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03-20-2011, 06:59 PM
  #23
GSC2k2*
 
Join Date: Mar 2005
Location: Hamilton, Ontario
Country: Canada
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Quote:
Originally Posted by Whileee View Post
It has nothing to do with "jacking up the expenses" in my opinion, but rather an overly broad definition of "non-hockey related expenses". I happen to think that you are making unwarranted assumptions about what might and might not be included in Team expenses. I didn't mention any of the $53 million in hockey operations, but I expect that not all of that is for coach and player salaries / travel and equipment, so some of that will be eligible.

Suffice to say, non-hockey related expenses are not defined in the Lease as you or I might define them. Instead, they only explicitly exclude a narrow set of specific hockey-related expenses. I am not sure how GAAP helps clarifies this since it is based on the contractual definition of eligibility of expenses, not how they are accounted. Anyway, if this deal proceeds we will see how this is interpreted, and I remain confident that we will see much wider latitude in the expenses that are deemed "non-hockey related" and therefore eligible under the "arena management fee" than you are suggesting.

I agree it is getting tedious, and won't post anything more on this subject. Other posters can read the lease and financial statements and come to their own conclusions.
Well, having now done the calculations, I am afraid I won't let you off that easy, whileee. I think there is a further "accounting" to be done here.

As I showed, even if one aggressively assumes (as I did) that MH will cut arena costs by 10-20%, we still have the direct arena costs at a minimum of $17.9M. My aggressive cost reduction assumptions may be invalid if, as one might expect, Hulsizer is going to undertake a massive promotional and advertising campaign after he acquires the team. In fact, the structure of the deal reflects this, with more money available in the first 2.5 years.:

Since it is now clear that Hulsizer will likely start from a 2008-09 base of $17.9M in indisputable no-trickery arena management costs, even without considering escalation in the first couple of years to do a promo carpetbombing, let's do some math.

First off, the $17.9M is based on 2008-09 numbers, so let's add 2% annual inflation, so we have a 2010-11 number of $18.6M. We will add 2% per annum for inflation going forward as well.

First Half Year (now) - $10M maximum amount, less $9.3M (50% of $18.6M) in true direct arena costs = $700k in remaining room for your potential shenanigans (not so at all, if one accepts my interpretation).

Year 1 - $20M, less $19.0M (without any speculative marketing blitz), leaving $1M in room.

Year 2 - $20M, less $19.4M (without any speculative marketing blitz), leaving $600k in room.

Year 3 - $17M, less $19.8M, leaving a shortfall for Hulsizer that he must fund of $2.8M.

Year 4 - $15M, less $20.2M, leaving a shortfall for Hulsizer that he must fund of $5.2M.

Year 5 - $15M, less $20.6M, leaving a shortfall for Hulsizer that he must fund of $5.6M.

Based on the above, this would leave Hulsizer short for direct arena management expenses, without Hulsizer doing any of your proposed padding, by $13.6M.

Now, even if you allow for Hulsizer to use up the remaining room in the amounts for things which are "really hockey-related" because of an overly broad definition, we have Hulsizer not getting covered for legitimate arena management costs to the tune of $11.3M

Let's let that sink in: this $97M, this supposed generous "gift", is not going to cover all of Hulsizer's direct arena operating expenses, to the tune of $13.6 million (or $11.3M, if you continue to insist that Hulsizer is going to be allowed to use this for hockey costs).

Hulsizer - the guy who is getting this team "for free" - is going to have to come up with this money, in addition to his equity investment and his team losses.

AND THAT is not even accounting for any kind of promo and advertising blitz to try to get the market - especially the corporate market - to recover. Most of that money is going to come out of Hulsizer's pocket, unless he used the $2.3M in room noted above (which then makes it not available for any shenanigans). AND that is assuming that he and the NHL could wring 10-20% in efficiencies out of operations from Moyes' operations.

As for what this means to your longtime assertions that this fee was ripe for Hulsizer to funnel huge amounts of hockey expenses and get reimbursed for them, that notion is now refuted by basic mathematics. So, you're right, we are probably done on this, although not for the reason you may have intended.

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