Financial Report - June 30, 2022

The Joffrey Ballet

Financial Report June 30, 2022

Independent auditor’s report

Financial statements

1-2

Statements of financial position 3

Statements of activities and changes in net assets 4-5

Statements of functional expenses 6-7

Statements of cash flows 8

Notes to financial statements 9-23

Independent Auditor’s Report

Board of Directors

The Joffrey Ballet

Opinion

We have audited the financial statements of The Joffrey Ballet (the Organization), which comprise the statements of financial position as of June 30, 2022 and 2021, the related statements of activities and changes in net assets, functional expenses and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Organization as of June 30, 2022 and 2021, 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.

Basis for Opinion

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

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

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

Auditor’s Responsibilities for the Audit of the Financial Statements

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

In performing an audit in accordance with GAAS, we: 

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

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

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization’s internal control. Accordingly, no such opinion is expressed. 

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

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

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

Chicago, Illinois December 8, 2022

The Joffrey Ballet

Statements of Financial Position

June 30, 2022 and 2021

Assets

2022 2021

Cash and cash equivalents 6,051,289 $ 7,967,782 $

Investments 5,389,139Operating pledges receivable, net 4,120,103 1,539,458

Other receivables, net 984,272 623,415

Prepaid expenses 788,510 762,622

Other assets 165,947 179,315

Endowment cash and cash equivalents 191,334 2,510,457

Endowment investment 10,988,038 8,635,707

Endowment pledges receivable, net 1,176,923 1,731,657 29,855,555 23,950,413

Property and equipment 16,638,751 17,319,197 46,494,306 $ 41,269,610 $

Liabilities and Net Assets

Liabilities:

Accounts payable 351,435 $ 153,850 $ Accrued expenses and other liabilities 509,378 505,067 Deferred revenue 2,353,267 1,989,716 PPP loan 1,764,592 1,764,592 4,978,672 4,413,225

Net assets:

Without donor restrictions 23,382,597 20,608,823 With donor restrictions 18,133,037 16,247,562 41,515,634 36,856,385 46,494,306 $ 41,269,610 $

See notes to financial statements.

The Joffrey Ballet

Statement of Activities and Changes Net Assets

Year Ended June 30, 2022

Revenue:

Without Donor Restrictions

Board

With

Donor Operations DesignatedTotalRestrictions Total

Contributions of cash and cash equivalents 5,122,931 $ 416,523 $ 5,539,454 $ 5,621,508 $ 11,160,962 $ Federal Funding 8,058,512 - 8,058,512 - 8,058,512 Special events 129,831 - 129,831 - 129,831 Contributions of nonfinancial assets 456,856 - 456,856 - 456,856 Performance 6,008,078 - 6,008,078 - 6,008,078 Academy 1,863,834 - 1,863,834 - 1,863,834 Community engagement 260,997 - 260,997 - 260,997 Other income 169,917 - 169,917 - 169,917 Contributions released from restriction 1,837,444 - 1,837,444 (1,837,444)Endowment draw 416,512 - 416,512 (416,512)24,324,912 416,523 24,741,435 3,367,552 28,108,987

Expenses:

Program services: Performance 14,163,105 - 14,163,105 - 14,163,105 Academy 2,039,457 - 2,039,457 - 2,039,457 Community engagement 671,667 - 671,667 - 671,667

Supporting services: Management and general 2,431,158 - 2,431,158 - 2,431,158

Fundraising: General 1,128,037 53,945 1,181,982 - 1,181,982 Costs and direct benefits to donors related to special events 42,798 - 42,798 - 42,798 20,476,222 53,945 20,530,167 - 20,530,167

Change in net assets before other items 3,848,690 362,578 4,211,268 3,367,552 7,578,820

Other items: Endowment investment loss, net - - - (1,482,077) (1,482,077) Investment loss, net - (609,950) (609,950) - (609,950) Transfers (5,990,900) 5,990,900 - -Depreciation (827,544) - (827,544) - (827,544)

Change in net assets (2,969,754) 5,743,528 2,773,774 1,885,475 4,659,249 Net assets: Beginning of year 17,493,283 3,115,540 20,608,823 16,247,562 36,856,385

End of year 14,523,529 $ 8,859,068 $ 23,382,597 $ 18,133,037 $ 41,515,634 $

See notes to financial statements.

The Joffrey Ballet

Statement of Activities and Changes Net Assets

Year Ended June 30, 2021

Revenue:

Without Donor Restrictions

Board

With Donor Operations DesignatedTotalRestrictions Total

Contributions of cash and cash equivalents 4,975,275 $ 467,483 $ 5,442,758 $ 1,332,020 $ 6,774,778 $ Federal Funding 1,333,005 - 1,333,005 - 1,333,005 Special events 187,236 - 187,236 - 187,236 Contributions of nonfinancial assets 8,780 - 8,780 - 8,780 Performance 201 - 201 - 201 Academy 1,268,374 - 1,268,374 - 1,268,374 Community engagement 113,864 - 113,864 - 113,864 Other income 148,215 779 148,994 - 148,994

Contributions released from restriction 2,758,899 - 2,758,899 (2,758,899)Endowment draw 174,023 - 174,023 (174,023)10,967,872 468,262 11,436,134 (1,600,902) 9,835,232

Expenses:

Program services: Performance 5,405,960 - 5,405,960 - 5,405,960 Academy 1,348,807 - 1,348,807 - 1,348,807 Community engagement 475,768 - 475,768 - 475,768

Supporting services: Management and general 1,305,320 - 1,305,320 - 1,305,320 Fundraising: General 897,573 - 897,573 - 897,573 Costs and direct benefits to donors related to special events 44,840 - 44,840 - 44,840 9,478,268 - 9,478,268 - 9,478,268

Change in net assets before other items 1,489,604 468,262 1,957,866 (1,600,902) 356,964

Other items: Gain from PPP loan forgiveness 2,019,225 - 2,019,225 - 2,019,225 Endowment investment gain, net - - - 1,714,078 1,714,078 Transfers 23,500 (23,500) - -Depreciation (849,775) - (849,775) - (849,775)

Change in net assets 2,682,554 444,762 3,127,316 113,176 3,240,492

Net assets: Beginning of year 14,810,729 2,670,778 17,481,507 16,134,386 33,615,893 End of year 17,493,283 $ 3,115,540 $ 20,608,823 $ 16,247,562 $ 36,856,385 $

See notes to financial statements.

The Joffrey Ballet

Statement of Functional Expenses

Year Ended June 30, 2022

TotalManagement Community Programand Performance Academy EngagementServicesGeneral Fundraising Total

Salary 4,537,705 $ 768,964 $ 387,890 $ 5,694,559 $ 1,330,640 $ 653,858 $ 7,679,057 $ Stipends 1,000 58,663 - 59,663 - - 59,663

Pension, retirement 305,099 1,195 762 307,056 360,608 1,105 668,769

Other employee benefits 771,239 73,243 38,449 882,931 46,522 51,172 980,625

Payroll taxes 432,838 64,189 34,182 531,209 76,674 55,774 663,657 Legal 130,674 8,131 - 138,805 337,455 - 476,260

Accounting/payroll 14,657 2,484 1,253 18,394 4,298 2,112 24,804 Other services 434,177 499,460 117,787 1,051,424 106,128 62,713 1,220,265

Advertising and promotion 1,354,815 22,350 11,000 1,388,165 - 19,500 1,407,665

Office expenses 11,166 20,260 2,369 33,795 8,169 25,962 67,926

Information technology 112,547 64,870 7,983 185,400 17,513 57,552 260,465 Royalties 333,096 4,002 - 337,098 - - 337,098 Occupancy 1,727,834 261,594 28,682 2,018,110 43,553 27,256 2,088,919 Travel 407,178 37,588 9,148 453,914 7,057 42,773 503,744

Conference, convention and meetings 34,354 746 1,551 36,651 61,157 69,662 167,470 Insurance 76,012 49,074 9,498 134,584 13,685 9,021 157,290 Production services 2,047,349 38,478 18,210 2,104,037 - - 2,104,037 Orchestra 1,220,524 - - 1,220,524 - - 1,220,524 Event meals and equipment 9,568 - 792 10,360 - 114,221 124,581 Miscellaneous 201,273 64,166 2,111 267,550 17,699 32,099 317,348 14,163,105 2,039,457 671,667 16,874,229 2,431,158 1,224,780 20,530,167 Depreciation 473,048 214,040 41,425 728,513 59,687 39,344 827,544 14,636,153

The Joffrey Ballet

Statement of Functional Expenses

Year Ended June 30, 2021

TotalManagement Community Programand Performance Academy EngagementServicesGeneral Fundraising Total

Salary 3,296,730 $ 651,877 $ 339,069 $ 4,287,676 $ 1,040,028 $ 581,964 $ 5,909,668 $ Stipends- 27,264 - 27,264 - 250 27,514

Pension, retirement30,657 1,140 710 32,507 18,651 2,159 53,317 Other employee benefits593,750 59,644 36,815 690,209 17,907 68,423 776,539

Payroll taxes301,009 54,430 27,983 383,422 54,256 61,063 498,741 Legal9,549 - - 9,549 4,791 - 14,340

Accounting/payroll10,612 2,098 1,091 13,801 3,350 1,873 19,024

Other services106,237 192,104 16,385 314,726 75,545 4,453 394,724

Advertising and promotion97,212 2,475 - 99,687 - 43,612 143,299

Office expenses7,150 3,261 1,588 11,999 7,968 24,967 44,934

Information technology102,839 54,769 9,749 167,357 16,764 48,500 232,621 Royalties52,154 443 378 52,975 - 451 53,426 Occupancy 445,502 209,371 22,084 676,957 34,300 20,975 732,232 Travel 24,711 4,210 10,772 39,693 205 5,487 45,385

Conference, convention and meetings 30,983 569 713 32,265 13,318 22,773 68,356 Insurance 50,520 32,383 6,279 89,182 9,030 5,953 104,165

Production services 226,115 2,626 2,152 230,893 - - 230,893 Orchestra 1,029 - - 1,029 - - 1,029

Event meals and equipment - - - - - 10,106 10,106 Miscellaneous 19,201 50,143 - 69,344 9,207 39,404 117,955 5,405,960 1,348,807 475,768 7,230,535 1,305,320 942,413 9,478,268

Depreciation 503,728 208,939 40,438 753,105 58,264 38,406 849,775

5,909,688 $ 1,557,746 $ 516,206 $ 7,983,640 $ 1,363,584 $ 980,819 $ 10,328,043 $

See notes to financial statements.

The Joffrey Ballet

Statements of Cash Flows

Years Ended June 30, 2022 and 2021 2022 2021

Cash flows from operating activities:

Increase in net assets 4,659,249 $ 3,240,492 $ Adjustments to reconcile change in net assets to net cash provided by operating activities:

Depreciation 827,544 849,775 Endowment investment loss, net 1,482,077 (1,714,078) Investment loss, net 609,950Gain from PPP loan forgiveness - (2,019,225) Donor-restricted contributions to the endowment (1,208,860) (66,602) Changes in:

Pledges receivable (2,580,645) 1,395,197 Other receivables (360,857) 81,222 Prepaid expenses (25,888) (19,596) Other assets 13,368 (6,338) Accounts payable 197,585 71,962 Accrued expenses and other liabilities 4,311 118,163 Deferred revenue 363,551 403,228 Net cash provided by operating activities 3,981,385 2,334,200

Cash flows from investing activities: Purchases of investments (20,373,265)Proceeds from sale of investment 10,539,768Additions to property and equipment (147,098) (660,869) Net cash used in investing activities (9,980,595) (660,869)

Cash flows from financing activities: Cash received from donors to be held in perpetuity 1,763,594 607,000 Proceeds from PPP loan - 1,764,592 Net cash provided by financing activities 1,763,594 2,371,592

(Decrease) increase in cash and cash equivalents (4,235,616) 4,044,923

Cash and cash equivalents:

Beginning of year 10,478,239 6,433,316 End of year 6,242,623 $ 10,478,239 $

Cash and cash equivalents: Operating cash and cash equivalents 6,051,289 $ 7,967,782 $ Endowment cash and cash equivalents 191,334 2,510,457 6,242,623 $ 10,478,239 $

Supplemental disclosure of non-cash financing activities: PPP loan forgiveness - $ 2,019,225 $

See notes to financial statements.

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 contributions without donor restrictions 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 statements of activities and changes in net assets 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, 2022, included a significant receivable from the Internal Revenue Service for the Employee Retention Tax Credit for the third quarter of 2021. An allowance for doubtful accounts is based on specific identification of uncollectible accounts and the Organization’s historical collection experience. No allowance was deemed necessary at June 30, 2022 and 2021.

Investments: In fiscal year 2021, the Organization’s endowment assets, other than cash, were invested in the JFMC Pooled Endowment Portfolio, LLC (the PEP) which was maintained by the Jewish Federation of Metropolitan Chicago (the Federation). The investment in the PEP was recorded at fair value. In September 2021, the Organization moved to a new advisory firm and moved all endowment funds from the PEP to be invested as advised by CapTrust.

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. The investment income, realized gains (losses) and the change in unrealized gains (losses) are reflected in the statements of activities and changes in net assets, net of related fees and costs.

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, three to 20 years for sets, costumes and props, and four 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 of cash and cash equivalents: Contributions of cash and cash equivalents, 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 contributions of cash and cash equivalents revenue. Conditional promises are not recognized as revenue until the donor conditions on which they depend have been substantially met.

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 and changes in net assets. 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.

Contributions of nonfinancial assets: Donated materials, goods and other noncash donations (nonfinancial assets) are recorded as contributions at their estimated fair values on the date received. The Organization recorded contributions of nonfinancial assets with corresponding expenses in the statements of activities and changes in net assets, 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 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 and was implemented at Note 15.

The Joffrey Ballet

Notes to Financial Statements

Note 1. Nature of Activities and Significant Accounting Policies (Continued)

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 statements of activities and changes in net assets. The new standard will be effective for the Organization’s 2023 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 $1,416,164 and $873,996 for the years ended June 30, 2022 and 2021, respectively, are included in contributions revenue on the statements of activities and changes in net assets. Pledges receivable from board members of $1,000,000 and $484,900 at June 30, 2022 and 2021, 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 8, 2022, 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: 2022 2021

Up to one year 2,428,713 $ 1,094,076 $ One to two years 1,945,000 895,200

More than two years 1,099,999 1,454,500 5,473,712 3,443,776

Discount to present value (4%) (166,686) (162,661)

Allowance for uncollectible pledges (10,000) (10,000) 5,297,026 $ 3,271,115 $

Pledges receivable, net of discount and allowance, are restricted as follows for the years ended June 30: 2022 2021

Time restricted pledges for operations 4,120,103 $ 1,539,458 $

Time restricted pledges for endowment 1,176,923 1,731,657 5,297,026 $ 3,271,115 $

Notes to Financial Statements

Note 3. Fair Value of Financial Instruments and Investments

The Organization records its investments at fair value. 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 and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined under the guidance on fair value measurements as assumptions market participants would use in pricing an asset or liability.

The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the Organization has the ability to access at the measurement date.

Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs are unobservable for the asset and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Organization’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

The availability of valuation techniques and observable inputs can vary from instrument to instrument and is affected by a wide variety of factors including, for example, the type of instrument, whether the instrument is new and not yet established in the marketplace, the liquidity of markets and other characteristics particular to the instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The Organization has established valuation processes and procedures for Level 3 investments to ensure proper reporting within the fair value hierarchy and in accordance with U.S. GAAP. The Organization is responsible for the valuation processes and procedures of the Level 3 investments, including conducting periodic reviews of the valuation policies, and determining the proper and consistent application of the valuation policies. The Organization periodically reviews and approves the valuations of the Level 3 investments.

In fiscal year 2021, the Organization’s investment of $8,635,707 represented its allocable share in the PEP and was measured at fair value using the net asset value (NAV) per share practical expedient and has not been categorized in the fair value hierarchy. In September 2021, the Organization moved to a new advisory firm and moved all endowment funds from the PEP to be invested as advised by CapTrust.

The practical expedient allows for investments, such as opportunistic funds, certain equity and credit funds, and also real asset funds and real estate funds, to be valued at NAV, which represents fair value and are not classified in the fair value hierarchy.

Note 3. Fair Value of Financial Instruments and Investments (Continued)

The PEP invests in various types of investments, including mutual funds, money market funds, U.S. Treasury bills, equity and debt securities, alternative investments and other investment vehicles.

The investment in the non-registered investment company consisting of the PEP is valued at fair value, as determined by the Organization, based on net asset information (practical expedient) provided by the PEP’s manager. In determining fair value, the Organization utilizes the valuation reflected on the financial statements and other financial reports of the PEP. The PEP values securities and other financial instruments at fair value based upon market price, when possible, or at fair value determined by the PEP’s manager when no market price is determinable. Although the Organization and the PEP’s manager use their best judgment in estimating the fair values, there are inherent limitations in any estimation technique. The estimated fair values of certain investments of the PEP, 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.

The Organization, through its investment in the PEP, indirectly 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: 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.

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 a 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 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.

Composition of investments: In fiscal year 2022, 100% of the Organization’s investments were invested in mutual funds, which are considered Level 1 investments. In fiscal year 2021, 100% of the Organization’s investments were invested in the PEP, which are valued at NAV.

Investments 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 to risk is limited to its allocable share of the PEP’s investment.

The Joffrey Ballet

Notes to Financial Statements

Note 4. Property and Equipment

Property and equipment are as follows:

June 30, 2022

AccumulatedNet CostDepreciationBook Value

22,045,873 $ (7,256,163) $ 14,789,710 $ Furniture, fixtures and equipment 2,160,329 (1,813,347) 346,982

Building and improvements

Leasehold improvements 23,466 (9,466) 14,000 Sets, costumes and props 526,607 (469,515) 57,092

Nutcracker sets, costumes and props 2,203,254 (870,925) 1,332,329 Website Redesign 162,200 (63,562) 98,638 27,121,729 $ (10,482,978) $ 16,638,751 $

June 30, 2021

AccumulatedNet CostDepreciationBook Value

22,045,873 $ (6,705,016) $ 15,340,857 $ Furniture, fixtures and equipment 2,027,231 (1,740,815) 286,416 Leasehold improvements 9,466 (9,466)Sets, costumes and props 526,607 (456,106) 70,501 Nutcracker sets, costumes and props 2,203,254 (714,775) 1,488,479 Website Redesign 162,200 (29,256) 132,944 26,974,631 $ (9,655,434) $ 17,319,197 $

Building and improvements

Note 5. Deferred Revenue

The Organization recorded deferred revenue from the following sources as of June 30: 2022 2021

Ticket revenues 1,574,794 $ 1,474,923 $ Tuition and other revenues 778,473 514,793 2,353,267 $ 1,989,716 $

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, 2023, with interest at the greater of 2.75% or prime rate less 0.50% (2.75% at June 30, 2022 and June 30, 2021). The Organization had no outstanding balance on the line of credit at June 30, 2022 and 2021, and no borrowings on the line of credit during the years ended June 30, 2022 and 2021. 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 certain requirements, the bank has provided a waiver for any covenants not met by the Organization.

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, 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 statements 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 statements of activities and changes is net assets 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. The Organization was notified in August 2022 that $1,671,078 of the second PPP loan was forgiven, and the remaining balance of $93,514 was repaid by the Organization in August 2022.

Note 8. Endowment Funds

The Organization’s endowment consists of donor-restricted funds established for a variety of purposes. As required by U.S. GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

Note 8. Endowment Funds (Continued)

Interpretation of Relevant Law

The Uniform Prudent Management of Institutional Funds Act (UPMIFA) was enacted in Illinois on June 30, 2009. 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 considers the following factors in making a determination to appropriate or accumulate earnings on donor-restricted endowment funds:

The duration and preservation of the fund

The purpose of the Organization and the donor-restricted endowment fund

General economic conditions

The possible effect of inflation and deflation

The expected total return from income and the appreciation of investments

Other resources of the Organization

The investment policies of the Organization

Return Objectives and Risk Parameters

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, 2022 and 2021, 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. Certain funds with original gifts values of totaling approximately $1,480,551 had deficiencies of $155,757, at June 30, 2022. These deficiencies resulted from unfavorable market fluctuations. There were no deficiencies at June 30, 2021.

Note 8. Endowment Funds (Continued)

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. The Organization approved a new investment policy in fiscal year 2022 which allows for the appropriation of 4% of the average market value of the endowment over the preceding 12 quarters. Appropriated earnings are to be used for the Organizations operations and expenses in accordance with donor restrictions, if any. For the years ended June 30, 2022 and 2021, appropriations amounted to $416,512 and $174,023, respectively.

The Organization’s endowment was invested as follows at June 30:

2022 2021

Cash and cash equivalents 191,334 $ 2,510,457 $ Investments 10,988,038 8,635,707 11,179,372 $ 11,146,164 $

The following are changes in endowment net assets for the years ended June 30, 2022 and 2021:

With Donor Restrictions

Endowment net assets at June 30, 2020 8,999,109 $ Cash contributions received 607,000 Net appreciation 1,714,078 Appropriations (174,023) Endowment net assets at June 30, 2021 11,146,164 Cash contributions received 1,763,594 Net depreciation (1,313,874) Appropriations (416,512) Endowment net assets at June 30, 2022 11,179,372 $

Note 9. Net Assets

Board-designated net assets: The Organization has designated a portion of its funds without donor restrictions for the specific uses detailed below as of June 30:

2022 2021

Future Projects Fund 6,395,139 $ 1,006,000 $ Building Improvements Fund 875,000 475,000 Eric B. Eatherly Scholarships 81,138 75,038 Women's Board Tribute Fund 5,667 4,343 Innovation Fund 496,055 550,000 7,852,999 2,110,381

Operating cash reserve 1,006,069 1,005,159 8,859,068 $ 3,115,540 $

The Joffrey Ballet

Notes to Financial Statements

Note 9. Net Assets (Continued)

Transfers to board designated funds in fiscal year 2022 represented excess operating funds. Transfers from board designated funds in fiscal year 2021 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, 2022 and 2021:

2022 2021

Subject to expenditure for a specific purpose:

Nutcracker 885,212 $ 860,212 $ Performances 1,013,978 1,023,667 Community engagement 42,500 146,202 Academy 30,000 58,100

Subject to the passage of time: Contributions related to future events 2,690,590 1,082,784 Pledges receivable 1,114,462 198,776 Endowment:

Subject to endowment spending policy and appropriation:

Rudolph Nureyev Fund and the Joffrey Ballet 2,851,312 3,293,221

The Mary B. Galvin Artistic Director Fund 5,368,133 6,165,886 Scholarships 1,324,794 393,822 Abbott Academy Director 2,812,056 3,024,892 18,133,037 $ 16,247,562 $

The following is a summary of releases of net assets with donor restrictions: 2022 2021

Time-restricted pledges 719,075 $ 1,439,646 $ Purpose-restricted pledges 1,118,369 1,319,253 1,837,444 $ 2,758,899 $

The following is a summary of draws from the endowment: 2022 2021

Rudolph Nureyev Fund and the Joffrey Ballet 107,424 $ 51,331 $

The Mary B. Galvin Artistic Director Fund 202,245 96,340 Scholarships 45,239 6,152 Abbott Academy Director 61,604 20,200 416,512 $ 174,023 $

The Joffrey Ballet

Notes to Financial Statements

Note 10. 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 $52,810 and $58,236 at June 30, 2022 and 2021, respectively.

Total rent expense for the warehouse was $151,833 for 2022 and 2021.

Future minimum rental commitments, exclusive of operating costs, are as follows:

Years ending June 30: 2023 161,190 $ 2024 165,219 326,409 $

The Organization has committed to using the Auditorium Theatre (the Theater) 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 $617,700 and $2,200 for fiscal years 2022 and 2021, respectively.

Note 11. 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.

Note 12. 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 $114,088 and $23,310 to the plan in the years ended June 30, 2022 and 2021, respectively. The Organization administers a 457(f) where, at the discretion of the board of trustees, certain executives receive deferred contributions. The Organization made contributions of $250,000 and $0 to the plan in the years ended June 30, 2022 and 2021, respectively.

The Joffrey Ballet

Notes to Financial Statements

Note 13. Liquidity and Availability

As of June 30, 2022 and 2021, the Organization had the following financial assets available to cover general operations within the next year:

2022 2021

Financial assets:

Cash and cash equivalents 6,051,289 $ 7,967,782 $ Investments 5,389,139Operating pledges receivable 4,120,103 1,539,458 Other receivables 984,272 623,415

Endowment cash and cash equivalents 191,334 2,510,457 Endowment investments 10,988,038 8,635,707 Endowment pledges receivable 1,176,923 1,731,657 28,901,098 23,008,476

Less amounts not available for general operations within the next year:

Endowment cash and cash equivalents 191,334 2,510,457 Endowment investment 10,988,038 8,635,707 Endowment pledges receivable 1,176,923 1,731,657 Board designated net assets 8,859,068 3,115,540

Operating pledges not expected to be received within one year 3,044,999 2,349,700 24,260,362 18,343,061

Financial assets available for general operations within one year 4,640,736 $ 4,665,415 $

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, 2022 and 2021, the balance in this account was $1,001,096 and $1,005,159, 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.

Notes to Financial Statements

Note 14. 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.

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. In December 2021 with the surge of the new COVID-19 variant, the Organization was forced to cancel 8 performances of the Nutcracker and refund ticket holders. The winter production of Don Quixote was moved from February 2022 to June 2022.

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 $704,582 and $1,333,005 of revenue under this program in fiscal years 2022 and 2021, respectively.

Additionally, the board of directors has launched a Crisis Stabilization Fund that raised $12 million dollars in order to sustain the Organization during a season of uncertainty. Additionally, the Organization obtained PPP loans to help cover payroll for its artists and staff. the Organization received funding through the Shuttered Venue Operators Grant (SVOG). The initial grant award in July 2021 was in the amount of $4,314,422. The Organization received an additional award in September 2021 of $3,039,508.

Note 15. Contribution of Nonfinancial Assets

For the years ended June 30 2022 and 2021, contributed nonfinancial assets recognized within the statements of activities and changes in net assets, included: 2022 2021

The Organization recognized nonfinancial assets within revenue, including professional services, legal services, supplies, and equipment. Unless otherwise noted, contributed nonfinancial assets did not have donor-imposed restrictions.

Contributed professional services recognized comprise of professional architecture services for space planning and design. Contributed professional services are valued and are reported at the estimated fair value in the financial statements based on current rates for similar services.

Contributed legal services recognized comprise of professional services from attorneys advising the Organization on various administrative matters including but not limited to the purchase of new studio spaces, visas for foreign artists, and legal services as it relates to labor and personnel matters.

The Joffrey Ballet

Notes to Financial Statements

Note 15. Contribution of Nonfinancial Assets (Continued)

Contributed legal services are valued and are reported at the estimated fair value in the financial statements based on current rates for similar services.

Contributed supplies recognized comprise of supplies related to COVID-19 testing at the Organization. Contributed supplies are valued and are reported at the fair value in the financial statements based on current purchase prices for the same or similar type of goods.

Contributed equipment recognized comprise of audio and visual equipment for the newly purchased studio at the Organization. Contributed equipment is valued and is reported at the fair value in the financial statements based on current purchase prices for the same or similar type of goods.