Levitt Report - NHL.com

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team operations are insufficient. Further, the combined loss of $273 millionexcludes any provisions for the replacement of depleting assets throughdepreciation or amortization.Including only net interest expense as reported in the UROs as non-operatingexpense (which may exclude interest expense for buildings, team purchases orborrowings to fund operations recorded by affiliates that might be properlyallocated to a team) would increase the operating loss to approximately ($374million).C. Whether the treatment of affiliated or related company income in the URO is: (a)reasonable for the purposes of measuring the relevant revenues and expensesassociated with operating a professional hockey franchise in the NHL; (b) similar tothe treatment of affiliated or related company income in the calculation of BasketballRelated Income (“BRI”), as that term is defined in the NBA/NBPA collectivebargaining agreement; and (c) similar to the treatment of affiliated or relatedcompany income in the calculation of Defined Gross Revenue (“DGR”), as that termis defined in the NFL/NFLPA collective bargaining agreement.In my opinion, the treatment of affiliated or related-party income in the combinedURO reasonably measures the relevant revenues and expenses associated withoperating a professional hockey franchise in the NHL in all material respects andis similar to the agreed-upon measures used in the NBA collective bargainingagreement in calculating the related-party revenues that it shares with the players.The URO captures all revenues and expenses derived directly or indirectly fromactivities related to NHL hockey regardless of the legal entities through whichthose activities are conducted. Specifically, the URO includes revenues receivedby affiliated and related-party entities that are properly allocable to the operationof a hockey franchise.D. Whether the current relationship between League-wide player costs and League-widerevenues is consistent with reasonable and sound business practices in thisLeague.Based on our work, our understanding of the business of the sport of hockey, andour knowledge of the financial relationships that generally need to exist in orderfor a business enterprise to be financially sound and successful, the currentrelationship between League-wide player costs and League-wide revenues isinconsistent with reasonable and sound business practices. Player costs of $1.494billion or 75% of revenues substantially exceed such relationships in both theNBA and the NFL as those relationships are set forth in their collectivebargaining agreements.Respectfully Yours,(Original signed byArthur Levitt Jr.)23
AppendicesA – List of teamsB – Copy of 2002-03 URO Reporting PackageC – Major Hockey-related RevenuesD – Major League Player CostsE – Other CostsF – Form of supplementary audit reportG – Form of agreed-upon procedures reports – affiliated arenasH – Form of agreed-upon procedures reports – teams not auditedI. – Combined URO for 2002-2003 seasonJ – Arthur Levitt’s curriculum vitaeK – Lynn Turner’s curriculum vitae24
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 22 and 23: ooks. Similarly, the combined URO r
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
Page 75 and 76:
Appendix C (cont’d)Arena Novelty
Page 77 and 78:
Appendix EURO REPORTINGOTHER COSTS!
Page 79 and 80:
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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