Leiweke: Kings Are on Thin Ice

King President Tim Leiweke, refuting a Forbes magazine report that pegged the club’s operating income for last season at a $7-million profit, said the Kings have never made money since Denver billionaire Philip Anschutz assumed ownership and, in fact, have swallowed more than $103 million.

They will continue hemorrhaging money, Leiweke said, unless the NHL and the players’ union dramatically revamp their collective bargaining agreement, which expires in 2004.

“To hear anyone, players or union, saying that we don’t have a problem here, they are blindfolded and they’re going to kill the sport,” Leiweke said. “We have a major problem. We have to fix this because I’m telling you, we will not continue. We won’t. We either fix it or we’re out.

“If someone came to us and said they will extend the current CBA for another five years, we’d turn around and sell the team. We can’t continue to do this. This is ridiculous.”

In a highly unusual move, Leiweke and Dan Beckerman, chief financial officer of Anschutz Entertainment Group -- which owns the Kings and Staples Center -- showed The Times the Kings’ historical cash basis income statements from 1996-97 through last season, an audited statement for last year, and this year’s budget. Those figures did not include debt service and deferred compensation to players, which peaked at $30.6 million in the 1998-99 season.

The Kings, once saddled with deferred payments to about 40 players, are still paying about a dozen long-departed players such as Wayne Gretzky, Rob Blake, Kelly Hrudey, Dave Taylor, Marty McSorley and Pat Conacher, a residue of the party-now, pay-later Bruce McNall regime.

While the figures showed the Kings have enjoyed strong revenue growth since Anschutz took over, built Staples Center and moved them into the $400-million building, their payroll and other expenses have soared. Leiweke said the Kings get 25% of the suite and premier seat revenue at Staples, as well as 50% of the concession and parking revenue during their games.

Leiweke said the Kings are spending 86% of every new dollar on salaries, “and if that’s the case, you’ve got a major issue with the economics.”

Sources confirmed the Kings were among four clubs that provided financial data to the NHL Players’ Assn. two years ago to back the league’s contention changes in the economic system are essential to the survival of many of its members.

The NHL, alone among the four major professional sports leagues, does not have a salary cap or luxury tax; Commissioner Gary Bettman has repeatedly declared a need for cost containment, but the NHLPA has maintained the fault, if any, lies in clubs’ management of the system, not the system itself.

NHLPA Executive Director Bob Goodenow was traveling Wednesday and unavailable for comment. Spokesman Jonathon Weatherdon declined to comment on Leiweke’s views of NHL economics.

“Forbes magazine is a highly regarded publication,” Weatherdon said. “If the Los Angeles Kings have an issue with the numbers published by Forbes, I’m sure they will take it up with Forbes directly.”

According to their statements for 1996-97, Anschutz’s first full season as owner, the Kings’ revenues were about $30.5 million and their operating expenses were slightly less than $38 million, a loss of about $7.3 million. “I thought that was an absolute disaster,” Leiweke said. “What you’ll see is it got worse.”

Their losses hit $20.5 million in 1998-99 but shrank to about $5.9 million in 1999-2000, their first season at Staples. Their best season was 2000-01 when they lost $3.7 million after a run to the second round of the playoffs.

Last season, with revenues of $62 million and operating expenses of $70.1 million, the Kings lost $8.8 million but whittled that to $6.5 million after playoff revenue.

Leiweke said the club has budgeted a $5-million loss EBIDA (earnings before income tax, depreciation, amortization) this season but that could total $10.5 million including deferred compensation and interest payment even if they play one playoff round.

“I have no idea where [Forbes] came up with that $7 million, because it’s beyond me,” Leiweke said. “They’re completely guessing, so it’s a blind guess.”

Kurt Badenhausen, statistics senior editor for Forbes, said no NHL club “lays out their income statement for us,” but valuations are calculated by phoning clubs for information and looking at revenues and expenses.

Forbes listed the Detroit Red Wings as the NHL’s most valuable team, at $266 million, but with a $3.4-million operating loss last season. The Kings ranked ninth in value, at $205 million.

Anschutz and partner Ed Roski Jr., bought the Kings in late 1995 for $113.25 million. They also own one-third of the Lakers.

“We’re comfortable in what we come up with,” Badenhausen said. “The Kings are a very complicated structure, with Staples Center and a three-team building, and in the sports business, a big part of it is depreciation and amortization. If you looked at the net income level as opposed to the operating level, which we do, the losses would be much more significant. The Kings have a lot of debt to pay off.”

He also said the Kings can camouflage revenues by attributing them to other Anschutz enterprises, such as Staples Center. Leiweke denied having done that.

“As a private company, you don’t want to show a profit because then you’re going to have to pay taxes,” Badenhausen said. “The Kings have a complicated situation because they have a lot of money that goes to the company that operates the arena. How you assign revenues that go to that company, the Kings or the Lakers is up to their discretion. If all the revenues go to the arena company, then they can say the Kings lost money.

“Of the four sports, hockey is in the most perilous position. At the same time, the Kings certainly have to be looked at as one of the upper-tier franchises in terms of stability.... Accounting can be manipulated in all sorts of ways.”

Bettman declined to comment on the Kings’ situation but said Leiweke’s comments “underscore why we as a league have the commitment we do to ensure there will be a new economic system. Phil Anschutz wants a new economic system, and we’re confident we’re going to have one.... We know what our economic condition is and the union knows what our economic condition is and we know there has to be a fundamental change. Anyone who says revenues are being siphoned off or funneled somewhere is being ostrich-like or disingenuous.”

Leiweke said he’s not trying to win pity or fire a salvo at the NHLPA.

“What discourages me is when I see players talking about a battle,” he said. “It shouldn’t be a battle because guess what? If it’s a battle, then kiss the league goodbye.”

He said he wants fans to understand Anschutz isn’t raising ticket prices and avoiding the free-agent market to pull more money out of the Kings. He said the Kings, whose player budget this year is $52.2 million -- including other team expenses that had been slotted into other areas -- committed significant amounts of money to Jason Allison, Mattias Norstrom and others while keeping their ticket prices in the bottom half of the league.

“Personally, and this is Phil as well, I love this sport and it’s a great sport. I believe it’s the best in-person, live sport there is out there, and I love this league,” Leiweke said. “I am very hopeful logic will prevail and we will come together and solve this. I have great faith in Gary. More than faith -- prayers.”