STARLIGHT THEATRE ASSOCIATION OF KANSAS … · Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness

STARLIGHT THEATRE ASSOCIATION OF KANSAS CITY, INC. AND EPIC INNOVATIVE

EVENTS, INC. CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

Contents

Page Independent Auditors’ Report ...................................................... 1 - 2 Financial Statements

Consolidated Statements Of Financial Position ............................ 3 - 4

Consolidated Statements Of Activities .......................................... 5 - 8

Consolidated Statement Of Cash Flows .............................................. 9

Notes To Consolidated Financial Statements ........................... 10 - 27

RubinBrown LLP Certified Public Accountants

& Business Consultants

1200 Main Street

Suite 1000

Kansas City, MO 64105

T 816.472.1122

F 816.472.1065

W rubinbrown.com E [email protected]

Independent Auditors’ Report Board of Directors Starlight Theatre Association of Kansas City, Inc. and EPIC Innovative Events, Inc. Kansas City, Missouri Report On The Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Starlight Theatre Association of Kansas City, Inc. and EPIC Innovative Events, Inc., which comprise the consolidated statements of financial position as of September 30, 2017 and 2016, and the related consolidated statements of activities 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 the 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 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 audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

Board of Directors Starlight Theatre Association of Kansas City, Inc. and EPIC Innovative Events, Inc.

Page 2

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 auditors’ 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 Starlight Theatre Association of Kansas City, Inc. and EPIC Innovative Events, Inc. as of September 30, 2017 and 2016, and the changes in its net assets and cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.

November 13, 2017

STARLIGHT THEATRE ASSOCIATION OF KANSAS CITY, INC. AND EPIC INNOVATIVE EVENTS, INC.

See the accompanying notes to consolidated financial statements. Page 3

CONSOLIDATED STATEMENT OF FINANCIAL POSITION September 30, 2017

Assets

Starlight EPIC Eliminations TotalCurrent Assets

Cash and cash equivalents 4,871,775$ 906,831$ —$ 5,778,606$ Investments 2,813,711 — — 2,813,711 Accounts receivable 11,811 17,534 — 29,345 Pledges receivable 54,975 — — 54,975 Prepaid expenses 84,202 260,780 — 344,982 Inventories 143,478 — — 143,478 Intercompany recievable 43,100 — (43,100) —

Total Current Assets 8,023,052 1,185,145 (43,100) 9,165,097

Investments Restricted For Endowment 4,903,080 — — 4,903,080

Pledges Receivable - Capital 50,000 — — 50,000

Property And Equipment, Net 15,309,316 — — 15,309,316

Other Assets 301,052 — (50,000) 251,052

Total Assets 28,586,500$ 1,185,145$ (93,100)$ 29,678,545$

Liabilities And Net Assets

Current LiabilitiesAccounts payable 271,709$ 42,960$ —$ 314,669$ Concert settlement liability 602,025 — — 602,025 Accrued expenses 582,079 — — 582,079 Intercompany payable — 43,100 (43,100) — Deferred revenue 1,699,664 257,100 — 1,956,764

Total Current Liabilities 3,155,477 343,160 (43,100) 3,455,537

Net AssetsCommon stock — 10,000 (10,000) — Additional paid-in capital — 40,000 (40,000) — Retained earnings — 791,985 (791,985) — Unrestricted net assets 20,212,753 — 791,985 21,004,738 Board designated net assets (unrestricted) 2,290,217 — — 2,290,217 Temporarily restricted 315,190 — — 315,190 Permanently restricted 2,612,863 — — 2,612,863

Total Net Assets 25,431,023 841,985 (50,000) 26,223,008

Total Liabilities And Net Assets 28,586,500$ 1,185,145$ (93,100)$ 29,678,545$



CONSOLIDATED STATEMENT OF FINANCIAL POSITION September 30, 2016

Assets

Starlight EPIC Eliminations TotalCurrent Assets

Cash and cash equivalents 4,726,916$ 942,214$ —$ 5,669,130$ Investments 2,789,468 — — 2,789,468 Accounts receivable 36,942 — — 36,942 Pledges receivable 76,590 — — 76,590 Prepaid expenses 161,905 18,290 — 180,195 Inventories 152,369 — — 152,369 Intercompany recievable 63,636 — (63,636) —

Total Current Assets 8,007,826 960,504 (63,636) 8,904,694

Investments Restricted For Endowment 4,402,682 — — 4,402,682

Property And Equipment, Net 16,683,956 — — 16,683,956

Other Assets 244,243 — (50,000) 194,243

Total Assets 29,338,707$ 960,504$ (113,636)$ 30,185,575$

Liabilities And Net Assets

Current LiabilitiesAccounts payable 540,360$ 27,970$ —$ 568,330$ Concert settlement liability 1,645,342 — — 1,645,342 Accrued expenses 483,001 — — 483,001 Intercompany payable — 63,636 (63,636) — Deferred revenue 389,039 132,633 — 521,672

Total Current Liabilities 3,057,742 224,239 (63,636) 3,218,345

Net AssetsCommon stock — 10,000 (10,000) — Additional paid-in capital — 40,000 (40,000) — Retained earnings — 686,265 (686,265) — Unrestricted net assets 21,694,893 — 686,265 22,381,158 Board designated net assets (unrestricted) 1,789,819 — — 1,789,819 Temporarily restricted 183,390 — — 183,390 Permanently restricted 2,612,863 — — 2,612,863

Total Net Assets 26,280,965 736,265 (50,000) 26,967,230

Total Liabilities And Net Assets 29,338,707$ 960,504$ (113,636)$ 30,185,575$



CONSOLIDATED STATEMENT OF ACTIVITIES For The Year Ended September 30, 2017

Total StarlightFundraising/ Non-Operating Unrestricted

Broadway Concert Indoor Education Administration Philanthropic City of KCMO Net AssetsRevenues, Gains And Other Support

Contributions:General —$ —$ —$ —$ —$ 330,553$ —$ 330,553$ Capital campaign — — — — — — — — Public Improvements Advisory Committee (PIAC) — — — — — — 157,355 157,355 Contributed services 504,356 — 40,585 — — — — 544,941 Annual gala — — — — — 644,075 — 644,075 Educational programs — — — — — — — —

Total contributions 504,356 — 40,585 — — 974,628 157,355 1,676,924

Revenues from operations:Ticket sales 6,673,959 6,546,890 454,613 — — — — 13,675,462 Parking and concessions 1,469,812 1,865,133 82,924 — — — — 3,417,869 Production revenue 367,207 — 1,314 — — — — 368,521 Sponsorships 166,167 209,610 20,000 — — — — 395,777 Outside events — — — — — — — — Investment and intercompany income — — — — 279,045 — — 279,045 Educational Fees and Other — — — 91,767 104,600 — — 196,367

Total revenues from operations 8,677,145 8,621,633 558,851 91,767 383,645 — — 18,333,041

Total Revenues, Gains And Other Support 9,181,501 8,621,633 599,436 91,767 383,645 974,628 157,355 20,009,965

ExpensesOperations, including administation 2,123,540 1,110,265 450,762 398,892 1,198,283 188,670 157,355 5,627,767 Tickets and marketing 1,961,997 325,650 272,393 — — — — 2,560,040 Production 4,454,108 6,208,440 538,711 — — — — 11,201,259 Annual gala — — — — — 108,990 — 108,990 Contributed services 504,356 — 40,585 — — — — 544,941

Total Expenses 9,044,001 7,644,355 1,302,451 398,892 1,198,283 297,660 157,355 20,042,997

Changes In Net Assets Before Depreciation,Amortization, Unrealized Gain And Net Assets Released From Restriction 137,500 977,278 (703,015) (307,125) (814,638) 676,968 — (33,032)

Depreciation And Amortization Expense 860,769 309,877 292,662 — — — — 1,463,308

Changes In Net Assets Before UnrealizedGain And Net Assets Released FromRestriction (723,269)$ 667,401$ (995,677)$ (307,125)$ (814,638)$ 676,968$ —$ (1,496,340)

Unrealized Gain 78,785

Net Assets Released From Restriction 435,813

Change In Net Assets (981,742)

Net Assets - Beginning Of Year 23,484,712

Net Assets - End Of Year 22,502,970$

Program Services Support ServicesUnrestricted Net Assets



CONSOLIDATED STATEMENT OF ACTIVITIES (CONTINUED) For The Year Ended September 30, 2017

Total Starlight Total Temporarily PermanentlyUnrestricted Unrestricted Restricted Restricted

Net Assets EPIC Eliminations Net Assets Net Assets Net Assets TotalRevenues, Gains And Other Support

Contributions:General 330,553$ —$ —$ 330,553$ —$ —$ 330,553$ Capital campaign — — — — 127,077 — 127,077 Public Improvements Advisory Committee (PIAC) 157,355 — — 157,355 — — 157,355 Contributed services 544,941 — — 544,941 — — 544,941 Annual gala 644,075 — — 644,075 — — 644,075 Educational programs — — — — 108,095 — 108,095

Total contributions 1,676,924 — — 1,676,924 235,172 — 1,912,096

Revenues from operations:Ticket sales 13,675,462 — — 13,675,462 — — 13,675,462 Parking and concessions 3,417,869 — (68,470) 3,349,399 35,470 — 3,384,869 Production revenue 368,521 — — 368,521 — — 368,521 Sponsorships 395,777 — — 395,777 — — 395,777 Outside events — 1,544,302 — 1,544,302 — — 1,544,302 Investment and intercompany income 279,045 — (70,200) 208,845 122,825 — 331,670 Educational Fees and Other 196,367 — — 196,367 — — 196,367

Total revenues from operations 18,333,041 1,544,302 (138,670) 19,738,673 158,295 — 19,896,968

Total Revenues, Gains And Other Support 20,009,965 1,544,302 (138,670) 21,415,597 393,467 — 21,809,064

ExpensesOperations, including administation 5,627,767 1,438,582 (94,949) 6,971,400 — — 6,971,400 Tickets and marketing 2,560,040 — (15,550) 2,544,490 — — 2,544,490 Production 11,201,259 — (27,968) 11,173,291 — — 11,173,291 Annual gala 108,990 — (203) 108,787 — — 108,787 Contributed services 544,941 — — 544,941 — — 544,941

Total Expenses 20,042,997 1,438,582 (138,670) 21,342,909 — — 21,342,909

Changes In Net Assets Before Depreciation,Amortization, Unrealized Gain And Net Assets Released From Restriction (33,032) 105,720 — 72,688 393,467 — 466,155

Depreciation And Amortization Expense 1,463,308 — — 1,463,308 — — 1,463,308

Changes In Net Assets Before UnrealizedGain And Net Assets Released FromRestriction (1,496,340) 105,720 — (1,390,620) 393,467 — (997,153)

Unrealized Gain 78,785 — — 78,785 174,146 — 252,931

Net Assets Released From Restriction 435,813 — — 435,813 (435,813) — —

Change In Net Assets (981,742) 105,720 — (876,022) 131,800 — (744,222)

Net Assets - Beginning Of Year 23,484,712 686,265 — 24,170,977 183,390 2,612,863 26,967,230

Net Assets - End Of Year 22,502,970$ 791,985$ —$ 23,294,955$ 315,190$ 2,612,863$ 26,223,008$

Unrestricted Net Assets



CONSOLIDATED STATEMENT OF ACTIVITIES For The Year Ended September 30, 2016

Total StarlightFundraising/ Non-Operating Unrestricted

Broadway Concert Indoor Education Administration Philanthropic City Of KCMO Net AssetsRevenues, Gains And Other Support

Contributions:General —$ —$ —$ —$ —$ 300,332$ —$ 300,332$ Capital campaign — — — — — — — — Public Improvements Advisory Committee (PIAC) — — — — — — 243,576 243,576 Contributed services 524,686 — 12,840 — — — — 537,526 Annual gala — — — — — 583,200 — 583,200 Educational programs — — — — — — — —

Total contributions 524,686 — 12,840 — — 883,532 243,576 1,664,634

Revenues from operations:Ticket sales 5,012,585 9,225,023 455,134 — — — — 14,692,742 Parking and concessions 1,063,371 2,143,953 60,645 — — — — 3,267,969 Production revenue 18,405 — — — — — — 18,405 Sponsorships 188,848 161,499 181 — — — — 350,528 Outside events — — — — — — — — Investment and intercompany income — — — — 252,635 — — 252,635 Educational Fees and Other — — — 97,504 30,198 — — 127,702

Total revenues from operations 6,283,209 11,530,475 515,960 97,504 282,833 — — 18,709,981

Total Revenues, Gains And Other Support 6,807,895 11,530,475 528,800 97,504 282,833 883,532 243,576 20,374,615

ExpensesOperations, including administation 1,869,615 1,509,110 195,916 383,915 1,218,223 164,341 243,576 5,584,696 Tickets and marketing 1,671,651 329,815 190,940 — — — — 2,192,406 Production 3,230,215 8,254,706 285,581 — — — — 11,770,502 Annual gala — — — — — 93,153 — 93,153 Contributed services 524,686 — 12,840 — — — — 537,526

Total Expenses 7,296,167 10,093,631 685,277 383,915 1,218,223 257,494 243,576 20,178,283

Changes In Net Assets Before Depreciation,Amortization, Unrealized Loss And Net Assets Released From Restriction (488,272) 1,436,844 (156,477) (286,411) (935,390) 626,038 — 196,332

Depreciation And Amortization Expense (Net of Gain On Sale Of Fixed Assets of $9,999) 741,590 494,394 158,912 — — — — 1,394,896

Changes In Net Assets Before UnrealizedLoss And Net Assets Released FromRestriction (1,229,862)$ 942,450$ (315,389)$ (286,411)$ (935,390)$ 626,038$ —$ (1,198,564)

Unrealized Gain 101,045

Net Assets Released From Restriction 359,379

Change In Net Assets (738,140)

Net Assets - Beginning Of Year 24,222,852

Net Assets - End Of Year 23,484,712$

Program Services Support ServicesUnrestricted Net Assets



CONSOLIDATED STATEMENT OF ACTIVITIES (CONTINUED) For The Year Ended September 30, 2016

Total Starlight Total Temporarily PermanentlyUnrestricted Unrestricted Restricted Restricted

Net Assets EPIC Eliminations Net Assets Net Assets Net Assets TotalRevenues, Gains And Other Support

Contributions:General 300,332$ —$ —$ 300,332$ —$ —$ 300,332$ Capital campaign — — — — 50,000 — 50,000 Public Improvements Advisory Committee (PIAC) 243,576 — — 243,576 — — 243,576 Contributed services 537,526 — — 537,526 — — 537,526 Annual gala 583,200 — — 583,200 — — 583,200 Educational programs — — — — 105,148 — 105,148

Total contributions 1,664,634 — — 1,664,634 155,148 — 1,819,782

Revenues from operations:Ticket sales 14,692,742 — — 14,692,742 — — 14,692,742 Parking and concessions 3,267,969 — (30,850) 3,237,119 20,038 — 3,257,157 Production revenue 18,405 — — 18,405 — — 18,405 Sponsorships 350,528 — — 350,528 — — 350,528 Outside events — 1,590,998 — 1,590,998 — — 1,590,998 Investment and intercompany income 252,635 — (100,531) 152,104 47,706 — 199,810 Educational Fees and Other 127,702 — — 127,702 — — 127,702

Total revenues from operations 18,709,981 1,590,998 (131,381) 20,169,598 67,744 — 20,237,342

Total Revenues, Gains And Other Support 20,374,615 1,590,998 (131,381) 21,834,232 222,892 — 22,057,124

ExpensesOperations, including administation 5,584,696 1,510,068 (107,479) 6,987,285 — — 6,987,285 Tickets and marketing 2,192,406 — (11,449) 2,180,957 — — 2,180,957 Production 11,770,502 — (12,396) 11,758,106 — — 11,758,106 Annual gala 93,153 — (57) 93,096 — — 93,096 Contributed services 537,526 — — 537,526 — — 537,526

Total Expenses 20,178,283 1,510,068 (131,381) 21,556,970 — — 21,556,970

Changes In Net Assets Before Depreciation,Amortization, Unrealized Loss And Net Assets Released From Restriction 196,332 80,930 — 277,262 222,892 — 500,154

Depreciation And Amortization Expense (Net of Gain On Sale Of Fixed Assets of $9,999) 1,394,896 — — 1,394,896 — — 1,394,896

Changes In Net Assets Before UnrealizedLoss And Net Assets Released FromRestriction (1,198,564) 80,930 — (1,117,634) 222,892 — (894,742)

Unrealized Gain 101,045 — — 101,045 148,858 — 249,903

Net Assets Released From Restriction 359,379 — — 359,379 (359,379) — —

Change In Net Assets (738,140) 80,930 — (657,210) 12,371 — (644,839)

Net Assets - Beginning Of Year 24,222,852 605,335 — 24,828,187 171,019 2,612,863 27,612,069

Net Assets - End Of Year 23,484,712$ 686,265$ —$ 24,170,977$ 183,390$ 2,612,863$ 26,967,230$

Unrestricted Net Assets


Page 9

CONSOLIDATED STATEMENT OF CASH FLOWS

For The YearsEnded September 30,

2017 2016Cash Flows From Operating Activities

Change in net assets (744,222)$ (644,839)$ Adjustments to reconcile change in net assets to net cash

provided by operating activities:Depreciation and amortization 1,463,308 1,404,895 Gain on sale of property and equipment — (9,999) Net realized gain on investments (141,699) (13,336) Net unrealized gain on investments (252,931) (249,903) Capital campaign contributions (127,077) (50,000) Changes in assets and liabilities:

Decrease in accounts receivable 7,597 265,461 Increase in prepaid expenses and inventories (155,896) (166,185) Decrease in pledges receivable 21,615 117,865 Increase in other assets (56,809) (117,341) Increase (decrease) in accounts payable (253,661) 338,149 Decrease in concert settlement liability (1,043,317) (58,561) Increase (decrease) in accrued expenses 99,078 (89,965) Increase in deferred revenue 1,435,092 184,763

Net Cash Provided By Operating Activities 251,078 911,004

Cash Flows From Investing ActivitiesNet purchases of property and equipment (88,668) (1,139,778) Proceeds from sale of property and equipment — 9,999 Purchases of investments (1,649,236) (2,129,407) Proceeds from sale of investments 1,519,225 1,973,819

Net Cash Used In Investing Activities (218,679) (1,285,367)

Cash Flows From Financing Activities Contributions received restricted for capital campaign 77,077 50,000 Contributions received restricted for education and endowment — 25,000

Net Cash Provided By Financing Activities 77,077 75,000

Net Increase (Decrease) In Cash And Cash Equivalents 109,476 (299,363)

Cash And Cash Equivalents - Beginning Of Year 5,669,130 5,968,493

Cash And Cash Equivalents - End Of Year 5,778,606$ 5,669,130$

Supplemental Disclosure Of Cash Flow InformationCash paid during the year for taxes 31,302$ 48,844$


Page 10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2017 And 2016

1. Nature of Operations

The consolidated financial statements include the accounts of the Starlight Theatre Association of Kansas City, Inc. (Starlight) and EPIC Innovative Events, Inc. (EPIC) (collectively, the Association). Starlight is a not-for-profit organization dedicated to producing, presenting and promoting excellence in musical theatre and the performing arts for diverse audiences of all ages, with continued programming for families and children. Starlight strives to enrich our region for all residents and visitors by building appreciation for the performing arts, making live theatre and music affordable and accessible, providing superior theatre arts education and community outreach programs, and delivering exceptional customer service. Starlight strives to remain a beloved Kansas City cultural tradition by devoting resources to preserving and enhancing its home venue in Swope Park and creating new memories for generations to come. The Association's revenue is derived principally from ticket sales, contributions, production, sponsorships, parking and concessions.

EPIC Innovative Events, Inc. is a for-profit entity whose mission and principal activities are as event professionals integrating creativity into memorable, one-of-a-kind events for clients, which includes corporations, non-profits and individuals. Assisting clients in defining their event goals and helping them to meet or exceed their goals, while creating a memorable event within a reasonable budget, is EPIC's area of expertise.

2. Summary of Significant Accounting Policies

Principles Of Consolidation And Comparability

The consolidated financial statements include the accounts of Starlight and its wholly owned subsidiary, EPIC. All significant intercompany accounts and transactions have been eliminated in consolidation.


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Basis Of Presentation

Financial Statement presentation follows the recommendations of accounting principles generally accepted in the United States of America. To ensure observance of limitations and restrictions placed on the use of resources available to the Association, resources are classified for accounting and financial reporting purposes into categories established according to their nature and purposes. The assets, liabilities and net assets of the Association are reported in three categories as follows: Unrestricted Net Assets: Unrestricted net assets are resources that are neither permanently nor temporarily restricted by donor-imposed stipulations. The only limits on unrestricted net assets are those resulting from the nature of the Association and its purposes. Board designated net assets relate to funds held in the endowment and are included within unrestricted net assets. Temporarily Restricted Net Assets: Temporarily restricted net assets are resources whose use by the Association is limited by donor-imposed restrictions that either expire by the passage of time or can be fulfilled by actions of the Association. Permanently Restricted Net Assets: Permanently restricted net assets are those whose use by the Association is limited by donor-imposed stipulations requiring that the corpus be maintained in perpetuity. Income earned on related investments, if any, may be restricted by donors or used for unrestricted purposes in the absence of donor restrictions. Description Of Program Services And Supporting Activities

The following program services and supporting activities are included in the accompanying financial statements:

Broadway – Starlight Theatre’s annual Broadway series continues to expand and diversify. Each summer’s Broadway season features a mix of national touring musicals, co-productions with other regional and national theatres, and locally produced shows.

Concerts – A favored performance venue for top concert artists, Starlight Theatre’s climate-controlled stage, rehearsal spaces, dressing rooms and many amenities are considered state of the art in the outdoor concert industry. Starlight is able to attract a younger demographic by offering a wide range of concert events and music genres.


Notes To Consolidated Financial Statements (Continued)

Page 12

Indoor – The newest programming addition at Starlight Theatre is a series of intimate, unconventional, Off-Broadway-style shows performed indoors in the climate-controlled Cohen Community Stage House.

Education – In keeping with its nonprofit mission and in response to growing community interest, Starlight continues to expand its portfolio of education programs. Starlight currently funds its 14 education offerings with operating funds and private donations.

Administration – Starlight Theatre administrative leaders, including senior staff, IT and the accounting department, guide financial and operating decisions that position the historic theatre for current fiscal viability and future growth.

Fundraising/Philanthropic – As a 501(c)(3) nonprofit organization, Starlight Theatre undertakes fundraising efforts to raise monies needed for programming, ongoing operations and maintenance, and education and community outreach programs. An annual fund, annual benefit gala and young professional fundraiser are among the fundraising vehicles employed.

Non-operating City of KCMO – Starlight funds select maintenance at the Starlight venue which is owned by the City of Kansas City, and receives reimbursement from the Public Improvements Advisory Committee (PIAC) for those expenditures. Reimbursements are reported as unrestricted revenue.

Estimates And Assumptions

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues, expenses, gains, losses, and other changes in net assets. Actual results could differ from those estimates. Cash And Cash Equivalents

The Association considers all liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist primarily of operating and money market accounts.



Page 13

Investments And Investment Income

Investments are reported at fair value and are based on quoted market prices or readily determinable fair values. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 6 for a discussion of fair value measurements. Gains or losses on sales of investments are determined on a specific cost identification method. Investment return includes dividends, interest, and realized and unrealized gains and losses. Accounts Receivable

Accounts receivable are stated at the amounts invoiced to customers. Accounts receivable are typically due within 30 days after the issuance of the invoice. Accounts outstanding longer than the contractual payment terms are considered past due. The Association’s management provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. The Association’s management considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is necessary at September 30, 2017 and 2016.

Pledges Receivable

Unconditional pledges receivable are recognized as support in the period the pledges are received. Pledges receivable that are expected to be collected within one year are recorded at their net realizable value. Pledges receivable that are expected to be collected in future years are recorded at the present value of estimated future cash flows, less an allowance for uncollectible pledges. At September 30, 2017 and 2016 all pledges receivable were expected to be collected within one year. No allowance for uncollectible pledges was deemed necessary as of September 30, 2017 and 2016. Included in pledges receivable as of September 30, 2017 is $50,000 that is restricted for the purchase of property and equipment. As a result, this amount has been classified as noncurrent assets on the accompanying consolidated statement of financial position. Conditional contributions, which depend upon specified future and uncertain events, are not included as support until such time as the conditions are substantially met. Inventories

Inventories consist of food, beverage, other concession items, apparel and miscellaneous novelties and are recorded at the lower of cost (first-in, first-out) or market (net realizable value).



Page 14

Other Assets

Other assets consist of the Association's investments in certain touring performances produced by others, or co-produced with others, as well as an investment in Audience Rewards, which is a nationwide company set up primarily as a benefits-based loyalty system for theatergoers. These investments are recorded at cost, less principle repaid by tour. Property And Equipment

Property and equipment are recorded at cost, if purchased, or at the estimated fair value at date of receipt, if acquired by donation, and are depreciated and amortized using the straight-line basis over the estimated useful life of each asset. The Association computes depreciation and amortization using the following useful lives:

Description Useful Life

Theatre equipment and facility improvements 3 - 30 yearsFurniture and fixtures 5 - 10 yearsStage props 5 years

The Association reviews the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Measurement of any impairment loss is based on the fair value of the asset. Generally, fair value will be determined using valuation techniques such as the present value of expected future cash flows. No loss for impairment of long-lived assets was recorded during the years ended September 30, 2017 and 2016.

Repair and maintenance costs are charged to expense as incurred. Revenue Recognition And Deferred Revenue

Revenues for ticket sales, parking and concessions, educational events and outside events are recognized on the day of the event. Revenue from advance sales for concerts, or events and advance deposits for corporate events are deferred and recognized in the period to which the revenue relates. Sponsorship revenues are recorded as sponsorship services are rendered in accordance with sponsorship agreements.



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Additionally, the Association contracted with a third party for a production and co-promotion relationship relating to concert and comedy artists performing at Starlight. In return, the third party receives an annual fee, based upon three key performance indicators which include an annual fee based upon the number of events, attendance per event and average net revenue per person. Additionally, select shared expenses are deducted and are settled monthly in accordance with the contract, and are reported as concert settlement liability on the consolidated statements of financial position. Concert revenues are recognized as the event is completed. Production revenue is generated for certain Broadway touring products offered by Starlight to other theaters. Production revenue is recognized upon performance date. Contributions And Other Support

Gifts of cash and other assets received without donor stipulations are reported as unrestricted revenue and net assets. Gifts received with a donor stipulation that limits their use are reported as temporarily or permanently restricted revenue and net assets. When a donor-stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statements of activities as net assets released from restrictions. Gifts and investment income that are originally restricted by the donor and for which the restriction is met in the same period are recorded as temporarily restricted and then released from restriction. Unconditional gifts expected to be collected within one year are reported at their net realizable values. Unconditional gifts expected to be collected in future years are reported at the net present value of estimated future cash flows using risk-adjusted discount rate. During the years ending September 30, 2017 and 2016 there were no long-term contributions. Contributed Services

Contributions of services are recognized as revenue at their estimated fair value only when the services received create or enhance nonfinancial assets or require specialized skills possessed by the individuals providing the service and the service would typically need to be purchased if not donated. Contribution revenue recognized from contributed services for marketing expenses amounted to $544,941 and $537,526 for the years ended September 30, 2017 and 2016, respectively.



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A substantial number of unpaid volunteers have made significant contributions of time and services to assist and develop the Association. The value of these contributed services is not reflected in the consolidated financial statements because the services do not represent services that require specialized skills. Ambassador volunteers contributed 8,572 and 8,324 hours of service to Starlight during the years ended September 30, 2017 and 2016, respectively. Income Taxes

Starlight is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code (IRC) as a not-for-profit organization. EPIC is a Missouri for-profit C Corporation and is subject to federal, state, and local income taxes. In 2017 and 2016, EPIC had net operating income and recorded a tax provision of $57,088 and $45,944, respectively. The income tax provision is included in EPIC expenses from operations on the consolidated statement of activities. Tax returns for both Starlight and EPIC for tax years 2013 and later remain subject to examination by taxing authorities. Advertising Costs

Advertising costs are expensed as incurred. Advertising expense totaled $1,458,576 and $1,203,350 for 2017 and 2016, respectively.

Functional Expenses

Expenses are charged to programs and support services on the basis of management’s estimates. Expenses that can be identified with a specific program and support service are allocated directly according to their natural expense classification. Salaries and wages are charged to program expense and support expense on the basis of periodic time studies. Other expenses that are common to several programs are allocated on a pro rata basis to the programs they benefit. Reclassifications

Certain reclassification have been made to the 2016 consolidated financial statements to conform to the 2017 consolidated financial statement presentation. These reclassifications have no effect on net assets.



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Subsequent Events

Management evaluates subsequent events through the date the consolidated financial statements were available for issue, which is the date of the Independent Auditors’ Report.

3. Pledges Receivable

Pledges receivable consist of the following at September 30, 2017 and 2016:

2017 2016Pledges Receivable

Unrestricted:Gala 54,975$ 76,590$

Temporarily restricted:Fan Club Capital Campaign 50,000 —

Total Pledges Receivable 104,975$ 76,590$

4. Investments Investments for the Association are comprised of the following at September 30, 2017 and 2016:

Cost Fair Value Cost Fair Value

Money market funds 105,983$ 105,983$ 172,684$ 172,684$ Mutual funds:

Domestic equity 1,822,225 2,507,421 1,876,548 2,358,641 Bonds 4,145,869 4,094,714 3,951,554 3,956,578 International equity 872,026 1,008,673 673,607 704,247

6,946,103$ 7,716,791$ 6,674,393$ 7,192,150$

2017 2016



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Investment income is summarized as follows: 2017 2016

Interest and dividend income 189,971$ 186,474$ Realized gains 141,699 13,336

331,670 199,810

Unrealized gains 252,931 249,903

584,601$ 449,713$

The Association paid $27,304 and $24,348 in investment fees for the years ended, September 30, 2017 and 2016, respectively. These fees are netted against the proceeds from sale of investments in the consolidated statements of cash flows and included in the operations, including administration line item on the consolidated statements of activities.

5. Property And Equipment

Property and equipment consist of the following at September 30, 2017 and 2016:

2017 2016

Theatre equipment and facility impovements 31,644,724$ 31,568,122$ Furniture and fixtures 103,715 101,098 Stage props 1,582,392 1,546,785 Construction in progess 41,634 67,792

33,372,465 33,283,797 Less: Accumulated depreciation 18,063,149 16,599,841

15,309,316$ 16,683,956$

Depreciation and amortization expense was $1,463,308 and $1,404,895 for the years ended September 30, 2017 and 2016, respectively. Depreciation and amortization expense is allocated between Broadway, Concert and Indoor events based on the number of performance days during the year.



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6. Fair Value Measurements

The Association follows an established 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 under these rules are described below:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Association has the ability to access.

Level 2 Inputs to the valuation methodology include:

Quoted prices for similar assets or liabilities in active

markets;

Quoted prices for identical or similar assets or liabilities in inactive markets;

Inputs other than quoted prices that are observable for the asset or liability;

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and

significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.



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Money Market Funds and Mutual Funds

Money market funds and mutual funds are stated at net asset value determined primarily by closing prices quoted on recognized U.S. and international security exchanges. There have been no changes to the valuation methodologies at September 30 2017 and 2016. The following table sets forth by level, within the fair value hierarchy, the Association’s assets at fair value as of September 30, 2017 and 2016:

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Money market funds 105,983$ —$ —$ 105,983$ 172,684$ —$ —$ 172,684$

Mutual funds:

Domestic equity 2,507,421 — — 2,507,421 2,358,641 — — 2,358,641

Bonds 4,094,714 — — 4,094,714 3,956,578 — — 3,956,578

International equity 1,008,673 — — 1,008,673 704,247 — — 704,247

7,716,791$ —$ —$ 7,716,791$ 7,192,150$ —$ —$ 7,192,150$

2017 2016

7. Net Assets

Temporarily Restricted Net Assets

Temporarily restricted net assets are available for the following purposes at September 30, 2017 and 2016:

2017 2016Swope Park Starlight Capital Improvement

Perimeter Fund 170,452$ 134,982$ Just Imagine Program — 27,863 Vincent Legacy Scholarship 17,661 20,545 Fan Club Donations 127,077 —

315,190$ 183,390$



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Permanently Restricted Net Assets

Permanently restricted net assets consist of the following at September 30, 2017 and 2016:

2017 2016

General endowment 2,357,863$ 2,357,863$ Education endowment 255,000 255,000

2,612,863$ 2,612,863$

Earnings on the educational endowment are used to support educational programs. Earnings on the general endowment are used to support operations. Board Designated Net Assets

Starlight considers all earnings on the Board designated general endowment and education endowment to be available for use for support of the operations of Starlight; however, all earnings remain in the endowment and can only be utilized with Board approval. Net Assets Released From Restrictions

Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors at September 30, 2017 and 2016 as follows:

2017 2016Purpose restrictions accomplished:

Education programs 121,016$ 100,325$ Capital projects — 50,000 Scholarships 7,640 5,700 After hours at the towers - internship 10,186 6,790 Appropriation of endowment net assets 296,971 196,564

435,813$ 359,379$



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8. Benefit Plans

The Association sponsors a 401(k) plan (the Plan) covering certain full-time employees who have completed nine months of service, worked 1,000 hours, attained the age of 21, and are employed on the last day of the fiscal year. Participants may defer a portion of their eligible annual compensation as defined in the Plan. Participants are fully vested in Association contributions after five years of service. The Plan provides for a 50% matching contribution of up to 6% of participants’ eligible compensation plus discretionary contributions by the Association. Contributions to the Plan totaled $143,201 and $158,225 for the years ended September 30, 2017 and 2016, respectively, of which $79,216 and $111,222 were payable as of September 30, 2017 and 2016, respectively. The Association also sponsors a 403(b) plan and a 457(b) plan covering certain highly compensated employees eligible to make elective salary deferrals to the 403(b) plan. Participants are fully vested in the Association's contributions after five years of service. As of September 30, 2017 and 2016, in accordance with a contractual agreement with one employee, an additional amount of $50,000 was accrued for contribution into the 457(b) plan. In addition, $24,000 and $22,073 was contributed to the 457(b) plan for the years ended September 30, 2017 and 2016, respectively.

9. Theatre Agreements

The Association has entered into an agreement with the City of Kansas City, Missouri (the City) for the use of an outdoor theatre at a cost of $1; however the Association is responsible for all operating costs of the theatre which amounted to $1,009,179 and $894,984 in expense for the years ended September 30, 2017 and 2016, respectively. The agreement is automatically extended for successive five year periods in perpetuity unless the Association is in default. The Association does not anticipate any future events to result in default. The Association was reimbursed by the City for capital improvement costs of $157,355 and $243,576 for the years ended September 30, 2017 and 2016, respectively. These reimbursements are reported as Public Improvements Advisory Committee (PIAC) contributions on the consolidated statement of activities.



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In 1990, the Association entered into an agreement with the City to create a Swope Park Starlight Perimeter Capital Improvement Fund (the Perimeter Fund) to be funded by the Association in an amount equal to $0.075 per item sold by the Association's concessionaire. The funds are recorded by the Association as concessions restricted for the Perimeter Fund. The funds are to be used solely for improvement projects mutually agreed upon between the Association and the Kansas City Board of Parks and Recreation. It is the Association's policy to fund the Perimeter Fund annually before September 30. The amounts contributed to the Perimeter Fund were $35,470 and $20,038 for the years ended September 30, 2017 and 2016, respectively. The amounts in the Perimeter Fund at September 30, 2017 and 2016 were $170,452 and $134,982, respectively (see Note 7). The amounts have been recorded in the accompanying consolidated statements of financial position as cash and cash equivalents and temporarily restricted net assets.

10. Endowment Funds

The Association’s endowment consists of several donor-restricted and board-designated funds established for various purposes. Assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions and are exclusive of any pledges receivable to the Association’s endowment funds. As of September 30, 2017, the asset composition of the endowment is as follows:

Unrestricted(Board Temporarily Permanently

Designated) Restricted Restricted TotalEndowment Composition By Net Asset Category

Donor restricted endowment funds —$ —$ 2,612,863$ 2,612,863$ Board-designated endowment funds 2,290,217 — — 2,290,217

Total Funds 2,290,217$ —$ 2,612,863$ 4,903,080$

As of September 30, 2016, the asset composition of the endowment is as follows:


Designated) Restricted Restricted TotalEndowment Composition By Net Asset Category

Donor restricted endowment funds —$ —$ 2,612,863$ 2,612,863$ Board-designated endowment funds 1,789,819 — — 1,789,819

Total Funds 1,789,819$ —$ 2,612,863$ 4,402,682$



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The changes in the endowment assets for the year ended September 30, 2017 are as follows:


Designated) Restricted Restricted TotalChange In Endowment Net Assets

Endowment net assets, beginning of year 1,789,819$ —$ 2,612,863$ 4,402,682$ Investment return

Investment income 95,236 139,029 — 234,265 Investment fees (11,100) (16,204) — (27,304) Unrealized gain 119,291 174,146 — 293,437

Total Investment Income 203,427 296,971 — 500,398

Contributions — — — — Appropriation of endowment funds to spending 296,971 (296,971) — —

Endowment Net Assets, End Of Year 2,290,217$ —$ 2,612,863$ 4,903,080$

The changes in the endowment assets for the year ended September 30, 2016 are as follows:


Designated) Restricted Restricted TotalChange In Endowment Net Assets

Endowment net assets, beginning of year 1,483,532$ —$ 2,587,863$ 4,071,395$ Investment return

Investment income 35,351 63,332 — 98,683 Investment fees (8,722) (15,626) — (24,348) Unrealized loss 83,094 148,858 — 231,952

Total Investment Loss 109,723 196,564 — 306,287

Contributions — — 25,000 25,000 Appropriation of endowment funds to spending 196,564 (196,564) — —

Endowment Net Assets, End Of Year 1,789,819$ —$ 2,612,863$ 4,402,682$



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Interpretation of Relevant Law

The Board of Directors of the Association has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Association classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction, if any is given, of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Association in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Association considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

(1) The duration and preservation of the fund (2) The purposes of the Association and the donor-restricted endowment

fund (3) General economic conditions (4) The possible effect of inflation and deflation (5) The expected total return from income and the appreciation of

investments (6) Other resources of the Association (7) The investment policies of the Association

Return Objectives And Risk Parameters

The Association has adopted investment and spending policies for endowment assets that seek to build and retain a permanent endowment, protecting principal, assets and income for generations to come. Endowment assets include assets of donor-restricted funds that the Association must hold in perpetuity or for a donor-specified period(s). Under this policy, as approved by the Board of Directors, the endowment assets are invested with a "total return" approach to managing the portfolio which acknowledges that both income (dividends and interest) and capital gain (realized and unrealized) are equally acceptable from a performance evaluation perspective, balancing (1) longer-term capital appreciation; and (2) prudent investment risk.



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Strategies Employed For Achieving Objectives

To satisfy its long-term objectives, the Association relies on an investment strategy that emphasizes a balance between return (capital appreciation and dividend/interest income) and risk. Understanding that risk is inherent with all types of securities and investment styles, the Association accepts a reasonable level of risk in pursuit of the desired long-term results. The Association targets a diversified asset allocation where funds are designated to both support operational needs and emphasize long term growth of principal, avoiding excessive risk, with results comparable to market indices. Spending Policy And How The Investment Objectives Relate To Spending Policy

The Association has a policy of making all investment proceeds from each endowment eligible for satisfaction each year according to the original wishes of the donor restriction. This is consistent with the Association's objective to maintain the purchasing power of the endowment assets held in perpetuity, or for a specified term, as well as to provide additional real growth through new gifts and investment return. Funds With Deficiencies

From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor requires the Association to retain as a fund of perpetual duration. There were no deficiencies of this nature reported as of September 30, 2017 and 2016.

11. Leases

The Association leases operating equipment from third parties under non-cancelable operating leases expiring through February 2021. Future minimum lease payments as of September 30, 2017 are as follows:

Year Amount

2018 29,797$ 2019 14,839 2020 8,393 2021 2,616

55,645$



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Lease expense was $165,620 and $157,689 for the years ended September 30, 2017 and 2016, respectively.

12. Related Party Transactions

The Association purchases services from companies affiliated with members of the Board of Directors. When applicable, services provided by related parties are subject to an appropriate competitive bid process. Services purchased from these related parties during 2017 and 2016 amounted to approximately $390,000 and $392,000, respectively, and relate to telephone, insurance, and other routine services. In addition, in September 2017, the Association entered into a contractual agreement for the Starlight Theatre Guest Comfort project in an approximate amount of $560,000. The construction project will begin in October 2017. The project architect and construction manager have or are currently represented on the Board of Directors.

13. Risks and Uncertainties

The Association maintains cash balances at banks in excess of federally insured limits at various times during the year. The Association has not experienced any losses on such accounts and management believes it is not exposed to significant credit risk. Starlight invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the consolidated statement of financial position.

Documents

STARLIGHT THEATRE ASSOCIATION OF KANSAS … · Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness