Panthers refute claims they were making money hand over fist while asking for public funding

As we've all found out in the last decade, you can make a balance sheet say pretty much anything you want it to. The Carolina Panthers franchise is having a bit of a problem with that fact right now, as the result of a Deadspin report that claims the Panthers were crying poor and begging for public funding for stadium improvements -- at the same time the team was practically printing money.

According to the report written by Deadspin's Tommy Craggs, Panthers owner Jerry Richardson ran a team that could brag a total operating profit of $112 million in 2010 and 2011. At the same time, Richardson was playing hardball with the players with the lockout at its peak, and insisting that his team would need public money for any stadium renovations.

The statement is for the years ending March 31, 2011, and March 31, 2012. Over the first period, as Richardson argued that the NFL's business model was hopelessly broken and steered the owners toward a showdown to extract more money from the players, the Panthers recorded an operating profit of $78.7 million. The team had gone 2-14 on the field, but Richardson and his partners were able to pay themselves $12 million.

Over the following year, after the owners had won their lockout and reduced the players' share of league revenue from 50 percent to 47 percent, the Panthers brought in $33.3 million in operating profit. Richardson began lobbying for public subsidies to renovate his 17-year-old stadium. The team went 6-10.

Richardson certainly wasn't feeling that financial warmth. According to Yahoo's Mike Silver, he told his fellow owners in 2010 that the expired CBA that led to the 2011 lockout was "a [expletive] deal last time, and we’re going to stick together and take back our league and [expletive] do something about it."

The owners certainly [expletive] did, reducing the players' percentage of total revenue when the new CBA was ratified in July, 2011. But in one rather interesting January 2011 press conference, Richardson tied to claim enormous operating losses based on a pie chart he (or somebody) had drawn. According to a balance sheet assembled by the firm of Deloitte & Touche, and analysis given by University of Oregon business prefessor Dennis Howard at Deadspin's request, Richardson's attempt to cry poor and extract $200 million in public funding for stadium renovations that he estimated would cost $300 million total, may have been based on something called Roster Depreciation Allowance.

From Craggs' report:

The RDA is an accounting gimmick whereby a new owner of a sports franchise gets to write off 100 percent of the purchase price of the team over a 15-year period, on the specious logic that a roster depreciates the same way, for instance, that your office's new fax machine does. That tax deduction shows up on the books as an operating expense, even though it's a pretend-loss that exists only in the quirks of the tax code. Thus, Stephen Ross, who purchased the Miami Dolphins for $1 billion, can claim an operational hit of nearly $70 million. "It has a huge impact on the bottom line," Howard says. "You're able to transform a real profit into an operational loss."

In the end, as Howard wrote to Craggs, it's almost impossible for an NFL team to lose money.

"Based on the team's financial condition, there is absolutely no justification for such a large public subsidy," Howard writes in an email. The financials "show unequivocally that the team has the capacity to finance the improvements on its own. The team could easily pledge a portion of the anticipated increase in TV revenues to finance the debt service for the improvements."

Remember, Jerry Richardson was the same guy who allegedly sat across a table from Peyton Manning and Drew Brees at the height of the lockout and condescendingly said that they'd need help reading a revenue chart. Brees later downplayed the supposedly contentious nature of the meeting, but if the Deadspin report is correct, it would seem that Richardson doesn't think the state in which he operates knows how to read financials, either.

On Thursday, the Carolina Panthers organization released a rebuttal to the Deadspin report through the team's official website:

The Deadspin story presents an incomplete picture of the Carolina Panthers profitability. The figures offer an isolated snapshot of the team’s financial situation during an unusual time as the NFL lockout loomed. At the time, the team had strategically reduced its spending because of the uncertainty and as part of a long-term plan to secure the team's best talent once a collective bargaining agreement had been reached.

The team's actual operating cash flow, even before federal and state tax payments were made, was significantly less than the accounting income reported in the story. The most meaningful reflection of a company's profitability is cash flow, and the team's operating cash flow fluctuated between pre-tax figures of $26.7M in fiscal year 2011 and $39.8M in fiscal year 2012.

A detailed review of the financial statements demonstrates the difficulty of being competitive in the NFL, paying players to the cap, and trying to add the financing of a major stadium renovation.

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