Stock Up: Week 5

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Every Monday during the season we will take a look back at three players who are entering important stages of their contract that may have helped their stock in upcoming negotiations with their play on Sunday. In addition we will also look at one player signed in the offseason to a new contract that exceeded all expectations and provided exceptional value to his team.

Stock Up

Terrell Suggs– Suggs has one year remaining on his contract, but at a $12 million dollar cap hit on a cap strapped team he is either getting a new contract in Baltimore or elsewhere. Suggs’ 2012 season was a total washout and at 31 years of age there were questions about what his future would be. He’s been spectacular this season and took it to another level against Miami. Suggs brutalized the Dolphins offensive line, racking up 3 sacks two of which came on Miami’s second to last drive of the game and helped set up the game winning field goal. He was in the backfield all day and showed no signs of his age slowing him down. Players over 30 at this position often struggle to get new lucrative contracts- he looks like the guy who may not struggle to do so.

Dez Bryant– Bryant has been spectacular this season and he was unstoppable against the Broncos. This was Bryant’s second 100 yard game of the year and his most dominant. I know he had the one fumble but he was a man among boys on the field. His toe tap touchdown is the type of catch very few players in the NFL can make and he seems to make with ease. Bryant is a true difference maker when healthy. He is the type of player that makes things easier for his teammates because you have to be aware of him on every play and every type or route. Dallas is going to want to extend him following the season. Whether they have the cap space to do so is a question, but he is positioning himself to be the highest paid at the position not named Fitzgerald of Johnson.

Brandon Spikes– Though it was a losing effort for New England, Spikes stood out defensively with a monster game. Spikes racked up 12 tackles and intercepted Andy Dalton on a play where Dalton pump faked and scrambled, never biting on anything and leaving his coverage responsibilities. The tackles Spikes had were mainly impact tackles all coming within 2 yards of the line of scrimmage.  Spikes in on pace to be involved in 85 tackles this season and is a key contributor to a defense that is the unit carrying the Patriots in 2013. He will be a free agent following the season and is going to be viewed as superior to and more versatile than the the Dolphins Dannell Ellerbe, who received a $7 million dollar a year contract in free agency last season. Spikes is well on his way to establishing himself in the mid-tier of the ILB market.

New Contract Player Of The Week

Tony Romo– I know Romo did not win and it has become fashionable to criticize Romo every time he makes a mistake, especially in crunch time, but that was the finest game of Romo’s career and when you score 48 points you should win the game even with an interception. Romo’s contract is not a great one for the Cowboys and probably extends too long, but for this week he outplayed the contract. With one defensive stop Romo would have been the talk of the NFL as he outdueled Peyton Manning. The final pick of the game wasn’t the type of throw that makes you scratch your head. He wasn’t falling down or lobbing a ball into triple coverage. It wasn’t a great throw and the defender made a very good play to pick it off. Those things happen to the best of QB’s. I think you can make a strong argument that he has been the 4th best QB in the NFL in 2013 and that’s worth something even when his defense allows 48 points.

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Looking at a Potential Darrelle Revis Extension

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I just wanted to post some opinions on what I think would be a contract that might make Darrelle Revis happy in terms of compensation. With the years of working on understanding the Jets salary cap Revis has been a hot topic of debate so he has been a player that I have really tried to get a better understanding of from a financial standpoint. Tampa has a very specific way of doing business so let’s see if we can get the two sides to meet.

Revis’ biggest desire in recent times has been to be the highest paid defensive player in the NFL. That distinction currently belongs to the Bills Mario Williams, who earns $16 million a year from the Buffalo Bills. Considering the market crash of 2013 and the fact that Revis is coming off an injury I think even he has come off that stance. I think at this point it will be acceptable to Revis to come in at a number that is going to be looked at as long term the highest in the game.

Clay Matthews recently signed an extension worth $13.2 million a season to top the OLB market and that becomes a number that Revis will need to top. The next highest paid defensive player is Julius Peppers of the Bears which averages $14 million a season.  That is probably the high end for Revis and a number he would love to top but might not be reasonable. Pepper and Williams could both be gone by 2014 and the reality is any number close to the $14 million is most likely not going to be surpassed barring a dramatic change in salary cap limits. The next “dominant” talents to have the chance would be JJ Watt of the Texans and potentially Jason Pierre Paul of the Giants if he put together two dominant years in 2013 and 2014.

So for the sake of argument I’d say $13.5 million gets the contract done, but we have to consider that  Revis has one year under contract left at $6 million dollars. Under a normal valuation the extension would kick in beginning in 2014 with $6 million of old money being built in, but I can’t see Revis buying that logic as it was an issue with his last Jets contract as well. In real terms that would make a deal $12.25 million for 6. He is going to want the full $13.5 for 6, making the extension years actually worth $15 million a season, for a total of $75 million. That number shatters the new money for Matthews and surpasses Peppers as well.

While Revis will compromise on the total value, if you can call it that, I do not think he will compromise as much on two other areas. The first is going to be the 2 year payout on his contract, which is typically where the guarantees of most contracts lie. Mario Williams takehome is $40 million over the first two years of his contract. That is the same number that DeMarcus Ware of the Cowboys and Terrell Suggs of the Ravens earned. I think that will be a deal breaker or close to it. Ware and Suggs will earn similar or less money annually than Revis and there were ways to have those high payouts early in the contract. To me he has to hit that number, unlike Matthews. The 3 year is important to him as well but I think more in terms of comparing to Ware than Williams. Williams’ takehome is $53 million while Ware is $45 million. Revis will want somewhere in between.  Again I cant imagine a compromise to fall under Ware.

The Buccaneers are a team that rarely does signing bonuses and I cant see them doing one here. They rarely do option bonuses either. For the most part they are a team that works on a cash to cap basis matching cash flow to cap hits other than for drafted rookies. To me that fits in fine with Revis. Revis wants to be the highest paid, in terms of cash, cornerback year after year. This was constantly a holdout argument from his side almost every year against the Jets who used option bonuses, void years, and salary advances in his prior two contracts to keep the cap hits reasonable. When you pay large sums of prorated money to a player it often inflates 1 year cash and deflates future cash flows. You would not hear a peep from Revis in a year designed to earn over $20 million, but the next year when his cash flow is around $7 million the rumblings of being underpaid occurred. You cant have it both ways and I think its important that a deal is structured in way that Revis is almost always guaranteed to be close to a double digit earner in cash flows.

To me that ties in fine with Tampa’s way of doing business. While they did prorate deals for Vincent Jackson and Carl Nicks this past year in preparation for a Revis trade they were not part of their original contract structure and I don’t think they want to compromise the way they do business.  If they fully guarantee base salary with no offset provisions that will provide Revis with the same level of protection as the signing bonus, at least early in the contract. While the Bucs could hold options to convert guaranteed salary to a prorated bonus, that would be as far as I think they would take it.

One of things that I think both sides will look at is the structure of the Jake Long contract with the Rams and a few deals done by Tom Brady with the Patriots. These were contracts where guarantees kick in provided a milestone occurs. Brady’s contracts in the past have had potential to be fully 100% guaranteed provided he was on the roster the day after a Super Bowl or, towards the end of his contract, the last day of the regular season. Jake Long’s has some similar provisions to kick in smaller guarantees and they are based on IR status, which could be a consideration for Revis’ knee. The sides could look at the Peyton Manning deal where passing one physical unlocks 2 years of guarantees as well, but with Revis in his prime and perhaps no prorated bonuses I think they may opt to try to go for year after year guarantees if the Bucs don’t make a decision early about his status. The first two years will be fully guaranteed regardless.

The Buccaneers have over $30 million in cap room and less than $100 million committed to next season (though without a QB under contract) so they can certainly frontload a pure cash contract to Revis and not get into too much trouble. Per CBA rules you have to maintain at least 50% of the salary between year 1 and year 2, but that should not be a problem considering he needs to earn $40 million in that time. Keeping in mind the fact that he has the one year under contract they could do a deal like this:

Cap

Real Cash Total

New Cash Total

Year 0

$24,000,000

$24,000,000

$18,000,000

Year 1

$15,000,000

$39,000,000

$33,000,000

Year 2

$7,000,000

$46,000,000

$40,000,000

Year 3

$10,000,000

$56,000,000

$50,000,000

Year 4

$13,000,000

$69,000,000

$63,000,000

Year 5

$12,000,000

$81,000,000

$75,000,000

At these numbers (and you could easily split the cap numbers up to offseason roster bonuses for early payments without hurting the cap) Revis would hit pretty much all his desires. $13.5 million annually. $15 million in “new” money. Yearly cash flows that are almost always double digit millions. Over 50% of his contract coming in the form of guarantees and two year payouts. $40 million in new money over the first two years while having a cash takehome over the first two years of $39 million.  He ends up as the highest paid defensive player in the game for the foreseeable future and will have the opportunity to guarantee large amounts of his contract.

The only worry from  the Bucs point of view is that year 2 payout, but that early  in his contract and given his reputation I do not think Revis would threaten a holdout. I guess there are ways you can protect from that but it would be the only concern. It wont deter Tampa who dealt with a similar malcontent in Vincent Jackson, also repped by the same team that represents Revis, and had no issues finding a deal structure that they hope made him happy.If Revis proves to be unhealthy they would be able to move away by 2016 with no cap penalties. At worst It would cost them $46 million in cap space for a 3 year look at him, and they have alot of that money already earmarked for him to spend now. If you  think he is the guy that gets you over the top its a risk well worth taking. They just need to protect themselves from getting cap penalties beyond that year if they are going to pay him that kind of money.

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Breaking Down the Real Value of the Clay Matthews Contract

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Yesterday we discussed the key metrics to look for when really valuing the Clay Matthews contract and now that the numbers are out per the Milwaukee Journal Sentinel we can put the numbers a bit in perspective compared to the Ware and Suggs contracts we focused on.

Despite the lofty totals of Matthew’s extension his contract is significantly less player friendly than the other contracts. First  of all Matthews has $2.5 million tied up in per game roster bonuses, a major win for the Packers. Neither Mario Williams nor Julius Peppers, the two higher level defensive contracts, have such provisions nor do the Suggs and Ware contracts at the positions. In terms of cash flows here is how Matthews stacks up against Ware and Suggs:

Ware

Ware Total

Suggs

Suggs Total

Matthews

Matthews Total

Year 1

$32,800,000

$32,800,000

$15,100,000

$15,100,000

$25,250,000

$25,250,000

Year 2

$7,200,000

$40,000,000

$24,900,000

$40,000,000

$8,600,000

$33,850,000

Year 3

$5,000,000

$45,000,000

$3,400,000

$43,400,000

$9,650,000

$43,500,000

Year 4

$6,000,000

$51,000,000

$4,900,000

$48,300,000

$11,100,000

$54,600,000

Year 5

$12,750,000

$63,750,000

$6,400,000

$54,700,000

$11,400,000

$66,000,000

Year 6

$14,250,000

$78,000,000

$7,800,000

$62,500,000

NA

NA

The key numbers here are the 2 and 3 year totals. His two year takehome of $33.85 million pales in comparison to the $40 million made by Ware and Suggs. Its 15% less salary than those two players earned in their first two new money years. His 3 year takehome barely eclipses that of Suggs and falls short of Ware by $1.5 million and these numbers are assuming he plays all 16 games for the Packers. It is really the backend of the contract in year 4 and 5 where he pulls away from Ware and Suggs in pay. As is often the case in the NFL these backend salaries are rarely earned and nothing more than fluff in a contract.

That brings us to functional guarantees. I stated in yesterdays piece that Ware had a functional guarantee of $40 million while Suggs had one worth $48.3 million. There was a strong probability that Ware would earn $45 million and Suggs just over $54 million. Here is how Matthew’s contract plays out:

Base

Prorated Money

Misc.

Cap Number

Dead

Savings

Year 1

$1,000,000

$4,100,000

$6,000,000

$11,100,000

$16,400,000

($5,300,000)

Year 2

$7,600,000

$4,100,000

$1,000,000

$12,700,000

$12,300,000

$400,000

Year 3

$8,650,000

$4,100,000

$1,000,000

$13,750,000

$8,200,000

$5,550,000

Year 4

$10,100,000

$4,100,000

$1,000,000

$15,200,000

$4,100,000

$11,100,000

Year 5

$10,400,000

$0

$1,000,000

$11,400,000

$0

$11,400,000

The only year of the extension fully protected by dead money is the first year of the deal, though with such minimal savings I would consider year 2 protected as well. That would make the functional guarantee similar to Ware’s in that it only lasts two seasons. By year 3 he becomes fair game if the play declines badly. I fool around at times with a number you see on the site called a CSC ratio which is the cap savings plus cash savings divided by the cap hit for a player. Basically it tells you if you gain something positive with a cut and once the ratio goes over 1 the power sways towards the team. Matthews is at a 1.11 by year 3 of his deal, while Ware was at 0.66. Suggs was in negative terms due to the lack of cap savings associated with a cut at the time. In Year 4 Ware jumped to a 1.2 and Suggs didn’t reach close to Matthews’ Year 3 number until the 6th year of his contract. In terms of protection Matthews’ deal doesn’t rank close.

So while Matthews will go down as the player with the highest annual value at the position the contract itself is much more reflective of the downturn in the NFL market. In real terms he is earning less than both Ware and Suggs, and its actually pretty significant. He has almost no protection it would seem beyond 2015, the third extension year of his contract. The other players were far more protected. Maybe some new details emerge today regarding ways he can earn more protection or more money, but based on the initial reports Matthews is highest paid in name only, but in the key valuation points this is not the top of the market deal it appears to be.

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Valuation Metrics for the Clay Matthews Extension

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After weeks of rumored contract negotiations between the Green Bay Packers and LB Clay Matthews, the two sides made it official that Matthews would not become the highest paid outside linebacker in the NFL, surpassing the $13 million per year that the Cowboys DeMarcus Ware received in his 2009 contract extension. While no numbers are in as I am writing this (who knows by the time I’m finished) I wanted to look at the two real benchmark deals ahead of time so that we can get a better idea of just how strong the contract really is. The two deals I want to look at are those of Ware and the Ravens’ Terrell Suggs.

When I evaluate high level deals like this for the site I like to look at two sets of numbers- yearly cash flow and functional guarantees. The cash flows are pretty self explanatory. Functional guarantees are the amount of money that a player will actually earn not just because of the guarantee but because of the structure of the contract which comes with prorated bonus protections that leads to excessive dead money if cut.

Ware’s case is more similar to Matthews in that both were currently under contract to their teams on rookie contracts when they signed their extensions. Suggs had gone beyond the rookie deal and was on a franchise tag. The following cash flows represent the new money totals per year for the players

Ware

Ware Total

Suggs

Suggs Total

Year 1

$32,800,000

$32,800,000

$15,100,000

$15,100,000

Year 2

$7,200,000

$40,000,000

$24,900,000

$40,000,000

Year 3

$5,000,000

$45,000,000

$3,400,000

$43,400,000

Year 4

$6,000,000

$51,000,000

$4,900,000

$48,300,000

Year 5

$12,750,000

$63,750,000

$6,400,000

$54,700,000

Year 6

$14,250,000

$78,000,000

$7,800,000

$62,500,000

The first benchmark for Matthews is clearly the $40 million over a two year period, matching what both Ware and Suggs received. Ware’s number is a bit more misleading since it actually took him 3 years to reach $40 million due to the prior year contract not counting in the calculation. If Matthews surpasses $45 million over his first three extension years he will get the best deal of the group. Matthews was already set to earn over $3 million this season which would mean his 4 year total would surpass Suggs’ 4 year if he gets $45 million over the first three new years of the contract. Ware’s contract was filled with big money at the end which normally wont be earned which is why I want to go to the functional guarantees next, first with Ware and then with Suggs.

Ware:

Base

Prorated Money

Misc.

Cap Number

Dead

Savings

Year 1

$7,800,000

$5,430,693

$0

$13,230,693

$25,226,772

($11,996,079)

Year 2

$6,700,000

$3,998,693

$500,000

$11,198,693

$11,996,079

($797,386)

Year 3

$4,500,000

$3,998,693

$500,000

$8,998,693

$7,997,386

$1,001,307

Year 4

$5,500,000

$3,998,693

$500,000

$9,998,693

$3,998,693

$6,000,000

Year 5

$12,250,000

$0

$500,000

$12,750,000

$0

$12,750,000

Year 6

$13,750,000

$0

$500,000

$14,250,000

$0

$14,250,000

Suggs:

Base

Prorated Money

Misc.

Cap Number

Dead

Savings

Year 1

$1,000,000

$2,020,000

$4,000,000

$7,020,000

$14,100,000

($7,080,000)

Year 2

$1,900,000

$6,620,000

$0

$8,520,000

$31,080,000

($22,560,000)

Year 3

$3,400,000

$6,620,000

$0

$10,020,000

$24,460,000

($14,440,000)

Year 4

$4,900,000

$6,620,000

$0

$11,520,000

$17,840,000

($6,320,000)

Year 5

$6,400,000

$6,620,000

$0

$13,020,000

$11,220,000

$1,800,000

Year 6

$7,800,000

$4,600,000

$0

$12,400,000

$4,600,000

$7,800,000

This actually drives home a major difference between the two contracts. The fact that Suggs got massive prorated bonus money rather than base salary guarantees in the first two years of his deal make him virtually uncuttable for the first 4 years of his contract and even Year 5 is a difficult choice. This would be a functional guarantee of $48.3 million with a decent chance of earning $54.7 million before being released.

Ware, before Jerry Jones went wild with the restructures, did not have that protection upon signing. In this case I would consider the first two years functionally guaranteed with a decent chance of the third year being earned.  So the reality is its $40 million and a good chance at $45. If his play trailed off he would have been a prime candidate for a restructure in year 4 and easily cut beyond that. In reality his year 5 and 6 were nothing but funny money. Now Dallas has virtually guaranteed the whole contract because of their cap problems, but when signed Suggs had the far better contract structure despite lower money totals.

For Matthews to come out on top of the market he needs a structure that is closer to that of Suggs. Something that functionally guarantees him those first four years and a great chance at 5 years. If he can reach that $51 million over 4 year plateau and have a structure that makes it difficult for the Packers to wave good bye in 2018 he will truly have the best contract in recent memory at the position. If the Packers have outs early on and his cash flow is similar to that of Ware it may be a case where it’s a deal that looks better on paper than it plays out in real life, especially since the Packers are not going to get in a deep mess the way the Cowboys did.