Preliminary FY06 Audit And Financial Report for November 2006

Meantime, there are several areas to highlight in this preliminary look at the FY06 audit results. Below I compare the. FY05 audit results compared to FY06 audit and show the results for the FY04 audit for comparison.(Changes since the last report are the result our auditor making adjustments.-(others may follow but only minor ones)

Revenue Analysis (‘000)
FY05 v. FY06 Audit Results

	FY04	FY05	FY06	Var $	Var%
Listener Support/Donations	13,022	13,710	13,774	64	.47%
Grants	1,547	1,899	2,172	273	15.17%
Community Events	668	487	440.6	-46.4	-9.53%
Other Income: (SCA, Katrina, Invest. Inc.PRA sales )	791	847	1,631	784	92.5.%
Total Revenue	16,028	16,943	18,015	1,072	6.33%

 

Expense Analysis (‘000)

	FY04	FY05	FY06	Var $	Var%
Gross Salaries	5,560	5,994	6,085	91	1.5%
Outside Services	263	393	265.8	-127.2	-32.3%
Depreciation	502	402	367.5	-34.5	-8.58%
Insurance	336	299	242.9	-56.2	-18.8%
Legal Expenses/Settlements	277	180	508	325	182%
Board Meetings and Elections	326	409	354	-55	13.45%
Premiums	1,018	1,082	1,192	110	10.17%
Total Expense	15,387	15,894	16,345	451	2.84%

 

The Revenue Analysis

First it is clear that while revenue in the listener support line is flat from FY05 to FY06 (up only .47%) revenue in the Other Revenue line is up 92.5% or 784k. Total Revenue is therefore up 1.072 million dollars. Much of this Other Income is one time gifts (cash of 622k and restricted gifts totaling 700k.) While this is great it also denotes the caution that one time gifts will not necessarily be present in FY07 (our current budget) and the flat listener support line needs to be addressed. This flatness is reflective of reduced listeners affecting virtually all stations in the Network, and, for that matter, all of commercial and non-commercial radio.

 

The Expense Analysis

Note that while revenue is up 6.33% expenses are up only 2.84% This is a remarkable outcome. How did it occur and what were the drivers in this expense scenario? First gross salaries were up only 1.5% compared to 7.81% per cent the year before. Much of it can be accounted for because of savings in the new union contracts where the Network saved money by moving employees from expensive union benefit plans to less expensive non-union or company benefit plans-thereby saving money.

We saved money in outside services (accounting, payroll etc) by doing more of the work in house. This reduced expenses. Also at play was clearing up some long-term legal bills dating back to 2001. We saved money in the depreciation area by purchasing less equipment and also through the on-set of fully depreciated items. Notice, too, that 56k was saved in the insurance area due mostly to reductions in our workers comp premiums along with the expiration of claims from previous years. Finally, Board related costs were down due to an off year in the Board elections cycle.

On the expense up side, we have legal expenses up by a whopping 182% or 325k. I do not expect that number to go down in FY07 and indeed may exceed the costs for FY06.

 

The Bottom Line—Surplus and Excess Revenue Analysis

	FY04	FY05	FY06	Var $	Var%
Total Revenue	16,028	16,943	18,015	1,072	6.33%
Total Expense	15,387	15,894	16,345	451	2.84%
Surplus/ Deficit /b/ dep	641	1,049	1,670	621	59.2%

 

What this indicates is that for FY06:

1. The Total Surplus for the Network increased 621k between FY05 and FY06
2. The percentage increase to the bottom line will be approximately 59.2%

This would make this one of the most profitable years in Pacifica’s history-but, but, but importantly 1.3 million was received as one-time gifts not likely to be replicated.

Also, note that the working capital of the Network increases from 1.8 million in FY05 to 2.8 million dollars in FY06, an increase of 55.56%. (Working capital is current assets minus current liabilities. See the “Balance Sheet Analysis” chart below.)

Congratulations are in order to all of our hard working staff, Board members, volunteers and listeners who have, working together, made these outcomes possible. It is a remarkable performance.

But what were the drivers?

In my next report at the Board meeting I will analyze each station and their individual financials for the year. (See charts on each station below—indicating their revenues and surpluses/deficits over the last 17 years.

Meantime, I include for completeness a preliminary Balance Sheet for FY06

Preliminary Balance Sheet Analysis FY06

	FY04	FY05	FY06	Var $	Var%
ASSETS
Cash	1,612,541	2,091,633	2,318.989	227,356	10.87%
Receivables	473,549	915,714	1,572,463	656,748	71.72%
Total Current Assets	2,283,715	3,007,347	3,891,452	884,105	29.4%
Total Assets	6,396,584	7,008,645	8,581,522	1,572,887	22.44%
LIABILITIES
Accounts Payable	1,458,599	1,146,621	1,077,675	-68,947	-6.01%
Total Current Liabilities	1,575,167	1,146,621	1,077,765	-68,947	-6.01%
Change in Net Assets	656,936	1,049,735	1,641,829	592,094	56.4%
TOTAL ASSETS	6,396,584	7,008,645	8,581,522	1,572,887	22.44%
TOTAL LIABILITIES	1,578,917	1,146,621	1,077,765	-68,947	6.01%

 

We see that the major factors are that we increased our assets and reduced our liabilities. The former increased by 22% and the latter decreased by 6.01

 

Detailed Balance Sheet Analysis:

1. Note that cash is up by 11% and that is good. But more importantly receivables increased by 71% due to major gifts. These one time gifts I have already alluded to above.
2. Also of interest is that current assets are up by 29% and the quick ratio (current assets minus current liabilities) improves working capital by a million dollars or approximately 51.

Meantime, find below the chart indicates the Network surplus deficit will be 1.6 million dollars.

 

Listener support is at an all time high at 14.5 million.

 

 

STATION ANALYSIS

I will go into detail at the Board meeting on the above charts.