Forbes Financial Data comes out

by Thunder on Mar 23, 2011 2:41 PM EDT

I don't know which, if either, point is more noteworthy in the annual Forbes Baseball Teams Valuation article. Is it the point that the Pirates are estimated to be the LEAST valuable franchise of the 30 franchises?? Or is it that the Pirates are estimated to have had a $25M operating profit in 2010?? I'm sure there will be a big to-do about how accurate the Forbes info is or is not, but last year, they seemed to have it pegged pretty well with numbers supported when Dejan came out with his articles.

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Or is it that the Pirates are estimated to have had a $25M operating profit in 2010?

Given the inaccuracy of their past estimates, when compared to the team’s leaked books, I’m not sure why anybody would bother paying attention to Forbes’s profit guesswork.

Is it the point that the Pirates are estimated to be the LEAST valuable franchise of the 30 franchises?

That shouldn’t really be surprising, either. The Pirates are a relatively small media market with a declining population base.

by Vlad on Mar 23, 2011 3:02 PM EDT reply actions

As an example

The leaked documents showed a 2009 operating profit of $5.4M. Forbes estimated it to be $15.6M.

http://www.forbes.com/2010/04/06/most-valuable-baseball-teams-business-sportsmoney-baseball-valuations-10-values_2.html

by biggyv on Mar 23, 2011 3:12 PM EDT up reply actions 1 recs

Yes...

and we are pretty sure that the difference between those two numbers was the “tax repay” or however you choose to word it.

by Thunder on Mar 23, 2011 3:18 PM EDT up reply actions

Not really

There was no “tax repay.” There was one year where the team made a distribution to cover the partners’ income tax liabilities, but those were the partners’ taxes, not the Pirates’. Taxes resulting from partnership income are passed through. So the payments to the partners would not be accounted for in the Pirates’ books as an expense. In fact, it’s totally irrelevant to the Pirates what the payments were for. It’s a cash distribution regardless of what the money was used for. It’s quite possible the funds paid to one or more of the partners never went to the IRS. They might have had other losses to offset the gains reported on their behalf by the ballclub.

You're entitled to your own opinions. You're not entitled to your own facts.

by WTM on Mar 23, 2011 7:01 PM EDT up reply actions

operating income is not a synonym for profit

Profit is derived from operating income – taxes and interest. So….

Moreover, the partnership can also decide to put their profits into the team by paying down partnership debt (which will help the partnership pay higher salaries in the future), by setting the money aside for a future moment when its needed, etc.

In other words, using the Forbes data comes with a caveat. The Forbes data does not tell us whether or not the Nutting Partnership took profits from the team in 2010 and it does not tell us what actual profits were and what happened to them.

Let us assume, then, that the Partners did not lose money in 2010. That’s a fairly safe entailment to draw from the Forbes data.

s.zielinski

by steve_z on Mar 23, 2011 5:42 PM EDT up reply actions

which i believe the partners admitted too.

they say the team is no longer in the red.

by white angus on Mar 23, 2011 5:44 PM EDT up reply actions

They may still find debt service difficult given the team’s income. But there’s a good chance they have and will continue to pay down their debt. This will help when it comes time to hand out large contracts (MLB counts player contracts as team debt).

s.zielinski

by steve_z on Mar 23, 2011 5:57 PM EDT up reply actions

if we can only find a way to get rid of Brian Giles...

hmmmm, i wonder what Wehner would do for a few bucks

by white angus on Mar 23, 2011 6:08 PM EDT up reply actions

Giles is still on the payroll?

Kendall too?

s.zielinski

by steve_z on Mar 23, 2011 6:25 PM EDT up reply actions

im pretty sure Giles is, but not Kendall

vlad? wilbur???

by white angus on Mar 23, 2011 9:38 PM EDT up reply actions

im pretty sure Giles is, but not Kendall

I figured you guys were kidding, but I wanted to be sure. According to Cot’s Baseball Contracts, the Pirates have no financial obligations this year to former players and are still receiving $3 million for Chris Snyder from Arizona.

Just going back and double checking the contracts:
Brian Giles signed a 5 year, $45 million contract extension with the Pirates in May 2000. This included a $5 million signing bonus that was partially deferred to 2001 and it overrode the contract that he had which was to pay him $3.2 million in 2001 and the club option in 2002. Most of the articles of that day talk about $12 million being deferred.

The Padres paid about $1 million of his remaining 2003 salary and the Padres paid the over $16 million he was owed for 2004 & 2005.

When looking up Jason Kendall’s contract, I find this interesting article from 1992 that talks about the day that the Pirates signed Jason Kendall out of high school and the Pirates gave him a $336,000 signing bonus, which was thought to be the highest that the Pirates had ever handed out, up to that point (boy how times have changed!!!)

Anyway, Kendall’s contract of 6 years, $60 million was signed in November of 2000 but didn’t start until the 2002 and ran though the 2007 season. The A’s paid about $33 million of that over the contract’s last 3 seasons.

Both Giles and Kendall are off of the Pirates books.

by impliedi on Mar 24, 2011 1:23 AM EDT up reply actions

Luckily the Pirates didn’t sign any 25-year deals like the Mets did with Bobby Bonilla. Good for him that starting this July 1st, he’ll start receiving $1,193,248.20 every year for the next 25 years (when he’ll 72-years-old!!!). He’s going to earn $29,831,205 over the next 25 years.

And don’t forget Bret Saberhagen. He’s been receiving $250,000 every year, also from the Mets, from 2004 and will keep getting them until 2028.

by impliedi on Mar 24, 2011 1:30 AM EDT up reply actions 1 recs

Makes for a nice pension plan.

by Thunder on Mar 24, 2011 9:40 AM EDT up reply actions

According to the PG in 2005:

http://www.post-gazette.com/pg/05044/456818-63.stm

Kendall had $3 million deferred over the life of the contract. The Pirates were responsible for half of that and the A’s took on the other half. The Pirates had to make 3 $500,000 payments in 2008, 2009, and 2010, while the A’s are one the hook for 2011, 2012, and 2013. Kendall was on the books last year, but is now off.

Giles had a lot more money deferred: $5.5 million of his signing bonus and $7 million of his salary from 2000-2002. The Pirates have to pay the $12.5 million off between 2011 and 2025. That works out to about $833k a year over 15 years if they plan to use that entire window. He’ll remain on the books for quite a while.

by ElDuce on Mar 24, 2011 1:54 AM EDT up reply actions 1 recs

see, Impliedi... THIS!!!!!!

snicker

by white angus on Mar 24, 2011 8:04 AM EDT up reply actions

Thanks ElDuce, I stand corrected.

I just assumed that by deferring the money (especially the signing bonus), they were deferring it to later into the contract, not to after the contract had expired. That’s interesting info to see.

by impliedi on Mar 24, 2011 3:42 PM EDT up reply actions

There was also an article within the last year or so that compared franchise sale prices with the Forbes’ valuation estimates that came out most recently before each sale. The Forbes’ figures were extremely inaccurate.

You're entitled to your own opinions. You're not entitled to your own facts.

by WTM on Mar 23, 2011 7:04 PM EDT up reply actions

Yeah. This, to me, is not news.

by Charlie Wilmoth on Mar 23, 2011 3:15 PM EDT up reply actions

Is it really still declining?

I thought recent reports showed it trending back up again.

by Slick1 on Mar 23, 2011 5:49 PM EDT up reply actions

2010 showed a population increase....

http://www.pittsburghlive.com/x/pittsburghtrib/news/pittsburgh/s_673090.html

First time in years so your point still holds.

by Slick1 on Mar 23, 2011 5:54 PM EDT up reply actions

Population is still declining

More people are coming than leaving, but population is still declining because more people are dying than being born. Your larger point stands though; things are trending in the right direction, and population will increase as the older folks die.

by biggyv on Mar 23, 2011 6:43 PM EDT up reply actions

Interesting thanks...

and I found that article right before leaving work so I didn’t read the whole thing. I apologize if that was in there.

by Slick1 on Mar 23, 2011 8:46 PM EDT up reply actions

I like that the Red Sox somehow lost $1 million last year. Shouldn’t they come up with some way to factor in the money they take in from their TV station?

by ElDuce on Mar 23, 2011 3:09 PM EDT reply actions

Paging Bob Smizik

by Bucsfan1978 on Mar 23, 2011 3:23 PM EDT via mobile reply actions

When even DK

calls it laughable, you know the report’s off the mark.

Free your ass and your mind will follow.

by cocktailsfor2 on Mar 23, 2011 3:36 PM EDT reply actions

This

by Slick1 on Mar 23, 2011 3:51 PM EDT up reply actions

Our old friend saleleb even makes a comment. And, of course, it’s the only one of the bunch that’s idiotic.

Thank you Ned Colletti.

by ryebr3ad on Mar 23, 2011 4:57 PM EDT up reply actions

ridiculous.

we’re supposed to believe the redsox LOSE money? whatever.

by white angus on Mar 23, 2011 3:53 PM EDT reply actions

Can't vouch for Forbes' accuracy

But consider this: Forbes’ figure for Baseball’s 2010 revenues is $6.1 billion. If accurate, that would put Baseball at about #355 on the Fortune 500 list — about equivalent to DaVita, a California health services company which also reported $422 million in profits, a little less than the $494 million in ebitda Forbes reports for Baseball.

I know: apples and oranges, public vs. private companies financial reporting, etc. Still, DaVita’s revenues and earnings were up year over year. Baseball’s revenues (again assuming the rough accuracy of Forbes’ numbers) were up 4%, but income was down 5%. Revenue sharing was also reported down about 6.7% to $404 million in 2010 from $433 million in 2009.

I suggest reading the associated article: Inside Baseball’s Debt Disaster. I’m not a financial expert, but it strikes me that baseball faces some financial challenges. Baseball is a business, but it’s not all that big a business; nor is it all that financially secure, despite its “wealthy” owners. As for the Pirates: $25 million in operating profit (if accurate) probably isn’t enough to make the Pirates competitive, especially in view of Vlad’s point above about the size of Pittsburgh’s market and declining population base.

I’ve said it before: I think the next CBA could turn out to be a very interesting (read contentious) negotiation.

Lino Donoso

by Lino Donoso on Mar 23, 2011 5:29 PM EDT reply actions

There are some that think the next CBA will be signed off on without much negotiation necessary. I’m not one of those people. I think that short of a court injunction…the NHL is the only major league that gets by without a work stoppage at the end of their current one. The NFL is already in a lockout, and there’s a better chance of hell freezing over than there is of the NBA escaping a work stoppage.

If the Pirates are losing money…they should be SCREAMING for a change in the current atmosphere. They aren’t. Bud Selig may be telling teams to keep quiet…but you can’t force someone to lose money. And if the Nuttings were truly losing money, they’d be looking to sell…which they insist they will never do.

The Pirates…under current mode of operation…are a profitable entity.

by Thunder on Mar 23, 2011 5:56 PM EDT up reply actions