8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 2, 2018

 

 

THE MADISON SQUARE GARDEN COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   1-36900   47-3373056

(State or another jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

2 Penn Plaza, New York, New York   10121
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area (212) 465-6000

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On February 2, 2018, The Madison Square Garden Company (the “Company”) announced its financial results for its second quarter ended December 31, 2017. A copy of the press release containing the announcement is included as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.

 

Item 9.01 Financial Statements and Exhibits.

 

  (d) Exhibits

 

99.1    Press Release dated February 2, 2018


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    THE MADISON SQUARE GARDEN COMPANY
    (Registrant)
    By:   /s/ Donna Coleman
    Name:   Donna Coleman
    Title:   Executive Vice President and Chief Financial Officer

Dated: February 2, 2018

EX-99.1

LOGO

Exhibit 99.1

THE MADISON SQUARE GARDEN COMPANY REPORTS

FISCAL 2018 SECOND QUARTER RESULTS

Fiscal 2018 second quarter revenue of $536.3 million, up 20% versus prior year period

Fiscal 2018 second quarter operating income of $72.4 million, up 24% versus prior year period

Fiscal 2018 second quarter adjusted operating income of $118.0 million, up 23% versus prior year period

NEW YORK, N.Y., February 2, 2018 - The Madison Square Garden Company (NYSE: MSG) today reported financial results for the second quarter ended December 31, 2017.

For the fiscal 2018 second quarter, the Company generated revenues of $536.3 million, an increase of 20% as compared with the prior year period. In addition, the Company generated fiscal 2018 second quarter operating income of $72.4 million and adjusted operating income of $118.0 million, which represent increases of 24% and 23%, respectively, both as compared to the prior year second quarter. (1) (2)

Executive Chairman and CEO Jim Dolan said, “For the fiscal 2018 second quarter, we delivered strong year-over-year growth in revenues and adjusted operating income, fueled by our continued focus on providing the very best in live experiences. Our performance this quarter was highlighted by strong bookings results, record revenue for the Christmas Spectacular and broad-based growth across our Sports segment. With regard to our venue expansion strategy, we continue to make important progress on the design of our Las Vegas venue. Looking ahead, we remain confident in our ongoing ability to deliver attractive long-term growth and value creation for our shareholders.”

Results from Operations

Segment results for the quarters ended December 31, 2017 and 2016 are as follows:

 

     Revenues     

Operating

Income (Loss)

    

Adjusted Operating

Income (Loss)

 
$ millions   

F’Q2

2018

    

F’Q2

2017

    

%

Change

    

F’Q2

2018

   

F’Q2

2017

   

%

Change

    

F’Q2

2018

   

F’Q2

2017

   

%

Change

 

MSG Entertainment

   $ 271.2      $ 192.5        41%      $ 74.5     $ 57.0       31 %      $ 81.9     $ 63.7       29 %  

MSG Sports

     265.1        252.7        5%        49.3       40.2       23 %        55.1       47.2       17 %  

Corporate and Other

                   NM        (45.5 )      (38.7     (18)%        (19.0 )      (14.9     (27)%  

Purchase accounting adjustments

                   NM        (5.9 )      (0.2     NM                    NM  

Total Company

   $     536.3      $     445.2        20%      $     72.4     $     58.3       24 %      $ 118.0     $ 96.0       23 %  

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 second 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.

 

1


MSG Entertainment

For the fiscal 2018 second quarter as compared to the prior year period, MSG Entertainment revenues of $271.2 million increased 41%. 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, as well as an increase 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 Theater at Madison Square Garden, the Forum, The Garden and The Chicago Theatre. The increase in revenues for the Christmas Spectacular production was primarily due to higher ticket-related revenue, mainly as a result of higher average ticket prices and the impact of additional scheduled performances, partially offset by a decrease in average per-show paid attendance.

Fiscal 2018 second quarter operating income of $74.5 million increased 31% and adjusted operating income of $81.9 million increased 29%, both as compared to the prior year period. The increases primarily reflect higher revenues, partially offset by an increase in direct operating expenses and higher 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) and higher corporate general and administrative costs and professional fees.

MSG Sports

For the fiscal 2018 second quarter as compared to the prior year period, MSG Sports revenues of $265.1 million increased 5%. The increase in revenues was primarily due to higher sponsorship and signage revenues, professional sports teams’ pre/regular season ticket-related revenue and food, beverage and merchandise sales, as well as higher local media rights fees from MSG Networks Inc., suite rental fees and league distributions. This was partially offset by lower event-related revenues from other live sporting events.

Second quarter operating income of $49.3 million increased 23% and adjusted operating income of $55.1 million increased 17%, both as compared to the prior year period. The increases primarily reflect higher revenues, partially offset by an increase in direct operating expenses and selling, general and administrative expenses. The increase in direct operating expenses was primarily due to higher other team operating expenses, net provisions for NBA and NHL revenue sharing expense, net provisions for certain team personnel transactions, and expenses associated with food, beverage and merchandise sales, partially offset by lower event-related expenses for other live sporting events and venue operating costs.

Corporate and Other

For the fiscal 2018 second quarter as compared to the prior year period, Corporate and Other’s operating loss of $45.5 million and adjusted operating loss of $19.0 million increased 18% and 27%, respectively, primarily due to higher employee compensation and related benefits and the inclusion of certain selling, general and administrative expenses for Obscura Digital, partially offset by a management fee earned for providing management and strategic services to TAO Group.

Purchase Accounting Adjustments

For the fiscal 2018 second quarter as compared to the prior year period, operating expenses related to purchase accounting adjustments of $5.9 million increased $5.6 million, primarily due to the amortization of intangible assets and expense related to the step-up in value of leases for TAO Group.

Other Items

During the fiscal second quarter, the Company purchased a nearly 5-acre site in London, zoned for commercial and leisure use and adjacent to the Westfield Stratford City shopping center, for $79.5 million (£60.0 million). This amount excludes transactional taxes, a significant majority of which is recoverable value-added tax.

As a result of the recently enacted Federal tax reform legislation effective January 1, 2018, which reduces the Company’s federal tax rate to 21% from 35% and provides that future net operating losses have an indefinite carry-forward period, fiscal 2018 second quarter net income includes a non-cash income tax benefit of $113.5 million to reduce the Company’s net deferred tax liabilities.

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 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.

 

2


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

Senior Vice President

Communications

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 7097567

Conference call replay number is 855-859-2056 / Conference ID Number 7097567 until February 9, 2018

 

3


THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2017     2016     2017     2016  

Revenues

   $         536,302     $         445,150     $         781,517     $         626,845  

Direct operating expenses

     311,881       266,673       435,617       378,080  

Selling, general and administrative expenses

     121,440       94,260       227,878       171,281  

Depreciation and amortization

     30,544       25,966       61,090       52,076  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     72,437       58,251       56,932       25,408  

Other income (expense):

        

Earnings (loss) in equity method investments

     (2,608     (1,188     2,117       (2,182

Interest income

     5,378       2,692       9,764       5,091  

Interest expense

     (3,798     (491     (7,509     (901

Miscellaneous income (expense)

     (250     1,405       (250     1,405  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations before income taxes

     71,159       60,669       61,054       28,821  

Income tax benefit (expense)

     116,832       (3,248     116,070       (314
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     187,991       57,421       177,124       28,507  

Less: Net income (loss) attributable to redeemable noncontrolling interests

     (767           133        

Less: Net loss attributable to nonredeemable noncontrolling interests

     (855     (305     (1,515     (593
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to The Madison Square Garden Company’s stockholders

   $ 189,613     $ 57,726     $ 178,506     $ 29,100  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share attributable to The Madison Square Garden Company’s stockholders

   $ 8.03     $ 2.41     $ 7.57     $ 1.21  

Diluted earnings per common share attributable to The Madison Square Garden Company’s stockholders

   $ 7.96     $ 2.39     $ 7.48     $ 1.20  

Basic weighted-average number of common shares outstanding

     23,621       23,971       23,594       24,013  

Diluted weighted-average number of common shares outstanding

     23,813       24,143       23,861       24,192  

 

4


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 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
December 31,
     Six Months Ended
December 31,
 
     2017      2016      2017      2016  

Operating income

   $         72,437      $         58,251      $         56,932      $         25,408  

Share-based compensation

     13,912        11,743        26,816        20,098  

Depreciation and amortization1

     30,544        25,966        61,090        52,076  

Other purchase accounting adjustments

     1,133               2,324         
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 118,026      $ 95,960      $ 147,162      $ 97,582  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  1 Includes depreciation and amortization related to purchase accounting adjustments.

 

5


THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED OPERATIONS DATA

(Dollars in thousands)

(Unaudited)

REVENUES

 

     Three Months Ended
December 31,
        
     2017      2016      % Change  

MSG Entertainment

   $         271,216      $         192,485                        41%  

MSG Sports

     265,086        252,665        5%  

Corporate and Other

                   NM  
  

 

 

    

 

 

    

The Madison Square Garden Company Total

   $ 536,302      $ 445,150        20%  
  

 

 

    

 

 

    
     Six Months Ended
December 31,
        
     2017      2016      % Change  

MSG Entertainment

   $ 435,497      $ 303,183        44%  

MSG Sports

     346,020        323,662        7%  

Corporate and Other

                   NM  
  

 

 

    

 

 

    

The Madison Square Garden Company Total

   $ 781,517      $ 626,845        25%  
  

 

 

    

 

 

    

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

 

     Operating Income
(Loss)
           Adjusted Operating
Income (Loss)
       
     Three Months Ended
December 31,
           Three Months Ended
December 31,
       
     2017     2016     % Change      2017     2016     % Change  

MSG Entertainment

   $ 74,531     $ 56,976       31 %      $ 81,944     $ 63,655       29 %  

MSG Sports

     49,324       40,205       23 %        55,078       47,210       17 %  

Corporate and Other

     (45,541     (38,700     (18)%        (18,996     (14,905     (27)%  

Purchase accounting adjustments

     (5,877     (230     NM                    NM  
  

 

 

   

 

 

      

 

 

   

 

 

   

The Madison Square Garden Company Total

   $ 72,437     $ 58,251       24 %      $ 118,026     $ 95,960       23 %  
  

 

 

   

 

 

      

 

 

   

 

 

   
     Operating Income
(Loss)
           Adjusted Operating
Income (Loss)
       
     Six Months Ended
December 31,
           Six Months Ended
December 31,
       
     2017     2016     % Change      2017     2016     % Change  

MSG Entertainment

   $ 84,378     $ 49,920       69 %      $ 99,853     $ 62,594       60 %  

MSG Sports

     69,016       49,522       39 %        80,912       62,629       29 %  

Corporate and Other

     (85,215     (73,574     (16)%        (33,603     (27,641     (22)%  

Purchase accounting adjustments

     (11,247     (460     NM                    NM  
  

 

 

   

 

 

      

 

 

   

 

 

   

The Madison Square Garden Company Total

   $ 56,932     $ 25,408       124 %      $ 147,162     $ 97,582       51 %  
  

 

 

   

 

 

      

 

 

   

 

 

   

 

6


THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

     December 31,
2017
    June 30,
2017
 

ASSETS

    

Current Assets:

    

Cash and cash equivalents

   $ 1,125,647     $ 1,238,114  

Restricted cash

     23,332       34,000  

Accounts receivable, net

     119,158       102,085  

Net related party receivables

     1,524       2,714  

Prepaid expenses

     44,132       23,358  

Other current assets

     41,475       49,458  
  

 

 

   

 

 

 

Total current assets

     1,355,268       1,449,729  

Investments and loans to nonconsolidated affiliates

     247,586       242,287  

Property and equipment, net

     1,235,133       1,159,271  

Amortizable intangible assets, net

     256,892       256,975  

Indefinite-lived intangible assets

     174,850       166,850  

Goodwill

     392,621       380,087  

Other assets

     51,921       57,554  
  

 

 

   

 

 

 

Total assets

   $         3,714,271     $         3,712,753  
  

 

 

   

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

    

Current Liabilities:

    

Accounts payable

   $ 38,416     $ 24,084  

Net related party payables

     21,197       17,576  

Current portion of long-term debt, net of deferred financing costs

     436        

Accrued liabilities:

    

Employee related costs

     69,651       138,858  

Other accrued liabilities

     184,131       191,344  

Deferred revenue

     390,056       390,180  
  

 

 

   

 

 

 

Total current liabilities

     703,887       762,042  

Long-term debt, net of deferred financing costs

     105,464       105,433  

Defined benefit and other postretirement obligations

     44,919       52,997  

Other employee related costs

     27,894       29,399  

Deferred tax liabilities, net

     80,324       196,436  

Other liabilities

     72,287       65,955  
  

 

 

   

 

 

 

Total liabilities

     1,034,775       1,212,262  
  

 

 

   

 

 

 

Commitments and contingencies

    

Redeemable noncontrolling interests

     77,819       80,630  

The Madison Square Garden Company Stockholders’ Equity:

    

Class A Common stock, par value $0.01, 120,000 shares authorized; 19,025 and 19,014 shares outstanding as of December 31, 2017 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 December 31, 2017 and June 30, 2017

     45       45  

Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2017 and June 30, 2017

            

Additional paid-in capital

     2,838,120       2,832,516  

Treasury stock, at cost, 1,422 and 1,433 shares as of December 31, 2017 and June 30, 2017, respectively

     (242,495     (242,077

Retained earnings (accumulated deficit)

     27,693       (148,410

Accumulated other comprehensive loss

     (39,449     (34,115
  

 

 

   

 

 

 

Total The Madison Square Garden Company stockholders’ equity

     2,584,118       2,408,163  

Nonredeemable noncontrolling interests

     17,559       11,698  
  

 

 

   

 

 

 

Total equity

     2,601,677       2,419,861  
  

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interests and equity

   $ 3,714,271     $ 3,712,753  
  

 

 

   

 

 

 

 

7


THE MADISON SQUARE GARDEN COMPANY

SELECTED CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)

 

 

   Six Months Ended
December 31,
 
     2017     2016  

Net cash provided by operating activities

   $ 63,267     $ 109,932  

Net cash used in investing activities

     (143,872     (62,691

Net cash used in financing activities

     (31,874     (81,213

Effect of exchange rates on cash and cash equivalents

     12        
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (112,467     (33,972

Cash and cash equivalents at beginning of period

     1,238,114       1,444,317  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $       1,125,647     $       1,410,345  
  

 

 

   

 

 

 

 

8