Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
________________________
(Mark One)
 þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 20172019
OR
 
☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to
Commission File Number: 1-36900
tmsgc10q12312019cover.jpg
(Exact name of registrant as specified in its charter)
Delaware 47-3373056
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
_______________________ 
Two Penn Plaza
New York, NY
Two Penn PlazaNew York,NY10121
(Address of principal executive offices)(Zip Code)
(212) 465-6000
(Address, including zip code, andRegistrant’s telephone number, including area code,code:(212) 465-6000
Securities registered pursuant to Section 12(b) of registrant's principal executive offices)the Act:
_______________________
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common StockMSGNew York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþ☑ Accelerated filero☐
Non-accelerated filero☐(Do not check if a smaller reporting company)Smaller reporting companyo☐
   Emerging growth companyo☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ☑ No
Number of shares of common stock outstanding as of January 31, 2018:
2020:
Class A Common Stock par value $0.01 per share —19,025,43919,459,798

Class B Common Stock par value $0.01 per share —4,529,517





Table of Contents






THE MADISON SQUARE GARDEN COMPANY
INDEX TO FORM 10-Q
 
 Page
PART I. FINANCIAL INFORMATION
 
  
Item 1. Financial Statements
 
  
Consolidated Balance Sheets as of December 31, 20172019 (unaudited) and June 30, 20172019
1
  
Consolidated Statements of Operations for the three and six months ended December 31, 20172019 and 20162018 (unaudited)
23
  
Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended December 31, 20172019 and 20162018 (unaudited)
34
  
Consolidated Statements of Cash Flows for the six months ended December 31, 20172019 and 20162018 (unaudited)
4
Consolidated Statements of Equity and Redeemable Noncontrolling Interests for the six months ended December 31, 2017 and 2016 (unaudited)
5
  
Notes to Consolidated Financial Statements of Equity and Redeemable Noncontrolling Interests for the three and six months ended December 31, 2019 and 2018 (unaudited)
7
  
Notes to Consolidated Financial Statements (unaudited)
11
Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
3242
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
5660
  
Item 4. Controls and Procedures
5660
  
PART II. OTHER INFORMATION
 
  
Item 1. Legal Proceedings
5761
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
5861
  
Item 6. Exhibits
5962






Table of Contents


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
  December 31,
2017		 June 30,
2017
  (Unaudited)  
ASSETS    
Current Assets:    
Cash and cash equivalents $1,125,647
 $1,238,114
Restricted cash 23,332
 34,000
Accounts receivable, net 119,158
 102,085
Net related party receivables 1,524
 2,714
Prepaid expenses 44,132
 23,358
Other current assets 41,475
 49,458
Total current assets 1,355,268
 1,449,729
Investments and loans to nonconsolidated affiliates 247,586
 242,287
Property and equipment, net 1,235,133
 1,159,271
Amortizable intangible assets, net 256,892
 256,975
Indefinite-lived intangible assets 174,850
 166,850
Goodwill 392,621
 380,087
Other assets 51,921
 57,554
Total assets $3,714,271
 $3,712,753
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY    
Current Liabilities:    
Accounts payable $38,416
 $24,084
Net related party payables 21,197
 17,576
Current portion of long-term debt, net of deferred financing costs 436
 —
Accrued liabilities:    
Employee related costs 69,651
 138,858
Other accrued liabilities 184,131
 191,344
Deferred revenue 390,056
 390,180
Total current liabilities 703,887
 762,042
Long-term debt, net of deferred financing costs 105,464
 105,433
Defined benefit and other postretirement obligations 44,919
 52,997
Other employee related costs 27,894
 29,399
Deferred tax liabilities, net 80,324
 196,436
Other liabilities 72,287
 65,955
Total liabilities 1,034,775
 1,212,262
Commitments and contingencies (see Note 9) 
 
Redeemable noncontrolling interests 77,819
 80,630
The Madison Square Garden Company Stockholders’ Equity:    
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,025 and 19,014 shares outstanding as of December 31, 2017 and June 30, 2017, respectively 204
 204
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of December 31, 2017 and June 30, 2017 45
 45
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2017 and June 30, 2017 —
 —
Additional paid-in capital 2,838,120
 2,832,516
Treasury stock, at cost, 1,422 and 1,433 shares as of December 31, 2017 and June 30, 2017, respectively (242,495) (242,077)
Retained earnings (accumulated deficit) 27,693
 (148,410)
Accumulated other comprehensive loss (39,449) (34,115)
Total The Madison Square Garden Company stockholders’ equity 2,584,118
 2,408,163
Nonredeemable noncontrolling interests 17,559
 11,698
Total equity 2,601,677
 2,419,861
Total liabilities, redeemable noncontrolling interests and equity $3,714,271
 $3,712,753
  December 31,
2019		 June 30,
2019
  (Unaudited)  
ASSETS    
Current Assets:    
Cash and cash equivalents $1,000,103
 $1,086,372
Restricted cash 43,001
 31,529
Short-term investments 113,020
 108,416
Accounts receivable, net 130,890
 96,856
Net related party receivables 1,750
 1,483
Prepaid expenses 65,350
 45,150
Other current assets 51,055
 43,303
Total current assets 1,405,169
 1,413,109
Investments and loans to nonconsolidated affiliates 63,241
 84,560
Property and equipment, net of accumulated depreciation and amortization of $815,032 and $766,065 as of December 31, 2019 and June 30, 2019, respectively 1,576,117
 1,380,392
Right-of-use lease assets 241,833
 —
Amortizable intangible assets, net 167,601
 220,706
Indefinite-lived intangible assets 176,485
 176,485
Goodwill 392,513
 392,513
Other assets 58,596
 95,786
Total assets $4,081,555
 $3,763,551
     
     
See accompanying notes to consolidated financial statements.


Table of Contents

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except per share data)

  December 31,
2019		 June 30,
2019
  (Unaudited)  
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY  
Current Liabilities:    
Accounts payable $41,602
 $25,009
Net related party payables, current 28,738
 19,048
Current portion of long-term debt, net of deferred financing costs 4,792
 6,042
Accrued liabilities:    
Employee related costs 115,184
 137,660
Other accrued liabilities 259,430
 211,403
Operating lease liabilities, current 51,206
 —
Collections due to promoters 60,815
 67,212
Deferred revenue 308,238
 293,410
Total current liabilities 870,005
 759,784
Related party payables, noncurrent —
 172
Long-term debt, net of deferred financing costs 31,160
 48,556
Operating lease liabilities, noncurrent 189,978
 —
Defined benefit and other postretirement obligations 33,255
 41,318
Other employee related costs 72,670
 62,015
Deferred tax liabilities, net 79,780
 79,098
Other liabilities 59,807
 66,221
Total liabilities 1,336,655
 1,057,164
Commitments and contingencies (see Note 10) 

 

Redeemable noncontrolling interests 66,223
 67,627
The Madison Square Garden Company Stockholders’ Equity:    
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,357 and 19,229 shares outstanding as of December 31, 2019 and June 30, 2019, respectively 204
 204
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of December 31, 2019 and June 30, 2019 45
 45
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2019 and June 30, 2019 —
 —
Additional paid-in capital 2,833,867
 2,845,961
Treasury stock, at cost, 1,090 and 1,219 shares as of December 31, 2019 and June 30, 2019, respectively (185,893) (207,790)
Retained earnings 43,163
 29,003
Accumulated other comprehensive loss (33,070) (46,923)
Total The Madison Square Garden Company stockholders’ equity 2,658,316
 2,620,500
Nonredeemable noncontrolling interests 20,361
 18,260
Total equity 2,678,677
 2,638,760
Total liabilities, redeemable noncontrolling interests and equity $4,081,555
 $3,763,551

See accompanying notes to consolidated financial statements.


Table of Contents


THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
 Three Months Ended Six Months Ended Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2017 2016 2017 2016 2019 2018 2019 2018
Revenues (a)
 $536,302
 $445,150
 $781,517
 $626,845
 $628,805
 $632,187
 $843,587
 $850,322
                
Operating expenses:                
Direct operating expenses (b)
 311,881
 266,673
 435,617
 378,080
 371,338
 386,809
 503,802
 510,718
Selling, general and administrative expenses (c)
 121,440
 94,260
 227,878
 171,281
 148,414
 136,935
 291,059
 252,256
Depreciation and amortization 30,544
 25,966
 61,090
 52,076
 28,211
 30,166
 57,202
 59,856
Operating income 72,437
 58,251
 56,932
 25,408
Operating income (loss) 80,842
 78,277
 (8,476) 27,492
Other income (expense):                
Earnings (loss) in equity method investments (2,608) (1,188) 2,117
 (2,182) (1,170) 9,487
 (2,643) 20,012
Interest income (d)
 5,378
 2,692
 9,764
 5,091
 6,269
 6,899
 13,585
 14,073
Interest expense (3,798) (491) (7,509) (901) (1,715) (5,176) (3,556) (9,209)
Miscellaneous income (expense) (250) 1,405
 (250) 1,405
Miscellaneous income (expense), net 9,299
 (12,863) 14,377
 (9,096)
 (1,278) 2,418
 4,122
 3,413
 12,683
 (1,653) 21,763
 15,780
Income from operations before income taxes 71,159
 60,669
 61,054
 28,821
 93,525
 76,624
 13,287
 43,272
Income tax benefit (expense) 116,832
 (3,248) 116,070
 (314)
Income tax expense (1,176) (656) (1,604) (1,352)
Net income 187,991
 57,421
 177,124
 28,507
 92,349
 75,968
 11,683
 41,920
Less: Net income (loss) attributable to redeemable noncontrolling interests (767) —
 133
 —
Less: Net loss attributable to redeemable noncontrolling interests (1,241) (3,142) (1,404) (3,655)
Less: Net loss attributable to nonredeemable noncontrolling interests (855) (305) (1,515) (593) (551) (2,489) (1,073) (3,812)
Net income attributable to The Madison Square Garden Company’s stockholders $189,613
 $57,726
 $178,506
 $29,100
 $94,141
 $81,599
 $14,160
 $49,387
                
Basic earnings per common share attributable to The Madison Square Garden Company’s stockholders $8.03
 $2.41
 $7.57
 $1.21
 $3.94
 $3.43
 $0.59
 $2.08
Diluted earnings per common share attributable to The Madison Square Garden Company’s stockholders $7.96
 $2.39
 $7.48
 $1.20
 $3.93
 $3.42
 $0.59
 $2.07
Weighted-average number of common shares outstanding:                
Basic 23,621
 23,971
 23,594
 24,013
 23,913
 23,777
 23,870
 23,742
Diluted 23,813
 24,143
 23,861
 24,192
 23,979
 23,840
 23,977
 23,860
_________________
(a) 
IncludeIncludes revenues from related parties of $41,131$67,500 and $39,040 $65,012 for the three months ended December 31, 20172019 and 2016,2018, respectively, and $77,041$74,564 and $72,881$71,746 for the six months ended December 31, 20172019 and 2016,2018, respectively.
(b) 
IncludeIncludes net charges from related parties of $425$169 and $475 $325 for the three months ended December 31, 20172019 and 2016,2018, respectively, and $571$390 and $689$489 for the six months ended December 31, 20172019 and 2016,2018, respectively.
(c) 
IncludeIncludes net charges to related parties of $(1,186)$(2,773) and $(1,616) $(1,772) for the three months ended December 31, 20172019 and 2016,2018, respectively, and $(2,624)$(5,464) and $(3,204)$(3,441) for the six months ended December 31, 20172019 and 2016,2018, respectively.
(d) 
Includes interest income from nonconsolidated affiliates of $2,154$1,181 and $1,114 $2,334 for the three months ended December 31, 2017 and 2016, respectively, and $3,317 and $1,979 for the six months ended December 31, 2017 and 2016,2018, respectively.


See accompanying notes to consolidated financial statements.


Table of Contents


THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
 Three Months Ended Six Months Ended Three Months Ended Six Months Ended
 December 31, December 31, December 31, December 31,
 2017 2016 2017 2016 2019 2018 2019 2018
Net income   $187,991
   $57,421
   $177,124
   $28,507
   $92,349
   $75,968
   $11,683
   $41,920
Other comprehensive income (loss), before income taxes:                                
Pension plans and postretirement plan:                                
Amounts reclassified from accumulated other comprehensive loss:                                
Amortization of actuarial loss included in net periodic benefit cost $280
   $344
   $620
 
 $688
 
 $346
   $328
   $685
 
 $656
 
Amortization of prior service credit included in net periodic benefit cost (6) 274
 (13) 331
 (18) 602
 (25) 663
 —
 346
 (2) 326
 —
 685
 (3) 653
Cumulative translation adjustments   2,277
   —
   2,277
   —
   23,186
   (2,251)   13,168
   (3,202)
Net changes related to available-for-sale securities   (7,443)   3,433
   (8,213)   10,175
Other comprehensive income (loss), before income taxes   (4,892)   3,764
 
 (5,334)   10,838
Reversal of income tax expense related to items of other comprehensive income   —
   3,126
   —
   —
Other comprehensive income (loss), net of income taxes   (4,892)   6,890
   (5,334)   10,838
Other comprehensive income (loss)   23,532
   (1,925)   13,853
   (2,549)
Comprehensive income   183,099
   64,311
 
 171,790
   39,345
   115,881
   74,043
 
 25,536
   39,371
Less: Comprehensive income (loss) attributable to redeemable noncontrolling interests   (767)   —
   133
   —
Less: Comprehensive loss attributable to redeemable noncontrolling interests   (1,241)   (3,142)   (1,404)   (3,655)
Less: Comprehensive loss attributable to nonredeemable noncontrolling interests   (855)   (305)   (1,515)   (593)   (551)   (2,489)   (1,073)   (3,812)
Comprehensive income attributable to The Madison Square Garden Company’s stockholders   $184,721
   $64,616
   $173,172
   $39,938
   $117,673
   $79,674
   $28,013
   $46,838


See accompanying notes to consolidated financial statements.



Table of Contents


THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
  Six Months Ended
  December 31,
  2017 2016
Cash flows from operating activities:    
Net income $177,124
 $28,507
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 61,090
 52,076
Provision for (benefit from) deferred income taxes (116,112) 314
Share-based compensation expense 26,816
 20,098
Loss (earnings) in equity method investments (2,117) 2,182
Purchase accounting adjustments associated with rent-related intangibles and deferred rent 2,280
 —
Other non-cash expense 1,133
 90
Change in assets and liabilities, net of acquisitions:    
Accounts receivable, net (16,896) (14,792)
Net related party receivables 1,190
 2,397
Prepaid expenses and other assets (2,637) (1,602)
Accounts payable 14,544
 12,549
Net related party payables 3,621
 996
Accrued and other liabilities (85,407) (31,930)
Deferred revenue (1,362) 39,047
Net cash provided by operating activities 63,267
 109,932
Cash flows from investing activities:    
Capital expenditures, net of acquisitions (127,684) (21,766)
Payments for acquisition of assets (6,000) (1,000)
Payments to acquire available-for-sale securities —
 (23,222)
Payments for acquisition of businesses, net of cash acquired (8,288) (13,468)
Investments and loans to nonconsolidated affiliates (3,000) (3,235)
Loan payments received 2,600
 —
Cash paid for notes receivable (1,500) —
Net cash used in investing activities (143,872) (62,691)
Cash flows from financing activities:    
Repurchases of common stock (11,830) (72,277)
Proceeds from stock option exercises —
 7
Taxes paid in lieu of shares issued for equity-based compensation (12,232) (7,034)
Distributions to noncontrolling interest holders (3,750) —
Payment of contingent consideration (4,000) —
Payments for financing costs (62) (1,909)
Net cash used in financing activities (31,874) (81,213)
Effect of exchange rates on cash and cash equivalents 12
 —
Net decrease in cash and cash equivalents (112,467) (33,972)
Cash and cash equivalents at beginning of period 1,238,114
 1,444,317
Cash and cash equivalents at end of period $1,125,647
 $1,410,345
Non-cash investing and financing activities:    
Investments and loans to nonconsolidated affiliates $14
 $322
Capital expenditures incurred but not yet paid 5,764
 2,961
Accrued earn-out liability and other contingencies 4,504
 —
Acquisition of assets not yet paid 3,000
 —
  Six Months Ended
  December 31,

 2019 2018
Cash flows from operating activities:    
Net income $11,683
 $41,920
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 57,202
 59,856
Provision for deferred income taxes 682
 1,074
Share-based compensation expense 33,585
 30,404
Loss (earnings) in equity method investments, net of income distributions 2,643
 (20,012)
Purchase accounting adjustments associated with leases 3,389
 2,167
Unrealized (gain) loss on equity investment with readily determinable fair value (14,725) 7,667
Other non-cash adjustments 2,227
 494
Change in assets and liabilities:    
Accounts receivable, net (34,188) (56,781)
Net related party receivables (267) (1,827)
Prepaid expenses and other assets (40,748) (33,844)
Accounts payable 16,593
 5,361
Net related party payables 9,518
 8,113
Accrued and other liabilities 58,400
 10,045
Collections due to promoters (6,397) (29,444)
Deferred revenue 12,184
 3,326
Operating lease right-of-use assets and lease liabilities (609) —
Net cash provided by operating activities $111,172
 $28,519
Cash flows from investing activities:    
Capital expenditures $(221,335) $(81,053)
Proceeds from insurance recoveries 476
 —
Payments for acquisition of assets (1,000) —
Purchase of short-term investments (106,063) —
Proceeds from maturity of short-term investment 106,587
 —
Investments and loans to nonconsolidated affiliates (63) (52,064)
Proceeds from sale of nonconsolidated affiliate 18,000
 125,000
Loan repayment received from subordinated note 58,735
 —
Cash received (paid) for notes receivable 750
 (7,761)
Net cash used in investing activities $(143,913) $(15,878)
     
     
See accompanying notes to consolidated financial statements.


Table of Contents

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)

  Six Months Ended
  December 31,

 2019 2018
Cash flows from financing activities:    
Taxes paid in lieu of shares issued for equity-based compensation $(26,264) $(19,525)
Noncontrolling interest holders capital contribution 2,000
 5,026
Distributions to noncontrolling interest holders (535) (259)
Loans from noncontrolling interest holders —
 606
Repayment of revolving credit facility (15,000) —
Principal repayment on long-term debt (3,750) (3,929)
Payment of contingent consideration (200) —
Net cash used in financing activities $(43,749) $(18,081)
Effect of exchange rates on cash, cash equivalents and restricted cash 1,693
 398
Net decrease in cash, cash equivalents and restricted cash (74,797) (5,042)
Cash, cash equivalents and restricted cash at beginning of period 1,117,901
 1,256,620
Cash, cash equivalents and restricted cash at end of period $1,043,104
 $1,251,578
Non-cash investing and financing activities:    
Capital expenditures incurred but not yet paid $47,478
 $6,788
Tenant improvement paid by landlord
 $195
 $11,114
Share-based compensation capitalized in property and equipment $2,482
 $—

See accompanying notes to consolidated financial statements.



Table of Contents


THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
 
Common
Stock
Issued
 
Additional
Paid-In
Capital
 
Treasury
Stock
 Retained Earnings (Accumulated Deficit) 
Accumulated
Other
Comprehensive
Loss
 
Total The Madison Square Garden Company Stockholders’ Equity
 
Non -
redeemable
Noncontrolling
Interests
 Total Equity 
Redeemable
Noncontrolling
 Interests
                  
Balance as of June 30, 2017 $249
 $2,832,516
 $(242,077) $(148,410) $(34,115) $2,408,163
 $11,698
 $2,419,861
 $80,630
Change in accounting policy related to share-based forfeiture rates —
 2,403
 —
 (2,403) —
 —
 —
 —
 —
 Three Months Ended December 31, 2019
 
Common
Stock
Issued
 
Additional
Paid-In
Capital
 
Treasury
Stock
 Retained Earnings (Accumulated Deficit) 
Accumulated
Other
Comprehensive
Loss
 
Total The Madison Square Garden Company Stockholders’ Equity
 
Non -
redeemable
Noncontrolling
Interests
 Total Equity 
Redeemable
Noncontrolling
 Interests
Balance as of September 30, 2019 $249
 $2,819,449
 $(186,583) $(50,978) $(56,602) $2,525,535
 $19,447
 $2,544,982
 $67,464
Net income (loss) —
 —
 —
 178,506
 —
 178,506
 (1,515) 176,991
 133
 —
 —
 —
 94,141
 —
 94,141
 (551) 93,590
 (1,241)
Other comprehensive loss —
 —
 —
 —
 (5,334) (5,334) —
 (5,334) —
Other comprehensive income —
 —
 —
 —
 23,532
 23,532
 —
 23,532
 —
Comprehensive income (loss)           173,172
 (1,515) 171,657
 133
 —
 —
 —
 —
 —
 117,673
 (551) 117,122
 (1,241)
Share-based compensation —
 26,845
 —
 —
 —
 26,845
 —
 26,845
 —
 —
 17,926
 —
 —
 —
 17,926
 —
 17,926
 —
Tax withholding associated with shares issued for equity-based compensation —
 (12,232) —
 —
 —
 (12,232) —
 (12,232) —
 —
 (2,818) —
 —
 —
 (2,818) —
 (2,818) —
Common stock issued under stock incentive plans —
 (11,412) 11,412
 —
 —
 —
 —
 —
 —
 —
 (690) 690
 —
 —
 —
 —
 —
 —
Repurchases of common stock —
 —
 (11,830) —
 —
 (11,830) —
 (11,830) —
Contributions from noncontrolling interest holders —
 —
 —
 —
 —
 —
 2,000
 2,000
 —
Distributions to noncontrolling interest holders —
 —
 —
 —
 —
 —
 (806) (806) (2,944) —
 —
 —
 —
 —
 —
 (535) (535) —
Noncontrolling interests from acquisition —
 —
 —
 —
 —
 —
 8,182
 8,182
 —
Balance as of December 31, 2017 $249
 $2,838,120
 $(242,495) $27,693
 $(39,449) $2,584,118
 $17,559
 $2,601,677
 $77,819
Balance as of December 31, 2019 $249
 $2,833,867
 $(185,893) $43,163
 $(33,070) $2,658,316
 $20,361
 $2,678,677
 $66,223
                  
See accompanying notes to consolidated financial statements.See accompanying notes to consolidated financial statements.


See accompanying notes to consolidated financial statements.




Table of Contents


THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
  Common Stock Issued Additional
Paid-In
Capital		 Treasury
Stock		 Accumulated Deficit 
Accumulated
Other
Comprehensive
Loss
 
Total The Madison Square Garden Company Stockholders’ Equity
 Non -
redeemable
Noncontrolling
Interests		 Total Equity
Balance as of June 30, 2016 $249
 $2,806,352
 $(101,882) $(75,687) $(42,611) $2,586,421
 $—
 $2,586,421
Net income (loss) —
 —
 —
 29,100
 —
 29,100
 (593) 28,507
Other comprehensive income —
 —
 —
 —
 10,838
 10,838
 —
 10,838
Comprehensive income (loss)           39,938
 (593) 39,345
Exercise of stock options —
 (39) 46
 —
 —
 7
 —
 7
Share-based compensation —
 20,175
 —
 —
 —
 20,175
 —
 20,175
Tax withholding associated with shares issued for equity-based compensation —
 (5,702) (1,332) —
 —
 (7,034) —
 (7,034)
Common stock issued under stock incentive plans —
 (8,630) 8,630
 —
 —
 —
 —
 —
Repurchases of common stock —
 —
 (72,277) —
 —
 (72,277) —
 (72,277)
Noncontrolling interests from acquisition —
 —
 —
 —
 —
 —
 11,394
 11,394
Balance as of December 31, 2016 $249
 $2,812,156
 $(166,815) $(46,587) $(31,773) $2,567,230
 $10,801
 $2,578,031
                   
  Three Months Ended December 31, 2018
  Common Stock Issued Additional
Paid-In
Capital		 Treasury
Stock		 Retained Earnings (Accumulated Deficit) 
Accumulated
Other
Comprehensive Loss
 
Total The Madison Square Garden Company Stockholders’ Equity
 
Non -
redeemable
Noncontrolling
Interests
 Total Equity Redeemable
Noncontrolling
Interests
Balance as of September 30, 2018 $249
 $2,795,544
 $(208,975) $(14,636) $(41,972) $2,530,210
 $19,546
 $2,549,756
 $75,912
Net income (loss) —
 —
 —
 81,599
 —
 81,599
 (2,489) 79,110
 (3,142)
Other comprehensive loss —
 —
 —
 —
 (1,925) (1,925) —
 (1,925) —
Comprehensive income (loss) —
 —
 —
 —
 —
 79,674
 (2,489) 77,185
 (3,142)
Share-based compensation —
 20,215
 —
 —
 —
 20,215
 —
 20,215
 —
Tax withholding associated with shares issued for equity-based compensation —
 (1,694) —
 —
 —
 (1,694) —
 (1,694) —
Common stock issued under stock incentive plans —
 (1,185) 1,185
 —
 —
 —
 —
 —
 —
Contribution from noncontrolling interest holders —
 —
 —
 —
 —
 —
 1,927
 1,927
 —
Balance as of December 31, 2018 $249
 $2,812,880
 $(207,790) $66,963
 $(43,897) $2,628,405
 $18,984
 $2,647,389
 $72,770
                   
See accompanying notes to consolidated financial statements.


See accompanying notes to consolidated financial statements.


Table of Contents


THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
                   
  Six Months Ended December 31, 2019
  
Common
Stock
Issued
 
Additional
Paid-In
Capital
 
Treasury
Stock
 Retained Earnings 
Accumulated
Other
Comprehensive
Loss
 
Total The Madison Square Garden Company Stockholders’ Equity
 
Non -
redeemable
Noncontrolling
Interests
 Total Equity 
Redeemable
Noncontrolling
 Interests
Balance as of June 30, 2019 $249
 $2,845,961
 $(207,790) $29,003
 $(46,923) $2,620,500
 $18,260
 $2,638,760
 $67,627
Net income (loss) —
 —
 —
 14,160
 —
 14,160
 (1,073) 13,087
 (1,404)
Other comprehensive income —
 —
 —
 —
 13,853
 13,853
 —
 13,853
 —
Comprehensive income (loss) —
 —
 —
 —
 —
 28,013
 (1,073) 26,940
 (1,404)
Share-based compensation —
 36,067
 —
 —
 —
 36,067
 —
 36,067
 —
Tax withholding associated with shares issued for equity-based compensation —
 (26,264) —
 —
 —
 (26,264) —
 (26,264) —
Common stock issued under stock incentive plans —
 (21,897) 21,897
 —
 —
 —
 —
 —
 —
Contribution from noncontrolling interest holders —
 —
 —
 —
 —
 —
 3,709
 3,709
 —
Distributions to noncontrolling interest holders —
 —
 —
 —
 —
 —
 (535) (535) —
Balance as of December 31, 2019 $249
 $2,833,867
 $(185,893) $43,163
 $(33,070) $2,658,316
 $20,361
 $2,678,677
 $66,223
                   
See accompanying notes to consolidated financial statements.

Table of Contents

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
                   
  Six Months Ended December 31, 2018
  Common Stock Issued Additional
Paid-In
Capital		 Treasury
Stock		 Retained Earnings (Accumulated Deficit) 
Accumulated
Other
Comprehensive Loss
 
Total The Madison Square Garden Company Stockholders’ Equity
 
Non -
redeemable
Noncontrolling
Interests
 Total Equity Redeemable
Noncontrolling
Interests
Balance as of June 30, 2018 $249
 $2,817,873
 $(223,662) $(11,059) $(46,918) $2,536,483
 $17,552
 $2,554,035
 $76,684
Adoption of ASU No. 2016-01 —
 —
 —
 (5,570) 5,570
 —
 —
 —
 —
Adoption of ASC Topic 606 —
 —
 —
 34,205
 —
 34,205
 —
 34,205
 —
Net income (loss) —
 —
 —
 49,387
 —
 49,387
 (3,812) 45,575
 (3,655)
Other comprehensive loss —
 —
 —
 —
 (2,549) (2,549) —
 (2,549) —
Comprehensive income (loss) —
 —
 —
 —
 —
 46,838
 (3,812) 43,026
 (3,655)
Share-based compensation —
 30,404
 —
 —
 —
 30,404
 —
 30,404
 —
Tax withholding associated with shares issued for equity-based compensation —
 (19,525) —
 —
 —
 (19,525) —
 (19,525) —
Common stock issued under stock incentive plans —
 (15,872) 15,872
 —
 —
 —
 —
 —
 —
Contribution from noncontrolling interest holders —
 —
 —
 —
 —
 —
 5,244
 5,244
  
Distributions to noncontrolling interest holders —
 —
 —
 —
 —
 —
 —
 —
 (259)
Balance as of December 31, 2018 $249
 $2,812,880
 $(207,790) $66,963
 $(43,897) $2,628,405
 $18,984
 $2,647,389
 $72,770
                   
See accompanying notes to consolidated financial statements.


Table of Contents

THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All amounts included in the following Notes to Consolidated Financial Statements are presented in thousands, except per share data or as otherwise noted.
Note 1. Description of Business and Basis of Presentation
Description of Business
The Madison Square Garden Company (together with its subsidiaries, the “Company” or “Madison Square Garden”) is a live sports and entertainment business. The Company classifies its business interests into two2 reportable segments: MSG Entertainment and MSG Sports. MSG Entertainment includes live entertainment events, including concerts and other live events, such as concerts, family shows, performing arts and special events, which are presented or hosted in the Company’s diverse collection of venues along with live offerings through TAO Group Holdings LLC (“TAO Group”Tao Group Hospitality”) and Boston Calling Events LLC (“BCE”). TAOTao Group Hospitality is a hospitality group with globally-recognizedglobally recognized entertainment, dining and nightlife brands: TAO,brands including Tao, Marquee, Lavo, Avenue, The Stanton Social, Beauty & Essex and Vandal.Cathédrale. BCE producesowns and operates New England’s premier Boston Calling Music Festival. MSG Entertainment also includes the Company’s original productionsproduction — the Christmas Spectacular Starring the Radio City Rockettes (the “Christmas Spectacular”) and the New York Spectacular Starring the Radio City Rockettes (the “New York Spectacular”).
MSG Sports includes the Company’s professional sports franchises: the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”), the New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”), the New York Liberty (the “Liberty”) of the Women’s National Basketball Association (the “WNBA”), the Hartford Wolf Pack of the American Hockey League (the “AHL”) and the Westchester Knicks of the NBA GatoradeG League (the “NBAGL”). TheThese professional sports franchises are collectively referred to herein as the “sports teams.” For the three and six months ended December 31, 2018, MSG Sports segmentalso included the New York Liberty (the “Liberty”) of the Women’s National Basketball Association (the “WNBA”), which was sold in January 2019. MSG Sports also includes other live sporting events, including professional boxing, college basketball, college hockey, professional bull riding, mixed martial arts, esports tennis and college wrestling, all of which the Company promotes, produces and/or presents. In July 2017, the Company acquired a controlling interest inaddition, MSG Sports includes Counter Logic Gaming (“CLG”), a premier North American esports organization, which is now part of the MSG Sports segment.Company acquired in July 2017, and Knicks Gaming, the Company’s franchise that competes in the NBA 2K League. CLG and Knicks Gaming are collectively referred to herein as the “esports teams,” and together with the sports teams, the “teams.”
The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns the Madison Square Garden Arena (“The Garden”) and TheHulu Theater at Madison Square Garden in New York City, the Forum in Inglewood, CA and The Chicago Theatre in Chicago. In addition, the Company leases Radio City Music Hall and the Beacon Theatre in New York City, and has a booking agreement with respect to the Wang Theatre in Boston.City. Additionally, TAOTao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in New York, Las Vegas, Los Angeles, Chicago, Australia and Singapore.
The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc. (“MSG Networks”), formerly known as The Madison Square Garden Company. On September 11,30, 2015, MSG Networks’ boardNetworks distributed all of directors approved the distribution of all the outstanding common stock of Madison Square Garden to MSG Networks’ stockholders (the “Distribution”stockholders.
Potential Spin-off Transaction
On June 27, 2018, the Company announced that its board of directors (“Board”) had authorized the Company’s management to explore a possible spin-off that would create a separately-traded public company comprised of its sports business, including the New York Knicks and New York Rangers professional sports franchises (“Sports Spinco”). On October 4, 2018, in connection with the distribution of Sports Spinco, a subsidiary of the Company submitted an initial Registration Statement on Form 10 with the U.S. Securities and Exchange Commission (“SEC”) (which has been amended). Upon completion of the contemplated separation, record holders of the Company’s common stock would have received a pro-rata distribution, expected to be equivalent, in the aggregate, to an approximately two-thirds economic interest in Sports Spinco. The remaining common stock, equivalent to an approximately one-third economic interest in Sports Spinco, was to be retained by the Company and used primarily to fund a portion of construction costs of MSG Spheres in Las Vegas and London. In October 2019, the Board reassessed the desirability of the retained interest based on the evolving timeline of the MSG Sphere in London (and related capital needs), the Company’s access to liquidity and greater tax efficiencies. Based on those considerations, on November 7, 2019, the Board authorized the Company’s management to proceed with pursuing the separation of the Company’s entertainment business (including sports bookings) from its sports businesses, but to do so without creating a retained interest.


Table of Contents
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


On November 21, 2019, the newly formed registrant, MSG Entertainment Spinco, Inc. (together with its subsidiaries, “Entertainment Spinco”), which occurred on September 30, 2015. See Note 1was incorporated in the State of Delaware. The Company refers to the consolidated and combined financial statements includedpotential spin-off as the “Entertainment Distribution.” References to “Entertainment Spinco” include the subsidiaries of the Company that will be subsidiaries of Entertainment Spinco at the time of the Entertainment Distribution. On December 2, 2019, in connection with the Entertainment Distribution, Entertainment Spinco, a subsidiary of the Company, confidentially submitted an initial draft Registration Statement on Form 10 with the SEC (which has been amended). The expectation is that the separation will take the form of a tax-free pro-rata distribution of 100% of the stock of Entertainment Spinco, a new entity that will own the Company’s entertainment business (including sports bookings), with the Company’s stockholders continuing to own 100% of the Company, whose assets will consist of the Company’s sports businesses. There can be no assurance that the proposed transaction will be completed in the Company’s Annual Report on Form 10-K formanner described above, or at all. Completion of the year ended June 30, 2017 for more information regardingtransaction is subject to various conditions, including final Board approval, approvals from the NBA and NHL, receipt of a tax opinion from counsel and the effectiveness of the registration statement with the SEC. The Company will maintain the current operating structure and will continue to report the financial results of its entertainment business (including sports bookings) in continuing operations until the Entertainment Distribution to its common stockholders.is completed.
Basis of Presentation
The accompanying unaudited consolidated interim financial statements (referred to as the “Financial Statements” herein) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”)SEC for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2017.2019 (“fiscal year 2019”). The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. The dependence of MSG Entertainment on revenues from theChristmas Spectacular generally means it earns a disproportionate share of its revenues in the second quarter of the Company’s fiscal year. The dependence of MSG Sports segment on revenues from its NBA and NHL sports teams generally means it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year. The dependence of the MSG Entertainment segment on revenues from the Christmas Spectacular generally means it earns a disproportionate share of its revenues in the second quarter of the Company’s fiscal year.


Table of Contents
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 2. Accounting Policies
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of The Madison Square Garden Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In addition, the consolidated financial statements of the Company include the accounts from TAOTao Group Hospitality, BCE and CLG, in which the Company has controlling voting interests. The Company’s consolidation criteria are based on authoritative accounting guidance for voting interest, controlling interest or variable interest entities. TAOTao Group Hospitality, BCE and CLG are consolidated with the equity owned by other shareholders shown as redeemable or nonredeemable noncontrolling interests in the accompanying consolidated balance sheets, and the other shareholders’ portion of net earnings (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to redeemable or nonredeemable noncontrolling interests in the accompanying consolidated statements of operations and consolidated statements of comprehensive income (loss), respectively. See Note 2 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 20172019 for more information regarding the classification of redeemable noncontrolling interests of TAO Group. In addition, TAO Group’sTao Group Hospitality.
Tao Group Hospitality’s results are reported on a three-month lag basis and TAOTao Group Hospitality reports on a fiscal year reflecting the retail-basedretail calendar that ends on the last Sunday of the calendar year (containing 4-4-5 week calendar quarters). Accordingly, the Company’s results for the three months ended December 31, 2019 and 2018 include Tao Group Hospitality’s operating results from July��1, 2019 to September 29, 2019 and from July 2, 2018 to September 30, 2018, respectively, and the Company’s results for the six months ended December 31, 2019 and 2018 include Tao Group Hospitality’s operating results from April 1, 2019 to September 29, 2019 and April 2, 2018 to September 30, 2018, respectively. With the exception of the balances and activities pertaining to the Tao Group Hospitality’s credit agreements entered into in May 2019, which are recorded as of December 31, 2019 and June 30, 2019 and for the three and six months ended December 31, 2017 include TAO Group’s operating results from June 26, 20172019, as well as cash distributions, all other disclosures related to Tao Group Hospitality’s financial position are therefore reported as of September 24, 201729, 2019 and March 27, 2017 to September 24, 2017, respectively.31, 2019, as applicable. See Note 12 for Tao Group Hospitality’s credit agreements entered in May 2019.


Table of Contents
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Use of Estimates
The preparation of the accompanying Financial Statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, investments, goodwill, intangible assets, other long-lived assets, tax accruals and other liabilities. In addition, estimates are used in revenue recognition, revenue sharing expense (net of escrow), luxury tax, expense, income tax, expense, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of contingent consideration and noncontrolling interests resulting from business combination transactions. Management believes its use of estimates in the Financial Statements areto be reasonable.
Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.
Summary of Significant Accounting Policies
The following is an update to the Company’s Summary of Significant Accounting Policies disclosed in its Annual Report on Form 10-K for the year ended June 30, 2017:
Revenue Recognition
Deferred revenue reported in the accompanying consolidated balance sheets as of December 31, 2017 and June 30, 2017 includes amounts due to the third-party promoters of $50,414 and $72,400, respectively.
Foreign Currency Translation
The consolidated financial statements are presented in U.S. Dollars. Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. Dollars at exchange rates in effect at the balance sheet date. Operating results of non-U.S. subsidiaries are translated at weighted-average exchange rates during the year which approximate the rates in effect at the transaction dates. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive income (loss) as changes in cumulative translation adjustments in the accompanying consolidated balance sheet.


Table of Contents
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In MarchFebruary 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. ASU No. 2016-07 eliminates the requirement for an investor to retrospectively apply the equity method when an investment that it had accounted for by another method qualifies for use of the equity method. This standard was adopted by the Company prospectively in the first quarter of fiscal year 2018. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting. ASU No. 2016-09, among other things, (i) requires the income tax effects of all awards to be recognized in the statement of operations when the awards vest or are settled, (ii) allows an employer to repurchase more of an employee’s shares for tax withholding purposes than currently allowable, without triggering liability accounting, and provides companies with the option to make a policy election to account for forfeitures as they occur, and (iii) requires companies to present excess tax benefits as operating activity rather than as financing activity on the statement of cash flows. This standard was adopted by the Company in the first quarter of fiscal year 2018. In connection with the Company’s election to record forfeitures as they occur, the Company used the modified retrospective transition method and recorded a cumulative effect of $2,403, which was an increase in beginning accumulated deficits with the offset by an equal increase in additional paid in capital. In addition, the Company prospectively adopted the provision regarding the presentation of excess tax benefits in the statement of cash flows, which did not result in a change in the net cash provided by operating activities for the six months ended December 31, 2017 because the Company currently maintains a 100% valuation allowance on its deferred tax asset.
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU No. 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This standard does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the changes are considered non-substantive. This standard was early adopted by the Company prospectively in the first quarter of fiscal year 2018. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in FASB Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. ASC Topic 606, among other things, (i) is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and (ii) requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU No. 2014-09 for all entities by one year. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue versus Net), which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard under ASU No. 2014-09. ASU No. 2016-08 clarifies how an entity should identify the unit of accounting (i.e. the specified good or service) for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the principle in ASU No 2014-09 for determining whether a good or service is separately identifiable from other promises in the contract and, therefore, should be accounted for separately. ASU No. 2016-10 also clarifies that entities are not required to identify promised goods or services that are immaterial in the context of the contract and allows entities to elect to account for shipping and handling activities as a fulfillment cost rather than as an additional promised service. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients, which clarifies the following aspects in ASU No. 2014-09: collectability, presentation of sales taxes and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed contracts at


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transition, and technical correction. In December, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and requires entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. ASCTopic 606 and the related updates will be effective for the Company beginning in the first quarter of fiscal year 2019 using one of two retrospective application methods. The Company’s evaluation of the impact this standard will have on its consolidated financial statements is ongoing. Based on the review to date, the Company believes that the adoption of the new standard will impact the quarterly and annual recognition for certain revenue streams. While the Company has made substantial progress in concluding the appropriate treatment for most of its revenue streams, the review is ongoing for a few remaining revenue streams. The Company has not decided whether the retrospective or modified retrospective method will be used in adopting the new standard.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This standard, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income and (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. Early adoption is not permitted with the exception of certain provisions related to the presentation of other comprehensive income. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842), which supersedes existing guidance on accounting for leases in FASB ASCAccounting Standards Codification (“ASC”) Topic 840, Leases. Leases. ASU No. 2016-02, among other things, requires (i) requires lessees to account for leases as either finance leases or operating leases and generally requires all leases to be recorded on the balance sheet, including those leases classified as operating leases under previous accounting guidance, through the recognition of right-of-use assets and corresponding lease liabilities and (ii) requires extensive qualitative and quantitative disclosures about leasing activities. The accounting applied by a lessor is largely unchanged from that applied under previous accounting guidance. ThisIn January 2018, the FASB issued ASU No. 2018-01, Leases (Topic 842) - Land Easement Practical Expedient for Transition to Topic 842, which provides a lessee or lessor the option to not assess at transition whether existing land easements, not currently accounted for as leases under the current lease guidance, should be treated as leases under the new standard. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842) Targeted improvements, which provides an additional (and optional) transition method whereby the new lease standard will be effective foris applied at the adoption date and recognized as an adjustment to retained earnings.
The Company adopted ASU No. 2016-02 on July 1, 2019 and elected to apply the standard as of the beginning inof the first quarter of fiscal year 2020 and is required to be applied usingunder the modified retrospective approach for all leases existing as of the effective date. Early adoption is permitted; however, the Company currently does not plan to adopt this standard early. The Company’s evaluation of the impact this standard will have on its consolidated financial statements is ongoing. Based on efforts to date,modified-retrospective transition approach. In connection with the adoption of this standard, the Company applied the package of practical expedients intended to ease transition for existing leases by not requiring the Company to reassess (i) its initial lease classification conclusions for existing or expired leases, (ii) whether an existing or expired contract is a lease or contains an embedded lease, and (iii) the capitalization of initial direct costs for existing or expired leases. In addition, the Company elected not to use “hindsight” in accordance with ASC Subtopic 842-10-65-1 (g) in assessing lease terms and impairment of right-of-use (“ROU”) assets for existing or expired leases under the new standard.
Upon adoption of this standard, will result in the recognitionCompany recorded initial (i) operating lease ROU assets of right of use assets and$261,110, (ii) current operating lease liabilities relatedof $51,389, and (iii) long-term operating lease liabilities of $207,425. The Company did not record any adjustment to retained earnings. As of July 1, 2019, there were no material finance leases for which the Company’s operating leases.Company was a lessee.
See Note 8 for further details on disclosure required under ASC Topic 842.


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Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments -— Credit Losses. ASU No. 2016-13 replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that will require the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC Topic 326 to provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, FASB issued ASU No. 2019-11 to provide clarification guidance in a number of areas, including: (i) expected recoveries for purchased financial assets with credit deterioration, (ii) transition relief for troubled debt restructuring, (iii) disclosures related to accrued interest receivables, and (iv) financial assets secured by collateral maintenance provisions. For most financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which will generally result in the earlier recognition of credit losses on financial instruments. This standard will be effective for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. ASU No. 2016-16 requires entities to recognize income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.


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In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash. The primary purpose of ASU No. 2016-18 is to reduce the diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. This standard will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This standard will be effective retrospectively for the Company beginning in the first quarter of fiscal year 2019, and will result in a change to the Company’s presentation of net cash provided by (used in) operating activities in the statement of cash flows for the impact of changes in restricted cash balances. Early adoption is permitted in any interim or annual period.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The primary purpose of this ASU is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses, which will affect many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019 and is required to be applied prospectively. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles -— Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. ASU No. 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard will be effective for the Company beginning in the first quarter of fiscal year 2021 and is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In March 2017,August 2018, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits2018-13, Fair Value Measurement (Topic 715)820): ImprovingDisclosure Framework — Changes to the PresentationDisclosure Requirements for Fair Value Measurement as part of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. the FASB’s broader disclosure framework project. ASU No. 2017-07 requires employers2018-13 removes, modifies and adds certain disclosures providing greater focus on requirements that clearly communicate the most important information to disaggregate the service cost component fromusers of the other components of net benefit cost and disclose by line item the amount of net benefit cost that is included in the statement of operations or capitalized in assets.financial statements with respect to fair value measurements. The standard requires employers to report the service cost component in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period and to report other components of net benefit cost separately and outside the subtotal of operating income. The standard also allows only the service cost component to be eligible for capitalization. This standard will beis effective for the Company beginning in the first quarter of fiscal year 2019. The guidance requires application2021, with early adoption permitted. Most of the disclosure requirements in ASU No. 2018-13 would need to be applied on a retrospective basis except for the guidance related to (i) unrealized gains and loss included in other comprehensive income, (ii) disclosure related to range and weighted average Level 3 unobservable inputs, and (iii) narrative disclosure requirements on measurement uncertainty, which are required to be applied on a prospective basis. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The standard will be effective for the Company in the fourth quarter of fiscal year 2021, with early adoption permitted. The amendments in ASU No. 2018-14 are required to be applied retrospectively. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles — Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance also specifies that the balance sheet, income statement, and statement of cash flows presentation of capitalized implementation costs and the related amortization should align with the presentation of the service cost component andhosting (service) element of the other components of net benefit costarrangement. The standard is effective for the Company in the statementsfirst quarter of operations and on a prospective basis forfiscal year 2021, with early adoption permitted. Entities have the capitalizationoption to apply the guidance prospectively to all implementation costs incurred after the date of the service cost componentadoption or retrospectively. The adoption of net benefit cost in assets. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. For the three months ended December 31, 2017, net periodic pension and other postretirement employee benefit cost reported within operating income totaled to $1,031, of which $53 represented service cost. For the six months ended December 31, 2017, net periodic pension and other postretirement employee benefit cost reported within operating income totaled to $2,093, of which $105 represented service cost.

Note 3. Acquisitions
On July 28, 2017, the Company acquired a 65% controlling interest in CLG, a premier North American esports organization. CLG’s results of operations since the acquisition date, which are included in the Company’s consolidated statements of operations for the three and six months ended December 31, 2017, were not material. Pro forma informationthis standard is not provided since the acquisition was notexpected to have a material when compared withimpact on the Company’s consolidated financial statements.
On November 20, 2017, the Company acquired a 100% controlling interest in Obscura Digital (“Obscura”), a creative studio, globally-recognized for its work in designing and developing next-generation immersive experiences. Obscura’s results of operations since the acquisition date, which are included in the Company’s consolidated statements of operations for the three and six months ended December 31, 2017, were not material. Pro forma information is not provided since the acquisition was not material when compared with the Company’s consolidated financial statements. In addition, the Obscura financial results of operations will be reflected in the MSG Entertainment segment. Any costs incurred by Obscura that are associated with the Company’s venue development initiatives will be reported in “Corporate and Other.”




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In November 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. ASU No. 2018-17 amends the variable interest entities (“VIE”) guidance to align the evaluation of a decision maker’s or service provider’s fee in assessing a variable interest with the guidance in the primary beneficiary test. Specifically, indirect interests held by a related party that is under common control will now be considered on a proportionate basis, rather than in their entirety, when assessing whether the fee qualifies as a variable interest. The proportionate basis approach is consistent with the treatment of indirect interests held by a related party under common control when evaluating the primary beneficiary of a VIE. This effectively means that when a decision maker or service provider has an interest in a related party, regardless of whether they are under common control, it will consider that related party’s interest in a VIE on a proportionate basis throughout the VIE model, for both the assessment of a variable interest and the determination of a primary beneficiary. The standard will be effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. The amendments in ASU No. 2018-17 are required to be applied retrospectively. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. ASU No. 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC Topic 606 when the counterparty is a customer. In addition, ASU No. 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The standard will be effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. The amendments in ASU No. 2018-18 are required to be applied retrospectively to the date when the Company initially adopted ASCTopic 606. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 — Financial Instruments. This ASU provides narrow-scope amendments to help apply these recent standards. The transition requirements and effective date of this ASU will be effective for the Company in the first quarter of fiscal year 2021 with early adoption permitted for certain amendments. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In November 2019, the FASB issued ASU No. 2019-08, Compensation — Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements — Share-Based Consideration Payable to a Customer. This ASU requires that share-based payment awards issued to a customer in connection with a revenue arrangement be recorded as a reduction of the transaction price in revenue. The amount recorded as a reduction of the transaction price is measured using the grant-date fair value of the award and is classified in accordance with ASC Topic 718. Changes in the measurement of the share-based payments after the grant date that are due to the form of the consideration are not included in the transaction price and are recorded elsewhere in the statement of operations. The award is measured and classified under ASC Topic 718 for its entire life, unless the award is modified after it vests and the grantee is no longer a customer. The new guidance is effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU eliminates certain exceptions to the general approach in ASC Topic 740 and includes methods of simplification to the existing guidance. The new guidance is effective for the Company in the first quarter of fiscal year 2022, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this ASU clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, the amendments clarify the accounting for certain forward contracts and purchased options accounted for under Topic 815. The new guidance is effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.


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Note 3. Revenue Recognition
Contracts with Customers
All revenue recognized in the consolidated statements of operations is considered to be revenue from contracts with customers. For the three and six months ended December 31, 2019 and 2018, the Company did not have any material impairment losses on receivables or contract assets arising from contracts with customers.
Disaggregation of Revenue
The following table disaggregates the Company’s revenue by major source and reportable segment based upon the timing of transfer of goods or services to the customer for the three and six months ended December 31, 2019 and 2018:
  Three Months Ended December 31, 2019
  MSG
Entertainment		 MSG
Sports		 Eliminations Total
Event-related and entertainment dining and nightlife offerings (a)
 $281,947
 $144,017
 $(83) $425,881
Sponsorship, signage and suite licenses (b)
 23,857
 57,268
 (170) 80,955
League distributions (b)
 —
 46,419
 —
 46,419
Local media rights fees from MSG Networks (b)
 —
 60,527
 —
 60,527
Other (c)
 6,888
 8,235
 (100) 15,023
Total revenues from contracts with customers $312,692
 $316,466
 $(353) $628,805

         
  Three Months Ended December 31, 2018
  MSG
Entertainment		 MSG
Sports		 Eliminations Total
Event-related and entertainment dining and nightlife offerings (a)
 $282,749
 $146,721
 $—
 $429,470
Sponsorship, signage and suite licenses (b)
 24,662
 60,906
 (170) 85,398
League distributions (b)
 —
 42,057
 —
 42,057
Local media rights fees from MSG Networks (b)
 —
 58,199
 —
 58,199
Other (c)
 9,103
 7,960
 —
 17,063
Total revenues from contracts with customers $316,514
 $315,843
 $(170) $632,187

         
  Six Months Ended December 31, 2019
  MSG
Entertainment		 MSG
Sports		 Eliminations Total
Event-related and entertainment dining and nightlife offerings (a)
 $418,695
 $155,057
 $(96) $573,656
Sponsorship, signage and suite licenses (b)
 38,927
 79,246
 (340) 117,833
League distributions (b)
 —
 60,844
 —
 60,844
Local media rights fees from MSG Networks (b)
 —
 66,738
 —
 66,738
Other (c)
 14,077
 10,615
 (176) 24,516
Total revenues from contracts with customers $471,699
 $372,500
 $(612) $843,587


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  Six Months Ended December 31, 2018
  MSG
Entertainment		 MSG
Sports		 Eliminations Total
Event-related and entertainment dining and nightlife offerings (a)
 $419,785
 $156,963
 $—
 $576,748
Sponsorship, signage and suite licenses (b)
 39,992
 83,161
 (340) 122,813
League distributions (b)
 —
 56,928
 —
 56,928
Local media rights fees from MSG Networks (b)
 —
 64,171
 —
 64,171
Other (c)
 19,690
 9,972
 —
 29,662
Total revenues from contracts with customers $479,467
 $371,195
 $(340) $850,322
_________________
(a)
Consisted of (i) ticket sales and other ticket-related revenues, (ii) Tao Group Hospitality’s entertainment dining and nightlife offerings, (iii) food, beverage and merchandise sales, and (iv) venue license fees from third-party promoters. Event-related revenues and entertainment, dining and nightlife offerings are recognized at a point in time as the related event occurs. As such, these revenues have been included in the same category in the table above.
(b)
See Note 3 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for further details on the pattern of recognition of (i) sponsorship, signage and suite license revenues, (ii) league distributions, and (iii) local media rights fees from MSG Networks.
(c)
For the three and six months ended December 31, 2019 and 2018, the Company’s other revenues primarily consisted of managed venue revenues from Tao Group Hospitality and advertising commission revenue from MSG Networks. For the three and six months ended December 31, 2018, the Company’s other revenues also included revenues from Obscura Digital (“Obscura”).
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheet. The following table provides information about contract balances from the Company’s contracts with customers as of December 31, 2019 and June 30, 2019.
  December 31, June 30,
  2019 2019
Receivables from contracts with customers, net (a)
 $131,079
 $96,982
Contract assets, current (b)
 11,395
 7,314
Deferred revenue, including non-current portion (c)
 318,147
 305,821
_________________
(a)
Receivables from contracts with customers, which are reported in Accounts receivable, net and Net related party receivables in the Company’s consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of December 31, 2019 and June 30, 2019, the Company’s receivables reported above included $189 and $126, respectively, related to various related parties associated with contracts with customers. See Note 18 for further details on these related party arrangements.
(b)
Contract assets, which are reported as Other current assets in the Company’s consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to the customer, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.


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(c)
Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to those customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. As of December 31, 2019, the Company’s deferred revenue related to local media rights with MSG Networks was $9,403. The Company had 0 deferred revenue related to local media rights with MSG Networks as of June 30, 2019. See Note 18 for further details on these related party arrangements. Revenue recognized for the six months ended December 31, 2019 relating to the deferred revenue balance as of June 30, 2019 was $161,470.
Transaction Price Allocated to the Remaining Performance Obligations
The following table depicts the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2019. This primarily relates to performance obligations under sponsorship and suite license arrangements. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less. Additionally, the Company has elected to exclude variable consideration from its disclosure related to the remaining performance obligations under its local media rights arrangements with MSG Networks.
Fiscal Year 2020 (remainder) $123,605
Fiscal Year 2021 201,298
Fiscal Year 2022 154,324
Fiscal Year 2023 87,092
Fiscal Year 2024 59,824
Thereafter 133,249
  $759,392

Note 4. Computation of Earnings per Common ShareTeam Personnel Transactions
The following table presents a reconciliation of weighted-average shares usedDirect operating expenses in the calculationsaccompanying consolidated statements of basic and diluted earnings per common share attributableoperations include a net expense for transactions relating to the Company’s stockholderssports teams for waiver/contract termination costs and player trades (“EPS”Team personnel transactions”).
  Three Months Ended Six Months Ended
  December 31, December 31,
  2017 2016 2017 2016
Weighted-average shares (denominator):        
Weighted-average shares for basic EPS 23,621
 23,971
 23,594
 24,013
Dilutive effect of shares issuable under share-based compensation plans 192
 172
 267
 179
Weighted-average shares for diluted EPS 23,813
 24,143
 23,861
 24,192
  Anti-dilutive shares 19
 7
 10
 6
Team personnel transactions expense was $17,644 and $40,754 for the three months ended December 31, 2019 and 2018, respectively, and $27,887 and $40,087 for the six months ended December 31, 2019 and 2018, respectively.
Note 5. Team Personnel TransactionsComputation of Earnings per Common Share
Direct operating expensesThe following table presents a reconciliation of weighted-average shares used in the accompanying consolidated statementscalculations of operations include net provisions for transactions relatingbasic and diluted earnings per common share attributable to players on the Company’s sports teams for waiver/contract termination costs and a player tradestockholders (“Team Personnel Transactions”EPS”). Team Personnel Transactions were $2,758 and $980 for the three months ended December 31, 2017 and 2016, respectively, and $2,858 and $5,990 for the six months ended December 31, 2017 and 2016, respectively.
         
  Three Months Ended Six Months Ended
  December 31, December 31,
  2019 2018 2019 2018
Weighted-average shares (denominator):        
Weighted-average shares for basic EPS 23,913
 23,777
 23,870
 23,742
Dilutive effect of shares issuable under share-based compensation plans 66
 63
 107
 118
Weighted-average shares for diluted EPS 23,979
 23,840
 23,977
 23,860
  Weighted-average anti-dilutive shares 510
 575
 507
 288



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 66. Cash, Cash Equivalents and Restricted Cash
The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.
  As of
  December 31,
2019		 June 30,
2019		 December 31,
2018		 June 30,
2018
Captions on the consolidated balance sheets:        
Cash and cash equivalents $1,000,103
 $1,086,372
 $1,227,861
 $1,225,638
Restricted cash (a)
 43,001
 31,529
 23,717
 30,982
Cash, cash equivalents and restricted cash on the consolidated statements of cash flows $1,043,104
 $1,117,901
 $1,251,578
 $1,256,620
_________________
(a)
See Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019 for more information regarding the nature of restricted cash.
Note 7. Investments and Loans to Nonconsolidated Affiliates
The Company’s investments and loans to nonconsolidated affiliates which are accounted for under the equity method and cost method of accounting and equity investments without readily determinable fair values in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures, and ASC Topic 325, 321, Investments - OtherEquity Securities, respectively, consisted of the following:
  Ownership Percentage Investment Loan Total
December 31, 2019        
Equity method investments:        
SACO Technologies Inc. (“SACO”) 30% $41,997
 $—
 $41,997
Others 

 7,910
 —
 7,910
Equity investments without readily determinable fair values (a)
   13,334
 —
 13,334
Total investments and loans to nonconsolidated affiliates   $63,241
 $—
 $63,241
         
June 30, 2019        
Equity method investments:        
SACO 30% $44,321
 $—
 $44,321
Tribeca Enterprises LLC (“Tribeca Enterprises”) (b)
 50% —
 18,000
 18,000
Others 
 8,372
 —
 8,372
Equity investments without readily determinable fair values (a)
   13,867
 —
 13,867
Total investments and loans to nonconsolidated affiliates   $66,560
 $18,000
 $84,560
  Ownership Percentage Investment 
Loan (a)
  Total
December 31, 2017         
Equity method investments:         
Azoff MSG Entertainment LLC (“AMSGE”) 50% $107,496
 $97,500
  $204,996
Tribeca Enterprises LLC (“Tribeca Enterprises”) 50% 11,535
 17,892
(b) 
 29,427
Other 50% 2,638
 —
  2,638
Cost method investments   10,525
 —
  10,525
Total investments and loans to nonconsolidated affiliates   $132,194
 $115,392
  $247,586
          
June 30, 2017         
Equity method investments:         
AMSGE 50% $104,024
 $97,592
(c) 
 $201,616
Brooklyn Bowl Las Vegas, LLC (“BBLV”) 
(d) 

 —
 2,662
(e) 
 2,662
Tribeca Enterprises 50% 12,864
 14,370
(b) 
 27,234
Cost method investments   10,775
 —
  10,775
Total investments and loans to nonconsolidated affiliates   $127,663
 $114,624
  $242,287
_________________
(a) 
In connectionaccordance with the Company’s investments in AMSGE and Tribeca Enterprises,ASC Topic 321, Investments - Equity Securities, the Company provides $100,000 and $17,500 revolving credit facilitiesapplies the measurement alternative to these entities, respectively. Pursuantits equity investments without readily determinable fair values. The Company recorded an impairment charge of $533 for the six months ended December 31, 2019. See Note 7 to their terms, the AMSGE and Tribeca Enterprises revolving credit facilities will terminateconsolidated financial statements included in the Company’s Annual Report on September 20, 2020 and Form 10-K for the year ended June 30, 2021, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


(b)
Includes outstanding payments-in-kind (“PIK”) interest2019 for more information regarding the application of $1,392 and $870 as of December 31, 2017 and June 30, 2017, respectively. PIK interest owed does not reduce availability under the revolving credit facility.measurement alternative.
(c)(b) 
Represents the outstanding loan balance, inclusive of amounts due
On August 5, 2019, immediately prior to the Companysale of the Company’s equity capital in Tribeca Enterprises for interest of $92 as of June 30, 2017.
(d)
As of June 30, 2017,$18,000, the Company was entitled to receive back its capital, which was 74%contributed the $18,000 of BBLV’s total capital, plus a preferred return, after whichindebtedness under the Company would own a 20% interest in BBLV. As of December 31, 2017, the Company now owns a 35% interest in BBLV with no preferred return, as a result of an amendmentCompany’s revolving credit facility to the BBLV’s operating agreement.
(e)
Represents the outstanding loan balance, inclusive of amounts due to the Company for interest of $62 as of June 30, 2017. In December 2017,Company’s equity capital in connection with the amendment of the BBLV’s operating agreement, the Company received a payment of $2,662, which represented the outstanding loan principal and accrued interest balance. In addition, the Company recognized interest income of $938 for the three and six months ended December 31, 2017, which was received in connection with the repayment of the loan receivable since the loan balance was on a nonaccrual status.Tribeca Enterprises.
See Note 9 for more information regarding a legal matter associated with AMSGE.
         
Note 7. Property and Equipment
As of December 31, 2017 and June 30, 2017, property and equipment consisted of the following assets:

  December 31,
2017		 June 30,
2017
Land $177,855
 $91,678
Buildings 1,112,527
 1,110,366
Leasehold improvements 177,679
 176,786
Equipment 315,903
 292,935
Aircraft 38,090
 38,090
Furniture and fixtures 50,045
 49,622
Construction in progress 37,848
 22,880
  1,909,947
 1,782,357
Less accumulated depreciation and amortization (674,814) (623,086)
  $1,235,133
 $1,159,271
The increase in gross property and equipment during the six months ended December 31, 2017 was primarily due to the purchase of land in London. The purchase price of the land was $79,518 (£60,000), excluding transactional taxes of $20,661 (£15,590). The transactional taxes include a value-added tax of $15,904 (£12,000), which the Company expects to recover and is included in other current assets in the accompanying consolidated balance sheet as of December 31, 2017.
Depreciation and amortization expense on property and equipment was $25,532 and $24,350 for the three months ended December 31, 2017 and 2016, respectively, and $51,544 and $48,844 for the six months ended December 31, 2017 and 2016, respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)




Equity Investment with Readily Determinable Fair Value
In addition to the investments discussed above, the Company holds an investment of 3,208 shares of the common stock of Townsquare Media, Inc. (“Townsquare”). Townsquare is a leading media, entertainment and digital marketing solutions company that is listed on the New York Stock Exchange (“NYSE”) under the symbol “TSQ.” In accordance with ASC Topic 321, Investments - Equity Securities, this investment is measured at readily determinable fair value and is reported under Other assets in the accompanying consolidated balance sheets as of December 31, 2019 and June 30, 2019. See Note 11 for more information on the fair value of the investment in Townsquare.
Note 8. Leases

The Company’s leases primarily consist of certain live-performance venues, entertainment dining and nightlife venues, corporate office space, storage and, to a lesser extent, office and other equipment. 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-cancellable 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 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.
For operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For finance leases, the initial ROU asset is depreciated on a straight-line basis over the lease term, along with recognition of interest expense associated with accretion of the lease liability, which is ultimately reduced by the related fixed payments. For leases with a term of 12 months or less (“short-term leases”), any fixed lease payments are recognized on a straight-line basis over the lease term and are not recognized on the consolidated balance sheet. Variable lease costs for both operating and finance leases, if any, are recognized as incurred and such costs are excluded from lease balances recorded on the consolidated balance sheet. In addition, the Company excluded its ground lease with Las Vegas Sands Corp. (“Sands”) associated with MSG Sphere in Las Vegas from the ROU asset and lease liability balance recorded on the consolidated balance sheet as the ground lease will have no fixed rent. Under the ground lease agreement, Sands will receive priority access to purchase tickets to events at the venue for inclusion in hotel packages or other uses, as well as certain rent-free use of the venue to support its Expo Center business. However, if certain return objectives are achieved, Sands will receive 25% of the after-tax cash flow in excess of such objectives. The ground lease is for a term of 50 years.
As of December 31, 2019, the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 1 month to 18.75 years. In certain instances, leases include options to renew, with varying option terms in each case. The exercise of lease renewal options is generally at the Company’s discretion and is considered in the Company’s assessment of the respective lease term. The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.

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THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except per share data)

The following table summarizes the ROU assets and lease liabilities recorded on the Company’s consolidated balance sheet as of December 31, 2019:
  Line Item in the Company’s Consolidated Balance Sheet  
Right-of-use assets:    
Operating leases Right-of-use lease assets $241,833
Lease liabilities:    
Operating leases, current Operating lease liabilities, current $51,206
Operating leases, noncurrent Operating lease liabilities, noncurrent 189,978
Total lease liabilities   $241,184

The following table summarizes the activity recorded within the Company’s consolidated statement of operations for the three and six months ended December 31, 2019:
  Line Item in the Company’s Consolidated Statement of Operations Three Months Ended December 31, 2019 Six Months Ended December 31, 2019
Operating lease cost Direct operating expenses $8,151
 $16,476
Operating lease cost Selling, general and administrative expenses 4,903
 9,718
Short-term lease cost Direct operating expenses 54
 432
Variable lease cost Direct operating expenses 923
 2,457
Variable lease cost Selling, general and administrative expenses 13
 26
Total lease cost   $14,044
 $29,109

Supplemental Information
For the six months ended December 31, 2019, cash paid for amounts included in the measurement of lease liabilities was $27,209and the Company had 0 ROU assets obtained in exchange for new operating lease liabilities.
The weighted average remaining lease term for operating leases recorded on the accompanying consolidated balance sheet as of December 31, 2019 was 6.5 years. The weighted average discount rate was 9.45% as of December 31, 2019 and represented the Company’s estimated incremental borrowing rate, assuming a secured borrowing, based on the remaining lease term at the time of either (i) adoption of the standard or (ii) the period in which the lease term expectation was modified.
Maturities of operating lease liabilities as of December 31, 2019 are as follows:
Fiscal Year 2020 (remainder) $27,751
Fiscal Year 2021 54,589
Fiscal Year 2022 54,671
Fiscal Year 2023 50,325
Fiscal Year 2024 38,329
Thereafter 126,228
Total lease payments 351,893
Less imputed interest 110,709
Total lease liabilities (a)
 $241,184
________________
(a)
Operating lease payments exclude minimum lease payments related to a location associated with the entertainment dining and nightlife offerings as the Company has not yet taken possession of the space.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 8.9. Goodwill and Intangible Assets
The carrying amounts of goodwill, by reportable segment, as of December 31, 20172019 and June 30, 20172019 are as follows:
MSG Entertainment $165,558
MSG Sports 226,955
  $392,513

  December 31,
2017		 June 30,
2017
MSG Entertainment $165,666
 $161,900
MSG Sports 226,955
 218,187
  $392,621
 $380,087
The net increase in the carrying amounts of goodwill, as compared to June 30, 2017, primarily reflects: (i) purchase price allocations for the CLG and Obscura acquisitions in the MSG Sports segment and MSG Entertainment segment, respectively, and (ii) measurement period adjustments for certain assets and liabilities for the TAO Group acquisition in the MSG Entertainment segment.
During the first quarter of fiscal year 2018,2020, the Company performed its annual impairment test of goodwill and determined that there were no0 impairments of goodwill identified for any of its reporting units.units as of the impairment test date.
The Company’s indefinite-lived intangible assets as of December 31, 20172019 and June 30, 20172019 are as follows:
   
Sports franchises (MSG Sports) $111,064
Trademarks (MSG Entertainment) 62,421
Photographic related rights (MSG Sports) 3,000
  $176,485

  December 31,
2017		 June 30,
2017
Sports franchises (MSG Sports segment) $109,429
 $101,429
Trademarks (MSG Entertainment segment) 62,421
 62,421
Photographic related rights (MSG Sports segment) 3,000
 3,000
  $174,850
 $166,850
The increase in the carrying amount of indefinite-lived intangible assets in MSG Sports segment reflects a franchise fee associated withCLG’s membership in the “League of Legends” North American League Championship Series.
During the first quarter of fiscal year 2018,2020, the Company performed its annual impairment test of identifiable indefinite-lived intangible assets and determined that there were no0 impairments identified.identified as of the impairment test date.
The Company’s intangible assets subject to amortization are as follows:
December 31, 2019 Gross 
Accumulated
Amortization
 Net
Trade names $99,830
 $(14,822) $85,008
Venue management contracts 79,000
 (12,169) 66,831
Favorable lease assets (a)
 —
 —
 —
Season ticket holder relationships 50,032
 (49,209) 823
Non-compete agreements 11,400
 (5,334) 6,066
Festival rights 8,080
 (1,885) 6,195
Other intangibles 9,364
 (6,686) 2,678
  $257,706
 $(90,105) $167,601
December 31, 2017 Gross 
Accumulated
Amortization
 Net
June 30, 2019 Gross 
Accumulated
Amortization
 Net
Trade names $101,830
 $(3,792) $98,038
 $100,830
 $(12,228) $88,602
Venue management contracts 79,000
 (3,042) 75,958
 79,000
 (9,887) 69,113
Favorable lease assets(a) 54,253
 (3,249) 51,004
 54,253
 (10,382) 43,871
Season ticket holder relationships 50,032
 (42,539) 7,493
 50,032
 (47,541) 2,491
Non-compete agreements 11,400
 (1,243) 10,157
 11,400
 (4,311) 7,089
Festival rights 9,080
 (1,108) 7,972
 8,080
 (1,617) 6,463
Other intangibles 10,417
 (4,147) 6,270
 10,064
 (6,987) 3,077
 $316,012
 $(59,120) $256,892
 $313,659
 $(92,953) $220,706
_________________
(a)
Upon adoption of ASC Topic 842, the Company also reclassified favorable lease assets net balance of $43,871, which was recognized in connection with the acquisition of Tao Group Hospitality, from Amortizable intangible assets, net, to Right-of-use lease assets in the accompanying consolidated balance sheet as of July 1, 2019. In addition, the Company also reclassified unfavorable lease liability of $6,841, which was reported in Other liabilities in the accompanying consolidated balance sheet, to Right-of-use lease assets as of July 1, 2019.




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)




June 30, 2017 Gross 
Accumulated
Amortization
 Net
Trade names $98,530
 $(1,003) $97,527
Venue management contracts 79,000
 (761) 78,239
Favorable lease assets 54,253
 (812) 53,441
Season ticket holder relationships 50,032
 (40,871) 9,161
Non-compete agreements 9,000
 (261) 8,739
Festival rights 9,080
 (739) 8,341
Other intangibles 4,217
 (2,690) 1,527
  $304,112
 $(47,137) $256,975
Amortization expense for intangible assets, excluding the amortization of favorable lease assets of $1,218 forFor the three months ended December 31, 2017, which is reported in rent expense, was $5,0122019 and $1,616 for the three months ended December 31, 2017 and 2016, respectively. For the six months ended December 31, 2017 and 2016,2018, amortization expense for intangible assets, excluding the amortization of favorable lease assets of $2,437$1,174 for the three months ended December 31, 2018, which is reported in rent expense, was $5,006 and $4,448, respectively. For the six months ended December 31, 2019 and 2018, amortization expense for intangible assets, excluding the amortization of favorable lease assets of $2,393 for the six months ended December 31, 2017,2018, which is reported in rent expense, was $9,546$9,234 and $3,232,$9,060, respectively. The increases in amortization expense reflects the purchase accounting adjustments for the TAO Group, CLG and Obscura acquisitions.
Note 9.10. Commitments and Contingencies
Commitments
As more fully described in Note 810 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017,2019, the Company’s commitments consist primarily of (i) the MSG Sports segment’sSports’ obligations under employment agreements that the Company has with its professional sports teams’ personnel that are generally guaranteed regardless of employee injury or termination and (ii) long-term noncancelable operating lease agreements primarily for entertainmentCompany venues, including Tao Group Hospitality venues, and various corporate offices, and (iii) revolving credit facilities provided byoffices. The Company adopted ASU No. 2016-02, Leases (Topic 842), on July 1, 2019. As a result, the Companycontractual obligations related to AMSGE and Tribeca Enterprises (seefuture lease payments, which were historically reported as off-balance sheet commitments, are now reflected on the consolidated balance sheet as lease liabilities as of December 31, 2019. See Note 6). The8 for more details about the lease liabilities. Except as described above with respect to lease accounting, the Company did not have any material changes in its contractual obligations since the end of fiscal year 20172019 other than activities in the ordinary course of business.
In connection with the TAOTao Group Hospitality and CLG acquisitions, the Company has accrued deferred and contingent consideration as part of the purchase price allocation. See Note 1011 for further details of the amount recorded in the accompanying consolidated balance sheet as of December 31, 2017. In addition, see Note 10 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 regarding the principal repayments required under the TAO Group’s senior secured term loan facility.2019.
Legal Matters
The Company owns 50% of AMSGE, which in turn owns a majority interest in Global Music Rights, LLC (“GMR”). GMR is primarily a performance rights organization, whose business includes obtaining the right to license the public performance rights of songs composed by leading songwriters. GMR engaged in negotiations with the Radio Music Licensing Committee (“RMLC”), which represents over ten thousand commercial radio stations. On November 18, 2016, RMLC filed a complaint against GMR in the United States District Court for the Eastern District of Pennsylvania alleging that GMR is violating Section 2 of the Sherman Antitrust Act and seeking an injunction, requiring, among other things, that GMR issue radio stations licenses for GMR’s repertory, upon request, at a rate set through a judicial rate-making procedure, that GMR offer “economically viable alternatives to blanket licenses,” and that GMR offer only licenses for songs which are fully controlled by GMR. GMR and RLMC agreed to an interim license arrangement through September 30, 2017, which has been extended through March 31, 2018. GMR has advised the Company that it believes that the RMLC Complaint is without merit and is vigorously defending itself. On January 20, 2017, GMR filed a motion to dismiss or to transfer venue, asserting that the Eastern District of Pennsylvania is not a proper venue for the matter, lacks personal jurisdiction of GMR and that in any event the complaint fails to state a claim. On December 6, 2016, GMR filed a complaint against RMLC in the United States District Court for the Central District of California, alleging that RMLC operates as an illegal cartel that unreasonably restrains trade in violation of Section 1 of the Sherman Antitrust Act and California state law, and seeking an injunction restraining RMLC and its co-conspirators from enforcing or establishing agreements that unreasonably restrict competition for public performance licenses. The judge in the


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Central District of California denied RMLC’s motion to dismiss GMR’s claim for lack of ripeness and, on the basis that the two cases involve similar facts, stayed the California action in order to assess the status of the Pennsylvania case. On July 21, 2017, RMLC filed a preliminary injunction motion in the United States District Court for the Eastern District of Pennsylvania to extend the duration of the interim licenses which GMR had granted to certain radio stations. The district court determined that the jurisdictional matter should be decided prior to addressing the motion for preliminary injunction and referred the jurisdictional questions to the Magistrate Judge in the United States District Court Eastern District of Pennsylvania. On November 29, 2017, the Magistrate Judge issued a report and recommendation that personal jurisdiction was not appropriate over GMR in the Eastern District of Pennsylvania and recommending the dismissal ofthe RMLC’s action without prejudice. The RMLC has filed objectionsto the Magistrate Judge’s report and recommendation.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Note 10.11. Fair Value Measurements
The following table presents the Company’s assets that are measured at fair value on a recurring basis, which include cash equivalents and available-for-sale securities:an equity investment with readily determinable fair value:
  Fair Value Hierarchy December 31,
2019		 June 30,
2019
Assets:      
Commercial Paper I $169,239
 $169,707
Money market accounts I 194,807
 101,517
Time deposits I 620,613
 789,833
Equity investment with readily determinable fair value I 31,985
 17,260
Total assets measured at fair value   $1,016,644
 $1,078,317
  Fair Value Hierarchy December 31,
2017		 June 30,
2017
Assets:      
Commercial Paper I $105,307
 $105,476
Money market accounts I 174,774
 102,884
Time deposits I 811,450
 1,007,302
Available-for-sale securities I 24,638
 32,851
Total assets measured at fair value   $1,116,169
 $1,248,513

All assets listed above are classified within Level I of the fair value hierarchy as they are valued using observable inputs that reflect quoted prices for identical assets in active markets. The carrying amountsamount of the Company’s commercial paper, money market accounts and time deposits approximateapproximates fair value due to their short-term maturities.


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(Continued)


The carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:
  December 31, 2019 June 30, 2019
  
Carrying
Value
 
Fair
Value
 Carrying
Value		 Fair
Value
Assets        
Notes receivable (a)
 $12,560
 $12,560
 $13,348
 $13,348
Short-term investments (a)
 113,020
 113,020
 108,416
 108,416
Equity investment with readily determinable fair value (b)
 31,985
 31,985
 17,260
 17,260
Subordinated term loan receivable (c)
 —
 —
 58,735
 57,711
Liabilities        
Long-term debt, including current portion (d)
 $36,250
 $36,486
 $55,000
 $54,883
  December 31, 2017 June 30, 2017
  
Carrying
Value
 
Fair
Value
 Carrying
Value		 Fair
Value
Assets        
Notes receivable, including interest accruals $4,114
 $4,114
 $2,610
 $2,610
Available-for-sale securities (a)
 24,638
 24,638
 32,851
 32,851
Liabilities        
Long-term debt, including current portion (b)
 $110,000
 $108,826
 $110,000
 $110,091
_________________
(a) 
The Company’s notes receivable are invested with banking institutions as collateral for issuances of letters of credit. In addition, the Company’s short-term investments consist of investments that (i) have original maturities of greater than three months and (ii) can be converted into cash by the Company within one year. The Company’s notes receivable and short-term investments are carried at cost, including interest accruals, which approximate fair value and are classified within Level III of the fair value hierarchy.
(b)
Aggregate cost basis for available-for-sale securities,the Company’s equity investment with readily determinable fair value in Townsquare, including transaction costs, was $23,222 as of December 31, 2017. The unrealized gain recorded in accumulated other comprehensive loss was $1,416 as of December 31, 2017.2019. The fair value of the available-for-sale securitiesthis investment is determined based on quoted market prices in an active market aton the New York Stock Exchange,NYSE, which is classified within Level I of the fair value hierarchy. For the three months ended December 31, 2019 and 2018, the Company recorded an unrealized gain (loss) of $9,432 and $(12,031), respectively, and for the six months ended December 31, 2019 and 2018, the Company recorded an unrealized gain (loss) of $14,725 and $(7,667), respectively, as a result of changes in the market value related to this investment. The unrealized gain (loss) is reported in Miscellaneous income (expense), net in the accompanying consolidated statement of operations.


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(Continued)


(b)(c) 
In connection with the sale of the Company’s joint venture interest in Azoff MSG Entertainment LLC (“AMSGE”) in December 2018, the $63,500 outstanding balance under the revolving credit facility extended by the Company to AMSGE was converted to a subordinated term loan with an original maturity date of September 21, 2021. The subordinated loan was assumed by an affiliate of AMSGE. During the three months ended March 31, 2019, the Company received a $4,765 principal repayment. During the three months ended December 31, 2019, the Company received a $58,735 principal repayment for the remaining outstanding balance. The Company’s subordinatedterm loan receivable as of June 30, 2019 was classified within Level II of the fair value hierarchy as it was valued using quoted indices of similar securities for which the inputs were readily observable.
(d)
On January 31, 2017, TAOMay 23, 2019, Tao Group Intermediate Holdings LLC (“TAOIH”), TAOand Tao Group Operating LLC (“TAOG”) and certain of its subsidiaries entered into a $110,000 senior secured$40,000 five-year term loan facility and a $25,000 five-year term revolving facility. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable. See Note 12 for more information and outstanding balances on this long-term debt.
Contingent Consideration Liabilities
In connection with the TAOTao Group acquisitionHospitality and CLG acquisitions (see Note 311 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 20172019 for further details), the Company recorded certain deferred and contingent consideration liabilities at fair value as part of the preliminary purchase price allocation. The fair value was estimated using a Monte-Carlo simulation model which included significant unobservable Level III inputs such as projected financial performance over the earn-out period (five years) along with estimates for market volatility and the discount rate applicable to potential cash payouts. As of December 31, 20172019 and June 30, 2017, the fair value of contingent consideration liabilities in connection with the TAO Group acquisition was $7,900.
In connection with the CLG acquisition, the Company may be required to make future payments for deferred and contingent consideration up to a total of $9,150 based upon the achievement of certain specified objectives during the three years following the transaction as defined under the membership interest purchase agreement. The Company recorded $6,586 as the initial fair value of deferred and contingent consideration liabilities as part of the preliminary purchase price allocation. The fair values of these deferred and contingent consideration liabilities were estimated using weighted probabilities of achievement for the possible objective and earn-out events and adjusted for a discount rate applicable to the deferred and potential cash payouts. During the six months ended December 31, 2017, the Company made a payment of $4,000 as one of the objectives for contingent consideration was achieved. As of December 31, 2017,2019, the fair value of deferred and contingent consideration liabilities in connection with the Tao Group Hospitality and CLG acquisitions was $2,586.$3,349.



Table of Contents
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 11.12. Credit Facilities


Knicks Revolving Credit Facility
On September 30, 2016, New York Knicks, LLC (“Knicks LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “Knicks Credit Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $200,000 with a term of five years (the “Knicks Revolving Credit Facility”) to fund working capital needs and for general corporate purposes. Amounts borrowed may be distributed to the Company except during an event of default.
The Knicks Revolving Credit Facility requires Knicks LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of December 31, 2017,2019, Knicks LLC was in compliance with this financial covenant.
All borrowings under the 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 0.00% to 0.125% per annum or (ii) LIBOR plus a margin ranging from 1.00% to 1.125% per annum. Knicks LLC is required to pay a commitment fee ranging from 0.20% to 0.25% per annum in respect of the average daily unused commitments under the Knicks Revolving Credit Facility. TheThere was 0 borrowing under the Knicks Revolving Credit Facility was undrawn as of December 31, 2017.2019.
All obligations under the Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S. national broadcast agreements.
Subject to customary notice and minimum amount conditions, Knicks LLC may voluntarily prepay outstanding loans under the 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 Knicks Revolving Credit Facility is greater than 350% of qualified revenues.


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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


In addition to the financial covenant described above, the Knicks Credit Agreement and the related security agreementagreements contain certain customary representations and warranties, affirmative covenants and events of default. The Knicks Revolving Credit AgreementFacility 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 Knicks Revolving Credit Agreement,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 Knicks Revolving Credit Agreement;Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any Knicks LLC’s collateral.
Knicks Unsecured Credit Facility
On September 30, 2016, Knicks LLC entered into an unsecured revolving credit facility with a lender for an initial maximum credit amount of $15,000 and a 364-day term (the “Knicks Unsecured Credit Facility”). Knicks LLC renewed this facility with the lender on the same terms in successive years and the facility has been renewed for a new term effective as of September 29, 2017. This facility27, 2019. There was undrawn0 borrowing under the Knicks Unsecured Credit Facility as of December 31, 2017.2019. This facility does not have financial covenants.
Rangers Revolving Credit Facility
On January 25, 2017, New York Rangers, LLC (“Rangers LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “Rangers Credit Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $150,000 with a term of five years (the “Rangers Revolving Credit Facility”) to fund working capital needs and for general corporate purposes. Amounts borrowed may be distributed to the Company except during an event of default.
The Rangers Revolving Credit Facility requires Rangers LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of December 31, 2017,2019, Rangers LLC was in compliance with this financial covenant.


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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


All borrowings under the 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 0.125% to 0.50% per annum or (ii) LIBOR plus a margin ranging from 1.125% to 1.50% 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 Rangers Revolving Credit Facility. TheThere was 0 borrowing under the Rangers Revolving Credit Facility was undrawn as of December 31, 2017.2019.
All obligations under the Rangers Revolving Credit Facility are secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i) Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S. and Canadian national broadcast agreements, and (iii) revenues to be paid to Rangers LLC pursuant to local media contracts.
Subject to customary notice and minimum amount conditions, Rangers LLC may voluntarily prepay outstanding loans under the 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 Rangers Revolving Credit Facility is less than 17% of qualified revenues.Facility.
In addition to the financial covenant described above, the Rangers Credit Agreement and the related security agreementagreements contain certain customary representations and warranties, affirmative covenants and events of default. The Rangers Revolving Credit AgreementFacility 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 Rangers Revolving Credit Agreement,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 Rangers Revolving Credit Agreement;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 Rangers Revolving Credit Facility.
TAO Credit Facilities
On May 23, 2019, Tao Group Intermediate Holdings LLC (“TAOIH” or “Intermediate Holdings”) and Tao Group Operating LLC (“TAOG” or “Senior Borrower”), entered into a credit agreement (the “Tao Senior Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and a letter of credit issuer, and the lenders party thereto. Together the Tao Senior Credit Agreement and a $49,000 intercompany subordinated credit agreement (the “Tao Subordinated Credit Agreement”) between a subsidiary of the Company and Tao Group Sub-Holdings LLC, a subsidiary of Tao Group Hospitality replaced the Senior Borrower’s prior credit agreement dated January 31, 2017 (“2017 Tao Credit Agreement”). The 2017 Tao Credit Agreement was terminated on May 23, 2019 in its entirety in accordance with its terms as a result of the repayment of all obligations thereunder from the proceeds of the Tao Senior Credit Agreement and the Tao Subordinated Credit Agreement as well as cash on hand. During the six months ended December 31, 2019, Tao Group Hospitality repaid $5,000 under the Tao Subordinated Credit Agreement. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement have been eliminated in the consolidated financial statements in accordance with ASC Topic 810, Consolidation.
The Tao Senior Credit Agreement provides TAOG with senior secured credit facilities (the “Tao Senior Secured Credit Facilities”) consisting of: (i) an initial $40,000 term loan facility with a term of five years (the “Tao Term Loan Facility”) and (ii) a $25,000 revolving credit facility with a term of five years (the “Tao Revolving Credit Facility”). Up to $5,000 of the Tao Revolving Credit Facility is available for the issuance of letters of credit. All borrowings under the Tao Revolving Credit Facility, including, without limitation, amounts drawn under the revolving line of credit are subject to the satisfaction of customary conditions. The Tao Senior Secured Credit Facilities were obtained without recourse to the Company or any of its affiliates (other than TAOG, TAOIH and its subsidiaries as discussed below).
The Tao Senior Credit Agreement requires Intermediate Holdings to comply with a maximum total leverage ratio of 4.00:1.00 and a maximum senior leverage ratio of 3.00:1.00 from the closing date until December 31, 2021 and a maximum total leverage ratio of 3.50:1.00 and a maximum senior leverage ratio of 2.50:1.00 from and after December 31, 2021. In addition, there is a minimum fixed charge coverage ratio of 1.25:1.00 for TAOIH. As of December 31, 2019, TAOIH was in compliance with these financial covenants.




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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)




TAOAll obligations under the Tao Senior Credit Facilities
On January 31, 2017, Agreement are guaranteed by TAOIH, TAOG, and certainTAOIH’s existing and future direct and indirect domestic subsidiaries (other than (i) TAOG, (ii) domestic subsidiaries substantially all of itswhose assets consist of controlled foreign corporations and (iii) subsidiaries entered into a credit and guaranty agreement with a syndicate of lenders providing for a senior secured term loan facility of $110,000 with a term of five yearsdesignated as immaterial subsidiaries or unrestricted subsidiaries) (the “TAO Term Loan Facility”) to fund, in part, the acquisition of TAO Group and a senior secured revolving credit facility of up to $12,000 with a term of five years (the “TAO Revolving Credit Facility,”“Tao Subsidiary Guarantors”, and together with TAOIH, the TAO Term Loan Facility,“Tao Guarantors”). All obligations under the “TAOTao Senior Credit Facilities”) for working capitalAgreement, including the guarantees of those obligations, are secured by substantially all of the assets of TAOG and general corporate purposeseach Guarantor (collectively, “Tao Collateral”), including, but not limited to, a pledge of the equity interests in TAOG. The TAO Credit Facilities were obtained without recourse to MSG or any of its affiliates (other than held directly by TAOIH and its subsidiaries).the equity interests in each Tao Subsidiary Guarantor held directly or indirectly by TAOIH.
The TAO Credit Facilities require TAOIH (i) to maintain, for the relevant TAO entities, a minimum consolidated liquidity of $5,000 at all times, (ii) to comply with a maximum total net leverage ratio of 4.00:1.00 initially and stepping down over time to 2.50:1.00 by the first quarter of calendar year 2021 and through the remainder of the term of the TAO Credit Facilities, and (iii) to comply with a minimum fixed charge coverage ratio of 1.50:1.00 initially and stepping down over time to 1.15:1.00 by the second quarter of calendar year 2021 and through the remainder of the term of the TAO Credit Facilities. TAOIH was in compliance with the financial covenants of the TAO Credit Facilities as of September 24, 2017 (the most recent date at which compliance was assessedBorrowings under the TAOTao Senior Credit Facilities). The TAO Revolving Credit Facility was undrawn as of December 31, 2017.
The TAO entities under the TAO Credit Facilities are also subject to certain limitations with respect to making capital expenditures based upon the total net leverage ratio and other factors. The restrictions on capital expenditures are subject to certain “carry-forward” provisions and other customary carve-outs.
All borrowings under the TAO Credit Facilities are subject to the satisfaction of certain customary conditions, including compliance with a maximum leverage multiple, accuracy of representations and warranties and absence of a default or event of default. BorrowingsAgreement bear interest at a floating rate, which at the option of TAOGthe Senior Borrower may be either (i) a base rate plus a marginan additional rate ranging from 6.50%1.50% to 7.00%2.50% per annum (determined based on a total leverage ratio) (the “Base Rate”), or (ii) LIBORa Eurocurrency rate plus a marginan additional rate ranging from 7.50%2.50% to 8.00%3.50% per annum.annum (determined based on a total leverage ratio) (the “Eurocurrency Rate”). The Tao Senior Credit Agreement requires TAOG is required to pay a commitment fee of 0.50% per annum in respect of the average daily unused commitments under the TAOTao Revolving Credit Facility. TAOG is also required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit pursuant to the Tao Senior Credit Agreement. The interest rate on the TAOTao Senior Credit FacilitiesAgreement as of September 24, 2017December 31, 2019 was 9.25%4.30%. TAO Group made interest paymentsThe outstanding amount drawn on the Tao Revolving Credit Facility was $15,000 as of June 30, 2019, which is reported under Long-term debt, net of deferred financing costs in the accompanying consolidated balance sheet. In addition to scheduled repayments required under the TAOTao Term Loan Facility, of $2,580 and $5,098 forTao Group Hospitality repaid the three and six months ended September 24, 2017 (the period for which TAO Group’s operating results are recorded in$15,000 outstanding balance under the Company’s consolidated statements of operations forTao Revolving Credit Facility during the three and six months ended December 31, 2017).
All obligations2019. There was 0 borrowing under the TAO Credit Facilities are secured by a first lien security interest in substantially all of the applicable TAO entities’ assets, including, but not limited to, a pledge of all of the capital stock of substantially all of TAOIH’s wholly-owned domestic subsidiaries and 65% of the voting capital stock, and 100% of the non-voting capital stock, of each of its first-tier foreign subsidiaries.
Subject to customary notice and minimum amount conditions, TAOG may voluntarily prepay outstanding loans under the TAO Credit Facilities at any time, in whole or in part (subject to customary breakage costs with respect to LIBOR loans) with premiums due in respect of prepayments of the TAO Term Loan Facility or permanent reduction under the TAOTao Revolving Credit Facility in each case, starting at 5.0% initiallyas of December 31, 2019.
During the six months ended December 31, 2019 and stepping down to 0% after three years. Beginning March 31, 2018, TAOG is required to make scheduled amortizationthe Company made interest payments of $1,218 and $5,489, respectively, under the TAO Term Loan Facility in consecutive quarterly installments equalTao Senior Credit Agreement and the 2017 Tao Credit Agreement.
In addition to $688 per quarter initially, stepping up over time to $4,125 per quarter by March 31, 2021the financial covenants described above, the Tao Senior Credit Agreement and through the final maturity daterelated security agreements contain certain customary representations and warranties, affirmative covenants and events of the TAO Term Loan Facility with the final balance payable on such maturity date. TAOG is also required to make mandatory prepayments under the TAOdefault. The Tao Senior Credit Facilities in certain circumstances, including, without limitation, 75% of excess cash flow, with a step-down to 50% when the total net leverage ratio is less than 2.00:1.00.
The TAO Credit Facilities containAgreement contains certain restrictions on the ability of TAOIH, the TAOG and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the TAOTao Senior Credit Facilities,Agreement, including, without limitation, the following: (i) incurring additional indebtedness;indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making distributions,investments, loans or advances in or to other persons; (iv) paying dividends and other restricted payments; (iv)distributions or repurchasing capital stock; (v) engaging in sale and leaseback transactions; (v)certain transactions with affiliates; (vi) amending specified agreements; (vii) merging or consolidating; (vi)(viii) making investments;certain dispositions; and (vii) prepaying(ix) entering into agreements that restrict the granting of liens. Intermediate Holdings is subject to a customary passive holding company covenant.
Subject to customary notice and minimum amount conditions, TAOG may voluntarily prepay outstanding loans under the Tao Senior Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). The initial Tao Term Loan Facility amortizes quarterly in accordance with its terms from June 30, 2019 through March 31, 2024 with a final maturity date on May 23, 2024. TAOG is required to make mandatory prepayments on the Tao Term Loan Facility from the net cash proceeds of certain indebtedness.sales of assets (including Tao Collateral) or casualty insurance and/or condemnation recoveries (in each case, subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.
See Note 1012 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 20172019 for more information regarding the Company’s debt maturities for the TAO Term Loan Facility.Tao Senior Secured Credit Facilities.




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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)




Deferred Financing Costs
The following table summarizes the presentation of the TAOTao Term Loan Facility and the related deferred financing costs in the accompanying consolidated balance sheets as of December 31, 20172019 and June 30, 2017.2019.
 December 31, 2017 December 31, 2019
 TAO Term Loan Facility Deferred Financing Costs Total Tao Term Loan Facility Deferred Financing Costs Total
Current portion of long-term debt, net of deferred financing costs $1,375
 $(939) $436
 $5,000
 $(208) $4,792
Long-term debt, net of deferred financing costs(a) 108,625
 (3,161) 105,464
 31,250
 (727) 30,523
Total $110,000
 $(4,100) $105,900
 $36,250
 $(935) $35,315
            
  June 30, 2019
  Tao Term Loan Facility Deferred Financing Costs Total
Current portion of long-term debt, net of deferred financing costs $6,250
 $(208) $6,042
Long-term debt, net of deferred financing costs (a)
 33,750
 (831) 32,919
Total $40,000
 $(1,039) $38,961
_________________
(a)
In addition to the outstanding balance associated with the Tao Term Loan Facility disclosed above, the Company’s Long-term debt, net of deferred financing costs in the accompanying consolidated balance sheets also includes $637 related to a note with respect to a loan received by BCE from its noncontrolling interest holder that is due in April 2021 as of December 31, 2019 and June 30, 2019, and $15,000 outstanding balance under the Tao Revolving Credit Facility as of June 30, 2019.
  June 30, 2017
  TAO Term Loan Facility Deferred Financing Costs Total
Current portion of long-term debt, net of deferred financing costs $—
 $—
 $—
Long-term debt, net of deferred financing costs 110,000
 (4,567) 105,433
Total $110,000
 $(4,567) $105,433

The following table summarizes deferred financing costs, net of amortization, related to the Knicks Revolving Credit Facility, Knicks Unsecured Credit Facility, Rangers Revolving Credit Facility, and TAOTao Revolving Credit Facility as reported on the accompanying consolidated balance sheets as of December 31, 2017 and June 30, 2017.sheet:
  December 31,
2019		 June 30,
2019
Other current assets $760
 $760
Other assets 892
 1,273
  December 31,
2017		 June 30,
2017
Other current assets $778
 $806
Other assets 2,296
 2,784



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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 1213. Pension Plans and Other Postretirement Benefit Plan
See Note 1113 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 20172019 for more information regarding the Company’s defined benefit pension plans (“Pension Plans”), postretirement benefit plan (“Postretirement Plan”), The Madison Square Garden 401(k) Savings Plan and the MSG Sports & Entertainment, LLC Excess Savings Plan (collectively, the “Savings Plans”), and The Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”).


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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Defined Benefit Pension Plans and Postretirement Benefit Plan
ComponentsThe following table presents components of net periodic benefit cost for the Pension Plans and Postretirement Plan recognized in direct operating expenses and selling, general and administrative expensesincluded in the accompanying consolidated statements of operations for the three and six months ended December 31, 20172019 and 20162018. Service cost is recognized in Direct operating expenses and Selling, general and administrative expenses. All other components of net periodic benefit cost are as follows:

reported in Miscellaneous income (expense), net.
         
  Pension Plans Postretirement Plan
  Three Months Ended Three Months Ended
  December 31, December 31,
  2019 2018 2019 2018
Service cost $20
 $20
 $17
 $27
Interest cost 1,328
 1,473
 27
 57
Expected return on plan assets (1,328) (782) —
 —
Recognized actuarial loss 344
 318
 2
 10
Amortization of unrecognized prior service credit —
 —
 —
 (2)
Net periodic benefit cost $364
 $1,029
 $46
 $92
 Pension Plans Postretirement Plan Pension Plans Postretirement Plan
 Three Months Ended Three Months Ended Six Months Ended Six Months Ended
 December 31, December 31, December 31, December 31,
 2017 2016 2017 2016 2019 2018 2019 2018
Service cost $21
 $23
 $32
 $34
 $48
 $40
 $35
 $55
Interest cost 1,374
 1,240
 51
 40
 2,656
 2,946
 55
 115
Expected return on plan assets (721) (596) —
 —
 (2,659) (1,563) —
 —
Recognized actuarial loss 280
 344
 —
 —
 680
 636
 5
 20
Amortization of unrecognized prior service credit —
 —
 (6) (13) —
 —
 —
 (3)
Net periodic benefit cost $954
 $1,011
 $77
 $61
 $725
 $2,059
 $95
 $187

  Pension Plans Postretirement Plan
  Six Months Ended Six Months Ended
  December 31, December 31,
  2017 2016 2017 2016
Service cost $42
 $46
 $63
 $68
Interest cost 2,613
 2,480
 90
 81
Expected return on plan assets (1,317) (1,192) —
 —
Recognized actuarial loss 620
 688
 —
 —
Amortization of unrecognized prior service credit —
 —
 (18) (25)
Net periodic benefit cost $1,958
 $2,022
 $135
 $124


Defined Contribution Pension Plans
For the three and six months ended December 31, 20172019 and 2016,2018, expenses related to the Savings Plans and Union Savings Plan included in the accompanying consolidated statements of operations are as follow:follows:
 Savings Plans Union Savings Plan
 Three Months Ended Six Months Ended Three Months Ended Six Months Ended
 December 31, December 31, December 31, December 31,
 2019 2018 2019 2018 2019 2018 2019 2018
 $2,883
 $3,076
 $5,510
 $5,376
 $31
 $26
 $53
 $48
Savings Plans Union Savings Plan
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2017 2016 2017 2016 2017 2016 2017 2016
$1,919
 $1,984
 $4,142
 $3,946
 $55
 $28
 $80
 $50



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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 1314. Share-based Compensation
See Note 1214 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 20172019 for more information regarding the Company’s 2015 Employee Stock Plan (the “Employee Stock Plan”) and its 2015 Stock Plan for Non-Employee Directors.


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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


ForShare-based compensation expense was $16,694 and $20,215 for the three months ended December 31, 20172019 and 2016, share-based compensation expense was recognized in the consolidated statements of operations as a component of direct operating expenses or selling, general2018, respectively, and administrative expenses$33,585 and was $13,912 and $11,743, respectively. For$30,404 for the six months ended December 31, 20172019 and 2016,2018, respectively. In addition, capitalized share-based compensation expense was $26,816$1,232 and $20,098, respectively.
Upon the adoption of ASU No. 2016-09, the Company elected to account for forfeitures as they occur on a prospective basis effective July 1, 2017, rather than estimating expected forfeitures as was required under the prior guidance. See “Note 2. Accounting Policies — Recently Issued Accounting Pronouncements” for further discussion on the impact from the adoption of ASU 2016-09.
In addition,$2,482 for the Company’s stock option awards, the Company applies the fair value recognition provisions of ASC Topic 718 “Compensation — Stock Compensation”. ASC Topic 718 requires companiesthree and six months ended December 31, 2019, respectively. There were 0 costs related to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company determines the fair value as of the grant date. For awards with graded vesting conditions, the values of the awards are determined by valuing all vesting tranches in the aggregate as one award using an average expected term. For stock options, the Black-Scholes option pricing model considers, among other factors, the expected life of the award and the expected volatility of the Company’s stock price.
The Company determines its assumptionscompensation that were capitalized for the Black-Scholes option-pricing model in accordance with ASC Topic 718three and SEC Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based Payment” based on the following:
The expected term of stock options is estimated using the simplified method.
The expected risk-free interest rate is based on the U.S. Treasury interest rate which term is consistent with the expected term of the stock options.
The expected volatility is based on the historical volatility of the Company’s stock price.
Insix months ended December 2007, the SEC staff issued SAB No. 110, “Certain Assumptions Used In Valuation Methods — Expected Term”. SAB No. 110 allows companies to continue to use the simplified method, as defined in SAB No. 107, to estimate the expected term of stock options under certain circumstances. The simplified method for estimating expected term uses the mid-point between the vesting term and the contractual term of the stock option. The Company has analyzed the circumstances in which the use of the simplified method is allowed. The Company has opted to use the simplified method for stock options the Company granted in fiscal year 2018 because management believes that the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

31, 2018.
Restricted Stock Units Award Activity
The following table summarizes activity related to holders (including the Company’s and MSG Networks’ employees) of the Company’s restricted stock units and performance restricted stock units, collectively referred to as “RSUs,” for the six months ended December 31, 2017:2019:
 Number of 
Weighted-Average
Fair Value 
Per Share at
Date of Grant
 
Nonperformance
Based Vesting
RSUs
 
Performance
Based Vesting
RSUs
 
Unvested award balance, June 30, 2019229
 359
 $252.02
Granted (a)
123
 114
 $247.18
Vested(107) (121) $213.94
Forfeited(6) (11) $261.55
Unvested award balance, December 31, 2019239
 341
 $264.75
_____________________
 Number of 
Weighted-Average
Fair Value 
Per Share At
Date of Grant
 
Nonperformance
Based
Vesting
RSUs
 
Performance
Based
Vesting
RSUs
 
Unvested award balance, June 30, 2017208
 464
 $172.78
  Granted103
 180
 $211.15
Vested(88) (249) $176.90
Forfeited(8) (127) $183.20
Unvested award balance, December 31, 2017215
 268
 $189.51


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


(a)
Includes incremental performance based RSUs (“PRSUs”) that were historically reported at a target payout of 100%. Upon meeting the performance objectives, the number of PRSUs vested at 105.5% of target.
The fair value of RSUs that vested during the six months ended December 31, 20172019 was $74,582.$59,032. Upon delivery, RSUs granted under the Employee Stock Plan were net share-settled to cover the required statutory tax withholding obligations. To fulfill the employees’ required statutory minimum tax withholding obligations for the applicable income and other employment taxes, 57101 of these RSUs, with an aggregate value of $12,232$26,264 were retained by the Company and the taxes paid are reflected as financing activity in the accompanying consolidated statement of cash flows for the six months ended December 31, 2017.2019.
The fair value of RSUs that vested during the six months ended December 31, 20162018 was $15,209.$50,371. The weighted-average fair value per share at grant date of RSUs granted during the six months ended December 31, 20162018 was $170.98.$305.40.
Stock Options Award Activity
The following table summarizes activity related to a holder of the Company’s stock options for the six months ended December 31, 2017:2019:
 
Number of
Time Vesting Options
 Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term (In Years) Aggregate Intrinsic Value
    
Balance as of June 30, 2019543
 $325.47
   
Granted—
 $—
    
Balance as of December 31, 2019543
 $325.47
 6.55 $7,887
Exercisable as of December 31, 2019175
 $299.67
 6.87 $5,258
 Number of Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term (In Years) Aggregate Intrinsic Value
 Nonperformance Based Vesting Options Performance Based Vesting Options   
Balance as of June 30, 2017—
 —
 $—
   $—
Granted94
 —
 $210.13
    
Balance as of December 31, 201794
 —
 $210.13
 9.96
 $68
Exercisable as of December 31, 2017—
 —
 $—
 —
 $—
During the six months ended December 31, 2017, the Company granted 94 stock options that vest ratably over three years and are being expensed on a straight-line basis over the vesting period of the stock options. The maximum contractual term is 10 years. The Company calculated the fair value of these options on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted-average grant-date fair value of $53.29.
The following are key assumptions used to calculate the weighted-average grant-date fair value of stock options:
Expected term6 years
Expected volatility20.38%
Risk-free interest rate2.22%



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Note 14.15. Stock Repurchase Program
On September 11, 2015, the Company’s board of directorsBoard authorized the repurchase of up to $525,000 of the Company’s Class A Common Stock once the shares of the Company’s Class A Common Stock began “regular way” trading on October 1, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors.
During the three and six months ended December 31, 2017,2019, the Company repurchased 56 shares of Class A Common Stock for a total cost of $11,685, including commissions and fees. These acquired shares have been classified as treasury stockdid not engage in the accompanying consolidated balance sheet as of December 31, 2017.any share repurchase activities under its share repurchase program. As of December 31, 2017,2019, the Company had $259,639 of availability remaining under its stock repurchase authorization.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 15.16. Accumulated Other Comprehensive Loss
The following table details the components of accumulated other comprehensive loss:
 
Pension Plans and
Postretirement
Plan (a)
 Cumulative Translation Adjustments 
Unrealized Gain on Available-for-sale
Securities
 
Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2017$(39,408) $—
 $5,293
 $(34,115)
Other comprehensive income (loss) before reclassifications, before income taxes—
 2,277
 (8,213) (5,936)
Amounts reclassified from accumulated other comprehensive loss, before income taxes602
 —
 —
 602
Other comprehensive income (loss)602
 2,277
 (8,213) (5,334)
Balance as of December 31, 2017$(38,806) $2,277
 $(2,920) $(39,449)
        
Balance as of June 30, 2016$(42,611) $—
 $—
 $(42,611)
Other comprehensive income before reclassifications, before income taxes—
 —
 10,175
 10,175
Amounts reclassified from accumulated other comprehensive loss, before income taxes663
 —
 —
 663
Other comprehensive income663
 —
 10,175
 10,838
Balance as of December 31, 2016$(41,948) $—
 $10,175
 $(31,773)
 Three Months Ended December 31, 2019
 
Pension Plans and
Postretirement
Plan
 Cumulative Translation Adjustments 
Accumulated
Other
Comprehensive
Loss
Balance as of September 30, 2019$(41,741) $(14,861) $(56,602)
Other comprehensive income before reclassifications—
 23,186
 23,186
Amounts reclassified from accumulated other comprehensive loss (a)
346
 —
 346
Other comprehensive income346
 23,186
 23,532
Balance as of December 31, 2019$(41,395) $8,325
 $(33,070)
 Three Months Ended December 31, 2018
 
Pension Plans and
Postretirement
Plan
 Cumulative Translation Adjustments 
Accumulated
Other
Comprehensive
Loss
Balance as of September 30, 2018$(40,519) $(1,453) $(41,972)
Other comprehensive loss before reclassifications—
 (2,251) (2,251)
Amounts reclassified from accumulated other comprehensive loss (a)
326
 —
 326
Other comprehensive income (loss)326
 (2,251) (1,925)
Balance as of December 31, 2018$(40,193) $(3,704) $(43,897)
      
 Six Months Ended December 31, 2019
 
Pension Plans and
Postretirement
Plan
 Cumulative Translation Adjustments 
Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2019$(42,080) $(4,843) $(46,923)
Other comprehensive income before reclassifications—
 13,168
 13,168
Amounts reclassified from accumulated other comprehensive loss (a)
685
 —
 685
Other comprehensive income685
 13,168
 13,853
Balance as of December 31, 2019$(41,395) $8,325
 $(33,070)


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


        
 Six Months Ended December 31, 2018
 
Pension Plans and
Postretirement
Plan
 Cumulative Translation Adjustments 
Unrealized Gain (Loss) on Available-for-sale
Securities (b)
 
Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2018$(40,846) $(502) $(5,570) $(46,918)
Reclassification of unrealized loss on available-for-sale securities—
 —
 5,570
 5,570
Other comprehensive income (loss) before reclassifications—
 (3,202) —
 (3,202)
Amounts reclassified from accumulated other comprehensive loss (a)
653
 —
 —
 653
Other comprehensive income (loss)653
 (3,202) —
 (2,549)
Balance as of December 31, 2018$(40,193) $(3,704) $—
 $(43,897)
________________
(a) 
Amounts reclassified from accumulated other comprehensive loss before income taxes, represent the amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected in direct operating expenses and selling, general and administrative expensesunder Miscellaneous income (expense), net in the accompanying consolidated statements of operations (see Note 12).operations.
(b)
As of July 1, 2018, upon adoption of ASU No. 2016-01, the Company recorded a transition adjustment to reclassify accumulated other comprehensive loss associated with its investment in Townsquare in the amount of $2,466 pre-tax ($5,570, net of tax) to accumulated deficit. See Notes 11 and 19 for more information related to the investment in Townsquare and its impact on the Company’s operating results for the three and six months ended December 31, 2019 and 2018, which is reflected under Miscellaneous income (expense), net in the accompanying consolidated statements of operations.
Note 16.17. Income Taxes
On December 22, 2017, new tax legislation, commonly referred to as the Tax Cuts and Jobs Act, was enacted, which significantly changed the existing U.S. tax laws, including a reduction in the corporate Federal income tax rate from 35% to 21% effective January 1, 2018. The Company is required to recognize the effect of tax law changes in the period of enactment even though certain key aspects of the new law became effective January 1, 2018. The Company’s income tax provision for interim periods is comprised of the tax on ordinary income (loss) provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. The Company used a blended statutory Federal income rate of 28% based upon the number of days that it will be taxed at the former rate of 35% and the number of days it will be taxed at the new rate of 21% to calculate its most recent estimated annual effective tax rate.
Income tax expense (benefit) for the three months ended December 31, 20172019 of $1,176 differs from income tax expense derived from applying the statutory federal rate of 21% to pretax income primarily due to a tax benefit related to a decrease in valuation allowance of $33,637 and 2016 was $(116,832)excess tax benefit related to share-based compensation awards of $450, partially offset by state income tax expense of $11,862 and $3,248, respectively. Fortax expense from nondeductible officers’ compensation of $1,547.
Income tax expense for the six months ended December 31, 2017 and 2016,2019 of $1,604 differs from income tax expense (benefit) was $(116,070)derived from applying the statutory federal rate of 21% to pretax income primarily due to a tax benefit related to a decrease in valuation allowance of $6,927 and $314, respectively.excess tax benefit related to share-based compensation awards of $3,960, partially offset by state income tax expense of $4,127 and tax expense from nondeductible officers’ compensation of $3,008.
Income tax benefitexpense for the three months ended December 31, 20172018 of $116,832$656 differs from the income tax expense derived from applying the blended statutory Federalfederal rate of 28%21% to pretax income primarily as a result of a deferred income tax benefit of $113,494 related to the revaluation of the Company’s deferred tax assets and liabilities under provisions contained in the new tax legislation, of which (i) $51,015 was due to the reduction of net deferred tax liabilities in connection with the lower Federal income tax rate of 21%, and (ii) $62,479 was due to a reductiontax benefit related to a decrease in the valuation allowance attributableof $30,310, partially offset by (i) state income tax expense of $10,642, (ii) tax expense of nondeductible officers’ compensation of $1,680, and (iii) tax expense relating to noncontrolling interest of $1,159.
Income tax expense for the new rules, which providesix months ended December 31, 2018 of $1,352 differs from income tax expense derived from applying the statutory federal rate of 21% to pretax income primarily due to a tax benefit related to a decrease in valuation allowance of $18,976 and excess tax benefit related to share-based compensation awards of $5,793, partially offset by (i) state income tax expense of $7,547, (ii) tax expense relating to nondeductible officers’ compensation of $5,333, and (iii) tax expense relating to noncontrolling interest of $1,545.
The Company was notified during the third quarter of fiscal year 2018 that future Federal net operating losses havethe Internal Revenue Service (“IRS”) was commencing an unlimited carry-forward period. These rules on future Federal net operating losses allowaudit of the federal income tax return for the year ended June 30, 2016. In October 2019, the Company to recognize a portion of its unrecognized deferred tax assets for future deductible items. Other decreases towas informed by the statutory rate includeIRS that the impact of an income tax benefit of $27,059audit resulted in Federal and state valuatno changes.




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(Continued)




ion allowance decreases recorded which offsets the income tax expense attributable to most of the operating income, and the impact of a change in state tax rate of $3,241. These decreases were partially offset by the impact of state and local income taxes (net of Federal benefit) of $6,494 and tax expense of $430 primarily related to non-deductible expenses.
Income tax benefit for the six months ended December 31, 2017 of $116,070 differs from the income tax expense derived from applying the blended statutory Federal rate of 28% to pretax income primarily as a result of a deferred income tax benefit of $113,494 related to the revaluation of the Company’s deferred tax assets and liabilities under provisions contained in the new tax legislation, of which (i) $51,015 was due to the reduction of net deferred tax liabilities in connection with the lower Federal income tax rate of 21%, and (ii) $62,479 was due to a reduction in the valuation allowance attributable to the new rules, which provide that future Federal net operating losses have an unlimited carry-forward period. These rules on future Federal net operating losses allow the Company to recognize a portion of its unrecognized deferred tax assets for future deductible items. Other decreases to the statutory rate include the impact of an income tax benefit of $24,399 in Federal and state valuation allowance decreases recorded which offsets the income tax expense attributable to most of the operating income, and the impact of a change in state tax rate of $3,110. These decreases were partially offset by the impact of state and local income taxes (net of Federal benefit) of $6,494 and tax expense of $1,237 primarily related to non-deductible expenses.
Income tax expense for the three months ended December 31, 2016 of $3,248 differs from income tax expense derived from applying the statutory Federal rate of 35% to pretax income primarily as a result of a reduction of $22,123 of recorded Federal and state valuation allowances which offsets tax expense that would otherwise have been recorded on operating income. The tax expense also includes $3,126 to reverse a tax benefit recorded on operating losses in the three months ended September 30, 2016, as well as tax expense of $1,012 primarily related to non-deductible expenses.
Income tax expense for the six months ended December 31, 2016 of $314 differs from income tax expense derived from applying the statutory Federal rate of 35% to pretax income primarily as a result of a reduction of $11,115 of recorded Federal and state valuation allowances which offsets tax expense that would have otherwise been recorded on operating income. The income tax expense also reflects tax expense of $1,342 primarily related to non-deductible expenses.
The Company has not recorded any unrecognized tax benefits for uncertain tax positions as of December 31, 2017 and June 30, 2017. The Company’s policy is to reflect interest and penalties associated with uncertain tax positions, if any, as a component of income tax expense.
Note 17.18. Related Party Transactions
As of December 31, 2017,2019, members of the Dolan family including trusts for members of the Dolan family (collectively, the “Dolan Family Group”), for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, collectively beneficially own all of the Company’s outstanding Class B Common Stock and own approximately 2.8%3.5% of the Company’s outstanding Class A Common Stock. Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately 71.3%71.1% of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan family are also the controlling stockholders of MSG Networks and AMC Networks Inc. (“AMC Networks”).
In connection with the Distribution, theThe Company entered intohas various agreements with MSG Networks, including media rights agreements covering the Knicks and the Rangers games, an advertising sales representation agreement, and a transition services agreement (“TSA”(the “Services Agreement”). The TSA expired on September 30, 2017. The Company entered into a new services agreementPursuant to the Services Agreement, which was effective July 1, 2017, which2018, the Company provides for each partycertain services to furnish substantially the same services,MSG Networks, such as information technology, accounts payable and payroll, human resources, and other corporate functions, as well as the executive support services described below, in exchange for service fees.
Beginning in The Services Agreement expired on June 2016,30, 2019. The Company entered into an interim agreement with MSG Networks, pursuant to which the parties are providing the same services on the same terms. The Company expects to enter into a new services agreement this calendar year, which will be retroactive to July 1, 2019. MSG Networks also provides certain services to the Company, agreed to sharein exchange for service fees.
The Company shares certain executive support costs, including office space, executive assistants, security and transportation costs, for (i) the Company’s Executive Chairman and Chief Executive Officer with MSG Networks and (ii) the Company’s Vice Chairman with MSG Networks and AMC Networks.
On June 16, 2016, the Company entered into an arrangement with the Dolan Family Office, LLC (“DFO”), an entity owned and controlled by Charles F. Dolan, AMC Networks and MSG Networks providing for the sharing of certain expenses associated with executive office space which will beis available to James L. Dolan (the Executive Chairman, Chief Executive Officer and a director of the Company, the Executive Chairman and a director of MSG Networks, and a director of AMC Networks), Charles F. Dolan (the father of James L. Dolan and the Executive Chairman and a director of AMC Networks and a director of the Company and MSG Networks)Networks), and the DFO which is controlled by Charles F. Dolan.
On January 11, 2017, Effective September 2018, the Company throughis no longer party to this arrangement.
The Company is a wholly-owned subsidiary,party to various Aircraft Support Services Agreements (the “Support Agreements”), pursuant to which the Company provides certain aircraft support services to entities controlled by (i) the Company’s Executive Chairman, Chief Executive Officer and a director, (ii) Charles F. Dolan, a director of the Company, and (iii) Patrick F. Dolan, the son of Charles F. Dolan and brother of James L. Dolan. On December 17, 2018, the Company terminated the agreement providing services to the entity controlled by Charles F. Dolan, and entered into a new agreement with Charles F. Dolan and certain of his children, who are siblings of James L. Dolan, specifically: Thomas C. Dolan (a director of the Company), Deborah Dolan-Sweeney, Patrick F. Dolan, Marianne Dolan Weber (a director of the Company), and Kathleen M. Dolan, which provides substantially the same services as the prior agreement for a new aircraft.
In addition, the Company is party to reciprocal time sharing/dry lease agreements with each of (i) Quart 2C, LLC (“Q2C”), a company controlled by the Company’s Executive Chairman, Chief Executive Officer and a director, and Kristin A. Dolan, his spouse and a director of the Company, and (ii) Charles F. Dolan and Sterling Aviation, LLC, a company controlled by Charles F. Dolan (collectively, “CFD”), pursuant to which the Company has agreed from time to time to make its aircraft available to each of Q2C and CFD, and Q2C, and CFD have agreed from time to time to make their aircraft available to the Company. Pursuant to the terms of the agreements, Q2C and/or CFD may lease on a non-exclusive, “time sharing” basis, the Company’s Gulfstream Aerospace G550 aircraft (the “G550 Aircraft”). On December 17, 2018, in connection with the purchase of a new aircraft (as noted above), the Company replaced the dry lease agreement with CFD with a new dry lease agreement with Sterling2k LLC, an entity owned and controlled by Deborah Dolan-Sweeney, the daughter of Charles F. Dolan and the sister of the Company’s Executive Chairman and Chief Executive Officer, which provides for the Company’s usage of the new aircraft on the same terms as the prior agreement.




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James L.On May 6, 2019, the Company entered into a dry lease agreement with Brighid Air, LLC (“Brighid Air”), a company owned and controlled by Patrick F. Dolan, the son of Charles F. Dolan and the brother of the Company’s Executive Chairman, Chief Executive Officer and director, and Kristin A. Dolan, his wife and a director, of the Company, entered into reciprocal aircraft lease agreements pursuant to which the Company and Q2C have agreed from time to time to make available formay lease each party’s aircraft to the other party on a non-exclusive basis for rent at an hourly rate and specified expenses of each flight. On February 8, 2017,Brighid Air’s Bombardier BD100-1A10 Challenger 350 aircraft (the “Challenger”). In connection with the dry lease agreement, on May 6, 2019 the Company throughalso entered into a wholly-owned subsidiary,Flight Crew Services Agreement (the “Flight Crew Agreement”) with DFO, an entity owned and controlled by Charles F. Dolan, pursuant to which the Company may utilize pilots employed by DFO for purposes of flying the Challenger when the Company is leasing that aircraft under the Company’s dry lease agreement with Brighid Air.
The Company and each of MSG Networks and AMC Networks entered intoare party to certain aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make the aircraft owned or leased by it available to AMC Networks for lease on a “time sharing” basis.
On May 22, 2017, the Company, through a wholly-owned subsidiary, and Charles F. Dolan, a director of the Company, entered into an aircraft dry lease agreement pursuant to which the Company has agreed to make available for lease its G550 aircraft on a non-exclusive basis for rent at an hourly rate and specified expenses of each flight. Additionally, on May 22, 2017, the Company, through a wholly-owned subsidiary, and Sterling Aviation, LLC, a company controlled by Charles F. Dolan, also entered into a reciprocal aircraft dry lease agreement pursuant to which Sterling Aviation, LLC has agreed to make available for lease its GV aircraft on a non-exclusive basis for rent at an hourly rate and specified expenses of each flight.
The Company, through a wholly-owned subsidiary, and MSG Networks are party to an aircraft time sharing agreement, pursuant to which the Company has agreed from time to time to make its aircraft available to MSG Networks and/or AMC Networks for lease on a “time sharing” basis. Additionally, the Company, MSG Networksand MSGAMC Networks have agreed on an allocation of the costs of certain helicopter use by its shared executives.
In addition to the aircraft arrangements described above, certain executives of the Company are party to aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make certain aircraft available for lease on a “time sharing” basis for personal use in exchange for payment of actual expenses of the flight (as listed in the agreement).
From time to time the Company enters into arrangements with 605, LLC. Kristin A. Dolan, a director of the Company and spouse of James L. Dolan, is the founder and Chief Executive Officer of 605, LLC.  James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, and Kristin A. Dolan own 50% of 605, LLC. 605, LLC provides audience measurement and data analytics services to the Company and its subsidiaries in the ordinary course of business.
As of December 31, 2019 and June 30, 2019, BCE had $637 of notes payable. See Note 12 for further information.
The Company has also hasentered into certain arrangementscommercial agreements with its nonconsolidated affiliates. See Note 6 for information on outstanding loans provided byaffiliates in connection with MSG Sphere. For the six months ended December 31, 2019, the Company recorded approximately $7,370 of capital expenditures in connection with services provided to its nonconsolidated affiliates.the Company under these agreements.
Revenues and Operating Expenses (Credits)
The following table summarizes the composition and amounts of the transactions with the Company’s affiliates, primarily MSG Networks. These amounts are reflected in revenues and operating expenses in the accompanying consolidated statements of operations for the three and six months ended December 31, 20172019 and 2016:2018:
  Three Months Ended December 31, Six Months Ended December 31,
  2019 2018 2019 2018
Revenues $67,500
 $65,012
 $74,564
 $71,746
Operating expenses (credits):        
Corporate general and administrative expenses, net — MSG Networks $(2,602) $(2,772) $(5,204) $(5,276)
Consulting fees —
 842
 —
 1,792
Advertising expenses 101
 278
 144
 346
Other operating expenses, net (103) 205
 (14) 186



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

  Three Months Ended December 31, Six Months Ended December 31,
  2017 2016 2017 2016
Revenues $41,131
 $39,040
 $77,041
 $72,881
Operating expenses (credits):        
Corporate general and administrative, net - MSG Networks $(2,494) $(2,406) $(4,950) $(4,895)
Consulting fees 1,014
 942
 2,029
 1,919
Advertising expenses 594
 475
 630
 595
Other, net 125
 (152) 238
 (134)

Revenues
Revenues from related parties primarily consist of local media rights recognized by the Company’sMSG Sports segment from the licensing of team-related programming to MSG Networks under the media rights agreements covering the Knicks and Rangers, which provide MSG Networks with exclusive media rights to team games in their local markets, as well as commissions earned in connection with the advertising sales representation agreement pursuant to which the Company has the exclusive right and obligation to sell MSG Networks’ advertising availabilities. In addition,As a result of the timing of recognition of media rights revenue, the Company recorded deferred revenue of $9,403 in the accompanying consolidated balance sheets as of December 31, 2019. The Company had 0 deferred revenue related to local media rights with MSG Networks as of June 30, 2019.
The Company and Tribeca Enterprises have a service agreement pursuant to which the Company provides marketing inventory, advertising sales and consulting services to Tribeca Enterprises for a fee. On August 5, 2019, the Company sold its equity capital in Tribeca Enterprises. Accordingly, Tribeca Enterprises is no longer a related party of the Company, and thus the related party transactions disclosed herein that relate to Tribeca Enterprises were recognized prior to August 5, 2019. The Company is also a party to certain commercial arrangements with AMC Networks and its subsidiaries.
Corporate General and Administrative Expense,Expenses, net - — MSG Networks
The Company’s corporate overhead expenses that are charged to MSG Networks are primarily related to centralized functions, including executive compensation, finance, treasury, tax, internal audit, legal, information technology, human resources and risk management functions. For the three and six months ended December 31, 2017, corporate
Corporate general and administrative expense,expenses, net - MSG Networks amount


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


reflects charges from the Company to MSG Networks under the Services Agreement of $2,274$2,641 and $4,477, respectively, net of general and administrative costs charged to the Company by MSG Networks, under a new services agreement, which became effective July 1, 2017.
For$2,779 for the three months ended December 31, 2019 and 2018, respectively, and $5,282 and $5,287 for the six months ended December 31, 2016, corporate general2019 and administrative expense, net - MSG Networks amount reflects charges from the Company to MSG Networks of $2,118 and $4,166, respectively, net of general and administrative costs charged to the Company by MSG Networks, under the TSA, which expired on September 30, 2017.2018, respectively.
Consulting Fees

On December 5, 2018, the Company’s joint venture interest in AMSGE was sold to Azoff Music, which resulted in the Company no longer being an owner of AMSGE (renamed The Azoff Company). Accordingly, The Azoff Company pays is not a related party of the Company, and thus the related party transactions disclosed herein that relate to AMSGE were recognized prior to December 5, 2018. Prior to the sale of AMSGE, the Company paid AMSGE and its nonconsolidated affiliates for advisory and consulting services that AMSGE and its nonconsolidated affiliates provide to the Company, and for the reimbursement of certain expenses in connection with such services. In the fourth quarter of fiscal year 2016, the Company paid $5,000 to AMSGE for work performed towards securing the right to lease property to be developed in Las Vegas. That amount is included in other assets in the accompanying consolidated balance sheets as of December 31, 2017 and June 30, 2017 and will be amortized over the term of the lease.
Advertising Expenses
The Company incurs advertising expenses for services rendered by its related parties, primarily MSG Networks, most of which are related to the utilization of advertising and promotional benefits by the Company.
Other Operating Expenses, net
The Company and its related parties enter into transactions with each other in the ordinary course of business. Amounts charged to the Company for other transactions with its related parties are net of amounts charged by the Company to the Knickerbocker Group, LLC, an entity owned by James L. Dolan, the Executive Chairman, Chief Executive Officer and a director of the Company, for office space equal to the allocated cost of such space and the cost of certain technology services. In addition, other operating expenses include net charges relating to (i) reciprocal aircraft arrangements between the Company and each of Q2C and DFO/Sterling Aviation, LLCCFD and (ii) time sharing agreements with MSG Networks and AMC Networks.


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Note 18.19. Segment Information
The Company is comprised of two2 reportable segments: MSG Entertainment and MSG Sports. In determining its reportable segments, the Company assessed the guidance of FASB ASC 280-10-50-1, which provides the definition of a reportable segment. In accordance with the FASBFASB’s guidance, the Company takes into account whether two or more operating segments can be aggregated together as one reportable segment as well as the type of discrete financial information that is available and regularly reviewed by its chief operating decision maker. The Company has evaluated this guidance and determined that there are two reportable segments. The Company allocates certain corporate costs and its performance venue operating expenses to each of its reportable segments. Allocated venue operating expenses include the non-event related costs of operating the Company’s venues, and include such costs as rent for the Company’s leased venues, real estate taxes, insurance, utilities, repairs and maintenance, and labor related to the overall management of the venues. Depreciation and amortization expense related to The Garden, TheHulu Theater at Madison Square Garden, the Forum, and certain corporate property, equipment and leasehold improvements not allocated to the reportable segments is reported in “Corporate and Other.” Additionally, the Company does not allocate any purchase accounting adjustments to the reporting segments.
The Company evaluates segment performance based on several factors, of which the key financial measure is their operating income (loss) before (i) depreciation, amortization and impairments of property and equipment and intangible assets, (ii) share-based compensation expense or benefit, (iii) restructuring charges or credits, and (iv) gains or losses on sales or dispositions of businesses, which is referred to as adjusted operating income (loss), a non-GAAP measure. In addition to excluding the impact of the items discussed above, the impact of purchase accounting adjustments related to business acquisitions is also excluded in evaluating the Company’s consolidated adjusted operating income (loss). Because it is based upon operating income (loss), adjusted operating income (loss) also excludes interest expense (including cash interest expense) and other non-operating income and expense items. Management believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash. The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis. 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.


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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


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).
Information as to the operations of the Company’s reportable segments is set forth below.

 
   Three Months Ended December 31, 2017
   
MSG
Entertainment
 
MSG
Sports
 Corporate and Other Purchase
accounting adjustments		 Total
Revenues  $271,216
 $265,086
 $—
 $—
 $536,302
Direct operating expenses  147,045
 163,683
 20
 1,133
 311,881
Selling, general and administrative expenses
(a) 
 45,278
 50,230
 25,932
 —
 121,440
Depreciation and amortization
(b) 
 4,362
 1,849
 19,589
 4,744

30,544
Operating income (loss)  $74,531
 $49,324
 $(45,541) $(5,877) $72,437
Loss in equity method investments          (2,608)
Interest income          5,378
Interest expense          (3,798)
Miscellaneous expense
(e) 
         (250)
Income from operations before income taxes          $71,159
            
Reconciliation of operating income (loss) to adjusted operating income (loss):           
Operating income (loss)  $74,531
 $49,324
 $(45,541) $(5,877) $72,437
Add back:           
Share-based compensation  3,051
 3,905
 6,956
 —
 13,912
Depreciation and amortization  4,362
 1,849
 19,589
 4,744
 30,544
Other purchase accounting adjustments  —
 —
 —
 1,133
 1,133
Adjusted operating income (loss)  $81,944
 $55,078
 $(18,996) $—
 $118,026
            
Other information:           
Capital expenditures
(c) 
 $3,407
 $588
 $104,150
 $—
 $108,145



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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)




Information as to the operations of the Company’s reportable segments is set forth below.
 Three Months Ended December 31, 2016 Three Months Ended December 31, 2019
 
MSG
Entertainment
 
MSG
Sports
 Corporate and Other Purchase
accounting adjustments		 Total MSG
Entertainment		 MSG
Sports		 Corporate and Other Purchase
accounting adjustments		 Inter-segment eliminations Total
Revenues $192,485
 $252,665
 $—
 $—
 $445,150
 $312,692
 $316,466
 $—
 $—
 $(353) $628,805
Direct operating expenses 106,464
 160,209
 —
 —
 266,673
 162,102
 208,347
 10
 1,114
 (235) 371,338
Selling, general and administrative expenses
(a) 
 26,442
 49,346
 18,472
 —
 94,260
(a) 
 50,240
 57,169
 40,843
 50
 112
 148,414
Depreciation and amortization
(b) (d) 
 2,603
 2,905
 20,228
 230
 25,966
(b) 
 4,816
 1,782
 18,490
 3,123
 —
 28,211
Operating income (loss) $56,976
 $40,205
 $(38,700) $(230) $58,251
 $95,534
 $49,168
 $(59,343) $(4,287) $(230) $80,842
Loss in equity method investments         (1,188)           (1,170)
Interest income         2,692
           6,269
Interest expense         (491)           (1,715)
Miscellaneous income
(e) 
         1,405
Miscellaneous income, net
(c) 
           9,299
Income from operations before income taxes         $60,669
           $93,525
                      
Reconciliation of operating income (loss) to adjusted operating income (loss):          Reconciliation of operating income (loss) to adjusted operating income (loss):    
Operating income (loss) $56,976
 $40,205
 $(38,700) $(230) $58,251
 $95,534
 $49,168
 $(59,343) $(4,287) $(230) $80,842
Add back:                      
Share-based compensation 4,076
 4,100
 3,567
 —
 11,743
 3,202
 4,348
 9,144
 —
 —
 16,694
Depreciation and amortization 2,603
 2,905
 20,228
 230
 25,966
 4,816
 1,782
 18,490
 3,123
 —
 28,211
Other purchase accounting adjustments —
 —
 —
 1,164
 —
 1,164
Adjusted operating income (loss) $63,655
 $47,210
 $(14,905) $—
 $95,960
 $103,552
 $55,298
 $(31,709) $—
 $(230) $126,911
                      
Other information:                      
Capital expenditures $5,434
 $693
 $7,297
 $—
 $13,424
(d) 
 $3,354
 $6,617
 $118,378
 $—
 $—
 $128,349




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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)




 Six Months Ended December 31, 2017 Three Months Ended December 31, 2018
 
MSG
Entertainment
 
MSG
Sports
 Corporate and Other Purchase
accounting adjustments		 Total 
MSG
Entertainment
 
MSG
Sports
 Corporate and Other Purchase
accounting adjustments		 Inter-segment eliminations Total
Revenues $435,497
 $346,020
 $—
 $—
 $781,517
 $316,514
 $315,843
 $—
 $—
 $(170) $632,187
Direct operating expenses 252,691
 180,585
 41
 2,300
 435,617
 167,014
 218,714
 38
 1,213
 (170) 386,809
Selling, general and administrative expenses
(a) 
 89,905
 92,664
 45,285
 24
 227,878
(a) 
 52,457
 53,313
 30,521
 522
 122
 136,935
Depreciation and amortization
(b) 
 8,523
 3,755
 39,889
 8,923

61,090
(b) 
 3,769
 1,984
 18,947
 5,466
 —
 30,166
Operating income (loss) $84,378
 $69,016
 $(85,215) $(11,247) $56,932
 $93,274
 $41,832
 $(49,506) $(7,201) $(122) $78,277
Earnings in equity method investments         2,117
           9,487
Interest income         9,764
           6,899
Interest expense         (7,509)           (5,176)
Miscellaneous expense
(e) 
         (250)
Miscellaneous expense, net
(c) 
           (12,863)
Income from operations before income taxes         $61,054
           $76,624
                      
Reconciliation of operating income (loss) to adjusted operating income (loss):          Reconciliation of operating income (loss) to adjusted operating income (loss):    
Operating income (loss) $84,378
 $69,016
 $(85,215) $(11,247) $56,932
 $93,274
 $41,832
 $(49,506) $(7,201) $(122) $78,277
Add back:                      
Share-based compensation 6,952
 8,141
 11,723
 —
 26,816
 3,960
 4,818
 11,437
 —
 —
 20,215
Depreciation and amortization 8,523
 3,755
 39,889
 8,923
 61,090
 3,769
 1,984
 18,947
 5,466
 —
 30,166
Other purchase accounting adjustments —
 —
 —
 2,324
 2,324
 —
 —
 —
 1,735
 —
 1,735
Adjusted operating income (loss) $99,853
 $80,912
 $(33,603) $—
 $147,162
 $101,003
 $48,634
 $(19,122) $—
 $(122) $130,393
                      
Other information:                      
Capital expenditures
(c) 
 $11,113
 $1,559
 $115,012
 $—
 $127,684
(d) 
 $6,038
 $1,218
 $31,782
 $—
 $—
 $39,038




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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)




 Six Months Ended December 31, 2016 Six Months Ended December 31, 2019
 
MSG
Entertainment
 
MSG
Sports
 Corporate and Other Purchase
accounting adjustments		 Total 
MSG
Entertainment
 
MSG
Sports
 Corporate and Other Purchase
accounting adjustments		 Inter-segment eliminations Total
Revenues $303,183
 $323,662
 $—
 $—
 $626,845
 $471,699
 $372,500
 $—
 $—
 $(612) $843,587
Direct operating expenses 198,322
 179,758
 —
 —
 378,080
 268,029
 232,658
 131
 3,390
 (406) 503,802
Selling, general and administrative expenses
(a) 
 49,882
 88,859
 32,540
 —
 171,281
(a) 
 100,898
 107,321
 82,498
 106
 236
 291,059
Depreciation and amortization
(b) (d) 
 5,059
 5,523
 41,034
 460

52,076
(b) 
 9,790
 3,583
 37,364
 6,465

—
 57,202
Operating income (loss) $49,920
 $49,522
 $(73,574) $(460) $25,408
Operating loss $92,982
 $28,938
 $(119,993) $(9,961) $(442) $(8,476)
Loss in equity method investments         (2,182)           (2,643)
Interest income         5,091
           13,585
Interest expense         (901)           (3,556)
Miscellaneous income
(e) 
         1,405
Miscellaneous income, net
(c) 
           14,377
Income from operations before income taxes         $28,821
           $13,287
                      
Reconciliation of operating income (loss) to adjusted operating income (loss):          Reconciliation of operating income (loss) to adjusted operating income (loss):    
Operating income (loss) $49,920
 $49,522
 $(73,574) $(460) $25,408
 $92,982
 $28,938
 $(119,993) $(9,961) $(442) $(8,476)
Add back:                      
Share-based compensation 7,615
 7,584
 4,899
 —
 20,098
 7,018
 9,117
 17,450
 —
 —
 33,585
Depreciation and amortization 5,059
 5,523
 41,034
 460
 52,076
 9,790
 3,583
 37,364
 6,465
 —
 57,202
Other purchase accounting adjustments —
 —
 —
 3,496
 —
 3,496
Adjusted operating income (loss) $62,594
 $62,629
 $(27,641) $—
 $97,582
 $109,790
 $41,638
 $(65,179) $—
 $(442) $85,807
                      
Other information:                      
Capital expenditures $6,794
 $2,357
 $12,615
 $—
 $21,766
(d) 
 $5,946
 $13,213
 $202,176
 $—
 $—
 $221,335


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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


 
   Six Months Ended December 31, 2018
   
MSG
Entertainment
 
MSG
Sports
 Corporate and Other Purchase
accounting adjustments		 Inter-segment eliminations Total
Revenues  $479,467
 $371,195
 $—
 $—
 $(340) $850,322
Direct operating expenses  274,799
 234,033
 59
 2,167
 (340) 510,718
Selling, general and administrative expenses
(a) 
 101,426
 95,530
 54,597
 581
 122
 252,256
Depreciation and amortization
(b) 
 8,251
 3,926
 38,217
 9,462

—
 59,856
Operating income (loss)  $94,991
 $37,706
 $(92,873) $(12,210) $(122) $27,492
Earnings in equity method investments            20,012
Interest income            14,073
Interest expense            (9,209)
Miscellaneous expense, net
(c) 
           (9,096)
Income from operations before income taxes            $43,272
              
Reconciliation of operating income (loss) to adjusted operating income (loss):    
Operating income (loss)  $94,991
 $37,706
 $(92,873) $(12,210) $(122) $27,492
Add back:             
Share-based compensation  6,801
 7,590
 16,013
 —
 —
 30,404
Depreciation and amortization  8,251
 3,926
 38,217
 9,462
 —
 59,856
Other purchase accounting adjustments  —
 —
 —
 $2,748
 $—
 2,748
Adjusted operating income (loss)  $110,043
 $49,222
 $(38,643) $—
 $(122) $120,500
              
Other information:             
Capital expenditures
(d) 
 $14,337
 $2,130
 $64,586
 $—
 $—
 $81,053
_________________
(a) 
Corporate and Other’s selling, general and administrative expenses primarily consist of unallocated corporate general and administrative costs.costs, including expenses associated with the Company’s content development and technology associated with the Company’s MSG Sphere initiative, as well as other business development activities.
(b) 
Corporate and Other principally includes depreciation and amortization onof The Garden, TheHulu Theater at Madison Square Garden, the Forum, and certain corporate property, equipment and leasehold improvement assets not allocated to the Company’s reportable segments.
(c) 
Miscellaneous income (expense), net primarily includes unrealized gain (loss) for the Company’s investment in Townsquare in accordance with ASU No. 2016-01 of $9,432 and $(12,031)for the three months ended December 31, 2019 and 2018, respectively, and $14,725 and $(7,667) for the six months ended December 31, 2019 and 2018, respectively. In addition, miscellaneous income (expense), net includes dividend income from the investment in Townsquare and non-service cost components of net periodic pension and postretirement benefit cost in accordance with ASU No. 2017-07. See Note 13 for further details on the non-service cost components of net periodic pension and postretirement benefit cost.


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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


(d)
Substantially all ofCorporate and Other’s capital expenditures for the three and six months ended December 31, 20172019 and 2018 are primarily associated withrelated to the purchase of landCompany’s planned MSG Spheres in Las Vegas and London. See Note 7 for more information regarding this purchase. MSG Entertainment’s capital expenditures for the six months ended December 31, 20172018 are primarily associated with certain investments with respect to Radio City Music Hall.
(d)
MSG Entertainment’s depreciation and amortization for the three and six months ended December 31, 2016 was reclassified to exclude the impactopening of purchase accounting adjustments related to the BCE acquisition.
(e)
Miscellaneous expense for the three and six months ended December 31, 2017 reflects a pre-tax non-cash impairment charge to write off the carrying value of one of the Company’s cost method investments. Miscellaneous income for the three and six months ended December 31, 2016 consists principally of the recovery of certain claims in connection with a third-party bankruptcy proceeding.new Tao Group Hospitality venue.
Substantially allA significant majority of revenues and assets of the Company’s reportable segments are attributed to or located in the United States and are primarily concentrated in the New York metropolitan area.


Note 20. Subsequent Event

On January 22, 2020, the Company acquired an additional 15% of common equity interest in Tao Group Hospitality from its noncontrolling interest holders through an issuance of shares of the Company’s Class A Common Stock. The Company now owns 77.5% of common equity interest in Tao Group Hospitality.

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Item 2. 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”&A”) contains forward-looking statements.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 The Madison Square Garden Company and its direct and indirect subsidiaries (collectively, “we,“we,” “us,” “our,“our,” “Madison Square Garden,” “MSG,” or the “Company”“Company”), including lower ticket-related revenueluxury tax payments or receipts, possible impacts from the timing and costs of new venue construction, increased investment in personnel, content and technology for the regular season.MSG Spheres, the potential spin-off of the Company’s entertainment businesses (the “Entertainment Distribution”), and the winding down of Obscura’s third-party production business. See Note 1 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further discussion of the Entertainment Distribution. 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 level of our revenues, which depends ability to successfully design, construct, finance and operate new venues in part on the popularityLas Vegas, London and competitiveness of our sports teamsother markets, and the levelinvestments, costs and timing associated with those efforts, including the impact of popularity of the Christmas Spectacular, New York Spectacular and other entertainment events which are presented in our venues;any unexpected construction delays and/or cost overruns;
•
the level of our revenues, which depends in part on the popularity and competitiveness of our sports teams and the level of popularity of the Christmas Spectacular and other entertainment events which are presented in our venues;
costs associated with player injuries, waivers or contract terminations of players and other team personnel;
changes in professional sports teams’ compensation, including the impact of signing free agents and trades, subject to league salary caps and the impact of luxury tax;
the level of our capital expenditures and other investments;
general economic conditions, especially in the New York City, Los Angeles and Las Vegas metropolitan areas where we conduct the majority of our operations;
•
general economic conditions, especially in the New York City, Los Angeles, Las Vegas and London metropolitan areas where we have business activities;
the demand for sponsorship arrangements and for advertising;
competition, for example, from other teams, other venues and other sports and entertainment options, including the construction of new competing venues;
our ability to successfully design, construct, finance and operate new venues in Las Vegas, London and other markets, and the investments and costs associated with those efforts, including the impact of unexpected construction delays and cost overruns;
changes in laws, NBA or NHL rules, regulations, guidelines, bulletins, directives, policies and agreements (includingincluding the leagues’ respective collective bargaining agreements (each a “CBA”) with their players’ associations, salary caps, revenue sharing, NBA luxury tax thresholds and media rights)rights or other regulations under which we operate;
any NBA or NHL work stoppage;
any economic actions, such as boycotts, protests, work stoppages or campaigns by labor organizations;
seasonal fluctuations and other variations in our operating results and cash flow from period to period;
the level of our expenses, including our corporate expenses;
the successful development of new live productions, or enhancements or changes to existing productions and the investments associated with such development, or enhancements, or changes;changes, as well as investment in personnel, content and technology for the MSG Spheres;
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 our venues;
the continued popularity and success of the TAOTao Group restaurantsHospitality entertainment dining and nightlife and hospitality venues, as well as its existing brands, and the ability to successfully open and operate new restaurantsentertainment dining and nightlife and hospitality venues;

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the ability of BCE to attract attendees and performers to its festival;
the evolution of the esports industry and its potential impact on CLG;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, new venues or new businesses into our operations;
the operating and financial performance of our strategic acquisitions and investments, including those we do not control;

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the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire;
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 and the ability to maintain necessary permits or licenses;
the impact of any government plans to redesign New York City’s Pennsylvania Station, including the possible disposition of The Theater at Madison Square Garden;
business, reputational and litigation risk if there is a loss, disclosure or misappropriation of stored personal information or other breaches of our information security;Station;
a default by our subsidiaries under their respective credit facilities;
financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;
the ability of our investees and others to repay loans and advances we have extended to them;
our ownership of professional sports franchises in the NBA and NHL and certain related transfer restrictions on our common stock;
the tax freetax-free treatment of the 2015 Distribution;
whether or not we pursue and complete the impact of the Tax CutsEntertainment Distribution and, Jobs Actif so, its impact on our income tax expensebusiness, financial condition and deferred tax liabilities;results of operations; and
the factors described under “Risk Factors” in the Company’sour Annual Report on Form 10-K for the year ended June 30, 2017.
2019.
We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable Federalfederal securities laws.

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All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
Introduction
This MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s unaudited financial statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the year ended June 30, 2017,2019, to help provide an understanding of our financial condition, changes in financial condition and results of operations. Unless the context otherwise requires, all references to “we,” “us,” “our,” “Madison Square Garden” or the “Company” refer collectively to The Madison Square Garden Company, a holding company, and its direct and indirect subsidiaries through which substantially all of our operations are actually conducted. The Company is comprised of two reportable segments: MSG Entertainment and MSG Sports.
MSG Entertainment includes live entertainment events including concerts and other live events, such as concerts, family shows, performing arts and special events, which are presented or hosted in the Company’s diverse collection of venues along with live offerings through TAOTao Group Hospitality and BCE. TAOTao Group Hospitality is a hospitality group with globally-recognizedglobally recognized entertainment, dining and nightlife brands: TAO,brands including Tao, Marquee, Lavo, Avenue, The Stanton Social, Beauty & Essex and Vandal.Cathédrale. BCE producesowns and operates New England’s premier Boston Calling Music Festival. MSG Entertainment also includes the Company’s original productionsproduction — the Christmas Spectacular and the New York Spectacular. In November 2017, the Company acquired a 100% controlling interest in Obscura, a creative studio, which is now part of our MSG Entertainment segment. See Note 3 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussion on certain costs incurred by Obscura.
MSG Sports includes the Company’s professional sports franchises: the Knicks of the NBA, the Rangers of the NHL, the Liberty of the WNBA, the Hartford Wolf Pack of the AHL, and the Westchester Knicks of the NBAGL. TheFor the three and six months ended December 31, 2018, MSG Sports segment is also homeincluded the Liberty of the WNBA, which was sold in January 2019. Our professional sports franchises are collectively referred to herein as our “sports teams.” MSG Sports also includes CLG, a premier North American esports organization, and Knicks Gaming, the Company’s franchise that competes in the NBA 2K League. CLG and Knicks Gaming are collectively referred to herein as our “esports teams,” and, together with our sports teams, our “teams.” In addition, our sports business also promotes, produces and/or presents a broad array of other live sporting events, including professional boxing, college basketball, college hockey, professional bull riding, mixed martial arts, esports, tennis and college wrestling, all of which the Company promotes, produces and/or presents. In July 2017, the Company acquired a controlling interest in CLG, a premier North American esports organization, which is now part of our MSG Sports segment.

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wrestling.
The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns The Garden and TheHulu Theater at Madison Square Garden in New York City, the Forum in Inglewood, CA and The Chicago Theatre in Chicago. In addition, the Company leases Radio City Music Hall and the Beacon Theatre in New York City, and has a booking agreement with respect to the Wang Theatre in Boston.City. Additionally, TAOTao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in New York, Las Vegas, Los Angeles, Chicago, Australia and Singapore.
Factors Affecting Results of Operations
TAO Group’s Operating Results
The Company completed the TAO Group acquisition on January 31, 2017. TAO Group financial statements are not available within the time constraints the Company requires to ensure the financial accuracy of the operating results. Therefore, the Company records TAO Group’s operating results in its consolidated statements of operations on a three-month lag basis. As a result, TAO Group’s related operating results for the three months ended December 31, 2017 are for the period from June 26, 2017 to September 24, 2017. TAO Group’s related operating results for the six months ended December 31, 2017 are for the period from March 27, 2017 to September 24, 2017. In addition, the results of operations of the Company and the MSG Entertainment segment forFor the three and six months ended December 31, 2016 do not include any of TAO Group’s operating results.
CLG’s Operating Results
The results of operations2018, MSG Sports also included the Liberty of the Company and the MSG Sports segment for the three and six months ended December 31, 2017 include CLG’s results of operations from the date of acquisition,WNBA, which was July 28, 2017. The Company’s results for the three and six months ended December 31, 2016 do not include any of CLG’s operating results.
Obscura’s Operating Results
The results of operations of the Company and the MSG Entertainment segment for the three and six months ended December 31, 2017 include Obscura’s results of operations from the date of acquisition, which was November 20, 2017. The Company’s results for the three and six months ended December 31, 2016 do not include any of Obscura’s operating results. In addition, the Obscura financial results of operations will be reflectedsold in the MSG Entertainment segment. Any costs incurred by Obscura that are associated with the Company’s venue development initiatives will be reported in “Corporate and Other.”January 2019.
This MD&A is organized as follows:
Results of Operations. This section provides an analysis of our unaudited results of operations for the three and six months ended December 31, 20172019 compared to the three and six months ended December 31, 20162018 on a consolidated and segment basis.
Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the six months ended December 31, 20172019 compared to the six months ended December 31, 2016,2018, as well as certain contractual obligations and off balance sheet arrangements.
Seasonality of Our Business. This section discusses the seasonal performance of our segments.
Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section discusses accounting pronouncements that have been adopted by the Company, recently issued accounting pronouncements not yet adopted by the Company, as well as the results of the Company’s annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of fiscal year 2018.2020. This section should be read together with our critical accounting policies, which are discussed in our Annual Report on Form 10-K for the year ended June 30, 20172019 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recently Issued Accounting Pronouncements and Critical Accounting Policies — Critical Accounting Policies” and in the notes to the consolidated and combined financial statements of the Company included therein.


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Results of Operations
Comparison of the Three Months Ended three and six months ended December 31, 20172019 versus the Three Months Ended three and six months ended December 31, 20162018
Consolidated Results of Operations
The tabletables below sets forth, for the periods presented, certain historical financial information.
 Three Months Ended     Three Months Ended    
 December 31, Change December 31, Change
 2017 2016 Amount Percentage 2019 2018 Amount Percentage
Revenues $536,302
 $445,150
 $91,152
 20 % $628,805
 $632,187
 $(3,382) (1)%
        
Direct operating expenses 311,881
 266,673
 45,208
 17 % 371,338
 386,809
 (15,471) (4)%
Selling, general and administrative expenses 121,440
 94,260
 27,180
 29 % 148,414
 136,935
 11,479
 8 %
Depreciation and amortization 30,544
 25,966
 4,578
 18 % 28,211
 30,166
 (1,955) (6)%
Operating income 72,437
 58,251
 14,186
 24 % 80,842
 78,277
 2,565
 3 %
Other income (expense):                
Loss in equity method investments (2,608) (1,188) (1,420) (120)%
Earnings (loss) in equity method investments (1,170) 9,487
 (10,657) NM
Interest income, net 1,580
 2,201
 (621) (28)% 4,554
 1,723
 2,831
 NM
Miscellaneous income (expense) (250) 1,405
 (1,655) (118)% 9,299
 (12,863) 22,162
 NM
Income from operations before income taxes 71,159
 60,669
 10,490
 17 % 93,525
 76,624
 16,901
 22 %
Income tax benefit (expense) 116,832
 (3,248) 120,080
 NM
Income tax expense (1,176) (656) (520) (79)%
Net income 187,991
 57,421
 130,570
 NM
 92,349
 75,968
 16,381
 22 %
Less: Net loss attributable to redeemable noncontrolling interests (767) —
 (767) NM
 (1,241) (3,142) 1,901
 61 %
Less: Net loss attributable to nonredeemable noncontrolling interests (855) (305) (550) (180)% (551) (2,489) 1,938
 78 %
Net income attributable to The Madison Square Garden Company’s stockholders $189,613
 $57,726
 $131,887
 NM
 $94,141
 $81,599
 $12,542
 15 %
  Six Months Ended    
  December 31, Change
  2019 2018 Amount Percentage
Revenues $843,587
 $850,322
 $(6,735) (1)%
Direct operating expenses 503,802
 510,718
 (6,916) (1)%
Selling, general and administrative expenses 291,059
 252,256
 38,803
 15 %
Depreciation and amortization 57,202
 59,856
 (2,654) (4)%
Operating income (loss) (8,476) 27,492
 (35,968) NM
Other income (expense):        
Earnings (loss) in equity method investments (2,643) 20,012
 (22,655) NM
Interest income, net 10,029
 4,864
 5,165
 NM
Miscellaneous income (expense), net 14,377
 (9,096) 23,473
 NM
Income from operations before income taxes 13,287
 43,272
 (29,985) (69)%
Income tax expense (1,604) (1,352) (252) (19)%
Net income 11,683
 41,920
 (30,237) (72)%
Less: Net loss attributable to redeemable noncontrolling interests (1,404) (3,655) 2,251
 62 %
Less: Net loss attributable to nonredeemable noncontrolling interests (1,073) (3,812) 2,739
 72 %
Net income attributable to The Madison Square Garden Company’s stockholders $14,160
 $49,387
 $(35,227) (71)%
_________________
NM — Percentage is not meaningful

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The following is a summary oftables summarize the changes in our segments’ operating results for the three and six months ended December 31, 20172019 as compared to the prior year period.
Our results for the three months ended December 31, 2017 include the operating results of TAO Group, CLG, and Obscura and, as a result, our operating results for the current year period are not directly comparable to our results for the prior year period.periods.
 For the Three Months Ended December 31, 2019
Changes attributable to Revenues Direct
operating
expenses		 Selling,
general and
administrative
expenses		 Depreciation and amortization Operating income (loss) Revenues 
Direct
operating
expenses
 Selling,
general and
administrative
expenses		 Depreciation and amortization Operating income (loss)
MSG Entertainment segment (a)
 $78,731
 $40,581
 $18,836
 $1,759
 $17,555
MSG Sports segment (a)
 12,421
 3,474
 884
 (1,056) 9,119
MSG Entertainment (a)
 $(3,822) $(4,912) $(2,217) $1,047
 $2,260
MSG Sports (a)
 623
 (10,367) 3,856
 (202) 7,336
Corporate and Other —
 20
 7,460
 (639) (6,841) —
 (28) 10,322
 (457) (9,837)
Purchase accounting adjustments —
 1,133
 —
 4,514
 (5,647) —
 (99) (472) (2,343) 2,914
Inter-segment eliminations (183) (65) (10) —
 (108)
 $91,152
 $45,208
 $27,180
 $4,578
 $14,186
 $(3,382) $(15,471) $11,479
 $(1,955) $2,565
  For the Six Months Ended December 31, 2019
Changes attributable to Revenues 
Direct
operating
expenses
 Selling,
general and
administrative
expenses		 Depreciation and amortization Operating income (loss)
MSG Entertainment (a)
 $(7,768) $(6,770) $(528) $1,539
 $(2,009)
MSG Sports (a)
 1,305
 (1,375) 11,791
 (343) (8,768)
Corporate and Other —
 72
 27,901
 (853) (27,120)
Purchase accounting adjustments —
 1,223
 (475) (2,997) 2,249
Inter-segment eliminations (272) (66) 114
 —
 (320)
  $(6,735) $(6,916) $38,803
 $(2,654) $(35,968)
_________________
(a) 
See “Business Segment Results” for a more detailed discussion relating to the operating results of our segments.

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Selling, general and administrative expenses - Corporate and Other
Selling, general and administrative expenses in Corporate and Other for the three months ended December 31, 20172019 increased $7,460,$10,322, or 40%34%, to $25,932. The increase was$40,843 as compared to the prior year period. For the six months ended December 31, 2019, selling, general and administrative expenses in Corporate and Other increased $27,901, or 51%, to $82,498 as compared to the prior year period.
For the three and six months ended December 31, 2019, the increases were primarily due to (i) higher expenses related to the Company’s MSG Sphere initiative of $10,406 and $18,642, respectively, which include increases in personnel, content development and technology costs, and (ii) higher professional fees of $3,573 and $2,307, respectively, associated with the proposed spin-off of the Company’s Entertainment business. For the three months ended December 31, 2019, this was partially offset by a decrease in employee compensation and related benefits as well as the inclusionin Corporate of certain Obscura selling, general and administrative costs, which primarily reflects retention bonuses paid in$2,934.
In connection with its MSG Sphere initiative, the changeCompany expects to continue increasing its investment in personnel, content and technology. Based on the timing of control. The increase wasthese efforts, the Company expects higher expenses for the remaining periods in fiscal year 2020.
Depreciation & amortization
Depreciation and amortization for the three months ended December 31, 2019 decreased $1,955, or 6%, to $28,211 as compared to the prior year period. For the six months ended December 31, 2019, depreciation and amortization decreased $2,654, or 4%, to $57,202 as compared to the prior year period. For the three and six months ended December 31, 2019, the decreases were primarily due to certain assets and purchase accounting adjustments being fully depreciated and amortized, partially offset by depreciation and amortization related to a management fee earned for providing managementnew entertainment dining and strategic services to TAO Group, which is eliminatednightlife venue and equipment associated with the development of MSG Sphere initiative in the Company’s consolidated resultscurrent year periods.

Table of operations presented above.Contents

Operating loss - Corporate and Other
Operating loss in Corporate and Other for the three months ended December 31, 20172019 increased $6,841,$9,837, or 18%20%, to $45,541. The increase was$59,343 as compared to the prior year period. For the six months ended December 31, 2019, operating loss in Corporate and Other increased $27,120, or 29%, to $119,993 as compared to the prior year period. For the three and six months ended December 31, 2019, the increases were primarily due to higher selling, general and administrative expenses, as discussed above, partially offset by lower depreciation and amortization as a result of certain assets being fully depreciated and amortized.above. See Note 1819 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussion of depreciation and amortization under Corporate and Other.
LossEarnings (loss) in equity method investments
Loss in equity method investments forFor the three months ended December 31, 2017 increased $1,420 to $2,608. The year-over-year increase2019, the earnings in loss reflects a distribution from an equity method investment duringinvestments decreased $10,657 to a loss of $1,170 as compared to the prior year period that was previously written off and an increaseperiod. For the six months ended December 31, 2019, the earnings in the netequity method investments decreased $22,655 to a loss attributableof $2,643 as compared to the Company’s investees, partially offset byprior year period. The decreases were due to the absence of the Company’s share of the results of Fuse Mediaequity earnings from AMSGE and Tribeca Enterprises as the investment was written offCompany sold these investments in December 2018 and August 2019, respectively. For the third quarterthree and six months ended December 31, 2018, the Company reported net earnings in equity method investments of fiscal year 2017.$10,658 and $21,986, respectively, from those investments.
Interest income, net
Net interest income for the three months ended December 31, 2017 decreased $621, or 28%,2019 increased $2,831 to $1,580$4,554 as compared to the prior year periodperiod. For the six months ended December 31, 2019, net interest income increased $5,165 to $10,029 as compared to the prior year period. The increases for the three and six months ended December 31, 2019, as compared to the prior year periods, were primarily due to lower interest expense incurred underassociated with the TAO Term Loan Facility. The decrease was partially offset by higher interest income earned by the CompanyTao Group Hospitality, as a result of higherthe refinancing of its credit facility in May 2019, which resulted in a reduction of the outstanding balance payable to the third parties by entering into an intercompany subordinated credit agreement with the Company, as well as lower variable interest rates and a change in investment mix. In addition, duringunder the three months ended December 31, 2017, the Company recognized interest income of $937, which was received in connection with the repayment of a loan receivable from one of the Company’s nonconsolidated affiliates that was on a nonaccrual status.
Miscellaneous income (expense)
Miscellaneous expenseTao Senior Credit Agreement in the current year period reflects a pre-tax non-cash impairment chargeperiods as compared to write off the carrying value of one of the Company’s cost method investments. Miscellaneous incomeprevious credit facility in the prior year period consists principallyperiods. See Note 12 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further details of the recovery of certain claims in connection with a third-party bankruptcy proceeding.Tao Senior Credit Agreement.
Income taxesMiscellaneous income (expense)
On December 22, 2017, new tax legislation, commonly referred to as the Tax Cuts and Jobs Act, was enacted, which significantly changed the existing U.S. tax laws, including a reduction in the corporate FederalNet miscellaneous income tax rate from 35% to 21% effective January 1, 2018. The Company is required to recognize the effect of tax law changes in the period of enactment even though certain key aspects of the new law became effective January 1, 2018. The Company’s income tax provision for interim periods is comprised of the tax on ordinary income (loss) provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. The Company used a blended statutory Federal income rate of 28% based upon the number of days that it will be taxed at the former rate of 35% and the number of days it will be taxed at the new rate of 21% to calculate its most recent estimated annual effective tax rate.
Income tax benefit for the three months ended December 31, 2017 was $116,832 and income tax2019 increased $22,162 to $9,299 as compared to net miscellaneous expense forof $12,863 in the threeprior year period. For the six months ended December 31, 2016 was $3,248.
Income tax benefit2019, net miscellaneous income increased $23,473 to $14,377 as compared to net miscellaneous expense of $9,096 in the prior year period. The increases were primarily due to the unrealized gains of $9,432 and $14,725 related to the Company’s investment in Townsquare for the three and six months ended December 31, 20172019, respectively, as compared to unrealized losses of $116,832 differs from the income tax expense derived from applying the blended statutory Federal rate of 28% to pretax income primarily as a result of a deferred income tax benefit of $113,494 related to the revaluation of the Company’s deferred tax assets$12,031 and liabilities under provisions contained in the new tax legislation, of which (i) $51,015 was due to the reduction of net deferred tax liabilities in connection with the lower Federal income tax rate of 21%, and (ii) $62,479 was due to a reduction in the valuation allowance attributable to the new rules, which provide that future Federal net operating losses have an unlimited carry-forward period. These rules on future Federal net operating losses allow the Company to recognize a portion of its unrecognized deferred tax assets for future deductible items. Other decreases to the statutory rate include the impact of an income tax benefit of $27,059 in Federal and state valuation allowance decreases recorded which offsets the income tax expense attributable to most of the operating income, and the impact of a change in state tax rate of $3,241. These decreases were partially offset by the impact of state and local income taxes (net of Federal benefit) of $6,494 and tax expense of $430 primarily related to non-deductible expenses.

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Income tax expense$7,667 for the three and six months ended December 31, 20162018, respectively. See Note 7 and Note 11 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of $3,248 differs from income tax expense derived from applying the statutory Federal rate of 35% to pretax income primarily as a result of a reduction of $22,123 of recorded Federal and state valuation allowances which offsets tax expense that would otherwise have been recordedthis Quarterly Report on operating income. The tax expense also includes $3,126 to reverse a tax benefit recorded on operating losses in the three months ended September 30, 2016, as well as tax expense of $1,012 primarilyForm 10-Q for additional information related to non-deductible expenses.the investment in Townsquare.
Income taxes
See Note 17 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s income taxes.
Adjusted operating income
The following is a reconciliationare the reconciliations of operating income (loss) to adjusted operating income:income for the three and six months ended December 31, 2019 as compared to the prior year periods:
  Three Months Ended    
  December 31, Change
  2017 2016 Amount Percentage
Operating income $72,437
 $58,251
 $14,186
 24%
Share-based compensation 13,912
 11,743
 

  
Depreciation and amortization (a)
 30,544
 25,966
 

  
Other purchase accounting adjustments 1,133
 —
    
Adjusted operating income $118,026
 $95,960
 $22,066
 23%
  Three Months Ended    
  December 31, Change
  2019 2018 Amount Percentage
Operating income $80,842
 $78,277
 $2,565
 3 %
Share-based compensation 16,694
 20,215
 

  
Depreciation and amortization (a)
 28,211
 30,166
 

  
Other purchase accounting adjustments 1,164
 1,735
    
Adjusted operating income $126,911
 $130,393
 $(3,482) (3)%

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  Six Months Ended    
  December 31, Change
  2019 2018 Amount Percentage
Operating income (loss) $(8,476) $27,492
 $(35,968) NM
Share-based compensation 33,585
 30,404
 

  
Depreciation and amortization (a)
 57,202
 59,856
 

  
Other purchase accounting adjustments 3,496
 2,748
    
Adjusted operating income $85,807
 $120,500
 $(34,693) (29)%
_________________
NM — Percentage is not meaningful
(a) 
Depreciation and amortization includes purchase accounting adjustments of $4,744$3,123 and $230$5,466 for the three months ended December 31, 20172019 and 2016,2018, respectively, and $6,465 and $9,462 for the six months ended December 31, 2019 and 2018, respectively.
Adjusted operating income for the three months ended December 31, 2017 increased by $22,066,2019 decreased $3,482, or 23%3%, to adjusted$126,911 as compared to the prior year period. For the six months ended December 31, 2019, adjusting operating income of $118,026decreased $34,693, or 29%, to $85,807 as compared to the prior year period. The increase isnet decreases were attributable to the following:
Increase in adjusted operating income of the MSG Entertainment segment$18,289
Increase in adjusted operating income of the MSG Sports segment7,868
Other net decreases(4,091)
 $22,066
 Three Six
 Months Months
Increase (decrease) in adjusted operating income of the MSG Entertainment$2,549
 $(253)
Increase (decrease) in adjusted operating income of the MSG Sports6,664
 (7,584)
Other net decreases(12,587) (26,536)
Inter-segment eliminations(108) (320)
 $(3,482) $(34,693)
Other net decreases of $12,587 for the three months ended December 31, 2019 were higher than the decrease of operating loss in Corporate and Other of $9,837 primarily due to higher employee compensation and related benefits, excludingdecreases in share-based compensation expense, as well asof $2,293 and depreciation and amortization of $457. For the inclusionsix months ended December 31, 2019, other net decreases of certain Obscura selling, general$26,536 were lower than the decrease of operating loss in Corporate and administrative costs, whichOther of $27,120 primarily reflects retention bonuses paiddue to an increase in connection with the changeshare-based compensation of control. This increase was partially$1,437, offset by a management fee earned for providing managementlower depreciation and strategic services to TAO Group, which is eliminated in the Company’s consolidated resultsamortization of operations presented above.$853.
Net loss attributable to redeemable and nonredeemable noncontrolling interests


For the three months ended December 31, 2017,2019, the Company recorded a$1,241 of net loss attributable to redeemable noncontrolling interests, including proportional share of $767expenses related to purchase accounting adjustments (“PPA Expenses”) of $1,386, and a net loss attributable to nonredeemable noncontrolling interests of $855 as compared to $305$551 of net loss attributable to nonredeemable noncontrolling interests, including $158 of PPA Expenses, as compared to $3,142 of net income attributable to redeemable noncontrolling interests, including $2,394 of PPA Expenses, and $2,489 of net loss attributable to nonredeemable noncontrolling interests, including $261 of PPA Expenses, for the three months ended December 31, 2016. 2018.
For the six months ended December 31, 2019, the Company recorded $1,404 of net loss attributable to redeemable noncontrolling interests, including $3,290 of PPA Expenses, and $1,073 of net loss attributable to nonredeemable noncontrolling interests, including $317 of PPA Expenses, as compared to $3,655 of net loss attributable to redeemable noncontrolling interests, including $3,904 of PPA Expenses, and $3,812 of net loss attributable to nonredeemable noncontrolling interests, including $585 of PPA Expenses, for the six months ended December 31, 2018.
These amounts represent the share of net loss from the Company’s investments in TAOTao Group Hospitality, BCE and CLG that are not attributable to the Company. In addition, the net loss attributable to redeemable and nonredeemable noncontrolling interests includes a proportional share of expenses related to purchase accounting adjustments.


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Business Segment Results
MSG Entertainment
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Entertainment segment.Entertainment.
 Three Months Ended     Three Months Ended    
 December 31, Change December 31, Change
 2017 2016 Amount Percentage 2019 2018 Amount Percentage
Revenues $271,216
 $192,485
 $78,731
 41% $312,692
 $316,514
 $(3,822) (1)%
Direct operating expenses 147,045
 106,464
 40,581
 38% 162,102
 167,014
 (4,912) (3)%
Selling, general and administrative expenses 45,278
 26,442
 18,836
 71% 50,240
 52,457
 (2,217) (4)%
Depreciation and amortization 4,362
 2,603
 1,759
 68% 4,816
 3,769
 1,047
 28 %
Operating income $74,531
 $56,976
 $17,555
 31% $95,534
 $93,274
 $2,260
 2 %
Reconciliation to adjusted operating income:                
Share-based compensation 3,051
 4,076
   

 3,202
 3,960
   

Depreciation and amortization 4,362
 2,603
     4,816
 3,769
    
Adjusted operating income $81,944
 $63,655
 $18,289
 29% $103,552
 $101,003
 $2,549
 3 %
  Six Months Ended    
  December 31, Change
  2019 2018 Amount Percentage
Revenues $471,699
 $479,467
 $(7,768) (2)%
Direct operating expenses 268,029
 274,799
 (6,770) (2)%
Selling, general and administrative expenses 100,898
 101,426
 (528) (1)%
Depreciation and amortization 9,790
 8,251
 1,539
 19 %
Operating income $92,982
 $94,991
 $(2,009) (2)%
Reconciliation to adjusted operating income:        
Share-based compensation 7,018
 6,801
    
Depreciation and amortization 9,790
 8,251
    
Adjusted operating income $109,790
 $110,043
 $(253) NM
_________________
NM — Percentage is not meaningful

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Revenues
Revenues decreased $3,822, or 1%, to $312,692 for the three months ended December 31, 2017 increased $78,731,2019 as compared to the prior year period. Revenue decreased $7,768, or 41%2%, to $271,216$471,699 for the six months ended December 31, 2019 as compared to the prior year period. The net increase isdecreases were attributable to the following:
  Three Six
  Months Months
Decrease in event-related revenues from concerts $(11,172) $(4,906)
Decrease in revenues from Obscura due to the decision to wind down its third-party production business to focus on the development of MSG Sphere (3,574) (8,129)
Decrease in revenues associated with the expiration of the Wang Theatre booking agreement in February 2019 (2,289) (3,251)
Decrease in venue-related sponsorship and signage and suite license fee revenues due to lower sales of existing sponsorship and signage inventory (815) (1,022)
Increase in event-related revenues from other live events 8,061
 1,821
Increase in revenues associated with entertainment dining and nightlife offerings primarily due to the impact of new venues, partially offset by lower revenues at other venues, including closing one venue in New York in January 2019 (a)
 4,155
 6,540
Increase in revenues from the presentation of the Christmas Spectacular
 1,841
 1,769
Other net decreases (29) (590)
  $(3,822) $(7,768)
_________________
Inclusion of revenues associated with entertainment dining and nightlife offerings$54,436
Increase in event-related revenues at The Theater at Madison Square Garden7,202
Increase in revenues from the presentation of the Christmas Spectacular
6,618
Increase in event-related revenues at the Forum5,204
Increase in event-related revenues at The Garden3,707
Increase in event-related revenues at The Chicago Theatre1,329
Net decrease in venue-related sponsorship and signage and suite rental fee revenues(1,067)
Other net increases, inclusive of revenues from Obscura1,302
 $78,731
(a)
Tao Group Hospitality’s operating results are recorded in the Company’s consolidated statements of operations on a three-month lag basis. See Note 2to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further discussion of Tao Group Hospitality’s consolidation.
The inclusion of revenues associated with entertainment dining and nightlife offerings is the result of the acquisition of a 62.5% interest in TAO Group on January 31, 2017, and primarily reflects revenues generated from food and beverage sales. TAO Group’s operating results are recorded in the Company’s consolidated statements of operations on a three-month lag basis. As a result, TAO Group’s related revenues are for the period from June 26, 2017 to September 24, 2017.
The increasedecrease in event-related revenues at The Theater at Madison Square Gardenfrom concerts for the three months ended December 31, 2019 was primarily due to a change in the mix of events, as well as additionallower per-event revenue and fewer events held at the venueCompany’s venues during the current year period as compared to the prior year period.
The increase For the six months ended December 31, 2019, the decrease in event-related revenues from the presentation of the Christmas Spectacularconcerts was primarily due to higher ticket-related revenue, mainly as a result of higher average ticket prices and the impact of additional scheduled performances,lower per-event revenues, partially offset by a decrease in average per-show paid attendance in the current year period as compared to the prior year period. The Company had 200 scheduled performances of the production this holiday season, 197 of which took place in the second quarter of fiscal year 2018, as compared to 197 scheduled performances in fiscal year 2017, of which 191 took place in the second quarter of fiscal year 2017. For the 2017 holiday season, more than one million tickets were sold, representing a low single digit percentage decrease as compared to the 2016 holiday season.
The increase in event-related revenues at the Forum was due to a change in the mix of events, as well as additional events held at the venue during the current year period as compared to the prior year period.
The increase in event-related revenues at The Garden was primarily due to a change in the mix of events held at the venueCompany’s venues during the current year period as compared to the prior year period.

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TheFor the three and six months ended December 31, 2019, the increase in event-related revenues at The Chicago Theatrefrom other live events was primarily due to higher per-event revenue from a changetheatrical production at the Hulu Theater at Madison Square Garden and The Chicago Theatre. In addition, for the six months ended December 31, 2019, the increase was partially offset by the impact of a large-scale special event held at Radio City Music Hall during the prior year period. The Company did not have a comparable special event in the mixcurrent year period.
For the three and six months ended December 31, 2019, the increase in revenues from the presentation of eventsthe Christmas Spectacular, as compared to the prior year periods, was primarily due to the following:
higher per-show ticket-related revenue from higher average ticket prices, an increase in average per-show paid attendance, and additionalhigher ticket-related fees in the current year periods; and
higher merchandise revenue due to recording certain merchandise sales on a gross basis (as principal) as a result of transitioning those operations in-house in the current year periods that were outsourced in the prior year periods.
The increases in per-show ticket-related revenue and merchandise revenue discussed above were partially offset by the impact on ticket-related revenue due to fewer scheduled performances in the current year periods as compared to the prior year periods. The Company had 199 scheduled Christmas Spectacular performances in this year’s holiday season, of which 186 took place in the second quarter of fiscal year 2020, as compared to 210 scheduled performances in the prior year’s holiday season, of which 197 took place in the second quarter of fiscal year 2019. For this year’s holiday season, more than one million tickets were sold, representing a low-single digit percentage decrease as compared to the prior year period.


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Direct operating expenses
Direct operating expenses decreased $4,912, or 3%, to $162,102 for the three months ended December 31, 2019 as compared to the prior year period. Direct operating expenses decreased $6,770, or 2%, to $268,029 for the six months ended December 31, 2019 as compared to the prior year period. The net decreases were attributable to the following:
  Three Six
  Months Months
Decrease in event-related direct operating expenses associated with concerts $(6,485) $(75)
Decrease in direct operating expenses associated with Obscura due to the decision to wind down its third-party production business to focus on the development of MSG Sphere (2,516) (6,492)
Decrease in direct operating expenses associated with the expiration of the Wang Theatre booking agreement in February 2019 (801) (1,694)
Increase (decrease) in event-related direct operating expenses associated with other live events 3,591
 (1,269)
Increase in direct operating expenses associated with entertainment dining and nightlife offerings primarily due to costs associated with a new venue which opened in September 2018, partially offset by lower food and beverage costs and employee compensation and related benefits, as well as the absence of costs related to one venue in New York which closed in January 2019 840
 2,453
Increase in direct operating expenses associated with the presentation of the Christmas Spectacular
 361
 316
Other net increases (decreases) 98
 (9)
  $(4,912) $(6,770)
The decrease in event-related direct operating expenses from concerts for the three months ended December 31, 2019 was due to lower per-event expenses and fewer events held at the venue duringCompany’s venues in the current year period as compared to the prior year period.
The net For the six months ended December 31, 2019, the decrease in venue-related sponsorship and signage and suite rental fee revenuesevent-related direct operating expense from concerts was primarily due to lower sponsorship and signage revenues, as a result of the timing of delivering certain contractually obligated sponsorship assets, as well as the impact of a marketing partner, upon renewal of its agreement, shifting its marketing spend from a combination of entertainment and sports, entirely to sports. The decrease in sponsorship and signage was partiallyper-event expense, largely offset by an increase in suite rental revenue.
Direct operating expenses
Direct operating expenses for the three months ended December 31, 2017 increased $40,581, or 38%, to $147,045 as compared to the prior year period. The net increase is attributable to the following:
Inclusion of direct operating expenses associated with entertainment dining and nightlife offerings$32,034
Increase in event-related direct operating expenses at the Forum4,016
Increase in event-related direct operating expenses at The Theater at Madison Square Garden3,298
Increase in direct operating expenses associated with the presentation of the Christmas Spectacular
1,102
Increase in event-related direct operating expenses at The Chicago Theatre858
Decrease in venue operating costs(1,278)
Other net increases, inclusive of direct operating expenses from Obscura551
 $40,581
The inclusion of direct operating expenses associated with entertainment dining and nightlife offerings is the result of the acquisition of a 62.5% interest in TAO Group on January 31, 2017, and primarily reflects costs associated with food and beverage sales, inclusive of labor costs, as well as venue related operating expenses. TAO Group’s operating results are recorded in the Company’s consolidated statements of operations on a three-month lag basis. As a result, TAO Group’s related direct operating expenses are for the period from June 26, 2017 to September 24, 2017.
The increase in event-related direct operating expenses at the Forum was primarily due to a change in the mix of events, as well as additional events held at the venueCompany’s venues during the current year period as compared to the prior year period.
The increase in event-related direct operating expenses from other live events for the three months ended December 31, 2019 was primarily due to higher per-event expenses from a theatrical production at Thethe Hulu Theater at Madison Square Garden was primarily due to a change inand The Chicago Theatre. For the mix of events held atsix months ended December 31, 2019, the venue during the current year period as compared to the prior year period.
The increase in direct operating expenses associated with the presentation of the Christmas Spectacular was primarily due to higher labor costs, additional scheduled performances, as well as an increase in deferred production cost amortization, partially offset by lower marketing expenses during the current year period as compared to the prior year period. The Company had 200 scheduled performances of the production this holiday season, 197 of which took place in the second quarter of fiscal year 2018, as compared to 197 scheduled performances in fiscal year 2017, of which 191 took place in the second quarter of fiscal year 2017.
The increasedecrease in event-related direct operating expenses at The Chicago Theatrefrom other live events was primarily due to the impact of a change in the mix of events and additional eventslarge-scale special event held at the venue during the current year period as compared to the prior year period.
The decrease in venue operating costs reflects lower labor costs, partially offset by higher real estate taxes at Radio City Music Hall during the current year period as compared to the prior year period. The Company did not have a comparable special event in the current year period. The decrease was partially offset by higher per-event expenses from a theatrical production at the Hulu Theater at Madison Square Garden and The Chicago Theatre.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended December 31, 2017 increased $18,836,2019 decreased $2,217, or 71%4%, to $45,278$50,240 as compared to the prior year period mainly due to (i) inclusion of TAO Group’speriod. For the six months ended December 31, 2019, selling, general and administrative costs, including a management fee incurred by TAO Group payableexpenses decreased $528, or 1%, to $100,898 as compared to the Companyprior year period.
For the three and six months ended December 31, 2019, the decreases were primarily due to (i) the absence of venue pre-opening costs of $2,519 and $3,738, respectively, associated with entertainment dining and nightlife offerings that were recorded in the prior year period and (ii) lower selling, general and administrative expenses associated with Obscura of $2,344 and $5,129, respectively, due to the Company’s decision to wind down Obscura’s third-party production business to focus on the development of MSG Sphere. The decreases were partially offset by higher employee compensation and related benefits of $2,873 and $6,959 for providing managementthe three and strategic services and, to a lesser extent, (ii)six months ended December 31, 2019, respectively, as well as an increase in corporate general and administrative costs and (iii) higher professional fees.fees for the six months ended December 31, 2019.
Depreciation and& amortization
Depreciation and amortization for the three months ended December 31, 20172019 increased $1,759,$1,047, or 68%28%, to $4,362$4,816 as compared to the prior year periodperiod. For the six months ended December 31, 2019, depreciation and amortization increased $1,539, or 19%, to $9,790 as compared to the prior year period. The increases for the three and six months ended December 31, 2019 were primarily due to capital expenditures associated with the inclusionopening of depreciationa new entertainment dining and amortization for TAO Group’s property and equipment.nightlife venue in September 2018.


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Operating income
Operating income for the three months ended December 31, 20172019 increased $17,555,$2,260, or 31%2%, to $74,531$95,534 as compared to the prior year periodperiod. The increase was primarily due to an increase in revenues partially offset by higherlower direct operating expenses higherand selling, general and administrative expenses, and, topartially offset by a lesser extent,decrease in revenues and higher depreciation and amortization, as discussed above.
Adjusted For the six months ended December 31, 2019, operating income
Adjusted operating income increased for the three months ended December 31, 2017 by $18,289, decreased $2,009, or 29%2%, to $81,944$92,982 as compared to the prior year periodperiod. The decrease was primarily due to lower revenues and an increase in revenuesdepreciation and amortization, partially offset by higherlower direct operating expenses and selling, general and administrative expenses, as discussed above, excludingabove.
Adjusted operating income
Adjusted operating income for the three months ended December 31, 2019 increased $2,549, or 3%, to $103,552 as compared to the prior year period. The increase was higher than the increase in operating income of $2,260 primarily due to an increase in depreciation and amortization, partially offset by lower share-based compensation expense.compensation. For the six months ended December 31, 2019, adjusted operating income decreased $253 to $109,790 as compared to the prior year period. The decrease was lower than the decrease in operating income of $2,009 primarily due to increases in depreciation and amortization and share-based compensation.
MSG Sports
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Sports segment.Sports.
 Three Months Ended     Three Months Ended    
 December 31, Change December 31, Change
 2017 2016 Amount Percentage 2019 2018 Amount Percentage
Revenues $265,086
 $252,665
 $12,421
 5 % $316,466
 $315,843
 $623
 NM
Direct operating expenses 163,683
 160,209
 3,474
 2 % 208,347
 218,714
 (10,367) (5)%
Selling, general and administrative expenses 50,230
 49,346
 884
 2 % 57,169
 53,313
 3,856
 7 %
Depreciation and amortization 1,849
 2,905
 (1,056) (36)% 1,782
 1,984
 (202) (10)%
Operating income $49,324
 $40,205
 $9,119
 23 % $49,168
 $41,832
 $7,336
 18 %
Reconciliation to adjusted operating income:                
Share-based compensation 3,905
 4,100
     4,348
 4,818
    
Depreciation and amortization 1,849
 2,905
     1,782
 1,984
    
Adjusted operating income $55,078
 $47,210
 $7,868
 17 % $55,298
 $48,634
 $6,664
 14 %

  Six Months Ended    
  December 31, Change
  2019 2018 Amount Percentage
Revenues $372,500
 $371,195
 $1,305
 NM
Direct operating expenses 232,658
 234,033
 (1,375) (1)%
Selling, general and administrative expenses 107,321
 95,530
 11,791
 12 %
Depreciation and amortization 3,583
 3,926
 (343) (9)%
Operating income $28,938
 $37,706
 $(8,768) (23)%
Reconciliation to adjusted operating income:        
Share-based compensation 9,117
 7,590
    
Depreciation and amortization 3,583
 3,926
    
Adjusted operating income $41,638
 $49,222
 $(7,584) (15)%
———————
NM — Percentage is not meaningful

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Revenues
Revenues increased $623 to $316,466 for the three months ended December 31, 20172019 as compared to the prior year period. Revenues increased $12,421, or 5%,$1,305 to $265,086$372,500 for the six months ended December 31, 2019 as compared to the prior year period. The net increase ischanges were attributable to the following:
Increase in professional sports teams’ sponsorship and signage revenues and ad sales commission$5,102
Increase in professional sports teams’ pre/regular season ticket-related revenue3,900
Increase in professional sports teams’ pre/regular season food, beverage and merchandise sales3,640
Increase in local media rights fees from MSG Networks2,140
Increase in suite rental fee revenue1,862
Increase in revenues from league distributions1,436
Decrease in event-related revenues from other live sporting events(6,149)
Other net increases, inclusive of other revenues from CLG not discussed elsewhere in this table490
 $12,421
  Three Six
  Months Months
Increase in revenues from league distributions $4,363
 $3,921
Increase in local media rights fees from MSG Networks due to contractual rate increases 2,380
 2,619
Increase in professional sports teams’ pre/regular season food, beverage and merchandise sales primarily due to higher average per-game revenue 520
 591
Decrease in event-related revenues from other live sporting events primarily due to fewer events partially offset by higher per-event revenue (5,154) (3,500)
Decrease in sponsorship and signage revenues and ad sales commission (1,242) (2,050)
Other net decreases (244) (276)
  $623
 $1,305
The increasedecrease in professional sports teams’ sponsorship and signage revenues and ad sales commission for the three and six months ended December 31, 2019 was primarily due to increasedlower sales of existing sponsorship and signage inventory new sponsorship and signage inventory, andslightly offset by higher ad sales commission. In addition, the decrease for the six months ended December 31, 2019 included the impact of the sale of the Liberty in January 2019.
Direct operating expenses
Direct operating expenses decreased $10,367, or 5%, to $208,347 for the three months ended December 31, 2019 as compared to the prior year period. Direct operating expenses decreased $1,375, or 1%, to $232,658 for the six months ended December 31, 2019 as compared to the prior year period. The net changes were attributable to the following:
  Three Six
  Months Months
Decrease in net provisions for certain team personnel transactions $(23,110) $(12,200)
Decrease in event-related expenses associated with other live sporting events primarily due to fewer events partially offset by higher per-event expenses (2,932) (1,666)
Increase in team personnel compensation primarily due to roster changes at the Company’s sports teams 6,876
 6,250
Increase in net provisions for league revenue sharing expense (excluding playoffs) and NBA luxury tax 4,030
 1,861
Increase in other team operating expenses not discussed elsewhere in this table primarily due to an increase in league assessments and other net increases 3,262
 1,799
Increase in professional sports teams’ pre/regular season expense associated with food, beverage and merchandise sales primarily due to higher average per-game expense 944
 1,407
Other net increases 563
 1,174
  $(10,367) $(1,375)
Net provisions for certain team personnel transactions were as follows:
  Three Months Ended Six Months Ended
  December 31, December 31,
  2019 2018 Decrease 2019 2018 Decrease
Net provisions for certain team personnel transactions $17,644
 $40,754
 $(23,110) $27,887
 $40,087
 $(12,200)
Team personnel transactions for the three months ended December 31, 2019 reflect waiver/contract terminations of $16,676 and a marketing partner, upon renewalplayer trade of its agreement, shifting its marketing spend from$968. Team personnel transactions for the three months ended December 31, 2018 reflect provisions recorded for waivers/contract terminations of $39,167 and a combinationplayer trade of entertainment$1,587.

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Team personnel transactions for the six months ended December 31, 2019 reflect waiver/contract terminations of $26,919 and sports, entirelya player trade of $968. Team personnel transactions for the six months ended December 31, 2018 reflect waivers/contract terminations of $38,500, which are net of credits due to sports.the recoveries associated with previously recorded waivers/contract termination costs, and a player trade of $1,587.
Net provisions for league revenue sharing expense (excluding playoffs) and NBA luxury tax were as follows:
  Three Months Ended Six Months Ended
  December 31, December 31,
  2019 2018 Increase 2019 2018 Increase
Net provisions for league revenue sharing expense (excluding playoffs) and NBA luxury tax $27,404
 $23,374
 $4,030
 $26,108
 $24,247
 $1,861

The increase in professional sports teams’ pre/regular season ticket-relatednet provisions for league revenue was due tosharing expense (excluding playoffs) and NBA luxury tax for the Knicksthree months ended December 31, 2019 reflect higher provisions for league revenue sharing expense of $2,697 and Rangers playing additional games at The Garden duringa lower estimated NBA luxury tax credit in the current year period as compared to the prior year period and higher average Rangers per-gameof $1,333. Higher provisions for league revenue partiallysharing expense primarily reflects adjustments to prior seasons’ revenue sharing expense slightly offset by lower average Knicks per-game revenue. The Knicks played five more regular season games and the Rangers played four more regular season games and one fewer pre-season game at The Garden during the current year period as compared to the prior year period.higher estimated net player escrow recoveries.
The increase in professional sports teams’ pre/regular season food, beveragenet provisions for league revenue sharing expense (excluding playoffs) and merchandise sales was due toNBA luxury tax for the Knicks and Rangers playing additional games at The Garden duringsix months ended December 31, 2019 reflect lower estimated NBA luxury tax credit in the current year period as compared to the prior year period partially offset by lower average per-game revenue during the current year period as compared to the prior year period.
The increase in local media rights fees from MSG Networks was due to contractual rate increases.
The increase in suite rental fee revenue was due to contractual rate increases, as well as higher sales of suite products.
The decrease in event-related revenues from other live sporting events was primarily due$1,333 and, to a change in the mix of events, one event that generated lower revenue and fewer events held during the current year period as compared to the prior year period.
Direct operating expenses
Direct operating expenses for the three months ended December 31, 2017 increased $3,474, or 2%, to $163,683 as compared to the prior year period. The net increase is attributable to the following:
Increase in other team operating expenses not discussed elsewhere in this table$2,137
Increase in net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax1,902
Increase in net provisions for certain team personnel transactions1,778
Increase in professional sports teams’ pre/regular season expense associated with food, beverage and merchandise sales1,709
Decrease in event-related expenses associated with other live sporting events(2,896)
Decrease in venue operating costs(1,383)
Other net increases227
 $3,474
The increase in other team operating expenses was primarily due to higher day-of-event costs, primarily driven by the Knicks and Rangers playing additional games at The Garden during the current year period as compared to the prior year period.
Net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax and for certain team personnel transactions were as follows:
  Three Months Ended Increase
  December 31, 
  2017 2016 
Net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax $20,973
 $19,071
 $1,902
Net provisions for certain team personnel transactions 2,758
 980
 1,778
The increase in net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax reflectslesser extent, higher provisions for both NBA and NHLleague revenue sharing expense of $1,855 and lower NBA luxury tax credit of $47.$528. Higher NBA and NHLleague revenue sharing expense primarily reflects higher estimated NBA and NHL revenue sharing expense for the 2017-18 season and adjustments to prior seasons’ revenue sharing expense partially offset by higher estimated net player escrow recoveries.

The Knicks were not a luxury tax payer for the 2016-172018-19 season and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams. The Knicks’ roster as of December 31, 20172019 would not result in the team being a luxury tax payer for the 2017-182019-20 season and the estimated luxury tax receipt is expectedcurrently anticipated to approximatebe lower than the luxury tax receipt for the 2016-172018-19 season. The actual amounts for the 2017-182019-20 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.
Team personnel transactions for the three months ended December 31, 2017 and 2016 reflect provisions recorded for player waivers/contract terminations.
The increase in professional sports teams’ pre/regular season expense associated with food, beverage and merchandise sales was due to the Knicks and Rangers playing additional games at The Garden during the current year period as compared to the prior year period partially offset by lower average per-game expense during the current year period as compared to the prior year period.

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The decrease in event-related expenses associated with other live sporting events was primarily due to a change in the mix of events, one event that generated lower expense and fewer events held during the current year period as compared to the prior year period.
The decrease in venue operating costs was primarily due to the absence of a non-recurring labor-related cost at The Garden.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended December 31, 20172019 increased $884,$3,856, or 2%7%, to $50,230$57,169 as compared to the prior year period.
Depreciation Selling, general and amortization
Depreciation and amortizationadministrative expenses for the threesix months ended December 31, 2017 decreased $1,056,2019 increased $11,791, or 36%12%, to $1,849$107,321 as compared to the prior year period includingperiod. For the impact of an intangible asset becoming fully amortized.three and six months ended December 31, 2019, the increases were primarily due to higher employee compensation and related benefits.
Operating income
Operating income for the three months ended December 31, 20172019 increased $9,119,$7,336, or 23%18%, to $49,324$49,168 as compared to the prior year period primarily due to anlower direct operating expenses, and to a lesser extent, increase in revenuesrevenue partially offset by higher direct operatingselling, general and administrative expenses, as discussed above.
Operating income for the six months ended December 31, 2019 decreased $8,768, or 23%, to $28,938 as compared to the prior year period primarily due to higher selling, general and administrative expenses slightly offset by lower direct operating expenses and an increase in revenue, as discussed above.
Adjusted operating income
Adjusted operating income for the three months ended December 31, 20172019 increased $7,868,$6,664, or 17%14%, to $55,078$55,298 as compared to the prior year periodperiod. The increase was lower than the increase in operating income primarily due to an increase in revenues partially offset by higher direct operating expenses and selling, general and administrative expenses, as discussed above, excludinglower share-based compensation expense.and depreciation and amortization.
The Company may experience lower regular season ticket-related revenue for the second half of fiscal year 2018 as compared to the prior fiscal year including the impact of the Knicks and Rangers playing fewer home games.

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Comparison of the Six Months EndedDecember 31, 2017 versus the Six Months EndedDecember 31, 2016
Consolidated Results of Operations
The table below sets forth, for the periods presented, certain historical financial information.
  Six Months Ended    
  December 31, Change
  2017 2016 Amount Percentage
Revenues $781,517
 $626,845
 $154,672
 25 %
         
Direct operating expenses 435,617
 378,080
 57,537
 15 %
Selling, general and administrative expenses 227,878
 171,281
 56,597
 33 %
Depreciation and amortization 61,090
 52,076
 9,014
 17 %
Operating income 56,932
 25,408
 31,524
 124 %
Other income (expense):        
Earnings (loss) in equity method investments 2,117
 (2,182) 4,299
 197 %
Interest income, net 2,255
 4,190
 (1,935) (46)%
Miscellaneous income (expense) (250) 1,405
 (1,655) (118)%
Income from operations before income taxes 61,054
 28,821
 32,233
 112 %
Income tax benefit (expense) 116,070
 (314) 116,384
 NM
Net income 177,124
 28,507
 148,617
 NM
Less: Net income attributable to redeemable noncontrolling interests 133
 —
 133
 NM
Less: Net loss attributable to nonredeemable noncontrolling interests (1,515) (593) (922) (155)%
Net income attributable to The Madison Square Garden Company’s stockholders $178,506
 $29,100
 $149,406
 NM
_________________
NM — Percentage is not meaningful
The following is a summary of changes in our segments’Adjusted operating resultsincome for the six months ended December 31, 20172019 decreased $7,584, or 15%, to $41,638 as compared to the prior year period.
Our results for the fiscal year 2018 include the operating results of TAO Group, CLG and Obscura and, as a result, our operating results for the fiscal year 2018 are not directly comparable to our results for the fiscal year 2017 period.
Changes attributable to Revenues Direct
operating
expenses		 Selling,
general and
administrative
expenses		 Depreciation and amortization Operating income (loss)
MSG Entertainment segment (a)
 $132,314
 $54,369
 $40,023
 $3,464
 $34,458
MSG Sports segment (a)
 22,358
 827
 3,805
 (1,768) 19,494
Corporate and Other —
 41
 12,745
 (1,145) (11,641)
Purchase accounting adjustments —
 2,300
 24
 8,463
 (10,787)
  $154,672
 $57,537
 $56,597
 $9,014
 $31,524
_________________
(a)
See “Business Segment Results” for a more detailed discussion relating to the operating results of our segments.


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Selling, general and administrative expenses -Corporate and Other
Selling, general and administrative expenses in Corporate and Other for the six months ended December 31, 2017 increased $12,745, or 39%, to $45,285. The increase was lower than the increase in operating income primarily due to higher employeelower share-based compensation and related benefits, as well as the inclusion of certain Obscura selling, general and administrative costs, which primarily reflects retention bonuses paid in connection with the change of control. The increase was partially offset by a management fee earned for providing management and strategic services to TAO Group. The TAO Group’s management fee is eliminated in the Company’s consolidated results of operations presented above.
Operating loss - Corporate and Other
Operating loss in Corporate and Other for the six months ended December 31, 2017 increased $11,641, or 16%, to $85,215. The increase was primarily due to higher selling, general and administrative expenses as discussed above, partially offset by lower depreciation and amortization as a resultamortization.

Table of certain assets being fully depreciatedContents

Liquidity and amortized. SeeCapital Resources
Overview
Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and maximum borrowing capacity under our $390,000 revolving credit facilities (see Note 1812 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of depreciation and amortization under Corporate and Other.
Earnings (loss) in equity method investments
Earnings in equity method investments for the six months ended December 31, 2017 improved $4,299 to $2,117. The year-over-year change primarily reflects an improvement in the net earnings attributable to the Company’s investees.
Interest income, net
Net interest income for the six months ended December 31, 2017 decreased $1,935, or 46% to $2,255 as compared to the prior year period primarily due to interest expense incurred under the TAO Term Loan Facility. The decrease was partially offset by higher interest income earned by the Company as a result of higher interest rates and a change in investment mix. In addition, during the six months ended December 31, 2017, the Company recognized interest income of $937, which was received in connection with the repayment of a loan receivable from one of the Company’s nonconsolidated affiliates that was on a nonaccrual status.
Miscellaneous income (expense)
Miscellaneous expense in the current year period reflects a pre-tax non-cash impairment charge to write off the carrying value of one of the Company’s cost method investments. Miscellaneous income in the prior year period consists principally of the recovery of certain claims in connection with a third-party bankruptcy proceeding.
Income taxes
Income tax benefit for the six months ended December 31, 2017 was $116,070 and income tax expense for the six months ended December 31, 2016 was $314.
Income tax benefit for the six months ended December 31, 2017 of $116,070 differs from the income tax expense derived from applying the blended statutory Federal rate of 28% to pretax income primarily as a result of a deferred income tax benefit of $113,494 related to the revaluation of the Company’s deferred tax assets and liabilities under provisions contained in the new tax legislation, of which (i) $51,015 was due to the reduction of net deferred tax liabilities in connection with the lower Federal income tax rate of 21%, and (ii) $62,479 was due to a reduction in the valuation allowance attributable to the new rules, which provide that future Federal net operating losses have an unlimited carry-forward period. These rules on future Federal net operating losses allow the Company to recognize a portion of its unrecognized deferred tax assets for future deductible items. Other decreases to the statutory rate include the impact of an income tax benefit of $24,399 in Federal and state valuation allowance decreases recorded which offsets the income tax expense attributable to most of the operating income, and the impact of a change in state tax rate of $3,110. These decreases were partially offset by the impact of state and local income taxes (net of Federal benefit) of $6,494 and tax expense of $1,237 primarily related to non-deductible expenses.
Income tax expense for the six months ended December 31, 2016 of $314 differs from income tax expense derived from applying the statutory Federal rate of 35% to pretax income primarily as a result of a reduction of $11,115 of recorded Federal and state valuation allowances which offsets tax expense that would have otherwise been recorded on operating income. The income tax expense also reflects tax expense of $1,342 primarily related to non-deductible expenses.

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Adjusted operating income
The following is a reconciliation of operating income to adjusted operating income:
  Six Months Ended    
  December 31, Change
  2017 2016 Amount Percentage
Operating income $56,932
 $25,408
 $31,524
 124%
Share-based compensation 26,816
 20,098
 

  
Depreciation and amortization (a)
 61,090
 52,076
 

  
Other purchase accounting adjustments 2,324
 —
    
Adjusted operating income $147,162
 $97,582
 $49,580
 51%
_________________
(a)
Depreciation and amortization includes purchase accounting adjustments of $8,923 and $460 for six months ended December 31, 2017 and 2016, respectively.
Adjusted operating income for the six months ended December 31, 2017 increased $49,580, or 51% to $147,162 as compared to the prior year period. The net increase is attributable to the following:
Increase in adjusted operating income of the MSG Entertainment segment$37,259
Increase in adjusted operating income of the MSG Sports segment18,283
Other net decreases(5,962)
 $49,580
Other net decreases were primarily due to higher employee compensation and related benefits, excluding share-based compensation expense, as well as the inclusion of certain Obscura selling, general and administrative costs, which primarily reflects retention bonuses paid in connection with the change of control.

Net income (loss) attributable to redeemable and nonredeemable noncontrolling interests

For the six months ended December 31, 2017, the Company recorded a net income attributable to redeemable noncontrolling interests of $133 and a net loss attributable to nonredeemable noncontrolling interests of $1,515 as compared to $593 of net loss attributable to nonredeemable noncontrolling interests for the six months ended December 31, 2016. These amounts represent the share of net income (loss) from the Company’s investments in TAO Group, BCE, and CLG that are not attributable to the Company. In addition, the net income (loss) attributable to redeemable and nonredeemable noncontrolling interests includes a proportional share of expenses related to purchase accounting adjustments.


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Business Segment Results
MSG Entertainment
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Entertainment segment.
  Six Months Ended    
  December 31, Change
  2017 2016 Amount Percentage
Revenues $435,497
 $303,183
 $132,314
 44%
Direct operating expenses 252,691
 198,322
 54,369
 27%
Selling, general and administrative expenses 89,905
 49,882
 40,023
 80%
Depreciation and amortization 8,523
 5,059
 3,464
 68%
Operating income $84,378
 $49,920
 $34,458
 69%
Reconciliation to adjusted operating income:        
Share-based compensation 6,952
 7,615
    
Depreciation and amortization 8,523
 5,059
    
Adjusted operating income $99,853
 $62,594
 $37,259
 60%
Revenues
Revenues for the six months endedDecember 31, 2017 increased $132,314, or 44%, to $435,497 as compared to the prior year period. The net increase is attributable to the following:
Inclusion of revenues associated with entertainment dining and nightlife offerings$115,121
Increase in event-related revenues at The Theater at Madison Square Garden6,540
Increase in revenues from the presentation of the Christmas Spectacular
6,534
Increase in event-related revenues at the Forum4,434
Increase in event-related revenues at The Garden4,115
Increase in event-related revenues at Radio City Music Hall, excluding the Christmas Spectacular and the New York Spectacular
3,900
Increase in event-related revenues at The Chicago Theatre3,779
Decrease in revenues from the presentation of the New York Spectacular as a result of no scheduled performances in the current year period
(11,238)
Decrease in venue-related sponsorship and signage and suite rental fee revenues(1,890)
Other net increases, inclusive of other revenues from Obscura1,019
 $132,314
The inclusion of revenues associated with entertainment dining and nightlife offerings is the result of the acquisition of a 62.5% interest in TAO Group on January 31, 2017, and primarily reflects revenues generated from food and beverage sales. TAO Group’s operating results are recorded in the Company’s consolidated statements of operations on a three-month lag basis. As a result, TAO Group’s related revenues are for the period from March 27, 2017 to September 24, 2017.
The increase in event-related revenues at The Theater at Madison Square Garden was primarily due to a change in the mix of events held at the venue during the current year period as compared to the prior year period.
The increase in revenues associated with the presentation of the Christmas Spectacular was primarily due to higher ticket-related revenue, mainly as a result of higher average ticket prices and the impact of additional scheduled performances, partially offset by a decrease in average per-show paid attendance in the current year period as compared to the prior year period. The Company had 200 scheduled performances of the production this holiday season, 197 of which took place in the second quarter of fiscal year 2018, as compared to 197 scheduled performances in fiscal year 2017, of which 191 took place in the second quarter of fiscal year 2017. For the 2017 holiday season, more than one million tickets were sold, representing a low single digit percentage decrease as compared to the 2016 holiday season.

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The increase in event-related revenues at the Forum was due to a change in the mix of events partially offset by fewer events held at the venue during the current year period as compared to the prior year period.
The increase in event-related revenues at The Garden was due to a change in the mix of events and additional events held at the venue during the current year period as compared to the prior year period.
The increase in event-related revenues at Radio City Music Hall, excluding the Christmas Spectacular and the New York Spectacular, was due to additional events and a change in the mix of events held at the venue during the current year period as compared to the prior year period.
The increase in event-related revenues at The Chicago Theatre was due to additional events and a change in the mix of events held at the venue during the current year period as compared to the prior year period.
The decrease in revenues from the presentation of the New York Spectacular was driven by no scheduled performances in the current year period as compared to 56 scheduled performances presented in the prior year period. This was a result of the Company’s decision to suspend the planned 2017 presentation announced in February 2017.
The net decrease in venue-related sponsorship and signage and suite rental fee revenues was primarily due to lower sponsorship and signage revenues, as a result of the timing of delivering certain contractually obligated sponsorship assets, as well as the impact of a marketing partner, upon renewal of its agreement, shifting its marketing spend from a combination of entertainment and sports, entirely to sports. The decrease in sponsorship and signage was partially offset by an increase in suite rental revenue.
Direct operating expenses
Direct operating expenses for the six months ended December 31, 2017 increased $54,369, or 27%, to $252,691 as compared to the prior year period. The net increase is attributable to the following:
Inclusion of direct operating expenses associated with entertainment dining and nightlife offerings$65,055
Increase in event-related direct operating expenses at the Forum4,239
Increase in event-related direct operating expenses at The Theater at Madison Square Garden2,774
Increase in event-related direct operating expenses at The Chicago Theatre2,759
Increase in event-related direct operating expenses associated with the presentation of the Christmas Spectacular
1,413
Increase in event-related direct operating expenses at Radio City Music Hall, excluding the Christmas Spectacular and the New York Spectacular
621
Decrease in direct operating expenses associated with the presentation of the New York Spectacular as a result of no scheduled performances in the current year period
(21,583)
Decrease in event-related direct operating expenses at The Garden(724)
Other net decreases(185)
 $54,369
The inclusion of direct operating expenses associated with entertainment dining and nightlife offerings is the result of the acquisition of a 62.5% interest in TAO Group on January 31, 2017, and primarily reflects costs associated with food and beverage sales, inclusive of labor costs, as well as venue related operating expenses. TAO Group’s operating results are recorded in the Company’s consolidated statements of operations on a three-month lag basis. As a result, TAO Group’s related direct operating expenses are for the period from March 27, 2017 to September 24, 2017.
The increase in event-related direct operating expenses at the Forum was due to a change in the mix of events partially offset by fewer events held at the venue during the current year period as compared to the prior year period.
The increase in event-related direct operating expenses at The Theater at Madison Square Garden was primarily due to a change in the mix of events held at the venue during the current year period as compared to the prior year period.
The increase in event-related direct operating expenses at The Chicago Theatre was due to additional events and a change in the mix of events held at the venue during the current year period as compared to the prior year period.
The increase in direct operating expenses associated with the presentation of the Christmas Spectacular was primarily due to higher labor costs, additional scheduled performances, as well as an increase in deferred production cost amortization, partially offset by lower marketing expenses during the current year period as compared to the prior year period. The Company had 200

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scheduled performances of the production this holiday season, 197 of which took place in the second quarter of fiscal year 2018, as compared to 197 scheduled performances in fiscal year 2017, of which 191 took place in the second quarter of fiscal year 2017.
The increase in event-related direct operating expenses at Radio City Music Hall, excluding the Christmas Spectacular and the New York Spectacular, was due to additional events largely offset by a change in the mix of events held at the venue during the current year period as compared to the prior year period.
The decrease in direct operating expenses associated with the presentation of the New York Spectacular was driven by no scheduled performances in the current year period as compared to 56 scheduled performances presented in the prior year period. This was a result of the Company’s decision to suspend the planned 2017 presentation announced in February 2017.
The decrease in event-related direct operating expenses at The Garden was due to a change in the mix of events partially offset by additional events held at the venue during the current year period as compared to the prior year period.
Selling, general and administrative expenses
Selling, general and administrative expenses for the six months ended December 31, 2017 increased $40,023, or 80%, to $89,905 as compared to the prior year period mainly due to (i) inclusion of TAO Group’s selling, general and administrative costs, including a management fee incurred by TAO Group payable to the Company for providing management and strategic services and, to a lesser extent, (ii) an increase in corporate general and administrative costs and (iii) higher professional fees.
Depreciation and amortization
Depreciation and amortization for the six months ended December 31, 2017 increased $3,464, or 68%, to $8,523 as compared to the prior year period primarily due to the inclusion of depreciation and amortization for TAO Group’s property and equipment.
Operating income
Operating income for the six months ended December 31, 2017 increased $34,458, or 69%, to $84,378 as compared to the prior year period primarily due to an increase in revenues, partially offset by higher direct operating expenses, selling, general and administrative expenses and depreciation and amortization, as discussed above.
Adjusted operating income
Adjusted operating income for the six months ended December 31, 2017 increased $37,259, or 60% to $99,853 as compared to the prior year period primarily due to an increase in revenues, partially offset by higher direct operating expenses, selling, general and administrative expenses as discussed above, excluding share-based compensation expense.
MSG Sports
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Sports segment.
  Six Months Ended    
  December 31, Change
  2017 2016 Amount Percentage
Revenues $346,020
 $323,662
 $22,358
 7 %
Direct operating expenses 180,585
 179,758
 827
 NM
Selling, general and administrative expenses 92,664
 88,859
 3,805
 4 %
Depreciation and amortization 3,755
 5,523
 (1,768) (32)%
Operating income $69,016
 $49,522
 $19,494
 39 %
Reconciliation to adjusted operating income:        
Share-based compensation 8,141
 7,584
    
Depreciation and amortization 3,755
 5,523
    
Adjusted operating income $80,912
 $62,629
 $18,283
 29 %
_________________
NM — Percentage is not meaningful

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Revenues
Revenues for the six months endedDecember 31, 2017 increased $22,358, or 7%, to $346,020 as compared to the prior year period. The net increase is attributable to the following:
Increase in professional sports teams’ pre/regular season ticket-related revenue$6,530
Increase in revenues from league distributions6,357
Increase in professional sports teams’ sponsorship and signage revenues and ad sales commission4,454
Increase in local media rights fees from MSG Networks4,235
Increase in professional sports teams’ pre/regular season food, beverage and merchandise sales4,144
Increase in suite rental fee revenue2,149
Decrease in event-related revenues from other live sporting events(6,310)
Other net increases, inclusive of other revenues from CLG not discussed elsewhere in this table799
 $22,358
The increase in professional sports teams’ pre/regular season ticket-related revenue was due to the Knicks and Rangers playing additional games at The Garden during the current year period as compared to the prior year period and higher average Rangers per-game revenue, partially offset by lower average Knicks per-game revenue. The Knicks played five more regular season games and the Rangers played four more regular season games at The Garden during the current year period as compared to the prior year period.
The increase in professional sports teams’ sponsorship and signage revenues and ad sales commission was primarily due to new sponsorship and signage inventory, increased sales of existing sponsorship and signage inventory and the impact of a marketing partner, upon renewal of its agreement, shifting its marketing spend from a combination of entertainment and sports, entirely to sports.
The increase in local media rights fees from MSG Networks was primarily due to contractual rate increases.
The increase in professional sports teams’ pre/regular season food, beverage and merchandise sales was due to the Knicks and Rangers playing additional games at The Garden during the current year period as compared to the prior year period partially offset by lower average per-game revenue during the current year period as compared to the prior year period.
The increase in suite rental fee revenue was due to contractual rate increases and higher sales of suite products.
The decrease in event-related revenues from other live sporting events was primarily due to a change in the mix of events, one event that generated lower revenue and fewer events held during the current year period as compared to the prior year period.
Direct operating expenses
Direct operating expenses for the six months ended December 31, 2017 increased $827 to $180,585 as compared to the prior year period. The net increase is attributable to the following:
Increase in other team operating expenses not discussed elsewhere in this table$2,950
Increase in net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax2,510
Increase in professional sports teams’ pre/regular season expense associated with food, beverage and merchandise sales2,215
Increase in team personnel compensation1,238
Decrease in event-related expenses associated with other live sporting events(3,158)
Decrease in net provisions for certain team personnel transactions(3,132)
Decrease in venue operating costs(1,416)
Other net decreases(380)
 $827
The increase in other team operating expenses was primarily due to higher day-of-event costs, primarily driven by the Knicks and Rangers playing additional games at The Garden during the current year period as compared to the prior year period.

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Net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax and for certain team personnel transactions were as follows:
  Six Months Ended Increase (Decrease)
  December 31, 
  2017 2016 
Net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax $21,880
 $19,370
 $2,510
Net provisions for certain team personnel transactions 2,858
 5,990
 (3,132)
The increase in net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax reflects higher provisions for both NBA and NHL revenue sharing expense of $2,463 and lower NBA luxury tax credit of $47. Higher NBA and NHL revenue sharing expense primarily reflects higher estimated NBA and NHL revenue sharing expense for the 2017-18 season and adjustments to prior seasons’ revenue sharing expense partially offset by higher estimated net player escrow recoveries. The Knicks were not a luxury tax payer for the 2016-17 season and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams. The Knicks’ roster as of December 31, 2017 would not result in luxury tax for the 2017-18 season and the estimated luxury tax receipt is expected to approximate the luxury tax receipt for the 2016-17 season. The actual amounts for the 2017-18 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.
Team personnel transaction for the six months ended December 31, 2017 reflect provisions recorded for player waivers/contract terminations. Team personnel transactions for the six months ended December 31, 2016 reflect provisions for a player trade and player waivers/contract terminations of $5,000 and $990, respectively.
The increase in professional sports teams’ pre/regular season expense associated with food, beverage and merchandise sales was due to the Knicks and Rangers playing additional games at The Garden during the current year period as compared to the prior year period partially offset by lower average per-game expense during the current year period as compared to the prior year period.
The increase in team personnel compensation was attributable to the inclusion of CLG’s results, which was acquired on July 28, 2017.
The decrease in event-related expenses associated with other live sporting events was primarily due to a change in the mix of events, one event that generated lower expense and fewer events held during the current year period as compared to the prior year period.
The decrease in venue operating costs was primarily due to the absence of a non-recurring labor-related cost at The Garden.
Selling, general and administrative expenses
Selling, general and administrative expenses for the six months ended December 31, 2017 increased $3,805, or 4%, to $92,664 as compared to the prior year period primarily due to higher corporate general and administrative costs and other net cost increases.
Depreciation and amortization
Depreciation and amortization for the six months ended ended December 31, 2017 decreased $1,768, or 32%, to $3,755 as compared to the prior year period including the impact of an intangible asset becoming fully amortized.
Operating income
Operating income for the six months ended December 31, 2017 increased $19,494, or 39%, to $69,016 as compared to the prior year period primarily due to higher revenues partially offset by an increase in selling, general and administrative expenses, as discussed above.

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Adjusted operating income
Adjusted operating income for the six months ended December 31, 2017 increased $18,283, or 29%, to $80,912, as compared to the prior year period primarily due to higher revenues partially offset by an increase in selling, general and administrative expenses and, to a lesser extent, higher direct operating expenses as discussed above, excluding share-based compensation expense.
The Company may experience lower regular season ticket-related revenue for the second half of fiscal year 2018 as compared to the prior fiscal year including the impact of the Knicks and Rangers playing fewer home games.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our businesses and available borrowing capacity under our $377,000 revolving credit facilities (see “Financing Agreements — Knicks Revolving Credit Facility” “Financing Agreements — , Knicks Unsecured Credit Facility” “Financing Agreements — , Rangers Revolving Credit Facility”Facility, and “Financing Agreements — TAOTao Revolving Credit Facilities” below)Facility). Our principal uses of cash include working capital-related items, capital spending (including our planned construction of large-scale venues in Las Vegas and London), investments and related loans that we may fund from time to time, repurchases of shares of the Company’s Class A Common Stock, repayment of debt, and the payment of earn-out obligations and mandatory purchases from prior acquisitions. 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, the optimal allocation of cash resources, and the timing of cash flow generation.
The Company plans to continue to grow its live sports and entertainment business, both organically and through acquisition and development, including by expanding its portfolio of venues, and is exploring investing in, acquiring or developing opportunities that range from new content to adjacencies that strengthen the Company’s position in delivering premium live experiences. The Company previously announced plans to build a new venue in Las Vegas which is anticipated to be approximately 600,000 square feet and have more than 18,000 seats. This state-of-the-art facility is expected to be constructed over a two and a half year period with the goal of commencing construction in the second half of calendar year 2018. In addition, the Company has purchased for approximately $79,518 (£60,000) a nearly five-acre parcel of land in London adjacent to Westfield Stratford City Shopping Center as the site of its first international large-scale venue. As is the case for any large scale real estate development, as the Company moves forward with the planning and construction for these and other major new venues, the Company will need to obtain all necessary and appropriate permits and other regulatory approvals and may face unexpected project delays and costs. In connection with these efforts, the Company will need to pursue additional capital beyond that which is available from cash on hand, cash flows from operations and borrowing under our revolving credit facilities. There is no assurance that we would be able to obtain such capital. The Company will continue to explore additional domestic and international markets where next generation venues can be successful. See also “— MSG Sphere” at the end of Management’s Discussion and Analysis of Financial Condition and Result of Operations.
We regularly monitor and assess our ability to meet our net funding and investing requirements. Over the next 12 months, we believe we have sufficient liquidity, including $1,125,647 in unrestricted cash and cash equivalents as of December 31, 2017, along with available borrowing capacity under our revolving credit facilities combined with operating cash flows to fund our operations, to pursue the development of the new arenas discussed above and other new business opportunities and to repurchase shares of the Company’s Class A Common Stock.
To the extent the Company desires to access alternative sources of funding through the capital and credit markets, weakchallenging U.S. and global economic conditions could adversely impact ourits ability to do so at that time.
TAO Group’sWe regularly monitor and assess our ability to meet our net funding and investing requirements. We believe we have sufficient liquidity, including approximately $1,000,000 in unrestricted cash and cash equivalents and $113,000 of short-term investments as of December 31, 2019, along with available borrowing capacity under our revolving credit facilities combined with operating cash flows, over the next 12 months, to fund our operations, to pursue the development of the new venues discussed below and other new business opportunities and to repurchase shares of the Company’s Class A Common Stock (see Note 11 to the consolidated financial statements included in “Part I - Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of the Company’s short-term investments).
Tao Group Hospitality’s principal uses of cash include working capital related items, investments in new venues, tax-related cash distributions, interest expense payments and repayment of debt. TAOTao Group Hospitality plans to continue to grow its business through the opening of new venues. TAOTao Group Hospitality regularly monitors and assesses its ability to meet its funding and investment requirements. Over the next 12 months, the Company believes that TAOTao Group Hospitality has sufficient liquidity from cash on hand, cash generated from operations and its revolving credit facility to fund its operations, service debt obligations and pursue new business opportunities.
On September 11, 2015,MSG Spheres
The Company has made significant progress on MSG Sphere at The Venetian, its state-of-the-art entertainment venue currently under construction in Las Vegas.
The Company expects the Company’s boardvenue to have a number of directors authorizedsignificant revenue streams, including a wide variety of content such as attractions, concert residencies, corporate and select sporting events, as well as sponsorship and premium hospitality opportunities. As a result, we anticipate that MSG Sphere at The Venetian will generate substantial revenue and adjusted operating income on an annual basis.
Our current cost estimate, inclusive of core technology and soft costs, for MSG Sphere at The Venetian is approximately $1,660,000. This cost estimate is net of $75,000 that the repurchase of upLas Vegas Sands Corp. has agreed to $525,000 of the Company’s Class A Common Stock once the shares of the Company’s Class A Common Stock began “regular way” trading on October 1, 2015. Under the authorization, shares of the Company’s Class A Common Stock may be purchased from timepay to time in accordance with applicable insider tradingdefray certain construction costs and other securities lawsalso excludes significant capitalized and regulations.non-capitalized costs for items such as content creation, internal labor, and furniture and equipment. Relative to our current cost estimate above, our actual construction costs for MSG Sphere at The timing and amount of purchases will

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depend on market conditions and other factors. As ofVenetian incurred through December 31, 2017,2019 were approximately $248,000, which is net of $37,500 received from Las Vegas Sands Corp. during the Company had $259,639 of availability remaining under its stock repurchase authorization.
Financing Agreements
Knicks Revolving Credit Facility
On September 30, 2016, Knicks LLC, a wholly owned subsidiary of the Company, entered into a credit agreement with a syndicate of lenders providing for a senior secured revolving credit facility of up to $200,000 with a term of five years to fund working capital needs and for general corporate purposes. Amounts borrowed may be distributed to the Company except during an event of default.
The 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 ofsix months ended December 31, 2017, Knicks LLC was2019. Our goal is to open MSG Sphere at The Venetian in compliancecalendar year 2021. As with this financial covenant.
All borrowings underany major construction project, the Knicks Revolving Credit Facility areconstruction of MSG Sphere is 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 0.00% to 0.125% per annumpotential unexpected delays, costs or (ii) LIBOR plus a margin ranging from 1.00% to 1.125% per annum. Knicks LLC is required to pay a commitment fee ranging from 0.20% to 0.25% per annum in respect of the average daily unused commitments under the Knicks Revolving Credit Facility. The Knicks Revolving Credit Facility was undrawn as of December 31, 2017. 
All obligations under the Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S. national broadcast agreements.
Subject to customary notice and minimum amount conditions, Knicks LLC may voluntarily prepay outstanding loans under the 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 Knicks Revolving Credit Facility is greater than 350% of qualified revenues.
The Knicks Credit Agreement 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 Knicks Credit Agreement, 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 Knicks Credit Agreement; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any Knicks LLC’s collateral.
Knicks Unsecured Credit Facility
On September 30, 2016, Knicks LLC entered into an unsecured revolving credit facility with a lender for an initial maximum credit amount of $15,000 and a 364-day term. Knicks LLC renewed this facility with the lender on the same terms effective as of September 29, 2017. This facility was undrawn as of December 31, 2017.
Rangers Revolving Credit Facility
On January 25, 2017, Rangers LLC, a wholly owned subsidiary of the Company, entered into a credit agreement with a syndicate of lenders providing for a senior secured revolving credit facility of up to $150,000 with a term of five years to fund working capital needs and for general corporate purposes. Amounts borrowed may be distributed to the Company except during an event of default.
The Rangers Revolving Credit Facility requires Rangers LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of December 31, 2017, Rangers LLC was in compliance with this financial covenant. All borrowings under the 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 0.125% to 0.50% per annum or (ii) LIBOR plus a margin ranging from 1.125% to 1.50% 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 Rangers Revolving Credit Facility. The Rangers Revolving Credit Facility was undrawn as of December 31, 2017.

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All obligations under the Rangers Revolving Credit Facility are secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i) Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S. and Canadian national broadcast agreements, and (iii) revenues to be paid to Rangers LLC pursuant to local media contracts.
Subject to customary notice and minimum amount conditions, Rangers LLC may voluntarily prepay outstanding loans under the 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 the maximum available amount under the Rangers Revolving Credit Facility is less than 17% of qualified revenues.
The Rangers Credit Agreement 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 Rangers Credit Agreement, 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 Rangers Credit Agreement; (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 Rangers Revolving Credit Facility.
TAO Credit Facilities
On January 31, 2017, TAOIH, TAOG, and certain of its subsidiaries entered into a credit and guaranty agreement with a syndicate of lenders providing for a senior secured term loan facility of $110,000 with a term of five years to fund, in part, the acquisition of TAO Group and a senior secured revolving credit facility of up to $12,000 with a term of five years for working capital and general corporate purposes of TAOG. The TAO Credit Facilities were obtained without recourse to MSG or any of its affiliates (other than TAOIH and its subsidiaries).
The TAO Credit Facilities require TAOIH (i) to maintain, for the relevant TAO entities, a minimum consolidated liquidity of $5,000 at all times, (ii) to comply with a maximum total net leverage ratio of 4.00:1.00 initially and stepping down over time to 2.50:1.00 by the first quarter of calendar year 2021 and through the remainder of the term of the TAO Credit Facilities, and (iii) to comply with a minimum fixed charge coverage ratio of 1.50:1.00 initially and stepping down over time to 1.15:1.00 by the second quarter of calendar year 2021 and through the remainder of the term of the TAO Credit Facilities. TAOIH was in compliance with the financial covenants of the TAO Credit Facilities as of September 24, 2017 (the most recent date at which compliance was assessed under the TAO Credit Facilities). The TAO Revolving Credit Facility was undrawn as of December 31, 2017.
The TAO entities under the TAO Credit Facilities are also subject to certain limitations with respect to making capital expenditures based upon the total net leverage ratio and other factors. The restrictions on capital expenditures are subject to certain “carry-forward” provisions and other customary carve-outs.
All borrowings under the TAO Credit Facilities are subject to the satisfaction of certain customary conditions, including compliance with a maximum leverage multiple, accuracy of representations and warranties and absence of a default or event of default. Borrowings bear interest at a floating rate, which at the option of TAOG may be either (i) a base rate plus a margin ranging from 6.50% to 7.00% per annum or (ii) LIBOR plus a margin ranging from 7.50% to 8.00% per annum. The interest rate on the TAO Credit Facilities as of September 24, 2017 was 9.25%. TAOG is required to pay a commitment fee of 0.50% per annum in respect of the average daily unused commitments under the TAO Revolving Credit Facility.
All obligations under the TAO Credit Facilities are secured by a first lien security interest in substantially all of the applicable TAO entities’ assets, including, but not limited to, a pledge of all of the capital stock of substantially all of TAOIH’s wholly-owned domestic subsidiaries and 65% of the voting capital stock, and 100% of the non-voting capital stock, of each of its first-tier foreign subsidiaries.
Subject to customary notice and minimum amount conditions, TAOG may voluntarily prepay outstanding loans under the TAO Credit Facilities at any time, in whole or in part (subject to customary breakage costs with respect to LIBOR loans) with premiums due in respect of prepayments of the TAO Term Loan Facility or permanent reduction under the TAO Revolving Credit Facility, in each case, starting at 5.0% initially and stepping down to 0% after three years. Beginning March 31, 2018, TAOG is required to make scheduled amortization payments under the TAO Term Loan Facility in consecutive quarterly installments equal to $688 per quarter initially, stepping up over time to $4,125 per quarter by March 31, 2021 and through the final maturity date of the TAO Term Loan Facility with the final balance payable on such maturity date. TAOG is also required to make mandatory prepayments under the TAO Credit Facilities in certain circumstances, including, without limitation, 75% of excess cash flow, with a step-down to 50% when the total net leverage ratio is less than 2.00:1.00.

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The TAO Credit Facilities contain certain restrictions on the ability of TAOG to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the TAO Credit Facilities, including, without limitation, the following: (i) incurring additional indebtedness; (ii) creating liens on assets; (iii) making distributions, dividends and other restricted payments; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; (vi) making investments; and (vii) prepaying certain indebtedness.complications.
See Note 10Exhibit 10.65 to the consolidated and combined financial statements included in the Company’s Annual Report onour Form 10-K for the year ended June 30, 20172019 for morea copy of the Construction Agreement, dated May 31, 2019, by and between MSG Las Vegas, LLC and Hunt Construction Group Inc. (AECOM).
In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to a future MSG Sphere. Cost estimates for MSG Sphere in London are still in development as the Company continues to refine its design, which it currently expects will be substantially similar to MSG Sphere in Las Vegas, including having approximately the same seating capacity. The Company submitted a planning application to the local planning authority in March 2019 and expects the planning application process will continue well into calendar year 2020. The Company will use this time to continue building on its design and construction learnings in Las Vegas, which it will leverage in London. And as we work through this planning application and design process, we expect our timeline will evolve and, therefore, we do not have a target opening date at this time.

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For additional information regarding the Company’s debt maturitiescapital expenditures related to the MSG Spheres for the TAO Term Loan Facility.three and six months ended December 31, 2019, see Note 19 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.
Revolving Credit Facilities ProvidedWith regard to Nonconsolidated Affiliates
In connection with the Company’s investment in AMSGE,MSG Sphere at The Venetian, the Company provides a $100,000 revolving credit facilityplans to this entity,finance the construction of which $97,500 had been drawn as of December 31, 2017.
In connection with the Company’s investment in Tribeca Enterprises, the Company provides a $17,500 revolving credit facility to this entity, of which $16,500 was outstanding, excluding PIK interest of $1,392, as of December 31, 2017. In January 2018, Tribeca Enterprises borrowed the remaining $1,000 availabilityvenue primarily from cash on the revolving credit facility.
Pursuant to their terms, the AMSGEhand, cash flows from operations and Tribeca Enterprisesborrowings under our revolving credit facilities, as well as additional debt financing. There is no assurance that the Company will terminatebe able to obtain such capital.
While the Company plans to self-fund the construction of MSG Sphere at The Venetian, the Company’s intention for any future venues is to explore other options, including non-recourse debt financing, joint ventures, equity partners and a managed venue model.
Financing Agreements and Stock Repurchases
See Note 12 and Note 15 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on September 20, 2020 Form 10-Q for discussions of the Company’s debt obligations and June 30, 2021, various financing agreements, and the Company’s stock repurchases, respectively.
Bilateral Letters of Credit Lines
The Company has established bilateral credit lines with a bank to issue letters of credit in support of the Company’s business operations. The Company either pays direct fees for the letters of credit or such feesthat are credited against interest income the Company receives in return from its investments in notes receivable with the same bank. As of December 31, 2017,2019, the Company had $2,610$12,512 of letters of credit outstanding pursuant to which fees were credited against a note investment. In addition, TAO Group had threeinvestment, which included two letters of credit outstanding for $1,500$750 pertaining to Tao Group Hospitality as of September 24, 2017.29, 2019.
Contractual Obligations
The Company adopted ASU No. 2016-02, Leases (Topic 842), on July 1, 2019. As a result, the contractual obligations related to future lease payments, which were historically reported as off-balance sheet commitments, are now reflected on the consolidated balance sheet as lease liabilities as of December 31, 2019. See Note 8 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for more details about the lease liabilities. Except as described above with respect to lease accounting, the Company did not have any material changes in its contractual obligations since the end of fiscal year 20172019 other than activities in the ordinary course of business.

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Cash Flow Discussion


As of December 31, 2017,2019, cash, and cash equivalents and restricted cash totaled $1,125,647,$1,043,104, as compared to $1,238,114$1,117,901 as of June 30, 2017.2019. The following table summarizes the Company’s cash flow activities for the six months ended December 31, 20172019 and 2016:2018:
 Six Months Ended December 31, Six Months Ended December 31,
 2017 2016 2019 2018
Net income $11,683
 $41,920
Adjustments to reconcile net income to net cash provided by operating activities 85,003
 81,650
Subtotal $96,686
 $123,570
Changes in working capital assets and liabilities 14,486
 (95,051)
Net cash provided by operating activities $63,267
 $109,932
 $111,172
 $28,519
Net cash used in investing activities (143,872) (62,691) (143,913) (15,878)
Net cash used in financing activities (31,874) (81,213) (43,749) (18,081)
Effect of exchange rates on cash and cash equivalents 12
 —
Net decrease in cash and cash equivalents $(112,467) $(33,972)
Effect of exchange rates on cash, cash equivalents and restricted cash 1,693
 398
Net decrease in cash, cash equivalents and restricted cash $(74,797) $(5,042)
Operating Activities
Net cash provided by operating activities for the six months ended December 31, 2017 decreased2019 improved by $46,665$82,653 to $63,267$111,172 as compared to the prior year period primarily due to a decreasechanges in other non-cash items and changes inworking capital assets and liabilities which include (i) higher increase in accrued and other liabilities primarily due to funds received from Las Vegas Sands Corp. in connection with the ground lease in Las Vegas, (ii) lower decrease in collections due to promoters due to timing, (iii) lower increase in accounts receivable due to timing, and (iv) lower net decreases in other working capital, partially offset by an increase inlower net income. The decrease in operating cash flows from other non-cash items was primarily due to (i) a reduction in net deferred tax liabilities as a result of the recently enacted Federal tax reform legislation effective January 1, 2018, (ii) higher depreciation and amortizationincome in the current year period as compared to the prior year period, and (iii) an increase in share-based compensation expense in the current year period as compared to the prior year period. The increase in net cash used in operating activities resulting from changes in assets and liabilities was primarily due to (i) a decrease in deferred revenue primarily due to timing, (ii) higher employee and team compensation and related benefits payments in the current year period, including severance-related costs attributable to a separation agreement with a team executive, and (iii) an increase in receivables during the current year period in connection with the value-added tax, which the Company expects to recover, associated with the purchase of land in London. These decreases in operating cash flows were slightly offset by a

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payment received in the current year period related to a league non-recurring distribution which was accrued for as of June 30, 2017.
Investing Activities
Net cash used in investing activities for the six months ended December 31, 20172019 increased by $81,181$128,035 to $143,872$143,913 as compared to the prior year period primarily due to (i) higher capital expenditures primarily associated with the purchase of land in London during the second quarter of fiscal year 2018 and venues and related technologies in the current year period as compared to the prior year period, of which substantially all are related to the Company’s planned MSG Spheres in Las Vegas and London, and (ii) lower proceeds received from the acquisitionssale of controlling intereststhe Company’s 50% interest in Obscura and CLG duringAMSGE in the prior year period compared to the the sale of the Company’s 50% interest in Tribeca in the current year period. These increases wereThis increase was partially offset by (i) a loan repayment received from subordinated note, (ii) lower investments made in nonconsolidated affiliates as compared to the prior year period, and (iii) acquisition of available-for-sale securities and a controlling interest in BCE innotes receivable during the prior year period as compared to none during the current year period.
Financing Activities
Net cash used in financing activities for the six months ended December 31, 2017 decreased2019 increased by $49,339$25,668 to $31,874$43,749 as compared to the prior year period largelyprimarily due to lower repurchases of shares ofa repayment on the Company’s Class A Common StockTao Revolving Credit Facility and an increase in the current year period as compared to the prior year period. This decrease was partially offset by higher taxes paid in lieu of shares issued for equity-based compensation in the current year period as compared to the prior year period and a contingent consideration payment related to the acquisition of CLG in the current year period.
Seasonality of Our Business
The dependence of MSG Entertainment on revenues from theChristmas Spectaculargenerally means it earns a disproportionate share of its revenues and operating income in the second quarter of the Company’s fiscal year. The dependence of MSG Sports segment on revenues from its NBA and NHL sports teams generally means it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year. The dependence of the MSG Entertainment segment on revenues from the Christmas Spectacular generally means it earns a disproportionate share of its revenues and operating income in the second quarter of the Company’s fiscal year.
In addition, while it does not have a material impact on seasonality of our business, the first and third calendar quarters are seasonally lighter quarters for TAOTao Group Hospitality as compared to its second and fourth calendar quarters. As the Company consolidates TAOTao Group Hospitality results of operations on a three-month lag basis, the seasonally lighter quarters for TAOTao Group Hospitality will be reflected in the second and fourth quarters of the Company’s fiscal year. See Note 2 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for more information regarding the consolidation on a three-month lag basis of Tao Group Hospitality.

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Recently Issued Accounting Pronouncements and Critical Accounting Policies
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussion of recently issued accounting pronouncements.
Critical Accounting Policies
The following discussion has been included to provide the results of our annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of fiscal year 2018.2020. There have been no material changes to the Company’s critical accounting policies from those set forth in our Annual Report on Form 10-K for the year ended June 30, 2017.2019 except for the adoption of ASC Topic 842, Leasesin the first quarter of fiscal year 2020. See Note 8 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussion of leases.
Goodwill
Goodwill is tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or substantive changes in circumstances. The Company performs its goodwill impairment test at the reporting unit level, which is one level below the operating segment level. The Company has two operating and reportable segments, MSG Sports and MSG Entertainment, consistent with the way management makes decisions and allocates resources to the business.
For purposes of evaluating goodwill for impairment, the Company has three reporting units across its two operating segments, which are MSG Sports, MSG Entertainment and TAO. During the first quarter of fiscal year 2018, the Company performed its annual impairment test of goodwill and determined that there were no impairments of goodwill identified for any of its reporting units. Tao Group Hospitality.
The goodwill balance reported on the Company’s consolidated balance sheet as of December 31, 20172019 by reporting unit was as follows:
MSG Sports$226,955
MSG Entertainment$76,840
76,975
TAO88,826
MSG Sports226,955
Tao Group Hospitality88,583
$392,621
$392,513
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform the two-step 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. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares 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 exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill that would be recognized in a business combination.


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The Company elected to perform the qualitative assessment of impairment for the goodwill for all of the Company’s reporting units for the fiscal year 20182020 annual impairment test. These assessments considered factors such as:
macroeconomic conditions;
industry and market considerations;
cost factors;
overall financial performance of the reporting units;
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.
During the first quarter of fiscal year 2020, the Company performed its annual impairment test of goodwill and determined that there were no impairments of goodwill identified for any of its reporting units as of the impairment test date. Based on these impairment tests, the Company’s reporting units had sufficient safety margins, representing the excess of the estimated fair value of each reporting unit, derived from the most recentlyrecent quantitative assessments, less its respective carrying value (including goodwill allocated to each respective reporting unit). The Company believes that if the fair value of the reporting unit exceeds its carrying value by greater than 10%, a sufficient safety margin has been realized.
Identifiable Indefinite-Lived Intangible Assets
Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or substantive changes in circumstances. The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of December 31, 20172019 by reportable segment:
Sports franchises (MSG Sports segment)$109,429
Trademarks (MSG Entertainment segment)62,421
Photographic related rights (MSG Sports segment)3,000
 $174,850
Sports franchises (MSG Sports)$111,064
Trademarks (MSG Entertainment)62,421
Photographic related rights (MSG Sports)3,000
 $176,485
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
The Company elected to perform the qualitative assessment of impairment for the indefinite-lived intangible assets for all of the Company’s reporting units for the fiscal year 2020 annual impairment test. 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.

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During the first quarter of fiscal year 2018,2020, the Company performed its annual impairment test of the identifiable indefinite-lived intangible assets and determined that there were no impairments identified.identified as of the impairment test date. Based on results of the impairment tests performed, 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.
Contingent Consideration
See Note 1011 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for more information regarding the fair value of the Company’s deferred and contingent consideration liabilities related to the acquisitions of TAOTao Group Hospitality and CLG.
MSG Sphere
The Company is moving forward with its venue strategy to create the “venue of the future.” These iconic structures will use cutting-edge technologies to establish an entirely new platform for creating the next-generation of immersive experiences. The Company will begin in Las Vegas with the construction of the first of these new venues — known as “MSG Sphere” for its iconic, spherical shape. The more than 18,000 seat venue is expected to be constructed over a two and a half year period with the goal of commencing construction in the second half of calendar year 2018. Key design features of the venue are expected to include (i) a 100% programmable exterior and an interior bowl that features the world’s largest and highest resolution media display known today, (ii) a first-of-its kind video system capable of capturing, curating and distributing both today’s and tomorrow’s content, (iii) an unprecedented, multi-layered audio system that will deliver a spectacular acoustical experience, and (iv) an advanced architecture for connectivity that will enable a broader range of content, greater interaction among guests and more immersive entertainment experiences. The Company intends to employ this state-of-the-art technological platform for a future venue to be built on land recently acquired in London and will continue to explore additional domestic and international markets where next-generation venues can be successful. See also “— Liquidity and Capital Resources — Overview.”

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes to the disclosures regarding market risks in connection with our pension and postretirement plans, interest rate risk exposure, foreign currency exchange rate risk, and commodity risk exposure. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended June 30, 2017.
We are exposed to market risk resulting from foreign currency fluctuations, primarily to the British pound sterling through our net investment position initiated with our acquisition of land in London. We may evaluate and decide, to the extent reasonable and practical, to reduce the translation risk of foreign currency fluctuations on this underlying nonfunctional currency exposure by entering into foreign currency forward exchange contracts with financial institutions. If we were to enter into such hedging transactions, the market risk resulting from foreign currency fluctuations is unlikely to be entirely eliminated. We do not plan to enter into derivative financial instrument transactions for foreign currency speculative purposes.2019.
As of December 31, 2017,2019, a uniform hypothetical 5% fluctuation in the GBP/USD exchange rate would have resulted in a change of approximately $5.2$15.8 million in the Company’s net asset value. For additional information, see Note 7 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussion of our recent acquisition of land in London.
Item 4. Controls and Procedures
An evaluation was carried out under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on that evaluation, the principal executive officerCompany’s Chief Executive Officer and principal financial officerChief Financial Officer concluded that as of December 31, 2019 the Company’s disclosure controls and procedures were effective as of December 31, 2017.effective.
There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) during the quarter ended December 31, 20172019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
For the fiscal year ended June 30, 2017, management excluded the operations of TAO Group, which was acquired by the Company on January 31, 2017, in its assessment of the Company’s internal control over financial reporting. During the quarter ended December 31, 2017, the Company implemented certain new or enhanced controls over the TAO Group's operations which will be included in conducting the Company’s assessment of the effectiveness of its internal control over financial reporting for the fiscal year ended June 30, 2018.



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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
TheOn March 29, 2019, a purported stockholder of the Company owns 50% of Azoff MSG Entertainment LLC, which in turn owns a majority interest in Global Music Rights, LLC (“GMR”). GMR is primarily a performance rights organization, whose business includes obtaining the right to license the public performance rights of songs composed by leading songwriters. GMR engaged in negotiations with the Radio Music Licensing Committee (“RMLC”), which represents over ten thousand commercial radio stations. On November 18, 2016, RMLC filed a complaint against GMR in the United States District Court of Chancery of the State of Delaware, derivatively on behalf of the Company, against certain directors of the Company who are members of the Dolan family group and against the directors of the Company who are members of the Compensation Committee (collectively, the “Director Defendants”). The Company is also named as a nominal defendant in the complaint. The complaint alleges that the Director Defendants breached their fiduciary duties to the Company’s stockholders in approving the compensation packages for James L. Dolan in his capacity as the Executive Chairman and Chief Executive Officer of the Company. The complaint seeks monetary damages in an unspecified amount from the Director Defendants in favor of the Company; rescission of Mr. Dolan’s employment agreements; restitution and disgorgement by Mr. Dolan in respect of his compensation; and costs and disbursements for the Eastern District of Pennsylvania alleging that GMR is violating Section 2 ofplaintiff. On June 5, 2019, the Sherman Antitrust ActBoard formed a Special Litigation Committee to investigate the claims made by the plaintiff and seeking an injunction, requiring, among other things, that GMR issue radio stations licenses for GMR’s repertory, upon request, at a rate set through a judicial rate-making procedure, that GMR offer “economically viable alternatives to blanket licenses,” and that GMR offer only licenses for songs which are fully controlled by GMR. GMR and RLMC agreed to an interim license arrangement through September 30, 2017, whichdetermine the Company’s response thereto. The litigation has been extended through March 31, 2018. GMR has advisedstayed while the Company that it believes that the RMLC ComplaintSpecial Litigation Committee’s work is without merit and is vigorously defending itself. On January 20, 2017, GMR filed a motion to dismiss or to transfer venue, asserting that the Eastern District of Pennsylvania is not a proper venue for the matter, lacks personal jurisdiction of GMR and that in any event the complaint fails to state a claim. On December 6, 2016, GMR filed a complaint against RMLC in the United States District Court for the Central District of California, alleging that RMLC operates as an illegal cartel that unreasonably restrains trade in violation of Section 1 of the Sherman Antitrust Act and California state law, and seeking an injunction restraining RMLC and its co-conspirators from enforcing or establishing agreements that unreasonably restrict competition for public performance licenses. The judge in the Central District of California denied RMLC’s motion to dismiss GMR’s claim for lack of ripeness and, on the basis that the two cases involve similar facts, stayed the California action in order to assess the status of the Pennsylvania case. On July 21, 2017, RMLC filed a preliminary injunction motion in the United States District Court for the Eastern District of Pennsylvania to extend the duration of the interim licenses which GMR had granted to certain radio stations. The district court determined that the jurisdictional matter should be decided prior to addressing the motion for preliminary injunction and referred the jurisdictional questions to the Magistrate Judge in the United States District Court Eastern District of Pennsylvania. On November 29, 2017, the Magistrate Judge issued a report and recommendation that personal jurisdiction was not appropriate over GMR in the Eastern District of Pennsylvania and recommending the dismissal ofthe RMLC’s action without prejudice. The RMLC has filed objectionsto the Magistrate Judge’s report and recommendation.ongoing.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information about
As of December 31, 2019, the Company had approximately $260 million remaining under the $525 million Class A Common Stock share repurchase program authorized by the Company’s board of directors on September 11, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations, with the timing and amount of purchases depending on market conditions and other factors. The Company has been funding and expects to continue to fund stock repurchases through a combination of stock that were made duringcash on hand and cash generated by operations. During the three months ended December 31, 2017 (amounts are presented2019, the Company did not engage in thousands except perany share data):
         
Period Total Number of Shares Purchased 
Average Price Paid per Share (a)
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)
 Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
October 1, 2017 - October 31, 2017 27
 $209.85
 26
 $262,053
November 1, 2017 - November 30, 2017 —
 $—
 —
 $262,053
December 1, 2017 - December 31, 2017 12
 $209.97
 12
 $259,639
Total 39
 $209.89
 38
  
_________________
(a)
The amounts do not give effect to any fees, commissions or other costs associated with repurchases of shares.
(b)
As of December 31, 2017, the total amount of Class A Common Stock authorized for repurchase by the Company’s board of directors was $525,000, and the Company had remaining authorization of $259,639 for future repurchases. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations, with the timing and amount of purchases depending on market conditions and other factors. The Company has been funding and expects to continue to fund stock repurchases through a combination of cash on hand and cash generated by operations. The Company may also choose to fund our stock repurchase program through other funding sources including under our revolving credit facilities. The Company first announced its stock repurchase program on September 11, 2015.

repurchase activity under its share repurchase program.

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Item 6. Exhibits


(a)Index to Exhibits
EXHIBIT
NO.
 DESCRIPTION
10.13.1
 
Time Sharing Agreement datedAmendment No. 1 to Amended By-laws of the Company, effective December 15, 2017 between MSG Sports & Entertainment LLC and Andrew Lustgarten (for4, 2019 (incorporated by reference to Exhibit 3.1 to the G450)Company’s Current Report on Form 8-K filed on December 4, 2019).


10.210.1
 
Time SharingEmployment Agreement, dated December 15, 2017January 23, 2020, between MSG Sports & Entertainment LLCThe Madison Square Garden Company and Andrew Lustgarten (for the G550).Joseph F. Yospe. †


10.331.1
 
Time Sharing Agreement dated December 15, 2017 between MSG Sports & Entertainment LLC and Andrew Lustgarten (for the GV).

10.4
Form of Option Agreement.

10.5
First Amendment to the Credit and Guaranty Agreement dated as of January 31, 2017, among TAO Group Operating LLC, TAO Group Intermediate Holdings LLC, certain subsidiaries of TAO Group Operating, the various lenders thereto, and Goldman Sachs Specialty Lending Group, L.P. entered into as of May 19, 2017.

10.6
Second Amendment to the Credit and Guaranty Agreement dated as of January 31, 2017, among TAO Group Operating LLC, TAO Group Intermediate Holdings LLC, certain subsidiaries of TAO Group Operating, the various lenders thereto, and Goldman Sachs Specialty Lending Group, L.P. entered into as of January 22, 2018.

31.1
Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


31.2
 
Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32.1
 
Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


32.2
 
Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


101.INS 
XBRL Instance Document.Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


101.SCH 
XBRL Taxonomy Extension Schema.


101.CAL 
XBRL Taxonomy Extension Calculation Linkbase.


101.DEF 
XBRL Taxonomy Extension Definition Linkbase.


101.LAB 
XBRL Taxonomy Extension Label Linkbase.


101.PRE 
XBRL Taxonomy Extension Presentation Linkbase.


104
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2019 formatted in Inline XBRL and contained in Exhibit 101.


_________________
†This exhibit is a management contract or a compensatory plan or arrangement.



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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 8th7th day of February 2018.2020.
The Madison Square Garden Company
  
By:    
/S/    DONNA COLEMANVICTORIA M. MINK
 Name:Donna ColemanVictoria M. Mink
 Title:Executive Vice President and Chief Financial Officer






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