Drexel University and Subsidiaries Consolidated Financial Statements For the Years Ended June 30, 2019 and 2018 Drexel University and Subsidiaries Index June 30, 2019 and 2018 Page(s) Report of Independent Auditors ......................................................................................... 1–2 Consolidated Financial Statements Consolidated Statements of Financial Position ............................................................................... 3 Consolidated Statements of Activities ........................................................................................ 4–5 Consolidated Statements of Cash Flows .......................................................................................... 6 Notes to Consolidated Financial Statements ............................................................................. 7–59 Report of Independent Auditors To the Board of Trustees Drexel University We have audited the accompanying consolidated financial statements of Drexel University and its subsidiaries (the “University”), which comprise the consolidated statements of financial position as of June 30, 2019 and 2018, and the related consolidated statements of activities and of cash flows for the years then ended. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the 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. Auditors’ Responsibility Our responsibility is to express an opinion on the 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 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 our 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, we consider internal control relevant to the University'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 University'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. PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1800, 2001 Market Street, Philadelphia, PA 19103-7045 T: (267) 330 3000, F: (267) 330 3300, www.pwc.com/us Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Drexel University and its subsidiaries as of June 30, 2019 and 2018, and their changes in net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Philadelphia, Pennsylvania October 24, 2019 PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1800, 2001 Market Street, Philadelphia, PA 19103-7045 T: (267) 330 3000, F: (267) 330 3300, www.pwc.com/us Drexel University and Subsidiaries Consolidated Statements of Financial Position June 30, 2019 and 2018 ($’s in thousands) 2019 2018 Assets: Cash, cash equivalents, and restricted cash Operating$ 45,087 $ 45,666 Restricted 12,668 12,611 Accounts receivable 118,332 173,419 Contributions receivable, net 87,393 100,653 Loans receivable 23,402 28,714 Prepaid expenses and other assets 32,000 33,529 Malpractice insurance trust 13,208 8,972 Beneficial interests in trusts 43,595 45,473 Investments 812,120 778,369 Land, buildings and equipment, net 972,039 952,536 Total assets $ 2,159,844 $ 2,179,942 Liabilities: Accounts payable$ 69,253 $ 60,660 Accrued liabilities 124,082 105,437 Deposits and deferred revenue 153,897 170,958 Capital lease obligations 6,846 2,613 Government advances for student loans 29,199 29,096 Accrued retirement obligations 45,948 48,568 Bonds and notes payable 445,527 424,521 Total liabilities 874,752 841,853 Net Assets: Without donor restrictions 590,213 655,993 With donor restrictions 694,879 682,096 Total net assets 1,285,092 1,338,089 Total liabilities and net assets $ 2,159,844 $ 2,179,942 The accompanying notes are an integral part of these consolidated financial statements. - 3 - Drexel University and Subsidiaries Consolidated Statement of Activities For the Year Ended June 30, 2019 ($’s in thousands) Without Donor With Donor Restrictions Restrictions Total Operating Revenues and releases: Tuition and fees, room and board$ 665,764 $ - $ 665,764 Grants and contracts 111,794 14,009 125,803 Physician services 90,682 90,682 Auxilliary enterprises 20,792 20,792 Commonwealth appropriations 9,165 9,165 Contributions 4,566 7,072 11,638 Allocation of endowment spending from financial capital 9,893 19,676 29,569 Investment income, net 2,594 414 3,008 Other income 28,019 393 28,412 Total revenues 943,269 41,564 984,833 Net assets released from restrictions 52,734 (52,734) - Total revenues and releases 996,003 (11,170) 984,833 Expenses: Salaries and wages 497,645 497,645 Employee benefits 129,076 129,076 Depreciation and amortization 50,396 50,396 Interest 15,402 15,402 Other operating expenses 373,814 373,814 Total expenses 1,066,333 - 1,066,333 (Decrease) in net assets from operating activities (70,330) (11,170) (81,500) Non-operating Contributions - Endowment and other gifts 1,362 14,922 16,284 Realized / unrealized net gain on investments, net of endowment payout and expenses 3,819 9,031 12,850 Change in funding status of post-retirement and defined benefit plans (1,697) (1,697) Other increases 1,066 1,066 Increase in net assets from non-operating activities 4,550 23,953 28,503 Total (decrease) / increase in net assets (65,780) 12,783 (52,997) Net assets, beginning of year 655,993 682,096 1,338,089 Net assets, end of year $ 590,213 $ 694,879 $ 1,285,092 The accompanying notes are an integral part of these consolidated financial statements. - 4 - Drexel University and Subsidiaries Consolidated Statement of Activities For the Year Ended June 30, 2018 ($’s in thousands) Without Donor With Donor Restrictions Restrictions Total Operating Revenues and releases: Tuition and fees, room and board$ 664,324 $ - $ 664,324 Grants and contracts 126,377 2,917 129,294 Physician services 92,034 92,034 Auxilliary enterprises 20,054 20,054 Commonwealth appropriations 8,217 8,217 Contributions 4,265 38,632 42,897 Allocation of endowment spending from financial capital 11,503 18,524 30,027 Investment income, net 2,909 1,737 4,646 Other income 32,079 718 32,797 Total revenues 961,762 62,528 1,024,290 Net assets released from restrictions 52,420 (52,420) - Total revenues and releases 1,014,182 10,108 1,024,290 Expenses: Salaries and wages 475,034 475,034 Employee benefits 124,723 124,723 Depreciation and amortization 52,108 52,108 Interest 14,859 14,859 Other operating expenses 338,195 338,195 Total expenses 1,004,919 - 1,004,919 Increase in net assets from operating activities 9,263 10,108 19,371 Non-operating Contributions - Endowment and other gifts 17,965 17,965 Realized/unrealized net gain on investments, net of endowment payout and expenses 16,963 25,544 42,507 Gain on conveyance of Schuylkill Y ards parcels 4,508 8,877 13,385 Loss on extinguishment of debt (10,663) (10,663) Change in funding status of post-retirement and defined benefit plans 1,207 1,207 Other (decreases) (1,014) (1,014) Increase in net assets from non-operating activities 11,001 52,386 63,387 Total increase in net assets 20,264 62,494 82,758 Net assets, beginning of year 635,729 619,602 1,255,331 Net assets, end of year $ 655,993 $ 682,096 $ 1,338,089 The accompanying notes are an integral part of these consolidated financial statements. - 5 - Drexel University and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended June 30, 2019 and 2018 ($’s in thousands) 2019 2018 Operating activities: (Decrease) / increase in net assets$ (52,997) $ 82,758 Adjustments to reconcile change in net assets to net cash (used in) / provided by operating activities: Depreciation and amortization 48,469 50,899 Loss on extinguishment of debt - 10,663 Loss on disposal of equipment 1,904 3,682 Change in market value in beneficial interests in trusts 1,878 3,254 Contributions restricted for long-term investment (15,793) (16,840) Non-cash contributions received (1,076) (3,718) Proceeds from the sale of donated securities 906 3,557 Actuarial change on annuity liabilities (543) (627) Realized/unrealized (gain) on investments (50,229) (87,160) Changes in assets and liabilities that provide / (use) cash: