ASSOCIATED STUDENTS UCLA

BOARD OF DIRECTORS

Finance Committee Meeting

November 16, 2007 9:00 a.m. Kerckhoff Hall 152

PRESENT: Richard Delia (ASUCLA Finance Director),

Bob Williams (ASUCLA Executive Director),

Monroe Gorden,

Dave Lowenstein,

Chris Recht (Chair),

Jesse Rogel,

Jennifer Willis-Graves (Recording Secretary), and

Amanda York

GUESTS: Donna Baker, ASUCLA Director of Financial Planning & Treasury

Rick Wentzel, Price Waterhouse Coopers

CALL TO ORDER

This meeting was called to order at 9:08 AM.

APPROVAL OF AGENDA

The agenda for this meeting was revised such that one item “Approve Proposed Changes to Policy on Finance” was inserted after item VI.A. “Bank Resolution”. Mr. Rogel moved, seconded by Mr. Lowenstein to approve these changes to the agenda. This motion passed with unanimous consent.

APPROVAL OF MINUTES FROM FINANCE COMMITTEE MEETING

HELD ON OCTOBER 19, 2007.

As there were no changes Mr. Monroe moved, seconded by Mr. Rogel to approve these minutes. This motion passed with unanimous consent.

EXTERNAL AUDITOR’S REPORT

Mr. Rick Wentzel of Price Waterhouse Coopers informed the committee that the audit of FY 06/07 Financial Statements was progressing well and that reports on these financial statements would be discussed in detail at the January 18, 2008 Finance Committee meeting.

EXECUTIVE DIRECTOR’S REPORT

Financial Overview

October Month-End Results

Mr. Williams reported that the Associated Students as a whole exceeded plan by more than $111,000 in terms of net income at month end, thus raising the overall positive variance year to date to $606,000. He noted that this represents an increase of more than $300,000 over the same period in the prior year, and he reminded the committee that results from the prior year were significantly higher than the year before. While there were strong positive variances in all areas of allocated expense, the majority of this positive variance resulted from operations. Mr. Williams reported that ASUCLA upper management attended a special luncheon on Wednesday in recognition of outstanding financial results in FY 06/07. He expressed his approval of the current management team and highlighted their overall effectiveness and cross-divisional congeniality.

Marketing & Sales

Textbooks: Impending Price Reduction

At next month’s Finance Committee meeting Mr. Williams will bring information related to a proposed decrease in textbook prices. As with a similar program implemented last year, if approved, revised text prices would be effective Winter Quarter. An extended discussion followed regarding last year’s discount program.

MarketLive

Mr. Williams reported that the Association has launched the first of several promotions for the new MarketLive-driven web retail platform. Currently, the UCLA Store is featured in a pop-up advertisement on the UCLA Sports page of the on-line version of the Los Angeles Times. He explained that although the UCLA Store is not the only retailer to be promoted on this page, the current advertising contract guarantees a minimum of 775,000 views. Management is currently able to monitor the number of user click-throughs from the Los Angeles Times site and will be able to track any sales that may result. ASUCLA Marketing is currently preparing to launch a similar promotion in the on-line version of the Orange County Register.

Preparation continues on a print promotion that will be displayed in the menus of three Cheesecake Factory locations: Orange County, South Bay/Redondo Beach, and Pasadena. Management will be able to track sales generated from these promotions if customers enter a discount code ‘cheesecake’. Mr. Lowenstein recommended the insertion of a pre or post-fixed numeral unique to each restaurant location so that management may also determine which sales are generated from promotions at each location and management concurred. An extended discussion followed regarding the rationale behind the selection of these particular restaurant locations.

ASUCLA Benefits U

Mr. Williams reported that ASUCLA Benefits U continues to generate positive results and that the e-mail coupon promotional campaign seems to be gaining in popularity.

Leased Operations

AU A261/Post Office

As was reported at last month’s meeting, Campus Technology Services has opted to end its occupation of a corner storefront on the A level of Ackerman Union. Management is currently discussing several options for this space including the relocation of the Post Office Express operation, and ASUCLA Restaurants management is examining the possibility of the development of a yogurt concept in the space currently occupied by the Post Office.

Food Service Master Plan:

Cooperage

Mr. Williams met with representatives from UCLA Facilities to discuss the pace of work on the Cooperage renovation project. Based on projections that include the actual costs related to the first phase of the project, management is hopeful that total project expenses will fall within the $3-$3.5 million range.

Ackerman Union 1st Floor Patio

Mr. Williams reported that he had received some concerned feedback regarding the impending ‘upscale casual dining’ concept slated for development on the Ackerman Union 1st Floor Patio. Student constituents have indicated that they would like to ensure that designs for this operation remain consistent with the student-friendly atmosphere that has been developed in the rest of the Student Union. Mr. Williams assured the committee that management plans to design a facility that will meet the needs of both the student and faculty/staff demographics. Preliminary plans for this operation were expected 3 to 6 weeks from the date of this meeting.

Upcoming Financial Challenges

Mr. Williams informed the committee of several financial challenges that are anticipated to materialize in the latter portion of this year and the early part of next year:

  1. Sustainability - The Association has plans to implement several sustainability projects in upcoming months. Expenditures in excess of $50,000 will be brought to this committee for approval.
  1. Retirement Contribution – The anticipated employer retirement contribution was not realized in this fiscal year, however Mr. Williams reminded the committee that it may be activated in the coming year. An extended discussion followed regarding the nature of the UC Retirement program.
  1. Capital Projects – Mr. Williams cautioned the committee to expect changes in the way capital projects are budgeted, scheduled, and executed in light of the currently-required relationship with UCLA Facilities.
  1. Wage Competitiveness – A recent salary survey suggests that comparative rates of compensation within the Association may be slipping behind those in the private sector, and Mr. Williams explained that this may require rate adjustments going forward in order to ensure that veteran employees continue to be compensated equitably in comparison with new hires who, by necessity, would be compensated at levels closer to the current market-rate.

FINANCE DIRECTOR’S REPORT

Internal Audit Report

Audit Report #06-01102B for North Campus

The committee briefly reviewed the above referenced audit report and management response. Mr. Delia indicated that management has accepted and intends to implement all recommendations contained therein

Letter on Refinance

Mr. Delia reported that, in June 2007 the University refinanced several bonds including that which financed the renovation of the Ackerman Union. As a result, ASUCLA debt and interest payments to the University were reduced by more than $400,000 in FY 06/07. Unfortunately, management was not informed of this change before the end of the fiscal year and consequently this increase in net income was not recorded for FY 06-07 financial statements. To ensure that there is no material deviation between the Association’s internal and audited financial statements, management will restate FY 06/07 year end results such that the income statement, balance sheet and cash flow will report net income of $2.7, as opposed to $2.3 million.

October Financial Statements

As Mr. Williams indicated in his report, in October the Association as a whole exceeded plan by $111,000 in terms of net income, with positive variances in contribution appearing in all areas save the Store:

  1. The Restaurants Division exceeded plan by $53,000 in terms of gross income primarily due to a $29,000 positive variance in the Cooperage (which results mostly from construction, as units that were scheduled to be closed remain open due to project delays); and a $16,000 positive variance in Catering due to increased bookings in the early part of the month. The LuValle Commons eatery also reported a positive variance of $7,000 due to increased customer traffic from North Campus. Together these positive variances helped to mitigate an $11,000 negative variance from the Kerckhoff Coffee House. These strong results, when combined with a $35,000 positive variance in gross margin and a $5,000 positive variance in wages and benefits offset a negative variance of $8,000 in other controllable expenses, thus generating a positive variance of $32,000 in terms of contribution. Year to date the Restaurants Division was $76,000 ahead of plan and $305,000 ahead of the prior year in terms of gross income; and $48,000 ahead of plan in terms of contribution and $27,000 ahead of the prior year.
  1. The Student Union Division exceeded plan by $25,000 in terms of gross income due to new special events including a wedding, a concert, and increased student programming. This and a positive variance of $17,000 in gross margin offset a $7,000 negative variance in other controllable expenses to allow for a positive variance of $10,000 in terms of contribution. Year to date the Student Union Division is $50,000 ahead of plan and $185,000 ahead of the prior year in terms of gross income; and $24,000 ahead of plan in terms of contribution and $17,000 ahead of the prior year.
  1. The Services Division was $5,000 ahead of plan , with a $6,000 positive variance in gross margin which offset a negative variance of $3,000 in controllable expenses such that contribution exceeded plan by $3,000. Year to date the Services Division is $194,000 ahead of plan and $255,000 ahead of the prior year in terms of contribution. Most of this positive variance is due to International Licensing.

The Store reported a negative variance of $40,000 in gross income that resulted primarily from decreases in text sales. (Gross income from new text was $140,000 off plan and gross income from used text was $33,000 off plan.) The negative impact of these deficits was partially offset by a $29,000 positive variance in gross income from Bearwear and a $13,000 positive variance in wages and benefits; however this mitigating effect was diminished by a $19,000 negative variance in other controllable expenses such that contribution from the Store was $18,000 off plan at month end. Year to date however, the Store was $528,000 ahead of plan in terms of gross income and $1,061,000 ahead of the prior year; and $121,000 ahead of plan in terms of contribution but $52,000 behind the prior year.

Significant positive variances were also reported in all areas of allocated expense:

  1. Administrative & Support Services was $20,000 better than plan;
  2. Maintenance was $8,000 better than plan;
  3. Utilities were $13,000 better than plan; and
  4. Depreciation was $36,000 better than plan.

Year to date the Association as a whole was $854,000 ahead of plan in terms of gross income and $1,798,000 ahead of the prior year; and $387,000 in terms of contribution and $247,000 ahead of the prior year. Once allocated expenses and other income and expenses are factored these positive variances increased to $606,000 for the year in terms of net income and $313,000 ahead of the prior year.

In October cash increased by $317,000 raising the net increase in cash for the year to $2,986,000 compared to $2,295,000 over the same period in the prior year. At month end the Association’s book balance was $17,841,000, $14,218,000 of which was committed to capital projects, leaving a $3,571,000 positive variance over the $52,000 Board-required cash reserve.

At the time of this meeting capital expenditures were anticipated to be $27,7000 off plan by year end.

Past due accounts receivable rose to roughly $80,000 or 3% of the total, a level that is consistent with the same period in the prior year.

Inventory at cost fell to roughly $7,700,000 and inventory turns fell to 5.2.


November Preliminary Sales

To date in November Store sales were $199,744 ahead of plan and $342,570 ahead of the prior year.

The Supplies Division was $256,761 ahead of plan due to a $248,226 positive variance in the Computer Store, and Academic Support was $42,304 ahead of plan due to a $40,460 positive variance from the Academic Publishing Service. Together these results offset a $51,437 negative variance in Apparel that resulted from a $50,095 negative variance in Bearwear. Mr. Delia noted however, that year to date Bearwear was $52,958 ahead of plan and $21,226 ahead of the prior year. In total, sales from Ackerman Union were $247,628 ahead of plan.

Strong results in Ackerman served to mitigate negative variances in LuValle Commons, which was $21,713 off plan (due to a $23,175 negative variance in Academic Support); and in Health Sciences which was $30,674 off plan (due to a $22,972 negative variance in the Medical Department). Mr. Delia indicated that management is confident that the negative variance in LuValle Commons resulted primarily from timing issues, and he noted that sales in the Health Sciences Store were $13,769 ahead of plan for the year and $12,715 ahead of the prior year.

Sales in the Wooden Center Store (also known as ‘The Energy Zone’) were $3,006 ahead of plan thus raising the positive variance to plan to $10,595 year to date. Mail telephone and web sales were $2,231 ahead of plan for the month and $30,593 ahead of plan year to date, thus increasing the positive variance over the prior year to $77,991, or 21%.

Based on these results, management anticipates about an $8,000 positive variance in terms of gross margin.

Month to date sales in the Restaurants Division were $28,918 ahead of plan and $50,629 ahead of the prior year. Significant positive variances appeared in:

  1. The Cooperage, which was $13,971 ahead of plan;
  2. The Greenhouse, which was $5,712 ahead of plan;
  3. LuValle Commons, which was $2,768 ahead of plan; and
  4. Jimmy’s, which was $2,099 ahead of plan.

Together these positive results served to offset negative variances in Northern Lights, the Kerckhoff Coffee House, and Café Synapse which were $5,394, $3,617, and $2,703 off plan respectively. Mr. Delia noted that Northern Lights had budgeted to open a new concept, however this has yet to occur.

Sales from third party operators exceeded plan by $28,918 with significant positive variances appearing in Panda Express and Sbarro which were $6,313 and $4,974 ahead of plan respectively.