On April 7, 2010 Forbes announced their annual MLB Team Valuations. As we all assumed, the NY Yankees are the most valuable team for the 13th strait season. Not only did Forbes announce their estimated values for each of the 30 MLB teams, but also their estimated Operating Income, Total Revenues, and Debt to Value (From which we can estimate total team Debt) The Texas Rangers have the highest Debt to Value percent of 105% and are the only team that is “under water”. The Dodgers have the 6th highest Debt to Value percent along with the 4th highest Team Value and Operating Income. However, “Operating Income is a deceptive term because it does not include a deduction for Interest Expense, Depreciation, Income Taxes, or Amortization.
Below is my interpretation of the Forbes data in a manner and format that generally follows the MLB Team Debt Rules included in the MLB Agreement. Unfortunately, the information provided by Forbes, even considered in the best light, shows that the Dodger Team financial position is most likely only 4th best in the NL West. Arizona had negative Operating Income in 2009 and therefore was not included in the presentation. Taken in the best light, the data shows that there is a possibility that the relationship between the LA Dodgers Debt and Operating Income has caused the team to be monitored and their activities partially restricted in some manner by MLB. Thus the payroll restrictions are more likely a result of the Debt load, which is partially a function of the pre-divorce lifestyle of the Dodger owners, as opposed to the payroll being restricted due to the impending divorce.
| 4th | 9th | 15th | 19th | ||||
| LA Dodgers | Giants | Padres | Rockies | ||||
| A | Data Per Forbes | ||||||
| B | Estimates Per Ken | ||||||
| Current Value | A | $727,000,000 | $ 483,000,000 | $ 408,000,000 | $ 384,000,000 | ||
| Debt Ratio | A | 58% | 26% | 49% | 21% | ||
| Estimated Total Debt | $421,660,000 | $ 125,580,000 | $ 199,920,000 | $ 80,640,000 | |||
| Excludable Debt: | |||||||
| Estimated Deferred Comp | B | $ 20,000,000 | $ - | $ - | $ - | ||
| Estimated Construction Loans – Camelback | B | $ 30,000,000 | $ - | $ - | $ - | ||
| Mandatory Exclusion | $ 36,500,000 | $ 36,500,000 | $ 36,500,000 | $ 36,500,000 | |||
| Total Excludable Debt: | $ 86,500,000 | $ 36,500,000 | $ 36,500,000 | $ 36,500,000 | |||
| Includible Debt | $335,160,000 | $ 89,080,000 | $ 163,420,000 | $ 44,140,000 | |||
| Operating Income (2009 EBITDA) | A | $ 33,100,000 | $ 23,500,000 | $ 32,100,000 | $ 20,100,000 | ||
| Debt Multiplier | 10 | 10 | 10 | 10 | |||
| $331,000,000 | $ 235,000,000 | $ 321,000,000 | $ 201,000,000 | ||||
| Estimated Excess Debt | B | $ 4,160,000 | $(145,920,000) | $(157,580,000) | $(156,860,000) | ||
| Operating Income (2009 EBITDA) | A | $ 33,100,000 | $ 23,500,000 | $ 32,100,000 | $ 20,100,000 | ||
| Estimated Depreciation | $ (6,000,000) | $ (1,000,000) | $ (1,000,000) | $ (1,000,000) | |||
| Estimated Interest Expense @ 6.5% | $(27,407,900) | $ (8,162,700) | $(12,994,800) | $ (5,241,600) | |||
| Taxable Income (Loss) | $ (307,900) | $ 14,337,300 | $ 18,105,200 | $ 13,858,400 | |||
Based upon the Forbes data, and traditional financial estimates, the Dodgers did not have taxable income during 2009. One obvious opinion is that creative tax planning was not the cause of the LA Dodgers paying no income taxes, rather the large interest deduction.
Frank – We welcome your providing the fans with a full and accurate disclosure of the LA Dodger consolidated financial Statements and the financial discourse package annually sent to Bud.
Written by Ken who is an attorney, MBA and CPA.
I totally understand the above. Now, just why did the cost of an official Dodger cap go up in price???
Explain that to me . . .
I drank too many beers at the Kings game tonight. Are we fucked or what?
Translation:
The Dodgers have more debt and also more income potential than most other teams, but they need to fulfill that “potential.”
Or – Any rich person that buys PART of the Dodgers from Beans or Franks (Depending upon the Family Law ownership and value decisions)in the next 2-3 years better do so with cash and with NO debt.