Financial Report - June 30, 2021 by The Joffrey Ballet

The Joffrey Ballet Financial Report June 30, 2021

Contents Independent auditor's report

Financial statements Statements of financial position

Statements of activities

3-4

Statements of functional expenses

5-6

Statements of cash flows Notes to financial statements

7 8-20

Independent Auditor's Report Board of Directors The Joffrey Ballet Report on the Financial Statements We have audited the accompanying financial statements of The Joffrey Ballet, which comprise the statements of financial position as of June 30, 2021 and 2020, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 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 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 financial statements referred to above present fairly, in all material respects, the financial position of The Joffrey Ballet as of June 30, 2021 and 2020, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Chicago, Illinois December 14, 2021

The Joffrey Ballet Statements of Financial Position June 30, 2021 and 2020 2020

2021 Assets Cash and cash equivalents Operating pledges receivable, net Other receivables, net Prepaid expenses Other assets Endowment cash and cash equivalents Endowment investment Endowment pledges receivable, net

Property and equipment

7,967,782 1,539,458 623,415 762,622 179,315 2,510,457 8,635,707 1,731,657 23,950,413

4,355,836 2,934,655 704,637 743,026 172,977 2,077,480 6,921,629 2,272,055 20,182,295 17,508,103

17,319,197 $

41,269,610

37,690,398

153,850 505,067 1,989,716 1,764,592 4,413,225

81,888 386,904 1,586,488 2,019,225 4,074,505

Liabilities and Net Assets Liabilities: Accounts payable Accrued expenses and other liabilities Deferred revenue PPP loan

Net assets: Without donor restrictions With donor restrictions

17,481,507 16,134,386 33,615,893

20,608,823 16,247,562 36,856,385 $

See notes to financial statements.

41,269,610

37,690,398

The Joffrey Ballet Statement of Activities Year Ended June 30, 2021 Without Donor Restrictions Board Designated

Operations Revenue: Contributions Contributions released from restriction Federal Funding—ERC Special events In-kind contributions Performance Academy Community engagement Endowment draw Other income

Expenses: Program services: Performance Academy Community engagement Supporting services: Management and general Fundraising: General Costs and direct benefits to donors related to special events Change in net assets before other items Other items: Gain from PPP loan forgiveness Endowment investment gain, net Transfers Depreciation Change in net assets Net assets: Beginning of year End of year

$ 4,975,275 2,758,899 1,333,005 187,236 8,780 201 1,268,374 113,864 174,023 148,215 10,967,872

467,483 779 468,262

With Donor Restrictions

Total $ 5,442,758 2,758,899 1,333,005 187,236 8,780 201 1,268,374 113,864 174,023 148,994 11,436,134

1,332,020 (2,758,899) (174,023) (1,600,902)

Total $

6,774,778 1,333,005 187,236 8,780 201 1,268,374 113,864 148,994 9,835,232

5,405,960 1,348,807 475,768

1,305,320

897,573

44,840 9,478,268

1,489,604

468,262

1,957,866

(1,600,902)

356,964

2,019,225 23,500 (849,775)

(23,500) -

2,019,225 (849,775)

1,714,078 -

2,019,225 1,714,078 (849,775)

2,682,554

444,762

3,127,316

113,176

3,240,492

14,810,729

2,670,778

17,481,507

16,134,386

33,615,893

3,115,540

$ 20,608,823

$ 17,493,283

See notes to financial statements.

16,247,562

36,856,385

The Joffrey Ballet Statement of Activities Year Ended June 30, 2020 Without Donor Restrictions Operations Revenue: Contributions Contributions released from restriction Special events In-kind contributions Performance Academy Community engagement Endowment draw Other income

Expenses: Program services: Performance Academy Community engagement Supporting services: Management and general Fundraising: General Costs and direct benefits to donors related to special events Change in net assets before other items Other items: Endowment investment gain, net Transfers Loss on uncollectable pledges Depreciation Change in net assets Net assets: Beginning of year End of year

$ 6,705,663 1,701,064 995,663 105,010 6,454,125 2,194,745 173,188 149,315 192,463 18,671,236

Board Designated $

316,668 7,500 324,168

With Donor Restrictions

Total $ 7,022,331 1,701,064 995,663 105,010 6,454,125 2,194,745 173,188 149,315 199,963 18,995,404

7,532,826 (1,701,064) (149,315) 5,682,447

Total $

14,555,157 995,663 105,010 6,454,125 2,194,745 173,188 199,963 24,677,851

12,759,071 1,990,112 757,264

1,561,147

1,254,886

40,559 18,363,039

308,197

324,168

632,365

156,332 (781,309)

(156,332) -

(781,309)

(316,780)

167,836

(148,944)

15,127,509 $ 14,810,729

2,502,942

17,630,451

2,670,778

$ 17,481,507

See notes to financial statements.

5,682,447

6,314,812

220,962 (488,609) -

220,962 (488,609) (781,309)

5,414,800

5,265,856

10,719,586

28,350,037

16,134,386

33,615,893

The Joffrey Ballet Statement of Functional Expenses Year Ended June 30, 2021

Academy

Community Total Program Management Engagement Services and General

651,877 27,264 1,140 59,644 54,430 2,098 192,104 2,475 3,261 54,769 443 209,371 4,210 569 32,383 2,626 50,143 1,348,807

$ 339,069 710 36,815 27,983 1,091 16,385 1,588 9,749 378 22,084 10,772 713 6,279 2,152 475,768

503,728

208,939

40,438

5,909,688

$ 1,557,746

$ 516,206

Performance Salary Stipends Pension, retirement Other employee benefits Payroll taxes Legal Accounting/payroll Other services Advertising and promotion Office expenses Information technology Royalties Occupancy Travel Conf, convention and meetings Insurance Production services Orchestra Event meals and equipment Miscellaneous

Depreciation $

3,296,730 30,657 593,750 301,009 9,549 10,612 106,237 97,212 7,150 102,839 52,154 445,502 24,711 30,983 50,520 226,115 1,029 19,201 5,405,960

See notes to financial statements.

4,287,676 27,264 32,507 690,209 383,422 9,549 13,801 314,726 99,687 11,999 167,357 52,975 676,957 39,693 32,265 89,182 230,893 1,029 69,344 7,230,535

$ 1,040,028 18,651 17,907 54,256 4,791 3,350 75,545 7,968 16,764 34,300 205 13,318 9,030 9,207 1,305,320

753,105

58,264

7,983,640

$ 1,363,584

Fundraising $

581,964 250 2,159 68,423 61,063 1,873 4,453 43,612 24,967 48,500 451 20,975 5,487 22,773 5,953 10,106 39,404 942,413

Total $

5,909,668 27,514 53,317 776,539 498,741 14,340 19,024 394,724 143,299 44,934 232,621 53,426 732,232 45,385 68,356 104,165 230,893 1,029 10,106 117,955 9,478,268

38,406

849,775

980,819

$ 10,328,043

The Joffrey Ballet Statement of Functional Expenses Year Ended June 30, 2020

Academy

Community Engagement

Total Program Services

Management and General

787,404 24,044 8,409 72,224 66,867 2,525 2,695 423,544 15,715 14,069 53,698 3,884 308,863 37,741 1,459 38,253 25,292 45,748 57,678 1,990,112

$ 382,704 7,139 49,986 33,302 1,310 100,520 10,893 7,765 21,727 43,858 6,685 7,403 65,615 4,025 14,332 757,264

5,592,516 24,044 292,681 1,210,752 493,165 124,464 19,143 915,984 1,153,016 38,207 170,831 299,719 1,725,921 372,038 31,734 104,538 1,901,937 722,859 68,165 244,733 15,506,447

$ 1,216,084 16,181 99,608 68,620 4,163 45,255 10,194 17,340 35,464 18,512 10,576 10,667 450 8,033 1,561,147

451,225

199,301

38,572

689,098

55,577

36,634

781,309

$ 13,210,296

$ 2,189,413

$ 795,836

$ 16,195,545

$ 1,616,724

$ 1,332,079

$ 19,144,348

Depreciation

4,422,408 277,133 1,088,542 392,996 121,939 15,138 391,920 1,137,301 13,245 109,368 295,835 1,395,331 290,439 23,590 58,882 1,811,030 722,859 18,392 172,723 12,759,071

See notes to financial statements.

Fundraising $

691,580 15,025 75,849 70,111 2,367 31,836 10,300 50,058 48,497 19,828 64,474 49,388 7,031 800 131,972 26,329 1,295,445

Total $

7,500,180 24,044 323,887 1,386,209 631,896 124,464 25,673 993,075 1,163,316 98,459 236,668 299,719 1,781,213 455,024 91,698 122,236 1,902,737 722,859 200,587 279,095 18,363,039

The Joffrey Ballet Statements of Cash Flows Years Ended June 30, 2021 and 2020 2020

2021 Cash flows from operating activities: Increase in net assets Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation Loss on uncollectable pledges Net gains from investment Gain from PPP loan forgiveness Donor-restricted contributions to the endowment Changes in: Pledges receivable Other receivables Prepaid expenses Other assets Accounts payable Accrued expenses and other liabilities Deferred revenue Net cash provided by (used in) operating activities

Cash flows from investing activities: Purchases of investments Additions to property and equipment Net cash used in investing activities Cash flows from financing activities: Cash received from donors to be held in perpetuity Proceeds from PPP loan Net cash provided by financing activities Increase in cash and cash equivalents Cash and cash equivalents: Beginning of year End of year Cash and cash equivalents: Operating cash and cash equivalents Operating reserve Endowment cash and cash equivalents

Supplemental disclosure of non-cash financing activities: PPP loan forgiveness See notes to financial statements.

3,240,492

5,265,856

849,775 (1,714,078) (2,019,225) (66,602)

781,309 488,609 (220,962) (3,922,055)

1,395,197 81,222 (19,596) (6,338) 71,962 118,163 403,228 2,334,200

(1,897,392) 74 (220,973) (6,061) (40,393) 31,967 (848,488) (588,509)

(660,869) (660,869)

(2,000,000) (191,809) (2,191,809)

607,000 1,764,592 2,371,592

4,162,000 2,019,225 6,181,225

4,044,923

3,400,907

6,433,316

3,032,409

10,478,239

6,433,316

7,967,782

4,355,836

2,510,457 10,478,239

2,077,480 6,433,316

2,019,225

The Joffrey Ballet Notes to Financial Statements Note 1.

Nature of Activities and Significant Accounting Policies

The Joffrey Ballet (the Organization) is a nonprofit corporation incorporated in the state of Illinois which 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 Schools system. The Organization is supported primarily through ticket sales, Academy revenue and contributions (cash and in-kind). The Organization has qualified as a charitable organization exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and applicable state law. Accounting policies: The Organization follows accounting standards established by the Financial Accounting Standards Board (FASB) to ensure consistent reporting of financial position, results of activities and cash flows. References to generally accepted accounting principles (U.S. GAAP) in these footnotes are to the FASB Accounting Standards Codification, sometimes referred to as the Codification or ASC. Basis of presentation: In accordance with limitations, designations and restrictions placed on the use of resources available to the Organization, the following two classifications are utilized according to the nature and purpose of the resources: Without donor restrictions: Net assets that are not subject to donor-imposed stipulations or the donorimposed stipulations have expired. Included are amounts designated by the board for operating reserves and other purposes. The board designates certain unrestricted contributions for specific future use when received. Contributions are considered to be available for use in operations unless specifically restricted by the donor. With donor restrictions: Net assets whose use by the Organization is subject to donor-imposed restrictions. Some restrictions may or will be satisfied by actions of the Organization or by the passage of time. When a restriction is satisfied, these net assets are transferred to net assets without donor restrictions and are reported in the statement of activities as net assets released from restrictions. Restricted amounts received in the same period in which the restrictions are satisfied are recorded as net assets without donor restrictions. Other restrictions do not terminate but instead require that funds be held in perpetuity, while the income is available for general use. Operating and endowment cash and cash equivalents: The Organization maintains its deposits in bank accounts which, at times, may exceed federally insured limits. The Organization has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. Pledges receivable: Pledges receivable intended by donors to fund the endowment and the Organization’s operations 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 provided based upon management’s judgment including such factors as prior collection history, type of contribution and nature of the fundraising activity.

The Joffrey Ballet Notes to Financial Statements Note 1.

Nature of Activities and Significant Accounting Policies (Continued)

Other receivables: Other receivables generally include tuition payments for the Academy and Community Engagement activities. Additionally, the balance at June 30, 2020, included a significant receivable from the Australian Ballet related to a joint work, which was collected in 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, 2021 and 2020. Endowment investments: The Organization’s endowment assets, other than cash, are invested in the JFMC Pooled Endowment Portfolio, LLC (the PEP) which is maintained by the Jewish Federation of Metropolitan Chicago (the Federation). The investment in the PEP is recorded at fair value. Investments are presented in the financial statements at fair value in accordance with U.S. GAAP. The fair value of investments is determined based on the estimated fair value as reported by the PEP. The investment income, realized gains (losses) and the change in unrealized gains (losses) are reflected in the statements of activities, net of related fees and costs. Subsequent to year-end, the Organization selected a new advisor to manage its investments and began the process of transferring funds from the PEP to its new advisor in September 2021. Property and equipment: Property and equipment are recorded at cost. Donated property and equipment are recorded as assets and support at their estimated fair value at date of contribution. In general, the Organization capitalizes all property and equipment purchases over $1,000, while general maintenance and repairs are charged to expense. Depreciation of property and equipment is provided over the estimated useful lives of the respective assets on a straight-line basis, 3 to 20 years for sets, costumes and props and 4 to 10 years for furniture and fixtures, equipment and other property. The Joffrey Tower is being depreciated over a period of 40 years. The Organization purchased a dance studio facility in May 2021, which is also being depreciated over a period of 40 years. Other assets: Other assets primarily represents the cash surrender value of a life insurance policy held by the Organization. Revenue recognition: The Organization recognizes Program and Academy revenues in accordance with ASC Topic 606, Revenue from 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 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. Revenue earned in connection with special events is recognized in the year in which the event occurs. Contributions: Contributions, including donors’ unconditional promises to give, that are expected to be collected within one year are recognized as revenue at net realizable value when the donor’s commitment is received. Unconditional promises to give that are expected to be collected in future years are recognized at their discounted contractual future cash flows, net of allowances. The discounts on these amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are expected to be received. Amortization of the discount is included in contribution revenue. Conditional promises are not recognized as revenue until the donor conditions on which they depend have been substantially met.

The Joffrey Ballet Notes to Financial Statements Note 1.

Nature of Activities and Significant Accounting Policies (Continued)

Program, management and general, and fundraising expenses: In accordance with the Organization’s mission to raise contributions to develop and manage a world-class ballet company, the Organization incurs program, management and general, and fundraising expenses which have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefitted, based on estimates made by management. Costs related to occupancy as well as certain insurance and technology costs are allocated to programs based on square footage usage. Personnel costs are allocated on the basis of estimates of time and effort. Donated materials, goods and services: Donated materials, goods and other noncash donations are recorded as contributions at their estimated fair values on the date received. The Organization recorded in-kind contribution revenue with corresponding expenses in the statements of activities primarily for donated professional services, transportation, event services and lodging. Volunteers have contributed their time to various programs, performances and other activities which do not meet the criteria for financial statement recognition. Accordingly, the value of this donated time is not reflected in the financial statements. Contributions of services are recognized if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Other income: Other income includes net revenue generated by merchandise sales, special event rentals and dues. Income taxes: The Organization follows the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Organization may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. Examples of tax positions include the tax-exempt status of the Organization and various positions related to the potential sources of unrelated business taxable income. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. There were no unrecognized tax benefits identified or recorded as liabilities for the reporting periods presented herein. The Organization files Form 990 in the U.S. federal jurisdiction and the state of Illinois. Newly adopted accounting pronouncement: In 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard replaced most existing revenue recognition guidance in U.S. GAAP when it became effective. In fiscal year 2021, the Organization adopted the ASU using the modified retrospective transition method, which did not have a significant impact on the financial statements. Pending accounting pronouncements: In 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new ASU, lessees are required to recognize lease assets and lease liabilities on the statement of financial position for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of activities. The new standard will be effective for the Organization’s 2023 financial statements.

The Joffrey Ballet Notes to Financial Statements Note 1.

Nature of Activities and Significant Accounting Policies (Continued)

In 2020, the FASB issued ASU 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. This ASU requires the presentation of contributed nonfinancial assets as a separate line item from contributions of cash and other financial assets. The ASU also requires additional qualitative disclosures for contributed nonfinancial assets, including additional disclosure requirements for recognized contributed services. The new standard is effective for the Organization’s 2022 financial statements. The Organization is currently evaluating the effect that these new standards will have on the financial statements. 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. Related parties: Contributions to the Organization from board members and staff, amounting to $873,996 and $1,258,078 for the years ended June 30, 2021 and 2020, respectively, are included in contributions revenue on the statements of activities. Pledges receivable from board members of $484,900 and $910,198 at June 30, 2021 and 2020, respectively, are included in pledges receivable on the statements of financial position. Subsequent events: The Organization has evaluated subsequent events for potential recognition and/or disclosure through December 14, 2021, the date the financial statements were available to be issued. Note 2.

Pledges Receivable

Pledges receivable expected to be received in future years are as follows: 2021 Up to one year One to two years More than two years

Discount to present value (4 percent) Allowance for uncollectible pledges $

1,094,076 895,200 1,454,500 3,443,776 (162,661) (10,000) 3,271,115

2020 $

2,752,812 1,005,500 1,650,000 5,408,312 (191,602) (10,000) 5,206,710

In July 2013, a donor made a signed commitment to support the Bridge Community Engagement program in the amount of $1 million payable over 10 years. The donor made payments for the first five years but subsequently became delinquent in payments and did not responded to repeated collection attempts in fiscal year 2020. Upon review, it was determined that the donor defaulted on the remaining five installments of the pledge, net of present value discount, and consequently the pledge was written off effective June 2020.

The Joffrey Ballet Notes to Financial Statements Note 2.

Pledges Receivable (Continued)

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

2021 Time restricted pledges for operations Time restricted pledges for endowment

$ $

Note 3.

1,539,458 1,731,657 3,271,115

2020 $ $

2,934,655 2,272,055 5,206,710

Investments and Fair Value Measurements

The accounting standard on fair value measurements provides a framework for measuring fair value under U.S. GAAP. The accounting standard defines fair value, establishes a framework for measuring fair value, sets out a fair value hierarchy, and expands disclosures about fair value measurements. The standard defines fair value as 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. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to quoted prices to unobservable inputs (Level 3). Inputs are broadly defined under the accounting standard as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy under the accounting standard are described below: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization 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. The Organization assesses the levels of its investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer. The Organization’s investments represent their allocable share in the PEP and are measured at fair value using the net asset value per share practical expedient as provided by the fund manager and have not been categorized in the fair value hierarchy.

The Joffrey Ballet Notes to Financial Statements Note 3.

Investments and Fair Value Measurements (Continued)

The Organization, through its investment in the PEP, enters into transactions with a variety of securities and derivative financial instruments. These derivative financial instruments may have market and/or credit risk in excess of the amounts recorded in the statements of financial position. Market risk of investment in the PEP: Market risk arises primarily from changes in the market value of financial instruments. Exposure to market risk is influenced by a number of factors, including the relationships between financial instruments, and the volatility and liquidity in the markets in which the financial instruments are traded. In many cases, the use of financial instruments serves to modify or offset market risk associated with other transactions and, accordingly, serves to decrease the overall exposure to market risk. The Federation attempts to control the PEP’s exposure to market risk through various analytical monitoring techniques. Credit risk: Credit risk arises primarily from the potential inability of counterparties to perform in accordance with the terms of a contract. Exposure to credit risk associated with counterparty nonperformance is limited to the current cost to replace all contracts in which there is gain. Exchangetraded financial instruments generally do not give rise to significant counterparty exposure due to the cash settlement procedures for daily market movements and the margin requirements of individual exchanges. Concentration of credit risk: In the event the PEP does not fulfill its obligations, the Organization’s endowment may be exposed to risk. This risk of default depends on the creditworthiness of the counterparty to these transactions. The PEP attempts to minimize this credit risk by monitoring the creditworthiness of its counterparties. Investment in funds: The managers of underlying investment funds in which the PEP invests may utilize derivative instruments with off-balance-sheet risk. The Organization’s exposure of risk is limited to their allocable share of the PEP’s investment. The PEP invests in various types of investments, including mutual funds, equity and debt securities, alternative investments and other investment vehicles. The Organization does not own or have any interest in the underlying investments held by the PEP. The Organization has the ability to contribute funds or withdraw funds from its account on the first day of each month. Withdrawal requests are required to be submitted to the PEP in writing at least 15 days prior to the beginning of each month and withdrawals representing more than 80% of an investor’s assets are paid within 60 days. The PEP’s investments in U.S. Treasury bills, common stock, registered investment companies and investments in various equity and credit assets are stated at the last reported sales price on the day of valuation. Options are valued at the mid between the highest bid and lowest ask price on the day of valuation across all listed exchanges. Commodities, such as precious metals, are valued based on the closing spot price, derived from the over-the-counter precious metals trading market. These financial instruments are classified as Level 1 in the fair value hierarchy. Investments in non-registered investment companies consisting of certain equity funds, hedged credit funds, private credit funds, opportunistic funds and also real asset and real estate funds, are valued at fair value, as determined by the PEP based on net asset information (practical expedient) provided by the underlying investment managers. In determining fair value, the PEP utilizes the valuation reflected on the financial statements and other financial reports of the underlying investment entities. The underlying investment entities value securities and other financial instruments at fair value based upon market price, when possible, or at fair value determined by the respective entities’ investment managers when no market price is determinable.

The Joffrey Ballet Notes to Financial Statements Note 3.

Investments and Fair Value Measurements (Continued)

Although the PEP and the underlying investment managers use their best judgment in estimating the fair value of investments in funds, there are inherent limitations in any estimation technique. The estimated fair values of certain investments of the underlying investment entities, which may include derivatives, securities and other designated or side pocketed investments for which prices are not readily available, may not reflect amounts that could be realized upon immediate sale, nor amounts that may be ultimately realized. Accordingly, the estimated fair values may differ significantly from the values that would have been used had a ready market existed for these investments and differences could be material. Note 4.

Property and Equipment

Property and equipment are as follows:

Cost Building and improvements Furniture, fixtures and equipment Leasehold improvements Sets, costumes and props Nutcracker sets, costumes and props Website Redesign

$ 22,045,873 2,027,231 9,466 526,607 2,203,254 162,200 $ 26,974,631

Cost Building and improvements Furniture, fixtures and equipment Leasehold improvements Sets, costumes and props Nutcracker sets, costumes and props Website Redesign

Note 5.

$ 21,448,082 1,997,588 9,466 526,607 2,203,254 128,766 $ 26,313,763

June 30, 2021 Accumulated Depreciation $ (6,705,016) (1,740,815) (9,466) (456,106) (714,775) (29,256) $ (9,655,434) June 30, 2020 Accumulated Depreciation $ (6,166,324) (1,671,225) (8,739) (400,357) (558,625) (390) $ (8,805,660)

Net Book Value $

15,340,857 286,416 70,501 1,488,479 132,944 17,319,197

Net Book Value $

15,281,758 326,363 727 126,250 1,644,629 128,376 17,508,103

Deferred Revenue

The Organization recorded deferred revenue from the following sources as of June 30: 2021 Ticket revenues Tuition and other revenues

$ $

1,474,923 514,793 1,989,716

2020 $ $

1,426,364 160,124 1,586,488

The Joffrey Ballet Notes to Financial Statements Note 6.

Line of Credit

The Organization has a $1,500,000 revolving line of credit agreement with The Northern Trust Company maturing on January 31, 2022, with interest at the greater of 2.75% or prime rate less 0.50% (2.75% at June 30, 2021 and June 30, 2020). The Organization had no outstanding balance on the line of credit at June 30, 2021 and 2020, and no borrowings on the line of credit during the years ended June 30, 2021 and 2020. The Organization intends to negotiate a renewal of the line of credit. The line of credit contains certain non-financial covenants including the requirement to file audited financial statements within 120 days of fiscal year-end with The Northern Trust Company. While the Organization is not currently in compliance with this requirement, the bank has provided a waiver. Note 7.

PPP Loan

In April 2020, the Organization applied for and received a loan in the amount of $2,019,225 from Chase Bank as part of the Paycheck Protection Program (PPP), a loan program administered by the Small Business Administration (SBA), in conjunction with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Organization determined it was eligible for the loan as the coronavirus pandemic caused financial uncertainty and anticipated decreases in normal cash inflows. The Organization elected to account for the loan under ASC 470 and accordingly recorded the proceeds as debt on the statement of financial position. The outstanding principal accrued interest at an annual rate of 1%, and no payments of principal or interest were required until the loan’s maturity date in April 2022. Under the terms of the program, amounts used for eligible costs and to maintain certain employee and wage rate thresholds are eligible to be forgiven. The Organization applied for and was notified that the entire amount of the loan was forgiven in June 2021. The amount of the loan forgiveness is reflected as a gain from PPP loan forgiveness on the statement of activities in 2021. In March 2021, the Organization applied for and received a second PPP loan in the amount of $1,764,592 from Chase Bank. The Organization determined it was eligible, because it experienced at least a 25% reduction in gross receipts relative to the comparison period, as prescribed by the program. The outstanding principal accrues interest at an annual rate of 1%. All outstanding principal and accrued interest is due when the loan matures in March 2026. Subsequent to year-end, the Organization applied for forgiveness of the full balance of the loan. Note 8.

Net Assets

Board-designated net assets: The Organization has designated a portion of its unrestricted funds for the specific uses detailed below as of June 30: 2021 Future Projects Fund Building Improvements Fund Eric B. Eatherly Scholarships Women's Board Tribute Fund Innovation Fund

Operating cash reserve $

1,006,000 475,000 75,038 4,343 550,000 2,110,381 1,005,159 3,115,540

2020 $

1,006,000 275,000 70,838 14,560 300,000 1,666,398 1,004,380 2,670,778

The Joffrey Ballet Notes to Financial Statements Note 8.

Net Assets (Continued)

Transfers from board designated funds in fiscal year 2021 and 2020 represented amounts spent on board-designated purposes, offset by the refund of amounts transferred from board-designated funds to cover operating losses in a previous year. Net assets with donor restrictions: The Organization had net assets with donor restrictions consisting of the following at June 30, 2021 and 2020: 2021 Subject to expenditure for a specific purpose: Nutcracker Performances Community engagement Academy

Subject to the passage of time: Contributions related to future events Pledges receivable Endowment: 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

860,212 1,023,667 146,202 58,100

2020 $

861,211 1,106,355 155,900 1,027,500

1,082,784 198,776

56,400 1,655,856

3,293,221 6,165,886 393,822 3,024,892 $ 16,247,562

2,798,764 5,267,334 333,011 2,872,055 $ 16,134,386

Endowment net assets: The Organization maintains endowment funds which are restricted in perpetuity by donor stipulation. Net assets associated with the Organization’s endowment funds are classified and reported based on the existence of donor-imposed restrictions. The Organization’s endowment was invested as follows at June 30: 2021 Cash and cash equivalents PEP investment

2,510,457 8,635,707 $ 11,146,164

2020 $ $

2,077,480 6,921,629 8,999,109

The Uniform Prudent Management of Institutional Funds Act (UPMIFA) governs endowment funds in the state of Illinois. UPMIFA eliminates the historic dollar value rule with respect to endowment fund spending, updates the prudence standards for the management and investment of charitable funds, and amends the provisions governing the release and modification of restrictions on charitable funds.

The Joffrey Ballet Notes to Financial Statements Note 8.

Net Assets (Continued)

The Organization’s management has interpreted the UPMIFA as requiring the preservation of the purchasing power of the original gift amounts contributed to an endowment fund, unless there are donor stipulations to the contrary. As a result of this interpretation, the Organization classified as net assets with donor restrictions (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 of the applicable donor gift instrument at the time the accumulation is added to the fund. The Organization considers a fund to be underwater if its fair value is less than the amount required to be maintained in perpetuity as previously described. The Organization has interpreted UPMIFA to permit spending from underwater funds in accordance with the standards of prudence prescribed by UPMIFA. Endowment funds are reclassified to net assets without donor restrictions when they are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Organization will consider the following factors in making a determination to appropriate or accumulate earnings on donor-restricted endowment funds: (1) The duration and preservation of the fund; (2) the purposes of the Organization 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 Organization and (7) the investment policies of the Organization. The Organization’s investment and spending policies for endowment assets 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. As of June 30, 2021 and 2020, endowment assets include only those assets of donor-restricted funds that the Organization must hold in perpetuity. As approved by the Organization’s Board of Directors, the endowment assets are invested in a manner that is intended to provide adequate liquidity, maximizing returns on all funds invested and achieving full employment of all available funds as earning assets. Funds with deficiencies: From time to time, the fair value of assets associated with the donor-restricted endowment fund may fall below the level that the donor or Illinois UPMIFA requires the Organization to retain as a fund of perpetual duration. There were no deficiencies at June 30, 2021 and 2020. Withdrawal policy: The Organization established a withdrawal policy in fiscal year 2019 which allows for the appropriation of 3% of the average market value of the endowment over the preceding 12 quarters. Appropriated earnings are to be used for Joffrey operations and expenses in accordance with donor restrictions, if any. For the years ended June 30, 2021 and 2020, appropriations amounted to $174,023 and $93,709, respectively. The endowment draw on the 2020 statement of activities includes the appropriations for fiscal years 2020 and 2019.

The Joffrey Ballet Notes to Financial Statements Note 8.

Net Assets (Continued)

The following are changes in endowment net assets for the years ended June 30, 2021 and 2020: With Donor Restrictions Endowment net assets at June 30, 2019 Cash contributions received Net appreciation Appropriations Endowment net assets at June 30, 2020 Cash contributions received Net appreciation Appropriations Endowment net assets at June 30, 2021 Note 9.

4,715,978 4,155,989 220,962 (93,820) 8,999,109 607,000 1,714,078 (174,023) $ 11,146,164

Lease Commitments

The Organization occupies warehouse space for its sets, costumes and props and related office space under a lease agreement that was renewed in 2018, with terms through June 2024. The lease provides for monthly base rents plus operating costs. The Organization has two five-year renewal options. Base rents required under the lease are recognized as rent expense on a straight-line basis over the lease term. The cumulative difference between the recognized rent expense and the amount paid is recorded as an imputed rent liability included in other liabilities on the statements of financial position. The value was $58,236 and $59,826 at June 30, 2021 and 2020, respectively. Total rent expense for the warehouse was $151,833 for 2021 and 2020, respectively. Future minimum rental commitments, exclusive of operating costs, are as follows: Years ending June 30: 2022 2023 2024

$ Note 10.

157,258 161,190 165,219 483,667

Commitments and Contingencies

The Organization is occasionally party to lawsuits and claims arising out of the conduct of its business. The Organization is of the opinion that the liabilities, if any, will not have a material effect on these financial statements or on the Organization’s ability to continue operations. The Organization has committed to using the Auditorium Theatre in Chicago for its performances under an agreement which extended through 2020. Beginning in July 2020, the Organization has a seven-year commitment with the Lyric Opera for all its subscription series and holiday performances. Total theater rental expenses were $2,200 and $572,000 for fiscal years 2021 and 2020, respectively. 18

The Joffrey Ballet Notes to Financial Statements Note 11.

Employee Benefit Plan

The Organization administers The Joffrey Ballet Tax Deferred Annuity Plan, a 403(b) defined contribution benefit plan. Employees are eligible to participate in this plan upon hiring. The plan allows for discretionary matching contributions in an amount equal to the lesser of the participant’s actual contributions or 3% of the participant’s salary. The Organization made contributions of $0 and $78,504 to the plan in the years ended June 30, 2021 and 2020, respectively. Note 12.

Liquidity and Availability

As of June 30, 2021 and 2020, the Organization had the following financial assets available to cover general operations within the next year: 2021 Financial assets: Cash and cash equivalents Operating pledges receivable Other receivables Endowment cash and cash equivalents Endowment investment Endowment pledges receivable

Less amounts not available for general operations within the next year: Endowment cash and cash equivalents Endowment investment Endowment pledges receivable Board designated net assets Operating pledges not expected to be received within one year Financial assets available for general operations within one year

7,967,782 1,539,458 623,415 2,510,457 8,635,707 1,731,657 23,008,476

2020 $

4,355,836 2,934,655 704,637 2,077,480 6,921,629 2,272,055 19,266,292

2,510,457 8,635,707 1,731,657 3,115,540

2,077,480 6,921,629 2,272,055 2,670,778

2,349,700 18,343,061

2,655,500 16,597,442

4,665,415

2,668,850

The Organization regularly monitors its liquidity in order to meet financial obligations. As part of its boarddesignated net assets, the Organization has a reserve fund that acts as an internal line of credit. Any spending from this account that brings the balance below $1,000,000 must be approved by the board and eventually refunded. As of June 30, 2021 and 2020, the balance in this account was $1,005,159 and $1,004,380, respectively. The remaining board-designated net assets could be released by action of the board in order to cover any cash deficits, should such an event occur. In addition, the Organization has a commercial line of credit with available credit of $1,500,000.

The Joffrey Ballet Notes to Financial Statements Note 13.

Impacts of Coronavirus Pandemic

In March 2020, the World Health Organization declared the coronavirus (COVID-19) outbreak to be a pandemic. The coronavirus and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the national and local economies. The Organization has been severely impacted by the coronavirus pandemic. Due to bans on large public gatherings by the City of Chicago and the State of Illinois, the 2020 spring production of Don Quixote, as well as various fundraising events and in-person classes were cancelled, resulting in an estimated loss of $2.9 million in revenue for fiscal 2020. With the ongoing restrictions on public gatherings, the Organization cancelled all productions for the fiscal year 2021. The Organization developed a digital program for the 2020/2021 season in order provide engagement and content for its audiences. A portion of the Academy’s classes were provided virtually, while others were provided in person, subject to health and safety guidelines established by the Organization. Cost containment efforts to offset the significant lost revenue in fiscal 2021 have included reductions in salaries and staff headcount. Subsequent to year-end, the Organization held its fall production for the 2021/2022 season at full capacity, with safety protocols including vaccination and masking requirements for attendees. The Organization also participated in the Employee Retention Credit (ERC) program made available under the CARES Act. This program grants eligible organizations an amount equal to 50% of qualified wages in each calendar quarter. The Organization recognized $1,333,005 of revenue under this program in fiscal 2021. Additionally, the board directors has launched a Crisis Stabilization Fund that raised $12 million dollars in order to sustain the Joffrey during a season of uncertainty. Additionally, the Organization obtained PPP loans to help cover payroll for its artists and staff. Subsequent to year-end, the Organization received funding through the Shuttered Venue Operators Grant (SVOG). Amounts to be received under the SVOG will be reflected in the Organization’s fiscal 2022 financial statements.

Financial Report - June 30, 2021

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Independent auditor's report