Former SEC Chair Arthur Levitt Verifies $273 million in NHL losses. (a review only)

Discussion in 'The Business of Hockey' started by Jean Beliveau, Mar 1, 2005.

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  1. Jean Beliveau

    Jean Beliveau Registered User

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    I just tought that it might be a good idea to look at this report one more time and realize that if this report is accurate (and I believe that it is) Bob Goodenow and his PA cronies have lost us 1 year or more of hockey as well as losing themselves over 1 billion dollars. was it for pride only?

    http://nhl.speedera.net/images/levittreport.pdf
    --------------------------------------------------------------------------------


    NEW YORK - Former U.S. Securities & Exchange Commission Chair Arthur Levitt warned today that the National Hockey League's losses of $273 million on revenues of $1.996 billion, sustained during the 2002-03 season, threaten the viability of the League.

    The warning is contained in an independent study of NHL finances, conducted by Mr. Levitt and released publicly today. The report was submitted to the NHL's Board of Governors, February 7.

    Levitt's report, following an intensive 10-month study, was compiled with the assistance of former SEC Chief Accountant, Lynn Turner as well as Eisner LLP an accounting firm nonconflicted by any other professional hockey clients.


    The 24 page study (plus 11 exhibits) reveals that 19 of the League's 30 teams had operating losses in 2002-2003 averaging $18 million and that only 11 teams were profitable averaging $6.4 million in profits.

    "On the basis of our examination, I believe that all elements of revenue and expenses reported by the teams, League and affiliated entities have been appropriately accounted for and reflect an accurate picture of the League's condition."

    "I am satisfied," said Levitt, "after more than 2000 hours of analysis, interviews, club visits and benchmarking verifications that the present business model of the National Hockey League is not economically viable.

    Player costs of 75% of revenue clearly diminish any possibility of restoring a feasible business model."

    Mr. Levitt's report included a comprehensive review of all 30 teams in the League. The review included audits of the NHL's member teams, including supplementary audits of their reports to the NHL as well as an extensive benchmarking study of revenues and expenses reported to the NHL by its member teams. In addition, as he deemed necessary, Mr. Levitt also had additional auditing procedures performed by members of the team he assembled to perform the review, including the independent accounting firm of Eisner LLP, and Mr. Lynn Turner.
     
    Last edited: Mar 1, 2005
  2. Behn Wilson

    Behn Wilson Registered User

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    Isnt this just more of the same that they did before.

    My question is what is included in the teams revenue. Ticket sales and tv revenues, I would assume are givens.

    Does it also include ancillary revenues such as sky boxes, concessions, parking, advertising, and hockey merchandise are a few I can think of?

    Im on the players side but I havent read the report. Its audited but that just means they are attesting to the validity of the figures based on the assumptions they are GIVEN. Who knows what assumptions they are making regarding revenues.
     
  3. Shark Attack

    Shark Attack Registered User

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    Please read carefully, it was not an official audit, or even a "super-audit" as some have inferred.
     
  4. Jean Beliveau

    Jean Beliveau Registered User

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    And if I may ask what is the official NHLPA reply to Mr Levitt's report.
     
  5. Mr Sakich

    Mr Sakich Registered User

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    this is the whole issue right here - the nhlpa refused to look at the numbers. They stuck their heads in the sand and said that there is no economic crisis in hockey. The nhlpa has absolutely no credibility when it comes to talking about "fair" cap numbers and "fair" terms of the contract. They gave up their ability to have input when they refused to look at the numbers.
     
  6. Shark Attack

    Shark Attack Registered User

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    I am not here to debate the pros and cons of the arguement, just clarify the facts. The Levitt Report is just that a report, not an audit or a "super-audit." The primary difference being that in an audit, you would research all of the numbers. Something that was not done for the Levitt report.
     
  7. Shark Attack

    Shark Attack Registered User

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    The problem is that it was not a real audit which researched all of the numbers that going into the ledger sheets. The other issue the PA has/had was what was the definition of revenue, it is inconsistent between almost all the teams. While I believe that the NHL is in serious financial health, the Levitt report should not be the final litmus test on that. A true independent AUDIT should be conducted where each side agrees to the definitions upfront.....
     
  8. BLONG7

    BLONG7 Registered User

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    The players not responding and refusing to acknowledge this report speaks volumes...hence the eventual caving into a salary cap 6 months too late...
     
  9. Jarqui

    Jarqui Registered User

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    24% rollback on Dec 9th. Which comes quite close to matching the numbers Levitt said the league needed to get to.
     
  10. Dave is a killer

    Dave is a killer Dave's a Mess

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    which some/most teams with RFA's/UFA's would have paid back that 24% BACK TO THE PLAYERS after signing their total rosters
     
  11. Jarqui

    Jarqui Registered User

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    If you mean the 24% would come back due to the inflationary nature of the proposal over time, then maybe yes. The starting point of the proposal wasn't bad. It is where it would end up that wasn't good.
     
  12. bcrt2000

    bcrt2000 Registered User

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    its all about defining hockey revenues.
     
  13. Mess

    Mess Global Moderator

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    Now Billionaire owners like Wirtz that own many Companies under its Corporate Umbrella (the hawks being just one) will purposely use these losses to its benefit for Income Tax purposes and Tax write-offs and to be used for its own gain in CBA Negotiating Talks by misrepresenting the true financial Picture of a single company when its true status is seen in its Consolidated Financials for the Entire Corporation when Prepared.

    A beginning Accountant can make double sided INTER-COMPANY Journal Entry that changes the Fiancial picture of any company with the stroke of a Pen ....This is the Trust issue that the Players are conserned about in any partnership that has Closed Books on behalf of the Owners..



    The players don't trust the league's numbers.

    "Everyone knows a good accountant can turn an $8 million profit into an $8 million loss, especially when owners have more than one business," said Bob Boughner, a players union vice president and Colorado Avalanche defenseman. "It goes in one pocket, out the other."
     
  14. BlueShirt

    BlueShirt Registered User

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    "...and that only 11 teams were profitable averaging $6.4 million in profits."

    So Bobby Holik makes more profit in one season than the entire organization he plays for? (assuming the Rangers are one of the profitable teams averaging $6.4mil in profits)

    Gee, what is wrong with this picture? I wonder how many other major corporations have an employee (a sub par one at that), earning more money than the entire corporation as a whole?
     
  15. Russian Fan

    Russian Fan Registered User

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    Until the 95% pro-owner of these board can understand or open their eyes about this, this manifesto on how the players are greedy won't stop.
     
  16. Smart Alek

    Smart Alek Registered User

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    Please, Russian Fan, indulge us: Where are these seemingly limitless additional revenue streams originating from?
     
  17. Russian Fan

    Russian Fan Registered User

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    Don't you think if I knew all about this accurately , I would be here ? I would have my own blog that's for sure ;)
     
  18. dakota

    dakota Registered User

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    Then take the owners up on their offer and audit the books... dont just cry about it... do something... dont just use 4 teams to base your whole strategy on... use all teams...until the NHLPA can understand or open thier eyes about this, the manifesto on how the owners are greedy won't stop....
     
  19. dakota

    dakota Registered User

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    Here is an email you (cleduc) sent me i thought would be good to post for this topic:

    The points are:
    - these issues raised by the NHLPA have been very reasonably and soundly addressed in my opinion. The Levitt report would withstand any accounting body or court of law.
    - Leviit & his people are the equivalent of a super corporate accounting cop. There are many ways of checking these numbers and Levitt employed a bunch of them. There's no way an accounting firm auditing an NHL team could afford to risk trying to cheat on Levitt who got paid up front. They'd be finished if they got caught.
    - At the end of the day, once you've seen some of the Forbes report claims chopped to pieces, the difference relative to the scale of the problem between Levitt & Forbes/NHLPA is small (a percent or two - Levitt guaranteed his numbers to less than 1% and it seems to be turning out that way).
    - The NHLPA can cling to numbers discrepancies in the media but in reality, both sides know the numbers well enough to negotiate a deal. Internally, between the two of them, it really is a non-issue (which Daly has alluded to Saskin admitting in the meetings and is also why we only hear about it in the form of media rhetoric).


    I do not recall what those "fair" claims were specifically in dollars, have not been able find them on the net and I may never have known specifically what they were but I do recall and know the URO process was modified to accommodate some of the concerns raised by the NHLPA that came out of the NHLPA review. So the $52 million NHLPA claim is not longer very relevant.

    …
    http://nhlcbanews.com/dalymail/daly_mailbag100504.html
    Well, it's certainly not true that we have ever refused to reveal the financials of the franchises to the Union. In fact, we have presented complete, detailed, team-by-team financials to the Players' Association going back six years now. And, when we first began to provide the financials in March of 1999, we expressly invited the Union to hire an independent auditor to verify the financial results of our clubs. That is something the Union was unprepared to do then and has never expressed an interest in doing since.
    Additionally, after completing his own independent review and audit of NHL team finances, Arthur Levitt also invited Union leadership to meet with him to review both the scope of his audit and the conclusions he had reached. The Union again refused. Any contention that the true financial condition of the league and the clubs has not already been established to a certainty, including through the detailed review and verification of underlying and supporting documentation, is unfounded and disingenuous.

    The offer to audit was put in writing to the union in a letter by Bettman in 1999. The NHLPA took him up on it and then bailed out when the NHL adjusted them to cover some of their complaints.

    http://www.cbc.ca/pcgi-bin/template...nhl-nhlpa031124
    "Unfortunately, Ted has a very short memory," Daly said. "He should check his notes from our high-level bargaining session of May 13 in Ottawa, as we have, where he expressly acknowledged the material accuracy of our UROs -- and suggested that, to the extent there remained any discrepancies in reporting among our clubs, they amounted to less than 10 per cent overall.
    "That was Ted's number. Not ours."

    The Forbes report that the NHLPA supporters and the NHLPA have clung to bore Daly out on that because the revenues it "found" were within around 5% (2.2 billion vs 2.1 billion) of Levitt’s.

    Some specific complaints were:

    Family members getting paid ridiculous amounts. Levitt investigated and shot it down in his report.

    Luxury box revenue either unreported or not fully reported :

    The Kings fan, as I posted in the thread ,nailed Forbes on the Kings boxes.
    This quote below dealt with the Forbes claim that Wirtz he had no box revenue in the Levitt report (which is an absurd assertion):
    From the post-gazette:
    Accused of failing to disclose luxury box revenues in former U.S. Securities & Exchange Commission chairman Arthur Levitt's report of NHL finances in February 2003, Wirtz was cleared of any wrongdoings by another member of the commission.
    "Let me say without reservation that when the Levitt Report was done, it was ensured that all hockey-related luxury box revenues were included in the reported revenues," former commission chief accountant Lynn Turner wrote in an e-mail to the Pittsburgh Post-Gazette. "Unfortunately, the players have refused to accept Mr. Levitt's written offer to sit down with them and take them through the numbers. This has led to such uninformed statements."
    The accusation was made by Penguins defenseman Brooks Orpik, who told the newspaper Wirtz "declared no revenue from luxury boxes at the United Center in Chicago."

    There was another claim that the method of distributing the luxury box revenue was unfair. The Kings fan addressed that for LA. Part of the notion used the example in Calgary where a box there was primarily for watching the Flames. When it was pointed out that half of the league has those luxury boxes for NBA teams who are more popular in every US city but Toronto, much of that roar died down.

    The NHLPA accusation that the NHL/Levitt used the NBA CBA cap formula to compute their numbers is false and misleading.
    http://www.nhlcbanews.com/main.html
    C. Whether the treatment of affiliated or related company income in the URO is: (a) reasonable for the purposes of measuring the relevant revenues and expenses associated with operating a professional hockey franchise in the NHL; (b) similar to the treatment of affiliated or related company income in the calculation of Basketball Related Income ("BRI"), as that term is defined in the NBA/NBPA collective bargaining agreement; and (c) similar to the treatment of affiliated or related company income in the calculation of Defined Gross Revenue ("DGR"), as that term is defined in the NFL/NFLPA collective bargaining agreement.

    So ONE of the things that they asked Levitt to do was size up how the NHL numbers looked compared to the NBA - not to use the NBA CBA for the NHL URO reporting. In short, Levitt found that the results, even though derived through different methods/formulas, would up in the same place

    Nevertheless, we took the data compiled during the benchmarking process and applied our interpretation of the NBA's BRI standards as set forth in the Collective Bargaining Agreement for treatment of suite, fixed signage and naming rights revenue, whether received by affiliated or related parties or the teams, to the NHL data in order to estimate what these NHL revenues would be by applying the BRI standards. We found the NHL's treatment of these revenues in the combined URO to be similar and the amounts reported in the combined URO not materially different from the results of our calculation.

    "He (Levitt) had unfettered access to all of the books and financial records of not only the clubs, but their related entities," Daly told TSN. Nov 12/2004 Which Levitt also mentions in his report.

    The bottom line is that Levitt tried to address every single conceivable NHLPA complaint in his review of the NHL’s numbers. Since Forbes report, people have come forward to shoot much of it down.

    The 24% rollback offered by the union Dec 9th didn’t cover the full ground requested by Levitt. Goodnenow held some back which just so happened to equate closely to the Forbes result. That act confirms that although there may be NHLPA *****es about revenue, there has to be an extraordinary agreement (at least 95% of the way) between the two parties on the numbers. The delta can be easily negotiated but the NHLPA prefers their smoke in the media.
     
  20. Smart Alek

    Smart Alek Registered User

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    Ha! Fair enough...
     
  21. Polydorus

    Polydorus Registered User

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    IIRC the reports are inconsistent from team to team as to what is revenue. If the owners had set up a legitimate revenue sharing system between themselves you could count on them to police the numbers.
     
  22. Other Dave

    Other Dave Registered User

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    Yeah right. Just like the 'league' lost $150 million in 1992-93. The owners have been consistently mendacious about their finances for as long as there's been a league; only the means by which they sell the big lie to the fans have changed and grown more sophisticated.
     
  23. ti-vite

    ti-vite Registered User

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    Yeah but does the Levitt report include peanut sales. I clearly saw peanuts at the concession the last time I went to a game. I saw no specific mention of peanut sales in the Levitt report. The owners are hiding millions, no quintillions behind peanut sales. For every peanut sold, we the players want a percentage of that.
    A partnership. Peanuts alone can prove the Levitt report is a fraud. And there are more.

    Comb/condom dispensors in the washrooms - not in Levitt probably more millions here.
    Pez - not in Levitt, millions.

    We the players are not stupid eh!
     
  24. dakota

    dakota Registered User

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    i dont know the details ... but if I buy a condom that is in the washroom during a concert do you think your entitled to a percentage of that revenue?

    if I buy peanuts when I am a show, are you saying you should get some of that?

    Personally I dont think the players have any rights to the concessions or the condoms... but that is my opinion... in fact a few owners dont even own their own building so technically that this not even their revenue... sorry to burst your bubble..

    Many of the owners sub out the concessions... and I am sure the Levitt report does take into account that revenue based on a percentage of games played by the NHL in the arenas (41 nights)...

    bottom line is the owners have every right to make their business profitable... that is the nature of capitalism.. nothing personal... it's just business.
     
  25. ti-vite

    ti-vite Registered User

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    Its called sarcasm... :joker:
     
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