On Maurkice Pouncey, Center Salaries, and How the Annual Value Can Be Misleading


With Maurkice Pouncey locked up and surpassing Alex Mack as the highest paid center in the NFL I thought it would be a good time to dissect the contracts at the top of the position and see why looking at annual value can sometimes be very misleading.

For the prior three years the Panthers’ Ryan Kalil has been the top earner at the center position. Carolina signed him to a six year contract in 2011 that would pay Kalil $49.116 million which worked out to be $8.186 million per year. It seemed like a number that would never be touched until the Jacksonville Jaguars offered Alex Mack a five year deal worth $8.4 million per year. Mack was a transition player so the Cleveland Browns matched the offer and made Mack the top paid in the game. That distinction did not last long as the Pittsburgh Steelers quickly signed Pouncey to a five year deal worth $8.827 million a season.

But numbers can sometimes be misleading and in the NFL we have to look at all kinds of aspects of a contract. To best compare apples to apples when looking at Pouncey’s contract we need to take into account the new money in the contract. This simple adjustment is made by adding Pouncey’s cash salaries in 2014 (the final year of his old contract) and 2015 (technically the first year of his new contract) and subtracting the money he was already going to earn in 2014.  For Pouncey that works out to be $15,636,625. Lets look at the five year cash flows for each player.

Year 1$15,636,625$10,000,000$19,000,000
Year 2$22,636,625$18,000,000$20,750,000
Year 3$30,136,625$26,000,000$30,750,000
Year 4$37,136,625$34,000,000$35,750,000
Year 5$44,136,625$42,000,000$41,366,000

There are a few things we should find interesting with this chart. The first one actually concerns Mack. Despite having the highest annual valued contract for a few months, this was an inferior contract to Kalil’s through the first four years of the contract. Considering the life of an NFL player is not the longest it would be pretty easy to argue that Kalil never really lost his standing as highest paid player at the position.

Between Pouncey and Kalil the results are a bit muddles. Kalil earned more in his first year than Pouncey, but Pouncey will exceed his cash flows in year two, only to trail him again in year three. Provided Pouncey gets to year four this is where he lays claim to being the highest paid player. That’s certainly not guaranteed.

Looking further into the contracts we need to look at two other factors when determining the true value of a contract and those factors are the guaranteed dollars and the dead money protections that come in the contract structure.  Teams do not like to pay players to not play on the team nor do they want to carry excessive salary cap charges for a player no longer on the team.  This further muddies the waters as to highest and not highest paid players.

Pouncey received no contract guarantees beyond a $13 million signing bonus that will be prorated through the fourth year of his contract. Mack received no signing bonus but did receive a full guarantee on his year one and two salaries. Kalil hit the jackpot receiving an $18 million signing bonus, prorated through the fifth year of his deal, and another $5 million bonus in the third year of his contract that would be prorated over the remaining four years of his contract.

Remember that money not yet accounted for on the salary cap or money owed accelerates onto the salary cap when the player is released. Here are the dead money charges that would be associated with releasing the player.

Year 1$10,400,000$18,000,000$19,000,000
Year 2$7,800,000$8,000,000$14,400,000
Year 3$5,200,000$0$15,800,000
Year 4$2,600,000$0$10,950,000
Year 5$0$0$6,100,000

These numbers paint an entirely different picture for the players. Pouncey’s contract is a little different in year one since his deal is an extension where proration begins in 2014, but I think its safe to say he would not be cut that year even though his protection is much less than the other two.

In year two Pouncey has the least secure contract for a few reasons. For Pouncey the $7.8 million dead figure represents money already paid to the player. If his play declined greatly their option is to save $7 million in real cash plus another $1.8 million in cap room. To see the magnitude of this I try to compare the savings to the players cap charge (this is the CSC ratio you see on the cap pages) where I’ll add the players cash plus cap savings and divide it by his salary cap charge. For Pouncey it’s a 0.92, which is close to the range where releasing a player is somewhat feasible.

Mack’s year two salary is protected by a guarantee so the Browns will be ambivalent on releasing him. They gain no cap and save no cash giving a 0.00 ratio. Kalil, assuming he was released before his year three guarantee kicked in, would cost the team $14.4 million in dead money which amounts to a loss of $9.05 million in cap room with a savings of just $1.75 million in cash. We don’t need to look at any ratio to realize Kalil is protected as well from release.

Mack loses almost all protection from that point forward (he has a vesting guarantee in year three but that would not save him from release), giving Pouncey more security from the dead money in his deal, but Pouncey would never come close to the security that Kalil has. Here are the yearly cap plus cash savings if the team released the player:

Year 1$3,200,000($8,000,000)($14,400,000)
Year 2$8,800,000$0($7,300,000)
Year 3$12,400,000$8,000,000($950,000)
Year 4$14,000,000$8,000,000$3,900,000
Year 5$14,000,000$8,000,000$9,982,000

When looking at these numbers we would consider Kalil’s three year payout “virtually guaranteed”. Pouncey and Mack’s are anything but. The magnitude of Kalil’s savings were so small in year four that payout would also likely be considered “virtually guaranteed”.  If the contracts are never touched there is no arguing who has the more valuable contract regardless of what the cash flows might say. Pouncey needs four years to best Kalil and the current contract structure is nowhere near as solid to make that happen.  In fairness to Pouncey he will likely get that protection since the Steelers, like the Panthers, over-rely on using yearly prorated bonuses to deal with their salary cap problems. Once that happens the dead money will soar thus reducing the cap savings the Steelers would see.

All of this doesn’t mean we should not consider Pouncey the highest paid (we should as the four year is significantly better than the four year for Kalil unlike Mack’s contract), but it should give some pause when we value the contract or criticize the Steelers for the final five year number. The goal for the next center to sign (likely Pouncey’s brother) is to exceed the $30.75 million paid over three years to Kalil or get significantly more virtual protection in the contract that matches the Kalil protection  That really sets a complete new standard when that happens.




Panthers Restructure Three Contracts to Gain Cap Space


The Carolina Panthers began the process of attempting to navigate a poor salary cap situation by restructuring the contracts of RB Jonathan Stewart, C Ryan Kalil, and LB Thomas Davis. The Panthers are following a similar model with their players at this stage using the voidable contract year for the sake of short term cap compliance. It’s a similar method used (or maybe abused is the better word) by the Dallas Cowboys, Washington Redskins and, in the past, the Oakland Raiders. The Panthers will need to bank on large salary cap increases in the future to offset the additional dead money or lack of contract leverage they will have with these players.

Stewart was restructured for the second time in two years. He converted $715,000 of base salary to go along with a $6.875 million bonus that was already in his contract. To reduce his cap charge they added a voidable season in 2018 to allow the bonus to prorate over five rather than four years. The team saved just over $900,000 in the restructure.

Restructuring Kalil is also an annual endeavor for the Panthers as he takes a big prorated bonus in lieu of salary for the second time in two years. Kalil already had one voidable season in his contract and now they added a second one to allow for longer proration of salaries. It saves the Panthers just over $3.1 million in 2014, but increases his cap in 2015 to nearly $11.8 million. With over $12 million in dead money in the contract next year the Panthers have basically assured Kalil of a lucrative contract extension in 2015. The Center market had pulled back considerably since the Panthers signed Kalil to the top contract at the position but he will likely set the market again because of the leverage he holds with Carolina.

Davis’ restructure might be the most controversial of the three. Davis has battled injuries in the past and the Panthers added three voidable years to his contract. The team had the right to pay him a $2.5 million bonus to extend his contract this year, which would have been prorated over two seasons, but instead they converted salary into a bonus on top of the option and prorated it over five seasons. He receives a $5 million bonus and that reduced his cap charge by $2.25 million. However his 2015 cap now jumps to just over $10 million with his dead money increasing to $5.57 million.

The Panthers find themselves in a difficult spot because the contracts that were signed by the prior General Manager were very player friendly, but the team also exceeded expectations in 2013, making it more difficult to consider eating a year for cap purposes in 2014.

Carolina arguably has the worst salary cap outlook of any team in the NFL moving forward. The team has around $102 million committed to the 2015 salary cap with just 29 players under contract. Those players do not include QB Cam Newton or DE Greg Hardy, two mega ticket items. Newton will either be playing on the transition tag number or on a contract that pays in the $16-$18 million a year vicinity. Hardy will be one of the highest paid defensive ends in the NFL. So this restructuring of deals is a juggling act the team will likely have to continue to do next season if they keep both players.

If the cap is $130 million this year the Panthers should have $18 million or so in cap to work with.  That is enough to franchise tag Hardy around $13 million and try to work out a contract extension. I have seen the reports about Carolina being nearly $29 million under the salary cap but at this time none of my estimates have the number that high. I’ll see if I can find out if any other changes occurred to the Panthers cap in the last few days to push it that high.




Looking Back at the Panthers Restructuring of Contracts


I had a request from Rachael to glance over what the Panthers did to maneuver themselves out of cap trouble and get to $12.8 million under the salary cap and what ramifications those moves will have in the future. Primarily the concern here was the restructuring of a number of deals to be cap compliant. So, based on the information I have, which I hope is accurate, here is an overview of what they did and some thoughts on the moves.

Ryan Kalil– the Panthers opened up $3.6 million in cap by converting $4 million of his base salary into a signing bonus and adding a voidable year onto his contact for proration purposes. The move adds $550,000 to Kalil’s top of the market cap charges in each season and will leave the Panthers with an additional $1.8 million in dead money that will hit the cap either when his contract voids in 2017 or whatever year he is cut. The cost to cut him in 2015, the year in which he turns 30, increases by $2.9 million dollars.

Haruki Nakumura– Was set to earn $1.3 million in salary. His restructured deal  reduced his base to $715,000 and included a $65,000 signing bonus and $35,000 workout bonus. In return for the paycut the Panthers agreed to void Nakumura’s contract following the 2013 season. This saved the team $517,500 in 2013 cap space and will only add $32,500 to next years cap. Barring an extension, Nakumura will count for $365,834 in dead money in 2014. The team should be able to find a low cost veteran safety to replace him next season making this a positive cap move.

Greg Olsen–  The restructuring of Olsen’s deal opened up $2.4 million in cap space. To do so the Panthers converted $3 million of base salary into an option bonus and added two voidable seasons for proration purposes. By using the void seasons the Panthers locked themselves into $1.2 million of dead money unless he is extended before 2016. Olsen’s cap will increase by $600,000 in 2014 and 2015.

Jordan Gross– This was a big, and perhaps questionable, move. Gross was set to count for $11.7 million in cap with a base salary of $8.7 million. Gross accepted a paycut from $8.7 to $5.5 million which would have been a reasonable $3.2 million in savings in 2013. However, Carolina freed up a whopping $6.8 million of cap room by adding four voidable years onto the tail end of Gross’ contract to mitigate the effects of a $4.5 million dollar signing bonus.  Had Carolina not made the move Gross’ dead money in 2014 would have only been $2 million. Instead they will take a $5.6 million dollar charge for a player not on the roster. When you factor in the cost of tackle, even in a depressed market, the Panthers stand to have significant cap charges associated with the position next season.

DeAngelo Williams– Williams did not take a paycut in 2013, but did take one for future years, reducing his 2014 and 2015 base salaries from $5.75 and $6.75 million to $1.85 million a season. They also added a $1 million dollar option to the 2015 season for Williams. To give cap relief this season the Panthers again turned to the void clauses, tacking on two additional void seasons for the purposes of prorating a $4 million dollar signing bonus in lieu of $4 million in base salary in 2013. The void year provision saved the Panthers $3.2 million in cap room this year. His 2014 cap figure dropped by $3.2 million as well, but with dead money charges rising from $6.4 to $9.6 million the Panthers essentially guaranteed Williams a spot on the 2014 team, despite the fact that he fell out of favor with the club in 2012.  He will be cut in 2015 due to the option bonus which will leave them with $5.6 million in dead money.

If we play the old contract out he likely would have counted $8.2 million against the cap this year and then would have been cut in 2014 at a dead charge of $6.4 million, making the total bill for Williams $14.6 million in cap over two years. Under the new structure he will count for $11 million in cap charges over the next two seasons and then $5.6 million in dead money in 2015. That is a total of $16.6 million.  Considering he could have been designated a June 1 cut in 2014 to split the $6.4 million across two seasons I can’t really understand the reasoning behind this move unless they expect a major resurgence from a 30 year old running back.

Jon BeasonWe covered Beason’s restructure earlier today in which he saved the team a little over $3.3 million. Unlike the other contracts no bonus money was put into this contract. This was a pure paycut.

Final Conclusions

All told the Panthers freed up $19.83 million in cap space  in 2013 via the restructure/renegotiation mechanism. The cost of those moves will be felt in the future as the team has now locked into $9.032 million in dead money that did not exist before the season. The dead money impacts future decisions for players like Kalil and Williams and may tie the Panthers into players for a longer time than they would like. The average dead money per team in the NFL this year is around $9 million so the Panthers essentially locked in a whole seasons worth of dead money via the void clause use.

The challenge in proceeding with this type of contractual system is not the short term gains but the long term implications. Despite all the chopping of salary the Panthers cap next year remains right near the limits for the NFL putting them right back to square one and needing to get back in and restructure more deals. The last thing a team wants is to have players going into their 30’s and have a dead money situation where their spots are essentially protected. The NFL is a young players league and the voidable years and high prorated money charges for veterans can provide for a tough cap situation.

The Panthers have a terrific young star playing Quarterback that is going to earn anywhere from $17 to $20 million a year starting in 2015. They have to get everything in order and convince him that they are going to be able to upgrade the talent around him by that time. That may be difficult if this restructuring path becomes the norm for the franchise.

Panthers Restructure Contract of C Ryan Kalil

Pat Yasinskas of ESPN has reported that the Panthers have restructured the contract of Center Ryan Kalil to better navigate the 2013 salary cap. Kalil was set to earn an option bonus this year of $5 million dollars to go along with a base salary of $4.75 million and a $250K workout bonus. If the Panthers failed to exercise the option Kalil’s base salary would have risen from $4.75 to $9.75 million dollars. His cap number, if the option was picked up, was $9.850.

Kalil’s base salary was reduced to $750,000 in the restructure with $5 million being given in the form of a signing bonus, as reported by Yasinskas. Yasinskas noted that his new cap figure would be $6.4 million which represents a savings of $3.45 million for the Panthers. For proration purposes the Panthers have added an extra season onto Kalil’s contract in 2017, which is simply going to be a “dummy season” for salary cap purposes. While I do not have confirmation of the actual mechanism used, Kalil either received a $4 million dollar option or fully guaranteed offseason bonus that will be prorated over the remaining 5 years of his contract.

Per rules in the CBA roster and option bonus money can only be recovered in the year that the bonus is awarded in the event a player holds out or commits a similar type of fine worthy offense. Signing bonus money can be attacked at any time. This is most likely why the two sides would simply not have a $9 million dollar signing bonus in the contract as it protects the player’s money from further attack by the team.

The Panthers salary cap is in terrible shape due to a number of bad contracts signed over the past two years that were very favorable towards the players. This is going to be another one. Based on my estimates Kalil will carry a cap charge of over 11 million in 2015 when he turns 30 years old with a dead money charge of $9 million dollars. For a center to have cap charges in 3 consecutive years of over 9.55 million is almost unheard of in the NFL, meaning that the Panthers will likely be forced to renegotiate again in the future with Kalil regardless of his level of play.

To view the new estimates for Kalil simply follow this link to his cap page.