the academy journal
cairn, Cairncrest and the Social Center) as
well as progress made on the new college
athletic field.
• The Academy shares pension and retiree medical obligations with the General
Church. $8.7 million of investments and cash
have been set aside on the Academy’s books
against liabilities totaling $17.5 million – an
underfunded situation of about $8.8 million.
This is an improvement of $4.3 million from
2012. The net liability decreased by $5.3 million from 2012 to 2013 and dedicated assets
declined by $1.0 million. The decline in the
liabilities is primarily the result of the decision by the Boards of the General Church
and the Academy to freeze the defined benefit pension plan, mentioned above.8 The
Academy withdrew $1.6 million from assets
set aside for retiree medical obligations to
make the first two of five special payments,
also discussed above.
• Our 2008 bond issue has a year-end balance of $41.3 million and is reflected within
the current portion of long-term debt and
long-term debt in the liabilities section of the
Balance Sheet. Last year, we paid an installment on the bond of $2.5 million. The bond
issue is a floating rate instrument referenced
to LIBOR, trading with the support of a letter of credit from our bank, Wells Fargo.
In 2008, we swapped into a 4.82% 10-year
fixed rate contract. This requires recordation
of the present value of the swap obligation
payments on our books, i.e., the amount we
would owe if we unwound the swap as of
yearend. This decreased from $8.1 million
to $5.9 million due to the debt amortization
and is shown as current value of derivative
instrument in our liabilities.
• Accounts payable and accrued expenses remained essentially flat from year to year.
• Total current liabilities increased by just $142
thousand. This along with the decrease of
current assets of $512 thousand resulted in a
slight deterioration in the ratio of current assets compared to current liabilities from 1.65
to 1.51 year over year. This current ratio is
a liquidity ratio that measures our ability to
pay our short-term obligations. A ratio over
1.00 is generally considered satisfactory.
The year-end balance of our tax exempt 2010
bond issue is $7.7 million6 and is also reflected
within the current portion of long-term debt and
long-term debt in the liabilities section of the Balance Sheet. Because of the tax exempt nature of
the debt, the interest is very low, at 66% of LIBOR
plus 95 basis points.
Our debt/equity ratio is .24:1. We are also required to calculate a liquidity ratio7 semi-annually
as one of the primary covenants on our debt. This
ratio was 1.94 at yearend, well above our required
balance of 1.25.
After year-end, in August, 2013 the Academy
entered into a Line of Credit with J.P. Morgan for
the purpose of redeeming the two bond issues.
This was done to simplify our debt structure and
to reduce ou r costs of holding the bonds. More
will be reported on this transaction next year.
More information about these liabilities is discussed in Footnotes E and F to the financial statements.
• Fund balances or net assets increased by
$10.4 million for the year. This is detailed in
the Statement of Activities statement which
follows.
The Statement of Activities, page 46, depicts the
operating budget results described above, along
with the revenues and expenses from other Academy funds:
• Revenues and expenses from the Academy
Operations Budget to Actual Summary (i.e.,
school operations, Glencairn, Cairnwood,
etc. in Exhibit A) are included in the Statement of Activities under the 2013 column
heading, “Unrestricted”. Some of the receipts
and expenditures from the Capital Items
section of Exhibit A would also be included
6
This bond was issued by the Montgomery County Industrial
Development Authority and subsequently purchased by Wells
Fargo. The proceeds from this debt were used to construct College residence halls.
7
Cash and unrestricted endowment compared to bank debt
and open lines of credit.
8
36
The General Church has a similar change to its liabilities.