Where is all the $$$ coming from anyway?

[BobPSU92]

I bet they get the $$$ from the Penske file!

I’m not Penske material.

 

[Bkmtnittany1]

I’m not Penske material.

I bet Kraft went down to payroll!!

 

[JoePaMajorCFBrecord409Ws]

Arkansas did this to Bielema and won.

The two parties can negotiate a one-time severance payment which would close the contract (including the guarantee). But given the fact that Franklin is likely to find new employment at a pretty significant salary and the "present value" of a current payment versus payments over time , it's quite unlikely that a one-time payment would be anything remotely close to $50 million.

 

[PSU4U]

Adidas, future ticket revenues, donors, Univ of California 'private equity' deal, future TV contracts, West Shore Homes, bowl/playoff distribution. Lots of places

And we have the second richest athletic department in college football, 2nd only to Michigan. Obviously, some PS bureaucrats who were chumming the waters about how broke we were are full or crap.

 

[Psumatt85]

I bet Kraft went down to payroll!!

You gotta go downtown, like the petula Clark song

 

[RolexKong]

I did not say $8 million is peanuts. I said that it won't be nearly as crippling as many believe for a variety of reasons, including the likelihood that Franklin coaches Power 5 football again in the near future. Just that happening likely halves (or more) what Penn State would owe him annually.

The athletic department does not disclose specific depreciation or amortization schedules in its financial reporting. That rolls up to the University level and is likely buried in much bigger line items. But there are a few listed expense items that figure to have significant depreciation, amortization and interest charges:

• Equipment: $6.1M
• Game Equipment: $17.0M
• Facilities Debt/Fees/Rent: $17.3M
• Direct Overhead/Admin: $17.6M

That's almost $60 million in costs accounted for in a single year. I'd bet some chunk of that is accounting based and the money stays within the program and is available for different purposes if needed.

There are accountants on the board who know more than me. I'd love to hear their thoughts.

Read the line item definitions. None include depreciation. The instructions for "Facilities Debt/Fees/Rent" specifically exclude depreciation, which is consistent with the inclusion of principal repayments as part of debt service.

 

[RolexKong]

So the University and athletic department don't pay any taxes for UBTI? The media money? Licensing income? Ticket revenue? Etc?

No taxes are levied on media rights fees (which would be levied at the conference level and they are not) or ticket revenue. The IRS has issued rulings specific to those items. The remainder roll under the generic IRS ruling that college sports are part of the institutional mission. Whether that remains in the future is questionable.

 

[RolexKong]

Exactly...especially when that organization (or that group that it's part of) is already looking at selling off some of their future earnings for a one-time cash payment due to the need for immediate $$$.

Is a 10% growth rate (as the previous poster assumed) really sustainable? What happens if/when we're not growing at 10%, or God forbid, a coaching hire doesn't work out and we actually slide backwards a bit (or the college football bubble bursts to some extent)? Should we be writing checks right now that will be cashed well down the road based on assumptions that we'll continue growing at 10% and always be able to put 107k into Beaver Stadium every Saturday?

The economics of that deal from the standpoint of the schools are dubious. Michigan and Ohio State know it, but the other schools, Penn State included, are so cash-strapped that they need the money now. That's pretty evident by the less-attractive media properties conceding a larger share (how much remains to be seen) to those pulling the weight.

 

[SleepyLion]

I bet they get the $$$ from the Penske file!

Vandelay Industries makes that kind of coin.

 

[Nittering Nabob]

Perhaps it’s just me but “RolexKong” reminds me of “Art”

 

[Catch1lion]

Perhaps it’s just me but “RolexKong” reminds me of “Art”

Is Art a Pepsi dial ?

 

[bdgan]

The annual revenue streams for PSU athletics are quite large. I believe they were in the realm of $220 million for the last fiscal year.

There are a lot of expenses that go along with that $220 million in revenues. $20 million for player salaries, $8 million per year for Franklin, $3.5 million for Knowles, $12 million for a new HC, etc. Then take facility expenses, travel costs, equipment, etc. We're likely have to pay the buyout for the new coach.

$10 million here, $20 million there, and before long you're talking about real money. Ticket revenues and playoff money aren't looking too great right now.