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March 26th is the 22rd anniversary of the final WCW Monday Nitro. To mark this occasion, WCWNitroBook.com presents the third of a series of excerpts from the book NITRO: The Incredible Rise and Inevitable Collapse of Ted Turner’s WCW:
Below is the third excerpt, taken from Chapter 9 (‘An Age-Old Problem’).
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UNDER THE LEADERSHIP of Eric Bischoff, WCW achieved the impossible in 1995 - profitability. However, in an important contrast to McMahon’s WWF, its financial picture could not be measured by a simple accounting of revenues and expenses. Rather, as a ‘downstream operating entity’, its bottom-line picture resulted from meeting a complex set of monthly allocations determined at the corporate accounting level, a kind of forecasting based on prior performance.
Inherently, it appeared that the system, although in concert with Generally Accepted Accounting Principles (GAAP), could offer a means to obscure any true accounting of marketplace performance. Suppositionally, if a certain item of revenue, for example, was credited to one TBS subsidiary - as opposed to another - this shifting of income could not be detected by the financial experts downstream. “We weren’t there,” clarifies Greg Prince, WCW’s controller, “to watch how the ‘sausage’ was made.”
According to Dick Cheatham CPA, a certified forensic accountant and former group controller at TBS, accounting issues pervaded across the company. “When I got there, there were a lot of accounting problems - serious accounting problems,” he reports.
“A lot of that had to do with the fact that Ted didn’t care much for accountants. The way he saw accountants was that they were necessary - [in that] they built financial statements you could use to borrow money with - but they weren’t risk-takers. Now that’s true…as a group, accountants are not risk-takers. We’re just record keepers, [or] scribes. But at TBS, there weren’t very many real accountants, although there were a lot of bookkeepers.
“I came in with a consultant - Jack Zimmermann and Associates - and our take was, ‘if your books aren’t any good, you can’t rely on the information that’s in there to make decisions …because the books are no good!’
“So our first nine months to a year was just cleaning stuff up. For example, we had something like $15 million in accounts receivable at Turner International. We asked, ‘when was the last time we got a payment on any of these receivables?’
“[The response was] ‘Well, I don’t know, we haven’t heard from any of these people in about three years’.
“Ok, wait a minute. We haven’t heard from any of these people in three years that owe us $15 million. What we’re looking at then is an impaired asset. We can’t carry this on our books at face value, because we don’t know where these guys are that owe us this money…and because we haven’t received a payment in three years, we may have to charge the damn thing off! That was the kind of mess we walked into, [because] from the perspective of some people who worked at Turner, collecting was not as important as selling. [It’s like], ‘if I can sell it, then I’ve earned my bonus, my commission…I’m a hero…and somebody else can collect the mess’.
“Sales was everything. Their deal was, ‘a dollar of sales revenue is worth more than a dollar of expense cutting’. To me, the impact on the bottom line is the same, but their deal was, ‘no - I need a dollar more in revenue, even if it takes me two more dollars in expenses to create it’. It was all revenue-driven - the whole company was revenue-driven.”
Interestingly - although the public may not have realized it - there existed a logical reason for such an attitude. “Underneath everything, Turner Broadcasting never really made a whole lot of money,” Cheatham reveals. “It was all revenue, and it’s hard to report to shareholders when you’re not really making net income. You know, when you’re not really making money!"
The preceding excerpt was taken from the book NITRO: The Incredible Rise and Inevitable Collapse of Ted Turner’s WCW by Guy Evans and reprinted with permission.
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