USF Financial Report Analysis: Enrollment, Debt, Performance, Strengths/Challenges, Exams of Theatre

Download USF Financial Report Analysis: Enrollment, Debt, Performance, Strengths/Challenges and more Exams Theatre in PDF only on Docsity! 1 UNIVERSITY OF SOUTH FLORIDA Debt Management and Debt Capacity Assessment Presentation to USF Finance Council October 20, 2006 Fell L. Stubbs USF Associate Treasurer 2 Debt Management Practices • Assess USF’s debt capacity o Ability to carry existing and proposed new debt • Identify the drivers of recent changes in debt capacity • Draw operating conclusions to ensure favorable access to capital o Manage / increase reserves o Protect investment performance on $875 million of cash and investments o Manage operations • Track financial performance • Restrict new debt to critical projects • Limit risk in the debt portfolio 5 Balance Sheet Assessment • USF has an “adequate” cushion to support debt and operations o Total Financial Resources equal $677 million in 2006, up from $622 million in 2005 • Total Financial Resources provide “attractive” coverage of $349 million of Direct Debt o 1.9x in 2006 and 2.4x in 2005 • Approximately 50% of USF’s Total Financial Resources are held in endowments • Expendable Financial Resources cover Direct Debt 0.8x, down from 1.0x in 2005, and cover Operations 0.3x, down from 0.4x in 2005 • USF’s Debt increased 82% over the past 3 years to $349 million. • Debt is projected to increase 24% or $85 million in 2007 Based on preliminary 2006 data 6 Operating Performance Assessment • USF’s Operating Margin was -0.6% in 2006, down from 4.2% in 2005 • USF’s 3-year average Operating Margin equals an “adequate” 1.8% • USF’s revenues are “well diversified” o Contracts & grants comprise 32% o State appropriations equal 36% o Net tuition & fees, auxiliary and other revenue equal 32% • The State’s Aa1 GO rating provides “strong support” Based on preliminary 2006 data 7 Strengths / Challenges Strengths • Student demand & quality • USF size & location • Diversified revenues • Private sector support • Financial resource base Challenges • Growing capital program & total outstanding debt • Debt service coverage • Limits on resident tuition 10 Debt Capacity – 2007 Pro Forma Pro Forma Impact of 2006 Parking Garage ($17 mil) and Proposed 2007 Magnolia II Housing ($68 mil) on USF Debt Capacity Pro Forma USF USF A1 2006 2007 Median Debt Service Coverage 5.43x 2.90x Debt Service / Op Exp 0.85% 2.50% Operating Margin -0.63% 1.10% Exp Fin Res / Debt 0.81x 0.65x 1.00x Total Fin Res / Debt 1.94x 1.56x 1.70x Exp Fin Res / Exp 0.32x 0.38x Pro Forma calculations using preliminary 2006 figures. NOTE: Debt service coverage at a Project level is critically important. Moody's Moody's Moody's A2 Rating A1 Rating Aa3 Rating Key Financial Statistics 2002 2003 2004 2005 Preliminary 2006 2007 Proforma w/ Parking & Housing** 2005 2005 2005 Notes Total Cash & Investments 140,976 177,103 241,332 254,045 269,646 Invested in capital assets 449,524 475,140 519,248 521,274 545,294 Unrestricted net assets 77,603 117,185 115,558 168,684 171,445 Restricted expendable net assets 46,603 74,004 113,966 134,838 149,202 Less: Invested in Capital Projects (39,858) (61,972) (75,739) (102,287) (108,112) DSO/CU unrestricted/temp restricted net assets 77,297 58,593 56,153 66,121 71,602 Expendable Financial Resources 161,645 187,811 209,937 267,355 284,137 Univ & CU restricted expendable & nonexp 400,246 286,832 314,547 354,986 393,523 Total Financial Resources 561,892 474,643 524,485 622,341 677,660 Total Direct Debt 215,168 192,426 189,021 262,054 349,198 434,436 81,920 148,360 340,520 Depreciation* 31,189 33,179 35,734 41,484 43,603 Interest 3,923 4,865 4,870 8,007 3,174 Principal Payments on debt 4,030 12,466 4,503 6,386 4,404 Actual annual debt service 7,953 17,331 9,373 14,393 7,578 Income Statement Revenues: Net Tuition Revenue 88,378 87,519 111,552 114,577 124,251 Less: Scholarships and Fellowships Expense (39,013) (41,339) (36,631) (55,105) (58,098) Net Auxiliary Enterprise Revenue 70,213 86,125 68,030 62,486 64,293 Endowment Spending 4,788 8,955 7,143 9,619 9,936 Grants and contracts 204,410 276,656 279,959 292,892 284,731 Sales and Services of Educational Depts 3,200 1,240 424 597 657 Other operating revenue 5,442 1,907 6,867 6,564 6,378 State Appropriations 267,972 297,904 293,485 296,541 319,341 Other Nonoperating Revenue 2,020 4,352 271 58,517 132,797 Total Revenues 607,410 723,319 731,100 786,688 884,286 148,630 413,280 890,530 Expenses: Compensation & Employee Benefits 418,951 450,961 489,978 520,909 573,736 Depreciation* 31,189 33,179 35,734 41,484 43,603 Interest 3,923 4,865 4,870 8,007 3,174 Other expenditures 210,601 205,901 185,626 183,649 269,375 Total Operating Expenses 664,664 694,906 716,209 754,049 889,888 145,660 410,320 871,630 Operating Income (loss) (57,254) 28,413 14,891 32,639 (5,602) 2,970 2,960 18,900 Key Ratios Measures Actual Debt Service Coverage (2.78) 3.83 5.92 5.71 5.43 2.40 2.90 3.20 Cash Flow [Op Income (loss) + Depr Exp + Interest Exp] / Actual annual debt service Actual Debt Service to Operating Expenses 1.20% 2.49% 1.31% 1.91% 0.85% 3.80% 2.50% 3.20% Leverage Actual Annual Debt Service / Total Operating Expense Operating margin -9.43% 3.93% 2.04% 4.15% -0.63% 1.40% 1.10% 2.70% Profitability Operating Income (loss) / Total Operating Revenue Average Operating Margin -1.15% 3.37% 1.85% Profitability Three year average of annual operating margin Expendable Financial Resources to Direct Debt 0.75 0.98 1.11 1.02 0.81 0.65 0.70 1.00 1.20 Liquidity Expendable Financial Resources / Outstanding Direct Debt Total Financial Resources to Direct Debt 2.61 2.47 2.77 2.37 1.94 1.56 0.90 1.70 2.00 Liquidity Expendable Financial Resources / Outstanding Direct Debt Expendable Financial Resources to Operating Expenses 0.24 0.27 0.29 0.35 0.32 0.42 0.38 0.48 Liquidity Expendable Financial Resources / Total Operating Expenses * Depreciation: The 2005 figure includes an adjustment of $45,795,453.06, which is the cumulative effect of the change in estimate for depreciating buildings from 50 years to 40 years. ** Proforma: Parking Garage IV direct debt: $17,020,000 Magnolia Housing direct debt: $68,218,000 Univ: Scholarships and Fellowships Expense Univ: Net Tuition Revenue Total Revenues - Total Operating Expenses Total Operating Expenses + Interest + Other Nonop. Exp. - Scholarships & Fellowships Total Op Exp (from below) - Comp & Benefits - Depreciation - Interest Univ: Interest Univ: Depreciation Univ: Compensation & Benefits Univ: Sales and Services of Education Univ: Grants and Contracts (Fed+State+Nongov't) Univ: Lesser of ave. previous 3 yrs cash & investments x 5% OR investment income Univ: Sales and Services of Auxiliary Enterprises Total of above Univ: Financial Aid/Non-Cap Grants/Contracts/Donations + Other Nonoperating Revenue Univ: State Appropriations Univ: Interest on Loans + Other Op. Rev. University of South Florida Fiscal Year Ended June 30, From Above: Interest + Principal Payments on debt Univ: Principal paid Univ: Interest on Asset-Related Debt Univ: Depreciation Univ & CU: Bond&Rev Cert. Payable + COPS Payable + Notes Payable + Installment Purchase Payable + CU Capital Lease Payable Univ & CU restricted expendable and nonexpendable Expendable Financial Resources + Univ & CU rest expendable and nonexpendable ($, in thousands) Univ: Unrestricted Net Assets Univ: Net Assets Invested in Cap. Assets + Capital Projects Univ: Current and Non-Current Unrestricted Cash & Investments Univ Unrest + Univ Rest for Exp - Univ Cap Projects + CU Unrestricted CU Unrestricted Net Assets Univ: Net Assets Capital Projects Univ: Net Assets Restricted for Expendable 11 Moody's Moody's Moody's A2 Rating A1 Rating Aa3 Rating Additional Data and Ratios 2002 2003 2004 2005 Preliminary 2006 2007 Proforma w/ Parking & Housing** 2005 2005 2005 Notes Market Data and Ratios Information from Debbie Hayward - Student Services Total Enrollment FTE (#) 21,834 23,027 30,540 31,451 33,563 10,322 19,283 27,092 Total FTE Freshman Selectivity (Accept. Rate, %) 67.70% 67.60% 58.70% 58.70% 51.16% 77.40% 77.10% 73.50% Number admitted/Number applicants Freshman Matriculation (Yield Rate, %) 45.40% 45.50% 41.70% 42.80% 38.04% 44.10% 45.20% 44.60% Number enrolled/Number admitted Net tuition per student ($) $2,261 $2,005 $2,453 $1,891 $1,971 $4,253 $5,523 $5,173 (Gross tuition and fees revenue - Scholarship Discount - Scholarship Exp)/Total FTE State appropriation per student ($) $12,273 $12,937 $9,610 $9,429 $9,515 $5,692 $6,538 $9,428 State appropriations/Total FTE Educational expenses per student ($) $30,442 $30,178 $23,452 $23,975 $26,514 $13,303 $19,253 $26,897 Total Operating Expenses/Total FTE Total Tuition Discount (%) 38.97% 42.17% 35.26% 45.80% 45.45% 28.40% 26.60% 27.70% (Scholarship Discount & Allowances + Scholarship Exp)/Gross Tuition & Fees Rev Other Capital Ratios Unrestricted financial resources-to-direct debt (x) 0.36 0.61 0.61 0.64 0.49 0.30 0.40 0.50 Unrestricted net assets / Direct Debt Total financial resources-to-direct debt (x) 2.27 2.47 2.77 2.37 1.94 0.90 1.70 2.00 Direct debt-per-student ($) $9,855 $8,357 $6,189 $8,332 $10,404 $7,758 $8,675 $12,592 Direct Debt/Total FTE Direct debt-to-total capitalization (x) 0.29 0.24 0.22 0.27 0.32 0.30 0.20 0.20 Direct Debt / (Total Net Assets + Direct Debt) Age of plant (#, in years) 8.25 8.56 8.79 9.48 12.70 11.00 11.90 Accumulated Depreciation / Depreciation Expense) Other Balance Sheet Ratios Unrestricted financial resources-to-operations (x) 0.12 0.17 0.16 0.22 0.19 0.18 0.18 0.20 Unrestricted Net Assets / Total Operating Expense Total financial resources-to-student ($) $22,361 $20,612 $17,174 $19,788 $20,191 $7,889 $14,108 $24,426 (Exp financial resources + CU Rest Exp and NonExp - CU Cap Projects) / Total FTE Other Operating Ratios Return on net assets (%) -6.04% 12.39% 10.75% 7.09% 4.77% 5.30% 4.40% 4.90% Contribution Ratios Net tuition and fees (%, of Total Revenue) 8.13% 6.38% 10.25% 7.56% 7.48% 28.40% 24.80% 19.50% Net tuition and fee revenue / total operating revenue Auxiliary Enterprises (%, of Total Revenue) 11.56% 11.91% 9.31% 7.94% 7.27% 14.10% 11.20% 9.70% Auxiliary revenues / total operating revenues Investment Income (%, of Total Revenue) 0.79% 1.24% 0.98% 1.22% 1.12% 1.60% 1.60% 1.80% Investment income revenue / total operating revenues Grants and contracts (%, of Total Revenue) 33.65% 38.25% 38.29% 37.23% 32.20% 11.40% 19.30% 22.50% Grants and contracts revenue / total operating revenues State appropriation (%, of Total Revenue) 44.12% 41.19% 40.14% 37.69% 36.11% 37.70% 35.00% 31.00% State appropriations revenue / total operating revenues Other (%, of Total Revenue) 1.76% 1.04% 1.03% 8.35% 15.81% 2.10% 2.90% 4.00% Other revenues / total operating revenues (Exp financial resources + CU Rest Exp and Nonexp - CU Cap Projects) / Direct Debt Increase(decrease) in net assets / ave total net assets (beg + end net assets / 2) University of South Florida ($, in thousands) Fiscal Year Ended June 30, 12 Operating Margin (%) -9.43% -0.63% 2.70% 1.70%1.20% 2.20% 1.10%1.00% -1.10% 0.20% 1.20% 1.40% 2.20% 0.50% 3.93% 4.15% 2.04% -12.00% -10.00% -8.00% -6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 2002 2003 2004 2005 Preliminary 2006 Year R at io Aa3 A1 A2 USF 15 Expendable Financial Resources-to-Direct Debt (x) 0.65 1.20 1.30 1.20 1.40 1.00 1.20 1.00 0.90 0.700.70 0.70 0.90 0.81 1.02 1.11 0.98 0.75 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 2002 2003 2004 2005 Preliminary 2006 Proforma 2007 w/ Parking & Housing Year R at io Aa3 A1 A2 USF 16 Total Financial Resources-to-Direct Debt (x) 1.70 0.90 1.94 1.56 2.002.00 2.20 2.30 1.60 1.70 2.10 1.001.00 1.30 2.37 2.77 2.47 2.61 0.00 0.50 1.00 1.50 2.00 2.50 3.00 2002 2003 2004 2005 Preliminary 2006 Proforma 2007 w/ Parking & Housing Year R at io Aa3 A1 A2 USF 17