Payroll vs. Revenue

[Lintyfresh85]

But what the hell is operating income?  Tickets and TV?  No way their income was $36.6MM total.  Or is that profit?  I mean if they are only bringing in $36 mil, they are losing money just making payroll.

Their revenue was 194 million in 2011.

Income is the bank they made after all of their expenditures. AKA profit.

[Nathan]

So they break even at ~$100MM payroll?

[Slateman]

But what the hell is operating income?  Tickets and TV?  No way their income was $36.6MM total.  Or is that profit?  I mean if they are only bringing in $36 mil, they are losing money just making payroll.

 Earnings before interest, taxes, depreciation and amortization

Now, I have no idea what that means. Nor why the Nats have 36 mil but the Tigers have -29

[Lintyfresh85]

So they break even at ~$100MM payroll?

104-ish.

Of course, with a higher payroll, likely comes more wins which equals more fans.

But yes, 100 million or so, and the team would likely make a small profit.

[Lintyfresh85]

Earnings before interest, taxes, depreciation and amortization

Now, I have no idea what that means. Nor why the Nats have 36 mil but the Tigers have -29

It means the Tigers are spending way over what they're making... and the owner is taking a bath in the name of winning... which no one has asked the Lerners to do... just to put a competitive payroll out there is all we ask. And not take in 30 million dollars in profit for your bank account.

Nats were third in 2010 with 33 million in income.

http://www.forbes.com/lists/2010/33/baseball-valuations-10_The-Business-Of-Baseball_Income.html

Nats were second in 2009 with 42 million in income.

http://bizofbaseball.com/index.php?option=com_wrapper&view=wrapper&Itemid=126

[Slateman]

Jeez ... I had no idea how.small the profit margins were in baseball.

[Lintyfresh85]

Jeez ... I had no idea how.small the profit margins were in baseball.

But the Nats aren't included in the small profit margin group.

They're in the massively high profit group... yet they don't ever reinvest it back into the team.

[Slateman]

I dunno, for the amount of.money that they're spending, I'd have expected more profit.

No wonder owners are always so rich .... They have to be ....

[Lintyfresh85]

I dunno, for the amount of.money that they're spending, I'd have expected more profit.

No wonder owners are always so rich .... They have to be ....

If you see a team make over 30 million in profits, and you don't think that's enough...

 I give up.

[Slateman]

If you see a team make over 30 million in profits, and you don't think that's enough...

 I give up.

Compared to what they're paying. I honestly thought that owners made a lot more.

[MarquisDeSade]

Unless you're looking at what's included in their actual financials (i.e. who's getting paid what that doesn't step on the field) those profits are probably understated.  Besides, even if they're not the Incompetence are just plowing all of that money (their version of investing) into the debt they took on to buy the team.  Want to guess how that's going to play out?  Let me save you the time - they're going to own the team outright in no time (<10 years) and have a cash cow of an annuity in a tax payer funded stadium filled with other teams fans.  Enjoy these years because once Harper and Strasburg are going it's going to get ugly.

[comish4lif]

But the Nats aren't included in the small profit margin group.

They're in the massively high profit group... yet they don't ever reinvest it back into the team.

They are the 1%.

[MarquisDeSade]

They are the 1%.

#OccupyNatsPark

[HalfSmokes]

I guess what I want to know is how much profit they're making.

See if they're not making any, or.making.an unsustantial amount, I'd completely understand why they are so cheap.

Unless you know the terms of of the debt from the lbo, there is no way to know anything about profit vs debt service

[JCA-CrystalCity]

Earnings before interest, taxes, depreciation and amortization

Now, I have no idea what that means. Nor why the Nats have 36 mil but the Tigers have -29

I'm not sure about the depreciation rules on assets like ballplayers (they have changed over the past 20 years or so), but interest includes what they are paying on the sum they borrowed to buy the team.    What the Lerners have admitted is that they are servicing the debt off of the cash flow on the team. That is after operating profit.  They get a nice family asset out of it, despite the deceptive claim that the Lerners would not take a dime out of the team in the first 10 years of running it. 

[The Chief]

If you see a team make over 30 million in profits, and you don't think that's enough...

 I give up.

I don't think he's trying to excuse the Lerners, and I agree with what he's saying - I would have thought being one of the most profitable teams in baseball would yield quite a bit more than that.  Not say that 36 million isn't a lot of money, but if you take our terrible TV deal out of that, it's a much smaller margin.

[Lintyfresh85]

And if you give the Nats a normal deal, say 50 a year then the team is upper 40's in profit.

[JCA-CrystalCity]

I'm guessing most teams operate near break even EBITDA and make the money on capital appreciation.

[PowerBoater69]

I'm guessing most teams operate near break even EBITDA and make the money on capital appreciation.

Not when they have no intent to sell and they are buying out minority partners when it makes sense to keep the appraised value low.

[JCA-CrystalCity]

Not when they have no intent to sell and they are buying out minority partners when it makes sense to keep the appraised value low.

I don't doubt that is what this team is trying to do.

[tomterp]

I'm not sure about the depreciation rules on assets like ballplayers

This is a valid concept in the realm of tax only, is not a factor in financial reporting which is what the focus of this discussion has been today.

Amounts paid to players are expensed as incurred, generally.  Bonuses are expensed fully when incurred, generally at the signing of the contract.

Signing of a player does not create an asset that would later be depreciated.

The one exception I could locate (based on the audited statements of the Florida Marlins) was that upon purchase of a franchise, some value may be associated with certain intangible assets such as below market contracts (say you bought the Rays - Longoria's contract would convey to you an asset that is more valuable than the expected cost over its life) which would then be recognized over the estimated period of benefit.

[JCA-CrystalCity]

Thanks Tom. I gave up the CPA more than 25 years ago, and have not done tax law in more since 1989

I sort of discounted any difference between tax and financial income for these guys because I assumed the rules were not generous anymore.   Do you figure they could be showing a tax loss once debt is paid?

[MarquisDeSade]

Question - did the Marlins audits show what the Board and Loria got paid and the FO?  Just curious what personnel expenses consisted of.

[tomterp]

I'm guessing most teams operate near break even EBITDA and make the money on capital appreciation.

That can work in the short run, but long term will result in failure.

- Interest is a real expense that must be paid, so ignoring it will immediately put you behind.
- Ditto for taxes, obviously.
- Depreciation and amortization represent writedown of long term assets that will ultimately have to be replaced presumably.  A ballpark for example. 

However one category that would not require replacement would be intangible assets recorded at the time of acquisition, which may be either amortized or adjusted for their "fair value" over time.  Either way, these are merely book entries with no economic impact in the future.

[tomterp]

Thanks Tom. I gave up the CPA more than 25 years ago, and have not done tax law in more since 1989

I sort of discounted any difference between tax and financial income for these guys because I assumed the rules were not generous anymore.   Do you figure they could be showing a tax loss once debt is paid?

I had to download the Marlins statement to make sure I knew what the practice is for sure.

Interesting thing about the tax loss question, because the Marlins are a partnership, they do not pay taxes, instead those flow through to the partners for ultimate settlement.  So there is no "income tax expense" line item on the Statement of Operations at all.