Associated Students Ucla

ASSOCIATED STUDENTS UCLA BOARD OF DIRECTORS Finance Committee Meeting August 11, 2006 10:00 a.m. Kerckhoff Hall 339

PRESENT: Richard Delia (ASUCLA Finance Director), Jared Fox , Dave Karlik, Dave Lowenstein, Bob Naples, Jason Sorger (Chair), Bob Williams (ASUCLA Executive Director), and Jennifer Willis-Graves (Recording Secretary)

CALL TO ORDER

This meeting was called to order at 10:03 a.m.

APPROVAL OF MINUTES FROM FINANCE COMMITTEE MEETING HELD ON JULY 18, 2006.

Mr. Karlik called the committee’s attention to page 3, paragraph 1 (subsection “Broad Arts Café”) of the minutes:

“Management anticipates that construction will begin on this kiosk shortly after the building opens and the related celebratory events have been concluded in the spring of 2007.”

Mr. Williams indicated that this sentence should be edited to read as follows:

“Management anticipates that construction will begin on this kiosk shortly after the building opens and the related celebratory events have been concluded in the fall of 2006.”

Mr. Lowenstein moved, seconded by Mr. Naples to approve these minutes with stipulated changes. This motion passed by consent.

EXECUTIVE DIRECTOR’S REPORT

Financial Overview Mr. Williams reported that preliminary results for July suggest strong performance in terms of gross income for both the Store and Restaurants Divisions. He noted, however, that increased sales in computer hardware and markdowns from the Health Sciences Store may result in negative variances in gross margin. Also, Mr. Delia reported that, in July, management will book a $30,000 payment to Shoe City for their tenant reimbursement allowance, called for under the lease agreement. This will be charged to non recurring expense.. Mr. Williams also reminded the committee of the reversal of $86,000 ($76,000 of which will impact the Restaurants Division directly) for sponsorship income that had been accrued earlier in the year in anticipation of the approval of a beverage contract with Coca-cola. He explained however, that these negative Finance Committee Meeting Page 1 August 11, 2006 variances will be lessened, to some degree, by a $67,000 credit to non-recurring income, which represents the Association’s portion of a court award paid to members of a class action suit against Visa/MasterCard.

A short discussion followed regarding the Associated Students Incentive Compensation Program. This program is a goal-based method of distributing financial awards to professional employees (Service Area Managers and above) based upon a Board approved formula. There are several caps on the total amount to be distributed and this year the total cost of this program this fiscal year is $180,000. The amount of each individual award is determined by the execution of several weighted goals and objectives mutually agreed upon by both the employee and management at the beginning of the year. Mr. Delia emphasized the fact that this payment is not budgeted, as the program is only triggered in the event of a positive budget variance at year end.

ASUCLA Benefits U Mr. Williams reported that “ASUCLA Benefits U” was launched this month. This new program is designed to familiarize students with ASUCLA products and services, and to encouraged to continued patronage by offering discounts and prizes to members. Upon enrollment, members receive a coupon booklet, and key tag that will activate automatic discounts at registers. Mr. Williams indicated that each coupon shows two values, one applicable to all students, and the other, a higher discount, which is available only to enrolled ASUCLA Benefits U members. Management is pleased with initial responses, as roughly 80% of those attending orientation activities have opted to enroll.

Capital Projects: Cooperage Management will bring final cost estimates to the next Finance Committee meeting for review. Mr. Williams noted most recent analysis suggests that actual costs will exceed the $2.5 million earmarked for this project in the FY 06-07 Budget. In light of this, management is currently working to value engineer and identify areas of potential cost reduction. He explained that, although the $2.5 million capital expenditure had been approved by the FY 05/06 Finance Committee and Board of Directors, this year’s committee/Board will approve the project again, as any budgeted capital expenditure in excess of $100,000 must receive Board approval before it begins.

Greenhouse Final issues regarding design and décor were resolved at the Services Committee meeting that was held before this meeting. Management hopes to have this facility operational before the beginning of the fall term.

Concessions in Pauley Pavilion Management has reviewed proposals to remove aging wood from the lower portions of concessions stands in Pauley Pavilion, and to line both upper and lower portions of these stands with stainless steel. This is an intermediate cost saving strategy to update these facilities in accordance with mandates by the LA County Department of Health, as full replacement would be financially imprudent given the impending renovation of Pauley Pavilion as a whole. Management hopes to reduce the initial $70,000-$100,000 expense by tasking internal maintenance personal with jobs associated with the disconnection and Finance Committee Meeting Page 2 August 11, 2006 subsequent reconnection of electrical and plumbing hardware. it is unclear at this stage whether this will be permissible by the University.

Kauffman Hall Coffee Cart Mr. Williams reported that this cart has been designed and is in the process of being built, and roll-out is anticipated during Fall Quarter.

A short discussion followed regarding the financial aspect of the Association’s nascent sustainability strategies. Mr. Williams explained that a portion of the cost of this program is represented in standard replacement capital budgets, however a significant portion of related expenses are currently unplanned.

FINANCE DIRECTOR’S REPORT

July Preliminary Financial Results As July Financial Statements were not available at the time of this meeting, Mr. Delia reported July Preliminary sales results.

Sales in the Store Division exceeded plan by $64,754, a 2.3% positive variance to plan. Significant positive variances appeared in the Apparel Division, which was $67,352 ahead of plan (due, in large part, to a $70,176 positive variance in Bearwear); the Supply Division, which was $67,812 ahead of plan (due primarily to a $73,265 positive variance in the Computer Store); and Academic Support, which was $43,355 ahead of plan (due to positive variances in New Text which was $25,848 ahead of plan, and the Academic Publishing Service which was $13,975 ahead of plan). Sales from the Hilltop Shop also exceeded plan by $14,368.

This strong performance was partially masked by negative variances in the Health Sciences Store, which was $80,247 off plan (due to a $73,823 negative variance from the Medical Supply department, $56,901 of which resulted from one lost dental kits contract, and $21,466 of which resulted from decreased sales of medical supplies); and in LuValle Commons, which was $29,186 off plan (due to a $23,870 negative variance in sales of New Text).

Year to date, sales from the Store Division exceeded plan by $2.7 million, a 5.1% positive variance to budget, and a 4.1% increase over the prior year. Mr. Williams emphasized the importance of reviewing prior year variances as often aggressive budgets allow for the appearance of negative variances to plan when actual growth from year to year is positive.

Based on this, management anticipates that the Store Division as a whole will report a $12,508 negative variance in terms of gross margin, as the result of the relatively high proportion of the overall positive variance represented by sales of computer hardware, (which generate smaller gross margin percentages), and from the afore mentioned markdowns in the Health Sciences Store.

Sales in the Restaurants Division exceeded plan by $181,892. Significant positive variances were reported in the Cooperage, which was $64,448 ahead of plan; North Campus, which was $15,159 ahead of plan; and Café Synapse, which was $10,025 ahead of plan. In addition, sales from third Finance Committee Meeting Page 3 August 11, 2006 party operators (with the exception of Panda Express) exceeded plan. Jamba Juice reported a $38,400 positive variance; Sbarro reported a $24,436 positive variance; and Rubio’s Baja Grill reported an $18,370 positive variance.

Together, these strong results served to mitigate the effect of a $30,625 negative variance to plan that resulted from delays in opening the Green House.

August Month To Date Preliminary Sales To date in August, sales from the Store Division exceeded plan by $117,808 (due to positive variances in the Apparel Division, which was $74,696 ahead of plan - $72,129 of which was reported in the Bearwear Department); the Supply Division, which was $53,668 (due in large part to the $66,855 positive variance reported in the Computer Store); and LuValle Commons which was $19,447 (due to an $18,334 positive variance in Academic Support, $17,079 was generated by sales of New Text).

The most notable negative variance to date was reported in the Health Sciences Store which was $54,915 off plan (due to a $37,440 negative variance in the sales of medical supplies). Management believes that much of this is due to timing, and it is anticipated that this variance will diminish by month end.

Based on these results, management anticipates a $44,064 positive variance in term of gross margin at this point in time.

In the Restaurants Division, positive variances in Catering, which was $13,088 ahead of plan; Cooperage, which was $12,915 ahead of plan; and Jamba Juice, which was $13,838 ahead of plan; contributed to a positive variance of $48,187 overall.

Mr. Williams noted that this division reported an 11.07% increase in customer count from the prior year, which indicates that there has been little to no cannibalization of Cooperage customers by Jamba Juice, as was previously feared.

REVISED FY 06-07 MEETING CALENDAR

After a brief discussion, the Committee decided to change the annual budget review meeting previously scheduled for Saturday May 5, 2007 from 9:00 AM – 3:00 PM, to Friday May 4, 2007 from 12:00 p.m. – 6:00 p.m. Additionally, the committee opted to move its next meeting, currently scheduled for September 22, 2006 from 9:00 AM – 10:30 a.m. to 8:00 a.m. – 9:30 a.m.

The Finance Committee Meeting adjourned at 11:12 a.m.

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