Packers Financials

[Deus Irae]

I think there may be some confusion between gross profit and net profit here. Also, not only do different industries have a wide variance in gross and net margins, but where they are in the supply chain will result in different markups and margins too. The company that makes IC's has one profit structure, the contract company that makes the boards another, the brand name companies like Cisco and Hewlett Packard a separate %, the wholesale distributors work on miniscule profit margins, and the companies that finally sell the product to the end user another profit margin. All of those just mentioned may be considered to be in the IT industry, but all five of them have different labor costs as a percentage of revenue and all five of them have different expectations for a reasonable net profit percentage.

Bottom line is we can't compare the NFL's labor costs to revenue percentage, or net profit percentage to a company or industry we are familiar with and hold that up as proof that they are in good or bad shape.

Back to the original topic: as patsfaninpittsburgh pointed out, without knowing the cash flow and seeing the balance sheet, it's difficult to make a judgement. Expenditures being fully expensed rather than amortized would make a huge difference.

I also recall reading somewhere that a big reason for the Packers' drop in profits in 2009 was due to investments the club had; when the stock market went south their investments did too. Their profits were up a bit in last summer's financial statement but not back up to where they were in 2008. Until those investments start to rebound, perhaps it is not reasonable to expect earnings to return to the levels they were at a few years ago. Remove those paper losses and the financial picture of the team changes dramatically.

Granted the numbers the Packers had last year - a return of 3.8 cents on every dollar of revenue - are pretty low. With few exceptions, anything below 4% is not considered to be good. But one still needs to dig deeper to get a truly accurate picture of the financial well being of the team.

Your position (more info is needed) is essentially what the players are saying publicly.

Also, did you note the coincidental jump in the Sales and Marketing expense? I'd expect, for example, that the players would want to know why a $4.3 million expense turned into a $20.7 million expense in one year. You can't get that if the owners are only offering a 2 number "financial".

 

[Ron Sellers]

Your position (more info is needed) is essentially what the players are saying publicly.

Also, did you note the coincidental jump in the Sales and Marketing expense? I'd expect, for example, that the players would want to know why a $4.3 million expense turned into a $20.7 million expense in one year. You can't get that if the owners are only offering a 2 number "financial".

I had totally missed that huge jump in Sales and Marketing expense until now. It's odd that so little has been made of that.

 

[neuronet]

You'd be thinking wrong. It's why grocery stores have a diverse range of things. There are only some products that they get less than 10% profit on. But many which they get more.

That's a different issue isn't it? What profit on item X do they get, versus what is their overall profit after considering all expenses.

 

[neuronet]

Back to the original topic: as patsfaninpittsburgh pointed out, without knowing the cash flow and seeing the balance sheet, it's difficult to make a judgement. Expenditures being fully expensed rather than amortized would make a huge difference.

I have no idea what that means. Can anyone explain to this financial idiot?

 

[letekro]

You are 100% wrong, and I dont think you even understand what non-profit means.
They had profits that they paid taxes on right in that report.
The fact that they retain the profits rather than distribute them to owners is entirely irrelevant.

You know what you call a corporation that never distributes profits to its owners? A nonprofit corporation. The fact that they paid taxes is neither here or there. They may not be tax-exempt, or they may have unrelated business taxable income, which is taxable even to corporations otherwise exempt from federal income tax.

 

[Deus Irae]

You are 100% wrong, and I dont think you even understand what non-profit means.
They had profits that they paid taxes on right in that report.
The fact that they retain the profits rather than distribute them to owners is entirely irrelevant.

This paper looks at the Green Bay Packers, unique among National Football League franchises as a nonprofit organization, and its impact on three local nonprofits that participate in the concession sales program for the team. Using the Packers as a simple example of “reinvesting,” the study examines the positive relationship between the team, the community, and its home state’s (Wisconsin) economy.

This paper will look at the Green Bay Packers and its relationship to the nonprofit community of Wisconsin through using its own nonprofit status. The Packers is unique to professional sports, as it is the only nonprofit major league sports franchise. It is also in one of the smallest "markets" (the immediate community expected to support a team). Green Bay is the 152"d largest Metropolitan Area of 273 recognized by the Office of Management and Budget.

The Nonproft “Reinvestment” Sector: A Case Study of the Green Bay Packers. Rhodes, Deborah. 1999. | 1999 | American Jewish University ( AJULA )

The Green Bay Packers, one of the NFL's best teams of the 1960s, and increasingly of the 1990s, are owned by their fans. Football champions in 1929, 1930, and 1931, Super Bowl I, II, and XXX champions, the Packers were incorporated in 1923 as a private, non-profit, tax-exempt organization. Article I of their bylaws states, "this association shall be a community project, intended to promote community welfare...its purposes shall be exclusively charitable." The team can move only through dissolution, in which case the shareholders get only the $25 a share they put in. A board of directors, elected by the stockholders, manages the team.

Community Owned Sports Teams - Examples | The New Rules Project

 

[Ron Sellers]

I have no idea what that means. Can anyone explain to this financial idiot?

For example, if I buy office equipment or a truck or whatever do I write off the cost completely this year, or for accounting purposes do I write off the expenses over the expected lifetime of that equipment. Same with signing bonuses on a new player contract.

 

[patsfaninpittsburgh]

The one area that is somewhat hard to believe is that the NFL does not have a proforma master capital plan that the players have not been able to access.

If that first $1 billion per year is for stadiums, it should not be overly difficult to figure out past construction costs, debt service, and required maintenance/ continual capital upgrades. This can be reconciled to any proforma plan.

A big part of the problem is how unused these stadiums are. Here in Pittsburgh, Heinz has been used for only one or two concerts in 10 years.

Allegheny County should force the Steelers to have the players spend weekends having "kids days" or something to get use.

 

[Ron Sellers]

After looking over the expenses in the link that Deus provided - Income Statement and Balance Sheet there are a couple things that stand out.

Player costs increased by $22 million to $160 million last year. Considering that 2010 was an uncapped year, perhaps the Packers increased salaries this year with to take advantage of their being no cap, with salary expense expected to stabilize or decrease next year. It's not as if they jumped up due to a bigger salary floor (minimum they had to spend).

Other income went from $14 million in 2008 to a loss of $2 million in 2010. That's a $16 million difference, which is very close to the bottom line difference in net income between those two years ($5 million versus $23 million).

NFL Property Income has jumped up just as much as player costs. In 2003 that figure was $4.7 million. Since then it went up to $7.3m in '04, $14.5m in '05, $15m in '06, $26m in '07, $32.8 in '08, $36.4 in '09, $45.8 in 2010. Essentially the profits from NFL Property have offset the increases in player salaries.

 

[letekro]

For a number of reasons, not the least of which that the Packers appear to be structured as a not for profit entity, the Packers' financials are likely not representative of the league as a whole.

 

[cmasspatsfan]

For a number of reasons, not the least of which that the Packers appear to be structured as a not for profit entity, the Packers' financials are likely not representative of the league as a whole.

They are not a "not for profit entity" they just dont disburse money to the owners or in this case shareholders, money stays in the bank for future costs. They operate like any other team as they have to have a positive cash flow to stay in business.

 

[BradyBranch39]

I don't want our books opened because then everybody will try to copy us even more.

 

[letekro]

They are not a "not for profit entity" they just dont disburse money to the owners or in this case shareholders, money stays in the bank for future costs. They operate like any other team as they have to have a positive cash flow to stay in business.

If no current distributions are made and the assets are distributable to another nonprofit on liquidation, it's a not for profit entity. My recollection from a brief espn piece during the super bowl is that the "owners'" "shares" do not represent an economic interest in the corporation. The reason is likely that it is a not for profit corporation. Others have posted articles in this thread substantiating this.

 

[patsfaninpittsburgh]

I have no idea what that means. Can anyone explain to this financial idiot?

Cash Flow is exactly what is says, where your cash gets spent and where the money comes from. This differs from net income based an capital payments/expenses and amortization of expenses. A cash flow statement starts with profit/loss then includes changes to the balance sheet

I may pay a player $10 million today. However, if his contract is for four years, it's reasonable to "expense" over four years or $2.5 million per year. As such, a would have four $2.5 million expenses but only one $10 million "cash flow". if I expense over four years, I have an "asset" that I expense.

In year two, I add the $2.5 million back to net income for cash purposes because the money has already left the kitty.

Cash flow will also show debt payments. Always remember that repayment of principle is not a profit/loss event. it's a balance sheet event.

A great saying is the "P/L" is the past. The balance sheet is the future. Here you can determine future cash payments based on liabilities and cash inflows from assets.

In the Packer's case, there should also be some disclosure concerning future capital plans and needs for Lambeau and associated facilities.

 

[BTTA]

Please provide us data showing us the Packers are non-profit. theres no way thats correct IMO

I did the exhaustive, difficult act of looking at their web site, and confirming it on a couple of others. Took all of five minutes.

 

[patsfaninpittsburgh]

You know what you call a corporation that never distributes profits to its owners? A nonprofit corporation. The fact that they paid taxes is neither here or there. They may not be tax-exempt, or they may have unrelated business taxable income, which is taxable even to corporations otherwise exempt from federal income tax.

A non profit is a "non profit" by applying for the classification as a "non profit" per the IRS.

Anyone know their actual legal classification?

"For profits" don't have to have distributions. Most new companies want to grow and keep that money for growth. Microsoft went years without dividends but had plenty of profit.

 

[BTTA]

Would love if for a group of GBP owners (fans) to file a lawsuit demanding that the owners of other teams open up their books for the sake of the negotiating process, claiming (as the players will in their suit) that they must do so or face antitrust violations. Owners vs. owners. Let's spill all that billionaires' petty jealousy and resentment out onto the sidewalk. Just what this mess needs to add some entertainment value over the next couple of months.

And to think that normally the only thing the NFL does for us to provide entertainment this time of year is pre draft speculation!

 

[letekro]

A non profit is a "non profit" by applying for the classification as a "non profit" per the IRS.

Anyone know their actual legal classification?

"For profits" don't have to have distributions. Most new companies want to grow and keep that money for growth. Microsoft went years without dividends but had plenty of profit.

No. A corporation incorporates as a nonprofit in one of the 50 states. If it so chooses, it applies for a Federal income tax exemption from the IRS. You are confusing "nonprofit", which is a state law concept, with "income tax-exempt", which is a Federal concept. Many nonprofits are not income tax-exempt because they don't meet the IRS's criteria for exemption. My understanding is that the Packers do not make current distributions and are bound to distribute their assets to another nonprofit upon dissolution, therefore they are a nonprofit corporation.

 

[Deus Irae]

They are not a "not for profit entity" they just dont disburse money to the owners or in this case shareholders, money stays in the bank for future costs. They operate like any other team as they have to have a positive cash flow to stay in business.

A non profit is a "non profit" by applying for the classification as a "non profit" per the IRS.

Anyone know their actual legal classification?

"For profits" don't have to have distributions. Most new companies want to grow and keep that money for growth. Microsoft went years without dividends but had plenty of profit.

Unless you two think the Packers are lying about their corporate status, on their own website, you're going to have to accept that the Packers are a nonprofit corporation:

Shareholders
Green Bay Packers, Inc., has been a publicly owned, nonprofit corporation since Aug. 18, 1923, when original articles of
incorporation were filed with Wisconsin’s secretary of state.

A total of 4,750,937 shares is owned by 112,158 stockholders —
none of whom receives any dividend on the initial investment.

The corporation is governed by a board of directors and a seven member executive committee.

Packers.com | Shareholders

 

[patsfaninpittsburgh]

No. A corporation incorporates as a nonprofit in one of the 50 states. If it so chooses, it applies for a Federal income tax exemption from the IRS. You are confusing "nonprofit", which is a state law concept, with "income tax-exempt", which is a Federal concept. Many nonprofits are not income tax-exempt because they don't meet the IRS's criteria for exemption. My understanding is that the Packers do not make current distributions and are bound to distribute their assets to another nonprofit upon dissolution, therefore they are a nonprofit corporation.

What I was trying to say is a "non profit" is a legal matter. I always thought they were some sort of trust that sold "shares" so people can say they were part "owners".

There was show done on this about 15 years ago. They had a guy who had his certiciate framed in his office.

Plenty of "for profits" don't make distributions...or make profits.