MEDIAN REPORT Not-for-Profit Organizations Confront ......Not-for-Profit Organizations Confront...

MEDIAN REPORT

U.S. PUBLIC FINANCE SEPTEMBER 18, 2014

Table of Contents:

SUMMARY 1 PRESSURE ON REVENUE GROWTH INTENSIFIES FOR MANY ORGANIZATIONS 2 OPERATING PERFORMANCE REMAINS STABLE WITH EXPENSE CUTS 3 FINANCIAL RESOURCE GROWTH SERVES AS A CREDIT STABILIZER 3 CAPITAL SPENDING MODERATES, A POTENTIAL LONG TERM COMPETITIVE ISSUE 4 APPENDICES 7 MOODY’S RELATED RESEARCH 35

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Edith Behr +1.212.553.0566 Vice President - Senior Credit Officer [email protected]

Not-for-Profit Organizations Confront Ongoing Revenue Pressure in Fiscal 2013 Medians Investment Returns and Philanthropy Serve as Credit Stabilizers for Some

Summary

Fiscal year (FY) 2013 not-for-profit organization medians reflect intensifying revenue pressure, with a rising number of organizations unable to generate top line growth. Revenue strains will force organizations to continue to contain costs to maintain stable operating performance. These pressures are partially mitigated by growing financial reserves, with stronger philanthropy and investment returns supported by market conditions.

The FY 2013 not-for-profit organization medians1 highlight the following trends:

» Pressure on revenue growth intensified, with 40% of not-for-profit organizations experiencing a decline in operating revenue in FY 2013. Lower-rated entities, research institutes, and service and advocacy organizations faced the greatest revenue constraints. Pressure on unrestricted earned revenue will continue for most sub-sectors. Philanthropic organizations will fare the best as investment income and fundraising rebound, while research institutes will continue to be the most pressured.

» Many not-for-profit organizations have successfully managed expenses to sustain steady operating performance. Most not-for-profits benefit from having a flexible expense structure, allowing them to adjust expenditures to compensate for declining revenues. Expense pressures will build in coming years, however, as not-for-profits, particularly those that act in a competitive marketplace, such as museums, will need to invest to remain attractive.

» Growing financial resources act as a credit stabilizer as more not-for-profits recover cash lost during the recession. Given shrinking expense bases for many organizations, financial reserves now provide greater flexibility relative to operations. Over 73% of not-for-profits’ cash and investments exceeded FY 2008 levels in FY 2013, a percentage expected to grow in FY 2014 and 2015 given investment returns.

» Capital spending has slowed significantly, with the median age of plant climbing each of the past five years. Sector-wide debt issuance has moderated, as capital investment declines following a period of large investment before the recession. Cultural organizations and research institutes – those sub-sectors generally the most reliant on sustained capital investment – have cut back significantly in recent years.

1 Moody’s medians for not-for-profit organizations are based on our analysis of fiscal year 2013 data for 95% of our rated non-for-profit organizations (other than

education and healthcare). We currently rate 96 separate organizations in this sector based on their stand-alone credit quality. See Appendix I for descriptions of and key statistics for the four sub-sectors covered by this report: cultural organizations, philanthropic organizations, research institutes, and service and advocacy organizations.

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U.S. PUBLIC FINANCE

2 SEPTEMBER 18, 2014

MEDIAN REPORT: NOT-FOR-PROFIT ORGANIZATIONS CONFRONT ONGOING REVENUE PRESSURE IN FISCAL 2013 MEDIANS

Pressure on revenue growth intensifies for many organizations

Revenue growth intensified in FY 2013, with 40% of not-for-profit organizations experiencing a decline in operating revenue. The median revenue growth for the sector, at 1.8%, lagged our 2% proxy for inflation for the first time since FY 2010. Intensifying revenue pressure continues a trend that has plagued not-for-profit organizations since the financial crisis. An average of 39% of organizations have experienced annual declines in operating revenue over the past five fiscal years, compared with just 18% from FY 2004-2008.

Revenue pressure is not spread evenly across sub-sectors (see Exhibit 1). Research institutes and service and advocacy organizations experienced a disproportionate share of revenue pressure in FY 2013, with 59% and 46%, respectively, experiencing declines in operating revenue. Research institutes were adversely affected by constrained grant revenue, with just three rated research institutes increasing grant and contract revenue in FY 2013. Even those sub-sectors that fared better on a relative basis experienced increasing revenue pressure in FY 2013. Median revenue growth for cultural institutions, for example, fell to 2.3% from a robust 6.0% in FY 2012.

EXHIBIT 1

Sub-sectors Experience Different Periods of Revenue Pressure % of Rated Not-for-Profit Organizations with Declining Revenue, by Sub-sector

Note: ARRA supplemental funding paid in FY 2009 and FY 2010 bolstered research institutes’ revenue. Source: Moody's Investors Service

Not-for-profits across most sub-sectors will face continued revenue pressure. Constrained government funding, changing technology, increased competition, and shifting consumer preferences will challenge organizations to grow revenue at the rate of inflation in coming years. Philanthropic organizations will fare the best given their reliance on investment returns and philanthropy. Research institutes will continue to be the most pressured as even elite institutions struggle in a stagnant funding environment.2

2 Independent Research Institutes: Challenging Environment Drives Multiple Strategies, September 2014

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% o

f Not

-for

-Pro

fits

with

Dec

linin

g Re

venu

e

Fiscal Year

Recessionary Years Cultural Organizations Philanthropic OrganizationsResearch Institutes Service and Advocacy Organizations

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM175119

http://www.moodys.com/

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Operating performance remains stable with expense cuts

Despite sustained revenue pressures, many not-for-profit organizations have maintained stable operating performance over the past five years by cutting expenses to compensate for declining revenue (see Exhibit 2). The median operating margin and cash flow margin have remained relatively unchanged between FY 2009 and FY 2013.

EXHIBIT 2

Not-for-Profits Have Lowered Expenses to Combat Declining Revenues

Source: Moody's Investors Service

While most organizations have maintained operating performance despite top line pressure, a material number are experiencing considerable operating stress. Nearly one-third of rated not-for-profits across all sub-sectors had an operating cash flow margin below 5% in FY 2013.

Not-for-profits have also become more reliant on gift revenue. In FY 2013, not-for-profit organizations would have run a median 22.3% deficit excluding gift revenue, compared to a 16.6% deficit in FY 2009.

Moving forward, expense pressures will build on not-for-profits, particularly impacting those organizations that need to invest to thrive in competitive markets. Organizations with a small scale and less ability to garner efficiencies will be the most pressured.

Financial resource growth serves as a credit stabilizer

Strong market returns led to increased financial resources in FY 2013, as balance sheets were bolstered by investment income and strong philanthropic support. Sector-wide cash and investments grew by $7.2 billion in FY 2013, or 10.7%, to an aggregate $74.9 billion. Similar to other sectors where balance sheet strength is a significant credit factor (such as private colleges and universities), nearly three-quarters of organizations have recovered cash lost during the recession (see Exhibit 3). Financial reserves now provide a greater operating cushion, especially given declining or stagnant expenses for many not-for-profits. Further improvement in sector-wide balance sheets is expected for FY 2014 and 2015 due to favorable investment performance.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% o

f Rat

ed N

ot-f

or-P

rofit

s

Fiscal Year

% of NFPs with Declining Revenues % of NFPs Cutting Expenses

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EXHIBIT 3

Gradual Growth in Cash Serves as a Credit Stabilizer % of Rated Entities with Total Cash & Investments Greater than FY 2008 Levels

Source: Moody's Investors Service

Philanthropic and cultural organizations benefit the most from the financial markets’ rebound as they have larger endowments and greater philanthropy. Service and advocacy organizations benefit the least since investment income and gifts are generally not meaningful contributors to the their credit profiles.

Capital spending moderates, a potential long term competitive issue

Capital spending has slowed significantly over FY 2009-2013, with median age of plant increasing in each of the last five years. Nearly two-thirds of not-for-profits failed to invest in capital at a level sufficient to fund depreciation in FY 2013, compared with just 37% in FY 2008 (see Exhibit 4). One large sale by Howard Hughes Medical Institute (Aaa stable) contributed to an overall sector-wide increase in debt in FY 2013. Aggregate debt outstanding declined slightly for the other 90 rated entities in the sample set.

EXHIBIT 4

Many Not-for-Profits Reduce Capital Investment, Leading to Increasing Age of Plant

Source: Moody's Investors Service Although not-for-profit organizations have varying capital needs, cultural organizations and research institutes – those sub-sectors with the greatest need to invest in capital to remain competitive – have reduced capital investment the most. The median capital spending ratio, which compares annual capital investment to depreciation, declined to 0.59 in FY 2013 from 2.05 in FY 2009 for cultural organizations. Capital spending at research institutes declined to a median 0.74 from 1.28 over the same period.

40.0%

46.7%

63.3% 63.3%

73.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2009 2010 2011 2012 2013

% o

f Rat

ed E

ntiti

es

Fiscal Year

Not-for-Profit Organizations Private Colleges & Universities

8.0

8.5

9.0

9.5

10.0

10.5

11.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013

Median Age of Plant (x)

% o

f NFP

s by

Cap

ital S

pend

ing

Ratio

Buc

ket

Fiscal Year

Less than 1x 1x-2x 2x-3x Above 3x Median Age of Plant [right axis]

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Since many organizations invested heavily in capital projects up until the financial crisis, a hiatus in capital spending is not necessarily a significant near-term credit concern. However, we expect that capital-intensive institutions, most of which have sharply decreased capital investment post-recession, will require additional investment over the next several years to remain competitive, likely resulting in additional borrowing.

U.S. PUBLIC FINANCE



Basis for medians Moody’s medians for not-for-profit organizations are based on our analysis of fiscal year 2013 data for 95% of our rated not-for-profit organizations (other than education and healthcare). We currently rate 96 separate organizations in this sector based on their stand-alone credit quality. This excludes 15 public university foundations for which the credit strength of their affiliated universities is factored into their ratings.

The appendices include medians and other financial statistics for not-for-profit organizations as of September 2, 2014 as presented below:

» Appendix I: Overview of Not-for-Profit Organization Sub-sectors

» Appendix II: Not-for-Profit Medians, FY 2009-2013

» Appendix III: Not-for-Profit Medians by Rating Category

» Appendix IV: Not-for-Profit Medians by Sub-sector

» Appendix V: Rated Institutions by Sub-sector

» Appendix VI: Rated Institutions by Rating

» Appendix VII: Moody's Not-for-Profit Ratio Definitions Medians for some rating categories and sub-sectors presented in Appendix III and Appendix IV are based on relatively small sample sizes. These medians, therefore, may be subject to potentially substantial year-over-year variation.

The medians are the outcome of a complex rating process that incorporates a broad variety of quantitative and qualitative factors. As such, there will be a wide range of values for individual ratios within each rating category. In assigning ratings, we do not assign an organization’s precise rating level simply by comparing ratios to medians, but rather weigh core credit variables over time as well as in relation to broad competitive trends in the sector. These variables include market position, operating performance, balance sheet and capital investment, governance and management, as well as legal security and debt structure.

Data for FY 2009 – 2012 may not match the December 2013 publication of the FY 2012 not-for-profit organization medians. Data included in this report are based on current ratings, as of September 2, 2014, which may have changed since the publication of the FY 2012 medians in December 2013. In addition, the data for this publication include initial ratings assigned since December 2013 as well as any data adjustments made since that time. Fiscal year 2009 – 2013 medians in this publication are based on the same subset of not-for-profit organizations for all five years and are derived from nominal values not adjusted for inflation.

The not-for-profit sector does not share a common fiscal year, although most organizations end their year on June 30 or December 31. We derive medians based on audited financial statements as of fiscal year ends ranging from February 28 to December 31. This can be a complicating factor when comparing data, especially since endowment values and reported investment returns will vary considerably depending on the reported fiscal year end of the rated organization.

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Appendix I

Overview of Not-for-Profit Organization Sub-sectors (FY 2013 financial data)

Cultural Philanthropic Research Service / Advocacy

Description Organizations committed to cultural enrichment, including museums, aquariums, zoos, performing arts venues, and public radio

Entities with a charitable mission and primary purpose of distributing funds to other entities for various uses

Non-degree granting organizations whose primary purpose is research

Diverse group of issue-oriented organizations, often with a mission to provide services to a body of constituents; includes membership organizations, religious organizations, social service agencies, professional associations among others

Examples Carnegie Hall, Wildlife Conservation Society, Smithsonian Institution, California Academy of Sciences, New York Public Library

Andrew W. Mellon Foundation, UJA-Federation of New York, American Legacy Foundation

Cold Spring Harbor Laboratory, Carnegie Institution of Washington, Rockefeller University, National Academy of Sciences

YMCAs, World Wildlife Fund, Salvation Army, Nature Conservancy, AARP, Archdiocese of Indianapolis

Median Rating by Number of Ratings

A1 Aa1 Aa3 A1

Median Rating Weighted by Amount of Debt Outstanding

Aa3 Aaa Aa1 A1

Underlying Rating Range Aaa to Baa1 Aaa to A2 Aaa to Baa2 Aa2 to Baa3

Number with Moody's Underlying Rating

37 9 23 27

Amount of Debt Outstanding $5,055 million $872 million $4,733 million $2,407 million

Credit Strengths Typically well-diversified revenue bases; instances of strong state and/or local government operating and capital support; strongest fundraising of all sub-sectors with examples of extraordinary philanthropic support to prominent institutions

Tend not to be capital intensive (often only borrowing for administrative headquarters); significant financial resource bases to cushion debt and operations

On average, balance sheets provide good support for debt and operations; may have more flexibility to contain operating expenses in response to declining revenue

Well-diversified revenue bases; generally balanced to positive operating performance; often broad and diversified member and donor bases

Credit Challenges Usually capital intensive; competition from other not-for-profits as well as for-profit venues; visitor-driven revenues can fluctuate in response to external forces

Need for strong investment management and oversight in light of heavy dependence on endowment spending; face difficult choices to contain operating expenses and grant commitments in response to investment losses

Grant-dependent research organizations susceptible to pressure on federal funding for research and shifting research priorities; some institutions are highly capital intensive needing to maintain up-to-date facilities and infrastructure

Typically thinner levels of financial resources as a result of modest fundraising for endowment; varying levels of market competition

Median Total Financial Resources ($000)

$319,974 $1,139,645 $316,408 $141,492

Median Debt Outstanding ($000)

$94,895 $55,000 $68,663 $56,665

Median Expendable Financial Resources-to-Debt (x)

2.41 22.03 3.81 2.43

Median Expendable Financial Resources-to-Operations (x)

2.32 6.91 1.65 0.81

Median Average Operating Margin (%)

-1.8 -4.1 0.2 3.5

Median Operating Cash Flow Margin (%)

14.4 -0.4 7.3 10.5

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Appendix II

Not-for-Profit Medians, FY 2009-2013

Year 2009 2010 2011 2012 2013

Sample Size 91 91 91 91 91

Key Financial Statistics:

Debt Outstanding ($000) $65,867 $71,532 $67,360 $73,134 $71,112

Unrestricted Financial Resources ($000) $99,201 $100,922 $109,090 $103,840 $122,818

Expendable Financial Resources ($000) $143,228 $164,379 $185,142 $189,980 $214,888

Total Financial Resources ($000) $235,791 $238,133 $262,194 $224,623 $274,578

Total Cash & Investments ($000) $216,710 $228,147 $251,584 $248,769 $283,690

Monthly Liquidity ($000) $100,569 $126,871 $132,237 $134,648 $153,415

Annual Liquidity ($000) $132,370 $139,419 $149,385 $153,536 $178,184

Operating Revenue ($000) $102,857 $105,160 $115,145 $125,763 $119,698

Change in Operating Revenue (%) 0.7 1.1 2.7 3.8 1.8

Total Expenses ($000) $107,466 $105,313 $113,534 $120,273 $117,799

Change in Expenses (%) 1.3 0.4 3.5 3.3 2.3

Total Gift Revenue ($000) $15,116 $12,930 $15,384 $16,376 $11,947

Average Gift Revenue (3yr avg) ($000) $18,749 $15,932 $15,794 $14,048 $14,089

Capital Ratios:

Unrestricted Financial Resources-to-Direct Debt (x) 1.27 1.33 1.39 1.40 1.62

Expendable Financial Resources-to-Direct Debt (x) 1.97 2.13 2.40 2.33 2.83

Total Financial Resources-to-Direct Debt (x) 3.01 2.89 3.31 3.21 3.81

Total Cash & Investments-to-Direct Debt (x) 3.29 3.19 3.37 3.71 4.01

Debt to Operating Revenues (x) 0.68 0.67 0.63 0.61 0.63

Debt Service to Operations (%) 3.7 3.7 4.0 3.8 3.9

MADS to Operations (%) 6.2 5.7 5.7 5.3 5.5

Variable Rate Exposure - Before Swaps (%) 61.3 53.2 53.6 37.7 38.3

Monthly Liquidity to Demand Debt (%)[1] 228.1 232.5 269.8 380.8 352.4

Annual Liquidity to Demand Debt (%)[1] 294.6 263.2 296.4 434.4 432.7

Capital Spending Ratio (x) 1.27 1.01 0.96 0.83 0.64

Age of Plant (Number of Years) (x) 8.93 9.53 9.86 10.10 10.45

Balance Sheet Ratios:

Unrestricted Financial Resources-to-Operations (x) 0.79 0.85 0.80 0.73 0.83

Expendable Financial Resources-to-Operations (x) 1.40 1.49 1.54 1.66 1.93

Free Expendable Financial Resources-to-Operations (x) 0.53 0.55 0.71 0.66 0.84

Monthly Days Cash on Hand (x) 353 403 390 373 474

Annual Days Cash on Hand (x) 464 472 425 431 563

Monthly Liquidity as a % of Total Cash & Investments (%) 51.7 57.8 58.6 59.0 58.2

Operating Ratios:

Operating Margin (%) 1.9 1.7 1.8 1.2 1.6

Average Operating Margin (%) 1.9 1.7 1.3 1.8 0.9

Operating Margin Excluding Gifts (%) -16.6 -15.7 -16.6 -20.3 -22.3

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Not-for-Profit Medians, FY 2009-2013

Year 2009 2010 2011 2012 2013

Sample Size 91 91 91 91 91

Operating Cash Flow Margin (%) 9.4 11.3 12.4 10.3 10.4

Debt Service Coverage (x) 2.38 2.99 2.76 2.67 2.43

Average Debt Service Coverage (x) 2.70 2.72 2.75 2.78 2.52

Average MADS Coverage (x) 1.87 1.84 1.72 1.87 1.83

Return on Net Assets (%) -6.6 6.3 9.6 2.4 9.5

Return on Financial Resources (%) -14.3 7.8 12.2 2.5 12.5

Contribution Ratios: [2]

Gifts (%) 13.0 11.4 14.5 16.1 16.5

Investment Income (%) 12.6 11.9 11.2 11.0 11.2

[1] Median values for monthly and annual liquidity to demand debt are derived from only those issuers that have at least $1 of demand debt outstanding.

[2] Since values represent the median issuer for each contribution ratio, each individual issuer's ratios will sum to 100%, but the median values may not total 100%.

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Appendix III

Not-for-Profit Medians by Rating Category, FY 2009-2013

Aaa

Year 2009 2010 2011 2012 2013

Sample Size 8 8 8 8 8



Unrestricted Financial Resources ($000) $1,147,290 $1,226,645 $1,258,202 $1,256,697 $1,355,043

Expendable Financial Resources ($000) $1,400,382 $1,500,096 $1,631,175 $1,580,932 $1,757,841

Total Financial Resources ($000) $1,800,025 $1,903,411 $2,041,609 $1,996,715 $2,185,779

Total Cash & Investments ($000) $1,895,446 $1,998,484 $2,134,041 $2,139,057 $2,292,814




Change in Operating Revenue (%) 1.7 -3.6 -5.3 3.7 3.0

Total Expenses ($000) $271,599 $275,523 $275,724 $289,362 $279,952

Change in Expenses (%) 1.4 -2.3 -4.2 4.5 1.7



Capital Ratios:




















U.S. PUBLIC FINANCE



Not-for-Profit Medians by Rating Category, FY 2009-2013

Aaa

Year 2009 2010 2011 2012 2013


Operating Ratios:

Operating Margin (%) 3.3 4.0 2.1 2.1 -7.5

Average Operating Margin (%) -6.4 -1.2 0.6 -0.3 -5.5









Gifts (%) 2.0 0.7 1.2 3.6 1.4




U.S. PUBLIC FINANCE



Aa

Year 2009 2010 2011 2012 2013

Sample Size 34 34 34 34 34











Total Expenses ($000) $116,178 $122,104 $137,051 $133,863 $130,664

Change in Expenses (%) 0.8 1.4 4.1 2.7 2.5



Capital Ratios:




















Operating Ratios:





U.S. PUBLIC FINANCE



Aa

Year 2009 2010 2011 2012 2013

Sample Size 34 34 34 34 34







Gifts (%) 12.4 9.6 12.0 17.1 20.7




U.S. PUBLIC FINANCE



A

Year 2009 2010 2011 2012 2013

Sample Size 40 40 40 40 40











Total Expenses ($000) $93,158 $92,812 $100,562 $105,028 $106,911

Change in Expenses (%) 1.7 -0.5 4.3 4.5 3.2



Capital Ratios:
















Free Expendable Financial Resources-to-Operations (x) -0.01 0.14 0.27 0.18 0.29




Operating Ratios:

Operating Margin (%) 1.3 1.0 1.4 -0.9 -0.9

Average Operating Margin (%) 1.7 1.5 1.1 1.8 -1.0



U.S. PUBLIC FINANCE



A

Year 2009 2010 2011 2012 2013

Sample Size 40 40 40 40 40




Return on Net Assets (%) -9.5 7.6 13.3 -3.0 10.7

Return on Financial Resources (%) -11.4 8.6 12.6 -3.8 12.5


Gifts (%) 18.6 18.1 20.2 16.5 17.0




U.S. PUBLIC FINANCE



Baa

Year 2009 2010 2011 2012 2013











Change in Operating Revenue (%) 2.7 2.3 1.7 2.4 -3.9

Total Expenses ($000) $94,132 $96,965 $97,106 $96,429 $91,181

Change in Expenses (%) 1.0 2.8 5.4 -0.3 -5.4



Capital Ratios:
















Free Expendable Financial Resources-to-Operations (x) -0.15 -0.09 -0.04 -0.08 -0.01




Operating Ratios:

Operating Margin (%) -1.0 2.4 1.1 2.0 2.4

Average Operating Margin (%) 0.0 -0.1 0.5 1.2 0.8



U.S. PUBLIC FINANCE



Baa

Year 2009 2010 2011 2012 2013





Return on Net Assets (%) 1.6 2.2 4.6 4.2 6.4

Return on Financial Resources (%) -7.1 -3.1 13.2 7.0 14.7


Gifts (%) 12.6 10.5 11.3 14.3 14.9




U.S. PUBLIC FINANCE



Appendix IV

Not-for-Profit Medians by Sub-sector, FY 2009-2013

Cultural

Year 2009 2010 2011 2012 2013

Sample Size 36 36 36 36 36










Change in Operating Revenue (%) -0.9 -0.6 2.2 6.0 2.3

Total Expenses ($000) $72,683 $71,371 $75,555 $84,328 $86,983

Change in Expenses (%) 1.9 -1.2 4.6 4.5 3.5



Capital Ratios:




















U.S. PUBLIC FINANCE



Not-for-Profit Medians by Sub-sector, FY 2009-2013

Cultural

Year 2009 2010 2011 2012 2013

Sample Size 36 36 36 36 36

Operating Ratios:

Operating Margin (%) 1.6 0.8 -1.0 -2.7 -1.7

Average Operating Margin (%) 3.6 2.2 0.2 0.1 -1.8






Return on Net Assets (%) -15.5 5.6 8.6 -2.3 9.3

Return on Financial Resources (%) -19.7 5.7 11.9 -4.2 12.4


Gifts (%) 22.8 22.6 22.5 22.6 24.0


Admissions and Memberships (%) 15.4 15.8 17.1 17.8 16.9



U.S. PUBLIC FINANCE



Philanthropic

Year 2009 2010 2011 2012 2013




Unrestricted Financial Resources ($000) $497,660 $518,656 $515,585 $427,790 $1,011,903

Expendable Financial Resources ($000) $860,715 $908,283 $1,034,706 $966,176 $1,011,903

Total Financial Resources ($000) $860,715 $908,283 $1,034,706 $966,176 $1,139,645

Total Cash & Investments ($000) $824,349 $873,382 $969,615 $913,882 $1,031,660




Change in Operating Revenue (%) -12.1 -3.6 -3.8 1.3 4.1

Total Expenses ($000) $116,963 $101,547 $115,176 $109,811 $114,998

Change in Expenses (%) 1.7 -13.2 4.6 -2.6 12.0



Capital Ratios:




















Operating Ratios:

Operating Margin (%) -20.2 1.9 5.0 0.9 -4.9

Average Operating Margin (%) -9.8 -6.0 -4.4 4.3 -4.1


Operating Cash Flow Margin (%) -18.4 2.5 6.5 3.1 -0.4

U.S. PUBLIC FINANCE



Philanthropic

Year 2009 2010 2011 2012 2013


Debt Service Coverage (x) -7.57 1.10 4.95 1.26 -0.11

Average Debt Service Coverage (x) -0.42 -0.48 0.08 1.94 0.38

Average MADS Coverage (x) -0.56 -0.39 0.05 1.49 0.38


Return on Financial Resources (%) 10.8 7.8 11.1 5.9 12.5


Gifts (%) 66.4 65.5 68.4 69.2 80.7




U.S. PUBLIC FINANCE



Research

Year 2009 2010 2011 2012 2013

Sample Size 22 22 22 22 22










Change in Operating Revenue (%) 4.6 3.4 5.6 -1.2 -2.5

Total Expenses ($000) $141,482 $142,412 $149,245 $148,660 $141,617

Change in Expenses (%) 1.3 4.8 4.7 2.9 -1.8



Capital Ratios:




















Operating Ratios:

Operating Margin (%) 2.0 2.3 1.2 -0.4 -0.5




U.S. PUBLIC FINANCE



Research

Year 2009 2010 2011 2012 2013

Sample Size 22 22 22 22 22







Gifts (%) 10.5 7.6 9.7 12.1 10.8


Grants and Contracts (%) 52.7 59.6 58.1 57.8 55.0



U.S. PUBLIC FINANCE



Service / Advocacy

Year 2009 2010 2011 2012 2013

Sample Size 26 26 26 26 26











Total Expenses ($000) $147,172 $148,676 $145,660 $152,198 $157,710

Change in Expenses (%) -0.5 -0.5 2.6 3.1 2.8



Capital Ratios:




















Operating Ratios:





U.S. PUBLIC FINANCE



Service / Advocacy

Year 2009 2010 2011 2012 2013

Sample Size 26 26 26 26 26




Return on Net Assets (%) 2.4 7.5 6.9 3.9 10.6



Gifts (%) 5.1 5.5 6.6 7.6 6.5




U.S. PUBLIC FINANCE



Appendix V

Rated Institutions by Sub-sector (Ratings as of September 2, 2014)

Rating State Institution Sub-sector

Aaa CA J. Paul Getty Trust Cultural

Aaa NY Metropolitan Museum of Art Cultural

Aaa DC Smithsonian Institution Cultural

Aa1 CA The Broad Foundations Cultural

Aa2 CA Academy of Motion Picture Arts & Sciences Cultural

Aa2 MA Museum of Fine Arts Cultural

Aa2 NY Museum of Modern Art Cultural

Aa2 DC National Geographic Society Cultural

Aa3 NY American Museum of Natural History Cultural

Aa3 IN Children's Museum of Indianapolis Cultural

Aa3 DC National Public Radio Cultural

Aa3 MO Nelson Gallery Foundation Cultural

Aa3 IL Poetry Foundation Cultural

Aa3 MO St. Louis Art Museum Cultural

Aa3 MA The Sterling And Francine Clark Art Institute Cultural

Aa3 NY Wildlife Conservation Society Cultural

A1 IL Art Institute of Chicago Cultural

A1 NY Carnegie Hall Cultural

A1 IN Indianapolis Museum of Art Cultural

A1 IL Lyric Opera of Chicago Cultural

A1 IL Shedd Aquarium Society Cultural

A2 MN American Public Media Group Cultural

A2 CA California Academy of Sciences Cultural

A2 PA Carnegie Museums of Pittsburgh Cultural

A2 IL Field Museum of Natural History Cultural

A2 MA Isabella Stewart Gardner Museum Cultural

A2 NY Lincoln Center For The Performing Arts Cultural

A2 CA Los Angeles County Museum of Natural History Foundation Cultural

A2 NY New York Public Library Cultural

A2 GA Woodruff Arts Center Cultural

A3 IL Chicago Symphony Orchestra Cultural

A3 IN Indiana Historical Society Cultural

A3 CA Los Angeles County Museum of Art Cultural

A3 NY Metropolitan Opera Association Cultural

A3 CA Performing Arts Center of Los Angeles County Cultural

Baa1 NY Alvin Ailey Dance Foundation Cultural

Baa1 PA Franklin Institute Cultural

Aaa DC American Legacy Foundation Philanthropic

Aaa NY Andrew W. Mellon Foundation Philanthropic

U.S. PUBLIC FINANCE





Aaa NY Doris Duke Charitable Foundation Philanthropic

Aaa MO Hall Family Foundation Philanthropic

Aa1 NY UJA-Federation of New York Philanthropic

Aa3 MA Combined Jewish Philanthropies of Greater Boston Philanthropic

A1 IL Jewish Federation of Metropolitan Chicago Philanthropic

A1 CA Walt And Lilly Disney Foundation Philanthropic

A2 MN Blandin Foundation Philanthropic

Aaa MD Howard Hughes Medical Institute Research

Aaa NJ Institute For Advanced Study at Princeton Research

Aa1 DC Carnegie Institution of Washington Research

Aa1 NY Rockefeller University Research

Aa1 TN St. Jude Children's Research Hospital Research

Aa1 MA Whitehead Institute Research

Aa2 DC Carnegie Endowment For International Peace Research

Aa2 DC Henry J. Kaiser Family Foundation Research

Aa3 DC Brookings Institution Research

Aa3 NY Cold Spring Harbor Laboratory Research

Aa3 MA Draper Laboratory Research

Aa3 DC National Academy of Sciences Research

Aa3 CA Scripps Research Institute Research

A1 MA Broad Institute Research

A1 ME Jackson Laboratory Research

A1 OK Oklahoma Medical Research Foundation Research

A1 CA Salk Institute For Biological Studies Research

A2 CO University Corporation For Atmospheric Research Research

A3 WA Fred Hutchinson Cancer Research Center Research

A3 CA SRI International Research

Baa1 CA Sanford Burnham Medical Research Institute Research

Baa1 PA Wistar Institute Research

Baa2 MO MRIGlobal Research

Aa2 IN National Collegiate Athletic Association Service / Advocacy

Aa2 VA Nature Conservancy Service / Advocacy

Aa2 PA Western Pennsylvania School For Blind Children Service / Advocacy

Aa3 DC AARP Service / Advocacy

Aa3 DC American Association for the Advancement of Science Service / Advocacy

Aa3 MD American Center For Physics Service / Advocacy

Aa3 PA National Board of Medical Examiners Service / Advocacy

Aa3 NY Salvation Army (Eastern Territory) Service / Advocacy

Aa3 DC World Wildlife Fund Service / Advocacy

A1 MN Amherst H. Wilder Foundation Service / Advocacy

U.S. PUBLIC FINANCE





A1 CO Auraria Higher Education Center Service / Advocacy

A1 IL Catholic Bishop of Chicago Service / Advocacy

A1 NY Consumers Union of United States, Inc. Service / Advocacy

A1 NY Institute of International Education Service / Advocacy

A1 CA Salvation Army (Western Territory) Service / Advocacy

A1 TX Texas Medical Center Service / Advocacy

A1 MD United States Pharmacopeial Convention Service / Advocacy

A2 IN Archdiocese of Indianapolis Service / Advocacy

A2 FL NCCI Holdings, Inc. Service / Advocacy

A2 DC Service Employees International Union Service / Advocacy

A2 VA United Negro College Fund Service / Advocacy

A3 CA Diocese of Oakland Service / Advocacy

A3 CO National Conference of State Legislatures Service / Advocacy

Baa1 TX Diocese of Austin Service / Advocacy

Baa1 NY YMCA of Greater New York Service / Advocacy

Baa2 PA Philadelphia Corporation For Aging Service / Advocacy

Baa3 TX YMCA Greater Houston Area Service / Advocacy

U.S. PUBLIC FINANCE



Appendix VI

Rated Institutions by Rating (Ratings as of September 2, 2014)


Aaa DC American Legacy Foundation Philanthropic

Aaa NY Andrew W. Mellon Foundation Philanthropic

Aaa NY Doris Duke Charitable Foundation Philanthropic

Aaa MO Hall Family Foundation Philanthropic

Aaa MD Howard Hughes Medical Institute Research

Aaa NJ Institute For Advanced Study at Princeton Research

Aaa CA J. Paul Getty Trust Cultural

Aaa NY Metropolitan Museum of Art Cultural

Aaa DC Smithsonian Institution Cultural

Aa1 DC Carnegie Institution of Washington Research

Aa1 NY Rockefeller University Research

Aa1 TN St. Jude Children's Research Hospital Research

Aa1 CA The Broad Foundations Cultural

Aa1 NY UJA-Federation of New York Philanthropic

Aa1 MA Whitehead Institute Research

Aa2 CA Academy of Motion Picture Arts & Sciences Cultural

Aa2 DC Carnegie Endowment For International Peace Research

Aa2 DC Henry J. Kaiser Family Foundation Research

Aa2 MA Museum of Fine Arts Cultural

Aa2 NY Museum of Modern Art Cultural

Aa2 IN National Collegiate Athletic Association Service / Advocacy

Aa2 DC National Geographic Society Cultural

Aa2 VA Nature Conservancy Service / Advocacy

Aa2 PA Western Pennsylvania School For Blind Children Service / Advocacy

Aa3 DC AARP Service / Advocacy

Aa3 DC American Association for the Advancement of Science Service / Advocacy

Aa3 MD American Center For Physics Service / Advocacy

Aa3 NY American Museum of Natural History Cultural

Aa3 DC Brookings Institution Research

Aa3 IN Children's Museum of Indianapolis Cultural

Aa3 NY Cold Spring Harbor Laboratory Research

Aa3 MA Combined Jewish Philanthropies of Greater Boston Philanthropic

Aa3 MA Draper Laboratory Research

Aa3 DC National Academy of Sciences Research

Aa3 PA National Board of Medical Examiners Service / Advocacy

Aa3 DC National Public Radio Cultural

Aa3 MO Nelson Gallery Foundation Cultural

Aa3 IL Poetry Foundation Cultural

Aa3 NY Salvation Army (Eastern Territory) Service / Advocacy

U.S. PUBLIC FINANCE





Aa3 CA Scripps Research Institute Research

Aa3 MO St. Louis Art Museum Cultural

Aa3 MA The Sterling And Francine Clark Art Institute Cultural

Aa3 NY Wildlife Conservation Society Cultural

Aa3 DC World Wildlife Fund Service / Advocacy

A1 MN Amherst H. Wilder Foundation Service / Advocacy

A1 IL Art Institute of Chicago Cultural

A1 CO Auraria Higher Education Center Service / Advocacy

A1 MA Broad Institute Research

A1 NY Carnegie Hall Cultural

A1 IL Catholic Bishop of Chicago Service / Advocacy

A1 NY Consumers Union of United States, Inc. Service / Advocacy

A1 IN Indianapolis Museum of Art Cultural

A1 NY Institute of International Education Service / Advocacy

A1 ME Jackson Laboratory Research

A1 IL Jewish Federation of Metropolitan Chicago Philanthropic

A1 IL Lyric Opera of Chicago Cultural

A1 OK Oklahoma Medical Research Foundation Research

A1 CA Salk Institute For Biological Studies Research

A1 CA Salvation Army (Western Territory) Service / Advocacy

A1 IL Shedd Aquarium Society Cultural

A1 TX Texas Medical Center Service / Advocacy

A1 MD United States Pharmacopeial Convention Service / Advocacy

A1 CA Walt And Lilly Disney Foundation Philanthropic

A2 MN American Public Media Group Cultural

A2 IN Archdiocese of Indianapolis Service / Advocacy

A2 MN Blandin Foundation Philanthropic

A2 CA California Academy of Sciences Cultural

A2 PA Carnegie Museums of Pittsburgh Cultural

A2 IL Field Museum of Natural History Cultural

A2 MA Isabella Stewart Gardner Museum Cultural

A2 NY Lincoln Center For The Performing Arts Cultural

A2 CA Los Angeles County Museum of Natural History Foundation Cultural

A2 FL NCCI Holdings, Inc. Service / Advocacy

A2 NY New York Public Library Cultural

A2 DC Service Employees International Union Service / Advocacy

A2 VA United Negro College Fund Service / Advocacy

A2 CO University Corporation For Atmospheric Research Research

A2 GA Woodruff Arts Center Cultural

A3 IL Chicago Symphony Orchestra Cultural

U.S. PUBLIC FINANCE





A3 CA Diocese of Oakland Service / Advocacy

A3 WA Fred Hutchinson Cancer Research Center Research

A3 IN Indiana Historical Society Cultural

A3 CA Los Angeles County Museum of Art Cultural

A3 NY Metropolitan Opera Association Cultural

A3 CO National Conference of State Legislatures Service / Advocacy

A3 CA Performing Arts Center of Los Angeles County Cultural

A3 CA SRI International Research

Baa1 NY Alvin Ailey Dance Foundation Cultural

Baa1 TX Diocese of Austin Service / Advocacy

Baa1 PA Franklin Institute Cultural

Baa1 CA Sanford Burnham Medical Research Institute Research

Baa1 PA Wistar Institute Research

Baa1 NY YMCA of Greater New York Service / Advocacy

Baa2 MO MRIGlobal Research

Baa2 PA Philadelphia Corporation For Aging Service / Advocacy

Baa3 TX YMCA Greater Houston Area Service / Advocacy

U.S. PUBLIC FINANCE



Appendix VII

Moody's Not-for-Profit Ratio Definitions

Age of plant (number of years)

Provides a rough indicator of institutional deferred maintenance as well as the operating efficiency of the existing plant facilities.

Accumulated depreciation divided by depreciation expense

Annual Days Cash on Hand (X)

Measures the number of days an institution is able to cover its cash operating expenses from Annual Liquidity

Annual liquidity times 365 divided by total expenses less depreciation less additional, unusually large non-cash expenses

Annual Liquidity ($)

Measures the amount of unrestricted cash and investments from operating and endowment/long-term accounts that can be liquidated and spent within one year.

Unrestricted operating funds available within one month plus unrestricted operating funds available within one year plus lesser of endowment funds available within one month and endowment funds available within one year or unrestricted board designated net assets and unrestricted working capital (or other unrestricted funds commingled with the endowment)

Annual Liquidity to Demand Debt (%)

Measures an institution’s ability to repay its demand debt from its Annual Liquidity

Annual liquidity divided by demand debt

Average MADS coverage (x)

Measures margin of protection for maximum annual debt service payments, averaged over three years.

Three year average of annual operating surplus (deficit) plus interest and depreciation expenses, divided by maximum principal and interest payments

Average operating margin (%)

Averages operating margin over three years for a longer-term view. Three year average of annual operating surplus divided by three year average of total revenues

Capital Spending Ratio (%)

Measures the annual investment in capital facilities compared to annual depreciation expense.

Purchases of property, plant and equipment (from statement of cash flows) divided by depreciation

Debt service to operations (%)

Measures burden of actual debt service payments relative to overall operating budget.

Actual annual debt service divided by total operating expenses

Direct debt ($)

Measures direct obligations of institution. Institutions obligations (e.g. bonds, notes, commercial paper, capital lease, bank loans, and draws upon lines of credit)

Direct debt service coverage (x)

Measures actual margin of protection for annual debt service payments from annual operations.

Annual operating surplus (deficit) plus interest and depreciation expenses, divided by actual principal and interest payments

Expendable financial resources ($)

Measure of financial resources that are ultimately expendable. Total unrestricted and temporarily restricted net assets less net investment in plant

Expendable financial resources-to-direct debt (x)

Measures coverage of direct debt by financial resources that are ultimately expendable.

Expendable financial resources divided by direct debt

Free expendable financial resources-to-operations (x)

Measures coverage of annual operating expenses by expendable resources remaining after pro-forma payment of all direct debt.

Expendable financial resources less direct debt, divided by total operating expenses

Gifts and pledges (% of total revenue)

Measures reliance on gift revenue as a percent of total revenue. Gift revenue divided by total operating revenues

U.S. PUBLIC FINANCE




Grants and contracts (% of total revenue)

Measures reliance on grants and contracts as a percent of total revenue. Grants and contracts revenue divided by total operating revenues

Investment Income (% of total revenue)

Measures reliance on investment income (endowment spending) as a percent of total revenue.

Investment income revenue divided by total operating revenues

MADS to operations (%)

Measures maximum annual debt service burden on the annual operating budget.

Maximum annual debt service divided by total operating expenses

Monthly Days Cash on Hand (X)

Measures the number of days an institution is able to operate (cover its cash operating expenses) from Monthly Liquidity

Monthly liquidity times 365 divided by total expenses less depreciation and additional, unusually large non-cash expenses

Monthly Liquidity ($)

Measures the amount of unrestricted cash and investments from operating and endowment/long-term accounts that can be liquidated and spent within 30 days.

Unrestricted operating funds available within one month plus lesser of endowment funds available within one month or unrestricted board designated net assets and unrestricted working capital (or other unrestricted funds commingled with the endowment)

Monthly Liquidity to Demand Debt (%)

Measures an institution’s ability to repay its demand debt from its Monthly Liquidity Monthly liquidity divided by demand debt

Operating cash flow margin (%)

Indicates the excess cash flow margin (or deficit) by which annual cash flow cover operating expenses.

Adjusted total unrestricted revenues (adjustments include limiting investment income to 5% of average of previous three years cash and investments and subtracting net assets released for construction and acquisition of fixed assets), less total unrestricted operating expenses, plus depreciation plus interest plus other large non-cash expenses, divided by adjusted total unrestricted revenues

Operating margin (%)

Indicates the excess margin (or deficit) by which annual revenues cover operating expenses.

Adjusted total unrestricted revenues (adjustments include limiting investment income to 5% of average of previous three years cash and investments and subtracting net assets released for construction and acquisition of fixed assets), less total unrestricted operating expenses, divided by adjusted total unrestricted revenues

Return on financial resources (%)

Indicates the direction and degree to which an institution has improved its financial resources (excluding plant).

Increase (decrease) in total financial resources divided by average total financial resources (the sum of beginning and ending total financial resources divided by two)

Return on net assets (%)

Indicates direction and degree to which an institution has improved its total resource base.

Increase (decrease) in total net assets, divided by average total net assets (the sum of beginning and ending net assets divided by two)

Total cash & investments-to-direct debt (x)

Measures coverage of direct debt by assets that generate investment return. Total cash and investments divided by direct debt

Total cash & investments ($)

Measure base of assets that generate investment return. Total cash and investments

Total expenses ($)

Measures size of operating budget. Total operating expenses

Total financial resources ($)

Measures total financial wealth of institution. Total net assets less net investment in plant

U.S. PUBLIC FINANCE




Total financial resources-to-direct debt (x)

Measures coverage of direct debt by total financial resources including permanent endowments.

Total financial resources divided by direct debt

Total gift revenue ($)

Measures philanthropic support of institution committed to annual operations, capital and endowment.

Total gift revenue (unrestricted, temporarily restricted, and permanently restricted)

Total revenues ($)

Measures overall size of operating budget. Total adjusted operating revenue as stated in audit, plus 5% of average three year cash and investments level, less net assets released for capital, less realized and unrealized gains or losses. Individual colleges may have other adjustments made to operating revenues based on additional information not included in audit

Unrestricted financial resources ($)

Amount of most liquid financial resources. Total unrestricted net assets less net investment in plant

Unrestricted financial resources-to-direct debt (x)

Measures coverage of direct debt by the most liquid financial resources. Unrestricted financial resources divided by direct debt

Unrestricted financial resources-to-operations (x)

Measures coverage of annual operations by the most liquid financial resources. Unrestricted financial resources divided by total operating expenses

Variable Rate Exposure (%)

Measures the portion of direct and indirect debt issued in variable rate mode. Sum of par amount of debt outstanding under all series of bonds and other debt issued as variable rate securities, divided by total comprehensive debt. (variable rate bonds synthetically swapped to a fixed rate are included in variable rate debt)

U.S. PUBLIC FINANCE



Moody’s Related Research

Industry Outlook:

» 2014 Outlook – US Higher Education, Not-for-Profits and Independent Schools, November 2013 (160659)

Rating Methodology:

» Not-for-Profit Organizations (other than Healthcare and Education), March 2014 (164670)

Special Comment:

» Independent Research Institutes: Challenging Environment Drives Multiple Strategies, September 2014 (175119)

Excel Supplement:

» Not-for-Profit Organizations Confront Ongoing Revenue Pressure in Fiscal 2013 Medians (Excel Supplement, September 2014 (175467)

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.



http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_164670





http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=175466

U.S. PUBLIC FINANCE



Report Number: 175466

Authors Matthew Kuchtyak Susan Fitzgerald

Editor Karen Kedem

Associate Analyst Aparna Bansal

Production Associate Srinivasan Raghavan

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