The laying off of secretaries during the lockout, the huge debt burden, the mindless haggling (ie Slauson) with players over a few thousand, and Woody being one of the owners preaching a hardline with the refs suggest a definite cash flow problem.
If they have $750-$800 million in debt, which they do, then the equity value (i.e. the price someone would actually pay), is around $400-$450 million.
I always laugh at people who look at the value Forbes magazine assigns to a franchise and think that is the price it would trade hands at.
Now, read the following.
Like you, I used Forbes and said in my post that their value is $1.1b (Forbes pegs it at $1.440 billion...you rounded that up to $1.2, I rounded it down to $1.1...while technically it's more correct to round that down than up, it's no big deal to round it up).
The Jets' portion of the new stadium would be the largest single item on the Jets balance sheet. The Stadium Cost was $1.6 billion, so, assuming they could capitalize their entire 50% share thereof, that would show up on their balance sheet as $800 million.
Next. Johnson paid $635 million for the Jets. Leon Hess had paid roughly $20 million for the team in 1973 and we have no idea what the Asset values were when Johnson acquired them in 2000, but he was widely viewed as having overpaid significantly in his bidding war with Charles Dolan; at the time, some estimated the Franchise as being worth closer to $250, but that's neither here nor there since, in the end, something is worth what you pay for it. But, since we don't have access to the information, we have no idea how much of the balance sheet at that time was in assets (like the stadium lease) and how much would have been shoved into Goodwill. To keep things simple, we can assume that the Asset side of the balance sheet totalled the $635 million with a whole bunch on the Goodwill line.
Forbes does some proprietary number crunching and estimates that the whole thing ends up being worth the $1.2 or so you cite and that's probably the basis of their numbers, assuming that the entire stadium value couldn't be capitalized.
Then, Forbes reports that they are carrying $750 million of debt, nearly all of which would come from the stadium.
Now, Finance 101, in case you were absent that day: Subtract Debt from Total Value to get "Net" value or "Net Worth."
$1,100,000,000 minus $750,000,000 equals $350,000,000 (I said "around $300 million").
So, the "net worth" of the Jets is, as I said, "around $300 million."
The cash that someone would actually pay for the team is a function of Revenues, Operating Profits and Asset value. But, I doubt very much that a buyer would be willing to assume all of that debt and hand Woody $1.1 or $1.2 billion for the team.
That's why I said the doubling of value was "funny money." We have no idea what a sale of the Jets would garner until they are actually up for sale and someone has to part with Cash to get them. In the Jets case, the operating income would be severely impaired by the interest burden.
By contrast, the "value" assigned by Forbes to the Pats is around $1.4 billion with $270 million of debt, leaving a net "worth" of over $1 billion.
Thus endeth the lesson.
I don't like Woody as an owner but it is wrong to infer that he does not give the team the money to compete. Pace, Harris, Scott, Revis, and Cro were all given top dollar contracts. Likewise, Sanchez, Holmes, Mangold, Dbrick were all given top 5 contracts.
His fault is when he puts the business side ahead of the football side. On things like hard knocks, Tebow, Farve, ESPN camping with the jets -that type of crap.
The problem with the jets is Tanny's fault. He spent future dollars and traded up all the time and filled out the roster with Big name FA. Pace, Scott, Cro (yes I know he was traded in the last year of his contract) Faneca and one year rentals.
His caving into Rex and picking Defensive players in both the draft and FA
leaves the team with no cap space next year and needing to replace 1/2 the defense in one year while the offense struggles to get out of their way.
Rex is who he is, he is brash and entertaining and has proved he can have a very good D when he has very good players. This year he doesn't, whether he should be replaced should be based on how well he adapts the D to compensate for the lack of Revis.
The jets are suffering from some play that can be placed at his feet, a lack of urgency and toughness.
I think Rex can succeed but he needs a complementary coaching staff that he does not have at this time, and with Westhof leaving it does not look any better going forward.
Assuming Woody could find a buyer using the Forbes numbers, he would NET around $378 million. Not a penny more.
Jets income for the 2 years of the NMS was just $8Mil in 2010 and $25Mil in 2011. Now read footnote 5 next to the Income graph.
What do you figure the interest costs are on $750 Mil of debt. I don't know the interest rate but doubt it would be less then 6% - is probably more. That is $45 Mil of interest which means that for 2011 there was a negative cash flow conservatively figured of at least $20 Mil. There was a greater loss in 2010 before they sold the naming rights and the new CBA. And what about taxes? That's not included in the income figures either.5 Earnings before interest, taxes, depreciation and amortization.
So now you see how Woody went from making sh*tty money with a lousy lease in Giant Stadium to losing money owning half of Met Life.
Yeah he's a great business man
Last edited by Queens Jet Fan; 10-01-2012 at 10:21 PM.