John Carroll University Board of Directors Presentation

1. John Carroll UniversityBoard of Directors Presentation Vice President for Finance and Administrative Services Financial Update December 14, 2004

2. Presenters • Jonathan Ivec – VP for Finance and Administrative Services • Richard Mausser – Executive Director of Finance / Controller

3. Agenda • 03-04 Financial Statement Review • Ratios, Trends and Ranking Statistics • 05-06 Budget • Q & A Session

4. 03-04 Financial Statement Review

5. Statements of Financial Position - Assets

6. Endowment Portfolio Market Value

7. Major Capital Projects Costs and Funding Sources 1996-2004 Projects by Year Capitalized ($113.9 million total)

8. Statements of Financial Position – Liabilities And Net Assets

9. Scheduled Long-Term Debt Principal Balances

10. Statements of Activities – Operating Revenues

11. Total Operating Revenues (Net of Aid)Current Operating Fund - Budget vs. Actual

12. Full-time Undergraduate EnrollmentFall Semester (end of third week)

13. Undergraduate Summer EnrollmentHeadcount Per Year

14. Graduate School Credit HoursFall and Spring Semesters

15. Transfer StudentsPer Academic Year

16. Students Studying Abroad(Fall and Spring Semesters)

17. Financial Aid (Unfavorable) Favorable to BudgetUndergraduate Unrestricted Non-repayable Aid Freshman Class Size 857 834 833 792 843 859 734

18. Endowment Spending Policy

19. Average Interest Rates (Income)

20. Statements of Activities – Operating Expenses

21. Total Operating ExpensesCurrent Operating Fund - Budget vs. Actual

22. Depreciation Expense

23. Factors that had been Expected to Offset Increase in Depreciation Expense • Expectation – Tuition revenue operating surpluses would continue • Reality – Tuition surplus was completely eroded by declining enrollment • Expectation – Dolan Center bridge financing, which had been built into budget, would be paid off by campaign • Reality – Bridge financing has become permanent financing • Expectation – Significant increase in annual fund giving • Reality – Annual fund giving was largely diverted to the capital campaign

24. Operating SurplusAccrual Basis of Accounting

25. Statements of Activities – Nonoperating Expenses

26. Ratios, Trends & Ranking Statistics

27. Jesuit InstitutionsRanked by 2004/05 Tuition, Fees, Room and Board - Part 1

28. Jesuit InstitutionsRanked by 2004/05 Tuition, Fees, Room and Board - Part 2

29. Ohio Private UniversitiesRanked by 2004/05 Tuition, Fees, Room and Board - Part 1

30. Ohio Private UniversitiesRanked by 2004/05 Tuition, Fees, Room and Board - Part 2

31. Ohio Private UniversitiesRanked by 2003/04 Average Faculty Salary - Part 1

32. Ohio Private UniversitiesRanked by 2003/04 Average Faculty Salary - Part 2

33. University Operating Fund Headcounts as a Percent of Total Student FTE

34. Student to Faculty RatioPer Academic Year

35. 05-06 Budget

36. Operating RevenuesYear Ended May 31, 2004 Revenue Sources

37. 05-06 Budget AssumptionsNet Revenues • Undergraduate tuition rate increase – 5.75% • Room and board rate increase – 4.0% (total room and board revenue expected to decline based on projection of 175 empty “beds” in 05-06) • Freshmen class size – 780 • Freshmen financial aid discount target – 38% • Summer school tuition rate – No change (total summer school tuition budget reduced based on trend) • Graduate School tuition rate – No change (total Graduate School tuition reduced based on trend) • $200,000 for Graduate School cohort program • $350,000 increase in annual fund giving

38. Proposed Tuition and Room and Board Increases – 2005-06

39. Operating ExpensesYear Ended May 31, 2004 Natural Expenses

40. 05-06 Budget AssumptionsExpenses • University-wide wage freeze • Funding for a 15% increase in medical premiums • $1.7 million in spending cuts, primarily from not replacing open positions • No increase in departmental operating budgets except for expected increases in utility and insurance costs • Added funding for the London study abroad program to begin in Fall 2005 • Funding for the hiring of a new Dean of the Business School and new Executive Director of Library • Funding for the hiring of two new fund raisers needed to increase annual fund goal by $350,000

41. Unrestricted Operating Fund Revenue04-05 Budget vs. 04-05 Estimate vs. 05-06 Projection

42. Unrestricted Operating Fund Expenditures04-05 Budget vs. 04-05 Estimate vs. 05-06 Projection

43. Moody’s Investors ServiceJCU Debt Rating Affirmation – 12/13/04 • Affirms A2 Debt Rating – Outlook is Stable • Credit Strengths • Established history of operating surpluses and healthy debt service coverage (average 2.2x) • Liquid financial resource base ($99.0 million in unrestricted resources • Strong Jesuit market reputation • Credit Challenges • Competitive market for students in Ohio (89% selectivity) • Reliance on tuition revenue (74%) • Expanding geographic draw of students

44. Moody’s Investors ServiceJCU Debt Rating Affirmation – 12/13/04 • What could change the rating – UP • A markedly enhanced student demand profile, represented by stable enrollments, improved selectivity and yield rates, and growing net tuition per student. • Ability of University to fund future capital needs through gifts rather than debt • What could change the rating - DOWN • A continuation of declining enrollment, especially if accompanied by pressure on operating margins • Substantial additional borrowing, especially without a stabilized enrollment

45. Center for Science and TechnologyCash Flow Projection - Cumulative $6.1 in Bequests * As of 10/31/04

46. Shula StadiumCash Flow Projection - Cumulative $0.6 in Bequests * As of 10/31/04

47. Q & A