The baseball season hasn't started yet, but Sammy Sosa has already delivered a solid hit this spring - to the first-quarter profit of Chicago Cubs owner Tribune Co.
As sports-page readers know by now, the Cubs were so eager to send Sosa packing that they agreed over the winter to pay about $16 million just to get out of the last year of their contract with the outfielder, who was traded to the Orioles.
Now, as it turns out, corporate-accounting rules require Tribune to publicly spell out in its first-quarter financial results the cost of pushing Sosa out the dugout door.
Because the trade caused the company to "accelerate" the payment of Sosa's salary, first-quarter net income will be reduced by nearly 3 cents per share, or more than $9 million on an after-tax basis, said Tribune chief executive Dennis J. FitzSimons.
"As you know, Sammy Sosa is now a Baltimore Oriole," FitzSimons told a media-industry investment conference this week. "While this trade will not impact our full-year results," he said, "there is a timing impact."
FitzSimons' disclosure Monday sent a ripple of laughter through the crowd of institutional investors, a number of whom appeared amused to learn that a major corporation's financial results could be skewed by the sudden departure of a baseball player.
"I hear some laughter out there," FitzSimons said mildly. "Sammy wasn't cheap."
A Tribune spokesman, asked about the dent in the company's profits, emphasized that although the first-quarter results will be hurt by the payout, the damage will be largely offset in the company's second and third quarters, which will benefit by about the same amount.
That's because the company always was legally bound to pay Sosa under his old contract, but typically the payments would have been accounted for during the baseball season, when Tribune accrues the cost of the Cubs' salaries.
The Orioles trade pushed those costs into the first quarter and into public view. The nation's investors best know Tribune Co. as a Chicago-based media holding concern with more than a score of TV stations and a chain of newspapers that includes The Sun, the Chicago Tribune, Newsday and the Los Angeles Times.
But Tribune also has owned the Cubs since 1981, when it acquired the team from the Wrigley chewing gum family for $20.5 million. Baseball has been very good for the company's profits.
Fans buy tickets from Tribune's Cubs subsidiary to watch games at Wrigley Field, listen to the games on a Tribune radio station in Chicago, watch them on a Tribune TV station and read about them in the Chicago Tribune.
Sosa's expensive departure isn't the first time that a high-priced deal has hurt the profits of a team's owner. But the owner isn't usually a publicly traded company subject to financial-disclosure regulations.
Over the winter, the Cubs decided that their 36-year-old superstar had to go. The problem was that under an earlier, $72 million, multiyear contract, Sosa was still owed $25 million over the next two years.
If the team that acquired Sosa didn't agree to absorb that obligation, the Cubs would be stuck with the tab. To clinch a deal with the Orioles, the Cubs agreed to pay $16.15 million.
Under that agreement, the Cubs will pay $8.15 million of Sosa's $17 million salary this year as an Oriole, and they paid Sosa about $8 million as a bonus for agreeing to the trade.
The Chicago Tribune is a Tribune Publishing newspaper.
