What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-02-03 compared with 2020-11-09 · 176 added, 144 removed, 258 unchanged (55% of the section changed)

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In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square Garden Sports Corp.

and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Sports,” or the “Company”), including, with respect to the NBA and the NHL 2020-21 seasons, and the impact of COVID-19 on our future operations.

and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Sports,” or the “Company”), including, with respect to the NBA and the NHL 2020-21 seasons, local media rights fees, and the impact of COVID-19 on our future operations.

Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements.

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Factors that may cause such differences to occur include, but are not limited to:

• the duration and severity of the coronavirus pandemic and our ability to effectively manage the impacts, including the unavailability of The Garden and league decisions regarding the resumption of play;

• the impact of the possible suspension or cancellation, or a change in the duration, of the 2020-21 NBA and NHL seasons on our ability to recognize revenue from national media rights fees;

• the duration and severity of the coronavirus pandemic and our ability to effectively manage the impacts, including the availability of The Garden with no or limited fans and league decisions regarding play;

• the impact of a change in the duration of the 2020-21 NBA and NHL seasons on our ability to recognize revenue from national media rights fees;

• the level of our revenues, which depends in part on the popularity and competitiveness of our sports teams;

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• competition, for example, from other teams, and other sports and entertainment options;

• changes in laws, NBA or NHL rules, regulations, guidelines, bulletins, directives, policies and agreements, including the leagues’ respective collective bargaining agreements (each a “CBA”) with their players’ associations, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights, or other regulations under which we operate;

• changes in laws, NBA or NHL rules, regulations, guidelines, bulletins, directives, policies and agreements, including the leagues’ respective collective bargaining agreements with their players’ associations, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights, or other regulations under which we operate;

• any NBA, NHL or other work stoppage in addition to those related to COVID-19 impacts;

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Results from continuing operations for the periods prior to the MSGE Distribution include certain corporate overhead expenses that the Company did not incur in the period after the completion of the MSGE Distribution and does not expect to incur in future periods, but which do not meet the criteria for inclusion in discontinued operations.

See “— Results of Operations — Comparison of the three months ended September 30, 2020 versus the three months ended September 30, 2019” and Note 3 to the consolidated financial statements included in “Part I — Item 1.

See “— Results of Operations — Comparison of the three and six months ended December 31, 2020 versus the three and six months ended December 31, 2019” and Note 3 to the consolidated financial statements included in “Part I — Item 1.

Financial Statements” of this Quarterly Report on Form 10-Q for more information.

Impact of COVID-19 on Our Business

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 we are recognizing materially less revenues, or in some cases no revenues, across a number of areas.

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;

our share of suite licenses;

the Company’s share of suite licenses;

sponsorships;

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and food, beverage and merchandise sales.

While we currently have 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 (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.

In addition, the Knicks and Rangers will play fewer games during the 2020-21 regular seasons, with the NBA scheduled to play a 72-game regular season schedule while the NHL is scheduled to play a 56-game regular season.

These both compare to traditional 82-game regular season schedules for the NBA and NHL.

Subsidiaries of the Company are parties to the Arena License Agreements with a subsidiary of MSG Entertainment that requires the Knicks and Rangers to play their home games at The Garden.

Under the Arena License Agreements, the Knicks and Rangers will pay an annual license fee in connection with their respective use of The Garden.

The license fee for the first full contract year ending June 30, 2021 is approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees will be 103% of the license fees for the immediately preceding contract year.

The Garden, however, is currently closed due to the COVID-19 pandemic and monthly rent is not required to be paid by the Knicks or Rangers.

If The Garden reopens without capacity limitations, future monthly rent payments due under the Arena License Agreements will be payable by the Knicks and 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 stated license fee for the first full contract year ending June 30, 2021 would have been approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees will be 103% of the license fees for the immediately preceding contract year.

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

On December 16, 2020 and January 14, 2021, respectively, the Knicks and Rangers resumed playing their home games at The Garden as part of the 2020-21 seasons.

However, fans are currently prohibited from attending events due to ongoing government-mandated assembly restrictions.

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

When games are played at The Garden by the Knicks and Rangers either without fans in attendance or with limited fans in attendance due to government mandated capacity constraints, the applicable rent paid to MSG Entertainment is reduced by up to 80%.

During the six months ended December 31, 2020, as a result of COVID-19, the Company implemented cost-reduction measures that included workforce reductions and limits on discretionary spending.

In addition, as a result of the disruptions caused by COVID-19, certain operating expenses are reduced including (i) rent payments to MSG Entertainment under the Arena License Agreements, (ii) NBA league assessments and day-of-game expenses for the Knicks and Rangers games, and (iii) league revenue sharing and team personnel expense.

These expense reductions will not fully offset revenue losses.

Additionally, as the Knicks and Rangers returned to play in December 2020 and January 2021, respectively, and in anticipation of fans returning to the building in the future, certain costs will increase including day-of-game expenses and certain selling, general and administrative costs.

This MD&A is organized as follows:

Results of Operations.

This section provides an analysis of our unaudited results of operations for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

This section provides an analysis of our unaudited results of operations for the three and six months ended December 31, 2020 compared to the three and six months ended December 31, 2019.

Liquidity and Capital Resources.

This section focuses primarily on (i) the liquidity and capital resources of the Company, (ii) an analysis of the Company’s cash flows for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, and (iii) certain contractual obligations.

This section focuses primarily on (i) the liquidity and capital resources of the Company, (ii) an analysis of the Company’s cash flows for the six months ended December 31, 2020 compared to the six months ended December 31, 2019, and (iii) certain contractual obligations.

Seasonality of Our Business.

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Results of Operations

Comparison of the three months ended September 30, 2020 versus the three months ended September 30, 2019

Comparison of the three and six months ended December 31, 2020 versus the three and six months ended December 31, 2019

The table below sets forth, for the periods presented, certain historical financial information.

Three Months Ended

September 30, Change (a)

2020 2019 Amount Percentage

Three Months Ended Six Months Ended

December 31, Change (a)

2020 2019 $ % 2020 2019 $ %

Revenues $ 28,771 $ 292,798 $ (264,027) (90) % $ 85,809 $ 342,648 $ (256,839) (75) %

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Depreciation and amortization 1,607 4,920 (3,313) (67) % 3,267 9,765 (6,498) (67) %

Operating loss (27,404) (59,324) 31,920 54 %

Operating loss (38,406) (233) (38,173) NM (65,810) (59,557) (6,253) (10) %

Other expense:

Interest expense, net (1,989) (284) (1,705) NM

Interest expense, net (2,487) (563) (1,924) NM (4,476) (847) (3,629) NM

Miscellaneous expense, net (70) (88) 18 20 % (190) (174) (16) (9) %

Loss from continuing operations before income taxes (29,513) (59,694) 30,181 51 %

Income tax benefit 498 19,503 (19,005) (97) %

Loss from continuing operations (29,015) (40,191) 11,176 28 %

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

Net loss (29,015) (80,666) 51,651 64 %

Loss from continuing operations before income taxes (40,963) (884) (40,079) NM (70,476) (60,578) (9,898) (16) %

Income tax benefit (expense) (170) (2,773) 2,603 94 % 328 16,730 (16,402) (98) %

Loss from continuing operations (41,133) (3,657) (37,476) NM (70,148) (43,848) (26,300) (60) %

Income from discontinued operations, net of taxes — 96,006 (96,006) NM — 55,531 (55,531) NM

Net income (loss) (41,133) 92,349 (133,482) NM (70,148) 11,683 (81,831) NM

Net loss attributable to nonredeemable noncontrolling interests from continued operations (508) (465) (43) (9) % (1,106) (915) (191) (21) %

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

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

Net loss attributable to Madison Square Garden Sports Corp.’s stockholders $ (28,417) $ (79,981) $ 51,564 64 %

Net loss attributable to redeemable noncontrolling interests from discontinued operations — (1,241) 1,241 NM — (1,404) 1,404 NM

Net loss attributable to nonredeemable noncontrolling interests from discontinued operations — (86) 86 NM — (158) 158 NM

Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders $ (40,625) $ 94,141 $ (134,766) NM $ (69,042) $ 14,160 $ (83,202) NM

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NM — Percentage is not meaningful

For the three months ended September 30, 2019, the reported financial results of the Company reflect the results of the MSG Entertainment business segment and the sports booking business, previously owned and operated by the Company through its MSG Sports business segment, as discontinued operations.

(a) Operating results were materially impacted by the coronavirus pandemic.

Please see “— Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” for more information.

For the three and six months ended December 31, 2019, the reported financial results of the Company reflect the results of the MSG Entertainment business segment and the sports booking business, previously owned and operated by the Company through its MSG Sports business segment, as discontinued operations.

In addition, results from continuing operations for the same period include certain corporate overhead expenses that the Company did not incur in the period after the completion of the MSGE Distribution and does not expect to incur in future periods, but which do not meet the criteria for inclusion in discontinued operations.

The reported financial results of the Company for the three months ended September 30, 2020 reflect the Company’s results on a standalone basis, including the Company’s actual corporate overhead.

Revenues increased $7,188 to $57,038 for the three months ended September 30, 2020 as compared to the prior year period.

The net increase was attributable to the following:

Increase in revenues from league distributions $ 30,341

Increase in local media rights fees from MSG Networks 2,139

Decrease in suite license fee revenue (14,002)

The reported financial results of the Company for the three and six months ended December 31, 2020 reflect the Company’s results on a standalone basis, including the Company’s actual corporate overhead.

Revenues decreased $264,027, or 90%, to $28,771 for the three months ended December 31, 2020 as compared to the prior year period.

Revenues decreased $256,839, or 75%, to $85,809 for the six months ended December 31, 2020 as compared to the prior year period.

The net decrease was attributable to the following:

Months Months

Decrease in pre/regular season ticket-related revenues $ (108,689) $ (114,991)

Decrease in local media rights fees from MSG Networks (47,180) (45,041)

Decrease in revenues from league distributions (37,320) (6,979)

Decrease in suite license fee revenues (28,185) (42,187)

Decrease in sponsorship and signage revenues (23,841) (26,731)

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Other net decreases (177) (984)

The increase in revenues from league distributions was primarily due to the recognition of the remainder of national media rights fees related to the 2019-20 NBA and NHL seasons during the three months ended September 30, 2020, that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020.

After suspending the 2019-20 seasons in March 2020 due to COVID-19, the NHL and NBA subsequently restarted their seasons, which were completed in September and October 2020, respectively.

This increase related to national media rights fees was partially offset by decreases in other league distributions.

The increase in local media rights fees from MSG Networks was primarily due to the recognition of local media rights fees associated with the Rangers’ participation in the Stanley Cup Qualifiers during the three months ended September 30, 2020.

The decrease in suite license fee revenue was primarily due to the impact of the MSGE Distribution.

$ (264,027) $ (256,839)

The decrease in pre/regular season ticket-related revenues for the three and six months ended December 31, 2020 was a result of fans being prohibited from attending events at The Garden due to ongoing government-mandated assembly restrictions.

We will not recognize pre/regular season ticket-related revenues until the Knicks and Rangers play home games at The Garden with fans in attendance.

The decrease in local media rights fees from MSG Networks for the three and six months ended December 31, 2020 was primarily due to the delayed start of the 2020-21 NBA and NHL regular seasons.

The Knicks’ regular season began on December 23, 2020, while the Rangers’ regular season began on January 14, 2021.

In addition, the decrease for the six months ended December 31, 2020 was slightly offset by the recognition of local media rights fees from MSG Networks associated with the Rangers’ participation in the Stanley Cup Qualifiers during the first quarter of fiscal year 2021.

The Company expects that local media rights fees from MSG Networks will be reduced for fiscal year 2021 as a result of the shortened NHL 2020-21 regular season schedule.

However, for the second half of fiscal year 2021, the Company anticipates that local media rights fees from MSG Networks will be higher as compared with the prior year period due to the timing of the 2020-21 NBA and NHL regular seasons, as well as the impact of the suspended 2019-20 regular seasons in the prior year period.

Furthermore, the Company expects local media rights fees from MSG Networks to be higher for fiscal year 2021 as compared with the prior year, which reflects contractual rate increases and the net impact of the shortened seasons in both periods.

The decrease in revenues from league distributions for the three and six months ended December 31, 2020 was primarily due to lower national media rights fees as a result of the delayed start of the 2020-21 NBA and NHL regular seasons as discussed above and, decreases in other league distributions.

In addition, the decrease for the six months ended December 31, 2020 was largely offset by the remainder of national media rights fees related to the 2019-20 NBA and NHL seasons which were recognized during the first quarter of fiscal year 2021, that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020.

After suspending the 2019-20 seasons in March 2020 due to the COVID-19 pandemic, the NHL and NBA subsequently resumed play and completed their seasons in September and October 2020, respectively.

The decrease in suite license fee revenue for the three and six months ended December 31, 2020 was a result of fans being prohibited from attending events at The Garden due to ongoing government-mandated assembly restrictions.

In addition, the six months ended December 31, 2020 includes the impact of the MSGE Distribution.

See “— Factors Affecting Results of Operations — MSGE Distribution — Suite License Fee Revenue” for more information.

In addition, the decrease reflects the absence of Rangers preseason home games during the current year period.

We will not recognize suite license fee revenue until the Knicks and Rangers resume playing home games at The Garden with fans in attendance.

The decrease in pre/regular season ticket-related revenues was due to the absence of Rangers preseason home games during the current year period as compared to three preseason home games during the prior year period.

We will not recognize pre/regular season ticket revenues until the Knicks and Rangers resume playing home games at The Garden with fans in attendance.

The decrease in sponsorship and signage revenues was primarily due to the impact of the MSGE Distribution.

We will not recognize suite license fee revenue until the Knicks and Rangers play home games at The Garden with fans in attendance.

The decrease in sponsorship and signage revenues for the three and six months ended December 31, 2020 was primarily due to (i) the delayed start of the 2020-21 NBA and NHL regular seasons, (ii) fans being prohibited from attending events at The Garden due to ongoing government-mandated assembly restrictions, and (iii) the impact of the MSGE Distribution.

See “— Factors Affecting Results of Operations — MSGE Distribution — Venue Sponsorship and Signage” for more information.

In addition, the decrease reflects the absence of Rangers preseason home games during the current year period.

We will continue recognizing significantly lower sponsorship and signage revenues until the Knicks and Rangers resume playing home games at The Garden with fans in attendance.

The decrease in pre/regular season food, beverage and merchandise sales was primarily due to the absence of Rangers preseason home games in the current year period as compared to three home games during the prior year period.

We will not recognize revenues from pre/regular season food and beverage sales and minimal revenues from merchandise sales until the Knicks and Rangers resume playing home games at The Garden with fans in attendance.

We will continue recognizing lower sponsorship and signage revenues until the Knicks and Rangers play home games at The Garden with fans in attendance.

The decrease in pre/regular season food, beverage and merchandise sales for the three and six months ended December 31, 2020 was a result of fans being prohibited from attending events at The Garden due to ongoing government-mandated assembly restrictions.

We will recognize no revenues from pre/regular season food and beverage sales and minimal revenues from merchandise sales until the Knicks and Rangers play home games at The Garden with fans in attendance.

Direct operating expenses

Direct operating expenses increased $21,367, or 116%, to $39,786 for the three months ended September 30, 2020 as compared to the prior year period.

The net increase was attributable to the following:

Increase in team personnel compensation $ 13,410

Increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax 11,633

Increase in other team operating expenses not discussed elsewhere in this table primarily due to higher league assessments 1,275

Increase in net provisions for certain team personnel transactions 630

Direct operating expenses decreased $181,122, or 92%, to $16,661 for the three months ended December 31, 2020 as compared to the prior year period.

Direct operating expenses decreased $159,755, or 74%, to $56,447 for the six months ended December 31, 2020 as compared to the prior year period.

The net decrease was attributable to the following:

Months Months

Decrease in team personnel compensation $ (88,710) $ (75,300)

Decrease in other team operating expenses not discussed elsewhere in this table (36,868) (35,593)

Decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax (28,431) (16,798)

Decrease in net provisions for certain team personnel transactions (14,805) (14,175)

Decrease in pre/regular season expense associated with food, beverage and merchandise sales (10,093) (10,748)

Inclusion of operating lease costs associated with the Knicks playing home games at The Garden 2,210 2,210

Other net decreases, including expenses that did not meet the criteria for inclusion in discontinued operations in the prior year period (4,425) (9,351)

The increase in team personnel compensation was primarily due to the recognition of player compensation expense in the current year period that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020 as a result of the NBA completing the 2019-20 season in October 2020.

$ (181,122) $ (159,755)

The decrease in team personnel compensation for the three and six months ended December 31, 2020 was primarily due to the delayed start of the 2020-21 NBA and NHL regular seasons.

In addition, the decrease in the six months ended December 31, 2020 was slightly offset by the recognition of player compensation expense during the first quarter of fiscal year 2021 that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020 as a result of the NBA completing the 2019-20 season in October 2020.

While the Company anticipates that the team personnel compensation expense will be higher during the second half of fiscal year 2021 as compared to the prior year period as a result of the timing of the 2020-21 NBA and NHL regular seasons, we expect the team personnel compensation expense to be lower during fiscal year 2021, as compared to prior fiscal year.

The decrease in other team operating expenses not discussed elsewhere in this table for the three and six months ended December 31, 2020 was primarily driven by fans being prohibited from attending events at The Garden due to ongoing government-mandated assembly restrictions and the delayed start of the 2020-21 NBA and NHL regular seasons.

We expect that certain of our team operating expenses will be lower due to the shortened 2020-21 NBA and NHL regular seasons and fans being prohibited from attending events at The Garden.

Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax were as follows:

Three Months Ended

September 30,

2020 2019 Increase

Three Months Ended Six Months Ended

December 31, December 31,

2020 2019 Decrease 2020 2019 Decrease

Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax $ (1,027) $ 27,404 $ (28,431) $ 9,310 $ 26,108 $ (16,798)

The increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) was due to adjustments to revenue sharing expense for the 2019-20 NBA and NHL seasons.

Based on the completion of the 2019-20 NBA and NHL seasons, the Company recognized during the three months ended September 30,2020 a portion of revenue sharing expense (net of escrow) related to those seasons that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020.

The decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the three and six months ended December 31, 2020 reflects lower provisions for league revenue sharing expense (net of escrow) of $28,777 and $17,146, respectively, primarily as a result of fans being prohibited from attending events at The Garden due to ongoing government-mandated assembly restrictions.

In addition, the six months ended December 31, 2020 includes adjustments to revenue sharing expense (net of escrow) for the 2019-20 NBA and NHL seasons.

Based on the completion of the 2019-20 NBA and NHL seasons, during the first quarter of fiscal year 2021 the Company recognized a portion of revenue sharing expense (net of escrow) related to those seasons that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020.

The Knicks were not a luxury tax payer for the 2019-20 season and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams.

The Knicks’ roster as of December 31, 2020 would not result in the team being a luxury tax payer for the 2020-21 season.

The actual amounts for the 2020-21 season may vary significantly from the recorded provisions based on actual operating results for each league and all teams within each league for the season and other factors.

Net provisions for certain team personnel transactions were as follows:

Three Months Ended

September 30,

2020 2019 Increase

Three Months Ended Six Months Ended

December 31, December 31,

2020 2019 Decrease 2020 2019 Increase (Decrease)

Waivers/contract terminations $ 2,756 $ 16,676 $ (13,920) $ 11,129 $ 26,919 $ (15,790)

Player trades 83 968 (885) 2,583 968 1,615

Net provisions for certain team personnel transactions $ 2,839 $ 17,644 $ (14,805) $ 13,712 $ 27,887 $ (14,175)

$ 10,873 $ 10,243 $ 630

Team personnel transactions for the three months ended September 30, 2020 reflect provisions for waivers/contract terminations of $8,373 and a player trade of $2,500.

Team personnel transactions for the three months ended September 30, 2019 include a net expense for waiver/contract termination costs.

The decrease in pre/regular season expense associated with food and beverage sales was due to the impact of the MSGE Distribution.

See “— Factors Affecting Results of Operations — MSGE Distribution — Food, Beverage and Merchandise Sales” for more information.

The decrease in pre/regular season expense associated with merchandise sales for the three and six months ended December 31, 2020 was a result of fans being prohibited from attending events at The Garden due to ongoing government-mandated assembly restrictions.

We will recognize minimal expense associated with merchandise sales until the Knicks and Rangers play home games at The Garden with fans in attendance.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended September 30, 2020 decreased $42,914, or 50%, to $42,996 as compared to the prior year period primarily due to lower corporate overhead costs, which in the prior year period included certain corporate expenses that the Company did not incur during the current year period and does not expect to incur in future periods, but which did not meet the criteria for inclusion in discontinued operations.

This decrease was partially offset by an increase in employee compensation and related benefits, primarily as a result of restructuring charges, and fees related to the Company’s sponsorship sales and service representation agreements with MSG Entertainment.

Depreciation & amortization

Depreciation and amortization for the three months ended September 30, 2020 decreased $3,185, or 66%, to $1,660 as compared to the prior year period primarily due to depreciation in the prior year period that do not meet the criteria for inclusion in discontinued operations and, to a lesser extent, certain asset being fully amortized.

Selling, general and administrative expenses for the three months ended December 31, 2020 decreased $41,419, or 46%, to $48,909 as compared to the prior year period.

Selling, general and administrative expenses for the six months ended December 31, 2020 decreased $84,333, or 48%, to $91,905 as compared to the prior year period.

For the three and six months ended December 31, 2020, the decrease was primarily due to lower corporate overhead costs, which in the prior year period included certain corporate expenses that the Company did not incur during the current year period and does not expect to incur in future periods, but which did not meet the criteria for inclusion in discontinued operations.

In addition, the decrease in selling, general and administrative expenses for the three months ended December 31, 2020 reflects lower marketing costs as compared to the prior year period.

These decreases in selling, general and administrative expenses were slightly offset by fees related to the Company’s sponsorship sales and service representation agreements with MSG Entertainment during the three and six months ended December 31, 2020.

Depreciation and amortization

Depreciation and amortization for the three months ended December 31, 2020 decreased $3,313, or 67%, to $1,607 as compared to the prior year period.

For the six months ended December 31, 2020 depreciation and amortization decreased $6,498, or 67%, to $3,267 as compared to the prior year period.

The decreases for the three and six months ended December 31, 2020 was primarily due to depreciation in the prior year period that do not meet the criteria for inclusion in discontinued operations and, to a lesser extent, certain asset being fully amortized.

The decrease was partially offset by higher depreciation on assets placed into service during the third quarter of fiscal year 2020.

Operating loss

Operating loss for the three months ended September 30, 2020 decreased $31,920, or 54%, to $27,404 as compared to the prior year period primarily due to a decrease in selling, general and administrative expenses and, to a lesser extent, higher revenue, partially offset by higher direct operating expenses.

Operating loss for the three months ended December 31, 2020 increased $38,173 to $38,406 as compared to the prior year period primarily due to a decrease in revenues, partially offset by lower direct operating expenses and, to a lesser extent, a decrease in selling, general and administrative expenses.

Operating loss for the six months ended December 31, 2020 increased $6,253, or 10%, to $65,810 as compared to the prior year period primarily due to a decrease in revenues, partially offset by lower direct operating expenses and, to a lesser extent, a decrease in selling, general and administrative expenses.

Interest expense, net

Net interest expense for the three months ended September 30, 2020 increased $1,705 to $1,989 as compared to the prior year period primarily due to the Knicks and Rangers revolving credit facilities, which were drawn on in March 2020.

Net interest expense for the three months ended December 31, 2020 increased $1,924 to $2,487 as compared to the prior year period.

Net interest expense for the six months ended December 31, 2020 increased $3,629 to $4,476 as compared to the prior year period.

For the three and six months ended December 31, 2020 the increases were primarily due to the Knicks and Rangers revolving credit facilities, which were initially drawn on in March 2020, with subsequent additional drawings in November 2020.

See Note 17 to the consolidated financial statements included in “Part I — Item 1.

Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s income taxes.

Adjusted operating loss

Adjusted operating income (loss)

The Company evaluates performance based on several factors, of which the key financial measure is operating income (loss) excluding (i) deferred rent expense under the Arena License Agreements with MSG Entertainment, (ii) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (iii) share-based compensation expense or benefit, (iv) restructuring charges or credits, (v) gains or losses on sales or dispositions of businesses, and (vi) the impact of purchase accounting adjustments related to business acquisitions, which is referred to as adjusted operating income (loss), a non-GAAP measure.

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The Company uses revenues and adjusted operating income (loss) measures as the most important indicators of its business performance and evaluates management’s effectiveness with specific reference to these indicators.

Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance

Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.

The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).

The following are the reconciliations of operating loss to adjusted operating loss for the three months ended September 30, 2020 as compared to the prior year period:

Three Months Ended

September 30, Change

2020 2019 Amount Percentage

Operating loss $ (27,404) $ (59,324) $ 31,920 54 %

Share-based compensation 6,345 13,796

The following are the reconciliations of operating loss to adjusted operating income (loss) for the three and six months ended December 31, 2020 as compared to the prior year period:

Three Months Ended Six Months Ended

December 31, Change December 31, Change

2020 2019 $ % 2020 2019 $ %

Operating loss $ (38,406) $ (233) $ (38,173) NM $ (65,810) $ (59,557) $ (6,253) (10) %

Deferred rent 1,802 — 1,802 —

Depreciation and amortization (a)

1,607 4,920 3,267 9,765

Share-based compensation 15,981 14,255 22,326 28,051

Restructuring charges — — 1,644 —

Other purchase accounting adjustments — 50 — 100

Adjusted operating loss $ (17,755) $ (40,633) $ 22,878 56 %

Adjusted operating income (loss) $ (19,016) $ 18,992 $ (38,008) NM $ (36,771) $ (21,641) $ (15,130) (70) %

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(a) Depreciation and amortization includes purchase accounting adjustments of $265 and $269 for the three months ended September 30, 2020 and 2019, respectively.

Adjusted operating loss for the three months ended September 30, 2020 decreased $22,878, or 56%, to $17,755 as compared to the prior year period.

The decrease was lower than the decrease of operating loss primary due to lower share-based compensation and depreciation and amortization.

(a) Depreciation and amortization includes purchase accounting adjustments of $265 and $269 for the three months ended December 31, 2020 and 2019, respectively and $530 and $538 for the six months ended December 31, 2020 and 2019, respectively.

Adjusted operating income for the three months ended December 31, 2020 decreased $38,008 to an adjusted operating loss of $19,016 as compared to the prior year period primarily due to a decrease in revenues, partially offset by lower direct operating expenses and, to a lesser extent, a decrease in selling, general and administrative expenses.

Adjusted operating loss for the six months ended December 31, 2020 increased $15,130, or 70%, to $36,771 as compared to the prior year period.

The increase was higher than the increase in operating loss primarily due to lower depreciation and amortization and lower share-based compensation.

This was partially offset by deferred rent expense and restructuring charges in the current year period.

Liquidity and Capital Resources

Our operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic and government and league actions taken in response.

The NBA and NHL suspended their 2019-20 seasons on March 11 and 12, 2020, respectively.

On May 26, 2020, the NHL announced return-to-play plans for 24 teams which began August 1, 2020.

The Rangers were among the teams that returned to play in a 24-team tournament.

On June 4, 2020, the NBA announced plans to resume play on July 30, 2020 with 22 teams.

The Knicks were not among the teams that returned to competition.

The Knicks and Rangers will play fewer games during the 2020-21 regular seasons, with the NBA scheduled to play a 72-game regular season while the NHL is scheduled to play a 56-game regular season.

These both compare to traditional 82-game regular season schedules for the NBA and NHL.

In addition, while games have resumed at The Garden, fans are currently prohibited from attending events due to ongoing government-mandated assembly restrictions.

For more information about the impacts and risks to the Company as a result of COVID-19, see “— Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” and “Item 1A.

Risk Factors — Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government and League Actions Taken in Response” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Until the 2020-21 NBA and NHL seasons commence, our primary sources of liquidity are cash and cash equivalents and available borrowing capacity under our credit facilities.

On November 6, 2020, the Company amended and extended the 2016 Knicks Credit Agreement and the 2017 Rangers Credit Agreement, and entered into the 2020 Knicks Holdings Credit Agreement (together with the 2020 Knicks Credit Agreement and the 2020 Rangers Credit Agreement, the “New Financing”), which provide for an aggregate of $250,000 of additional liquidity.

In connection with the New Financing, the Company terminated its existing Knicks Unsecured Credit Facility and DDTL Facilities, described below.

Once the 2020-21 NBA and NHL seasons commence, we also expect to have access to cash flow from our operations as a source of liquidity, but there can be no assurances that our expenses will not exceed our revenues, thereby presenting an ongoing use of liquidity.

In addition, see also Note 1 to the consolidated financial statements included in “Part I — Item 1.

Financial Statements” of this Quarterly Report on Form 10-Q for further information.

Our primary sources of liquidity are cash and cash equivalents and available borrowing capacity under our credit facilities as well as cash flow from our operations.

There can be no assurance, however, that our expenses will not exceed our revenues, thereby presenting an ongoing use of liquidity.

Our principal uses of cash include the operation of our businesses, working capital-related items, the repayment of outstanding debt, and potential repurchases of shares of the Company’s Class A Common Stock.

As of September 30, 2020, we had approximately $23,500 in unrestricted cash and cash equivalents.

As of September 30, 2020, the Company had approximately $138,000 in current deferred revenue obligations.

This balance is primarily comprised of obligations in connection with tickets, local media rights, suites and sponsorships.

The prepaid media rights payments are expected to be earned as the 2020-21 NBA and NHL seasons commence, but if those seasons do not commence, certain of those amounts are required to be returned.

As a general matter, deferred revenue obligations relating to suites, tickets and sponsorships will be addressed, to the extent necessary, through credits, make-goods and/or refunds, as applicable.

Cash and cash equivalents decreased from approximately $77,900 as of June 30, 2020 to approximately $23,500 as of September 30, 2020, primarily reflecting the impact of compensation-related payments.

This included significant amounts related to team and corporate personnel that typically occur in the first quarter and not during the balance of the year.

These payments were partially offset by local media rights fees and advance season ticket sales, both related to the 2020-21 NBA and NHL seasons, along with escrow recoveries related to the 2019-20 NHL season.

As of December 31, 2020, we had approximately $70,800 in Cash and cash equivalents.

In addition, as of December 31, 2020, the Company’s deferred revenue obligations were approximately $206,200, net of billed, but not yet collected deferred revenue.

This balance is primarily comprised of obligations in connection with local and national media rights, tickets, suites and sponsorships.

In addition, the Company's deferred revenue obligations included $30,000 from the NBA, which the league provided to each team following the completion of the NBA’s $900,000 private placement in December 2020.

The prepaid media rights payments and certain sponsorships are expected to be earned throughout the 2020-21 NBA and NHL seasons.

As a general matter, deferred revenue obligations relating to suites, tickets and certain sponsorships will be addressed, to the extent necessary, through credits, make-goods and/or refunds, as applicable.

We regularly monitor and assess our ability to meet our net funding and investing requirements.

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and global economic and market conditions could adversely impact its ability to do so at that time.

We believe we have sufficient liquidity, including approximately $23,500 in unrestricted cash and cash equivalents as of September 30, 2020, along with $250,000 of additional available borrowing capacity from the New Financing, to fund our operations, satisfy any obligations with respect to the return or application of deferred revenue and repay any outstanding debt that becomes due over the next 12 months.

We believe we have sufficient liquidity, including approximately $70,800 in Cash and cash equivalents as of December 31, 2020, along with $220,000 of additional available borrowing capacity under existing credit facilities, to fund our operations and satisfy any obligations with respect to the return or application of deferred revenue over the next 12 months.

2020 Knicks Revolving Credit Facility

On November 6, 2020, Knicks LLC, a wholly owned subsidiary of the Company, entered into the 2020 Knicks Credit Agreement with a syndicate of lenders providing for the 2020 Knicks Revolving Credit Facility to fund working capital needs and for general corporate purposes.

The 2020 Knicks Revolving Credit Facility increased borrowing capacity from $200,000 to $275,000.

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

The 2020 Knicks Revolving Credit Facility requires Knicks LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period.

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

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

The 2020 Knicks Revolving Credit Facility will mature and any unused commitments thereunder will expire on November 6, 2023.

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Knicks LLC is required to pay a commitment fee ranging from 0.25% to 0.30% per annum in respect of the average daily unused commitments under the 2020 Knicks Revolving Credit Facility.

The outstanding balance under the 2020 Knicks Revolving Credit Facility was $220,000 as of November 9, 2020.

The outstanding balance under the 2020 Knicks Revolving Credit Facility was $220,000 as of December 31, 2020.

All obligations under the 2020 Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S.

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and (vi) taking certain actions that would invalidate the secured lenders’ liens on any Knicks LLC’s collateral.

The foregoing description of the 2020 Knicks Credit Agreement is qualified in its entirety by reference to that agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

2020 Knicks Holdings Revolving Credit Facility

On November 6, 2020, Knicks Holdings entered into the 2020 Knicks Holdings Credit Agreement with a syndicate of lenders providing for the 2020 Knicks Holdings Revolving Credit Facility to fund working capital needs and for general corporate purposes.

The 2020 Knicks Holdings Revolving Credit Facility provides for $75,000 of borrowing capacity.

The 2020 Knicks Holdings Revolving Credit Facility requires Knicks Holdings to comply with a debt service ratio of 1.1:1.0 over a trailing four quarter period.

As of December 31, 2020, Knicks Holdings was in compliance with this financial covenant.

The 2020 Knicks Holdings Revolving Credit Facility will mature and any unused commitments thereunder will expire on November 6, 2023.

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Knicks Holdings is required to pay a commitment fee ranging from 0.375% to 0.50% per annum in respect of the average daily unused commitments under the 2020 Knicks Holdings Revolving Credit Facility.

The 2020 Knicks Holdings Revolving Credit Facility is currently undrawn as of November 9, 2020.

The 2020 Knicks Holdings Revolving Credit Facility is currently undrawn as of December 31, 2020.

All obligations under the 2020 Knicks Holdings Revolving Credit Facility are secured by debt service and distribution accounts maintained by Knicks Holdings, and includes a guarantee from MSG NYK Holdings, LLC, an indirect wholly-owned subsidiary of the Company and the direct parent of Knicks Holdings.

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and (vi) taking certain actions that would invalidate the secured lenders’ liens on any Knicks Holdings’ collateral.

The foregoing description of the Knicks Holdings Credit Agreement and related security agreements is qualified in its entirety by reference to those agreements, which are attached hereto as Exhibits 10.2 and 10.3 and are incorporated herein by reference.

Knicks Unsecured Credit Facility

On September 30, 2016, Knicks LLC entered into the Knicks Unsecured Credit Facility.

Knicks LLC renewed this facility with the lender on the same terms in successive years and the facility was 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 connection with the New Financing.

2020 Rangers Revolving Credit Facility

On November 6, 2020, Rangers LLC entered into the 2020 Rangers Credit Agreement with a syndicate of lenders providing for the 2020 Rangers Revolving Credit Facility to fund working capital needs and for general corporate purposes.

The 2020 Rangers Revolving Credit Facility increased borrowing capacity from $150,000 to $250,000.

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

The 2020 Rangers Revolving Credit Facility requires Rangers LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period.

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

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

The 2020 Rangers Revolving Credit Facility will mature and any unused commitments thereunder will expire on November 6, 2023.

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Rangers LLC is required to pay a commitment fee ranging from 0.375% to 0.625% per annum in respect of the average daily unused commitments under the 2020 Rangers Revolving Credit Facility.

The outstanding balance under the 2020 Rangers Revolving Credit Facility was $160,000 as of November 9, 2020.

The outstanding balance under the 2020 Rangers Revolving Credit Facility was $160,000 as of December 31, 2020.

All obligations under the 2020 Rangers Revolving Credit Facility are secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i) Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S.

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Subject to customary notice and minimum amount conditions, Rangers LLC may voluntarily prepay outstanding loans under the 2020 Rangers Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans).

Rangers LLC is required to make mandatory prepayments in certain

circumstances, including without limitation if qualified revenues are less than 17% of the maximum available amount under the 2020 Rangers Revolving Credit Facility.

Rangers LLC is required to make mandatory prepayments in certain circumstances, including without limitation if qualified revenues are less than 17% of the maximum available amount under the 2020 Rangers Revolving Credit Facility.

In addition to the financial covenant described above, the 2020 Rangers Credit Agreement and related security agreements contain certain customary representations and warranties, affirmative covenants and events of default.

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and (vi) taking certain actions that would invalidate the secured lenders’ liens on any of Rangers LLC’s assets securing the obligations under the 2020 Rangers Revolving Credit Facility.

The foregoing description of the 2020 Rangers Credit Agreement is qualified in its entirety by reference to that agreement, which is attached hereto as Exhibit 10.4 and is incorporated herein by reference.

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 the DDTL Lender.

The credit agreement for the Knicks DDTL Facility Borrower provides for a $110,000 Knicks DDTL Facility and the credit agreement for the Rangers DDTL Facility Borrower provides for a $90,000 Rangers DDTL Facility.

On November 6, 2020, the Company terminated the DDTL Facilities in connection with the New Financing.

The credit agreement for MSG NYK Holdings, LLC provided for a $110,000 senior unsecured delayed draw term loan facility and the credit agreement for MSG NYR Holdings, LLC provided for a $90,000 senior unsecured delayed draw term loan facility.

On November 6, 2020, prior to making any borrowings under the DDTL Facilities, the Company terminated the DDTL Facilities in their entirety in connection with the New Financing.

Financing Agreements and Stock Repurchases

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Cash Flow Discussion

The following table summarizes the Company’s cash flow activities for the three months ended September 30, 2020 and 2019:

Three Months Ended September 30,

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

Adjustments to reconcile net loss to net cash used in operating activities 7,459 45,477

The following table summarizes the Company’s cash flow activities for the six months ended December 31, 2020 and 2019:

Six Months Ended December 31,

Net income (loss) $ (70,148) $ 11,683

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities 25,461 85,003

(44,687) 96,686

Changes in working capital assets and liabilities 23,054 14,486

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

Net cash (used in) provided by operating activities (21,633) 111,172

Net cash used in investing activities (141) (143,913)

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

Net cash provided by (used in) financing activities 11,363 (43,749)

Effect of exchange rates on cash, cash equivalents and restricted cash — 1,693

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Operating Activities

Net cash used in operating activities for the three months ended September 30, 2020 increased by $23,251 to $57,485 as compared to the prior year period due to changes in working capital assets and liabilities partially offset by the decrease in net loss adjusted for non-cash items.

Net cash used in operating activities for the prior year period was not adjusted to exclude net cash used in discontinued operations.

Net cash used in operating activities for the six months ended December 31, 2020 was $21,633 as compared to net cash provided by operating activities in the prior year period of $111,172.

This change is primarily due to the decrease in net income to net loss in the current year period adjusted for non-cash items.

Net cash provided by operating activities for the prior year period was not adjusted to exclude net cash provided by discontinued operations.

Investing Activities

Net cash used in investing activities for the three months ended September 30, 2020 decreased by $74,156 to $80 as compared to the prior year period primarily driven by investing activities in discontinued operations in the prior year period.

activities included in discontinued operations in the prior year period primarily consisted of capital expenditures related to MSG Entertainment’s planned MSG Spheres in Las Vegas and London partially offset by proceeds received from the sale of interest in a nonconsolidated affiliate.

Net cash used in investing activities for the six months ended December 31, 2020 decreased by $143,772 to $141 as compared to the prior year period primarily driven by investing activities in discontinued operations in the prior year period.

Investing activities included in discontinued operations in the prior year period primarily consisted of capital expenditures related to MSG Entertainment’s planned MSG Spheres in Las Vegas and London partially offset by a loan repayment received from subordinated note and proceeds received from the sale of interest in a nonconsolidated affiliate.

Financing Activities

Net cash used in financing activities for the three months ended September 30, 2020 decreased by $17,044 to $6,902 as compared to the prior year period.

This decrease was primarily due to lower taxes paid in lieu of shares issued for equity-based compensation in the current year period as compared to the prior year period.

Taxes paid in lieu of shares issued for equity-based compensation in the prior year period included taxes associated with MSG Entertainment employees.

Net cash provided by financing activities for the six months ended December 31, 2020 was $11,363 as compared to net cash used in financing activities in the prior year period of $43,749.

This change was primarily due to (i) proceeds received from the borrowings under the amended and extended 2020 Knicks Credit Agreement and 2020 Rangers Credit Agreement, (ii) repayments of a credit facility included in discontinued operations in the prior year period as compared to none in the current year period, and (iii) lower taxes paid in lieu of shares issued for equity-based compensation in the current year period as compared to the prior year period.

This was slightly offset by financing costs incurred in the current year period associated with the New Financing.

Seasonality of Our Business

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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 might 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.

In addition, due to the delayed start of the 2020-21 NBA and NHL seasons, the Company will 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.

Recently Issued Accounting Pronouncements and Critical Accounting Policies

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There have been no material changes to the Company’s critical accounting policies from those set forth in our Annual Report on Form 10-K for the year ended June 30, 2020.

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

The carrying amount of goodwill as of December 31, 2020 is $226,955.

Goodwill is tested annually for impairment as of August 31 st and at any time upon the occurrence of certain events or changes in circumstances.

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The Company performed its most recent annual impairment test of goodwill during the first quarter of fiscal year 2021, and there was no impairment of goodwill.

Based on this impairment test, the Company’s reporting unit had sufficient safety margins, defined as the excess of the amount by which the estimated fair value of the reporting unit exceeded the carrying value of the reporting unit, including goodwill.

The Company believes that if the fair value of a reporting unit exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.

Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.

Identifiable Indefinite-Lived Intangible Assets

Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31 st and at any time upon the occurrence of certain events or substantive changes in circumstances.

The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of September 30, 2020:

The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of December 31, 2020:

Sports franchises $ 111,064

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The Company performed its most recent annual impairment test of identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2021, and there were no impairments identified.

Based on this impairment test, the Company’s indefinite-lived intangible assets had sufficient safety margins, representing the excess of each identifiable indefinite-lived intangible asset’s estimated fair value over its respective carrying value.

The Company believes that if the fair value of an indefinite-lived intangible asset exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.

Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the indefinite-lived intangible assets was less than their carrying amount.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis