What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-05-11 · 565 added, 969 removed, 376 unchanged (80% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

September 30,

2020 June 30,

Current Assets:

1 unchanged sentence

Restricted cash 2,679 12,821

Short-term investments

Accounts receivable, net 15,465 7,403

2 unchanged sentences

Other current assets 9,907 9,433

Assets held for sale

Total current assets 96,100 128,278

Investments and loans to nonconsolidated affiliates

Property and equipment, net of accumulated depreciation and amortization

Property and equipment, net of accumulated depreciation and amortization of $ 39,756 and $ 38,361 as of September 30, 2020 and June 30, 2020, respectively

38,281 39,597

Right-of-use lease assets 720,326 718,051

1 unchanged sentence

Indefinite-lived intangible assets 112,144 112,144

Goodwill 226,955 226,955

Other assets 23,071 6,019

Total assets $ 1,219,366 $ 1,233,798

See accompanying notes to consolidated financial statements.

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED BALANCE SHEETS (Continued)

(in thousands, except per share data)

September 30,

2020 June 30,

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable $ 1,303 $ 2,301

Net related party payables, current

Current portion of long-term debt, net of deferred financing costs

Net related party payables 39,048 17,952

Accrued liabilities:

2 unchanged sentences

Operating lease liabilities, current 38,789 39,131

Collections due to promoters

Deferred revenue 138,007 126,348

Liabilities held for sale

Total current liabilities 312,444 290,254

Related party payables, noncurrent

Long-term debt, net of deferred financing costs

Long-term debt 350,000 350,000

Operating lease liabilities, noncurrent 682,079 679,053

5 unchanged sentences

Commitments and contingencies (see Note 10)

Redeemable noncontrolling interests

Madison Square Garden Sports Corp.

1 unchanged sentence

Class A Common stock, par value $ 0.01 , 120,000 shares authorized;

19,462 and 19,229 shares outstanding as of March 31, 2020 and June 30, 2019, respectively

19,582 and 19,466 shares outstanding as of September 30, 2020 and June 30, 2020, respectively

Class B Common stock, par value $ 0.01 , 30,000 shares authorized;

4,530 shares outstanding as of March 31, 2020 and June 30, 2019

4,530 shares outstanding as of September 30, 2020 and June 30, 2020

Preferred stock, par value $ 0.01 , 15,000 shares authorized;

none outstanding as of March 31, 2020 and June 30, 2019

none outstanding as of September 30, 2020 and June 30, 2020

Additional paid-in capital — 5,940

Treasury stock, at cost, 986 and 1,219 shares as of March 31, 2020 and June 30, 2019, respectively

Retained earnings (accumulated deficit)

Treasury stock, at cost, 866 and 982 shares as of September 30, 2020 and June 30, 2020, respectively

( 147,605 ) ( 167,431 )

Accumulated deficit ( 93,361 ) ( 43,605 )

Accumulated other comprehensive loss ( 2,129 ) ( 2,139 )

2 unchanged sentences

Nonredeemable noncontrolling interests 2,953 3,551

Total liabilities, redeemable noncontrolling interests and equity

Total equity ( 239,893 ) ( 203,435 )

Total liabilities and equity $ 1,219,366 $ 1,233,798

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

$ 57,038 $ 49,850

Operating expenses:

Direct operating expenses (b)

39,786 18,419

Selling, general and administrative expenses (c)

42,996 85,910

Depreciation and amortization 1,660 4,845

Impairment of intangibles, long-lived assets and goodwill

Operating income (loss)

Operating loss ( 27,404 ) ( 59,324 )

Other income (expense):

Earnings (loss) in equity method investments

Interest income (d)

Interest income

Interest expense ( 1,989 ) ( 577 )

Miscellaneous income (expense), net

Income (loss) from operations before income taxes

Income tax benefit (expense)

Net income (loss)

Net loss attributable to redeemable noncontrolling interests

Net loss attributable to nonredeemable noncontrolling interests

Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders

Basic earnings (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders

Diluted earnings (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders

Miscellaneous expense, net ( 120 ) ( 86 )

( 2,109 ) ( 370 )

Loss from continuing operations before income taxes ( 29,513 ) ( 59,694 )

Income tax benefit 498 19,503

Loss from continuing operations ( 29,015 ) ( 40,191 )

Loss from discontinued operations, net of taxes — ( 40,475 )

Net loss ( 29,015 ) ( 80,666 )

Net loss attributable to nonredeemable noncontrolling interests from continuing operations ( 598 ) ( 450 )

Net loss attributable to redeemable noncontrolling interests from discontinued operations — ( 163 )

Net loss attributable to nonredeemable noncontrolling interests from discontinued operations — ( 72 )

Net loss attributable to Madison Square Garden Sports Corp.’s stockholders $ ( 28,417 ) $ ( 79,981 )

Continuing operations

$ ( 1.18 ) $ ( 1.67 )

Discontinued operations

Basic loss per common share attributable to Madison Square Garden Sports Corp.’s stockholders $ ( 1.18 ) $ ( 3.36 )

Continuing operations

$ ( 1.18 ) $ ( 1.67 )

Discontinued operations

Diluted loss per common share attributable to Madison Square Garden Sports Corp.’s stockholders $ ( 1.18 ) $ ( 3.36 )

Weighted-average number of common shares outstanding:

Basic 24,062 23,827

Diluted 24,062 23,827

_________________

Includes revenues from related parties of $ 63,764 and $ 74,020 for the three months ended March 31, 2020 and 2019 , respectively, and $ 138,328 and $ 145,766 for the nine months ended March 31, 2020 and 2019 , respectively.

Includes net charges from related parties of $ 372 and $ 325 for the three months ended March 31, 2020 and 2019 , respectively, and $ 762 and $ 814 for the nine months ended March 31, 2020 and 2019 , respectively.

Includes net charges to related parties of $( 2,679 ) and $( 2,451 ) for the three months ended March 31, 2020 and 2019 , respectively, and $( 8,143 ) and $( 5,892 ) for the nine months ended March 31, 2020 and 2019 , respectively.

Includes interest income from nonconsolidated affiliates of $ 380 and $ 2,714 for the three and nine months ended March 31, 2019 , respectively.

(a) Includes revenues from related parties of $ 9,061 and $ 6,327 for the three months ended September 30, 2020 and 2019, respectively.

(b) Includes net charges from related parties of $ 614 and $ 0 for the three months ended September 30, 2020 and 2019, respectively.

(c) Includes net charges from (to) related parties of $ 13,747 and $( 2,657 ) for the three months ended September 30, 2020 and 2019, respectively.

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Three Months Ended

Nine Months Ended

Net income (loss)

September 30,

Net loss $ ( 29,015 ) $ ( 80,666 )

Other comprehensive income (loss), before income taxes:

2 unchanged sentences

Amortization of actuarial loss included in net periodic benefit cost

Settlement loss recognized

Amortization of prior service credit included in net periodic benefit cost

Cumulative translation adjustments — ( 10,018 )

Other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive loss attributable to redeemable noncontrolling interests

Comprehensive loss attributable to nonredeemable noncontrolling interests

Comprehensive income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders

Other comprehensive income (loss), before income taxes

Income tax benefit (expense) related to items of other comprehensive income (loss)

Other comprehensive income (loss), net of income taxes 10 ( 9,679 )

Comprehensive loss ( 29,005 ) ( 90,345 )

Comprehensive loss attributable to nonredeemable noncontrolling interests from continuing operations ( 598 ) ( 450 )

Comprehensive loss attributable to redeemable noncontrolling interests from discontinued operations — ( 163 )

Comprehensive loss attributable to nonredeemable noncontrolling interests from discontinued operations — ( 72 )

Comprehensive loss attributable to Madison Square Garden Sports Corp.’s stockholders $ ( 28,407 ) $ ( 89,660 )

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended

Three Months Ended

September 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net loss $ ( 29,015 ) $ ( 80,666 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 1,660 28,991

Impairment of intangibles, long-lived assets and goodwill

Provision (benefits) from deferred income taxes ( 498 ) 301

Share-based compensation expense 6,345 16,891

Earnings (loss) in equity method investments, net of income distributions

Loss in equity method investments, net of income distributions — 1,473

Purchase accounting adjustments associated with leases

Unrealized loss on equity investment with readily determinable fair value

Provision for doubtful accounts

Unrealized gains on equity investment with readily determinable fair value — ( 5,293 )

(Recovery of) provision for doubtful accounts ( 175 ) 759

Other non-cash adjustments 127 79

9 unchanged sentences

Operating lease right-of-use assets and lease liabilities 409 ( 54 )

Net cash provided by operating activities

Net cash used in operating activities ( 57,485 ) ( 34,234 )

Cash flows from investing activities:

4 unchanged sentences

Proceeds from maturity of short-term investments — 106,587

Investments and loans to nonconsolidated affiliates

Proceeds from sale of nonconsolidated affiliates — 18,000

Loan repayment received from subordinated note

Cash received (paid) for notes receivable

Cash received for notes receivable — 750

Net cash used in investing activities ( 80 ) ( 74,236 )

3 unchanged sentences

(in thousands)

Nine Months Ended

Three Months Ended

September 30,

Cash flows from financing activities:

1 unchanged sentence

Noncontrolling interest holders’ capital contribution — 2,000

Distributions to noncontrolling interest holders

Loans from noncontrolling interest holders

Proceeds from revolving credit facilities

Repayment of revolving credit facility

Principal repayment on long-term debt — ( 2,500 )

Payment of contingent consideration ( 200 ) —

Net cash provided by (used in) financing activities

Net cash used in financing activities ( 6,902 ) ( 23,946 )

Effect of exchange rates on cash, cash equivalents and restricted cash — ( 1,950 )

Net decrease in cash, cash equivalents and restricted cash ( 64,467 ) ( 134,366 )

Cash, cash equivalents and restricted cash from continuing operations, beginning of period 90,673 25,836

Cash, cash equivalents and restricted cash from discontinued operations, beginning of period — 1,092,065

Cash, cash equivalents and restricted cash at beginning of period

90,673 1,117,901

Cash, cash equivalents and restricted cash from continuing operations, end of period 26,206 22,937

Cash, cash equivalents and restricted cash from discontinued operations, end of period — 960,598

Cash, cash equivalents and restricted cash at end of period $ 26,206 $ 983,535

Non-cash investing and financing activities:

Non-cash acquisition of additional redeemable noncontrolling interests

Capital expenditures incurred but not yet paid $ — $ 43,841

5 unchanged sentences

(in thousands)

Three Months Ended March 31, 2020

Retained Earnings (Accumulated Deficit)

Comprehensive

Total Madison Square Garden Sports Corp.

Stockholders ’ Equity

Noncontrolling

Balance as of December 31, 2019

Net income (loss)

Other comprehensive loss

Comprehensive income (loss)

Share-based compensation

Tax withholding associated with shares issued for equity-based compensation

Common stock issued under stock incentive plans

Noncontrolling interest non-cash acquisition

Noncontrolling interest acquisition

Redeemable noncontrolling interest adjustment to redemption fair value

Balance as of March 31, 2020

See accompanying notes to consolidated financial statements.

MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)

(in thousands)

Three Months Ended March 31, 2019

Common Stock Issued

Retained Earnings

Comprehensive Loss

Total Madison Square Garden Sports Corp.

Stockholders ’ Equity

Noncontrolling

Balance as of December 31, 2018

Net income (loss)

Other comprehensive income

Comprehensive income (loss)

Share-based compensation

Contribution from noncontrolling interest holders

Distributions to noncontrolling interest holders

Balance as of March 31, 2019

See accompanying notes to consolidated financial statements.

MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)

(in thousands)

Nine Months Ended March 31, 2020

Retained Earnings (Accumulated Deficit)

Three Months Ended September 30, 2020

Issued Additional

Capital Treasury

Stock Accumulated Deficit Accumulated

Comprehensive

Total Madison Square Garden Sports Corp.

Loss Total Madison Square Garden Sports Corp.

Stockholders ’ Equity

Noncontrolling

Interests Total Equity

Balance as of June 30, 2020 $ 249 $ 5,940 $ ( 167,431 ) $ ( 43,605 ) $ ( 2,139 ) $ ( 206,986 ) $ 3,551 $ ( 203,435 )

Other comprehensive loss

Net loss — — — ( 28,417 ) — ( 28,417 ) ( 598 ) ( 29,015 )

Other comprehensive income — — — — 10 10 — 10

Comprehensive loss

— — — — — ( 28,407 ) ( 598 ) ( 29,005 )

Share-based compensation

— 6,345 — — — 6,345 — 6,345

Tax withholding associated with shares issued for equity-based compensation

— ( 10,930 ) — ( 2,868 ) — ( 13,798 ) — ( 13,798 )

Common stock issued under stock incentive plans

Contribution from noncontrolling interest holders

Distributions to noncontrolling interest holders

Noncontrolling interest non-cash acquisition

Noncontrolling interest acquisition

Redeemable noncontrolling interest adjustment to redemption fair value

Balance as of March 31, 2020

— ( 1,355 ) 19,826 ( 18,471 ) — — — —

Balance as of September 30, 2020 $ 249 $ — $ ( 147,605 ) $ ( 93,361 ) $ ( 2,129 ) $ ( 242,846 ) $ 2,953 $ ( 239,893 )

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended March 31, 2019

Common Stock Issued

Retained Earnings (Accumulated Deficit)

Comprehensive Loss

Total Madison Square Garden Sports Corp.

Three Months Ended September 30, 2019

Common Stock Issued Additional

Capital Treasury

Stock Retained Earnings (Accumulated Deficit) Accumulated

Comprehensive Loss Total Madison Square Garden Sports Corp.

Stockholders ’ Equity

Noncontrolling

Interests Total Equity Redeemable

Noncontrolling

Balance as of June 30, 2019 $ 249 $ 2,845,961 $ ( 207,790 ) $ 29,003 $ ( 46,923 ) $ 2,620,500 $ 18,260 $ 2,638,760 $ 67,627

Adoption of ASU No.

Adoption of ASC Topic 606

Net income (loss)

Other comprehensive income

Comprehensive income (loss)

Net loss — — — ( 79,981 ) — ( 79,981 ) ( 522 ) ( 80,503 ) ( 163 )

Other comprehensive loss — — — — ( 9,679 ) ( 9,679 ) — ( 9,679 ) —

Comprehensive loss — — — — — ( 89,660 ) ( 522 ) ( 90,182 ) ( 163 )

Share-based compensation

— 18,141 — — — 18,141 — 18,141 —

Tax withholding associated with shares issued for equity-based compensation

— ( 23,446 ) — — — ( 23,446 ) — ( 23,446 ) —

Common stock issued under stock incentive plans

— ( 21,207 ) 21,207 — — — — — —

Contribution from noncontrolling interest holders

Distributions to noncontrolling interest holders

Balance as of March 31, 2019

— — — — — — 1,709 1,709

Balance as of September 30, 2019 $ 249 $ 2,819,449 $ ( 186,583 ) $ ( 50,978 ) $ ( 56,602 ) $ 2,525,535 $ 19,447 $ 2,544,982 $ 67,464

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Description of Business and Basis of Presentation

Spin-off Transaction

On April 17, 2020 (the “ Entertainment Distribution Date ”), Madison Square Garden Sports Corp.

(the “ Company ”) distributed all of the outstanding common stock of Madison Square Garden Entertainment Corp.

(formerly MSG Entertainment Spinco, Inc.) to its stockholders (the “ Entertainment Distribution ”).

Madison Square Garden Entertainment Corp.

owns, directly or indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment (collectively, the “ Spinco Business ”).

In the Entertainment Distribution, (a) each holder of the Company’s Class A common stock, par value $ 0.01 per share, received one share of Madison Square Garden Entertainment Corp.

Class A common stock, par value $ 0.01 per share, for every share of the Company’s Class A common stock held of record as of the close of business, New York City time, on April 13, 2020 (the “Record Date”), and (b) each holder of the Company’s Class B common stock, par value $ 0.01 per share, received one share of Madison Square Garden Entertainment Corp.

Class B common stock, par value $ 0.01 per share, for every share of the Registrant’s Class B common stock held of record as of the close of business, New York City time, on the Record Date.

Following the Entertainment Distribution , the Company’s business consist of the Company’s professional sports franchises:

the New York Knicks (the “ Knicks ”) of the National Basketball Association (the “ NBA ”), the New York Rangers (the “ Rangers ”) of the National Hockey League (the “ NHL ”), the Hartford Wolf Pack of the American Hockey League (the “ AHL ”) and the Westchester Knicks of the NBA G League (the “ NBAGL ”).

In addition, the Company’s business includes esports teams through Counter Logic Gaming (“ CLG ”) and Knicks Gaming, the Company’s franchise that competes in the NBA 2K League.

As of March 31, 2020, the Company maintained the historical operating structure and reported the financial results of its entertainment business (including its sports bookings business) in continuing operations until the Entertainment Distribution Date .

After the Entertainment Distribution , the historical financial results of the Company’s entertainment business (including its sports bookings business) will be reflected in the Company’s consolidated financial statements as discontinued operations under U.S.

generally accepted accounting principles (“ GAAP ”) for all periods presented through the Entertainment Distribution Date , effective as of the filing with the U.S.

Securities and Exchange Commission (the “SEC”) of the Company’s Annual Report on Form 10-K for the year ending on June 30, 2020.

Description of Business

Given that the Entertainment Distribution did not occur until after March 31, 2020, the accompanying unaudited condensed consolidated interim financial statements include the historical results of the Company and all descriptions of the Company are as of March 31, 2020 unless otherwise indicated.

In future filings, the historical results of the Spinco Business will be presented as discontinued operations.

The Company is a live sports and entertainment business.

The Company classifies its business interests into two reportable segments:

MSG Entertainment and MSG Sports.

MSG Entertainment includes live entertainment events, including concerts and other live events, such as family shows, performing arts and special events, which are presented or hosted in the Company’s diverse collection of venues along with live offerings through TAO Group Holdings LLC (“ Tao Group Hospitality ”) and Boston Calling Events LLC (“ BCE ”).

Tao Group Hospitality is a hospitality group with globally recognized entertainment, dining and nightlife brands including Tao, Marquee, Lavo, Avenue, Beauty & Essex and Cathédrale .

BCE owns and operates New England’s premier Boston Calling Music Festival.

MSG Entertainment also includes the Company’s original production — the Christmas Spectacular Starring the Radio City Rockettes (the “ Christmas Spectacular ”).

MSG Sports includes the Company’s professional sports franchises:

the Knicks of the NBA , the Rangers of the NHL , the Hartford Wolf Pack of the AHL and the Westchester Knicks of the NBAGL .

These professional sports franchises are collectively referred to herein as the “ sports teams .” For the three and nine months ended March 31, 2019 , MSG Sports also included the New York Liberty (the “ Liberty ”) of the Women’s National Basketball Association (the “ WNBA ”), which was sold in January 2019.

MSG Sports also includes other live sporting events, including professional boxing, college basketball, college hockey, professional bull riding, mixed martial arts, esports and college wrestling, all of which the Company promotes, produces and/or presents.

In addition, MSG Sports includes CLG , a premier North American esports organization, which the Company acquired in July 2017, and Knicks Gaming , the Company’s franchise that competes in the NBA 2K League.

Madison Square Garden Sports Corp., formerly The Madison Square Garden Company (together with its subsidiaries, the “Company” or “MSG Sports”) owns and operates a portfolio assets featuring some of the most recognized teams in all of sports, including the New York Knickerbockers (“Knicks”) of the National Basketball Association (“NBA”) and the New York Rangers (“Rangers”) of the National Hockey League (“NHL”).

Both the Knicks and the Rangers play their home games in Madison Square Garden Arena (“The Garden”).

The Company’s other professional franchises include two development league teams — the Hartford Wolf Pack of the American Hockey League (“AHL”) and the Westchester Knicks of the NBA G League (“NBAGL”).

These professional sports franchises are collectively referred to herein as the “sports teams.” In addition, the Company owns Knicks Gaming, an esports franchise that competes in the NBA 2K League, as well as a controlling interest in Counter Logic Gaming (“CLG”), a North American esports organization.

The Company also operates two professional sports team performance centers — the Madison Square Garden Training Center in Greenburgh, NY and the CLG Performance Center in Los Angeles, CA.

CLG and Knicks Gaming are collectively referred to herein as the “esports teams,” and together with the sports teams, the “teams.”

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases.

The Company owns the Madison Square Garden Arena (“ The Garden ”) and Hulu Theater at Madison Square Garden in New York City, the Forum in Inglewood, CA (See Note 3 for further discussion on the sale of the Forum in the fourth quarter of fiscal year 2020) and The Chicago Theatre in Chicago.

In addition, the Company leases Radio City Music Hall and the Beacon Theatre in New York City.

Additionally, Tao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in New York, Las Vegas, Los Angeles, Chicago, Australia and Singapore.

The Company operates and reports financial information in one segment.

The Company’s decision to report in one segment is based upon its internal organizational structure;

the manner in which its operations are managed;

the criteria used by the Company’s Executive Chairman, its Chief Operating Decision Maker (“CODM”), to evaluate segment performance.

The Company’s CODM reviews total company operating results to assess overall performance and allocate resources.

The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc.

(“MSG Networks”), formerly known as The Madison Square Garden Company.

On September 30, 2015, MSG Networks distributed all of the outstanding common stock of Madison Square Garden to MSG Networks’ stockholders.

(“MSG Networks”).

All the outstanding common stock of the Company was distributed to MSG Networks shareholders (the “MSGS Distribution”) on September 30, 2015.

On April 17, 2020 (the “MSGE Distribution Date”), the Company distributed all of the outstanding common stock of Madison Square Garden Entertainment Corp.

(formerly MSG Entertainment Spinco, Inc.

and referred to herein as “MSG Entertainment”) to its stockholders (the “MSGE Distribution”).

MSG Entertainment owns, directly or indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment.

In the MSGE Distribution, (a) each holder of the Company’s Class A common stock received one share of MSG Entertainment Class A common stock, par value $ 0.01 per share, for every share of the Company’s Class A common stock held of record as of the close of business, New York City time, on April 13, 2020 (the “Record Date”), and (b) each holder of the Company’s Class B common stock received one share of MSG Entertainment Class B common stock, par value $ 0.01 per share, for every share of the Registrant’s Class B common stock held of record as of the close of business, New York City time, on the Record Date.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements (referred to as the “Financial Statements” herein) have been prepared in accordance with U.S.

GAAP and Article 10 of Regulation S-X of the SEC for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 (“ fiscal year 2019 ”).

generally accepted accounting principles (“GAAP“) and Article 10 of Regulation S-X of the SEC for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 (“fiscal year 2020”).

The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited;

1 unchanged sentence

The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year.

The dependence of MSG Entertainment on revenues from the Christmas Spectacular generally means it earns a disproportionate share of its revenues in the second quarter of the Company’s fiscal year.

The dependence of MSG Sports on revenues from its NBA and NHL sports teams generally means it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year.

Impact of COVID-19

The Company’s operations and operating results have been materially impacted by the COVID-19 pandemic and government and league actions taken in response.

As of the date of this Quarterly Report on Form 10-Q, virtually all of the Company’s business operations have been suspended.

On March 11 and 12, 2020, respectively, the NBA and NHL suspended their 2019-20 seasons (but did not cancel) and no Knicks or Rangers games are currently being played.

In addition, as a result of government mandated assembly limitations and closures, no events are currently permitted to be held at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre or The Chicago Theatre.

Additionally, public officials have imposed mandates limiting restaurants and bars to only take-out and delivery service and requiring that nightlife venues close in the cities in which Tao Group Hospitality operates.

As a result, virtually all Tao Group Hospitality venues in and outside the United States are closed, which has resulted in the business being materially impacted.

Additionally, as a result of operating disruptions due to COVID-19, the Company’s projected cash flows were directly impacted.

This disruption along with the macroeconomic industry and market conditions, were considered a “triggering event” for one of the Company’s reporting units, which required the Company to assess the carrying value of its intangible assets, long-lived assets and goodwill, in that order in accordance with ASC 350-30, for that reporting unit for impairment.

Based on this evaluation, the Company recorded a non-cash goodwill impairment charge of $ 80,698 during the three and nine months ended March 31, 2020 associated with Tao Group Hospitality .

In addition, during the three and nine months ended March 31, 2020, the Company recorded non-cash impairment charges associated with one venue within the Tao Group Hospitality of $ 11,573 , $ 6,399 and $ 3,541 , for Right-of-use assets, Property and equipment assets, and a tradename, respectively.

No other goodwill or intangible asset balance was impaired as of March 31, 2020 based on the assessment.

However, the duration and impact of the COVID-19 pandemic may result in additional future impairment charges that management will evaluate as facts and circumstances evolve through time.

Refer to Note 11 for further detail.

However, on March 11 and 12, 2020, respectively, the NBA and NHL suspended their 2019-20 seasons due to COVID-19.

In July and August 2020, the NBA and NHL, respectively, restarted their seasons.

As a result, the Company recognized certain revenues that otherwise would have been recognized during the third and fourth quarter of fiscal year 2020 during the first quarter of fiscal year 2021.

In addition, depending on when the 2020-21 NBA and NHL seasons commence, the Company may recognize certain revenues during the third and fourth quarters of fiscal year 2021 that otherwise would have been recognized during the second and third quarters of fiscal year 2021, respectively.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Reclassifications

The historical results of MSG Entertainment have been reflected in the accompanying statements of operations for the three months ended September 30, 2019 as discontinued operations.

See Note 3 for more information.

Impact of COVID-19

As a result of government-mandated assembly limitations and closures due to the COVID-19 pandemic, no events are currently permitted to be held at The Garden where the Knicks and Rangers play their home games, and some or all of these mandated restrictions may remain in effect even after the NBA and/or NHL resume for the 2020-21 seasons.

No assurances can be made that games will be played at The Garden or will be played with any in-arena audiences or without limited-capacity in-arena audiences.

COVID-19 disruptions have materially impacted the Company’s revenues and the Company is recognizing materially less revenues, or in some cases no revenues, across a number of areas.

Those areas include:

ticket sales;

the Company’s share of suite licenses;

sponsorships;

signage and in-venue advertising at The Garden;

and food, beverage and merchandise sales.

While the Company currently has the ability to reduce certain operating expenses as a result of the disruptions caused by COVID-19, including (i) rent payments to MSG Entertainment under the Arena License Agreements while The Garden remains closed, (ii) NBA league assessments and day-of-game expenses for the Knicks and Rangers games, (iii) league revenue sharing expense and NBA luxury tax, and (iv) certain other selling, general and administrative and discretionary expenses, those expense reduction opportunities will not fully offset revenue losses.

In August 2020, the Company implemented cost-reduction measures which included workforce reductions, limits on third-party vendor use and additional cuts to discretionary spending.

The Knicks and Rangers are not currently required to pay license fees to MSG Entertainment under the Arena License Agreements while The Garden is closed due to the government mandated suspension of events as a result of COVID-19.

If The Garden reopens without capacity limitations, future monthly rent payments due under the Arena License Agreements will be payable by the Knicks and the Rangers, even if the NBA or NHL seasons do not resume simultaneously or at all.

If the Knicks or Rangers play games at The Garden subject to government mandated capacity constraints due to COVID-19, the applicable rent for such periods will be reduced by up to 80 % depending on the size of the capacity constraint.

The Company believes that it has sufficient liquidity, including approximately $ 23,500 in unrestricted cash and cash equivalents as of September 30, 2020, along with available borrowing capacity under existing credit facilities, to fund its operations and repay its outstanding debt that becomes due over the next 12 months.

At this time, the Company’s management is unable to predict when the Company will be able to resume normal business operations and if there will be any longer-term effects, due to these COVID-related disruptions.

The Company’s business is also particularly sensitive to discretionary business and consumer spending.

COVID-19 could impede economic activity in impacted regions or globally over the long-term, causing a global recession and leading to a further decline in discretionary spending on sporting events and other leisure activities, including declines in domestic and international tourism, which could result in long-term effects on the Company’s business.

Accounting Policies

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All significant intercompany transactions and balances have been eliminated in consolidation.

In addition, the consolidated financial statements of the Company include the accounts from Tao Group Hospitality , BCE and CLG , in which the Company has controlling voting interests.

In addition, the consolidated financial statements of the Company include the accounts from CLG, in which the Company has controlling voting interests.

The Company’s consolidation criteria are based on authoritative accounting guidance for voting interest, controlling interest or variable interest entities.

Tao Group Hospitality , BCE and CLG are consolidated with the equity owned by other shareholders shown as redeemable or nonredeemable noncontrolling interests in the accompanying consolidated balance sheet s, and the other shareholders’ portion of net earnings (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to redeemable or nonredeemable noncontrolling interests in the accompanying consolidated statements of operation s and consolidated statements of comprehensive income (loss) , respectively.

See Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for more information regarding the classification of redeemable noncontrolling interests of Tao Group Hospitality .

Tao Group Hospitality ’s results are reported on a three -month lag basis and Tao Group Hospitality reports on a fiscal year reflecting the retail calendar that ends on the last Sunday of the calendar year (containing 4-4-5 week calendar quarters).

Accordingly, the Company’s results for the three months ended March 31, 2020 and 2019 include Tao Group Hospitality ’s operating results from September 30, 2019 to December 29, 2019 and from October 1, 2018 to December 30, 2018 , respectively, and the Company’s results for the nine months ended March 31, 2020 and 2019 include Tao Group Hospitality ’s operating results from April 1, 2019 to December 29, 2019 and April 2, 2018 to December 30, 2018 , respectively.

With the exception of the balances and activities pertaining to the Tao Group Hospitality ’s credit agreements entered into in May 2019, which are recorded as of March 31, 2020 and June 30, 2019 and for the three and nine months ended March 31, 2020 , as well as cash distributions and COVID-19 impact on goodwill, which resulted in impairment, all other disclosures related to Tao Group Hospitality ’s financial position are reported as of December 29, 2019 and March 31, 2019 , as applicable.

See Note 14 for further details on Tao Group Hospitality ’s credit agreements entered in May 2019.

On January 22, 2020 , the Company acquired an additional 15 % of common equity interest in Tao Group Hospitality from its noncontrolling interest holders in exchange for an issuance of 102 shares of the Company’s Class A Common Stock.

The Company now owns 77.5 % of common equity interest in Tao Group Hospitality .

In connection with the acquisition of the additional 15 % of common equity interest, the Company recorded (i) a decrease of $ 37,715 in the carrying value of redeemable noncontrolling interest, (ii) a decrease of $ 17,453 in treasury stock, which represents the average cost of the treasury stock, for the issuance of 102 shares of the Company’s Class A Common Stock, and (iii) an increase of additional paid in capital of $ 20,262 under the caption “ Noncontrolling interest non-cash acquisition ” in the accompanying consolidated statements of equity and redeemable noncontrolling interests for the three and nine months ended March 31, 2020 .

CLG is consolidated with the equity owned by other shareholders shown as nonredeemable noncontrolling interests in the accompanying consolidated balance sheets, and the other shareholders’ portion of net earnings (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to nonredeemable noncontrolling interests in the accompanying consolidated statements of operations and consolidated statements of comprehensive income (loss), respectively.

Use of Estimates

The preparation of the accompanying Financial Statements in conformity with GAAP requires management to make estimates and assumptions about future events.

These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses.

Such estimates include the valuation of accounts receivable, investments, goodwill, intangible assets, other long-lived assets, tax accruals and other liabilities.

In addition, estimates are used in revenue recognition, revenue sharing expense (net of escrow), luxury tax, income tax, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of contingent consideration and noncontrolling interests resulting from business combination transactions.

These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses.

Such estimates include the valuation of accounts receivable, goodwill, intangible assets, other long-lived assets, deferred tax valuation allowance, tax accruals and other liabilities.

In addition, estimates are used in revenue recognition, revenue sharing expense (net

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

of escrow), luxury tax expense, income tax expense, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of contingent consideration and noncontrolling interests resulting from business combination transactions.

Management believes its use of estimates in the Financial Statements to be reasonable.

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Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016 , the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standards Update (“ ASU ”) No.

2016-02, Leases (Topic 842) , which supersedes existing guidance on accounting for leases in Accounting Standards Codification (“ASC”) Topic 840, Leases.

2016-02, among other things, requires (i) lessees to account for leases as either finance leases or operating leases and generally requires all leases to be recorded on the balance sheet, including those leases classified as operating leases under previous accounting guidance, through the recognition of right-of-use assets and corresponding lease liabilities and (ii) extensive qualitative and quantitative disclosures about leasing activities.

The accounting applied by a lessor is largely unchanged from that applied under previous accounting guidance.

In January 2018, the FASB issued ASU No.

2018-01, Leases (Topic 842) - Land Easement Practical Expedient for Transition to Topic 842 , which provides a lessee or lessor the option to not assess at transition whether existing land easements, not currently accounted for as leases under the current lease guidance, should be treated as leases under the new standard.

In July 2018, the FASB issued ASU No.

2018-10, Codification Improvements to Topic 842, Leases and ASU No.

2018-11, Leases (Topic 842) Targeted improvements , which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings.

The Company adopted ASU No.

2016-02 on July 1, 2019 and elected to apply the standard as of the beginning of the first quarter of fiscal year 2020 under the modified-retrospective transition approach.

In connection with the adoption of this standard, the Company applied the package of practical expedients intended to ease transition for existing leases by not requiring the Company to reassess (i) its initial lease classification conclusions for existing or expired leases, (ii) whether an existing or expired contract is a lease or contains an embedded lease, and (iii) the capitalization of initial direct costs for existing or expired leases.

In addition, the Company elected not to use “hindsight” in accordance with ASC Subtopic 842-10-65-1 (g) in assessing lease terms and impairment of right-of-use (“ ROU ”) assets for existing or expired leases under the new standard.

Upon adoption of this standard, the Company recorded initial (i) operating lease ROU assets of $ 261,110 , (ii) current operating lease liabilities of $ 51,389 , and (iii) long-term operating lease liabilities of $ 207,425 .

The Company did not record any adjustment to retained earnings.

As of July 1, 2019, there were no material finance leases for which the Company was a lessee.

See Note 9 for further details on disclosure required under ASC Topic 842.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles — Goodwill and Other (Topic 350):

Simplifying the Accounting for Goodwill Impairment.

2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

The Company adopted this standard in the third quarter of fiscal year 2020 and applied it prospectively, beginning with the interim goodwill impairment test performed during the quarter ended March 31, 2020.

See Note 11 for further details.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments — Credit Losses .

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In May 2019, the FASB issued ASU No.

2019-05, Targeted Transition Relief , which amends ASC Topic 326 to provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost.

2019-05, Targeted Transition Relief , which amends Accounting Standards Codification (“ASC”) Topic 326 to provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost.

In November 2019, FASB issued ASU No.

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2020-02, Financial Instruments — Credit Losses and Leases , which includes amendments pursuant to SEC Staff Accounting Bulletin No.

This standard will be effective for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted.

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company adopted this standard as of the beginning of fiscal year 2021, and the adoption did not have an impact on its consolidated financial statements.

The impact in future periods is not expected to be material.

In August 2018, the FASB issued ASU No.

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2018-13 removes, modifies and adds certain disclosures providing greater focus on requirements that clearly communicate the most important information to the users of the financial statements with respect to fair value measurements.

The standard is effective for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted.

Most of the disclosure requirements in ASU No.

2018-13 would need to be applied on a retrospective basis except for the guidance related to (i) unrealized gains and loss included in other comprehensive income, (ii) disclosure related to range and weighted average Level 3 unobservable inputs, and (iii) narrative disclosure requirements on measurement uncertainty, which are required to be applied on a prospective basis.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-14, Compensation-Retirement Benefits-Defined Benefit Plans — General (Subtopic 715-20):

Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans .

2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures.

The standard will be effective for the Company in the fourth quarter of fiscal year 2021, with early adoption permitted.

The amendments in ASU No.

2018-14 are required to be applied retrospectively.

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

The Company adopted this standard as of the beginning of fiscal year 2021, and the adoption did not have an impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No.

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2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The guidance also specifies that the balance sheet, income statement, and statement of cash flows presentation of capitalized implementation costs and the related amortization should align with the presentation of the hosting (service) element of the arrangement.

The standard is effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted.

Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

The guidance also specifies that the balance sheet, statement of operations, and statement of cash flows presentation of capitalized implementation costs and the related amortization should align with the presentation of the hosting (service) element of the arrangement.

The Company adopted this standard as of the beginning of fiscal year 2021, and the adoption did not have an impact on its consolidated financial statements.

However, to the extent future costs incurred in a cloud computing arrangement are capitalizable, the corresponding amortization will be included in “Direct operating expenses” or “Selling, general and administrative expenses” in the consolidated statements of operations, rather than “Depreciation and amortization.”

In November 2018, the FASB issued ASU No.

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The proportionate basis approach is consistent with the treatment of indirect interests held by a related party under common control when evaluating the primary beneficiary of a VIE.

This effectively means that when a decision maker or service provider has an interest in a related party, regardless of whether they are under common control, it will consider that related party’s interest in a VIE on a proportionate basis throughout the VIE model for both the assessment of a variable interest and the determination of a primary beneficiary.

The standard will be effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted.

The amendments in ASU No.

2018-17 are required to be applied retrospectively.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2018, the FASB issued ASU No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606.

2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC Topic 606 when the counterparty is a customer.

In addition, ASU No.

2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction.

The standard will be effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted.

The amendments in ASU No.

2018-18 are required to be applied retrospectively to the date when the Company initially adopted ASC Topic 606 .

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

basis throughout the VIE model for both the assessment of a variable interest and the determination of a primary beneficiary.

The Company adopted this standard as of the beginning of fiscal year 2021, and the adoption did not have an impact on its consolidated financial statements.

In April 2019, the FASB issued ASU No.

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This ASU provides narrow-scope amendments to help apply these recent standards.

The transition requirements and effective date of this ASU will be effective for the Company in the first quarter of fiscal year 2021 with early adoption permitted for certain amendments.

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company adopted this standard as of the beginning of fiscal year 2021, and the adoption did not have an impact on its consolidated financial statements.

In November 2019, the FASB issued ASU No.

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The award is measured and classified under ASC Topic 718 for its entire life, unless the award is modified after it vests and the grantee is no longer a customer.

The new guidance is effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted.

The adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

This ASU eliminates certain exceptions to the general approach in ASC Topic 740 and includes methods of simplification to the existing guidance.

The new guidance is effective for the Company in the first quarter of fiscal year 2022, with early adoption permitted.

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

The Company adopted this standard as of the beginning of fiscal year 2021, and the adoption did not have an impact on its consolidated financial statements.

In January 2020, the FASB issued ASU No.

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In addition, the amendments clarify the accounting for certain forward contracts and purchased options accounted for under Topic 815.

The Company adopted this standard as of the beginning of fiscal year 2021, and the adoption did not have an impact on its consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU No.

2018-14, Compensation-Retirement Benefits-Defined Benefit Plans - General (Subtopic 715-20):

Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.

2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures.

The standard will be effective for the Company in the fourth quarter of fiscal year 2021, with early adoption permitted.

The amendments in ASU No.

2018-14 are required to be applied retrospectively.

The adoption of this standard, which relates to disclosure, is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU eliminates certain exceptions to the general approach in ASC Topic 740 and includes methods of simplification to the existing guidance.

The new guidance is effective for the Company in the first quarter of fiscal year 2022, with early adoption permitted.

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates.

This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

The new guidance was effective upon issuance, and the Company may elect to apply the amendments prospectively through December 31, 2022.

The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

Discontinued Operations

As a result of the MSGE Distribution, the results of the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment through the MSGE Distribution Date, as well as transaction costs related to the MSGE Distribution, have been classified in the accompanying consolidated statement of operations for the three months ended September 30, 2019 as discontinued operations.

See Note 3 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 for more information.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Assets Held for Sale

On March 24, 2020 , the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with CAPSS LLC pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC and settle related litigation for a cash purchase price of $400,000, subject to regulatory and other customary closing conditions.

The transaction subsequently closed on May 1, 2020.

As a result of the MIPA, the assets and liabilities of the Forum were classified as held for sale as of March 31, 2020 in accordance with ASC Subtopic 360-10-45-9.

The Forum meets the definition of a business under SEC Regulation S-X Rule 11-01(d)-1 and FASB ASC Topic 805 — Business Combinations .

This disposition does not represent a strategic shift with a major effect on the Company’s operations, and as such, has not been reflected as a discontinued operation under FASB ASC subtopic 205-20 — Discontinued Operations.

The Company believes the fair value less costs to sell for the assets held for sale exceeds their carrying amount;

therefore, no adjustment to their carrying value was recorded for the three and nine month ended March 31, 2020 .

The assets and liabilities of the Forum were classified in the consolidated balance sheet as assets and liabilities held for sale as of March 31, 2020 and consist of the following, by major class:

Prepaid expenses

Other current assets

Property and equipment, net of accumulated depreciation and amortization

Indefinite-lived intangible assets

Assets held for sale

Accounts payable and accrued liabilities

Collections due to promoters

Deferred revenue

Other liabilities

Liabilities held for sale

Net assets held for sale

The table below sets forth operating results of discontinued operations for the three months ended September 30, 2019.

Amounts presented below differ from historically reported results for the MSG Entertainment business segment due to reclassifications and adjustments made for purposes of discontinued operations.

Three Months Ended

September 30, 2019

Revenues $ 165,115

Direct operating expenses 114,216

Selling, general and administrative expenses 56,747

Depreciation and amortization 24,146

Operating loss ( 29,994 )

Other income (expense):

Loss in equity method investments ( 1,473 )

Interest income 7,023

Interest expense ( 1,264 )

Miscellaneous income, net 5,164

Loss from discontinued operations before income taxes ( 20,544 )

Income tax expense ( 19,931 )

Net loss from discontinued operations ( 40,475 )

Net loss attributable to redeemable noncontrolling interests ( 163 )

Net loss attributable to nonredeemable noncontrolling interests ( 72 )

Net loss from discontinued operations attributable to Madison Square Garden Sports Corp.’s stockholders $ ( 40,240 )

As permitted under ASU 2014-08, the Company has elected not to adjust the consolidated statement of cash flows for the three months ended September 30, 2019 to exclude cash flows attributable to discontinued operations.

The table below sets forth, for the period presented, significant selected financial information related to the MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment through the MSGE Distribution Date, which is included in the accompanied consolidated statements of cash flows:

Three Months Ended

September 30, 2019

Non-cash items included in net income (loss):

Depreciation and amortization $ 24,146

Share-based compensation expense 3,095

Cash flows from investing activities:

Capital expenditures $ 86,390

Non-cash investing activities:

Capital expenditures incurred but not yet paid $ 39,592

MADISON SQUARE GARDEN SPORTS CORP.

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All revenue recognized in the consolidated statements of operations is considered to be revenue from contracts with customers.

For the three and nine months ended March 31, 2020 and 2019 , the Company did not have any material impairment losses on receivables or contract assets arising from contracts with customers.

For the three months ended September 30, 2020 and 2019, the Company did not have any material impairment losses on receivables or contract assets arising from contracts with customers.

Disaggregation of Revenue

The following table disaggregates the Company’s revenue by major source and reportable segment based upon the timing of transfer of goods or services to the customer for the three and nine months ended March 31, 2020 and 2019 :

Three Months Ended March 31, 2020

Entertainment

Event-related and entertainment dining and nightlife offerings (a)

Sponsorship, signage and suite licenses (b)

League distributions (b)

Local media rights fees from MSG Networks (b)

Total revenues from contracts with customers

Three Months Ended March 31, 2019

Entertainment

Event-related and entertainment dining and nightlife offerings (a)

Sponsorship, signage and suite licenses (b)

League distributions (b)

Local media rights fees from MSG Networks (b)

Total revenues from contracts with customers

Nine Months Ended March 31, 2020

Entertainment

Event-related and entertainment dining and nightlife offerings (a)

Sponsorship, signage and suite licenses (b)

League distributions (b)

Local media rights fees from MSG Networks (b)

Total revenues from contracts with customers

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Nine Months Ended March 31, 2019

Entertainment

Event-related and entertainment dining and nightlife offerings (a)

Sponsorship, signage and suite licenses (b)

League distributions (b)

Local media rights fees from MSG Networks (b)

The following table disaggregates the Company’s revenues by type of goods or services in accordance with the required entity-wide disclosure requirements set forth in ASC Subtopic 280-10-50-38 to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic 606-10-50-5 for the three months ended September 30, 2020 and 2019:

Three Months Ended

September 30,

Event-related (a)

Media rights (b)

Sponsorship, signage and suite licenses 2,950 20,141

League distributions and other 3,899 16,078

Total revenues from contracts with customers $ 57,038 $ 49,850

_________________

Consisted of (i) ticket sales and other ticket-related revenues, (ii) Tao Group Hospitality ’s entertainment dining and nightlife offerings, (iii) food, beverage and merchandise sales, and (iv) venue license fees from third-party promoters.

Event-related revenues and entertainment, dining and nightlife offerings are recognized at a point in time as the related event occurs.

As such, these revenues have been included in the same category in the table above.

See Note 3 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for further details on the pattern of recognition of (i) sponsorship, signage and suite license revenues, (ii) league distributions, and (iii) local media rights fees from MSG Networks.

For the three and nine months ended March 31, 2020 and 2019 , the Company’s other revenues primarily consisted of managed venue revenues from Tao Group Hospitality and advertising commission revenue from MSG Networks.

For the three and nine months ended March 31, 2019 , the Company’s other revenues also included revenues from Obscura Digital (“Obscura”).

Contract Balances

(a) Consists of (i) ticket sales and other ticket-related revenues, and (ii) food, beverage and merchandise sales.

(b) Consists of (i) local media rights fees from MSG Networks, (ii) revenue from the distribution through league-wide national and international television contracts, and (iii) other local radio rights fees.

The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheet.

The following table provides information about contract balances from the Company’s contracts with customers as of March 31, 2020 and June 30, 2019 .

The following table provides information about contract balances from the Company’s contracts with customers as of September 30, 2020 and June 30, 2020.

September 30, June 30,

Receivables from contracts with customers, net (a)

$ 16,174 $ 8,035

Contract assets, current (b)

Deferred revenue, including non-current portion (c)

Deferred revenue, including non-current portion (c), (d)

139,985 128,362

Receivables from contracts with customers, which are reported in Accounts receivable, net and Net related party receivables in the Company’s consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers.

As of March 31, 2020 and June 30, 2019 , the Company’s receivables reported above included $ 18 and $ 126 , respectively, related to various related parties associated with contracts with customers.

_________________

(a) Receivables from contracts with customers, net, which are reported in Accounts receivable, net and Net related party receivables in the Company’s consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers.

As of September 30, 2020 and June 30, 2020, the Company’s receivables reported above included $ 709 and $ 632 , respectively, related to various related parties associated with contracts with customers.

See Note 15 for further details on these related party arrangements.

Contract assets, which are reported as Other current assets in the Company’s consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to the customer, for which the Company does not have an unconditional right to bill as of the reporting date.

(b) Contract assets, current, which are reported as Other current assets in the Company’s consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to the customer, for which the Company does not have an unconditional right to bill as of the reporting date.

Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.

As of March 31, 2020 , the Company’s contract assets above included $ 10,059 of contract assets related to local media rights with MSG Networks.

(c) Deferred revenue, including non-current portion primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to those customers.

Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer.

The Company’s deferred revenue related to local media rights with MSG Networks was $ 33,440 and $ 0 as of September 30, 2020 and June 30, 2020, respectively.

See Note 15 for further details on these related party arrangements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to those customers.

Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer.

The Company’s deferred revenue related to local media rights with MSG Networks was zero as of March 31, 2020 and June 30, 2019 .

See Note 20 for further details on these related party arrangements.

Revenue recognized for the nine months ended March 31, 2020 relating to the deferred revenue balance as of June 30, 2019 was $ 252,857 .

(d) Revenue recognized for the three months ended September 30, 2020 relating to the deferred revenue balance as of June 30, 2020 was $ 43,913 .

Transaction Price Allocated to the Remaining Performance Obligations

The following table depicts the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2020 .

This primarily relates to performance obligations under sponsorship and suite license arrangements.

The following table depicts the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2020 and is based on current projections and expectations of the Company’s operations resuming.

In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

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Fiscal Year 2025 5,065

Thereafter 12,262

Team Personnel Transactions

Direct operating and selling, general and administrative expenses in the accompanying consolidated statements of operations include a net expense for transactions relating to the Company’s sports teams for waiver/contract termination costs, player trades and season-ending injuries (“ Team personnel transactions ”).

Team personnel transactions expense was $ 5,711 and $ 16,976 for the three months ended March 31, 2020 and 2019 , respectively, and $ 33,598 and $ 57,063 for the nine months ended March 31, 2020 and 2019 , respectively.

Computation of Earnings (Loss) per Common Share

The following table presents a reconciliation of weighted-average shares used in the calculations of basic and diluted earnings (loss) per common share attributable to the Company’s stockholders (“EPS”).

Three Months Ended

Nine Months Ended

Weighted-average shares (denominator):

Weighted-average shares for basic EPS

Dilutive effect of shares issuable under share-based compensation plans

Weighted-average shares for diluted EPS

Weighted-average anti-dilutive shares

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Direct operating expenses in the accompanying consolidated statements of operations include a net expense for transactions relating to the Company’s sports teams for waiver/contract termination costs and a player trade (“Team personnel transactions”).

Team personnel transactions expense was $ 10,873 and $ 10,243 for the three months ended September 30, 2020 and 2019, respectively.

Cash, Cash Equivalents and Restricted Cash

The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.

September 30,

2020 June 30,

2020 September 30,

2019 June 30,

Captions on the consolidated balance sheets:

1 unchanged sentence

Restricted cash (a)

2,679 12,821 21,294 21,519

Cash, cash equivalents and restricted cash on the consolidated statements of cash flows

$ 26,206 $ 90,673 $ 22,937 $ 25,836

See Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for more information regarding the nature of restricted cash.

Investments and Loans to Nonconsolidated Affiliates

The Company’s investments and loans to nonconsolidated affiliates which are accounted for under the equity method of accounting and equity investments without readily determinable fair values in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures and ASC Topic 321, Investments - Equity Securities , respectively, consisted of the following:

Ownership Percentage

March 31, 2020

Equity method investments:

SACO Technologies Inc.

Equity investments without readily determinable fair values (a)

Total investments and loans to nonconsolidated affiliates

June 30, 2019

Equity method investments:

Tribeca Enterprises LLC (“Tribeca Enterprises”) (b)

Equity investments without readily determinable fair values (a)

Total investments and loans to nonconsolidated affiliates

_________________

In accordance with the ASC Topic 321, Investments - Equity Securities, the Company applies the measurement alternative to its equity investments without readily determinable fair values.

The Company recorded an impairment charge of $ 533 for the nine months ended March 31, 2020 .

See Note 7 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for more information regarding the application of the measurement alternative.

On August 5, 2019 , immediately prior to the sale of the Company’s equity capital in Tribeca Enterprises for $ 18,000 , the Company contributed the $ 18,000 of indebtedness under the Company’s revolving credit facility to the Company’s equity capital in Tribeca Enterprises .

(a) Restricted cash as of September 30, 2020 relates to the Company’s revolving credit facilities (see Note 11 for more information).

For all prior periods, restricted cash primarily included cash deposited in escrow account (see Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 for more information).

The Company’s leases primarily consist of the lease of the Company’s principal executive offices under the Sublease Agreement with MSG Entertainment (the “Sublease Agreement”) and the lease of CLG Performance Center.

In, addition, the Company accounts for the rights of use of The Garden pursuant to the Arena License Agreements as leases under the ASC Topic 842, Leases.

See Note 9 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 for more information regarding the Company’s accounting policies associated with its leases.

On April 17, 2020, in connection with the MSGE Distribution, the Company entered into the Sublease Agreement.

The sublease right of use (“ROU”) assets and liabilities are recorded on the balance sheet at lease commencement based on the

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Equity Investment with Readily Determinable Fair Value

In addition to the investments discussed above, the Company holds an investment of 3,208 shares of the common stock of Townsquare Media, Inc.

(“ Townsquare ”).

Townsquare is a leading media, entertainment and digital marketing solutions company that is listed on the New York Stock Exchange (“ NYSE ”) under the symbol “TSQ”.

In accordance with ASC Topic 321, Investments - Equity Securities, this investment is measured at readily determinable fair value and is reported under Other assets in the accompanying consolidated balance sheets as of March 31, 2020 and June 30, 2019 .

See Note 13 for more information on the fair value of the investment in Townsquare .

The Company’s leases primarily consist of certain live-performance venues, entertainment dining and nightlife venues, corporate office space, storage and, to a lesser extent, office and other equipment.

The Company determines whether an arrangement contains a lease at the inception of the arrangement.

If a lease is determined to exist, the lease term is assessed based on the date when the underlying asset is made available for the Company’s use by the lessor.

The Company’s assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain not to exercise, as well as periods covered by renewal options which the Company is reasonably certain of exercising.

The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations over the lease term.

For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of the fixed minimum payment obligations over the lease term.

A corresponding ROU asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received.

The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as the Company has elected to account for lease and non-lease components together as a single lease component.

ROU assets associated with finance leases are presented separate from operating leases ROU assets and are included within Property and equipment, net on the Company’s consolidated balance sheet.

For purposes of measuring the present value of the Company’s fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in the underlying leasing arrangements are typically not readily determinable.

The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment surrounding the associated lease.

For operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term.

For finance leases, the initial ROU asset is depreciated on a straight-line basis over the lease term, along with recognition of interest expense associated with accretion of the lease liability, which is ultimately reduced by the related fixed payments.

For leases with a term of 12 months or less (“short-term leases”), any fixed lease payments are recognized on a straight-line basis over the lease term and are not recognized on the consolidated balance sheet.

Variable lease costs for both operating and finance leases, if any, are recognized as incurred and such costs are excluded from lease balances recorded on the consolidated balance sheet.

In addition, the Company excluded its ground lease with Las Vegas Sands Corp.

(“ Sands ”) associated with MSG Sphere in Las Vegas from the ROU asset and lease liability balance recorded on the consolidated balance sheet as the ground lease will have no fixed rent.

Under the ground lease agreement, Sands will receive priority access to purchase tickets to events at the venue for inclusion in hotel packages or other uses, as well as certain rent-free use of the venue to support its Expo Center business.

However, if certain return objectives are achieved, Sands will receive 25% of the after-tax cash flow in excess of such objectives.

The ground lease is for a term of 50 years.

As of March 31, 2020 , the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 3 months to 18.5 years .

In certain instances, leases include options to renew, with varying option terms in each case.

The exercise of lease renewal options is generally at the Company’s discretion and is considered in the Company’s assessment of the respective lease term.

present value of minimum base rent and other fixed payments over the reasonably certain lease term, which ends April 30, 2024.

In addition, in connection with the MSGE Distribution, the Company entered into the Arena License Agreements with MSG Entertainment that end on June 30, 2055 and will allow the Knicks and the Rangers to continue to play their home games at The Garden.

The Arena License Agreements provide for fixed payments to be made from inception through June 30, 2055 in 12 equal installments during each year of the contractual term.

The Garden has not been available for use since April 17, 2020 due to the COVID-19 pandemic and local government restrictions on gatherings;

however, the licenses were viewed as a continuation of a relationship that existed prior to the MSGE Distribution where the Knicks and Rangers used The Garden through an inter-company cost-sharing arrangement and therefore the licenses were viewed to have commenced on April 17, 2020.

However, due to the force majeure clause, the Company is not required to make payments until The Garden is available for use, and on September 30, 2020 the assets and liabilities were remeasured utilizing the same discount rate as of April 17, 2020, taking into account the unpaid monthly installments during the lease period as a resolution of a lease contingency.

There were no events and thus no rent expense was recorded during the three months ended September 30, 2020.

As of September 30, 2020, the Company’s existing operating leases, which are recorded in the accompanying financial statements, have remaining lease terms ranging from 23 months to 35 years.

In certain instances, leases include options to renew, with varying option terms.

The exercise of lease renewal, if available under the lease options, is generally at the Company’s discretion and is considered in the Company’s assessment of the respective lease term.

The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.

MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED BALANCE SHEETS (Continued)

(in thousands, except per share data)

The following table summarizes the ROU assets and lease liabilities recorded on the Company’s consolidated balance sheet as of March 31, 2020 :

Line Item in the Company’s Consolidated Balance Sheet

The following table summarizes the ROU assets and lease liabilities recorded on the Company’s accompanying consolidated balance sheets as of September 30, 2020 and June 30, 2020:

Line Item in the Company’s Consolidated Balance Sheet September 30,

2020 June 30,

Right-of-use assets:

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Lease liabilities:

Operating leases, current

Operating leases, current (a)

Operating lease liabilities, current $ 38,789 $ 39,131

Operating leases, noncurrent

Operating leases, noncurrent (a)

Operating lease liabilities, noncurrent 682,079 679,053

Total lease liabilities $ 720,868 $ 718,184

The following table summarizes the activity recorded within the Company’s consolidated statement of operations for the three and nine months ended March 31, 2020 :

Line Item in the Company’s Consolidated Statement of Operations

Three Months Ended March 31, 2020

Nine Months Ended March 31, 2020

_________________

(a) As of September 30, 2020, Operating lease liabilities, current and Operating lease liabilities, noncurrent included balances of $ 38,391 and $ 681,450 , respectively, that are payable to MSG Entertainment.

As of June 30, 2020, Operating lease liabilities, current and Operating lease liabilities, noncurrent included balances of $ 38,770 and $ 678,366 , respectively, that are payable to MSG Entertainment.

The following table summarizes the activity recorded within the Company’s accompanying consolidated statements of operations for the three months ended September 30, 2020 and 2019:

Line Item in the Company’s Consolidated Statement of Operations Three Months Ended September 30, 2020 Three Months Ended September 30, 2019

Operating lease cost

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Direct operating expenses 24 42

Variable lease cost

Direct operating expenses

Variable lease cost

Selling, general and administrative expenses

Total lease cost $ 725 $ 131

Supplemental Information

For the nine months ended March 31, 2020 , cash paid for amounts included in the measurement of lease liabilities was $ 41,102 .

For the nine months ended March 31, 2020 , the Company had two ROU assets of $ 15,759 obtained in exchange for new operating lease liabilities.

During the three months ended March 31, 2020, a non-cash impairment charge of $ 11,573 was recorded for Right-of-use lease associated with one venue within the Tao Group Hospitality .

See Note 1 for further details.

The weighted average remaining lease term for operating leases recorded on the accompanying consolidated balance sheet as of March 31, 2020 was 6.2 years .

The weighted average discount rate was 9.44 % as of March 31, 2020 and represented the Company’s estimated incremental borrowing rate, assuming a secured borrowing, based on the remaining lease term at the time of either (i) adoption of the standard or (ii) the period in which the lease term expectation was modified.

Maturities of operating lease liabilities as of March 31, 2020 are as follows:

For the three months ended September 30, 2020 and 2019, cash paid for amounts included in the measurement of lease liabilities was $ 295 and $ 100 , respectively.

The weighted average remaining lease term for operating leases recorded on the accompanying consolidated balance sheet as of September 30, 2020 was 34.4 years.

The weighted average discount rate was 7.13 % as of September 30, 2020 and represented

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

the Company’s estimated incremental borrowing rate, assuming a secured borrowing, based on the remaining lease term at the time of either (i) adoption of the standard or (ii) the period in which the lease term expectation commenced or was modified.

Maturities of operating lease liabilities as of September 30, 2020 are as follows:

Fiscal Year 2021 (remainder) $ 30,736

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Fiscal Year 2025 44,052

Thereafter 2,158,686

Total lease payments 2,366,982

Less imputed interest ( 1,646,114 )

Total lease liabilities (a)

________________

Operating lease payments exclude minimum lease payments related to a location associated with the entertainment dining and nightlife offerings as the Company has not yet taken possession of the space.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Property and Equipment

As of March 31, 2020 and June 30, 2019 , property and equipment consisted of the following assets:

Buildings (a)

Equipment (a)

Furniture and fixtures (a)

Leasehold improvements

Construction in progress (a)

Less accumulated depreciation and amortization (a)(b)

_________________

In connection with the execution of the MIPA on March 24, 2020, pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC (See Note 3 for further details), the Company allocated $ 104,781 of Property and equipment, net of accumulated depreciation and amortization of $ 47,609 to assets held for sale.

The allocation substantially consisted of buildings and, to a lesser extent, land.

During the three months and nine month ended March 31, 2020, the Company recorded a non-cash impairment charge of $ 6,399 for long-lived assets associated with one venue within the Tao Group Hospitality .

See Note 1 for further details.

The increase in Construction in progress is primarily associated with the development and construction of MSG Spheres in Las Vegas and London.

The property and equipment balances above included $ 77,188 and $ 35,380 of capital expenditure accruals as of March 31, 2020 and June 30, 2019, respectively, which are reflected in “Other accrued liabilities” in the accompanying consolidated balance sheets.

Depreciation and amortization expense on property and equipment was $ 24,576 and $ 24,684 for the three months ended March 31, 2020 and 2019 , respectively.

For the nine months ended March 31, 2020 and 2019 , depreciation and amortization expense on property and equipment was $ 72,544 and $ 75,480 , respectively.

Total lease liabilities $ 720,868

Goodwill and Intangible Assets

The carrying amounts and activity of goodwill , by reportable segment, as of June 30, 2019 through March 31, 2020 are as follows:

MSG Entertainment

Balance as of June 30, 2019

Allocation to assets held for sale (a)

Goodwill impairment (b)

Balance as of March 31, 2020

_________________

In connection with the execution of the MIPA on March 24, 2020 , pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC (See Note 3 for further details), the Company classified $ 2,864 of goodwill associated with the Forum to assets held for sale in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other, ASC subtopics 350-20-40-1 to 350-20-40-7.

The allocation of goodwill to the Forum was based on the fair value of the Forum compared to the fair value of the Company’s MSG Entertainment reporting unit (“Relative Fair Value Basis”).

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

value of the Company’s MSG Entertainment reporting unit and the Forum were based on unobservable inputs classified within Level III of the fair value hierarchy, primarily from utilizing the discounted cash flow model, which is an income-based approach.

During the first quarter of fiscal year 2020 , the Company performed its annual impairment test of goodwill and determined that there were no impairments of goodwill identified for any of its reporting units as of the impairment test date.

During the third quarter of fiscal year 2020, the Company’s operating results have been, and continue to be, materially impacted by the COVID-19 pandemic (see Note 1 “ Impact of COVID-19 ” for further details).

While the Company concluded that the effects of COVID-19 would not more likely than not reduce the fair value of its MSG Sports and MSG Entertainment reporting units below their carrying amounts, the Company concluded a triggering event had occurred for its Tao Group Hospitality reporting unit as of March 31, 2020 and performed an interim impairment test.

For the interim impairment test, the Company estimated the fair value of the Tao Group Hospitality reporting unit based on a discounted cash flow model (income approach).

This approach relied on numerous assumptions and judgments that were subject to various risks and uncertainties.

Principal assumptions utilized, all of which are considered Level III inputs under the fair value hierarchy, include the Company’s estimates of future revenue and terminal growth rates, margin assumptions and the discount rate applied to estimate future cash flows.

As a result of the interim impairment test, the Company recorded a non-cash goodwill impairment charge of $ 80,698 for the three and nine months ended March 31, 2020.

The Company’s indefinite-lived intangible assets as of March 31, 2020 and June 30, 2019 are as follows:

Sports franchises (MSG Sports)

Trademarks (MSG Entertainment)

Photographic related rights (MSG Sports)

Balance as of June 30, 2019

Allocation to the assets held for sale (a)

Balance as of March 31, 2020

_________________

In connection with the execution of the MIPA on March 24, 2020 , pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC (See Note 3 for further detail), the Company allocated $ 540 of trademarks associated with the Forum to assets held for sale in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other, ASC subtopics 350-20-40-1 to 350-20-40-7.

During the first quarter of fiscal year 2021, the Company performed its annual impairment test of goodwill and determined that there were no impairments identified as of the impairment test date.

The carrying amount of goodwill as of September 30, 2020 and June 30, 2020 is $ 226,955 .

The Company’s indefinite-lived intangible assets as of September 30, 2020 and June 30, 2020 are as follows:

Sports franchises $ 111,064

Photographic related rights 1,080

During the first quarter of fiscal year 2021, the Company performed its annual impairment test of identifiable indefinite-lived intangible assets and determined that there were no impairments identified as of the impairment test date.

The Company’s intangible assets subject to amortization are as follows:

March 31, 2020

Trade names (a)

Venue management contracts

Favorable lease assets (b)

Season ticket holder relationships

September 30, 2020 Gross Accumulated

Amortization Net

Trade names $ 2,300 $ ( 1,457 ) $ 843

Non-compete agreements 2,400 ( 1,520 ) 880

Festival rights

Other intangibles (c)

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2019

Trade names (a)

Venue management contracts

Favorable lease assets (b)

Season ticket holder relationships

Other intangibles 1,200 ( 434 ) 766

$ 5,900 $ ( 3,411 ) $ 2,489

June 30, 2020 Gross Accumulated

Amortization Net

Trade names $ 2,300 $ ( 1,342 ) $ 958

Non-compete agreements 2,400 ( 1,400 ) 1,000

Festival rights

Other intangibles (c)

Other intangibles 1,200 ( 404 ) 796

$ 5,900 $ ( 3,146 ) $ 2,754

During the three and nine month ended March 31, 2020, the company recorded a non-cash impairment charge of $ 3,541 associated with one venue within the Tao Group Hospitality (see Note 1 “ Impact of COVID-19 ” for further details) .

Upon adoption of ASC Topic 842, the Company also reclassified favorable lease assets net balance of $ 43,871 , which was recognized in connection with the acquisition of Tao Group Hospitality , from Amortizable intangible assets, net , to Right-of-use lease assets in the accompanying consolidated balance sheet as of July 1, 2019.

In addition, the Company also reclassified unfavorable lease liability of $ 6,841 , which was reported in Other liabilities in the accompanying consolidated balance sheet, to Right-of-use lease assets as of July 1, 2019.

The decreases in the Other intangibles gross and accumulated amortization balances related to the write-off of an Obscura asset after it was fully amortized on an accelerated basis.

For the three months ended March 31, 2020 and 2019 , amortization expense of intangible assets, excluding the amortization of favorable lease assets of $ 1,152 for the three months ended March 31, 2019 , which is reported in rent expense, was $ 5,091 and $ 4,252 , respectively.

For the nine months ended March 31, 2020 and 2019 , amortization expense of intangible assets, excluding the amortization of favorable lease assets of $ 3,545 for the nine months ended March 31, 2019 , which is reported in rent expense, was $ 14,325 and $ 13,312 , respectively.

Commitments and Contingencies

As more fully described in Note 10 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 , the Company’s commitments consist primarily of (i) the MSG Sports’ obligations under employment agreements that the Company has with its professional sports teams’ personnel that are generally guaranteed regardless of employee injury or termination and (ii) long-term noncancelable operating lease agreements primarily for Company venues, including Tao Group Hospitality venues, and various corporate offices.

The Company adopted ASU No.

2016-02, Leases (Topic 842), on July 1, 2019.

As a result, the contractual obligations related to future lease payments, which were historically reported as off-balance sheet commitments, are now reflected on the consolidated balance sheet as lease liabilities as of March 31, 2020 .

See Note 9 for further details about the lease liabilities.

Except as described above with respect to lease accounting, the Company did not have any material changes in its contractual obligations since the end of fiscal year 2019 other than activities in the ordinary course of business.

In connection with the Tao Group Hospitality and CLG acquisitions, the Company has accrued deferred and contingent consideration as part of the purchase price allocation.

See Note 13 for further details of the amount outstanding as of March 31, 2020 .

Legal Matters

The Company is a defendant in various lawsuits.

Although the outcome of these lawsuits cannot be predicted with certainty (including the extent of available insurance), management does not believe that resolution of these lawsuits will have a material adverse effect on the Company.

For the three months ended September 30, 2020 and 2019, amortization expense of intangible assets was $ 265 and $ 1,103 , respectively.

MADISON SQUARE GARDEN SPORTS CORP.

1 unchanged sentence

Fair Value Measurements

The following table presents the Company’s assets that are measured at fair value on a recurring basis, which include cash equivalents, short-term investments in U.S treasury bills and an equity investment with readily determinable fair value:

Fair Value Hierarchy

Commercial paper

Money market accounts

Time deposits

treasury bills

Equity investment with readily determinable fair value

Total assets measured at fair value

All assets listed above are classified within Level I of the fair value hierarchy as they are valued using observable inputs that reflect quoted prices for identical assets in active markets.

The carrying amount of the Company’s commercial paper, money market accounts, time deposits and U.S.

treasury bills approximates fair value due to their short-term maturities.

The carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:

March 31, 2020

June 30, 2019

Notes receivable (a)

Short-term investments (a)

Equity investment with readily determinable fair value (b)

Subordinated term loan receivable (c)

Long-term debt, including current portion (d)

September 30, 2020 June 30, 2020

Value Carrying

Long-term debt (a)

$ 350,000 $ 350,000 $ 350,000 $ 350,000

The Company’s notes receivable are invested with banking institutions as collateral for issuances of letters of credit.

In addition, the Company’s short-term investments consist of investments that (i) have original maturities of greater than three months and (ii) can be converted into cash by the Company within one year.

The Company’s notes receivable and short-term investments are carried at cost, including interest accruals, which approximate fair value and are classified within Level III of the fair value hierarchy.

Aggregate cost basis for the Company’s equity investment with readily determinable fair value in Townsquare, including transaction costs, was $ 23,222 as of March 31, 2020 .

The fair value of this investment is determined based on quoted market prices in an active market on the NYSE , which is classified within Level I of the fair value hierarchy.

For the three months ended March 31, 2020 and 2019 , the Company recorded an unrealized gain (loss) of $( 17,196 ) and $ 5,261 , respectively, and for the nine months ended March 31, 2020 and 2019 , the Company recorded an unrealized loss of $( 2,471 ) and $( 2,405 ) , respectively, in accordance with ASU No.

2016-01 as a result of changes in the market value related to this investment.

The unrealized loss is reported in Miscellaneous income (expense), net in the accompanying consolidated statement of operations.

In connection with the sale of the Company’s joint venture interest in Azoff MSG Entertainment LLC (“ AMSGE ”) in December 2018, the $ 63,500 outstanding balance under the revolving credit facility extended by the Company to AMSGE was converted to a subordinated term loan with an original maturity date of September 21, 2021 .

The subordinated loan

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

was assumed by an affiliate of AMSGE .

During the three months ended March 31, 2019, the Company received a $ 4,765 principal repayment.

During the three months ended December 31, 2019, the Company received a $ 58,735 principal repayment for the remaining outstanding balance.

The Company’s subordinated term loan receivable as of June 30, 2019 was classified within Level II of the fair value hierarchy as it was valued using quoted indices of similar securities for which the inputs were readily observable.

On March 12, 2020, the Company drew $ 200,000 on the New York Knicks, LLC and $ 150,000 on the New York Rangers, LLC five-year revolving facilities.

On May 23, 2019, Tao Group Intermediate Holdings LLC and Tao Group Operating LLC entered into a $ 40,000 five -year term loan facility and a $ 25,000 five -year term revolving facility.

The outstanding balance of the Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable.

_________________

(a) On March 12, 2020, the Company borrowed $ 200,000 under the New York Knicks, LLC and $ 150,000 under the New York Rangers, LLC five-year revolving facilities.

The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable.

On November 6, 2020, the Company amended and extended these credit facilities.

See Note 11 for further details.

Contingent Consideration Liabilities

In connection with the Tao Group Hospitality and CLG acquisitions (see Note 11 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for further details), the Company recorded certain deferred and contingent consideration liabilities at fair value as part of the preliminary purchase price allocation.

The following table provides a reconciliation of the deferred and contingent consideration liabilities in connection with the acquisitions discussed above:

Nine Months Ended March 31, 2020

In connection with the CLG acquisition (see Note 11 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 for further details), the Company recorded certain deferred and contingent consideration liabilities at fair value as part of the purchase price allocation.

The following table provides a reconciliation of the deferred and contingent consideration liabilities in connection with the CLG acquisition:

Three Months Ended September 30, 2020

Balance as of June 30, 2020 $ 336

1 unchanged sentence

Change in fair value of contingent consideration (a)

Balance as of March 31, 2020

Balance as of September 30, 2020 $ —

_________________

The change in fair value of contingent consideration, including accretion, was recorded within Selling, general and administrative expenses in the accompanying consolidated statement of operations for the three and nine months ended March 31, 2020.

Redeemable Noncontrolling Interests

The Company has the right to increase its equity interest in Tao Group Hospitality through a call right on the equity of the other Tao Group Hospitality equityholders after the fifth anniversary of the closing date (January 31, 2022) and prior to such date in certain events.

The other Tao Group Hospitality equityholders have the right to put to Tao Group Hospitality their equity interests in Tao Group Hospitality after the fifth anniversary of the closing and, in certain circumstances to put to the Company prior to the fifth anniversary.

As of March 31, 2020, the put and call prices were at fair market value (or in certain circumstances, subject to a discount).

Consideration paid upon the exercise of any such put or call right shall be, at the Company’s option, in cash, debt, or the Company’s Class A Common Stock, subject to certain limitations.

During the three and nine months ended March 31, 2020 , the Company reduced the carrying value of redeemable noncontrolling interests by $ 37,715 to reflect a non-cash purchase of the additional 15 % of common equity interest in Tao Group Hospitality on January 22, 2020 (see Note 2 for further details).

In addition, the redeemable noncontrolling interests balance was reduced by $ 22,997 , which represents a proportional allocation for impairment of intangibles, long-lived assets, and goodwill from the Tao Group Hospitality reporting unit (See Notes 1 , 10 and 11 for further details).

Concurrently, the nonredeemable noncontrolling interests carrying value was increased by $ 16,939 to align with its fair value of $ 23,000 as of March 31, 2020 .

The fair value of nonredeemable noncontrolling interests was based on unobservable inputs classified within Level III of the fair value hierarchy, primarily from utilizing the discounted cash flow model, which is an income-based approach.

(a) The change in fair value of contingent consideration, including accretion, was recorded within Selling, general and administrative expenses in the accompanying consolidated statement of operations for the three months ended September 30, 2020.

Commitments and Contingencies

As more fully described in Note 12 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020, the Company’s commitments consist primarily of the Company’s obligations under employment agreements that the Company has with its professional sports teams’ personnel that are generally guaranteed regardless of employee injury or termination.

In addition, see Note 7 for more information on the contractual obligations related to future lease payments.

The Company did not have any material changes in its contractual obligations since the end of fiscal year 2020 other than activities in the ordinary course of business.

Legal Matters

The Company is a defendant in various lawsuits.

MADISON SQUARE GARDEN SPORTS CORP.

3 unchanged sentences

On September 30, 2016, New York Knicks, LLC (“Knicks LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “2016 Knicks Credit Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $ 200,000 with a term of five years (the “2016 Knicks Revolving Credit Facility”) to fund working capital needs and for general corporate purposes.

Amounts borrowed may be distributed to the Company except during an event of default.

The Knicks Revolving Credit Facility requires Knicks LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period .

As of March 31, 2020 , Knicks LLC was in compliance with this financial covenant.

All borrowings under the Knicks Revolving Credit Facility are subject to the satisfaction of certain customary conditions.

Borrowings bear interest at a floating rate, which at the option of Knicks LLC may be either (i) a base rate plus a margin ranging from 0.00% to 0.125% per annum or (ii) LIBOR plus a margin ranging from 1.00% to 1.125% per annum.

Knicks LLC is required to pay a commitment fee ranging from 0.20 % to 0.25 % per annum in respect of the average daily unused commitments under the Knicks Revolving Credit Facility .

The outstanding balance under the Knicks Revolving Credit Facility was $ 200,000 as of March 31, 2020 and was recorded as the noncurrent portion of Long-term debt, net of deferred financing costs in the accompanying consolidated balance sheet.

The interest rate on the Knicks Revolving Credit Facility as of March 31, 2020 was 1.81 % .

No interest payments were made under the Knicks Revolving Credit Facility during the nine months ended March 31, 2020 .

All obligations under the Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S.

Amounts borrowed may have been distributed to the Company except during an event of default.

On November 6, 2020, the Company amended and restated the 2016 Knicks Credit Agreement in its entirety (the “2020 Knicks Credit Agreement”).

Refer to Note 17 for further details.

The 2016 Knicks Revolving Credit Facility required Knicks LLC to comply with a debt service ratio of 1.5 :1.0 over a trailing four quarter period.

As of September 30, 2020, Knicks LLC was in compliance with this financial covenant.

The 2016 Knicks Revolving Credit Facility would have matured and any unused commitments thereunder would have expired on September 30, 2021.

All borrowings under the 2016 Knicks Revolving Credit Facility were subject to the satisfaction of certain customary conditions.

Borrowings bore interest at a floating rate, which at the option of Knicks LLC may have been either (i) a base rate plus a margin ranging from 0.00 % to 0.125 % per annum or (ii) LIBOR plus a margin ranging from 1.00 % to 1.125 % per annum.

Knicks LLC was required to pay a commitment fee ranging from 0.20 % to 0.25 % per annum in respect of the average daily unused commitments under the 2016 Knicks Revolving Credit Facility.

The outstanding balance under the 2016 Knicks Revolving Credit Facility was $ 200,000 as of September 30, 2020 and was recorded as Long-term debt in the accompanying consolidated balance sheet.

The interest rate on the 2016 Knicks Revolving Credit Facility as of September 30, 2020 was 1.16 %.

During the three months ended September 30, 2020 the Company made interest payments of $ 625 .

All obligations under the 2016 Knicks Revolving Credit Facility were secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S.

national broadcast agreements.

Subject to customary notice and minimum amount conditions, Knicks LLC may voluntarily prepay outstanding loans under the Knicks Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans).

Knicks LLC is required to make mandatory prepayments in certain circumstances, including without limitation if the maximum available amount under the Knicks Revolving Credit Facility is greater than 350% of qualified revenues.

In addition to the financial covenant described above, the Knicks Credit Agreement and related security agreements contain certain customary representations and warranties, affirmative covenants and events of default.

The Knicks Revolving Credit Facility contains certain restrictions on the ability of Knicks LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Knicks Revolving Credit Facility, including the following:

Subject to customary notice and minimum amount conditions, Knicks LLC may have voluntarily prepaid outstanding loans under the 2016 Knicks Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans).

Knicks LLC was required to make mandatory prepayments in certain circumstances, including without limitation if the maximum available amount under the 2016 Knicks Revolving Credit Facility was greater than 350 % of qualified revenues.

In addition to the financial covenant described above, the 2016 Knicks Credit Agreement and related security agreements contained certain customary representations and warranties, affirmative covenants and events of default.

The 2016 Knicks Revolving Credit Facility contained certain restrictions on the ability of Knicks LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the 2016 Knicks Revolving Credit Facility, including the following:

(i) incurring additional indebtedness and contingent liabilities;

7 unchanged sentences

Knicks LLC renewed this facility with the lender on the same terms in successive years and the facility has been renewed for a new term effective as of September 25, 2020.

There was no borrowing under the Knicks Unsecured Credit Facility as of March 31, 2020 .

This facility does not have financial covenants.

There was no borrowing under the Knicks Unsecured Credit Facility as of September 30, 2020.

On November 6, 2020, the Company terminated the Knicks Unsecured Credit Facility in its entirety.

Refer to Note 17 for further details.

2017 Rangers Revolving Credit Facility

On January 25, 2017, New York Rangers, LLC (“Rangers LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “2017 Rangers Credit Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $ 150,000 with a term of five years (the “2017 Rangers Revolving Credit Facility”) to fund working capital needs and for general corporate purposes.

Amounts borrowed may be distributed to the Company except during an event of default.

Amounts borrowed may have been distributed to the Company except during an event of default.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Rangers Revolving Credit Facility requires Rangers LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period .

As of March 31, 2020 , Rangers LLC was in compliance with this financial covenant .

All borrowings under the Rangers Revolving Credit Facility are subject to the satisfaction of certain customary conditions.

Borrowings bear interest at a floating rate, which at the option of Rangers LLC may be either (i) a base rate plus a margin ranging from 0.125% to 0.50% per annum or (ii) LIBOR plus a margin ranging from 1.125% to 1.50% per annum.

Rangers LLC is required to pay a commitment fee ranging from 0.375 % to 0.625 % per annum in respect of the average daily unused commitments under the Rangers Revolving Credit Facility .

The outstanding balance under the Rangers Revolving Credit Facility was $ 150,000 as of March 31, 2020 and was recorded as the noncurrent portion of Long-term debt, net of deferred financing costs in the accompanying consolidated balance sheet.

The interest rate on the Rangers Revolving Credit Facility as of March 31, 2020 was 2.185 % .

No interest payments were made under the Rangers Revolving Credit Facility during the nine months ended March 31, 2020 .

All obligations under the Rangers Revolving Credit Facility are secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i) Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S.

On November 6, 2020, the Company amended and restated the 2017 Rangers Credit Agreement in its entirety (the “2020 Rangers Credit Agreement”).

Refer to Note 17 for further details.

The 2017 Rangers Revolving Credit Facility required Rangers LLC to comply with a debt service ratio of 1.5 :1.0 over a trailing four quarter period.

As of September 30, 2020, Rangers LLC was in compliance with this financial covenant.

The 2017 Rangers Revolving Credit Facility would have matured and any unused commitments thereunder would have expired on January 25, 2022.

All borrowings under the 2017 Rangers Revolving Credit Facility were subject to the satisfaction of certain customary conditions.

Borrowings bore interest at a floating rate, which at the option of Rangers LLC may have been either (i) a base rate plus a margin ranging from 0.125 % to 0.50 % per annum or (ii) LIBOR plus a margin ranging from 1.125 % to 1.50 % per annum.

Rangers LLC was required to pay a commitment fee ranging from 0.375 % to 0.625 % per annum in respect of the average daily unused commitments under the 2017 Rangers Revolving Credit Facility.

The outstanding balance under the 2017 Rangers Revolving Credit Facility was $ 150,000 as of September 30, 2020 and was recorded as Long-term debt in the accompanying consolidated balance sheet.

The interest rate on the 2017 Rangers Revolving Credit Facility as of September 30, 2020 was 1.540 %.

During the three months ended September 30, 2020 the Company made interest payments of $ 617 .

All obligations under the 2017 Rangers Revolving Credit Facility were secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i) Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S.

and Canadian national broadcast agreements, and (iii) revenues to be paid to Rangers LLC pursuant to local media contracts.

Subject to customary notice and minimum amount conditions, Rangers LLC may voluntarily prepay outstanding loans under the Rangers Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans).

Rangers LLC is required to make mandatory prepayments in certain circumstances, including without limitation if qualified revenues are less than 17% of the maximum available amount under the Rangers Revolving Credit Facility.

In addition to the financial covenant described above, the Rangers Credit Agreement and related security agreements contain certain customary representations and warranties, affirmative covenants and events of default.

The Rangers Revolving Credit Facility contains certain restrictions on the ability of Rangers LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Rangers Revolving Credit Facility, including the following:

Subject to customary notice and minimum amount conditions, Rangers LLC may have voluntarily prepaid outstanding loans under the 2017 Rangers Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans).

Rangers LLC was required to make mandatory prepayments in certain circumstances, including without limitation if qualified revenues are less than 17 % of the maximum available amount under the 2017 Rangers Revolving Credit Facility.

In addition to the financial covenant described above, the 2017 Rangers Credit Agreement and related security agreements contained certain customary representations and warranties, affirmative covenants and events of default.

The 2017 Rangers Revolving Credit Facility contained certain restrictions on the ability of Rangers LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the 2017 Rangers Revolving Credit Facility, including the following:

(i) incurring additional indebtedness and contingent liabilities;

4 unchanged sentences

and (vi) taking certain actions that would invalidate the secured lenders’ liens on any of Rangers LLC’s assets securing the obligations under the 2017 Rangers Revolving Credit Facility.

TAO Credit Facilities

On May 23, 2019, Tao Group Intermediate Holdings LLC (“ TAOIH ” or “Intermediate Holdings”) and Tao Group Operating LLC (“ TAOG ” or “Senior Borrower”), entered into a credit agreement (the “ Tao Senior Credit Agreement ”) with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and a letter of credit issuer, and the lenders party thereto.

Together the Tao Senior Credit Agreement and a $ 49,000 intercompany subordinated credit agreement (the “ Tao Subordinated Credit Agreement ”) between a subsidiary of the Company and Tao Group Sub-Holdings LLC, a subsidiary of Tao Group Hospitality replaced the Senior Borrower’s prior credit agreement dated January 31, 2017 (“ 2017 Tao Credit Agreement ”).

The 2017 Tao Credit Agreement was terminated on May 23, 2019 in its entirety in accordance with its terms as a result of the repayment of all obligations thereunder from the proceeds of the Tao Senior Credit Agreement and the Tao Subordinated Credit Agreement as well as cash on hand.

During the nine months ended March 31, 2020 , Tao Group Hospitality repaid $ 5,000 under the Tao Subordinated Credit Agreement .

The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement have been eliminated in the consolidated financial statements in accordance with ASC Topic 810, Consolidation .

The Tao Senior Credit Agreement provides TAOG with senior secured credit facilities (the “ Tao Senior Secured Credit Facilities ”) consisting of:

(i) an initial $ 40,000 term loan facility with a term of five years (the “ Tao Term Loan Facility ”) and (ii) a $ 25,000 revolving credit facility with a term of five years (the “ Tao Revolving Credit Facility ”).

Up to $ 5,000 of the Tao Revolving Credit Facility is available for the issuance of letters of credit.

All borrowings under the Tao Revolving Credit Facility , including, without limitation, amounts drawn under the revolving line of credit are subject to the satisfaction of customary conditions.

The Tao Senior Secured Credit Facilities were obtained without recourse to the Company or any of its affiliates (other than TAOG , TAOIH and its subsidiaries as discussed below).

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Tao Senior Credit Agreement requires Intermediate Holdings to comply with a maximum total leverage ratio of 4.00:1.00 and a maximum senior leverage ratio of 3.00:1.00 from the closing date until December 31, 2021 and a maximum total leverage ratio of 3.50:1.00 and a maximum senior leverage ratio of 2.50:1.00 from and after December 31, 2021.

In addition, there is a minimum fixed charge coverage ratio of 1.25:1.00 for TAOIH.

As of March 31, 2020 , TAOIH was in compliance with these financial covenants.

All obligations under the Tao Senior Credit Agreement are guaranteed by TAOIH and TAOIH ’s existing and future direct and indirect domestic subsidiaries (other than (i) TAOG , (ii) domestic subsidiaries substantially all of whose assets consist of controlled foreign corporations and (iii) subsidiaries designated as immaterial subsidiaries or unrestricted subsidiaries) (the “ Tao Subsidiary Guarantors ”, and together with TAOIH , the “ Tao Guarantors ”).

All obligations under the Tao Senior Credit Agreement , including the guarantees of those obligations, are secured by substantially all of the assets of TAOG and each Guarantor (collectively, “ Tao Collateral ”), including, but not limited to, a pledge of the equity interests in TAOG held directly by TAOIH and the equity interests in each Tao Subsidiary Guarantor held directly or indirectly by TAOIH.

Borrowings under the Tao Senior Credit Agreement bear interest at a floating rate, which at the option of the Senior Borrower may be either (i) a base rate plus an additional rate ranging from 1.50% to 2.50% per annum (determined based on a total leverage ratio) (the “Base Rate”), or (ii) a Eurocurrency rate plus an additional rate ranging from 2.50% to 3.50% per annum (determined based on a total leverage ratio) (the “Eurocurrency Rate”) .

The Tao Senior Credit Agreement requires TAOG to pay a commitment fee of 0.50 % in respect of the daily unused commitments under the Tao Revolving Credit Facility .

TAOG is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the Tao Senior Credit Agreement .

The interest rate on the Tao Senior Credit Agreement as of March 31, 2020 was 3.28 % .

The outstanding amount drawn on the Tao Revolving Credit Facility was $ 15,000 as of June 30, 2019 , which is reported under Long-term debt, net of deferred financing costs in the accompanying consolidated balance sheet.

In addition to scheduled repayments required under the Tao Term Loan Facility , Tao Group Hospitality repaid the $ 15,000 outstanding balance under the Tao Revolving Credit Facility during the nine months ended March 31, 2020 .

There was no borrowing under the Tao Revolving Credit Facility as of March 31, 2020 .

During the nine months ended March 31, 2020 and 2019 , the Company made interest payments of $ 1,531 and $ 7,395 , respectively, under the Tao Senior Credit Agreement and the 2017 Tao Credit Agreement .

In addition to the financial covenants described above, the Tao Senior Credit Agreement and related security agreements contain certain customary representations and warranties, affirmative covenants and events of default.

The Tao Senior Credit Agreement contains certain restrictions on the ability of TAOIH, the TAOG and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Tao Senior Credit Agreement, including, without limitation, the following:

(i) incurring additional indebtedness and contingent liabilities;

(ii) creating liens on certain assets;

(iii) making investments, loans or advances in or to other persons;

(iv) paying dividends and distributions or repurchasing capital stock;

(v) engaging in certain transactions with affiliates;

(vi) amending specified agreements;

(vii) merging or consolidating;

(viii) making certain dispositions;

and (ix) entering into agreements that restrict the granting of liens.

Intermediate Holdings is subject to a customary passive holding company covenant.

Subject to customary notice and minimum amount conditions, TAOG may voluntarily prepay outstanding loans under the Tao Senior Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans).

The initial Tao Term Loan Facility amortizes quarterly in accordance with its terms from June 30, 2019 through March 31, 2024 with a final maturity date on May 23, 2024.

TAOG is required to make mandatory prepayments on the Tao Term Loan Facility from the net cash proceeds of certain sales of assets (including Tao Collateral) or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.

See Note 12 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for more information regarding the Company’s debt maturities for the Tao Senior Secured Credit Facilities .

Delayed Draw Term Loan Credit Facilities

As an additional source of liquidity for the Company in response to the COVID-19 pandemic, on April 17, 2020, MSG NYR Holdings, LLC and MSG NYK Holdings, LLC, two indirect wholly-owned subsidiaries of the Company, each entered into a separate delayed draw term loan credit agreement with MSG Entertainment Group, LLC, a wholly-owned subsidiary of MSG Entertainment, as lender (the “DDTL Lender”).

The credit agreement for MSG NYK Holdings, LLC (the “Knicks DDTL Facility Borrower”) provided for a $ 110,000 senior unsecured delayed draw term loan facility (the “Knicks DDTL Facility”) and the credit agreement for MSG NYR Holdings, LLC (the “Rangers DDTL Facility Borrower”) provided for a $ 90,000 senior unsecured delayed draw term loan facility (the “Rangers DDTL Facility” and, together with the Knicks DDTL Facility, the “DDTL Facilities”).

On November 6, 2020, the Company terminated the DDTL Facilities in their entirety.

Refer to Note 17 for further details.

The DDTL Facilities would have matured and any unused commitments thereunder would have expired on October 17, 2021.

Borrowings under the DDTL Facilities bore interest at a variable rate equal to either, at the election of the applicable borrower, (i) LIBOR plus 2.00 % per annum or (ii) a base rate plus 1.00 % per annum.

Subject to the borrowing conditions, each of the DDTL Facilities may have been drawn in up to four separate borrowings of $ 10,000 or more.

Proceeds of borrowings under the DDTL Facilities would have been used for general corporate purposes.

The availability of each of the DDTL Facilities to the respective borrowers was subject to certain conditions, including (a) the liquidity, including cash on hand and availability under revolving credit commitments, of the Company, MSG Sports, LLC, the Knicks DDTL Facility Borrower and its subsidiaries and the Rangers DDTL Facility Borrower and its subsidiaries (other than any liquidity that is restricted by law or contractual obligation from being transferred to the relevant DDTL Facility Borrower or its subsidiaries) must have been (i) less than $ 50,000 immediately prior to giving effect to any borrowing, and (ii) less than

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Deferred Financing Costs

The following table summarizes the presentation of the Tao Term Loan Facility and the related deferred financing costs in the accompanying consolidated balance sheets as of March 31, 2020 and June 30, 2019 .

March 31, 2020

Tao Term Loan Facility

$ 75,000 immediately after giving effect to any borrowing, and (b) with respect to the Knicks DDTL Facility, the Knicks DDTL Facility Borrower and its subsidiaries must have used commercially reasonable efforts to raise additional financing (“New Third-Party Debt”), including additional commitments under existing revolving facilities, prior to drawing on the Knicks DDTL Facility to the extent permitted by the debt policies of the NBA.

In addition, the commitments of the DDTL Lender to make advances under the Knicks DDTL Facility would have been permanently reduced and the Knicks DDTL Facility would have been subject to mandatory prepayments in an amount equal to the net cash proceeds received by the Company, MSG Sports, LLC, the Knicks DDTL Facility Borrower, or the subsidiaries of the Knicks DDTL Facility Borrower from any New Third-Party Debt.

Pursuant to the NBA debt policies, the NBA has consented (the “NBA Consent Letter”) to the incurrence of the indebtedness under the Knicks DDTL Facility.

The NBA Consent Letter provided that the Knicks DDTL Facility Borrower and its subsidiaries (including the Knicks basketball team) will, among other matters, (i) operate the team in a first class manner, consistent with the manner in which NBA teams generally are operated, as determined by the NBA Commissioner in his sole discretion, and (ii) maintain sufficient net working capital and cash reserves to pay expenses, liabilities and obligations of the team in the ordinary course and in a timely fashion.

In addition, the Knicks DDTL Facility Borrower and its subsidiaries (including the Knicks basketball team) agreed with the NBA to not transfer certain basketball-related assets and to not make distributions to the Company without first providing the NBA with advance notice and not receiving the objection of the NBA Commissioner.

There was no borrowing under the DDTL Facilities as of September 30, 2020.

Deferred Financing Costs

Current portion of long-term debt, net of deferred financing costs

Long-term debt, net of deferred financing costs (a)

The following table summarizes deferred financing costs, net of amortization, related to the 2016 Knicks Revolving Credit Facility, Knicks Unsecured Credit Facility and 2017 Rangers Revolving Credit Facility as reported on the accompanying consolidated balance sheet:

September 30,

2020 June 30,

Tao Term Loan Facility

Deferred Financing Costs

Current portion of long-term debt, net of deferred financing costs

Long-term debt, net of deferred financing costs (a)

_________________

In addition to the outstanding balance associated with the Tao Term Loan Facility disclosed above, the Company’s Long-term debt, net of deferred financing costs in the accompanying consolidated balance sheet as of March 31, 2020 also includes, (i) $ 200,000 outstanding balance drawn under the Knicks Revolving Credit Facility , (ii) $ 150,000 outstanding balance drawn under the Rangers Revolving Credit Facility , and (iii) $ 637 related to a note with respect to a loan received by BCE from its noncontrolling interest holder that is due in April 2021.

As of June 30, 2019 , the Company’s Long-term debt, net of deferred financing costs in the accompanying consolidated balance sheets also includes $ 15,000 outstanding balance under the Tao Revolving Credit Facility and $ 637 related to a note with respect to a loan received by BCE from its noncontrolling interest holder that is due in April 2021 in addition to the outstanding balance associated with the Tao Term Loan Facility disclosed above.

The following table summarizes deferred financing costs, net of amortization, related to the Knicks Revolving Credit Facility , Rangers Revolving Credit Facility , and Tao Revolving Credit Facility as reported on the accompanying consolidated balance sheet:

Other current assets $ 675 $ 675

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other assets 95 264

Pension Plans and Other Postretirement Benefit Plan

See Note 13 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for more information regarding the Company’s defined benefit pension plans (“Pension Plans”), postretirement benefit plan (“Postretirement Plan”), The Madison Square Garden 401(k) Savings Plan and the MSG Sports & Entertainment, LLC Excess Savings Plan (collectively, the “ Savings Plans ”), and The Madison Square Garden 401(k) Union Plan (the “ Union Savings Plan ”).

Defined Benefit Pension Plans and Postretirement Benefit Plan

The following table presents components of net periodic benefit cost for the Pension Plans and Postretirement Plan included in the accompanying consolidated statements of operations for the three and nine months ended March 31, 2020 and 2019 .

Prior to the MSGE Distribution, the Company sponsored a non-contributory, qualified cash balance retirement plan covering its non-union employees (the “Cash Balance Pension Plan”) and an unfunded non-contributory, non-qualified excess cash balance plan (the “Excess Cash Balance Plan”) covering certain employees who participate in the underlying qualified plan (collectively, the “Cash Balance Plans”).

Since March 1, 2011, the Cash Balance Pension Plan has also included the assets and liabilities of a frozen (as of December 31, 2007) non-contributory qualified defined benefit pension plan covering non-union employees hired prior to January 1, 2001.

Also, the Company historically sponsored an unfunded non-contributory, non-qualified defined benefit pension plan for the benefit of certain employees who participate in the underlying qualified plan which was merged into the Cash Balance Pension Plan on March 1, 2011 (the “Excess Plan”).

As of December 31, 2007, the Excess Plan was amended to freeze all benefits earned through December 31, 2007 and to eliminate the ability of participants to earn benefits for future service under these plans.

The Cash Balance Plans were amended to freeze participation and future benefit accruals effective December 31, 2015 for all employees.

Therefore, after December 31, 2015, no employee of the Company who was not already a participant may become a participant in the plans and no further annual pay credits will be made for any future year.

Existing account balances under the plans will continue to be credited with monthly interest in accordance with the terms of the plans.

Prior to the MSGE Distribution, the Company sponsored a non-contributory, qualified defined benefit pension plan covering certain of its union employees (the “Union Plan”).

Benefits payable to retirees under the Union Plan are based upon years of Benefit Service (as defined in the Union Plan document).

The Cash Balance Plans, Union Plan and Excess Plan are collectively referred to as the “MSGE Pension Plans.”

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In addition, the Company also sponsored a contributory welfare plan which provided certain postretirement healthcare benefits to certain employees hired prior to January 1, 2001 who are eligible to commence receipt of early or normal benefits under the Cash Balance Pension Plan and their dependents, as well as certain union employees (“Postretirement Plan”).

As of the MSGE Distribution Date, the Company and MSG Entertainment entered into an employee matters agreement (the “Employee Matters Agreement”) which determined each company’s obligations after the MSGE Distribution with regard to historical liabilities under the Company’s former pension and postretirement plans.

Under the Employee Matters Agreement, the MSGE Pension Plans and Postretirement Plan were transferred to MSG Entertainment.

However, the Company has retained liabilities from the Excess Cash Balance Plan and Excess Plan that related to its current employees, former employees (other than employees transferred to MSG Entertainment in connection with the MSGE Distribution) and employees that are employed in a senior executive capacity by both the MSG Sports and MSG Entertainment.

Such liabilities were transferred to the MSG Sports, LLC Excess Cash Balance Plan and MSG Sports, LLC Excess Retirement Plan, which the Company established in connection with the MSGE Distribution and are collectively referred to the “MSGS Pension Plans.”

The following table presents components of net periodic benefit cost for the MSGE Pension Plans, MSGS Pension Plans and Postretirement Plan included in the accompanying consolidated statements of operations for the three months ended September 30, 2020 and 2019.

Service cost is recognized in direct operating expenses and selling, general and administrative expenses.

All other components of net periodic benefit cost are reported in Miscellaneous income (expense), net .

Pension Plans

Postretirement Plan

Three Months Ended

Interest cost

Expected return on plan assets

Recognized actuarial loss

Settlement loss

Amortization of unrecognized prior service credit

Net periodic benefit cost

Pension Plans

Postretirement Plan

Nine Months Ended

All other components of net periodic benefit cost are reported in Miscellaneous expense, net.

MSGE Pension Plans & MSGS Pension Plans Postretirement Plan

Three Months Ended Three Months Ended

September 30, September 30,

2020 2019 2020 2019

Service cost $ — $ 28 $ — $ 18

Interest cost 60 1,328 — 28

1 unchanged sentence

Recognized actuarial loss 10 336 — 3

Settlement loss

Amortization of unrecognized prior service credit

Net periodic benefit cost $ 70 $ 361 $ — $ 49

Amounts presented in the table above include net periodic benefit cost related to continuing operations and discontinued operations as noted in the following table:

MSGE Pension Plans & MSGS Pension Plans Postretirement Plan

Three Months Ended Three Months Ended

September 30, September 30,

2020 2019 2020 2019

Continuing Operations $ 70 $ 86 $ — $ —

Discontinued Operations — 275 — 49

Total net periodic benefit cost

$ 70 $ 361 $ — $ 49

Defined Contribution Pension Plans

Prior to the MSGE Distribution, the Company sponsored The Madison Square Garden 401(k) Savings Plan (the “401(k) Plan”), which is a multiple employer plan and the MSG S&E, LLC Excess Savings Plan (collectively referred to as the “Savings Plans”) and The Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”), which is also a multiple employer plan.

As a result of the MSGE Distribution, the Savings Plans and Union Savings Plan were transferred to MSG Entertainment.

However, MSG Sports employees continue to participate in the 401(k) Plan.

In addition, pursuant to the Employee Matters Agreement the Company established MSG Sports LLC Excess Savings Plan to provide non-qualified retirement benefits to eligible MSG Sports employees and assumed the liabilities associated with its current employees, former employees (other than employees transferred to MSG Entertainment in connection with the MSGE Distribution) and employees that are employed in a

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Defined Contribution Pension Plans

For the three and nine months ended March 31, 2020 and 2019 , expenses related to the Savings Plans and Union Savings Plan included in the accompanying consolidated statements of operations are as follows:

Savings Plans

Union Savings Plan

Three Months Ended

Nine Months Ended

senior executive capacity by both MSG Sports and MSG Entertainment as of the MSGE Distribution Date of the MSG S&E, LLC Excess Savings Plan.

Expenses related to the Savings Plans that are included in the accompanying consolidated statements of operations for the three months ended September 30, 2020 and 2019 are as follows:

Three Months Ended

Nine Months Ended

September 30,

Continuing Operations $ 598 $ 2,078

Discontinued Operations — 780

Total Savings Plan Expenses

$ 598 $ 2,858

For the three months ended September 30, 2019, expenses related to the Union Savings Plan of $ 22 have been classified in the accompanying consolidated statement of operations as discontinued operations.

Share-based Compensation

See Note 15 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 for more information regarding the Company’s 2015 Employee Stock Plan (the “Employee Stock Plan”) and its 2015 Stock Plan for Non-Employee Directors.

Share-based compensation expense was $ 13,855 and $ 15,580 for the three months ended March 31, 2020 and 2019 , respectively, and $ 47,440 and $ 45,984 for the nine months ended March 31, 2020 and 2019 , respectively.

In addition, capitalized share-based compensation expense was $ 1,308 and $ 3,790 for the three and nine months ended March 31, 2020 , respectively.

Capitalized share-based compensation expense was $ 1,951 for the three and nine months ended March 31, 2019 .

Share-based compensation expense was $ 6,345 and $ 13,796 for the three months ended September 30, 2020 and 2019, respectively.

There were no costs related to share-based compensation in continuing operations that were capitalized for the three months ended September 30, 2020 and 2019, respectively.

Share-based compensation expense for discontinued operations was $ 3,095 for the three months ended September 30, 2019.

As a result of an agreement to settle an action (the “Settlement”) filed by a purported stockholder of the Company derivatively on behalf of the Company against certain directors of the Company who are members of the Dolan family and against the directors of the Company who were members of the Compensation Committee, Mr.

Dolan voluntarily relinquished a one-time equity award granted by the Company in October 2018 pursuant to his 2018 employment agreement, and the related award agreements were canceled.

The one-time equity award included:

32 target performance stock units and three grants of stock options to purchase an aggregate of 449 shares of Class A Common Stock, which were to vest over a four-year period.

The Settlement became effective October 8, 2020 and therefore the Company will reverse share-based compensation expense of approximately $ 18,500 related to this award in the second quarter of fiscal year 2021.

Restricted Stock Units Award Activity

The following table summarizes activity related to the Company’s restricted stock units and performance restricted stock units, collectively referred to as “ RSUs ,” for the nine months ended March 31, 2020 :

Weighted-Average

Date of Grant

The following table summarizes activity related to the Company’s restricted stock units and performance restricted stock units, collectively referred to as “RSUs,” held by the Company and MSG Entertainment employees, for the three months ended September 30, 2020:

Number of Weighted-Average

Date of Grant (a)

Nonperformance

Based Vesting

RSUs Performance

Based Vesting

Unvested award balance, June 30, 2020 275 327 $ 262.13

Unvested award balance, March 31, 2020

Granted 113 48 $ 161.27

Vested ( 99 ) ( 100 ) $ 242.62

Forfeited ( 10 ) ( 13 ) $ 254.57

Unvested award balance, September 30, 2020 279 262 $ 239.65

_____________________

Includes incremental performance based RSUs (“PRSUs”) that were historically reported at a target payout of 100%.

Upon meeting the performance objectives, the number of PRSUs vested at 105.5% of target.

The fair value of RSUs that vested during the nine months ended March 31, 2020 was $ 59,215 .

(a) Weighted-average fair value per share at date of grant does not reflect any adjustments to awards granted prior to the MSGE Distribution.

The fair value of RSUs that vested during the three months ended September 30, 2020 was $ 32,779 .

Upon delivery, RSUs granted under the Employee Stock Plan were net share-settled to cover the required statutory tax withholding obligations.

To fulfill the employees’ required statutory tax withholding obligations for the applicable income and other employment taxes, 102 of these RSUs , with an aggregate value of $ 26,447 were retained by the Company and the taxes paid are reflected as financing activity in the accompanying consolidated statement of cash flows for the nine months ended March 31, 2020 .

The fair value of RSUs that vested during the nine months ended March 31, 2019 was $ 51,207 .

The weighted-average fair value per share at grant date of RSUs granted during the nine months ended March 31, 2019 was $ 305.40 .

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

fulfill the employees’ required statutory tax withholding obligations for the applicable income and other employment taxes, 84 of these RSUs, with an aggregate value of $ 13,798 were retained by the Company.

Taxes paid related to the Company’s employees are reflected as financing activity, while the taxes paid related to MSG Entertainment employees (who vested in the Company’s RSUs) are reflected as operating activity in the accompanying consolidated statement of cash flows for the three months ended September 30, 2020.

The fair value of RSUs that vested during the three months ended September 30, 2019 was $ 53,522 .

The weighted-average fair value per share at grant date of RSUs granted during the three months ended September 30, 2019 was $ 246.54 .

Stock Options Award Activity

The following table summarizes activity related to the Company’s stock options for the nine months ended March 31, 2020 :

Time Vesting Options

Weighted-Average Exercise Price Per Share

Weighted-Average Remaining Contractual Term (In Years)

Aggregate Intrinsic Value

The following table summarizes activity related to the Company’s stock options for the three months ended September 30, 2020:

Time Vesting Options Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term (In Years) Aggregate Intrinsic Value

Balance as of June 30, 2020 543 $ 225.79

Balance as of March 31, 2020

Exercisable as of March 31, 2020

Balance as of September 30, 2020 543 $ 225.79 5.80 $ 441

Exercisable as of September 30, 2020 287 $ 221.43 5.88 $ 294

Stock Repurchase Program

On September 11, 2015, the Company’s Board authorized the repurchase of up to $ 525,000 of the Company’s Class A Common Stock once the shares of the Company’s Class A Common Stock began “regular way” trading on October 1, 2015.

On September 11, 2015, the Company’s board of directors authorized the repurchase of up to $ 525,000 of the Company’s Class A Common Stock once the shares of the Company’s Class A Common Stock began “regular way” trading on October 1, 2015.

Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations.

The timing and amount of purchases will depend on market conditions and other factors.

During the three and nine months ended March 31, 2020 , the Company did not engage in any share repurchase activities under its share repurchase program.

As of March 31, 2020 , the Company had $ 259,639 of availability remaining under its stock repurchase authorization.

Accumulated Other Comprehensive Loss

The following table details the components of accumulated other comprehensive loss:

Three Months Ended March 31, 2020

Pension Plans and

Postretirement

Cumulative Translation Adjustments

Comprehensive

Balance as of December 31, 2019

Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other comprehensive loss (a)

Other comprehensive income (loss)

Balance as of March 31, 2020

Three Months Ended March 31, 2019

Pension Plans and

Postretirement

Cumulative Translation Adjustments

Comprehensive

Balance as of December 31, 2018

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive loss (a)

Other comprehensive income

Balance as of March 31, 2019

Nine Months Ended March 31, 2020

Pension Plans and

Postretirement

Cumulative Translation Adjustments

Comprehensive

Balance as of June 30, 2019

Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other comprehensive loss (a)

Other comprehensive income (loss)

Balance as of March 31, 2020

During the three months ended September 30, 2020, the Company did no t engage in any share repurchase activities under its share repurchase program.

As of September 30, 2020, the Company had $ 259,639 of availability remaining under its stock repurchase authorization.

Related Party Transactions

As of September 30, 2020, members of the Dolan family including trusts for members of the Dolan family (collectively, the “Dolan Family Group”), for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, collectively beneficially own 100 % of the Company’s outstanding Class B Common Stock and own approximately 3.0 % of the Company’s outstanding Class A Common Stock (inclusive of options exercisable within 60 days of September 30, 2020).

Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately 70.7 % of the aggregate voting power of the Company’s outstanding common stock.

Members of the Dolan family are also the controlling stockholders of MSG Entertainment, MSG Networks and AMC Networks Inc.

(“AMC Networks”).

Current Related Party Arrangements

The Company is party to the following agreements and/or arrangements with MSG Entertainment and MSG Networks, as applicable:

• Arena License Agreements pursuant to which MSG Entertainment (i) provides the right to use The Garden for games of the Knicks and Rangers for a 35 -year term in exchange for arena license fees, (ii) shares revenues collected for suite licenses, (iii) operates and manages the sale of the sports teams merchandise at The Garden for a commission, (iv) operates and manages the sale of food and beverage concessions and catering services during the Knicks and Rangers home games, (v) provides day of game services that were historically provided prior to the MSGE Distribution, and (vi) provides other general services within The Garden;

• Media rights agreements, that the Company and MSG Networks entered into in July 2015 with stated terms of 20 years, providing MSG Networks with local telecast rights for the Knicks and Rangers games in exchange for media rights fees;

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Nine Months Ended March 31, 2019

Pension Plans and

Postretirement

Cumulative Translation Adjustments

Unrealized Gain (Loss) on Available-for-sale

Securities (b)

Comprehensive

Balance as of June 30, 2018

Reclassification of unrealized loss on available-for-sale securities

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive loss (a)

Other comprehensive income

Balance as of March 31, 2019

________________

Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected under Miscellaneous income (expense), net in the accompanying consolidated statements of operations.

As of July 1, 2018, upon adoption of ASU No.

2016-01, the Company recorded a transition adjustment to reclassify accumulated other comprehensive loss associated with its investment in Townsquare in the amount of $ 2,466 pre-tax ( $ 5,570 , net of tax) to accumulated deficit.

See Notes 13 and 21 for more information related to the investment in Townsquare and its impact on the Company’s operating results for the three and nine months ended March 31, 2020 and 2019 , which is reflected under Miscellaneous income (expense), net in the accompanying consolidated statements of operations.

Income tax benefit for the three months ended March 31, 2020 of $ 10,904 differs from income tax benefit derived from applying the statutory federal rate of 21 % to the pretax loss primarily due to tax expense related to (i) an increase in valuation allowance of $ 27,412 , (ii) tax expense of $ 4,838 relating to noncontrolling interest, and (iii) tax expense from nondeductible officers’ compensation of $ 1,523 , partially offset by state income tax benefit of $ 13,043 .

Income tax benefit for the nine months ended March 31, 2020 of $ 9,300 differs from income tax benefit derived from applying the statutory federal rate of 21 % to the pretax loss primarily due to (i) tax expense of $ 20,485 related to an increase in the valuation allowance, (ii) tax expense of $ 4,531 from nondeductible officers’ compensation, (iii) tax expense of $888 relating to indefinite-lived intangible amortization, and (iv) tax expense of $ 5,358 relating to noncontrolling interest, partially offset by state income tax benefit of $ 8,916 and excess tax benefit related to share-based compensation awards of $ 3,953 .

Income tax expense for the three months ended March 31, 2019 of $ 11,253 differs from income tax expense derived from applying the statutory federal rate of 21 % to the pretax income primarily due to a tax benefit related to a decrease in valuation allowance of $ 7,654 , partially offset by (i) state income tax expense of $ 6,515 , (ii) tax expense of nondeductible officers’ compensation of $ 1,646 , and (iii) tax expense relating to noncontrolling interest of $ 256 .

Income tax expense for the nine months ended March 31, 2019 of $ 12,605 differs from income tax expense derived from applying the statutory federal rate of 21 % to the pretax income primarily due to a tax benefit related to a decrease in valuation allowance of $ 26,630 and excess tax benefit related to share-based compensation awards of $ 5,793 , partially offset by (i) state income tax expense of $ 14,062 , (ii) tax expense relating to nondeductible officers’ compensation of $ 6,979 , (iii) tax expense relating to noncontrolling interest of $ 1,801 , and (iv) tax expense relating to nondeductible expenses of $ 1,685 .

The Company was notified during the third quarter of fiscal year 2018 that the Internal Revenue Service (“ IRS ”) was commencing an audit of the federal income tax return for the year ended June 30, 2016 .

In October 2019, the Company was informed by the IRS that the audit resulted in no changes.

• Sponsorship sales and service representation agreements pursuant to which MSG Entertainment has the exclusive right and obligation to sell the Company’s sponsorships for an initial stated term of 10 years for a commission;

• Team sponsorship allocation agreement with MSG Entertainment, pursuant to which teams continue receiving an allocation of sponsorship and signage revenues associated with the sponsorship agreements that existed at the MSGE Distribution Date;

• Transition Services Agreement (the “TSA”) pursuant to which the Company receives certain services from MSG Entertainment, such as information technology, accounts payable, payroll, human resources, and other corporate functions, as well as the executive support services, in exchange for service fees;

• A services agreement with MSG Networks, pursuant to which the Company provides certain legal services to MSG Networks (the “Current MSGN Services Agreement”);

• Sublease agreement, pursuant to which the Company leases an office space from MSG Entertainment;

• Group ticket sales representation agreement, pursuant to which MSG Entertainment appointed the Company as its sales and service representative to sell group ticket packages related to MSG Entertainment events in exchange for a commission;

• Single night rental commission agreement, pursuant to which the Company may, from time to time, sell (or make referrals for sales of) licenses for the use of suites at The Garden for individual MSG Entertainment events in exchange for a commission;

• The DDTL Facilities with MSG Entertainment that provided for a $ 110,000 and $ 90,000 senior unsecured delayed draw term loan facilities, for the Knicks and Rangers, respectively.

The DDTL facilities were terminated on November 6, 2020.

See Notes 11 and 17 for more information;

• Aircraft sharing agreements pursuant to which MSG Entertainment has agreed from time to time to make its aircraft and an aircraft it leases from another related party available to the Company for lease on a “time sharing” basis;

• Other agreements with MSG Entertainment entered into in connection with the MSGE Distribution, including a distribution agreement, a tax disaffiliation agreement, an employee matters agreement, a trademark license agreement and certain other arrangements;

• Other agreements with MSG Networks entered into in connection with the MSGS Distribution, including a distribution agreement, a tax disaffiliation agreement, an employee matters agreement and certain other arrangements.

In addition, the Company shares certain executive support costs, including office space, executive assistants, security and transportation costs for:

(i) the Company’s Executive Chairman with MSG Entertainment and MSG Networks;

(ii) the Company’s Vice Chairman with AMC Networks, MSG Entertainment and MSG Networks;

and (iii) the Company’s President and Chief Executive Officer with MSG Entertainment.

Additionally, the Company, MSG Entertainment, MSG Networks and AMC Networks agreed on an allocation of the costs of certain personal aircraft and helicopter use by their shared executives.

From time to time the Company has entered into, and is expected to continue to enter into, arrangements with 605, LLC.

Dolan, a director of the Company and spouse of James L.

Dolan, the Company’s Executive Chairman and a director, is the founder and Chief Executive Officer of 605, LLC.

Dolan and Kristin A.

Dolan own 50 % of 605, LLC.

605, LLC provides audience measurement and data analytics services to the Company and its subsidiaries in the ordinary course of business.

Related Party Arrangements Prior to the MSGE Distribution

Following the MSGE Distribution, except as otherwise noted, the Company is no longer party to the arrangements described below.

However, the amounts associated with such arrangements are reflected in the Company’s results of operations for the periods prior to the MSGE Distribution.

The Company had various agreements with MSG Networks, including an advertising sales representation agreement and a services agreement (the “Prior MSGN Services Agreement”).

Pursuant to the Prior MSGN Services Agreement, which was effective July 1, 2019, the Company provided certain services to MSG Networks, such as information technology, accounts payable, payroll, human resources, and other corporate functions, as well as the executive support services described below, in exchange for service fees.

MSG Networks also provided certain services to the Company, in exchange for service fees.

Effective as of the MSGE Distribution, this agreement is now between MSG Entertainment and MSG Networks.

The Company separately entered into the Current MSGN Services Agreement.

See “— Current Related Party Arrangements.”

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company was notified in April 2020 that the City of New York was commencing an audit of the state income tax returns for the fiscal years ended June 30, 2016 and 2017.

The Company does not expect the examination, when finalized, to result in material changes.

Related Party Transactions

Given that the Entertainment Distribution did not occur until after March 31, 2020, the descriptions of the transactions below, unless otherwise indicated, are as of March 31, 2020.

Following the Entertainment Distribution, the Company is no longer party to the arrangements described below, except the media rights agreements and the sharing of certain of the Company’s Executive Chairman’s and Vice Chairman’s expenses.

As of March 31, 2020 , members of the Dolan family including trusts for members of the Dolan family (collectively, the “ Dolan Family Group ”), for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, collectively beneficially own all of the Company’s outstanding Class B Common Stock and own approximately 3.5 % of the Company’s outstanding Class A Common Stock (inclusive of options exercisable within 60 days of the date hereof).

Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately 70.9 % of the aggregate voting power of the Company’s outstanding common stock.

Members of the Dolan family are also the controlling stockholders of Madison Square Garden Entertainment Corp.

, MSG Networks and AMC Networks Inc.

(“ AMC Networks ”).

The Company has various agreements with MSG Networks , including media rights agreements covering the Knicks and the Rangers games, an advertising sales representation agreement , and a services agreement (the “ Services Agreement ”).

Pursuant to the Services Agreement, which was effective July 1, 2019, the Company provides certain services to MSG Networks , such as information technology, accounts payable and payroll, human resources, and other corporate functions, as well as the executive support services described below, in exchange for service fees.

MSG Networks also provides certain services to the Company, in exchange for service fees.

Effective as of the Entertainment Distribution, this agreement is now between Madison Square Garden Entertainment Corp.

and MSG Networks.

The Company entered into a separate services agreement with MSG Networks for the provision of certain legal services.

The Company shares certain executive support costs, including office space, executive assistants, security and transportation costs, for (i) the Company’s Executive Chairman with MSG Networks and (ii) the Company’s Vice Chairman with MSG Networks and AMC Networks .

Following the Entertainment Distribution, the Company will also share these expenses with Madison Square Garden Entertainment Corp.

The Company shared certain executive support costs, including office space, executive assistants, security and transportation costs, for (i) the Company’s Executive Chairman with MSG Networks and (ii) the Company’s Vice Chairman with MSG Networks and AMC Networks.

Additionally, the Company, MSG Networks and AMC Networks agreed on an allocation of the costs of certain personal aircraft and helicopter use by their shared executives.

Following the MSGE Distribution, the Company also shares these expenses with MSG Entertainment.

See “— Current Related Party Arrangements.”

Prior to September 2018, the Company had an arrangement with the Dolan Family Office, LLC (“DFO”), an entity owned and controlled by Charles F.

Dolan, AMC Networks and MSG Networks providing for the sharing of certain expenses associated with executive office space which is available to James L.

Dolan ( the Executive Chairman and a director of the Company , the Executive Chairman, Chief Executive Officer and a director of Madison Square Garden Entertainment Corp.

, the Executive Chairman and a director of MSG Networks , and a director of AMC Networks ), Charles F.

Dolan, AMC Networks and MSG Networks providing for the sharing of certain expenses associated with executive office space which was available to James L.

Dolan (the Executive Chairman and a director of the Company, the Executive Chairman, Chief Executive Officer and a director of MSG Entertainment, the Executive Chairman and a director of MSG Networks, and a director of AMC Networks), Charles F.

Dolan (the father of James L.

Dolan and the Executive Chairman and a director of AMC Networks and a director of the Company , Madison Square Garden Entertainment Corp.

and MSG Networks ), and the DFO .

The Company is a party to various Aircraft Support Services Agreements (the “ Support Agreements ”), pursuant to which the

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Company provides certain aircraft support services to entities controlled by (i) James L.

Dolan and the Executive Chairman and a director of AMC Networks and a director of the Company, MSG Entertainment and MSG Networks), and the DFO.

The Company was a party to various Aircraft Support Services Agreements (the “Support Agreements”), pursuant to which the Company provided certain aircraft support services to entities controlled by (i) James L.

Dolan, (ii) Charles F.

8 unchanged sentences

Dolan, Marianne Dolan Weber (a director of the Company), and Kathleen M.

Dolan, which provides substantially the same services as the prior agreement for a new aircraft.

In addition, the Company is party to reciprocal time sharing/dry lease agreements with each of (i) Quart 2C, LLC (“ Q2C ”), a company controlled by James L.

Dolan, which provided substantially the same services as the prior agreement for a new aircraft.

In addition, the Company was party to reciprocal time sharing/dry lease agreements with each of (i) Quart 2C, LLC (“Q2C”), a company controlled by James L.

Dolan and Kristin A.

3 unchanged sentences

Pursuant to the terms of the agreements, Q2C and/or CFD may lease on a non-exclusive, “time sharing” basis, the Company’s Gulfstream Aerospace G550 aircraft (the “G550 Aircraft”).

On December 17, 2018, in connection with the purchase of a new aircraft (as noted above), the Company replaced the dry lease agreement with CFD with a new dry lease agreement with Sterling2k LLC, an entity owned and controlled by Deborah Dolan-Sweeney, which provides for the Company’s usage of the new aircraft on the same terms as the prior agreement.

Dolan, which provides for the Company’s usage of the new aircraft on the same terms as the prior agreement.

On May 6, 2019, the Company entered into a dry lease agreement with Brighid Air, LLC (“Brighid Air”), a company owned and controlled by Patrick F.

Dolan, pursuant to which the Company may lease on a non-exclusive basis Brighid Air ’s Bombardier BD100-1A10 Challenger 350 aircraft (the “ Challenger ”).

Dolan, pursuant to which the Company was permitted to lease on a non-exclusive basis Brighid Air’s Bombardier BD100-1A10 Challenger 350 aircraft (the “Challenger”).

In connection with the dry lease agreement, on May 6, 2019, the Company also entered into a Flight Crew Services Agreement (the “Flight Crew Agreement”) with DFO, an entity owned and controlled by Charles F.

Dolan, pursuant to which the Company may utilize pilots employed by DFO for purposes of flying the Challenger when the Company is leasing that aircraft under the Company’s dry lease agreement with Brighid Air .

The Company and each of MSG Networks and AMC Networks are party to certain aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make its aircraft available to MSG Networks and/or AMC Networks for lease on a “time sharing” basis.

Additionally, the Company, MSG Networks and AMC Networks have agreed on an allocation of the costs of certain helicopter use by its shared executives.

In addition to the aircraft arrangements described above, certain executives of the Company are party to aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make certain aircraft available for lease on a “time sharing” basis for personal use in exchange for payment of actual expenses of the flight (as listed in the agreement).

From time to time the Company enters into arrangements with 605, LLC.

Dolan, a director of the Company and spouse of James L.

Dolan, is the founder and Chief Executive Officer of 605, LLC.

Dolan, the Company’s Executive Chairman and a director, and Kristin A.

Dolan own 50% of 605, LLC.

605, LLC provides audience measurement and data analytics services to the Company and its subsidiaries in the ordinary course of business.

As of March 31, 2020 and June 30, 2019 , BCE had $ 637 of notes payable.

See Note 14 for further details.

The Company has also entered into certain commercial agreements with its nonconsolidated affiliates in connection with MSG Sphere.

For the nine months ended March 31, 2020 , the Company recorded approximately $ 11,137 of capital expenditures in connection with services provided to the Company under these agreements.

Dolan, pursuant to which the Company was permitted to utilize pilots employed by DFO for purposes of flying the Challenger when the Company was leasing that aircraft under the Company’s dry lease agreement with Brighid Air.

The Company and each of MSG Networks and AMC Networks were party to certain aircraft time sharing agreements, pursuant to which the Company agreed from time to time to make its aircraft available to MSG Networks and/or AMC Networks for lease on a “time sharing” basis.

In addition to the aircraft arrangements described above, certain executives of the Company were party to aircraft time sharing agreements, pursuant to which the Company agreed from time to time to make certain aircraft available for lease on a “time sharing” basis for personal use in exchange for payment of actual expenses of the flight (as listed in the agreement).

MADISON SQUARE GARDEN SPORTS CORP.

1 unchanged sentence

Revenues and Operating Expenses (Credits)

The following table summarizes the composition and amounts of the transactions with the Company’s affiliates, primarily MSG Networks.

These amounts are reflected in revenues and operating expenses in the accompanying consolidated statements of operations for the three and nine months ended March 31, 2020 and 2019 :

Three Months Ended March 31,

Nine Months Ended March 31,

The following table summarizes the composition and amounts of the transactions with the Company’s affiliates, primarily with MSG Networks.

These amounts are reflected in revenues and operating expenses in the accompanying consolidated statements of operations for the three months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Revenues $ 9,061 $ 6,327

Operating expenses (credits):

Corporate general and administrative expenses, net — MSG Networks

Consulting fees

Advertising expenses

Other operating expenses, net

Revenues from related parties primarily consist of local media rights recognized by MSG Sports from the licensing of team-related programming to MSG Networks under the media rights agreements covering the Knicks and Rangers, which provide MSG Networks with exclusive media rights to team games in their local markets, as well as commissions earned in connection with the advertising sales representation agreement pursuant to which the Company has the exclusive right and obligation to sell MSG Networks’ advertising availabilities.

As a result of the timing of recognition of media rights revenue, the Company recorded a contract asset of $10,059 in the accompanying consolidated balance sheet as of March 31, 2020 .

The Company and Tribeca Enterprises have a service agreement pursuant to which the Company provides marketing inventory, advertising sales and consulting services to Tribeca Enterprises for a fee.

On August 5, 2019 , the Company sold its equity capital in Tribeca Enterprises .

Accordingly, Tribeca Enterprises is no longer a related party of the Company, and thus the related party transactions disclosed herein that relate to Tribeca Enterprises were recognized prior to August 5, 2019 .

The Company is also a party to certain commercial arrangements with AMC Networks and its subsidiaries.

Corporate general and administrative credits, net — MSG Networks $ ( 219 ) $ ( 2,602 )

Corporate general and administrative expenses, net — MSG Entertainment 11,862 —

Costs associated with the Sponsorship sales and service representation agreements 2,358 —

Other operating expenses (credits), net 360 ( 55 )

Revenues from related parties primarily consist of local media rights recognized from the licensing of team-related programming to MSG Networks under the media rights agreements covering the Knicks and Rangers, which provide MSG Networks with exclusive media rights to team games in their local markets.

In addition, pursuant to the group ticket sales representation agreement, the Company charges MSG Entertainment a share of the cost of the Company’s sales and service staff and related overhead, which are included in the revenues from related parties.

Additionally, pursuant to this agreement, the Company earns commission on group ticket packages sales related to MSG Entertainment events.

The Company has not earned such commission during the three months ended September 30, 2020.

Corporate General and Administrative Expenses, net — MSG Networks

The Company’s corporate overhead expenses that are charged to MSG Networks are primarily related to centralized functions, including executive compensation, finance, treasury, tax, internal audit, legal, information technology, human resources and risk management functions.

Corporate general and administrative expenses, net — MSG Networks reflects charges from the Company to MSG Networks under the Services Agreement of $ 2,700 and $ 2,563 for the three months ended March 31, 2020 and 2019 , respectively, and $ 7,982 and $ 7,850 for the nine months ended March 31, 2020 and 2019 , respectively.

Consulting Fees

On December 5, 2018, the Company’s joint venture interest in AMSGE was sold to Azoff Music, which resulted in the Company no longer being an owner of AMSGE (renamed The Azoff Company).

Accordingly, The Azoff Company is not a related party of the Company, and thus the related party transactions disclosed herein that relate to AMSGE were recognized prior to December 5, 2018.

Prior to the sale of AMSGE , the Company paid AMSGE and its nonconsolidated affiliates for advisory and consulting services that AMSGE and its nonconsolidated affiliates provide to the Company, and for the reimbursement of certain expenses in connection with such services.

Advertising Expenses

The Company incurs advertising expenses for services rendered by its related parties, primarily MSG Networks , most of which are related to the utilization of advertising and promotional benefits by the Company.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company’s corporate overhead expenses that were charged to MSG Networks prior to MSGE Distribution are primarily related to centralized functions, including executive compensation, finance, treasury, tax, internal audit, legal, information technology, human resources and risk management functions.

These charges are reflected in the Company’s results of operations for the periods prior to the MSGE Distribution as they do not meet the criteria for inclusion in discontinued operations.

Except for certain legal services, following the MSGE Distribution, the Company no longer provides these services to MSG Networks.

Corporate general and administrative expenses, net — MSG Networks reflects charges from the Company to MSG Networks under the Current MSGN Services Agreement and Prior MSGN Services Agreement of $ 219 and $ 2,641 for the three months ended September 30, 2020 and 2019, net of general and administrative costs charged to the Company by MSG Networks, respectively.

Corporate general and administrative expenses, net — MSG Entertainment

Corporate general and administrative expense, net — MSG Entertainment reflects charges of $ 11,036 from MSG Entertainment pursuant to the TSA for certain business functions that were previously performed by internal resources.

These services include information technology, accounting, accounts payable, payroll, tax, legal, human resources, insurance and risk management, investor relations, corporate communications, benefit plan administration and reporting, and internal audit.

Costs associated with the Sponsorship sales and service representation agreements

Pursuant to the Sponsorship sales and service representation agreements, MSG Entertainment charges the Company sales commission fees and sponsorship fulfillment costs, as well as costs of MSG Entertainment sales and service staff and overhead associated with the sales of sponsorship assets.

Other Operating Expenses, net

The Company and its related parties enter into transactions with each other in the ordinary course of business.

Amounts charged to the Company for other transactions with its related parties are net of amounts charged by the Company to the Knickerbocker Group, LLC, an entity owned by James L.

Dolan, for office space equal to the allocated cost of such space and the cost of certain technology services.

In addition, other operating expenses include net charges relating to (i) reciprocal aircraft arrangements between the Company and each of Q2C and CFD and (ii) time sharing agreements with MSG Networks and AMC Networks .

Related Party Transactions after the Entertainment Distribution

In connection with the Entertainment Distribution the Company and Madison Square Garden Entertainment Corp.

have entered into arrangements with respect to transition services and a number of ongoing commercial relationships, including Arena License Agreements with Madison Square Garden Entertainment Corp.

that will require the Knicks and Rangers to play their home games at The Garden.

Additionally, On April 17, 2020, MSG NYR Holdings, LLC and MSG NYK Holdings, LLC, entered into a separate delayed draw term loan credit agreements (the “ DDTL Facilities ”) with a wholly-owned subsidiary of Madison Square Garden Entertainment Corp.

The DDTL Facilities provide for a $ 110,000 and $ 90,000 senior unsecured delayed draw term loan facilities, for the Knicks and Rangers, respectively.

The DDTL Facilities will mature and any unused commitments thereunder will expire on October 17, 2021 .

Segment Information

Following the Entertainment Distribution, the Company has a single reportable segment.

As of March 31, 2020, the Company was comprised of two reportable segments:

MSG Entertainment and MSG Sports .

In determining its reportable segments, the Company assessed the guidance of ASC 280-10-50-1, which provides the definition of a reportable segment.

In accordance with the FASB’s guidance, the Company takes into account whether two or more operating segments can be aggregated together as one reportable segment as well as the type of discrete financial information that is available and regularly reviewed by its chief operating decision maker.

The Company has evaluated this guidance and determined that there are two reportable segments.

The Company allocates certain corporate costs and its performance venue operating expenses to each of its reportable segments.

Allocated venue operating expenses include the non-event related costs of operating the Company’s venues, and include such costs as rent for the Company’s leased venues, real estate taxes, insurance, utilities, repairs and maintenance, and labor related to the overall management of the venues.

Depreciation and amortization expense related to The Garden , Hulu Theater at Madison Square Garden, the Forum, and certain corporate property, equipment and leasehold improvements not allocated to the reportable segments is reported in “ Corporate and Other .” Additionally, the Company does not allocate any purchase accounting adjustments to the reporting segments.

The Company evaluates segment performance based on several factors, of which the key financial measure is operating income (loss) before (i) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (ii) share-based compensation expense or benefit, (iii) restructuring charges or credits, and (iv) gains or losses on sales or dispositions of businesses, which is referred to as adjusted operating income (loss) , a non-GAAP measure.

In addition to excluding the impact of the items discussed above, the impact of purchase accounting adjustments related to business acquisitions is also excluded in evaluating the Company’s consolidated adjusted operating income (loss) .

Because it is based upon operating income (loss), adjusted operating income (loss) also excludes interest expense (including cash interest expense) and other non-operating income and expense items.

Management believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash.

The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis.

Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company’s performance.

The Company uses revenues and adjusted operating income (loss) measures as the most important indicators of its business performance and evaluates management’s effectiveness with specific reference to these indicators.

Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP.

Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

measure may not be comparable to similar measures with similar titles used by other companies.

The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss) .

Information as to the operations of the Company’s reportable segments is set forth below.

Three Months Ended March 31, 2020

Entertainment

Corporate and Other

accounting adjustments

Inter-segment eliminations

Direct operating expenses

Selling, general and administrative expenses

Depreciation and amortization

Impairment of intangibles, long-lived assets and goodwill

Operating income (loss)

Loss in equity method investments

Interest income

Interest expense

Miscellaneous expense, net

Loss from operations before income taxes

Reconciliation of operating income (loss) to adjusted operating income (loss):

Operating income (loss)

Share-based compensation

Depreciation and amortization

Impairment of intangibles, long-lived assets and goodwill

Other purchase accounting adjustments

Adjusted operating income (loss)

Other information:

Capital expenditures

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended March 31, 2019

Entertainment

Corporate and Other

accounting adjustments

Inter-segment eliminations

Direct operating expenses

Selling, general and administrative expenses

Depreciation and amortization

Operating income (loss)

Loss in equity method investments

Interest income

Interest expense

Miscellaneous income, net

Income from operations before income taxes

Reconciliation of operating income (loss) to adjusted operating income (loss):

Operating income (loss)

Share-based compensation

Depreciation and amortization

Other purchase accounting adjustments

Adjusted operating income (loss)

Other information:

Capital expenditures

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Nine Months Ended March 31, 2020

Entertainment

Corporate and Other

accounting adjustments

Inter-segment eliminations

Direct operating expenses

Selling, general and administrative expenses

Depreciation and amortization

Impairment of intangibles, long-lived assets and goodwill

Operating income (loss)

Loss in equity method investments

Interest income

Interest expense

Miscellaneous expense, net

Loss from operations before income taxes

Reconciliation of operating income (loss) to adjusted operating income (loss):

Operating income (loss)

Share-based compensation

Depreciation and amortization

Impairment of intangibles, long-lived assets and goodwill

Other purchase accounting adjustments

Adjusted operating income (loss)

Other information:

Capital expenditures

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Nine Months Ended March 31, 2019

Entertainment

Corporate and Other

accounting adjustments

Inter-segment eliminations

Direct operating expenses

Selling, general and administrative expenses

Depreciation and amortization

Operating income (loss)

Earnings in equity method investments

Interest income

Interest expense

Miscellaneous expense, net

Income from operations before income taxes

Reconciliation of operating income (loss) to adjusted operating income (loss):

Operating income (loss)

Share-based compensation

Depreciation and amortization

Other purchase accounting adjustments

Adjusted operating income (loss)

Other information:

Capital expenditures

_________________

Corporate and Other ’s selling, general and administrative expenses primarily consist of unallocated corporate general and administrative costs, including expenses associated with the Company’s content development and technology associated with the Company’s MSG Sphere initiative, as well as other business development activities.

Corporate and Other principally includes depreciation and amortization of The Garden, Hulu Theater at Madison Square Garden, the Forum, and certain corporate property, equipment and leasehold improvement assets not allocated to the Company’s reportable segments.

Other operating expenses, net include net charges relating to (i) reciprocal aircraft arrangements between the Company and each of Q2C and CFD and (ii) time sharing agreements with MSG Networks and AMC Networks.

Following the MSGE Distribution, the Company no longer provides these services to MSG Networks.

However, these charges are reflected in the Company’s results of operations for the periods prior to the MSGE Distribution as they do not meet the criteria for inclusion in discontinued operations.

MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As a result of operating disruptions due to COVID-19 (see Note 1 for further details), the Company recorded a non-cash impairment charge of $ 102,211 for the three and nine months ended March 31, 2020 associated with Tao Group Hospitality.

This impairment charge included $ 3,541 related to a tradename and $ 17,972 related to long-lived assets associated with one venue within the Tao Group Hospitality , in addition to an impairment charge of $ 80,698 , which is related to goodwill.

Of the total impairment charge, $ 90,154 , which is associated with goodwill, property and equipment and right-of-use assets, was reflected within the “MSG Entertainment” segment.

The remaining $ 12,057 of the impairment charge was reported as “Purchase accounting adjustments” for segment reporting purposes and primarily relates to intangible assets and certain right-of use assets for favorable lease, as these balances are associated with the purchase price allocations in connection with the acquisition of Tao Group Hospitality on January 25, 2017.

Miscellaneous income (expense), net primarily includes unrealized gain (loss) for the Company’s investment in Townsquare in accordance with ASU No.

2016-01 of $( 17,196 ) and $ 5,261 for the three months ended March 31, 2020 and 2019 , respectively, and $( 2,471 ) and $( 2,405 ) for the nine months ended March 31, 2020 and 2019 , respectively.

In addition, miscellaneous income (expense), net includes dividend income from the investment in Townsquare and non-service cost components of net periodic pension and postretirement benefit cost in accordance with ASU No.

See Note 15 for further details on the non-service cost components of net periodic pension and postretirement benefit cost.

Substantially all of Corporate and Other ’s capital expenditures for the three and nine months ended March 31, 2020 and 2019 are related to the Company’s planned MSG Spheres in Las Vegas and London.

MSG Entertainment’s capital expenditures for the nine months ended March 31, 2019 are primarily associated with the opening of a new Tao Group Hospitality venue.

A significant majority of revenues and assets of the Company’s reportable segments are attributed to or located in the United States and are primarily concentrated in the New York metropolitan area.

See Note 1 for further discussion on the effect of COVID-19 due to the geographic concentration of the Company’s operations.

Discontinued operations

Related party transactions included in Loss from discontinued operations, net of taxes in the accompanying consolidated statements of operations for the three months ended September 30, 2019 include (i) revenues from related parties of $ 738 , (ii) operating expenses charged by related parties of $ 187 , and (iii) loss in equity-method investments of $ 1,473 .

Income tax benefit for the three months ended September 30, 2020 of $ 498 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to tax expense of $ 7,621 related to an increase in the valuation allowance and tax expense of $ 861 from nondeductible officers’ compensation, partially offset by state income tax benefit of $ 2,834 .

Income tax benefit for the three months ended September 30, 2019 of $ 19,503 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax income primarily due to state income tax benefit of $ 5,479 and excess tax benefit of $ 2,752 related to share-based compensation awards, partially offset by tax expense of $ 1,461 resulting from nondeductible officers’ compensation.

The Company was notified in April 2020 that the City of New York was commencing an audit of the state income tax returns for the fiscal years ended June 30, 2016 and 2017.

The Company does not expect the examination, when finalized, to result in material changes.

Subsequent Events

Canceled Equity Awards

On October 8, 2020, as a result of the Settlement filed by a purported stockholder of the Company derivatively on behalf of the Company, certain equity awards were canceled.

See Note 13 for more information.

Credit Facilities

On November 6, 2020, subsidiaries of the Company entered into the 2020 Knicks Credit Agreement, which amended and restated the 2016 Knicks Credit Agreement in its entirety, and the 2020 Rangers Credit Agreement, which amended and restated the 2017 Rangers Credit Agreement in its entirety.

Further, Knicks Holdings, LLC, an indirect, wholly-owned subsidiary of the Company and the direct parent of Knicks LLC (“Knicks Holdings”), entered into a new credit agreement with a syndicate of lenders (the “2020 Knicks Holdings Credit Agreement”).

In connection with entry into the facilities above, the Company terminated the DDTL Facilities and the Knicks Unsecured Credit Facility in their entirety.

The 2020 Knicks Credit Agreement provides for a senior secured revolving credit facility of up to $ 275,000 (the “2020 Knicks Revolving Credit Facility”) to fund working capital needs and for general corporate purposes.

The maturity date of the 2020 Knicks Credit Agreement is November 6, 2023.

Borrowings under the 2020 Knicks Credit Agreement bear interest at a floating rate, which at the option of Knicks LLC may be either (i) a base rate plus a margin ranging from 0.50 % to 0.75 % per annum or (ii) LIBOR plus a margin ranging from 1.50 % to 1.75 % per annum.

The $ 200,000 in borrowings outstanding under the 2016 Knicks Revolving Credit Facility as of September 30, 2020 were refinanced on a long-term basis with proceeds from the 2020 Knicks Credit Agreement.

The outstanding balance under the 2020 Knicks Revolving Credit Facility was $ 220,000 as of November 9, 2020.

The 2020 Rangers Credit Agreement provides for a senior secured revolving credit facility of up to $ 250,000 (the “2020 Rangers Revolving Credit Facility”) to fund working capital needs and for general corporate purposes.

The maturity date of the 2020 Rangers Credit Agreement is November 6, 2023.

Borrowings under the 2020 Rangers Credit Agreement bear interest at a floating rate, which at the option of Rangers LLC may be either (i) a base rate plus a margin ranging from 0.75 % to 1.25 % per annum or (ii) LIBOR plus a margin ranging from 1.75 % to 2.25 % per annum.

The $ 150,000 in borrowings outstanding under the 2017 Rangers Revolving Credit Facility as of September 30, 2020 were refinanced on a long-term basis with proceeds from the 2020 Rangers Credit Agreement.

The outstanding balance under the 2020 Rangers Revolving Credit Facility was $ 160,000 as of November 9, 2020.

The 2020 Knicks Holdings Credit Agreement provides for a revolving credit facility of up to $ 75,000 (the “2020 Knicks Holdings Revolving Credit Facility” to fund working capital needs and for general corporate purposes.

The maturity date of the 2020 Knicks Holdings Credit Agreement is November 6, 2023.

Borrowings under the 2020 Knicks Holdings Credit Agreement bear interest at a floating rate, which at the option of Knicks Holdings may be either (i) a base rate plus a margin ranging from 1.00 % to 1.25 % per annum or (ii) LIBOR plus a margin ranging from 2.00 % to 2.25 % per annum.

The 2020 Knicks Holdings Credit Agreement is currently undrawn as of November 9, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements