FAMILY STATIONS, INC. And Its Affiliates
TABLE OF CONTENTS DECEMBER 31, 2014 AND 2013
Independent auditors’ report 2 - 3
Consolidated statements of financial position 4
Consolidated statements of activities 5
Consolidated statements of cash flows 6
Notes to consolidated financial statements 7 - 17
Supplementary information: Schedule I - Consolidated support from contributions 19 - 21
Schedule II - Consolidated operating expenses – broadcasting stations and departments 22 - 23
1 RINA accountancy corporation 100 Montgomery St., Suite 2075, San Francisco, CA 94104 phone: 415.777.4488 fax: 415.777.0680 1.800.RINA.CPA web: www.rina.com
Independent Auditors’ Report
The Board of Directors Family Stations, Inc.
We have audited the accompanying consolidated financial statements of Family Stations, Inc. (a California not-for- profit Corporation) and its affiliates, which comprise the consolidated statements of financial position as of December 31, 2014 and December 31, 2013, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements Family Stations Inc.'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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Family Stations, Inc. and affiliates as of December 31, 2014 and December 31, 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.
2 Report on Supplementary Information
Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information in Schedule I and Schedule II starting on page 19 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
Certified Public Accountants
San Francisco, California April 22, 2015
3 FAMILY STATIONS, INC. And Its Affiliates
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS December 31, 2014 December 31, 2013 CURRENT: Cash and cash equivalents$ 32,677,017 $ 54,869,815 Investments 22,207 - Funds held in trust 1,453,087 - Receivables Accounts receivable 25,373 7,773 Bequest receivable 85,000 - Officer and employees - receivable 6,453 11,157 Note receivable 18,000 19,000 Inventory for equipment on hand 12,530 12,530 Prepaid expenses 144,464 143,047
TOTAL CURRENT ASSETS 34,444,131 55,063,322
PROPERTY AND EQUIPMENT, net 6,268,931 6,675,683
OTHER: Federal Communications Commission licenses, net 37,476,824 38,966,600 Debt financing fees, net of amortization of $478,035 for 2014 and $118,277 for 2013 1,319,773 1,679,531 Charitable remainder trusts 143,767 569,339 Escrow deposits and prepaid expenses 684,382 36,882
$ 80,337,808 $ 102,991,357
LIABILITIES
CURRENT: Listener and sponsor notes payable 1,453,087 16,308,309 Accounts payable 114,675 145,970 Accrued liabilities 531,362 6,645,231
TOTAL CURRENT LIABILITIES 2,099,124 23,099,510
LONG-TERM: Term loan debt financing 39,860,225 35,358,051 Revolving loan debt financing 812,855 661,675 Accrued loan fees 47,263 14,084
TOTAL LIABILITIES 42,819,467 59,133,320
NET ASSETS
Unrestricted 37,518,341 43,858,037 Temporarily restricted - - Permanently restricted - 37,518,341 - 43,858,037
$ 80,337,808 $ 102,991,357 See notes to consolidated financial statements. 4 FAMILY STATIONS, INC. And Its Affiliates
CONSOLIDATED STATEMENTS OF ACTIVITIES
Year Ended Year Ended December 31, 2014 December 31, 2013
SUPPORT: Contributions$ 5,409,709 93.9 %$ 5,252,390 100.0 % Program service fee 350,000 6.1 - -
TOTAL SUPPORT 5,759,709 100.0 5,252,390 100.0
OPERATING EXPENSES: Broadcasting stations 5,890,149 102.3 7,787,671 148.3 Departments 4,431,517 76.9 6,049,597 115.2
TOTAL OPERATING EXPENSES 10,321,666 179.2 13,837,268 263.5
EXCESS OF OPERATING EXPENSES OVER SUPPORT (4,561,957) (79.2) (8,584,878) (163.5)
OTHER REVENUE (EXPENSES): Gain (loss) on sale of station licenses, property and equipment (1,317,835) (23.0) 41,805,602 795.9 Amortization of debt financing fees (359,759) (6.3) (118,277) (2.4) Lease income and air time revenue 250,096 4.5 308,229 5.9 Unrealized gain on charitable remainder trust 1,306 0.0 90,938 1.7 Miscellaneous gain (loss) (26,434) (0.5) 9,155 0.2 Dividend and interest income 19,079 0.3 6,122 0.2 Unrealized loss on securities (430) (0.0) - - Charitable remainder trust loss (84,596) (1.5) - - Bad debt expense (46,462) (0.8) (25,024) (0.5) Income and sales taxes recovery (expense) 5,434,695 94.4 (5,938,199) (113.1) Fees for sale of assets (335,580) (5.8) (1,114,242) (21.2) Interest expense (5,311,819) (92.2) (2,358,416) (44.9)
INCREASE (DECREASE) IN NET ASSETS (6,339,696) (110.1) % 24,081,010 458.4 %
NET ASSETS, beginning of year 43,858,037 19,777,027
NET ASSETS, end of year $ 37,518,341 $ 43,858,037
See notes to consolidated financial statements. 5 FAMILY STATIONS, INC. And Its Affiliates
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended Year Ended December 31, 2014 December 31, 2013 CASH FLOWS FROM OPERATING ACTIVITIES: Increase (decrease) in net assets $ (6,339,696) $ 24,081,010 Adjustments to reconcile changes in net assets to net cash used by operating activities: Depreciation and amortization 989,426$ $ 1,018,774 Funds held in trust for others (1,453,087) - Loss (gain) on sale of property, equipment and station licenses 1,317,835 (41,805,602) Loss on disposition of charitable remainder trust - non-cash item 84,596 - Distribution of terminated charitable remainder trust 342,282 - Unrealized loss on marketable securities 430 Donations of non-cash assets and promissory notes (90,681) (91,181) Capitalized interest on loan proceeds - non-cash item 4,603,354 1,381,918 Unrealized gain on charitable remainder trusts (1,305) (90,939) Decrease (increase) in: Receivables (97,897) 28,749 Inventories - (12,530) Prepaid expenses (1,417) 25,476 Increase (decrease) in: Accounts payable (31,295) (169,209) Accrued liabilities (5,990,009) (327,768) 5,302,079 (34,412,465)
NET CASH USED BY OPERATING ACTIVITIES (6,667,464) (10,331,455)
CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of station licenses, property and equipment 297,000 50,298,401 Acquisition of property, equipment and station licenses (347,975) (284,009) Acquisition of marketable securities (22,637) Assets held for sale - 10,365 Debt financing fee - (1,797,808) Note receivable 1,000 (19,000) Increase in deposits and other prepaids (647,500) (1,647)
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (720,112) 48,206,302
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 50,000 34,640,420 Payments on notes payable (14,855,222) (20,027,712)
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (14,805,222) 14,612,709 NET INCREASE (DECREASE) IN CASH (22,192,798) 52,487,556
CASH AND CASH EQUIVALENTS, beginning of year 54,869,815 2,382,259
CASH AND CASH EQUIVALENTS, end of year $ 32,677,017 $ 54,869,815
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 708,465 $ 988,128 Income taxes $ 105,286 $ 384,800
See notes to consolidated financial statements. 6 FAMILY STATIONS, INC. And Its Affiliates
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2014 AND DECEMBER 31, 2013
Note 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Nature of activities: Family Stations, Inc. (“the Corporation”) is a California not-for-profit corporation which proclaims the Christian message primarily through its radio and television broadcasting network. The Corporation accepts contributions from its listeners for its support.
Affiliated entities: Family Stations of New Jersey, Inc. was incorporated in 1986 as a New Jersey not-for-profit corporation. A majority of its directors are members of the Board of Directors of Family Stations, Inc. Pursuant to the terms of the Financing Agreement described in Note 9, Family Stations of New Jersey formed two single member limited liability companies under Delaware law in 2013. Family License Co., LLC holds the WFME license and Family OpCo, LLC owns the remaining assets. Family Stations of New Jersey is the single member owner of each LLC.
Financial statement presentation: For financial statement purposes all financial transactions are classified in accordance with professional accounting standards which require classification in one of three categories. The Corporation has three classes of net assets, permanently restricted, temporarily restricted, and unrestricted, which consists of the following:
Permanently restricted net assets – Net assets subject to donor-imposed stipulations that they may be maintained permanently by the Corporation. There were no permanently restricted net assets at December 31, 2014 and December 31, 2013.
Temporarily restricted net assets – Net assets restricted by donor-imposed stipulations that either expire with the passage of time or the satisfaction of the stipulations by the Corporation. There were no temporarily restricted net assets at December 31, 2014 and December 31, 2013.
Unrestricted net assets – Net assets not subject to donor-imposed stipulations.
Principles of consolidation: The accompanying consolidated financial statements include the accounts of the Corporation and its affiliate, Family Stations of New Jersey, Inc. Intercompany transactions and accounts have been eliminated.
Reclassifications: Certain amounts appearing in the 2013 financial statements may have been reclassified to conform to the 2014 presentation. The reclassifications have no effect on reported amounts of total net assets or change in total net assets.
Fair value measurements: Professional accounting standards establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows:
7 FAMILY STATIONS, INC. And Its Affiliates
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2014 AND DECEMBER 31, 2013
Note 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.
Level 2 Inputs to the valuation methodology include: