MADISON SQUARE GARDEN SPORTS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

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 the
impact of COVID-19 on our future operations. See "Part I - Item 1. Business" for
further discussion of the MSGE Distribution (defined below). 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 availability of the Madison Square
Garden Arena ("The Garden") with no or limited fans, league decisions regarding
play, the cancellation of games and the impact of restrictions imposed by New
York State, New York City, or otherwise;
•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;
•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, National Basketball Association ("NBA") or National Hockey
League ("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 New York Knickerbockers (the "Knicks") and the New York Rangers
(the "Rangers") are played;
•a default by our subsidiaries under their respective credit facilities;
•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 Madison Square
Garden Entertainment Corp. ("MSG Entertainment") to maintain necessary permits
or licenses;
                                       25

--------------------------------------------------------------------------------

Table of Contents

•the impact of any government plans to redesign New York City's Pennsylvania
Station;
•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 distribution of the outstanding common stock of
the Company to the former shareholders of MSG Networks Inc. ("MSG Networks") in
fiscal year 2016 and the MSGE Distribution (as defined below);
•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 "Part I - Item 1A. Risk Factors" included in this
Annual Report on Form 10-K.
We disclaim any obligation to update or revise the forward-looking statements
contained herein, except as otherwise required by applicable federal securities
laws.
All dollar amounts included in the following MD&A are presented in thousands,
except as otherwise noted.
MSGE Distribution
On April 17, 2020 (the "MSGE Distribution Date"), the Company distributed all of
the outstanding common stock of MSG Entertainment to its stockholders (the "MSGE
Distribution"). MSG Entertainment owns, directly or indirectly, the
entertainment business previously owned and operated by the Company through its
MSG Entertainment business segment and the sports booking business previously
owned and operated by the Company through its MSG Sports business segment. In
the MSGE Distribution, (a) each holder of the Company's Class A common stock,
received one share of MSG Entertainment Class A common stock, par value $0.01
per share, for every share of the Company's Class A common stock held of record
as of the close of business, New York City time, on April 13, 2020 (the "Record
Date"), and (b) each holder of the Company's Class B common stock, received one
share of MSG Entertainment Class B common stock, par value $0.01 per share, for
every share of the Registrant's Class B common stock held of record as of the
close of business, New York City time, on the Record Date. 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.
Introduction
MD&A is provided as a supplement to, and should be read in conjunction with, the
audited consolidated financial statements and footnotes thereto included in
Item 8 of this Annual Report on Form 10-K to help provide an understanding of
our financial condition, changes in financial condition and results of
operations.
Our MD&A is organized as follows:
Business Overview. This section provides a general description of our business,
as well as other matters that we believe are important in understanding our
results of operations and financial condition and in anticipating future trends.
Results of Operations. This section provides an analysis of our results of
operations for the years ended June 30, 2021 and 2020. The Company has applied
the Securities and Exchange Commission's recently adopted FAST Act Modernization
and Simplification of Regulation S-K, which limits the discussion to the two
most recent fiscal years. For the comparison of our results of operations for
the years ended June 30, 2020 and 2019, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of
our 2020 Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on August 31, 2020.
Liquidity and Capital Resources. This section provides a discussion of our
financial condition, as well as an analysis of our cash flows for the years
ended June 30, 2021 and 2020. The discussion of our financial condition and
liquidity includes summaries of (i) our primary sources of liquidity and
(ii) our contractual obligations and off balance sheet arrangements that existed
at June 30, 2021.
                                       26

--------------------------------------------------------------------------------

Table of Contents

Seasonality of Our Business. This section discusses the seasonal performance of
our Company.
Recently Issued Accounting Pronouncements and Critical Accounting Policies. This
section includes a discussion of accounting policies considered to be important
to our financial condition and results of operations and which require
significant judgment and estimates on the part of management in their
application. In addition, all of our significant accounting policies, including
our critical accounting policies, are discussed in the notes to our consolidated
financial statements included in Item 8 of this Annual Report on Form 10-K.
Business Overview
The Company owns and operates a portfolio of assets featuring some of the most
recognized teams in all of sports, including the Knicks of the NBA and the
Rangers of the NHL. Both the Knicks and the Rangers play their home games at The
Garden. The Company's other professional franchises include two development
league teams - the Hartford Wolf Pack of the American Hockey League ("AHL") and
the Westchester Knicks of the NBA G League ("NBAGL"). Our professional sports
franchises are collectively referred to herein as "our sports teams." In
addition, the Company owns Knicks Gaming, an esports franchise that competes in
the NBA 2K League, as well as a controlling interest in Counter Logic Gaming
("CLG"), a North American esports organization. The Company also operates two
professional sports team performance centers - the Madison Square Garden
Training Center in Greenburgh, NY and the CLG Performance Center in Los Angeles,
CA. CLG and Knicks Gaming are collectively referred to herein as "our esports
teams," and together with the sports teams, the "teams."
Revenue Sources
We earn revenue from several primary sources: ticket sales and a portion of
suite rental fees at The Garden, our share of distributions from NHL and NBA
league-wide national and international television contracts and other
league-wide revenue sources, venue signage and other sponsorships, food and
beverage sales at The Garden and merchandising. We also earn substantial fees
from MSG Networks for the local media rights to telecast the games of our sports
teams. The amount of revenue we earn is influenced by many factors, including
the impacts of COVID-19, the popularity and on-court or on-ice performance of
our sports teams and general economic conditions. In particular, when our sports
teams have strong on-court and on-ice performance, we benefit from increased
demand for tickets, potentially greater food and merchandise sales from
increased attendance and increased sponsorship opportunities. When our sports
teams qualify for the playoffs, we also benefit from the attendance and in-game
spending at the playoff games. The year-to-year impact of team performance is
somewhat moderated by the fact that a significant portion of our revenue derives
from media rights fees, suite rental fees and sponsorship and signage revenue,
all of which are generally contracted on a multi-year basis. Nevertheless, the
long-term performance of our business is tied to the success and popularity of
our sports teams. In addition, due to the NBA and NHL playing seasons, revenues
from our business are typically concentrated in the second and third quarters of
each fiscal year. The concentration of our revenues and expenses, however, was
different in fiscal year 2021 due to the effects of the COVID-19 pandemic.
Ticket Sales and Facility and Ticketing Fees
Ticket sales have historically constituted our largest single source of revenue.
Tickets to our sports teams' home games are sold through season tickets (full
and partial plans), which are typically held by long-term season subscribers,
through group sales, and through single-game tickets, which are purchased by
fans either individually or in multi-game packages. We generally review and set
the price of our tickets before the start of each team's season. However, we
dynamically price our individual tickets based on opponent, seat location, day
of the week and other factors. We do not earn revenue from ticket sales for
games played by our teams at their opponents' arenas.
We also earn revenues in the form of certain fees added to ticket prices, which
currently include a facility fee the Company charges on tickets it sells to our
sports teams' games, except for season tickets.
Media Rights
We earn revenue from the licensing of media rights for our sports teams' home
and away games and also through the receipt of our share of fees paid for
league-wide media rights, which are awarded under contracts negotiated and
administered by each league.
The Company and MSG Networks are parties to media rights agreements covering the
local telecast rights for the Knicks and the Rangers. The financial success of
the Company is significantly dependent on the rights fees we receive from MSG
Networks in connection with the telecast of our Knicks and Rangers games.
National and international telecast arrangements differ by league. Fees paid by
telecasters under these arrangements are pooled by each league and then
generally shared equally among all teams.

                                       27

--------------------------------------------------------------------------------

Table of Contents

Suites and Clubs
We earn revenue through the sale of suite and premium club licenses at The
Garden, which are generally sold by MSG Entertainment to corporate customers
pursuant to multi-year licenses. Under standard licenses, the licensees pay an
annual license fee, which varies depending on the location and type of the suite
or club. The license fee includes, for each seat in the suite or club, tickets
for our home games and other events at The Garden that are presented by MSG
Entertainment for which tickets are sold to the general public, subject to
certain exceptions. In addition, suite holders separately pay for food and
beverage service in their suites at The Garden. Food and non-alcoholic beverage
service is included in the annual license fee paid by club members.
Because suite and club licenses cover both our games and events that MSG
Entertainment presents at The Garden, suite and club rental revenue is shared
between us and MSG Entertainment under the arena license agreements (the "Arena
License Agreements") we entered into in connection with the MSGE Distribution.
Pursuant to the Arena Licenses Agreements, the Knicks and the Rangers are
entitled to 35% and 32.5%, respectively, of the revenues received by MSG
Entertainment in connection with suite and club licenses.
Venue Signage and Sponsorships
We earn revenues through the sale of sponsorships and signage specific to the
teams. Sales of team specific signage generally involve the sale of advertising
space within The Garden during our sports teams' home games and include the sale
of signage on the ice and on the boards of the hockey rink during Rangers games,
courtside during Knicks games, and/or on the various scoreboards and display
panels at The Garden. We offer both television camera-visible and
non-camera-visible signage space. We also earn a portion of revenues through MSG
Entertainment's sale of venue indoor signage space and sponsorship rights at The
Garden that are not specific to our teams pursuant to the Arena License
Agreements.
Sponsorship rights generally require the use of the name, logos and other
trademarks of a sponsor in the advertising and in promotions for The Garden in
general or our teams specifically during our sports events. Sponsorship
arrangements may be exclusive within a particular sponsorship category or
non-exclusive and generally permit a sponsor to use the name, logos and other
trademarks of our teams and, in the case of sponsorship arrangements shared with
MSG Entertainment, MSG Entertainment's venues and brands in connection with
their own advertising and in promotions in The Garden or in the community.
Food, Beverage and Merchandise Sales
We earn revenues from the sale of food and beverages during our sports teams'
games at The Garden. In addition to concession-style sales of food and
beverages, which represent the majority of food and beverage revenues, The
Garden also provides higher-end dining at premium clubs as well as catering for
suites. Pursuant to the Arena License Agreements, the Knicks and the Rangers
receive 50% of net profits from the sales of food and beverages during their
games at The Garden.
We also earn revenues from the sale of our sports teams' merchandise both
through the in-venue (and in some cases, online) sale of items bearing the logos
or other marks of our teams and through our share of sports league distributions
of royalties and other revenues from the sports leagues' licensing of team and
sports league trademarks, which are generally shared equally among the teams in
the sports leagues. Pursuant to the Arena License Agreements, the Knicks and the
Rangers pay MSG Entertainment a commission equal to 30% of revenues from the
sales of their merchandise at The Garden.
Other
Amounts collected for ticket sales, suite licenses and clubs, sponsorships and
venue signage in advance of an event are recorded as deferred revenue and are
recognized as revenues when earned.
Expenses
The most significant expenses are player and other team personnel salaries and
charges for transactions relating to players for career-ending and season-ending
injuries, trades, and waivers and contract termination costs of players and
other team personnel, including team executives. We also incur costs for travel,
player insurance, league operating assessments (including a 6% NBA assessment on
regular season ticket sales), NHL and NBA revenue sharing and, when applicable,
NBA luxury tax.
In addition, in connection with the MSGE Distribution we entered into long term
leases with MSG Entertainment that end June 30, 2055 and allow the Knicks and
the Rangers to continue to play their home games at The Garden (the "Arena
License Agreements"). The Arena License Agreements provide for fixed payments to
be made from inception through June 30, 2055 in 12 equal installments during
each year of the contractual term. Absent COVID-19, the stated license fee for
the first full contract year ending June 30, 2021 would have been approximately
$22,500 for the Knicks and approximately $16,700 for the Rangers, and then for
each subsequent year, the license fees are 103% of the license fees for the
immediately preceding contract year.
                                       28

--------------------------------------------------------------------------------

Table of Contents

The Garden was not available for use between April 17, 2020 and the start of the
NBA and NHL 2020-21 seasons in December 2020 and January 2021, respectively, due
to the government-mandated suspension of events in response to COVID-19, and as
a result, the Company was 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 the
Rangers resumed playing their homes games at The Garden as part of their 2020-21
seasons. However, fans were initially prohibited from attending games 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 the Rangers began playing games at The Garden with
a limited number of fans in attendance on February 23 and 26, respectively. When
games were played at The Garden by the Knicks and the Rangers either without
fans in attendance or with limited fans in attendance due to government mandated
capacity constraints, the applicable license fees paid to MSG Entertainment
under the Arena License Agreements were substantially reduced.
Effective May 19, 2021, event venues such as The Garden were permitted to host
guests at full capacity, subject to certain restrictions, including, for
example, restrictions for unvaccinated guests. As a result, the Knicks played
three home playoff games with ticket sales of approximately 15,000-16,500 per
game during the fiscal year ended June 30, 2021.
As a result of New York City regulations effective August 17, 2021, subject to
certain exceptions, all guests 12 years of age or older and employees (other
than players who are not residents of New York City) at indoor entertainment
venues such as The Garden must show proof that they have received at least one
dose of a COVID-19 vaccine. Guests under the age of 12 must wear masks, provide
proof of a negative COVID test and are permitted to enter only when accompanied
by a vaccinated parent or guardian.
Player Salaries, Escrow System/Revenue Sharing and NBA Luxury Tax
The amount we pay an individual player is typically determined by negotiation
between the player (typically represented by an agent) and us, and is generally
influenced by the player's past performance, the amounts paid to players with
comparable past performance by other sports teams and restrictions in the CBAs,
including the salary floors and caps and NBA luxury tax. The leagues' CBAs
typically contain restrictions on when players may move between league clubs
following expiration of their contracts and what rights their current and former
clubs have.
NBA CBA. The NBA CBA expires after the 2023-24 season (although each of the NBA
and the National Basketball Players Association ("NBPA") has the right to
terminate the CBA effective following the 2022-23 season). The NBA CBA contains
a salary floor (i.e., a floor on each team's aggregate player salaries with a
requirement that the team pay any deficiency to the players on its roster) and a
"soft" salary cap (i.e., a cap on each team's aggregate player salaries but with
certain exceptions that enable teams to pay players more, sometimes
substantially more, than the cap).
NBA Luxury Tax. Amounts in this paragraph are in thousands, except for luxury
tax rates. The NBA CBA generally provides for a luxury tax that is applicable to
all teams with aggregate player salaries exceeding a threshold that is set prior
to each season based upon projected league-wide revenues (as defined under the
NBA CBA). The luxury tax rates for teams with aggregate player salaries above
such threshold start at $1.50 for each $1.00 of team salary above the threshold
up to $5,000 and scale up to $3.25 for each $1.00 of team salary that is from
$15,000 to $20,000 over the threshold, and an additional tax rate increment of
$0.50 applies for each additional $5,000 (or part thereof) of team salary in
excess of $20,000 over the threshold. In addition, for teams that are taxpayers
in at least three of four previous seasons, the above tax rates are increased by
$1.00 for each increment. Fifty percent of the aggregate luxury tax payments is
a funding source for the revenue sharing plan (described below) and the
remaining 50% of such payments is distributed in equal shares to non-taxpaying
teams. For the 2020-21 and 2019-20 seasons, the Knicks were not a luxury tax
payer and we recorded approximately $3,442, and $230, respectively, of luxury
tax proceeds from tax-paying teams. Tax obligations for years beyond the 2020-21
season will be subject to contractual player payroll obligations and
corresponding NBA luxury tax thresholds. The Company recognizes the estimated
amount associated with luxury tax expense or the amount it expects to receive as
a non-tax paying team, if applicable, on a straight-line basis over the NBA
regular season as a component of direct operating expenses.
NBA Escrow System/Revenue Sharing. The NBA CBA also provides that players
collectively receive a designated percentage of league-wide revenues (net of
certain direct expenses) as compensation (approximately 49% to 51%), and the
teams retain the remainder. The percentage of league-wide revenues paid as
compensation and retained by the teams does not apply evenly across all teams
and, accordingly, the Company may pay its players a higher or lower percentage
of the Knicks' revenues than other NBA teams. Throughout each season, NBA teams
withhold 10% of each player's salary. If the league's aggregate player
compensation exceeds the designated percentage of league-wide revenues, some or
all of such escrowed amounts are distributed equally to all NBA teams. In the
event that the league's aggregate player compensation is below the designated
percentage of league-wide revenues, the teams with the shortfall will remit the
shortfall in equal shares to the NBPA for distribution to the players.
                                       29

--------------------------------------------------------------------------------

Table of Contents

For the 2020-21 season and the remainder of the CBA, the escrow system above was
eliminated and a new "Ten-and-Spread" system was put in place. Under the
Ten-and-Spread system, based upon league-wide revenues, aggregate player
compensation will be reduced by up to 10% of each player's salary. If, for a
particular season, compensation reductions in excess of 10% are needed, the
excess will be divided by three and recouped via reductions to players'
compensation over the same season, and the subsequent two seasons. The reduction
of players' salary for any one season is capped at 20% and carried over to the
subsequent season as additional compensation reductions. Each team is entitled
to receive an equal one-thirtieth share of the compensation reductions up to 10%
and the excess above 10% is allocated in proportion to each team's player
payroll.
The NBA also has a revenue sharing plan that generally requires the distribution
of a pool of funds to teams with below-average net revenues (as defined in the
plan), subject to reduction or elimination based on individual team market size
and profitability. The plan is funded by a combination of disproportionate
contributions from teams with above-average net revenues, subject to certain
profit-based limits (each as defined in the plan); 50% of aggregate league-wide
luxury tax proceeds (see above); and collective league sources, if necessary.
Additional amounts may also be distributed on a discretionary basis, funded by
assessments on playoff ticket revenues and through collective league sources.
We record our revenue sharing expense net of the amount we expect to receive
from the escrow. Our net provision for these items for the year ended June 30,
2021 was approximately $3,575. The actual amounts for the 2020-21 season may
vary significantly from the recorded provision based on actual operating results
for the league and all NBA teams for the season and other factors.
NHL CBA. The current NHL CBA expires after the 2025-26 season (with the
possibility of a one year extension in certain circumstances). The NHL CBA
provides for a salary floor (i.e., a floor on each team's aggregate player
salaries) and a "hard" salary cap (i.e., teams may not exceed a stated maximum,
which is adjusted each season based upon league-wide revenues).
NHL Escrow System/Revenue Sharing. The NHL CBA provides that each season the
players receive as player compensation 50% of that season's league-wide
revenues. Because the aggregate amount to be paid to the players is based upon
league-wide revenues and not on a team-by-team basis, the Company may pay its
players a higher or lower percentage of the Rangers' revenues than other NHL
teams pay of their own revenues. In order to implement the escrow system, NHL
teams withhold a portion of each player's salary and contribute the withheld
amounts to an escrow account. If the league's aggregate player compensation for
a season exceeds the designated percentage (50%) of that season's league-wide
revenues, the excess is retained by the league. Any such excess funds are
distributed to all teams in equal shares. In addition, the NHL CBA limits the
amount of deductions to be withheld from player salaries each year. If annual
escrow deductions from player salaries are insufficient to limit league-wide
player salaries to 50% of that season's league-wide revenues, any shortfall will
be carried forward to future seasons and remain due from the players to the
league.
The NHL CBA also provides for a revenue sharing plan. The plan generally
requires the distribution of a pool of funds approximating 6.055% of league-wide
revenues to certain qualifying lower-revenue teams and is funded as follows:
(a) 50% from contributions by the top ten revenue earning teams (based on
preseason and regular season revenues, net of arena costs) in accordance with a
formula; (b) then from payments by teams participating in the playoffs, with
each team contributing 35% of its gate receipts for each home playoff game
(although this provision was waived for the 2020-21 season); and (c) the
remainder from centrally-generated NHL sources. We record our revenue sharing
expense net of the amount we expect to receive from escrow recoveries. Our net
provisions for these items for the year ended June 30, 2021 was a credit of
approximately $35,396. The actual amounts for the 2020-21 season may vary
significantly from the recorded provision based on actual operating results for
the league and all NHL teams for the season and other factors.
Other Team Operating Expenses
Our teams also pay expenses associated with day-to-day operations, including for
travel, equipment maintenance and player insurance. Direct variable day-of-event
costs incurred at The Garden, such as the costs of front-of-house and
back-of-house staff, including electricians, laborers, box office staff, ushers,
security, and event production are charged to the Company.
In addition, our team operating expenses include operating costs of the
Company's training center in Greenburgh, NY. The operation of the Hartford Wolf
Pack is reported as a net Rangers player development expense.
As members of the NBA and NHL, the Knicks and the Rangers, respectively, are
also subject to league assessments. The governing bodies of each league
determine the amount of each season's league assessments that are required from
each member team. The NBA imposed on each team a 6% assessment on regular season
ticket revenue.
We also incur costs associated with VIP amenities provided to certain ticket
holders.

                                       30

--------------------------------------------------------------------------------

Table of Contents

Other Expenses
Other expenses primarily include Selling, general and administrative ("SG&A")
expenses that consist of administrative costs, including compensation,
professional fees, as well as sales and marketing costs, including non-event
related advertising expenses.
SG&A expenses for periods prior to the MSGE Distribution include certain
corporate overhead expenses that do not meet the criteria for inclusion in
discontinued operations.
Factors Affecting Operating Results
General
Our operating results are largely dependent on the continued popularity and/or
on-court or on-ice competitiveness of our Knicks and Rangers teams, which have a
direct effect on ticket sales for the teams' home games and are each team's
largest single source of revenue. As with other sports teams, the competitive
positions of our sports teams depend primarily on our ability to develop, obtain
and retain talented players, for which we compete with other professional sports
teams. A significant factor in our ability to attract and retain talented
players is player compensation. The Company's operating results reflect the
impact of high costs for player salaries (including NBA luxury tax, if any) and
salaries of non-player team personnel. In addition, we have incurred significant
charges for costs associated with transactions relating to players on our sports
teams for season-ending and career-ending injuries and for trades, waivers and
contract terminations of players and other team personnel, including team
executives. Waiver and termination costs reflect our efforts to improve the
competitiveness of our sports teams. These transactions can result in
significant charges as the Company recognizes the estimated ultimate costs of
these events in the period in which they occur, although amounts due to these
individuals are generally paid over their remaining contract terms. For example,
the expense for these items was $44,242, and $33,690 for fiscal years 2021 and
2020, respectively. These expenses add to the volatility of our operating
results. We expect to continue to pursue opportunities to improve the overall
quality of our sports teams and our efforts may result in continued significant
expenses and charges. Such expenses and charges may result in future operating
losses although it is not possible to predict their timing or amount. Our
performance has been, and may in the future be, impacted by work stoppages. See
"Part I - Item 1A. Risk Factors - Organized Labor Matters May Have a Material
Negative Effect on Our Business and Results of Operations."
In addition to our future performance being dependent upon the continued
popularity and/or on-court or on-ice competitiveness of our Knicks and Rangers
teams, it is also dependent on general economic conditions, in particular those
in the New York City metropolitan area, and the effect of these conditions on
our customers. An economic downturn could adversely affect our business and
results of operations as it may lead to lower demand for suite licenses and
tickets to the games of our sports teams, which would also negatively affect
merchandise and concession sales, as well as decrease levels of sponsorship and
venue signage revenues.
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 17 to the
consolidated financial statements included in Item 8 of this Annual Report on
Form 10-K 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
the Rangers. In addition, pursuant to the Arena License Agreements, the
Company's aggregate share of suite license fee revenue is 67.5%, as compared to
a higher percentage allocated to the Knicks and the 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 the 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
                                       31

--------------------------------------------------------------------------------

Table of Contents

instead 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 the 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 the 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. In addition, pursuant to the Arena License Agreements, the Knicks and
the Rangers pay MSG Entertainment a 30% commission related to merchandise sales
at The Garden.
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 Year Ended June 30, 2021 versus the Year Ended June 30, 2020" and Note 3
to the consolidated financial statements included in Item 8 of this Annual
Report on Form 10-K for more information.
Impact of COVID-19 on Our Business
COVID-19 disruptions have materially impacted the Company's revenues and the
Company recognized materially less revenues, or in some cases no revenues,
across a number of areas. Those areas include: ticket sales; the Company's share
of suite licenses; sponsorships; signage and in-venue advertising at The Garden;
and food, beverage and merchandise sales. In addition, the Knicks and the
Rangers played fewer games during the 2020-21 regular seasons, with the NBA
playing a 72-game regular season schedule and the NHL playing a 56-game regular
season schedule. These compare to traditional 82-game regular season schedules
for both the NBA and NHL. In addition, while games have resumed at The Garden,
until May 2021, fan attendance was limited due to ongoing government-mandated
assembly restrictions.
On March 11 and 12, 2020, the NBA and NHL, respectively, suspended their 2019-20
seasons due to COVID-19. At the time the seasons were suspended, the Knicks had
16 games remaining, including eight home games, and the Rangers had 12 games
remaining, including five home games. 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. As a result,
during the first quarter of fiscal year 2021 the Company recognized certain
revenues that otherwise would have been recognized during the third and fourth
quarter of fiscal year 2020.
In connection with the MSGE Distribution, we entered into the Arena License
Agreements with MSG Entertainment. The Garden was not available for use between
April 17, 2020 and the start of the NBA and NHL 2020-21 seasons in December 2020
and January 2021, respectively, due to the government-mandated suspension of
events in response to COVID-19, and as a result, the Company was 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 the
Rangers resumed playing their homes games at The Garden as part of their 2020-21
seasons. However, fans were initially prohibited from attending games 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 the Rangers began playing games at The Garden with
a limited number of fans in attendance on February 23 and 26, respectively. When
games were played at The Garden by the Knicks and the Rangers either without
fans in attendance or with limited fans in attendance due to government mandated
capacity constraints, the applicable license fees paid to MSG Entertainment
under the Arena License Agreements were substantially reduced.
Effective May 19, 2021, event venues such as The Garden were permitted to host
guests at full capacity, subject to certain restrictions, including, for
example, restrictions for unvaccinated guests. As a result, the Knicks played
three home playoff games with ticket sales of approximately 15,000-16,500 per
game during the fiscal year ended June 30, 2021.
During the fiscal year 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 were reduced including (i) payments to MSG
Entertainment under the Arena License Agreements, (ii) NBA league assessments
and day-of-game expenses for Knicks and Rangers games, and (iii) league revenue
sharing, net of escrow and team personnel expense. These expense reductions did
not fully offset revenue losses.
As a result of New York City regulations effective August 17, 2021, subject to
certain exceptions, all guests 12 years of age or older and employees (other
than players who are not residents of New York City) at indoor entertainment
venues such as The
                                       32

--------------------------------------------------------------------------------

Table of Contents

Garden must show proof that they have received at least one dose of a COVID-19
vaccine. Guests under the age of 12 must wear masks, provide proof of a negative
COVID test and are permitted to enter only when accompanied by a vaccinated
parent or guardian.
Results of Operations
Comparison of the Year Ended June 30, 2021 versus the Year Ended June 30, 2020
The table below sets forth, for the periods presented, certain historical
financial information.
                                                          Years Ended June 30,                             Change (a)
                                                        2021                2020               Amount                Percentage
Revenues                                            $  415,721          $  603,319          $ (187,598)                       (31) %

Direct operating expenses                              281,890             359,970             (78,080)                       (22) %
Selling, general and administrative expenses           206,700             319,675            (112,975)                       (35) %
Depreciation and amortization                            5,574              17,540             (11,966)                       (68) %
Operating loss                                         (78,443)            (93,866)             15,423                         16  %
Other income (expense):
Interest expense, net                                  (10,529)             (3,761)             (6,768)                           NM
Miscellaneous expense, net                                (346)               (421)                 75                         18  %
Loss from continuing operations before income
taxes                                                  (89,318)            (98,048)              8,730                          9  %
Income tax benefit (expense)                            73,421             (20,593)             94,014                            NM
Loss from continuing operations                        (15,897)           (118,641)            102,744                         87  %
Loss from discontinued operations, net of
taxes                                                        -             (90,222)             90,222                            NM
Net loss                                               (15,897)           (208,863)            192,966                         92  %
Less: Net loss attributable to nonredeemable
noncontrolling interests from continuing
operations                                              (1,943)             (2,342)                399                         17  %
Less: Net loss attributable to redeemable
noncontrolling interests from discontinued
operations                                                   -             (24,013)             24,013                            NM
Less: Net loss attributable to nonredeemable
noncontrolling interests from discontinued
operations                                                   -                (120)                120                            NM
Net loss attributable to Madison Square
Garden Sports Corp.'s stockholders                  $  (13,954)         $ (182,388)         $  168,434                         92  %



NM - Percentage is not meaningful
(a) Operating results were materially impacted by the coronavirus pandemic.
Please see "- Factors Affecting Operating Results - Impact of COVID-19 on Our
Business" for more information.
For the period through the MSGE Distribution, 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 period 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. The reported financial results of the
Company for the period after the MSGE Distribution reflect the Company's results
on a standalone basis, including the Company's actual corporate overhead.
                                       33

--------------------------------------------------------------------------------

Table of Contents

Revenues

Revenues for the year ended June 30, 2021 decreased $187,598, or 31%, to
$415,721 as compared to the prior year. The net decrease is attributable to the
following:
Decrease in pre/regular season ticket-related revenues                           $   (192,393)
Decrease in suite license fee revenues                                      

(67,433)

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

(35,597)

Decrease in sponsorship and signage revenues                                

(11,676)

Increase in revenues from league distributions                                         98,329

Inclusion of playoff related revenues as the Knicks did not qualify in the prior fiscal year

                                                                      15,243
Increase in local media rights fees from MSG Networks                                   7,116
Other net decreases                                                                    (1,187)
                                                                                 $   (187,598)


The decrease in pre/regular season ticket-related revenues was a result of
government-mandated assembly restrictions and the Knicks and the Rangers playing
games at The Garden with no fans in attendance until February 23 and 26, 2021,
respectively, and after that, playing games with attendance restricted to 10%
capacity. The year ended June 30, 2020 was impacted by the suspension of the
Knicks and the Rangers 2019-20 regular seasons in March 2020.
The decrease in suite license fee revenues was a result of 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
primarily sold by way of individual tickets, thus minimal suite license fee
revenue was recognized for the year ended June 30, 2021. In addition, the year
ended June 30, 2021 includes the impact of the MSGE Distribution. See "- Factors
Affecting Operating Results - MSGE Distribution - Suite License Fee Revenue" for
more information.
The decrease in pre/regular season food and beverage sales was a result of
government-mandated assembly restrictions at The Garden, as discussed above. In
addition, the year ended June 30, 2021 includes the impact of the MSGE
Distribution. See "- Factors Affecting Operating Results - MSGE Distribution -
Food, Beverage and Merchandise Sales" for more information. The decrease in
pre/regular season merchandise sales was a result of government-mandated
assembly restrictions at The Garden, as discussed above.
The decrease in sponsorship and signage revenues was primarily due to the impact
of the MSGE Distribution as well as lower recognition of existing sponsorship
and signage inventory as a result of government-mandated assembly restrictions
at The Garden, as discussed above, partially offset by sales of new sponsorship
and signage inventory.
The increase in revenues from league distributions was primarily due to 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 and a $21,043 expansion fee from the NHL. The increase was
partially offset by decreases in other league distributions.
The increase in local media rights fees from MSG Networks was primarily due to
the impact of the suspended 2019-20 NBA and NHL seasons which reduced revenue
recognized in the prior year period, contractual rate increases, and the
recognition of local media rights fees associated with the Rangers'
participation in the Stanley Cup Qualifiers during the first quarter of fiscal
year 2021. 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. This increase was partially
offset by the impact of the reduced NBA and NHL 2020-21 regular season
schedules.
Direct operating expenses
Direct operating expenses generally include:
•compensation expense for our sports teams' players and certain other team
personnel;
•arena license fees recognized as operating lease costs associated with the
Knicks and the Rangers playing home games at The Garden;
•cost of team personnel transactions for waivers/contract termination costs,
trades, and season-ending player injuries (net of anticipated insurance
recoveries) of players and other team personnel;
                                       34

--------------------------------------------------------------------------------

Table of Contents

•NBA and NHL revenue sharing (net of escrow), league assessments and NBA luxury
tax receipts; and
•the cost of merchandise and, prior to the MSGE Distribution, food and beverage
sales.
Direct operating expenses for the year ended June 30, 2021 decreased $78,080, or
22%, to $281,890 as compared to the prior year. The net decrease is attributable
to the following:
Decrease in net provisions for league revenue sharing expense (net of
escrow and excluding playoffs) and NBA luxury tax                           

$ (44,164) Decrease in other team operating expenses not discussed elsewhere in this table

(19,345)

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

(18,907)

Decrease in team personnel compensation                                     

(17,801)

Decrease in net provisions for certain team personnel transactions

(5,315)

Inclusion of operating lease costs associated with the Knicks and the Rangers playing home games at The Garden

35,419

Inclusion of playoff related expenses as the Knicks did not qualify in the prior year period

9,792

Other net decreases, including expenses that do not meet the criteria for inclusion in discontinued operations

        (17,759)
                                                                               $    (78,080)

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

                                                                  Years 

Ended June 30,

                                                                 2021                  2020             Decrease
Net provisions for league revenue sharing expense
(net of escrow and excluding playoffs) and NBA
luxury tax                                                $    (37,731)

$ 6,433 $ (44,164)

The decrease in net provisions for league revenue sharing expense (net of escrow
and excluding playoffs) and NBA luxury tax primarily reflects lower provisions
for league revenue sharing expense (net of escrow) of $40,953 primarily as a
result of the COVID-19 pandemic. In addition, the year ended June 30, 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 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 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 June 30, 2021 did
not result in the team being a luxury tax payer for the 2020-21 season and the
company will receive an equal share of the portion of luxury tax receipts that
are distributed to non-tax paying teams.
The decrease in other team operating expenses not discussed elsewhere in this
table was primarily the result of government-mandated assembly restrictions at
The Garden, as discussed above, and the shortened 2020-21 NBA and NHL regular
seasons.
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
Operating Results - MSGE Distribution - Food, Beverage and Merchandise Sales"
for more information. The decrease in pre/regular season expense associated with
merchandise sales was a result of government-mandated assembly restrictions at
The Garden, as discussed above.
The decrease in team personnel compensation was primarily due to lower player
compensation and the net impact of the 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.
                                       35

--------------------------------------------------------------------------------

Table of Contents

Net provisions for certain team personnel transactions were as follows:

                                                                      Years Ended June 30,                  Increase
                                                                    2021                  2020             (Decrease)
Waivers/contract terminations                                 $    20,959             $  27,055          $     (6,096)
Player trades                                                       2,583                 1,802                   781

Net provisions for certain team personnel transactions $ 23,542

$ 28,857 $ (5,315)

Selling, general and administrative expenses
Selling, general and administrative expenses primarily consist of administrative
costs, including compensation, professional fees, costs under the Company's
transition services agreement with MSG Entertainment and sales and marketing
costs.
Selling, general and administrative expenses for the year ended June 30, 2021
decreased $112,975, or 35%, to $206,700 as compared to the prior year primarily
due to lower corporate overhead costs, which in the prior year included certain
corporate expenses that the Company did not incur during the current year 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 partially offset by higher sports teams' employee
compensation and related benefits, including severance related to team
executives, and fees related to the Company's sponsorship sales and service
representation agreements with MSG Entertainment.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2021 decreased
$11,966, or 68%, to $5,574 as compared to the prior year 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, a certain asset
being fully amortized.
Operating loss
Operating loss for the year ended June 30, 2021 decreased $15,423, or 16%, to
$78,443 as compared to the prior year. The decrease was primarily due to lower
selling, general and administrative expenses, direct operating expenses and, to
a lesser extent, lower depreciation and amortization, partially offset by lower
revenues as discussed above.
Interest expense, net
Net interest expense increased $6,768 to $10,529 as compared to the prior year.
The increase was primarily due to the Knicks and the Rangers revolving credit
facilities, which were initially drawn on in March 2020, with subsequent
additional drawings in November 2020.
Income taxes
Income tax benefit for the year ended June 30, 2021 of $73,421 differs from the
income tax benefit derived from applying the statutory federal rate of 21% to
pretax loss primarily due to a decrease in valuation allowance of $52,108 and
state and local tax benefit of $7,331, partially offset by nondeductible
officers' compensation of $4,081. See Note 18 to the consolidated financial
statements included in Item 8 of this Annual Report on Form 10-K for further
details on the components of income tax and a reconciliation of the statutory
federal rate to the effective tax rate.
Income tax expense for the year ended June 30, 2020 of $20,593 differs from the
income tax benefit derived from applying the statutory federal rate of 21% to
pretax loss primarily due to an increase in valuation allowance of $46,310, tax
expense of $492 relating to noncontrolling interests, and tax expense of $762
relating to nondeductible expenses, partially offset by state and local tax
benefit of $7,332.
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
                                       36

--------------------------------------------------------------------------------

Table of Contents

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 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 is a reconciliation of operating loss to adjusted operating loss:

                                                 Years Ended June 30,                  Change
                                                 2021            2020          Amount       Percentage
Operating loss                               $   (78,443)     $ (93,866)     $ 15,423             16  %
Deferred rent                                     28,305              -
Depreciation and amortization (a) (b)              5,574         17,540
Share-based compensation (a)                      30,437         48,693
Restructuring charges                              1,597              -
Other purchase accounting adjustments                  -            167
Adjusted operating loss                      $   (12,530)     $ (27,466)     $ 14,936             54  %


________________
(a)For the period through the MSGE Distribution, depreciation and amortization
and share-based compensation includes expenses that the Company does not expect
to incur in future periods, but which do not meet the criteria for inclusion in
discontinued operations.
(b)Depreciation and amortization included purchase accounting adjustments of
$1,059 and $1,070 for the years ended June 30, 2021 and 2020, respectively.
Adjusted operating loss for the year ended June 30, 2021 decreased $14,936, or
54%, to $12,530 as compared to the prior year. The decrease was primarily due to
lower direct operating expenses, lower selling, general and administrative
expenses and lower depreciation and amortization partially offset by lower
revenues.

                                       37

--------------------------------------------------------------------------------

Table of Contents

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. For more information about the impacts and risks to the Company as a
result of COVID-19, see "- Impact of COVID-19 on Our Business" and "Item 1A.
Risk Factors - Sports Business Risks - Our Operations and Operating Results Have
Been, and May Continue to be, Materially Impacted by the COVID-19 Pandemic and
Government and League Actions Taken in Response". In addition, see also Note 1
to the consolidated financial statements included in "Part II - Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K
for further information.
Our primary sources of liquidity are cash and cash equivalents and available
borrowing capacity under our credit facilities as well as cash flow from our
operations. There can be no assurance, however, that our expenses will not
exceed our revenues, thereby presenting an ongoing use of liquidity. 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 June 30, 2021, we had approximately $64,900 in Cash and cash equivalents.
In addition, as of June 30, 2021, the Company's deferred revenue obligations
were approximately $146,300, net of billed, but not yet collected deferred
revenue. This balance is primarily comprised of obligations in connection with
tickets and suites. 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. As a
general matter, deferred revenue obligations relating to tickets and suites will
be addressed through games played and, 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. 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 $64,900 in Cash
and cash equivalents as of June 30, 2021, along with $245,000 of additional
available borrowing capacity under existing credit facilities, to fund our
operations and satisfy any obligations, including with respect to the return or
application of deferred revenue, over the next 12 months.
Financing Agreements and Stock Repurchases
2020 Knicks Revolving Credit Facility
On November 6, 2020, New York Knicks, LLC ("Knicks LLC"), a wholly owned
subsidiary of the Company, entered into the 2020 Knicks Credit Agreement with a
syndicate of lenders providing for the 2020 Knicks Revolving Credit Facility to
fund working capital needs and for general corporate purposes. The 2020 Knicks
Revolving Credit Facility increased borrowing capacity from $200,000 to
$275,000. Amounts borrowed may be distributed to the Company except during an
event of default.
The 2020 Knicks Revolving Credit Facility requires Knicks LLC to comply with a
debt service ratio of 1.5:1.0 over a trailing four quarter period. As of
June 30, 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. 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 June 30, 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
                                       38

--------------------------------------------------------------------------------

Table of Contents

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). 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.
2020 Knicks Holdings Revolving Credit Facility
On November 6, 2020, Knicks Holdings, LLC ("Knicks Holdings"), a wholly-owned
subsidiary of the Company, entered into the 2020 Knicks Holdings Credit
Agreement with a syndicate of lenders providing for the 2020 Knicks Holdings
Revolving Credit Facility to fund working capital needs and for general
corporate purposes. The 2020 Knicks Holdings Revolving Credit Facility provides
for $75,000 of borrowing capacity.
The 2020 Knicks Holdings Revolving Credit Facility requires Knicks Holdings to
comply with a debt service ratio of 1.1:1.0 over a trailing four quarter period.
As of June 30, 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. 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 June 30, 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.
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.
2020 Rangers Revolving Credit Facility
On November 6, 2020, New York Rangers, LLC ("Rangers LLC"), a wholly-owned
subsidiary of the Company, entered into the 2020 Rangers Credit Agreement with a
syndicate of lenders providing for the 2020 Rangers Revolving Credit Facility to
fund working capital needs and for general corporate purposes. The 2020 Rangers
Revolving Credit Facility increased borrowing capacity from $150,000 to
$250,000. Amounts borrowed may be distributed to the Company except during an
event of default.
The 2020 Rangers Revolving Credit Facility requires Rangers LLC to comply with a
debt service ratio of 1.5:1.0 over a trailing four quarter period. As of
June 30, 2021, Rangers LLC was in compliance with this financial covenant.
                                       39

--------------------------------------------------------------------------------

Table of Contents

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 $135,000 as of June 30, 2021.
During the year ended June 30, 2021, the Company made principal repayments of
$25,000.
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.
Subject to customary notice and minimum amount conditions, Rangers LLC may
voluntarily prepay outstanding loans under the 2020 Rangers Revolving Credit
Facility at any time, in whole or in part, without premium or penalty (except
for customary breakage costs with respect to Eurocurrency loans). Rangers LLC is
required to make mandatory prepayments in certain circumstances, including
without limitation if qualified revenues are less than 17% of the maximum
available amount under the 2020 Rangers Revolving Credit Facility.
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.
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 June 30, 2021.
See Note 13 and Note 16 to the consolidated financial statements included in
Item 8 of this Annual Report on Form 10-K for discussions of the Company's debt
obligations and various financing agreements, and the Company's stock
repurchases, respectively.

                                       40

--------------------------------------------------------------------------------

Table of Contents

Cash Flow Discussion
The following table summarizes the Company's cash flow activities for the years
ended June 30, 2021 and 2020:
                                                                         Years Ended June 30,
                                                                      2021                 2020
Net loss                                                          $ 

(15,897) $ (208,863) Adjustments to reconcile net loss to net cash provided by (used in) operating activities

                                       (36,744)              264,259
Subtotal                                                          $  (52,641)         $     55,396
Changes in working capital assets and liabilities                     17,315               (51,828)
Net cash provided by (used in) operating activities               $  (35,326)         $      3,568
Net cash used in investing activities                                   (466)             (514,863)
Net cash provided by (used in) financing activities                   17,155              (520,588)

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

                                                            -                 4,655

Net decrease in cash, cash equivalents and restricted cash $ (18,637) $ (1,027,228)

Operating Activities
Net cash used in operating activities for the year ended June 30, 2021 was
$35,326 as compared to net cash provided by operating activities in the prior
year of $3,568. This was primarily due to the decrease in net loss adjusted for
non-cash items partially offset by changes in certain assets and liabilities.
Net cash provided by operating activities for the prior year was not adjusted to
exclude net cash provided by discontinued operations.
Investing Activities
Net cash used in investing activities for the year ended June 30, 2021 decreased
by $514,397 to $466 as compared to the prior year primarily driven by investing
activities in discontinued operations in the prior year. Investing activities
included in discontinued operations in the prior year primarily consisted of
purchase of short-term investments and capital expenditures, of which
substantially all are related to the MSG Entertainment planned MSG Spheres in
Las Vegas and London, partially offset by proceeds from the maturity of
short-term investments, a loan repayment received from a subordinated note, and
proceeds received from the sale of interest in a nonconsolidated affiliate.
Financing Activities
Net cash provided by financing activities for the year ended June 30, 2021 was
$17,155 as compared to net cash used in financing activities in the prior year
of $520,588. This change is primarily due to the distribution of cash to MSG
Entertainment in the prior year and proceeds received in the current year from
the 2021 Rangers NHL Advance Agreement, partially offset by higher initial
borrowings in the prior year compared to the additional borrowings in the
current year under, the now, amended and extended 2020 Knicks Credit Agreement
and 2020 Rangers Credit Agreement.

                                       41

--------------------------------------------------------------------------------

Table of Contents

Contractual Obligations and Off Balance Sheet Arrangements
Future cash payments required under contracts entered into by the Company in the
normal course of business as of June 30, 2021 are summarized in the following
table:
                                                                           Payments Due by Period
                                                                Year              Years              Years              More Than
                                           Total                  1                 2-3                4-5               5 Years

Off balance sheet arrangements (a) $ 330,076 $ 116,937

     $ 138,583          $  66,217          $     8,339
Contractual obligations reflected on the balance
sheet:
Leases (b)                                2,336,268             43,563             89,966             89,427            2,113,312
Long-term debt (c)                          355,000                  -            355,000                  -                    -
Contractual obligations (d)                 111,751             70,557             27,554              5,392                8,248
                                          2,803,019            114,120            472,520             94,819            2,121,560
Total (e)                               $ 3,133,095          $ 231,057          $ 611,103          $ 161,036          $ 2,129,899


_________________
(a)Contractual obligations not reflected on the balance sheet consist
principally of the Company's obligations under employment agreements that the
Company has with certain of its professional sports teams' personnel that are to
be performed in future periods and that are generally guaranteed regardless of
employee injury or termination.
(b)Includes contractually obligated minimum license fees under the Arena License
Agreement, which fees are characterized as lease payments for operating leases
having an initial noncancelable term in excess of one year under GAAP. These
commitments are presented exclusive of the imputed interest used to reflect the
payment's present value. See Note 8 to the consolidated financial statements
included in Item 8 of this Annual Report on Form 10-K for information on the
contractual obligations related to future lease payments, which are reflected on
the consolidated balance sheet as lease liabilities as of June 30, 2021.
(c)Consists of amounts drawn under the 2020 Knicks Revolving Credit Facility and
2020 Rangers Revolving Credit Facility. See Note 13 to the consolidated
financial statements included in Item 8 of this Annual Report on Form 10-K for
further details.
(d)Contractual obligations reflected on the balance sheet consist principally of
the Company's obligations under employment agreements that the Company has with
certain of its professional sports teams' personnel that have been fully
performed and that are being paid on a deferred basis.
(e)Pension obligations have been excluded from the table above as the timing of
the future cash payments is uncertain. See Note 14 to the consolidated financial
statements included in Item 8 of this Annual Report on Form 10-K for more
information on the future funding requirements under our pension obligations.
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, resumed their seasons
and the NHL and NBA subsequently completed their seasons in September and
October 2020, respectively. As a result, during the first quarter of fiscal year
2021 the Company recognized certain revenues that otherwise would have typically
been recognized during the third and fourth quarter of fiscal year 2020. 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 and fourth quarters of fiscal year 2021, that
otherwise would have typically been recognized during the second and third
quarters of fiscal year 2021.
Recently Issued Accounting Pronouncements and Critical Accounting Policies
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements included in Item 8 of this
Annual Report on Form 10-K for discussion of recently issued accounting
pronouncements.

                                       42

--------------------------------------------------------------------------------

Table of Contents

Critical Accounting Policies
The preparation of the Company's consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions about future
events. These estimates and the underlying assumptions affect the amounts of
assets and liabilities reported, disclosures about contingent assets and
liabilities, and reported amounts of revenues and expenses. Management believes
its use of estimates in the consolidated financial statements to be reasonable.
The significant accounting policies which we believe are the most critical to
aid in fully understanding and evaluating our reported financial results include
the following:
Arrangements with Multiple Performance Obligations
The Company has contracts with customers, including multi-year sponsorship
agreements, that contain multiple performance obligations. Payment terms for
such arrangements can vary by contract, but payments are generally due in
installments throughout the contractual term. The performance obligations
included in each sponsorship agreement vary and may include various advertising
benefits such as, but not limited to, signage, digital advertising, and event or
property specific advertising, as well as non-advertising benefits such as suite
licenses and event tickets. To the extent the Company's multi-year arrangements
provide for performance obligations that are consistent over the multi-year
contractual term, such performance obligations generally meet the definition of
a series as provided for under the accounting guidance. If performance
obligations meet the definition of a series, the contractual fees for all years
during the contract term are aggregated and the related revenue is recognized
proportionately as the underlying performance obligations are satisfied.
The timing of revenue recognition for each performance obligation is dependent
upon the facts and circumstances surrounding the Company's satisfaction of its
respective performance obligation. The Company allocates the transaction price
for such arrangements to each performance obligation within the arrangement
based on the estimated relative standalone selling price of the performance
obligation. The Company's process for determining its estimated standalone
selling prices involves management's judgment and considers multiple factors
including company specific and market specific factors that may vary depending
upon the unique facts and circumstances related to each performance obligation.
Key factors considered by the Company in developing an estimated standalone
selling price for its performance obligations include, but are not limited to,
prices charged for similar performance obligations, the Company's ongoing
pricing strategy and policies, and consideration of pricing of similar
performance obligations sold in other arrangements with multiple performance
obligations.
The Company may incur costs such as commissions to obtain its multi-year
sponsorship agreements. The Company assesses such costs for capitalization on a
contract by contract basis. To the extent costs are capitalized, the Company
estimates the useful life of the related contract asset which may be the
underlying contract term or the estimated customer life depending on the facts
and circumstances surrounding the contract. The contract asset is amortized over
the estimated useful life.
Impairment of Long-Lived and Indefinite-Lived Assets
The Company's long-lived and indefinite-lived assets accounted for approximately
29% of the Company's consolidated total assets as of June 30, 2021 and consisted
of the following:
Goodwill                                                          $ 226,955
Indefinite-lived intangible assets                                  112,144

Amortizable intangible assets, net of accumulated amortization 1,695 Property and equipment, net

                                          35,716
                                                                  $ 376,510


In assessing the recoverability of the Company's long-lived and indefinite-lived
assets, the Company must make estimates and assumptions regarding future cash
flows and other factors to determine the fair value of the respective assets.
These estimates and assumptions could have a significant impact on whether an
impairment charge is recognized and also the magnitude of any such charge. Fair
value estimates are made at a specific point in time, based on relevant
information. These estimates are subjective in nature and involve significant
uncertainties and judgments and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates. If these
estimates or material related assumptions change in the future, the Company may
be required to record impairment charges related to its long-lived and/or
indefinite-lived assets.
Goodwill
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 for the year ended June 30, 2021, the
Company had 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
                                       43

--------------------------------------------------------------------------------

Table of Contents

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. Subsequent to the adoption of ASU No. 2017-04 in the third quarter of
fiscal year 2020, 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. Prior to the adoption
of ASU No. 2017-04, if the carrying amount of a reporting unit exceeded its fair
value, the second step of the goodwill impairment test was performed to measure
the amount of impairment loss, if any. The second step of the goodwill
impairment test compared the implied fair value of the reporting unit's goodwill
with the carrying amount of that goodwill. If the carrying amount of the
reporting unit's goodwill exceeded the implied fair value of that goodwill, an
impairment loss was recognized in an amount equal to that excess. The implied
fair value of goodwill was determined in the same manner as the amount of
goodwill that would be recognized in a business combination.
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;
•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 most recent quantitative assessments were used in making
this determination. 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.
As a result of operating disruptions due to COVID-19, the Company's projected
cash flows were directly impacted. This disruption along with the macroeconomic
industry and market conditions, resulted in the evaluation of whether there was
a "triggering event", which required the Company to assess the carrying value of
its goodwill and intangible assets for impairment. Based on the assessment,
management determined that it was not more likely than not that an impairment
exists and there was no goodwill or intangible asset balance that was impaired
as of June 30, 2021. However, the duration and impact of the COVID-19 pandemic
may result in future impairment charges that management will evaluate as facts
and circumstances evolve through time.
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 June 30, 2021:
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
                                       44

--------------------------------------------------------------------------------

Table of Contents

(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.
Lease Accounting
The Company's leases primarily consist of the lease of the Company's corporate
offices under the Sublease Agreement with MSG Entertainment (the "Sublease
Agreement") for our principal executive offices at Two Pennsylvania Plaza in New
York and the lease of CLG Performance Center. In, addition, the Company accounts
for the rights of use of The Garden pursuant to the Arena License Agreements as
leases under the Accounting Standards Codification Topic 842, Leases. The
Company determines whether an arrangement contains a lease at the inception of
the arrangement. If a lease is determined to exist, the lease term is assessed
based on the date when the underlying asset is made available for the Company's
use by the lessor. The Company's assessment of the lease term reflects the
non-cancelable term of the lease, inclusive of any rent-free periods and/or
periods covered by early-termination options which the Company is reasonably
certain not to exercise, as well as periods covered by renewal options which the
Company is reasonably certain of exercising. The Company also determines lease
classification as either operating or finance at lease commencement, which
governs the pattern of expense recognition and the presentation reflected in the
consolidated statements of operations over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the
Company's consolidated balance sheet at lease commencement reflecting the
present value of the fixed minimum payment obligations over the lease term. A
corresponding right of use ("ROU") asset equal to the initial lease liability is
also recorded, adjusted for any prepaid rent and/or initial direct costs
incurred in connection with execution of the lease and reduced by any lease
incentives received.
The Company includes fixed payment obligations related to non-lease components
in the measurement of ROU assets and lease liabilities, as the Company has
elected to account for lease and non-lease components together as a single lease
component. ROU assets associated with finance leases are presented separate from
operating leases ROU assets and are included within Property and equipment, net
on the Company's consolidated balance sheet. For purposes of measuring the
present value of the Company's fixed payment obligations for a given lease, the
Company uses its incremental borrowing rate, determined based on information
available at lease commencement, as rates implicit in the underlying leasing
arrangements are typically not readily determinable. The Company's incremental
borrowing rate reflects the rate it would pay to borrow on a secured basis and
incorporates the term and economic environment surrounding the associated lease.
On April 17, 2020, in connection with the MSGE Distribution, we entered into a
sublease agreement with MSG Entertainment (the "Sublease Agreement") for our
principal executive offices at Two Pennsylvania Plaza in New York. The Sublease
Agreement right of use assets and liabilities are recorded on the balance sheet
at lease commencement based on the present value of minimum base rent and other
fixed payments over the reasonably certain lease term, which ends April 30,
2024.
In addition, in connection with the MSGE Distribution we entered into long term
leases with MSG Entertainment that end June 30, 2055 and allow the Knicks and
the Rangers to continue to play their home games at The Garden. The Arena
License Agreements provide for fixed payments to be made from inception through
June 30, 2055 in 12 equal installments during each year of the contractual term.
Absent COVID-19, the stated license fee for the first full contract year ending
June 30, 2021 would have been approximately $22,500 for the Knicks and
approximately $16,700 for the Rangers, and then for each subsequent year, the
license fees are 103% of the license fees for the immediately preceding contract
year.
                                       45

--------------------------------------------------------------------------------

Table of Contents

The Garden was not available for use between April 17, 2020 and the start of the
NBA and NHL 2020-21 seasons in December 2020 and January 2021, respectively, due
to the government-mandated suspension of events in response to COVID-19, and as
a result, the Company was 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 the
Rangers resumed playing their homes games at The Garden as part of their 2020-21
seasons. However, fans were initially prohibited from attending games 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 the Rangers began playing games at The Garden with
a limited number of fans in attendance on February 23 and 26, respectively. When
games were played at The Garden by the Knicks and the Rangers either without
fans in attendance or with limited fans in attendance due to government mandated
capacity constraints, the applicable license fees to MSG Entertainment under the
Arena License Agreements were substantially reduced.
Effective May 19, 2021, event venues such as The Garden were permitted to host
guests at full capacity, subject to certain restrictions, including, for
example, restrictions for unvaccinated guests. As a result, the Knicks played
three home playoff games with ticket sales of approximately 15,000-16,500 per
game during the fiscal year ended June 30, 2021.
As a result of New York City regulations effective August 17, 2021, subject to
certain exceptions, all guests 12 years of age or older and employees (other
than players who are not residents of New York City) at indoor entertainment
venues such as The Garden must show proof that they have received at least one
dose of a COVID-19 vaccine. Guests under the age of 12 must wear masks, provide
proof of a negative COVID test and are permitted to enter only when accompanied
by a vaccinated parent or guardian.
The Knicks and the Rangers are entitled to use The Garden on home game days,
which are usually nonconsecutive, for a pre-defined period of time from before
and after the game. In evaluating the Company's lease cost, the Company
considered the timing of payments throughout the lease terms and the
nonconsecutive periods of use, provided for within each license. While payments
are made throughout the contract year in twelve equal installments under each
arrangement, the periods of use only span each of the individual team event
days. As such, the Company concluded that the related straight-line operating
lease costs should be recorded by each team equally over the home game days as
each takes place. In the event a team were to qualify for the playoffs in a
given season, a prospective adjustment may be recorded to adjust for the
additional use days within that season, while the total expense for the team's
season would remain the same.
As part of Arena License Agreements, we recognized license fees which are
characterized as operating lease liabilities and a right of use assets. We
measured the lease liabilities at the present value of the future lease payments
as of April 17, 2020 and remeasured the lease liabilities during the period that
The Garden was not available for use as discussed above. We use our incremental
borrowing rates based on the remaining lease term to determine the present value
of future lease payments. Our incremental borrowing rate for a lease is the rate
of interest we would have to pay on a collateralized basis to borrow an amount
equal to the lease payments under similar terms. This rate is also used for the
Sublease Agreement.
Our incremental borrowing rate is calculated as the weighted average risk-free
rate plus a spread to reflect our current unsecured credit rating. We
subsequently measure the lease liability at the present value of the future
lease payments as of the reporting date with a corresponding adjustment to the
right-to-use asset. Absent a lease modification we will continue to utilize the
April 17, 2020 incremental borrowing rate.
Estimation of the incremental borrowing rate requires judgment by management and
reflects an assessment of credit standing to derive an implied secured credit
rating and corresponding yield curve. Changes in management's estimates of
discount rate assumptions could result in a significant overstatement or
understatement of right of use assets or lease liabilities, resulting in an
adverse impact to MSG Sports' financial position. See Note 8 to the consolidated
financial statements included in Item 8 of this Annual Report on Form 10-K for
more information on our leases.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
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.
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. See Note 13 to the consolidated financial statements included in
Item 8 of this Annual Report on Form 10-K for more information on our credit
facilities. As of June 30, 2021, we had a total of $355 million borrowings
outstanding under our credit facilities. The effect of a hypothetical 100 basis
point increase in floating interest rates prevailing as of June 30, 2021 and
continuing for a full year would increase interest expense approximately $3.6
million.
In addition, see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors Affecting Operating Results -
Impact of COVID-19 on Our Business" for discussions of disruptions caused by
COVID-19.
                                       46

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses