A first-quarter turnaround should carry into the second quarter as eChapman Inc. benefits from stronger marketing and continued cost-cutting, Chairman and Chief Executive Officer Nathan A. Chapman Jr. told shareholders at the Baltimore-based firm's annual shareholders meeting yesterday.
"Going forward, we expect substantial benefit from our ability to reduce our costs and as we continue to [market] our product" with a radio advertising campaign, Chapman told the half-dozen outside shareholders who attended the meeting at the firm's 28th-floor headquarters in Baltimore's World Trade Center.
eChapman reported a first-quarter profit of $245,000, compared with a $1.6 million loss in the corresponding quarter a year ago. Chapman told shareholders yesterday that - with three weeks to go until the second-quarter's close - the company should better last year's showing, when it incurred a second-quarter loss of $544,000.
(For all last year, eChapman had an operating loss of $4.3 million and a net loss of $11.6 million. Its net loss for 2000 was $3.5 million.)
Chapman articulated a straightforward turnaround strategy: cut costs and increase revenues. But the company has to execute on this plan, Chapman told shareholders.
To add to already-discovered cost savings, eChapman is trying to renegotiate lease rates in all its other locations and is looking to leave downtown. In one section of its headquarters sits row after row of empty desks, their desk lamps dark and computer screens turned off.
Chapman said the company is looking at three locations in Howard County, where lease costs would drop by at least two-thirds.
Even as it cuts costs, eChapman has revved up its marketing program. It intends to spend $1.25 million to promote its trademarked Domestic Emerging Market stock mutual fund on Radio One-owned radio stations, which target urban audiences. The campaign - which started last month and is to run to September - is aimed at boosting assets under management, a key way eChapman generates fee revenue, Chapman said.
At the meeting, several shareholders expressed concerns about the Securities and Exchange Commission investigation that caused the state pension board to drop eChapman this year as manager of about $175 million in retirement funds.
Two fund managers chosen by the company's money-management arm had invested state pension money in the shares of eChapman as part of an initial public stock offering in 2000. That's attracted SEC scrutiny.
Chapman told shareholders the company has complied with all SEC requests for information but said he could provide no details, nor say how he expects the investigation to turn out. However, Chapman did say that "we have not been charged or accused with anything."
Chapman also repeated a vow from this week that the company would contest a move by the Nasdaq National Market System to remove eChapman's stock listing because its sub-$1 share price was violating listing requirements. eChapman has requested a hearing before the Nasdaq, Chapman said.
The firm's stock closed at 19 cents a share yesterday, up 2 cents. Its IPO price was $13.
Two shareholders - both members of the Friends and Sisters Investment Club of Fort Meade - said that they were satisfied with Chapman's report on the company. The investment club holds 200 eChapman shares.
"He seemed to deal with a lot of the issues very well," said Leatha Jones of Severn. "I think everything's going to be OK."
Chapman was paid $320,158 in salary last year, down from $353,300 in 2000, according to the company's proxy statement. He received no performance bonus last year - after getting $200,000 in 2000 - and was awarded no stock options.
As of April 15, he remained the largest single stockholder, holding 72.9 percent of the 12.281 million shares outstanding.