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8. We tested the mathematical accuracy of the combined URO for the 2001-2002season. We randomly selected five teams and the individual team’s URO datawas checked against the related amounts included in the combining spreadsheets.No exceptions were noted as a result of these procedures.Phase III – 2002-2003:9. Based on the results of the procedures noted in Phases I and II above, the NHLfinancial staff, at our request, clarified and modified the 2002-2003 UROinstructions prior to their issuance to the teams in September, 2003. Clarificationswe requested included: (i) a change in the instructions clearly confirming alldepreciation expense be reported as non-operating expenses (not included in the$273 million of net operating loss), (ii) a change in the reporting of certaingovernment grants to be more inclusive, (iii) clarification of the instructions toavoid certain reporting oversights made by some teams in the 2001-2002 season,(iv) clarification of the accounting for deferred signing bonuses and (v) theaddition of new schedules setting forth in detail: (a) any allocations of revenueand expenses between hockey and non-hockey activities, by the teams and anyaffiliated entities together with supporting information, and (b) number of events,paid attendance and gross receipts statistics for the team’s arena. At our request,the NHL financial staff also issued specific instructions to particular teams tochange the way certain revenue or expense items were being reported in the UROin order that they be in compliance with the revised instructions. In all cases, themodifications are reflected in the combined URO results. 210. We obtained and read the NHL URO Reporting Package and Instructions andaudited financial statements for three teams we selected for the 2002-2003 season.We visited each of those three teams and discussed the preparation of the UROfor the 2002-2003 season with the financial management of those teams.Interviews were conducted with the financial management of the teams andinquiries were made concerning any changes in: (i) the business and financialoperations, and the ownership structure of the teams, (ii) the nature of eachrevenue stream reportable in the URO, (iii) any transactions between the teamsand any affiliated or related parties, (iv) how revenue and cost allocations weremade between the teams and any affiliated entities, and (v) the accountingprinciples followed in the preparation of the URO. Detailed supporting schedulesfor allocations of revenues and expenses between hockey and non-hockey eventsby the teams and any affiliated entities were provided by each team and discussedduring the visits. Financial management of each team responded to our questionsregarding the URO preparation, the operations of the team and variances based onan analytical review of the 2002-2003 UROs compared with the prior two fiscalyears UROs.2 Our review of the 2001-2002 combined URO statements was not made for determining whetherthe UROs for years prior to 2002-2003 were materially accurate. The 2001-2002 unauditedcombined URO as initially reported by the NHL and teams, and not subject to our review,reported an operating loss of $218 million.9
11. We selected eight teams and requested that each team’s independent auditorperform additional agreed-upon procedures specified by us with respect to theteam’s allocation of revenues and expenses between hockey and non-hockeyactivities in the 2002-2003 URO. Those procedures were requested to providegreater assurance as to the accuracy of data and analysis contained in SchedulesXIII (Allocations) and XIV (Building/Arena Statistics) of the teams’ UROs. Theindependent auditors were requested to issue a separate agreed-upon proceduresreport covering the financial information and statistical data included on theseschedules of the URO for the 2002-2003 season. A sample of such a report isincluded in Appendix G. We applied these procedures to teams where themethodology for the allocation of revenues and expenses was particularlycomplex. We obtained and read the agreed-upon procedures reports of theindependent auditors.12. We obtained and read the UROs, team audited financial statements andsupplementary audit reports on URO Schedules I and XII for the 2002-2003season for all 30 teams, except as noted below. Telephone interviews wereconducted with financial management of the 27 teams that we did not visit.Management of each team responded to our questions regarding the UROpreparation, allocations of revenues and expenses between hockey and nonhockeyevents by the teams and any affiliated entities, and variances based on acomparison of the 2002-2003 season UROs with the two prior fiscal years’UROs. After the interviews, follow-up questions were sent to any team of whichwe had questions and the responses were received and analyzed.Four of the teams did not have audited financial statements for the 2002-2003season or supplementary audit reports on Schedules I and XII. For each of theseteams, Eisner personnel or the team’s independent auditor visited the team andperformed on site the list of procedures specified by me and set forth at AppendixH. (In addition to Ottawa and Buffalo (see footnote 1), two other teams did nothave their audit reports issued because of pending financing issues andtransactions.) Of the 26 team audited financial statements received, 23 wereunqualified and three had “going concern opinions”.13. For the 22 teams with affiliated arenas, we obtained and read the audited financialstatements of the affiliated entities, except as noted below. The purpose was todetermine that 1) all hockey-related revenues and expenses were included in theURO, and 2) all significant related-party transactions were properly disclosed andreflected in our analysis.We were not provided with the audited financial statements for the arenas of 6 ofthe 22 teams that have affiliated arena entities. In three cases, the arenas’independent auditors performed agreed-upon procedures specified by me on theinternal financial statements of the arena. In one case, the arena’s independentauditor performed agreed-upon procedures on the excerpted information providedto us by comparing it to amounts reported in the audited financial statements ofthe arena. We obtained and read the agreed-upon procedures reports of theindependent auditors in each of these cases. In the other two cases, Ottawa and10
Page 1 and 2: independent review of thecombined f
Page 3 and 4: Conclusions:In accordance with my a
Page 5 and 6: The revenues and expenses reported
Page 7: Phase III - Review of 2002-2003:For
Page 12 and 13: .Buffalo, the agreed-upon procedure
Page 14: from the licensing of suites and cl
Page 18 and 19: formula which takes into account: c
Page 20 and 21: However, with respect to broadcasti
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Page 24 and 25: team operations are insufficient. F
Page 26 and 27: Appendix ATEAMMighty Ducks of Anahe
Page 29 and 30: UNIFIED REPORT OF OPERATIONSREPORTI
Page 35 and 36: National Hockey LeagueUnified Repor
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UNIFIED REPORT OF OPERATIONSREPORTI
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Appendix C (cont’d)Arena Novelty
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Appendix EURO REPORTINGOTHER COSTS!
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Appendix GForm of Agreed Upon Proce
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Appendix HForm Of Agreed Upon Proce
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Appendix INHL Summary Statement of
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Lynn E. TurnerAppendix KMr. Turner
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