'Bleak picture' in Lenox
"I have to say this is a bleak picture," said Tony Simotes, the artistic director of the Lenox-based theater company.
Simotes, who took over for Tina Packer earlier this year, said the year-round company will help its bottom line by producing about half as many shows next year as will be done this year.
The financial analysis released Tuesday was performed at Shakespeare & Company's request by the Nonprofit Finance Fund under the auspices of the Massachusetts Cultural Council.
The Nonprofit Finance Fund examined Shakespeare & Company's business model since 2004, and reported that it has produced an operational deficit for five consecutive years totaling $4.75 million.
The report also said the debt of the 32-year-old theater company has more than doubled since 2007, and the company's current liabilities exceed assets by a ratio of almost 7 to 1.
According to the report, Shakespeare & Company's debt problems stemmed from "several years of operating deficits and heavy borrowing for property and facilities" and acquiring a "great deal of property very quickly" while losing substantial net worth.
The company bought its property at 70 Kemble St. for $4.1 million in 2001 and launched construction of the $7.5 million Elayne P. Bernstein Theatre last year.
The company also runs a business model in which costs cannot be sustained by revenues, the report stated.
"They're in a very urgent and severe situation," said Anita Walker, director of the Massachusetts Cultural Council. "They've got quite a few issues that need to be addressed and, in a way, they all need to be addressed simultaneously."
The report recommends that Shakespeare & Company needs to raise $2.3 million by March 31 to cover its operating expenses, prove it can secure an additional $8.15 million in long-term funding, and produce an extensive, restructured business model.
If those don't happen, the report says, the potential alternatives are "dissolution or bankruptcy."
"I think [the report] is the basis on which they can craft an effort to move forward," Walker said. "Obviously, everyone is concerned with Shakespeare & Company. It is a really important cultural asset in the Berkshires."
The study found that the company balanced its budgets by taking on additional bank debt, selling a portion of its property, and soliciting donations. In addition, funds were borrowed from its current $10 million capital expenditure campaign to meet operational expenses.
"Every year we were saying that was wrong to do, we're not going to do it again -- and then we did it again," Richard Mescon, chairman of the Shakespeare & Company's board of trustees, said in reference to the company's financial practices in recent years.
Simotes said the company "is looking to atone for what was happening in the past" after struggling to adapt to its operational budget after buying its Kemble Street facility in 2001.
He also said there is no "magic bullet," since the company needs to rely less upon donors and won't seek any kind of bailout from the state.
The group met with State Rep. William "Smitty" Pignatelli, D-Lenox, for two hours earlier on Tuesday. Pignatelli said the board needs to make "very aggressive, bold internal decisions." And while he remains optimistic they will, he added: "If they don't, I hate to think what could happen in the long term."
Earlier this year, the company instituted a hiring freeze, laid off seven full-time employees, and cut all salaries by 10 percent.
Administrators now will look to go beyond those measures, including making some full-time employees seasonal, looking at sharing its facility with other organizations, and producing only 10 shows next year, compared with the 18 it will do this year.
Simotes said Shakespeare & Company also is in the process of restructuring its bank debts of $6.8 million.
Simotes said he won't be "the person manning the ship when it's going down" because he intends to help solve the problem.
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