strand theatre of shreveport...the strand theatre of shreveport corporation is a nonprofit...

The Strand Theatre of Shreveport Corporation

Financial Statements Years Ended May 31, 2016 and 2015


Contents

Independent Auditor's Report 3-4

Financial Statements

Statements of Financial Position 5

Statements of Activities 6-8

Statements of Cash Flows 9

Summary of Accounting Policies 10-13

Notes to Financial Statements 14-17

Supplementary Information

Schedule of Compensation, Benefits and Other Payments to Agency Head 19

Schedule of Findings 20

Business Park Drive

Shreveport, Louisiana 71105

Phone: 318.219,5020

Fax: 318.798.191?

Jomes K. McClelland, CPA LLC info ilj kmc pel s.biz

Independent Auditor's Report

The Board of Directors The Strand Theatre of Shreveport Corporation Shreveport, Louisiana

I have audited the accompanying financial statements of The Strand Theatre of Shreveport Corporation (a nonprofit organization) which con^rise the statements of financial position for die years ended May 31, 2016 and 2015, and the related statements of activities and cash flows for the years then ended, and summary of significant accoimting policies and the related notes to financial statements.

Management's Responsibility for the Financial Statements

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 intemal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit 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 intemal confrol 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 piuq)ose of expressing an opinion on the effectiveness of the entity's intemal control. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accoimting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Serving Christ Through Serving Youl

Opinion

In my opinion, tiie financial statements referred to above present fairly, in all material respects, die financial position of die Sdmd Theatre of Shreveport Corporation as of May 31,2016 and 2015, and the changes in its net assets and cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.

LU^

Certified Public Accountant

Shreveport, Louisiana September 15, 2016

Serving Christ Through Serving Youl


Statements of Financial Position

May 31, 2016 2015

Assets

Current assets: Cash (Note 1) $ 101,405 $ 38,478 Short-term investments (Notes 3 and 11) 100,000 100,000 Trade accounts receivable - 16,214 Grants receivable 16,311 10,000 Prepaid expenses 45,551 43,356

Total ciurent assets 263,267 208,048

Cash restricted for long-term purposes (Notes 1, 9 and 14) - 552,500

Property and equipment (Notes 2 and 14) 3,733,648 3,333,977

Work of art (Note 12) 106,400 106,400

Strand Building Fund (Note 10) 202,844 _

$4,306,159 $4,200,925

Liabilities and Net Assets

Current liabilities: Notes Payable (Note 3) $ 63,000 $ 85,000 Accounts payable 11,371 3,112 Accrued expenses 15,592 16,749 Deferred revenue 159,580 251,209

Total current liabilities 249,543 356,070

Net assets (Note 9): Unrestricted 3,196,400 3,192,355 Temporarily restricted 660,216 652,500 Permanently reshicted 200,000 -

Total net assets 4,056,616 3,844,855

$4,306,159 $4,200,925

See accompanying summary of accounting policies and notes to financial statements.


Statements of Activities

Years Ended May 31, 2016 2015

Changes in unrestricted net assets:

Support and revenues: Ticket sales $ 501,373 $ 435,978 Fund raising 329,802 283,240 Other income 369,540 218,746 Business sponsorships 82,750 97,850 Grant income 87,622 70,988 Program advertising 24,355 26,725

Total support and revenues 1,395,442 1,133,527

Expenses:

Program services and theatrical: Salary and wages 232,265 222,773 Artist fees 232,000 210,800 Depreciation and amortization 166,866 153,525 Occupancy expense 108,122 121,964 Insurance 74,591 69,732 Printing 72,364 30,990 Contract labor 65,861 31,629 Payroll taxes and benefits 58,943 64,009 Advertising 44,228 53,860 Production cost 37,342 45,791 Box office 13,003 21,107 Janitorial expense 10,145 5,133 Credit card fees 7,436 -Security 7,045 6,885 Theatre supplies 1,375 944

Total program services and theatrical 1,131,586 1,039,142

Management and general: Salaries and wages 42,693 66,067 Professional fees 26,119 14,689 Payroll taxes and benefits 14,686 23,584 Miscellaneous 14,347 8,084 Office supplies and equipment 9,957 8,782 Conference and travel 9,384 9,990

(Continued)

6


Statements of Activities (Continued)


Telq)hone Postage Interest Dues and subscriptions

$ 6,860 6,665 4,186 1,661

$ 6,771 6,679 4,928 3,191

Total management and general 136,558 152,765

Fundraising: Salaries and wages Payroll taxes and employee benefits Friends expense

22,465 3,197

91

14,911 2,589

191

Total fimdraising 25,753 17,691

Other income (expense): Litigation settlement (Note 8) Assets released from restriction (Note 9) Assets reclassed to long-term purposes (Notes 9 and 10)

2,500 (100,000)

(11,128) 117,141

Other income (expense) (97,500) 106,013

Licrease in imrestricted net assets 4,045 29,942

Changes in temporarily restricted net assets: Contributions restricted to major maintenance projects Contributions restricted to pledged assets Contributions restricted to union settlement Investment income on Strand Building Fund (Note 10) Assets released from restriction (Note 9)

7,372

2,844 (2,500)

569,173 100,000

72,500

(117,141)

Licrease in temporarily restricted net assets 7,716 624,532

Changes in permanently restricted net assets: Reclassification of unrestricted net assets to long-term purpose

(Notes 9 and 10) Permanently reshicted contributions (Notes 9 and 10)

100,000 100,000

-

Increase in permanently restricted net assets 200,000 (Continued)


Statements of Activities (Concluded)


Licrease in net assets $ 211,761 $ 654,474

Net assets, beginning of year 3,844,855 3,190,381

Net assets, end of year $4,056,616 $3,844,855



Statements of Cash Flows


Cash Flows from Operating Activities: Increase in net assets $211,761 $ 654,474 Adjustments to reconcile increase in net assets

to net cash provided by operating activities: Contributions restricted for long-term purposes (102,844) (552,500) Net assets released from restrictions 2,500 -Depreciation and amortization 166,866 153,525 Change in operating assets and liabihties:

Trade accounts receivable 16,214 (10,155) Grants receivable (6,311) (5,106) Prepaid expenses (2,195) 25,763 Accounts payable 8,259 (55,441) Accrued expenses (1,157) 7,858 Deferred revenue (91,629) (91,149) Litigation settlement - (72,914)

Net cash provided by operating activities 201,464 54,355

Cash Flows From Investing Activities: Expenditures for property and equipment (566,537) (9,129) Investment in other long-term assets (202,844) -Cash held for long-term purposes utilized in acquisition

of property and equipment 550,000 -Purchase of short-term investments - (100,000)

Net cash used in investment activities (219,381) (109,129)

Cash Flows From Financing Activities -Contributions restricted for long-term purposes 100,000 -Restricted interest and dividends 2,844 Payments decrease on line-of-credit, net (22,000) (10,000)

Net cash provided by (used in) financing activities 80,844 (10,000)

Net increase (decrease) in cash 62,927 (64,774)

Cash, at beginning of year 38,478 103,252

Cash, at end of year $ 101,405 S 38,478



Summary of Accounting Policies

Summary of Accounting Policies

Nature of Business

Method of Accounting

Revenue Recognition

This summary of accounting policies of The Strand Theatre of Shreveport Corporation (the "Strand") is presented to assist in understanding the Organization's financial statements. The financial statements and notes are representations of the Organization's management, who is responsible for their integrity and objectivity. These accounting policies have been consistently applied in the preparation of the financial statements.

The Strand Theatre of Shreveport Corporation is a nonprofit corporation organized under the laws of the State of Louisiana. The Strand was incorporated September 17,1976, and operates primarily to provide live entertainment attractions for Shreveport and the surrounding community and to promote the performing arts.

Substantially all of the Strand's revenue is firom the sale of admissions to the Strand sponsored events, fiindraising and sponsorships, rentals and grant income.

The Strand uses the accrual basis of accounting for bodi unrestricted and restricted funds. Unrestricted fund assets, liabilities, revenue and expenses are those items acquired or incurred through the Strand's normal fund raising efforts and production activities. Restricted fund assets, liabilities, revenue and expenses include those items acquired or received through the Strand's normal fund raising efforts as well as those items received or incurred pursuant to grants from various agencies, the use of which is governed by reshictions placed thereon by the donors. Restricted funds may be used only for the purposes for which the donor or grantor contributed such funds.

The Strand reports gifts of cash and other assets as restricted support if they are received with donor stipulations ftiat limit the use of donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, tenq)orarily restricted net assets are reclassified to unresfticted net assets and reported in ftie statement of activities as net assets released from restrictions. Temporarily restricted donations on which the restriction expires in the same year received are reported in the unrestricted fund.

10


Summary of Accounting Policies (Continued)

Use of Estimates

Concentrations of Credit Risk

Property and Equipment

Deferred Revenue

Contributions and Contributed Services

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assun^tions that affect the reported amounts of assets and liabilities and disclosiure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates in the financial statements are depreciation and amortization of property and equipment and fair market value of beneficial interest in net assets of foundation.

The Shand serves a limited geographic area. Due to the nature of its operations, the Strand is dependent upon the local community and the health of the local economy in which it operates.

The Strand capitalizes property and equipment with useful lives over three years. Property and equipment are stated at cost, or if donated, at the fair market value at the date of donation. Works of art are capitalized at their fair market value on donation and, pursuant to FASB Accounting Standards Codification 958, Not-For-Profit Entities, are not depreciated. Depreciation is calculated on the straight-line method over the estimated usehil lives of the assets, which range from 5 to 40 years. Maintenance and repairs which do not inq)rove or extend the life of the respective assets are expensed as incurred.

Deferred revenue consists of ticket sales and payments received in advance for theatrical productions to be performed in the following fiscal year and proceeds from fund raising efforts related to the following fiscal year. Amounts related to deferred revenue for 2016 and 2015 were $159,580 and $251,209, respectively.

The Strand has adopted FASB Accounting Standards Codification 958, Not-For-Profit Entities. Contributions received are recorded as unrestricted, temporarily reshicted, or permanently restricted support depending on the existence or nature of any donor restrictions.

The Strand receives donated services fi:om many unpaid volunteers who donate their time and perform a variety of tasks that assist the organization. The value of contributed services meeting the requirements for recognition in the financial statements for 2016 and 2015 was not material and has not been recorded.

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Summary of Accounting Policies (Continued)

Income Taxes The Strand is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and exenq)t from state income tax under appropriate provisions in the laws of the State of Louisiana. The Strand is not a private foundation within the meaning of Section 509(a) and there was no unrelated net business taxable income for the years ended May 31, 2016 and 2015. Accordingly, no provision for income taxes has been made in the financial statements.

Financial Statement Presentation

Functional Expenses

Collective Bargaining Agreement

Statements of Cash Flows

Reclassifications

The Strand has adopted ASC 740, Accountingfor Uncertainty in Income Taxes. Management has evaluated the Strand's tax positions and concluded that the Sfrand has taken no uncertain tax positions that require adjustment to die financial statements in order to comply with the provisions of ASC 740. In addition, Management is not aware of any matters that would cause the Strand to lose its tax-exenq)t status. The income tax filings for the Strand's years ending in 2014 through 2016 are subject to examination by taxing authorities.

The Strand has adopted FASB Accounting Standards Codification 958, Not-For-Profit Entities. Under FASB ASC 958, the Strand is required to report information regarding its financial position and activities according to three classes of net assets; unrestricted net assets, tenqiorarily restricted net assets, and permanently resfricted net assets. As permitted by the statement, the Strand does not use fimd accounting.

Expenses are charged directly to program services, management and general and fund raising expenses in general categories based on specific identification.

Certain wages paid by the Strand were covered by a collective bargaining agreement. The agreement sets wage rates for various job classifications along with other terms and conditions and is effective through August 31, 2018.

For purposes of the statements of cash flows, the Strand considers all cash in bank accounts and highly liquid debt instruments purchased with original maturities of three months or less, including restricted fimds not pledged as collateral or for long-term purposes, to be cash equivalents.

Cetain prior year amounts have been reclassified to conform to current year presentation.

12


Summary of Accounting Policies (Concluded)

Subsequent Events Management evaluated events subsequent to the Strand's most recent year end through September 15, 2016, the financial statement issuance date.

Advertising The Strand expenses advertising as it is inciured. The Shrand expended $44,228 and $53,860 in the years ended May 31, 2016 and 2015, respectively, for advertising.

13


Notes to Financial Statements

1. Cash

2. Property and Equipment

3. Notes Payable

4. Operating Leases

5. Employee Benefit Plan

Included in cash as of May 31, 2016 and 2015 are interest-bearing accounts totaling $97,995 and $37,568, respectively. Additionally, cash restricted for long-term purposes at May 31, 2015 included $550,000 in interest bearing deposits.

At May 31, 2016, $0 in demand deposits exceeded Federal Depository insurance limits.

Major classes of property and equipment consist of the following:

2016 2015

Land Theatre and improvements Theatrical equipment Office furniture and equipment Construction in progress

$ 96,000 6,058,390

281,257 68,029

$ 96,000 5,500,904

265,171 67,564

7,500

Less accumulated depreciation and amortization

6,503,676

2,770,028

5,937,139

2,603,162

Net property and equipment $3,733,648 $3,333,977

The Organization has a $ 100,000, variable rate (5.50% at May 31,2016) revolving line-of-credit with a bank seciured by a $100,000 certificate of deposit. The outstanding balance as of May 31, 2016 and 2015 was $63,000 and $85,000, respectively.

Interest expense was $4,186 and $4,928 for the years ended May 31, 2016 and 2015, respectively.

The Strand leases certain office equipment. The following is a schedule by year of fiitiure minimum lease payments due under office equipment leases: 2017 - $1,800; 2018 - $1,500. Rental expense under operating leases for 2016 was $2,100.

The Strand uses hoiurly enq)loyees who belong to the International Alliance of Theatrical Stage Employees Union and are covered under the lATSE National Benefit Funds pension plan. Benefits paid to union employees for years ended May 31, 2016 and 2015 were $9,260 and $8,922, respectively.

14


Notes to Financial Statements (Continued)

6. Related Party Transactions

7. Supplemental Cash Flows Information

8. Litigation

9. Net Assets

The Strand's general insurance agent is a member of the board. The annual premium cost paid to the agency, with which this individual is associated, was $74,591 and $69,732 for the years ended May 31, 2016 and 2015, respectively.

Cash paid for interest was $4,186 and $4,928 for the years ended May 31, 2016 and 2015, respectively. There was no cash paid for income taxes in either 2016 or 2015.

On April 29, 2010, the National Labor Relations Board approved die settlement (the "Settlement") of an action against the Strand in a case brought by the Stage Enqiloyees Local 298 of the lATSE. The settlement called for die payment of a total of $144,532 to be paid out at $12,000 per yearplus an initial payment of$12,532. The Settlement established back wages to be $111,068 and interest to be paid over the term of die agreement to be $33,464.

The balance of the Setdement was fidly paid dming 2015, allocating $72,914 to principal aid $11,128 to litigation settlement in the acconqianying financial statements. There were no Htigation setdement payments in 2016.

Net assets were released from donor restrictions during 2016 and 2015 by inciuring expenses satisfying the restricted purposes or by die occurrence of other events specified by the donors. Net assets released were donated for the following specific purposes:

May 31, 2016 2015

Capital Inqirovements $2,500 $ 7,500 Satisfaction of Union Setdement - 72,500 Major Maintenance - 37,141

Total $2,500 $117,141

The following is a description of amomits classified as temporarily restricted net assets at May 31, 2016 and 2015

May 31, 2016 2015

Portion of building restiicted imtil December 31, 2036 (Note 14) $550,000 $

(Continued)

15


Notes to Financial Statements (Continued)

9. Net Assets - (continued)

10. Strand Building Fund

May 31, 2016 2015

Net assets of Strand Buil(hng Fimd available for building expenchtures

Net assets required to be retained until used for capital in^rovements

Net assets required to be retained as collateral for a bank line-of-crecht

S 2,844

7,372

100,000

$

552,500

100,000

Total $660,216 $652,500

The following is a description of amounts classified as restricted net assets

permanently

May 31, 2016 2015

Net assets permanently restricted, but whose earnings and capital appreciation may be used for capital urq)rovements (see Note 10) $200,000 $

Total $200,000 $

On April 11, 2016 the Strand entered into a Designated Agency Endowment Fimd Agreement with the Community Foundation of North Louisiana (the "Foundation") to establish a Strand Building Fund (the "Fund"). Under the terms of the agreement, the Strand invested $100,000 cash from unrestricted net assets which was matched by a $100,000 donation from the Foundation as a permanently restricted contribution to be deposited into the Fund.

Under the terms of the Fund, the Foundation has ovmership of the fiinds while the Strand retains a beneficial interest in the earnings and capital appreciation, which may be wifiicfrawn to pay for repairs, maintenance and ofiier capital improvements to the Sfrand building in accordance wifii fiie Foundation's spending policy. Disfributions from the fimd in excess of earnings and capital appreciation can only be made for special or board of directors.

16


Notes to Financial Statements (Concluded)

10. Strand Building Fund - (continued)

11. Investments

12. Work of Art

13. Endowment Account

14. Building Mortgage

The fair market value of the fund at May 31, 2016 was $202,844. For the year ended May 31, 2016 die Fund had earned $2,844, which is reflected as a tenqiorarily restticted hind.

Short-term investment at May 31, 2016 comprises one certificate of deposit with a cost and current market value of $100,000 matiuing on July 1, 2016. The Sfiand has pledged this asset as collateral on its line-of-credit identified in Note 3.

Work of Art comprises an 18''^ century Waterford Chandelier.

In 1998, the Shrand entered into an agreement with the Community Foundation of Shreveport-Bossier (die "Foimdation"), The agreement establishes an Agency Endowment Fund at The Fomdation called "The Strand Theatre Fund" ("Fund"). All property of the Fund belongs to the Foundation. The fund will be used for support of the charitable piuposes of The Shrand. Net income and capital appreciation of the Fund, as governed by The Foundation's Spending Pohcy, will be paid and distributed to The Sfiand at least annually, for as long as The Sfiand is a Quahfied Charitable Organization.

The fair nwket value of the fmd at May 31, 2016 and 2015 was $74,584 and $79,663 respectively. Income received by the Shr^d from the fimd used for operations at May 31, 2016 md 2015 were $3,093 and $3,015 respectively.

On April 9, 2015, as part of the terms of a $550,000 grant to replace its roof (the "Grant"), die Strand executed a P* Mortgage in favor of die foundation making die grant (the "Grantor"). The mortgage will remain in place throu^ December 31,203 6.

Further conditions of the Grant include, but are not limited to:

• The Sfiand agrees not to mortgage or dransfer ovmership of the builchng dirou^ December 31, 2036. Should die Sfiand do so, the entirety of the Grant will be repayable to die Grantor.

• If the actual costs of the project do not equal or exceed $550,000, the excess must be used direcdy for water proofing and restoration.

• The project must begin before January 1, 2016.

The project was completed according to the grant conctitions.

17

I

Supplementary Information


Schedule of Compensation, Benefits and Other Payments to Agency Head

Year Ended May 31, 2015

Louisiana Revised Statute 24:513 (A) (3) requires reporting of the total compensation, reimbursements, and benefits paid to the agency head or chief executive officer. This law was further amended by Act 462 of the 2015 Regular Session of the Louisiana Legislature to clarify that nongovernmental or not-for-profit local auditees are required to report only the compensation, reimbursements, and benefits paid to the agency head or chief executive officer from public funds.

The Strand Theatre of Shreveport Corporation is not required to report the total compensation, reimbursements, and benefits paid to Ms. Jenifer HUl, the Executive Director, as none of those payments were made from public funds.

19


Schedule of Findings

Current Findings:

There were no findings for the year ended May 31.2016.

Past Findings:

There were no findings for the year ended May 31, 2015.

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