Summary of Balance Sheets _part1 ppt

During fiscal year 2010, current and other assets increased $2.2 million due to increases in cash balances of$1.5 million of which $0.7 million is attributable to the Expanded Lottery an

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Summary of Balance Sheets

The following table presents the Lottery's assets, liabilities, and net assets (shown in millions

of dollars):

Current and other assets $ 18.0 $ 15.8 $ 17.1

Net assets

Total Liability and Net Assets $ 26.3 $ 16.3 $ 17.5

Current and other assets consist primarily of cash balances for operations, expanded lottery and prizes, accounts receivable from Lottery retailers for lottery tickets sales activity, and instant ticket inventory During fiscal year 2010, current and other assets increased $2.2 million due to increases in cash balances of$1.5 million of which $0.7 million is attributable

to the Expanded Lottery and an increase in accounts receivable of $0.7 million over the prior year

For fiscal year 2009, current and other assets decreased $1.3 million as cash balances decreased $0.7 million and the MUSL operating reserve receivable decreased $0.7 million from the prior year

Capital assets increased $7.8 million from 2009 as a result of recording contributed capital assets related to Expanded Lottery activities of $9.1 million less $1.2 million in current year depreciation Additional detailed information on capital assets may be found in notes 1 and 3

to the notes to financial statements

Current liabilities consist of accounts payable and accrued liabilities, transfers due to the State of Kansas, and prize liabilities The decrease in current liabilities from 2009 is attributable to a decrease in amounts due to the State of Kansas of $1.2 million which offset increases in accounts payable and accrued liabilities from 2009

For fiscal year 2009, current liabilities decreased $0.1 million from 2008 as accounts payable and accrued liabilities and amounts due to the State of Kansas decreased $1.0 million which offset the increase in prize liabilities of$0.8 million

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Summary of Revenue, Expenses, and Changes in Net Assets

The following table presents the Lottery's changes in net assets (shown in millions of

dollars):

Q>erating revenues:

Net lottery game revenues

Expanded lottery revenues

Reimburserrents and other

Total operating revenues

Operating expenses:

Lottery

Expanded lottery

Total operating expenses

Operating income

Nonoperating revenues (expenses):

Lottery

Expanded lottery

Total nonoperating revenues (expenses)

Income (loss) before contributions

Capital contributions

Change in net assets

Net assets, beginning of )ear

Net assets, end of year

$

235.4 20.7 2.4 258.5

166.0 17.9 183.9 74.6

(67.9) (5.0) (72.9) 1.7 9.1 10.8 3.1 13.9

$

230.5

1.6 232.1

165.0 165.0 67.1

(68.2)

(68.2) (1.1)

(1.1) 4.2 3.1

$

236.7

1.6 238.3

171.2 171.2 67.1

(70.0)

(70.0) (2.9)

(2.9) 7.1 4.2

The change in net assets between fiscal year 2010 and fiscal year 2009 represented an increase of$10.8 million The increase is the result of the increase in sales revenues in excess

of corresponding increases in operating expenses, as well as capital assets contributions related to Expanded Lottery activities

The change in net assets between fiscal year 2009 and fiscal year 2008 was a decrease of

$1.1 million The decrease is the result of the overall decrease in sales revenues during the fiscal year

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Lottery Game Revenues

Presented in millions of dollars, the following table compares online and instant Lottery sales

by game type between fiscal years 2010 and 2009:

Type of Game 2010 2009 Difference Percentage

Megt Mllions 3.9 3.9

Revenues from the sale of online and instant lottery tickets for the fiscal year ended June 30,

2010 increased 2.1 % or $4.9 million compared to the previous year Fiscal year 2010 sales were $235.4 million compared to $230.5 million in fiscal year 2009 Two new online games were added during fiscal year 2010 including the Mega Millions (a MUSL game) with $3.9 million in sales, and the Holiday Raffle game as a sell-out of $3.0 million Powerball had increased sales of $1.0 million while Super Kansas Cash, Pick 3, and 2 by 2 had minor increases Instant sales decreased $1.2 million from 2009 Increases in overall sales were accomplished by providing new games to the public as well as entering into partnerships with Bass Pro Shops, Cabela's, Buick LaCross, Kansas Speedway, Kansas State Fair, the 3i Show and other businesses, in special games promotions Pulltab sales had an increase of $0.8 million A third series of the Mid-West Millions with the State of Iowa was successfully completed Increases in these games were offset by decreases in Keno of $1.8 million and Kansas Hold 'Em of$0.9 million, respectively

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Presented in millions of dollars, the following table compares online and instant Lottery sales

by game type between fiscal years 2009 and 2008:

Revenues from the sale of online and instant lottery tickets for the fiscal year ended June 30,

2009 decreased 2.6% or $6.2 million compared to the previous year Fiscal year 2009 sales were $230.5 million compared to $236.7 million in fiscal year 2008 Powerba1l, Super Kansas Cash, and Keno experienced decreases in sales during the fiscal year of $3.0 million,

$2.6 million, and $2.9 million, respectively Several games experienced increased sales including the instant scratch game whose sales increased $0.6 million compared to fiscal year

2008 The Lottery is continuing to provide new games to the public and continued to benefit from its partnerships with Kansas Speedway, 3i Show, Wichita River Festival, Kansas State Fair, and other businesses, in special games promotions Pull-tabs and Hot Lotto experienced increased sales compared to fiscal year 2008 of $1.2 million and $1.5 million, respectively The second series of the multi-state instant scratch game with the State of Iowa called Mid-West Millions was completed Each state received the same number of tickets for sale, and with two drawings being held, one in each state for a top prize of $500,000 at each drawing The eScratch game was discontinued January 1, 2008, with the partial year sales of $1.0 million

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Major Lottery Expenses

The following table compares the lottery game-related expenses between fiscal year 2010 and fiscal year 2009 The expenses are shown in millions of dollars:

On-line Games Service Bureau 5.6 5.3 0.3 5.7% Instant Ticket Printing Costs 3.8 4.8 _ _ ( > 1_.0J-) -20.8%

The overall increase in game prizes was the result of the increase in sales compared to those

in fiscal year 2009 The online games service bureau costs increased as a result of more on-line sales Instant ticket printing costs for fiscal year 2010 decreased due to the relative cost per ticket being less for the games issued during the year

Of the $10.3 million of fiscal year 2010 lottery operating expenses that were not game-related, $4.4 million, was for employees' salaries and wages, $2.9 million was spent for games and promotional advertising, and other administrative expenses accounted for $3.0 million In fiscal year 2009, these same expenses totaled $10.5 million including $4.2 million for employees' salaries and wages, $3.3 million for games and promotional advertising, and

$3.0 million for other administrative expenses

The following table compares the lottery game-related expenses between fiscal year 2009 and fiscal year 2008 The expenses are shown in millions of dollars:

Telecommunications Terminal Costs 0.0 2.0 (2.0) -100.0%

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The overall decrease in Game Prizes was the result of the decrease in sales compared to fiscal year 2008 The Telecommunications Terminal Costs are no longer a separate charge in fiscal year 2009 The On-line Games Service Bureau costs decreased as a result of fewer on-line sales Instant Ticket Printing Costs for fiscal year 2009 increased as instant ticket sales increased by 5%, and the strategy of ordering smaller quantities of each game was successfuL

Of the $10.5 million of fiscal year 2009 lottery operating expenses that were not game-related, $4.2 million was for employees' salaries and wages, $3.3 million was spent for games and promotional advertising, and other administrative expenses accounted for $3.0 million In fiscal year 2008, these same expenses totaled $12.3 million including $5.6 million for employees' salaries and wages, $3.1 million for games and promotional advertising, and

$3.6 million for other administrative expenses

Kansas Lottery Graphs of Financial Highlights For the Fiscal Year Ended June 30, 2010

Percent of Sales

Commissions 5.8%

Prizes 56.3%

To depict compliance with the 45% prize payment statute and the retailers' commissions rules

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Expenses as a Percent of Lottery Revenues

Cost of Sales

66.1%

5.1 %

Transfers to SGRF 28.8%

The Cost of Sales category includes prizes, commissions, service bureau, auto-ship, and instant ticket printing

Transfers to the State Gaming Revenues Fund (SGRF) and State General Fund (SGF)

Pursuant to the Lottery Act, the Director of Accounts and Reports of the State of Kansas shall transfer monies in the Lottery Operating Fund to the State Gaming Revenue Fund (SGRF), at least monthly, in an amount equal to the monies in such fund in excess of those needed for payment of Lottery expenses, payment of compensation to retailers and transfers

to the Prize Payment Fund as certified by the Executive Director of the Lottery Although all Lottery transfers are made to the SGRF, there is a $50.0 million cap Therefore, any transfers

in excess of $50.0 million are subsequently transferred to the State General Fund (SGF) Of the $50.0 million in the SGRF, the first $80,000 is transferred to the Problem Gambling Grant Fund (pGGF) Then, of the balance remaining, 85% is transferred to the Economic Development Initiatives Fund (EDIF), 10% to the Correctional Institutions Building Fund (CmF), and 5% to the Juvenile Detention Facilities Fund (JDFF)

For fiscal year 2010 legislature again waived the percentage of sales SGRF requirement for a minimum transfer of $72.0 million originally with a minimum monthly transfer of $4.5 million For 2010, transfers to the SGRF were $67.8 million, an increase of $0.5 million over 2009 The fiscal year 2009 transfer of $67.3 million was $2.7 million less than the fiscal year 2008 transfers

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Expanded Lottery

The 2007 Legislature passed Senate Bill 66, the Expanded Lottery Act The Act provides for the Kansas Lottery to own and operate electronic gaming machines at Kansas horse and dog racetracks, if the facilities are established upon the County's voter approvaL Currently there are no active horse and dog racetracks in the State The Expanded Lottery Act also allows for the Lottery, upon county voter approval, to operate lottery gaming facilities in four specific gaming zones The Expanded Lottery Act establishes the distribution requirements of net gaming revenues

Expanded Lottery Revenues and Expenses

The Boot Hill Casino and Resort represents the State's first casino which opened Mid-December 2009 The net revenue and related expenses are as follows (shown in millions of dollars):

Net Revenue

Expenses:

State of Kansas

Problem Gaming

Zone City and County

Management Fees

$

2010 20.7

4.6 0.4

0.6

15.1 20.7

Expanded Lottery Distributions

Management Fees 73%

State of Kansas

Gambling 2%

Zone City/County 3%

To depict the distribution of net revenue as set forth in the 2007 Legislature enacting the Expanded Lottery Act

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Contacting the Lottery's Financial Management

This management's discussion and analysis report is designed to provide Kansas citizens, Kansas government officials, players, retailers and other interested parties with a general overview of the Lottery's financial activity for the fiscal years ended June 30, 2010 and 2009 and to demonstrate the Lottery's accountability for the monies it received from its lottery ticket sales activity Questions or comments about this report may be addressed to Carolyn Brock, Director of Finance or Wayne Regnier, Fiscal Manager at 128 N Kansas Avenue, Topeka, KS 66603

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KANSAS LOTTERY (A COMPONENT UNIT OF THE STATE OF KANSAS)

BALANCE SHEETS JUNE 30, 2010 and 2009

2010

ASSETS

Current Assets:

Cash:

Operating fund $ 5,533,496

Prize payment fund 895,529

Accounts receivable, net of allowance for

doubtful accounts of $618,583 and $480,163

at 2010 and 2009, respectively 3,507,672

Accounts receivable - unbilled 5,897,136

Other receivable 153,378

Instant ticket game inventory 2,014,378

Total current assets 18,001,589

Capital assets, net of depreciati9n:

Property and equipment - Lottery 442,494

Property and equipment - Expanded Lottery 7,889,090

Total capital assets 8,331,584

Total assets $ 26,333,173

LIABILITIES AND NET ASSETS

Current liabilities:

Accounts payable and accrued liabilities $ 2,481,796

Due to the State of Kansas 4,567,697

Prize liability 5,358,996

Total current liabilities 12,408,489

Net assets:

Invested in capital assets 8,331,584

Unrestricted 5,593,100

Total net assets 13,924,684

Total liabilities and net assets $ 26,333,173

See accompanying notes to financial statements

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2009

$ 3,944,668 991,212

2,912,262 5,748,353 212,576 2,008,267 15,817,338 464,742

464,742

$ 16,282,080

$ 1,606,719 5,750,000 5,794,238 13,150,957

464,742 2,666,381 3,131,123

$ 16,282,080

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