Kings valued at $210 million

Forbes has released its latest study of NHL teams and puts the Kings’ estimated value at $210 million, which ranks them 12th among 30 NHL teams. Last year, the Kings were valued at $209 million and ranked No. 10. Forbes lists the Kings’ operating income — described as “earnings before interest, taxes, depreciation and amortization” — at $1.2 million, down from $2 million last season and, of course, quite different from the Kings’ claims of losing millions each year. Revenue and player expenses each increased by $7 million and gate receipts remained at $29 million.

The report on the Kings can be found here and the entire report can be found here. The report on the Kings starts off with, “The Los Angeles Kings are owned by billionaire Philip Anschutz, who knows nothing about hockey and probably cares even less.” Ouch!

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  • cristobal

    I think somebody at AEG is guilty of “creative accounting.”
    Much like home values, the Kings are only worth $210 million if somebody is willing to pay that much.
    It’s comforting to see that AEG is reported to be “raking” in profits. I sure would be upset if things were tough for this oil baron.
    Of course, I think last year forbes listed Big Phil as being worth 13 or 17 billion, whereas now he’s only at 8 billion. What stress that must create, trying to get by on 8 billion dollars…

  • Jeff

    Someday, Rich, someday we’ll be owned by a Steinbrenner of the NHL. Of course with our luck, he’ll end up going to jail for fraud. Oh, wait…

  • cristobal

    Could someone explain why operating income is so low, yet revenues are so high? I don’t quite understand the ratio.

  • Actuary

    Whatever happened to the famous Piston report where he supposedly audited the Kings and took their word for the losses … while Forbes said they made money?

    And, incidentally, what did AEG pay for the Kings? 120 mill or something? How can you have the franchise value going up exponentially while you say you are losing money? If the value goes up 10 million and you spend 5 million to get there, didn’t you just MAKE 5 million?

  • Irish Pat

    Wow. It bothers me that my favorite sports team has an owner who is thought of by fellow fans of both the Kings and of hockey in general as someone that doesn’t care about the game or how he’s perceived in the hockey community. Aside from handing the keys to the car to Lombardi and company (to what extent I’m sure we’ll never truly know), every other article or sound byte I’ve read or heard concerning Mr. Anschutz’ hockey oriented business dealings always leave a sour taste in my mouth. I wish he would just sell the team to an owner who isn’t viewed as a cad and gives a damn about the Los Angeles Kings and their fans.

  • http://www.ifreezeti.me/ Gary Livingston

    haha. Awesome. I have wondered where I need to set my goal at to be able to buy the team. This is helpful. =P

  • jeremy

    For those of you who aren’t into finance or anything it’s very likely AEG is losing money on the kings themselves. As Rich and the article mention the kings churn 1.2 million of EBITDA. If you read that or know what it is, it is earnings BEFORE interest expenses, taxes, depreciation and amortization. The kings are most definitely loosing money if they only have EBITDA of 1.2 million when you add in interest expenses, depreciation and amortization. EBITDA is used to estimate the value of different companies in relation to eachother because it takes away different methods of accounting. EBIT is by definition lower, because it includes expenses associated with depreciation and amortization. EBIT is considered net income but even that is before interest expense on any loans they have and taxes they pay.

    Could someone explain why operating income is so low, yet revenues are so high? I don’t quite understand the ratio.

    In the simplest of terms it means they have an awful lot of expenses associated with running the business. Player costs, venue costs, travel costs, scouting costs all add up very quickly.

  • cristobal

    It warms my heart to hear that MLS or some body involved with Soccer has created the Anschutz Cup.
    I guess they’re trying to honor the Daddy Warbucks of MLS because without his billions that crap league would already be bankrupt.
    Maybe its meant as an honor for the owner of the worst team in MLS, the LA Galaxy.

    What’s next, an award for Staples Center, the most dangerous ice surface in the NHL?

  • jet

    Cristobal – there was actually a fan with a CPA a few years ago that ARG allowed to look through their books prior to the lockout. The fan thought for sure there would be multiple subsidiaries that were draining off top line, but he found nothing. He actually was surprised at how clean the accounting was.

  • http://www.extremepaingear.com Captain Crunch

    Rich, I am pretty sure the Kings have Interest Expenses and Depreciation Expenses that far exceeding 1.2 million, therefore the Kings are probably losing millions based on their income statement bottom line. However, as you pointed out, the Kings have a positive cash flow, albeit a very modest one.

    For those of you who are bothered by the fact the AEG makes a very modest cash flow and have seen the value of the team double, remember that AEG spent 375 million on the Staples Center and I am sure that has quite a bit to do with the team’s value. Oh, and I believe AEG has also invested in two minor league teams to help support player development. As a Kings fan since the days of Gilles Marrotte, Whitey Whiting, etal, I have witnessed every owner beginning with Jack Kent Cooke, and I believe that AEG will eventually have the most success because they know how to succeed.

  • cristobal

    Jeremy – It all gets confusing when trying to figure this out because there are so many variables. Is Anschutz actually financing his purchase of the Kings? I thought he owns them outright. If there are no depreciation costs because the value is rising, supposedly, and there are no interest payments or loans to pay down, the only cost affecting the profits would be taxes, right?

    I have my doubts about the value of the team and think Anschutz would be hard pressed at that price to find a buyer who’s in it for the money. If Roman Abromovich wants to get involved in the NHL, sure the team would sell, but realistically, profits might be increasing but the fans are disappearing.

    If Anschutz were really succeeding with his projects shouldn’t his stock compared to the world’s richest be rising instead of declining?

    I’ll keep rooting for MY team, but I think AEG is treading water at best. They spend it as fast as they make it and I think they’re going to make less in this economy.

  • nayagamj

    i don’t understand what people want aeg to do? the kings play in a state of the art arena and practice in a great practice facility. they have invested in the king’s minor league affiliates. they have handed over hockey operations to people that know hockey. as far as we know, it doesn’t appear that they’re interfering with lombardi or luc. i could be worse. we could be owned by the guys who own tampa bay. what else can aeg do? they may not have started off as the greatest owners, but over the past few years, i don’t know what more we can ask for.

  • cristobal

    nayagamj – State of the Art? Have you been watching the games?
    The ice is terrible and the glass keeps popping out or breaking. It nearly killed a woman the other night.
    Tampa Bay? They might not be so hot right now, but they have some incredible players AND they just won a Cup 4 years ago.
    What more can we ask for? Sell to somebody who cares about winning hockey in LA and “Hockey” as a sport. Sell to someone who would be pissed that there were more Redwings fans than Kings fans at a game in your own building.

  • jeremy

    Cristobal

    The kings undoubtedly have depreciation and amortization costs. Depreciation refers to the fall in the value of assets within the company, not what forbes is saying the company is worth. I can’t begin to speculate on all of them and if they own the boards and what not, but they surely own zamboni’s, cars, training equipment, medical equipment and countless other expensive assets that would be depreciated.

    I don’t know about the specific capital structure in place, but it’s very rare to find a business anywhere that doesn’t have at least some debt, and therefore interest expense. He can still own all the equity in the kings and have debt on it. Much like you may own a house but have a loan on that.

    A standard valuation is somewhere around 8x and 10x EBITDA. Cisco trades at 7.9x, Nike at 8.4x and Coca Cola at 11.2x. They’re talking about an EBITDA multiple of 150x. Forbes’ valuation of the company has nothing to do with its financial performace, I wouldn’t take it to mean much other than the Kings value relative to other hockey clubs.

    I agree there isn’t a snowballs chance in hell someone is paying 210 for the kings. There is no one to whom the kings are worth more than they are to AEG.

  • AntWorks

    As if the glass has never popped out in the other NHL arenas.

  • cristobal

    So Jeremy, what you’re telling me is that AEG is doing all that spending for less than Preissing is earning? HA HA.

  • cristobal

    Jeremy – By the way, thanks for helping me understand all that. The standard valuation subject is truly revealing. Comparing it to a house makes sense although I don’t understand paying interest if you don’t have to, but I’m sure that there are millions of tax-based reasons for that. In regards to depreciation, I was way off and understand now that you’ve explained.
    I wonder what the market in LA is for a used Zamboni and a bunch of 3rd jerseys that never sold?

  • jet

    Cristobal – I had an opportunity to speak with Eddie Lewis recently and I asked about the direction of the Galaxy. He mentioned that Arena has a brilliant soccer mind and understands defense wins championships. While his comments were slightly evasive to remain politically correct, it sure sounds like they are going to stop bringing in superstars and put more emphasis on developing players. I really think Lombardi has AEG realizing that anyone can buy a shot at a championship, but a legacy has to be built.
    By the by, Lewis was a wonderful to speak with and is one of a small percentage of athletes that I would consider an excellent role model. I have not gone to a game since Cobi retired, but I will definitely go again next year.
    Rich, sorry for corrupting your blog with futbal. I just wanted to make a point about how the Kings may be influencing managements view.

  • cristobal

    Jet – I thought there may be connections as well. I think it was ChewyRockyHorror who posted that Lombardi had to confront the owners about staying out of his business. I don’t know if it’s true, but they need to keep their distance with the hockey team.

    The problem in MLS is that they have been Champions with the Galaxy before, but their big Marketing push has blown up in their face. MLS is beyond 3rd rate primarily because of the way AEG structured the league (in my opinion). In MLS winning doesn’t translate as success. They’ve got hundreds of millions of dollars invested, but just like with the value of the Kings, it doesn’t mean much if nobody wants to buy it. There’s no way their attendance is funding the league.
    Unfortunately, I believe that AEG’s influence on the NHL is rather strong. The game is as exciting as ever, but the NHL wants fans who just aren’t interested. The league is too concerned with “business” and too little concerned with building the GAME on the ice.

    Sounds a lot like what’s been going on in LA.

  • Cristobal

    Cristobal

    not a problem. I actually work the firm that represented the kings in their sale out of the Bruce McNall mess.

    The shortest way to explain paying interest when you don’t have to.

    Situation 1:
    We want to buy the kings for 100 million. We pull together 100 million and buy them. For arguments sake at the end of the year we make the playoffs and can now sell them for 125 million one year later. We just made 25% on our money.

    Situation 2:
    We want to buy the kings for 100 million. We pull together 50 million between you and I and borrow 50 million from a bank (paying 10% interest on it). A year from now we make the playoffs and can sell them again for 125 million. We pay the bank the 5 million in interest, and the 50 million we owed them. We take away the left over 70 million. Remember we had an investment of 50 million. We just made 40% on our money, because we could use the banks money.

    40% is way better than 25%

    It’s all rather interesting stuff, and pretty much the reason the economic world is falling apart right now. It’s a great time to be an investment banker. Hope that helps.

    Jeremy

  • JonG

    I’d like to know how much rent expense is included in the Kings’ EBITDA figure. The rent is paid to AEG, so a better measure of the Kings’ value would be to increase the $1.2 million of reported EBITDA by the amount of annual rent expense.

    If the rent were, say, $5 million, then the Kings would be valued at 34 times EBITDA, which is still ridiculuously high. Either certain revenue streams have been excluded (something which the union has complained about in the past) or there is a huge “trophy property” premium associated with the team.

    It’s interesting to see that the Ducks, one year removed from the Stanley Cup, are less valuable than the Kings.

  • cristobal

    JonG – Excellent information. Keep it coming if you have more. It’s just amazing (not to mention unbelievable) that it seems as though the Forbes page is saying that a business that earns under 2 million dollars a year (before paying the bills?) is worth over 200 million.
    Astounding. And truly creative.

  • Actuary

    It’s very interesting that you apologists want the Kings to somehow expense out “depreciation” but you don’t then value in the appreciation of the franchise.

    Look at it this way. If you buy an apt complex for 1 million and with rent and depreciation and all the rest (even if you rent it out to your OTHER companies and have your other companies do all the advertising, leasing, maintenance etc) you end up making “just” 1 thousand dollars a year … BUT the property is now worth 2 million, you are pretty much full of it if you say “I can barely make a living here”. You just made a million bucks!

    There is no question that the internal accounting used by AEG and it’s companies is specifically designed to show these minimal gains running the Kings. It’s not a “bad” thing – it just is what it is. All the NHL franchises do it.

  • Actuary

    So cristobal you take the word of some guy posting on this blog over what Forbes says? No wonder AEG and the Kings get away with it.

  • JonG

    Thanks Cristobal. I really should make it a point to dive into this in more detail. I have a finance background and have been involved in a few corporate acquisitions over the years, but I have never understood why some sporting organizations are valued as high as they are.

    Either I’m overlooking something very obvious (which, alas, would not be unprecedented) or these really are trophy assets whose value is not measured in dollars and cents.

  • deadcatbounce

    As people have tried to explain in the past, ice conditions at Staples Center are not a result of AEG’s negligence, but rather because of the number of events held there as well as regional climate conditions. The ice at MSG is even worse than that at Staples, so I guess that means the Rangers ownership is more deplorable than the Kings, so the fact that they’re first overall in the NHL right now must be a fluke. For those of you who blame AEG for the ice surface at Staples, come up with a solution and don’t just bitch. I’m sure the NHL would love to hear your solution to the ice problem since this seems to plague many teams who play in warm-weather areas, which means there must be a lot of lousy owners in the league other than AEG. how dare they let their teams play on ice conditions that they can so easily improve if you just informed them as to how. Bitch all you want, but at least have a solution in mind instead of complaining just to hear yourself complain!

  • cristobal

    deadcatbounce – Here’s my solution. Hire an engineer and get ‘er done.
    Do you know that in Dubai they have Skiing? Its a fucking dessert, mate.

    Apologize all you want for them, its absolutely negligent in every building it happens in.

    Antworks – 4 straight games with the glass popping out or breaking. I’ve never seen that in my life.

    Actuary – What the hell are you talking about? The word of a blog commentor over Forbes? What are you talking about? Who is being an apologist and about what? Unbelievable.

  • deadcatbounce

    cristobal said:
    “Actuary – What the hell are you talking about? The word of a blog commentor over Forbes? What are you talking about? Who is being an apologist and about
    what? Unbelievable.”

    I have no clue what you’re going off on with that remark. Have you called the Kings to suggest that they hire an engineer? They’re obviously too stupid to think of doing so themselves, so perhaps you should enlighten them? I wonder why the NHL has never thought about hiring an engineer? Are they all a bunch of idiots in New York and Toronto? You obviously must think so, but if you think an engineer can fix the ice you should be proactive in bringing it to the Kings’ and the league’s attention.

    And before you get defensive, no, I am not questioing your intelligence. Your idea of hiring an engineer is one which I’ve never seen on the boards before so you have it all over the rest of us.

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    Miss.

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