Carolina Panthers Leaked Financials

Afternoon Monkeys,

I saw something late last week on Deadspin that caught my eye, someone leaked the Carolina Panther's financial statements. Deadspin, upon receiving the leaked statements, contacted Dennis Howard, a business professor at the University of Oregon, to review the financials and report what he found:

"This team is pretty damn healthy," [Howard] says, and its financial outlook is "very bright," citing the new, owner-friendly collective bargaining agreement and the league's fat new TV contract, signed in 2011, which kicks in next year. Under the terms of that deal, Howard estimates, the Panthers could bring in an additional $60-$65 million in annual TV revenue alone.

The article goes on to discuss the implications of these leaked financials in regards to the team's plans to renovate their stadium. Namely, because of the $300 million in renovations to Bank of America stadium, the team hopes that $200 million will come from the tax payer. While the city of Charlotte appears interested in helping, the state is less enthusiastic. Understandably so, if you accept Howard's conclusion:

"Based on the team's financial condition, there is absolutely no justification for such a large public subsidy," Howard writes in an email. The financials "show unequivocally that the team has the capacity to finance the improvements on its own. The team could easily pledge a portion of the anticipated increase in TV revenues to finance the debt service for the improvements."

Unsurprisingly, the reponse from the Panthers has been to a rather different tune than the one offered by Howard and Deadspin.

The Deadspin story presents an incomplete picture of the Carolina Panthers profitability. The figures offer an isolated snapshot of the team's financial situation during an unusual time as the NFL lockout loomed.

Now, I've gone through the leaked financials and there are several key points that stick out as very peculiar. Granted, I'm not well versed in the accounting practices of sports franchises, and I'm far more inclined to see bad situation as opposed to a good one, so take all this with a big grain of salt.

  • Cash Position: I suppose they're healthy, and, but I'm not exactly sure how healthy they really are. For instace, while it's noted that they were holding $8 million and $38 million in 2011 and 2012 respectively, in 2010, they were sitting on $57 million in cash. It appears that they utilized this for debt repayment, a good sign I suppose, but without comparables, I'm unsure if you can really say that a team is "pretty damn healthy".
  • Skyrocketing Contract Liabilities: Looking between 2011 and 2012, one thing is clear, this team is spending some loot on players. Deadspin notes this fact, but only from the perspective of the income statement, not the balance sheet, where the current liability "Current maturity of player contract liabilities" went from $0 to over $53 million. Additionally, the non-current liability "Player Contract Liability" increased by a factor of 11, from $3 million in 2011 to $33 million in 2012. Like I noted earlier, I'm not well versed in the accounting practices of sports franchises, but increases of this magnitude raise red flags for me.
  • Cash Reserves Held by the NFL: Admittedly, I don't know what this is, but it's a non-current asset that went from just over $27 million to $0. I couldn't find anything within the notes about it either (granted, I probably could've looked harder), which seems more troubling than the change itself.

So, what's the point you may ask? Well, unlike Deadspin, which only had access to a few finance professionals to review the leaked documents, this is WSO, a community full of member of the industry! Take a look at the financials, let me know what you think, and of course, for those of you who are looking to practice their modeling, SB to the first DCF & LBO model posted!

Attachment Size
richardson financials carolina panthers.pdf 6.19 MB 6.19 MB
 
Best Response

Cool stuff man! I saw this on Deadspin a while ago but have been too lazy to do a dive into these financials. I don't seem to understand why such a large increase in player contract liability would raise red flags. Acquiring talent in the NFL comes at a high cost, especially veteran players. Also there was a change in the CBA (as stated by the Panthers rep) which increases expenditure on players. I too am pretty hazy on the accounting practices of sports franchies, so I was hoping some guys may be able to chime in!

Some comparables would be pretty nice, but owners didn't seem to want to open their books during the CBA negotiations. I figure pretty damn healthy here means that Carolina shouldn't have to get taxpayers to fund stadium renovations because that is just unfair to the state. Conversely, if you're going to ask for money from the state, at least open your books so people can see why it is you're asking for such a large amount. I have been pretty wary of sports franchises and sports welfare since reading this Sports on Earth article:

http://www.sportsonearth.com/article/40595178/

 
milehigh:
VoidTrading:
Some comparables would be pretty nice, but owners didn't seem to want to open their books during the CBA negotiations.

Aren't the Packers financials released every year? Too lazy to Google it before someone chimes in with a lmgtfy link.

They are. I am too lazy as well. Shoulda done that first...

http://www.packers.com/news-and-events/article-1/Packers-present-financ…

Its tough comparing Carolina to Green Bay though. Panthers haven't recorded a winning season since 2008, whereas Green Bay recently won a Superbowl and are consistently ranked as a threat to challenge for the Superbowl for the past few years.

But it would shed a good amount of light.

 
VoidTrading:
I don't seem to understand why such a large increase in player contract liability would raise red flags. Acquiring talent in the NFL comes at a high cost, especially veteran players.

It's not so much that the absolute value of the increase is raising a red flag (for exactly the reason you note) but the relative increase of "infinity %" and ">1,000%" that's troubling. I mean, aren't all NFL players really expensive? Didn't DeAngelo Williams get a massive payday before the lockout, too? The expenses on the income statement associated with players seems believable, it's these balance sheet items that I find curious.

"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
 
mikesswimn:
VoidTrading:
I don't seem to understand why such a large increase in player contract liability would raise red flags. Acquiring talent in the NFL comes at a high cost, especially veteran players.

It's not so much that the absolute value of the increase is raising a red flag (for exactly the reason you note) but the relative increase of "infinity %" and ">1,000%" that's troubling. I mean, aren't all NFL players really expensive? Didn't DeAngelo Williams get a massive payday before the lockout, too? The expenses on the income statement associated with players seems believable, it's these balance sheet items that I find curious.

what about pro-rating player contracts for cutting them so they don't count against the cap? Like cut a vet 2 years into a 7 year deal and owe him the rest of the $25MM on his contract? Would stuff like this make sense to shove into the balance sheet?

EDIT: Or worse, having had dealt the player in terms of a trade and having had agreed to pay his salary/a portion of his salary for the rest of the season.

 

Lol at anyone believing NFL teams were ever struggling. The NFL has zero competitive threats and is unbelievably popular. North Carolina and Charlotte should be very thankful Jerry Richardson hasn't sold his team out to LA (and also does not intend to). The Panthers need a new stadium if they want to attract more top talent and Charlotte and NC need the Panthers = a stadium will be built using mainly public funds and Jerry Richardson will continue to stack cheese.

 
droking7:
Lol at anyone believing NFL teams were ever struggling. The NFL has zero competitive threats and is unbelievably popular.

Oakland and Jacksonville might disagree, haha.

droking7:
North Carolina and Charlotte should be very thankful Jerry Richardson hasn't sold his team out to LA (and also does not intend to).

What's with LA always being interested in an NFL team they end up never watching? But, yeah, good point.

droking7:
The Panthers need a new stadium if they want to attract more top talent and Charlotte and NC need the Panthers = a stadium will be built using mainly public funds and Jerry Richardson will continue to stack cheese.

This is almost certainly true.

"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
 

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