NHRA roles for bankruptcy

[Mike Jones]

In the early 1980`s, I first heard of a bankruptcy "strategy". The story went like this: max out your lines of credit, whatever anybody would give you, take it. There never was any intention of paying the bills.They payed back pennies on the dollar, if at all. Terrible deal for honest vendors. Not saying NHRA would do anything like that, but many people did.
MJ

[KRatcliff]

Originally Posted by Julie Jordan

The museum is a separate tax-exempt organization.

NHRA’s tax returns are public. The returns include a balance sheet which shows no long-term debt, i.e. mortgages. The organization owns real property, pays property taxes like the rest of us.

I know you are not suggesting that they are filing bankruptcy or even considering it, but I have a general question for you in this regards. You have researched that they have no long term debt, mortgages, etc. My question is why would bankruptcy even be on the table at all?

Unless somehow a company, individual, or organization would have liabilities or obligations exceeding assets or capital to cover then nothing should force (no pun intended) them to choose bankruptcy as an option.

[Julie Jordan]

Originally Posted by KRatcliff

I know you are not suggesting that they are filing bankruptcy or even considering it, but I have a general question for you in this regards. You have researched that they have no long term debt, mortgages, etc. My question is why would bankruptcy even be on the table at all?

Unless somehow a company, individual, or organization would have liabilities or obligations exceeding assets or capital to cover then nothing should force (no pun intended) them to choose bankruptcy as an option.

Kyle, you could have assets that are worth more than your liabilities but still can file bankruptcy, especially if the assets are hard to sell, would take a lot of time, etc. For example, you could have a building but little cash to operate with, have creditors and employees breathing down your back. In conditions like we are experiencing now, cash is necessary to get businesses through this pandemic downturn and closures. Bankruptcy basically provides debtors with significant power to rearrange their business affairs while giving creditors a clear plan as to how they will get paid. If there are lawsuit issues oftentimes the defendant will file bankruptcy, get that debt in the entire scheme of the finances.

[KRatcliff]

Originally Posted by Julie Jordan

Kyle, you could have assets that are worth more than your liabilities but still can file bankruptcy, especially if the assets are hard to sell, would take a lot of time, etc. For example, you could have a building but little cash to operate with, have creditors and employees breathing down your back. In conditions like we are experiencing now, cash is necessary to get businesses through this pandemic downturn and closures. Bankruptcy basically provides debtors with significant power to rearrange their business affairs while giving creditors a clear plan as to how they will get paid. If there are lawsuit issues oftentimes the defendant will file bankruptcy, get that debt in the entire scheme of the finances.

Thank you for responding and I should have narrowed it down to be more specific for the NHRA. I do understand about the lawsuit issues and that is why I somewhat referenced it with my "obligations" comment. I wrote that thinking about how Texaco filed bankruptcy many years ago to protect them from the lawsuit that Pennzoil won when Texaco gave Getty a get out of jail free card to sell to them instead of Pennzoil. I think Pennzoil was awarded something like $10 billion which made Joe Jamail famous (and rich). I digress.

Specifically on the NHRA it appears that compensation for upper management and the board of directors are their greatest ongoing liability. Why would the board want to put their organization into potential receivership or at the mercy of a bankruptcy judge that would determine their ongoing compensation as they are working through a reorganization? Their compensation would appear to be the first thing at risk of significant reductions by a judge.

[Julie Jordan]

Originally Posted by KRatcliff

Thank you for responding and I should have narrowed it down to be more specific for the NHRA. I do understand about the lawsuit issues and that is why I somewhat referenced it with my "obligations" comment. I wrote that thinking about how Texaco filed bankruptcy many years ago to protect them from the lawsuit that Pennzoil won when Texaco gave Getty a get out of jail free card to sell to them instead of Pennzoil. I think Pennzoil was awarded something like $10 billion which made Joe Jamail famous (and rich). I digress.

Specifically on the NHRA it appears that compensation for upper management and the board of directors are their greatest ongoing liability. Why would the board want to put their organization into potential receivership or at the mercy of a bankruptcy judge that would determine their ongoing compensation as they are working through a reorganization? Their compensation would appear to be the first thing at risk of significant reductions by a judge.

Well I don’t think NHRA is filing bankruptcy, only rumors? Compensation is looked at in bankruptcy proceedings and adjusted if they are out-of-line for a similar sized business. Though some may think upper management of NHRA are over-compensated, when you compare to other organizations with similar revenues, I don’t think the compensation is out of the ordinary. I deal with businesses, see many W-2’s of CEO’s, etc. High 6 digits is the norm.

[KRatcliff]

Originally Posted by Julie Jordan

Well I don’t think NHRA is filing bankruptcy, only rumors? Compensation is looked at in bankruptcy proceedings and adjusted if they are out-of-line for a similar sized business. Though some may think upper management of NHRA are over-compensated, when you compare to other organizations with similar revenues, I don’t think the compensation is out of the ordinary. I deal with businesses, see many W-2’s of CEO’s, etc. High 6 digits is the norm.

I don't think they are either, but I am curious if the other businesses that you view with highly compensated CEOs, CFOs, COOs,
VPs, Boards, etc....how they compare to the compensation ratio of the corresponding NHRA executives to revenues versus other ancillary liabilities.

[KRatcliff]

Maybe this would clarify where I am going with the compensation ratios a little better with the NHRA. It is fairly well known that they don't pay the track help much at all and that they seem to produce VPs like weeds. If you look at their most recent available tax returns they had been running at about a 15% compensation to revenue ratio.

But the last couple of years that are available to review they have increased that to about 20% without a material change in revenue. I would venture to guess that the 2018 and 2019 filings would reflect a percentage of greater than 20%. It is information like this along with the reduction in tech, payouts, increased entries, and other things that make the upper execs at the NHRA appear to be lining their pockets at the expense of others such as the racers.

[SStockDart]

And of course, everyone believes to other makes too much money. I've been away for a while, but a $30 per hour employee actually costs the company around $50 when figuring the costs for workers comp, social security, retirement, 401 matching, insurancex2, life insurance, osha's compliant.
So, ya want to start a company, or bitch about one.