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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
________________________
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MarchDecember 31, 2020
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: 001-39245
msge-20201231_g1.jpg
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
(Exact name of registrant as specified in its charter) 
Delaware84-3755666
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Delaware84-3755666
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
Two Penn PlazaNew York,NY10121
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (212) 465-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common StockMSGENew 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. ☐ Yes ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically 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 such files). ☑ 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 filer☐Accelerated filer☐
Non-accelerated filer☑Smaller reporting company☐
Emerging growth company☑
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 ☑ No
Number of shares of common stock outstanding as of April 30, 2020:
January 29, 2021:
Class A Common Stock par value $0.01 per share —19,489,79319,618,324 
Class B Common Stock par value $0.01 per share —4,529,517



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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
INDEX TO FORM 10-Q
 
Page
Page
Item 1. Financial Statements
CombinedConsolidated Balance Sheets as of MarchDecember 31, 2020 (unaudited) and June 30, 20192020
1
Consolidated Statements of Operations for the three and six months ended December 31, 2020 (unaudited) and the Combined Statements of Operations for the three and ninesix months ended MarchDecember 31, 2019 (unaudited)
3
Consolidated Statements of Comprehensive Loss for the three and six months ended December 31, 2020 (unaudited) and 2019 (unaudited)
3
the Combined Statements of Comprehensive Income (Loss) for the three and ninesix months ended MarchDecember 31, 2020 and 2019 (unaudited)
4
Combined StatementsConsolidated Statement of Cash Flows for the ninesix months ended MarchDecember 31, 2020 (unaudited) and the Combined Statement of Cash Flows for the six months ended December 31, 2019 (unaudited)
5
Consolidated Statements of Equity and Redeemable Noncontrolling Interests for the three and six months ended December 31, 2020 (unaudited) and the Combined Statements of Divisional Equity and Redeemable Noncontrolling Interests for the three and ninesix months ended March 31, 2020 andDecember 31, 2019 (unaudited)
7
Notes to Consolidated and Combined Financial Statements (unaudited)
911
3946
5970
6070
6171
6171
71
6372





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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
COMBINEDCONSOLIDATED BALANCE SHEETS
(in thousands)
 March 31,
2020		 June 30,
2019		December 31,
2020		June 30,
2020
 (Unaudited)  (Unaudited) 
ASSETS    ASSETS
Current Assets:    Current Assets:
Cash and cash equivalents $1,003,893
 $1,082,055
Cash and cash equivalents$1,451,352 $906,555 
Restricted cash 17,955
 10,010
Restricted cash26,207 17,749 
Short-term investments 331,019
 108,416
Short-term investments0 337,192 
Accounts receivable, net 105,212
 81,044
Accounts receivable, net73,711 57,184 
Net related party receivables 2,288
 1,722
Net related party receivables31,170 23,062 
Prepaid expenses 39,255
 24,067
Prepaid expenses56,066 62,127 
Other current assets 40,581
 39,430
Other current assets23,787 22,633 
Assets held for sale 109,155
 —
Total current assets 1,649,358
 1,346,744
Total current assets1,662,293 1,426,502 
Investments and loans to nonconsolidated affiliates 61,998
 84,560
Property and equipment, net of accumulated depreciation and amortization 1,540,786
 1,349,122
Investments in nonconsolidated affiliatesInvestments in nonconsolidated affiliates49,626 52,622 
Property and equipment, netProperty and equipment, net1,837,072 1,646,115 
Right-of-use lease assets 234,760
 —
Right-of-use lease assets198,464 220,328 
Amortizable intangible assets, net 155,948
 214,391
Amortizable intangible assets, net144,658 150,426 
Indefinite-lived intangible assets 64,881
 65,421
Indefinite-lived intangible assets63,801 63,801 
Goodwill 81,996
 165,558
Goodwill74,309 74,309 
Other assets 37,438
 89,963
Other assets91,616 85,103 
Total assets $3,827,165
 $3,315,759
Total assets$4,121,839 $3,719,206 
    
    
See accompanying notes to combined financial statements.
See accompanying notes to unaudited consolidated and combined financial statements.See accompanying notes to unaudited consolidated and combined financial statements.
1

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except per share data)
December 31,
2020		June 30,
2020
(Unaudited)
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable$4,952 $17,258 
Net related party payables, current16,428 18,418 
Current portion of long-term debt, net of deferred financing costs5,115 5,429 
Accrued liabilities:
Employee related costs50,977 68,837 
Other accrued liabilities114,326 125,452 
Operating lease liabilities, current54,963 53,388 
Collections due to promoters19,876 31,879 
Deferred revenue205,641 189,308 
Total current liabilities472,278 509,969 
Long-term debt, net of deferred financing costs649,445 28,126 
Operating lease liabilities, noncurrent155,440 174,219 
Defined benefit and other postretirement obligations25,103 26,132 
Other employee related costs13,481 15,591 
Collections due to promoters, noncurrent5,179 0 
Deferred tax liabilities, net12,927 12,450 
Other liabilities78,138 78,279 
Total liabilities1,411,991 844,766 
Commitments and contingencies (see Note 10)00
Redeemable noncontrolling interests14,543 20,600 
Madison Square Garden Entertainment Corp. Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,613 and 19,493 shares outstanding as of December 31, 2020 and June 30, 2020, respectively196 195 
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of December 31, 2020 and June 30, 202045 45 
Preferred stock, par value $0.01, 15,000 shares authorized; NaN outstanding as of December 31, 2020 and June 30, 20200 0 
Additional paid-in capital2,782,042 2,751,318 
Retained earnings(72,768)141,936 
Accumulated other comprehensive loss(25,381)(51,857)
Total Madison Square Garden Entertainment Corp. stockholders’ equity2,684,134 2,841,637 
Nonredeemable noncontrolling interests11,171 12,203 
Total equity2,695,305 2,853,840 
Total liabilities, redeemable noncontrolling interests and equity$4,121,839 $3,719,206 

See accompanying notes to unaudited consolidated and combined financial statements.
2

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
COMBINED BALANCE SHEETS (Continued)
(in thousands)

  March 31,
2020		 June 30,
2019
  (Unaudited)  
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND DIVISIONAL EQUITY
Current Liabilities:    
Accounts payable $18,766
 $23,974
Net related party payables, current 31,728
 18,911
Current portion of long-term debt, net of deferred financing costs 4,792
 6,042
Accrued liabilities:    
Employee related costs 70,418
 82,411
Other accrued liabilities 117,207
 88,614
Operating lease liabilities, current 54,506
 —
Collections due to promoters 49,421
 67,212
Deferred revenue 206,045
 186,883
Liabilities held for sale 72,811
 —
Total current liabilities 625,694
 474,047
Related party payables, noncurrent —
 172
Long-term debt, net of deferred financing costs 29,962
 48,556
Operating lease liabilities, noncurrent 191,762
 —
Defined benefit and other postretirement obligations 32,359
 41,318
Other employee related costs 17,570
 15,703
Deferred tax liabilities, net 13,131
 22,973
Other liabilities 77,770
 59,525
Total liabilities 988,248
 662,294
Commitments and contingencies (see Note 10) 

 

Redeemable noncontrolling interests 23,000
 67,627
Company Divisional Equity:    
Madison Square Garden Sports Corp. Investment 2,851,522
 2,618,971
Accumulated other comprehensive loss (52,607) (46,923)
Total Company divisional equity 2,798,915
 2,572,048
Nonredeemable noncontrolling interests 17,002
 13,790
Total divisional equity 2,815,917
 2,585,838
Total liabilities, redeemable noncontrolling interests and divisional equity $3,827,165
 $3,315,759

See accompanying notes to combined financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
 Three Months Ended Nine Months Ended Three Months EndedSix Months Ended
March 31, March 31,December 31,December 31,
2020 2019 2020 20192020201920202019
Revenues (a)
 $199,861
 $250,018
 $767,038
 $832,384
Revenues (a)
$23,137 $394,072 $37,515 $572,035 
Operating expenses:        Operating expenses:
Direct operating expenses (b)
 132,809
 158,710
 472,582
 507,249
Direct operating expenses (b)
35,464 210,194 69,623 341,716 
Selling, general and administrative expenses (c)
 84,186
 83,159
 257,970
 231,038
Selling, general and administrative expenses (c)
74,950 86,854 135,275 174,621 
Depreciation and amortization 26,196
 26,768
 80,271
 81,606
Depreciation and amortization23,875 27,434 50,457 54,254 
Impairment for intangibles, long-lived assets, and goodwill 102,211
 —
 102,211
 —
Restructuring chargesRestructuring charges1,372 0 21,299 — 
Operating income (loss) (145,541) (18,619) (145,996) 12,491
Operating income (loss)(112,524)69,590 (239,139)1,444 
Other income (expense):        Other income (expense):
Earnings (loss) in equity method investments (1,096) (2,881) (3,739) 17,131
Loss in equity method investmentsLoss in equity method investments(1,568)(1,170)(3,264)(2,643)
Interest income (d)
 3,659
 7,987
 17,242
 22,020
349 6,268 644 13,583 
Interest expense (605) (3,247) (1,854) (10,076)Interest expense(7,675)(144)(8,084)(1,249)
Miscellaneous income (expense), net (e)
 (17,381) 4,613
 (2,893) (4,118)
Miscellaneous income (loss), netMiscellaneous income (loss), net(7,362)9,355 26,862 16,386 
 (15,423) 6,472
 8,756
 24,957
(16,256)14,309 16,158 26,077 
Income (loss) from operations before income taxes (160,964) (12,147) (137,240) 37,448
Income (loss) from operations before income taxes(128,780)83,899 (222,981)27,521 
Income tax benefit (expense) 10,126
 (469) 8,686
 (1,253)
Income tax expenseIncome tax expense(323)(1,255)(486)(1,440)
Net income (loss) (150,838) (12,616) (128,554) 36,195
Net income (loss)(129,103)82,644 (223,467)26,081 
Less: Net loss attributable to redeemable noncontrolling interests (22,447) (7) (23,851) (3,662)
Less: Net income (loss) attributable to redeemable noncontrolling interestsLess: Net income (loss) attributable to redeemable noncontrolling interests(3,342)885 (7,231)249 
Less: Net income (loss) attributable to nonredeemable noncontrolling interests 195
 (680) 38
 (3,121)Less: Net income (loss) attributable to nonredeemable noncontrolling interests(902)453 (1,532)493 
Net income (loss) attributable to the Company $(128,586) $(11,929) $(104,741) $42,978
Basic and diluted earnings (loss) per common share attributable to the Company (f)
 $(5.36) $(0.50) $(4.37) $1.79
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholdersNet income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders$(124,859)$81,306 $(214,704)$25,339 
Basic and diluted income (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholdersBasic and diluted income (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders$(5.17)$3.39 $(8.91)$1.06 
Weighted-average number of common shares outstanding:Weighted-average number of common shares outstanding:
Basic and diluted (d)
Basic and diluted (d)
24,146 23,992 24,108 23,992 
_________________
(a)
(a)Includes revenues from related parties of $5,262 and $984 for the three months ended December 31, 2020 and 2019, respectively, and $9,280 and $7,459 for the six months ended December 31, 2020 and 2019, respectively.
(b)Includes net charges from related parties of $15 and $23,976 for the three months ended December 31, 2020 and 2019, respectively, and$96 and $40,405 for the six months ended December 31, 2020 and 2019, respectively.
(c)Includes net charges to related parties of $(10,086) and $(31,974) for the three months ended December 31, 2020 and 2019, respectively, and $(21,969) and $(65,757) for the six months ended December 31, 2020 and 2019, respectively.
(d)On April 17, 2020 (the “Entertainment Distribution Date”), 23,992 common shares were distributed to Madison Square Garden Sports Corp. (“MSG Sports,” formerly known as The Madison Square Garden Company) stockholders as of April 13, 2020. This share amount is being utilized for the calculation of basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders for the six months ended December 31, 2019 because Madison Square Garden Entertainment Corp. was a wholly-owned subsidiary of MSG Sports prior to the Entertainment Distribution Date.
Includes revenues from related parties of $6,333 and $7,906 for the three months ended March 31, 2020 and 2019, respectively, and $13,792 and $15,762 for the nine months ended March 31, 2020 and 2019, respectively.
(b)
Includes net charges from related parties of $13,743 and $31,479 for the three months ended March 31, 2020 and 2019, respectively, and$54,149 and $74,975 for the nine months ended March 31, 2020 and 2019, respectively.
(c)
Includes net charges to related parties of $(32,074) and $(30,293) for the three months ended March 31, 2020 and 2019, respectively, and $(97,832) and $(84,956) for the nine months ended March 31, 2020 and 2019, respectively.
(d)
Includes interest income from nonconsolidated affiliates of $2,334 for the nine months ended March 31, 2019.
(e)
Miscellaneous expense, net includes charges to related parties of $(67) and $(183) for the three months ended March 31, 2020 and 2019, respectively, and $(178) and $(548) for the nine months ended March 31, 2020 and 2019, respectively.
(f)
On April 17, 2020 (the “Entertainment Distribution Date”), 23,992 common shares were distributed to Madison Square Garden Sports Corp. (formerly known as The Madison Square Garden Company) stockholders as of April 13, 2020. This share amount is being utilized for the calculation of basic and diluted earnings (loss) per share for both the three and nine months ended March 31, 2020 and 2019 because Madison Square Garden Entertainment Corp. was a wholly-owned subsidiary of Madison Square Garden Sports Corp. prior to the Entertainment Distribution Date.
See accompanying notes to unaudited consolidated and combined financial statements.
3

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
Three Months EndedSix Months Ended
December 31,December 31,
2020201920202019
Net income (loss)$(129,103)$82,644 $(223,467)$26,081 
Other comprehensive income, before income taxes:
Amortization of actuarial loss included in net periodic benefit cost290 346 642 685 
Cumulative translation adjustments11,883 23,186 25,834 13,168 
Other comprehensive income, before income taxes12,173 23,532 26,476 13,853 
Income tax expense related to items of other comprehensive income0 0 0 0 
Other comprehensive income, net of income taxes12,173 23,532 26,476 13,853 
Comprehensive income (loss)(116,930)106,176 (196,991)39,934 
Less: Comprehensive income (loss) attributable to redeemable noncontrolling interests(3,342)885 (7,231)249 
Less: Comprehensive income (loss) attributable to nonredeemable noncontrolling interests(902)453 (1,532)493 
Comprehensive income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders$(112,686)$104,838 $(188,228)$39,192 
  Three Months Ended Nine Months Ended
  March 31, March 31,
  2020 2019 2020 2019
Net income (loss)   $(150,838)   $(12,616)   $(128,554)   $36,195
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 $342
   $328
   $1,027
 
 $984
 
Settlement loss recognized 67
   —
   67
   —
  
Amortization of prior service credit included in net periodic benefit cost —
 409
 (1) 327
 —
 1,094
 (4) 980
Cumulative translation adjustments   (19,946)   6,383
   (6,778)   3,181
Other comprehensive income (loss)   (19,537)   6,710
   (5,684)   4,161
Comprehensive income (loss)   (170,375)   (5,906) 
 (134,238)   40,356
Less: Comprehensive loss attributable to redeemable noncontrolling interests   (22,447)   (7)   (23,851)   (3,662)
Less: Comprehensive income (loss) attributable to nonredeemable noncontrolling interests   195
   (680)   38
   (3,121)
Comprehensive income (loss) attributable to the Company   $(148,123)   $(5,219)   $(110,425)   $47,139

See accompanying notes to unaudited consolidated and combined financial statements.


4
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

Six Months Ended
December 31,
20202019
Cash flows from operating activities:
Net income (loss)$(223,467)$26,081 
Adjustment to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization50,457 54,254 
Provision for deferred income taxes476 515 
Share-based compensation expense35,091 20,458 
Loss in equity method investments3,264 2,643 
Net unrealized and realized gains on equity investments with readily determinable fair value(26,431)(14,725)
Provision for credit losses770 4,450 
Other non-cash adjustments1,354 707 
Change in assets and liabilities:
Accounts receivable, net(17,296)(8,959)
Receivables from related parties, net of payables(10,098)9,316 
Prepaid expenses and other assets(2,264)(23,217)
Accounts payable(12,306)17,924 
Accrued and other liabilities(27,676)19,582 
Collections due to promoters, including noncurrent portion(6,824)(6,397)
Deferred revenue14,658 (2,913)
Operating lease right-of-use assets and lease liabilities4,660 4,039 
Net cash (used in) provided by operating activities$(215,632)$103,758 
Cash flows from investing activities:
Capital expenditures$(219,296)$(208,028)
Purchase of short-term investments0 (106,063)
Proceeds from maturity of short-term investments339,110 106,587 
Proceeds from sale of equity securities20,583 0 
Proceeds from sale of nonconsolidated affiliate0 18,000 
Loan repayment received from subordinated debt0 58,735 
Cash received for notes receivable6,328 750 
Other investing activities(43)413 
Net cash provided by (used in) investing activities$146,682 $(129,606)
See accompanying notes to unaudited consolidated and combined financial statements.
5
  Nine Months Ended
  March 31,

 2020 2019
Cash flows from operating activities:    
Net income (loss) $(128,554) $36,195
Adjustment to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization 80,271
 81,606
Impairment of intangibles, long-lived assets and goodwill 102,211
 —
Provision (benefits) from deferred income taxes (9,842) 794
Share-based compensation expense 29,294
 27,929
Loss (earnings) in equity method investments 3,739
 (17,131)
Purchase accounting adjustments associated with leases 4,458
 3,197
Unrealized loss on equity investment with readily determinable fair value 2,471
 2,405
Provision for doubtful accounts 6,954
 765
Other non-cash adjustments (1,488) 2,569
Change in assets and liabilities:    
Accounts receivable, net (31,413) (70,436)
Net related party receivables (566) (885)
Prepaid expenses and other assets (32,231) (38,937)
Accounts payable 3,327
 (4,589)
Net related party payables 12,645
 18,693
Accrued and other liabilities 46,519
 (2,359)
Collections due to promoters 15,924
 (16,953)
Deferred revenue 34,193
 22,103
Operating lease right-of-use assets and lease liabilities (961) —
Net cash provided by operating activities $136,951
 $44,966
Cash flows from investing activities:    
Capital expenditures $(326,596) $(114,313)
Proceeds from insurance recoveries 476
 —
Purchase of short-term investments (405,935) (112,735)
Proceeds from maturity of short-term investment 176,661
 —
Investments and loans to nonconsolidated affiliates (75) (51,807)
Proceeds from sale of nonconsolidated affiliate 18,000
 125,000
Loan repayment received from subordinated debt 58,735
 4,765
Cash received (paid) for notes receivable 750
 (7,761)
Net cash used in investing activities $(477,984) $(156,851)
     
     
See accompanying notes to combined financial statements.

Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)




Six Months Ended
December 31,
20202019
Cash flows from financing activities:
Proceeds from issuance of term loan, net of issuance discount$630,500 $0 
Proceeds from revolving credit facility6,500 0 
Taxes paid in lieu of shares issued for equity-based compensation(5,975)0 
Noncontrolling interest holders’ capital contribution500 2,000 
Distributions to noncontrolling interest holders0 (535)
Repayment of revolving credit facility— (15,000)
Principal repayment on long-term debt(2,500)(3,750)
Payments for financing costs(14,615)0 
Net transfers from (to) Madison Square Garden Sports Corp. and its subsidiaries0 (23,600)
Net cash provided by (used in) financing activities$614,410 $(40,885)
Effect of exchange rates on cash, cash equivalents and restricted cash7,795 1,693 
Net increase (decrease) in cash, cash equivalents and restricted cash553,255 (65,040)
Cash, cash equivalents and restricted cash at beginning of period924,304 1,092,065 
Cash, cash equivalents and restricted cash at end of period$1,477,559 $1,027,025 
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid$76,945 $46,151 
Share-based compensation capitalized in property and equipment$2,784 $2,482 
  Nine Months Ended
  March 31,

 2020 2019
Cash flows from financing activities:    
Noncontrolling interest holders’ capital contribution $4,000
 $5,560
Distributions to noncontrolling interest holders (535) (1,263)
Loans from noncontrolling interest holders —
 606
Repayment of revolving credit facility (15,000) —
Principal repayment on long-term debt (5,000) (3,929)
Net transfers from Madison Square Garden Sports Corp. and its subsidiaries 283,435
 31,604
Net cash provided by financing activities $266,900
 $32,578
Effect of exchange rates on cash, cash equivalents and restricted cash 3,916
 6,440
Net decrease in cash, cash equivalents and restricted cash (70,217) (72,867)
Cash, cash equivalents and restricted cash at beginning of period 1,092,065
 1,232,356
Cash, cash equivalents and restricted cash at end of period $1,021,848
 $1,159,489
Non-cash investing and financing activities:    
Non-cash acquisition of additional redeemable noncontrolling interests $37,715
 $—
Capital expenditures incurred but not yet paid $75,656
 $17,515
Tenant improvement paid by landlord
 $195
 $13,715
Share-based compensation capitalized in property and equipment $3,790
 $1,926

See accompanying notes to unaudited consolidated and combined financial statements.


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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS’ AND DIVISIONAL EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
Three Months Ended December 31, 2020
Common
Stock
Issued		Additional
Paid-In
Capital		Retained
Earnings
(Accumulated Deficits)		Accumulated
Other
Comprehensive
Income (Loss)		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
Interests
Balance as of September 30, 2020$241 $2,757,155 $52,091 $(37,554)$2,771,933 $11,773 $2,783,706 $17,298 
Net loss— — (124,859)— (124,859)(902)(125,761)(3,342)
Other comprehensive income— — — 12,173 12,173 — 12,173 — 
Comprehensive loss— — — — (112,686)(902)(113,588)(3,342)
Share-based compensation— 24,892 — — 24,892 — 24,892 — 
Accretion of put options— — — — — — — 587 
Tax withholding associated with shares issued for equity-based compensation— (5)— — (5)— (5)— 
Contributions from noncontrolling interest holders— — — — — 300 300 — 
Balance as of December 31, 2020$241 $2,782,042 $(72,768)$(25,381)$2,684,134 $11,171 $2,695,305 $14,543 
See accompanying notes to unaudited consolidated and combined financial statements.
7

             
  Three Months Ended March 31, 2020
  Madison Square Garden Sports Corp. Investment 
Accumulated
Other
Comprehensive
Loss
 Total Company Divisional Equity 
Non -
redeemable
Noncontrolling
Interests
 Total Divisional Equity 
Redeemable
Noncontrolling
 Interests
Balance as of December 31, 2019 $2,638,955
 $(33,070) $2,605,885
 $16,807
 $2,622,692
 $66,223
Net income (loss) (128,586) —
 (128,586) 195
 (128,391) (22,447)
Other comprehensive loss —
 (19,537) (19,537) —
 (19,537) —
Comprehensive income (loss) —
 —
 (148,123) 195
 (147,928) (22,447)
Net increase in Madison Square Garden Sports Corp. Investment 320,377
 —
 320,377
 —
 320,377
 —
Noncontrolling interests non-cash acquisition 37,715
 —
 37,715
 —
 37,715
 (37,715)
Redeemable noncontrolling interest adjustment to redemption fair value (16,939) —
 (16,939) —
 (16,939) 16,939
Balance as of March 31, 2020 $2,851,522
 $(52,607) $2,798,915
 $17,002
 $2,815,917
 $23,000
             
  Three Months Ended March 31, 2019
  Madison Square Garden Sports Corp. Investment 
Accumulated
Other
Comprehensive Loss
 Total Company Divisional Equity 
Non -
redeemable
Noncontrolling
Interests
 Total Divisional Equity Redeemable
Noncontrolling
Interests
Balance as of December 31, 2018 $2,616,196
 $(43,897) $2,572,299
 $14,308
 $2,586,607
 $72,770
Net loss (11,929) —
 (11,929) (680) (12,609) (7)
Other comprehensive income —
 6,710
 6,710
 —
 6,710
 —
Comprehensive loss —
 —
 (5,219) (680) (5,899) (7)
Net increase in Madison Square Garden Sports Corp. Investment 53,299
 —
 53,299
 —
 53,299
 —
Contribution from noncontrolling interest holders —
 —
 —
 3,156
 3,156
 —
Distributions to noncontrolling interest holders —
 —
 —
 —
 —
 (1,004)
Balance as of March 31, 2019 $2,657,566
 $(37,187) $2,620,379
 $16,784
 $2,637,163
 $71,759
             
See accompanying notes to combined financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS’ AND DIVISIONAL EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Three Months Ended December 31, 2019
MSG Sports
Corp.’s
Investment		Accumulated
Other
Comprehensive Income (Loss)		Total Company Divisional EquityNon -
redeemable
Noncontrolling
Interests		Total Divisional EquityRedeemable
Noncontrolling
Interests
Balance as of September 30, 2019$2,539,552 $(56,602)$2,482,950 $15,539 $2,498,489 $66,991 
Net income81,306 — 81,306 453 81,759 885 
Other comprehensive income— 23,532 23,532 — 23,532 — 
Comprehensive income— — 104,838 453 105,291 885 
Net increase in Madison Square Garden Sports Corp. Investment22,789 — 22,789 — 22,789 — 
Contribution from noncontrolling interest holders— — — 2,000 2,000 — 
Distributions to noncontrolling interest holders— — — (535)(535)— 
Balance as of December 31, 2019$2,643,647 $(33,070)$2,610,577 $17,457 $2,628,034 $67,876 
See accompanying notes to unaudited consolidated and combined financial statements.
             
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
COMBINED STATEMENTS OF DIVISIONAL EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(Continued)
(Unaudited) (in thousands)
             
  Nine Months Ended March 31, 2020
  Madison Square Garden Sports Corp. Investment Accumulated
Other
Comprehensive Loss		 Total Company Divisional Equity Non -
redeemable
Noncontrolling
Interests		 Total Divisional Equity Redeemable
Noncontrolling
Interests
Balance as of June 30, 2019 $2,618,971
 $(46,923) $2,572,048
 $13,790
 $2,585,838
 $67,627
Net income (loss) (104,741) —
 (104,741) 38
 (104,703) (23,851)
Other comprehensive loss —
 (5,684) (5,684) —
 (5,684) —
Comprehensive income (loss) —
 —
 (110,425) 38
 (110,387) (23,851)
Net increase in Madison Square Garden Sports Corp. Investment 316,516
 —
 316,516
 —
 316,516
 —
Contributions from noncontrolling interest holders —
 —
 —
 3,709
 3,709
 —
Distributions to noncontrolling interest holders —
 —
 —
 (535) (535) —
Noncontrolling interest non-cash acquisition 37,715
 —
 37,715
 —
 37,715
 (37,715)
Redeemable noncontrolling interest adjustment to redemption fair value (16,939) —
 (16,939) —
 (16,939) 16,939
Balance as of March 31, 2020 $2,851,522
 $(52,607) $2,798,915
 $17,002
 $2,815,917
 $23,000
8

             
  Nine Months Ended March 31, 2019
  Madison Square Garden Sports Corp. Investment Accumulated
Other
Comprehensive Loss		 Total Company Divisional Equity Non -
redeemable
Noncontrolling
Interests		 Total Divisional Equity Redeemable
Noncontrolling
Interests
Balance as of June 30, 2018 $2,525,031
 $(46,918) $2,478,113
 $11,505
 $2,489,618
 $76,684
Adoption of ASU No. 2016-01 (5,570) 5,570
 —
   —
  
Adoption of ASC Topic 606 33,669
 —
 33,669
 —
 33,669
 —
Net income (loss) 42,978
 —
 42,978
 (3,121) 39,857
 (3,662)
Other comprehensive income —
 4,161
 4,161
 —
 4,161
 —
Comprehensive income (loss) —
 —
 47,139
 (3,121) 44,018
 (3,662)
Net increase in Madison Square Garden Sports Corp. Investment 61,458
 —
 61,458
 —
 61,458
 —
Contributions from noncontrolling interest holders —
 —
 —
 8,400
 8,400
 —
Distributions to noncontrolling interest holders —
 —
 —
 —
 —
 (1,263)
Balance as of March 31, 2019 $2,657,566
 $(37,187) $2,620,379
 $16,784
 $2,637,163
 $71,759
             
See accompanying notes to combined financial statements.


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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS’ AND DIVISIONAL EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Six Months Ended December 31, 2020
Common
Stock
Issued		Additional
Paid-In
Capital		Retained Earnings
(Accumulated Deficits)		Accumulated
Other
Comprehensive Income (Loss)		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
Interests
Balance as of June 30, 2020$240 $2,751,318 $141,936 $(51,857)$2,841,637 $12,203 $2,853,840 $20,600 
Net loss— — (214,704)— (214,704)(1,532)(216,236)(7,231)
Other comprehensive income— — — 26,476 26,476 — 26,476 — 
Comprehensive loss— — — — (188,228)(1,532)(189,760)(7,231)
Share-based compensation— 36,700 — — 36,700 — 36,700 
Accretion of put options— — — — — — — 1,174 
Tax withholding associated with shares issued for equity-based compensation1 (5,976)— — (5,975)— (5,975)— 
Contributions from noncontrolling interest holders— — — — — 500 500 — 
Balance as of December 31, 2020$241 $2,782,042 $(72,768)$(25,381)$2,684,134 $11,171 $2,695,305 $14,543 
See accompanying notes to unaudited consolidated and combined financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS’ AND DIVISIONAL EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Six Months Ended December 31, 2019
MSG Sports’
Investment		Accumulated
Other
Comprehensive Income (Loss)		Total Company Divisional EquityNon -
redeemable
Noncontrolling
Interests		Total Divisional EquityRedeemable
Noncontrolling
Interests
Balance as of June 30, 2019$2,618,971 $(46,923)$2,572,048 $13,790 $2,585,838 $67,627 
Net income25,339 — 25,339 493 25,832 249 
Other comprehensive income— 13,853 13,853 — 13,853 — 
Comprehensive income— — 39,192 493 39,685 249 
Net decrease in Madison Square Garden Sports Corp. Investment(663)— (663)— (663)— 
Contributions from noncontrolling interest holders— — — 3,709 3,709 — 
Distributions to noncontrolling interest holders— — — (535)(535)0 
Balance as of December 31, 2019$2,643,647 $(33,070)$2,610,577 $17,457 $2,628,034 $67,876 
See accompanying notes to unaudited consolidated and combined financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
All amounts included in the following notes to consolidated and combined financial statements (unaudited) are presented in thousands, except per share data or as otherwise noted.

Note 1. Description of Business and Basis of Presentation
Spin-off TransactionDescription of Business
On April 17, 2020 (the “Entertainment Distribution Date”), Madison Square Garden Sports Corp. (formerly The Madison Square Garden Company) distributed all of the outstanding common stock of Madison Square Garden Entertainment Corp. (formerly MSG Entertainment Spinco, Inc.) (the “Company”) to(together with its stockholders (the “Entertainment Distribution”). The Company owns, directlysubsidiaries, the “Company” or indirectly, the entertainment business previously owned and operated by Madison Square Garden Sports Corp. through its MSG Entertainment business segment and the sports booking business previously owned and operated by Madison Square Garden Sports Corp. through its MSG Sports business segment. In the Entertainment Distribution, stockholders of Madison Square Garden Sports Corp. received (a) one share of the Company’s Class A common stock, par value $0.01 per share, for every share of Madison Square Garden Sports Corp. Class A common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on April 13, 2020 (the “Record Date”“MSG Entertainment”), and (b) one share of the Company’s Class B common stock, par value $0.01 per share, for every share of Madison Square Garden Sports Corp. Class B common stock, par value $0.01 per share, held of record as of the close of business, New York City time, on the Record Date.
Description of Business
The Company is a leader in live experiences comprised of iconic venues; marquee entertainment content; popular dining and nightlife offerings; and a premier music festival. Utilizing the Company’s powerful brands and live entertainment expertise, the Company delivers unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences. The Company’s portfolio of venues includes: Madison Square Garden (“The Garden”), Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre. For all periods presented, the Company’s venues also included the Forum in Inglewood, CA, which was sold on May 1, 2020 (see Note 3 for further details). In addition, the Company is constructing a state-of-the-art venue, MSG Sphere, in Las Vegas and plans to build a second MSG Sphere in London.London, pending necessary approvals. The Company also includes the original production, the Christmas Spectacular Starring the Radio City Rockettes (“Christmas Spectacular”), as well as Boston Calling Events, LLC (“BCE”), the entertainment production company that owns and operates the Boston Calling Music Festival, and TAOTao Group Holdings LLC (“Tao Group Hospitality”), a hospitality group with globally-recognized entertainment dining and nightlife brands.
AsThe 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, Hulu Theater at Madison Square Garden and The Chicago Theatre. In addition, the Company leases Radio City Music Hall and the Beacon Theatre in New York City. Additionally, Tao 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, formerly named MSG Entertainment Spinco, Inc., was incorporated on November 21, 2019 as a direct, wholly owned subsidiary of Madison Square Garden Sports Corp. (“MSG Sports” or “Former Parent”), formerly known as The Madison Square Garden Company. On March 31, 2020, MSG Sports’ board of directors approved the Company operated and reported its financial information as one segment. In making this determination,distribution of all the Company (i) determined its Chief Operating Decision Maker (“CODM”outstanding common stock of MSG Entertainment to MSG Sports’ stockholders (the “Entertainment Distribution”), (ii) identified and analyzed potential business components, (iii) identified its operating segments, and (iv) determined whether there were multiple operating segments requiring presentation as reportable segments. The Company’s decisionwhich occurred on April 17, 2020 (the “Entertainment Distribution Date”). See Note 1 to report as 1 segment was based upon the following:
i)its internal organizational structure;
ii)the manner in which its operations were managed; and
iii)the criteria used by the Company’s Executive Chairman and Chief Executive Officer, its CODM, to evaluate segment performance.
As part of the analysis in determining that the Company operated as one segment as of March 31, 2020, the Company reviewed the financial information provided to its CODM. While the Company’s CODM reviewed total company operating results to assess overall performanceaudited consolidated and allocate resources, discretecombined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for more information atregarding the business component level was not provided to the CODM on a disaggregated basis. Therefore, through March 31, 2020, the Company presented its financial information as one segment. Entertainment Distribution.
Following the Entertainment Distribution, on April 17, 2020, the Company will havehas 2 reportable segments (the Entertainment business and the Tao Group Hospitality business) as a result of certain changes in the financial information that is provided to its CODM. This change in reportable segments will be presented in the Company’s Annual Report on Form 10-K for the fiscal year ending June 30, 2020 to be filed with the U.S. Securities and Exchange Commission (the “SEC”Chief Operating Decision Maker (“CODM”).
A significant majority Additionally, as part of the Company’s revenues and assets are attributed to or locatedEntertainment Distribution, the Company has entered into various agreements with MSG Sports as detailed in the United States and are primarily concentrated in the New York City metropolitan area.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 17.
Basis of Presentation
The Company reports on a fiscal year basis ending on June 30th. In these consolidated and combined financial statements, the years ended on June 30, 2021 and 2020 are referred to as “Fiscal Year 2021,” and “Fiscal Year 2020,” respectively.
Subsequent to the Entertainment Distribution, the Company’s balance sheets as of December 31, 2020 and June 30, 2020 and for the statement of operations for the three and six months ended December 31, 2020 are presented on a consolidated basis, as the Company (the “combinedbecame a standalone public company on April 17, 2020. The Company’s financial statements”)statements prior to April 17, 2020 that are included in the results of operations for the year ended June 30, 2020, and the interim periods therein, were prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of Madison Square GardenMSG Sports Corp.(“combined financial statements”). These financial statements reflect the combined historical results of operations, financial position and cash flows of the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) and SECSecurities and Exchange Commission (“SEC”) Staff Accounting Bulletin Topic 1-B, Allocation of Expenses and Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity, andArticle 10 of Regulation S-X of the SEC for interim financial information. References to GAAP issued by the Financial Accounting Standards Board (“FASB”) in these footnotes are to the FASB Accounting StandardsCodification, also referred to as the “Codification” or “ASC.”
Historically, separate financial statements have not been prepared for the Company and it has not operated as a stand-alone business from Madison Square Garden Sports Corp. The combined financial statements include certain assets and liabilities that have historically been held by Madison Square Garden Sports Corp. or by other Madison Square Garden Sports Corp. subsidiaries but are specifically identifiable or otherwise attributable to the Company. All significant intercompany transactions between Madison Square Garden Sports Corp. and the Company have been included as components of the Madison Square Garden Sports Corp. investment in the combined financial statements, as they are to be considered effectively settled upon effectiveness of the Entertainment Distribution. The combined financial statements are presented as if the Company’s businesses had been combined for all periods presented. The assets and liabilities in the combined financial statements have been reflected on a historical cost basis, as immediately prior to the Entertainment Distribution all of the assets and liabilities presented were wholly-owned by Madison Square Garden Sports Corp. and were transferred to the Company at a carry-over basis.
The combined statements of operations include allocations for certain support functions that were provided on a centralized basis and not historically recorded at the business unit level by Madison Square Garden Sports Corp., such as expenses related to executive management, finance, legal, human resources, government affairs, information technology, and venue operations, among others. As part of the Entertainment Distribution, certain corporate and operational support functions were transferred to the Company and therefore, charges were reflected in order to properly burden all business units comprising Madison Square Garden Sports Corp.’s historical operations. These expenses have been allocated to Madison Square Garden Sports Corp. on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of combined revenues, headcount or other measures of the Company or Madison Square Garden Sports Corp., which are recorded as a reduction of either direct operating expenses or selling, general and administrative expense. In addition, certain of the Company’s contracts with its customers for suite license, sponsorship and venue signage arrangements contain performance obligations that are fulfilled by both the Company and Madison Square Garden Sports Corp. Revenue sharing expenses attributable to Madison Square Garden Sports Corp. have primarily been recorded on the basis of specific identification where possible, with the remainder allocated proportionately as a component of direct operating expenses within the combined statements of operations. See Note 31 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information Statement, dated April 6, 2020 (the “Information Statement”), filed as Exhibit 99.1 to the Company’s CurrentAnnual Report on Form 8-K filed on April 7, 202010-K for more information regarding the Company’s policy for recognitionassumptions underlying the combined financial statements and additional details on the preparation of suites, sponsorship and venue signage revenues.such combined financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Management believes that the assumptions underlying the combined financial statements, including the assumptions regarding allocating general corporate expenses, are reasonable. Nevertheless, the combined financial statements may not include all of the actual expenses that would have been incurred by the Company and may not reflect its combined results of operations, financial position, and cash flows had it been a stand-alone company during the periods presented. Actual costs that would have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company is unable to quantify the amounts that it would have recorded during the historical periods on a stand-alone basis as it is not practicable to do so. See Note 17 for more information regarding allocations of certain costs from the Company to Madison Square Garden Sports Corp.
Madison Square Garden Sports Corp. uses a centralized approach to cash management and financing of operations. Cash is managed centrally with net earnings reinvested and working capital requirements met from existing liquid funds. The Company and Madison Square Garden Sports Corp.’s cash was available for use and was regularly “swept” historically. Most of the cash and cash equivalents held at the corporate level by Madison Square Garden Sports Corp. were attributed to the Company for each of the periods presented, as such, cash was held in accounts legally owned by the Company. Therefore, such amounts were attributed to the combined balance sheets for each period presented. Transfers of cash both to and from Madison Square Garden

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Sports Corp. are included as components of the Madison Square Garden Sports Corp. investment in the accompanying combined statements of divisional equity and redeemable noncontrolling interests.
Madison Square Garden Sports Corp.’s net investment in the Company has been presented as a component of divisional equity in the combined financial statements. Distributions made by Madison Square Garden Sports Corp. to the Company or to Madison Square Garden Sports Corp. from the Company are recorded as transfers to and from Madison Square Garden Sports Corp., and the net amount is presented on the combined statements of cash flows as “Net transfers to/from Madison Square Garden Sports Corp. and Madison Square Garden Sports Corp.’s subsidiaries.”MSG Sports.
Unaudited Interim Financial Statements
The accompanying interim consolidated and combined financial statements have been prepared in accordance with GAAP for interim financial information and the instruction of Rule 10-01 of Regulation S-X, and should be read in conjunction with the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information Statement.Annual Report on Form 10-K. The consolidated and combined financial statements as of MarchDecember 31, 2020 and for the three and ninesix months ended MarchDecember 31, 2020 and 2019 presented herein 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 Company’s dependence on revenues from the Christmas Spectacular generally means it earns a disproportionate share of its revenues in the second quarter of the its fiscal year. In addition, the Company’s operating results in the third and fourth quarters of Fiscal Year 2020 and the first and second quarters of Fiscal Year 2021 were negatively impacted due to the COVID-19 pandemic.
Impact of the COVID-19 Pandemic
The Company’s operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic and actions taken in response by the governmentgovernmental authorities and certain professional sports leagues. As of the date of this Quarterly Report on Form 10-Q, virtually all of the Company’s businessEntertainment business’ operations have been suspended and itTao Group Hospitality is operating at significantly reduced capacity and demand. It is not clear when those operationswe will resume. be permitted or able to resume normal business operations.
As a result of government mandatedgovernment-mandated assembly limitations and closures, our performance venues were closed in mid-March 2020, and, subject to limited exceptions, such as the use of The Garden for Knicks and Rangers (as defined below) home games without fans in attendance and our virtual residency in Fall 2020 featuring Phish’s Trey Anastasio live from the Beacon Theatre, as of the date of this filing no events are currently permitted to be held at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall and the Beacon Theatre orTheatre. Although events are permitted at The Chicago Theatre, current government-mandated capacity restrictions and virtuallyother safety requirements make it economically unfeasible to do so. Other than Knicks and Rangers home games at the Garden, all events at our venues arehave been postponed or cancelledcanceled through June. at least March 2021, and will likely be impacted through the rest of 2021. We are not recognizing revenue from events that have been canceled or postponed and, while events have been rescheduled into the second half of calendar year 2021, it is unclear whether and to what extent those events will take place. We are actively monitoring government regulations and guidance, and when such regulations permit, and there is an opportunity to reopen our venues for events safely and on economically feasible terms, we expect that we would do so.
The impact to our operations included the cancellation of both the 2020 production of the Christmas Spectacular and the 2020 Boston Calling music festival, which had been slated for Memorial Day weekend,Music Festival.
The Company has also been cancelled. Additionally, public officials have imposed mandates limiting restaurantslong-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and barsthe New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”) to only take-outplay their home games at The Garden.
While the NBA began its 2020-21 regular season in December 2020 and delivery servicethe NHL began its 2020-21 regular season in January 2021, the Knicks and requiring that nightlife venues closeRangers are currently playing home games at The Garden without fans in attendance due to government-mandated assembly restrictions. Even if fans are permitted to attend in the citiesfuture, capacity restrictions, use limitations and social distancing requirements may remain in place through, at least, the rest of Fiscal Year 2021, which would continue to affect the payments we receive under the Arena License Agreements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Due to government actions taken in response to the COVID-19 pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in mid-March, and Avenue and Vandal in New York were permanently closed in April and June, respectively. Tao Group Hospitality operates.has resumed limited operations at certain venues, subject to significant regulatory requirements, including limits on capacity, curfews and social distancing requirements for outdoor and indoor dining. As of December 31, 2020, eight of Tao Group Hospitality’s venues were open for outdoor dining and/or limited capacity indoor dining, four were open for delivery and/or takeout only, while sixteen venues remained closed.
The COVID-19 pandemic has materially impacted our revenues, most significantly because, as of the date of this filing, we are generating substantially reduced sponsorship and advertising revenue as well as reduced payments under the Arena License Agreements and we are not generating revenue from:
•events at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre;
•suite licenses; and
•the 2020 production of the Christmas Spectacular.
The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance. As a result, we have taken several actions to improve our financial flexibility, reduce operating costs and preserve liquidity.
•We have revised our processes and construction schedule for MSG Sphere, providing for a substantially reduced spend in Fiscal Year 2021 and a lengthened timetable that enables the Company to preserve cash in the near-term. We now expect to open MSG Sphere in Las Vegas in calendar year 2023;
•In connection with our extended construction timeline, we have reduced our expected near-term spending on technology and content development for MSG Sphere;
•At the end of May 2020, we ended all financial support that was previously provided for certain event-level employees at the Company’s performance venues, and as a result virtually all venue employees, approximately 6,000 in total, are effectively furloughed;
•At the end of March 2020, Tao Group Hospitality venues ineliminated essentially all of its venue line staff and outside the United States are closed, which has resulted in the business being materially impacted.
Additionally,manager positions, with limited numbers of employees returning as a result of operating disruptions due to COVID-19, the Company’s projected cash flows were directly impacted. This disruption along with the deteriorating macroeconomic conditions and industry/market considerations, were considered a “triggering event” for theoperations slowly resume. In August 2020, Tao Group Hospitality reporting unit,reduced its corporate workforce, and made additional reductions in venue and corporate positions during the second quarter of Fiscal Year 2021;
•We reduced our regular full-time workforce by approximately 350 positions in August, with a modest additional reduction in November 2020;
•We have implemented and are continuing to pursue additional comprehensive cost reduction measures, including terminating certain third-party services, negotiating reduced rates and/or reduced service levels with third parties, and pursuing targeted savings and reductions in spending on marketing and travel and entertainment, and deferring or limiting non-essential operating or other discretionary expenses;
•We have successfully negotiated certain relief and deferral of cash payments from landlords and other vendors. Conversations with third parties are ongoing as we continue to pursue additional options, some of which requiredmay or may not be successful; and
•In November 2020, MSG National Properties, LLC (“MSG National Properties”) and certain of our subsidiaries entered into a five-year $650,000 senior secured term loan facility (“National Properties Term Loan Facility”). See Note 12 for further details of National Properties Term Loan Facility.
Disruptions caused by the CompanyCOVID-19 pandemic have had, and are likely to assess the carrying value ofcontinue to have, a significant and negative impact on Tao Group Hospitality’s intangible assets, long-lived assetsoperations and goodwill, in that order in accordance with ASC Subtopic 350-30, for impairment. Based on this evaluation, the Company recorded a non-cash goodwill impairment charge of $80,698 during the three and nine months ended March 31,financial performance. In August 2020, associated with one venue within the Tao Group Hospitality reporting unit.entered into an amendment to the Tao Senior Credit Agreement, which suspended certain financial covenants through December 31, 2021 and increased the minimum liquidity requirement. In addition, duringin connection with the threeamendment, our wholly owned subsidiary MSG Entertainment Group, LLC (“MSG Entertainment Group”) entered into a guarantee agreement, which also included a minimum liquidity requirement for MSG Entertainment Group. See Note 12 for more information regarding the amendment to the Tao Senior Credit Agreement. If recovery from the pandemic takes longer than currently estimated, Tao Group Hospitality
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may need to seek covenant waivers in the future. Tao Group Hospitality's failure to obtain debt covenant waivers could trigger a violation of these covenants and nine months ended March 31, 2020, the Company recorded non-cash impairment charges associated with one venue withinlead to default and acceleration of all of its outstanding debt, which could have a material adverse effect on Tao Group Hospitality of $11,573, $6,399 and $3,541, for right-of-use assets, property and equipment assets, and a tradename, respectively. Duethe Company.
See Note 1 to the COVID-19-related shutdown of its venues, TAOCompany’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for impairment charges recorded by the Company for Tao Group Hospitality began a review of its lease contracts and could decide to close certain venues (which may later reopen elsewhere) if the landlords are unwilling to make appropriate concessions, which could result in additional charges related to the venue’s long-lived assets.
Fiscal Year 2020. There was no triggering event identifiedimpairment charge recorded by the Company for the Entertainment reporting unit as of Marchthree and six months ended December 31, 2020. However, the duration and impact of the COVID-19 pandemic may result in additional future impairment charges that management will evaluate as facts and circumstances evolve over time. Refer to Note 7 and Note 9 for further detail.detail of the Company’s intangible assets, long-lived assets and goodwill.
Note 2. Accounting Policies
Principles of Consolidation and Combination
TheFor the periods prior to the Entertainment Distribution, the combined financial statements of the Company include assets and liabilities that have been determined to bewere historically held at Former Parent’s corporate level but were specifically identifiable or otherwise attributable to the Company. All intracompany accounts within the Company’s combined businesses have been eliminated. All significant intercompany transactions and balances between the Company and Madison Square

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Garden Sports Corp.Former Parent have been included in thesethe combined financial statements as components of Madison Square Garden Sports Corp. Investment.MSG Sports’ investment. Expenses related to corporate allocations from the Company to Madison Square Garden Sports Corp. prior to the Entertainment Distribution arewere considered to be effectively settled in the combined financial statements at the time the transaction iswas recorded, with the offset recorded against MSG Sports’ investment. All significant intracompany transactions and accounts within the Company's consolidated and combined financial statements have been eliminated.
After the Entertainment Distribution, the consolidated financial statements of the Company include the accounts of Madison Square Garden SportsEntertainment Corp. investment.
and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In addition, the consolidated and combined financial statements of the Company include the accounts from Tao Group Hospitality and BCE, in which the Company has controlling voting interests. The Company’s consolidation criteria isare based on authoritative accounting guidance for voting interest, controlling interest or variable interest entities. Tao Group Hospitality and BCE are consolidated with the equity owned by other stockholders shown as redeemable or nonredeemable noncontrolling interests in the accompanying combinedconsolidated balance sheets, and the other stockholders’ portion of net earningsincome (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 and combined statements of operations and consolidated and combined statements of comprehensive income (loss), respectively.
See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information Statement for more informationAnnual Report on Form 10-K regarding the classification of redeemable noncontrolling interests of Tao Group Hospitality.
Tao Group Hospitality’s results are reported on aHospitality and the elimination of the three-month lag basis andin the consolidation of Tao Group Hospitality reports on a fiscal year reflecting the retail 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 March 31, 2020 and 2019 include Tao Group Hospitality’s operating results from September 30, 2019 to December 29, 2019 and from October 1, 2018 to December 30, 2018, respectively, and the Company’s result for the nine months ended March 31, 2020 and 2019 include Tao Group Hospitality’s operating results from April 1, 2019 to December 29, 2019 and from April 2, 2018 to December 30, 2018, respectively. With the exception of the balances and activities pertaining to Tao Group Hospitality’s credit agreements entered into in May 2019, which are recorded as of March 31, 2020 and June 30, 2019 and for the period ended March 31, 2020, as well as cash distributions, impairment charges, and change in ownership as discussed below, all disclosures related to Tao Group Hospitality’s financial position are reported as of December 29, 2019 and March 31, 2019, as applicable. See Note 7, 8 and 9 for further discussion of the impairment charges recorded for three and nine months ended March 31,Fiscal Year 2020. See Note 12 for further discussion of Tao Group Hospitality’s credit agreements.
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 102 shares of Madison Square Garden Sports Corp. Class A Common Stock. The Company now owns 77.5% of common equity interest in Tao Group Hospitality. In connection with the acquisition of the additional 15% of common equity interest in Tao Group Hospitality, the Company recorded a decrease of $37,715 in the carrying value of the redeemable noncontrolling interests and an offset of the same amount in the Madison Square Garden Sports Corp. investment in the accompanying combined statements of divisional equity and redeemable noncontrolling interests.
Use of Estimates
The preparation of the accompanying consolidated and combined 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, income tax, 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 to 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.
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Summary of Significant Accounting Policies
The following is an update to the Company’s Summary of Significant Accounting Policies disclosed in the Company’s audited combined financial statements and notes thereto for the year ended June 30, 2019 included in the Company’s Information Statement:
Earnings (Loss) Per Common Share
Basic earnings (loss) per common share (“EPS”) is based upon net income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. On the Entertainment Distribution Date, 23,992 common shares of the Company were distributed to Madison Square Garden Sports Corp. stockholders as of the Record Date and were outstanding as of April 17, 2020. This share amount is being utilized for the calculation of basic earnings (loss) per share for both the three and nine months ended March 31, 2020 and 2019 because the Company was a wholly-owned subsidiary of Madison Square Garden Sports Corp. prior to the Entertainment Distribution Date. In addition, the computation of diluted earnings per share equals the basic earnings (loss) per common share calculation since there was no stock trading information available to compute dilutive effect of shares issuable under share-based compensation plans needed under the treasury method in accordance with ASC Topic 260, Earnings Per Share.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In FebruaryJune 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in ASC Topic 840, Leases. ASU No. 2016-02, among other things, requires (i) 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) extensive qualitative and quantitative disclosures about leasing activities. The accounting applied by a lessor is largely unchanged from that applied under previous accounting guidance. In 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 is 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 of the first quarter of fiscal year 2020 under the 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, the Company recorded initial (i) operating lease ROU assets of $259,840, (ii) current operating lease liabilities of $50,996, and (iii) long-term operating lease liabilities of $206,418. 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 was a lessee. See Note 8 for further details on disclosure required under ASC Topic 842.
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. The Company adopted this standard in the third quarter of fiscal year 2020 and applied it prospectively, beginning with the interim goodwill impairment test performed during the quarter ended March 31, 2020. See Note 9 for further details.

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Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit LossesLosses.. ASU No. 2016-13 replacesreplaced the incurred loss impairment methodology in currentprevious GAAP with a methodology that will requirerequires 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.estimates at inception. 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,Codification Improvements to Topic 326, Financial Instruments — Credit Losses, 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 requirerequires 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. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments — Credit Losses and Leases,, which includes amendments pursuant to SEC Staff Accounting Bulletin No. 119. This standard will be effective forwas adopted by the Company beginning in the first quarter of fiscal year 2021, with earlyFiscal Year 2021. The adoption permitted. The Company is currently evaluatingof the standard did not have an impact this standard will have on its combinedthe Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurementas part of the FASB’s broader disclosure framework project. ASU No. 2018-13 removes, modifies and adds certain disclosures providing greater focus on requirements that clearly communicate the most important information to the users of the financial statements with respect to fair value measurements. The standard is effective for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted. Most of the disclosure requirements in ASU No. 2018-13 would needare required to be applied on a retrospective basis except for the guidance related to (i) unrealized gains and losslosses 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. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of thisthe standard isdid not expected to have a materialan impact on the Company’s combinedconsolidated 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 PlansPlans.. ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. TheThis standard will be effective forwas adopted by the Company in the fourthfirst quarter of fiscal year 2021, with earlyFiscal Year 2021. The adoption permitted. The amendments in ASU No. 2018-14 are required to be applied retrospectively. The Company is currently evaluatingof the standard did not have an impact this standard will have on its combinedthe Company’s 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 hosting (service) element of the arrangement. TheThis standard is effective forwas adopted by the Company in the first quarter of fiscal year 2021, with early adoption permitted. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively.Fiscal Year 2021. The adoption of thisthe standard isdid not expected to have a materialan impact on the Company’s combinedconsolidated financial statements. However, to the extent future costs incurred in a cloud computing arrangement are capitalizable, the corresponding amortization will be included in “Direct operating expenses” or “Selling, general and administrative expenses” in the consolidated statements of operations depending on the nature of the related arrangement, rather than “Depreciation and amortization.”
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(Continued)
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 noware to 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 whenWhen a decision maker or service provider has an interest in a related party, regardless of whether they are under common control, it willthey 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.

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(Continued)


The This standard will be effective forwas adopted by 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.Fiscal Year 2021. The adoption of thisthe standard isdid not expected to have a materialan impact on the Company’s combinedconsolidated financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606.606. 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. TheThis standard will be effective forwas adopted by the Company in the first quarter of fiscal year 2021, with earlyFiscal Year 2021. The adoption permitted. The amendments in ASU No. 2018-18 are required to be applied retrospectively toof the date whenstandard did not have an impact on the Company initially adopted ASCTopic 606. The Company is currently evaluating the impact this standard will have on its combinedCompany’s 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 forThis standard was adopted by the Company in the first quarter of fiscal yearFiscal Year 2021 in connection with earlythe adoption permitted for certain amendments.of ASU No. 2016-13 discussed above. The Company is currently evaluatingadoption of the standard did not have an impact this standard will have on its combinedthe Company’s 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 CustomerCustomer.. 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 forThis standard was adopted by the Company in the first quarter of fiscal year 2021, with early adoption permitted.Fiscal Year 2021. The adoption of thisthe standard isdid not expected to have an impact on the Company’s combinedconsolidated 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 ASC 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 ASC Topic 815. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. 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 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 Companyadoption of the standard is currently evaluatingnot expected to have a material impact on the impact this standard will have on its combinedCompany’s consolidated financial statements.
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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 methodTable 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 combined financial statements.Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate activities. The new guidance was effective upon issuance, and the Company is allowed to elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this standard will have on its combinedconsolidated financial statements.

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NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 3. Assets Held for Sale
On March 24, 2020, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with CAPSS LLC pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC and settle related litigation for cash consideration in the amount of $400,000, subject to regulatory and other customary closing conditions. The transaction subsequently closed on May 1, 2020. As a result of the MIPA, the assets and liabilities of the Forum were classified as held for sale as of March 31, 2020 in accordance with ASC Subtopic 360-10-45-9. The Forum meets the definition of a business under SEC Regulation S-X Rule 11-01(d)-1 and FASB ASC Topic 805 — Business Combinations. This disposition does not represent a strategic shift with a major effect on the Company’s operations, and as such, has not been reflected as a discontinued operation under FASB ASC Subtopic 205-20 — Discontinued Operations. The Company believes the fair value less costs to sell for the assets held for sale exceeds their carrying amount; therefore, no adjustment to their carrying value was recorded for the three and nine months ended March 31, 2020.
The assets and liabilities of the Forum were classified in the combined balance sheet as assets and liabilities held for sale as of March 31, 2020 and consist of the following, by major class:
Prepaid expenses $589
Other current assets 381
Property and equipment, net of accumulated depreciation and amortization 104,781
Indefinite-lived intangible assets 540
Goodwill 2,864
Assets held for sale 109,155
   
Accounts payable and accrued liabilities 18,444
Collections due to promoters 33,715
Deferred revenue 18,791
Other liabilities 1,861
Liabilities held for sale 72,811
Net assets held for sale $36,344

Note 4.3. Revenue Recognition
Contracts with Customers
See Note 34 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information StatementAnnual Report on Form 10-K for more information regarding the details of the Company’s revenue recognition.recognition policies. All revenue recognized in the consolidated and combined statements of operations is considered to be revenue from contracts with customers.customers in accordance with ASC Topic 606 except for $2,333 and $3,081 of revenues from Arena License Agreements, leases and subleases, which are accounted for in accordance with ASC Topic 842 for the three and six months ended December 31, 2020, respectively. For the three and ninesix months ended MarchDecember 31, 2020, and 2019, the Company did not have any material impairmentprovision for credit losses on receivables or contract assets arising from contracts with customers. The allowance for credit losses associated with contracts with customers was $9,222 and $9,135 as of December 31, 2020 and June 30, 2020, respectively. The change in allowance for credit losses from June 30, 2020 to December 31, 2020 was due to a $770 increase in provisions for credit losses and a $682 accounts receivable write off.
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, in accordance with ASC Subtopic 606-10-50-5, for the three and ninesix months ended MarchDecember 31, 2020 and 2019:
Three Months Ended
December 31, 2020
EntertainmentTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$1,002 $9,179 $(43)$10,138 
Sponsorship, signage and suite licenses (b)
6,064 414 21 6,499 
Other (c)
3,270 898 (1)4,167 
Total revenues from contracts with customers$10,336 $10,491 $(23)$20,804 
     
  Three Months Ended March 31,
  2020 2019
Event-related and entertainment dining and nightlife offerings (a)
 $126,185
 $159,606
Sponsorship, signage and suite licenses (b)
 61,800
 77,897
Other (c)
 11,876
 12,515
Total revenues from contracts with customers $199,861
 $250,018

Three Months Ended
December 31, 2019
EntertainmentTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$242,545 $63,256 $(83)$305,718 
Sponsorship, signage and suite licenses (b)
74,630 39 (220)74,449 
Other (c)
8,195 5,809 (99)13,905 
Total revenues from contracts with customers$325,370 $69,104 $(402)$394,072 

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(Continued)


Six Months Ended
December 31, 2020
EntertainmentTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$1,729 $14,839 $(43)$16,525 
Sponsorship, signage and suite licenses (b)
8,524 486 (211)8,799 
Other (c)
6,890 2,387 (167)9,110 
Total revenues from contracts with customers$17,143 $17,712 $(421)$34,434 

    Six Months Ended
 Nine Months Ended March 31,December 31, 2019
 2020 2019EntertainmentTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
 $560,996
 $597,551
Event-related and entertainment dining and nightlife offerings (a)
$325,259 $115,597 $(96)$440,760 
Sponsorship, signage and suite licenses (b)
 172,368
 195,652
Sponsorship, signage and suite licenses (b)
110,068 223 (437)109,854 
Other (c)
 33,674
 39,181
Other (c)
9,695 11,901 (175)21,421 
Total revenues from contracts with customers $767,038
 $832,384
Total revenues from contracts with customers$445,022 $127,721 $(708)$572,035 

_________________
(a)
Consists of (i) ticket sales and other ticket-related revenues, (ii) Tao Group Hospitality’s entertainment dining and nightlife offerings, (iii) venue license fees from third-party promoters, and (iv) food, beverage and merchandise sales. Event-related revenues and entertainment, dining and nightlife offerings are recognized at a point in time. As such, these revenues have been included in the same category in the table above.
(b)
See Note 3 to the Company’s audited combined financial statements and notes thereto for the year ended June 30, 2019 included in the Company’s Information Statement for further details on the pattern of recognition of sponsorship, signage and suite license revenues.
(c)
Primarily consists of (i) advertising commission revenue from MSG Networks Inc. (“MSG Networks”), and (ii) Tao Group Hospitality’s managed venue revenues. For the three and nine months ended March 31, 2020 and 2019, the Company’s other revenues also included revenues from Obscura Digital’s (“Obscura”) third-party production business, which the Company decided to wind down to focus on the development of MSG Sphere.
(a)Consists of (i) ticket sales and other ticket-related revenues, (ii) Tao Group Hospitality’s entertainment dining and nightlife offerings, (iii) venue license fees from third-party promoters, and (iv) food, beverage and merchandise sales. Event-related revenues and entertainment dining and nightlife offerings are recognized at a point in time. As such, these revenues have been included in the same category in the table above.
(b)See Note 4 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for further details on the pattern of recognition of sponsorship, signage and suite license revenues.
(c)Primarily consists of (i) revenues from sponsorship sales and representation agreements with MSG Sports, (ii) advertising commission revenue from MSG Networks Inc. (“MSG Networks”), and (ii) Tao Group Hospitality’s managed venue revenues.
In addition to the disaggregation of the Company’s revenue by major source based upon the timing of transfer of goods or services to the customer disclosed above, the following table disaggregates the Company’s consolidated and combined revenues by type of goods or services in accordance with the required entity-wide disclosure requirements of FASB ASC Subtopic 280-10-50-38 to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic 606-10-50-5 for the three and ninesix months ended MarchDecember 31, 2020 and 2019:
     
  Three Months Ended March 31,
  2020 2019
Ticketing and venue license fee revenues (a)
 $47,758
 $66,768
Sponsorship and signage, suite, and advertising commission revenues 69,124
 87,413
Revenues from entertainment dining and nightlife offerings (b)
 69,103
 74,140
Food, beverage and merchandise revenues 11,694
 17,508
Other (c)
 2,182
 4,189
Total revenues from contracts with customers $199,861
 $250,018
     
  Nine Months Ended March 31,
  2020 2019
Ticketing and venue license fee revenues (a)
 $308,874
 $333,955
Sponsorship and signage, suite, and advertising commission revenues 192,081
 217,644
Revenues from entertainment dining and nightlife offerings (b)
 191,965
 190,463
Food, beverage and merchandise revenues 62,339
 68,255
Other (c)
 11,779
 22,067
Total revenues from contracts with customers $767,038
 $832,384
18
_________________
(a)
Amounts include ticket sales, including other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts, (ii) the presentation of the Christmas Spectacular, and (iii) other live entertainment and sporting events. In addition, the amount for the three and nine months ended March 31, 2019 included revenues from the booking agreement with the Wang Theatre, which expired in February 2019.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Three Months ended
December 31, 2020
EntertainmentTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$968 $0 $0 $968 
Sponsorship and signage, suite, and advertising commission revenues9,130 0 21 9,151 
Revenues from entertainment dining and nightlife offerings (b)
0 10,491 (44)10,447 
Food, beverage and merchandise revenues0 0 0 0 
Other238 0 0 238 
Total revenues from contracts with customers$10,336 $10,491 $(23)$20,804 

Three Months ended
December 31, 2019
EntertainmentTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$199,969 $0 $0 $199,969 
Sponsorship and signage, suite, and advertising commission revenues85,250 0 (220)85,030 
Revenues from entertainment dining and nightlife offerings (b)
0 69,104 (83)69,021 
Food, beverage and merchandise revenues34,470 0 0 34,470 
Other5,681 0 (99)5,582 
Total revenues from contracts with customers$325,370 $69,104 $(402)$394,072 
Six Months Ended
December 31, 2020
EntertainmentTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$1,698 $0 $0 $1,698 
Sponsorship and signage, suite, and advertising commission revenues14,989 0 (211)14,778 
Revenues from entertainment dining and nightlife offerings (b)
0 17,712 (210)17,502 
Food, beverage and merchandise revenues0 0 0 0 
Other456 0 0 456 
Total revenues from contracts with customers$17,143 $17,712 $(421)$34,434 

19

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Six Months Ended
December 31, 2019
EntertainmentTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$261,116 $0 $0 $261,116 
Sponsorship and signage, suite, and advertising commission revenues123,395 0 (437)122,958 
Revenues from entertainment dining and nightlife offerings (b)
0 127,721 (96)127,625 
Food, beverage and merchandise revenues50,741 0 0 50,741 
Other9,770 0 (175)9,595 
Total revenues from contracts with customers$445,022 $127,721 $(708)$572,035 
(b)
_________________
(a)Amounts include ticket sales, including other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts, (ii) the presentation of the Christmas Spectacular, and (iii) other live entertainment and sporting events.
(b)Primarily consist of revenues from (i) entertainment dining and nightlife offerings and (ii) venue management agreements.
Primarily consist of revenues from (i) entertainment dining and nightlife offerings and (ii) venue management agreements.
(c)
Amounts include revenues from Obscura’s third-party production business, which decreased significantly for the three and nine months ended March 31, 2020 as compared to the prior year period due to the Company’s decision to wind down Obscura’s third-party production business to focus those resources on the MSG Sphere development.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the combinedconsolidated balance sheets. The following table provides information about contract balances from the Company’s contracts with customers as of MarchDecember 31, 2020 and June 30, 2019.2020:
December 31,June 30,
20202020
Receivables from contracts with customers, net (a)
$75,367 $59,828 
Contract assets, current (b)
8,718 3,850 
Deferred revenue, including non-current portion (c)
207,770 193,112 
_________________
(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, 2020 and June 30, 2020, the Company’s receivables from contracts with customers above included $1,656 and $2,644, respectively, related to various related parties. See Note 17 for further details on 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 customers, 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.
(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. Revenue recognized for the six months ended December 31, 2020 relating to the deferred revenue balance as of June 30, 2020 was $5,069.
  March 31, June 30,
  2020 2019
Receivables from contracts with customers, net (a)
 $105,222
 $81,170
Contract assets, current (b)
 8,164
 6,873
Deferred revenue, including non-current portion (c)
 212,766
 197,047
20
_________________
(a)

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Receivables from contracts with customers, which are reported in Accounts receivable, net and Net related party receivables in the Company’s combined balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of March 31, 2020 and June 30, 2019, the Company’s receivables from contracts with customers above included $10 and $126, respectively, related to various related parties. See Note 17 for further details on related party arrangements.
(b)
Contract assets, which are reported as Other current assets in the Company’s combined balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to customers, 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.
(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. Revenue recognized for the nine months ended March 31, 2020 relating to the deferred revenue balance as of June 30, 2019 was $163,118.
Transaction Price Allocated to the Remaining Performance Obligations
The following table depicts the estimated revenue expected to be recognized, based on current projections and expectations of our business resuming, in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of MarchDecember 31, 2020. This primarily relates to performance obligations under sponsorship and suite license arrangements.arrangements that have original expected durations longer than one year. 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.
Fiscal Year 2020 (remainder) $21,317
Fiscal Year 2021 207,045
Fiscal Year 2022 141,696
Fiscal Year 2023 85,300
Fiscal Year 2024 59,141
Thereafter 127,529
  $642,028

Fiscal Year 2021 (remainder)$8,253 
Fiscal Year 2022114,652 
Fiscal Year 202377,938 
Fiscal Year 202454,456 
Fiscal Year 202545,422 
Thereafter53,688 
$354,409 

Note 4. Restructuring Charges
TableThe Company’s operations have been disrupted since March 2020 due to the COVID-19 pandemic. As a direct response to this disruption, on August 4, 2020, the Company implemented cost savings initiatives in order to streamline operations and preserve liquidity. These measures included a reduction in full-time workforce of Contentsapproximately 350 employees in August and 10 employees in November for a total expense of $21,299. For the three and six months ended December 31, 2020, the Company recorded a total of $1,372 and $21,299, respectively, for restructuring charges related to termination benefits provided to employees in the Entertainment reportable segment and these are reflected in restructuring charges in the accompanying consolidated and combined statements of operations.

The Company’s restructuring accrual activity through December 31, 2020 is as follows:
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
June 30, 2020$0 
Restructuring charges21,299 
Payments(19,442)
December 31, 2020$1,857 
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 5. 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
 As ofDecember 31,
2020		June 30,
2020		December 31,
2019		June 30,
2019
 March 31,
2020		 June 30,
2019		 March 31,
2019		 June 30,
2018
Captions on the combined balance sheets:        
Captions on the consolidated balance sheets:Captions on the consolidated balance sheets:
Cash and cash equivalents $1,003,893
 $1,082,055
 $1,151,428
 $1,225,645
Cash and cash equivalents$1,451,352 $906,555 $1,009,127 $1,082,055 
Restricted cash (a)
 17,955
 10,010
 8,061
 6,711
Restricted cash (a)
26,207 17,749 17,898 10,010 
Cash, cash equivalents and restricted cash on the combined statements of cash flows $1,021,848
 $1,092,065
 $1,159,489
 $1,232,356
Cash, cash equivalents and restricted cash on the consolidated and combined statements of cash flowsCash, cash equivalents and restricted cash on the consolidated and combined statements of cash flows$1,477,559 $924,304 $1,027,025 $1,092,065 
_________________
(a)
(a)See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for more information regarding the nature of restricted cash. In addition, the restricted cash balance as of December 31, 2020included a deposit in a reserve account of approximately $8,100 associated with credit facilities of Tao Group Hospitality. See Note 12 for further details on the amendment to the Tao Senior Credit Agreement in August 2020.
21

See Note 2 to the Company’s audited combined financial statements and notes thereto for the year ended June 30, 2019 included in the Company’s Information Statement for more information regarding the nature of restricted cash.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 6. 6. Investments and Loans toin Nonconsolidated Affiliates
The Company’s investments and loans toin nonconsolidated affiliates, which are accounted for under the equity 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 321, Investments - Equity Securities, respectively, consisted of the following:
  Ownership Percentage Investment Loan Total
March 31, 2020        
Equity method investments:        
SACO Technologies Inc. (“SACO”) 30% $40,656
 $—
 $40,656
Others 

 8,007
 —
 8,007
Equity investments without readily determinable fair values (a)
   13,335
 —
 13,335
Total investments and loans to nonconsolidated affiliates   $61,998
 $—
 $61,998
         
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 PercentageInvestment
December 31, 2020
Equity method investments:
SACO Technologies Inc. (“SACO”)30 %$38,232 
Others7,894 
Equity securities without readily determinable fair values (a)
3,500 
Total investments in nonconsolidated affiliates$49,626 
June 30, 2020
Equity method investments:
SACO30 %$40,461 
Others8,661 
Equity securities without readily determinable fair values (a)
3,500 
Total investments in nonconsolidated affiliates$52,622 
_________________
_________________(a)In accordance with the ASC Topic 321, Investments - Equity Securities, the Company applies the measurement alternative to its equity investments without readily determinable fair values. Under the measurement alternative, equity securities without readily determinable fair values are accounted for at cost, adjusted for impairment and changes resulting from observable price fluctuations in orderly transactions for the identical or a similar investment of the same issuer, which is classified within Level III of the fair value hierarchy. For the three and six months ended December 31, 2020, the Company did not have impairment charges or change in carrying value recorded to its equity securities without readily determinable fair values. For the six months ended December 31, 2019, the Company recorded an impairment charge of $533 to an equity investment without readily determinable fair value.
(a)
In accordance with the ASC Topic 321, Investments - Equity Securities, the Company applies the measurement alternative to its equity investments without readily determinable fair values. The Company recorded an impairment charge of $533 for the nine months ended March 31, 2020. See Note 5 to the Company’s audited combined financial statements and notes thereto for the year ended June 30, 2019 included in the Company’s Information Statement for more information regarding the application of the measurement alternative.
(b)
On August 5, 2019, immediately prior to the sale of the Company’s equity capital in Tribeca Enterprises for $18,000, the Company contributed the $18,000 of indebtedness under the Company’s revolving credit facility to the Company’s equity capital in Tribeca Enterprises.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Equity InvestmentInvestments with Readily Determinable Fair Value
In addition to the investments discussed above, the Company holds an investmentinvestments of (i) 3,208 shares of the common stock of Townsquare Media, Inc. (“Townsquare”), and (ii) 894 shares of common stock of DraftKings Inc. (“DraftKings”). Townsquare is a 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 investmentDraftKings is measured at readily determinablea fantasy sports contest and sports gambling provider that is listed on the NASDAQ Stock Market (“NASDAQ”) under the symbol “DKNG” for its common stock. The fair value of the Company’s investments in Townsquare and isDraftKings are determined based on quoted market prices in active markets on the NYSE and NASDAQ, respectively, which are classified within Level I of the fair value hierarchy.
22


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The cost basis and the carrying fair value of these investments, which are reported under Other assets in the accompanying combinedconsolidated balance sheets as of MarchDecember 31, 2020 and June 30, 2019. See Note 112020, are as follows:
December 31, 2020
Equity Investment with Readily Determinable Fair ValuesShares / Units
Held		Cost BasisCarrying value
/ Fair value
Townsquare common stock3,208 $23,222 $21,366 
DraftKings common stock894 6,209 41,647 
Total$29,431 $63,013 

June 30, 2020
Equity Investment with Readily Determinable Fair ValuesShares / Units
Held		Cost BasisCarrying value
/ Fair value
Townsquare common stock3,208 $23,222 $14,340 
DraftKings common stock1,280 8,798 42,589 
DraftKings warrants9 22 132 
Total$32,042 $57,061 
For the three and six months ended December 31, 2020, the Company sold 395 shares of common stock of DraftKings for more informationcash proceeds of $20,583 and recorded a realized loss of $2,659. For the three and six months ended December 31, 2020, the Company recorded a net unrealized loss of $4,568 and a net unrealized gain of $29,090, respectively, on the fair valueinvestments in DraftKings and Townsquare. For the three and six months ended December 31, 2019, the Company recorded an unrealized gain of $9,432 and $14,725, respectively, on the investment in Townsquare.
Note 7. Property and Equipment
As of MarchDecember 31, 2020 and June 30, 2019,2020, property and equipment consisted of the following assets: 
    
 
March 31,
 2020 (a)
 June 30,
2019		December 31,
2020		June 30,
2020
Land $141,931
 $167,405
Land$149,771 $141,638 
Buildings 992,496
 1,091,851
Buildings994,826 993,206 
Equipment 329,696
 318,301
Equipment361,948 345,314 
Aircraft 38,090
 38,090
Aircraft38,090 38,090 
Furniture and fixtures 42,034
 53,242
Furniture and fixtures42,059 42,389 
Leasehold improvements 183,033
 180,111
Leasehold improvements169,648 170,585 
Construction in progress 574,876
 232,390
Construction in progress895,542 685,382 
 2,302,156
 2,081,390
2,651,884 2,416,604 
Less accumulated depreciation and amortization(b)
 (761,370) (732,268)
Less accumulated depreciation and amortizationLess accumulated depreciation and amortization(814,812)(770,489)
 $1,540,786
 $1,349,122
$1,837,072 $1,646,115 

_________________
(a)
In connection with the execution of the MIPA on March 24, 2020, pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC (see Note 3), the Company reclassified $104,781 of property and equipment, net of accumulated depreciation and amortization of $47,609 to assets held for sale. The reclassification substantially consisted of buildings and, to a lesser extent, land.
(b)
During the three and nine months ended March 31, 2020, the Company recorded a non-cash impairment charge of $6,399 for long-lived assets associated with one venue within Tao Group Hospitality. See Note 1 for further details.
The increase in Construction in progress is primarily associated with the development and construction of MSG Spheres in Las Vegas and London. The property and equipment balances above include $76,953$76,945 and $32,238$78,618 of capital expenditure accruals as of MarchDecember 31, 2020 and June 30, 2019,2020, respectively, which are reflected in “OtherOther accrued liabilities”liabilities in the accompanying combinedconsolidated balance sheets.
Depreciation and amortization expense on property and equipment was $23,187$20,991 and $23,617$22,490 for the three months ended MarchDecember 31, 2020 and 2019, respectively. DepreciationFor the six months ended December 31, 2020 and 2019, depreciation and amortization expense on property and equipment was $69,240$44,689 and $72,155 for the nine months ended March 31, 2020 and 2019,$46,405, respectively.
23

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


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 by the lessor for the Company’s use. 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 to exercise. 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 and combined statements of operations and consolidated and combined statements of cash flows over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s combinedconsolidated 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 ROU assets associated with operating leases and are included within Property and equipment, net on the Company’s combinedconsolidated 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 combinedconsolidated 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 combinedconsolidated 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 combinedconsolidated 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, commencing upon substantial completion of the MSG Sphere.
As of MarchDecember 31, 2020, the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 910 months to 18.518 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.
24


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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


The following table summarizes the ROU assets and lease liabilities recorded on the Company’s combinedconsolidated balance sheetsheets as of MarchDecember 31, 2020 and June 30, 2020:
  Line Item in the Company’s Combined Balance Sheet  
Right-of-use assets:    
Operating leases Right-of-use lease assets $234,760
Lease liabilities:    
Operating leases, current Operating lease liabilities, current $54,506
Operating leases, noncurrent Operating lease liabilities, noncurrent 191,762
Total lease liabilities $246,268

Line Item in the Company’s Consolidated Balance SheetDecember 31,
2020		June 30,
2020
Right-of-use assets:
Operating leasesRight-of-use lease assets$198,464 $220,328 
Lease liabilities:
Operating leases, currentOperating lease liabilities, current$54,963 $53,388 
Operating leases, noncurrentOperating lease liabilities, noncurrent155,440 174,219 
Total lease liabilities$210,403 $227,607 
The following table summarizes the activity recorded within the Company’s consolidated and combined statementstatements of operations for the ninethree and six months ended MarchDecember 31, 2020:2020 and 2019:
Three Months Ended
Line Item in the Company’s Consolidated and Combined Statement of OperationsDecember 31,
20202019
Operating lease costDirect operating expenses$6,545 $11,333 
Operating lease costSelling, general and administrative expenses5,029 5,102 
Short-term lease costDirect operating expenses0 12 
Variable lease costDirect operating expenses271 1,696 
Variable lease costSelling, general and administrative expenses15 14 
Total lease cost$11,860 $18,157 
  Line Item in the Company’s Combined Statement of Operations Three Months Ended March 31, 2020 Nine Months Ended March 31, 2020
Operating lease cost Direct operating expenses $8,090
 $24,397
Operating lease cost Selling, general and administrative expenses 5,348
 15,066
Short-term lease cost Direct operating expenses —
 348
Variable lease cost Direct operating expenses 830
 3,287
Variable lease cost Selling, general and administrative expenses 14
 40
Total lease cost $14,282
 $43,138

Six Months Ended
Line Item in the Company’s Consolidated and Combined Statement of OperationsDecember 31,
20202019
Operating lease costDirect operating expenses$12,952 $19,574 
Operating lease costSelling, general and administrative expenses10,124 9,917 
Short-term lease costDirect operating expenses0 348 
Variable lease costDirect operating expenses547 3,230 
Variable lease costSelling, general and administrative expenses38 27 
Total lease cost$23,661 $33,096 
Supplemental Information
For the ninesix months ended MarchDecember 31, 2020, cash paid for amounts included in the measurement of lease liabilities was $40,807$25,272.. For the ninesix months ended MarchDecember 31, 2020, the Company had 2 ROU assets of $15,759 obtained in exchange fordid not have new operating lease liabilities.
During the three months ended March 31, 2020, a non-cash impairment charge of $11,573 was recorded for theliabilities arising from obtaining right-of-use lease assets associated with one venue of Tao Group Hospitality. See Note 1 for further details.assets.
The weighted average remaining lease term for operating leases recorded on the accompanying combinedconsolidated balance sheet as of MarchDecember 31, 2020 was 6.25.7 years. The weighted average discount rate was 9.46%9.27% as of MarchDecember 31, 2020 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.
25

Maturities of operating lease liabilities as of March 31, 2020 are as follows:
Fiscal Year 2020 (remainder) $15,587
Fiscal Year 2021 58,204
Fiscal Year 2022 59,101
Fiscal Year 2023 54,872
Fiscal Year 2024 39,735
Thereafter 126,222
Total lease payments 353,721
Less imputed interest 107,453
Total lease liabilities (a)
 $246,268

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Maturities of operating lease liabilities as of December 31, 2020 are as follows:
________________
Fiscal Year 2021 (remainder)$25,115 
Fiscal Year 202260,298 
Fiscal Year 202356,801 
Fiscal Year 202438,529 
Fiscal Year 202523,356 
Thereafter90,972 
Total lease payments295,071 
Less imputed interest84,668 
Total lease liabilities (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.210,403 
________________
(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.
Lessor Arrangements
In connection with the Entertainment Distribution, the Company entered into Arena License Agreements with MSG Sports that, among other things, require the Knicks and the Rangers to play their home games at The Garden in exchange for fixed monthly license fees over the term of the agreements. The Company accounts for these license fees as operating lease revenue given that the Company provides MSG Sports with the right to direct the use of and obtain substantially all of the economic benefit from The Garden during Knicks and Rangers home games. Operating lease revenue is recognized on a straight-line basis over the lease term, adjusted pursuant to the terms of the Arena License Agreements. In the case of the Arena License Agreements, the lease terms relate to non-consecutive periods of use when MSG Sports uses The Garden for their professional sports teams’ home games, and operating lease revenue is therefore recognized ratably as events occur.
The Arena License Agreements provide that license fees are not required to be paid by MSG Sports during periods when The Garden is unavailable for use due to a force majeure event. As a result of government-mandated suspension of events at The Garden beginning on March 13, 2020 due to the impact of the COVID-19 pandemic, The Garden was not available for use by MSG Sports from the effective date of the Arena License Agreements through the first quarter of Fiscal Year 2021, and, accordingly, the Company did not record any operating lease revenue for this arrangement during the first quarter of Fiscal Year 2021. During a portion of the three months ended December 31, 2020, The Garden reopened for games of the Knicks and the Rangers but fans were not permitted to attend due to governmental restrictions. The Knicks played four games at The Garden in December 2020 and the Company recorded $1,585 of revenues under the Arena License Agreements for the three and six months ended December 31, 2020. In addition, the Company recorded other lease and sublease revenues of $748 and $1,496 for the three and six months ended December 31, 2020, respectively.
Note 9. Goodwill and Intangible Assets
See Note 10 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K regarding the details of the $88,583 goodwill impairment in the Tao Group Hospitality segment in Fiscal Year 2020. The carrying amount and activity of goodwill as of December 31, 2020 and June 30, 2019 through March 31, 2020 are as follows:
Balance as of June 30, 2019 $165,558
Allocation to the assets held for sale(a)
 (2,864)
Goodwill impairment(b)
 (80,698)
Balance as of March 31,2020 $81,996
_________________
(a)
In connection with the execution of the MIPA on March 24, 2020, pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC (see Note 3), the Company allocated $2,864 of goodwill associated with the Forum to assets held for sale in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other, ASC subtopics 350-20-40-1 to 350-20-40-7. The allocation of goodwill to the Forum was based on the fair value of the Forum compared to the fair value of the Company’s reporting unit. The fair value of the Company’s reporting unit and the Forum were based on unobservable inputs classified within Level III of the fair value hierarchy, primarily from utilizing the discounted cash flow model, which is an income-based approach.
(b)
During the first quarter of fiscal year 2020,was $74,309, all of which is within the Entertainment segment. During the first quarter of Fiscal Year 2021, the Company performed its annual impairment test of goodwill and determined that there were 0 impairments of goodwill identified for any of its reporting units as of the impairment test date. During the third quarter of fiscal year 2020, the Company’s operating results have been, and continue to be, materially impacted by the COVID-19 pandemic (see Note 1 “Impact of COVID-19”). While the Company concluded that the effects of COVID-19 would not more likely than not reduce the fair value of its Entertainment reporting unit below its carrying amount, the Company concluded that a triggering event had occurred for its Tao Group Hospitality reporting unit as of March 31, 2020 and performed an interim impairment test. For the interim impairment test, the Company estimated the fair value of the Tao Group Hospitality reporting unit based on a discounted cash flow model (income approach). This approach relied on numerous assumptions and judgments that were subject to various risks and uncertainties. Principal assumptions utilized, all of which are considered Level III inputs under the fair value hierarchy, include the Company’s estimates of future revenue and terminal growth rates, margin assumptions and the discount rate applied to estimate future cash flows. As a result of the interim impairment test, the Company recorded a non-cash goodwill impairment charge of $80,698 for the three and nine months ended March 31, 2020.
The carrying amount and activity of indefinite-lived intangible assets as of June 30, 2019 through March 31, 2020 are as follows:the impairment test date.
  Trademarks Photographic related rights Total
Balance as of June 30, 2019 $62,421
 $3,000
 $65,421
Reclassification to the assets held for sale(a)
 (540) —
 (540)
Balance as of March 31,2020 $61,881
 $3,000
 $64,881
26
_________________
(a)
In connection with the execution of the MIPA on March 24, 2020, pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC (see Note 3), the Company reclassified $540 of indefinite-lived intangible assets associated with the Forum to the assets held for sale in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other, ASC subtopics 350-20-40-1 to 350-20-40-7.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


The carrying amount of indefinite-lived intangible assets, all of which are within the Entertainment segment, as of December 31, 2020 and June 30, 2020 were as follows:
Trademarks$61,881 
Photographic related rights1,920 
Total$63,801 
During the first quarter of fiscal year 2020,Fiscal Year 2021, the Company performed its annual impairment test of indefinite-lived intangible assets and determined that there were 0 impairments of indefinite-lived intangibles identified as of the impairment test date.
The Company’s intangible assets subject to amortization are as follows: 
December 31, 2020GrossAccumulated
Amortization		Net
Trade names$97,530 $(23,066)$74,464 
Venue management contracts79,000 (17,872)61,128 
Non-compete agreements9,000 (6,131)2,869 
Festival rights8,080 (2,426)5,654 
Other intangibles4,217 (3,674)543 
$197,827 $(53,169)$144,658 
June 30, 2020June 30, 2020GrossAccumulated
Amortization		Net
Trade namesTrade names$97,530 $(20,774)$76,756 
Venue management contractsVenue management contracts79,000 (15,590)63,410 
March 31, 2020 Gross 
Accumulated
Amortization
 Net
Trade names(a)
 $97,530
 $(18,522) $79,008
Venue management contracts 79,000
 (13,310) 65,690
Favorable lease assets (b)
 —
 —
 —
Non-compete agreements 9,000
 (4,565) 4,435
Non-compete agreements9,000 (5,348)3,652 
Festival rights 8,080
 (2,020) 6,060
Festival rights8,080 (2,156)5,924 
Other intangibles(c)
 4,217
 (3,462) 755
4,217 (3,533)684 
 $197,827
 $(41,879) $155,948
$197,827 $(47,401)$150,426 
June 30, 2019 Gross 
Accumulated
Amortization
 Net
Trade names(a)
 $98,530
 $(11,346) $87,184
Venue management contracts 79,000
 (9,887) 69,113
Favorable lease assets (b)
 54,253
 (10,382) 43,871
Non-compete agreements 9,000
 (3,391) 5,609
Festival rights 8,080
 (1,617) 6,463
Other intangibles(c)
 6,717
 (4,566) 2,151
  $255,580
 $(41,189) $214,391
_________________
(a)
During the three and nine months ended March 31, 2020, the company recorded a non-cash impairment charge of $3,541associated with one venue within Tao Group Hospitality (see Note 1 “Impact of COVID-19”).
(b)
Upon adoption of ASC Topic 842, the Company 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 combined balance sheet as of July 1, 2019. In addition, the Company also reclassified an unfavorable lease liability of $6,841, which was reported in Other liabilities in the accompanying combined balance sheet, to Right-of-use lease assets as of July 1, 2019.
(c)
The decreases in the Other intangibles gross and accumulated amortization balances related to the write-off of an Obscura asset after it was fully amortized on an accelerated basis.
ForAmortization expense for intangible assets was $2,884 and 4,944 for the three months ended MarchDecember 31, 2020 and 2019, respectively. For the six months ended December 31, 2020 and 2019, amortization expense for intangible assets excluding the amortization of favorable lease assets of $1,152 for the three months ended March 31, 2019, which is reported in rent expense, was $3,009$5,768 and $3,151, respectively. For the nine months ended March 31, 2020 and 2019, amortization expense for intangible assets, excluding the amortization of favorable lease assets of $3,545 for the nine months ended March 31, 2019, which is reported in rent expense, was $11,031 and $9,451,$7,849, respectively.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 10. Commitments and Contingencies
Commitments
As more fully described in Note 811 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information Statement,Annual Report on Form 10-K, the Company’s commitments consist primarily of long-term noncancelable operating lease agreements primarily for Company venues, including Tao Group Hospitality venues, and various corporate offices. 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 combined balance sheet as lease liabilities as of March 31, 2020. See Note 8 for more details about the lease liabilities. Except for the National Properties Term Loan Facility entered into in November 2020 and the cancellation in November 2020 of the separate delayed draw term loan credit agreements (the “DDTL Facilities”) entered into on April 17, 2020 between a wholly-owned subsidiary of the Company as described above with respect to lease accounting,lender and each of MSG NYK Holdings, LLC and MSG NYR Holdings, LLC, subsidiaries of MSG Sports, the Company did not have any material changes in its contractual obligations since the end of fiscal year 2019Fiscal Year 2020 other than activities in the ordinary course of business. See Notes 12 and 17for further details of National Properties Term Loan Facility repayment requirements and the cancellation of the DDTL Facilities, respectively.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Legal Matters
The Company is a defendant in various lawsuits. Although the outcome of these lawsuits cannot be predicted with certainty (including the extent of available insurance), management does not believe that resolution of these lawsuits will have a material adverse effect on the Company.
As more fully described in Note 3, on March 24, 2020, the Company entered into a MIPA with CAPSS LLC pursuant to which the Company agreed to sell the Forum in Inglewood to CAPSS LLC and settle related litigation for a cash purchase price of $400,000. The transaction closed on May 1, 2020. In connection with the closing, the parties executed a settlement and mutual release agreement in connection with the Company’s lawsuit against the City of Inglewood and other defendants, including CAPSS LLC, related to the planned new Los Angeles Clippers arena project of the Buyer, as well as other related litigations.
Note 11. Fair Value Measurements
The following table presents the Company’s assets that are measured at fair value within Level I of the fair value hierarchy on a recurring basis, which include cash equivalents, short-term investments in U.S. treasury bills and an equity investment with readily determinable fair value: 
  Fair Value Hierarchy March 31,
2020		 June 30,
2019
Assets:      
Commercial Paper I $—
 $169,707
Money market accounts I —
 101,517
Time deposits I 67,761
 789,833
U.S. treasury bills I 999,542
 —
Equity investment with readily determinable fair value I 14,790
 17,260
Total assets measured at fair value   $1,082,093
 $1,078,317

Fair Value HierarchyDecember 31,
2020		June 30,
2020
Assets:
Money market accountsI$198,051 $0 
Time depositsI481,011 777 
U.S. treasury billsI314,998 999,887 
Equity investments with readily determinable fair valueI63,013 57,061 
Total assets measured at fair value$1,057,073 $1,057,725 
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 amount of the Company’s commercial paper, money market accounts, time deposits and U.S. treasury bills approximates fair value due to their short-term maturities. See Note 6 for more information on the Company’s equity investments with readily determinable fair value.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


The carrying value and fair value of the Company’s financial instruments reported in the accompanying combinedconsolidated balance sheets are as follows:
  March 31, 2020 June 30, 2019
  
Carrying
Value
 
Fair
Value
 Carrying
Value		 Fair
Value
Assets        
Notes receivable (a)
 $12,566
 $12,566
 $13,348
 $13,348
Short-term investments (a)
 331,019
 331,019
 108,416
 108,416
Equity investment with readily determinable fair value (b)
 14,790
 14,790
 17,260
 17,260
Subordinated term loan receivable (c)
 —
 —
 58,735
 57,711
Liabilities        
Long-term debt, including current portion (d)
 $35,000
 $31,310
 $55,000
 $54,883
_________________
(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 the Company’s equity investment in Townsquare with readily determinable fair value, including transaction costs, was $23,222 as of March 31, 2020. The fair value of this investment is determined based on quoted market prices in an active market on the NYSE, which is classified within Level I of the fair value hierarchy. For the three months ended March 31, 2020 and 2019, the Company recorded an unrealized gain (loss) of $(17,196) and $5,261, respectively, and for the nine months ended March 31, 2020 and 2019, the Company recorded unrealized losses of $(2,471) and $(2,405), respectively, as a result of changes in the market value related to this investment. The unrealized loss is reported in Miscellaneous income (expense), net in the accompanying combined statement of operations.
(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 year ended June 30, 2019, the Company received a $4,765 principal repayment. In December 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 May 23, 2019, Tao Group Intermediate Holdings LLC and Tao Group Operating LLC entered into a $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
December 31, 2020June 30, 2020
Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Assets
Notes receivable (a)
$0 $0 $6,328 $6,328 
Short-term investments (a)
— — 337,192 337,192 
Equity investments with readily determinable fair value (b)
63,013 63,013 57,061 57,061 
Liabilities
Current and non-current portion of long-term debt under National Properties Term Loan Facility (c)
$650,000 $657,313 $— $— 
Current and non-current portion of long term debt under Tao Credit Facilities (c)
37,750 37,723 33,750 32,367 
_________________
(a)As of June 30, 2020, the Company’s notes receivable were invested with banking institutions as collateral for issuances of letters of credit. In connection withaddition, the Tao Group Hospitality acquisition (see Note 9Company’s short-term investments consisted of investments that (i) had original maturities of greater than three months and (ii) could be converted into cash by the Company within one year. The Company’s short-term investments as of June 30, 2020 included $299,942 in U.S. treasury bills and $37,250 in term deposits. The short-term investments in U.S. treasury bills were classified within Level I of the fair value hierarchy. The Company’s notes receivable and short-term investments in term deposits were carried at cost, including interest accruals, which approximated fair value and were classified within Level I of the fair value hierarchy. For the six months ended December 31, 2020, the changes in term deposits and notes receivable were all related to the Company’s audited combined financial statementssettlement upon those investments expirations. No gain or loss was recognized on those notes receivable and notes theretoterm deposits for the yearsix months ended June 30, 2019 included in the Company’s Information Statement), the Company recorded certain contingent consideration liabilities at fair value as part of the preliminary purchase price allocation.December 31, 2020.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


(b)See Note 6 for more information on the Company’s equity investments with readily determinable fair value assets under Level I of the fair value hierarchy.
The following table provides a reconciliation of the deferred and contingent consideration liabilities in connection with the acquisitions discussed above:
   
  Nine Months Ended March 31, 2020
Balance as of June 30, 2019 $1,210
Change in fair value of contingent consideration(a)
 (1,210)
Balance as of March 31, 2020 $—
________________(c)
(a)
The change in fair value of contingent consideration was recorded within Selling, general and administrative expenses in the accompanying combined statement of operations for the three and nine months ended March 31, 2020.

Redeemable Noncontrolling Interests

The Company has the right to increase its equity interest inOn May 23, 2019, Tao Group Hospitality throughIntermediate Holdings LLC and Tao Group Operating LLC entered into a call right on the equity$40,000 five-year term loan facility and a $25,000 five-year term revolving facility. In November 2020, MSG National Properties and certain subsidiaries of the other Tao Group Hospitality equityholders afterCompany entered into the fifth anniversary of the closing date (January 31, 2022) and, in certain circumstances, prior to such date.National Properties Term Loan Facility, providing a five-year $650,000 term loan facility. The other Tao Group Hospitality equityholders have the right to put to Tao Group Hospitality their equity interests in Tao Group Hospitality after the fifth anniversary of the closing and, in certain circumstances to put to the Company prior to the fifth anniversary. As of March 31, 2020, the put and call prices were at fair market value (or in certain circumstances, subject to a discount). Consideration paid upon the exercise of any such put or call right shall be, at the Company’s option, in cash,long-term debt or the Madison Square Garden Sports Corp.’s Class A Common Stock, or a combination thereof, subject to certain limitations. Following the Entertainment Distribution, such consideration would instead be paid upon the exercise of any such put or call right, at the Company’s option, in cash, debt, or the Company’s Class A Common Stock, or a combination thereof, subject to certain limitations.

During the three and nine months ended March 31, 2020, the Company reduced the carrying value of redeemable
noncontrolling interests by $37,715 to reflect a non-cash purchase of an additional 15% of common equity interest in Tao Group Hospitality on January 22, 2020 (see Note 2). In addition, the redeemable noncontrolling interests balance was reduced by $22,997, which represents a proportional allocation for impairment of intangibles, long-lived assets, and goodwill from the Tao Group Hospitality reporting unit (See Notes 1, 7 and 9). Concurrently, the redeemable noncontrolling interests carrying value was increased by $16,939 to align with its fair value of $23,000 as of March 31, 2020. The fair value of redeemable noncontrolling interests was based on unobservable inputsis classified within Level IIIII of the fair value hierarchy primarily from utilizingas it is valued using quoted indices of similar securities for which the discounted cash flow model, which is an income-based approach.inputs are readily observable. See Note 12 for more information and outstanding balances on this long-term debt.
Note 12. Credit Facilities
TAOTao Credit Facilities
On May 23, 2019, TAOTao 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 that matures in August 2024 (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 2017On June 15, 2020, the Company entered into the second amendment to the Tao Subordinated Credit Agreement, was terminated on May 23, 2019 in its entirety in accordance with its terms as a resultwhich provided an additional $22,000 of the repayment of all obligations thereunder from the proceeds ofintercompany loan borrowing availability under the Tao SeniorSubordinated Credit Agreement andAgreement. The net intercompany loan outstanding balances under the Tao Subordinated Credit Agreement, as wellamended, were $62,000 and $49,000 as cash on hand. During the nine months ended Marchof December 31, 2020 Tao Group Hospitality repaid $5,000 under the Tao Subordinated Credit Agreement.and June 30, 2020, respectively. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement, as amended, have been eliminated in the consolidated and combined financial statements in accordance with ASC Topic 810, Consolidation.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


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 and in respect of a certain reserve account, each 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. On August 6, 2020, TAOG and TAOIH entered into an amendment to the Tao Senior Credit Agreement, which suspended the application of the financial maintenance covenants thereunder, modified certain restrictive covenants therein through December 31, 2021, modified the applicable interest rates and increased the minimum liquidity requirement for the outstanding balance of $33,750 under the Tao Term Loan Facility and for the $25,000 availability under the Tao Revolving Credit Facility. In addition, in connection with the amendment, the Company, through its direct wholly owned subsidiary, MSG Entertainment Group, entered into a guarantee and reserve account agreement (i) to guarantee the obligations of TAOG under the Tao Senior Credit Agreement, (ii) to establish and grant a security interest in a reserve account that initially held a deposit of approximately $9,800 and (iii) with a covenant to maintain a minimum liquidity requirement of no less than $75,000 at all times. The balance held in the reserve account was approximately $8,100 as of December 31, 2020. As of MarchDecember 31, 2020, TAOG, TAOIH wasand the restricted subsidiaries were in compliance with these financial covenants.the covenants of the Tao Senior Credit Agreement.
All obligations under the Tao Senior Credit Agreement are guaranteed by MSG Entertainment Group, TAOIH and TAOIH’s existing and future direct and indirect domestic subsidiaries (other than (i) TAOG, (ii) domestic subsidiaries substantially all of whose assets consist of controlled foreign corporations and (iii) subsidiaries designated as immaterial subsidiaries or unrestricted subsidiaries) (the “Tao Subsidiary Guarantors,”Guarantors”, and together with TAOIH, the “Tao Guarantors”). All obligations under the Tao Senior Credit Agreement, including the guarantees of those obligations, are secured by the reserve account noted above and substantially all of the assets of TAOG and each Tao Guarantor (collectively, “Tao Collateral”), including, but not
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
limited to, a pledge of the equity interests in TAOG held directly by TAOIH and the equity interests in each Tao Subsidiary Guarantor held directly or indirectly by TAOIH.
Borrowings under the Tao Senior Credit Agreement bear interest at a floating rate, which at the option of the Senior Borrower may be either (a) a base rate plus an additional rate ranging from 1.50% to 2.50% per annum (determined based on a total leverage ratio) (the “Base Rate”), or (b) a Eurocurrency rate plus an additional rate ranging from 2.50% to 3.50% per annum (determined based on a total leverage ratio) (the “Eurocurrency Rate”)., provided that through December 31, 2021, the additional rate used in calculating the floating rate is (i) 1.50% per annum for borrowings bearing the Base Rate, and (ii) 2.50% per annum for borrowings bearing the Eurocurrency Rate. The Tao Senior Credit Agreement requires TAOG to pay a commitment fee of 0.50% in respect of the daily unused commitments under the Tao 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 Tao Senior Credit Agreement as of MarchDecember 31, 2020 was 3.28%2.65%. The 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 combined balance sheet. In addition to scheduled repayments required under the Tao Term Loan Facility, Tao Group Hospitality repaid the $15,000 outstanding balance under the Tao Revolving Credit Facility during the nine months ended March 31, 2020. There was $6,500 and 0 borrowing outstanding under the Tao Revolving Credit Facility as of MarchDecember 31, 2020.2020 and June 30, 2020, respectively. Tao Group Hospitality utilized $750 of the Tao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available as of December 31, 2020 was $17,750.
During the ninesix months ended MarchDecember 31, 2020 and 2019, the Company made interest payments of $1,531$554 and $7,395,$1,218, respectively, under the Tao Senior Credit Agreement and the 2017 Tao Credit Agreement.
In addition to the financial covenants described above, the Tao Senior Credit Agreement and the related security agreements contain certain customary representations and warranties, affirmative covenants and events of default. The Tao Senior Credit Agreement contains certain restrictions on the ability of TAOIH, TAOG and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Tao Senior Credit Agreement, including, without limitation, the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making investments, loans or advances in or to other persons; (iv) paying dividends and distributions or repurchasing capital stock; (v) engaging in certain transactions with affiliates; (vi) amending specified agreements; (vii) merging or consolidating; (viii) making certain dispositions; and (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 onof the Tao Term Loan Facility from the net cash proceeds of certain 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.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


See Note 1013 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information StatementAnnual Report on Form 10-K for more information regarding the Company’s debt maturities for the Tao Senior Secured Credit Facilities.
National Properties Term Loan Facility
On November 12, 2020, MSG National Properties, an indirect, wholly-owned subsidiary of the Company, MSG Entertainment Group and certain subsidiaries of MSG National Properties entered into a five-year $650,000 senior secured term loan facility (the “National Properties Term Loan Facility”). The proceeds of the National Properties Term Loan Facility may be used to fund working capital needs, for general corporate purposes of MSG National Properties and its subsidiaries, and to make distributions to MSG Entertainment Group.
The National Properties Term Loan Facility includes a minimum liquidity covenant, pursuant to which MSG National Properties and its restricted subsidiaries are required to maintain a specified minimum level of average daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter. From the closing date until the first anniversary of the National Properties Term Loan Facility, the minimum liquidity threshold is $450,000, which is reduced each quarter by the amount of cash usage, subject to a minimum liquidity floor of $200,000. After the first anniversary, the minimum liquidity level is reduced to $200,000. If at any time the total leverage ratio of MSG National
30

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Properties and its restricted subsidiaries is less than 5.00 to 1.00 as of the end of any four consecutive fiscal quarter period or MSG National Properties obtains an investment grade rating, the minimum liquidity level is permanently reduced to $50,000.
The principal obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments in an aggregate amount equal to 1.00% per annum (0.25% per quarter), with the balance due at the maturity of the facility. The National Properties Term Loan Facility will mature on November 12, 2025. Borrowings under the National Properties Term Loan Facility bear interest at a floating rate, which at the option of MSG National Properties may be either (i) a base rate plus a margin of 5.25% per annum or (ii) LIBOR, with a floor of 0.75%, plus a margin of 6.25% per annum. The interest rate on the National Properties Term Loan Facility as of December 31, 2020 was 7.00%. During the six months ended December 31, 2020, the Company was not required to make interest or principal payments under the National Properties Term Loan Facility.
All obligations under the National Properties Term Loan Facility are guaranteed by MSG Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than the subsidiaries that own The Garden, BCE and certain other excluded subsidiaries (the “Subsidiary Guarantors”). All obligations under the National Properties Term Loan Facility, including the guarantees of those obligations, are secured by certain of the assets of MSG National Properties and the Subsidiary Guarantors (collectively, “Collateral”) including, but not limited to, a pledge of some or all of the equity interests held directly or indirectly by MSG National Properties in each Subsidiary Guarantor. The Collateral does not include, among other things, any interests in The Garden or the leasehold interests in Radio City Music Hall and the Beacon Theater. Under certain circumstances, MSG National Properties is required to make mandatory prepayments on loans outstanding, including prepayments in an amount equal to a specified percentage of excess cash flow in any fiscal year and prepayments in an amount equal to the net cash proceeds of certain sales of assets or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), in each case subject to certain exceptions.
In addition to the minimum liquidity covenant, the National Properties Term Loan Facility and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default. The National Properties Term Loan Facility contains certain restrictions on the ability of MSG National Properties and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the National Properties Term Loan Facility, including the following: (i) incur additional indebtedness; (ii) create liens on certain assets; (iii) make investments, loans or advances in or to other persons; (iv) pay dividends and distributions or repurchase capital stock (which will restrict the ability of MSG National Properties to make cash distributions to the Company); (v) repay, redeem or repurchase certain indebtedness; (vi) change its lines of business; (vii) engage in certain transactions with affiliates; (viii) amend their respective organizational documents; (ix) merge or consolidate; and (x) make certain dispositions. As of December 31, 2020, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Term Loan Facility.
As of December 31, 2020, the principal repayments required for the next five years under the National Properties Term Loan Facility are as follows:
Fiscal Year 2021 (remainder)$3,250 
Fiscal Year 20226,500 
Fiscal Year 20236,500 
Fiscal Year 20246,500 
Fiscal Year 20256,500 
Thereafter620,750 
$650,000 

Deferred Financing Costs

In connection with the National Properties Term Loan Facility, the Company incurred a $19,500 original issue discount and $14,417 of issuance costs (collectively, “deferred financing costs”). The deferred financing costs are amortized, as interest expense, over the term of the National Properties Term Loan Facility on a straight-line basis, which approximates the effective interest method.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The following table summarizes the presentation ofoutstanding balances under the Tao Term Loan Facility, the Tao Revolving Credit Facility and the National Properties Term Loan Facility, as well as the related deferred financing costs in the accompanying combinedconsolidated balance sheets as of MarchDecember 31, 2020 and June 30, 2019.
2020.
  March 31, 2020
  Tao Term Loan Facility Deferred Financing Costs Total
Current portion of long-term debt, net of deferred financing costs $5,000
 $(208) $4,792
Long-term debt, net of deferred financing costs (a)
 30,000
 (675) 29,325
Total $35,000
 $(883) $34,117
       
December 31, 2020June 30, 2020
PrincipalUnamortized Deferred Financing Costs
Net (a)
PrincipalUnamortized Deferred Financing Costs
Net (a)
Current portion
Tao Term Loan Facility$5,000 $(239)$4,761 $5,000 $(208)$4,792 
National Properties Term Loan Facility6,500 (6,783)(283)— — — 
Current portion of long-term debt, net of deferred financing costs (a)
$11,500 $(7,022)$4,478 $5,000 $(208)$4,792 
December 31, 2020June 30, 2020
PrincipalUnamortized Deferred Financing CostsNetPrincipalUnamortized Deferred Financing CostsNet
Noncurrent portion
Tao Term Loan Facility$26,250 $(595)$25,655 $28,750 $(624)$28,126 
Tao Revolving Credit Facility (b)
6,500 0 6,500 — — — 
National Properties Term Loan Facility643,500 (26,210)617,290 — — — 
Long-term debt, net of deferred financing costs$676,250 $(26,805)$649,445 $28,750 $(624)$28,126 
  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)
(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 combined 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 March 31, 2020 and June 30, 2019, and $15,000 outstanding balance under the Tao Revolving Credit Facility as of June 30, 2019.
The following table summarizes deferred financing costs, net of amortization, related to the Tao Revolving Credit Facility as reported onand the National Properties Term Loan Facility disclosed above, the Company’s current portion of long-term debt, net of deferred financing costs in the accompanying combinedconsolidated balance sheet: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, 2020 and June 30, 2020.
(b)Unamortized deferred financing costs associated with Tao Revolving Credit Facility are presented under the captions Other current assets and Other assets in the accompanying consolidated balance sheets.
  March 31,
2020		 June 30,
2019
Other current assets $85
 $85
Other assets 269
 333
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 13.13. Pension Plans and Other Postretirement Benefit Plan
See Note 1114 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information StatementAnnual Report on Form 10-K 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”). The Company’s Pension Plans and Postretirement Plan are considered “Shared Plans.”

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Defined Benefit Pension Plans and Postretirement Benefit Plan
The following tables present components of net periodic benefit cost for the Pension Plans and Postretirement Plan included in the accompanying consolidated and combined statements of operations for the three and ninesix months ended MarchDecember 31, 2020 and 2019. Service cost is recognized in direct operating expenses and selling, general and administrative expenses. All other components of net periodic benefit cost are reported in Miscellaneousmiscellaneous expense, net.
Pension PlansPostretirement Plan
Three Months EndedThree Months Ended
December 31,December 31,
2020201920202019
Service cost$22 $20 $13 $17 
Interest cost845 1,328 10 27 
Expected return on plan assets(1,324)(1,328)0 0 
Recognized actuarial loss270 344 20 2 
Net periodic benefit cost$(187)$364 $43 $46 
Contributory charge to MSG Sports for participation in the Shared Plans and allocation of costs related to the corporate employees (a)
0 (52)0 (8)
Net periodic benefit cost reported in consolidated and combined statements of operations$(187)$312 $43 $38 
         
  Pension Plans Postretirement Plan
  Three Months Ended Three Months Ended
  March 31, March 31,
  2020 2019 2020 2019
Service cost $24
 $20
 $18
 $28
Interest cost 1,326
 1,473
 28
 58
Expected return on plan assets (1,330) (781) —
 —
Recognized actuarial loss 339
 318
 3
 10
Settlement loss recognized 67
 —
 —
 —
Amortization of unrecognized prior service credit —
 —
 —
 (1)
Net periodic benefit cost $426
 $1,030
 $49
 $95
Contributory charge to Madison Square Garden Sports Corp. for participation in the Shared Plans and allocation of costs related to the corporate employees (a)
 (62) (171) (8) (17)
Net periodic benefit cost reported in combined statements of operations $364
 $859
 $41
 $78
Pension PlansPostretirement Plan
Six Months EndedSix Months Ended
December 31,December 31,
2020201920202019
Service cost$42 $48 $26 $35 
Interest cost1,690 2,656 20 55 
Expected return on plan assets(2,648)(2,659)0 0 
Recognized actuarial loss602 680 40 5 
Net periodic (benefit) cost$(314)$725 $86 $95 
Contributory charge to MSG Sports for participation in the Shared Plans and allocation of costs related to the corporate employees (a)
0 (102)0 (16)
Net periodic (benefit) cost reported in consolidated and combined statements of operations$(314)$623 $86 $79 
________________
  Pension Plans Postretirement Plan
  Nine Months Ended Nine Months Ended
  March 31, March 31,
  2020 2019 2020 2019
Service cost $72
 $60
 $53
 $83
Interest cost 3,982
 4,419
 83
 173
Expected return on plan assets (3,989) (2,344) —
 —
Recognized actuarial loss 1,019
 954
 8
 30
Settlement loss recognized 67
 —
 —
 —
Amortization of unrecognized prior service credit —
 —
 —
 (4)
Net periodic benefit cost $1,151
 $3,089
 $144
 $282
Contributory charge to Madison Square Garden Sports Corp. for participation in the Shared Plans and allocation of costs related to the corporate employees (a)
 (164) (515) (25) (50)
Net periodic benefit cost reported in combined statements of operations $987
 $2,574
 $119
 $232

________________
33


(a)
The pension expense related to employees of other Madison Square Garden Sports Corp. businesses participating in any of these plans is reflected as a contributory charge from the Company to Madison Square Garden Sports Corp., resulting in a decrease to the expense recognized in the combined statements of operations.


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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


(a)The pension expense related to employees of other MSG Sports businesses participating in any of these plans is reflected as a contributory charge from the Company to MSG Sports, resulting in a decrease to the expense recognized in the consolidated and combined statements of operations.
Defined Contribution Pension Plans
For the ninethree and six months ended MarchDecember 31, 2020 and 2019, expenses related to the Savings Plans and Union Savings Plan included in the accompanying consolidated and combined statements of operations are as follows:
Savings Plans (a)
 Union Savings Plan
Savings PlansSavings PlansUnion Savings Plan
Three Months EndedThree Months Ended Nine Months Ended Three Months Ended Nine Months EndedThree Months EndedSix Months EndedThree Months EndedSix Months Ended
March 31, March 31, March 31, March 31,
December 31,December 31,December 31,December 31,December 31,
20202020 2019 2020 2019 2020 2019 2020 20192020
2019 (a)
2020
2019 (a)
2020201920202019
$(1,307) $1,854
 $3,288
 $5,945
 $469
 $450
 $522
 $498
1,457 $2,435 $2,647 $4,595 $10 $31 $19 $53 
_________________

(a)The amounts include expenses of $891 and $1,752 related to the MSG Sports’ corporate employees which were allocated to the Company during the three and six months ended December 31, 2019, respectively.
(a)
These amounts include a benefit of $(782) and an expense of $755 related to the Company’s corporate employees which were allocated to the Company during the three months ended March 31, 2020 and 2019, respectively, and $970 and $2,385 of expenses related to the Company’s corporate employees which were allocated to the Company during the nine months ended March 31, 2020 and 2019, respectively.
Note 14. Share-based Compensation
See Note 1215 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information StatementAnnual Report on Form 10-K for more information regarding Madison Square GardenMSG Sports Corp.’s 2015 Employeeequity award programs (the “MSG Sports Stock Plan (the “Madison Square Garden Sports Corp. Employee Stock Plan”Plans”). and MSG Entertainment equity award programs.
Share-based compensation expense was $8,836$23,562 and $8,726$10,373 for the three months ended MarchDecember 31, 2020 and 2019, respectively, and $29,294$35,091 and $27,929$20,458 for the ninesix months ended MarchDecember 31, 2020 and 2019, respectively. In addition, capitalized share-based compensation expense was $1,308$2,784 and $3,790$2,482 for the three and ninesix months ended MarchDecember 31, 2020 respectively, and $1,926 for the three and nine months ended March 31, 2019.2019, respectively. These amounts reflect only the expenses for the awards provided to the Company’s direct employees, net of expenses related to the Company’s corporate employees who participate in the Madison Square GardenMSG Sports Corp. Employee Stock PlanPlans that were charged to Madison Square Garden Sports Corp.

MSG Sports. The Company recorded previously unrecognized share-based compensation expense of $11,129 for the three and six months ended December 31, 2020 associated with the cancellation of certain awards pursuant to a settlement agreement related to an executive.
Restricted Stock Units Award Activity
The following table summarizes activity related to Madison Square Gardenholders (including the Company and MSG Sports Corp.’semployees) of the Company’s restricted stock units and performance restricted stock units, collectively referred to as “RSUs,” held by the Company’s employees for the ninesix months ended MarchDecember 31, 2020:
 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, 2019215
 354
 $252.51
Granted (a)
112
 112
 $246.51
Vested(97) (119) $212.66
Forfeited(10) (17) $257.93
Unvested award balance, March 31, 2020220
 330
 $265.47
_____________________
(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.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


 Number ofWeighted-Average
Fair Value 
Per Share at
Date of Grant
 Nonperformance
Based Vesting
RSUs
(In Thousands)		Performance
Based Vesting
RSUs
(In Thousands)
Unvested award balance, June 30, 2020277 328 $75.34 
Granted387 328 $71.60 
Vested(134)(85)$69.00 
Forfeited(26)(29)$72.63 
Cancelled— (32)$88.58 
Unvested award balance, December 31, 2020504 510 $73.80 
The fair value of RSUs that vested during the ninesix months ended MarchDecember 31, 2020 was $55,668.$16,251. Upon delivery, RSUs granted under the Madison Square Garden Sports Corp. Employee Stock Plan were net share-settled to cover the required statutory tax withholding obligations. To fulfill the
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
employees’ required statutory tax withholding obligations for the applicable income and other employment taxes, 9981 of these RSUs, with an aggregate value of $25,599$5,976, were retained by Madison Square Garden Sports Corp.
The fairthe Company during the six months ended December 31, 2020, of which 8 of these RSUs, with an aggregate value of RSUs that vested during the nine months ended March 31, 2019 was $46,807. The weighted-average fair value per share at grant date of RSUs granted during the nine months ended March 31, 2019 was $306.11.$575, related to MSG Sports employees.
Stock Options Award Activity
The following table summarizes activity related to Madison Square Garden Sports Corp.’sthe Company’s stock options held by the Company’s employees for the ninesix months ended MarchDecember 31, 2020:
        
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 March 31, 2020543
 $325.47
 6.31 $120
Exercisable as of March 31, 2020175
 $299.67
 6.62 $80

Number of
Time Vesting Options
(In Thousands)		Weighted-Average Exercise Price Per ShareWeighted-Average Remaining Contractual Term (In Years)Aggregate Intrinsic Value
(In Thousands)
Balance as of June 30, 2020543 $99.68 
Cancelled(449)$107.07 
Balance as of December 31, 202094 $64.36 6.96$3,817 
Exercisable as of December 31, 202094 $64.36 6.96$3,817 
Note 15. Accumulated Other Comprehensive Loss
The following table details the components of accumulated other comprehensive loss:
      
 Three Months Ended March 31, 2020
 
Pension Plans and
Postretirement
Plan
 Cumulative Translation Adjustments 
Accumulated
Other
Comprehensive
Loss
Balance as of December 31, 2019$(41,395) $8,325
 $(33,070)
Other comprehensive loss before reclassifications—
 (19,946) (19,946)
Amounts reclassified from accumulated other comprehensive loss (a)
409
 —
 409
Other comprehensive income (loss)409
 (19,946) (19,537)
Balance as of March 31, 2020$(40,986) $(11,621) $(52,607)
     Three Months Ended December 31, 2020
Three Months Ended March 31, 2019Pension Plans and
Postretirement
Plan		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Pension Plans and
Postretirement
Plan
 Cumulative Translation Adjustments 
Accumulated
Other
Comprehensive
Loss
Balance as of December 31, 2018$(40,193) $(3,704) $(43,897)
Balance as of September 30, 2020Balance as of September 30, 2020$(38,970)$1,416 $(37,554)
Other comprehensive income before reclassifications—
 6,383
 6,383
Other comprehensive income before reclassifications— 11,883 11,883 
Amounts reclassified from accumulated other comprehensive loss (a)
327
 —
 327
Amounts reclassified from accumulated other comprehensive loss (a)
290 0 290 
Other comprehensive income327
 6,383
 6,710
Other comprehensive income290 11,883 12,173 
Balance as of March 31, 2019$(39,866) $2,679
 $(37,187)
Balance as of December 31, 2020Balance as of December 31, 2020$(38,680)$13,299 $(25,381)
Three Months Ended December 31, 2019
Pension Plans and
Postretirement
Plan		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of September 30, 2019$(41,741)$(14,861)$(56,602)
Other comprehensive income before reclassifications— 23,186 23,186 
Amounts reclassified from accumulated other comprehensive loss (a)
346 0 346 
Other comprehensive income346 23,186 23,532 
Balance as of December 31, 2019$(41,395)$8,325 $(33,070)
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Six Months Ended December 31, 2020
Pension Plans and
Postretirement
Plan		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of June 30, 2020$(39,322)$(12,535)$(51,857)
Other comprehensive income before reclassifications0 25,834 25,834 
Amounts reclassified from accumulated other comprehensive loss (a)
642 0 642 
Other comprehensive income642 25,834 26,476 
Balance as of December 31, 2020$(38,680)$13,299 $(25,381)
      
 Nine Months Ended March 31, 2020
 
Pension Plans and
Postretirement
Plan
 Cumulative Translation Adjustments 
Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2019$(42,080) $(4,843) $(46,923)
Other comprehensive loss before reclassifications—
 (6,778) (6,778)
Amounts reclassified from accumulated other comprehensive loss (a)
1,094
 —
 1,094
Other comprehensive income (loss)1,094
 (6,778) (5,684)
Balance as of March 31, 2020$(40,986) $(11,621) $(52,607)
Six Months Ended December 31, 2019
Pension Plans and
Postretirement
Plan		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of June 30, 2019$(42,080)$(4,843)$(46,923)
Other comprehensive income before reclassifications0 13,168 13,168 
Amounts reclassified from accumulated other comprehensive loss (a)
685 0 685 
Other comprehensive income685 13,168 13,853 
Balance as of December 31, 2019$(41,395)$8,325 $(33,070)
        
 Nine Months Ended March 31, 2019
 
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) $(46,918)
Reclassification of unrealized loss on available-for-sale securities—
 —
 5,570
 5,570
Other comprehensive income before reclassifications—
 3,181
 —
 3,181
Amounts reclassified from accumulated other comprehensive loss (a)
980
 —
 —
 980
Other comprehensive income980
 3,181
 —
 4,161
Balance as of March 31, 2019$(39,866) $2,679
 $—
 $(37,187)
________________
(a)
Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected under Miscellaneous income (expense), net in the accompanying combined statements of 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 the Madison Square Garden Sports Corp. Investment. See Note 11 for more information related to the investment in Townsquare and its impact on the Company’s operating results for the three and nine months ended March 31, 2020 and 2019, which is reflected under Miscellaneous income (expense), net in the accompanying combined statements of operations.
(a)Amounts reclassified from accumulated other comprehensive loss represent the amortization of net actuarial loss and net unrecognized prior service credit included in net periodic benefit cost, which is reflected under Miscellaneous income (expense), net in the accompanying consolidated and combined statements of operations.
Note 16. Income Taxes

DuringFor the periods presented inprior to the combined financial statements,Entertainment Distribution, the Company did not file separate income tax returns. Thereturns as the Company was included in the federal and state income tax returnsgrouping of Madison Square Gardenother MSG Sports Corp. for all periods presented.entities within the respective entity’s tax jurisdiction. The income tax expense or benefit presentedprovision included in these periods has been determined on acalculated using the separate return basis, as if the Company filed a separate income tax return.
Income tax benefitexpense for the three months ended MarchDecember 31, 2020 of $10,126$323 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to tax expenses of (i) a tax expense$35,819 related to an increase in valuation allowance, (ii) $2,337 resulting from the acceleration of $30,968, (ii) taxshare-based compensation expense in connection with the cancellation of $4,673certain awards, and (iii) $891 related to noncontrolling interests, and (iii) tax expense from nondeductible officers’ compensation of $1,296, partially offset by state income tax benefit of $14,084.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


$12,705.
Income tax benefitexpense for the ninesix months ended MarchDecember 31, 2020 of $8,686$486 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to tax expenses of (i) a tax expense$64,251 related to an increase in valuation allowance, (ii) $2,337 resulting from the acceleration of $22,043, (ii) taxshare-based compensation expense in connection with the cancellation of $5,001certain awards, (iii) $1,840 related to noncontrolling interests, and (iii) tax expense(iv) $1,669 resulting from nondeductible officers’ compensation, of $3,846, partially offset by state income tax benefit of $9,761 and excess$22,519.
For the six months ended December 31, 2020, the Company made income tax benefitpayments of $15,526 related to share-based compensation awardstaxable income recognized in the fourth quarter of $2,067.Fiscal Year 2020.
Income tax expense for the three months ended MarchDecember 31, 2019 of $469 differs from income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to (i) a tax expense related to an increase in valuation allowance of $1,699, (ii) tax expense of nondeductible officers’ compensation of $1,422, and (iii) tax expense of $144 related to noncontrolling interests, partially offset by state income tax expense of $431.
Income tax expense for the nine months ended March 31, 2019 of $1,253$1,255 differs from income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to a tax benefit related to a decrease in valuation allowance of $19,171,$27,074, partially offset by state income tax expense of $9,621 and tax expense of $1,318 resulting from nondeductible officers’ compensation.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Income tax expense for the six months ended December 31, 2019 of $1,440 differs from income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to a tax benefit of $8,922 related to a decrease in the valuation allowance and excess tax benefit of $2,481 related to share-based compensation awards, of $2,817, partially offset by (i) state income tax expense of $7,425, (ii)$4,323 and tax expense of $2,550 from nondeductible officers’ compensation of $6,140, and (iii) tax expense relatedcompensation.
Prior to noncontrolling interests of $1,424.
The Company’s historical combined financial statements reflect net operating loss (“NOL”) carryforwards calculated on a separate return basis. These NOL carryforwards were calculated as if the Company operated as a separate stand-alone entity for the periods presented in the historical annual and interim combined financial statements of the Company. Because the Entertainment Distribution, involved a spin-off of the Company these NOLs do not carry over to the Company. However, in connection with the Entertainment Distribution, certain deferred revenue of the Company will be accelerated for income tax purposes, rather than recognized as the associated events occur. The tax on such acceleration will be the responsibility of Madison Square Gardenand MSG Sports Corp. and not the Company. The Company will not reimburse Madison Square Garden Sports Corp. for such taxes.
Madison Square Garden Sports Corp. was notified during the third quarter of fiscal year 2018 that the Internal Revenue Service (“IRS”) was commencing an audit of the federal income tax return for the year ended June 30, 2016. In October 2019, Madison Square Garden Sports Corp. was informed by the IRS that the audit resulted in no changes.
Madison Square Garden Sports Corp. was notified in April 2020 that the City of New York was commencing an audit of the state income tax returns for the fiscal years ended June 30, 2016 and 2017. The Company does not expect the examination, when finalized, to result in material changes.
On March 31, 2020, Madison Square Garden Sports Corp. and the Company entered into a Tax Disaffiliation Agreement (“TDA”) that governs the parties’ respective rights, responsibilities and obligations with respect to taxes and tax benefits.. Under the TDA, Madison Square GardenMSG Sports Corp. will generally be responsible for all U.S. federal, state, local and other applicable income taxes of the Company for any taxable period or portion of such period ending on or before the Entertainment Distribution Date.
Note 17. Related Party Transactions
Given that the Entertainment Distribution did not occur until after March 31, 2020, the transactions described below, unless otherwise indicated, were in place with Madison Square Garden Sports Corp. as of March 31, 2020, and continued with the Company following the Entertainment Distribution.
As of MarchDecember 31, 2020, members of the Dolan family including trusts for membermembers 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 owned all100% of Madison Square Garden Sports Corp.’sthe Company’s outstanding Class B common stockCommon Stock and approximately 3.5%3.1% of Madison Square Garden Sports Corp.’sthe Company’s outstanding Class A common stock (inclusive of options exercisable within 60 days of the date hereof).Common Stock. Such shares of Madison Square Garden Sports Corp.’s Class A common stock and Class B common stock, collectively, represent approximately 70.9% of the aggregate voting power of Madison Square Garden Sports Corp.’s outstanding common stock. Pursuant to the Entertainment Distribution on April 17, 2020, one share of the Company’s Class A Common Stock was issued for every share of Madison Square Garden Sports Corp.’s Class A common stock held as of the Record Date, and one share of the Company’s Class B Common Stock, was issued for every share of Madison Square Garden Sports Corp.’s Class B common stock held ascollectively, represent approximately 70.7% of the Record Date.aggregate voting power of the Company’s outstanding common stock. Members of the Dolan family are also the controlling stockholders of MSG Sports, MSG Networks and AMC Networks Inc. (“AMC Networks”).
Current Related Party Arrangements
The Company is party to the following agreements and/or arrangements with MSG Sports:
•Sponsorship sales and service representation agreements pursuant to which the Company has the exclusive right and obligation to sell MSG Sports’ sponsorships for an initial stated term of ten years for a commission;
•Team sponsorship allocation agreement, pursuant to which MSG Sports continues receiving an allocation of sponsorship and signage revenues associated with the sponsorship agreements that existed at the Entertainment Distribution Date;
•Arena License Agreements pursuant to which the Company (i) provides MSG Sports the right to use The Garden for games of the Knicks and Rangers for a 35-year term in exchange for venue license fees, (ii) shares revenues collected for suite licenses, (iii) operates and manages the sale of the sports teams merchandise at The Garden for a commission, (iv) operates and manages the sale of food and beverage concessions and catering services during the Knicks and Rangers games for a portion of net profits (as defined under the Arena License Agreements), (v) provides day of game services that were historically provided prior to the Entertainment Distribution, and (vi) provides other general services within The Garden;
•Transition Services Agreement (the “TSA”) pursuant to which the Company provides certain corporate and other transition services to MSG Sports, such as information technology, accounting, accounts payable, payroll, tax, certain legal functions, human resources, insurance and risk management, government affairs, investor relations, corporate communications, benefit plan administration and reporting, and internal audit functions as well as certain marketing functions, in exchange for service fees. MSG Sports also provides certain transition services to the Company, in exchange for service fees;
•Sublease agreement, pursuant to which the Company subleases office space to MSG Sports;
•Group ticket sales representation agreement, pursuant to which the Company appointed MSG Sports as its sales and service representative to sell group ticket packages related to Company events in exchange for a commission;
•Single night rental commission agreement, pursuant to which MSG Sports may, from time to time, sell (or make referrals for sales of) licenses for the use of suites at The Garden for individual Company events in exchange for a commission;
•The DDTL Facilities providing for a $110,000 and $90,000 senior unsecured delayed draw term loan facilities, for the Knicks and Rangers, respectively, which were terminated on November 6, 2020;
•Aircraft time sharing agreements (discussed below); and
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(Continued)


Members of•Other agreements with MSG Sports entered into in connection with the Dolan family are the controlling stockholders of the Company, Madison Square Garden Sports Corp., MSG NetworksEntertainment Distribution such as a distribution agreement, a tax disaffiliation agreement, an employee matters agreement, a trademark license agreement and AMC Networks Inc. (“AMC Networks”).certain other arrangements.
TheIn addition, the Company has various agreements with MSG Networks,, including an advertising sales representation agreement and a services agreement (the “Services“MSG Networks Services Agreement”). Pursuant to the advertising sales representation agreement, the Company has the exclusive right and obligation to sell advertising on behalf of MSG Networks in exchange for a commission. Pursuant to the MSG Networks Services Agreement, which was effective July 1, 2019,2020, the Company provides certain services to 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. MSG Networks also provides certain services to the Company, in exchange for service fees.
In connection withFurther, the Entertainment Distribution, on March 31, 2020, the Company entered into a Transition Services Agreement with Madison Square Garden Sports Corp. (the “TSA”). Pursuant to the TSA, following the Entertainment Distribution, the Company will provide Madison Square Garden Sports Corp. certain corporate and other transition services, such as information technology, accounts payable, payroll, tax, certain legal functions, human resources, insurance and risk management, government affairs, investor relations, corporate communications, benefit plan administration and reporting, and internal audit functions as well as certain marketing functions, in exchange for service fees. Madison Square Garden Sports Corp. will also provide certain transition services to the Company, in 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 Sports and MSG Networks, (ii) the Company’s President with MSG Sports, and (ii)(iii) the Company’s Vice Chairman with MSG Sports, MSG Networks and AMC Networks. Following the Entertainment Distribution, the Company will also share these expenses with Madison Square Garden Sports Corp.
The Company is a party to various aircraft arrangements. Pursuant to certain Aircraft Support Services Agreements (the “Support Agreements”), the Company provides certain aircraft support services to entities controlled by (i) James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, (ii) Charles F. Dolan, a director, 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, and (iii) Patrick F. Dolan, the son of Charles F. Dolan and brother of James L. Dolan.
The Company hasentered into reciprocal time sharing/dry lease agreements with each of (i) Quart 2C, LLC (“Q2C”), a company controlled by James L. Dolan and Kristin A. Dolan, his spouse and a director of the Company, and (ii) Charles F. Dolan and Sterling2k LLC (collectively, “CFD”), an entity owned and controlled by Deborah Dolan-Sweeney, the daughter of Charles F. Dolan and the sister of James L. Dolan, 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 Company is also party to 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 James L. Dolan, pursuant to which the Company may lease on a non-exclusive basis Brighid Air’s Bombardier BD100-1A10 Challenger 350 aircraft (the “Challenger”). In connection with the dry lease agreement, the Company also entered into a Flight Crew Services Agreement (the “Flight Crew Agreement”) with Dolan Family Office, LLC (“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 Sports, MSG Networks and AMC Networks are party to certain aircraft time sharing agreements, pursuant to which the Company has agreed from time to time to make aircraft available to MSG Sports, MSG Networks and/or AMC Networks for lease on a “time sharing” basis. Additionally, the Company, MSG Sports, MSG Networks and AMC Networks have agreed on an allocation of the costs of certain aircraft and helicopter use by their shared executives. Following the Entertainment Distribution, the Company will also share these expenses with Madison Square Garden Sports Corp.
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).

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NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


From time to time the Company enters into arrangements with 605, LLC. James L. Dolan, the Company’s Executive Chairman, Chief Executive Officer and a director, and his spouse, Kristin A. Dolan (a director of the Company), own 50% of 605, LLC. Kristin A. Dolan is also the founder and Chief Executive Officer 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 MarchDecember 31, 2020 and June 30, 2019,2020, BCE had $637 of notes payable duewith respect to a loan received by BCE from its noncontrolling interest holder. See Note 12 for further information.
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(Continued)
The Company has also entered into certain commercial agreements with its nonconsolidated affiliates in connection with MSG Sphere. For the ninesix months ended MarchDecember 31, 2020 and 2019, the Company recorded approximately $11,137$24,989 and $7,370, respectively, of capital expenditures in connection with services provided to the Company under these agreements. As of December 31, 2020 and June 30, 2020, accrued capital expenditures associated with related parties were $9,151 and $2,121, respectively, and are reported under other accrued liabilities in the accompanying consolidated balance sheets.
Revenues and Operating Expenses (Credits)
The following table summarizes the composition and amounts of the transactions with the Company’s affiliates. These amounts are reflected in revenues and operating expenses in the accompanying consolidated and combined statements of operations for the three and ninesix months ended MarchDecember 31, 2020 and 2019:
  Three Months Ended March 31, Nine Months Ended March 31,
  2020 2019 2020 2019
Revenues $6,333
 $7,906
 $13,792
 $15,762
Operating expenses (credits):        
Revenue sharing expenses $42,878
 $55,756
 $108,380
 $124,949
Allocation of charges for venue usage to Madison Square Garden Sports Corp. (26,355) (21,694) (48,459) (44,447)
Corporate general and administrative expenses, net — Madison Square Garden Sports Corp. (32,672) (30,716) (96,485) (85,196)
Corporate general and administrative expenses, net — MSG Networks (2,672) (2,514) (7,876) (7,790)
Consulting fees —
 —
 —
 1,792
Advertising expenses 316
 403
 460
 749
Other operating expenses, net 174
 (49) 297
 (38)

Three Months Ended December 31,Six Months Ended December 31,
2020201920202019
Revenues$5,262 $984 $9,280 $7,459 
Operating expenses (credits):
Revenue sharing expenses$15 $47,214 $96 $65,502 
Allocation of charges for venue usage to MSG Sports0 (20,025)0 (22,104)
Corporate general and administrative expenses, net — MSG Sports(8,445)(32,720)(18,625)(63,813)
Corporate general and administrative expenses, net — MSG Networks(2,334)(2,602)(4,877)(5,204)
Advertising expenses0 101 0 144 
Other operating expenses, net693 34 1,533 123 
Revenues
Revenues from related parties primarily consist of 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, amounts disclosed above for Fiscal Year 2021 include the Company’s sharerevenues from sponsorship sales and representation agreements with MSG Sports in connection with the Entertainment Distribution.
In connection with the Entertainment Distribution, the Company entered into Arena License Agreements with MSG Sports that, among other things, require the Knicks and the Rangers to play their home games at The Garden in exchange for fixed monthly license fees over the term of the agreements. The Company accounts for these license fees as operating lease revenue given that the Company provides MSG Sports with the right to direct the use of and obtain substantially all of the economic benefit from The Garden during Knicks and Rangers home games, as further detailed in Note 8.
The Arena License Agreements provide that license fees are not required to be paid by MSG Sports during periods when The Garden is unavailable for use due to a force majeure event. As a result of government-mandated suspension of events at The Garden beginning on March 13, 2020 due to the impact of the COVID-19 pandemic, The Garden was not available for use by MSG Sports from the effective date of the Arena License Agreements through the first quarter of Fiscal Year 2021 and, accordingly, the Company did not record any operating lease revenue for this arrangement during the first quarter of Fiscal Year 2021. During a portion of the three months ended December 31, 2020, The Garden reopened for games of the Knicks and the Rangers but fans were not permitted to attend due to governmental restrictions. The Knicks played four games at The Garden in December 2020 and the Company recorded $1,585 of revenues earned from sponsorship agreements that were entered into by Madison Square Garden Sports Corp. and include performance obligations satisfied by bothunder the Company and Madison Square Garden Sports Corp.
Arena License Agreements. In addition, the Company recorded $611 and Tribeca Enterprises have a service agreement pursuant to which$1,229 of sublease revenue from related parties during the Company provides marketing inventory, advertising salesthree and consulting services to six months ended December 31, 2020, respectively.
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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 partyTable of the Company, and thus the related party transactions disclosed herein that relate to Contents
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.
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Revenue Sharing Expenses
Prior to the Entertainment Distribution, revenue sharing expenses
Revenue for with MSG Sports included the Company’s suite license arrangements and venue signage and sponsorship agreements entered into by the Company isand sales of in-venue food and beverages were recorded on a gross basis. Madison Square Garden Sports Corp.’sMSG Sports’ share of the Company’s revenue related to such arrangements is recognized as a component of direct operating expenses. See Note 3 toAfter the Entertainment Distribution, revenue sharing expenses include MSG Sports’ share of the Company’s audited combined

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NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


financial statementssuite license arrangements and notes thereto forcertain venue signage agreements entered into by the year ended June 30, 2019 included in the Company’s Information Statement for more information.Company.
Allocation of Charges for Venue Usage to Madison Square GardenMSG Sports Corp.
For purposes of the Company’s combined financial statements prior to the Entertainment Distribution, the Company allocatesallocated to Madison Square GardenMSG Sports Corp. certain expenses for the usage of The Garden, which are reported as a reduction of direct operating expense in the accompanying consolidated and combined statements of operations. See Note 2 to
Fees recognized by the Company’s audited combined financial statements and notes theretoCompany under the Arena License Agreements with MSG Sports for use of The Garden are reported as operating lease revenues in accordance with ASC Topic 842, Leases. Because The Garden was closed by government mandate, the Company did not recognize operating lease revenue under the Arena License Agreements for the yearthree months ended JuneSeptember 30, 2019 included in2020. During a portion of the Company’s Information Statementthree months ended December 31, 2020, The Garden reopened for more information.games of the Knicks and the Rangers and the Company recorded $1,585 of revenues under the Arena License Agreements.
Corporate General and Administrative Expenses, net — Madison Square GardenMSG Sports Corp.
AllocationsPrior to the Entertainment Distribution, allocations of corporate overhead and shared services expense were recorded by both the Company and Madison Square GardenMSG Sports Corp. for corporate and operational functions based on direct usage or the relative proportion of revenue, headcount or other measures of the Company or Madison Square Garden Sports Corp.MSG Sports. The Company’s corporate overhead expenses primarily related to centralized functions, including executive management, finance, treasury, tax, internal audit, legal, information technology, human resources and risk management functions. After the Entertainment Distribution, corporate general and administrative expenses, net – MSG Sports reflects charges from the Company to MSG Sports pursuant to the TSA of $8,710 and $19,773 for the three and six months ended December 31, 2020, respectively.
Corporate General and Administrative 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.
Corporate general and administrative expenses, net – MSG Networks reflects charges from the Company to MSG Networks under the MSG Networks Services Agreement of $2,700$2,374 and $2,563$2,641 for the three months ended MarchDecember 31, 2020 and 2019, respectively, and$7,982 and $7,850 forrespectively. For the ninesix months ended MarchDecember 31, 2020 and 2019, respectively.
Consulting Fees

On December 5, 2018, the Company’s joint venture interest in AMSGE was sold to Azoff Music, which resulted incorporate general and administrative expenses, net – MSG Networks reflects charges from the Company no longer being an ownerto MSG Networks under the MSG Networks Services Agreement of AMSGE (renamed The Azoff Company). Accordingly, The Azoff Company is not a related party of the Company,$4,748 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 provided to the Company, and for the reimbursement of certain expenses in connection with such services.$5,282, respectively.
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, and Madison Square Garden Sports Corp., 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 CFD and (ii) time sharing agreements with MSG Sports, MSG Networks and AMC Networks.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Nonoperating Expense
Miscellaneous expense, net includes a contributory charge to Madison Square GardenMSG Sports Corp. related to the participation of Madison Square GardenMSG Sports Corp. and corporate employees in the Shared Plans and Postretirement Plan, of $67$56 and $183$111 for the three and six months ended MarchDecember 31, 2020 and 2019, respectively, and $178 and $548 for the nine months ended March 31, 2020 and 2019, respectively.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Cash Management
Madison Square GardenMSG Sports Corp. uses a centralized approach to cash management and financing of operations. The Company and other Madison Square GardenMSG Sports Corp. or Madison Square GardenMSG Sports Corp. subsidiaries’ cash was available for use and was regularly “swept” historically. Transfers of cash both to and from Madison Square GardenMSG Sports Corp. are included as components of the Madison Square GardenMSG Sports Corp. investmentInvestment on the combined statements of divisional equity and redeemable noncontrolling interests. The main components of the net transfers (to)/from Madison Square GardenMSG Sports Corp. are cash pooling/general financing activities, various expense allocations to/from Madison Square GardenMSG Sports, Corp., and receivables/payables from/to Madison Square GardenMSG Sports Corp. deemed to be effectively settled upon the distribution of the Company by Madison Square Garden Sports Corp.
TheMadison Square Garden Sports Corp. Investment
All significant balances and transactions among the Company and Madison Square Garden Sports Corp. and its subsidiaries, which include allocations of corporate general and administrative expenses, share-based compensation expense and other historical intercompany activities, are recorded as components of Divisional Equity. As the books and records of the Company were not kept on a separate basis from Madison Square Garden Sports Corp., the determination of the average net balance due to or from Madison Square Garden Sports Corp. is not practicable.MSG Sports.
Related Party Transactions after the Entertainment Distribution
In connection with the Entertainment Distribution, the Company and Madison Square GardenMSG Sports Corp. have entered into arrangements with respect to transition services and a number of ongoing commercial relationships, including Arena License Agreements with Madison Square GardenMSG Sports Corp. that will requirerequiring the New York Knicks ( the “Knicks”) and the New York Rangers (the “Rangers”) to play their home games at The Garden. Additionally, on April 17, 2020, subsidiaries of Madison Square GardenMSG Sports, Corp., MSG NYK Holdings, LLC and MSG NYR Holdings, LLC, entered into separate delayed draw term loan credit agreements (the “DDTL Facilities”)the DDTL Facilities with a wholly-owned subsidiary of the Company as lender. The DDTL Facilities provideprovided for a $110,000 and $90,000 senior unsecured delayed draw term loan facilities, for the MSG NYK Holdings, LLC and MSG NYR Holdings, LLC, respectively. TheOn November 6, 2020, each of MSG NYK Holdings, LLC and MSG NYR Holdings, LLC delivered notice to the Company that they had secured third-party debt and, as a result, all commitments under their applicable DDTL Facilities will maturewere terminated.
Note 18. Segment Information
The Company is comprised of 2 reportable segments: Entertainment and Tao Group Hospitality. In determining its reportable segments, the Company assessed the guidance of ASC 280-10-50-1, which provides the definition of a reportable segment. In accordance with the FASB’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 CODM. The Company has evaluated this guidance and determined that there are two reportable segments. In addition, the Company incurs non-capitalizable content development and technology costs associated with the Company’s MSG Sphere initiative, which are reported in “Entertainment.” In addition to event-related operating expenses, Entertainment also includes other expenses such as (a) corporate and supporting department operating costs that are attributable to MSG Sphere development and (b) non-event related operating expenses for the Company’s venues such as (i) rent for the Company’s leased venues, (ii) real estate taxes, (iii) insurance, (iv) utilities, (v) repairs and maintenance, (vi) labor related to the overall management of the venues, and (vii) depreciation and amortization expense related to the Company’s performance venues and certain corporate property, equipment and leasehold improvements. Additionally, the Company does not allocate any unused commitments thereunder will expirepurchase accounting adjustments related to business acquisitions to the reporting segments.
The Company evaluates segment performance based on October 17, 2021.
several factors, of which the key financial measure is operating income (loss) before (i) adjustments to remove the impact of non-cash straight-line leasing revenue associated with the Arena License Agreements with MSG Sports, (ii) depreciation, amortization and impairments of property and equipment, goodwill and intangible assets, (iii) amortization for capitalized cloud computing arrangement costs (see Note 2 for further details), (iv) share-based compensation expense or benefit, (v) restructuring charges or credits, and (vi) gains or losses on sales or dispositions of businesses and associated settlements, 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 and combined 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. In addition, the Company believes that given the length of the Arena License Agreements and resulting magnitude of the difference in leasing revenue recognized and cash revenue received, the exclusion of non-cash leasing revenue provides investors with a clearer picture of the Company's operating performance. The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated and
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
combined 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.
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, 2020

Entertainment		Tao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$12,669 $10,491 $0 $(23)$23,137 
Direct operating expenses23,409 10,980 924 151 35,464 
Selling, general and administrative expenses

65,730 9,131 0 89 74,950 
Depreciation and amortization19,246 1,563 3,066 0 23,875 
Restructuring charges1,372 — — 0 1,372 
Operating loss$(97,088)$(11,183)$(3,990)$(263)$(112,524)
Loss in equity method investments(1,568)
Interest income349 
Interest expense(7,675)
Miscellaneous expense, net(a)(7,362)
Loss from operations before income taxes$(128,780)
Reconciliation of operating loss to adjusted operating loss:
Operating loss$(97,088)$(11,183)$(3,990)$(263)$(112,524)
Add back:
Non-cash portion of arena license fees from MSG Sports(1,176)— — — (1,176)
Share-based compensation22,374 1,188 0 0 23,562 
Depreciation and amortization19,246 1,563 3,066 0 23,875 
Restructuring charges1,372 0 0 0 1,372 
Other purchase accounting adjustments— — 924 — 924 
Adjusted operating loss$(55,272)$(8,432)$0 $(263)$(63,967)
Other information:
Capital expenditures$106,945 $293 $0 $0 $107,238 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Three Months Ended December 31, 2019

Entertainment		Tao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$325,370 $69,104 $0 $(402)$394,072 
Direct operating expenses168,241 41,159 1,068 (274)210,194 
Selling, general and administrative expenses68,869 18,038 0 (53)86,854 
Depreciation and amortization21,128 2,411 3,895 0 27,434 
Operating income (loss)$67,132 $7,496 $(4,963)$(75)$69,590 
Loss in equity method investments(1,170)
Interest income6,268 
Interest expense(144)
Miscellaneous income, net(a)9,355 
Income from operations before income taxes$83,899 
Reconciliation of operating income (loss) to adjusted operating income (loss):
Operating income (loss)$67,132 $7,496 $(4,963)$(75)$69,590 
Add back:
Share-based compensation10,373 0 0 0 10,373 
Depreciation and amortization21,128 2,411 3,895 0 27,434 
Other purchase accounting adjustments— — 1,068 — 1,068 
Adjusted operating income (loss)$98,633 $9,907 $0 $(75)$108,465 
Other information:
Capital expenditures$120,529 $1,139 $0 $0 $121,668 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Six Months Ended December 31, 2020

Entertainment		Tao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$20,224 $17,712 $0 $(421)$37,515 
Direct operating expenses47,024 20,808 1,848 (57)69,623 
Selling, general and administrative expenses118,380 16,734 0 161 135,275 
Depreciation and amortization41,260 2,609 6,588 

0 50,457 
Restructuring charges21,299 — — — 21,299 
Operating loss$(207,739)$(22,439)$(8,436)$(525)$(239,139)
Loss in equity method investments(3,264)
Interest income644 
Interest expense(8,084)
Miscellaneous income, net(a)26,862 
Loss from operations before income taxes$(222,981)
Reconciliation of operating loss to adjusted operating loss:
Operating loss$(207,739)$(22,439)$(8,436)$(525)$(239,139)
Add back:
Non-cash portion of arena license fees from MSG Sports(1,176)— — — (1,176)
Share-based compensation32,807 2,284 0 0 35,091 
Depreciation and amortization41,260 2,609 6,588 0 50,457 
Restructuring charges21,299 0 0 0 21,299 
Other purchase accounting adjustments— — 1,848 — 1,848 
Adjusted operating loss$(113,549)$(17,546)$0 $(525)$(131,620)
Other information:
Capital expenditures$218,344 $952 $0 $0 $219,296 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Six Months Ended December 31, 2019

Entertainment		Tao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$445,022 $127,721 $0 $(708)$572,035 
Direct operating expenses263,201 76,826 2,182 (493)341,716 
Selling, general and administrative expenses139,218 35,462 6 (65)174,621 
Depreciation and amortization42,915 4,590 6,749 0 54,254 
Operating income (loss)$(312)$10,843 $(8,937)$(150)$1,444 
Loss in equity method investments(2,643)
Interest income13,583 
Interest expense(1,249)
Miscellaneous income, net(a)16,386 
Income from operations before income taxes$27,521 
Reconciliation of operating income (loss) to adjusted operating income (loss):
Operating income (loss)$(312)$10,843 $(8,937)$(150)$1,444 
Add back:
Share-based compensation20,430 28 0 0 20,458 
Depreciation and amortization42,915 4,590 6,749 0 54,254 
Other purchase accounting adjustments— — 2,188 — 2,188 
Adjusted operating income (loss)$63,033 $15,461 $0 $(150)$78,344 
Other information:
Capital expenditures$205,686 $2,342 $0 $0 $208,028 
_________________
(a)Miscellaneous income (expense), net includes the following:
Three Months EndedSix Months Ended
December 31,December 31,
2020201920202019
Unrealized and unrealized gain (loss) on equity investments with readily determinable fair value$(7,227)$9,432 $26,431 $14,725 
Non-service cost components of net periodic pension and postretirement benefit costs178 (317)294 (626)
Dividend income from equity investments0 240 0 481 
Measurement alternative adjustments for equity investments without readily determinable fair value0 0 0 (532)
Others, net. (For the six months ended December 31, 2019, the balance primarily reflected the impact of the elimination of Tao Group Hospitality’s three-month lag in Fiscal Year 2020)(313)0 137 2,338 
Total$(7,362)$9,355 $26,862 $16,386 

Substantially all revenues and assets of the Company’s reportable segments are attributed to or located in the United States. A majority of the Company’s revenue and assets are concentrated in the New York City metropolitan area.
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Item 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 within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A,, there are statements concerning the future operating and future financial performance of Madison Square Garden Entertainment Corp.(formerly MSG Entertainment Spinco, Inc.) and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Entertainment,” or the “Company”), including the impact of the COVID-19 pandemic on our future operations, our anticipated operational cash burn on a go-forward basis, cost-cutting measures the Company may or may not pursue to preserve cash and financial flexibility, the potential for future impairment charges, the timing and costs of new venue construction, our plans to pursue additional debt financing and negotiate amendments to Tao Group Hospitality’s credit facility, increased investment in personnel, content and technology for the MSG Spheres, and increased expenses of being a standalone public company. 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:
•our ability to effectively manage the impacts of the COVID-19 pandemic and the actions taken in response by governmental authorities and certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues as they are permitted to reopen;
•the extent to which attendance at our venues following their reopening will be suppressed due to government mandated suspensionactions and continuing health concerns by potential attendees;
•the impact on the payments we receive under the Arena License Agreements as a result of government-mandated capacity restrictions and social-distancing requirements at Knicks and Rangers games;
•the level of our business operations;expenses and our operational cash burn rate, including our corporate expenses as a stand-alone publicly traded company;
•our ability to successfully design, construct, finance and operate new venues in Las Vegas, London and other markets, and the investments, costs and timing associated with those efforts, including the impact of the current temporary suspension of construction and any other unexpected construction delays and/or cost overruns;
•
•the level of our revenues, which depends in part on the popularity of the Christmas Spectacular and other entertainment and sports events which are presented in our venues;
•Christmas Spectacular and other entertainment and sports events which are presented in our venues;
the level of our capital expenditures and other investments;
•general economic conditions, especially in the New York City, Las Vegas, Chicago and London metropolitan areas where we have (or plan to have) significant business activities;
•the demand for sponsorship arrangements and for advertising;
•competition, for example, from other venues and other sports and entertainment and nightlife options, including the construction of new competing venues;
•changes in laws, guidelines, bulletins, directives, policies and agreements or regulations under which we operate;
•any economic, social or political 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 as a stand-alone publicly traded company;
•the successful development of new live productions or attractions, enhancements or changes to existing productions and the investments associated with such development, enhancements, or 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 (including COVID-19)(such as pandemics, including the COVID-19 pandemic) that discourage or may discourage congregation at prominent places of public assembly, including our venues;
•the continued popularity and success of Tao Group Hospitality entertainment dining and nightlife venues, as well as its existing brands, and the ability to successfully open and operate new entertainment dining and nightlife venues;
•the ability of BCE to attract attendees and performers to its future festivals;
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•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;

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the operating and financial performance of our strategic acquisitions and investments, including those we do not control;
•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;
a•the substantial amount of debt incurred, and any default, by our subsidiaries under their respective credit facilities;
•financial community and rating agency perceptions of our business, operations, financial condition and the industryindustries in which we operate;
•the ability of our investees and others to repay loans and advances we have extended to them;
•our status as an emerging growth company;
•the tax-free treatment of the Entertainment Distribution (as defined below);Distribution;
•our ability to achieve the intended benefits of the Entertainment Distribution;
•the performance by Madison Square GardenMSG Sports Corp. of its obligations under various agreements with the Company related to the Entertainment Distribution and ongoing commercial arrangements;
•lack of operating history as an operating company and costs associated with being an independent public company; and
•the additional factors described under “Risk Factors” in the Company’s Information Statement,Annual Report on Form 10-K for the year ended June 30, 2020 and this Quarterly Report on Form 10-Q under “Part II -— Item 1A. Risk Factors.”
We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.
All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
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 audited combined annual financial statements and footnotes thereto included inAnnual Report on Form 10-K for the Company’s Information Statementyear ended June 30, 2020 to help provide an understanding of our financial condition, changes in financial condition and results of operations. Unless the context otherwise requires, all references to “we,” “us,” “our,” “MSG Entertainment,”or the “Company” refer collectively to Madison Square Garden Entertainment Corp., a holding company, and its direct and indirect subsidiaries through which substantially all of our operations are actually conducted. Through the period ended March 31,April 17, 2020, the Company operatesoperated and reportsreported financial information as one reportable segment. Following the Entertainment Distribution on April 17, 2020, the Company will havehas two segments (the Entertainment business and the Tao Group Hospitality business),. See Note 18 to the consolidated and combined financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further discussion of the Company’s segment reporting.
This MD&A is organized as follows:
Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.
Results of Operations. This section provides an analysis of our unaudited results of operations for the three and six months ended December 31, 2020 and 2019 on both a consolidated and combined basis and a 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, 2020 and 2019, as well as certain contractual obligations and off-balance sheet arrangements.
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Seasonality of Our Business. This section discusses the seasonal performance of our Entertainment and Tao Group Hospitality 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 2021. This section should be read together with our critical accounting policies, which will be presentedare discussed in the Company’sour Annual Report on Form 10-K for the fiscal year endingended June 30, 2020.
A significant majority2020 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’s revenues and assets are attributed to or located in the United States and are primarily concentrated in the New York City metropolitan area.Company included therein.
Business Overview
The Company is a leader in live experiences comprised of iconic venues; marquee entertainment content; popular dining and nightlife offerings; and a premier music festival that, together, entertain millions of guests each year. Utilizing our powerful brands and live entertainment expertise, the Company delivers unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences.expertise. The Company’s portfolio of venues includes: The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre. In addition, the Company is constructing a state-of-the-art venue, MSG Sphere, in Las Vegas and plans to build a second MSG Sphere in London.London, pending necessary approvals. The Company also includes the original production, the Christmas Spectacular, as well as BCE, the entertainment production company that owns and operates the Boston Calling Music Festival, and Tao Group Hospitality, a hospitality group with globally-recognized entertainment dining and nightlife brands.

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Tao Group Hospitality’s Operating Results
The Company completed the Tao Group Hospitality acquisition on January 31, 2017. Tao Group Hospitality’s 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 Hospitality’s operating results in its combined statements of operations on a three-month lag basis. As a result, the Company’s results for the three months ended March 31, 2020 and 2019 include Tao Group Hospitality’s operating results from September 30, 2019 to December 29, 2019 and from October 1, 2018 to December 30, 2018, respectively, and the Company’s results for the nine months ended March 31, 2020 and 2019 include Tao Group Hospitality’s operating results from April 1, 2019 to December 29, 2019 and from April 2, 2018 to December 30, 2018, respectively. With the exception of the balances and activities pertaining to Tao Group Hospitality’s credit agreements entered into in May 2019, which are recorded as of March 31, 2020 and June 30, 2019 and for the period ended March 31, 2020, as well as cash distributions, impairment charges, and change in ownership as discussed below, all disclosures related to Tao Group Hospitality’s financial position are reported as of December 29, 2019 and March 31, 2019, as applicable.
The Spin-Off from Madison Square Garden Sports Corp.
On April 17, 2020, the Company became an independent publicly traded company through the Entertainment Distribution. In the Entertainment Distribution, stockholders of Madison Square Garden Sports Corp. received (a) one share of the Company’s Class A Common Stock for every share of Madison Square Garden Sports Corp. Class A common stock, held of record as of the close of business, New York City time, on the Record Date and (b) one share of the Company’s Class B Common Stock for every share of Madison Square Garden Sports Corp. Class B common stock held of record as of the close of business, New York City time, on the Record Date. In the Entertainment Distribution, an aggregate of 19,461,991 shares of the Company’s Class A Common Stock and 4,529,517 shares of the Company’s Class B Common Stock were issued, with any fractional shares converted to cash and paid to stockholders.
Factors Affecting Results of Operations
Basis of Presentation - Impact of the Entertainment Distribution
The Company’s combinedconsolidated statements of operations for the three and ninesix months ended MarchDecember 31, 2020 is presented on a consolidated basis, as the Company became a standalone public company on April 17, 2020. The Company’s combined statement of operations for the three and six months ended December 31, 2019 werewas prepared on a stand-alonestandalone basis derived from the consolidated financial statements and accounting records of Madison Square Gardenthe Company’s former parent, MSG Sports, Corp., and areis presented ason the basis of carve-out financial statements because(“combined basis”) as the Company was not a standalone public company prior to the Entertainment Distribution.
The Company’s combined statements of operations for the periodsthree and six months ended MarchDecember 31, 2020 and 2019 include allocations for certain support functions that were provided on a centralized basis by Madison Square GardenMSG Sports Corp. and not historically recorded at the business unit level, such as expenses related to executive management, finance, legal, human resources, government affairs, information technology, and venue operations, among others.
As part of the Entertainment Distribution, certain corporate and operational support functions were transferred to the Company and therefore, charges were reflected in the combined statements of operations for the three and six months ended December 31, 2019 in order to properly burden all business units comprising Madison Square Garden Sports Corp.’sMSG Sports’ historical operations. These expenses have beenwere allocated to Madison Square Garden Sports Corp. operations on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of combined revenues, headcount or other measures of the Company or Madison Square Gardenand MSG Sports, Corp., which arewere recorded as a reduction of either direct operating expenses or selling, general and administrative expense.
In addition, certain of the Company’s contracts with its customers for suite license, sponsorship and venue signage arrangements contain performance obligations that are fulfilled by both the Company and Madison Square Garden Sports Corp.MSG Sports. Revenue sharing expenses attributable to Madison Square GardenMSG Sports Corp. have primarily been recorded on the basis of specific identification where possible, with the remainder allocated proportionately as a component of direct operating expenses within the consolidated and combined statements of operations. See Note 43 to the consolidated and combined financial statements included in “Part I —“— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information on revenue recognition.
Management believes the assumptions underlying the combined financial statements, including the assumptions regarding allocating general corporate expenses, are reasonable. Nevertheless, the combined financial statements may not include all of the actual expenses that would have been incurred by the Company and may not reflect its combined results of operations, financial position and cash flows had it been a separate, stand-alone company during the periods presented. Actual costs that would have been incurred if the Company had been a separate, stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company is unable to quantify the amounts that it would have recorded during the historical periods on a stand-alone basis as it is not practicable to do so. See Note 1 to the combined financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information.infrastructure.
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Impact of COVID-19 on Our Business
Our operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic and actions taken in response by the governmentgovernmental authorities and certain professional sports leagues. As of the date of this Quarterly Report on Form 10-Q, virtually all of the businessEntertainment business’ operations of the Company have been suspended and itTao Group Hospitality is operating at significantly reduced capacity and demand. It is not clear when those operationswe will resume.be permitted or able to resume normal business operations.
As a result of government mandatedgovernment-mandated assembly limitations and closures, our performance venues were closed in mid-March 2020, and, subject to limited exceptions, such as the use of The Garden for Knicks and Rangers home games without fans in attendance, and our virtual residency in Fall 2020 featuring Phish’s Trey Anastasio live from the Beacon Theatre, as of the date of this filing no events are currently permitted to be held at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall and the Beacon Theatre andTheatre. Although events are permitted at The Chicago Theatre, current government-mandated capacity restrictions and virtuallyother safety requirements make it economically unfeasible to do so. Other than Knicks and Rangers home games at The Garden, all events at our venues arehave been postponed or cancelledcanceled through June.at least March 2021 and will likely be impacted through the rest of Fiscal Year 2021. We are not recognizing revenue from those events that have been canceled or postponed and, while events have been rescheduled into the second half of calendar year 2021, it is unclear whether and to what extent those events will be rescheduled.take place. We are actively monitoring government regulations and guidance, including the impact of New York State’s recent announcement that, starting February 23, 2021, arenas with capacities of over 10,000 people may reopen at 10% capacity with certain safety protocols, such as testing and social distancing requirements. When there is an opportunity to safely and economically welcome guests back to The Garden for events at increased capacity, as well as at our other venues that remain closed, we expect to do so. The impact to our operations included the cancellation of both the 2020 production of the Christmas Spectacular and the 2020 Boston Calling music festival,Music Festival.
The Company and MSG Sports are party to the Arena License Agreements, which had been slatedrequire the Knicks and the Rangers to play their home games at The Garden. In March, the NBA and the NHL announced that their 2019-20 seasons were suspended, and subsequently announced in June and May, respectively, plans for Memorial Day weekend, has also been cancelled. Additionally, public officials have imposed mandates limiting restaurants and barsa return to only take-out and delivery service and requiring that nightlife venues closeplay in the designated cities of Orlando for the NBA and Edmonton and Toronto for the NHL. With The Garden closed by government mandate for the remainder of the NBA and NHL 2019-20 seasons, MSG Sports made no payments under the Arena License Agreements for the period following the Entertainment Distribution through November 2020. While the NBA began its 2020-21 regular season in December 2020, and the NHL began its 2020-21 regular season in January 2021, the Knicks and Rangers are currently playing home games at The Garden without fans in attendance due to government-mandated assembly restrictions. Four Knicks home games were played at The Garden in December 2020. However, in light of New York State’s recent announcement that New York arenas with capacities of over 10,000 people can re-open beginning February 23, 2021, with limited capacities and safety protocols, we expect to have limited fans in attendance for home games beginning with the Knicks on February 23rd and the Rangers on February 26th, as permitted under these new guidelines. Even though limited numbers of fans are expected to be permitted to attend home games starting February 23rd, capacity restrictions, use limitations and social distancing requirements may remain in place through, at least, the rest of Fiscal Year 2021, which would continue to affect the payments we receive under the Arena License Agreements.
Due to government actions taken in response to the COVID-19 pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in mid-March, and Avenue and Vandal in New York were permanently closed in April 2020 and June 2020, respectively. Tao Group Hospitality operates.has resumed limited operations at certain venues, subject to significant regulatory requirements, including limits on capacity, curfews and social distancing requirements for outdoor and indoor dining. As a result, virtually allof December 31, 2020, eight of Tao Group HospitalityHospitality’s venues are closed, which has materially impacted business. The National Basketball Association (the “NBA”) and the National Hockey League (the “NHL”) have also suspended their 2019-20 seasons. It is unclear how long these restrictions will be in effect.were open for outdoor dining and/or limited capacity indoor dining, four were open for delivery and/or takeout only, while sixteen venues remained closed.
The COVID-19 pandemic has materially impacted our revenues, most significantly because, as of the date of this filing, we are currentlygenerating substantially reduced sponsorship and advertising revenue as well as reduced payments under the Arena License Agreements and we are not generating revenue from:
•events at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre;
rent payments under the Arena License Agreements (defined below);•suite licenses; and
sponsorships, suite licenses and in-venue advertising;
our Tao Group Hospitality dining and nightlife business; and
•the 2020 Boston Calling music festival.production of the Christmas Spectacular.
While we have the ability to reducereduced certain operating expenses as a result of the COVID-19 pandemic (including (i) direct event expenses at any of our performance venues during the period our business operations are suspended, (ii) advertising and promotional spending for suspended and cancelledcanceled games and events, (iii) reduction in corporate work-force and (iii)(iv) certain direct operating and SG&A expenses, including at our Tao Group Hospitality business), thosethese expense reduction opportunitiesreductions are not sufficientnearly enough to fully offset revenue losses.
Additionally, as a result
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Table of operating disruptions due to COVID-19, the Company’s projected cash flows were directly impacted. This disruption along with the deteriorating macroeconomic conditions and industry/market considerations, were considered a “triggering event” for the Tao Group Hospitality reporting unit, which required the Company to assess the carrying value of Tao Group Hospitality’s intangible assets, long-lived assets and goodwill for impairment. Based on this evaluation, the Company recorded a non-cash goodwill impairment charge of $80,698 during the three and nine months ended March 31, 2020 associated with the Tao Group Hospitality reporting unit. In addition, during the three and nine months ended March 31, 2020, the Company recorded non-cash impairment charges associated with one venue within Tao Group Hospitality of $11,573, $6,399 and $3,541, for right-of-use assets, property and equipment assets, and certain intangible assets, respectively. Due to the COVID-19-related shutdown of its venues, TAO Group Hospitality began a review of its lease contracts and could decide to close certain venues (which may later reopen elsewhere) if the landlords are unwilling to make appropriate concessions, which could result in additional charges related to the venue’s long-lived assets.Contents
There was no triggering event identified by the Company for the Entertainment reporting unit as of March 31, 2020. However, the duration and impact of the COVID-19 pandemic may result in additional future impairment charges that management will evaluate as facts and circumstances evolve over time. See Notes 1, 7, 8 and 9 to the combined financial statements included in “Part I - Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further details.

We are building a state-of-the-art venue in Las Vegas, called MSG Sphere. This is a complex construction project with cutting-edge technology that relies on subcontractors obtaining components from a variety of sources around the world. The widespread globalIn April 2020, the Company announced that it was suspending construction of MSG Sphere due to COVID-19 related factors that were outside of its control, including supply chain issues. As the ongoing effects of COVID-19the pandemic have resultedcontinued to impact its business operations, the Company has revised its processes and construction schedule, and has resumed work with a lengthened timetable that enables the Company to better preserve cash in significant impedimentsthe near-term. The Company remains committed to construction that are beyond our control, including disruptionsbringing MSG Sphere to our supply chain. As a result, in April 2020, we implemented a temporary suspension of construction and we expect to incur additional expenses related to stopping and re-starting construction. At this time, we are unable to determine the full impact of COVID-19 related disruptions, however they may impact our cost estimates. We remain committed

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to building a state-of-the-art venue in Las Vegas and, we look forwardbased on its new construction schedule, expects to quickly and efficiently resuming construction as soon as practicable. As a result of this delay, we do not expect to achieve our goal of openingopen the venue in calendar year 2021.2023.
A subsidiary of the Company is party to arena license agreements (the “Arenathe Arena License Agreements”)Agreements with subsidiaries of Madison Square GardenMSG Sports Corp. that require the New York Knicks (the “Knicks”) of the NBA and the New York Rangers (the “Rangers”) of the NHL to play their home games at The Garden. Under the Arena License Agreements, the Knicks and the Rangers will pay an annual license fee in connection with their respective use of The Garden. For each, the license fee for the initial contract year ending June 30, 2020 willwas to be prorated based on the number of games scheduled to be played at The Garden between the Entertainment Distribution dateDate and the end of that contract year. The license fee for the first full contract year ending June 30, 2021 is approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees will be 103% of the license fees for the immediately preceding contract year. If,The teams are not required to pay the license fee during a period in which The Garden is unavailable for home games due to a force majeure event (including the government-mandated suspension ofwhen events at The Garden were suspended by government mandate as a result of the disruptions caused by COVID-19),the COVID-19 pandemic). As a result, we did not receive any license fee payments under the Arena License Agreements from the period following the Entertainment Distribution through November 2020. While the NBA began its 2020-21 regular season in December 2020 and the NHL began its 2020-21 regular season in January 2021, the Knicks and Rangers are currently playing home games at The Garden without fans in attendance due to government-mandated assembly restrictions, which affects the payments we receive under the Arena License Agreements. If, due to a force majeure event, capacity at The Garden is limited to 1,000 or fewer attendees, the teams may schedule and play home games at The Garden with amounts payable to the Company under the Arena License Agreements reduced by up to 80%. The teams are not required to pay the license fee during a period in whichAfter The Garden is unavailablereopens for home games due to a force majeure event. As a result, we have not yet received any rent payments under the Arena License Agreements and will continue to not receive any rent payments during the government mandated suspension of events at The Garden as a result of the disruptions caused by COVID-19. However, once The Garden becomes availableKnicks and the Rangers following a force majeure event, future rent payments due under the Arena License Agreements will be payable by the Knicks and the Rangers evenand payments may be partially reduced in accordance with terms of the Arena License Agreements if The Garden opens with materially limited capacity greater than 1,000 attendees. The Company recorded $1,585 of revenues under Arena License Agreements for the NBA or NHL seasons do not resume simultaneously or at all.three and six months ended December 31, 2020.
For more information about the risks to the CompanyAdditionally, as a result of the COVID-19 pandemic and its impact on our operating results, see “Part II - Item 1A. Risk Factors - Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government Actions Taken in Response.”
Obscura’s Operating Results
The results of operations of the Company for the three and nine months ended March 31, 2019 included Obscura’s results of operations from its third-party production business. The Company made a decision in the fiscal year 2019 to wind down Obscura’s third-party production business to focus on MSG Sphere development.
Renewal of a Ticketing Agreement
The Company’s operating results for the three and nine months ended March 31, 2019 were impacted by the recognition of additional revenues for events that took place during previous periods as the result of the renewal of the agreement with the Company’s ticketing platform provider during the quarter ended March 31, 2019. The following table presents the impact on the Company’s combined revenues, operating income and adjusted operating income for the three and nine months ended March 31, 2019 from events in the prior periods as a result of the ticketing agreement renewal.
  Three Months Ended March 31, 2019 Nine Months Ended March 31, 2019
Renewal of a Ticketing Agreement $4,000
 $2,000
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 nine months ended March 31, 2020 and 2019.
Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the nine months ended March 31, 2020 and 2019, as well as certain contractual obligations and off balance sheet arrangements.
Seasonality of Our Business. This section discusses the seasonal performance of our Christmas Spectacular production and Tao Group Hospitality.
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 2020 and interim impairment testing of goodwill performed

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during the third quarter of fiscal year 2020. This section should be read together with our critical accounting policies, which are discussed under “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 combined financial statements of the Company’s audited combined financial statements and notes thereto for the fiscal year ended June 30, 2019 included in the Information Statement.
Combined Results of Operations
Comparison of the Three and Nine Months EndedMarch 31, 2020 versus the Three and Nine Months EndedMarch 31, 2019
The table below sets forth, for the periods presented, certain historical financial information.
  Three Months Ended    
  March 31, 
Change (a)
  2020 2019 Amount Percentage
Revenues 199,861
 250,018
 (50,157) (20)%
         
Direct operating expenses 132,809
 158,710
 (25,901) (16)%
Selling, general and administrative expenses 84,186
 83,159
 1,027
 1 %
Depreciation and amortization 26,196
 26,768
 (572) (2)%
Impairment of intangibles, long-lived assets and goodwill 102,211
 —
 102,211
 NM
Operating loss (145,541) (18,619) (126,922) NM
Other income (expense):        
Loss in equity method investments (1,096) (2,881) 1,785
 62 %
Interest income, net 3,054
 4,740
 (1,686) (36)%
Miscellaneous income (expense), net (17,381) 4,613
 (21,994) NM
Loss from operations before income taxes (160,964) (12,147) (148,817) NM
Income tax benefit (expense) 10,126
 (469) 10,595
 NM
Net loss (150,838) (12,616) (138,222) NM
Less: Net loss attributable to redeemable noncontrolling interests (22,447) (7) (22,440) NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests 195
 (680) 875
 NM
Net loss attributable to the Company (128,586) (11,929) (116,657) NM


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  Nine Months Ended    
  March 31, 
Change (a)
  2020 2019 Amount Percentage
Revenues $767,038
 $832,384
 $(65,346) (8)%
         
Direct operating expenses 472,582
 507,249
 (34,667) (7)%
Selling, general and administrative expenses 257,970
 231,038
 26,932
 12 %
Depreciation and amortization 80,271
 81,606
 (1,335) (2)%
Impairment of intangibles, long-lived assets and goodwill 102,211
 —
 102,211
 NM
Operating income (loss) (145,996) 12,491
 (158,487) NM
Other income (expense):        
Earnings (loss) in equity method investments (3,739) 17,131
 (20,870) NM
Interest income, net 15,388
 11,944
 3,444
 29 %
Miscellaneous expense, net (2,893) (4,118) 1,225
 30 %
Income (loss) from operations before income taxes (137,240) 37,448
 (174,688) NM
Income tax benefit (expense) 8,686
 (1,253) 9,939
 NM
Net income (loss) (128,554) 36,195
 (164,749) NM
Less: Net loss attributable to redeemable noncontrolling interests (23,851) (3,662) (20,189) NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests 38
 (3,121) 3,159
 NM
Net income (loss) attributable to the Company $(104,741) $42,978
 $(147,719) NM
_________________
NM — Percentage is not meaningful

(a)
The Company’s operating results were materially impacted during the three and nine months ended March 31, 2020 by the COVID-19 pandemic and government actions taken in response. Please see “— Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” for more information.


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Revenues
Revenues for the three months ended March 31, 2020 decreased $50,157, or 20%, to $199,861 as compared to the prior year period. Revenues for the nine months ended March 31, 2020 decreased $65,346, or 8%, to $767,038 as compared to the prior year period. The net decreases were attributable to the following:
  Three Nine
  Months Months
Decrease in event-related revenues from concerts $(17,694) $(22,600)
Decrease in suite license fee revenues (9,464) (9,617)
Decrease in venue-related signage and sponsorship revenues (6,296) (11,049)
Decrease in event-related revenues from other live sporting events (5,204) (8,704)
(Decrease) increase in revenues associated with entertainment dining and nightlife offerings (a)
 (5,037) 1,503
Decrease in event-related revenues from other live entertainment events (3,889) (2,068)
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 (1,049) (9,178)
Decrease in ad sales commission due to lower sales in advertising availabilities of MSG Networks (793) (552)
Decrease in revenues associated with the expiration of the Wang Theatre booking agreement in February 2019 (632) (3,883)
Increase in revenues from the presentation of the Christmas Spectacular
 275
 2,044
Other net decreases (374) (1,242)
  $(50,157) $(65,346)
_________________
(a)
Tao Group Hospitality’s operating results are recorded in the Company’s combined statements of operations on a three-month lag basis. Accordingly, the Company’s results for the three and nine months ended March 31, 2020 include Tao Group Hospitality’s operating results from September 30, 2019 to December 29, 2019 and from April 1, 2019 to December 29, 2019, respectively. As such, the Tao Group Hospitality’s operating results reported above did not include the periods impacted by COVID-19, which will be reflected in the fourth quarter of fiscal year 2020. See “Note 2 to the combined 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 decrease in event-related revenues from concerts for the three months ended March 31, 2020 was due to (i) the impact of the temporary closure of venues since March 12, 2020 due to COVID-19, (ii) fewer events held at the Company’s venues prior to the temporary closure of venues on March 12, 2020 as compared to the prior year period, and (iii) the impact of the recognition of additional revenue during the prior year period as a result of the ticketing agreement renewal during the third quarter of fiscal year 2019. For the nine months ended March 31, 2020, the decrease in event-related revenues from concerts was primarily due to (i) lower per-event revenues prior to the temporary closure of venues on March 12, 2020 as compared to the prior year period, (ii) the impact of the temporary closure of venues since March 12, 2020 due to COVID-19, (iii) the impact of the recognition of additional revenue during the prior year period as a result of the ticketing agreement renewal during the third quarter of fiscal year 2019, partially offset by additional events held at the Company’s venues prior to the temporary closure of venues on March 12, 2020 as compared to the prior year period.
The decrease in suite license revenues for the three and nine months ended March 31, 2020 was primarilydisruptions due to the impact of the temporary closure of venues since March 12, 2020 due to COVID-19. As further described in Note 3 to the Company’s audited combined financial statements for the year ended June 30, 2019 included in the Company’s Information Statement, suite license revenue is recognized proportionately over the license period as the Company satisfies the related performance obligation, which is generally determined based on the Company’s projections for the concentration of scheduled events across fiscal periods. As a result, the amount of suite license revenue recognized over any period of time will vary based on the concentration of scheduled events over that period, and therefore the suite license revenue for the period from March 12 through 31, 2020 is not representative of suite license revenue earned over any other period during the fiscal year.


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The decrease in venue-related signage and sponsorship revenues for the three and nine months ended March 31, 2020 was primarily due to the impact of the temporary closure of venues since March 12, 2020 due to COVID-19. In addition, the decrease during the three months ended March 31, 2020 was slightly offset by higher sales of existing sponsorship and signage inventory in the current year period as compared to the prior year period.
The decrease in event-related revenues from other live sporting events for the three months ended March 31, 2020 was primarily due to the cancellation of college basketball events as a result of the temporary closure of venues since March 12, 2020 due to COVID-19 slightly offset by an additional event prior to the temporary closure. The decrease in event-related revenues from other live sporting events for the nine months ended March 31, 2020 was primarily due to the cancellation of college basketball events as a result of the temporary closure of venues since March 12, 2020 due to COVID-19 and fewer events prior to the temporary closure slightly offset by higher per-event revenue.
The decrease in revenues associated with entertainment dining and nightlife offerings for the three months ended March 31, 2020 was primarily due to lower revenues in New York including the impact of closing one venue in January 2019. For the nine months ended March 31, 2020, the increase in revenues associated with entertainment dining and nightlife offerings was primarily due to the impact of new venues (both owned and managed), partially offset by lower revenues at other venues, including the impact of closing one venue in New York in January 2019.
The decreases in event-related revenues from other live entertainment events for the three and nine months ended March 31, 2020 were primarily due to the impact of the temporary closure of venues since March 12, 2020 due to COVID-19. In addition, the decrease in event-related revenues from other live entertainment events for the three months ended March 31, 2020 also included lower per-event revenue prior to the temporary closure of venues on March 12, 2020 as compared to the prior year period. For the nine months ended March 31, 2020, the Company had higher per-event revenue from a theatrical production at the Hulu Theater at Madison Square Garden and The Chicago Theatre in the current year period largely 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 current year period.
For the three months ended March 31, 2020, the increase in revenues from the presentation of the Christmas Spectacular, as compared to the prior year period, was primarily due to higher per-show ticket-related revenue from an increase in average per-show paid attendance, higher average ticket prices and higher ticket-related fees in the current year period, largely offset by the impact of the recognition of additional revenue during the prior year period as a result of the ticketing agreement renewal during the third quarter of fiscal year 2019.
For the nine months ended March 31, 2020, the increase in revenues from the presentation of the Christmas Spectacular, as compared to the prior year period, 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 higher ticket-related fees in the current year period; 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 period that were outsourced in the prior year period.
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 period as compared to the prior year period. The Company had 199 scheduled Christmas Spectacular performances in this year’s holiday season, of which 186 and 13 took place in the second quarter and third quarter of fiscal year 2020, respectively, as compared to 210 scheduled performances in the prior year’s holiday season, of which 197 and 13 took place in the second quarter and third quarter of fiscal year 2019, respectively. 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 for the three months ended March 31, 2020 decreased $25,901, or 16%, to $132,809 as compared to the prior year period. Direct operating expenses for the nine months ended March 31, 2020 decreased $34,667, or 7%, to $472,582 as compared to the prior year period. The net decreases are attributable to the following:
 Three Nine
 Months Months
Decrease in event-related direct operating expenses associated with concerts primarily due to the impact of the temporary closure of venues since March 12, 2020 due to COVID-19$(6,883) $(6,958)
Decrease in direct operating expenses associated with suite licenses primarily due to lower revenue sharing expenses associated with suite license fee revenue decreases(6,112) (6,793)
Decrease in direct operating expenses associated with the venue-related signage and sponsorship primarily due to lower revenue sharing expenses associated with venue-related signage and sponsorship revenue decreases(6,014) (9,686)
Decrease in direct operating expenses associated with entertainment dining and nightlife offerings(2,880) (427)
Decrease in event-related expenses associated with live sporting events(1,863) (3,529)
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(1,822) (8,314)
Decrease in event-related direct operating expenses associated with other live entertainment events(1,115) (2,384)
Decrease in direct operating expenses associated with the expiration of the Wang Theatre booking agreement in February 2019(927) (2,621)
(Decrease) increase in direct operating expenses associated with the presentation of the Christmas Spectacular
(85) 231
Increase in venue operating costs, net of recovery charges from Madison Square Garden Sports Corp.3,578
 6,809
Other net decreases(1,778) (995)
 $(25,901) $(34,667)

For the three months ended March 31, 2020, the decrease in direct operating expenses associated with entertainment dining and nightlife offerings was primarily due to (i) higher expenses during the prior year period at a new venue which opened in September 2018, (ii) lower food and beverage costs and employee compensation and related benefits due to lower revenues, and (iii) the absence of costs related to one venue in New York which closed in January 2019.

The decrease in event-related expenses associated with other live sporting events for the three months ended March 31, 2020 was primarily due to the cancellation of college basketball events as a result of the temporary closure of venues since March 12, 2020 due to COVID-19, slightly offset by an additional event prior to the temporary closure and higher per-event expenses. The decrease in event-related expenses associated with other live sporting events for the nine months ended March 31, 2020 was primarily due to the cancellation of college basketball events as a result of the temporary closure of venues since March 12, 2020 due to COVID-19 and fewer events prior to the temporary closure, slightly offset by higher per-event expenses.
The decrease in event-related direct operating expenses associated with other live entertainment events for the three months ended March 31, 2020 was primarily due to the impact of the temporary closure of venues since March 12, 2020 due to COVID-19. For the nine months ended March 31, 2020, the decrease in event-related direct operating expenses associated with other live entertainment events was due to (i) the impact of a large-scale special event held at Radio City Music Hall during the prior year period with no comparable special event during the current year period, and (ii) the impact of the temporary closure of venues since March 12, 2020 due to COVID-19. 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 during the second quarter of the current year period.
The increase in venue operating costs, net for the three and nine months ended March 31, 2020 reflects higher labor-related venue operating costs as the Company continued to pay event-level employees during the temporary shutdown of its venues. In addition, for the three months ended March 31, 2020, this increase was slightly offset by higher recovery charges for venue usage from Madison Square Garden Sports Corp. for hosting the professional sports franchises’ home games of the Knicks and Rangers at The Garden in the current year period as compared to the prior year period.

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Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended March 31, 2020 increased $1,027, or 1%, to $84,186 as compared to the prior year period. Selling, general and administrative expenses for the nine months ended March 31, 2020 increased $26,932, or 12%, to $257,970 as compared to the prior year period.
For the three months ended March 31, 2020 the increase was primarily due to higher expenses related to the Company’s MSG Sphere initiative of $13,013, which include increases in personnel, content development and technology costs offset by (i) lower employee compensation and related benefits of $3,814, (ii) lower professional fees of $2,561, (iii) the absence of venue pre-opening costs of $1,443 associated with entertainment dining and nightlife offerings that were recorded in the prior year period, (iv) lower selling, general and administrative expenses associated with Obscura of $1,413 due to the Company’s decision to wind down Obscura’s third-party production business to focus on the development of MSG Sphere, and (v) other net decreases.
For the nine months ended March 31, 2020 the increase was primarily due to (i) higher expenses related to the Company’s MSG Sphere initiative of $31,655, which include increases in personnel, content development and technology costs, (ii) an increase in employee compensation and related benefits of $5,002, and (iii) higher professional fees of $2,225. The increase was partially offset by (i) lower selling, general and administrative expenses associated with Obscura of $6,542 due to the Company’s decision to wind down Obscura’s third-party production business to focus on the development of MSG Sphere, and (ii) the absence of venue pre-opening costs of $5,181 associated with entertainment dining and nightlife offerings that were recorded in the prior year period.
In connection with its MSG Sphere initiative, the Company expects to continue increasing its investment in personnel, content and technology. Based on the timing of these efforts, the Company expects higher expenses in future periods.
Depreciation and amortization
Depreciation and amortization for the three months ended March 31, 2020 decreased $572, or 2%, to $26,196 as compared to the prior year period. Depreciation and amortization for the nine months ended March 31, 2020 decreased $1,335, or 2%, to $80,271 as compared to the prior year period. For the nine months ended March 31, 2020, the decrease was primarily due to certain assets and purchase accounting adjustments being fully depreciated and amortized, partially offset by depreciation and amortization related to a new entertainment dining and nightlife venue.
Impairment of intangibles, long-lived assets and goodwill
The disruptions caused by COVID-19 directly impactedpandemic, the Company’s projected cash flows resulting in operating disruptions. This disruptionwere directly impacted. These disruptions along with the deteriorating macroeconomic conditions and industry/industry and market considerations, were considered a “triggering event” for the Company’s Tao Group Hospitality reporting unit, which required the Company to assess the carrying value of Tao Group Hospitality’s intangible assets, long-lived assets and goodwill for impairment. Based on this evaluation, the Company recorded a non-cashtotal impairment charge of $102,211$105,817 in Fiscal Year 2020.
There has been no triggering event identified by the Company for the Entertainment reporting unit due to the COVID-19 pandemic. However, the duration and impact of the COVID-19 pandemic may result in future impairment charges that management will evaluate as facts and circumstances evolve over time.
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Consolidated and Combined Results of Operations
Comparison of the Three and Six Months Ended December 31, 2020 versus the Three and Six Months Ended December 31, 2019
The table below sets forth, for the periods presented, certain historical financial information.
Three Months Ended
December 31,
Change (a)
20202019AmountPercentage
Revenues$23,137 $394,072 $(370,935)(94)%
Direct operating expenses35,464 210,194 (174,730)(83)%
Selling, general and administrative expenses (“SG&A”)74,950 86,854 (11,904)(14)%
Depreciation and amortization23,875 27,434 (3,559)(13)%
Restructuring charges1,372 — 1,372 NM
Operating income (loss)(112,524)69,590 (182,114)NM
Other income (expense):
Loss in equity method investments(1,568)(1,170)(398)(34)%
Interest income (expense), net(7,326)6,124 (13,450)NM
Miscellaneous income (expense), net(7,362)9,355 (16,717)NM
Income (loss) from operations before income taxes(128,780)83,899 (212,679)NM
Income tax expense(323)(1,255)932 74 %
Net income (loss)(129,103)82,644 (211,747)NM
Less: Net income (loss) attributable to redeemable noncontrolling interests(3,342)885 (4,227)NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests(902)453 (1,355)NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders$(124,859)$81,306 $(206,165)NM

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Six Months Ended
December 31,
Change (a)
20202019AmountPercentage
Revenues$37,515 $572,035 $(534,520)(93)%
Direct operating expenses69,623 341,716 (272,093)(80)%
Selling, general and administrative expenses135,275 174,621 (39,346)(23)%
Depreciation and amortization50,457 54,254 (3,797)(7)%
Restructuring charges21,299 — 21,299 NM
Operating income (loss)(239,139)1,444 (240,583)NM
Other income (expense):
Loss in equity method investments(3,264)(2,643)(621)(23)%
Interest income (expense), net(7,440)12,334 (19,774)NM
Miscellaneous income, net26,862 16,386 10,476 64 %
Income (loss) from operations before income taxes(222,981)27,521 (250,502)NM
Income tax expense(486)(1,440)954 66 %
Net income (loss)(223,467)26,081 (249,548)NM
Less: Net income (loss) attributable to redeemable noncontrolling interests(7,231)249 (7,480)NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests(1,532)493 (2,025)NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders$(214,704)$25,339 $(240,043)NM
_________________
NM — Percentage is not meaningful
(a)The consolidated statements of operations for the three and ninesix months ended MarchDecember 31, 2020 which included impairment charges associated with one venue within Tao Group Hospitalityare presented on a consolidated basis, as the Company became a standalone public company on April 17, 2020. The Company’s combined statements of $3,541 and $17,972, related to a tradename and certain long-lived asset, respectively, and an impairment charge of $80,698 related to goodwill associated with the Tao Group Hospitality reporting unit.
Due to the COVID-19-related shutdown of its venues, TAO Group Hospitality began a review of its lease contracts and could decide to close certain venues (which may later reopen elsewhere) if the landlords are unwilling to make appropriate concessions, which could result in additional charges related to the venue’s long-lived assets.
Operating income (loss)
Operating loss for the three months ended March 31, 2020 increased $126,922 to $145,541 as compared to the prior year period. Operating loss for the nine months ended March 31, 2020 was $145,996 as compared to an operating income of $12,491 in the prior year period. The change in operating lossoperations for the three and ninesix months ended MarchDecember 31, 2019 were prepared on a standalone basis derived from the consolidated financial statements and accounting records of the Company’s former parent, MSG Sports, and are presented on the basis of carve-out financial statements as the Company was not a standalone public company prior to the Entertainment Distribution. In addition, the Company’s operating results were materially impacted during the three and six months ended December 31, 2020 by the COVID-19 pandemic and government actions taken in response. See “— Introduction — Factors Affecting Results of Operations — Basis of Presentation” and “— Introduction — Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” for more information.
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The following is a summary of changes in segments’ operating results for the three and six months ended December 31, 2020 as compared to the prior year period was primarily due to (i)period.
For the Three Months Ended December 31, 2020
Changes attributable toRevenueDirect operating expensesSG&ADepreciation and amortizationRestructuring chargesOperating income (loss)
Entertainment segment (a)
$(312,701)$(144,832)$(3,139)$(1,882)$1,372 $(164,220)
Tao Group Hospitality segment (a)
(58,613)(30,179)(8,907)(848)— (18,679)
Purchase accounting adjustments— (144)— (829)— 973 
Inter-segment eliminations379 425 142 — — (188)
MSG Entertainment Corp. total$(370,935)$(174,730)$(11,904)$(3,559)$1,372 $(182,114)

For the Six Months Ended December 31, 2020
Changes attributable toRevenueDirect operating expensesSG&ADepreciation and amortizationRestructuring chargesOperating income (loss)
Entertainment segment (a)
$(424,798)$(216,177)$(20,838)$(1,655)$21,299 $(207,427)
Tao Group Hospitality segment (a)
(110,009)(56,018)(18,728)(1,981)— (33,282)
Purchase accounting adjustments— (334)(6)(161)— 501 
Inter-segment eliminations287 436 226 — — (375)
MSG Entertainment Corp. total$(534,520)$(272,093)$(39,346)$(3,797)$21,299 $(240,583)
_________________
(a)See “Business Segment Results” for a non-cash impairmentmore detailed discussion of intangibles, long-lived assets and goodwill and, to a lesser extent, (ii) lower revenues, and (iii) higher selling, general and administrative expenses slightly offset by lower directthe operating expenses and lower depreciation and amortization, as discussed above.results of our segments.
Earnings (loss)Loss in equity method investments
Loss in equity method investments for the three months ended MarchDecember 31, 2020 decreased $1,785,increased $398, or 62%,34% to $1,096$1,568 as compared to the prior year period. Loss in equity method investments forFor the ninesix months ended MarchDecember 31, 2020, was $3,739 as compared to earnings of $17,131 in the prior year period. The decreases were due to the absence of equity earnings from AMSGE and Tribeca Enterprises as the Company sold these investments in December 2018 and August 2019, respectively. For

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the three and nine months ended March 31, 2019, the Company reported net loss in equity method investments of $1,571 and net earnings in equity method investments of $20,415, respectively, from those investments.
Interest income, net
Net interest income for the three months ended March 31, 2020 decreased $1,686,increased $621, or 36%23%, to 3,054$3,264 as compared to the prior year periodperiod. The year-over-year increase was primarily due to lower interest income as a result of (i) lower interest rates, (ii) a change in investment mix, and (iii) the absence of interest income earned on loans extended to AMSGE and Tribeca Enterprises as compared to the prior year period since these loans were fully repaid during the first and second quarters of fiscal year 2020, respectively. The decrease in interest income was partially offset by lower interest expense associated with Tao Group Hospitality, as a result of the refinancing of its credit facility in May 2019, which resulted in a reduction of the outstanding balance payable to third-parties by entering into an intercompany subordinated credit agreement with the Company, as well as lower variable interest rates under the Tao Senior Credit Agreementhigher inter-entity profit eliminations recorded in the current year period as comparedperiods in connection with the capital expenditure purchases for MSG Sphere. See Note 16 to the previous credit facility in the prior year period. See Note 12 to theconsolidated and combined financial statements included in “Part I —“— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further detailsdiscussions of these arrangements with nonconsolidated affiliates.
Interest income (expense), net
Interest expense, net for the Tao Senior Credit Agreement.
Netthree months ended December 31, 2020 was $7,326 as compared to net interest income forof $6,124 in the nineprior year period, a decrease of net interest income of $13,450. For the six months ended MarchDecember 31, 2020, increased $3,444, or 29%,net interest expense was $7,440 as compared to $15,388net interest income of $12,334 in the prior year period, a decrease of net interest income of $19,774. The decreases in net interest income in the current year periods were primarily due to (i) lower interest income as the Company shifted its investments into U.S. Treasury Bills in the current year period, which yield a lower interest rate, (ii) higher interest expense in the current year periods associated with the National Properties Term Loan Facility, and to a lesser extent, (iii) the absence of interest income earned on a loan extended to The Azoff Company as compared to the prior year period primarily due to lower interest expense associated with Tao Group Hospitality, partially offset by lower interest income as a resultperiods since the loan was repaid during the second quarter of (i) lower interest rates, (ii) a change in investment mix, and (iii) lower interest earned on loans extended to AMSGE and Tribeca Enterprises.Fiscal Year 2020.
Miscellaneous income (expense), net
Net miscellaneousMiscellaneous expense, net for the three months ended MarchDecember 31, 2020 was $17,381$7,362 as compared to a net miscellaneous income of $4,613$9,355 in the prior year period. Net miscellaneous expense forperiod, a decrease of $16,717, primarily due to (i) unrealized and realized loss associated with the nine months ended March 31, 2020 decreased $1,225, or 30%, to $2,893 as compared to the prior year period. The changeinvestment in DraftKings for the three months ended MarchDecember 31, 2020 was primarily dueand, to thea lesser extent, (ii) lower unrealized loss of $17,196 related togains associated with the Company’s investment in Townsquare in the current year periodperiod. For the six months ended December 31, 2020, net miscellaneous income was $26,862, as compared to an unrealized gain of $5,261$16,386 in the prior year period, an increase of $10,476, primarily due to higher net gain on the investments in DraftKings, partially offset by lower unrealized gains associated with the investment in Townsquare in the current year period. See Note 6 and Note 11 to the consolidated and combined financial statements included in “Part I —“— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information related to the investmentCompany’s investments in Townsquare. For the nine months ended March 31, 2020, the decrease in net miscellaneous expense was primarily due to lower pensionDraftKings and postretirement benefit cost related to the non-service components in accordance with ASU No. 2017-07.Townsquare.
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Income taxes
See Note 16 to the consolidated and combined 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 (loss)
The Company evaluates performance based on several factors, of which the key financial measure is adjusted operating income (loss), which is a non-GAAP financial measure. We define adjusted operating income (loss) as operating income (loss) before 1) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, 2) share-based compensation expense or benefit, 3) restructuring charges or credits, 4) gains or losses on sales or dispositions of businesses and 5) the impact of purchase accounting adjustments related to business acquisitions. 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. We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of our business without regard to the settlement of an obligation that is not expected to be made in cash.
We believe adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of our 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 our performance. We use revenues and adjusted operating income (loss) as the most important indicators of our business performance, and evaluate management’s effectiveness with specific reference to these indicators.
Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.

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The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).
The following are the reconciliations of operating income (loss) to adjusted operating income (loss) for the three and ninesix months ended MarchDecember 31, 2020 as compared to the prior year periods:period:
Three Months Ended
December 31,Change
20202019AmountPercentage
Operating income (loss)$(112,524)$69,590 $(182,114)NM
Non-cash portion of arena license fees from MSG Sports(1,176)— 
Share-based compensation23,562 10,373 
Depreciation and amortization (a)
23,875 27,434 
Restructuring charges1,372 — 
Other purchase accounting adjustments924 1,068 
Adjusted operating income (loss)$(63,967)$108,465 $(172,432)NM
  Three Months Ended    
  March 31, Change
  2020 2019 Amount Percentage
Operating loss $(145,541) $(18,619) $(126,922) NM
Share-based compensation 8,836
 8,726
    
Depreciation and amortization (a)
 26,196
 26,768
    
Impairment of intangibles, long-lived assets and goodwill (b)
 102,211
 —
    
Other purchase accounting adjustments 1,068
 1,069
    
Adjusted operating income (loss) $(7,230) $17,944
 $(25,174) NM

Six Months Ended
December 31,Change
20202019AmountPercentage
Operating income (loss)$(239,139)$1,444 $(240,583)NM
Non-cash portion of arena license fees from MSG Sports(1,176)— 
Share-based compensation35,091 20,458 
Depreciation and amortization (a)
50,457 54,254 
Restructuring charges21,299 — 
Other purchase accounting adjustments1,848 2,188 
Adjusted operating income (loss)$(131,620)$78,344 $(209,964)NM
  Nine Months Ended    
  March 31, Change
  2020 2019 Amount Percentage
Operating income (loss) $(145,996) $12,491
 $(158,487) NM
Share-based compensation 29,294
 27,929
 

  
Depreciation and amortization (a)
 80,271
 81,606
    
Impairment of intangibles, long-lived assets and goodwill (b)
 102,211
 —
    
Other purchase accounting adjustments 4,464
 3,717
    
Adjusted operating income $70,244
 $125,743
 $(55,499) (44)%
_________________
NM — Percentage is not meaningful
(a)
Depreciation and amortization includes purchase accounting adjustments of $3,799 and $3,509 for the three months ended March 31, 2020 and 2019, respectively, and $9,727 and $11,880 for the nine months ended March 31, 2020 and 2019, respectively.
(b)
For the three and nine months ended March 31, 2020, the Company recorded a non-cash impairment charge of $102,211 associated with Tao Group Hospitality. This impairment charge included impairment charges associated with one venue within Tao Group Hospitality of $3,541 and $17,972, related to a tradename and long-lived assets, respectively, in addition to an impairment charge of $80,698 related to goodwill associated with the Tao Group Hospitality reporting unit. See Notes 7 and 9 to the combined financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further details.
_________________
(a)    Depreciation and amortization includes purchase accounting adjustments of $3,066 and $3,895 for the three months ended December 31, 2020 and 2019, respectively, and $6,588 and $6,749 for the six months ended December 31, 2020 and 2019, respectively.

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Adjusted operating loss for the three months ended MarchDecember 31, 2020 was $7,230increased $172,432 to $63,967 as compared to adjusted operating income of $17,944$108,465 in the prior year period. AdjustedFor the six months ended December 31, 2020, adjusted operating loss increased $209,964 to $131,620 as compared to adjusted operating income for the nine months ended March 31, 2020 decreased $55,499, or 44%, to $70,244 as compared toof $78,344 in the prior year period. The decreasesincreases in adjusted operating incomeloss were lower than the increases in operating losses primarily dueattributable to the impairmentfollowing:
Three Months Ended December 31, 2020Six Months Ended December 31, 2020
Increase in adjusted operating loss of the Entertainment segment (a)
$(153,905)$(176,582)
Increase in adjusted operating loss of the Tao Group Hospitality segment (a)
(18,339)(33,007)
Inter-segment eliminations(188)(375)
$(172,432)$(209,964)
_________________
(a)See “ — Business Segment Results” for a more detailed discussion of intangibles, long-lived assets and goodwill.

the operating results of our segments.
Net income (loss) attributable to redeemable and nonredeemable noncontrolling interests

For the three months ended MarchDecember 31, 2020, the Company recorded $22,447$3,342 of net loss attributable to redeemable noncontrolling interests including a proportional share of expenses related to impairment charges of $22,997 and purchase accounting adjustments (“PPA Expenses”), which total $22,257 and $195$902 of net loss attributable to nonredeemable noncontrolling interests including $57 of PPA Expenses as compared to $7$885 of net income attributable to redeemable noncontrolling interests and $453 of net income attributable to nonredeemable noncontrolling interests for the three months ended December 31, 2019. For the six months ended December 31, 2020, the Company recorded $7,231 of net loss attributable to redeemable noncontrolling interests including $1,595 of PPA Expenses and $680$1,532 of net loss attributable to nonredeemable noncontrolling interests including $87 of PPA Expenses for the three months ended March 31, 2019.


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For the nine months ended March 31, 2020, the Company recorded $23,851as compared to $249 of net lossincome attributable to redeemable noncontrolling interests including a proportional share of expenses related to impairment charges of $22,997 and PPA Expenses, which total $25,547, and $38$493 of net lossincome attributable to nonredeemable noncontrolling interests including $171 of PPA Expenses, as compared to $3,662 of net loss attributable to redeemable noncontrolling interests, including $5,499 of PPA Expenses, and $3,121 of net loss attributable to nonredeemable noncontrolling interests, including $261 of PPA Expenses, for the ninesix months ended MarchDecember 31, 2019.

These amounts represent the share of net lossincome (loss) from the Company’s investments in Tao Group Hospitality and BCE that are not attributable to the Company.
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Business Segment Results
Entertainment
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating income (loss) for the Company’s Entertainment segment.
Three Months Ended
December 31,Change
20202019AmountPercentage
Revenues$12,669 $325,370 $(312,701)(96)%
Direct operating expenses23,409 168,241 (144,832)(86)%
Selling, general and administrative expenses65,730 68,869 (3,139)(5)%
Depreciation and amortization19,246 21,128 (1,882)(9)%
Restructuring charges1,372 — 1,372 NM
Operating income (loss)$(97,088)$67,132 $(164,220)NM
Reconciliation to adjusted operating income (loss):
Non-cash portion of arena license fees from MSG Sports(1,176)— 
Share-based compensation22,374 10,373 
Depreciation and amortization19,246 21,128 
Restructuring charges1,372 — 
Adjusted operating income (loss)$(55,272)$98,633 $(153,905)NM
Six Months Ended
December 31,Change
20202019AmountPercentage
Revenues$20,224 $445,022 $(424,798)(95)%
Direct operating expenses47,024 263,201 (216,177)(82)%
Selling, general and administrative expenses118,380 139,218 (20,838)(15)%
Depreciation and amortization41,260 42,915 (1,655)(4)%
Restructuring charges21,299 — 21,299 NM
Operating loss$(207,739)$(312)$(207,427)NM
Reconciliation to adjusted operating income (loss):
Non-cash portion of arena license fees from MSG Sports(1,176)— 
Share-based compensation32,807 20,430 
Depreciation and amortization41,260 42,915 
Restructuring charges21,299 — 
Adjusted operating income (loss)$(113,549)$63,033 $(176,582)NM
_________________
NM — Percentage is not meaningful
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Factors Affecting Results of Operations
Carve-out Financial Statements
The consolidated statement of operations for the three and six months ended December 31, 2020 is presented on a consolidated basis, as the Company became a standalone public company on April 17, 2020. The Company's combined statement of operations for the three months ended December 31, 2019 was prepared on a standalone basis derived from the consolidated financial statements and accounting records of the Company’s former parent, MSG Sports, and is presented on the basis of carve-out financial statements as the Company was not a standalone public company prior to the Entertainment Distribution.
The combined statements of operations for the three and six months ended December 31, 2019 include allocations for certain support functions that were provided on a centralized basis by MSG Sports and not historically recorded at the business unit level, such as expenses related to finance, human resources, information technology, and venue operations, among others. As part of the Entertainment Distribution, certain corporate and operational support functions were transferred to the Company and therefore, charges were reflected in order to properly burden all business units comprising MSG Sports’ historical operations. These expenses were allocated on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of combined revenues, headcount or other measures of the Company and MSG Sports.
Management believes the assumptions underlying the combined financial statements, including the assumptions regarding allocating general corporate expenses, are reasonable. Nevertheless, the combined financial statements may not include all of the actual expenses that would have been incurred by the Company and may not reflect its combined results of operations, financial position and cash flows had it been a separate, standalone company during the periods presented. Actual costs that would have been incurred if the Company had been a separate, standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.
Impact of the COVID-19 Pandemic
The Entertainment segment operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic and actions taken in response by governmental authorities and certain professional sports leagues. As of the date of this Quarterly Report on Form 10-Q, virtually all of our Entertainment business’ operations have been suspended with the exception of hosting the Knicks and Rangers at The Garden without live audiences. It is not clear when we will be permitted or able to resume normal business operations. See “— Introduction — Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” for further discussions.
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Revenues
Revenues for the three months ended December 31, 2020 decreased $312,701, or 96.1%, to $12,669 as compared to the prior year period. For the six months ended December 31, 2020, revenues decreased $424,798, or 95%, to $20,224 as compared to the prior year period. The net decreases were attributable to the following:
Three Months Ended December 31, 2020Six Months Ended December 31, 2020
Decrease in revenues from the Christmas Spectacular due to the cancellation of the 2020 holiday season production as a result of the COVID-19 pandemic
$(122,789)$(122,818)
Decrease in event-related revenues, as discussed below(102,916)(173,267)
Decrease in suite license fee revenues, as discussed below(36,107)(55,693)
Decrease in venue-related signage and sponsorship revenues due to the impact of carve-out financial assumptions on the prior year period as well as the impact of government-mandated closures and restrictions on the use of our venues beginning in March 2020 as a result of the COVID-19 pandemic(26,920)(38,472)
Absence of revenues from the Forum due to its disposition in May 2020(21,275)(33,076)
Decrease in revenues from advertising sales commission from MSG Networks, as discussed below(5,428)(4,660)
Increase in revenues from Sponsorship Sales and Service Representation Agreements with MSG Sports, as discussed below2,441 4,646 
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements1,585 1,585 
Other net decreases(1,292)(3,043)
$(312,701)$(424,798)

The decrease in event-related revenues reflects (i) lower revenues from concerts of $67,534 and $133,169 for the three and six months ended December 31, 2020, respectively, and (ii) lower revenues from other live entertainment and sporting events of $35,382 and $40,097 for the three and six months ended December 31, 2020, respectively, both due to government-mandated closures and restrictions on the use of our venues beginning in March 2020 as a result of the COVID-19 pandemic.
The decrease in suite license fee revenues was due to government-mandated closures and restrictions on the use of our venues beginning in March 2020 as a result of the COVID-19 pandemic. During the three and six months ended December 31, 2020, The Garden remained closed for entertainment events but was permitted to host four Knicks home games, which were played without fans in attendance due to government-mandated attendance restrictions.
Due to the COVID-19 pandemic, in March 2020, the 2019-20 NHL and NBA seasons were suspended. The NHL and NBA resumed play several months later and subsequently completed their seasons in September and October 2020, respectively, which impacted the start of each league’s 2020-21 regular season. The Knicks’ regular season began on December 23, 2020, while the Rangers’ regular season started on January 14, 2021. For the three and six months ended December 31, 2020, the decrease in advertising sales commissions from MSG Networks was primarily due to the delayed start of the NBA and NHL 2020-21 regular seasons. For the six months ended December 31, 2020, the decrease in advertising sales commissions was partially offset by the impact of the Rangers’ participation in the NHL’s return-to-play for the 2019-20 season.
The increase in revenues from the Company’s Sponsorship Sales and Service Representation Agreements and Arena License Agreements with MSG Sports reflects the impact of these agreements which were entered into in connection with, and effective as of, the Entertainment Distribution. The arena license fee revenues from MSG Sports in the current year period were due to The Garden reopening for Knicks games in December 2020.
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Direct operating expenses
Direct operating expenses for the three months ended December 31, 2020 decreased $144,832, or 86%, to $23,409. For the six months ended December 31, 2020, direct operating expenses decreased $216,177, or 82%, to $47,024 as compared to the prior year period. The net decreases were attributable to the following:
Three Months Ended December 31, 2020Six Months Ended December 31, 2020
Decrease in event-related direct operating expenses from (i) concerts of $33,112 and $70,234 for the three and six months ended December 31, 2020, respectively, and (ii) other live entertainment and sporting events of $22,413 and $28,020, respectively both due to government-mandated closures and restrictions on the use of our venues beginning in March 2020 as a result of the COVID-19 pandemic$(55,525)$(98,254)
Decrease in direct operating expenses associated with the Christmas Spectacular due to the cancellation of the 2020 holiday season production as a result of the COVID-19 pandemic
(47,647)(47,518)
Decrease in direct operating expenses associated with suite license operations primarily due to the impact of lower revenue sharing expenses with MSG Sports due to government-mandated closures and restrictions on the use of our venues beginning in March 2020 as a result of the COVID-19 pandemic(24,128)(37,539)
Decrease in direct operating expenses associated with venue-related signage and sponsorship primarily due to the impact of lower revenue sharing expense with MSG Sports of $23,374 and $28,354 for the three and six months ended December 31, 2020, respectively(23,568)(29,786)
Decrease in direct operating expenses associated with the Forum due to its disposition in May 2020(11,248)(18,125)
Other net increases, primarily due to the absence of venue operating costs carve-out adjustments in prior year periods17,284 15,045 
$(144,832)$(216,177)
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended December 31, 2020 decreased $3,139, or 5%, to $65,730 as compared to the prior year period. The decrease was primarily due to lower professional fees of $4,621 associated with litigation and MSG Sphere content development partially offset by an increase in employee compensation and related benefits of $886 primarily as a result of an incremental expense for share-based compensation of $11,129 associated with the cancellation of certain awards pursuant to the settlement agreement more fully described in Note 14 to the consolidated and combined financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q, which was largely offset as a result of the Company’s full-time workforce reduction in August 2020.
For the six months ended December 31, 2020, selling, general and administrative expenses decreased $20,838, or 15%, to $118,380 as compared to the prior year period. For the three and six months ended December 31, 2020, the decreases were primarily due to (i) lower professional fees of $16,028 associated with litigation, MSG Sphere content development and corporate development, and (ii) a net decrease in employee compensation and related benefits of $3,010 respectively, primarily as a result of the Company’s full-time workforce reduction in August 2020 and partially offset by an incremental expense for share-based compensation of $11,129 associated with the cancellation of certain awards pursuant to the settlement agreement.

See “— Restructuring charges” below for further discussion on the Company’s full-time workforce reduction in August 2020. See Note 14 to the consolidated and combined financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further discussion of the Company’s reversal of share-based compensation expenses in the second quarter of Fiscal Year 2021.
Restructuring charges
The Company's operations have been disrupted since March 2020 due to the COVID-19 pandemic. As a direct response to this disruption, the Company implemented cost savings initiatives in order to streamline operations and preserve liquidity. For the three and six months ended December 31, 2020, the Company recorded total restructuring charges of $1,372 and $21,299, respectively, related to termination benefits provided to employees associated with a full-time workforce reduction of approximately 350 employees in August 2020 and 10 employees in November 2020.
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Operating loss
Operating loss for the three months ended December 31, 2020 was $97,088 as compared to operating income of $67,132 in the prior year period, an increase in operating loss of $164,220. For the six months ended December 31, 2020, operating loss was $207,739 as compared to $312 in the prior year period, an increase in operating loss of $207,427. The decreases were primarily due to a decrease in revenues and the impact of restructuring charges, partially offset by lower direct operating expenses and selling, general and administrative expenses, as discussed above.
Adjusted operating income (loss)
Adjusted operating loss for the three months ended December 31, 2020 was $55,272 as compared to adjusted operating income of $98,633 in the prior year period, an increase in adjusted operating loss of $153,905. The increase in adjusted operating loss was higher than the increase in operating loss of $164,220 primarily due to an increase in share-based compensation of $12,001, including an incremental expense of $11,129 in the current year period associated with the cancellation of certain awards pursuant to the settlement agreement that is excluded in the calculation of adjusted operating loss. For the six months ended December 31, 2020, adjusted operating loss was $113,549 as compared to adjusted operating income of $63,033 in the prior year period, an increase in adjusted operating loss of $176,582. The increase in adjusted operating loss was less than the increase in operating loss of $207,427 primarily due to (i) the restructuring charges of $21,299 and (ii) an increase in share-based compensation of $12,377, including an incremental expense of $11,129 in the current year period associated with the cancellation of certain awards pursuant to the settlement agreement that are excluded in the calculation of adjusted operating loss.
Tao Group Hospitality
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income (loss) to adjusted operating income (loss) for the Company’s Tao Group Hospitality segment.
Three Months Ended
December 31,Change
20202019AmountPercentage
Revenues$10,491 $69,104 $(58,613)(85)%
Direct operating expenses10,980 41,159 (30,179)(73)%
Selling, general and administrative expenses9,131 18,038 (8,907)(49)%
Depreciation and amortization1,563 2,411 (848)(35)%
Operating income (loss)$(11,183)$7,496 $(18,679)NM
Reconciliation to adjusted operating income (loss):
Share-based compensation1,188 — 
Depreciation and amortization1,563 2,411 
Adjusted operating income (loss)$(8,432)$9,907 $(18,339)NM

Six Months Ended
December 31,Change
20202019AmountPercentage
Revenues$17,712 $127,721 $(110,009)(86)%
Direct operating expenses20,808 76,826 (56,018)(73)%
Selling, general and administrative expenses16,734 35,462 (18,728)(53)%
Depreciation and amortization2,609 4,590 (1,981)(43)%
Operating income (loss)$(22,439)$10,843 $(33,282)NM
Reconciliation to adjusted operating income (loss):
Share-based compensation2,284 28 
Depreciation and amortization2,609 4,590 
Adjusted operating income (loss)$(17,546)$15,461 $(33,007)NM
_________________
NM — Percentage is not meaningful
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Factors Affecting Results of Operations
Due to government actions taken in response to the COVID-19 pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in mid-March and Avenue and Vandal in New York were permanently closed in April 2020 and June 2020, respectively. Tao Group Hospitality has resumed limited operations at certain venues, subject to significant regulatory requirements, including limits on capacity, curfews and social distancing requirements for outdoor and indoor dining. As of December 31, 2020, eight of Tao Group Hospitality’s venues were open for outdoor dining and/or limited capacity indoor dining, four were open for delivery and/or takeout only, while sixteen venues remained closed.
Revenues
Revenues for the three months ended December 31, 2020 decreased $58,613, or 85%, to $10,491 as compared to the prior year period. For the six months ended December 31, 2020, revenues decreased $110,009, or 86%, to $17,712 as compared to the prior year period. The net decreases were attributable to the following:
Three Months Ended December 31, 2020Six Months Ended December 31, 2020
Decrease in revenues due to capacity restrictions at re-opened venues$(34,337)$(55,245)
Decrease in revenues due to the closure of certain venues as a result of the COVID-19 pandemic(19,666)(45,368)
Decrease in revenues associated with the permanent closing of Vandal and Avenue in New York(5,375)(9,413)
Other net increases765 17 
$(58,613)$(110,009)
Direct operating expenses
Direct operating expenses for the three months ended December 31, 2020 decreased $30,179, or 73%, to $10,980 as compared to the prior year period. For the six months ended December 31, 2020, direct operating expenses decreased $56,018, or 73%, to $20,808 as compared to the prior year period. The net decreases were attributable to the following:
Three Months Ended December 31, 2020Six Months Ended December 31, 2020
Decrease in employee compensation and related benefits as a result of (i) a reduction in headcount at re-opened venues, (ii) the elimination of venue line staff and manager positions at closed venues, and (iii) the permanent closure of Vandal and Avenue, all as a result of the COVID-19 pandemic$(12,303)$(23,918)
Decrease in (i) costs of food and beverage, and (ii) costs of venue entertainment, both as a result of the closure of certain venues, capacity restrictions at re-opened venues and the permanent closure of Vandal and Avenue, all due to the COVID-19 pandemic(11,430)(22,219)
Decrease in direct operating expenses associated with rent expense, primarily due to rent concessions received and the permanent closure of Vandal and Avenue(2,797)(5,337)
Decrease in provisions for doubtful accounts(2,313)(2,058)
Other net decreases, primarily due to lower credit card fees(1,336)(2,486)
$(30,179)$(56,018)
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended December 31, 2020 decreased $8,907, or 49%, to $9,131 as compared to the prior year period. For the six months ended December 31, 2020, selling, general and administrative expenses decreased $18,728, or 53%, to $16,734 as compared to the prior year period. For the three and six months ended December 31, 2020, the decreases were primarily due to lower (i) marketing cost of $3,237 and $6,699, respectively, and (ii) employee compensation and related benefits, inclusive of an increase in share-based compensation, of $1,868 and $3,289, respectively, as well as other net decreases including expenses related to restaurant expenses and supplies, general liability insurance, repairs and maintenance, and utilities.
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Operating income (loss)
Operating loss for the three months ended December 31, 2020 was $11,183 as compared to operating income of $7,496 in the prior year period, a decrease of $18,679. For the six months ended December 31, 2020, operating loss was $22,439 as compared to operating income of $10,843 in the prior year period, a decrease of $33,282. For the three and six months ended December 31, 2020, the decreases were primarily due to lower revenues, partially offset by decreases in direct operating expenses and selling, general and administrative expenses, as discussed above.
Adjusted operating income (loss)
Adjusted operating loss for the three months ended December 31, 2020 was $8,432 as compared to adjusted operating income of $9,907 in the prior year period, a decrease of $18,339. For the six months ended December 31, 2020, adjusted operating loss was $17,546, as compared to adjusted operating income of $15,461 in the prior year period, a decrease of $33,007. The adjusted operating loss was less than the operating loss, due to higher share-based compensation, partially offset by less depreciation and amortization.
Liquidity and Capital Resources
Overview
Our operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic and actions taken in response by the governmentgovernmental authorities and certain professional sports leagues. As of the date of this Quarterly Report on Form 10-Q, nearlyvirtually all of our businessEntertainment business’ operations have been suspended and itTao Group Hospitality is operating at significantly reduced capacity and demand. It is not clear when those operationswe will resume. be permitted or able to resume normal business operations.
As a result of government mandatedgovernment-mandated assembly limitations and closures, virtually allour performance venues were closed in mid-March 2020, and, subject to limited exceptions, such as the use of The Garden for Knicks and Rangers home games without fans in attendance and our scheduledvirtual residency in Fall 2020 featuring Phish’s Trey Anastasio live from the Beacon Theatre, as of the date of this filing no events are permitted to be held at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall and the Beacon Theatre andTheatre. Although events are permitted at The Chicago Theatre, arecurrent government-mandated capacity restrictions and other safety requirements make it economically unfeasible to do so. Other than Knicks and Rangers home games at The Garden, all events at our venues have been postponed or cancelledcanceled through June,at least March 2021, and will likely be impacted through the rest of Fiscal Year 2021. We are not recognizing revenue from events that have been canceled or postponed and, while events have been rescheduled into the second half of calendar year 2021, it is unclear whether and to what extent those events will take place. We are actively monitoring government regulations and guidance, including the impact of New York State’s recent announcement that, starting February 23, 2021, arenas with capacities of over 10,000 people may reopen at 10% capacity with certain safety protocols, such as testing and social distancing requirements. When there is an opportunity to safely and economically welcome guests back to The Garden for events at increased capacity, as well as at our other venues that remain closed, we expect to do so.
The impact to our operations included the cancellation of both the 2020 production of the Christmas Spectacular and the 2020 Boston Calling music festival,Music Festival. While the NBA began its 2020-21 regular season in December 2020 and the NHL began its 2020-21 regular season in January 2021, the Knicks and Rangers are currently playing home games at The Garden without fans in attendance due to government-mandated assembly restrictions. However, in light of New York State’s recent announcement that New York arenas with capacities of over 10,000 people can re-open beginning February 23, 2021, with limited capacities and safety protocols, we expect to have limited fans in attendance for home games beginning with the Knicks on February 23rd and the Rangers on February 26th, as permitted under these new guidelines. Even though limited numbers of fans are expected to be permitted to attend home games starting February 23rd, capacity restrictions, use limitations and social distancing requirements may remain in place through, at least, the rest of Fiscal Year 2021, which had been slatedwould continue to affect the payments we receive under the Arena License Agreements.
The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance. As a result, we have taken several actions to improve our financial flexibility, reduce operating costs and preserve liquidity:
•We have revised our processes and construction schedule for Memorial Day weekend, has also been cancelled,MSG Sphere, providing for a substantially reduced spend in Fiscal Year 2021 and a lengthened timetable that enables the Company to preserve cash in the near-term. We now expect to open MSG Sphere in Las Vegas in calendar year 2023;
•In connection with our extended construction timeline, we have reduced our expected near-term spending on technology and content development for MSG Sphere;
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•At the end of May 2020, we ended all financial support that was previously provided for certain event-level employees at the Company’s performance venues, and as a result virtually all venue employees, approximately 6,000 in total, are effectively furloughed;
•At the end of March 2020, Tao Group Hospitality venueseliminated essentially all of its venue line staff and manager positions, with limited numbers of employees returning as operations slowly resume. In August 2020, Tao Group Hospitality reduced its corporate workforce, and made additional reductions in venue and corporate positions during the second quarter of Fiscal Year 2021;
•We reduced our regular full-time workforce by approximately 350 positions in August, with a modest additional reduction in November 2020;
•We have implemented and are currently closed. continuing to pursue additional comprehensive cost reduction measures, including terminating certain third-party services, negotiating reduced rates and/or reduced service levels with third parties, and pursuing targeted savings and reductions in spending on marketing and travel and entertainment, and deferring or limiting non-essential operating or other discretionary expenses;
•We have successfully negotiated certain relief and deferral of cash payments from landlords and other vendors. Conversations with third parties are ongoing as we continue to pursue additional options, some of which may or may not be successful; and
•In November 2020, MSG National Properties, LLC (“MSG National Properties”) and certain of our subsidiaries entered into a five-year $650,000 senior secured term loan facility.
The NBACompany has moved to align its costs with its expectation of having limited revenue during Fiscal Year 2021. Taking into account the workforce reductions and the NHL suspended their 2019-20 seasons on March 11 and 12, 2020, respectively. No Knicks or Rangers games are currently being played, and it is uncertain if the current seasonscost saving initiatives noted above, although this amount will resume. For more information about the impacts and risks tofluctuate, the Company estimates its monthly operational cash burn rate will average approximately $25,000 on a go-forward basis for the duration of Fiscal Year 2021. We define operational cash burn rate as a result of COVID-19, see “— Impact of COVID-19revenue less direct operating and SG&A expenses (excluding share-based compensation). Excluded from operational cash burn are (i) severance costs, (ii) capital expenditures, (iii) capitalized spending on Our Business”content and “Item 1A. Risk Factors — Our Operationstechnology related to MSG Sphere and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government Actions Taken in Response.”(iv) working capital adjustments.
Our primary sources of liquidity are cash and cash equivalents and cash flows from the operations of our businesses. On November 12, 2020, MSG National Properties and certain of our subsidiaries entered into a five year $650 million senior secured term loan facility (the “National Properties Term Loan Facility”). Our principal uses of cash include working capital-related items (including funding our operations), capital spending (including our planned construction of large-scale venues in Las Vegas and London), borrowings by Madison Square Garden Sports Corp. under the DDTL Facilities, investments and related loans and advances that we may fund from time to time, repayment of debt, and mandatory purchases from prior acquisitions. We may also use cash to repurchase our common stock. Our decisions as to the use of our 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. To the extent that we desire to access alternative sources of funding through the capital and credit markets, challenging U.S. and global economic and market conditions could adversely impact our ability to do so at that time.
We regularly monitor and assess our ability to meet our net funding and investing requirements. We believe we have sufficient liquidity, including approximately $1,004,000$1,451,000 in cash and cash equivalents and $331,000 of short-term investments as of MarchDecember 31, 2020, to over the next 12 months, fund our operations, make committed funds available to Madison Square Garden Sports Corp. underservice the DDTL Facilities,National Properties Term Loan Facility, and pursue the development of the new venues discussed below. Cash and cash equivalents as of March 31, 2020 includes unrestricted cash and cash equivalents of $100,000 which was retained by Madison Square Garden Sports Corp. atbelow over the time of the Madison Square Garden Entertainment Corp. spin-off. See Note 11 to the combined 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.next 12 months. Our cash and cash equivalents include approximately $223,000$190,000 in advance cash proceeds — primarily related to suites, tickets suites and, to a lesser extent, sponsorships — all of which would be addressed, to the extent necessary, through refunds, credits, make-goods, refunds and/or rescheduled dates.
In connection with the Entertainment Distribution and as an additional source of liquidity for Madison Square GardenMSG Sports Corp. in response to the COVID-19 pandemic, on April 17, 2020, a subsidiary of the Company entered into the DDTL Facilitiesseparate delayed draw term loan credit agreements (the “DDTL Facilities”) with subsidiaries of Madison Square Garden Sports Corp. Pursuant to theMSG Sports. The DDTL Facilities, permitted two of Madison Square Garden Sports Corp.’sMSG Sports’ subsidiaries, MSG NYK Holdings, LLC and MSG NYR Holdings, LLC will be able to draw up to $110,000 and $90,000, respectively, for general corporate purposes until October 17, 2021, subject to the terms and conditions of the DDTL Facilities. Each DDTL Facility bears interest atOn November 6, 2020, each of MSG NYK Holdings, LLC and MSG NYR Holdings, LLC delivered notice to the Company that they had secured third-party debt and, as a rate equal to LIBOR plus 2.00%, or at the option of Madison Square Garden Sports Corp., a base rate plus 1.00%. If Madison Square Garden Sports Corp. draws down on one or bothresult, all commitments under their applicable DDTL Facilities the outstanding principal balance of each term loan will be due, together with any unpaid interest thereon, on October 17, 2021. If Madison Square Garden Sports Corp. were to fully draw on the DDTL Facilities, the Company’s cash balance would decrease by $200,000. For more information on the DDTL Facilities, see Note 17 to the combined financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

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terminated.
On March 31, 2020, the Company’s Board of Directors authorized, effective following the Entertainment Distribution, a share repurchase program to repurchase up to $350 million$350,000 of the Company’s Class A Common Stock. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, 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. No shares have been repurchased to date.
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Tao Group Hospitality’s principal uses of cash include working capital related-items (including funding its operations), investments in new venues, tax-related cash distributions, interest expense payments and repayment of debt. Tao Group Hospitality plans to continue to grow its business through the opening of new venues. With the onset of the pandemic, Tao Group Hospitality’s business was also materially impacted by the COVID-19 related restrictions imposed by state and local officials, which included limiting restaurants and bars to take-out and delivery service only and requiring the closure of nightlife establishments. As a result of these restrictions, virtually all of Tao’s venues were closed for approximately three months starting in mid-March, and Avenue and Vandal in New York were permanently closed in April 2020 and June 2020, respectively. Tao Group Hospitality has resumed limited operations at certain venues, subject to significant regulatory requirements, including limits on capacity, curfews and social distancing requirements for outdoor and indoor dining. As of December 31, 2020, eight of Tao Group Hospitality’s venues were open for outdoor dining and/or limited capacity indoor dining, four were open for delivery and/or takeout only, and sixteen venues remained closed. However, we believe that Tao Group Hospitality has sufficient liquidity from cash-on-hand, its revolving credit facility and committed capital from the Company to fund its operations and service its debt obligations over the next 12 months.
MSG Spheres
The Company has madecontinues to make significant progress on MSG Sphere at The Venetian, its state-of-the-art entertainment venue under construction in Las Vegas.
The Company expects the venue to have a number of significant 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 currentMSG Sphere at The Venetian is a complex construction project that has become even more challenging due to the global impact of COVID-19. In April 2020, the Company announced that it was suspending construction due to COVID-19-related factors outside of its control, including supply chain issues. As the ongoing effects of the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it resumed construction with a lengthened timetable. The Company remains committed to bringing MSG Sphere to Las Vegas and expects to open the venue in calendar year 2023.
While it is always difficult to provide a definitive construction cost estimate for large-scale construction projects, it is particularly challenging for one as unique as MSG Sphere. On February 7, 2020 we announced that our cost estimate, inclusive of core technology and soft costs, for MSG Sphere at The Venetian iswas approximately $1,660,000. This cost estimate is net of $75,000 that the Las Vegas Sands Corp. has agreed to pay to defray certain construction costs and also excludes significant capitalized and non-capitalized costs for items such as content creation, internal labor, and furniture and equipment. Relative to our currentthe cost estimate above, our actual construction costs for MSG Sphere at The Venetian incurred through MarchDecember 31, 2020 were approximately $349,000,$645,000, which is net of $65,000 received from Las Vegas Sands Corp. during the nine months ended March 31,Corp in Fiscal Year 2020. In addition, the amountThe construction cost of construction costs incurred as of March 31, 2020 includes$645,000 discussed above included approximately $67,600$73,000 of accrued expenses that were not yet paid as of that date.December 31, 2020. Given the complexity of the project, the more than two years remaining until the venue’s planned opening and the ongoing impact of the global pandemic, this cost estimate is subject to uncertainty. As with any major construction project, the construction of MSG Sphere is subject to potential delays, unexpected delays, costscomplications or cost fluctuations.
As previously disclosed, effective as of November 12, 2020, the Company entered into a letter agreement amending its ground lease agreement with Sands. The ground lease agreement previously required that the Company commence erection of above-grade structural steel for the MSG Sphere no later than 18 months after the date of the ground lease agreement and achieve substantial completion of the project no later than three years after the construction commencement date, subject to certain permitted extensions. The Sands Letter Agreement sets this outside completion date at September 30, 2023. There were no other complications.material changes to the terms of the ground lease.
On December 11, 2020, the Company and Hunt Construction Group Inc. (d/b/a AECOM Hunt) (“AECOM”) entered into a Termination Agreement, effective December 12, 2020, terminating the construction agreement, dated May 31, 2019, between the Company’s wholly-owned subsidiary, MSG Las Vegas, LLC and AECOM. The Company (through one of its wholly-owned subsidiaries) is now serving as construction manager and overseeing the construction process, including the direct engagement and supervision of the subcontractors. AECOM will continue to support the MSG Sphere at The Venetian isthrough a complex construction project with cutting-edge technologynew services agreement that relies on subcontractors obtaining components from a variety of sources aroundfacilitates AECOM’s ongoing involvement through the world. The effects of COVID-19 have resulted in significant impediments to construction that are beyond our control, including disruptions to our supply chain. As a result, in April 2020, we implemented a temporary suspension of construction, and we expect to incur additional expenses related to stopping and re-starting construction. At this time, we are unable to determine the full impact of the COVID-19 related disruptions, however they may impact our cost estimates. The Company remains committed to building a state-of-the-art venue in Las Vegas and looks forward to quickly and efficiently resuming construction as soon as practicable. As a result of this delay, we do not expect to achieve our goal of opening the venue in calendar year 2021.
See Exhibit 10.18 to Amendment No. 1 to the Company’s registration statement on Form 10 filed on March 18, 2020 for a copy of the Construction Agreement, dated May 31, 2019, by and between MSG Las Vegas, LLC and Hunt Construction Group Inc. (AECOM).Sphere’s completion.
In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to a future MSG Sphere.Sphere, pending necessary approvals. 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 the planning application process has continued in 2020.is ongoing. The Company is using this time to continue building on its
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design and construction learnings in Las Vegas, which it will leverage in London. And asLondon, should we receive such necessary approvals. 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.
With regard to MSG Sphere at The Venetian, the Company plans to finance the construction of the venue from cash-on-hand and cash flows from operations, as well as additional debt financing. The Company expects to incur $400,000 of new long-term financing by a subsidiary of the Company that indirectly owns an interest in its venues, which is expected to be comprised of a term loan of $225,000 and a revolving credit facility with $175,000 of borrowing capacity.operations. If the Company’s cash flows from operations are not sufficient to finance the remaining construction costs of MSG Sphere at The Venetian, the Company would need to completepursue additional debt financing. There is no assurance that the Company will be 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 partnerspartnerships and a managed venue management model.

We will continue to explore additional domestic and international markets where we believe next-generation venues such as the MSG Sphere can be successful.
National Properties Term Loan Facility
On November 12, 2020, MSG National Properties, an indirect, wholly owned subsidiary of the Company, MSG Entertainment Group and certain subsidiaries of MSG National Properties entered into the National Properties Term Loan Facility. The proceeds of the National Properties Term Loan Facility may be used to fund working capital needs, for general corporate purposes of MSG National Properties and its subsidiaries, and to make distributions to MSG Entertainment Group.
The National Properties Term Loan Facility includes a minimum liquidity covenant, pursuant to which MSG National Properties and its restricted subsidiaries are required to maintain a specified minimum level of average daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter. From the closing date until the first anniversary of the National Properties Term Loan Facility, the minimum liquidity threshold is $450,000, which is reduced each quarter by the amount of cash usage, subject to a minimum liquidity floor of $200,000. After the first anniversary, the minimum liquidity level is reduced to $200,000. If at any time the total leverage ratio of MSG National Properties and its restricted subsidiaries is less than 5.00 to 1.00 as of the end of any four consecutive fiscal quarter periods or MSG National Properties obtains an investment grade rating, the minimum liquidity level is permanently reduced to $50,000.
The principal obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments in an aggregate amount equal to 1.00% per annum (0.25% per quarter), with the balance due at the maturity of the facility. The National Properties Term Loan Facility will mature on November 12, 2025. Borrowings under the National Properties Term Loan Facility bear interest at a floating rate, which at the option of MSG National Properties may be either (i) a base rate plus a margin of 5.25% per annum or (ii) LIBOR, with a floor of 0.75%, plus a margin of 6.25% per annum. The interest rate on the National Properties Term Loan Facility as of December 31, 2020 was 7.00%. During the six months ended December 31, 2020, the Company was not required to make interest or principal payments under the National Properties Term Loan Facility.
All obligations under the National Properties Term Loan Facility are guaranteed by MSG Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than the subsidiaries that own Madison Square Garden (“The Garden”), BCE and certain other excluded subsidiaries (the “Subsidiary Guarantors”). All obligations under the Term Loan Facility, including the guarantees of those obligations, are secured by certain of the assets of MSG National Properties and the Subsidiary Guarantors (collectively, “Collateral”) including, but not limited to, a pledge of some or all of the equity interests held directly or indirectly by MSG National Properties in each Subsidiary Guarantor. The Collateral does not include, among other things, any interests in The Garden or the leasehold interests in Radio City Music Hall and the Beacon Theater. Under certain circumstances, MSG National Properties is required to make mandatory prepayments on loans outstanding, including prepayments in an amount equal to a specified percentage of excess cash flow in any fiscal year and prepayments in an amount equal to the net cash proceeds of certain sales of assets or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), in each case subject to certain exceptions.
In addition to the minimum liquidity covenant, the National Properties Term Loan Facility and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default. The Term Loan Facility contains certain restrictions on the ability of MSG National Properties and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Term Loan Facility, including the following: (i) incur additional indebtedness; (ii) create liens on certain assets; (iii) make investments, loans or advances in or to other persons; (iv) pay dividends and distributions or repurchase capital stock (which will restrict the ability of MSG National Properties to make cash distributions to the Company); (v) repay, redeem or repurchase certain indebtedness; (vi) change its lines of business; (vii) engage in certain transactions with affiliates; (viii) amend their respective organizational documents; (ix)
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merge or consolidate; and (x) make certain dispositions. As of December 31, 2020, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Term Loan Facility.
Tao Group Hospitality
Liquidity
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 repayments of debt. Tao Group Hospitality plans to grow its business through the opening of new venues. Tao Group Hospitality’s business and liquidity have been materially impacted by the COVID-19 pandemic, and all Tao Group Hospitality venues are currently closed. However, we believe that Tao Group Hospitality has sufficient liquidity from cash-on-hand, its revolving credit facility and committed capital from the Company to fund its operations and service its debt obligations and pursue new business opportunities over the next 12 months.
Financing AgreementsSenior Secured Credit Facilities
On May 23, 2019, TAOIH and TAOG, entered into the Tao Senior Credit Agreement with JPMorgan Chase Bank, N.A., and the lenders party thereto. The Tao Senior Credit Agreement provides TAOG with the Taosenior secured credit facilities (the “Tao Senior Secured Credit FacilitiesFacilities”) consisting of: (i) an initial $40,000 term loan facility with a term of five years and (ii) the Taoa $25,000 revolving credit facility with a term of five years (the “Tao Revolving Credit Facility.Facility”). 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)subsidiaries and in respect of the reserve account discussed below)). There was no$6,500 outstanding amount drawn on the Tao Revolving Credit Facility as of MarchDecember 31, 2020. As of MarchDecember 31, 2020, TAOIH was in compliance with the required financial covenants.
Tao Group Hospitality has financedutilized $750 of the Tao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available was $17,750. The Credit Agreement matures on May 23, 2024.
Disruptions caused by the COVID-19 pandemic have had, and are likely to continue to have, a significant and negative impact on Tao Group Hospitality’s operations and financial performance. On August 6, 2020, TAOIH and TAOG entered into an amendment to the Tao Senior Credit Agreement, which suspended the application of the financial maintenance covenants thereunder through December 31, 2021, modified certain restrictive covenants therein, modified the applicable interest rates and increased the minimum liquidity requirement. In addition, in connection with the amendment, the Company, through its operationsdirect subsidiary, MSG Entertainment Group, entered into a guarantee and reserve account agreement (i) to guarantee the obligations of TAOG under the Tao Senior Credit Agreement, including(ii) to establish and grant a security interest in a reserve account that initially held a deposit of approximately $9,800 and (iii) with a covenant to maintain a minimum liquidity requirement of no less than $75,000 at all times. The balance held in the $25,000 revolving credit facility.reserve account was approximately $8,100 as of December 31, 2020. As a result of December 31, 2020, TAOG, TAOIH and the COVID-19 effects, Tao Group Hospitality will not berestricted subsidiaries were in compliance with the required financial covenants underof the Tao Senior Credit Agreement as of June 30, 2020 absent an amendment or waiver, and it has entered into discussions with its senior secured lenders to obtain such an amendment or waiver. Agreement.
If recovery from the pandemic takes longer than currently estimated, Tao Group Hospitality cannot obtain an amendment or waiver from its lenders, it may not have accessneed to seek covenant waivers in the revolving credit facility under the Tao Senior Credit Agreement to finance its operations and expansion strategy, and may not be able to secure alternative sources of third-party financing. In such event, the Company has committed to providefuture. Tao Group Hospitality with capitalHospitality’s failure to serviceobtain covenant waivers could trigger a violation of these covenants and lead to default and acceleration of all of its outstanding debt, obligations.which could have a material adverse effect on liquidity.
On May 23, 2019, MSG Entertainment Holdings LLC, a subsidiary of the Company, and Tao Group Sub Holdings LLC, a subsidiary of Tao Group Hospitality entered into the Tao Subordinateda Credit Agreement providing for a credit facility of $49,000 that matures inon August 2024. During22, 2024 (the “Tao Subordinated Credit Agreement”). On June 15, 2020, the nine months ended MarchTao Subordinated Credit Agreement was amended to provide an additional $22,000 of borrowing capacity. As of December 31, 2020, Tao Group Hospitality repaid $5,000the outstanding balance under the Tao Subordinated Credit Agreement.Agreement was $62,000. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement have been eliminated in the consolidated and combined financial statements in accordance with ASC Topic 810, Consolidation.
See Note 12 to the consolidated and combined financial statements included in “Part I -“— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s debt obligations and various financing agreements.
Bilateral Letters of Credit Lines
The Company has established bilateral credit lines with a bank to issueuses letters of credit into support of the Company’sits business operations. The Company pays fees for the letters of credit that are credited against interest income the Company receives in return from its investments in notes receivable with the same bank. As of MarchDecember 31, 2020, the Company had $11,079$4,226 of letters of credit outstanding, pursuant to which fees were credited against a note investment, which included two letters of credit for $750 pertaining toissued under the Tao Group Hospitality as of December 29, 2019.Revolving Credit Facility.
Sale of the Forum
On March 24, 2020, the Company, through three of its wholly-owned subsidiaries, MSG National Properties, LLC (the “Seller”), MSG Entertainment Group, LLC (“Seller Parent”), and MSG Forum, LLC (“MSG Forum”), entered into the MIPA with CAPSS LLC (the “Buyer”) and Polpat LLC. Pursuant to the MIPA, (i) the Seller agreed to sell 100% of the membership interests of MSG Forum to the Buyer, (ii) MSG Forum, Seller Parent, the Buyer and certain other parties agreed to mutually release all claims and counterclaims at issue in the previously disclosed lawsuit against the City of Inglewood and other defendants, including the Buyer, related to the planned new Los Angeles Clippers arena project of the Buyer, as well as other related litigations, and (iii) the Buyer agreed to pay the Seller cash consideration, which was deposited in escrow prior to closing, of $400,000, subject to certain adjustments. On May 1, 2020, the Company completed the transaction. The transaction resulted in an approximately $322,000 increase in cash to the Company after transaction costs and income tax. The $322,000 includes approximately $64,000 of net working capital adjustments, resulting in net cash proceeds to the Company of approximately $258,000 (which amount remains subject to change).

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Contractual Obligations
Our contractual obligations as of the fiscal year ended June 30, 2019 are summarized in the table of contractual obligations disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations” in the Information Statement.
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 combined balance sheet as lease liabilities as of March 31, 2020. See Note 8 to the combined 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 2019Fiscal Year 2020 other than (i) the National Properties Term Loan Facility entered into on November 12, 2020, (ii) the termination of the DDTL Facilities on November 6, 2020, and (iii) activities in the ordinary course of business. See Notes 12 and 17to the consolidated and combined financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s National Properties Term Loan Facility repayment requirements and the cancellation of the DDTL Facilities, respectively.
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Cash Flow Discussion

As of MarchDecember 31, 2020, cash, cash equivalents and restricted cash totaled $1,021,848,$1,477,559, as compared to $1,092,065$924,304 as of June 30, 2019.2020. The following table summarizes the Company’s cash flow activities for the ninesix months ended MarchDecember 31, 2020 and 2019:
  Nine Months Ended March 31,
  2020 2019
Net income (loss) $(128,554) $36,195
Adjustments to reconcile net income (loss) to net cash provided by operating activities 218,068
 102,134
Subtotal $89,514
 $138,329
Changes in working capital assets and liabilities 47,437
 (93,363)
Net cash provided by operating activities $136,951
 $44,966
Net cash used in investing activities (477,984) (156,851)
Net cash provided by financing activities 266,900
 32,578
Effect of exchange rates on cash, cash equivalents and restricted cash 3,916
 6,440
Net decrease in cash, cash equivalents and restricted cash $(70,217) $(72,867)
Six Months Ended December 31,
20202019
Net income (loss)$(223,467)$26,081 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities64,981 68,302 
Subtotal$(158,486)$94,383 
Changes in working capital assets and liabilities(57,146)9,375 
Net cash provided by (used in) operating activities$(215,632)$103,758 
Net cash provided by (used in) investing activities146,682 (129,606)
Net cash provided by (used in) financing activities614,410 (40,885)
Effect of exchange rates on cash, cash equivalents and restricted cash7,795 1,693 
Net increase (decrease) in cash, cash equivalents and restricted cash$553,255 $(65,040)
Operating Activities
Net cash provided byused in operating activities for the ninesix months ended MarchDecember 31, 2020 improvedincreased by $91,985$319,390 to $136,951$215,632 as compared to the prior year period primarily due to a higher operating loss in the current year period and changes in working capital assets and liabilities, which includeincluded (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 increase in accounts receivable as a result of the temporary closure of venues due to COVID-19, and (iii) higher collections due to promoters as events were postponed as a result of the temporary closure of venues due to COVID-19. The increase in cash provided by the changes in working capital discussed above was partially offset by the decrease from net income tax payments in the current year period, adjusted for non-cash items.(ii) payments associated with restructuring charges related to termination benefits provided to employees, and (iii) an increase in related party receivables associated with the Transition Services Agreement pursuant to which the Company provides certain corporate and other transition services to MSG Sports in connection with the Entertainment Distribution.
Investing Activities
Net cash used inprovided by investing activities for the ninesix months ended MarchDecember 31, 2020 increased by $321,133$276,288 to $477,984$146,682 as compared to the prior year period primarily due to (i) an increase in purchaseproceeds from the maturity of short-term investments in the current year period, as compared to the prior year period, (ii) higher capital expenditures 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 (iii) lower proceeds received from the sale of the Company’s 50% interest in AMSGE in the prior year period compared to the sale of the Company’s 50% interest in Tribeca in the current year period. This increase was partially offset by (i) proceeds from maturitythe absence of short-term investments, (ii) a prior period loan repayment received from a subordinated note, (iii) lower investments made in nonconsolidated affiliates in the current year period as compared to the prior year period, and (iv) acquisition of notes receivable during the prior year period as compared to none during the current year period.note.
Financing Activities
Net cash provided by financing activities for the ninesix months ended MarchDecember 31, 2020 increased by $234,322$655,295 to $266,900$614,410 as compared to the prior year period primarily due to net transfers to Madison Square Garden Sports Corp. and Madison Square Garden Sports Corp.’s subsidiaries and slightly offset by a repayment on the Tao Revolving Credit Facility.proceeds received from the National Properties Term Loan Facility in the current year period.

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Seasonality of Our Business
The dependence on revenues from the Christmas Spectacular generally means the Company 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 haveAs a material impact on seasonalityresult of our business, the first and third calendar quarters are seasonally lighter quarters for Tao Group Hospitality as compared to its second and fourth calendar quarters. AsCOVID-19, the Company reports Tao Group Hospitality results of operations on a three-month lag basis,canceled the seasonally lighter quarters for Tao Group Hospitality are reflected in the second and fourth quarters2020 production of the Company’s fiscal year. See Note 2 to the combined financial statements included in “Part I — Item 1. Financial Statements”Christmas Spectacular, and accordingly, such seasonality is not expected for Fiscal Year 2021.
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Table of this Quarterly Report on Form 10-Q for more information regarding the consolidation on a three-month lag basis of Tao Group Hospitality.Contents


Recently Issued Accounting Pronouncements and Critical Accounting Policies
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated and combined 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 preparation of the Company’s combined financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Management believes its use of estimates in the combined financial statements to be reasonable. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
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 2020 and our interim impairment testing of goodwill and long-lived assets during the quarter ended March 31, 2020. In addition, the Company elected to adopt ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment in the third quarter of fiscal year 2020 in connection with its interim goodwill impairment test performed as of March 31, 2020, as discussed further below. 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.
Subsequent to the issuance of the Company’s audited combined financial statements and notes thereto for the year ended June 30, 2019 included in the Company’s Information Statement, the Company adopted the ASC Topic 842, Leasesin the first quarter of fiscal year 2020. See Note 2. Accounting Policies and Note 8. Leases to the combined financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussion of leases and the adoption impact.
Fiscal Year 2021. There have been no other material changes to the Company’s critical accounting policies from those set forth in Note 2. Summary of Significant Accounting Policies of the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information Statement.Annual Report on Form 10-K.
Arrangements with Multiple Performance Obligations and Principal versus Agent Revenue Recognition
See Note 3. Revenue Recognition of4 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192020 included in the Company’s Information StatementAnnual Report on Form 10-K for discussion of (i) the Company’s arrangements with multiple performance obligations, primarily multi-year sponsorship agreements and (ii) the application of principal versus agent revenue recognition guidance, and the related revenue sharing expenses attributable to Madison Square GardenMSG Sports Corp. for suite license arrangements and venue signage and sponsorship agreements, as well as the advertising sales representation agreement with MSG Networks.

Impairment of Long-Lived and Indefinite-Lived Assets
TableThe Company elected to adopt ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment in the third quarter of ContentsFiscal Year 2020. ASU No. 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment is now the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.



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. As of MarchDecember 31, 2020.2020, the Company had onetwo operating and reportable segmentsegments consistent with the process the Company’s management followed in making decisions and allocating resources to the business.
For purposes of evaluating goodwill for impairment, the Company has two reporting units: Entertainment and Tao Group Hospitality. Tao Group Hospitality was acquired after the annual goodwill impairment test for fiscal year 2017 and represents a separate reporting unit within the Company for goodwill impairment testing.
The goodwill balance reported on the Company’s combinedconsolidated balance sheet as of MarchDecember 31, 2020 by reporting unit was as follows: 
Entertainment$74,309 
Tao Group Hospitality (a)
— 
$74,309 
Entertainment$74,111
Tao Group Hospitality7,885
 $81,996
_________________
(a)As of December 31, 2020 and June 30, 2020, Tao Group Hospitality had no goodwill remaining after the impairment charges recorded during Fiscal Year 2020.
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, the first step of thea quantitative 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.transactions or other acceptable valuation techniques, including the cost approach. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, cost-based assumptions, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows. Subsequent to the adoption of ASU No. 2017-04 in the third quarter of fiscal year 2020, theThe amount of an impairment loss is measured as the amount by which a
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reporting unit’s carrying value exceeds its fair value, determined in step one, not to exceed the carrying amount of goodwill. Prior to the adoption of ASU No. 2017-04, if the carrying amount of a reporting unit exceeded its fair value, the second step of the goodwill impairment test was performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compared the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeded the implied fair value of that goodwill, an impairment loss was recognized in an amount equal to that excess. The implied fair value of goodwill was determined in the same manner as the amount of goodwill that would be recognized in a business combination. 
The Company elected to perform the qualitative assessment of impairment for both of the Company’s Entertainment reporting unitsunit for the fiscal year 2020Fiscal Year 2021 impairment tests. These assessmentstest. The assessment 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.

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During the first quarter of fiscal year 2020,Fiscal Year 2021, the Company performed its most recent annual impairment test of goodwill and determined that there werewas no impairmentsimpairment of goodwill identified for any of its Entertainment reporting unitsunit as of the impairment test date. Based on thesethe impairment tests,test, the Company’s Entertainment and Tao Group Hospitality reporting unitsunit had a sufficient safety margins,margin, representing the excess of the estimated fair value of eachthe reporting unit, derived from the most recent quantitative assessments,assessment, less its respective carrying value (including goodwill allocated to each respectivethe reporting unit). The most recent quantitative assessments were used in making this determination and due to the proximity of the acquisition date for Tao Group Hospitality to the goodwill impairment test date, the initial purchase price was assumed to be the fair value of the Tao Group Hospitality reporting unit for purposes of the goodwill impairment test. 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.
During the third quarter of fiscal year 2020, the Company’s operating results have been, and continue to be, materially impacted by the COVID-19 pandemic and actions taken in response by the government and certain professional sports leagues, including government mandated assembly limitations and venue, restaurant, bar and nightclub closures impacting both of the Company’s reporting units. While the Company concluded that the effects of COVID-19 would not more likely than not reduce the fair value of its Entertainment reporting unit below its carrying amount, the Company concluded a triggering event had occurred for its Tao Group Hospitality reporting unit as of March 31, 2020 as a result of COVID-19. Accordingly, the Company performed an interim quantitative impairment test as of March 31, 2020 (“interim testing date”) for the Tao Group Hospitality reporting unit, which required the Company to assess the carrying value of its long-lived assets, amortizable intangible assets and goodwill as of the interim test date.
Amortizable intangible assets and other long-lived assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are independent from cash flows from other assets and liabilities. In determining whether an impairment of long-lived assets has occurred, the Company considers both qualitative and quantitative factors. The quantitative analysis involves estimating the undiscounted future cash flows directly related to that asset group and comparing the resulting value against the carrying value of the asset group. If the carrying value of the asset group is greater than the sum of the undiscounted future cash flows, an impairment loss is recognized for the difference between the carrying value of the asset group and its estimated fair value.
For the interim impairment test, the Company estimated the fair value of the Tao Group Hospitality reporting unit based on a discounted cash flow model (income approach). This approach relied on numerous assumptions and judgments that were subject to various risks and uncertainties. Principal assumptions utilized, all of which are considered Level III inputs under the fair value hierarchy (see Note 9 to the combined financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q), include the Company’s estimates of future revenue and terminal growth rates, margin assumptions and the discount rate applied to estimate future cash flows. The assumptions utilized are subject to a high degree of judgment and complexity, particularly in light of economic and operational uncertainty that exists as a result of COVID-19 as of March 31, 2020.
Based upon the results of the Company’s interim quantitative impairment test, the Company concluded that the carrying value of the Tao Group Hospitality reporting unit exceeded its estimated fair value (“Fair Value Deficit”) as of the interim testing date by $102,211. Based on the evaluation of amortizable intangible assets and other long-lived assets, the Company recorded non-cash impairment charges of $11,573, $6,399 and$3,541, for right-of-use assets, property and equipment, and certain intangible assets, respectively, which were associated with a single venue within Tao Group Hospitality. The remaining Tao Group Hospitality Fair Value Deficit was allocated to goodwill for a non-cash goodwill impairment charge of $80,698. The goodwill impairment charge was calculated as the amount that the adjusted carrying value of the reporting unit, including any goodwill, exceeded its fair value. Upon completion of the quantitative impairment test and recording of the associated impairments, as of March 31, 2020, the carrying value of the Tao Group Hospitality reporting unit equals its fair value, whereas the Company’s other reporting unit still maintain a headroom that is sufficiently in excess of its carrying values. See “Part II — Item 1A. Risk Factors” for more information about the risks to the Company’s business operations as a result of the COVID-19 pandemic.

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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 combinedconsolidated balance sheet as of MarchDecember 31, 2020: 
Trademarks$61,881
Photographic related rights3,000
 $64,881
Trademarks$61,881 
Photographic related rights1,920 
$63,801 
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform the qualitative assessment of impairment for the photographic related rights and the majority of the trademarks. These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair valuevalues of the intangible asset.assets. 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.
During the first quarter of fiscal year 2020,Fiscal Year 2021, the Company performed its most recent annual impairment test of the identifiable indefinite-lived intangible assets and determined that there were no impairments identified. Based on these impairment tests, 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.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Except for the broad effects of COVID-19 as a result of its negative impact on the global economy and major financial markets, which we cannot reasonably estimate, thereThere 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,plans. See Item 7A, “Quantitative and commodity risk exposure. For sensitivity analysis and other information regarding market risks we face in connection withQualitative Disclosures About Market Risk,” of our Pension Plans and Postretirement Plan, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recently Issued Accounting Pronouncements and Critical Accounting Policies — Critical Accounting Policies — Defined Benefit Pension Plans and Other Postretirement Benefit Plan” in the Information Statement. In addition, see Item 2, “— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” of this QuarterlyAnnual Report on Form 10-Q10-K for discussions of disruptions caused by COVID-19. We do not have any meaningful commodity risk exposures associated with the operation of our venues.year ended June 30, 2020.
Potential Interest Rate Risk Exposure:Exposure
The Company, through its subsidiary MSG National Properties and the consolidation of Tao Group Hospitality, has potential interest rate risk exposure related to borrowings incurred under the National Properties Term Loan Facility and the Tao Senior Secured Credit Facilities. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under the Tao Senior Secured Credit Facilities.these credit facilities.
Borrowings under the National Properties Term Loan Facility and Tao Senior Secured Credit Facilities incur interest, depending on Tao Group Operating LLC’s election by MSG National Properties and TAOG, at a floating rate based upon LIBOR, the U.S. Federal Funds Rate or the U.S. Prime Rate, plus, in eachthe case of TAOG, an additional spread

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which is dependent upon the total leverage ratio at the time.time for Tao Senior Secured Credit Facilities. Accordingly, the National Properties Term Loan Facility and the Tao Senior Secured Credit Facilities are subject to interest rate risk with respect to the tenor of any borrowings incurred. See Note 12 to the consolidated and combined financial statements included in “Part I -“— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information on interest rate.the Tao Credit Facilities and National Properties Term Loan Facility. For the ninetwelve months ended MarchDecember 31, 2020, the interest rate on the Tao Senior Secured Credit Facilities ranged from 4.91%4.30% to 3.25%2.61% and it was approximately 3.28%2.65% as of MarchDecember 31, 2020. In addition, the interest rate on National Properties Term Loan Facility was 7.00% as of December 31, 2020 and has been unchanged since inception. The effect of a hypothetical 100 basis point and a hypothetical 200 basis point increase in floating interest rates prevailing as of MarchDecember 31, 2020 and continuing for a full year would increase interest expense ofby $2,938 and $9,815, respectively, on the amountcombined outstanding onbalances under the National Properties Term Loan Facility and Tao Senior Secured Credit Facilities by $350 and $700, respectively.Facilities.
Foreign Currency Exchange Rate Exposure:Exposure
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 in the second quarter of fiscal year 2018 for future MSG Sphere development and through cash and invested funds which will be deployed in the construction of our London venue. We may evaluate and decide, to the extent reasonable and practical, to reduce the translation risk of foreign currency fluctuations 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. During the past 12twelve months ended MarchDecember 31, 2020, the GBP/USD exchange rate ranged from 1.33571.1491 to 1.14911.3682 as compared to GBP/USD exchange rate of 1.24491.3682 as of MarchDecember 31, 2020, a fluctuation of approximately 7-8%19%. As of MarchDecember 31, 2020, a uniform hypothetical 8%10% fluctuation in the GBP/USD exchange rate would have resulted in a change of approximately $23,700$17,700 in the Company’s net asset value.
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) ofunder the Securities Exchange Act of 1934). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of MarchDecember 31, 2020 the Company’s disclosure controls and procedures were effective.
There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) ofunder the Securities Exchange Act of 1934) during the fiscal quarter ended MarchDecember 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
On March 29, 2019, a purported stockholder of Madison Square Garden Sports Corp. filed a complaintSee “Part II — Item 1. Legal Proceedings” in the Court of Chancery of the State of Delaware, derivativelyCompany’s Quarterly Report on behalf of Madison Square Garden Sports Corp., against certain directors of Madison Square Garden Sports Corp. who are members of the Dolan family group and against the directors of Madison Square Garden Sports Corp. who are members of the Compensation Committee (collectively, the “Director Defendants”). Madison Square Garden Sports Corp. is also named as a nominal defendant in the complaint. The complaint alleges that the Director Defendants breached their fiduciary duties to Madison Square Garden Sports Corp. stockholders in approving the compensation packages for James L. Dolan in his capacity as the Executive Chairman and Chief Executive Officer of Madison Square Garden Sports Corp. The complaint seeks monetary damages in an unspecified amount from the Director Defendants in favor of Madison Square Garden Sports Corp.; rescission of Mr. Dolan’s employment agreements; restitution and disgorgement by Mr. Dolan in respect of his compensation; and costs and disbursementsForm 10-Q for the plaintiff. Onquarter ended September 30, 2020 for a discussion of a derivative action that was settled on June 5, 2019, Madison Square Garden Sports Corp.’s Board of Directors formed a Special Litigation Committee to investigate the claims made by the plaintiff and to determine Madison Square Garden Sports Corp.’s response thereto. The litigation has been stayed while the Special Litigation Committee’s work is ongoing.18, 2020, which settlement became effective on October 8, 2020.
The Company is a defendant in various other lawsuits. Although the outcome of these lawsuits cannot be predicted with certainty (including the extent of available insurance)insurance, if any), management does not believe that resolution of these lawsuits will have a material adverse effect on the Company.
Item 1A. Risk Factors
We Have Substantial Indebtedness and Are Highly Leveraged, Which Could Adversely Affect Our Business.
We are highly leveraged with a significant amount of debt and we may continue to incur additional debt in the future. In November 2020, MSG National Properties, LLC (“MSG National Properties”) and certain of our subsidiaries entered into a five-year $650,000 senior secured term loan facility to fund working capital needs, for general corporate purposes of MSG National Properties and its subsidiaries, and to make distributions to MSG Entertainment Group, LLC. As a result of our indebtedness, we are required to make interest and principal payments on our borrowings that are significant in relation to our revenues and cash flows. These payments reduce our earnings and cash available for other potential business purposes. This leverage also exposes us to significant risk by limiting our flexibility in planning for, or reacting to, changes in our business (whether through competitive pressure or otherwise), the entertainment and hospitality industries and the economy at large. Although our cash flows could decrease in these scenarios, our required payments in respect of indebtedness would not decrease.
In addition, our ability to make payments on, or repay or refinance, such debt, and to fund our operating and capital expenditures, depends largely upon our future operating performance. Our future operating performance, to a certain extent, is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control. Furthermore, our interest expense could increase if interest rates increase because our indebtedness bears interest at floating rates or to the extent we have to refinance existing debt with higher cost debt.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Borrowings under our facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on certain of our variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
In addition, in July 2017, the United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that it will no longer persuade or compel banks to submit LIBOR rates after 2021. It is unclear whether or not, at that time, a satisfactory replacement rate will be developed or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The risk factor set forth below should be read carefullyU.S. Federal Reserve, in conjunction with the risk factors discussedAlternative Reference Rates Committee, a steering committee comprised of, among other entities, large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index that measures the cost of borrowing cash overnight, backed by U.S. Treasury securities (“SOFR”). SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Whether or not SOFR or any other potential alternative reference rate attains market traction as a LIBOR replacement rate remains in question. The consequences of these developments with respect to LIBOR cannot be entirely predicted but may result in the Company’s Information Statement, dated April 6, 2020 (the “Information Statement”), which could materially affectlevel of interest payments on the portion of our business, financial condition and results of operations. The discussion in “Part I — Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q also includes additional informationindebtedness that may supplement or update the discussion of risk factors below and in our Information Statement.
OurOperations and Operating Results Have Been, and Continuebears interest at variable rates to be Materially Impactedaffected, which may adversely impact the amount of our interest payments under such debt.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
As of December 31, 2020, the Company has the availability to repurchase up to $350 million of the Company’s Class A Common Stock under the Class A Common Stock share repurchase program authorized by the COVID-19 PandemicCompany’s Board of Directors on March 31, 2020. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, in accordance with applicable insider trading and Government Actions Taken in Response.
An outbreakother securities laws and regulations. The timing and amount of a novel strain of coronavirus, COVID-19, in December 2019 subsequently became a pandemic after spreading to multiple countries, including the United States. As of the date of this Quarterly Reportpurchases will depend on Form 10-Q, virtually all of our business operationsmarket conditions and other factors. No shares have been suspended and it is not clear when those operations will resume.repurchased to date.
As a result of government mandated assembly limitations and closures, no events are currently permitted to be held at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre, and virtually all events at our venues are postponed or cancelled through June. The 2020 Boston Calling music festival, which had been slated for Memorial Day weekend, has also been cancelled. All NBA and NHL games have been suspended. We are not recognizing revenue from those events and it is unclear whether and to what extent those events will be rescheduled. Additionally, public officials have imposed mandates limiting restaurants and bars to only take-out and delivery service and requiring that nightlife venues close in the cities in which Tao Group Hospitality operates. As a result, virtually all Tao Group Hospitality venues are currently closed, which has materially impacted the business. It is unclear how long these restrictions will be in effect.
Even if the bans on public assembly and closures are lifted in the near future, concerns about the COVID-19 pandemic could deter artists from touring and/or substantially decrease the use of and demand for our venues. It is also possible that continuing concerns related to COVID-19 could cause professional sports teams in the United States to play games without an audience or deter our employees and vendors from working at our venues. As a result of the government mandates and possibility of continued concerns, we are facing a potentially lengthy period of time in which we are unable to host and book events due to the uncertainty around COVID-19. It is also unclear whether and to what extent COVID-19 concerns will impact the use of and/or demand for our entertainment and dining and nightlife venues, and demand for our sponsorship and advertising assets, even after the restrictions are lifted.
The impact of cancelled events, closed venues and reduced attendance, including at our dining and nightlife venues, will substantially decrease our revenues. In all cases, we will not be able to reduce our expenses, many of which are fixed over the near-term, to the same degree as our decline in revenues, which will adversely affect our results of operations and cash flow to a greater extent.

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Our business is particularly sensitive to reductions in travel and discretionary consumer spending. We cannot predict the time period over which our business will be impacted by COVID-19. Over the long-term, COVID-19 could impede economic activity in impacted regions or globally, causing a global recession, leading to a further decline in discretionary spending on sports and entertainment events and other leisure activities, which could result in long-term effects on our business. For example, Tao Group Hospitality, which has dining and nightlife venues in New York City, Las Vegas, Los Angeles, Chicago, Singapore and Australia, would be adversely affected by a decline in discretionary spending.
Even after our businesses resume operations there can be no assurances that guests at our venues or vendors and employees working at our venues will not contract COVID-19 at one of our venues. Any such occurrence could result in litigation, legal and other costs and reputational risk that could materially and adversely impact our business and results of operations.
We are building the MSG Sphere in Las Vegas. This is a complex construction project with cutting-edge technology that relies on subcontractors obtaining components from a variety of sources around the world. The widespread global effects of COVID-19 have resulted in significant impediments to construction that are beyond our control, including disruptions to our supply chain. As a result, in April 2020, we implemented a temporary suspension of construction, and we expect to incur additional expense related to stopping and re-starting construction. At this time, we are unable to determine the full impact of coronavirus-related disruptions, however, they may impact our cost estimates. We remain committed to building a state-of-the-art venue in Las Vegas and look forward to quickly and efficiently resuming construction as soon as practicable. As a result of this delay, we do not expect to achieve our goal of opening the venue in calendar year 2021.
For the reasons set forth above and other reasons that may come to light as the COVID-19 outbreak and protective measures expand, we cannot reasonably estimate the impact to our future revenues, results of operations, cash flows or financial condition, but such impacts have been and will continue to be significant and could have a material adverse effect on our business, revenues, results of operations, cash flows and financial condition.

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Item 6. Exhibits

(a)Index to Exhibits
(a)Index to Exhibits
EXHIBIT

NO.
DESCRIPTION
2.110.1

2.231.1

3.1
Amended and Restated Certificate of Incorporation of Madison Square Garden Entertainment Corp., dated April 17, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 23, 2020).

3.2
Amended By-Laws of Madison Square Garden Entertainment Corp., dated April 17, 2020 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on April 23, 2020).

10.1
Transition Services Agreement, dated as of March 31, 2020, between MSG Entertainment Group, LLC and MSG Sports, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form 10 (file No. 001-39245) filed on April 1, 2020).

10.2
Tax Disaffiliation Agreement, dated as of March 31, 2020, between Madison Square Garden Sports Corp. and Madison Square Garden Entertainment Corp. (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10 (file No. 001-39245) filed on April 1, 2020).

10.3
Employee Matters Agreement, dated as of March 31, 2020, between Madison Square Garden Sports Corp. and Madison Square Garden Entertainment Corp. (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 (file No. 001-39245) filed on April 1, 2020).

10.4
Employment Agreement, dated as of March 31, 2020, between Madison Square Garden Entertainment Corp. and James L. Dolan (incorporated by reference to Exhibit 10.47 to the Company’s Registration Statement on Form 10 (file No. 001-39245) filed on April 1, 2020).

10.5
Employment Agreement, dated as of March 31, 2020, between Madison Square Garden Entertainment Corp. and Andrew Lustgarten (incorporated by reference to Exhibit 10.48 to the Company’s Registration Statement on Form 10 (file No. 001-39245) filed on April 1, 2020).

10.6
Amendment to Employment Agreement, dated as of March 31, 2020, between Madison Square Garden Sports Corp. and Joseph Yospe, as assigned to Madison Square Garden Entertainment Corp. (incorporated by reference to Exhibit 10.51 to the Company’s Registration Statement on Form 10 (file No. 001-39245) filed on April 1, 2020).

10.7
Membership Interest Purchase Agreement, dated March 24, 2020, by and among CAPSS LLC, Polpat LLC, MSG National Properties, LLC, MSG Entertainment Group, LLC and MSG Forum, LLC (incorporated by reference to Exhibit 10.54 to the Company’s Registration Statement on Form 10 (file No. 001-39245) filed on March 26, 2020).

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

31.2

32.1

32.2


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101.INS
EXHIBIT
NO.
DESCRIPTION
101.INS
XBRL Instance 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.

104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended MarchDecember 31, 2020 formatted in Inline XBRL and contained in Exhibit 101.



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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 1512th day of May 2020.February 2021.
Madison Square Garden Entertainment Corp.
By:
/S/    MARK H. FITZPATRICK
Name:Mark H. FitzPatrick
Title:
Executive Vice President and

Chief Financial Officer


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