Fellow Members of the Naval Institute,
It has been a year since the Board asked Tom Wilkerson to assume the duties of CEO—a year of unprecedented change at the Naval Institute. With that we wanted to share with you, our valued members, the rationale for and the impact of these changes. Thus, in accordance with the Constitution, we are grateful to communicate this initial part of our annual report on the State of the Naval Institute in its 131st year of service. In January 2004 it was apparent that we were sailing into financial extremis. Since 2000, we had expended cash at the rate of almost $1M per yeara total of $4.3M in cash from our savings or portfolio, representing a 50% loss in total value. Without an immediate and dramatic course change, we were less than four years away from insolvency. We had not regularly posted a positive operating margin in either of our principal line units (Periodicals and the Naval Institute Press); our membership was in a 15-year decline; our last new product offering was 20 years ago; and our internal business processes were in need of transformation.