News & Analysis

NHRA’s 2012 Tax Return: Opening Pandora’s Box

I’ve been looking at the 2012 National Hot Rod Association Tax return and comparing it to the sanctioning body's 2010-11 returns. It makes interesting reading, especially if you are a numbers freak which most drag racers are. The info in the tax returns reveals one significant trend that under the guidance of president Tom Compton, the NHRA has been on a fiscal “diet” since after the 2009 season and the result is that the NHRA for the first time in decades is a profitable business.

The past half-decade has been a tough one for the NHRA after several years of grossing over $100 million in sales. The economy turned that around, and now it has been two years and probably three (the 2013 return won’t be released until fall of 2014) since the NHRA has grossed over $100 million in sales.

During those five years their tax returns have shown that the NHRA has regularly lost money, but some serious reduction in workforce and cost cutting by president Compton put the NHRA in the financial black to the tune of approximately $1.2M in 2012.

One way Compton and his Board of Directors were proactive in cutting expenses was to reduce the management team’s total compensation. In 2012 Mr. Compton took a nearly $40,000 reduction in pay, his treasurer and fellow board member, Peter Clifford, a $20,000 cut, and almost everyone on Compton’s team took a significant pay cut prior to and during fiscal year 2012.   

It is obvious that another area where the NHRA saved money was by a work force reduction of their rank and file employees. In 2011 the salaries for the NHRA work force (not counting what the management team is paid) amounted to $13.2 million, while in 2012 that amount was reduced to approximately $12.1 million.

So, let’s look at a few items from the NHRA (a not for profit by definition) Federal 990 income tax return for 2012, shall we?

In 2011 the NHRA grossed $98,241,375 and spent $101,629,225 for a deficit of $3,387,855!

In 2012 the NHRA grossed $98,271,020 and spent $97,093,169 for a profit of $1,177,851! That is an almost $4,000,000 improvement over 2011 and almost $7,000,000 less than the company spent in 2010.

So, the question is how did that happen? Well, for one thing the NHRA reduced the total money paid to employees by just over a $1,000,000. They reduced their charitable contributions from about $74,000 in 2011 to just over $17,000 in 2012 -- and it should be noted that Racers For Christ got a $6,700 grant and the DRAW association got no grant or donation. It also should be noted that the NHRA has more than $10,000,000 in cash reserves year-to-year and no donation to DRAW!

The NHRA began the 2012 season with over $11,000,000 in cash reserves and ended the 2012 season with over $12,000,000 in cash reserves.

There are other kernels of information the tax return yields. For instance, the 24 NHRA national events in 2012 sold almost $39,000,000 worth of tickets, which means each of the 24 national events averaged $1.6 million in ticket sales in 2012. The NHRA also took in over $38,000,000 dollars in sponsorship and advertising revenue in 2012.

On the other side of the ledger, in 2012 the NHRA paid racers approximately $23,500,000 in prize money and awards and spent almost $22,000,000 for advertising and another $12,500.000 for the ESPN network to produce and broadcast the NHRA national events.  

Comparing the NHRA’s 2012 tax returns to 2010 and 2011 does reveal some trends and some facts that, being a numbers freak, caught my attention.

The 2010 return shows ticket sales of $41.9 million. On their 2011 and 2012 tax returns the NHRA states they sold a total of $38.7 million in tickets in 2011 and $38.8 million in 2012. It is curious to me that, although track operators have told me their attendance has steadily dropped the last three years, the difference in total revenue from ticket sales in 2011 and 2012 was less than $100,000.

For the same two years NHRA claimed total revenues of $98,241,376 (2011) and $98,271,020 (2012). The difference in total revenue year to year is, remarkably, less than $30,000.

During the past three years NHRA has gone from a company that grossed $104.5 million in 2010 to one that grossed just a tick over $98 million in both 2011 and 2012. During the same time period NHRA’s management team has cut spending from a high of $105 million in 2010 to just $97 million in 2012.

These are just a few facts garnered from the NHRA tax return. We’ll leave the interpretation of those facts to the NHRA members and the drag racing business industry. One thing is sure: Tom Compton and his management team have cut the “fat” at the NHRA and their bottom line tax return numbers prove that!