Chapter 11 1 Report of Independent Certified Public Accountants on Supplemental Information

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

COMBINED FINANCIAL STATEMENTS

and

REPORT OF INDEPENDENT CERTIFIED

PUBLIC ACCOUNTANTS

December 31, 2007 and 2006

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

COMBINED FINANCIAL STATEMENTS

and

REPORT OF INDEPENDENT CERTIFIED

PUBLIC ACCOUNTANTS

December 31, 2007 and 2006

C O N T E N T S

Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1

FINANCIAL STATEMENTS

Combined Statements of Financial Position 2

Combined Statements of Activities and Changes in Net Assets 3

Combined Statements of Cash Flows 4

Notes to Financial Statements 5-13

SUPPLEMENTAL INFORMATION

Report of Independent Certified Public Accountants on Supplemental Information 14

Other Operating Revenues 15

Production Expenses 16

Advertising and Publicity Expenses 17

Box Office Expenses 18

Administrative and General Expenses 19

BOLLAM, SHEEDY, TORANI & CO. LLP

Certified Public Accountants

Albany, New York

An Independent Member of the RSM McGladrey Network

Page 1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Boardsof Directors

Saratoga Performing Arts Center, Inc.

and National Museum of Dance

We conducted our auditsin accordance with auditing standards generally accepted in the United

States of America. Those standards require that we plan and perform the auditsto obtain reasonable

assurance about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. We believe our audits

provide a reasonable basis for our opinion.

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

COMBINED STATEMENTS OF FINANCIAL POSITION

December 31,

2007 2006

536,484$ 603,557$

78,394 103,920

10,000 134,524

20,386 18,517

74,275 94,524

6,371,056$ 6,281,163$

–$ 19,572$

230,382 502,074

289,103 469,195

688,207 701,349

Total current liabilities 1,207,692 1,692,190

ASSETS

CURRENT ASSETS

Accounts payable and accrued expenses

Accrued pension and other compensation benefits

Cash and cash equivalents

LIABILITIES AND NET ASSETS

Current installments of long-term debt

CURRENT LIABILITIES

Accounts receivable, net

Pledges receivable, current portion

Accrued interest receivable

Other current assets

Deferred revenues

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

COMBINED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS

Year Ended December 31, 2007

Temporarily Permanently

Unrestricted Restricted Restricted Total

OPERATING REVENUES AND GAINS

Ticket sales 2,864,648$ –$ –$ 2,864,648$

Restricted by donors for operating purposes

Gifts and grants 979,421 19,512 – 998,933

Investment income from foundation 83,264 – – 83,264

–

OPERATING EXPENSES

Performance costs

Direct talent costs 4,323,110 – – 4,323,110

Production expenses 899,202 – – 899,202

Advertising and publicity 613,910 – – 613,910

Box office 129,056 – – 129,056

5,965,278

–

5,965,278

–

Operating expenses (over) operating revenues

(2,335,889)

(3,844)

–

(2,339,733)

NON-OPERATING REVENUES GAINS

Membership revenues 2,050,970 – – 2,050,970

Gifts and bequests 7,148 – – 7,148

Fund raising benefits, net, including $188,271

related to National Museum of Dance 487,373 – – 487,373

2,726,815

–

2,726,815

–

CHANGE IN NET ASSETS

578,235

(3,844)

–

574,391

Permanently

Unrestricted Temporarily Restricted Total

OPERATING REVENUES AND GAINS

Ticket sales 2,555,004$ –$ –$ 2,555,004$

Restricted by donors for operating purposes

Gifts and grants 1,021,996 23,356 – 1,045,352

Investment income from foundation 115,136 – – 115,136

OPERATING EXPENSES

Performance costs

Direct talent 3,945,383 – – 3,945,384

Production expenses 893,155 – – 893,155

Advertising and publicity 569,113 – – 569,113

Box office 132,250 – – 132,250

5,539,901 – – 5,539,902

Operating expenses (over) operating revenues

(1,361,221)

(327,758)

–

(1,688,979)

NON-OPERATING REVENUES AND GAINS (LOSSES)

Membership revenues 1,813,911 – – 1,813,911

Gifts and bequests 20,951 – – 20,951

Fund raising benefits net, including $109,063

related to National Museum of Dance 284,762 – – 284,762

2,202,569 – – 2,202,569

OTHER CHANGE IN NET ASSETS

Additional minimum pension expense

3,929

–

3,929

CHANGE IN NET ASSETS 837,419 (327,758) – 509,661

Year Ended December 31, 2006

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

COMBINED STATEMENTS OF CASH FLOWS

YearsEnded December 31,

2007 2006

CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES

Change in net assets 574,391$ 509,661$

Adjustments to reconcile change in net assets to cash

provided (used) by operating activities

Bad debts 938 307

Depreciation 146,913 157,426

Realized gains on sales of investments (248,954) (905,290)

Unrealized (gains) losses on investments (67,605) 443,867

Excess of unrecognized prior service costs of post-retirement benefits (187,309) 3,929

(Increase) decrease in

107,809 583,615

CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES

Purchases of leaseholds and equipment (128,692) (94,214)

Purchases of investments (1,932,391) (2,967,619)

Proceeds from sales of investments 1,905,773 5,435,934

Change in other assets – (75,588)

(155,310) 2,298,513

CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES

Net repayments from notes payable – (2,975,000)

Repayment on long-term debt (19,572) (30,327)

(19,572) (3,005,327)

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2007 and 2006

NOTE A –SUMMARY OF ACCOUNTING POLICIES

1. Organization

Saratoga Performing Arts Center, Inc. (“SPAC”) was incorporated in the State of New York on

June 25, 1962, to promote, sponsor, cultivate, and develop among its members and the community at

large an appreciation and understanding of the performing arts. The National Museum of Dance

(“Museum”) was chartered as an education membership corporation on April 26, 1985. The financial

2. Accounting Method

The accompanying combined financial statements have been prepared on the accrual basis of

accounting in accordance with accounting principles generally accepted in the United States of

America. Net assets and revenues, gains, other support and program expenditures, and non–operating

items are classified based on the existence or absence of donor–imposed restrictions. Accordingly, net

assets of SPAC and changes therein are classified and reported as follows:

3. Cash Equivalents

Cash equivalents represent money market funds and certificates of deposit with a maturity of less than

4. Investments

Investments are carried at the fair value of the instruments, based on current market prices. The net

realized and unrealized gains (losses) on investments are reflected in the statements of activities.

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2007 and 2006

NOTE A –SUMMARY OF ACCOUNTING POLICIES –Continued

5. Accounts Receivable, Net

6. Leaseholds and Equipment, Net

7. Recognition of Donor Restricted Contributions

Support that is restricted by the donor is reported as an increase in unrestricted net assets if the

restriction expires in the reporting period in which the support is recognized. All other donor

restricted support is reported as an increase in temporarily or permanently restricted net assets

depending on the nature of the restriction. When a restriction expires, temporarily restricted net

assets are reclassified to unrestricted net assets.

8. Pledges

Pledges are recognized when the donor makes a promise to give to SPAC or the Museum that is, in

substance, unconditional. Pledges that are restricted by the donor are reported as increases in

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2007 and 2006

Page 7

NOTE A –SUMMARY OF ACCOUNTING POLICIES –Continued

9. Deferred Revenue

10. Income Taxes

The purposes of SPAC and the Museum are educational within the meaning of Section 501(c)(3) of

11. Estimates

12. Advertising

NOTE B –INVESTMENTS

Investments consist of the following:

Cost

Fair Value

Cost

Fair Value

U.S. treasury obligations

662,337

$

673,426

$

416,103

$

416,075

$

Corporate bonds

639,110

648,163

740,707

741,028

Mutual funds/other

183,243

220,176

147,945

198,541

Corporate common stocks

2,120,721

2,544,087

2,024,979

2,387,031

3,605,411

4,085,852

3,329,734

3,742,675

2007 2006

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2007 and 2006

NOTE C –LEASEHOLDS AND EQUIPMENT, NET

A summary of SPAC’s and the Museum’s leaseholds and equipment, net, is as follows:

2007

2006

Cost of constructing amphitheater

2,687,986

$

2,687,986

$

Amphitheater and facility improvements

924,294

National Museum of Dance, leasehold improvements

1,341,708

1,026,161

1,731,314

1,602,624

7,711,463

7,582,773

951,451

969,674

December 31,

SPAC constructed an amphitheater, on land owned by the State of New York, at a cost of

$2,687,986 during 1964 to 1966. In accordance with the provisions of a licensee agreement dated

March 1, 1969, SPAC transferred title of the amphitheater to the State in exchange for exclusive use

of the amphitheater during the months of June through September each year for a period of fifty

years. SPAC has the right to renew the license, which expires February 28, 2019, for an additional

period of fifty years. For accounting purposes, the cost of constructing the amphitheater is being

amortized on a straight–line basis over the initial 50–year term of the license.

NOTE D –PLEDGES RECEIVABLE

Pledges receivable represent pledges recognized in the financial statements that will be received in the

future as follows:

2007

2006

Receivable in less than one year

10,000

$

135,000

$

Receivable in one to two years 10,000 10,000

Total unconditional promises to give

20,000

145,000

December 31,

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2007 and 2006

Page 9

NOTE E –NOTES PAYABLE

During December 2005, the SPAC Board approved the liquidation of quasi endowment investments to

pay off the notes payable. The pay off was completed during the first half of 2006 in the amount of

$2,975,000.

NOTE F –CURRENT INSTALLMENTS OF LONG–TERM DEBT

Current installments of long-term debt consists of the following:

Combined interest expense for current installments of long–term debt and notes payable (Note E) was

$557 and $29,824 for the years ended December 31, 2007 and 2006, respectively.

NOTE G –ESCROW ACCOUNT

SPAC is party to an agreement with the New York State Office of Parks, Recreation and Historic

Preservation (OPRHP)granting SPAC a license to use the Hall of Springs for the purpose of

operating a concession for the sale of food and beverages through March 2016. Under the terms of

NOTE H –EMPLOYEE BENEFIT PLAN

During 2007, SPAC adopted SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and

Other Postretirement Plans, which is an amendment to FASB Statements No. 87, 88, 106, 132, and

SARATOGA PERFORMING ARTS CENTER, INC.

AND NATIONAL MUSEUM OF DANCE

NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2007 and 2006

Page 10

NOTE H –EMPLOYEE BENEFIT PLAN –Continued

For the year ended December 31, 2007, SPAC has accrued $17,165 in net periodic post–retirement

benefit income, and this amount has been included in accrued post–retirement benefits.

17,165

$

Pension related changes, other than net periodic pension costs

Reduction of prior service cost (275,977)$ 275,977$

Net actuarial loss 3,274 (3,274)

Reclassification from

Amortization of prior service cost (91,374)

Amortization of net actuarial loss 5,980

187,309$

Benefits paid (32,524)

Liability for post-retirement benefits, end of year

211,728

$