John Carroll University Board of Directors Presentation Vice President for Finance and Administrative Services Financial Update December 14, 2004

John Carroll University 2 Presenters  Jonathan Ivec – VP for Finance and Administrative Services  Richard Mausser – Executive Director of Finance / Controller

John Carroll University 3 Agenda  Financial Statement Review  Ratios, Trends and Ranking Statistics  Budget  Q & A Session

John Carroll University Financial Statement Review

John Carroll University 5 Statements of Financial Position - Assets

John Carroll University 6 Endowment Portfolio Market Value

John Carroll University 7 Major Capital Projects Costs and Funding Sources Projects by Year Capitalized ($113.9 million total)

John Carroll University 8 Statements of Financial Position – Liabilities And Net Assets

John Carroll University 9 Scheduled Long-Term Debt Principal Balances

John Carroll University 10 Statements of Activities – Operating Revenues

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

John Carroll University 12 Full-time Undergraduate Enrollment Fall Semester (end of third week)

John Carroll University 13 Undergraduate Summer Enrollment Headcount Per Year

John Carroll University 14 Graduate School Credit Hours Fall and Spring Semesters

John Carroll University 15 Transfer Students Per Academic Year

John Carroll University 16 Students Studying Abroad (Fall and Spring Semesters)

John Carroll University 17 Financial Aid (Unfavorable) Favorable to Budget Undergraduate Unrestricted Non-repayable Aid Freshman Class Size

John Carroll University 18 Endowment Spending Policy

John Carroll University 19 Average Interest Rates (Income)

John Carroll University 20 Statements of Activities – Operating Expenses

John Carroll University 21 Total Operating Expenses Current Operating Fund - Budget vs. Actual

John Carroll University 22 Depreciation Expense

John Carroll University 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

John Carroll University 24 Operating Surplus Accrual Basis of Accounting

John Carroll University 25 Statements of Activities – Nonoperating Expenses

John Carroll University 26 Ratios, Trends & Ranking Statistics

John Carroll University 27 Jesuit Institutions Ranked by 2004/05 Tuition, Fees, Room and Board - Part 1

John Carroll University 28 Jesuit Institutions Ranked by 2004/05 Tuition, Fees, Room and Board - Part 2

John Carroll University 29 Ohio Private Universities Ranked by 2004/05 Tuition, Fees, Room and Board - Part 1

John Carroll University 30 Ohio Private Universities Ranked by 2004/05 Tuition, Fees, Room and Board - Part 2

John Carroll University 31 Ohio Private Universities Ranked by 2003/04 Average Faculty Salary - Part 1

John Carroll University 32 Ohio Private Universities Ranked by 2003/04 Average Faculty Salary - Part 2

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

John Carroll University 34 Student to Faculty Ratio Per Academic Year

John Carroll University Budget

John Carroll University 36 Operating Revenues Year Ended May 31, 2004 Revenue Sources

John Carroll University Budget Assumptions Net 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

John Carroll University 38 Proposed Tuition and Room and Board Increases –

John Carroll University 39 Operating Expenses Year Ended May 31, 2004 Natural Expenses

John Carroll University Budget Assumptions Expenses  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

John Carroll University 41 Unrestricted Operating Fund Revenue Budget vs Estimate vs Projection

John Carroll University 42 Unrestricted Operating Fund Expenditures Budget vs Estimate vs Projection

John Carroll University 43 Moody’s Investors Service JCU 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

John Carroll University 44 Moody’s Investors Service JCU 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

John Carroll University 45 Center for Science and Technology Cash Flow Projection - Cumulative $6.1 in * As of 10/31/04 Bequests

John Carroll University 46 Shula Stadium Cash Flow Projection - Cumulative $0.6 in * As of 10/31/04 Bequests

John Carroll University 47 Q & A