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Thread: Pirates open books, show $5.4 million profit for 2009

      
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    Default Pirates open books, show $5.4 million profit for 2009

    Pirates open books, show $5.4 million profit for 2009
    Sunday, August 22, 2010
    By Dejan Kovacevic, Pittsburgh Post-Gazette
    The Pirates made $5.4 million in profit in 2009, owner Bob Nutting said today, and would have lost money if not for the midseason trades of veteran players.

    In an afternoon meeting with four media outlets at PNC Park that Nutting described as being aimed at a recent leak to the Associated Press of the team's 2007 and 2008 financial books -- the AP has not yet published any report on the subject -- he gave unprecedented detail about the team's financial history since he took over as chairman and controlling owner in early 2007.

    Among the numbers Nutting and team president Frank Coonelly attributed to the same audited statements that the Pirates file annually with Major League Baseball and its players' union:

    The Pirates' exact profit -- or net income -- for last season was $5,409,087.

    The profit for 2007 was $15,008,032, and the profit for 2008 was $14,408,249.

    No ownership dividends were paid in that time, and Nutting took no salary or management fee, but there was one multilayered distribution of $20,443,000 made to the general ownership in the 2008 books.

    Nutting and Coonelly spent most of the meeting focusing on the latter number.

    "That's the one that could be most easily misconstrued, and we're here to address it," Nutting said.

    According to Nutting and Coonelly, slightly more than half of the $20.4 million payout, $10,839,000, was distributed to the ownership group -- all of the ownership group, including Nutting -- to cover the owners' individual taxes, federal and state, on the team's profits for 2006 and 2007.

    There was a payment of $7,178,000 to cover the owners' 2006 taxes, made on Jan. 16, 2008. There was another payment of $3,661,000 to cover the owners' 2007 taxes, made on April 11, 2008.

    No payments were made to cover the owners' taxes for 2008 or 2009. The Pittsburgh Post-Gazette reported in December that this displeased some of the minority owners, who were receiving no money from the Pirates -- dividends or distributions -- and, thus, had to pay the taxes themselves.

    In a corporation, Coonelly explained, the company is required to pay such taxes for its owners. The Pirates, he added, are a limited partnership, and such payments are "not automatic."

    The rest of the $20.4 million payout, $9,604,000, was the repayment of interest on a loan the Nutting family made to the Pirates in 2003.

    That was the year that previous controlling owner Kevin McClatchy told the Post-Gazette the Pirates were losing $30 million, and a higher debt level than allowed by MLB prompted the team to openly dump players' salaries, including promising third baseman Aramis Ramirez.

    The loan, technically known as a convertible note, came with terms that would have allowed the Nutting family to convert it into cash at any point. After five years, it also could be converted into equity in the team.

    More equity was the family's preference, but that would have resulted in diminished shares for the minority owners, and they balked.

    The vote of the ownership was to convert the interest on the loan for 2007 and 2008 into cash, or "interest in partnership units," as it is called on the audited statement. The first payment, $4,563,000, was made Dec. 20, 2007. The second payment, $9,604,000, was made July 10, 2008.

    The principal on the loan -- an unknown amount -- as well as the interest on the first three years of the loan remains unpaid.

    "The total of $20.4 million in distributions made in the 2008 fiscal year looks significant simply because, as a result of the timing of board votes, two separate interest payments and two separate tax payments associated with three different years were all made in one fiscal year," Coonelly said. "Had the four distributions been made over the three years to which they related, there likely would have been little interest in these standard and appropriate distributions."

    Nutting said that his aim has been to keep as much of the capital as possible inside the Pirates, and he took umbrage at the widely held public sentiment that he is profiting from the team at the expense of winning. The team's 40-man roster payroll of $44 million will finish the year last in the majors.

    "I hear all that," Nutting said. "I really believe we are doing the right things for the club. I know we're acting honorably. I know we're acting in the best interests of the Pittsburgh Baseball Club. And I know we're making good decisions that are going to help us create a winning organization.

    "I really believe that what we're going through is worth it. Because if I didn't, there would be no reason to put up with the agony, whether that's the on-field performance this year, or the public lashing. We're going to stay the course."

    On that topic, Coonelly added, "From my perspective, it's particularly frustrating because Bob has given us every asset we've asked for. This past week alone, we asked for a lot of resources to bring in what we feel are the three premier arms in amateur baseball."

    That reference was to the signings of the top two draft picks, Jameson Taillon ($6.5 million) and Stetson Allie ($2.25 million), as well as Mexican amateur Luis Heredia ($2.6 million).

    The three costliest of the players traded in 2009 were shortstop Jack Wilson ($7.25 million), first baseman Adam LaRoche ($7.05 million) and second baseman Freddy Sanchez ($6.1 million), and the team's total savings from those trades was $7.3 million. That left the team's total payout on the 40-man roster, per MLB's official accounting, at $47.8 million, far below the $55 million that had been projected on opening day of 2009.

    The Post-Gazette report in December estimated that the Pirates' combined profit in 2008 and 2009 was less than $11 million -- a figure that did not come directly from the team -- but that estimate did not reflect the distributions.

    In the meeting today, Nutting and Coonelly also detailed the spending on capital expenditures over the past three years. Such expenditures are financed over time, but both men said the reason it is important for the Pirates to remain in the black is to be able to fund those without taking on additional debut. The figure was $4,415,258 for 2007, $8,051,42 for 2008, $7,322,713 for 2009.

    Those mostly were comprised of the building of the $5 million academy in the Dominican Republic, improvements to Pirate City in Bradenton, Fla., and the purchase of the Class A Bradenton Marauders affiliate in the Florida State League.

    More details in tomorrow's Pittsburgh Post-Gazette.



    Read more: http://www.post-gazette.com/pg/10234...#ixzz0xMjsMkC9
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    Default Re: Pirates open books, show $5.4 million profit for 2009

    I really have no idea what they wanted to accomplish by doing this. The same people who complained before still will. The ones who didn't still won't. Saying nothing would still bring the same results.

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    i think the pirates are trying to learn from their mistakes of withholding information, they took a huge beating on not announcing the NH and JR re-signings, and i think this is just part of rebuilding some public relations. You really dont see NH and FC making the same mistakes twice, and thats a really good thing to see. With knowledge now that the team isnt rolling in capital i dont see how they are going to increase the MLB payroll by anything significant. If they do, you can bet that draft signings are going to suffer. If they arent fudging the numbers i also dont see how they would be able to sign anyone to any sort of long term deal.

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    The fact that they were making money was not a State secret, That is the Hush money from the Big Market owners

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    Read the article but ended wondering what the Pirates max payroll could be while still making a modest profit?

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    I've stated it before in the near future the team will need to accept operating losses. The young player's salaries will naturally escalate with the MLB payroll rising. If the payroll rises naturally to $60 million the profit will go away even if ticket sales increase by half a million. Will BN have the stomach for it? We'll see !

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    Here is the AP article Link

    I believe Coonelly, Huntington, and Nutting are operating with integrity. The article is trying to stir up some trouble but there is nothing of substance that impugns the character of the Pirates managment in it. I am glad the Pirates offered their version of the facts before this nonsense was published. So far as I can tell, Nutting has been very unfairly criticized. The shrill, baseless whining of the Smizik lemmings not withstanding....

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    The Pirates check to Seven Springs is troubling. Allegations have long been made that the Pirates earnings are being used to offset Nutting's Seven Springs losses. I never gave those much credence, but the check referenced in the AP story raises concerns. It'd be nice to know how much it was and to see some more digging into he Buc's claim that it was for a Pirates/Seven Springs joint advertising venture (which itself sounds strange and pretextual, even if such a venture existed, how could it help the Pirates when places like Seven Springs should be paying the Pirates to advertise in the stadium, etc?).

    Anyway, one thing is clear, as Shaker said, it is going to take a monetary investment (meaning operating losses) at some point for this team to return to healthy profitability AND winning baseball.

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    Quote Originally Posted by Mister Pittsburgh View Post
    This quote is hidden because you are ignoring this member. Show Quote
    Read the article but ended wondering what the Pirates max payroll could be while still making a modest profit?
    Not enough to have the same payroll as the Brewers or even the Reds.

    Look at what we have this year. a Payroll that'll top out at what? $41 million and only have a $5.4 million profit (which is modest IMO)?
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    Default Re: Pirates open books, show $5.4 million profit for 2009

    Quote Originally Posted by Shaker100 View Post
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    I've stated it before in the near future the team will need to accept operating losses. The young player's salaries will naturally escalate with the MLB payroll rising. If the payroll rises naturally to $60 million the profit will go away even if ticket sales increase by half a million. Will BN have the stomach for it? We'll see !
    It depends on the amount of operating loses and whether the rest of the shareholders would approve it. It can't be something that's not manageable and the team itself will have to have shown somewhat of an improvement in their record. IMO

    You'll be hard pressed to find any owner that will taking operating loses and I wouldn't want to see something happen where the Pirates end up like the Penguins and hit bankruptcy due to spending money you don't have and not making it back. The pirates won't have the benefit of a salary cap and new venue to bail them out. In some ways, it's good to have a cheap owner
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    Default Re: Pirates open books, show $5.4 million profit for 2009

    Quote Originally Posted by PE1 View Post
    This quote is hidden because you are ignoring this member. Show Quote
    The Pirates check to Seven Springs is troubling. Allegations have long been made that the Pirates earnings are being used to offset Nutting's Seven Springs losses. I never gave those much credence, but the check referenced in the AP story raises concerns. It'd be nice to know how much it was and to see some more digging into he Buc's claim that it was for a Pirates/Seven Springs joint advertising venture (which itself sounds strange and pretextual, even if such a venture existed, how could it help the Pirates when places like Seven Springs should be paying the Pirates to advertise in the stadium, etc?).

    Anyway, one thing is clear, as Shaker said, it is going to take a monetary investment (meaning operating losses) at some point for this team to return to healthy profitability AND winning baseball.
    Did you even read the article? There was NOTHING in there that said anything about Seven Springs. The article says in pretty plain ink that Bob Nutting has NOT been lining his pockets. Bob Nutting got a check cut as reimbursement on a LOAN he gave Kevin McClatchy - then majority owner) to help bring down an outrageous amount of debt that was created by .... Spending more money than you had coming in and not being able to make it back.

    Everything else was money going towards payment of taxes which currently appears to not be haopening and has ****ed of some share holders (which we had all known about)
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    Default Re: Pirates open books, show $5.4 million profit for 2009

    I'm going to have to stay away from local radio for a few days at least. As someone who's been through 3 billion accounting and finance classes and now sees this kind of information on a daily basis, there is nothing more frustrating than listening to someone try to analyze financial information when they clearly don't understand it.

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    Quote Originally Posted by jnn123 View Post
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    I'm going to have to stay away from local radio for a few days at least. As someone who's been through 3 billion accounting and finance classes and now sees this kind of information on a daily basis, there is nothing more frustrating than listening to someone try to analyze financial information when they clearly don't understand it.
    A voice of reason. Thankyou.

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    Quote Originally Posted by Kipper View Post
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    Did you even read the article? There was NOTHING in there that said anything about Seven Springs. The article says in pretty plain ink that Bob Nutting has NOT been lining his pockets. Bob Nutting got a check cut as reimbursement on a LOAN he gave Kevin McClatchy - then majority owner) to help bring down an outrageous amount of debt that was created by .... Spending more money than you had coming in and not being able to make it back.

    Everything else was money going towards payment of taxes which currently appears to not be haopening and has ****ed of some share holders (which we had all known about)
    Yup. I read it, but I guess YOU missed it. The AP article Tochett92 linked, which I referenced in my post, says:

    Apart from the financial statements, the AP obtained a check stub of a payment made from a Pirates account to settle a bill with Seven Springs ski resort, which is owned by the Nutting family. The check bore a Pirates logo, which at first look suggests a financial transaction between the two operations, but the team says it came from a since-closed joint advertising account.

    "I can tell you for certain there has not been a dime that has left the Pirates organization to fund any other business of any of the partners of the Pirates," Coonelly said.

    As I said, this is the part of the article that concerned me - all the payments to owners seemed relatively easily explained and I don't have enough information to judge one way or the other (although I hope some financial reporters will follow-up and get these questions answered once and for all).

    Look, I get that you do not think that Nutting is acting inappropriately as an owner, but knee-jerk support, IMO, is as bad as knee-jerk criticism. I am NOT saying anything untoward has happened, but if I were a reporter, I would be looking into the Seven Springs check, as funneling $$ from the Pirates to cover Seven Springs loses would constitute a breach of fiduciary duty. If there is nothing there then a story explaining the check and how the joint advertising arrangement worked would still interest me because on the surface such an arrangement could be a cover for funneling $$.

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    Default Re: Pirates open books, show $5.4 million profit for 2009

    Quote Originally Posted by jnn123 View Post
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    I really have no idea what they wanted to accomplish by doing this. The same people who complained before still will. The ones who didn't still won't. Saying nothing would still bring the same results.
    It takes a monkey off of one's back personally. I wouldn't be surprised if Frank had something to do with this. He's comped at bit the past offseason at wanting to say more about the finances.

    It probably changes nothing like you said. Stupid and ignorant people will completely ignore every fact because they have a personal agenda to fulfill. Others just want something to ***** about at all times and the Pirates have been their simplistic fall back in that area
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