The following excerpt is from the company's SEC filing.
Fiscal 2019 first quarter revenues of $164.5 million
Fiscal 2019 first quarter operating income of $78.9 million
Fiscal 2019 first quarter adjusted operating income of $84.6 million
NEW YORK, N.Y., November
2, 2018
MSG Networks Inc. (NYSE: MSGN) today reported financial results for the fiscal first quarter
ended September 30, 2018.
For the fiscal 2019 first quarter, MSG Networks Inc. generated revenues of $164.5 million, an increase of 4% as
compared with the prior year period. In addition, the Company generated operating income of $78.9 million, adjusted operating
income
of $84.6 million and net income of
$46.9 million.
President and CEO Andrea Greenberg said, We had a strong start to
fiscal 2019 driven by our continued commitment to building on our financial, operational and strategic successes. The
2018-19
NBA and NHL seasons are underway and we remain focused on leveraging our exclusive
live game content, while we continue to innovate with new features and formats, to deliver meaningful value for our viewers, as well as our affiliates, advertisers and shareholders.
Fiscal Year 2019 First Quarter Results
(In thousands, except per share data)
Three Months Ended
Revenues
164,464
Operating income
78,861
Adjusted operating income
84,582
Net Income
46,930
Diluted EPS
1. See page 3 of this earnings release for the definition of adjusted
operating income included in the discussion of
non-GAAP
financial measures.
Summary of Reported Results from Operations
Fiscal 2019 first quarter total revenues of $164.5 million increased 4%, or $7.0 million, as compared with the prior year period. Affiliation fee
revenue increased $6.5 million, primarily due to 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 $0.1 million,
while other revenues increased $0.6 million as compared with the prior year period.
Direct operating expenses of $66.7 million increased 6%, or
$3.6 million, as compared with the prior year period. The increase was primarily due to higher rights fees expense and, to a lesser extent, higher other programming-related costs. The increase in rights fees expense primarily reflects annual
contractual rate increases and a full quarter impact of the
step-up
in expense related to the renewal of a rights agreement with the Buffalo Sabres, as compared to a partial quarter impact in the prior year
period.
Selling, general and administrative expenses of $16.9 million increased 9%, or $1.3 million, as compared with the prior year period,
primarily due to higher advertising and marketing costs, and employee compensation and related benefits (including share-based compensation expense).
Operating income of $78.9 million increased 3%, or $2.5 million, as compared with the prior year period, primarily due to the increase in revenues,
partially offset by higher direct operating expenses and, to a lesser extent, higher selling, general and administrative expenses (including share-based compensation expense).
Adjusted operating income of $84.6 million increased 3%, or $2.9 million, as compared with the prior year period, primarily due to the increase in
revenues, partially offset by higher direct operating expenses and, to a lesser extent, higher selling, general and administrative expenses (excluding share-based compensation expense).
About MSG Networks Inc.
An industry leader in sports
production, and content development and distribution, MSG Networks Inc. owns and operates two award-winning regional sports and entertainment networks, MSG Network (MSGN) and MSG+, and a live streaming and video on demand platform, MSG GO. The
networks are home to 10 professional sports teams, delivering live games of the New York Knicks; New York Rangers; New York Islanders; New Jersey Devils; Buffalo Sabres; New York Liberty; New York Red Bulls and the Westchester Knicks, as well as
coverage of the New York Giants and Buffalo Bills. Each year, MSGN and MSG+ collectively telecast approximately 500 live professional games, along with a comprehensive lineup of other sporting events, including college football and basketball, and
critically-acclaimed original programming. The gold standard for regional broadcasting, MSG Networks has won 152 New York Emmy Awards over the past ten years.
Non-GAAP
Financial Measures
We define adjusted operating income, which is a
financial measure, as operating income 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, adjusted operating income 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 Company without regard to the settlement of an obligation that is not expected to be made in cash.
We believe adjusted operating income is an appropriate measure for evaluating the operating performance of our Company. Adjusted operating income 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 measures as the most important indicators of our business
performance, and evaluate managements effectiveness with specific reference to these indicators. Adjusted operating income should be viewed as a supplement to and not a substitute for operating income, net income, 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 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 operating income to adjusted operating income, please see page 6 of this release.
The Company defines Free Cash Flow (Free Cash Flow), which is a
financial measure, as net cash
provided by operating activities less capital expenditures, both of which are reported in our Consolidated Statement of Cash Flows. The Company believes the most comparable GAAP financial measure is net cash provided by operating activities. The
Company believes that Free Cash Flow is useful as an indicator of its overall ability to generate liquidity, as the amount of Free Cash Flow generated in any period is representative of cash that is generated for debt repayment, investment, and
other discretionary and
non-discretionary
cash uses. The Company also believes that Free Cash Flow is one of several benchmarks used by analysts and investors for comparison of the Companys generation of
liquidity with other companies in the industry, although the Companys measure of Free Cash Flow may not be directly comparable to similar measures reported by other companies. For a reconciliation of Free Cash Flow to net cash provided by
operating activities, please see page 8 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 perceptions of the Company and its business, operations, financial condition and the industry in which it operates and the factors described in the
Companys filings with the Securities and Exchange Commission, including the sections titled Risk Factors and Managements 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
Communications
(212)
465-6442
Ari Danes, CFA
Investor Relations
465-6072
Conference Call Information:
The conference call will be Webcast live today at 10:00 a.m. ET at
www.msgnetworks.com
Conference call
dial-in
number is
877-883-0832
/ Conference ID Number 1577714
Conference call replay
number is
855-859-2056
/ Conference ID Number 1577714 until November 9, 2018
MSG NETWORKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
157,456
66,655
63,091
16,903
15,561
Depreciation and amortization
76,353
Other income (expense):
Interest income
Interest expense
(11,922
(10,643
Other components of net periodic benefit cost
(10,735
(10,172
Income from operations before income taxes
68,126
66,181
Income tax expense
(21,196
(25,024
Net income
41,157
Earnings per share:
Weighted-average number of common shares outstanding:
74,895
75,285
75,693
75,779
ADJUSTMENTS TO RECONCILE OPERATING INCOME
TO ADJUSTED OPERATING INCOME
(In thousands)
The following is a
description of the adjustments to operating income in arriving at adjusted operating income as described in this earnings release:
Share-based compensation expense.
This adjustment eliminates the compensation expense relating to
restricted stock units and stock options granted under our employee stock plan and
non-employee
director stock plan in all periods.
Depreciation and amortization.
This adjustment eliminates depreciation, amortization and impairments of
property and equipment and intangible assets in all periods.
81,725
CONSOLIDATED BALANCE SHEETS
June 30,
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents
170,083
205,343
Accounts receivable, net
109,519
110,657
Related party receivables, net
12,100
Prepaid income taxes
Prepaid expenses
Other current assets
Total current assets
296,993
338,442
Property and equipment, net
10,029
Amortizable intangible assets, net
36,338
37,203
Goodwill
424,508
Other assets
38,926
39,430
Total assets
806,444
849,612
LIABILITIES AND STOCKHOLDERS DEFICIENCY
Current Liabilities:
Accounts payable
Related party payables
Current portion of long-term debt
72,414
Income taxes payable
18,507
Accrued liabilities:
Employee related costs
15,342
Other accrued liabilities
Deferred revenue
Total current liabilities
111,342
111,216
Long-term debt, net of current portion
1,024,914
1,118,017
Defined benefit and other postretirement obligations
25,647
28,170
Other employee related costs
Other liabilities
Deferred tax liability
246,046
241,417
Total liabilities
1,416,668
1,507,354
Commitments and contingencies
Stockholders Deficiency:
Class A Common stock, par value $0.01, 360,000 shares authorized; 61,235 and 61,017 shares
outstanding as of September 30, 2018 and June 30, 2018, respectively
Class B Common stock, par value $0.01, 90,000 shares authorized; 13,589 shares outstanding
as of September 30, 2018 and June 30, 2018
Preferred stock, par value $0.01, 45,000 shares authorized; none outstanding
Additional
paid-in
Treasury stock, at cost, 3,024 and 3,242 shares as of September 30, 2018 and June 30,
2018, respectively
(182,714
(195,881
Accumulated deficit
(421,666
(460,007
Accumulated other comprehensive loss
(6,623
(6,700
Total stockholders deficiency
(610,224
(657,742
Total liabilities and stockholders deficiency
SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in thousands)
Summary Data from the
Statements of Cash Flows
Net cash provided by operating activities
62,978
52,419
Net cash used in investing activities
Net cash used in financing activities
(97,408
(20,074
Net cash provided by (used in) operations
(35,260
31,861
Cash and cash equivalents at beginning of period
141,087
Cash and cash equivalents at end of period
172,948
Less: Capital expenditures
Free cash flow
62,148
51,935
Capitalization
September 30, 2018
Credit facility debt
1,102,500
Net debt
932,417
Reconciliation of operating income to AOI for trailing twelve-month period
Operating Income
315,666
14,734
339,332
Leverage ratio
Represents aggregate principal amount of the debt outstanding.
Represents reported adjusted operating income for the trailing twelve months.
Represents net debt divided by annualized adjusted operating income, which differs from the covenant calculation
contained in the Companys credit facility.
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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