Fiscal 2016 third quarter revenues of $179.6 million
Fiscal 2016 third quarter AOCF of $87.8 million
Fiscal 2016 third quarter operating income of $84.1 million

NEW YORK, May 04, 2016 (GLOBE NEWSWIRE) -- MSG Networks Inc. (NYSE:MSGN) today reported financial results for the fiscal third quarter ended March 31, 2016. 

For the fiscal 2016 third quarter, MSG Networks Inc. generated revenues of $179.6 million, an increase of 6% as compared with the prior year period.  In addition, the Company generated adjusted operating cash flow (“AOCF”) of $87.8 million, operating income of $84.1 million and income from continuing operations of $44.7 million.⁽¹⁾

For the three months ended March 31, 2015, the reported financial results of MSG Networks Inc. reflect the results of the sports and entertainment businesses of The Madison Square Garden Company as discontinued operations.  Please note that results from continuing operations for the fiscal 2015 third quarter include certain corporate overhead expenses that MSG Networks Inc. did not incur in the fiscal 2016 third quarter and does not expect to incur in future periods, but do not meet the criteria for inclusion in discontinued operations.  The reported financial results of MSG Networks Inc. for the three months ended March 31, 2016 reflect the Company's results on a standalone basis, including the Company’s actual corporate overhead. 

President and CEO Andrea Greenberg said, “For the third quarter, our compelling lineup of highly valuable, exclusive live sports content and other award-winning original programming drove strong results that included continued growth in affiliate revenue, and a strong increase in advertising revenue.  We are well on our way to delivering a substantial level of revenue and AOCF for the full fiscal year, and remain confident in our ability to create long-term value for our shareholders.”

Fiscal Year 2016 Third Quarter Results
(In thousands, except per share data)		Three Months Ended
		March 31,
		2016
Revenues		$	179,596
Adjusted operating cash flow		87,766
Operating income		84,087
Income from continuing operations		44,710
Diluted EPS from continuing operations		$	0.59

1. See definition of adjusted operating cash flow (“AOCF”) included in the discussion of non-GAAP financial measures on page 3 of this earnings release.

Summary of Reported Results from Continuing Operations
Fiscal 2016 third quarter total revenues of $179.6 million increased 6%, or $10.6 million, as compared with the prior year period. Affiliation fee revenue increased $4.4 million, primarily due to higher affiliation rates and, to a lesser extent, the impact of a favorable affiliate adjustment recorded in the current year period, partially offset by the impact of a low single digit percentage decrease in subscribers versus the prior year period. Advertising revenue increased $6.1 million, primarily driven by higher average per game sales from the telecast of live professional sports programming. Excluding the impact of the favorable affiliate adjustment recorded in the current year quarter, fiscal 2016 third quarter affiliation fee revenue increased $2.8 million and total company revenues increased $9.1 million, or 5%, both as compared with the prior year period.  

Direct operating expenses of $73.3 million increased 21%, or $12.7 million, as compared with the prior year period.  The increase was primarily due to higher rights fees expense, partially offset by other programming-related cost decreases.  Higher rights fees expense includes a $12.1 million increase related to the new long-term media rights agreements with the New York Knicks and New York Rangers.   Assuming the new media rights fees with the New York Knicks and New York Rangers were in place during the prior year third quarter, direct operating expenses of $73.3 million in the current year period would have represented an increase of 1%, or $0.6 million.

Selling, general and administrative expenses of $19.6 million decreased 38%, or $11.9 million, as compared with the prior year period, primarily due to the absence of certain corporate overhead expenses included in the results of the prior year third quarter.  As noted above, fiscal 2015 third quarter reported results from continuing operations include certain corporate expenses that MSG Networks Inc. did not incur during the current year third quarter and does not expect to incur in future periods.  Partially offsetting this decrease in expenses are corporate costs which were incurred during the fiscal 2016 third quarter by MSG Networks Inc. as a standalone public company as well as incremental net expenses related to the Company's advertising sales representation agreement with The Madison Square Garden Company.

Adjusted operating cash flow of $87.8 million increased 13%, or $10.2 million, and operating income of $84.1 million increased 16%, or $11.7 million, both as compared with the prior year period, primarily due to lower selling, general and administrative expenses and higher revenues, partially offset by higher direct operating expenses.

About MSG Networks Inc.
MSG Networks Inc. is an industry leader with two award-winning regional sports and entertainment networks, MSG Network (MSG) and MSG+, as well as the live streaming and video on demand platform, MSG GO. The networks are home to nine professional sports teams, delivering live games of the New York Knicks; New York Rangers; New York Islanders; New Jersey Devils; Buffalo Sabres; New York Liberty; Major League Soccer’s Red Bulls and the Westchester Knicks, and exclusive non-game coverage of the New York Giants.  Each year, the networks collectively telecast approximately 700 live sporting events - which also include college football and college basketball from top conferences - along with a full schedule of critically-acclaimed original programming.  The gold standard for regional broadcasting, MSG Networks has won 145 New York Emmy Awards over the past nine years.

Non-GAAP Financial Measures
We define adjusted operating cash flow (“AOCF”), 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.  The Company excluded the gain on sale of Fuse from AOCF as it is not indicative of the Company’s ongoing operating performance.  Because it is based upon operating income, AOCF also excludes interest expense (including cash interest expense) and other non-operating income and expense items. We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the Company without regard to either the distortive effects of fluctuating stock prices or the settlement of an obligation that is not expected to be made in cash.

We believe AOCF is an appropriate measure for evaluating the operating performance of our Company.  AOCF and similar measures with similar titles are common performance measures used by investors and analysts to analyze our performance. Internally, we use revenues and AOCF measures as the most important indicators of our business performance, and evaluate management’s effectiveness with specific reference to these indicators. AOCF should be viewed as a supplement to and not a substitute for operating income, net income, cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Since AOCF is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. For a reconciliation of operating income to AOCF, please see page 5 of this release.

This press release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results, developments and events may differ materially from those in the forward-looking statements as a result of various factors, including financial community perceptions of the Company and its business, operations, financial condition and the industry in which it operates and the factors described in the Company’s filings with the Securities and Exchange Commission, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. The Company disclaims any obligation to update any forward-looking statements contained herein.

Conference Call Information:

The conference call will be Webcast live today at 10:00 a.m. ET at www.msgnetworks.com
Conference call dial-in number is 877-883-0832 / Conference ID Number 94958091
Conference call replay number is 855-859-2056 / Conference ID Number 94958091 until May 11, 2016

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2016				2015				2016				2015
Revenues		$	179,596			$	168,958			$	497,674			$	477,848
Direct operating expenses		73,329				60,601				204,978				165,374
Selling, general and administrative expenses		19,578				31,471				83,066				113,276
Depreciation and amortization		2,602				4,474				10,372				13,204
Gain on sale of Fuse		—				—				—				(186,178		)
Operating income		84,087				72,412				199,258				372,172
Other income (expense):
Interest expense, net		(9,804		)		(461		)		(20,289		)		(1,509		)
Income from continuing operations before income taxes		74,283				71,951				178,969				370,663
Income tax expense		(29,573		)		(36,132		)		(58,878		)		(165,506		)
Income from continuing operations		44,710				35,819				120,091				205,157
Income (loss) from discontinued operations, net of taxes		(40		)		3,893				(161,194		)		3,858
Net income (loss)		$	44,670			$	39,712			$	(41,103	)		$	209,015
Earnings (loss) per share:
Basic
Income from continuing operations		$	0.60			$	0.46			$	1.60			$	2.65
Income (loss) from discontinued operations		—				0.05				(2.15		)		0.05
Net income (loss)		$	0.60			$	0.51			$	(0.55	)		$	2.70
Diluted
Income from continuing operations		$	0.59			$	0.46			$	1.59			$	2.63
Income (loss) from discontinued operations		—				0.05				(2.13		)		0.05
Net income (loss)		$	0.59			$	0.51			$	(0.54	)		$	2.68
Weighted-average number of common shares outstanding:
Basic		75,037				77,134				75,173				77,454
Diluted		75,353				77,575				75,544				78,042

Note: For the three months ended September 30, 2015 and for the three and nine months ended March 31, 2015, the reported financial results of MSG Networks Inc. reflect the results of the sports and entertainment businesses of The Madison Square Garden Company as discontinued operations.  Please note that results from continuing operations for these periods include certain corporate overhead expenses that MSG Networks Inc. did not incur in the fiscal 2016 second and third quarters and does not expect to incur in future periods, but do not meet the criteria for inclusion in discontinued operations.

ADJUSTMENTS TO RECONCILE OPERATING INCOME
TO ADJUSTED OPERATING CASH FLOW

The following is a description of the adjustments to operating income in arriving at adjusted operating cash flow as described in this earnings release: 

• Share-based compensation expense. This adjustment eliminates the compensation expense relating to restricted stock units granted under our employee stock plans and non-employee director plans in all periods.
  
• Depreciation and amortization. This adjustment eliminates depreciation, amortization and impairments of property and equipment and intangible assets in all periods.
  
• Gain on sale of Fuse. This adjustment eliminates the pre-tax gain on the sale of Fuse.
  

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2016				2015				2016				2015
Operating income		$	84,087			$	72,412			$	199,258			$	372,172
Share-based compensation		1,077				679				7,976				8,681
Depreciation and amortization		2,602				4,474				10,372				13,204
Gain on sale of Fuse		—				—				—				(186,178		)
Adjusted operating cash flow		$	87,766			$	77,565			$	217,606			$	207,879

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)

		March 31,  2016				June 30,  2015
ASSETS
Current Assets:
Cash and cash equivalents		$	111,055			$	203,768
Restricted cash		—				9,003
Accounts receivable, net		76,984				85,610
Net related party receivables		52,149				27,324
Prepaid income taxes		22,463				30,375
Prepaid expenses		7,518				12,863
Other current assets		2,477				3,514
Current assets of discontinued operations		—				125,896
Total current assets		272,646				498,353
Property and equipment, net		14,534				19,514
Amortizable intangible assets, net		44,988				47,583
Goodwill		424,508				424,508
Other assets		42,866				46,274
Non-current assets of discontinued operations		—				1,983,597
Total assets		$	799,542			$	3,019,829
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable		$	1,012			$	11,359
Net related party payables		14,170				420
Current portion of long-term debt		57,414				—
Income taxes payable		35,001				—
Accrued liabilities:
Employee related costs		8,423				19,504
Other accrued liabilities		15,863				18,101
Deferred revenue		5,878				4,971
Current liabilities of discontinued operations		—				520,179
Total current liabilities		137,761				574,534
Long-term debt, net of current portion		1,430,949				—
Defined benefit and other postretirement obligations		28,148				28,476
Other employee related costs		4,439				5,318
Related party payable		1,637				—
Other liabilities		4,145				5,951
Deferred tax liability		359,541				351,734
Non-current liabilities of discontinued operations		—				330,294
Total liabilities		1,966,620				1,296,307
Commitments and contingencies
Stockholders' Equity (Deficiency):
Class A Common stock, par value $0.01, 360,000 shares authorized; 61,293 and 62,207 shares outstanding as of March 31, 2016 and June 30, 2015, respectively		643				643
Class B Common stock, par value $0.01, 90,000 shares authorized; 13,589 shares outstanding as of March 31, 2016 and June 30, 2015		136				136
Preferred stock, par value $0.01, 45,000 shares authorized; none outstanding		—				—
Additional paid-in capital		1,490				1,084,002
Treasury stock, at cost, 2,966 and 2,052 shares as of March 31, 2016 and June 30, 2015, respectively		(213,002		)		(143,250		)
Retained earnings (accumulated deficit)		(950,594		)		807,563
Accumulated other comprehensive loss		(5,751		)		(25,572		)
Total stockholders' equity (deficiency)		(1,167,078		)		1,723,522
Total liabilities and stockholders' equity (deficiency)		$	799,542			$	3,019,829

SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in thousands)
(Unaudited)

Summary Data from the Statements of Cash Flows

		Nine Months Ended
		March 31,
		2016				2015
Net cash provided by operating activities from continuing operations		$	161,280			$	61,194
Net cash provided by (used in) investing activities from continuing operations		(2,458		)		223,857
Net cash used in financing activities from continuing operations		(82,357		)		(121,628		)
Net cash provided by continuing operations		76,465				163,423
Net cash provided by (used in) discontinued operations		(184,095		)		(14,605		)
Cash and cash equivalents at beginning of period		218,685				92,251
Cash and cash equivalents at end of period		$	111,055			$	241,069

Free Cash Flow

		Nine Months Ended
		March 31,
		2016				2015
Net cash provided by operating activities from continuing operations		$	161,280			$	61,194
Less: Capital expenditures		(2,458		)		(4,206		)
Free cash flow		$	158,822			$	56,988

Capitalization

		March 31, 2016
Cash and cash equivalents		$	111,055
Credit facility debt(a)		1,500,000
Net debt		$	1,388,945
Annualized AOCF(b)		$	332,864
Leverage ratio(c)			4.2	x
(a)Represents aggregate principal amount of the debt.
(b)Represents reported AOCF for the fiscal 2016 second and third quarters, multiplied by two.
(c)Represents net debt divided by Annualized AOCF. This ratio differs from the covenant calculation contained in the Company's credit facility.
Note: MSG Networks Inc. made its first principal payment of $50 million during the fiscal 2016 third quarter.  In addition, during the fiscal 2016 third quarter, the Company made tax payments of $142 million, which primarily reflects a one-time payment related to certain historical activities of the Company's former subsidiary, The Madison Square Garden Company, approximately $22 million of taxes paid related to continuing operations, and other offsetting items.

Contacts:
Kimberly Kerns
Communications
(212) 465-6442

Ari Danes, CFA
Investor Relations
(212) 465-6072