Coyotes' operating losses of $16.5M a pleasant surprise
The Arizona Coyotes opened up their books to the City of Glendale on Friday, reporting losses from the 2014 fiscal year as approximately $34.8 million. But the actual loss from operating the franchise from the first year of IceArizona's ownership was lower than anticipated.
That loss came in at about $16.5 million, President and CEO Anthony LeBlanc said, which was a pleasant surprise for the ownership group since it expected its first-year hit to be at $20 million after acquiring the Coyotes in August 2013.
But it's the loss released to Glendale that counts toward the out-clause included in the 15-year, $225 million agreement between the city and the Coyotes. The out-clause can be exercised should losses reach $50 million after five years.
"(The out-clause) is absolutely something, I can't say more emphatically, we have not even talked about," LeBlanc said.
The $34.8 million figure includes two one-time charges. The Coyotes had to account for the closing costs of purchasing the franchise (the bulk of which were legal fees), which amounted to roughly $7.9 million.
They also had to factor in the buyout of center Mike Ribeiro, an approximate $10.5 million price tag.
Although the team is paying Ribeiro about $1.9 million annually for six years since exercising a buyout last June because of behavior issues, the total cost of that decision has to be included in their losses for the fiscal year it was made.
"Really, half of that number was from unexpected, unusual one-time costs that, first off obviously, we won't have acquisition costs in the future, and it isn't in our plan to buy out any additional players at this time," LeBlanc said.
So what the Coyotes are focusing on is the $16.5 million total from running the franchise. Although LeBlanc wouldn't give an update on the team's status for the current fiscal year, he said the team is expecting to lose money but that it will be "substantially lower" than the losses suffered in 2014.
"Do we expect to achieve profitably? Yes," LeBlanc said. "The time frame is still a little murky, but I think it's still fair to say that's our goal. That's our expectation."
The prospect of profitability is one of the reasons why LeBlanc considers the out-clause a non-factor, aside from the fact LeBlanc made it clear $50 million in losses isn't an "automatic trigger" to uproot the team.
"If the franchise is going to hit profitability like we're projecting and expecting to, why would we even consider exercising the out-clause?" he said.
A jump in corporate sponsorships helped decrease predicted losses, LeBlanc said, and ticket sales met projections. But attracting more non-hockey events to Gila River Arena remains on the to-do list, with LeBlanc acknowledging that the ownership group didn't anticipate the market to host concerts in the Valley to be as competitive as it is.
As for any effects on the on-ice product, the financial flexibility that was added when Andrew Barroway took over as majority owner remains in place. Ownership met with management last month to hear an initial outlook for next season and once the group receives final details of that blueprint from General Manager Don Maloney, it will work on supplying a budget for off-season spending. That should reach Maloney no later than mid-June, LeBlanc said.
To give further insight, LeBlanc and Maloney will host a town-hall meeting at 3 p.m. outside of Gate 6 at Gila River Arena ahead of Saturday's game against the Devils to answer questions from fans.
"Some changes will have to be made," LeBlanc said. "We know there will be some necessities for the team in the free agency market or the trade market. We feel very confident that we'll be able to provide the flexibility to allow Don to go out and make those moves."
Sarah McLellan writes for The Arizona Republic
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