Prior to the start of free agency, we published a quick free agency primer here on Blogging The Boys titled "NFL Salary Cap Primer: 15 Minutes That Can Save You From Salary Cap Hell." That article provided an explanation of salary cap terminology like proration, amortization, cap hits, or dead money, and illustrated how those concepts are applied to NFL contracts.
Yesterday, Todd Archer took a detailed look at every single one of the five contracts the Cowboys handed out to Terrance Williams, Nolan Carroll, Stephen Paea, Brice Butler and Damontre Moore in a great article for ESPN Dallas.
What we'll do today is combine Archer's data with the approach we used in the cap primer to provide you with an illustrated guide to the six new contracts the Cowboys have handed out in free agency so far.
We'll start with Terrance Williams because his contract initially looks pretty straightforward: 4-year contract worth $17 million, with a $5 million signing bonus, and $9.5 million guaranteed. This is what the contract looks like visually:
Signing bonuses are paid out immediately, so Terrance Williams will get his $5 million signing bonus right away, and will get his $1 million base salary for year 2017 paid out in 16 weekly paychecks. That means Williams will get $6 million in real money in 2017.
But for salary cap purposes, the full amount of the signing bonus doesn't count against the cap immediately. Instead, the $5 million are prorated over the four years of the contract, adding $1.25 million to Williams' cap amount for each of the four years of his contract. The yearly cap charge (the red figures in the graph above) for Williams is his base salary plus the prorated bonus allocated to that specific year.
This is a fairly routine contract structure, which is designed to be "cap-friendly" because the team is backloading the contract by pushing more money into the outer years. But there are two more things that make this contract interesting.
The guaranteed money
According to Archer, $9.5 million of Williams' contract is guaranteed, which is the sum of his signing bonus ($5M), and his 2017 and 2018 base salaries ($1.0M and $3.5M). That means the Cowboys can cut Williams after the 2018 season and wouldn't owe him a dime (though they'd have to account for $2.5 million in dead money from the unamortized part of his signing bonus).
But there's another aspect to his contract that's very interesting. The Cowboys were widely lauded for getting Williams at a bargain with an annual contract value of just $4.25 million and there are countless articles out there proposing all sorts of reasons why the Cowboys got Williams back for what looks like a fairly small contract.
And at first glance, that appears to be true. Among the free agent wide receivers who've signed contracts so far this year, Williams ranks a modest 11th. But if you look at the guaranteed parts of the WR contracts, Williams jumps to No. 5 overall, as the table below shows.
|2017 Top Free Agent Wide Receiver Contracts|
|Player||Team||Avg. Annual Value||Guaranteed Money|
|DeSean Jackson||TB||$11.2 million
|Pierre Garcon||SF||$9.5 million||$17.0 million|
|Kenny Britt||CLE||$8.1 million||$17.0 million|
|Robert Woods||LA||$6.8 million||$15.0 million|
|Terrance Williams||DAL||$4.2 million||$9.5 million|
|Alshon Jeffery||PHI||$9.5 million||$8.7 million|
|Terrelle Pryor||WAS||$6.0 million||$6.0 million|
|Markus Wheaton||CHI||$5.5 million||$6.0 million|
|Brandon Marshall||NYG||$5.5 million||$5.0 million|
|Cordarrelle Patterson||OAK||$5.2 million||$5.0 million|
|Torrey Smith||PHI||$5.0 million||$0.5 million|
Superficially, Williams does indeed look like a bargain. And if he stays healthy and plays out the length of his contract, he will be a bargain. But Williams and his agent were looking primarily for guaranteed money, and they must be quite happy with what they got.
Like all NFL contracts, the only number that really matters is the guaranteed portion of the deal. Guaranteed money is the holy grail for players and agents, as it is the only part of the contract the player will get no matter what happens. And Williams got more than all but four of the WR free agents signed this year. Not a bad deal.
And there's an additional element in Williams' contract that is also interesting.
Archer writes that "Williams has escalators in the deal, topping out at $1.5 million each year if he has at least 80 catches, 1,200 yards and 12 touchdowns in a season."
In the NFL, incentives are classified as "Likely To Be Earned" and "Not Likely To Be Earned". LTBEs count against the cap but NLTBEs don’t. Instead, the NLTBE incentives are applied to the cap retroactively after the season. NLTBEs are based on the previous year’s performance, per the CBA:
"Any team performance will be automatically deemed to be "Likely to be earned" if the Team met or exceeded the specified performance during the prior League Year, and will be automatically deemed to be "not likely to be earned" if the Team did not meet the specified performance during the prior League Year."
We know that Williams has never reached the maximum milestones built into his escalators. What we don't know is the progression of those escalators. For example, would 40 catches, 600 yards and 6 touchdowns be worth $0.75 million?
But we do know that anything that surpasses his performance from 2016 (44 Recs, 594 yards, 4 TDs) will automatically be classified as NLTBE, which means that part of his escalator won't count against the 2017 salary cap. If he does reach those milestones in 2017, the NLTBEs will count against the 2018 cap via a process that balances the sum of unearned LTBEs and earned NLTBEs:
At the end of the season, the NFL calculates how much each team had set aside for LTBEs that weren’t earned – or said differently, it figures out how much was charged to the team’s cap that was not actually spent.
Similarly, the NFL calculates the amount of incentives designated NLTBE that were actually earned.
If the unearned LTBEs are greater than the earned NLTBEs, then the following year’s salary cap for that team is increased by the net amount.
Similarly, if the earned NLTBEs exceed the unearned LTBEs, then the team’s cap for the following year is lowered by that amount.
That process results in what is called the "net incentive adjustment." In 2015, for example, the Cowboys received a credit of $2 million from that adjustment; in 2016 they received a credit of $0.4 million.
Carroll's contract doesn't contain all the funky stuff Williams has in his. The deal is a straight-up 3-year, $10 million deal with a $3 million signing bonus.
Archer also explains that the Cowboys "hold option years on 2018 and 2019." This means that Carroll's contract is basically a one-year rental, which the team can decide to extend if it wishes. The Cowboys will pay Carroll $4 million in 2017, with $2 million of that counting against the cap in 2017, and $2 million counting against the cap in 2018 - if they release him after the 2017 season.
If you think of this contract as a 1-year, $4 million contract for a 30-year old corner, you'll feel much better than if you think about it as a 3-year, $10 million contract for a corner who'll be 33 years old at the end of the contract.
Another one-year deal, but without any team options for the outer years. Paea gets $1 million as a base salary, plus a $0.5 million signing bonus. Additionally, he gets roster bonuses for every game played ($31,250 per game) for a maximum of $500,000. Because Paea only played 13 games last year, 3 of those game checks count as NLTBE.
Yet another one-year deal, again boosted by NLTBEs. Butler gets $800,000 as a base salary, a signing bonus of $300,000 and incentives of up to $400,000 if he reaches 70 receptions in 2017. A part of those incentives (Butler had 16 receptions in 2016) are classified as NLTBEs and again don't count against this year's cap.
Moore's contract isn't very complicated. Nominally, the contract is for two years, with the Cowboys holding an option for the second year, but effectively this is another one-year rental. Moore signed for the league minimum of $775,000 for a four-year veteran, and the Cowboys added $100,000 as a signing bonus to get him to sign in Dallas.
The Cowboys can cut Moore at any time before the start of the season, and he won't have cost them more than the $100,000 signing bonus, plus some incidentals for OTAs and training camp. If Moore, against all odds, turns out to be a solid contributor, the Cowboys could keep him for a second year on a very low contract.
Moore, who'll be on his fifth team in five years in Dallas, probably didn't have a lot of options with his contract, which is why the Cowboys got a second-year option out of him, an option they didn't get for Butler, Paea, and Jonathan Cooper, who signed earlier this week. All three players signed one-year deals in the hope that a strong performance in 2017 will lead to a bigger contract in 2018, in Dallas or elsewhere.
Moore didn't have that option, and the Cowboys are basically paying him $100,000 to see whether he has anything left to contribute. And if he does work out, they'll have him for next to nothing (relatively speaking) in 2018. A lot has to go right for that to happen though.
Contract details for Cooper are not available yet, but it's a good bet that his base salary will be very close to the veteran minimum of $690,000 for a player with three accrued seasons in the NFL. The deal is for one year, so Cooper and his agent are hoping that a good 2017 season for the 27-year old will result in a bigger deal for 2018. Like Moore and Butler, Cooper will likely have a small signing bonus, and probably some incentives that would be linked to the number of games he plays. And because he only played in five games last year, a large part of those incentives would be classified as NLTBE.
In summary, the Cowboys have signed five players to what are effectively one-year deals (with the occasional option for future years), and have guaranteed Williams for two years. All contracts are cap friendly in that they have a fairly low base salary in 2017, and the Cowboys have used signing bonuses to spread some of the cap hits of those contracts into 2018 and beyond. Similarly, most contracts have an NLTBE element to them that would borrow from the 2018 salary cap if the incentives are earned.
And that's not a bad strategy. As it currently stands, and assuming the Cowboys take the full cap hits for Tony Romo and Doug Free this year, Dallas will have around $40 million in cap space in 2018. No reason why the team shouldn't borrow a little money from that.