2013
CONTINUING DISCLOSURE APPLICABILITY
The following continuing disclosure information filed in December 2013 is in compliance with the provisions of Continuing Disclosure Agreements, as amended, into which Vanderbilt University (“Vanderbilt” or “Borrower”) has entered in connection with certain debt financings, including those issued through The Health and Educational Facilities Board of The Metropolitan Government of Nashville and Davidson County, Tennessee. This information is filed in conjunction with Vanderbilt’s most recent audited annual financial report available at http://finance.vanderbilt.edu/report/
Through US Bank (“Trustee”), as successor to Wachovia Bank, National Association, Vanderbilt will file the audited consolidated financial statements of the university (“the University Audit”) with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (“EMMA”). The University Audit includes the operations of The Vanderbilt University Hospitals and Clinics. Through the Trustee, Vanderbilt also will file with EMMA other annual operating data set forth in the Continuing Disclosure Agreements.
Selected disclosure items may not apply universally to all Continuing Disclosure Agreements for all of the applicable bond issues, so users should be informed that the following comprehensive disclosure is not necessarily precedent setting for subsequent years.
ACADEMIC ENTERPRISE Academic Units
Vanderbilt's academic enterprise consists of 10 schools and colleges offering undergraduate, professional, and graduate degrees. All Doctor of Philosophy (Ph.D.) degrees, which are offered in more than 40 separate graduate programs, are conferred by the Graduate School. More than 93% of Vanderbilt’s students are considered full-time students. The following table sets forth the fall 2013 student enrollment headcount distribution amongst Vanderbilt’s 10 schools and colleges.
Undergraduate Graduate and Total
Students Professional Students (1) Students
College of Arts and Science 4,197 - 4,197
Blair School of Music 193 - 193
School of Engineering 1,329 21 1,350
Peabody College of Education
and Human Development 1,085 695 1,780
Graduate School - 2,249 2,249
Divinity School - 241 241
Law School - 619 619
Owen Graduate School of Management - 589 589
School of Medicine - 665 665
School of Nursing - 881 881
Students in unclassified studies 31 - 31
Less: Students in multiple schools - (38) (38)
Total enrollment headcount 6,835 5,922 12,757
________________________________ (1)
All research Masters Degrees are administered through the Graduate School. Faculty and Staff
As of November 2013, Vanderbilt’s administrative, teaching, and research faculty (including members of the schools of medicine and nursing) was composed of 3,742 full-time faculty members consisting of 808 professors, 692 associate professors, 1,501 assistant professors, 592 instructors, 137 lecturers, and 12 faculty with other academic titles. Faculty data, including administrative, teaching, and research faculty, is listed below.
Fall 2013 Fall 2012 Fall 2011 Fall 2010 Fall 2009
Number of full-time faculty 3,742 3,672 3,551 3,448 3,309
Number of part-time faculty 406 430 439 396 424
Number of FTE faculty 3,877 3,815 3,696 3,580 3,450
Number of FTE tenured faculty 907 932 910 886 909
Tenure rate (1) 74% 73% 72% 72% 72%
________________________________ (1)
Represents the number of tenured faculty members as a percentage of the combined total number of tenured faculty members and faculty members who will be eligible for tenure upon satisfying the requirements for tenure.
In addition to faculty, Vanderbilt employs 20,160 full-time and 764 part-time employees in a regular status, including staff in the Hospitals and Clinics. In addition, Vanderbilt employs more than 1,000 temporary and term staff in varying capacities. Approximately 700 of Vanderbilt’s staff in a regular status are service and maintenance employees who are represented by Local No. 386 of the Laborers’ International Union of North America, AFL-CIO (the "Union"). Vanderbilt and the Union negotiated a new collective bargaining agreement (“CBA”) effective for two years commencing on November 15, 2012, and expiring on November 15, 2014. Vanderbilt is functioning under an Affirmative Action Plan and is an Equal Opportunity Employer.
Student Enrollment
Consistent with Vanderbilt’s admission policy, enrollments have remained relatively stable during the past several years in Vanderbilt’s 10 schools and colleges. All schools and colleges continue to be highly selective in their acceptances, as applicants outnumber the places available for each school and college.
Vanderbilt draws its student population from the entire United States and many foreign countries. About 65% of the undergraduate students are from outside the southern region of the United States and 88% are from outside the State of Tennessee. The following table provides additional enrollment data for undergraduate freshmen.
Fall 2013 Fall 2012 Fall 2011 Fall 2010 Fall 2009
Undergraduate Freshmen
Number of applications received 31,099 28,348 24,837 21,811 19,353
Number of acceptances 3,963 4,034 4,078 3,914 3,899
Number of students enrolled 1,613 1,608 1,601 1,600 1,599
Percentage accepted (selectivity) 13% 14% 16% 18% 20%
Percentage enrolled (yield) 41% 40% 39% 41% 41%
The following table provides total enrollment data for Vanderbilt.
Fall 2013 Fall 2012 Fall 2011 Fall 2010 Fall 2009
Enrollment Distribution
Undergraduate headcount 6,835 6,796 6,817 6,879 6,794
Graduate and professional headcount 5,922 5,914 6,019 5,835 5,712
Total enrollment headcount 12,757 12,710 12,836 12,714 12,506
Undergraduate FTE 6,788 6,753 6,770 6,847 6,757
Graduate and professional FTE 5,441 5,418 5,459 5,309 5,207
Total enrollment FTE 12,229 12,171 12,229 12,156 11,964
Tuition and Fees
Tuition rates for Vanderbilt’s undergraduate colleges have increased each of the last five academic years. Tuition rates for professional and advanced degree programs differ among Vanderbilt’s schools and colleges. Undergraduate tuition rates and fees for each of the last five academic years were as follows:
2013-2014 2012-2013 2011-2012 2010-2011 2009-2010
Undergraduate tuition $ 41,928 $ 41,088 $ 40,320 $ 38,952 $ 37,632
Undergraduate activity and
Recreation fees $ 1,050 $ 1,030 $ 1,012 $ 978 $ 946
Average undergraduate room and board charges for each of the last five academic years were as follows:
2013-2014 2012-2013 2011-2012 2010-2011 2009-2010 Average room and board for
Student Financial Aid
Vanderbilt provides financial aid to eligible students based upon documented financial need and/or merit to help cover their cost of attendance, including tuition, education fees, room, board, books and course materials, plus travel and acceptable miscellaneous expenses. This financial assistance is funded from/through institutional resources, gifts, endowment income, and various externally sponsored/funded (federal, state, third party, etc.) aid programs. Beginning in the fall of 2009, need-based student financial aid packages awarded to eligible incoming and returning undergraduate students have not included any need-based loans. The amount of need-based loans that students would have been offered prior to the fall of 2009 to meet their full demonstrated financial need is now replaced annually with Vanderbilt-funded and/or other sources of grant (gift) assistance while continuing to meet their full demonstrated need.
Components of financial aid during each of the last five fiscal years were as follows:
Fiscal Year Ended June 30,
2013 2012 2011 2010 2009
(in thousands) Financial Aid
Institutional scholarships $ 178,039 $ 165,215 $ 166,460 $ 152,073 $ 124,913
Endowed scholarships 42,272 44,270 34,465 31,699 36,101
External financial aid 18,858 18,671 19,836 19,837 19,116
Total financial aid $ 239,169 $ 228,155 $ 220,761 $ 203,609 $ 180,130 Vanderbilt also continues to offer and participate in various other student financial aid programs, including the Federal Work-Study Program, the Federal Perkins Loan Program (previously named the National Direct Student Loan Program), the Federal Nursing Loan Program, the Federal Direct Student Loan Program, and the Federal Direct PLUS Programs. (The PLUS acronym refers to a program that initially was available only as a Parent Loan for Undergraduate Students, but subsequently was expanded to also allow graduate and professional students to borrow on their own behalf). Loans for education-related expenses are also available to eligible students through other public and private lending entities and programs, and a limited amount of loan funds is also available to eligible students through programs funded and administered by Vanderbilt.
Research Activities and Programs
Sponsored research and project awards (awards represent research funding commitments that have not yet been expended by Vanderbilt), which include multiple-year grants and contracts from government sources, foundations, associations, and corporations, totaled $616 million in fiscal 2013 and $571 million in fiscal 2012. Federal and state awards grew by 5% to $477 million in fiscal 2013 from $456 million in fiscal 2012, while non-federal awards increased to $139 million in fiscal 2013, a 21% increase from $115 million in fiscal 2012. Due to governmental budgetary restraints, government and private grants and contracts revenue, predominantly for research activities and facilities and administrative (F&A) costs recovery, declined 3% from fiscal 2012 to 2013 (from $600 million to $582 million). Federal funding from the NSF, the Department of Defense, Department of Education, HHS, and other federal agencies supported 87% and 88% of sponsored research revenue at Vanderbilt in fiscal 2013 and fiscal 2012, respectively.
VANDERBILT UNIVERSITY MEDICAL CENTER Patient Care Facilities and Services
The Hospitals and Clinics are comprised of many facilities serving multiple purposes related to patient care, medical research, and educational missions. Vanderbilt has a total of 1,019 beds licensed and approved for operation and currently utilizes 72 operating rooms, primarily located in the Adult Hospital and the Children’s Hospital.
Available Beds
Licensed-Bed Category Type
Adult Medical Surgical 596
Adult Obstetric 50
Adult Clinical Research Center 14
Pediatric Medical/Surgical 129
Pediatric Neonatal Intensive Care 100
Pediatric Intensive Care 42
Psychiatric Care 88
Total Beds Licensed and Approved for Operation 1,019
Vanderbilt Medical Group and Clinical Faculty
A prerequisite for appointment as a member of Vanderbilt’s medical staff is a full-time or part-time appointment to the faculty of the School of Medicine. As of October 2013, Vanderbilt’s medical staff consisted of 1,842 practicing clinical faculty, of whom 1,452 are members of the Vanderbilt Medical Group (VMG) and regularly admit and attend to patients at the Hospitals and Clinics. Practicing clinical faculty that are not members of the VMG primarily consist of community physicians, especially in pediatrics, granted privileges to practice in Vanderbilt’s facilities. Vanderbilt estimates that approximately 80% of the combined totals of patients admitted to its Adult Hospital and Children’s Hospital during fiscal 2013 were admitted by full-time faculty members.
The following table sets forth the number of Vanderbilt’s medical staff by specialty as of October 2013. Number of
Physicians
Practicing Clinical Faculty
Anesthesiology 123 Emergency Medicine 52 Physical Medicine 8 Medicine 501 Neurology 68 Obstetrics/Gynecology 78 Ophthalmology 46 Orthopedics 57 Otolaryngology 35 Pathology 49 Pediatrics 496 Psychiatry 54 Radiation Oncology 10 Radiology 85 Surgical Science 180
Patient Origins
The geographic origins of Vanderbilt inpatient discharges by fiscal year were as follows: Fiscal Year Ended June 30,
2013 2012 2011 2010 2009
Geographic Origin of Inpatient Discharges
Primary Service Area (8 counties) 53.3% 53.1% 53.4% 53.9% 54.1%
Secondary Service Area (36 counties) 23.3 23.5 22.4 23.5 22.8
Rest of Tennessee 9.1 9.3 10.0 8.8 9.3
Kentucky (primarily western) 8.4 8.6 9.6 9.6 9.7
Alabama (primarily northern) 1.6 1.3 1.5 1.4 1.2
Other states 4.3 4.2 3.1 2.8 2.9
100.0% 100.0% 100.0% 100.0% 100.0%
Hospitals and Clinics Service Area Market Share
Vanderbilt University Medical Center has increased its brand identity and market share through investment in facilities, growth of faculty, research initiatives, and targeted marketing. Because of the comprehensive services provided at Vanderbilt and the long distances many patients travel to receive specialized care, Vanderbilt University Medical Center’s competitors for highly specialized services include both tertiary care, local hospitals (Baptist Hospital, Centennial Medical Center, and Saint Thomas Hospital), and regional academic medical centers located in states adjacent to Tennessee (such as Emory University Hospital in Atlanta, Georgia, and the University of Alabama-Birmingham Hospital). The table below identifies the hospitals that provide the most significant competition to Vanderbilt for inpatient services in its primary and secondary service area and their relative share of total admissions to hospitals in the service area for each hospital’s respective fiscal period.
Fiscal Periods Ending
2012 2011 2010 2009
Market Share
Vanderbilt 16.8% 16.4% 16.2% 16.1%
Baptist Hospital (1) 8.1 8.2 8.1 7.7
Centennial Medical Center 8.6 7.7 7.9 8.3
Saint Thomas Hospital (2) 7.5 7.6 7.6 7.5
Local tertiary care competitors (3) 24.2 23.5 23.6 23.5
All other (4) 59.0 60.1 60.2 60.4
100.0% 100.0% 100.0% 100.0%
________________________________ (1)
In 2013 Baptist Hospital was renamed Saint Thomas Midtown Hospital (2)
In 2013 Saint Thomas Hospital was renamed Saint Thomas West Hospital (3)
“Local tertiary care competitors” represents the three competitor hospitals with the largest market shares. (4)
“All other” represents outlying hospitals that serve Vanderbilt’s primary and secondary service area, each with generally less market share than Vanderbilt and the local tertiary care competitors listed above.
Source: Tennessee Department of Health, Office of Policy, Planning and Assessment, Division of Health Statistics, Annual
Hospital Summary Report(s), Report 2A. For 2012, for Riverview North and University Medical Center, their respective volumes were adjusted to reflect their direct reported JAR-H reports.
Medical Utilization
The following table shows various utilization statistics of the Hospitals and Clinics for the last five fiscal years. Fiscal Year Ended June 30,
2013 2012 2011 2010 2009 Licensed beds (1)
1,019 985 916 916 836
Hospital inpatient days (2) 307,292 285,270 282,547 272,731 265,733
Hospital discharges (2) 57,768 53,818 52,453 51,874 51,575
Average length of stay in days (2) 5.3 5.3 5.4 5.3 5.2
Average occupancy level (licensed beds) (2) 83.3% 83.6% 84.5% 83.6% 87.1%
Surgical operations (3) 52,419 50,998 47,896 45,492 39,880
Ambulatory (clinic outpatient) visits 1,833,337 1,725,901 1,586,395 1,450,196 1,266,255
Emergency visits 119,225 114,051 109,987 108,398 102,631
________________________________ (1)
Excludes nursery bassinets. (2)
Includes nursery and psychiatric hospital; excludes observation patients. (3)
Excludes surgical operations performed by Vanderbilt-employed physicians at separate surgery centers that are partially owned by a Vanderbilt University Medical Center subsidiary.
Hospitals and Clinics Payor Mix
Payments are made to the Hospitals and Clinics on behalf of most of its patients by a number of third parties, including Blue Cross Blue Shield and other private insurers, the federal government through Medicare, and the federal and state governments through Medicaid. The majority of Medicaid revenues are provided through TennCare, the State of Tennessee managed care plan operating under a waiver from the federal government. The remaining Medicaid revenues are for Medicaid patients who live outside of Tennessee. Blue Cross, one of Vanderbilt’s largest payors, represented 23.9% of total gross patient service revenue for the fiscal year ended June 30, 2013. The revenues attributable to Blue Cross are represented in the managed care category in the following table, which sets forth the sources of gross patient service revenue for the Hospitals and Clinics during each of the last five fiscal years.
Fiscal Year Ended June 30,
2013 2012 2011 2010 2009 Payor Mix Commercial/Managed Care(1) 45.5% 46.9% 46.7% 47.3% 47.5% Medicare/Managed Medicare 28.8 28.1 27.2 27.7 27.8 TennCare/Medicaid 19.4 18.6 20.2 19.1 19.1 Uninsured (self-pay) 6.3 6.4 5.9 5.9 5.6 100.0% 100.0% 100.0% 100.0% 100.0% ________________________________ (1)
Commercial includes commercial indemnity and other patient service programs provided under contractual arrangements.
Nursing, Paramedical, and Other Hospitals and Clinics Staff
As of the beginning of the current fiscal year, the Hospitals and Clinics employed approximately 11,310 full-time employees and 1,724 part-time employees; these employees include 4,985 nursing personnel, 1,610 technicians, 674 residents, 318 administrative and management personnel, 634 professional employees, 1,090 service employees, and 1,988 office, clerical, and support employees. Approximately 1,112 unpaid volunteers render various non-medical services to the Hospitals and Clinics and their patients. No employees of the Hospitals and Clinics are represented by a collective bargaining agreement, although some services are performed by certain unionized maintenance employees of Vanderbilt.
FINANCIAL INFORMATION Summary of Assets, Liabilities, and Net Assets
Vanderbilt’s total assets, liabilities, and net assets (unrestricted, temporarily restricted, and permanently restricted) as of the end of the following fiscal years, derived from Vanderbilt’s audited financial statements, were as follows:
As of June 30,
2013 2012 2011 2010 2009
(in thousands)
ASSETS
Cash and cash equivalents $ 845,472 $ 912,419 $ 1,129,804 $ 959,157 $ 752,397
Collateral under security lending agreements - - -
Accounts receivable, net 413,172 518,566 436,687 405,714 344,703
Prepaid expenses and other assets 85,675 82,167 78,756 90,235 80,190
Contributions receivable, net, student loans,
notes receivable, and other assets 113,884 117,743 118,779 118,679 134,500
Investments 4,141,408 3,872,014 3,664,182 3,374,127 3,328,506
Investments allocable to
noncontrolling interests (1) 186,901 201,386 199,249 77,695 -
Property, plant, and equipment, net 1,781,293 1,727,611 1,754,524 1,807,284 1,801,485
Interests in trusts held by others 38,091 39,257 39,362 36,393 33,927
Total assets $ 7,605,896 $ 7,471,163 $ 7,421,343 $ 6,869,284 $ 6,475,708 LIABILITIES
Accounts payable and accrued liabilities $ 226,643 $ 228,422 $ 236,428 $ 255,100 $ 236,723 Accrued compensation and withholdings 235,169 245,859 225,360 225,049 218,711 Deferred revenue, actuarial liabilities,
and government advances for student loans 256,563 280,653 290,617 277,740 259,403
Commercial paper 214,011 264,075 264,862 301,248 148,904
Long-term debt and capital leases 1,127,458 1,117,029 1,178,531 1,206,134 1,380,317 Fair value of interest rate exchange
agreements, net 206,733 315,577 135,026 230,776 154,091
Total liabilities $ 2,266,577 $ 2,451,615 $ 2,330,824 $ 2,496,047 $ 2,398,149 NET ASSETS
Unrestricted net assets controlled
by Vanderbilt $ 2,784,933 $ 2,559,802 $ 2,603,397 $ 2,241,335 $ 2,120,507 Unrestricted net assets related to
non-controlling interests (1) 186,901 201,386 199,249 77,695 -
Total unrestricted net assets $ 2,971,834 $ 2,761,188 $ 2,802,646 $ 2,319,030 $ 2,120,507 Temporarily restricted net assets 1,235,066 1,191,216 1,262,271 1,108,024 1,068,304 Permanently restricted net assets 1,132,419 1,067,144 1,025,602 946,183 888,748 Total net assets $ 5,339,319 $ 5,019,548 $ 5,090,519 $ 4,373,237 $ 4,077,559 Total liabilities and net assets $ 7,605,896 $ 7,471,163 $ 7,421,343 $ 6,869,284 $ 6,475,708
________________________________ (1)
For entities in which other organizations are minority equity participants to Vanderbilt's controlling interest, the respective assets are reported separately on the consolidated statements of financial position at fair value as investments allocable to minority interests. Beginning June 30, 2010, in accordance with the provisions of Accounting Standards Update (ASU) 2010-07, Not-for-Profit Entities: Mergers and Acquisitions, the non-controlling interests are reported within unrestricted net assets on the consolidated statements of financial position. The balance representing other organizations’ minority or non-controlling interests is recorded based on contractual provisions, which represent an estimate of a settlement value. Separately, Vanderbilt’s residual controlling interests in limited partnership agreements are reported in investments. See “Endowment—Investment Allocation” herein for a summary of Vanderbilt’s endowment investment allocations, which includes limited partnership agreements.
Summary of Revenues and Expenses
Detailed below is a five-year summary of Vanderbilt’s consolidated revenues and expenses. This summary is derived from Vanderbilt’s audited financial statements. Certain reclassifications have been made to prior year amounts to conform to current presentation format. Non-operating activity from unrestricted temporarily restricted, and permanently restricted net asset categories are combined. This summary should be read in conjunction with the audited financial statements and related notes for fiscal years ended June 30.
Fiscal Year Ended June 30,
2013 2012 2011 2010 2009
(in thousands)
OPERATING REVENUES
Tuition and educational fees, net $ 265,962 $ 250,137 $ 243,859 $ 237,623 $ 230,018
Government grants and contracts 377,839 397,555 399,440 360,861 329,156
Facilities and administrative costs recovery 142,609 147,806 145,295 131,558 120,071 Private gifts, grants, and contracts 98,701 80,629 77,058 78,099 87,095
Endowment distributions 144,801 136,883 142,252 146,749 146,638
Investment income 19,675 19,831 14,666 19,341 3,427
Health care services (1) 2,394,341 2,461,830 2,426,661 2,279,232 2,051,835 Room, board, and other auxiliary services, net 112,929 109,733 103,769 99,874 93,883
Other sources 53,285 39,068 40,351 32,214 33,130
Net assets released from restrictions 15,275 21,459 19,160 11,116 12,301 Total operating revenues
and other support $ 3,625,417 $ 3,664,931 $ 3,612,511 $ 3,396,667 $ 3,107,554 OPERATING EXPENSES(2)
Instruction 489,458 480,296 464,313 430,172 415,520
Research 447,251 439,395 441,064 401,612 389,947
Health care services (1) 2,326,339 2,184,054 2,180,188 2,058,702 1,865,368
Public service 34,039 44,889 39,262 39,489 34,123
Academic support 158,581 148,871 133,076 120,666 125,875
Student services 40,921 35,586 34,919 32,493 29,881
Institutional support 51,518 41,851 46,879 51,497 73,451
Room, board, and other auxiliary services 120,993 132,458 133,879 128,446 123,021 Total operating expenses $ 3,669,100 $ 3,507,400 $ 3,473,580 $ 3,263,077 $ 3,057,186 Change in unrestricted net assets
from operating activity $ (43,683) $ 157,531 $ 138,931 $ 133,590 $ 50,368 NON-OPERATING ACTIVITY
Non-operating endowment and
investment activity, net 205,577 (85,710) 310,485 121,513 (795,502) Change in appreciation of interest
rate exchange agreements 108,844 (180,551) 72,070 (76,685) (271,693) New permanently restricted gifts
and pledges 61,294 28,580 51,314 37,215 34,111
Other restricted gift activity and
non-operating results 2,224 7,042 22,928 2,350 77,518
Increase in net assets related to
non-controlling interests (3) (14,485) 2,137 121,554 77,695 -
Total change in net assets $ 363,454 $ (70,971) $ 717,282 $ 295,678 $ (905,198)
________________________________
(1) Vanderbilt implemented the provisions of Accounting Standards Update (ASU) 2011-07, Health Care Entities: Presentation and
Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities
(ASU 2011-07), which specifies that bad debt related to patient service revenue is to be reported as a component of net patient service revenue (contra revenue) for fiscal years beginning after December 15, 2011. Vanderbilt elected to early adopt ASU 2011-07 for fiscal
Endowment
The overarching objective of Vanderbilt’s endowment is to preserve and enhance the real (inflation-adjusted) purchasing power of the fund in perpetuity, net of distributions. Assets are invested to provide a relatively predictable and stable stream of earnings to meet spending needs and attain long-term return objectives without the assumption of undue risks. The last five fiscal years have been a challenging period for Vanderbilt’s endowment performance due to the global financial crisis. Over this period, Vanderbilt’s endowment returned 2.8% on an annualized basis, largely due to a rate of return of -16.3% in fiscal 2009. Specific appropriation for expenditure of Vanderbilt’s endowment funds occurs each spring when the Board of Trust approves Vanderbilt’s operations budget for the ensuing fiscal year. For each of the last five fiscal years, endowment distributions per the spending formula were computed at 4.5% of the average of the previous three calendar year-end market values.
Endowment Market Value: The market value of Vanderbilt’s endowment as of the end of each of the last five fiscal
years was as follows:
As of June 30,
2013 2012 2011 2010 2009
(in thousands)
Endowment market value $ 3,635,343 $ 3,360,036 $ 3,375,153 $ 3,007,607 $ 2,833,614
Investment Allocation: The targeted and actual asset allocation percentages of Vanderbilt’s endowment portfolio as
of June 30, 2013, were as follows:
Target Actual
Global equities 35% 28%
Absolute return strategies (1) 25 23
Private equity (2) 15 28
Inflation hedges (3) 15 15
Fixed income 10 5
Cash and other 0 1
100% 100%
________________________________ (1)
Absolute return investments are designed to generate a consistent rate of return irrespective of the direction of the market. (2)
Due to a combination of unrealized equity losses in 2008-2009 and appreciation in the university’s non-marketable investments over the last few years, some marketable asset classes are above targeted allocation bands. As and if non-marketable asset classes realize gains through liquidity events and investor distributions, the asset classes would move toward the targeted allocations.
(3)
Inflation hedges include real estate and natural resources.
Returns and Distributions: Investment returns and distributions of Vanderbilt’s endowment assets for each of the
last five fiscal years were as follows:
Fiscal Year Ended June 30,
2013 2012 2011 2010 2009
(in thousands)
Total endowment investment return (1) $ 319,370 $ 52,852 $ 407,081 $ 243,768 $ (571,421) Endowment distributed
per spending formula (150,556) (147,895) (152,258) (149,570) (147,280)
Endowment distributed
for strategic initiatives - - - (3,503) (5,437)
Annual return net of distributions $ 168,814 $ (95,043) $ 254,823 $ 90,695 $ (724,138)
Endowment rate of return 9.3% 1.3% 13.6% 8.9% -16.3%
Total endowment distributed (2) 4.3% 4.4% 4.8% 5.3% 4.8%
________________________________ (1)
Property, Plant, and Equipment
The book value, net of accumulated depreciation, of Vanderbilt’s land and improvements, buildings, furniture, and equipment as of the end of each of the last five fiscal years were as follows:
As of June 30,
2013 2012 2011 2010 2009
(in thousands) Property, Plant, and Equipment
Land and improvements $ 131,870 $ 130,526 $ 127,845 $ 123,228 $ 115,389 Buildings and leasehold improvements 2,507,984 2,451,030 2,383,701 2,283,108 2,094,654
Furniture and equipment (1) 1,041,030 1,028,982 977,289 941,137 872,670
Construction in progress 160,893 55,264 38,161 86,948 189,529
Subtotal $ 3,841,777 $ 3,665,802 $ 3,526,996 $ 3,434,421 $ 3,272,242 Less: Accumulated depreciation 2,060,484 1,938,191 1,772,472 1,627,137 1,470,757 Total property, plant, and equipment, net (2) $ 1,781,293 $ 1,727,611 $ 1,754,524 $ 1,807,284 $ 1,801,485 ________________________________
(1)
Includes fixed equipment. In Vanderbilt’s most recent audited financial statements, fixed equipment is included in buildings and improvements.
(2)
Purchases for the library collection are expensed at the time of purchase and are not capitalized. As of June 30, 2013, the estimated replacement cost for library collections, including processing costs, totaled about $359 million.
Outstanding Debt
Vanderbilt had the following debt outstanding as of June 30, 2013:
Principal Subject to Repurchase Final
Balance Requirements Maturity
(in thousands) Commercial Paper
Tax-exempt commercial paper (1) $ 99,205 Yes – at maturity, 270 days or less Not applicable
Taxable commercial paper (1) 114,806 Yes – at maturity, 270 days or less Not applicable
Subtotal 214,011
Long-Term Debt with Repurchase Requirements
Series 2012A bonds 67,000 Yes – mandatory tender on October 1, 2015 2038 Series 2012B bonds 67,000 Yes – mandatory tender on October 1, 2017 2038
Subtotal 134,000
Long-Term Fixed-Rate Debt
Series 2012D bonds 106,230 No 2037
Series 2012E bonds 45,225 No 2019
Series 2012C bonds 25,875 No 2017
Series 2009A taxable notes 250,000 No 2019
Series 2009A&B bonds 330,000 No 2039
Series 2008A&B bonds 213,260 No 2018
Miscellaneous (2) 527 No 2014
Subtotal 971,117
Estimated Annual Debt Service Requirements for Long-Term Debt
The following table sets forth the approximate annual debt service requirements by fiscal year for Vanderbilt’s long-term debt. This table does not include debt service on commercial paper or capital leases.
Fiscal Year Ending June 30,
Long-Term Debt Principal
Interest(1) Total Debt Service Fixed Rate Subject to Repurchase(1) 2014 $ 38,465 $ - $ 47,809 $ 86,274 2015 40,240 - 45,990 86,230 2016 54,245 - 44,119 98,364 2017 44,875 - 42,023 86,898 2018 47,070 - 40,120 87,190 2019 342,300 - 38,135 380,435 2020 17,165 - 24,452 41,617 2021 3,920 5,010 23,869 32,799 2022 4,080 5,140 23,505 32,725 2023 4,265 5,280 23,108 32,653 2024 4,485 5,310 22,676 32,471 2025 4,715 5,480 22,229 32,424 2026 4,955 5,530 21,767 32,252 2027 5,210 3,000 21,359 29,569 2028 5,480 3,030 20,971 29,481 2029 5,760 3,010 20,569 29,339 2030 46,025 - 19,165 65,190 2031 6,300 5,180 17,649 29,129 2032 6,590 9,730 17,031 33,351 2033 6,825 10,010 16,400 33,235 2034 7,045 10,290 15,775 33,110 2035 67,275 - 13,800 81,075 2036 7,515 13,910 11,584 33,009 2037 7,765 14,260 10,770 32,795 2038 8,020 14,690 9,932 32,642 2039 - 15,140 9,201 24,341 2040 180,000 - 4,500 184,500 Total $ 970,590 $ 134,000 $ 628,508 $ 1,733,098 _______________________________ (1)
Assumes that bonds subject to repurchase are continuously remarketed to maturity and that the interest rates on variable- rate debt average 3% per annum in each year. Debt subject to repurchase could become due for purchase sooner, and actual interest expense could differ, so actual debt service requirements could differ from those shown, and the difference could be substantial. In addition, this table does not reflect payments and receipts under interest rate swap transactions. See “Interest Rate Exchange Agreements” below.
Interest Rate Exchange Agreements
As of June 30, 2013, Vanderbilt had $718.2 million of aggregate fixed-payer interest rate exchange agreements outstanding, which include amounts amortizing through 2044. Vanderbilt receives 68.3% of one-month LIBOR and pays a weighted average fixed-rate of 3.8% for these fixed-payer interest rate exchange agreements.
To mitigate potential interest rate increases associated with its variable-rate debt, Vanderbilt has also entered into basis interest rate exchange agreements. Under these agreements, Vanderbilt is to receive a weighted average ratio of 81.5% of one-month LIBOR and make variable-rate payments tied to the SIFMA Municipal Swap Index on notional amounts totaling $500 million through 2035.
As of June 30, 2013, the mark-to-market valuation of Vanderbilt’s interest rate exchange agreement portfolio was a liability of $206.7 million, and Vanderbilt had pledged $95.1 million in collateral to secure the other parties’ exposure.
On October 1, 2013, Vanderbilt executed the novation of $99.6 million of fixed-payer interest rate exchange agreements from Citibank N.A. to Bank of New York Mellon in order to diversify counterparty risk and reduce Vanderbilt’s aggregate collateral posting requirements. On September 10, 2013 and December 4, 2013, Vanderbilt terminated $40.0 million and $60.0 million, respectively, of notional fixed-payer interest rate exchange agreements with Goldman Sachs, at a cost of $6.5 million and $11.6 million, respectively, to reduce interest rate exchange collateral exposure and to eliminate ongoing carrying costs.
Liquidity
Vanderbilt currently has dedicated hybrid lines of credit in an amount of $400 million available to repurchase debt in the event of a failed remarketing; one of these lines totaling $200 million includes a general use provision. The $400 million total consists of two separate lines of $200 million each, with the earlier expiration being March 2016, while the latter $200 million line of credit expires in April 2016. None of the existing lines of credit may be accessed by bondholders or note-holders or their respective indenture trustees. In addition, Vanderbilt is not obligated to maintain any line of credit, and if it elects to maintain a line of credit, the amount available to Vanderbilt may be increased or decreased by Vanderbilt from time to time at its discretion. Vanderbilt has never borrowed under its hybrid lines of credit to support repurchases of debt.
Vanderbilt currently has a separate general use line of credit with one bank in the amount of $100 million. This line of credit, which may be drawn upon for general operating purposes, expires in October 2014. No amounts had been drawn on any of Vanderbilt’s lines of credit as of June 30, 2013.
Vanderbilt maintains a portion of its cash resources and endowment funds in short-term, marketable investments that may be liquidated, if required, to provide funds for its debt repurchase obligations or for retirement of debt. Although Vanderbilt’s investment practices are a factor in Vanderbilt’s short-term credit rating, Vanderbilt has no contractual obligation to maintain any specific amount of its investment portfolio in short-term investments. The maximum amount of debt that could become due for purchase or payment on the same day is $348 million, including the Series 2012A and Series 2012B bonds, or $214 million excluding the Series 2012A and Series 2012B bonds. As of June 30, 2013, Vanderbilt had $1.9 billion of assets providing liquidity within 30 days, including $726 million of liquid assets available on a same-day basis. Vanderbilt’s liquid assets fluctuate throughout the year primarily due to operating cycles and asset allocation decisions. In the twelve months prior to June 30, 2013, Vanderbilt’s estimated same-day liquid assets fluctuated between $650 million and $1.0 billion, while its total monthly liquidity fluctuated between $1.7 billion and $1.9 billion.
