The Madison Square Garden Company Reports Fiscal 2016 Second Quarter Results

Strong AOCF and operating income growth for the second quarter versus the prior year periodFiscal 2016 second quarter revenue of $410.8 millionFiscal 2016 second quarter AOCF of $82.1 millionFiscal 2016 second quarter operating income of $49.0 million

NEW YORK, Feb. 04, 2016 (GLOBE NEWSWIRE) -- The Madison Square Garden Company (NYSE: MSG) today reported financial results for the second quarter ended December 31, 2015. 

On September 30, 2015, The Madison Square Garden Company completed its spin-off from MSG Networks Inc.  The fiscal 2016 second quarter is the first period that 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 second 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 second 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 second 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, fiscal 2016 second quarter revenues of $410.8 million grew 4%, adjusted operating cash flow (“AOCF”)(1) of $82.1 million increased 18%, and operating income of $49.0 million increased 23%, all as compared to the prior year period. 

President and CEO David O'Connor said, "For the fiscal second quarter, we generated strong top-line and AOCF results driven by the New York Knicks and Rangers, a successful run of the Radio City Christmas Spectacular and our continued ability to attract an exciting and diverse array of artists and events to our venues.  As we look ahead, we remain focused on delivering excellence across our operations, while executing on our plans for growth and long-term value creation."

Results from OperationsSegment results for the quarters ended December 31, 2015 and 2014 are as follows:

	Revenues								AOCF								Operating Income (Loss)
$ millions	F’Q2 2016			F’Q2 2015			%Change		F’Q2 2016			F’Q2 2015			% Change		F’Q2 2016			F’Q2 2015			%Change
MSG Entertainment	$	183.8		$	194.1		(5	)%	$	50.1		$	57.9		(13	)%	$	45.5		$	54.4		(16	)%
MSG Sports		226.8			202.5		12	%		44.5			17.4		156	%		39.3			13.6		189	%
Other		0.2			0.2		NM			(12.6	)		(5.5	)	(126	)%		(35.8	)		(28.1	)	(27	)%
Total Company	$	410.8		$	396.8		4	%	$	82.1		$	69.7		18	%	$	49.0		$	39.9		23	%

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 EntertainmentFor the fiscal 2016 second quarter as compared to the prior year period, MSG Entertainment revenues of $183.8 million decreased 5%.  The decrease was primarily due to the absence of approximately $14.1 million in revenue from the theatrical productions of the Radio City Christmas Spectacular presented outside New York (which the Company made the decision to end after the 2014 holiday season) and, to a lesser extent, a decrease in overall event-related revenues at the Company's venues.  This decrease was partially offset by higher ad sales commission, venue-related sponsorship and signage and suite rental fee revenues, as well as higher revenues from the New York production of the Radio City Christmas Spectacular.

Second quarter AOCF of $50.1 million decreased by $7.7 million and operating income of $45.5 million decreased by $8.9 million.   The decrease in AOCF and operating income primarily reflects an increase in selling, general and administrative expenses and the absence of approximately $4.5 million in direct contribution to AOCF from the theatrical productions of the Radio City Christmas Spectacular presented outside New York, partially offset by other net increases.  The increase in selling, general and administrative expenses was primarily due to higher corporate general and administrative costs and costs associated with the Company's new Advertising Sales Representation Agreement with MSG Networks Inc.  As noted above, selling, general and administrative expenses in the prior year second 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.

MSG SportsFor the fiscal 2016 second quarter as compared to the prior year period, MSG Sports revenues of $226.8 million increased 12%.  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 higher event-related revenues from other live sporting events and ad sales commission and professional sports teams' sponsorship and signage revenues.  Excluding the impact of the new long-term media rights agreements, MSG Sports revenues would have increased 6%, as compared to the prior year period.

Second quarter AOCF increased by $27.1 million to $44.5 million and operating income increased by $25.7 million to $39.3 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 NBA luxury tax and NBA and NHL revenue sharing expense, team personnel compensation costs and net provisions for certain team personnel transactions, partially offset by higher event-related expenses associated with other live sporting events.  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 Company's new Advertising Sales Representation Agreement with MSG Networks Inc., partially offset by lower marketing costs and professional fees.  As noted above, selling, general and administrative expenses in the prior year second 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 CompanyThe 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 the Rockettes New York Spectacular, both starring the Rockettes, and 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 atwww.themadisonsquaregardencompany.com. 

Non-GAAP Financial MeasuresWe 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 28173695Conference call replay number is 855-859-2056 / Conference ID Number 28173695 until February 11, 2016

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2015				2014				2015				2014
Revenues		$	410,838			$	396,814			$	561,219			$	515,730
Direct operating expenses		249,632				268,870				320,982				336,906
Selling, general and administrative expenses		86,262				63,001				144,630				114,402
Depreciation and amortization		25,905				25,024				51,145				59,563
Operating income		49,039				39,919				44,462				4,859
Other income (expense):
Equity in earnings (loss) of equity-method investments		(2,475		)		(30,151		)		204				(32,755		)
Interest income		1,448				715				2,405				1,448
Interest expense		(514		)		(619		)		(1,054		)		(1,275		)
Miscellaneous income (expense)		(4,080		)		(5		)		(4,080		)		75
Income (loss) from operations before income taxes		43,418				9,859				41,937				(27,648		)
Income tax benefit (expense)		70				(223		)		(52		)		(446		)
Net income (loss)		$	43,488			$	9,636			$	41,885			$	(28,094	)
Basic earnings (loss) per common share		$	1.74			$	0.39			$	1.68			$	(1.13	)
Diluted earnings (loss) per common share		$	1.74			$	0.39			$	1.67			$	(1.13	)
Basic weighted-average number of common shares outstanding		24,971				24,928				24,949				24,928
Diluted weighted-average number of common shares outstanding		25,055				24,928				25,031				24,928

ADJUSTMENTS TO RECONCILE ADJUSTED OPERATING CASH FLOW TOOPERATING INCOME

The following is a description of the adjustments to operating income 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								Six Months Ended
		December 31,								December 31,
		2015				2014				2015				2014
Operating income		$	49,039			$	39,919			$	44,462			$	4,859
Share-based compensation		7,154				4,772				10,259				7,087
Depreciation and amortization		25,905				25,024				51,145				59,563
Adjusted operating cash flow		$	82,098			$	69,715			$	105,866			$	71,509

THE MADISON SQUARE GARDEN COMPANY

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

REVENUES

		Three Months Ended
		December 31,
		2015				2014				% Change
MSG Entertainment		$	183,834			$	194,125			(5	)%
MSG Sports		226,786				202,512				12	%
All other		218				177				NM
Total Madison Square Garden Company		$	410,838			$	396,814			4	%
		Six Months Ended
		December 31,
		2015				2014				% Change
MSG Entertainment		$	260,860			$	259,360			1	%
MSG Sports		299,934				256,017				17	%
All other		425				353				NM
Total Madison Square Garden Company		$	561,219			$	515,730			9	%

 

ADJUSTED OPERATING CASH FLOW AND OPERATING INCOME (LOSS)

		Adjusted Operating Cash Flow											Operating Income (Loss)
		Three Months Ended December 31,											Three Months Ended December 31,
		2015				2014				% Change			2015				2014				% Change
MSG Entertainment		$	50,143			$	57,861			(13	)%		$	45,515			$	54,419			(16	)%
MSG Sports		44,505				17,395				156	%		39,295				13,601				189	%
All other		(12,550		)		(5,541		)		(126	)%		(35,771		)		(28,101		)		(27	)%
Total Madison Square Garden Company		$	82,098			$	69,715			18	%		$	49,039			$	39,919			23	%
		Adjusted Operating Cash Flow											Operating Income (Loss)
		Six Months Ended December 31,											Six Months Ended December 31,
		2015				2014				% Change			2015				2014				% Change
MSG Entertainment		$	53,276			$	56,957			(6	)%		$	45,158			$	50,035			(10	)%
MSG Sports		68,918				25,182				174	%		59,274				7,283				NM
All other		(16,328		)		(10,630		)		(54	)%		(59,970		)		(52,459		)		(14	)%
Total Madison Square Garden Company		$	105,866			$	71,509			48	%		$	44,462			$	4,859			NM

 

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED AND COMBINED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
		December 31,				June 30,
		2015				2015
ASSETS
Current Assets:
Cash and cash equivalents		$	1,558,897			$	14,211
Restricted cash		20,653				12,590
Accounts receivable, net		74,602				51,734
Net related party receivables, current		25,192				327
Prepaid expenses		38,381				23,879
Loan receivable from MSG Networks		—				30,836
Other current assets		22,443				35,058
Total current assets		1,740,168				168,635
Net related party receivables, noncurrent		1,652				—
Investments and loans to nonconsolidated affiliates		265,137				249,394
Property and equipment, net		1,193,695				1,188,693
Amortizable intangible assets, net		18,855				22,324
Indefinite-lived intangible assets		166,850				166,850
Goodwill		277,166				277,166
Other assets		82,580				75,880
Total assets		$	3,746,103			$	2,148,942
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable		$	21,965			$	3,307
Net related party payables		17,246				1,588
Accrued liabilities:
Employee related costs		63,325				95,997
Other accrued liabilities		130,312				121,509
Deferred revenue		385,245				311,317
Total current liabilities		618,093				533,718
Defined benefit and other postretirement obligations		56,804				80,900
Other employee related costs		39,281				53,337
Deferred tax liabilities, net		194,338				206,944
Other liabilities		49,133				50,768
Total liabilities		957,649				925,667
Commitments and contingencies
Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 20,333 shares outstanding as of   December 31, 2015		204				—
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of December 31,   2015		45				—
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2015		—				—
Additional paid-in capital		2,794,837				—
Treasury stock, at cost, 115 shares as of December 31, 2015		(15,716		)		—
Retained earnings		43,488				—
MSG Networks investment		—				1,263,490
Accumulated other comprehensive loss		(34,404		)		(40,215		)
Total stockholders’ equity		2,788,454				1,223,275
Total liabilities and stockholders’ equity		$	3,746,103			$	2,148,942

THE MADISON SQUARE GARDEN COMPANY
SELECTED CASH FLOW INFORMATION
(Dollars in thousands)
(Unaudited)
		Six Months Ended
		December 31,
		2015				2014
Net cash provided by operating activities		$	112,282			$	35,001
Net cash used in investing activities		(77,130		)		(46,281		)
Net cash provided by financing activities		1,509,534				23,194
Net increase in cash and cash equivalents		1,544,686				11,914
Cash and cash equivalents at beginning of period		14,211				6,143
Cash and cash equivalents at end of period		$	1,558,897			$	18,057

 

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

Source: The Madison Square Garden Company

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