August 17, 2017

The Madison Square Garden Company Reports Fourth Quarter and Fiscal 2017 Results

NEW YORK, Aug. 17, 2017 (GLOBE NEWSWIRE) -- The Madison Square Garden Company (NYSE:MSG) today reported financial results for the fourth quarter and fiscal year ended June 30, 2017

On a reported basis for fiscal 2017, the Company generated revenues of over $1.3 billion, an operating loss of $60.4 million and adjusted operating income ("AOI") of $97.6 million.(1)(2)(3)  Please note that fiscal 2017 revenues include $30.5 million in non-recurring NHL and NBA distributions, while fiscal 2017 operating loss and adjusted operating income results also include the impact of these league distributions, as well as $42.3 million in net provisions for team personnel transactions and a $33.6 million non-cash write-off.

On a reported basis for the fiscal 2017 fourth quarter, the Company generated revenues of $305.6 million, an operating loss of $92.5 million and adjusted operating loss of $43.6 million.  Please note that fiscal 2017 fourth quarter revenues include $15.0 million in non-recurring NHL and NBA distributions, while fiscal 2017 fourth quarter operating loss and adjusted operating loss results also include the impact of these league distributions, as well as $35.2 million in net provisions for team personnel transactions and the non-cash write-off discussed above.

President and CEO David O'Connor said, "Our efforts to more efficiently and effectively harness the strength of our sports and entertainment assets and brands led to numerous operational successes in fiscal 2017.  Notable highlights include an increase in the utilization of our venues and growth across most of the Company's key revenue lines, which drove strong underlying financial results for the year.  We also took the successful first steps in expanding our portfolio of live offerings with our investments in TAO Group and Boston Calling Events, two complementary businesses with meaningful growth potential.  Looking ahead, we remain confident that as a pure-play provider of live sports and entertainment experiences, we are uniquely positioned to generate attractive long-term growth and asset value creation for our shareholders."

Results from Operations
Segment results for the quarters ended June 30, 2017 and 2016 are as follows:

 RevenuesOperating
Income (Loss)
Adjusted Operating
Income (Loss)
$ millions F'Q4
2017
F'Q4
2016
%
Change
F'Q4
2017
F'Q4
2016
%
Change
F'Q4
2017
F'Q4
2016
%
Change
MSG Entertainment$125.9 $84.0 50%$(46.1)$(17.9)(158)%$(39.2)$(13.2)(197)%
MSG Sports 179.6  133.5 35% 9.8  12.8 (23)% 14.5  18.4 (21)%
Corporate and Other   0.2 NM  (44.2) (41.0)(8)% (18.9) (19.0)—%
Purchase Accounting Adjustments    NM  (11.9)  NM     NM 
Total Company $305.6 $217.8 40%$(92.5)$(46.2)(100)%$(43.6)$(13.8)(216)%


Note: Does not foot due to rounding
  
(1)Adjusted operating income (loss) now excludes the impact of purchase accounting adjustments related to business acquisitions.  See page 5 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures.
(2)During the fiscal 2017 first quarter, the Company refined its approach to allocating its corporate, venue operating and other shared expenses.  Prior period results are reflected as originally reported and have not been restated.  Had this approach been used in fiscal 2016, MSG Sports operating income and MSG Entertainment operating loss for the fiscal 2016 fourth quarter would have increased by approximately $1.7 million and $0.1 million, respectively, while Other operating loss would have increased by $1.6 million.  Further, MSG Sports adjusted operating income and MSG Entertainment adjusted operating loss for the fiscal 2016 fourth quarter would have improved by approximately $1.6 million and $0.5 million, respectively, while Other adjusted operating loss would have increased by $2.2 million.
(3)Fiscal 2017 fourth quarter financial results include TAO Group's operating results for the period from February 1, 2017 to March 26, 2017.  The Company records TAO Group's operating results in its consolidated statements of operations on a three-month lag basis.
  

MSG Entertainment
For the fiscal 2017 fourth quarter as compared to the prior year period, MSG Entertainment revenues of $125.9 million increased 50%.  The increase was primarily due to the inclusion of operating results for TAO Group and Boston Calling Events and, to a lesser extent, higher venue-related sponsorship and signage revenues.  This was partially offset by lower event-related revenues at the Company's venues and lower revenues for the New York Spectacular Starring the Radio City Rockettes production.  The decrease in event-related revenues was primarily due to lower event-related revenues at The Garden, the Beacon Theatre and The Chicago Theatre, partially offset by higher event-related revenues at Radio City Music Hall.  The decrease in revenues for the New York Spectacular Starring the Radio City Rockettes production was a result of no performances being held in the fiscal 2017 fourth quarter as compared to 21 shows in the prior year period.

Fiscal 2017 fourth quarter operating loss of $46.1 million increased by $28.3 million and adjusted operating loss of $39.2 million increased by $26.0 million. The increase in operating loss and adjusted operating loss primarily reflects higher direct operating expenses and, to a lesser extent, selling, general and administrative expenses, partially offset by the increase in revenues. 

The increase in direct operating expenses primarily reflects a $33.6 million write-off of the remaining deferred production costs for the New York Spectacular Starring the Radio City Rockettes production and the inclusion of operating results for TAO Group and Boston Calling Events.  This was partially offset by lower operating costs for the New York Spectacular Starring the Radio City Rockettes production (a result of no performances being held in the fiscal 2017 fourth quarter as compared to 21 shows in the prior year period) and, to a lesser extent, lower 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 operating results and, to a lesser extent, higher corporate general and administrative costs.

MSG Sports
For the fiscal 2017 fourth quarter as compared to the prior year period, MSG Sports revenues of $179.6 million increased 35%.  The increase in revenues was due to higher league distributions and playoff-related revenues and, to a lesser extent, higher professional sports teams' sponsorship and signage revenues and media rights fees from MSG Networks Inc., partially offset by lower event-related revenues from other live sporting events and other net decreases.  The increase in league distributions reflects $15 million in non-recurring NHL and NBA distributions and, to a lesser extent, the impact of the NBA's new national media rights agreements. The increase in playoff-related revenues was primarily due to additional home playoff games as compared to the prior year quarter.

Fiscal 2017 fourth quarter operating income decreased by $3.0 million to $9.8 million and adjusted operating income decreased by $3.9 million to $14.5 million. The decrease in operating income and adjusted operating income was primarily due to an increase in direct operating expenses and selling, general and administrative expenses, partially offset by the increase in revenues.     

The increase in direct operating expenses was primarily due to an increase in net provisions for certain team personnel transactions, higher playoff-related expenses and, to a lesser extent, higher team compensation costs.  The increase in selling, general and administrative expenses was primarily due to the impact of severance-related costs associated with the separation agreement with a team executive.

Corporate and Other
For the fiscal 2017 fourth quarter, Corporate and Other operating loss of $44.2 million increased by $3.1 million, primarily due to higher employee compensation and related benefits (including share-based compensation expense) and other net increases, partially offset by the absence of a $6.9 million reorganization charge recorded in the prior year fourth quarter.  Fiscal 2017 fourth quarter adjusted operating loss of $18.9 million improved by $0.1 million, primarily due to the absence of the reorganization charge recorded in the prior year fourth quarter, offset by an increase in employee compensation and related benefits (excluding share-based compensation expense) and other net increases.

Purchase Accounting Adjustments
For the fiscal 2017 fourth quarter, the operating loss related to purchase accounting adjustments was $11.9 million, the majority of which reflects expense related to the step-up in value of TAO Group's inventory and leases.

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 popular original entertainment productions -- the Christmas Spectacular and New York Spectacular - both starring the Radio City Rockettes, and through Boston Calling Events, produces outdoor festivals, including 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 adjusted operating income (loss) to operating income (loss), please see page 4 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.

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 57274623
Conference call replay number is 855-859-2056 / Conference ID Number 57274623 until August 24, 2017 

 
THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  Three Months Ended Twelve Months Ended
  June 30, June 30,
  2017 2016 2017 2016
Revenues $305,574  $217,764  $1,318,452  $1,115,311 
Direct operating expenses 230,593  141,757  861,381  737,857 
Selling, general and administrative expenses 138,674  96,621  410,039  333,603 
Depreciation and amortization 28,777  25,543  107,388  102,482 
Operating loss (92,470) (46,157) (60,356) (58,631)
Other income (expense):        
Loss in equity method investments (1,475) (14,130) (29,976) (19,099)
Interest income 3,740  2,412  11,836  6,782 
Interest expense (2,457) (485) (4,189) (2,028)
Miscellaneous income (expense) 51  63  1,492  (4,017)
Loss from operations before income taxes (92,611) (58,297) (81,193) (76,993)
Income tax benefit (expense)
 5,158  (122) 4,404  (297)
Net loss (87,453) (58,419) (76,789) (77,290)
Less: Net income attributable to nonredeemable noncontrolling interests 1,195    304   
Less: Net loss attributable to redeemable noncontrolling interests (4,370)   (4,370)  
Net loss attributable to The Madison Square Garden Company's stockholders $(84,278) $(58,419) $ (72,723) $(77,290)
Basic loss per common share attributable to The Madison Square Garden Company's stockholders $(3.58) $(2.39) $(3.05) $(3.12)
Diluted loss per common share attributable to The Madison Square Garden Company's stockholders $(3.58) $(2.39) $(3.05) $(3.12)
Basic weighted-average number of common shares outstanding 23,559  24,479  23,853  24,754 
Diluted weighted-average number of common shares outstanding.  23,559  24,479  23,853  24,754 
             


 
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.
Purchase accounting adjustments. This adjustment eliminates the impact of various purchase accounting adjustments related to business acquisitions, primarily fair value adjustments to inventory and favorable / unfavorable lease agreements of the acquiree.
 
  Three Months Ended Twelve Months Ended
  June 30, June 30,
   2017 2016 2017 2016
Operating loss $(92,470) $(46,157) $(60,356) $(58,631)
Share-based compensation 10,664  6,829  41,129  24,476 
Depreciation and amortization 28,777  25,543  107,388  102,482 
Purchase accounting adjustments 9,466    9,466   
Adjusted operating income (loss) $(43,563) $(13,785) $97,627  $68,327 
                  


 
THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED OPERATIONS DATA
(Dollars in thousands)
(Unaudited)
     
REVENUES    
     
  Three Months Ended  
  June 30,  
  2017 2016 % Change
MSG Entertainment $125,937  $84,042  50%
MSG Sports 179,637  133,506  35%
Corporate and Other    216  NM 
Total Madison Square Garden Company $305,574  $217,764  40%


  Twelve Months Ended  
  June 30,  
  2017 2016 % Change
MSG Entertainment $ 506,468  $415,390  22%
MSG Sports 811,984  699,062  16%
Corporate and Other   859  NM 
Total Madison Square Garden Company $1,318,452  $1,115,311   18%


OPERATING INCOME (LOSS) AND ADJUSTED OPERATING INCOME (LOSS)
      
  Operating Income (Loss) Adjusted Operating Income (Loss)
  Three Months Ended   Three Months Ended  
  June 30,   June 30,  
  2017 2016 % Change 2017 2016 % Change
MSG Entertainment $(46,137)  $(17,863) (158)% $(39,153) $(13,176)  (197)%
MSG Sports 9,762  12,750  (23)% 14,482  18,369  (21)%
Corporate and Other (44,156) (41,044) (8)% (18,892) (18,978) —%
Purchase accounting adjustments  (11,939)   NM       NM 
Total Madison Square Garden Company $(92,470) $(46,157) (100)% $(43,563) $(13,785 ) (216)%


  Operating Income (Loss) Adjusted Operating Income (Loss)
  Twelve Months Ended   Twelve Months Ended  
  June 30,   June 30,  
  2017 2016 % Change 2017 2016 % Change
MSG Entertainment $(3,692) $(32,335) 89% $ 21,970  $(14,581) NM 
MSG Sports 119,134   109,754  9% 143,001  131,027  9%
Corporate and Other (163,180) (136,050) (20)% (67,344) (48,119) (40)%
Purchase accounting adjustments (12,618)   NM      NM 
Total Madison Square Garden Company $(60,356)  $(58,631) (3)% $97,627  $68,327  43%
                     


 
THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
 
  June 30,
 2017
 June 30,
 2016
ASSETS    
Current Assets:    
Cash and cash equivalents $1,238,114  $1,444,317 
Restricted cash 34,000  27,091 
Accounts receivable, net 102,085  75,998 
Net related party receivables, current 2,714  4,079 
Prepaid expenses 23,358  27,031 
Other current assets 49,458  25,337 
   Total current assets 1,449,729  1,603,853 
Net related party receivables, noncurrent   1,710 
Investments and loans to nonconsolidated affiliates 242,287  263,546 
Property and equipment, net 1,159,271  1,160,609 
Amortizable intangible assets, net 256,975  15,729 
Indefinite-lived intangible assets 166,850  166,850 
Goodwill 380,087  277,166 
Other assets 57,554  54,487 
   Total assets $3,712,753  $3,543,950 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY    
Current Liabilities:    
Accounts payable $24,084  $13,935 
Net related party payables 17,576  15,275 
Accrued liabilities:    
Employee related costs 138,858   119,357 
Other accrued liabilities 191,344  133,832 
Deferred revenue 390,180  332,416 
   Total current liabilities 762,042  614,815 
Long-term debt, net of deferred financing costs 105,433   
Defined benefit and other postretirement obligations 52,997  66,035 
Other employee related costs 29,399  32,921 
Deferred tax liabilities, net 196,436  194,583 
Other liabilities 65,955  49,175 
   Total liabilities 1,212,262  957,529 
Commitments and contingencies    
Redeemable noncontrolling interests 80,630   
The Madison Square Garden Company Stockholders' Equity:    
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,014 and 19,777 shares outstanding as of June 30, 2017 and 2016, respectively 204  204 
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of June 30, 2017 and 2016 45  45 
Preferred stock, par value $0.01,15,000 shares authorized; none outstanding as of June 30, 2017 and 2016    
Additional paid-in capital 2,832,516  2,806,352 
Treasury stock, at cost, 1,433 and 671 shares as of June 30, 2017 and 2016, respectively (242,077) (101,882)
Accumulated deficit (148,410) (75,687)
Accumulated other comprehensive loss (34,115) (42,611)
   Total The Madison Square Garden Company stockholders' equity 2,408,163  2,586,421 
Nonredeemable noncontrolling interests 11,698   
   Total equity 2,419,861  2,586,421 
   Total liabilities, redeemable noncontrolling interests and equity $3,712,753  $3,543,950 
         


 
THE MADISON SQUARE GARDEN COMPANY
SELECTED CASH FLOW INFORMATION
(Dollars in thousands)
(Unaudited)
 
   Twelve Months Ended
  June 30,
  2017 2016
Net cash provided by operating activities $216,623  $125,785 
Net cash used in investing activities (264,301) (115,690)
Net cash provided by (used in) financing activities (158,525) 1,420,011 
Net increase (decrease) in cash and cash equivalents (206,203) 1,430,106 
Cash and cash equivalents at beginning of period 1,444,317  14,211 
Cash and cash equivalents at end of period $1,238,114  $1,444,317 
         
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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