Performance Review – Sample Continuing Care...

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Performance Review – Sample Continuing Care Community

For the period ended 06/30/2012

Provided By

Perkins & Co

503.221.0336

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This report is designed to assist you in your organization's development. Below you will find your overall ranking, organizational snapshot and narrative write-up.

Snapshot of: Sample Continuing Care Community Sector: P75 - Senior Continuing Care Communities

Revenue: $10M - $50M Periods:

12 months against the same 12 months from the previous year

NONPROFIT OPERATIONAL ANALYSIS A measure of how well the organization is managing money with regard to its sector and mission.

The positive trend to note in this area of analysis is that of program efficiency which still measures in the average range in comparison to the sector average. This number is important to internal and external stakeholders alike because it acts as an indicator of an organization’s commitment to its overall mission measuring the percentage of total expenses that are used for program services. The two revenue indicators including the organization’s revenue composition and operating reliance both rank in the average or normal range. The former measures the amount of total revenue that is generated from program services and the latter measures the amount of total expenses covered using program service revenue. Therefore the organization creates and relies on about the same amount of program generated revenue as similar nonprofits. Finally, a minor concern is that the organization’s fundraising efficiency is below average for this sector, meaning that the money spent on fundraising efforts have not generated at least an average amount of contributions.

Shows the basic relationship between program expenses and total expenses. The best outcome would be a ratio close to 1, where the majority paid by a nonprofit would go towards "programs". This ratio is

typically keenly watched by employees, managers, Board members, donors, and contributors. It tends to be one of the more important metrics that many nonprofits use in assessing performance.

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This shows the breakdown of all expenses of the nonprofit. In most cases, the majority should go

towards Program Service Expenses.

This metric shows the composition of the organization's revenue stream. Specifically, it shows how many cents in program revenue there are for each dollar of revenue generated. Some people like to look at this

to see how dependent the entity is on outside funding.

This shows the breakdown of all incoming revenue of the nonprofit. In most cases, the majority should be coming from Program Service. This chart can be useful to show how dependent the entity is on outside

funding.

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Shows how able a nonprofit entity is to pay for total expenses from program revenues alone. Many times (although not always) program revenues are more predictable and consistent sources of money and,

therefore, it is a point of interest to see how able a nonprofit is to liquidate expenses from just program revenue. The ideal score would be 1 or even above 1 in very rare cases.

Shows how much contribution revenue a nonprofit can generate from fundraising activities/expenses. The ideal relationship is a high number, which would mean that the nonprofit is able to generate a

multiple of how much it costs to do fundraising.

This shows the average amount contributed by donors to the organization.

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NONPROFIT FINANCIAL ANALYSIS Financial Score for Sample Continuing Care Community

LIQUIDITY - A measure of the organization's ability to meet obligations as they come due.

OPERATING YIELD TRENDS - A measure of whether the trends in profit are favorable for the organization.

REVENUE - A measure of how revenue is growing and how it lends itself to the organization's program services.

BORROWING - A measure of how responsibly the organization is borrowing and how effectively it is managing debt.

ASSETS - A measure of how effectively the organization is utilizing their gross fixed assets.

EMPLOYEES - A measure of how effectively the organization is hiring and managing its employees.

Financial Analysis for Sample Continuing Care Community

LIQUIDITY A measure of the organization's ability to meet obligations as they come due.

The organization's liquidity position is very good as reflected by traditional barometers of measuring the overall strength of organizations. In fact, both the overall liquidity and the cash and near-cash accounts look strong relative to short-term obligations. In short, the organization seems to be in a good condition at this very specific time.

However, there are two limitations to this analysis, which might be noted. First, just because the organization's "overall" liquidity position is good does not mean that it will always be good. Liquidity is a financial barometer that can change rapidly (i.e. day by day). Second, even though overall liquidity is good, the organization can still occasionally have a difficult time paying bills. We are using good "rules of thumb" to analyze these results, but these rules of thumb do not always tell the whole story. Management needs to prepare good cash flow forecasts to stay on top of this key area.

It should also be noted that the organization's receivable days ratio is high. Often (although not always the case), this ratio indicates how quickly an organization is collecting receivables. The organization's score in this area is high, which indicates that it is collecting receivables at a slower rate, at least as compared to other similar organizations. Collection of receivables has an obvious direct effect on an organization's cash position. Over time, managers would want to keep this key metric low, even though the organization's overall current ratio is strong.

LIMITS TO LIQUIDITY ANALYSIS: Keep in mind that liquidity conditions are volatile, and this is a general analysis looking at a snapshot in time. Review this section, but do not overly rely on it.

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Generally, this metric measures the overall liquidity position of an organization. It is certainly not a perfect barometer, but it is a good one. Watch for big decreases in this number over time. Make sure the accounts listed in "current assets" (numerator) are collectible. The higher the ratio, the more liquid the

organization is.

This is another good indicator of liquidity, although by itself, it is not a perfect one. If there are receivable accounts included in the numerator, they should be collectible. Look at the length of time the

organization has to pay the amount listed in the denominator (current liabilities). The higher the number, the stronger the organization.

This metric shows how much inventory (in days) is on hand. It indicates how quickly an organization can respond to market and/or product changes. Not all organizations have inventory for this metric. The

lower the better.

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This number reflects the average length of time required to collect cash from receivable accounts such as pledged contributions and/or program services transactions completed using credit. It is crucial to

maintaining positive liquidity.

This number reflects the average length of time required to collect cash from all receivable accounts

except pledged contributions. It is crucial to maintaining positive liquidity.

This ratio shows the average number of days that lapse between the purchase of material and labor, and payment for them. It is a rough measure of how timely an organization is in meeting payment

obligations.

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Cash reserve is a rough measure of the amount of cash on hand to cover future expenses. The

organization should target 182 or more days of cash reserve.

OPERATING YIELD TRENDS1 A measure of whether the trends in profit are favorable for the organization.

The organization's revenues increased this period, and it has maintained much of the strength in this Operating Yield section from last period. The organization's operating margin is healthy and strong, both generally and relative to the operating margins that are being earned by sector peers. The operating margin was strong last period as well, so it is particularly positive that the organization has been able to maintain this level of surplus for successive periods. This is a key measure of success in this area, and is highlighted in the graph area of the report. The operating margin represents the cents of net gain that the organization extracts from each dollar it earns as revenue.

Also, it is good to see that the organization is earning about the same level of net gains (in dollars) as last period. If the organization can sustain this level of operating yield and maintain its operating margins, it should see performance improve in most areas of its finances. Operating with a surplus is ultimately a signal of an organization's ability to thrive in the long term. An organization that earns above-average net gains for an extended period of time -- especially when it can consistently boost revenues simultaneously -- can usually invest in its future growth and gain an advantage over sector peers as it strives to achieve its mission.

1 Operating yield (net operating gain/loss) is the nonprofit equivalent of net profit.

This number indicates the percentage of revenue that is left over after paying for program expenses. It is an important statistic that can be used in business planning because it indicates how many cents of gross program profit can be generated by future revenue and also what percentage of revenue the organization

can use for other expenses such as administration and fundraising.

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A very important number. In fact, over time, it is one of the more important barometers that we look at. It measures how many surplus cents the organization is generating for every dollar it sells. This is a very

important number in preparing forecasts.

Investment yield shows the investment rate of return.

REVENUE A measure of how revenue is growing and how it lends itself to the organization's program services.

The organization's revenues are higher this period, which is a good sign. Additionally, the organization increased its fixed asset base this period. Managers might want to investigate if the increase in fixed assets had a direct impact on the revenue increase, or if other factors were at work in this area.

The next three sections will examine how effectively the organization is using three of its most important resources: borrowed funds, assets, and employees. Ultimately, effectiveness here is determined by comparing changes in these resources to changes in the organization's revenue level. Resources are costs that should be used to leverage higher revenues, since higher revenues are necessary to improve and expand the organization's program services and make progress toward its mission.

BORROWING A measure of how responsibly the organization is borrowing and how effectively it is managing debt.

Borrowing allows an organization to take advantage of a powerful resource: leverage. Leverage is using borrowed funds to improve revenues. In this case, the organization actually improved revenues as it lowered debt. This indicates that the organization may not need additional debt at this time to continue to improve revenues. Eliminating debt and boosting revenues at the same time will typically lead to an improved

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operating margin over the long run, as long as future borrowing decisions continue to be made with great care. This is because this dynamic generally lowers the cost structure and risk in the organization.

ASSETS A measure of how effectively the organization is utilizing their gross fixed assets.

Although it is positive to see revenues rising, the results here in terms of fixed asset management are actually less favorable. The reason is that in this case, revenues increased by 2.79%, but assets rose even faster. Assets are a kind of bundled cost. Ideally, increases in assets should leverage larger improvements in revenues. In this case, assets increased faster than revenues. Unless this circumstance is due to the assets needing some time to achieve optimal performance, it could mean that these assets may be underproductive.

EMPLOYEES A measure of how effectively the organization is hiring and managing its employees.

This organization has seen some excellent results with its employees. The results are positive because managers have improved the amount of revenue that is flowing through about the same number of employees, a fact that improves the revenue per employee statistic. This statistic is a key barometer of efficiency in this particular sector. If the organization can keep improving revenues without hiring additional people, there may not be a compelling reason to bring on more staff at this time. Of course, this analysis is based upon past data. Careful planning in the human resource area is always necessary. Specifically, good decisions in this area are based upon forward-looking data and solid projections about revenues and program expansion.

"Can you name a more powerful resource than information? I cannot." -- John Jacob Astor

This metric measures the dollars of revenue generated per dollar spent on payroll.

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RAW DATA

06/30/2010 06/30/2011 06/30/2012 Statement of Activities

Program Service Revenue

$14,017,139 $13,668,504 $14,061,074

Contributions

$1,200,581 $1,345,757 $1,485,916

Government Grants

$974,910 $857,822 $841,616

Investment Revenue

$725,600 $757,777 $695,041

Membership Dues

$0 $0 $0

Other Operating Revenue

$125,000 $213,575 $229,658

Net Assets Released From Restrictions

$0 $0 $0

Total Unrestricted Revenue

$17,043,230 $16,843,435 $17,313,305

Program Service Expenses

$11,500,698 $11,109,004 $11,531,454

Payroll & Benefits

$0 $0 $0

Depreciation and Amortization

$242,768 $199,300 $196,811

Interest Expense

$120,000 $110,000 $100,000

Rent

$126,501 $129,445 $128,759

Utilities

$268,820 $271,771 $267,295

Payroll Expense

$4,607,337 $4,403,710 $4,338,471

Gross Yield

$5,542,532 $5,734,431 $5,781,851

Gross Program Margin

32.52% 34.05% 33.40%

Fundraising Expenses

$460,433 $397,069 $376,447

Payroll & Benefits

$0 $0 $0


$130,356 $77,424 $74,932

Interest Expense

$85,000 $85,000 $75,000

Rent

$61,608 $61,735 $62,972

Utilities

$84,107 $84,663 $78,340

Payroll Expense

$99,362 $86,237 $85,203

Administration Expenses

$1,467,111 $1,729,477 $1,734,744

Payroll & Benefits

$0 $0 $0


$521,141 $449,441 $425,618

Interest Expense

$98,750 $30,141 $100,010

Utilities

$97,576 $98,784 $97,622

Rent

$206,239 $208,733 $216,631

Payroll Expense

$2,193,405 $2,092,378 $2,094,863

Other Operating Expenses

$3,172,251 $3,181,621 $3,243,138

Payroll & Benefits

$0 $0 $0

Utilities

$0 $0 $0


$0 $0 $0

Interest Expense

$0 $0 $0

Rent

$1,512,399 $1,497,385 $1,443,534

Payroll Expense

$1,959,852 $1,684,236 $1,799,604

Total Operating Expenses

$16,600,493 $16,417,171 $16,885,783

Operating Yield (Net Operating Gain/Loss)

$442,737 $426,264 $427,522

Operating Margin

2.60% 2.53% 2.47%

Other Inflows

$0 $0 $0

Other Outflows

$0 $0 $0

Total Change In Net Assets

$442,737 $426,264 $427,522

06/30/2010 06/30/2011 06/30/2012 Statement of Financial Position

Total Cash and Cash Equivalents

$5,675,250 $5,505,250 $5,360,700

Restricted Cash

$225,000 $225,000 $225,000

Unrestricted Cash

$5,450,250 $5,280,250 $5,135,700

Total Receivables

$3,149,943 $3,112,201 $3,004,946

Other Receivables

$1,486,790 $1,383,771 $1,453,346

Contributions Receivable

$1,067,182 $1,182,568 $1,012,039

Accounts Receivable

$595,971 $545,862 $539,561

Inventory

$317,219 $307,294 $297,181

Current Investments

$0 $0 $0

Other Current Assets

$0 $0 $0

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Total Current Assets

$9,142,412 $8,924,745 $8,662,827

Gross Fixed Assets

$22,402,363 $25,594,315 $27,303,246

Accumulated Depreciation

$4,000,000 $4,500,000 $5,000,000

Net Fixed Assets

$18,402,363 $21,094,315 $22,303,246

Long Term Investment Assets

$22,197,139 $20,813,700 $20,200,950

Other Assets

$558,655 $62,026 $69,242

Total Assets

$50,300,569 $50,894,786 $51,236,265

Payables

$1,083,164 $900,760 $864,175

Short Term Debt

$23,799 $27,622 $23,135

Notes Payable / Current Portion of Long Term Debt

$512,615 $867,796 $754,820

Other Current Liabilities

$0 $0 $0

Total Current Liabilities

$1,619,578 $1,796,178 $1,642,130

Total Long Term Liabilities

$901,694 $4,711,134 $3,764,106

Notes Payable / Subordinated Debt

$0 $815,000 $800,000

Notes Payable / Senior Debt

$0 $3,095,138 $2,163,110

Other Long Term Liabilities

$901,694 $800,996 $800,996

Total Liabilities

$2,521,272 $6,507,312 $5,406,236

Total Net Assets

$47,779,297 $44,387,474 $45,830,029

Number of Employees (FTE)

2,310.0 2,280.0 2,250.0

Number of Donors

4,048.0 3,749.0 3,550.0

COMMON SIZE STATEMENTS

06/30/2010 06/30/2011 06/30/2012 Industry* (119)

Statement of Activities

Program Service Revenue 82% 81% 81% 81%

Contributions 7% 8% 9% 6%

Government Grants 6% 5% 5% 6%

Investment Revenue 4% 4% 4% 3%

Membership Dues 0% 0% 0% 0%

Other Operating Revenue 1% 1% 1% 4%

Net Assets Released From Restrictions 0% 0% 0% 1%

Total Unrestricted Revenue 100% 100% 100% 100%

Program Service Expenses 67% 66% 67% 81%

Payroll & Benefits 0% 0% 0% N/A

Depreciation and Amortization 1% 1% 1% N/A

Interest Expense 1% 1% 1% N/A

Rent 1% 1% 1% N/A

Utilities 2% 2% 2% N/A

Payroll Expense 27% 26% 25% N/A

Gross Yield 33% 34% 33% 19%

Fundraising Expenses 3% 2% 2% 0%




Rent 0% 0% 0% N/A



Administration Expenses 9% 10% 10% 10%





Rent 1% 1% 1% N/A


Other Operating Expenses 19% 19% 19% 7%




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Rent 9% 9% 8% N/A


Total Operating Expenses 97% 97% 98% 98%

Operating Yield (Net Operating Gain/Loss) 3% 3% 2% 2%

Other Inflows 0% 0% 0% 2%

Other Outflows 0% 0% 0% 2%

Total Change In Net Assets 3% 3% 2% 2%

06/30/2010 06/30/2011 06/30/2012 Industry* (119)

Statement of Financial Position

Total Cash and Cash Equivalents 11% 11% 10% 9%

Restricted Cash 0% 0% 0% N/A

Unrestricted Cash 11% 10% 10% N/A

Total Receivables 6% 6% 6% 5%

Other Receivables 3% 3% 3% N/A

Contributions Receivable 2% 2% 2% N/A

Accounts Receivable 1% 1% 1% N/A

Inventory 1% 1% 1% 0%

Current Investments 0% 0% 0% 2%

Other Current Assets 0% 0% 0% 3%

Total Current Assets 18% 18% 17% 23%

Gross Fixed Assets 45% 50% 53% 87%

Accumulated Depreciation 8% 9% 10% 34%

Net Fixed Assets 37% 41% 44% 53%

Long Term Investment Assets 44% 41% 39% 18%

Other Assets 1% 0% 0% 6%

Total Assets 100% 100% 100% 100%

Payables 2% 2% 2% 5%

Short Term Debt 0% 0% 0% 0%

Notes Payable / Current Portion of Long Term Debt 1% 2% 1% 0%

Other Current Liabilities 0% 0% 0% 6%

Total Current Liabilities 3% 4% 3% 12%

Total Long Term Liabilities 2% 9% 7% 63%

Notes Payable / Subordinated Debt 0% 2% 2% N/A

Notes Payable / Senior Debt 0% 6% 4% N/A

Other Long Term Liabilities 2% 2% 2% N/A

Total Liabilities 5% 13% 11% 75%

Total Net Assets 95% 87% 89% 25%

*The industry common size figures shown above were taken from all nonprofit organizations with NTEE code P75 for all years in all areas with yearly revenue $10 million to $50 million.

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SECTOR SCORECARD

Financial Indicator Current Period Sector Range Distance from Sector

Program Efficiency 0.68 0.63 to 0.87 0.00% = Program Service Expenses / Total Expenses

Explanation: Shows the basic relationship between program expenses and total expenses. The best outcome would be a ratio close to 1, where the majority paid by a nonprofit would go towards "programs". This ratio is typically keenly watched by employees, managers, Board members, donors, and contributors. It tends to be one of the more important metrics that many nonprofits use in assessing performance.

Revenue Composition 0.81 0.65 to 0.90 0.00% = Unrestricted Program Service Revenue / Total Unrestricted Revenue

Explanation: This metric shows the composition of the organization's revenue stream. Specifically, it shows how many cents in program revenue there are for each dollar of revenue generated. Some people like to look at this to see how dependent the entity is on outside funding.

Operating Reliance 0.83 0.72 to 0.90 0.00% = Unrestricted Program Service Revenue / Total Expenses

Explanation: Shows how able a nonprofit entity is to pay for total expenses from program revenues alone. Many times (although not always) program revenues are more predictable and consistent sources of money and, therefore, it is a point of interest to see how able a nonprofit is to liquidate expenses from just program revenue. The ideal score would be 1 or even above 1 in very rare cases.

Fundraising Efficiency 3.95 5.00 to 15.00 -21.00% = Unrestricted Contributions / Unrestricted Fundraising Expenses

Explanation: Shows how much contribution revenue a nonprofit can generate from fundraising activities/expenses. The ideal relationship is a high number, which would mean that the nonprofit is able to generate a multiple of how much it costs to do fundraising.

Average Donor Contribution $419 N/A N/A = Total Contributions / Number of Donors

Explanation: This shows the average amount contributed by donors to the organization.

Current Ratio 5.28 1.90 to 3.02 +74.83% = Total Current Assets / Total Current Liabilities

Explanation: Generally, this metric measures the overall liquidity position of an organization. It is certainly not a perfect barometer, but it is a good one. Watch for big decreases in this number over time. Make sure the accounts listed in "current assets" (numerator) are collectible. The higher the ratio, the more liquid the organization is.

Quick Ratio 5.09 1.30 to 2.16 +135.65% = (Cash + Total Receivables) / Total Current Liabilities

Explanation: This is another good indicator of liquidity, although by itself, it is not a perfect one. If there are receivable accounts included in the numerator, they should be collectible. Look at the length of time the organization has to pay the amount listed in the denominator (current liabilities). The higher the number, the stronger the organization.

Inventory Days 9.41 Days 1.00 to 10.00 Days 0.00% = (Inventory / Program Service Expenses) * 365

Explanation: This metric shows how much inventory (in days) is on hand. It indicates how quickly an organization can respond to market and/or product changes. Not all organizations have inventory for this metric. The lower the better.

Receivable Days 63.35 Days 10.00 to 40.00 Days -58.38% = (Total Receivables / Total Unrestricted Revenue) * 365

Explanation: This number reflects the average length of time required to collect cash from receivable accounts such as pledged contributions and/or program services transactions completed using credit. It is crucial to maintaining positive liquidity.

Receivable Days Less Contributions 45.96 Days N/A N/A

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= ((Total Receivables - Contributions Receivable) / (Total Unrestricted Revenue - Contributions)) * 365 Explanation: This number reflects the average length of time required to collect cash from all receivable

accounts except pledged contributions. It is crucial to maintaining positive liquidity.

Payable Days 27.35 Days 15.00 to 45.00 Days 0.00% = (Payables / Program Service Expenses) * 365

Explanation: This ratio shows the average number of days that lapse between the purchase of material and labor, and payment for them. It is a rough measure of how timely an organization is in meeting payment obligations.

Days Cash Reserve 115.79 Days 90.00 to 120.00 Days 0.00% = (Unrestricted Cash / (Total Expenses - Depreciation and Amortization)) * 365

Explanation: Cash reserve is a rough measure of the amount of cash on hand to cover future expenses. The organization should target 182 or more days of cash reserve.

Gross Program Margin 33.40% 16.00% to 42.00% 0.00% = Gross Yield / Total Unrestricted Revenue

Explanation: This number indicates the percentage of revenue that is left over after paying for program expenses. It is an important statistic that can be used in business planning because it indicates how many cents of gross program profit can be generated by future revenue and also what percentage of revenue the organization can use for other expenses such as administration and fundraising.

Operating Margin 2.47% -3.50% to 1.00% +147.00% = Operating Yield / Total Unrestricted Revenue

Explanation: A very important number. In fact, over time, it is one of the more important barometers that we look at. It measures how many surplus cents the organization is generating for every dollar it sells. This is a very important number in preparing forecasts.

Investment Yield 3.44% N/A N/A = Investment Revenue / Investment Balance

Explanation: Investment yield shows the investment rate of return.

Employee Productivity $2.08 N/A N/A = Unrestricted Revenue / Total Payroll

Explanation: This metric measures the dollars of revenue generated per dollar spent on payroll.

NOTE: Exceptions are sometimes applied when calculating the Financial Indicators. Generally, this occurs when the inputs used to calculate the ratios are zero and/or negative.

READER: Financial analysis is not a science; it is about interpretation and evaluation of financial events. Therefore, some judgment will always be part of our reports and analyses. Before making any financial decision, always consult an experienced and knowledgeable professional (accountant, banker, financial planner, attorney, etc.).

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