term Indebtedness Coverage Ratio June 30, 2017 Jun-17 Jun-16 Unrestricted Cash and Investments Cash 12,623,263 16,139,279 Title IV Funds Available 2,186,497 941,943 Investments 6,932,867 7,584,314 Restricted Cash (2,162,648) (2,042,293) 19,579,979 22,623,245 Long-term Indebtedness 65,690,888 66,145,174 0.30 0.34 0.15 Required 0.15 Required 0.15 Pass 0.19 Pass
The Bond Agreement requires that 90% of trade payables be less than 60 days and that this must be tested annually by the auditors Jun-17 Jun-16 A/P greater than 60 days per aging 14,741 52,209 Total A/P (after adjustment) per detail 280,107 1,218,309 % less than 60 days 94.74% 95.71% Minimum Requirement 90.00% 90.00% Difference 4.74% Pass 5.71% Pass
Life University Enrollment Report Summer 2017 11-12 12-13 13-14 14-15 15-16 16-17 11-12 12-13 13-14 14-15 15-16 16-17 New Students New Students Fall 474 428 460 403 399 448 Fall 200 177 225 147 179 188 Winter 276 264 275 221 231 191 Winter 126 131 137 113 121 99 Spring 202 186 151 132 150 115 Spring 91 94 85 65 51 59 Summer 276 255 234 243 227 197 Summer 121 110 111 122 94 85 Total Annual 1228 1238 1120 999 1007 951 Total Annual 538 512 558 447 445 431 Headcount: Headcount: Fall 2609 2655 2776 2754 2708 2692 Fall 1620 1667 1798 1786 1783 1726 Winter 2611 2645 2747 2648 2658 2638 Winter 1644 1716 1833 1766 1766 1704 Spring 2544 2550 2599 2567 2545 2500 Spring 1591 1685 1775 1724 1682 1644 Summer 2395 2464 2418 2394 2331 2271 Summer 1581 1680 1731 1704 1631 1585 10159 10314 10540 10363 10242 10101 Total Annual 6436 6748 7137 6980 6862 6659 FTE Students Life University FTE Students College of Chiropractic Fall 2448 2486 2598 2569 2546 2533 Fall 1570 1624 1758 1743 1742 1684 Winter 2451 2485 2579 2496 2514 2482 Winter 1602 1680 1802 1733 1736 1661 Spring 2376 2395 2432 2397 2390 2343 Spring 1559 1651 1747 1693 1650 1599 Summer 2212 2282 2249 2260 2135 2084 Summer 1535 1640 1696 1664 1585 1545 9487 9648 9858 9722 9585 9442 Total Annual 6266 6595 7003 6833 6713 6489 11-12 12-13 13-14 14-15 15-16 16-17 11-12 12-13 13-14 14-15 15-16 16-17 New Students New Students Fall 243 212 204 210 178 199 Fall 31 39 31 46 42 61 Winter 119 98 105 69 76 68 Winter 31 35 33 39 34 24 Spring 84 68 45 36 47 32 Spring 27 24 21 31 52 24 Summer 124 105 87 78 87 69 Summer 31 40 36 43 46 43 Total Annual 570 483 441 393 388 368 Total Annual 120 138 121 159 174 152 Headcount: Headcount: Fall 862 843 811 788 718 718 Fall 127 145 167 180 207 248 Winter 843 781 744 698 687 696 Winter 124 148 170 184 205 238 Spring 817 719 660 658 640 629 Spring 136 146 164 185 223 227 Summer 698 632 531 513 490 465 Summer 116 152 156 177 210 221 Total Annual 3220 2975 2746 2657 2535 2508 Total Annual 503 591 657 726 845 934 FTE Students Undergraduate FTE Students Graduate Fall 770 754 716 682 640 648 Fall 108 108 124 144 164 201 Winter 755 700 652 615 614 637 Winter 94 105 125 148 164 184 Spring 715 632 568 561 566 570 Spring 102 112 117 143 174 174 Summer 592 541 441 470 400 392 Summer 85 101 112 126 150 147 Total Annual 2832 2627 2377 2328 2220 2247 Total Annual 389 426 478 561 652 706 Prepared by OIR Summer 2016 Census Date: Tuesday, July 18, 2017