FINANCIAL STATEMENTS
TABLE OF CONTENTS Page(s) Independent Auditors Report 1 2 Required Supplementary Information Management s Discussion and Analysis 3 16 Basic Financial Statements Statements of Net Position 17 Statements of Revenues, Expenses, and Changes in Net Position 18 Statements of Cash Flows 19 20 Notes to Financial Statements 21 36 Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 37 38
INDEPENDENT AUDITORS REPORT The Audit Committee, The University Athletic Association, Inc.: Report on the Financial Statements: We have audited the accompanying financial statements of The University Athletic Association, Inc. (the Association), a direct support organization and component unit (for accounting purposes only) of the University of Florida, as of and for the years ended June 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise the Association s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements The Association s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. - 1 -
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Association as of June 30, 2016 and 2015, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 3 through 16 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 6, 2016, on our consideration of the Association s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Association s internal control over financial reporting and compliance. Gainesville, Florida September 6, 2016-2 -
MANAGEMENT'S DISCUSSION AND ANALYSIS Introduction The University Athletic Association, Inc. (the Association), a not-for-profit corporation, is a direct support organization of the University of Florida (UF). The Association exists to advance UF s teaching, research and service missions through the intercollegiate athletics program. The Association s strategic purpose focuses on providing a championship experience with integrity on and off the field for student-athletes and the Gator Nation. The Association s vision is to be the model collegiate athletics program, combining excellence and integrity in academics, athletics, and fan engagement to elevate the UF brand. The Association recognizes its responsibility to UF to operate the Association in an efficient manner using sound business principles within an ethical decision making process. The tremendous success of the athletic program can be attributed to many factors: outstanding coaches and support staff, extremely talented student-athletes, a great academic institution, a strong recruiting base, university support, supportive alumni and friends, and a commitment to each sport. The Association s financial strength is also a key component in its success and is a major factor in maintaining or surpassing its current level of achievement in all the Association s endeavors. Overview of the Financial Statements and Financial Analysis The Association is pleased to present its financial statements for the fiscal years ended June 30, 2016 and 2015. This discussion and analysis is a narrative explanation of the Association s financial condition and operating activities for these years. The overview presented below highlights the significant financial activities that occurred during the past two years and describes changes in financial activity from the prior year. Please read this overview in conjunction with the comparative summaries of net position and revenues, expenses and changes in net position and the Association s financial statements which begin on Page 18. Using these Financial Statements This report consists of a series of financial statements, prepared in accordance with the Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments and Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Colleges and Universities. There are three financial statements presented: the Statements of Net Position; the Statements of Revenues, Expenses and Changes in Net Position; and the Statements of Cash Flows. The Association s net position is one indicator of the improvement or erosion of its financial health when considered with non-financial facts such as the overall academic and athletic success of the intercollegiate athletic program and the condition of its facilities, and is a key indicator of the overall health of the Association and its programs. The success of the intercollegiate athletic program for the current year is evidenced by the information displayed on the following page. - 3 -
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) - 4 -
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Summary of Net Position The Statements of Net Position present the assets, liabilities and net position of the Association as of the end of the last two fiscal years. A Statement of Net Position is a point-in-time financial statement. Its purpose is to present to the readers of the financial statements a fiscal snapshot of the Association. The Statements of Net Position present end-of-the-year data concerning assets (what the Association owns and how much is owed to the Association by others), liabilities (what the Association owes to others and has collected from others before the service has been provided), and net position (assets minus liabilities). The statements are prepared using the economic resources measurement focus and the accrual basis of accounting, where revenues are recorded when they are earned and expenses are recognized when they are incurred. From the data presented, readers of the Statements of Net Position are able to determine the assets available to continue the operations of the Association. They are able to determine how much the Association owes to vendors and lending institutions. Finally, the Statements of Net Position provide a picture of the net position and their availability for expenditure by the Association. Net Position is divided into three major categories. The first category, net investment in capital assets, presents the Association s equity in property, plant and equipment. The next net position category is restricted net position. The Association s restricted net positions have constraints placed upon their use by independent donors. The final category is unrestricted net position. Unrestricted assets are available to the Association for any legal use. Condensed Summary of Net Position (thousands of dollars) 2016-2015 2015-2014 Increase Percent Increase Percent 2016 2015 (decrease) change 2014 (decrease) change Assets Current assets $ 76,842 $ 82,326 $ (5,484) -6.66% $ 75,147 $ 7,178 9.55% Capital assets, net of depreciation 193,185 174,581 18,604 10.66% 171,919 2,662 1.55% Other assets 57,020 60,313 (3,293) -5.46% 58,074 2,239 3.86% Total assets 327,047 317,220 9,827 3.10% 305,140 12,079 3.96% Liabilities Long-term debt outstanding 91,450 80,630 10,820 13.42% 84,710 (4,080) -4.82% Other liabilities 78,146 71,470 6,676 9.34% 67,619 3,850 5.69% Total liabilities 169,596 152,100 17,496 11.50% 152,329 (230) -0.15% Net Position Net investment in capital assets 101,735 93,951 7,784 8.29% 87,209 6,742 7.73% Restricted - 23,844 (23,844) -100.00% 15,122 8,722 57.68% Unrestricted 55,716 47,325 8,391 17.73% 50,480 (3,155) -6.25% Total net position $ 157,451 $ 165,120 $ (7,669) -4.64% $ 152,811 $ 12,309 8.06% - 5 -
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Highlights The Association s total assets increased by $9.8 million and $12.0 million in 2016 and 2015, respectively. The fluctuation in total assets between 2016 and 2015 was primarily due to an increase in capital assets related to major projects, a decrease in amounts due from Gator Boosters, Inc., a decrease in cash, and an increase in short-term investments. In 2015, the increase was primarily due to increases in the market value of investments. Current assets decreased in 2016 by $5.5 million primarily due to a $6.8 million decrease in cash and cash equivalents, a $9.8 million increase in short-term investments and an $8.8 million decrease in due from Gator Boosters, Inc. Capital assets, net of depreciation increased in 2016 by $18.6 million due to asset additions exceeding depreciation expense and significant capital projects. Other assets decreased by $3.3 million in 2016 and increased by $2.2 million in 2015 due to fluctuations in the value of long term investments. Long-term debt outstanding increased by $10.8 million in 2016 due to the issuance of a new $15 million bond and principal payments on outstanding bonds. Long-term debt outstanding decreased by $4.1 million in 2015 due to principal payments on outstanding bonds. Other liabilities increased by $6.7 million in 2016 primarily due to an increase in deferred Royalties and Sponsorships related to the naming of the O Connell Center of $7.1 million, a decrease in contracts payable of $2.0 million and a $1.5 million increase in accounts payable and accrued expenses. Total net position decreased by $7.7 million and increased by $12.3 million in 2016 and 2015, respectively. Unrestricted net position increased by $8.4 million in 2016 and decreased by $3.2 million in 2015. In 2016, net position invested in capital assets, net of related debt increased by $7.8 million due to the issuance of $15 million in new bonds, payments of $4.2 million on long-term debt, purchases of $13.2 million in capital assets, spending of $15 million in construction trust funds and the expensing of $9.6 million in depreciation. Restricted net position decreased by $23.8 million in 2016 and increased by $8.7 million in 2015 primarily due to receipt of contributions and construction expenses related to construction projects in the Stephen C. O Connell Center & the Hawkins Center for Academic Excellence. Summary of Revenues, Expenses and Changes in Net Position The Statements of Revenues, Expenses and Changes in Net Position present the revenues and expenses incurred during each year. Revenues and expenses are reported as operating and nonoperating. In general, operating revenues are received for providing goods and services to the Association s various customers and constituencies. Operating expenses are those expenses paid to acquire or produce goods and services provided in return for the operating revenues, and to carry out the mission of the Association. The utilization of long-lived assets, referred to as capital assets, is reflected in the financial statements as depreciation, which amortizes, and reduces operating income, by the cost of an asset over its expected useful life. - 6 -
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Nonoperating revenues are revenues received for which goods or services are not provided, such as investment income. Nonoperating expenses include interest on capital asset related debt and contributions to the University of Florida (UF) and the University of Florida Foundation (UFF). Contributions to UF include unrestricted gifts for the academic mission of the University, contributions for designated purposes and costs contributed by the Association for UF projects. Contributions to the UFF are transfers by the Association to the athletic scholarship endowment. Capital contributions are considered neither operating nor nonoperating and are reported after Income before contributions. Changes in total net position as presented on the Statements of Net Position are based on the activity presented in the Statements of Revenues, Expenses and Changes in Net Position. The purpose of the Statements of Revenues, Expenses and Changes in Net Position is to present the operating and nonoperating revenues received by the Association and the operating and nonoperating expenses paid by the Association, and any other revenues, expenses, gains and losses received or spent by the Association. Condensed Summary of Net Position (thousands of dollars) 2016-2015 2015-2014 Increase Percent Increase Percent 2016 2015 (decrease) change 2014 (decrease) change Operating revenues Football $ 82,270 $ 78,034 $ 4,236 5.43% $ 67,384 $ 10,650 15.80% Other sports 17,594 14,888 2,706 18.18% 10,781 4,107 38.09% Royalties and sponsorships 22,990 22,090 900 4.07% 18,769 3,321 17.69% Auxiliaries, camps, student fees and other 12,470 12,130 340 2.80% 11,871 259 2.18% Total operating revenues 135,324 127,142 8,182 6.44% 108,805 18,337 16.85% Nonoperating revenues (1,291) 2,128 (3,419) -160.67% 10,056 (7,928) -78.84% Total revenues 134,033 129,270 4,763 3.68% 118,861 10,409 8.76% Operating expenses Team expenses 51,523 61,719 (10,196) -16.52% 43,605 18,114 41.54% Scholarships and support services 30,326 27,244 3,082 11.31% 25,087 2,157 8.60% Administrative services 29,394 27,880 1,514 5.43% 25,965 1,915 7.38% Auxiliaries, camps and depreciation 13,154 12,834 320 2.49% 12,461 373 2.99% Total operating expenses 124,397 129,677 (5,280) -4.07% 107,118 22,559 21.06% Nonoperating expenses Interest on capital related debt 1,724 1,782 (58) -3.25% 2,035 (253) -12.43% Contributions to University of Florida and UF Foundation 24,775 6,124 18,651 304.56% 4,345 1,779 40.94% Total nonoperating expenses 26,499 7,906 18,593 235.18% 6,380 1,526 23.92% Total expenses 150,896 137,583 13,313 9.68% 113,498 24,085 21.22% Capital contributions from Gator Boosters, Inc. and others 9,194 20,622 (11,428) -55.42% 5,252 15,370 292.65% Increase (decrease) in net position (7,669) 12,309 (19,978) -162.30% 10,615 1,694 15.96% Net position, beginning of year 165,120 152,811 12,309 8.06% 142,196 10,615 7.47% Net position, end of year $ 157,451 $ 165,120 $ (7,669) -4.64% $ 152,811 $ 12,309 8.06% - 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Highlights Football revenues increased in 2016 by $4.2 million primarily due to an increase in Football Game Revenues, which includes bowl revenue, related to a more successful season for the Football team as well as an increase in revenues received from the Southeastern Conference. Other sports revenues increased in 2016 by $2.7 million primarily due to an increase in revenue earned from the SEC Network. Royalties and sponsorships increased by $0.9 million in 2016 primarily due to an increase of $1.2 million in multimedia rights, a combined $1.5 million increase in sponsorships, royalties and concession sales, and a $2.0 million decrease in equipment contract revenue related to a signing bonus on a new Nike equipment contract received in the prior year. Nonoperating revenue decreased by $3.4 million in 2016 and by $7.9 million in 2015 due to investment performance fluctuations. In 2016, operating expenses decreased by $5.3 million due to the following: o Team expenses decreased by $10.2 million primarily due to one-time coaching staff transition expenses in football and men s basketball in 2015 that did not occur in 2016. Those prior year expenses included over $6.9 million in termination settlements, which includes the full payout to former football and men s basketball coaching staffs. As well as a one-time expense of $5.1 million to fully recognize the contractual buyout agreements and signing bonuses for the football and men s basketball coaches. o Scholarships and supports services increased by $3.1 million primarily due to an increase in scholarship costs related to the full cost of attendance which is now awardable to the student athlete. As well as, increased costs related to student athlete tutoring and student athlete medical expenses. o Administrative services expenses increased by $1.5 million primarily due to an increase of $0.8 million in salaries and benefits for full time employees and a $0.5 million increase in information technology expenses related to implementation of new business software for Human Resources and Accounting. o Auxiliaries, camps and depreciation expenses increased primarily due to an increase of $0.3 million in depreciation. In 2015, operating expenses increased by $22.6 million due to the following: o Team expenses increased by $16.6 million primarily due to one-time coaching staff transition expenses in football and men s basketball. These expenses included over $6.9 million in termination settlements, which includes the full payout to former football and men s basketball coaching staffs. As well as a one-time expense of $5.1 million to fully recognize the contractual buyout agreements and signing bonuses for the football and men s basketball coaches. As well, the football team did not participate in a bowl game in the 2013 season, but did in the 2014 season for an increase in cost of $1.8 million. There was also an increase of $2.4 million in team expenses due to increases in charter aircraft costs and post season travel, along with increased coaching salaries for other sports. - 8 -
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) o Scholarships and supports services increased by $2.3 million primarily due to an increase in scholarship costs, student athlete tutoring and student athlete medical expenses. o General and administrative expenses increased by $3.3 million primarily due to an increase of $1.0 million in administrative support to the University, $0.6 million increase in employee health insurance expenses, $0.3 million in utility expenses and an increase of $1.0 million in maintenance project expenses, as well as, salary increases of 3.5% for all full time employees. o Auxiliaries, camps and depreciation expenses increased primarily due to an increase of $0.3 million in depreciation. Contributions to the University of Florida and to the University of Florida Foundation increased by $18.7 million in 2016 by $1.8 million in 2015. Contributions to the University of Florida include unrestricted gifts for the academic mission of the University, contributions for designated purposes and costs incurred by the Association for UF construction projects. See Note 8 in the Notes to the Financial Statements for further details on the Association s contributions to the University of Florida. Contributions to the University of Florida Foundation consisted of transfers by the Association to the Athletic Endowment Fund from profits from the Gator Walk brick program. See Note 9 in the Notes to the Financial Statements for further details on the Association s contributions to the University of Florida Foundation. Capital contributions are major gifts designated by the donors for facility construction, renovations and equipment purchases. The amount will fluctuate from year to year based on giving schedules. In 2016, capital contributions totaled $9.2 million and included $4.0 million for the renovation of The Hawkins Center at Farrior Hall, $1.1 million for the renovation of the Stephen C. O Connell Center, $2.9 million for the Football In-Door Practice Facility, $0.7 million for the Basketball Practice Facility and $0.5 million for various other projects. In 2015, capital contributions totaled $20.6 million and included $14.0 million for the renovation of The Hawkins Center at Farrior Hall, $5.0 million for the renovation of the Stephen C. O Connell Center, $1.0 million for the Gateway of Champions football front door project, and $0.1 million for various other projects. - 9 -
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MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Statement of Cash Flows The final statements presented include Statements of Cash Flows. The primary purpose of the Statements of Cash Flows is to provide relevant information about the Association s cash receipts and cash payments during the years shown. The statements classify cash receipts and cash payments as they result from operating, noncapital financing, capital and related financing, or investing activities. The first section, cash flows from operating activities, presents the cash effects of transactions and other events that enter into the determination of the Association s operating income. The second section, cash flows from noncapital financing activities, shows the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes and includes contributions to and from the University of Florida, the University of Florida Foundation and the State of Florida. The next section, cash flows from capital and related financing activities, provides information about cash used for the acquisition and construction of capital and related items and cash received from contributions specifically designated for capital purposes. The fourth section, cash flows from investing activities, details the purchases, proceeds and income received from investing activities. The final section reconciles the net cash provided (used) by operating activities to the operating income reflected on the Statements of Revenues, Expenses, and Changes in Net Position. Condensed Summary of Net Position (thousands of dollars) 2016-2015 2015-2014 Increase Percent Increase Percent 2016 2015 (decrease) change 2014 (decrease) change Cash flows from: Operating activities 36,363 11,004 25,359 230.45% 5,540 5,464 98.63% Noncapital financing activities (24,735) (6,140) (18,595) 302.85% (5,844) (296) 5.07% Capital & related financing activities (10,010) 2,337 (12,347) -528.33% (6,782) 9,119-134.46% Investing activities (8,423) (7,047) (1,376) 19.53% 4,301 (11,348) -263.85% Net change in cash and cash equivalents (6,805) 154 (6,959) -4518.83% (2,785) 2,939-105.53% Cash and cash equivalents, beginning of year 8,135 7,981 154 1.93% 10,766 (2,785) -25.87% Cash and cash equivalents, end of year 1,330 8,135 (6,805) -83.65% 7,981 154 1.93% Highlights Cash provided by operating activities increased by $25.4 million in 2016 due to increased cash contributions from Gator Boosters of $10.6 million, increased cash receipts from ticket holders of $4.3 million, increased cash receipts from the Southeastern Conference of $4.6 million, increased cash receipts from rights, royalties and sponsors of $9.9 million, increased cash used for payments to suppliers of $17.9 million, increased cash used for scholarships of $2.5 million and decreased cash used for payments to employees of $15.0 million. Cash used in noncapital financing activities increased by $18.6 million in 2016 due to increased contributions to the University of Florida for the renovation of the Stephen C. O Connell Center. - 13 -
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MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) As of June 30, 2016, the Association has a total of $91,450,000 in outstanding debt. This debt was used to finance a number of different athletic facilities, including a 1990 expansion of the north end zone of Ben Hill Griffin Stadium, a 2001 expansion of the Ben Hill Griffin Stadium Skybox and press box complex, a 2005 expansion and renovation of the baseball stadium and locker room, a 2007 expansion and renovation of the football offices and student athlete strength and conditioning center, a 2011 expansion of the west concourse of Ben Hill Griffin Stadium, an expansion and renovation of the gymnastics practice facility and an expansion and renovation of the men s and women s indoor tennis facility and the 2016 construction of a football indoor practice facility and renovation and expansion of the Hawkins Center for Academic and Personal Excellence. Economic Outlook The UAA s vision is to be the model collegiate athletics program by combining excellence and integrity in academics, athletics, and fan engagement to elevate the UF brand. The UAA continues to be in good condition financially, through a supportive fan base, a successful Gator Booster organization, and as a member of the Southeastern Conference (SEC). The launch of the SEC Network has been financially successful and has increased visibility of our league and will continue to be a significant revenue source along with the bowl agreements the league has entered into under the College Football Playoff format. The NCAA s culture is evolving to allow institutions to provide more assistance to student-athletes and has brought student-athlete safety to the forefront. This trend will increase the UAA s expenditures but will provide an opportunity to further support our vision. The UAA is in the process of completing construction of over $100 million in capital projects during the last 12 months. These projects have been funded through private contributions and a new bond issue. The Association needs to continue to be aggressive in providing the best possible facilities for our student athletes and our fans. Due to the nature of the Association fully funding all capital projects this is an integral piece of our future financial planning We must continue to seek donors for major gifts and endowments. The major gifts allow us to have some of the finest facilities in the country and the scholarship endowment (currently at $50.2 million) protects our future. Raising dollars for endowment is a major priority for the UAA and Gator Boosters. The financial success of the UAA will allow our student-athletes and our respective programs to compete and succeed at the highest level. Contacting Management This financial narrative is designed to provide the reader with a general overview of the University Athletic Association, Inc. s finances and to show the Association s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Association s Business Office at Ben Hill Griffin Stadium, Gainesville, Florida: The University Athletic Association, Inc. Attn: Associate Athletics Director Business Manager PO Box 14485 Gainesville, FL 32604-2485 (352) 375-4683 - 16 -
STATEMENTS OF NET POSITION 2016 2015 ASSETS Current assets Cash and cash equivalents $ 1,330,798 $ 8,135,034 Short-term investments 63,255,384 53,470,607 Accounts and other receivables, net 5,098,574 4,868,733 Due from Gator Boosters, Inc., current portion 4,976,794 13,782,257 Inventories 60,249 52,027 Prepaid expenses and other assets, current portion 2,120,456 2,016,964 Total current assets 76,842,255 82,325,622 Noncurrent assets Investments 56,240,482 58,808,477 Due from Gator Boosters, Inc., less current portion 779,300 1,450,964 Prepaid expenses and other assets, less current portion - 53,614 Capital assets not being depreciated 22,288,321 14,324,612 Capital assets being depreciated, net of accumulated depreciation 170,897,155 160,256,697 Total noncurrent assets 250,205,258 234,894,364 Total assets $ 327,047,513 $ 317,219,986 LIABILITIES Current liabilities Accounts payable and accrued expenses $ 9,632,240 $ 8,158,616 Accrued compensated absences, current 211,000 369,000 Contracts payable, current 1,381,358 1,868,058 Longevity incentive payable, current 470,000 87,500 Long-term debt, current 5,035,000 4,180,000 Unearned revenues, current 54,243,698 52,128,456 Agency funds payable - 12,947 Total current liabilities 70,973,296 66,804,577 Noncurrent liabilities Accrued compensated absences, less current portion 1,305,889 1,294,977 Contracts payable, less current portion 3,009,356 4,669,561 Longevity incentive payable, less current portion 351,667 361,667 Unearned revenues, less current portion 7,540,787 2,518,800 Long-term debt, less current portion 86,415,000 76,450,000 Total noncurrent liabilities 98,622,699 85,295,005 Total liabilities $ 169,595,995 $ 152,099,582 NET POSITION Net position Net investment in capital assets $ 101,735,476 $ 93,951,309 Restricted for capital projects - 23,844,351 Unrestricted 55,716,042 47,324,744 Total net position $ 157,451,518 $ 165,120,404 The accompanying notes to financial statements are an integral part of these statements. - 17 -
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEARS ENDED 2016 2015 Operating revenues Football $ 82,270,439 $ 78,034,139 Men's basketball 13,127,968 12,587,724 Other sports 4,465,862 2,299,786 Auxiliaries 1,400,181 1,125,812 Camps 1,484,841 1,872,982 Royalties and sponsorships 22,990,125 22,090,484 Student fees 2,431,579 2,438,374 Other 7,153,460 6,693,209 Total operating revenues 135,324,455 127,142,510 Operating expenses Football team expenses 26,174,374 22,841,413 Football coaching staff transition expenses - 11,168,334 Men's basketball team expenses 5,344,383 9,106,047 Other sports team expenses 20,003,826 18,603,211 Scholarships 14,216,818 12,699,899 Support services 16,109,598 14,543,717 Administrative services 29,394,167 27,880,381 Auxiliaries 1,927,061 1,649,544 Camps 1,587,694 1,871,828 Depreciation and amortization 9,639,491 9,312,457 Total operating expenses 124,397,412 129,676,831 Operating income (loss) 10,927,043 (2,534,321) Nonoperating revenues (expenses) Investment income, net (1,290,792) 2,127,936 Interest on capital asset related debt (1,724,193) (1,781,853) Contributions to the University of Florida (24,710,836) (6,100,292) Contributions to the University of Florida Foundation, Inc. (64,134) (23,695) Net nonoperating revenues (expenses) (27,789,955) (5,777,904) Loss before capital contributions (16,862,912) (8,312,225) Capital contributions from Gator Boosters, Inc. and others 9,194,026 20,621,687 Increase (decrease) in net position (7,668,886) 12,309,462 Net position, beginning of year 165,120,404 152,810,942 Net position, end of year $ 157,451,518 $ 165,120,404 The accompanying notes to financial statements are an integral part of these statements. - 18 -
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 2016 2015 Cash flows from operating activities Contributions from Gator Boosters, Inc. $ 42,684,063 $ 32,008,098 Receipts from ticket holders and others 35,575,309 31,312,268 Receipts from the Southeastern Conference and NCAA 39,203,612 34,607,428 Receipts from rights, royalties, and sponsors 28,411,334 18,426,013 Receipts from the University of Florida and the State of Florida for women's athletics 1,998,856 1,856,122 Other receipts 772,847 654,306 Payments to suppliers and others (49,034,558) (32,047,236) Payments to employees (48,938,209) (63,956,265) Payments for scholarships (14,310,257) (11,856,845) Net cash provided by operating activities 36,362,997 11,003,889 Cash flows from noncapital financing activities Contributions to the University of Florida (24,710,836) (6,100,292) Contributions to the University of Florida Foundation, Inc. (23,695) (39,321) Net cash used in noncapital financing activities (24,734,531) (6,139,613) Cash flows from capital and related financing activities Purchase of capital assets (27,934,764) (12,394,442) Proceeds from capital debt 15,000,000 - Capital contributions from Gator Boosters, Inc. 9,194,026 20,621,687 Principal paid on bonds (4,180,000) (4,080,000) Interest paid on bonds (2,089,108) (1,811,502) Proceeds from sale of capital assets - 1,472 Net cash (used in) provided by capital and asset related financing activities (10,009,846) 2,337,215 Cash flows from investing activities Purchases of investment securities (67,463,972) (71,655,124) Proceeds from sale and maturities of investment securities 57,246,892 61,853,271 Interest and dividends received 1,794,224 2,754,630 Net cash used in investing activities (8,422,856) (7,047,223) Net (decrease) increase in cash and cash equivalents (6,804,236) 154,268 Cash and cash equivalents, beginning of year 8,135,034 7,980,766 Cash and cash equivalents, end of year $ 1,330,798 $ 8,135,034 The accompanying notes to financial statements are an integral part of these statements. - 19 -
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED (Continued) 2016 2015 Reconciliation of operating income (loss) to net cash provided by operating activities Operating income (loss) $ 10,927,043 $ (2,534,321) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 9,639,491 9,312,457 Loss on disposal of capital assets 3,380 418,255 Changes in assets and liabilities: Accounts and other receivables (207,912) (812,998) Due from Gator Boosters, Inc. 9,477,127 407,825 Inventories (8,222) (9,598) Prepaid expenses and other assets (49,878) 107,937 Accounts payable and accrued expenses 1,374,804 2,812,800 Accrued compensated absences (147,088) (43,485) Longevity incentive payable 372,500 (19,167) Contracts payable (2,142,530) 6,276,502 Unearned revenues 7,137,229 (4,925,265) Agency funds payable (12,947) 12,947 Net cash provided by operating activities 36,362,997 11,003,889 The accompanying notes to financial statements are an integral part of these statements. - 20 -
NOTES TO FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies: The following is a summary of the more significant accounting policies of The University Athletic Association, Inc. (the Association), which affect significant elements of the accompanying basic financial statements. (a) Reporting entity The Association is a not-for-profit entity organized in 1929 for the purpose of conducting various intercollegiate athletic programs for and on behalf of the University of Florida. The Association operates for the service and convenience of the University of Florida and is a direct support organization and component unit (for accounting purposes only) of the University of Florida. (b) Measurement focus, basis of accounting, and financial statement presentation The financial statements of the Association have been prepared using the economic resources measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The Association distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses for the Association are those that result from the operation of the University of Florida s intercollegiate athletic programs. It also includes all revenue and expenses not related to capital and related financing, noncapital financing, or investing activities. As required by GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, capital contributions from Gator Boosters and others and contributions to the University of Florida and University of Florida Foundation, Inc. are not considered operating revenues or expenses and are reported after nonoperating revenues and expenses in the accompanying statements of revenues, expenses, and changes in net position. (c) Cash and cash equivalents Cash and cash equivalents include cash in banks and money market funds available for immediate use. (d) Accounts receivable Accounts receivable are stated at the amount management expects to collect from balances at year-end. Based on management's assessment of the credit history with organizations and individuals having outstanding balances and current relationships with them, it has concluded that realization losses on balances outstanding at year-end will be immaterial. The Association has no policy requiring collateral or other security to support its accounts receivable. (e) Inventories Inventories consist of items held for sale at the golf course pro shop and snack bar. Inventory items at the golf course pro shop are recorded at the lower of cost or market using the average cost method. All other inventory items are recorded at the lower of cost or market, as determined by using the first-in, first-out (FIFO) method. (f) Fair value measurements The Association categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. - 21 -
NOTES TO FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies: (Continued) (g) Capital assets Capital assets purchased with an original cost of $1,000 or more are recorded at cost and depreciated utilizing the straight-line method over the estimated useful lives of assets (generally 5 years for permanent equipment and 10 to 15 years for capital improvements, except for improvements to buildings which range from 50 to 60 years). Interest incurred during the construction phase of capital assets is included as part of the capitalized value of assets constructed. Costs to maintain or repair these assets are expensed as incurred. (h) Agency funds The Association acts as an agent for the control and distribution of cash from the sale of Gator Growl tickets for the University of Florida. Such amounts are not included in the statements of revenues, expenses and changes in net position. (i) Accrued compensated absences Eligible employees are entitled to annual vacation and sick leave with pay. The Association accrues accumulated unpaid annual vacation leave and associated employee-related costs, these amounts are included in the accompanying statements of net position. Vacation pay is expensed when earned by the employee up to the maximum payout. Sick leave payments are expensed when used as sick leave is not eligible for payout. (j) Unearned revenues Current unearned revenue consist of advance sales of football, men s and women s basketball, volleyball gold and platinum card tickets, related football and men s basketball contributions, and miscellaneous other unearned fees received. The unearned items are recognized as revenue when the related games are played and when the service is performed or event occurs for which miscellaneous fees were received. Additionally, unearned revenues included in other liabilities consist of booster prepayments and advance sponsorship and royalty payments. The sponsorship and royalty amounts are recognized over the life of the agreements, while the booster prepayments will be recognized in the applicable sports season. (k) Longevity incentive payable The Association accrues longevity incentives due to various employees as specified in their employment contracts. In some circumstances, the employee s employment contract may require the Association to make specified deposits into an employee directed investment account until such time as the employee has reached the stay period specified in their contract. These investment balances would transfer to the employee at the end of the stay period and are included in investments or short term investments in the accompanying statements of net position. In other circumstances, the Association is obligated to pay certain amounts to the employee at the end of the stay period. The Association accrues for these amounts ratably over the contract period. No payments will be made to the employee until they have reached the stay period specified in their contract. (l) Net position Net position is classified and displayed in three components: Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any debt that is attributable to those assets. Restricted consists of assets that have constraints placed upon their use either by external donors or creditors or through laws, regulations or constraints imposed by law through constitutional provisions or enabling legislation, reduced by any liabilities to be paid from - 22 -
NOTES TO FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies: (Continued) these assets. Restricted net position consists of capital contributions received for specific future capital projects. Unrestricted consists of assets that are available to the Association for any legal use. When both restricted and unrestricted net position is available for use, it is the Association s policy to use restricted resources first, then unrestricted resources as they are needed. (m) Sales taxes retained In accordance with Chapter 1006, Section 71 of the Florida Statutes, the Association retains an amount equal to sales taxes collected from ticket sales to athletic events for use in the support of women s athletic programs. Sales taxes retained totaled $1,614,394 and $1,471,660 for the years ended June 30, 2016 and 2015, respectively, and are included in other operating revenues in the statement of revenues, expenses, and changes in net position. (n) Income taxes The Association is generally exempt from Federal income taxes under the provisions of Section 501(c) (3) of the Internal Revenue Code. However, the Association is subject to income tax on unrelated business income. Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial reporting and tax purposes in different periods. Deferred taxes are classified as current or noncurrent, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The principal sources of temporary differences at June 30, 2016 and June 30, 2015, relate to differences in the timing of revenue recognition for financial reporting and tax purposes on certain sponsorship agreements. See financial statement Note 12 for additional information. The Association files tax returns in the U.S. federal jurisdiction and in the state of Florida. Management of the Association considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential significant changes that management believes are more likely than not to occur upon examination by tax authorities, including changes to the Association s status as a not-for-profit entity. Management believes the Association met the requirements to maintain its tax-exempt status and has not identified any uncertain tax positions subject to the unrelated business income tax that require recognition or disclosure in the accompanying financial statements. The Association s income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination. (o) In-kind contributions Donations of materials and services are recorded at their fair market value at the date of donation. (p) Reclassifications In order to facilitate the comparison of financial data, certain June 30, 2015 account balances have been reclassified to conform to the current year reporting format. These reclassifications had no effect on net position. (q) Reporting changes The Association implemented GASB Statement No. 72, Fair Value Measurement and Application, for the current fiscal year which requires the Association to use valuation techniques that are appropriate under the circumstances and for which sufficient data are available to measure fair value. - 23 -