MSG Co. Tallies 18% Gain in Operating Cash Flow
With all three of its units contributing, the Madison Square Garden Co. scored an 18% rise in adjusted operating cash flow during its second fiscal quarter.
MSG Co., comprising MSG Entertainment, MSG Sports and MSG Media, generated $149.8 million in adjusted operating cash flow for the period ended Dec. 31, 2014, compared with AOCF of $126.6 million in the year-earlier period. Management said there was no material AOCF impact on MSG Media or the company overall in the quarter, after last year's sale of Fuse to SiTV for $226 million.
Total revenue for the company rose 7% to $542.5 million from $509.4 million. Operating income surged 43% to $149.8 million from $126.6 million. MSG’s bottom line edged up 1% to $61.2 million in the recently completed quarter.
"Our company delivered double-digit AOCF growth in the second quarter as we benefited from the full availability of the Forum and The Garden, as well as broad-based organic growth,” said president and CEO Tad Smith. “Additionally, we are continuing to explore the possible separation of our businesses and believe that the creation of two distinct publicly traded companies would provide both new entities with greater flexibility to pursue their own business plans, while enabling investors to evaluate more clearly each company's unique assets and potential."
MSG’s board of directors, in October, unanimously approved a plan to explore a spin-off that would separate the live entertainment venues like the Madison Square Garden Arena, The Beacon Theater and The Forum in Los Angeles, from its professional sports teams, inlcuding the New York Knicks and New York Rangers, and media properties under MSG Networks.
A breakdown shows that MSG Media saw revenues decline 8% to $166.2, as affiliate fee revenue fell $10.3 million, largely due to the absence of affiliate fees from Fuse, partially offset by higher affiliate fees for MSG Networks. Advertising revenue was off $5.4 million, mostly minus Fuse contributions, which overcame an increase at MSGN.
Second-quarter AOCF of $89.1 million increased 4% due to a decrease in selling, general and administrative and direct operating expenses, mostly offset by the decrease in revenues. The decline in selling, general and administrative expenses was due to the absence of costs 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.
Operating income rose 35% to $108.9 million largely on the $23.8 million increase in the gain on sale of Fuse realized in the quarter. During the quarter, MSG said satisfied certain performance goals necessary to recognize the value of the 15% equity interest in SiTV Media, LLC it received as consideration in the transaction.
MSG Entertainment revenues climbed 19% to $194.1 million behind more event-funds from the Forum, the Madison Square Garden Arena and The Chicago Theatre; an uptick in revenues for the Radio City Christmas Spectacular franchise (primarily due to the production at Radio City Music Hall); plus higher venue-related sponsorship and signage and suite rental fee revenues. This was partially offset by lower event-related revenues at Radio City Music Hall -- excluding the annual holiday show.
Second-quarter AOCF reached $56.1 million, 33% higher than in the corresponding year-ago period, while operating jincome jumped 37% to $52.3 million, both due to higher revenues, partially offset by an increase in direct operating expenses, emanating from the added number of events at the various venues.
At MSG Sports, second-quarter revenues advanced 10% to $202.5 million, reflecting the favorable impact of The Garden being fully open during the quarter. On an overall basis, the increase in revenues was primarily due to higher professional sports team pre/regular season ticket-related revenue; suite rental fee revenue; inter-segment broadcast rights fees; professional sports team pre/regular season food, beverage and merchandise sales; and professional sports team sponsorship and signage revenues.
Second-quarter AOCF advanced $13.8 million to $14.9 million, as operating income totaled $11.4 million, reversing a $2.9 million loss the prior year. The results stemmed primarily from the increase in revenues, partially offset by higher selling, general and administrative expenses and, to a lesser extent, more direct operating expenses. The higher SGA costs came from more team-related marketing costs, allocated corporate general and administrative expenses and employee compensation and related benefits, partially offset by the absence of marketing costs recorded in the prior year quarter associated with the debut of the fully transformed Madison Square Garden Arena.
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