USCF NEARS BREAKEVEN FOR YEAR

The US Chess Federation has reported a $44,517 profit for March, reducing the  loss for the fiscal year ending 5/31/03 to $16,455.   Membership revenue for the month was $245,193 compared to a budgeted $182,350, a sign that the dues increases approved at last year's annual meeting are proving financially beneficial. 

As all prior USCF dues increases over a history of 36 years have had a positive financial result, it is not surprising that this is happening again.  The dues have never shown much cost sensitivity, and after six consecutive years of losses, it would have been unwise for the delegates to continue with the existing structure.  What is astonishing, though, is that in their campaign statements in the May Chess Life, two Executive Board candidates, Hanke and Sloan, are actually calling for adult dues to be reduced! This position is highly irresponsible, though it may be popular with voters looking to save money on their memberships.      

The 10-month results are $38,532 ahead of budget, and with over $50,000 budgeted surplus for the final two months, it appears likely that the fiscal year will finish in the black, at least in the unaudited reports.

If the federation shows a profit for the fiscal year, it will be the first time that has happened since 1995-1996.  It should be kept in mind, though, that the final audited figures have sometimes been disappointing, and that even some audited results have later been negatively revised (notably for 2000-2001, when an audited $14,000 profit was reported which was later found to be a six-figure loss).  

The following report is by USCF Executive Director Frank Niro.

U.S. CHESS FEDERATION
FINANCIAL REVIEW

During the month of March, the USCF experienced an operating gain of $44,500 compared to a gain of $13,000 last year and a budgeted gain of $55,200. The year-to-date (ten months) loss is $16,500 compared to a loss of $141,000 during the same period last year. The budgeted loss for the first ten months of the fiscal year was $55,000, resulting in a favorable year-to-date variance on the bottom line of $38,500.

Total revenue for the month was $570,200, which was $150,400 more than last year and $42,100 (8%) ahead of budget. Memberships were ahead of budget for the month by $62,800. Please note that the budgeted membership amounts for January through May do not include any impact of the dues increases. Below is a summary of memberships processed during the past 25 months, comparing renewals to new memberships:

MONTH   NEW MEMBERS   RENEWALS   TOTAL
March 2001         4,308                     5,168             9,476
April                     2,971                    3,772             6,743
May                     1,955                     2,910             4,865
June                     1,633                     3,069             4,702
July                      1,112                     2,878             3,990
August                 1,376                     2,819             4,195
September           1,337                     2,922             4,259
October               2,714                     3,952             6,666
November            3,839                     4,062             7,901
December            4,074                      3,684             7,758
January 2002        3,292                     4,819             8,111
February              4,717                     5,255              9,972
March                  3,956                     4,490              8,446
April                     4,256                     4,395              8,651
May                     2,181                     3,068              5,249
June                     1,687                     2,505              4,278
July                      1,383                     2,912              4,295
August                 1,427                     2,775              4,202
September           1,951                     3,504              5,455
October               3,516                     3,571              7,087
November            4,257                     4,076              8,333
December             4,971                     5,664            10,635
January 2003        3,251                     3,880              7,131
February               4,085                     3,602              7,687
March                   4,199                     5,012              9,211

Net Sales Revenues for the month were below budget by $2,100. Net Sales for March were $225,900 compared to $173,400 last year, an increase of 30%. Including in these amounts were sales from the concessions at the National High School tournaments in Louisville, KY (2002) and Columbus, OH (2003) totaling $32,300 and $30,100, respectively. The slight decrease was not unexpected because of a decline in attendance resulting from the start of the war in Iraq just prior to the tournament. There were more than 100 last-minute entry cancellations. Nevertheless, the tournament was profitable. On a year-to-date basis, Total Revenues are $1,225,100 ahead of last year ($731,800 from Sales) and $423,900 ahead of budget (10%).

Net Sales for the first ten months of the fiscal year were $159,500 (8%) above budget. This can be accounted for by our strategic partnership with Classic Games, which was $261,000 (12% of net sales). In order to be conservative in the budgeting process, none of the revenue from this partnership was included in the original budget. Without the Classic Games revenue, the year-to-date variance in net sales would be unfavorable by $101,500.

Classic Games Partnership Sales

June 2002 $5,600 $5,600
July 2002 6,600 12,200
August 2002 8,200 20,400
September 2002 8,200 28,600
October 2002 36,700 65,300
November 2002 45,300 110,600
December 2002 61,400 172,000
January 2003 37,900 209,900
February 2003 20,800 230,700
March 2003 $30,300 $261,000

Total Back Orders as of 3/31 are $13,600, which is the lowest amount in more than a year and a half. There are no vendors who have placed USCF on credit hold at this time, and no accounts payable over 60 days outstanding as of March 31, 2003. A major effort will be made during April to improve internal systems with the objective of accelerating payments to Chess Life contributors, concession partners, and USCF volunteers and staff for their expense reimbursements.

Total operating expenses for the month of March were $376,200 compared to $274,200 last year and $338,300 as budgeted. Despite the fact that sales were $52,500 higher this year, the amount recorded for Cost of Sales in February was only $16,900 higher than the amount recorded last year. As stated last month, this is because of the discrepancy in inventory determined as of January 31, 2002, which resulted in adjustments to net purchases and indirect sales expenses in February thorough May of 2002. A complete physical inventory was taken as of February 28, 2003, resulting in a minimal adjustment (less than $4,000). As a result, Management is confident that the Cost of Sales estimates this year are reasonable and the methodology can be relied upon through the rest of fiscal 2003.

With respect to the budget, the principal causes of the unfavorable aggregate variance of $37,800 in operating expenses during March were as follows:

1. Chess Life Mailing ($9,900) – The favorable variance in School Mates printing, mailing and contributor fees ($6,000) partially offset this amount, with an aggregate favorable variance in total magazine expenses of $2,100. Following is a summary of the budgeted and projected actual magazine expenses for the remaining three months of the year:

Month Budget Projected Actual Anticipated variance

Year-to-date thru 2/28 $592,440 $620,460 $28,020
April 2003 56,280 50,240 (6,040)
May 2003 56,280 66,300 10,020
Total $705,000 $737,000 $32,000

2. Catalog printing and mailing - $6,900 unfavorable variance in printing and $23,800 unfavorable variance in mailing. As noted elsewhere, none of the partnership expenses with Classic Games were included in the original budget, including the expanded B+E Holiday Catalog. In general, printing costs of the catalog were allocated 50% to October, 30% to November, and 20% to December. One printing invoice was allocated 50% to November, 30% to December, and 20% in January. The year-to-date variance in catalog printing is unfavorable by $48,700. Note that catalog mailing costs were expensed in the month incurred. The year-to-date variance in catalog mailing is unfavorable by $8,600 and the variance in shipping supplies is favorable by $17,200, resulting in an overall unfavorable books & equipment expense variance of $40,000 through March 31, 2003. Please note that the new catalog (64 pages) will be in the May issue of Chess Life, mailed in early April. The postage bill for the new catalog was paid in March. The printing bills will be allocated over three months as was done with the holiday catalog.
3. Personnel Expenses - $17,800. This represents additional staff and overtime to accommodate the increase in B+E sales volume and related payroll taxes & benefits. In particular, some overtime was necessary to produce the new Spring B+E Catalog. The budget for fiscal 2003 was a baseline budget assuming substantially the same level of activity as last year. The year-to-date variance in Salaries & Wages is unfavorable by $98,300 (9.7%). This is consistent with our expectations as a result of increased activity and volume. Of particular concern in the personnel area is Health Benefits, which are over budget by $19,300 (19.1%) and ahead of last year by $41,500 (52.7%).

Please note that Salaries & Wages paid to staff have been declining each month since October. This is a result of a conscious effort by management to reduce staff levels and overtime. With the exception of one Senior Staff position, there has not been a formal lay-off. However, the staff has been reduced wherever possible by attrition. Non-essential overtime has been restricted significantly.

Following is a summary of Salaries & Wages over the past six months. As can be seen, the impact of cuts that have been made is reflected in the most recent numbers:

MONTH SALARIES & WAGES PAID
October 2002 $124,208
November 2002 118,877
December 2002 117,986
January 2003 115,888
February 2003 104,630
March 2003 97,829

4. Total General & Admin. Expenses - $17,100. This variance is mostly a timing variance as members of Senior Staff have been encouraged to get caught up with submission of travel expense reports resulting in several months of expenses recorded in March. We are confident that these expenses are up-to-date at this point and will not represent a potential surprise at year-end. Additionally, postage expenses were over budget by $2,900 for the month, but seem to be in line on a year-to-date basis.
5. Tournament Expenses – under budget by $23,100. This variance is related to the closing out, for accounting purposes, of the spring national tournaments. Correspondingly, Tournament Revenue was under budget by $18,100. Please note that the National Open, held during March in prior years, will not be held until June this year.

Total year-to-date operating expenses through March 31,2003 are $3,387,400 compared to $2,871,300 last year ($516,100 increase) and $3,184,000 as budgeted ($203,400 unfavorable variance).

Following is the seasonally adjusted budget, spread by month, as previously presented:

June 2002 7.1% $170,400

July 2002 7.0% 168,000

August 2002 7.4% 177,600

September 2002 6.7% 160,800

October 2002 8.4% 201,600

November 2002 10.4% 249,600

December 2002 11.0% 264,000

January 2003 7.9% 189,600

February 2003 7.8% 187,200

April 2003 8.8% 211,200

Annual Total 100.0% $2,400,000

For the ten months ended March 31, membership revenues are 8.6% ahead of last year and 10.7% over budget. The number of Total Paid Memberships, not including Affiliates, as of 3/31/03, is 94,583. This is lower than last month’s record (95,388), but 6.8% higher than May 31, 2002 (89,282). The Total Members, which includes Affiliates, is 98,100. A comparison March membership statistics by category compared to last month and last year follows:

Life 10,610 10,623 10,606 + 17 ---

Regular Adult: *

Full 24,808 24,283 25,635 - 1,352 (5%)

Economy 369 402 279 + 123 +44%

Total 25,177 24,685 25,914 - 1,229 (5%)

Senior 3,175 3,178 3,263 - 85 (3%)

Sustaining 403 390 446 - 56 (13%)

Youth 12,661 12,658 12,209 + 449 +4%

Scholastic:

Full 40,641 37,969 38,323 - 354 (1%)

Economy 2,025 4,282 0 +4,282 ---

Total 42,666 42,251 38,323 +3,928 +10%

Family 478 454 506 - 52 (10%)

Special (Blind & Prison) * 185 276 44 + 232 +528%

Trial & Computer 33 28 44 - 16 (36%)

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Total Paid Memberships 95,388 94,543 91,355 +3,188 +3%

Regular Affiliate 725 720 694 + 26 +4%

College Affiliate 65 67 60 + 7 +12%

High School Affiliate 1,262 1,248 1,164 + 84 +7%

Prison Affiliate 30 30 43 - 13 (30%)

State Affiliate 49 50 49 + 1 +2%

Tournament 122 119 122 - 3 (2%)

Junior Tournament 26 29 8 + 21 +263%

Chess Life Subscriber 1,128 1,189 1,077 + 112 +10%

School Mates Subscriber 67 60 98 - 38 (39%)

Exchange 45 45 45 --- ---

Non-member 0 0 10 - 10 (100%)

-----------------------------------------------------------------------------------------------------------------Total All Categories 98,907 98,100 94,725 +3,375 +4%

* Prisoners were shifted from regular adult and combined with blind members to form a new ‘special’ category beginning in January 2003.

An eight-year comparison of key membership categories as of 3/31 each year follows:

Life 10,114 10,246 10,422 10,560 10,518 10,528 10,606 10,623 +509 +5%

Regular Adult 32,047 30,519 29,658 28,772 28,135 26,940 25,635 24,283 -7,764 -24%

Scholastic 27,179 28,216 29,517 29,112 31,749 35,489 38,323 42,251 +15,072 +55%

Total Paid 84,327 85,107 86,594 86,615 88,834 90,385 91,355 94,543 +10,216 +12%

Total All 88,150 89,092 90,678 90,378 92,964 94,139 94,725 98,100 +9,950 +11%

Following are ‘Orders Processed’ by week through the end of March:

August 5-10, 2002 329 408 - 81 - 20%

August 12-17, 2002 456 402 + 54 + 13%

August 19-24, 2002 538 392 +146 + 37%

August 26-31, 2002 433 372 + 61 + 16%

September 2- 7, 2002 614 424 +190 + 45%

September 8-14, 2002 345 309 + 36 + 12%

September 15-21, 2002 557 313 +244 + 78%

September 22-28, 2002 528 367 +161 + 44%

Sept. 30-October 4, 2002 482 379 +103 + 27%

October 7-12, 2002 478 442 + 36 + 8%

October 14-19, 2002 524 486 + 38 + 8%

<New Catalog Arrived Here>

October 21-26, 2002 894 518 +376 + 73%

Oct. 28-November 2, 2002 701 523 +178 + 34%

November 4- 9, 2002 827 472 +355 + 75%

November 11-16, 2002 657 564 +93 + 16%

November 18-23, 2002 875 343 +532 +155%

November 25-30, 2002 851 869 -18 - 2%

December 2- 7, 2002 976 712 +264 + 37%

December 9-14, 2002 1,346 829 +517 + 62%

December 16-21, 2002 1,009 436 +573 +131%

December 23-28, 2002 518 419 + 99 + 24%

Dec. 30, 2002-Jan. 4, 2003 440 268 +172 + 64%

January 6-11, 2003 565 462 +103 + 22%

January 13-18, 2003 618 500 +118 + 24%

January 20-25, 2003 558 473 + 75 + 16%

January 27 – Feb. 1, 2003 632 313 +319 +102%

February 3- 8, 2003 623 607 + 16 + 3%

February 10-15, 2003 594 349 +245 + 70%

February 17-22, 2003 557 388 +169 + 44%

Feb. 24 – Mar. 1, 2003 627 300* +327 +109%*

March 3- 8, 2003 515 589* - 74 - 13%*

March 10-15, 2003 570 340 +230 + 68%

March 17-22, 2003 517 403 +114 + 28%

March 24-29, 2003 437 310 +127 + 41%

March 31 – Apr. 5, 2003 462 342 +120 + 35%

Past 15 weeks --

(Post-holiday weekly avg.) 549 404 +145 + 41%

*Note: Difference apparently due to month-end sales cut-off problem in prior year.

The audited financial statements for the fiscal year ended May 31, 2002 have been delivered and are posted on the USCF web site. The required form 990s for 2001 (fiscal year ended May 31, 2002) were filed prior to the extended deadline granted by the I.R.S. Copies are available upon request (845-562-8350, ext. 138).

Cash flow remained steady during March, bolstered by the entries and new memberships for the spring national tournaments. As a result, Accounts Payable have been reduced to $242,500 by the end of March.

Respectfully submitted,

Frank A. Niro,

Executive Director

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