Title: ELCA Publisher Reports Financial Health Improved
ELCA NEWS SERVICE

May 5, 2003

ELCA PUBLISHER REPORTS FINANCIAL HEALTH IMPROVED
03-092-JB

     PHILADELPHIA (ELCA) -- The financial health of Augsburg Fortress,
the publishing house of the Evangelical Lutheran Church in America
(ELCA), has improved, and the company's management team is focused on
achieving a "break even" financial year in 2003.  The information was
part of a financial report to the board of trustees which met here April
24-26.
     The board met here so members could tour the company's
Ecclesiastical Arts Studio, which specializes in making clergy clothing
and paraments, and offers consulting services to help congregations
design or refurbish worship spaces.
     Expressing guarded optimism, George W. Poehlman, Augsburg Fortress
vice president for finance, said the company's first quarter financial
report was better than forecast. Augsburg Fortress recorded a first
quarter operating loss of $473,000.  That was $260,000 better than
budgeted and $142,000 less than the loss reported in the first quarter
of 2002, he said.  Better-than-expected sales of educational materials,
plus expense and inventory controls, resulted in the "promising" first
quarter report, Poehlman said.  Company management is focused on a
"break even" financial goal for 2003, he said.
     The first quarter report suggests "we can see that we can make our
budget," Poehlman said.  He emphasized that the company's performance
must improve further if it is to achieve management's break even goal.
     For 2002, the company recorded an audited net loss of $4.3
million, $3.5 million better than the previous year, Poehlman said.  For
2001 the company's auditors restated the net loss to $7.8 million from
the originally reported $7.2 million.  Results were restated when it was
discovered that two information systems projects had been completed and
put into service in 2001 rather than 2002, causing an increase in
depreciation expenses for 2001, Poehlman said.  In addition, two annual
service contracts included in the capitalized cost of the project were
reclassified as operating expenses, he said.
     In response to questions from board members, Poehlman said he was
"not happy" about the 2001 financial reporting errors and said the
company is reviewing its procedures to prevent similar errors in the
future.
     The board also discussed or heard about several other company
matters:
     + In a session on strategic planning, it directed the company
management team "to develop a strategic plan for 2006" and provide the
plan for review and action by the board at its October meeting in
Minneapolis. The session was "closed" under provisions of the ELCA's
policy on open meetings.
     + The board discussed the company's "defined benefit" pension
plan.  It learned that the company will need to make a cash contribution
of $798,000 to the plan in 2003 because of declines in investment
returns.  For 2004 the company is expected to put an estimated $950,000
into the pension plan.  As a possible alternative, some board members
suggested the publisher consider joining the ELCA Board of Pensions
plan.  Sandy Middendorf, Augsburg Fortress vice president for human
resources, said the company is analyzing the possibility of joining the
Board of Pensions plan.  She also said employees are aware the company
is making cash contributions to the current pension plan.
     + The board discussed but took no action on a decision of the ELCA
churchwide organization to drop an annual subsidy to The Lutheran, the
magazine of the ELCA.  The $100,000 subsidy was dropped as part of a
series of recent churchwide budget reductions.  Half of the subsidy was
invested by the magazine in an endowment fund, and half was sent to
Augsburg Fortress to help offset production costs.  This year the
publisher will lose about $37,500, the amount of its annual share
remaining when the subsidy was dropped April 1, Poehlman explained.
     Janice M. Bowman, board member, Thousand Oaks, Calif., and board
representative to the magazine's advisory committee, said the committee
objected to the decision primarily because of its  "symbolic" meaning.
The loss of the funds will not make a difference in the quality of
service Augsburg Fortress can provide for the magazine, responded Beth
A. Lewis, Augsburg Fortress president and chief executive officer.  To
avoid "damaging relationships," she recommended the board not take any
formal action and defer possible action to the magazine's advisory
committee.
     + The board discussed declining subscriptions for The Lutheran,
which fell to 463,000 this spring.  James M. Huber, publishing director
for The Lutheran and Lutheran Woman Today, the magazine of Women of the
ELCA, said The Lutheran lost nearly 25,000 subscribers in April.  Most
congregations report they cannot maintain the financial commitment to
pay for subscriptions for members, he said.  The Rev. Steven L.
Ullestad, bishop of the ELCA Northeastern Iowa Synod, Waverly, said the
publisher must "find a way for members to find out what's going on in
this church."  The Rev. Richard F. Bansemer, board member, Salem, Va.,
suggested there be an examination of the magazine itself which may
include publication of a resource "secondary" to The Lutheran.  Some
congregations don't subscribe because pastors are concerned some
information reported by the magazine "stirs up" members, he said.
     + The board was introduced to the first of a possible 10-volume
"Lutheran Voices" series focusing on core Lutheran values and
traditions.  The company hopes to publish most of the volumes in the new
series in time for the the ELCA Churchwide Assembly, Aug. 11-17 in
Milwaukee, Lewis said.  The first book is "Reclaiming the 'L' Word:
Renewing the Church from Its Lutheran Core" by the Rev. Kelly A. Fryer,
Cross of Glory Lutheran Church, Lockport, Ill.
     + A promising new book, "Executive Values: A Christian Approach to
Organizational Leadership," by Kurt Senske, sold out its first printing
a few days after it was introduced, said J. Michael West, acting general
manager, Augsburg Books.
     + In her report to the board, Lewis said she "loves" her work and
is "having fun every day."  The company is reviewing products that are
or are nearly out of print and is considering selling them through the
Augsburg Fortress Web site, she said.  Testing is under way.
     Augsburg Fortress is building relationships within the churchwide
organization, especially with the ELCA Division for Congregational
Ministries (DCM), Lewis said.  In 2001 the DCM board questioned its
relationship with the publisher and suggested the ELCA explore
publishing alternatives.  Following a lengthy inquiry, the ELCA Church
Council was told in April that leaders of Augsburg Fortress and DCM had
done considerable work to solve publishing concerns and that no further
action was needed. "There is a new spirit of cooperation and
coordination between DCM and Augsburg Fortress and other units in the
churchwide organization," Lewis told the board.  "Many units of the
church have worked hard at this."
     The company announced it will host congregations needing off-site
space for meetings or retreats at its Minneapolis offices, as part of
its "ministry of hospitality," Lewis said.
     Overall, Lewis said she and others in the church are optimistic
and hopeful about the company's future, though she acknowledged "some
people believe we will fail in our turnaround of Augsburg Fortress."
     + Ullestad, representing the ELCA Conference of Bishops, affirmed
Lewis' work and said she had led the organization through "important
changes and the right changes."
     "I wonder if Augsburg Fortress should see itself as a new
organization and not a merger of two publishing houses?" he said.
     + The board elected James Myers, Kailua, Hawaii, to a two-year
term as board chair, succeeding Timothy I. Maudlin, Eden Prairie, Minn.,
whose board term ends this year.  "I am personally very encouraged by
management's vision and strategic directions.  This gives us great hope
for the future," said Maudlin, who led the board through a transition to
Lewis' leadership.
     Myers, who has expertise in publishing sales and marketing, told
the board he hoped Augsburg Fortress could become the leader in
supplying resources to the ELCA market and said he is committed to
supporting the company's leadership and staff.  Myers is a former DCM
board chair.
-- -- --
     Augsburg Fortress maintains a Web site at
http://www.augsburgfortress.com
on the Web.

     Information about Augsburg Fortress' Ecclesiastical Arts Studio,
     is at
http://www.thelutheran.org/0304/page46.html on the Web.


For information contact:
John Brooks, Director (773) 380-2958 or [log in to unmask]
http://listserv.elca.org/archives/elcanews.html