Levitt Report - NHL.com

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ooks. Similarly, the combined URO results include all expenses 5 related tohockey activities such as player costs, development costs, game day costs, fixedbuilding costs (excluding depreciation and interest) and applicable General andAdministrative Costs (G&A) regardless of whether recorded on the team’s booksor an affiliate’s books.The combined League-wide URO for the fiscal year ended June 30, 2003 reports thefollowing amounts (in millions of U.S. dollars):2003 % of RevenueCombined Revenues $1,996 100Player Costs 1,494 75Other Operating Costs 775 39Total Operating Costs 2,269 114Operating Loss, excludingdepreciation, amortization,interest and taxes 1 ($273)(1) Incorporated in the above combined results for the League are the costs of running the League office,the operating profit of NHL Enterprises and the net profit from the national broadcasting agreements.These are audited annually at the League level and each team includes in their URO their share ofthese revenues and costs as calculated in accordance with the League’s constitution and by-laws(1/30th adjusted for currency).Separate line items are provided in each team URO for League office costs, under “Dues andAssessments”; for net profit from NHL Enterprises, included in Other Revenues as “NHL EnterprisesRights”; and for net profit from the national broadcasting contracts included as “NHL TV Revenues –Net”.In the 2002-2003 season, 19 teams reported operating losses and 11 teams reportedoperating profits. The largest profit reported in its URO by a team was $14.6 million andthe largest loss was $40.9 million. The average profit of the 11 teams reporting a profiton the URO was $6.4 million. The average loss of the 19 teams reporting losses was$18.0 million. The average loss reported on the combined League-wide URO for the 30teams was $9.1 million.5 Such expenses are more fully detailed in the URO reporting package (Appendix B) and outlined inAppendix D & E.21
Below the number of teams are segmented by size of operating loss/profit. In reviewingthe underlying data, there appears to be no clear relationship between the size of the lossand revenue ranking or market size as measured by a relative DMA ranking. All amountsreported below include operating profits earned in playoffs.Number ofTeamsAverage(Loss)/ProfitHighest(Loss)/ProfitCombined(Loss)/ProfitTeams ReportingOperating Losses:Over $30 Million 4 ($35.5) ($40.9) ($142.0)$20-$29.9 Million 2 (23.2) (26.2) (46.4)$10-$19.9 Million 6 (16.9) (19.0) (101.5)$5-$9.9 Million 6 (8.2) (9.9) (49.4)Under $5 Million 1 (3.1) (3.1) (3.1)Totals for TeamsReporting OperatingLosses 19 (18.0) (40.9) (342.4)Teams ReportOperating ProfitsOver $10 Million 2 $12.7 $14.6 $25.3$5.0-$9.9 Million 4 8.1 9.4 32.4Under $5 Million 5 2.4 4.3 12.1Total for TeamsReporting OperatingProfits11 6.4 14.6 69.8Overall CombinedOperating Loss ($272.6)It is my opinion, based on all our work, that the combined URO operating loss forthe fiscal year-ended June 30, 2003 of $273 million is a comprehensive andaccurate statement, in all material respects, of the results of operating the 30 NHLhockey franchises during the 2002-2003 season and includes all revenue andexpenses attributable to the hockey business whether recorded by the team or inan affiliated or related entity.However, it should be noted that the $273 million in operating loss is understatedas it excludes two important cost components required to be considered undergenerally accepted accounting principles in measuring the results of operations.The $273 million combined operating loss excludes any interest charges or debtservice for monies borrowed to directly support the operations such as workingcapital loans or borrowings to fund deficits, nor does it include any costs offinancing to purchase the teams, construct arenas or purchase any other tangibleassets, all of which need to be funded by team operations or the owner, when the22
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 10 and 11: 8. We tested the mathematical accur
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
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
Page 81 and 82:
Appendix HForm Of Agreed Upon Proce
Page 83 and 84:
Appendix INHL Summary Statement of
Page 85:
Lynn E. TurnerAppendix KMr. Turner
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Levitt Report - NHL.com

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