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May 2, 2018

The Madison Square Garden Company Reports Fiscal 2018 Third Quarter Results

Fiscal 2018 third quarter revenue of $459.6 million, up 19% versus prior year period
Fiscal 2018 third quarter operating income of $7.3 million, up 9% versus prior year period
Fiscal 2018 third quarter adjusted operating income of $49.1 million, up 13% versus prior year period

NEW YORK, May 02, 2018 (GLOBE NEWSWIRE) -- The Madison Square Garden Company (NYSE:MSG) today reported financial results for the third quarter ended March 31, 2018. 

For the fiscal 2018 third quarter, the Company generated revenues of $459.6 million, an increase of 19% as compared with the prior year period.  In addition, the Company generated fiscal 2018 third quarter operating income of $7.3 million and adjusted operating income of $49.1 million, which represent increases of 9% and 13%, respectively, both as compared to the prior year third quarter. (1) (2)

Executive Chairman and CEO Jim Dolan said, “For the fiscal 2018 third quarter, we generated strong growth in revenues and adjusted operating income, a reflection of our ongoing success in delivering exceptional live experiences.  Our ability to provide unmatched value for our customers and partners will become even more significant as we move forward with expanding our venue footprint.  We have made important progress on our plans to build state-of-the-art venues in Las Vegas, where we expect to break ground this summer, and in London, where we are working with stakeholders to make the city home to our first international music and entertainment venue.  As we look ahead, we remain confident that our Company is uniquely positioned to deliver ongoing growth and value creation for our shareholders.”

Results from Operations
Segment results for the quarters ended March 31, 2018 and 2017 are as follows:

  Revenues Operating
Income (Loss)
Adjusted Operating
 Income (Loss)
$ millions F’Q3
2018
F’Q3
2017
%
Change
F’Q3
2018
F’Q3
2017
%
Change
F’Q3
2018
F’Q3
2017
%
Change
MSG Entertainment $ 159.6   $ 77.3   106 %   $ 2.1   $ (7.5 ) NM   $ 9.4   $ (1.5 ) NM  
MSG Sports   300.1     308.7   (3)%     53.0     59.9   (11)%     58.6     65.9   (11)%  
Corporate and Other (3)   (0.1 )     NM     (41.6 )   (45.5 ) 9 %     (18.9 )   (20.8 ) 9 %  
Purchase accounting adjustments         NM     (6.2 )   (0.2 ) NM           NM  
Total Company $ 459.6   $ 386.0   19 %   $ 7.3   $ 6.7   9 %   $ 49.1   $ 43.6   13 %  


Note: Does not foot due to rounding
     
  (1) See page 3 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures.
  (2) Fiscal 2017 third quarter operating results did not include TAO Group, Counter Logic Gaming and Obscura Digital, which the Company acquired on January 31, 2017, July 28, 2017 and November 20, 2017, respectively.  Accordingly, the Company's results for fiscal 2018 are not directly comparable to fiscal 2017 results.  In addition, the Company records TAO Group's operating results in its consolidated statements of operations on a three-month lag basis.
  (3) Corporate and Other primarily consists of unallocated corporate general and administrative costs (including costs associated with business development initiatives) and unallocated venue-related depreciation and amortization expense, as well as inter-segment eliminations. 

MSG Entertainment
For the fiscal 2018 third quarter as compared to the prior year period, MSG Entertainment revenues of $159.6 million increased 106%.  The increase was primarily due to the inclusion of operating results for TAO Group and higher overall event-related revenues at the Company's venues, slightly offset by a decrease in revenues for the Christmas Spectacular Starring the Radio City Rockettes production.  The increase in event-related revenues was primarily due to higher revenues at The Garden, Radio City Music Hall and The Hulu Theater at Madison Square Garden.  The decrease in revenues for the Christmas Spectacular production was primarily due to lower ticket-related revenue, mainly as a result of fewer scheduled performances as compared to the prior year period.

Fiscal 2018 third quarter operating income of $2.1 million improved $9.6 million and adjusted operating income of $9.4 million improved $10.9 million, both as compared to the prior year period.  The improvement in operating income reflects the increase in revenues, partially offset by higher direct operating expenses and selling, general and administrative expenses and, to a lesser extent, higher depreciation and amortization expense.  The improvement in adjusted operating income reflects the increase in revenues, partially offset by the increase in direct operating expenses and selling, general and administrative expenses.  The increase in direct operating expenses was primarily due to the inclusion of TAO Group's operating results and higher overall event-related expenses at the Company's venues.  The increase in selling, general and administrative expenses was primarily due to the inclusion of TAO Group’s operating results (including a management fee incurred by TAO Group payable to the Company).

MSG Sports
For the fiscal 2018 third quarter as compared to the prior year period, MSG Sports revenues of $300.1 million decreased 3%.  The decrease in revenues was due to lower league distributions, event-related revenues from other live sporting events and professional sports teams' food, beverage and merchandise sales, partially offset by higher professional sports teams' sponsorship and signage revenues, suite rental fees, regular season ticket-related revenue, local media rights fees from MSG Networks Inc. and other net increases.  The decrease in league distributions reflects the absence of $15.5 million in non-recurring NHL expansion fee revenue recorded during the prior year third quarter.  

Third quarter operating income of $53.0 million and adjusted operating income of $58.6 million both decreased 11%, as compared to the prior year period.  The decrease in operating income primarily reflects lower revenues, partially offset by decreases in depreciation and amortization expense and direct operating expenses.  The decrease in adjusted operating income primarily reflects lower revenue, partially offset by the decrease in direct operating expenses.  The decrease in direct operating expenses was primarily due to lower net provisions for NBA and NHL revenue sharing expense and NBA luxury tax, event-related expenses for other live sporting events and team personnel compensation, offset by higher net provisions for certain team personnel transactions and other team operating expenses.

Excluding the impact of the $15.5 million in non-recurring NHL expansion fee revenue recorded during the prior year quarter, fiscal 2018 third quarter MSG Sports revenues and adjusted operating income increased 2% and 16%, respectively, both as compared to the prior year period.

Corporate and Other
For the fiscal 2018 third quarter as compared to the prior year period, Corporate and Other’s operating loss of $41.6 million and adjusted operating loss of $18.9 million both improved 9%, reflecting lower professional fees and the impact of a management fee earned for providing management and strategic services to TAO Group, partially offset by the inclusion of Obscura Digital expenses associated with the Company's business development initiatives.  The improvement in Corporate and Other's operating loss also reflects a decrease in depreciation and amortization expense.

Purchase Accounting Adjustments
For the fiscal 2018 third quarter as compared to the prior year period, operating expenses related to purchase accounting adjustments of $6.2 million increased $6.0 million, primarily due to the amortization of intangible assets and expense related to the step-up in value of leases for TAO Group.


About The Madison Square Garden Company
The Madison Square Garden Company (MSG) is a world leader in live sports and entertainment experiences.  The company presents or hosts a broad array of premier events in its diverse collection of iconic venues: New York’s Madison Square Garden, The Hulu Theater at Madison Square Garden, Radio City Music Hall and Beacon Theatre; the Forum in Inglewood, CA; The Chicago Theatre; and the Wang Theatre in Boston.  Other MSG properties include legendary sports franchises: the New York Knicks (NBA), the New York Rangers (NHL) and the New York Liberty (WNBA); two development league teams -- the Westchester Knicks (NBAGL) and the Hartford Wolf Pack (AHL); and one of the leading North American esports organizations, Counter Logic Gaming.  In addition, the Company features the popular original production - the Christmas Spectacular Starring the Radio City Rockettes - and through Boston Calling Events, produces New England’s preeminent Boston Calling Music Festival.  Also under the MSG umbrella is TAO Group, a world-class hospitality group with globally-recognized entertainment dining and nightlife brands: Tao, Marquee, Lavo, Avenue, The Stanton Social, Beauty & Essex and Vandal.  More information is available at www.themadisonsquaregardencompany.com.

Non-GAAP Financial Measures
We define adjusted operating income (loss), which is a non-GAAP financial measure, as operating income (loss) before 1) depreciation, amortization and impairments of property and equipment and intangible assets, 2) share-based compensation expense or benefit, 3) restructuring charges or credits, 4) gains or losses on sales or dispositions of businesses and 5) the impact of purchase accounting adjustments related to business acquisitions.  Because it is based upon operating income (loss), adjusted operating income (loss) also excludes interest expense (including cash interest expense) and other non-operating income and expense items. We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of our business without regard to the settlement of an obligation that is not expected to be made in cash.

We believe adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of our business segments and the Company on a consolidated basis. Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze our performance. Internally, we use revenues and adjusted operating income (loss) measures as the most important indicators of our business performance, and evaluate management’s effectiveness with specific reference to these indicators. Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. For a reconciliation of operating income (loss) to adjusted operating income (loss), please see page 5 of this release.

Forward-Looking Statements
This press release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results, developments and events may differ materially from those in the forward-looking statements as a result of various factors, including financial community and rating agency perceptions of the Company and its business, operations, financial condition and the industry in which it operates and the factors described in the Company’s filings with the Securities and Exchange Commission, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. The Company disclaims any obligation to update any forward-looking statements contained herein.

Contacts:

Kimberly Kerns
Chief Communications Officer
The Madison Square Garden Company                               
(212) 465-6442
Ari Danes, CFA
Senior Vice President, Investor Relations
The Madison Square Garden Company             
(212) 465-6072

Conference Call Information:
The conference call will be Webcast live today at 10:00 a.m. ET at www.themadisonsquaregardencompany.com 
Conference call dial-in number is 877-347-9170 / Conference ID Number 6196887
Conference call replay number is 855-859-2056 / Conference ID Number 6196887 until May 9, 2018


THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS 
(In thousands, except per share data)
(Unaudited)

    Three Months Ended   Nine Months Ended
    March 31,   March 31,
    2018   2017   2018   2017
Revenues   $ 459,621     $ 386,033     $ 1,241,138     $ 1,012,878  
Direct operating expenses   299,706     252,708     736,249     630,788  
Selling, general and administrative expenses   122,154     100,084     349,106     271,365  
Depreciation and amortization   30,429     26,535     91,519     78,611  
Operating income   7,332     6,706     64,264     32,114  
Other income (expense):                
Earnings (loss) in equity method investments   (678 )   (26,319 )   1,439     (28,501 )
Interest income   5,224     3,005     14,988     8,096  
Interest expense   (3,965 )   (831 )   (11,474 )   (1,732 )
Miscellaneous income   553     36     303     1,441  
Income (loss) from operations before income taxes   8,466     (17,403 )   69,520     11,418  
Income tax benefit (expense)   (652 )   (440 )   115,418     (754 )
Net income (loss)   7,814     (17,843 )   184,938     10,664  
Less: Net income attributable to redeemable noncontrolling interests   389         522      
Less: Net loss attributable to nonredeemable noncontrolling interests   (1,716 )   (298 )   (3,231 )   (891 )
Net income (loss) attributable to The Madison Square Garden Company’s stockholders   $ 9,141     $ (17,545 )   $ 187,647     $ 11,555  
Basic earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholders   $ 0.39     $ (0.74 )   $ 7.94     $ 0.48  
Diluted earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholders   $ 0.38     $ (0.74 )   $ 7.87     $ 0.48  
Basic weighted-average number of common shares outstanding   23,683     23,825     23,623     23,951  
Diluted weighted-average number of common shares outstanding   23,809     23,825     23,843     24,147  
                         


THE MADISON SQUARE GARDEN COMPANY

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO
ADJUSTED OPERATING INCOME (LOSS)

The following is a description of the adjustments to operating income (loss) in arriving at adjusted operating income (loss) as described in this earnings release:

  • Share-based compensation expense. This adjustment eliminates the compensation expense relating to restricted stock units and stock options granted under our employee stock plan and non-employee director plan in all periods.
  • Depreciation and amortization.  This adjustment eliminates depreciation, amortization and impairments of property and equipment and intangible assets in all periods.
  • Other purchase accounting adjustments. This adjustment eliminates the impact of various purchase accounting adjustments related to business acquisitions, primarily fair value adjustments to favorable / unfavorable lease agreements of the acquiree.
    Three Months Ended   Nine Months Ended
    March 31,   March 31,
    2018   2017   2018   2017
Operating income   $ 7,332     $ 6,706     $ 64,264     $ 32,114  
Share-based compensation   10,076     10,367     36,892     30,465  
Depreciation and amortization (1)   30,429     26,535     91,519     78,611  
Other purchase accounting adjustments   1,312         3,636      
Adjusted operating income   $ 49,149     $ 43,608     $ 196,311     $ 141,190  
 
(1) Includes depreciation and amortization related to purchase accounting adjustments.
 



THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED OPERATIONS DATA
(Dollars in thousands)
(Unaudited)

REVENUES

             
    Three Months Ended    
    March 31,    
    2018   2017   % Change
MSG Entertainment   $ 159,586     $ 77,348     106 %  
MSG Sports   300,148     308,685     (3)%  
Inter-segment eliminations   (113 )       NM  
The Madison Square Garden Company Total   $ 459,621     $ 386,033     19 %  
             
    Nine Months Ended    
    March 31,    
    2018   2017   % Change
MSG Entertainment   $ 595,083     $ 380,531     56 %  
MSG Sports   646,168     632,347     %  
Inter-segment eliminations   (113 )       NM  
The Madison Square Garden Company Total   $ 1,241,138     $ 1,012,878     23 %  
 

OPERATING INCOME (LOSS) AND ADJUSTED OPERATING INCOME (LOSS)

                         
    Operating Income
(Loss)
      Adjusted Operating
Income (Loss)
   
    Three Months Ended
March 31,
      Three Months Ended
March 31,
   
    2018   2017   % Change   2018   2017   % Change
MSG Entertainment   $ 2,078     $ (7,475 )   NM     $ 9,445     $ (1,471 )   NM  
MSG Sports   53,033     59,850     (11)%     58,555     65,890     (11)%  
Corporate and Other   (41,578 )   (45,450 )   9 %     (18,851 )   (20,811 )   9 %  
Purchase accounting adjustments   (6,201 )   (219 )   NM             NM  
The Madison Square Garden Company Total   $ 7,332     $ 6,706     %     $ 49,149     $ 43,608     13 %  
                         
    Operating Income
(Loss)
      Adjusted Operating
Income (Loss)
   
    Nine Months Ended
March 31,
      Nine Months Ended
March 31,
   
    2018   2017   % Change   2018   2017   % Change
MSG Entertainment   $ 86,456     $ 42,445     104 %     $ 109,298     $ 61,123     79 %  
MSG Sports   122,049     109,372     12 %     139,467     128,519     %  
Corporate and Other   (126,793 )   (119,024 )   (7)%     (52,454 )   (48,452 )   (8)%  
Purchase accounting adjustments   (17,448 )   (679 )   NM             NM  
The Madison Square Garden Company Total   $ 64,264     $ 32,114     100 %     $ 196,311     $ 141,190     39 %  
                         


THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)

    March 31,
 2018
  June 30,
 2017
ASSETS        
Current Assets:        
Cash and cash equivalents   $ 1,176,554     $ 1,238,114  
Restricted cash   27,837     34,000  
Accounts receivable, net   143,876     102,085  
Net related party receivables   1,577     2,714  
Prepaid expenses   37,326     23,358  
Other current assets   27,404     49,458  
    Total current assets   1,414,574     1,449,729  
Investments and loans to nonconsolidated affiliates   252,705     242,287  
Property and equipment, net   1,245,433     1,159,271  
Amortizable intangible assets, net   250,490     256,975  
Indefinite-lived intangible assets   174,850     166,850  
Goodwill   392,378     380,087  
Other assets   50,751     57,554  
    Total assets   $ 3,781,181     $ 3,712,753  
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY        
Current Liabilities:        
Accounts payable   $ 26,572     $ 24,084  
Net related party payables   27,352     17,576  
Current portion of long-term debt, net of deferred financing costs   1,811      
Accrued liabilities:        
Employee related costs   107,862     138,858  
Other accrued liabilities   170,102     191,344  
Deferred revenue   430,785     390,180  
    Total current liabilities   764,484     762,042  
Long-term debt, net of deferred financing costs   104,342     105,433  
Defined benefit and other postretirement obligations   44,678     52,997  
Other employee related costs   26,985     29,399  
Deferred tax liabilities, net   80,618     196,436  
Other liabilities   75,291     65,955  
    Total liabilities   1,096,398     1,212,262  
Commitments and contingencies        
Redeemable noncontrolling interests   78,208     80,630  
The Madison Square Garden Company Stockholders’ Equity:        
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,131 and 19,014 shares outstanding as of March 31, 2018 and June 30, 2017, respectively   204     204  
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of March 31, 2018 and June 30, 2017   45     45  
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of March 31, 2018 and June 30, 2017        
Additional paid-in capital   2,808,901     2,832,516  
Treasury stock, at cost, 1,317 and 1,433 shares as of March 31, 2018 and June 30, 2017, respectively   (224,557 )   (242,077 )
Retained earnings (accumulated deficit)   36,834     (148,410 )
Accumulated other comprehensive loss   (34,691 )   (34,115 )
    Total The Madison Square Garden Company stockholders’ equity   2,586,736     2,408,163  
Nonredeemable noncontrolling interests   19,839     11,698  
    Total equity   2,606,575     2,419,861  
    Total liabilities, redeemable noncontrolling interests and equity   $ 3,781,181     $ 3,712,753  
 


THE MADISON SQUARE GARDEN COMPANY

SELECTED CASH FLOW INFORMATION
(Dollars in thousands)
(Unaudited)

    Nine Months Ended
    March 31,
    2018   2017
Net cash provided by operating activities   $ 171,180     $ 107,558  
Net cash used in investing activities   (183,433 )   (252,814 )
Net cash used in financing activities   (50,231 )   (158,158 )
Effect of exchange rates on cash and cash equivalents   924      
Net decrease in cash and cash equivalents   (61,560 )   (303,414 )
Cash and cash equivalents at beginning of period   1,238,114     1,444,317  
Cash and cash equivalents at end of period   $ 1,176,554     $ 1,140,903  

 

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Source: The Madison Square Garden Company