The University of Central Arkansas’s debt rating remains stable, according to a recent report by Moody’s Investors Service.
The stable outlook reflects expectations of a gradual improvement in cash and financial resource levels, management’s ongoing successful implementation of cash flow enhancement efforts and continued support from the state, the report states.
The university maintained its A3 rating. In May, UCA’s rating was recalibrated to A3 from Baa1.
“The latest Moody’s report positively reflects the tremendous progress UCA has made and continues to make,” said Diane Newton, vice president for finance and administration. “While we are pleased with the previously upgraded rating of A3 with a stable rating, we think when Moody’s receives the University’s audited statements later this year, there will be room for additional upward movement.”
The current rating should provide for favorable interest rates, Newton added.
UCA ended fiscal year 2009 with a cash balance of $3.2 million with no amounts drawn on a line of credit as compared to a net cash position of negative $4.3 million the prior year, the report states. Operating cash flow, improved in fiscal year 2010 — based on unaudited data — to 16.2%, from an average of 9.3% in the prior five years.
Based on preliminary data, monthly days cash on hand improved to 34 days at June 30, 2010 from 13 days at June 30, 2009, the report states. According to unaudited reports, fiscal year 2010 shows an increase in net cash position from $6.1 million to $23 million through expense containment and careful cash management.
Unrestricted and unallocated cash improved from $221,000 at the end of fiscal year 2008 to $4.5 million as of June 30, 2010. UCA officials plan to build fund balance reserves to eight percent of the operating budget or around $12.6 million for fiscal year 2010.
The report noted that the university’s rating could improve “if the University continues to rebuild financial reserves and maintains student market strength and operating support from the State while limiting additional debt.”
The report credits the university’s rating to the senior management’s resolve “to improve operating cash flow and cash position through revenue management, cost containment and collection of accounts receivable.
“Management continues to cut expenditures and pursue student accounts receivable more aggressively along with instituting more effective financial control,” the report states.
“We are pleased that Moody continues to recognize our steady march back to a solid financial position,” said UCA President Allen Meadors. “I truly appreciate the University community coming together and helping produce the healthiest financial position at UCA in nearly a decade. When the economy starts to turn around, UCA will be in an excellent position to move forward and build on its outstanding legacy.”
