Re: C's financial numbers...

[Kim Malo <kmalo19@idt.net>]

At 02:52 PM 1/9/98 -0500, Michael Zaino wrote:
>There has been a lot of talk about signing big name FA's (especially
>Walker) on this list and the ability of the C's (or Gaston) to come up
>with money. The one thing I haven't seen is that hardcore numbers so I
>thought I might post some interesting numbers from the C's balance sheet
>and statement of income.
>First, according to the balance sheet, the C's have about $95 million
>dollars in cash (or cash equivalents). This is an enormous amount of
>money. I am not exactly sure why they are holding so much money, or for
>how long they have been holding this money, or  if they plan to part
>with this money but it is there. This alone would make you think that
>the C's should have money to pay at least Antoine but there are more
>considerations.

If you're really interested, the core of this is the proceeds of selling the
TV and radio stations, plus the return on investing those proceeds. What has
been said about it is that they are holding it in part as a cash cushion but
mainly with the intention of investing it in some other revenue generating
venture, to maintain future cash flow. Some of it will likely also go to
capital improvements, such as the practice center Pitino wants (did anyone
else hear a report that a deal is in place on this out near 128?).
 
>According to the statement of income, the C's had $31 million of revenue
>from ticket sales and another $23 million of TV and radio money. Other
>revenue is listed as $8 million. But I don't know where this comes from.
>(It says "other, principally promotional adverstising") The total
>revenue is just $62 million. That seems to indicate that maybe if we
>give Antoine $17 million (what Garnett makes), then there won't be much
>left over for the rest of the team.
>For those of you looking to increase revenue there are two real ways.

The problem is that there is another consideration than revenue per se
-salary cap. Yes, they can use the Bird exemption to go over the cap and
break the bank in paying Walker. But that handcuffs them on making other
deals -once they're over, they can only offer outside FA the league minimum.
The problem is more allocation of existing/anticipated revenue and cash,
rather than needing to generate more.

<snip>
>(Ever wonder why the Bulls can pay Jordan so much...)

Which illustrates why that point is so important. The Bulls' core roster was
set, it was only the role players that changed. So they didn't need the same
kind of FA flexibility, and could afford to pay MJ more than the entire cap.
The Cs are still much more of a work in process in putting together their
team, and need more flexibility.

Another point to remember, BTW, re: revenues and the cap, is that it will go
up $6-8MM next year with the new TV deal, giving the Cs -but also the teams
they are bidding against, including some now over the cap- more flexibility
in attracting FA.
 
>The final thing to keep in mind is that C's are a public partnership.
>This mandates that they report their finances and that they at least try
>and turn a profit. (this is a legal issue that I can explain, but I will
>spare you the boredom.) The point is, they are under different financial
>and other constraints that other teams don't face.

To a degree. They have a fiduciary responsibility to not act against the
interest of the LP shareholders, and to maintain the value of their
investment, to the best of thei r abilities. However, there are various ways
of doing so, including locking up the team's biggest assets. The
shareholders' annual cash distribution might decrease in the short term, but
the value of the team and therefore the partnership (i.e. their actual
investment) stays steady or goes up. And losing such an asset might save
short term cash, while decreasing the value of the investment itself.

Your basic idea is right -Cs management has to answer to someone other than
themselves, unlike say George Steinbrenner when he gives out a megacontract.
But realistically, that's not that much of a restriction -how many of ML
Carr's signings were truly fiscally responsible? It's not like the sort of
fiduciary responsibility the Red Sox are involved with, answering to a
charitable trust.
 
-Kim
Kim Malo
kmalo19@idt.net