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Union immediately challenges results

NEW YORK -- Painting a gloomy financial picture that could
lead to a lockout, the NHL released a report Thursday that its 30
teams combined for $272.6 million in operating losses last season.

To bolster its contention of widespread red ink, the league
hired former Securities and Exchange Commission chairman Arthur
Levitt Jr. to examine franchises' financial figures. Levitt said
his report was independent and concluded 19 teams had operating
losses in 2002-03.

"The results are as catastrophic as I've seen in any enterprise
of this size," Levitt said. "They are on a treadmill to
obscurity, that's the way the league is going. So, something's got
to change."

The NHL Players Association immediately challenged the results.
Ted Saskin, the union's senior director of business affairs, said
that its examination of four teams' finances -- Boston, Buffalo, Los
Angeles and Montreal -- found revenue and benefits to the clubs had
been underreported by $52 million.

"The Levitt report is simply another league public relations
initiative," NHLPA head Bob Goodenow said in a statement. He
called it "fundamentally flawed" because it defined NHL revenue
in the same manner used by the NFL and NBA in their salary-cap
systems.

In addition, the league released figures to The Associated Press
that show 10 consecutive seasons of operating losses totaling
$1.544 billion on operating revenue of $12.98 billion. The league
says players got 75 percent of operating revenue last season, up
from 57 percent in 1993-94.

Hockey's collective bargaining agreement expires Sept. 15, and
commissioner Gary Bettman, echoing baseball management in its 2002
bargaining talks, said change is needed.

In 1994-95, a 103-day lockout canceled 468 NHL games, cutting
each team's schedule to 48 games. After reaching a six-year labor
contract, the sides decided in 1997 to extend the deal through this
season.

Bettman conceded that decision to extend the agreement, and the
one to expand by four teams, was based on a belief that the league
was on sound footing. He said Thursday that might have been overly
optimistic.

"If we don't fix this, I want you to hold me accountable," he
told reporters.

Levitt reported the league had $1.996 billion in operating
revenues last season and spent 75 percent of it on players: $1.494
billion.

"I would not underwrite as a banker any of these ventures, nor
would I invest a dollar of my own personal money in what appears,
to me, a business that's heading south," Levitt said.

Levitt was paid $250,000 in advance to produce the report and
said the league did not interfere with his conclusions. In
addition, the accountants he used were paid at least $500,000, he
said.

The report said $1.047 billion of the league's money came from
tickets -- $886 million from the regular season, $111 million from
the playoffs and $50 million from exhibition games. Broadcasting
contracts and new media brought in $449 million and arenas took in
$415 million from areas such as concessions and advertising.

Factoring in below-the-line costs such as interest and
depreciation, Levitt said the loss increased to $374 million.

He said 26 of the 30 teams were audited. Buffalo and Ottawa were
not because they were in bankruptcy proceedings, and two
unidentified teams could not be audited because accountants
concluded they were not viable ongoing concerns.

While six teams combined for $188.4 million in operating losses,
11 teams combined to make $69.8 million.

While Levitt did find some owners put relatives on their
payrolls at salaries that were above market, it was no more
excessive than other businesses he had examined.

Part of the debate between management and players is how to
define revenue. Twenty-two of the 30 teams play in arenas that are
owned at least 50 percent by affiliates or related parties, and
Levitt used attendance to apportion revenue among the different
teams and events that use the buildings.

In addition, he increased revenue for the league by $30 million
to account for underreporting of broadcast money by teams that are
owned by networks that televise their games.

"We've always said it's not an accounting issue of making sure
the numbers add up," Saskin said, "but a much more complex task
of how one defines the revenues in a business with many related
parts and complicated corporate structures. There's no way to tell
because they continue to refuse to give you individual team
financial information."

The last bargaining session was Oct. 1. Bettman said the sides
had "plenty of time" to reach an agreement.

"We have an economic system that doesn't work," he said.