Madison Square Garden Second-Quarter Profit Drops 39% Amid Renovation

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Revenue rises 3 percent though, and the company says the MSG arena is on track to re-open in late October.

NEW YORK - The Madison Square Garden Co., controlled by the Dolan family, reported a lower second-quarter profit on Friday as slightly higher revenue was offset by higher expenses in some areas, such as for team personnel transactions and for depreciation due to a renovation of the MSG arena.

The shutdown of MSG and the Theater at Madison Square Garden due to the renovation, known as the Transformation project, started in mid-April. The company said Friday that the arena will re-open in late October.

Second-quarter revenue at the company rose 3 percent to $233.9 million, but earnings declined 39 percent from $14.0 million to $8.5 million.

The MSG Sports unit, which includes the NY Knicks basketball and NY Rangers hockey teams, saw revenue rise 18 percent in the latest quarter due to higher playoffs revenue, but the unit swung to an operating loss. The company cited "higher direct operating expenses, including a $5.5 million increase in expenses for certain team personnel transactions" as a reason.

On a conference call, management said that more than 90 percent of Knicks season tickets have been renewed for the 2011-2012 season, and more than 85 percent of Rangers season tickets.

The MSG Media unit grew revenue 3.8 percent as TV network advertising and affiliate fee revenue rose, but operating profit fell 9 percent amid increased costs.

Meanwhile, MSG Entertainment saw a 23 percent revenue drop, but narrowed its operating loss by 36 percent. The revenue fell due to the renovation, but the bottom line improved due to "the absence of operating losses incurred in the prior year period related to a co-production and improved event-related results at the Beacon Theatre," the company said.        

"We achieved these results even as the Madison Square Garden Arena and the Theater at Madison Square Garden were unavailable for the majority of the second quarter," Madison Square Garden president and CEO Hank Ratner said. "The Transformation project remains on schedule, with the Garden expected to re-open in late October. Our Transformation sales initiatives continue to progress well and we remain confident that the project will generate meaningful growth for our company."  

Management said that a possible NBA work stoppage would affect MSG's business, but it didn't go into much detail.

Executives said that the company has not felt much distress amid continued economic weakness, highlighting that MSG's core market of New York, but also Boston seem to be doing better than other parts of the country.


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