Esks' financial picture doesn't seem bleak, despite overall loss

The Edmonton Eskimos released their 2010 financial results today (full report available in PDF form here), and many will focus on two key numbers in their report. First, the Eskimos managed to make a profit of $5.1 million from hosting the Grey Cup. Second, despite that, their bottom line still shows a $2.3 million loss. If read without context, that has frightening implications for the entire league; the Grey Cup's the biggest cash cow the CFL has, so if the team hosting it is still losing millions of dollars, the league is in major trouble.

Fortunately, the context appears to make those numbers far less worrying. As Mario Annicharico points out, the primary reason for the bottom-line loss is the Eskimos' investment of close to $9 million into a new recreation centre and $1.3 million into field improvements, neither of which should be a cost that recurs every year. The recreation centre figure Annicharico is referencing is presumably the $8,961,766 in expenses listed as "community donations" on page four of the statement (although the Eskimos' release cites that cost as $7.5 million and the field cost as $1.3 million, so it's possible that those two together make up the "community donations" category). The turf replacement at Commonwealth Stadium is listed as $536,480 on page five, with another $58,003 pegged for the scoreboard upgrade; it's easy to see other stadium renovations making up the remainder of that $1.3 million figure. Other hopefully non-repeating losses on the football side (which we'll discuss in more detail below) include the decisions to change their general manager and their head coach, bringing in Eric Tillman and Kavis Reed (pictured left to right above).

The financial statement by itself doesn't particularly clear everything up. For example, by far the biggest expenditure listed in that document is $30,934,249 (on page five) for "funds spent on capital project". It isn't clear what capital project that is (although at least part of it would seem to be the recreation centre investment), or where the $936,491 for "purchase of capital assets" went. Still, you'd imagine that those would be costs that aren't likely to repeat year after year.

The best indication of the Eskimos' current financial health probably comes from looking at the numbers that do seem likely to recur. We can start with page four there, which lists columns of revenues and expenses for both 2010 and 2009. It's notable that the Eskimos' gate revenues increased from $7,664,148 to $7,920,999 (an increase of $256,851) despite a horrendous start to the season and a worse on-field campaign overall than 2009 (despite a promising second half). Their sponsorship income also rose from $2,781,306 to $3,145,518, a jump of $364,212. Some of that may not be sustainable, as some sponsors might have more interest in being associated with the team in a year where they're hosting the Grey Cup, but that's still an impressive boost. It's also notable that the "Canadian Football League" income (probably TV and national sponsorship revenues) paid out to the Eskimos rose from $1,830,349 to $1,960,735, an increase of $130, 386. That doesn't look like all that much, but if you figure that each of the eight teams receives the same payout (which would seem logical), that would mean an increase of $1,043,088 league-wide in those shared revenues, which is very impressive and bodes well for the state of the CFL.

Three of the Eskimos' revenue sources on that same page did decline. Game-day revenues (probably food, drink and merchandise) fell from $2,948,367 to $2,728,887, which is a slightly worrying decline of $219,480. That decline is more troubling when you note the increased gate revenues, which suggest that more people are coming to the games but spending less money while there. Some of the likely reasons why are beyond the Eskimos' control (economic issues and such), but it might behoove them to try and find ways to revive the game-day revenues section next year, perhaps by offering different and unusual food, drink and merchandising options. The other declines are less worrying; interest income fell from $11,750 to $6,060 simply because they had a great deal less cash to earn interest on, and special events income fell from $3,155 to $960, probably as a result of the team focusing on events during Grey Cup Week (which they undoubtedly raked in a fair bit of cash from). Overall, the team hauled in $15,763,125 from regular income sources, up $497,050 from $15,239,075 in 2009.

The team's expenses did rise even more, though, from $14,730,201 to $15,589,307 (an increase of $859,106). However, some of those expenses are undoubtedly related to the team's decision to change general managers (Danny Maciocia to interim replacements to Tillman) and coaches (Richie Hall to Reed), and you'd hope they wouldn't have to deal with those costs every year. What looks like the key takeaway to me, though, is that even with those extra costs, the team's regular revenues exceeded their regular costs by $173,818. That's not a huge profit, but it is a substantial one, and it's a notable one for a season that got off to one of the worst starts in Eskimos' history; it would seem likely that they can either repeat that financial performance or improve on it next year. It's not entirely a sunshine and lollipops financial statement for Edmonton, but it's hardly a bad one, and it looks like the club essentially still made a reasonable amount of money (before Grey Cup revenues and capital costs) last season. If they can do that while the on-field product's in disarray for a sizeable portion of the year, how much better will the revenues look if they're able to build on last year's strong finish?

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