Louisville Athletics Still Has a Big Spending Problem...

[zipp]

LINK

But then most of the good folks here already knew that.

And what the article refers to but doesn't mention exactly--you only get so much space sometimes--is that our revenues for the last three years combined are less $2 million more than they ran in 2017.

So you've got $68 million more in expenses and $2 million more in revenues. Something's gotta give, and soon...

 

[Cardfan1937]

LINK

But then most of the good folks here already knew that.

And what the article refers to but doesn't mention exactly--you only get so much space sometimes--is that our revenues for the last three years combined are less $2 million more than they ran in 2017.

So you've got $68 million more in expenses and $2 million more in revenues. Something's gotta give, and soon...

14 Mil for Petrino, 7 Mil for Jurich, 10 Mil for Papa John equals 31 Mil. WE were told that ticket sales for 2020 football and basketball would result in another 32 mil less. Doesn't that make the total deficit?

 

[zipp]

14 Mil for Petrino, 7 Mil for Jurich, 10 Mil for Papa John equals 31 Mil. WE were told that ticket sales for 2020 football and basketball would result in another 32 mil less. Doesn't that make the total deficit?

U of L uses accrual accounting. Most of the tickets sales for football and basketball this year will show up in FISCAL YEAR 2021 results. What the article covers are financials thru June 30, 2020.

And most of those numbers were PRE-Covid...

 

[PushupMan]

Slight improvement in net position from 2019 to 2020 (up $4.3 million, to $126.3 million), but the losses in 2017-18 (down $16.7 million) and 2018-19 (down $15 million) are pretty startling.

Evidence of a great deal of belt tightening in 2019-2020: operating expenses were reduced from $141.6 million in 2018-19 to $119.9 million in 2019-20. More will definitely be needed if it's true that we're losing $32 million in revenue due to the pandemic.

I am curious to know where the gifts are coming from: $41.9 million in 2018-19 and $39.2 million in 2019-20. Is that sustainable at any level close to that during the pandemic?

 

[nccardfan]

Slight improvement in net position from 2019 to 2020 (up $4.3 million, to $126.3 million), but the losses in 2017-18 (down $16.7 million) and 2018-19 (down $15 million) are pretty startling.

Evidence of a great deal of belt tightening in 2019-2020: operating expenses were reduced from $141.6 million in 2018-19 to $119.9 million in 2019-20. More will definitely be needed if it's true that we're losing $32 million in revenue due to the pandemic.

I am curious to know where the gifts are coming from: $41.9 million in 2018-19 and $39.2 million in 2019-20. Is that sustainable at any level close to that during the pandemic?

We should bow down to UPS and give them whatever they want. That’s one company that continues to thrive during this epidemic.

 

[zipp]

I don't understand how we could have spent $37 million more over the last three years ($68 million minus the aforementioned buyouts), pre-Covid, and anticipating the fan attrition that we would be facing in football and basketball, at least temporarily. What were people out on Floyd St. thinking?...

 

[PushupMan]

I don't understand how we could have spent $37 million more over the last three years ($68 million minus the aforementioned buyouts), pre-Covid, and anticipating the fan attrition that we would be facing in football and basketball, at least temporarily. What were people out on Floyd St. thinking?...

We were thinking that we have a net position of $157 million, we’re in the ACC with a much higher conference revenue floor than we’ve ever had before, and we’ve got to invest money to make the ACC network a success.

 

[zipp]

We were thinking that we have a net position of $157 million, we’re in the ACC with a much higher conference revenue floor than we’ve ever had before, and we’ve got to invest money do to make the ACC network a success.

I've got a different slant on that... We didn't appreciate how conditional support was for an athletic department run by a longtime AD and his longstanding coaches. We thought that coaches, players, and fans would just fall in line behind anyone sporting a red blazer. And that any support we lost could readily be replaced.

So we went right on spending at the same trajectory that we had been spending, only to find that revenue had flat-lined or was about to. IOW we miscalculated. And of course, a few people in important places at U of L have their heads too far up their a$$es to acknowledge any of that, which means the discovery process will be painful and costly.

And BTW, more than 80% of that $157 million was tied up in illiquid assets like facilities ("net investment in capital assets"). Most of the balance was in restricted assets that can't be used for general expenses. You can't spend pink seats at the football stadium when the bank accounts run dry.

Yeah, we were worth a lot more three years ago, but the guys now are spending cash they're not bringing in. That's a problem in any organization...

 

[PushupMan]

The longtime AD and his most prominent longtime coach screwed themselves - otherwise they’d still be here. That’s 100% on them.

There’s absolutely no doubt about a lot of what you say regarding the failure to slash budgets immediately. However, some would argue (possibly successfully) that when you have a net position of $157 million, you don’t need to make drastic cuts immediately.

 

[zipp]

If you’re willing to mortgage fixed assets you can go on spending. It sounds like we’re doing that. The outside auditors apparently don’t view cash on the balance sheet as unencumbered. Or cash (unrestricted assets) would show up as a component of our net position.

It’s inexcusable that we have managers acting like they have a handle on expenses. Not with results like these. It doesn’t matter how we got here, whether anyone “screwed themselves” years ago. We have enough “screwing” going on now that IS relevant...

 

[PushupMan]

And so ... you’re willing to chalk the +$4.3 million in net position in 2019-20 to what? Pure blind luck?

 

[zipp]

And so ... you’re willing to chalk the +$4.3 million in net position in 2019-20 to what? Pure blind luck?

It sure wasn't due to reining in our spending, which was $16 million more last year than it was three years before. AND which is the subject of this thread.

So why wasn't the surplus $14.3 million? It's not like we're overflowing our bank accounts. I doubt the IRS would challenge our non-profit status...

 

[PushupMan]

It sure wasn't due to reining in our spending, which was $16 million more last year than it was three years before. AND which is the subject of this thread.

So why wasn't the surplus $14.3 million? It's not like we're overflowing our bank accounts. I doubt the IRS would challenge our non-profit status...

I no longer have the report in front of me, so I’m just going by memory here ... but IIRC, spending in 2019-20 was down by about $15 million from the previous year.

And the previous two years were when UofL had to pay the bulk of Petrino’s, Jurich’s, and Papa John’s payments.

So yes, UofL may still have a spending problem, but at this point that’s only because revenue is down significantly due to the pandemic - not because UofL fired Pitino, Jurich, and Petrino, repaid the naming rights to Papa John’s and spent money to build ACC network facilities on UofL’s campus.

The way I interpret those numbers from 2019-20, they are an indication that we were heading in the right direction before the pandemic hit. As long as revenue returns to the 2019-20 level, our spending during that fiscal year is appropriate to the size of our athletic department.

 

[zipp]

Here are the spending numbers again...

2017: $104.2 million
2018: $118.9
2019: $141.6 ($110)
2020: $119.9

The number in parentheses backs out the three big buyouts. Adjusting for that, this department spent a record amount of money last year.

And 2017 was a record prior to that point, under the guidance of supposedly one of the biggest spending ADs in the country. As far as throwing money around, THAT guy was a piker compared to “Vince”...

 

[zipp]

[As an aside... One problem with the BRL website is they won't allow contributors to upload images due to concerns about copyright infringement. So I can't use the nice charts and illustrations that I more or less take for granted using here. Like cutting off my right arm!]

The net position that P-Up mentions above is worth analyzing. It's true that U of L managed to show a positive number after two years of massive declines. But let's look at the trend to gauge that increase of $4.3 million...

Is it progress and sustaibable? Could be. But look where we were headed a few years ago. The trend in net position was unmistakably higher, and the number for this year continuing that trend would have been around $165 million. So we're maybe stemming the decline some $40 million lower. The tangible value of athletics under "Vince" is 25% lower than where we expected to be.

And how are we getting there? How are we going to keep from losing that value? How will we keep our revenues ahead of our expenses, as bad as the latter are now? It's pretty clear from this chart what's going on...

The asset base for athletics had been growing until 2017 when it peaked at $328 million. It didn't grow every year as evidenced by small declines in 2012 and 2015. But now, athletics assets are systematically decreasing. In essence, we're trying to stay in business by decreasing the size of the business. Assets at the end of 2020 have declined to $288 million. That's a $40 million decline--seen that number before in this post?--the last three years.

Our asset base declined $20 million last year alone, so the trend down is obviously increasing. And keep in mind that the big buyouts occurred the year before (2019). Also, the effects of Covid aren't expressed in these numbers.

"Vince" is doing what he knows how to do. He's going to eventually stabilize the financial condition of U of L at some fraction of what the athletic department used to be--through downsizing, layoffs, deferred investments, and dummying down the department. If you can't grow it, you don't have a choice. This guy sure doesn't...