'We're all broke'

The signs outside the one-story blue-and-cream building in a dusty shopping strip on South Bridge Street, a couple of blocks off U.S. 40 in the northeastern Maryland town of Elkton, tell the story: "SALE-Retail Store Closing" and "LEASE-Space Available." As if a silent commentary, on a sign next door is "HARD TIMES," the name of a fitness center.

Inside the store-all that remains of the nearly 30-year-old Great Christian Books (GCB) national mail-order enterprise-is a lone worker tending the cash register and an occasional customer browsing through the "30% off discounted price" clearance merchandise.

The lone worker is a round, bearded, balding man, Phillip Hibbard, 40. He was GCB's president until it was forced out of business at the end of 1998. A local bank, GCB's prime secured creditor (owed $1.1 million), kept him on to liquidate what was left-an estimated $200,000 in inventory. He says he doesn't know when the bank will finally call it quits and lock the doors.

GCB is the only work Mr. Hibbard has known since his father, Walter, left now-defunct Religious Books Discount House in nearby Wilmington, Del., in 1970 to organize his own similar but more focused business, Puritan and Reformed Books. He switched its name to GCB in the 1980s and became chairman after naming his son president. Walt Hibbard belongs to an Orthodox Presbyterian church; son Phil is Reformed Episcopal.

When asked to explain what happened to GCB and to comment on pending lawsuits by creditors, Phil Hibbard became teary-eyed and choked with emotion. He referred all questions to "majority owner" William Wallace, who had an office in a nearby building. Many 1998 lawsuits by creditors on file at the district and circuit courts in Elkton are marked as settled. "The firm has no money; it can't pay," GCB attorney William Riddle explained. Trials were pending in circuit court over unpaid loans the Hibbards solicited from friends last year in a futile bid to save the business.

Between bites of grilled chicken salad at a restaurant across the street, Will Wallace, 56, told his story. He retired early from real estate development in the Seattle area. Active in pro-life and renewal efforts in the Presbyterian Church (U.S.A.), he explored ministry-related business opportunities. He contemplated opening a Christian bookstore and attended Christian Booksellers Association seminars. His and Walt Hibbard's paths crossed. GCB, grossing several million dollars per year, had growth potential but needed more capital. In 1994, Mr. Wallace refinanced the company to the tune of $1.25 million and moved to the Elkton area. He had his eye on the rapidly expanding homeschooling market. Few distributors were servicing it.

Sales took off. In 1997, $18 million worth of orders poured in (up from $4 million in 1994), many of them for homeschooling materials through GCB's Homeschool Warehouse division. But, said Mr. Wallace: "We grew too fast. We weren't prepared. We were doing everything in-house, and we couldn't handle the volume." GCB executives hustled to lease more warehouse space and plug holes with new hires. At its zenith, GCB employed 85 full-time staff and about that many part-time and seasonal workers.

Worse, GCB's suppliers were hard pressed to keep up, too. Millions of dollars worth of back-orders piled up, Mr. Wallace said. Many people canceled and requested refunds. Shipping costs eroded profits further. On regular orders, customers paid for shipping, but on back-orders, GCB paid. For a discount company already operating on thin profit margins, the cancellations, refunds, and shipping costs spelled disaster. Of the $18 million in orders in 1997, the company was able to fulfill only about $12 million worth, Mr. Wallace estimated. Things skidded downhill rapidly in 1998. There wasn't enough money to pay staff and suppliers or to fulfill refund demands, and the bank finally intervened.

Customers complained they sent checks with orders as late as last November, at a time when GCB knew it could not deliver the goods. Why, they asked, did GCB cash the checks instead of returning them?

Mr. Wallace said negotiations for new financing continued into late fall, and GCB kept on taking back-orders in anticipation that the funding would come through. Charge-card orders were halted at the end of October. The company kept taking orders for merchandise in stock but in November ran out of money for shipping. Many customers were left with neither the products they ordered nor a refund.

Pushing away from the table, Mr. Wallace shrugged and said: "We're all broke." He said he and the Hibbards together personally had lost nearly $500,000. He and other former executives, he added, are collecting state unemployment benefits.

Mr. Wallace is looking for investors to help launch a new company to service the booming homeschooling market "before the opportunity slips away entirely." Lessons learned from mistakes at GCB would include out-sourcing fulfillment and other operations, he said. In time, he believes, the new company could gain the respect and credibility he and the others at GCB once had.

But so far, there are no takers. And the "Hard Times" sign remains in place in Elkton.