MSG Networks Inc. Reports Fiscal 2017 Third Quarter Results
Fiscal 2017 third quarter revenues of
Fiscal 2017 third quarter operating income of
Fiscal 2017 third quarter adjusted operating income of
For the fiscal 2017 third quarter,
President and CEO
Fiscal Year 2017 Third Quarter Results | |||||
(In thousands, except per share data) | Three Months Ended | ||||
2017 | |||||
Revenues | $ | 183,247 | |||
Operating income | 83,054 | ||||
Adjusted operating income | 88,019 | ||||
Income from continuing operations | 44,155 | ||||
Diluted EPS from continuing operations | $ | 0.58 | |||
1. The Company formerly referred to adjusted operating income as adjusted operating cash flow. The components of adjusted operating income are identical to the components of adjusted operating cash flow. 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 Continuing Operations
Fiscal 2017 third quarter total revenues of
Direct operating expenses of
Selling, general and administrative expenses of
Operating income of
Adjusted operating income of
Excluding the impact of the favorable affiliate adjustment recorded in the prior year quarter, fiscal 2017 third quarter operating income of
About
An industry leader in sports production, and content development and distribution,
Non-GAAP Financial Measures
We define adjusted operating income, which is a non-GAAP 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.
The Company formerly referred to adjusted operating income as adjusted operating cash flow. The components of adjusted operating income are identical to the components of adjusted operating cash flow.
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 management's 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
The Company defines Free Cash Flow ("Free Cash Flow"), which is a non-GAAP financial measure, as net cash provided by operating activities from continuing operations less capital expenditures, both of which are reported in our Consolidated Statement of Cash Flows. Net cash provided by operating activities from continuing operations excludes net cash provided by operating activities of discontinued operations. 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 Company's generation of liquidity with other companies in the industry, although the Company's 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 from continuing operations, 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 Company's filings with the
Conference Call Information:
The conference call will be Webcast live today at
Conference call dial-in number is 877-883-0832 / Conference ID Number 5164511
Conference call replay number is 855-859-2056 / Conference ID Number 5164511 until
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
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Three Months Ended | Nine Months Ended | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | $ | 183,247 | $ | 179,596 | $ | 512,471 | $ | 497,674 | ||||||||
Direct operating expenses | 75,687 | 73,329 | 206,697 | 204,978 | ||||||||||||
Selling, general and administrative expenses | 21,930 | 19,578 | 60,680 | 83,066 | ||||||||||||
Depreciation and amortization | 2,576 | 2,602 | 7,734 | 10,372 | ||||||||||||
Operating income | 83,054 | 84,087 | 237,360 | 199,258 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 741 | 687 | 2,017 | 1,771 | ||||||||||||
Interest expense | (10,204 | ) | (10,491 | ) | (29,433 | ) | (22,060 | ) | ||||||||
Interest expense, net | (9,463 | ) | (9,804 | ) | (27,416 | ) | (20,289 | ) | ||||||||
Income from continuing operations before income taxes | 73,591 | 74,283 | 209,944 | 178,969 | ||||||||||||
Income tax expense | (29,436 | ) | (29,573 | ) | (82,173 | ) | (58,878 | ) | ||||||||
Income from continuing operations | 44,155 | 44,710 | 127,771 | 120,091 | ||||||||||||
Loss from discontinued operations, net of taxes | — | (40 | ) | (120 | ) | (161,194 | ) | |||||||||
Net income (loss) | $ | 44,155 | $ | 44,670 | $ | 127,651 | $ | (41,103 | ) | |||||||
Earnings (loss) per share: | ||||||||||||||||
Basic | ||||||||||||||||
Income from continuing operations | $ | 0.59 | $ | 0.60 | $ | 1.70 | $ | 1.60 | ||||||||
Loss from discontinued operations | — | — | — | (2.15 | ) | |||||||||||
Net income (loss) | $ | 0.59 | $ | 0.60 | $ | 1.70 | $ | (0.55 | ) | |||||||
Diluted | ||||||||||||||||
Income from continuing operations | $ | 0.58 | $ | 0.59 | $ | 1.69 | $ | 1.59 | ||||||||
Loss from discontinued operations | — | — | — | (2.13 | ) | |||||||||||
Net income (loss) | $ | 0.58 | $ | 0.59 | $ | 1.69 | $ | (0.54 | ) | |||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||
Basic | 75,264 | 75,037 | 75,194 | 75,173 | ||||||||||||
Diluted | 75,643 | 75,353 | 75,505 | 75,544 |
Note: For the nine months ended
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.
Three Months Ended | Nine Months Ended | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Operating income | $ | 83,054 | $ | 84,087 | $ | 237,360 | $ | 199,258 | |||||||||
Share-based compensation | 2,389 | 1,077 | 7,438 | 7,976 | |||||||||||||
Depreciation and amortization | 2,576 | 2,602 | 7,734 | 10,372 | |||||||||||||
Adjusted operating income | $ | 88,019 | $ | 87,766 | $ | 252,532 | $ | 217,606 |
CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) |
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2017 |
2016 |
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ASSETS | (unaudited) | |||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 176,670 | $ | 119,568 | ||||||||
Accounts receivable, net | 105,955 | 101,427 | ||||||||||
Net related party receivable | 31,488 | 15,492 | ||||||||||
Prepaid income taxes | 19,576 | 28,384 | ||||||||||
Prepaid expenses | 9,061 | 13,188 | ||||||||||
Other current assets | 2,345 | 3,053 | ||||||||||
Total current assets | 345,095 | 281,112 | ||||||||||
Property and equipment, net | 11,342 | 14,154 | ||||||||||
Amortizable intangible assets, net | 41,528 | 44,123 | ||||||||||
424,508 | 424,508 | |||||||||||
Other assets | 41,960 | 42,645 | ||||||||||
Total assets | $ | 864,433 | $ | 806,542 | ||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable | $ | 1,011 | $ | 2,043 | ||||||||
Net related party payable | 5,702 | 4,302 | ||||||||||
Current portion of long-term debt | 72,414 | 64,914 | ||||||||||
Income taxes payable | 32,125 | 8,662 | ||||||||||
Accrued liabilities: | ||||||||||||
Employee related costs | 11,906 | 10,340 | ||||||||||
Other accrued liabilities | 20,973 | 15,991 | ||||||||||
Deferred revenue | 5,578 | 6,143 | ||||||||||
Total current liabilities | 149,709 | 112,395 | ||||||||||
Long-term debt, net of current portion | 1,308,535 | 1,412,845 | ||||||||||
Defined benefit and other postretirement obligations | 31,121 | 31,827 | ||||||||||
Other employee related costs | 3,913 | 5,550 | ||||||||||
Related party payable | — | 1,710 | ||||||||||
Other liabilities | 5,490 | 5,612 | ||||||||||
Deferred tax liability | 352,710 | 356,561 | ||||||||||
Total liabilities | 1,851,478 | 1,926,500 | ||||||||||
Commitments and contingencies | ||||||||||||
Stockholders' Deficiency: | ||||||||||||
Class A Common stock, par value |
643 | 643 | ||||||||||
Class |
136 | 136 | ||||||||||
Preferred stock, par value |
— | — | ||||||||||
Additional paid-in capital | 5,044 | — | ||||||||||
(199,300 | ) | (207,796 | ) | |||||||||
Accumulated deficit | (786,230 | ) | (905,352 | ) | ||||||||
Accumulated other comprehensive loss | (7,338 | ) | (7,589 | ) | ||||||||
Total stockholders' deficiency | (987,045 | ) | (1,119,958 | ) | ||||||||
Total liabilities and stockholders' deficiency | $ | 864,433 | $ | 806,542 |
SUPPLEMENTAL FINANCIAL INFORMATION (Dollars in thousands) (Unaudited) |
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Summary Data from the Statements of Cash Flows | ||||||||||||||||
Nine Months Ended | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Net cash provided by operating activities from continuing operations | $ | 161,673 | $ | 161,280 | ||||||||||||
Net cash used in investing activities from continuing operations | (2,576 | ) | (2,458 | ) | ||||||||||||
Net cash used in financing activities from continuing operations | (101,019 | ) | (82,357 | ) | ||||||||||||
Net cash provided by continuing operations | 58,078 | 76,465 | ||||||||||||||
Net cash used in discontinued operations | (976 | ) | (184,095 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 119,568 | 218,685 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 176,670 | $ | 111,055 |
Free Cash Flow | ||||||||||||||||
Nine Months Ended | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Net cash provided by operating activities from continuing operations | $ | 161,673 | $ | 161,280 | ||||||||||||
Less: Capital expenditures | (2,576 | ) | (2,458 | ) | ||||||||||||
Free cash flow | $ | 159,097 | $ | 158,822 |
Capitalization | ||||||||||
Cash and cash equivalents | $ | 176,670 | ||||||||
Credit facility debt(a) | 1,390,000 | |||||||||
Net debt | $ | 1,213,330 | ||||||||
Annualized adjusted operating income(b) | $ | 332,361 | ||||||||
Leverage ratio(c) | 3.7x |
(a)Represents aggregate principal amount of the debt outstanding. |
(b)Represents reported adjusted operating income for the trailing twelve months. |
(c)Represents net debt divided by annualized adjusted operating income, which differs from the covenant calculation contained in the Company's credit facility. |
Contacts:Kimberly Kerns Communications (212) 465-6442Ari Danes , CFA Investor Relations (212) 465-6072
Source:
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