This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. 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. 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.
Investors are cautioned that such forward-looking statements are not guarantees
of future performance, results or events and involve risks and uncertainties and
that actual results or developments may differ materially from the
forward-looking statements as a result of various factors. 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 level of our revenues, which depends in part on the popularity and
competitiveness of our sports teams;
•costs associated with player injuries, waivers or contract terminations of
players and other team personnel;
•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;
•the demand for sponsorship arrangements and for advertising;
•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;
•any NBA, NHL or other work stoppage in addition to those related to COVID-19
impacts;
•any economic, political or other actions, such as boycotts, protests, work
stoppages or campaigns by labor organizations;
•seasonal fluctuations and other variation in our operating results and cash
flow from period to period;
•the level of our expenses, including our corporate expenses;
•business, reputational and litigation risk if there is a security incident
resulting in loss, disclosure or misappropriation of stored personal information
or other breaches of our information security;
•activities or other developments that discourage or may discourage congregation
at prominent places of public assembly, including The Garden where the home
games of the Knicks and Rangers are played;
•the evolution of the esports industry and its potential impact on our esports
businesses;
•the acquisition or disposition of assets or businesses and/or the impact of,
and our ability to successfully pursue, acquisitions or other strategic
transactions;
•our ability to successfully integrate acquisitions or new businesses into our
operations;
•the operating and financial performance of our strategic acquisitions and
investments, including those we may not control;
•the impact of governmental regulations or laws, including changes in how those
regulations and laws are interpreted and the continued benefit of certain tax
exemptions (including for The Garden) and the ability for us and MSG
Entertainment to maintain necessary permits or licenses;
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•the impact of any government plans to redesign New York City's Pennsylvania
Station;
•a default by our subsidiaries under their respective credit facilities;
•business, economic, reputational and other risks associated with, and the
outcome of, litigation and other proceedings;
•financial community and rating agency perceptions of our business, operations,
financial condition and the industry in which we operate;
•our ownership of professional sports franchises in the NBA and NHL and certain
related transfer restrictions on our common stock;
•the tax-free treatment of the MSGS Distribution and the MSGE Distribution;
•the performance by MSG Entertainment of its obligations under various
agreements with the Company related to the MSGE Distribution and ongoing
commercial arrangements; and
•the factors described under "Risk Factors" in our Annual Report on Form 10-K
for the year ended June 30, 2020.

We disclaim any obligation to update or revise the forward-looking statements
contained herein, except as otherwise required by applicable federal securities
laws.
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All dollar amounts included in the following MD&A are presented in thousands,
except as otherwise noted.
Introduction
This MD&A is provided as a supplement to, and should be read in conjunction
with, the Company's unaudited financial statements and accompanying notes
thereto included in this Quarterly Report on Form 10-Q, as well as the Company's
Annual Report on Form 10-K for the year ended June 30, 2020, to help provide an
understanding of our financial condition, changes in financial condition and
results of operations. Unless the context otherwise requires, all references to
"we," "us," "our," "MSG Sports," or the "Company" refer collectively to Madison
Square Garden Sports Corp., a holding company, and its direct and indirect
subsidiaries through which substantially all of our operations are conducted.
On April 17, 2020, the Company distributed all of the outstanding common stock
of MSG Entertainment to its stockholders. MSG Entertainment owns, directly or
indirectly, the entertainment business previously owned and operated by the
Company through its MSG Entertainment business segment and the sports booking
business previously owned and operated by the Company through its MSG Sports
business segment. In the MSGE Distribution, (a) each holder of the Company's
Class A common stock, received one share of MSG Entertainment Class A common
stock, par value $0.01 per share, for every share of the Company's Class A
common stock held of record as of the close of business, New York City time, on
April 13, 2020, and (b) each holder of the Company's Class B common stock,
received one share of MSG Entertainment Class B common stock, par value $0.01
per share, for every share of the Registrant's Class B common stock held of
record as of the close of business, New York City time, on the Record Date.
Subsequent to the MSGE Distribution, the Company no longer consolidates the
financial results of MSG Entertainment for purposes of its own financial
reporting and the historical financial results of MSG Entertainment have been
reflected in the Company's consolidated financial statements as discontinued
operations for all periods presented through the MSGE Distribution Date.
After giving effect to the MSGE Distribution, the Company operates and reports
financial information in one segment.
Factors Affecting Results of Operations
MSGE Distribution
In connection with the MSGE Distribution, the Company and MSG Entertainment
entered into a number of related party agreements under which both companies
will continue sharing certain revenues and expenses. See Note 15 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 related party transactions. The terms of certain related party
agreements impact the comparability of the results of operations, primarily the
following revenues and expenses.
Suite License Fee Revenue
Prior to the MSGE Distribution, suite license fee revenue was recognized based
on the allocations between the Company's MSG Sports and MSG Entertainment
segments and was dependent on the total number of events held at The Garden.
After the MSGE Distribution, the Company recognizes suite license fee revenue
based on the Arena License Agreements and as games are played by the Knicks and
Rangers. In addition, pursuant to the Arena License Agreements, the Company's
aggregate share of the suite license fee is 67.5%, as compared to a higher
percentage allocated to the Knicks and Rangers prior to the MSGE Distribution.
Venue Sponsorship and Signage
Prior to the MSGE Distribution, revenues from the sale of venue interior and
exterior signage and sponsorship rights at The Garden that were not specific to
our teams or entertainment events were allocated between the Company's MSG
Sports and MSG Entertainment segments and recognized over a fiscal year.
Subsequent to the MSGE Distribution, pursuant to the Arena License Agreements,
the Company no longer recognizes revenue related to exterior signage at The
Garden, but rather only from the sale of venue interior signage space and
sponsorship rights, which is now recognized over the Knicks and Rangers seasons.
In addition, prior to the MSGE Distribution, costs associated with sponsorship
and signage sales were allocated between the Company's MSG Sports and MSG
Entertainment segments. Subsequent to the MSGE Distribution, the Company pays
sales commission fees along with the fixed fee pursuant to the sponsorship sales
and service and representation agreements.
Food, Beverage and Merchandise Sales
Prior to the MSGE Distribution, the Knicks and Rangers reported revenues earned
from food and beverage sales as gross revenue. 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. 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. In
addition, pursuant to the Arena License Agreements, the Knicks and Rangers
recognize sales of their merchandise at The Garden net of 30% commission paid to
MSG Entertainment.
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Corporate Costs
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. 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. Those areas include:
ticket sales; our share of suite licenses; sponsorships; signage and in-venue
advertising at The Garden; 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.
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.
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.
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.
Seasonality of Our Business. This section discusses the seasonal performance of
our business.
Recently Issued Accounting Pronouncements and Critical Accounting Policies. This
section discusses accounting pronouncements that have been adopted by the
Company, recently issued accounting pronouncements not yet adopted by the
Company, as well as the results of the Company's annual impairment testing of
goodwill and identifiable indefinite-lived intangible assets performed during
the first quarter of fiscal year 2021. This section should be read together with
our critical accounting policies, which are discussed in our Annual Report on
Form 10-K for the year ended June 30, 2020 under "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Recently Issued Accounting Pronouncements and Critical Accounting Policies -
Critical Accounting Policies" and in the notes to the consolidated financial
statements of the Company included therein.

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Results of Operations
Comparison of the three months ended September 30, 2020 versus the three months
ended September 30, 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
Revenues                                                $  57,038          $  49,850          $   7,188                       14  %
Direct operating expenses                                  39,786             18,419             21,367                      116  %
Selling, general and administrative expenses               42,996             85,910            (42,914)                     (50) %
Depreciation and amortization                               1,660              4,845             (3,185)                     (66) %
Operating loss                                            (27,404)           (59,324)            31,920                       54  %
Other expense:
Interest expense, net                                      (1,989)              (284)            (1,705)                         NM
Miscellaneous expense, net                                   (120)               (86)               (34)                     (40) %
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  %
Less: Net loss attributable to nonredeemable
noncontrolling interests from continued
operations                                                   (598)              (450)              (148)                     (33) %
Less: Net loss attributable to redeemable
noncontrolling interests from discontinued
operations                                                      -               (163)               163                          NM
Less: 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  %


_________________
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. 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
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)


Decrease in pre/regular season ticket-related revenues                      

(6,302)


Decrease in sponsorship and signage revenues                                

(2,890)

Decrease in pre/regular season food, beverage and merchandise sales


       (1,291)
Other net decreases                                                                  (807)
                                                                                 $  7,188


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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. 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. 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.
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

Decrease in pre/regular season expense associated with food, beverage and merchandise sales

                                                                             (655)

Other net decreases, including expenses that did not meet the criteria for inclusion in discontinued operations in the prior year period


                (4,926)
                                                                                         $  21,367


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.
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

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

$ 10,337 $ (1,296) $ 11,633




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.
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Net provisions for certain team personnel transactions were as follows:
                                                                         Three Months Ended
                                                                           September 30,
                                                                                      2020              2019             Increase
Net provisions for certain team personnel transactions                      

$ 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.
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. 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.
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.
Income taxes
See Note 16 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
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.
Management believes that the exclusion of share-based compensation expense or
benefit allows investors to better track the performance of the Company's
business without regard to the settlement of an obligation that is not expected
to be made in cash. In addition, management believes that given the length of
the Arena License Agreements and resulting magnitude of the difference in
deferred rent expense and the cash rent payments, the exclusion of deferred rent
expense provides investors with a clearer picture of the Company's operating
performance.
The Company believes adjusted operating income (loss) is an appropriate measure
for evaluating the operating performance of the Company. Adjusted operating
income (loss) and similar measures with similar titles are common performance
measures used by investors and analysts to analyze the Company's performance.
The Company uses revenues and adjusted operating income (loss) measures as the
most important indicators of its business performance and evaluates management's
effectiveness with specific reference to these indicators.
Adjusted operating income (loss) should be viewed as a supplement to and not a
substitute for operating income (loss), net income (loss), cash flows from
operating activities, and other measures of performance and/or liquidity
presented in accordance
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with GAAP. 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
Depreciation and amortization (a)              1,660          4,845
Restructuring charges                          1,644              -
Other purchase accounting adjustments              -             50
Adjusted operating loss                    $ (17,755)     $ (40,633)     $ 22,878             56  %


_________________
(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.
Liquidity and Capital Resources
Overview
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. 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.
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.
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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.
We regularly monitor and assess our ability to meet our net funding and
investing requirements. The decisions of the Company as to the use of its
available liquidity will be based upon the ongoing review of the funding needs
of the business, management's view of a favorable allocation of cash resources,
and the timing of cash flow generation. To the extent the Company desires to
access alternative sources of funding through the capital and credit markets,
restrictions imposed by the NBA and NHL and challenging U.S. 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.
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. 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.
The 2020 Knicks Revolving Credit Facility will mature and any unused commitments
thereunder will expire on November 6, 2023. All borrowings under the 2020 Knicks
Revolving Credit Facility are subject to the satisfaction of certain customary
conditions. Borrowings bear interest at a floating rate, which at the option of
Knicks LLC may be either (i) a base rate plus a margin ranging from 0.50% to
0.75% per annum or (ii) LIBOR plus a margin ranging from 1.50% to 1.75% per
annum. 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.
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.
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). Knicks LLC is
required to make mandatory prepayments in certain circumstances, including
without limitation if the maximum available amount under the 2020 Knicks
Revolving Credit Facility is greater than 350% of qualified revenues.
In addition to the financial covenant described above, the 2020 Knicks Credit
Agreement and related security agreements contain certain customary
representations and warranties, affirmative covenants and events of default. The
2020 Knicks Revolving Credit Facility contains certain restrictions on the
ability of Knicks LLC to take certain actions as provided in (and subject to
various exceptions and baskets set forth in) the 2020 Knicks Revolving Credit
Facility, including the following: (i) incurring additional indebtedness and
contingent liabilities; (ii) creating liens on certain assets; (iii) making
restricted payments during the continuance of an event of default under the 2020
Knicks Revolving Credit Facility; (iv) engaging in sale and leaseback
transactions; (v) merging or consolidating; and (vi) taking certain actions that
would invalidate the secured lenders' liens on any Knicks LLC's collateral.
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 requires Knicks Holdings to
comply with a debt service ratio of 1.1:1.0 over a trailing four quarter period.
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The 2020 Knicks Holdings Revolving Credit Facility will mature and any unused
commitments thereunder will expire on November 6, 2023. All borrowings under the
2020 Knicks Holdings Revolving Credit Facility are subject to the satisfaction
of certain customary conditions. 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 November 9, 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.
Subject to customary notice and minimum amount conditions, Knicks Holdings may
voluntarily prepay outstanding loans under the 2020 Knicks Holdings Revolving
Credit Facility at any time, in whole or in part, without premium or penalty
(except for customary breakage costs with respect to Eurocurrency loans). Knicks
Holdings is required to make mandatory prepayments in certain circumstances,
including if the amount of commitments under the 2020 Knicks Holdings Revolving
Credit Facility increase above $350,000.
In addition to the financial covenant described above, the 2020 Knicks Holdings
Revolving Credit Facility and related security agreements contain certain
customary representations and warranties, affirmative covenants and events of
default. The 2020 Knicks Holdings Revolving Credit Facility contains certain
restrictions on the ability of Knicks Holdings to take certain actions as
provided in (and subject to various exceptions and baskets set forth in) the
2020 Knicks Holdings Revolving Credit Facility, including the following: (i)
incurring additional indebtedness and contingent liabilities; (ii) creating
liens on certain assets; (iii) making restricted payments during the continuance
of an event of default under the 2020 Knicks Holdings Revolving Credit Facility;
(iv) engaging in sale and leaseback transactions; (v) merging or consolidating;
and (vi) taking certain actions that would invalidate the secured lenders' liens
on any Knicks 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.
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.
The 2020 Rangers Revolving Credit Facility will mature and any unused
commitments thereunder will expire on November 6, 2023. All borrowings under the
2020 Rangers Revolving Credit Facility are subject to the satisfaction of
certain customary conditions. Borrowings bear interest at a floating rate, which
at the option of Rangers LLC may be either (i) a base rate plus a margin ranging
from 0.75% to 1.25% per annum or (ii) LIBOR plus a margin ranging from 1.75% to
2.25% per annum. Rangers LLC is required to pay a commitment fee ranging from
0.375% to 0.625% per annum in respect of the average daily unused commitments
under the 2020 Rangers Revolving Credit Facility. The outstanding balance under
the 2020 Rangers Revolving Credit Facility was $160,000 as of November 9, 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. and
Canadian national broadcast agreements, and (iii) revenues to be paid to Rangers
LLC pursuant to local media contracts.
Subject to customary notice and minimum amount conditions, Rangers LLC may
voluntarily prepay outstanding loans under the 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
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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. The
2020 Rangers Revolving Credit Facility contains certain restrictions on the
ability of Rangers LLC to take certain actions as provided in (and subject to
various exceptions and baskets set forth in) the 2020 Rangers Revolving Credit
Facility, including the following: (i) incurring additional indebtedness and
contingent liabilities; (ii) creating liens on certain assets; (iii) making
restricted payments during the continuance of an event of default under the 2020
Rangers Revolving Credit Facility; (iv) engaging in sale and leaseback
transactions; (v) merging or consolidating; and (vi) taking certain actions that
would invalidate the secured lenders' liens on any of Rangers LLC's assets
securing the obligations under the 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.
Financing Agreements and Stock Repurchases
See Note 11 and Note 14 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 debt obligations and various financing
agreements, and the Company's stock repurchases, respectively.
Contractual Obligations
The Company did not have any material changes in its contractual obligations
since the end of fiscal year 2020 other than activities in the ordinary course
of business.
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,
                                                                       2020                    2019
Net loss                                                        $       

(29,015) $ (80,666) Adjustments to reconcile net loss to net cash used in operating activities

                                                       7,459               45,477
Subtotal                                                                 (21,556)             (35,189)
Changes in working capital assets and liabilities                        (35,929)                 955
Net cash used in operating activities                                    (57,485)             (34,234)
Net cash used in investing activities                                        (80)             (74,236)
Net cash used in financing activities                                     (6,902)             (23,946)

Effect of exchange rates on cash, cash equivalents and restricted cash

                                                                -               (1,950)
Net decrease in cash, cash equivalents and restricted
cash                                                            $        (64,467)         $  (134,366)


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.
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. Investing
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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.
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.
Seasonality of Our Business
The Company's dependence on revenues from its NBA and NHL sports teams generally
means that it earns a disproportionate share of its revenues in the second and
third quarters of the Company's fiscal year. On March 11 and 12, 2020,
respectively, the NBA and NHL suspended their 2019-20 seasons due to COVID-19.
In July and August 2020, the NBA and NHL, respectively, restarted their seasons.
As a result, the Company recognized certain revenues that otherwise would have
been recognized during the third and fourth quarter of fiscal year 2020 during
the first quarter of fiscal year 2021. In addition, depending on when the
2020-21 NBA and NHL seasons commence, the Company 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.
Recently Issued Accounting Pronouncements and Critical Accounting Policies
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements included in "Part I - Item
1. Financial Statements" of this Quarterly Report on Form 10-Q for discussion of
recently issued accounting pronouncements.
Critical Accounting Policies
The following discussion has been included to provide the results of our annual
impairment testing of goodwill and identifiable indefinite-lived intangible
assets performed during the first quarter of fiscal year 2021. 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.
Goodwill
The carrying amount of goodwill as of September 30, 2020 is $226,955. Goodwill
is tested annually for impairment as of August 31st and at any time upon the
occurrence of certain events or changes in circumstances. The Company performs
its goodwill impairment test at the reporting unit level, which is the same as
or one level below the operating segment level. The Company has one operating
and reportable segment, and one reporting unit for goodwill impairment testing
purposes.
The Company has the option to perform a qualitative assessment to determine if
an impairment is more likely than not to have occurred. If the Company can
support the conclusion that it is not more likely than not that the fair value
of a reporting unit is less than its carrying amount, the Company would not need
to perform a quantitative impairment test for that reporting unit. If the
Company cannot support such a conclusion or the Company does not elect to
perform the qualitative assessment, the first step of the goodwill impairment
test is used to identify potential impairment by comparing the fair value of a
reporting unit with its carrying amount, including goodwill. The estimates of
the fair value of the Company's reporting units are primarily determined using
discounted cash flows and comparable market transactions. These valuations are
based on estimates and assumptions including projected future cash flows,
discount rates, determination of appropriate market comparables and the
determination of whether a premium or discount should be applied to comparables.
Significant judgments inherent in a discounted cash flow analysis include the
selection of the appropriate discount rate, the estimate of the amount and
timing of projected future cash flows and identification of appropriate
continuing growth rate assumptions. The discount rates used in the analysis are
intended to reflect the risk inherent in the projected future cash flows. The
amount of an impairment loss is measured as the amount by which a reporting
unit's carrying value exceeds its fair value determined in step one, not to
exceed the carrying amount of goodwill.
The Company elected to perform the qualitative assessment of impairment for the
Company's reporting unit for the fiscal year 2021 impairment test. These
assessments considered factors such as:
•macroeconomic conditions;
•industry and market considerations;
•market capitalization;
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•cost factors;
•overall financial performance of the reporting unit;
•other relevant company-specific factors such as changes in management, strategy
or customers; and
•relevant reporting unit specific events such as changes in the carrying amount
of net assets.
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.
Identifiable Indefinite-Lived Intangible Assets
Identifiable indefinite-lived intangible assets are tested annually for
impairment as of August 31st 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:
Sports franchises             $ 111,064
Photographic related rights       1,080
                              $ 112,144


The Company has the option to perform a qualitative assessment to determine if
an impairment is more likely than not to have occurred. In the qualitative
assessment, the Company must evaluate the totality of qualitative factors,
including any recent fair value measurements, that impact whether an
indefinite-lived intangible asset other than goodwill has a carrying amount that
more likely than not exceeds its fair value. The Company must proceed to
conducting a quantitative analysis, if the Company (i) determines that such an
impairment is more likely than not to exist, or (ii) forgoes the qualitative
assessment entirely. Under the quantitative assessment, the impairment test for
identifiable indefinite-lived intangible assets consists of a comparison of the
estimated fair value of the intangible asset with its carrying value. If the
carrying value of the intangible asset exceeds its fair value, an impairment
loss is recognized in an amount equal to that excess. For all periods presented,
the Company elected to perform a qualitative assessment of impairment for the
indefinite-lived intangible assets. These assessments considered the events and
circumstances that could affect the significant inputs used to determine the
fair value of the intangible asset. Examples of such events and circumstances
include:
•cost factors;
•financial performance;
•legal, regulatory, contractual, business or other factors;
•other relevant company-specific factors such as changes in management, strategy
or customers;
•industry and market considerations; and
•macroeconomic conditions.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Except for the broad effects of COVID-19 as a result of its negative impact on
the global economy and major financial markets, there were no material changes
to the disclosures regarding market risks in connection with our interest rate
risk exposure and commodity risk exposure. See Item 7A, "Quantitative and
Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K
for the year ended June 30, 2020. In addition, see Item 2, "- Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Factors Affecting Results of Operations - Impact of COVID-19 on Our Business" of
this Quarterly Report on Form 10-Q for discussions of disruptions caused by
COVID-19.
Potential interest rate risk exposure:
We have potential interest rate risk exposure related to outstanding borrowings
incurred under our credit facilities. Changes in interest rates may increase
interest expense payments with respect to any borrowings incurred under the
credit facilities.
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Borrowings under our credit facilities incur interest, depending on our
election, at a floating rate based upon LIBOR, the U.S. Federal Funds Rate or
the U.S. Prime Rate, plus, in each case, a fixed spread. If appropriate, we may
seek to reduce such exposure through the use of interest rate swaps or similar
instruments. As of September 30, 2020, we had a total of $350 million borrowings
outstanding under our credit facilities. The effect of a hypothetical 100 basis
point increase in floating interest rates prevailing as of September 30, 2020
and continuing for a full year would increase interest expense by approximately
$3.5 million.
Item 4. Controls and Procedures
An evaluation was carried out under the supervision and with the participation
of the Company's management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934). Based on that evaluation, the Company's
Chief Executive Officer and Chief Financial Officer concluded that as of
September 30, 2020 the Company's disclosure controls and procedures were
effective.
There were no changes in the Company's internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities
Exchange Act of 1934) during the quarter ended September 30, 2020 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
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