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May 31 Financial Results

the artist FKA zipp

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Here’s my take on last month’s ULAA balance statement. It arrived with the budget that I posted on here. LINK

Assets

Liquidity is the most critical issue we’re facing as the cash drain continues. Cash reported on the last quarterly (March 31) had a negative balance, and it declined an additional $1.2 million the last two months from -$4.9 million to -$6.1 million. Current assets including cash declined from $5.8 million in March to $0.9 million in May. The Republic Bank credit line balance held at $9 million. Subtracting the credit line, NET current assets are now -$8.1 million.

Here are comparable values for May 31 in each of the last three years. 2021 was the year impacted by Covid and when the line of credit was set up…

2020: Total assets = $269 million; net current assets = +$18.8 million
2021: Total assets = $258 million; net current assets = +$1.2 million
2022: Total assets = $248 million; net current assets = -$8.1 million

U of L is systematically experiencing a decline of around $10 million annually in the financial scale of its athletic department. From 2004 until 2017, we increased in size by $15 million annually. Continuing from where we were in 2017, total assets would have been approaching $400 million today. Most of the decline has been cash and liquid/current items. This is because our revenues do not consistently meet expenses.

Net Position

U of L’s net position (NP) or its value after you subtract liabilities has declined to $93 million, down from $99 million last May. NP was $156 million as recently as September 2019. Per the Republic Bank loan covenants, the original credit line was advanced with the provision that NP was >$90 million.

Not sure whether that’s a call provision or not, but U of L is teetering on the edge of a potential issue with Republic. For sure, our status to borrow further is in question.

Where are we headed?

You fix a cash burn problem by raising revenue and/or cutting expenses. Not since Owsley Frazier has U of L had a big donor who helped them meet operating expenses.

Cash burn has existed most of the last five years. The current folks in charge are probably trying to bring in more money. It just hasn’t happened. And after five years, it’s unlikely to be within their capabilities. They’ve been unwilling to simply cut operating expenses which are budgeted to be UP another $7 million in 2023. They evidently don’t want the mantra of downsizing athletics (which will happen anyway.)

U of L still has a large base of fixed assets. A typical operation would look to sell or liquidate fixed assets to meet critical cash needs. I’m not sure U of L has that option beyond selling a golf course or a parking lot somewhere.

Unfortunately, the pace of decline is too great and the financial hole too deep to reasonably expect Josh Heird to make an impact soon. This would be hard for anyone to pull off, much less a new guy in that position. We’re down around $15 million in current assets since Heird took the interim job, which is comparable to the declines in 2020 and 2021 for the same time period. There’s been no improvement.
 
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Question: Is the department looking to cover and offset these cash burns & shortages with the upcoming conference payout? Doesn't it occur on June 30th?
The ACC paid about $2.9m per month, on average, from all media and other NCAA sources, to UofL, for each of the 12 months in year ended June 30,2021. I do not know on what schedule these payments are made, monthly, quarterly or yearly.

The average ACC media/NCAA distribution to Louisville for the year to be ended on June 30, 2022 should end up amounting to more than $2.9m per month. But I do not know WHEN the amounts are paid. The average monthly distribution of $2.9m should rise perhaps to somewhere on the order of $3.3m.

But ticket sales are rising as well. So that helps.
 
Question: Is the department looking to cover and offset these cash burns & shortages with the upcoming conference payout? Doesn't it occur on June 30th?
It's a good question, and it's at the root of the answer I was given by U of L how we can have large, negative cash balances. (...Which is a first for our financial statements.) This distribution does indeed come in June.

So I try to be careful reporting data trends that contain outsized cash flows. When I do a YOY comparison like May 31, 2022 vs May 31, 2021, we're getting an apples-to-apples comparison. In a few weeks, I'll know how full fiscal year numbers compare. Annual results are presented in audited reports from outside accountants.

Re. G-man's comment about increased ticket sales, we would need 10,000 more season tickets at $1,000 each to total $10 million. And that just gets us in the vicinity of operating breakeven. To get an annual $15 million increase in assets--what we used to see--it would equate to 25,000 more season ticket sales.

When you look at the thousands of empty seats in basketball, you get a pretty good visual of why or how...
 
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all good points AKA but an optimist would say that CKP has brought an energy this year not seen in a decade and CSS is in the midst of his best recruiting year, and while neither means a load of crap to winning actual games in june, if this current trend continues and we see recruits wanting to be here and we see positive results on the playing surfaces, i believe you'll bring back the fans within 85% of standard in both venues. thus resulting in some postive cash flow but more importantly, you'll bring back some donors and find some new ones as simply, everyone wants to jump on the coattails of winners but it takes more gumption to hop on in the middle of troubled seas. to me 22 wins in bball and 9 wins plus a bowl win in football and everyone will be back top to bottom. less than that and they'll still be people riding the fence. partiers love winners lol
 
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now the one area I'll agree with AKA main donation reduction is that over the last two years a ton of people made a ton of money in the markets and yet a ton of money didn't flow into the school which means turmoil at all levels jsut killed all fundraising. calm the ship and things will return
 
I've got too many tickets in the Angel's Envy Club. No one wants to see football back on top more than me.

And @glassmanJ is right that there are also macro factors now at work. Some people are making tough choices due to inflation and declines in their investments. It's a harder financial environment for U of L to compete...
 
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It seems like our financial situation would improve if Kenny and Satterfield start winning. I have a feeling people will turn out for Kenny. But he was always one of my favorite players. I also think our fans will rally around Clarkson & Co. assuming they make it here.

Right now isn't so great, but perhaps the future will be brighter financially?
 
It seems like our financial situation would improve if Kenny and Satterfield start winning. I have a feeling people will turn out for Kenny. But he was always one of my favorite players. I also think our fans will rally around Clarkson & Co. assuming they make it here.

Right now isn't so great, but perhaps the future will be brighter financially?
what's the adage... winning solves everything (unless you're the FL Marlins where when they win they blow up the team and start over for some reason)
 
Maybe the donors are gonna funnel that $ to the players via NIL.
That's probably happening at some level. Of course, we (athletics) need the money too.

I come at the issue with numbers and data, but U of L's financial situation is pretty easy to grasp without it...

We're trying to spend/invest money in athletics as we always have. We come up a little short, and current inflation makes that more difficult. But except for men's basketball, the people managing athletics are not overtly starving it. See my other recent thread on the budget.

And since we can't meet expenses with revenues, we have depleted our cash reserves. Now we're out of it.

Something has to change soon... More revenue, less spending, and/or another infusion of cash from outside operations (loans, transfers, donations, etc.)
 
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That's probably happening at some level. Of course, we (athletics) need the money too.

I come at the issue with numbers and data, but U of L's financial situation is pretty easy to grasp without it...

We're trying to spend/invest money in athletics as we always have. We come up a little short, and current inflation makes that more difficult. But except for men's basketball, the people managing athletics are not overtly starving it. See my other recent thread on the budget.

And since we can't meet expenses with revenues, we have depleted our cash reserves. Now we're out of it.

Something has to change soon... More revenue, less spending, and/or another infusion of cash from outside operations (loans, transfers, donations, etc.)
^^^^ what he said
 
When do we expect to get naming rights on the stadium? I haven’t heard anything about that in a LONG time.
I've been asking the same question, but no answer...

Unfortunately, I don't think naming rights revenue on the stadium will be anywhere close to what the LAA receives for the basketball arena. I doubt we'll get a half million a year which is about one percent of football revenue overall.

As a comparison, that naming rights revenue would equate to about 500 more season tickets sold in somewhere besides the cheap seats.

We obviously need a lot more fans in the stands...
 
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I've been asking the same question, but no answer...

Unfortunately, I don't think naming rights revenue on the stadium will be anywhere close to what the LAA receives for the basketball arena. I doubt we'll get a half million a year which is about one percent of football revenue overall.

As a comparison, that naming rights revenue would equate to about 500 more season tickets sold in somewhere besides the cheap seats.

We obviously need a lot more fans in the stands...
hey ZippAKA! do you have the previous contracts payouts available? like pre schnatter blowup and post? what was he paying, $1MM/year? just curious what numbers you'd think a new sponsor paying would be considered good for ULAA? 75% of before? equal after inflation? basically, totally wondering what the baseline sholdd be and do we have any comparisons to other colleges? one area i have zero clue in and i'd love to know all the deets if you can provide them. one thig for sure, i do not argue your data points. maybe how your interpret them, but i trust what you're bringing to the table. in fact, i'd think we'd make great in person conversationalists 8-D. maybe one day i'll convince you to take me to a game in the angels envy suites and i'll buy the drinks lol you're the best ZippAKA
 
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hey ZippAKA! do you have the previous contracts payouts available? like pre schnatter blowup and post? what was he paying, $1MM/year? just curious what numbers you'd think a new sponsor paying would be considered good for ULAA? 75% of before? equal after inflation? basically, totally wondering what the baseline sholdd be and do we have any comparisons to other colleges? one area i have zero clue in and i'd love to know all the deets if you can provide them. one thig for sure, i do not argue your data points. maybe how your interpret them, but i trust what you're bringing to the table. in fact, i'd think we'd make great in person conversationalists 8-D. maybe one day i'll convince you to take me to a game in the angels envy suites and i'll buy the drinks lol you're the best ZippAKA
It's kind of a complex set of numbers because there was an initial contract as well as an extension.

But this article pegs the total contributed by Schnatter/Papa Johns at $12.5 million over a 42-year term (1998-2040). That would have worked out to around $300,000 annually had the contract gone to term...

Can Louisville Recoup Naming Rights Settlement With A New Deal?


Considering that Tyra agreed to refund Schantter $9.5 million in 2019 and removed his name, the Papa paid a net of $3 million for having his name on the stadium for 21 years. That means U of L received an average of $143,000 annually.

Now, you know why/how I say that a half million per year is as much as I'm expecting with a new deal...
 
IMO the earlier posts about ticket sales vs revenues is the logical way to analyze what is going on. Nationally attendance is falling. If this is the new normal, expenses must be cut. You cannot keep borrowing to meet expenses. Ticket sales or donations must rise quickly. We will soon see in the next year.
 
It's kind of a complex set of numbers because there was an initial contract as well as an extension.

But this article pegs the total contributed by Schnatter/Papa Johns at $12.5 million over a 42-year term (1998-2040). That would have worked out to around $300,000 annually had the contract gone to term...

Can Louisville Recoup Naming Rights Settlement With A New Deal?


Considering that Tyra agreed to refund Schantter $9.5 million in 2019 and removed his name, the Papa paid a net of $3 million for having his name on the stadium for 21 years. That means U of L received an average of $143,000 annually.

Now, you know why/how I say that a half million per year is as much as I'm expecting with a new deal...
totally did not realize the original PJ deal was so beneficial to PJ, that's dirt cheap imho. What was the other health care company, HCA Columbia? where i think they were at $500k a year then they moved corporate to nashville and the deal fell thru if memory serves. but yes $500k a year would be enormous comparatively
 
You cannot keep borrowing to meet expenses. Ticket sales or donations must rise quickly. We will soon see in the next year.
jsut to go off on a tangent, but that's actually not a bad way to do business, borrow and pay later, or invest in the stock market as time value of money usually makes the payments cheaper over time. so if you could get rates below 3% you should borrow every possible cent you can and pay it off in the future when the value of money is less. simple example for investing, say you want to buy a house and you think you cannot afford it because it's $1000 and that's at your limit but almsot every person who works increases their salaries over time so in 5 years paying $1000 isn't as stressful as your paycheck should be higher and in 20 years that $1000 doesn't look bad at all. same with investing, if i had a $200k house paid off, i'd go back to the bank and cash out every cent if i could get it under 3% then i'd put it all in the stock market which averages 7% returns over time thus you net 4% free money (simplistically speaking) all the while paying back into the equity of your house. btw a paid off hosue is a waste when you could be using that money to invest adn make more money, that's how the rich stay rich, they refi their houses at cheap rates, have enough interest to claim on standard deduction, so if you were rich and borrowed $500k at 3% but got to write off 33% of the interest then they are actually only borrowing at 2%. they dump all that into the market and make a killing without having to work. well same thing with costs, borrow and pay later and use other cash on hand to invest in more profittable areas to pay of loans. defer defer defer payments at all costs. eventually you may declare bankrupycy and you then got it all free. how many times did trump decalre bankruptcy (thus a failure) and he still became prez. but never pay you bills to the last minute and defer if possible as better places to put your money. so my advice to ULAA, borrow and defer
 
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