Exhibit 99.1
CABLEVISION
SYSTEMS CORPORATION
1111 STEWART AVENUE
BETHPAGE, NEW YORK 11714
January ,
2010
Dear Stockholder:
I am pleased to report that the previously announced spin-off by
Cablevision Systems Corporation of its Madison Square Garden
subsidiary is expected to become effective
on ,
2010. Madison Square Garden, Inc., a Delaware corporation, will
become a public company on that date and will own the sports,
entertainment and media businesses currently owned and operated
by Cablevisions Madison Square Garden subsidiary. Madison
Square Garden, Inc.s Class A Common Stock will be
listed on The NASDAQ Stock Market LLC under the symbol
MSG.
Holders of record of Cablevision NY Group Class A Common
Stock as of the close of business on
January , 2010, which will be
the record date, will receive one share of Madison Square
Garden, Inc. Class A Common Stock for
every shares
of Cablevision NY Group Class A Common Stock held. Holders
of record of Cablevision NY Group Class B Common Stock as
of the close of business on the record date will receive one
share of Madison Square Garden, Inc. Class B Common Stock
for
every shares
of Cablevision NY Group Class B Common Stock held. No
action is required on your part to receive your Madison Square
Garden, Inc. shares. You will not be required either to pay
anything for the new shares or to surrender any shares of
Cablevision stock.
No fractional shares of Madison Square Garden, Inc. stock will
be issued. If you otherwise would be entitled to a fractional
share you will receive a check for the cash value thereof, which
generally will be taxable to you. In due course you will be
provided with information to enable you to compute your tax
bases in both the Cablevision and the Madison Square Garden,
Inc. stock. Cablevision has received a private letter ruling
from the Internal Revenue Service and expects to obtain an
opinion from Sullivan & Cromwell LLP to the effect
that, for U.S. Federal income tax purposes, the
distribution of the Madison Square Garden, Inc. stock will be
tax-free to Cablevision and to you to the extent that you
receive Madison Square Garden, Inc. stock.
The enclosed information statement describes the distribution of
shares of Madison Square Garden, Inc. stock and contains
important information about Madison Square Garden, Inc.,
including financial statements. I suggest that you read it
carefully. If you have any questions regarding the distribution,
please contact Cablevisions transfer agent, Wells Fargo
Shareowner Services at
1-800-401-1957.
Sincerely,
Charles F. Dolan
Chairman
PRELIMINARY
INFORMATION STATEMENT
SUBJECT TO COMPLETION, DATED JANUARY ,
2010
INFORMATION
STATEMENT
MADISON
SQUARE GARDEN, INC.
Distribution
of
Class A Common Stock
Par Value, $0.01 Per Share
Class B Common Stock
Par Value, $0.01 Per Share
This information statement is being furnished in connection with
the distribution by Cablevision Systems Corporation to holders
of its common stock of all the outstanding shares of Madison
Square Garden, Inc. common stock. Prior to the distribution, we
will enter into a series of transactions with Cablevision
pursuant to which we will own the sports, entertainment and
media businesses currently owned and operated by the Madison
Square Garden segment of Cablevision, as described in this
information statement.
Shares of our Class A Common Stock will be distributed to
holders of Cablevision NY Group Class A Common Stock of
record as of the close of business on
January , 2010, which will be
the record date. Each such holder will receive one share of our
Class A Common Stock for
every shares
of Cablevision NY Group Class A Common Stock held on the
record date. Shares of our Class B Common Stock will be
distributed to holders of Cablevision NY Group Class B
Common Stock as of the close of business on the record date.
Each holder of Cablevision NY Group Class B Common Stock
will receive one share of our Class B Common Stock for
every shares
of Cablevision NY Group Class B Common Stock held on the record
date. The distribution will be effective at 11:59 p.m.
on ,
2010. For Cablevision stockholders who own common stock in
registered form, in most cases the transfer agent will credit
their shares of Madison Square Garden, Inc. common stock to book
entry accounts established to hold their Cablevision common
stock. Our distribution agent will mail these stockholders a
statement reflecting their Madison Square Garden, Inc. common
stock ownership shortly after
January , 2010. For
stockholders who own Cablevision common stock through a broker
or other nominee, their shares of Madison Square Garden, Inc.
common stock will be credited to their accounts by the broker or
other nominee. Stockholders will receive cash in lieu of
fractional shares, which generally will be taxable. See
The Distribution Material U.S. Federal
Income Tax Consequences of the Distribution.
No stockholder approval of the distribution is required or
sought. We are not asking you for a proxy and you are requested
not to send us a proxy. Cablevision stockholders will not be
required to pay for the shares of our common stock to be
received by them in the distribution, or to surrender or to
exchange shares of Cablevision common stock in order to receive
our common stock, or to take any other action in connection with
the distribution. There is currently no trading market for our
common stock. We have applied to list our Class A Common
Stock on The NASDAQ Stock Market LLC under the symbol
MSG. We will not list our Class B Common
Stock on any stock exchange.
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD CAREFULLY
CONSIDER THE MATTERS DESCRIBED UNDER THE CAPTION RISK
FACTORS BEGINNING ON PAGE 21.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS INFORMATION STATEMENT IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
Stockholders of Cablevision with inquiries related to the
distribution should contact Cablevisions transfer agent,
Wells Fargo Shareowner Services at
1-800-401-1957.
The date of this Information Statement is
January , 2010.
TABLE OF
CONTENTS
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Page
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SUMMARY
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1
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OUR COMPANY
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1
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Our Strengths
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2
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Our Strategy
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3
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Company Information
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4
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THE DISTRIBUTION
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5
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SELECTED FINANCIAL DATA
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8
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QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION
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10
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THE DISTRIBUTION
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14
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General
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14
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Manner of Effecting the Distribution
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14
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Reasons for the Distribution
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15
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Results of the Distribution
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16
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Material U.S. Federal Income Tax Consequences of the Distribution
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17
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Listing and Trading of Our Common Stock
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19
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Reason for Furnishing this Information Statement
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20
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RISK FACTORS
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21
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Risks Relating to Our Sports Business
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21
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Risks Relating to Our Entertainment Business
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23
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Risks Relating to Our Media Business
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24
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General Risks
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26
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BUSINESS
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36
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General
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36
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Our Strengths
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37
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Our Strategy
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38
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Garden of Dreams Foundation
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39
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MSG Sports
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40
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MSG Entertainment
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42
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MSG Media
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44
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Our Venues
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47
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Investment in Front Line Management Group Inc.
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51
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Regulation
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51
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Competition
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53
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Legal Proceedings
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55
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Employees
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56
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Properties
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56
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DIVIDEND POLICY
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57
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
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58
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SELECTED FINANCIAL DATA
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65
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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67
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Introduction
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68
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Business Overview
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68
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MSG Media
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69
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MSG Entertainment
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70
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MSG Sports
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74
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i
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Page
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Corporate Expenses
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78
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Impact of Current Economic Conditions
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78
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Combined Results of Operations
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79
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Liquidity and Capital Resources
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102
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Cash Flow Discussion
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104
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Contractual Obligations and Off Balance Sheet Arrangements
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105
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Seasonality of Our Business
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106
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Recently Issued Accounting Pronouncements Not Yet Adopted and
Critical Accounting Policies
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106
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CORPORATE GOVERNANCE AND MANAGEMENT
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112
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Corporate Governance
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112
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Our Directors
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113
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Our Executive Officers
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117
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EXECUTIVE COMPENSATION
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119
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Introduction
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119
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Compensation Discussion and Analysis
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119
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Employment Agreements
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128
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Key Elements of 2010 Expected Compensation from the Company
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135
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Historical Compensation Information
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136
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Termination and Severance
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145
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Our Equity Compensation Plan Information
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153
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Our Employee Stock Plan
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153
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Our Stock Plan for Non-Employee Directors
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157
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Our Cash Incentive Plan
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160
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Treatment of Outstanding Options, Rights, Restricted Stock,
Restricted Stock Units and Other Awards
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161
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
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163
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Relationship Between Cablevision and Us After The Distribution
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163
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Certain Relationships and Potential Conflicts of Interest
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167
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Related Party Transaction Approval Policy
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167
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
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169
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Beneficial Ownership of Stock
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169
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SHARES ELIGIBLE FOR FUTURE SALE
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181
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Rule 144
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181
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Employee Stock Awards
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181
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Non-Employee Director Stock Awards
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181
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Registration Rights Agreements
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182
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DESCRIPTION OF CAPITAL STOCK
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183
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Class A Common Stock and Class B Common Stock
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183
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Preferred Stock
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186
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Certain Corporate Opportunities and Conflicts
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186
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Section 203 of the Delaware General Corporation Law
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188
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Limitation on Personal Liability
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188
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
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189
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AVAILABLE INFORMATION
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190
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INDEX TO COMBINED FINANCIAL STATEMENTS
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F-1
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ii
SUMMARY
The following is a summary of some of the information contained
in this information statement. This summary is included for
convenience only and should not be considered complete. This
summary is qualified in its entirety by the more detailed
information contained elsewhere in this information statement,
which should be read in its entirety.
Unless the context otherwise requires, all references to
we, us, our, Madison
Square Garden or the Company refer to Madison
Square Garden, Inc., together with its direct and indirect
subsidiaries. Madison Square Garden, Inc. refers to
Madison Square Garden, Inc. individually as a separate entity.
Where we describe in this information statement our business
activities, we do so as if the transfer of the Madison Square
Garden business of Cablevision Systems Corporation to Madison
Square Garden, Inc. has already occurred.
OUR
COMPANY
Madison Square Garden is a fully-integrated sports,
entertainment and media business comprised of dynamic and
powerful brands. Madison Square Gardens business grew from
the legendary venue widely known as The Worlds Most
Famous Arena. The Companys three business segments:
MSG Sports, MSG Entertainment and MSG Media, are strategically
aligned to work together to drive our overall business, which is
built on a foundation of iconic venues and compelling content,
including live sports and entertainment events, that we create,
produce, present
and/or
distribute through our programming networks and other media
assets.
The Company operates in three business segments:
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MSG Sports.
Our sports business consists of
owning and operating sports franchises, including the New York
Knicks, a founding member of the National Basketball Association
(NBA) and the New York Rangers, one of the
original six franchises of the National Hockey
League (NHL). We also own and operate the New York
Liberty of the Womens National Basketball Association
(WNBA), one of the leagues founding
franchises, and the Hartford Wolf Pack of the American Hockey
League (AHL), which is the primary player
development team for the Rangers and competitive in its own
right in the AHL. The Knicks, Rangers and Liberty play their
home games at The Madison Square Garden Arena (which we also
refer to as The Garden). The Companys sports
business also features other sports properties, including the
presentation of a wide variety of premier live sporting events
including professional boxing, college basketball (The Big East
Tournament, Jimmy
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V Classic, Post-season NIT Finals and, on occasion, Duke
University games), track and field (The Millrose Games) and
tennis (The BNP Paribas Showdown for the Billie Jean King Cup,
which features the women winners of the previous years
Grand Slam tennis events).
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MSG Entertainment.
Our entertainment business
is one of the countrys leaders in live entertainment. We
create, produce
and/or
present a variety of live productions, including the
Radio
City Christmas Spectacular
, featuring the Radio City
Rockettes (the Rockettes), which is the #1 live
holiday family show in America and is seen by approximately two
million people annually and the world-renowned Cirque du
Soleils
Wintuk
. We also present or host other live
entertainment events, such as concerts, including shows by The
Police, Eric Clapton, Jimmy Buffett, Bruce Springsteen, Justin
Timberlake and Madonna; family shows, such as
Dora the
Explorer
,
Thomas the Tank Engine
and
Sesame Street
Live
; special events such as the Tony Awards, Fashion Rocks
and appearances by the Dalai Lama; and theatrical productions,
such as
The Wizard of Oz
and
Annie
, in our diverse
collection of venues. These venues include The Garden, Radio
City Music Hall, The Theater at Madison Square Garden, the
Beacon Theatre, The Chicago Theatre and the Wang Theatre. MSG
Entertainment increasingly utilizes the strength of its industry
relationships and live event expertise, as well as the reach of
MSG Media, to create performance, promotion and distribution
opportunities for artists and productions that, in turn, provide
new programming and promotion for both our entertainment and our
media businesses.
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MSG Media.
Our media business is a leader in
production and content development for multiple distribution
platforms, including content originating from our venues. This
business consists of programming networks and interactive
offerings, including the MSG Networks (MSG network, MSG Plus,
MSG HD and MSG Plus HD) and the Fuse Networks (Fuse and Fuse
HD). MSG Networks are home to seven professional sports teams:
the New York Knicks, New York Rangers, New York Liberty, New
York Islanders, New Jersey Devils, Buffalo Sabres and New York
Red Bulls, as well as to our critically acclaimed original and
other programming, including
MSG Originals
, highlighted
by the New York Emmy-award winning series
The 50
Greatest Moments at MSG
, Big 12 and PAC 10 football, and
ACC, Big East and PAC 10 basketball. Since Fuse became part of
MSG Media in 2008, it has focused on establishing itself as a
unique multi-platform music destination, where artists and fans
can interact and build relationships. Programming on Fuse
focuses on music-related programming, including coverage of
premier artists, events and festivals, original content and high
profile concerts. Certain Fuse programming centers around its
insider access to MSG Entertainment and Madison Square
Gardens venues, which Fuse uses to create music
programming while offering a voice and enhanced exposure to
artists. Our interactive businesses include a group of highly
targeted websites (including msg.com, thegarden.com,
radiocity.com, nyknicks.com, newyorkrangers.com and fuse.tv) and
wireless, video on demand and digital platforms for all Madison
Square Garden properties. MSG Media allows us to leverage the
value of the content created, produced
and/or
presented by MSG Sports and MSG Entertainment.
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Strengths
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Owned sports franchises
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Media assets, including affiliation agreements with distributors
and exclusive sports and entertainment programming rights
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Iconic venues
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Diverse collection of marquee brands and content, including the
Radio City Christmas Spectacular
and the Rockettes
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Powerful presence in the New York tri-state area with
established core assets and expertise for strategic expansion
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Unique ability to provide artists and productions with multiple
distribution platforms to develop and promote their businesses
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Strong industry relationships that create opportunities for new
content and brand extensions
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Deep connection with loyal and passionate fan bases that span a
wide demographic mix
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Strong and seasoned management team
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Our
Strategy
Madison Square Garden pursues opportunities that capitalize on
the combination of our iconic venues, our popular sports
franchises, the distribution of our programming networks and our
exclusive sports and entertainment content.
The core of MSG Sports strategy is to develop teams that
consistently compete for championships in their respective
leagues. Leveraging the strength of its fan bases and the
popularity of its teams, MSG Sports seeks to expand through the
creation
and/or
acquisition of substantial, enduring sports properties and
events that can be presented either inside or outside The
Garden. Our extensive fan base provides broad access to growth
opportunities and new revenue streams.
Building on our iconic venues and the hallmark
Radio City
Christmas Spectacular
and Rockettes brands, MSG
Entertainment is focused on enhancing the reach and breadth of
our productions and creating a network of venues to deliver high
quality live content and increased bookings across all our
venues. We are pursuing a strategy of opportunistically
acquiring, building or obtaining control of theater venues in
additional major markets. Our expansion plans also include the
development of new productions and live entertainment events.
MSG Media has a strong foundation of recurring revenue streams
supported by our long-term rights for live-event content of our
New York Knicks, New York Rangers and New York Liberty
franchises, in addition to those of the New York Islanders, New
Jersey Devils and Buffalo Sabres, and our affiliation agreements
for distribution of our networks. MSG Medias programming
networks serve as strong platforms through which artists,
performers and athletes are connected to regional and national
audiences, including Fuse, which brings artists and fans
together through its music programming and the networks
insider access to MSG Entertainment and our historic venues. Our
ability to offer both marquee live performance venues and
extensive public exposure through our significant marketing
expertise and media platforms attracts world-class artists,
performers and athletes to our businesses, and allows us to
create with them a relationship built on mutual benefit. We
obtain quality sports and entertainment content, while the
artists, performers and athletes gain a unique opportunity to
develop their brands.
The Company believes that its competitive strength stems from
combining opportunities across more than one of our segments and
aligning these businesses to provide what no other organization
can: sports and entertainment content, derived from games and
performances at our iconic venues and distributed through our
regional and national programming networks.
We have an expansive view of the power of this integrated
approach and believe no other organization can offer athletes,
artists, performers, fans and business partners comparable
opportunities or experiences. Examples of how we believe we have
effectively implemented our strategy are:
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We have expanded the programming on MSG network to include
additional programming originating from or relating to our
venues, while continuing to deliver award-winning live sports
coverage. MSG networks focus on becoming all things
Madison Square Garden serves as a powerful platform for
the
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distribution of our content and supports the Companys
integrated strategic vision, while differentiating our media
offerings in a diverse and competitive environment.
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Our media business continues to seek opportunities to
collaborate with our entertainment and sports businesses. For
example, in 2009 our media and entertainment businesses forged a
multi-faceted relationship with the Dave Matthews Band, through
which we booked the Beacon Theatre for a sold-out Dave Matthews
Band concert and telecast the concert commercial-free on Fuse.
Fuse also aired a week-long series of complementary Dave
Matthews Band programming, leading up to the release of the
bands new album. Similarly, in 2008 our media and sports
businesses collaborated on the Pete Sampras versus Roger Federer
exhibition tennis match, an event that represented the revival
of The Gardens historic affiliation with big-event tennis.
The sold-out match, which pitted the #1 ranked Federer
against Sampras, who was at that time the recently retired
holder of the most Grand Slam titles, originated from The Garden
and was promoted as the first live sports programming on the
newly re-branded MSG Plus (formerly known as FSN New York).
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We acquired control of New Yorks Beacon Theatre, purchased
The Chicago Theatre, and entered into a long-term booking
agreement in respect of the Wang Theatre in Boston, extending
our geographic footprint and providing new distribution outlets
for our live entertainment content. These transactions
diversified the collection of venues we offer to artists and
productions.
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Building on their initial collaboration,
Wintuk
, MSG
Entertainment and the world-renowned Cirque du Soleil have
expanded their relationship this year with the debut of a new
vaudeville-inspired live entertainment show,
Banana
Shpeel
. The show began previews in The Chicago Theatre on
November 19, 2009, and is expected to premiere at the
Beacon Theatre in March of 2010. This plan illustrates our
strategy of developing new live entertainment content that can
be utilized through Madison Square Gardens owned and
operated venues.
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Our commitment to strengthening our core assets is also
exemplified by the planned full-scale renovation of The Garden.
The renovation is expected to result in a
state-of-the-art
facility that enhances the experience of our customers,
partners, athletes and entertainers and is designed to attract
even more marquee events to the building, while augmenting our
revenue streams. Utilizing The Gardens current footprint,
the renovation is designed to ensure The Gardens continued
and lasting prominence as a sports and entertainment venue.
We believe the Companys unique combination of assets and
integrated approach, the depth of our relationships within the
sports, media and entertainment industries and strong connection
with our diverse and passionate audiences, sets the Company
apart in its industry and represents a substantial opportunity
for growth.
Company
Information
We are a Delaware corporation with our principal executive
offices at Two Penn Plaza, New York, NY, 10121. Our telephone
number is
212-465-6000.
Madison Square Garden, Inc. is a holding company and conducts
substantially all of its operations through its subsidiaries.
Madison Square Garden, Inc. was incorporated on July 29,
2009 as an indirect, wholly-owned subsidiary of Cablevision
Systems Corporation (Cablevision). Prior to the
Distribution, it will acquire subsidiaries of Cablevision that
own, directly and indirectly, all of the partnership interests
in Madison Square Garden, L.P. (MSG L.P.), which is
the indirect, wholly-owned subsidiary of Cablevision through
which Cablevision currently holds the Madison Square Garden
business. Cablevision acquired all of the interests in MSG L.P.
in a series of transactions beginning in 1995 and completed in
2005.
4
THE
DISTRIBUTION
Please see The Distribution for a more detailed
description of the matters described below.
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Distributing Company
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Cablevision Systems Corporation, which is one of the largest
cable television operators in the United States. In addition to
the business of Madison Square Garden, Cablevision also provides
telecommunication services and operates cable programming
networks and a newspaper publishing business.
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Distributed Company
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Madison Square Garden, Inc., which will own and operate the
sports, entertainment and media businesses currently owned and
operated by MSG L.P., a
wholly-owned
indirect subsidiary of Cablevision, each of which is described
in this information statement. Please see Business
and Managements Discussion and Analysis of Financial
Condition and Results of Operations for information
concerning these businesses.
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Distribution Ratio
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Each holder of Cablevision NY Group Class A Common Stock
will receive a distribution of one share of our Class A
Common Stock for
every shares
of Cablevision NY Group Class A Common Stock held on the
record date and each holder of Cablevision NY Group Class B
Common Stock will receive a distribution of one share of our
Class B Common Stock for
every shares
of Cablevision NY Group Class B Common Stock held on the
record date.
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Securities to be Distributed
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Based
on shares
of Cablevision NY Group Class A Common Stock
and shares
of Cablevision NY Group Class B Common Stock outstanding on
January , 2010,
approximately shares
of our Class A Common Stock
and shares
of our Class B Common Stock will be distributed. We refer
to this distribution of securities as the
Distribution. The shares of our common stock to be
distributed will constitute all of the outstanding shares of our
common stock immediately after the Distribution. Cablevision
stockholders will not be required to pay for the shares of our
common stock to be received by them in the Distribution, or to
surrender or exchange shares of Cablevision common stock in
order to receive our common stock, or to take any other action
in connection with the Distribution.
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Fractional Shares
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Fractional shares of our common stock will not be distributed.
Fractional shares of our Class A Common Stock will be
aggregated and sold in the public market by the distribution
agent and stockholders will receive a cash payment in lieu of a
fractional share. Similarly, fractional shares of our
Class B Common Stock will be aggregated, converted to
Class A Common Stock, and sold in the public market by the
distribution agent. The aggregate net cash proceeds of these
sales will be distributed ratably to the stockholders who would
otherwise have received fractional interests. These proceeds
generally will be taxable to those stockholders.
|
|
Distribution Agent, Transfer Agent and Registrar for the Shares
|
|
Wells Fargo Shareowner Services will be the distribution agent,
transfer agent and registrar for the shares of our common stock.
|
5
|
|
|
Record Date
|
|
The record date is the close of business on
January , 2010.
|
|
Distribution Date
|
|
11:59 p.m.
on ,
2010.
|
|
Material U.S. Federal Income Tax Consequences of the Distribution
|
|
Cablevision has received a private letter ruling from the
Internal Revenue Service (IRS) to the effect that,
among other things, the Distribution, and certain related
transactions, will qualify for tax-free treatment under the
Internal Revenue Code of 1986, as amended (the
Code). In addition, Cablevision expects to obtain an
opinion from Sullivan & Cromwell LLP substantially to the
effect that, among other things, the Distribution and certain
related transactions will qualify for tax-free treatment under
the Code, and that accordingly, for U.S. federal income tax
purposes, no gain or loss will be recognized by, and no amount
will be included in the income of, a holder of Cablevision
common stock upon the receipt of shares of our common stock
pursuant to the Distribution, except to the extent such holder
receives cash in lieu of fractional shares of our common stock.
|
|
|
|
|
Although a private letter ruling from the IRS generally is
binding on the IRS, if the factual representations or
assumptions made in the letter ruling request are untrue or
incomplete in any material respect, we will not be able to rely
on the ruling. Furthermore, the IRS will not rule on whether a
distribution satisfies certain requirements necessary to obtain
tax-free treatment under the Code. Rather, the ruling is based
upon representations by Cablevision that these conditions have
been satisfied, and any inaccuracy in such representations could
invalidate the ruling. The opinion discussed above addresses all
of the requirements necessary for the Distribution and certain
related transactions to obtain tax-free treatment under the Code
and is based on, among other things, certain assumptions and
representations made by Cablevision and us, which if incorrect
or inaccurate in any material respect would jeopardize the
conclusions reached by counsel in such opinion. The opinion will
not be binding on the IRS or the courts. See The
Distribution Material U.S. Federal Income Tax
Consequences of the Distribution.
|
|
Stock Exchange Listing
|
|
There is not currently a public market for our common stock. We
have applied for our Class A Common Stock to be listed on
The NASDAQ Stock Market LLC under the symbol
MSG. If the application is approved, it is
anticipated that trading will commence on a when-issued basis
prior to the Distribution. On the first trading day following
the Distribution date, when-issued trading in respect of our
Class A Common Stock will end and regular-way trading will
begin. Our Class B Common Stock will not be listed on a
securities exchange.
|
|
Relationship between Cablevision and Us after the Distribution
|
|
Following the Distribution, we will be a public company and
Cablevision will have no continuing stock ownership interest in
us. Prior to the Distribution, we and Cablevision will enter
into a Distribution Agreement and will enter into several
ancillary agreements for the purpose of accomplishing the
distribution of our common stock to Cablevisions common
stockholders. These
|
6
|
|
|
|
|
agreements also will govern our relationship with Cablevision
subsequent to the Distribution and provide for the allocation of
employee benefit, tax and some other liabilities and obligations
attributable to periods prior to the Distribution. These
agreements also will include arrangements with respect to
transition services and a number of on-going commercial
relationships. The Distribution Agreement will include an
agreement that we and Cablevision will agree to provide each
other with appropriate indemnities with respect to liabilities
arising out of the businesses being transferred to us by
Cablevision. We will also be party to other arrangements with
Cablevision and its subsidiaries, such as affiliation agreements
covering the MSG Networks and Fuse. See Certain
Relationships and Related Party Transactions.
|
|
|
|
Following the Distribution, our intercompany advances to a
subsidiary of Cablevision (in an aggregate amount of
$190 million) will remain outstanding. Prior to the
Distribution date, the terms of these advances will be changed
to provide for a maturity date of no later than June 30,
2010 (with prepayment at Cablevisions option) and for the
payment of cash interest at a fixed rate equal to the prime rate
on the date the changes to the terms are made.
|
|
|
|
Following the Distribution there will be an overlap between the
senior management of the Company and Cablevision. James L. Dolan
will serve as the Executive Chairman of the Company and as the
President and Chief Executive Officer and as a director of
Cablevision. Hank J. Ratner will serve as the President and
Chief Executive Officer of the Company and as Vice Chairman of
Cablevision. In addition, immediately following the
Distribution, eight of the members of our Board of Directors
will also be directors of Cablevision, and several of our
directors will continue to serve as officers and/or employees of
Cablevision concurrently with their service on our Board of
Directors.
|
|
|
|
See Certain Relationships and Related Party
Transactions Relationship Between Cablevision and Us
After The Distribution for a discussion of the policy that
will be in place for dealing with potential conflicts of
interest that may arise from our ongoing relationship with
Cablevision.
|
|
Control by Dolan Family
|
|
Following the Distribution, we will be controlled by Charles F.
Dolan, members of his family and certain related family
entities. We have been informed that Charles F. Dolan, these
family members and the related entities will enter into a
stockholders agreement relating, among other things, to the
voting of their shares of our Class B Common Stock.
|
|
|
|
See Risk Factors General Risks We
are Controlled by the Dolan Family. Immediately following
the Distribution, eight of the members of our Board of Directors
will be members of the Dolan family.
|
|
Post-Distribution Dividend Policy
|
|
We do not anticipate paying any cash dividends on our common
stock in the foreseeable future.
|
|
Risk Factors
|
|
Stockholders should carefully consider the matters discussed
under Risk Factors.
|
7
SELECTED
FINANCIAL DATA
The operating and balance sheet data included in the following
selected financial data for each year in the five-year period
ended December 31, 2008 have been derived from the combined
annual financial statements of Madison Square Garden, Inc. and
certain media, entertainment and sports businesses and assets
(which we refer to collectively as the Company) that
were historically owned and operated as part of Cablevision. The
operating and balance sheet data for the nine months ended and
as of September 30, 2009 and 2008 included in the following
selected financial data have been derived from the interim
condensed combined financial statements of the Company and, in
the opinion of the management of the Company, reflect all
adjustments necessary for the fair presentation of such data for
the respective interim periods. The financial information does
not necessarily reflect what our results of operations and
financial position would have been if we had operated as a
separate publicly-traded entity during the periods presented.
The results of operations for the nine month period ended
September 30, 2009 are not necessarily indicative of the
results that might be expected for future interim periods or for
the full year. The selected financial data presented below
should be read in conjunction with the annual and interim
financial statements included elsewhere in this information
statement and with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and Unaudited Pro Forma Combined Financial
Information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in thousands)
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$
|
650,418
|
|
|
$
|
645,400
|
|
|
$
|
1,042,958
|
|
|
$
|
1,002,182
|
|
|
$
|
905,196
|
|
|
$
|
847,552
|
|
|
$
|
810,730
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below)
|
|
|
401,149
|
|
|
|
418,434
|
|
|
|
724,904
|
|
|
|
635,108
|
|
|
|
637,090
|
|
|
|
543,279
|
|
|
|
579,129
|
|
Selling, general and administrative
|
|
|
202,245
|
|
|
|
202,258
|
|
|
|
270,065
|
|
|
|
243,196
|
|
|
|
222,962
|
|
|
|
198,198
|
|
|
|
170,825
|
|
Gain on curtailment of pension plans(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221
|
|
|
|
143
|
|
|
|
367
|
|
|
|
4,146
|
|
Other operating income(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95,840
|
)
|
Depreciation and amortization
|
|
|
45,973
|
|
|
|
49,576
|
|
|
|
66,231
|
|
|
|
62,223
|
|
|
|
64,995
|
|
|
|
68,616
|
|
|
|
55,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
1,051
|
|
|
|
(24,868
|
)
|
|
|
(18,242
|
)
|
|
|
77,307
|
|
|
|
(19,994
|
)
|
|
|
37,092
|
|
|
|
97,213
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
|
|
(931
|
)
|
|
|
2,051
|
|
|
|
1,919
|
|
|
|
11,607
|
|
|
|
6,212
|
|
|
|
1,582
|
|
|
|
(1,630
|
)
|
Miscellaneous
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
(250
|
)
|
|
|
(1
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes and cumulative
effect of a change in accounting principle
|
|
|
2,120
|
|
|
|
(22,817
|
)
|
|
|
(16,323
|
)
|
|
|
87,914
|
|
|
|
(14,032
|
)
|
|
|
38,673
|
|
|
|
95,613
|
|
Income tax benefit (expense)
|
|
|
2,141
|
|
|
|
6,624
|
|
|
|
11,387
|
|
|
|
(45,031
|
)
|
|
|
1,173
|
|
|
|
(6,900
|
)
|
|
|
(45,444
|
)
|
Cumulative effect of a change in accounting principle, net of
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,261
|
|
|
$
|
(16,193
|
)
|
|
$
|
(4,936
|
)
|
|
$
|
42,883
|
|
|
$
|
(13,097
|
)
|
|
$
|
31,773
|
|
|
$
|
50,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances due from Cablevision(3)
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
|
$
|
130,000
|
|
|
$
|
|
|
|
$
|
21,000
|
|
|
$
|
|
|
Total assets
|
|
|
1,994,879
|
|
|
|
1,956,130
|
|
|
|
2,000,341
|
|
|
|
1,969,321
|
|
|
|
1,891,282
|
|
|
|
1,933,938
|
|
|
|
1,922,529
|
|
Capital lease obligations
|
|
|
6,543
|
|
|
|
6,956
|
|
|
|
7,457
|
|
|
|
7,774
|
|
|
|
5,050
|
|
|
|
5,865
|
|
|
|
6,625
|
|
Combined group equity
|
|
|
1,087,760
|
|
|
|
1,066,654
|
|
|
|
1,072,623
|
|
|
|
1,072,316
|
|
|
|
999,076
|
|
|
|
990,811
|
|
|
|
1,058,574
|
|
8
|
|
|
(1)
|
|
Gain on curtailment of pension
plans relates to the amendment to freeze all benefits earned
through December 31, 2007 and eliminate the ability of
participants to earn benefits for future service under a certain
Company-sponsored qualified defined benefit pension plan
covering certain non-union employees and a Company-sponsored
unfunded, non-qualified defined benefit pension plan covering
certain employees who participate in the underlying qualified
plan.
|
|
(2)
|
|
Other operating income represents a
contractually obligated termination fee received by the Company
and the reversal in 2004 of a purchase accounting liability
related to the notice received from the New York Mets to
terminate their telecast rights agreement with the Company.
|
|
(3)
|
|
The Company has outstanding
non-interest bearing advances to a subsidiary of Cablevision.
Prior to the Distribution date, the terms of these advances will
be changed to provide for a maturity date of no later than
June 30, 2010 (with prepayment at Cablevisions
option) and for the payment of cash interest at a fixed rate
equal to the prime rate on the date the changes to the terms are
made.
|
9
QUESTIONS
AND ANSWERS ABOUT THE DISTRIBUTION
The following is a brief summary of the terms of the
Distribution. Please see The Distribution for a more
detailed description of the matters described below.
|
|
|
Q:
|
|
What is the Distribution?
|
|
A:
|
|
The Distribution is the method by which Cablevision will
separate the business of our Company from Cablevisions
other businesses, creating two separate, publicly-traded
companies. In the Distribution, Cablevision will distribute to
its shareholders all of the shares of our Class A Common
Stock and Class B Common Stock that it owns. Following the
Distribution, we will be a separate company from Cablevision,
and Cablevision will not retain any ownership interest in us.
The number of shares of Cablevision common stock you own will
not change as a result of the Distribution.
|
|
Q:
|
|
What is being distributed in the Distribution?
|
|
A:
|
|
Approximately million shares
of our Class A Common Stock
and shares
of our Class B Common Stock will be distributed in the
Distribution, based upon the number of shares of Cablevision NY
Group Class A Common Stock and Cablevision NY Group
Class B Common Stock outstanding on the record date. The
shares of our Class A Common Stock and Class B Common
Stock to be distributed by Cablevision will constitute all of
the issued and outstanding shares of our Class A Common
Stock and Class B Common Stock immediately after the
Distribution. For more information on the shares being
distributed in the Distribution, see Description of
Capital Stock Class A Common Stock and
Class B Common Stock.
|
|
Q:
|
|
What will I receive in the Distribution?
|
|
A:
|
|
Holders of Cablevision NY Group Class A Common Stock will
receive a distribution of one share of our Class A Common
Stock for
every shares
of Cablevision NY Group Class A Common Stock held by them
on the record date, and holders of Cablevision NY Group
Class B Common Stock will receive a distribution of one
share of our Class B Common Stock for
every shares
of Cablevision NY Group Class B Common Stock held by them
on the record date. As a result of the Distribution, your
proportionate interest in Cablevision will not change and you
will own the same percentage of equity securities and voting
power in Madison Square Garden as you previously did in
Cablevision. For a more detailed description, see The
Distribution.
|
|
Q:
|
|
What is the record date for the Distribution?
|
|
A:
|
|
Record ownership will be determined as of the close of business
on January , 2010, which we refer to as the
record date. The person in whose name shares of Cablevision
common stock are registered at the close of business on the
record date is the person to whom shares of the Companys
common stock will be issued in the Distribution. As described
below, the Cablevision NY Group Class A Common Stock will
not trade on an ex-dividend basis with respect to our common
stock and, as a result, if a record holder of Cablevision NY
Group Class A Common Stock sells those shares after the
record date and on or prior to the Distribution date, the seller
will be obligated to deliver to the purchaser the shares of our
common stock that are issued in respect of the transferred
Cablevision NY Group Class A Common Stock.
|
|
Q:
|
|
When will the Distribution occur?
|
|
A:
|
|
We expect that shares of our Class A Common Stock and
Class B Common Stock will be distributed by the
Distribution agent, on behalf of Cablevision, as of
11:59 p.m.
on ,
2010, which we refer to as the Distribution date.
|
|
Q:
|
|
What will the relationship between Cablevision and us be
following the Distribution?
|
|
A:
|
|
Following the Distribution, we will be a public company and
Cablevision will have no continuing stock ownership interest in
us. Prior to the Distribution, we and Cablevision will enter
into a Distribution Agreement and several other agreements for
the purpose of accomplishing the distribution of our common
stock to Cablevisions common stockholders. These
agreements also will govern our relationship with Cablevision
subsequent to the Distribution and provide for the allocation of
employee benefit, tax and
|
10
|
|
|
|
|
some other liabilities and obligations attributable to periods
prior to the Distribution. These agreements will also include
arrangements with respect to transition services and a number of
ongoing commercial relationships. The Distribution Agreement
will provide that we and Cablevision will provide each other
with appropriate indemnities with respect to liabilities arising
out of the businesses being transferred to us by Cablevision. We
will also be party to other arrangements with Cablevision and
its subsidiaries, such as affiliation agreements covering the
MSG Networks and Fuse. See Certain Relationships and
Related Party Transactions. We and Cablevision will both
be controlled by Charles F. Dolan, members of his family and
certain related family entities.
|
|
|
|
Following the Distribution, our intercompany advances to a
subsidiary of Cablevision (in an aggregate amount of
$190 million) will remain outstanding. Prior to the
Distribution date, the terms of these advances will be changed
to provide for a maturity date of no later than June 30,
2010 (with prepayment at Cablevisions option) and for the
payment of cash interest at a fixed rate equal to the prime rate
on the date the changes to the terms are made.
|
|
|
|
Following the Distribution, there will be overlap between the
senior management of the Company and Cablevision. James L. Dolan
will serve as the Executive Chairman of the Company and as the
President and Chief Executive Officer and as a director of
Cablevision. Hank J. Ratner will serve as the President and
Chief Executive Officer of the Company and as Vice Chairman of
Cablevision. In addition, immediately following the
Distribution, eight of the members of our Board of Directors
will also be directors of Cablevision, and several of our
directors will continue to serve as officers and/or employees of
Cablevision concurrently with their service on our Board of
Directors.
|
|
|
|
See Certain Relationships and Related Party
Transactions Relationship Between Cablevision and Us
After The Distribution for a discussion of the policy that
will be in place for dealing with potential conflicts of
interest that may arise from our ongoing relationship with
Cablevision.
|
|
Q:
|
|
What do I have to do to participate in the Distribution?
|
|
A:
|
|
No action is required on your part. Shareholders of Cablevision
on the record date for the Distribution are not required to pay
any cash or deliver any other consideration, including any
shares of Cablevision common stock, for the shares of our common
stock distributable to them in the Distribution.
|
|
Q:
|
|
If I sell, on or before the Distribution date, shares of
Cablevision NY Group Class A Common Stock that I held on
the record date, am I still entitled to receive shares of
Madison Square Garden Class A Common Stock distributable
with respect to the shares of Cablevision NY Group Class A
Common Stock I sold?
|
|
A:
|
|
No. No ex-dividend market will be established for our
Class A Common Stock until the first trading day following
the Distribution date. Therefore, if you own shares of
Cablevision NY Group Class A Common Stock on the record
date and thereafter sell those shares on or prior to the
Distribution date, you will also be selling the shares of our
Class A Common Stock that would have been distributed to
you in the Distribution with respect to the shares of
Cablevision NY Group Class A Common Stock you sell.
Conversely, a person who purchases shares of Cablevision NY
Group Class A Common Stock after the record date and on or prior
to the Distribution date will be entitled to receive from the
seller of those shares the shares of our Class A Common Stock
issued in the Distribution with respect to the transferred
Cablevision NY Group Class A Common Stock.
|
|
Q:
|
|
How will fractional shares be treated in the Distribution?
|
|
A:
|
|
If you would be entitled to receive a fractional share of our
Class A Common Stock in the Distribution, you will instead
receive a cash payment. See The Distribution
Manner of Effecting the Distribution for an explanation of
how the cash payments will be determined.
|
|
Q:
|
|
How will Cablevision distribute shares of Madison Square
Garden common stock to me?
|
|
A:
|
|
Holders of shares of Cablevisions NY Group Class A
Common Stock or NY Group Class B Common Stock on the record
date will receive shares of the same class of our common stock,
in book-entry form. See The Distribution
Manner of Effecting the Distribution for a more detailed
explanation.
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11
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Q:
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What is the reason for the Distribution?
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A:
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The potential benefits considered by Cablevisions board of
directors in making the determination to consummate the
Distribution included the following:
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to increase the aggregate value of the stock of Cablevision and
the Company above the value that the stock of Cablevision would
have had if it had continued to represent an interest in both
the businesses of Cablevision and the Company, so that following
the Distribution each company can use its stock to pursue and
achieve strategic objectives including evaluating and
effectuating acquisitions, raising capital and increasing the
long-term attractiveness of equity compensation programs in a
significantly more efficient and effective manner with
significantly less dilution to existing stockholders;
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to improve Cablevisions access to debt markets and lower
its overall financing costs; and
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to provide the Company with increased flexibility to fully
pursue its business plan including capital expenditures and
acquisitions that would be more difficult to consider or
effectuate within Cablevision in the absence of the
Distribution. This flexibility reflects the Companys
belief that investors in a company with the mix of assets the
Company will own following the Distribution will be more
receptive to strategic initiatives the Company may pursue, such
as the major renovation of The Garden and the acquisition or
construction of additional theater venues. Certain investors in
Cablevision have historically expressed concern for
Cablevisions funding of strategic investments by its
Madison Square Garden segment.
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Cablevisions board of directors also considered several
factors that might have a negative effect on Cablevision as a
result of the Distribution. Cablevisions board of
directors considered that the Distribution would result in
substantial reductions to the restricted payments baskets under
various debt instruments of Cablevision and its subsidiary, CSC
Holdings. Moreover, the Distribution would separate from
Cablevision the businesses of the Company, which represent
significant value, in a transaction that produces no direct
economic consideration for Cablevision. Because the Company will
no longer be a wholly-owned subsidiary of Cablevision, the
Distribution also will affect the terms of, or limit the ability
of Cablevision to pursue, cross-company business transactions
and initiatives with Madison Square Garden. Finally, following
the Distribution, Cablevision and its remaining businesses will
need to absorb corporate and administrative costs previously
allocated to its Madison Square Garden segment.
Cablevisions board of directors considered certain aspects
of the Distribution that may be adverse to the Company. The
Companys common stock may come under initial selling
pressure as certain Cablevision stockholders sell their shares
in the Company because they are not interested in holding an
investment in the Companys businesses. Moreover, certain
factors such as a lack of comparable public companies may limit
investors ability to appropriately value the
Companys common stock. Because the Company will no longer
be a wholly-owned subsidiary of Cablevision, the Distribution
also will limit the ability of the Company to pursue
cross-company business transactions and initiatives with other
businesses of Cablevision. Finally, as a result of the
Distribution, the Company will bear significant incremental
costs associated with being a publicly held company.
In determining to move ahead with the Distribution, Cablevision
has noted that certain aspects of its business and the business
of the Company have changed since Cablevisions initial
acquisition of Madison Square Garden in 1995. When the initial
acquisition was completed, Madison Square Garden had certain
synergies with Cablevision including its ownership of two
important sports franchises, a major arena and a significant
regional sports programming business, all in Cablevisions
most important market the New York metropolitan
area. Over time, the business of the Company has expanded beyond
its scope at the time of the initial acquisition to include
multiple entertainment venues and expanded content. Also, at the
time of the initial investment, Cablevision owned a portfolio of
regional sports programming businesses in various major cities.
Through a series of transactions all of those regional sports
programming businesses other than the MSG Networks have been
divested. As a result, the synergies associated with owning the
MSG Networks have diminished. Finally, the planned renovation of
The Garden and other possible growth initiatives such as the
acquisition or construction of additional venues, will create
significant funding requirements at the Company which are of a
nature that did not exist at the time Cablevision made its
initial investment in Madison Square Garden.
12
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Q:
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What are the federal income tax consequences to me of the
Distribution?
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A:
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Cablevision has received a private letter ruling from the
Internal Revenue Service (IRS) and expects to obtain
an opinion from Sullivan & Cromwell LLP to the effect
that the Distribution will qualify as a tax-free transaction
under the Internal Revenue Code of 1986, as amended (the
Code). See The Distribution
Material U.S. Federal Income Tax Consequences of the
Distribution, and Risk Factors General
Risks The Distribution could result in significant
tax liability and Risk Factors General
Risks The Tax Rules Applicable to the Distribution
may Restrict Us from Engaging in Certain Corporate Transactions
or From Raising Equity Capital Beyond Certain Thresholds for a
Period of Time After the Distribution.
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Q:
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Does Madison Square Garden intend to pay cash dividends?
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A:
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No. We currently intend to retain future earnings, if any,
to finance the expansion of our businesses and ongoing
operations. As a result, we do not expect to pay any cash
dividends for the foreseeable future. All decisions regarding
the payment of dividends will be made by our board of directors
from time to time in accordance with applicable law.
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Q:
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How will Madison Square Garden common stock trade?
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A:
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There is not currently a public market for our common stock. We
have applied for our Class A Common Stock to be listed on
The NASDAQ Stock Market LLC under the symbol
MSG. It is anticipated that trading will commence on
a when-issued basis prior to the Distribution. On the first
trading day following the Distribution date, when-issued trading
in respect of our Class A Common Stock will end and
regular-way trading will begin. Our Class B Common Stock
will not be listed on a securities exchange.
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Q:
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Will the Distribution affect the trading price of my
Cablevision Group NY Class A Common Stock?
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A:
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Yes. After the distribution of our Class A Common Stock,
the trading price of Cablevision Group NY Class A Common
Stock may be lower than the trading price of the Cablevision
Group NY Class A Common Stock immediately prior to the
Distribution. Moreover, until the market has evaluated the
operations of Cablevision without the operations of Madison
Square Garden, the trading price of Cablevision Group NY
Class A Common Stock may fluctuate significantly.
Cablevision believes the separation of Madison Square Garden
from Cablevision offers its shareholders the greatest long-term
value. However, the combined trading prices of Cablevision Group
NY Class A Common Stock and Madison Square Garden
Class A Common Stock after the Distribution may be lower
than the trading price of Cablevision Group NY Class A
Common Stock prior to the Distribution. See Risk
Factors beginning on page 21.
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Q:
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Do I have appraisal rights?
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A:
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No. Holders of Cablevision common stock are not entitled to
appraisal rights in connection with the Distribution.
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Q:
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Who is the transfer agent for Madison Square Garden common
stock?
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A:
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Wells Fargo Shareowner Services, 161 North Concord Exchange,
South St. Paul, Minnesota
55075-1139.
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Q:
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Where can I get more information?
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A:
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If you have questions relating to the mechanics of the
Distribution of shares of Madison Square Garden common stock,
you should contact the distribution agent:
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Wells Fargo Shareowner Services, 161 North Concord Exchange,
South St. Paul, Minnesota
55075-1139.
Telephone: 1-800-401-1957.
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Before the Distribution, if you have questions relating to the
Distribution, you should contact: Cablevision Systems
Corporation Investor Relations Dept., 1111 Stewart Ave.,
Bethpage, NY
11714-3581.
Telephone: 1-516-803-2300.
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After the Distribution, if you have questions relating to
Madison Square Garden, you should contact: Madison Square
Garden, Inc. Investor Relations Dept., Two Penn Plaza, New York,
NY 10121. Telephone: 1-212-465-6000.
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13
THE
DISTRIBUTION
General
We will distribute all of the outstanding shares of our
Class A Common Stock to the holders of Cablevision NY Group
Class A Common Stock and all of the outstanding shares of
our Class B Common Stock to the holders of Cablevision NY
Group Class B Common Stock. We refer to this distribution
of securities as the Distribution. In the
Distribution, each holder of Cablevision common stock will
receive a distribution of one share of our common stock for
every shares
of Cablevision common stock held on January ,
2010, which will be the record date.
Manner of
Effecting the Distribution
The general terms and conditions relating to the Distribution
will be set forth in the Distribution Agreement between us and
Cablevision. Under the Distribution Agreement, the Distribution
will be effective at 11:59 p.m. on the Distribution
date, ,
2010. For most Cablevision stockholders who own Cablevision
common stock in registered form on the record date, our transfer
agent will credit their shares of our common stock to book entry
accounts established to hold these shares. Our distribution
agent will send these stockholders a statement reflecting their
ownership of our common stock. Book entry refers to a method of
recording stock ownership in our records in which no physical
certificates are used. For stockholders who own Cablevision
common stock through a broker or other nominee, their shares of
our common stock will be credited to these stockholders
accounts by the broker or other nominee. As further discussed
below, fractional shares will not be distributed. Following the
Distribution, stockholders whose shares are held in book entry
form may request that their shares of our common stock be
transferred to a brokerage or other account at any time, as well
as delivery of physical stock certificates for their shares, in
each case without charge.
CABLEVISION STOCKHOLDERS WILL NOT BE REQUIRED TO PAY FOR
SHARES OF OUR COMMON STOCK RECEIVED IN THE DISTRIBUTION, OR
TO SURRENDER OR EXCHANGE SHARES OF CABLEVISION COMMON STOCK
IN ORDER TO RECEIVE OUR COMMON STOCK, OR TO TAKE ANY OTHER
ACTION IN CONNECTION WITH THE DISTRIBUTION. NO VOTE OF
CABLEVISION STOCKHOLDERS IS REQUIRED OR SOUGHT IN CONNECTION
WITH THE DISTRIBUTION, AND CABLEVISION STOCKHOLDERS HAVE NO
APPRAISAL RIGHTS IN CONNECTION WITH THE DISTRIBUTION.
Fractional shares of our common stock will not be issued to
Cablevision stockholders as part of the Distribution or credited
to book entry accounts. In lieu of receiving fractional shares,
each holder of Cablevision common stock who would otherwise be
entitled to receive a fractional share of our common stock will
receive cash for the fractional interest, which generally will
be taxable to such holder. An explanation of the tax
consequences of the Distribution can be found below in the
subsection captioned Material
U.S. Federal Income Tax Consequences of the
Distribution. The distribution agent will, as soon as
practicable after the Distribution date, aggregate fractional
shares of our Class A Common Stock into whole shares and
sell them in the open market at the prevailing market prices and
distribute the aggregate proceeds, net of brokerage fees,
ratably to Cablevision NY Group Class A stockholders
otherwise entitled to fractional interests in our Class A
Common Stock. Similarly, fractional shares of our Class B
Common Stock will be aggregated, converted to Class A
Common Stock, and sold in the public market by the distribution
agent. The amount of such payments will depend on the prices at
which the aggregated fractional shares are sold by the
distribution agent in the open market shortly after the
Distribution date.
As described under Executive Compensation
Treatment of Outstanding Options, Rights, Restricted Stock,
Restricted Stock Units and Other Awards, in connection
with the Distribution, each Cablevision option will become two
options: one will be an option to acquire Cablevision NY Group
Class A Common Stock and one an option to acquire our
Class A Common Stock. Similarly, each right will become a
right with respect to Cablevision NY Group Class A Common
Stock and a right with respect to our Class A Common Stock.
The options and the rights with respect to our Class A
Common Stock will be issued under our Employee Stock Plan. The
existing exercise price will be allocated between the existing
Cablevision options/rights and our new
14
options/rights based upon the ten-day weighted-average price of
the Cablevision NY Group Class A Common Stock and our
Class A Common Stock immediately following the
Distribution, and the underlying share amount will take into
account the distribution ratio (i.e., the number of shares of
Cablevision common stock in respect of which one share of our
common stock will be issued). The Cablevision options/rights and
our new options/rights will not be exercisable during a period
beginning on a date prior to the Distribution determined by
Cablevision in its sole discretion, and continuing until the
exercise prices of the Cablevision options/rights and our new
options/rights are determined after the Distribution, or such
longer period as Cablevision or we determine is necessary with
respect to our and Cablevisions respective awards. Other
than the split of the Cablevision options and rights and the
allocation of the existing exercise price, upon issuance of our
new options and rights there will be no additional adjustment to
the existing Cablevision options and rights in connection with
the Distribution and the terms of each employees
applicable Cablevision award agreement will continue to govern
the Cablevision options and rights. The terms of a new award
agreement with us will govern the new options and rights issued
under our Employee Stock Plan. Under the new award agreement,
our options and rights may be affected upon a change in control
or a going private transaction of the Company or Cablevision, as
set forth in the terms of the award agreement. With respect to
all outstanding Cablevision awards (and our options and stock
appreciation rights issued in connection with such awards)
holders of such awards will continue to vest in them so long as
they remain employed by the Company, Cablevision or affiliates
of either entity, provided that an employee who moves between
the Company or one of its subsidiaries, on the one hand, and
Cablevision or one of its subsidiaries, on the other hand, at a
time when the two entities are no longer affiliates will not
continue to vest in our awards and such change will constitute a
termination of employment for purposes of the award agreement.
Notwithstanding the foregoing, Messrs. James L. Dolan
and Hank J. Ratner will continue to vest in their
outstanding Cablevision awards (as well as in Company stock
options and stock appreciation rights issued upon the
Distribution with respect to such outstanding Cablevision
awards) based solely on their continued service with Cablevision
and not in respect of their continued service with the Company
and its subsidiaries.
In order to be entitled to receive shares of our common stock in
the Distribution, Cablevision stockholders must be stockholders
of record of Cablevision common stock at the close of business
on the record date, January , 2010.
Reasons
for the Distribution
Cablevisions board of directors has determined that
separation of our businesses from Cablevisions other
businesses is in the best interests of Cablevision and its
stockholders. The potential benefits considered by
Cablevisions board of directors in making the
determination to consummate the Distribution included the
following:
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to increase the aggregate value of the stock of Cablevision and
the Company above the value that the stock of Cablevision would
have had if it had continued to represent an interest in both
the businesses of Cablevision and the Company, so that following
the Distribution each company can use its stock to pursue and
achieve strategic objectives including evaluating and
effectuating acquisitions, raising capital and increasing the
long-term attractiveness of equity compensation programs in a
significantly more efficient and effective manner with
significantly less dilution to existing stockholders;
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to improve Cablevisions access to debt markets and lower
its overall financing costs; and
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to provide the Company with increased flexibility to fully
pursue its business plan including capital expenditures and
acquisitions that would be more difficult to consider or
effectuate within Cablevision in the absence of the
Distribution. This flexibility reflects the Companys
belief that investors in a company with the mix of assets the
Company will own following the Distribution will be more
receptive to strategic initiatives the Company may pursue, such
as the major renovation of The Garden and the acquisition or
construction of additional theater venues. Certain investors in
Cablevision have historically expressed concern for
Cablevisions funding of strategic investments by its
Madison Square Garden segment.
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15
Cablevisions board of directors also considered several
factors that might have a negative effect on Cablevision as a
result of the Distribution. Cablevisions board of
directors considered that the Distribution would result in
substantial reductions to the restricted payments baskets under
various debt instruments of Cablevision and its subsidiary, CSC
Holdings. Moreover, the Distribution would separate from
Cablevision the businesses of the Company, which represent
significant value, in a transaction that produces no direct
economic consideration for Cablevision. Because the Company will
no longer be a wholly-owned subsidiary of Cablevision, the
Distribution also will affect the terms of, or limit the ability
of Cablevision to pursue, cross-company business transactions
and initiatives with Madison Square Garden. Finally, following
the Distribution, the remaining businesses of Cablevision will
need to absorb corporate and administrative costs previously
allocated to its Madison Square Garden segment.
Cablevisions board of directors considered certain aspects
of the Distribution that may be adverse to the Company. The
Companys common stock may come under initial selling
pressure as certain Cablevision stockholders sell their shares
in the Company because they are not interested in holding an
investment in the Companys businesses. Moreover, certain
factors such as a lack of comparable public companies may limit
investors ability to appropriately value the
Companys common stock. Because the Company will no longer
be a wholly-owned subsidiary of Cablevision, the Distribution
also will limit the ability of the Company to pursue
cross-company business transactions and initiatives with other
businesses of Cablevision. Finally, as a result of the
Distribution, the Company will bear significant incremental
costs associated with being a publicly held company.
In determining to move ahead with the Distribution, Cablevision
has noted that certain aspects of its business and the business
of the Company have changed since Cablevisions initial
acquisition of Madison Square Garden in 1995. When the initial
acquisition was completed, Madison Square Garden had certain
synergies with Cablevision including its ownership of two
important sports franchises, a major arena and a significant
regional sports programming business, all in Cablevisions
most important market the New York metropolitan
area. Over time, the business of the Company has expanded beyond
its scope at the time of the initial acquisition to include
multiple entertainment venues and expanded content. Also, at the
time of the initial investment, Cablevision owned a portfolio of
regional sports programming businesses in various major cities.
Through a series of transactions all of those regional sports
programming businesses other than the MSG Networks have been
divested. As a result, the synergies associated with owning the
MSG Networks have diminished. Finally, the planned renovation of
The Garden and other possible growth initiatives such as the
acquisition or construction of additional theaters, will create
significant funding requirements at the Company which are of a
nature that did not exist at the time Cablevision made its
initial investment in Madison Square Garden.
Results
of the Distribution
After the Distribution, we will be a public company owning and
operating the sports, entertainment and media businesses
currently owned and operated by MSG L.P., a wholly-owned
indirect subsidiary of Cablevision. Immediately after the
Distribution, we expect to have
approximately
holders of record of our Class A Common Stock
and holders
of record of our Class B Common Stock and
approximately shares
of Class A Common Stock
and shares
of Class B Common Stock outstanding, based on the number of
record stockholders and outstanding shares of Cablevision common
stock on January , 2010 and after giving effect
to the delivery to stockholders of cash in lieu of fractional
shares of our common stock. The actual number of shares to be
distributed will be determined on the record date. You can find
information regarding options to purchase our common stock that
will be outstanding after the Distribution in the section
captioned, Executive Compensation Treatment of
Outstanding Options, Rights, Restricted Stock, Restricted Stock
Units and Other Awards. We and Cablevision will both be
controlled by Charles F. Dolan, members of his family and
certain related family entities.
Prior to the Distribution, we will enter into several agreements
with Cablevision (and certain of its subsidiaries and
affiliates) in connection with, among other things, employee
matters, tax, transition services and a number of ongoing
commercial relationships.
16
The Distribution will not affect the number of outstanding
shares of Cablevision common stock or any rights of Cablevision
stockholders.
Material
U.S. Federal Income Tax Consequences of the
Distribution
The following is a summary of the material U.S. federal
income tax consequences of the Distribution to us, Cablevision
and Cablevision stockholders. This summary is based on the Code,
the Treasury regulations promulgated under the Code, and
interpretations of such authorities by the courts and the IRS,
all as in effect as of the date of this information statement
and all of which are subject to change at any time, possibly
with retroactive effect. This summary is limited to holders of
Cablevision common stock that are U.S. holders, as defined
below, that hold their shares of Cablevision common stock as
capital assets, within the meaning of section 1221 of the
Code. Further, this summary does not discuss all tax
considerations that may be relevant to holders of Cablevision
common stock in light of their particular circumstances, nor
does it address the consequences to holders of Cablevision
common stock subject to special treatment under the
U.S. federal income tax laws, such as tax-exempt entities,
partnerships (including entities treated as partnerships for
U.S. federal income tax purposes), persons who acquired
such shares of Cablevision common stock pursuant to the exercise
of employee stock options or otherwise as compensation,
financial institutions, insurance companies, dealers or traders
in public securities, and persons who hold their shares of
Cablevision common stock as part of a straddle, hedge,
conversion, constructive sale, synthetic security, integrated
investment or other risk-reduction transaction for
U.S. federal income tax purposes. This summary does not
address any U.S. federal estate, gift or other non-income
tax consequences or any applicable state, local, foreign, or
other tax consequences. Each stockholders individual
circumstances may affect the tax consequences of the
Distribution.
For purposes of this summary, a U.S. holder is
a beneficial owner of Cablevision common stock that is, for
U.S. federal income tax purposes:
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an individual who is a citizen or a resident of the United
States;
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a corporation, or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized
under the laws of the United States or any state or political
subdivision thereof;
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an estate, the income of which is subject to United States
federal income taxation regardless of its source; or
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a trust, if (i) a court within the United States is able to
exercise primary jurisdiction over its administration and one or
more U.S. persons have the authority to control all of its
substantial decisions, or (ii) it has a valid election in
place under applicable Treasury regulations to be treated as a
U.S. person.
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If a partnership (including any entity treated as a partnership
for U.S. federal income tax purposes) holds shares of
Cablevision common stock, the tax treatment of a partner in the
partnership generally will depend upon the status of the partner
and the activities of the partnership. A partner of a
partnership holding shares of Cablevision common stock should
consult its tax advisor regarding the tax consequences of the
Distribution.
Cablevision has received a private letter ruling from the IRS to
the effect that, among other things, the Distribution, and
certain related transactions, will qualify for tax-free
treatment under the Code. In addition, Cablevision expects to
obtain an opinion from Sullivan & Cromwell LLP
substantially to the effect that, among other things, the
Distribution and certain related transactions will qualify for
tax-free treatment under the Code, and that accordingly, for
U.S. federal income tax purposes, no gain or loss will be
recognized by, and no amount will be included in the income of,
a holder of Cablevision common stock upon the receipt of shares
of our common stock pursuant to the Distribution, except to the
extent such holder receives cash in lieu of fractional shares of
our common stock.
Although a private letter ruling from the IRS generally is
binding on the IRS, if the factual representations or
assumptions made in the letter ruling request are untrue or
incomplete in any material respect, we will not be able to rely
on the ruling. Furthermore, the IRS will not rule on whether a
distribution
17
satisfies certain requirements necessary to obtain tax-free
treatment under the Code. Rather, the ruling is based upon
representations by Cablevision that these conditions have been
satisfied, and any inaccuracy in such representations could
invalidate the ruling. The opinion discussed above addresses all
of the requirements necessary for the Distribution and certain
related transactions to obtain tax-free treatment under the Code
and is based on, among other things, certain assumptions and
representations made by Cablevision and us, which if incorrect
or inaccurate in any material respect would jeopardize the
conclusions reached by counsel in such opinion. The opinion will
not be binding on the IRS or the courts.
On the basis of the ruling we have received and the opinion we
expect to receive, and assuming that Cablevision common stock is
a capital asset in the hands of a Cablevision stockholder on the
Distribution date:
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Except for any cash received in lieu of a fractional share of
our common stock, a Cablevision stockholder will not recognize
any income, gain or loss as a result of the receipt of our
common stock in the Distribution.
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A Cablevision stockholders holding period for our common
stock received in the Distribution will include the period for
which that stockholders Cablevision common stock was held.
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A Cablevision stockholders tax basis for our common stock
received in the Distribution will be determined by allocating to
that common stock, on the basis of the relative fair market
values of Cablevision common stock and our common stock at the
time of the Distribution, a portion of the stockholders
basis in his or her Cablevision common stock. A Cablevision
stockholders basis in his or her Cablevision common stock
will be decreased by the portion allocated to our common stock.
Within a reasonable period of time after the Distribution,
Cablevision will provide its stockholders who receive our common
stock pursuant to the Distribution with a worksheet for
calculating their tax bases in our common stock and their
Cablevision common stock.
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The receipt of cash in lieu of a fractional share of our common
stock generally will be treated as a sale of the fractional
share of our common stock, and a Cablevision stockholder will
recognize gain or loss equal to the difference between the
amount of cash received and the stockholders basis in the
fractional share of our common stock, as determined above. The
gain or loss will be long-term capital gain or loss if the
holding period for the fractional share of our common stock, as
determined above, is more than one year.
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Neither we, nor Cablevision will recognize a taxable gain or
loss as a result of the Distribution.
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If the Distribution does not qualify for tax-free treatment for
U.S. federal income tax purposes, then, in general,
Cablevision would recognize taxable gain in an amount equal to
the excess of the fair market value of the common stock of our
Company over Cablevisions tax basis therein, i.e., as if
it had sold the common stock of our Company in a taxable sale
for its fair market value. In addition, the receipt by
Cablevisions stockholders of common stock of our Company
would be a taxable distribution, and each U.S. holder that
participated in the Distribution would recognize a taxable
distribution as if the U.S. holder had received a
distribution equal to the fair market value of our common stock
that was distributed to him or her, which generally would be
treated first as a taxable dividend to the extent of
Cablevisions earnings and profits, then as a non-taxable
return of capital to the extent of each U.S. holders
tax basis in his or her Cablevision common stock, and thereafter
as capital gain with respect to any remaining value.
Even if the Distribution otherwise qualifies for tax-free
treatment under the Code, the Distribution may be disqualified
as tax-free to Cablevision and would result in a significant
U.S. federal income tax liability to Cablevision (but not
to holders of Cablevision common stock) under
Section 355(e) of the Code if the Distribution were deemed
to be part of a plan (or series of related transactions)
pursuant to which one or more persons acquire, directly or
indirectly, stock representing a 50% or greater interest by vote
or value, in Cablevision or us. For this purpose, any
acquisitions of Cablevisions stock or our stock within the
period beginning two years before the Distribution and ending
two years after the Distribution are presumed to be part of such
a plan, although Cablevision or we may be able to rebut that
presumption. The process for determining whether a prohibited
acquisition has occurred under the rules described in this
paragraph is
18
complex, inherently factual and subject to interpretation of the
facts and circumstances of a particular case. Cablevision or we
might inadvertently cause or permit a prohibited change in the
ownership of Cablevision or us to occur, thereby triggering tax
to Cablevision, which could have a material adverse effect. If
such an acquisition of our stock or Cablevisions stock
triggers the application of Section 355(e), Cablevision
would recognize taxable gain equal to the excess of the fair
market value of the common stock of our Company held by it
immediately before the Distribution over Cablevisions tax
basis therein, but the Distribution would be tax-free to each
Cablevision stockholder. In certain circumstances, under the Tax
Disaffiliation Agreement between Cablevision and us, we would be
required to indemnify Cablevision against that taxable gain if
it were triggered by an acquisition of our stock. Please see
Certain Relationships and Related Party
Transactions Relationship Between Cablevision and Us
After The Distribution Tax Disaffiliation
Agreement for a more detailed discussion of the Tax
Disaffiliation Agreement between Cablevision and us.
Payments of cash in lieu of a fractional share of any common
stock of our Company made in connection with the Distribution
may, under certain circumstances, be subject to backup
withholding, unless a holder provides proof of an applicable
exception or a correct taxpayer identification number, and
otherwise complies with the applicable requirements of the
backup withholding rules. Any amounts withheld under the backup
withholding rules are not additional tax and may be refunded or
credited against the holders U.S. federal income tax
liability, provided that the holder furnishes the required
information to the IRS.
U.S. Treasury regulations require certain Cablevision
stockholders with significant ownership in Cablevision that
receive shares of our stock in the Distribution to attach to
their U.S. federal income tax return for the year in which
such stock is received a detailed statement setting forth such
data as may be appropriate to show that the Distribution is
tax-free under the Code. Within a reasonable period of time
after the Distribution, Cablevision will provide its
stockholders who receive our common stock pursuant to the
Distribution with the information necessary to comply with such
requirement.
Cablevision and the Company have determined that the Company
will not be deemed to be a United States real property holding
corporation, as defined in section 897(c)(2) of the Code.
EACH CABLEVISION STOCKHOLDER SHOULD CONSULT HIS OR HER TAX
ADVISOR ABOUT THE PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO
SUCH STOCKHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL AND
FOREIGN TAX LAWS, AND POSSIBLE CHANGES IN TAX LAW THAT MAY
AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.
Listing
and Trading of Our Common Stock
There is not currently a public market for our common stock. We
have applied to list our Class A Common Stock on The NASDAQ
Stock Market LLC under the symbol MSG. Assuming
such listing is approved, it is anticipated that trading will
commence on a when-issued basis prior to the Distribution. On
the first trading day following the Distribution date,
when-issued trading in our Class A Common Stock will end
and regular-way trading will begin. When-issued
trading refers to trading which occurs before a security
is actually issued. These transactions are conditional with
settlement to occur if and when the security is actually issued
and The NASDAQ Stock Market LLC determines transactions are
to be settled. Regular way trading refers to normal
trading transactions, which are settled by delivery of the
securities against payment on the third business day after the
transaction.
We cannot assure you as to the price at which our Class A
Common Stock will trade before, on or after the Distribution
date. Until our Class A Common Stock is fully distributed
and an orderly market develops in our Class A Common Stock,
the price at which such stock trades may fluctuate
significantly. In addition, the combined trading prices of our
Class A Common Stock and Cablevision NY Group Class A
Common Stock held by stockholders after the Distribution may be
less than, equal to or greater than the trading price of the
Cablevision NY Group Class A Common Stock prior to the
Distribution. Our Class B Common Stock will not be listed
on a securities exchange or publicly traded.
19
The shares of our common stock distributed to Cablevision
stockholders will be freely transferable, except for shares
received by people who may have a special relationship or
affiliation with us or shares subject to contractual
restrictions. People who may be considered our affiliates after
the Distribution generally include individuals or entities that
control, are controlled by, or are under common control with us.
This may include certain of our officers, directors and
significant stockholders. Persons who are our affiliates will be
permitted to sell their shares only pursuant to an effective
registration statement under the Securities Act of 1933, as
amended, or an exemption from the registration requirements of
the Securities Act, or in compliance with Rule 144 under
the Securities Act. As described under Shares Eligible for
Future Sale Registration Rights Agreements,
certain persons will have registration rights with respect to
our stock.
Reason
for Furnishing this Information Statement
This information statement is being furnished by Cablevision
solely to provide information to stockholders of Cablevision who
will receive shares of our common stock in the Distribution. It
is not, and is not to be construed as, an inducement or
encouragement to buy or sell any of our securities. We will not
update the information in this information statement except in
the normal course of our respective public disclosure
obligations and practices.
20
RISK
FACTORS
You should carefully consider the following risk factors and all
the other information contained in this information statement in
evaluating us and our common stock.
Risks
Relating to Our Sports Business
Our
Sports Business Faces Intense and Wide-Ranging
Competition.
The success of a sports business, like ours, is dependent upon
the performance
and/or
popularity of its franchises. Our New York Knicks and New York
Rangers franchises compete, in varying respects and degrees,
with other live sporting events, and with sporting events
delivered over television networks, the Internet, radio, online
services, and other alternative sources. For example, our sports
teams compete for attendance, viewership and advertising with a
wide range of alternatives available in New York City. During
some or all of the basketball and hockey seasons, our sports
teams face competition, in varying respects and degrees, from
professional baseball (including the New York Yankees and the
New York Mets), professional football (including the New York
Giants and the New York Jets) and each other. For fans who
prefer the unique experience of NHL hockey, we must compete with
two other hockey teams located in the New York area (the New
York Islanders and the New Jersey Devils) as well as, in varying
respects and degrees, with other NHL hockey teams and the NHL
itself. Similarly, for those fans attracted to the equally
unique experience of NBA basketball, we must compete, in varying
respects and degrees, with another NBA team located in the New
York area (the New Jersey Nets) as well as other NBA teams and
the NBA itself.
As a result of the large number of options available, we face
strong competition for the New York sports fan. We must compete
with these other sporting events, in varying respects and
degrees, including on the basis of the quality of the teams we
field, their success in the leagues in which they compete, our
ability to provide an entertaining environment at our games and
the prices we charge for tickets. Given the nature of sports, we
cannot assure you that we will be able to compete effectively,
in particular with large companies that have substantially
greater resources than we have, and as a consequence our
operating margins and market position could be reduced and the
growth of our business inhibited.
Our
Basketball and Hockey Decisions, Especially Those Concerning
Player Selection and Salaries, Affect Our Financial
Performance.
Creating and maintaining our sports teams popularity
and/or
on-court and on-ice competitiveness is key to the success of our
sports business. Accordingly, efforts to improve our revenues
and income from period to period may be secondary to actions
that management believes will generate long-term value. As with
other sports teams, the competitive positions of our sports
teams depends primarily on our ability to develop, obtain and
retain talented players, for which we compete with other
professional sports teams. Our efforts in this regard may
include, among other things, trading for highly compensated
players, signing draft picks, free agents or current players to
new contracts, engaging in salary arbitration with existing
players or terminating or waiving players. Any of these actions
could increase expenses for a particular period, subject to
salary cap restrictions contained in the respective
leagues collective bargaining agreements. There can be no
assurance that any actions taken by management to increase our
long-term value will be successful.
A significant factor in our ability to attract and retain
talented players is player compensation. NBA and NHL player
salaries have generally increased significantly through the
1990s and 2000s, and may continue to increase. Although the
collective bargaining agreements between, respectively, the NBA
and the National Basketball Players Association and the NHL and
the National Hockey League Players Association cap player
salaries at a prescribed percentage of league-wide revenues,
such provisions do not apply on a
team-by-team
basis and, accordingly, we may pay our players a different
proportion of our revenues than other NBA or NHL franchises.
Future collective bargaining agreements may increase the
percentage of league-wide revenues to which NBA or NHL players
are entitled, which may further increase our costs. In addition,
we may also be obligated to pay the NBA a luxury tax each year,
the calculation of which is determined by a formula that takes
into account the aggregate salaries paid to our NBA players.
Significant increases in players salaries or
21
luxury tax payments could have a material adverse effect on our
financial condition, results of operations and cash flows if the
increases are not offset by adequate increases in revenue.
We have incurred significant charges in each of the last three
years for costs associated with transactions relating to players
on our sports teams for season-ending and career-ending injuries
and for waivers and terminations of players and other team
personnel, including team executives. These transactions can
result in significant charges as the Company recognizes the
estimated ultimate costs of these events in the period in which
they occur, although amounts due to these individuals are
generally paid over their remaining contract terms. These
expenses add to the volatility of the results of our MSG Sports
segment. For example, the expense for these items was
approximately $60.2 million, $6.8 million,
$24.9 million and $23.5 million in 2006, 2007, 2008
and for the nine months ended September 30, 2009,
respectively.
The
Actions of the Basketball and Hockey Leagues may Have a Material
Effect on Our Businesses.
The governing bodies of the NBA (including the WNBA) and the NHL
have certain rights under certain circumstances to take actions
that they deem to be in the best interests of their respective
sports, which may not necessarily be consistent with maximizing
our results of operations and which could affect the Knicks or
the Rangers in ways that are different than the impact on other
teams. Certain of these decisions by the NBA or the NHL could
have a material adverse effect on our business, results of
operations, financial condition and cash flows. From time to
time, we may disagree with or challenge actions the leagues take
or the power and authority they assert. The following discussion
highlights certain areas in which decisions of the NBA and the
NHL could materially affect our businesses.
The NBA and the NHL may assert control over certain matters,
under certain circumstances, that may affect our revenues such
as the national and international rights to telecast the games
of league members, including the Knicks and the Rangers,
licensing of the rights to produce and sell merchandise bearing
the logos of our teams and the leagues, and the online
activities of our teams. Changes to national and international
telecast rights could impact the availability of games covered
by our local telecast rights. The NBA and NHL have each entered
into agreements regarding the national and international
telecasts of NBA and NHL games. We receive a share equal to that
of other teams in the respective leagues of the income the NHL
and the NBA generate from these contracts, which expire from
time to time. There can be no assurance that the NHL or the NBA
will be able to renew these contracts following their expiration
on terms as favorable as those in the current agreements or that
we will continue to receive the same level of revenues in the
future.
The leagues have asserted control over certain other important
decisions, under certain circumstances, such as the length and
format of the playing season, including preseason and playoff
schedules, the operating territories of the member teams,
admission of new members, franchise relocations, labor relations
with the players associations, collective bargaining, free
agency, and luxury taxes and revenue sharing. Decisions on these
matters, some or all of which are also subject to the terms of
the relevant collective bargaining agreement, may materially
affect our business. In addition, the NBA imposes a luxury tax
and escrow system with respect to player salaries as well as a
revenue assistance plan, and the NHL has also imposed a revenue
sharing system.
The NBA and the NHL have imposed certain restrictions on the
ability of owners to undertake some types of transactions in
respect of teams, including a change in ownership, a relocation
of a team and certain types of financing transactions. In
certain instances, these restrictions could impair our ability
to proceed with a transaction that is in the best interests of
the Company and its stockholders if we were unable to obtain
required league approvals in a timely manner or at all.
The leagues impose certain rules that define, under certain
circumstances, the territories in which we operate, including
the markets in which we telecast games. Changes to these rules
could materially adversely affect us.
Each leagues governing body has imposed a number of rules,
regulations, guidelines, bulletins, directives, policies and
agreements upon its teams. Changes to these provisions may apply
to our sports teams
22
and their personnel, regardless of whether we agree or disagree
with such changes, have voted against such changes or have
challenged them through other means, and it is possible that any
such changes could materially adversely affect our business to
the extent they are ultimately determined to bind our teams. See
Business Legal Proceedings for a
discussion of recent litigation between us and the NHL.
The commissioners of each of the NBA and NHL assert significant
authority to take certain actions on behalf of their respective
leagues under certain circumstances. Decisions by the
commissioners of the NBA and the NHL, including on the matters
described above, may adversely affect our businesses. The
leagues governing documents and our agreements with the
leagues purport to limit the manner in which we may challenge
decisions and actions by a league commissioner or the league
itself.
Injuries
to Players on Our Sports Teams Could Hinder Our
Success.
To the degree that our financial results are dependent on our
sports teams popularity
and/or
on-court and on-ice success, the likelihood of achieving such
popularity or competitive success may, given the nature of
sports, be substantially impacted by serious or untimely
injuries to key players. Nearly all of our players, including
those with multi-year contracts, have guaranteed contracts,
meaning that (subject to the terms of the applicable player
contract and collective bargaining agreement) each player may be
entitled to receive his salary even if the player dies or is
unable to play as a result of injury. These salaries represent
significant financial commitments for our sports teams. We are
generally insured against having to pay salaries in the event of
a players death and have obtained disability insurance
policies for substantially all of our material player contracts.
In the event of injuries sustained resulting in lost services
(as defined in the policies), the policies provide for payment
to us of the majority of the players salary for the
remaining term of the contract or until the player can resume
play, in each case following a deductible number of missed
games. The cost of such insurance has risen substantially,
however, and it may not be available in certain circumstances or
on terms that are commercially feasible. We may choose not to
obtain (or may not be able to obtain) such insurance in some
cases, and we may change coverage levels (or be unable to change
coverage levels) in the future.
If an injured player is not insured, we may be obligated to pay
all of the injured players salary. In addition, player
disability insurance policies do not cover any NBA luxury tax
that we are required to pay as a result of league rules and
regulations and may exclude from coverage certain pre-existing
conditions. For purposes of determining any NBA luxury tax,
salary payable to an injured player is included in team salary,
unless and until that players salary is removed from the
team salary for purposes of calculating NBA luxury tax pursuant
to the terms of the collective bargaining agreement. Replacement
of an injured player may result in an increase in salary expense
for us, subject to any applicable salary cap.
Risks
Relating to Our Entertainment Business
Our
Entertainment Business Faces Intense and Wide-Ranging
Competition.
Our entertainment business competes, in certain respects and to
varying degrees, with other leisure-time activities such as
television, the Internet, radio, online services, motion picture
theaters, Broadway shows, home video and other alternative
sources of entertainment and information for total entertainment
dollars in our marketplace. The success of our entertainment
business is largely dependent on the continued success of our
Radio City Christmas Spectacular
, and, to a lesser
extent, the availability of, and our venues ability to
attract, concerts, family shows and other events, competition
for which is intense. For example, our Madison Square Garden
complex (comprising The Garden and a theater within the complex
currently known as The Theater at Madison Square Garden), Radio
City Music Hall and the Beacon Theatre all compete with other
entertainment venues in New York and elsewhere, such as the
Nassau Coliseum, the Meadowlands Sports Complex, the IZOD Center
and the Prudential Center. The Chicago Theatre and the Wang
Theatre face similar competition from other venues in Chicago,
Boston and elsewhere.
Further, in order to maintain the competitive positions of The
Garden and our theaters, we must invest on a continuous basis in
state-of-the-art
technology while maintaining a competitive pricing structure for
events that may be held in our venues, many of which have
alternative venue options available to them in New York
23
and other cities. In addition, we invest a substantial amount in
our
Radio City Christmas Spectacular
and in new
productions, to continue to attract our audiences. We cannot
assure you that such investments will generate revenues that are
sufficient to justify our investment or even that exceed our
expenses.
The
Success of Our Entertainment Business Depends on the Continued
Popularity of Our Live Productions, Particularly the Radio City
Christmas Spectacular.
The financial results of our entertainment business are
dependent on the popularity of our live productions with
audiences in New York and, with respect to our touring
productions, other cities throughout North America. In
particular, our entertainment business depends on the continuing
popularity of the
Radio City Christmas Spectacular
, which
has historically made up a significant portion of the revenues
of our entertainment business.
Should the popularity of the
Radio City Christmas Spectacular
decline, our revenues from ticket sales, concession and
merchandise sales would likely also decline, and we might not be
able to replace that lost revenue with revenues from other
sources. In addition, we have made significant investments in
the touring and arena productions of the
Radio City Christmas
Spectacular
, and a decline in the popularity of the
Radio
City Christmas Spectacular
franchise might mean that we are
less able to recoup those investments.
Our
Strategy for Our Entertainment Business Includes the Development
of New Live Productions and the Possible Addition of New Venues,
Each of Which Could Require Making Considerable Investments for
Which There Can be No Guarantee of Success.
As part of our business strategy, we intend to develop new
productions and live entertainment events, which may include
expansions of our existing productions or relationships or the
creation of entirely new live productions. Expansion of
productions or the development of new productions could require
significant upfront investment in sets, staging, creative
processes, casting and advertising. To the extent that any
efforts at expanding productions or creating new productions do
not result in a viable live show, or to the extent that any such
productions do not achieve expected levels of popularity among
audiences, we may lose all or a portion of such investments.
Our strategy also involves the possible addition of venues,
including in additional major markets beyond New York, Chicago
and Boston. Any such additions may involve acquiring control of
existing venues or constructing new venues and could require
significant investment. In pursuing such an expansion strategy,
we will face risks, potentially including risks associated with
the construction of new facilities, such as cost overruns and
construction delays, risks associated with financing, such as
the potential lack of availability of adequate financing to
commence or complete an acquisition or development, risks
associated with operating in new markets and the risk that we
may lose all or a part of our investment in any additional
venues.
Risks
Relating to Our Media Business
Our
Media Business Faces Intense and Wide-Ranging
Competition.
Our media business competes, in certain respects and to varying
degrees, for viewers and advertisers with other programming
networks,
pay-per-view,
video on demand, and other content offered on cable television
and other programming distribution systems. We also compete for
viewers and advertisers with other television networks, radio,
motion picture theaters, home video, the Internet, mobile media
and other sources of information and entertainment and
advertising services. Important competitive factors are the
prices charged for programming, the quantity, quality (in
particular, the on-court and on-ice performance of our sports
teams as well as other teams whose rights we control) and the
variety of the programming offered and the effectiveness of
marketing efforts.
The competitive environment in which our media business operates
may be affected by technological developments. It is difficult
to predict the future effect of technology on many of the
factors affecting our competitive position. For example, data
compression technology has made it possible for most programming
distributors to increase their channel capacity, which may
reduce the competition among programming
24
networks and broadcasters for channel space. On the other hand,
the addition of channel space could also increase competition
for desired entertainment and sports programming and ultimately,
for viewing by subscribers. As more channel space becomes
available, the position of our programming networks in the most
favorable tiers of these distributors would be an important
goal. Additionally, video content delivered directly to viewers
over the Internet competes with our programming networks for
viewership.
With respect to advertising services, factors affecting the
degree and extent of competition include prices, reach, audience
demographics and similar factors.
Some of our competitors are large companies that have greater
financial resources than us.
The
Success of Our Media Business Also Depends on Affiliation Fees,
and on the Existence of Agreements with a Limited Number of
Distributors for Our Programming.
Our media business derives much of its revenues from affiliation
fees paid by cable television operators (including cable
television systems owned by Cablevision), satellite operators
and other operators (which we collectively refer to as
Distributors) that provide video service and sales
of advertising. Increases in affiliation fee revenues result
from a combination of changes in rates and changes in subscriber
counts, factors that may be largely out of our control.
Our success is also dependent upon the existence of agreements
between our programming networks and Distributors. Existing
affiliation agreements of our programming networks expire at
various dates. Although we have historically been able to secure
distribution of our programming networks, we cannot assure you
that we will be able to renew these affiliation agreements, or
to obtain terms similar to our existing agreements in the event
of a renewal. The loss of any of our significant Distributors
could severely impact our business and results of operations. In
addition, in some cases, if a Distributor is acquired, the
affiliation agreement of the acquiring Distributor will govern
following the acquisition. In those circumstances, the
acquisition of a Distributor that is a party to one or more
affiliation agreements with us on terms that are more favorable
to us could materially adversely impact our business and results
of operations.
We
Derive Substantial Revenues From the Sale of Advertising Time
and Those Revenues are Subject to a Number of Factors, Many of
Which are Beyond Our Control.
Our media business is dependent on advertising revenues, which,
in turn, depend on a number of factors, many of which are beyond
our control, such as the health of the economy in the markets
our businesses serve and in the nation as a whole, general
economic trends in the advertising industry, the popularity of
our programming, the activities of our competitors, including
increased competition from other forms of advertising-based
media (such as newspapers, cable television, Internet and
radio), consumer budgeting and buying patterns, and team
performance. A continuing decline in the economic prospects of
advertisers or the economy in general could alter current or
prospective advertisers spending priorities, which could
cause our revenues and operating results to decline
significantly in any given period. In addition, we cannot assure
you that our programming will achieve favorable ratings. Our
ratings depend partly upon unpredictable and volatile factors
beyond our control, such as viewer preferences, competing
programming and the availability of other entertainment
activities. A shift in viewer preferences could cause our
advertising revenues to decline as a result of changes to the
ratings for our programming. Recently, the advertising market
has experienced significant weakness. Our advertising revenues
declined in 2008 and in the nine months ended September 30,
2009, in each case as compared with the comparable period in the
prior year, due in part to the economic recession.
Our
Rights Agreements with Various Professional Sports Teams that We
Do Not Own Have Varying Durations and Renewal Terms and We may
be Unable to Renew Those Agreements on Acceptable
Terms.
In addition to carrying the games of the Knicks, Rangers and
Liberty, our media business has rights agreements with other
professional sports teams that we do not control. We may seek
renewal of these contracts and, if we do so, we may be outbid by
a competing network for these contracts or the renewal costs
could substantially exceed our costs under the current
contracts. One or more of these teams may seek to establish
their own programming network or join a competitors
network and, in certain circumstances, we
25
may not have an opportunity to bid for the rights. Moreover, the
value of these contracts may also be affected by various league
decisions
and/or
league agreements that we may not be able to control, including
a decision to alter the number of games played during a season.
The value of these rights can also be affected, or we could lose
such rights entirely, if a team is liquidated, undergoes
reorganization in bankruptcy or relocates to an area where it is
not possible or commercially feasible for us to continue to
carry games. Any loss or diminution in the value of rights could
impact the extent of the sports coverage offered by us and could
adversely affect our affiliation fee and advertising revenues.
In addition, our distribution agreements typically include
certain remedies in the event our MSG Networks fail to meet a
minimum number of professional events, and, accordingly, any
loss of rights could adversely affect our business.
Each leagues governing body has imposed a number of rules,
regulations, guidelines, bulletins, directives, policies and
agreements upon its teams, including the teams we carry on our
MSG Networks. Changes to these provisions could materially
adversely affect our business.
Our
Programming Business is Subject to Direct and Indirect
Government Regulation, in Part as a Result of Federal Law and
Federal Communications Commission (FCC) Regulations
Applicable Because of Cablevisions and Our Common
Directors, Officers, and Shareholders.
For FCC purposes, the common directors and five percent or
greater shareholders of Cablevision and Madison Square Garden
will be deemed to hold attributable interests in each of the
companies after the Distribution. As a result, certain
regulations applicable to a programming network affiliated with
a cable television operator will continue to apply to Madison
Square Garden. This affiliation may also limit the activities or
strategic business alternatives available to Madison Square
Garden, including the ability to own or operate media properties
we do not presently own or operate. Other FCC regulations,
although imposed on cable television operators and satellite
operators, affect programming networks indirectly. See
Business Regulation Regulation of
Our Media Business. Legislative enactments, court actions,
and federal regulatory proceedings could materially affect our
programming business by modifying the rates, terms, and
conditions under which we offer our programming services to
distributors and the public, or otherwise materially affect the
range of our activities or strategic business alternatives. We
cannot predict the likelihood or results of any such
legislative, judicial, or regulatory actions.
General
Risks
Our
Business has been Adversely Impacted and may, in the Future, be
Materially Adversely Impacted by the Economic
Downturn.
Our businesses depend upon the ability and willingness of
consumers and businesses to purchase tickets (including season
tickets) or to license suites at our facilities and to spend on
concessions and merchandise, and upon advertising revenues. As a
result, the current economic downturn and its negative effects
on consumers discretionary spending has adversely affected
our revenues. The New York City metropolitan area has been
particularly adversely affected by the impact of the economic
downturn.
Our
Business Could be Adversely Affected by Terrorist Activity or
the Threat of Terrorist Activity and Other Developments that
Discourage Congregation at Prominent Places of Public
Assembly.
The venues we operate, like all prominent places of public
assembly, could be the target of terrorist activities. The
success of our businesses is dependent upon the willingness of
patrons to attend events at our venues. Terrorist activity at
other locations, or even the threat of terrorist activity, could
result in reduced attendance at our venues. Similarly, a major
epidemic or pandemic, or the threat of such an event, could
adversely affect attendance at our events.
Our
Businesses are Substantially Dependent on the Continued
Popularity and/or Competitive Success of the New York
Knicks and the New York Rangers, Which Cannot be
Assured.
Our financial results have historically been dependent on, and
are expected to continue to depend in large part on, the New
York Knicks and the New York Rangers remaining popular with our
fan bases and, in
26
varying degrees, on the teams achieving on-court and
on-ice success, which can generate fan enthusiasm, resulting in
sustained ticket, premium seating, suite, concession and
merchandise sales during the regular season, greater shares of
total viewership and increased advertising sales. Furthermore,
success in the regular season may qualify a team for
participation in post-season playoffs, which provides us with
additional revenue by increasing the number of games played by
our teams and, more importantly, by generating increased
excitement and interest in our teams, which can improve
attendance and viewership in subsequent seasons. There can be no
assurance that any sports teams, including the New York Knicks
and the New York Rangers, will compete in post-season play in
2010 or thereafter.
We are
Planning an Extensive Renovation of The Garden, the Cost, Timing
and Revenue Impact of Which are Uncertain.
We previously announced our intent to pursue a major renovation
of The Garden. We continue to review all aspects of this complex
project with our consultants in order to improve the renovation
plans, mitigate project risks and identify efficiencies in all
aspects of costs, planning and project-phasing. We also continue
to develop our cost and capital investment estimates to ensure
that the planned renovation meets our overall expectations and
objectives.
While the pre-construction planning and cost estimates of this
renovation are not yet final, we currently expect that the
projects cost will be between $775 million and
$850 million, of which approximately $60 million was
incurred through December 31, 2009. We expect that the
estimated costs associated with the project will be met from
cash on hand, receipt of repayments of advances made to a
subsidiary of Cablevision and cash flow from our operations. We
have recently obtained commitments from a group of banks for a
revolving credit facility. (See Managements
Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital
Resources Financing Agreements.) To the extent
that management determines that financing for this renovation is
required or desirable, we would expect to draw on this facility.
In order to most efficiently and effectively complete the
renovation, it will be a year-round project. Our goal is to
minimize disruption to current operations and, to achieve this,
The Garden will remain open for the New York Knicks and
New York Rangers seasons in the years when the renovation
takes place, while we sequence the construction to ensure that
we maximize our construction efforts when we close the arena
during summer months. Our current expectation is that the
renovated lower bowl of The Garden will be open for the 2011-12
seasons, and that the renovated upper bowl will be open for the
2012-13
seasons.
Although the Company continues to pursue the arena renovation
plan, there can be no assurance that a renovation will occur or
what the ultimate cost, scope or timing of any renovation
activity may be.
We Do
Not Own all of Our Venues and Our Failure to Renew Our Leases or
Booking Agreements on Economically Attractive Terms Could Have
an Adverse Effect on Our Business.
The lease on Radio City Music Hall expires in 2023. We have the
option to renew the lease for an additional ten years by
providing two years notice prior to the initial expiration
date. Similarly, we lease the Beacon Theatre pursuant to a lease
that expires in 2026. We have also entered into a booking
agreement in respect of the Wang Theatre in Boston. Our booking
agreement expires in 2019 and we have the option to renew the
agreement at that time for an additional ten years. If we are
unable to renew these leases or the booking agreement on
economically attractive terms, our business could be adversely
affected.
Our
Properties are Subject to, and Benefit from, Certain Easements,
the Availability of Which may Not Continue on Terms Favorable to
Us or at All.
Our properties are subject to, and benefit from, certain
easements. For example, the breezeway into the
Madison Square Garden complex from Seventh Avenue in New York
City is a significant easement that we share with other property
owners. Our ability to continue to utilize this and other
easements, including for advertising purposes, requires us to
comply with a number of conditions. Moreover, certain adjoining
property owners have easements over our property, which we are
required to maintain so long as those property owners meet
certain conditions. It is possible that we will be unable to
continue to access or maintain any easements
27
on terms favorable to us, or at all, which could have a
significant negative impact on our revenues and results of
operations.
We may
Require Third-Party Financing to Fund Our Ongoing Operations and
Capital Expenditures, Including Our Planned Renovation of The
Garden, the Availability of Which is Highly
Uncertain.
The capital and credit markets have been experiencing extreme
volatility and disruption. The markets have exerted extreme
downward pressure on stock prices and upward pressure on the
cost of new debt capital and have severely restricted credit
availability for most issuers.
Our business has been characterized by significant expenditures
for properties and businesses, for renovations and for
productions. In particular, our planned renovation of The Garden
will require significant cash resources. In the future we may
also engage in similar transactions and such transactions may be
dependent on our ability to obtain third-party financing. We may
also seek third-party financing to fund our ongoing operations.
Although we have obtained commitments from lenders for a credit
facility (see Managements Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources Financing
Agreements), our ability to draw on any such facility will
depend on our ability to meet certain financial tests and other
conditions. In addition, you should not assume that we will be
able to refinance any such facility in the future or raise any
required additional capital or do so on favorable terms. We may
not be able to raise additional capital on favorable terms, or
at all, if unsettled conditions in financial markets continue to
exist. In addition, as described above, the leagues in which our
sports teams compete may have, under certain circumstances,
approval rights over certain financing transactions, and in
connection with those rights, could affect our ability to use
third-party financing. If we are unable to pursue our current
and future spending programs, we may be forced to cancel or
scale back those programs. Our choice of which spending programs
to cancel or reduce may be limited, although we do not currently
anticipate that unavailability of third-party financing in any
circumstances would materially affect our spending on player
salaries in any respect. Failure to successfully pursue our
capital expenditure and other spending plans could materially
and adversely affect our ability to compete effectively.
We
have Substantial Credit Exposure to a Subsidiary of
Cablevision.
Cablevision actively manages the available cash of its
subsidiaries to minimize the overall need for short term
borrowings. As a result, subsidiaries of Cablevision that have
excess cash will advance some or all of those funds to
Cablevision or to other subsidiaries of Cablevision which have
funding needs. We have intercompany advances outstanding with a
total balance of $190 million to Rainbow Media Holdings LLC
(RMH). RMH is an indirect, wholly-owned subsidiary
of Cablevision. Our advances to RMH are unsecured, do not bear
interest and have not been guaranteed by any person. Prior to
the Distribution date, the terms of these advances will be
changed to provide for a maturity date of no later than
June 30, 2010 (with prepayment at Cablevisions
option) and for the payment of cash interest at a fixed rate
equal to the prime rate on the date the changes to the terms are
made. Until the advances are repaid to us we are exposed to the
credit risk of RMH for a substantial portion of our liquid
assets.
Our
Business is Subject to Seasonal Fluctuations.
The revenues of our MSG Sports and MSG Entertainment segments
tend to be cyclical. For example, because 39% of our MSG
Entertainment segments revenues and 12% of our combined
revenues in 2008, net of intersegment eliminations, were derived
from our
Radio City Christmas Spectacular
, including its
touring shows, the revenues of our MSG Entertainment segment are
highest in the fourth quarter when these performances primarily
occur. As a result, MSG Entertainment earns a disproportionate
amount of its revenue and operating income in the fourth quarter
of each year. Similarly, because of the nature of the NBA and
NHL playing seasons, revenues from our sports teams are
concentrated in the first and last quarters of each year.
Revenues from our business on a consolidated basis tend to be at
their lowest in the second and third quarters.
28
Our
Sales of Beverages Entails Certain Legal, Regulatory and
Reputational Risks.
We hold liquor licenses at each of our venues and are subject to
licensing requirements with respect to the sale of alcoholic
beverages in the jurisdictions in which we serve those
beverages. Failure to receive or retain, or the suspension of,
liquor licenses or permits could interrupt or terminate our
ability to serve alcoholic beverages at the applicable venue and
could have a material adverse effect on our results of
operations. Additional regulation relating to liquor licenses
may limit our activities in the future or significantly increase
the cost of compliance, or both.
In the jurisdictions in which our venues are located, we are
subject to statutes that generally provide that serving alcohol
to a visibly intoxicated or minor patron is a violation of the
law. Our liability insurance coverage may not be adequate or
available to cover any potential liability. See
Business Legal Proceedings.
Our
Business Benefits from a New York City Real Estate Tax
Exemption, Which Could be Changed or Withdrawn.
Many arenas, ballparks and stadia nationally and in New York
City have received significant public support, including tax
exempt financing, other tax benefits, direct subsidies and other
contributions, including for public infrastructure critical to
the facilities such as parking lots and transit improvements.
Our Madison Square Garden complex benefits from a more limited
real estate tax exemption pursuant to an agreement with the City
of New York and legislation enacted by the State of New York in
1982. This tax exemption results in annual expense savings of
approximately $12.4 million. From time to time there have
been calls to repeal or amend the tax exemption. Repeal or
amendment would require legislative action by New York State.
There can be no assurance that the tax exemption will not be
amended in a manner adverse to us or repealed in its entirety,
either of which would be financially adverse to us.
Organized
Labor Matters Could Adversely Impact Our Business and Our
Results of Operations.
Our business is dependent upon the efforts of unionized workers.
Any labor disputes, such as strikes or lockouts, with the unions
with which we deal could materially adversely affect our
businesses, including our ability to produce or present
concerts, theatrical productions, sporting events and live
telecasts.
The NHL players and the NBA players are covered by collective
bargaining agreements between the NHL Players Association
and the NHL and between the National Basketball Players
Association and the NBA, respectively. Both the NHL and the NBA
have experienced labor difficulties in the past and may have
labor issues in the future. Labor difficulties may include
players strikes or management lockouts. In 1992, the NHL
Players Association conducted a
10-day
strike. A lockout during the
1994-95
NHL
season resulted in the regular season being shortened from 84 to
48 games. A lockout beginning in September 2004 resulted in the
cancellation of the entire
2004-05
NHL
season. The NBA has also experienced labor difficulties,
including a lockout during the
1998-99
season, which resulted in the regular season being shortened
from 82 to 50 games.
Because
There has Not been Any Public Market for Our Common Stock, the
Market Price and Trading Volume of Our Common Stock may be
Volatile and You may Not be Able to Resell Your Shares at or
Above the Initial Market Price of Our Stock Following the
Distribution.
Prior to the Distribution, there will have been no trading
market for our common stock. We cannot predict the extent to
which investors interest will lead to a liquid trading
market or whether the market price of our common stock will be
volatile. The market price of our common stock could fluctuate
significantly for many reasons, including in response to the
risk factors listed in this information statement or for reasons
unrelated to our specific performance, such as reports by
industry analysts, investor perceptions, or negative
developments for our customers, competitors or suppliers, as
well as general economic and industry conditions.
29
The
Combined Post-Distribution Value of Cablevision and Madison
Square Garden Shares may Not Equal or Exceed the
Pre-Distribution Value of Cablevision Shares.
After the Distribution, Cablevision NY Group Class A Shares
will continue to be listed and traded on the New York Stock
Exchange. Application has been made to list the shares of
Madison Square Garden Class A Common Stock on the NASDAQ
Stock Market LLC under the symbol MSG. We cannot
assure you that the combined trading prices of Cablevision NY
Group Class A Shares and Madison Square Garden Class A
Common Stock after the Distribution, as adjusted for any changes
in the combined capitalization of these companies, will be equal
to or greater than the trading price of Cablevision NY Group
Class A Shares prior to the Distribution. Until the market
has fully evaluated the business of Cablevision without the
business of Madison Square Garden, the price at which
Cablevision NY Group Class A Shares trade may fluctuate
significantly. Similarly, until the market has fully evaluated
the business of Madison Square Garden, the price at which shares
of Madison Square Garden Class A Common Stock trade may
fluctuate significantly.
The
Distribution Could Result in Significant Tax
Liability.
Cablevision has received a private letter ruling from the IRS to
the effect that, among other things, the Distribution, and
certain related transactions, will qualify for tax-free
treatment under the Code. In addition, Cablevision expects to
obtain an opinion from Sullivan & Cromwell LLP
substantially to the effect that, among other things, the
Distribution and certain related transactions will qualify for
tax-free treatment under the Code, and that accordingly, for
U.S. federal income tax purposes, no gain or loss will be
recognized by, and no amount will be included in the income of,
a holder of Cablevision common stock upon the receipt of shares
of our common stock pursuant to the Distribution, except to the
extent such holder receives cash in lieu of fractional shares of
our common stock.
Although a private letter ruling from the IRS generally is
binding on the IRS, if the factual representations or
assumptions made in the letter ruling request are untrue or
incomplete in any material respect, we will not be able to rely
on the ruling. Furthermore, the IRS will not rule on whether a
distribution satisfies certain requirements necessary to obtain
tax-free treatment under the Code. Rather, the ruling is based
upon representations by Cablevision that these conditions have
been satisfied, and any inaccuracy in such representations could
invalidate the ruling. The opinion discussed above addresses all
of the requirements necessary for the Distribution and certain
related transactions to obtain tax-free treatment under the Code
and is based on, among other things, certain assumptions and
representations made by Cablevision and us, which if incorrect
or inaccurate in any material respect would jeopardize the
conclusions reached by counsel in such opinion. The opinion will
not be binding on the IRS or the courts. See The
Distribution Material U.S. Federal Income Tax
Consequences of the Distribution.
If the Distribution does not qualify for tax-free treatment for
U.S. federal income tax purposes, then, in general,
Cablevision would be subject to tax as if it had sold the common
stock of our Company in a taxable sale for its fair market
value. Cablevisions shareholders would be subject to tax
as if they had received a distribution equal to the fair market
value of our common stock that was distributed to them, which
generally would be treated first as a taxable dividend to the
extent of Cablevisions earnings and profits, then as a
non-taxable return of capital to the extent of each
shareholders tax basis in his or her Cablevision stock,
and thereafter as capital gain with respect to the remaining
value. It is expected that the amount of any such taxes to
Cablevisions shareholders and Cablevision would be
substantial. See The Distribution Material
U.S. Federal Income Tax Consequences of the
Distribution.
We may
have a Significant Indemnity Obligation to Cablevision if the
Distribution is Treated as a Taxable Transaction.
We will enter into a Tax Disaffiliation Agreement with
Cablevision, which will set out each partys rights and
obligations with respect to deficiencies and refunds, if any, of
federal, state, local or foreign taxes for periods before and
after the Distribution and related matters such as the filing of
tax returns and the conduct of IRS and other audits. We expect
that pursuant to the Tax Disaffiliation Agreement, we will be
required to indemnify Cablevision for losses and taxes of
Cablevision resulting from the breach of certain covenants and
for certain taxable gain recognized by Cablevision, including as
a result of certain acquisitions of our stock or assets. If we
are
30
required to indemnify Cablevision under the circumstances set
forth in the Tax Disaffiliation Agreement, we may be subject to
substantial liabilities, which could materially adversely affect
our financial position.
The
Tax Rules Applicable to the Distribution may Restrict Us from
Engaging in Certain Corporate Transactions or From Raising
Equity Capital Beyond Certain Thresholds for a Period of Time
After the Distribution.
To preserve the tax-free treatment of the Distribution to
Cablevision and its shareholders, under the Tax Disaffiliation
Agreement with Cablevision, for the two-year period following
the Distribution, we will be subject to restrictions with
respect to:
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entering into any transaction pursuant to which 50% or more of
our shares or assets would be acquired, whether by merger or
otherwise, unless certain tests are met;
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issuing equity securities, if any such issuances would, in the
aggregate, constitute 50% or more of the voting power or value
of our capital stock;
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certain repurchases of our common shares;
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ceasing to actively conduct our business;
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amendments to our organizational documents (i) affecting
the relative voting rights of our stock or (ii) converting
one class of our stock to another;
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liquidating or partially liquidating; and
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taking any other action that prevents the Distribution and
related transactions from being tax-free.
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These restrictions may limit our ability during such period to
pursue strategic transactions of a certain magnitude that
involve the issuance or acquisition of our stock or engage in
new businesses or other transactions that might increase the
value of our business. These restrictions may also limit our
ability to raise significant amounts of cash through the
issuance of stock, especially if our stock price were to suffer
substantial declines, or through the sale of certain of our
assets. For more information, see the sections entitled
The Distribution Material U.S. Federal
Income Tax Consequences of the Distribution and
Certain Relationships and Related Party
Transactions Relationship Between Cablevision and Us
After the Distribution Tax Disaffiliation
Agreement.
We do
not have an Operating History as a Public Company.
In the past, we relied on Cablevision for various financial,
operational and managerial resources in conducting our
businesses. Following the Distribution, we will maintain our own
credit and banking relationships and perform our own financial
and operational functions. We cannot assure you that we will be
able to successfully put in place the financial, operational and
managerial resources necessary to operate as a public company or
that we will be able to be profitable doing so.
Our
Historical Financial Results as a Business Segment of
Cablevision and Our Unaudited Pro Forma Combined Financial
Statements may Not be Representative of Our Results as a
Separate, Stand-Alone Company.
The historical financial information we have included in this
information statement has been derived from the consolidated
financial statements and accounting records of Cablevision and
does not necessarily reflect what our financial position,
results of operations or cash flows would have been had we been
a separate, stand-alone company during the periods presented.
Although Cablevision did account for our company as a business
segment, we were not operated as a separate, stand-alone company
for the historical periods presented. The historical costs and
expenses reflected in our combined financial statements include
an allocation for certain corporate functions historically
provided by Cablevision, including general corporate expenses
and employee benefits and incentives. These allocations were
based on what we and Cablevision considered to be reasonable
reflections of the historical utilization levels of these
services required in support of our business. The historical
information does not necessarily indicate what our results of
operations, financial position, cash flows or costs and expenses
will be in the future. Our pro forma financial information set
forth under Unaudited Pro Forma Combined Financial
Information reflects changes that may occur in
31
our funding and operations as a result of the separation.
However, there can be no assurances that this unaudited pro
forma combined financial information will reflect our costs as a
publicly-traded company.
Our
Ability to Operate Our Business Effectively may Suffer If We do
Not, Quickly and Effectively, Establish Our Own Financial,
Administrative and Other Support Functions in Order to Operate
as a
Stand-Alone
Company, and We cannot Assure You that the Transition Services
Cablevision has Agreed to Provide Us will be Sufficient for Our
Needs.
Historically, we have relied on financial, administrative and
other resources of Cablevision to support the operation of our
business. In conjunction with our separation from Cablevision,
we will need to expand our financial, administrative and other
support systems or contract with third parties to replace
certain of Cablevisions systems. Any failure or
significant downtime in our own financial or administrative
systems or in Cablevisions financial or administrative
systems during the transition period could impact our results
and/or
prevent us from performing other administrative services and
financial reporting on a timely basis and could materially harm
our business, financial condition and results of operations.
We may
Incur Material Costs and Expenses as a Result of Our Separation
from Cablevision.
We may incur costs and expenses greater than those we currently
incur as a result of our separation from Cablevision. These
increased costs and expenses may arise from various factors,
including financial reporting, costs associated with complying
with federal securities laws (including compliance with the
Sarbanes-Oxley Act of 2002), tax administration, legal and human
resources related functions. Although Cablevision will continue
to provide certain of these services to us under the transition
services agreement, such services are for a limited period of
time. We cannot assure you that these costs will not be material
to our business.
If,
Following the Distribution, We are Unable to Satisfy the
Requirements of Section 404 of the
Sarbanes-Oxley
Act of 2002, or Our Internal Control Over Financial Reporting is
not Effective, the Reliability of Our Financial Statements may
be Questioned and Our Stock Price may Suffer.
Section 404 of the Sarbanes-Oxley Act of 2002 requires any
company subject to the reporting requirements of the
U.S. securities laws to do a comprehensive evaluation of
its and its consolidated subsidiaries internal control
over financial reporting. To comply with this statute, we will
eventually be required to document and test our internal control
procedures, our management will be required to assess and issue
a report concerning our internal control over financial
reporting, and our independent auditors will be required to
issue an opinion on managements assessment of those
matters. The rules governing the standards that must be met for
management to assess our internal control over financial
reporting are complex and require significant documentation,
testing and possible remediation to meet the detailed standards
under the rules. During the course of its testing, our
management may identify material weaknesses or deficiencies
which may not be remedied in time to meet the deadline imposed
by the Sarbanes-Oxley Act. If our management cannot favorably
assess the effectiveness of our internal control over financial
reporting or our auditors identify material weaknesses in our
internal controls, investor confidence in our financial results
may weaken, and our stock price may suffer.
We are
Controlled by the Dolan Family.
We have two classes of common stock:
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Class B Common Stock, which is generally entitled to ten
votes per share and is currently entitled collectively to elect
75% of our Board of Directors, and
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Class A Common Stock, which is entitled to one vote per
share and is currently entitled collectively to elect the
remaining 25% of our Board of Directors.
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As of the Distribution date, the Dolan family, including trusts
for the benefit of members of the Dolan family, will
collectively own all of our Class B Common Stock, less than
3% of our outstanding Class A Common Stock and
approximately 70% of the total voting power of all our
outstanding common stock. Of this amount,
32
Cablevisions Chairman, Charles F. Dolan, will beneficially
own approximately 46% of our outstanding Class B Common
Stock, less than 1% of our outstanding Class A Common Stock
and approximately 32% of the total voting power of all our
outstanding common stock. The members of the Dolan family
holding Class B Common Stock will execute prior to the
Distribution a voting agreement that has the effect of causing
the voting power of the holders of our Class B Common Stock
to be cast as a block with respect to all matters to be voted on
by holders of Class B Common Stock. The Dolan family is
able to prevent a change in control of our company and no person
interested in acquiring us will be able to do so without
obtaining the consent of the Dolan family.
Charles F. Dolan, members of his family and certain related
family entities, by virtue of their stock ownership, have the
power to elect all of our directors subject to election by
holders of Class B Common Stock and are able collectively
to control stockholder decisions on matters on which holders of
all classes of our common stock vote together as a single class.
These matters could include the amendment of some provisions of
our certificate of incorporation and the approval of fundamental
corporate transactions.
In addition, the affirmative vote or consent of the holders of
at least
66
2
/
3
%
of the outstanding shares of the Class B Common Stock,
voting separately as a class, is required to approve:
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the authorization or issuance of any additional shares of
Class B Common Stock, and
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any amendment, alteration or repeal of any of the provisions of
our certificate of incorporation that adversely affects the
powers, preferences or rights of the Class B Common Stock.
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As a result, Charles F. Dolan, members of his family and certain
related family entities also collectively have the power to
prevent such issuance or amendment.
Prior to the Distribution, the members of the Dolan family group
will enter into an agreement with the Company in which they will
agree that during the
12-month
period beginning on the Distribution date, the Dolan family
group must obtain the prior approval of a majority of the
Companys Independent Directors prior to acquiring common
stock of the Company through a tender offer that results in
members of the Dolan family group owning more than 50% of the
total number of outstanding shares of common stock of the
Company. For purposes of this agreement, the term
Independent Directors means the directors of the
Company who have been determined by our Board of Directors to be
independent directors for purposes of The NASDAQ Stock
Market LLC corporate governance standards.
We
Have Elected to be a controlled company for The
NASDAQ Stock Market LLC Purposes Which Allows Us Not to Comply
with all of the Corporate Governance Rules of The NASDAQ Stock
Market LLC.
We have been informed that prior to the Distribution, Charles F.
Dolan, members of his family and certain related family entities
will enter into a Stockholders Agreement relating, among other
things, to the voting of their shares of our Class B Common
Stock. As a result, following the Distribution, we will be a
controlled company under the corporate governance
rules of The NASDAQ Stock Market LLC. As a controlled
company, we will have the right to elect not to comply with the
corporate governance rules of The NASDAQ Stock Market LLC
requiring: (i) a majority of independent directors on our
Board and (ii) an independent corporate governance and
nominating committee. We expect our Board of Directors to elect
to be treated as a controlled company under The
NASDAQ Stock Market LLC corporate governance rules and to
elect not to comply with The NASDAQ Stock Market LLC
requirement for a majority independent board of directors and
for an independent corporate governance and nominating committee
because of our status as a controlled company.
Future
Stock Sales could Adversely Affect the Trading Price of Our
Class A Common Stock Following the
Distribution.
All of the shares of Class A Common Stock will be freely
tradable without restriction or further registration under the
Securities Act unless the shares are owned by our
affiliates as that term is defined in the rules
under the Securities Act. Shares held by affiliates
may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144
which is summarized under
33
Shares Eligible for Future Sale. Further, we
plan to file a registration statement to cover the shares issued
under our equity-based benefit plans.
As described under Shares Eligible for Future
Sale Registration Rights Agreements, certain
parties have registration rights covering a portion of our
shares. We expect to enter into registration rights agreements
with Charles F. Dolan, certain Dolan family interests and the
Dolan Family Foundations that will provide them with
demand and piggyback registration rights
with respect
to shares
of Class A Common Stock, including shares issuable upon
conversion of shares of Class B Common Stock. Sales of a
substantial number of shares of Class A Common Stock could
adversely affect the market price of the Class A Common
Stock and could impair our future ability to raise capital
through an offering of our equity securities.
Transfers
and Ownership of Our Common Stock are Subject to Restrictions
Under Rules of the NBA and the NHL and Our Certificate of
Incorporation Provides Us With Remedies Against Holders Who
Dont Comply with Those Restrictions.
The Company is the indirect owner of professional sports
franchises in the NBA and the NHL. As a result, transfers and
ownership of our Common Stock are subject to certain
restrictions under the constituent documents of the NBA and the
NHL as well as under consent agreements entered into by the
Company with the NBA and the NHL in connection with their
approval of the Distribution. These restrictions are described
under Description of Capital Stock
Class A Common Stock and Class B Common
Stock Transfer Restrictions. In order to
protect the Company and its NBA and NHL franchises from
sanctions that might be imposed by the NBA or the NHL as a
result of violations of these restrictions, our amended and
restated certificate of incorporation provides that if a
transfer of shares of our Common Stock to a person or the
ownership of shares of our Common Stock by a person requires
approval or other action by a league and such approval or other
action was not obtained or taken as required, the Company shall
have the right by written notice to the holder to require the
holder to dispose of the shares of Common Stock which triggered
the need for such approval. If a holder fails to comply with
such a notice, in addition to any other remedies that may be
available, the Company may redeem the shares at 85% of the fair
market value of those shares.
We
Share Certain Key Executives and Directors with Cablevision
Which Means Those Executives Will Not Devote Their Full Time and
Attention to Our Affairs and the Overlap may Give Rise to
Conflicts.
Following the Distribution, our Executive Chairman, James L.
Dolan, will also continue to serve as the President and Chief
Executive Officer of Cablevision and our President and Chief
Executive Officer, Hank J. Ratner, will continue to serve as a
Vice Chairman of Cablevision. This arrangement is similar to the
historical situation whereby Messrs. Dolan and Ratner are
serving or have served as senior officers of both companies. As
a result, following the Distribution, the two most senior
officers of the Company will not be devoting their full time and
attention to the Companys affairs. In addition,
immediately following the Distribution, eight members of our
Board of Directors will also be directors of Cablevision, and
several of our directors will continue to serve as employees of
Cablevision concurrently with their service on our Board of
Directors. These officers and directors may have actual or
apparent conflicts of interest with respect to matters involving
or affecting each company. For example, there will be the
potential for a conflict of interest when we or Cablevision look
at acquisitions and other corporate opportunities that may be
suitable for both companies. Also, conflicts may arise if there
are issues or disputes under the commercial arrangements that
will exist between Cablevision and us. In addition, after the
Distribution, certain of our directors and officers will
continue to own Cablevision stock and options to purchase
Cablevision stock, as well as cash performance awards with any
payout based on Cablevisions performance, which they
acquired or were granted prior to the Distribution, including
Messrs. Dolan and Ratner. These ownership interests could
create actual, apparent or potential conflicts of interest when
these individuals are faced with decisions that could have
different implications for our Company and Cablevision. See
Certain Relationships and Related Party
Transactions Certain Relationships and Potential
Conflicts of Interest for a discussion of certain
procedures we will institute to help ameliorate such potential
conflicts that may arise.
34
Our
Overlapping Directors and Executive Officers with Cablevision
may Result in the Diversion of Corporate Opportunities and Other
Conflicts to Cablevision and Provisions in Our Amended and
Restated Certificate of Incorporation may Provide Us No Remedy
in That Circumstance.
The Companys amended and restated certificate of
incorporation will acknowledge that directors and officers of
the Company may also be serving as directors, officers,
employees, consultants or agents of Cablevision and its
subsidiaries and that the Company may engage in material
business transactions with such entities. The Company will
renounce its rights to certain business opportunities and the
Companys amended and restated certificate of incorporation
will provide that no director or officer of the Company who is
also serving as a director, officer, employee, consultant or
agent of Cablevision and its subsidiaries will be liable to the
Company or its stockholders for breach of any fiduciary duty
that would otherwise exist by reason of the fact that any such
individual directs a corporate opportunity (other than certain
limited types of opportunities set forth in our certificate of
incorporation) to Cablevision or any of its subsidiaries instead
of the Company, or does not refer or communicate information
regarding such corporate opportunities to the Company. These
provisions in our amended and restated certificate of
incorporation will also expressly validate certain contracts,
agreements, assignments and transactions (and amendments,
modifications or terminations thereof) between the Company and
Cablevision
and/or
any
of its subsidiaries and, to the fullest extent permitted by law,
provide that the actions of the overlapping directors or
officers in connection therewith are not breaches of fiduciary
duties owed to the Company, any of its subsidiaries or their
respective shareholders. See Description of Capital
Stock Certain Corporate Opportunities and
Conflicts.
35
BUSINESS
We are a Delaware corporation with our principal executive
offices at Two Penn Plaza, New York, NY, 10121. Our telephone
number is
212-465-6000.
Unless the context otherwise requires, all references to
we, us, our, Madison
Square Garden or the Company refer to Madison
Square Garden, Inc., together with its direct and indirect
subsidiaries. Madison Square Garden, Inc. refers to
Madison Square Garden, Inc. individually as a separate entity.
Madison Square Garden, Inc. is a holding company and conducts
substantially all of its operations through its subsidiaries.
Madison Square Garden, Inc. was incorporated on July 29,
2009 as an indirect, wholly-owned subsidiary of Cablevision
Systems Corporation (Cablevision). Prior to the
Distribution, it will acquire subsidiaries of Cablevision that
own, directly and indirectly, 100% of the partnership interests
in Madison Square Garden, L.P. (MSG L.P.), which is
the indirect, wholly-owned subsidiary of Cablevision through
which Cablevision currently holds the Madison Square Garden
business. Where we describe in this information statement our
business activities, we do so as if the transfer of the
subsidiaries owning the partnership interests in MSG L.P. to
Madison Square Garden, Inc. has already occurred. Cablevision
acquired all of the interests in Madison Square Garden in a
series of transactions beginning in 1995.
General
Madison Square Garden is a fully-integrated sports,
entertainment and media business comprised of dynamic and
powerful brands. Madison Square Gardens business grew from
the legendary venue widely known as The Worlds Most
Famous Arena. The Companys three business segments:
MSG Sports, MSG Entertainment and MSG Media, are strategically
aligned to work together to drive our overall business, which is
built on a foundation of iconic venues and compelling content,
including live sports and entertainment events, that we create,
produce, present
and/or
distribute through our programming networks and other media
assets.
The Company operates in three business segments:
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MSG Sports.
Our sports business consists of
owning and operating sports franchises, including the
New York Knicks, a founding member of the National
Basketball Association (NBA) and the New York
Rangers, one of the original six franchises of the
National Hockey League (NHL). We also own and
operate the New York Liberty of the Womens National
Basketball Association (WNBA), one of the
leagues founding franchises, and the Hartford Wolf Pack of
the American Hockey League (AHL), which is the
primary player development team for the Rangers and competitive
in its own right in the AHL. The
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Knicks, Rangers and Liberty play their home games at The Madison
Square Garden Arena (which we also refer to as The
Garden). The Companys sports business also features
other sports properties, including the presentation of a wide
variety of premier live sporting events including professional
boxing, college basketball (The Big East Tournament, Jimmy V
Classic, Post-season NIT Finals and, on occasion, Duke
University games), track and field (The Millrose Games) and
tennis (The BNP Paribas Showdown for the Billie Jean King Cup,
which features the women winners of the previous years
Grand Slam tennis events).
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MSG Entertainment.
Our entertainment business
is one of the countrys leaders in live entertainment. We
create, produce
and/or
present a variety of live productions, including the
Radio
City Christmas Spectacular
, featuring the Radio City
Rockettes (the Rockettes), which is the #1 live
holiday family show in America and is seen by approximately two
million people annually, and the world-renowned Cirque du
Soleils
Wintuk
. We also present or host other live
entertainment events, such as concerts, including shows by The
Police, Eric Clapton, Jimmy Buffett, Bruce Springsteen, Justin
Timberlake and Madonna; family shows, such as
Dora the
Explorer
,
Thomas the Tank Engine
and
Sesame Street
Live
; special events such as the Tony Awards, Fashion Rocks
and appearances by the Dalai Lama; and theatrical productions,
such as
The Wizard of Oz
and
Annie
, in our diverse
collection of venues. These venues include The Garden, Radio
City Music Hall, The Theater at Madison Square Garden, the
Beacon Theatre, The Chicago Theatre and the Wang Theatre. MSG
Entertainment increasingly utilizes the strength of its industry
relationships and live event expertise, as well as the reach of
MSG Media, to create performance, promotion and distribution
opportunities for artists and productions that, in turn, provide
new programming and promotion for both our entertainment and our
media businesses.
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MSG Media.
Our media business is a leader in
production and content development for multiple distribution
platforms, including content originating from our venues. This
business consists of programming networks and interactive
offerings, including the MSG Networks (MSG network, MSG Plus,
MSG HD and MSG Plus HD) and the Fuse Networks (Fuse and Fuse
HD). MSG Networks are home to seven professional sports teams:
the New York Knicks, New York Rangers, New York Liberty, New
York Islanders, New Jersey Devils, Buffalo Sabres and New York
Red Bulls, as well as to our critically acclaimed original and
other programming, including
MSG Originals
, highlighted
by the New York Emmy-award winning series The 50 Greatest
Moments at MSG, Big 12 and PAC 10 football, and ACC, Big East
and PAC 10 basketball. Since Fuse became part of MSG Media in
2008, it has focused on establishing itself as a unique
multi-platform music destination, where artists and fans can
interact and build relationships. Programming on Fuse focuses on
music-related programming, including coverage of premier
artists, events and festivals, original content and high profile
concerts. Certain Fuse programming centers around its insider
access to MSG Entertainment and Madison Square Gardens
venues, which Fuse uses to create music programming, while
offering a voice and enhanced exposure to artists. Our
interactive businesses include a group of highly targeted
websites (including msg.com, thegarden.com, radiocity.com,
nyknicks.com, newyorkrangers.com and fuse.tv) and wireless,
video on demand and digital platforms for all Madison Square
Garden properties. MSG Media allows us to leverage the value of
the content created, produced
and/or
presented by MSG Sports and MSG Entertainment.
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Our
Strengths
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Owned sports franchises
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Media assets, including affiliation agreements with distributors
and exclusive sports and entertainment programming rights
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Iconic venues
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Diverse collection of marquee brands and content, including the
Radio City Christmas Spectacular
and the Rockettes
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Powerful presence in the New York tri-state area with
established core assets and expertise for strategic expansion
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Unique ability to provide artists and productions with multiple
distribution platforms to develop and promote their businesses
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Strong industry relationships that create opportunities for new
content and brand extensions
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Deep connection with loyal and passionate fan bases that span a
wide demographic mix
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Strong and seasoned management team
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Our
Strategy
Madison Square Garden pursues opportunities that capitalize on
the combination of our iconic venues, our popular sports
franchises, the distribution of our programming networks and our
exclusive sports and entertainment content.
The core of MSG Sports strategy is to develop teams that
consistently compete for championships in their respective
leagues. Leveraging the strength of its fan bases and the
popularity of its teams, MSG Sports seeks to expand through the
creation
and/or
acquisition of substantial, enduring sports properties and
events that can be presented either inside or outside The
Garden. Our extensive fan base provides broad access to growth
opportunities and new revenue streams.
Building on our iconic venues and the hallmark
Radio City
Christmas Spectacular
and Rockettes brands, MSG
Entertainment is focused on enhancing the reach and breadth of
our productions and creating a network of venues to deliver high
quality live content to those venues and increased bookings
across all our venues. We are pursuing a strategy of
opportunistically acquiring, building or obtaining control of
theater venues in additional major markets. Our expansion plans
also include the development of new productions and live
entertainment events.
MSG Media has a strong foundation of recurring revenue streams
supported by our long-term rights for live-event content of our
New York Knicks, New York Rangers and New York Liberty
franchises, in addition to those of the New York Islanders, New
Jersey Devils and Buffalo Sabres, and our affiliation agreements
for distribution of our networks. MSG Medias programming
networks serve as strong platforms through which artists,
performers and athletes are connected to regional and national
audiences, including Fuse, which brings artists and fans
together through its music programming and the networks
insider access to MSG Entertainment and our historic venues. Our
ability to offer both marquee live performance venues and
extensive public exposure through our significant marketing
expertise and media platforms attracts world-class artists,
performers and athletes to our businesses, and allows us to
create with them a relationship built on mutual benefit. We
obtain quality sports and entertainment content, while the
artists, performers and athletes gain a unique opportunity to
develop their brands.
The Company believes that its competitive strength stems from
combining opportunities across more than one of our segments and
aligning these businesses to provide what no other organization
can: sports and entertainment content, derived from games and
performances at our iconic venues and distributed through our
regional and national programming networks.
We have an expansive view of the power of this integrated
approach and believe no other organization can offer athletes,
artists, performers, fans and business partners comparable
opportunities or experiences. Examples of how we believe we have
effectively implemented our strategy are:
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We have expanded the programming on MSG network to include
additional programming originating from or relating to our
venues, while continuing to deliver award-winning live sports
coverage. MSG networks focus on becoming all things
Madison Square Garden serves as a powerful platform for
the
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distribution of our content and supports the Companys
integrated strategic vision, while differentiating our media
offerings in a diverse and competitive environment.
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Our media business continues to seek opportunities to
collaborate with our entertainment and sports businesses. For
example, in 2009 our media and entertainment businesses forged a
multi-faceted relationship with the Dave Matthews Band, through
which we booked the Beacon Theatre for a sold-out Dave Matthews
Band concert and telecast the concert commercial-free on Fuse.
Fuse also aired a week-long series of complementary Dave
Matthews Band programming, leading up to the release of the
bands new album. Similarly, in 2008 our media and sports
businesses collaborated on the Pete Sampras versus Roger Federer
exhibition tennis match, an event that represented the revival
of The Gardens historic affiliation with big-event tennis.
The sold-out match, which pitted the #1 ranked Federer
against Sampras, who was at that time the recently retired
holder of the most Grand Slam titles, originated from The Garden
and was promoted as the first live sports programming on the
newly re-branded MSG Plus (formerly known as FSN New York).
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We acquired control of New Yorks Beacon Theatre, purchased
The Chicago Theatre, and entered into a long-term booking
agreement in respect of the Wang Theatre in Boston, extending
our geographic footprint and providing new distribution outlets
for our live entertainment content. These transactions
diversified the collection of venues we offer to artists and
productions.
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Building on their initial collaboration,
Wintuk,
MSG
Entertainment and the world-renowned Cirque du Soleil have
expanded their relationship this year with the debut of a new
vaudeville-inspired live entertainment show,
Banana
Shpeel
. The show began previews in The Chicago Theatre on
November 19, 2009, and is expected to premiere at the
Beacon Theatre in March of 2010. This plan illustrates our
strategy of developing new live entertainment content that can
be utilized through Madison Square Gardens owned and
operated venues.
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Our commitment to strengthening our core assets is also
exemplified by the planned full-scale renovation of The Garden.
The renovation is expected to result in a
state-of-the-art
facility that enhances the experience of our customers,
partners, athletes and entertainers and is designed to attract
even more marquee events to the building, while augmenting our
revenue streams. Utilizing The Gardens current footprint,
the renovation is designed to ensure The Gardens continued
and lasting prominence as a sports and entertainment venue.
We believe the Companys unique combination of assets and
integrated approach, the depth of our relationships within the
sports, media and entertainment industries and strong connection
with our diverse and passionate audiences, sets the Company
apart in the industry and represents a substantial opportunity
for growth.
Garden of
Dreams Foundation
Madison Square Garden also has a close association with The
Garden of Dreams Foundation, a non-profit charity. This
foundation is dedicated to making dreams come true for children
in crisis. Working with 21 organizations in New York, New Jersey
and Connecticut, including hospitals, wish organizations,
homeless shelters, foster care organizations and community-based
organizations, The Garden of Dreams Foundation utilizes the
power and magic of Madison Square Garden and its properties to
bring joy and happiness to children facing devastating problems.
Garden of Dreams events and activities include full Knicks,
Rangers and Liberty team events, special celebrations and event
attendance at The Garden, Radio City Music Hall and the Beacon
Theatre, visits by Madison Square Garden and Fuse celebrities,
the MSG Entertainment Talent Show, where children perform on the
Great Stage at Radio City Music Hall, a Dream Week
summer camp, toy and coat drives, and the Make A Dream
Come True Program, where children enjoy unforgettable
experiences with celebrities and at events. In November of 2009,
the Make-A-Wish Foundation presented the Chris Greicius Industry
Award to the Garden of Dreams Foundation in recognition of
Garden of Dreams exceptional dedication to helping grant
the wishes of children with life-threatening medical conditions.
We believe the depth of Madison Square Gardens
relationship with Garden of Dreams, which is actively integrated
with each of our business segments, reflects our commitment to
positively impact our community. Since its inception in 2006,
the Foundation and Madison Square Garden have created
once-in-a-lifetime
experiences for more than 100,000 tri-state area children in
crisis.
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MSG
Sports
Our MSG Sports business consists of owning and operating sports
franchises, including the New York Knicks, a founding member of
the NBA, and the New York Rangers, one of the original
six members of the NHL. We also own and operate the New
York Liberty of the WNBA, one of the leagues founding
franchises, and the Hartford Wolf Pack of the AHL, the primary
player development team for the Rangers, which is competitive in
its own right in the AHL. The Companys sports business
also features other sports properties, including the
presentation of a wide variety of premier live sporting events
including professional boxing, college basketball (The Big East
Tournament, Jimmy V Classic, Post-season NIT Finals and, on
occasion, Duke University games), track and field (The Millrose
Games) and tennis (The BNP Paribas Showdown for the Billie Jean
King Cup, which features the women winners of the previous
years Grand Slam tennis events).
Our MSG Sports and MSG Media businesses naturally complement
each other with MSG Sports providing valuable
content and MSG Media serving as a vital distribution system and
promotional platform. MSG Media, through MSG Networks, telecasts
the games of our Knicks, Rangers and Liberty teams, and we are
continually exploring opportunities to enhance the relationship
between MSG Sports and MSG Media through new events, both at our
venues and elsewhere. For example, we utilized the 2008 sold-out
Pete Sampras versus Roger Federer tennis match at The Garden as
the first live sporting event on our newly rebranded MSG Plus
network, taking advantage of the significant interest in the
match to enhance viewership. In 2008, we broadened our boxing
programming on MSG network by telecasting a middleweight bout
from the Beacon Theatre featuring John Duddy.
Our
Sports Franchises
The New York Knicks and the New York Rangers are two of the most
recognized franchises in professional sports, with storied
histories and passionate, multi-generational fan bases. These
teams are major occupants of The Garden, with a total of 82
regular season home games, often at or near capacity attendance.
In addition, the New York Liberty play 17 regular season home
games at The Garden each year. The number of home games
increases if our teams qualify for the playoffs.
In addition to being valuable stand-alone businesses, the Knicks
and Rangers provide core content for our MSG Media segment, with
approximately 150 regular season games telecast on MSG Networks,
and generate significant audience demand for wrap-around and
themed programming. As part of team and league marketing and
telecast efforts, our sports teams provide regional and national
visibility for the Company.
New York
Knicks
As an original franchise of the NBA, the New York Knicks have a
rich history that includes two NBA Championships, eight
conference titles and some of the greatest athletes to ever play
the game. Under the leadership of Donnie Walsh and head coach
Mike DAntoni, the New York Knicks are focused on being
competitive as they rebuild the team with the goal of becoming
an elite member of the NBA. The Knicks current strategy
centers on managing its rostered salary to be below the salary
cap so that it can be active in the 2010 free agent market,
while continuing to play an exciting, energetic and entertaining
style of basketball. The Knicks enjoy the fierce allegiance of
generations of passionate and knowledgeable fans. The Knicks
ranked second in the NBA for ticket sales receipts for the
2008-09
season, while experiencing a 20% increase in regular season
television ratings over the previous season.
New York
Rangers
The New York Rangers hockey club is one of the original
six franchises of the NHL. Winners of four Stanley Cup
Championships, the Rangers have won 10 conference titles over
their history. More recently, the team is one of only two
Eastern Conference clubs to have made the playoffs in each of
the last four seasons. The Rangers have a dynamic new style of
play since hall of fame general manager Glen Sather hired head
coach John Tortorella in February 2009. Tortorella is the
winningest American coach in NHL history. The Rangers are known
to have one of the most passionate, loyal and active fanbases in
all of sports and ranked third in the NHL for ticket sales
receipts for the 2008-09 season.
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New York
Liberty
The New York Liberty were established on October 30, 1996,
when New York was selected as one of eight charter members of
the WNBA. The Liberty have won four conference championships and
appeared in the post-season playoffs nine times. The Liberty
have a well-known tradition of on-court competitiveness
supported by an enthusiastic and loyal fan base.
Hartford
Wolf Pack
The Company owns the Hartford Wolf Pack, a minor-league team, as
a player development team for the Rangers, which is also
competitive in its own right in the AHL. The Rangers send draft
picks and other players to the Wolf Pack for skill development
and injury rehabilitation, and can call up players as needed for
the Rangers roster to enhance the teams
competitiveness. The Wolf Pack has reached the AHL playoffs
every year of its existence, a streak that has run for twelve
straight seasons.
The
Role of the Leagues in Our Operations
As franchises in professional sports leagues, our teams are
members of the leagues and, as such, may be subject to certain
limitations, under certain circumstances, on the control and
management of their affairs. The respective league
constitutions, under which each league is operated, together
with the collective bargaining agreements each league has signed
with its players association, contain numerous provisions
that, as a practical matter in certain circumstances, could
impact our ability to operate our businesses. In addition, under
the respective league constitutions, the commissioner of each
league, either acting alone or with the consent of a majority
(or, in some cases, a supermajority) of the other teams in the
league, may be empowered in certain circumstances to take
certain actions felt to be in the best interests of the league,
whether or not such actions would benefit our teams and whether
or not we consent or object to those actions.
While the precise rights and obligations of member teams vary
from league to league, the leagues may have varying degrees of
control exercisable under certain circumstances over the length
and format of the playing season, including pre-season and
playoff schedules; the operating territories of the member
teams; national and international media and other licensing
rights; admission of new members and changes in ownership;
franchise relocations; indebtedness affecting the franchise; and
labor relations with the players associations, including
collective bargaining, free agency, and rules applicable to
player transactions, luxury taxes and revenue sharing. See
Management Discussion and Analysis of Financial Condition
and Results of Operations MSG Sports. From
time to time, we may disagree with or challenge actions the
leagues take or the power and authority they assert, although
the leagues governing documents and our agreements with
the leagues purport to limit the manner in which we may
challenge decisions and actions by a league commissioner or the
league itself. See Business Legal
Proceedings for a discussion of recent litigation between
us and the NHL.
Other
Sports Properties
The Companys sports business also features the
presentation of a wide variety of premier live sporting events
outside of Knicks, Rangers and Liberty games, including
professional boxing, college basketball, track and field and
tennis. MSG Sports also presents events such as WWE wrestling
and the NBA and NFL drafts. Our sports business includes events
that have been among the most popular in our history, as well as
perennial highlights on our annual calendar, and also features
some of Madison Square Gardens longest-running
associations. We continue to focus on growing this business
through an increase in the diversity and number of events and
through brand extensions, both at our venues and elsewhere, as
we believe it presents growth opportunities for both our MSG
Sports and MSG Media segments.
Professional boxing, beginning with John L. Sullivan in 1882,
has had a long association with The Garden. This includes
hosting Muhammad Alis and Joe Fraziers 1971
The Fight of the Century, which is considered among
the greatest sporting events in modern history, as well as bouts
featuring dozens of other boxing greats. These have included
Miguel Cotto, Roberto Duran, George Foreman, Rocky Graziano,
Emile Griffith, Bernard Hopkins, Oscar de la Hoya, Jake LaMotta,
Sugar Ray Leonard, Lennox Lewis, Joe Louis,
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Rocky Marciano, Floyd Patterson, Sugar Ray Robinson, Felix
Trinidad, Roy Jones, Jr., Mike Tyson, and Evander
Holyfield. Additionally, The Golden Gloves amateur boxing
tournament has called The Garden home since 1928.
College basketball has been a mainstay at The Garden for
decades, with the sports longest running holiday
tournament, the Holiday Festival, first tipping off over
50 years ago. In addition to St. Johns University
calling The Garden its home away from home, the popular Big East
Tournament celebrated its 27th anniversary at The Garden in
2009. Popular college basketball events also include visits from
Duke Universitys Blue Devils and the annual Jimmy V
Classic and post-season NIT Finals. The Garden has hosted the
Millrose Games, with their world famous Wanamaker Mile, since
1914. Additionally, the BNP Paribas Showdown for the Billie Jean
King Cup, a premier tennis event featuring the women winners of
the previous years Grand Slam events, debuted in 2009 and
is scheduled to take place annually through 2013.
MSG
Entertainment
Our entertainment business, MSG Entertainment, continues to
solidify its position as one of the countrys leaders in
live entertainment. It is responsible for the creation,
production
and/or
presentation of a variety of live productions, including
The
Radio City Christmas Spectacular
, featuring the Rockettes,
which is the #1 live holiday family show in America and
seen by approximately two million people annually, and the
world-renowned Cirque du Soleils
Wintuk
. MSG
Entertainment also presents or hosts other live entertainment
events such as concerts, including shows by The Police, Eric
Clapton, Jimmy Buffett, Bruce Springsteen, Justin Timberlake,
Pearl Jam, Chris Rock, Madonna and the Jonas Brothers; family
shows, such as
Dora the Explorer, Thomas the Tank Engine
and
Sesame Street Live;
special events such as the
premiere of
Sex and the City: The Movie,
Fashion Rocks
and the Tony Awards; and theatrical productions, such as
The
Wizard of Oz
and
Annie
. MSG Entertainment focuses on
consistently delivering unforgettable live entertainment
experiences in exceptional settings, creating demand for an
association with our brands by artists and demand for our
productions by the public. From a starting point of world-class
expertise in live entertainment, including the historic
traditions of the Worlds Most Famous Arena and
Radio City Music Hall, as well as our other venues (including
The Theater at Madison Square Garden, the Beacon Theatre, The
Chicago Theatre and the Wang Theatre), MSG Entertainment has a
proven ability to utilize the strength of its industry
relationships and live event expertise to create performance,
promotion and distribution opportunities for artists and
productions.
MSG Entertainments unique combination of relationships and
expertise is important not only for MSG Entertainments
current and future business, but also to our MSG Media segment,
which increasingly benefits from opportunities for quality new
programming and relationships. For example, our recent,
multi-faceted relationship with the Dave Matthews Band resulted
in a sold-out show at the Beacon Theatre and exclusive content
on Fuse, demonstrating our ability to help artists move beyond
their core fan base to attract more diversified interest from
fans, venues and other sources. MSG Entertainments
industry relationships also helped Fuse secure agreements to
become the television home of the Rock & Roll Hall of
Fame induction ceremonies, Bonnaroo Festival and Lollapalooza.
Our
Productions
Radio
City Christmas Spectacular
One of MSG Entertainments core properties, the
Radio
City Christmas Spectacular
, has been performed at Radio City
Music Hall for more than 75 years and is a holiday
celebration for approximately two million people nationwide each
year. Featuring the world-famous Radio City Rockettes, the
critically acclaimed
Radio City Christmas Spectacular
features show-stopping performances, festive holiday scenes
and
state-of-the-art
special effects, including utilizing one of the worlds
largest high definition LED screens.
In 2007, in celebration of the shows 75th anniversary
and as part of our strategic commitment to invest in our core
assets, we significantly enhanced the
Radio City Christmas
Spectacular
. The enhanced show balances cutting-edge new
Rockettes numbers with more nostalgic fan favorites, including
The Living Nativity and Parade of the Wooden
Soldiers, both of which have been performed in the show
since its inception in 1933. Also as part of the
75th anniversary celebration and speaking to the
shows national appeal,
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NBC aired and Madison Square Garden produced a
one-hour
special of the
Radio City Christmas Spectacular
, anchored
from Radio City Music Hall by Meredith Vieira and Matt Lauer.
Additionally, as part of its
MSG Originals
series, and in
another instance of collaboration among our segments, our MSG
network created a documentary on the history of Radio City Music
Hall and the 75th Anniversary of the
Radio City
Christmas Spectacular
. The documentary, which first aired in
2007, utilized historic footage, interviews with historians,
Rockettes and production representatives to showcase the
remarkable history of the Showplace of the Nation,
while also increasing awareness and interest in the
Radio
City Christmas Spectacular
.
We continue to invest in strengthening and broadening our
Rockette brand, targeting the most prominent and effective
vehicles that elevate their visibility and underscore their
reputation as beloved American cultural icons. The Rockettes
have appeared or performed at high profile events, such as Super
Bowl halftime shows, Presidential Inaugurations and the annual
Macys Thanksgiving Day Parade, among many others, and
pursue carefully considered branded products, such as table-top
books, exercise DVDs and Rockette dolls.
Based on the success of the
Radio City Christmas
Spectacular
, in 1994 we expanded the
Radio City Christmas
Spectacular
franchise outside of the New York area, with a
specially designed theater-sized version of the show. Since that
time, the
Radio City Christmas Spectacular
has been
performed in many cities across North America, including Boston,
Los Angeles, Atlanta, Toronto, St. Louis, Chicago, Detroit,
Ft. Lauderdale, Denver, Cleveland, Columbus, Dallas,
Seattle, Nashville and Phoenix. The current theatrical touring
version of the show consists of three productions: a recurring
production at the Grand Ole Opry House in Nashville, as well as
two other productions that each perform in two cities for up to
four weeks during the holiday season.
In 2008, we further extended the
Radio City Christmas
Spectacular
brand with the debut of the
Radio City
Christmas Spectacular
arena tour. This full-scale arena
touring production of the show emulates the size and grandeur of
the
Radio City Christmas Spectacular
experience at Radio
City Music Hall and, as such, the production required
significant investment to recreate the scope and energy of that
experience. The show played arenas in 18 cities across the
United States, from Minneapolis to Houston, including Austin,
Cincinnati, Baltimore, Oklahoma City and Little Rock. This arena
production took the show beyond its traditional theater
environment, extending our presence into new markets, while
attracting a greater audience. Although playing to critical
acclaim during its inaugural year, the performance of the show
did not meet our financial expectations due, in part, to the
severe economic climate at the end of 2008. Currently, the show
is being re-designed to be more cost efficient and to be able to
tour more cities so that it can achieve its goal of contributing
to our profitability. In 2009, the arena tour is expected to
play arenas in 31 cities, including Ft. Lauderdale,
Toronto, Philadelphia, Columbus, Baltimore, Washington D.C.,
Memphis, Montreal, Birmingham, Charlotte and Orlando.
Since its inception, the
Radio City Christmas Spectacular
has played to more than 67 million people in 43
different cities. We acquired the rights to the
Radio City
Christmas Spectacular
in 1997, and those rights are separate
from, and do not depend on the continuation of, our lease on
Radio City Music Hall. We also hold rights to the Rockettes in
the same manner.
Wintuk
and Other Cirque du Soleil Productions
In 2007, to realize our vision of creating, developing or
acquiring unique and compelling new content for our venues, we
entered into an agreement with the world-renowned Cirque du
Soleil. This relationship led to the creation of
Wintuk
,
the story of a boys quest for snow, which was built
specifically for The Theater at Madison Square Garden and
represents the first Cirque du Soleil family-themed show.
Currently scheduled to run at least through the 2010 holiday
season,
Wintuk
weaves together thrilling acrobatics,
theatrical effects and memorable songs.
We plan to build on the strength of our current relationship
with Cirque du Soleil and our shared commitment to create
compelling new live events in exceptional settings. For example,
we recently have expanded our relationship to include another
new stage theatrical production,
Banana Shpeel
, based on
a Vaudeville theme.
Banana Shpeel
began previews in The
Chicago Theatre on November 19, 2009, and is expected to
premiere at the Beacon Theatre in New York in March of 2010.
This production was designed to be capable of touring theaters
throughout the world. We hope to further expand our relationship
with Cirque
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du Soleil in the future, with the creation of additional new
productions for our venues, as well as touring productions.
Our
Bookings and Other Entertainment Business
Activities
MSG Entertainment is an established industry leader responsible
for booking a wide variety of live entertainment events in our
venues, which perennially include some of the biggest names in
music and entertainment. Over the last several years, our venues
have showcased artists including The Police, Jimmy Buffett,
Bruce Springsteen, Justin Timberlake, Madonna, The Dead,
Beyonce, Paul Simon and Eric Clapton and other popular events
such as the Westminster Kennel Club Dog Show and the Tony
Awards. Although we primarily license our venues to third-party
promoters for a fee, we also promote or co-promote shows, in
which case we share the economic risk relating to the event. We
do not currently promote or co-promote events outside of our
venues other than our productions described above.
MSG
Media
MSG Media is a leader in production and content development for
multiple distribution platforms, including content originating
from our venues. It consists of programming networks and
interactive offerings, including the MSG Networks (MSG network,
MSG Plus, MSG HD and MSG Plus HD) and the Fuse Networks (Fuse
and Fuse HD). MSG Networks are home to seven professional sports
teams: the New York Knicks, New York Rangers, New York Liberty,
New York Islanders, New Jersey Devils, Buffalo Sabres and New
York Red Bulls, as well as to our critically acclaimed original
and other programming, including
MSG Originals
,
highlighted by the New York Emmy-award winning series
The 50
Greatest Moments at MSG
, Big 12 and PAC 10
football, and ACC, Big East and PAC 10 basketball.
Since Fuse became part of MSG Media in 2008, it has focused on
establishing itself as a unique multi-platform music
destination, where artists and fans can interact and build
relationships. Programming on Fuse focuses on music-related
programming, including coverage of premier artists, events and
festivals, original content and high profile concerts. Certain
Fuse programming centers around its insider access to MSG
Entertainment and Madison Square Gardens venues that Fuse
uses to create music programming, while offering a voice and
enhanced exposure to artists. Our interactive businesses include
a group of highly targeted websites (including msg.com,
thegarden.com, radiocity.com, nyknicks.com, newyorkrangers.com
and fuse.tv) and wireless, video on demand and digital platforms
for all Madison Square Garden properties. MSG Media allows us to
leverage the value of the content created, produced
and/or
presented by MSG Sports and MSG Entertainment.
MSG Networks and Fuse provide regional and national distribution
for both MSG Sports and MSG Entertainment content, and thereby
play a critical role in supporting, promoting and enhancing
those businesses. Fuses national distribution and focus on
music-related programming provide a national vehicle to expand
MSG Medias and MSG Entertainments involvement in the
music and entertainment industries, deepening our ability to
offer artists enhanced exposure. MSG networks focus on
being all things Madison Square Garden allows it to
serve as a powerful platform for the distribution of our sports
and entertainment content, while differentiating our media
offerings in a diverse and competitive environment.
Examples of the success of our business collaborations include
Fuse becoming the television home of several music-focused
events and festivals and Fuses groundbreaking series
showcasing numerous performances from Madison Square Garden
venues, entitled
Fuse Presents
. MSG networks
documentary on the history of Radio City Music Hall and the
75
th
Anniversary of the
Radio City Christmas Spectacular
also
epitomizes this cooperative approach. The documentary, which
first aired in 2007, utilized historic footage, interviews with
historians, Rockettes and production representatives to showcase
the remarkable history of the Showplace of the
Nation, while also increasing awareness and interest in
the
Radio City Christmas Spectacular
. When the restored
Beacon Theatre was re-opened, MSG network and Fuse collaborated
on a
one-hour
documentary detailing the history of the theater and the process
of restoration that was telecast on both networks. MSG Media and
MSG Entertainment also worked together with Kanye West for The
Kanye West Foundation event at The Chicago Theatre in June 2009.
The event aired on Fuse, Fuse HD and Fuse On
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Demand, with subsequent re-airings on MSG network. This
collaboration is indicative of the mutually beneficial
opportunities we can provide todays artists. Kanye West
was able to perform a concert to benefit his foundation and
received significant visibility between albums, while Fuse and
MSG network produced exclusive content and targeted programming
to increase viewership.
MSG
Networks
Winner of more than 140 New York Emmy awards for live sports and
original programming, MSG Networks is the home to seven
professional sports teams: the New York Knicks, New York
Rangers, New York Liberty, New York Islanders, New Jersey
Devils, Buffalo Sabres and New York Red Bulls, as well as our
critically acclaimed original and other programming, including
MSG Originals
, highlighted by the New York Emmy-award
winning series
The 50 Greatest Moments at MSG
, Big 12 and
PAC 10 football, and ACC, Big East and Pac 10 basketball. In
addition to the Companys ownership of Knicks, Rangers and
Liberty rights, MSG Networks has long-term rights agreements
with the Islanders, Devils and Sabres. MSG network and MSG Plus
are among the nations largest regional cable networks and
collectively telecast nearly 700 live sporting events over
2,100 hours of original programming in 2008. MSG HD and MSG
Plus HD collectively telecast over 300 live sporting events in
high definition in 2008. MSG network and MSG Plus are each
received by approximately 8 million subscribers primarily
in New York, New Jersey and Connecticut.
In 2006, we expanded the programming on MSG network to include
additional programming originating from or related to our
venues, while continuing to deliver award-winning live sports
coverage. MSG networks
line-up
of
programming highlights how the Companys sports,
entertainment and media segments work together to increase
exposure for our brands, enhance our offerings to artists and
productions, and create must-see content for our programming
networks. Examples include:
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The critically acclaimed and New York Emmy award-winning,
MSG
Originals
documentary series, which has featured such titles
as
The 50 Greatest Moments at MSG
,
Concert for New
York City Remembered
,
Mecca of Boxing
, and
The
Restoration of the Beacon Theatre
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The MSG Concert Series,
which features a variety of past
and present concerts or artists playing our venues
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Road to MSG
, a series that brings viewers along as their
favorite artists and athletes prepare to take the stage or hit
the floor of the Worlds Most Famous Arena or
one of our other venues
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Programming relating to the Knicks, Rangers and Liberty, such as
MSG Vault, MSG Profiles, Fans Most Wanted, Hockey Night
Live
, and dedicated pre- and post-game shows, all of which
allows us to capitalize on the extraordinary enthusiasm of our
teams fans
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In March 2008, together with our MSG Sports segment, MSG Media
capitalized on the interest and excitement regarding the Roger
Federer versus Pete Sampras tennis match at The Garden to launch
MSG Plus (previously known as FSN New York). The sold-out match,
which pitted the #1 ranked Federer against Sampras, who was
at that time the recently retired holder of the most Grand Slam
titles, originated from The Garden and was aggressively promoted
as the first live sports programming on the newly rebranded MSG
Plus. We also have a long and rich tradition of presenting
professional and amateur boxing events, including numerous title
bouts and the Golden Gloves amateur boxing tournament, which has
called The Garden home since 1928.
MSG Plus programming includes the best of live sports and
original programming from Fox Sports Net, which has included a
strong lineup of national and local college football and
basketball, shows such as
Best Damn Sports Show
,
The
FSN Final Score
and
Sports Science
, as well as a
variety of live local sports. In addition, MSG Plus produces a
robust lineup of original sports programming and games,
including high school sports, supporting original programming
for its professional teams, human interest shows, horse racing,
and international sports content.
In 1998, MSG HD became the first regular provider of sporting
events in high definition. Today we produce substantially all
New York Knicks and New York Rangers telecasts, substantially
all of the home
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telecasts and certain away telecasts of the New York Islanders
and New Jersey Devils and substantially all of the home
telecasts of the Buffalo Sabres and certain original programming
in a high definition format for inclusion in MSG HD and MSG Plus
HD.
Fuse
Fuse is a national programming network that provides a unique,
multi-platform music destination, centered on the development of
creative music programming driven by meaningful relationships
within the music industry and the interaction of artists and
fans. Fuse is received by approximately 54 million
subscribers and has a
video-on-demand
platform that is available to over 25 million homes. Fuse
Networks currently distributes programming on its linear
television channel, Fuse, on its high-definition channel Fuse
HD, on-demand via Fuse On Demand, on-line via fuse.tv and to
mobile technologies via Fuse Mobile.
Closely tied to MSG Entertainment and to some of the
worlds most iconic venues, such as The Garden, Radio City
Music Hall, the Beacon Theatre, and The Chicago Theatre, we
believe Fuse is positioned to provide artists and fans with a
music experience that is not available anywhere else. Its unique
access to Madison Square Garden assets allows Fuse to bring fans
on-stage, off-stage and behind the stage of some of todays
hottest performances and events, while its ability to offer
direct exposure to marketing opportunities for artists gives it
credibility among todays artists and their management. We
believe this combination creates opportunities to expand
Fuses distribution, domestically and internationally.
Prior to 2008, Fuse was part of Cablevisions Rainbow
segment, however, the combined financial statements of the
Company and the operating results of our MSG Media segment
include the operating results for Fuse for all periods presented
in this information statement. In 2008, Fuse was contributed to
Madison Square Garden to fulfill a strategic objective to expand
our reach to a national audience, increase the value proposition
of our programming and marketing to promoters, artists and music
labels and take advantage of the unique access to our iconic
venues and our entertainment industry relationships through MSG
Entertainment. Following the contribution, Fuse underwent a year
of transition in 2008, as we invested in programming, production
and marketing initiatives to reposition the network as a
multi-platform music destination. After assessing Fuses
development during 2008, we have refined our strategy to create
a voice for artists and fans by emphasizing collaborations with
MSG Entertainment, expanding industry relationships, creating
innovative programming and exploiting Fuses insider access
to our iconic venues.
As part of its efforts to enhance its position within the music
television space, Fuse has forged exclusive arrangements with
popular artists, events and festivals, produced original
programming and featured high profile concerts and events. These
initiatives often represent a coordinated effort between MSG
Entertainment and Fuse. Fuses current slate of programming
includes:
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Exclusive television coverage of one of musics biggest
annual events, the Rock and Roll Hall of Fame induction
ceremonies. Branded
Fuse Hall of Fame
, this relationship
also includes a year-long block of specially dedicated Hall of
Fame programming that celebrates the classic and iconic in rock
history
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FuseFest
, featuring footage from Bamboozle, Warped Tour,
Lollapalooza, Bonnaroo Music and Arts Festival and the New
Orleans-focused Voodoo Experience
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No. 1 Countdown
,
Video Yearbook
and
Loaded
, which feature top music videos in rock, pop,
alternative, hip-hop and viewers choice and select
documentaries of artists
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Fuse Presents
, a select series of concert specials and
dedicated support programming covering such artists as Dave
Matthews Band, Kanye West, Fall Out Boy, The Killers, Foo
Fighters and the Cure
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Full Volume Flicks
, which features Hollywood movies
relating to music
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Other
Media Properties MSG Interactive
MSG Interactive is the network of websites and wireless, video
on demand and digital platforms for all Madison Square Garden
properties. It includes 16 interactive websites, blogs and
social networking sites for our properties, which collectively
reach two million unique users each month. Websites include
msg.com,
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thegarden.com, beacontheatre.com, radiocity.com,
chicagotheatre.com and fuse.tv, as well as sites dedicated to
our sports teams (nyknicks.com, newyorkrangers.com and
newyorkliberty.com). Like our MSG Sports business, the on-line
operations relating to our sports teams may, in certain
circumstances, be subject to certain agreements, rules,
policies, regulations and directives of the leagues in which the
respective team operates. See Business
Regulation Regulation of Our Media Business.
MSG Interactive properties also include the MSG Insider email,
alert and wireless platform and a series of Madison Square
Garden social network and blog sites. The MSG Interactive
business generates revenue for Madison Square Garden via the
sale of advertising and sponsorships on these digital
properties. Additionally, supported by its database of nearly
four million engaged sports and music fans, MSG Interactive
offers a strategic marketing asset that creates opportunities to
market directly to our fans and cross-promote across our
businesses.
The Company has a small number of licensing arrangements
permitting third parties to use trademarks or other intellectual
property of the Company for limited purposes. For example, we
have a licensing arrangement with Cablevision permitting it to
use MSG Varsity as the name of its high school
sports programming service.
Our
Venues
The Company operates a mix of iconic venues that continue to
build on their historic prominence as destinations for
unforgettable experiences and events. Individually, these venues
are each premier showplaces, with a passionate and loyal
following of fans, performers and events. Taken together, we
believe they represent an outstanding collection of venues.
We operate five venues in New York City and Chicago, which are
either owned or operated under long-term leases, and have a
long-term booking agreement with the Wang Theatre in Boston. Our
New York City venues include the Madison Square Garden complex
(which includes both The Garden and The Theater at Madison
Square Garden), Radio City Music Hall and the Beacon Theatre,
and our Chicago venue is the landmark Chicago Theatre.
Madison
Square Garden Arena
Madison Square Garden has been a celebrated center of New York
life since the first Garden opened its doors in 1879. Over its
130-year
history, there have been four Garden buildings, each known for
showcasing the best of the eras live entertainment
offerings. We believe that The Garden has come to epitomize the
power and passion of live sports and entertainment to people
around the world, with an appearance at The Garden often
representing a pinnacle of an athletes or performers
career. Known simply as The Worlds Most Famous
Arena, The Garden has been the site of some of the most
memorable events in sports and entertainment, and, along with
The Theater at Madison Square Garden, currently plays host to
approximately 400 events and approximately four million visitors
each year. The Garden is the highest-grossing entertainment
venue in North America and the second highest-grossing
entertainment venue in the world, based on Billboard
Magazines 2009 rankings.
The Garden is home to three professional sports teams, the New
York Knicks, New York Rangers and New York Liberty, and is
associated with countless big events, inspired
performances and
one-of-a-kind
moments. The Gardens thousands of highlights include
The Fight of the Century between Muhammad Ali and
Joe Frazier in 1971 (considered among the greatest sporting
events in history); the 1970 Knicks NBA Championship; the
Rangers 1994 Stanley Cup Championship; three Democratic
National Conventions and one Republican National Convention; a
landmark visit from Pope John Paul II; Marilyn Monroes
famous birthday serenade to President John F. Kennedy; Frank
Sinatras Main Event concert in 1974; Elton
Johns record 60 performances; Billy Joels
record-setting 12 consecutive sold-out shows; three prominent
benefit concerts, which galvanized the public to respond to
national or global crises, including the first of its kind, The
Concert for Bangladesh in 1972, as well as The Concert for New
York City, following the events of 9/11 and The Big Apple to the
Big Easy, following Hurricane Katrina in 2005.
The current Madison Square Garden complex, located between
31
st
and
33
rd
Streets and Seventh and Eighth Avenues on Manhattans West
Side, opened on February 11, 1968, with a salute to the
U.S.O., hosted
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by Bob Hope and Bing Crosby. From a structural standpoint, the
construction of the current Garden was considered an engineering
wonder for its time, including its famous circular shape and
unique, cable-supported ceiling, which contributes to its
intimate feel. It was the first large structure built over an
active railroad track. The builder, R.E. McKee, had a national
reputation and was later recognized as a Master
Builder by the construction industry. Architect Joe
Luckman had one of the largest firms in the country and designed
such buildings as the Prudential Center in Boston and
NASAs flight center in Houston.
We own the Madison Square Garden building, the platform on which
it is built and certain development rights (including air
rights) associated with the lot. Madison Square Garden sits atop
Pennsylvania Station, a major commuter hub in Manhattan, which
is owned by the National Railroad Passenger Corporation
(Amtrak). While the development rights we own would permit us to
expand in the future, any such use of development rights would
require various approvals from the City of New York. The Garden
seats up to approximately 21,000 spectators for sporting and
entertainment events and contains 985,600 square feet of
floor space over 11 levels.
The
Madison Square Garden Arena Renovation
The Garden has gone through four incarnations, with the current
building occupying its position above Pennsylvania Station since
1968. We are in the pre-construction planning phase of our
renovation of The Garden, which we believe will have multiple
benefits, including:
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Providing a state-of-the-art venue that can attract concerts, as
well as other large, high profile sports, entertainment and
other special events which benefit our customers, as well as the
New York economy
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Improving the experience of customers in all parts of the venue
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Increasing our attractiveness to free agents in basketball and
hockey
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Supporting our efforts to retain and grow our season ticket
bases for our teams
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Increasing the breadth of VIP offerings and venue-based
opportunities available to marketing partners
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Augmenting revenue streams
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Providing a new point of origination for programming from our
MSG Networks studios
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The renovation is an example of our strategic commitment to
invest in our core assets and continue to provide the kind of
historic, unforgettable experiences that have long been a key
component of our business. Focused on the total fan experience,
the renovation will benefit everyone in attendance, from the
first row to the last, whether they are first time visitors,
season ticket subscribers, athletes or marketing partners. All
of our customers will experience improved sight lines,
entertainment and dining options, new concourses, hospitality
areas, views of the city, new technology and a completely
transformed interior. The current renovation plan, which is
designed to ensure that attending an event at The Garden is
unlike anywhere else, will be specifically highlighted by:
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A dramatically redesigned Seventh Avenue entrance
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New, more comfortable seats, with better sightlines that put
patrons closer to the action
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New, wider and more spacious public concourses with spectacular
views of the city
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Unique bridges suspended above each side of The
Garden, providing seating for fans that does not exist in any
arena today
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State-of-the-art
lighting, sound and LED video systems in HDTV
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New food, beverage and bar options
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A new suite configuration that includes:
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58 new lower-level suites that are 50 percent larger than
our current suites and half the distance to events
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20 new event level suites, which include the best seats in the
house
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One super suite, which is the size of 10 traditional suites
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Improved dressing rooms, locker rooms, star dressing rooms and
production offices for athletes and performers
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A new upper level with a party deck with bars and buffets
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Additional new restrooms
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Restoration of The Gardens famous ceiling
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We continue to review all aspects of this complex project with
our consultants in order to improve the renovation plans,
mitigate project risks and identify efficiencies in all aspects
of costs, planning and project-phasing. We also continue to
develop our cost and capital investment estimates to ensure that
the planned renovation meets our overall expectations and
objectives.
While the pre-construction planning and cost estimates of this
renovation are not yet final, we currently expect that the
projects cost will be between $775 million and
$850 million, of which approximately $60 million was
incurred through December 31, 2009. We expect that the
estimated costs associated with the project will be met from
cash on hand, receipt of repayments of advances made to a
subsidiary of Cablevision and cash flow from our operations. We
have recently obtained commitments from a group of banks for a
revolving credit facility. (See Managements
Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital
Resources Financing Agreements.) To the extent
that management determines that financing for this renovation is
required or desirable, we would expect to draw on this facility.
In order to most efficiently and effectively complete the
renovation, it will be a year-round project. Our goal is to
minimize disruption to current operations and, to achieve this,
The Garden will remain open for the New York Knicks and
New York Rangers seasons in the years when the renovation
takes place, while we sequence the construction to ensure that
we maximize our construction efforts when we close the arena
during summer months. Our current expectation is that the
renovated lower bowl of The Garden will be open for the 2011-12
seasons, and that the renovated upper bowl will be open for the
2012-13
seasons.
Although the Company continues to pursue the arena renovation
plan, there can be no assurance that a renovation will occur or
what the ultimate cost, scope or timing of any renovation
activity may be.
The
Theater at Madison Square Garden
The current incarnation of The Theater at Madison Square Garden
has approximately 5,600 seats. The theater opened as part
of the fourth Madison Square Garden complex in 1968, with seven
nights of performances by Judy Garland. Since then, some of the
biggest names in the music world have played the theater,
including Bob Dylan, Diana Ross, Elton John, James Taylor,
Melissa Etheridge, Neil Young, Radiohead, The Doors and Van
Morrison. The theater has also hosted award shows such as The
Daytime Emmys and the Essence Awards. We also host theatrical
productions, family shows and other special events in the
theater. Today, The Theater at Madison Square Garden is the
third-highest grossing entertainment venue of its size in the
world, based on Billboard Magazines 2009 rankings.
The Theater at Madison Square Garden is also home to
Wintuk
, the winter themed show we co-produce with Cirque
du Soleil. See Business MSG
Entertainment Our Productions
Wintuk
and Other Cirque du Soleil Productions.
Radio
City Music Hall
Radio City Music Hall has a rich history as a national
theatrical and cultural mecca since it was first established by
theatrical impresario S.L. Roxy Rothafel in 1932.
Known as The Showplace of the Nation it was the
first building in the Rockefeller Center complex and, at the
time, the largest indoor theater in the world. Perhaps best
known as home to the countrys #1 live holiday family
show, the
Radio City Christmas
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Spectacular
, starring the world-famous Rockettes, Radio
City Music Hall also hosts concerts, family shows and special
events, such as the Tony Awards, the NFL Draft and Fashion
Rocks. See Business MSG
Entertainment Our Productions
Radio
City Christmas Spectacular
. Today, Radio City Music
Hall is the highest-grossing entertainment venue of its size in
the world, based on Billboard Magazines 2009 rankings.
First built for approximately $8 million in 1932, Radio
City Music Hall was designated a New York City landmark in 1979
and a National Historic Landmark in 1987. We acquired the lease
in 1997, and in 1999, in another example of our commitment to
invest in our core assets to help drive our long-term business,
we invested approximately $70 million on a complete
restoration that returned the legendary theater to its original
grandeur. Our acclaimed restoration included burnishing the
ceilings of Radio City with 720,000 sheets of gold and aluminum
leaf, replacing the existing stage curtain with a new 112-foot
wide golden silk replacement, and replacing its approximately
6,000 seats. All furniture, wall fabric, carpeting,
lighting fixtures and appointments were cleaned, repaired or
remade, and the three-story tall mural The Fountain of
Youth, by Ezra Winter, which looms above the grand
staircase, was cleaned of decades of grime, varnish and
polyurethane.
State-of-the-art
sound systems, lighting and HDTV capabilities were also
installed, and the theater now houses one of the worlds
largest LED screens, which is prominently featured in the
Radio City Christmas Spectacular.
We lease Radio City Music Hall, located at Sixth Avenue and 50th
Street in Manhattan, pursuant to a long-term lease. The lease on
Radio City Music Hall expires in 2023. We have the option to
renew the lease for an additional ten years by providing two
years notice prior to the initial expiration date.
The
Beacon Theatre
In November 2006, we entered into a long-term lease agreement to
operate the legendary Beacon Theatre, which sits on the corner
of Broadway and
74
th
Street in Manhattan. Designed by Chicago architect Walter
Ahlschlager, and conceived of by Roxy Rothafel as the sister
venue to Radio City Music Hall, the Beacon Theatre opened in
1929 as a forum for vaudeville acts, musical productions, drama,
opera, and movies. In 1979, the Beacon was designated a New York
landmark building by the NYC Landmarks Preservation Commission
and a national landmark on the National Register of Historic
Places. Over its history, the Beacon has been a veritable
rock & roll room for some of the greatest names in
music. The Allman Brothers have held an annual rite of spring
concert series at the Beacon Theatre known as The Beacon
Run, performing over 175 shows at the Beacon over ten
years. The Beacon has also staged operatic events, including
Madame Butterfly
in 1988, and has hosted numerous
luminaries, including His Holiness the Dalai Lama in 1999 and
2009, and President Bill Clinton in 2006, when the Rolling
Stones played a private concert in honor of his
60th birthday.
In order to ensure that we could deliver a first-class
experience to customers and performers, in August of 2008 we
closed the Beacon for a seven-month restoration to return the
theater to its original 1929 grandeur, at a cost of
approximately $17 million. The comprehensive restoration of
the Beacon focused on all historic, interior public spaces of
the building, backstage and
back-of-house
areas, and was based on extensive historic research, as well as
detailed,
on-site
examination of original, decorative painting techniques that had
been covered by decades-old layers of paint. The widely
acclaimed, comprehensive restoration was similar to our
restoration of Radio City Music Hall, and reflects our
commitment to New York City, which we believe should have the
worlds most iconic venues that provide unforgettable
experiences for millions of patrons every year. The Beacon
Theatre is the third-highest grossing entertainment venue of its
size in the world, based on Billboard Magazines 2009
rankings.
Our lease on the approximately 2,800 seat Beacon Theatre
expires in 2026.
The
Chicago Theatre
In October 2007, to extend our presence outside of New York and
provide us with an anchor for content and distribution in a key
market in the Midwest, we purchased the legendary Chicago
Theatre, a venue with approximately 3,600 seats. The
Chicago Theatre, which features its famous six-story-high
C-H-I-C-A-G-O marquee, was built in 1921 and
designed in the French Baroque style by architects Cornelius W.
Rapp and
50
George L. Rapp. It is the oldest surviving example of this
architectural style in Chicago today, and was designated a
Chicago landmark building in 1983 by the Mayor of Chicago and
the Chicago City Council.
Today, The Chicago Theatre is becoming a highly attractive
destination for concerts, shows and events, including a wide
range of entertainers, such as Bob Dylan, Chris Rock, Fall Out
Boy, Kanye West, Kathy Griffin and Steely Dan. The theatre also
has served host to Broadway tours, including
Joseph and the
Amazing Technicolor Dreamcoat
and
Dreamgirls
. While
continuing to present first-class concert events, we also intend
to diversify The Chicago Theatres entertainment offerings
to include an increased number of theatrical and family shows,
as well as special events. The Chicago Theatre is the eighth
highest-grossing
entertainment venue of its size in the world, based on Billboard
Magazines 2009 rankings.
In connection with our acquisition of The Chicago Theatre, we
assumed certain obligations of the previous owner contained in a
redevelopment agreement between that owner and the City of
Chicago, all of which obligations expire in 2014. Until the
expiration of those obligations, we are required to obtain the
approval of the City of Chicago in connection with any sale of
The Chicago Theatre.
The
Wang Theatre
In August 2008, we entered into a booking agreement with respect
to the historic Wang Theatre in Boston. Under the booking
agreement, we are utilizing our experience in event production
and entertainment marketing to increase the quantity and
diversity of performances staged at the Wang Theatre. These
performances include theatrical productions and family shows,
such as
Chitty Chitty Bang Bang
, concerts, such as a
multi-night run by Steely Dan and a performance by poet and
singer-songwriter Leonard Cohen, and a timely speaker series
featuring todays newsmakers. The Wang Theatre seats
approximately 3,600.
Our booking agreement expires in 2019. We have the option to
renew the agreement at that time for an additional ten years.
Investment
in Front Line Management Group Inc.
In June 2008, we purchased a 10% ownership interest in Front
Line Management Group Inc. (Front Line), a musical
artist management company. A controlling interest in Front Line
is owned by Ticketmaster Entertainment, Inc. Front Line is one
of the worlds leading artist management companies. Front
Line manages musical artists and acts primarily in rock, classic
rock, pop and country music, including the Eagles, Jimmy
Buffett, Neil Diamond, Van Halen, Fleetwood Mac, Christina
Aguilera, Stevie Nicks, Aerosmith, Steely Dan, Chicago and
Journey. As of December 31, 2008, Front Line had almost 200
artists on its roster and approximately 80 managers providing
services to artists. The investment is designed to more closely
align Madison Square Garden with a strong collection of music
artists. The Company is continuing to explore opportunities to
attract Front Lines artists to our portfolio of music
related assets, including our historic venues, and to our media
assets, including Fuse and MSG network.
Regulation
Regulation
of Our Sports and Entertainment Businesses
Our sports and entertainment businesses are subject to
legislation governing the sale and resale of tickets and
consumer protection statutes generally.
In addition, many of the events produced or promoted by our
sports and entertainment businesses are presented in our venues
which are, similar to all public spaces, subject to building
codes and fire regulations imposed by the state and local
governments in the jurisdictions in which our venues are
located. These venues are also subject to zoning and outdoor
advertising regulations, which restrict us from making certain
modifications to our facilities as of right or from operating
certain types of businesses. These venues also require a number
of licenses in order for us to operate, including occupancy
permits, exhibition licenses, food and beverage permits, liquor
licenses and other authorizations. In addition, our venues are
subject to the federal Americans with Disabilities Act, which
requires us to maintain certain accessibility features at each
of our facilities.
51
The professional sports leagues in which we operate, primarily
the NBA and NHL, claim the right under certain circumstances to
regulate important aspects of our sports business and our
team-related interactive businesses. See
Business MSG Sports The Role
of the Leagues in Our Operations.
Regulation
of Our Media Business
The Federal Communications Commission (FCC) imposes
regulations on cable television operators and satellite
operators that affect programming networks indirectly. In
addition, cable television programming networks, such as our MSG
Networks and Fuse, are also regulated by the FCC because they
are affiliated with a cable television operator like Cablevision.
Closed
Captioning and Advertising Restrictions on Childrens
Programming.
Certain of our networks must provide closed-captioning of
programming for the hearing impaired, and our programming and
Internet websites intended primarily for children 12 years
of age and under must comply with certain limits on advertising.
Indecency
and Obscenity Restrictions.
Cable operators and other distributors are prohibited from
transmitting obscene programming, and our affiliation agreements
generally require us to refrain from including such programming
on our networks.
Program
Access.
The program access provisions of the Federal Cable
Act generally require satellite-delivered video programming in
which a cable operator holds an attributable interest, as that
term is defined by the FCC, to be made available to all
multichannel video programming providers, including satellite
providers and telephone companies, on nondiscriminatory prices,
terms and conditions, subject to certain exceptions specified in
the statute and the FCCs rules. For purposes of these
rules, the common directors and five percent or greater voting
shareholders of Cablevision and the Company will be deemed to be
cable operators with attributable interests in Madison Square
Garden after the Distribution. As long as we continue to have
common directors and major shareholders with Cablevision, our
satellite-delivered video programming services will remain
subject to the program access provisions. Until October 2012,
these rules also prohibit us from entering into exclusive
contracts with cable operators for these services. This
prohibition has been challenged in federal court.
The program-access rules do not currently cover
terrestrially-delivered programming created by cable
system-affiliated programmers such as the Company, but the FCC
is considering revising its rules to compel the licensing of
such programming in response to a complaint by a multichannel
video programming distributor if the complainant can demonstrate
that the lack of such programming significantly hinders or
prevents it from providing video service. We cannot predict
whether the FCC will adopt such changes or make other revisions
to the program access rules. Verizon and AT&T have each
filed a program access complaint at the FCC against Cablevision
and us challenging their respective lack of access to our
terrestrially-delivered high definition programming of our MSG
Networks. Cablevision and the Company are vigorously contesting
both complaints. We cannot predict whether or how action by the
FCC to expand the scope of the program access rules will affect
these complaints or our defense of them. Cablevisions
multichannel video competitors have also proposed that Congress
change the law to expressly extend the program access
requirements to terrestrially-delivered programming. We cannot
predict whether or how Congress will act in response to these
proposals.
The FCC is seeking comment on a proposal to allow a cable
operator to seek repeal of the exclusivity ban prior to 2012
with respect to programming it owns, in markets where the cable
operator faces competition from other video programming
distributors; revisions to the program access complaint
procedures; and whether it would be appropriate to extend the
Commissions program access rules, including the exclusive
contract prohibition, to terrestrially delivered
cable-affiliated programming and programming delivered in high
definition format.
52
Wholesale
A La Carte.
The FCC is also seeking comment on whether to require
programming networks to make each of their services available to
video programming distributors on an a la carte
basis.
Effect of
Must-Carry Requirements.
The FCCs implementation of the statutory
must-carry obligations requires cable and satellite
operators to give broadcasters preferential access to channel
space. This may reduce the amount of channel space that is
available for carriage of our networks by cable television
systems and DBS operators.
Satellite
Carriage.
All satellite carriers must under federal law offer their
service to deliver Madison Square Gardens and its
competitors programming networks on a nondiscriminatory
basis (including by means of a lottery). A satellite carrier
cannot unreasonably discriminate against any customer in its
charges or conditions of carriage.
Media
Ownership Restrictions.
FCC rules set media ownership limits that restrict, among other
things, the number of daily newspapers and radio and TV stations
in which a single entity may hold an attributable interest as
that term is defined by the FCC. The fact that the common
directors and five percent or greater voting shareholders of
Cablevision and the Company will hold attributable interests in
each of the companies after the Distribution for purposes of
these rules means that these cross ownership rules may have the
effect of limiting the activities or strategic business
alternatives available to us, at least for as long as we
continue to have common directors and major shareholders with
Cablevision.
Website
Requirements.
Madison Square Garden maintains various websites that provide
information and content regarding its businesses and offer
merchandise for sale. The operation of these websites may be
subject to a range of federal, state and local laws such as
privacy and consumer protection regulations. The on-line
operations relating to our sports teams may, in certain
circumstances, be subject to certain agreements, rules,
policies, regulations and directives of the leagues in which the
respective team operates. See Business MSG
Sports The Role of the Leagues in Our
Operations.
Competition
Competition
in Our Sports Business
Our sports business operates in a market in which numerous
sports entertainment opportunities are available. In addition to
the NBA, NHL and WNBA teams that we own and operate, the New
York market is home to two Major League Baseball teams (the New
York Yankees and the New York Mets), two National Football
League teams (the New York Giants and the New York Jets), two
additional NHL teams (the New York Islanders and the New
Jersey Devils), a second NBA team (the New Jersey Nets) and a
Major League Soccer franchise (the New York Red Bulls). In
addition, there are a number of other amateur and professional
teams that compete in other sports, including at the collegiate
and minor league levels. New York is also home to the
U.S. Open tennis event each summer, as well as many other
non-sports related entertainment options.
As a result of the large number of options available, we face
strong competition for the general New York sports fan. We
must compete with these other sporting events in varying
respects and degrees, including on the basis of the quality of
the teams we field, their success in the leagues in which they
compete, our ability to provide an entertaining environment at
our games and the prices we charge for our tickets. In addition,
for fans who prefer the unique experience of NHL hockey, we must
compete with two other hockey teams located in the New York area
as well as, in varying respects and degrees, with other NHL
hockey teams and the NHL itself. Similarly, for those fans
attracted to the equally unique experience of NBA basketball, we
53
must compete, in varying respects and degrees, with another NBA
team located in the New York area as well as other NBA teams and
the NBA itself.
Competition
in Our Entertainment Business
Our entertainment business competes, in certain respects and to
varying degrees, with other live performances, sporting events,
movies, home entertainment (including television, home video and
gaming devices) and the large number of other entertainment
options available to members of the public. Some of our
businesses, such as our live productions and our sporting
events, represent alternative uses for the publics
entertainment dollar. The primary geographic area in which we
operate, New York City, is among the most competitive
entertainment markets in the world, with the worlds
largest live theater industry, eleven major professional sports
teams, numerous museums, galleries and other attractions, and
hundreds of movie screens available to the public. We compete
with these other entertainment options on the basis of the
quality of our productions, as well as on the price of our
tickets and the quality and location of our venues.
We compete for bookings with a large number of other venues in
the cities in which our venues are located and in alternative
locations. Generally, we compete for bookings on the basis of
the size, quality, expense and nature of the venue required for
the booking.
In addition to competition for ticket sales and bookings, we
also compete to varying degrees with other live productions for
advertising and sponsorship dollars.
Competition
in Our Media Business
Distribution
of Programming Networks
The business of distributing programming networks to cable
television systems and satellite, telephone and other
multichannel video programming distributors
(Distributors) is highly competitive. Our
programming networks face competition from other programming
networks for the right to be carried by a particular
Distributor, and for the right to be carried on the service tier
that will attract the most subscribers. Once our programming
network is selected by a Distributor for carriage, that network
competes for viewers not only with the other channels available
through the Distributor, but also with television,
pay-per-view
channels and
video-on-demand
channels, as well as online services, mobile services, radio,
print media, motion picture theaters, DVDs, and other sources of
information, sporting events and entertainment. Important to our
success in each area of competition MSG Media faces are the
price we charge for our programming networks; the quantity,
quality and variety of programming offered on our networks and
the effectiveness of our networks marketing efforts.
Our ability to successfully compete with other programming
networks for distribution may be hampered because the
Distributors through which distribution is sought may be
affiliated with other programming networks. In addition, because
such affiliated Distributors may have a substantial number of
subscribers, the ability of such programming networks to obtain
distribution on affiliated Distributors may lead to increased
subscriber and advertising revenue for such networks because of
their increased penetration compared to our programming
networks. Even if such affiliated Distributors carry our
programming networks, there is no assurance that such
Distributors would not place their affiliated programming
network on a more desirable tier, thereby giving the affiliated
programming network a competitive advantage over our own.
New or existing programming networks that are owned by or are
affiliates of broadcasting networks like NBC, ABC, CBS or FOX
may also have a competitive advantage over our networks in
obtaining distribution through the bundling of
agreements to carry those programming networks with the
agreements giving the cable system or other Distributor the
right to carry a station affiliated with the network.
Sources
of Programming
We also compete with other programming networks to secure
desired programming, although some of our programming is
generated internally through our ownership of sports teams and
our efforts in original
54
programming. Competition for programming will increase as the
number of programming networks increases. Other programming
networks that are affiliated with programming sources such as
movie or television studios, film libraries or sports teams may
have a competitive advantage over us in this area.
Competition
for Entertainment Programming Sources
With respect to the acquisition of music-related and
entertainment programming, such as concerts, festivals,
syndicated programs and movies, which are not produced by or
specifically for programming networks, our competitors include
national commercial broadcast television networks, local
commercial broadcast television stations, the Public
Broadcasting Service and local public television stations,
pay-per-view
programs, and other cable programming networks. Internet-based
video content distributors may also emerge as competitors for
the acquisition of content or the rights to distribute content.
Competition
for Sports Programming Sources
Because the loyalty of the sports viewing audience to a sports
programming network is primarily driven by loyalty to a
particular team or teams, access to adequate sources of sports
programming is particularly critical to our sports networks. We
own the programming rights to the Knicks, the Rangers and the
Liberty. We also have in place long-term rights agreements
covering the New York Islanders, New Jersey Devils and Buffalo
Sabres. The rights with respect to these professional teams may
be limited in certain circumstances. See
Business MSG Sports The Role of
the Leagues in Our Operations. Our programming networks
compete for telecast rights for other teams or events
principally with national or regional cable networks that
specialize in or carry sports programming; television
superstations which distribute sports and other
programming by satellite; local and national commercial
broadcast television networks; and independent syndicators that
acquire and resell such rights nationally, regionally and
locally. Some of our competitors may own or control, or are
owned or controlled by, sports teams, leagues or sports
promoters, which gives them an advantage in obtaining telecast
rights for such teams or sports. Distributors may also contract
directly with the sports teams in their local service areas for
the right to distribute games on their systems. Our programming
networks may also compete with Internet-based distributors of
sports programming.
The increasing amount of sports programming available on a
national basis, including pursuant to national rights
arrangements (e.g., NBA on ABC, ESPN, and TNT, and NHL on NBC
and Versus), as part of league-controlled sports networks (e.g.,
NBA TV and NHL Network), and in
out-of-market
packages (e.g., NBAs League Pass and NHL Center Ice), may
have an adverse impact on our competitive position as our
programming networks compete for distribution and for viewers.
Two professional sports teams located in New York have organized
their own cable television networks featuring the games of their
teams, which adversely affects the competitive position of MSG
Networks by denying or limiting our access to those games for
our own networks and subjecting our networks to competition from
these team-owned networks. On the other hand, the competitive
position of our programming networks is substantially enhanced
by our ownership of the New York Knicks and the New York Rangers.
Competition
for Advertising Revenue
The financial success of our programming businesses also depends
in part upon unpredictable and volatile factors beyond our
control, such as viewer preferences, the strength of the
advertising market, the quality and appeal of the competing
programming and the availability of other entertainment
activities.
Legal
Proceedings
In March 2008, a lawsuit was filed against MSG L.P. arising out
of a January 23, 2007 automobile accident involving an
individual who was allegedly drinking at several different
establishments prior to the accident, allegedly including at an
event at The Garden. The accident resulted in the death of one
person and caused serious injuries to another. The plaintiffs
filed suit against MSG L.P., the driver, and a New York City
bar, asserting claims under the New York Dram Shop Act and
seeking unspecified compensatory and punitive
55
damages. The Company has insurance coverage for compensatory
damages and legal expenses in this matter. Discovery in the case
has been completed and MSG L.P. has filed a motion for summary
judgment, which is pending before the court.
MSG L.P. filed a lawsuit in September 2007 against the NHL and
certain related entities. This suit, filed in the United States
District Court for the Southern District of New York, alleged
violations of the United States Federal and New York State
antitrust laws as a result of agreements providing the NHL with
the exclusive right to control, for most commercial purposes,
the individual clubs trademarks, licensing, advertising
and distribution opportunities. The suit sought declaratory
relief against these alleged anticompetitive activities and
against the imposition by the NHL of any sanctions or penalties
for the filing and prosecution of the lawsuit. The NHL filed
counterclaims against MSG L.P. alleging that MSG L.P.s
prosecution of its lawsuit violated contractual obligations and
seeking a judicial declaration that the NHL had the right to
pursue disciplinary proceedings against MSG L.P. under the NHL
constitution. In March 2009, the parties entered into a
settlement agreement, and this action and the counterclaims have
been dismissed.
In addition to the matters discussed above, the Company is a
defendant in various lawsuits. Although the outcome of these
matters cannot be predicted with certainty, management does not
believe that resolution of these lawsuits will have a material
adverse effect on the Company.
Employees
As of October 1, 2009 we had 1,318 full-time union and
non-union employees and 7,053 part-time union and non-union
employees. Approximately 62% of our employees are represented by
unions. Labor relations in general and in the sports and theater
industry in particular can be volatile, and though our current
relationships with our unions are positive, we have from time to
time faced labor action or had to make contingency plans because
of threatened or potential labor actions.
The NHL players and the NBA players are covered by collective
bargaining agreements between the NHL Players Association
and the NHL and between the National Basketball Players
Association and the NBA, respectively. Both the NHL and the NBA
have experienced labor difficulties in the past and may have
labor issues in the future.
Properties
We own the Madison Square Garden complex (with a maximum
capacity of approximately 21,000 seats in The Garden),
including The Theater at Madison Square Garden (approximately
5,600 seats) in New York City, comprising approximately
985,600 square feet; a training center in Greenburgh, New
York with approximately 105,000 square feet of space, and
The Chicago Theatre (approximately 3,600 seats) in Chicago
comprising approximately 72,600 square feet.
Significant properties that are leased in New York City include
approximately 330,000 square feet housing Madison Square
Gardens administrative offices and certain studio space,
executive offices, approximately 577,000 square feet
comprising Radio City Music Hall (approximately
6,000 seats) and approximately 57,000 square feet
comprising the Beacon Theatre (approximately 2,800 seats).
We also lease approximately 13,000 square feet of warehouse
space in Jersey City, New Jersey and storage space in various
other locations.
For more information on our venues, see
Business Our Venues.
Our Madison Square Garden complex is subject to and benefits
from various easements, including the breezeway into
Madison Square Garden from Seventh Avenue in New York City
(which we share with other property owners). Our ability to
continue to utilize this and other easements requires us to
comply with certain conditions. Moreover, certain adjoining
property owners have easements over our property, which we are
required to maintain so long as those property owners meet
certain conditions.
56
DIVIDEND
POLICY
We do not expect to pay cash dividends on our common stock for
the foreseeable future.
57
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined balance
sheet as of September 30, 2009 and the unaudited pro forma
condensed combined statement of operations for the nine months
ended September 30, 2009 and the unaudited pro forma
combined statement of operations for the year ended
December 31, 2008 are based on the historical combined
financial statements of the Company. The unaudited pro forma
combined financial statements presented below should be read in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations and our
combined annual and interim financial statements and
corresponding notes thereto included elsewhere in this
information statement. The unaudited pro forma combined
financial statements reflect certain known impacts as a result
of the proposed Distribution to separate the Company from
Cablevision. The unaudited pro forma combined financial
statements have been prepared giving effect to the Distribution
as if this transaction had occurred as of January 1, 2008
for the unaudited pro forma combined statement of operations for
the year ended December 31, 2008 and for the unaudited pro
forma condensed combined statement of operations for the nine
months ended September 30, 2009, and as of
September 30, 2009 for the unaudited pro forma condensed
combined balance sheet.
In connection with the proposed Distribution to separate the
Company from Cablevision, Cablevision will contribute to Madison
Square Garden, Inc. its subsidiaries that own directly or
indirectly all of the interests in MSG L.P., the Cablevision
subsidiary through which it conducts the business of the
Company, which consists of its media, entertainment and sports
businesses, as well as its venues. These transfers to us by
Cablevision are treated as a contribution to our capital at
Cablevisions historical cost.
The unaudited pro forma combined financial information set forth
below have been derived from the combined annual and interim
financial statements of the Company including the unaudited
condensed combined balance sheet as of September 30, 2009
and the unaudited condensed combined statement of operations for
the nine months ended September 30, 2009 and for the year
ended December 31, 2008 included elsewhere within this
information statement and reflect certain assumptions that we
believe are reasonable given the information currently
available. While such adjustments are subject to change based
upon the finalization of the terms of the separation and the
underlying separation agreements, in managements opinion,
the pro forma adjustments have been developed on a reasonable
and rational basis.
The costs to operate our business as an independent public
entity are expected to exceed the historical expenses, including
corporate and administrative charges from Cablevision of
approximately $19.3 million and $24.3 million for the
nine months ended September 30, 2009 and for the year ended
December 31, 2008, respectively reflected in the
accompanying annual and interim combined financial statements
presented elsewhere within this information statement and
principally relate to areas that include, but are not limited to,
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|
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|
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additional personnel including finance, accounting, compliance,
tax, treasury, internal audit and legal;
|
|
|
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additional professional fees associated with audits, tax, legal
and other services;
|
|
|
|
increased insurance premiums;
|
|
|
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costs relating to board of directors fees;
|
|
|
|
stock market listing fees, investor relations costs and fees for
preparing and distributing periodic filings with the Securities
and Exchange Commission (SEC); and
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other administrative costs and fees, including anticipated
incremental executive compensation costs related to existing and
new executive management and excluding future share-based
compensation expense (see pro forma adjustment (4) below).
|
The preliminary estimates for these net incremental expenses in
2010 range between approximately $5 million and
$8 million on an annual basis going forward. The pro forma
impact of such incremental costs has not been reflected herein
as many of the costs that comprise this increase are not
objectively determinable. Actual expenses could vary from this
range estimate and such variations could be material.
58
Effective January 1, 2010 a new long-term affiliation
agreement was entered into between Cablevision and the MSG
Networks. This new long-term affiliation agreement will result
in estimated incremental revenues provided to the Company of
approximately $30 million for 2010, as compared to the
amount of revenue expected to be recognized by the Company
pursuant to the Companys arrangement with Cablevision for
2009, and other additional consideration. Such incremental
revenue has not been reflected in the unaudited pro forma
combined financial information presented herein. This new
affiliation agreement will provide for the carriage of the MSG
and MSG Plus program services on Cablevisions cable
systems in the tri-state area. This agreement will have a term
of 10 years, obligates Cablevision to carry such program
services on its cable systems and provides for the payment by
Cablevision to the Company of a per subscriber license fee,
which fee is increased each year during the term of the
agreement.
These unaudited pro forma combined financial statements reflect
all other adjustments that, in the opinion of management, are
necessary to present fairly the pro forma combined results of
operations and combined financial position of the Company as of
and for the periods indicated. The unaudited pro forma combined
financial information is for illustrative and informational
purposes only and is not intended to represent or be indicative
of what our financial condition or results of operations would
have been had the Company operated historically as a company
independent of Cablevision or if the Distribution had occurred
on the dates indicated. The unaudited pro forma combined
financial information also should not be considered
representative of our future combined financial condition or
combined results of operations.
59
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET
September 30, 2009
(Dollars in thousands)
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|
|
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|
|
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|
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|
|
|
|
|
|
|
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Pro Forma
|
|
|
|
|
|
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Historical
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
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ASSETS
|
Current Assets:
|
|
|
|
|
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|
|
|
|
|
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|
Cash and cash equivalents
|
|
$
|
72,667
|
|
|
$
|
2,700
|
(2)
|
|
$
|
75,367
|
|
Restricted cash
|
|
|
13,769
|
|
|
|
|
|
|
|
13,769
|
|
Accounts receivable (less allowance for doubtful accounts)
|
|
|
95,925
|
|
|
|
|
|
|
|
95,925
|
|
Net receivable due from Cablevision
|
|
|
7,699
|
|
|
|
|
|
|
|
7,699
|
|
Advances due from Cablevision
|
|
|
|
|
|
|
190,000
|
(6)
|
|
|
190,000
|
|
Prepaid expenses
|
|
|
49,957
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|
|
|
|
|
|
|
49,957
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Other current assets
|
|
|
39,263
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|
|
|
|
|
|
|
39,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total current assets
|
|
|
279,280
|
|
|
|
192,700
|
|
|
|
471,980
|
|
Advances due from Cablevision
|
|
|
190,000
|
|
|
|
(190,000
|
)(6)
|
|
|
|
|
Property and equipment, net of accumulated depreciation
|
|
|
330,725
|
|
|
|
|
|
|
|
330,725
|
|
Other assets
|
|
|
141,662
|
|
|
|
|
|
|
|
141,662
|
|
Amortizable intangible assets, net of accumulated amortization
|
|
|
152,624
|
|
|
|
|
|
|
|
152,624
|
|
Indefinite-lived intangible assets
|
|
|
158,096
|
|
|
|
|
|
|
|
158,096
|
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Goodwill
|
|
|
742,492
|
|
|
|
|
|
|
|
742,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,994,879
|
|
|
$
|
2,700
|
|
|
$
|
1,997,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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LIABILITIES AND COMBINED GROUP EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
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Accounts payable
|
|
$
|
4,101
|
|
|
$
|
|
|
|
$
|
4,101
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|
Accrued liabilities
|
|
|
135,890
|
|
|
|
(4,700
|
)(3)
|
|
|
132,590
|
|
|
|
|
|
|
|
|
1,400
|
(4)
|
|
|
|
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Deferred revenue
|
|
|
163,141
|
|
|
|
|
|
|
|
163,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
303,132
|
|
|
|
(3,300
|
)
|
|
|
299,832
|
|
Other liabilities
|
|
|
134,279
|
|
|
|
2,100
|
(1)
|
|
|
132,379
|
|
|
|
|
|
|
|
|
3,300
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
(7,300
|
)(3)
|
|
|
|
|
Deferred tax liability
|
|
|
469,708
|
|
|
|
58,900
|
(5)
|
|
|
528,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
907,119
|
|
|
|
53,700
|
|
|
|
960,819
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined group equity
|
|
|
1,087,760
|
|
|
|
(2,100
|
)(1)
|
|
|
1,036,760
|
|
|
|
|
|
|
|
|
(600
|
)(2)
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
(1,400
|
)(4)
|
|
|
|
|
|
|
|
|
|
|
|
(58,900
|
)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,994,879
|
|
|
$
|
2,700
|
|
|
$
|
1,997,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS
For the Nine Months Ended September 30,
2009
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
Historical
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
Revenues, net
|
|
$
|
650,418
|
|
|
$
|
|
|
|
$
|
650,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below)
|
|
|
401,149
|
|
|
|
|
|
|
|
401,149
|
|
Selling, general and administrative
|
|
|
202,245
|
|
|
|
|
|
|
|
202,245
|
|
Depreciation and amortization
|
|
|
45,973
|
|
|
|
|
|
|
|
45,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,367
|
|
|
|
|
|
|
|
649,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,051
|
|
|
|
|
|
|
|
1,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(931
|
)
|
|
|
|
|
|
|
(931
|
)
|
Miscellaneous
|
|
|
2,000
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069
|
|
|
|
|
|
|
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income taxes
|
|
|
2,120
|
|
|
|
|
|
|
|
2,120
|
|
Income tax benefit (expense)
|
|
|
2,141
|
|
|
|
(100
|
)(7)
|
|
|
2,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,261
|
|
|
$
|
(100
|
)
|
|
$
|
4,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted average common shares
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the
Year Ended December 31, 2008
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
Historical
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
Revenues, net
|
|
$
|
1,042,958
|
|
|
$
|
|
|
|
$
|
1,042,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below)
|
|
|
724,904
|
|
|
|
|
|
|
|
724,904
|
|
Selling, general and administrative
|
|
|
270,065
|
|
|
|
|
|
|
|
270,065
|
|
Depreciation and amortization
|
|
|
66,231
|
|
|
|
|
|
|
|
66,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,061,200
|
|
|
|
|
|
|
|
1,061,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(18,242
|
)
|
|
|
|
|
|
|
(18,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5,193
|
|
|
|
|
|
|
|
5,193
|
|
Interest expense
|
|
|
(3,274
|
)
|
|
|
|
|
|
|
(3,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,919
|
|
|
|
|
|
|
|
1,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
|
(16,323
|
)
|
|
|
|
|
|
|
(16,323
|
)
|
Income tax benefit (expense)
|
|
|
11,387
|
|
|
|
335
|
(7)
|
|
|
11,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,936
|
)
|
|
$
|
335
|
|
|
$
|
(4,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted average common shares
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
The unaudited pro forma adjustments to the accompanying
historical financial information as of September 30, 2009,
and for the nine months ended September 30, 2009 and for
the year ended December 31, 2008 are described below:
Balance
Sheet
(1) Represents the establishment of a liability recorded in
Other liabilities and a corresponding charge to
Combined group equity for the unrecognized actuarial
losses of approximately $2,100 associated with Company employees
who participated in the Cablevision cash balance pension plan, a
qualified plan, which will be transferred to the Company under a
newly created Madison Square Garden, Inc. cash balance pension
plan after the Distribution.
(2) Represents the combined effect at the time of the
Distribution of (a) the transfer of cash, recorded in
Cash and cash equivalents and the establishment of a
liability, recorded in Other liabilities of
approximately $2,700, resulting from the transfer to the Company
from Cablevision of the Companys employees
participant accounts formerly in the Cablevision excess cash
balance pension plan, to a newly created Madison Square Garden,
Inc. excess cash balance pension plan and (b) the establishment
of an additional liability of $600, recorded in Other
liabilities and a corresponding charge to Combined
group equity for unrecognized actuarial losses associated
with these participant accounts. For our employees who
participated in the Cablevision excess cash balance pension
plan, since it is an unqualified plan, the cash expected to be
received from Cablevision represents the reimbursement to the
Company of its cash contributions (net of benefits paid)
historically paid to Cablevision.
(3) Represents at the Distribution date, the elimination of
certain accrued liabilities of approximately $12,000 ($4,700 of
which was recorded in current Accrued liabilities
and $7,300 of which was recorded in non-current Other
liabilities), and the recording of an offsetting deemed
capital contribution recorded in Combined group
equity, resulting from the full assumption of this
liability by Cablevision. This liability reflects costs
historically allocated to the Company for certain Cablevision
corporate employees participation in certain long-term
incentive plans. Subsequent to the Distribution, Cablevision
will be solely responsible for the settlement of such amounts.
(4) Represents the fair value of the obligation held by a
subsidiary of Cablevision prior to the Distribution date
(approximately $1,400) which will be assumed by and transferred
to the Company relating to Company employees who have
outstanding Cablevision stock appreciation rights
(SARs) and which will be recorded in Accrued
liabilities with a corresponding charge to Combined
group equity. Subsequent to the Distribution, the Company
will be solely responsible for settling these obligations upon
Company employee exercises of
his/her
SARs.
It is expected that the Compensation Committee of our Board of
Directors may grant stock based awards to directors, executive
management and other personnel after the Distribution. However,
it is not possible to estimate, at this time, how such stock
based compensation expense will differ from those expenses
included and disclosed in the Companys historical annual
and unaudited interim financial statements included elsewhere in
this information statement.
(5) Prior to the Distribution, Cablevision will contribute
to the Company its subsidiaries which own, directly and
indirectly, all of the interests in MSG L.P. The pro forma
adjustment recorded to Deferred tax liability would
result from the Distribution of the Company to
Cablevisions shareholders. Deferred tax assets and
liabilities presented have been measured using the applicable
corporate tax rates historically used by Cablevision for the
periods presented. Due to the Companys significant
presence in the City of New York, the estimated applicable
corporate tax rates used to measure deferred taxes are expected
to be higher on a stand-alone basis. The resulting change of
approximately $33,400 relating to the increase in the applicable
corporate tax rate used to measure the Companys deferred
tax assets and liabilities will be recorded as an adjustment in
Combined group equity as of the Distribution date.
In addition, presenting the income tax expense and deferred
taxes on a separate return basis results in a difference between
the net operating loss carry forward reflected in the deferred
tax asset and the actual deferred tax asset for such carry
forwards under the applicable tax laws because the operations of
the Company were included in the consolidated federal income
63
tax returns of Cablevision for all periods presented. Such
inclusion results in utilization of tax losses each year to
offset the taxable income of other members in the Cablevision
federal consolidated group that are not reflected in these
financial statements. As a result, the Companys net
operating loss carry forwards and associated deferred tax asset
will be substantially lower at the Distribution date. This
reduction of approximately $23,200 to the Companys
deferred tax asset recorded in Deferred tax
liability will be reflected as an adjustment to
Combined group equity as of the Distribution date.
The Company will have an insignificant amount of tax net
operating loss carry forwards immediately subsequent to the
Distribution. Furthermore, the pro forma adjustment recorded as
an increase to Deferred tax liability includes the
deferred tax impact of approximately $2,300 relating to the pro
forma adjustments discussed in (1) through (4) above. These
three pro forma adjustments aggregate to the total $58,900 pro
forma increase to Deferred tax liability and
corresponding reduction to Combined group equity in
the accompanying unaudited pro forma condensed combined balance
sheet.
(6) The Company has outstanding non-interest bearing
advances to a subsidiary of Cablevision. Prior to the
Distribution date, the terms of these advances will be changed
to provide for a maturity date of no later than June 30,
2010 (with prepayment at Cablevisions option) and for the
payment of cash interest at a fixed rate equal to the prime rate
on the date the changes to the terms are made. The pro forma
information does not include any adjustments for interest income
on these advances.
Statements
of Operations
(7) Represents the pro forma adjustments of approximately
$(100) and $335 for the nine months ended September 30,
2009 and for the year ended December 31, 2008,
respectively, to reflect the change in the applicable combined
corporate income tax rates that are expected to be higher on a
stand-alone basis due to the Companys significant presence
in the City of New York as compared with the applicable combined
corporate tax rates historically used by Cablevision.
(8) The number of shares used to compute basic and diluted
earnings per share
is ,
which is the number of shares of Madison Square Garden, Inc.
common stock assumed to be outstanding on the Distribution date,
based on a distribution ratio of one share of Madison Square
Garden, Inc. common stock for
every shares
of Cablevision common stock outstanding. The actual number of
our basic and diluted shares outstanding will not be known until
the Distribution declaration date. For purposes of the pro forma
earnings per share information, the Company used the outstanding
Class A and Class B common shares of Cablevision at
September 30, 2009, adjusted for the distribution ratio to
compute basic and diluted earnings per share. There is no
dilutive impact from common stock equivalents for periods prior
to the Distribution, as the Company had no dilutive securities
outstanding. The dilutive effect of the Companys
share-based awards that will be issued in connection with the
conversion of Cablevisions share-based payment awards upon
the Distribution and for future Company grants will be included
in the computation of diluted net income per share in periods
subsequent to the Distribution.
64
SELECTED
FINANCIAL DATA
The operating and balance sheet data included in the following
selected financial data for each year in the five-year period
ended December 31, 2008 have been derived from the annual
combined financial statements of Madison Square Garden, Inc. and
certain media, entertainment and sports businesses and assets
(which we refer to collectively as the Company) that
were historically owned and operated as part of Cablevision. The
operating and balance sheet data for the nine months ended and
as of September 30, 2009 and 2008 included in the following
selected financial data have been derived from the interim
condensed combined financial statements of the Company and, in
the opinion of the management of the Company, reflect all
adjustments necessary for the fair presentation of such data for
the respective interim periods. The financial information does
not necessarily reflect what our results of operations and
financial position would have been if we had operated as a
separate publicly-traded entity during the periods presented.
The results of operations for the nine month period ended
September 30, 2009 are not necessarily indicative of the
results that might be expected for future interim periods or for
the full year. The selected financial data presented below
should be read in conjunction with the annual and interim
financial statements included elsewhere in this information
statement and with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and Unaudited Pro Forma Combined Financial
Information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in thousands)
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$
|
650,418
|
|
|
$
|
645,400
|
|
|
$
|
1,042,958
|
|
|
$
|
1,002,182
|
|
|
$
|
905,196
|
|
|
$
|
847,552
|
|
|
$
|
810,730
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below)
|
|
|
401,149
|
|
|
|
418,434
|
|
|
|
724,904
|
|
|
|
635,108
|
|
|
|
637,090
|
|
|
|
543,279
|
|
|
|
579,129
|
|
Selling, general and administrative
|
|
|
202,245
|
|
|
|
202,258
|
|
|
|
270,065
|
|
|
|
243,196
|
|
|
|
222,962
|
|
|
|
198,198
|
|
|
|
170,825
|
|
Gain on curtailment of pension
plans(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221
|
|
|
|
143
|
|
|
|
367
|
|
|
|
4,146
|
|
Other operating income(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95,840
|
)
|
Depreciation and amortization
|
|
|
45,973
|
|
|
|
49,576
|
|
|
|
66,231
|
|
|
|
62,223
|
|
|
|
64,995
|
|
|
|
68,616
|
|
|
|
55,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
1,051
|
|
|
|
(24,868
|
)
|
|
|
(18,242
|
)
|
|
|
77,307
|
|
|
|
(19,994
|
)
|
|
|
37,092
|
|
|
|
97,213
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
|
|
(931
|
)
|
|
|
2,051
|
|
|
|
1,919
|
|
|
|
11,607
|
|
|
|
6,212
|
|
|
|
1,582
|
|
|
|
(1,630
|
)
|
Miscellaneous
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
(250
|
)
|
|
|
(1
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes and cumulative
effect of a change in accounting principle
|
|
|
2,120
|
|
|
|
(22,817
|
)
|
|
|
(16,323
|
)
|
|
|
87,914
|
|
|
|
(14,032
|
)
|
|
|
38,673
|
|
|
|
95,613
|
|
Income tax benefit (expense)
|
|
|
2,141
|
|
|
|
6,624
|
|
|
|
11,387
|
|
|
|
(45,031
|
)
|
|
|
1,173
|
|
|
|
(6,900
|
)
|
|
|
(45,444
|
)
|
Cumulative effect of a change in accounting principle, net of
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,261
|
|
|
$
|
(16,193
|
)
|
|
$
|
(4,936
|
)
|
|
$
|
42,883
|
|
|
$
|
(13,097
|
)
|
|
$
|
31,773
|
|
|
$
|
50,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances due from Cablevision(3)
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
|
$
|
130,000
|
|
|
$
|
|
|
|
$
|
21,000
|
|
|
$
|
|
|
Total assets
|
|
|
1,994,879
|
|
|
|
1,956,130
|
|
|
|
2,000,341
|
|
|
|
1,969,321
|
|
|
|
1,891,282
|
|
|
|
1,933,938
|
|
|
|
1,922,529
|
|
Capital lease obligations
|
|
|
6,543
|
|
|
|
6,956
|
|
|
|
7,457
|
|
|
|
7,774
|
|
|
|
5,050
|
|
|
|
5,865
|
|
|
|
6,625
|
|
Combined group equity
|
|
|
1,087,760
|
|
|
|
1,066,654
|
|
|
|
1,072,623
|
|
|
|
1,072,316
|
|
|
|
999,076
|
|
|
|
990,811
|
|
|
|
1,058,574
|
|
65
|
|
|
(1)
|
|
Gain on curtailment of pension
plans relates to the amendment to freeze all benefits earned
through December 31, 2007 and eliminate the ability of
participants to earn benefits for future service under a certain
Company-sponsored qualified defined benefit pension plan
covering certain non-union employees and Company-sponsored
unfunded, non-qualified defined benefit pension plan covering
certain employees who participate in the underlying qualified
plan.
|
|
(2)
|
|
Other operating income represents a
contractually obligated termination fee received by the Company
and the reversal in 2004 of a purchase accounting liability
related to the notice received from the New York Mets to
terminate their telecast rights agreement with the Company.
|
|
(3)
|
|
The Company has outstanding
non-interest bearing advances to a subsidiary of Cablevision.
Prior to the Distribution date, the terms of these advances will
be changed to provide for a maturity date of no later than
June 30, 2010 (with prepayment at Cablevisions
option) and for the payment of cash interest at a fixed rate
equal to the prime rate on the date the changes to the terms are
made.
|
66
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Managements Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. In this Managements
Discussion and Analysis of Financial Condition and Results of
Operations, there are statements concerning our future operating
and future financial performance, including our estimate of the
costs and timing of the planned renovation of The Garden and the
anticipated benefits of the renovation, the expected decrease in
operating losses at Fuse, the potential benefit to our future
operating results from the touring version of the Radio City
Christmas Spectacular, the expected increases in affiliation
agreement revenues during the remainder of 2009 in our MSG Media
segment and the expected reduction in full-year litigation
expenses in 2009 as compared with 2008. Words such as
expects, anticipates,
believes, estimates, may,
will, should, could,
potential, continue,
intends, plans, and similar words and
terms used in the discussion of future operating and future
financial performance identify forward-looking statements.
Investors are cautioned that such forward-looking statements are
not guarantees of future performance or results and involve
risks and uncertainties and that actual results or developments
may differ materially from the forward-looking statements as a
result of various factors. Factors that may cause such
differences to occur include, but are not limited to:
|
|
|
|
|
the level of our revenues, which depends in part on the
popularity and competitiveness of our sports teams and the level
and popularity of the
Radio City Christmas Spectacular
and other entertainment events which are presented in our
venues;
|
|
|
|
costs associated with player injuries, and waivers or
terminations of players and other team personnel;
|
|
|
|
changes in professional sports teams compensation, including the
impact of signing of free agents, subject to league salary caps;
|
|
|
|
the level of our capital expenditures, including the planned
renovation of The Garden;
|
|
|
|
the expected impact of the planned renovation of The Garden on
our operations;
|
|
|
|
the demand for our programming among cable television systems,
satellite, telephone and other multichannel distributors (which
we refer to in this discussion as Distributors), and
our ability to renew affiliation agreements with them;
|
|
|
|
general economic conditions especially in the New York
metropolitan area where we conduct the majority of our
operations;
|
|
|
|
the demand for advertising time and viewer rating for our
programming;
|
|
|
|
competition, for example, from other regional sports networks,
other teams and other entertainment options;
|
|
|
|
changes in laws, NBA or NHL rules, regulations, guidelines,
bulletins, directives, policies and agreements (including the
leagues respective collective bargaining agreements with
their players associations, salary caps and NBA luxury tax
thresholds) or other regulations under which we operate;
|
|
|
|
our ability to maintain, obtain or produce content for our MSG
Media segment, together with the cost of such content;
|
|
|
|
the level of our expenses, including the anticipated
expenditures related to the expected increase in our corporate
expenses as a stand-alone publicly-traded company;
|
|
|
|
future acquisitions and dispositions of assets;
|
|
|
|
the costs associated with, and the outcome of, litigation and
other proceedings to the extent uninsured, including the matters
described under Business Legal
Proceedings;
|
|
|
|
financial community and rating agency perceptions of our
business, operations, financial condition and the industry in
which we operate;
|
67
|
|
|
|
|
our indirect ownership of professional sports franchises in the
NBA and NHL and certain transfer restrictions on our common
stock; and
|
|
|
|
the factors described under Risk Factors in this
information statement.
|
We disclaim any obligation to update or revise the
forward-looking
statements contained herein, except as otherwise required by
applicable federal securities laws.
All dollar amounts included in the following
Managements Discussion and Analysis of Financial Condition
and Results of Operations are presented in thousands, except as
otherwise noted.
Introduction
Managements discussion and analysis, or MD&A, of our
results of operations and financial condition is provided as a
supplement to the audited combined annual financial statements
and unaudited interim condensed combined financial statements
and footnotes thereto included elsewhere herein to help provide
an understanding of our financial condition, changes in
financial condition and results of our operations. The
information included in MD&A should be read in conjunction
with the annual and interim combined financial statements
included in this information statement as well as the financial
data set forth under Selected Financial Data and the
pro forma combined financial information set forth under
Unaudited Pro Forma Combined Financial Information.
Our MD&A is organized as follows:
Business Overview.
This section provides a
general description of our business, as well as other matters
that we believe are important in understanding our results of
operations and financial condition and in anticipating future
trends.
Combined Results of Operations.
This section
provides an analysis of our results of operations for the nine
months ended September 30, 2009 and 2008, and the years
ended December 31, 2008, 2007 and 2006. Our discussion is
presented on both a combined and segment basis. Our segments are
MSG Media, MSG Entertainment and MSG Sports.
Liquidity and Capital Resources.
This section
provides a discussion of our financial condition as of
September 30, 2009, as well as an analysis of our cash
flows for the nine months ended September 30, 2009 and 2008
and the years ended December 31, 2008, 2007 and 2006,
respectively. The discussion of our financial condition and
liquidity includes summaries of (i) our primary sources of
liquidity and (ii) our contractual obligations and off
balance sheet arrangements that existed at December 31,
2008.
Seasonality of Our Business.
This section
discusses the seasonal performance of our MSG Sports and MSG
Entertainment segments. Because of the seasonality of these
segments, our results for the nine months ended
September 30, 2009 are not necessarily indicative of
full-year performance.
Recently Issued Accounting Pronouncements Not Yet Adopted and
Critical Accounting Policies.
This section
discusses accounting policies considered to be important to our
financial condition and results of operations, and which require
significant judgment and estimates on the part of management in
their application. In addition, all of our significant
accounting policies, including our critical accounting policies,
are discussed in the notes to our annual combined financial
statements included elsewhere in this information statement.
Business
Overview
Madison Square Garden is a fully-integrated media, entertainment
and sports business comprised of dynamic and powerful brands.
Madison Square Gardens business grew from the legendary
venue widely known as The Worlds Most Famous
Arena, and is organized into three strategically aligned
segments: MSG Media, MSG Entertainment and MSG Sports. Our
business capitalizes on the combination of our iconic
68
venues, our popular sports franchises, the distribution of our
programming networks and our exclusive sports and entertainment
content. A description of our segments follows:
MSG
Media
MSG Media, which represented 41% of our combined revenues for
the year ended December 31, 2008, is a leader in production
and content development for multiple distribution platforms,
including content originating from our venues. This business
consists of programming networks and interactive offerings,
including the MSG Networks (MSG network, MSG Plus, MSG HD and
MSG Plus HD) and the Fuse Networks (Fuse and Fuse HD). MSG
Networks are home to seven professional sports teams: the New
York Knicks, New York Rangers, New York Liberty, New York
Islanders, New Jersey Devils, Buffalo Sabres and New York Red
Bulls, as well as to our critically acclaimed original and other
programming. Programming on Fuse focuses on music-related
programming, including coverage of premier artists, events and
festivals, original content and high profile concerts.
MSG Media also includes our interactive businesses, which are
comprised of a group of highly targeted websites (including
msg.com, thegarden.com, radiocity.com, nyknicks.com,
newyorkrangers.com and fuse.tv) and wireless, video on demand
and digital platforms for all Madison Square Garden properties.
Revenue
Sources
Our MSG Media segment earns revenues from two primary sources:
affiliation fees and advertising. Affiliation fees, which are
the fees we earn from Distributors that carry our programming,
constitute the significant majority of our revenues. Fees paid
by advertisers to show commercials during our programs make up a
smaller portion of our overall revenues.
Affiliation
Fees
We earn affiliation fees from certain Distributors that carry
our programming services, including Cablevision. The fees we
receive depend largely on the demand from subscribers for our
programming. Our affiliation agreements generally require us to
meet certain content criteria, such as minimum thresholds for
professional event telecasts throughout the year. If we were to
be unable to meet these thresholds, we could become subject to
remedies available to the Distributors, which may include
termination of these agreements in some cases. Affiliation fees
from Cablevision accounted for more than 10% of the
Companys combined revenues in 2008 and 2007.
Advertising
Revenues
In addition to affiliation fees, we earn a smaller amount of
revenue through the sale of commercial time to advertisers
during our programming or through the sale of program
sponsorship rights. We typically sell advertising time through
our in-house staff and, to a lesser extent, through agencies.
Expenses
The principal expenses of our MSG Media segment are rights fees,
which we pay to sports teams in order to carry their games and
others who hold rights to the programming content (such as
movies, concerts and other programming) we telecast; production
costs, which include the salaries of on-air personalities,
producers and technicians; and the costs of studio, broadcast
and transmission facilities. We also allocate a portion of our
corporate expenses to the MSG Media segment.
Programming
Acquisition Costs
MSG Networks obtains telecast rights for the sports teams whose
games we televise, the cost of which we accrue evenly over the
applicable contract year. We negotiate directly with the teams
to determine the fee and other provisions of the rights
arrangement. Rights fees for sports programming are influenced
by, among other things, the size and demographics of the
geographic area in which the programming is distributed, and
69
the popularity and/or the on-court or on-ice competitiveness of
a team. For purposes of reporting our segment information the
rights fees we pay to our owned teams are recognized as an
inter-segment charge to our MSG Media segment. These
inter-segment charges are eliminated in the combined financial
statements. In addition to the rights for our Knicks, Rangers
and Liberty franchises, we have long-term rights agreements in
place with the New York Islanders, New Jersey Devils and Buffalo
Sabres.
In addition to rights fees for sports telecasts, we must also
pay to acquire the right to carry other events or programming,
such as movies, concerts or specials.
Production
Costs
We incur costs to pay the salaries of our on-air personalities,
producers, directors, technicians, writers and other creative
and technical staff, as well as expenses associated with
maintaining studios and transmission facilities.
Marketing
and Advertising Costs
We incur costs to market our media business and our programs
through outdoor and newspaper advertisements, television and
radio advertising and online marketing.
Factors
Affecting Operating Results
The financial performance of our MSG Media segment is affected
by the affiliation arrangements we are able to negotiate with
Distributors and also by the advertising rates we can charge
advertisers. These factors in turn depend on the popularity
and/or
on-court and on-ice competitiveness of the professional sports
teams carried on MSG Networks and the attractiveness of the
programming content generally on MSG Networks and Fuse.
Due largely to our long-term rights agreements and the generally
recurring nature of our affiliation arrangements, the MSG
Networks have consistently produced operating profits over a
number of years. Advertising revenues are less predictable and
can vary based upon a number of factors, including general
economic conditions. Our MSG Media segment experienced decreases
in advertising revenues in 2008 and for the nine months ended
September 30, 2009, in each case as compared with the
comparable period in the prior year.
In 2008, Fuse was in transition, implementing a strategy to
rebrand the network and more closely integrate its content with
our MSG Entertainment business and our venues. Fuse has incurred
operating losses and they will likely continue. These losses are
expected to decrease in future periods as we refine our strategy
and incur expenses to acquire and produce compelling content and
market the Fuse brand to effectively position it as a unique
multi-platform music destination.
Our MSG Media segments future performance is also
dependent on general economic conditions, in particular those
affecting the New York metropolitan area, the impact of direct
competition, and the relative strength of our current and future
advertising customers. Continuation of the economic downturn and
the global financial crisis may lead to lower demand for
television advertising. We have already experienced some of
these effects during this economic downturn and any continuation
could adversely affect our future results of operations, cash
flows and financial position.
MSG
Entertainment
Our MSG Entertainment segment, which, net of inter-segment
revenues, represented 30% of our combined revenues for the year
ended December 31, 2008, is one of the countrys
leaders in live entertainment. Our MSG Entertainment segment
creates, produces
and/or
presents a variety of live productions, including the
Radio
City Christmas Spectacular
, featuring the Rockettes, which
is the #1 live holiday family show in America and is seen
by approximately two million people annually, and the
world-renowned Cirque du Soleils
Wintuk
. MSG
Entertainment also presents and hosts other live entertainment
events, such as concerts, including shows by The Police, Eric
Clapton, Jimmy Buffett, Bruce Springsteen, Justin Timberlake,
Madonna and the Jonas Brothers;
70
family shows, such as
Dora the Explorer
,
Thomas the
Tank Engine
and
Sesame Street Live
; special events
such as the premiere of
Sex and the City: The Movie
,
Fashion Rocks, the Tony Awards and appearances by the Dalai
Lama; and theatrical productions, such as
The Wizard of Oz
and
Annie
, in our diverse collection of venues. MSG
Entertainment presents its live entertainment events to
audiences both at our six venues in New York, Chicago and Boston
and, with respect to our touring productions, at other arenas
and theatrical venues.
Revenue
Sources
Our primary sources of revenue in our entertainment business are
ticket sales to our live audiences for events that we promote or
co-promote (Promote) and license fees for our venues
paid by third-party promoters in connection with events that we
do not Promote. We also derive smaller amounts of revenue from
other sources, including from a portion of suite licensing fees
at The Garden and from facility and ticketing fees, concessions,
sponsorships, merchandising and tours of our venues. The levels
of revenue and expense we record in our MSG Entertainment
segment for a given event depends to a significant extent on
whether we are Promoting the event or are licensing our venue to
a third-party promoter.
Ticket
Sales and Suite Licenses
For our productions and for entertainment events in our venues
that we Promote, we recognize revenues from the sale of tickets
to our audiences. We sell tickets to the public through our box
office, on our websites and through ticket agencies. The amount
of revenue we earn from ticket sales depends on the number of
shows and the mix of events that we Promote, the seating
capacity of the venue used, the extent to which we can sell our
seating capacity and our average ticket prices.
The Garden has 89 club suites and ten other premium seating
products that are licensed annually. Suite licenses at The
Garden are generally sold to corporate customers pursuant to
multi-year licenses. Under standard suite licenses, the
licensees pay an annual license fee, which varies depending on
the location of the suite. The license fee includes, for each
seat in the suite, tickets for events at The Garden for which
tickets are sold to the general public, subject to certain
exceptions. In addition, suite holders pay for food and beverage
service in their suite at The Garden. Revenues from the sale of
suite licenses are shared between our MSG Entertainment and MSG
Sports segments.
Venue
License Fees
For entertainment events held at our venues that we do not
produce or Promote, we earn venue license fees from the
third-party promoter of the event. These events include
theatrical productions and other events, such as concerts, award
shows, family shows and trade shows. The amount of license fees
we charge varies by venue and by the complexity of the
production, among other factors. Our fees include both the cost
of renting space in our venues and costs for providing
production services, such as front-of-house and back-of-house
staff, including stagehands, box office staff, ushers and
security staff, staging, lighting and sound, and building
services.
Whether we are Promoting an event or licensing our venues to a
third-party
promoter has a significant impact on the level of revenues and
the costs that we record in our MSG Entertainment segment.
Facility
and Ticketing Fees
For all entertainment events held in our venues, we also earn
additional revenues on substantially all tickets sold, whether
we Promote the event or license the venue to a third party.
These revenues are earned in the form of certain fees and
assessments including the facility fee we charge on each ticket
sold, and varies by venue.
71
Concessions
We sell food and beverages during all entertainment events held
at our venues. In addition to concession-style sales of food and
beverages, which represent the majority of our concession
revenues, we also provide catering for our suites at The Garden.
Merchandise
We earn revenues from the sale of merchandise relating to our
proprietary productions and other live entertainment events that
take place at our venues. The majority of our merchandise
revenues are generated through
on-site
sales during performances of our productions and other live
events. We also generate revenues from the sales of our
Radio
City Christmas Spectacular
merchandise, such as DVDs, CDs,
and books, through traditional retail channels. Typically,
revenues from our merchandise sales at our non-proprietary
events relate to sales of merchandise provided by the artist,
the producer or promoter of the event.
Venue
Signage and Sponsorship
We earn revenues through the sale of signage space at our venues
and sponsorship rights in connection with our productions and
other live entertainment events. Signage sales generally involve
the sale of advertising space within The Garden during
entertainment events and otherwise in our theaters.
Sponsorship rights may require us to use the name, logos and
other trademarks of a sponsor in our advertising and in
promotions for our venues, productions and other live
entertainment events. Sponsorship arrangements may be exclusive
within a particular sponsorship category or non-exclusive and
generally permit a sponsor to use the name, logos and other
trademarks of our productions and events in connection with
their own advertising and in promotions in our venues or in the
community.
Expenses
Our MSG Entertainment segments principal expenses are
payments made to performers and co-promoters, staging costs and
day-of-event costs associated with events, and advertising
costs. We charge a portion of our actual expenses associated
with the ownership, lease, maintenance and operation of our
venues, along with a portion of our corporate expenses to our
MSG Entertainment segment. However, the operating results of our
MSG Entertainment segment benefit from the fact that no rent is
imposed on our MSG Entertainment segment for events that it
presents at our owned venues (The Garden, The Theater at Madison
Square Garden and The Chicago Theatre). We do not allocate to
our segments any of the depreciation and amortization charges
related to The Garden and The Theater at Madison Square Garden.
Performer
Payments
Our productions are performed by talented actors, dancers,
singers and entertainers. In order to attract and retain this
talent, we are required to pay our performers an amount that is
commensurate both with their ability and with demand for their
services from other entertainment companies.
Our productions, including the
Radio City Christmas
Spectacular
, typically feature ensemble casts (such as the
Rockettes), where there is no single headline
performer. As a result, most of our performers are paid based on
a standard scale, pursuant to collective bargaining
agreements we negotiate with the performers unions.
Staging
Costs
Staging costs for our proprietary events as well as others that
we Promote include the costs of sets, lighting, display
technologies, special effects, sound and all of the other
technical aspects involved in presenting a live entertainment
event. These costs vary substantially depending on the nature of
the particular show, but tend to be highest for large-scale
theatrical productions, such as the
Radio City Christmas
Spectacular
. For concerts we Promote, the performer usually
provides a fully-produced show. As with
72
performer salaries, the staging costs associated with a given
production are an important factor in our determination of
ticket prices.
Day-of-event
Costs
For days on which MSG Entertainment stages its productions,
Promotes an event or provides one of our venues to a
third-party
promoter under a license fee arrangement, it is charged the
variable costs associated with such event, including box office
personnel, stagehands, ticket takers, ushers, security, and
other similar expenses. Where we are receiving a license fee
from a third-party promoter, we will typically charge these
variable costs to the promoter.
Marketing
and Advertising Costs
We incur significant costs promoting our productions and other
events through outdoor and newspaper advertisements, television
and radio advertising and online marketing. In light of the
intense competition for entertainment events, especially in the
New York metropolitan area, such expenditures are a necessity to
drive interest in our productions and encourage members of the
public to purchase tickets to our shows.
Touring
Expenses
For productions that we take on the road, such as the
Radio
City Christmas Spectacular
, we must pay the logistical costs
associated with travel and equipment, as well as fees and
expenses, including the costs of venue staff, for the use of
third-party
venues.
Factors
Affecting Operating Results
The operating results of our MSG Entertainment segment are
largely dependent on the continued success of our
Radio City
Christmas Spectacular
as well as our ability to attract
concerts, family shows and other events to our venues. Our MSG
Entertainment segment had recorded operating profits in 2007 and
2006, but it recognized a small operating loss in 2008,
reflecting the economic environment, particularly in the fourth
quarter of the year when our
Radio City Christmas Spectacular
was presented.
The success of the
Radio City Christmas Spectacular
and,
to a lesser extent,
Wintuk
, has allowed us to invest in
the development of the touring versions of the
Radio City
Christmas Spectacular
, which did not contribute to operating
income in 2008. However, we believe this investment will benefit
our future periods operating results.
Our MSG Entertainment segments future performance is
dependent on general economic conditions, and the effect of
these conditions on our customers. Continuation of the economic
downturn and the global financial crisis may lead to lower
demand for suite licenses and tickets to our live productions,
concerts, family shows and other events, which would also
negatively affect merchandise and concession sales, as well as
lower levels of sponsorship and venue signage. These conditions
may also affect the level of concerts, family shows and other
events that take place in the future. We have already
experienced some of these effects during this economic downturn
and any continuation could adversely affect our future results
of operations, cash flows and financial position.
We are pursuing a strategy of opportunistically acquiring,
building or obtaining control of theater venues in additional
major markets. It is likely that any such new venues will not
initially contribute to operating income, but will be expected
to become operationally profitable over time.
We have previously announced our intent to pursue a major
renovation of The Garden. In order to most efficiently and
effectively complete the renovation, it will be a year-round
project. Our goal is to minimize disruption to current
operations and, to achieve this, The Garden will remain open for
live entertainment events during the period coinciding with the
Knicks and Rangers seasons in the years when the
renovation takes place, while we sequence the construction to
ensure that we maximize our construction efforts when we close
the arena during summer months. An important objective for us to
achieve in connection with the renovation will be to manage the
project in a manner that minimizes the impact of the renovation
on our
73
ability to generate revenues from live entertainment events. Our
current expectation is that the renovated lower bowl of The
Garden will be open for the 2011-12 seasons, and that the
renovated upper bowl will be open for the 2012-13 seasons.
MSG
Sports
Our MSG Sports segment, which, net of inter-segment revenues,
represented 29% of our combined revenues for the year ended
December 31, 2008, owns and operates sports franchises,
including the New York Knicks, a founding member of the NBA and
the New York Rangers, one of the original six
franchises of the NHL. MSG Sports also owns and operates the New
York Liberty of the WNBA, one of the leagues founding
franchises, and the Hartford Wolf Pack of the AHL, which is the
primary player development team for the Rangers, and is
competitive in its own right in the AHL. The Knicks, Rangers and
Liberty play their home games at The Garden. Our sports business
also features other sports properties, including the
presentation of a wide variety of premier live sporting events
including professional boxing, college basketball (The Big East
Tournament, Jimmy V Classic, Post-season NIT Finals and, on
occasion, Duke University games), track and field (The Millrose
Games) and tennis (The BNP Paribas Showdown for the Billie Jean
King Cup, which features the women winners of the previous
years Grand Slam tennis events).
Revenue
Sources
We earn revenue in our MSG Sports segment from several primary
sources: ticket sales and a portion of our suite license fees at
The Garden, our share of distributions from league-wide national
and international television contracts and other league-wide
revenue sources, in-venue signage and sponsorships, concessions
and merchandising. We also earn venue license fees, primarily
from the rental of The Garden to third-party promoters holding
their sports events at our arena. The amount of revenue we earn
is influenced by many factors, including the popularity and
on-court or on-ice performance of our professional sports teams
and general economic conditions. Our MSG Sports segment also
earns substantial fees from our MSG Media segment for the right
to telecast the games of our professional sports teams. These
inter-segment revenues are eliminated in our combined financial
statements.
Ticket
Sales, Suite Licenses, Venue Licenses, Facility Fees and
Charges
Ticket sales constitute the largest single source of revenue for
our MSG Sports segment. We sell tickets to our sports
teams home games through season tickets, which are
typically held by long-term season subscribers, and through
single-game tickets, which are purchased by fans either
individually or in multi-game packages. The prices of our
tickets vary, depending on the sports team and the location of
the seats. We review and set the price of our tickets before the
start of each teams season. We also earn revenue from the
sale of tickets to live sporting events that we promote other
than Knicks, Rangers and Liberty games.
The Garden has 89 club suites and ten other premium seating
products that are licensed annually. Suite licenses at The
Garden are generally sold to corporate customers pursuant to
multi-year licenses. Under standard suite licenses, the
licensees pay an annual license fee, which varies depending on
the location of the suite. The license fee includes, for each
seat in the suite, tickets for events at The Garden for which
tickets are sold to the general public, subject to certain
exceptions. In addition, suite holders pay for food and beverage
service in their suite at The Garden. Revenues from the sale of
suite licenses are shared between our MSG Entertainment and MSG
Sports segments.
In addition to Knicks, Rangers and Liberty home games, we also
present at our venues other live sporting events, such as boxing
matches, tennis, college basketball and track and field meets.
When we act as the Promoter of such events, we earn revenues
from ticket sales and incur expenses associated with the event.
When these events are promoted by
third-party
promoters, we earn revenues from the venue license fee we charge
to such promoter for use of our venues. When licensing our
venues, the amount recorded as revenue also includes the
events variable costs such as the costs of front-of-house
and back-of-house staffs, including union laborers, box office
staff, ushers, security and building services, which we pass
along to the Promoter. The mix of live sporting events,
including whether we are the Promoter of an event or license our
venues to a
74
third-party
promoter, has a significant effect on the level of revenues and
event related costs that we report in our MSG Sports segment.
Our MSG Sports segment revenues also include proceeds from
certain fees and assessments added to ticket prices for events
held at our venues, regardless of whether we act as Promoter for
such events. This currently includes a facility fee on tickets
to all events at our facilities, except for team season tickets
and certain other limited exceptions.
Telecast
Rights
We earn revenue from the sale of telecast rights for our sports
teams home and away games and also through the receipt of
our share of fees paid for league-wide telecast rights, which
are awarded under contracts negotiated and administered by each
league.
Telecast rights for the Knicks and Rangers are held by MSG
Networks, pursuant to inter-segment arrangements between our MSG
Sports and MSG Media segments. The financial success of our MSG
Sports segment is largely dependent on the rights fees we
receive from our MSG Media segment in connection with the
telecast of our Knicks and Rangers games. These inter-segment
fees are eliminated in our combined financial statements.
National and international telecast arrangements differ by
league. Fees paid by telecasters under these arrangements are
pooled by each league and then generally shared equally among
all teams.
Venue
Signage and Sponsorships
We earn revenues through the sale of signage space at The Garden
and sponsorship rights in connection with our sports teams and
certain other sporting events. Signage sales generally involve
the sale of advertising space within The Garden during our
teams home games and includes the sale of signage on the
ice and on the boards of the hockey rink during Rangers games,
courtside during Knicks and Liberty games, or on the various
scoreboards and display panels at The Garden. We offer both
television camera-visible and non-camera-visible signage space.
Sponsorship rights generally require us to use the name, logos
and other trademarks of a sponsor in our advertising and in
promotions for our sports teams and during our sports events.
Sponsorship arrangements may be exclusive within a particular
sponsorship category or non-exclusive and generally permit a
sponsor to use the name, logos and other trademarks of our
sports teams in connection with their own advertising and in
promotions on-court, on-ice or in the community.
Concessions
We sell food and beverages during all sporting events held at
our venues. In addition to concession-style sales of food and
beverages, which represent the majority of our concession
revenues, we also provide higher-end dining at our full service
restaurants and catering for suites at The Garden.
Merchandise
We earn revenues from the sale of our sports teams
merchandise both through the in-venue (and in some cases,
on-line) sale of items bearing the logos or other marks of our
sports teams and through our share of league distributions of
royalty and other revenues from the leagues licensing of
team and league trademarks, which revenues are generally shared
equally among the teams in the leagues. By agreement among the
teams, each of the leagues in which we operate acts as agent for
the teams to license their logos and other marks, as well as the
marks of the leagues, subject to certain rights retained by the
teams to license these marks within their arenas and the
geographic areas in which they operate.
75
Expenses
The most significant expenses in our MSG Sports segment are
player and team personnel salaries and charges for transactions
relating to players for career-ending and season-ending injuries
and waivers and termination costs of players and other team
personnel, although we also incur costs for travel, player
insurance, league assessments (including a 6% NBA assessment on
regular season ticket sales), NHL revenue sharing, and NBA
luxury tax. We charge a portion of our actual expenses
associated with the ownership, lease, maintenance and operation
of our venues, along with a portion of our corporate expenses to
our MSG Sports segment. However, the operating results of our
teams and our MSG Sports segment benefit from the fact that no
rent charge is allocated to the teams or to our MSG Sports
segment for games or other sporting events that it presents at
The Garden. We do not allocate to our segments any of the
depreciation and amortization charges of The Garden and The
Theater at Madison Square Garden.
Player
Salaries and League Payments
The amount we pay an individual player is determined by
negotiation between the player (typically represented by an
agent) and us, and is generally influenced by the players
individual playing statistics, by the amounts paid to players
with comparable playing statistics by other sports teams and by
restrictions in the collective bargaining agreements
(CBA), including the salary caps. Each league is
party to a CBA with the respective players association that
contains restrictions on when players may move between league
clubs following expiration of their contracts and what rights
their current and former clubs have. Our most significant player
expenses generally come from signing unrestricted free agents,
because players are generally able to negotiate the highest
salary when they become unrestricted free agents.
The NBA CBA was last negotiated in 2005 and expires in 2011,
with the NBA having a one-year extension option. The NBA CBA
contains a soft salary cap (i.e., a cap on each
teams aggregate salaries but with certain exceptions that
enable teams to pay more, sometimes substantially more than the
cap). The NBA CBA also provides that players receive a
designated percentage of league-wide revenues (generally between
57% and 58% depending on the level of league-wide revenues and
other factors), and the teams retain the remainder. This
provision does not apply on a
team-by-team
basis and accordingly we may pay our players a higher or lower
portion of our revenues than other NBA teams.
Throughout each season, NBA teams withhold a portion of each
players salary and contribute the withheld amounts to an
escrow account. If the leagues aggregate player
compensation exceeds the designated percentage of league-wide
revenues, some or all of such escrowed amounts are distributed
equally to all NBA teams. The NBA CBA also provides for a luxury
tax that is applicable to all teams with aggregate player
salaries exceeding a threshold that is set prior to each season
based upon league-wide revenues (as defined under the CBA). The
luxury tax is generally equal to the amount by which a
teams aggregate player salaries exceed such threshold. The
aggregate luxury tax payments collected by the league are
distributed in equal one-thirtieth shares to non-taxpaying
teams. The NBA also has a revenue assistance program, by which a
pool of revenues (up to a maximum of $49,000 per season) are
collected from a combination of the undistributed luxury tax
discussed above and contributions from teams (a portion of which
is based on revenues) and are then distributed to lower revenue
teams that meet certain operating requirements. We record our
combined luxury tax and revenue assistance expense net of the
amount we expect to receive from the escrow. Our net provision
for these items for the year ended December 31, 2008,
including luxury tax provisions related to team personnel
transactions, was approximately $20,900. Whether or not we will
be a net NBA luxury tax payer for the 2009-10 season will be
dependent on the Knicks rostered salaries subject to the
tax at the end of the season.
The NBA also imposes on each team a 6% assessment on regular
season ticket revenue and an assessment of between 45% and 55%
on playoff ticket revenue, depending on the number of home games
played.
The current NHL CBA was last negotiated in 2005 and expires in
2011, with the players association having a one-year extension
option. The NHL CBA contains a hard salary cap
(i.e., teams may not exceed a stated maximum that is adjusted
each season based upon league-wide revenues). The NHL CBA
provides that players receive a designated percentage of
league-wide revenues (between 54% and 57% depending on the
76
level of league-wide revenues), and the teams retain the
remainder. This provision does not apply on a
team-by-team
basis and accordingly we may pay our players a higher or lower
portion of our revenues than other NHL teams.
Throughout each season, NHL teams withhold a portion of each
players salary and contribute the withheld amounts to an
escrow account. If the leagues aggregate player
compensation exceeds the designated percentage of league-wide
revenues, some or all of the escrowed amounts are retained by
the league and distributed as follows: first, to fund a portion
of the revenue sharing pool as described below, then
disproportionately to certain lower-payroll teams, and then to
all teams in equal shares.
The NHL CBA also provides for a revenue sharing plan that
generally requires the distribution of a pool of approximately
4.5% of league-wide revenues to certain qualifying lower-revenue
teams. This pool is funded from a combination of the escrow
amounts discussed above, league-wide revenues, payments by teams
participating in the playoffs and disproportionate contributions
by the top ten revenue earning teams (based on preseason and
regular season revenues). The Rangers are consistently among the
top ten revenue teams and, accordingly, contribute to this pool
on a disproportionate basis. We record our revenue sharing
expense net of the amount we expect to receive from the escrow.
Our net provision for these items for the year ended
December 31, 2008 was approximately $8,500 (including
$3,800 related to playoffs).
Other
Expenses
Our sports teams also pay expenses associated with
day-to-day
operations, including for travel, equipment maintenance and
selling, general and administrative expenses. Direct variable
day-of-event
costs incurred at The Garden, such as the costs of
front-of-house and back-of-house staff, including union
laborers, box office staff, ushers, security, and event
production are charged to our MSG Sports segment. We charge a
portion of our actual expenses associated with the ownership,
lease, maintenance and operation of our venues, along with a
portion of our corporate expenses to our MSG Sports segment.
However, the operating results of our teams and our MSG Sports
segment benefit from the fact that no rent is imposed on the
teams or to the segment for use of The Garden. We do not
allocate to our segments any of the depreciation and
amortization charges relating to The Garden and The Theater at
Madison Square Garden. Operating costs of the Companys
training facility in Greenburgh, New York and the operating and
maintenance costs of the aircraft that the Company owns are also
charged to our MSG Sports segment. The operation of our Hartford
Wolf Pack is also a net Ranger player development expense for
our MSG Sports segment.
Factors
Affecting Our Operating Results
The operating results of our MSG Sports segment are largely
dependent on the continued popularity
and/or
on-ice or on-court competitiveness of our Knicks and Rangers
teams, which has a direct effect on ticket sales for the
teams home games, which is each teams largest single
source of revenue.
Our MSG Sports segment has incurred substantial operating losses
in each of the last three years and in the nine months ended
September 30, 2009. These losses primarily reflect the
impact of high costs for player salaries (including NBA luxury
tax) and salaries of non-player team personnel. In addition, we
incurred significant charges in each of those years for
career-ending and season-ending injuries of players and for
waivers and terminations of players and other team personnel,
including team executives. Waiver and termination costs reflect
our efforts to improve the competitiveness of our teams. These
transactions can result in significant charges as the Company
recognizes the estimated ultimate costs of these events in the
periods in which they occur, although amounts due are generally
paid over the remaining contract terms. For example, the expense
for these items was approximately $60,200, $6,800, $24,900 and
$23,500 in 2006, 2007, 2008 and for the nine months ended
September 30, 2009, respectively. These expenses add to the
volatility of the results of our MSG Sports segment. We expect
to continue to pursue opportunities to improve the overall
quality of our teams and our efforts may result in continued
significant expenses and charges. Such expenses and charges may
result in future operating losses for our MSG Sports segment
although it is not possible to predict the timing or amount of
such expenses and charges.
77
In addition to our MSG Sports segments future performance
being dependent upon on the continued popularity
and/or
on-ice or on-court competitiveness of our Knicks and Rangers
teams, it is also dependent on general economic conditions, in
particular those in the New York metropolitan area and the
effect of these conditions on our customers. Continuation of the
economic downturn and the global financial crisis may lead to
lower demand for suite licenses and tickets to the games of our
sports teams, which would also negatively affect merchandise and
concession sales, as well as lower levels of sponsorship and
venue signage. These conditions may also affect the number of
other live sporting events that this segment is able to present.
We have already experienced some of these effects during this
economic downturn and any continuation could adversely affect
our future results of operations, cash flows and financial
position.
We have previously announced our intent to pursue a major
renovation of The Garden. In order to most efficiently and
effectively complete the renovation, it will be a year-round
project. Our goal is to minimize disruption to current
operations and, to achieve this, The Garden will remain open
during the Knicks and Rangers seasons in the years
when the renovation takes place, while we sequence the
construction to ensure that we maximize our construction efforts
when we close the arena during summer months. An important
objective for us to achieve in connection with the renovation
will be to manage the project in a manner that does not impair
our ability to generate revenues from Knicks and Rangers home
games. Our current expectation is that the renovated lower bowl
of The Garden will be open for the
2011-12
seasons, and that the renovated upper bowl will be open for the
2012-13
seasons.
The Companys historical results of operations reflected in
our combined financial statements include an allocation for
certain corporate functions historically provided by
Cablevision. These allocations were based on what the Company
and Cablevision considered to be reasonable reflections of the
historical utilization levels of these services required in
support of our business. As a stand-alone company, we will need
to expand our financial, administrative and other staff to
support these new requirements. In addition, we will need to add
staff and systems to replace many of the functions previously
provided by Cablevision. As a result, our corporate operating
costs as a separate company, including those associated with
being a publicly-traded company, are expected to be higher
subsequent to the Distribution.
Impact of
Current Economic Conditions
Our future performance is dependent, to a large extent, on
general economic conditions, including capital market
conditions, the impact of direct competition, our ability to
manage our businesses effectively and our relative strength and
leverage in the marketplace, both with suppliers and customers.
Continuation of the economic downturn and the global financial
crisis may lead to lower demand for suite licenses and tickets
to the games of our sports teams and to our live productions, as
well as lower levels of sponsorship, venue signage and
television advertising. We have already experienced some of
these effects during this economic downturn, including a
reduction in the renewal of certain of our suite licenses and a
lower level of arena event bookings, and any continuation could
adversely affect our future results of operations, cash flows
and financial position.
78
Combined
Results of Operations
The following tables below set forth, for the periods presented,
certain historical financial information and the percentage that
those items bear to revenues, net. All dollar amounts included
in the following combined results of operations are presented in
thousands, except as otherwise noted.
STATEMENT
OF OPERATIONS DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
in Net
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Income
|
|
|
|
(Unaudited)
|
|
|
Revenues, net
|
|
$
|
650,418
|
|
|
|
100
|
%
|
|
$
|
645,400
|
|
|
|
100
|
%
|
|
$
|
5,018
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below)
|
|
|
401,149
|
|
|
|
62
|
|
|
|
418,434
|
|
|
|
65
|
|
|
|
17,285
|
|
Selling, general and administrative
|
|
|
202,245
|
|
|
|
31
|
|
|
|
202,258
|
|
|
|
31
|
|
|
|
13
|
|
Depreciation and amortization
|
|
|
45,973
|
|
|
|
7
|
|
|
|
49,576
|
|
|
|
8
|
|
|
|
3,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
1,051
|
|
|
|
|
|
|
|
(24,868
|
)
|
|
|
(4
|
)
|
|
|
25,919
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
|
|
(931
|
)
|
|
|
|
|
|
|
2,051
|
|
|
|
|
|
|
|
(2,982
|
)
|
Miscellaneous
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
|
2,120
|
|
|
|
|
|
|
|
(22,817
|
)
|
|
|
(4
|
)
|
|
|
24,937
|
|
Income tax benefit
|
|
|
2,141
|
|
|
|
|
|
|
|
6,624
|
|
|
|
1
|
|
|
|
(4,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,261
|
|
|
|
1
|
%
|
|
$
|
(16,193
|
)
|
|
|
(3
|
)%
|
|
$
|
20,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
(Increase)
|
|
|
|
2008
|
|
|
2007
|
|
|
Decrease
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
in Net
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Loss
|
|
|
Revenues, net
|
|
$
|
1,042,958
|
|
|
|
100
|
%
|
|
$
|
1,002,182
|
|
|
|
100
|
%
|
|
$
|
40,776
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below)
|
|
|
724,904
|
|
|
|
70
|
|
|
|
635,108
|
|
|
|
63
|
|
|
|
(89,796
|
)
|
Selling, general and administrative
|
|
|
270,065
|
|
|
|
26
|
|
|
|
243,196
|
|
|
|
24
|
|
|
|
(26,869
|
)
|
Gain on curtailment of pension plans
|
|
|
|
|
|
|
|
|
|
|
(15,873
|
)
|
|
|
2
|
|
|
|
(15,873
|
)
|
Restructuring expense
|
|
|
|
|
|
|
|
|
|
|
221
|
|
|
|
|
|
|
|
221
|
|
Depreciation and amortization
|
|
|
66,231
|
|
|
|
6
|
|
|
|
62,223
|
|
|
|
6
|
|
|
|
(4,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(18,242
|
)
|
|
|
(2
|
)
|
|
|
77,307
|
|
|
|
8
|
|
|
|
(95,549
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
1,919
|
|
|
|
|
|
|
|
11,607
|
|
|
|
1
|
|
|
|
(9,688
|
)
|
Miscellaneous
|
|
|
|
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
|
(16,323
|
)
|
|
|
(2
|
)
|
|
|
87,914
|
|
|
|
9
|
|
|
|
(104,237
|
)
|
Income tax benefit (expense)
|
|
|
11,387
|
|
|
|
1
|
|
|
|
(45,031
|
)
|
|
|
(4
|
)
|
|
|
56,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,936
|
)
|
|
|
|
%
|
|
$
|
42,883
|
|
|
|
4
|
%
|
|
$
|
(47,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
in Net
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Income
|
|
|
Revenues, net
|
|
$
|
1,002,182
|
|
|
|
100
|
%
|
|
$
|
905,196
|
|
|
|
100
|
%
|
|
$
|
96,986
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below)
|
|
|
635,108
|
|
|
|
63
|
|
|
|
637,090
|
|
|
|
70
|
|
|
|
1,982
|
|
Selling, general and administrative
|
|
|
243,196
|
|
|
|
24
|
|
|
|
222,962
|
|
|
|
25
|
|
|
|
(20,234
|
)
|
Gain on curtailment of pension plans
|
|
|
(15,873
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
15,873
|
|
Restructuring expense
|
|
|
221
|
|
|
|
|
|
|
|
143
|
|
|
|
|
|
|
|
(78
|
)
|
Depreciation and amortization
|
|
|
62,223
|
|
|
|
6
|
|
|
|
64,995
|
|
|
|
7
|
|
|
|
2,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
77,307
|
|
|
|
8
|
|
|
|
(19,994
|
)
|
|
|
(2
|
)
|
|
|
97,301
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
11,607
|
|
|
|
1
|
|
|
|
6,212
|
|
|
|
1
|
|
|
|
5,395
|
|
Miscellaneous
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
(250
|
)
|
|
|
|
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
|
87,914
|
|
|
|
9
|
|
|
|
(14,032
|
)
|
|
|
(2
|
)
|
|
|
101,946
|
|
Income tax benefit (expense)
|
|
|
(45,031
|
)
|
|
|
(4
|
)
|
|
|
1,173
|
|
|
|
|
|
|
|
(46,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of a change in accounting
principle
|
|
|
42,883
|
|
|
|
4
|
|
|
|
(12,859
|
)
|
|
|
(1
|
)
|
|
|
55,742
|
|
Cumulative effect of a change in accounting principle, net of
taxes
|
|
|
|
|
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
42,883
|
|
|
|
4
|
%
|
|
$
|
(13,097
|
)
|
|
|
(1
|
)%
|
|
$
|
55,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the following discussion of the combined results of
operations of the Company, the segment financial information,
including the discussion related to individual line items, does
not reflect inter-segment eliminations unless specifically
indicated. See Business Segment Results within the
discussion of each of the comparative financial periods for a
more detailed discussion relating to the operating results of
our segments.
Comparison
of Combined Nine Months Ended September 30, 2009 Versus
Nine Months Ended September 30, 2008
Combined
Results
Revenues, net
for the nine months ended
September 30, 2009 increased $5,018 (1%) as compared to
revenues, net for the same period in 2008. The net increase is
attributable to the following:
|
|
|
|
|
Increase in MSG Media segment revenues, net
|
|
$
|
28,571
|
|
Decrease in MSG Entertainment segment revenues, net
|
|
|
(20,698
|
)
|
Decrease in MSG Sports segment revenues, net
|
|
|
(742
|
)
|
Inter-segment eliminations
|
|
|
(2,113
|
)
|
|
|
|
|
|
|
|
$
|
5,018
|
|
|
|
|
|
|
Technical and operating expenses (excluding depreciation and
amortization)
include primarily:
|
|
|
|
|
contractual compensation expense pursuant to employment
agreements with the personnel of our professional sports teams;
|
|
|
|
cost of team personnel transactions for career- and
season-ending player injuries, net of anticipated insurance
recoveries, and waivers and termination costs of players and
other team personnel;
|
80
|
|
|
|
|
payments we make to obtain the contractual rights to carry
certain live sporting events on our networks;
|
|
|
|
other programming and production costs of our networks;
|
|
|
|
event costs related to the presentation and production of our
entertainment and live sporting events;
|
|
|
|
venue lease, maintenance and operating expenses; and
|
|
|
|
the cost of food and beverage and merchandise sold.
|
Technical and operating expenses
(excluding depreciation
and amortization) for the nine months ended September 30,
2009 decreased $17,285 (4%) as compared to the same period in
2008. The net decrease is attributable to the following:
|
|
|
|
|
Decrease in MSG Media segment expenses
|
|
$
|
(8,909
|
)
|
Increase in MSG Entertainment segment expenses
|
|
|
1,031
|
|
Decrease in MSG Sports segment expenses
|
|
|
(7,304
|
)
|
Increase in other expenses
|
|
|
3
|
|
Inter-segment eliminations
|
|
|
(2,106
|
)
|
|
|
|
|
|
|
|
$
|
(17,285
|
)
|
|
|
|
|
|
As a percentage of revenues, net, technical and operating
expenses decreased 3% for the nine months ended
September 30, 2009 as compared to the same period in 2008.
Selling, general and administrative expenses
primarily
consist of administrative costs, including compensation,
severance and professional fees, and sales, marketing and
non-event related advertising expenses. Selling, general and
administrative expenses for the nine months ended
September 30, 2009 decreased $13 (-%) as compared to the
same period in 2008. The net decrease is attributable to the
following:
|
|
|
|
|
Increase in MSG Media segment expenses
|
|
$
|
617
|
|
Increase in MSG Entertainment segment expenses
|
|
|
5,152
|
|
Increase in MSG Sports segment expenses
|
|
|
17,677
|
|
Decrease in litigation expense not allocated to segments
|
|
|
(22,833
|
)
|
Decrease in other expenses
|
|
|
(626
|
)
|
|
|
|
|
|
|
|
$
|
(13
|
)
|
|
|
|
|
|
As a percentage of revenues, net, selling, general and
administrative expenses remained flat for the nine months ended
September 30, 2009 as compared to the same period in 2008.
Depreciation and amortization
for the nine months ended
September 30, 2009 decreased $3,603 (7%) as compared to the
same period in 2008 resulting primarily from lower amortization
of intangible assets mainly due to certain intangible assets
becoming fully amortized.
Interest income (expense), net
for the nine months ended
September 30, 2009 decreased $2,982 (145%) as compared to
2008. The net decrease reflects lower interest income of $2,143
and was primarily attributable to lower levels of invested cash,
reflecting in part our use of cash to make a non-interest
bearing advance in the amount of $60,000 to a subsidiary of
Cablevision in 2008 and due to lower interest rates. As of
September 30, 2009, the total amount of advances
outstanding to a subsidiary of Cablevision was $190,000.
Income
taxes
The Company operated as a partnership during the periods
presented. However, the income tax expense or benefit and
deferred tax liability presented are determined as if Madison
Square Garden, Inc. had owned all of the partnership interests
in MSG L.P. for all periods presented notwithstanding that
the contribution of such interests in MSG L.P. had not yet
occurred. The Companys provision for income taxes is based
on current period income and changes in deferred tax assets and
liabilities.
81
Income tax benefit for the nine months ended September 30,
2009 and 2008 of $2,141 and $6,624, respectively, differs from
the income tax benefit derived from applying the federal
statutory rate to the pretax income or loss due principally to
state income taxes, tax benefit of $3,229 recorded in the third
quarter of 2009 resulting from a change in the rate used to
measure deferred taxes, tax benefit resulting from nontaxable
disability insurance proceeds of $741 in the 2009 period, tax
expense of $594 resulting from nondeductible disability
insurance premiums in the 2008 period and tax expense resulting
from nondeductible expenses of $1,312 and $1,728 for the nine
months ended September 30, 2009 and 2008, respectively.
Upon completion of the Distribution, certain adjustments to the
deferred tax liability will be recorded as an adjustment to
equity. These adjustments primarily relate to: (i) the
difference in the deferred tax asset for tax net operating loss
carry forwards based upon the separate return method as compared
to the amount determined under applicable federal tax law and
(ii) a difference resulting from using an estimated
applicable corporate tax rate to measure deferred tax assets and
liabilities based on the state income tax apportionment factors
of the Company as compared to the historical estimated
applicable corporate tax rates used by Cablevision. The Company
will have an insignificant amount of tax net operating loss
carry forwards immediately subsequent to the Distribution.
Business
Segment Results
MSG
Media
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net, for the Companys MSG Media
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease) in
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
Operating
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Income
|
|
|
Revenues, net
|
|
$
|
345,638
|
|
|
|
100
|
%
|
|
$
|
317,067
|
|
|
|
100
|
%
|
|
$
|
28,571
|
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
156,652
|
|
|
|
45
|
|
|
|
165,561
|
|
|
|
52
|
|
|
|
8,909
|
|
Selling, general and administrative expenses
|
|
|
67,263
|
|
|
|
19
|
|
|
|
66,646
|
|
|
|
21
|
|
|
|
(617
|
)
|
Depreciation and amortization
|
|
|
15,158
|
|
|
|
4
|
|
|
|
16,792
|
|
|
|
5
|
|
|
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
106,565
|
|
|
|
31
|
%
|
|
$
|
68,068
|
|
|
|
21
|
%
|
|
$
|
38,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of operating income to
adjusted operating cash flow (AOCF):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating income
|
|
$
|
106,565
|
|
|
$
|
68,068
|
|
|
$
|
38,497
|
|
Share-based compensation
|
|
|
4,394
|
|
|
|
3,484
|
|
|
|
910
|
|
Depreciation and amortization
|
|
|
15,158
|
|
|
|
16,792
|
|
|
|
(1,634
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
126,117
|
|
|
$
|
88,344
|
|
|
$
|
37,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
Revenues, net
for the nine months ended
September 30, 2009 increased $28,571 (9%) as compared to
revenues, net for the same period in 2008. The net increase is
attributable to the following:
|
|
|
|
|
Increase in affiliation fee revenue, primarily at MSG Networks
(see discussion below)
|
|
$
|
29,469
|
|
Decrease in advertising revenue (see discussion below)
|
|
|
(1,875
|
)
|
Other net increases
|
|
|
977
|
|
|
|
|
|
|
|
|
$
|
28,571
|
|
|
|
|
|
|
The increase in affiliation fee revenue discussed above was
primarily attributable to increases in contractual affiliation
rates and higher subscriber counts. Most of MSG Medias
affiliation agreements provide for rate increases effective
January 1 of each year. These increases are expected to result
in similar affiliation fee revenue increases during the
remainder of 2009 compared to the same period in 2008.
Effective January 1, 2010, a new long-term affiliation
agreement was entered into between Cablevision and the MSG
Networks. This new long-term affiliation agreement will result
in estimated incremental revenues provided to MSG Media of
approximately $30,000 for 2010, as compared to the amount
expected to be recognized by the Company pursuant to the
Companys arrangement with Cablevision for 2009, and other
additional consideration.
The decrease in advertising revenue discussed above reflects
lower advertising revenues at MSG Networks due primarily to
lower per game advertising revenues for the sports teams which
were partially offset by higher advertising revenues at Fuse due
primarily to higher ratings.
Technical and operating expenses (excluding depreciation and
amortization)
for the nine months ended September 30,
2009 decreased $8,909 (5%) as compared to the same period in
2008. The net decrease is attributable to the following:
|
|
|
|
|
Increase in rights fees
|
|
$
|
2,985
|
|
Decrease due to lower levels of other production costs
|
|
|
(11,894
|
)
|
|
|
|
|
|
|
|
$
|
(8,909
|
)
|
|
|
|
|
|
We currently anticipate that network production costs will also
be lower for the full year 2009 as compared to 2008.
As a percentage of revenues, net, technical and operating
expenses decreased 7% during the nine months ended
September 30, 2009 as compared to the same period in 2008.
Selling, general and administrative expenses
for the nine
months ended September 30, 2009 increased $617 (1%) as
compared to the same period in 2008. The net increase is
attributable to the following:
|
|
|
|
|
Increase due to higher employee salaries and related benefits
|
|
$
|
8,086
|
|
Decrease due to lower marketing costs, primarily at Fuse (see
discussion below)
|
|
|
(6,861
|
)
|
Other net decreases
|
|
|
(608
|
)
|
|
|
|
|
|
|
|
$
|
617
|
|
|
|
|
|
|
Marketing costs at Fuse for the nine months ended
September 30, 2009 were lower as compared to the same
period in 2008, which reflected marketing initiatives taken in
2008 to rebrand Fuse as a national network primarily dedicated
to music, along with providing marketing support for Fuses
2008 programming initiatives.
As a percentage of revenues, net, selling, general and
administrative expenses decreased 2% during the nine months
ended September 30, 2009 as compared to the same period in
2008.
Depreciation and amortization
for the nine months ended
September 30, 2009 decreased $1,634 (10%) as compared to
the same period in 2008 resulting primarily from lower
amortization of intangible assets of $2,402 for the nine months
ended September 30, 2009 compared to the same period in
2008 due to certain intangible assets becoming fully amortized.
83
Adjusted operating cash flow
increased $37,773 (43%) in
the nine months ended September 30, 2009 as compared to the
same period in 2008. The increase, as discussed above, was due
primarily to an increase in affiliation fee revenue and a net
decrease in operating costs.
MSG
Entertainment
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net for the Companys MSG
Entertainment segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Increase in
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
Operating
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Loss
|
|
|
Revenues, net
|
|
$
|
109,589
|
|
|
|
100%
|
|
|
$
|
130,287
|
|
|
|
100%
|
|
|
$
|
(20,698
|
)
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
107,853
|
|
|
|
98
|
|
|
|
106,822
|
|
|
|
82
|
|
|
|
(1,031
|
)
|
Selling, general and administrative expenses
|
|
|
46,625
|
|
|
|
43
|
|
|
|
41,473
|
|
|
|
32
|
|
|
|
(5,152
|
)
|
Depreciation and amortization
|
|
|
7,623
|
|
|
|
7
|
|
|
|
7,093
|
|
|
|
5
|
|
|
|
(530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(52,512
|
)
|
|
|
(48
|
)%
|
|
$
|
(25,101
|
)
|
|
|
(19
|
)%
|
|
$
|
(27,411
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of operating loss to adjusted
operating cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating loss
|
|
$
|
(52,512
|
)
|
|
$
|
(25,101
|
)
|
|
$
|
(27,411
|
)
|
Share-based compensation
|
|
|
4,073
|
|
|
|
3,062
|
|
|
|
1,011
|
|
Depreciation and amortization
|
|
|
7,623
|
|
|
|
7,093
|
|
|
|
530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
(40,816
|
)
|
|
$
|
(14,946
|
)
|
|
$
|
(25,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
for the nine months ended
September 30, 2009 decreased $20,698 (16%) as compared to
revenues, net for the same period in 2008. The net decrease is
attributable to the following:
|
|
|
|
|
Decrease in revenues at the Madison Square Garden arena
(The Garden)
|
|
$
|
(25,933
|
)
|
Decrease in revenues from the winter themed production,
Wintuk,
due primarily to fewer shows in January 2009 than
in January 2008
|
|
|
(1,698
|
)
|
Increase in revenues at the Beacon Theatre which was shut down
the last five months of 2008 for its restoration
|
|
|
8,150
|
|
Increase in revenues from the presentation of the
Radio City
Christmas Spectacular
(see discussion below)
|
|
|
2,085
|
|
Other net decreases
|
|
|
(3,302
|
)
|
|
|
|
|
|
|
|
$
|
(20,698
|
)
|
|
|
|
|
|
For the nine months ended September 30, 2009, revenues at
The Garden have decreased as compared to the same period in 2008
primarily due to a lower level of event bookings reflecting the
current economic environment. MSG Entertainment is dependent on
the number of events presented in our venues by the Company and
by third parties.
The increase in revenues from the presentation of the
Radio
City Christmas Spectacular
discussed above primarily
reflects revenues from performances in January 2009 of a new
arena-sized
Radio City Christmas Spectacular
touring show
which was launched during the 2008 holiday season (including
January 2009).
84
Technical and operating expenses (excluding depreciation and
amortization)
for the nine months ended September 30,
2009 increased $1,031 (1%) as compared to the same period in
2008. The net increase is attributable to the following:
|
|
|
|
|
Increase in event expenses for the Beacon Theatre which was shut
down the last five months of 2008 for its restoration
|
|
$
|
5,433
|
|
Increase in venue operating costs including the impact of a new
venue booking agreement for the Wang Theatre
|
|
|
5,428
|
|
Net increase in expenses from the presentation of the
Radio
City Christmas Spectacular
discussed above
|
|
|
1,728
|
|
Net decrease in event expenses for The Garden
|
|
|
(13,849
|
)
|
Decrease in show costs related to the winter themed production,
Wintuk
|
|
|
(995
|
)
|
Other net increases
|
|
|
3,286
|
|
|
|
|
|
|
|
|
$
|
1,031
|
|
|
|
|
|
|
As a percentage of revenues, net, technical and operating
expenses increased 16% during the nine months ended
September 30, 2009 as compared to the same period in 2008.
Selling, general and administrative expenses
for the nine
months ended September 30, 2009 increased $5,152 (12%) as
compared to the same period in 2008. The net increase is
attributable to the following:
|
|
|
|
|
Increase in employee salaries and related benefits
|
|
$
|
4,768
|
|
Other net increases
|
|
|
384
|
|
|
|
|
|
|
|
|
$
|
5,152
|
|
|
|
|
|
|
As a percentage of revenues, net, selling, general and
administrative expenses increased 11% during the nine months
ended September 30, 2009 as compared to the same period in
2008.
Adjusted operating cash flow
decreased $25,870 (173%) in
the nine months ended September 30, 2009 as compared to the
same period in 2008. The decrease, as discussed above, was due
primarily to lower revenues from live entertainment events,
other than the
Radio City Christmas Spectacular
and
events at the Beacon Theatre, and a net increase in operating
costs.
MSG
Sports
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net for the Companys MSG Sports
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
(Increase)
|
|
|
|
2009
|
|
|
2008
|
|
|
Decrease in
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
Operating
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Loss
|
|
|
Revenues, net
|
|
$
|
244,927
|
|
|
|
100
|
%
|
|
$
|
245,669
|
|
|
|
100
|
%
|
|
$
|
(742
|
)
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
186,035
|
|
|
|
76
|
|
|
|
193,339
|
|
|
|
79
|
|
|
|
7,304
|
|
Selling, general and administrative expenses
|
|
|
82,900
|
|
|
|
34
|
|
|
|
65,223
|
|
|
|
27
|
|
|
|
(17,677
|
)
|
Depreciation and amortization
|
|
|
8,306
|
|
|
|
3
|
|
|
|
8,139
|
|
|
|
3
|
|
|
|
(167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(32,314
|
)
|
|
|
(13
|
)%
|
|
$
|
(21,032
|
)
|
|
|
(9
|
)%
|
|
$
|
(11,282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
The following is a reconciliation of operating loss to adjusted
operating cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating loss
|
|
$
|
(32,314
|
)
|
|
$
|
(21,032
|
)
|
|
$
|
(11,282
|
)
|
Share-based compensation
|
|
|
2,251
|
|
|
|
4,010
|
|
|
|
(1,759
|
)
|
Depreciation and amortization
|
|
|
8,306
|
|
|
|
8,139
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
(21,757
|
)
|
|
$
|
(8,883
|
)
|
|
$
|
(12,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
for the nine months ended
September 30, 2009 decreased $742 (-%) as compared to
revenues, net for the same period in 2008. The net decrease is
attributable to the following:
|
|
|
|
|
Decrease in sports team playoff related revenues
|
|
$
|
(3,859
|
)
|
Decrease in revenues from other live sporting events (see
discussion below)
|
|
|
(3,103
|
)
|
Increase in sports team regular season ticket related revenue
due primarily to higher average ticket prices
|
|
|
3,226
|
|
Increase in rights fees charged to MSG Media
|
|
|
2,107
|
|
Increase in NBA and NHL distributions
|
|
|
1,969
|
|
Other net decreases
|
|
|
(1,082
|
)
|
|
|
|
|
|
|
|
$
|
(742
|
)
|
|
|
|
|
|
The decrease in revenues from other live sporting events
discussed above was primarily due to lower boxing ticket sales
mostly attributable to the absence of a large scale boxing event
such as one Promoted in 2008.
Technical and operating expenses (excluding depreciation and
amortization)
for the nine months ended September 30,
2009 decreased $7,304 (4%) as compared to the same period in
2008. The net decrease is attributable to the following:
|
|
|
|
|
Decrease in expenses associated with other live sporting events
(see discussion below)
|
|
$
|
(7,015
|
)
|
Decrease due to lower net provision for NBA luxury tax
(excluding the impact of certain team personnel transactions
described below) of $3,016 and lower net provision for NHL
revenue sharing (excluding playoffs) of $3,277 (see discussion
below)
|
|
|
(6,293
|
)
|
Decrease in net provisions for certain team personnel
transactions (including the impact of NBA luxury tax) (see
discussion below)
|
|
|
(1,207
|
)
|
Decrease in sports team playoff related expenses, including
playoff related NHL revenue sharing
|
|
|
(1,438
|
)
|
Increase in team personnel compensation, net of insurance
recovery (see discussion below)
|
|
|
5,371
|
|
Increase in venue operating costs
|
|
|
1,336
|
|
Other net increases
|
|
|
1,942
|
|
|
|
|
|
|
|
|
$
|
(7,304
|
)
|
|
|
|
|
|
The lower expenses associated with other live sporting events
primarily reflects the absence of costs associated with a large
scale boxing event such as one Promoted in 2008.
86
Net provisions for NBA luxury tax (excluding the impact of
certain team personnel transactions), NHL revenue sharing
(excluding playoffs) and certain team personnel transactions
(including the impact of NBA luxury tax) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Amount
|
|
|
Amount
|
|
|
Decreases
|
|
|
Net provisions for NBA luxury tax (excluding the impact of
certain team personnel transactions described below) and NHL
revenue sharing (excluding playoffs)
|
|
$
|
3,076
|
|
|
$
|
9,369
|
|
|
$
|
(6,293
|
)
|
Net provisions for certain team personnel transactions,
including the impact of NBA luxury tax
|
|
|
7,969
|
|
|
|
9,176
|
|
|
|
(1,207
|
)
|
The change in the net provisions for NBA luxury tax (excluding
the impact of certain team personnel transactions described
below) and NHL revenue sharing (excluding playoffs) for the nine
months ended September 30, 2009 as compared to the same
period in 2008, as reflected in the table above, reflects a
lower net provision for NBA luxury tax, based primarily on the
Knicks season-ending team salaries subject to the tax and
a lower net provision for NHL revenue sharing expense, based
primarily on the Rangers and league-wide season-ending
revenues. See MSG Sports
Expenses Player Salaries and League Payments.
Team personnel transactions discussed above for the nine months
ended September 30, 2009 primarily reflect provisions
recorded for player waivers and the costs associated with a
player trade of $5,109 and $3,286, respectively. Team personnel
transactions for the nine months ended September 30, 2008
primarily reflect provisions recorded for
season-ending
player injuries of $5,667, which is net of anticipated insurance
recoveries of $2,314, and a player waiver of $2,760. The cost of
these transactions are recorded when the transaction occurs, but
payments owed are generally paid over the remaining contract
terms.
The increase in team personnel compensation during the nine
months ended September 30, 2009, as compared to the same
period in 2008, is net of $4,838 in insurance recoveries related
to a non
season-ending
player injury in 2009.
As a percentage of revenues, net, technical and operating
expenses decreased 3% during the nine months ended
September 30, 2009 as compared to the same period in 2008.
Selling, general and administrative expenses
for the nine
months ended September 30, 2009 increased $17,677 (27%) as
compared to the same period in 2008. The net increase is
attributable to the following:
|
|
|
|
|
Increase in severance, employee salaries and related benefits
(see discussion below)
|
|
$
|
18,671
|
|
Other net decreases
|
|
|
(994
|
)
|
|
|
|
|
|
|
|
$
|
17,677
|
|
|
|
|
|
|
Higher severance, employee salaries and related benefits in the
nine months ended September 30, 2009 as compared to the
same period in 2008 primarily reflects higher severance costs
attributable to a separation agreement with a team executive
entered into in 2009.
As a percentage of revenues, net, selling, general and
administrative expenses increased 7% during the nine months
ended September 30, 2009 as compared to the same period in
2008.
Adjusted operating cash flow
decreased $12,874 (145%) in
the nine months ended September 30, 2009 as compared to the
same period in 2008. The decrease was due primarily to the
higher severance costs discussed above.
87
Comparison
of Combined Year Ended December 31, 2008 Versus Year Ended
December 31, 2007
Combined
Results
Revenues, net
for the year ended December 31, 2008
increased $40,776 (4%) as compared to revenues, net for the
prior year. The net increase is attributable to the following:
|
|
|
|
|
Increase in MSG Media segment revenues, net
|
|
$
|
38,482
|
|
Decrease in MSG Entertainment segment revenues, net
|
|
|
(8,476
|
)
|
Increase in MSG Sports segment revenues, net
|
|
|
13,535
|
|
Inter-segment eliminations
|
|
|
(2,765
|
)
|
|
|
|
|
|
|
|
$
|
40,776
|
|
|
|
|
|
|
Technical and operating expenses (excluding depreciation and
amortization)
for the year ended December 31, 2008
increased $89,796 (14%) as compared to 2007. The net increase is
attributable to the following:
|
|
|
|
|
Increase in MSG Media segment expenses
|
|
$
|
26,634
|
|
Increase in MSG Entertainment segment expenses
|
|
|
22,515
|
|
Increase in MSG Sports segment expenses
|
|
|
43,156
|
|
Increase in other expenses
|
|
|
247
|
|
Inter-segment eliminations
|
|
|
(2,756
|
)
|
|
|
|
|
|
|
|
$
|
89,796
|
|
|
|
|
|
|
As a percentage of revenues, net, technical and operating
expenses increased 7% in 2008 as compared to 2007.
Selling, general and administrative expenses
for the year
ended December 31, 2008 increased $26,869 (11%) as compared
to 2007. The net increase is attributable to the following:
|
|
|
|
|
Increase in MSG Media segment expenses
|
|
$
|
7,774
|
|
Increase in MSG Entertainment segment expenses
|
|
|
8,788
|
|
Increase in MSG Sports segment expenses
|
|
|
8,904
|
|
Increase in litigation expense and settlements not allocated to
segments
|
|
|
7,911
|
|
Decrease in other expenses
|
|
|
(6,508
|
)
|
|
|
|
|
|
|
|
$
|
26,869
|
|
|
|
|
|
|
The decrease in other expenses discussed above primarily
reflects lower other professional fees.
As a percentage of revenues, net, selling, general and
administrative expenses increased 2% in 2008 as compared to 2007.
Gain on curtailment of pension plans
for the year ended
December 31, 2007 amounted to $15,873. As of
December 31, 2007, a Company-sponsored qualified defined
benefit pension plan covering certain non-union employees and a
Company-sponsored, non-qualified unfunded defined benefit
pension plan covering certain employees who participate in the
underlying qualified plan were amended to freeze all benefits
earned through December 31, 2007 and eliminate the ability
of participants to earn benefits for future service under these
plans.
Depreciation and amortization
for the year ended
December 31, 2008 increased $4,008 (6%) as compared to
2007. The net increase resulted from higher depreciation of
$5,137, which was primarily attributable to the acceleration of
depreciation of certain components of The Garden due to its
planned renovation, offset by lower amortization of intangible
assets of $1,129 due primarily to certain intangible assets
becoming fully amortized.
88
Interest income, net
for the year ended December 31,
2008 decreased $9,688 (83%) as compared to 2007. The net
decrease was primarily attributable to lower levels of interest
income caused primarily by our use of cash to make non-interest
bearing advances to a subsidiary of Cablevision of $130,000 in
2007 and an additional $60,000 in 2008.
Income tax benefit
for the year ended December 31, 2008
of $11,387 differs from the income tax benefit derived from
applying the federal statutory tax rate to the pretax loss due
principally to state income taxes, tax benefit of $1,555
resulting from nontaxable disability insurance proceeds offset
by tax expense of $2,464 relating to nondeductible expenses, and
tax benefit of $5,769 resulting from a change in the estimated
applicable corporate tax rate used to measure deferred tax
assets and liabilities.
Income tax expense
for the year ended December 31, 2007
of $45,031 differs from the income tax expense derived from
applying the federal statutory tax rate to pretax income due
principally to state income taxes, tax expense of $2,362
resulting from nondeductible disability insurance premiums, tax
expense of $1,212 relating to nondeductible expenses, and tax
expense of $4,385 resulting from a change in the estimated
applicable corporate tax rate used to measure deferred tax
assets and liabilities.
Business
Segment Results
MSG
Media
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net for the Companys MSG Media
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Increase
|
|
|
|
2008
|
|
|
2007
|
|
|
(Decrease) in
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
Operating
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Income
|
|
|
Revenues, net
|
|
$
|
430,004
|
|
|
|
100
|
%
|
|
$
|
391,522
|
|
|
|
100
|
%
|
|
$
|
38,482
|
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
227,746
|
|
|
|
53
|
|
|
|
201,112
|
|
|
|
51
|
|
|
|
(26,634
|
)
|
Selling, general and administrative expenses
|
|
|
94,343
|
|
|
|
22
|
|
|
|
86,569
|
|
|
|
22
|
|
|
|
(7,774
|
)
|
Restructuring expense
|
|
|
|
|
|
|
|
|
|
|
221
|
|
|
|
|
|
|
|
221
|
|
Depreciation and amortization
|
|
|
22,451
|
|
|
|
5
|
|
|
|
21,067
|
|
|
|
5
|
|
|
|
(1,384
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
85,464
|
|
|
|
20
|
%
|
|
$
|
82,553
|
|
|
|
21
|
%
|
|
$
|
2,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of operating income to
adjusted operating cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Increase
|
|
|
|
2008
|
|
|
2007
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating income
|
|
$
|
85,464
|
|
|
$
|
82,553
|
|
|
$
|
2,911
|
|
Share-based compensation
|
|
|
4,202
|
|
|
|
4,567
|
|
|
|
(365
|
)
|
Restructuring expense
|
|
|
|
|
|
|
221
|
|
|
|
(221
|
)
|
Depreciation and amortization
|
|
|
22,451
|
|
|
|
21,067
|
|
|
|
1,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
112,117
|
|
|
$
|
108,408
|
|
|
$
|
3,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
Revenues, net
for the year ended December 31, 2008
increased $38,482 (10%) as compared to revenues, net for the
prior year. The net increase is attributable to the following:
|
|
|
|
|
Increase in affiliation fee revenue (see discussion below)
|
|
$
|
43,667
|
|
Decrease in advertising revenue (see discussion below)
|
|
|
(7,471
|
)
|
Other net increases
|
|
|
2,286
|
|
|
|
|
|
|
|
|
$
|
38,482
|
|
|
|
|
|
|
The increase in affiliation fee revenue was primarily
attributable to increases in contractual affiliation rates and
higher subscriber counts. Most of MSG Medias affiliation
agreements provide for rate increases effective January 1 of
each year.
Advertising revenues at MSG Networks were lower in 2008 as
compared to 2007 due primarily to lower per game advertising
revenues in the fourth quarter of 2008 for the sports teams.
This variance reflected the periods economic environment.
Advertising revenues at Fuse in 2008 as compared to 2007 were
also lower primarily as a result of lower program ratings.
Technical and operating expenses (excluding depreciation and
amortization)
for the year ended December 31, 2008
increased $26,634 (13%) as compared to the prior year. The net
increase is attributable to the following:
|
|
|
|
|
Increase in level of MSG Media rights fee expense due primarily
to MSG Networks annual sports rights increases
|
|
$
|
10,901
|
|
Increase in levels of other production costs due primarily to
Fuse (see discussion below)
|
|
|
15,733
|
|
|
|
|
|
|
|
|
$
|
26,634
|
|
|
|
|
|
|
Fuses programming and other production costs in 2008 were
higher than 2007 as a result of initiatives taken to develop
programming in support of our effort to reposition the network
as a national multi-platform music network.
As a percentage of revenues, net, technical and operating
expenses increased 2% during the year ended December 31,
2008 as compared to the prior year.
Selling, general and administrative expenses
for the year
ended December 31, 2008 increased $7,774 (9%) as compared
to the prior year. The net increase is attributable to the
following:
|
|
|
|
|
Increase in marketing costs, primarily at Fuse (see discussion
below)
|
|
$
|
10,960
|
|
Other net decreases, primarily lower rent
|
|
|
(3,186
|
)
|
|
|
|
|
|
|
|
$
|
7,774
|
|
|
|
|
|
|
Marketing costs at Fuse in 2008 were higher than 2007 reflecting
marketing initiatives taken to rebrand Fuse as a network
primarily dedicated to music, as well as marketing support for
the programming initiatives set forth above.
As a percentage of revenues, net, selling, general and
administrative expenses remained flat during the year ended
December 31, 2008 as compared to the prior year.
Depreciation and amortization
for the year ended
December 31, 2008 increased $1,384 (7%) as compared to the
prior year resulting primarily from higher depreciation expense
of $1,401 primarily due to fixed asset additions.
Adjusted operating cash flow
increased $3,709 (3%) for
the year ended December 31, 2008 as compared to 2007. The
increase, as discussed above, was due primarily to an increase
in affiliation fee revenue, substantially offset by higher
operating costs.
90
MSG
Entertainment
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net for the Companys MSG
Entertainment segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Increase in
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
Operating
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Loss
|
|
|
Revenues, net
|
|
$
|
307,816
|
|
|
|
100
|
%
|
|
$
|
316,292
|
|
|
|
100
|
%
|
|
$
|
(8,476
|
)
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
243,933
|
|
|
|
79
|
|
|
|
221,418
|
|
|
|
70
|
|
|
|
(22,515
|
)
|
Selling, general and administrative expenses
|
|
|
56,939
|
|
|
|
18
|
|
|
|
48,151
|
|
|
|
15
|
|
|
|
(8,788
|
)
|
Depreciation and amortization
|
|
|
9,407
|
|
|
|
3
|
|
|
|
8,718
|
|
|
|
3
|
|
|
|
(689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
(2,463
|
)
|
|
|
(1
|
)%
|
|
$
|
38,005
|
|
|
|
12
|
%
|
|
$
|
(40,468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of operating income (loss) to
adjusted operating cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Increase
|
|
|
|
2008
|
|
|
2007
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating income (loss)
|
|
$
|
(2,463
|
)
|
|
$
|
38,005
|
|
|
$
|
(40,468
|
)
|
Share-based compensation
|
|
|
3,692
|
|
|
|
3,094
|
|
|
|
598
|
|
Depreciation and amortization
|
|
|
9,407
|
|
|
|
8,718
|
|
|
|
689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
10,636
|
|
|
$
|
49,817
|
|
|
$
|
(39,181
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
for the year ended December 31, 2008
decreased $8,476 (3%) as compared to revenues, net for the prior
year. The net decrease is attributable to the following:
|
|
|
|
|
Decrease in revenues from the presentation of the
Radio City
Christmas Spectacular
(see discussion below)
|
|
$
|
(8,023
|
)
|
Net decrease in revenues for the Beacon Theatre, primarily due
to a five month shutdown in 2008 for its restoration
|
|
|
(7,805
|
)
|
Decrease in revenues from the winter themed production,
Wintuk
, due primarily to lower attendance
|
|
|
(7,414
|
)
|
Increase due to impact of new venues, primarily The Chicago
Theatre acquired in the fourth quarter of 2007
|
|
|
8,126
|
|
Net increase in revenues from the presentation of other live
entertainment events (see discussion below)
|
|
|
3,494
|
|
Other net increases
|
|
|
3,146
|
|
|
|
|
|
|
|
|
$
|
(8,476
|
)
|
|
|
|
|
|
Net lower revenues from the presentation of the
Radio City
Christmas Spectacular
discussed above reflect lower revenues
at the shows presentation at Radio City Music Hall, due
primarily to lower attendance. This reduction was offset in part
by a net increase in revenues from the shows touring
productions. The increase in revenues from the shows
touring productions was due to the impact of the launch of a new
arena-sized touring show for the 2008 holiday season offset in
part by lower revenue for the touring shows theater
presentations which was primarily the result of fewer scheduled
performances and lower attendance.
The net higher revenues from the presentation of other live
entertainment events discussed above were primarily due to
additional entertainment events and the change in the mix of
events.
91
Technical and operating expenses (excluding depreciation and
amortization)
for the year ended December 31, 2008
increased $22,515 (10%) as compared to the prior year. The net
increase is attributable to the following:
|
|
|
|
|
Net increase in expenses from the presentation of the
Radio
City Christmas Spectacular
(see discussion below)
|
|
$
|
16,258
|
|
Increase in venue operating costs including the impact of a new
venue booking agreement for the Wang Theatre
|
|
|
4,623
|
|
Increase in expenses for entertainment events at The Chicago
Theatre, which was acquired in the fourth quarter of 2007
|
|
|
4,538
|
|
Net increase in expenses associated with the higher revenues
from other live entertainment events discussed above
|
|
|
689
|
|
Net decrease in show costs related to the winter themed
production,
Wintuk
|
|
|
(3,162
|
)
|
Net decrease in event expenses for the Beacon Theatre, primarily
due to a five-month shutdown in 2008 for its restoration
|
|
|
(3,015
|
)
|
Other net increases
|
|
|
2,584
|
|
|
|
|
|
|
|
|
$
|
22,515
|
|
|
|
|
|
|
The net increase in expenses from the presentation of the
Radio City Christmas Spectacular
shows primarily
represents the increased costs associated with the launch of the
new arena-sized touring show partly offset by the lower cost
associated with the theater touring version of the show, due
primarily to fewer scheduled performances.
As a percentage of revenues, net, technical and operating
expenses increased 9% during the year ended December 31,
2008 as compared to the prior year.
Selling, general and administrative expenses
for the year
ended December 31, 2008 increased $8,788 (18%) as compared
to the prior year. The net increase is attributable to the
following:
|
|
|
|
|
Net increase in legal and other professional fees
|
|
$
|
2,837
|
|
Increase in employee salaries and related benefits
|
|
|
2,159
|
|
Other net increases, primarily higher rent
|
|
|
3,792
|
|
|
|
|
|
|
|
|
$
|
8,788
|
|
|
|
|
|
|
As a percentage of revenues, net, selling, general and
administrative expenses increased 3% during the year ended
December 31, 2008 as compared to the prior year.
Depreciation and amortization
for the year ended
December 31, 2008 increased $689 (8%) as compared to the
prior year resulting primarily from higher depreciation expense
due to fixed asset additions.
Adjusted operating cash flow
decreased $39,181 (79%) for
the year ended December 31, 2008 as compared to 2007. The
decrease, as discussed above, was due primarily to a net
decrease in revenues and a net increase in operating costs.
92
MSG
Sports
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net for the Companys MSG Sports
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
(Increase)
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
Decrease in
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Operating Loss
|
|
|
Revenues, net
|
|
$
|
369,333
|
|
|
|
100
|
%
|
|
$
|
355,798
|
|
|
|
100
|
%
|
|
$
|
13,535
|
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
316,723
|
|
|
|
86
|
|
|
|
273,567
|
|
|
|
77
|
|
|
|
(43,156
|
)
|
Selling, general and administrative expenses
|
|
|
88,331
|
|
|
|
24
|
|
|
|
79,427
|
|
|
|
22
|
|
|
|
(8,904
|
)
|
Depreciation and amortization
|
|
|
10,706
|
|
|
|
3
|
|
|
|
11,783
|
|
|
|
3
|
|
|
|
1,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(46,427
|
)
|
|
|
(13
|
)%
|
|
$
|
(8,979
|
)
|
|
|
(3
|
)%
|
|
$
|
(37,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of operating loss to adjusted
operating cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Increase
|
|
|
|
2008
|
|
|
2007
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating loss
|
|
$
|
(46,427
|
)
|
|
$
|
(8,979
|
)
|
|
$
|
(37,448
|
)
|
Share-based compensation
|
|
|
4,838
|
|
|
|
4,054
|
|
|
|
784
|
|
Depreciation and amortization
|
|
|
10,706
|
|
|
|
11,783
|
|
|
|
(1,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
(30,883
|
)
|
|
$
|
6,858
|
|
|
$
|
(37,741
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
for the year ended December 31, 2008
increased $13,535 (4%) as compared to revenues, net for the
prior year. The net increase is attributable to the following:
|
|
|
|
|
Increase in revenues from other live sporting events (see
discussion below)
|
|
$
|
8,842
|
|
Increase in primarily non-recurring NBA and NHL distributions
|
|
|
6,461
|
|
Increase in sports teams regular season ticket related
revenue due primarily to higher average ticket prices
|
|
|
5,843
|
|
Decrease due to termination of the operating agreements for two
Connecticut venues effective July 1, 2007
|
|
|
(6,925
|
)
|
Other net decreases
|
|
|
(686
|
)
|
|
|
|
|
|
|
|
$
|
13,535
|
|
|
|
|
|
|
The increase in revenues from other live sporting events
discussed above was primarily due to higher ticket sales mostly
attributable to a large scale boxing match we Promoted in 2008
and an increase in the number of events that were Promoted.
93
Technical and operating expenses (excluding depreciation and
amortization)
for the year ended December 31, 2008
increased $43,156 (16%) as compared to the prior year. The net
increase is attributable to the following:
|
|
|
|
|
Increase in team personnel compensation
|
|
$
|
13,214
|
|
Increase in expenses associated with other live sporting events
(see discussion below)
|
|
|
12,769
|
|
Increase in net provisions for certain team personnel
transactions (including the impact of NBA luxury tax) (see
discussion below)
|
|
|
18,090
|
|
Increase due to higher net provision for NHL revenue sharing
(excluding playoffs) of $1,307 partly offset by lower net
provision for NBA luxury tax (excluding the impact of certain
team personnel transactions described above) of $213 (see
discussion below)
|
|
|
1,094
|
|
Increase in other team operating expenses
|
|
|
2,047
|
|
Decrease due to termination of the operating agreements for two
Connecticut venues effective July 1, 2007
|
|
|
(6,263
|
)
|
Other net increases
|
|
|
2,205
|
|
|
|
|
|
|
|
|
$
|
43,156
|
|
|
|
|
|
|
Net provisions for NBA luxury tax (excluding the impact of
certain team personnel transactions), NHL revenue sharing
(excluding playoffs) and certain team personnel transactions
(including the impact of NBA luxury tax) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Amount
|
|
|
Amount
|
|
|
Increases
|
|
|
Net provisions for NBA luxury tax (excluding the impact of
certain team personnel transactions described below) and NHL
revenue sharing (excluding playoffs)
|
|
$
|
14,948
|
|
|
$
|
13,854
|
|
|
$
|
1,094
|
|
Net provisions for certain team personnel transactions,
including the impact of NBA luxury tax
|
|
|
24,927
|
|
|
|
6,837
|
|
|
|
18,090
|
|
The change in the net provisions for NBA luxury tax (excluding
the impact of certain team personnel transactions described
below) and NHL revenue sharing (excluding playoffs) for the year
ended December 31, 2008 as compared to the prior year, as
reflected in the table above, reflects a lower net provision for
NBA luxury tax, based primarily on the Knicks estimated
season-ending team salaries subject to the tax and a higher net
provision for NHL revenue sharing expense, based primarily on
estimates of the Rangers and league-wide season-ending
revenues. See MSG Sports
Expenses Player Salaries and League Payments.
Team personnel transactions discussed above for the year ended
December 31, 2008 primarily reflect provisions recorded for
career-ending and season-ending player injuries of $20,952,
which is net of anticipated insurance recoveries of $11,935, as
well as player waivers of $3,226. Team personnel transactions
for the year ended December 31, 2007 primarily reflect
provisions recorded for player waivers and a season-ending
player injury of $4,254 and $2,502, respectively. The cost of
these transactions are recorded when the transaction occurs, but
payments owed are generally paid over the remaining contract
terms.
The higher expenses associated with other live sporting events
primarily reflects the costs associated with a large scale
boxing event we Promoted in 2008.
As a percentage of revenues, net, technical and operating
expenses increased 9% during the year ended December 31,
2008 as compared to the prior year.
94
Selling, general and administrative expenses
for the year
ended December 31, 2008 increased $8,904 (11%) as compared
to the prior year. The net increase is attributable to the
following:
|
|
|
|
|
Increase in employee salaries and related benefits
|
|
$
|
6,298
|
|
Increase in legal and other professional fees
|
|
|
868
|
|
Decrease due to termination of the operating agreements for two
Connecticut venues effective July 1, 2007
|
|
|
(2,723
|
)
|
Other net increases, primarily higher rent
|
|
|
4,461
|
|
|
|
|
|
|
|
|
$
|
8,904
|
|
|
|
|
|
|
As a percentage of revenues, net, selling, general and
administrative expenses increased 2% during the year ended
December 31, 2008 as compared to the prior year.
Depreciation and amortization
for the year ended
December 31, 2008 as compared to the prior year decreased
$1,077 (9%), due primarily to lower amortization expense of
intangible assets due primarily to certain intangible assets
becoming fully amortized.
Adjusted operating cash flow
decreased $37,741 (550%) for
the year ended December 31, 2008 as compared to 2007. The
decrease, as discussed above, was due primarily to higher
operating costs offset in part by an increase in revenues.
Comparison
of Combined Year Ended December 31, 2007 Versus Year Ended
December 31, 2006
Combined
Results
Revenues, net
for the year ended December 31, 2007
increased $96,986 (11%) as compared to revenues, net for the
prior year. The net increase is attributable to the following:
|
|
|
|
|
Increase in MSG Media segment revenues, net
|
|
$
|
21,201
|
|
Increase in MSG Entertainment segment revenues, net
|
|
|
63,327
|
|
Increase in MSG Sports segment revenues, net
|
|
|
12,455
|
|
Inter-segment eliminations
|
|
|
3
|
|
|
|
|
|
|
|
|
$
|
96,986
|
|
|
|
|
|
|
Technical and operating expenses (excluding depreciation and
amortization)
for the year ended December 31, 2007
decreased $1,982 (-%) as compared to 2006. The net decrease is
attributable to the following:
|
|
|
|
|
Increase in MSG Media segment expenses
|
|
$
|
5,514
|
|
Increase in MSG Entertainment segment expenses
|
|
|
53,101
|
|
Decrease in MSG Sports segment expenses
|
|
|
(60,608
|
)
|
Inter-segment eliminations
|
|
|
11
|
|
|
|
|
|
|
|
|
$
|
(1,982
|
)
|
|
|
|
|
|
As a percentage of revenues, net, technical and operating
expenses decreased 7% in 2007 as compared to 2006.
95
Selling, general and administrative expenses
for the year
ended December 31, 2007 increased $20,234 (9%) as compared
to 2006. The net increase is attributable to the following:
|
|
|
|
|
Increase in expenses of the MSG Media segment
|
|
$
|
6,909
|
|
Increase in expenses of the MSG Entertainment segment
|
|
|
5,394
|
|
Decrease in expenses of the MSG Sports segment
|
|
|
(2,158
|
)
|
Increase in litigation expense and settlements not allocated to
segments
|
|
|
8,115
|
|
Increase in other expenses
|
|
|
1,974
|
|
|
|
|
|
|
|
|
$
|
20,234
|
|
|
|
|
|
|
As a percentage of revenues, net, selling, general and
administrative expenses decreased 1% in 2007 as compared to 2006.
Gain on curtailment of pension plans
for the year ended
December 31, 2007 amounted to $15,873. As of
December 31, 2007, a Company sponsored qualified defined
benefit pension plan covering certain non-union employees and a
Company sponsored non-qualified unfunded defined benefit pension
plan covering certain employees who participate in the
underlying qualified plan were amended to freeze all benefits
earned through December 31, 2007 and eliminate the ability
of participants to earn benefits for future service under these
plans.
Depreciation and amortization
for the year ended
December 31, 2007 decreased $2,772 (4%) as compared to
2006, as a result of lower depreciation primarily caused by
certain assets becoming fully depreciated.
Interest income, net
for the year ended December 31,
2007 increased $5,395 (87%) as compared to 2006. The net
increase was primarily attributable to higher levels of interest
income caused primarily by higher levels of cash and cash
equivalents and higher interest rates. At December 31,
2007, the Company had a non-interest bearing advance outstanding
to a subsidiary of Cablevision of $130,000.
Income tax expense
for the year ended December 31, 2007
of $45,031 differs from the income tax expense derived from
applying the federal statutory tax rate to pretax income due
principally to state income taxes, tax expense of $2,362
resulting from nondeductible disability insurance premiums, tax
expense of $1,212 relating to nondeductible expenses, and tax
expense of $4,385 resulting from a change in the estimated
applicable corporate tax rates used to measure deferred tax
assets and liabilities.
Income tax benefit for the year ended December 31, 2006 of
$1,173 differs from the income tax benefit expected from
applying the federal statutory tax rate to the pretax loss due
principally to state income taxes, tax expense of $2,310
resulting from nondeductible disability insurance premiums, tax
expense of $859 relating to nondeductible expenses and tax
expense of $869 resulting from a change in the estimated
applicable corporate tax rates used to measure deferred tax
assets and liabilities.
96
Business
Segment Results
MSG
Media
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net for the Companys MSG Media
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Increase
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Operating Income
|
|
|
Revenues, net
|
|
$
|
391,522
|
|
|
|
100
|
%
|
|
$
|
370,321
|
|
|
|
100
|
%
|
|
$
|
21,201
|
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
201,112
|
|
|
|
51
|
|
|
|
195,598
|
|
|
|
53
|
|
|
|
(5,514
|
)
|
Selling, general and administrative expenses
|
|
|
86,569
|
|
|
|
22
|
|
|
|
79,660
|
|
|
|
22
|
|
|
|
(6,909
|
)
|
Restructuring expense
|
|
|
221
|
|
|
|
|
|
|
|
143
|
|
|
|
|
|
|
|
(78
|
)
|
Depreciation and amortization
|
|
|
21,067
|
|
|
|
5
|
|
|
|
22,220
|
|
|
|
6
|
|
|
|
1,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
82,553
|
|
|
|
21
|
%
|
|
$
|
72,700
|
|
|
|
20
|
%
|
|
$
|
9,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of operating income to
adjusted operating cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating income
|
|
$
|
82,553
|
|
|
$
|
72,700
|
|
|
$
|
9,853
|
|
Share-based compensation
|
|
|
4,567
|
|
|
|
6,282
|
|
|
|
(1,715
|
)
|
Restructuring expense
|
|
|
221
|
|
|
|
143
|
|
|
|
78
|
|
Depreciation and amortization
|
|
|
21,067
|
|
|
|
22,220
|
|
|
|
(1,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
108,408
|
|
|
$
|
101,345
|
|
|
$
|
7,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
for the year ended December 31, 2007
increased $21,201 (6%) as compared to revenues, net for the
prior year. The net increase is attributable to the following:
|
|
|
|
|
Increase in affiliation fee revenue, primarily at MSG Networks
|
|
$
|
26,220
|
|
Decrease in advertising revenue, primarily at MSG Networks
|
|
|
(3,396
|
)
|
Other net decreases
|
|
|
(1,623
|
)
|
|
|
|
|
|
|
|
$
|
21,201
|
|
|
|
|
|
|
The increase in affiliation fee revenue was primarily
attributable to increases in contractual affiliation rates and
higher subscriber counts. Most of MSG Medias affiliation
agreements provide for rate increases effective January 1 of
each year.
Lower advertising revenues at MSG Networks was due primarily to
lower per game advertising revenue for the sports teams
presented. Lower advertising revenues at Fuse was due primarily
to lower ratings.
97
Technical and operating expenses (excluding depreciation and
amortization)
for the year ended December 31, 2007
increased $5,514 (3%) as compared to the prior year. The net
increase is attributable to the following:
|
|
|
|
|
Increase in production costs at MSG Networks, primarily related
to expanding original programming
|
|
$
|
5,551
|
|
Increase in rights expense at MSG Networks due primarily to
annual sports rights rate increases
|
|
|
2,730
|
|
Decrease in levels of licensed programming costs and other
production costs at Fuse
|
|
|
(2,767
|
)
|
|
|
|
|
|
|
|
$
|
5,514
|
|
|
|
|
|
|
As a percentage of revenues, net, technical and operating
expenses decreased 2% during the year ended December 31,
2007 as compared to the prior year.
Selling, general and administrative expenses
for the year
ended December 31, 2007 increased $6,909 (9%) as compared
to the prior year. The net increase is attributable to the
following:
|
|
|
|
|
Increase in marketing costs
|
|
$
|
2,848
|
|
Increase in employee salaries and related benefits
|
|
|
1,249
|
|
Other net increases
|
|
|
2,812
|
|
|
|
|
|
|
|
|
$
|
6,909
|
|
|
|
|
|
|
As a percentage of revenues, net, selling, general and
administrative expenses remained flat during the year ended
December 31, 2007 as compared to the prior year.
Depreciation and amortization
for the year ended
December 31, 2007 decreased $1,153 (5%) as compared to the
prior year resulting primarily from certain fixed assets
becoming fully depreciated.
Adjusted operating cash flow
increased $7,063 (7%) for
the year ended December 31, 2007 as compared to 2006. The
increase, as discussed above, was due primarily to an increase
in affiliation fee revenue, offset in part by higher operating
costs.
MSG
Entertainment
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net for the Companys MSG
Entertainment segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Increase
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Operating Income
|
|
|
Revenues, net
|
|
$
|
316,292
|
|
|
|
100
|
%
|
|
$
|
252,965
|
|
|
|
100
|
%
|
|
$
|
63,327
|
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
221,418
|
|
|
|
70
|
|
|
|
168,317
|
|
|
|
67
|
|
|
|
(53,101
|
)
|
Selling, general and administrative expenses
|
|
|
48,151
|
|
|
|
15
|
|
|
|
42,757
|
|
|
|
17
|
|
|
|
(5,394
|
)
|
Depreciation and amortization
|
|
|
8,718
|
|
|
|
3
|
|
|
|
6,322
|
|
|
|
2
|
|
|
|
(2,396
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
38,005
|
|
|
|
12
|
%
|
|
$
|
35,569
|
|
|
|
14
|
%
|
|
$
|
2,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
The following is a reconciliation of operating income to
adjusted operating cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating income
|
|
$
|
38,005
|
|
|
$
|
35,569
|
|
|
$
|
2,436
|
|
Share-based compensation
|
|
|
3,094
|
|
|
|
4,127
|
|
|
|
(1,033
|
)
|
Depreciation and amortization
|
|
|
8,718
|
|
|
|
6,322
|
|
|
|
2,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
49,817
|
|
|
$
|
46,018
|
|
|
$
|
3,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
for the year ended December 31, 2007
increased $63,327 (25%) as compared to revenues, net for the
prior year. The net increase is attributable to the following:
|
|
|
|
|
Increase in revenues from a new winter themed production,
Wintuk
, first presented in 2007
|
|
$
|
36,668
|
|
Increase in revenues from the Beacon Theatre (which the Company
began operating in 2007) and The Chicago Theatre (which the
Company acquired in the fourth quarter of 2007)
|
|
|
15,291
|
|
Increase in revenues from the
Radio City Christmas
Spectacular,
primarily due to increased attendance at the
Radio City Music Hall presentation
|
|
|
13,681
|
|
Net decrease in revenues from the presentation of other live
entertainment events (see discussion below)
|
|
|
(6,539
|
)
|
Other net increases
|
|
|
4,226
|
|
|
|
|
|
|
|
|
$
|
63,327
|
|
|
|
|
|
|
The decrease in revenues from other live entertainment events
was primarily due to the presentation of
Annie
in 2006
(which was replaced by
Wintuk
) offset in part by higher
revenue from other live entertainment events.
Technical and operating expenses (excluding depreciation and
amortization)
for the year ended December 31, 2007
increased $53,101 (32%) as compared to the prior year. The net
increase is attributable to the following:
|
|
|
|
|
Increase in event related costs associated with the new winter
themed production,
Wintuk
, first presented in 2007
|
|
$
|
29,224
|
|
Increase in venue operating costs primarily associated with the
Beacon Theatre (which the Company began operating in
2007) and The Chicago Theatre (which the Company acquired
in the fourth quarter of 2007)
|
|
|
11,629
|
|
Net increase in event related costs associated with the
Radio
City Christmas Spectacular
|
|
|
9,917
|
|
Net increase in event related expenses associated with the new
venues
|
|
|
6,734
|
|
Decrease in event related costs associated with the decrease in
revenues from the other live entertainment events discussed above
|
|
|
(6,766
|
)
|
Other net increases
|
|
|
2,363
|
|
|
|
|
|
|
|
|
$
|
53,101
|
|
|
|
|
|
|
As a percentage of revenues, net, technical and operating
expenses increased 3% during the year ended December 31,
2007 as compared to the prior year.
99
Selling, general and administrative expenses
for the year
ended December 31, 2007 increased $5,394 (13%) as compared
to the prior year. The net increase is attributable to the
following:
|
|
|
|
|
Increase in employee salaries and related benefits
|
|
$
|
3,602
|
|
Other net increases
|
|
|
1,792
|
|
|
|
|
|
|
|
|
$
|
5,394
|
|
|
|
|
|
|
As a percentage of revenues, net, selling, general and
administrative expenses decreased 2% during the year ended
December 31, 2007 as compared to the prior year.
Depreciation and amortization
for the year ended
December 31, 2007 as compared to the prior year increased
$2,396 (38%), primarily due to higher depreciation expense of
$2,229, caused mainly by fixed asset additions.
Adjusted operating cash flow
increased $3,799 (8%) for
the year ended December 31, 2007 as compared to 2006. The
increase, as discussed above, was due primarily to a net
increase in revenues, which was substantially offset in part by
higher operating costs.
MSG
Sports
The table below sets forth, for the periods presented, certain
historical financial information and the percentage that those
items bear to revenues, net for the Companys MSG Sports
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
% of Net
|
|
|
|
|
|
% of Net
|
|
|
Decrease in
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
Amount
|
|
|
Revenues
|
|
|
Operating Loss
|
|
|
Revenues, net
|
|
$
|
355,798
|
|
|
|
100
|
%
|
|
$
|
343,343
|
|
|
|
100
|
%
|
|
$
|
12,455
|
|
Technical and operating expenses (excluding depreciation and
amortization)
|
|
|
273,567
|
|
|
|
77
|
|
|
|
334,175
|
|
|
|
97
|
|
|
|
60,608
|
|
Selling, general and administrative expenses
|
|
|
79,427
|
|
|
|
22
|
|
|
|
81,585
|
|
|
|
24
|
|
|
|
2,158
|
|
Depreciation and amortization
|
|
|
11,783
|
|
|
|
3
|
|
|
|
12,013
|
|
|
|
3
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(8,979
|
)
|
|
|
(3
|
)%
|
|
$
|
(84,430
|
)
|
|
|
(25
|
)%
|
|
$
|
75,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of operating loss to adjusted
operating cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Increase
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease) in
|
|
|
|
Amount
|
|
|
Amount
|
|
|
AOCF
|
|
|
Operating loss
|
|
$
|
(8,979
|
)
|
|
$
|
(84,430
|
)
|
|
$
|
75,451
|
|
Share-based compensation
|
|
|
4,054
|
|
|
|
5,408
|
|
|
|
(1,354
|
)
|
Depreciation and amortization
|
|
|
11,783
|
|
|
|
12,013
|
|
|
|
(230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating cash flow
|
|
$
|
6,858
|
|
|
$
|
(67,009
|
)
|
|
$
|
73,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
Revenues, net
for the year ended December 31, 2007
increased $12,455 (4%) as compared to revenues, net for the
prior year. The net increase is attributable to the following:
|
|
|
|
|
Increases in sports team playoff related revenues
|
|
$
|
8,202
|
|
Increases in sports teams regular season ticket related
revenue due primarily to higher average ticket prices
|
|
|
6,597
|
|
Increase in revenues from other live sporting events (see
discussion below)
|
|
|
7,403
|
|
Decrease due to the termination of the operating agreements for
two Connecticut venues effective July 1, 2007
|
|
|
(8,291
|
)
|
Other net decreases
|
|
|
(1,456
|
)
|
|
|
|
|
|
|
|
$
|
12,455
|
|
|
|
|
|
|
The higher level of revenues from other live sporting events was
primarily due to an increased number of promoted events and
higher ticket sales.
Technical and operating expenses (excluding depreciation and
amortization)
for the year ended December 31, 2007
decreased $60,608 (18%) as compared to the prior year. The net
decrease is attributable to the following:
|
|
|
|
|
Decrease in net provisions for certain team personnel
transactions (including the impact of NBA luxury tax) (see
discussion below)
|
|
$
|
(53,335
|
)
|
Decrease due to lower net provision for NBA luxury tax
(excluding the impact of certain team personnel transactions
referred to above) of $9,799 and lower net provision for NHL
revenue sharing (excluding playoffs) of $449 (see discussion
below)
|
|
|
(10,248
|
)
|
Decrease in team personnel compensation
|
|
|
(7,074
|
)
|
Decrease due to termination of the operating agreements for two
Connecticut venues effective July 1, 2007
|
|
|
(4,172
|
)
|
Increase in benefit from amortization of team related purchase
accounting liabilities (see discussion below)
|
|
|
6,263
|
|
Increase in expenses associated with other live sporting events
|
|
|
4,756
|
|
Increase in sports team playoff related expenses, including
playoff related NHL revenue sharing
|
|
|
4,231
|
|
Other net decreases
|
|
|
(1,029
|
)
|
|
|
|
|
|
|
|
$
|
(60,608
|
)
|
|
|
|
|
|
Net provisions for NBA luxury tax (excluding the impact of
certain team personnel transactions), NHL revenue sharing
(excluding playoffs) and certain team personnel transactions
(including the impact of NBA luxury tax) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
Amount
|
|
|
Amount
|
|
|
Decreases
|
|
|
Net provisions for NBA luxury tax (excluding the impact of
certain team personnel transactions described below) and NHL
revenue sharing (excluding playoffs)
|
|
$
|
13,854
|
|
|
$
|
24,102
|
|
|
$
|
(10,248
|
)
|
Net provisions for certain team personnel transactions,
including the impact of NBA luxury tax
|
|
|
6,837
|
|
|
|
60,172
|
|
|
|
(53,335
|
)
|
The change in the net provisions for NBA luxury tax (excluding
the impact of certain team personnel transactions described
below) and NHL revenue sharing (excluding playoffs) for the year
ended December 31, 2007 as compared to the prior year, as
reflected in the table above, reflects a lower net provision for
NBA luxury tax, based primarily on the Knicks estimated
season-ending team salaries subject to the tax and a lower net
provision for NHL revenue sharing expense, based primarily on
estimates of the Rangers and
101
league-wide season-ending revenues. See MSG
Sports Expenses Player Salaries and
League Payments.
Team personnel transactions discussed above for the year ended
December 31, 2007 primarily reflect provisions recorded for
player waivers and a season-ending player injury of $4,254 and
$2,502, respectively. Team personnel transactions for the year
ended December 31, 2006 reflect provisions recorded for
player waivers and the costs of a termination related to other
team personnel of $41,404 and $18,768, respectively. The cost of
these transactions are recorded when the transaction occurs, but
payments owed related to the player waivers and the
season-ending injury are generally paid over the remaining
contract terms. The cost of the 2006 termination of other team
personnel was paid at the time of the termination.
The purchase accounting liabilities were established in April
2005 through push down accounting as a result of
Cablevisions acquisition of the 40% minority interest in a
subsidiary of Cablevision, which wholly-owned the Company.
Following this transaction, amortization of these purchase
accounting liabilities began over the period of the respective
player contracts. During 2006 and 2005, the majority of these
players were waived or traded and the unamortized purchase
accounting liabilities associated with these players were
written off.
As a percentage of revenues, net, technical and operating
expenses decreased 20% during the year ended December 31,
2007 as compared to the prior year.
Selling, general and administrative expenses
for the year
ended December 31, 2007 decreased $2,158 (3%) as compared
to the prior year. The net decrease is attributable to the
following:
|
|
|
|
|
Decrease in legal and other professional fees
|
|
$
|
(3,082
|
)
|
Decrease in marketing costs
|
|
|
(1,663
|
)
|
Increase in employee salaries and related benefits
|
|
|
2,469
|
|
Other net increases
|
|
|
118
|
|
|
|
|
|
|
|
|
$
|
(2,158
|
)
|
|
|
|
|
|
As a percentage of revenues, net, selling, general and
administrative expenses decreased 2% during the year ended
December 31, 2007 as compared to the prior year.
Adjusted operating cash flow
increased $73,867 (110%) for
the year ended December 31, 2007 as compared to 2006. The
increase, as discussed above, was due primarily to a net
decrease in the segments operating costs along with a net
increase in its net revenues.
Liquidity
and Capital Resources
Overview
Sources of cash primarily include cash flow from the operations
of our businesses. Our principal uses of cash include capital
spending and investments that we may fund from time to time. We
currently expect that our net funding and investment
requirements for the next twelve months will be met by our cash
on hand and cash generated by our operating activities. The
decision of the Company as to the use of cash on hand and cash
generated from operating activities will be based upon an
ongoing review of the funding needs of the business, the optimal
allocation of cash resources, and the timing of cash flow
generation.
We previously announced our intent to pursue a major renovation
of The Garden. We continue to review all aspects of this complex
project with our consultants in order to improve the renovation
plans, mitigate project risks and identify efficiencies in all
aspects of costs, planning and project-phasing. We also continue
to develop our cost and capital investment estimates to ensure
that the planned renovation meets our overall expectations and
objectives.
While the pre-construction planning and cost estimates of this
renovation are not yet final, we currently expect that the
projects cost will be between $775,000 and $850,000, of
which approximately $60,000 was incurred through
December 31, 2009. We expect that the estimated costs
associated with the project will be met from cash on hand,
receipt of repayments of advances made to a subsidiary of
Cablevision and cash flow from our operations. We have recently
obtained commitments from a group of banks for a revolving
102
credit facility. (See Financing
Agreements below.) To the extent that management
determines that financing for this renovation is required or
desirable, we would expect to draw on this facility.
In order to most efficiently and effectively complete the
renovation, it will be a year-round project. Our goal is to
minimize disruption to current operations and to achieve this,
The Garden will remain open for the New York Knicks and
New York Rangers seasons in the years the renovation takes
place, while we sequence the construction to ensure that we
maximize our construction efforts when we close the arena during
summer months. Our current expectation is that the renovated
lower bowl of The Garden will be open for the 2011-12 seasons,
and that the renovated upper bowl will be open for the
2012-13
seasons.
Although the Company continues to pursue the arena renovation
plan, there can be no assurance that a renovation will occur or
what the ultimate cost, scope or timing of any renovation
activity may be.
We have assessed the implications of the recent distress in the
capital and credit markets on our ability to meet our net
funding and investing requirements over the next twelve months
and we believe that a combination of
cash-on-hand
and cash generated from operating activities should provide us
with sufficient liquidity. However, continued market disruptions
could cause broader economic downturns, which may lead to lower
demand for our services, such as lower levels of attendance or
advertising. These events would adversely impact our results of
operations, cash flows and financial position. We continue to
evaluate options to manage our liquidity and capital structure.
The Company will have an insignificant amount of tax net
operating losses immediately subsequent to the Distribution.
Financing
Agreements
The Company currently does not have any outstanding credit
facilities or indentures. However, MSG L.P., our wholly owned
subsidiary, has obtained commitments from a group of banks for a
new $375,000,
five-year
senior secured revolving credit facility. The facility will be
undrawn at the time it becomes available. We may use this
facility to fund certain of our working capital needs and
capital expenditures, and for general corporate purposes,
including but not limited to the renovation of The Garden. Entry
into any such facility is conditioned on negotiation of a
definitive credit agreement with the lending banks. In addition
to any such facility, we expect to fund our liquidity
requirements through cash on hand, cash flow from operations and
the repayment of intercompany advances to a subsidiary of
Cablevision.
Following the Distribution, our intercompany advances to a
subsidiary of Cablevision (in an aggregate amount of $190,000)
will remain outstanding. Prior to the Distribution date, the
terms of these advances will be changed to provide for a
maturity date of no later than June 30, 2010 (with
prepayment at Cablevisions option) and for the payment of
cash interest at a fixed rate equal to the prime rate on the
date the changes to the terms are made. The proceeds of the
repayment of these intercompany advances will be used to meet
our net funding and investment requirements.
Under the terms of our Tax Disaffiliation Agreement with
Cablevision, in order to preserve the tax-free treatment to
Cablevision of the Distribution, we are subject to certain
restrictions during the two-year period following the
Distribution that might affect our ability to raise cash. In
particular, we may not issue equity securities if any such
issuances would, in the aggregate, constitute 50% or more of the
voting power or value of our capital stock, which might limit
our financing options. This restriction will be more pronounced
if the market price of our stock declines significantly below
the value of our stock on the Distribution date, since the
restrictions in the Tax Disaffiliation Agreement apply to the
number of shares issued, rather than the proceeds we receive
upon issuance. In addition, we are restricted from selling
certain of our assets during the two-year period, which might
also impede our ability to raise cash through asset sales.
103
Cash Flow
Discussion
Operating
Activities
Net cash provided by operating activities amounted to $39,947
for the nine months ended September 30, 2009 compared to
$42,965 for the nine months ended September 30, 2008. The
September 30, 2009 cash provided by operating activities
resulted from $50,234 of income before depreciation and
amortization and $9,817 of non-cash items. Partially offsetting
these increases was a decrease in cash resulting from a $20,104
decrease in other assets and liabilities. The decrease in cash
provided by operating activities of $3,018 for the nine months
ended September 30, 2009 as compared to the nine months
ended September 30, 2008 resulted from a decrease of
$20,877 resulting from changes in other assets and liabilities,
primarily working capital, including the timing of payments
among other items, partially offset by an increase in income
before depreciation and amortization and other non-cash items of
$17,859.
Net cash provided by operating activities amounted to $69,446
for the year ended December 31, 2008 compared to $102,822
for the year ended December 31, 2007. The 2008 cash
provided by operating activities resulted from $61,295 of income
before depreciation and amortization, $9,272 of non-cash items
and a $58,163 increase in accrued and other liabilities.
Partially offsetting these increases were decreases in cash
resulting from a $17,207 decrease in current and other assets, a
$17,973 decrease in deferred revenue, a $12,717 decrease in
accounts payable and a decrease in the deferred tax liability of
$11,387. The decrease in cash provided by operating activities
of $33,376 in 2008 as compared to 2007 resulted from a decrease
in income before depreciation and amortization and other
non-cash items of $30,809 and a net decrease of $2,567 resulting
from changes in working capital, including the timing of
payments among other items.
Net cash provided by operating activities amounted to $102,822
for the year ended December 31, 2007 compared to $36,151
for the year ended December 31, 2006. The 2007 cash
provided by operating activities resulted from $105,106 of
income before depreciation and amortization, a $43,468 increase
in the deferred tax liability, a $18,609 increase in deferred
revenue and a $7,479 increase in accounts payable. Partially
offsetting these increases were decreases in cash resulting from
a $18,999 decrease in current and other assets, a $49,111
decrease in accrued and other liabilities and a $3,730 decrease
in
non-cash
items. The increase in cash provided by operating activities of
$66,671 in 2007 as compared to 2006 resulted from an increase in
income before depreciation and amortization and other non-cash
items of $41,942 and a net increase of $24,729 resulting from
changes in working capital, including the timing of payments
among other items.
Net cash provided by operating activities is generally higher
than operating income (loss) before depreciation and
amortization expense due to provisions made in 2008 and 2007 for
career-ending player injuries, net of anticipated insurance
recoveries, and waivers, as well as costs of terminations
related to other team personnel. The cost of these transactions
are recorded when the transaction occurs, but payments owed are
generally paid over the remaining contract terms.
Investing
Activities
Net cash used in investing activities for the nine months ended
September 30, 2009 was $37,240 compared to $63,639 for the
nine months ended September 30, 2008. The nine months ended
September 30, 2009 investing activities consisted of
$37,240 of capital expenditures. The nine months ended
September 30, 2008 investing activities consisted of
$26,007 of capital expenditures and a $37,632 payment relating
to the acquisition of an interest in a company, accounted for as
a cost method investment.
Net cash used in investing activities for the year ended
December 31, 2008 was $92,824 compared to $44,521 for the
year ended December 31, 2007. The 2008 investing activities
consisted of $55,192 of capital expenditures and $37,632 of
payment relating to the acquisition of an interest in a company,
accounted for as a cost method investment.
Net cash used in investing activities for the year ended
December 31, 2007 was $44,521 compared to net cash used in
investing activities of $21,590 for the year ended
December 31, 2006. The 2007 investing activities consisted
primarily of $30,107 of capital expenditures and $14,425 of
payments relating to the
104
purchase of The Chicago Theatre. The 2006 investing activities
consisted primarily of $23,762 of capital expenditures.
Financing
Activities
Net cash used in financing activities amounted to $766 for the
nine months ended September 30, 2009 compared to net cash
used in financing activities of $60,994 for the nine months
ended September 30, 2008. For the nine months ended
September 30, 2008, the Companys financing activities
consisted primarily of an advance of $60,000 to a subsidiary of
Cablevision.
Net cash used in financing activities amounted to $61,277 for
the year ended December 31, 2008 compared to net cash used
in financing activities of $120,945 for the year ended
December 31, 2007. In 2008, the Companys financing
activities consisted primarily of an advance of $60,000 to a
subsidiary of Cablevision.
Net cash used in financing activities amounted to $120,945 for
the year ended December 31, 2007 compared to net cash
provided by financing activities of $32,198 for the year ended
December 31, 2006. In 2007, the Companys financing
activities consisted primarily of a $130,000 advance made to a
subsidiary of Cablevision, partially offset by a capital
contribution from Cablevision of $9,961. In 2006, the
Companys financing activities consisted primarily of a
$21,000 advance repayment from Cablevision.
Contractual
Obligations and Off Balance Sheet Arrangements
The Companys contractual obligations as of
December 31, 2008, and the effect such obligations are
expected to have on our liquidity and cash flow in future
periods, are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
More Than
|
|
|
|
Total
|
|
|
1
|
|
|
2-3
|
|
|
4-5
|
|
|
5 Years
|
|
|
Off balance sheet arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual obligations(1)
|
|
$
|
1,477,594
|
|
|
$
|
210,645
|
|
|
$
|
285,014
|
|
|
$
|
152,768
|
|
|
$
|
829,167
|
|
Operating lease obligations(2)
|
|
|
395,320
|
|
|
|
29,437
|
|
|
|
58,972
|
|
|
|
59,008
|
|
|
|
247,903
|
|
Letters of credit(3)
|
|
|
2,400
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,875,314
|
|
|
|
242,482
|
|
|
|
343,986
|
|
|
|
211,776
|
|
|
|
1,077,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual obligations reflected on the balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations(4)
|
|
|
10,631
|
|
|
|
1,822
|
|
|
|
3,644
|
|
|
|
1,244
|
|
|
|
3,921
|
|
Contractual obligations(5)
|
|
|
63,942
|
|
|
|
29,496
|
|
|
|
10,159
|
|
|
|
5,888
|
|
|
|
18,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,573
|
|
|
|
31,318
|
|
|
|
13,803
|
|
|
|
7,132
|
|
|
|
22,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,949,887
|
|
|
$
|
273,800
|
|
|
$
|
357,789
|
|
|
$
|
218,908
|
|
|
$
|
1,099,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Contractual obligation amounts not reflected on the balance
sheet consist primarily of (i) long-term rights agreements
which provide the Company with exclusive broadcast rights to
certain live sporting events in exchange for minimum contractual
payments in the MSG Media segment, (ii) payments under
employment agreements that we have with our professional sports
teams personnel in the MSG Sports segment that are
generally guaranteed regardless of employee injury or
termination, and (iii) minimum purchase requirements
incurred in the normal course of the Companys operations.
|
|
(2)
|
|
Operating lease obligations primarily represent future minimum
rental payments on various long-term, noncancelable leases for
office and storage space, and lease commitments for Radio City
Music Hall and the Beacon Theatre.
|
|
(3)
|
|
Consists primarily of a letter of credit obtained by the Company
under a certain lease agreement.
|
|
(4)
|
|
Reflects the face amount of capital lease obligations, including
related interest.
|
|
(5)
|
|
Consists principally of amounts earned under employment
agreements that we have with certain of our professional sports
teams personnel in the MSG Sports segment.
|
105
The future cash payments reflected above do not include the
impact of potential insurance recoveries or amounts which may be
due to the NBA for luxury tax payments or the NHL for revenue
sharing.
Seasonality
of Our Business
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 first and fourth
quarter of each year. The dependence of the MSG Entertainment
segment on revenues from its Christmas shows generally means it
earns a disproportionate share of its revenues and operating
income in the fourth quarter of each year.
Recently
Issued Accounting Pronouncements Not Yet Adopted and Critical
Accounting Policies
Recently
Issued Accounting Pronouncements Not Yet Adopted
To be
Adopted in the Fourth Quarter of 2009
In December 2008, the Financial Accounting Standards Board
(FASB) issued guidance under Accounting Standards
Codification (ASC)
Topic 715-20,
which requires more detailed disclosures about employers
plan assets, including employers investment strategies,
major categories of plan assets, concentrations of risk within
plan assets, and valuation techniques used to measure the fair
value of plan assets.
In August 2009, the FASB issued Accounting Standards Update
(ASU)
No. 2009-05,
Measuring Liabilities at Fair Value, which provides
clarification that in circumstances where a quoted market price
in an active market for an identical liability is not available,
a reporting entity must measure fair value of the liability
using one of the following techniques: (a) the quoted price
of the identical liability when traded as an asset;
(b) quoted prices for similar liabilities or similar
liabilities when traded as assets; or (c) another valuation
technique, such as a present value technique or the amount that
the reporting entity would pay to transfer the identical
liability or would receive to enter into the identical liability
that is consistent with the provisions of ASC Topic 820.
In September 2009, the FASB issued ASU
No. 2009-12,
Investments in Certain Entities That Calculate Net Asset Value
per Share (or Its Equivalent), which provides guidance on how to
determine the fair value of an alternative investment when fair
value is not readily determinable and an investor is provided
only with a net asset value per share (or its equivalent) by the
investee that has been calculated in a manner consistent with
GAAP for investment companies (ASC Topic 946). ASU
No. 2009-12
requires an investor to disclose (a) by major category of
investment the attributes of each investment it holds that meet
the criteria of ASU
No. 2009-12
and (b) the investment strategies of the investees.
To be
Adopted by the First Quarter of 2011
In October 2009, the FASB issued ASU
No. 2009-13,
Multiple-Deliverable Revenue Arrangements, which provides
amendments that (a) update the criteria for separating
consideration in multiple-deliverable arrangements,
(b) establish a selling price hierarchy for determining the
selling price of a deliverable, and (c) replace the term
fair value in the revenue allocation guidance with
the term selling price to clarify that the
allocation of revenue is based on entity-specific assumptions.
ASU
No. 2009-13
eliminates the residual method of allocating arrangement
consideration to deliverables, requires the use of the relative
selling price method and requires that a vendor determine its
best estimate of selling price in a manner consistent with that
used to determine the price to sell the deliverable on a
standalone basis. ASU
No. 2009-13
requires a vendor to significantly expand the disclosures
related to multiple-deliverable revenue arrangements with the
objective to provide information about the significant judgments
made and changes to those judgments and how the application of
the relative selling-price method affects the timing or amount
of revenue recognition. ASU
No. 2009-13
is required to be adopted on a prospective basis to revenue
arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010.
106
Critical
Accounting Policies
In preparing its combined financial statements, the Company is
required to make certain estimates, judgments and assumptions
that it believes are reasonable based upon the information
available. These estimates and assumptions affect the reported
amounts of assets and liabilities at the date of the combined
financial statements and the reported amounts of revenues and
expenses during the periods presented. The significant
accounting policies which we believe are the most critical to
aid in fully understanding and evaluating our reported financial
results include the following:
Impairment
of Long-Lived and Indefinite-Lived Assets
The Companys long-lived and indefinite-lived assets at
September 30, 2009 include goodwill of $742,492, other
intangible assets, net of $310,720 ($158,096 of which are
identifiable indefinite-lived intangibles), and $330,725 of
property and equipment, net. These assets accounted for
approximately 69% of the Companys combined total assets as
of September 30, 2009.
For long-lived assets, including intangible assets subject to
amortization, the Company evaluates assets for impairment
whenever events or circumstances indicate that the carrying
amount of an asset may not be recoverable. If the undiscounted
cash flows from a group of assets being evaluated is less than
the carrying value of that group of assets, the fair value of
the asset group is determined and the carrying value of the
asset group is written down to fair value.
Goodwill and identifiable indefinite-lived intangible assets,
which represent the Companys various trademarks and sports
franchise intangibles, are tested annually for impairment during
the first quarter and at any time upon the occurrence of certain
events or substantive changes in circumstances.
The impairment test for identifiable indefinite-lived intangible
assets consists of a comparison of the estimated fair value of
the intangible asset with its carrying value. If the carrying
value of the intangible asset exceeds its fair value, an
impairment loss is recognized in an amount equal to that excess.
The Companys identifiable indefinite-lived intangible
assets consist of sports franchises included in the MSG Sports
segment of $96,215 and the Radio City and The Chicago Theatre
related trademarks of $53,881, and $8,000, respectively,
included in the MSG Entertainment segment.
The impairment test for goodwill is a two-step process. The
first step of the goodwill impairment test is used to identify
potential impairment by comparing the fair value of a reporting
unit with its carrying amount, including goodwill. If the
carrying amount of a reporting unit exceeds its fair value, the
second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. The second step
of the goodwill impairment test compares the implied fair value
of the reporting units goodwill with the carrying amount
of that goodwill. If the carrying amount of the reporting
units goodwill exceeds the implied fair value of that
goodwill, an impairment loss is recognized in an amount equal to
that excess. The implied fair value of goodwill is determined in
the same manner as the amount of goodwill that would be
recognized in a business combination. For the purpose of
evaluating goodwill impairment, the Company has three reporting
units, all of which recognized goodwill. These reporting units
are MSG Media, MSG Entertainment and MSG Sports. The goodwill
balance by reporting unit is as follows:
|
|
|
|
|
|
|
Goodwill Balance
|
|
|
|
as of
|
|
Reporting Unit
|
|
September 30, 2009
|
|
|
MSG Media
|
|
$
|
465,326
|
|
MSG Entertainment
|
|
|
58,979
|
|
MSG Sports
|
|
|
218,187
|
|
|
|
|
|
|
|
|
$
|
742,492
|
|
|
|
|
|
|
In assessing the recoverability of the Companys goodwill
and other long-lived assets, the Company must make assumptions
regarding estimated future cash flows and other factors to
determine the fair value of the respective assets. These
estimates and assumptions could have a significant impact on
whether an impairment
107
charge is recognized and also the magnitude of any such charge.
Fair value estimates are made at a specific point in time, based
on relevant information. These estimates are subjective in
nature and involve uncertainties and matters of significant
judgments and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Estimates of fair value are primarily determined using
discounted cash flows and comparable market transactions. These
valuations are based on estimates and assumptions including
projected future cash flows, discount rate, and determination of
appropriate market comparables and determination of whether a
premium or discount should be applied to comparables. In
addition, for MSG Entertainment, these valuations include
assumptions for number of shows and events at the Companys
venues and number of shows related to the Companys
proprietary content on tour. For MSG Sports, these valuations
include assumptions for ticket sales, which include suite
income, local and national television broadcasting rights,
sponsorship income, concessions, player and personnel
compensation, and luxury tax or revenue sharing assumptions for
comparable market transactions. For MSG Media, these valuations
also include assumptions for projected average rates per viewing
subscribers and growth in fixed price contractual arrangements
used to determine affiliation fee revenue, access to sports
programming and programming rights and the cost of such sports
programming and programming rights, amount of programming time
that is advertiser supported, number of advertising spots
available and the sell through rates for those spots, average
fee per advertising spot, and operating margins, among other
assumptions.
Based on the Companys annual impairment test during the
first quarter of 2009, the Companys reporting units had
significant safety margins, representing the excess of the
estimated fair value of each reporting unit less its respective
carrying value (including goodwill allocated to each respective
reporting unit). In order to evaluate the sensitivity of the
estimated fair value calculations of the Companys
reporting units on the annual impairment calculation for
goodwill, the Company applied a hypothetical 30% decrease to the
estimated fair values of each reporting unit. This hypothetical
decrease of 30% would have no impact on the goodwill impairment
analysis for any of the Companys reporting units.
The Companys identifiable indefinite-lived intangible
assets relate to trademarks and sports franchises. The
Companys indefinite-lived trademark intangible assets
relate to the Companys Radio City related trademarks which
include the
Radio City Christmas Spectacular
and The
Rockettes and The Chicago Theatre related trademarks, which were
all valued using a relief-from-royalty method in which the
expected benefits are valued by discounting royalty revenue over
projected revenues covered by the trademarks. The Companys
indefinite-lived sports franchises intangibles representing the
Companys NBA and NHL sports franchises are valued using a
direct valuation method based on market comparables. Both the
Radio City related trademarks and the sports franchises were
recorded in April 2005 when Cablevision acquired the remaining
40% interest in a subsidiary of Cablevision, which wholly-owned
the Company. Significant judgments inherent in a valuation
include the selection of appropriate discount rates, estimating
the amount and timing of estimated future cash flows and
identification of appropriate continuing growth rate
assumptions. The discount rates used in the analysis are
intended to reflect the risk inherent in the projected future
cash flows generated by the respective intangible assets.
Based on the Companys annual impairment test during the
first quarter of 2009, the Companys Radio City related
trademarks and sports franchise identifiable indefinite-lived
intangible assets had significant safety margins, representing
the excess of the identifiable indefinite-lived intangible
assets estimated fair value unit of accounting less their
respective carrying values. In order to evaluate the sensitivity
of the fair value calculations of all the Companys
identifiable indefinite-lived intangibles, the Company applied
hypothetical 10%, 20% and 30% decreases to the estimated fair
value of each of the Companys identifiable
indefinite-lived intangibles. These hypothetical 10%, 20% and
30% decreases in estimated fair value would not have resulted in
an impairment of any of our identifiable indefinite-lived
intangibles other than The Chicago Theatre related trademarks,
which have a carrying value of $8,000. The hypothetical fair
value decline would have resulted in impairment charges of
approximately $800, $1,600 and $2,400 at 10%, 20% and 30%,
respectively.
108
Useful
Lives of Finite-Lived Intangible Assets
The Company has recognized intangible assets for affiliation
agreements and affiliate relationships, broadcast rights, season
ticket holder relationships, suite holder relationships, and
other intangibles as a result of purchase accounting. The
Company has determined that certain of such intangible assets
have finite lives. The estimated useful lives and net carrying
values of these intangibles at September 30, 2009 are as
follows:
|
|
|
|
|
|
|
|
|
Net Carrying Value at
|
|
Estimated
|
|
|
September 30, 2009
|
|
Useful Lives
|
|
Affiliation agreements and affiliate relationships
|
|
$
|
80,707
|
|
|
4 to 24 years
|
Season ticket holder relationships
|
|
|
49,991
|
|
|
10 to 15 years
|
Suite holder relationships
|
|
|
9,099
|
|
|
11 years
|
Broadcast rights
|
|
|
4,408
|
|
|
10 years
|
Other amortizable intangibles
|
|
|
8,419
|
|
|
5 to 15 years
|
All of the primary finite-lived intangible assets were recorded
in April 2005 when Cablevision acquired the remaining 40%
interest in a subsidiary of Cablevision, which wholly owned the
Company. The useful lives for the affiliation agreements,
affiliate relationships, season ticket holder relationships and
suite holder relationships were determined based upon an
analysis of the weighted average remaining terms of existing
agreements the Company had in place with its major customers at
the time that purchase accounting was applied, plus an estimate
for renewals of such agreements. The Company has been successful
in renewing its major affiliation agreements and maintaining
customer relationships in the past and believes it will be able
to renew its major affiliation agreements and maintain those
customer relationships in the future. Furthermore, the Company
has been successful in maintaining its relationships with its
season ticket holders and suite holders in the past and believes
it will be able to significantly renew its season ticket and
suite holder relationships and maintain those relationships in
the future. However, it is possible that the Company will not
successfully renew such agreements as they expire or that if it
does, the net revenue earned may not equal or exceed the net
revenue currently being earned, which could have a significant
adverse impact on our business. In light of these facts and
circumstances, the Company has determined that its estimated
useful lives are appropriate.
There have been periods when an existing affiliation agreement
has expired and the parties have not finalized negotiations of
either a renewal of that agreement or a new agreement for
certain periods of time. In substantially all these instances,
the affiliates continued to carry and pay for the service under
oral or written interim agreements until execution of definitive
replacement agreements or renewal.
If an affiliate were to cease carrying the service on an other
than temporary basis, the Company would record an impairment
charge for the then remaining carrying value of that affiliation
agreement and affiliate relationship intangible asset. If the
Company were to renew an affiliation agreement at rates that
produced materially less net revenue compared to the net revenue
produced under the previous agreement, the Company would
evaluate the impact on its cash flows and, if necessary, would
further evaluate such indication of potential impairment by
following the policy described above under Impairment of
Long-Lived and Indefinite-Lived Assets for the asset group
containing that intangible asset. The Company also would
evaluate whether the remaining useful life of the affiliation
agreement and affiliate relationship remained appropriate. Based
on December 31, 2008 carrying values, if the estimated life
of all affiliation agreements and affiliate relationships were
shortened by 10%, the effect on amortization for the year ended
December 31, 2008 would be to increase our annual
amortization expense by approximately $1,334.
Defined
Benefit Pension and Other Postretirement Benefit Plans
The Company utilizes actuarial methods to calculate pension and
other postretirement benefit obligations and the related net
periodic benefit cost using numerous actuarial assumptions. Two
key assumptions, the discount rate and the expected long-term
rate of return on plan assets, are important elements of the
plans expense and liability measurement and we evaluate
these key assumptions annually. Other assumptions include
demographic factors, such as mortality, retirement age and
turnover. The actuarial assumptions used by the Company may
differ materially from actual results due to various factors,
including, but not limited to,
109
changing economic and market conditions. Differences between
actual and expected occurrences could significantly impact the
actual amount of net periodic benefit cost and the benefit
obligation recorded by the Company. Material changes in the
costs of the plans may occur in the future due to changes in
these assumptions, changes in the number of the plan
participants, changes in the level of benefits provided, changes
in asset levels and changes in legislation. Our assumptions
reflect our historical experience and our best judgment
regarding future expectations.
Accumulated and projected benefit obligations reflect the
present value of future cash payments for benefits. The rate we
use to discount these payments was determined (based on the
expected duration of the benefit payments for the plans) by
referring to applicable bond yields (such as Moodys Aaa
Corporate Bonds) and the Buck Consultants Discount Rate
Model (which is developed by examining the yields on selected
highly rated corporate bonds), to select a rate at which we
believe the plans benefits could be effectively settled.
Lower discount rates increase the present value of benefit
obligations and the subsequent years net periodic benefit
cost. The weighted-average discount rates used to determine
benefit obligations as of December 31, 2008 for the
Companys pension and postretirement plans were 5.81% and
5.80%, respectively. A 25 basis point decrease in these
assumed discount rates would increase the projected benefit
obligations for the Companys pension and postretirement
plans at December 31, 2008 by $4,050 and $180,
respectively. The weighted-average discount rates used to
determine net periodic benefit cost for the year ended
December 31, 2008 for the Companys pension and
postretirement plans were 6.15% and 6.05%, respectively. A
25 basis point decrease in these assumed discount rates
would increase the total net periodic benefit cost for the
Companys pension and postretirement plans for the year
ended December 31, 2008 by $39 and $12, respectively.
The expected long-term return on plan assets is based on a
periodic review and modeling of the plans asset allocation
structure over a long-term horizon. Expectations of returns for
each asset class are the most important of the assumptions used
in the review and modeling and are based on comprehensive
reviews of historical data and economic/financial market theory.
The expected long-term rate of return was selected from within
the reasonable range of rates determined by (a) historical
real returns, net of inflation, for the asset classes covered by
the investment policy, and (b) projections of inflation
over the long-term period during which benefits are payable to
plan participants. The expected long-term rate of return on plan
assets for the Companys funded pension plans was 7.41% for
the year ended December 31, 2008. Performance of the
capital markets affects the value of assets that are held in
trust to satisfy future obligations under the Companys
funded plans. Adverse market performance in the future could
result in lower rates of return for these assets than projected
by the Company which could increase the Companys funding
requirements related to these plans, as well as negatively
affect the Companys operating results by increasing the
net periodic benefit cost. A 25 basis point decrease in the
long-term return on pension plan assets assumption would
increase net periodic pension benefit cost by $171 for the year
ended December 31, 2008.
Another important assumption for our postretirement plan is
healthcare cost trend rates. We developed our estimate of the
healthcare cost trend rates through examination of the
Companys claims experience and the results of recent
healthcare trend surveys.
Assumptions for healthcare cost trend rates used to determine
the benefit obligation and net periodic benefit cost for our
postretirement plan as of and for the year ended
December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Net Periodic
|
|
|
|
|
Benefit
|
|
Benefit
|
|
|
Cost
|
|
Obligation
|
|
Healthcare trend rate assumed for next year
|
|
|
10.00
|
%
|
|
|
9.00
|
%
|
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate)
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Year that the rate reaches the ultimate trend rate
|
|
|
2014
|
|
|
|
2014
|
|
110
A one-percentage-point change in assumed healthcare cost trend
rates would have the following effects on the benefit obligation
for our postretirement plan and net periodic postretirement
benefit cost as of and for the year ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
(Decrease) on
|
|
|
|
|
|
|
Net Periodic
|
|
|
Increase
|
|
|
|
Postretirement
|
|
|
(Decrease) on
|
|
|
|
Benefit
|
|
|
Benefit
|
|
|
|
Cost
|
|
|
Obligation
|
|
|
One percentage point increase
|
|
$
|
80
|
|
|
$
|
742
|
|
One percentage point decrease
|
|
$
|
(71
|
)
|
|
$
|
(642
|
)
|
U.S. generally accepted accounting principles include
mechanisms that serve to limit the volatility in our earnings
which otherwise would result from recording changes in the value
of plan assets and benefit obligations in our combined financial
statements in the periods in which those changes occur. For
example, while the expected long-term rate of return on the
plans assets should, over time, approximate the actual
long-term returns, differences between the expected and actual
returns could occur in any given year. These differences
contribute to the deferred actuarial gains or losses, which are
then amortized over time.
See Note 11 to the Combined Financial Statements as of
December 31, 2008 for more information on our pension and
other postretirement benefit plans.
111
CORPORATE
GOVERNANCE AND MANAGEMENT
Corporate
Governance
We have applied to list our Class A Common Stock on The
NASDAQ Stock Market LLC under the symbol MSG.
General
Our Class A Common Stock will be listed on The NASDAQ Stock
Market LLC. As a result, we are generally subject to The
NASDAQ Stock Market LLC corporate governance listing
standards.
A listed company that meets The NASDAQ Stock Market LLC
definition of controlled company may elect not to
comply with certain of these requirements. Holders of
Cablevision NY Group Class B Common Stock who are members
of the Dolan family and certain related family entities entered
into a Stockholders Agreement relating, among other things, to
the voting of their shares of Cablevision NY Group Class B
Common Stock and filed a Schedule 13D with the SEC as a
group under the rules of the SEC. We have been
informed that prior to the Distribution, these parties will
enter into a similar stockholders agreement with respect to the
voting of their shares of the Class B Common Stock that
will be issued in the Distribution. As a result, following the
Distribution, we will be a controlled company. As a
controlled company, we will have the right to elect not to
comply with the corporate governance rules of The NASDAQ Stock
Market LLC requiring: (i) a majority of independent
directors on our Board and (ii) an independent corporate
governance and nominating committee. We expect our Board of
Directors to elect to be treated as a controlled
company under The NASDAQ Stock Market LLC corporate
governance rules and to elect not to comply with The NASDAQ
Stock Market LLC requirement for a majority independent
board of directors and for a corporate governance and nominating
committee because of our status as a controlled company.
In connection with the consideration of the Distribution by the
board of directors of Cablevision, a committee of the
Cablevision board, comprising two independent Class A
directors, recommended to the full Cablevision board of
directors the principal elements of our governance structure,
including the replication in our amended and restated
certificate of incorporation of the Cablevision common stock
voting structure, which the Cablevision board adopted as part of
its approval of the filing with the SEC of the registration
statement of which this information statement forms a part.
Cablevisions Class A directors also approved this
filing.
Corporate
Governance Guidelines
Our Board of Directors has adopted our Corporate Governance
Guidelines. These guidelines set forth our practices and
policies with respect to Board composition and selection, Board
meetings, executive sessions of the Board, Board committees, the
expectations we have of our directors, selection of the
Executive Chairman and the President and Chief Executive
Officer, management succession, Board and executive
compensation, and Board self-evaluation. The full text of our
Corporate Governance Guidelines may be viewed at our corporate
website at http://investor.msg.com. A copy may be obtained by
writing to Madison Square Garden, Inc., Two Penn Plaza, New
York, NY 10121; Attention: Corporate Secretary.
Executive
Sessions of Non-Management and Independent Board
Members
Under our Corporate Governance Guidelines, our directors who are
not also officers of our Company or any of its affiliates
(Non-management directors) are to meet at
least quarterly in executive sessions. If the Non-management
directors include any directors who are not independent under
The NASDAQ Stock Market LLC rules, then those directors who are
independent directors are to meet in executive sessions at least
twice a year. The Non-management directors will rotate as the
presiding director at these executive sessions.
Communicating
with Our Directors
Our Board has adopted policies designed to allow shareholders
and other interested parties to communicate with our directors.
Any interested party that wishes to communicate directly with
the Board or
112
any director or the Non-management directors as a group should
send communications in writing to Chairman of the Audit
Committee, Madison Square Garden, Inc., Two Penn Plaza, New
York, NY 10121. Any person, whether or not an employee, who has
a concern with respect to our accounting, internal accounting
controls or auditing issues, may, in a confidential or anonymous
manner, communicate those concerns to our Audit Committee by
contacting The Network, Inc., which has been designated to act
as a confidential contact organization for this purpose, at
1-877-756-4306.
Code
of Conduct and Ethics
Our Board of Directors has adopted a Code of Conduct and Ethics
for our directors, officers and employees. A portion of this
Code of Conduct and Ethics also serves as a code of conduct and
ethics for our senior financial officers and principal
accounting officers or controller. Among other things, our Code
of Conduct and Ethics covers conflicts of interest, disclosure
responsibilities, legal compliance, reporting and compliance
under the Code, confidentiality, corporate opportunities, fair
dealing, protection and proper use of assets, and equal
employment opportunity and harassment. The full text of the code
is available on our website at http://investor.msg.com. In
addition, a copy may be obtained by writing to Madison Square
Garden, Inc., Two Penn Plaza, New York, NY 10121; Attention:
Corporate Secretary.
Our
Directors
The following individuals are expected to serve as directors of
the Company commencing on or prior to the time of the
Distribution.
Directors
Elected by Class A Common Stockholders
RICHARD D. PARSONS, 61. Mr. Parsons is Senior Advisor for
Providence Equity Partners LLC since October 2009. Chairman of
Citigroup Inc. since January 2009. Chief Executive Officer of
Time Warner from 2002 to 2007; Chairman of Time Warner from 2003
to 2008;
Co-Chief
Operating Officer of AOL Time Warner from 2001 to 2002; and
President of Time Warner from 1995 to 2000. Chairman and Chief
Executive Officer of Dime Bancorp from 1990 to 1995; President
and Chief Operating Officer of the Dime from 1988 to 1990.
Partner of Patterson, Belknap, Webb & Tyler law firm
from 1979 to 1988. Mr. Parsons is a director of Estee
Lauder Companies and Citigroup Inc. He is a trustee of Howard
University, the Museum of Modern Art and the American Museum of
Natural History. Mr. Parsons is chairman of the Apollo
Theater Foundation and the Jazz Foundation of America.
ALAN D. SCHWARTZ, 59. Mr. Schwartz is Executive Chairman of
Guggenheim Partners, LLC since June 2009. Consultant for
Rothschild Inc. from 2008 to 2009. President of
Bear Stearns Companies Inc. from 2007 to 2008. Chief
Executive Officer of Bear Stearns Companies Inc. January 2008 to
March 2008. Co-President of Bear Stearns Companies Inc. from
2001 to 2007. President and
Co-Chief
Operating Officer of Bear Stearns & Co from 2001 to
2008. Mr. Schwartz is a director of Marvin &
Palmer Associates, Inc. He is a trustee of Duke University,
Chairman of the Board of the Robin Hood Foundation and a member
of the boards of Mentor, St. Vincents Services for
Children and NYU Medical Center.
VINCENT TESE, 66. Mr. Tese served as Chairman and Chief
Executive Officer of the New York State Urban Development
Corporation from 1985 to 1987 and as Director of Economic
Development for New York State from 1987 to December 1994.
Mr. Tese is Chairman of Wireless Cable International, Inc.
and is a director of Cablevision, Bowne & Company,
Inc., Cabrini Mission Society, Mack-Cali Realty Corp.,
IntercontinentalExchange, Inc., Municipal Art Society, NRDC
Acquisition Corp. and a trustee of New York Presbyterian
Hospital and New York University School of Law.
Directors
Elected by Class B Stockholders
CHARLES F. DOLAN, 83, Director of the Company since
July 29, 2009. Chairman of Cablevision since 1985. Chief
Executive Officer of Cablevision from 1985 to October 1995.
Founded and acted as the General Partner of Cablevisions
predecessor from 1973 to 1985. Established Manhattan Cable
Television in 1961 and Home Box Office in 1971. Mr. Dolan
serves as a director of Cablevision. Charles F. Dolan is the
father of
113
James L. Dolan, Deborah A. Dolan-Sweeney,
Marianne Dolan Weber and Thomas C. Dolan and
father-in-law
of Brad Dorsogna, Brian G. Sweeney and Kristin A. Dolan.
JAMES L. DOLAN, 54, Director of the Company since July 29,
2009. Executive Chairman of the Company since July 29,
2009. Chairman of Madison Square Garden since 1999. President of
Cablevision since June 1998. Chief Executive Officer of
Cablevision since October 1995. Chief Executive Officer of
Rainbow Media Holdings, Inc., a subsidiary of Cablevision, from
September 1992 to October 1995. Vice President of Cablevision
from 1987 to September 1992. Mr. Dolan will continue in his
role as President and Chief Executive Officer of Cablevision
following the Distribution. Mr. Dolan serves as a director
of Cablevision. James L. Dolan is the son of Charles F. Dolan,
the spouse of Kristin A. Dolan, the brother of
Deborah A. Dolan-Sweeney, Marianne Dolan Weber and Thomas
C. Dolan and the
brother-in-law
of Brad Dorsogna and Brian G. Sweeney.
KRISTIN A. DOLAN, 43, Senior Vice President of Cablevision since
June 2003. Kristin A. Dolan is the spouse of James L. Dolan, the
daughter-in-law
of Charles F. Dolan and the
sister-in-law
of Thomas C. Dolan, Marianne Dolan Weber, Brad Dorsogna,
Deborah A. Dolan-Sweeney and Brian G. Sweeney.
THOMAS C. DOLAN, 57, Executive Vice President-Strategy and
Development, Office of the Chairman of Cablevision since
September 2008. Executive Vice President and Chief Information
Officer of Cablevision from October 2001 until April 2005.
Senior Vice President and Chief Information Officer of
Cablevision from February 1996 to October 2001. Vice President
and Chief Information Officer of Cablevision from July 1994 to
February 1996. General Manager of Cablevisions East End
Long Island cable system from November 1991 to July 1994. System
Manager of Cablevisions East End Long Island cable system
from August 1987 to October 1991. Mr. Dolan serves as a
director of Cablevision. Thomas C. Dolan is the son of Charles
F. Dolan, the brother of James L. Dolan, Deborah A.
Dolan-Sweeney, and Marianne Dolan Weber and the
brother-in-law
of Brad Dorsogna, Brian G. Sweeney and Kristin A. Dolan.
DEBORAH A. DOLAN-SWEENEY, 46, Director of Dolan Family
Foundation since 1986. Director of Dolan Childrens
Foundation since 1997. Ms. Dolan-Sweeney serves as a
director of Cablevision. Deborah A. Dolan-Sweeney is the
daughter of Charles F. Dolan, the spouse of Brian G.
Sweeney, the sister of James L. Dolan, Marianne Dolan Weber and
Thomas C. Dolan and the
sister-in-law
of Brad Dorsogna and Kristin A. Dolan.
MARIANNE DOLAN WEBER, 52, President of Dolan Family Foundation
from 1986 to September 1999. Chairman of Dolan Family Foundation
since September 1999. President of Dolan Childrens
Foundation from 1997 to September 1999. Chairman of Dolan
Childrens Foundation since September 1999. Manager of
Dolan Family Office, LLC since 1997. Ms. Dolan Weber serves
as a director of Cablevision. Marianne Dolan Weber is the
daughter of Charles F. Dolan, the sister of James L. Dolan,
Deborah A. Dolan-Sweeney and Thomas C. Dolan and the
sister-in-law
of Brad Dorsogna, Brian G. Sweeney and Kristin A. Dolan.
BRAD DORSOGNA, 55, Owner and Executive Producer of Artistree
Productions since 1997. Mr. Dorsogna serves as a director
of Cablevision. Mr. Dorsogna is the
son-in-law
of Charles F. Dolan, and the
brother-in-law
of James L. Dolan, Thomas C. Dolan, Marianne Dolan Weber,
Deborah A. Dolan-Sweeney, Brian G. Sweeney and Kristin A.
Dolan.
BRIAN G. SWEENEY, 45, Senior Vice President eMedia
of Cablevision since January 2000. Mr. Sweeney serves as a
director of Cablevision. Brian G. Sweeney is the
son-in-law
of Charles F. Dolan, the
brother-in-law
of James L. Dolan, Marianne Dolan Weber, Thomas C. Dolan, Brad
Dorsogna and Kristin A. Dolan and the spouse of Deborah A.
Dolan-Sweeney.
The term of office of our directors will expire at the next
annual meeting of stockholders and at each succeeding annual
meeting after that. The business address for each director is
c/o Madison
Square Garden, Inc., Two Penn Plaza, New York, NY 10121 and each
director is a citizen of the United States. We will encourage
our directors to attend annual meetings of stockholders and
believe that attendance at annual meetings is just as important
as attendance at meetings of the Board.
114
Because we did not have any operations in 2009, were not
organized in 2009, our Board did not hold any meetings during
that year.
Director
Compensation
A director who is a Company employee will receive no extra
compensation for serving as a director. Each non-employee
director will receive a base fee of $50,000 per year; $2,000 per
Board, committee and non-management director meeting attended in
person; and $500 per Board, committee and non-management
director meeting attended by telephone. Non-employee directors
will also receive $5,000 annually per committee membership and
$10,000 annually per committee chairmanship.
We will also pay our non-employee directors compensation in
restricted stock units. Each year, each non-employee director
will receive a number of restricted stock units for the number
of shares of common stock equal to $110,000 divided by the fair
market value of a share of Class A common stock. The
restricted stock units the non-employee directors will receive
will be fully vested on the date of grant. Such compensation
will be made pursuant to our Stock Plan for Non-Employee
Directors. Please see Executive Compensation
Our Stock Plan for Non-Employee Directors for
information concerning our Stock Plan for Non-Employee Directors.
Board
Committees
The board will have two permanent committees: the Audit
Committee and the Compensation Committee.
Audit
Committee.
At the time of the Distribution, our Audit Committee will
consist of three members. The primary purposes and
responsibilities of our Audit Committee are: (a) to assist
the Board of Directors (i) in its oversight of the integrity of
our financial statements, (ii) in its oversight of our
compliance with legal and regulatory requirements, (iii) in
assessing our independent registered public accounting
firms qualifications and independence, and (iv) in
assessing the performance of our internal audit function and
independent registered public accounting firm; (b) to
decide whether to appoint, retain or terminate the
Companys independent auditors and to pre-approve, or to
adopt appropriate procedures to pre-approve, all audit,
audit-related and other services, if any, to be provided by the
independent registered public accounting firm; (c) to
review the appointment and replacement of the head of our
internal audit department; (d) to establish procedures for
the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls
or auditing matters and for the confidential, anonymous
submission by Company employees or any provider of accounting
related services of concerns regarding questionable accounting
and auditing matters and review of submissions and treatment of
any such complaints; (e) to conduct and review with the
Board an annual performance review of the Audit Committee; and
(f) to prepare any report of the Audit Committee required
by the rules and regulations of the SEC for inclusion in our
annual proxy statement. The text of our Audit Committee charter
is available on our website at http://investor.msg.com. A copy
may be obtained by writing to Madison Square Garden, Inc., Two
Penn Plaza, New York, NY 10121; Attention: Corporate Secretary.
We expect our Board of Directors to determine that each member
of our Audit Committee is independent within the
meaning of the rules of both The NASDAQ Stock Market LLC
and the SEC, has not participated in the preparation of the
financial statements of the Company or any current subsidiary of
the Company at any time during the past three years and is able
to read and understand fundamental financial statements,
including balance sheets, income statements and cash flow
statements. All directors we add to the Audit Committee in the
future will also meet these standards. We expect our Board to
also determine that at least one member of our Audit Committee
is an audit committee financial expert within the
meaning of the rules of the SEC.
Our Board has established a procedure whereby complaints or
concerns with respect to accounting, internal controls and
auditing matters may be submitted to the Audit Committee. This
procedure is described under Communicating with Our
Directors above.
Our Audit Committee did not exist in 2009.
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Compensation
Committee.
At the time of the Distribution, our Compensation Committee will
consist of not less than two members. We expect our Board of
Directors to determine that each member of our Compensation
Committee is independent under the rules of The
NASDAQ Stock Market LLC. The primary purposes of our
Compensation Committee are to: (a) establish our general
compensation philosophy and, in consultation with management,
oversee the development and implementation of compensation
programs; (b) review and approve corporate goals and
objectives relevant to the compensation of our President and
Chief Executive Officer and our executive officers other than
the President and Chief Executive Officer who are required to
file reports with the SEC under Section 16 of the
Securities Exchange Act of 1934 (together with the President and
Chief Executive Officer, the Senior Employees),
evaluate their performance in light of these goals and
objectives and determine and approve their compensation based
upon that evaluation; (c) approve any new equity
compensation plan or material changes to an existing plan;
(d) oversee the activities of the committee or committees
administering our retirement plans; (e) in consultation
with management, oversee regulatory compliance with respect to
compensation matters; (f) determine and approve any
severance or similar termination payments to be made to Senior
Employees (current or former); (g) review at least once
every three years the components and amount of Board
compensation in relation to other similarly situated companies;
(h) prepare any reports of the Compensation Committee to be
included in the Companys annual proxy statement; and (i)
conduct and review with the Board an annual performance review
of the Compensation Committee. The text of our Compensation
Committee charter is available on our website at
http://investor.msg.com. A copy may be obtained by writing to
Madison Square Garden, Inc., Two Penn Plaza, New York, NY 10121;
Attention: Corporate Secretary.
Our Compensation Committee did not exist in 2009.
Absence
of Nominating Committee
We will not have a nominating committee. We believe that it is
appropriate not to have a nominating committee because of our
stockholder voting structure. Under the terms of our amended and
restated certificate of incorporation, the holders of our
Class B Common Stock currently have the right to elect 75%
of the members of our Board. We believe that creating a
committee consisting solely of independent directors charged
with responsibility for recommending nominees for election as
directors would be inconsistent with the vested rights of the
holders of Class B Common Stock under our certificate of
incorporation. Instead, our Corporate Governance Guidelines
provide a mechanism for the selection of nominees for election
as directors by the holders of our Class A Common Stock
(Class A Directors) and by the holders of our
Class B Common Stock (Class B Directors).
The holders of our Class A Common Stock are currently
entitled to elect 25% of the members of our Board. Under our
Corporate Governance Guidelines, nominees for election as
Class A Directors shall be recommended to the Board by the
Class A Directors then in office who were elected by the
holders of our Class A Common Stock. Nominees for election
as Class B Directors shall be recommended to our Board by
the Class B Directors then in office who were elected by
the holders of the Class B Common Stock.
Our directors have not set specific, minimum qualifications that
nominees must meet in order for them to be nominated for
election to the Board, but rather believe that each nominee
should be evaluated based on his or her individual merits,
taking into account, among other matters, the factors set forth
in our Corporate Governance Guidelines under Board
Composition and Selection of Directors. Those
factors include:
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The desire to have a Board that encompasses a broad range of
skills, expertise, industry knowledge, diversity of viewpoints,
opinions, background and experience, and contacts relevant to
our business;
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Personal qualities and characteristics, accomplishments and
reputation in the business community;
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Ability and willingness to commit adequate time to Board and
committee matters; and
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The fit of the individuals skills and personality with
those of other directors and potential directors in building a
Board that is effective, collegial and responsive to the needs
of our Company.
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The Class A Directors will evaluate possible candidates to
recommend to the Board for nomination as Class A Directors
and suggest individuals for the Board to explore in more depth.
The Board will consider nominees for Class A Directors
recommended by our stockholders. Nominees recommended by
stockholders will be given appropriate consideration in the same
manner as other nominees. Stockholders who wish to
116
submit nominees for consideration by the Board for election at
our annual meeting of stockholders may do so by submitting in
writing such nominees names, in compliance with the
procedures and along with the other information required by our
By-laws. Any such nominee must be submitted to the Corporate
Secretary of the Company, at Madison Square Garden, Inc., Two
Penn Plaza, New York, NY 10121 not less than 60 or more
than 90 days prior to the date of our annual meeting of
stockholders, provided that if the date of the meeting is
publicly announced or disclosed less than 70 days prior to
the date of the meeting, such notice must be given not more than
ten days after such date is first announced or disclosed.
The Class B Directors will consult from time to time with
one or more of the holders of Class B Common Stock to
assure that all Class B Director nominees recommended to
the Board are individuals who will make a meaningful
contribution as Board members and will be individuals likely to
receive the approving vote of the holders of a majority of the
outstanding Class B Common Stock. The Class B
Directors do not intend to consider unsolicited suggestions of
nominees by holders of our Class A Common Stock. We believe
that this is appropriate in light of the voting provisions of
our amended and restated certificate of incorporation which vest
exclusively in the holders of our Class B Common Stock the
right to elect our Class B Directors.
Other
Committees
In addition to standing committees, the Company has adopted a
policy whereby a committee of our Board of Directors consisting
entirely of independent directors (an Independent
Committee) will review and approve or take such other
action as it may deem appropriate with respect to transactions
involving the Company and its subsidiaries, on the one hand, and
in which any director, officer, greater than 5% stockholder of
the Company or any other related person as defined
in Item 404 of
Regulation S-K
of the SEC (Item 404) has or will have a direct
or indirect material interest. This approval requirement covers
any transaction that meets the related party disclosure
requirements of the SEC as set forth in Item 404, which
currently apply to any transaction (or any series of similar
transactions) in which the amount involved exceeds $120,000. The
policy does not cover decisions on compensation or benefits or
the hiring or retention of any person. The hiring or retention
of executive officers is determined by our full Board of
Directors. Compensation of executive officers is subject to the
approval of our Compensation Committee. This policy also does
not cover any pro rata distributions to all Company
stockholders, including a pro rata distribution of our
Class A Common Stock to holders of our Class A Common
Stock and our Class B Common Stock to holders of our
Class B Common Stock. No director on an Independent
Committee will participate in the consideration of a related
party transaction with that director or any related person of
that director.
Our By-laws provide for the formation of an Executive Committee
of the Board of Directors which would have the power to exercise
all of the powers and authority of the Board in the management
of the business and affairs of the Company, except as limited by
the Delaware General Corporation Law. Our Board has not formed
an Executive Committee, although it could do so in the future.
Our
Executive Officers
The following individuals are expected to serve as our executive
officers at the time of the Distribution. Additional executive
officers are expected to be appointed.
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James L. Dolan(1)
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Executive Chairman
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Hank J. Ratner
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President and Chief Executive Officer
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Robert M. Pollichino
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Executive Vice President and Chief Financial Officer
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Lawrence J. Burian
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Executive Vice President, General Counsel and Secretary
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(1)
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The biography for James L. Dolan is on page 114 of this
information statement.
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HANK J. RATNER, 50, President and Chief Executive Officer of the
Company since July 29, 2009. Vice Chairman of Madison
Square Garden from November 2003 until the Distribution date.
Vice Chairman of Cablevision since December 2002. Vice Chairman
of Rainbow Media Holdings, LLC, a subsidiary of Cablevision,
since June 2002. Director of Rainbow Media Holdings, Inc. from
April 1997 to September 2003.
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Chief Operating Officer of Rainbow Media Holdings, Inc. from
October 1999 to June 2002. Chief Operating Officer and Secretary
of Rainbow Media Holdings, Inc. from October 1998 to October
1999. Executive Vice President & Secretary of Rainbow
Media Holdings, Inc., a subsidiary of Cablevision, from October
1997 to October 1998. Executive Vice President Legal &
Business Affairs and Secretary of Rainbow Media Holdings, Inc.
from July 1993 to October 1997. Mr. Ratner will continue as
Vice Chairman of Cablevision following the Distribution.
ROBERT M. POLLICHINO, 55, Executive Vice President and Chief
Financial Officer of the Company since July 29, 2009.
Executive Vice President, Finance of Madison Square Garden from
July 1998 until the Distribution date. Senior Vice President of
Rainbow Sports, a subsidiary of Rainbow Media Holdings, Inc.,
from November 1993 to June 1998. Vice President and General
Manager of SportsChannel Associates from June 1988 to October
1993. Vice President, Finance and Administration of Cablevision
Program Enterprises, the predecessor of Rainbow Media Holdings,
Inc. from January 1980 to May 1988. Director, Finance of
Cablevision Systems Corporation from March 1977 to December
1980. All of the foregoing companies are indirect subsidiaries
of Cablevision.
LAWRENCE J. BURIAN, 40, Executive Vice President, General
Counsel and Secretary of the Company since
January , 2010. Senior Vice President,
Associate General Counsel and Business Affairs of Cablevision
from January 2005 until the Distribution date. Vice President
and Associate General Counsel of Cablevision from February 2002
to December 2005. Assistant General Counsel of Cablevision from
February 2000 to January 2002. Associate at Davis
Polk & Wardwell LLP from August 1995 to February 2000
and September 1994 to January 1995. Law Clerk to Justice Aharon
Barak, Deputy President (later President) of the Supreme Court
of Israel from January 1995 to June 1995.
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EXECUTIVE
COMPENSATION
Introduction
This section presents information concerning compensation
arrangements for our executive officers. We present historical
information concerning the compensation of Messrs. James L.
Dolan, Hank J. Ratner and Robert M. Pollichino, each of whom was
or has been an executive of Madison Square Garden.
Messrs. Dolan and Ratner are also named executive officers
of Cablevision. The historical compensation information,
including in particular the information set forth below under
Historical Compensation Information, is not directly
relevant to the compensation that these officers will receive
from the Company. With respect to future compensation, we have
presented information below under Key Elements of 2010
Expected Compensation from the Company concerning the
compensation that Messrs. Dolan, Ratner and Pollichino will
receive from the Company under employment agreements which each
officer has entered into with the Company and which become
effective on the Distribution date. We have presented similar
information for Lawrence J. Burian, who will be an executive
officer of the Company but was not, prior to the Distribution, a
named executive officer of Cablevision or an officer of Madison
Square Garden. Mr. Burian is also party to an employment
agreement with the Company which will become effective on the
Distribution date. Information concerning the Companys
employment agreements with these executive officers is set forth
below under Employment Agreements.
Each of Messrs. Dolan, Ratner, Pollichino and Burian hold
various cash and equity based long-term incentive awards that
were granted by Cablevision. Treatment of these in the
Distribution is described under Treatment of Outstanding
Options, Rights, Restricted Stock, Restricted Stock Units and
Other Awards.
Compensation
Discussion and Analysis
This Compensation Discussion and Analysis describes the specific
arrangements that the Company has in place for its named
executive officers as well as a discussion of Cablevisions
compensation philosophy for its named executive officers for
2009. Cablevisions compensation philosophy may be relevant
to the Company because it is anticipated that the elements of
our compensation will be similar to the elements of
Cablevisions compensation. However, our Compensation
Committee will review the impact of the separation and will
review all aspects of compensation and make appropriate
adjustments.
For purposes of this Compensation Discussion and Analysis, the
Companys named executive officers are James L. Dolan, Hank
J. Ratner, Robert M. Pollichino and Lawrence J. Burian. These
individuals are referred to collectively as Named Executive
Officers (NEOs). We have not identified other
executive officers although we expect one or more additional
executive officers will be appointed. Messrs. Dolan and
Ratner are also named executive officers of Cablevision and each
of them will continue as an officer of Cablevision following the
Distribution. We have entered into an employment agreement with
each of our NEOs. See Employment Agreements. Messrs.
Dolan and Ratner have also entered into new employment
agreements with Cablevision.
Compensation
Consultant
In accordance with their charters, Cablevisions
compensation committee has and our Compensation Committee will
have the authority to engage outside consultants to assist in
the performance of duties and responsibilities.
Cablevisions compensation committee uses a compensation
consultant to assist the Cablevision compensation committee in
determining whether the elements of Cablevisions executive
compensation program are reasonable and consistent with
Cablevisions objectives. The compensation consultant
advises Cablevisions compensation committee on designing
Cablevisions executive compensation program and the
reasonableness of individual compensation awards. The
compensation consultant reports directly to Cablevisions
compensation committee, although the compensation consultant
meets with members of Cablevisions management from time to
time for purposes of gathering information on management
proposals and recommendations to be presented to
Cablevisions compensation committee.
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As part of its ongoing engagement, the compensation consultant,
Executive Compensation Advisors, a Korn/Ferry company
(ECA), conducted a review of Cablevisions 2008
executive compensation to assist Cablevisions compensation
committee in determining compensation programs and decisions for
2009. The lead individual who performed these services on behalf
of ECA formed ClearBridge Compensation Group
(ClearBridge) in September 2009. The Cablevision
compensation committee has retained ClearBridge to assist in
designing and establishing the Companys executive
compensation program. Our Compensation Committee is also
expected to engage a compensation consultant to assist our
Compensation Committee in making compensation decisions in the
future.
Cablevision
Compensation Overview and Philosophy
Cablevisions executive compensation program is designed to
meet the following key objectives:
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The majority of compensation for Cablevisions executive
officers should be at risk and based on the performance of
Cablevision, so that actual compensation levels depend upon the
Cablevisions actual performance as determined by its
compensation committee.
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Over time, incentive compensation of Cablevisions
executive officers should focus more heavily on long-term rather
than short-term accomplishments and results.
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Equity-based compensation should be used to align
Cablevisions executive officers with the
stockholders interests.
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The overall executive compensation program should be
competitive, equitable and structured so as to ensure
Cablevisions ability to attract, retain, motivate and
reward the talented executives who are essential to
Cablevisions continuing success. Total direct
compensation, rather than individual compensation elements, is
the focus in providing competitive compensation opportunities.
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Cablevision
Elements of In-Service Compensation
Cablevisions compensation committee seeks to fulfill the
objectives described above by maintaining appropriate balances
between (1) short-term and long-term compensation,
(2) cash and equity compensation, and
(3) performance-based and non-performance-based
compensation. We expect to use a similar mix of these
compensation elements.
The Cablevision executive compensation program consists of three
principal elements: base salary, annual cash incentives and
long-term incentives. In addition, each executive officer is
also eligible to receive certain benefits, which are generally
provided to all other eligible employees, and certain
perquisites described below.
A significant percentage of total direct compensation is
allocated to incentive compensation in accordance with the
philosophy of Cablevisions compensation committee as
described above. Cablevisions compensation committee
reviews historical Cablevision compensation and other
information provided by its compensation consultant and other
factors such as experience, performance and length of service to
determine the level and mix of compensation for its executive
officers, by position and grade level, that the Cablevision
compensation committee has deemed appropriate.
Base
Salaries
The Cablevision compensation committee was responsible for
setting the base salaries of Messrs. Dolan and Ratner in
2009. Base salaries for Cablevisions named executive
officers have been set at levels that are intended to reflect
the competitive marketplace in attracting and retaining quality
executives. The Cablevision employment agreements of
Messrs. Dolan and Ratner contain a minimum base salary
level. Cablevisions compensation committee reviews the
salaries of its named executive officers no less frequently than
on an annual basis. Cablevisions compensation committee
evaluates each of its executives performance, experience
and grade level and may increase its executive salaries. Based
on their performance and in accordance with the terms of the
Cablevision employment agreements, the Cablevision compensation
committee, in its discretion, has increased base salaries for
certain of its executive officers over time. Based on evaluation
of performance, experience, grade level, and the competitive
marketplace, Cablevisions compensation committee reviewed
the base salaries of
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Messrs. Dolan and Ratner in 2009. Cablevisions
compensation committee increased the base salary of
Mr. Dolan in 2009 by $72,000, from $1,800,000 in 2008 to
$1,872,000 in 2009. Cablevisions compensation committee
increased the base salary of Mr. Ratner in 2009 by $63,000,
from $1,575,000 in 2008 to $1,638,000 in 2009.
Robert M. Pollichino was not an executive officer of
Cablevision in 2009. As an employee of Madison Square Garden,
Mr. Pollichinos 2009 base salary was reviewed by the
Companys executive management, working within guidelines
and procedures established by Cablevisions compensation
committee. Mr. Pollichinos base salary for 2009 was
increased by $22,400, from $560,000 in 2008 to $582,400 in 2009.
Pursuant to their employment agreements with the Company, the
Companys NEOs will receive the following base
salaries from the Company for 2010: Mr. Dolan
$500,000, Mr. Ratner $1,200,000,
Mr. Pollichino $700,000 and
Mr. Burian $600,000. As Mr. Dolan and
Mr. Ratner will remain as officers and employees of
Cablevision following the Distribution, they will also receive
annual base salaries from Cablevision.
Annual
Incentives
Under Cablevisions executive compensation program, annual
incentive awards, or bonuses, are made to its executive officers
and other members of Cablevision management. For the Cablevision
individuals that the compensation committee determines may be
covered by Section 162(m) of the Internal Revenue Code, as
amended, 2009 bonuses were granted under Cablevisions 2006
Cash Incentive Plan (Cablevision CIP), a stockholder
approved plan. For all other members of management, bonuses were
granted under a management performance incentive program
(Cablevision MPIP) administered by the compensation
committee.
Cablevisions annual incentive awards are designed to link
directly executive compensation to performance and provide
incentives and rewards for excellent business performance during
the year. Each bonus-eligible employee is assigned a target
bonus of a percentage of that employees annual base
salary. The target bonuses are determined based upon the
applicable employees position, grade level,
responsibilities, and historical and expected future
contributions to Cablevision. In addition, the Cablevision
employment agreements of Messrs. Dolan and Ratner contain a
minimum target bonus level. Cablevisions compensation
committee currently reviews the target bonus levels of its named
executive officers no less frequently than on an annual basis.
Cablevisions compensation committee evaluates each of its
executives performance, experience and grade level and may
adjust executive target bonus levels accordingly. Based on their
performance and in accordance with the terms of the Cablevision
employment agreements, Cablevisions compensation
committee, in its discretion, has increased target bonus levels
for Messrs. Dolan and Ratner over time. Similarly,
Mr. Pollichinos target bonus level has also been
increased by the Companys executive management over time.
Target bonuses for 2009 were as follows (expressed as a
percentage of base salary): Mr. Dolan 200%,
Mr. Ratner 200%, and Mr. Pollichino
60%. In respect of 2009, bonuses paid to Mr. Dolan and
Mr. Ratner will be pursuant to the Cablevision CIP and
bonuses paid to Mr. Pollichino will be pursuant to the
Cablevision MPIP.
The payment of annual incentive awards depends on the extent to
which Cablevision achieves performance objectives established by
Cablevisions compensation committee (subject to the
discretion of Cablevisions compensation committee to
reduce the incentive award).
Pursuant to their employment agreements with the Company, the
Companys named executive officers have the following
target bonus levels for 2010 bonuses, if any, that may be paid
by the Company (expressed as a percentage of base salary): Mr.
Dolan 200%; Mr. Ratner 200%;
Mr. Pollichino 60% and
Mr. Burian 60%. As Mr. Dolan and Mr. Ratner
will remain as officers and employees of Cablevision following
the Distribution, they are also eligible to receive annual
bonuses from Cablevision.
Long-Term
Incentives
Cablevisions executive compensation program is designed to
achieve the objectives described above. Its core long-term
incentive program in 2008 consisted of two elements: restricted
stock and cash performance awards. These long-term incentives
were awarded to members of management based upon each
individuals
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grade level. Cablevision believed restricted stock would provide
its executive officers with an incentive to improve
Cablevisions stock price performance and a direct
alignment with stockholders interests, as well as a
continuing stake in the long-term success of Cablevision. The
cash performance awards also would provide strong incentives for
the executives to help Cablevision achieve specific long-term
financial objectives. In addition, because these equity and cash
awards would vest over time, Cablevision believes these awards
would provide strong incentives for the executives to remain
with Cablevision. In 2008, Messrs. Dolan and Ratner
received approximately 40% of the value of their total long-term
incentive award in restricted stock and approximately 60% of the
value of their total long-term incentive award as cash
performance awards. In 2009, Cablevision changed the long-term
incentive program for its most senior executives, including
Messrs. Dolan and Ratner, and added stock options as a
third long-term incentive element for those executives, while
maintaining the same target long-term incentive compensation
value based upon each individuals grade level. Cablevision
believes adding stock options for those executives reinforces
alignment with stockholders interests. As a result of the
change in the long-term incentive program, in 2009,
Messrs. Dolan and Ratner received approximately 40% of the
value of their total long-term incentive awards in stock
options, approximately 30% in restricted stock and approximately
30% of the value of their long-term incentive awards as cash
performance awards. Mr. Pollichino does not receive stock
options under the current Cablevision program. In 2008,
Mr. Pollichino received approximately 50% of the value of
his total long-term incentive award in restricted stock and
approximately 50% of the value of his total long-term incentive
award as a cash performance award.
Grants of long-term incentives are made under Cablevisions
stockholder-approved plans. Prior to 2006, restricted stock,
stock options and stock appreciation rights awards were granted
under Cablevisions 1996 Amended and Restated Employee
Stock Plan, which expired by its terms in February 2006. This
plan was replaced by Cablevisions 2006 Employee Stock
Plan, which was approved by stockholders at Cablevisions
annual meeting in May 2006. Cash awards have been made under
Cablevisions Long-Term Incentive Plan, which was replaced
by the Cablevision CIP in May 2006.
As discussed below under Employment Agreements, the
employment agreements of Messrs. Dolan and Ratner with the
Company provide for long-term incentive awards with a targeted
value for 2010 of $1,750,000 and $5,400,000, respectively. The
employment agreements of Messrs. Pollichino and Burian with
the Company reflect the Companys expectation that they
will receive long-term incentive awards with a targeted value
for 2010 of $950,000 and $650,000 respectively. The actual
amount of these awards and their form or forms will be as
determined by our Compensation Committee. In addition, under his
employment agreement with the Company, Mr. Ratner will receive
no later than March 31, 2010, a one-time equity or
equity-based award, in such form or forms as determined by the
Companys Compensation Committee having a value of
$4,750,000, which will be subject to forfeiture restrictions
expiring on the third anniversary of the grant and, if other
than stock options and SARs, will be subject to the satisfaction
of performance objectives set forth in his employment agreement.
Restricted
Stock
Under Cablevisions executive compensation program, annual
grants of restricted stock are made to its executive officers
and other members of Cablevisions management. An award of
restricted stock provides the recipient with a specified number
of shares of Cablevision NY Group Class A Common Stock as
long as the recipient remains employed by Cablevision through
the date that the restrictions lapse. Under the current
executive compensation program, restricted stock awards will
vest in their entirety on the third anniversary of the date of
grant as long as the recipient is continuously employed in order
to conform the vesting periods of each type of long-term
incentive being granted under the Cablevision executive
compensation program. Grants by Cablevision of restricted stock
made prior to 2006 generally vest at the end of a four-year
period, subject to certain limited exceptions. Information
regarding restricted stock awards for Messrs. Dolan, Ratner
and Pollichino in 2009 is set forth in the Summary Compensation
Table below. More information regarding other restricted stock
grants for Messrs. Dolan, Ratner and Pollichino appears in
the Outstanding Cablevision Equity Awards at 2009 Fiscal
Year-End Table below. See Treatment of
Outstanding Options, Rights, Restricted Stock, Restricted Stock
Units and Other Awards for a discussion of the impact of
the Distribution on Cablevision restricted stock.
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Performance
Awards
The current Cablevision executive compensation program
contemplates annual grants of three-year performance awards to
its executive officers and other members of Cablevisions
management to be earned on the basis of long-term performance
relative to pre-established financial goals. Cablevisions
compensation committee sets the performance objectives for each
award in the first quarter of the year of grant. Each recipient
will be eligible to receive a specified dollar amount, depending
on the employees grade level, to the extent that the
performance objectives are achieved.
The performance awards granted in 2009 will be payable in 2012
if Cablevision achieves specified targets of net revenues or
adjusted operating cash flow in the year ending
December 31, 2011. The target levels of net revenues and
adjusted operating cash flow were derived from
Cablevisions five-year plan for its operating business
units presented to the Cablevision board of directors in
connection with Cablevisions 2009 annual budget and risk
adjusted as approved by the compensation committee. These
targets were intended to measure ongoing operating performance
of Cablevision and are subject to various adjustments such as
for acquisitions and dispositions and investments in new
business initiatives and exclude all charges for long-term
performance based compensation. In determining achievement of
the 2009 performance awards, each performance measure is
weighted equally. The awards provide for a potential payout on a
sliding scale such that the actual payment may range from zero
(if both incremental operating business unit net revenues and
incremental operating business unit adjusted operating cash flow
fail to reach at least 60% of the targets) to 200% (if, for
example, both incremental operating business unit net revenues
and operating business unit adjusted operating cash flow equal
or exceed 120% of the targets). If Cablevision does not achieve
threshold levels of performance, the award does not provide for
any payment. If Cablevision exceeds threshold levels but does
not achieve the targeted rates, or if Cablevision achieves one
target but not both, the award provides for partial payments. In
addition, if results exceed the desired targets, recipients will
be rewarded for the exceptional performance. Based on the
experience and grade level of Messrs. Dolan and Ratner in
2009, Cablevisions compensation committee granted
Messrs. Dolan and Ratner performance awards with targeted
amounts of $2,235,000 and $1,995,000, respectively.
Mr. Pollichinos performance award in 2009 was based
on his grade level with a targeted amount of $250,000.
Cablevision performance awards for Messrs. Dolan, Ratner
and Pollichino granted in 2009 are set forth in the Grants of
Cablevision Plan-Based Awards Table below.
Because the targets for all performance awards have been derived
from Cablevisions confidential five-year strategic plans,
which are not disclosed publicly for competitive reasons,
Cablevision does not believe it is appropriate to disclose
specific numerical targets. Disclosure of these targets could
provide information that could lead to competitive harm to
Cablevision. Cablevision believes that its five-year plans, and
consequently the targets set for the performance awards, are
ambitious and reflect desired above-market performance. In
determining the threshold levels of performance,
Cablevisions compensation committee considered, among
other factors, Cablevisions five-year plan and the degree
of difficulty in achieving the targets, including a comparison
of the five-year plan with analysts published projections
of our growth as well as of some of our competitors. The 2009
performance award includes a sliding scale of payouts based upon
the levels of incremental net revenues and adjusted operating
cash flow. Cablevision believes that the lowest levels on the
sliding scale should be achieved, although there can be no
assurance this will occur. As the payout scale increases, the
likelihood of achievement decreases and the payouts increase.
Cablevisions compensation committee has the authority to
amend or waive the performance targets under these awards and to
make interpretations and adjustments thereto.
See Treatment of Outstanding Options, Rights,
Restricted Stock, Restricted Stock Units and Other Awards
for a discussion of the impact of the Distribution on
Cablevision performance awards.
Stock
Options
Under Cablevisions 2009 executive compensation program,
Cablevision issued stock options to its most senior executives,
including Messrs. Dolan and Ratner, in addition to
restricted stock and cash performance awards. Cablevisions
executive compensation program for other Cablevisions
executive officers and members of Cablevisions management
continues to consist of two types of long-term incentives:
restricted stock and
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cash performance awards. Each stock option granted in 2009 was
granted with an exercise price no less than the closing price of
Cablevision NY Group Class A Common Stock on the date
of grant. Stock options will have value only if, and to the
extent that, the price of Cablevision NY Group Class A
Common Stock on the date the stock option is exercised exceeds
this exercise price.
Under Cablevisions executive compensation program, prior
to 2007, annual grants of stock options were made to
Messrs. Dolan and Ratner. Each stock option was required to
be granted with an exercise price no less than the closing price
of Cablevision NY Group Class A Common Stock on the
date of grant. Stock options will have value only if, and to the
extent that, the price of Cablevision NY Group Class A
Common Stock on the date the stock option is exercised exceeds
this exercise price.
Generally, the stock options vest over three years in
33
1
/
3
%
annual increments and expire 10 years from the grant date;
however, stock options granted to Messrs. Dolan and Ratner in
2009 had a
5
1
/
2
year term. More information regarding other stock option grants
to Messrs. Dolan, Ratner and Pollichino appears in the
Outstanding Cablevision Equity Awards at 2009 Fiscal Year-End
Table below. See Treatment of Outstanding
Options, Rights, Restricted Stock and Other Awards for a
discussion of the impact of the Distribution on Cablevision
stock options.
Other
Types of Awards in Prior Years
In the past, Cablevision has issued other types of long-term
incentives to its executive officers and other members of
Cablevision management, such as performance-based stock options,
stock appreciation rights, performance retention awards and
deferred compensation awards.
Under Cablevisions former executive compensation program,
grants of stock appreciation rights were made to its executive
officers and other members of Cablevision management. Stock
appreciation rights are the right to receive the appreciation in
the value of Cablevision NY Group Class A Common Stock
over a specified period of time. Upon exercise of a stock
appreciation right, the award recipient will receive an amount
of cash, common stock or a combination of cash and common stock
equal to the amount of the appreciation. Historically,
Cablevision granted stock appreciation rights in tandem with
options. Each stock appreciation right was required to be
granted with an exercise price no less than the closing price of
a share of Cablevision NY Group Class A Common Stock
on the date of grant; for a tandem stock appreciation right, the
exercise price is equal to the exercise price per share of the
related option. Generally the stock appreciation rights vest
over three years in
33
1
/
3
%
annual increments and expire 10 years from the grant date.
More information regarding Cablevision stock appreciation right
grants for Messrs. Dolan and Ratner appears in the
Outstanding Cablevision Equity Awards at 2009 Fiscal Year-End
Table below. See Treatment of Outstanding
Options, Rights, Restricted Stock and Other Awards for a
discussion of the impact of the Distribution on Cablevision
stock appreciation rights.
Cablevisions former executive compensation program also
included special retention incentives called deferred
compensation awards. Although Cablevision referred to these
awards as deferred compensation awards, it does not
believe that they constitute deferred compensation
under Section 409A of the Internal Revenue Code. These
awards were generally made to its executive officers and other
members of Cablevision management. The purpose of these deferred
compensation awards was to attract and retain senior executives.
Messrs. Dolan, Ratner and Pollichino received these awards
in October 2004.
The Cablevision deferred compensation awards contemplated an
initial award amount for each recipient of $500,000. Each year,
on the anniversary date of the award, the award amount grows by
an additional amount equal to the lesser of 20% of the
individuals annual base salary in effect at that time and
$150,000. In addition, the award amount is increased by
quarterly interest, at an annual interest rate equal to the
average of the one-year LIBOR fixed-rate equivalent for the ten
business days immediately preceding October 1st of
each year. The deferred compensation award is paid in
installments: 50% of the then current award amount was paid on
the fifth anniversary of the effective date of the award
(October 2009 for Messrs. Dolan, Ratner and Pollichino),
and the balance of the then current award amount is payable on
the seventh anniversary of the effective date (October 2011 for
Messrs. Dolan, Ratner and Pollichino), so long as the
recipient continues to be employed. Information regarding the
Cablevision deferred compensation awards of Messrs. Dolan,
Ratner and Pollichino is set forth in the Summary Compensation
Table below. See Treatment of Outstanding
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Options, Rights, Restricted Stock and Other Awards for a
discussion of the impact of the Distribution on Cablevision
deferred compensation awards.
Benefits
Cablevision offers benefits to its executive officers generally
to provide for retirement income and serve as a safety net
against hardships that can arise from illness, disability or
death.
Cablevisions executive officers are eligible to
participate in the same health and welfare benefit plans made
available to the other benefits-eligible employees of
Cablevision, including, for example, medical, dental, vision,
life insurance and disability coverage.
For a description of Cablevisions defined benefit plans
and defined contribution plans, please see
Pension Plans,
Cablevision Cash Balance Pension Plan,
Cablevision Excess Cash Balance Plan,
Cablevision 401(k) Plan and
Cablevision Excess Savings Plan below.
As an employee of Madison Square Garden, Mr. Pollichino has
also accrued benefits under the Madison Square Garden, L.P.
Retirement Plan and the Madison Square Garden, L.P. Excess
Retirement Plan. For a description of these plans, please see
Pension Benefits Madison Square
Garden, L.P. Retirement Plan, and
Pension Benefits Madison Square
Garden, L.P. Excess Retirement Plan below.
In addition to the above employee benefit plans,
Mr. Pollichino is also eligible for benefits under the
Madison Square Garden Retiree Medical Program, which provides
continued medical coverage to employees who (i) were hired
prior to January 1, 2002, (ii) retire after
age 55 with at least 10 years of service,
(iii) commence payments under the Madison Square Garden,
L.P. Retirement Plan and (iv) are eligible for the
Companys active medical plan on the day before the
retirement date. The program is self-funded and participants pay
25% of the cost of pre-65 coverage and 100% of post-65 coverage.
Following the Distribution, we expect to offer health and
welfare benefits and retirement plans that are substantially
similar to the existing benefits and plans. See
Our Retirement Benefits.
In addition to the standard life insurance available to all
Cablevision employees (based on a multiple of base salary, up to
a $4,000,000 cap on the total amount of life insurance),
Cablevision purchased whole life insurance policies for certain
current and former senior executives of Cablevision, including
Messrs. Dolan and Ratner. The policies originally provided
coverage (before the application of any dividends to purchase
increased insurance) in the amount of the greater of three times
the individuals annual base salary as in effect in 1996 or
the estimated death benefit provided under previous policies. As
of each respective policys 2009 anniversary date, the
policies provided estimated death benefits for these executives
in the following amounts: Mr. Dolan $1,826,117;
and Mr. Ratner $942,704. Based on current
projections, Cablevision believes the policies for
Mr. Dolan are fully funded and Cablevision does not
anticipate the need to make any additional premium payments. The
expected death benefits are expected to grow over time to the
extent that the dividends payable on the policy values exceed
the premiums required to fund the death benefit. Information
regarding premiums paid by Cablevision with respect to
Messrs. Dolan and Ratner is set forth in the Summary
Compensation Table below. This program will not become a
responsibility of the Company.
Perquisites
Cablevision provides certain perquisites to its executive
officers as described below. The approximate aggregate value of
Cablevision perquisites received by Messrs. Dolan, Ratner
and Pollichino in 2009 is set forth in the Summary Compensation
Table below. Following the Distribution, we expect to provide
certain perquisites to our eligible employees and executive
officers as described below.
Telecommunications
Services
Cablevision perquisites include access to telecommunications
services (cable television, high-speed data and voice) at no
monthly cost to its employees, including its executive officers,
living in Cablevisions service area. Certain Cablevision
employees living outside the service area are eligible for
reimbursement of certain
125
costs in purchasing similar services. The services provided vary
depending on the grade level of the Cablevision employee.
Cablevision also provides access to purchase tickets to events
at Company venues.
It is currently expected that for a period of two months
following the Distribution, as Company employees, our executive
officers will continue to have access to the telecommunications
benefit they received from Cablevision immediately prior to the
Distribution. Following the Distribution, and for such time as
they are employed by Cablevision, Mr. Dolan and
Mr. Ratner are expected to continue to receive
telecommunications benefits as Cablevision employees.
Executive
Security
In order to address the security concerns of Cablevision,
Cablevision has established an executive security program for
the protection of certain of its executive officers, including
Messrs. Dolan and Ratner. Recommendations of a third-party
security expert have been implemented for office, home and
travel, at Cablevisions cost, to the extent approved by
the compensation committee. Because certain of these costs can
be viewed as conveying personal benefits to Cablevisions
executive officers, they are reported as perquisites.
Following the Distribution, the Company may provide executive
security services to certain of its executive officers. Such
services are expected (at least initially) to be obtained from
Cablevision pursuant to the Transition Services Agreement, and
the Company will pay an allocation of the costs for such
services.
Car and
Driver
In connection with Cablevisions executive security
program, Mr. Dolan has a Cablevision car and driver
assigned to him on a full-time basis, which he is permitted to
use for his personal use in addition to business purposes. In
addition, certain Cablevision executive officers and members of
management have used Cablevision cars and drivers on a limited
basis for personal use.
To the extent Cablevision employees use a Cablevision car and
driver for personal use, those employees are imputed
compensation for tax purposes. For compensation reporting
purposes, the benefit attributable to the personal use of
Company cars is valued at a portion of the cost of the driver
and car plus car maintenance, fuel and other related costs,
based on an estimated percentage of use.
Following the Distribution, the Company may provide car and
driver services to certain of its executive officers. Under
Mr. Ratners employment agreement with the Company, he
is to be provided with a car and driver appropriate to his
status and responsibilities. Such services are expected (at
least initially) to be obtained from Cablevision pursuant to the
Transition Services Agreement, and the Company will pay an
allocation of the costs for such services.
Aircraft
Cablevision owns and operates passenger helicopters and leases
and operates a jet to facilitate business travel of senior
executives. In connection with its executive security program,
it is recommended that certain of Cablevisions executive
officers, including Messrs. Dolan and Ratner, use the
aircraft for all travel whenever practical.
Generally, Mr. Dolan is permitted to use the helicopters
and jet for personal travel. In addition, certain other
Cablevision executive officers and other members of its
management are permitted to use the helicopters and jet for
personal travel upon the approval of Cablevisions Chief
Executive Officer or his designee. Mr. Ratner is permitted
to use the Cablevision jet for up to 35 flight hours annually
for personal travel, subject to reimbursement of the Company as
described below. Personal use of the helicopters by
Cablevisions executives has primarily been for purposes of
commutation.
To the extent any employee uses any of the aircraft for personal
travel without reimbursement, they are imputed compensation for
tax purposes. This personal use is valued at the Standard
Industry Fare Level rates that are published biannually by the
IRS. For compensation reporting purposes, Cablevision valued the
incremental cost of the personal use of the aircraft based on
the variable costs incurred by Cablevision net of reimbursements
received by executives. The incremental cost of the use of the
aircraft does not include any
126
costs that would have been incurred by Cablevision whether or
not the personal trip was taken, such as lease and insurance
payments, pilot salaries and other overhead costs.
In connection with any personal travel on the Cablevision jet,
Mr. Dolan reimburses Cablevision for the actual expenses of
each specific flight at the maximum amount Cablevision may
legally charge under Part 91 of the Federal Aviation
Regulations.
In connection with any personal travel on the Cablevision jet,
Mr. Ratner reimburses Cablevision for the actual expenses
of each specific flight at a rate no greater than the maximum
amount Cablevision may legally charge under Part 91 of the
Federal Aviation Regulations.
Following the Distribution, it is anticipated that certain of
the Companys executive officers will be permitted to use
Cablevisions helicopters for personal use, primarily for
commuting purposes. The Company will reimburse Cablevision for
such use.
Other
Generally, certain of the Cablevision executive officers have,
from time to time, used Cablevisions travel department to
make their personal travel arrangements. For compensation
reporting purposes, Cablevision valued the incremental cost of
personal use of the travel department as a portion of the cost
of the travel department employees and related overhead, based
on the time spent making the arrangements.
From time to time, senior executives have access to tickets to
sporting events and other entertainment at Cablevision venues,
at no cost.
Following the Distribution, we may provide similar and
additional perquisites to certain of our executive officers or
senior executives as determined by our Compensation Committee.
Post-Termination
Compensation
Cablevision believes that its post-termination benefits
described below are integral to Cablevisions ability to
attract and retain qualified executives. Following the
Distribution, we expect to provide post-termination benefits for
our executives See Employment Agreements
for a description of the severance arrangements we have agreed
to provide to each of our NEOs.
Under certain circumstances, payments or other benefits may be
provided by Cablevision to employees upon the termination of
their employment with Cablevision. The amount and type of any
payment or benefit will depend upon the circumstances of the
termination of employment. These may include termination by
Cablevision without cause, termination by the employee for good
reason, other voluntary termination by the employee, retirement,
death, disability, or termination following a change in control
of Cablevision or following a going-private transaction. The
definitions of cause and good reason
vary among the different Cablevision employment agreements with
executive officers and the Cablevision award agreements. The
Distribution is not a change in control under the Cablevision
employment agreements for Messrs. Dolan and Ratner.
The Cablevision award agreements regarding the various long-term
incentives also address employment termination events, including
the circumstances upon which vesting, payment
and/or
forfeiture of all or a portion of the long-term incentives may
be accelerated. If an executives employment agreement with
Cablevision refers to the treatment of any award upon a
triggering event, the particular award agreement does not
supersede the terms of the employment agreement unless otherwise
provided in the award agreement.
The Cablevision CHOICE Severance Pay Plan provides for the
discretionary payment of severance benefits under certain
circumstances. Under the severance plan, Cablevision has
discretion to determine (1) under what conditions severance
benefits will be made available to any employee, (2) the
type and amount of severance benefits to be paid or provided and
for what period of time, (3) the manner and form in which
severance benefits will be paid or provided to any employee and
(4) any other terms and conditions for receiving severance
benefits. All severance benefits payable under this severance
plan would be conditioned on the employee executing a severance
agreement with Cablevision, including any terms and conditions
that Cablevision may require.
127
Tax
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code, as amended,
establishes a $1 million limit on the amount that a
publicly held corporation may deduct for compensation paid to
the chief executive officer and the next three most highly paid
named executive officers in a taxable year. This limitation does
not apply to any compensation that is qualified
performance-based compensation under Section 162(m),
which is defined as compensation paid only if the
individuals performance meets pre-established objective
goals based on performance criteria established under a plan
approved by stockholders. Our short-term and long-term incentive
compensation plans are expected to be generally designed to
qualify for this exemption from the deduction limitations of
Section 162(m) and to be consistent with providing
appropriate compensation to executives.
From time to time, to the extent it deems appropriate,
Cablevisions compensation committee may make awards (or
modifications to awards) that would not qualify for an exemption
from Section 162(m). For example, Cablevisions
deferred compensation awards to Cablevisions executive
officers and certain other members of Cablevisions
management were not designed to be deductible under
Section 162(m). These Cablevision awards were specifically
designed to encourage executive retention over a seven-year
period and do not contain performance objectives. In addition,
restricted stock that vests over time is not considered
performance-based compensation under
Section 162(m), so compensation realized upon the vesting
of restricted stock awarded to Cablevisions individual
executive officers covered by Section 162(m) will not be
deductible by Cablevision. In this regard, Cablevision expects
that, for 2009, the amount of base salary in excess of
$1 million for Cablevisions chief executive officer
and the next three most highly paid named executive officers,
plus any other annual compensation paid or imputed to
Cablevisions chief executive officer and the next three
most highly paid named executive officers covered by
Section 162(m) that causes his non-performance-based
compensation to exceed the $1 million limit, will not be
deductible by Cablevision for federal income tax purposes. Our
Compensation Committee may also make awards (or modifications to
awards) that would not qualify for an exemption from
Section 162(m).
Although it is the Companys intent generally to qualify
compensation for the exemption from the deduction limitations,
we believe that it is in the best interests of the
Companys stockholders to allow our Compensation Committee
the flexibility and discretion to design an appropriate
executive compensation program so that the Company can attract,
retain and motivate our executives, notwithstanding
Section 162(m).
Employment
Agreements
Each of our executive officers has entered into an employment
agreement with the Company that becomes effective on the date of
the Distribution. Messrs. Dolan and Ratner have also
entered into new employment agreements with Cablevision that
will become effective at the date of the Distribution. Set forth
below is a description of the employment agreements between the
Company and each of our executive officers. All of these
employment agreements were negotiated by the Cablevision
compensation committee prior to the Distribution with the
assistance of its compensation consultant.
James L.
Dolan
The new agreement provides for Mr. Dolans employment
as Executive Chairman of the Company through December 31,
2014 at a minimum annual base salary of $500,000 (subject to
annual review and potential increase in the discretion of the
Compensation Committee) and an annual target bonus equal to 200%
of his annual base salary (and a possible range of 0% to 400%)
in the discretion of the Compensation Committee. It is also
expected that Mr. Dolan will continue to be nominated for
election as a director of the Company during the period he
serves as Executive Chairman. Under the agreement,
Mr. Dolan continues to be eligible to participate in all
the Companys employee benefits and retirement plans at the
level available to other members of senior management of the
Company subject to meeting the relevant eligibility requirements
and the terms of the plans. In light of Mr. Dolans
dual role at the Company and Cablevision, he may not meet the
eligibility requirements of certain qualified and other plans.
In the event Mr. Dolan does not meet the requirements for
the Madison Square Garden, L.P. Salary Continuation Plan
(short-term disability), any amount that otherwise would have
been payable to Mr. Dolan under that plan in the event of a
short-term disability will be payable by the Company in the
amount and for the duration set forth in the plan. In addition,
128
to the extent that Mr. Dolan does not participate in the
Madison Square Garden, L.P. 401(k) Savings Plan
and/or
the
Madison Square Garden, L.P. Cash Balance Pension Plan, his full
MSG base salary will be used to determine his applicable
benefits under the Madison Square Garden, L.P. Excess Savings
Plan
and/or
the Madison Square Garden, L.P. Excess Cash Balance Plan. Any
life and accidental death and dismemberment insurance provided
by the Company will continue to be based on
Mr. Dolans base salary.
Mr. Dolan will also be eligible to participate in the
Companys long-term cash or equity programs and
arrangements at the level determined by the Compensation
Committee in its discretion consistent with the role and
responsibilities of Executive Chairman. For example, in calendar
year 2010, Mr. Dolan will be entitled to receive one or
more long-term cash
and/or
equity awards with an aggregate target value of $1,750,000, as
determined by the Compensation Committee in its discretion.
Although not guaranteed, it is currently expected that long-term
cash or equity awards of similar target values will be made to
him annually.
If, prior to December 31, 2014 (the Scheduled
Expiration Date), Mr. Dolans employment with
the Company is terminated (i) for any reason by him during
the thirteenth calendar month following a Change in Control of
the Company, (ii) by the Company or (iii) by him for
Good Reason, and at the time of any such termination Cause does
not exist, then, subject to his execution of the Companys
then standard separation agreement (modified to reflect terms of
the agreement) which separation agreement will include, without
limitation, general releases by him as well as non-competition,
non-solicitation, non-disparagement, confidentiality and other
provisions substantially similar to those set forth in the
employment agreement (a Separation Agreement), with
us, we will provide him with the following benefits and rights:
(a) A severance payment in an amount determined at the
discretion of the Compensation Committee, but in no event less
than two times the sum of his annual base salary and annual
target bonus and which will be made on the 90th day after
the termination of his employment;
(b) Each of the Companys outstanding long-term cash
performance awards granted under the plans of the Company will
immediately vest in full and will be paid to the same extent
that other members of senior management receive payment for such
awards as determined by the Compensation Committee (subject to
the satisfaction of any applicable performance objectives);
(c) Each of his outstanding long-term cash awards
(including any deferred compensation awards under the long-term
cash award program) that are not subject to performance criteria
granted under the plans of the Company will immediately vest in
full and will be made on the 90th day after the termination
of his employment;
(d) (i) All of the time based restrictions on each of
his outstanding restricted stock or restricted stock units
granted to him under the plans of the Company will immediately
be eliminated, (ii) payment and deliveries with respect to
his restricted stock that are not subject to performance
criteria will be made to him on the 90th day after the
termination of his employment, (iii) the performance based
restrictions with respect to his restricted stock and restricted
stock units that are subject to performance criteria will lapse
when and to the same extent that such restrictions lapse on such
awards held by other executive officers as determined by the
Compensation Committee (subject to satisfaction of any
applicable performance objectives) and (iv) payments or
deliveries with respect to restricted stock units that are
subject to performance criteria will be made only if, when and
to the same extent that payment or deliveries are made to other
executive officers who hold such restricted stock units and in
accordance with the terms of the award;
(e) Each of his outstanding stock options and stock
appreciation awards under the plans of the Company will
immediately vest and become exercisable and he will have the
right to exercise each of those options and stock appreciation
awards for the remainder of the term of the option or
award; and
(f) A prorated annual bonus for the year in which such
termination occurred to the same extent that other executive
officers receive payment of bonuses for such year as determined
by the Compensation Committee in its sole discretion (and
subject to the satisfaction of any applicable performance
objectives), payable at the same time annual bonuses for such
year are payable to other executive officers, and, if not
previously paid, his annual bonus for the preceding year, to the
same extent that other members of senior management receive
payment of annual bonuses for such preceding year as determined
by the
129
Compensation Committee in its sole discretion (and subject to
the satisfaction of any applicable performance objectives),
which annual bonus shall be payable at the same time annual
bonuses for such preceding year are payable to other members of
senior management.
If Mr. Dolan cease
s
to be an employee of the Company
or any of its affiliates (other than Cablevision and its
subsidiaries) prior to the Scheduled Expiration Date as a result
of his death or physical or mental disability, Mr. Dolan
(or his estate or beneficiary) will be provided with the
benefits and rights set forth in (b) through (f) of
the preceding paragraph, and, in the event of his death, such
longer period to exercise his then outstanding stock options and
stock appreciation awards as may otherwise be permitted under
the applicable plan and award letter.
If, after the Scheduled Expiration Date, Mr. Dolans
employment with the Company is terminated (i) for any
reason by him during the thirteenth calendar month following a
Change in Control of the Company, (ii) by the Company,
(iii) by him for Good Reason, or (iv) as a result of
his death or disability, and at the time of any such
termination, Cause does not exist, then, subject to (except in
the case of his death) his execution of a Separation Agreement,
he or his estate or beneficiary, as the case may be, will be
provided with the benefits and rights set forth above in
(b) through (f) of the next preceding paragraph.
If, prior to or after the Scheduled Expiration Date,
Mr. Dolan ceases to be employed by the Company for any
reason other than his being terminated for Cause, he will have
three years to exercise outstanding stock options and stock
appreciation awards, unless he is afforded a longer period for
exercise pursuant to his employment agreement or any applicable
award letter. In no event, however, will stock options or stock
appreciation rights remain exercisable beyond their regularly
scheduled term (except as may otherwise be permitted under the
applicable award in the case of death).
Upon the termination of Mr. Dolans employment with
the Company, except as otherwise specifically provided in the
employment agreement, his rights to benefits and payments under
the Companys pension and welfare plans (other than
severance benefits) and any outstanding long-term cash or equity
awards will be determined in accordance with the then current
terms and provisions of such plans, agreements and awards under
which such benefits and payments (including such long-term cash
or equity awards) were granted.
In the employment agreement, the Company acknowledges that, in
addition to Mr. Dolans services pursuant to the
agreement, he will simultaneously serve, and is expected to
devote most of his business time and attention to serving, as
President and Chief Executive Officer of Cablevision. The
Company recognizes and agrees that his responsibilities to
Cablevision will preclude him from devoting a substantial
portion of his time and attention to the Companys affairs.
The agreement states the Companys recognition that there
may be certain potential conflicts of interest and fiduciary
duty issues associated with Mr. Dolans dual roles at
the Company and Cablevision and that none of (i) his dual
responsibilities at the Company and Cablevision, (ii) his
inability to devote a substantial portion of his time and
attention to the Companys affairs, (iii) the actual
or potential conflicts of interest and fiduciary duty issues
that are waived in the Companys certificate of
incorporation, or (iv) any actions taken, or omitted to be
taken, by him in good faith to comply with his duties and
responsibilities to the Company in light of his dual
responsibilities to the Company and Cablevision, will be deemed
to be a breach by him of his obligations under the employment
agreement nor will any of the foregoing constitute Cause as such
term is defined in the employment agreement.
The employment agreement contains certain covenants by
Mr. Dolan including a noncompetition agreement that
restricts Mr. Dolans ability to engage in competitive
activities until the first anniversary of the termination of his
employment with the Company.
For purposes of the foregoing description, the following
definitions apply:
Cause is defined as (1) commission of an act of
fraud, embezzlement, misappropriation, willful misconduct, gross
negligence or breach of fiduciary duty against the company or an
affiliate thereof, or (2) commission of any act or omission
that results in, or may reasonably be expected to result in, a
conviction, plea of no contest, plea of nolo contendere or
imposition of unadjudicated probation for any crime involving
moral turpitude or any felony.
Change in Control of the Company means the
acquisition, in a transaction or a series of related
transactions, by any person or group, other than Charles F.
Dolan or members of the immediate family of
130
Charles F. Dolan or trusts for the benefit of Charles F. Dolan
or his immediate family (or an entity or entities controlled by
any of them) or any employee benefit plan sponsored or
maintained by the Company, of the power to direct the management
of the Company or substantially all its assets (as constituted
immediately prior to such transaction or transactions).
Termination for Good Reason means that
(1) without Mr. Dolans consent,
(A) Mr. Dolans base salary or bonus target is
reduced, (B) the Company requires that
Mr. Dolans principal office be located outside of
Nassau County or Manhattan, (C) the Company materially
breaches its obligations to Mr. Dolan under his employment
agreement, (D) Mr. Dolan is no longer the Executive
Chairman of the Company, (E) Mr. Dolan no longer
reports directly to the Board of Directors of the Company, or
(F) Mr. Dolans responsibilities are materially
diminished, (2) Mr. Dolan has given the Company
written notice, referring specifically to this definition, that
he does not consent to such action, (3) the Company has not
corrected such action within 15 days of receiving such
notice, and (4) Mr. Dolan voluntarily terminates his
employment within 90 days following the happening of the
action described in subsection (1) of this definition.
In addition, references in the forgoing description to stock
options, stock appreciation and equity awards granted under
plans of the Company shall not be deemed to refer to stock
options and stock appreciation rights issued with respect to
Cablevision stock options and stock appreciation rights in
connection with the Distribution (Distribution
Awards). Pursuant to Mr. Dolans employment agreement
with Cablevision, in certain events of termination of his
employment with Cablevision, his Distribution Awards will be
subject to accelerated vesting.
Hank J.
Ratner
Mr. Ratners new employment agreement with the Company
provides for his employment as President and Chief Executive
Officer of the Company through December 31, 2014 at a
minimum annual base salary of $1,200,000 (subject to annual
review and potential increase in the discretion of the
Compensation Committee) and an annual target bonus equal to 200%
of his annual base salary (and a possible range of 0% to 400%)
in the discretion of the Compensation Committee. He will be
entitled to participate in all the Companys employee
benefits and retirement plans at the level available to other
members of senior management (subject to meeting the relevant
eligibility requirements and terms of the plans).
Mr. Ratner will also be eligible to participate in the
Companys long-term cash or equity programs. For example,
in calendar year 2010, Mr. Ratner will be entitled to
receive one or more long-term cash and/or equity awards with an
aggregate target value of $5,400,000, as determined by the
Compensation Committee in its discretion. Although not
guaranteed, it is currently expected that long-term cash or
equity awards of similar target values will be made to him
annually. Neither the scheduled expiration of the employment
agreement nor Mr. Ratners rights in connection with
the expiration will have any effect on any determination by the
Compensation Committee with respect to the amount, terms or form
of any long-term incentive awards granted to him in the future.
In addition to Mr. Ratners eligibility for the grant
of equity and/or cash long-term incentives in 2010, he will also
receive a one-time special award in stock options, stock
appreciation rights, restricted stock and/or restricted stock
units, in such form or forms as determined by the Compensation
Committee, with an aggregate target value of $4,750,000, all as
to be determined by the Compensation Committee in its discretion
(the Special Equity Award). The Special Equity Award
will be made no later than March 31, 2010. The Special
Equity Award will be subject to terms substantially similar to
the terms contained in the agreements historically used by
Cablevision for similar equity awards for its senior executives,
except that the forfeiture restrictions for the equity awards
will expire on the third anniversary of the grant, and that any
portion of the Special Equity Award in the form of restricted
stock or restricted stock units will also be subject to the
performance objectives set forth in the employment agreement.
If, prior to December 31, 2014 (the Scheduled
Expiration Date), Mr. Ratners employment with
the Company is terminated (i) for any reason by him during
the thirteenth calendar month following a Change in Control of
the Company, (ii) by the Company, (iii) by him for
Good Reason, or (iv) by Mutual Consent, and
131
at the time of any such termination Cause does not exist, then,
subject to his execution of a Separation Agreement with the
Company), the Company will provide him with the following
benefits and rights:
(a) A severance payment in an amount determined at the
discretion of the Compensation Committee, but in no event less
than two times the sum of his annual base salary and annual
target bonus and which will be made on the 90th day after
termination of his employment;
(b) Each of the Companys outstanding long-term cash
performance awards granted under the plans of the Company will
immediately vest in full and will be paid only if, when and to
the same extent that other similarly situated executives receive
payment for such awards as determined by the Compensation
Committee (subject to the satisfaction of any applicable
performance objectives);
(c) Each of his outstanding long-term cash awards
(including any deferred compensation awards under the long-term
cash award program) that are not subject to performance criteria
granted under the plans of the Company will immediately vest in
full and will be made on the 90th day after the termination of
his employment;
(d) (i) All of the time based restrictions on each of
his outstanding restricted stock or restricted stock units
granted to him under the plans of the Company will immediately
be eliminated, (ii) deliveries with respect to his
restricted stock that are not subject to performance criteria
shall be made immediately after the effective date of the
Separation Agreement, (iii) payment and deliveries with
respect to his restricted stock units that are not subject to
performance criteria shall be made on the 90th day after the
termination of his employment, and (iv) payments or
deliveries with respect to his restricted stock and restricted
stock units that are subject to performance criteria shall be
made only if, when and to the same extent that other similarly
situated executives receive payment or deliveries for such
awards as determined by the Compensation Committee (subject to
satisfaction of any applicable performance objectives);
(e) Each of his outstanding stock options and stock
appreciation awards under the plans of the Company will
immediately vest and become exercisable and he will have the
right to exercise each of those options and stock appreciation
awards for the remainder of the term of the option or award; and
(f) A prorated annual bonus for the year in which such
termination occurred only if, when and to the same extent that
other similarly situated executives receive payment of bonuses
for such year (without adjustment for Mr. Ratners
individual performance) as determined by the Compensation
Committee in its sole discretion (and subject to the
satisfaction of any applicable performance objectives) and, if
not previously paid, his annual bonus for the preceding year,
if, when and to the same extent that other similarly situated
executives receive payment of bonuses for such year (without
adjustment for his individual performance) as determined by the
Compensation Committee in its sole discretion (and subject to
the satisfaction of any applicable performance objectives).
If Mr. Ratner ceases to be an employee of the Company or
any of its affiliates (other than Cablevision and its
subsidiaries) prior to the Scheduled Expiration Date as a result
of his death or physical or mental disability, Mr. Ratner
(or his estate or beneficiary) will be provided with the
benefits and rights set forth in (b) through (f) of the
preceding paragraph, and, in the event of his death, such longer
period to exercise his then outstanding stock options and stock
appreciation awards as may otherwise be permitted under the
applicable plan and award letter.
If, after the Scheduled Expiration Date, Mr. Ratners
employment with the Company is terminated (i) for any
reason by him during the thirteenth calendar month following a
Change in Control of the Company, (ii) by the Company,
(iii) by him for Good Reason, (iv) by him without Good
Reason but only if he had provided the Company with at least six
months advance written notice of his intent to so
terminate his employment, or (v) as a result of his death
or disability, and at the time of any such termination, Cause
does not exist, then, subject to (except in the case of his
death) his execution of a Separation Agreement, he or his estate
or beneficiary, as the case may be, will be provided with the
benefits and rights set forth above in (b) through (f) of the
next preceding paragraph.
132
If, prior to or after the Scheduled Expiration Date,
Mr. Ratner ceases to be employed by the Company for any
reason other than his being terminated for Cause, he will have
three years to exercise outstanding stock options and stock
appreciation awards unless he is afforded a longer period for
exercise pursuant to his employment agreement or any applicable
award letter. In no event, however, will stock options or stock
appreciation rights remain exercisable beyond their regularly
scheduled term (except as may otherwise be permitted under the
applicable award in the case of death).
Upon the termination of Mr. Ratners employment with
the Company, except as otherwise specifically provided in the
employment agreement, his rights to benefits and payments under
the Companys pension and welfare plans (other than
severance benefits) and any outstanding long-term cash or equity
awards shall be determined in accordance with the then current
terms and provisions of such plans, agreements and awards under
which such benefits and payments (including such long-term cash
or equity awards) were granted.
The agreement provides that the Company will provide
Mr. Ratner with the use of a driver and a car appropriate
to his status and responsibilities.
In the agreement, the Company acknowledges that, in addition to
Mr. Ratners services pursuant to the agreement, he
will simultaneously serve, and is expected to devote a portion
of his business time and attention to serving, as Vice Chairman
of Cablevision. The Company recognizes and agrees that his
responsibilities to Cablevision will preclude him from devoting
all of his time and attention to the Companys affairs. The
agreement states the Companys recognition that there may
be certain potential conflicts of interest and fiduciary duty
issues associated with Mr. Ratners dual roles at the
Company and Cablevision and that none of (i) his dual
responsibilities at the Company and Cablevision, (ii) his
inability to devote all of his time and attention to the
Companys affairs, (iii) the actual or potential
conflicts of interest and fiduciary duty issues that are waived
in the Companys certificate of incorporation, or
(iv) any actions taken, or omitted to be taken, by him in
good faith to comply with his duties and responsibilities to the
Company in light of his dual responsibilities to the Company and
Cablevision, shall be deemed to be a breach by him of his
obligations under the employment agreement nor shall any of the
foregoing constitute Cause as such term is defined in the
employment agreement.
The employment agreement contains certain covenants by
Mr. Ratner including a noncompetition agreement that
restricts Mr. Ratners ability to engage in
competitive activities until the first anniversary of the
termination of his employment with the Company.
For purposes of the foregoing description, the following
definitions apply:
Cause is defined as (1) commission of an act of
fraud, embezzlement, misappropriation, willful misconduct, gross
negligence or breach of fiduciary duty against the Company or an
affiliate thereof, or (2) commission of any act or omission that
results in, or may reasonably be expected to result in, a
conviction, plea of no contest, plea of nolo contendere or
imposition of unadjudicated probation for any crime involving
moral turpitude or any felony.
Change in Control of the Company means the
acquisition, in a transaction or a series of related
transactions, by any person or group, other than Charles F.
Dolan or members of the immediate family of Charles F.
Dolan or trusts for the benefit of Charles F. Dolan or his
immediate family (or an entity or entities controlled by any of
them) or any employee benefit plan sponsored or maintained by
the Company, of the power to direct the management of the
Company or substantially all its assets (as constituted
immediately prior to such transaction or transactions).
Mutual Consent means Mr. Ratner and the Company
have mutually agreed in writing to terminate his employment with
the Company and that such termination of employment shall not
constitute a termination by the Company with or without Cause or
by Mr. Ratner with or without Good Reason.
Termination for Good Reason means that
(1) without Mr. Ratners consent, (A) his
base salary or bonus target as an employee is reduced,
(B) the Company requires that his principal office be
located outside of Nassau County or Manhattan, (C) the
Company materially breaches its obligations to Mr. Ratner under
the employment agreement, (D) Mr. Ratner is no longer
the President and Chief Executive Officer of the
133
Company, (E) Mr. Ratner reports directly to someone
other than the Chairman (or the Executive Chairman), or
(F) Mr. Ratners responsibilities are materially
diminished, (2) Mr. Ratner has given the Company written
notice, referring specifically to this definition, that he does
not consent to such action, (3) the Company has not
corrected such action within 15 days of receiving such
notice, and (4) Mr. Ratner voluntarily terminates his
employment within 90 days following the happening of the
action described in subsection (1) of this definition.
In addition, references in the forgoing description to stock
options, stock appreciation and equity awards granted under
plans of the Company shall not be deemed to refer to stock
options and stock appreciation rights issued with respect to
Cablevision stock options and stock appreciation rights in
connection with the Distribution (Distribution
Awards). Pursuant to Mr. Ratners employment
agreement with Cablevision, in certain events of termination of
his employment with Cablevision, his Distribution Awards will be
subject to accelerated vesting.
Robert M.
Pollichino
On December 22, 2009, the Company entered into an
employment agreement with Robert M. Pollichino. The agreement
provides for Mr. Pollichinos employment as Executive
Vice President and Chief Financial Officer of the Company
through the third anniversary of the Distribution at a minimum
annual base salary of $700,000 (subject to annual review and
increase in the discretion of the Companys Compensation
Committee) and an annual target bonus opportunity equal to 60%
of his annual base salary in the discretion of the
Companys Compensation Committee. He will be eligible for
our standard benefits programs and to participate in our
long-term incentive programs, in each case on the same basis as
similarly situated executives at the Company.
Mr. Pollichinos employment agreement provides
severance benefits if Mr. Pollichinos employment is
terminated prior to the third anniversary of the Distribution by
(1) the Company, or (2) by Mr. Pollichino for
Good Reason, if at the time of such termination under
clause (1) or (2), Cause does not exist. These benefits
consist of (1) the payment of an amount in cash equal to
not less than 2.00 times the sum of Mr. Pollichinos
annual base salary and his annual target bonus as in effect at
that time; (2) a prorated bonus based on the portion of the
year he worked for the Company, provided that such bonus will be
payable if and when such bonuses are generally paid to similarly
situated employees and will be based on his then current annual
target bonus as well as Company and his business unit
performance as determined by the Compensation Committee in its
sole discretion, but without adjustment for his individual
performance and, if not previously paid, his annual bonus for
the preceding year, if, when and to the same extent that other
similarly situated executives receive payment of bonuses for
such year (without adjustment for his individual performance) as
determined by the Compensation Committee in its sole discretion;
(3) any vested stock options or stock appreciation rights
that he has outstanding as of the time of such termination will
remain exercisable until the earlier of the three-year
anniversary of the termination date and the end of the original
term of the applicable award and (4) the Compensation
Committee will consider, in good faith, approving the vesting of
his then outstanding equity and cash incentive awards on a pro
rata basis, provided that, to the extent any such awards are
subject to any performance criteria, any such pro rata vested
portion as may be approved by the Compensation Committee shall
be payable only if when and to the same extent as paid to other
employees generally holding such awards subject to the
satisfaction of the performance criteria. All payments would be
conditioned on Mr. Pollichino executing a separation
agreement.
For purposes of Mr. Pollichinos employment agreement
the following definitions apply:
Cause is defined as (1) commission of an act of
fraud, embezzlement, misappropriation, willful misconduct, gross
negligence or breach of fiduciary duty against the Company or
one of its affiliates or (2) commission of any act or
omission that results in a conviction, plea of no contest, plea
of nolo contendere or imposition of unadjudicated probation for
any crime involving moral turpitude or any felony.
Termination for Good Reason means: (1) without
Mr. Pollichinos consent, (A) his base salary or
annual target bonus is reduced or (B) he is no longer the
Executive Vice President and Chief Financial Officer of the
Company; (2) he gives written notice to the Company that he
does not consent to such action; (3) the
134
Company does not correct such action within 30 days of
receiving his notice; and (4) he voluntarily terminates his
employment within 90 days of such action.
Lawrence
J. Burian
On December 21, 2009, the Company entered into an
employment agreement with Lawrence J. Burian. The agreement
provides for Mr. Burians employment as Executive Vice
President, General Counsel and Secretary of the Company through
the third anniversary of the Distribution at a minimum annual
base salary of $600,000 (subject to annual review and increase
in the discretion of our Compensation Committee) and an annual
target bonus opportunity equal to 60% of his annual base salary
in the discretion of the Companys Compensation Committee.
He will be eligible for our standard benefits programs and to
participate in our long-term incentive programs, in each case on
the same basis as similarly situated executives at the Company.
Mr. Burians employment agreement provides severance
benefits if Mr. Burians employment is terminated
prior to the third anniversary of the Distribution by
(1) the Company, or (2) by Mr. Burian for Good
Reason, if at the time of such termination under clause (1)
or (2), Cause does not exist. These benefits consist of
(1) the payment of an amount in cash equal to not less than
2.00 times the sum of Mr. Burians annual base salary
and his annual target bonus as in effect at that time;
(2) a prorated bonus based on the portion of the year he
worked for the Company, provided that such bonus will be payable
if and when such bonuses are generally paid to similarly
situated employees and will be based on his then current annual
target bonus as well as Company and his business unit
performance as determined by the Compensation Committee in its
sole discretion, but without adjustment for his individual
performance and, if not previously paid, his annual bonus for
the preceding year, if, when and to the same extent that other
similarly situated executives receive payment of bonuses for
such year (without adjustment for his individual performance) as
determined by the Compensation Committee in its sole discretion;
(3) any vested stock options or stock appreciation rights
that he has outstanding as of the time of such termination will
remain exercisable until the earlier of the three-year
anniversary of the termination date and the end of the original
term of the applicable award; and (4) the Compensation
Committee will consider, in good faith, approving the vesting of
his then outstanding equity and cash incentive awards on a pro
rata basis, provided that, to the extent any such awards are
subject to any performance criteria, any such pro rata vested
portion as may be approved by the Compensation Committee shall
be payable only if when and to the same extent as paid to other
employees generally holding such awards subject to the
satisfaction of the performance criteria. All payments would be
conditioned on Mr. Burian executing a separation agreement.
For purposes of Mr. Burians employment agreement the
following definitions apply:
Cause is defined as (1) commission of an act
of fraud, embezzlement, misappropriation, willful misconduct,
gross negligence or breach of fiduciary duty against the Company
or an affiliate thereof or (2) commission of any act or
omission that results in a conviction, plea of no contest, plea
of nolo contendere or imposition of unadjudicated probation for
any crime involving moral turpitude or any felony.
Termination for Good Reason means: (1) without
Mr. Burians consent, (A) his base salary or
annual target bonus is reduced, (B) his title is reduced
from Executive Vice President and General Counsel of the Company
or (C) he is no longer the Companys most senior legal
officer; (2) he gives written notice to the Company that he
does not consent to such action; (3) the Company does not
correct such action within 30 days of receiving his notice;
and (4) he voluntarily terminates his employment within
90 days of such action.
Key
Elements of 2010 Expected Compensation from the
Company
As a newly-formed entity, we did not have any executive officers
or pay any compensation during 2008 or 2009. The following
summarizes the principal components of the compensation we
expect to provide in 2010 to each of our executive officers
based upon our employment agreements with them. Except as noted,
we have not yet determined the form of any long-term incentives.
135
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James L. Dolan:
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Base Salary
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$500,000
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Target Bonus
|
|
200% of base salary
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Target 2010 Long-Term Incentives
|
|
$1,750,000
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Hank J. Ratner:
|
|
|
Base Salary
|
|
$1,200,000
|
Target Bonus
|
|
200% of base salary
|
Target 2010 Long-Term Incentives
|
|
$5,400,000
|
Special Equity or Equity-Based Stock Award
|
|
$4,750,000
|
Robert M. Pollichino:
|
|
|
Base Salary
|
|
$700,000
|
Target Bonus
|
|
60% of base salary
|
Target 2010 Long-Term Incentives
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|
$950,000
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Lawrence J. Burian:
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|
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Base Salary
|
|
$600,000
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Target Bonus
|
|
60% of base salary
|
Target 2010 Long-Term Incentives
|
|
$600,000
|
In addition, these executive officers are expected to receive
other benefits and perquisites as discussed above.
Historical
Compensation Information
All of the information set forth in the following table reflects
compensation earned during 2009 based upon services rendered to
Cablevision by our Executive Chairman and our President and
Chief Executive Officer, and is based upon services rendered to
Madison Square Garden by our Executive Vice President and Chief
Financial Officer. The services rendered by these executives in
2009 were, in some instances, in capacities not equivalent to
the positions in which they will serve the Company or our
subsidiaries. The information below is therefore not necessarily
indicative of the compensation these individuals will receive as
executive officers of the Company. For information on the
compensation of these individuals, and of Mr. Burian, as
executive officers of the Company in 2010, see
Key Elements of 2010 Expected Compensation
from the Company and for a description of their employment
agreements with the Company, see Employment
Agreements.
Summary
Compensation Table
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Change in
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Pension
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Value and
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Non-Equity
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Nonqualified
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Option
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Incentive
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Deferred
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Stock
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and Rights
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Plan
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Compensation
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All Other
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Salary
|
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal Position
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Year
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)(6)
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($)(7)
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($)
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James L. Dolan
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2009
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1,872,000
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717,616
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2,863,297
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1,259,594
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8,214,000
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215,020
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1,161,805
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16,303,332
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President and Chief Executive Officer of Cablevision
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Hank J. Ratner
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2009
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1,638,000
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717,616
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2,521,761
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1,333,028
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7,266,000
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167,823
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1,450,989
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15,095,217
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Vice Chairman of Cablevision
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Robert M. Pollichino
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2009
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582,400
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599,665
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220,838
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599,440
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30,002
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174,538
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2,206,883
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Executive Vice President,
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Finance of Madison Square Garden, L.P.
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(1)
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For 2009, salaries paid accounted for the following percentages
of total compensation: Mr. Dolan 11%;
Mr. Ratner 11%; and
Mr. Pollichino 26%.
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136
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(2)
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This column reflects the portion of the deferred compensation
award paid out on the fifth anniversary of such award in
accordance with its terms. For more information regarding the
deferred compensation award, please see Compensation
Discussion and Analysis Cablevision Elements of In
Service Compensation Other Types of Awards in Prior
Years.
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(3)
|
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This column reflects the dollar amount of expense recognized by
Cablevision for financial statement reporting purposes in 2009
for restricted stock awards granted to the executives in that
year and prior years, as calculated under ASC Topic 718,
without any reduction for risk of forfeiture.
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(4)
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This column reflects the dollar amount of expense recognized by
Cablevision for financial statement reporting purposes in 2009
for stock options and stock appreciation rights awards granted
to the executives in that year and prior years, as calculated
under ASC Topic 718, without any reduction for risk of
forfeiture. Cablevision calculates the fair value of each option
award on the date of grant and for each stock appreciation right
on the date of grant and at the end of each reporting period
using the Black-Scholes option pricing model. For unvested
share-based awards as of January 1, 2006, granted prior to
2006, Cablevisions computation of expected life was
determined based on historical experience of similar awards,
giving consideration to the contractual terms of the share-based
awards and vesting schedules. In addition, for stock
appreciation rights, expected term was also determined based on
historical experience of similar awards as of December 31,
2009. For options granted in 2006, Cablevisions
computation of expected life was based on the simplified method
(the average of the vesting period and option term) as
prescribed in SAB No. 107, Share Based Payments. The
interest rate for periods within the contractual life of the
share-based award is based on interest yields for U.S. Treasury
instruments in effect at the time of grant and as of
December 31, 2009, for stock appreciation rights.
Cablevisions computation of expected volatility is based
on historical volatility of its common stock. The following
assumptions were used to calculate the fair value of stock
appreciation rights outstanding as of December 31, 2009 and
options issued in 2009:
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Stock Appreciation
|
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Rights
|
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Options
|
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December 31, 2009
|
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Issued in 2009
|
|
Range of risk-free interest rates
|
|
.05%
|
|
1.4%
|
Weighted average expected life (in years)
|
|
0.2
|
|
5.5
|
Dividend Yield
|
|
0.0%
|
|
1.56%
|
Weighted average volatility
|
|
27.32%
|
|
46.1%
|
|
|
|
(5)
|
|
This information reflects each individuals target annual
incentive award for performance in 2009 and the target value of
performance awards granted in 2007, earned at the end of 2009.
Actual performance for the annual incentive award has not yet
been determined and is expected to be determined by the
compensation committee during the first quarter of 2010 based on
a number of factors including Company and individual
performance. The target annual incentive award values are as
follows: Mr. Dolan $3,744,000, Mr. Ratner $3,276,000
and Mr. Pollichino $349,440.
|
|
|
|
|
|
Actual performance for the 2007 performance award has also not
yet been determined and is expected to be determined by the
compensation committee during the first quarter of 2010 based on
achievement against the goals established in the award. The
target 2007 performance award values are as follows:
Mr. Dolan $4,470,000, Mr. Ratner $3,990,000, and
Mr. Pollichino $250,000.
|
|
|
|
(6)
|
|
This column represents, for each individual, the sum of the
increase in the present value of his accumulated cash balance
plan account and accumulated excess cash balance account. There
were no above-market earnings on nonqualified deferred
compensation. For more information regarding the named executive
officers pension benefits, please see the Pension Benefits
Table below.
|
137
|
|
|
(7)
|
|
The table below shows the components of this column:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k)
|
|
|
Savings
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Plan
|
|
|
Life Insurance
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Match
|
|
|
Match
|
|
|
Premiums
|
|
|
Awards
|
|
|
Dividends
|
|
|
Perquisites
|
|
|
Total
|
|
Name
|
|
Year
|
|
|
$(a)
|
|
|
($)(a)
|
|
|
($)(b)
|
|
|
($)(c)
|
|
|
($)(d)
|
|
|
($)(e)
|
|
|
($)
|
|
|
James L. Dolan
|
|
|
2009
|
|
|
|
2,640
|
|
|
|
53,454
|
|
|
|
|
|
|
|
195,876
|
|
|
|
665,200
|
|
|
|
244,635
|
|
|
|
1,161,805
|
|
Hank J. Ratner
|
|
|
2009
|
|
|
|
7,350
|
|
|
|
41,732
|
|
|
|
5,534
|
|
|
|
195,876
|
|
|
|
1,111,666
|
|
|
|
88,831
|
|
|
|
1,450,989
|
|
Robert M. Pollichino
|
|
|
2009
|
|
|
|
6,600
|
|
|
|
6,829
|
|
|
|
|
|
|
|
150,652
|
|
|
|
2,640
|
|
|
|
7,817
|
|
|
|
174,538
|
|
|
|
|
(a)
|
|
These columns represent, for each individual, a matching
contribution by Cablevision on behalf of such individual under
Cablevisions 401(k) Plan or Excess Savings Plan, as
applicable.
|
|
|
|
(b)
|
|
This column represents amounts paid for premiums on whole life
insurance policies purchased by Cablevision for Mr. Ratner.
|
|
|
|
(c)
|
|
This column represents, for each individual other than
Mr. Pollichino, the following amounts allocated under his
deferred compensation award: a notional contribution of $150,000
and notional interest of $45,876 in 2009. This column
represents, for Mr. Pollichino, the following amounts
allocated under his deferred compensation award: a notional
contribution of $112,000 and notional interest of $38,652 in
2009. For more information regarding these deferred compensation
awards, see Compensation Discussion and
Analysis Cablevision Elements of In-Service
Compensation Other Types of Awards in Prior
Years.
|
|
|
|
(d)
|
|
As a result of the special cash dividend declared by Cablevision
in April 2006, and cash dividends declared by Cablevision in
August and November 2008, and February, May and July 2009,
holders of stock options and stock appreciation rights that had
vested prior to December 31, 2004 receive a cash dividend
upon exercise. Restricted shareholders are entitled to receive a
cash amount equal to the dividends when the restricted shares
vest. This column represents dividend payments made upon stock
option and stock appreciation right exercises and restricted
stock vesting in the respective periods.
|
|
|
|
(e)
|
|
This column represents, for each individual, the following
aggregate estimated perquisites, as described in the table
below. For more information regarding the calculation of these
perquisites, please see Compensation
Discussion and Analysis Perquisites.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Car and Driver
|
|
|
Aircraft
|
|
|
Other
|
|
|
Total
|
|
Name
|
|
Year
|
|
|
($)
|
|
|
($)(I)
|
|
|
($)(II)
|
|
|
($)
|
|
|
James L. Dolan
|
|
|
2009
|
|
|
|
91,340
|
|
|
|
41,131
|
|
|
|
112,164
|
|
|
|
244,635
|
|
Hank J. Ratner
|
|
|
2009
|
|
|
|
14,886
|
|
|
|
60,316
|
|
|
|
13,629
|
|
|
|
88,831
|
|
Robert M. Pollichino
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
*
|
|
Represents less than $10,000.
|
|
|
|
(I)
|
|
As discussed under Compensation Discussion and
Analysis Perquisites Aircraft, Mr.
Dolan and Mr. Ratner reimburse Cablevision for the actual
expenses associated with personal use of Cablevisions
corporate airplanes. The amounts in the table exclude personal
use of aircraft for which the executive provides reimbursement.
The amounts in the table reflect the incremental cost of
personal use of Cablevisions helicopters and for personal
guests accompanying the executive when the executive is
traveling on business. Incremental cost is determined as the
variable costs incurred by Cablevision net of reimbursements
received by executives and does not include any costs that would
have been incurred by Cablevision whether or not the personal
trip was taken, such as lease and insurance payments, pilot
salaries and other overhead costs. In November 2006, Cablevision
entered into time sharing agreements with Mr. Dolan pursuant to
which he was permitted to lease two specified aircraft from
Cablevision for his personal use. These agreements provided for
reimbursement to Cablevision for such usage at the maximum
amount Cablevision legally may charge under Part 91 of the
Federal Aviation Regulations (the FAA Maximum Rate).
In 2009, Mr. Dolan paid Cablevision $148,051 for the use of the
two aircraft under the agreement. In June 2007, Cablevision
entered into time sharing agreements with Mr. Ratner
|
138
|
|
|
|
|
pursuant to which he was permitted to lease two specified
aircraft from Cablevision for his personal use. The agreements
provide for reimbursement to Cablevision for such usage at a
rate no greater than the FAA Maximum Rate. In 2009,
Mr. Ratner paid Cablevision $46,431 for the use of the two
aircraft under the agreements.
|
|
|
|
(II)
|
|
This column includes the following components: (A) free
cable television service, high-speed data and voice service;
(B) executive home security; and (C) use of
Cablevisions travel department to arrange for personal
travel.
|
Grants
of Cablevision Plan-Based Awards
The table below presents information regarding awards granted in
2009 to each named executive officer under Cablevisions
plans, including estimated possible and future payouts under
non-equity incentive plan awards and other restricted stock and
stock option awards. There were no performance-based equity
awards granted in 2009. See Treatment of
Outstanding Options, Rights, Restricted Stock and Other
Awards for a discussion of the impact of the Distribution
on certain of the awards discussed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
All Other
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Option
|
|
|
or Base
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Awards:
|
|
|
Price of
|
|
|
of Stock
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-
|
|
|
Stock
|
|
|
Securities
|
|
|
Option
|
|
|
and Option
|
|
|
|
|
|
|
Grant
|
|
|
Equity Incentive Plan Awards
|
|
|
or
|
|
|
Underlying
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Year
|
|
|
Date
|
|
|
Threshold($)
|
|
|
Target($)
|
|
|
Maximum($)
|
|
|
Units(#)
|
|
|
Options(#)
|
|
|
($/Sh)
|
|
|
($) (1)
|
|
|
James L. Dolan
|
|
|
2009
|
|
|
|
3/5/09
|
(2)
|
|
|
|
|
|
|
3,744,000
|
|
|
|
7,488,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
3/5/09
|
(3)
|
|
|
1,117,500
|
|
|
|
2,235,000
|
|
|
|
4,470,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
3/5/09
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169,100
|
|
|
|
|
|
|
|
|
|
|
|
1,731,584
|
|
|
|
|
2009
|
|
|
|
3/5/09
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
903,100
|
|
|
|
10.24
|
|
|
|
2,991,067
|
|
|
|
Hank J. Ratner
|
|
|
2009
|
|
|
|
3/5/09
|
(2)
|
|
|
|
|
|
|
3,276,000
|
|
|
|
6,552,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
3/5/09
|
(3)
|
|
|
997,500
|
|
|
|
1,995,000
|
|
|
|
3,990,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
3/5/09
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151,000
|
|
|
|
|
|
|
|
|
|
|
|
1,546,240
|
|
|
|
|
2009
|
|
|
|
3/5/09
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
806,100
|
|
|
|
10.24
|
|
|
|
2,669,803
|
|
|
|
Robert M. Pollichino
|
|
|
2009
|
|
|
|
3/5/09
|
(2)
|
|
|
|
|
|
|
349,440
|
|
|
|
698,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
3/5/09
|
(3)
|
|
|
125,000
|
|
|
|
250,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
3/5/09
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,000
|
|
|
|
|
|
|
|
|
|
|
|
194,560
|
|
|
|
|
|
|
(1)
|
|
This column reflects the full grant date fair value of the
restricted stock awards granted to each of the executives in
2009, as calculated under ASC Topic 718 on the date of
grant. The assumptions used by Cablevision in calculating the
grant date fair value of options are described in note
(4) to the Summary Compensation Table above. The grant date
fair value of restricted stock awards is calculated based on the
closing price of Cablevisions common stock at the grant
date.
|
|
|
|
(2)
|
|
This row reflects the possible payouts with respect to grants of
annual incentive awards under Cablevisions CIP for
performance in 2009. Each of the executives is assigned a target
bonus percentage and amount; there is no threshold amount for
annual incentive awards. Under the terms of the awards, each
named executive officer is eligible to receive payment of an
annual incentive award equal to the lesser of $10 million
or two times his bonus target, subject to the Cablevision
compensation committees discretion to reduce the award.
The amounts of annual incentive awards actually paid for
performance in 2009 are disclosed in the Non-Equity Incentive
Plan Compensation column of the Summary Compensation Table
above. For more information regarding the terms of these annual
incentive awards, please see Compensation
Discussion and Analysis Cablevision Elements of
In-Service Compensation Annual Incentives.
|
|
|
|
(3)
|
|
This row reflects the future payouts with respect to performance
awards that were granted under Cablevisions Long-Term
Incentive Plan in 2009. Each performance award was granted with
a target amount, subject to actual payment based on a sliding
scale ranging from zero to two times the target amount. These
performance awards will be payable in the first quarter of 2012
if Cablevision achieves specified performance targets in the
year ending December 31, 2011. For more information
regarding the
|
139
|
|
|
|
|
terms of these performance awards, please see
Compensation Discussion and
Analysis Cablevision Elements of In-Service
Compensation Performance Awards.
|
|
|
|
(4)
|
|
This row reflects the number of shares of restricted stock
awarded in 2009. These grants of restricted stock, which were
made under Cablevisions 2006 Employee Stock Plan, are
scheduled to vest in their entirety on March 5, 2012.
|
|
|
|
(5)
|
|
This row reflects the number of shares underlying options
awarded in 2009. These grants of options were made under the
Cablevision 2006 Employee Stock Plan, and are scheduled to vest
in thirds on the first 3 anniversaries following the grant date.
|
Outstanding
Cablevision Equity Awards at 2009 Fiscal Year-End
The table below shows (i) each grant of stock options and
stock appreciation rights of Cablevision that are still
unexercised and outstanding and (ii) the aggregate number
of shares of unvested restricted stock of Cablevision
outstanding for Messrs. Dolan, Ratner and Pollichino, in each
case as of December 31, 2009. See
Treatment of Outstanding Options, Rights,
Restricted Stock, Restricted Stock Units and Other Awards
for a discussion of the impact of the Distribution on certain of
the awards discussed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option and Restricted Stock Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Unearned
|
|
|
Shares,
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Shares,
|
|
|
Units or
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Units or
|
|
|
Other
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
Other
|
|
|
Rights
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights That
|
|
|
That
|
|
|
|
Options(#)
|
|
|
Options(#)
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options(#)
|
|
|
Price($)
|
|
|
Date
|
|
|
Vested(#)
|
|
|
Vested($) (1)
|
|
|
Vested(#)
|
|
|
Vested($)
|
|
|
James L. Dolan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
383,800
|
(2)
|
|
|
9,909,716
|
|
|
|
|
|
|
|
|
|
|
|
|
166,666
|
|
|
|
|
|
|
|
|
|
|
|
10.78
|
(3)
|
|
|
6/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,400
|
|
|
|
|
|
|
|
|
|
|
|
15.51
|
(3)
|
|
|
10/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
|
10.46
|
(3)
|
|
|
10/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
|
15.51
|
(3)
|
|
|
11/8/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
15.51
|
(3)
|
|
|
11/8/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,000
|
|
|
|
|
|
|
|
|
|
|
|
20.51
|
|
|
|
6/5/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
903,100
|
(5)
|
|
|
|
|
|
|
10.24
|
|
|
|
9/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hank J. Ratner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
342,700
|
(7)
|
|
|
8,848,514
|
|
|
|
|
|
|
|
|
|
|
|
|
47,636
|
(8)(9)
|
|
|
|
|
|
|
|
|
|
|
5.46
|
(3)(4)(8)
|
|
|
5/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,000
|
|
|
|
|
|
|
|
|
|
|
|
15.51
|
(3)
|
|
|
10/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,333
|
|
|
|
|
|
|
|
|
|
|
|
10.46
|
(3)
|
|
|
10/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,666
|
|
|
|
|
|
|
|
|
|
|
|
15.51
|
(3)
|
|
|
11/8/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
15.51
|
(3)
|
|
|
11/8/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
220,000
|
|
|
|
|
|
|
|
|
|
|
|
20.51
|
|
|
|
6/5/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
806,100
|
(5)
|
|
|
|
|
|
|
10.24
|
|
|
|
9/5/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Pollichino
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,100
|
(6)
|
|
|
957,922
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
10.46
|
(3)
|
|
|
10/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
15.51
|
(3)
|
|
|
11/8/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Calculated using the closing price of Cablevision NY Group
Class A Common Stock on the New York Stock Exchange on
December 31, 2009 of $25.82 per share.
|
|
|
|
(2)
|
|
This reflects (i) a grant of 101,500 shares of
restricted stock made on March 2, 2007 that is scheduled to
vest on March 2, 2010; (ii) a grant of
113,200 shares of restricted stock made on March 3,
2008 that is
|
140
|
|
|
|
|
scheduled to vest on March 3, 2011, and (iii) a grant
of 169,100 shares of restricted stock made on March 5, 2009
scheduled to vest on March 5, 2012.
|
|
|
|
(3)
|
|
As a result of the special dividend declared by Cablevision in
April 2006, stock options that had not vested by
December 31, 2004 were adjusted to reduce their per share
exercise price by the $10.00 amount of the special dividend.
|
|
|
|
(4)
|
|
In addition, stock options and stock appreciation rights that
had vested by December 31, 2004 were adjusted to reduce
their per share exercise price by the $10.00 amount of the
special dividend as well as any applicable quarterly dividends.
|
|
|
|
(5)
|
|
These stock options, which were granted on March 5, 2009
are scheduled to vest in thirds on the first three anniversaries
following the grant date.
|
|
|
|
(6)
|
|
This reflects (i) a grant of 8,600 shares of restricted
stock made on March 2, 2007 that is scheduled to vest on
March 2, 2010; (ii) a grant of 9,500 shares of
restricted stock made on March 3, 2008 that is scheduled to
vest on March 3, 2011, and (iii) a grant of 19,000
shares of restricted stock made on March 5, 2009 scheduled
to vest on March 5, 2012.
|
|
|
|
(7)
|
|
This reflects (i) a grant of 90,600 shares of
restricted stock made on March 2, 2007 that are scheduled
to vest on March 2, 2010; (ii) a grant of
101,100 shares of restricted stock made on March 3,
2008 that are scheduled to vest on March 3, 2011 and
(iii) a grant of 151,000 shares of restricted stock made on
March 5, 2009 scheduled to vest on March 5, 2012.
|
|
|
|
(8)
|
|
These grants reflect decreases in the exercise price and
increases in the number of shares of Cablevision NY Group
Class A Common Stock to be purchased upon exercise as a
result of the issuance of the Rainbow Media Group tracking stock
in March 2001 and its conversion back into shares of Cablevision
NY Group Class A Common Stock in August 2002. The exercise
price also reflects an adjustment based on a settlement of
certain stock option litigation in June 2008 and a dividend
adjustment approved by the compensation committee in 2009.
|
|
|
|
(9)
|
|
This grant includes stock options to purchase 23,818 shares
of Cablevision NY Group Class A Common Stock and 23,818
stock appreciation rights.
|
Cablevision
Option Exercises and Stock Vested
The table below shows exercises of Cablevision stock options
during 2009 and awards of Cablevision restricted stock that
vested during 2009. See Treatment of
Outstanding Options, Rights, Restricted Stock, Restricted Stock
Units and Other Awards for a discussion of the impact of
the Distribution on certain of the awards discussed in the
following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Exercises
|
|
|
Restricted Stock
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
Name
|
|
Acquired on Exercise
|
|
|
Exercise ($) (1)
|
|
|
Acquired on Vesting
|
|
|
on Vesting ($)
|
|
|
James L. Dolan
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
1,483,800
|
(2)(4)
|
|
|
|
|
|
|
|
|
|
|
|
88,000
|
|
|
|
1,641,200
|
(3)(5)
|
|
|
Hank J. Ratner
|
|
|
53,591
|
|
|
|
134,513
|
(4)
|
|
|
50,000
|
|
|
|
1,236,500
|
(2)(4)
|
|
|
|
|
|
|
|
|
|
|
|
73,300
|
|
|
|
1,367,045
|
(3)(5)
|
|
|
Robert M. Pollichino
|
|
|
|
|
|
|
|
|
|
|
6,600
|
|
|
|
123,090
|
(3)(5)
|
|
|
|
|
|
(1)
|
|
Calculated using the closing price (per share) of Cablevision NY
Group Class A Common Stock on the New York Stock Exchange
on the date of exercise less the option price per share
multiplied by the number of options exercised.
|
|
|
|
(2)
|
|
Calculated using the closing price (per share) of Cablevision NY
Group Class A Common Stock on the New York Stock
Exchange on November 6, 2009 multiplied by the number of
shares vesting.
|
141
|
|
|
(3)
|
|
Calculated using the average of the high and low (per share) of
Cablevision NY Group Class A Common Stock on the New York Stock
Exchange on June 5, 2009 multiplied by the number of shares
vesting.
|
|
|
|
(4)
|
|
A $10.00 per share special dividend declared on the Cablevision
NY Group Class A Common Stock in April 2006 and $0.10 per share
dividends declared on the Cablevision NY Group Class A Common
Stock in August and November 2008, as well as February, May and
July 2009, were associated with this vesting in addition to the
value realized and reflected in the table.
|
|
|
|
(5)
|
|
A $10.00 per share dividend declared on the Cablevision NY Group
Class A Common Stock in April 2006 and $0.10 per share dividends
declared on the Cablevision NY Group Class A Common Stock in
August and November 2008, as well as February and May 2009
respectively, were associated with this vesting in addition to
the value realized and reflected in the table.
|
Pension
Benefits
The table below shows the present value of accumulated benefits
payable to each of Messrs. Dolan, Ratner and Pollichino,
including the number of years of service credited to each of
them, under the defined benefit pension plans as of
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
Present Value of
|
|
Payments During
|
|
|
|
|
Credited Service
|
|
Accumulated Benefit
|
|
2008
|
Name
|
|
Plan Name
|
|
(#)(1)
|
|
($)(2)
|
|
($)
|
|
James L. Dolan
|
|
Cablevision Cash Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
12
|
|
|
|
149,728
|
|
|
|
|
|
|
|
Cablevision Excess
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Balance Plan
|
|
|
9
|
|
|
|
940,973
|
|
|
|
|
|
|
|
Hank J. Ratner
|
|
Cablevision Cash Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
12
|
|
|
|
128,999
|
|
|
|
|
|
|
|
Cablevision Excess
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Balance Plan
|
|
|
9
|
|
|
|
556,404
|
|
|
|
|
|
|
|
Robert M. Pollichino
|
|
Cablevision Cash Balance
|
|
|
2
|
|
|
|
38,348
|
|
|
|
|
|
|
|
Cablevision Excess Cash
Balance Plan
|
|
|
2
|
|
|
|
46,126
|
|
|
|
|
|
|
|
Madison Square Garden, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plan
|
|
|
10
|
|
|
|
216,682
|
|
|
|
|
|
|
|
Madison Square Garden, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Retirement Plan
|
|
|
10
|
|
|
|
685,065
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Years of service are calculated based on elapsed time measured
from date of plan participation. Actual elapsed time for each
individual as an employee of Cablevision are as follows: Mr.
Dolan, 31 years; Mr. Ratner, 23 years; and
Mr. Pollichino, 33 years.
|
|
|
|
(2)
|
|
Assumes that each individual will take a lump sum payment of the
cash balance benefits at retirement. The lump sum payment is
based on an assumed retirement age of 65 for all individuals.
The lump sum payable under the cash balance plans was determined
by crediting the account balances with an assumed
interest-crediting rate of 4.23% until age 65. The present
value of the accumulated benefits under the Cablevision Cash
Balance Plan and the Cablevision Excess Cash Balance Plan were
calculated using a discount rate of 5.15%. Also assumes that
Mr. Pollichino elects a life annuity form of payment at
retirement for the Madison Square Garden Retirement Plans. The
present value of the benefits was calculated using a discount
rate of 6.25% and the RP2000 Mortality Table projected eight
years beyond the valuation date (2010).
|
142
Cablevision
Cash Balance Pension Plan
The Cablevision Cash Balance Pension Plan is a tax-qualified
defined benefit plan that generally covers regular full-time and
part-time nonunion employees of Cablevision and certain of its
affiliates who have completed one year of service. A notional
account is maintained for each participant under the plan,
including Messrs. Dolan Ratner and Pollichino, which consists of
(i) annual allocations made by Cablevision as of the end of
each year on behalf of each participant who has completed
800 hours of service during the year that range from 3% to
9% of the participants compensation, based on the
participants age, and (ii) monthly interest credits
based on the average of the annual rate of interest on the
30-year
U.S. Treasury Bonds for the months of September, October
and November of the prior year. Compensation includes all direct
cash compensation received while a participant as part of the
participants primary compensation structure (excluding
bonuses, fringe benefits, and other compensation that is not
received on a regular basis), and before deductions for elective
deferrals (in accordance with the Internal Revenue Code limits,
the maximum compensation taken into account in determining
benefits was limited to $245,000 in 2009).
A participants interest in the cash balance account is
subject to vesting limitations for the first three years of
employment. A participants account will vest in full upon
his or her termination due to death, disability or retirement
after attaining age 65. Upon retirement or other
termination of employment with Cablevision, the participant may
elect a distribution of the vested portion of the cash balance
account. Any amounts remaining in the plan will continue to be
credited with interest until the account is paid. The normal
form of benefit payment for an unmarried participant is a single
life annuity and the normal form of benefit payment for a
married participant is a 50% joint and survivor annuity. The
participant, with spousal consent if applicable, can waive the
normal form and elect a single life annuity or a lump sum.
Cablevision
Excess Cash Balance Plan
Cablevisions Excess Cash Balance Plan is a non-qualified
deferred compensation plan that is intended to provide eligible
participants, including each of Messrs. Dolan, Ratner and
Pollichino, with the portion of their benefit that cannot be
paid to them under the Cablevision Cash Balance Pension Plan due
to Internal Revenue Code limits on the amount of compensation
(as defined in the Cablevision Cash Balance Pension Plan) that
can be taken into account in determining benefits under
tax-qualified plans ($245,000 in 2009). Cablevision maintains a
notional excess cash balance account for each eligible
participant, and for each calendar year, credits these accounts
with the portion of the allocation that could not be made on his
behalf under the Cablevision Cash Balance Pension Plan due to
the compensation limitation. In addition, Cablevision credits
each notional excess cash balance account monthly with interest
at the same rate used under the Cablevision Cash Balance Pension
Plan. A participant vests in the excess cash balance account
according to the same schedule in the Cablevision Cash Balance
Pension Plan. The excess cash balance account, to the extent
vested, is paid in a lump sum to the participant as soon as
practicable following his or her retirement or other termination
of employment with Cablevision.
Madison
Square Garden, L.P. Retirement Plan
The Madison Square Garden, L.P. Retirement Plan (MSG
Retirement Plan) is a tax-qualified defined benefit plan
covering substantially all of our non-union full-time and
eligible part-time employees, including Mr. Pollichino.
Effective as of January 1, 2001, membership in the plan was
frozen and benefit accruals under the plan continued only for
employees who were already active participants in the plan as of
December 31, 2000. Effective January 1, 2008, all
future benefit accruals under the plan ceased and no
participants accrue any benefits under the plan on and after
January 1, 2008.
The plan provides a benefit at retirement equal to (i) 2%
of a participants final average pay multiplied by years of
benefit service up to 20 years; plus (ii) 1% of the
participants final average pay multiplied by years of
service in excess of 20 years; minus (iii) 1.25% of
the participants Social Security benefit multiplied by
total benefit service up to 40 years. Final average pay is
based on the highest average compensation paid during 60
consecutive months out of the last 120 months of benefit
service. Compensation means the basic
143
cash remuneration paid to the participant, including annual
bonus, commissions and overtime pay, and before deductions for
elective deferrals (up to applicable Internal Revenue Code
limits, which in 2008 was $230,000).
As a result of plan participants benefits under the plan
being frozen, any pay earned and service completed after that
date will not be taken into account when determining the amount
of a participants benefit under the plan. Participants
will continue to earn eligibility towards early retirement as
long as they remain our employees. Normal retirement under the
plan is age 65; however, participants who have attained
age 55 and completed at least 10 years of vesting
service may retire prior to age 65 and receive a reduced
benefit. Based upon his age and years of benefit service,
Mr. Pollichinos monthly accrued benefit payable at
age 65 under the plan is $3,108.
The normal form of benefit is a single life annuity for an
unmarried participant and a 50% joint and survivor annuity for a
married participant. The participant, with the spouses
consent if married, may waive the normal form and elect an
optional form of payment, including a single life annuity, a
50%, 75% or 100% joint and survivor annuity, a
10-year
certain and life annuity, a level income option that integrates
with Social Security benefits, and a lump sum payment if the
actuarial present value of the benefit does not exceed $10,000.
Madison
Square Garden, L.P. Excess Retirement Plan
The Madison Square Garden, L.P. Excess Retirement Plan
(MSG Excess Retirement Plan) is a non-qualified
defined benefit plan that provides eligible participants,
including Mr. Pollichino, with the portion of their benefit
that cannot be paid to them under the MSG Retirement Plan due to
Internal Revenue Code limits on the amount of compensation that
can be taken into account in determining benefits under
tax-qualified plans ($245,000 in 2009). Future benefit accruals
under the MSG Excess Retirement Plan ceased as of
January 1, 2008 in conjunction with the cessation of future
accruals under the MSG Retirement Plan.
Benefits are payable under the MSG Excess Retirement Plan upon
the participants termination of employment. The normal
form of payment under the MSG Excess Retirement Plan is a life
annuity for all participants. Instead of the normal form of
payment, participants may instead elect a 50%, 75% or 100% joint
and survivor annuity option or a
10-year
certain and life annuity option. Based upon his age and years of
benefit service, Mr. Pollichinos monthly accrued
benefit payable at age 65 under the plan is $9,825.
Cablevision
Nonqualified Deferred Compensation
The table below shows (i) the contributions made by
Messrs. Dolan, Ratner and Pollichino and by Cablevision in
2009, (ii) aggregate earnings on each such executive
officers account balance in 2009 and (iii) the
account balance of each such executive officer under the
Cablevision Excess Savings Plan as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Contributions
|
|
Contributions
|
|
Earnings
|
|
Aggregate
|
|
Aggregate
|
|
|
|
|
in 2009 FY(1)
|
|
in 2009 FY(2)
|
|
in 2009 FY(3)
|
|
Withdrawals/
|
|
Balance at
|
Name
|
|
Plan Name
|
|
($)
|
|
($)
|
|
($)
|
|
Distributions ($)
|
|
2009 FY ($)
|
|
James L. Dolan
|
|
Cablevision Excess Savings Plan
|
|
|
108,227
|
|
|
|
53,454
|
|
|
|
14,348
|
|
|
|
|
|
|
|
|
|
Hank J. Ratner
|
|
Cablevision Excess Savings Plan
|
|
|
83,464
|
|
|
|
41,732
|
|
|
|
17,703
|
|
|
|
|
|
|
|
|
|
Robert M. Pollichino
|
|
Cablevision Excess Savings Plan
|
|
|
24,811
|
|
|
|
10,756
|
|
|
|
6,821
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
These amounts represent a portion of the executives
salaries, which are included in the numbers reported in the
Salary column of the Summary Compensation Table that
the executives contributed to the respective plans.
|
|
(2)
|
|
These amounts are reported in the All Other
Compensation column of the Summary Compensation Table.
|
|
(3)
|
|
These amounts are not reported in the All Other
Compensation column of the Summary Compensation Table.
|
144
Cablevision
401(k) Plan
Under the Cablevision 401(k) Savings Plan (the Cablevision
401(k) Plan), a tax-qualified retirement savings plan,
participating employees, including executive officers, may
contribute into their plan accounts a percentage of their
eligible pay on a before-tax basis as well as a percentage of
their eligible pay on an after-tax basis. Cablevision will match
50% of the first 6% of eligible pay contributed by participating
employees. The Cablevision matching contributions will be
subject to vesting limitations for the first three years of
employment.
Cablevision
Excess Savings Plan
The Cablevision Excess Savings Plan is a non-qualified deferred
compensation plan that operates in conjunction with the
Cablevision 401(k) Plan. An employee is eligible to participate
in the Cablevision Excess Savings Plan for a calendar year if
his compensation (as defined in the Cablevision Cash Balance
Pension Plan described above) in the preceding year exceeded (or
would have exceeded, if the employee had been employed for the
entire year) the IRS limit on the amount of compensation that
can be taken into account in determining contributions under
tax-qualified retirement plans ($245,000 in 2009) and he
makes an election to participate prior to the beginning of the
year. An eligible employee whose contributions to the
Cablevision 401(k) Plan are limited as a result of this
compensation limit or as a result of reaching the maximum 401(k)
deferral limit ($16,500 or $22,000 if 50 or over, for
2009) can continue to make pre-tax contributions under the
Cablevision Excess Savings Plan of up to 6% of his eligible pay.
In addition, Cablevision will make matching contributions of up
to 50% of the first 6% of eligible pay contributed by the
employee. A participant is always fully vested in his own
contributions and vests in Cablevision matching contributions
over three years (subject to full vesting upon death, disability
or retirement after attaining age 65). Account balances
under the Cablevision Excess Savings Plan are credited monthly
with the rate of return earned by the Stable Value Fund offered
as an investment alternative under the Cablevision 401(k) Plan.
Distributions are made in a lump sum as soon as practicable
after the participants termination of employment with
Cablevision.
Our
Retirement Benefits
After the Distribution, liabilities for benefits under the
Cablevision Cash Balance Pension Plan, the Cablevision Excess
Cash Balance Plan, the Cablevision Excess Savings Plan and the
Cablevision 401(k) Plan, in which our employees participate,
will be assumed by us together with the actuarially determined
associated assets, to the extent such assets and benefits are
not already our assets or liabilities. The actuarial present
values of the accumulated pension benefits of
Messrs. Dolan, Ratner and Pollichino who have participated
in the Cablevision Cash Balance Pension Plan, the Cablevision
Excess Cash Balance Plan, the MSG Retirement Plan and the MSG
Excess Retirement Plan as of the end of 2008 are reported in the
Pension Benefits Table herein. Information concerning the
Cablevision Excess Savings Plan as of the end of 2008 is
reported in the Non-Qualified Deferred Compensation Table herein.
Following the Distribution, we expect to offer retirement plans
that are substantially similar to the Cablevision Cash Balance
Pension Plan, the Cablevision Excess Cash Balance Plan, the
Cablevision Excess Savings Plan and the Cablevision 401(k) Plan,
which are described above.
Termination
and Severance
This section describes the payments that would be received by
executive officers upon various termination of employment
scenarios. The information under Separation from the
Company is based upon the provisions of each executive
officers employment agreement with the Company and assumes
that the executive officer was employed by the Company under
that agreement at December 31, 2009. The information under
Separation from Cablevision for Messrs. Dolan
and Ratner is based upon their employment arrangements as named
executive officers of Cablevision and for Mr. Pollichino is
based upon his employment arrangements as an executive of
Madison Square Garden, in each case as in effect as of
December 31, 2008. This information is presented to
illustrate the payments such executives would have received from
Cablevision under the various termination scenarios. The
consummation of the Distribution is not a termination of
employment with Cablevision for these purposes. The Company will
have no liability for the payment of any
145
amounts to Messrs. Dolan and Ratner with respect to the
amounts shown as the payments they would receive from
Cablevision.
Separation
from the Company
Payments may be made to employees upon the termination of their
employment with the Company depending upon the circumstances of
their termination, which include termination by the Company
without cause, termination by the employee for good reason,
other voluntary termination by the employee, retirement, death,
disability, or termination following a change in control of the
Company or following a going-private transaction. Certain of
these circumstances are addressed in employment agreements
between the Company and the executives. For a description of
termination provisions in the employment agreements, see
Employment Agreements above. In
addition, future award agreements for any long-term incentives
will also address some of these circumstances.
The following table sets forth the estimated cash severance
benefits payable by the Company to each of its executive
officers as of December 31, 2009 in connection with their
applicable employment agreements with the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without
|
|
|
|
Termination by the
|
|
|
|
|
|
|
|
Termination in
|
|
|
|
|
Cause by the
|
|
|
|
Executive or
|
|
|
|
|
|
|
|
Connection with a
|
|
|
|
|
Company or with
|
|
|
|
Termination due to
|
|
|
|
|
|
|
|
Company Change in
|
|
|
|
|
Good Reason by the
|
|
|
|
Retirement, Death
|
|
|
|
Termination for Cause
|
|
|
|
Control or Going
|
|
Executive
|
|
|
Executive
|
|
|
|
or Disability
|
|
|
|
by the Company
|
|
|
|
Private Transaction
|
|
James L. Dolan
|
|
|
$
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,000,000
|
|
Hank J. Ratner
|
|
|
$
|
7,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,200,000
|
|
Robert M. Pollichino
|
|
|
$
|
2,240,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,240,000
|
|
Lawrence J. Burian
|
|
|
$
|
1,920,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,920,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts set forth above, if any, represent severance equal
to two times the sum of the executives base salary and
target bonus as provided in their applicable employment
agreement with the Company. The amounts do not reflect amounts
the executives would remain eligible to receive as a 2009 annual
bonus given that, in the case of Messrs. Dolan, Ratner and
Burian, such bonuses are the responsibility of Cablevision (and
not the Company) and, in the case of Mr. Pollichino, such
bonus is discretionary and has not yet been determined.
In addition, the above table does not include any amounts with
respect to accelerated vesting or payment of any Company
long-term cash or equity incentives, given that the Company will
not have granted any such awards as of December 31, 2009.
The above table similarly does not reflect any amounts with
respect to accelerated vesting or payment of outstanding
Cablevision long-term cash or equity incentives given that, in
the case of Messrs. Dolan and Ratner, such awards will be
the responsibility of Cablevision (and not the Company) and in
the case of Messrs. Pollichino and Burian, any pro rata
accelerated vesting of such awards in connection with certain
employment termination events will be discretionary on the part
of our Compensation Committee in accordance with the applicable
employment agreements. The outstanding Cablevision long-term
cash and equity incentive awards held by Messrs. Dolan and
Ratner may, however, be subject to accelerated vesting
and/or
payment by Cablevision (not by the Company) under certain types
of termination of their employment with Cablevision and, in the
case of Messrs. Dolan, Ratner, Pollichino and Burian, may
be subject to accelerated vesting
and/or
payment in connection with certain types of Cablevision change
in control or Cablevision going private transactions.
We expect that, over time, our executive officers will receive
long-term awards from the Company, and, as a result, actual
aggregate potential termination payments in the future will be
materially higher in certain of the termination scenarios.
146
Separation
from Cablevision
This section presents historical information concerning payments
that would have been made to Messrs. Dolan, Ratner and
Pollichino upon termination of their employment at
December 31, 2009. The amount of these payments would have
depended upon the circumstances of their termination, which
include termination without cause, termination by the executive
for good reason, other voluntary termination by the executive,
retirement, death, disability, or termination following a change
in control or following a going-private transaction. Payments in
such circumstances would have also been affected by the terms of
employment agreements between Cablevision and Messrs. Dolan
and Ratner that were in effect at such time as well as by the
terms of applicable award agreements. Mr. Pollichino did
not have an employment agreement in effect as of
December 31, 2009. In 2009, in contemplation of the
Distribution, Messrs. Dolan and Ratner entered into new
employment agreements with Cablevision that will be effective as
of the Distribution.
Cablevision
Award Agreements
Under the applicable Cablevision award agreements, vesting of
restricted stock, stock options and stock appreciation rights
granted to employees, including the Messrs. Dolan, Ratner
and Pollichino, may be affected upon a change of
control of Cablevision or a going private transaction (as
defined in
Rule 13e-3
of the Securities Exchange Act of 1934). A change of
control is defined in the Cablevision award agreements as
the acquisition by any person or group, other than Charles F.
Dolan or members of his immediate family (or trusts for the
benefit of Charles F. Dolan or his immediate family) or any
employee benefit plan sponsored or maintained by Cablevision, of
(1) the power to direct the management of substantially all
of the cable television systems then owned by Cablevision in the
New York City metropolitan area, or (2) after any fiscal
year of Cablevision in which Cablevisions cable television
systems in the New York City metropolitan area contributed in
the aggregate less than a majority of the net revenues of
Cablevision and its consolidated subsidiaries, the power to
direct the management of Cablevision or substantially all of its
assets. Upon a change in control, as defined, the restricted
stock, stock options and stock appreciation rights may be
converted into either a right to receive an amount of cash based
upon the highest price per share of Cablevisions
Class A common stock paid in the transaction resulting in
the change of control, or, as long as the surviving entity is a
public company, into a corresponding award with equivalent
profit potential in the surviving entity, at the election of the
Cablevision compensation committee. Upon a going private
transaction, the restricted stock, stock options and stock
appreciation rights would be converted into a right to receive
an amount of cash based upon the highest price per share of
Cablevisions Class A common stock paid in the
transaction. Following the change of control or going private
transaction, the award of restricted stock, stock options or
stock appreciation rights will become payable on the earlier to
occur of (1) the date on which the award was originally
scheduled to vest or (2) the date on which the
recipients employment with Cablevision or the surviving
entity is terminated (A) by Cablevision or the surviving
entity other than for cause or (B) by the recipient for
good reason, if such termination occurs within three years after
the change of control or going private transaction, or by the
recipient for any reason if such termination occurs at least six
months, but not more than nine months, after completion of the
change of control or going private transaction. In addition, the
amount payable under the award agreement will include interest
from the date of the change of control or going private
transaction.
Under the Cablevision applicable award agreements, vesting of
restricted stock, stock options and stock appreciation rights
granted to employees, including Messrs. Dolan, Ratner and
Pollichino, may be accelerated in certain other circumstances.
Under stock option or stock appreciation rights award
agreements, upon termination for cause, the entire award is
forfeited. Upon termination by Cablevision without cause,
termination by the employee, death, disability or retirement,
the unvested portion of the award is forfeited; provided,
however, that only with respect to stock options granted in
2006, upon death, the entire award is immediately vested.
Depending on the type of termination and specific option grant,
the time to exercise the vested portion varies from 90 days
to three years. With respect to stock options granted in March
2009, depending on the type of termination, the time to exercise
the vested option varies from 90 days to the remainder of
the term. In no event is this period later than the expiration
date, except in the case of death, in which the time to exercise
may be extended for one year after the expiration date. Under
restricted stock
147
award agreements, upon any termination for any reason prior to
the third anniversary of the grant date other than death or
change of control or going private transaction, the entire award
is forfeited; upon death, the entire award is immediately
vested. Under the applicable award agreements for performance
awards, upon termination for cause, the entire award is
forfeited. Under the applicable award agreements for all
performance awards, upon a change in control, the entire award
vests and is immediately payable, regardless of the performance
objectives. Under subsequent performance award agreements, upon
any termination for any reason prior to the payment date other
than death, the entire award is forfeited. Upon death before the
end of the performance period, a pro rata portion of the award
will vest and be immediately payable; upon death after the end
of the performance period but prior to the payment date, the
entire award will be payable upon the payment date. In the event
of a going private transaction, the entire award vests and is
immediately payable, regardless of the performance objectives.
Under the applicable Cablevision award agreements for deferred
compensation awards, upon termination for cause, the entire
award is forfeited. Upon death or disability, the then-current
award amount outstanding on that date is immediately payable.
Upon termination without cause, termination by the employee or
retirement prior to the second anniversary of the grant date,
the entire award is forfeited. Upon termination without cause,
termination by the employee or retirement after the second
anniversary of the grant date, the then-current award amount
outstanding on the date of termination vests on a pro rata basis
and the pro rata portion is payable (adjusted, if applicable,
for any amount that may have been paid out on the fifth
anniversary of the date of grant). Upon a change in control, the
entire award vests and is immediately payable. The award
agreements for deferred compensation do not provide for any
special benefits in the event of a going private transaction.
Under the applicable Cablevision award agreements for the
performance retention award, upon termination for cause, the
entire award is forfeited. Upon death, the entire award vests
and is immediately payable, regardless of the performance
objective. Upon disability, the award will continue to vest
during the term of the disability. Upon termination without
cause, termination by the employee or retirement prior to the
fourth anniversary of the grant date, the entire award is
forfeited. Upon termination without cause, termination by the
employee or retirement after the fourth anniversary of the grant
date, the award vests on a pro rata basis and the pro rata
portion will be payable (subject to the Cablevision compensation
committees discretion) if the performance objective is
achieved. Upon a change in control, the entire award vests and
is immediately payable. The award agreements for performance
retention awards do not provide for any special benefits in the
event of a going private transaction.
Quantification
of Termination and Severance payable by
Cablevision
The following tables set forth a quantification of estimated
severance and other benefits payable to Messrs. Dolan, Ratner
and Pollichino under various circumstances regarding the
termination of their employment. In calculating these severance
and other payments, we have taken into consideration or
otherwise assumed the following:
|
|
|
|
|
Termination of employment occurred after the close of business
on December 31, 2009.
|
|
|
|
|
|
We have valued equity awards using the closing market price of
Class A common stock on the New York Stock Exchange on
December 31, 2008, the last trading day of the year, of
$25.82.
|
|
|
|
|
|
We have valued stock options at their intrinsic value, equal to
the difference between $25.82 and the per share exercise price,
multiplied by the number of shares underlying the stock options.
|
|
|
|
|
|
Where applicable, we have included in the calculation of the
value of equity awards the payment of any quarterly dividends
declared through December 31, 2009.
|
|
|
|
|
|
In the event of termination of employment, the payment of
certain long-term incentive awards and other amounts may be
delayed, depending upon the terms of each specific award
agreement, the provisions of the applicable named executive
officers employment agreement and the applicability of
Section 409A. In quantifying aggregate termination
payments, we have not taken into account the
|
148
|
|
|
|
|
timing of the payments and we have not discounted the value of
payments that would be made over time, except where otherwise
disclosed.
|
|
|
|
|
|
We have assumed that all performance metrics for
performance-based awards are achieved (but not exceeded).
|
Benefits
Payable As a Result of Voluntary Termination of Employment by
Employee*
|
|
|
|
|
|
|
|
|
|
|
|
|
Elements
|
|
James L. Dolan
|
|
Hank J. Ratner
|
|
Robert M. Pollichino
|
|
Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
Most recent bonus
|
|
|
|
|
|
$
|
3,276,000
|
|
|
|
|
|
Unvested restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested performance options
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance awards
|
|
$
|
4,470,000
|
(1)
|
|
$
|
3,990,000
|
(1)
|
|
$
|
250,000
|
(1)
|
Performance retention award
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation award
|
|
$
|
326,280
|
(2)
|
|
$
|
326,280
|
(2)
|
|
$
|
272,651
|
(2)
|
Consulting arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive life insurance premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The amounts in this table do not include any payments or awards
which were vested at December 31, 2009 or any pension or
other vested retirement benefits.
|
|
(1)
|
|
Represents the full value of his 2007 three-year performance
award; his other performance awards would be forfeited.
|
|
(2)
|
|
Represents a pro rata share of the then-current award amount of
his deferred compensation award at December 31, 2009.
|
Benefits
Payable As a Result of Termination of Employment Due to
Retirement*
|
|
|
|
|
|
|
|
|
|
|
|
|
Elements
|
|
James L. Dolan
|
|
Hank J. Ratner
|
|
Robert M. Pollichino
|
|
Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
Most recent bonus
|
|
|
|
|
|
$
|
3,276,000
|
|
|
|
|
|
Unvested restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested performance options
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance awards
|
|
$
|
4,470,000
|
(1)
|
|
$
|
3,990,000
|
(1)
|
|
$
|
250,000
|
(1)
|
Performance retention award
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation award
|
|
$
|
326,280
|
(2)
|
|
$
|
326,280
|
(2)
|
|
$
|
272,651
|
(2)
|
Consulting arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive life insurance premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The amounts in this table do not include any payments or awards
which were vested at December 31, 2009 or any pension or
other vested retirement benefits.
|
|
(1)
|
|
Represents the full value of his 2007 three-year performance
award; his other performance awards would be forfeited.
|
|
(2)
|
|
Represents a pro rata share of the then-current award amount of
his deferred compensation award at December 31, 2009.
|
149
Benefits
Payable As a Result of Termination of Employment by Cablevision
for Cause
In the event of termination by Cablevision for cause, no
executive officer is entitled to any payments.
Benefits
Payable As a Result of Termination of Employment by Cablevision
Without Cause*
|
|
|
|
|
|
|
|
|
|
|
|
|
Elements
|
|
James L. Dolan
|
|
Hank J. Ratner
|
|
Robert M. Pollichino
|
|
Severance
|
|
$
|
16,848,000
|
(1)
|
|
$
|
14,692,860
|
(6)
|
|
|
|
|
Most recent bonus
|
|
|
|
|
|
$
|
3,276,000
|
|
|
|
|
|
Unvested restricted stock
|
|
$
|
10,106,176
|
|
|
$
|
9,023,934
|
|
|
|
|
|
Unvested stock options
|
|
$
|
14,070,298
|
|
|
$
|
12,559,038
|
|
|
|
|
|
Unvested performance options
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance awards
|
|
$
|
11,175,000
|
(2)
|
|
$
|
9,975,000
|
(2)
|
|
|
|
|
Performance retention award
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation award
|
|
$
|
719,880
|
(3)
|
|
$
|
719,880
|
(3)
|
|
$
|
272,651
|
(4)
|
Consulting arrangements
|
|
$
|
3,629,895
|
(5)
|
|
$
|
1,665,055
|
(7)
|
|
|
|
|
Health insurance benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive life insurance premiums
|
|
|
|
|
|
$
|
33,166
|
(8)
|
|
|
|
|
|
|
|
*
|
|
The amounts in this table do not include any payments or awards
which were vested at December 31, 2009 or any pension or
other vested retirement benefits
|
|
(1)
|
|
Represents severance equal to $40,000 plus three times the sum
of his salary and target bonus.
|
|
(2)
|
|
Represents the full value of his 2007, 2008 and 2009 performance
awards.
|
|
(3)
|
|
Represents the full value of the then current deferred
compensation award at December 31, 2009.
|
|
(4)
|
|
Represents a pro rata share of the then-current award amount of
his deferred compensation award at December 31, 2009.
|
|
(5)
|
|
Represents the present value, based on a 4% discount rate, of a
four-year consulting agreement with Cablevision that provides
for the payment of at least $1 million each year.
|
|
(6)
|
|
Represents severance equal to 2.99 times the sum of his salary
and target bonus.
|
|
(7)
|
|
Represents the present value, based on a 4% discount rate, of a
three-year consulting agreement with Cablevision that provides
for the payment of at least $600,000 each year.
|
|
(8)
|
|
This amount represents the cumulative expected future premiums
until such point which policies are expected to be fully funded
and there would no longer be a need to make any additional
premium payments.
|
Benefits
Payable As a Result of Termination of Employment by Employee For
Good Reason*
|
|
|
|
|
|
|
|
|
|
|
|
|
Elements
|
|
James L. Dolan
|
|
Hank J. Ratner
|
|
Robert M. Pollichino
|
|
Severance
|
|
$
|
16,848,000
|
(1)
|
|
$
|
14,692,860
|
(6)
|
|
|
|
|
Most recent bonus
|
|
|
|
|
|
$
|
3,276,000
|
|
|
|
|
|
Unvested restricted stock
|
|
$
|
10,106,176
|
|
|
$
|
9,023,934
|
|
|
|
|
|
Unvested stock options
|
|
$
|
14,070,298
|
|
|
$
|
12,559,038
|
|
|
|
|
|
Unvested performance options
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance awards
|
|
$
|
11,175,000
|
(2)
|
|
$
|
9,975,000
|
(2)
|
|
|
|
|
Performance retention award
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation award
|
|
$
|
719,880
|
(3)
|
|
$
|
719,880
|
(3)
|
|
$
|
272,651
|
(4)
|
Consulting arrangements
|
|
$
|
3,629,895
|
(5)
|
|
$
|
1,665,055
|
(7)
|
|
|
|
|
Health insurance benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive life insurance premiums
|
|
|
|
|
|
$
|
33,166
|
(8)
|
|
|
|
|
150
|
|
|
*
|
|
The amounts in this table do not include any payments or awards
which were vested at December 31, 2009 or any pension or
other vested retirement benefits.
|
|
(1)
|
|
Represents severance equal to $40,000 plus three times the sum
of his salary and target bonus.
|
|
(2)
|
|
Represents the full value of his 2007, 2008 and 2009 performance
awards.
|
|
(3)
|
|
Represents the full value of the then current deferred
compensation award amount as of December 31, 2009.
|
|
(4)
|
|
Represents a pro rata share of the then-current award amount of
his deferred compensation award at December 31, 2009.
|
|
(5)
|
|
Represents the present value, based on a 4% discount rate, of a
four-year consulting agreement with Cablevision that provides
for the payment of at least $1 million each year.
|
|
(6)
|
|
Represents severance equal to 2.99 times the sum of his salary
and target bonus.
|
|
(7)
|
|
Represents the present value, based on a 4% discount rate, of a
three-year consulting agreement with Cablevision that provides
for the payment of at least $600,000 each year.
|
|
(8)
|
|
This amount represents the cumulative expected future premiums
until such point which policies are expected to be fully funded
and there would no longer be a need to make any additional
premium payments.
|
Benefits
Payable As a Result of Termination of Employment Due to
Death*
|
|
|
|
|
|
|
|
|
|
|
|
|
Elements
|
|
James L. Dolan
|
|
Hank J. Ratner
|
|
Robert M. Pollichino
|
|
Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
Most recent bonus
|
|
|
|
|
|
$
|
3,276,000
|
|
|
|
|
|
Unvested restricted stock
|
|
$
|
10,106,176
|
|
|
$
|
9,023,934
|
|
|
$
|
976,382
|
|
Unvested stock options
|
|
$
|
14,070,298
|
|
|
$
|
12,559,038
|
|
|
|
|
|
Unvested performance options
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance awards
|
|
$
|
11,175,000
|
|
|
$
|
9,975,000
|
|
|
$
|
500,000
|
|
Performance retention award
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation award
|
|
$
|
719,880
|
|
|
$
|
719,880
|
|
|
$
|
601,557
|
|
Consulting arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive life insurance premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The amounts in this table do not include any payments or awards
which were vested at December 31, 2009 or any pension or
other vested retirement benefits.
|
151
Benefits
Payable As a Result of Termination of Employment Due to
Disability*
|
|
|
|
|
|
|
|
|
|
|
|
|
Elements
|
|
James L. Dolan
|
|
Hank J. Ratner
|
|
Robert M. Pollichino
|
|
Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
Most recent bonus
|
|
|
|
|
|
$
|
3,276,000
|
|
|
|
|
|
Unvested restricted stock
|
|
$
|
10,106,176
|
|
|
$
|
9,023,934
|
|
|
$
|
976,382
|
|
Unvested stock options
|
|
$
|
14,070,298
|
|
|
$
|
12,559,038
|
|
|
|
|
|
Unvested performance options
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance awards
|
|
$
|
11,175,000
|
|
|
$
|
9,975,000
|
|
|
$
|
250,000
|
|
Performance retention award
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation award
|
|
$
|
719,880
|
|
|
$
|
719,880
|
|
|
$
|
601,557
|
|
Consulting arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
Health insurance benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive life insurance premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The amounts in this table do not include any payments or awards
which were vested at December 31, 2009 or any pension or
other vested retirement benefits.
|
Benefits
Payable As a Result of Termination of Employment In Connection
with a Change in Control or Going Private
Transaction(1)*
|
|
|
|
|
|
|
|
|
|
|
|
|
Elements
|
|
James L. Dolan(2)
|
|
Hank J. Ratner(3)
|
|
Robert M. Pollichino
|
|
Severance
|
|
$
|
16,848,000
|
(4)
|
|
$
|
14,692,860
|
(6)
|
|
|
|
|
Most recent bonus
|
|
|
|
|
|
$
|
3,276,000
|
|
|
|
|
|
Unvested restricted stock
|
|
$
|
10,106,176
|
|
|
$
|
9,023,934
|
|
|
$
|
976,382
|
|
Unvested stock options
|
|
$
|
14,070,298
|
|
|
$
|
12,559,038
|
|
|
|
|
|
Unvested performance options
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance awards
|
|
$
|
11,175,000
|
|
|
$
|
9,975,000
|
|
|
|
|
|
Performance retention award
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation award
|
|
$
|
719,880
|
|
|
$
|
719,880
|
|
|
$
|
601,557
|
|
Consulting arrangements
|
|
$
|
3,629,895
|
(5)
|
|
$
|
1,665,055
|
(7)
|
|
|
|
|
Health insurance benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive life insurance premiums
|
|
|
|
|
|
$
|
33,166
|
(8)
|
|
|
|
|
|
|
|
*
|
|
The amounts in this table do not include any payments or awards
which were vested at December 31, 2009 or any pension or
other vested retirement benefits.
|
|
(1)
|
|
The numbers presented in this table reflect amounts payable as a
result of termination of employment by the executive or
Cablevision following a change in control. The amounts payable
as a result of termination of employment by the executive or
Cablevision following a going private transaction are generally
equal to or less than the amounts payable as a result of
termination of employment by the executive or Cablevision
following a change in control. For specific information about
payments for a termination following a going private
transaction, see Notes (2) to (6) below.
|
|
(2)
|
|
If a change in control of Cablevision were to occur but
Mr. James L. Dolans employment was not terminated, he
would nevertheless be entitled to receive the following upon
consummation of the change in control (in addition to all
previously vested amounts): (i) the full amount of his 2007
performance award of $4,470,000; and (ii) the full amount
of the then-current award amount of his deferred compensation
award at December 31, 2009 equal to $719,880. If
Mr. James L. Dolans employment were terminated by
Cablevision, or by him, following a going private transaction,
it would be treated as a termination by Cablevision without
cause. He would be entitled to receive payments in the same
amounts that are set forth in this table above. If a going
private transaction were to occur but Mr. James L.
Dolans employment was not terminated, he would
nevertheless be entitled to receive the full amount of his 2007
performance award of $4,470,000.
|
152
|
|
|
(3)
|
|
If a change in control of Cablevision were to occur but
Mr. Ratners employment was not terminated, he would
nevertheless be entitled to receive the following upon
consummation of the change in control: (i) the full amount
of his 2007 performance award of $3,990,000; and (ii) the
full amount of the then-current award amount of his deferred
compensation award at December 31, 2009 equal to $719,880.
If Mr. Ratners employment were terminated by
Cablevision or by him following a going private transaction, it
would be treated as a termination by Cablevision without cause.
He would be entitled to receive payments in the same amounts
that are set forth in this table above. If a going private
transaction were to occur but Mr. Ratners employment
was not terminated, he would nevertheless be entitled to receive
the full amount of his 2007 performance award of $3,990,000.
|
|
(4)
|
|
Represents severance equal to three times the sum of his salary
and target bonus plus $40,000.
|
|
(5)
|
|
Represents the present value, based on a 4% discount rate, of a
four-year consulting agreement with Cablevision that provides
for the payment of at least $1 million each year.
|
|
(6)
|
|
Represents severance equal to 2.99 times the sum of his salary
and target bonus.
|
|
(7)
|
|
Represents the present value, based on a 4% discount rate, of a
three-year consulting agreement with Cablevision that provides
for the payment of at least $600,000 each year.
|
|
(8)
|
|
This amount represents the cumulative expected future premiums
until such point which policies are expected to be fully funded
and there would no longer be a need to make any additional
premium payments.
|
Our
Equity Compensation Plan Information
We plan to adopt an Employee Stock Plan and a Stock Plan for
Non-Employee Directors both of which are discussed below.
Our
Employee Stock Plan
Prior to the Distribution, we will adopt an Employee Stock Plan
(the Employee Stock Plan), subject to the approval
of Cablevision as our sole shareholder at such time.
A form of the Employee Stock Plan is filed as an exhibit to the
registration statement of which this information statement forms
a part that we have filed with the SEC, and the following
description of the Employee Stock Plan is qualified in its
entirety by reference to the Employee Stock Plan.
Overview
The purpose of the Employee Stock Plan is to compensate
employees of the Company and its affiliates who are responsible
for the management and growth of the business of the Company and
its affiliates and to advance the interest of the Company by
encouraging and enabling the acquisition of a personal
proprietary interest in the Company by employees upon whose
judgment and keen interest the Company and its affiliates are
largely dependent for the successful conduct of their
operations. It is anticipated that the acquisition of such a
proprietary interest in the Company will stimulate the efforts
of these employees on behalf of the Company and its affiliates,
and strengthen their desire to remain with the Company and its
affiliates. It is also expected that the opportunity to acquire
such a proprietary interest will enable the Company and its
affiliates to attract and retain desirable personnel. The
Employee Stock Plan provides for grants of incentive stock
options (as defined in Section 422A of the Internal Revenue
Code), non-qualified stock options, stock appreciation rights,
restricted shares, restricted stock units and other equity-based
awards (collectively, Awards). The Employee Stock
Plan will terminate, and no more Awards will be granted after
ten years from the effective date of the plan (unless sooner
terminated by our Board of Directors or our Compensation
Committee). The termination of the Employee Stock Plan will not
affect previously granted Awards.
Shares Subject
to the Employee Stock Plan; Other Limitations
The Employee Stock Plan will be administered by the
Companys Compensation Committee. Awards may be granted
under the Employee Stock Plan to such employees of the Company
and its affiliates as the Compensation Committee may determine.
An affiliate is defined in the Employee Stock Plan
to mean any
153
entity controlling, controlled by, or under common control with
the Company or any other affiliate and also includes any entity
in which the Company owns at least five percent of the
outstanding equity interests. Cablevisions compensation
committee will be authorized to grant Awards under the Employee
Stock Plan with respect to outstanding equity awards of
Cablevision in connection with the Distribution. Such Awards may
include options or rights with exercise prices that are less
than the fair market value of the underlying shares in order to
preserve the intrinsic value of the outstanding Cablevision
equity awards prior to the Distribution. The total number of
shares of the Companys Class A Common Stock that may
be issued pursuant to Awards under the Employee Stock Plan may
not exceed an aggregate of 7,000,000, which may be either
treasury shares or authorized and unissued shares. To the extent
that (i) an Award is paid, settled or exchanged or expires,
lapses, terminates or is cancelled for any reason without the
issuance of shares, (ii) any shares under an Award are not
issued because of payment or withholding obligations or
(iii) restricted shares revert back to the Company prior to
the lapse of the restrictions or are applied by the Company for
purposes of tax withholding obligations, then the Compensation
Committee may also grant Awards with respect to such shares or
restricted shares. Awards payable only in cash or property other
than shares do not reduce the aggregate remaining number of
shares with respect to which Awards may be made under the
Employee Stock Plan and shares relating to any other Awards that
are settled in cash or property other than shares, when settled,
will be added back to the aggregate remaining number of shares
with respect to which Awards may be made under the Employee
Stock Plan. Any shares underlying Awards that the Company
becomes obligated to make through the assumption of, or in
substitution for, outstanding awards previously granted by an
acquired entity shall not count against the shares available to
be delivered pursuant to Awards under the Employee Stock Plan.
No single employee may be issued Awards during any one calendar
year for, or that relate to, a number of shares exceeding
2,000,000. In the event that any dividend or other distribution
(whether in the form of cash, shares, other securities, or other
property), recapitalization, forward or reverse stock split,
reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects shares such that
the failure to make an adjustment to an Award would not fairly
protect the rights represented by the Award in accordance with
the essential intent and principles thereof (each such event, an
Adjustment Event), then the Compensation Committee
will, in such manner as it may determine to be equitable in its
sole discretion, adjust any or all of the terms of an
outstanding Award (including, without limitation, the number of
shares covered by such outstanding Award, the type of property
to which the Award is subject and the exercise price of such
Award).
As a result of the Distribution, options with respect
to shares
of the Companys Class A Common Stock and stock
appreciation rights with respect
to shares
of the Companys Class A Common Stock will be issued
to employees under the Employee Stock Plan. See
Shares Eligible for Future Sale Employee
Stock Awards.
Awards
All employees of the Company and its affiliates will be eligible
to receive Awards under the Employee Stock Plan. Under the
Employee Stock Plan, the Company may grant options and stock
appreciation rights, which will be exercisable at a price
determined by the Compensation Committee on the date of the
Award grant, which price will be no less than the fair market
value of a share of Class A Common Stock on the date the
option or stock appreciation right is granted. Other than in the
case of the death of a participant, such options and stock
appreciation rights may be exercised for a term fixed by the
Compensation Committee but no longer than ten years from the
date of grant. An award agreement may provide that, in the event
the participant dies while the option or stock appreciation
right is outstanding, the option or stock appreciation right
will remain outstanding until the first anniversary of the
participants death, whether or not such first anniversary
occurs after such ten-year period. Upon its exercise, a stock
appreciation right will be settled (and an option may be
settled, in the Compensation Committees discretion) for an
amount equal to the excess of the fair market value of a share
of Class A Common Stock on the date of exercise over the
exercise price of the stock appreciation right (or option).
The Company may also grant restricted shares and restricted
stock units. A restricted share is a share of Class A
Common Stock that is registered in the participants name,
but that is subject to certain transfer
and/or
forfeiture restrictions for a period of time as specified in the
participants award agreements. The recipient of a
154
restricted share will have the rights of a shareholder, subject
to any restrictions and conditions specified by the Compensation
Committee in the recipients award agreement.
Notwithstanding the previous sentence, unless the Compensation
Committee determines otherwise, all ordinary cash dividends paid
upon any restricted share prior to its vesting will be retained
by the Company for the account of the relevant participant and
upon vesting will be paid to the relevant participant.
A restricted stock unit is an unfunded, unsecured right to
receive a share of Class A Common Stock (or cash or other
property) at a future date upon the satisfaction of the
conditions specified by the Compensation Committee in the award
agreement. Unless otherwise provided by the Compensation
Committee, a restricted stock unit will also carry a dividend
equivalent right representing an unfunded and unsecured promise
to pay to the relevant participant, upon the vesting of the
restricted stock unit, an amount equal to the ordinary cash
dividends that would have been paid upon any share underlying a
restricted stock unit had such shares been issued.
The Compensation Committee may grant other equity-based or
equity-related awards to participants subject to terms and
conditions it may specify. These awards may entail the transfer
of shares or payment in cash based on the value of shares.
Under the Employee Stock Plan, the Compensation Committee will
have the authority, in its discretion, to add performance
criteria as a condition to any employees exercise of a
stock option or stock appreciation right, or the vesting or
payment of any restricted shares or restricted stock units,
granted under the Employee Stock Plan. Additionally, the
Employee Stock Plan specifies certain performance criteria that
may, in the case of certain executive officers of the Company,
be conditions precedent to the vesting of bonus award shares or
restricted shares granted to such executives under the Employee
Stock Plan. The performance criteria may be determined by
reference to the performance of the Company, an affiliate or a
business unit, product, team, venue, production, event, network
or service thereof or any combination of the foregoing. Such
criteria may also be measured on a per customer, subscriber,
sponsor, viewer (or available viewer), basic or diluted share
basis or any combination of the foregoing and may reflect
absolute performance, incremental performance or comparative
performance to other companies (or their products or services)
determined on a gross, net, GAAP or non-GAAP basis, with respect
to one or more of the following: (i) net or operating
income or other measures of profit; (ii) measures of
revenue; (iii) earnings before interest, taxes,
depreciation and amortization (EBITDA); (iv) cash flow,
free cash flow, adjusted operating cash flow and similar
measures; (v) return on equity, investment, assets or
capital; (vi) gross or operating margins or savings;
(vii) performance relative to budget, forecast or market
expectations; (viii) market share or penetration,
subscriber or customer acquisition or retention, ratings,
viewership, facilities utilization or attendance;
(ix) sports team performance; (x) operating metrics
relating to sales, subscriptions, sponsorships or customer
service or satisfaction; (xi) capital spending management,
network upgrades, facility maintenance, construction or
renovation or product or service deployments;
(xii) achievement of strategic business objectives such as
acquisitions, dispositions or investments; (xiii) a
specified increase in the fair market value of the
Companys Class A Common Stock; (xiv) a specified
increase in the private market value of the Company;
(xv) the price of the Companys Class A Common
Stock; (xvi) earnings per share;
and/or
(xvii) total shareholder return.
Amendment;
Termination
The Board of Directors or the Compensation Committee may
discontinue the Employee Stock Plan at any time and from time to
time may amend or revise the terms of the Employee Stock Plan or
any award agreement, as permitted by applicable law, except that
it may not (a) make any amendment or revision in a manner
unfavorable to a participant (other than if immaterial), without
the consent of the participant or (b) make any amendment or
revision without the approval of the stockholders of the Company
if such approval is required by the rules of The NASDAQ Stock
Market LLC. Consent of the participant will not be required
solely pursuant to the previous sentence in respect of any
adjustment made in light of an Adjustment Event, except to the
extent the terms of an award agreement expressly refer to an
Adjustment Event, in which case such terms will not be amended
in a manner unfavorable to a participant (other than if
immaterial) without such participants consent.
155
U.S.
Federal Tax Implications of Certain Awards under the
Plan
The following summary generally describes the principal Federal
(but not state and local) income tax consequences of certain
awards under the Plan. It is general in nature and is not
intended to cover all tax consequences that may apply to a
particular participant or the Company. The provisions of the
Internal Revenue Code and the regulations thereunder relating to
these matters are complex and their impact in any one case may
depend upon the particular circumstances.
Incentive
Stock Options.
An employee will not be subject to tax upon the grant of an
incentive stock option (an ISO) or upon the exercise
of an ISO. However, the excess of the fair market value of the
shares on the date of exercise over the exercise price paid will
be included in the employees alternative minimum taxable
income. Whether the employee is subject to the alternative
minimum tax will depend on his or her particular circumstances.
The employees basis in the shares received will be equal
to the exercise price paid, and the holding period in such
shares will begin on the day following the date of exercise. If
an employee disposes of the shares on or after (i) the
second anniversary of the date of grant of the ISO and
(ii) the first anniversary of the date of exercise of the
ISO (the statutory holding period), the employee
will recognize a capital gain or loss in an amount equal to the
difference between the amount realized on such disposition and
his or her basis in the shares.
Nonstatutory
Stock Options.
For the grant of an option that is not intended to be (or does
not qualify as) an ISO, an employee will not be subject to tax
upon the grant of such an option (a nonstatutory stock
option). Upon exercise of a nonstatutory stock option, an
amount equal to the excess of the fair market value of the
shares acquired on the date of exercise over the exercise price
paid is taxable to an employee as ordinary income, and such
amount is generally deductible by the Company. This amount of
income will be subject to income tax withholding and employment
taxes. An employees basis in the shares received will
equal the fair market value of the shares on the date of
exercise, and an employees holding period in such shares
will begin on the day following the date of exercise.
Restricted
Stock.
An employee will not be subject to tax upon receipt of an award
of shares subject to forfeiture conditions and transfer
restrictions (the restrictions) under the Plan
unless the employee makes the election referred to below. Upon
lapse of the restrictions, an employee will recognize ordinary
income equal to the fair market value of the shares on the date
of lapse (less any amount the employee may have paid for the
shares), and such income will be subject to income tax
withholding and employment taxes. An employees basis in
the shares received will be equal to the fair market value of
the shares on the date the restrictions lapse, and an
employees holding period in such shares begins on the day
after the restrictions lapse. If any dividends are paid on such
shares prior to the lapse of the restrictions they will be
includible in an employees income during the restricted
period as additional compensation (and not as dividend income)
and will be subject to income tax withholding and employment
taxes.
If permitted by the applicable award agreement, an employee may
elect, within thirty days after the date of the grant of the
restricted stock, to recognize immediately (as ordinary income)
the fair market value of the shares awarded (less any amount an
employee may have paid for the shares), determined on the date
of grant (without regard to the restrictions). Such income will
be subject to income tax withholding and employment taxes at
such time. This election is made pursuant to Section 83(b)
of the Code and the regulations thereunder. If an employee makes
this election, the employees holding period will begin the
day after the date of grant, dividends paid on the shares will
be subject to the normal rules regarding distributions on stock,
and no additional income will be recognized by the employee upon
the lapse of the restrictions. However, if the employee forfeits
the restricted shares before the restrictions lapse, no
deduction or capital loss will be available to the employee
(even though the employee previously recognized income with
respect to such forfeited shares).
In the taxable year in which an employee recognizes ordinary
income on account of shares awarded to the employee, the Company
generally will be entitled to a deduction equal to the amount of
income
156
recognized by the employee. In the event that the restricted
shares are forfeited by an employee after having made the
Section 83(b) election referred to above, the Company
generally will include in our income the amount of our original
deduction.
Stock
Appreciation Rights.
An employee will not be subject to tax upon the grant of a stock
appreciation right. Upon exercise of a stock appreciation right,
an amount equal to the cash
and/or
the
fair market value (measured on the date of exercise) of shares
receivable by the employee in respect of a stock appreciation
right will be taxable to the employee as ordinary income, and
such amount generally will be deductible by the Company. This
amount of income will be subject to income tax withholding and
employment taxes. An employees basis in any shares
received will be equal to the fair market value of such shares
on the date of exercise, and an employees holding period
in such shares will begin on the day following the date of
exercise.
Restricted
Stock Units.
An employee will not be subject to tax upon the grant of a
restricted stock unit. Upon vesting of a restricted stock unit,
the fair market value of the shares covered by the award on the
vesting date will be subject to employment taxes. Upon
distribution of the cash
and/or
shares underlying a restricted stock unit, an employee will
recognize as ordinary income an amount equal to the cash
and/or
fair
market value (measured on the Distribution date) of the shares
received, and such amount will generally be deductible by the
Company. This amount of income will generally be subject to
income tax withholding on the date of distribution. An
employees basis in any shares received will be equal to
the fair market value of the shares on the date of distribution,
and an employees holding period in such shares will begin
on the date of distribution. If any dividend equivalent amounts
are paid to an employee, they will be includible in the
employees income as additional compensation (and not as
dividend income) and will be subject to income and employment
tax withholding.
Disposition
of Shares.
Unless stated otherwise above, upon the subsequent disposition
of shares acquired under any of the preceding awards, an
employee will recognize capital gain or loss based upon the
difference between the amount realized on such disposition and
the employees basis in the shares, and such amount will be
long-term capital gain or loss if such shares were held for more
than 12 months. Currently, capital gain is generally taxed
at a maximum rate of 15% if the property is held more than one
year.
The Company generally will be entitled to a tax deduction equal
to the amount recognized as ordinary income by the employee in
connection with the exercise of an option. The Company generally
is not entitled to a tax deduction with respect to any amount
that represents compensation in excess of $1 million paid
to covered employees that is not qualified
performance-based compensation under Section 162(m)
of the Internal Revenue Code. To the extent possible, the
Company intends to utilize the benefits of certain transition
rules under Section 162(m) to insure the deductibility of
compensation in excess of $1 million.
Our Stock
Plan for Non-Employee Directors
Prior to the Distribution, we will adopt a Stock Plan for
Non-Employee Directors (the Director Stock Plan),
subject to the approval of Cablevision as our sole shareholder
at such time.
A form of the Director Stock Plan is filed as an exhibit to the
registration statement of which this information statement forms
a part that we have filed with the SEC, and the following
description of the Director Stock Plan is qualified in its
entirety by reference to the Director Stock Plan.
Overview
We believe that the Companys ability to attract and retain
capable persons as non-employee directors will be enhanced if it
can provide its non-employee directors with equity-based awards
and that the Company will benefit from encouraging a sense of
proprietorship of such persons stimulating the active interest
of such persons in the development and financial success of the
Company. The Director Stock Plan provides for
157
potential grants of non-qualified stock options, restricted
stock units and other equity-based awards (collectively,
Director Awards). The Director Stock Plan will
terminate, and no more Director Awards will be granted, after
ten years from the effective date of the plan (unless sooner
terminated by our Board of Directors or our Compensation
Committee). The termination of the Director Stock Plan will not
affect previously granted Director Awards.
Shares Subject
to the Director Stock Plan; Other Limitations
The Director Stock Plan will be administered by the
Companys Compensation Committee. However,
Cablevisions compensation committee will be authorized to
grant Awards under the Director Stock Plan with respect to
outstanding equity awards of Cablevision in connection with the
Distribution. Such Awards may include options with exercise
prices that are less than the fair market value of the
underlying shares in order to preserve the intrinsic value of
the outstanding Cablevision equity awards prior to the
Distribution. Director Awards may be granted under the Director
Stock Plan to members of the Board of Directors who are not
current employees of the Company or its subsidiaries as the
Compensation Committee may determine. Immediately following the
Distribution, there will be ten non-employee directors who will
be eligible to participate in the Director Stock Plan. In
addition, non-employee directors of Cablevision will receive
grants under the Director Stock Plan in connection with the
Distribution in respect of their outstanding awards issued by
Cablevision. The total number of shares of the Companys
Class A Common Stock that may be issued pursuant to
Director Awards under the Director Stock Plan may not exceed an
aggregate of 300,000, which may be either treasury shares or
authorized and unissued shares. To the extent that (i) a
Director Award is paid, settled or exchanged or expires, lapses,
terminates or is cancelled for any reason without the issuance
of shares or (ii) any shares under a Director Award are not
issued because of payment or withholding obligations, then the
Compensation Committee may also grant Director Awards with
respect to such shares. Director Awards payable only in cash or
property other than shares do not reduce the aggregate remaining
number of shares with respect to which Director Awards may be
made under the Director Stock Plan and shares relating to any
other Director Awards that are settled in cash or property other
than shares, when settled, will be added back to the aggregate
remaining number of shares with respect to which Director Awards
may be made under the Director Stock Plan. Any shares underlying
Awards that the Company becomes obligated to make through the
assumption of, or in substitution for, outstanding awards
previously granted by an acquired entity shall not count against
the shares available to be delivered pursuant to Awards under
the Director Stock Plan. In the event that any dividend or other
distribution (whether in the form of cash, shares, other
securities, or other property), recapitalization, forward or
reverse stock split, reorganization, merger, consolidation,
spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event
affects shares such that the failure to make an adjustment to a
Director Award would not fairly protect the rights represented
by the Director Award in accordance with the essential intent
and principles thereof (each such event, a Director Stock
Plan Adjustment Event), then the Compensation Committee
will, in such manner as it may determine to be equitable in its
sole discretion, adjust any or all of the terms of an
outstanding Director Award (including, without limitation, the
number of shares covered by such outstanding Director Award, the
type of property to which the Director Award is subject and the
exercise price of such Director Award).
As a result of the Distribution, options with respect
to
shares of the Companys Class A Common Stock will be
issued to directors under the Director Stock Plan. See
Shares Eligible for Future Sale
Non-Employee Director Stock Awards.
Director
Awards
Under the Director Stock Plan, the Company may grant options to
participants. The options will be exercisable at a price
determined by the Compensation Committee on the date of the
Director Award grant, which price will be no less than the fair
market value of a share of Class A Common Stock on the date
the option is granted, and will otherwise be subject to such
terms and conditions as specified by the Compensation Committee,
provided that, unless determined otherwise by the Compensation
Committee, such options will be fully vested and exercisable on
the date of grant. Each option granted pursuant to the Director
Stock Plan will terminate upon the earlier to occur of
(i) the expiration of ten years following the date upon
which the option
158
is granted and (ii) a period fixed by the Compensation
Committee in the award agreement, however, an award agreement
may provide that in the event that a participant dies while an
option is exercisable, the option will remain exercisable by the
participants estate or beneficiary only until the first
anniversary of the participants date of death and whether
or not such first anniversary occurs prior to or following the
expiration of the relevant period referred to above. Upon its
exercise, an option may be settled, in the Compensation
Committees discretion, for an amount equal to the excess
of the fair market value of a share of Class A Common Stock
on the date of exercise over the exercise price of the option.
The Company may also grant restricted stock units to
participants. A restricted stock unit is an unfunded, unsecured
right to receive a share of Class A Common Stock (or cash
or other property) at a future date upon the satisfaction of the
conditions specified by the Compensation Committee in the award
agreement. Unless otherwise provided by the Compensation
Committee, such restricted stock units will be fully vested on
the date of grant and will also carry a dividend equivalent
right representing an unfunded and unsecured promise to pay to
the relevant participant an amount equal to the ordinary cash
dividends that would have been paid upon any share underlying a
restricted stock unit had such shares been issued. If a
restricted stock unit is not fully vested at the date of grant,
the dividend equivalent right will not apply until such
restricted stock unit is vested.
The Compensation Committee may grant other equity-based or
equity-related awards to non-employee directors subject to terms
and conditions it may specify. These awards may entail the
transfer of shares or payment in cash based on the value of
shares.
Amendment;
Termination
The Board of Directors or the Compensation Committee may
discontinue the Director Stock Plan at any time and from time to
time may amend or revise the terms of the Director Stock Plan or
any award agreement, as permitted by applicable law, except that
it may not (a) make any amendment or revision in a manner
unfavorable to a participant (other than if immaterial), without
the consent of the participant or (b) make any amendment or
revision without the approval of the stockholders of the Company
if such approval is required by the rules of The NASDAQ Stock
Market LLC. Consent of the participant will not be required
solely pursuant to the previous sentence in respect of any
adjustment made in light of a Director Stock Plan Adjustment
Event, except to the extent the terms of an award agreement
expressly refer to a Director Stock Plan Adjustment Event, in
which case such terms will not be amended in a manner
unfavorable to a participant (other than if immaterial) without
such participants consent.
U.S.
Federal Tax Implications of Options and Restricted Stock Units
Under the Director Stock Plan
The following summary generally describes the principal Federal
(but not state and local) income tax consequences of the
issuance and exercise of options and restricted stock units
under the Director Stock Plan. It is general in nature and is
not intended to cover all tax consequences that may apply to a
particular participant or the Company. The provisions of the
Internal Revenue Code and the regulations thereunder relating to
these matters are complex and subject to change and their impact
in any one case may depend upon the particular circumstances.
A non-employee director will not realize any income, and the
Company will not be entitled to a deduction, at the time that a
stock option is granted under the Director Stock Plan. Upon
exercising an option, a non-employee director will realize
ordinary income (not as capital gain), and the Company will be
entitled to a corresponding deduction, in an amount equal to the
fair market value on the exercise date of the shares subject to
the option over the exercise price of the option. The
non-employee director will have a basis in the shares received
as a result of the exercise, for purposes of computing capital
gain or loss, equal to the fair market value of those shares on
the exercise date and the non-employee directors holding
period in the shares received will commence on the day after the
date of exercise. If an option is settled by the Company in
cash, shares or a combination thereof, the non-employee
directors will recognize ordinary income at the time of
settlement equal to the fair market value of such cash, shares
or combination thereof, and the Company will be entitled to a
corresponding deduction.
159
A non-employee director will not realize any income, and the
Company will not be entitled to a deduction, at the time that a
restricted stock unit is granted under the Director Stock Plan.
Upon payment or settlement of a restricted stock unit award in
Class A Common Stock or cash, the non-employee director
will recognize ordinary income, and the Company will be entitled
to a corresponding deduction, equal to the fair market value of
any Class A Common Stock or cash received.
Our Cash
Incentive Plan
Prior to the Distribution, we will adopt a Cash Incentive Plan
(the CIP), subject to the approval of Cablevision as
our sole shareholder at such time.
A form of the CIP is filed as an exhibit to the registration
statement of which this information statement forms a part that
we have filed with the SEC, and the following description of the
CIP is qualified in its entirety by reference to the CIP.
Overview
The purposes of the CIP are (i) to advance the interest of
the Company and its shareholders by providing a means to
motivate the employees of the Company and its affiliates, upon
whose judgment, initiative and efforts the continued success,
growth and development of the Company is dependent; (ii) to
link the rewards of the employees of the Company and its
affiliates to the achievement of specific performance objectives
and goals when so desired; (iii) to assist the Company and
its affiliates in maintaining a competitive total compensation
program that serves to attract and retain the most highly
qualified individuals; and (iv) to permit the grant and
payment of awards that are deductible to the Company pursuant to
Section 162(m) of the Internal Revenue Code when so
desired. The CIP provides for cash awards. No awards shall be
made under this Plan after the five year anniversary of the
Distribution.
CIP
Awards
The Plan will be administered by the Companys Compensation
Committee. Awards may be granted under the CIP to such employees
of the Company or an affiliate of the Company, as the
Compensation Committee may determine. An affiliate
is defined in the CIP to mean any entity controlling, controlled
by, or under common control with the Company or any other
affiliate and also includes any entity in which the Company owns
at least five percent of the outstanding equity interests. The
CIP provides for two types of cash awards: Long-Term Incentive
Awards and Annual Incentive Awards. Long-Term Incentive Awards
may be subject to such terms and conditions (including the
performance criteria described below) as the Compensation
Committee determines; however, no Long-Term Incentive Award will
cover a period of more than ten years. In no event may any
covered employee be granted Long-Term Incentive Awards that are
intended to satisfy the requirements of Section 162(m) in
any fiscal year of the Company exceeding in the aggregate
$10 million. Annual Incentive Awards may also be subject to
such terms and conditions (including the performance criteria
described below) as the Compensation Committee determines. In no
event may any covered employee be granted Annual Incentive
Awards that are intended to satisfy the requirements of
Section 162(m) in any fiscal year of the Company exceeding
in the aggregate $10 million.
The Compensation Committee may establish one or more conditions
which must be satisfied in order for an employee to be entitled
to an award under the CIP. The CIP specifies that, to the extent
that an award under the CIP is intended to qualify for
deductibility under Section 162(m), the payment of the
award will be conditioned on the satisfaction of one or more of
the performance criteria listed below over a period or periods
selected by the Compensation Committee. The performance criteria
may be determined by reference to the performance of the
Company, an affiliate or a business unit, product, team, venue,
production, event, network or service thereof or any combination
of the foregoing. Such criteria may also be measured on a per
customer, subscriber, sponsor, viewer (or available viewer),
basic or diluted share basis or any combination of the foregoing
and may reflect absolute performance, incremental performance or
comparative performance to other companies (or their products or
services) determined on a gross, net, GAAP or non-GAAP basis,
with respect to one or more of the following: (i) net or
operating income or other measures of profit; (ii) measures
of revenue; (iii) earnings before interest, taxes,
depreciation and amortization (EBITDA); (iv) cash flow,
free
160
cash flow, adjusted operating cash flow and similar measures;
(v) return on equity, investment, assets or capital;
(vi) gross or operating margins or savings;
(vii) performance relative to budget, forecast or market
expectations; (viii) market share or penetration,
subscriber or customer acquisition or retention, ratings,
viewership, facilities utilization or attendance;
(ix) sports team performance; (x) operating metrics
relating to sales, subscriptions, sponsorships or customer
service or satisfaction; (xi) capital spending management,
network upgrades, facility maintenance, construction or
renovation or product or service deployments;
(xii) achievement of strategic business objectives such as
acquisitions, dispositions or investments; (xiii) a
specified increase in the fair market value of the
Companys Class A Common Stock; (xiv) a specified
increase in the private market value of the Company;
(xv) the price of the Companys Class A Common
Stock; (xvi) earnings per share;
and/or
(xvii) total shareholder return.
If the Compensation Committee establishes conditions to the
entitlement of a Long-Term Incentive Award or Annual Incentive
Award for a covered employee relating to the achievement of
performance criteria, the Compensation Committee must determine
whether the performance criteria have been met with respect to
the employee and, if they have, so certify and ascertain the
amount of the applicable Long-Term Incentive Award or Annual
Incentive Award. No Long-Term Incentive Award or Annual
Incentive Award (if contingent on such performance criteria)
will be paid until such certification is made by the
Compensation Committee.
Amendment;
Termination
The Board of Directors or the Compensation Committee may
discontinue the CIP at any time and from time to time may amend
or revise the terms of the CIP, as permitted by applicable law,
except that it may not amend or revise, in any manner
unfavorable to a recipient (other than if immaterial), any
Long-Term Incentive Award, without the consent of the recipient
of that Long-Term Incentive Award.
Treatment
of Outstanding Options, Rights, Restricted Stock, Restricted
Stock Units and Other Awards
Cablevision has issued options to purchase, and stock
appreciation rights in respect of, its Cablevision NY Group
Class A Common Stock. In connection with the Distribution,
each Cablevision option will become two options: one will be an
option to acquire Cablevision NY Group Class A Common Stock
and one an option to acquire our Class A Common Stock.
Similarly, each right will become a right with respect to
Cablevision NY Group Class A Common Stock and a right with
respect to our Class A Common Stock. The options and the
rights with respect to our Class A Common Stock will be
issued under our Employee Stock Plan. The existing exercise
price will be allocated between the existing Cablevision
options/rights and our new options/rights based upon the ten-day
weighted average prices of the Cablevision NY Group Class A
Common Stock and our Class A Common Stock immediately
following the Distribution, and the underlying share amount will
take into account the distribution ratio (i.e., the number of
shares of Cablevision common stock in respect of which one share
of our common stock will be issued). The Cablevision
options/rights and our new options/rights will not be
exercisable during a period beginning on a date prior to the
Distribution determined by Cablevision in its sole discretion,
and continuing until the exercise prices of the Cablevision
options/rights and our new options/rights are determined after
the Distribution, or such longer period as Cablevision or we
determine is necessary with respect to our and
Cablevisions respective awards. Other than the split of
the Cablevision options and rights and the allocation of the
existing exercise price, upon issuance of our new options and
rights there will be no additional adjustment to the existing
Cablevision options and rights in connection with the
Distribution and the terms of each employees applicable
Cablevision award agreement will continue to govern the
Cablevision options and rights. The options and rights that we
issue in respect of outstanding Cablevision stock options and
rights will be affected by a change in control or going private
transaction of the Company or Cablevision, as set forth in the
terms of the award agreement.
Cablevision has issued restricted stock to its employees which
vests according to a vesting schedule that was established when
the shares were issued. In connection with the Distribution each
holder of Cablevision restricted share will receive one share of
our Class A Common Stock in respect of
each
Cablevision restricted shares. Our shares will be subject to the
same conditions and restrictions as the Cablevision restricted
shares in respect of which they are issued. Following the
Distribution, if a holder of Cablevision restricted stock
forfeits such restricted stock and therefore forfeits our
accompanying shares, Cablevision has agreed our restricted
shares will be returned to us.
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Cablevision has issued restricted stock units to its
non-employee directors which represent unfunded, unsecured
rights to receive shares of Cablevision NY Group Class A
Common Stock (or cash or other property) at a future date upon
the satisfaction of the conditions specified by the Compensation
Committee in the award agreement. Such restricted stock units
were fully vested on the date of grant. In connection with the
Distribution, each holder of a restricted stock unit will
receive one share of our Class A Common Stock in respect of
each Cablevision
restricted stock units owned on the record date upon the
Distribution and continue to be entitled to a share of
Cablevision NY Group Class A Common Stock (or cash or other
property) in accordance with the award agreement. Such shares of
Class A Common Stock will be issued under our Stock Plan
for Non-Employee Directors. Cablevision has issued to its
non-employee directors options to purchase its Cablevision NY
Group Class A Common Stock, and such options are fully
vested. In connection with the Distribution, each Cablevision
option will become two options: one will be an option to acquire
Cablevision NY Group Class A Common Stock and one an option
to acquire our Class A Common Stock. The allocation of
exercise price between the existing non-employee director
Cablevision options and our new non-employee director options
and the number of shares subject to those new options will be
determined in the same manner as described above for our
options/rights to be issued under our Employee Stock Plan at the
time of the Distribution.
As a result of the Distribution, there will be outstanding
options to acquire approximately
million of our shares of Class A Common Stock, most of
which will be held by employees of Cablevision and its
affiliates other than us. In addition,
approximately million of our shares
of our Class A Common Stock will be distributed by
Cablevision in respect of outstanding Cablevision restricted
shares, most of which will be to employees of Cablevision and
its affiliates other than us.
In 2007, 2008 and 2009, Cablevision granted three-year
performance awards to executives and certain other members of
management of the Company under Cablevisions 2006 CIP. The
performance objectives in each employees applicable award
agreement are required to be adjusted to reflect the exclusion
of our business from the business of Cablevision.
Deferred compensation awards granted by Cablevision pursuant to
Cablevisions Long-Term Incentive Plan (which was
superseded by Cablevisions Cash Incentive Plan in
2006) will be unaffected by the Distribution.
With respect to outstanding long-term cash and equity awards,
the Company and Cablevision will not be regarded as competitive
entities of each other for purposes of any non-compete
provisions contained in the applicable award agreements. With
respect to all outstanding Cablevision awards (and our options
and stock appreciation rights issued in connection with such
awards) holders of such awards will continue to vest in them so
long as they remain employed by the Company, Cablevision or
affiliates of either entity, provided that an employee who moves
between the Company or one of its subsidiaries, on the one hand,
and Cablevision or one of its subsidiaries, on the other hand,
at a time when the two entities are no longer affiliates will
not continue to vest in our awards and such change will
constitute a termination of employment for purposes of the award
agreement. Notwithstanding the foregoing, Messrs. James L. Dolan
and Hank J. Ratner will continue to vest in their outstanding
Cablevision awards (as well as in Company stock options and
stock appreciation rights issued upon the Distribution with
respect to such outstanding Cablevision awards) based solely on
their continued service with Cablevision and not in respect of
their continued service with the Company and its subsidiaries.
We will not be responsible for any payments associated with any
annual, long-term cash or deferred compensation award granted by
Cablevision to Mr. Dolan or Mr. Ratner that is
outstanding as of the Distribution. Payment of such awards will
be the sole responsibility of Cablevision. Payments of any
awards granted to Mr. Pollichino will continue to be the
responsibility of the Company. The Company will assume any
annual, long-term cash or deferred compensation award granted by
Cablevision to Mr. Burian that are outstanding as of the
Distribution; however, Cablevision will make a payment to the
Company of the amounts accrued prior to the Distribution in
respect of such awards.
The performance awards, deferred compensation awards and stock
appreciation rights applicable to our employees will be assigned
by Cablevision to us and will be assumed by us.
162
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Relationship
Between Cablevision and Us After The Distribution
Following the Distribution, we will be a public company and
Cablevision will have no continuing common stock ownership
interest in us. As described under The
Distribution Results of the Distribution, both
Cablevision and we will be under the control of Charles F.
Dolan, members of his family and certain related family entities
immediately following the Distribution. See Unaudited Pro
Forma Combined Financial Information and Note 13 of
Notes to Combined Financial Statements for
information concerning historical intercompany payments between
us and Cablevision.
For purposes of governing the ongoing relationships between
Cablevision and us after the Distribution and to provide for an
orderly transition, Cablevision and we will enter into the
agreements described in this section prior to the Distribution.
Certain of the agreements summarized in this section are
included as exhibits to the registration statement of which this
information statement forms a part that we have filed with the
SEC, and the following summaries of those agreements are
qualified in their entirety by reference to the agreements as so
filed.
Distribution
Agreement
We will enter into the Distribution Agreement with Cablevision
as part of a series of transactions pursuant to which we have
acquired or will acquire prior to the Distribution the
subsidiaries of Cablevision that own, directly or indirectly,
all of the partnership interests in MSG, L.P.
Under the Distribution Agreement, Cablevision will distribute
our common stock to its common stockholders.
Cablevision will provide us with indemnities with respect to
liabilities, damages, costs and expenses arising out of any of
(i) Cablevisions businesses (other than businesses of
ours), (ii) certain identified claims or proceeding,
(iii) any breach by Cablevision of its obligations under
the Distribution Agreement; (iv) any untrue statement or
omission in the Registration Statement or the Information
Statement relating to Cablevision and its subsidiaries; and
(v) indemnification obligations we may have to the NBA or
NHL that result from acts or omissions of Cablevision. We will
provide Cablevision with indemnities with respect to
liabilities, damages, costs and expenses arising out of any of
(i) our businesses, (ii) any breach by MSG of its
obligations under the Distribution Agreement; and (iii) any
untrue statement or omission in the Registration Statement or
Information Statement other than any such statement or omission
relating to Cablevision and its subsidiaries. For purposes of
these indemnities, Fuse is treated as a business of Cablevision
prior to its transfer to Madison Square Garden and as a business
of ours thereafter.
In the Distribution Agreement we will release Cablevision from
any claims we might have arising out of:
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the management of the businesses and affairs of Madison Square
Garden on or prior to the Distribution;
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the terms of the Distribution, our amended and restated
certificate of incorporation, our by-laws and the other
agreements entered into in connection with the
Distribution; and
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any decisions that have been made, or actions taken, relating to
Madison Square Garden or the Distribution.
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The Distribution Agreement will also provide that Cablevision
will have the sole and absolute discretion to determine whether
to proceed with the Distribution, including the form, structure
and terms of any transactions to effect the Distribution and the
timing of and satisfaction of conditions to the consummation of
the Distribution.
The Distribution Agreement will also provide for access to
records and information, cooperation in defending litigation, as
well as methods of resolution for certain disputes.
163
Transition
Services Agreement
We will enter into a Transition Services Agreement with
Cablevision under which, in exchange for the fees specified in
such agreement, Cablevision will agree to provide transition
services with regard to such areas as tax, information
technology, insurance and employee recruiting, compensation and
benefits. We will agree to provide transition services to
Cablevision with regard to those information technology systems
that we and Cablevision may share. The Company and Cablevision,
as parties receiving services under the agreement, will agree to
indemnify the party providing services for losses incurred by
such party that arise out of or are otherwise in connection with
the provision by such party of services under the agreement,
except to the extent that such losses result from the providing
partys gross negligence, willful misconduct or breach of
its obligations under the agreement. Similarly, each party
providing services under the agreement will agree to indemnify
the party receiving services for losses incurred by such party
that arise out of or are otherwise in connection with the
indemnifying partys provision of services under the
agreement if such losses result from the providing partys
gross negligence, willful misconduct or breach of its
obligations under the agreement. We believe that the terms and
conditions of the Transition Services Agreement are as favorable
to us as those available from unrelated parties for a comparable
arrangement.
Tax
Disaffiliation Agreement
On or before the Distribution date, we will enter into a Tax
Disaffiliation Agreement with Cablevision that governs
Cablevisions and our respective rights, responsibilities
and obligations with respect to taxes and tax benefits, the
filing of tax returns, the control of audits and other tax
matters. References in this summary description of the Tax
Disaffiliation Agreement to the terms tax or
taxes mean taxes as well as any interest, penalties,
additions to tax or additional amounts in respect of such taxes.
We and our eligible subsidiaries currently join with Cablevision
in the filing of a consolidated return for U.S. federal
income tax purposes and also join with Cablevision in the filing
of certain consolidated, combined, and unitary returns for
state, local, and other applicable tax purposes. However, for
periods (or portions thereof) beginning after the Distribution,
we generally will not join with Cablevision in the filing of any
federal, state, local or other applicable consolidated, combined
or unitary tax returns.
Under the Tax Disaffiliation Agreement, except for certain New
York City income taxes, Cablevision will be responsible for all
of our U.S. federal, state, local and other applicable
income taxes for any taxable period or portion of such period
ending on or before the Distribution date. We will be
responsible for all other taxes (including certain New York City
income taxes) for all taxable periods ending on or before the
Distribution date, and all taxes that are attributable to us or
one of our subsidiaries after the Distribution date.
Notwithstanding the Tax Disaffiliation Agreement, under
U.S. Treasury Regulations, each member of a consolidated
group is severally liable for the U.S. federal income tax
liability of each other member of the consolidated group.
Accordingly, with respect to periods in which we have been
included in Cablevisions consolidated group, we could be
liable to the U.S. government for any U.S. federal
income tax liability incurred, but not discharged, by any other
member of such consolidated group. However, if any such
liability were imposed, we would generally be entitled to be
indemnified by Cablevision for tax liabilities allocated to
Cablevision under the Tax Disaffiliation Agreement.
We will be responsible for filing all tax returns for any period
ending after the Distribution date that include us or one of our
subsidiaries other than any consolidated, combined or unitary
income tax return for periods after such date (if any) that
includes us or one of our subsidiaries, on the one hand, and
Cablevision or one of its subsidiaries (other than us or any of
our subsidiaries), on the other hand. We also will be
responsible for filing, for all periods, all returns related to
certain New York City income taxes that include us or one of our
subsidiaries. Where possible, we have waived the right to carry
back any losses, credits, or similar items to periods ending
prior to or on the Distribution date, however, if we cannot
waive the right, we would be entitled to receive the resulting
refund or credit, net of any taxes incurred by Cablevision with
respect to the refund or credit.
164
Generally, we will have the authority to conduct all tax
proceedings, including tax audits, relating to taxes or any
adjustment to taxes for which we are responsible for filing a
return under the Tax Disaffiliation Agreement, and Cablevision
will have the authority to conduct all tax proceedings,
including tax audits, relating to taxes or any adjustment to
taxes for which Cablevision is responsible for filing a return
under the Tax Disaffiliation Agreement. However, if one party
acknowledges a liability to indemnify the other party for a tax
to which such proceeding relates, and provides evidence to the
other party of its ability to make such payment, the
first-mentioned party will have the authority to conduct such
proceeding. The Tax Disaffiliation Agreement further provides
for cooperation between Cablevision and the Company with respect
to tax matters, the exchange of information and the retention of
records that may affect the tax liabilities of the parties to
the agreement.
Finally, the Tax Disaffiliation Agreement requires that neither
we nor any of our subsidiaries will take, or fail to take, any
action where such action, or failure to act, would be
inconsistent with or preclude the Distribution from qualifying
as a tax-free transaction to Cablevision and to its stockholders
under Section 355 of the Code, or would otherwise cause
holders of Cablevision stock receiving our stock in the
Distribution to be taxed as a result of the Distribution and
certain transactions undertaken in connection with the
Distribution. Additionally, for the two-year period following
the Distribution, we may not engage in certain activities that
may jeopardize the tax-free treatment of the Distribution to
Cablevision and its stockholders, unless we receive
Cablevisions consent or otherwise obtain a ruling from the
IRS or a legal opinion, in either case reasonably satisfactory
to Cablevision, that the activity will not alter the tax-free
status of the Distribution to Cablevision and its stockholders.
Such restricted activities include:
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entering into any transaction pursuant to which 50% or more of
our shares or assets would be acquired, whether by merger or
otherwise, unless certain tests are met;
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issuing equity securities, if any such issuances would, in the
aggregate, constitute 50% or more of the voting power or value
of our capital stock;
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certain repurchases of our common shares;
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ceasing to actively conduct our business;
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amendments to our organizational documents (i) affecting the
relative voting rights of our stock or (ii) converting one class
of our stock to another;
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liquidating or partially liquidating; and
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taking any other action that prevents the Distribution and
related transactions from being tax-free.
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Moreover, we must indemnify Cablevision and its subsidiaries,
officers and directors for any taxes, resulting from action or
failure to act, if such action or failure to act precludes the
Distribution from qualifying as a tax-free transaction
(including taxes imposed as a result of a violation of the
restrictions set forth above).
Employee
Matters Agreement
Upon completion of the Distribution, we will have in place an
Employee Matters Agreement with Cablevision that will allocate
assets, liabilities and responsibilities with respect to certain
employee compensation and benefit plans and programs and certain
other related matters. In general, our employees currently
participate in various Cablevision retirement, health and
welfare, and other employee benefit plans. After the
Distribution, it is anticipated that our employees will
generally participate in similar plans and arrangements
established and maintained by the Company; however, we shall
continue to be a participating company in certain Cablevision
employee benefit plans during a transition period. Effective as
of the Distribution date, we and Cablevision will each hold
responsibility for our respective employees and compensation
plans.
For a description of the impact of the Distribution on holders
of Cablevision options, restricted stock and other awards, see
Executive Compensation Treatment of
Outstanding Options, Rights, Restricted Stock, Restricted Stock
Units, and Other Awards.
165
Aircraft
Arrangements
In connection with the Distribution, the Company has entered
into a Time Sharing Agreement with CSC Transport, Inc.
(CSC Transport), a subsidiary of Cablevision,
pursuant to which CSC Transport will lease to the Company on a
time-sharing basis any aircraft owned or operated
by Cablevision (currently a Gulfstream Aerospace G-V aircraft
(the G-V) and four helicopters). The Company will
pay CSC Transport an amount equal to the actual non-fuel
expenses of each flight it elects to utilize and 200% of the
actual fuel usage for such flights, but not to exceed the
maximum amount payable under Federal Aviation Administration
rules. In calculating the amounts payable under the agreement,
the Company and CSC Transport will allocate in good faith the
treatment of any flight that is for the benefit of the Company
and Cablevision.
The Company and CSC Transport have also entered into an Aircraft
Management Agreement, pursuant to which CSC Transport has agreed
to manage the Companys Boeing
737-400
for
the 2010 to 2015 period. The agreement provides for an annual
management fee of $210,000 (with an annual CPI based increase)
in addition to reimbursement of certain expenses.
Affiliation
Agreement
A new affiliation agreement between the Company and Cablevision
took effect on January 1, 2010, with respect to the
carriage of the MSG and MSG Plus program services on
Cablevisions cable systems in the tri-state area. This
agreement has a term of ten years, obligates Cablevision to
carry such program services on its cable systems and provides
for the payment by Cablevision to the Company of a per
subscriber license fee, which fee is increased each year during
the term of the agreement. See Unaudited Pro Forma
Combined Financial Information for information on the
increased revenues that the Company expects to derive from this
new arrangement.
Other
Arrangements and Agreements with Cablevision
The Company will also enter into a number of commercial and
technical arrangements and agreements with Cablevision and its
subsidiaries, none of which will be material to the Company.
These will include arrangements for the Companys use of
equipment, offices and other premises, lease of transponders,
provision of technical and transport services and vendor
services, lease of titles in film and other libraries, access to
technology and for Cablevisions sponsorship of the Company
and its professional sports teams.
Dolan
Family Arrangements
The Company will enter into a Time Sharing Agreement with Dolan
Family Office, LLC (DFO LLC), a company controlled
by Charles F. Dolan, a director of the Company. Under this
agreement, DFO LLC has agreed to sublease to the Company on a
time sharing basis, a Gulfstream Aerospace GIV-SP
aircraft. The Company will pay DFO LLC an amount equal to the
actual non-fuel expenses of each flight it elects to utilize and
200% of the actual fuel usage for such flights, but not to
exceed the maximum amount payable under Federal Aviation
Administration rules. In addition, from time to time, certain
other services of the Company may be made available to members
of the Dolan family and to entities owned by them. It is the
policy of the Company to receive reimbursement for the costs of
these services. There were no reimbursements in 2009.
See Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters for a
description of registration rights agreements among Dolan family
interests and the Company.
Other
Since 2005, Charles Tese, the brother of Vincent Tese, has been
employed by Madison Square Garden, L.P., a subsidiary of the
Company, in a non-executive officer position. Mr. Charles
Tese earned a salary of $106,295 and a bonus of $4,102 in 2009.
166
Certain
Relationships and Potential Conflicts of Interest
Following the Distribution, our Executive Chairman, James L.
Dolan, will also continue to serve as the President and Chief
Executive Officer of Cablevision and our President and Chief
Executive Officer, Hank J. Ratner, will continue to serve as
Vice Chairman of Cablevision. In addition, immediately following
the Distribution, eight of the members of our Board of Directors
will also serve as directors of Cablevision, and several of our
directors will continue to serve as officers and/or employees of
Cablevision concurrently with their service on our Board of
Directors. Therefore, these officers and directors may have
actual or apparent conflicts of interest with respect to matters
involving or affecting each company. For example there will be
the potential for a conflict of interest when we or Cablevision
look at certain acquisitions and other corporate opportunities
that may be suitable for both companies. Also, conflicts may
arise if there are issues or disputes under the commercial
arrangements that will exist between Cablevision and us. See
Description of Capital Stock Certain Corporate
Opportunities and Conflicts. In addition, after the
Distribution, certain of our officers and directors will
continue to own Cablevision stock and options to purchase
Cablevision stock, as well as cash performance awards with any
payout based on Cablevisions performance, which they
acquired or were granted prior to the Distribution. These
ownership interests could create actual, apparent or potential
conflicts of interest when these individuals are faced with
decisions that could have different implications for the Company
and Cablevision. See Related Party Transaction
Approval Policy below for a discussion of certain
procedures we will institute to help ameliorate any such
potential conflicts that may arise. Under the Employee Matters
Agreement, executives that are employed by both the Company and
Cablevision will be considered Cablevision employees with
respect to all amounts and awards outstanding as of the
Distribution date, and we will not be responsible for any costs
associated with any cash or equity incentive award outstanding
as of the Distribution date with respect to any such executive.
The Companys amended and restated certificate of
incorporation will acknowledge that the Company may have
overlapping directors and officers with Cablevision and its
subsidiaries and that the Company may engage in material
business transactions with such entities. The Company will
renounce its rights to certain business opportunities and the
Companys amended and restated certificate of incorporation
will provide that in certain circumstances our directors and
officers will not have liability to the Company or its
stockholders for breach of any fiduciary duty by reason of the
fact that any such individual directs a corporate opportunity to
Cablevision or any of its subsidiaries instead of the Company,
or does not refer or communicate information regarding such
corporate opportunity to the Company. These provisions in our
amended and restated certificate of incorporation will also
expressly validate certain contracts, agreements, arrangements
and transactions (and amendments, modifications or terminations
thereof) between the Company and Cablevision
and/or
any
of its subsidiaries and will provide that, to the fullest extent
permitted by law, the actions of the overlapping directors and
officers in connection therewith are not breaches of fiduciary
duties owed to the Company or its stockholders. See
Description of Capital Stock Certain Corporate
Opportunities and Conflicts.
Prior to the Distribution, the members of the Dolan family group
will enter into an agreement with the Company in which they will
agree that during the
12-month
period beginning on the Distribution date, the Dolan family
group must obtain the approval of a majority of the
Companys Independent Directors prior to acquiring common
stock of the Company through a tender offer that results in
members of the Dolan family group owning more than 50% of the
total number of outstanding shares of common stock of the
Company. For purposes of this agreement, the term
Independent Directors means the directors of the
Company who have been determined by our Board of Directors to be
independent directors for purposes of The NASDAQ Stock
Market LLC corporate governance standards.
Related
Party Transaction Approval Policy
We will adopt a written policy whereby a committee of our Board
of Directors consisting entirely of independent directors (an
Independent Committee) will review and approve or
take such other action as it may deem appropriate with respect
to transactions involving the Company and its subsidiaries, on
the one hand, and in which any director, officer, greater than
5% stockholder of the Company or any other related
person as defined in Item 404 of
Regulation S-K
of the SEC (Item 404) has or will have a direct
or indirect material interest. This approval requirement covers
any transaction that meets the related party disclosure
requirements
167
of the SEC as set forth in Item 404, which currently apply
to transactions (or any series of similar transactions) in which
the amount involved exceeds $120,000. To simplify the
administration of the approval process under this policy, an
Independent Committee may, where appropriate, establish
guidelines for certain of those transactions. The policy does
not cover decisions on compensation or benefits or the hiring or
retention of any person. The hiring or retention of executive
officers is determined by our full Board of Directors.
Compensation of executive officers is subject to the approval of
our Compensation Committee. This policy also does not cover any
pro rata distributions to all Company stockholders, including a
pro rata distribution of our Class A Common Stock to
holders of our Class A Common Stock and our Class B
Common Stock to holders of our Class B Common Stock. No
director on an Independent Committee will participate in the
consideration of a related party transaction with that director
or any related person of that director.
Following the Distribution, our Board of Directors will also
adopt a special approval policy for transactions with
Cablevision and its subsidiaries whether or not such
transactions qualify as related party transactions
described above. Under this policy, an Independent Committee
will oversee approval of all transactions and arrangements
between the Company and its subsidiaries, on the one hand, and
Cablevision and its subsidiaries, on the other hand in which the
amount exceeds the dollar threshold set forth in Item 404
(currently $120,000). To simplify the administration of the
approval process under this policy, an Independent Committee
may, where appropriate, establish guidelines for certain of
these transactions. The approval requirement will not apply to
the implementation and administration of intercompany
arrangements under the related party transaction approval
policy, but will cover any amendments, modifications,
terminations or extensions, other than ministerial,
nonsubstantive amendments or modifications, as well as the
handling and resolution of any disputes. Our executive officers
and directors who are also senior executives or directors of
Cablevision may participate in the negotiation, execution,
amendment, modification, or termination of these intercompany
arrangements as well as in any resolution of disputes
thereunder, on behalf of either or both of the Company and
Cablevision, in each case under the direction of an Independent
Committee or the comparable committee of the board of directors
of Cablevision.
Our related party transaction approval policy cannot be amended
or terminated without the prior approval of a majority of the
independent directors and by a majority of the directors elected
by our Class B Common Stockholders. For purposes of this
policy, independent directors means those directors
who have been determined by our Board to be independent
directors for purposes of The NASDAQ Stock Market LLC corporate
governance standards.
168
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial
Ownership of Stock
This table shows the number and percentage of shares of our
Class A Common Stock and our Class B Common Stock that
will be owned of record and beneficially at the time of the
Distribution by each director and executive officer of the
Company named in the summary compensation table. The table also
shows the name, address and the number and percentage of shares
owned by persons beneficially owning more than five (5%) percent
of any class at the time of distribution. All information in the
table is based upon information available to Cablevision as of
January 4, 2010 (or, in the case of members of the Dolan
family and trusts for their benefit, January ,
2010) as to the ownership of Cablevision common stock and is
presented as if the Distribution has occurred prior to the dates
of ownership information used in the table.
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Combined Voting
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Power of All
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Classes of Stock
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Title of
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Beneficial
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Percent
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Beneficially
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Name and Address
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Stock Class(1)
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Ownership(1)(2)
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of Class
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Owned(1)(2)
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Dolan Family Group(3)
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Class A Common Stock
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%
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%
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340 Crossways Park Drive
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Class B Common Stock
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%
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Woodbury, NY 11797
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Charles F. Dolan(3)(4)(5)(6)(7)(8)(9)(10)(11)
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Class A Common Stock
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%
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%
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1111 Stewart Avenue
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Class B Common Stock
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%
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Bethpage, NY 11714
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Helen A. Dolan(3)(4)(5)(6)(7)(8)(9)(10)(11)
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Class A Common Stock
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%
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%
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1111 Stewart Avenue
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Class B Common Stock
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%
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Bethpage, NY 11714
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Charles F. Dolan 2008 Grantor Retained
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Class A Common Stock
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%
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%
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Annuity Trust #2(3)(5)
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Class B Common Stock
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%
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340 Crossways Park Drive
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Woodbury, NY 11797
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Charles F. Dolan 2009 Grantor Retained
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Class A Common Stock
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%
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%
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Annuity Trust #1(3)(6)
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Class B Common Stock
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%
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340 Crossways Park Drive
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Woodbury, NY 11797
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Charles F. Dolan 2009 Revocable Trust(3)(7)
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Class A Common Stock
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%
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%
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340 Crossways Park Drive
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Class B Common Stock
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%
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%
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Woodbury, NY 11797
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Helen A. Dolan 2009 Grantor Retained
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Class A Common Stock
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%
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%
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Annuity Trust #1(3)(9)
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Class B Common Stock
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%
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340 Crossways Park Drive
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Woodbury, NY 11797
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Helen A. Dolan 2009 Revocable Trust(3)(10)
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Class A Common Stock
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%
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%
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340 Crossways Park Drive
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Class B Common Stock
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%
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%
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Woodbury, NY 11797
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James L. Dolan(3)(11)(12)(20)(34)
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Class A Common Stock
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%
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%
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Class B Common Stock
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%
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Hank J. Ratner(11)(13)
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Class A Common Stock
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%
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%
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Class B Common Stock
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%
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Robert M. Pollichino(11)
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Class A Common Stock
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%
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%
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Class B Common Stock
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%
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Lawrence J. Burian(11)
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Class A Common Stock
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%
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%
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Class B Common Stock
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%
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Kristin A. Dolan(11)(12)(20)(34)
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Class A Common Stock
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%
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%
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Class B Common Stock
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%
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Thomas C. Dolan(3)(11)(21)(33)
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Class A Common Stock
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%
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%
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Class B Common Stock
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%
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Deborah A. Dolan-Sweeney(3)(11)(17)(19)(30)
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Class A Common Stock
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%
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%
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Class B Common Stock
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%
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|
|
|
|
Marianne Dolan Weber(3)(14)(15)(16)(31)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Voting
|
|
|
|
|
|
|
|
|
|
|
|
Power of All
|
|
|
|
|
|
|
|
|
|
|
|
Classes of Stock
|
|
|
|
Title of
|
|
Beneficial
|
|
|
Percent
|
|
|
Beneficially
|
|
Name and Address
|
|
Stock Class(1)
|
|
Ownership(1)(2)
|
|
|
of Class
|
|
|
Owned(1)(2)
|
|
|
Brad Dorsogna(14)(15)(18)(23)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
(29)(30)(31)(32)(33)(34)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
|
Richard D. Parsons
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
|
Alan D. Schwartz
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
|
Brian G. Sweeney(11)(17)(19)(30)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
|
Vincent Tese(14)(15)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
|
Patrick F. Dolan(3)(22)(32)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
|
Kathleen M. Dolan(3)(14)(15)(18)(23)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
(29)(30)(31)(32)(33)(34)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Paul J. Dolan(3)(24)(29)(34)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Progressive Field
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
2401 Ontario St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cleveland, Ohio 44115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary S. Dolan(3)(25)(30)(32)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
300 So. Riverside Plaza, Suite 1480
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Chicago, IL 60606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Dolan(3)(26)(31)(33)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
231 Main Street Court House Annex
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Chardon, OH 44024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence J. Dolan(3)(27)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Progressive Field 2401 Ontario St.
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Cleveland, Ohio 44115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David M. Dolan(3)(28)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
7 Glenmaro Lane
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
St. Louis, MO 63131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Dolan Children Trust
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
fbo Kathleen M. Dolan(3)(29)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
340 Crossways Park Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodbury, NY 11797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Dolan Children Trust
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
fbo Deborah A. Dolan-Sweeney(3)(30)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
340 Crossways Park Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodbury, NY 11797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Dolan Children Trust
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
fbo Marianne Dolan Weber(3)(31)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
340 Crossways Park Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodbury, NY 11797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Dolan Children Trust
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
fbo Patrick F. Dolan(3)(32)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
340 Crossways Park Drive
Woodbury, NY 11797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Dolan Children Trust
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
fbo Thomas C. Dolan(3)(33)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
340 Crossways Park Drive
Woodbury, NY 11797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Dolan Children Trust
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
fbo James L. Dolan(3)(34)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Two Penn Plaza, 26th Floor
New York, NY 10121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Voting
|
|
|
|
|
|
|
|
|
|
|
|
Power of All
|
|
|
|
|
|
|
|
|
|
|
|
Classes of Stock
|
|
|
|
Title of
|
|
Beneficial
|
|
|
Percent
|
|
|
Beneficially
|
|
Name and Address
|
|
Stock Class(1)
|
|
Ownership(1)(2)
|
|
|
of Class
|
|
|
Owned(1)(2)
|
|
|
All executive officers and directors as a group
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
|
GAMCO Investors, Inc.(35)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
GAMCO Asset Management Inc.(35)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
One Corporate Center
Rye, NY 10580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ClearBridge Advisors, LLC(36)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
620 8th Avenue
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc.(37)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
100 East Pratt Street
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Baltimore, MD 21202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.A.M. Investments Ltd.(38)
|
|
Class A Common Stock
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Marathon Asset Management (Services) Ltd.(38)
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Marathon Asset Management LLC(38)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Arah, Neil Ostrer, Jeremey Hosking(38)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Orion House, 5 Upper St. Martins Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
London, United Kingdom WC2H 9EA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Less than 1%
|
|
(1)
|
|
Beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the vote)
and/or sole or shared investment power (including the power to
dispose or direct the disposition) with respect to the security
through any contract, arrangement, understanding, and
relationship or otherwise. Unless indicated, beneficial
ownership disclosed consists of sole voting and investment
power. Beneficial ownership of Class A Common Stock is
exclusive of the shares of Class A Common Stock that are
issuable upon conversion of shares of Class B Common Stock.
|
|
(2)
|
|
Shares of Class B Common Stock are convertible into shares
of Class A Common Stock at the option of the holder on a
share for share basis. The holder of one share of Class A
Common Stock has one vote per share at a meeting of our
stockholders and the holder of one share of Class B Common
Stock has 10 votes per share at a meeting of our stockholders,
except in the separate elections of directors. Holders of
Class A Common Stock have the right to elect 25% of our
Board of Directors rounded up to the nearest whole director and
the holders of Class B Common Stock have the right to elect
the remaining members of our Board of Directors.
|
|
|
|
(3)
|
|
Members of the Dolan family will form a group for
purposes of Section 13D of the Securities and Exchange Act of
1934. The members of this group (the Group Members)
are: Charles F. Dolan, individually and as Trustee of the
Charles F. Dolan 2009 Revocable Trust (the CFD 2009
Trust), the Charles F. Dolan 2008 Grantor Retained Annuity
Trust #2 (the 2008 GRAT #2), the Charles
F. Dolan 2009 Grantor Retained Annuity Trust #1 (the
2009 GRAT #1), the Charles F. Dolan 2009
Grantor Retained Annuity Trust #2 (the 2009
GRAT #2), the Charles F. Dolan 2009 Grantor Retained
Annuity Trust #3 (the 2009 GRAT #3) and
the Charles F. Dolan 2010 Grantor Retained Annuity Trust #1
(the 2010 GRAT #1); Helen A. Dolan, individually and as
Trustee of the Helen A. Dolan 2009 Revocable Trust (the
HAD 2009 Trust), the Helen A. Dolan 2009 Grantor
Retained Annuity Trust #1 (the HAD 2009
GRAT #1), the Helen A. Dolan 2009 Grantor Retained
Annuity Trust #2 (the HAD 2009 GRAT #2)
and the Helen A. Dolan 2010 Grantor Retained Annuity
Trust #1 (the HAD 2010 GRAT #1); James L.
Dolan; Thomas C. Dolan; Patrick F. Dolan; Kathleen M. Dolan,
individually and as a Trustee of the Charles F. Dolan Children
Trust fbo Kathleen M. Dolan, the Charles F. Dolan Children Trust
fbo Deborah Dolan-Sweeney, the Charles F. Dolan Children Trust
fbo Marianne Dolan Weber, the Charles F. Dolan Children Trust
fbo Patrick F. Dolan, the Charles F. Dolan Children Trust fbo
Thomas C. Dolan and the Charles F. Dolan Children Trust fbo
James L. Dolan (collectively, the Dolan Children
Trusts), the Charles Dolan 1989 Trust (for the benefit of
Charles P. Dolan), the Ryan Dolan
|
171
|
|
|
|
|
1989 Trust and the Tara Dolan 1989 Trust; Marianne Dolan Weber;
Deborah A. Dolan-Sweeney; Lawrence J. Dolan, as a Trustee of the
Charles F. Dolan 2009 Family Trust fbo Patrick F. Dolan, the
Charles F. Dolan 2009 Family Trust fbo Thomas C. Dolan, the
Charles F. Dolan 2009 Family Trust fbo James L. Dolan, the
Charles F. Dolan 2009 Family Trust fbo Marianne Dolan Weber, the
Charles F. Dolan 2009 Family Trust fbo Kathleen M. Dolan and the
Charles F. Dolan 2009 Family Trust fbo Deborah Dolan-Sweeney
(collectively, the 2009 Family Trusts); David M.
Dolan, as a Trustee of 2009 Family Trusts; Paul J. Dolan, as a
Trustee of the Dolan Children Trusts fbo Kathleen M. Dolan and
James L. Dolan; Matthew J. Dolan, as a Trustee of the Dolan
Children Trusts fbo Marianne Dolan Weber and Thomas C. Dolan;
and Mary S. Dolan, as a Trustee of the Dolan Children Trusts fbo
Deborah A. Dolan-Sweeney and Patrick F. Dolan. See footnotes
(4)(8)(12)(16)(19)(21)(22)(23)(24)(25)(26)(27) and (28).
|
|
|
|
(4)
|
|
Charles F. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock
(including shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on ,
2010 were unexercised but were exercisable within a period of
60 days), owned
personally, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
CFD 2009
Trust, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2008 GRAT
#2, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 GRAT
#1,
shares of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the 2009
GRAT
#2, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 GRAT #3,
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2010 GRAT #1, and the shared power to vote or direct the
vote of and to dispose of or direct the disposition
of
shares of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the HAD
2009
Trust,
shares of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the HAD
2009 GRAT
#1, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2009
GRAT #2, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2010 GRAT #1,
and
shares of Class A Common Stock owned by the Dolan Family
Foundation. He disclaims beneficial ownership of
the shares
of Class A Common Stock owned by the Dolan Family
Foundation, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2009
Trust, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2009
GRAT #1, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2009 GRAT #2,
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2010 GRAT #1. See footnotes (5), (6), (7) (8), (9),(10)
and (11).
|
|
|
|
(5)
|
|
Includes shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2008 GRAT #2. The 2008 GRAT #2 was established on
December 16, 2008 by Charles F. Dolan for estate planning
purposes. Charles F. Dolan, as Trustee of the 2008 GRAT #2, has
the sole power to vote and dispose of such shares. For two
years, the 2008 #2 GRAT will pay to Charles F. Dolan, and in the
event of his death, to his estate, a certain percentage of the
fair market value of the property initially contributed to the
2008 GRAT #2. If Mr. Dolan is living at the expiration of
the term of the 2008 GRAT #2, the remainder will pass into
another trust for the benefit of the descendants of Charles F.
Dolan. If Mr. Dolan is not living at the expiration of the
term of the 2008 GRAT #2, the then principal of the 2008 GRAT #2
will pass to his estate.
|
|
|
|
(6)
|
|
Includes shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 GRAT #1. The 2009 GRAT #1 was established on
|
172
|
|
|
|
|
February 11, 2009 by Charles F. Dolan for estate planning
purposes. Charles F. Dolan, as Trustee of the 2009 GRAT #1, has
the sole power to vote and dispose of such shares. For two
years, the 2009 GRAT #1 will pay to Charles F. Dolan, and in the
event of his death, to his estate, a certain percentage of the
fair market value of the property initially contributed to the
2009 GRAT #1. If Mr. Dolan is living at the expiration of
the term of the 2009 GRAT #1, the remainder will pass into
another trust for the benefit of the descendants of Charles F.
Dolan. If Mr. Dolan is not living at the expiration of the
term of the 2009 GRAT #1, the then principal of the 2009 GRAT #1
will pass to his estate.
|
|
|
|
(7)
|
|
Includes shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
CFD 2009 Trust. The CFD 2009 Trust was established on
November 3, 2009 by Charles F. Dolan for estate planning
purposes. Charles F. Dolan, as Trustee of the CFD 2009 Trust,
has the sole power to vote and dispose of such shares.
|
|
|
|
(8)
|
|
Helen A. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock issuable upon conversion of an equal
number of shares of Class B Common Stock owned by the HAD 2009
Trust, shares
of Class A Common Stock issuable upon conversion of an equal
number of shares of Class B Common Stock owned by the HAD 2009
GRAT
#1, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2009 GRAT #2,
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2010 GRAT #1, and the shared power to vote or direct
the vote of and to dispose of or direct the disposition
of shares
of Class A Common Stock owned by the Dolan Family
Foundation,
and shares
of Class A Common Stock
(including shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on ,
2010 were unexercised but were exercisable within a period of
60 days) owned personally by her spouse, Charles F.
Dolan, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
CFD 2009
Trust, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2008 GRAT
#2, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 GRAT
#1, shares
of Class A Common Stock issuable upon conversion of an equal
number of shares of Class B Common Stock owned by the 2009 GRAT
#2, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 GRAT #3,
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2010 GRAT #1. She disclaims beneficial ownership of
the shares
of Class A Common Stock owned by the Dolan Family
Foundation, shares
of Class A Common Stock
(including shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on ,
2010 were unexercised but were exercisable within a period of
60 days) owned personally by her
spouse, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
CFD 2009
Trust, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2008 GRAT
#2, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 GRAT
#1, shares
of Class A Common Stock issuable upon conversion of an equal
number of shares of Class B Common Stock owned by the 2009 GRAT
#2, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009
GRAT #3, shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2010 GRAT #1. See footnotes (4), (5), (6), (7), (9), (10)
and (11).
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(9)
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Includes shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the HAD
2009 GRAT #1. The HAD 2009 GRAT #1 was established on
April 23, 2009 by Helen A. Dolan for estate planning
purposes. Helen A. Dolan, as Trustee of the HAD 2009 GRAT
#1, has the sole power to vote and dispose of such shares. For
two years, the 2009 GRAT #1 will pay to Helen A. Dolan, and
in the event of her death, to her estate, a certain percentage
of the fair market value of the property initially contributed
to the HAD 2009 GRAT
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#1. If Mrs. Dolan is living at the expiration of the term
of the HAD 2009 GRAT #1, the remainder will pass into another
trust for the benefit of her descendants. If Mrs. Dolan is
not living at the expiration of the term of the HAD 2009 GRAT
#1, the then principal of the HAD 2009 GRAT #1 will pass to her
estate.
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(10)
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Includes shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
HAD 2009 Trust. The HAD 2009 Trust was established on
November 3, 2009 by Helen A. Dolan for estate planning
purposes. Helen A. Dolan, as Trustee of the HAD 2009 Trust, has
the sole power to vote and dispose of such shares.
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(11)
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Includes shares of Class A Common Stock issuable upon the
exercise of options granted in respect of stock options that
were issued pursuant to the Cablevision 2006 Employee Stock Plan
and predecessor plans, which
on ,
2010, were unexercised but were exercisable within a period of
60 days. These amounts include the following number of
shares of Class A Common Stock for the following
individuals: Charles F.
Dolan ;
James L.
Dolan ;
Thomas C.
Dolan ;
Mr. Ratner ;
Mr. Pollichino ;
Kristin A.
Dolan ;
Brian G.
Sweeney ;
and
Mr. Burian ;
all executive officers and directors as a
group .
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(12)
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James L. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock
(including shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on ,
2010 were unexercised but were exercisable within a period of
60 days), the shared power to vote or direct the vote of
and to dispose of or direct the disposition
of shares
of Class A Common Stock
(including shares
of restricted stock owned by his spouse, Kristin A. Dolan,
and shares
of Class A Common Stock owned jointly with his spouse), an
aggregate
of shares
of Class A Common Stock held by his children
and shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for his benefit. He disclaims beneficial
ownership of
the shares
of Class A Common Stock owned by his children,
the shares
of Class A Common Stock
(including shares
of restricted stock) owned by his spouse and
the shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for his benefit. See footnote (11).
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(13)
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Includes an aggregate
of shares
of Class A Common Stock owned by his children.
Mr. Ratner disclaims beneficial ownership of
the shares
of Class A Common Stock owned by his children. See footnote
(11).
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(14)
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Includes shares of Class A Common Stock issuable upon the
exercise of options granted in respect of stock options that
were issued pursuant to the Cablevision 2006 Stock Plan for
Non-Employee Directors and predecessor plans. These amounts
include the following number of shares of Class A Common
Stock for the following individuals:
Mr. Tese ,
Ms. Dolan
Weber ,
Kathleen M.
Dolan ,
and Brad
Dorsogna .
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(15)
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Does not include restricted stock units granted under the
Cablevision 2006 Stock Plan for Non-Employee Directors and
predecessor plans. These amounts include the following number of
restricted stock units for the following individuals:
Mr. Tese ,
Ms. Dolan
Weber ,
Kathleen M.
Dolan ,
and Brad
Dorsogna .
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(16)
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Marianne Dolan Weber may be deemed to have the sole power to
vote or direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock owned personally, the shared power
to vote or direct the vote of and to dispose of or direct the
disposition
of shares
of Class A Common Stock owned by her
spouse, shares
of Class A Common Stock owned by her child
and shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for her benefit. She disclaims beneficial
ownership of
the shares
of Class A Common Stock owned by her spouse,
the shares
of Class A Common Stock owned by her child and
the shares
of Class A Common Stock
and
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shares of Class A Common Stock issuable upon
conversion of an equal number of shares of Class B Common
Stock owned by the Dolan Children Trust for her benefit.
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(17)
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Brian G. Sweeney may be deemed to have the sole power to vote or
direct the vote of and dispose or direct the disposition
of shares
of Class A Common Stock
(including shares
of Class A Common
Stock, shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on
were unexercised but were exercisable within a period of
60 days) owned personally, the shared power to vote or
direct the vote of and to dispose of or direct the disposition
of shares
of Class A Common Stock owned by his spouse,
Deborah A.
Dolan-Sweeney,
an aggregate
of shares
Class A Common Stock held in trust for his children for
which he serves as co-trustee
and shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for the benefit of his spouse. He disclaims
beneficial ownership of
the shares
of Class A Common Stock owned by his spouse,
the shares
of Class A Common Stock held in trusts for his children for
which he serves as co-trustee and
the shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for the benefit of his spouse.
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(18)
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Brad Dorsogna may be deemed to have the shared power to vote or
direct the vote of and to dispose of or direct the disposition
of shares
of Class A Common Stock owned by his spouse, Kathleen M.
Dolan, shares
of Class A Common Stock owned jointly with his
spouse, shares
of Class A Common Stock held by his spouse as custodian for
their children, an aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
for which his spouse serves as co-Trustee and an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Charles Dolan 1989 Trust (for the benefit of Charles P. Dolan),
the Ryan Dolan 1989 Trust, the Tara Dolan 1989 Trust and the
Dolan Children Trusts for which his wife serves as Trustee
and/or co-Trustee. He disclaims beneficial ownership of an
aggregate
of shares
of Class A Common Stock directly owned by his
spouse, shares
of Class A Common Stock held by his spouse as custodian for
their children, an aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
for which his spouse serves as co-Trustee and an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Charles Dolan 1989 Trust (for the benefit of Charles P. Dolan),
the Ryan Dolan 1989 Trust, the Tara Dolan 1989 Trust and the
Dolan Children Trusts for which his spouse serves as Trustee
and/or co-Trustee.
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(19)
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Deborah A. Dolan-Sweeney may be deemed to have the sole power to
vote or direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock owned personally, the shared power
to vote or direct the vote of and to dispose of or direct the
disposition
of shares
of Class A Common Stock
(including shares
of Class A Common
Stock, shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on were
unexercised but were exercisable within a period of
60 days) owned by her spouse, Brian G. Sweeney, an
aggregate
of shares
of Class A Common Stock held in trust for her children
and shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for her benefit. She disclaims beneficial
ownership of
the shares
of Class A Common Stock
(including
shares of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on were
unexercised but were exercisable within a period of
60 days) owned by her spouse,
the shares
of Class A Common Stock held in trust for her children and
the shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for her benefit.
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(20)
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Kristin A. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition
of
shares of Class A Common Stock (including restricted stock)
owned
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personally, the shared power to vote or direct the vote of and
to dispose of or direct the disposition
of shares
of Class A Common Stock owned jointly with her spouse,
James L. Dolan, an aggregate
of shares
of Class A Common Stock
(including shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on ,
2010 were unexercised but were exercisable within a period of
60 days) owned by her
spouse, shares
of Class A Common Stock owned by her children,
and shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for the benefit of her spouse. She
disclaims beneficial ownership of
the shares
of Class A Common Stock
(including shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on ,
2010 were unexercised but were exercisable within a period of
60 days),
owned by her
spouse, shares
of Class A Common Stock owned by her children,
and shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for the benefit of her spouse.
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(21)
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Thomas C. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock
(including shares
of restricted stock) owned personally and the shared power to
vote or direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for his benefit. He disclaims beneficial
ownership of
the shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for his benefit.
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(22)
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Patrick F. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock
(including shares
of restricted stock
and shares
of Class A Common Stock issuable upon exercise of options
which
on ,
2010 were unexercised but were exercisable within a period of
60 days) owned personally and the shared power to vote or
direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock owned by the Daniel P. Mucci Trust
for which he serves as
co-Trustee, shares
of Class A Common Stock owned jointly with his spouse, an
aggregate
of shares
of Class A Common Stock owned by his children,
and shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for his benefit. He disclaims beneficial
ownership of
the shares
of Class A Common Stock owned by the
Daniel P. Mucci Trust for which he serves as
co-Trustee, an aggregate
of shares
of Class A Common Stock owned by his children,
and shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trust for his benefit.
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(23)
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Kathleen M. Dolan may be deemed to have the sole power to vote
or direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock owned
personally, shares
of Class A Common Stock held as custodian for her children
and an aggregate
of shares
of Class A Common Stock issuable upon the conversion of an
equal number of shares of Class B Common Stock owned by the
Charles Dolan 1989 Trust (for the benefit of Charles P. Dolan),
the Ryan Dolan 1989 Trust, the Tara Dolan 1989 Trust for which
she serves as Trustee and the shared power to vote or direct the
vote of and to dispose of or direct the disposition
of shares
of Class A Common Stock owned jointly with her spouse, Brad
Dorsogna, an aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
and an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trusts for which she serves as Co-Trustee. She
disclaims beneficial ownership
of shares
of Class A Common Stock held as custodian for her children
and an aggregate
of
shares of Class A Common Stock issuable upon the conversion
of an equal number of shares of Class B Common Stock owned
by the Charles Dolan 1989 Trust (for the benefit of
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176
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Charles P. Dolan), the Ryan Dolan 1989 Trust, the
Tara Dolan 1989 Trust for which she serves as Trustee and an
aggregate shares
of Class A Common Stock owned by the Dolan Children Trusts
and an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trusts for which she serves as Co-Trustee.
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(24)
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Paul J. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition of an aggregate
of shares
of Class A Common Stock held as custodian for his
children, shares
of Class A Common Stock owned by the CFD
Trust No. 10 and the shared power to vote or direct
the vote of and to dispose of or direct the disposition
of shares
of Class A Common Stock owned jointly with his spouse, an
aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
for the benefit of James L. Dolan and Kathleen M. Dolan and an
aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trusts for the benefit of James L. Dolan and
Kathleen M. Dolan. He disclaims beneficial ownership of
the shares
of Class A Common Stock held as custodian for his children,
the shares
of Class A Common Stock owned by the CFD Trust No. 10,
an aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
for the benefit of James L. Dolan and Kathleen M. Dolan and an
aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trusts for the benefit of
James L. Dolan and Kathleen M. Dolan.
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(25)
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Mary S. Dolan may be deemed to have the sole power to vote or
direct the vote and to dispose of or direct the disposition
of shares
of Class A Common Stock held as custodian for her children,
the shared power to vote or direct the vote of or to dispose of
or direct the disposition
of shares
of Class A Common Stock owned jointly with her spouse, an
aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
for the benefit of Deborah A. Dolan-Sweeney and Patrick F. Dolan
and an aggregate
of shares
of Class A Common Stock issuable upon conversion of an equal
number of shares of Class B Common Stock owned by the Dolan
Children Trusts for the benefit of Deborah A. Dolan-Sweeney and
Patrick F. Dolan. She disclaims beneficial ownership
of shares
of Class A Common Stock held as custodian for her children,
an aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
for the benefit of Deborah A. Dolan-Sweeney and Patrick F. Dolan
and an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trusts for the benefit of
Deborah A. Dolan-Sweeney and Patrick F. Dolan.
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(26)
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Matthew J. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock owned
personally, shares
of Class A Common Stock held as custodian for his child,
the shared power to vote or direct the vote of and to dispose of
or direct the disposition of an aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
for the benefit of Marianne Dolan Weber and Thomas C. Dolan and
an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trusts for the benefit of Marianne Dolan Weber
and Thomas C. Dolan. He disclaims beneficial ownership
of shares
of Class A Common Stock held as custodian for his child and
an aggregate
of shares
of Class A Common Stock owned by the Dolan Children Trusts
for the benefit of Marianne Dolan Weber and Thomas C. Dolan and
an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Dolan Children Trusts for the benefit of Marianne Dolan Weber
and Thomas C. Dolan.
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(27)
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Lawrence J. Dolan may be deemed to have the shared power to vote
or direct the vote of and to dispose of or direct the
disposition
of shares
of Class A Common Stock owned jointly with his spouse, an
aggregate
of shares
of Class A Common Stock owned by the 2009 Family Trusts for
which he serves as co-trustee and an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 Family Trusts.
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He disclaims beneficial ownership of an aggregate
of shares
of Class A Common Stock owned by the 2009 Family Trusts and
an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 Family Trusts.
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(28)
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David M. Dolan may be deemed to have the sole power to vote or
direct the vote of and to dispose of or to direct the
disposition
of shares
of Class A Common Stock owned by the David M. Dolan
Revocable Trust
and shares
of Class A Common Stock owned by the Charles F. Dolan
Charitable Remainder Trust, the shared power to vote or direct
the vote of and to dispose of or direct the disposition
of shares
of Class A Common Stock held jointly with his
spouse, shares
of Class A Common Stock owned by the Ann H. Dolan Revocable
Trust, shares
of Class A Common Stock held by his spouse as custodian for
a child, an aggregate
of
shares of Class A Common Stock owned by the 2009 Family
Trusts for which he serves as co-trustee and an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 Family Trusts. He disclaims beneficial ownership of
the shares
of Class A Common Stock owned by the Charles F. Dolan
Charitable Remainder
Trust, shares
of Class A Common Stock owned by the Ann H. Dolan Revocable
Trust, shares
of Class A Common Stock held by his spouse as custodian for
a child, an aggregate
of shares
of Class A Common Stock owned by the 2009 Family Trusts and
an aggregate
of shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
2009 Family Trusts.
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(29)
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Includes shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Charles F. Dolan Children Trust fbo Kathleen M. Dolan,
established on December 22, 2009.
Kathleen M. Dolan and Paul J. Dolan serve as
co-trustees.
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(30)
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Includes shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Charles F. Dolan Children Trust fbo Deborah A.
Dolan-Sweeney, established on December 22, 2009.
Kathleen M. Dolan and Mary S. Dolan serve as
co-trustees.
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(31)
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Includes shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Charles F. Dolan Children Trust fbo Marianne Dolan-Weber,
established on December 22, 2009. Kathleen M. Dolan and
Matthew J. Dolan serve as co-trustees.
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(32)
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Includes shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Charles F. Dolan Children Trust fbo Patrick F. Dolan,
established on December 22, 2009.
Kathleen M. Dolan and Mary S. Dolan serve as
co-trustees.
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(33)
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Includes shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Charles F. Dolan Children Trust fbo Thomas C. Dolan,
established on December 22, 2009.
Kathleen M. Dolan and Matthew J. Dolan serve as
co-trustees.
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(34)
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Includes shares
of Class A Common Stock
and shares
of Class A Common Stock issuable upon conversion of an
equal number of shares of Class B Common Stock owned by the
Charles F. Dolan Children Trust fbo James L. Dolan,
established on December 22, 2009. Kathleen M. Dolan and
Paul J. Dolan serve as co-trustees.
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(35)
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The Company has been informed that certain operating
subsidiaries of GAMCO Investors, Inc. beneficially held, or
exercised investment discretion over various institutional
accounts which held an aggregate of 19,217,957 shares of
Class A Common Stock as of December 31, 2008.
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(36)
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The Company has been informed that ClearBridge Advisors, LLC, an
investment adviser, held sole voting power over
24,864,543 shares of Class A Common Stock and sole
dispositive power over 30,488,514 shares of Class A
Common Stock as of December 31, 2008.
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(37)
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The Company has been informed that T. Rowe Price Associates,
Inc. (Price Associates) held sole voting power over
6,271,381 and sole dispositive power over 35,037,924 shares
of Class A Common Stock as of December 31, 2008. These
securities are owned by various individual and institutional
investors, which Price Associates serves as investment adviser
with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to
be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities.
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(38)
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The Company has been informed that M.A.M. Investments Ltd.,
Marathon Asset Management (Services) Ltd., Marathon Asset
Management LLP, William James Arah, Jeremy John Hosking and Neil
Mark Ostrer (collectively, Marathon) held as a group
in accordance with Rule 13.d-1(b)(1)(ii)(J)
16,615,423 shares of Class A Common Stock. Marathon
held sole voting and dispositive power over 730,000 shares
of Class A Common Stock, shared voting power over
11,259,426 shares of Class A Common Stock and shared
dispositive power over 15,885,423 shares of Class A
Common Stock as of December 31, 2008. For purposes of the
reporting requirements of the Securities Exchange Act of 1934,
Marathon is deemed to be the beneficial owner of such
securities; however, Marathon expressly disaffirms membership in
any group under Rule 13d-5 under the Securities Exchange
Act of 1934, as amended.
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Charles F. Dolan, members of his family and related family
entities, by virtue of their ownership of Class B Common
Stock, are able collectively to control stockholder decisions on
matters in which holders of Class A Common Stock and
Class B Common Stock vote together as a single class, and
to elect up to 75% of the Companys Board of Directors. In
addition, Charles F. Dolan, members of the Dolan family and
related family entities will, prior to the Distribution, enter
into a Class B Stockholders Agreement which has the effect
of causing the voting power of these Class B stockholders
to be cast as a block on all matters on which the holders of
Class B Common Stock are entitled to vote. A purpose of
this agreement is to consolidate the Dolan family control of the
Company.
Charles F. Dolan and all other holders of Class B Common
Stock, other than the Charles F. Dolan Children Trusts, and the
Company will enter into a registration rights agreement (the
Dolan Registration Rights Agreement) upon
consummation of the Distribution. Under this agreement, the
Company will provide the parties to the Dolan Registration
Rights Agreement (the Dolan Parties) (and, in
certain cases, transferees and pledgees of shares of
Class B Common Stock owned by these parties) with certain
demand and piggy-back registration rights with respect to
Class A Common Stock issued upon conversion of the
Class B Common Stock they hold. The Dolan Parties are
expected to receive
approximately million shares
of Class B Common Stock in the Distribution (the
Dolan Shares), which is expected to represent
approximately % of our Class B
Common Stock, % of our Common Stock
and % of the aggregate voting power
of our Common Stock.
The Charles F. Dolan Children Trusts (the Children
Trusts) and the Company will enter into a registration
rights agreement (the Children Trusts Registration Rights
Agreement) upon consummation of the Distribution. Under
this agreement, the Company will provide the Children Trusts
(and, in certain cases, transferees and pledgees of shares of
Class B Common Stock owned by these parties) with certain
demand and piggy-back registration rights with respect to
Class A Common Stock issued upon conversion of the
Class B Common Stock they hold. The Children Trusts are
expected to receive
approximately million shares
of Class B Common Stock in the Distribution (the
Children Trust Shares), which is expected to
represent approximately % of our
Class B Common Stock, % of our
Common Stock and % of the aggregate
voting power of our Common Stock.
In the Children Trusts Registration Rights Agreement, each
Children Trust will agree that in the case of any sale or
disposition of its shares of Class B Common Stock (other
than to Charles F. Dolan or other Dolan family interests) by
such Children Trust, or of any of the Children Trust Shares by
any other Dolan family interest to which such shares of
Class B Common Stock are transferred, such stock will be
converted to Class A Common Stock. The Dolan Registration
Rights Agreement does not include a comparable conversion
179
obligation, and the conversion obligation in the Children
Trusts Registration Rights Agreement does not apply to the Dolan
Shares.
The Dolan Registration Rights Agreement and the Children Trusts
Registration Rights Agreement are included as exhibits to the
registration statement of which this information statement forms
a part that we have filed with the Securities and Exchange
Commission, and the foregoing discussion of those agreements is
qualified in its entirety by reference to those agreements as so
filed.
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SHARES ELIGIBLE
FOR FUTURE SALE
Sales or the availability for sale of substantial amounts of our
Class A Common Stock in the public market could adversely
affect the prevailing market price for such stock. Upon
completion of the Distribution, we will have outstanding an
aggregate
of shares
of our Class A Common Stock
and shares
of our Class B Common Stock based upon the shares of
Cablevision common stock outstanding as
of ,
2010, excluding treasury stock and assuming no exercise of
outstanding options. All of the shares of Class A Common
Stock will be freely tradable without restriction or further
registration under the Securities Act unless the shares are
owned by our affiliates as that term is defined in
the rules under the Securities Act. Shares held by
affiliates may be sold in the public market only if
registered or if they qualify for an exemption from registration
or in compliance with Rule 144 under the Securities Act
which is summarized below. Further, as described below, we plan
to file a registration statement to cover the shares issued
under our Employee Stock Plan.
Rule 144
In general, under Rule 144 as currently in effect, an
affiliate would be entitled to sell within any three-month
period a number of shares of Class A Common Stock that does
not exceed the greater of:
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one percent of the number of shares of our Class A Common
Stock then outstanding; or
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the average weekly trading volume of our Class A Common
Stock on The NASDAQ Stock Market LLC during the four
calendar weeks preceding the filing of a notice of Form 144
with respect to such sale.
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Sales under Rule 144 are also subject to certain holding
period requirements, manner of sale provisions and notice
requirements and to the availability of current public
information about us.
Employee
Stock Awards
As described under Executive Compensation
Treatment of Outstanding Options, Rights, Restricted Stock,
Restricted Stock Units and Other Awards, in connection
with the Distribution we will issue under our Employee Stock
Plan options covering
approximately million shares
of our Class A Common Stock and stock appreciation rights
in respect of
approximately million of our
shares of Class A Common Stock, all in respect of
previously outstanding awards by Cablevision. In addition, we
anticipate making other equity based awards to our employees in
the future. We currently expect to file a registration statement
under the Securities Act to register shares to be issued under
our Employee Stock Plan, including the options and stock
appreciation rights that were granted in connection with the
Distribution. Shares covered by such registration statement,
other than shares issued to affiliates, generally will be freely
tradable without further registration under the Securities Act.
Non-Employee
Director Stock Awards
We also currently expect to file a registration statement under
the Securities Act to register shares to be issued under our
Director Stock Plan, including the options with respect
to shares
of the Companys Class A Common Stock that will be
granted in respect of outstanding Cablevision stock options
and shares
of the Companys Class A Common Stock in connection
with Cablevisions outstanding restricted stock units, in
each case held by Cablevision directors. These options and
shares will be granted, issued and fully vested as of the
Distribution date. Shares covered by such registration
statement, other than shares issued to affiliates, generally
will be freely tradable without further registration under the
Securities Act.
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Registration
Rights Agreements
Charles F. Dolan and all other holders of Class B Common
Stock, other than the Charles F. Dolan Children Trusts, and the
Company will enter into a registration rights agreement (the
Dolan Registration Rights Agreement) upon
consummation of the Distribution. Under this agreement, the
Company will provide the parties to the Dolan Registration
Rights Agreement (the Dolan Parties) (and, in
certain cases, transferees and pledgees of shares of
Class B Common Stock owned by these parties) with certain
demand and piggy-back registration rights with respect to
Class A Common Stock issued upon conversion of the
Class B Common Stock they hold. The Dolan Parties are
expected to receive
approximately million shares
of Class B Common Stock in the Distribution (the
Dolan Shares), which is expected to represent
approximately % of our Class B
Common Stock, % of our Common Stock
and % of the aggregate voting power
of our Common Stock.
The Charles F. Dolan Children Trusts (the Children
Trusts) and the Company will enter into a registration
rights agreement (the Children Trusts Registration Rights
Agreement) upon consummation of the Distribution. Under
this agreement, the Company will provide the Children Trusts
(and, in certain cases, transferees and pledgees of shares of
Class B Common Stock owned by these parties) with certain
demand and piggy-back registration rights with respect to
Class A Common Stock issued upon conversion of the
Class B Common Stock they hold. The Children Trusts are
expected to receive
approximately million shares
of Class B Common Stock in the Distribution
(the
Children Trust Shares)
, which is expected
to represent approximately % of our
Class B Common Stock, % of our
Common Stock and % of the aggregate
voting power of our Common Stock.
The Dolan Registration Rights Agreement and the Children Trusts
Registration Rights Agreement are included as exhibits to the
registration statement of which this information statement forms
a part that we have filed with the Securities and Exchange
Commission, and the foregoing discussion of those agreements is
qualified in its entirety by reference to those agreements as so
filed.
182
DESCRIPTION
OF CAPITAL STOCK
We are currently authorized to issue 1,000 shares of common
stock. Prior to the Distribution we will amend our certificate
of incorporation to provide authorization for us to
issue shares
of capital stock, of
which shares
will be Class A Common Stock, par value $.01 per
share, shares
will be Class B Common Stock, par value $.01 per share,
and shares
will be Preferred Stock, par value $.01 per share. The amended
certificate of incorporation will provide that our common stock
and preferred stock will have the rights described below.
Class A
Common Stock and Class B Common Stock
All shares of our common stock currently outstanding are fully
paid and non-assessable, not subject to redemption and without
preemptive or other rights to subscribe for or purchase any
proportionate part of any new or additional issues of stock of
any class or of securities convertible into stock of any class.
Voting
Holders of Class A Common Stock are entitled to one vote
per share. Holders of Class B Common Stock are entitled to
ten votes per share. All actions submitted to a vote of
stockholders are voted on by holders of Class A Common
Stock and Class B Common Stock voting together as a single
class, except for the election of directors and as otherwise set
forth below. With respect to the election of directors, holders
of Class A Common Stock will vote together as a separate
class and be entitled to elect 25% of the total number of
directors constituting the whole Board of Directors and, if such
25% is not a whole number, then the holders of Class A
Common Stock, voting together as a separate class, will be
entitled to elect the nearest higher whole number of directors
that is at least 25% of the total number of directors. Holders
of Class B Common Stock, voting together as a separate
class, will be entitled to elect the remaining directors.
If, however, on the record date for notice of any stockholders
meeting at which directors are to be elected, the number of
outstanding shares of Class A Common Stock is less than 10%
of the total number of outstanding shares of both classes of
common stock, the holders of Class A Common Stock and
Class B Common Stock will vote together as a single class
with respect to the election of directors and the holders of
Class A Common Stock will not have the right to elect 25%
of the total number of directors but will have one vote per
share for all directors and the holders of Class B Common
Stock will have ten votes per share for all directors. (On the
date of the Distribution, we anticipate that the number of
outstanding shares of Class A Common Stock will represent
approximately 80% of the total number of outstanding shares of
both classes of common stock.)
If, on the record date for notice of any stockholders meeting at
which directors are to be elected, the number of outstanding
shares of Class B Common Stock is less than
12
1
/
2
%
of the total number of outstanding shares of both classes of
common stock, then the holders of Class A Common Stock,
voting as a separate class, would continue to elect a number of
directors equal to 25% of the total number of directors
constituting the whole Board of Directors and, in addition,
would vote together with the holders of Class B Common
Stock, as a single class, to elect the remaining directors to be
elected at such meeting, with the holders of Class A Common
Stock entitled to one vote per share and the holders of
Class B Common Stock entitled to ten votes per share.
In addition, the affirmative vote or consent of the holders of
at least
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2
/
3
%
of the outstanding shares of Class B Common Stock, voting
separately as a class, is required for the authorization or
issuance of any additional shares of Class B Common Stock
and for any amendment, alteration or repeal of any provisions of
our amended and restated certificate of incorporation which
would affect adversely the powers, preferences or rights of the
Class B Common Stock. The number of authorized shares of
Class A Common Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the
affirmative vote of the holders of the majority of the common
stock. Our amended and restated certificate of incorporation
does not provide for cumulative voting.
Advance
Notification of Stockholder Nominations and
Proposals
Our amended and restated by-laws will establish advance notice
procedures with respect to stockholder proposals and nomination
of candidates for election as directors other than nominations
made by or at the
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direction of our Board of Directors. In particular,
stockholders must notify our corporate secretary in writing
prior to the meeting at which the matters are to be acted upon
or directors are to be elected. The notice must contain the
information specified in our amended and restated by-laws. To be
timely, the notice must be received by our corporate secretary
not less than 60 or more than 90 days prior to the date of
the stockholders meeting, provided that if the date of the
meeting is publicly announced or disclosed less than
70 days prior to the date of the meeting, the notice must
be given not more than 10 days after such date is first
announced or disclosed.
No
Stockholder Action by Written Consent
Our amended and restated certificate of incorporation will
provide that, except as otherwise provided as to any series of
preferred stock in the terms of that series, no action of
stockholders required or permitted to be taken at any annual or
special meeting of stockholders may be taken without a meeting
of stockholders, without prior notice and without a vote, and
the power of the stockholders to consent in writing to the
taking of any action without a meeting is specifically denied.
Conversions
The Class A Common Stock has no conversion rights. The
Class B Common Stock is convertible into Class A
Common Stock in whole or in part at any time and from time to
time on the basis of one share of Class A Common Stock for
each share of Class B Common Stock. In certain
circumstances certain holders of our Class B Common Stock
will be required to convert their Class B Common Stock to
Class A Common Stock prior to transferring such stock. See
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Beneficial Ownership of Stock.
Dividends
Holders of Class A Common Stock and Class B Common
Stock are entitled to receive dividends equally on a per share
basis if and when such dividends are declared by the Board of
Directors from funds legally available therefor. No dividend may
be declared or paid in cash or property or shares of either
Class A Common Stock or Class B Common Stock unless
the same dividend is paid simultaneously on each share of the
other class of common stock. In the case of any stock dividend,
holders of Class A Common Stock are entitled to receive the
same dividend on a percentage basis (payable in shares of or
securities convertible to shares of Class A Common Stock
and other securities of us or any other person) as holders of
Class B Common Stock receive (payable in shares of or
securities convertible into shares of Class A Common Stock,
shares of or securities convertible into shares of Class B
Common Stock and other securities of us or any other person).
The distribution of shares or other securities of the Company or
any other person to common stockholders is permitted to differ
to the extent that the common stock differs as to voting rights
and rights in connection to certain dividends.
Liquidation
Holders of Class A Common Stock and Class B Common
Stock share with each other on a ratable basis as a single class
in the net assets available for distribution in respect of
Class A Common Stock and Class B Common Stock in the
event of a liquidation.
Other
Terms
Neither the Class A Common Stock nor the Class B
Common Stock may be subdivided, consolidated, reclassified or
otherwise changed, except as expressly provided in our amended
and restated certificate of incorporation, unless the other
class of common stock is subdivided, consolidated, reclassified
or otherwise changed at the same time, in the same proportion
and in the same manner.
In any merger, consolidation or business combination the
consideration to be received per share by holders of either
Class A Common Stock or Class B Common Stock must be
identical to that received by holders of the other class of
common stock, except that in any such transaction in which
shares of capital stock are distributed, such shares may differ
as to voting rights only to the extent that voting rights now
differ between Class A Common Stock and Class B Common
Stock.
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Transfer
Agent
The transfer agent and registrar for the Class A Common
Stock is Wells Fargo Shareowner Services.
Transfer
Restrictions
The Company is the indirect owner of professional sports
franchises in the NBA and the NHL. As a result, ownership and
transfers of our Common Stock are subject to certain
restrictions under the constituent documents of the NBA and the
NHL as well as under consent agreements entered into by the
Company with the NBA and the NHL in connection with their
approval of the Distribution.
Under the NBA arrangements, transfers and ownership of 5% or
more of our Common Stock require the prior approval of the NBA.
So long as the Company is controlled by the Dolan family,
Institutional Investors are permitted to acquire and
own up to 15% of our Class A Common Stock without obtaining
approval of the NBA. For this purpose, an Institutional
Investor is a person or entity that falls within one or
more of the categories of persons listed in
Rule 13d-1(b)(1)(ii)
under the Securities Exchange Act of 1934 (the Exchange
Act):
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A broker or dealer registered under Section 15 of the
Exchange Act;
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A bank as defined in Section 3(a)(6) of the Exchange Act;
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An insurance company as defined in Section 3(a)(19) of the
Exchange Act;
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An investment company registered under Section 8 of the
Investment Company Act of 1940;
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Any person registered as an investment adviser under
Section 203 of the Investment Advisers Act of 1940 or under
the laws of any state;
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An employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
29 U.S.C. 1001
et. seq.
(ERISA) that is
subject to the provisions of ERISA, or any such plan that is not
subject to ERISA that is maintained primarily for the benefit of
the employees of a state or local government or instrumentality,
or an endowment fund; and
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A
non-U.S. institution
that is the functional equivalent of any of the institutions
listed above, so long as the
non-U.S. institution
is subject to a regulatory scheme that is (A) substantially
comparable to the regulatory scheme applicable to the equivalent
U.S. institution and (B) imposed under the laws of
Switzerland, Canada, Australia, Japan, China or any country in
Europe that is part of the G-20 group of nations.
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However, each of the foregoing institutions will only qualify as
an Institutional Investor if the sum of its total assets owned
and under management exceeds $500 million
($100 million in the case of a registered investment
company). An institution that meets these standards is referred
to as an Institutional Investor.
In addition, an Affiliate of an Institutional
Investor will also be deemed to be an Institutional Investor;
provided, that no such Affiliate that is not an Institutional
Investor in its own right can own more than 5% of our
outstanding common stock and no Institutional Investor, together
with its Affiliates, can own more than 15% of our outstanding
Class A Common Stock. For purposes of these transfer
restrictions, an Affiliate means a person that
controls, is controlled by or is under common control with the
institution/investor.
Transfers of our Class B Common Stock are also subject to
restrictions under the NBA rules, subject to certain exceptions
involving transfers of such shares among Dolan family interests.
Prior to any transaction that results in the Dolan family no
longer controlling the Company, we will likely need to negotiate
a new consent agreement with the NBA.
Under the NHL arrangements, transfers and ownership of our
Class A Common Stock are subject to NHL approval only if
they constitute a controlling interest in the New
York Rangers. The NHL has agreed that so long as the Dolan
family has the right to elect a majority of our board of
directors, there are no restrictions on transactions in, or
ownership of, our Class A Common Stock. Transfers of our
Class B Common Stock are subject to restrictions under the
NHL arrangements, subject to certain exceptions involving
transfers of such
185
shares among Dolan family interests. Prior to any transaction
that results in the Dolan family no longer controlling the
Company, we will likely need to negotiate a new consent
agreement with the NHL.
In order to protect the Company and its NBA and NHL franchises
from sanctions that might be imposed by the NBA or the NHL as a
result of violations of these restrictions, our amended and
restated certificate of incorporation provides that at any time
during which the Company owns, directly or indirectly, an
interest in a professional sports franchise, the ownership and
transfer of shares of our Common Stock will be subject to any
applicable restrictions on transfer imposed by the league or
other governing body with respect to such franchise (a
League), which restrictions are described in our
filings (including exhibits) with the SEC. If a transfer of
shares of our Common Stock (including any pledge or creation of
a security interest therein) to a person or the ownership of
shares of our Common Stock by a person requires approval or
other action by a League and such approval or other action has
not been obtained or taken as required, the Company shall have
the right by written notice to the holder to require the holder
to dispose of the shares of Common Stock which triggered the
need for such approval (the excess shares) within
10 days of delivery of such notice (a required
divestiture). If a holder has failed to provide
documentation satisfactory to the Company of the holders
compliance with a required divestiture by the fifth business day
following the end of the 10 day period, then, in addition
to any other remedies the Company may have for such failure to
comply with a required divestiture, the Company shall have the
right, in its sole discretion, to redeem from such holder the
excess shares (mandatory redemption) by providing
written notice of such required divestiture to the holder (a
redemption notice) and mailing a check payable to
the holder in an amount equal to 85% of the fair market value of
the excess shares on the date of the notice. For the purposes of
establishing the fair market value of the excess shares, the
fair market value of a share of our Common Stock will be equal
to the average of the closing sale price (or if no closing sale
price is reported, the last reported sale price) of our Class A
Common Stock on The NASDAQ Stock Market LLC (or if the
Class A Common Stock is not traded on The NASDAQ Stock
Market LLC on any date of determination, the principal
securities exchange on which such stock is listed or quoted)
over the 10 trading day period ending on the second trading day
preceding the redemption notice, or such other amount as
determined in good faith by the Companys board of
directors. A mandatory redemption shall require no action by the
holder of the redeemed shares and the shares shall be deemed
cancelled upon our delivery of payment therefore. The
certificates representing our common stock will contain a legend
with respect to the foregoing provision in our amended and
restated certificate of incorporation.
Preferred
Stock
Under our amended and restated certificate of incorporation, our
Board of Directors is authorized, without further stockholder
action to provide for the issuance of up
to shares
of preferred stock in one or more series. The powers,
designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or
restrictions, including dividend rights, voting rights,
conversion rights, terms of redemption and liquidation
preferences, of the preferred stock of each series will be fixed
or designated by the Board of Directors pursuant to a
certificate of designations. There will be no shares of our
preferred stock outstanding at the time of the Distribution. Any
issuance of preferred stock may adversely affect the rights of
holders of our common stock and may render more difficult
certain unsolicited or hostile attempts to take over the Company.
Certain
Corporate Opportunities and Conflicts
Our amended and restated certificate of incorporation will
recognize that certain directors and officers of the Company
(the Overlap Persons) may serve as directors,
officers, employees, consultants and agents of Cablevision and
its subsidiaries and successors (each of the foregoing is an
Other Entity) and will provide that if a director or
officer of the Company who is an Overlap Person is presented or
offered, or otherwise acquires knowledge of, a potential
transaction or matter that may constitute or present a business
opportunity for the Company or any of its subsidiaries, in which
the Company or any of its subsidiaries could have an interest or
expectancy (any such transaction or matter, and any such actual
or potential business opportunity, a Potential Business
Opportunity), (i) such director or officer will, to
the fullest extent permitted by law, have no duty or obligation
to refrain from referring such Potential Business Opportunity to
any Other Entity and, if such director or officer refers such
Potential Business Opportunity to an Other Entity, such director
or officer
186
shall have no duty or obligation to refer such Potential
Business Opportunity to the Company or to any of its
subsidiaries or to give any notice to the Company or to any of
its subsidiaries regarding such Potential Business Opportunity
(or any matter related thereto), (ii) if such director or
officer refers a Potential Business Opportunity to an Other
Entity, such director or officer will not be liable to the
Company or to any of its subsidiaries, as a director, officer,
stockholder or otherwise, for any failure to refer such
Potential Business Opportunity to the Company, or for referring
such Potential Business Opportunity to any Other Entity, or for
any failure to give any notice to the Company regarding such
Potential Business Opportunity or any matter relating thereto,
(iii) any Other Entity may participate, engage or invest in
any such Potential Business Opportunity notwithstanding that
such Potential Business Opportunity may have been referred to
such Other Entity by an Overlap Person, and (iv) if a
director or officer who is an Overlap Person refers a Potential
Business Opportunity to an Other Entity, then, as between the
Company and such Other Entity, the Company shall not have any
interest, expectancy or right in or to such Potential Business
Opportunity or to receive any income or proceeds derived
therefrom solely as a result of such director or officer having
been presented or offered, or otherwise acquiring knowledge of
such Potential Business Opportunity unless in each case referred
to in clause (i), (ii), (iii) or (iv), all of the following
conditions are satisfied: (A) such Potential Business
Opportunity was expressly presented or offered to the director
or officer of the Company solely in his or her capacity as a
director or officer of the Company; (B) the director or
officer believed that the Company possessed, or would reasonably
be expected to be able to possess, the resources necessary to
exploit such Potential Business Opportunity; and (C) such
opportunity relates exclusively to (x) the business of
owning and operating a regional professional sports programming
service that features the live carriage of games of teams that
compete in the National Hockey League, the National Basketball
Association or Major League Baseball and that is targeted to,
and made available to, multichannel video programming
distributors in the New York, New Jersey and Connecticut
tri-state area, (y) the business of owning and operating a
programming service that is primarily devoted to music
programming and that is made available nationally to
multichannel video programming distributors, or (z) a
theatrical or arena venue with a seating capacity of greater
than 1,000; provided that in the cases of each of clauses (x),
(y) and (z), the Company or any of its subsidiaries is
directly engaged in such business at the time the Potential
Business Opportunity is presented or offered to the director or
officer. In our amended and restated certificate of
incorporation, the Company has renounced to the fullest extent
permitted by law, any interest or expectancy in any Potential
Business Opportunity that is not a Restricted Potential Business
Opportunity. In the event that our Board of Directors declines
to pursue a Restricted Potential Business Opportunity, the
Overlap Persons are free to refer such Restricted Potential
Business Opportunity to an Other Entity.
Our amended and restated certificate of incorporation will
provide that no contract, agreement, arrangement or transaction
(or any amendment, modification or termination thereof) entered
into between the Company
and/or
any
of its subsidiaries, on the one hand, and an Other Entity, on
the other hand, before the Company ceased to be an indirect,
wholly-owned subsidiary of Cablevision shall be void or voidable
or be considered unfair to the Company or any of its
subsidiaries solely because Cablevision or any of its
subsidiaries is a party thereto, or because any directors,
officers or employees of Cablevision or a subsidiary of
Cablevision were present at or participated in any meeting of
the Board of Directors, or a committee thereof, of the Company
or of any subsidiary of the Company, that authorized the
contract, agreement, arrangement or transaction (or any
amendment, modification or termination thereof), or because his,
her or their votes were counted for such purpose. The Company
may from time to time enter into and perform, and cause or
permit any of its subsidiaries to enter into and perform, one or
more contracts, agreements, arrangements or transactions (or
amendments, modifications or supplements thereto) with an Other
Entity. To the fullest extent permitted by law, no such
contract, agreement, arrangement or transaction (nor any such
amendments, modifications or supplements), nor the performance
thereof by the Company or any subsidiary of the Company or an
Other Entity, shall be considered contrary to any fiduciary duty
owed to the Company (or to any subsidiary of the Company, or to
any stockholder of the Company or any of its subsidiaries) by
any director or officer of the Company (or by any director or
officer of any subsidiary of the Company) who is an Overlap
Person. To the fullest extent permitted by law, no director or
officer of the Company or any subsidiary of the Company who is
an Overlap Person thereof shall have or be under any fiduciary
duty to the Company (or to any subsidiary of the Company, or to
any stockholder of the Company or any of its subsidiaries) to
refrain from acting on behalf of the Company or Cablevision, or
any of their respective subsidiaries, in respect of any such
contract, agreement,
187
arrangement or transaction or performing any such contract,
agreement, arrangement or transaction in accordance with its
terms and each such director or officer of the Company or any
subsidiary of the Company who is an Overlap Person shall be
deemed to have acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of the Company, and shall be deemed not to have
breached his or her duties of loyalty to the Company (or to any
subsidiary of the Company, or to any stockholders of the Company
or any of its subsidiaries) and not to have derived an improper
personal benefit therefrom.
No amendment, repeal or adoption of any provision inconsistent
with the foregoing provisions will have any effect upon
(a) any agreement between the Company or a subsidiary
thereof and any Other Entity, that was entered into before the
time of such amendment or repeal or adoption of any such
inconsistent provision (the Amendment Time), or any
transaction entered into in connection with the performance of
any such agreement, whether such transaction is entered into
before or after the Amendment Time, (b) any transaction
entered into between the Company or a subsidiary thereof and any
Other Entity, before the Amendment Time, (c) the allocation
of any business opportunity between the Company or any
subsidiary thereof and any Other Entity before the Amendment
Time, or (d) any duty or obligation owed by any director or
officer of the Company or any subsidiary of the Company (or the
absence of any such duty or obligation) with respect to any
Potential Business Opportunity which such director or officer
was offered, or of which such director or officer otherwise
became aware, before the Amendment Time (regardless of whether
any proceeding relating to any of the above is commenced before
or after the Amendment Time).
Section 203
of the Delaware General Corporation Law
Section 203 of the General Corporation Law of the State of
Delaware prohibits certain transactions between a Delaware
corporation and an interested stockholder. An
interested stockholder for this purpose is a
stockholder who is directly or indirectly a beneficial owner of
15% or more of the aggregate voting power of a Delaware
corporation. This provision prohibits certain business
combinations between an interested stockholder and a corporation
for a period of three years after the date on which the
stockholder became an interested stockholder, unless:
(1) prior to the time that a stockholder became an
interested stockholder, either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder is approved by the Companys Board
of Directors, (2) the interested stockholder acquired at
least 85% of the aggregate voting power of the Company in the
transaction in which the stockholder became an interested
stockholder, or (3) the business combination is approved by
a majority of the Board of Directors and the affirmative vote of
the holders of two-thirds of the aggregate voting power not
owned by the interested stockholder at or subsequent to the time
that the stockholder became an interested stockholder. These
restrictions do not apply if, among other things, the
Companys certificate of incorporation contains a provision
expressly electing not to be governed by Section 203. Our
certificate of incorporation will not contain such an election.
However, we expect our Board of Directors to exercise its right
under Section 203 to approve the acquisition of our common
stock in the Distribution by members of the Dolan family group.
This will have the effect of making Section 203
inapplicable to transactions between the Company and members of
the Dolan family group.
Limitation
on Personal Liability
We have provided, consistent with the Delaware General
Corporation Law, in our certificate of incorporation that a
director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for:
|
|
|
|
|
any breach of the directors duty of loyalty to us or our
stockholders;
|
|
|
|
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
|
|
|
|
payments of unlawful dividends or unlawful stock repurchases or
redemptions; or
|
|
|
|
any transaction from which the director derived an improper
personal benefit.
|
Neither the amendment nor repeal of such provision will
eliminate or reduce the effect of such provision in respect of
any matter occurring, or any cause of action, suit or claim
that, but for such provision, would accrue or arise prior to
such amendment or repeal.
188
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law
provides that a corporation may indemnify any current or former
director, officer or employee or other individual against
expenses, judgments, fines and amounts paid in settlement in
connection with civil, criminal, administrative or investigative
actions or proceedings, other than a derivative action by or in
the right of the corporation, if the director, officer, employee
or other individual acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, if he or she had no reasonable cause to
believe his or her conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that
indemnification only extends to expenses incurred in connection
with the defense or settlement of such actions, and the statute
requires court approval before there can be any indemnification
where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a
corporations by-laws, disinterested director vote,
stockholder vote, agreement or otherwise.
Our certificate of incorporation, will provide that each person
who was or is made or is threatened to be made a party to any
action or proceeding by reason of the fact that such person, or
a person of whom such person is the legal representative, is or
was a director or officer of us or is or was serving at our
request as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, will be indemnified and held harmless by us to the
fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended. Such rights
are not exclusive of any other right which any person may have
or thereafter acquire under any statute, provision of the
certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise. Our
certificate of incorporation will also specifically authorize us
to maintain insurance and to grant similar indemnification
rights to our employees or agents.
The Distribution Agreement between us and Cablevision provides
for indemnification by us of Cablevision and its directors,
officers and employees and by Cablevision of us and our
directors, officers and employees for some liabilities,
including liabilities under the Securities Act and the
Securities Exchange Act of 1934. The amount of these indemnity
obligations is unlimited.
189
AVAILABLE
INFORMATION
We have filed with the SEC a registration statement under the
Exchange Act and the rules and regulations promulgated under the
Exchange Act with respect to the shares of our Class A
Common Stock being distributed to Cablevision stockholders in
the Distribution. This information statement does not contain
all of the information set forth in the registration statement
and its exhibits and schedules, to which reference is made
hereby. Statements in this information statement as to the
contents of any contract, agreement or other document are
qualified in all respects by reference to such contract,
agreement or document. If we have filed any of those contracts,
agreements or other documents as an exhibit to the registration
statement, you should read the full text of such contract,
agreement or document for a more complete understanding of the
document or matter involved. For further information with
respect to us and our Class A Common Stock, we refer you to
the registration statement, including the exhibits and the
schedules filed as a part of it.
We intend to furnish the holders of our Class A Common
Stock with annual reports and proxy statements containing
financial statements audited by an independent public accounting
firm and file with the SEC quarterly reports for the first three
quarters of each fiscal year containing interim unaudited
financial information. We also intend to furnish other reports
as we may determine or as required by law.
The registration statement of which this information statement
forms a part and its exhibits and schedules, and other documents
which we file with the SEC can be inspected and copied at, and
copies can be obtained from, the SECs public reference
room. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. In
addition, our SEC filings are available to the public at the
SECs web site at
http://www.sec.gov.
You can also obtain reports, proxy statements and other
information about us at NASDAQs web site at
http://www.nasdaq.com.
Information that we file with the SEC after the date of this
information statement may supersede the information in this
information statement. You may read these reports, proxy
statements and other information and obtain copies of such
documents and information as described above.
No person is authorized to give any information or to make any
representations other than those contained in this information
statement, and, if given or made, such information or
representations must not be relied upon as having been
authorized. Neither the delivery of this information statement
nor any distribution of securities made hereunder shall imply
that there has been no change in the information set forth or in
our affairs since the date hereof.
190
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Page
|
|
Combined Financial Statements as of December 31, 2008
and 2007 and for the three years ended December 31, 2008,
2007 and 2006
|
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|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
F-2
|
|
Combined Balance Sheets as of December 31, 2008 and 2007
|
|
|
F-3
|
|
Combined Statements of Operations for the years ended
December 31, 2008, 2007 and 2006
|
|
|
F-4
|
|
Combined Statements of Group Equity and Comprehensive Income
(Loss) for the years ended December 31, 2008, 2007 and 2006
|
|
|
F-5
|
|
Combined Statements of Cash Flows for the years ended
December 31, 2008, 2007 and 2006
|
|
|
F-6
|
|
Notes to Combined Financial Statements
|
|
|
F-7
|
|
Schedule II Valuation and Qualifying Accounts
|
|
|
F-44
|
|
|
|
|
|
|
Condensed Combined Financial Statements as of
September 30, 2009 (Unaudited) and December 31, 2008
and for the nine months ended September 30, 2009 and 2008
(Unaudited)
|
|
|
|
|
Condensed Combined Balance Sheets as of September 30, 2009
(Unaudited) and December 31, 2008
|
|
|
F-45
|
|
Condensed Combined Statements of Operations for the nine months
ended September 30, 2009 and 2008 (Unaudited)
|
|
|
F-46
|
|
Condensed Combined Statement of Group Equity and Comprehensive
Income (Loss) for the nine months ended September 30, 2009
(Unaudited)
|
|
|
F-47
|
|
Condensed Combined Statements of Cash Flows for the nine months
ended September 30, 2009 and 2008 (Unaudited)
|
|
|
F-48
|
|
Notes to Condensed Combined Financial Statements (Unaudited)
|
|
|
F-49
|
|
F-1
WHEN THE TRANSACTION REFERRED TO IN NOTE 1 OF THE NOTES
TO THE COMBINED FINANCIAL STATEMENTS HAS BEEN CONSUMMATED, WE
WILL BE IN A POSITION TO RENDER THE FOLLOWING REPORT.
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors of
Madison Square Garden, Inc.:
We have audited the accompanying combined balance sheets of
Madison Square Garden, Inc. (a combination of certain businesses
and assets of Cablevision Systems Corporation) as of
December 31, 2008 and 2007, and the related combined
statements of operations, combined group equity and
comprehensive income (loss), and cash flows for each of the
years in the three-year period ended December 31, 2008. In
connection with our audits of the combined financial statements,
we also have audited the financial statement schedule (as listed
in the index to Item 15). These combined financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the combined
financial position of Madison Square Garden, Inc. as of
December 31, 2008 and 2007, and the combined results of its
operations and cash flows for each of the years in the
three-year period ended December 31, 2008, in conformity
with U.S. generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when
considered in relation to the basic combined financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
New York, New York
,
2010
F-2
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
COMBINED BALANCE SHEETS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
70,726
|
|
|
$
|
155,381
|
|
Restricted cash
|
|
|
5,845
|
|
|
|
5,576
|
|
Accounts receivable (less allowance for doubtful accounts of
$2,320 and $3,164)
|
|
|
133,632
|
|
|
|
139,004
|
|
Net receivable due from Cablevision
|
|
|
8,115
|
|
|
|
11,022
|
|
Prepaid expenses
|
|
|
36,088
|
|
|
|
35,120
|
|
Other current assets
|
|
|
22,423
|
|
|
|
12,028
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
276,829
|
|
|
|
358,131
|
|
Advances due from Cablevision
|
|
|
190,000
|
|
|
|
130,000
|
|
Property and equipment, net of accumulated depreciation of
$344,778 and $304,996
|
|
|
324,506
|
|
|
|
312,155
|
|
Other assets
|
|
|
140,842
|
|
|
|
89,416
|
|
Amortizable intangible assets, net of accumulated amortization
of $106,009 and $88,110
|
|
|
167,576
|
|
|
|
187,031
|
|
Indefinite-lived intangible assets
|
|
|
158,096
|
|
|
|
150,096
|
|
Goodwill
|
|
|
742,492
|
|
|
|
742,492
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,000,341
|
|
|
$
|
1,969,321
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND COMBINED GROUP EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
7,893
|
|
|
$
|
20,610
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Employee related costs
|
|
|
74,050
|
|
|
|
62,582
|
|
Other expenses
|
|
|
112,400
|
|
|
|
74,891
|
|
Deferred revenue
|
|
|
122,436
|
|
|
|
140,409
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
316,779
|
|
|
|
298,492
|
|
Defined benefit and other postretirement obligations
|
|
|
27,476
|
|
|
|
20,497
|
|
Other employee related costs
|
|
|
51,120
|
|
|
|
43,086
|
|
Other liabilities
|
|
|
60,496
|
|
|
|
47,339
|
|
Deferred tax liability
|
|
|
471,847
|
|
|
|
487,591
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
927,718
|
|
|
|
897,005
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Combined Group Equity:
|
|
|
|
|
|
|
|
|
Paid-in capital
|
|
|
1,027,726
|
|
|
|
1,016,194
|
|
Retained earnings
|
|
|
50,224
|
|
|
|
55,160
|
|
Accumulated other comprehensive income (loss)
|
|
|
(5,327
|
)
|
|
|
962
|
|
|
|
|
|
|
|
|
|
|
Combined group equity
|
|
|
1,072,623
|
|
|
|
1,072,316
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,000,341
|
|
|
$
|
1,969,321
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to combined financial statements.
F-3
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenues, net (including revenues, net from Cablevision of
$121,059, $105,035 and $94,911)
|
|
$
|
1,042,958
|
|
|
$
|
1,002,182
|
|
|
$
|
905,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below and including expenses from Cablevision of $32,517,
$28,674 and $23,505)
|
|
|
724,904
|
|
|
|
635,108
|
|
|
|
637,090
|
|
Selling, general and administrative (including expenses from
Cablevision of $65,417, $67,536 and $63,105)
|
|
|
270,065
|
|
|
|
243,196
|
|
|
|
222,962
|
|
Gain on curtailment of pension plans
|
|
|
|
|
|
|
(15,873
|
)
|
|
|
|
|
Restructuring expense
|
|
|
|
|
|
|
221
|
|
|
|
143
|
|
Depreciation and amortization
|
|
|
66,231
|
|
|
|
62,223
|
|
|
|
64,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,061,200
|
|
|
|
924,875
|
|
|
|
925,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(18,242
|
)
|
|
|
77,307
|
|
|
|
(19,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5,193
|
|
|
|
15,217
|
|
|
|
11,231
|
|
Interest expense
|
|
|
(3,274
|
)
|
|
|
(3,610
|
)
|
|
|
(5,019
|
)
|
Miscellaneous
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
(250
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,919
|
|
|
|
10,607
|
|
|
|
5,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
|
(16,323
|
)
|
|
|
87,914
|
|
|
|
(14,032
|
)
|
Income tax benefit (expense)
|
|
|
11,387
|
|
|
|
(45,031
|
)
|
|
|
1,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of a change in accounting
principle
|
|
|
(4,936
|
)
|
|
|
42,883
|
|
|
|
(12,859
|
)
|
Cumulative effect of a change in accounting principle, net of
taxes
|
|
|
|
|
|
|
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,936
|
)
|
|
$
|
42,883
|
|
|
$
|
(13,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to combined financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
Balance at January 1, 2006
|
|
$
|
965,764
|
|
|
$
|
25,374
|
|
|
$
|
(327
|
)
|
|
$
|
990,811
|
|
Net loss
|
|
|
|
|
|
|
(13,097
|
)
|
|
|
|
|
|
|
(13,097
|
)
|
Minimum pension liability adjustment, net of taxes
|
|
|
|
|
|
|
|
|
|
|
224
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,873
|
)
|
Adjustment related to initial application of ASC Topic 715,
net of taxes
|
|
|
|
|
|
|
|
|
|
|
(6,904
|
)
|
|
|
(6,904
|
)
|
Deemed capital contribution related to the allocation of
Cablevision share-based compensation expense
|
|
|
16,220
|
|
|
|
|
|
|
|
|
|
|
|
16,220
|
|
Deemed capital distribution related to income taxes
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
(191
|
)
|
Capital contribution
|
|
|
12,013
|
|
|
|
|
|
|
|
|
|
|
|
12,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
993,806
|
|
|
|
12,277
|
|
|
|
(7,007
|
)
|
|
|
999,076
|
|
Net income
|
|
|
|
|
|
|
42,883
|
|
|
|
|
|
|
|
42,883
|
|
Pension and postretirement plan liability adjustments, net of
taxes
|
|
|
|
|
|
|
|
|
|
|
7,969
|
|
|
|
7,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,852
|
|
Deemed capital contribution related to the allocation of
Cablevision share-based compensation expense
|
|
|
11,974
|
|
|
|
|
|
|
|
|
|
|
|
11,974
|
|
Deemed capital contribution related to income taxes
|
|
|
453
|
|
|
|
|
|
|
|
|
|
|
|
453
|
|
Capital contribution
|
|
|
9,961
|
|
|
|
|
|
|
|
|
|
|
|
9,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
1,016,194
|
|
|
|
55,160
|
|
|
|
962
|
|
|
|
1,072,316
|
|
Net loss
|
|
|
|
|
|
|
(4,936
|
)
|
|
|
|
|
|
|
(4,936
|
)
|
Pension and postretirement plan liability adjustments, net of
taxes
|
|
|
|
|
|
|
|
|
|
|
(6,289
|
)
|
|
|
(6,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,225
|
)
|
Deemed capital distribution, net
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
Deemed capital contribution related to the allocation of
Cablevision share-based compensation expense
|
|
|
12,389
|
|
|
|
|
|
|
|
|
|
|
|
12,389
|
|
Deemed capital distribution related to income taxes
|
|
|
(843
|
)
|
|
|
|
|
|
|
|
|
|
|
(843
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
1,027,726
|
|
|
$
|
50,224
|
|
|
$
|
(5,327
|
)
|
|
$
|
1,072,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to combined financial statements.
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,936
|
)
|
|
$
|
42,883
|
|
|
$
|
(13,097
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
66,231
|
|
|
|
62,223
|
|
|
|
64,995
|
|
Cablevision share-based compensation expense allocations, net
|
|
|
12,389
|
|
|
|
11,974
|
|
|
|
15,817
|
|
Cumulative effect of a change in accounting principle, net of tax
|
|
|
|
|
|
|
|
|
|
|
238
|
|
Gain on curtailment of pension plans
|
|
|
|
|
|
|
(15,873
|
)
|
|
|
|
|
Amortization of purchase accounting liability related to
unfavorable contracts
|
|
|
(2,276
|
)
|
|
|
(2,471
|
)
|
|
|
(8,736
|
)
|
Loss on equity investment
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
Deemed capital contribution (distribution) related to income
taxes
|
|
|
(843
|
)
|
|
|
453
|
|
|
|
(191
|
)
|
Provision for doubtful accounts
|
|
|
2
|
|
|
|
1,187
|
|
|
|
408
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Account receivable, net
|
|
|
5,168
|
|
|
|
2,437
|
|
|
|
(1,680
|
)
|
Net receivable due from Cablevision
|
|
|
3,051
|
|
|
|
(2,184
|
)
|
|
|
(20,871
|
)
|
Prepaid expenses and other assets
|
|
|
(25,426
|
)
|
|
|
(19,252
|
)
|
|
|
1,510
|
|
Accounts payable
|
|
|
(12,717
|
)
|
|
|
7,479
|
|
|
|
4,009
|
|
Accrued and other liabilities
|
|
|
58,163
|
|
|
|
(49,111
|
)
|
|
|
2,585
|
|
Deferred revenue
|
|
|
(17,973
|
)
|
|
|
18,609
|
|
|
|
(7,640
|
)
|
Deferred tax liability
|
|
|
(11,387
|
)
|
|
|
43,468
|
|
|
|
(1,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
69,446
|
|
|
|
102,822
|
|
|
|
36,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(55,192
|
)
|
|
|
(30,107
|
)
|
|
|
(23,762
|
)
|
Proceeds from sale of fixed assets
|
|
|
|
|
|
|
11
|
|
|
|
5,172
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
(2,000
|
)
|
Payments for acquisition of assets or equity interests
|
|
|
(37,632
|
)
|
|
|
(14,425
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(92,824
|
)
|
|
|
(44,521
|
)
|
|
|
(21,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances to Cablevision
|
|
|
(60,000
|
)
|
|
|
(130,000
|
)
|
|
|
|
|
Repayment of advances to Cablevision
|
|
|
|
|
|
|
|
|
|
|
21,000
|
|
Principal payments on capital lease obligations
|
|
|
(1,101
|
)
|
|
|
(906
|
)
|
|
|
(815
|
)
|
Capital contributions from (distributions to) Cablevision
|
|
|
(176
|
)
|
|
|
9,961
|
|
|
|
12,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(61,277
|
)
|
|
|
(120,945
|
)
|
|
|
32,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(84,655
|
)
|
|
|
(62,644
|
)
|
|
|
46,759
|
|
Cash and cash equivalents at beginning of year
|
|
|
155,381
|
|
|
|
218,025
|
|
|
|
171,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
70,726
|
|
|
$
|
155,381
|
|
|
$
|
218,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to combined financial statements.
F-6
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
(Dollars in thousands, except per share amounts)
|
|
Note 1.
|
Nature of
Operations and Basis of Presentation
|
Madison Square Garden, Inc. and its subsidiaries (the
Company or Madison Square Garden)
represents a combination of certain media, entertainment and
sports businesses and assets owned and operated as integral
parts of Cablevision Systems Corporation (Cablevision Systems
Corporation and its subsidiaries are referred to as
Cablevision), consisting of the following reportable
segments:
|
|
|
|
|
MSG Media.
MSG Media produces and develops
content for multiple distribution platforms, including content
originating from the Companys venues. This business
consists of programming networks and interactive offerings,
including the MSG Networks (MSG network, MSG Plus, MSG HD and
MSG Plus HD) and the Fuse Networks (Fuse and Fuse HD). The MSG
Networks are home to seven professional sports teams: the New
York Knicks, New York Rangers, New York Liberty, New York
Islanders, New Jersey Devils, Buffalo Sabres and New York Red
Bulls, as well as to the Companys other programming. Fuse
is a multi-platform music network that focuses on music-related
programming. Also included in MSG Media is an interactive
business, which includes a group of targeted websites (including
msg.com, thegarden.com, radiocity.com, nyknicks.com,
newyorkrangers.com and fuse.tv) and wireless, video on demand
and digital platforms for all of the Companys properties.
|
|
|
|
MSG Entertainment.
MSG Entertainment creates,
produces
and/or
presents a variety of live productions, including the
Radio
City Christmas Spectacular
, featuring the Radio City
Rockettes, and Cirque du Soleils
Wintuk
. MSG
Entertainment also presents or hosts other live entertainment
events, such as concerts, family shows, special events and
theatrical productions in the Companys venues.
|
|
|
|
MSG Sports.
MSG Sports owns and operates
sports franchises, including the New York Knicks of the National
Basketball Association (NBA), the New York Rangers
of the National Hockey League (NHL), the New York
Liberty of the Womens National Basketball Association
(WNBA), and the Hartford Wolf Pack of the American
Hockey League (AHL), which is the primary player
development team for the Rangers. The Knicks, Rangers and
Liberty play their home games at the arena in the Madison Square
Garden complex (the Arena or The
Garden). MSG Sports also features other live sporting
events.
|
The Company conducts a significant portion of its operations at
venues which are either owned or operated by it under long-term
leases. The Company owns the Madison Square Garden complex in
New York City, which includes the Arena and a theater (The
Theater at Madison Square Garden), and The Chicago Theatre
in Chicago. It leases Radio City Music Hall and the Beacon
Theatre in New York City. The Company also has a booking
agreement with respect to the Wang Theatre in Boston.
On July 29, 2009, Cablevisions board of directors
authorized Cablevisions management to take all actions
necessary or appropriate to pursue a transaction in which
Cablevision will transfer to the Company the Cablevision
subsidiaries which own, directly or indirectly, all of the
partnership interests in Madison Square Garden, L.P. (MSG
L.P.), the subsidiary through which Cablevision conducts
the businesses described above, and subsequently spin-off the
Company as a publicly held entity (the Distribution)
subject, among other things, to final Board approval of the
Distribution. Immediately prior to the Distribution, the Company
will be an indirect wholly-owned subsidiary of Cablevision. The
Company will own these businesses and assets and will become a
public company on the date of the Distribution. Holders of
record of Cablevision NY Group Class A Common Stock as of
the close of business on the record date for the Distribution
will receive one share of Madison Square Garden Class A
Common Stock for each shares
of Cablevision NY Group Class A Common Stock held. Holders
of record of Cablevision NY Group Class B Common Stock as
of the close of business on the record date will receive one
share of Madison Square Garden Class B Common Stock for
each shares of Cablevision NY
Group Class B Common Stock held.
F-7
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
|
|
Note 2.
|
Summary
of Significant Accounting Policies
|
Principles
of Combination
These combined financial statements were prepared in accordance
with generally accepted accounting principles in the United
States of America (GAAP), and have been derived from
the consolidated financial statements and accounting records of
Cablevision. The accompanying combined financial statements
reflect the assets, liabilities, revenues and expenses of the
Company as if it were a separate entity for all periods
presented.
All significant intercompany transactions and balances have been
eliminated in combination.
Revenue
Recognition
MSG
Media
The Companys MSG Media business receives affiliation fees
from cable television system, direct broadcast satellite and
other operators that carry the Companys programming
services. The programming service is delivered throughout the
term of the agreements and the Company recognizes this revenue
in the period that the programming service is provided. It also
earns advertising revenues, which are recognized when the
commercials are aired.
In certain advertising sales arrangements, the Companys
MSG Media business guarantees specified viewer ratings for their
programming. For these types of transactions, a portion of such
revenue is deferred if the guaranteed viewer ratings are not met
and is subsequently recognized either when the Company provides
the required additional advertising time, the guarantee
obligation contractually expires or additional performance
requirements become remote.
MSG
Entertainment
Event-related revenues from the sale of tickets, sponsorships,
food, beverage and merchandise, and rental income are recognized
when the event occurs. Revenues collected in advance of an event
are recorded as deferred revenue until the event occurs.
Revenues from the sale of advertising in the form of signage and
sponsorships, which are not related to any specific event, are
recorded as deferred revenue and are recognized ratably over the
period of benefit of the respective agreements.
Revenues from the rental of The Gardens luxury suites are
recorded as deferred revenue and recognized ratably over the
period of benefit of the respective agreements for the benefit
of the Companys MSG Entertainment segment.
MSG
Sports
The Knicks, Rangers and Liberty derive revenues principally from
ticket sales and league-wide distributions of national
television rights fees and royalties, which are recognized over
the respective teams season. Event-related revenues from
other live sporting events, including the sale of tickets,
sponsorships, food and merchandise, and rental income are
recognized as the event occurs. Revenues collected in advance of
an event are recorded as deferred revenue until earned.
F-8
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Revenues from the sale of advertising in the form of signage and
sponsorships, which are not related to any specific event, are
recorded as deferred revenue and are recognized ratably over the
period of benefit of the respective agreements.
Revenues from the rental of The Gardens luxury suites are
recorded as deferred revenue and recognized ratably over the
period of benefit of the respective agreements for the benefit
of the Companys MSG Sports segment.
Multiple
Element Transactions
The Company has multiple-element transactions, primarily
involving advertising sales including sponsorship, signage and
the sale of commercial time during programming on the
Companys networks. In such multiple-element arrangements
there generally is objective and reliable evidence of fair value
for all elements of accounting derived from historical or other
comparable cash transactions and the arrangement consideration
is allocated to the separate elements of accounting based on
relative fair values.
Technical
and Operating Expenses
Costs of revenue related to sales of services including, but not
limited to, contractual compensation expense pursuant to
employment agreements with professional sports teams personnel,
luxury tax assessed by the NBA, revenue sharing costs assessed
by the NHL, show costs related to the presentation and
production of our entertainment events, network programming and
production costs, venue rental expense and operating expense are
classified as technical and operating expenses in the
accompanying combined statements of operations.
Player
Costs and League Assessments
Costs incurred to acquire player contracts, including signing
bonuses, are capitalized as deferred costs and amortized over
the applicable NBA or NHL regular season (for the NBA, November
through April and for the NHL, October through April) on a
straight-line basis over the fixed contract period of the
respective player. Player salaries are also expensed over the
applicable NBA, NHL or WNBA regular season on a straight-line
basis and are classified in technical and operating expense. In
instances where a player sustains what is deemed to be a
season-ending or career-ending injury, a provision is recorded,
when that determination can be reasonably made, for the
remainder of the players seasonal or contractual salary,
together with any associated luxury tax, net of any anticipated
insurance recoveries. See Note 5 for further discussion of
significant team personnel provisions. When player contracts are
assigned or terminated, any remaining unamortized signing
bonuses are expensed to current operations.
The NBA and NHL each have collective bargaining agreements
(CBA) with the respective leagues players
association, which the Company is subject to. The NBA CBA
contains a salary cap and also provides that players receive a
designated percentage of league-wide revenue. Throughout the NBA
season, the leagues teams withhold a portion of each
players salary and contribute the withheld amounts to an
escrow account. To the extent that aggregate player compensation
exceeds the designated percentage of league-wide revenue, some
or all of such escrowed amounts are distributed to all NBA teams
following the end of the season. The NBA CBA also provides for a
luxury tax that is applicable to all teams in the league with
aggregate player salaries exceeding a threshold that is set
prior to each season. Throughout the NBA season, the Company
recognizes the estimated amount it will receive from the
players escrow account each reporting period. The NBA also
has a revenue assistance program pursuant to which the Company
is required to contribute an amount for the benefit of other
teams in the league. The Company recognizes the net estimated
amount associated with luxury tax, anticipated receipt of any
player escrow and the cost of the revenue assistance
F-9
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
program on a straight-line basis over the NBA regular season as
a component of technical and operating expense in the
Companys combined statement of operations.
The NHL has a revenue sharing plan, under which the top ten
revenue-generating teams are required to contribute a portion of
their preseason and regular season revenues to a pool for
distribution to certain lower revenue generating teams in the
NHL. NHL teams that participate in the playoffs make additional
contributions to this program. The Company recognizes the amount
of its estimated revenue sharing plan contributions associated
with the preseason and regular season on a straight-line basis
over the applicable NHL season as a component of technical and
operating expense in the Companys combined statement of
operations. In years when the Rangers participate in the
playoffs, the Company recognizes its estimate of the playoff
revenue sharing contribution in the periods when the playoffs
occur. The NHL CBA contains a salary cap, and also provides that
players receive a designated percentage of league-wide revenues.
Throughout the NHL season, the leagues teams withhold a
portion of each players salary and contribute the withheld
amounts to an escrow account. To the extent that aggregate
player compensation exceeds the designated percentage of
league-wide revenues, certain of such escrowed amounts
contributed are paid to certain lower-revenue and lower-payroll
generating teams pursuant to the revenue sharing plan, and
following the end of the season any remaining amounts are
distributed equally to all NHL teams. The Company recognizes the
amount it estimates that it will receive from the players
escrow account each reporting period as an offset to technical
and operating expense in the Companys combined statement
of operations.
As members of the NBA and NHL, the Knicks and Rangers,
respectively, are subject to annual league assessments. The
governing bodies of each league determine the amount of each
seasons league assessments that are required from each
member team. The Company accrues its teams estimated
league assessments on a straight-line basis over the applicable
NBA or NHL season.
Programming
Rights
For the Companys regional sports networks, included in the
MSG Media segment, rights acquired under license agreements to
telecast various sporting events and other programming for
exhibition on these networks are expensed on a straight-line
basis to technical and operating expense over the term of the
applicable contract or license period.
For the Companys Fuse programming network, included in the
MSG Media segment, rights to programming acquired under license
agreements along with the related obligations are recorded at
the contract value when a license agreement is executed, unless
there is uncertainty with respect to either cost, acceptability
or availability, then the earlier of when the uncertainty is
resolved, or when the license period has begun. Costs are
amortized to technical and operating expense on a straight-line
basis over the respective license periods. The Company
periodically reviews the programming usefulness of its program
rights and if it is determined that the programming has no
future usefulness and will no longer be exploited, an impairment
of the portion of the unamortized cost of the license agreement
is recorded in technical and operating expense.
Certain owned original programming is produced for the
Companys networks by independent production companies.
Owned original programming costs are expensed as incurred.
Advertising
Expenses
Advertising costs are charged to expense when incurred. Total
advertising costs classified in technical and operating expense
and selling, general and administrative expense were $44,545,
$35,110 and $26,694 for the years ended December 31, 2008,
2007 and 2006, respectively.
F-10
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Income
Taxes
The Company operated as a partnership during the periods
presented. However, the income tax expense or benefit and
deferred tax liability presented are determined as if Madison
Square Garden, Inc. had owned all of the partnership interests
in MSG L.P. for all periods presented notwithstanding that the
contribution of such interests in MSG L.P. had not yet occurred.
As such, the Company measures its deferred tax liability with
regard to MSG L.P. based on the difference between the tax basis
and the carrying amount for financial reporting purposes; this
is commonly referred to as the outside basis difference. The
Companys provision for income taxes is based on current
period income and changes in deferred tax assets and
liabilities. Deferred tax assets are subject to an ongoing
assessment of realizability. The Company has not recorded any
unrecognized tax benefit for uncertain tax positions. The
Companys policy is to reflect interest and penalties
associated with uncertain tax positions as a component of income
tax expense.
The income tax expense or benefit presented in the combined
statements of operations is based upon the taxable income of the
Company on a separate tax return basis. Any differences between
the historical current tax liability and the current tax
liability determined on a separate tax return basis have been
reflected as deemed capital contributions or distributions.
Share-Based
Compensation
Cablevision charges the Company expenses or benefits related to
its various employee stock plans. Cablevision records
share-based compensation expense during the period based on the
fair value of the portion of share-based payment awards that are
ultimately expected to vest. Cablevision uses the Black-Scholes
valuation model in determining the fair value of stock options
and stock appreciation rights and uses the closing price on the
date of grant for restricted shares. For options and performance
based option awards and stock appreciation rights granted prior
to December 31, 2005, Cablevision recognizes compensation
expense using the accelerated attribution method. For options
and performance based option awards granted after
January 1, 2006, Cablevision recognizes compensation
expense based on the estimated grant date fair value using the
Black-Scholes valuation model using a straight-line amortization
method. For restricted shares, Cablevision recognizes
compensation expense using a straight-line amortization method,
based on the grant date price of Cablevision NY Group
Class A Common Stock over the vesting period. Restricted
stock units granted to Cablevisions non-employee directors
are 100% vested and fully expensed on the grant date. For stock
appreciation rights, Cablevision recognizes compensation expense
based on the estimated fair value at each reporting period using
the Black-Scholes valuation model. As the obligations related to
the grants for equity classified and liability classified awards
under the Cablevision employee stock plans are funded by
Cablevision, the allocation to the Company of its proportionate
share of the related expenses is reflected as a deemed capital
contribution in the accompanying combined financial statements
of the Company. Refer to Note 12 for further discussion on
Cablevisions Equity Plans.
Cumulative
Effect of a Change in Accounting Principle
In connection with Cablevisions adoption of the guidance
now codified under Accounting Standards Codification
(ASC) Topic 718, Compensation Stock
Compensation, on January 1, 2006, the Company recorded an
allocated charge of $238 from Cablevision as a cumulative effect
of a change in accounting principle, net of taxes of $(165), in
the Companys combined statement of operations for the year
ended December 31, 2006.
F-11
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Cash
and Cash Equivalents
The Company considers the balance of its investment in funds
that substantially hold securities that mature within three
months or less from the date the fund purchases these securities
to be cash equivalents. The carrying amount of cash and cash
equivalents either approximates fair value due to the short-term
maturity of these instruments or are at fair value.
Restricted
Cash
Pursuant to the NHL CBA, certain amounts have been withheld from
player salaries and deposited in an escrow account which is in
the name of the Company. The escrow funds will be distributed at
the end of the season to the players and NHL teams based on the
provisions of the NHL CBA. (See Player Costs and League
Assessments above). The Company has a letter of credit
agreement with a lending institution which requires that a cash
balance, held under the Companys name and custody, be
maintained in an amount equal to outstanding letters of credit.
The carrying amount of restricted cash approximates fair value
due to the short-term maturity of these instruments. Changes in
restricted cash are primarily reflected as a change in cash
flows from operations as the underlying restricted cash
generally relates to operations.
Long-Lived
and Indefinite-Lived Assets
Property and equipment is stated at cost and includes purchase
accounting adjustments as a result of certain historical
transactions. Equipment under capital leases is recorded at the
present value of the total minimum lease payments. Depreciation
is calculated on the straight-line basis over the estimated
useful lives of the assets or, with respect to equipment under
capital leases and leasehold improvements, amortized over the
shorter of the lease term or the assets estimated useful
lives.
Construction in progress is primarily related to design and
development costs associated with the Companys planned
renovation of the Arena (Arena Renovation).
Depreciation of construction in progress costs will begin when
elements of the Arena Renovation are placed into service.
Identifiable intangible assets with definite useful lives are
amortized on a straight-line basis over their respective
estimated useful lives. Goodwill and identifiable intangible
assets that have indefinite useful lives are not amortized.
Impairment
of Long-Lived and Indefinite-Lived Assets
The Companys long-lived and indefinite-lived assets at
December 31, 2008 include goodwill of $742,492, other
intangible assets, net of $325,672 ($158,096 of which are
identifiable indefinite-lived intangibles), and $324,506 of
property and equipment, net. These assets accounted for
approximately 70% of the Companys combined total assets as
of December 31, 2008.
For long-lived assets, including intangible assets subject to
amortization, the Company evaluates assets for impairment
whenever events or circumstances indicate that the carrying
amount of an asset may not be recoverable. If the undiscounted
cash flows from a group of assets being evaluated is less than
the carrying value of that group of assets, the fair value of
the asset group is determined and the carrying value of the
asset group is written down to fair value.
Goodwill and identifiable indefinite-lived intangible assets,
which represent the Companys various trademarks and sports
franchise intangibles, are tested annually for impairment during
the first quarter and at any time upon the occurrence of certain
events or substantive changes in circumstances.
F-12
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
The impairment test for identifiable indefinite-lived intangible
assets consists of a comparison of the estimated fair value of
the intangible asset with its carrying value. If the carrying
value of the intangible asset exceeds its fair value, an
impairment loss is recognized in an amount equal to that excess.
The Companys identifiable indefinite-lived intangible
assets consist of sports franchises included in the MSG Sports
segment of $96,215 and Radio City and The Chicago Theatre
related trademarks of $53,881 and $8,000, respectively, included
in the MSG Entertainment segment.
The impairment test for goodwill is a two-step process. The
first step of the goodwill impairment test is used to identify
potential impairment by comparing the fair value of a reporting
unit with its carrying amount, including goodwill. If the
carrying amount of a reporting unit exceeds its fair value, the
second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. The second step
of the goodwill impairment test compares the implied fair value
of the reporting units goodwill with the carrying amount
of that goodwill. If the carrying amount of the reporting
units goodwill exceeds the implied fair value of that
goodwill, an impairment loss is recognized in an amount equal to
that excess. The implied fair value of goodwill is determined in
the same manner as the amount of goodwill that would be
recognized in a business combination. For the purpose of
evaluating goodwill impairment, the Company has three reporting
units, all of which recognized goodwill. These reporting units
are MSG Media, MSG Entertainment and MSG Sports. The goodwill
balance as of December 31, 2008 by reporting unit is as
follows:
|
|
|
|
|
Reporting Unit
|
|
|
|
|
MSG Media
|
|
$
|
465,326
|
|
MSG Entertainment
|
|
|
58,979
|
|
MSG Sports
|
|
|
218,187
|
|
|
|
|
|
|
|
|
$
|
742,492
|
|
|
|
|
|
|
In assessing the recoverability of the Companys goodwill
and other long-lived assets, the Company must make assumptions
regarding estimated future cash flows and other factors to
determine the fair value of the respective assets. These
estimates and assumptions could have a significant impact on
whether an impairment charge is recognized and also the
magnitude of any such charge. Fair value estimates are made at a
specific point in time, based on relevant information. These
estimates are subjective in nature and involve uncertainties and
matters of significant judgments and therefore cannot be
determined with precision. Changes in assumptions could
significantly affect the estimates. Estimates of fair value are
primarily determined using discounted cash flows and comparable
market transactions. These valuations are based on estimates and
assumptions including projected future cash flows, discount
rate, and determination of appropriate market comparables and
determination of whether a premium or discount should be applied
to comparables. In addition, for MSG Entertainment, these
valuations include assumptions for number of shows and events at
the Companys venues and number of shows related to the
Companys proprietary content on tour. For MSG Sports,
these valuations include assumptions for ticket sales, which
include suite income, local and national television broadcasting
rights, sponsorship income, concessions, player and personnel
compensation, and luxury tax or revenue sharing assumptions for
comparable market transactions. For MSG Media, these valuations
also include assumptions for projected average rates per viewing
subscribers and growth in fixed price contractual arrangements
used to determine affiliation fee revenue, access to sports
programming and programming rights and the cost of such sports
programming and programming rights, amount of programming time
that is advertiser supported, number of advertising spots
available and the sell through rates for those spots, average
fee per advertising spot, and operating margins, among other
assumptions.
Based on the Companys annual impairment test during the
first quarter of 2008, the Companys reporting units had
significant safety margins, representing the excess of the
estimated fair value of each reporting unit
F-13
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
less its respective carrying value (including goodwill allocated
to each respective reporting unit). In order to evaluate the
sensitivity of the estimated fair value calculations of the
Companys reporting units on the annual impairment
calculation for goodwill, the Company applied a hypothetical 30%
decrease to the estimated fair values of each reporting unit.
This hypothetical decrease of 30% would have no impact on the
goodwill impairment analysis for any of the Companys
reporting units.
The Companys identifiable indefinite-lived intangible
assets relate to trademarks and sports franchises. The
Companys indefinite-lived trademark intangible assets
relate to the Companys Radio City related trademarks which
include the
Radio City Christmas Spectacular
and The
Rockettes and The Chicago Theatre trademarks, which were all
valued using a relief-from-royalty method in which the expected
benefits are valued by discounting royalty revenue over
projected revenues covered by the trademarks. The Companys
indefinite-lived sports franchises intangibles representing the
Companys NBA and NHL sports franchises are valued using a
direct valuation method based on market comparables. Both the
Radio City related trademarks and the sports franchises were
recorded in April 2005 when Cablevision acquired the
remaining 40% interest in a subsidiary of Cablevision, which
wholly owned the Company. Significant judgments inherent in a
valuation include the selection of appropriate discount rates,
estimating the amount and timing of estimated future cash flows
and identification of appropriate continuing growth rate
assumptions. The discount rates used in the analysis are
intended to reflect the risk inherent in the projected future
cash flows generated by the respective intangible assets.
Based on the Companys annual impairment test during the
first quarter of 2008, the Companys Radio City related
trademarks and sports franchise identifiable indefinite-lived
intangible assets had significant safety margins, representing
the excess of the identifiable indefinite-lived intangible
assets estimated fair value unit of accounting less their
respective carrying values. In order to evaluate the sensitivity
of the fair value calculations of all the Companys
identifiable indefinite-lived intangibles, the Company applied
hypothetical 10%, 20% and 30% decreases to the estimated fair
value of each of the Companys identifiable
indefinite-lived intangibles. These hypothetical 10%, 20% and
30% decreases in estimated fair value would not have resulted in
an impairment of any of our identifiable indefinite-lived
intangibles other than The Chicago Theatre related trademarks,
which have a carrying value of $8,000. The hypothetical fair
value decline would have resulted in impairment charges of
approximately $800, $1,600 and $2,400 at 10%, 20% and 30%,
respectively.
Cash
Flows
During 2008, 2007 and 2006, the Companys non-cash
investing and financing activities and other supplemental data
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Deemed capital contributions, net primarily related to
allocation of Cablevision share-based compensation expense and
income taxes
|
|
$
|
11,532
|
|
|
$
|
12,427
|
|
|
$
|
16,029
|
|
Asset retirement obligations
|
|
|
9,243
|
|
|
|
|
|
|
|
136
|
|
Leasehold improvements paid by landlord
|
|
|
1,890
|
|
|
|
|
|
|
|
|
|
Capital lease obligation
|
|
|
640
|
|
|
|
3,467
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid (refunded), net
|
|
|
(5
|
)
|
|
|
381
|
|
|
|
3,043
|
|
Interest paid for capital lease obligations
|
|
|
696
|
|
|
|
452
|
|
|
|
389
|
|
F-14
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Use
of Estimates in Preparation of Financial
Statements
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
Commitments
and Contingencies
Liabilities for loss contingencies arising from claims,
assessments, litigation, fines and penalties and other sources
are recorded when it is probable that a liability has been
incurred and the amount of the assessment can be reasonably
estimated.
Recently
Adopted Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board
(FASB) issued guidance now codified under ASC
Topic 820. ASC Topic 820 defines fair value,
establishes a framework for measuring fair value in GAAP, and
expands disclosures about fair value measurements. Under ASC
Topic 820, fair value refers to the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants in the market in
which the reporting entity transacts. It also clarifies the
principle that fair value should be based on the assumptions
market participants would use when pricing the asset or
liability. ASC Topic 820 applies under other accounting
pronouncements that require or permit fair value measurements.
Accordingly, ASC Topic 820 does not require any new fair
value measurements. The guidance under ASC Topic 820 became
effective for the Company on January 1, 2008 with respect
to financial assets and financial liabilities. The guidance
under ASC Topic 820 became effective for the Company on
January 1, 2009 for nonfinancial assets and nonfinancial
liabilities. See Note 10 for a discussion of the impact of
the adoption of the guidance now codified under ASC
Topic 820 for certain financial assets and financial
liabilities. The adoption of the guidance now codified under ASC
Topic 820 for nonfinancial assets and nonfinancial
liabilities which include goodwill, intangible assets, and
long-lived
assets measured at fair market value for impairment assessments,
did not have an impact on the Companys combined financial
position or results of operations.
Recently
Issued Accounting Pronouncements Expected to be Adopted
Subsequent to December 31, 2008
Adopted
in the First Quarter of 2009
In December 2007, the FASB issued guidance now codified under
ASC Topic 805. ASC Topic 805 requires an acquirer to
recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date,
measured at their fair values as of that date. Additionally, in
April 2009, the FASB issued guidance now codified under ASC
Topic 805-20 to address some of the application issues
under ASC Topic 805. ASC Topic 805-20 sets forth the
requirements associated with the initial recognition and
measurement of an asset acquired or a liability assumed in a
business combination that arises from a contingency (provided
the fair value on the date of acquisition of the related asset
or liability can be determined). Both the guidance under ASC
Topics 805 and 805-20 became effective as of
January 1, 2009 for the Company. Accordingly, any business
combination completed prior to January 1, 2009 was
accounted for pursuant to Statement of Financial Accounting
Standards No. 141, Business Combinations. Business
combinations completed subsequent to January 1, 2009, will
be accounted for pursuant to ASC Topics 805 and 805-20. The
impact that ASC Topics 805 and 805-20 will have on the
Companys combined financial statements will depend upon
the nature, terms and size of such business combinations, if any.
F-15
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
In April 2008, the FASB issued guidance now codified under ASC
Topics 350-30
and
275-10,
which amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under ASC Topic 350.
The adoption of the guidance under ASC
Topics 350-30
and
275-10
did not have an effect on the Companys combined financial
statements.
In December 2007, the FASB issued guidance now codified under
ASC
Topic 808-10,
which defines collaborative arrangements and establishes
reporting requirements for transactions between participants in
a collaborative arrangement and between participants in the
arrangement and third parties. ASC
Topic 808-10
also establishes the appropriate income statement presentation
and classification for joint operating activities and payments
between participants, as well as the disclosure requirements
related to these arrangements. The adoption of the guidance
under ASC
Topic 808-10
did not have an effect on the Companys combined financial
statements.
Adopted
in the Second Quarter of 2009
In May 2009, the FASB issued guidance now codified under ASC
Topic 855-10,
which requires an entity after the balance sheet date to
evaluate events or transactions that may occur for potential
recognition or disclosure in its financial statements. ASC
Topic 855-10
determines the circumstances under which the entity shall
recognize these events or transactions in its financial
statements and provides the disclosures that an entity shall
make about them including disclosing the date through which the
entity evaluated these events or transactions, as well as
whether that date is the date the entitys financial
statements were issued or the date the financial statements were
available to be issued. The Company adopted the guidance under
ASC
Topic 855-10
as of June 30, 2009.
In April 2009, the FASB issued guidance now codified under ASC
Topic 820-10,
which amends guidance under ASC Topic 820 to provide
additional guidance on (i) estimating fair value when the
volume and level of activity for an asset or liability have
significantly decreased in relation to normal market activity
for the asset or liability, and (ii) circumstances that may
indicate that a transaction is not orderly. The guidance under
ASC
Topic 820-10
also requires additional disclosures about fair value
measurements in interim and annual reporting periods. The
adoption of the guidance under ASC
Topic 820-10
did not have an effect on the Companys combined financial
statements.
In April 2009, the FASB issued guidance now codified under ASC
Topic 825-10,
to require disclosures about fair value of financial instruments
for interim reporting periods of publicly-traded companies, as
well as in annual financial statements. ASC Topic 825-10
also amends the disclosure requirements of ASC
Topic 270-10,
to require those disclosures in summarized financial information
at interim reporting periods. The disclosure requirements of the
guidance under
ASC 825-10
became effective for the Company as of June 30, 2009.
Adopted
in the Third Quarter of 2009
In June 2009, the FASB issued guidance now codified under ASC
Topic 105-10,
which establishes the FASB Accounting Standards Codification
(the Codification) as the source of authoritative
accounting principles recognized by the FASB to be applied in
the preparation of financial statements in conformity with GAAP.
ASC Topic 105-10 explicitly recognizes rules and
interpretive releases of the Securities and Exchange Commission
(SEC) under federal securities laws as authoritative
GAAP for SEC registrants. Upon adoption of this guidance under
ASC Topic 105-10, the Codification superseded all
then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not
included in the Codification became non-authoritative. The
guidance under ASC Topic 105-10 became effective for the
F-16
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Company as of September 30, 2009. References made to
authoritative FASB guidance throughout this document have been
updated to the applicable Codification section.
To be
Adopted in the Fourth Quarter of 2009
In December 2008, the FASB issued guidance under ASC
Topic 715-20, which requires more detailed disclosures
about employers plan assets, including employers
investment strategies, major categories of plan assets,
concentrations of risk within plan assets, and valuation
techniques used to measure the fair value of plan assets.
In August 2009, the FASB issued Accounting Standards Update
(ASU)
No. 2009-05,
Measuring Liabilities at Fair Value, which provides
clarification that in circumstances where a quoted market price
in an active market for an identical liability is not available,
a reporting entity must measure fair value of the liability
using one of the following techniques: (a) the quoted price
of the identical liability when traded as an asset;
(b) quoted prices for similar liabilities or similar
liabilities when traded as assets; or (c) another valuation
technique, such as a present value technique or the amount that
the reporting entity would pay to transfer the identical
liability or would receive to enter into the identical liability
that is consistent with the provisions of ASC Topic 820.
In September 2009, the FASB issued ASU
No. 2009-12,
Investments in Certain Entities That Calculate Net Asset Value
per Share (or Its Equivalent), which provides guidance on how to
determine the fair value of an alternative investment when fair
value is not readily determinable and an investor is provided
only with a net asset value per share (or its equivalent) by the
investee that has been calculated in a manner consistent with
GAAP for investment companies (ASC Topic 946). ASU
No. 2009-12
requires an investor to disclose (a) by major category of
investment the attributes of each investment it holds that meet
the criteria of ASU
No. 2009-12
and (b) the investment strategies of the investees.
To be
Adopted by the First Quarter of 2011
In October 2009, the FASB issued ASU No. 2009-13,
Multiple-Deliverable Revenue Arrangements, which provides
amendments that (a) update the criteria for separating
consideration in multiple-deliverable arrangements,
(b) establish a selling price hierarchy for determining the
selling price of a deliverable, and (c) replace the term
fair value in the revenue allocation guidance with
the term selling price to clarify that the
allocation of revenue is based on entity-specific assumptions.
ASU No. 2009-13 eliminates the residual method of
allocating arrangement consideration to deliverables, requires
the use of the relative selling price method and requires that a
vendor determine its best estimate of selling price in a manner
consistent with that used to determine the price to sell the
deliverable on a standalone basis. ASU No. 2009-13 requires
a vendor to significantly expand the disclosures related to
multiple-deliverable revenue arrangements with the objective to
provide information about the significant judgments made and
changes to those judgments and how the application of the
relative selling-price method affects the timing or amount of
revenue recognition. ASU No. 2009-13 is required to be
adopted on a prospective basis to revenue arrangements entered
into or materially modified in fiscal years beginning on or
after June 15, 2010.
2008
Transactions
In June 2008, the Company purchased a minority ownership
interest in a company for $37,632, which is accounted for under
the cost method. This investment is being carried at its
original cost of $37,632 at
F-17
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
December 31, 2008 as a component of other assets in the
combined balance sheet since it was not practicable for the
Company to estimate the fair value of this minority ownership
interest.
2007
Transactions
In October 2007, the Company purchased The Chicago Theatre. The
net cash paid of $14,425 has been allocated to property and
equipment ($6,294), amortizable intangible assets ($4,217),
identifiable indefinite-lived trademark ($8,000), and other
assets and liabilities, primarily deferred revenue.
|
|
Note 4.
|
Restructuring
and Impairment Charges
|
As part of its periodic review of expected usefulness of
programming rights, the Companys MSG Media segment
recorded impairment losses of $1,129, $2,037, and $1,640 in
2008, 2007 and 2006, respectively, which are included in
technical and operating expense.
During 2007 and 2006, the Company recorded restructuring charges
of $221 and $143, respectively, in its MSG Media segment related
to its Fuse programming network. There were no restructuring
charges for the year ended December 31, 2008. As of
December 31, 2008 and 2007, there were no unpaid balances.
|
|
Note 5.
|
Significant
Team Personnel Provisions
|
The accompanying combined statements of operations include net
provisions associated with transactions relating to players on
our sports teams for season-ending or career-ending injuries,
waivers and terminations of players, and other team personnel.
The Companys MSG Sports segment recognizes the estimated
ultimate costs of these events, including anticipated insurance
recoveries and the Companys estimated future obligation
for luxury tax attributable to Knicks player transactions, in
the periods in which they occur. However, amounts due to these
individuals are generally paid over their remaining contract
terms. These provisions amounted to $24,927, $6,837 and $60,172
for the years ended December 31, 2008, 2007 and 2006,
respectively. The provisions recorded in 2008 are net of
anticipated insurance recoveries of $11,935. The accompanying
combined balance sheet as of December 31, 2008 includes
$4,123 and $5,562 in accounts receivable and other assets
(long-term), respectively, related to insurance recoveries.
F-18
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
|
|
Note 6.
|
Intangible
Assets
|
The following table summarizes information relating to the
Companys intangible assets as of December 31, 2008
and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Estimated
|
|
|
2008
|
|
|
2007
|
|
|
Useful Lives
|
|
Gross carrying amount of amortizable intangible assets
|
|
|
|
|
|
|
|
|
|
|
Affiliation agreements and affiliate relationships
|
|
$
|
143,243
|
|
|
$
|
143,243
|
|
|
4 to 24 years
|
Season ticket holder relationships
|
|
|
75,005
|
|
|
|
75,005
|
|
|
10 to 15 years
|
Suite holder contracts and relationships (1)
|
|
|
15,394
|
|
|
|
21,167
|
|
|
11 years
|
Broadcast rights
|
|
|
15,209
|
|
|
|
15,209
|
|
|
10 years
|
Other intangibles (2)
|
|
|
24,734
|
|
|
|
20,517
|
|
|
5 to 15 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,585
|
|
|
|
275,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
Affiliation agreements and affiliate relationships
|
|
|
(55,833
|
)
|
|
|
(43,830
|
)
|
|
|
Season ticket holder relationships
|
|
|
(20,927
|
)
|
|
|
(15,476
|
)
|
|
|
Suite holder contracts and relationships (1)
|
|
|
(5,246
|
)
|
|
|
(9,136
|
)
|
|
|
Broadcast rights
|
|
|
(9,661
|
)
|
|
|
(8,140
|
)
|
|
|
Other intangibles
|
|
|
(14,342
|
)
|
|
|
(11,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(106,009
|
)
|
|
|
(88,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable intangible assets, net of accumulated amortization
|
|
|
167,576
|
|
|
|
187,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
Sports franchises (MSG Sports segment) (3)
|
|
|
96,215
|
|
|
|
96,215
|
|
|
|
Trademarks (MSG Entertainment segment) (2)(3)
|
|
|
61,881
|
|
|
|
53,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets
|
|
|
158,096
|
|
|
|
150,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (3)
|
|
|
742,492
|
|
|
|
742,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
1,068,164
|
|
|
$
|
1,079,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
During the year ended December 31, 2008, the Company
wrote-off fully amortized intangible assets related to suite
holder contracts.
|
|
(2)
|
|
The aggregate increase in the gross carrying amount of other
amortizable intangible assets and trademarks for the year ended
December 31, 2008 reflects a reclassification of $12,217 of
acquired assets from property and equipment related to the
finalization of certain purchase price allocations associated
with The Chicago Theatre, as discussed in Note 3.
|
|
(3)
|
|
Refer to Note 2 for the Companys Summary of
Significant Accounting Policies.
|
F-19
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Aggregate amortization expense for intangible assets amounted to
$23,672, $24,801 and $24,801 for the years ended
December 31, 2008, 2007 and 2006, respectively.
|
|
|
|
|
Estimated Amortization Expense:
|
|
|
|
|
For the year ended December 31, 2009
|
|
$
|
19,549
|
|
For the year ended December 31, 2010
|
|
|
17,629
|
|
For the year ended December 31, 2011
|
|
|
17,224
|
|
For the year ended December 31, 2012
|
|
|
14,434
|
|
For the year ended December 31, 2013
|
|
|
10,574
|
|
The carrying amount of goodwill as of December 31, 2008 and
2007 by reportable segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
MSG Media
|
|
$
|
465,326
|
|
|
$
|
465,326
|
|
MSG Entertainment
|
|
|
58,979
|
|
|
|
58,979
|
|
MSG Sports
|
|
|
218,187
|
|
|
|
218,187
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
742,492
|
|
|
$
|
742,492
|
|
|
|
|
|
|
|
|
|
|
The Company has various long-term noncancelable operating lease
agreements with non-affiliates primarily for entertainment
venues and office and storage space expiring at various dates
through 2026. Certain leases include renewal provisions at our
option and provide for additional rent based on sales. The rent
expense associated with such operating leases are recognized on
a straight-line basis over the initial lease term. The
difference between rent expense and rent paid is recorded as
deferred rent. Rent expense under these lease agreements totaled
$29,222, $27,295 and $19,294 for the years ended
December 31, 2008, 2007 and 2006, respectively.
In addition, Cablevision leases certain office facilities under
long-term lease agreements with non-affiliates. The Company pays
its share of monthly lease payments for the portion of the
premises occupied by its employees. Rent expense incurred by the
Company which was charged by Cablevision for such leases was
approximately $6,187, $5,150 and $3,008 for the years ended
December 31, 2008, 2007 and 2006, respectively.
As of December 31, 2008, future minimum rental payments
under leases with non-affiliates having noncancelable initial
lease terms in excess of one year were as follows:
|
|
|
|
|
2009
|
|
$
|
29,437
|
|
2010
|
|
|
29,362
|
|
2011
|
|
|
29,610
|
|
2012
|
|
|
29,558
|
|
2013
|
|
|
29,450
|
|
Thereafter
|
|
|
247,903
|
|
|
|
|
|
|
|
|
$
|
395,320
|
|
|
|
|
|
|
F-20
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Under the terms of a lease agreement and related guaranty,
subsidiaries of the Company have certain operating requirements
and are required to meet a certain net worth obligation. In the
event that these subsidiaries were to fail to meet the required
obligations and were unable to avail themselves of the provided
for cure options, the landlord could terminate the lease.
Capital lease assets for transponder space have been subleased
to the Company from Cablevision. As of December 31, 2008,
the future minimum lease payments for capital lease obligations
were as follows:
|
|
|
|
|
2009
|
|
$
|
1,822
|
|
2010
|
|
|
1,822
|
|
2011
|
|
|
1,822
|
|
2012
|
|
|
622
|
|
2013
|
|
|
622
|
|
Thereafter
|
|
|
3,921
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
10,631
|
|
Less amount representing interest
|
|
|
(3,174
|
)
|
|
|
|
|
|
Present value of minimum future capital lease payments
|
|
|
7,457
|
|
Less principal portion of current installments
|
|
|
(1,221
|
)
|
|
|
|
|
|
Long-term portion of obligations under capital leases
|
|
$
|
6,236
|
|
|
|
|
|
|
The long-term portion of obligations under capital leases is
classified as other liabilities in the accompanying combined
balance sheets.
|
|
Note 8.
|
Contractual
Obligations and Off Balance Sheet Arrangements
|
Future cash payments required under unconditional purchase
obligations pursuant to material contracts entered into by the
Company in the normal course of business as of December 31,
2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More Than
|
|
|
|
Total
|
|
|
Year 1
|
|
|
Years 2-3
|
|
|
Years 4-5
|
|
|
5 Years
|
|
|
Off balance sheet arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual obligations (1)
|
|
$
|
1,477,594
|
|
|
$
|
210,645
|
|
|
$
|
285,014
|
|
|
$
|
152,768
|
|
|
$
|
829,167
|
|
Letters of credit (2)
|
|
|
2,400
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,479,994
|
|
|
|
213,045
|
|
|
|
285,014
|
|
|
|
152,768
|
|
|
|
829,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual obligations reflected on the balance sheet (3)
|
|
|
63,942
|
|
|
|
29,496
|
|
|
|
10,159
|
|
|
|
5,888
|
|
|
|
18,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,543,936
|
|
|
$
|
242,541
|
|
|
$
|
295,173
|
|
|
$
|
158,656
|
|
|
$
|
847,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Contractual obligation amounts not reflected on the balance
sheet consist primarily of (i) long-term rights agreements
which provide the Company with exclusive telecast rights to
certain live sporting events in exchange for minimum contractual
payments in the MSG Media segment, (ii) payments under
employment agreements that the Company has with its professional
sports teams personnel in the MSG Sports segment that are
generally guaranteed regardless of employee injury or
termination, and (iii) minimum purchase requirements
incurred in the normal course of the Companys operations.
|
|
(2)
|
|
Consists primarily of a letter of credit obtained by the Company
under a certain lease agreement.
|
F-21
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
|
|
|
(3)
|
|
Consists principally of amounts earned under employment
agreements that the Company has with certain of its professional
sports teams personnel in the MSG Sports segment. Refer to
Note 2 for further discussion as to the nature of these
contractual obligations.
|
The future cash payments reflected above do not include the
impact of potential insurance recoveries or amounts which may be
due to the NBA for luxury tax payments or the NHL for revenue
sharing.
NHL
Litigation
MSG L.P. filed a lawsuit in September 2007 against the NHL and
certain related entities. This suit, filed in the United States
District Court for the Southern District of New York, alleged
violations of the United States Federal and New York State
antitrust laws as a result of agreements providing the NHL with
the exclusive right to control, for most commercial purposes,
the individual clubs trademarks, licensing, advertising
and distribution opportunities. The suit sought declaratory
relief against these alleged anticompetitive activities and
against the imposition by the NHL of any sanctions or penalties
for the filing and prosecution of the lawsuit. The NHL filed
counterclaims against MSG L.P. alleging that MSG L.P.s
prosecution of its lawsuit violated contractual obligations and
seeking a judicial declaration that the NHL had the right to
pursue disciplinary proceedings against MSG L.P. under the NHL
constitution.
In March 2009, the parties entered into a settlement agreement,
and this action and the counterclaims have been dismissed.
Provisions for all legal expenses related to this matter were
primarily recognized as of December 31, 2008.
Litigation
Against MSG L.P.
In March 2008, a lawsuit was filed against MSG L.P. arising out
of a January 23, 2007 automobile accident involving an
individual who was allegedly drinking at several different
establishments prior to the accident, allegedly including at an
event at The Garden. The accident resulted in the death of one
person and caused serious injuries to another. The plaintiffs
filed suit against MSG L.P., the driver, and a New York City
bar, asserting claims under the New York Dram Shop Act and
seeking unspecified compensatory and punitive damages. The
Company has insurance coverage for compensatory damages and
legal expenses in this matter. Discovery in the case has been
completed and MSG L.P. has filed a motion for summary judgement,
which is pending before the court.
Other
Matters
In addition to the matters discussed above, the Company is a
defendant in various lawsuits. Although the outcome of these
matters cannot be predicted with certainty, management does not
believe that resolution of these lawsuits will have a material
adverse effect on the financial position or liquidity of the
Company.
|
|
Note 10.
|
Fair
Value Measurement
|
As discussed in Note 2, the Company adopted the guidance
under ASC Topic 820 on January 1, 2008 for certain
financial assets and financial liabilities, which among other
things, required enhanced disclosures about assets and
liabilities measured at fair value. The Companys adoption
of the guidance under ASC Topic 820 was limited to certain
financial assets and financial liabilities within the scope of
ASC Topic 820, which relate to the Companys cash
equivalents.
F-22
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
The fair value hierarchy, as outlined in the guidance under ASC
Topic 820, is based on inputs to valuation techniques that
are used to measure fair value that are either observable or
unobservable. Observable inputs reflect assumptions market
participants would use in pricing an asset or liability based on
market data obtained from independent sources while unobservable
inputs reflect a reporting entitys pricing based upon
their own market assumptions. The fair value hierarchy consists
of the following three levels:
|
|
|
|
|
Level I Quoted prices for identical instruments
in active markets.
|
|
|
|
Level II Quoted prices for similar instruments
in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived
valuations whose inputs are observable or whose significant
value drivers are observable.
|
|
|
|
Level III Instruments whose significant value
drivers are unobservable.
|
The following table presents for each of these hierarchy levels,
the Companys financial assets that are measured at fair
value on a recurring basis at December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
|
|
|
$
|
73,852
|
|
|
$
|
|
|
|
$
|
73,852
|
|
The Companys cash equivalents are classified within
Level II of the fair value hierarchy because they are
valued primarily on inputs that can be observed with market
price information and other relevant information from
third-party pricing services.
|
|
Note 11.
|
Pension
and Other Postretirement Benefit Plans
|
Company
Sponsored Plans
The Company sponsors a non-contributory qualified defined
benefit pension plan covering its non-union employees hired
prior to January 1, 2001 (the Retirement Plan).
Benefits payable to retirees under the Retirement Plan are based
upon years of service and participants compensation. The
Company also sponsors an unfunded, non-qualified defined benefit
pension plan for the benefit of certain employees who
participate in the underlying qualified plan (the Excess
Plan). This plan provides that, upon retirement, a
participant will receive a benefit based on a formula which
reflects the participants compensation. As of
December 31, 2007, both the Retirement Plan and Excess Plan
were amended to freeze all benefits earned through
December 31, 2007 and eliminate the ability of participants
to earn benefits for future service under these plans. These
transactions have been accounted for as plan curtailments which
reduced the liability relating to these plans by $18,803, of
which $15,873, before tax, was recognized as a gain with the
balance recorded as a credit to accumulated other comprehensive
income.
In addition, the Company sponsors two non-contributory qualified
defined benefit pension plans covering certain of its union
employees (Union Plans). Benefits payable to
retirees under the Union Plans are based upon years of service
and, for one plan, participants compensation.
The Retirement Plan, Excess Plan and Union Plans are
collectively referred to as Pension Plans.
The Company also sponsors a contributory welfare plan which
provides certain postretirement health care benefits to certain
employees hired prior to January 1, 2001 and their
dependents that are eligible for early or normal retirement
under the Retirement Plan, as well as certain union employees
(Postretirement Plan).
F-23
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
The following table summarizes the projected benefit
obligations, assets, funded status and the amounts recorded on
the Companys combined balance sheets associated with the
Pension Plans and Postretirement Plan based upon actuarial
valuations as of December 31, 2008 and 2007 (the
measurement date).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Plans
|
|
|
Plan
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
79,801
|
|
|
$
|
99,809
|
|
|
$
|
6,246
|
|
|
$
|
6,907
|
|
Service cost
|
|
|
334
|
|
|
|
4,805
|
|
|
|
251
|
|
|
|
367
|
|
Interest cost
|
|
|
4,836
|
|
|
|
5,919
|
|
|
|
331
|
|
|
|
380
|
|
Curtailment gain
|
|
|
|
|
|
|
(18,803
|
)
|
|
|
|
|
|
|
|
|
Actuarial loss (gain)
|
|
|
10,456
|
|
|
|
(10,241
|
)
|
|
|
(344
|
)
|
|
|
(1,170
|
)
|
Benefits paid
|
|
|
(2,033
|
)
|
|
|
(1,688
|
)
|
|
|
(274
|
)
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
|
93,394
|
|
|
|
79,801
|
|
|
|
6,210
|
|
|
|
6,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
68,913
|
|
|
|
54,544
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
4,127
|
|
|
|
3,841
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
529
|
|
|
|
12,216
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(2,033
|
)
|
|
|
(1,688
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
|
71,536
|
|
|
|
68,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
|
$
|
(21,858
|
)
|
|
$
|
(10,888
|
)
|
|
$
|
(6,210
|
)
|
|
$
|
(6,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the combined balance sheets as of
December 31, 2008 and 2007 consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Plans
|
|
|
Plan
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Non-current assets (included in other assets)
|
|
$
|
|
|
|
$
|
3,878
|
|
|
$
|
|
|
|
$
|
|
|
Current liabilities (included in accrued employee related costs)
|
|
|
(366
|
)
|
|
|
(289
|
)
|
|
|
(226
|
)
|
|
|
(226
|
)
|
Non-current liabilities (included in defined benefit and other
postretirement obligations)
|
|
|
(21,492
|
)
|
|
|
(14,477
|
)
|
|
|
(5,984
|
)
|
|
|
(6,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(21,858
|
)
|
|
$
|
(10,888
|
)
|
|
$
|
(6,210
|
)
|
|
$
|
(6,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), before tax, as of
December 31, 2008 and 2007 consists of the following
amounts that have not yet been recognized in net periodic
benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Plans
|
|
|
Plan
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Actuarial gain (loss)
|
|
$
|
(11,272
|
)
|
|
$
|
(482
|
)
|
|
$
|
856
|
|
|
$
|
579
|
|
Prior service credit (cost) and unrecognized transition asset
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
918
|
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(11,276
|
)
|
|
$
|
( 486
|
)
|
|
$
|
1,774
|
|
|
$
|
1,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Components of net periodic benefit cost for the Companys
Pension Plans and Postretirement Plan for the years ended
December 31, 2008, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
|
|
|
Plans
|
|
|
Plan
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
Service cost
|
|
$
|
334
|
|
|
$
|
4,805
|
|
|
$
|
4,988
|
|
|
$
|
251
|
|
|
$
|
367
|
|
|
$
|
399
|
|
|
|
|
|
Interest cost
|
|
|
4,836
|
|
|
|
5,919
|
|
|
|
5,441
|
|
|
|
331
|
|
|
|
380
|
|
|
|
361
|
|
|
|
|
|
Expected return on plan assets
|
|
|
(4,509
|
)
|
|
|
(4,569
|
)
|
|
|
(3,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized actuarial loss (gain)
|
|
|
50
|
|
|
|
111
|
|
|
|
627
|
|
|
|
(67
|
)
|
|
|
(10
|
)
|
|
|
(4
|
)
|
|
|
|
|
Amortization of unrecognized prior service cost (credit) and
transition asset
|
|
|
|
|
|
|
22
|
|
|
|
22
|
|
|
|
(132
|
)
|
|
|
(133
|
)
|
|
|
(133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
711
|
|
|
$
|
6,288
|
|
|
$
|
7,392
|
|
|
$
|
383
|
|
|
$
|
604
|
|
|
$
|
623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment gain
|
|
$
|
|
|
|
$
|
15,873
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other pre-tax changes in plan assets and benefit obligations
recognized in other comprehensive income (loss) for the years
ended December 31, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
|
|
|
Plans
|
|
|
Plan
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
Actuarial gain (loss)
|
|
$
|
(10,839
|
)
|
|
$
|
9,513
|
|
|
$
|
344
|
|
|
$
|
1,170
|
|
|
|
|
|
Recognized actuarial (gain) loss
|
|
|
50
|
|
|
|
2,813
|
(1)
|
|
|
(67
|
)
|
|
|
(10
|
)
|
|
|
|
|
Recognized prior service (credit) cost and transition asset
|
|
|
|
|
|
|
250
|
(1)
|
|
|
(132
|
)
|
|
|
(133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive income (loss)
|
|
$
|
(10,789
|
)
|
|
$
|
12,576
|
|
|
$
|
145
|
|
|
$
|
1,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes impact of plan curtailments.
|
The estimated net loss and prior service cost for the Pension
Plans expected to be amortized from accumulated other
comprehensive income (loss) and recognized as components of net
periodic benefit cost over the next fiscal year are $178 and $2,
respectively. The estimated net gain and prior service credit
for the Postretirement Plan expected to be amortized from
accumulated other comprehensive income (loss) into net periodic
benefit cost over the next fiscal year are $44 and $132,
respectively.
Funded
Status
The accumulated benefit obligation for the Pension Plans
aggregated to $92,437 at December 31, 2008. As of
December 31, 2008 each of the Pension Plans had accumulated
benefit obligations and projected benefit obligations in excess
of plan assets.
The accumulated benefit obligation for the Pension Plans
aggregated to $78,971 at December 31, 2007. The aggregate
accumulated benefit obligation and aggregate fair value of plan
assets for Pension Plans with accumulated benefit obligations in
excess of plan assets as of December 31, 2007 were $15,562
and $1,263, respectively. The aggregate projected benefit
obligation and aggregate fair value of plan assets for Pension
F-25
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Plans with projected benefit obligations in excess of plan
assets as of December 31, 2007 were $23,186 and $8,421,
respectively.
Pension
Plans and Postretirement Plan Assumptions
Weighted-average assumptions used to determine benefit
obligations (made at the end of the year) as of
December 31, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Plans
|
|
|
Plan
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Discount rate
|
|
|
5.81
|
%
|
|
|
6.15
|
%
|
|
|
5.80
|
%
|
|
|
6.05
|
%
|
Rate of compensation increase
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Health care trend rate assumed for next years
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
9.00
|
%
|
|
|
10.00
|
%
|
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate)
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Years that the rate reaches the ultimate trend rate
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
2014
|
|
|
|
2014
|
|
Weighted-average assumptions used to determine net periodic
benefit cost (made at the beginning of the year) for the years
ended December 31, 2008, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Plans
|
|
|
Plan
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Discount rate
|
|
|
6.15
|
%
|
|
|
6.14
|
%
|
|
|
5.75
|
%
|
|
|
6.05
|
%
|
|
|
6.05
|
%
|
|
|
5.75
|
%
|
Expected long-term return on plan assets
|
|
|
7.41
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Rate of compensation increase
|
|
|
3.00
|
%
|
|
|
4.39
|
%
|
|
|
4.00
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Healthcare trend rate assumed for next years
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
10.00
|
%
|
|
|
9.00
|
%
|
|
|
9.00
|
%
|
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate)
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Years that the rate reaches the ultimate trend rate
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
2012
|
|
The discount rate was determined (based on the expected duration
of the benefit payments for the plans) by referring to
applicable bond yields (such as Moodys Aaa Corporate
Bonds) and the Buck Consultants Discount Rate Model (which
is developed by examining the yields on selected highly rated
corporate bonds), to select a rate at which the Company believed
the plans benefits could be effectively settled. The
Companys expected long-term return on plan assets is based
on a periodic review and modeling of the plans asset
allocation structure over a long-term horizon. Expectations of
returns for each asset class are the most important of the
assumptions used in the review and modeling and are based on
comprehensive reviews of historical data and economic/financial
market theory. The expected long-term rate of return was
selected from within the reasonable range of rates determined by
(a) historical real returns, net of inflation, for the
asset classes covered by the investment policy, and
(b) projections of inflation over the long-term period
during which benefits are payable to plan participants.
F-26
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Assumed healthcare cost trend rates have a significant effect on
the amounts reported for the Postretirement Plan. A
one-percentage-point change in assumed healthcare cost trend
rates would have the following effects:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) on Total of
|
|
|
|
|
Service and Interest Cost
|
|
Increase (Decrease) on
|
|
|
Components for the Years
|
|
Benefits Obligation at
|
|
|
Ended December 31,
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
2007
|
|
One percentage point increase
|
|
$
|
80
|
|
|
$
|
121
|
|
|
$
|
129
|
|
|
$
|
742
|
|
|
$
|
772
|
|
One percentage point decrease
|
|
$
|
(71
|
)
|
|
$
|
(101
|
)
|
|
$
|
(107
|
)
|
|
$
|
(642
|
)
|
|
$
|
(663
|
)
|
Plan
Assets and Investment Policy
The weighted-average asset allocation of the Retirement Plan and
Union Plans at December 31, 2008 and 2007 was as follows:
|
|
|
|
|
|
|
|
|
Asset Category:
|
|
2008
|
|
|
2007
|
|
|
Fixed income securities
|
|
|
75
|
%
|
|
|
28
|
%
|
Cash equivalents
|
|
|
25
|
%
|
|
|
|
|
Equity securities
|
|
|
|
|
|
|
64
|
%
|
Other
|
|
|
|
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
On January 1, 2007, the Retirement Plan, Union Plans, and
the Cablevision sponsored Cash Balance Retirement Plan assets
were pooled together into the Cablevision Retirement Plan Master
Trust (Master Trust). Although assets of these plans
are commingled in the Master Trust, the trustee maintained
supporting records for the purpose of allocating the net gain or
loss of the investment account to these plans. The net
investment income or loss of the investment assets was allocated
by the trustee to the Retirement Plan, Union Plans and
Cablevision Cash Balance Retirement Plan based on the
relationship of the interest of each plan to the total of the
interests of the plans in the Master Trust.
On July 1, 2008, the trustee for the Master Trust was
changed, whereby the trustee maintains the assets of the
Cablevision Cash Balance Retirement Plan (Cablevision Plan
Trust) separately from the Retirement Plan and Union Plans
(MSG Pension Plan Trust). All investment gains and
losses that prior to July 1, 2008 were allocated between
the Cablevision Cash Balance Retirement Plan, Retirement Plan,
and Union Plans based on their interest in the total assets of
the Master Trust, are now accounted for by the trustee based on
investment gains and losses on the assets held in the
Cablevision Plan Trust and MSG Pension Plan Trust. Investment
gains and losses for the Retirement Plan and Union Plans are
allocated by the trustee based on the relationship of the
interest of each of these plans to the total of the interest of
these plans in the MSG Pension Plan Trust.
The Master Trusts investment objectives are to invest in
portfolios that would obtain a market rate of return throughout
economic cycles, commensurate with the investment risk and cash
flow needs of the plans. This requires the Master Trust to
subject a portion of its assets to increased risk to generate a
greater rate of return. The investments held in the Master Trust
are readily marketable and can be sold to fund benefit payment
obligations of the plans as they become payable.
In November 2008, the Master Trusts investment objectives
were amended to reflect an overall lower risk tolerance to stock
market volatility. The amended investment objectives modified
the asset allocations so
F-27
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
that any equity investments held by the Master Trust would be
reinvested in cash, cash equivalent investments
and/or
other
appropriate fixed income investments.
Contributions
for Qualified Defined Benefit Pension Plans
The Company is currently not required to make minimum
contributions to the Retirement Plan and Union Plans in 2009,
however, the Company expects to contribute $210 to the Union
Plans in 2009.
Estimated
Future Benefit Payments
The following table presents estimated future benefit payments,
as well as the expected Medicare Prescription Drug Subsidy, for
the Pension Plans and Postretirement Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Postretirement
|
|
|
|
|
Plans
|
|
Plan
|
|
Subsidy
|
|
2009
|
|
$
|
2,548
|
|
|
$
|
256
|
|
|
$
|
23
|
|
2010
|
|
|
2,716
|
|
|
|
293
|
|
|
|
23
|
|
2011
|
|
|
2,828
|
|
|
|
331
|
|
|
|
23
|
|
2012
|
|
|
2,937
|
|
|
|
340
|
|
|
|
23
|
|
2013
|
|
|
3,101
|
|
|
|
365
|
|
|
|
23
|
|
2014 2018
|
|
|
20,203
|
|
|
|
2,497
|
|
|
|
102
|
|
Cablevision
Sponsored Plans
Cablevision sponsors a non-contributory qualified defined
benefit cash balance retirement plan and an unfunded
non-contributory non-qualified excess cash balance plan that
cover certain of the Companys employees hired on or after
January 1, 2001 and, effective January 1, 2008, the
affected Retirement Plan and Excess Plan participants. In
connection with these plans, Cablevision charges the Company for
credits made into an account established for each participant.
In addition, Cablevision sponsors 401(k) savings plans in which
the Company participates. The Company makes matching cash
contributions for a portion of employee contributions to the
401(k) savings plans. Expense related to these Cablevision
sponsored plans included in the accompanying combined statements
of operations totaled $5,814, $2,992 and $1,944 for the years
ended December 31, 2008, 2007 and 2006, respectively.
Multi-employer
Plans
The Company contributes to various multi-employer pension plans.
Contributions made to these multi-employer plans for the years
ended December 31, 2008, 2007 and 2006 approximated $7,717,
$6,323 and $6,966, respectively. In addition, the Company
contributed $8,154, $5,485 and $6,591, respectively for the
years ended December 31, 2008, 2007 and 2006, to
multi-employer plans that provide health and welfare benefits to
active as well as retired employees.
Treatment
of Retirement Benefits after the Distribution
After the Distribution, liabilities for benefits under
Cablevisions cash balance retirement plan, unfunded
non-contributory non-qualified excess cash balance plan, and
401(k) plans (collectively, the Cablevision Retirement
Plans), in which the Companys employees participate,
will be transferred and assumed by the Company (to the extent
not already reflected in the Companys accompanying
combined balance sheets).
F-28
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Following the Distribution, the Company expects to offer
retirement plans that are substantially similar to the
Cablevision Retirement Plans.
Cablevisions
Equity Plans
Cablevision is authorized to grant under its 2006 Employee Stock
Plan incentive stock options, nonqualified stock options,
restricted shares, restricted stock units, stock appreciation
rights and other equity-based awards. Options and stock
appreciation rights under the 2006 Employee Stock Plan must be
granted with an exercise price of not less than the fair market
value of a share of Cablevisions Class A common stock
on the date of grant and must expire no later than 10 years
from the date of grant (or up to one additional year in the case
of the death of a holder). The terms and conditions of awards
granted under the 2006 Employee Stock Plan, including vesting
and exercisability, are determined by Cablevisions
compensation committee of the Board of Directors and may be
based upon performance criteria.
Cablevision is also authorized to grant under its 2006 Stock
Plan for Cablevisions Non-Employee Directors nonqualified
stock options, restricted stock units and other equity-based
awards. Options under this plan must be granted with an exercise
price of not less than the fair market value of a share of
Cablevisions Class A common stock on the date of
grant and must expire no later than 10 years from the date
of grant (or up to one additional year in the case of the death
of a holder). The terms and conditions of awards granted under
the Cablevision 2006 Stock Plan for Non-Employee Directors,
including vesting and exercisability, are determined by
Cablevisions compensation committee of the Board of
Directors. Unless otherwise provided in an applicable award
agreement, options granted under this plan will be fully vested
and exercisable, and restricted stock units granted under this
plan will be fully vested, upon the date of grant. In 2008 and
2007, Cablevision granted its non-employee directors an
aggregate of 42,320 and 36,900 restricted stock units,
respectively, which also vested on the date of grant. A portion
of the expense recorded by Cablevision relating to these awards
were allocated to the Company. The Cablevision 2006 Employee
Stock Plan and the 2006 Stock Plan for Cablevisions
Non-Employee Directors are collectively referred to as the
Cablevision 2006 Stock Plans.
Options under the Cablevision 2006 Stock Plans were typically
scheduled to vest over three years in
33
1
/
3
%
annual increments and to expire 10 years from the grant
date. Restricted shares under the Cablevision 2006 Stock Plans
were typically subject to three or four year cliff vesting.
Options and restricted stock units issued to non-employee
directors have been fully vested on the date of grant.
Previously, Cablevision had a 1996 Employee Stock Plan under
which it was authorized to grant incentive stock options,
nonqualified stock options, restricted shares, restricted stock
units, stock appreciation rights, and bonus awards and a 1996
Stock Plan for Cablevisions Non-Employee Directors under
which it was authorized to grant options and restricted stock
units. The Cablevision 1996 Employee Stock Plan expired in
February 2006 and the Cablevision 1996 Non-Employee Directors
Stock Plan expired in May 2006. These plans provided that the
exercise price of stock options and stock appreciation rights
could not be less than the fair market value per share of
Cablevisions Class A common stock on the date the
option was granted and the option expired no later than
10 years from the date of grant (or up to one additional
year in the case of the death of a holder of nonqualified
options). The Cablevision 2006 Stock Plans, 1996 Employee Stock
Plan, and the 1996 Stock Plan for Cablevisions
Non-Employee Directors are collectively referred to as the
Cablevision Stock Plans.
F-29
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Performance based options awarded under the 1996 Employee Stock
Plan were typically subject to approximately two year or three
year cliff vesting, with exercisability subject to achievement
of specific performance criteria. Performance based options
expire 10 years from the date of grant (or up to one
additional year in the case of the death of the holder).
Cablevision has 809,000 performance based options and 775,401
stock appreciation rights outstanding at December 31, 2008
of which 82,200 and 101,774, respectively, are held by Company
employees.
Options and performance based option compensation expense is
based on awards that are ultimately expected to vest.
Share-based compensation (which includes options, performance
options, restricted stock, restricted stock units and stock
appreciation rights) for the years ended December 31, 2008,
2007 and 2006 has been reduced for estimated forfeitures.
Forfeitures were estimated based on historical experience.
The following table presents the share-based compensation
expense (income) recorded for 2008, 2007 and 2006 relating to
Company employees participating in the Cablevision Stock Plans
and compensation expense relating to Cablevision corporate
employees and directors and the portion of such share-based
compensation expense that was allocated to the Company. For
purposes of the following table and remaining Note, the portion
of share-based compensation expense related to Cablevision
corporate employees that is allocated to the Company includes
allocations for the Companys Executive Chairman, and
President and Chief Executive Officer (which amounts are not
included in the Company employee amounts), given they are also
executive officers of Cablevision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based Compensation Expense Related to the Cablevision
Stock Plans
|
|
|
|
|
|
|
Share-based Compensation
|
|
|
|
|
|
|
Share-based Compensation
|
|
|
Expense Related to
|
|
|
|
|
|
|
Expense Related to
|
|
|
Cablevision Corporate Employees and
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards Granted to Company Employees
|
|
|
Directors Allocated to the Company
|
|
|
Total Share-based Compensation Expense
|
|
|
|
Year Ended December 31,
|
|
|
Year Ended December 31,
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Stock options
|
|
$
|
1,202
|
|
|
$
|
1,453
|
|
|
$
|
3,315
|
|
|
$
|
1,011
|
|
|
$
|
1,850
|
|
|
$
|
2,804
|
|
|
$
|
2,213
|
|
|
$
|
3,303
|
|
|
$
|
6,119
|
|
Stock appreciation rights
|
|
|
(573
|
)
|
|
|
(19
|
)
|
|
|
1,863
|
|
|
|
(574
|
)
|
|
|
(139
|
)
|
|
|
923
|
|
|
|
(1,147
|
)
|
|
|
(158
|
)
|
|
|
2,786
|
|
Restricted shares
|
|
|
7,334
|
|
|
|
4,627
|
|
|
|
2,978
|
|
|
|
4,332
|
|
|
|
3,943
|
|
|
|
3,934
|
|
|
|
11,666
|
|
|
|
8,570
|
|
|
|
6,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
$
|
7,963
|
|
|
$
|
6,061
|
|
|
$
|
8,156
|
|
|
$
|
4,769
|
|
|
$
|
5,654
|
|
|
$
|
7,661
|
|
|
$
|
12,732
|
|
|
$
|
11,715
|
|
|
$
|
15,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the adoption of the guidance issued under ASC
Topic 718, the Company recorded $238 as a cumulative effect
of a change in accounting principle, net of taxes, in the
Companys consolidated statement of operations for the year
ended December 31, 2006.
Valuation
Assumptions Stock Options and Stock Appreciation
Rights
Cablevision calculates the fair value of each option award on
the date of grant and for each stock appreciation right on the
date of grant and at the end of each reporting period using the
Black-Scholes option pricing model. For unvested share-based
awards as of January 1, 2006, granted prior to 2006,
Cablevisions computation of expected life was determined
based on historical experience of similar awards, giving
consideration to the contractual terms of the share-based awards
and vesting schedules. In addition, for stock appreciation
rights, expected term was also determined based on historical
experience of similar awards as of December 31, 2008, 2007
and 2006. For options granted in 2006, Cablevisions
computation of expected life was based on the simplified method
(the average of the vesting period and option term) as
prescribed in SAB No. 107, Share Based Payments. The
interest rate for periods within the contractual life of the
share-based award is based on interest yields for
U.S. Treasury instruments in effect at the time of grant
and as of
F-30
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
December 31, 2008, 2007 and 2006 for stock appreciation
rights. Cablevisions computation of expected volatility is
based on historical volatility of its common stock.
The following assumptions were used to calculate the fair value
of Cablevision stock appreciation rights outstanding relating to
Company employees as of December 31, 2008, 2007 and 2006,
respectively:
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
2006
|
|
Range of risk-free interest rates
|
|
0.26%-0.94%
|
|
3.12%-3.45%
|
|
4.74%-5.02%
|
Weighted average expected life (in years)
|
|
1.13
|
|
1.40
|
|
1.58
|
Dividend yield
|
|
1.77%
|
|
0%
|
|
0%
|
Weighted average volatility
|
|
37.10%
|
|
20.04%
|
|
23.62%
|
The weighted average grant date fair value of stock appreciation
rights outstanding relating to Company employees at
December 31, 2008, 2007 and 2006 was $7.72, $14.27 and
$19.11, respectively.
Share-Based
Payment Award Activity
The following table summarizes activity relating to Company
employees who held Cablevision stock options for the year ended
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
Shares Under Option
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
Time
|
|
|
Performance
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Vesting
|
|
|
Vesting
|
|
|
Price Per
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Options
|
|
|
Share
|
|
|
Term (In Years)
|
|
|
Value(2)
|
|
|
Balance, December 31, 2007(1)
|
|
|
797,950
|
|
|
|
59,800
|
|
|
$
|
14.23
|
|
|
|
6.69
|
|
|
$
|
10,340
|
|
Exercised
|
|
|
(24,593
|
)
|
|
|
|
|
|
$
|
14.26
|
|
|
|
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(6,000
|
)
|
|
|
|
|
|
$
|
28.12
|
|
|
|
|
|
|
|
|
|
Transfer(3)
|
|
|
29,600
|
|
|
|
22,400
|
|
|
$
|
17.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008(1)
|
|
|
796,957
|
|
|
|
82,200
|
|
|
$
|
14.31
|
|
|
|
5.84
|
|
|
$
|
4,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2008(1)
|
|
|
696,925
|
|
|
|
82,200
|
|
|
$
|
14.48
|
|
|
|
5.77
|
|
|
$
|
3,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options expected to vest in the future(l)
|
|
|
99,466
|
|
|
|
|
|
|
$
|
12.99
|
|
|
|
6.32
|
|
|
$
|
527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
As a result of a special $10.00 dividend declared by
Cablevision, options issued under the 1996 Employee Stock Plan
and the 1996 Non-Employee Directors Plan that were not vested on
or prior to December 31, 2004 but were outstanding at the
time of the dividend were adjusted to reduce their per share
exercise price by the amount of the dividend. The per share
exercise price of options that were vested on or prior to
December 31, 2004 was not adjusted and the holders will
receive the amount of the $10.00 dividend, together with all
subsequent quarterly dividends declared by Cablevision
(collectively Dividends) upon exercise.
|
|
(2)
|
|
The aggregate intrinsic value is calculated as the difference
between (i) the exercise price of the underlying award and
(ii) the quoted price of Cablevisions NY Group
Class A common stock on December 31, 2008 and 2007
plus, where applicable, the Dividends.
|
|
(3)
|
|
Represents the transfer of stock options for an employee who
transferred from a Cablevision affiliated entity to the Company.
|
F-31
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
The aggregate intrinsic value is calculated as the difference
between (i) the exercise price of the underlying awards and
(ii) the quoted price of Cablevisions NY Group
Class A common stock plus, where applicable, the Dividends
for the 731,157 options outstanding held by Company employees
(which included 671,157 exercisable options) that were
in-the-money
at December 31, 2008. For the years ended December 31,
2008, 2007 and 2006, the aggregate intrinsic value of options
exercised by Company employees under Cablevisions stock
option plans was $463, $4,295 and $2,675, respectively,
determined as of the date of option exercise, plus, where
applicable, the Dividends which each holder of options vested on
or prior to December 31, 2004 received upon exercise.
The following table summarizes activity relating to Company
employees who held Cablevision restricted shares for the year
ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
Fair Value Per
|
|
|
Restricted
|
|
Share at Date of
|
|
|
Shares
|
|
Grant
|
|
Unvested award balance, December 31, 2007
|
|
|
591,199
|
|
|
$
|
25.46
|
|
Granted
|
|
|
474,500
|
|
|
$
|
24.92
|
|
Awards vested
|
|
|
(25,000
|
)
|
|
$
|
21.47
|
|
Forfeited
|
|
|
(46,567
|
)
|
|
$
|
25.52
|
|
Transfer(1)
|
|
|
33,600
|
|
|
$
|
26.20
|
|
|
|
|
|
|
|
|
|
|
Unvested award balance, December 31, 2008
|
|
|
1,027,732
|
|
|
$
|
25.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents the transfer of restricted shares for an employee who
transferred from a Cablevision affiliated entity to the Company.
|
The following table summarizes the vested shares outstanding
relating to Company employees who held Cablevision stock
appreciation rights at December 31, 2008. There were no
unvested stock appreciation rights outstanding as of
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
|
Outstanding
|
|
Exercise Price
|
|
Average
|
|
|
|
|
Vested Stock
|
|
Per Share at
|
|
Remaining
|
|
Aggregate
|
|
|
Appreciation
|
|
December 31,
|
|
Contractual
|
|
Intrinsic
|
|
|
Rights
|
|
2008
|
|
Term (In Years)
|
|
Value(1)
|
|
Balance, December 31, 2008
|
|
|
101,774
|
|
|
$
|
24.51
|
|
|
|
1.89
|
|
|
$
|
781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The aggregate intrinsic value, which will be settled in cash, is
calculated as the difference between (i) the exercise price
of the underlying award and (ii) the quoted price of
Cablevisions NY Group Class A common stock plus,
where applicable, the Dividends.
|
For the years ended December 31, 2008, 2007 and 2006, the
amount of cash paid by the Company to Cablevision to settle the
aggregate intrinsic value of stock appreciation rights exercised
under the Cablevision Stock Plans for Company employees was
$250, $1,994 and $893, respectively, determined as of the date
of exercise. In addition, amounts allocated and paid by the
Company for the aggregate intrinsic value of stock appreciation
rights exercised by Cablevision corporate employees amounted to
$290, $643 and $929 for the years ended December 31, 2008,
2007 and 2006, respectively, determined as of the date of
exercise. The aggregate intrinsic value, which was settled in
cash, is calculated as the difference between (i) the
exercise price of the underlying awards and (ii) the quoted
price of the Class A common stock as of the date of
F-32
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
exercise, plus for the 2008 and 2007 periods, the Dividends
which each holder of rights vested prior to December 31,
2004 received upon exercise.
As of December 31, 2008, there was approximately $11,681 of
total unrecognized compensation cost related to Company
employees who held unvested Cablevision options and restricted
shares under the Cablevision Stock Plans. The unrecognized
compensation cost is expected to be recognized over a
weighted-average period of 1 year.
Treatment
of Share-Based Payment Awards After the
Distribution
In connection with the Distribution, each Cablevision stock
option and stock appreciation right (right or
SAR) will become two options/rights: one will be an
option/right to acquire Cablevision NY Group Class A Common
Stock and one an option/right to acquire the Companys
Class A Common Stock. The number of shares of the
Companys Class A Common Stock that will be subject to
each option/right will be based on the distribution ratio (i.e.,
the number of shares of Cablevision common stock in respect of
which one share of the Companys common stock will be
issued in the Distribution). The options and the rights with
respect to the Companys Class A Common Stock will be
issued under a new Employee Stock Plan. The existing exercise
price will be allocated between the existing Cablevision
options/rights and the Companys new options/rights based
upon the respective market prices of the Cablevision NY Group
Class A Common Stock and the Companys Class A
Common Stock and taking into account the distribution ratio.
Further, in the Distribution, shares of the Companys
Class A Common Stock will be issued in respect of the
restricted stock issued by Cablevision based upon the
distribution ratio. The Companys shares will be restricted
on the same basis as the Cablevision restricted shares in
respect of which they are issued.
|
|
Note 13.
|
Related
Party Transactions
|
The Company provides services to and receives services from
Cablevision. The combined financial statements of the Company
reflect the application of certain allocation policies of
Cablevision. Management believes that these charges have been
made on a reasonable basis. However, it is not practicable to
determine whether the allocated amounts represent amounts that
might have been incurred on a stand-alone basis, including as a
separate independent publicly traded company, as there are no
company-specific or comparable industry benchmarks with which to
make such estimates. Actual costs that may have been incurred if
the Company had been a stand-alone company would depend on a
number of factors, including what functions were outsourced or
performed by employees and strategic decisions made in areas
such as information technology staffing and infrastructure.
Explanations of the composition and the amounts of the
significant
F-33
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
transactions and charges, not explained elsewhere in the
accompanying notes to the combined financial statements, are
described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenues, net
|
|
$
|
121,059
|
|
|
$
|
105,035
|
|
|
$
|
94,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate general and administrative
|
|
$
|
(24,290
|
)
|
|
$
|
(25,627
|
)
|
|
$
|
(24,732
|
)
|
Health and welfare plans
|
|
|
(10,656
|
)
|
|
|
(8,697
|
)
|
|
|
(7,794
|
)
|
Advertising
|
|
|
(1,268
|
)
|
|
|
(1,148
|
)
|
|
|
(1,107
|
)
|
Sales support function
|
|
|
(100
|
)
|
|
|
(2,535
|
)
|
|
|
(403
|
)
|
Studio production services
|
|
|
(4,200
|
)
|
|
|
(4,831
|
)
|
|
|
(4,805
|
)
|
Film library usage
|
|
|
(3,117
|
)
|
|
|
(878
|
)
|
|
|
(14
|
)
|
Programming and production services
|
|
|
(8,441
|
)
|
|
|
(7,612
|
)
|
|
|
(6,993
|
)
|
Long-term incentive plan
|
|
|
(13,801
|
)
|
|
|
(13,972
|
)
|
|
|
(11,365
|
)
|
Risk management and general insurance
|
|
|
(6,371
|
)
|
|
|
(6,768
|
)
|
|
|
(6,671
|
)
|
Other
|
|
|
(1,310
|
)
|
|
|
(4,285
|
)
|
|
|
(1,554
|
)
|
Revenues,
net
The Company recognizes revenue from the distribution of
programming services to subsidiaries of Cablevision. Cablevision
pays the Company for advertising in connection with signage at
events, sponsorships and television advertisements. The Company
also incurs advertising expenses charged by Cablevision. The
Company together with other subsidiaries of Cablevision, may
enter into agreements with third parties in which the amounts
paid/received by Cablevision, its subsidiaries, or the Company
may differ from the amounts that would have been paid/received
if such arrangements were negotiated separately. Where other
subsidiaries of Cablevision have incurred a cost incremental to
fair value and the Company has received a benefit incremental to
fair value from these negotiations, the other subsidiaries of
Cablevision charge the Company for the incremental amount.
Corporate
General and Administrative
General and administrative costs, including costs of maintaining
corporate headquarters, facilities and common support functions
(such as executive management, human resources, legal, finance,
tax, accounting, audit, treasury, strategic planning,
information technology, transportation services, creative and
production services, etc.) have been charged to the Company by
Cablevision. Such costs charged to the Company have been
included in selling, general and administrative expenses.
Health
and Welfare Plans
Employees of the Company participate in health and welfare plans
sponsored by Cablevision. Health and welfare benefit costs have
generally been charged by Cablevision based upon the
proportionate number of participants in the plans. Such costs
charged to the Company have been included in technical and
operating expenses, and selling, general and administrative
expenses.
F-34
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Sales
Support Function
Cablevision provides affiliate sales support functions which
primarily include salaries, facilities, and general and
administrative costs to the Company.
Studio
Production Services
Cablevision provides various studio production services for the
Company.
Film
Library Usage
The Companys MSG Media segment has usage of the film
library of Cablevision.
Programming
and Production Services
Cablevision provides certain programming signal transmission and
production services to the Company. Such costs charged to the
Company have been included in technical and operating expenses.
Long-Term
Incentive Plans
Cablevision charges to the Company its proportionate share of
expenses related to Cablevisions long-term incentive
plans. Such amounts are included in selling, general and
administrative expenses in the combined statements of
operations. The long-term incentive plans are funded by the
Company and aggregate liabilities of $32,605 and $29,964,
related to these plans are included in current and long-term
accrued employee related costs in the Companys combined
balance sheets at December 31, 2008 and 2007, respectively.
These liabilities include certain performance based awards for
which the performance criteria had not been met as of
December 31, 2008 as such awards are based on achievement
of certain performance criteria through December 31, 2010.
The Company has accrued the amount that it currently believes
will ultimately be paid based upon the performance criteria
established for these performance based awards. If it is
subsequently determined that the performance criteria for such
awards is not probable of being achieved, the Company would
reverse the accrual in respect of such award at that time.
Risk
Management and General Insurance
Cablevision provides the Company with risk management and
general insurance.
Advances
to Cablevision
The Company has advances outstanding to a subsidiary of
Cablevision at December 31, 2008 and 2007 of $190,000 and
$130,000, respectively, in the form of non-interest bearing
advances which are classified as non-current advances due from
Cablevision in the accompanying combined balance sheets.
Treatment
of Long-Term Incentive Plans after the
Distribution
In 2008, 2007 and 2006, Cablevision granted three-year
performance awards to certain executive officers and other
members of management under Cablevisions 2006 Cash
Incentive Plan. The performance metrics in each employees
applicable award agreement are required to be adjusted to
reflect the exclusion of the Company from the business of
Cablevision. Amounts applicable to employees of the Company are
and will continue to be reflected as liabilities in the
Companys balance sheet until settled.
F-35
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Deferred compensation awards granted by Cablevision pursuant to
Cablevisions Long-Term Incentive Plan (which was
superseded by the Cash Incentive Plan in 2006) will be
similarly unaffected by the Distribution. Amounts applicable to
employees of the Company are and will continue to be reflected
as liabilities in the Companys balance sheet until settled.
|
|
Note 14.
|
Property
and Equipment
|
As of December 31, 2008 and 2007 property and equipment
(including equipment under capital leases) consisted of the
following assets, which are depreciated or amortized on a
straight-line basis over the estimated useful lives shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Estimated Useful Lives
|
|
Land (1)
|
|
$
|
67,918
|
|
|
$
|
66,172
|
|
|
|
Buildings (1)
|
|
|
183,385
|
|
|
|
188,529
|
|
|
7 to 32 years
|
Equipment (1)
|
|
|
218,418
|
|
|
|
201,370
|
|
|
2 to 15 years
|
Aircraft.
|
|
|
38,611
|
|
|
|
38,611
|
|
|
15 years
|
Furniture and fixtures (1)
|
|
|
14,756
|
|
|
|
11,920
|
|
|
3 to 8 years
|
Leasehold improvements
|
|
|
106,238
|
|
|
|
103,068
|
|
|
Shorter of term of lease or life of improvement
|
Construction in progress
|
|
|
39,958
|
|
|
|
7,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
669,284
|
|
|
|
617,151
|
|
|
|
Less accumulated depreciation and amortization
|
|
|
(344,778
|
)
|
|
|
(304,996
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
324,506
|
|
|
$
|
312,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Changes in the gross carrying amount for the year ended
December 31, 2008 reflect reclassifications among property
and equipment categories, as well as a decrease in total
property and equipment of $12,217 which reflects a
reclassification to intangible assets related to the
finalization of certain purchase price allocations associated
with The Chicago Theatre acquisition in October 2007.
|
Depreciation and amortization expense on property and equipment
(including capital leases) amounted to $42,559, $37,422 and
$40,194, respectively, for the years ended December 31,
2008, 2007 and 2006.
The Company has announced its intent to complete a major
renovation of the Arena. Through December 31, 2008, the
Company has incurred $24,324 in pre-construction planning and
development costs associated with the planned renovation which
are recorded in construction in progress. Depreciation is being
accelerated for the Arena assets that are planned to be removed
as a result of the Arena Renovation.
As of December 31, 2008 and 2007, the gross amount of
equipment and related accumulated depreciation recorded under
capital leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Equipment
|
|
$
|
13,351
|
|
|
$
|
12,710
|
|
Less accumulated depreciation
|
|
|
(7,621
|
)
|
|
|
(6,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,730
|
|
|
$
|
6,003
|
|
|
|
|
|
|
|
|
|
|
F-36
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
In 2008, a capital lease asset for transponder space was
transferred to the Company from certain Cablevision subsidiaries
which resulted in an increase in property and equipment, net, of
$640, an increase in a capital lease obligation for transponder
space of $785, and an increase in accounts receivable from
affiliates of $145.
In 2007, a capital lease asset for transponder space was
transferred to the Company from a subsidiary of Cablevision
which resulted in an increase in property and equipment, net, of
$3,467, an increase in a capital lease obligation for
transponder space of $3,573, and an increase in accounts
receivable from affiliates of $106.
The Company has recorded asset retirement obligations primarily
related to the estimated cost associated with the removal of
assets which will result from the Arena Renovation (see
Note 2). The changes in the carrying amount of asset
retirement obligations for the year ended December 31, 2008
and 2007 are as follows:
|
|
|
|
|
Balance as of December 31, 2006
|
|
$
|
10,139
|
|
Accretion expense
|
|
|
10
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
10,149
|
|
Additional obligations incurred
|
|
|
6,011
|
|
Revisions in estimated cash flows
|
|
|
3,232
|
|
Accretion expense
|
|
|
565
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
$
|
19,957
|
|
|
|
|
|
|
For the periods presented, the results of operations were
reflected in the consolidated federal and certain state income
tax returns of Cablevision. The income tax expense or benefit is
based on the taxable income of the Company on a separate return
basis.
F-37
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Income tax expense (benefit) is comprised of the following
components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Current expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
1,181
|
|
|
$
|
|
|
State & other
|
|
|
|
|
|
|
382
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,563
|
|
|
|
23
|
|
Deferred expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(1,259
|
)
|
|
|
27,397
|
|
|
|
(2,072
|
)
|
State & other
|
|
|
(10,128
|
)
|
|
|
16,071
|
|
|
|
876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,387
|
)
|
|
|
43,468
|
|
|
|
(1,196
|
)
|
Tax expense relating to uncertain tax positions, including
accrued interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
$
|
(11,387
|
)
|
|
$
|
45,031
|
|
|
$
|
(1,173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax expense (benefit) differs from the amount derived
by applying the statutory federal rate to pretax income
principally due to the effect of the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Federal tax expense (benefit) at statutory federal rate
|
|
$
|
(5,713
|
)
|
|
$
|
30,770
|
|
|
$
|
(4,911
|
)
|
State income taxes, net of federal benefit
|
|
|
(814
|
)
|
|
|
6,302
|
|
|
|
(300
|
)
|
Change in the estimated applicable corporate tax rate used to
determine deferred taxes
|
|
|
(5,769
|
)
|
|
|
4,385
|
|
|
|
869
|
|
Tax expense relating to uncertain tax positions, including
accrued interest, net of deferred tax benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Nondeductible disability insurance premiums expense and
(nontaxable) disability insurance recoveries, net
|
|
|
(1,555
|
)
|
|
|
2,362
|
|
|
|
2,310
|
|
Nondeductible expenses
|
|
|
2,464
|
|
|
|
1,212
|
|
|
|
859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
$
|
(11,387
|
)
|
|
$
|
45,031
|
|
|
$
|
(1,173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences which give rise to
significant portions of the deferred tax assets and liabilities
at December 31, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Deferred Tax Asset (Liability)
|
|
|
|
|
|
|
|
|
Investment in MSG L.P.
|
|
$
|
(483,352
|
)
|
|
$
|
(494,045
|
)
|
Net operating loss carry forwards
|
|
|
3,141
|
|
|
|
|
|
Compensation and benefit plans
|
|
|
8,276
|
|
|
|
6,365
|
|
Other
|
|
|
88
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
Net noncurrent deferred tax liability
|
|
$
|
(471,847
|
)
|
|
$
|
(487,591
|
)
|
|
|
|
|
|
|
|
|
|
F-38
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
Deferred tax assets have resulted from the Companys future
deductible temporary differences and net tax operating loss
carry forwards. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not
that some portion or all of the deferred tax asset will not be
realized. The Companys ability to realize its deferred tax
assets depends upon the generation of sufficient future taxable
income to allow for the utilization of its deductible temporary
differences and net tax operating loss carry forwards. If such
estimates and related assumptions change in the future, the
Company may be required to record valuation allowances against
its deferred tax assets, resulting in additional income tax
expense in the Companys statement of operations. At this
time, based on current facts and circumstances, management
believes that it is more likely than not that the Company will
realize benefit for its gross deferred tax assets.
The Company has not recorded any unrecognized tax benefit for
uncertain tax positions as of December 31, 2008.
Prior to the Distribution, Cablevision will transfer to the
Company the Cablevision subsidiaries which own, directly or
indirectly, all of the partnership interests in MSG L.P. Certain
adjustments to the deferred tax liability will be recorded as of
the Distribution date. Deferred tax assets and liabilities
presented have been measured using the estimated applicable
corporate tax rates historically used by Cablevision for the
periods presented. Due to the Companys significant
presence in the City of New York, the estimated applicable
corporate tax rates used to measure deferred taxes are expected
to be higher on a stand-alone basis. The resulting change in the
Companys deferred tax assets and liabilities will be
recorded as an adjustment to equity as of the Distribution date.
In addition, presenting the income tax expense and deferred
taxes on a separate return basis results in a difference between
the net operating loss carry forward reflected in the deferred
tax asset and the actual deferred tax asset for such carry
forwards under the applicable tax laws because the operations of
the Company were included in the consolidated federal income tax
returns of Cablevision for all periods presented. Such inclusion
results in utilization of tax losses each year to offset the
taxable income of other members in the Cablevision federal
consolidated group that are not included in these financial
statements. As a result, the net operating loss carry forwards
and associated deferred tax asset will be lower. This reduction
in the Companys deferred tax asset will be reflected as an
adjustment to equity as of the Distribution date. The Company
will have an insignificant amount of tax net operating losses
immediately subsequent to the Distribution.
|
|
Note 16.
|
Segment
Information
|
As discussed in Note 1, the Company classifies its business
interests into three reportable segments which are MSG Media,
MSG Entertainment and MSG Sports.
The Company allocates certain corporate costs to all of its
reportable segments. In addition, the Company allocates its
venue operating expenses to its MSG Entertainment and MSG Sports
segments. Venue operating costs include the non-event related
costs of operating the Companys venues, and includes such
costs as rent, real estate taxes, insurance, utilities, repairs
and maintenance and labor related to the overall management of
the venues. Depreciation related to The Garden and The Theater
at Madison Square Garden is not allocated to the reportable
segments and is recognized in All other.
The Company conducts a significant portion of its operations at
venues that are either owned or operated by it under long-term
leases. The Company owns The Garden and The Theater at Madison
Square Garden which are in New York City and The Chicago Theatre
in Chicago. It leases Radio City Music Hall and the Beacon
Theatre in New York City. The Company also has a booking
agreement with respect to the Wang Theatre in Boston.
F-39
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
The Company evaluates segment performance based on several
factors, of which the primary financial measure is their
operating income (loss) before depreciation and amortization,
share-based compensation expense or benefit and restructuring
charges or credits, which is referred to as adjusted operating
cash flow, a non-GAAP measure. The Company has presented the
components that reconcile adjusted operating cash flow to
operating income (loss), an accepted GAAP measure. Information
as to the operations of the Companys reportable segments
is set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenues, net
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
430,004
|
|
|
$
|
391,522
|
|
|
$
|
370,321
|
|
MSG Entertainment
|
|
|
307,816
|
|
|
|
316,292
|
|
|
|
252,965
|
|
MSG Sports
|
|
|
369,333
|
|
|
|
355,798
|
|
|
|
343,343
|
|
Inter-segment eliminations
|
|
|
(64,195
|
)
|
|
|
(61,430
|
)
|
|
|
(61,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,042,958
|
|
|
$
|
1,002,182
|
|
|
$
|
905,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Inter-segment revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
MSG Entertainment
|
|
|
99
|
|
|
|
97
|
|
|
|
74
|
|
MSG Sports
|
|
|
64,096
|
|
|
|
61,333
|
|
|
|
61,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
64,195
|
|
|
$
|
61,430
|
|
|
$
|
61,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inter-segment eliminations are primarily local television rights
recognized by the Companys MSG Sports segment from the
licensing of team programming to the Companys MSG Media
segment.
Reconciliation
(by Segment and in Total) of Adjusted Operating Cash Flow to
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Adjusted operating cash flow
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
112,117
|
|
|
$
|
108,408
|
|
|
$
|
101,345
|
|
MSG Entertainment
|
|
|
10,636
|
|
|
|
49,817
|
|
|
|
46,018
|
|
MSG Sports
|
|
|
(30,883
|
)
|
|
|
6,858
|
|
|
|
(67,009
|
)
|
All other (a)
|
|
|
(31,149
|
)
|
|
|
(13,617
|
)
|
|
|
(19,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,721
|
|
|
$
|
151,466
|
|
|
$
|
60,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
22,451
|
|
|
$
|
21,067
|
|
|
$
|
22,220
|
|
MSG Entertainment
|
|
|
9,407
|
|
|
|
8,718
|
|
|
|
6,322
|
|
MSG Sports
|
|
|
10,706
|
|
|
|
11,783
|
|
|
|
12,013
|
|
All other (b)
|
|
|
23,667
|
|
|
|
20,655
|
|
|
|
24,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
66,231
|
|
|
$
|
62,223
|
|
|
$
|
64,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
4,202
|
|
|
$
|
4,567
|
|
|
$
|
6,282
|
|
MSG Entertainment
|
|
|
3,692
|
|
|
|
3,094
|
|
|
|
4,127
|
|
MSG Sports
|
|
|
4,838
|
|
|
|
4,054
|
|
|
|
5,408
|
|
All other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,732
|
|
|
$
|
11,715
|
|
|
$
|
15,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Restructuring expense
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
|
|
|
$
|
221
|
|
|
$
|
143
|
|
MSG Entertainment
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Sports
|
|
|
|
|
|
|
|
|
|
|
|
|
All other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
221
|
|
|
$
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
85,464
|
|
|
$
|
82,553
|
|
|
$
|
72,700
|
|
MSG Entertainment
|
|
|
(2,463
|
)
|
|
|
38,005
|
|
|
|
35,569
|
|
MSG Sports
|
|
|
(46,427
|
)
|
|
|
(8,979
|
)
|
|
|
(84,430
|
)
|
All other
|
|
|
(54,816
|
)
|
|
|
(34,272
|
)
|
|
|
(43,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(18,242
|
)
|
|
$
|
77,307
|
|
|
$
|
(19,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
A reconciliation of reportable segment amounts to the
Companys combined balances is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Operating income (loss) before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income for reportable segments
|
|
$
|
36,574
|
|
|
$
|
111,579
|
|
|
$
|
23,839
|
|
Other operating loss
|
|
|
(54,816
|
)
|
|
|
(34,272
|
)
|
|
|
(43,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(18,242
|
)
|
|
|
77,307
|
|
|
|
(19,994
|
)
|
Items excluded from operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5,193
|
|
|
|
15,217
|
|
|
|
11,231
|
|
Interest expense
|
|
|
(3,274
|
)
|
|
|
(3,610
|
)
|
|
|
(5,019
|
)
|
Miscellaneous expense
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
(250
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
$
|
(16,323
|
)
|
|
$
|
87,914
|
|
|
$
|
(14,032
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
11,413
|
|
|
$
|
9,875
|
|
|
$
|
3,725
|
|
MSG Entertainment
|
|
|
15,234
|
|
|
|
6,875
|
|
|
|
11,664
|
|
MSG Sports
|
|
|
860
|
|
|
|
593
|
|
|
|
609
|
|
All other
|
|
|
27,685
|
|
|
|
12,764
|
|
|
|
7,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
55,192
|
|
|
$
|
30,107
|
|
|
$
|
23,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Consists of legal fees and litigation settlement costs of
$24,262, $16,351 and $8,236 in 2008, 2007 and 2006,
respectively, as well as unallocated corporate general and
administrative costs of $6,887, $13,139 and $11,157 in 2008,
2007 and 2006, respectively, and a $15,873 gain on curtailment
of Pension Plans for the year ended December 31, 2007.
|
|
(b)
|
|
Principally includes depreciation and amortization expense on
The Garden and certain corporate property, equipment and
leasehold improvement assets not allocated to the Companys
reportable segments.
|
Substantially all revenues and assets of the Companys
reportable segments are attributed to or located in the United
States and are primarily concentrated in the New York
metropolitan area.
|
|
Note 17.
|
Concentrations
of Risk
|
Financial instruments that may potentially subject the Company
to a concentration of credit risk consist primarily of cash and
cash equivalents and accounts receivable. Cash and cash
equivalents are invested in money market funds and bank time
deposits. The Company monitors the financial institutions and
money market funds where it invests its cash and cash
equivalents with diversification among counterparties to
mitigate exposure to any single financial institution. The
Companys emphasis is primarily on safety of principal and
liquidity and secondarily on maximizing the yield on its
investments. The Company did not have a single non-affiliated
customer that represented 10% or more of its combined net
revenues for the years ended December 31, 2008, 2007 and
2006. As discussed in Note 13, revenues from Cablevision
amounted to $121,059, $105,035 and $94,911 for the years ended
December 31, 2008, 2007 and 2006, respectively, which
represent 12%, 10% and 10%, respectively, of the Companys
combined net revenues. The Company has
F-42
MADISON
SQUARE GARDEN, INC.
(a
combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO
COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
advances outstanding to a subsidiary of Cablevision at
December 31, 2008 and 2007 of $190,000 and $130,000,
respectively, in the form of non-interest bearing advances which
are classified as non-current advances due from Cablevision in
the accompanying combined balance sheets. The following
individual non-affiliated customers accounted for the following
percentages of the Companys combined accounts receivable
balances:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
Customer A
|
|
|
12
|
%
|
|
|
11
|
%
|
Customer B
|
|
|
10
|
%
|
|
|
12
|
%
|
As of December 31, 2008, approximately
5,000 employees, which represents a substantial portion of
the Companys workforce, are subject to collective
bargaining agreements. Approximately 2% are subject to
collective bargaining agreements that expired as of
December 31, 2008 and approximately 13% are subject to
collective bargaining agreements that will expire as of
December 31, 2009 if they are not extended prior thereto.
|
|
Note 18.
|
Interim
Financial Information (Unaudited)
|
The following is a summary of the Companys selected
quarterly financial data for the years ended December 31,
2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
Total
|
|
2008:
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
Revenues, net
|
|
$
|
275,336
|
|
|
$
|
209,246
|
|
|
$
|
160,818
|
|
|
$
|
397,558
|
|
|
$
|
1,042,958
|
|
Operating expenses
|
|
|
(293,499
|
)
|
|
|
(206,955
|
)
|
|
|
(169,814
|
)
|
|
|
(390,932
|
)
|
|
|
(1,061,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
(18,163
|
)
|
|
$
|
2,291
|
|
|
$
|
(8,996
|
)
|
|
$
|
6,626
|
|
|
$
|
(18,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(11,519
|
)
|
|
$
|
2,448
|
|
|
$
|
(7,122
|
)
|
|
$
|
11,257
|
|
|
$
|
(4,936
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
Total
|
|
2007:
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
Revenues, net
|
|
$
|
254,462
|
|
|
$
|
190,221
|
|
|
$
|
149,762
|
|
|
$
|
407,737
|
|
|
$
|
1,002,182
|
|
Operating expenses
|
|
|
(257,605
|
)
|
|
|
(183,696
|
)
|
|
|
(150,981
|
)
|
|
|
(332,593
|
)
|
|
|
(924,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
(3,143
|
)
|
|
$
|
6,525
|
|
|
$
|
(1,219
|
)
|
|
$
|
75,144
|
|
|
$
|
77,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(708
|
)
|
|
$
|
5,039
|
|
|
$
|
1,011
|
|
|
$
|
37,541
|
|
|
$
|
42,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deductions/
|
|
|
|
|
|
|
Balance at
|
|
|
Provision
|
|
|
Write-Offs
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
for Bad
|
|
|
and Other
|
|
|
End of
|
|
|
|
of Period
|
|
|
Debt
|
|
|
Charges
|
|
|
Period
|
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
(3,164
|
)
|
|
$
|
(2
|
)
|
|
$
|
846
|
|
|
$
|
(2,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
(2,701
|
)
|
|
$
|
(1,187
|
)
|
|
$
|
724
|
|
|
$
|
(3,164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
(3,343
|
)
|
|
$
|
(408
|
)
|
|
$
|
1,050
|
|
|
$
|
(2,701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
72,667
|
|
|
$
|
70,726
|
|
Restricted cash
|
|
|
13,769
|
|
|
|
5,845
|
|
Accounts receivable (less allowance for doubtful accounts of
$1,963 and $2,320)
|
|
|
95,925
|
|
|
|
133,632
|
|
Net receivable due from Cablevision
|
|
|
7,699
|
|
|
|
8,115
|
|
Prepaid expenses
|
|
|
49,957
|
|
|
|
36,088
|
|
Other current assets
|
|
|
39,263
|
|
|
|
22,423
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
279,280
|
|
|
|
276,829
|
|
Advances due from Cablevision
|
|
|
190,000
|
|
|
|
190,000
|
|
Property and equipment, net of accumulated depreciation of
$375,772 and $344,778
|
|
|
330,725
|
|
|
|
324,506
|
|
Other assets
|
|
|
141,662
|
|
|
|
140,842
|
|
Amortizable intangible assets, net of accumulated amortization
of $102,488 and $106,009
|
|
|
152,624
|
|
|
|
167,576
|
|
Indefinite-lived intangible assets
|
|
|
158,096
|
|
|
|
158,096
|
|
Goodwill
|
|
|
742,492
|
|
|
|
742,492
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,994,879
|
|
|
$
|
2,000,341
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND COMBINED GROUP EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,101
|
|
|
$
|
7,893
|
|
Accrued liabilities
|
|
|
135,890
|
|
|
|
186,450
|
|
Deferred revenue
|
|
|
163,141
|
|
|
|
122,436
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
303,132
|
|
|
|
316,779
|
|
Other liabilities
|
|
|
134,279
|
|
|
|
139,092
|
|
Deferred tax liability
|
|
|
469,708
|
|
|
|
471,847
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
907,119
|
|
|
|
927,718
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Combined Group Equity:
|
|
|
|
|
|
|
|
|
Paid-in capital
|
|
|
1,038,599
|
|
|
|
1,027,726
|
|
Retained earnings
|
|
|
54,485
|
|
|
|
50,224
|
|
Accumulated other comprehensive loss
|
|
|
(5,324
|
)
|
|
|
(5,327
|
)
|
|
|
|
|
|
|
|
|
|
Combined group equity
|
|
|
1,087,760
|
|
|
|
1,072,623
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,994,879
|
|
|
$
|
2,000,341
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed combined financial
statements.
F-45
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
Revenues, net (including revenues, net from Cablevision of
$95,002 and $90,662)
|
|
$
|
650,418
|
|
|
$
|
645,400
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Technical and operating (excluding depreciation and amortization
shown below and including expenses from Cablevision of $23,047
and $23,641)
|
|
|
401,149
|
|
|
|
418,434
|
|
Selling, general and administrative (including expenses from
Cablevision of $51,780 and $51,318)
|
|
|
202,245
|
|
|
|
202,258
|
|
Depreciation and amortization
|
|
|
45,973
|
|
|
|
49,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,367
|
|
|
|
670,268
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
1,051
|
|
|
|
(24,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
|
|
(931
|
)
|
|
|
2,051
|
|
Miscellaneous
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069
|
|
|
|
2,051
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
|
2,120
|
|
|
|
(22,817
|
)
|
Income tax benefit
|
|
|
2,141
|
|
|
|
6,624
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,261
|
|
|
$
|
(16,193
|
)
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed combined financial
statements.
F-46
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
|
(Unaudited)
|
|
|
Balance at December 31, 2008
|
|
$
|
1,027,726
|
|
|
$
|
50,224
|
|
|
$
|
(5,327
|
)
|
|
$
|
1,072,623
|
|
Net income
|
|
|
|
|
|
|
4,261
|
|
|
|
|
|
|
|
4,261
|
|
Pension and postretirement plan liability adjustments, net of
taxes
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,264
|
|
Deemed capital contribution related to the allocation of
Cablevision share-based compensation expense
|
|
|
10,781
|
|
|
|
|
|
|
|
|
|
|
|
10,781
|
|
Deemed capital distribution related to income taxes
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
(56
|
)
|
Capital contribution
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009
|
|
$
|
1,038,599
|
|
|
$
|
54,485
|
|
|
$
|
(5,324
|
)
|
|
$
|
1,087,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed combined financial
statements.
F-47
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,261
|
|
|
$
|
(16,193
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
45,973
|
|
|
|
49,576
|
|
Cablevision share-based compensation expense allocations, net
|
|
|
10,781
|
|
|
|
10,202
|
|
Amortization of purchase accounting liability related to
unfavorable contracts
|
|
|
(1,344
|
)
|
|
|
(1,604
|
)
|
Deemed capital contribution (distribution) related to income
taxes
|
|
|
(56
|
)
|
|
|
411
|
|
Provision for doubtful accounts
|
|
|
436
|
|
|
|
(200
|
)
|
Changes in other assets and liabilities
|
|
|
(20,104
|
)
|
|
|
773
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
39,947
|
|
|
|
42,965
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(37,240
|
)
|
|
|
(26,007
|
)
|
Payments for acquisition of an equity interest
|
|
|
|
|
|
|
(37,632
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(37,240
|
)
|
|
|
(63,639
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Advances to Cablevision
|
|
|
|
|
|
|
(60,000
|
)
|
Principal payments on capital lease obligations
|
|
|
(914
|
)
|
|
|
(818
|
)
|
Capital contributions from (distributions to) Cablevision
|
|
|
148
|
|
|
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(766
|
)
|
|
|
(60,994
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
1,941
|
|
|
|
(81,668
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
70,726
|
|
|
|
155,381
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
72,667
|
|
|
$
|
73,713
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed combined financial
statements.
F-48
|
|
Note 1.
|
Nature of
Operations and Basis of Presentation
|
Madison Square Garden, Inc. and its subsidiaries (the
Company or Madison Square Garden)
represents a combination of certain media, entertainment and
sports businesses and assets owned and operated as integral
parts of Cablevision Systems Corporation (Cablevision Systems
Corporation and its subsidiaries are referred to as
Cablevision), consisting of the following reportable
segments:
|
|
|
|
|
MSG Media.
MSG Media produces and develops
content for multiple distribution platforms, including content
originating from the Companys venues. This business
consists of programming networks and interactive offerings,
including the MSG Networks (MSG network, MSG Plus, MSG HD and
MSG Plus HD) and the Fuse Networks (Fuse and Fuse HD). The MSG
Networks are home to seven professional sports teams: the New
York Knicks, New York Rangers, New York Liberty, New York
Islanders, New Jersey Devils, Buffalo Sabres and New York Red
Bulls, as well as to the Companys other programming. Fuse
is a multi-platform music network that focuses on music-related
programming. Also included in MSG Media is an interactive
business, which includes a group of targeted websites (including
msg.com, thegarden.com, radiocity.com, nyknicks.com,
newyorkrangers.com and fuse.tv) and wireless, video on demand
and digital platforms for all of the Companys properties.
|
|
|
|
MSG Entertainment.
MSG Entertainment creates,
produces
and/or
presents a variety of live productions, including the
Radio
City Christmas Spectacular
, featuring the Radio City
Rockettes, and Cirque du Soleils
Wintuk
. MSG
Entertainment also presents or hosts other live entertainment
events, such as concerts, family shows, special events and
theatrical productions in the Companys venues.
|
|
|
|
MSG Sports.
MSG Sports owns and operates
sports franchises, including the New York Knicks of the National
Basketball Association (NBA), the New York Rangers
of the National Hockey League (NHL), the New York
Liberty of the Womens National Basketball Association
(WNBA), and the Hartford Wolf Pack of the American
Hockey League (AHL), which is the primary player
development team for the Rangers. The Knicks, Rangers and
Liberty play their home games at the arena in the Madison Square
Garden complex (the Arena or The
Garden). MSG Sports also features other live sporting
events.
|
The Company conducts a significant portion of its operations at
venues which are either owned or operated by it under long-term
leases. The Company owns the Madison Square Garden complex in
New York City, which includes the Arena and a theater (The
Theater at Madison Square Garden), and The Chicago Theatre
in Chicago. It leases Radio City Music Hall and the Beacon
Theatre in New York City. The Company also has a booking
agreement with respect to the Wang Theatre in Boston.
On July 29, 2009, Cablevisions board of directors
authorized Cablevisions management to take all actions
necessary or appropriate to pursue a transaction in which
Cablevision will transfer to the Company the Cablevision
subsidiaries which own, directly or indirectly, all of the
partnership interests in Madison Square Garden, L.P. (MSG
L.P.), the subsidiary through which Cablevision conducts
the businesses described above, and subsequently spin-off the
Company as a publicly held entity (the Distribution)
subject, among other things, to final Board approval of the
Distribution. Immediately prior to the Distribution, the Company
will be an indirect wholly-owned subsidiary of Cablevision. The
Company will own these businesses and assets and will become a
public company on the date of the Distribution. Holders of
record of Cablevision NY Group Class A Common Stock as of
the close of business on the record date for the Distribution
will receive one share of Madison Square Garden Class A
Common Stock for each shares
of Cablevision NY Group Class A Common Stock held. Holders
of record of Cablevision NY Group Class B Common Stock as
of the
F-49
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
close of business on the record date will receive one share of
Madison Square Garden Class B Common Stock for
each shares of Cablevision NY
Group Class B Common Stock held.
|
|
Note 2.
|
Responsibility
for Interim Financial Statements
|
The accompanying unaudited condensed combined financial
statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of
America (GAAP) and with the instructions to
Form 10-Q
and Article 10 of
Regulation S-X
for interim financial information. Accordingly, these financial
statements do not include all the information and notes required
for complete annual financial statements.
The interim condensed combined financial statements should be
read in conjunction with the audited combined financial
statements and notes thereto for the year ended
December 31, 2008.
The condensed combined financial statements as of
September 30, 2009 and for the nine months ended
September 30, 2009 and 2008 presented herein are unaudited;
however, in the opinion of management, such statements include
all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of the results
for the periods presented.
The results of operations for the interim periods are not
necessarily indicative of the results that might be expected for
future interim periods or for the full year ended
December 31, 2009.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
|
|
Note 3.
|
Recently
Adopted Accounting Pronouncements
|
In June 2009, the Financial Accounting Standards Board
(FASB) issued guidance now codified under Accounting
Standards Codification (ASC) Topic
105-10,
which establishes the FASB Accounting Standards Codification
(the Codification) as the source of authoritative
accounting principles recognized by the FASB to be applied in
the preparation of financial statements in conformity with GAAP.
ASC Topic
105-10
explicitly recognizes rules and interpretive releases of the
Securities and Exchange Commission (SEC) under
federal securities laws as authoritative GAAP for SEC
registrants. Upon adoption of this guidance under ASC Topic
105-10,
the
Codification superseded all then-existing non-SEC accounting and
reporting standards. All other non-grandfathered non-SEC
accounting literature not included in the Codification became
non-authoritative. The guidance under ASC Topic
105-10
became effective for the Company as of September 30, 2009.
References made to authoritative FASB guidance throughout this
document have been updated to the applicable Codification
section.
In December 2007, the FASB issued guidance now codified under
ASC Topic 805. ASC Topic 805 requires an acquirer to recognize
the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date.
Additionally, in April 2009, the FASB issued guidance now
codified under ASC Topic
805-20
to
address some of the application issues under ASC Topic 805. ASC
Topic
805-20
sets forth the requirements associated with the initial
recognition and measurement of an asset acquired or a liability
assumed in a business combination that arises from a contingency
(provided the fair value on the date of acquisition of the
related asset or liability can be determined). Both the guidance
under ASC Topics 805 and
805-20
became effective as of January 1, 2009 for the Company.
Accordingly, any business combination completed prior to
January 1, 2009 was accounted for
F-50
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
pursuant to Statement of Financial Accounting
Standards No. 141, Business Combinations. Business
combinations completed subsequent to January 1, 2009 will
be accounted for pursuant to ASC Topics 805 and
805-20.
The
impact that ASC Topics 805 and
805-20
will
have on the Companys combined financial statements will
depend upon the nature, terms and size of such business
combinations, if any.
In September 2006, the FASB issued guidance now codified under
ASC Topic 820. ASC Topic 820 defines fair value, establishes a
framework for measuring fair value in GAAP, and expands
disclosures about fair value measurements. Under ASC Topic 820,
fair value refers to the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants in the market in which the reporting
entity transacts. It also clarifies the principle that fair
value should be based on the assumptions market participants
would use when pricing the asset or liability. ASC Topic 820
applies under other accounting pronouncements that require or
permit fair value measurements. Accordingly, ASC Topic 820 does
not require any new fair value measurements. The guidance under
ASC Topic 820 became effective for the Company on
January 1, 2008 with respect to financial assets and
financial liabilities. The additional disclosures required by
ASC Topic 820 are included in Note 7. The adoption of the
guidance now codified under ASC Topic 820 for nonfinancial
assets and nonfinancial liabilities, which include goodwill,
intangible assets, and long-lived assets measured at fair value
for impairment assessments, and nonfinancial assets and
nonfinancial liabilities initially measured at fair value in a
business combination, became effective for the Company on
January 1, 2009 and did not have an effect on the
Companys combined financial position or results of
operations.
In May 2009, the FASB issued guidance now codified under ASC
Topic
855-10,
which requires an entity after the balance sheet date to
evaluate events or transactions that may occur for potential
recognition or disclosure in its financial statements. ASC Topic
855-10
determines the circumstances under which the entity shall
recognize these events or transactions in its financial
statements and provides the disclosures that an entity shall
make about them including disclosing the date through which the
entity evaluated these events or transactions, as well as
whether that date is the date the entitys financial
statements were issued or the date the financial statements were
available to be issued. The guidance under ASC Topic
855-10
became effective for the Company as of June 30, 2009. The
Company evaluated all events or transactions that occurred after
September 30, 2009 up through January 8, 2010, the
date the Company issued these condensed combined financial
statements.
In April 2009, the FASB issued guidance now codified under ASC
Topic
825-10,
to
require disclosures about fair value of financial instruments
for interim reporting periods of publicly-traded companies, as
well as in annual financial statements. ASC Topic
825-10
also
amends the disclosure requirements of ASC Topic
270-10
,
to require those disclosures in summarized financial
information at interim reporting periods. The disclosure
requirements of the guidance under
ASC Topic 825-10,
which became effective for the Company as of June 30, 2009,
are reflected in these notes to condensed combined financial
statements.
In April 2008, the FASB issued guidance now codified under ASC
Topics
350-30
and
275-10,
which amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under ASC Topic 350. The
guidance under ASC Topics
350-30
and
275-10
became effective as of January 1, 2009 for the Company. The
adoption of the guidance under ASC Topics
350-30
and
275-10
did
not have an effect on the Companys combined financial
statements.
In April 2009, the FASB issued guidance under ASC Topic
820-10,
which amends guidance under ASC Topic 820 to provide additional
guidance on (i) estimating fair value when the volume and
level of activity for an asset or liability have significantly
decreased in relation to normal market activity for the asset or
liability,
F-51
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
and (ii) circumstances that may indicate that a transaction
is not orderly. The guidance under ASC Topic
820-10
also
requires additional disclosures about fair value measurements in
interim and annual reporting periods. The guidance under ASC
Topic
820-10
became effective for the Company for the quarter ended
June 30, 2009, and the adoption of the guidance under ASC
Topic
820-10
did not have an effect on the Companys combined financial
statements.
In December 2007, the FASB issued guidance now codified under
ASC Topic
808-10,
which defines collaborative arrangements and establishes
reporting requirements for transactions between participants in
a collaborative arrangement and between participants in the
arrangement and third parties. ASC Topic
808-10
also
establishes the appropriate income statement presentation and
classification for joint operating activities and payments
between participants, as well as the disclosure requirements
related to these arrangements. The guidance under ASC Topic
808-10
became effective as of January 1, 2009 for the Company. The
adoption of the guidance under ASC Topic
808-10
did
not have an effect on the Companys combined financial
statements.
In June 2008, the Company purchased a minority ownership
interest in a company for $37,632, which is accounted for under
the cost method. During the nine months ended September 30,
2009, the Company received a $2,000 dividend representing the
distribution of earnings from this cost method investment which
was recognized in miscellaneous income in the condensed combined
statement of operations. As of September 30, 2009, this
investment is recognized as a component of other assets in the
accompanying condensed combined balance sheet. It was not
practicable for the Company to estimate the fair value of this
minority ownership interest.
The Company considers the balance of its investment in funds
that substantially hold securities that mature within three
months or less from the date the fund purchases these securities
to be cash equivalents. The carrying amount of cash equivalents
either approximates fair value due to the short-term maturities
of these instruments or are at fair value.
During the nine months ended September 30, 2009 and 2008,
the Companys non-cash investing and financing activities
and other supplemental data were as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Deemed capital contributions, net primarily related to
allocation of Cablevision share-based compensation expense and
income taxes
|
|
$
|
10,725
|
|
|
$
|
10,599
|
|
Asset retirement obligations
|
|
|
|
|
|
|
9,243
|
|
Leasehold improvements paid by landlord
|
|
|
|
|
|
|
1,688
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
Income taxes refunded, net
|
|
|
|
|
|
|
(5
|
)
|
Interest paid for capital lease obligations
|
|
|
459
|
|
|
|
468
|
|
F-52
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
Note 6.
|
Intangible
Assets
|
The following table summarizes information relating to the
Companys intangible assets as of September 30, 2009
and December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
Estimated
|
|
|
2009
|
|
2008
|
|
Useful Lives
|
|
Gross carrying amount of amortizable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliation agreements and affiliate relationships (1)
|
|
$
|
124,770
|
|
|
$
|
143,243
|
|
|
|
4 to 24 years
|
|
Season ticket holder relationships
|
|
|
75,005
|
|
|
|
75,005
|
|
|
|
10 to 15 years
|
|
Suite holder relationships
|
|
|
15,394
|
|
|
|
15,394
|
|
|
|
11 years
|
|
Broadcast rights
|
|
|
15,209
|
|
|
|
15,209
|
|
|
|
10 years
|
|
Other intangibles
|
|
|
24,734
|
|
|
|
24,734
|
|
|
|
5 to 15 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255,112
|
|
|
|
273,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliation agreements and affiliate relationships (1)
|
|
|
(44,063
|
)
|
|
|
(55,833
|
)
|
|
|
|
|
Season ticket holder relationships
|
|
|
(25,014
|
)
|
|
|
(20,927
|
)
|
|
|
|
|
Suite holder relationships
|
|
|
(6,295
|
)
|
|
|
(5,246
|
)
|
|
|
|
|
Broadcast rights
|
|
|
(10,801
|
)
|
|
|
(9,661
|
)
|
|
|
|
|
Other intangibles
|
|
|
(16,315
|
)
|
|
|
(14,342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102,488
|
)
|
|
|
(106,009
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable intangible assets, net of accumulated amortization
|
|
|
152,624
|
|
|
|
167,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Sports franchises (MSG Sports segment)
|
|
|
96,215
|
|
|
|
96,215
|
|
|
|
|
|
Trademarks (MSG Entertainment segment)
|
|
|
61,881
|
|
|
|
61,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets
|
|
|
158,096
|
|
|
|
158,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
742,492
|
|
|
|
742,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
1,053,212
|
|
|
$
|
1,068,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
During the nine months ended September 30, 2009, the
Company wrote-off fully amortized intangible assets related to
certain affiliation agreements.
|
F-53
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
Aggregate amortization expense for intangible assets amounted to
$14,952 and $17,886 for the nine months ended September 30,
2009 and 2008, respectively.
|
|
|
|
|
Estimated Amortization Expense:
|
|
|
|
|
For the year ended December 31, 2009
|
|
$
|
19,549
|
|
For the year ended December 31, 2010
|
|
|
17,629
|
|
For the year ended December 31, 2011
|
|
|
17,224
|
|
For the year ended December 31, 2012
|
|
|
14,434
|
|
For the year ended December 31, 2013
|
|
|
10,574
|
|
|
|
Note 7.
|
Fair
Value Measurement
|
The Company adopted the guidance under ASC Topic 820 on
January 1, 2008 for certain financial assets and financial
liabilities. ASC Topic 820 requires enhanced disclosures
about assets and liabilities measured at fair value. As noted in
Note 3 above, the Company adopted the guidance under ASC
Topic 820 with respect to its nonfinancial assets and
nonfinancial liabilities on January 1, 2009. However, there
were no nonfinancial assets or nonfinancial liabilities
requiring initial measurement or subsequent remeasurement for
the nine months ended September 30, 2009.
The fair value hierarchy, as outlined in the guidance under ASC
Topic 820, is based on inputs to valuation techniques that are
used to measure fair value that are either observable or
unobservable. Observable inputs reflect assumptions market
participants would use in pricing an asset or liability based on
market data obtained from independent sources while unobservable
inputs reflect a reporting entitys pricing based upon
their own market assumptions. The fair value hierarchy consists
of the following three levels:
|
|
|
|
|
Level I Quoted prices for identical instruments
in active markets.
|
|
|
|
Level II Quoted prices for similar instruments
in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived
valuations whose inputs are observable or whose significant
value drivers are observable.
|
|
|
|
Level III Instruments whose significant value
drivers are unobservable.
|
The following table presents for each of these hierarchy levels,
the Companys financial assets that are measured at fair
value on a recurring basis at September 30, 2009 and
December 31, 2008:
At September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
|
|
|
$
|
67,756
|
|
|
$
|
|
|
|
$
|
67,756
|
|
At December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
|
|
|
$
|
73,852
|
|
|
$
|
|
|
|
$
|
73,852
|
|
The Companys cash equivalents are classified within
Level II of the fair value hierarchy because they are
valued primarily on inputs that can be observed with market
price information and other relevant information from
third-party pricing services.
F-54
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
Components of net periodic benefit cost for the Companys
qualified and non-qualified defined benefit pension plans (the
Pension Plans) and postretirement benefit plan (the
Postretirement Plan) for the nine months ended
September 30, 2009 and 2008, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
Postretirement Plan
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
$
|
293
|
|
|
$
|
267
|
|
|
$
|
177
|
|
|
$
|
189
|
|
Interest cost
|
|
|
3,960
|
|
|
|
3,638
|
|
|
|
252
|
|
|
|
249
|
|
Expected return on plan assets
|
|
|
(1,713
|
)
|
|
|
(3,478
|
)
|
|
|
|
|
|
|
|
|
Recognized actuarial loss (gain)
|
|
|
146
|
|
|
|
48
|
|
|
|
(42
|
)
|
|
|
(51
|
)
|
Amortization of unrecognized prior service cost (credit) and
transition asset
|
|
|
2
|
|
|
|
|
|
|
|
(99
|
)
|
|
|
(99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
2,688
|
|
|
$
|
475
|
|
|
$
|
288
|
|
|
$
|
288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2009, the Company
contributed $285 to two non-contributory qualified defined
benefit pension plans covering certain of the Companys
union employees.
The Company operated as a partnership during the periods
presented. However, the income tax expense or benefit and
deferred tax liability presented are determined as if Madison
Square Garden, Inc. had owned all of the partnership interests
in MSG L.P. for all periods presented notwithstanding that
the contribution of such interests in MSG L.P. had not yet
occurred. The Companys provision for income taxes is based
on current period income and changes in deferred tax assets and
liabilities.
Income tax benefit for the nine months ended September 30, 2009
and 2008 of $2,141 and $6,624, respectively, differs from the
income tax benefit derived from applying the federal statutory
rate to the pretax income or loss due principally to state
income taxes, tax benefit of $3,229 recorded in the third
quarter of 2009 resulting from a change in the rate used to
measure deferred taxes, tax benefit resulting from nontaxable
disability insurance proceeds of $741 in the 2009 period, tax
expense of $594 resulting from nondeductible disability
insurance premiums in the 2008 period and tax expense resulting
from nondeductible expenses of $1,312 and $1,728 for the nine
months ended September 30, 2009 and 2008, respectively.
Upon the Distribution date, certain adjustments to the deferred
tax liability will be recorded as an adjustment to equity. These
adjustments primarily relate to: (i) the difference in the
deferred tax asset for tax net operating loss carry forwards
based upon the separate return method as compared to the amount
determined under applicable federal tax law and (ii) a
difference resulting from using an estimated applicable
corporate tax rate to measure deferred tax assets and
liabilities based on the state income tax apportionment factors
of the Company as compared to the historical estimated
applicable corporate tax rates used by Cablevision. The Company
will have an insignificant amount of tax net operating loss
carry forwards immediately subsequent to the Distribution.
|
|
Note 10.
|
Segment
Information
|
As discussed in Note 1, the Company classifies its business
interests into three reportable segments which are MSG Media,
MSG Entertainment and MSG Sports.
F-55
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
The Company allocates certain corporate costs to all of its
reportable segments. In addition, the Company allocates its
venue operating expenses to its MSG Entertainment and MSG Sports
segments. Venue operating costs include the non-event related
costs of operating the Companys venues, and includes such
costs as rent, real estate taxes, insurance, utilities, repairs
and maintenance and labor related to the overall management of
the venues. Depreciation related to The Garden and The Theater
at Madison Square Garden is not allocated to the reportable
segments and is recognized in All other.
The Company conducts a significant portion of its operations at
venues that are either owned or operated by it under long-term
leases. The Company owns The Garden and The Theater at Madison
Square Garden which are in New York City and The Chicago Theatre
in Chicago. It leases Radio City Music Hall and the Beacon
Theatre in New York City. The Company also has a booking
agreement with respect to the Wang Theatre in Boston.
The Company evaluates segment performance based on several
factors, of which the primary financial measure is their
operating income (loss) before depreciation and amortization,
share-based compensation expense or benefit and restructuring
charges or credits, which is referred to as adjusted operating
cash flow, a non-GAAP measure. The Company has presented the
components that reconcile adjusted operating cash flow to
operating income (loss), an accepted GAAP measure. Information
as to the operations of the Companys reportable segments
is set forth below.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Revenues, net
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
345,638
|
|
|
$
|
317,067
|
|
MSG Entertainment
|
|
|
109,589
|
|
|
|
130,287
|
|
MSG Sports
|
|
|
244,927
|
|
|
|
245,669
|
|
Inter-segment eliminations
|
|
|
(49,736
|
)
|
|
|
(47,623
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
650,418
|
|
|
$
|
645,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Inter-segment revenues
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
|
|
|
$
|
|
|
MSG Entertainment
|
|
|
76
|
|
|
|
74
|
|
MSG Sports
|
|
|
49,660
|
|
|
|
47,549
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49,736
|
|
|
$
|
47,623
|
|
|
|
|
|
|
|
|
|
|
Inter-segment eliminations are primarily local television rights
recognized by the Companys MSG Sports segment from the
licensing of team programming to the Companys MSG Media
segment.
F-56
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
Reconciliation
(by Segment and in Total) of Adjusted Operating Cash Flow to
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Adjusted operating cash flow
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
126,117
|
|
|
$
|
88,344
|
|
MSG Entertainment
|
|
|
(40,816
|
)
|
|
|
(14,946
|
)
|
MSG Sports
|
|
|
(21,757
|
)
|
|
|
(8,883
|
)
|
All other (a)
|
|
|
(5,802
|
)
|
|
|
(29,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57,742
|
|
|
$
|
35,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
15,158
|
|
|
$
|
16,792
|
|
MSG Entertainment
|
|
|
7,623
|
|
|
|
7,093
|
|
MSG Sports
|
|
|
8,306
|
|
|
|
8,139
|
|
All other (b)
|
|
|
14,886
|
|
|
|
17,552
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
45,973
|
|
|
$
|
49,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
4,394
|
|
|
$
|
3,484
|
|
MSG Entertainment
|
|
|
4,073
|
|
|
|
3,062
|
|
MSG Sports
|
|
|
2,251
|
|
|
|
4,010
|
|
All other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,718
|
|
|
$
|
10,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
106,565
|
|
|
$
|
68,068
|
|
MSG Entertainment
|
|
|
(52,512
|
)
|
|
|
(25,101
|
)
|
MSG Sports
|
|
|
(32,314
|
)
|
|
|
(21,032
|
)
|
All other
|
|
|
(20,688
|
)
|
|
|
(46,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,051
|
|
|
$
|
(24,868
|
)
|
|
|
|
|
|
|
|
|
|
F-57
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
A reconciliation of reportable segment amounts to the
Companys combined balances is as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Operating income (loss) before income taxes
|
|
|
|
|
|
|
|
|
Total operating income for reportable segments
|
|
$
|
21,739
|
|
|
$
|
21,935
|
|
Other operating loss
|
|
|
(20,688
|
)
|
|
|
(46,803
|
)
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
1,051
|
|
|
|
(24,868
|
)
|
Items excluded from operating income (loss):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,101
|
|
|
|
4,244
|
|
Interest expense
|
|
|
(3,032
|
)
|
|
|
(2,193
|
)
|
Miscellaneous
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
$
|
2,120
|
|
|
$
|
(22,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
MSG Media
|
|
$
|
1,030
|
|
|
$
|
6,003
|
|
MSG Entertainment
|
|
|
6,637
|
|
|
|
2,094
|
|
MSG Sports
|
|
|
199
|
|
|
|
459
|
|
All other
|
|
|
29,374
|
|
|
|
17,451
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,240
|
|
|
$
|
26,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Consists of litigation expenses of $138 and $22,971 for the nine
months ended September 30, 2009 and 2008, respectively, as
well as unallocated corporate general and administrative costs
of $5,664 and $6,280 for the nine months ended
September 30, 2009 and 2008, respectively.
|
|
|
|
(b)
|
|
Principally includes depreciation and amortization expense on
The Garden and certain corporate property, equipment and
leasehold improvement assets not allocated to the Companys
reportable segments.
|
Substantially all revenues and assets of the Companys
reportable segments are attributed to or located in the United
States and are primarily concentrated in the New York
metropolitan area.
|
|
Note 11.
|
Concentrations
of Risk
|
Financial instruments that may potentially subject the Company
to a concentration of credit risk consist primarily of cash and
cash equivalents and accounts receivable. Cash and cash
equivalents are invested in money market funds and bank time
deposits. The Company monitors the financial institutions and
money market funds where it invests its cash and cash
equivalents with diversification among counterparties to
mitigate exposure to any single financial institution. The
Companys emphasis is primarily on safety of principal and
liquidity and secondarily on maximizing the yield on its
investments. Revenues from Cablevision amounted to $95,002 and
$90,662 for the nine months ended September 30, 2009 and
2008, respectively, which represent 15% and 14%, respectively,
of the Companys combined net revenues. The Company has
advances outstanding to a subsidiary of Cablevision at
September 30, 2009 and December 31, 2008 of
F-58
MADISON
SQUARE GARDEN, INC.
(a combination of certain businesses and assets of Cablevision
Systems Corporation)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
$190,000 in the form of non-interest bearing advances which are
classified as non-current advances due from Cablevision in the
accompanying condensed combined balance sheets. The following
individual non-affiliated customers accounted for the following
percentages of the Companys combined accounts receivable
balances and net revenues:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
17
|
%
|
|
|
12
|
%
|
Customer B
|
|
|
14
|
%
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
2009
|
|
2008
|
|
Revenues, net
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
11
|
%
|
|
|
11
|
%
|
As of September 30, 2009, approximately
5,000 employees, who represent a substantial portion of the
Companys workforce, are subject to collective bargaining
agreements. Approximately 9% are subject to collective
bargaining agreements that expired as of September 30, 2009
and approximately 39% are subject to collective bargaining
agreements that will expire as of September 30, 2010 if
they are not extended prior thereto.
F-59