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Texas Hoarders: Livestrong Piled Up Cash

Livestrong has been stockpiling cash in recent years, holding four times as much in short-term savings and temporary cash in 2012 as it did three years ago, according to a review of its Internal Revenue Service (IRS) Form 990.

The Austin, Texas charity held $38.5 million in savings, temporary cash last year, while reporting total revenue of $38.77 million. As recently as 2009, Livestrong held $9.3 million in cash, about 22 percent of the $41 million in total revenue reported.

Chief Financial Officer Greg Lee said the move wasn’t in response to anything in specific other than market conditions. “With the economic uncertainty at that time, as well as the decline in charitable giving noted by many in the industry, our tendency has been to be financially conservative,” he said.

Livestrong officials hosted a conference call with media recently to present the charity’s most recent annual tax Form 990, for 2012. Filing the Form 990 is an IRS requirement but a conference call about it is rare among charities.

“We think it’s a valuable requirement that people provide information on how they’re doing and what they’re doing,” Lee said. “It’s an opportunity for us as an organization to be fully transparent about activities and where money goes,” he said.

Among the highlights of the Form 990:

  • Total revenue was down 17 percent, from $46.8 million to 38.77 million, and 8 percent compared with 2010’s $42.3 million.
  • Contributions/grants were down 8 percent, from $24.67 million to $22.68 million, and down 24 percent from $29.7 million in 2010.
  • Contributions from the “Movember” fundraising campaign were nearly $4.5 million, almost $2 million more than the previous year’s $2.64 million.
  • Revenue from license fees – which comprised more than a third of last year’s revenue – were down 35 percent, from $15.8 million to $10.3 million.
  • The number of contributions was up 3.5 percent, to 200,000.
  • Cancellation of the New York City Marathon forced about $700,000 in revenue to be deferred to 2013.
  • Net assets continue to grow, from less than $30 million in 2008 to $106 million last year, up from $103 million in 2011.

In a two-page overview accompanying the Form 990, Lee reported total revenue of $48.2 million last year and $48.8 million in 2011. The differences between the 990 and annual report come down to how the IRS form recognizes in-kind contributions and realized gains. The Form 990 presents subsets of revenue but is not intended to be a complete economic picture, Lee said. About $3.4 million in in-kind contributions was received but excluded from the tax form except for Schedule D.

“Accounting rules require us to report something like free water bottles for races, showing it the in-kind value of that contribution. If we didn’t get that free, we’d have to buy it,” Lee said. Another $3.5 million in investment gains are again reflected on Schedule D but not required to be included in the tax form.

Through April of this year, revenue was running about $16.4 million, compared with a budgeted $17 million. A vast majority of fundraising efforts occur in the last half of the year. The total number of donations was down about 7 percent and revenue was down about $600,000. Lee said the charity feels good about those figures “given the headwinds” faced in recent months.

Founder Lance Armstrong resigned from the board last fall before ultimately admitting to blood doping when he won seven Tour de France championships almost a decade ago. The organization has tried to distance itself ever since, changing its name last fall from the Lance Armstrong Foundation to the Livestrong Foundation.

The dip in license fees was attributed to a unique, one-time payment of about $2.5 million from Demand Media, Inc., related to its public filing. The company runs, the for-profit web partner of Livestrong. Demand Media was almost half of the year-to-year difference in fees. In 2010, overall license fees were $8.9 million, almost 16 percent less than they were in 2012. Nike earlier this year announced it would stop producing Livestrong merchandise after its current partnership expires this year.

Another $1.7 million of license fees in 2012 were related to a decline in portfolio value in its agreement with American Century. There were other several relatively minor agreements that affected license fees, Lee said. In 2011, license fees totaled $10.3 million, which was up from $8.9 million in 2010.

The sale of Livestrong bracelets dropped some 30 percent, from 3.139 million in 2011 to 2.175 million in 2012. Sales were down almost 5 percent through April and projected to decline about 14 percent in 2013. Donations through April were off by about 7 percent.

Highlights of the expense side of the Form 990 included:

  • Total expenses were up from $31.7 million to $38.2 million last year.
  • Legal fees continued to rise, to $962,964 last year, up 17 percent from $824,198 the previous year, and up 32 percent from 2010’s $732,512.
  • Advertising and promotion was up 25 percent, from $3.2 million to $4 million, and almost double the $2.1 million in 2010.
  • Public awareness decreased by two-thirds, from $2.5 million to about $800,000.

Advertising and promotions encompasses promotions of specific programs or events while items classified as public awareness are more general in nature, not promoting any particular initiative or legislation but more about what the organization is and what it provides, Lee said. The increase in advertising and promotion last year was attributed to $1.3 million for advertising “navigation services” for survivors and patients, which was up from $360,156 in 2011. About $1.8 million of the $4 million spent last year was online advertising, compared with print advertising, the second-highest total at $612,713.

The $2.5 million figure includes an in-kind contribution of $1.75 million from Sporting KC naming rights deal. Combined, the two categories had similar totals in 2012 ($4.8 million) as in 2011 ($4.7 million), he said. The six-year deal with the Kansas City, Kan., soccer stadium ultimately ended after just two years when Armstrong admitted to doping.

The majority of nearly $1 million in legal fees is for the trademark enforcement of the Livestrong brand, including in 60 countries. “That requires a significant effort to continue to monitor registered trademark and enforce the valuable brand that we have,” Lee said. Some legal fees were attributed to external fees on reviewing contracts for such things as license agreements. It’s the second year in a row legal fees have increased, from a high of $1.76 million in 2008.

Livestrong officials said the charity continues to invest in cancer initiatives and programs. Government relations was an especially active area – up from $219,000 to $1.6 million last year because of efforts related to Proposition 29, the California Cancer Research Act, which would have imposed a cigarette tax to fund cancer preventative measures. Lee said this expense category will fluctuate depending on the year, being more active during key election years or when ballot initiatives are proposed.  NPT

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