PHOENIX (ELCA) -- Augsburg Fortress, the publishing house of the Evangelical Lutheran Church in America (ELCA), finished 2000 with a net loss of $3.037 million, according to final audited financial figures presented to the publisher's board of trustees when it met here April 19-21. The Minneapolis-based publisher reported a $1.1 million profit in 1999.
Sales for 2000 were $54.2 million, up $289,000 over 1999, but operating expenses increased nearly $1.3 million over 1999. That increase, along with costs for inventory reserves, new projects and other expenses, led to the $3.037 net loss for 2000, said George W. Poehlman, vice president for finance, Augsburg Fortress.
In addition, Augsburg Fortress showed a net loss for the first quarter of 2001 of $2.305 million, nearly $1 million more than budgeted and $3.9 million more than the same period in 2000, Poehlman said. A significant factor in the publisher's first quarter performance was a decline in trade sales to companies that resell books, most likely a result of a dip in the economy, he said.
Augsburg Fortress is budgeting sales this year at nearly $60 million, $6.7 million more than the company's sales in 2000, Poehlman said. The budget for 2001 is a "break even" budget, he said. The company will not be able to afford its current personnel expenses unless its sales are close to the 2001 forecast, Poehlman said.
The company's poor financial performance for the past 15 months has weakened its overall financial position, Poehlman said in his report to the board. Augsburg Fortress has high inventories of materials, less cash, and its credit ratios have fallen but still remain at acceptable levels, he said.
Augsburg Fortress' overall financial situation is "serious," Poehlman warned. "We have to find a way to operate this company in a more financially reasonable way."
During the past 18 months the company has reorganized itself, with board approval, into several "small business units (SBU)." Each SBU focused its publishing and sales efforts on specific markets. The decision to reorganize followed extensive work by an outside consulting firm, which examined and addressed several years of marginal financial performance by Augsburg Fortress.
The publishing house is still headed in the right direction with its business plan, said Richard E. Lodmill, Augsburg Fortress board chair, Seattle, reacting to the financial news. The company has not yet realized the full potential of its new SBUs, he said.
"The unfortunate part is that sales have not responded to the investment we've made to this point," he said in an interview. The recent decline in the economy also has affected Augsburg Fortress' performance, Lodmill added.
To respond to the company's financial problems, management will review Augsburg Fortress' programs, projects and activities, said the Rev. Marvin L. Roloff, president and chief executive officer. In addition, the company's "personnel structure" will be reviewed, affordable, short-term projects may be considered, and the publisher will likely cease looking for acquisitions for the near term, he said. General and administrative costs must be lowered, Roloff said.
Calling the company's financial situation "one of the greatest challenges we face," Roloff said the results for 2000 were "sobering."
"We had such high expectations," Roloff told the board. "We had such confidence."
While the company must work to correct its financial problems, it must not compromise its mission to serve congregations with useful resources, Roloff said in an interview.
The board of trustees met here in support of a new relationship to publish educational resources developed through Community Church of Joy, an ELCA congregation near Phoenix. The board met with some of Joy's pastors and toured the church property. In 2000, Augsburg Fortress provided $300,000 in seed money to help establish the publishing relationship.
For information contact:
John Brooks, Director (773) 380-2958 or NEWS@ELCA.ORG
http://listserv.elca.org/archives/elcanews.html
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About the Evangelical Lutheran Church in America:
The ELCA is one of the largest Christian denominations in the United States, with 2.8 million members in more than 8,500 worshiping communities across the 50 states and in the Caribbean region. Known as the church of "God's work. Our hands.," the ELCA emphasizes the saving grace of God through faith in Jesus Christ, unity among Christians and service in the world. The ELCA's roots are in the writings of the German church reformer Martin Luther.
For information contact:
Candice Hill Buchbinder
Public Relations Manager
Candice.HillBuchbinder@ELCA.org
