SBJ/November 23 - 29, 1998/No Topic Name
Celtics seeing red over lost games
Published November 23, 1998
The Boston Celtics LP said it will take a charge against earnings this quarter because of losses from games canceled by the NBA lockout and warned that a continued labor dispute would impair the financial fortunes of the NBA's only public team.
The partnership didn't say how much earnings would be reduced or whether it would lose money in the fiscal second quarter, which runs Oct. 1 to Dec. 31. Through Nov. 16, two preseason and eight regular-season games had been canceled.
In a quarterly report, the team warned: "Given the lockout ...there can be no assurance that the Boston Celtics will recognize any income in the 1998-99 season and beyond."
The partnership expects to meet obligations through September, however, using payments from NBC and Turner Sports, as well as available cash and a credit facility with Citizens Bank.
The team had $3.7 million in cash as of Sept. 30, compared with $8.4 million June 30. And the team has $82 million in short-term investments it could begin to liquidate.
In last year's fiscal second quarter, the company had $25 million in team-related revenue, including nearly $13 million from ticket sales. The team earned $1.28 a share, or $6.3 million, in that quarter.
Not having to pay player salaries this quarter will dramatically lower the more than $18 million in expenses incurred in last year's fiscal second quarter, but the company still must pay several million dollars in general administrative costs. The partnership also has to pay interest on notes issued earlier this year as part of a reorganization.
Because of the media payments, the second quarter may be slightly profitable on a cash flow basis meaning the partnership takes in more money than it pays out, said Robert Willens, a partnerships expert at Lehman Brothers Inc. But earnings per share will likely be a loss, he said, because the partnership must still take income accounting charges for amortizing player salaries. He said a continued lockout could soon affect the team's stock price.
The partnership's fiscal first quarter results were hurt because it tapped its $60 million credit facility in September, drawing on $20 million to buy out former Celtics co-owner Alan Cohen.
The team issued him the notes in August 1995 in exchange for his ownership stake. The notes had not been due to expire until 2000, but because of favorable interest rate conditions, the company decided to buy Cohen out eight weeks ago.