NFL Owners May Have Misled Players About Team Profits To Pay Them Less

Panthers owner Jerry Richardson

When National Football League owners locked out players before the 2011 season, they did so claiming that the league’s financial system was driving it down a path of unsustainability. Even though league revenues were growing steadily, many owners, including Carolina Panthers owner Jerry Richardson, argued that they were destined for financial hardship because players were enjoying too large a share of the pie.

According to a team financial statement obtained by the Deadspin last week, however, Richardson wasn’t telling the truth. The Panthers, in fact, made more than $100 million in profits in 2011 and 2012, even as Richardson was claiming poverty:

The statement is for the years ending March 31, 2011, and March 31, 2012. Over the first period, as Richardson argued that the NFL’s business model was hopelessly broken and steered the owners toward a showdown to extract more money from the players, the Panthers recorded an operating profit of $78.7 million. The team had gone 2-14 on the field, but Richardson and his partners were able to pay themselves $12 million.

Over the following year, after the owners had won their lockout and reduced the players’ share of league revenue from 50 percent to 47 percent, the Panthers brought in $33.3 million in operating profit. Richardson began lobbying for public subsidies to renovate his 17-year-old stadium. The team went 6-10.

NFL teams, like franchises in other sports, aren’t required to disclose financial statements, and they refused to open their books when players asked during lockout negotiations. That allowed owners in a profitable league to claim poverty and hardship without any check into whether those claims were true. At the same time, tax breaks and special financing deals with the league allows NFL owners to make their financial pictures even more obscure.

As a result of that obscurity, labor disputes like the NFL’s become even more tilted away from players. Owners already hold leverage in such disputes, since the vast majority of players, unlike owners, depend on the game as their only source of income and players have short careers (the average NFL career is between three and six years long), so missing games or full seasons to negotiate more favorable bargaining agreements often isn’t palatable. The results, then, are predictable: owners are able to extract huge concessions from players to their direct financial advantage. In the NFL, NBA, and NHL, all of which locked out players in the last two years, players gave up substantial shares of revenue in their latest negotiations, and in the NFL, the salary cap is now growing at a far slower pace than it once was. While player salaries are still growing, the slowing growth of the salary cap means there will be less money to divide among them, even as the value of all 32 NFL teams continues to grow and league revenues continue to skyrocket.

This isn’t just a football story. The player-owner relationship is emblematic of the problems facing workers across America. Corporate profits have grown to record levels, but workers’ wages have stagnated. Companies like Caterpillar that are raking in record profits of their own are forcing workers off the job and demanding concessions on salaries and health and pension plans. Corporations are using built-in advantages to rig the game against the workers, padding their bottom lines but making workers worse for it. It may be hard to sympathize with million-dollar professional athletes, but the fights they’re having aren’t altogether different from the fights workers are facing across America.

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Awash In Record Profits, Corporations Shift Even More To Offshore Tax Havens

Even as American corporations are raking in record profits, the largest among them are shifting larger amounts of money away from the United States and into offshore tax havens that allow them to pad their bottom lines even more, according to multiple analyses of legal filings made since the beginning of 2013.

The Wall Street Journal found that the 60 largest companies moved $166 billion offshore in 2012, shielding 40 percent of their earnings from American taxes and costing the U.S. billions in lost revenue:

The amount of money at stake is significant, particularly when the U.S. budget deficit is high on the political agenda. Just 19 of the 60 companies in the Journal’s survey disclose the tax hit they could face if they brought the money back to their U.S. parent. Those companies say they might have to pay $98 billion in additional tax—more than the $85 billion in automatic-spending cuts triggered this month after the White House and Congress couldn’t agree on an alternative.

A similar analysis from Bloomberg found that 83 of the largest American companies moved $183 billion overseas in 2012, bringing the total offshore to $1.46 trillion for those 83 companies alone. Most of the companies, like Apple, Microsoft, and Yahoo, have set up subsidiaries in low-tax countries like Bermuda, Ireland, and the Cayman Islands specifically to receive tax benefits. That has ramifications for states, which lost $42 billion in revenue to corporate tax dodging in the last three years alone, and taxpayers and small businesses, who often have to pick up the tab.

And while the debate over corporate tax reform has flared again in Washington, the favorite reform of Republicans and corporate lobbying groups would only exacerbate the problem, making it easier for corporations to push even more money overseas at the expense of revenue and investment that could be made in the United States.

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WRAPUP 2-Pfizer, Lilly profits beat Street; generics take toll

* Pfizer sees 2013 EPS $2.20-$2.30 excluding items

* Lilly sees 2013 EPS $3.82 to $3.97

* Pfizer, Lilly shares close up 3.2 pct

Jan 29 (Reuters) - Pfizer Inc and Eli Lilly and Co reported better-than-expected fourth-quarter profits as deals, cost cutting and strong sales of new products helped the pharmaceutical companies weather generic competition for once top-selling products.

The U.S. drugmakers also issued 2013 forecasts on Tuesday that encouraged investors, who sent shares of both companies up more than 3 percent.

Excluding special items, Pfizer earned 47 cents per share, topping analysts' average expectations by 3 cents, according to Thomson Reuters I/B/E/S.

But global sales for the largest U.S. drugmaker fell 7 percent to $15.1 billion as sales of Lipitor, formerly the world's top selling prescription medicine at nearly $13 billion a year, plunged 71 percent to $584 million. Sales of the cholesterol fighter began tumbling in November 2011, when its U.S. patent expired and cheaper generics flooded the market.

Pfizer's quarterly net profit quadrupled to $6.32 billion, or 86 cents per share, due to the November sale of its nutritional products business to Swiss food group Nestle SA for about $12 billion. It is also preparing to spin off its animal health business through an initial public offering expected to bring in billions more.

"I don't think the Lipitor expiration is an issue for our investors today," Chief Executive Ian Read said in an interview. "We've done what we needed to do and (investors) are focused on the future," he added, referring to the company's decision to spin off the nutritional and animal health units in order to focus on its more-profitable core pharmaceuticals business.

Pfizer recently won approvals for highly promising new products, including the blood clot preventer Eliquis, which it shares with Bristol-Myers Squibb Co, and Xeljanz for rheumatoid arthritis.

In mid to late-stage trials, it is testing treatments for cholesterol, psoriasis and numerous types of cancer. Read said Pfizer's biggest priority is developing the drug pipeline and getting the products to market.

"Pfizer is doing exactly what you want them to do," said Bill Smead, portfolio manager of Seattle-based Smead Value Fund that owns Pfizer shares. "Pfizer is moving back to their core with a strong balance sheet and a bright future."

Lilly's fourth-quarter net profit fell more than 3 percent as sales of its Zyprexa schizophrenia drug - at one time one of the world's top five sellers - fell 49 percent to $385 million.

Excluding one-time items such as asset impairments and restructuring charges, Lilly earned 85 cents per share, beating analysts' expectations by 7 cents per share.

Lilly's results and its 2013 forecast were dependent upon aggressive companywide cost controls. Strong sales of other drugs and animal health products helped offset the toll of generic Zyprexa in the fourth quarter.

"We are absolutely emerging from the loss of Zyprexa," Lilly Chief Financial Officer Derica Rice said in an interview. "We feel good where we are."

But the company is facing yet another daunting patent cliff at the end of this year when its best-selling product, the antidepressant Cymbalta, begins to face generic competition.

"They're negotiating the Zyprexa patent cliff pretty well by keeping costs down, but the question is whether they can keep tightening the belt to offset the patent expiration on Cymbalta," said Judson Clark, an analyst for Edward Jones. "It's a $6 billion a year drug, and a tough act to follow."

Lilly updated the 2013 earnings forecast it issued earlier this month, to include 7 cents per share from a delayed research and development tax credit. It now expects to earn $3.82 to $3.97 per share, up 13-17 percent from a year earlier.

Pfizer forecast 2013 earnings of $2.20 to $2.30 per share, excluding special items. The average analyst estimate was $2.29 per share, according to Thomson Reuters, and the midpoint of the company's range is less than that.

Pfizer earned $2.19 a share in 2012.

Pfizer earnings were propped up by rebounding sales in emerging markets, which rose 17 percent to $2.65 billion, and strong sales of its Prevnar vaccine for pneumococcal bacteria, which jumped 19 percent to $993 million.

"As they pare away non-pharmaceuticals businesses, that will allow Pfizer's drug pipeline to shine even more because it will represent a bigger portion of the company going forward," Clark said.

Smead likes the U.S. pharmaceutical sector as a whole. "The best business over next 20 years is keeping baby boomers alive and keeping their animals alive," he said.

Pfizer shares closed up 86 cents, or 3.2 percent, at $27.70, while Lilly shares rose $1.68, or 3.2 percent, to close at $54.32 on the New York Stock Exchange.

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