Madison Square Garden Sports Corp. (MSGS) Q1 2012 Earnings Report, Transcript and Summary

Good morning. My name is Melissa and I will be your conference operator today. At this time I would like to welcome everyone to The Madison Square Garden Company, fiscal 2012 first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions). I will now turn the conference over to Ari Danes, Vice President of Investor Relations for The Madison Square Garden Company. Please go ahead.

Thanks Melissa. Good morning and welcome to The Madison Square Garden Company's fiscal 2012 first quarter earnings conference call. Joining us this morning are members of the MSG management team, including Hank Ratner, President and CEO; Bob Pollichino, EVP and Chief Financial Officer; Mike Bair, President, MSG Media; Melissa Ormond President, MSG Entertainment; and Scott O'Neil, President, MSG Sports. Following a discussion of the company's financial results we will open the call for questions. If you do not have a copy of today's earnings release, it is available in the Investor’s section of our website at www.themadisonsquaregardencompany.com. Please take note of the following: Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties and that actual results or developments may differ materially from those in the forward-looking statements as a result of various factors, including financial community perceptions of the company and its business, operations, financial condition and the industry in which it operates and the factors described in the company's filings with the Securities and Exchange Commission, including the sections entitled ‘Risk Factors’ and management's discussion and analysis of financial condition and results of operations contained therein. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. Let me point out that on page four of today's earnings release, we provide consolidated operations data and a reconciliation of adjusted operating cash flow or AOCF to operating income. I would now like to introduce, Hank Ratner, President and CEO of the Madison Square Garden Company.

Thank you Ari. This morning we released our first quarter results as we have shifted to our new fiscal year, which covers the period from July 1, 2011 through June 30, 2010. Most notably we delivered adjusted operating cash flow of approximately $46 million, up 9% versus the prior year period. We were able to achieve these solid results despite the Garden being unavailable for events for the entire quarter due to the transformation project. To put the impact of the fall season shut down in context, for the quarter ended June 30, 2010, we generated approximately $20 million in event related revenues and $10 million in AOCF contributed for events held at the Garden. While we can’t precisely determine the number of events, which would have taken place if the Garden had been open this past quarter, our results clearly would have been significantly stronger if the venue had been available for events. Turning to our business segments, our MSG Media segment drove our company’s overall AOCF increase for the quarter due, primarily to continue growth in our affiliate fee and advertising revenue base. With the respect to Fuse, we continue to see the network as a significant growth opportunity for our company. As our programming strategy at the network is gaining traction, we plan to strategically invest in Fuse to drive long-term growth. Turning to our MSG Entertainment segment; this week drawing on the depth of our executives, we announced that Melissa Ormond has been named President of MSG Entertainment. Melissa had been serving as the interim Head of MSG Entertainment since earlier this year and had been the division's Chief Operating Officer since 2008. With 24 years on industry experience, strong leadership skills and long standing relationships, Melissa is ideally suited to lead the MSG Entertainment Division…

Thank you Hank. For the first quarter of fiscal 2012, revenues and AOCF reflect the first full quarter impact of the scheduled shut down of both the Garden and the Theatre at Madison Square Garden, due to the transformation project. As a reminder, the theatre at Madison Square Garden was also closed for the three months ended September 30, 2010. To reiterate what Hank just said, for the quarter ended September 30, 2010, we generated approximately $20 million in event related revenues and $10 million in AOCF contribution for the events held at the Garden and while we cannot precisely determine the number of events which would have taken place if the Garden had been opened this past quarter, our results clearly would have been significantly stronger if the venue had been available for events. Total revenues for our fiscal first quarter were $177.6 million, a 6.9% decrease versus the prior year period. Consolidated AOCF was $46.1 million, a 9% increase versus the prior year quarter. Operating income of $26.4 million and net income of $21.3 million was up 0.4% and 10.5% respectively as compared to the prior year quarter. Now turning to the fiscal first quarter results for our business segments, our MSG Media segment generated $138.6 million in revenues, an increase of $5.2 million or 3.9% as compared to the prior year quarter. Affiliate fee revenue increased $4.5 million versus the prior year period, primarily attributable to higher affiliation rates, with the overall increase being significantly offset by the impact of previously disclosed expiration of certain affiliation agreements. Our advertising revenue increased $1.2 million versus the prior year period. MSG Media segment AOCF of $63.8 million was up 14.6% versus the prior year period, due primarily to the increasing revenues and to a lesser extent the decrease in…

Thanks Bob. The NHL season is off to an exciting start, with MSG networks continuing to serve as the local broadcast home of hockey, featuring games of the New York Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres. We also remain focused on delivering the rich and broad array of additional content on MSG Networks. This includes Hockey Night Live, the only comprehensive hockey show in the New York area, which initially returned for it’s sixth season. In September, we telecast the Traverse City NHL Prospects Tournament for the first time, which included four rangers prospects game, an exclusive behind the scenes access. In addition, following the Rangers Home Opener last week, we watched our original series beginning, which features a behind the scenes look at how various sports and entertainment figures got their start, with the first four episodes dedicated to the Rangers and the subsequent episodes planned to feature entertainers who performed at the Garden during their career. We also continue to leverage our extensive library to create original programming related to the Knicks. Including the mid September debut of 1994 March to the Finals. The 20-part shoot is looking back to the Knicks run to the NBA finals. This fall, we will premier Knicks greatest rivalries, a 25-part shootage that spotlights the most unforgettable Knicks rivalries of the 1990s. We also plan to debut the six part shootings of First Person, which will focus on professional athletes and their personal insights and the classic games in which they played. And in December we will debut the documentary, The Garden Transformed-Year One, which takes an inside look of the first phase of Madison Square Gardens transformation. The series will continue over the next three years as we unveil each phase of the Gardens transformation. New York…

Thanks Mike. During the fiscal first quarter we continued to focus on maximizing theatre utilization by leveraging strategic partnerships and driving multi market and multi night appearances at our venues. For example, our value partner Cirque du Soleil recently completed the debut engagement and its large-scale acrobatic theatrical production Zarcana at Radio City Music Hall. Zarcana, which ran from June 9 through October 8 will drive a significant increase in the number of events, attendance, revenues and AOCF contribution at Radio City in our fiscal first quarter. We look forward to the shows return in June of 2012. In terms of multi market concert, we hosted artists including Steely Dan, Alison Krauss, Chris Tucker and Celtic Thunder at more than one of our venues in New York, Chicago and Boston during the quarter. We also saw further traction with our multi night concert strategy at the Beacon Theatre where over 50% of the concerts there reported were multi night engagement. In terms of our fiscal second quarter, many high profile artists have performed or are scheduled to perform at our venues, including Sting, Duran Duran, Jay Z and Kanye West, The Foo Fighters, Katy Perry, Taylor Swift, Z100's Jingle Ball, Hitch and Conan O'Brien's Night time television return to New York. As we discussed on our last earnings call, the 2011 Radio City Christmas Spectacular, which begins at the Holiday Season run on November 11 will be one of the most innovative and contemporary productions in the show setting nine year history. We have made significant enhancements, including new rocket performances, new scenes and musical numbers, dazzling new costumes, never before seen 3D live technology and state of the art digital mapping technology, the latter of which will create a more immersive experience for our customers. The show also continues…

Thanks Melissa. The New Your Rangers opened the 2011 – ‘12 seasons on October 7 and 8 in Stockholm Sweden as part of the 2011 Compuware NHL Premiere. The Rangers home opener at the Garden took place last week against The Toronto Maple Leafs, with fans experiencing the transformed Lower Bowl and transformed portions of the Upper Bowl of the arena for the first time. Fan interest in the team remains strong with the Rangers having now played four consecutive home games to near capacity crowds. In addition, the NHL announced the Rangers will play in the fifth annual winner classic against the Philadelphia Flyers at Citizens Bank Park on January 2, 2012. We are excited that the Rangers will be competing at what is typically the NHLs most highly watched game of the regular season. HBOs popular series 24/7 will also feature the Rangers in four episodes leading up to the winner classic. Turing towards Transformation suites, our 20 event level suites, which are sold out, came online in last October when the Garden reopened. The suites provided world class experience that is a first in professional sports and initial feedback from our customers has been very enthusiastic. Our 58 Madison Level suites are expected to come online for the 2012 – ‘13 NBA and NHL seasons. 70% plus of the Madison Level suites are under contact or have agreements that have been finalized. We will soon start the sales process for the Madison Club, which is a premium experience location, the size of 10 suites and which sits on the same level of the Madison Level suites. The Madison Club is expected to come online for the 2012 – ‘13 seasons and we plan to go to market with two to four seat packages for all Knicks, Rangers and collage basket ball games. With the Garden now open, MSG Sports will host a variety of marquee sporting events in the months ahead. WWEs popular survivor series takes place later this month, while collage basketball returns for the 77th consecutive year, featuring many elite programs including Duke, Georgetown, Kansas, Kentucky, Illinova and Michigan State and prominent collage basketball tournaments such as the Jimmy V Classic and the Big East Championship. As far as our collage lineups, St. John's Red Storm, which retuned to the NCA tournament last year will also play at the Garden. Boxing returns to the arena on December 3 with Miguel Cotto defending his WBAs Super Welter Weight title against Antonio Margarito. This follows the recent fight between Omar Narvaez and Nonito Darnaire at the theater in Madison Square Garden two weeks ago. Finally, the BNP Paribas Tennis Showdown returns to the Garden for its fifth consecutive year on march 12, 2012m featuring several of tennis top stars, including Maria Sharapova against Caroline Wozniacki and Roger Federer against Andy Roddick. I’ll now turn the call back over to Ari Danes

Thanks Scott. Melissa we’d now like to open the call for questions.

Thank you. (Operator Instructions) Your first question comes from Bryan Goldberg of Bank of America Merrill Lynch.

Hi, thanks for taking the question. I got one quick one on the transformation and a follow up on the lockout impact at media and the entertainment strategy. On the transformation, the new Lower Bowl has been opened for just a few weeks now. We know some of the higher end food options have yet to open, but what signs of change have you observed in per-cap spending at the Garden, particularly in the Lower Bowl.

Bob, you want to take that.

So as you said, our concessions will be opening over time. They are not all open as we sit here and so its hard to draw firm conclusions, but looking at the first three Ranger games that we had and it has a little bit of an anomaly in there, because one of the games was a 3 o’clock afternoon game, but the signs are good, because what we see is that the per-caps are higher than they were last year, and in addition they are higher than we have in our plan at this point in the roll out of the concession plan. So the signs look promising.

Okay thanks. And on the MBA lockout, I was wondering if you can give us some more color on how the organizing is working around it, particularly at media? How would your television advertisers reacted to November’s game cancellations? Have budgets simply gone elsewhere in search of the New York’s sport fan or have you been able to hold market share with alternative programming or better selling at Ranger games.

Mike, you want to take that.

Yes, at it relates to the media side, you know it really, its pretty difficult to kind of determine the ideal outcome is just to give the lack in clarity in the work stock, but what we have found so far is it definitely has an effect on us; the cancellation of the Knicks games. Past history tells us that we have been able to secure some of that money and clearly some of it will go in other places, but I think what’s also been interesting for us is that the vitality of the market for hockey has been slightly better than what it was last year and better than our plan as well, so we are excited about that. But on a national basis, it really has no effect for Fuse. Fuse continued to see weightings growth and continued to see healthy ad shells groups as well and we are pleased with that development.

Okay thanks, and just one last one for Melissa. Congratulations on the new position. We’d love to hear your big picture view of the path to higher margins in entertainment. So when you look across the resources of the company, where will you be most focused in the next year of two in terms of driving higher AOCF contribution?

Well we do believe we have a significant opportunity to reach positive AOCF and well because its on the current operations of the business, the multi-night, multi-market strategy which we are seeing great benefit from in the Beacon, Chicago and Wang will continue. Strategic partnerships like Cirque du Soleil and Varcanca (ph) saw very favorable results in the summer of this year and we look forward to Varcanca (ph) returning in the summer of ‘12. You are aware of the enhancements of the New York Christmas Spectacular as well as the Theater Christmas Spectacular shows and we are confident, we are positively up, we are cautiously optimistic currently with sales to date and have already received some very favorable reviews on the enhancement. Then we continue to explore strategic expansions of our venue network in select major markets and finally we look for opportunities to grow the production business, which also benefits our utilization.

Good, thank you.

Your next question comes from Ben Swinburne of Morgan Stanley

Thank you. Good morning. I have two questions; I guess also for Melissa. I wanted to ask, there is a comment on the live nation call yesterday about replacing NBA with concerts and Hank mentioned at the outset it was challenging to do that, but they made a comment yesterday that as we move into next year, so that after Christmas they think there’s an opportunity for things to open up more. I wondered if you guys would give a comment if that – if you see it the same the way. Do you think next year you get to a point where you can just try to fill more of these dates with content? And then on the affiliate revenue side, I think this is the last quarter of the dish loss comp; I just wanted to confirm that with you and as a result, what should we expect. It looked like total revenues grew about 3.5% in the quarter. Does that get better or does that get worse in Q2 since you have the dish-comp going away, but obviously you might have some impact from the lack of NBA games.

I’m going to take the first question. As we know and I’m sure Live Nation spoke about, most concerts go on tour and you know they are scheduled to go throughout the nation. And what our job is when dates up is to do our best to fill those dates, but you know we have to see the way things go here. All that we know is what’s been canceled at this point, and we can’t really speculate beyond that, other than knowing that we are going to use the influence we have as Madison Square Garden, the relationships we have with the artist community to do the best we can, to book as many dates as we possibly can. I think Bob won’t you…

I think having lots of dish comps in this quarter.

The dish is not in the comparable numbers, I think. Yes, this is the last quarter that dish – you will see the quarter-over-quarter impact of the dish issue.

Okay, thank you.

Your next question comes from Robert Routh of Phoenix Partners.

Hi guys. A couple of quick questions; first when it comes to the NBA lockout, I know you can’t speak any more than you have about that. When it comes to the suite sales, especially the 2011 suites that are open, in the event that the Live wants to go the whole season, half seasons, is there any impact on those long terms contracts you have already signed that most people would purchase suites back out as a result of this or are they basically locked into those contacts regardless of what happens with the NBA situation.

I think Scott is going to take this one.

Yes, first off I would tell you, we haven’t had a change to tour the building and to see the suites; it’s worth the effort. They are absolutely incredible. I can’t overstate the impact that its had on our suite holders and corporate partners as they tour the building, its in – it’s a virtual of whose who of Corporate America that’s there every night, so its been a lot of fun. But to answer your question directly, I can tell you that while we don’t discuss any specific terms of contracts with any of our partners across the business, that’s not a concern of ours. You know we have fortunately one of the busiest buildings in the world. We have a slate of concerts that’s unparalleled. We have an incredible – you know if you look at collage basketball we got 30 increasable games, the tournaments are amassing. We have tennis, boxing, family show, it goes on and on and then we are out in the market and we are talking to suite holders while the mix is certainly a key component of that and they are a tremendous brand and they have an incredible support base here. What we are actually selling is the experience of Madison Square Garden and the 250 plus events that are here.

Okay, so its safe to say that basically we shouldn’t worry about that as it obviously kind of looks like it sits on the issue. Also, is there any impact as it relates to sponsorships or any of the signage contracts that you have, on the same basis as those in the prior question.

I’ll take that one as well, this is Scott. Yes, I’ll give you a painful similar response and that we don’t discuss any of the specifics of any of our contracts. I will tell you, at least in our business, this is a relatively big and wide business for the business that we are in on the sports and arena and marketing partnerships side and we blessed to have an array of assets. So our partners understand when they buy into Madison Square Garden Company, that the sports teams are terrific and certainly a draw but when you are out in the market and you can talk to the Radio City Christmas and the Beacon Theatre and the Chicago Theatre, and its incredible networks we have and Fuse. I think a lot of the magic and some of the details we have been doing is kind of integrating them all together. So when there are some changes in the schedule which come up from time-to-time, you know in various different aspects our business, the good news is we have a tremendous array of assets with various target markets that we seem to find. So we are not concerned on that front either.

Okay great. And just one last quick one; you mentioned in the original program we are doing all of that. I was just trying to get a sense as to how much you plan to spend on original programming going forward, obviously it makes a lot of sense and I think defiantly you are increasingly going in to the lib, but do you already have a library, and if so how many hours do you have and what do you plan to spend going forward on that?

Well I mean, look, first of all you know we love being and approving the content because of the scalability in its economies and we really believe that investment and program than drive long term meaningful revenue in an AOCF growth in the medium segment. As it relates to spending on Fuse, we’ve been thrilled I think with the ratings increased that we’ve seen as a result of the spending I think that I mentioned in the past. But when we do this we are far from prudent about the way we do these investments. We measure everything that we do to make sure that there’s a return. The big part of this is again its pretty much consistent, stabilized sort of day part that allows us to launch the new and original programming as I mentioned before. Like one of your guys, they don’t do it in the street which will launch out some of our new programming as well as often the Fuse Presents Concert around single, but those are very powerful for us. The other piece of the certainly programming investment is important and it continues to allow us to extend our relationship with the iconic menus. The MSG Entertainment for example has levels with the sports teams beginnings, which is an investment against the teams, just to create various sort of programs that promote the players of the team, which helps sponsors, but also helps the profile the brand themselves. That comes from library content that we have. Again, very deep, very efficient to create and easily fundable through advertisers. At the end of the day, all we are trying to do is consistently support and drive the messaging and the brands that we are related to, as well as to create value for the advertisers and ultimately for the affiliates.

Okay, great. Thank you very much. Congratulations on a great quarter and I completely agree, it sounds like you have an hidden asset in the liberally that people don’t see.

Your next question comes from David Joyce of Miller Tabak & Company. David Joyce - Miller Tabak & Company: Thank you. There are a couple of questions. First, I was wondering on the spending for the Fuse during the year. What kind of seasonality for that could we expect? Do you say there is 300 hours that’s here in the second quarter that will be able to step up? What should we expect there? And then secondly on capital expenditures, how much – you recognize $147 million of cash CapEx here in the first quarter. What’s the remaining amount? What’s been done to-date? Thanks.

Let me take the – this is Bob and let me take the second question first, which is so what we said is the project to-date is $509 million has been incurred and we said in the quarter $168 million has been incurred, just to make sure that everybody understands what we are saying, we are trying to communicate the level of work that has been completed, irrespective of whether we cut the check to pay for it year. So with respect to that last piece, which is what I think you are asking about, last quarter we were around $90 million was in our liabilities unpaid and we are in about the same position. So as you pay off prior incurred amounts and you keep building, then that sort of gets replenished, so that’s sort of where we are today. With respect to the first question about programming I think the best way for us to sort of communicate it is that I think what we have seen in the quarter-over-quarter really is the timing and that as Fuse continues to invest in its plan, I think we are going to see that level of increased cost move back into the balance of this fiscal year. And of course we have some little bit of lumpiness, because you know one of the great programming strands that we have on Fuse is called Fuse presents and those are concerts that we do and the timing of those concerts are hard to predict period-over-period, so you’re seeing a little bit of that as well. So I think its predominantly a timing related issue. David Joyce - Miller Tabak & Company: Thanks and finally, I think I missed it, do you have any comment on the update on the Forum?

No, we are pretty much the same. We continue to do our work on the forum, make sure that we put the right amount of investment in up-front and then the panning and you know we continue to have our contract subject to certain conditions to closing and we are still working on it. David Joyce - Miller Tabak & Company: Okay great, thank you.

Your next question comes from Ben Mogil of Stifel Nicolaus.

Hi guys, good morning and thanks for taking my question. Two questions, and because the Q isn’t out yet; in you are putting expenses in media was the fact that you weren’t sort of airing any MBA or any MBA pre-games towards the end of the quarter. Did that help you a little bit in terms of you know license payments to the Knicks. And then second of all and I know you obviously can’t talk much about the stick given the league rules, if the strike were to continue into the first calendar quarters like I suppose into the New Year, on the media side you know can you talk us through just without numbers, but just conceptual what the impact would be, you know not just on rations, but potentially on affiliate call backs etcetera.

Okay, Bob will…

So on the first piece Ben, there is nothing in this quarter related to the lockout. So, we had no impact because the pre season and the cancelled games are all prospective for this quarter, so there is really nothing going on in the quarter related to that. And the second part of the questions was…

That’s in court related to the affiliation agreements and impact from the…

I think you said it in your question, it is really – with the lack of clarity of the work stock it is hard to predict the – what I can tell you about the affiliate world for us is that every affiliated agreement is different and they generate all the produces that deal with these work stocks. So we are going to deal with each individual based of what those provisions require us to do or unless they come along, but beyond that there’s really not much more that I can provide you with.

Yes, you might want to give us some color as to the program that will be on the air, the library that we all discussed.

We don’t talk about that. What we let people know is the fact that we have already put on about 430 events this years in 1900 hours of original programming. We have four hockey teams, around which all have fan basis, so we produce an extraordinary number of live events. We are also able to again create an awful lot of programming around the mix and around the Rangers, (Inaudible) and those do get ratings and viewer ship. So you know we – but we like the mix, we actually love the mix, but the fact is they represent a portion, well it’s an important portion. The full volume really comes from a lot of our other content.

When you look at your MSO agreements, are they just, you have to provide ex-number of hours of originally programming you know month or quarter or year or it needs to be coming from certain specific sports?

You know its really – its something that I really just can’t give you details on at this point as much as I’d love to.

Sure and then one last question back to Bob; in terms of the media cost reduction in the quarter, and you may have said this earlier, I many have missed it. Is a lot of it – I mean is it because Fuse costs were a little bit lower because there were fewer live events, than you expect that to switch towards the back half of the year like you talked about earlier.

Yes, and it was related to marketing of that programming you know. So it was both, programming and the marketing.

And sort of looking at it from the full year, not just the one quarter, expect that to sort of get back up to some more normalized levels in the second half of the year as you have more programming and more advertising around that programming.

Yes I think again its timings, so I think that’s what you are going to see.

That’s fare enough, thanks a lot guys.

Your next question comes form John Tinker of Maxim.

Hi thanks. This may be a simplification, but it basically looks after all the noise and the concern about what the transformation would cost you that, the entertainment and the sports side basically were about $5 million less on AOCF this quarter than last quarter. So is that – it is simplifying it – is that a fare way of looking at what this actually cost you. It is the first full quarter, last quarter I think was only 2.5 months.

Let me catch up with you for a second. John it’s probably not exactly fare to look at it that way. You know as we disclosed in the press release and in the script, obviously there was an impact that the Garden due to the shutdown that was partially offset by what happened at Radio City, with Zarkana what happened at the Beacon Theater. So you can’t just look at the look at the year-over-year variance and add it up to look at it that way. Yes, you will see in the Q which we will be filing later today, there was a larger impact due to the off season shutdown of the Garden.

Okay. As we go forward in the next – well we’re now comping the like with like which should make that a little easier to quantify.

Correct, I think that’s there.

Great. Thank you. Great quarter.

Your next question comes from Vasily Karasyov of Susquehanna Financial.

Good morning, thank you. I’m sorry if I missed it, but did you comment on the sell out rates of season tickets after you raised the prices.

We haven’t on this call, but Scott will update you.

Sure, so a good proxy for fan interest and season tick holder. Impact of the price increase is typically renewal rates and so I’ll start on the Knicks or in the 90s and Rangers in the mid-80s. I will tell you kind of on top of that on the Knicks side, you know I’m willing to hear thee years. I have spend several years, almost a decade in the MBA and I haven’t seen demand like this for Knicks tickets. So I can tell you that that’s been very positive.

All right, thank you.

And then I have a – I’m sorry…

I’m sorry.

No go ahead, that’s fine. I can just tell you on the ranger side, the proof is in the putting. We are four games in and we are playing to near capacity crowds, season ticks have been strong and individual tickets good and solid. So we are well on our way.

Thank you and then you can please zoom in on the swing factors on the revenue side and cost side for the December quarter with the Christmas Spectacular please. I know you had some storm issues last year and you had more touring products. So can you please help us quantify what we should expect?

I think as Melissa said, you know we’ve put a significant upgrade into this show, an investment into this show and the intention is for that to drive increased dependence. Most of our ticker sales occur from this point going forward. We are happy where we are right now and…

And then the other point just on that investment to clarify, that investment will be amortized through AOCF over five years. So that investment will be not hit you know in the period. So that will help smooth out the results of the show.

And then on the theater, the theater percent of this year, you know we decreased a number of markets from 25 last to 30 this year. We’ve enhanced all three shows that we’ll play this year by utilizing existing assets and while there will clearly be an impact on the top line. We expect a several million dollars and confirm with ASCF.

Thank you very much.

If we could actually – we are running a little short on time, so if each caller could limit it to one question we’d appreciate it.

Your next question comes from Rick Tullo of Albert Fried

Hey, thank you very much guys for taking my questions, especially in light of my crazy rating system. To me it looks like you did very well during the quarter. What was the resulting growth while we also saw a reduction in operating expenses and are any of the expense reductions or margin improvements due to efficiencies, due to the transformation, perhaps you know making the media center there, operating more efficiently and also during the quarter did you include any Verizon related revenue?

I think the media segment is the last quarter was not effected by transformation, and we do have Verizon revenue. They are a customer of both MSG, MSG Plus and Fuse, so their revenue has been there for years now.

I was reading to the high definition affiliate negotiations I guess.

Right. As far as HD is concerned, there is still a legal process under way, so we are not going to comment on that.

Fair enough, fair enough. Thank you very much for taking my question and great quarter you know and excellent execution by everyone.

Thank you.

Thanks Rick. Operator we will take the next and last question. Martin Pyykkonen Operator Your final question comes form Martin Pyykkonen of Wedge Partners. Martin Pyykkonen - Wedge Partners Yes thanks. Good morning, nice quarter too. I wanted to ask you, in terms of the scope of the impact on cash flow AOCF in the event of a lockout that continues to drag on the whole season and I guess what I’m particularly wondering is from your season ticket holders, what is the process in terms of refunds, credits and so forth. You’ve obviously sold season tickets; the renewal rates are good and so forth. But you know from a timing and you used some games now. Have you already refunded or given credits or when did that kick in and you know maybe kind of a worst case, if there is no NBA season this year, can you scope out what the cash floor impact is and as best you can by timing in the quarter, you know again from the consumer side of refund credit so forth.

Scott, will take you through refund.

That’s a hell of a question. You know I’ll try to tackle what I can tackle here. You know first off, several quarters ago we talked about building out our service team and in somewhat of a kind of throwaway line, but it’s really turned out to be quite a smart move. You know we have this dedicated team of 12 people who’s jobs are – is to make sure we are in constant contact with our C&T holders, both in arena and also speaking to them kind of throughout the week and updating them on things to come. Its been proved very fruitful as there have been some uncertainty about around the waiver situation. And as you also likely know, this is an extremely passionate and extremely knowledgably fan base, which has actually played to our strengths and so we’ve had pretty good dialog and good communication. To answer your question a little bit more specifically, you likely know that NBAs canceled games through November 30, which is eight mix home dates. So that’s three dates in October that are all for season games and the five home games in November. The refund policy is relatively simple and it’s been public; it’s the NBA dictated policy. So essentially NBA teams provide refund or they just want to see the subscribers or those who don’t opt to keep the money on account, which about a third have opted on our end to keep the money on account. The season ticket holders earn a simple interest rate of 1% that’s retroactive and effective on October1. So to answer your question directly and we are supposed to give you that – to send out the money within 10 business days of the close of the month and so in the next couple of days we’ll be sending our checks out, our refund check outs and that 1% is really annual rate not a periodic rate, so its fairly modest. Martin Pyykkonen - Wedge Partners I guess I’ll follow up to that. If again there is no season and if we’re keeping on account as you said then you kind of keep it at normal phase. Is there any risk of your needing to use of maybe deciding what you use the revolver in terms of the transformation work that’s going to go on through next winter or do you not get to that point even if there is no NBA season.

Well you we were very thoughtful when we launched this company and took it public and it’s paying its dividends today. Because after the shutdown, you know we have really no change in our perspective on our liquidity and plan, because what we basically did was make sure that we could fund the transformation out of the cash that we had on hand, our cash flow from operations and if necessarily, the $375 million revolver that we put in place and we continually monitor the incredible number of scenarios of the NBA lockout and other initiatives and we think we are just in the same place and we are fine with our liquidly under those facts.

Great. Thank Bob.

I will now turn the call back over to Ari Danes for closing remarks.

Thanks for joining us and we look forward to speaking with you on our next earnings call. Operator Thank you for participating in today’s conference call. You may now disconnect.