Madison Square Garden Sports Corp. - FORM 8-K - EX-99.1

Attached files

file	filename
8-K - FORM 8-K - Madison Square Garden Sports Corp.	d390784d8k.htm

Exhibit 99.1

LOGO

THE MADISON SQUARE GARDEN COMPANY REPORTS

FISCAL 2017 THIRD QUARTER RESULTS

Fiscal 2017 third quarter revenue of $386.0 million, an increase of 15% versus the prior year quarter

Fiscal 2017 third quarter operating income of $6.7 million, an increase of $63.6 million versus the prior year quarter

Fiscal 2017 third quarter AOI of $43.6 million, an increase of $67.4 million versus the prior year quarter

NEW YORK, N.Y., May 4, 2017 - The Madison Square Garden Company (NYSE: MSG) today reported financial results for the third quarter ended March 31, 2017.

For the fiscal 2017 third quarter, the Company generated revenues of $386.0 million, an increase of 15% as compared with the prior year period. In addition, the Company generated fiscal 2017 third quarter operating income of $6.7 million and adjusted operating income of $43.6 million, which represent increases of $63.6 million and $67.4 million, respectively, both as compared to the prior year third quarter. ^{(1) (2) (3)}

Please note that the fiscal 2017 third quarter included $15.5 million in non-recurring NHL expansion fee revenue, and the year-ago quarter included a $41.8 million write-off of deferred production costs.

President and CEO David O’Connor said, “For the fiscal 2017 third quarter, we again generated strong top-line and adjusted operating income growth as we continued to more efficiently and effectively harness the strength of our live sports and entertainment assets and brands. This quarter was highlighted by our ongoing success in attracting an increasing number of premium live entertainment events to our venues, as well as solid organic growth across virtually every other area of our business, from sponsorship and signage to media rights. We are pleased with how fiscal 2017 is unfolding and remain confident that the Company is well positioned to drive attractive long-term growth for our shareholders.”

Results from Operations

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


	Revenues						Operating Income (Loss)								Adjusted Operating Income (Loss)
$ millions	F’Q3 2017		F’Q3 2016		% Change		F’Q3 2017			F’Q3 2016			% Change		F’Q3 2017			F’Q3 2016			% Change

MSG Entertainment	$	77.3	$	73.2		6%	$	(7.7	)	$	(58.4	)		87 %	$	(1.5	)	$	(53.4	)		97 %
MSG Sports		308.7		262.9		17%		59.9			36.5			64 %		65.9			42.5			55 %
Other		—		0.2		NM		(45.5	)		(35.0	)		(30)%		(20.8	)		(12.8	)		(62)%
Total Company	$	386.0	$	336.3		15%	$	6.7		$	(56.9	)		NM	$	43.6		$	(23.8	)		NM

Note: Does not foot due to rounding

(1)

The Company formerly referred to adjusted operating income (loss) as adjusted operating cash flow. The components of adjusted operating income (loss) are identical to the components of adjusted operating cash flow. 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)

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 third 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 third quarter would have improved by approximately $1.8 million and $0.6 million, respectively, while Other adjusted operating loss would have increased by $2.4 million.

(3)

Fiscal 2017 third quarter operating results do not include TAO Group. The Company records TAO Group’s operating results in its consolidated statements of operations on a quarter lag basis.

MSG Entertainment

For the fiscal 2017 third quarter as compared to the prior year period, MSG Entertainment revenues of $77.3 million increased 6%. The increase was primarily due to higher overall event-related revenues at the Company’s venues and, to a lesser extent, an increase in venue-related sponsorship, signage and suite rental fee revenues, partially 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 Theater at Madison Square Garden, The Chicago Theatre and the Forum, partially offset by lower revenues at The Garden. The decrease in revenues for the Christmas Spectacular Starring the Radio City Rockettes production was primarily due to fewer scheduled performances in January as compared to the prior year period, partially offset by higher average paid attendance and higher average ticket prices.

Fiscal 2017 third quarter operating loss of $7.7 million improved by $50.7 million and adjusted operating loss of $1.5 million improved by $52.0 million, both as compared to the prior year period. The improvement in operating loss and adjusted operating loss as compared to the prior year period primarily reflects lower direct operating expenses and, to a lesser extent, the increase in revenues and lower selling, general and administrative expenses.

The decrease in direct operating expenses reflects the absence of a $41.8 million write-off of deferred production costs recorded in the prior year quarter related to the New York Spectacular Starring the Radio City Rockettes production and other net decreases.

MSG Sports

For the fiscal 2017 third quarter as compared to the prior year period, MSG Sports revenues of $308.7 million increased 17%. The increase in revenues was primarily due to higher league distributions, professional sports teams’ ticket-related revenue and sponsorship and signage revenues and ad sales commissions. The increase in league distributions reflects the impact of the NBA’s new national media rights agreements which began with the 2016-17 NBA regular season and $15.5 million in non-recurring NHL expansion fee revenue, partially offset by other net decreases. The increase in professional sports teams’ ticket-related revenue primarily reflects higher average per-game revenue as compared to the prior year period. In addition, MSG Sports revenues increased due to higher event-related revenues from other live sporting events and local media rights fees from MSG Networks Inc., as well as higher professional sports teams’ food, beverage and merchandise sales.

Third quarter operating income of $59.9 million increased by $23.4 million and adjusted operating income of $65.9 million increased by $23.4 million. The increase in operating income and adjusted operating income primarily reflects the increase in revenue, partially offset by an increase in direct operating expenses.

The increase in direct operating expenses primarily reflects higher team personnel compensation costs and, to a lesser extent, higher net provisions for NBA and NHL revenue sharing expense and NBA luxury tax and event-related expenses associated with other live sporting events, partially offset by a decrease in net provisions for team personnel transactions.

Other

For the fiscal 2017 third quarter, Other operating loss of $45.5 million and adjusted operating loss of $20.8 million increased by $10.4 million and $8.0 million, respectively, primarily due to an increase in employee compensation and related benefits and higher professional fees, partially offset by a lower provision for the Company’s New York State and City capital tax.

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 the 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), along with two development league teams -- the Westchester Knicks (NBADL) and the Hartford Wolf Pack (AHL). 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 and 4) gains or losses on sales or dispositions of businesses. 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.

# # #

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 5157489

Conference call replay number is 855-859-2056 / Conference ID Number 5157489 until May 11, 2017

THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2017		2016		2017		2016
Revenues	$	386,033	$	336,328	$	1,012,878	$	897,547

Direct operating expenses		252,708		275,118		630,788		596,100

Selling, general and administrative expenses		100,084		92,352		271,365		236,982

Depreciation and amortization		26,535		25,794		78,611		76,939


Operating income (loss)		6,706		(56,936)		32,114		(12,474)

Other income (expense):

Loss in equity method investments		(26,319)		(5,173)		(28,501)		(4,969)

Interest income		3,005		1,965		8,096		4,370

Interest expense		(831)		(489)		(1,732)		(1,543)

Miscellaneous income (expense)		36		—		1,441		(4,080)

Income (loss) from operations before income taxes		(17,403)		(60,633)		11,418		(18,696)

Income tax expense		(440)		(123)		(754)		(175)

Net income (loss)		(17,843)		(60,756)		10,664		(18,871)

Less: Net loss attributable to nonredeemable noncontrolling interests		(298)		—		(891)		—

Net income (loss) attributable to The Madison Square Garden Company’s stockholders	$	(17,545)	$	(60,756)	$	11,555	$	(18,871)

Basic earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholders	$	(0.74)	$	(2.47)	$	0.48	$	(0.76)

Diluted earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholders	$	(0.74)	$	(2.47)	$	0.48	$	(0.76)

Basic weighted-average number of common shares outstanding		23,825		24,635		23,951		24,845

Diluted weighted-average number of common shares outstanding		23,825		24,635		24,147		24,845

Note: For the fiscal 2017 third quarter, the Company recorded a non-cash impairment charge of $20.6 million to write-off the carrying value of its equity investment in Fuse Media, which is reflected in the loss in equity method investments.

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.


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Operating income (loss)	$	6,706	$	(56,936)	$	32,114	$	(12,474)

Share-based compensation		10,367		7,388		30,465		17,647

Depreciation and amortization		26,535		25,794		78,611		76,939

Adjusted operating income (loss)	$	43,608	$	(23,754)	$	141,190	$	82,112

THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED OPERATIONS DATA

(Dollars in thousands)

(Unaudited)

REVENUES


	Three Months Ended
	March 31,
	2017		2016		% Change
MSG Entertainment	$	77,348	$	73,235		6 %

MSG Sports		308,685		262,875		17 %

All other		—		218		NM

The Madison Square Garden Company Total	$	386,033	$	336,328		15%

	Nine Months Ended
	March 31,
	2017		2016		% Change
MSG Entertainment	$	380,531	$	331,348		15 %

MSG Sports		632,347		565,556		12 %

All other		—		643		NM

The Madison Square Garden Company Total	$	1,012,878	$	897,547		13%

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,
	2017		2016		% Change		2017		2016		% Change
MSG Entertainment	$	(7,694)	$	(58,391)		87 %	$	(1,471)	$	(53,430)		97 %

MSG Sports		59,850		36,491		64 %		65,890		42,489		55 %

All other		(45,450)		(35,036)		(30)%		(20,811)		(12,813)		(62)%


The Madison Square Garden Company Total	$	6,706	$	(56,936)		NM	$	43,608	$	(23,754)		NM

	Operating Income (Loss)						Adjusted Operating Income (Loss)
	Nine Months Ended March 31,						Nine Months Ended March 31,
	2017		2016		% Change		2017		2016		% Change
MSG Entertainment	$	41,766	$	(14,472)		NM	$	61,123	$	(1,405)		NM

MSG Sports		109,372		97,004		13 %		128,519		112,658		14 %

All other		(119,024)		(95,006)		(25)%		(48,452)		(29,141)		(66)%


The Madison Square Garden Company Total	$	32,114	$	(12,474)		NM	$	141,190	$	82,112		72 %

THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)


	March 31, 2017		June 30, 2016
ASSETS
Current Assets:
Cash and cash equivalents	$	1,140,903	$	1,444,317
Restricted cash		32,647		27,091
Accounts receivable, net		131,636		75,998
Net related party receivables, current		5,293		4,079
Prepaid expenses		40,370		27,031
Other current assets		63,138		25,337

Total current assets		1,413,987		1,603,853
Net related party receivables, noncurrent		—		1,710
Investments and loans to nonconsolidated affiliates		239,921		263,546
Property and equipment, net of accumulated depreciation and amortization of $614,131 and $540,801 as of March 31, 2017 and June 30, 2016, respectively		1,166,508		1,160,609
Amortizable intangible assets, net		262,136		15,729
Indefinite-lived intangible assets		166,850		166,850
Goodwill		387,314		277,166
Other assets		98,979		54,487

Total assets	$	3,735,695	$	3,543,950

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable	$	27,167	$	13,935
Net related party payables		31,756		15,275
Accrued liabilities:
Employee related costs		113,738		119,357
Other accrued liabilities		181,059		133,832
Deferred revenue		339,045		332,416

Total current liabilities		692,765		614,815
Long-term debt, net of deferred financing costs		105,292		—
Defined benefit and other postretirement obligations		56,878		66,035
Other employee related costs		23,453		32,921
Deferred tax liabilities, net		195,181		194,583
Other liabilities		76,217		49,175

Total liabilities		1,149,786		957,529

Commitments and contingencies
Redeemable noncontrolling interests		85,000		—
The Madison Square Garden Company Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,012 and 19,777 shares outstanding as of March 31, 2017 and June 30, 2016, respectively		204		204
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of March 31, 2017 and June 30, 2016		45		45
Preferred stock, par value $0.01,15,000 shares authorized; none outstanding as of March 31, 2017 and June 30, 2016		—		—
Additional paid-in capital		2,822,565		2,806,352
Treasury stock, at cost, 1,436 and 671 shares as of March 31, 2017 and June 30, 2016, respectively		(242,505)		(101,882)
Accumulated deficit		(64,132)		(75,687)
Accumulated other comprehensive loss		(25,771)		(42,611)

Total The Madison Square Garden Company stockholders’ equity		2,490,406		2,586,421
Nonredeemable noncontrolling interests		10,503		—

Total equity		2,500,909		2,586,421

Total liabilities, redeemable noncontrolling interests and equity	$	3,735,695	$	3,543,950

THE MADISON SQUARE GARDEN COMPANY

SELECTED CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)


	Nine Months Ended
	March 31,
	2017		2016
Net cash provided by operating activities	$	107,558	$	86,021

Net cash used in investing activities		(252,814)		(96,493)

Net cash provided by (used in) financing activities		(158,158)		1,447,948

Net increase (decrease) in cash and cash equivalents		(303,414)		1,437,476

Cash and cash equivalents at beginning of period		1,444,317		14,211

Cash and cash equivalents at end of period	$	1,140,903	$	1,451,687

Madison Square Garden Sports Corp. - FORM 8-K - EX-99.1 - May 4, 2017

Attached files

Madison Square Garden Sports Corp. Reports