Here’s my take on last month’s ULAA balance statement. It arrived with the budget that I posted on here.
LINK
Assets
Liquidity is the most critical issue we’re facing as the cash drain continues. Cash reported on the last quarterly (March 31) had a negative balance, and it declined an additional $1.2 million the last two months from -$4.9 million to -$6.1 million. Current assets including cash declined from $5.8 million in March to $0.9 million in May. The Republic Bank credit line balance held at $9 million. Subtracting the credit line, NET current assets are now -$8.1 million.
Here are comparable values for May 31 in each of the last three years. 2021 was the year impacted by Covid and when the line of credit was set up…
2020: Total assets = $269 million; net current assets = +$18.8 million
2021: Total assets = $258 million; net current assets = +$1.2 million
2022: Total assets = $248 million; net current assets = -$8.1 million
U of L is systematically experiencing a decline of around $10 million annually in the financial scale of its athletic department. From 2004 until 2017, we increased in size by $15 million annually. Continuing from where we were in 2017, total assets would have been approaching $400 million today. Most of the decline has been cash and liquid/current items. This is because our revenues do not consistently meet expenses.
Net Position
U of L’s net position (NP) or its value after you subtract liabilities has declined to $93 million, down from $99 million last May. NP was $156 million as recently as September 2019. Per the Republic Bank loan covenants, the original credit line was advanced with the provision that NP was >$90 million.
Not sure whether that’s a call provision or not, but U of L is teetering on the edge of a potential issue with Republic. For sure, our status to borrow further is in question.
Where are we headed?
You fix a cash burn problem by raising revenue and/or cutting expenses. Not since Owsley Frazier has U of L had a big donor who helped them meet operating expenses.
Cash burn has existed most of the last five years. The current folks in charge are probably trying to bring in more money. It just hasn’t happened. And after five years, it’s unlikely to be within their capabilities. They’ve been unwilling to simply cut operating expenses which are budgeted to be UP another $7 million in 2023. They evidently don’t want the mantra of downsizing athletics (which will happen anyway.)
U of L still has a large base of fixed assets. A typical operation would look to sell or liquidate fixed assets to meet critical cash needs. I’m not sure U of L has that option beyond selling a golf course or a parking lot somewhere.
Unfortunately, the pace of decline is too great and the financial hole too deep to reasonably expect Josh Heird to make an impact soon. This would be hard for anyone to pull off, much less a new guy in that position. We’re down around $15 million in current assets since Heird took the interim job, which is comparable to the declines in 2020 and 2021 for the same time period. There’s been no improvement.