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

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ladybugblue

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Every other league (NFL, MLB, and NBA) can count Revenues why not the NHL are they extra special?? This argument is so old and stupid I can't believe I am responding to it. If there is difficulty counting all Revenues why not say okay the players we take a higher percentage of known revenues?? Instead of a 54% of all revenues how about 60% of some of the major revenues??

I guess that would be too logical and the players could not hold their argument anymore... :banghead:
 

Mothra

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Behn Wilson said:
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?

I am of the belief that you should only include items that all teams have.....not all teams own the building....or parking.....etc....they may make advertising money but its costs to sell it as well. These items should not be included.....IMO its similar to certain players getting endorsment money. Some players can get extra income...and some cant. For the players that do, good for them....if an owner can buy or cut a better deal with the concessions company that just good buisness and should not be shared with the players. The owners arent asking the player who does car commercials for the local dealer to give him a cut.

again...you can only count as revenue what all teams have...IMO anyway
 

Other Dave

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ti-vite said:
Yeah but does the Levitt report include peanut sales.

Jeremy Jacobs' primary interest in sports business is in the sales of concessions. He could, if he wished, choose to run the Bruins as a loss-leader and turn a profit on the concession side.

If 'peanut sales' aren't part of the URO they should be, since they are revenues that clearly owe their provenance to the on-ice product.
 

Lorenzo1000

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Until the NHLPA comes out out of their dream like haze all of this arguing about revenue streams is merely rhetoric. There is no big US TV contract, there is no giant pool of money at the end of the rainbow. Wake up before the money is all gone. :shakehead
 

richardn

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I always find it amusing that company's always seem to be losing massive amounts of money arround the time of an expired contract. Many of these owners who own multi business's have many ways to adjust the books to show losses. Why did the league go behind the players back and do this Levitt report. What they should have done is told them in the beginning and invited a rep of the PA's choice to assist. The Levitt report is not an audit, so it can't be taken seriously by the players. This is why they don't need to look at it. If the NHL opened there books to the players it would make the Levitt report look like a joke which is why they never will. I don't doubt that there are a number of teams losing money. But I can guarantee you that it is not as bad as the Levitt report suggests. I also agree with Messenger that most of these owners use these NHL teams losses to their advantage at Tax time.
 

BLONG7

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Lorenzo1000 said:
Until the NHLPA comes out out of their dream like haze all of this arguing about revenue streams is merely rhetoric. There is no big US TV contract, there is no giant pool of money at the end of the rainbow. Wake up before the money is all gone. :shakehead
someone should tell Goodenow...
 

dakota

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Other Dave said:
Jeremy Jacobs' primary interest in sports business is in the sales of concessions. He could, if he wished, choose to run the Bruins as a loss-leader and turn a profit on the concession side.

If 'peanut sales' aren't part of the URO they should be, since they are revenues that clearly owe their provenance to the on-ice product.

not if the peanut sales take place during a concert or other event... the teams only play 41 home game... and that number will be lower in the next incarnation of the NHL probably 35 home games... which means revenues for peanut sales will be lower as well... this is part of the reason why the NHL wants linkage...
 

guymez

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IMO the players are employees...nothing more. So I don't think they are justified in claiming a partnership. Just for arguments sake however, lets say their position is justified and they deserve to be partners with the owners. The NHLPA's current stance is that they don't trust the books....okay, why not be proactive and suggest that the league and the NHLPA jointly commision a forensic accountant to audit the books. Oh ya... I forgot...they (NHLPA) don't want do this beacause there is no forensic accountant alive who can determine all revenue sources and therefore they wouldn't get their due. What a load of crap. Truth is, the players are afraid to do this because of what they might find. They are terrified of losing the only leverage they believe they have. Their entire postion is based on an assumption which they refuse to verify.
Until the NHLPA makes some overtures to verify the books they have zero credibility IMO. The players, however, do have a great idea.... claim a partnership while investing a grand total of zero dollars and therefore lose no money if the league falters, but if the league flouishes they gain. If the players are sincere in their desire for a partnership then maybe they should 'invest' a percentage of their salary to benefit all teams...call it revenue sharing. ;)
Until the players are willing to absorb the losses as well as benefit from any gains, they certainly don't qualify as a partner. But I guess if you think you can get all of the benefits if being an employee and all the benefits of being a 'partner' all rolled up into one...go for it.
After all, as the NHLPA has stated, their stance has the good of the game at heart. :lol
 

shakes

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guymez said:
IMO the players are employees...nothing more. So I don't think they are justified in claiming a partnership. Just for arguments sake however, lets say their position is justified and they deserve to be partners with the owners. The NHLPA's current stance is that they don't trust the books....okay, why not be proactive and suggest that the league and the NHLPA jointly commision a forensic accountant to audit the books. Oh ya... I forgot...they (NHLPA) don't want do this beacause there is no forensic accountant alive who can determine all revenue sources and therefore they wouldn't get their due. What a load of crap. Truth is, the players are afraid to do this because of what they might find. They are terrified of losing the only leverage they believe they have. Their entire postion is based on an assumption which they refuse to verify.
Until the NHLPA makes some overtures to verify the books they have zero credibility IMO. The players, however, do have a great idea.... claim a partnership while investing a grand total of zero dollars and therefore lose no money if the league falters, but if the league flouishes they gain. If the players are sincere in their desire for a partnership then maybe they should 'invest' a percentage of their salary to benefit all teams...call it revenue sharing. ;)
Until the players are willing to absorb the losses as well as benefit from any gains, they certainly don't qualify as a partner. But I guess if you think you can get all of the benefits if being an employee and all the benefits of being a 'partner' all rolled up into one...go for it.
After all, as the NHLPA has stated, their stance has the good of the game at heart. :lol


Some teams, most notably the Leafs, are private companies and refuse to open their books to anyone or discuss their finances. (with obvious exception to the government that is). As well, would you trust Jacobs or Wirtz to be honest? I sure as hell wouldn't.
 

DuklaNation

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Just a quick note for pro-players re:Levitt report. These are "operating losses".

Nashville pays for the cost of the building and is included as an expense in the operating loss figure. Toronto which owns the arena and basketball team. Assuming a 50/50 split, the depreciation and interest expenses on the arena would be significant. However, operating losses are before depreciation and interest amongst other items. Therefore, the Toronto operating figure should be lower if you're comparing net incomes and player salaries.

Another thing, any team that went through a restructuring has had there losses written off (eg. Ottawa, Buffalo, Pittsburgh) to large extent. Therefore there operating loss figures should be even worse.

I've never heard the players cry about these facts, only that Chicago excluded luxury box revenues (due to some securitization of this revenue stream earlier). That is legit. Therefore, use the last 5 years operating figures not just one year!

Sports teams are a very basic audit. As an ex-auditor, I can tell you that all of the claims by players to date are too small (immaterial) to affect anyones decision.

Bottom line, players won't go down the audit angle of this debate because it does not help their cause and now everyone knows it.
 

AM

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Real problem NHLPA has with Levitt Report

Its inconsistent with them winning the lottery 10 times a season.
 

myrocketsgotcracked

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shakes said:
Some teams, most notably the Leafs, are private companies and refuse to open their books to anyone or discuss their finances. (with obvious exception to the government that is). As well, would you trust Jacobs or Wirtz to be honest? I sure as hell wouldn't.
its the auditors job to find the "missing" revenue, what does the honesty of jacobs and wirtz have to do with anything?
 

mattbnh

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The Messenger said:

"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."


Frankly, I would prefer to attend the Arthur Leavitt College of Accounting than the Bob Boughner College of Accounting. Leavitt's report in my opinion did an effective job of isolating hockey revenues and losses, and I read the report as a skeptic. On finishing I felt that the owners commisson had done a better job than was alleged by critics.

The answer, as many have said, is an independent audit. However, as long as the NHLPA refuses to accept that offer, it is clear that they are basing their case on rhetoric and little else.

I firmly believe the players were screwed by the owners in the Ziegler-Eagleson era. Then the pendulum swung the other way, and the players made the most of it (while voting to deny the old-timers who got screwed additional benefits). Now the pendulum is swinging back. It will take cooperation from both sides to stop the swinging.
 

MmmBacon

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guymez said:
IMO the players are employees...nothing more.

I think that's the arrangement the players would prefer, too. It's the owners that are pushing linkage, which essentially makes the two parties partners.
 

guymez

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MmmBacon said:
I think that's the arrangement the players would prefer, too. It's the owners that are pushing linkage, which essentially makes the two parties partners.
If the players considered themselves as employees this dispute would have ended a long time ago. They would have no reason to concern themselves with the owners 'hiding' revenues. Their only concern would be if they are fairly compensated. Determining that would involve comparing apples to apples. This means comparing the salaries in the NHL to the other elite pro hockey leagues because those are the alternatives if they don't want to play in the NHL. Truth is they can't make NHL money (even at an average reduced salary of 1.3 million) anywhere else on the planet. IMO this dispute, more than anything, is about the good ole union mentality of unjustified entitlement.
 

Shark Attack

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DuklaNation said:
Just a quick note for pro-players re:Levitt report. These are "operating losses".

Nashville pays for the cost of the building and is included as an expense in the operating loss figure. Toronto which owns the arena and basketball team. Assuming a 50/50 split, the depreciation and interest expenses on the arena would be significant. However, operating losses are before depreciation and interest amongst other items. Therefore, the Toronto operating figure should be lower if you're comparing net incomes and player salaries.

Another thing, any team that went through a restructuring has had there losses written off (eg. Ottawa, Buffalo, Pittsburgh) to large extent. Therefore there operating loss figures should be even worse.

I've never heard the players cry about these facts, only that Chicago excluded luxury box revenues (due to some securitization of this revenue stream earlier). That is legit. Therefore, use the last 5 years operating figures not just one year!

Sports teams are a very basic audit. As an ex-auditor, I can tell you that all of the claims by players to date are too small (immaterial) to affect anyones decision.

Bottom line, players won't go down the audit angle of this debate because it does not help their cause and now everyone knows it.

If you are an auditor then you realize that Levitt did not perform a true audit and not the super-audit that has been referred to in the past, this was nothing more than than a financial report/analysis. I do question how you can say that the claims by the players to date are immaterial. IMO, they could very material as the sources in the Levitt report have not been verified, thus it appears that you may have jumped to a conclusion on that one.

With respect to your bottom line a good CPA can make a losses look like profit and vice versa, however, I don't think there is any doubt the NHL is losing money, the question is how much is it really. And unfortunately that question will not be answered until definitions of revenue are agreed to.....and as an ex-auditor you should know that.......
 

Jarqui

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SuperKarateMonkey said:
its the auditors job to find the "missing" revenue, what does the honesty of jacobs and wirtz have to do with anything?

And there really wasn't any "missing revenue". Most of the teams and related entities got audited. Some entities couldn't be audited for reasons like bankruptcy or transition for example.

The NHL operates on a seasonal fiscal year. If a sale or a bankruptcy interrupts that fiscal year where you get a 1/2 of a fiscal year at the time of transition (year end) at mid fiscal year and then a new fiscal year starts half way through as a new entity with new ownership due to the transition, you can't practically get audited statements for the entire fiscal year with two owners. You get pieces to work with - before and after transition. In bankruptcy, the trustee suddenly has the business from whenever the team failed.

In those circumstances, Levitt's people: either Eisner or a designated independent auditor directed by Levitt/Eisner went in to get those numbers for those business entities. So that circumstance of not all teams having audited results is not as sleazy as the PA apologists may have made it out to be. Levitt can’t go get stuff that doesn’t exist (audited statements for those entities) so he went and got the numbers because of their circumstances.

The NHLPA has said that the issue is not "Do the NHL's numbers add up ?" They do. The issues revolve around the NHL's definitions of revenue verses the NHLPA's defintions.

Two points about that:
1) From all the revenues gathered up from the audited statements of the entities, not only did these entities have to report the revenues that would go into the UROs, they also had to reconcile the remaining revenues that didn't go on the UROs to match their financial statements. So no revenues went 'missing" or got "hidden". They were either in one column - the URO or the other - the non-URO = very visible.

And one reviewing those numbers would be doing things like seeing that the proportions of numbers line up for all the similar entities in all the right places or requesting a detailed written explanation and documents to back it up when there were exceptions. All normal stuff and very proper.

2) The NHLPA has said that the league used the NBA Cap system for revenue allocation. If you read Levitt's report you will see that it does not. One of the Bettman’s requests of Levitt was to compare the NHL’s numbers to the NBA cap system (from the NBA labor agreement). It turned out that the NHL arrived a similar results as the NBAs system (as a cross-check). Now Goodnenow may not like the NBA system but it’s hard to believe that the revenues are grossly or unfairly ripping players off when they tie in to a similar type of collective bargaining agreement as a check.

At the end of the day, with Levitt's report, we have a very good, reliable and provable accounting report on the league’s operating results and a dispute over a small percentage of the revenues that can be negotiated around.
 

Russian Fan

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richardn said:
I always find it amusing that company's always seem to be losing massive amounts of money arround the time of an expired contract. Many of these owners who own multi business's have many ways to adjust the books to show losses. Why did the league go behind the players back and do this Levitt report. What they should have done is told them in the beginning and invited a rep of the PA's choice to assist. The Levitt report is not an audit, so it can't be taken seriously by the players. This is why they don't need to look at it. If the NHL opened there books to the players it would make the Levitt report look like a joke which is why they never will. I don't doubt that there are a number of teams losing money. But I can guarantee you that it is not as bad as the Levitt report suggests. I also agree with Messenger that most of these owners use these NHL teams losses to their advantage at Tax time.

great post ! :handclap:
 

Shark Attack

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richardn said:
I always find it amusing that company's always seem to be losing massive amounts of money arround the time of an expired contract. Many of these owners who own multi business's have many ways to adjust the books to show losses.

That is very true a good accountant can make a profitable business look bad or a poor business look good.


richardn said:
Why did the league go behind the players back and do this Levitt report. What they should have done is told them in the beginning and invited a rep of the PA's choice to assist.

Actually over the past 5 years the NHL invited the PA to participate at least 3 times, they elected not to.


richardn said:
The Levitt report is not an audit, so it can't be taken seriously by the players. This is why they don't need to look at it. If the NHL opened there books to the players it would make the Levitt report look like a joke which is why they never will. I don't doubt that there are a number of teams losing money. But I can guarantee you that it is not as bad as the Levitt report suggests. I also agree with Messenger that most of these owners use these NHL teams losses to their advantage at Tax time.

I agree the Levitt report is not an audit or a "super-audit" as it has been referred. It is a report from a prominent accountant so you are really being unfair (and a little blind) to dismiss the work completely. As a report it contains a lot of information that could be used in an audit, however, in an audit you actually research a lot of the data as opposed to accepting it at face value, which Levitt did. Wheter you actually believe the number or not it does indicate that the NHL is running at a loss over the period of time in question. It is disappointing that the PA did not engage the NHL in this activity.

The bottom line is the NHL is probably losing money, I don't think anyone will deny that but the question is how much. That cannot be determined until both sides agree on the accounting definitons (ie revenue) and an independent audit is conducted.
 

Jarqui

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Shark Attack said:
If you are an auditor then you realize that Levitt did not perform a true audit and not the super-audit that has been referred to in the past, this was nothing more than than a financial report/analysis. I do question how you can say that the claims by the players to date are immaterial. IMO, they could very material as the sources in the Levitt report have not been verified, thus it appears that you may have jumped to a conclusion on that one.

An auditor must obtain independent evidence to substantiate the assertions made by a business' employees and management. They look at things like bank statements to see that the dollars in and out are reflected properly, they look at statements they request from 3rd parties (ie vendors & customers) to substantiate the dollars exchanged, etc, etc. They gather and check independent proof of the numbers.

87% of NHL teams were independently audited in that fashion. A roughly similar percentage of arenas were audited. 100% of NHL affiliated entities were audited. Two teams/arenas in bankruptcy and two other teams and some arenas in financial transition or trouble (can't remember) were not "audited" due to this but independent auditors went in to get those numbers and verify what they got. Do you think the NHL stashed a bunch of revenue in the bankrupt teams or teams on the brink ?

Levitt and his accounting people verified the work of these independent auditors - a second layer of independent quality assurance and integrity. The report was a heck of a lot more than merely a "a financial report/analysis". They have the financial proof to back up what they said.

Shark Attack said:
With respect to your bottom line a good CPA can make a losses look like profit and vice versa.

A good CPA can do that and they are paid to do that within the limits of the law. However, when audited by a third party independent auditor, the funky journal entries to accomplish that go out the window. Those entries have to be proven and justified.

Further, the numbers gathered up to produce Levitt and these audits are raw numbers of revenues or expenses. The only significant room for "creativity" would be in the percentage allocated to the NHL. But Levitt checked and defined those rules in advance and checked that they were adhered to. He also cross checked them against things like the NBA method so that they were "reasonable" in magnitude.

There is a legitimate debate the NHLPA may have with the NHL on those percentage of allocations or methods. But the overall difference in revenues that they represent is in the order of a small percentage (ie 1-3%). Even Forbes, publishing outrageous and incorrect facts in an attempt to substantiate their article without looking at the books was within 5% of Levitt in revenues.

If you split the difference between Forbes and Levitt, each player would get $49,000 more per year. All the screaming by the NHLPA about this report is founded on a trivial ***** that can be easily negotiated around. The NHLPA proposed 24% rollback on Dec 9th proves that and proves Levitt was indeed very close in accuracy that the NHLPA agreed with.
 

dakota

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have we heard what the NHLPA defines "Hockey Revenues" as? Have the come up with their definition and if so do we know what it includes?
 

Jarqui

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dakota said:
have we heard what the NHLPA defines "Hockey Revenues" as? Have the come up with their definition and if so do we know what it includes?

I've heard random complaints, some of which were shown to be inaccurate or virtually irrelevant in scale in my opinion but I've never seen a complete statement, hard evidence or report from them stating that "this is the way it ought to be" for the NHL in all these revenue areas.

Part of the reason for that is that some of these areas are virtually negotiable as we saw in the NBA deal for example. Another part of the reason for that is they have never accepted the offer to audit all the books which has been made in the media and in writing several times by Bettman & the NHL.

But it has been a whole lot of NHLPA smoke over a small amount of money relative to the big picture. The smoke was worth more to the NHLPA in negotiations and PR that the total amount of money they were whining about.
 

DuklaNation

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Shark Attack said:
If you are an auditor then you realize that Levitt did not perform a true audit and not the super-audit that has been referred to in the past, this was nothing more than than a financial report/analysis. I do question how you can say that the claims by the players to date are immaterial. IMO, they could very material as the sources in the Levitt report have not been verified, thus it appears that you may have jumped to a conclusion on that one.

With respect to your bottom line a good CPA can make a losses look like profit and vice versa, however, I don't think there is any doubt the NHL is losing money, the question is how much is it really. And unfortunately that question will not be answered until definitions of revenue are agreed to.....and as an ex-auditor you should know that.......

I realize he did not report a true audit. It was more like a review of methodology. I dont have the exact document only what was on the NHL website. From what I heard the Chicago revenues were $3M ($3M over $2.1B is immaterial). Immaterial means too small to affect any decision using the $2.1B revenue figure.

Wirtz probably booked a sale in a prior year for a lot more than that. Therefore, easy solution is to use more than 1 year for your basis. What other claims by players have actual hard numbers and facts to them NONE! The only way to substantiate anything is to do some kind of audit on the teams. Event he Chicago revenue number is ambiguous. How do they know what it is without a proper audit?

On your point of a "good" CPA can make a profit turn into a loss. Not on an operating basis. You're thinking of net income. Levitt used operating numbers. That is why you also use 5-10 years of financial data to base your decisions on, not 1 year. Worldcom & Enron eventually collapsed becasue their accountants can never keep up the sham indefinitely. I'd say 2-3 years at most. The operating losses can include intercompany & related party transactions (i.e NY Rangers not booking cable costs as the company is in a loss position already) Easily corrected. Anaheim was strictly purchased for tax loss pools. Do you think next year's Anaheim financial books will be reflective of its reality? Of course not.

Definitions of revenue is a good point. Solution book all ticket & advertising revenue. Book all cable deals (Fair market value if intercompany) The rest is immaterial to the CBA negotiations. If you ***** about parking & concessions, the owner can just sell the arena to another company. These should be excluded.

Once again I've audited very complex companies and sports teams are so basic its not funny. Any auditor worth their grain of salt can easily audit these teams. NHLPA does not want to because it doesnt serve their purposes. Everyone knows that.
 
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