Annual Financial Report Results for FY07

The University of Texas at San Antonio

FY 07 Annual Financial Report

Highlights

January, 2008

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Annual Financial Report Highlights

The Annual Financial Report (AFR) is made up of three primary

statements with many supporting schedules.

1. Balance Sheet – Explains what we own, our obligations and what is available.

2. Statement of Revenues, Expenses and Changes in Net Assets (SRECNA) – Shows the results of operations for the year.

3. Statement of Cash Flows – Shows what revenue came in, what was expended and what is left.

Review pie charts and ratios that help explain our financial condition

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UTSA FY 07Balance Sheet

The Balance Sheet has three sections:

Assets: What we own - Items that are available to meet operating costs of the Institution, plus buildings, land, equipment, etc.

Investments increased by $53.5M due to additions, investment income and appreciation.

Capital Assets increased by $106.2M predominantly due to the construction of Rec Center II, Laurel Village, BSE – II, Thermal Energy Plant and University Center – III.

Liabilities: Our obligations -Amounts due and payable within one year or beyond.

Net Assets: What’s available - Capital Assets net of depreciation, endowment funds and other unrestricted funds.

Amount invested in Capital Assets increased predominately by $106.2M due to construction.

Unrestricted Net Assets grew by $27.0M due to increase in Tuition & Fees.

The University of Texas at San Antonio - Balance Sheet($ in millions) 2007 2006 Variance % Change

Assets:Current Assets 158.6 177.9 (19.3) -11%Noncurrent Investments 193.4 139.9 53.5 38%Other Noncurrent Assets 2.4 2.9 (0.5) -17%Capital Assets, net 550.3 444.1 106.2 24% Total Assets 904.7 764.8 139.9 18%

Liabilities:Current Liabilities 141.1 127.5 13.6 11%Noncurrent Liabilities 2.3 2.2 0.1 5% Total Liabilities 143.4 129.7 13.7 11%

Net AssetsInvested in Capital Assets, Net of Related Debt 550.3 444.1 106.2 24%Restricted 77.5 84.5 (7.0) -8%Unrestricted 133.5 106.5 27.0 25% Net Assets 761.3 635.1 126.2 20%

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UTSA Operating Revenues ($ in millions)

2007 2006

Student Tuition and Fees

- Net of Discounts

143.57

118.7Sponsored

Programs72.8 73.

2Sales and Services of Educational Activities

6.7 6.0Auxiliary

Enterprises15.1 14.

2Other

2.5

3.2Total Operating

Revenues240.6

215.3Total Operating

Expenses315.6

293.8Operating

Loss(75.0)Nonoperating Revenues

(Expenses):State Appropriations

98.1

97.1Gift

Contributions3.8

3.5Net Investment Income

(Loss)10.9 6.

1Net Inc. (Dec.) in Fair Value of Investments

12.4 4.1Gain/(Loss) on State of Capital

Assets(0.1)Othe

r Nonoperating

Revenues/Expenses

0.0

0.0Income (Loss) Before Other Revenues, Expenses,

Gains or Losses

50.1

32.2Gifts and Sponsored

Programs0.0

0.6Additions to Permanent

Endowments4.0

4.9Reclass From (To) Other

Institutions(48.7)

19.8

Mandatory Transfers

- Comp & Sys Admin

-Debt Svc

(19.7)

(16.6)Nonmandator

yTransfers

- Comp & Sys Admin

141.9

28.6Transfers From (To) Other State

entities(1.4)Change in Net

Assets126.2

68.7Net Assets, Beginning of the

Year635.1

566.4

Net Assets, End of the Year

761.3

635.1

UTSA Operating Revenues ($ in millions)

2007 2006

Student Tuition and Fees

- Net of Discounts

143.5 118.7

Sponsored Programs

72.8 73.2Sales and Services of Educational

Activities6.7 6.

0Auxiliary Enterprises

15.1 14.2Othe

r2.5

3.2Total Operating

Revenues240.6

215.3Total Operating

Expenses

315.6

293.8Operating

Loss(75.0)

(78.5)Nonoperating Revenues

(Expenses):State Appropriations

98.1

97.1

Gift Contributions

3.8

3.5

Net Investment Income (Loss)

10.8 6.0

Net Inc. (Dec.) in Fair Value of Investments

12.4 4.1

Income (Loss) Before Other Revenues, Expenses, Gains or

Losses

50.1

32.2

Gifts and Sponsored Programs

0.0

0.6Additions to Permanent

Endowments4.0

4.9Reclass From (To) Other

Institutions(48.7)

19.8

Mandatory Transfers

(19.7)

(16.6)

Nonmandatory

Transfers

141.9

28.6Transfers From (To) Other State

entities(1.4)

(0.8)

Change in Net Assets

126.2

68.7

Net Assets, Beginning of the Year

635.1 566.4

Net Assets, End of the Year

761.3 635.1

The Statement of Revenue, Expenses, and Changes in Net Assets (SRECNA) . This statement is called the “Operating Statement” as it reports the results of operations for the year.

Tuition and Fees increased by $24.8M.

Operating loss is calculated before state appropriations. Tuition and fees increased more than operating expenses causing a slight change.

The increase is predominantly due to a $8.3M increase in FV of investments and increase in net investment income of $4.8M.

Mandatory Transfers represent amounts transferred to System Admin to pay debt service, and nonmandatory transfers represent anticipated bond proceeds transferred to UTSA to fund construction projects.

As on the previous exhibit, Change in Net Assets was $126.2M. In the current year operations, this is most dramatically impacted by the transfers from system of bond proceeds for capital improvement projects.

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UTSA FY 07Statement of Cash Flows Cash from operations includes tuition

and fees and expenditures for operations includes salaries, depreciation, scholarship/fellowship and supplies.

Noncapital financing activities include State appropriations and Gifts.

Capital and related financing activities include purchase of equipment and construction of buildings.

Investing Activities include the purchase/sale of investments, interest income and endowment income distribution.

Cash & Cash Equivalents decreased slightly.

The University of Texas at San AntonioStatement of Cash Flows

($ in millions) 2007 2006

Cash Flows

Cash received from operations 262.0 243.9

Cash expended for operations (301.1) (287.2)

Net cash used in operating activities (39.1) (43.3)

Net cash used by noncapital financing activities

105.8 103.4

Net cash used in capital and related financing activities

(38.4) (25.2)

Net cash used by investing activities (30.2) (49.3)

Net increase in cash and cash equivalents

(1.9) (14.4)

Cash & cash equivalents, beginning of the year

79.7 94.1

Cash & cash equivalents, end of year 77.8 79.7

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UTSA FY 2007 Sources of Revenue by Category

Operating Sources by Category

Institutional Resources

$42.1 12%

State of Texas $107.6 30%

Student & Parent $143.5 41%

Federal Government $60.1 17%

($ in Millions)

UTSA FY 07 Sources of Revenue

Operating Sources

Research Development Funds

$1.1 0%

State Appropriations $97.0 27%

State Grants & Contracts

$9.63%

Tuition & Fees $143.5

41%

Private Gifts & Grants $6.4 2%

Other Income $2.4 1%

Net Auxiliary Enterprises

$15.1 4%

Sales & Services $6.7 2%

Endowment & Interest Income $10.9 3%

Local Government Grants

$.5 0%

Federal Grants & Contracts

$60.1 17%

($ in Millions)

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UTSA FY 07 Uses of Funds

Operating Uses

Other Expenses$.020%

Instruction$98.934%

Research$25.28%

Public Service$15.1

5%

Academic Support$25.7

9%

Student Services$24.58%

Institutional Support$30.210%

Scholarships & Fellowships

$23.58%

Operations & Maintenance of Plant

$31.310%

Auxiliary Enterprises$17.16%

Capital Outlay$6.82%

($ in Millions)

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UTSA FY 07 Analysis of Financial ConditionComposite Financial Index

Composite Financial Index measures the overall financial health by combining four core ratios into a single score: primary reserve ratio, expendable resources to debt ratio, return on net assets ratio and the annual operating margin ratio.

The CFI increased by .8 primarily due to increase in interest earnings and appreciation on investments, as well as higher net operating income.

System’s benchmark is 3.0 or greater.

3.1 3.13.7 3.6

4.4

0.0

2.0

4.0

6.0

2003 2004 2005 2006 2007

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UTSA FY 07 Analysis of Financial ConditionOperating Expense Coverage Ratio

Measures an institution’s ability to cover future operating expenses with available year-end balances. Ratio is expressed in number of months coverage.

Increase from 4.2 months to 5.0 months is due to increase in unrestricted net assets as a result of increases in Tuition & Fees attributable to enrollment growth and rate increases.

System Satisfactory rating is at two months or above and should be stable or improve.

3.02.3

3.64.2

5.0

0.01.02.03.04.05.06.0

2003 2004 2005 2006 2007

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UTSA FY 07 Analysis of Financial ConditionDebt Service Coverage Ratio

This ratio measures the actual margin of protection provided to investors by annual operations. Calculation is used by Moody’s Investment Services, system-wide to determine bond rating. This is watched very closely so UT System can maintain AAA bond rating.

Trend helps to determine if an institution has assumed more debt than it can afford to service.

Our trend is growing exceeding UT System’s benchmark of greater than 2.4. This means that our net resources are 3.1 times what we are currently expending for debt payments. The ratio increased slightly due to operating performance off-set by increased debt service.

3.1

2.21.8

2.93.0

0.0

1.0

2.0

3.0

4.0

2003 2004 2005 2006 2007

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UTSA FY 07 Analysis of Financial ConditionExpendable Resources to Debt Ratio

This ratio measures an institution’s ability to fund outstanding debt with existing net asset balances should an emergency occur.

UTSA’s debt ratio changed slightly due to a decrease in expendable net assets restricted for capital projects as a result of completion of capital improvement projects.

This ratio basically shows that more and more of our resources are going towards paying off debt. System’s Satisfactory benchmark is 0.7x or greater.

0.60.7

1.0

0.70.7

0.0

0.4

0.8

1.2

2003 2004 2005 2006 2007Restated

Restated

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UTSA FY07 Analysis of Financial ConditionDebt Burden Ratio

This ratio examines the institution’s dependence on borrowed funds and cost of borrowing relative to overall expenses.

UTSA’s debt burden ratio increased as a result of a major capital improvements program resulting in increased debt service payments. The institution is heavily reliant on debt to fund cost.

System’s Satisfactory benchmark is less than 4.3%.

5.9%6.6%

6.2%6.8%

5.7%

0.0%

2.0%

4.0%

6.0%

8.0%

2003 2004 2005 2006 2007

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UTSA FY 07 AFR Summary UTSA continues to receive a “Satisfactory”

rating from UT System as a result of a healthy financial condition.

UTSA’s operating margin ratio of 8.4% is strong but not sustainable; future expenditures are expected to exceed revenue growth as new positions are hired and needed infrastructure is purchased to meet growth demands. We will have to closely monitor our debt as we continue to require additional facilities.