School Update Feb09_TOWNHALL

8/14/2019 School Update Feb09_TOWNHALL

1/18

1

State of the School: Managingin Turbulent Times

February 19, 2009


2/18

Impact of the Crisis in Higher

Education Endowments down 25% or more State appropriations for higher education being cut

dramatically ASU $90M since June 2008

Expense reductions underway at most private and publicuniversities

Corporate spending in training and development down GMAT test taker up, but unemployment and family net

worth down

High growth expected in for-profit sector P/E Apollo: 27, DeVry: 29, Grand Canyon: 147 (IPO Nov. 08,07/08 revenues $100M, Market Cap: $834M)


3/18

Impact of the crisis on Thunderbird

Decline in forecasted Corporate Learning revenues $3.1M in Russia (business plus currency), $2.9M in other programs

(deferrals, cancellations and less new business), $0.4M contingency

Real Estate transactions not completed Endowment loss of $6.6M (31%) since 6/30/08 Slowdown in new philanthropic commitments

Loss of liquidity due to CommonFund short-term fundclosure ($2.4M still tied up) Lower interest cost on variable rate bond debt (current rate

< 1.5%, vs. 5% budgeted)

Declining liquidity ratio as consequence of short-term fundclosure and endowment loss (58% expected at 6/30/09 vs.required 50%)


4/18


5/18

Fall Enrollment Trends

-

200400

600

800

1,0001,200

1,400

1,600

04/05 05/06 06/07 07/08 08/09F 09/10F

Full-time MBAGM Executive MBA GMBA Latin America GMBA On-Demand MA/MS


6/18

-

5,000

10,000

15,000

20,000

25,000

30,000

04/05 05/06 06/07 07/08 08/09F 09/10F

Learn ing and

Co ns ul ting N etwo rk

Dis tance L earn ing

Open Enrol lm ent

Consor t ia

Ru s s ia

Cus tom

Corporate Fee Trends


7/18

Change in Unrestricted Net Assets

vs. Free Cash Flow

(8,000)

(6,000)

(4,000)

(2,000)

-

2,000

04/05 05/06 06/07 07/08 08/09F

Amount(inthousan

d)

Change in unrestrictednet assets *

Unrestricted Investmentand Currency Gain/Loss

Free Cash Flow

* Change in unrest ri ct ed net asset s is before unreali zed gains or losses on unrest ri ct ed endowment and currency t ranslat ion.


8/18

Capital Expenditures

-

1,000

2,000

3,000

4,000

5,000

04/05 05/06 06/07 07/08 08/09F 09/10F

-

1,000

2,000

3,000

4,000

5,000

Russia

Glendale

08/09 Budget &

09/10 Strategic

Plan


9/18

$41.56M

$15.62M

$44.44M

$0

$10

$20

$30

$40

$50

$60

$70

2/1/2006 FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11

Millions

Level Pace

Actual CommitmentsNeeded per year (3 yrs) as 6/30/08 -$7.81MNeeded per year (2 yrs) based on current amount raised -$10.49M28M

(as of February 16, 2009)

Capital Campaign


10/18

How is Thunderbird positioned to

weather the storm? Program portfolio diversification to tap multiple markets

On-Demand, MA/MS, future European EMBA and future Part Time

MBA

Concentration of Corporate Learning clients in resilientsectors

Oil & Gas and Pharma industries Promising new business in the Corporate Learning

pipeline

Prior reorganization improved productivity and flexibility New Learning Management System to support new

distance programs


11/18

How is Thunderbird positioned to

weather the storm? Limited reliance on endowment or state funding Preparedness to execute transactions

Land zoning completed

Letter of credit in place until Sept. 2011, new $2M line ofcredit Significant campaign commitments in place Endowment moved to a 100% insured bank account to

eliminate any further downside risk Actions to improve cash position

Deferred $3M capex Reviewed all open positions, with significant savings from deferred

hires/replacements Converted rubles to US dollars Other expense reductions $15.8M of cash in the bank as of Jan 31st (includes Spring tuition)


12/18

Risks going forward

Outstanding bond risks Default risk from missing covenants (ex: liquidity ratio),

Other risks: Interest rate volatility (currently covered by interest ratecap), Bank of NY rating downgrade, inability to remarket bonds

Limited options to restructure debt before Sept. 2011

Further declines in corporate learning revenues

Further decline in new philanthropic commitments andpledge payments

Shift in applications from Full Time MBA to early careerand working professional degree programs

Potential decline in enrollments due to lack of financing Foreign currency impact on affordability of Thunderbird

programs


13/18

Weathering the storm in the next

two years Revenue opportunities

Expense reductions Restructuring of assets and liabilities

Strategic initiatives


14/18

Planning for the worst while working

for the best

$74,902$70,871$66,939$62,735$59,252$68,537$69,801Total Revenue(including Russia)

10%5%0%(6%)(11%)09/10 Fcst vs 08/09 Fcst %

6,1263,095163(3,541)(6,524)09/10 Fcst vs 08/09 Fcst $

$67,902$64,871$61,939$58,235$55,252$61,776$60,527Total revenue(excluding Russia)

8,1637,8407,5177,1046,6918,7149,282Other

17,22515,53513,84412,69911,43513,70715,126Corporate Fees (excludingRussia)

$42,514$41,496$40,578$38,432$37,126$39,355$36,119Tuition and fees net ofscholarships

ForecastActualRevenueBestCase

HiMidpoint

MiddleCase

LoMidPoint

WorstCase

08/0907/08

09/10 Forecast

$ in Thousands

09/10 Revenue Projection Scenarios


15/18

Revenue Opportunities &Potential Expense Reductions

Consultative process: Identify and prioritize options for

revenue opportunities and expense reductions Suggestion box open to all faculty and staff Senior administration in consultation with the faculty senate

and others to review all options and submit a final proposal to

the president Budget process for 2009/10 fiscal year

Incorporate suggestions from consultative process


16/18

Restructuring of assets and liabilities

Potential sale of multi-family residential and officeparcels

Restructure bond debt before Sept. 2011

Endowment management Minimize down-side risk

Once liquidity position improves and market volatility subsides,look for opportunities to re-enter markets


17/18

Strategic Initiatives

Opportunities in the Middle East Kingdom of Saudi Arabia

Partnership with for-profit sector Expansion of the CBSD model to other emerging markets

Other initiatives


18/18

18

State of the School: Managingin Turbulent Times

February 19, 2009

School Update Feb09_TOWNHALL

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