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MPN ends year with operating surplus, looks to next phase of "barn raising"

   

July 1, 2003
-by Jack Scott
Contact: Jack Scott, (724) 887-8500, E-mail: jscott@mph.org

Scottdale, Pa.— In a remarkable turn-around, the Mennonite Publishing Network's (MPN) recent fiscal year ended with an operating surplus of $485,493.

The Mennonite Publishing Network's phase two of its "barn raising" campaign received this boost of good news from its auditor and encouragement from its board. The MPN interim board of directors, made up of the Joint Executive Committee of Mennonite Church Canada and Mennonite Church USA, met June 12 to receive the audited results of the fiscal year that ended Jan. 31.

This is MPN's second fully certified annual audit since the merger of the former Faith & Life Press with Mennonite Publishing House. The positive news follows an operating loss of $793,079 in fiscal 2002. The surplus was due in large part to the achievement of greater operating efficiencies and other cost reductions.

An executive committee of the board consists of chair Ron Sawatsky, vice-chair Ervin Stutzman and secretary-treasurer Jim Harder. They've provided leadership for the publishing agency since the Joint Executive Committee took over as the interim board in March 2002.

Because of the decision to close the MPN printing press division in December 2002, the audit assessed a one-time charge of $ $433,735 for employee severance payments and equipment write-down against the year's operating surplus, yielding a bottom line increase in unrestricted net assets of $51,758 for the year. This compares to a loss of more than $1.7 million in net assets during fiscal 2002

"These are truly remarkable year-to-year financial improvements," Harder said. "But perhaps most critical for the future of MPN and its supportive church constituency is the 21.7 percent reduction in comprehensive MPN indebtedness that was also achieved during the past year."

Harder informed the board that MPN ended the fiscal year with $4,382,638 in total indebtedness, a $1,211,659 reduction from the nearly $5.6 million of debt held one year earlier. About half of the debt reduction was realized from the barn raising campaign donations from church members and former debenture note holders. The remainder was funded from improved MPN operating results at Provident Bookstores, Herald Press, and Faith & Life Resources.

For the fiscal year, total donations to MPN from U.S. sources came to $608,098. Donations from Canada totaled $42,957 (U.S. equivalent). An additional $32,057 was received by Mennonite Church USA for the purpose of restoring supplemental health insurance benefits for MPH retirees.

  • The audit firm's representative at the annual meeting noted that a $75,886 non-cash "foreign currency adjustment" charge was necessary to properly reflect the book value of the $1.2 million (Canadian funds) still owed Mennonite Church Canada, in light of the declining foreign exchange value of the U.S. dollar. This charge effectively reduced MPN's calculated net worth by $24,124 for the year, but should not affect cash reserves insofar as MPN expects to use Canadian sales revenue to pay back this loan in future years, MPN's controller, Christopher Ronallo, said to the board.

Ben Sprunger, MPN's interim executive director, reported that MPN is still fragile, but there is ample reason for optimism. Besides returning the business operations to stability through reduced costs and overheads, and successful audit this year, he noted successes:

  • Refocus from a publishing house to a publishing network that is more closely linked with its Mennonite Church constituency.
  • Restructure with new business division alignments for a smaller, nimbler, more focused effort.
  • Divestiture of on-site production, printing and manufacturing to out-sourcing and contract production.
  • Recovery from financial fragility to stability through longer-term loans, and providing adequate cash for taking early discounts on accounts payable.

Sales for MPN of $16.3 million dollars were only down slightly from the previous year, even with the closing of the in-house printing service. At the same time, overheads and total wage costs were substantially decreased as staff (not including the Provident Bookstores) were decreased from nearly 100 full-time equivalents to less than 39.

"We have a $2.3 million loan that is due Aug. 31," Sawatsky said. "We have already paid down nearly $800,000 of that, but it is critical that we have contributions or pledges to cover the balance of $1.5 million by the time school starts this fall."

Congregations throughout the United States and Canada have just received packets of bulletin inserts, pledge cards and a letter that explains phase two of the barn raising. A three-person debt reduction committee that is supporting the barn raising campaign is also seeking larger donations from individuals or corporate donors.

"If we can pay off this loan, we will not need to return to congregations for further special contributions to pay down debt," said Jack Scott, MPN's development director. "The publishing and bookstores should be able to pay down the remaining debt over the next decade through normal debt servicing.

Future fundraising will then be focused on new projects such as a refreshment of the successful Jubilee children's Sunday school curriculum, additional volumes in the Believers Church Bible Commentary Series, or a supplement to Hymnal, A Worship Book.

Jack Scott is director of marketing and development for Mennonite Publishing Network.