SBJ/20090907/This Week's News

PGA Tour’s investments suffer in ’08

The PGA Tour’s financial reserves lost more than a quarter of their value in 2008 as the stock market experienced its worst year since the 1930s, with the value of the players’ retirement funds taking a comparable drop.

The PGA Tour ended 2008 with an estimated market value of $694 million in investments, representing a year-over-year decline of 27 percent from $947 million at the end of 2007.

The majority of the drop was due to investments in stocks and mutual funds. The tour ended 2008 with an estimated value of $401 million in mutual funds, down 35 percent from $614 million in 2007. The market value of the tour’s stock dropped 38 percent, starting the year at $128 million and ending at $80 million.

The value of the player retirement benefits was hit hard by the investment losses. According to the tour’s balance sheet, the value of the assets set aside to satisfy expected obligations under the retirement plan decreased 26 percent, ending the year at $451 million, down from $610 million at the end of 2007.

PGA Tour Investment Performance
(In Thousands of Dollars)
12/31/2007
12/31/2008
U.S. Treasury securities and obligations
$54,271
$79,986
Mortgage-backed securities
$15,440
$10,552
Corporate and other debt securities
$50,840
$57,519
Equity securities
$127,650
$79,760
Mutual funds (primarily equity securities)
$614,087
$400,851
Other investments
$84,877
$65,749
Total
$947,165
$694,417
Source: PGA Tour annual report

The entire portfolio, heavy on stocks and mutual funds, likely experienced a moderate rebound this year based on overall market gains ranging from single to low double digit percentage points, depending upon the index. That investment performance will be published in the 2009 annual report.

According to the tour’s financial statements, investments are used to help fund retirement benefits, purses, capital needs, and other unspecified programs.

All figures were disclosed in financial documents audited by PricewaterhouseCoopers and recently released to players in the tour’s annual report. The dollar value placed on unsold investments are market-driven estimates based on stock prices and market conditions at the end of 2008, and do not represent actual recorded investment losses.

Figures posted in the PGA Tour’s consolidated income statement paint a more positive view of financial activities in 2008. Combined revenue from tournaments and supporting business, such as licensing, television production and the network of Tournament Players Clubs is creeping closer to the $1 billion mark.

Income from television and tournaments was $773 million, up 3 percent from $752 million in 2007. Revenue from supporting business like licensing, the network of Tournament Players Clubs and PGA Tour Productions fell 5 percent to $208 million.

As a nonprofit, the PGA Tour reinvests nearly all of its net profits in the form of prize money, retirement funds and spending on tournaments. The tour generated $538 million in net profit in 2008, down from $563 million in 2007.

The largest single decline came from investment income, which fell from $75 million in 2007 to less than $1 million in 2008.

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