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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, 20202021
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-20211231_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 31, 2022:
Class A Common Stock par value $0.01 per share —19,489,79327,340,882 
Class B Common Stock par value $0.01 per share —4,529,5176,866,754 



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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
INDEX TO FORM 10-Q
 
Page
Page
Item 1. Financial Statements (Unaudited)
CombinedConsolidated Balance Sheets as of MarchDecember 31, 2020 (unaudited)2021 and June 30, 20192021
1
CombinedConsolidated Statements of Operations for the three and ninesix months ended MarchDecember 31, 20202021 and 2019 (unaudited)2020
3
CombinedConsolidated Statements of Comprehensive Income (Loss) for the three and ninesix months ended MarchDecember 31, 20202021 and 2019 (unaudited)2020
4
Combined StatementsConsolidated Statement of Cash Flows for the ninethree and six months ended MarchDecember 31, 20202021 and 2019 (unaudited)2020
5
CombinedConsolidated Statements of DivisionalStockholders' Equity and Redeemable Noncontrolling Interests for the three and ninesix months ended MarchDecember 31, 20202021 and 2019 (unaudited)2020
7
Notes to CombinedConsolidated Financial Statements (unaudited)
911
3954
5979
6080
6181
6182
83
6384





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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
COMBINEDCONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
 March 31,
2020		 June 30,
2019		December 31,
2021		June 30,
2021
 (Unaudited)  
ASSETS    ASSETS
Current Assets:    Current Assets:
Cash and cash equivalents $1,003,893
 $1,082,055
Cash and cash equivalents$1,258,105 $1,516,992 
Restricted cash 17,955
 10,010
Restricted cash23,914 22,984 
Short-term investments 331,019
 108,416
Accounts receivable, net 105,212
 81,044
Accounts receivable, net190,491 184,613 
Net related party receivables 2,288
 1,722
Net related party receivables48,929 31,916 
Prepaid income taxesPrepaid income taxes1,850 12,772 
Prepaid expenses 39,255
 24,067
Prepaid expenses69,476 67,445 
Other current assets 40,581
 39,430
Other current assets42,637 36,014 
Assets held for sale 109,155
 —
Total current assets 1,649,358
 1,346,744
Total current assets1,635,402 1,872,736 
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 affiliates46,412 49,221 
Property and equipment, netProperty and equipment, net2,474,693 2,156,292 
Right-of-use lease assets 234,760
 —
Right-of-use lease assets470,253 280,579 
Amortizable intangible assets, net 155,948
 214,391
Amortizable intangible assets, net182,006 198,274 
Indefinite-lived intangible assets 64,881
 65,421
Indefinite-lived intangible assets63,801 63,801 
Goodwill 81,996
 165,558
Goodwill500,181 502,195 
Other assets 37,438
 89,963
Other assets150,326 166,781 
Total assets $3,827,165
 $3,315,759
Total assets$5,523,074 $5,289,879 
    
    
See accompanying notes to combined financial statements.
See accompanying notes to unaudited consolidated financial statements.See accompanying notes to unaudited consolidated financial statements.
1

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS (Unaudited) (Continued)
(in thousands, except per share data)
December 31,
2021		June 30,
2021
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable$43,815 $26,644 
Net related party payables, current56,597 23,173 
Current portion of long-term debt, net of deferred financing costs56,483 53,973 
Income taxes payable406 2,527 
Accrued liabilities:
Employee related costs73,078 91,853 
Other accrued liabilities268,135 210,749 
Operating lease liabilities, current65,663 73,423 
Collections due to promoters49,513 37,877 
Deferred revenue256,154 209,651 
Total current liabilities869,844 729,870 
Long-term debt, net of deferred financing costs1,606,759 1,650,628 
Operating lease liabilities, noncurrent450,019 233,556 
Defined benefit and other postretirement obligations52,653 54,179 
Other employee related costs17,814 21,193 
Collections due to promoters, noncurrent— 6,625 
Deferred tax liabilities, net181,214 200,325 
Other liabilities74,952 75,263 
Total liabilities3,253,255 2,971,639 
Commitments and contingencies (see Note 11)00
Redeemable noncontrolling interests142,004 137,834 
Madison Square Garden Entertainment Corp. Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 27,327 and 27,093 shares outstanding as of December 31, 2021 and June 30, 2021, respectively273 271 
Class B Common stock, par value $0.01, 30,000 shares authorized; 6,867 shares outstanding as of December 31, 2021 and June 30, 202169 69 
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2021 and June 30, 2021— — 
Additional paid-in capital2,317,415 2,294,775 
Accumulated deficit(173,302)(96,341)
Accumulated other comprehensive loss(32,632)(30,272)
Total Madison Square Garden Entertainment Corp. stockholders’ equity2,111,823 2,168,502 
Nonredeemable noncontrolling interests15,992 11,904 
Total equity2,127,815 2,180,406 
Total liabilities, redeemable noncontrolling interests and equity$5,523,074 $5,289,879 

See accompanying notes to unaudited consolidated 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.
COMBINEDCONSOLIDATED 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 20192021202020212020
Revenues (a)
 $199,861
 $250,018
 $767,038
 $832,384
Revenues (a)
$516,439 $168,752 $810,949 $339,298 
Operating expenses:        Operating expenses:
Direct operating expenses (b)
 132,809
 158,710
 472,582
 507,249
Direct operating expenses (b)
296,258 92,497 462,019 191,728 
Selling, general and administrative expenses (c)
 84,186
 83,159
 257,970
 231,038
Selling, general and administrative expenses (c)
162,277 96,018 337,116 177,675 
Depreciation and amortization 26,196
 26,768
 80,271
 81,606
Depreciation and amortization30,533 25,677 59,963 54,087 
Impairment for intangibles, long-lived assets, and goodwill 102,211
 —
 102,211
 —
Impairment and other (gains) loss, netImpairment and other (gains) loss, net(7,979)— (161)— 
Restructuring chargesRestructuring charges— 1,372 — 21,299 
Operating income (loss) (145,541) (18,619) (145,996) 12,491
Operating income (loss)35,350 (46,812)(47,988)(105,491)
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(1,774)(1,568)(2,981)(3,264)
Interest income (d)
 3,659
 7,987
 17,242
 22,020
773 837 1,548 1,609 
Interest expense (605) (3,247) (1,854) (10,076)Interest expense(8,167)(5,262)(17,415)(10,535)
Miscellaneous income (expense), net (e)
 (17,381) 4,613
 (2,893) (4,118)(17,100)(7,568)(19,647)26,449 
 (15,423) 6,472
 8,756
 24,957
(26,268)(13,561)(38,495)14,259 
Income (loss) from operations before income taxes (160,964) (12,147) (137,240) 37,448
Income (loss) from operations before income taxes9,082 (60,373)(86,483)(91,232)
Income tax benefit (expense) 10,126
 (469) 8,686
 (1,253)Income tax benefit (expense)(4,063)298 14,847 (9,159)
Net income (loss) (150,838) (12,616) (128,554) 36,195
Net income (loss)5,019 (60,075)(71,636)(100,391)
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 interests2,642 (3,342)4,854 (7,231)
Less: Net income (loss) attributable to nonredeemable noncontrolling interests 195
 (680) 38
 (3,121)Less: Net income (loss) attributable to nonredeemable noncontrolling interests106 (902)471 (1,532)
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$2,271 $(55,831)$(76,961)$(91,628)
Basic earnings (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholdersBasic earnings (loss) per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders$0.07 $(1.64)$(2.25)$(2.70)
Diluted earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholdersDiluted earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholders$0.07 $(1.64)$(2.25)$(2.70)
Weighted-average number of common shares outstanding:Weighted-average number of common shares outstanding:
BasicBasic34,278 34,021 34,186 33,961 
DilutedDiluted34,436 34,021 34,186 33,961 
_________________
(a)
(a)Includes revenues from related parties of $30,702 and $4,638 for the three months ended December 31, 2021 and 2020, respectively, and $34,889 and $7,461 for the six months ended December 31, 2021 and 2020, respectively.
(b)Includes net charges from related parties of$37,027 and $35,270for the three months ended December 31, 2021 and 2020, respectively, and $79,360 and $75,186 for the six months ended December 31, 2021 and 2020, respectively.
(c)Includes net charges to related parties of $(9,526) and $(10,491)for the three months ended December 31, 2021 and 2020, respectively, and $(16,786) and $(20,538) for the six months ended December 31, 2021 and 2020, respectively.

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 combinedunaudited consolidated financial statements.
3

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
COMBINEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Net income (loss)$5,019 $(60,075)$(71,636)$(100,391)
Other comprehensive income (loss), before income taxes:
Amortization of prior service credit included in net periodic benefit cost510 416 1,020 894 
Cumulative translation adjustments2,486 11,883 (3,932)25,834 
Other comprehensive income (loss), before income taxes2,996 12,299 (2,912)26,728 
Income tax benefit (expense) related to items of other comprehensive income (loss)(568)(3,733)552 (6,465)
Other comprehensive income (loss), net of income taxes2,428 8,566 (2,360)20,263 
Comprehensive income (loss)7,447 (51,509)(73,996)(80,128)
Less: Net income (loss) attributable to redeemable noncontrolling interests2,642 (3,342)4,854 (7,231)
Less: Net income (loss) attributable to nonredeemable noncontrolling interests106 (902)471 (1,532)
Comprehensive income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders$4,699 $(47,265)$(79,321)$(71,365)
  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 combinedunaudited consolidated financial statements.


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

Six Months Ended
December 31,
20212020
Cash flows from operating activities:
Net loss$(71,636)$(100,391)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization59,963 54,087 
Amortization of deferred financing costs4,367 1,898 
Benefit from deferred income taxes(17,173)(29,505)
Share-based compensation expense43,699 45,984 
Loss in equity method investments2,981 3,264 
Net unrealized loss (gains) on equity investments with readily determinable fair value19,615 (26,431)
Provision for credit losses1,236 495 
Other non-cash adjustments2,202 263 
Change in assets and liabilities:
Accounts receivable(20,857)(9,821)
Receivables from related parties, net of payables16,411 (2,049)
Prepaid expenses and other assets(11,504)(9,173)
Accounts payable17,796 (12,614)
Prepaid/payable for income taxes8,044 2,033 
Accrued and other liabilities5,133 (32,420)
Collections due to promoters, including noncurrent portion5,011 (6,824)
Deferred revenue47,016 14,077 
Operating lease right-of-use assets and lease liabilities20,482 4,660 
Net cash provided by (used in) operating activities$132,786 $(102,467)
Cash flows from investing activities:
Capital expenditures$(313,076)$(221,829)
Capitalized interest(19,926)(7,911)
Proceeds from maturity of short-term investments— 339,110 
Proceeds from sale of equity securities— 20,583 
Cash received for notes receivable— 6,328 
Other investing activities470 (43)
Net cash (used in) provided by investing activities$(332,532)$136,238 
See accompanying notes to unaudited consolidated 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.

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




Six Months Ended
December 31,
20212020
Cash flows from financing activities:
Proceeds from issuance of term loan, net of issuance discount$— $630,500 
Proceeds from revolving credit facility— 6,500 
Taxes paid in lieu of shares issued for equity-based compensation(15,240)(8,123)
Noncontrolling interest holders’ capital contribution4,677 500 
Distributions to noncontrolling interest holders(1,060)— 
Distribution to related parties associated with the settlement of certain share-based awards(516)— 
Repayments of revolving credit facility(15,000)— 
Principal repayments on long-term debt(30,500)(16,250)
Payments for financing costs— (14,615)
Net cash (used in) provided by financing activities$(57,639)$598,512 
Effect of exchange rates on cash, cash equivalents and restricted cash(572)7,795 
Net (decrease) increase in cash, cash equivalents and restricted cash(257,957)640,078 
Cash, cash equivalents and restricted cash at beginning of period1,539,976 1,121,141 
Cash, cash equivalents and restricted cash at end of period$1,282,019 $1,761,219 
Non-cash investing and financing activities:
Investments and loans to nonconsolidated affiliates$675 $— 
Capital expenditures incurred but not yet paid$154,131 $79,478 
Share-based compensation capitalized in property and equipment$1,763 $2,784 
  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 combinedunaudited consolidated financial statements.


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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
COMBINEDCONSOLIDATED STATEMENTS OF DIVISIONALSTOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
Three Months Ended December 31, 2021
Common
Stock
Issued		Additional
Paid-In
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of September 30, 2021$342 $2,293,157 $(175,573)$(35,060)$2,082,866 $13,141 $2,096,007 $140,410 
Net income— — 2,271 — 2,271 106 2,377 2,642 
Other comprehensive income— — — 2,428 2,428 — 2,428 — 
Comprehensive income— — — — 4,699 106 4,805 2,642 
Share-based compensation— 24,595 — — 24,595 — 24,595 — 
Tax withholding associated with shares issued for equity-based compensation— (337)— — (337)— (337)— 
Accretion of put options— — — — — — — 587 
Contributions from noncontrolling interest holders— — — — — 3,805 3,805 — 
Distributions to noncontrolling interest holders— — — — — (1,060)(1,060)(1,635)
Balance as of December 31, 2021$342 $2,317,415 $(173,302)$(32,632)$2,111,823 $15,992 $2,127,815 $142,004 
See accompanying notes to unaudited consolidated financial statements.

             
  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 STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Three Months Ended December 31, 2020
Common Stock IssuedAdditional
Paid-In
Capital		Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of September 30, 2020$340 $2,294,072 $16,345 $(37,295)$2,273,462 $11,773 $2,285,235 $17,298 
Reversal of valuation allowance1,415 — 1,415 — 1,415 — 
Net loss——(55,831)— (55,831)(902)(56,733)(3,342)
Other comprehensive income——— 8,566 8,566 — 8,566 — 
Comprehensive loss— — — — (47,265)(902)(48,167)(3,342)
Share-based compensation— 31,158 — — 31,158 — 31,158 — 
Tax withholding associated with shares issued for equity-based compensation— (53)— — (53)— (53)— 
Accretion of put options— — — — — — — 587 
Contribution from noncontrolling interest holders— — — — — 300 300 — 
Balance as of December 31, 2020$340 $2,325,177 $(38,071)$(28,729)$2,258,717 $11,171 $2,269,888 $14,543 
See accompanying notes to unaudited consolidated 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 STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
Six Months Ended December 31, 2021
Common
Stock
Issued		Additional
Paid-In
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of June 30, 2021$340 $2,294,775 $(96,341)$(30,272)$2,168,502 $11,904 $2,180,406 $137,834 
Net (loss) income— — (76,961)— (76,961)471 (76,490)4,854 
Other comprehensive loss— — — (2,360)(2,360)— (2,360)— 
Comprehensive (loss) income— — — — (79,321)471 (78,850)4,854 
Share-based compensation— 44,287 — — 44,287 — 44,287 — 
Tax withholding associated with shares issued for equity-based compensation2 (15,242)— — (15,240)— (15,240)— 
Adjustment of redeemable noncontrolling interest for change in ownership— — — — — — — (7,500)
Redeemable noncontrolling interest adjustment to redemption fair value— (6,178)— — (6,178)— (6,178)7,566 
Accretion of put options— — — — — — — 1,174 
Contributions from noncontrolling interest holders— — — — — 4,677 4,677 — 
Distributions to noncontrolling interest holders— — — — — (1,060)(1,060)(1,635)
Distribution to related parties associated with the settlement of certain share-based awards— (227)— — (227)— (227)(289)
Balance as of December 31, 2021$342 $2,317,415 $(173,302)$(32,632)$2,111,823 $15,992 $2,127,815 $142,004 
See accompanying notes to unaudited consolidated financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands)
Six Months Ended December 31, 2020
Common Stock IssuedAdditional
Paid-In
Capital		Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Loss		Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
 Interests
Balance as of June 30, 2020$338 $2,285,709 $50,246 $(48,992)$2,287,301 $12,203 $2,299,504 $20,600 
Cumulative effect of adoption of ASU 2016-13, credit losses(480)— (480)(480)
Reversal of valuation allowance— — 3,791 — 3,791 — 3,791 — 
Net loss——(91,628)— (91,628)(1,532)(93,160)(7,231)
Other comprehensive income——— 20,263 20,263 — 20,263 — 
Comprehensive loss— (71,365)(1,532)(72,897)(7,231)
Share-based compensation— 47,593 — — 47,593 — 47,593 — 
Tax withholding associated with shares issued for equity-based compensation2 (8,125)— — (8,123)— (8,123)— 
Accretion of put options— — — — — — — 1,174 
Contributions from noncontrolling interest holders— — — — — 500 500 — 
Balance as of December 31, 2020$340 $2,325,177 $(38,071)$(28,729)$2,258,717 $11,171 $2,269,888 $14,543 
See accompanying notes to unaudited consolidated financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All amounts included in the following notes to combinedconsolidated 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 TransactionEntertainment Distribution and Merger with MSG Networks Inc.
Madison Square Garden Entertainment Corp. (together with its subsidiaries, the “Company” or “MSG Entertainment”) was incorporated on November 21, 2019 as a direct, wholly-owned subsidiary of Madison Square Garden Sports Corp. (“MSG Sports”), formerly known as The Madison Square Garden Company. On March 31, 2020, MSG Sports’ board of directors approved the distribution of all the outstanding common stock of MSG Entertainment to MSG Sports’ stockholders (the “Entertainment Distribution”), which occurred on April 17, 2020 (the “Entertainment Distribution Date”), Madison Square Garden Sports Corp. (formerly The Madison Square Garden Company) distributed all. See Note 1 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K, as amended by Form 10-K/A filed on February 9, 2022 (the “Form 10-K”) for more information regarding the Entertainment Distribution. As part of the outstanding common stock of Madison Square Garden Entertainment Corp. (formerly MSG Entertainment Spinco, Inc.) (the “Company”) to its stockholders (the “Entertainment Distribution”). The Company owns, directly 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, stockholdersthe Company has entered into various agreements with MSG Sports as detailed in Note 18.
On July 9, 2021, the Company completed its previously announced acquisition of Madison Square Garden Sports Corp. received (a) one shareMSG Networks Inc. pursuant to the Agreement and Plan of Merger, dated as of March 25, 2021 (the “Merger Agreement”), among the Company, Broadway Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company’sCompany (“Merger Sub”), and MSG Networks Inc. Merger Sub merged with and into MSG Networks Inc. (the “Merger”), with MSG Networks Inc. surviving and continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of the Company. On July 9, 2021, at the effective time of the Merger (the “Effective Time”), (i) each share of Class A common stock, par value $0.01 per share, for every share of Madison Square Garden Sports Corp.MSG Networks Inc. (“MSGN Class A Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class A common stock, par value $0.01 per share, of the Company (“Class A Common Stock”) such that each holder of record of shares of MSGN Class A Common Stock had the right to receive, in the aggregate, a number of shares of Class A Common Stock equal to the total number of shares of MSGN Class A Common Stock held of record as ofimmediately prior to the close of business, New York City time, on April 13, 2020 (the “Record Date”),Effective Time multiplied by 0.172, with such product rounded up to the next whole share and (b) one(ii) each share of the Company’s Class B common stock, par value $0.01 per share, for every share of Madison Square Garden Sports Corp.MSG Networks Inc. (“MSGN Class B Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class B common stock, par value $0.01 per share, of the Company (“Class B Common Stock”) such that each holder of record of shares of MSGN Class B Common Stock had the right to receive, in the aggregate, a number of shares of Class B Common Stock equal to the total number of shares of MSGN Class B Common Stock held of record asimmediately prior to the Effective Time multiplied by 0.172, with such product rounded up to the next whole share, in each case except for Excluded Shares (as defined in the Merger Agreement). The Company issued 7,476 shares of the closeClass A Common Stock and 2,337 shares of business, New York City time,Class B Common Stock on July 9, 2021 to holders of MSGN Class A Common Stock and MSGN Class B Common Stock, respectively, which shares are reflected as outstanding for all periods presented.
The Merger has been accounted for as a transaction between entities under common control as the Record Date.Company and MSG Networks Inc. were, prior to the Merger, each controlled by the Dolan Family Group (as defined herein). Upon the closing of the Merger, the net assets of MSG Networks Inc. were combined with those of the Company at their historical carrying amounts and the companies have been presented on a combined basis for all historical periods that the companies were under common control. As a result, all prior period balances in these consolidated financial statements (including share activities) were retrospectively adjusted as if MSG Entertainment and MSG Networks Inc. had been operating as a single company.
Description of Business
The Company is a leader in live experiences comprised of iconic venues; marquee entertainment content;brands; regional sports and entertainment networks; 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 is comprised of 3 reportable segments: Entertainment, MSG Networks and Tao Group Hospitality.
•The Entertainment segment includes the Company’s portfolio of venues includes:venues: 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 ahas unveiled its vision for state-of-the-art venue,venues, called MSG Sphere, and is currently building its first such venue in Las Vegas and plans to build a second MSG Sphere in London.Vegas. The CompanyEntertainment segment also includes the original production, the Christmas
11

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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,Festival. This segment also includes our bookings business, which features a variety of live entertainment and sports experiences.
•The MSG Networks segment is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG+, a companion streaming app, MSG GO, and other digital properties. MSG Networks serves the New York Designated Market Area (“DMA”), as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including exclusive live local games and other programming of the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”), New York Islanders, New Jersey Devils and Buffalo Sabres of the National Hockey League (the “NHL”), as well as significant coverage of the New York Giants and Buffalo Bills of the National Football League.
•The Tao Group Hospitality segment features the Company’s controlling interest in TAO Group Holdings LLC, (“Tao Group Hospitality”) a hospitality group with globally-recognized entertainment dining and nightlife brands.brands including: Tao, Marquee, Lavo, Beauty & Essex, Cathédrale, Hakkasan and Omnia.
AsThe Company conducts a significant portion of March 31, 2020, the Company operated and reported its financial information as one segment. In making this determination, the Company (i) determined its Chief Operating Decision Maker (“CODM”), (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 decision to report as 1 segment was based upon the following:
i)its internal organizational structure;
ii)the manner in which its operations were managed;at venues that it either owns or operates under long-term leases. The Company owns The Garden, Hulu Theater at Madison Square Garden 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 The Chicago Theatre. 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 performance and allocate resources, discrete financial information at 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. Following the Entertainment Distribution on April 17, 2020, the Company will have 2 segments (the Entertainment businessleases Radio City Music Hall and the Beacon Theatre. Additionally, Tao Group Hospitality business) as a result of certain changesoperates various restaurants, nightlife and hospitality venues under long-term leases and management contracts 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”).
A significant majority of the Company’s revenues and assets are attributed to or located in the United States and are primarily concentrated in theLas Vegas, New York, City metropolitan area.

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


Southern California, London, Singapore, Sydney and various other domestic and international locations.
Basis of Presentation
The combined financial statements of the Company (the “combined financial statements”) were preparedreports on a stand-alonefiscal year basis derived from theending on June 30th (“Fiscal Year”). In these consolidated financial statements, the year ending on June 30, 2022 is referred to as “Fiscal Year 2022,” and accounting records of Madison Square Garden Sports Corp. Thesethe years ended on June 30, 2021 and 2020 are referred to as “Fiscal Year 2021” and “Fiscal Year 2020”, respectively.
The accompanying interim consolidated financial statements reflect the combined historical results of operations, financial position and cash flows of the Companyhave been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and 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 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, dated April 6, 2020 (the “Information Statement”), filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 7, 2020 for more information regarding the Company’s policy for recognition of suites, sponsorship and venue signage revenues.
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 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.”
Unaudited Interim Financial Statements
The accompanying interim 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 of Securities and Exchange Commission (“SEC”), 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, 20192021 included in the Company’s Information Statement.Annual Report on Form 10-K and the Company’s consolidated financial statements and notes thereto for the three months ended September 30, 2021 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2021, as amended by Form 10-Q/A filed on February 9, 2022. The combinedconsolidated financial statements as of MarchDecember 31, 20202021 and for the three and ninesix months ended MarchDecember 31, 20202021 and 20192020 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 fromAs a result of the production of the Christmas Spectacularand arena license fees from MSG Sports in connection with the Knicks and Rangers use of the Garden, the Company generally means it earns a disproportionate share of its annual revenues in the second quarterand third quarters of the its fiscal year. In addition, the Company’s operating results since the third quarter of Fiscal Year 2020 have been negatively impacted due to the COVID-19 pandemic.
As discussed above, the Merger has been accounted for as a transaction between entities under common control and resulted in a change in reporting entity for purposes of U.S. GAAP. The results of operations for the eight days ended July 8, 2021 from MSG Networks were immaterial and the Company has included these results in the period for the six months ended December 31, 2021. The following table provides the impact of the change in reporting entity on the results of operations for the three and six months ended December 31, 2020 in accordance with Accounting Standards Codification (“ASC”) Subtopic 250-10-50-6:
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Three Months EndedSix Months Ended
December 31, 2020
Decrease in net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$61,472 $115,165 
Decrease in other comprehensive income$(3,607)$(6,213)
Decrease in net loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders (basic and diluted)$3.25 $5.88 
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 (including COVID-19 variants) and actions taken in response by the governmentgovernmental authorities and certain professional sports leagues. AsFor the majority of the date of this Quarterly Report on Form 10-Q, virtuallyFiscal Year 2021, substantially all of the Company’sEntertainment business operations were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. While operations have been suspended andresumed, it is not clear when those operationswe will resume. fully return to normal operations.
As a result of government mandatedgovernment-mandated assembly limitations and closures, noall of our performance venues were closed beginning in March 2020. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from February through May 2021 with certain safety protocols and social distancing. Beginning in May 2021, all of our New York performance venues were permitted to host guests at full capacity, subject to certain restrictions, and effective June 2021, The Chicago Theatre was permitted to host events without restrictions. Effective August 17, 2021, all workers and customers in New York City indoor dining, indoor fitness and indoor entertainment facilities, including our venues, were subject to certain vaccination requirements. Following updated regulations, effective January 3, 2022 for the Chicago Theatre, and January 29, 2022 for our New York venues, all guests five and older, as well as employees, are currentlyrequired to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine (although specific performers may require enhanced protocols). Children under age 5 can attend events with a vaccinated adult, but ages 2 to 4 need to wear a mask while inside our venues. In addition, effective August 20, 2021 and continuing, masks are required for all individuals in indoor public spaces in Chicago, including our venues.
For Fiscal Year 2021, the majority of ticketed events at our venues were postponed or cancelled. For the six months ended December 31, 2021 and as of this date, live events have been permitted to be held at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre or The Chicago Theatre,all of our performance venues and virtually all events at our venueswe are continuing to host and book new events. As a result of an increase in cases of a COVID-19 variant, select bookings were postponed or cancelled through June. at our performance venues in the second quarter of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
The impact of the COVID-19 pandemic on our operations also included (i) the partial cancellation of the 2021 production of the Christmas Spectacular, (ii) the cancellation of the 2020 production of the Christmas Spectacular, and (iii) the cancellation of both the 2020 and 2021 Boston Calling music festival,Music Festivals.
The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the Knicks and Rangers to play their home games at The Garden. As discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the entirety of the Knicks and Rangers 2020-21 regular seasons, which had been slatedmaterially impacted the payments we received under the Arena License Agreements for Memorial Day weekend, has also been cancelled. Additionally, public officials have imposed mandates limiting restaurantsFiscal Year 2021. On July 1, 2021, the Knicks and bars to only take-outRangers began paying the full amounts provided for under their respective Arena License Agreements and delivery service full 82-game regular seasons for the 2021-22 NBA and requiring that nightlife venues close in the cities in which Tao Group Hospitality operates. NHL seasons are scheduled.
As a result virtually all Tao Group Hospitality venuesof the COVID-19 pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in and outside the United States are closed, which hasrevenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the business being materially impacted.
Additionally,NBA and NHL, and, as a result, ofour advertising revenue and certain operating disruptions due toexpenses, including rights fees expense, reflect the same.
Disruptions caused by the COVID-19 the Company’s projected cash flows were directly impacted. This disruption along with the deteriorating macroeconomic conditionspandemic had a significant and industry/market considerations, were considered a “triggering event” for thenegative impact on Tao Group Hospitality reporting unit, which requiredHospitality’s operations and financial performance for Fiscal Year 2021. Due to government actions taken in response to the Company to assess the carrying valueCOVID-19 pandemic,
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virtually all of Tao Group Hospitality’s intangiblevenues were closed for approximately three months starting in March 2020. Additionally, three venues were permanently closed. Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and social distancing requirements for outdoor and indoor dining. Tao Group Hospitality’s operations fluctuated throughout Fiscal Year 2021 and during the first two quarters of Fiscal Year 2022 as certain markets lifted restrictions, imposed restrictions, and changed operational requirements over time. Following updated regulations applicable to indoor dining facilities and entertainment venues, effective January 3, 2022 for Chicago, and January 29, 2022 for New York, all guests five and older, as well as employees, are required to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. In addition, certain jurisdictions have reinstated safety protocols, such as mask mandates in Nevada and Chicago, but Tao Group Hospitality is continuing to operate without capacity restrictions in domestic and key international markets.
It is unclear how long and to what extent COVID-19 concerns, including with respect to new variants, will continue to impact government and league-mandated capacity restrictions or vaccination/mask requirements, the use of and/or demand for our entertainment and dining and nightlife venues, demand for our sponsorship and advertising assets, long-lived assetsdeter our employees and goodwill,vendors from working at our venues (which may lead to difficulties in that order in accordance with ASC Subtopic 350-30, for impairment. Based on this evaluation,staffing) or otherwise materially impact our operations.
Impairment and other (gains) loss, net
For the three months ended December 31, 2021, the Company recorded other gains of $7,979 primarily from extinguishments and modification of lease liabilities associated with certain Hakkasan venues and a non-cash goodwill impairment chargegain on disposal of $80,698 duringone of the Hakkasan venues. For the three and nine months ended March 31, 2020 associated with one venue within theSeptember 30, 2021, Tao Group Hospitality reporting unit. In addition, duringrecorded an impairment charge for long-lived assets of $7,818 due to decisions made by management to cease operations at certain Hakkasan venues subsequent to the threeHakkasan acquisition date, resulting in the impairment of the respective right-of-use asset and nine months ended March 31, 2020, the Company recorded non-casha leasehold improvement. There were no other 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 a tradename, 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.
There was no triggering event identifiedrecorded by the Company for the Entertainment reporting unit as of Marchsix months ended December 31, 2020. However, the2021. 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 8, Note 9 and Note 10 for further detail.detail of the Company’s intangible assets, long-lived assets and goodwill.
Note 2. Accounting Policies
Principles of CombinationConsolidation
The combinedconsolidated financial statements of the Company include assetsthe accounts of Madison Square Garden Entertainment Corp. and liabilities that have been determined to be specifically identifiable or otherwise attributable to the Company. All intracompany accounts within the Company’s combined businesses have been eliminated.its subsidiaries. All significant intercompany transactions and balances between the Company and Madison Square

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Garden Sports Corp. have been includedeliminated in these combined financial statements as components of Madison Square Garden Sports Corp. Investment. Expenses related to corporate allocations from the Company to Madison Square Garden Sports Corp. prior to the Entertainment Distribution are considered to be effectively settled in the combined financial statements at the time the transaction is recorded, with the offset recorded against the Madison Square Garden Sports Corp. investment.
consolidation. In addition, the combinedconsolidated 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 combinedconsolidated statements of operations and combinedconsolidated 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, 20192021 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 a three-month lag basis and 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, 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 combinedconsolidated 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 provision for credit losses, valuation of accounts receivable, investments, goodwill, intangible assets, other long-lived assets, pension and other postretirement benefit obligations and the related net periodic benefit cost, tax accruals and other liabilities. In addition, estimates are used in revenue recognition, rights fees, 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.
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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’sCompany's Summary of Significant Accounting Policies, disclosed in the Company’s audited combined financial statements and notes theretoits Form 10-K. The update primarily reflects specific policies for the year ended June 30, 2019 includedMSG Networks segment in connection with the Merger.
Revenue Recognition — Media Affiliation Fee and Advertising Revenues
The MSG Networks segment generates revenues principally from affiliation fees charged to cable, satellite, telephone and other platforms (“Distributors”) for the right to carry its networks, as well as from the sale of advertising, largely derived from the sale of inventory in its live professional sports programming. Due to the COVID-19 pandemic, the NBA and NHL 2020-21 regular seasons were delayed and primarily occurred during the third and fourth quarters of Fiscal Year 2021 and will affect the comparability in the Company’s Information Statement:second, third and the fourth fiscal quarters of Fiscal Year 2022.
Earnings (Loss) Per Common ShareAffiliation fee revenue is earned from Distributors for the right to carry the segment’s networks under contracts, commonly referred to as “affiliation agreements.” The performance obligation under its affiliation agreements is satisfied as MSG Networks provides its programming over the term of the affiliation agreement.
Basic earnings (loss) per common share (“EPS”)Affiliation fee is the predominant revenue stream of the MSG Networks segment. Substantially all of the MSG Networks’ affiliation agreements are sales-based and usage-based royalty arrangements, the revenue for which is recognized as the sale or usage occurs. The transaction price is represented by affiliation fees that are generally based upon net income (loss) availablecontractual rates applied to common stockholders divided by the weighted-average number of common shares outstanding during the period. OnDistributor’s subscribers who receive or can receive the Entertainment Distribution Date, 23,992 common sharesMSG Networks programming. Such subscriber information is generally not received until after the close of the reporting period, and in these cases, the Company were distributedestimates the number of subscribers. Historical adjustments to Madison Square Garden Sports Corp. stockholdersrecorded estimates have not been material.
In addition to affiliation fee revenue, the MSG Networks segment also earns advertising revenue primarily through the sale of commercial time and other advertising inventory during its live professional sports programming. In general, these advertising arrangements either do not exceed one year or are primarily multi-year media banks, the elements of which are agreed upon each year. Advertising revenue is recognized as advertising is aired. In certain advertising arrangements, the Company guarantees specified viewer ratings for its programming. In such cases, the promise to deliver the guaranteed viewer ratings by airing the advertising represents MSG Networks’ performance obligation. A contract liability is recognized as deferred revenue to the extent any guaranteed viewer ratings are not met and the customer is expected to exercise a contractual right for additional advertising time. The related revenue is subsequently recognized as revenue either when MSG Networks provides the required additional advertising time, or additional performance requirements become remote, which may be at the time the guarantee obligation contractually expires.
Direct Operating Expenses
Direct operating expenses from the MSG Networks segment primarily represent media rights fees and other direct programming and production costs, such as the salaries of on-air personalities, producers, directors, technicians, writers and other creative staff, as well as expenses associated with location costs, remote facilities and maintaining studios, origination, and transmission services and facilities. The professional team media rights acquired under media rights agreements to telecast various sporting events and other programming for exhibition on the Record Datesegment’s networks are typically expensed on a straight-line basis over the applicable annual contract or license period.
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Advertising Expenses
Advertising costs are typically charged to expense when incurred. The MSG Networks segment enters into nonmonetary transactions, primarily with its Distributors (see discussion below), that involve the exchange of advertising and were outstanding as of April 17, 2020. This share amount is being utilizedpromotional benefits, for the calculation of basic earnings (loss) per sharesegment’s services. Total advertising costs, which includes the aforementioned nonmonetary transactions and are classified in selling, general and administrative expenses, were $11,102 and $16,229 for both the three and ninesix months ended MarchDecember 31, 2021, respectively, and $3,667 and $8,469 for the three and six months ended December 31, 2020, respectively.
Noncash Consideration
The MSG Networks segment enters into nonmonetary transactions, primarily with its Distributors, that involve the exchange of products or services, such as advertising and 2019 becausepromotional benefits, for the segment’s services. For arrangements that are subject to sales based and usage-based royalty guidance, MSG Networks measures noncash consideration that it receives at fair value as the sale or usage occurs. For other arrangements, the MSG Networks segment measures the estimated fair value of the noncash consideration that it receives at contract inception. If the MSG Networks segment cannot reasonably estimate the fair value of the noncash consideration, the segment measures the fair value of the consideration indirectly by reference to the standalone selling price of the services promised to the customer in exchange for the consideration as revenues.
Interest Capitalization
For significant long term construction projects, such as MSG Sphere, the Company wasbegins to capitalize qualified interest costs once activities necessary to get the asset ready for its intended use have commenced. The Company calculates qualified interest capitalization using the average amount of accumulated expenditures during the period the asset is being prepared for its intended use and a wholly-owned subsidiarycapitalization rate which is derived from the Company’s weighted average borrowing rate during such time, in the absence of Madison Square Garden Sports Corp. priorspecific borrowings related to the Entertainment Distribution Date. In addition,significant long term construction projects. The Company ceases capitalization on any portions substantially completed and ready for their intended use. See Note 8 for further details on interest capitalization during 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, three and six months ended December 31, 2021 and 2020.
Earnings Per Share.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2016December 2019, the FASBFinancial Accounting Standards Board (“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 Losses. ASU No. 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that will require the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC Topic 326 to provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, FASB issued ASU No. 2019-11 to provide clarification guidance in a number of areas, including: (i) expected recoveries for purchased financial assets with credit deterioration, (ii) transition relief for troubled debt restructuring, (iii) disclosures related to accrued interest receivables, and (iv) financial assets secured by collateral maintenance provisions. For most financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which will generally result in the earlier recognition of credit losses on financial instruments. 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 for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its combined 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 Measurement as 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 need to be applied on a retrospective basis except for the guidance related to (i) unrealized gains and loss included in other comprehensive income, (ii) disclosure related to range and weighted average Level 3 unobservable inputs and (iii) narrative disclosure requirements on measurement uncertainty, which are required to be applied on a prospective basis. The adoption of this standard is not expected to have a material impact on the Company’s combined financial statements.
In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The standard will be effective for the Company in the fourth quarter of fiscal year 2021, with early adoption permitted. The amendments in ASU No. 2018-14 are required to be applied retrospectively. The Company is currently evaluating the impact this standard will have on its combined 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. The standard is effective for 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. The adoption of this standard is not expected to have a material impact on the Company’s combined financial statements.
In November 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. ASU No. 2018-17 amends the variable interest entities (“VIE”) guidance to align the evaluation of a decision maker’s or service provider’s fee in assessing a variable interest with the guidance in the primary beneficiary test. Specifically, indirect interests held by a related party that is under common control will now be considered on a proportionate basis, rather than in their entirety, when assessing whether the fee qualifies as a variable interest. The proportionate basis approach is consistent with the treatment of indirect interests held by a related party under common control when evaluating the primary beneficiary of a VIE. This effectively means that when a decision maker or service provider has an interest in a related party, regardless of whether they are under common control, it will consider that related party’s interest in a VIE on a proportionate basis throughout the VIE model, for both the assessment of a variable interest and the determination of a primary beneficiary.

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The standard will be effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. The amendments in ASU No. 2018-17 are required to be applied retrospectively. The adoption of this standard is not expected to have a material impact on the Company’s combined financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. ASU No. 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC Topic 606 when the counterparty is a customer. In addition, ASU No. 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The standard will be effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. The amendments in ASU No. 2018-18 are required to be applied retrospectively to the date when the Company initially adopted ASCTopic 606. The Company is currently evaluating the impact this standard will have on its combined financial statements.
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 — Financial Instruments. This ASU provides narrow-scope amendments to help apply these recent standards. The transition requirements and effective date of this ASU will be effective for the Company in the first quarter of fiscal year 2021 with early adoption permitted for certain amendments. The Company is currently evaluating the impact this standard will have on its combined financial statements.
In November 2019, the FASB issued ASU No. 2019-08, Compensation — Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements — Share-Based Consideration Payable to a Customer. This ASU requires that share-based payment awards issued to a customer in connection with a revenue arrangement be recorded as a reduction of the transaction price in revenue. The amount recorded as a reduction of the transaction price is measured using the grant-date fair value of the award and is classified in accordance with ASC Topic 718. Changes in the measurement of the share-based payments after the grant date that are due to the form of the consideration are not included in the transaction price and are recorded elsewhere in the statement of operations. The award is measured and classified under ASC Topic 718 for its entire life, unless the award is modified after it vests and the grantee is no longer a customer. The new guidance is effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. The adoption of this standard is not expected to have an impact on the Company’s combined financial statements.
In December 2019, the FASB issued ASU No. 2019-12,Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU eliminates certain exceptions to the general approach in ASC Topic 740 and includes methods of simplification to the existing guidance. The new guidance is effective forThis standard was adopted by the Company in the first quarter of fiscal year 2022, with earlyFiscal Year 2022. The adoption permitted. The Company is currently evaluatingof the standard had no impact this standard will have on its combinedthe Company’s consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this ASU clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, the amendments clarify the accounting for certain forward contracts and purchased options accounted for under Topic 815. The new guidance is effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its combined financial statements.Recently Issued Accounting Pronouncements Not Yet Adopted
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.
Note 3. Acquisition
Acquisition of Hakkasan
See Note 3 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K regarding the details of Tao Group Hospitality’s acquisition of the business (“Hakkasan”) of Hakkasan USA, Inc., a Delaware corporation (“Hakkasan Parent”) on April 27, 2021. During the three months ended September 30, 2021, the Company completed the finalization of a working capital adjustment and net debt against agreed upon targets. As a result, the initial determination of approximately 18% noncontrolling interest ownership
16

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


of common equity interests in Tao Group Sub-Holdings LLC owned by the Hakkasan Parent was subsequently revised to approximately 15%. The Company continues to own a 77.5% controlling interest in Tao Group Holdings LLC, which, after the ownership adjustments, translates to an approximately 66% indirect controlling interest in Tao Group Sub-Holdings LLC. Tao Group Hospitality’s results will continue to be consolidated in the financial results of the Company.
Note 3. Assets HeldThe Company’s purchase price allocation and measurement period adjustment for Salethe Hakkasan acquisition is presented below:
Fair Value Recognized as of Acquisition Date (as previously reported)
Measurement Period Adjustment (a)
Fair Value Recognized as of September 30, 2021 as adjusted (b)
Cash and cash equivalents$16,737 $— $16,737 
Property and equipment, net33,393 — 33,393 
Right-of-use lease assets44,818 — 44,818 
Amortizable intangible assets, net47,170 (7,020)40,150 
Other assets12,641 — 12,641 
Accrued expenses and other current liabilities(15,957)1,534 (14,423)
Operating lease liabilities(52,025)— (52,025)
Other liabilities(13,655)— (13,655)
Total identifiable net assets acquired73,122 (5,486)67,636 
Goodwill3,378 (2,014)1,364 
Redeemable noncontrolling interests$(76,500)$7,500 $(69,000)
_________________
On March 24, 2020,(a)During the three months ended September 30, 2021, the Company entered intorecorded an adjustment to reflect a Membership Interest Purchase Agreement (the “MIPA”) with CAPSSmeasurement period adjustment. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in Tao Group Sub-Holdings LLC pursuantwas reduced from approximately 18% as initially estimated to whichapproximately 15%. Such change resulted in a decrease in the Company’s redeemable noncontrolling interest of $7,500, a decrease in Goodwill of $480, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company agreed to sell the Forumwrote-off a previously reported accrual of $1,534, which resulted in Inglewood to CAPSS LLC and settle related litigation for cash considerationan additional decrease in the amountGoodwill 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$1,534.
(b)No additional adjustments 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 forduring the three and nine months ended MarchDecember 31, 2020.2021.
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. 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, 20192021 included in the Company’s Information StatementAnnual Report on Form 10-K and “— Note 2. Accounting Policies — Summary of Significant Accounting Policies — Revenue Recognition — Media Affiliation Fee and Advertising Revenues” for more information regarding the details of the Company’s revenue recognition.recognition policies. All revenue recognized in the combinedconsolidated statements of operations is considered to be revenue from contracts with customers. Forcustomers in accordance with ASC Topic 606, except for revenues from Arena License Agreements, leases and subleases that are accounted for in accordance with ASC Topic 842 of $29,196 and $31,512 for the three and nine sixmonths ended MarchDecember 31, 2021, respectively, and $2,334 and $3,082 for the three and sixmonths ended December 31, 2020, and 2019,respectively.
The following table presents the Company did not have any material impairmentactivity in the allowance for credit losses on receivables or contract assets arising from contracts with customers.for the six months ended December 31, 2021:
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Beginning balance, June 30, 2021$6,449 
Provision for expected credit losses1,236 
Write-offs(1,760)
Ending balance, December 31, 2021$5,925 
Disaggregation of Revenue
The following table disaggregatestables disaggregate 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, 20202021 and 2019:2020:
Three Months Ended
December 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$155,476 $— $108,241 $(657)$263,060 
Sponsorship, signage and suite licenses (b)
50,979 1,787 490 (521)52,735 
Media related, primarily from affiliation agreements (c)
— 156,202 — — 156,202 
Other (d)
11,959 1,992 8,355 (7,060)15,246 
Total revenues from contracts with customers$218,414 $159,981 $117,086 $(8,238)$487,243 

Three Months Ended
December 31, 2020
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$1,001 $— $9,179 $(43)$10,137 
Sponsorship, signage and suite licenses (b)
6,064 408 414 21 6,907 
Media related, primarily from affiliation agreements (c)
— 145,364 — — 145,364 
Other (d)
3,270 467 898 (625)4,010 
Total revenues from contracts with customers$10,335 $146,239 $10,491 $(647)$166,418 
18
     
  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


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


Six Months Ended
December 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$177,492 $— $216,931 $(838)$393,585 
Sponsorship, signage and suite licenses (b)
57,956 2,423 625 (521)60,483 
Media related, primarily from affiliation agreements (c)
— 296,673 — — 296,673 
Other (d)
14,889 2,358 18,994 (7,545)28,696 
Total revenues from contracts with customers$250,337 $301,454 $236,550 $(8,904)$779,437 
     
  Nine Months Ended March 31,
  2020 2019
Event-related and entertainment dining and nightlife offerings (a)
 $560,996
 $597,551
Sponsorship, signage and suite licenses (b)
 172,368
 195,652
Other (c)
 33,674
 39,181
Total revenues from contracts with customers $767,038
 $832,384

Six Months Ended
December 31, 2020
EntertainmentMSG NetworksTao 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)
8,524 692 486 (211)9,491 
Media related, primarily from affiliation agreements (c)
— 302,015 — — 302,015 
Other (d)
6,890 895 2,387 (1,986)8,186 
Total revenues from contracts with customers$17,143 $303,602 $17,712 $(2,240)$336,217 
_________________
(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, 2021 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)See “— Note 2. Accounting Policies — Summary of Significant Accounting Policies — Revenue Recognition — Media Affiliation Fee and Advertising Revenues” for further details on the pattern of recognition of Media affiliation fee and advertising revenues in the MSG Networks segment.
(d)Primarily consists of (i) revenues from sponsorship sales and representation agreements with MSG Sports, (ii) Tao Group Hospitality’s managed venue revenues, and (iii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $6,985 and $7,395 for the three and six months ended December 31, 2021, respectively, and $624 and $1,819 for the three and six months ended December 31, 2020, respectively, that are eliminated in consolidation.
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 disaggregatestables disaggregate the Company’s combinedconsolidated revenues by type of goods or services in accordance with the required entity-wide disclosure requirements of 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, 20202021 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
2020:
     
  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
19
_________________
(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.


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Three Months ended
December 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$109,141 $— $— $— $109,141 
Sponsorship and signage, suite, and advertising commission revenues (b)
70,602 — — (7,506)63,096 
Revenues from entertainment dining and nightlife offerings (c)
— — 117,086 (732)116,354 
Food, beverage and merchandise revenues37,765 — — — 37,765 
Media networks revenues (d)
— 159,981 — — 159,981 
Other906 — — — 906 
Total revenues from contracts with customers$218,414 $159,981 $117,086 $(8,238)$487,243 

Three Months ended
December 31, 2020
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$968 $— $— $— $968 
Sponsorship and signage, suite, and advertising commission revenues (b)
9,130 — — (604)8,526 
Revenues from entertainment dining and nightlife offerings (c)
— — 10,491 (43)10,448 
Food, beverage and merchandise revenues— — — — — 
Media networks revenues (d)
— 146,239 — — 146,239 
Other237 — — — 237 
Total revenues from contracts with customers$10,335 $146,239 $10,491 $(647)$166,418 

Six Months Ended
December 31, 2021
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$125,977 $— $— $— $125,977 
Sponsorship and signage, suite, and advertising commission revenues (b)
81,415 — — (7,916)73,499 
Revenues from entertainment dining and nightlife offerings (c)
— — 236,550 (988)235,562 
Food, beverage and merchandise revenues41,688 — — — 41,688 
Media networks revenues (d)
— 301,454 — — 301,454 
Other1,257 — — — 1,257 
Total revenues from contracts with customers$250,337 $301,454 $236,550 $(8,904)$779,437 
20


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

Six Months Ended
December 31, 2020
EntertainmentMSG NetworksTao Group
Hospitality		EliminationsTotal
Ticketing and venue license fee revenues (a)
$1,698 $— $— $— $1,698 
Sponsorship and signage, suite, and advertising commission revenues (b)
14,989 — — (2,031)12,958 
Revenues from entertainment dining and nightlife offerings (c)
— — 17,712 (209)17,503 
Food, beverage and merchandise revenues— — — — — 
Media networks revenues (d)
— 303,602 — — 303,602 
Other456 — — — 456 
Total revenues from contracts with customers$17,143 $303,602 $17,712 $(2,240)$336,217 
(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)Amounts include (i) revenues from sponsorship sales and representation agreements with MSG Sports and (ii) advertising commission revenues recognized by the Entertainment segment from the MSG Networks segment of $6,985 and $7,395 for the three and six months ended December 31, 2021, respectively, and $624 and $1,819 for the three and six months ended December 31, 2020, respectively, that are eliminated in consolidation.
(c)Primarily consist of revenues from (i) entertainment dining and nightlife offerings and (ii) venue management agreements.
(d)Primarily consist of affiliation fees from Distributors and, to a lesser extent, advertising revenues through the sale of commercial time and other advertising inventory during MSG Networks programming.
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, 20202021 and June 30, 2019.2021:
December 31,June 30,
20212021
Receivables from contracts with customers, net (a)
$195,945 $185,112 
Contract assets, current (b)
10,204 7,052 
Contract assets, non-current (b)
296 87 
Deferred revenue, including non-current portion (c)
257,054 210,187 
_________________
(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, 2021 and June 30, 2021, the Company’s receivables from contracts with customers above included $11,239 and $4,848, respectively, related to various related parties. See Note 18 for further details on related party arrangements.
(b)Contract assets, which are reported as Other current assets or Other assets (non-current portion) 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.
  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
21
_________________
(a)

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(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, 2021 relating to the contract liability balance (primarily deferred revenue) as of June 30, 2021 was $86,108.
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, 2020.2021. This primarily relates to performance obligations under sponsorship and suite license arrangements.arrangements and to a lesser extent, non-variable affiliation fee arrangements that have original expected durations longer than one year and the consideration is not variable. For arrangements with variable consideration, such variability is based on the Company’s ability to deliver the underlying benefits as dictated by the related contractual provisions. 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 2022 (remainder)$114,338 
Fiscal Year 2023170,402 
Fiscal Year 2024143,572 
Fiscal Year 2025101,341 
Fiscal Year 202672,543 
Thereafter88,109 
$690,305 
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
Note 5. Computation of Earnings (Loss) per Common Share
The following table presents a reconciliation of weighted-average shares used in the calculations of basic and diluted earnings (loss) per common share attributable to the Company’s stockholders (“EPS”).
Three Months EndedSix Months Ended
 December 31,December 31,
 2021202020212020
Weighted-average shares (denominator):
Weighted-average shares for basic EPS (a)
34,278 34,021 34,186 33,961 
Dilutive effect of shares issuable under share-based compensation plans (a)
158 — — — 
Weighted-average shares for diluted EPS34,436 34,021 34,186 33,961 
Weighted-average anti-dilutive shares (b)
668 — — — 
_________________
(a)For the three months ended December 31, 2020 and six months endedDecember 31, 2021 and 2020, all restricted stock units and stock options were excluded from the above table because the Company reported a net loss for the periods presented and, therefore, their impact on reported loss per share would have been antidilutive. See Note 15 for further detail.
(b)For the three months ended December 31, 2021, weighted-average anti-dilutive shares primarily consisted of approximately 630 units of stock options and were excluded in the calculation of diluted earnings per share because their effect would have been anti-dilutive. An anti-dilutive option exists when the average stock price for the period is less than the exercise price of the option.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 5.6. 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,
2021		June 30,
2021		December 31,
2020		June 30,
2020
 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$1,258,105 $1,516,992 $1,735,012 $1,103,392 
Restricted cash (a)
 17,955
 10,010
 8,061
 6,711
Restricted cash (a)
23,914 22,984 26,207 17,749 
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 statements of cash flowsCash, cash equivalents and restricted cash on the consolidated statements of cash flows$1,282,019 $1,539,976 $1,761,219 $1,121,141 
_________________
(a)
See Note 2 to the Company’s audited combined financial statements and notes thereto for the year ended June 30, 2019
(a)See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K for more information regarding the nature of restricted cash.
Note 7. Investments in the Company’s Information Statement for more information regarding the nature of restricted cash.
Note 6. Investments and Loans to 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, 2021
Equity method investments:
SACO Technologies Inc. (“SACO”)30 %$33,731 
Others5,674 
Equity securities without readily determinable fair values (a)
7,007 
Total investments in nonconsolidated affiliates$46,412 
June 30, 2021
Equity method investments:
SACO30 %$36,265 
Others6,204 
Equity securities without readily determinable fair values (a)
6,752 
Total investments in nonconsolidated affiliates$49,221 
_________________
_________________(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. For the three and six months ended December 31, 2021 and 2020, the Company did not have impairment charges or change in carrying value recorded to its equity securities without readily determinable fair values.
(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.
Equity Investments with Readily Determinable Fair Value
23


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


Equity Investment 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) 869 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 Class A common stock of Townsquare and Class A common stock of DraftKings 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. As a holder of Class C common stock of Townsquare, the Company is entitled to convert at any time all or any part of the Company’s shares into an equal number of shares of Class A common stock of Townsquare, subject to restrictions set forth in Townsquare’s certificate of incorporation.
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, 20202021 and June 30, 2019. See Note 11 for more information2021, are as follows:
December 31, 2021
Equity Investment with Readily Determinable Fair ValuesShares / Units
Held		Cost BasisCarrying value
/ Fair value
Townsquare Class A common stock583 $4,221 $7,773 
Townsquare Class C common stock2,625 19,001 34,992 
DraftKings common stock869 6,036 23,884 
Total$29,258 $66,649 

June 30, 2021
Equity Investment with Readily Determinable Fair ValuesShares / Units
Held		Cost BasisCarrying value
/ Fair value
Townsquare Class A common stock583 $4,221 $7,435 
Townsquare Class C common stock2,625 19,001 33,469 
DraftKings common stock869 6,036 45,360 
Total$29,258 $86,264 

The following table summarizes the realized and unrealized gain (loss) on theequity investments with readily determinable fair value offor the investment in Townsquare.three and six months ended December 31, 2021 and 2020:

Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Unrealized gain — Townsquare$834 $6,416 $1,861 $7,026 
Unrealized gain (loss) — DraftKings(17,989)(10,984)(21,476)22,064 
Realized loss — DraftKings— (2,659)— (2,659)
$(17,155)$(7,227)$(19,615)$26,431 

24


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 7.8. Property and Equipment
As of MarchDecember 31, 20202021 and June 30, 2019,2021, property and equipment consisted of the following assets:following: 
     
  
March 31,
 2020 (a)
 June 30,
2019
Land $141,931
 $167,405
Buildings 992,496
 1,091,851
Equipment 329,696
 318,301
Aircraft 38,090
 38,090
Furniture and fixtures 42,034
 53,242
Leasehold improvements 183,033
 180,111
Construction in progress 574,876
 232,390
  2,302,156
 2,081,390
Less accumulated depreciation and amortization(b)
 (761,370) (732,268)
  $1,540,786
 $1,349,122

December 31,
2021		June 30,
2021
Land$148,919 $150,750 
Buildings997,216 996,295 
Equipment414,243 405,835 
Aircraft38,090 38,090 
Furniture and fixtures38,806 40,660 
Leasehold improvements227,349 214,678 
Construction in progress (a)
1,546,952 1,194,525 
3,411,575 3,040,833 
Less accumulated depreciation and amortization(936,882)(884,541)
$2,474,693 $2,156,292 
_________________
(a)
(a)Interest is capitalized during the construction period for significant long term construction projects. The Company capitalizes interest within the Entertainment segment in connection with the construction of MSG Sphere in Las Vegas. For the three and six months ended December 31, 2021, the company capitalized $10,600 and $19,926 of interest, respectively. As disclosed on the Company’s Form 10-K/A filed on February 9, 2022 for the Fiscal Year 2021, the Company determined that the application of ASC Topic 835-20 (Capitalization of Interest) required that a portion of the interest incurred under the Company’s credit facilities should have been capitalized during the periods that the Company had been capitalizing costs related to MSG Sphere at the Venetian (the “accounting error”), which capitalization of such costs began in 2017. As a result, the previously reported consolidated statements of operation of the Company for the three and six months ended December 31, 2020 have been revised to correct this immaterial accounting error by decreasing the Company’s previously reported interest expense by $7,566 and $7,911, respectively.
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 SpheresSphere in Las Vegas and London.Vegas. The property and equipment balances above include $76,953$154,131 and $32,238$106,990 of capital expenditure accruals (primarily related to MSG Sphere construction) as of MarchDecember 31, 20202021 and June 30, 2019,2021, 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$26,100 and $23,617$51,221 for the three and six months ended December 31, 2021, respectively, and $21,928 and $46,589 for the three and six months ended December 31, 2020, respectively.
During the three months ended March 31, 2020 and 2019, respectively. Depreciation and amortization expense on property and equipment was $69,240 and $72,155September 30, 2021, Tao Group Hospitality recorded an impairment charge for the nine months ended March 31, 2020 and 2019, respectively.
leasehold improvements of $3,269 due to decisions made by management to cease operations at certain venues subsequent to Hakkasan acquisition date.

25


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


Note 8. 9. 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 combinedconsolidated statements of operations and combinedconsolidated 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 ROUright-of-use (“ROU”) asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received.
The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as the Company has elected to account for lease and non-lease components together as a single lease component. ROU assets associated with finance leases are presented separate from 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, ifIf 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, 2020,2021, the Company’s existing operating leases, which are recorded on the accompanying financial statements, have remaining lease terms ranging from 9 months0.3 years to 18.520.1 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.

Table of Contents

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO 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, 2020:2021 and June 30, 2021:
  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
26


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Line Item in the Company’s Consolidated Balance SheetDecember 31,
2021		June 30,
2021
Right-of-use assets:
Operating leasesRight-of-use lease assets$470,253 $280,579 
Lease liabilities:
Operating leases, currentOperating lease liabilities, current$65,663 $73,423 
Operating leases, noncurrentOperating lease liabilities, noncurrent450,019 233,556 
Total lease liabilities$515,682 $306,979 
The following table summarizes the activity recorded within the Company’s combined statementconsolidated statements of operations for the ninethree and six months ended MarchDecember 31, 2021 and 2020:
Three Months Ended
Line Item in the Company’s Consolidated and Combined Statement of OperationsDecember 31,
20212020
Operating lease costDirect operating expenses$10,324 $6,545 
Operating lease costSelling, general and administrative expenses7,723 6,410 
Variable lease costDirect operating expenses1,006 315 
Variable lease costSelling, general and administrative expenses15 15 
Total lease cost$19,068 $13,285 
  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 Statement of OperationsDecember 31,
20212020
Lease cost, operating leasesDirect operating expenses$21,960 $12,952 
Lease cost, operating leasesSelling, general and administrative expenses14,144 12,903 
Variable lease costDirect operating expenses2,092 591 
Variable lease costSelling, general and administrative expenses29 38 
Total lease cost$38,225 $26,484 
Supplemental Information
For the ninesix months ended MarchDecember 31, 2021 and 2020, cash paid for amounts included in the measurement of operating lease liabilities was $40,807$30,282 and $28,261, respectively.. For the ninesix months ended MarchDecember 31, 2021, the Company recorded new operating lease liabilities of $321,863 arising from obtaining right-of-use lease assets including (i) the renewal of the Radio City Music Hall and Beacon Theatre leases, and to a lesser extent, reflecting (ii) leases associated with MSG Sphere development, net of tenant incentives, (iii) a lease agreement with the existing landlord for the Company’s New York corporate office space, which extended the term for certain existing office space in use, and (iv) an aviation lease. For the six months ended December 31, 2021, the Company received approximately $12,800 of the aforementioned tenant incentives, through a cash receipt from the landlord and payments by the landlord for capital expenditures on behalf of the Company. For the six months ended December 31, 2020, the Company had 2 ROU assetsdid not enter into new leases.
27


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In November 2021, the Company executed an agreement with the existing landlord for its New York corporate office space pursuant to which it will be relocating from the space that the Company currently occupies to newly renovated office space within the same building. The Company will not be involved in exchangethe design or construction of the new space for purposes of the Company’s buildout prior to obtaining possession, which is expected to occur in Fiscal Year 2024. Upon obtaining possession of the space, the new operating lease liabilities.is expected to result in an additional lease obligation and right of use asset. While lease payments under the new lease agreement will be recognized as a lease expense on a straight-line basis over the lease term, the Company will begin paying full rent in the second half of Fiscal Year 2026 due to certain tenant incentives included in the arrangement. Base rent payments will increase every five years beginning in Fiscal Year 2031 in accordance with the terms of the lease. The Company anticipates entering into a new sublease agreement with MSG Sports for a lease term equivalent to the November 2021 agreement that the Company entered into with the existing landlord. The future lease payments related to this new lease for the next five fiscal years and thereafter are expected to be as follows:
Fiscal Year 2022$— 
Fiscal Year 2023— 
Fiscal Year 2024— 
Fiscal Year 202510,121 
Fiscal Year 202619,023 
Thereafter (Fiscal Year 2027 to Fiscal Year 2046)1,026,207 
Total lease payments$1,055,351 
During the three months ended March 31, 2020,September 30, 2021, a non-cash impairment charge of $11,573$4,549 was recorded for the right-of-use lease assets associated with one venuecertain Hakkasan venues of Tao Group Hospitality due to decisions made by management to cease operations at certain venues subsequent to the Hakkasan acquisition date. For the three months ended December 31, 2021, the Company recorded a net gain of approximately $5,900 principally from extinguishments and modification of lease liabilities associated with certain Hakkasan venues of Tao Group Hospitality. See Note 1 for further details.
TheAs of December 31, 2021, the weighted average remaining lease term for operating leases recorded on the accompanying combinedconsolidated balance sheet as of March 31, 2020 was 6.212.2 years. The weighted average discount rate was 9.46%6.41% as of MarchDecember 31, 20202021 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, (ii) upon entering a new lease or (ii)(iii) the period in which the lease term expectation was modified.
Maturities of operating lease liabilities as of MarchDecember 31, 20202021 are as follows:
Fiscal Year 2022 (remainder)$28,220 
Fiscal Year 202378,709 
Fiscal Year 202480,196 
Fiscal Year 202557,624 
Fiscal Year 202634,293 
Thereafter479,386 
Total lease payments758,428 
Less imputed interest242,746 
Total lease liabilities$515,682 
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
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 annual license fees scheduled to be paid monthly 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
28


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


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. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from February through May 2021 when it became available at 100% seating capacity. The Company recorded $27,854 and $29,182 of revenues under the Arena License Agreements for the three and six months ended December 31, 2021, respectively, and $1,585 for the three and six months ended December 31, 2020. In addition, the Company recorded revenues from third party and related party lease and sublease arrangements of $1,342 and $2,330 for the three and six months ended December 31, 2021, respectively, and $749 and $1,497 for the three and six months ended December 31, 2020, respectively.
(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.
Note 9.10. Goodwill and Intangible Assets
The carrying amount and activity of goodwill as of December 31, 2021 and June 30, 2019 through March 31, 20202021 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
EntertainmentMSG NetworksTao Group HospitalityTotal
Balance as of June 30, 2021$74,309 $424,508 $3,378 $502,195 
Measurement period adjustment (a)
— — (2,014)(2,014)
Balance as of December 31, 2021$74,309 $424,508 $1,364 $500,181 
_________________
(a)
In
(a)During the three months ended September 30, 2021, the Company recorded an adjustment to reflect a measurement period adjustment in connection with the acquisition of Hakkasan by Tao Group Hospitality. Upon the finalization of the closing statement during the first quarter of Fiscal Year 2022, the noncontrolling interest owned by Hakkasan Parent in Tao Group Sub-Holdings LLC was reduced from approximately 18% as initially estimated to approximately 15%. Such change resulted in a decrease in the Company’s redeemable noncontrolling interest of $7,500, a decrease in Goodwill of $480 as included above, and a decrease in amortizable intangibles of approximately $7,020 related to trade names and venue management contracts. Additionally, the Company wrote-off a previously reported accrual of $1,534, which resulted in an additional decrease in Goodwill of $1,534, also included above. See Note 3 to the Company’s audited consolidated and combined financial statements and notes thereto for 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, 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 March2021 included in the Company’s Annual Report on Form 10-K regarding the details of the acquisition of Hakkasan. No additional adjustments were recorded during the three months ended December 31, 2020 are as follows:
  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
_________________2021 .
(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.

Table of Contents

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


During the first quarter of fiscal year 2020,Fiscal Year 2022, the Company performed its annual impairment test of goodwill and determined that there were no impairments of goodwill identified as of the impairment test date.
The carrying amount of indefinite-lived intangible assets, all of which are within the Entertainment segment, as of December 31, 2021 and June 30, 2021 were as follows:
Trademarks$61,881 
Photographic related rights1,920 
Total$63,801 
During the first quarter of Fiscal Year 2022, the Company performed its annual impairment test of indefinite-lived intangible assets and determined that there were 0no impairments of indefinite-lived intangibles identified as of the impairment test date.
29


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The Company’s intangible assets subject to amortization are as follows: 
December 31, 2021GrossAccumulated
Amortization		Net
Trade names$113,333 $(28,292)$85,041 
Venue management contracts85,763 (20,572)65,191 
Affiliate relationships83,044 (57,951)25,093 
Non-compete agreements9,000 (7,696)1,304 
Festival rights8,080 (2,966)5,114 
Other intangibles4,217 (3,954)263 
$303,437 $(121,431)$182,006 
June 30, 2021June 30, 2021GrossAccumulated
Amortization		Net
Trade namesTrade names$121,000 $(25,605)$95,395 
Venue management contractsVenue management contracts85,700 (17,518)68,182 
Affiliate relationshipsAffiliate relationships83,044 (56,221)26,823 
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 (6,913)2,087 
Festival rights 8,080
 (2,020) 6,060
Festival rights8,080 (2,696)5,384 
Other intangibles(c)
 4,217
 (3,462) 755
4,217 (3,814)403 
 $197,827
 $(41,879) $155,948
$311,041 $(112,767)$198,274 
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.
For the three months ended March 31, 2020 and 2019, amortizationAmortization expense for intangible assets excluding the amortization of favorable lease assets of $1,152was $4,433 and $8,742 for the three and six months ended MarchDecember 31, 2019, which is reported in rent expense, was $3,0092021, respectively, and $3,151, respectively. For the nine months$3,749 and $7,498 for three and six month ended MarchDecember 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, respectively.

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


Note 10.11. Commitments and Contingencies
Commitments
As more fully described inSee Note 812 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192021 included in the Company’s Information Statement,Annual Report on Form 10-K for details on 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. off-balance sheet commitments. 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 asCompany’s off-balance sheet commitments are now reflected on the combined balance sheet as lease liabilities as of MarchJune 30, 2021 included a total of $3,646,250 of contract obligations (primarily related to media rights agreements) from the MSG Networks segment, as a result of the Merger, as follows:
Fiscal Year 2022$276,707 
Fiscal Year 2023273,370 
Fiscal Year 2024253,485 
Fiscal Year 2025246,013 
Fiscal Year 2026249,584 
Thereafter2,347,091 
$3,646,250 
During the three and six months ended December 31, 2020. See Note 8 for more details about the lease liabilities. Except as described above with respect to lease accounting,2021, the Company did not have any material changes in its non-cancelable contractual obligations since the end of fiscal year 2019 other than activities in the ordinary course of business. See Note 13 for details of the principal repayments required under the Company’s various credit facilities, including the MSG Networks Senior Secured Credit Facilities, and Note 9 for details on the commitments under the Company’s lease obligations.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Legal Matters
Fifteen complaints were filed in connection with the Merger by purported stockholders of the Company and MSG Networks Inc.
Nine of these complaints involved allegations of materially incomplete and misleading information set forth in the joint proxy statement/prospectus filed by the Company and MSG Networks Inc. in connection with the Merger. As a result of supplemental disclosures made by the Company and MSG Networks Inc. on July 1, 2021, all of the disclosure actions were voluntarily dismissed with prejudice prior to or shortly following the consummation of the Merger.
On May 27, 2021, a complaint captioned Hollywood Firefighters’ Pension Fund et al. v. James Dolan, et al., 2021-0468-KSJM, was filed in the Court of Chancery of the State of Delaware by purported stockholders of the Company against the Company, its Board of Directors (the “Board”), certain Dolan family stockholders and MSG Networks Inc. The complaint purported to allege derivative claims on behalf of the Company and claims on behalf of a putative class of Company stockholders concerning the Merger. Plaintiffs alleged, among other things, that the Merger was a business combination with an interested stockholder that is not allowed under Section 203 of the Delaware General Corporation Law (the “DGCL”), that the Board members and majority stockholders violated their fiduciary duties in agreeing to the Merger, and that the disclosures relating to the Merger were misleading or incomplete. Plaintiffs sought, among other relief, declaratory and preliminary and permanent injunctive relief enjoining the stockholder vote and consummation of the Merger, and an award of damages in the event the transaction was consummated and plaintiffs’ attorneys’ fees. On June 15, 2021, plaintiffs filed a brief in support of their motion seeking a preliminary injunction enjoining the Company’s stockholder vote and consummation of the Merger, which the defendants opposed. The Court of Chancery denied the plaintiffs’ preliminary injunction motion on July 2, 2021.
On June 9, 2021, a complaint captioned Timothy Leisz v. MSG Networks Inc. et al., 2021-0504-KSJM, was filed in the Court of Chancery of the State of Delaware by a purported stockholder of MSG Networks Inc. against MSG Networks Inc., the MSG Networks Inc. board of directors, certain Dolan family stockholders and the Company. The complaint purported to allege claims on behalf of a putative class of MSG Networks Inc. stockholders concerning the Merger. The MSG Networks Inc. plaintiff alleged, among other things, that the Merger was a business combination with an interested stockholder that is not allowed under Section 203 of the DGCL, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger, and that the disclosures relating to the merger were misleading or incomplete. Plaintiff sought, among other relief, declaratory and preliminary and permanent injunctive relief enjoining the stockholder vote and consummation of the Merger, and an award of damages in the event the transaction was consummated and plaintiff’s attorneys’ fees. On June 21, 2021, plaintiff filed a brief in support of his motion seeking a preliminary injunction enjoining the MSG Networks Inc. stockholder vote and consummation of the Merger, which defendants opposed. The Court of Chancery denied the plaintiff’s preliminary injunction motion on July 2, 2021.
On July 6, 2021, a complaint captioned Stevens et al. v. Dolan et al., 2021-0575, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The complaint purported to allege claims on behalf of a putative class of MSG Networks Inc. stockholders concerning the Merger. The plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages in the event the transaction was consummated, and plaintiffs’ attorneys’ fees.
On July 6, 2021, a complaint captioned The City of Boca Raton Police and Firefighters’ Retirement System v. MSG Networks Inc., 2021-0578, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against MSG Networks Inc. The complaint purported to seek to enforce plaintiff’s right to inspect certain of MSG Networks Inc.’s books and records under Section 220 of the DGCL. The complaint was voluntarily dismissed on August 10, 2021.
On August 11, 2021, a stockholder derivative complaint captioned City of Miramar Retirement Plan and Trust Fund for General Employees et al. v. Dolan et al., 2021-0692 was filed in the Court of Chancery of the State of Delaware by purported stockholders of the Company. The complaint purported to allege derivative claims on behalf of the Company and direct claims on behalf of a putative class of Company stockholders. Plaintiffs alleged that the Board and the Company’s majority stockholders violated their fiduciary duties by failing to protect the Company’s interest in connection with the Merger. Plaintiffs sought, among other relief, an award of damages to the purported class and Company including interest, and plaintiffs’ attorneys’ fees.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
On August 31, 2021, a complaint captioned Murray v. Dolan et al., 2021-0748, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The complaint purported to allege claims on behalf of a putative class of MSG Networks stockholders concerning the Merger. Plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages, and plaintiffs’ attorneys’ fees.
All of the above complaints have since either been dismissed or consolidated into one of two litigations.
On September 10, 2021, the Court of Chancery entered an order consolidating the complaints in the Hollywood Firefighters and City of Miramar actions. The new consolidated action is captioned: In re Madison Square Garden Entertainment Corp. Stockholders Litigation, C.A. 2021-0468-KSJM. The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which names the Company as only a nominal defendant, retains all of the derivative allegations for breach of fiduciary duties that were present in the Hollywood Firefighters and City of Miramar complaints and abandons the direct claims in those prior complaints. Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. The Company and other defendants filed answers to the complaint on December 30, 2021, and are currently engaged in responding to the consolidated plaintiffs’ discovery requests. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.
On September 27, 2021, the Court of Chancery entered an order consolidating the complaints in the Leisz, Stevens, City of Boca Raton, and Murray complaints. The new consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation, C.A. 2021-0575-KSJM. The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint asserts claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. prior to the Merger. Plaintiffs allege that the MSG Networks Inc. board of directors and majority stockholders breached their fiduciary duties in negotiating and approving the Merger. The Company is not named as a defendant.Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action. Plaintiffs seek, among other relief, monetary damages for the putative class and plaintiffs’ attorneys’ fees. Defendants to the MSG Networks Inc. consolidated action filed answers to the complaint on December 30, 2021 and are currently engaged in responding to the plaintiffs’ discovery requests.
We are currently unable to determine a range of potential liability, if any, with respect to these Merger-related claims. Accordingly, no accrual for these matters has been made in our consolidated financial statements.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance)insurance, if any), management does not believe that resolution of these other 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. 12. Fair Value Measurements
The following table presents the Company’s assets that are measured at fair value on a recurring basis, which include cash equivalents, 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

All assets listed above are classified within Level I of the fair value hierarchy as they are valuedon a recurring basis using observable inputs that reflect quoted prices for identical assets in active markets. The carrying amount of the Company’s commercial paper,These assets include (i) cash equivalents in money market accounts and time deposits, and U.S. treasury bills approximates(ii) equity investments with readily determinable fair value due to their short-term maturities.value:
Line Item on Consolidated Balance SheetDecember 31,
2021		June 30,
2021
Assets:
Money market accounts and time deposits(a)
Cash and cash equivalents$1,107,768 $1,361,729 
Equity investments with readily determinable fair value (b)
Other assets66,649 86,264 
Total assets measured at fair value$1,174,417 $1,447,993 
_________________
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


(a)The carrying amount of the Company’s cash equivalents in money market accounts and time deposits approximate fair value due to their short-term maturities.
(b)See Note 7 for more information on the Company’s equity investments with readily determinable fair value in Townsquare and DraftKings.
In addition to the table above, the carrying value and fair value of the Company’s financial instruments reported in the accompanying combinedconsolidated balance sheets are as follows:
December 31, 2021June 30, 2021
Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Liabilities
Current and non-current portion of long-term debt under the MSG Networks Term Loan Facility (a)
$1,023,000 $1,012,770 $1,047,750 $1,042,510 
Current and non-current portion of long-term debt under the National Properties Term Loan Facility (a)
$643,500 $658,783 $646,750 $669,386 
Current and non-current portion of long-term debt under the Tao Credit Facilities (a)
$26,250 $26,315 $43,750 $43,851 
_________________
(a)
  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 October 11, 2019, MSGN Holdings, L.P., certain MSGN Holdings, L.P. subsidiaries and certain MSG Networks Inc. subsidiaries entered into an amended and restated credit facility consisting of a $1,100,000 five-year term loan facility and a $250,000 five-year revolving credit facility. 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. In November 2020, MSG National Properties and certain subsidiaries of the Company entered into the National Properties Term Loan Facility, providing a five-year $650,000 term loan facility. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable. See Note 12 for more information and outstanding balances on this long-term debt.
Contingent Consideration Liabilities
In connection with the Tao Group Hospitality acquisition (see Note 9 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), the Company recorded certain contingent consideration liabilities at fair value as part of the preliminary purchase price allocation.

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


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 $—
________________
(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 in Tao Group Hospitality through a call right on the equity of the other Tao Group Hospitality equityholders after the fifth anniversary of the closing date (January 31, 2022) and, in certain circumstances, prior to such date. 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, 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 inputs classified within Level III 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 13 for more information and outstanding balances on this long-term debt.
Note 12. 13. Credit Facilities
MSG Networks Senior Secured Credit Facilities
On September 28, 2015, MSGN Holdings, L.P. (”MSGN L.P.”), MSGN Eden, LLC, an indirect subsidiary of the Company (through the Merger) and the general partner of MSGN L.P., Regional MSGN Holdings LLC, an indirect subsidiary of the Company and the limited partner of MSGN L.P. (collectively with MSGN Eden, LLC, the “MSGN Holdings Entities”), and certain subsidiaries of MSGN L.P. entered into a credit agreement (the “MSGN Former Credit Agreement”) with a syndicate of lenders. The MSGN Former Credit Agreement provided MSGN L.P. with senior secured credit facilities that consisted of: (a) an initial $1,550,000 term loan facility and (b) a $250,000 revolving credit facility.
On October 11, 2019, MSGN L.P., the MSGN Holdings Entities and certain subsidiaries of MSGN L.P. amended and restated the MSGN Former Credit Agreement in its entirety (the “MSGN Credit Agreement”). The MSGN Credit Agreement provides MSGN L.P. with senior secured credit facilities (as amended, the “MSG Networks Senior Secured Credit Facilities”) consisting of: (i) an initial $1,100,000 term loan facility (the “MSGN Term Loan Facility”) and (ii) a $250,000 revolving credit facility (the “MSGN Revolving Credit Facility”), each with a term of five years. Proceeds from the MSGN Term Loan Facility were used by MSGN L.P. to repay outstanding indebtedness under the MSGN Former Credit Agreement. Up to $35,000 of the MSGN Revolving Credit Facility is available for the issuance of letters of credit. Subject to the satisfaction of certain conditions and limitations, the MSGN Credit Agreement allows for the addition of incremental term and/or revolving loan commitments and incremental term and/or revolving loans.
Borrowings under the MSGN Credit Agreement bear interest at a floating rate, which at the option of MSGN L.P. may be either (i) a base rate plus an additional rate ranging from 0.25% to 1.25% per annum (determined based on a total net leverage ratio) (the “MSGN Base Rate”), or (ii) a Eurodollar rate plus an additional rate ranging from 1.25% to 2.25% per annum (determined
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
based on a total net leverage ratio) (the “MSGN Eurodollar Rate”). Upon a payment default in respect of principal, interest or other amounts due and payable under the MSGN Credit Agreement or related loan documents, default interest will accrue on all overdue amounts at an additional rate of 2.00% per annum. The MSGN Credit Agreement requires that MSGN L.P. pay a commitment fee ranging from 0.225% to 0.30% (determined based on a total net leverage ratio) in respect of the average daily unused commitments under the MSGN Revolving Credit Facility. MSGN L.P. will also be required to pay customary letter of credit fees, as well as fronting fees, to banks that issue letters of credit. The interest rate on the MSGN Term Loan Facility as of December 31, 2021 was 1.60%.
The MSGN Credit Agreement generally requires the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis to comply with a maximum total leverage ratio of 5.50:1.00, subject, at the option of MSGN L.P. to an upward adjustment to 6.00:1.00 during the continuance of certain events. In addition, the MSGN Credit Agreement requires a minimum interest coverage ratio of 2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis. All borrowings under the MSGN Credit Agreement are subject to the satisfaction of customary conditions, including absence of a default and accuracy of representations and warranties. As of December 31, 2021, the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis were in compliance with the covenants. As of December 31, 2021, there were no letters of credit issued and outstanding under the MSGN Revolving Credit Facility. As of December 31, 2021, there was $1,023,000 outstanding under the MSGN Term Loan Facility, and no borrowings under the MSGN Revolving Credit Facility.
All obligations under the MSGN Credit Agreement are guaranteed by the MSGN Holdings Entities and MSGN L.P.’s existing and future direct and indirect domestic subsidiaries that are not designated as excluded subsidiaries or unrestricted subsidiaries (the “MSGN Subsidiary Guarantors,” and together with the MSGN Holdings Entities, the “MSGN Guarantors”). All obligations under the MSGN Credit Agreement, including the guarantees of those obligations, are secured by certain assets of MSGN L.P. and each MSGN Guarantor (collectively, “MSGN Collateral”), including, but not limited to, a pledge of the equity interests in MSGN L.P. held directly by the Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P.
Subject to customary notice and minimum amount conditions, MSGN L.P. may voluntarily repay outstanding loans under the MSGN Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurodollar loans). The MSGN Term Loan Facility amortizes quarterly in accordance with its terms beginning March 31, 2020 through September 30, 2024 with a final maturity date of October 11, 2024. MSGN L.P. is required to make mandatory prepayments in certain circumstances, including without limitation from the net cash proceeds of certain sales of assets (including MSGN Collateral) or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights) and the incurrence of certain indebtedness, subject to certain exceptions.
In addition to the financial covenants discussed above, the MSGN Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative covenants, and events of default. The MSGN Credit Agreement contains certain restrictions on the ability of MSGN L.P. and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the MSGN Credit Agreement, including 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) changing their lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending specified material agreements; (viii) merging or consolidating; (ix) making certain dispositions; and (x) entering into agreements that restrict the granting of liens. The MSGN Holdings Entities are also subject to customary passive holding company covenants. The Merger did not result in a change of control or acceleration of debt payments under the MSGN Credit Agreement.
National Properties Term Loan Facility
On November 12, 2020, MSG National Properties, an indirect, wholly-owned subsidiary of the Company, MSG Entertainment Group, LLC (“MSG Entertainment Group”) and certain subsidiaries of MSG National Properties entered into a 5-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. Following
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
the first anniversary of the closing of the facility in November 2021, the minimum liquidity level was 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 period or MSG National Properties obtains an investment grade rating, the minimum liquidity level is permanently reduced to $50,000. As of December 31, 2021, the trailing twelve month AOI (as defined under the National Properties Term Loan Facility) for MSG National Properties and its restricted subsidiaries was negative and therefore, the minimum liquidity level continues to be $200,000.
Subject to customary notice and minimum amount conditions, the Company may voluntarily repay outstanding loans under the National Properties Term Loan Facility at any time, in whole or in part (subject to customary breakage costs with respect to LIBOR loans) subject to a prepayment premium equal to (i) for the initial 18 month period following the facility’s effective date, 2.0% of the principal amount prepaid plus the amount of interest that would have been payable on such principal amount from the date of such prepayment through the end of such 18-month period, (ii) after the initial 18 month period but on or prior to the three year anniversary of the effective date, 2.0% of the principal amount prepaid, (iii) after the three year anniversary but on or prior to the four year anniversary of the effective date, 1.0% of the principal amount prepaid and (iv) after the 4th anniversary, —%. 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, 2021 was 7.00%. As of December 31, 2021, there was $643,500 outstanding 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 Theatre. 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, 2021, MSG National Properties and its restricted subsidiaries were in compliance with the covenants of the National Properties Term Loan Facility.
Tao 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
35

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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 balance under the Tao Subordinated Credit Agreement, as wellamended, was $63,000 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.2021. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement, as amended, have been eliminated in the combinedconsolidated 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 HoldingsTAOIH 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. As of MarchJanuary 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. TAOIH and its restricted subsidiaries must maintain a minimum consolidated liquidity, consisting of cash and cash equivalents and available revolving commitments, at all times of $10,000. 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 $1,600 as of December 31, 2020,2021. As of December 31, 2021, 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,” 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 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“Tao 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“Tao 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 Tao 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, 20202021 was 3.28%2.61%. 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 0no borrowing outstanding under the Tao Revolving Credit Facility as of MarchDecember 31, 2020.
During2021. Tao Group Hospitality utilized $750 of the nine months ended MarchTao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available as of December 31, 2020 and 2019, the Company made interest payments2021 was $24,250. As of $1,531 and $7,395, respectively,December 31, 2021, there was $26,250 outstanding under the Tao Senior Credit Agreement and the 2017 Tao Credit Agreement.Term Loan Facility.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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 prepayrepay 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.
Principal Repayments
Long-term debt maturities over the next five years for the outstanding balance under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities as of December 31, 2021 were:
MSG Networks Senior Secured Credit FacilitiesNational Properties Term Loan FacilityTao Credit FacilitiesTotal
Fiscal Year 2022 (remainder)$24,750 3,250 $3,750 $31,750 
Fiscal Year 202366,000 6,500 10,000 82,500 
Fiscal Year 202482,500 6,500 12,500 101,500 
Fiscal Year 2025849,750 6,500 — 856,250 
Fiscal Year 2026— 620,750 — 620,750 
Thereafter— — — — 
$1,023,000 $643,500 $26,250 $1,692,750 
The following table summarizes the outstanding balances under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities as well as the related deferred financing costs in the accompanying consolidated balance sheets as of December 31, 2021 and June 30, 2021:
December 31, 2021June 30, 2021
PrincipalUnamortized Deferred Financing Costs
Net (a)
PrincipalUnamortized Deferred Financing Costs
Net (a)
Current portion
MSG Networks Senior Secured Credit Facilities$49,500 $(1,244)$48,256 $49,500 $(1,255)$48,245 
National Properties Term Loan Facility6,500 (6,783)(283)6,500 (6,783)(283)
Tao Term Loan Facility8,750 (240)8,510 6,250 (239)6,011 
Current portion of long-term debt, net of deferred financing costs$64,750 $(8,267)$56,483 $62,250 $(8,277)$53,973 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO COMBINEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

December 31, 2021June 30, 2021
PrincipalUnamortized Deferred Financing Costs
Net (a)
PrincipalUnamortized Deferred Financing Costs
Net (a)
Noncurrent portion
MSG Networks Senior Secured Credit Facilities$973,500 $(2,095)$971,405 $998,250 $(2,715)$995,535 
National Properties Term Loan Facility637,000 (19,427)617,573 640,250 (22,819)617,431 
Tao Term Loan Facility17,500 (356)17,144 22,500 (475)22,025 
Tao Revolving Credit Facility— — — 15,000 — 15,000 
Long-term debt, net of deferred financing costs$1,628,000 $(21,878)$1,606,122 $1,676,000 $(26,009)$1,649,991 
_________________
(a)In addition to the outstanding balance associated with the MSG Networks Senior Secured Credit Facilities, the Tao Term Loan Facility, the Tao Revolving Credit Facility and the National Properties Term Loan Facility disclosed above, the Company’s long-term debt, net of deferred financing costs in the accompanying consolidated balance sheets of $1,606,759 and $1,650,628 as of December 31, 2021 and June 30, 2021, respectively, also includes $637 related to a note with respect to a loan received by BCE from its noncontrolling interest holder that matures in April 2023.
Unamortized deferred financing costs associated with MSGN Revolving Credit Facility and Tao Revolving Credit Facility are presented under the captions Other current assets and Other assets in the accompanying consolidated balance sheets.
Supplemental cash flows information
During the six months ended December 31, 2021 and 2020, interest payments and loan principal repayments made by the Company under the MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility, and Tao Senior Credit Agreement for term loan and revolving credit facilities were as follows:
Interest Payments (a)
Loan Principal Repayments
Six Months EndedSix Months Ended
December 31, 2021December 31, 2020December 31, 2021December 31, 2020
MSG Networks Senior Secured Credit Facilities$8,886 $9,584 $24,750 $13,750 
National Properties Term Loan Facility23,141 — 3,250 — 
Tao Credit Facilities415 554 17,500 2,500 
$32,442 $10,138 $45,500 $16,250 
_________________
(a)See Note 2 and Note 8 for further details on interest capitalization during the three and six months ended December 31, 2021, and 2020. Interest payments, net of capitalized interest, were $12,516 and $2,227 for the six months ended December 31, 2021 and 2020.
38


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 14. Pension Plans and Other Postretirement Benefit Plan
See Note 1014 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 20192021 included in the Company’s Information Statement for more information regarding the Company’s debt maturities for the Tao Senior Secured Credit Facilities.
Deferred Financing Costs
The following table summarizes the presentation of the Tao Term Loan Facility and the related deferred financing costs in the accompanying combined balance sheets as of March 31, 2020 and June 30, 2019.
  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
       
  June 30, 2019
  Tao Term Loan Facility Deferred Financing Costs Total
Current portion of long-term debt, net of deferred financing costs $6,250
 $(208) $6,042
Long-term debt, net of deferred financing costs (a)
 33,750
 (831) 32,919
Total $40,000
 $(1,039) $38,961
_________________
(a)
In addition to the outstanding balance associated with the Tao Term Loan Facility disclosed above, the Company’s Long-term debt, net of deferred financing costs in the accompanying 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 on the accompanying combined balance sheet:
  March 31,
2020		 June 30,
2019
Other current assets $85
 $85
Other assets 269
 333

Note 13. Pension Plans and Other Postretirement Benefit Plan
See Note 11 to the Company’s audited combined financial statements and notes thereto for the year ended June 30, 2019 included in the Company’s Information StatementForm 10-K for more information regarding the Company’s defined benefit pension plans (“MSGE Pension Plans”), postretirement benefit plan (“MSGE 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
Through the Merger, the Company also sponsors (i) a non-contributory, qualified defined benefit pension plan covering certain of its union employees, (ii) an unfunded non-contributory, non-qualified frozen excess cash balance plan covering certain employees who participated in an underlying qualified plan, and (iii) an unfunded noncontributory, non-qualified frozen defined benefit pension plan for the benefit of certain employees who participated in an underlying qualified plan (collectively the “MSGN Pension Plans”, and together with MSGE Pension Plans, the “Pension Plans”). MSG Networks also sponsors a contributory welfare plan which provides certain postretirement healthcare benefits to certain employees hired prior to January 1, 2001 (the “MSGN Postretirement Plan”, and together with MSGE Postretirement Plan, are considered “Shared Plans.”

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


the “Postretirement Plans”).
Defined Benefit Pension Plans and Postretirement Benefit Plan
The following tables present components of net periodic benefit cost for the Pension Plans and Postretirement PlanPlans included in the accompanying combinedconsolidated statements of operations for the three and ninesix months ended MarchDecember 31, 20202021 and 2019.2020. 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,
2021202020212020
Service cost$118 $123 $16 $22 
Interest cost1,190 1,101 20 19 
Expected return on plan assets(1,719)(1,509)— — 
Recognized actuarial loss501 396 9 20 
Net periodic benefit cost$90 $111 $45 $61 
Pension PlansPostretirement Plans
Six Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Service cost$236 $244 $32 $44 
Interest cost2,380 2,203 40 38 
Expected return on plan assets(3,438)(3,018)— — 
Recognized actuarial loss1,002 854 18 40 
Net periodic (benefit) cost$180 $283 $90 $122 
         
  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 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

________________
39


(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 COMBINEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Defined Contribution Pension Plans
For the ninethree and six months ended MarchDecember 31, 20202021 and 2019,2020, expenses related to the Savings Plans and Union Savings Plan included in the accompanying combinedconsolidated statements of operations are as follows:
Savings PlansUnion Savings Plan
Three Months EndedSix Months EndedThree Months EndedSix Months Ended
December 31,December 31,December 31,December 31,
20212020202120202021202020212020
$2,475 $1,672 $4,494 $3,077 $7 $10 $21 $19 
Savings Plans (a)
 Union Savings Plan
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
March 31, March 31, March 31, March 31,
2020 2019 2020 2019 2020 2019 2020 2019
$(1,307) $1,854
 $3,288
 $5,945
 $469
 $450
 $522
 $498
_________________

(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 14.15. 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, 20192021 included in the Company’s Information StatementForm 10-K for more information regarding Madison Square GardenMSG Sports Corp.’s 2015equity award programs (the “MSG Sports Stock Plans”) and MSG Entertainment equity award programs. Prior to the Merger, share-based compensation awards were also granted under the MSG Networks Inc. 2010 Employee Stock Plan, (the “Madison Square Garden Sports Corp. Employeeas amended, and the MSG Networks Inc. 2010 Stock Plan”Plan for Non-Employee Directors (collectively, “MSGN Equity Incentive Plans”). Upon exercise of stock options or vesting of time-based restricted stock units and performance condition based restricted stock units, collectively referred to as “RSUs,” under MSGN Equity Incentive Plans, shares were either issued from MSG Networks Inc.’s unissued reserved stock or from treasury stock.
At the Effective Time, each RSU for MSG Networks Inc.’s common stock was converted into 0.172 RSUs for the Company’s Class A Common Stock and each outstanding stock option for MSG Networks Inc.’s common stock was converted into 0.172 options for Class A Common Stock. The exercise price of stock options was adjusted by dividing the exercise price of the MSG Networks Inc.’s stock options by 0.172 (rounded up to the nearest whole cent). All outstanding performance-based vesting RSU or stock option awards for which the performance period had not been completed were converted into time-based (nonperformance based) vesting RSUs or stock option awards, respectively, based on the 100% target number of shares included in the terms of the original award (“Performance Award Conversion”).
Share-based compensation expense was $8,836$24,171 and $8,726$43,699 for the three and six months ended MarchDecember 31, 2020 and 2019,2021, respectively, and $29,294$29,828 and $27,929$45,984 for the ninethree and six months ended MarchDecember 31, 2020, and 2019, respectively. In addition, capitalized share-based compensation expense was $1,308$1,763 and $3,790$2,784 for the three and ninesix months ended MarchDecember 31, 2021 and 2020, respectively,respectively.
RSUs and $1,926stock options information is presented herein as if the Company and MSG Networks Inc. had been combined for the three and nine months ended March 31, 2019. 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 Garden Sports Corp. Employee Stock Plan that were charged to Madison Square Garden Sports Corp.all periods presented, unless otherwise noted.
40

Restricted Stock Units Award Activity
The following table summarizes activity related to Madison Square Garden Sports Corp.’s restricted stock units and performance restricted stock units, collectively referred to as “RSUs,” held by the Company’s employees for the nine months ended March 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 COMBINEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Restricted Stock Units Award Activity
The following table summarizes activity related to holders (including (i) Company employees and (ii) MSG Sports employees that received share-based awards prior to the Entertainment Distribution) of the Company’s RSUs for the six months ended December 31, 2021:
 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, 2021683 701 $76.15 
Granted445 422 $79.07 
Performance Award Conversion223 (223)$82.63 
Vested(332)(77)$87.42 
Forfeited(9)(12)$74.87 
Unvested award balance, December 31, 20211,010 811 $75.02 
The fair value of RSUs that vested during the ninesix months ended MarchDecember 31, 20202021 was $55,668.$32,734. 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 employees’ required statutory tax withholding obligations for the applicable income and other employment taxes, 99195 of these RSUs, with an aggregate value of $25,599$15,652, were retained by Madison Square Garden Sports Corp.
The fairthe Company during the six months ended December 31, 2021, of which 6 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.$477, related to MSG Sports employees.
Stock Options Award Activity
Compensation expense for the Company’s existing stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model. Stock options generally vest over a three year service period and expire 7.5 to 10 years from the date of grant.
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, 2020:2021:
        
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)		Number of
Performance
Based 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, 2021409 315 $103.88 
Performance Award Conversion315 (315)$109.76 
Balance as of December 31, 2021724 — $103.88 3.96$561 
Exercisable as of December 31, 2021597 — $108.29 3.70$561 
41


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 15.16. Accumulated Other Comprehensive Loss
The following table details the components of accumulated other comprehensive loss:
      
 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) $(52,607)
     Three Months Ended December 31, 2021
Three Months Ended March 31, 2019Pension Plans and
Postretirement
Plan		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Pension Plans and
Postretirement
Plan
 Cumulative Translation Adjustments 
Accumulated
Other
Comprehensive
Loss
Balance as of December 31, 2018$(40,193) $(3,704) $(43,897)
Balance as of September 30, 2021Balance as of September 30, 2021$(45,009)$9,949 $(35,060)
Other comprehensive income before reclassifications—
 6,383
 6,383
Other comprehensive income before reclassifications— 2,486 2,486 
Amounts reclassified from accumulated other comprehensive loss (a)
327
 —
 327
Amounts reclassified from accumulated other comprehensive loss (a)
510 — 510 
Income tax expenseIncome tax expense(97)(471)(568)
Other comprehensive income327
 6,383
 6,710
Other comprehensive income413 2,015 2,428 
Balance as of March 31, 2019$(39,866) $2,679
 $(37,187)
Balance as of December 31, 2021Balance as of December 31, 2021$(44,596)$11,964 $(32,632)


Three Months Ended December 31, 2020
Pension Plans and
Postretirement
Plan		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of September 30, 2020$(38,452)$1,157 $(37,295)
Other comprehensive income before reclassifications— 11,883 11,883 
Amounts reclassified from accumulated other comprehensive loss (a)
416 — 416 
Income tax expense(1,562)(2,171)(3,733)
Other comprehensive income (loss)(1,146)9,712 8,566 
Balance as of December 31, 2020$(39,598)$10,869 $(28,729)
Six Months Ended December 31, 2021
Pension Plans and
Postretirement
Plan		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of June 30, 2021$(45,425)$15,153 $(30,272)
Other comprehensive loss before reclassifications— (3,932)(3,932)
Amounts reclassified from accumulated other comprehensive loss (a)
1,020 — 1,020 
Income tax benefit (expense)(191)743 552 
Other comprehensive income (loss)829 (3,189)(2,360)
Balance as of December 31, 2021$(44,596)$11,964 $(32,632)
42


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


      
 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)
        
 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
 $—
 $(37,187)
Six Months Ended December 31, 2020
Pension Plans and
Postretirement
Plan		Cumulative Translation AdjustmentsAccumulated
Other
Comprehensive
Loss
Balance as of June 30, 2020$(38,767)$(10,225)$(48,992)
Other comprehensive income before reclassifications— 25,834 25,834 
Amounts reclassified from accumulated other comprehensive loss (a)
894 — 894 
Income tax expense(1,725)(4,740)(6,465)
Other comprehensive income (loss)(831)21,094 20,263 
Balance as of December 31, 2020$(39,598)$10,869 $(28,729)
_____________________________
(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 statements of operations.
Note 16. 17. Income Taxes

DuringFor the periods presented inprior to the combined financial statements,Entertainment Distribution, the Company did not file separate income tax returns. The Company was included in the federal and statefiled consolidated income tax returns of Madison Square Garden Sports Corp. for all periods presented.with MSG Sports. 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 tax return. In addition, although the Company and MSG Networks did not file consolidated returns for periods prior to the Merger, income tax return.expense or benefit and deferred tax assets and liabilities have been presented on a combined basis for all historical periods, as described in Note 1.
Income tax expense for the three months ended December 31, 2021 of $4,063 differs from income tax expense derived from applying the statutory federal rate of 21% to the pretax income primarily due to (i) tax expense of $2,910 related to nondeductible officers’ compensation and, (ii) state income tax expense of $3,107 primarily offset by (x) tax benefit of $1,378 resulting from a decrease in the valuation allowance, (y) tax benefit of $1,015 resulting from federal tax credits and (z) tax benefit of $577 related to noncontrolling interests.
Income tax benefit for the threesix months ended MarchDecember 31, 20202021 of $10,126$14,847 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) a tax expense relatedof $9,048 to an increase in valuation allowance of $30,968,write off the deferred tax for certain transaction costs associated with the Merger, (ii) tax expense of $4,673$5,769 related to noncontrolling interests, and (iii) tax expense from nondeductible officers’ compensation, of $1,296, partially offset by (w) state income tax benefit of $14,084.

Table$5,067, (x) tax benefit of Contents

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


$2,460 resulting from a decrease in the valuation allowance, (y) tax benefit of $1,987 resulting from a change in the estimated applicable tax rate used to measure deferred taxes and (z) tax benefit of $1,118 related to noncontrolling interests.
Income tax benefit for the ninethree months ended MarchDecember 31, 2020 of $8,686$298 differs from income tax benefitbenefits derived from applying the statutory federal rate of 21% to the pretax loss primarily due to (i) a tax expense related toof $11,021 resulting from an increase in the valuation allowance, of $22,043, (ii) tax expense of $5,001$4,056 related to noncontrolling interests,nondeductible officers’ compensation and (iii) tax expense from nondeductible officers’ compensation of $3,846,$891 relating to noncontrolling interests, partially offset by state income tax benefit of $9,761 and excess tax benefit related to share-based compensation awards of $2,067.$3,531.
Income tax expense for the threesix months ended MarchDecember 31, 20192020 of $469$9,159 differs from income tax expensebenefits derived from applying the statutory federal rate of 21% to the pretax incomeloss primarily due to (i) a tax expense related toof $18,561 resulting from an increase in the valuation allowance, of $1,699, (ii) tax expense of nondeductible officers’ compensation of $1,422, and$6,921 resulting from a change in the estimated applicable tax rate used to measure deferred taxes, (iii) tax expense of $144$5,512 related to nondeductible officers’ compensation, and (iv) tax expense of $1,840 related to noncontrolling interests, partially offset by state income tax expensebenefit of $431.$5,267.
IncomeIn assessing the realizability of deferred tax expense for the nine months ended March 31, 2019assets, management considers whether it is more likely than not that some portion of $1,253 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, and excess tax benefit related to share-based compensation awards of $2,817, partially offset by (i) state income tax expense of $7,425, (ii) tax expense from nondeductible officers’ compensation of $6,140, and (iii) tax expense related 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 statementsall of the Company. Because the Entertainment Distribution involved a spin-offdeferred tax asset will not be realized. As of the Company, these NOLs doDecember 31, 2021, based on current facts and circumstances, management believes that it is more likely than not carry over to the Company. However, in connection with the Entertainment Distribution, certain deferred revenue ofthat the Company will be acceleratednot realize the benefit for incomea portion of its deferred tax purposes, rather than recognizedasset.Accordingly, a partial valuation allowance has been recorded as the associated events occur. The tax on such acceleration will be the responsibility of Madison Square Garden Sports Corp. and not the Company. December 31, 2021.The Company will not reimburse Madison Square Garden Sports Corp. for such taxes.continue to assess the realizability of its deferred tax assets on a quarterly basis.
Madison Square Garden Sports Corp. was notified during
43


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
During the third quarter of fiscal year 2018 thatsix months ended December 31, 2021 the Internal Revenue Service (“IRS”) was commencing an audit of the federalCompany received income tax return forrefunds, net of payments, of $7,063. During the yearsix months ended June 30, 2016. In October 2019, Madison Square Garden Sports Corp. was informed byDecember 31, 2020, 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 stateCompany made 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.payments (net) of $52,147.
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 Garden 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 17.18. 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, 2020,2021, 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%5.0% of Madison Square Garden Sports Corp.’sthe Company’s outstanding Class A common stockCommon Stock (inclusive of options exercisable within 60 days of the date hereof). Such shares of Madison Square Garden Sports Corp.’sthe Company’s Class A common stockCommon Stock and Class B common stock,Common Stock, collectively, represent approximately 70.9%72.6% of the aggregate voting power of Madison Square Garden Sports Corp.’sthe Company’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 as of the Record Date.

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


Members of the Dolan family are also the controlling stockholders of the Company, Madison Square GardenMSG Sports Corp., 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:
•Media rights agreements with MSG Sports pursuant to which the Company has the exclusive media rights to Knicks and Rangers games in their local markets.
The•Sponsorship sales and service representation agreements pursuant to which the Company has variousthe exclusive right and obligation to sell MSG Sports’ sponsorships for an initial stated term of ten years for a commission;
•A team sponsorship allocation agreement, pursuant to which MSG Sports continues receiving an allocation of sponsorship and signage revenues associated with the sponsorship agreements with that existed at the Entertainment Distribution Date;
•Arena License Agreements pursuant to which the Company (i) provides MSG NetworksSports 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 sales and catering services during the Knicks and Rangers games for a portion of net profits (as defined under the Arena License Agreements), including an advertising sales representation agreement and a(v) provides day of game services agreement (the “Services Agreement”). Pursuantthat 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 was effective July 1, 2019, 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 with 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 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. Madison Square GardenMSG Sports Corp. will also provideprovides certain transition services to the Company, in exchange for service fees.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;
•Aircraft time sharing agreements (discussed below); and
•Other agreements with MSG Sports entered into in connection with the Entertainment Distribution such as a distribution agreement, a tax disaffiliation agreement, an employee matters agreement, a trademark license agreement and certain other arrangements.
44


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Further, 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 and the Company’s President with MSG NetworksSports and (ii) the Company’s Vice Chairman with MSG NetworksSports 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 Aircraft Support Services Agreement with the entity controlled by James L. Dolan is no longer effective as of December 21, 2021.
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 G550certain Company aircraft. The reciprocal dry lease agreement between the Company and Q2C is no longer effective as of December 21, 2021.
The Company is also party to a dry lease agreement and a time sharing 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’sAir has agreed from time to time to make its Bombardier BD100-1A10 Challenger 350 aircraft (the “Challenger”). available to the Company on a non-exclusive basis. 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 NetworksSports 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 NetworksSports and/or AMC Networks for lease on a “time sharing” basis. Additionally, the Company, MSG NetworksSports 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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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
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, 20202021 and June 30, 2019,2021, BCE had $637 of notes payable duewith respect to a loan received by BCE from its noncontrolling interest holder. See Note 1213 for further information.
The Company has also entered into certain commercial agreements with its equity method investment nonconsolidated affiliates in connection with MSG Sphere. For the ninesix months ended MarchDecember 31, 2021 and 2020, the Company recorded approximately $11,137$36,741 and $20,742, respectively, of capital expenditures in connection with services provided to the Company under these agreements. As of December 31, 2021 and June 30, 2021, accrued capital expenditures associated with related parties were $20,606 and $6,921, respectively, and are reported under other accrued liabilities in the accompanying consolidated balance sheets.
45


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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 combinedconsolidated statements of operations for the three and ninesix months ended December 31, 2021 and 2020:
Three Months Ended December 31,Six Months Ended December 31,
2021202020212020
Revenues$30,702 $4,638 $34,889 $7,461 
Operating expenses (credits):
Direct operating — media rights fees$40,813 $34,422 $81,258 $73,963 
Direct operating — revenue sharing expenses$1,131 $15 1,985 96 
Direct operating — reimbursement under Arena License Arrangement(6,125)(351)(6,465)(1,241)
General and administrative with MSG Sports — net of TSA credits(10,513)(10,273)(19,729)(20,453)
Direct operating — origination, master control and technical services1,208 1,184 2,416 2,368 
Other operating expenses, net987 (218)3,109 (85)
Revenues
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 annual license fees scheduled to be paid monthly 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 9, 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 in March 31,2020 through the first half of Fiscal Year 2021 due to the impact of the COVID-19 pandemic, The Garden was either not available for use by MSG Sports or available for Knicks home games without fans in attendance. The Knicks’2020-2021 pre/regular season began in December 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)
the Company recorded $1,585 of operating lease revenue for this arrangement for the three and six months en
ded December 31, 2020. The Rangers resumed playing home games at The Garden in January 2021. The Company recorded $27,854 and $29,182 of revenues under the Arena License Agreements for the three and six months ended December 31, 2021, respectively.
Revenues
RevenuesIn addition to the Arena License Agreements discussed above, the Company’s 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 include the Company’s share of revenues earned fromreflected sponsorship agreements that were entered into by Madison Square Garden Sports Corp. and include performance obligations satisfied by both the Company and Madison Square Garden Sports Corp.
In addition, the Company and Tribeca Enterprises have a service agreement pursuant to which the Company provides marketing inventory, advertising sales and consulting services toservice representation agreements with MSG Sports of $4,831 and $7,179 during the three and six months ended December 31, 2021, respectively and $2,441 and $4,646 during the three and six months ended December 31, 2020, respectively. Tribeca Enterprises for a fee. On August 5, 2019,The Company also earned sublease revenue from related parties of $611 and $1,222 during the Company sold its equity capital in Tribeca Enterprises. Accordingly, Tribeca Enterprises is no longer athree and six months ended December 31, 2021, respectively and $611 and $1,223 during the three and six months ended December 31, 2020, respectively. These related party revenues were partially offset by approximately $3,002 and $3,126 of merchandise revenue sharing with MSG Sports during the Company,three and thus the related party transactions disclosed herein that relate to Tribeca Enterprises were recognized prior to August 5, 2019. The Company is also a party to certain commercial arrangements with AMC Networks and its subsidiaries.six months ended December 31, 2021, respectively.
Revenue sharing expenses
46

Revenue for the Company’s suite license arrangements and venue signage and sponsorship agreements entered into by the Company is recorded on a gross basis. Madison Square Garden Sports Corp.’s share of the Company’s revenue related to such arrangements is recognized as a component of direct operating expenses. See Note 3 to the Company’s audited combined

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


Media Rights Fees
financial statementsMSG Networks’ media rights agreements with MSG Sports, effective as of July 1, 2015, provide the MSG Networks segment with the exclusive media rights to Knicks and notes thereto forRangers games in their local markets.
Revenue Sharing Expenses
In connection with the year ended June 30, 2019 included in the Company’s Information Statement for more information.
Allocation of Charges for Venue Usage to Madison Square Garden Sports Corp.
For purposesEntertainment Distribution, revenue sharing expenses include MSG Sports’ share of the Company’s combined financial statements,suite license arrangements and certain venue signage agreements entered into by the Company, allocatesas well as profit sharing expenses related to Madison Square Garden Sports Corp. certain expenses forin-venue food and beverage sales in connection with the usage of The Garden, which are reported as a reduction of direct operating expense in the accompanying combined statements of operations. 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.Arena License Agreements.
Corporate General and Administrative Expenses, netwith MSG Sports — Madison Square Garden Sports Corp.
AllocationsNet of corporate overhead and shared services expense were recorded by both the Company and Madison Square Garden 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. 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.
Corporate General and Administrative Expenses, net — MSG NetworksTSA Credits
The Company’s corporate overhead expenses that are charged to MSG NetworksSports are primarily related to centralized functions, including executive compensation, finance, treasury, tax, internal audit, legal, information technology, accounting, accounts payable, payroll, tax, legal, human resources, insurance and risk management, functions.investor relations, corporate communications, benefit plan administration and reporting, and internal audit.
Corporate generalGeneral and administrative operating expenses with MSG Sports, net – MSG Networks reflectsof TSA credits included in the table above primarily reflect charges from the Company to MSG Networks underSports pursuant to the Services AgreementTSA of $2,700$10,513 and $2,563$19,729 for the three and six months ended MarchDecember 31, 2021, respectively, and $10,273 and $20,452 for the three and six months ended December 31, 2020, and 2019, respectively, and$7,982 and $7,850 for the nine months ended March 31, 2020 and 2019, respectively.
Consulting FeesDirect Operating — Origination, Master Control and Technical Services

On December 5, 2018, the Company’s joint venture interest in AMSGE was sold to Azoff Music, which resulted in the Company no longer being an owner of AMSGE (renamed The Azoff Company). Accordingly, The Azoff Company is not a related party of the Company,AMC Networks provides certain origination, master control, and thus the related party transactions disclosed herein that relate to AMSGE were recognized prior to December 5, 2018. Priortechnical services 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.
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.segment.
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 and/or dry lease agreements with MSG Sports, AMC Networks and AMC Networks.Brighid Air and (iii) commission under the group ticket sales representation agreement with MSG Sports. The reciprocal aircraft arrangement between the Company and Q2C and the related aircraft support services arrangement between them was no longer effective as of December 21, 2021.
Nonoperating Expense
Miscellaneous expense, netNote 19. Segment Information
The Company is comprised of 3 reportable segments: Entertainment, MSG Networks 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 Chief Operating Decision Maker (“CODM”). The Company has evaluated this guidance and determined that there are 3 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 a contributory chargeother expenses such as (a) corporate and supporting department operating costs that are attributable to Madison Square Garden Sports Corp.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 participationoverall management of Madison Square Garden Sports Corp.the venues, and (vii) depreciation and amortization expense related to the Company’s performance venues and certain corporate employees inproperty, equipment and leasehold improvements. Additionally, the Shared Plans and Postretirement Plan, of $67 and $183 forCompany does not allocate any purchase accounting adjustments related to business acquisitions to 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.reporting segments.
47


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


Cash Management
Madison Square Garden Sports Corp. uses a centralized approach to cash management and financing of operations. The Company and other Madison Square Garden Sports Corp. or Madison Square Garden Sports Corp. subsidiaries’ cash was available for use and was regularly “swept” historically. Transfersevaluates segment performance based on several factors, of cash bothwhich the key financial measure is operating income (loss) before (i) adjustments to and from Madison Square Garden Sports Corp. are included as componentsremove the impact of the Madison Square Garden Sports Corp. investment on the combined statements of divisional equity and redeemable noncontrolling interests. The main components of the net transfers (to)/from Madison Square Garden Sports Corp. are cash pooling/general financing activities, various expense allocations to/from Madison Square Garden Sports Corp., and receivables/payables from/to Madison Square Garden 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.
Related Party Transactions after the Entertainment Distribution
In connectionnon-cash straight-line leasing revenue associated with the Entertainment Distribution the Company and Madison Square Garden 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.(ii) depreciation, amortization and impairments of property and equipment, goodwill and intangible assets, (iii) amortization for capitalized cloud computing arrangement costs, (iv) share-based compensation expense or benefit, (v) restructuring charges or credits, (vi) merger and acquisition-related costs, including litigation expenses, (vii) gains or losses on sales or dispositions of businesses and associated settlements, and (viii) the impact of purchase accounting adjustments related to business acquisitions, which is referred to as adjusted operating income (loss), a non-GAAP measure. 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 will require the New York Knicks (exclusion of share-based compensation expense or benefit allows investors to better track the “Knicks”)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 New York Rangers (the “Rangers”) to play their home games at The Garden. Additionally, on April 17, 2020, subsidiariesdifference in leasing revenue recognized and cash revenue received, the exclusion of Madison Square Garden Sports Corp., MSG NYK Holdings, LLC and MSG NYR Holdings, LLC, entered into separate delayed draw term loan credit agreements (the “DDTL Facilities”)non-cash leasing revenue provides investors with a wholly-owned subsidiaryclearer picture of the Company's operating performance. We eliminate merger and acquisition-related costs because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as lender. they result from an event that is of a non-recurring nature, thereby enhancing comparability.
The DDTL Facilities provideCompany believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of its business segments and the Company on a $110,000consolidated basis. Adjusted operating income (loss) and $90,000 senior unsecured delayed draw term loan facilities,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.
48


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Three Months Ended December 31, 2021
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$247,610 $159,981 $117,086 $— $(8,238)$516,439 
Direct operating expenses147,343 85,924 60,880 3,038 (927)296,258 
Selling, general and administrative expenses

91,516 37,192 40,685 — (7,116)162,277 
Depreciation and amortization19,024 1,756 6,243 3,510 — 30,533 
Impairment and other (gains) loss, net— — (7,443)(536)— (7,979)
Operating income (loss)$(10,273)$35,109 $16,721 $(6,012)$(195)$35,350 
Loss in equity method investments(1,774)
Interest income773 
Interest expense(8,167)
Miscellaneous expense, net(a)(17,100)
Income from operations before income taxes$9,082 
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(10,273)$35,109 $16,721 $(6,012)$(195)$35,350 
Add back:
Non-cash portion of arena license fees from MSG Sports(11,346)— — — — (11,346)
Share-based compensation16,155 6,058 1,958 — — 24,171 
Depreciation and amortization19,024 1,756 6,243 3,510 — 30,533 
Amortization for capitalized cloud computing costs(34)44 — — — 10 
Merger and acquisition related costs1,456 875 — — — 2,331 
Impairment and other (gains) loss, net— — (7,443)(536)— (7,979)
Other purchase accounting adjustments— — — 3,038 — 3,038 
Adjusted operating income (loss)$14,982 $43,842 $17,479 $— $(195)$76,108 
Other information:
Capital expenditures$166,218 $600 $8,987 $— $— $175,805 
49


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Three Months Ended December 31, 2020
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$12,669 $146,239 $10,491 $— $(647)$168,752 
Direct operating expenses23,409 57,033 10,980 924 151 92,497 
Selling, general and administrative expenses65,730 21,692 9,131 — (535)96,018 
Depreciation and amortization19,246 1,802 1,563 3,066 — 25,677 
Restructuring charges1,372 — — — — 1,372 
Operating income (loss)$(97,088)$65,712 $(11,183)$(3,990)$(263)$(46,812)
Loss in equity method investments(1,568)
Interest income837 
Interest expense(5,262)
Miscellaneous expense, net(a)(7,568)
Loss from operations before income taxes$(60,373)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(97,088)$65,712 $(11,183)$(3,990)$(263)$(46,812)
Add back:
Non-cash portion of arena license fees from MSG Sports(1,176)— — — — (1,176)
Share-based compensation22,374 6,266 1,188 — — 29,828 
Depreciation and amortization19,246 1,802 1,563 3,066 — 25,677 
Restructuring charges1,372 — — — — 1,372 
Other purchase accounting adjustments— — — 924 — 924 
Adjusted operating income (loss)$(55,272)$73,780 $(8,432)$— $(263)$9,813 
Other information:
Capital expenditures$106,945 $792 $293 $— $— $108,030 
50


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Six Months Ended December 31, 2021
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$281,849 $301,454 $236,550 $— $(8,904)$810,949 
Direct operating expenses183,645 154,347 121,973 3,123 (1,069)462,019 
Selling, general and administrative expenses184,478 85,167 74,779 — (7,308)337,116 
Depreciation and amortization38,680 3,553 12,621 5,109 

— 59,963 
Impairment and other (gains) loss, net— — 375 (536)— (161)
Operating income (loss)$(124,954)$58,387 $26,802 $(7,696)$(527)$(47,988)
Loss in equity method investments(2,981)
Interest income1,548 
Interest expense(17,415)
Miscellaneous expense, net(a)(19,647)
Loss from operations before income taxes$(86,483)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(124,954)$58,387 $26,802 $(7,696)$(527)$(47,988)
Add back:
Non-cash portion of arena license fees from MSG Sports(11,889)— — — — (11,889)
Share-based compensation26,298 13,532 3,869 — — 43,699 
Depreciation and amortization38,680 3,553 12,621 5,109 — 59,963 
Amortization for capitalized cloud computing costs7 88 — — — 95 
Merger and acquisition related costs15,448 24,075 — — — 39,523 
Impairment and other (gains) loss, net— — 375 (536)— (161)
Restructuring charges— — — — — — 
Other purchase accounting adjustments— — — 3,123 — 3,123 
Adjusted operating income (loss)$(56,410)$99,635 $43,667 $— $(527)$86,365 
Other information:
Capital expenditures$299,756 $2,049 $11,271 $— $— $313,076 
51


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Six Months Ended December 31, 2020
EntertainmentMSG NetworksTao Group HospitalityPurchase
accounting adjustments		Inter-segment eliminationsTotal
Revenues$20,224 $303,602 $17,712 $— $(2,240)$339,298 
Direct operating expenses47,024 122,105 20,808 1,848 (57)191,728 
Selling, general and administrative expenses118,380 44,219 16,734 — (1,658)177,675 
Depreciation and amortization41,260 3,630 2,609 6,588 — 54,087 
Restructuring charges21,299 — — — — 21,299 
Operating income (loss)$(207,739)$133,648 $(22,439)$(8,436)$(525)$(105,491)
Loss in equity method investments(3,264)
Interest income1,609 
Interest expense(10,535)
Miscellaneous income, net(a)26,449 
Loss from operations before income taxes$(91,232)
Reconciliation of operating loss to adjusted operating income (loss):
Operating income (loss)$(207,739)$133,648 $(22,439)$(8,436)$(525)$(105,491)
Add back:
Non-cash portion of arena license fees from MSG Sports(1,176)— — — — (1,176)
Share-based compensation32,807 10,893 2,284 — — 45,984 
Depreciation and amortization41,260 3,630 2,609 6,588 — 54,087 
Impairment and other (gains) loss, net— — — — — — 
Restructuring charges21,299 — — — — 21,299 
Other purchase accounting adjustments— — — 1,848 — 1,848 
Adjusted operating income (loss)$(113,549)$148,171 $(17,546)$— $(525)$16,551 
Other information:
Capital expenditures$218,344 $2,533 $952 $— $— $221,829 

52


MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
_________________
(a)Miscellaneous income (expense), net includes the following:
Three Months EndedSix Months Ended
December 31,December 31,
2021202020212020
Unrealized gain (loss) on equity investments with readily determinable fair value, see Note 7 for further details.$(17,155)$(7,227)$(19,615)$26,431 
Non-service cost components of net periodic pension and postretirement benefit costs(8)(28)(16)(119)
Others, net63 (313)(16)137 
Total$(17,100)$(7,568)$(19,647)$26,449 
Concentration of Risk
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.
Accounts receivable, net on the accompanying consolidated balance sheets as of December 31, 2021 and June 30, 2021 include amounts due from the following individual customers, all derived from the MSG Networks segment, which accounted for the MSG NYK Holdings, LLCnoted percentages of the gross balance:
December 31, 2021June 30, 2021
Customer A (a)
15 %1 %
Customer B14 %15 %
Customer C13 %17 %
Customer D10 %16 %
_________________
(a) A receivable from Customer A as of December 31,2021 is primarily due to timing of cash receipts.
Revenues in the accompanying consolidated statements of operations for the three and MSG NYR Holdings, LLC, respectively. six months ended December 31, 2021 and 2020 include amounts from the following individual customers, which accounted for the noted percentages of the total:
Three Months EndedSix Months Ended
December 31, 2021December 31, 2020December 31, 2021December 31, 2020
Customer 19 %24 %11 %25 %
Customer 28 %24 %10 %24 %
The DDTL Facilities will matureaccompanying consolidated balance sheets as of December 31, 2021 and any unused commitments thereunder will expire on October 17, 2021.June 30, 2021 include the following approximate amounts that are recorded in connection with the Company’s license agreement with the New Jersey Devils:
December 31, 2021June 30, 2021
Prepaid expenses$3,200 $1,400 
Other current assets3,000 3,700 
Other assets30,100 31,100 
$36,300 $36,200 

53




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”“Company��), including the impact of the COVID-19 pandemic and COVID-19 variants on our future operations, our ability to realize the potential for future impairment charges,benefits of the Merger with MSG Networks, the timing and costs of new venue construction, our plans to pursue additional debt financing and negotiate amendments toexpansion plan for Tao Group Hospitality’s credit facility, increased investment in personnel, contentHospitality, and technology for the status of the non-carriage of MSG Spheres, and increased expenses of being a standalone public company.Networks by Comcast Corporation (“Comcast”). 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 (including COVID-19 variants) as well as 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 continue to operate;
•the effect of any show postponements or cancellations by third-parties or the Company as a result of the COVID-19 pandemic due to operational challenges and other health and safety concerns (such as the partial cancellation of the 2021 production of the Christmas Spectacular);
•the extent to which attendance at our venues may be impacted by government actions, continuing health concerns by potential attendees and reduced tourism;
•risks related to the Merger, as defined herein, with MSG Networks Inc., including, but not limited to: failure to realize the expected benefits of the Merger, business disruption following the Merger and the government mandated suspensionrisk of the litigation relating to the Merger;
•the impact on the payments we receive under the Arena License Agreements as a result of government-mandated capacity restrictions, league restrictions and/or social-distancing or vaccination requirements at Knicks and Rangers games;
•the level of our business operations;expenses and our operational cash burn rate, including our corporate expenses;
•our ability to successfully design, construct, finance and operate new entertainment 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, the sports teams whose games are played at The Garden and broadcast on our networks, the appeal of our Tao Group Hospitality venues, and other events which are presented in our venues or broadcast on our networks;
•the demand for MSG Networks programming among cable, satellite, telephone and other platforms (“Distributors”) and the subscribers thereto, and our ability to enter into and renew affiliation agreements with Distributors, or to do so on favorable terms, as well as the impact of consolidation among Distributors;
•the ability of our Distributors to maintain, or minimize declines in, subscriber levels;
•the impact of subscribers selecting Distributors’ packages that do not include our networks or Distributors that do not carry our networks at all;
•the security of our MSG Networks program signal and electronic data;
•the on-ice and on-court performance of the professional sports teams whose games we broadcast on our networks and host 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 advertising and viewer ratings for advertising;our networks;
54



•competition, for example, from other venues and other sports and entertainment and nightlife options and other regional sports and entertainment networks, including the construction of new competing venues;
•the relocation or insolvency of professional sports teams with which we have a media rights agreement;
•our ability to maintain, obtain or produce content, together with the cost of such content;
•our ability to renew or replace our media rights agreements with professional sports teams through MSG Networks Inc.;
•changes in laws, guidelines, bulletins, directives, policies and agreements, orand regulations under which we operate;
•any economic, social or political actions, such as boycotts, protests, work stoppages or campaigns by labor organizations;organizations, including the unions representing players and officials of the National Basketball Association (“NBA”) and National Hockey League (“NHL”), or other work stoppage due to COVID-19 or otherwise;
•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;Sphere;
•business, reputational and litigation risk if there is a cyber or other security incident resulting in loss, disclosure or misappropriation of stored personal information, disruption of our Networks business or disclosure of confidential 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 Boston Calling Events, LLC (“BCE”)to attract attendees and performers to its future festivals;
•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;operations, including the Merger with MSG Networks Inc. and our acquisition of Hakkasan through Tao Group Hospitality;

Table of Contents•



the operating and financial performance of our strategic acquisitions and investments, including those we do not control;
•our internal control environment, remediation of the material weakness, and our ability to identify any future material weaknesses;
•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, andincluding with respect to the legalization of sports gaming, as well as 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 impact of sports league rules, regulations and/or agreements and changes thereto;
•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);
•our ability to achieve the intended benefits of the Entertainment Distribution;Distribution and the Merger with MSG Networks;
55



•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;arrangements, including the Arena License Agreements;
•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, and this QuarterlyAnnual Report on Form 10-Q under “Part II - Item 1A. Risk Factors.”10-K for the year ended June 30, 2021, as amended by the Company’s Annual Report on Form 10-K/A filed on February 9, 2022 (the “Form 10-K”).
We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.
All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
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 in the Company’s Information StatementForm 10-K 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 and the Merger on July 9, 2021, the Company will have twohas three segments (the Entertainment business, and the Tao Group Hospitality business), which will be presented in the Company’s Annual Report on Form 10-K for the fiscal year ending June 30, 2020.
A significant majority 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.
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. 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. 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.

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,business, 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, 2019MSG Networks business). See Note 19 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 combined statements of operations for the three and nine months ended March 31, 2020 and 2019 were prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of Madison Square Garden Sports Corp., and are presented as carve-out financial statements, because the Company was not a standalone public company prior to the Entertainment Distribution.
The Company’s combined statements of operations for the periods ended March 31, 2020 and 2019 include allocations for certain support functions that were provided on a centralized basis by Madison Square Garden 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 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. 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 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 4 to the 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 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 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.

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 government and certain professional sports leagues. As of the date of this Quarterly Report on Form 10-Q, virtually all of the business operations of the Company have been suspended and it is not clear when those operations will resume.
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. We are not recognizing revenue from those events and it is unclear whether and to what extent those events will be rescheduled. The 2020 Boston Calling music festival, which had been slated for Memorial Day weekend, has also been cancelled. 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 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.
The COVID-19 pandemic has materially impacted our revenues, most significantly because we are currently 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);
sponsorships, suite licenses and in-venue advertising;
our Tao Group Hospitality dining and nightlife business; and
the 2020 Boston Calling music festival.
While we have the ability to reduce 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 cancelled games and events and (iii) certain direct operating and SG&A expenses, including at our Tao Group Hospitality business), those expense reduction opportunities are not sufficient to fully offset revenue losses.
Additionally, 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 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.
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 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 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

to building a state-of-the-art venue in Las Vegas and we 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.
A subsidiarydiscussion of the Company is party to arena license agreements (the “Arena License Agreements”) with subsidiaries of Madison Square Garden 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 will be prorated based on the number of games scheduled to be played at The Garden between the Distribution date 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, due to a force majeure event (including the government-mandated suspension of events at The Garden as a result of the disruptions caused by COVID-19), 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 which The Garden is unavailable 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 available following a force majeure event, future rent payments due under the Arena License Agreements will be payable by the Knicks and the Rangers even if the NBA or NHL seasons do not resume simultaneously or at all.
For more information about the risks to the Company 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
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 ninesix months ended MarchDecember 31, 2021 and 2020 on both a consolidated basis and 2019.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 ninesix months ended MarchDecember 31, 20202021 and 2019,2020, as well as certain contractual obligations and off balanceoff-balance sheet arrangements.
Seasonality of Our Business. This section discusses the seasonal performance of our Christmas Spectacular production and Tao Group Hospitality. Entertainment segment.
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

during the third quarter of fiscal year 2020.Fiscal Year 2022. This section should be read together with our critical accounting policies, which are discussed in our Form 10-K under “Management's“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 combinedconsolidated financial statements of the Company’s audited combined financial statements and notes thereto for the fiscal year ended June 30, 2019Company 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, 2019therein.
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


  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.


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 primarily 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.


Business Overview
The decreaseCompany is a leader in venue-related signagelive experiences comprised of iconic venues; marquee entertainment brands; regional sports 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 networks; popular dining and nightlife offerings for the three months ended March 31, 2020 was primarily due to lower revenues in New York including the impactofferings; and a premier music festival that, together, entertain millions 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.
guests each year. 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 closureCompany’s portfolio 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 theincludes: The Garden, 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.Beacon Theatre and The Chicago Theatre. In addition, the Company unveiled its vision for state-of-the-art venues, called MSG Sphere, and is currently building its first such venue in Las Vegas. The Company did not havealso includes the original production, the Christmas Spectacular, as well as BCE, the entertainment production company that owns and operates the Boston Calling Music Festival. MSG Networks produces, develops and acquires content for multiple distribution platforms, including content originating from the Company’s venues, and is comprised of the Company’s regional sports and entertainment networks, MSG Network and MSG+, a comparable special eventcompanion streaming app, MSG GO, and other digital properties. Tao Group Hospitality is a hospitality group with globally-recognized entertainment dining and nightlife brands.
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Merger with MSG Networks Inc.
On July 9, 2021, the Company completed its previously announced acquisition of MSG Networks Inc. pursuant to that certain Agreement and Plan of Merger, dated as of March 25, 2021 (the “Merger Agreement”), among the Company, Broadway Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and MSG Networks Inc. Merger Sub merged with and into MSG Networks Inc. (the “Merger”), with MSG Networks Inc. surviving and continuing as the surviving corporation in the currentMerger as a wholly-owned subsidiary of the Company. On July 9, 2021, at the effective time of the Merger (the “Effective Time”), (i) each share of Class A common stock, par value $0.01 per share, of MSG Networks (“MSGN Class A Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class A common stock, par value $0.01 per share, of the Company (“Class A Common Stock”) such that each holder of record of shares of MSGN Class A Common Stock had the right to receive, in the aggregate, a number of shares of Class A Common Stock equal to the total number of shares of MSGN Class A Common Stock held of record immediately prior to the Effective Time multiplied by 0.172, with such product rounded up to the next whole share and (ii) each share of Class B common stock, par value $0.01 per share, of MSG Networks Inc. (“MSGN Class B Common Stock”) issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive a number of shares of Class B common stock, par value $0.01 per share, of the Company (“Class B Common Stock”) such that each holder of record of shares of MSGN Class B Common Stock had the right to receive, in the aggregate, a number of shares of Class B Common Stock equal to the total number of shares of MSGN Class B Common Stock held of record immediately prior to the Effective Time multiplied by 0.172, with such product rounded up to the next whole share, in each case except for Excluded Shares (as defined in the Merger Agreement). The Company issued 7,476 shares of the Class A Common Stock and 2,337 shares of Class B Common Stock on July 9, 2021 to holders of MSGN Class A Common Stock and MSGN Class B Common Stock, respectively, which shares are reflected as outstanding for all periods presented.
Beginning this fiscal year, period.the Merger has been accounted for as a transaction between entities under common control as the Company and MSG Networks Inc. were, prior to the Merger, each controlled by the Dolan Family Group (as defined herein). Upon the closing of the Merger, the net assets of MSG Networks Inc. were combined with those of the Company at their historical carrying amounts and the companies have been presented on a combined basis for all historical periods that the companies were under common control.
Factors Affecting Results of Operations
Impact of the COVID-19 Pandemic on Our Business
The Company’s operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic (including COVID-19 variants) and actions taken in response by governmental authorities and certain professional sports leagues. For the majority of Fiscal Year 2021, substantially all of the Entertainment business operations were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. While operations have resumed, it is not clear when we will fully return to normal operations.
As a result of government-mandated assembly limitations and closures, all of our performance venues were closed beginning in March 2020. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from February through May 2021 with certain safety protocols and social distancing. Beginning in May 2021, all of our New York performance venues were permitted to host guests at full capacity, subject to certain restrictions, and effective June 2021, The Chicago Theatre was permitted to host events without restrictions. Effective August 17, 2021, all workers and customers in New York City indoor dining, indoor fitness and indoor entertainment facilities, including our venues, were subject to certain vaccination requirements. Following updated regulations, effective January 3, 2022 for the Chicago Theatre, and January 29, 2022 for our New York venues, all guests five and older, as well as employees, are required to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine (although specific performers may require enhanced protocols). Children under age 5 can attend events with a vaccinated adult, but ages 2 to 4 need to wear a mask while inside our venues. In addition, effective August 20, 2021 and continuing, masks are required for all individuals in indoor public spaces in Chicago, including our venues.
For Fiscal Year 2021, the threemajority of ticketed events at our venues were postponed or cancelled. For the six months ended MarchDecember 31, 2020, the2021 and as of this date, live events have been permitted to be held at all of our performance venues and we are continuing to host and book new events. As a result of an increase in revenues fromcases of a COVID-19 variant, select bookings were postponed or cancelled at our performance venues in the presentationsecond quarter of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
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The impact of the COVID-19 pandemic on our operations also included (i) the partial cancellation of the 2021 production of the Christmas Spectacular, (ii) the cancellation of the 2020 production of the Christmas Spectacular, as comparedand (iii) the cancellation of both the 2020 and 2021 Boston Calling Music Festivals.
The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the Knicks and Rangers to play their home games at The Garden. Under the prior yearArena License Agreements, the Knicks and the Rangers pay an annual license fee in connection with their respective use of The Garden. The teams are not required to pay the license fee during a period was primarilyin which The Garden is unavailable for home games 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 offseta force majeure event (including when events at The Garden were suspended by the impact of the recognition of additional revenue during the prior year periodgovernment mandate as a result of the ticketing agreement renewal duringCOVID-19 pandemic). As a result, we did not receive any license fee payments under the third quarter of fiscal year 2019.
For the nine months ended March 31, 2020, the increase in revenuesArena License Agreements from the presentationperiod following the Entertainment Distribution through November 2020.On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License Agreements and full 82-game regular seasons for the 2021-22 NBA and NHL seasons are scheduled. See “Item. 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Revenue Sources — Entertainment — Venue License Fees” on the Christmas Spectacular, as comparedCompany’s Form 10-K and Note 9 to the prior year period, was primarily due toconsolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further information on revenue recognition under the following:Arena License Agreements.
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.

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 asAs a result of the temporary closureCOVID-19 pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of venues since March 12, 2020 duelive sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL, and, as a result, our advertising revenue and certain operating expenses, including rights fees expense, reflect the same.
Disruptions caused by the COVID-19 pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. Due to COVID-19, slightly offset by an additional event priorgovernment actions taken in response to the temporary closureCOVID-19 pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in March 2020. Additionally, three venues were permanently closed. Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and higher per-event expenses. The decreasesocial distancing requirements for outdoor and indoor dining. Tao Group Hospitality’s operations fluctuated throughout Fiscal Year 2021 and during the first two quarters of Fiscal Year 2022 as certain markets lifted restrictions, imposed restrictions, and changed operational requirements over time. Following updated regulations applicable to indoor dining facilities and entertainment venues, effective January 3, 2022 for Chicago, and January 29, 2022 for New York, all guests five and older, as well as employees, are required to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. In addition, certain jurisdictions have reinstated safety protocols, such as mask mandates in event-related expenses associatedNevada and Chicago, but Tao Group Hospitality is continuing to operate without capacity restrictions in domestic and key international markets.
It is unclear how long and to what extent COVID-19 concerns, including with other live sporting eventsrespect to new variants, will continue to impact government and league-mandated capacity restrictions or vaccination/mask requirements, the use of and/or demand for the nine months ended March 31, 2020 was primarily dueour entertainment and dining and nightlife venues, demand for our sponsorship and advertising assets, deter our employees and vendors from working at our venues (which may lead to the cancellation of college basketball events asdifficulties in staffing) or otherwise materially impact our operations.
As a result of the temporary closure of venues since March 12, 2020 duematerial impact COVID-19 had on our revenues during Fiscal Year 2021, we took several actions to COVID-19improve our financial flexibility, reduce operating costs and fewer events prior to the temporary closure, slightly offset by higher per-event expenses.
The decreasepreserve liquidity, including (i) revising our construction schedule for MSG Sphere (which has an anticipated opening date 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 quarterhalf of the currentcalendar year period.
The increase2023), (ii) making significant cuts in venue operating costs, net for the threeboth Entertainment andnine 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.

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 impacted the Company’s projected cash flows resulting in operating disruptions. This disruption along with the deteriorating macroeconomic conditions and industry/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 assetsvenue and goodwill for impairment. Based on this evaluation, the Company recordedcorporate headcounts, and (iii) having our wholly-owned subsidiary, MSG National Properties, LLC (“MSG National Properties”) enter into a non-cash impairment charge of $102,211 for the three and nine months ended March 31, 2020, which included impairment charges associated with one venue within Tao Group Hospitality 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.
Duefive-year $650,000 senior secured term loan facility (“National Properties Term Loan Facility”). See Note 13 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 loss for the three and nine months ended March 31, 2020 as compared to the prior year period was primarily due to (i) a non-cash impairment 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 direct operating expenses and lower depreciation and amortization, as discussed above.
Earnings (loss) in equity method investments
Loss in equity method investments for the three months ended March 31, 2020 decreased $1,785, or 62%, to $1,096 as compared to the prior year period. Loss in equity method investments for the nine months ended March 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

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, or 36%, to 3,054 as compared to the prior year period 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 Agreement in the current year period as compared to the previous credit facility in the prior year period. See Note 12 to the combinedconsolidated financial statements included in “Part I —“— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further details ofon the National Properties Term Loan Facility.
In August 2020, Tao Group Hospitality 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. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. In addition, in connection with the amendment, 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 13 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for more information regarding the amendment to the Tao Senior Credit Agreement. Tao Group Hospitality may need to seek covenant waivers in the future. Tao Group Hospitality’s failure to obtain debt covenant waivers could trigger a violation of
Net interest income
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these covenants and lead to default, acceleration of all of its outstanding debt and a demand for payment under the guarantee of MSG Entertainment Group, which would negatively impact the liquidity of Tao Group Hospitality and the Company.
The Company is building its first MSG Sphere in Las Vegas. This is a complex construction project with cutting-edge technology, which relies on subcontractors obtaining components from a variety of sources around the world. In 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 the pandemic continued to impact its business operations, in August 2020, the Company disclosed that it had resumed full construction with a lengthened timetable to better preserve cash through the COVID-19 pandemic. The Company remains committed to bringing MSG Sphere to Las Vegas and expects to open the venue in the second half of calendar year 2023.
In December 2020, the Company terminated its construction agreement with AECOM and assumed the role of construction manager to gain greater transparency and control over the construction process, including direct engagement and supervision of subcontractors. AECOM continues to support MSG Sphere at The Venetian through a services agreement that facilitates their ongoing involvement through MSG Sphere’s completion. As the construction manager of the project, we aim to aggressively manage the cost of the project in this volatile environment to minimize any potential cost increases.
For more information about the risks to the Company as a result of the COVID-19 pandemic and its impact on our operating results, see “Part I — Item 1A. Risk Factors—General Risk Factors— Our 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.” of the Form 10-K.
Factors Related to the MSG Networks Business
As further discussed under Note 2 to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q, the financial performance of MSG Networks business is affected by the affiliation agreements the Company negotiates with Distributors (including rates, terms, and conditions as well as the ability to renew such agreements), the number of subscribers of our Distributors that receive MSG Networks, and also by the advertising rates we charge advertisers. Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams carried on the Company’s networks as well as the cost and the attractiveness of the Company’s programming content.
Consolidated Results of Operations
Comparison of the Three and Six Months Ended December 31, 2021 versus the Three and Six Months Ended December 31, 2020
The table below sets forth, for the nineperiods presented, certain historical financial information.
Three Months Ended
December 31,
Change (a)
20212020AmountPercentage
Revenues$516,439 $168,752 $347,687 NM
Direct operating expenses296,258 92,497 203,761 NM
Selling, general and administrative expenses162,277 96,018 66,259 69 %
Depreciation and amortization30,533 25,677 4,856 19 %
Impairment and other (gains) loss, net(7,979)— (7,979)NM
Restructuring charges— 1,372 (1,372)NM
Operating income (loss)35,350 (46,812)82,162 NM
Other expense:
Loss in equity method investments(1,774)(1,568)(206)13 %
Interest expense, net (a)
(7,394)(4,425)(2,969)(67)%
Miscellaneous expense, net(17,100)(7,568)(9,532)(126)%
Income (loss) from operations before income taxes9,082 (60,373)69,455 NM
Income tax benefit (expense)(4,063)298 (4,361)NM
Net income (loss)5,019 (60,075)65,094 NM
Less: Net income (loss) attributable to redeemable noncontrolling interests2,642 (3,342)5,984 NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests106 (902)1,008 NM
Net income (loss) attributable to Madison Square Garden Entertainment Corp.’s stockholders$2,271 $(55,831)$58,102 NM
Six Months Ended
December 31,Change
20212020AmountPercentage
Revenues$810,949 $339,298 $471,651 139 %
Direct operating expenses462,019 191,728 270,291 141 %
Selling, general and administrative expenses337,116 177,675 159,441 90 %
Depreciation and amortization59,963 54,087 5,876 11 %
Impairment and other (gains) loss, net(161)— (161)NM
Restructuring charges— 21,299 (21,299)NM
Operating loss(47,988)(105,491)57,503 55 %
Other income (expense):
Loss in equity method investments(2,981)(3,264)283 9 %
Interest expense, net (a)
(15,867)(8,926)(6,941)(78)%
Miscellaneous income (expense), net(19,647)26,449 (46,096)NM
Loss from operations before income taxes(86,483)(91,232)4,749 5 %
Income tax benefit (expense)14,847 (9,159)24,006 NM
Net loss(71,636)(100,391)28,755 29 %
Less: Net income (loss) attributable to redeemable noncontrolling interests4,854 (7,231)12,085 NM
Less: Net income (loss) attributable to nonredeemable noncontrolling interests471 (1,532)2,003 NM
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(76,961)$(91,628)$14,667 16 %
_________________
(a)As disclosed on the Company’s Form 10-K/A filed on February 9, 2022 for the Fiscal Year 2021, the Company determined that the application of ASC Topic 835-20 (Capitalization of Interest) required that a portion of the interest incurred under the Company’s credit facilities should have been capitalized during the periods that the Company had been capitalizing costs related to MSG Sphere at the Venetian (the “accounting error”), which capitalization of such costs began in 2017. As a result, the previously reported consolidated statements of operation of the Company for the three and six months ended MarchDecember 31, 2020 increased $3,444,have been revised to correct this immaterial accounting error by decreasing the Company’s previously reported interest expense by $7,566 and $7,911, respectively.
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or 29%, to $15,388zero values are considered not meaningful.
Factors Affecting Results of Operations
For the three and six months ended December 31, 2021 and 2020, the Company’s operations and operating results were materially impacted by the COVID-19 pandemic and actions taken in response by governmental authorities. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information. Also, see “ — Factors Affecting Results of Operations” under Business Segment Results for more information surrounding the factors affecting comparability of each business segment’s results.
Depreciation and amortization
Depreciation and amortization for the three months ended December 31, 2021 was $30,533 as compared to $25,677 in the prior year period, an increase of $4,856, or 19% primarily due to the acquisition of Hakkasan in April 2021. For the six months ended December 31, 2021, depreciation and amortization was $59,963 as compared to $54,087 in the prior year period, an increase of $5,876, or 11% primarily due to the acquisition of Hakkasan in April 2021, partially offset by lower depreciation expense due to certain assets in The Garden being fully depreciated and amortized and disposal of certain assets in the prior year period.
59



Impairment and other (gains) loss, net
For the three months ended December 31, 2021, impairment and other (gains) loss of $7,979 principally reflects gains from extinguishments and modification of lease liabilities in the Tao Group Hospitality segment associated with certain Hakkasan venues and a gain on disposal of one of the Hakkasan venues.
The following is a summary of changes in operating income (loss) by segment for the three and six months ended December 31, 2021 as compared to the prior year period.
For the Three Months Ended December 31, 2021
Changes attributable toOperating income (loss)
Entertainment segment (a)
$86,815 
MSG Networks segment (a)
(30,603)
Tao Group Hospitality segment (a)
27,904 
Purchase accounting adjustments(2,022)
Inter-segment eliminations68 
MSG Entertainment Corp. total$82,162 
For the Six Months Ended December 31, 2021
Changes attributable toOperating income (loss)
Entertainment segment (a)
$82,785 
MSG Networks segment (a)
(75,261)
Tao Group Hospitality segment (a)
49,241 
Purchase accounting adjustments740 
Inter-segment eliminations(2)
MSG Entertainment Corp. total$57,503 
_________________
(a)See “Business Segment Results” for a more detailed discussion of the operating results of our segments.
Interest expense, net
Net interest expense was $7,394 for the three months ended December 31, 2021, as compared to $4,425 in the prior year period, a net increase of $2,969, or 67%. The increase was primarily due to lowerthe entry into the National Properties Term Loan Facility on November 12, 2020, which resulted in an increase of interest expense associated with Tao Group Hospitality,of approximately $5,990. The increase was partially offset by lowerhigher interest incomecapitalization related to construction of approximately $3,000. The Company capitalized $10,600 of interest for the three months ended December 31, 2021 as compared to $7,566 in the prior year period.
For the six months ended December 31, 2021, net interest expense was $15,867 as compared to $8,926 in the prior year period, a resultnet increase of (i) lowernet interest rates, (ii) a changeexpense of $6,941 or 78%. The increase was primarily due to the entry into the National Properties Term Loan Facility on November 12, 2020, which resulted in investment mix, and (iii) loweran increase of interest earned on loans extendedexpense by approximately $19,260. The increase was partially offset by higher interest capitalization related to AMSGE and Tribeca Enterprises.construction of approximately $12,030. The Company capitalized $19,926 of interest for the six months ended December 31, 2021 as compared to $7,911 in the prior year period.
Miscellaneous income (expense), net
Net miscellaneous expense for the three months ended MarchDecember 31, 20202021 was $17,381$17,100, as compared to a net miscellaneous income of $4,613$7,568 in the prior year period. Net miscellaneous expenseperiod, an increase of $9,532, or 126%, primarily due to an increase in unrealized loss of $7,005 associated with the Company’s investment in DraftKings Inc. (“DraftKings”), for, which the nine months ended March 31, 2020 decreased $1,225, or 30%, to $2,893 as compared to the prior year period. The changeCompany recorded an unrealized loss of $17,989 for the three months ended MarchDecember 31, 20202021 as compared to an unrealized loss of $10,984 in the prior year period.
For the six months ended December 31, 2021, net miscellaneous expense was $19,647 as compared to net miscellaneous income of 26,449, a decrease of $46,096, primarily due to the unrealized loss of $17,196 related toassociated with the Company’s investment in Townsquare inDraftKings of $21,476 for the current year periodsix months ended December 31, 2021 as compared to an unrealized gain of $5,261$22,064 in the prior year period. See Note 6 and Note 11 to the combined financial statements included in “Part I — Item 1. Financial Statements”
60



Income taxes
See Note 1617 to the combinedconsolidated 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.

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, 20202021 as compared to the prior year periods:period:
Three Months Ended
December 31,Change
20212020AmountPercentage
Operating income (loss)$35,350 $(46,812)$82,162 NM
Non-cash portion of arena license fees from MSG Sports(11,346)(1,176)
Share-based compensation24,171 29,828 
Depreciation and amortization (a)
30,533 25,677 
Amortization for capitalized cloud computing costs10 — 
Merger and acquisition related costs2,331 — 
Impairment and other (gains) loss, net(7,979)— 
Restructuring charges— 1,372 
Other purchase accounting adjustments3,038 924 
Adjusted operating income$76,108 $9,813 $66,295 NM
 Three Months Ended   Six Months Ended
 March 31, ChangeDecember 31,Change
 2020 2019 Amount Percentage20212020AmountPercentage
Operating loss $(145,541) $(18,619) $(126,922) NMOperating loss$(47,988)$(105,491)$57,503 55 %
Non-cash portion of arena license fees from MSG SportsNon-cash portion of arena license fees from MSG Sports(11,889)(1,176)
Share-based compensation 8,836
 8,726
   Share-based compensation43,699 45,984 
Depreciation and amortization (a)
 26,196
 26,768
   
Depreciation and amortization (a)
59,963 54,087 
Impairment of intangibles, long-lived assets and goodwill (b)
 102,211
 —
   
Amortization for capitalized cloud computing costsAmortization for capitalized cloud computing costs95 — 
Merger and acquisition related costsMerger and acquisition related costs39,523 — 
Impairment and other (gains) loss, netImpairment and other (gains) loss, net(161)— 
Restructuring chargesRestructuring charges— 21,299 
Other purchase accounting adjustments 1,068
 1,069
   Other purchase accounting adjustments3,123 1,848 
Adjusted operating income (loss) $(7,230) $17,944
 $(25,174) NM
Adjusted operating incomeAdjusted operating income$86,365 $16,551 $69,814 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.
Adjusted operating loss_________________
(a)    Depreciation and amortization includes purchase accounting adjustments of $3,510 and $3,066 for the three months ended MarchDecember 31, 2021 and 2020, was $7,230 as comparedrespectively, and $5,109 and $6,588 for the six months ended December 31, 2021 and 2020, respectively.
NM — Absolute percentages greater than 200% and comparisons from positive to adjusted operating incomenegative values or to zero values are considered not meaningful.
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Adjusted operating income for the ninethree months ended MarchDecember 31, 2020 decreased $55,499, or 44%,2021 improved $66,295, to $70,244 as compared$76,108. For the six months ended December 31, 2021, adjusted operating income increased $69,814, to the prior year period. The decreases$86,365. These increases in adjusted operating income were lower than the increases in operating losses primarily dueattributable to the impairmentfollowing:
Three Months Ended December 31, 2021Six Months Ended December 31, 2021
Increase in adjusted operating income of the Entertainment segment (a)
$70,254 $57,139 
Decrease in adjusted operating income of the MSG Networks segments (a)
(29,938)(48,536)
Increase in adjusted operating income of the Tao Group Hospitality segment (a)
25,911 61,213 
Inter-segment eliminations68 (2)
$66,295 $69,814 
_________________
(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, 2020,2021, the Company recorded $22,447$2,642 of net income attributable to redeemable noncontrolling interests and $106 of net income attributable to nonredeemable noncontrolling interests as compared to $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 $57for the three months ended December 31, 2020. For the six months ended December 31, 2021, the Company recorded $4,854 of PPA Expensesnet income attributable to redeemable noncontrolling interests and $471 of net income attributable to nonredeemable noncontrolling interests as compared to $7$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 threesix months ended MarchDecember 31, 2019.


Table of Contents



For the nine months ended March 31, 2020, the Company recorded $23,851 of net loss 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 of net loss 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 nine months ended March 31, 2019.

2020. 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
20212020AmountPercentage
Revenues$247,610 $12,669 $234,941 NM
Direct operating expenses147,343 23,409 123,934 NM
Selling, general and administrative expenses91,516 65,730 25,786 39 %
Depreciation and amortization19,024 19,246 (222)(1)%
Restructuring charges— 1,372 (1,372)NM
Operating loss$(10,273)$(97,088)$86,815 89 %
Reconciliation to adjusted operating income (loss):
Non-cash portion of arena license fees from MSG Sports(11,346)(1,176)
Share-based compensation16,155 22,374 
Amortization for capitalized cloud computing arrangement costs(34)— 
Merger and acquisition related costs1,456 — 
Depreciation and amortization19,024 19,246 
Restructuring charges— 1,372 
Adjusted operating income (loss)$14,982 $(55,272)$70,254 NM
Six Months Ended
December 31,Change
20212020AmountPercentage
Revenues$281,849 $20,224 $261,625 NM
Direct operating expenses183,645 47,024 136,621 NM
Selling, general and administrative expenses184,478 118,380 66,098 56 %
Depreciation and amortization38,680 41,260 (2,580)(6)%
Restructuring charges— 21,299 (21,299)NM
Operating loss$(124,954)$(207,739)$82,785 40 %
Reconciliation to adjusted operating loss:
Non-cash portion of arena license fees from MSG Sports(11,889)(1,176)
Share-based compensation26,298 32,807 
Depreciation and amortization38,680 41,260 
Amortization for capitalized cloud computing costs7 — 
Merger and acquisition related costs15,448 — 
Restructuring charges— 21,299 
Adjusted operating loss$(56,410)$(113,549)$57,139 50 %
_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
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Factors Affecting Results of Operations
Impact of the COVID-19 Pandemic
For the six months ended December 31, 2021 and 2020, the Entertainment segment operations and operating results were materially impacted by the COVID-19 pandemic and the actions taken in response by governmental authorities. While the number of events held at the Company’s venues has started to increase, it is not clear when the Company will fully return to normal business operations. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.
Revenues
Revenues for the three months ended December 31, 2021 increased $234,941 to $247,610 as compared to the prior year period. For the six months ended December 31, 2021, revenues increased $261,625 to $281,849 as compared to the prior year period. The net increases were attributable to the following: 
Three Months Ended December 31, 2021Six Months Ended December 31, 2021
Increase in event-related revenues, as discussed below$79,972 $100,632 
Increase in revenues from the Christmas Spectacular given the cancellation of the 2020 production as a result of the COVID-19 pandemic
55,328 55,209 
Increase in revenues from signage, suites licenses, and sales of food, beverage and merchandise subject to revenue or profit sharing with MSG Sports pursuant to the Arena License Agreements45,285 47,011 
Increase in arena license fees from MSG Sports pursuant to the Arena License Agreements, as discussed below26,268 27,596 
Increase in suite license fee revenues, as a result of no live events held in the prior year periods due to the COVID-19 pandemic13,080 13,459 
Increase in venue-related signage and sponsorship revenues primarily due to the return of live events at the Company’s venues during the current year period as compared to no live events held in the prior year periods due to the COVID-19 pandemic4,634 7,297 
Increase in revenues from Sponsorship Sales and Service Representation Agreements with MSG Sports2,391 2,534 
Increase in inter-segment revenues on advertising sales commission from MSG Networks, which are eliminated in consolidation6,357 5,572 
Other net increases1,626 2,315 
$234,941 $261,625 
For the three and six months ended December 31, 2021, the increase in event-related revenues reflects (i) higher revenues from concerts of $58,104 and $74,605, respectively, and (ii) higher revenues from other sporting and live entertainment events of $21,868 and $26,027, respectively, primarily due to the return of events to the Company’s venues during the current year period as compared to no live events held in the prior year period due to the COVID-19 pandemic. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.
For the three and six months ended December 31, 2021, the Knicks and Rangers hosted a combined 35 and 37 pre-season and regular season games without any capacity restrictions. As a result, the Company recorded $27,854 and $29,182 in arena license fees under the Arena License Agreements for the three and six months ended December 31, 2021. In the prior year, the Knicks began their season in December 2020 and played four pre-season and regular season home games in the Fiscal Year 2021 second quarter without fans in attendance due to government-mandated assembly restrictions at that time. As capacity at The Garden was limited to 1,000 or fewer attendees, the amounts payable to the Company under the Arena License Agreement with the Knicks were reduced by 80%. As a result, the Company recorded $1,585 in arena license fees under the Arena License Agreement with the Knicks for the three and six months ended December 31, 2020. In the prior year, the Rangers played no home games and the Company recorded no arena license fees under the Arena License Agreement with the Rangers. The Rangers’ 2020-21 season began subsequently in January 2021.

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For the three and six months ended December 31, 2021, the increase in revenues from the presentation of the Christmas Spectacular was due to the cancellation of the 2020 production in the prior year periods. During the production’s 2021 holiday season run, the Company welcomed over 400,000 guests across 101 performances, all of which took place in the Fiscal Year 2022 second quarter.
Direct operating expenses
Direct operating expenses for the three months ended December 31, 2021 increased $123,934 to $147,343 as compared to the prior year period. For the six months ended December 31, 2021, direct operating expenses increased $136,621 to $183,645 as compared to the prior year period. The net increases were attributable to the following:
Three Months Ended December 31, 2021Six Months Ended December 31, 2021
Increase in event-related direct operating expenses, as discussed below$41,844 $51,570 
Increase in direct operating expenses associated with the Christmas Spectacular given the cancellation of the 2020 production as a result of the COVID-19 pandemic
38,923 39,522 
Increase in direct operating expenses associated with revenue or profit sharing expense from signage, suites licenses and sales of food, beverage and merchandise with MSG Sports pursuant to the Arena License Agreements32,697 33,978 
Increase in direct operating expenses associated with the Arena License Agreements5,630 6,173 
Increase in direct operating expenses associated with venue operating costs2,622 5,348 
Other net increases2,218 30 
$123,934 $136,621 
For the three and six months ended December 31, 2021, the increase in event-related direct operating expenses reflects (i) higher direct operating expenses from concerts of $28,981 and $36,246, respectively, and (ii) higher direct operating expenses from other sporting and live entertainment events of $12,863 and $15,324, respectively, primarily due to the return of events to the Company’s venues during the current year period as compared to no live events held in the prior year period due to the COVID-19 pandemic.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended December 31, 2021 increased $25,786, or 39% to $91,516 as compared to the prior year period. The increase primarily reflects (i) higher employee compensation and related benefits of $14,105, which is net of a decrease in share-based compensation of $6,241, and (ii) an increase in professional fees of $7,766, inclusive of costs for MSG Sphere development. For the six months ended December 31, 2021, selling, general and administrative expenses increased $66,098, or 56%, to $184,478 as compared to the prior year period. This increase primarily reflects (i) higher employee compensation and related benefits of $32,867, which is net of a decrease in share-based compensation of $6,699, and (ii) an increase in professional fees of $22,567, inclusive of expenses in the current year period related to the Company’s acquisition of MSG Networks Inc. of $13,992 and, to a lesser extent, initiatives for MSG Sphere development.
Depreciation and amortization
Depreciation and amortization for the six months ended December 31, 2021, decreased $2,580, or 6% to $38,680 as compared to the prior year period primarily due to lower depreciation expense as a result of certain assets in The Garden being fully depreciated and amortized, and disposal of certain assets in the prior year period.
Operating loss
Operating loss for the three months ended December 31, 2021 was $10,273 as compared to $97,088 in the prior year period, a decrease in operating loss of $86,815, or 89%. For the six months ended December 31, 2021, operating loss was $124,954 as compared to $207,739 in the prior year period, a decrease in operating loss of $82,785 or 40%. The decreases in operating loss were primarily due to increases in revenues offset by higher direct operating expenses and selling, general and administrative expenses and, to a lesser extent, the impact of restructuring charges in the prior year periods, as discussed above.
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Adjusted operating income (loss)
Adjusted operating income for the three months ended December 31, 2021 was $14,982 as compared to adjusted operating loss of $55,272 in the prior year period, an increase in adjusted operating income of $70,254. The increase in adjusted operating income was lower than the decrease in operating loss of $86,815 primarily due to (i) the increase in adjustments for the non-cash portion of arena license fees from MSG Sports of $10,170, and (ii) a decrease in share-based compensation of $6,219, both of which are excluded in the calculation of adjusted operating income (loss). For the six months ended December 31, 2021, adjusted operating loss was $56,410 as compared to $113,549 in the prior year period, a decrease in adjusted operating loss of $57,139. The decrease in adjusted operating loss was lower than the decrease in operating loss of $82,785 primarily due to (i) restructuring charges of $21,299 in the prior year period as compared to merger and acquisition related costs of $15,448 in the current year period, (ii) the increase in adjustments for the non-cash portion of arena license fees from MSG Sports of $10,713, and (iii) a decrease in share-based compensation of $6,509, which are excluded in the calculation of adjusted operating loss.
MSG Networks
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Networks segment.
Three Months Ended
December 31,Change
20212020AmountPercentage
Revenues$159,981 $146,239 $13,742 9 %
Direct operating expenses85,924 57,033 28,891 51 %
Selling, general and administrative expenses37,192 21,692 15,500 71 %
Depreciation and amortization1,756 1,802 (46)(3)%
Operating income$35,109 $65,712 $(30,603)(47)%
Reconciliation to adjusted operating income:
Share-based compensation6,058 6,266 
Depreciation and amortization1,756 1,802 
Amortization for capitalized cloud computing arrangement costs44 — 
Merger and acquisition related costs875 — 
Adjusted operating income$43,842 $73,780 $(29,938)(41)%
Six Months Ended
December 31,Change
20212020AmountPercentage
Revenues$301,454 $303,602 $(2,148)(1)%
Direct operating expenses154,347 122,105 32,242 26 %
Selling, general and administrative expenses85,167 44,219 40,948 93 %
Depreciation and amortization3,553 3,630 (77)(2)%
Operating income$58,387 $133,648 $(75,261)(56)%
Reconciliation to adjusted operating income:
Share-based compensation13,532 10,893 
Depreciation and amortization3,553 3,630 
Amortization for capitalized cloud computing arrangement costs88 — 
Merger and acquisition related costs24,075 — 
Adjusted operating income$99,635 $148,171 $(48,536)(33)%
_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
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Factors Affecting Results of Operations
Due to the COVID-19 pandemic, in March 2020, the 2019-20 NHL and NBA seasons were suspended. The leagues resumed play during the summer of 2020, with the Rangers and Islanders participating in the NHL’s return to play and the Islanders advancing to the 2019-20 playoffs. The NHL and NBA subsequently completed their shortened 2019-20 seasons in September and October 2020, respectively, which resulted in a delayed start to the shortened 2020-21 NBA and NHL seasons. For the 2021-22 seasons, MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL. See “— Introduction — Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.
Revenues
Revenues for the three months ended December 31, 2021 increased $13,742, or 9% to $159,981 as compared to the prior year period. Revenues for the six months ended December 31, 2021 decreased $2,148, or 1%, to $301,454 as compared to the prior year period. The changes in revenues were attributable to the following:
Three Months Ended December 31, 2021Six Months Ended December 31, 2021
Decrease in affiliation fee revenue$(16,114)$(28,379)
Increase in advertising revenue28,307 24,745 
Other net increases1,549 1,486 
$13,742 $(2,148)
For the three months ended December 31, 2021, the decrease in affiliation fee revenue was primarily due to the impact of (i) the non-renewal of MSG Networks’ carriage agreement with Comcast as of October 1, 2021 and (ii) a decrease in subscribers of approximately 7% (excluding the impact of the non-renewal with Comcast). These decreases were partially offset by (i) the net impact of higher affiliation rates and (ii) a decrease in net unfavorable affiliate adjustments of approximately $3,100. For the six months ended December 31, 2021, the decrease in affiliation fee revenue was primarily due to the impact of (i) the non-renewal of MSG Networks’ carriage agreement with Comcast as of October 1, 2021, (ii) a decrease in subscribers of approximately 6.5% (excluding the impact of the non-renewal with Comcast), and (iii) an increase in net unfavorable affiliate adjustments of approximately $2,200. These decreases were partially offset by the impact of higher affiliation rates.
Effective October 1, 2021, Comcast’s license to carry MSG Networks expired and MSG Networks has not been carried by Comcast since that date. The financial impact of Comcast’s non-carriage of MSG Networks will depend on many factors including if, when and on what terms Comcast and the Company reach a new carriage agreement and the extent to which Comcast subscribers switch to other Distributors that carry MSG Networks. Comcast’s non-carriage has reduced MSG Networks’ subscribers by approximately 10% and, subject to the foregoing factors, has and is expected to reduce MSG Networks’ revenue by a comparable percentage for so long as MSG Networks’ carriage agreement with Comcast is not renewed. In addition, during any period of non-carriage, MSG Networks’ segment operating income and AOI have been and are expected to be reduced by an amount that is approximately equal to the dollar amount of the reduced revenue.
For the three months ended December 31, 2021, the increase in advertising revenue primarily reflects a greater number of live NBA and NHL telecasts as compared with the prior year period. As a result of the delayed start to the 2020-21 NBA and NHL seasons due to the COVID-19 pandemic, MSG Networks telecast nine NBA games and no NHL games in the prior year period, as compared with a regular NBA and NHL telecast schedule in the current year period. For the six months ended December 31, 2021, the increase in advertising revenue primarily reflects a greater number of live NBA and NHL telecasts in the current year period as compared with the prior year period. As a result of the impact of the COVID-19 pandemic to NBA and NHL seasons, MSG Networks telecast nine NBA games and 14 NHL games in the prior year period, as compared with a regular NBA and NHL telecast schedule in the current year period.

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Direct operating expenses
Direct operating expenses for the three months ended December 31, 2021 increased $28,891, or 51%, to $85,924 as compared to the prior year period. For the six months ended December 31, 2021, direct operating expenses increased $32,242, or 26%, to $154,347 as compared to the prior year period. For the three and six months ended December 31, 2021, the increase was primarily due to higher rights fees expenses of $20,358 and $22,901, respectively, and, to a lesser extent, an increase in other programming and production-related costs of $8,286 and $9,052, respectively. The increases in rights fees were primarily due to the impact of (i) lower media rights fees in the prior year periods as a result of the rights fees reductions related to the shortened 2020-21 NHL seasons, (ii) the impact in the prior year periods of the delayed start of the 2020-21 NBA and NHL regular seasons, and (iii) annual contractual rate increases. The increase in other programming and production-related costs was primarily due to the impact of a regular NBA and NHL telecast schedule in the current year period, as compared to the prior year period in which due to the impact of the COVID-19 pandemic to NBA and NHL seasons, MSG Networks telecast nine NBA games and 14 NHL games.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended December 31, 2021 increased $15,500, or 71%, to $37,192 as compared to the prior year period. For the six months ended December 31, 2021, selling, general and administrative expenses increased $40,948, or 93%, to $85,167 as compared to the prior year period. The increase in selling, general and administrative expenses was primarily due to higher (i) advertising, and marketing expenses of approximately $7,000 for the three and six months ended December 31, 2021, and (ii) advertising sales commissions of approximately $6,400 and $5,600 for the three and six months ended December 31, 2021, respectively. In addition, for the six months ended December 31, 2021, the increase in selling, general and administrative expenses also reflected approximately $25,700 of merger and acquisition costs that occurred primarily during the first quarter of Fiscal Year 2022, inclusive of the impact of executive separation agreements.
Operating income
Operating income for the three months ended December 31, 2021 decreased $30,603, or 47% to $35,109 as compared to the prior year period. The decrease in operating income for three months ended December 31, 2021 was primarily due to the increase in direct operating expenses and, to a lesser extent, the increase in selling, general and administrative expenses, partially offset by the increase in revenues. For the six months ended December 31, 2021, operating income decreased $75,261, or 56%, to $58,387 as compared to the prior year period. The decrease in operating income for the six months ended December 31, 2021 was primarily due to the increase in selling, general and administrative expenses and direct operating expenses and, to a lesser extent the decrease in revenues.
Adjusted operating income
Adjusted operating income for the three months ended December 31, 2021 decreased $29,938, or 41%, to $43,842 as compared to the prior year period, which is consistent with the decrease in operating income of $30,603, as discussed above. For the six months ended December 31, 2021, adjusted operating income decreased $48,536, or 33%, to $99,635 as compared to the prior year period. The decrease in adjusted operating income for the six months ended December 31, 2021 was lower than the decrease in operating income of $75,261 primarily due to the merger and acquisition-related costs of $24,075 recorded in the current year period, which are excluded in the calculation of adjusted operating income.
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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
20212020AmountPercentage
Revenues$117,086 $10,491 $106,595 NM
Direct operating expenses60,880 10,980 49,900 NM
Selling, general and administrative expenses40,685 9,131 31,554 NM
Depreciation and amortization6,243 1,563 4,680 NM
Impairment and other (gains) loss, net(7,443)— (7,443)NM
Operating income (loss)$16,721 $(11,183)$27,904 NM
Reconciliation to adjusted operating income (loss):
Share-based compensation1,958 1,188 
Depreciation and amortization6,243 1,563 
Impairment and other (gains) loss, net(7,443)— 
Adjusted operating income (loss)$17,479 $(8,432)$25,911 NM
Six Months Ended
December 31,Change
20212020AmountPercentage
Revenues$236,550 $17,712 $218,838 NM
Direct operating expenses121,973 20,808 101,165 NM
Selling, general and administrative expenses74,779 16,734 58,045 NM
Depreciation and amortization12,621 2,609 10,012 NM
Impairment and other (gains) loss, net375 — 375 NM
Operating income (loss)$26,802 $(22,439)$49,241 NM
Reconciliation to adjusted operating income (loss):
Share-based compensation3,869 2,284 
Depreciation and amortization12,621 2,609 
Impairment and other (gains) loss, net375 — 
Adjusted operating income (loss)$43,667 $(17,546)$61,213 NM
_________________
NM — Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Factors Affecting Results of Operations
Disruptions caused by the COVID-19 pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. In the prior year period, due to government actions taken in response to the COVID-19 pandemic in 2020, virtually all of Tao Group Hospitality’s venues closed for approximately three months starting in March. Certain venues then resumed limited operations, subject to significant regulatory requirements, which included limits on capacity, curfews and social distancing requirements for outdoor and indoor dining. See “— Introduction —Factors Affecting Results of Operations — Impact of the COVID-19 Pandemic on Our Business” for more information.
As of December 31, 2021, 53 of Tao Group Hospitality’s venues (24 legacy Tao Group Hospitality venue and 29 Hakkasan venues acquired in connection with the April 27, 2021 transaction) were open for outdoor dining, limited or full capacity indoor dining (depending on the market), and delivery/takeout, inclusive of Tao Asian Bistro & Lounge at Mohegan Sun, a venue that first opened in March 2021, while six venues remained closed (four legacy Tao Group Hospitality venues and two Hakkasan
69



venues). Our venues continue to be operating under various governmental safety protocols such as vaccine mandates, curfews, capacity limitations and social distancing depending on the location.
Revenues
Revenues for the three months ended December 31, 2021 increased $106,595 to $117,086 as compared to the prior year period. For the six months ended December 31, 2021, revenues increased $218,838 to $236,550 as compared to the prior year period. The net increases were attributable to the following:
Three Months Ended December 31, 2021Six Months Ended December 31, 2021
Increase in revenues due to Hakkasan, acquired in April 2021$51,579 $110,931 
Increase in revenues at venues subject to capacity restrictions in the prior year period (a)
36,455 62,728 
Increase in revenues at venues that were temporarily closed in the prior year period as a result of the COVID-19 pandemic17,243 42,791 
Other net increases1,318 2,388 
$106,595 $218,838 
_________________
(a) Includes the increases in revenues from converting previously managed venues to self-operated venues of $9,291 and $20,222 for the three and six months ended December 31, 2021 as compared to the prior year periods.
Direct operating expenses
Direct operating expenses for the three months ended December 31, 2021 increased $49,900 to $60,880 as compared to the prior year period. For the six months ended December 31, 2021, direct operating expenses increased $101,165, to $121,973 as compared to the prior year period. The net increases were attributable to the following:
Three Months Ended December 31, 2021Six Months Ended December 31, 2021
Increase in direct operating expenses due to Hakkasan, acquired in April 2021$24,614 $52,480 
Increase in employee compensation and related benefits as a result of resuming operations compared with the prior year period’s reduction in headcount resulting from the COVID-19 pandemic11,578 21,688 
Increase in the costs of food, beverage and venue entertainment as a result of resuming operations compared with the prior year period’s closure of certain venues and capacity restrictions due to the COVID-19 pandemic10,855 21,020 
Increase in rent expense, primarily due to rent concessions in the prior year period resulting from the COVID-19 pandemic2,603 5,282 
Other net increases250 695 
$49,900 $101,165 
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended December 31, 2021 increased $31,554 to $40,685 as compared to the prior year period. For the six months ended December 31, 2021, selling, general and administrative expenses increased $58,045 to $74,779 as compared to the prior year period. For the three and six months ended December 31, 2021, the increases were primarily due to higher (i) expenses from the Hakkasan operations acquired in April 2021 of $15,973 and $30,696, respectively, (ii) employee compensation and related benefits, inclusive of an increase in share-based compensation, of $6,454 and $10,640, respectively, (iii) professional fees and restaurant expenses, as well as supplies, utilities, general liability insurance, pre-opening expenses and repairs and maintenance of $4,521 and $8,376, respectively, and (iv) marketing costs of $2,357 and $4,490, respectively. All increases were significantly driven by the acquisition of Hakkasan in April 2021.
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Depreciation and amortization
Depreciation and amortization for the three months ended December 31, 2021 increased $4,680 to $6,243 as compared to the prior year period. For the six months ended December 31, 2021, depreciation and amortization increased $10,012 to $12,621 as compared to the prior year period. The increases were primarily due to acquisition of Hakkasan in April 2021.
Impairment and other (gains) loss, net
For the three months ended December 31, 2021, the Company recorded net gains of $7,443 principally from extinguishments and modification of lease liabilities associated with certain Hakkasan venues.
Operating income (loss)
Operating income for the three months ended December 31, 2021 was $16,721 as compared to an operating loss of $11,183 in the prior year period, an increase in operating income of $27,904. For the six months ended December 31, 2021, operating income was $26,802 as compared to an operating loss of $22,439 in the prior year period, an increase in operating income of $49,241. The increases in operating income for the three and six months ended December 31, 2021 were primarily due to the acquisition of Hakkasan in April 2021 and increased revenues, partially offset by an increase in direct operations, selling, general and administrative expenses, depreciation and amortization and impairment of long-lived assets, as discussed above. All increased operations were significantly driven by the acquisition of Hakkasan in April 2021 and the prior year period disruptions caused by the COVID-19 pandemic.
Adjusted operating income (loss)
Adjusted operating income for the three months ended December 31, 2021 was $17,479 as compared to adjusted operating loss $8,432 in the prior year period, an increase in adjusted operating income of $25,911. For the six months ended December 31, 2021, adjusted operating income was $43,667, as compared to adjusted operating loss of $17,546 in the prior year period, an increase in adjusted operating income of $61,213. The increase in adjusted operating income for the three months ended December 31, 2021 was lower as compared to the increase in operating income primarily due to the net recovery of impairment of long-lived assets, offset by the higher depreciation and amortization, as discussed above. For the six months ended December 31, 2021, the increase in adjusted operating income was higher than the increase in operating income primarily due to increased depreciation and amortization, as discussed above.
Liquidity and Capital Resources
Overview
OurThe Company’s operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic (including COVID-19 variants) and actions taken in response by the governmentgovernmental authorities and certain professional sports leagues. AsFor the majority of Fiscal Year 2021, substantially all of the date of this Quarterly Report on Form 10-Q, nearly all of ourEntertainment business operations were suspended, MSG Networks aired substantially fewer games and Tao Group Hospitality was operating at significantly reduced capacity and demand. While operations have been suspended andresumed, it is not clear when those operationswe will resume. fully return to normal operations.
As a result of government mandatedgovernment-mandated assembly limitations and closures, all of our performance venues were closed beginning in March 2020. Use of The Garden resumed for Knicks and Rangers home games without fans in December 2020 and January 2021, respectively, and was available at 10% seating capacity from February through May 2021 with certain safety protocols and social distancing. Beginning in May 2021, all of our New York performance venues were permitted to host guests at full capacity, subject to certain restrictions, and effective June 2021, The Chicago Theatre was permitted to host events without restrictions. Effective August 17, 2021, all workers and customers in New York City indoor dining, indoor fitness and indoor entertainment facilities, including our venues, were subject to certain vaccination requirements. Following updated regulations, effective January 3, 2022 for the Chicago Theatre, and January 29, 2022 for our New York venues, all guests five and older, as well as employees, are required to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine (although specific performers may require enhanced protocols). Children under age 5 can attend events with a vaccinated adult, but ages 2 to 4 need to wear a mask while inside our venues. In addition, effective August 20, 2021 and continuing, masks are required for all individuals in indoor public spaces in Chicago, including our venues.
For Fiscal Year 2021, the majority of ticketed events at our venues were postponed or cancelled. For the six months ended December 31, 2021 and as of this date, live events have been permitted to be held at all of our performance venues and we are continuing to host and book new events. As a result of an increase in cases of a COVID-19 variant, select bookings were postponed or cancelled at our performance venues in the second quarter of Fiscal Year 2022. Variants of COVID-19 that arise in the future may result in additional postponements or cancellations of bookings at our performance venues.
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The impact of the COVID-19 pandemic on our operations also included (i) the partial cancellation of the 2021 production of the Christmas Spectacular, (ii) the cancellation of the 2020 production of the Christmas Spectacular, and (iii) the cancellation of both the 2020 and 2021 Boston Calling Music Festivals.
The Company has Arena License Agreements with MSG Sports that require the Knicks and Rangers to play their home games at The Garden. As discussed above, capacity restrictions, use limitations and social distancing requirements were in place for the entirety of the Knicks and Rangers 2020-21 regular seasons, which materially impacted the payments we received under the Arena License Agreements for Fiscal Year 2021. On July 1, 2021, the Knicks and Rangers began paying the full amounts provided for under their respective Arena License Agreements and full 82-game regular seasons for the 2021-22 NBA and NHL seasons are scheduled.
As a result of the COVID-19 pandemic and league and government actions relating thereto, MSG Networks aired substantially fewer NBA and NHL telecasts during Fiscal Year 2021, as compared with Fiscal Year 2019 (the last full fiscal year not impacted by COVID-19), and consequently experienced a decrease in revenues, including a material decrease in advertising revenue. The absence of live sports games also resulted in a decrease in certain MSG Networks expenses, including rights fees, variable production expenses, and advertising sales commissions. MSG Networks has resumed airing full regular season telecast schedules for its five professional teams across both the NBA and NHL, and, as a result, our advertising revenue and certain operating expenses, including rights fees expense, reflect the same.
Disruptions caused by the COVID-19 pandemic had a significant and negative impact on Tao Group Hospitality’s operations and financial performance for Fiscal Year 2021. Due to government actions taken in response to the COVID-19 pandemic, virtually all of our scheduled events at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre are postponed or cancelled through June, the 2020 Boston Calling music festival, which had been slatedTao Group Hospitality’s venues were closed for Memorial Day weekend, has also been cancelled, and virtually allapproximately three months starting in March 2020. Additionally, three venues were permanently closed. Throughout Fiscal Year 2021, Tao Group Hospitality conducted limited operations at certain venues, subject to significant regulatory requirements, including capacity limits, curfews and social distancing requirements for outdoor and indoor dining. Tao Group Hospitality’s operations fluctuated throughout Fiscal Year 2021 and during the first two quarters of Fiscal Year 2022 as certain markets lifted restrictions, imposed restrictions, and changed operational requirements over time. Following updated regulations applicable to indoor dining facilities and entertainment venues, effective January 3, 2022 for Chicago, and January 29, 2022 for New York, all guests five and older, as well as employees, are currently closed. The NBArequired to provide proof that they have received two doses of a two-shot COVID-19 vaccine or one dose of a single-shot vaccine. In addition, certain jurisdictions have reinstated safety protocols, such as mask mandates in Nevada and the NHL suspended their 2019-20 seasons on March 11Chicago, but Tao Group Hospitality is continuing to operate without capacity restrictions in domestic and 12, 2020, respectively. No Knicks or Rangers games are currently being played, and it is uncertain if the current seasons will resume. For more information about the impacts and risks to the Company as a result of COVID-19, see “— Impact of COVID-19 on Our Business” and “Item 1A. Risk Factors — Our Operations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government Actions Taken in Response.”key international markets.
It is unclear how long and to what extent COVID-19 concerns, including with respect to new variants, will continue to impact government and league-mandated capacity restrictions or vaccination/mask requirements, the use of and/or demand for our entertainment and dining and nightlife venues, demand for our sponsorship and advertising assets, deter our employees and vendors from working at our venues (which may lead to difficulties in staffing) or otherwise materially impact our operations.
Our primary sources of liquidity are cash and cash equivalents, and cash flows from the operations of our businesses.businesses and available borrowing capacity under our MSGN Credit Agreement. Our principal uses of cash include working capital-related items (including funding our operations), capital spending (including our planned construction of large-scale venuesMSG Sphere at The Venetian in Las Vegas, and London)as described below), borrowings by Madison Square Garden Sports Corp. under the DDTL Facilities,debt service, 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$1,258,105 in cash and cash equivalents and $331,000 of short-term investments as of MarchDecember 31, 2020,2021, to over the next 12 months, fund our operations, make committed funds available to Madison Square Garden Sports Corp. underservice the DDTLMSGN Credit Agreement, the National Properties Term Loan Facility, the Tao Credit Facilities, 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 for the time of the Madison Square Garden Entertainment Corp. spin-off.foreseeable future. See Note 1113 to the combinedconsolidated 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.MSGN Credit Agreement, the National Properties Term Loan Facility and the Tao Revolving Credit Facilities. Our cash and cash equivalents include approximately $223,000$264,000 in advance cash proceeds — primarily related to tickets, suites, and, sponsorships —  all of which would be addressed, to thea lesser extent, necessary, through refunds, credits, make-goods and/or rescheduled dates.sponsorships.
In connection with the Entertainment Distribution and as an additional source of liquidity for Madison Square Garden Sports Corp. in response to the COVID-19 pandemic, on April 17, 2020, a subsidiary of the Company entered into the DDTL Facilities with subsidiaries of Madison Square Garden Sports Corp. Pursuant to the DDTL Facilities, two of Madison Square Garden Sports Corp.’s 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 at 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 both 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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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 and acquisitions.
MSG SpheresSphere
The Company has made 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 and 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 the second half of calendar year 2023. As with any major construction project, the construction of MSG Sphere is subject to potential delays, unexpected complications or cost fluctuations.
On August 23, 2021, we announced that our cost estimate inclusive of core technology and soft costs, for MSG Sphere at The Venetian iswas approximately $1,660,000.$1,865,000. This cost estimate iswas net of $75,000 that the Las Vegas Sands Corp. has agreed to pay to defray certain construction costs and also excludes the impacts of changes in inflation and significant capitalized and non-capitalized costs for items such as content creation, internal labor, capitalized interest, and furniture and equipment. Relative to our current cost estimate above, our actual construction costs for MSG Sphere at The Venetian incurred through MarchDecember 31, 20202021 were approximately $349,000,$1,131,000, which is net of $65,000 received from Las Vegas Sands Corp. during the nine months ended March 31, 2020.Sands. In addition, the amount of construction costs incurred as of MarchDecember 31, 20202021 includes approximately $67,600$146,000 of accrued expenses that were not yet paid as of that date. As with any major construction project, the construction of MSG Sphere is subject to potential unexpected delays, costs or other complications.
The MSG Sphere at The Venetian is a complex construction project with cutting-edge technology that relies on subcontractors obtaining components from a variety of sources around 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).
In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to a future MSG Sphere. Cost estimates for MSG Sphere in London are still in development as the Company continues to refine its design, which it currently expects will be substantially similar to MSG Sphere in Las Vegas, including having approximately the same seating capacity. The Company submitted a planning application to the local planning authority in March 2019 and the planning application process has continued in 2020. The Company is using this time to continue building on its design and construction learnings in Las Vegas, which it will leverage in London. And as we work through this planning application and design process, we expect our timeline will evolve and, therefore, we do not have a target opening date at this time.
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-on-hand and cash flows from operations are not sufficient to finance the remaining construction costs of MSG Sphere at The Venetian, the Company would need to completeaccess additional debt financing.capital, including potential incremental debt. 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, under the right terms it would consider third-party financing alternatives. The Company’s intention for any future venues is to explore otherutilize several options, includingsuch as non-recourse debt financing, joint ventures, equity partners and a managed venue model.

For additional information regarding the Company’s capital expenditures, including those related to MSG Sphere, see Note 21 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2021 included in the Company’s Annual Report on Form 10-K.
TableIn February 2018, we announced the purchase of Contentsland in Stratford, London, which we expect will become home to a future MSG Sphere. The Company submitted a planning application to the local planning authority in March 2019 and that process, which will require various stages of review to be completed and approvals to be granted, is ongoing. Therefore, we do not have a definitive timeline at this time.



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,We will continue to explore additional domestic 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,international markets where 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.next-generation venues such as MSG Sphere can be successful.
Financing Agreements
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 Tao Senior Secured Credit Facilities consisting of: (i) an initial $40,000 term loan facility with a term of five years and (ii) the Tao Revolving Credit Facility. The Tao Senior Secured Credit Facilities were obtained without recourseSee Note 13 to the Company or any of its affiliates (other than TAOG, TAOIH and its subsidiaries). There was no outstanding amount drawn on the Tao Revolving Credit Facility as of March 31, 2020. As of March 31, 2020, TAOIH was in compliance with the required financial covenants.
Tao Group Hospitality has financed its operations under the Tao Senior Credit Agreement, including with the $25,000 revolving credit facility. As a result of the COVID-19 effects, Tao Group Hospitality will not be in compliance with the required financial covenants under 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. If Tao Group Hospitality cannot obtain an amendment or waiver from its lenders, it may not have access to 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 provide Tao Group Hospitality with capital to service its debt obligations.
On May 23, 2019, a subsidiary of the Company and a subsidiary of Tao Group Hospitality entered into the Tao Subordinated Credit Agreement providing for a credit facility of $49,000 that matures in August 2024. During the nine months ended March 31, 2020, Tao Group Hospitality repaid $5,000 under the Tao Subordinated Credit Agreement. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement have been eliminated in the combined financial statements in accordance with ASC Topic 810, Consolidation.
See Note 12 to the combinedconsolidated 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
MSGN Credit Facility

MSG Networks has made principal repayments aggregating to $77,000 through December 31, 2021 under the MSGN Credit Agreement. The MSGN Term Loan Facility amortizes quarterly in accordance with its terms. As of December 31, 2021, there was $1,023,000 outstanding under the MSGN Term Loan Facility, and no borrowings under the MSGN Revolving Credit LinesFacility. As of December 31, 2021, the Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis
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were in compliance with the covenants of the MSGN Credit Agreement. The scheduled repayments for the remainder of Fiscal Year 2022 are $24,750.
National Properties Term Loan Facility
The Company has established bilateral credit lines withNational Properties Term Loan Facility includes a bankminimum liquidity covenant, pursuant to issue letterswhich MSG National Properties and its restricted subsidiaries are required to maintain a specified minimum level of credit in supportaverage daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter. Following the first anniversary of the Company’s business operations.closing of the facility in November 2021, the minimum liquidity level was 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. As of December 31, 2021, the trailing twelve month AOI (as defined under the National Properties Term Loan Facility) for MSG National Properties and its restricted subsidiaries was negative and therefore, the minimum liquidity level continues to be $200,000.

MSG National Properties has made principal repayments aggregating to $6,500 through December 31, 2021 under the National Properties Term Loan Facility, which amortizes quarterly in accordance with its terms. As of December 31, 2021, there was $643,500 outstanding under the National Properties Term Loan Facility. The Company pays feesscheduled repayments for the lettersremainder of credit thatFiscal Year 2022 are credited against interest income$3,250.

In addition to the Company receivesminimum 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. As of December 31, 2021, MSG National Properties and its restricted subsidiaries were in return from its investments in notes receivablecompliance with the same bank. covenants of the National Properties Term Loan Facility.
Tao Senior Secured Credit Facilities
As of MarchDecember 31, 2020,2021, there was $26,250 outstanding drawn on the Company had $11,079Tao Term Loan Facility. The scheduled repayments for the remainder of Fiscal Year 2022 are $3,750. As of December 31, 2021, Tao Group Hospitality utilized $750 of the Tao Revolving Credit Facility for issuance of letters of credit and the remaining borrowing available was $24,250.
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 through December 31, 2021, modified the applicable interest rates and increased the minimum liquidity requirement for the outstanding pursuantbalance of $33,750 under the Tao Term Loan Facility and for the $25,000 availability under the Tao Revolving Credit Facility. As of January 1, 2022, such financial maintenance and restrictive covenant suspensions are no longer in effect. TAOIH and its restricted subsidiaries must maintain a minimum consolidated liquidity, consisting of cash and cash equivalents and available revolving commitments, at all times of $10,000. In addition, in connection with the amendment, the Company, through its direct 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 $1,600 as of December 31, 2021. As of December 31, 2021, TAOG, TAOIH and the restricted subsidiaries were in compliance with the covenants of the Tao Senior Credit Agreement.

As of December 31, 2021, the outstanding balance under the Tao Subordinated Credit Agreement was $63,000. The balances and interest-related activities pertaining to the Tao Subordinated Credit Agreement have been eliminated in the consolidated financial statements in accordance with ASC Topic 810, Consolidation. If recovery from the pandemic takes longer than currently estimated, Tao Group Hospitality may need to seek covenant waivers in the future. Tao Group Hospitality’s failure to obtain covenant waivers could trigger a violation of these covenants and lead to default and acceleration of all of its outstanding debt, which fees were credited againstcould have a note investment,material adverse effect on liquidity.
Letters of Credit
The Company uses letters of credit to support its business operations. As of December 31, 2021, the Company had a total of $8,447 of letters of credit outstanding, which included two letters of credit for an aggregate of $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 2021 other than (i) a total of approximately $3,646,250 in contract obligations (primarily related to media rights agreements) that are now included
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as a part of the Company’s contractual obligation in connection with the Merger with MSG Networks on July 9, 2021, and (ii) activities in the ordinary course of business. See Note 11to the consolidated financial statements included in “— Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further details on the timing and amount of payments under various media rights agreements.
Cash Flow Discussion

As of MarchDecember 31, 2020,2021, cash, cash equivalents and restricted cash totaled $1,021,848,$1,282,019, as compared to $1,092,065$1,539,976 as of June 30, 2019.2021. The following table summarizes the Company’s cash flow activities for the ninesix months ended MarchDecember 31, 20202021 and 2019:2020:
  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) $(72,867)
Six Months Ended December 31,
20212020
Net loss$(71,636)$(100,391)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities116,890 50,055 
Subtotal$45,254 $(50,336)
Changes in working capital assets and liabilities87,532 (52,131)
Net cash provided by (used in) operating activities$132,786 $(102,467)
Net cash (used in) provided by investing activities(332,532)136,238 
Net cash (used in) provided by financing activities(57,639)598,512 
Effect of exchange rates on cash, cash equivalents and restricted cash(572)7,795 
Net (decrease) increase in cash, cash equivalents and restricted cash$(257,957)$640,078 
Operating Activities
Net cash provided by operating activities for the ninesix months ended MarchDecember 31, 2020 improved2021 increased by $91,985$235,253 to $136,951$132,786 as compared to net cash used in operating activities of $102,467 in the prior year period primarily due to lower net 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 connectioncash collection associated 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) higherdeferred revenue account including collections due to promoters, as events were postponed as a result of the temporary closure of venues due to COVID-19. Theand (ii) higher increase in cash provided by the changes in working capital discussed above was partially offset by the decrease frompayables, including related party payable. Our lower net incomeloss in the current year period adjusted forreflect significant non-cash items.items such as (i) net unrealized loss of $19,615 as compared to net unrealized gain of $29,090 in the prior year period and (ii) lower deferred income taxes benefits of $17,173 in the current year period as compared to $29,505 in the prior year period.
Investing Activities
Net cash used in investing activities for the ninesix months ended MarchDecember 31, 20202021 increased by $321,133$468,770 to $477,984$332,532 as compared to the prior year period primarily due to (i) an increase in purchasethe absence of proceeds 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 maturity of short-term investments, (ii) a loan repayment received from 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 duringa lesser extent, an increase in capital expenditures in the current year period.
Financing Activities
Net cash used in financing activities for the six months ended December 31, 2021 increased by $656,151 to $57,639 as compared to cash provided by financing activities for the nine months ended March 31, 2020 increased by $234,322of $598,512 in prior year period. The increase in net cash used in financing activity was primarily due to $266,900 as compared toproceeds from National Properties Term Loan Facility of $630,500 received during 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.in November 2020.

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Seasonality of Our Business
The dependence on revenues the Company earns from the Christmas Spectacularand arena license fees from MSG Sports in connection with the Knicks and Rangers use of the Garden generally means the CompanyEntertainment segment earns a disproportionate share of its revenues and operating income in the second quarter of the Company’s fiscal year. In addition, while it does not have a material impact on seasonality of our business, the first and third calendar quarters are seasonally lighter quarters for Tao Group Hospitality as compared to its second and fourth calendar quarters. As the Company reports Tao Group Hospitality results of operations on a three-month lag basis, the seasonally lighter quarters for Tao Group Hospitality are reflected in the second and fourth quarters of the Company’s fiscal year. See Note 2 toyear with the combined financial statements includedfirst fiscal quarter being disproportionally lower.

As a result of the foregoing, the Company’s revenue and operating income are disproportionally higher in “Part I — Item 1. Financial Statements”the fiscal second and third quarter of this Quarterly Report on Form 10-Q for more information regarding the consolidation on a three-month lag basisfiscal year and lower in the first quarter of Tao Group Hospitality.the fiscal year.

Recently Issued Accounting Pronouncements and Critical Accounting Policies
Recently Issued Accounting Pronouncements
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See Note 2 to the combinedconsolidated 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.
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, 20192021 included in the Company’s Information Statement.Form 10-K. 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 2022.
Arrangements with Multiple Performance ObligationsImpairment of Long-Lived and Principal versus Agent Revenue Recognition
See Note 3. Revenue Recognition 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 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 Garden Sports Corp. for suite license arrangements and venue signage and sponsorship agreements, as well as the advertising sales representation agreement with MSG Networks.

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GoodwillIndefinite-Lived Assets
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, 2020.2021, the Company had onethree 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 twothree reporting units: Entertainment, MSG Networks 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, 20202021 by reporting unit was as follows: 
Entertainment$74,111
Tao Group Hospitality7,885
 $81,996
Entertainment$74,309 
MSG Networks424,508 
Tao Group Hospitality1,364 
$500,181 
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 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 bothall of the Company’s reporting units for the fiscal year 2020Fiscal Year 2022 annual impairment tests.test. These assessments considered factors such as:
•macroeconomic conditions;
•industry and market considerations;
•cost factors;
•overall financial performance of the reporting units;
•other relevant company-specific factors such as changes in management, strategy or customers; and
•relevant reporting unit specific events such as changes in the carrying amount of net assets.
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During the first quarter of fiscal year 2020,Fiscal Year 2022, the Company performed its most recent annual impairment testtests of goodwill and determined that there were no impairmentsimpairment of goodwill identified for any of its reporting units as of the impairment test date. Based on these impairment tests, the Company’s Entertainment and Tao Group Hospitality reporting units had sufficient safety margins, representing the excess of the estimated fair value of each reporting unit, derived from the most recent quantitative assessments, less its respective carrying value (including goodwill allocated to each respective 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, 2020:2021: 
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 2022, 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.
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 with 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 Quarterly Report on Form 10-Q for discussions of disruptions caused by COVID-19. We do not have any meaningful commodity risk exposures associated with the operationQualitative Disclosures About Market Risk,” of our venues.Form 10-K.
Potential Interest Rate Risk Exposure:Exposure
The Company, through its subsidiaries MSGN L.P. and MSG National Properties, and as a result of the consolidation of Tao Group Hospitality, has potential interest rate risk exposure related to borrowings incurred under the MSG Networks Senior Secured Credit Facilities, 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. In addition, borrowings under the MSG Networks Senior Secured Credit
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Facilities bear interest at a floating rate, which at the option of MSGN L.P. may be either (i) a base rate plus an additional rate ranging from 0.25% to 1.25% per annum (determined based on a total net leverage ratio), or (ii) a Eurodollar rate plus an additional rate ranging from 1.25% to 2.25% per annum (determined based on a total net leverage ratio). Accordingly, the MSG Networks Senior Secured Credit Facilities, 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 1213 to the combinedconsolidated 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 MSG Networks Senior Secured Credit Facilities, National Properties Term Loan Facility and Tao Credit Facilities.
For the ninetwelve months ended MarchDecember 31, 2020,2021, the interest rate on the MSG Networks Senior Secured Credit Facilities ranged from 1.58% to 1.65% and was approximately 1.60% as of December 31, 2021. The interest rate on the Tao Senior Secured Credit Facilities ranged from 4.91%2.59% to 3.25%2.65% and it was approximately 3.28%2.61% as of MarchDecember 31, 2020.2021. In addition, the interest rate on National Properties Term Loan Facility was 7.00% as of December 31, 2021 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, 20202021 and continuing for a full year would increase interest expense ofby $12,567, on the amount outstanding onbalances under the MSG Networks Senior Secured Credit Facilities, 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, 2020,2021, the GBP/USD exchange rate ranged from 1.33571.3207 to 1.14911.4218 as compared to GBP/USD exchange rate of 1.24491.3548 as of MarchDecember 31, 2020,2021, a fluctuation range of approximately 7-8%5%. As of MarchDecember 31, 2020,2021, a uniform hypothetical 8%4% fluctuation in the GBP/USD exchange rate would have resulted in a change of approximately $23,700$6,800 in the Company’s net asset value.
Item 4. Controls and Procedures
An evaluation was carried out under the supervision andOur management, with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, ofevaluated the effectiveness of the design and operation of our disclosure controls and procedures (asas defined in Rules 13a-15(e) and 15d-15(e) ofunder the Securities Exchange Act, as of 1934).December 31, 2021. Based on that evaluation and as a result of the Company’smaterial weakness in our internal control over financial reporting, previously disclosed under Part II, “Item 9A, Controls and Procedures” in the Form 10-K/A filed on February 9, 2022, our Chief Executive Officer and Chief Financial Officer, concluded that as of March 31, 2020 the Company’sCompany's disclosure controls and procedures were effective.not effective as of December 31, 2021.
ThereNotwithstanding the ineffective disclosure controls and procedures as a result of the identified material weakness, our Chief Executive Officer and Chief Financial Officer have concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).
Remediation Plan and Status
As of December 31, 2021, the material weakness previously disclosed has not yet been fully remediated.
In response to the material weakness in the Company’s internal control over financial reporting, management has designed and implemented control activities related to the identification, calculation, and disclosure of capitalized interest expense. We will continue to work towards full remediation of this material weakness to improve our internal control over financial reporting.
The material weakness cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting in the areas affected by the material weakness described above.
Changes in Internal Control over Financial Reporting
Other than the material weakness described above, 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, 20202021 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
Fifteen complaints were filed in connection with the Merger by purported stockholders of the Company and MSG Networks Inc.
Nine of these complaints involved allegations of materially incomplete and misleading information set forth in the joint proxy statement/prospectus filed by the Company and MSG Networks Inc. in connection with the Merger. As a result of supplemental disclosures made by the Company and MSG Networks Inc. on July 1, 2021, all of the disclosure actions were voluntarily dismissed with prejudice prior to or shortly following the consummation of the Merger.
On March 29, 2019, a purported stockholder of Madison Square Garden Sports Corp. filedMay 27, 2021, a complaint captioned Hollywood Firefighters’ Pension Fund et al. v. James Dolan, et al., 2021-0468-KSJM, was filed in the Court of Chancery of the State of Delaware derivativelyby purported stockholders of the Company against the Company, its Board of Directors (the “Board”), certain Dolan family stockholders and MSG Networks Inc. The complaint purported to allege derivative claims on behalf of the Company and claims on behalf of a putative class of Company stockholders concerning the Merger. Plaintiffs alleged, among other things, that the Merger was a business combination with an interested stockholder that is not allowed under Section 203 of the Delaware General Corporation Law (the “DGCL”), that the Board members and majority stockholders violated their fiduciary duties in agreeing to the Merger, and that the disclosures relating to the Merger were misleading or incomplete. Plaintiffs sought, among other relief, declaratory and preliminary and permanent injunctive relief enjoining the stockholder vote and consummation of the Merger, and an award of damages in the event the transaction was consummated and plaintiffs’ attorneys’ fees. On June 15, 2021, plaintiffs filed a brief in support of their motion seeking a preliminary injunction enjoining the Company’s stockholder vote and consummation of the Merger, which the defendants opposed. The Court of Chancery denied the plaintiffs’ preliminary injunction motion on July 2, 2021.
On June 9, 2021, a complaint captioned Timothy Leisz v. MSG Networks Inc. et al., 2021-0504-KSJM, was filed in the Court of Chancery of the State of Delaware by a purported stockholder of MSG Networks Inc. against MSG Networks Inc., the MSG Networks Inc. board of directors, certain Dolan family stockholders and the Company. The complaint purported to allege claims on behalf of a putative class of MSG Networks Inc. stockholders concerning the Merger. The MSG Networks Inc. plaintiff alleged, among other things, that the Merger was a business combination with an interested stockholder that is not allowed under Section 203 of the DGCL, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger, and that the disclosures relating to the merger were misleading or incomplete. Plaintiff sought, among other relief, declaratory and preliminary and permanent injunctive relief enjoining the stockholder vote and consummation of the Merger, and an award of damages in the event the transaction was consummated and plaintiff’s attorneys’ fees. On June 21, 2021, plaintiff filed a brief in support of his motion seeking a preliminary injunction enjoining the MSG Networks Inc. stockholder vote and consummation of the Merger, which defendants opposed. The Court of Chancery denied the plaintiff’s preliminary injunction motion on July 2, 2021.
On July 6, 2021, a complaint captioned Stevens et al. v. Dolan et al., 2021-0575, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The complaint purported to allege claims on behalf of a putative class of MSG Networks Inc. stockholders concerning the Merger. The plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages in the event the transaction was consummated, and plaintiffs’ attorneys’ fees.
On July 6, 2021, a complaint captioned The City of Boca Raton Police and Firefighters’ Retirement System v. MSG Networks Inc., 2021-0578, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against MSG Networks Inc. The complaint purported to seek to enforce plaintiff’s right to inspect certain of MSG Networks Inc.’s books and records under Section 220 of the DGCL. The complaint was voluntarily dismissed on August 10, 2021.
On August 11, 2021, a stockholder derivative complaint captioned City of Miramar Retirement Plan and Trust Fund for General Employees et al. v. Dolan et al., 2021-0692 was filed in the Court of Chancery of the State of Delaware by purported stockholders of the Company. The complaint purported to allege derivative claims on behalf of the Company and direct claims on behalf of a putative class of Company stockholders. Plaintiffs alleged that the Board and the Company’s majority stockholders violated their fiduciary duties by failing to protect the Company’s interest in connection with the Merger. Plaintiffs sought, among other relief, an award of damages to the purported class and Company including interest, and plaintiffs’ attorneys’ fees.
On August 31, 2021, a complaint captioned Murray v. Dolan et al., 2021-0748, was filed in the Court of Chancery of the State of Delaware by purported stockholders of MSG Networks Inc. against the MSG Networks Inc. board of directors. The
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complaint purported to allege claims on behalf of a putative class of MSG Networks stockholders concerning the Merger. Plaintiffs alleged, among other things, that the MSG Networks Inc. board members and majority stockholders violated their fiduciary duties in agreeing to the Merger and that the disclosures relating to the merger were misleading or incomplete. Plaintiffs sought, among other relief, an order rescinding the merger and rescinding any severance paid to James Dolan in connection with the Merger, an award of damages, and plaintiffs’ attorneys’ fees.
All of the above complaints have since either been dismissed or consolidated into one of two litigations.
On September 10, 2021, the Court of Chancery entered an order consolidating the complaints in the Hollywood Firefighters and City of Miramar actions. The new consolidated action is captioned: In re Madison Square Garden SportsEntertainment Corp. Stockholders Litigation, against certain directors of Madison Square Garden Sports Corp. who are members ofC.A. 2021-0468-KSJM. The consolidated plaintiffs filed their Verified Consolidated Derivative Complaint on October 11, 2021. The complaint, which names 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 namedCompany as only a nominal defendant, retains all of the derivative allegations for breach of fiduciary duties that were present in the complaint.Hollywood Firefighters and City of Miramar complaints and abandons the direct claims in those prior complaints. Plaintiffs seek, among other relief, an award of damages to the Company including interest, and plaintiffs’ attorneys’ fees. The Company and other defendants filed answers to the complaint on December 30, 2021, and are currently engaged in responding to the consolidated plaintiffs’ discovery requests. Pursuant to the indemnity rights in its bylaws and Delaware law, the Company is advancing the costs incurred by defendants in this action, and defendants may assert indemnification rights in respect of any adverse judgment or settlement of the action.
On September 27, 2021, the Court of Chancery entered an order consolidating the complaints in the Leisz, Stevens, City of Boca Raton, and Murray complaints. The new consolidated action is captioned: In re MSG Networks Inc. Stockholder Class Action Litigation, C.A. 2021-0575-KSJM. The consolidated plaintiffs filed their Verified Consolidated Stockholder Class Action Complaint on October 29, 2021. The complaint allegesasserts claims on behalf of a putative class of former MSG Networks Inc. stockholders against each member of the board of directors of MSG Networks Inc. prior to the Merger. Plaintiffs allege that the Director DefendantsMSG Networks Inc. board of directors and majority stockholders breached their fiduciary duties to Madison Square Garden Sports Corp. stockholders in negotiating and approving the compensation packages for James L. DolanMerger. The Company is not named as a defendant.Pursuant to the indemnity rights in his capacity asits bylaws and Delaware law, the Executive ChairmanCompany is advancing the costs incurred by defendants in this action, 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. Dolandefendants may assert indemnification rights in respect of his compensation; and costs and disbursementsany adverse judgment or settlement of the action. Plaintiffs seek, among other relief, monetary damages for the plaintiff. On June 5, 2019, Madison Square Garden Sports Corp.’s Board of Directors formed a Special Litigation Committeeputative class and plaintiffs’ attorneys’ fees. Defendants to investigate the claims made byMSG Networks Inc. consolidated action filed answers to the plaintiffcomplaint on December 30, 2021 and are currently engaged in responding to the plaintiffs’ discovery requests.
We are currently unable to determine Madison Square Garden Sports Corp.’s response thereto. The litigationa range of potential liability, if any, with respect to these Merger-related claims. Accordingly, no accrual for these matters has been stayed while the Special Litigation Committee’s work is ongoing.made in our consolidated financial statements.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance)insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Item 1A. Risk Factors
The risk factorIn addition to the other information set forth belowin this report, you should be read carefully in conjunction withconsider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the Company’s Information Statement, dated April 6, 2020fiscal year ended June 30, 2021, as amended by Form 10-K/A filed on February 8, 2022 (the “Information Statement”“Form 10-K”), which could materially affect ourthe Company’s business, financial condition or future results. The risks described in the Form 10-K are not the only risks facing the Company. Additional risks and resultsuncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition or future results.
We Are Required to Assess Our Internal Control Over Financial Reporting on an Annual Basis and Our Management Has Identified a Material Weakness. If Our Remediation of operations.the Material Weakness Is Not Effective, or We Identify Additional Material Weaknesses or Other Adverse Findings in the Future, Our Ability to Report Our Financial Condition or Results of Operations Accurately or Timely May Be Adversely Affected, Which May Result in a Loss of Investor Confidence in Our Financial Reports, Significant Expenses to Remediate Any Internal Control Deficiencies, and Ultimately Have an Adverse Effect on the Market Price of Our Common Stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, we perform activities that include reviewing, documenting and testing our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail
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to achieve and maintain an effective internal control environment, we could suffer misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price.
Management of the Company evaluated an immaterial accounting error related to interest costs that should have been capitalized for MSG Sphere at the Venetian in the fiscal years ended June 30, 2021, 2020 and 2019 and in the fiscal quarter ended September 30, 2021, as prescribed by Accounting Standards Codification (“ASC”) Topic 835-20 (Capitalization of Interest). As a result of the accounting error, the Company has re-evaluated the effectiveness of the Company’s internal control over financial reporting and identified a material weakness in the Company’s internal control over financial reporting as of June 30, 2021, September 30, 2021 and December 31, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. For further discussion regarding the accounting error and the correction of such error to the Company’s previously issued consolidated and combined financial statements, see Note 23 – Correction of Previously Issued Consolidated and Combined Financial Statements to the consolidated and combined financial statements of the Company included in the Form 10-K.
Our management may be unable to conclude in future periods that our disclosure controls and procedures are effective due to the effects of various factors, which may, in part, include unremediated material weaknesses in internal controls over financial reporting. For further discussion of the material weakness, see “Part I — Item 2 - Management’s Discussion4. Controls and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q also includes additional information that may supplement or update the discussion of risk factors below and in our Information Statement.
OurOperations and Operating Results Have Been, and Continue to be, Materially Impacted by the COVID-19 Pandemic and Government Actions Taken in Response.
An outbreak 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 dateProcedures” of this Quarterly Report on Form 10-Q, virtually all of our business operations have been suspended10-Q. Disclosure controls and it is not clear when those operations will resume.
As a result of government mandated assembly limitationsprocedures include, without limitation, controls and closures, no events are currently permittedprocedures designed to ensure that information required to be held at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall,disclosed by a company in those reports is accumulated and communicated to the Beacon Theatrecompany’s management, including its principal executive and The Chicago Theatre,principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management is committed to maintaining a strong internal control environment and virtually all events at our venues are postponed or cancelled through June. The 2020 Boston Calling music festival, which had been slatedbelieves its remediation efforts will represent an improvement in existing controls. Management anticipates that the new controls, as implemented and when tested 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 lengthysufficient period of time, will remediate the material weakness. We may not be successful in which we are unable to host and book events due topromptly remediating the uncertainty around COVID-19. It is also unclear whether and to what extent COVID-19 concerns will impact the use of and/material weaknesses identified by management, 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, manyidentify and remediate additional control deficiencies, including material weaknesses, in the future.
Item 2. Unregistered Sales of which are fixed overEquity Securities and Use of Proceeds
As of December 31, 2021, the near-term,Company has the ability to repurchase up to $350 million of the same degree as our declineCompany’s Class A Common Stock under the Class A Common Stock share repurchase program authorized by the Company’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 revenues, whichopen market transactions, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will adversely affect our results of operationsdepend on market conditions and cash flowother factors. No shares have been repurchased to a greater extent.date.


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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
10.2

2.2
Contribution Agreement, dated as of March 31, 2020, among Madison Square Garden Sports Corp., MSG Entertainment Group, LLC and Madison Square Garden Entertainment Corp. (incorporated by reference to Exhibit 2.2 to the Company’s Registration Statement on Form 10 (file No. 001-39245) filed on April 1, 2020).

3.1
Amended and Restated Certificate of Incorporation of Madison Square Garden Entertainment Corp., dated April 17, 2020 (incorporated by reference to Exhibit 3.110.1 to the Company’s Current Report on Form 8-K filed on April 23, 2020)November 19, 2021).

†
3.210.3

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,December 27, 2021, between Madison Square Garden Entertainment Corp. and James L. Dolan (incorporated by reference to Exhibit 10.4710.1 to the Company’s Registration StatementCurrent Report on Form 10 (file No. 001-39245)8-K filed on April 1, 2020)December 30, 2021).

†
10.510.4

†
10.610.5
10.6
10.7

†
10.710.8
10.9

31.110.10
10.11
31.1

31.2

32.1

32.2


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.SCH101
XBRL Taxonomy Extension Schema.

The following materials from Madison Square Garden Entertainment Corp. Quarterly Report on Form 10-Q for the quarter ended December 31, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated Statements of comprehensive loss, (iv) consolidated statements of cash flows, (v) consolidated statements of equity and redeemable noncontrolling interests, and (vi) notes to consolidated financial statements.
101.CAL104
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, 20202021 formatted in Inline XBRL and contained in Exhibit 101.

_________________

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

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 159th day of May 2020.February 2022.
Madison Square Garden Entertainment Corp.
By:
/S/    MARK H. FITZPATRICKDAVID F. BYRNES
Name:Mark H. FitzPatrickDavid F. Byrnes
Title:
Executive Vice President and

Chief Financial Officer


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