What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2021-02-03 · 142 added, 125 removed, 309 unchanged (46% of the section changed)

11 unchanged sentences

• changes in professional sports teams’ compensation, including the impact of signing free agents and trades, subject to league salary caps and the impact of luxury tax;

• the level of our capital expenditures and other investments;

• general economic conditions, especially in the New York City metropolitan area;

48 unchanged sentences

The costs of food and beverage sales were reported in direct operating expenses.

Pursuant to the Arena License Agreements, the Knicks and Rangers receive 50% of net profits from the sales of food and beverages during their games at The Garden.

Pursuant to the Arena License Agreements, the Knicks and Rangers receive 50% of net profits from the sales of food and beverage during their games at The Garden.

As such, the Company no longer recognizes costs of sales during the periods after the MSGE Distribution, and reports revenues earned from food and beverage sales as net revenues.

2 unchanged sentences

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 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.

See “— Results of Operations — Comparison of the three and nine months ended March 31, 2021 versus the three and nine months ended March 31, 2020” 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.

7 unchanged sentences

and food, beverage and merchandise sales.

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.

These compare to traditional 82-game regular season schedules for both 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.

2 unchanged sentences

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.

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

However, fans were initially prohibited from attending events due to government-mandated assembly restrictions.

Effective February 23, 2021, New York venues with at least a 10,000-person capacity were permitted to operate at 10% capacity, and the Knicks and Rangers began playing games at The Garden with a limited number of fans in attendance on February 23 and 26, respectively.

Effective May 19, 2021, The Garden will be permitted to operate at up to 30% capacity, which would be after the end of the 2020-21 regular seasons.

No assurances can be made that attendance will remain permissible or at stated capacity limits during the remainder of the 2020-21 regular seasons and postseasons.

During the nine months ended March 31, 2021, 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.

Additionally, as the Knicks and Rangers returned to play in December 2020 and January 2021, respectively, and with fans having returned to The Garden in February 2021, certain costs increased and will continue to increase, to the extent that attendance capacity increases, 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 and six months ended December 31, 2020 compared to the three and six months ended December 31, 2019.

This section provides an analysis of our unaudited results of operations for the three and nine months ended March 31, 2021 compared to the three and nine months ended March 31, 2020.

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 six months ended December 31, 2020 compared to the six months ended December 31, 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 nine months ended March 31, 2021 compared to the nine months ended March 31, 2020, and (iii) certain contractual obligations.

Seasonality of Our Business.

5 unchanged sentences

Results of Operations

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

Comparison of the three and nine months ended March 31, 2021 versus the three and nine months ended March 31, 2020

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

Three Months Ended Six Months Ended

December 31, Change (a)

Three Months Ended Nine Months Ended

March 31, Change (a)

2021 2020 $ % 2021 2020 $ %

3 unchanged sentences

Depreciation and amortization 1,573 5,573 (4,000) (72) % 4,840 15,338 (10,498) (68) %

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

Operating income (loss) 8,124 10,625 (2,501) (24) % (57,686) (48,932) (8,754) (18) %

Other expense:

1 unchanged sentence

Miscellaneous expense, net (46) (142) 96 68 % (236) (316) 80 25 %

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

Income (loss) from continuing operations before income taxes 5,148 9,781 (4,633) (47) % (65,328) (50,797) (14,531) (29) %

Income tax benefit (expense) (53) (5,598) 5,545 99 % 275 11,132 (10,857) (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

Income (loss) from continuing operations 5,095 4,183 912 22 % (65,053) (39,665) (25,388) (64) %

Loss from discontinued operations, net of taxes — (145,249) 145,249 NM — (89,718) 89,718 NM

Net income (loss) 5,095 (141,066) 146,161 NM (65,053) (129,383) 64,330 50 %

Net loss attributable to nonredeemable noncontrolling interests from continued operations (373) (785) 412 52 % (1,479) (1,700) 221 13 %

Net loss attributable to redeemable noncontrolling interests from discontinued operations — (22,447) 22,447 NM — (23,851) 23,851 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

Net income attributable to nonredeemable noncontrolling interests from discontinued operations — 195 (195) NM — 37 (37) NM

Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders $ 5,468 $ (118,029) $ 123,497 NM $ (63,574) $ (103,869) $ 40,295 39 %

_________________

2 unchanged sentences

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.

For the three and nine months ended March 31, 2020, 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 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 reported financial results of the Company for the three and nine months ended March 31, 2021 reflect the Company’s results on a standalone basis, including the Company’s actual corporate overhead.

Revenues decreased $84,621, or 32%, to $183,010 for the three months ended March 31, 2021 as compared to the prior year period.

Revenues decreased $341,460, or 56%, to $268,819 for the nine months ended March 31, 2021 as compared to the prior year period.

The net decrease was attributable to the following:

1 unchanged sentence

Decrease in pre/regular season ticket-related revenues $ (87,797) $ (202,788)

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 (25,280) (67,467)

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

Decrease in pre/regular season food, beverage and merchandise sales (16,409) (36,335)

Other net decreases (177) (984)

Decrease in sponsorship and signage revenues (1,618) (28,349)

Increase (decrease) in local media rights fees from MSG Networks 22,847 (22,194)

Increase in revenues from league distributions 22,493 15,514

Other net increases 1,143 159

$ (84,621) $ (341,460)

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 decreases in pre/regular season ticket-related revenues for the three and nine months ended March 31, 2021 were a result of government-mandated assembly restrictions and the Knicks and Rangers playing games at The Garden with no fans in attendance until February 23 and 26, respectively, and after that, playing games with attendance restricted to 10% capacity.

We will continue recognizing reduced ticket-related revenues until attendance increases for Knicks and Rangers home games at The Garden.

The three and nine month periods ended March 31, 2020 were impacted by the suspension of the Knicks and Rangers 2019-20 regular seasons in March 2020.

The decreases in suite license fee revenues for the three and nine months ended March 31, 2021 were a result of ongoing government-mandated assembly restrictions at The Garden, as discussed above.

For Knicks and Rangers games played with a limited number of fans in attendance, access to suites was sold by way of individual tickets, thus no suite license revenue was recognized for the three and nine months ended March 31, 2021.

In addition, the nine months ended March 31, 2021 includes the impact of the MSGE Distribution.

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

Suite license fee revenues are not expected to be material in the current fiscal year.

The decreases in pre/regular season food and beverage sales for the three and nine months ended March 31, 2021 were primarily due to the impact of the MSGE Distribution and a result of ongoing government-mandated assembly restrictions at The Garden, as discussed above.

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

The decreases in pre/regular season merchandise sales for the three and nine months ended March 31, 2021 were a result of ongoing government-mandated assembly restrictions at The Garden, as discussed above.

We will continue to recognize reduced revenues from pre/regular season food, beverage and merchandise sales until attendance increases for Knicks and Rangers home games at The Garden.

The decrease in sponsorship and signage revenues for the three months ended March 31, 2021 was primarily a result of ongoing government-mandated assembly restrictions at The Garden, as discussed above, and the impact of the MSGE Distribution, offset by sales of new sponsorship and signage inventory.

The decrease in sponsorship and signage revenues for the nine months ended March 31, 2021 was primarily due to (i) the delayed start of the 2020-21 NBA and NHL regular seasons, (ii) ongoing government-mandated assembly restrictions at The Garden, as discussed above, and (iii) the impact of the MSGE Distribution.

This decrease was offset by sales of new sponsorship and signage inventory.

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

The increase in local media rights fees from MSG Networks for the three months ended March 31, 2021 was primarily due to the compressed timing of the NBA and NHL 2020-21 seasons and the impact of the suspended 2019-20 regular seasons in the prior year period, partially offset by the impact of the reduced NHL 2020-21 regular season schedule.

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 local media rights fees from MSG Networks for the nine months ended March 31, 2021 was primarily due to the delayed start of the 2020-21 NBA and NHL regular seasons and as a result of the shortened NBA and NHL 2020-21 regular season schedules, partially offset by contractual rate increases.

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.

In addition, the decrease for the nine months ended March 31, 2021 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.

However, for the fourth quarter 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.

The increase in revenues from league distributions for the three months ended March 31, 2021 was primarily due to the compressed timing of the NBA and NHL 2020-2021 seasons and higher national media rights fees as a result of the lower recognition in the prior year period 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.

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.

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.

The increase in revenues from league distributions for the nine months ended March 31, 2021 was primarily due to the recognition of 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, partially offset by 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.

Direct operating expenses

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.

Direct operating expenses decreased $34,878, or 22%, to $126,510 for the three months ended March 31, 2021 as compared to the prior year period.

Direct operating expenses decreased $194,633, or 52%, to $182,957 for the nine months ended March 31, 2021 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 $ (54,841) $ (71,640)

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 (8,373) (19,218)

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

Decrease in other team operating expenses not discussed elsewhere in this table (1,921) (36,233)

Inclusion of operating lease costs associated with the Knicks and Rangers playing home games at The Garden 20,357 22,567

Increase (decrease) in team personnel compensation 11,894 (64,547)

Increase (decrease) in net provisions for certain team personnel transactions 2,428 (11,761)

Other net decreases, including expenses that did not meet the criteria for inclusion in discontinued operations in the prior year period (4,422) (13,801)

$ (34,878) $ (194,633)

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 Six Months Ended

December 31, December 31,

Three Months Ended Nine Months Ended

March 31, March 31,

2021 2020 Decrease 2021 2020 Decrease

Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax $ (31,773) $ 23,068 $ (54,841) $ (22,463) $ 49,177 $ (71,640)

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.

The decrease in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax for the three and nine months ended March 31, 2021 primarily reflects lower provisions for league revenue sharing expense (net of escrow) of $52,762 and $69,908, respectively, primarily as a result of the COVID-19 pandemic.

In addition, the nine months ended March 31, 2021 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 Knicks’ roster as of March 31, 2021 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.

The decreases in pre/regular season expense associated with food and beverage sales for the three and nine months ended March 31, 2021 were 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 decreases in pre/regular season expense associated with merchandise sales for the three and nine months ended March 31, 2021 were a result of ongoing government-mandated assembly restrictions at The Garden, as discussed above.

We will continue to recognize reduced expense associated with merchandise sales until attendance increases for Knicks and Rangers home games at The Garden.

The decreases in other team operating expenses not discussed elsewhere in this table for the three and nine months ended March 31, 2021 were primarily driven by ongoing government-mandated assembly restrictions at The Garden, as discussed above.

In addition, the decrease for the nine months ended March 31, 2021 was impacted by the delayed start of the 2020-21 NBA and NHL regular seasons.

We expect that certain of our team operating expenses will be reduced due to the shortened 2020-21 NBA and NHL regular seasons and ongoing government-mandated assembly restrictions at The Garden.

The increase in team personnel compensation for the three months ended March 31, 2021 was primarily driven by the impact of the compressed timing of the 2020-21 NBA and NHL regular seasons and the impact of the suspensions of the 2019-20 NBA and NHL regular seasons due to COVID-19 during the third quarter of fiscal year 2020, partially offset by lower player compensation.

The decrease in team personnel compensation for the nine months ended March 31, 2021 was primarily due to lower player compensation and the net impact of the delayed start and shortened 2020-21 NBA and NHL regular seasons, 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 fourth quarter 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 as a result of COVID-19.

Net provisions for certain team personnel transactions were as follows:

Three Months Ended Six Months Ended

December 31, December 31,

2020 2019 Decrease 2020 2019 Increase (Decrease)

Three Months Ended Nine Months Ended

March 31, March 31,

2021 2020 Increase (Decrease) 2021 2020 Increase (Decrease)

Waivers/contract terminations $ 3,305 $ 43 $ 3,262 $ 14,420 $ 26,962 $ (12,542)

1 unchanged sentence

Net provisions for certain team personnel transactions $ 3,305 $ 877 $ 2,428 $ 17,003 $ 28,764 $ (11,761)

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 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.

Selling, general and administrative expenses for the three months ended March 31, 2021 decreased $43,242, or 48%, to $46,803 as compared to the prior year period.

Selling, general and administrative expenses for the nine months ended March 31, 2021 decreased $127,575, or 48%, to $138,708 as compared to the prior year period.

For the three and nine months ended March 31, 2021, the decrease was primarily due to lower corporate overhead costs, which in the prior year periods included certain corporate expenses that the Company did not incur during the current year periods and does not expect to incur in future periods, but which did not meet the criteria for inclusion in discontinued operations.

This decrease in selling, general and administrative expenses was slightly offset by fees related to the Company’s sponsorship sales and service representation agreements with MSG Entertainment.

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.

Depreciation and amortization for the three months ended March 31, 2021 decreased $4,000, or 72%, to $1,573 as compared to the prior year period.

For the nine months ended March 31, 2021 depreciation and amortization decreased $10,498, or 68%, to $4,840 as compared to the prior year period.

The decreases for the three and nine months ended March 31, 2021 were 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 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.

Operating income (loss)

Operating income for the three months ended March 31, 2021 decreased $2,501 to $8,124 as compared to the prior year period primarily due to a decrease in revenues, partially offset by lower selling, general and administrative expenses, direct operating expenses and, to a lesser extent, a decrease in depreciation and amortization.

Operating loss for the nine months ended March 31, 2021 increased $8,754, or 18%, to $57,686 as compared to the prior year period primarily due to a decrease in revenues, partially offset by lower direct operating expenses, selling, general and administrative expenses and, to a lesser extent, a decrease in depreciation and amortization.

Interest expense, net

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.

Net interest expense for the three months ended March 31, 2021 increased $2,228 to $2,930 as compared to the prior year period.

Net interest expense for the nine months ended March 31, 2021 increased $5,857 to $7,406 as compared to the prior year period.

For the three and nine months ended March 31, 2021 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.

10 unchanged sentences

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 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

The following are the reconciliations of operating income (loss) to adjusted operating income (loss) for the three and nine months ended March 31, 2021 as compared to the prior year period:

Three Months Ended Nine Months Ended

March 31, Change March 31, Change

2021 2020 $ % 2021 2020 $ %

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

Operating income (loss) $ 8,124 $ 10,625 $ (2,501) (24) % $ (57,686) $ (48,932) $ (8,754) (18) %

Deferred rent 16,478 — 18,280 —

6 unchanged sentences

_________________

(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.

(a) Depreciation and amortization includes purchase accounting adjustments of $265 and $266 for the three months ended March 31, 2021 and 2020, respectively and $795 and $804 for the nine months ended March 31, 2021 and 2020, respectively.

Adjusted operating income for the three months ended March 31, 2021 increased $2,286, or 8%, to $30,042 as compared to the prior year period primarily due to decreases in direct operating expenses and selling, general and administrative expenses, offset by lower revenues.

Adjusted operating income for the nine months ended March 31, 2021 decreased $12,844 to an adjusted operating loss of $6,729 as compared to the prior year period primarily due to lower revenues, partially offset by decreases in direct operating expenses and selling, general and administrative expenses.

Liquidity and Capital Resources

2 unchanged sentences

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.

In addition, while games have resumed at The Garden, fan attendance is limited 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.

5 unchanged sentences

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 additional liquidity.

In addition, the NHL advanced the Company $30,000, which the league made available to each team following the completion of the NHL’s approximately $1,000,000 private placement in January 2021 (the “2021 Rangers NHL Advance Agreement”).

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 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.

As of March 31, 2021, we had approximately $69,100 in Cash and cash equivalents.

In addition, as of March 31, 2021, the Company’s deferred revenue obligations were approximately $133,200, net of billed, but not yet collected deferred revenue.

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

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.

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.

2 unchanged sentences

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 $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.

We believe we have sufficient liquidity, including approximately $69,100 in Cash and cash equivalents as of March 31, 2021, 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

3 unchanged sentences

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

As of March 31, 2021, 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.

2 unchanged sentences

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 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.

national broadcast agreements.

The outstanding balance under the 2020 Knicks Revolving Credit Facility was $220,000 as of March 31, 2021.

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, (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S.

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

Subject to customary notice and minimum amount conditions, Knicks LLC may voluntarily prepay outstanding loans under the 2020 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).

12 unchanged sentences

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.

As of March 31, 2021, 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.

1 unchanged sentence

Borrowings under the 2020 Knicks Holdings Revolving Credit Facility 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.

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 December 31, 2020.

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 March 31, 2021.

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.

14 unchanged sentences

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

As of March 31, 2021, 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.

2 unchanged sentences

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 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.

The outstanding balance under the 2020 Rangers Revolving Credit Facility was $160,000 as of March 31, 2021.

All obligations under the 2020 Rangers Revolving Credit Facility are, subject to the 2021 Rangers NHL Advance Agreement, 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.

9 unchanged sentences

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

2021 Rangers NHL Advance Agreement

On March 19, 2021, Rangers LLC, Rangers Holdings, LLC and MSG NYR Holdings LLC entered into the 2021 Rangers NHL Advance Agreement with the NHL, pursuant to which the NHL advanced $30,000 to Rangers LLC.

The advance is to be utilized solely and exclusively to pay for Rangers LLC operating expenses.

All obligations under the 2021 Rangers NHL Advance Agreement are senior to and shall have priority over all secured and other indebtedness of Rangers LLC, Rangers Holdings, LLC, and MSG NYR Holdings LLC.

All borrowings under the 2021 Rangers NHL Advance Agreement were made on a non-revolving basis and bear interest at 3.00% per annum, ending on the date any such advances are fully repaid.

Advances received under the 2021 Rangers NHL Advance Agreement are payable upon demand by the NHL.

It is expected that the advanced amount will be set off against funds that would otherwise be paid, distributed or transferred by the NHL to Rangers LLC.

The outstanding balance under the 2021 Rangers NHL Advance Agreement was $30,000 as of March 31, 2021.

Delayed Draw Term Loan Credit Facilities

8 unchanged sentences

Cash Flow Discussion

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

The following table summarizes the Company’s cash flow activities for the nine months ended March 31, 2021 and 2020:

Nine Months Ended March 31,

Net loss $ (65,053) $ (129,383)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities 31,389 244,646

(33,664) 115,263

2 unchanged sentences

Net cash used in investing activities (437) (494,631)

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

Net cash provided by financing activities 42,155 306,818

Effect of exchange rates on cash, cash equivalents and restricted cash — 3,916

1 unchanged sentence

Operating Activities

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 used in operating activities for the nine months ended March 31, 2021 was $54,367 as compared to net cash provided by operating activities in the prior year period of $111,133.

This change is primarily due to the decrease in net loss 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 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.

Net cash used in investing activities for the nine months ended March 31, 2021 decreased by $494,194 to $437 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 purchases of short-term investments and capital expenditures related to MSG Entertainment’s planned MSG Spheres in Las Vegas and London partially offset by proceeds from maturity of short-term investments, a loan repayment received from subordinated note and proceeds received from the sale of interest in a nonconsolidated affiliate.

Financing Activities

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.

Net cash provided by financing activities for the nine months ended March 31, 2021 decreased by $264,663 to $42,155 as compared to the prior year period primarily due to the higher initial borrowings in the prior year period compared to the additional borrowings in the current year period under, the now, amended and extended 2020 Knicks Credit Agreement and 2020 Rangers Credit Agreement and financing costs incurred in the current year period associated with the New Financing.

This decrease was slightly offset by (i) proceeds from the 2021 Rangers NHL Advance 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.

Seasonality of Our Business

1 unchanged sentence

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.

In July and August 2020, the NBA and NHL, respectively, resumed their seasons and the NHL and NBA subsequently completed their seasons in September and October 2020, respectively.

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, 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.

In addition, due to the delayed start of the 2020-21 NBA and NHL seasons in December 2020 and January 2021, respectively, the Company recognized certain revenues during the third quarter of fiscal year 2021 and will recognize certain revenues during the fourth quarter 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

5 unchanged sentences

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 December 31, 2020 is $226,955.

The carrying amount of goodwill as of March 31, 2021 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.

22 unchanged sentences

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 December 31, 2020:

The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of March 31, 2021:

Sports franchises $ 111,064

17 unchanged sentences

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