May 6, 2016

The Madison Square Garden Company Reports Fiscal 2016 Third Quarter Results

NEW YORK, May 06, 2016 (GLOBE NEWSWIRE) -- The Madison Square Garden Company (NYSE:MSG) today reported financial results for the third quarter ended March 31, 2016.  

On September 30, 2015, The Madison Square Garden Company completed its spin-off from MSG Networks Inc.  The fiscal 2016 third quarter reflects the Company's financial results on a standalone basis, including the Company's actual corporate general and administrative costs.

Reported results for the fiscal 2015 third quarter are presented as the combined results of the sports and entertainment businesses, which, prior to the completion of the spin-off, had been consolidated with MSG Networks Inc.  Please note that results for the fiscal 2015 third quarter reflect the allocation of corporate general and administrative costs based on accounting requirements for the preparation of carve-out financial statements.  As a result, fiscal 2015 third quarter results do not reflect all of the actual expenses that the Company would have incurred had it been a standalone public company for that quarter.  

On a reported basis for the fiscal 2016 third quarter, the Company generated revenues of $336.3 million, adjusted operating cash flow loss ("AOCF")(1) of $23.8 million, and operating loss of $56.9 million.  Excluding the impact of a $41.8 million non-cash write-off recorded during the quarter, adjusted operating cash flow would have been $18.1 million, an increase of 8%, and operating loss would have been $15.1 million, an increase of $5.5 million, both as compared to the prior year period.

President and CEO David O'Connor said, "We are pleased with our continued success in creating exceptional live experiences for our fans and partners.  Looking ahead, we remain focused on delivering excellence across our operations and see ample opportunities to continue to grow our live sports and entertainment businesses, all with the goal of creating meaningful long-term asset value for our Company and shareholders."

Results from Operations
Segment results for the quarters ended March 31, 2016 and 2015 are as follows:

  RevenuesAOCFOperating Income (Loss)
$ millionsF'Q3
2016
F'Q3
2015
%
Change
F'Q3
2016
F'Q3
2015
%
Change
F'Q3
2016
F'Q3
2015
%
Change
MSG Entertainment  $73.2 $61.6 19%$(53.4)$(11.2)(378)%$(58.4)$(14.4)(306)%
MSG Sports 262.9  239.1 10% 42.5  31.0 37% 36.5  27.7 32%
Other 0.2  0.2 NM  (12.8) (3.0)(326)% (35.0) (22.9)(53)%
Total Company$336.3 $300.9 12%$(23.8 )$16.8 NM $(56.9)$(9.6)(494)%
                         

Note: Does not foot due to rounding

1. See definition of adjusted operating cash flow ("AOCF") included in the discussion of non-GAAP financial measures on page 3 of this earnings release.

MSG Entertainment
For the fiscal 2016 third quarter as compared to the prior year period, MSG Entertainment revenues of $73.2 million increased 19%.  The increase was primarily due to higher event-related revenues at all of the Company's venues, led by The Garden and Radio City Music Hall, and revenue from the New York production of the Radio City Christmas Spectacular, as well as higher venue-related sponsorship, signage and suite rental fee revenues.  Partially offsetting the overall increase in revenues was the impact from the Company's decision to shift the timing of the production, now called the New York Spectacular Starring The Radio City Rockettes, from the spring to the summer.

On a reported basis, third quarter AOCF loss was $53.4 million and operating loss was $58.4 million.  These results include the impact of a $41.8 million non-cash write-off of deferred production costs due to the creative decision to not include certain prior scenes in the production, now called the New York Spectacular Starring The Radio City Rockettes.  Excluding the write-off, fiscal 2016 third quarter AOCF loss would have been $11.6 million, an increase of 4%, and operating loss would have been $16.6 million, an increase of 15%, both as compared to the prior year quarter.  The increase in AOCF loss (excluding the write-off) as compared to the prior year quarter reflects higher selling, general and administrative expenses and, to a lesser extent, direct operating expenses, offset by the increase in revenues. 

The increase in selling, general and administrative expenses primarily reflects higher corporate general and administrative costs and employee compensation and related benefits.  As noted above, selling, general and administrative expenses in the prior year third quarter do not include all of the actual expenses that the Company would have incurred had it been a standalone public company for that period.  The increase in direct operating expenses (excluding the write-off) primarily reflects higher event-related expenses at the Company's venues and expenses for the New York production of the Radio City Christmas Spectacular, partially offset by lower expenses for the New York Spectacular Starring The Radio City Rockettes production.

MSG Sports
For the fiscal 2016 third quarter as compared to the prior year period, MSG Sports revenues of $262.9 million increased 10%.  The increase in revenues was primarily due to higher broadcast rights fees from MSG Networks Inc. as a result of new long-term media rights agreements between the New York Knicks and New York Rangers and MSG Networks Inc.  In addition, the overall increase in segment revenues reflects the new advertising sales representation agreement with MSG Networks Inc. and higher professional sports teams' sponsorship, signage and ticket-related revenues.  Excluding the impact of the new long-term media rights agreements and advertising sales representation agreement, MSG Sports revenues would have increased 2%, as compared to the prior year period.

Third quarter AOCF increased by $11.5 million to $42.5 million and operating income increased by $8.8 million to $36.5 million.    The increase in AOCF and operating income was primarily due to the increase in revenues and, to a lesser extent, a decrease in direct operating expenses, partially offset by higher selling, general and administrative expenses. 

The decrease in direct operating expenses was primarily due to lower net provisions for certain team personnel transactions and lower event-related expenses associated with other live sporting events.  This was partially offset by higher net provisions for NBA and NHL revenue sharing expense and NBA luxury tax, team personnel compensation costs, and other team operating expenses.  The increase in selling, general and administrative expenses was primarily due to higher corporate general and administrative costs, employee compensation and related benefits, and costs associated with the new advertising sales representation agreement with MSG Networks Inc.  As noted above, selling, general and administrative expenses in the prior year third quarter do not include all of the actual expenses that the Company would have incurred had it been a standalone public company for that period.

About The Madison Square Garden Company
The Madison Square Garden Company (MSG) is a world leader in live sports and entertainment with a portfolio of legendary sports teams, exclusive entertainment productions and celebrated venues.  MSG Sports owns and operates some of the most widely recognized sports franchises: the New York Knicks (NBA), the New York Rangers (NHL) and the New York Liberty (WNBA), along with two development league teams - the Westchester Knicks (NBADL) and the Hartford Wolf Pack (AHL).  MSG Sports also presents a broad array of world-class sporting events, including: professional boxing, college basketball, tennis, bull riding and e-gaming events.  MSG Entertainment features exclusive, original productions that include the Radio City Christmas Spectacular and New York Spectacular Starring The Radio City RockettesMSG Entertainment also presents or hosts a wide variety of live entertainment offerings, including concerts, family shows and special events, in the Company's diverse collection of iconic venues. These venues are: New York's Madison Square Garden, The Theater at Madison Square Garden, Radio City Music Hall and Beacon Theatre; the Forum in Inglewood, California; The Chicago Theatre; and the Wang Theatre in Boston, MA.  More information is available at www.themadisonsquaregardencompany.com.

Non-GAAP Financial Measures
We define adjusted operating cash flow ("AOCF"), 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 and 4) gains or losses on sales or dispositions of businesses.  Because it is based upon operating income (loss), AOCF 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 either the distortive effects of fluctuating stock prices or the settlement of an obligation that is not expected to be made in cash.

We believe AOCF is an appropriate measure for evaluating the operating performance of our business segments and the Company on a consolidated basis. AOCF and similar measures with similar titles are common performance measures used by investors and analysts to analyze our performance. Internally, we use revenues and AOCF measures as the most important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators. AOCF 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 AOCF 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 AOCF to operating income (loss), please see page 4 of this release.

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.

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 94963430
Conference call replay number is 855-859-2056 / Conference ID Number 94963430 until May 13, 2016

 
 THE MADISON SQUARE GARDEN COMPANY
 
CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  Three Months Ended Nine Months Ended
  March 31, March 31,
  2016 2015 2016 2015
Revenues $336,328  $300,856  $897,547  $816,586 
Direct operating expenses 275,118  231,098  596,100  568,004 
Selling, general and administrative expenses  92,352  53,786  236,982  168,188 
Depreciation and amortization 25,794  25,556  76,939  85,119 
Operating loss (56,936) (9,584) (12,474) (4,725)
Other income (expense):        
Loss in equity-method investments (5,173) (2,294) (4,969) (35,049)
Interest income 1,965  768  4,370  2,216 
Interest expense (489) (606) (1,543) (1,881)
Miscellaneous income (expense)   116  (4,080) 191 
Loss from operations before income taxes (60,633) (11,600) (18,696) (39,248)
Income tax benefit (expense) (123) 129  (175) (317)
Net loss $(60,756) $(11,471)  $(18,871) $(39,565)
Basic loss per common share $(2.47) $(0.46) $(0.76) $(1.59)
Diluted loss per common share $(2.47) $(0.46) $(0.76) $(1.59)
Basic weighted-average number of common shares outstanding 24,635  24,928  24,845  24,928 
Diluted weighted-average number of common shares outstanding 24,635  24,928  24,845  24,928 
             

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

The following is a description of the adjustments to operating income (loss) in arriving at adjusted operating cash flow 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 plans and non-employee director plans in all periods.
  • Depreciation and amortization.  This adjustment eliminates depreciation, amortization and impairments of property and equipment and intangible assets in all periods.
     
  Three Months Ended Nine Months Ended
  March 31, March 31,
  2016 2015 2016 2015
Operating loss $(56,936) $(9,584) $(12,474) $(4,725)
Share-based compensation 7,388  785  17,647  7,872 
Depreciation and amortization 25,794  25,556  76,939  85,119 
Adjusted operating cash flow $(23,754) $16,757   $82,112  $88,266 
                 

 

 THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED/COMBINED OPERATIONS DATA
(Dollars in thousands)
(Unaudited)

REVENUES

  Three Months Ended  
  March 31,  
  2016 2015 % Change
MSG Entertainment $73,235  $61,566  19%
MSG Sports 262,875   239,114  10%
All other 218  176   NM 
The Madison Square Garden Company Total $336,328  $300,856  12%


  Nine Months Ended  
  March 31,  
  2016 2015 % Change
MSG Entertainment $331,348  $320,926  3%
MSG Sports 565,556  495,131  14%
All other 643  529  NM 
The Madison Square Garden Company Total $897,547  $816,586  10%
             

 

ADJUSTED OPERATING CASH FLOW AND OPERATING INCOME (LOSS)

  Adjusted Operating Cash
Flow
   Operating Income (Loss)  
  Three Months Ended
March 31,
    Three Months Ended
March 31,
  
  2016 2015 % Change 2016 2015 % Change
MSG Entertainment $(53,430) $(11,188) (378)% $(58,391) $(14,372) (306)%
MSG Sports 42,489  30,954  37% 36,491  27,676  32%
All other (12,813) (3,009) (326)% (35,036) (22,888) (53)%
The Madison Square Garden Company Total $(23,754) $16,757  NM  $(56,936) $(9,584) (494)%


  Adjusted Operating Cash
Flow
   Operating Income (Loss)  
  Nine Months Ended
March 31,
   Nine Months Ended
March 31,
  
  2016 2015 % Change 2016 2015 % Change
MSG Entertainment $(1,405) $45,769  NM  $(14,472) $35,663  NM 
MSG Sports 112,658  56,136  101% 97,004  34,959  177%
All other (29,141) (13,639) (114)% (95,006) (75,347) (26)%
The Madison Square Garden Company Total $82,112  $88,266  (7)% $(12,474)  $(4,725) (164)%


 THE MADISON SQUARE GARDEN COMPANY
 
CONSOLIDATED AND COMBINED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
 
  March 31,
 2016
 June 30,
 2015
ASSETS    
Current Assets:    
Cash and cash equivalents $1,451,687  $14,211 
Restricted cash 28,102   12,590 
Accounts receivable, net 109,492  51,734 
Net related party receivables, current 14,331  327 
Prepaid expenses 33,280  23,879 
Loan receivable from MSG Networks   30,836 
Other current assets 19,893  35,058 
Total current assets 1,656,785  168,635 
Net related party receivables, noncurrent 1,637   
Investments and loans to nonconsolidated affiliates 273,063  249,394 
Property and equipment, net 1,173,126  1,188,693 
Amortizable intangible assets, net 17,114  22,324 
Indefinite-lived intangible assets 166,850  166,850 
Goodwill 277,166  277,166 
Other assets 44,428  75,880 
Total assets $3,610,169  $2,148,942 
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current Liabilities:    
Accounts payable $12,270  $3,307 
Net related party payables 28,028  1,588 
Accrued liabilities:    
Employee related costs 95,367  95,997 
Other accrued liabilities 131,966  121,509 
Deferred revenue 327,682  311,317 
Total current liabilities 595,313  533,718 
Defined benefit and other postretirement obligations  58,426  80,900 
Other employee related costs 39,470  53,337 
Deferred tax liabilities, net 194,461  206,944 
Other liabilities 49,165  50,768 
Total liabilities 936,835  925,667 
Commitments and contingencies    
Stockholders' Equity:    
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,937 shares outstanding as of March 31, 2016 204   
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of March 31, 2016 45   
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of March 31, 2016    
Additional paid-in capital 2,799,233   
Treasury stock, at cost, 511 shares as of March 31, 2016 (74,682)  
Accumulated deficit (17,268)  
MSG Networks investment   1,263,490 
Accumulated other comprehensive loss (34,198) (40,215)
Total stockholders' equity 2,673,334  1,223,275 
Total liabilities and stockholders' equity $3,610,169  $2,148,942 


 THE MADISON SQUARE GARDEN COMPANY
 
SELECTED CASH FLOW INFORMATION
(Dollars in thousands)
(Unaudited)
 
  Nine Months Ended
  March 31,
  2016 2015
Net cash provided by operating activities $84,021  $22,456 
Net cash used in investing activities (94,493) (88,396)
Net cash provided by financing activities 1,447,948  73,938 
Net increase in cash and cash equivalents 1,437,476  7,998 
Cash and cash equivalents at beginning of period 14,211  6,143 
Cash and cash equivalents at end of period $1,451,687  $14,141 


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

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Source: The Madison Square Garden Company

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