The University of Texas at San Antonio

FY 08 Annual Financial Report

Highlights

January, 2009

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 08Balance 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 $37.8M due to additions and investment income.

Capital Assets increased by $79.1M predominantly due to the construction of Engineering Building, Laurel Village, 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 $79.1M due to construction.

Unrestricted Net Assets grew by $18.2M due to increase in Tuition & Fees and a delay in implementing key strategic initiatives.

ASSETS: 2008 2007 Variance

%

Change Current Assets 161.8 158.6 3.2 2%

Noncurrent Assets 231.2 193.4 37.8 20% Other Noncurrent

Assets

4.3 2.4 1.9 79%

Capital Assets, net 629.4 550.3 79.1 14% Total Assets 1,026.7 904.7 122.3 14%

LIABILITIES: Current Liabilities 153.7 141.1 12.6 9% Noncurrent

Liabilities

2.3 2.3 0.0 0%

Total Liabilities 156.0 143.4 12.6

9%

NET ASSETS: Invested in Capital

Assets, Net of

Related Debt

629.4 550.3 79.1 14%

Restricted 89.6 77.5 12.1 16%

Unrestricted 151.7 133.5 18.2 14% Net Assets 870.7 761.3 109.4 14%

The University of Texas at San Antonio – Balance Sheet

($ in millions)

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)

2008 2007

Student Tuition and Fees

- Net of Discounts

148.1 143.5

Sponsored Programs

79.7 72.8Sales and Services of Educational

Activities7.7 6.

7Auxiliary Enterprises

17.9 15.1Othe

r3.1

2.5Total Operating

Revenues256.5

240.6Total Operating

Expenses

348.7

315.6Operating

Loss(92.2)

(75.0)Nonoperating Revenues

(Expenses):State Appropriations

114.7 98.1

Gift Contributions

5.8

3.8

Net Investment Income (Loss)

12.9 10.8

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

(13.8) 12.4

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

Losses

27.4

50.1

Gifts and Sponsored Programs

.5

0.0Additions to Permanent

Endowments4.4

4.0Reclass From (To) Other

Institutions97.8 (48.7)

Mandatory Transfers

(28.3)

(19.7)

Nonmandatory

Transfers

9.1 141.9

Transfers From (To) Other State entities

(1.5)

(1.4)

Change in Net Assets

109.4

126.2

Net Assets, Beginning of the Year

761.3 635.1

Net Assets, End of the Year

870.7 761.3

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 $4.6M (3%). Sponsored Programs increased by $6.9M (9%) due to Texas Grant Pass through funding.

Operating Loss is calculated before State Appropriations. Operating expenses outpaced operating revenues causing an increase of $17.2M (23%).

State Appropriations increased by $16.6M (17%). Income Before Other Revenues decreased by

$22.7M (45%) due to a $13.8M Net Decrease in FV of Investments and an increase in Operating Loss.

Mandatory Transfers represent amounts transferred to System 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 $109.4M. This is predominately due to debt issued for construction projects for which bond proceeds are due from System.

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The University of Texas at San AntonioFY 08 – Statement of Cash Flows

Cash from operations includes tuition and fees and expenditures for operations includes salaries, 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 by $13.2M due to increased spending for operations.

($ in millions)

Cash Flows

2008

2007 Cash received from operations 277.7 262.0

Cash expended for operations (337.1) (301.1)

Net cash used in operating activities (59.4) (39.1)

Net cash used by noncapital financing activities

111.3 105.8

Net cash used by capital and related financing activities

(26.3) (38.4)

Net cash used by investing activities (38.8) (30.2)

Net decrease in cash and cash equivalents

(13.2) (1.9)

Cash and cash equivalents, beginning of the year

77.8 79.7

Cash and cash equivalents, end of year 64.6 77.8

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UTSA FY 2008 Sources of Revenue by Category

Federal Government$64.517%

Institutional Resources$51.413%

State of Texas$126.232%

Student & Parent$148.138%

Operating Sources by Category

($ in Millions)

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UTSA FY 08 Sources of Revenue

Operating Sources($ in Millions)

Other Income$3.41%

Net Auxiliary Enterprises

$17.95%

Sales & Services$7.72%

Private Gifts & Grants

$8.82%

Local Government Grants

$0.70%

Endowment & Interest Income

$12.93%

Federal Grants & Contracts

$64.517%

Tuition & Fees$148.138%

Research Development Funds

$3.01%

State Grants & Contracts

$11.53%

State Appropriations

$111.728%

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UTSA FY 08 Uses of Funds

8

Operating Uses($ in Millions)

Capital Outlay$8.93%

Auxiliary Enterprises

$20.56%

Scholarships & Fellowships

$24.98%

Operations & Maintenance of

Plant$37.811%

Institutional Support$31.510%

Student Services$28.99%

Academic Support$28.79%

Public Service$16.65%

Research$26.88%

Instruction$106.831%

UTSA FY 08 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 decreased by .9 primarily due to decrease in the fair value of investments of $13.8M, as well as $69.2M increase in the amount of debt outstanding.

System’s benchmark is 3.0 or greater.

9

3.54.4

3.63.73.1

0.0

2.0

4.0

6.0

2004 2005 2006 2007 2008

UTSA FY 08 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 slightly from 5.0 months to 5.1 months is due to increase in unrestricted net assets as a result of increases in Tuition & Fees attributable to rate increases. In addition, a delay in implementing several key initiatives.

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

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5.15.04.2

3.63.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2004 2005 2006 2007 2008

UTSA FY 08 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.

The debt service coverage declined but still exceeds UT System’s benchmark of greater than 1.8. This means that our net resources are 2.4 times what we are currently expending for debt payments. The ratio decreased as a result of a reduction in operating performance and an increase in debt service.

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2.4

3.13.02.9

2.2

0.0

1.0

2.0

3.0

4.0

2004 2005 2006 2007 2008

UTSA FY 08 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 increase in debt associated with Engineering Building, Laurel Village and University Center III.

This ratio shows that more and more of our resources are going towards paying off debt. System’s Satisfactory benchmark is 0.8x or greater.

Restated

Restated

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0.60.7

0.70.7

0.7

0.0

0.2

0.4

0.6

0.8

2004 2005 2006 2007* 2008

UTSA FY08 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 dramatically 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 5.0%.

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8.5%

6.6%5.9%5.7%

6.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2004 2005 2006 2007 2008

UTSA FY 08 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 7.3% is high but we expect it to trend downward. Future expenditures are expected to exceed revenue growth as strategic initiatives are implemented, new positions are hired, equipment is replaced and planned capital renovations are completed. The university must establish an appropriate level of reserves and closely monitor its debt capacity.

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