NORTH TEXAS PUBLIC BROADCASTING, INC. CONSOLIDATED FINANCIAL STATEMENTS (WITH INDEPENDENT AUDITOR’S REPORT THEREON) JUNE 30, 2018 AND 2017 NORTH TEXAS PUBLIC BROADCASTING, INC. TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR’S REPORT …...……………………………………………………………… 1 FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF JUNE 2018 AND 2017 …………….. 2 CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017..……………………………………………... 3 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 ……………………………………………….. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS …………….………………………………… 5 2500 Dallas Parkway, Suite 300 Plano, 300 Throckmorton Street, Suite 520 2901 Via Fortuna, Building 6, Suite 550 Texas 75093 Fort Worth, Texas 76102 Austin, Texas 78746 MONTGOMERY COSCIA GREILICH LLP 972.748.0300 p 972.748.0700 f INDEPENDENT AUDITOR’S REPORT To the Board of Directors of North Texas Public Broadcasting, Inc. We have audited the accompanying consolidated financial statements of North Texas Public Broadcasting, Inc. (the “Corporation”), which comprise the consolidated statements of financial position as of June 30, 2018 and 2017, and the related consolidated statements of activities and changes in net assets and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial 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 consolidated 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 audits 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 consolidated 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 North Texas Public Broadcasting, Inc. as of June 30, 2018 and 2017, and the results of their activities and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. MONTGOMERY COSCIA GREILICH LLP Plano, Texas October 30, 2018 The accompanying notes are an integral part of these financial statements. 1 NORTH TEXAS PUBLIC BROADCASTING, INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION JUNE 30, 2018 AND 2017 2018 2017 ASSETS CURRENT ASSETS Cash and cash equivalents $ 4,070,395 $ 2,616,961 Restricted cash 1,285,294 1,285,294 Membership contribution, grant, 4,215,907 3,565,871 and underwriting receivable, net Investments 22,263,581 21,260,055 Prepaid expenses and other assets 789,212 959,409 Total current assets 32,624,389 29,687,590 Interest rate swaps 233,988 - Property and equipment, net 7,830,784 8,183,085 FCC Broadcast License 18,250,276 18,250,276 TOTAL ASSETS $ 58,939,437 $ 56,120,951 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses $ 1,589,055 $ 1,750,445 Deferred revenue 146,568 131,627 Interest rate swaps - 139,233 Current portion of capital lease obligations 125,181 137,697 Current portion of notes payable 799,759 746,509 Total current liabilities 2,660,563 2,905,511 Capital lease obligations, net of current portion 76,858 202,039 Notes payable, net of current portion 13,250,149 14,049,908 Other long-term liabilities 233,259 210,523 TOTAL LIABILITIES 16,220,829 17,367,981 NET ASSETS Unrestricted 39,689,192 35,538,583 Temporarily restricted 2,029,416 2,214,387 Permanently restricted 1,000,000 1,000,000 Total net assets 42,718,608 38,752,970 TOTAL LIABILITIES AND NET ASSETS $ 58,939,437 $ 56,120,951 The accompanying notes are an integral part of these financial statements. 2 NORTH TEXAS PUBLIC BROADCASTING, INC. CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 2018 2017 Te mporarily Permanently Unre stricte d Restricted Restricted Total Total OPERATING REVENUES: Membership contributions $ 16,376,773 $ 1,267,469 $ - $ 17,644,242 $ 16,388,885 Underwriting and trade 5,770,828 - - 5,770,828 5,163,014 Community service grants 2,020,202 - - 2,020,202 2,007,091 Contribution and grants for capital expenditures 20,000 - - 20,000 132,045 Special events 376,291 - - 376,291 380,764 In-kind contributions 571,852 - - 571,852 500,999 Other support 173,567 - - 173,567 140,209 Net assets released from restrictions 1,411,522 (1,411,522) - - - Total operating revenues 26,721,035 (144,053) - 26,576,982 24,713,007 OPERATING EXPENSES: Program services: Technical services 2,261,523 - - 2,261,523 2,253,546 Television broadcasting 2,781,813 - - 2,781,813 2,886,688 Television programming 107,156 - - 107,156 89,824 Educational resources 113,626 - - 113,626 103,772 Radio 4,492,572 - - 4,492,572 4,361,330 Content services 4,932,097 - - 4,932,097 4,861,933 Total program services 14,688,787 - - 14,688,787 14,557,093 Support services: General and administrative 3,168,458 - - 3,168,458 2,751,004 Corporate communications 909,545 - - 909,545 826,234 Total support services 4,078,003 - - 4,078,003 3,577,238 Fundraising costs: Membership development 3,765,685 - - 3,765,685 3,677,048 Corporate development 1,438,287 - - 1,438,287 1,389,872 Special events 48,190 - - 48,190 46,587 Total fundraising costs 5,252,162 - - 5,252,162 5,113,507 Depreciation and amortization 917,808 - - 917,808 846,689 Total operating expenses 24,936,760 - 24,936,760 24,094,527 Change in net assets from operating activities 1,784,275 (144,053) - 1,640,222 618,480 NON-OPERATING: Return on investments 1,874,464 (35,939) - 1,838,525 2,812,282 Gain on settlement 125,000 - - 125,000 - Change in value of split-interest agreements - (4,979) - (4,979) 78 Loss on retirement assets (6,351) - - (6,351) (908,197) Unrealized gain on interest rate swaps 373,221 - - 373,221 618,120 Change in net assets from non-operating activities 2,366,334 (40,918) - 2,325,416 2,522,283 CHANGE IN NET ASSETS 4,150,609 (184,971) - 3,965,638 3,140,763 NET ASSETS, BEGINNING OF YEAR 35,538,583 2,214,387 1,000,000 38,752,970 35,612,207 NET ASSETS, END OF YEAR $ 39,689,192 $ 2,029,416 $ 1,000,000 $ 42,718,608 $ 38,752,970 The accompanying notes are an integral part of these financial statements. 3 NORTH TEXAS PUBLIC BROADCASTING, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 2018 2017 CASH FLOWS FROM OPERATING ACTIVITIES Increase in net assets $ 3,965,638 $ 3,140,763 Adjustments to reconcile net assets to cash provided by operating activities: Depreciation of property and equipment 891,658 820,539 Amortization of debt issuance costs 26,150 26,150 Loss on retirement of assets (6,351) 908,196 Net unrealized (gain) loss on investments 129,510 (2,098,342) Net realized gain on investments (1,446,775) (268,688) Change in value of split-interest agreements 4,979 (78) Unrealized gain on interest rate swap liability (373,221) (618,120) Dividend income reinvested (521,260) (445,252) Changes in operating assets and liabilities: (Increase) decrease in assets Membership contributions and underwriting receivable (650,036) (326,774) Prepaid expenses and other assets 165,218 82,836 Increase (decrease) in liabilities Accounts payable and accrued expenses (161,390) 133,020 Deferred revenue 14,941 (13,696) Other liabilities 22,736 35,787 Net cash provided by operating activities 2,061,797 1,376,341 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (533,006) (611,949) Purchases of investments (2,050,001) (1,641,000) Proceeds from the sale of investments 2,885,000 2,251,211 Net cash provided by (used in) investing activities 301,993 (1,738) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings of notes payable 1,000,000 1,000,000 Repayment of notes payable (1,772,659) (1,746,500) Payment of capital lease obligations (137,697) (138,859) Net cash used in financing activities (910,356) (885,359) Net increase in cash and cash equivalents 1,453,434 489,244 Cash and cash equivalents, beginning of year 2,616,961 2,127,717 Cash and cash equivalents, end of year $ 4,070,395 $ 2,616,961 SUPPLEMENTAL INFORMATION: Cash paid for taxes $ 7,418 $ 9,311 Cash paid for interest $ 527,976 $ 559,869 The accompanying notes are an integral part of these financial statements.