You are on page 1of 37

Nonprofit Finance Fund

An Independent Assessment of the Current
Financial Situation of Shakespeare &
Company, Inc.

Prepared for

Massachusetts Cultural Council
THIS ASSESSMENT REPORT DOES NOT RECOMMEND, ADVOCATE OR
SUGGEST ANY PARTICULAR COURSE OF ACTION ON THE PART OF MCC,
S&Co., THE COMMONWEALTH OF MASSACHUSETTS OR ANY OF ITS
AUTHORIZED ENTITIES OR INDIVIDUALS, S&CO.’S BANK LENDER OR
OTHER CREDITORS OR ANY OTHER INTERESTED PARTY. ANY ATTEMPT
TO PORTRAY NONPROFIT FINANCE FUND AS RECOMMENDING,
ADVOCATING OR SUGGESTING ANY PARTICULAR COURSE OF ACTION
ON THE PART OF ANY OF THESE PARTIES IS A MISREPRESENTATION
OF BOTH THE INTENT AND CONTENT OF THE ASSESSMENT REPORT.

nonprofitfinancefund.org
nonprofitfinancefund.org ©2009
©2009Nonprofit
NonprofitFinance
FinanceFund
Fund 1
Contents 

Introduction
 Objective of the Assessment
 Background
 Scope of the Assessment 
Summary of NFF’s Key Criteria for Nonprofit Financial Health and
Sustainability 
Information Relied Upon for the Assessment 
The History of Shakespeare and Company’s Current Financial
Situation 
Summary of Shakespeare and Company’s Financial History 
The Current Financial Situation of Shakespeare and Company 
Summary of the Independent Assessment of the Current Financial
Situation of Shakespeare and Company

nonprofitfinancefund.org
nonprofitfinancefund.org ©2009
©2009Nonprofit
NonprofitFinance
FinanceFund
Fund 2
Introduction

Objective of the Assessment

In its approach to this report, “An Independent Assessment of the Current
Financial Situation of Shakespeare and Company, Inc.” (“S&Co.”, and the
“Assessment”), the Nonprofit Finance Fund (“NFF”) has taken pains to provide the
Massachusetts Cultural Council (“MCC”) with an objective, factual report of the
current financial situation of S&Co.

The content of the Assessment is limited to facts and observations supported by
(i) the multi-year data we reviewed, (ii) interviews with selected S&Co. board
members and senior managers and (iii) an on-site visual inspection of S&Co.’s
property and facilities (see “Information Relied Upon for the Assessment”).

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 3
Introduction (cont’d)

Objective of the Assessment (cont’d)

This report needs be read in its entirety in order to obtain an accurate and
complete understanding of S&Co.’s current financial situation and to avoid
misunderstandings that can arise from reading isolated sections or pages without
the content or context provided by the full report.

THIS ASSESSMENT REPORT DOES NOT RECOMMEND, ADVOCATE OR
SUGGEST ANY PARTICULAR COURSE OF ACTION ON THE PART OF MCC,
S&Co., THE COMMONWEALTH OF MASSACHUSETTS OR ANY OF ITS
AUTHORIZED ENTITIES OR INDIVIDUALS, S&Co.’S BANK LENDER OR
OTHER CREDITORS OR ANY OTHER INTERESTED PARTY. ANY ATTEMPTS
TO PORTRAY NONPROFIT FINANCE FUND AS RECOMMENDING,
ADVOCATING OR SUGGESTING ANY PARTICULAR COURSE OF ACTION ON
THE PART OF ANY OF THESE PARTIES IS A MISREPRESENTATION OF
BOTH THE INTENT AND CONTENT OF THE ASSESSMENT REPORT.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 4
Introduction (cont'd)

Background

NFF has prepared this assessment report for the MCC under a contract executed
with MCC on September 9, 2009.

Although NFF is familiar with the highly regarded performances and educational
and training programs of S&Co., this report is limited to a summary of NFF's
assessment of S&Co.'s current financial situation and will not address aspects of
artistic or educational merit.

NFF observes that new events that can have an impact on S&Co.’s current
financial situation may occur after the completion of this report. Readers should
note that the facts and observations discussed in this Assessment are based on
and limited to the information identified in “Information Relied Upon for the
Assessment” in pages 8 through 11 of this Assessment report and that the
Assessment report will not reflect events that occur after the October 9, 2009
date of the Assessment report.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 5
Introduction (cont'd)

Scope of the Assessment

Specifically, the scope of this Assessment report is as follows:

“NFF will conduct an independent analysis of the current financial
situation of Shakespeare and Company, Inc. (the “Assessment”). Where
applicable, the Assessment will identify those financial requirements
(e.g., liquidity, surpluses and reserves, balance sheet strength)
necessary for a sustainable Shakespeare and Company, Inc. business
model and, to the degree possible, the potential implications of these
financial requirements for Shakespeare and Company. NFF will provide
Massachusetts Cultural Council with a report of the Assessment. This
scope of work specifically excludes the design of a sustainable business
model for Shakespeare and Company, Inc. and negotiating on behalf of
Shakespeare and Company, Inc. with third parties.”

Please note that the bulk of this Assessment focused on information pertaining to
S&Co.’s fiscal years 2004-2009 as well as information to August 2009 for S&Co.’s
fiscal year 2010 (S&Co.’s fiscal year ends on March 31, 2009). Unless otherwise
indicated, facts and observations discussed in this report may not apply to prior
S&Co. fiscal years.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 6
Summary of NFF’s Key Criteria for
Nonprofit Financial Health and
Sustainability
NFF's assessments typically examine financial and interview data to gain as
much visibility and meaning as is possible into the following key criteria for
nonprofit financial health and sustainability. A considerable portion of the
Assessment will speak to the facts of S&Co.’s current financial situation in
the context of these criteria. 

Profitability & Savings: Do operating revenues (earned and contributed) cover
operating costs? Are one-time, non-operating revenues (e.g., proceeds from
capital campaigns, debt proceeds, asset disposition proceeds and extraordinary
gifts) used routinely to fund operating deficits and balance end-of-year budgets?
Are surpluses sufficient to pay for facility replacements, renovations and
renewals? Are you generating adequate savings? 

Balance Sheet Strength: Are the size, nature and distribution of assets, net
assets and liabilities appropriate to support the organization’s business, facilities
and programs over the long term? Is there an adequate cushion of accumulated
savings or reserves to absorb risk and/or take advantage of opportunities? 

Liquidity: Is there enough cash available to cover current obligations? How
many months of expenses can current cash and investments cover? How quickly
can you convert receivables to cash? How liquid are your net assets? Is some
cash restricted or spoken for, e.g., for capital expenditures?

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 7
Information Relied Upon for the
Assessment

In conducting the Assessment, NFF relied upon the following sources of
information. Although NFF conducted as much due diligence of this
information as was feasible, it did not attempt to verify the accuracy or
completeness of any of this information as this was outside the scope and
timeframe of the Assessment.

Documents Obtained Through Public Sources or Provided by S&Co. 

FY 2004 -2008 audits 
FY 2009 draft audit 
FY 2010 budget 
FY 2010 financial statements through August 2009 
Monthly cash flow projections through March 2010 
2009 Revenue detail listing 
A copy of the Way Forward document 
The Way Forward cash flow and budget projections through
FY 2011 and proposed balance sheet restructuring 
Shakespeare & Company Campaign Overview, September 3, 2009

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 8
Information Relied Upon for the
Assessment

Documents Obtained Through Public Sources or Provided by S&Co.
(cont’d) 
Listing of Board Committees (including sitting committee members) 
Board meeting minutes from 2007 - 2009 
Details on management cuts from 2007 to 2008 
Debt principal and interest schedules 
Loan and line of credit documents 
2007, 2008, 2009 Box office reports 
Aggregate 2009 ticket sales information 
Annual capital campaign donations FY 2005 - 2009 
Current schedule of campaign pledges receivable 
Shakespeare & Company Campaign Overview, September 3, 2009

Interviews and Other Communications 
September 4, 2009 -
Preliminary due diligence call with MCC on summary
detail and urgency of S&Co.’s situation 

September 10, 2009 -
“Kickoff”/organizational conference call with representatives from S&Co., MCC,
The Commonwealth of Massachusetts, and Nonprofit Finance Fund. NFF email
to S&Co. detailing document/information required from S&Co. for the
Assessment

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 9
Information Relied Upon for the
Assessment (cont'd)

Interviews and Other Communications (cont’d) 

September 10 to September 17, 2009 –
Various emails and telephone conversations between NFF and S&Co. to clarify due
diligence documents and information sent to NFF by S&Co. 

September 17, 2009 –
Due diligence interview with Tina Packer at NFF’s Boston office 

September 18, 2009 –
Individual on-site due diligence interviews at S&Co. with Nick Puma, Richard Mescon,
Tony Simotes and Bonnie Stevens and visual inspection/tour of S&Co. property and
facilities by NFF 

September 22, 2009 –
NFF meeting with MCC at MCC offices to outline Assessment methodology and discuss
preliminary observations

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 10
Information Relied Upon for the
Assessment (cont'd)

Interviews and Other Communications (cont’d) 

September 29, 2009 –
NFF email to S&Co. for further clarification on selected data provided by S&Co. 

October 1, 2009 –
Preview of NFF technical draft Assessment report with MCC at MCC offices 

October 2, 2009 –
MCC and NFF preview of technical draft Assessment report with representatives
of S&Co.’s Board of Trustees and senior management and representatives
from The Commonwealth of Massachusetts at S&Co.’s offices in Lenox. 

October 6, 2009 –
MCC and NFF follow-up review of technical draft Assessment report
with selected representatives of S&Co.’s Board of Trustees and
senior management at MCC’s offices in Boston. Final NFF information request
presented to S&Co. 

October 9, 2009 –
NFF delivery of completed, final Assessment report to MCC

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 11
The History of Shakespeare & Company’s
Current Financial Situation

Profitability and Savings

nonprofitfinancefund.org
nonprofitfinancefund.org ©2009
©2009Nonprofit
NonprofitFinance
FinanceFund
Fund 12
S&Co.’s Operating Budget Has Ranged
Between $3.7M and $5.6M in Operating
Expenses
Income Statement Overview
($ in thousands)
6,000

S&CO.’s business
5,000 model has produced
an operating deficit
for 5 consecutive
4,000 years (2005-2009).

3,000

2,000
Operating revenue

1,000

Operating expenses
(before depreciation)
0
2004 2005 2006 2007 2008 2009

Source: S&Co. Financial Audits 2004-2008, S&Co. Draft Audit 2009

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 13
S&Co.’s Operating Deficits Have Grown at
a 14% Compound Annual Rate

Operating Surplus (Deficit) Before Depreciation
Surplus/deficit as a % of expenses ($ in thousands)
1,000
S&CO.’s operating
deficits were financed
500 15% by one-time proceeds
from non-operating
0 sources of funds such
as capital campaigns,
-5% bank debt, asset
-500 -9%
-9% disposition proceeds
and extraordinary
-1,000 gifts

-1,500 -27%

-29%
-2,000
2004 2005 2006 2007 2008 2009

Source: S&Co. Financial Audits 2004-2008, S&Co. Draft Audit 2009

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 14
Growth in Net Assets from Non-Operating
Activities Has Been Masking These Deficits

Operating Results vs. Change in Net Assets
($ in thousands)

2,000

Non-operating
1,500
activities include one-
1,000 time sources of funds
from capital
500 campaigns, debt,
asset dispositions and
0
extraordinary gifts
-500

-1,000
Operating surplus (deficit)
-1,500 before depreciation

Operating surplus (deficit)
-2,000 after depreciation

-2,500 Change in net assets
2004 2005 2006 2007 2008 2009

Change in net assets is total revenue (including restricted and non-operating) less total expenses Source: S&Co. Financial Audits
(including non-operating). The change in total net assets is an overall representation of a “bottom line.” 2004-2008, S&Co. Draft Audit 2009
Depreciation is a non-cash expense associated with reducing a fixed asset’s book value due to general
wear and tear over its defined accounting or useful life. Depreciation is only an approximation of the amount
needed to replace fixed assets.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 15
Operating Revenues Have Not Covered
Operating Expenses Since 2005

Total Operating Expenses Covered by Earned and
Contributed Operating Revenue ($ in thousands)
6,000 $5,600

$5,077
The accumulated
$4,880 operating deficit from
5,000
$4,328 $4,313 2005 – 2009 is
$4.75M
4,000 $3,726

3,000

2,000

Contributed operating
revenue
1,000
Earned revenue

0 Operating expenses
2004 2005 2006 2007 2008 2009

Source: S&Co. Financial Audits 2004-2008, S&Co. Draft Audit 2009

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 16
S&Co. Has Had A Structural Deficit Since
2005

Total Cost of All Business Activity Historically, S&Co.
$ in thousands
has failed to have
9,000 operating revenues
cover operating
8,000
expenses or to
7,000 provide for a surplus
to cover its full costs
6,000 and to produce
savings or reserves
5,000

4,000
Estimated debt
principal payment
3,000
Depreciation expense
2,000
Operating Expenses
1,000 (before depreciation)

Operating Revenue
0
2005 2006 2007 2008 2009

Source: S&Co. Financial Audits 2004-2008, S&Co. Draft Audit 2009

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 17
The History of Shakespeare & Company’s
Current Financial Situation

Balance Sheet

nonprofitfinancefund.org
nonprofitfinancefund.org ©2009
©2009Nonprofit
NonprofitFinance
FinanceFund
Fund 18
S&Co.’s Debt Load Has More Than Doubled
Since 2007 and Almost 60% is Current
Debt
Total Debt Levels
($ in thousands)
9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

Long-term debt
1,000

Current debt
0
2004 2005 2006 2007 2008 2009

Long-term debt represents obligations due in longer than one year. It includes multi-year term
loans, mortgage loans, and capitalized long-term leases. Source: S&Co. Financial Audits 2004-
2008, S&Co. Draft Audit 2009
Current debt represents obligations due in one year or less from the date of a financial
statement. It includes advances under lines of credit, notes with maturities of one year or less,
and the current portion (amount due in the next twelve months) of long-term debt.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 19
Current Liabilities Now Exceed Current Assets
by a Ratio of Almost 7 to 1

Current Assets & Liabilities
($ in thousands)
8,000
In the 2004 to 2009
7,000 timeframe, S&Co.’s
business model has
6,000 never operated with
current assets
5,000 covering its current
liabilities
4,000

3,000

2,000

1,000 Current assets

Current liabilities
0
2004 2005 2006 2007 2008 2009

Current assets are items that generally will be turned into cash, sold, or consumed Source: S&Co. Financial Audits 2004-
within one year. 2008, S&Co. Draft Audit 2009

Current liabilities are obligations that will usually be repaid within one year.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 20
Recent Construction in Progress Has
Doubled The Property & Equipment Level
Since 2007
Gross Property & Equipment (P&E)
($ in thousands)
20,000
In the fiscal year
18,000
2010 audit, this
16,000 “construction in
progress” will convert
14,000
to “building”
12,000

10,000
Vehicles
8,000
Site Development
6,000
Construction in progress

4,000 Building

2,000 Land

0 Furniture, fixtures
2004 2005 2006 2007 2008 2009

Gross Property & Equipment refers to the original acquisition cost of property & equipment, Source: S&Co. Financial Audits
the physical items an organization owns (e.g., property, building, equipment, improvements) 2004-2008, Draft Audit 2009
that cannot easily be converted to cash.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 21
The History of Shakespeare & Company’s
Current Financial Situation

Liquidity

nonprofitfinancefund.org
nonprofitfinancefund.org ©2009
©2009Nonprofit
NonprofitFinance
FinanceFund
Fund 22
S&Co.’s Operating Cash Cushion Has
Trended Down Since The Kemble Street
Purchase and is Currently at Crisis Level
Months of Expenses Covered by Cash & Investments
At Fiscal Year End
8.0

7.0

6.0

5.0

4.0
Target
comfort level
3.0 (3 months)

2.0

1.0

0.0

9
98

99

00

01

02

03

04

05

06

07

08

09

00
19

19

20

20

20

20

20

20

20

20

20

20

/2
31
7/
Source: S&Co. Financial Audits 2004-2008, S&Co. Draft Audit 2009,
S&Co. form 990 1998 - 2003

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 23
Since 2000, Cash Was Built By Non-
Operating Sources (Capital Campaigns,
and Debt) and Spent On Facilities
Months of Expenses Covered by Cash & Investments
At Fiscal Year End
8.0
$4.1M Construction on
purchase of Bernstein
Founders
70 Kemble Theatre begins
Theatre, Sold 30.14 Acres
7.0 St
including Spring December 27th
Spring Lawn
Theatre Lawn Theatre for
Bridge LOC
completed $3.9M (3.3M cash
2.250M
6.0 received). Majority
Moved to 70 received from
of cash was used
Kemble St. bank lender
to pay down Refinanced January 30
existing debt debt with bank
5.0 Began $5M lender to 30 yr
Capital mortgage for
Campaign for $3.25M.
4.0 Elayne P. Capital
Bernstein Campaign
Theatre goal raised to
$7.5M Capital
3.0 Campaign goal
raised to $10M

2.0 Bank LOC
S&Co. board increased to
requested 4.5M
theatre
1.0 Changed fiscal construction
year to April1- be finished
March 31 by June
0.0

9
98

99

00

01

02

03

04

05

06

07

08

09

00
19

19

20

20

20

20

20

20

20

20

20

20

/2
31
7/
Source: S&Co. Financial Audits 2004-2008, S&Co. Draft Audit 2009,
S&Co. form 990 1998 - 2003

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 24
Summary of S&Co.’s Financial History 

S&Co. is in a cash crisis that is a result of several years of operating deficits and
heavy borrowing for property and facilities. 

S&Co. has recorded 5 years of consecutive operating deficits that have increased
each year and effectively eliminated S&Co.’s liquid (usable) net worth. 

S&Co. has also acquired a great deal of property very quickly, while it has lost
substantial liquid (usable) net worth. 

Since 2005, S&Co.’s operating revenues have not been sufficient to cover operating
expenses due to a heavy debt load from property acquisition and facility renovations
and a business model whose costs have been too high to be sustained by the revenue
it can produce. This has resulted in an accumulated operating deficit of $4.75M.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 25
Summary of S&Co.’s Financial History
(Cont’d) 

S&Co. took steps to supplement its operating revenues during this period with its
plan for a “Bridge Fund/Programmatic Support” component of $1M in its
comprehensive campaign. The intent of this was to provide interim funding to support
the organization’s programs until “the production, training, education and capital plan
come together to fully realize the Company’s strategic vision and business plan”
(Shakespeare & Company Campaign Overview, September 3, 2009). S&Co.’s actual
operating deficits during this period were $4.75M, or $3.75M more than the “Bridge
Fund/Programmatic Support” component of the campaign provided for. 

S&Co. has funded its serial deficits and balanced end-of-year budgets with one-time,
non-operating sources of cash. These sources have included (i) borrowing from
money raised for capital expenditures, (ii) taking on additional bank debt, (iii) selling
an asset (land) and (iv) soliciting extraordinary gifts.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 26
The Current Financial Situation of
Shakespeare & Company

nonprofitfinancefund.org
nonprofitfinancefund.org ©2009
©2009Nonprofit
NonprofitFinance
FinanceFund
Fund 27
Even With Cost-Cutting to Date, S&Co. Will
Not Generate Revenues to Cover Its Costs
to March 31, 2010
Projected 2010 Deficit
$ in thousands
5,000
4,597 At August 31, 2009,
4,500 Shakespeare &
3,865 Company’s 4-month
4,000
Profit & Loss showed
3,500 a deficit of $334,500
before depreciation.
3,000
The full year
2,500 projection shows a
deficit of $732,300
2,000

1,500
Projected operating
1,000 revenue

500 Projected operating
expense
-

Source: S&Co. “Summary Statement of
Activities FY 2011 Special Budget Analysis”

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 28
Without Approximately $2.3M in
Immediate Cash, S&Co. Will Run Out
of Funds for Short-term Operations
Current, Projected Months of Expenses Covered by Cash

5.00

3.00

S&Co. board Court decision
1.00 requested due for $823K
theatre contractor
0 Refinanced construction lawsuit
debt with bank be finished (December
by June 2009) One full year of
lender to 30 yr
(1.00) mortgage for debt service is
Construction Capital due at $504K
$3.25M.
on Bernstein Campaign goal
Theatre raised to $10M $44,276 cash Ending cash
Capital begins balance at balance
Campaign December 7/31/2009 ($813K)
(3.00) 27th
Bank LOC
according to
goal raised to increased to
$7.5M 4.5M cash flow
Bridge projections
LOC 2.25M
received from
(5.00) bank lender
January 30

(7.00)
2007 2008 2009 7/31/2009 3/31/2010

Source: S&Co. Financial Audits 2007-2008, S&Co. Draft Audit 2009,
interviews with S&Co.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 29
Short-term Solvency Will Also Likely
Require up to ~ $8.15M of Replacement
Funding for Balance Sheet Restructuring

Shakespeare & Company Debt

12,000
S&Co.’s bank lender required
S&Co. to prepay principal and
10,000
interest due on its loans
through March 31, 2010 and
8,000 holds $1.22 M in S&Co. funds
as additional security for this
debt. Currently, it does not
6,000
appear that S&Co. will have
cash from its operations to
8,146 pay principal and interest on
4,000
the debt to its bank lender
beginning April 1, 2010.
2,000

0
Existing S&Co.balance sheet debt

Source: S&Co. Draft Audit 2009

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 30
For Solvency to April 1, 2010 S&Co.
Will Likely Need a Total of Up to
~ $10.45M in Cash and Replacement Funding

Cash and Replacement Funding Needed
This is the Subtitle
12,000
The required replacement
funding would not be in
10,000 addition to the debt currently
2,300 on S&Co.’s balance sheet.
This ~ $8.15 M would be used
8,000
to replace the existing
~$8.15M in S&Co. debt such
6,000 that S&Co. would be able to
pay principal and interest on it
with operating funds produced
4,000 8,146
from a more extensively
restructured business model.
2,000
Cash
Replacement funding

0

Source: S&Co. Draft Audit 2009

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 31
In Addition to the ~ $10.45M, Solvency &
Sustainability Require a Business Model
With a Sustainability Surplus

Illustrative S&Co. Breakeven Model with Sustainability
Surplus
The break-even operating
6,000
business model and facility
reserve shown are
5,000 illustrations. A consulting
engineer should conduct an
? assessment of S&Co.’s
4,000
facilities to determine an
appropriate annual deposit to
3,000
the facility reserve for S&Co.

Additional facility reserve

2,000 3% Surplus

Depreciation
1,000
S&Co. balanced budget
operating expenses

0

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 32
Summary of the Current Financial
Situation of S&Co.

There are 4 potential scenarios that could conceivably arise over the next six
months, depending on S&Co.'s ability to raise cash of approximately $2.3M that
it currently does not have. Each of them leads to a critical solvency juncture for
S&Co. sometime between now and April 1, 2010. 

Cash is insufficient to make payroll sometime in October 2009 or November 2009. 

Cash is sufficient to make payroll to December 2009, but insufficient to satisfy S&Co’s
largest capital payable. This creditor prevails legally (a December resolution is
anticipated by S&Co.) and the creditor forces S&CO.’s bank lender to exercise its rights. 

Cash is sufficient to get S&Co. through December 2009, but it is insufficient to make
payroll sometime in January 2010 or February 2010. 

Cash is sufficient to make payroll through March 31, 2010 and satisfy the largest capital
payable. Prepaid debt service to S&Co.’s bank lender is expended at March 31, 2010,
and cash is insufficient for FY 2011 debt service payments on either a current or
prepaid basis.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 33
Summary of the Current Financial
Situation of S&Co. (cont’d)

Requirements for S&Co.’s Short-term Solvency (to March 31, 2010) 

Assuming that there are no material changes to the current timing and amount of
S&Co.’s existing obligations, it appears that S&Co. can only continue operations
on its own in the short term (through March 31, 2010) if approximately $2.3M in
cash is raised in very short order. 

S&Co.’s ability to raise the cash necessary to continue operations in the
immediate term will likely also require that S&Co. immediately produce the
following items or their functional economic equivalent: (i) at a minimum, show
evidence that it has firm commitments for up to ~ $8.15M in replacement funding
to restructure a significant portion of its ~ $8.15M balance sheet debt and (ii)
present an achievable and credible plan for a business model that is more
extensively restructured so that it can reliably produce operating revenues that
(a) cover operating expenses and (b) provide for sustainability surplus to cover
renewals, replacements and renovations to facilities (facility reserve) and
reasonable savings to rebuild its balance sheet risk cushion.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 34
Summary of the Current Financial
Situation of S&Co. (cont’d)

Requirements for S&Co.’s Short-term Solvency (to March 31, 2010)
(cont’d) 

In summary, the continuation of S&Co.’s short-term operations (through March
31, 2010) is likely to depend on three things (or their functional economic
equivalent) all happening immediately: (i) raising approximately $2.3M in cash it
currently does not have, (ii) obtaining sources of replacement funding to
complete a significant balance sheet restructuring and (iii) presenting a more
extensive business model restructuring that demonstrates S&Co.’s ability to cover
the full costs of its business operations and to provide for a reasonable
sustainability surplus.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 35
Summary of the Independent
Assessment of the Current Financial
Condition of Shakespeare and Company

nonprofitfinancefund.org
nonprofitfinancefund.org ©2009
©2009Nonprofit
NonprofitFinance
FinanceFund
Fund 36
Requirements for S&Co.’s Solvency and
Sustainability 

Immediate cash of approximately $2.3M to support ongoing operations
through March 31, 2010. 

Immediate replacement funding (or its functional economic equivalent) of
up to ~ $8.15M to restructure the balance sheet. 

An immediate, more extensively restructured business model.
 Operating revenues cover operating costs
 Plus a sustainability surplus for savings and a facilities reserve in an
amount that needs to be determined through facilities studies by a
consulting engineer (the sustainability surplus could range from
several hundred thousand to over $1M annually). 

Potential Alternatives – dissolution or bankruptcy.

nonprofitfinancefund.org ©2009 Nonprofit Finance Fund 37