LifeWay announces budget cuts and staff reductions amid COVID-19

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NASHVILLE (BP) -- In response to a sudden and steep decline in revenue and amid uncertainty over the near future, LifeWay Christian Resources announced plans for budget cuts of $25-30 million -- approximately 10 percent of its budget -- including spending freezes and staff layoffs.


LifeWay CEO Ben Mandrell said the cuts were necessary because of the onset of an economic crisis prompted by the COVID-19 pandemic.


"We hope these proactive steps will allow LifeWay to continue ministering to churches throughout the crisis, however long it lasts, and long into the future," Mandrell said. "We know the COVID-19 crisis has created a unique challenge for churches as they find new ways to gather, and many are also facing severe financial strains. We want to make sure LifeWay is in a position to continue serving churches and church leaders to help them fuel their ministries.


"These are challenging times, but I am confident the Lord will use this for His glory and will push LifeWay into the future in a fresh way."


LifeWay was unable to provide current employee headcount numbers or the number of employees affected by the layoffs when requested by Baptist Press.


In total, the budget cuts would range from 8.9-10.7 percent of LifeWay’s 2019-20 budget of $281.3 million. In addition to staff reductions, LifeWay plans to freeze hiring and discretionary spending, to suspend salary increases and matching 401K contributions for all employees. Additionally, members of the executive leadership team will give up one month’s salary beginning in May.


All of the temporary expense reductions are scheduled to go into effect Friday (May 1).


The cuts come after five consecutive weeks of steep revenue decline across all sales channels -- a trend that is expected to continue. Revenue across key channels is down 24 percent compared to the year prior.


While book and Bible sales continue to see strong growth through LifeWay channels, the decline in revenue is largely due to a sharp drop in bulk orders from churches for resources like ongoing Sunday School curriculum, Bible study materials and VBS.


"Churches and church leaders are enduring a season of heartbreak and pain," Mandrell said. "Since our mission is tied so closely to local churches, we expect the impact of COVID-19 to continue to be felt here at LifeWay as churches slowly and cautiously begin to reopen their facilities and gather in person."


Mandrell also noted the continued uncertainty over whether LifeWay would be able to host camps and other events this summer, saying LifeWay could lose "tens of millions of dollars" from those, as well as sales of VBS and other summer curriculum.


"LifeWay is mitigating these losses as much as possible through various expense reduction plans, including staff reductions and cuts in non-employee expenses," Mandrell said. "Additionally, LifeWay will likely have to use money from its reserves to cover a portion of the lost revenue."


LifeWay reported a reserve balance of $44,389,000 at the end of the 2019 fiscal year last September, with no outstanding balances on its two available lines of credit. The organization confirmed to Baptist Press the line of credit balance is now $17 million.


LifeWay announced last week it is exploring options for the sale of Ridgecrest Conference Center and Summer Camps in North Carolina due to changes in organizational strategy, rising costs and uncertainty surrounding COVID-19.


"We know these decisions will cause pain and affect every LifeWay employee in some way," Mandrell said. "But we are committed to helping our employees transition well."


LifeWay will provide a comprehensive package of benefits to those impacted by the staff reductions, including severance pay where applicable.


LifeWay currently has about 4,000 participants in its pension plan, including around 2,000 retirees receiving monthly pension checks, according to a statement provided to Baptist Press. According to the statement, "effective Dec. 31, 2019, pension benefits were frozen for active employees who were pension eligible, meaning their pension will not increase as a result of additional years of service at LifeWay."


But the statement said the pension plan would not be impacted by the budget cuts, adding:


"As evidenced by LifeWay's contribution of over $100 million to the Retirement Trust Fund since 2009, LifeWay is committed to funding the pension plan and will continue to make contributions to the Retirement Trust Fund to fund pensions."


The pandemic has magnified some challenges already faced by LifeWay in recent years and reversed headway made in addressing them. Mandrell said LifeWay leaders have been working even before the pandemic to replenish reserves and free up capital to invest in strategic areas of focus.


Mandrell said the COVID-19 crisis hit while LifeWay was still rebounding from the closing of its brick-and-mortar stores. In March 2019, LifeWay announced the closing of its retail chain due to nearly $50 million of losses from 2014-2019. While LifeWay closed its last store in November 2019, the company is still working to settle more than 30 leases.


At the February meeting of LifeWay's board of trustees, Mandrell reported LifeWay had experienced a successful transition in closing its retail chain and had seen significant growth in its direct sales channels.


Through February 2020, sales through LifeWay's direct channels were 12 percent above the same period the previous year, according to Mandrell, who added: "We were pleased with the progress we had made in a fairly short period of time."


LifeWay exceeded its first quarter revenue budget of $56 million by $600,000, or 1 percent. By the end of March, LifeWay was 3 percent ahead of budget. But when the pandemic arrived, shutting down the economy, the progress slowed and sales fell into steep decline.


"It seemed like overnight we went from serving the church gathered to serving the church scattered," Mandrell said. "I'm so proud of how quickly the teams at LifeWay came together to provide free digital resources to churches, families and individuals so discipleship could continue. "


In 2015, LifeWay sold its former campus and property in downtown Nashville for $125 million and spent approximately $100 million for land, construction, furnishings and relocation to a new campus. When employees moved into a new 277,000-square-foot, debt-free building in November 2017, it was intended to house about 1,100 corporate employees.


In an April 13 email, Mandrell told LifeWay employees the organization will begin a feasibility study of its corporate office building. Although no decisions have been made about the corporate headquarters, according to Mandrell, who added it could take several months or longer before a recommendation is made to the board of trustees, options include leasing several floors to external occupants, selling the building and leasing back office space or moving to another location.


In August 2019, LifeWay sold its distribution center in Lebanon, Tenn., for $20.1 million and is leasing back the warehouse and distribution space.


"Christ calls us to be wise stewards of all He provides," Mandrell said, "and it's fitting for us to do all we can to make the best use of our resources."


Mandrell said he and the executive leadership team had begun redefining LifeWay's mission and asking what churches really needed from LifeWay before the COVID-19 crisis hit.


"This situation has only helped to clarify the purpose of LifeWay moving forward as we seek to come alongside church leaders," Mandrell said. "The time has come for LifeWay to make bold moves to prepare for future ministry. This temporary trial does not change our mission; it merely sharpens our focus."


Carol Pipes, director of Corporate Communications for LifeWay Christian Resources, contributed to this report.

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