SMU Budget at Work

May 2, 2011 by · Comments Off 

By Jonathan Richter
jkrichter@smu.edu

Over the past five years, SMU’s allotted spending plan has increased 24.4 percent despite investment declines occurring from the financial crisis that hit the nation in 2008.

The university has shown a steady rise in spending since the crisis, currently boasting an operating budget for 2010-2011 of $474.7 million compared to $381.5 million in 2006-2007. However, due to a drastic decrease in investment income, SMU’s expenses exceeded its revenues by $52.7 million during 2008 as opposed to a gain of $163.1 million in 2007, according to its Form 990 tax return. More recent returns were not available.

“The financial crisis caused SMU to reduce budgets to absorb reductions in payout from the endowment fund as well as other investment revenue declines,” Chris Casey, SMU’s vice president for Business and Finance said in an e-mail interview.

The biggest challenge related to the financial crisis came from the loss to SMU’s investments. In 2007 SMU showed investment revenues of $125.1 million, representing more than 20 percent of total revenue. By contrast in 2008, the university recorded losses of $43.3 million. The endowment fund had a balance of $1.4 billion in 2007, but fell 23.7 percent to an end balance of $1.032 billion in 2008.

“Academic areas were responsible for reducing their budgets to absorb endowment declines while administrative areas were asked to take percentage reductions over several years to balance the budget,” Casey said.

A majority of the revenue SMU receives stems from tuition and fees, endowment income, auxiliary income, athletic income and other sources.

According to SMU’s Statement of Revenue for 2008, revenue totaled $416.7, down from $627.1 million in 2007. Of that tuition and fees accounted for 66.6 percent, while auxiliary activities came in second making up 8.6 percent. Sponsored research totaled 5.2 percent, other student fees were 2.4 percent and organized activities came to 1.9 percent of the university’s revenue.

“Overall, revenue has increased during the current year mainly due to tuition, fees, and room and board increases,” Casey said. “Budget reductions have occurred across campus and in all other areas to balance the university’s budget in light of investment declines and lower tuition increases.”

Over the past five years tuition increases have averaged 6.74 percent, with the highest increase occurring in 2007-2008 at 7.9 percent. However, in light of the financial crisis SMU tuition rose this year at just 5.9 percent.

“Tuition and fee increases we kept as low as possible to be sensitive to the financial pressures faced by many of our students and their families, limiting the ability of SMU to fund various initiatives,” Casey said.

Students are positively reacting to this reduction in tuition increases. SMU senior Blythe Bumstead said: “I’m glad SMU decided upon a lower tuition increase. It reassures me and my parents that we don’t have to pay as much in this financially stressful time. Hopefully we won’t see drastic increases in tuition once the country is fully recovered from the financial crisis.”

Grants and salaries are the two largest areas of expenditure for the university. Of total expenses at $514.4 million in 2008, over $104.3 million or 20.3 percent was spent on scholarships and other assistance to individuals. Salaries and wages, not including compensation or benefits, accounted for 34.6 percent expenses. These numbers are continuing to rise.

“With this budget SMU provides financial aid to students,” said Ernie Barry, university budget director. “The budget schedule reflects an overall increase in spending and our major areas of spending include compensation to university employees, debt services, and auxiliaries.”

Not only are students happy that tuition is rising less quickly, but they are also excited to see how the university is spending its money to create a better campus.

According to SMU’s Form 990, the five highest-paid contractors in 2008 were all construction companies, which received a total of $26.4 million. With the help of independent contractors like Hunt Construction Group Inc. and Turner Construction Co Inc., compensated $7.9 million and $7.7 million respectively, SMU maintains buildings and makes improvements around campus.

“I feel the university does a great job of creating the best educational environment for us,” said SMU senior Matt Gormly. “Look around at all the construction and improvements being made on campus and you can tell SMU is spending tuition dollars appropriately.”

Allan Sloan of Fortune Magazine Touches on “The Golden Age” of Journalism

April 10, 2011 by · Comments Off 

By Jonathan Richter
jkrichter@smu.edu

Allan Sloan, senior Editor-At-Large for Fortune Magazine, spoke to journalists and business executives from around the country on Friday, using his personal experience as a journalist to reveal that a new “golden age” is coming to journalism.

Sloan addressed a lively audience in Crum Auditorium at the 48th Annual conference for the Society of American Business Editors and Writers, SABEW, and kept the crowd entertained with accounts of his career in journalism.

The breakout session focused on the evolution of journalism and its future given the decline in the profitability of newspapers and magazines. It asked the question of whether or not the “craft we love will still love us back”.

“Somebody is going to figure out how to get people to pay for what we do,” said Sloan. “My real hope is that my encouragement I’m offering here is going to encourage someone to do this and pay me a fee.”

He pointed out we have to face the fact that the old business model of making profit from advertising has failed because of media fragmentation.

“Do not morn the thing that is gone,” Sloan said in regards to the decline of the old business profit model of newspapers and magazines. “Every year we can have a drink in memory of the ad model.”

Sloan stumbled upon his career as a business journalist in 1969 after failing as a sports writer in Charlotte, NC.

“I managed to start writing business news when nobody cared about it and managed to have my career go through the whole ark of journalism changing from a lower middle class lifestyle to a brief golden age,” Sloan commented.

This golden age occurred when newspapers were enjoying profits from increases in advertising and classifieds, and this money trickled down to writers. However, as Sloan reveled, this age has come to a halt because there has not been a way to profit without using advertisers.

The audience responded favorably to Sloan’s speech.

“I liked his sense of humor and I liked that he had an insider’s perspective on the industry,” said Sam Taute, writer for Smartbrief.

Journalism students from the University of North Carolina at Chapel Hill were also gathered in the audience to hear Sloan’s breakout session.

“I thought the speech was really entertaining and useful, especially his advice to young journalists. It was nice to hear an expert say that the industry is not doing well, but to keep passionate and committed to about what you are doing,” said Tori Stilwell, a junior journalism student at UNC.

Sloan concluded the session by emphasizing not to whine for yesterday because yesterday is not coming back, and gave some advice to young journalists looking for jobs in the industry.

“Things aren’t any different now days than when I was doing this and the opportunity is still out there,” Sloan said.

The SABEW Conference was held at Southern Methodist University’s Collins Executive Education Center and concluded Saturday, April 9th.

A Bright Future for Pier 1 Imports

April 5, 2011 by · Comments Off 

By Jonathan Richter
jkrichter@smu.edu

As Melissa Isaacs casually entered Pier 1 Imports off the corner of West Lovers Lane and Preston Park Drive, she hoped to find a good buy on unique home furnishing and pick up any knick-knack along the way that caught her attention.

“I’ve been a customer for 12 or 13 years now and enjoy the modern selection and decent quality the store offers,” said Isaacs. “I always drop in every now and then to scan for the best deals and enjoy finding that unique item.”

This loyal customer base, alongside a new turnaround strategy implemented by Alexander W. Smith, president and chief executive officer of Pier 1 Imports Inc., has kept the company afloat during the economic downturn. Smith was hired in February 2007 and set out to retool business priorities when the company was facing high debt and a merchandise mix that was not appealing to customers.

Failed merchandise, like food gift items, were replaced by more effective items, such as a line of tasting party glassware, that appeal to the current in-home entertaining trend. Furniture displays were also rearranged to assure customer satisfaction.

Pier 1 is a global importer and one of the nation’s largest specialty retailers of decorative home furnishings and gifts. Its stores offer various furniture items, home decorations, dining and kitchen goods, bed and bathing accessories, seasonal assortments and other specialty items for the home in over 1,000 store locations in the U.S., Canada and Mexico.

In April 2007, the company implemented a plan to improve the merchandise assortment, reduce inventory levels, increase merchandise margins and reduce operational costs. However, these strategies came at a time when the economy was struggling from a collapse in the housing market, dealing a heavy blow to Pier 1 and its competitors.

The entire home furnishings industry felt the effects of the meltdown in 2008 as consumers tightened their wallets on items purchased for the home. Bed Bath & Beyond, Cost Plus and Euromarket Designs all took a hit in falling revenues and increased expenses, thus lowering their stock prices and crippling the industry.

Competitors like Bombay Co., located in Fort Worth, the same headquarter city as Pier 1, went bankrupt. During this time, Pier 1 shares fell to an all-time low trading at $.10 in March 2009.

Despite these industry setbacks, Pier 1 managed to reestablish itself, finally benefiting from its new business strategy and signs of life in consumer spending. According to equity research on home furnishing stores by Shine’s Room Online, a market strategies company, household purchases grew by 4.4% last quarter due to decreasing unemployment and a rise in wages. This has allowed Pier 1 to regain some footing in store sales and merchandise margins.

“With sales and margins exceeding our expectations and the overall leveraging of expenses, we are reporting net income for our fifth consecutive quarter,” Smith said in the press release announcing 2010 third quarter financial results.

In the quarter ending November 27, 2010, Pier 1 reported a net income of $21 million up from a loss of $16.8 million, excluding the effect of a one-time tax benefit in the year ago quarter. Total sales for the third quarter increased 8.2% reaching $353.8 million compared to $327.1 million in the year-ago quarter despite the closing of 38 stores in fiscal 2010. Pier 1 posted net income of $21 million, or $.18 a share, and the stock closed at $9.80 in November 2010 compared to a $3.79 close in November 2009.

Another aspect Pier 1 improved was its comparable store sales during 2010. That measure of sales in stores open a year or more increased 1.5% compared to a decline of 9.2% in fiscal 2009 as reported in the Form 10-K. This meant an increase in consumer traffic within existing stores as the holiday season rolled around, thus helping reduce inventory stocks.

Pier 1 achieved an increase in merchandise margins for the third quarter growing to 58.9% of sales compared to 56.6% in the year ago. This was accomplished through reduced supply chain costs and reassessing the management of inventory levels, which in turn improved merchandise offerings to customers and boosted rates of sale.

The company also worked to leverage its expenditures company-wide as sales continued to increase in 2010. Pier 1 reduced occupancy costs by negotiating lower rent costs with landlords and closed unprofitable stores. A restructured approach to expenses and increased sales meant a $19.1 million improvement in operating income for the third quarter.

In addition to the four point improvement strategy, Smith also closed down its e-commerce business in 2007, strictly using its website as a marketing and promotional tool. However, with current increases in internet sales and the risk of losing business to on-line sales of competitors like Bed Bath & Beyond, the company plans to reinvest additional capital into the website in order to return to on-line selling.

This comes as good news to Molly Cronin, SMU senior and Pier 1 customer. “Since owning my own apartment, I’ve always shopped around on-line for good prices. Having the option to buy furniture on-line from Pier 1 would save me both time and money.”

With the new business strategy implemented by Smith, Pier 1 experienced growth at a crucial point in time when businesses were failing and the economy was in a drought. This company is continuing to grow within its industry and is showing no signs of turning back.

Women’s Soccer: Tie vs. St. Mary’s Sunday Leads to 5-2-2 on Season

September 21, 2010 by · Comments Off 

By Jonathan Richter
jkrichter@smu.edu

The SMU women’s soccer team tied St. Mary’s 1-1 at Westcott Field Sunday afternoon.

In the second half of play, SMU’s Logan May scored on a strike to put the Mustangs on the board in the 65th minute. Forward Kenzie Scovill and midfielder Kristin Medeiros were credited with assists on the goal.

Soon after in the 67th minute, St. Mary’s Daelyn Paul found the back of the net to even the scoreboard.

The tie moves SMU to 5-2-2 on the season, while St. Mary’s moves to 6-1-2.

The women’s soccer team commences conference play this coming weekend as they travel to Houston. SMU faces off against Houston on Friday followed by a game against Rice on Sunday.