Thu 29 Oct 2009
Williams College has posted its year-end audited financial statement for the year ending June 30th, 2009.
As I anticipated, there is no big news and no surprises. In the grand scheme of things, Williams is in good shape financially relative to most peer colleges and universities. In keeping with Williams tradition, there is no accompanying management discussion, although the notes contain significant detail. For the first time, there is an identifiable line item that matches the endowment value Williams reports to the NACUBO endowment survey. As in recent years, there is no clearly identifiable number for endowment spending that matches any other number Williams provides. Like many colleges, Williams is allocating endowment spending to a mix of operating and capital expenses; I simply cannot tease a number out of this report. (Correction: Endowment spending for the year was stated as 4.5%).
Endowment declined from $1.808 billion to $1.409 billion, as previously reported. This is a decline of 22% which is right on par with what we are seeing from most liberal arts colleges.
Debt is $255 million or 18% of endowment. This is at the lower end of debt loads being carried by colleges and universities. A good bit of the debt is variable rate demand bond debt which worked out OK this past year with an average debt service in the 1% range. It’s easy to see why Morty had such a tone of concern last October when the credit markets seized. The interest rate on his variable rate debt shot up as high as 7% at one point during the year. Had they failed to remarket the bonds on a given day, the college would have had to tap a line of credit and repurchase the bonds.
Cash call commitments are $240 million or 17% of endowment. This is at the low end of what we are seeing. Middlebury is 21%. Bowdoin 32%. Amherst 38%. Haverford 41%. Williams should be in good shape from a liquidity standpoint.
Student revenues fell by $2 million on the back of a $7 million increase in aid discounting offset by $5 million bump in sticker price. Net per student revenue is now somewhere in the $27,000 range.
$900 million of the $1408 million endowment is in LEVEL III investments, i.e. those that have no direct market price. These include hedge funds, private equity, real estate funds, etc. This may be on the high side. I need to see some more colleges report. The actual allocation among equity, bonds, private equity, etc. is virtually unchanged from last year and is on the conservative side compared to the Yales and Amhersts. Looks OK.
The Williams Club is valued at the appraisal: $21 million. The only other specific real estate holdings for investment noted in the report are Pine Cobble houses for sale ($1.5 million). Personally, I think it would be nearly impossible to make the case the College should keep this property once the real estate market recovers enough to sell it at a non-distressed price.
Total operating expenses were $179.4 million, up $3 million or so from the prior year. Average per student spending was $83,000. With an average per student cost of $27,000, Williams is selling at a steep discount and is a very attractive deal to the consumer.
The one financial indicator that I can’t determine is the endowment spending rate. From previous information, I think it should be somewhere between 5.5% and 6.0% with the budget cuts for the new year, which is OK but on the high side. This appears to be the driving factor behind the signficant cost cutting to come. I think there will be some pressure to boost net per student revenues. Correction: Endowment spending was stated as 4.3% for the prior year and 4.5% for the year covered by this annual report. Those are very good numbers. The estimated spend rate for the new year is 5.6%. That’s a little high and above Williams’ targets, but not the dire levels that some colleges are seeing.
28 Responses to “Williams Financial Statement (June 30, 2009)”
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