NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All amounts included in the following Notes to
Consolidated Financial Statements
are presented in thousands, except per share data or as otherwise noted.
Note 1. Description of Business and Basis of Presentation
Description of Business
The Madison Square Garden Company (together with its subsidiaries, the “Company” or “
Madison Square Garden
”) is a live sports and entertainment business. The Company classifies its business interests into
two
reportable segments: MSG Entertainment and MSG Sports. MSG Entertainment includes live entertainment events such as concerts, family shows, performing arts and special events, which are presented or hosted in the Company’s diverse collection of venues along with live offerings through TAO Group Holdings LLC (“
TAO Group
”) and Boston Calling Events LLC (“
BCE
”).
TAO Group
is a hospitality group with globally-recognized entertainment dining and nightlife brands: TAO, Marquee, Lavo, Avenue, The Stanton Social, Beauty & Essex and Vandal. BCE produces outdoor music festivals, including New England’s premier Boston Calling Music Festival. MSG Entertainment also includes the Company’s original productions — the
Christmas Spectacular Starring the Radio City Rockettes
(the “
Christmas Spectacular
”) and the
New York Spectacular Starring the Radio City Rockettes
(the “
New York Spectacular
”). MSG Sports includes the Company’s professional sports franchises: the New York Knicks (the “
Knicks
”) of the National Basketball Association (the “
NBA
”), the New York Rangers (the “
Rangers
”) of the National Hockey League (the “
NHL
”), the New York Liberty (the “
Liberty
”) of the Women’s National Basketball Association (the “
WNBA
”), the Hartford Wolf Pack of the American Hockey League (the “
AHL
”) and the Westchester Knicks of the NBA Gatorade League (the “
NBAGL
”). The MSG Sports segment also includes other live sporting events, including professional boxing, college basketball, college hockey, professional bull riding, mixed martial arts, esports, tennis and college wrestling, all of which the Company promotes, produces and/or presents. In July 2017, the Company acquired a controlling interest in Counter Logic Gaming (“
CLG
”), a premier North American esports organization, which is now part of the MSG Sports segment.
The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns the Madison Square Garden Arena (“
The Garden
”) and The Theater at Madison Square Garden in New York City, the Forum in Inglewood, CA and The Chicago Theatre in Chicago. In addition, the Company leases Radio City Music Hall and the Beacon Theatre in New York City, and has a booking agreement with respect to the Wang Theatre in Boston.
Additionally, TAO Group operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in New York, Las Vegas, Los Angeles and Australia.
The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc. (“
MSG Networks
”), formerly known as The Madison Square Garden Company. On September 11, 2015,
MSG Networks
’
board of directors approved the distribution of all the outstanding common stock
of
Madison Square Garden
to MSG Networks’ stockholders (the “
Distribution
”), which occurred on September 30, 2015. See Note 1 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
for more information regarding the
Distribution
to its common stockholders.
Basis of Presentation
The accompanying unaudited consolidated interim financial statements (referred to as the “
Financial Statements
” herein) have been prepared in accordance with U.S. generally accepted accounting principles (“
GAAP
”) and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
. The
Financial Statements
presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the
Financial Statements
reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. The dependence of the MSG Sports segment on revenues from its NBA and NHL sports teams generally means it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year. The dependence of the MSG Entertainment segment on revenues from the
Christmas Spectacular
generally means it earns a disproportionate share of its revenues in the second quarter of the Company’s fiscal year.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note
2
.
Accounting Policies
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of The Madison Square Garden Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In addition, the consolidated financial statements of the Company include the accounts from
TAO Group
,
BCE
and
CLG
, in which the Company has a controlling voting interest. The Company’s consolidation criteria are based on authoritative accounting guidance for voting interest, controlling interest or variable interest entities.
TAO Group
,
BCE
and
CLG
are consolidated with the equity owned by other shareholders shown as redeemable or nonredeemable noncontrolling interest in the
accompanying consolidated balance sheet
s, and the other shareholders’ portion of net earnings (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to redeemable or nonredeemable noncontrolling interest in the
accompanying consolidated statements of operation
s and
consolidated statements of comprehensive income (loss)
, respectively. See Note 2 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
for more information regarding the classification of redeemable noncontrolling interests of
TAO Group
. In addition,
TAO Group
’s results are reported on a
three-month
lag basis and
TAO Group
reports on a fiscal year reflecting the retail-based calendar (containing 4-4-5 week calendar quarters). Accordingly, the Company’s results for the
three
months ended
September 30, 2017
include
TAO Group
’s operating results from March 27, 2017 to June 25, 2017.
Use of Estimates
The preparation of the accompanying
Financial Statements
in conformity with
GAAP
requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, investments, goodwill, intangible assets, other long-lived assets, tax accruals and other liabilities. In addition, estimates are used in revenue recognition, revenue sharing expense (net of escrow), luxury tax expense, income tax expense, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of contingent consideration and noncontrolling interests resulting from business combination transactions. Management believes its use of estimates in the
Financial Statements
are reasonable.
Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.
Summary of Significant Accounting Policies
The following is an update to the Company’s Summary of Significant Accounting Policies disclosed in its Annual Report on Form 10-K for the year ended
June 30, 2017
:
Revenue Recognition
Deferred revenue reported in the accompanying consolidated balance sheets as of
September 30, 2017
and
June 30, 2017
includes amounts due to the third-party promoters of
$46,479
and
$72,400
, respectively.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“
FASB
”) issued Accounting Standards Update (“
ASU
”) No. 2016-07,
Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting
.
ASU
No. 2016-07 eliminates the requirement for an investor to retrospectively apply the equity method when an investment that it had accounted for by another method qualifies for use of the equity method. This standard was adopted by the Company prospectively in the first quarter of fiscal year 2018. The adoption of the standard did not have an impact on the
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Company’s consolidated financial statements.
In March 2016, the
FASB
issued
ASU
No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting
. ASU No. 2016-09, among other things, (i) requires the income tax effects of all awards to be recognized in the statement of operations when the awards vest or are settled, (ii) allows an employer to repurchase more of an employee’s shares for tax withholding purposes than currently allowable, without triggering liability accounting, and provides companies with the option to make a policy election to account for forfeitures as they occur, and (iii) requires companies to present excess tax benefits as operating activity rather than as financing activity on the statement of cash flows. This standard was adopted by the Company in the first quarter of fiscal year 2018. In connection with the Company's election to record forfeitures as they occur, the Company used the modified retrospective transition method and recorded a cumulative effect of
$2,403
, which was an increase in beginning accumulated deficits with the offset by an equal increase in additional paid in capital. As a result of this guidance, the company also recorded
$1,083
of additional deferred tax assets, which are fully offset by a valuation allowance. In addition, the Company prospectively adopted the provision regarding the presentation of excess tax benefits in the statement of cash flows, which did not result in a change in the net cash provided by operating activities for the
three
months ended
September 30, 2017
because the Company currently maintains a 100% valuation allowance on its deferred tax asset.
In May 2017, the FASB issued ASU No. 2017-09,
Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.
ASU No. 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This standard does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the changes are considered non-substantive. This standard was early adopted by the Company prospectively in the first quarter of fiscal year 2018. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the
FASB issued
ASU No. 2014-09,
Revenue from Contracts with Customers (
Topic 606
)
, which supersedes the revenue recognition requirements in FASB
Accounting Standards Codification
(“
ASC
”) Topic 605,
Revenue Recognition
.
ASC
Topic 606
,
among other things,
(i) is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange f
or those goods or services, and (ii) requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14
, Revenue from Contracts with Customers (Topic 606)
:
Deferral of the Effective Date
, which defers the effective date of ASU No. 2014-09 for all entities by one year. In March 2016, the FASB issued ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue versus Net)
, which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard under ASU No. 2014-09. ASU No. 2016-08 clarifies how an entity should identify the unit of accounting (i.e. the specified good or service) for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. In April 2016, the FASB issued ASU No. 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
, which clarifies the principle in ASU No 2014-09 for determining whether a good or service is separately identifiable from other promises in the contract and, therefore, should be accounted for separately. ASU No. 2016-10 also clarifies that entities are not required to identify promised goods or services that are immaterial in the context of the contract and allows entities to elect to account for shipping and handling activities as a fulfillment cost rather than as an additional promised service. In May 2016, the FASB issued ASU No. 2016-12,
Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients
, which clarifies the following aspects in ASU No. 2014-09: collectability, presentation of sales taxes and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed contracts at transition, and technical correction. In December, the FASB issued ASU No. 2016-20,
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
, which allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and requires entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. Early adoption of
ASC
Topic 606
and the related updates discussed above is permitted and the Company can early adopt
ASC
Topic 606
and the related updates beginning in the first quarter of fiscal year 2018. If the Company does not apply the early adoption provision,
ASC
Topic 606
and the related updates will be effective for the Company beginning in the first quarter of fiscal year 2019 using one of two retrospective application methods. The
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Company’s evaluation of the impact this standard will have on its consolidated financial statements is ongoing. Based on efforts to date, the Company believes that the adoption of the standard will impact the identification of, and allocation across, performance obligations as well as the timing of revenue recognition for certain of its revenue streams that were previously recorded on a straight-line basis over the related contractual terms.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,
addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This standard, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income and (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. Early adoption is not permitted with the exception of certain provisions related to the presentation of other comprehensive income. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In February 2016, the FASB issued
ASU
No. 2016-02,
Leases (Topic 842)
, which supersedes existing guidance on accounting for leases in FASB ASC Topic 840,
Leases
.
ASU
No. 2016-02, among other things, (i) requires lessees to account for leases as either finance leases or operating leases and generally requires all leases to be recorded on the balance sheet, including those leases classified as operating leases under previous accounting guidance, through the recognition of right-of-use assets and corresponding lease liabilities, and (ii) requires extensive qualitative and quantitative disclosures about leasing activities. The accounting applied by a lessor is largely unchanged from that applied under previous accounting guidance. This standard will be effective for the Company beginning in the first quarter of fiscal year 2020 and is required to be applied using the modified retrospective approach for all leases existing as of the effective date. Early adoption is permitted. The Company’s evaluation of the impact this standard will have on its consolidated financial statements is ongoing. Based on efforts to date, the adoption of the standard will result in the recognition of right of use assets and lease liabilities related to the Company’s operating leases.
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments- Credit Losses
. ASU 2016-13 replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that will require the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates. For most financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which will generally result in the earlier recognition of credit losses on financial instruments. This standard will be effective for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230).
ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
. ASU No. 2016-16 requires entities to recognize income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows: Restricted Cash
. The primary purpose of ASU No. 2016-18 is to reduce the diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. This standard will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This standard will be effective retrospectively for the Company beginning in the first quarter of fiscal year 2019, and will result in a change to the Company’s presentation of net cash provided by (used in) operating activities in the statement of cash flows for the impact of changes in restricted cash balances. Early adoption is permitted in any interim or annual period.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In January 2017, the FASB issued ASU No. 2017-01,
Business Combinations (Topic 805) Clarifying the Definition of a Business
. The primary purpose of this ASU is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses, which will affect many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019 and is required to be applied prospectively. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.
ASU No. 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard will be effective for the Company beginning in the first quarter of fiscal year 2021 and is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07,
Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
ASU No. 2017-07 requires employers to disaggregate the service cost component from the other components of net benefit cost and disclose by line item the amount of net benefit cost that is included in the statement of operations or capitalized in assets. The standard requires employers to report the service cost component in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period and to report other components of net benefit cost separately and outside the subtotal of operating income. The standard also allows only the service cost component to be eligible for capitalization. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. The guidance requires application on a retrospective basis for the presentation of the service cost component and the other components of net benefit cost in the statements of operations and on a prospective basis for the capitalization of the service cost component of net benefit cost in assets. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. For the
three
months ended
September 30, 2017
, net periodic pension and other postretirement employee benefit cost reported within operating loss totaled to
$1,062
of which
$52
represented service cost.
Note
3
.
Acquisition
On July 28, 2017, the Company acquired a
65%
controlling interest in
CLG
, a premier North American esports organization. The amounts of revenue and net income of
CLG
since the acquisition date included in the Company’s consolidated statement of operations for the
three
months ended
September 30, 2017
were not material. Pro forma information is not provided since the acquisition was not material when compared with the Company’s consolidated financial statements.
Note 4. Team Personnel Transactions
Direct operating expenses in the accompanying consolidated statements of operations include net provisions for transactions relating to players on the Company’s sports teams for waiver/contract termination costs and a player trade (“
Team Personnel Transactions
”).
Team Personnel Transactions
amounted to
$100
and
$5,010
for the
three
months ended
September 30, 2017
and
2016
, respectively.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note
5
. Investments and Loans to Nonconsolidated Affiliates
The Company’s investments and loans to nonconsolidated affiliates which are accounted for under the equity method and cost method of accounting in accordance with ASC Topic 323,
Investments - Equity Method and Joint Ventures
, and ASC Topic 325,
Investments - Other
, respectively, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership Percentage
|
|
Investment
|
|
Loan
(a)
|
|
|
Total
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
Equity method investments:
|
|
|
|
|
|
|
|
|
|
Azoff MSG Entertainment LLC (“AMSGE”)
|
|
50
|
%
|
|
$
|
107,304
|
|
|
$
|
97,500
|
|
|
|
$
|
204,804
|
|
Brooklyn Bowl Las Vegas, LLC (“BBLV”)
|
|
(b)
|
|
|
—
|
|
|
2,662
|
|
(c)
|
|
2,662
|
|
Tribeca Enterprises LLC (“Tribeca Enterprises”)
|
|
50
|
%
|
|
14,336
|
|
|
16,911
|
|
(d)
|
|
31,247
|
|
Cost method investments
|
|
|
|
10,775
|
|
|
—
|
|
|
|
10,775
|
|
Total investments and loans to nonconsolidated affiliates
|
|
|
|
$
|
132,415
|
|
|
$
|
117,073
|
|
|
|
$
|
249,488
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
|
|
|
|
|
|
|
Equity method investments:
|
|
|
|
|
|
|
|
|
|
AMSGE
|
|
50
|
%
|
|
$
|
104,024
|
|
|
$
|
97,592
|
|
(e)
|
|
$
|
201,616
|
|
BBLV
|
|
(b)
|
|
|
—
|
|
|
2,662
|
|
(c)
|
|
2,662
|
|
Tribeca Enterprises
|
|
50
|
%
|
|
12,864
|
|
|
14,370
|
|
(d)
|
|
27,234
|
|
Cost method investments
|
|
|
|
10,775
|
|
|
—
|
|
|
|
10,775
|
|
Total investments and loans to nonconsolidated affiliates
|
|
|
|
$
|
127,663
|
|
|
$
|
114,624
|
|
|
|
$
|
242,287
|
|
_________________
|
|
(a)
|
In connection with the Company’s investments in AMSGE and Tribeca Enterprises, the Company provides
$100,000
and
$17,500
revolving credit facilities to these entities, respectively.
Pursuant to their terms, the AMSGE and Tribeca Enterprises revolving credit facilities will terminate on
September 20, 2020
and
June 30, 2021
, respectively.
|
|
|
(b)
|
The Company is entitled to receive back its capital, which was
74%
of BBLV’s total capital as of
September 30, 2017
and
June 30, 2017
, plus a preferred return, after which the Company would own a
20%
interest in BBLV.
|
|
|
(c)
|
Represents the outstanding loan balance, inclusive of amounts due to the Company for interest of
$62
as of
September 30, 2017
and
June 30, 2017
.
|
|
|
(d)
|
Includes outstanding payments-in-kind (“
PIK
”) interest of
$1,111
and
$870
as of
September 30, 2017
and
June 30, 2017
, respectively.
PIK
interest owed does not reduce availability under the revolving credit facility.
|
|
|
(e)
|
Represents the outstanding loan balance, inclusive of amounts due to the Company for interest of
$92
as of
June 30, 2017
.
|
See Note
7
for more information regarding a legal matter associated with
AMSGE
.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Summarized Financial Information of Equity Method Investees
The following is summarized financial information for the Company’s individually significant equity method investment as required by the guidance in the SEC Regulation S-X Rule 4-08(g). The amounts shown below represent 100% of this equity method investment’s results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
September 30,
|
Results of Operations
|
|
2017
|
|
2016
|
Revenues
|
|
$
|
45,545
|
|
|
$
|
36,049
|
|
Income from continuing operations
|
|
7,561
|
|
|
1,552
|
|
Net income
|
|
7,561
|
|
|
1,552
|
|
Net income attributable to controlling interest
|
|
5,311
|
|
|
596
|
|
Note
6
. Goodwill and Intangible Assets
The carrying amounts of
goodwill
, by reportable segment, as of
September 30, 2017
and
June 30, 2017
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
June 30,
2017
|
MSG Entertainment
|
|
$
|
161,952
|
|
|
$
|
161,900
|
|
MSG Sports
|
|
226,623
|
|
|
218,187
|
|
|
|
$
|
388,575
|
|
|
$
|
380,087
|
|
During the first quarter of fiscal year
2018
, the Company performed its annual impairment test of goodwill and determined that there were
no
impairments of goodwill identified for any of its reporting units.
The Company’s indefinite-lived intangible assets as of
September 30, 2017
and
June 30, 2017
are as follows:
|
|
|
|
|
|
Sports franchises (MSG Sports segment)
|
|
$
|
101,429
|
|
Trademarks (MSG Entertainment segment)
|
|
62,421
|
|
Photographic related rights (MSG Sports segment)
|
|
3,000
|
|
|
|
$
|
166,850
|
|
During the first quarter of fiscal year
2018
, the Company performed its annual impairment test of identifiable indefinite-lived intangible assets and determined that there were
no
impairments identified.
The Company’s intangible assets subject to amortization are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
Trade names
|
|
$
|
100,830
|
|
|
$
|
(2,373
|
)
|
|
$
|
98,457
|
|
Venue management contracts
|
|
79,000
|
|
|
(1,901
|
)
|
|
77,099
|
|
Favorable lease assets
|
|
54,253
|
|
|
(2,031
|
)
|
|
52,222
|
|
Season ticket holder relationships
|
|
50,032
|
|
|
(41,705
|
)
|
|
8,327
|
|
Non-compete agreements
|
|
11,400
|
|
|
(732
|
)
|
|
10,668
|
|
Festival rights
|
|
9,080
|
|
|
(923
|
)
|
|
8,157
|
|
Other intangibles
|
|
7,917
|
|
|
(3,225
|
)
|
|
4,692
|
|
|
|
$
|
312,512
|
|
|
$
|
(52,890
|
)
|
|
$
|
259,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
Trade names
|
|
$
|
98,530
|
|
|
$
|
(1,003
|
)
|
|
$
|
97,527
|
|
Venue management contracts
|
|
79,000
|
|
|
(761
|
)
|
|
78,239
|
|
Favorable lease assets
|
|
54,253
|
|
|
(812
|
)
|
|
53,441
|
|
Season ticket holder relationships
|
|
50,032
|
|
|
(40,871
|
)
|
|
9,161
|
|
Non-compete agreements
|
|
9,000
|
|
|
(261
|
)
|
|
8,739
|
|
Festival rights
|
|
9,080
|
|
|
(739
|
)
|
|
8,341
|
|
Other intangibles
|
|
4,217
|
|
|
(2,690
|
)
|
|
1,527
|
|
|
|
$
|
304,112
|
|
|
$
|
(47,137
|
)
|
|
$
|
256,975
|
|
For the
three months ended
September 30, 2017
and
2016
, amortization expense for intangible assets was
$5,753
and
$1,616
, respectively. The increase in amortization expense reflects the purchase accounting adjustments for the
TAO Group
and
CLG
acquisitions.
Note
7
. Commitments and Contingencies
Commitments
As more fully described in Note 8 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
, the Company’s commitments consist primarily of (i) the MSG Sports segment’s obligations under employment agreements that the Company has with its professional sports teams’ personnel that are generally guaranteed regardless of employee injury or termination, (ii)
long-term noncancelable operating lease agreements
primarily for entertainment venues, and corporate office, and (iii) revolving credit facilities provided by the Company to
AMSGE
and Tribeca Enterprises (see Note
5
). The Company did not have any material changes in its contractual obligations since the end of fiscal year
2017
other than activities in the ordinary course of business.
In connection with the
TAO Group
and
CLG
acquisitions, the Company has accrued contingent consideration as part of the purchase price allocation. See Note
8
for further details of the amount recorded in the accompanying consolidated balance sheet as of
September 30, 2017
. In addition, see Note 10 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
regarding the principal repayments required under the
TAO Group
’s senior secured term loan facility.
Legal Matters
The Company owns
50%
of
AMSGE
,
which in turn owns a majority interest in Global Music Rights, LLC (“GMR”). GMR is primarily a performance rights organization, whose business includes obtaining the right to license the public performance rights of songs composed by leading songwriters. GMR engaged in negotiations with the Radio Music Licensing Committee (“RMLC”), which represents over ten thousand commercial radio stations. On November 18, 2016, RMLC filed a complaint against GMR in the United States District Court for the Eastern District of Pennsylvania alleging that GMR is violating Section 2 of the Sherman Antitrust Act and seeking an injunction, requiring, among other things, that GMR issue radio stations licenses for GMR’s repertory, upon request, at a rate set through a judicial rate-making procedure, that GMR offer “economically viable alternatives to blanket licenses,” and that GMR offer only licenses for songs which are fully controlled by GMR. GMR and RLMC agreed to an interim license arrangement through September 30, 2017, which has been extended through March 31, 2018. GMR has advised the Company that it believes that the RMLC Complaint is without merit and is vigorously defending itself. On January 20, 2017, GMR filed a motion to dismiss or to transfer venue, asserting that the Eastern District of Pennsylvania is not a proper venue for the matter, lacks personal jurisdiction of GMR and that in any event the complaint fails to state a claim. On December 6, 2016, GMR filed a complaint against RMLC in the United States District Court for the Central District of California, alleging that RMLC operates as an illegal cartel that unreasonably restrains trade in violation of Section 1 of the Sherman Antitrust Act and California state law, and seeking an injunction restraining RMLC and its co-conspirators from enforcing or establishing agreements that unreasonably restrict competition for public performance licenses. The judge in the Central District of California recently denied RMLC’s motion to dismiss GMR’s claim for lack of ripeness and, on the basis that the two cases involve similar facts, stayed the California action in order to assess the status of the Pennsylvania case. On July 21, 2017, RMLC filed a preliminary injunction motion in the United States District Court for the Eastern District of
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Pennsylvania to extend the duration of the interim licenses which GMR had granted to certain radio stations. The district court determined that the jurisdictional matter should be decided prior to addressing the motion for preliminary injunction.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Note
8
. Fair Value Measurements
The following table presents the Company’s assets that are measured at fair value on a recurring basis, which include cash equivalents, marketable securities and available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy
|
|
September 30,
2017
|
|
June 30,
2017
|
Assets:
|
|
|
|
|
|
|
Commercial Paper
|
|
I
|
|
$
|
105,587
|
|
|
$
|
105,476
|
|
Money market accounts
|
|
I
|
|
195,799
|
|
|
102,884
|
|
Time deposits
|
|
I
|
|
833,573
|
|
|
1,007,302
|
|
Available-for-sale securities
|
|
I
|
|
32,081
|
|
|
32,851
|
|
Total assets measured at fair value
|
|
|
|
$
|
1,167,040
|
|
|
$
|
1,248,513
|
|
All assets listed above are classified within Level I of the fair value hierarchy as they are valued using observable inputs that reflect quoted prices for identical assets in active markets. The carrying amounts of the Company’s commercial paper, money market accounts and time deposits approximate fair value due to their short-term maturities.
The carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
June 30, 2017
|
|
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
Assets
|
|
|
|
|
|
|
|
|
Notes receivable, including interest accruals
|
|
$
|
4,113
|
|
|
$
|
4,113
|
|
|
$
|
2,610
|
|
|
$
|
2,610
|
|
Available-for-sale securities
(a)
|
|
32,081
|
|
|
32,081
|
|
|
32,851
|
|
|
32,851
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion
(b)
|
|
$
|
110,000
|
|
|
$
|
109,843
|
|
|
$
|
110,000
|
|
|
$
|
110,091
|
|
_________________
|
|
(a)
|
Aggregate cost basis for available-for-sale securities, including transaction costs, was
$23,222
as of
September 30, 2017
. The unrealized gain recorded in accumulated other comprehensive loss was
$8,859
as of
September 30, 2017
. The fair value of the available-for-sale securities is determined based on quoted market prices in an active market at the New York Stock Exchange, which is classified within Level I of the fair value hierarchy.
|
|
|
(b)
|
On January 31, 2017, TAO Group Intermediate Holdings LLC (“
TAOIH
”), TAO Group Operating LLC (“
TAOG
”) and certain of its subsidiaries entered into a
$110,000
senior secured
five
-year term loan facility. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable.
|
In connection with the
TAO Group
acquisition (see Note 3 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
for further details), the Company recorded certain contingent consideration liabilities at fair value as part of the purchase price allocation. The fair value was estimated using a Monte-Carlo simulation model which included significant unobservable Level III inputs such as projected financial performance over the earn-out period (
five years
) along with estimates for market volatility and the discount rate applicable to
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
potential cash payouts. As of
September 30, 2017
and
June 30, 2017
, the fair value of contingent consideration liabilities in connection with the
TAO Group
acquisition was
$7,900
.
In connection with the
CLG
acquisition, the Company may be required to make future payments for deferred and contingent consideration up to a total of
$9,150
based upon the achievement of certain specified objectives during the
three years
following the transaction as defined under the membership interest purchase agreement. As of
September 30, 2017
, the Company recorded
$6,586
as the initial fair value of deferred and contingent consideration liabilities as part of the preliminary purchase price allocation. The fair values of these deferred and contingent consideration liabilities were estimated using weighted probabilities of achievement for the possible objective and earn-out events and adjusted for a discount rate applicable to the deferred and potential cash payouts.
Note
9
. Credit Facilities
Knicks Revolving Credit Facility
On September 30, 2016, New York Knicks, LLC (“
Knicks LLC
”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “
Knicks Credit Agreement
”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to
$200,000
with a term of
five
years (the “
Knicks Revolving Credit Facility
”) to fund working capital needs and for general corporate purposes.
The
Knicks Revolving Credit Facility
requires
Knicks LLC
to comply with
a debt service ratio of 1.5:1.0 over a trailing four quarter period
. As of
September 30, 2017
,
Knicks LLC was in compliance with this financial covenant.
All borrowings under the
Knicks Revolving Credit Facility
are subject to the satisfaction of certain customary conditions.
Borrowings bear interest at a floating rate, which at the option of Knicks LLC may be either (i) a base rate plus a margin ranging from 0.00% to 0.125% per annum or (ii) LIBOR plus a margin ranging from 1.00% to 1.125% per annum.
Knicks LLC
is required to pay a commitment fee ranging from
0.20%
to
0.25%
per annum in respect of the average daily unused commitments under the
Knicks Revolving Credit Facility
. The
Knicks Revolving Credit Facility
was undrawn
as of
September 30, 2017
.
All obligations under the Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S. national broadcast agreements.
Subject to customary notice and minimum amount conditions,
Knicks LLC
may voluntarily prepay outstanding loans under the
Knicks Revolving Credit Facility
at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans).
Knicks LLC is required to make mandatory prepayments in certain circumstances, including without limitation if the maximum available amount under the Knicks Revolving Credit Facility is greater than 350% of qualified revenues.
In addition to the financial covenant described above, the
Knicks Credit Agreement
and the related security agreement contain certain customary representations and warranties, affirmative covenants and events of default.
The Knicks Credit Agreement contains certain restrictions on the ability of Knicks LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Knicks Credit Agreement, including the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the Knicks Credit Agreement; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any Knicks LLC’s collateral.
Knicks Unsecured Credit Facility
On September 30, 2016, Knicks LLC entered into an unsecured revolving credit facility with a lender for an initial maximum credit amount of
$15,000
and a
364
-day term (the “
Knicks Unsecured Credit Facility
”).
Knicks LLC renewed this facility with the lender on the same terms effective as of September 29, 2017.
This facility
was undrawn
as of
September 30, 2017
.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Rangers Revolving Credit Facility
On January 25, 2017, New York Rangers, LLC (“
Rangers LLC
”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “
Rangers Credit Agreement
”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to
$150,000
with a term of
five
years (the “
Rangers Revolving Credit Facility
”) to fund working capital needs and for general corporate purposes.
The
Rangers Revolving Credit Facility
requires
Rangers LLC
to comply with
a debt service ratio of 1.5:1.0 over a trailing four quarter period
.
As of
September 30, 2017
,
Rangers LLC was in compliance with this financial covenant
. All borrowings under the
Rangers Revolving Credit Facility
are subject to the satisfaction of certain customary conditions.
Borrowings bear interest at a floating rate, which at the option of Rangers LLC may be either (i) a base rate plus a margin ranging from 0.125% to 0.50% per annum or (ii) LIBOR plus a margin ranging from 1.125% to 1.50% per annum.
Rangers LLC
is required to pay a commitment fee ranging from
0.375%
to
0.625%
per annum in respect of the average daily unused commitments under the
Rangers Revolving Credit Facility
. The
Rangers Revolving Credit Facility
was undrawn
as of
September 30, 2017
.
All obligations under the Rangers Revolving Credit Facility are secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i) Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S. and Canadian national broadcast agreements, and (iii) revenues to be paid to Rangers LLC pursuant to local media contracts.
Subject to customary notice and minimum amount conditions,
Rangers LLC
may voluntarily prepay outstanding loans under the Rangers Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans).
Rangers LLC is required to make mandatory prepayments in certain circumstances, including without limitation if the maximum available amount under the Rangers Revolving Credit Facility is less than 17% of qualified revenues.
In addition to the financial covenant described above, the
Rangers Credit Agreement
and the related security agreement contain certain customary representations and warranties, affirmative covenants and events of default.
The Rangers Credit Agreement contains certain restrictions on the ability of Rangers LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Rangers Credit Agreement, including the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the Rangers Credit Agreement; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any of Rangers LLC’s assets securing the obligations under the Rangers Revolving Credit Facility.
TAO Credit Facilities
On
January 31, 2017,
TAOIH
,
TAOG
, and certain of its subsidiaries entered into a credit and guaranty agreement with a syndicate of lenders providing for a senior secured term loan facility of
$110,000
with a term of
five
years (the “TAO Term Loan Facility”) to fund, in part, the acquisition of TAO Group and a senior secured revolving credit facility of up to
$12,000
with a term of
five
years (the “TAO Revolving Credit Facility,” and together with the TAO Term Loan Facility, the “TAO Credit Facilities”) for working capital and general corporate purposes of
TAOG
.
The TAO Credit Facilities were obtained without recourse to MSG or any of its affiliates (other than TAOIH and its subsidiaries).
The TAO Credit Facilities require TAOIH (i) to maintain, for the relevant TAO entities, a minimum consolidated liquidity of $5,000 at all times, (ii) to comply with a maximum total net leverage ratio of 4.00:1.00 initially and stepping down over time to 2.50:1.00 by the first quarter of calendar year 2021 and through the remainder of the term of the TAO Credit Facilities, and (iii) to comply with a minimum fixed charge coverage ratio of 1.50:1.00 initially and stepping down over time to 1.15:1.00 by the second quarter of calendar year 2021 and through the remainder of the term of the TAO Credit Facilities.
TAOIH was in compliance with the financial covenants of the TAO Credit Facilities as of June 25, 2017 (the most recent date at which compliance was assessed under the TAO Credit Facilities).
The TAO Revolving Credit Facility was undrawn as of
September 30, 2017
.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The TAO entities under the TAO Credit Facilities are also subject to certain limitations with respect to making capital expenditures based upon the total net leverage ratio and other factors. The restrictions on capital expenditures are subject to certain “carry-forward” provisions and other customary carve-outs.
All borrowings under the TAO Credit Facilities are subject to the satisfaction of certain customary conditions, including compliance with a maximum leverage multiple, accuracy of representations and warranties and absence of a default or event of default.
Borrowings bear interest at a floating rate, which at the option of TAOG may be either (i) a base rate plus a margin ranging from 6.50% to 7.00% per annum or (ii) LIBOR plus a margin ranging from 7.50% to 8.00% per annum.
TAOG is required to pay a commitment fee of
0.50%
per annum in respect of the average daily unused commitments under the TAO Revolving Credit Facility.
TAO Group
made interest payments under the
TAO Term Loan Facility
of
$2,518
for the
three months ended
June 25, 2017 (the period for which TAO Group’s operating results are recorded in the Company’s consolidated statements of operations for the three months ended September 30, 2017).
All obligations under the TAO Credit Facilities are secured by a first lien security interest in substantially all of the applicable TAO entities’ assets, including, but not limited to, a pledge of all of the capital stock of substantially all of TAOIH’s wholly-owned domestic subsidiaries and 65% of the voting capital stock, and 100% of the non-voting capital stock, of each of its first-tier foreign subsidiaries.
Subject to customary notice and minimum amount conditions, TAOG may voluntarily prepay outstanding loans under the TAO Credit Facilities at any time, in whole or in part (subject to customary breakage costs with respect to LIBOR loans) with premiums due in respect of prepayments of the TAO Term Loan Facility or permanent reduction under the TAO Revolving Credit Facility, in each case, starting at 5.0% initially and stepping down to 0% after three years. Beginning March 31, 2018, TAOG is required to make scheduled amortization payments under the TAO Term Loan Facility in consecutive quarterly installments equal to $688 per quarter initially, stepping up over time to $4,125 per quarter by March 31, 2021 and through the final maturity date of the TAO Term Loan Facility with the final balance payable on such maturity date.
TAOG is also required to make mandatory prepayments under the TAO Credit Facilities in certain circumstances, including, without limitation, 75% of excess cash flow, with a step-down to 50% when the total net leverage ratio is less than 2.00:1.00.
The TAO Credit Facilities contain certain restrictions on the ability of TAOG to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the TAO Credit Facilities, including, without limitation, the following: (i) incurring additional indebtedness; (ii) creating liens on assets; (iii) making distributions, dividends and other restricted payments; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; (vi) making investments; and (vii) prepaying certain indebtedness.
See Note 10 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
for more information regarding the Company’s debt maturities for the
TAO Term Loan Facility
.
Deferred Financing Costs
The following table summarizes the presentation of the
TAO Term Loan Facility
, and the related deferred financing costs in the accompanying consolidated balance sheets as of
September 30, 2017
and
June 30, 2017
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
TAO Term Loan Facility
|
|
Deferred Financing Costs
|
|
Total
|
Current portion of long-term debt
|
|
$
|
688
|
|
|
$
|
—
|
|
|
$
|
688
|
|
Long-term debt, net of deferred financing costs
|
|
109,312
|
|
|
(4,325
|
)
|
|
104,987
|
|
Total
|
|
$
|
110,000
|
|
|
$
|
(4,325
|
)
|
|
$
|
105,675
|
|
|
|
|
|
|
|
|
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
TAO Term Loan Facility
|
|
Deferred Financing Costs
|
|
Total
|
Current portion of long-term debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Long-term debt, net of deferred financing costs
|
|
110,000
|
|
|
(4,567
|
)
|
|
105,433
|
|
Total
|
|
$
|
110,000
|
|
|
$
|
(4,567
|
)
|
|
$
|
105,433
|
|
The following table summarizes deferred financing costs, net of amortization, related to the
Knicks Revolving Credit Facility
,
Knicks Unsecured Credit Facility
,
Rangers Revolving Credit Facility
, and
TAO Revolving Credit Facility
as reported on the accompanying consolidated balance sheets as of
September 30, 2017
and
June 30, 2017
.
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
June 30,
2017
|
Other current assets
|
|
$
|
778
|
|
|
$
|
806
|
|
Other assets
|
|
2,491
|
|
|
2,784
|
|
Note 10. Accumulated Other Comprehensive Income (Loss)
The following table details the components of accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans and
Postretirement
Plan
(a)
|
|
Unrealized Gain on Available-for-sale
Securities
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Balance as of June 30, 2017
|
$
|
(39,408
|
)
|
|
$
|
5,293
|
|
|
$
|
(34,115
|
)
|
Other comprehensive loss before reclassifications, before income taxes
|
—
|
|
|
(770
|
)
|
|
(770
|
)
|
Amounts reclassified from accumulated other comprehensive loss, before income taxes
|
328
|
|
|
—
|
|
|
328
|
|
Other comprehensive income (loss)
|
328
|
|
|
(770
|
)
|
|
(442
|
)
|
Balance as of September 30, 2017
|
$
|
(39,080
|
)
|
|
$
|
4,523
|
|
|
$
|
(34,557
|
)
|
|
|
|
|
|
|
Balance as of June 30, 2016
|
$
|
(42,611
|
)
|
|
$
|
—
|
|
|
$
|
(42,611
|
)
|
Other comprehensive income before reclassifications, before income taxes
|
—
|
|
|
6,742
|
|
|
6,742
|
|
Amounts reclassified from accumulated other comprehensive loss, before income taxes
|
332
|
|
|
—
|
|
|
332
|
|
Income tax expense
|
(100
|
)
|
|
(3,026
|
)
|
|
(3,126
|
)
|
Other comprehensive income
|
232
|
|
|
3,716
|
|
|
3,948
|
|
Balance as of September 30, 2016
|
$
|
(42,379
|
)
|
|
$
|
3,716
|
|
|
$
|
(38,663
|
)
|
________________
|
|
(a)
|
Amounts reclassified from accumulated other comprehensive loss, before income taxes, represent amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected in direct operating expenses and selling, general and administrative expenses in the accompanying consolidated statements of operations (see Note
11
).
|
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note
11
. Pension Plans and Other Postretirement Benefit Plan
See Note 11 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
for more information regarding the Company’s defined benefit pension plans (“Pension Plans”), postretirement benefit plan (“Postretirement Plan”), MSG Holdings, L.P. 401(k) Savings Plan and the MSG Holdings, L.P. Excess Savings Plan (collectively, the “
Savings Plans
”), and MSG Holdings, L.P. 401(k) Union Plan (the “
Union Savings Plan
”).
Defined Benefit Pension Plans and Postretirement Benefit Plan
Components of net periodic benefit cost for the Pension Plans and Postretirement Plan recognized in direct operating expenses and selling, general and administrative expenses in the accompanying consolidated statements of operations for the
three
months ended
September 30, 2017
and
2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
Postretirement Plan
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Service cost
|
|
$
|
21
|
|
|
$
|
23
|
|
|
$
|
31
|
|
|
$
|
34
|
|
Interest cost
|
|
1,239
|
|
|
1,240
|
|
|
39
|
|
|
41
|
|
Expected return on plan assets
|
|
(596
|
)
|
|
(596
|
)
|
|
—
|
|
|
—
|
|
Recognized actuarial loss
|
|
340
|
|
|
344
|
|
|
—
|
|
|
—
|
|
Amortization of unrecognized prior service credit
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
(12
|
)
|
Net periodic benefit cost
|
|
$
|
1,004
|
|
|
$
|
1,011
|
|
|
$
|
58
|
|
|
$
|
63
|
|
Defined Contribution Pension Plans
For the three months ended
September 30, 2017
and
2016
, expenses related to the
Savings Plans
included in the accompanying consolidated statements of operations were
$2,223
and
$1,962
, respectively. For the three months ended
September 30, 2017
and
2016
, expenses related to the
Union Savings Plan
included in the accompanying consolidated statements of operations were
$25
and
$22
, respectively.
Note
12
. Share-based Compensation
See Note 12 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2017
for more information regarding the Company’s 2015 Employee Stock Plan (the “
Employee Stock Plan
”) and its 2015 Stock Plan for Non-Employee Directors.
For the three months ended
September 30, 2017
and
2016
, share-based compensation expense was recognized in the consolidated statements of operations as a component of direct operating expenses or selling, general and administrative expenses and was
$12,904
and
$8,355
, respectively. Upon the adoption of ASU 2016-09, the Company elected to account for forfeitures as they occur on a prospective basis effective July 1, 2017, rather than estimating expected forfeitures as was required under the prior guidance. See “Note
2
.
Accounting Policies
—
Recently Issued Accounting Pronouncements
” for further discussion on the impact from the adoption of ASU 2016-09.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Restricted Stock Units Award Activity
The following table summarizes activity related to holders (including the Company and MSG Networks’ employees) of the Company’s restricted stock units and performance restricted stock units, collectively referred to as “
RSUs
,” for the
three months ended
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Weighted-Average
Fair Value
Per Share At
Date of Grant
|
|
Nonperformance
Based
Vesting
RSUs
|
|
Performance
Based
Vesting
RSUs
|
|
Unvested award balance, June 30, 2017
|
208
|
|
|
464
|
|
|
$
|
172.78
|
|
Granted
|
96
|
|
|
180
|
|
|
$
|
211.17
|
|
Vested
|
(69
|
)
|
|
(42
|
)
|
|
$
|
160.84
|
|
Unvested award balance, September 30, 2017
|
235
|
|
|
602
|
|
|
$
|
187.04
|
|
The fair value of RSUs that vested during the
three months ended
September 30, 2017
was
$23,874
.
RSUs
granted under the
Employee Stock Plan
were net share-settled to cover the required statutory tax withholding obligations. To fulfill the employees’ statutory minimum tax withholding obligations for the applicable income and other employment taxes,
51
of these
RSUs
, with an aggregate value of
$10,873
were retained by the Company and reflected as financing activity in the accompanying consolidated statement of cash flows for the
three months ended
September 30, 2017
.
The fair value of RSUs that vested during the
three months ended
September 30, 2016
was
$13,642
. The weighted-average fair value per share at grant date of RSUs granted during the
three months ended
September 30, 2016
was
$170.50
.
Note 13. Stock Repurchase Program
On September 11, 2015, the Company’s board of directors authorized the repurchase of up to
$525,000
of the Company’s Class A Common Stock once the shares of the Company’s Class A Common Stock began “regular way” trading on October 1, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors.
During the
three months ended
September 30, 2017
, the Company repurchased
18
shares of Class A Common Stock for a total cost of
$3,761
, including commissions and fees. These acquired shares have been classified as treasury stock in the accompanying consolidated balance sheet as of
September 30, 2017
. As of
September 30, 2017
, the Company had
$267,562
of availability remaining under its stock repurchase authorization.
Note 14. Related Party Transactions
As of
September 30, 2017
, members of the Dolan family including trusts for members of the Dolan family (collectively, the “
Dolan Family Group
”), for purposes of Section 13(d) of the Securities Exchange Act of 1934, collectively beneficially own all of the Company’s outstanding Class B Common Stock and own approximately
2.8%
of the Company’s outstanding Class A Common Stock. Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately
71.2%
of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan family are also the controlling stockholders of
MSG Networks
and AMC Networks Inc. (“
AMC Networks
”).
In connection with the
Distribution
, the Company has entered into various agreements with MSG Networks, including media rights agreements covering the Knicks and the Rangers games, an
advertising sales representation agreement
, and a transition services agreement (“
TSA
”). The TSA expired on September 30, 2017, and in connection with the expiration, the Company entered into an interim services agreement pursuant to which each party provides the other with certain services on the same terms as provided in the TSA on an interim basis while the parties work to finalize a new services agreement. The Company expects to enter into a new services agreement this calendar year which will be retroactive to July 1, 2017 and will provide for each party to furnish substantially the same services in exchange for service fees.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
On June 16, 2016, the Company entered into an arrangement with the Dolan Family Office, LLC (“
DFO
”),
AMC Networks
and MSG Networks providing for the sharing of certain expenses associated with executive office space which will be available to James L. Dolan (the Executive Chairman and a director of the Company and
MSG Networks
and a director of
AMC Networks
), Charles F. Dolan (the Executive Chairman and a director of
AMC Networks
and a director of the Company and
MSG Networks
), and the
DFO
which is controlled by Charles F. Dolan.
Beginning in June 2016, the Company agreed to share certain executive support costs, including office space, executive assistants, security and transportation costs, for (i) the Company’s Executive Chairman with MSG Networks and (ii) the Company’s Vice Chairman with MSG Networks and AMC Networks.
On January 11, 2017, the Company, through a wholly-owned subsidiary, and Quart 2C, LLC (“
Q2C
”), a company controlled by James L. Dolan, the Company’s Executive Chairman and director, and Kristin A. Dolan, his wife and a director of the Company, entered into reciprocal aircraft lease agreements pursuant to which the Company and
Q2C
have agreed from time to time to make available for lease each party’s aircraft to the other party on a non-exclusive basis for rent at an hourly rate and specified expenses of each flight. On February 8, 2017, the Company, through a wholly-owned subsidiary, and
AMC Networks
entered into aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make the aircraft owned or leased by it available to
AMC Networks
for lease on a “time sharing” basis.
On May 22, 2017, the Company, through a wholly-owned subsidiary, and Charles F. Dolan, a director of the Company, entered into an aircraft dry lease agreement pursuant to which the Company has agreed to make available for lease its G550 aircraft on a non-exclusive basis for rent at an hourly rate and specified expenses of each flight. Additionally, on May 22, 2017, the Company, through a wholly-owned subsidiary, and Sterling Aviation, LLC, a company controlled by Charles F. Dolan, also entered into a reciprocal aircraft dry lease agreement pursuant to which Sterling Aviation, LLC has agreed to make available for lease its GV aircraft on a non-exclusive basis for rent at an hourly rate and specified expenses of each flight.
The Company, through a wholly-owned subsidiary, and MSG Networks are party to an aircraft time sharing agreement, pursuant to which the Company has agreed from time to time to make its aircraft available to MSG Networks for lease on a “time sharing” basis. Additionally, the Company and MSG Networks have agreed on an allocation of the costs of certain helicopter use by its shared executives.
The Company also has certain arrangements with its nonconsolidated affiliates. See Note
5
for information on outstanding loans provided by the Company to its nonconsolidated affiliates.
Revenues and Operating Expenses
The following table summarizes the composition and amounts of the transactions with the Company’s affiliates, primarily MSG Networks. These amounts are reflected in revenues and operating expenses in the accompanying consolidated statements of operations for the
three
months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
2017
|
|
2016
|
Revenues
|
|
$
|
35,910
|
|
|
$
|
33,841
|
|
Operating expenses (credits):
|
|
|
|
|
Corporate general and administrative, net - MSG Networks
|
|
$
|
(2,456
|
)
|
|
$
|
(2,489
|
)
|
Consulting fees
|
|
1,015
|
|
|
977
|
|
Advertising expenses
|
|
36
|
|
|
120
|
|
Other, net
|
|
113
|
|
|
18
|
|
Revenues
Revenues from related parties primarily consist of local media rights recognized by the Company’s Sports segment from the licensing of team-related programming to MSG Networks under the media rights agreements covering the Knicks and Rangers, which provide MSG Networks with exclusive media rights to team games in their local markets, as well as commissions earned
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
in connection with the advertising sales representation agreement pursuant to which the Company has the exclusive right and obligation to sell MSG Networks’ advertising availabilities. In addition, the Company and Tribeca Enterprises have a service agreement pursuant to which the Company provides marketing inventory and consulting services to Tribeca Enterprises for a fee.
Corporate General and Administrative Expense, net - MSG Networks
The Company’s corporate overhead expenses are primarily related to centralized functions, including executive compensation, finance, treasury, tax, internal audit, legal, information technology, human resources and risk management functions. For the
three
months ended
September 30, 2017
and
2016
, corporate general and administrative expense, net - MSG Networks amount reflects charges from the Company to MSG Networks under the TSA of
$2,203
and
$2,048
, respectively, net of general and administrative costs charged to the Company by MSG Networks.
Consulting Fees
The Company pays AMSGE and its nonconsolidated affiliates for advisory and consulting services that AMSGE and its nonconsolidated affiliates provide to the Company, and for the reimbursement of certain expenses in connection with such services. In the fourth quarter of fiscal year 2016, the Company paid
$5,000
to AMSGE for work performed towards securing the right to lease property to be developed in Las Vegas. That amount is included in other assets in the accompanying consolidated balance sheets as of
September 30, 2017
and
June 30, 2017
and will be amortized over the term of the lease.
Advertising Expenses
The Company incurs advertising expenses for services rendered by its related parties, primarily MSG Networks, most of which related to the utilization of advertising and promotional benefits by the Company.
Other Operating Expenses, net
The Company and its related parties enter into transactions with each other in the ordinary course of business. Amounts charged to the Company for other transactions with its related parties are net of amounts charged by the Company to the Knickerbocker Group, LLC, an entity owned by James L. Dolan, the Executive Chairman and a director of the Company, for office space equal to the allocated cost of such space and the cost of certain technology services. In addition, other operating expenses include net charges relating to (i) reciprocal aircraft arrangements between the Company and each of Q2C and DFO/Sterling Aviation, LLC and (ii) time sharing agreements with MSG Networks and AMC Networks.
Note 15. Income Taxes
Income tax expense (benefit) for the
three
months ended
September 30, 2017
and
2016
was
$762
and
$(2,934)
, respectively. The effective tax rate for the
three
months ended
September 30, 2017
and
2016
was
(7.5)%
and
9.2%
, respectively.
The Company’s effective tax rate for the
three
months ended
September 30, 2017
is different when compared to the statutory federal rate of
35%
as a result of
$3,492
in Federal and state valuation allowance increases recorded which offset the benefit of most of the operating losses.
The income tax expense also reflects expense of
$807
related to non-deductible expenses.
The Company’s effective tax rate for the three months ended
September 30, 2016
is different when compared to the statutory federal rate of
35%
as a result of
$11,201
Federal and state valuation allowances recorded which offset the benefit of most of the operating losses.
Such increase in the valuation allowances reflects a reduction of
$3,126
as the mark-to-market gains on available-for-sale securities in other comprehensive income allowed for the recognition of benefit on a portion of such operating losses.
The income tax benefit also reflects expense of
$138
primarily related to non-deductible expenses.
The Company has not recorded any unrecognized tax benefits for uncertain tax positions
as of
September 30, 2017
and
June 30, 2017
. The Company’s policy is to reflect interest and penalties associated with uncertain tax positions, if any, as a component of income tax expense.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note
16
. Segment Information
The Company is comprised of
two
reportable segments: MSG Entertainment and MSG Sports. In determining its reportable segments, the Company assessed the guidance of
FASB
ASC
280-10-50-1, which provides the definition of a reportable segment. In accordance with the
FASB
guidance, the Company takes into account whether two or more operating segments can be aggregated together as one reportable segment as well as the type of discrete financial information that is available and regularly reviewed by its chief operating decision maker. The Company has evaluated this guidance and determined that there are two reportable segments. The Company allocates certain corporate costs and its performance venue operating expenses to each of its reportable segments. Allocated venue operating expenses include the non-event related costs of operating the Company’s venues, and include such costs as rent for the Company’s leased venues, real estate taxes, insurance, utilities, repairs and maintenance, and labor related to the overall management of the venues. Depreciation and amortization expense related to
The Garden
, The Theater at Madison Square Garden, the Forum, and certain corporate property, equipment and leasehold improvements not allocated to the reportable segments is reported in “
Corporate and Other
.” Additionally, the Company does not allocate any purchase accounting adjustments to the reporting segments.
The Company evaluates segment performance based on several factors, of which the key financial measure is their operating income (loss) before (i) depreciation, amortization and impairments of property and equipment and intangible assets, (ii) share-based compensation expense or benefit, (iii) restructuring charges or credits, and (iv) gains or losses on sales or dispositions of businesses, which is referred to as
adjusted operating income (loss)
, a non-GAAP measure. In addition to excluding the impact of the items discussed above, the impact of purchase accounting adjustments related to business acquisitions is also excluded in evaluating the Company’s consolidated
adjusted operating income (loss)
. The Company believes
adjusted operating income (loss)
is an appropriate measure for evaluating the operating performance of its 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 the Company’s performance. The Company uses revenues and
adjusted operating income (loss)
measures as the most important indicators of its business performance, and evaluates 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 GAAP. The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to
adjusted operating income (loss)
.
Information as to the operations of the Company’s reportable segments is set forth below.
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017
|
|
|
|
MSG
Entertainment
|
|
MSG
Sports
|
|
Corporate and Other
|
|
Purchase
accounting adjustments
|
|
Total
|
Revenues
|
|
|
$
|
164,138
|
|
|
$
|
80,934
|
|
|
$
|
—
|
|
|
$
|
(24
|
)
|
|
$
|
245,048
|
|
Direct operating expenses
|
|
|
105,646
|
|
|
16,902
|
|
|
21
|
|
|
1,167
|
|
|
123,736
|
|
Selling, general and administrative expenses
|
(a)
|
|
44,627
|
|
|
42,436
|
|
|
19,353
|
|
|
—
|
|
|
106,416
|
|
Depreciation and amortization
|
(b)
|
|
4,161
|
|
|
1,906
|
|
|
20,300
|
|
|
4,179
|
|
|
30,546
|
|
Operating income (loss)
|
|
|
$
|
9,704
|
|
|
$
|
19,690
|
|
|
$
|
(39,674
|
)
|
|
$
|
(5,370
|
)
|
|
$
|
(15,650
|
)
|
Earnings in equity method investments
|
|
|
|
|
|
|
|
|
|
|
4,725
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
4,386
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(3,711
|
)
|
Miscellaneous income
|
|
|
|
|
|
|
|
|
|
|
145
|
|
Loss from operations before income taxes
|
|
|
|
|
|
|
|
|
|
|
$
|
(10,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of operating income (loss) to adjusted operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
$
|
9,704
|
|
|
$
|
19,690
|
|
|
$
|
(39,674
|
)
|
|
$
|
(5,370
|
)
|
|
$
|
(15,650
|
)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
3,901
|
|
|
4,236
|
|
|
4,767
|
|
|
—
|
|
|
12,904
|
|
Depreciation and amortization
|
|
|
4,161
|
|
|
1,906
|
|
|
20,300
|
|
|
4,179
|
|
|
30,546
|
|
Other purchase accounting adjustments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,191
|
|
|
1,191
|
|
Adjusted operating income (loss)
|
|
|
$
|
17,766
|
|
|
$
|
25,832
|
|
|
$
|
(14,607
|
)
|
|
$
|
—
|
|
|
$
|
28,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(c)
|
|
$
|
7,706
|
|
|
$
|
971
|
|
|
$
|
10,862
|
|
|
$
|
—
|
|
|
$
|
19,539
|
|
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2016
|
|
|
|
MSG
Entertainment
|
|
MSG
Sports
|
|
Corporate and Other
|
|
Purchase
accounting adjustments
|
|
Total
|
Revenues
|
|
|
$
|
110,698
|
|
|
$
|
70,997
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
181,695
|
|
Direct operating expenses
|
|
|
91,858
|
|
|
19,549
|
|
|
—
|
|
|
—
|
|
|
111,407
|
|
Selling, general and administrative expenses
|
(a)
|
|
23,440
|
|
|
39,513
|
|
|
14,068
|
|
|
—
|
|
|
77,021
|
|
Depreciation and amortization
|
(b) (d)
|
|
2,456
|
|
|
2,618
|
|
|
20,806
|
|
|
230
|
|
|
26,110
|
|
Operating income (loss)
|
|
|
$
|
(7,056
|
)
|
|
$
|
9,317
|
|
|
$
|
(34,874
|
)
|
|
$
|
(230
|
)
|
|
$
|
(32,843
|
)
|
Loss in equity method investments
|
|
|
|
|
|
|
|
|
|
|
(994
|
)
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
2,399
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(410
|
)
|
Miscellaneous income
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Loss from operations before income taxes
|
|
|
|
|
|
|
|
|
|
|
$
|
(31,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of operating income (loss) to adjusted operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
$
|
(7,056
|
)
|
|
$
|
9,317
|
|
|
$
|
(34,874
|
)
|
|
$
|
(230
|
)
|
|
$
|
(32,843
|
)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
3,539
|
|
|
3,484
|
|
|
1,332
|
|
|
—
|
|
|
8,355
|
|
Depreciation and amortization
|
|
|
2,456
|
|
|
2,618
|
|
|
20,806
|
|
|
230
|
|
|
26,110
|
|
Adjusted operating income (loss)
|
|
|
$
|
(1,061
|
)
|
|
$
|
15,419
|
|
|
$
|
(12,736
|
)
|
|
$
|
—
|
|
|
$
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
$
|
1,360
|
|
|
$
|
1,664
|
|
|
$
|
5,318
|
|
|
$
|
—
|
|
|
$
|
8,342
|
|
_________________
|
|
(a)
|
Corporate and Other
’s selling, general and administrative expenses primarily consist of unallocated corporate general and administrative costs.
|
|
|
(b)
|
Corporate and Other principally includes depreciation and amortization on The Garden, The Theater at Madison Square Garden, the Forum, and certain corporate property, equipment and leasehold improvement assets not allocated to the Company’s reportable segments.
|
|
|
(c)
|
Corporate and Other’s capital expenditures for the
three
months ended
September 30, 2017
are primarily associated with venues. MSG Entertainment’s capital expenditures for the
three
months ended
September 30, 2017
are primarily associated with certain investments with respect to Radio City Music Hall.
|
|
|
(d)
|
MSG Entertainment’s depreciation and amortization for the
three
months ended
September 30, 2016
was reclassified to exclude the impact of purchase accounting adjustments related to business acquisitions.
|
Substantially all revenues and assets of the Company’s reportable segments are attributed to or located in the United States and are primarily concentrated in the New York metropolitan area.