Data-August 12, 2015

[BeenThere]

https://www.businesswire.com/news/home/20150812006066/en/Fitch-Affirms-Albuquerque-Academys-New-Mexico-Revs
Excerpt
The operating margin has been historically negative with a heavy reliance on endowment to support operations. In addition, revenue diversity is limited with student-generated revenues representing a high 73% of fiscal 2014 unrestricted operating revenues, though this is common among private independent schools.

The academy’s endowment spending policy is aggressive as compared to the traditional 5% for independent schools. The academy suspended its formal spending policy of between 4%-6% of the rolling three-year average in fiscal 2013. The board has designated a specific annual target for the next three years as part of a broader plan to gradually reduce endowment spending to more sustainable levels.

The endowment spend for operations is reduced in fiscal 2014 to $5.8 million (or about 5.9% of the $97.7 million endowment), from $6.0 million (or about 6.4%) in fiscal 2013, and is expected to be reduced further in fiscal 2015, fiscal 2016, and fiscal 2017 to $5.7 million, $5.4 million and $5.1 million, respectively. Fitch notes, however, that the total cash endowment distribution for operations regularly includes a supplemental draw which is higher due to other operational costs of the endowment and interest expense. When factoring in the supplemental draw, distributions increase to about $9.6 million or 9.8% of the endowment and the academy’s fiscal 2014 operating margin improves to positive 11.3% compared to 10.7% in fiscal 2013. While the operating margin is positive, Fitch is concerned that the total level of the endowment draw is unsustainable over the long term.

Positively, operating improvement continued in fiscal 2014 due to reductions in financial aid and growth in net tuition revenues, combined with various cost containment measures (including reduced staff headcount and salary freezes). The academy’s ability to continue reducing endowment spending while sustaining recent operating improvements is assumed in the ‘A+’ rating and Stable Outlook. An inability to do so will result in a rating downgrade.

[BeenThere]

Kudos to the site administrators for finding the 2017 Fitch ratings. My original post in this category was the most recent I could uncover. Keep working on the unbiased, outside rating agencies for guidance. I will not repost that data here, but taking a look at 2017 will confirm that warnings in this report were not headed.

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