Title: ELCA Publishing House Reports Significant Financial Losses
ELCA NEWS SERVICE

April 26, 2001

ELCA PUBLISHING HOUSE SHOWS SIGNIFICANT FINANCIAL LOSSES
01-100-JB

     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 [log in to unmask]
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