Saturday, December 21, 2013

A little refresher: Cap Numbers, Salary, & Dead Money---what's the difference?

This topic came up yesterday on this thread on BigBlueInteractive.com to go along with dead money. I'll write up a refresher on Dead Money here in the couple of days, but I'll start with cap numbers first.

To start off, what is a cap number?? It is how much a player counts against a team's adjusted salary cap (each team has a different adjusted salary cap). A player's salary is not necessarily the same as his cap number. Most of the time it isn't. Only about a third of the players on the Giants' roster now have a salary that is equal to their cap number (I wrote about this in more detail in this previous article/post).

For the sake of reference, here is the list of the 25 players on the Giants now whose cap numbers are equal to their salaries. 14 players are from the 53-man roster, 4 are from Injured Reserve, & 7 are from the Practice Squad:

















Simply put, a cap number is basically this:

A player's prorated signing bonus + his base salary + other assorted bonuses (i.e., workout bonus, roster bonus on a given day in the league year). 

Let's use a player already on the roster as an example to help explain. Here's Will Beatty's contractual breakdown courtesy of OverTheCap.com:









Look at Beatty's contract starting from 2013, the first year of the deal that he signed last off-season. He received $12.5 million in guaranteed dollars---the key for any NFL player, especially in their 2nd contracts. Only $2.5 million of this amount counted towards the cap in 2013 (contracts can only be prorated for no more than 5 years under the latest CBA agreement between the NFLPA and owners signed in August of 2011; I think it was for 6 years under the old CBA).

This is why you rarely see contracts for more than 5 years under the new CBA. This spreads the money out over the length of the 5 years---the maximum that a contract can be prorated for---unless the contract is for a a shorter amount, as in the case of someone like Cullen Jenkins, who signed a three-year deal this past off-season with the Giants.

When you add up the roster bonus money (nothing), off-season workout bonus ($50,000), and workout bonuses for 2013, you get to the prorated amount of $2.5 million for this season (workout bonuses and roster bonus are not prorated). That's it for the bonuses.


That leaves the non-guaranteed portion of the deal---the paragraph 5 salary, a.k.a. a player's base salary. This can be structured however the player's agent and team contract officer agree on. In Beatty's case, it happens to be for exactly a cool million in 2013. This brings his cap number to $3,550,000. His salary for 2013 though is different. Counting his bonuses and paragraph 5 money, Beatty earned $13,550,000 in real money in 2013. This is in essence the difference between CASH and CAP dollars, which was another issue of contention between the players and owners that owners gave a little to the players (the only other minor concession being the Minimum Salary Benefit).

*****





What is Dead Money? Let me use a food analogy to keep things in layman's terms, as people can often relate to things better with their stomachs, especially if they're allergic to financial speak and jargon. Before I explain, first kindly keep this formula in mind as I go through the analogy below:

CAP NUMBER - CAP SAVINGS = DEAD MONEY

Let's say you're a poor starving college student living in a dorm. You're hungry, and you love pizza. Guess what? There's a box with leftover slices that your roommate liberated from a party he attended the previous night and brought back for you. 




You're starving, and you help yourself to the cold pizza in the box when you wake up. Problem is this: you can't save all the pizza. Only half the pie is left (4 slices), but one slice is no good, and is stuck to the bottom of the cardboard pizza box, with lots of cheese missing on top to boot.

That slice is analogous to DEAD MONEY. You saved the 3 other slices (CAP SAVINGS), but weren't able to save that poor slice stuck to the box.

Apply this now to Will Beatty's contract in the 2015 season:

CAP NUMBER ($8,050,000) - CAP SAVINGS ($550,000) = DEAD MONEY ($7,500,000)





Let's also apply this logic back to the pizza box. The pizza box originally had 8 slices in it---our CAP NUMBER. You subtracted the savings from it (4 slices), and were left with one bad slice that you couldn't put to use, a.k.a. DEAD MONEY. In the case of the pizza box, you had DEAD MONEY amounting to one slice. In Beatty's case, should the Giants decide to cut him in 2015, you'd be left with $7.5 Million in DEAD MONEY.


In summary, what's DEAD MONEY? It's the amount of a given player's CAP NUMBER that is left over after you cut him and count CAP SAVINGS. It's the part of the player's contract that remains on the accounting books after cutting him loose. The catch with DEAD MONEY is that it still counts towards a team's salary cap even after the player in question is off of the team. 


When Free Agents walk, they have no Dead Money---unless they have Voidable Year deals like Brandon Myers and Corey Webster currently do, but they're exceptions to the rule. Dead Money is what you're stuck with still counting against your cap AFTER you get rid of the player---kind of like that disgusting slice of pizza.