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Form 8-K Madison Square Garden For: May 01

May 1, 2015 4:12 PM EDT

 

 

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): May 1, 2015

 

 

THE MADISON SQUARE GARDEN COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   1-34434   27-0624498

(State or other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

 

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

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

N/A

(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))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On May 1, 2015, The Madison Square Garden Company (the “Company”) announced its financial results for its third quarter ended March 31, 2015. 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 May 1, 2015.

 

2


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/ Sean R. Creamer

Name: Sean R. Creamer
Title: Executive Vice President and Chief Financial Officer

Dated: May 1, 2015

 

3

LOGO

Exhibit 99.1

THE MADISON SQUARE GARDEN COMPANY REPORTS

FISCAL 2015 THIRD QUARTER RESULTS

Third quarter AOCF of $100.4 million, a 53% increase compared to prior year third quarter

Third quarter operating income of $70.1 million, a 155% increase compared to prior year third quarter

NEW YORK, N.Y., May 1, 2015 - The Madison Square Garden Company (NASDAQ: MSG) today reported financial results for the third quarter ended March 31, 2015.

Fiscal 2015 third quarter revenues of $449.4 million decreased 2%, as compared to the prior year quarter. This decrease was due to the absence of Fuse revenues in the MSG Media segment as the Company completed its sale of the network on July 1, 2014. Excluding the impact from the absence of Fuse, segment revenues increased at MSG Entertainment, MSG Sports and MSG Media.

Fiscal 2015 third quarter adjusted operating cash flow (“AOCF”)(1) of $100.4 million increased 53%, as compared to the prior year quarter, due to improved AOCF results in the MSG Sports and MSG Entertainment segments, as well as a decrease in unallocated corporate expenses (“Other”). The absence of Fuse’s operating results did not have a material impact on MSG Media AOCF or total company AOCF in the fiscal 2015 third quarter. Operating income of $70.1 million increased 155% and net income of $39.7 million ($0.51 per diluted share) increased 108%, both as compared to the prior year quarter.

Executive Chairman Jim Dolan said, “The Company’s solid fiscal third quarter results reflect the continued strong demand from our customers and partners for our portfolio of media, sports and entertainment assets and brands. We remain focused on ensuring that the Company is well-positioned for long-term success and, with this in mind, are pursuing the spin-off of our sports and entertainment businesses from our media business. We believe this separation, which creates two distinct companies, will build on our ongoing commitment to create shareholder value.”

Results from Operations

Segment results for the quarters ended March 31, 2015 and 2014 are as follows:

 

     Revenues     AOCF     Operating Income (Loss)  
$ millions    F’Q3
2015
    F’Q3
2014
    %
Change
    F’Q3
2015
    F’Q3
2014
    %
Change
    F’Q3
2015
    F’Q3
2014
    %
Change
 

MSG Media

   $ 169.0      $ 190.8        (11 )%    $ 91.9      $ 92.0        —    $ 88.3      $ 87.1        1

MSG Entertainment

     61.6        52.8        17     (13.4     (20.2     34     (16.8     (24.2     31

MSG Sports

     239.1        233.7        2     29.4        9.8        198     26.2        5.9        346

Other (includes eliminations)

     (20.2     (18.4     (10 )%      (7.5     (15.9     53     (27.6     (41.3     33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Company

$ 449.4    $ 459.0      (2 )%  $ 100.4    $ 65.7      53 $ 70.1    $ 27.4      155
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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.

 

1


MSG Media

For the fiscal 2015 third quarter as compared to the prior year period, MSG Media revenues of $169.0 million decreased 11%. Affiliation fee revenue decreased $13.4 million, due to the absence of affiliation fee revenue for Fuse, partially offset by a small increase in affiliation fee revenue at MSG Networks. The increase at MSG Networks was mainly a result of higher affiliation rates, partially offset by the impact of a low single digit percentage decrease in subscribers versus the prior year period. Advertising revenue decreased $9.4 million, due to the absence of advertising revenue for Fuse and, to a lesser extent, a decrease in advertising revenue at MSG Networks. The decrease in advertising revenue at MSG Networks was primarily due to lower Knicks-related advertising revenue, partially offset by higher hockey-related advertising revenue. Third quarter AOCF of $91.9 million was essentially unchanged and operating income of $88.3 million increased 1%, as a decrease in selling, general and administrative and direct operating expenses was offset by the decrease in revenues. The decrease in selling, general and administrative expenses was due to the absence of expenses for Fuse, while the decrease in direct operating expenses was due to the absence of expenses for Fuse, partially offset by an increase in expenses at MSG Networks.

MSG Entertainment

For the fiscal 2015 third quarter as compared to the prior year period, MSG Entertainment revenues of $61.6 million increased 17%. The increase was primarily due to the opening of New York Spring Spectacular, higher event-related revenues at The Garden and the Beacon Theatre, and higher venue-related sponsorship and signage and suite rental fee revenues. This increase was partially offset by lower event-related revenues at The Theater at Madison Square Garden. Third quarter AOCF loss of $13.4 million improved 34% and operating loss of $16.8 million improved 31%, both due to the increase in revenues, partially offset by an increase in direct operating and selling, general and administrative expenses. The increase in direct operating expenses was primarily due to higher event-related operating expenses at the Company’s venues and other net increases. This increase was partially offset by a small decrease in expenses for New York Spring Spectacular. The decrease for New York Spring Spectacular reflects $9.5 million in expenses recorded in the prior year quarter, primarily related to the acceleration of marketing costs due to the postponement of last year’s planned run until the current fiscal year. This was largely offset by costs in the current quarter associated with the production’s initial performances, including preview shows, which began on March 12, 2015.

MSG Sports

For the fiscal 2015 third quarter as compared to the prior year period, MSG Sports revenues of $239.1 million increased 2%. The increase in revenues was primarily due to higher league distributions, inter-segment broadcast rights fees, and professional sports teams’ sponsorship and signage revenues. Third quarter AOCF increased by $19.5 million to $29.4 million and operating income increased by $20.3 million to $26.2 million, both primarily due to a decrease in direct operating expenses and, to a lesser extent, the increase in revenues, partially offset by an increase in 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 other team operating expenses, partially offset by higher net provisions for certain team personnel transactions and event-related expenses associated with other live sporting events.

Other Matters

The company also announced that Sean Creamer will resign as chief financial officer, effective May 4. The company will commence a search for a successor and has named Donna Coleman interim chief financial officer. She will begin immediately following Mr. Creamer’s departure. Ms. Coleman worked for more than 15 years at Cablevision, where she recently retired as EVP of corporate financial planning and control. During her time with the company, Ms. Coleman managed the development and coordination of Cablevision’s budget and financial planning, as well as the critical accounting and control processes, and was actively involved in the spin-offs of both The Madison Square Garden Company and AMC Networks from Cablevision.

About The Madison Square Garden Company

The Madison Square Garden Company is comprised of three business segments: MSG Sports, MSG Media and MSG Entertainment and is built on a foundation of iconic venues and compelling content that the company creates, produces, presents and/or distributes through its programming networks and other media assets. MSG Sports owns and operates the following sports franchises: the New York Knicks (NBA), the New York Rangers (NHL), the New York Liberty (WNBA), the Westchester Knicks (NBADL) and the Hartford Wolf Pack (AHL). MSG Sports also features the presentation of a wide variety of live sporting events including professional boxing, college basketball, bull riding and tennis. MSG Media is a leader in production and content development for multiple distribution platforms, including content originating from the Company’s venues. MSG Media’s television networks consist of regional sports networks, MSG Network and MSG+, collectively referred to as MSG Networks. MSG Entertainment is one of the country’s leaders in live entertainment. MSG Entertainment creates, produces and/or presents a variety of live productions, including the Radio City Christmas Spectacular and the New York Spring Spectacular, both featuring the Rockettes. MSG Entertainment also presents or hosts other live entertainment events such as concerts, family shows and special events in the Company’s diverse collection of venues. These venues consist of Madison Square Garden, The Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, the Forum in Inglewood, CA, The Chicago Theatre, and the Wang Theatre in Boston, MA. More information is available at www.themadisonsquaregardencompany.com.

 

2


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. The Company excluded the gain on sale of Fuse from AOCF as it is not indicative of the Company’s ongoing operating performance. 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.

# # #

Contacts:

 

Kimberly Kerns

Senior Vice President

Communications

The Madison Square

Garden Company

(212) 465-6442

Ari Danes, CFA

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 28434735

Conference call replay number is 855-859-2056 / Conference ID Number 28434735 until May 8, 2015

 

3


THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     March 31,     March 31,  
     2015     2014     2015     2014  

Revenues

   $ 449,417      $ 458,956      $ 1,233,685      $ 1,183,920   

Direct operating expenses

     271,400        300,888        672,863        682,046   

Selling, general and administrative expenses

     79,299        100,945        246,749        261,146   

Depreciation and amortization

     28,594        29,674        94,440        76,869   

Gain on sale of Fuse

     —          —          (186,178     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  70,124      27,449      405,811      163,859   

Other income (expense):

Equity in loss of nonconsolidated affiliates

  (2,294   663      (35,049   (75

Interest expense, net

  (597   (1,135   (2,039   (3,636

Miscellaneous income

  783      72      2,136      95   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations before income taxes

  68,016      27,049      370,859      160,243   

Income tax expense

  (28,304   (7,995   (161,844   (56,812
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 39,712    $ 19,054    $ 209,015    $ 103,431   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share

$ 0.51    $ 0.25    $ 2.70    $ 1.34   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

$ 0.51    $ 0.24    $ 2.68    $ 1.32   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic weighted-average number of common shares outstanding

  77,134      77,162      77,454      77,069   

Diluted weighted-average number of common shares outstanding

  77,575      78,211      78,042      78,142   

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.

 

    Gain on sale of Fuse. This adjustment eliminates the pre-tax gain on the sale of Fuse.

 

     Three Months Ended      Nine Months Ended  
     March 31,      March 31,  
     2015      2014      2015     2014  

Operating income

   $ 70,124       $ 27,449       $ 405,811      $ 163,859   

Share-based compensation

     1,666         8,590         12,310        17,057   

Depreciation and amortization

     28,594         29,674         94,440        76,869   

Gain on sale of Fuse

     —           —           (186,178     —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted operating cash flow

$ 100,384    $ 65,713    $ 326,383    $ 257,785   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

4


THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED OPERATIONS DATA

(Dollars in thousands)

(Unaudited)

REVENUES

 

     Three Months Ended
March 31,
       
     2015     2014     % Change  

MSG Media

   $ 168,958      $ 190,825        (11 )% 

MSG Entertainment

     61,566        52,785        17

MSG Sports

     239,114        233,739        2

Other (including Inter-segment eliminations)

     (20,221     (18,393     (10 )% 
  

 

 

   

 

 

   

Total Madison Square Garden Company

$ 449,417    $ 458,956      (2 )% 
  

 

 

   

 

 

   
     Nine Months Ended
March 31,
       
     2015     2014     % Change  

MSG Media

   $ 477,848      $ 538,149        (11 )% 

MSG Entertainment

     320,926        244,510        31

MSG Sports

     495,131        455,293        9

Other (including Inter-segment eliminations)

     (60,220     (54,032     (11 )% 
  

 

 

   

 

 

   

Total Madison Square Garden Company

$ 1,233,685    $ 1,183,920      4 % 
  

 

 

   

 

 

   

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,
       
     2015     2014     % Change     2015     2014     % Change  

MSG Media

   $ 91,922      $ 91,950        —     $ 88,319      $ 87,071        1

MSG Entertainment

     (13,386     (20,200     34     (16,769     (24,186     31

MSG Sports

     29,358        9,846        198     26,180        5,872        346

All other

     (7,510     (15,883     53     (27,606     (41,308     33
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Madison Square Garden Company

$ 100,384    $ 65,713      53 %  $ 70,124    $ 27,449      155 % 
  

 

 

   

 

 

     

 

 

   

 

 

   
     Adjusted Operating Cash
Flow
          Operating Income (Loss)        
     Nine Months Ended
March 31,
          Nine Months Ended
March 31,
       
     2015     2014     % Change     2015     2014     % Change  

MSG Media

   $ 262,107      $ 259,194        1   $ 436,690      $ 244,438        79

MSG Entertainment

     38,340        7,110        439     27,308        (4,412     —     

MSG Sports

     51,926        13,871        274     31,211        2,551        1,123

All other

     (25,990     (22,390     (16 )%      (89,398     (78,718     (14 )% 
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Madison Square Garden Company

$ 326,383    $ 257,785      27 %  $ 405,811    $ 163,859      148 % 
  

 

 

   

 

 

     

 

 

   

 

 

   

 

5


THE MADISON SQUARE GARDEN COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

     March 31,
2015
    June 30,
2014
 

ASSETS

    

Current Assets:

    

Cash and cash equivalents

   $ 241,069      $ 92,251   

Restricted cash

     29,533        9,823   

Accounts receivable, net

     179,597        135,369   

Net related party receivables

     27,801        25,156   

Prepaid expenses

     39,932        37,108   

Other current assets

     28,630        23,216   

Assets held for sale

     —          77,056   
  

 

 

   

 

 

 

Total current assets

  546,562      399,979   

Investments in and loans to nonconsolidated affiliates

  244,339      225,632   

Property and equipment, net

  1,220,456      1,252,467   

Amortizable intangible assets, net

  72,507      80,306   

Indefinite-lived intangible assets

  166,850      163,850   

Goodwill

  701,674      701,674   

Other assets

  130,783      102,053   
  

 

 

   

 

 

 

Total assets

$ 3,083,171    $ 2,925,961   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$ 21,724    $ 16,710   

Net related party payables

  390      283   

Income taxes payable

  49,431      13,418   

Accrued liabilities:

Employee related costs

  100,684      102,097   

Other accrued liabilities

  136,473      159,585   

Deferred revenue

  366,707      300,937   

Liabilities held for sale

  —        11,171   
  

 

 

   

 

 

 

Total current liabilities

  675,409      604,201   

Defined benefit and other postretirement obligations

  75,649      75,728   

Other employee related costs

  55,429      61,284   

Other liabilities

  57,136      59,970   

Deferred tax liability

  514,219      520,334   
  

 

 

   

 

 

 

Total liabilities

  1,377,842      1,321,517   
  

 

 

   

 

 

 

Commitments and contingencies

Stockholders’ Equity:

Class A Common stock, par value $0.01, 360,000 shares authorized; 62,509 and 63,606 shares outstanding as of March 31, 2015 and June 30, 2014, respectively

  643      639   

Class B Common stock, par value $0.01, 90,000 shares authorized; 13,589 shares outstanding as of March 31, 2015 and June 30, 2014

  136      136   

Preferred stock, par value $0.01, 45,000 shares authorized; none outstanding

  —        —     

Additional paid-in capital

  1,082,546      1,081,055   

Treasury stock, at cost, 1,750 and 317 shares as of March 31, 2015 and June 30, 2014, respectively

  (118,080   (7,537

Retained earnings

  761,877      552,862   

Accumulated other comprehensive loss

  (21,793   (22,711
  

 

 

   

 

 

 

Total stockholders’ equity

  1,705,329      1,604,444   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

$ 3,083,171    $ 2,925,961   
  

 

 

   

 

 

 

 

6


THE MADISON SQUARE GARDEN COMPANY

SELECTED CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)

 

     Nine Months Ended
March 31,
 
     2015     2014  
  

 

 

   

 

 

 

Net cash provided by operating activities

$ 134,957    $ 217,048   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

  135,489      (413,126
  

 

 

   

 

 

 

Net cash used in financing activities

  (121,628   (5,290
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

  148,818      (201,368

Cash and cash equivalents at beginning of period

  92,251      277,913   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 241,069    $ 76,545   
  

 

 

   

 

 

 

 

7



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