Madison Square Garden Sports Corp. 10-Q

Item 1. Financial Statements MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) September 30, 2020 June 30, 2020 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 23,527 $ 77,852 Restricted cash 2,679 12,821 Accounts receivable, net 15,465 7,403 Net related party receivables 8,904 135 Prepaid expenses 35,618 20,634 Other current assets 9,907 9,433 Total current assets 96,100 128,278 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 Amortizable intangible assets, net 2,489 2,754 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. 1 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED BALANCE SHEETS (Continued) (in thousands, except per share data) September 30, 2020 June 30, 2020 (Unaudited) LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 1,303 $ 2,301 Net related party payables 39,048 17,952 Accrued liabilities: Employee related costs 49,764 71,451 Other accrued liabilities 45,533 33,071 Operating lease liabilities, current 38,789 39,131 Deferred revenue 138,007 126,348 Total current liabilities 312,444 290,254 Long-term debt 350,000 350,000 Operating lease liabilities, noncurrent 682,079 679,053 Defined benefit and other postretirement obligations 6,746 7,014 Other employee related costs 47,787 50,027 Deferred tax liabilities, net 57,223 57,721 Other liabilities 2,980 3,164 Total liabilities 1,459,259 1,437,233 Commitments and contingencies (see Note 10) Madison Square Garden Sports Corp. Stockholders’ Equity: Class A Common stock, par value $ 0.01 , 120,000 shares authorized; 19,582 and 19,466 shares outstanding as of September 30, 2020 and June 30, 2020, respectively 204 204 Class B Common stock, par value $ 0.01 , 30,000 shares authorized; 4,530 shares outstanding as of September 30, 2020 and June 30, 2020 45 45 Preferred stock, par value $ 0.01 , 15,000 shares authorized; none outstanding as of September 30, 2020 and June 30, 2020 — — Additional paid-in capital — 5,940 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 ) Total Madison Square Garden Sports Corp. stockholders’ equity ( 242,846 ) ( 206,986 ) Nonredeemable noncontrolling interests 2,953 3,551 Total equity ( 239,893 ) ( 203,435 ) Total liabilities and equity $ 1,219,366 $ 1,233,798 See accompanying notes to consolidated financial statements. 2 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Three Months Ended September 30, 2020 2019 Revenues (a) $ 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 Operating loss ( 27,404 ) ( 59,324 ) Other income (expense): Interest income — 293 Interest expense ( 1,989 ) ( 577 ) 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 ) Less: Net loss attributable to nonredeemable noncontrolling interests from continuing operations ( 598 ) ( 450 ) Less: Net loss attributable to redeemable noncontrolling interests from discontinued operations — ( 163 ) Less: 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 ) Basic Continuing operations $ ( 1.18 ) $ ( 1.67 ) Discontinued operations — ( 1.69 ) Basic loss per common share attributable to Madison Square Garden Sports Corp.’s stockholders $ ( 1.18 ) $ ( 3.36 ) Diluted Continuing operations $ ( 1.18 ) $ ( 1.67 ) Discontinued operations — ( 1.69 ) 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 _________________ (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 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (in thousands) Three Months Ended September 30, 2020 2019 Net loss $ ( 29,015 ) $ ( 80,666 ) Other comprehensive income (loss), before income taxes: Pension plans and postretirement plan: Amounts reclassified from accumulated other comprehensive loss: Amortization of actuarial loss included in net periodic benefit cost 10 339 Cumulative translation adjustments — ( 10,018 ) Other comprehensive income (loss), before income taxes 10 ( 9,679 ) 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 ) Less: Comprehensive loss attributable to nonredeemable noncontrolling interests from continuing operations ( 598 ) ( 450 ) Less: Comprehensive loss attributable to redeemable noncontrolling interests from discontinued operations — ( 163 ) Less: 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. 4 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended September 30, 2020 2019 Cash flows from 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 Provision (benefits) from deferred income taxes ( 498 ) 301 Share-based compensation expense 6,345 16,891 Loss in equity method investments, net of income distributions — 1,473 Purchase accounting adjustments associated with leases — 2,276 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 Change in assets and liabilities: Accounts receivable, net ( 7,887 ) ( 24,855 ) Net related party receivables ( 8,769 ) ( 45 ) Prepaid expenses and other assets ( 32,679 ) ( 49,331 ) Accounts payable ( 998 ) 1,389 Net related party payables 14,000 ( 14,939 ) Accrued and other liabilities ( 11,668 ) ( 30,859 ) Collections due to promoters — ( 2,108 ) Deferred revenue 11,663 121,757 Operating lease right-of-use assets and lease liabilities 409 ( 54 ) Net cash used in operating activities ( 57,485 ) ( 34,234 ) Cash flows from investing activities: Capital expenditures ( 80 ) ( 92,986 ) Proceeds from insurance recoveries — 476 Payments for acquisition of assets — ( 1,000 ) Purchase of short-term investments — ( 106,063 ) Proceeds from maturity of short-term investments — 106,587 Proceeds from sale of nonconsolidated affiliates — 18,000 Cash received for notes receivable — 750 Net cash used in investing activities ( 80 ) ( 74,236 ) See accompanying notes to consolidated financial statements. 5 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) (in thousands) Three Months Ended September 30, 2020 2019 Cash flows from financing activities: Taxes paid in lieu of shares issued for equity-based compensation ( 6,702 ) ( 23,446 ) Noncontrolling interest holders’ capital contribution — 2,000 Principal repayment on long-term debt — ( 2,500 ) Payment of contingent consideration ( 200 ) — 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: Capital expenditures incurred but not yet paid $ — $ 43,841 Tenant improvement paid by landlord $ — $ 98 Share-based compensation capitalized in property and equipment $ — $ 1,250 See accompanying notes to consolidated financial statements. 6 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Unaudited) (in thousands) Three Months Ended September 30, 2020 Common Stock Issued Additional Paid-In Capital Treasury Stock Accumulated Deficit Accumulated Other Comprehensive Loss Total Madison Square Garden Sports Corp. Stockholders ’ Equity Non - redeemable 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 ) 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 — ( 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. 7 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued) (Unaudited) (in thousands) Three Months Ended September 30, 2019 Common Stock Issued Additional Paid-In Capital Treasury Stock Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total Madison Square Garden Sports Corp. Stockholders ’ Equity Non - redeemable Noncontrolling Interests Total Equity Redeemable Noncontrolling Interests 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 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 — — — — — — 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. 8 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) All amounts included in the following Notes to Consolidated Financial Statements are presented in thousands, except per share data or as otherwise noted. Note 1. Description of Business and Basis of Presentation Description of Business 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.” 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”). 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. 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; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. 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 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. 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. 9 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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. Note 2. Accounting Policies Principles of Consolidation The consolidated financial statements of the Company include the accounts of Madison Square Garden Sports Corp. and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. 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. 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 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 10 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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. Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. 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. Recently Issued Accounting Pronouncements Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses . ASU No. 2016-13 replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that will require the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates. In May 2019, the FASB issued ASU No. 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. 2019-11 to provide clarification guidance in a number of areas, including: (i) expected recoveries for purchased financial assets with credit deterioration, (ii) transition relief for troubled debt restructuring, (iii) disclosures related to accrued interest receivables, and (iv) financial assets secured by collateral maintenance provisions. For most financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which will generally result in the earlier recognition of credit losses on financial instruments. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments — Credit Losses and Leases , which includes amendments pursuant to SEC Staff Accounting Bulletin No. 119. 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. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement as part of the FASB’s broader disclosure framework project. ASU No. 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 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. 2018-15, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU No. 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, 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. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. ASU No. 2018-17 amends the variable interest entities (“VIE”) guidance to align the evaluation of a decision maker’s or service provider’s fee in assessing a variable interest with the guidance in the primary beneficiary test. Specifically, indirect interests held by a related party that is under common control will now be considered on a proportionate basis, rather than in their entirety, when assessing whether the fee qualifies as a variable interest. 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 11 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 - Financial Instruments. This ASU provides narrow-scope amendments to help apply these recent standards. 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. 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements - Share-Based Consideration Payable to a Customer. This ASU requires that share-based payment awards issued to a customer in connection with a revenue arrangement be recorded as a reduction of the transaction price in revenue. The amount recorded as a reduction of the transaction price is measured using the grant-date fair value of the award and is classified in accordance with ASC Topic 718. Changes in the measurement of the share-based payments after the grant date that are due to the form of the consideration are not included in the transaction price and are recorded elsewhere in the statement of operations. 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 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. 2020-01, Investments-Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this ASU clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. 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. ASU No. 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. The Company is currently evaluating the impact this standard will have on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): 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 (“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. Note 3. 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. 12 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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 ) Less: Net loss attributable to redeemable noncontrolling interests ( 163 ) Less: 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 13 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Note 4. Revenue Recognition Contracts with Customers All revenue recognized in the consolidated statements of operations is considered to be revenue 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 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, 2020 2019 Event-related (a) $ — $ 7,420 Media rights (b) 50,189 6,211 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 _________________ (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 September 30, 2020 and June 30, 2020. September 30, June 30, 2020 2020 Receivables from contracts with customers, net (a) $ 16,174 $ 8,035 Contract assets, current (b) 4,390 4,112 Deferred revenue, including non-current portion (c), (d) 139,985 128,362 _________________ (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. (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. (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. 14 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) (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 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. Additionally, the Company has elected to exclude variable consideration from its disclosure related to the remaining performance obligations under its local media rights arrangements with MSG Networks. Fiscal Year 2021 (remainder) $ 20,280 Fiscal Year 2022 26,945 Fiscal Year 2023 7,389 Fiscal Year 2024 6,092 Fiscal Year 2025 5,065 Thereafter 12,262 $ 78,033 Note 5. Team Personnel Transactions 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. Note 6. Cash, Cash Equivalents and Restricted Cash The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash. As of September 30, 2020 June 30, 2020 September 30, 2019 June 30, 2019 Captions on the consolidated balance sheets: Cash and cash equivalents $ 23,527 $ 77,852 $ 1,643 $ 4,317 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 _________________ (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). Note 7. Leases 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 15 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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. 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, 2020 Right-of-use assets: Operating leases Right-of-use lease assets $ 720,326 $ 718,051 Lease liabilities: Operating leases, current (a) Operating lease liabilities, current $ 38,789 $ 39,131 Operating leases, noncurrent (a) Operating lease liabilities, noncurrent 682,079 679,053 Total lease liabilities $ 720,868 $ 718,184 _________________ (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 Direct operating expenses $ 90 $ 89 Operating lease cost Selling, general and administrative expenses 611 — Short-term lease cost Direct operating expenses 24 42 Total lease cost $ 725 $ 131 Supplemental Information 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 16 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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 Fiscal Year 2022 43,552 Fiscal Year 2023 45,019 Fiscal Year 2024 44,937 Fiscal Year 2025 44,052 Thereafter 2,158,686 Total lease payments 2,366,982 Less imputed interest ( 1,646,114 ) Total lease liabilities $ 720,868 Note 8. Goodwill and Intangible Assets 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 $ 112,144 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: September 30, 2020 Gross Accumulated Amortization Net Trade names $ 2,300 $ ( 1,457 ) $ 843 Non-compete agreements 2,400 ( 1,520 ) 880 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 Other intangibles 1,200 ( 404 ) 796 $ 5,900 $ ( 3,146 ) $ 2,754 For the three months ended September 30, 2020 and 2019, amortization expense of intangible assets was $ 265 and $ 1,103 , respectively. 17 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Note 9. Fair Value Measurements The carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows: September 30, 2020 June 30, 2020 Carrying Value Fair Value Carrying Value Fair Value Liabilities Long-term debt (a) $ 350,000 $ 350,000 $ 350,000 $ 350,000 _________________ (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 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 Contingent consideration payment ( 200 ) Change in fair value of contingent consideration (a) ( 136 ) Balance as of September 30, 2020 $ — _________________ (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. Note 10. Commitments and Contingencies Commitments 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. 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. 18 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Note 11. Credit Facilities 2016 Knicks Revolving Credit Facility 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 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 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; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the 2016 Knicks Revolving Credit Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any Knicks LLC’s collateral. Knicks Unsecured Credit Facility On September 30, 2016, Knicks LLC entered into an unsecured revolving credit facility with a lender for an initial maximum credit amount of $ 15,000 and a 364-day term (the “Knicks Unsecured Credit Facility”). 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 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 have been distributed to the Company except during an event of default. 19 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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 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; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the 2017 Rangers Revolving Credit Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; 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. 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 20 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) $ 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 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, 2020 Other current assets $ 675 $ 675 Other assets 95 264 Note 12. Pension Plans and Other Postretirement Benefit Plan Defined Benefit Pension Plans and Postretirement Benefit Plan 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.” 21 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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 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 Expected return on plan assets — ( 1,331 ) — — Recognized actuarial loss 10 336 — 3 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 22 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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 September 30, 2020 2019 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. Note 13. 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 $ 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,” held by the Company and MSG Entertainment employees, for the three months ended September 30, 2020: Number of Weighted-Average Fair Value Per Share at Date of Grant (a) Nonperformance Based Vesting RSUs Performance Based Vesting RSUs Unvested award balance, June 30, 2020 275 327 $ 262.13 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 _____________________ (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 23 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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 three months ended September 30, 2020: Number of 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 Granted — $ — Balance as of September 30, 2020 543 $ 225.79 5.80 $ 441 Exercisable as of September 30, 2020 287 $ 221.43 5.88 $ 294 Note 14. Stock Repurchase Program 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 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. Note 15. 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; 24 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) • 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; and • 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. Kristin A. 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. James L. 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.” 25 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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 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, 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. Dolan, and (iii) Patrick F. Dolan, the son of Charles F. Dolan and brother of James L. Dolan. On December 17, 2018, the Company terminated the agreement providing services to the entity controlled by Charles F. Dolan, and entered into a new agreement with Charles F. Dolan and certain of his children, who are siblings of James L. Dolan, specifically: Thomas C. Dolan (a director of the Company), Deborah Dolan-Sweeney, Patrick F. Dolan, Marianne Dolan Weber (a director of the Company), and Kathleen M. 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. Dolan, his spouse and a director of the Company, and (ii) Charles F. Dolan and Sterling Aviation, LLC, a company controlled by Charles F. Dolan (collectively, “CFD”), pursuant to which the Company has agreed from time to time to make its aircraft available to each of Q2C and CFD, and Q2C and CFD have agreed from time to time to make their aircraft available to the Company. 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, the daughter of CFD and the sister of James L. 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 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 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). 26 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Revenues and Operating Expenses (Credits) 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, 2020 2019 Revenues $ 9,061 $ 6,327 Operating expenses (credits): 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 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 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. 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. 27 Table of Contents MADISON SQUARE GARDEN SPORTS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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 . Note 16. Income Taxes 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. Note 17. 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. 28 Table of Contents