YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE FINANCIAL STATEMENTS December 31, 2014 and 2013 YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE TABLE OF CONTENTS Page Independent Auditor’s Report ......................................................................................................... 1 – 2 Financial Statements: Statements of Financial Position ............................................................................................... 3 Statements of Activities....................................................................................................... 4 – 5 Statements of Functional Expenses ..................................................................................... 6 – 7 Statements of Cash Flows ................................................................................................... 8 – 9 Notes to Financial Statements ...................................................................................................... 10 – 25 FRASIERDEAN HOWARDC PAS INDEPENDENT REPORT To the Board of Directors of Young Men's Christian Association of Middle Tennessee Nashville, Tennessee We have audited the accompanying ?nancial statements of the Young Men's Christian Association of Middle Tennessee (a nonpro?t organization), which comprise the statements of ?nancial position as of December 31, 2014 and 2013, and the related statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the ?nancial statements. Management?s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these ?nancial 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 ?nancial statements that are free from material misstatement, whether due to fraud or error. Auditor?s Responsibility Our responsibility is to express an opinion on these ?nancial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ?nancial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ?nancial statements. The procedures selected depend on the auditor?s judgment, including the assessment of the risks of material misstatement of the ?nancial 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 ?nancial 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 signi?cant accounting estimates made by management, as well as evaluating the overall presentation of the ?nancial statements. We believe that the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our audit opinion. Frasier, Dean 8c Howard, PLLC 3310 West End Avenue, Suite 550 Nashville,Tennessee 37203?1089 615.383.6592 fax 615.383.7094 wx-xwidhcparom Opinion In our opinion, the ?nancial statements referred to above present fairly, in all material respects, the ?nancial position of the Young Men's Christian Association of Middle Tennessee as of December 31, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. I'Aqm? pm i? May 4, 2015 YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE STATEMENTS OF FINANCIAL POSITION December 31, 2014 and 2013 2014 ASSETS Current assets: Cash and cash equivalents Accounts receivable: Membership and program fees, net of allowance of $169,397 and $160,451 at December 31, 2014 and 2013, respectively Grants and contracts Pledges receivable, net Prepaid expenses and other assets $ Total current assets Pledges receivable, less current portion Land held for sale Property and equipment, net Bond issue costs, net Cash restricted for investment in property and equipment Total assets $ 9,871,057 Line of credit Long term interest rate swap Long term notes payable, less current portion Long term bonds payable, less current portion Long term capital leases, less current portion Deferred lease revenue Total liabilities Net assets: Unrestricted: Undesignated Board-designated Total unrestricted Temporarily restricted Total net assets Total liabilities and net assets $ $ 12,661,417 1,476,717 152,589 147,571 546,105 1,400,196 155,188 919,894 996,772 12,194,039 16,133,467 1,017,616 2,387,500 124,305,205 76,462 272,008 1,028,800 2,700,000 129,482,104 80,709 856,908 140,252,830 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable $ 1,328,667 Accrued expenses 4,966,438 Deferred membership and other revenues 1,962,897 Current portion of notes payable 35,722 Current portion of bonds payable 2,949,177 Current portion of capital leases 936,636 Total current liabilities 2013 $ 150,281,988 $ 2,398,351 5,619,359 1,644,677 19,053 2,694,548 2,300,734 12,179,537 14,676,722 5,844,414 2,239,029 54,816 47,414,060 1,388,673 1,170,665 4,419,724 1,861,082 23,929 50,859,738 1,253,149 1,250,164 70,291,194 74,344,508 64,739,724 3,784,717 67,391,595 5,740,283 68,524,441 73,131,878 1,437,195 2,805,602 69,961,636 75,937,480 140,252,830 See accompanying notes to financial statements. -3- $ 150,281,988 YOUNG MEN'S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE STATEMENTS OF ACTIVITIES For the Year Ended December 31, 2014 (With Summarized Financial Information for the Year Ended December 31, 2013) Unrestricted Operating activities: Public support: Contributions Foundation and corporate grants Special events, net Loss on sale of property and equipment Total public support $ 3,972,779 1,050,491 839,748 Temporarily Restricted $ (205,755) 5,657,263 - Permanently Restricted $ - 2013 Total Total $ 3,972,779 1,050,491 839,748 $ - - 46,064,734 23,204,946 1,818,438 887,481 856,160 183,152 113,776 73,128,687 - - 46,064,734 23,204,946 1,818,438 887,481 856,160 183,152 113,776 73,128,687 49,004,314 23,791,112 2,070,484 825,306 855,804 165,809 117,058 76,829,887 78,785,950 - - 78,785,950 82,021,834 71,769,906 9,633,895 1,530,644 82,934,445 - - 71,769,906 9,633,895 1,530,644 82,934,445 77,299,280 10,545,295 1,526,252 89,370,827 Changes in net assets from operations (4,148,495) - - (4,148,495) (7,348,993) Non-operating activities: Unrealized gain (loss) on interest rate swap Contributions for capital assets Restructuring costs Release from restriction Total non-operating activities (377,947) 846,497 (2,297,442) 1,369,950 (458,942) 1,543 (1,369,950) (1,368,407) - (377,947) 848,040 (2,297,442) (1,827,349) 1,722,966 676,246 (10,351,370) (7,952,158) Change in net assets (4,607,437) (1,368,407) - (5,975,844) (15,301,151) Net assets - beginning of year 73,131,878 2,805,602 - 75,937,480 91,238,631 Revenue: Membership fees, net Program fees, net Government grants and contracts Sales to members Other income Consulting and management fees Interest income Total revenue Total public support and revenue Expenses: Program services Administrative Fundraising Total expenses Net assets - end of year $ 68,524,441 $ 1,437,195 $ - See accompanying notes to the financial statements. -4- (205,755) 5,657,263 3,993,866 797,483 509,793 $ 69,961,636 (109,195) 5,191,947 $ 75,937,480 YOUNG MEN'S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2013 Unrestricted Operating activities: Public support: Contributions Foundation and corporate grants Special events, net Loss on disposal of property and equipment Total public support $ 3,993,866 797,483 509,793 Temporarily Restricted $ (109,195) 5,191,947 - Permanently Restricted $ - Total $ 3,993,866 797,483 509,793 - - 49,004,314 23,791,112 2,070,484 855,804 825,306 165,809 117,058 76,829,887 - - 49,004,314 23,791,112 2,070,484 855,804 825,306 165,809 117,058 76,829,887 82,021,834 - - 82,021,834 77,299,280 10,545,295 1,526,252 89,370,827 - - 77,299,280 10,545,295 1,526,252 89,370,827 Changes in net assets from operations (7,348,993) - - (7,348,993) Non-operating activities: Unrealized gain (loss) on interest rate swap Contributions for capital assets Restructuring costs Release from restriction Total non-operating activities 1,722,966 (10,351,370) 2,890,178 (5,738,226) 676,246 (2,890,178) (2,213,932) - 1,722,966 676,246 (10,351,370) (7,952,158) Changes in net assets (13,087,219) (2,213,932) - (15,301,151) 86,219,097 5,019,534 - 91,238,631 Revenue: Membership fees, net Program fees, net Government grants and contracts Other income Sales to members Consulting and management fees Interest income Total revenue Total public support and revenue Expenses: Program services Administrative Fundraising Total expenses Net assets - beginning of year Net assets - end of year $ 73,131,878 $ 2,805,602 $ See accompanying notes to the financial statements. -5- - (109,195) 5,191,947 $ 75,937,480 YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2014 Supporting Services Program Services Personnel costs: Salaries and wages Employee benefits Payroll taxes $ Total personnel costs Non-personnel costs: Occupancy Depreciation and amortization Supplies Purchased services Financing costs Technology systems and services Conferences, meetings, and staff development Promotion and publication Equipment Awards, grants and assitance Travel, meals and entertainment Membership and professional dues Bad debt expense Liability and other insurance Postage and shipping Miscellaneous Total non-personnel costs Total expenses $ 31,299,750 3,244,455 3,127,104 Administrative $ 4,411,100 1,283,061 407,646 Fundraising $ 1,067,347 148,962 76,644 Total $ 36,778,197 4,676,478 3,611,394 37,671,309 6,101,807 1,292,953 45,066,069 10,874,119 8,576,887 4,550,711 1,639,078 1,995,539 408,468 763,423 141,901 650,624 27,291 109,674 37,710 - 11,282,587 9,340,310 4,802,286 2,327,412 2,022,830 1,239,744 591,759 33,015 1,864,518 880,148 908,584 696,178 856,476 539,406 207,058 24,794 219,944 132,285 17,848 3,019 10,369 1,105,054 933,378 919,141 856,476 682,060 375,615 431,752 263,163 160,790 110,407 61,396 34,505 120,391 148,249 4,114 3,441 18,501 441,125 431,752 297,668 284,622 277,157 34,098,597 3,532,088 237,691 37,868,376 71,769,906 $ 9,633,895 $ 1,530,644 See accompanying notes to the financial statements. -6- $ 82,934,445 YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2013 Supporting Services Program Services Personnel costs: Salaries and wages Employee benefits Payroll taxes $ Total personnel costs Non-personnel costs: Occupancy Depreciation and amortization Supplies Purchased services Financing costs Equipment Conferences, meetings and staff development Travel, meals and entertainment Awards, grants and assistance Promotion and publication Technology system and services Bad debt expense Miscellaneous Membership and professional dues Postage and shipping Liability and other insurance Total non-personnel costs Total expenses $ 34,278,933 3,459,974 3,192,019 Administrative $ 4,770,877 928,230 494,903 Fundraising $ 954,857 163,050 67,749 Total $ 40,004,667 4,551,254 3,754,671 40,930,926 6,194,010 1,185,656 48,310,592 11,958,335 9,279,087 4,918,004 1,917,182 1,677,301 1,009,554 469,340 1,007,574 205,825 966,497 29,028 631,593 117,492 112,997 6,534 12,427,675 10,286,661 5,241,321 2,996,676 1,706,329 1,647,681 1,048,906 780,300 946,094 833,228 426,957 539,072 254,560 326,129 182,860 270,785 307,366 202,573 7,035 147,120 184,609 54,155 129,966 8,604 26,694 29,524 35,312 3,468 8,575 - 1,382,966 1,012,397 946,094 840,263 574,077 539,072 474,481 383,752 321,401 279,389 36,368,354 4,351,285 340,596 41,060,235 77,299,280 $ 10,545,295 $ 1,526,252 See accompanying notes to the financial statements. -7- $ 89,370,827 YOUNG MEN'S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2014 and 2013 2014 Cash flows from operating activities: Change in net assets Adjustments to reconcile change in net assets to cash provided by operating activities: Depreciation and amortization Loss (gain) on disposition and impairment of property and equipment Donated property and equipment Increase (decrease) in interest rate swap Contributions for property and equipment Gain on sale of investments Changes in operating assets and liabilities: Accounts and grants receivable Pledges receivable Prepaid expenses and other assets Accounts payable and accrued expenses Deferred membership and other revenues Deferred lease revenue $ Net cash provided by operating activities Cash flows from investing activities: Proceeds from sale of investments Purchases of property and equipment Decrease in cash restricted for investment in property and equipment Proceeds from sale of property and equipment (5,975,844) 2013 $ (15,301,151) 9,340,310 10,286,661 2,317,935 (846,497) 377,947 (1,543) - 8,504,900 (1,722,966) (282,646) (17,363) (73,922) (693,541) 450,667 (1,722,605) 318,220 (79,499) (636,480) (253,493) 2,394,518 (365,002) (107,409) 3,411,628 2,499,569 (2,895,978) 2,034,903 (5,143,510) 584,900 598,200 Net cash used in investing activities Cash flows from financing activities: Proceeds received from contributions for property and equipment Principal payments on debt obligations Proceeds from debt obligations Principal payments on capital lease obligations Net cash (used in) provided by financing activities 415,844 476,653 (1,712,878) (2,216,110) 1,478,591 (5,553,913) 3,835,110 (4,248,898) 2,080,734 (5,404,884) 7,205,203 (3,177,218) (4,489,110) 703,835 (Decrease) increase in cash and cash equivalents (2,790,360) 987,294 Cash and cash equivalents - beginning of year 12,661,417 Cash and cash equivalents - end of year $ 9,871,057 See accompanying notes to the financial statements. -8- 11,674,123 $ 12,661,417 YOUNG MEN'S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE STATEMENTS OF CASH FLOWS (Continued) For the Years Ended December 31, 2014 and 2013 2014 Supplemental cash flow disclosures: Non-cash investing and financing activities: Donated property and equipment Property and equipment acquired through capitalized leases Accounts payable for construction-in-progress Interest expense paid 2013 $ 846,497 $ $ 3,020,324 $ 2,418,797 $ 77,604 $ 1,706,329 $ $ 2,022,830 See accompanying notes to the financial statements. -9- - YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS December 31, 2014 and 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General The Young Men’s Christian Association of Middle Tennessee (the “YMCA”) is a worldwide charitable fellowship united by a common loyalty to Jesus Christ for the purpose of helping people grow in spirit, mind and body. As the region’s leading nonprofit dedicated to strengthening community, the YMCA works side-by-side with neighbors to make sure that everyone, regardless of age, income or background, has the opportunity to learn, grow and thrive. With 18 family wellness centers and nearly 200 program locations, the YMCA exists to nurture the potential of children and teens, improve the region’s health and well-being and provide opportunities to give back and support neighbors. Basis of Presentation The accompanying financial statements present the financial position and operations of the corporate office and all YMCA centers on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. All significant transactions and balances between and among the Corporate Office and the centers have been eliminated in combination. Resources are classified as unrestricted, temporarily restricted and permanently restricted based on the existence or absence of donor-imposed restrictions as follows: Unrestricted net assets are free of donor-imposed restrictions. All revenues, gains and losses that are not temporarily or permanently restricted by donors are included in this classification. All expenditures are reported in the unrestricted class of net assets, since the use of restricted contributions in accordance with the donors’ stipulations results in the release of the restriction. Unrestricted net assets include certain board designated reserves for contingencies, major maintenance and capital asset additions. Temporarily restricted net assets are limited as to use by donor-imposed restrictions that expire with the passage of time or that can be satisfied by use for the specific purpose. As of December 31, 2014 and 2013, all temporarily restricted net assets were from contributions and pledges for capital improvements at the various YMCA facilities. Permanently restricted net assets are amounts required by donors to be held in perpetuity, including gifts requiring that the principal be invested and the income or specific portions thereof be used for operations or certain restricted purposes. The YMCA had no permanently restricted net assets as of December 31, 2014 or 2013. -10- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Contributions and Support Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes. When a restriction is fulfilled (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted and reported in the statement of activities as net assets released from restrictions. However, if a restriction is fulfilled in the same time period in which the contribution is received, the support is reported as unrestricted. The YMCA also receives grant revenue from various federal and state agencies. Grant revenue is recognized in the period a liability is incurred for eligible expenditures under the terms of the grant. Any gifts of equipment or materials are reported as unrestricted support unless explicit donor restrictions specify how the assets must be used. Gifts of long-lived assets with explicit restrictions as to how the assets are to be used or funds restricted for the acquisition of long-lived assets are reported as restricted support. Expirations of donor restrictions are recognized when the donated or acquired long-lived assets are placed in service. Donated Services Many individuals volunteer their time and perform a variety of tasks for or on behalf of the YMCA. During 2014 and 2013, contributed services meeting the requirements for recognition in the financial statements was not significant. Cash and Cash Equivalents Cash and cash equivalents consist primarily of checking account balances, savings account balances, and money market funds that can be liquidated without significant penalty or restriction. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through adjustments to valuation allowances based on its assessment of the current status of individual receivables. The allowance for doubtful accounts for accounts receivable at December 31, 2014 and 2013, is $169,397 and $160,451, respectively. -11- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Promises to Give Unconditional promises to give that are expected to be collected within one year are recorded as contributions receivable at their net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of estimated future cash flows. The discount on those amounts is computed using an appropriate discount rate commensurate with the rate on U.S. Government bonds whose maturities correspond to the maturities of the contributions and management’s estimate of credit risk for each contribution. Amortization of the discount is recognized using the interest method over the term of the gift and is included in contribution revenue. Conditional promises to give are not included as support until such time as the conditions are substantially met. The allowance for uncollectible contributions is provided based on management’s estimate of uncollectible pledges and historical trends. Prepaid Expenses Prepaid expenses include certain marketing and promotional costs pertaining to future campaigns and are paid in advance and charged to operating expense when the campaign occurs. Advertising, marketing and promotional costs incurred amounted to $1,254,475 and $1,300,282 for the years ended December 31, 2014 and 2013, respectively. Property and Equipment Land, building, equipment, furniture and software are reported at cost at the date of purchase or at estimated fair value at date of gift to the YMCA. The YMCA’s policy is to capitalize purchases with a cost of $5,000 or more and an estimated useful life greater than one year. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets ranging from three to fifteen years for equipment and furniture, five years for software, fifteen years for land improvements and forty years for buildings. Interest costs are capitalized in connection with construction of qualifying assets. Capitalization begins when expenditures for qualifying assets are made, activities necessary to prepare the asset for its intended use are in progress, and interest cost is being incurred. Capitalization ends when the asset is ready for its intended use. Capitalized interest cost is depreciated the same as the associated qualifying asset. -12- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and Equipment (Continued) Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The YMCA assesses recoverability of the carrying value of the asset by estimating future net cash flows expected to result from the assets, including eventual disposition. If the future cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and its estimated fair value. Bond Issue Costs and Amortization Bond issue costs are capitalized and amortized by the straight-line method over the term of the related bond issue. Accumulated amortization at December 31, 2014 and 2013 was $4,247 and $4,248, respectively. Derivatives The YMCA utilizes derivative financial instruments to manage its interest rate exposure by reducing the impact of fluctuating interest rates on its debt service requirements. Derivatives are recognized as either assets or liabilities in the statement of financial position at fair value. Changes in the fair value of derivatives are recognized currently in the statement of activities. Deferred Revenues Deferred revenue consists of membership dues, unearned revenue from a lease, and advance operational and maintenance costs received from a leasee. Income from membership dues is deferred initially and recognized over the periods to which the dues relate. Deferred lease revenue is recognized into income on the straight-line method over the term of the lease. The reimbursement for operational and maintenance costs relating to a lease is recognized as the actual costs are incurred which is currently expected to represent a term of approximately 15 years. Grant funds received prior to expenditure are recorded initially as deferred revenue and recognized in the period a liability is incurred for eligible expenditures under the terms of the grant. -13- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The YMCA qualifies as a nonprofit organization exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The YMCA pays tax on unrelated business income from certain activities. These activities and the related tax were insignificant in 2014 and 2013. The YMCA files U.S. Federal Form 990 for organizations exempt from income tax and Form 990-T, an exempt organization business income tax return. In addition, the YMCA files a Tennessee state income tax return. The YMCA follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) guidance related to unrecognized tax benefits. The guidance clarifies the accounting for uncertainty in income taxes recognized in an organization’s financial statements. This guidance prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The YMCA has no tax penalties or interest reported in the accompanying financial statements. Tax years that remain open for examination include years ended December 31, 2011 through 2014. There is no accrual for uncertain tax positions at December 31, 2014 and 2013. Program and Supporting Services The following program and supporting services are included in the accompanying financial statements: Program Services - includes activities carried out to fulfill the YMCA’s mission to provide nurturing and healthy development of children, teens, adults, seniors, families and communities. Supporting Services: Administrative - relates to the overall direction of the organization. These expenses are not identifiable with a particular program or event or with fundraising, but are indispensable to the conduct of those activities and are essential to the organization. Specific activities include organization oversight, business management, recordkeeping, budgeting, financing, and other administrative activities. -14- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Program and Supporting Services (Continued) Fundraising - includes costs of activities directed toward appeals for financial support including special events and grants. Other activities include the cost of solicitations and creation and distribution of fundraising materials. Allocation of Functional Expenses Expenses that can be directly attributed to a particular function are charged to that function. Certain costs have been allocated among more than one program or activity based on objectively evaluated financial and nonfinancial data or reasonable subjective methods determined by management. Use of Estimates The preparation of 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value Measurements The YMCA classifies its financial assets and liabilities based on a hierarchy consisting of: Level 1 (securities valued using quoted prices from active markets for identical assets), Level 2 (securities not traded on an active market but for which observable market inputs are readily available), and Level 3 (securities valued based on significant unobservable inputs). An asset’s or liability’s 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 maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for financial assets and liabilities: Interest rate swaps are measured at fair value on a recurring basis utilizing Level 2 inputs. The YMCA obtains bank quotations to value its interest rate swaps. For purposes of potential valuation adjustments to its derivative positions, the YMCA evaluates the credit risk of its counterparties as well as that of the YMCA. -15- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair Value Measurements (Continued) The carrying value of cash and cash equivalents, accounts and grants receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments. The carrying value of contributions receivable approximates fair value because of the present value discount included in the carrying amount. Notes payable, bonds payable, and capital lease obligations have a carrying value which approximates the fair value of the outstanding balance of the notes, bonds, and capital lease obligations, respectively. The estimated fair value amounts have been determined by the YMCA using available market information and appropriate valuation methodologies. No changes in the valuation methodologies were made during 2014 or 2013. Reclassifications Certain reclassifications have been made to the 2013 financial statements to conform to the 2014 presentation. Subsequent Events The YMCA evaluated subsequent events through May 4, 2015, when these financial statements were available to be issued. Except as discussed in Note 15, YMCA management is not aware of any significant events that occurred subsequent to the statement of financial position date but prior to the filing of this report that would have a material impact on the financial statements. NOTE 2 – CASH AND CASH EQUIVALENTS Cash and cash equivalents Cash restricted for investment in property and equipment -16- 2014 2013 $ 9,871,057 272,008 $ 12,661,417 856,908 $ 10,143,065 $ 13,518,325 YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 3 – CONTRIBUTIONS RECEIVABLE Pledges receivable consisted of the following as of December 31: 2014 Temporarily restricted: Less than one year One to five years Five years and greater $ Less: allowance for uncollectible contributions Less: discount to net present value Total 259,765 1,168,980 1,428,745 (112,194) (151,364) $ 1,165,187 2013 $ 1,253,145 1,233,437 2,486,582 (333,251) (204,637) $ 1,948,694 Conditional promises to give that have not been recognized as support consisted of the following at December 31: 2013 2014 Nelson Andrews Leadership Center Campaign $ - $ 200,000 NOTE 4 – LAND HELD FOR SALE During 2009, the YMCA received a land donation with an estimated fair value of $600,000. Management determined that the YMCA will sell the land and currently lists the property for sale. During 2014, the YMCA recognized an impairment loss of $312,500 which is included within restructuring costs in the accompanying 2014 statement of activities. During 2011, the YMCA received a land donation with an estimated fair value of $2,000,000. During the same year, the YMCA purchased adjacent land for $1,825,738. During 2013, management determined that the YMCA will sell the land and currently lists the property for sale. In conjunction with the listing, the YMCA recognized an impairment loss of $1,725,738 which is included within restructuring costs in the accompanying 2013 statement of activities. -17- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of December 31: Land and land improvements Buildings and improvements Equipment and furniture Software Construction in progress Less: accumulated depreciation 2014 2013 $ 16,371,682 139,673,067 41,554,938 4,024,031 126,551 201,750,269 (77,445,064) $ 15,428,094 142,289,966 41,578,435 3,653,726 170,410 203,120,631 (73,638,527) $124,305,205 $129,482,104 Construction-in-progress includes expansions and additions that were underway at December 31, 2014, at certain YMCA centers, as to which the estimated cost to complete these projects was approximately $6,087,000. NOTE 6 – DEFERRED LEASE REVENUE In June 2006, the YMCA entered into an agreement with Fifty Forward (a nonprofit organization) for facility use and maintenance. Under the terms of the lease, Fifty Forward has the right to occupy approximately 20% of the space at the Bellevue Family YMCA and J.L. Turner Center for Lifelong Learning for an initial term of 20 years, with four consecutive five-year renewal options. The agreement required an initial advance payment of $2,000,000, of which $1,486,636 was prepaid rent for the entire initial lease term, and $513,364 was a prepayment for estimated operational costs and maintenance for approximately 15 years. The remaining unamortized balance of deferred lease revenue for the Bellevue facility totaled $1,170,665 and $1,250,164 at December 31, 2014 and 2013, respectively. The agreement with Fifty Forward also includes revenue sharing provisions related to certain jointly sponsored programs primarily directed to senior citizens at the Bellevue facility. NOTE 7 – LINE OF CREDIT During 2012, the YMCA entered into a line of credit with a financial institution in conjunction with the refinancing of its existing notes and bonds payable (see Note 8). The line of credit matures June 30, 2017 and provides for maximum borrowings of $7,000,000 through June 30, 2013, $10,500,000 through June 30, 2014, and $15,000,000 through June 30, 2017. The agreement requires monthly interest payments calculated at a rate of LIBOR plus 1.30% (1.46% and 1.47% at December 31, 2014, and 2013, respectively) in addition to a fee of 0.25% of the unused principal balance. Outstanding borrowings on the line of credit totaled $5,844,414 and $4,419,724 at December 31, 2014 and 2013, respectively. The line of credit contains restrictive covenants and is secured by a -18- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 7 – LINE OF CREDIT (Continued) negative pledge of the YMCA’s assets. The YMCA was in compliance with all covenants at December 31, 2014. NOTE 8 – NOTES AND BONDS PAYABLE On July 1, 2012, the YMCA entered into an agreement with a financial institution to provide up to $57 million in financing through a guaranty and credit qualified tax exempt loan and up to $15 million in financing (see line of credit discussed in Note 7) through a taxable debt facility. These debt instruments served to refinance substantially all existing debt and provide additional borrowing capacity. The industrial development bond associated with the tax exempt loan was approved by the Davidson County Industrial Development Board on May 8, 2012. The guaranty and credit agreement contains restrictive covenants and is secured by a negative pledge of the YMCA’s real property. The YMCA was in compliance with all covenants at December 31, 2014. Notes and bonds payable consisted of the following at December 31: Bonds Payable 2012 Industrial Revenue Bonds, face value $57,000,000, final maturity date of June 1, 2037. Payments toward principal repayment are due monthly. Interest on the bonds is determined weekly by the Remarketing Agent and ranged from 1.54% - 1.55% in 2014 (1.55% - 1.59% in 2013). Notes Payable Notes payable on vehicles purchased for employee and program usage. Total monthly payments range from $389 to $667, including interest ranging from 0% to 4.89% per annum. Maturities range through 2018. Total notes and bonds payable -19- (1) 2014 2013 $ 50,363,237 $ 53,554,286 90,538 42,982 $ 50,453,775 $ 53,597,268 YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 8 – NOTES AND BONDS PAYABLE (Continued) Annual principal maturities and required reimbursement payments of notes and bonds payable as of December 31, 2014, are as follows: Notes Payable Years Ending December 31; 2015 2016 2017 2018 2019 Thereafter 2012 Bond Issue Total $ 35,722 27,004 22,359 5,453 - $ 2,949,177 3,115,130 3,250,392 3,380,408 3,515,624 34,152,506 $ 2,984,899 3,142,134 3,272,751 3,385,861 3,515,624 34,152,506 $ 90,538 $ 50,363,237 $ 50,453,775 (1) At December 31, 2014 and 2013, the YMCA had an interest rate swap agreement with SunTrust Bank (the “Bank”) in order to lessen exposure to fluctuating interest rates on the Bonds. The interest rate swap is applicable to a scheduled notional amount, which reduces annually each January. Under the agreement, the YMCA makes a monthly interest payment to the Bank equal to a per annum rate of 2.95% times the scheduled annual notional amount ($25,429,869 and $25,277,143 in 2014 and 2013, respectively), and the Bank makes a monthly interest adjustment payment to the YMCA equal to the applicable notional amount times a per annum rate of 77% of LIBOR (0.12% and 0.13% at December 31, 2014 and 2013, respectively). NOTE 9 – COMMITMENTS AND CONTINGENCIES The YMCA has received certain federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could result in disallowance of expenditures, management believes that any required reimbursements would not be significant. Accordingly, no provision has been made for any potential reimbursements to the grantors. During 2001, the YMCA entered into a management agreement with the YMCA of Scottsville and Allen County, Inc. (“Scottsville Center”) for the YMCA to oversee the day-to-day operations of the facility. This agreement was renewed during 2010 and expired December 31, 2013. The YMCA determined the Scottsville Center to be a variable interest entity because of beneficial use. As a result, the YMCA included the Scottsville Center land, building and equipment in the YMCA’s total assets. However, when the agreement expired December 31, 2013, these assets were transferred to the YMCA of Scottsville and Allen County, Inc. The carrying value of these assets approximated $3.5 million at December 31, 2013. The resulting loss is included within restructuring costs in the accompanying 2013 statement of activities. -20- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 10 - CONCENTRATIONS OF CREDIT RISK The YMCA maintains cash balances at financial institutions whose accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to statutory limits. As of December 31, 2014, the YMCA’s depositor accounts exceeded FDIC insurance limits by approximately $6,200,000. Contributions receivable represent concentrations of credit risk to the extent they are receivable from concentrated sources. Contributions receivable from one donor amounted to 81% of total gross outstanding contributions receivable as of December 31, 2014 (three donors comprised 80% of gross outstanding contributions receivable as of December 31, 2013). NOTE 11 – EMPLOYEE BENEFIT PLANS The YMCA participates in a defined contribution, individual account, money purchase retirement plan, which is administered by the Young Men’s Christian Association Retirement Fund (a separate corporation) (the “Retirement Fund”). This plan is for the benefit of all eligible professional and nonprofessional staff of duly organized and reorganized YMCA’s throughout the United States. Contributions to the plan by employees and employer YMCA’s are based on a percentage of the participating employees’ salaries and are remitted monthly. Total contributions to the plan by the YMCA of Middle Tennessee, which are included in employee benefits, amounted to $2,262,577 in 2014 and $2,562,280 in 2013. The Retirement Fund is operated as a church pension plan and is a nonprofit, tax-exempt New York State corporation. As a defined contribution plan, the Retirement Fund has no unfunded benefit obligations. NOTE 12 – RELATED PARTY TRANSACTIONS AND RELATED ENTITIES The YMCA purchases insurance, utilities, contracts for marketing services, law services, construction services and architectural services from entities in which certain Board members are affiliated. The total of such expenditures approximated $921,000 in 2014 and $331,000 in 2013. The YMCA Foundation of Middle Tennessee (the “YMCA Foundation”) was formed to establish a sustaining means of support, using its income primarily for the benefit of the YMCA. The YMCA has representation on the YMCA Foundation’s Board of Directors but does not have a majority voting interest. The YMCA Foundation receives donor designated funds and also makes grants to other nonprofit organizations. For the year ended December 31, 2014, the YMCA Foundation paid out total grants of $754,997 ($181,169 in 2013), of which $741,505 ($173,704 in 2013) was paid to the YMCA and included in grant revenues. During the year ended December 31, 2013, the YMCA contributed $292,384 into the YMCA Foundation’s endowment fund. -21- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 12 – RELATED PARTY TRANSACTIONS AND RELATED ENTITIES (Continued) A condensed summary of financial information of the YMCA Foundation as of and for the years ended December 31, follows: 2014 2013 Total assets $ 8,317,785 $ 7,738,497 55,551 57,267 Net assets $ 8,262,234 $ 7,681,230 Net assets: Unrestricted Unrestricted – Philanthropic funds Temporarily restricted $ 7,210,990 97,527 953,717 $ 6,635,441 92,072 953,717 Total net assets $ 8,262,234 $ 7,681,230 Total support and revenue, including realized and unrealized gains on investments of $612,742 in 2014 and $1,000,514 in 2013. $ 1,389,443 $ 1,602,129 Total expenses $ $ Resources held for the benefit of the YMCA $ 8,164,707 Total liabilities 808,439 267,425 $ 7,589,158 NOTE 13 – LEASES The YMCA is obligated under several noncancelable operating leases for office space, equipment and vehicles that expire at various dates through 2023. Total rental expense incurred under these leases for the years ended December 31, 2014 and 2013, amounted to: office space - $1,091,386 and $1,082,571, respectively; equipment - $171,405 and $226,058, respectively; and vehicles - $82,168 and $110,409, respectively. The YMCA has also entered into several noncancelable capital leases for equipment that expire at various dates through 2019. Total capital lease payments made under these leases for the years ended December 31, 2014 and 2013 amounted to $4,339,735 and $3,286,514, including $90,837 and $109,294 of imputed interest, respectively. -22- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 13 – LEASES (Continued) Assets recorded under capital leases are included in property, plant and equipment and consisted of the following at December 31: 2014 2013 Cost Accumulated depreciation $ 3,020,324 (1,006,775) $ 6,991,438 (2,101,898) Net book value $ 2,013,549 $ 4,889,540 Future minimum lease payments required under all noncancelable leases as of December 31, 2014, are: Operating Leases Capital Leases Equipment Vehicles Total Equipment Office Years Ending December 31: 2015 $ 775,112 $ 186,608 $ 6,582 $ 968,302 $ 981,600 2016 740,638 186,608 6,582 933,828 981,600 2017 756,371 108,855 1,646 866,872 247,997 2018 465,307 465,307 181,305 2019 320,000 320,000 15,110 Thereafter 1,280,000 1,280,000 $ 4,337,428 $ 482,071 $ 14,810 Less: interest imputed at rates ranging from 1.20% to 4.23% Present value of future minimum lease payments $ 4,834,309 $ 2,407,612 82,303 $ 2,325,309 NOTE 14 – RESTRUCTURING COSTS During 2013, YMCA staff and a volunteer task force completed a center sustainability review with the objective of maintaining service and ensuring the long-term fiscal stability of the YMCA. The decision was made to cease current operations at three subsidized YMCA centers (Cool Springs effective September 30, 2013, and Maury County and Oakwood Commons effective December 31, 2013). The Scottsville Center management agreement expired December 31, 2013 and was not renewed. Additionally, land held in Mt. Juliet was listed for sale. Land, building, and equipment at the Maury County location with a net depreciated value of $3,184,267 was deeded to a successor notfor-profit entity effective January 1, 2014. The assets of the Scottsville Center with a net depreciated value of $3,447,319 were transferred out at December 31, 2013 (See note 9). Property and equipment at Oakwood Commons and Cool Springs with a depreciated value of $38,381 were disposed in connection with the restructuring. An impairment loss totaling $1,725,738 was -23- YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 14 – RESTRUCTURING COSTS (Continued) recognized to record the Mt. Juliet land at the current listing price. The net depreciated values of the subsidized YMCA centers and the Scottsville center are included in restructuring costs in the statement of activities for the year ended December 31, 2013. Additionally, the Cool Springs and Oakwood Commons facilities were leased under multiple year operating lease agreements. As a result, the YMCA recognized $1,524,787 in restructuring costs to accrue future lease payments. Additional costs of $430,878 were incurred related to severance, refunds, and other related costs. The following table summarizes the financial impact of ceasing operations at the centers for the year ended December 31, 2013. Property and equipment carrying value Impairment on Mt. Juliet property Future operating lease payments (Oakwood Commons and Cool Springs) Employee severance and other expenses $ 6,669,967 1,725,738 1,524,787 430,878 Total $ 10,351,370 The accompanying 2013 financial statements include an accrual for the expected costs of ceasing operations at the centers of $1,803,442 to be paid in future years. During 2014, the YMCA entered into an agreement to sell certain assets comprising the Putnam County Family YMCA to the Upper Cumberland Family YMCA (“Upper Cumberland”) for $496,500. Property and equipment at this facility with a depreciated value of $2,115,375 were disposed in connection with the restructuring. Additionally during 2014, the YMCA’s lease for the Mt. Juliet Family YMCA facility was not renewed and the center closed. Property and equipment at this facility with a depreciated value of $16,902 were disposed in connection with this closure. The following table summarizes the financial impact of ceasing operations at the centers for the year ended December 31, 2014. Impairment charge for Mt. Juliet land Loss on disposal of property and equipment, Upper Cumberland and Mt. Juliet Employee severance and other expenses $ Total $ 2,297,442 -24- 312,500 1,799,680 185,262 YOUNG MEN’S CHRISTIAN ASSOCIATION OF MIDDLE TENNESSEE NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2014 and 2013 NOTE 15 – SUBSEQUENT EVENTS Subsequent to December 31, 2014, the YMCA entered into sublease agreements for the facilities previously occupied by the Cool Springs and Oakwood Commons facilities. Under terms of the agreements, the YMCA expects to receive approximately $825,000 through the year ending December 31, 2018 to offset related accruals recorded during the 2013 restructure (see Note 14). Additionally subsequent to December 31, 2014, the YMCA announced the closure of three additional subsidized YMCA facilities. -25-