Coyotes report better-than-expected losses of $16.458M for Fiscal Year 1
GLENDALE, Ariz. — The Coyotes ownership group reported its Fiscal Year 1 losses to the City of Glendale on Friday, and the number was alarming to everyone but the team.
Coyotes president and CEO Anthony LeBlanc said the team lost $16.458 million, but for Generally Accepted Accounting Principles (GAAP), it also had to include its one-time acquisition and closing costs ($7.878 million), along with the complete amount of the Mike Ribeiro buyout ($10.495 million), bringing the total operating loss to $34.831 million.
The latter is the figure that counts toward the team’s oft-mentioned "out clause," which can be exercised within a 180-day window after five years and allows the team to leave Arizona if it reaches or exceeds $50 million in losses. The $50 million threshold is just a gating factor, not an automatic trigger for the out clause. There are many other determining factors.
Nonetheless, $34.831 million in losses means the Coyotes are more than halfway there, but LeBlanc emphasized that the acquisition costs and buyout costs won’t recur. He also noted that while the team is forecasting losses in Fiscal Year 2, they should be "significantly less" than Year 1’s $16.458 million figure. Finally, he noted that the IceArizona ownership group had projected losses of $20 million (not including the acquisition costs or buyout costs) for Year 1, so the $16.458 million figure was actually better than expected.
"People are going to focus on the out clause and talk about the $50 million," he said. "Based off what we said, I actually don’t know why people would be talking about it. This franchise is doing exactly what we said it would do when we purchased it. This is a viable market.
LeBlanc said the team saw an increase in ticket sales the first season, but the main reason its losses were less than projected was because it did far better than expected in corporate sales and sponsorships.
"We killed it in corporate," LeBlanc said.
In August, the team announced a nine-year, hybrid partnership agreement with Gila River Casinos that will pay in the neighborhood of $3.5 million per year and includes naming rights to the arena. The Coyotes have also signed other long-term agreements, including a television rights agreement with FOX Sports Arizona last year, the arena lease agreement with the City of Glendale arena lease (15 years), LEVY Restaurants (food and beverage, 15 years) and Ticketmaster (10 years).
Coyotes co-owner George Gosbee told FOX Sports Arizona in August that the team could achieve profitability or at least break even by Year 3.
LeBlanc said it is too early to project when that will happen, calling the timeline "murky," but he said profitability is expected.
"Naysayers will try and bring up the out clause at every opportunity," he said. "It leads to a simple question: If the franchise is successful financially, why would you even consider exercising it? The out clause was a protection mechanism. It was a mechanism to be used only if success was not attainable. Our better-than-expected financial performance in Year 1 shows that success is well within reach."
There is another aspect to the out clause that is often overlooked. That is the league’s perspective. Even if the Coyotes wanted to move after five years — LeBlanc says it has not even been discussed — it would have to gain approval from the league’s board of governors.
Commissioner Gary Bettman fought long and hard to keep the team in Arizona and has said numerous times it isn’t leaving, adding that the Atlanta Thrashers departure for Winnipeg was an entirely different matter because there simply was no ownership group willing to buy the team and keep it in Atlanta.
There is also the likelihood of expansion, which would prove far more lucrative to the NHL and its teams than relocating a franchise. When asked about this angle, LeBlanc acknowledged the league’s stance, but reiterated that relocation is a moot point.
"I think the way to look at it would be it’s probably not worth looking at," he said.