Financial Report - June 30, 2023

The Joffrey Ballet Financial Report June 30, 2023

The Joffrey Ballet

Contents Independent Auditor's Report

1-2

Financial Statements Statement of Financial Position

3

Statement of Activities

4

Statement of Functional Expenses

5-6

Statement of Cash Flows

7

Notes to Financial Statements

8-21

Independent Auditor's Report To the Board of Directors The Joffrey Ballet Opinion We have audited the financial statements of The Joffrey Ballet (the "Organization"), which comprise the statement of financial position as of June 30, 2023 and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Organization as of June 30, 2023 and the changes in its net assets, functional expenses, and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Organization and to meet our ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Report on Prior Year Financial Statements The financial statements of the Organization as of and for the year ended June 30, 2022 were audited by other auditors, who expressed an unmodified opinion on those statements on December 8, 2022.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization's ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our an opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

1

To the Board of Directors The Joffrey Ballet In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit 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 Organization's internal control. Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

December 6, 2023

2

The Joffrey Ballet

Statement of Financial Position June 30, 2023 and 2022 2023

2022

5,050,604 $ 5,811,224

6,051,289 5,389,139

2,562,914 204,546 172,880 587,149 14,324,723 600,000 187,534 18,291,037

4,120,103 984,272 165,947 788,510 11,179,372 1,176,923 16,638,751

$

47,792,611 $

46,494,306

$

311,878 $ 1,544,044

351,431 509,382

1,855,922

860,813

Deferred revenue Lease liabilities Paycheck Protection Program (PPP) loan

2,083,578 216,687 -

2,353,267 1,764,592

Total liabilities

4,156,187

4,978,672

Net Assets Without donor restrictions: Undesignated Board designated

13,815,674 10,497,943

14,523,529 8,859,068

24,313,617

23,382,597

19,322,807

18,133,037

43,636,424

41,515,634

47,792,611 $

46,494,306

Assets Cash and cash equivalents Investments Receivables: Contributions receivable - Net Other accounts receivable Other assets Prepaid expenses Endowment investment Endowment pledges receivable - Net Right-of-use operating lease assets Property and equipment - Net

$

Total assets Liabilities and Net Assets Liabilities Accounts payable and accrued expenses: Trade accounts payable Accrued liabilities and other Total accounts payable and accrued expenses

Total without donor restrictions With donor restrictions Total net assets $

Total liabilities and net assets

See notes to financial statements.

3

The Joffrey Ballet

Statement of Activities Years Ended June 30, 2023 and 2022 Without Donor Restrictions Revenue, Gains, and Other Support Contributions of cash and cash equivalents Federal funding Contributions of nonfinancial assets Academy Performance Community engagement Special events Other income Endowment draw Contributions released from restrictions

$

2023 With Donor Restrictions

Total

Without Donor Restrictions

2022 With Donor Restrictions

Total

6,040,325 $ 1,671,078 356,643 2,274,649 10,643,464 180,860 2,255,753 409,475 442,544 2,416,940

2,761,360 $ (442,544) (2,416,940)

8,801,685 $ 1,671,078 356,643 2,274,649 10,643,464 180,860 2,255,753 409,475 -

5,539,454 $ 8,058,512 456,856 1,863,834 6,008,078 260,997 129,831 169,917 416,512 1,837,444

5,621,508 $ (416,512) (1,837,444)

11,160,962 8,058,512 456,856 1,863,834 6,008,078 260,997 129,831 169,917 -

26,691,731

(98,124)

26,593,607

24,741,435

3,367,552

28,108,987

17,397,562 2,785,594 846,514

-

17,397,562 2,785,594 846,514

14,163,105 2,039,457 671,667

-

14,163,105 2,039,457 671,667

2,122,432 1,695,571

-

2,122,432 1,695,571

2,431,158 1,181,982

-

2,431,158 1,181,982

450,088

-

450,088

42,798

-

42,798

Total expenses

25,297,761

-

25,297,761

20,530,167

-

20,530,167

Increase (Decrease) in Net Assets - Before other items

1,393,970

(98,124)

1,295,846

4,211,268

3,367,552

7,578,820

Other Items Endowment investment income (loss) - Net Investment income (loss) - Net Depreciation

445,372 (908,322)

1,287,894 -

1,287,894 445,372 (908,322)

(609,950) (827,544)

(1,482,077) -

(1,482,077) (609,950) (827,544)

(462,950)

1,287,894

824,944

(1,437,494)

(1,482,077)

(2,919,571)

931,020

1,189,770

2,120,790

2,773,774

1,885,475

4,659,249

23,382,597

18,133,037

41,515,634

20,608,823

16,247,562

36,856,385

24,313,617 $

19,322,807 $

43,636,424 $

23,382,597 $

18,133,037 $

41,515,634

Total revenue, gains, and other support Expenses Program services: Performance Academy Community engagement Support services: Management and general Fundraising Costs and direct benefits to donor related special events

Total other items Increase in Net Assets Net Assets - Beginning of year Net Assets - End of year

See notes to financial statements.

$

4

The Joffrey Ballet

Statement of Functional Expenses Year Ended June 30, 2023

Performance Salaries $ Stipends Pension retirement Other employee benefits Payroll taxes Legal Accounting/Payroll Other services Advertising and promotion Office expenses Information technology Royalties Occupancy Travel Conference, convention, and meetings Insurance Production services Orchestra Event meals and equipment Miscellaneous Subtotal Depreciation Total functional expenses

See notes to financial statements.

Program Services Community Academy Engagement

Total Program Services

Support Services Management and General Fundraising

5,346,541 $ 11,700 485,052 782,379 504,124 88,279 17,727 746,143 2,063,074 26,642 128,001 274,526 2,039,003 367,947 51,195 86,381 2,750,758 1,301,289 31,962 294,839

1,027,887 $ 90,716 39,403 94,643 104,274 1,250 3,408 539,213 19,600 16,447 122,613 5,816 472,771 49,391 1,307 58,034 19,837 118,984

444,282 $ 20,053 47,957 42,685 1,473 114,672 3,102 4,109 10,089 40,144 47,540 4,790 11,151 50,438 3,899 130

6,818,710 $ 102,416 544,508 924,979 651,083 89,529 22,608 1,400,028 2,085,776 47,198 260,703 280,342 2,551,918 464,878 57,292 155,566 2,821,033 1,301,289 35,861 413,953

1,383,509 $ 146,430 76,101 95,942 68,455 87,464 35,784 3,912 20,137 48,033 36,125 82,444 15,752 22,344

17,397,562

2,785,594

846,514

21,029,670

2,122,432

2,145,659

25,297,761

514,530

239,762

46,070

800,362

65,078

42,882

908,322

$ 17,912,092 $

3,025,356 $

892,584 $ 21,830,032 $

5

2,187,510 $

700,295 $ 14,106 44,016 62,853 2,322 224,980 56,561 57,185 53,941 33,190 55,638 88,076 10,379 1,395 681,437 59,285

Total 8,902,514 102,416 705,044 1,045,096 809,878 157,984 112,394 1,660,792 2,142,337 108,295 334,781 280,342 2,633,141 556,641 227,812 181,697 2,822,428 1,301,289 717,298 495,582

2,188,541 $ 26,206,083

The Joffrey Ballet

Statement of Functional Expenses Year Ended June 30, 2022

Performance Salaries $ Stipends Pension retirement Other employee benefits Payroll taxes Legal Accounting/Payroll Other services Advertising and promotion Office expenses Information technology Royalties Occupancy Travel Conference, convention, and meetings Insurance Production services Orchestra Event meals and equipment Miscellaneous Subtotal Depreciation Total functional expenses

See notes to financial statements.

4,537,705 $ 1,000 305,099 771,239 432,838 130,674 14,657 434,177 1,354,815 11,166 112,547 333,096 1,727,834 407,178 34,354 76,012 2,047,349 1,220,524 9,568 201,273

Program Services Community Academy Engagement 768,964 $ 58,663 1,195 73,243 64,189 8,131 2,484 499,460 22,350 20,260 64,870 4,002 261,594 37,588 746 49,074 38,478 64,166

Total Program Services

Support Services Management and General Fundraising

387,890 $ 762 38,449 34,182 1,253 117,787 11,000 2,369 7,983 28,682 9,148 1,551 9,498 18,210 792 2,111

5,694,559 $ 59,663 307,056 882,931 531,209 138,805 18,394 1,051,424 1,388,165 33,795 185,400 337,098 2,018,110 453,914 36,651 134,584 2,104,037 1,221,316 9,568 267,550

1,330,640 $ 360,608 46,522 76,674 337,455 4,298 106,128 8,169 17,513 43,553 7,057 61,157 13,685 17,699

653,858 $ 1,105 51,172 55,774 2,112 62,713 19,500 25,962 57,552 27,256 42,773 69,662 9,021 114,221 32,099

Total 7,679,057 59,663 668,769 980,625 663,657 476,260 24,804 1,220,265 1,407,665 67,926 260,465 337,098 2,088,919 503,744 167,470 157,290 2,218,258 1,221,316 9,568 317,348

14,163,105

2,039,457

671,667

16,874,229

2,431,158

1,224,780

20,530,167

473,048

214,040

41,425

728,513

59,687

39,344

827,544

$ 14,636,153 $

2,253,497 $

713,092 $ 17,602,742 $

6

2,490,845 $

1,264,124 $ 21,357,711

The Joffrey Ballet

Statement of Cash Flows Years Ended June 30, 2023 and 2022 2023

2022

2,120,790 $

4,659,249

908,322 (1,062,525) (297,497) (1,671,078) 145,870 (1,728,327)

827,544 1,482,077 609,950 (1,208,860)

1,608,892 779,726 201,361 (6,933) (39,553) 292,387 (169,526) (269,689)

(2,580,645) (360,857) (25,888) 13,368 197,585 4,311 363,551

812,220

3,981,385

(8,824,210) 6,616,796 (1,765,524)

(20,373,265) 10,348,434 (147,098)

(3,972,938)

(10,171,929)

2,253,547 (93,514)

1,763,594 -

2,160,033

1,763,594

Net Decrease in Cash and Cash Equivalents

(1,000,685)

(4,426,950)

Cash and Cash Equivalents - Beginning of year

6,051,289

10,478,239 6,051,289

Cash Flows from Operating Activities Increase in net assets Adjustments to reconcile increase in net assets to net cash and cash equivalents from operating activities: Depreciation Endowment investment (gain) loss - Net Investment (gain) loss - Net Gain on debt extinguishment - PPP loan Amortization of right-of-use assets Donor-restricted contributions to the endowment Changes in: Contributions receivable Other receivables Prepaid expenses Other assets Accounts payable Accrued liabilities and other Operating lease liability Deferred revenue

$

Net cash and cash equivalents provided by operating activities Cash Flows from Investing Activities Purchases of investments Proceeds from sales of investments Additions to property and equipment Net cash and cash equivalents used in investing activities Cash Flows from Financing Activities Contributions received from donors to be held in perpetuity Payments on debt Net cash and cash equivalents provided by financing activities

Cash and Cash Equivalents - End of year

$

5,050,604 $

Supplemental Cash Flow Information - Capital expenditures included in accounts payable and accrued expenses

$

795,084 $

See notes to financial statements.

7

-

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 1 - Nature of Business The Joffrey Ballet (the “Organization”) is a nonprofit corporation incorporated in the state of Illinois that commenced operations on May 1, 1995. The Organization is a classically based dance company whose signature elements include the incorporation of popular culture, modern technology, and contemporary ideas into its ballets. The repertoire emphasizes works by contemporary American and international artists and revivals of the 20th-century masterworks. The Organization's operations include the Joffrey Academy of Dance (the "Academy") and community engagement programs. Classes and programs are for various age groups at varying levels of dance instruction. The Organization conducts its activities from the Joffrey Tower, its building located in Chicago, Illinois; its new studios on South Wabash; and throughout the Chicago Public School System, and its subscription series and the Nutcracker are performed at the Lyric Opera of Chicago. The Organization is supported primarily through ticket sales, academy revenue, and contributions (cash and in kind).

Note 2 - Significant Accounting Policies Basis of Presentation The financial statements of the Organization have been prepared on the basis of generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with maturities of three months or less when purchased. The Organization maintains its cash and cash equivalents in bank deposit accounts that at times may exceed federally insured limits. The Organization has not experienced any losses in such accounts.

Contributions Receivable The Organization's contributions receivable are primarily composed of pledges. These are intended by donors to fund the Organization's operations and the endowment and are stated at the present value of the expected future cash flows. Discounts are amortized to contribution revenue over the duration of the pledge. An allowance for uncollectible pledges receivable is calculated based upon management's judgment, including such factors as prior collection history, the type of contribution, and the nature of the fundraising activity.

Other Receivables Other receivables generally include tuition payments for the Academy and community engagement activities. Additionally, the balance at June 30, 2022 included a significant receivable from the Internal Revenue Service for the Employee Retention Tax Credit for the third quarter of 2021. An allowance for doubtful accounts is based on specific identification of uncollectible accounts and the Organization's historical collection experience. No allowance was deemed necessary at June 30, 2023 and 2022.

Investments Investments are presented at fair value. The Organization's investments are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to these risk factors, it is reasonably possible that changes in the value of the investments will occur in the near term and could materially affect the amounts reported in the financial statements.

8

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 2 - Significant Accounting Policies (Continued) Property and Equipment Property and equipment are recorded at cost. Donated property and equipment are recorded as assets at their estimated fair value on the date of contribution. The Organization capitalizes all property and equipment purchases over $1,000. Costs of maintenance and repairs are charged to expense when incurred. Depreciation is recorded on the straight-line basis over the estimated useful lives of the assets, which are 3 to 20 years for sets, costumes, and props and 4 to 10 years for furniture and fixtures, equipment, and other property.

Classification of Net Assets Net assets of the Organization are classified based on the presence or absence of donor-imposed restrictions.

Net assets without donor restrictions: Net assets that are not subject to donor-imposed restrictions or for which the donor-imposed restrictions have expired or been fulfilled. Net assets in this category may be expended for any purpose in performing the primary objectives of the Organization.

Net assets with donor restrictions: Net assets subject to stipulations imposed by donors and grantors.

Some donor restrictions are temporary in nature; those restrictions will be met by actions of the Organization or by the passage of time. Other donor restrictions are perpetual in nature, where the donor has stipulated the funds be maintained in perpetuity.

Earnings, gains, and losses on donor-restricted net assets are classified as net assets without donor restrictions unless specifically restricted by the donor or by applicable state law.

Board-designated Net Assets Board-designated net assets are net assets without donor restrictions designated by the board primarily for capital improvements, future projects, and innovation. These designations are based on board actions, which can be altered or revoked at a future time by the board (see Note 9).

Revenue Recognition The Organization recognizes performance and academy revenue in accordance with guidance for revenue for contracts with customers. Revenue from contracts with patrons and students is reported at the amount that reflects the consideration to which the Organization expects to be entitled to in exchange for providing performances and instruction. Revenue is recognized as performance obligations are satisfied, which generally occurs when performances or classes are held. Payments for ticket sales are generally received in advance of the related performance; payments for classes are received in advance or in installments over the duration of the program. Cash received from ticket sales for the next fiscal year's programs and tuition payments received in advance for classes that take place after the fiscal year end are recorded as deferred revenue. The Organization had deferred revenue of $2,083,578, $2,353,267, and $1,989,716 as of June 30, 2023; June 30, 2022; and July 1, 2021, respectively. Special event revenue is composed of an exchange element based upon the direct benefits donors receive and a contribution element for the difference. Special event revenue is recognized when the event takes place.

Contributions Contributions of cash and other assets, including unconditional promises to give in the future, are reported as revenue when received, measured at fair value. Contributions with donor-imposed time or purpose restrictions are reported as contributions with donor restrictions. All other contributions are reported as contributions without donor restrictions. Contributions without donor-imposed restrictions and contributions with donor-imposed time or purpose restrictions that are met in the period in which the gift is received are both reported as unrestricted support.

9

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 2 - Significant Accounting Policies (Continued) Contributions of Nonfinancial Assets Contributions of nonfinancial assets are reflected in contributions and expenses recorded in the corresponding functional expense category in the accompanying statement of activities at their estimated fair value. The Organization has recorded in-kind contributions, which include professional services, transportation, and event services, at their estimated fair values. See Note 17 for additional information.

Leases The Organization has an operating lease for warehouse space and a finance lease for office equipment.

The Organization recognizes expense for leases on a straight-line basis over the lease term. The Organization made a policy election not to separate lease and nonlease components for the warehouse lease. Therefore, all payments are included in the calculation of the right-of-use asset and lease liability.

The Organization has operating leases for office equipment, academy summer program housing, and stage rental for performances with lease terms of one year or less that the Organization has elected to account for as short-term leases. As these leases are short-term leases, they are not included in the rightof-use asset and lease liability. Total expense related to short-term leases was $250,963 for 2023.

The Organization has elected to use the risk-free rate as the discount rate for calculating the right-of-use asset and lease liability in place of the incremental borrowing rate for the operating and finance leases.

Income Taxes The Organization is a not-for-profit corporation and is exempt from tax under the provisions of Internal Revenue Code Section 501(c)(3).

Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions affecting the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Advertising Expense Advertising expense is charged to expense during the year in which it is incurred. Advertising expense for exchange-related transactions is included in program expenses. Advertising expense for 2023 and 2022 was $2,142,337 and $1,407,665, respectively.

Functional Allocation of Expenses Costs of providing the program and support services have been reported on a functional basis in the statement of activities. Costs have been allocated between the various program and support services on the basis of square footage for depreciation, information technology, facilities, insurance, and other services. Payroll taxes, retirement benefits, and other employee benefits were allocated based on related salary allocations. Although the methods of allocation used are considered appropriate, other methods could be used that would produce different amounts.

10

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 2 - Significant Accounting Policies (Continued) Upcoming Accounting Pronouncement In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The ASU includes changes to the accounting and measurement of financial assets, including the Organization's accounts receivable, by requiring the Organization to recognize an allowance for all expected losses over the life of the financial asset at origination. This is different from the current practice where an allowance is not recognized until the losses are considered probable. Credit losses are recognized through the recording of an allowance rather than as a write-down of the carrying value. The new guidance will be effective for the Organization's year ending June 30, 2024. Upon adoption, the ASU will be applied as of the beginning of the year of implementation.

Subsequent Events The financial statements and related disclosures include evaluation of events up through and including December 6, 2023, which is the date the financial statements were available to be issued.

Note 3 - Adoption of New Accounting Pronouncement As of July 1, 2022, the Organization adopted Financial Accounting Standards Board Accounting Standards Update No. 2016-02, Leases. The ASU requires lessees to recognize a right-of-use asset and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of operations. The Organization elected to adopt the ASU using the modified retrospective method as of July 1, 2022.

As a result of the adoption of the ASU, the Organization recorded a right-of-use asset of $333,404 and a lease liability of $386,213 as of July 1, 2022 for existing operating leases.

Note 4 - Contributions Receivable Included in contributions receivable are several unconditional promises to give generated from a campaign. They are included as follows:

Less than one year One to two years More than two years

$

Subtotal Less allowance for uncollectibles Less discount to present value $

Total

2023

2022

1,755,544 $ 1,225,000 250,000

2,428,713 1,945,000 1,099,999

3,230,544

5,473,712

(67,630)

(10,000) (166,686)

3,162,914 $

5,297,026

Contributions receivable, net of discount and allowance, are restricted as follows for the years ended June 30:

Contributions receivable for operations Contributions receivable for endowment Total contributions receivable

11

2023

2022

$

2,562,914 $ 600,000

4,120,103 1,176,923

$

3,162,914 $

5,297,026

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 4 - Contributions Receivable (Continued) The discount rate used in determining the fair value of contributions receivable ranged from 4.00 to 4.87 percent as of June 30, 2023 and 2022.

Note 5 - Fair Value Measurements Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value.

Fair values determined by Level 1 inputs use quoted prices in active markets for identical assets that the Organization has the ability to access.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly.

These Level 2 inputs include quoted prices for similar assets in active markets and other inputs, such as interest rates and yield curves, that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques taking into account the characteristics of the asset.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Organization’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

The following tables present information about the Organization’s assets measured at fair value on a recurring basis at June 30, 2023 and 2022 and the valuation techniques used by the Organization to determine those fair values: Assets Measured at Fair Value on a Recurring Basis at June 30, 2023 Quoted Prices in Active Markets Significant Other Significant for Identical Observable Unobservable Assets Inputs Inputs Balance at (Level 1) (Level 2) (Level 3) June 30, 2023 Investments: Bond funds Equity funds Exchange-traded funds

1,590,753 $ 3,501,073 687,539

-

Total investments

5,779,365

-

-

5,779,365

Endowment investments: Bond funds Equity funds Exchange-traded funds

1,705,117 10,831,901 1,588,431

-

-

1,705,117 10,831,901 1,588,431

Total endowment investments

14,125,449

-

-

14,125,449

19,904,814 $

-

Total assets

$

$

12

$

$

-

-

$

$

1,590,753 3,501,073 687,539

19,904,814

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 5 - Fair Value Measurements (Continued) Assets Measured at Fair Value on a Recurring Basis at June 30, 2022 Quoted Prices in Active Markets Significant Other Significant for Identical Observable Unobservable Assets Inputs Inputs Balance at (Level 1) (Level 2) (Level 3) June 30, 2022 Investments: Bond funds Equity funds

$

Total investments Endowment investments: Bond funds Equity funds Total endowment investments Total assets

$

2,198,661 $ 3,170,275

-

$

-

5,368,936

-

-

5,368,936

2,041,418 8,946,620

-

-

2,041,418 8,946,620

10,988,038

-

-

10,988,038

16,356,974 $

-

$

-

$

$

2,198,661 3,170,275

16,356,974

Not included in the above tables is $231,133 and $211,537 in cash and money market funds as of June 30, 2023 and 2022 respectively.

Note 6 - Property and Equipment Property and equipment as of June 30 are summarized as follows:

Building and improvements Furniture, fixtures, and equipment Leasehold improvements Sets, costumes, and props Nutcracker sets, costumes, and props Website redesign Construction in progress

$

Total cost Accumulated depreciation: Building and improvements Furniture, fixtures, and equipment Leasehold improvements Sets, costumes, and props Nutcracker sets, costumes, and props Website redesign Total accumulated depreciation Net property and equipment

$

2023

2022

22,045,873 $ 2,257,945 808,073 526,607 2,378,254 162,200 1,503,384

22,045,873 2,160,329 23,466 526,607 2,203,254 162,200 -

29,682,336

27,121,729

7,807,310 1,918,813 39,362 480,842 1,047,492 97,480

7,256,163 1,813,347 9,466 469,515 870,925 63,562

11,391,299

10,482,978

18,291,037 $

16,638,751

Depreciation expense for 2023 and 2022 was $908,322 and $827,544, respectively.

As of June 30, 2023 and 2022 the Organization had no outstanding construction commitments.

13

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 7 - Leases The Organization is obligated under an operating lease for warehouse space, expiring in June 2024. The right-of-use asset and related lease liability have been calculated using a discount rate of 2.84 percent.

The Organization leases office equipment under a long-term lease arrangement that is classified as a finance lease. Under the terms of the lease agreement, payment of $1,414 is due monthly through October 2026. The right-of-use asset and related lease liability have been calculated using a discount rate of 2.79 percent.

Expenses recognized under these leases for the year ended June 30, 2023 consist of the following: Lease cost: Finance lease cost: Amortization of right-of-use assets Interest on lease liabilities Operating lease cost Total lease cost Other information: Operating cash flows from finance lease - Interest Operating cash flows from operating leases Financing cash flows from finance lease

$

15,965 1,736 136,800

$

154,501

$

1,736 161,190 15,232

The future minimum lease payments under operating and finance leases are as follows: Years Ending June 30 2024 2025 2026 2027

Operating Leases $

Total Less amount representing interest Present value of net minimum lease payments $

Finance Leases Total Payments

165,219 $ -

16,968 $ 16,968 16,968 5,656

182,187 16,968 16,968 5,656

165,219

56,560

221,779

2,482

2,610

5,092

162,737 $

53,950 $

216,687

Beginning in July 2020, the Organization has a seven-year license agreement with the Lyric Opera for all its subscription series and holiday performances. Total theater rental expenses were $658,150 and $617,700 for fiscal years 2023 and 2022, respectively.

14

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 8 - Net Assets The Organization's board has designated a portion of its funds without donor restrictions for the specific uses detailed below as of June 30:

Future Projects Fund Building Improvements Fund Eric B. Eatherly Scholarships Women's Board Tribute Fund Innovation Fund

$

Total Operating cash reserve Total board-designated net assets

$

2023

2022

3,375,350 $ 2,375,000 77,663 15,453 204,477

6,395,139 875,000 81,138 5,667 496,055

6,047,943

7,852,999

4,450,000

1,006,069

10,497,943 $

8,859,068

Transfers to board-designated funds in fiscal year 2022 represented excess operating funds.

The Organization had net assets with donor restrictions consisting of the following as of June 30 :

Subject to expenditures for a specified purpose: Nutcracker Performances Community engagement Academy

$

Total subject to expenditures for a specified purpose Subject to the passage of time: Contributions related to future events Pledges receivable Total subject to the passage of time Subject to endowment spending policy and appropriation: Rudolph Nureyev Fund and The Joffrey Ballet The Mary B. Galvin Artistic Director Fund Scholarships Abbott Academy director Community Engagement Bridge Program Total subject to endowment spending policy and appropriation Total net assets with donor restrictions

$

2023

2022

858,712 $ 1,025,000 340,000 60,000

885,212 1,013,978 42,500 30,000

2,283,712

1,971,690

1,484,951 624,171

2,690,590 1,114,462

2,109,122

3,805,052

3,068,826 5,764,757 1,422,675 2,965,081 1,708,634

2,851,312 5,368,133 1,324,794 2,812,056 -

14,929,973

12,356,295

19,322,807 $

18,133,037

Net assets were released from restrictions due to the passage of time or by incurring expenses to satisfy the purposes specified by donor grant agreements as follows:

Time-restricted pledges Purpose-restricted pledges Total

15

2023

2022

$

2,385,600 $ 31,340

719,075 1,118,369

$

2,416,940 $

1,837,444

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 9 - Donor-restricted Endowments The Organization's endowment includes donor-restricted endowment funds. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

Interpretation of Relevant Law The Organization is subject to the State Prudent Management of Institutional Funds Act (SPMIFA) and, thus, classifies amounts in its donor-restricted endowment funds as net assets with donor restrictions because those net assets are time restricted until the board of directors appropriates such amounts for expenditures. Most of those net assets also are subject to purpose restrictions that must be met before reclassifying those net assets to net assets without donor restrictions. The board of directors of the Organization had interpreted SPMIFA as not requiring the maintenance of purchasing power of the original gift amount contributed to an endowment fund, unless a donor stipulates the contrary. As a result of this interpretation, when reviewing its donor-restricted endowment funds, the Organization considers a fund to be underwater if the fair value of the fund is less than the sum of (a) the original value of initial and subsequent gift amounts donated to the fund and (b) any accumulations to the fund that are required to be maintained in perpetuity in accordance with the direction of the applicable donor gift instrument. The Organization has interpreted SPMIFA to permit spending from underwater funds in accordance with the prudent measures required under the law. Additionally, in accordance with SPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:       

The duration and preservation of the fund The purpose of the Organization and the donor-restricted endowment fund General economic conditions The possible effect of inflation and deflation The expected total return from income and the appreciation of investments Other resources of the Organization The investment policies of the Organization Endowment Net Asset Composition by Type of Fund as of June 30, 2023 Without Donor With Donor Restrictions Restrictions Total Donor-restricted endowment funds: Original donor-restricted gift amount and amounts required to be maintained in perpetuity by the donor $ Accumulated investment gains

-

$

13,329,540 $ 1,000,433

13,329,540 1,000,433

Total donor-restricted endowment funds

-

$

14,329,973 $

14,329,973

$

Changes in Endowment Net Assets for the Fiscal Year Ended June 30, 2023 Without Donor With Donor Restrictions Restrictions Total Endowment net assets - Beginning of year Investment return - Net appreciation (realized and unrealized) Contributions Appropriation of endowment assets for expenditure

$

Endowment net assets - End of year

$

16

-

$

-

$

11,179,372 $

11,179,372

1,287,894 2,305,251 (442,544)

1,287,894 2,305,251 (442,544)

14,329,973 $

14,329,973

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 9 - Donor-restricted Endowments (Continued) Endowment Net Asset Composition by Type of Fund as of June 30, 2022 Without Donor With Donor Restrictions Restrictions Total Donor-restricted endowment funds: Original donor-restricted gift amount and amounts required to be maintained in perpetuity by the donor $ Accumulated investment gains

-

$

11,022,719 $ 156,653

11,022,719 156,653

Total donor-restricted endowment funds

-

$

11,179,372 $

11,179,372

$

Changes in Endowment Net Assets for the Fiscal Year Ended June 30, 2022 Without Donor With Donor Restrictions Restrictions Total Endowment net assets - Beginning of year Investment return - Net depreciation (realized and unrealized) Contributions Appropriation of endowment assets for expenditure

$

Endowment net assets - End of year

$

-

$

-

$

11,146,164 $

11,146,164

(1,313,874) 1,763,594 (416,512)

(1,313,874) 1,763,594 (416,512)

11,179,372 $

11,179,372

Underwater Endowment Funds From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or SPMIFA requires the Organization to retain as a fund of perpetual duration. Deficiencies of this nature exist in two donor-restricted endowment funds, which together have an original gift value of $3,414,180, a current fair value of $3,263,013, and a deficiency of $151,167 as of June 30, 2023. Deficiencies of this nature existed in two donor-restricted endowment funds at June 30, 2022, which had an original gift value of $2,814,180, a current fair value or $2,471,286, and a deficiency of $342,894. These deficiencies resulted from unfavorable market fluctuations that occurred shortly after the investment of new contributions for donor-restricted endowment funds and continued appropriation for certain programs that was deemed prudent by the board of directors.

Return Objectives and Risk Parameters The Organization has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment, while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Organization must hold in perpetuity or for a donor-specified period, as well as board-designated funds. Under this policy, as approved by the board of directors, the endowment assets are invested in a manner that is intended to achieve a return of 5 percent, net of inflation and investment expenses. The secondary investment objective is to earn a total return, net of expenses, at least equal to the portfolio's composite benchmark, as defined in its investment policy statement. Actual returns in any given year may vary from this amount.

Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Organization targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints.

17

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 9 - Donor-restricted Endowments (Continued) Spending Policy and How the Investment Objectives Relate to Spending Policy The Organization established an investment policy that allows for the appropriation of 4 percent of the average market value of the endowment over the preceding 12 quarters. Appropriated earnings are to be used for the Organization's operations and expenses in accordance with donor restrictions, if any. For the years ended June 30, 2023 and 2022, appropriations amounted to $442,544 and $416,512, respectively.

Note 10 - Federal Funding Shuttered Venue Operators Grant The Shuttered Venue Operators Grant (SVOG) program was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act and amended by the American Rescue Plan Act. The program includes over $16 billion in grants to shuttered venues and is administered by the SBA's Office of Disaster Assistance. In July 2021, the Organization applied for and was awarded $4,314,422 under the SVOG, which allowed funds to be used for specific expenses incurred due to the shutdown of operations between March 1, 2020 and December 31, 2021. In September 2021, the Organization applied for and was awarded a second award in the amount of $3,039,508. The amounts were recognized as a government grant in the statement of activities in the year ended June 30, 2022.

Paycheck Protection Program Loans The Organization received Paycheck Protection Program (PPP) term loans in April 2020 and March 2021 in the amounts of $2,019,225 and $1,764,592, respectively. The notes were issued pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act's PPP. The loan structure required Joffrey officials to certify certain statements that permitted the Organization to qualify for the loans and provides loan forgiveness for a portion or all of the borrowed amount if the Organization uses the loan proceeds for the permitted loan purpose described in the PPP agreement; the portion not forgiven will be required to be paid back in full by the Organization in equal monthly principal payments plus interest at 1.00 percent beginning after the financial institution receives the approved loan forgiveness funds from the Small Business Administration (SBA). The Organization has the right to repay any amount outstanding at any time without penalty. These loans helped the Organization fund payroll, benefits, lease payments and building utility costs.

The legal form of the PPP agreements is a loan, and the Organization had concluded to record them as such until the Small Business Administration reviewed and approved the forgiveness application. In June 2021, the first PPP loan was forgiven, and the Organization recognized a gain on extinguishment. In August 2022, the Organization was notified that $1,671,078 of the second PPP loan was forgiven, and the remaining balance of $93,514 was repaid by the Organization in August 2022. The Organization recognized a gain on extinguishment for the forgiven amount for the year ended June 30, 2023.

Employee Retention Credit The CARES Act of 2020 introduced the Employee Retention Credit (ERC) as pandemic relief for eligible organizations. The ERC is a refundable credit against certain employment taxes and qualifies as a government grant. Under generally accepted accounting principles, government grants are recognized as revenue in the period in which an organization substantially overcomes all measurable barriers to be entitled to the funding. Management has determined that the measurable barriers that must be overcome for entitlement to the ERC funding are qualifying for the credit based on having operations suspended to comply with a government order related to COVID-19, meeting the threshold for gross receipts decline in 2021 compared to 2019, and incurring eligible payroll expenses.

18

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 10 - Federal Funding (Continued) The Organization recognized $704,582 of revenue under this program in 2022. The Organization's claim is subject to review by the Internal Revenue Service (IRS) within the applicable statute of limitations. If a portion or all of the ERC is determined to be ineligible upon IRS review, the Organization would be required to return the ineligible portion on demand and could potentially be subject to penalties and interest on unpaid employment taxes.

Note 11 - Collective Bargaining Agreements Approximately 45 percent of the Organization’s workforce is covered by various collective bargaining agreements (CBA); the American Guild of Musical Artists; and the International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists, and Allied Crafts, or Makeup Artists or Hairstylists of the United States, its Territories and Canada. The CBA covering the Organization's employees who were organized under IATSE Local 769 expires on June 30, 2024. The CBA covering the Organization's employees who were organized under Theatrical Stage Employees Union Local No. 2 expires on June 30, 2024. The CBA covering the Organization's employees who were organized under Motion Picture Studio Mechanics Local Number 476 expires on August 31, 2024. The CBA covering the Organization's employees who were organized under the American Guild of Musical Artists expires on June 30, 2027.

Note 12 - Line of Credit Under a line of credit agreement with a bank, the Organization has available borrowings of approximately $1,500,000. Interest is at the greater of 2.75 percent or the prime rate less 0.50 percent (an effective rate of 7.875 percent and 4.25 percent at June 30, 2023 and 2022, respectively). The line of credit matures on January 31, 2024, and the Organization intends to negotiate a renewal. The line of credit is collateralized by general assets and pledges receivable. The Organization had no outstanding balance on the line of credit at June 30, 2023 and 2022. No borrowings were made on the line of credit during the years ended June 30, 2023 and 2022 Under the agreement with the bank, the Organization is subject to certain nonfinancial covenants, including the requirement to file audited financial statements within 120 days of fiscal year end with the bank. During 2022, the Organization was not in compliance with certain requirements, due to outstanding debt related to the second PPP loan. The Organization received a waiver for any covenants not met in 2022. There were no such violations in 2023.

At June 30, 2023, the Organization was in violation of the covenant requiring audited financial statements to be filed with the bank within 120 days of fiscal year end. The bank has waived that requirement of the agreement as of December 6, 2023 and for the period ended June 30, 2023.

Note 13 - Retirement Plans The Organization administers The Joffrey Ballet Tax Deferred Annuity Plan, a 403(b) defined contribution benefit plan. The plan allows for discretionary matching contributions in an amount equal to the lesser of the participant's actual contributions or 3 percent of the participant's salary. Contributions to the plan totaled $124,437 and $114,088 for the years ended June 30, 2023 and 2022, respectively. The Organization administers a 457(f) where, at the discretion of the board of directors, certain executives receive deferred contributions. The Organization made contributions of $250,000 to the plan in the years ended June 30, 2023 and 2022.

19

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 14 - Deferred Revenue The Organization recorded deferred revenue from the following sources as of June 30:

Ticket revenue Tuition and other revenue Total

2023

2022

$

1,319,312 $ 764,266

1,574,794 778,473

$

2,083,578 $

2,353,267

Note 15 - Liquidity and Availability of Resources The following reflects the Organization's financial assets as of June 30, 2023 and 2022, reduced by amounts not available for general use because of board-designated or donor-imposed restrictions within one year of the statement of financial position date:

Cash and cash equivalents Investments Contributions receivable Other receivables Endowment cash and cash equivalents Endowment investments Endowment pledges receivable

$

Financial assets Less amounts not available to be used within one year: Endowment cash and cash equivalents Endowment investments Endowment pledges receivable Board-designated net assets Operating pledges not expected to be received within one year Total Financial assets available to meet general expenditures within one year

$

2023

2022

5,050,604 $ 5,811,224 2,562,914 204,546 199,274 14,125,449 600,000

6,051,289 5,389,139 4,120,103 984,272 191,334 10,988,038 1,176,923

28,554,011

28,901,098

199,274 14,125,449 600,000 8,956,943 1,475,000

191,334 10,988,038 1,176,923 8,859,068 3,044,999

25,356,666

24,260,362

3,197,345 $

4,640,736

The pledges receivable are subject to implied time restrictions, but the amount reported above is expected to be collected within one year.

The Organization's endowment funds consist of donor-restricted endowments. Income from donorrestricted endowments is restricted for specific purposes and, therefore, is not available for general expenditure.

The Organization regularly monitors its liquidity in order to meet financial obligations. As part of its boarddesignated net assets, the Organization approved in 2023 an operating reserve fund policy that requires the Organization to maintain an equivalent of three months of average actual cash operating costs. The amount of the operating reserve will be calculated each year after the annual budget is approved. The available line of credit may be counted as a part of the calculated target reserve but may not exceed 50 percent of the reserve amount. Any spending from this account that brings the balance below the approved amount must be eventually refunded. As of June 30, 2023 and 2022, the balance in this account was $4,450,000 and $1,006,069, respectively. The remaining board-designated net assets could be released by action of the board in order to cover any approved budgeted uses. In addition, the Organization has a commercial line of credit with available credit of $1,500,000.

20

The Joffrey Ballet

Notes to Financial Statements June 30, 2023 and 2022

Note 16 - Related Party Transactions Contributions to the Organization from board members and staff, amounting to $1,552,650 and $1,416,164 for the years ended June 30, 2023 and 2022, respectively, are included in contributions revenue on the statements of activities. Pledges receivable from board members of $211,400 and $1,000,000 at June 30, 2023 and 2022, respectively, are included in pledges receivable on the statement of financial position.

Note 17 - Contributed Nonfinancial Assets Contributed nonfinancial assets recognized within the statement of activities consisted of the following for the years ended June 30: 2023 Professional services Legal services Supplies Equipment Event space and catering Total

2022

$

50,761 $ 95,757 89,440 120,685

3,092 419,582 23,000 11,182 -

$

356,643 $

456,856

Contributed nonfinancial assets did not have donor-imposed restrictions.

Contributed nonfinancial assets are valued and reported at their estimated fair value in the financial statements. Contributed professional and legal services, as well as event space and catering, are estimated based on stated prices for similar items or services. Contributed supplies and equipment are estimated based on market value for similar supplies or pieces of equipment. None of the contributed nonfinancial assets were sold or monetized.

21