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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 March 31, 2021
OR
| | | | | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-36900
MADISON SQUARE GARDEN SPORTS CORP.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Delaware | | 47-3373056 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | | | | | | | | | | | | | | | | | |
Two Penn Plaza | , | New York | , | NY | | 10121 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (212) 465-1111
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common Stock | MSGS | New 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 ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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, 2021:
| | | | | | | | |
Class A Common Stock par value $0.01 per share | — | 19,587,113 | |
Class B Common Stock par value $0.01 per share | — | 4,529,517 | |
MADISON SQUARE GARDEN SPORTS CORP.
INDEX TO FORM 10-Q
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| | | | | | | | | | | | | | |
| | March 31, 2021 | | June 30, 2020 |
| | (Unaudited) | | |
ASSETS | | | | |
Current Assets: | | | | |
Cash and cash equivalents | | $ | 69,128 | | | $ | 77,852 | |
Restricted cash | | 8,896 | | | 12,821 | |
| | | | |
Accounts receivable, net | | 82,518 | | | 7,403 | |
| | | | |
Net related party receivables | | 5,048 | | | 135 | |
Prepaid expenses | | 25,598 | | | 20,634 | |
| | | | |
Other current assets | | 11,176 | | | 9,433 | |
Total current assets | | 202,364 | | | 128,278 | |
| | | | |
Property and equipment, net of accumulated depreciation and amortization of $42,406 and $38,361 as of March 31, 2021 and June 30, 2020, respectively | | 35,955 | | | 39,597 | |
Right-of-use lease assets | | 707,323 | | | 718,051 | |
Amortizable intangible assets, net | | 1,959 | | | 2,754 | |
Indefinite-lived intangible assets | | 112,144 | | | 112,144 | |
Goodwill | | 226,955 | | | 226,955 | |
Other assets | | 17,740 | | | 6,019 | |
Total assets | | $ | 1,304,440 | | | $ | 1,233,798 | |
| | | | |
| | | | |
See accompanying notes to consolidated financial statements. |
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except per share data)
| | | | | | | | | | | | | | |
| | March 31, 2021 | | June 30, 2020 |
| | (Unaudited) | | |
LIABILITIES AND EQUITY | | |
Current Liabilities: | | | | |
Accounts payable | | $ | 1,554 | | | $ | 2,301 | |
Net related party payables | | 20,700 | | | 17,952 | |
Debt | | 30,000 | | | — | |
| | | | |
Accrued liabilities: | | | | |
Employee related costs | | 70,993 | | | 71,451 | |
Other accrued liabilities | | 61,587 | | | 33,071 | |
Operating lease liabilities, current | | 34,329 | | | 39,131 | |
| | | | |
Deferred revenue | | 129,390 | | | 126,348 | |
Total current liabilities | | 348,553 | | | 290,254 | |
| | | | |
Long-term debt | | 380,000 | | | 350,000 | |
Operating lease liabilities, noncurrent | | 692,243 | | | 679,053 | |
Defined benefit and other postretirement obligations | | 6,544 | | | 7,014 | |
Other employee related costs | | 41,977 | | | 50,027 | |
Deferred tax liabilities, net | | 57,446 | | | 57,721 | |
Deferred revenue, noncurrent | | 31,978 | | | 2,014 | |
Other liabilities | | 1,000 | | | 1,150 | |
Total liabilities | | 1,559,741 | | | 1,437,233 | |
Commitments and contingencies (see Note 11) | | | | |
Madison Square Garden Sports Corp. Stockholders’ Equity: | | | | |
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,587 and 19,466 shares outstanding as of March 31, 2021 and June 30, 2020, respectively | | 204 | | | 204 | |
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of March 31, 2021 and June 30, 2020 | | 45 | | | 45 | |
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of March 31, 2021 and June 30, 2020 | | — | | | — | |
Additional paid-in capital | | 19,327 | | | 5,940 | |
Treasury stock, at cost, 861 and 982 shares as of March 31, 2021 and June 30, 2020, respectively | | (146,734) | | | (167,431) | |
Accumulated deficit | | (128,518) | | | (43,605) | |
Accumulated other comprehensive loss | | (2,062) | | | (2,139) | |
Total Madison Square Garden Sports Corp. stockholders’ equity | | (257,738) | | | (206,986) | |
Nonredeemable noncontrolling interests | | 2,437 | | | 3,551 | |
Total equity | | (255,301) | | | (203,435) | |
Total liabilities and equity | | $ | 1,304,440 | | | $ | 1,233,798 | |
See accompanying notes to consolidated financial statements.
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| March 31, | | March 31, |
| 2021 | | 2020 | | 2021 | | 2020 |
Revenues (a) | | $ | 183,010 | | | $ | 267,631 | | | $ | 268,819 | | | $ | 610,279 | |
| | | | | | | | |
Operating expenses: | | | | | | | | |
Direct operating expenses (b) | | 126,510 | | | 161,388 | | | 182,957 | | | 377,590 | |
Selling, general and administrative expenses (c) | | 46,803 | | | 90,045 | | | 138,708 | | | 266,283 | |
Depreciation and amortization | | 1,573 | | | 5,573 | | | 4,840 | | | 15,338 | |
Operating income (loss) | | 8,124 | | | 10,625 | | | (57,686) | | | (48,932) | |
Other income (expense): | | | | | | | | |
Interest income | | 9 | | | 165 | | | 9 | | | 691 | |
Interest expense | | (2,939) | | | (867) | | | (7,415) | | | (2,240) | |
Miscellaneous expense, net | | (46) | | | (142) | | | (236) | | | (316) | |
| | (2,976) | | | (844) | | | (7,642) | | | (1,865) | |
Income (loss) from continuing operations before income taxes | | 5,148 | | | 9,781 | | | (65,328) | | | (50,797) | |
Income tax benefit (expense) | | (53) | | | (5,598) | | | 275 | | | 11,132 | |
Income (loss) from continuing operations | | 5,095 | | | 4,183 | | | (65,053) | | | (39,665) | |
Loss from discontinued operations, net of taxes | | — | | | (145,249) | | | — | | | (89,718) | |
Net income (loss) | | 5,095 | | | (141,066) | | | (65,053) | | | (129,383) | |
Less: Net loss attributable to nonredeemable noncontrolling interests from continuing operations | | (373) | | | (785) | | | (1,479) | | | (1,700) | |
Less: Net loss attributable to redeemable noncontrolling interests from discontinued operations | | — | | | (22,447) | | | — | | | (23,851) | |
Less: Net income attributable to nonredeemable noncontrolling interests from discontinued operations | | — | | | 195 | | | — | | | 37 | |
Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders | | $ | 5,468 | | | $ | (118,029) | | | $ | (63,574) | | | $ | (103,869) | |
| | | | | | | | |
Basic | | | | | | | | |
Continuing operations | | $ | 0.23 | | | $ | 0.20 | | | $ | (2.64) | | | $ | (1.58) | |
Discontinued operations | | — | | | (5.12) | | | — | | | (2.76) | |
Basic income (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders | | $ | 0.23 | | | $ | (4.92) | | | $ | (2.64) | | | $ | (4.34) | |
Diluted | | | | | | | | |
Continuing operations | | $ | 0.22 | | | $ | 0.20 | | | $ | (2.64) | | | $ | (1.58) | |
Discontinued operations | | — | | | (5.12) | | | — | | | (2.76) | |
Diluted income (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders | | $ | 0.22 | | | $ | (4.92) | | | $ | (2.64) | | | $ | (4.34) | |
Weighted-average number of common shares outstanding: | | | | | | | | |
Basic | | 24,156 | | | 24,004 | | | 24,120 | | | 23,914 | |
Diluted | | 24,344 | | | 24,004 | | | 24,120 | | | 23,914 | |
_________________
(a)Includes revenues from related parties of $80,322 and $57,827 for the three months ended March 31, 2021 and 2020, respectively, and $103,752 and $125,273 for the nine months ended March 31, 2021 and 2020, respectively.
(b)Includes net charges from (to) related parties of $24,855 and $(125) for the three months ended March 31, 2021 and 2020, respectively, and $28,119 and $(262) for the nine months ended March 31, 2021 and 2020, respectively.
(c)Includes net charges from (to) related parties of $14,957 and $(2,729) for the three months ended March 31, 2021 and 2020, respectively, and $39,214 and $(8,128) for the nine months ended March 31, 2021 and 2020, respectively.
See accompanying notes to consolidated financial statements.
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | March 31, | | March 31, |
| | 2021 | | 2020 | | 2021 | | 2020 |
Net income (loss) | | | | $ | 5,095 | | | | | $ | (141,066) | | | | | $ | (65,053) | | | | | $ | (129,383) | |
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 | | | | 57 | | | | | 342 | | | | | 77 | | | | | 1,027 | |
Settlement loss recognized | | | | — | | | | | 67 | | | | | — | | | | | 67 | |
| | | | | | | | | | | | | | | | |
Cumulative translation adjustments | | | | — | | | | | (19,946) | | | | | — | | | | | (6,778) | |
Other comprehensive income (loss), before income taxes | | | | 57 | | | | | (19,537) | | | | | 77 | | | | | (5,684) | |
Income tax benefit (expense) related to items of other comprehensive income (loss) | | | | — | | | | | — | | | | | — | | | | | — | |
Other comprehensive income (loss), net of income taxes | | | | 57 | | | | | (19,537) | | | | | 77 | | | | | (5,684) | |
Comprehensive income (loss) | | | | 5,152 | | | | | (160,603) | | | | | (64,976) | | | | | (135,067) | |
Less: Comprehensive loss attributable to nonredeemable noncontrolling interests from continuing operations | | | | (373) | | | | | (785) | | | | | (1,479) | | | | | (1,700) | |
Less: Comprehensive loss attributable to redeemable noncontrolling interests from discontinued operations | | | | — | | | | | (22,447) | | | | | — | | | | | (23,851) | |
Less: Comprehensive income attributable to nonredeemable noncontrolling interests from discontinued operations | | | | — | | | | | 195 | | | | | — | | | | | 37 | |
Comprehensive income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders | | | | $ | 5,525 | | | | | $ | (137,566) | | | | | $ | (63,497) | | | | | $ | (109,553) | |
See accompanying notes to consolidated financial statements.
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| | | | | | | | | | | | | | |
| | Nine Months Ended |
| | March 31, |
| | 2021 | | 2020 |
Cash flows from operating activities: | | | | |
Net loss | | $ | (65,053) | | | $ | (129,383) | |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | |
Depreciation and amortization | | 4,840 | | | 86,869 | |
Impairment of intangibles, long-lived assets and goodwill | | — | | | 102,211 | |
Benefits from deferred income taxes | | (275) | | | (9,805) | |
Share-based compensation expense | | 26,193 | | | 47,440 | |
Loss in equity method investments, net of income distributions | | — | | | 3,739 | |
Purchase accounting adjustments associated with leases | | — | | | 4,458 | |
Unrealized loss on equity investment with readily determinable fair value | | — | | | 2,471 | |
(Recovery of) provision for doubtful accounts | | (175) | | | 6,990 | |
Other non-cash adjustments | | 806 | | | 273 | |
Change in assets and liabilities: | | | | |
Accounts receivable, net | | (74,940) | | | (41,249) | |
Net related party receivables | | (4,913) | | | (815) | |
Prepaid expenses and other assets | | (14,823) | | | (52,593) | |
Accounts payable | | (747) | | | 3,222 | |
Net related party payables | | 2,748 | | | 12,593 | |
Accrued and other liabilities | | 19,700 | | | 71,870 | |
Collections due to promoters | | — | | | 15,924 | |
Deferred revenue | | 33,156 | | | (12,110) | |
Operating lease right-of-use assets and lease liabilities | | 19,116 | | | (972) | |
Net cash (used in) provided by operating activities | | (54,367) | | | 111,133 | |
Cash flows from investing activities: | | | | |
Capital expenditures | | (437) | | | (342,243) | |
Proceeds from insurance recoveries | | — | | | 476 | |
Payments for acquisition of assets | | — | | | (1,000) | |
Purchase of short-term investments | | — | | | (405,935) | |
Proceeds from maturity of short-term investments | | — | | | 176,661 | |
| | | | |
Investments and loans to nonconsolidated affiliates | | — | | | (75) | |
Proceeds from sale of nonconsolidated affiliates | | — | | | 18,000 | |
Loan repayment received from subordinated note | | — | | | 58,735 | |
Cash received for notes receivable | | — | | | 750 | |
Net cash used in investing activities | | (437) | | | (494,631) | |
| | | | |
See accompanying notes to consolidated financial statements. |
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
| | | | | | | | | | | | | | |
| | Nine Months Ended |
| | March 31, |
| | 2021 | | 2020 |
Cash flows from financing activities: | | | | |
| | | | |
| | | | |
Taxes paid in lieu of shares issued for equity-based compensation | | (13,891) | | | (26,447) | |
Proceeds from share issuance | | 808 | | | — | |
Noncontrolling interest holders’ capital contribution | | — | | | 4,000 | |
Distributions to noncontrolling interest holders | | — | | | (535) | |
| | | | |
Proceeds from revolving credit facilities | | 30,000 | | | 350,000 | |
Proceeds from NHL advance | | 30,000 | | | — | |
Repayment of revolving credit facility | | — | | | (15,000) | |
Principal repayment on long-term debt | | — | | | (5,000) | |
Payment of contingent consideration | | (200) | | | (200) | |
Payments for financing costs | | (4,562) | | | — | |
Net cash provided by financing activities | | 42,155 | | | 306,818 | |
Effect of exchange rates on cash, cash equivalents and restricted cash | | — | | | 3,916 | |
Net decrease in cash, cash equivalents and restricted cash | | (12,649) | | | (72,764) | |
Cash, cash equivalents and restricted cash from continuing operations, beginning of period | | 90,673 | | | 25,836 | |
Cash, cash equivalents and restricted cash from discontinued operations, beginning of period | | — | | | 1,092,065 | |
Cash, cash equivalents and restricted cash at beginning of period | | 90,673 | | | 1,117,901 | |
Cash, cash equivalents and restricted cash from continuing operations, end of period | | 78,024 | | | 23,289 | |
Cash, cash equivalents and restricted cash from discontinued operations, end of period | | — | | | 1,021,848 | |
Cash, cash equivalents and restricted cash at end of period | | $ | 78,024 | | | $ | 1,045,137 | |
Non-cash investing and financing activities: | | | | |
| | | | |
Non-cash acquisition of additional redeemable noncontrolling interests | | $ | — | | | $ | 37,715 | |
Capital expenditures incurred but not yet paid | | $ | 38 | | | $ | 75,846 | |
Tenant improvement paid by landlord | | $ | — | | | $ | 195 | |
Share-based compensation capitalized in property and equipment | | $ | — | | | $ | 3,790 | |
| | | | |
| | | | |
See accompanying notes to consolidated financial statements.
MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2021 |
| | Common Stock Issued | | Additional Paid-In Capital | | Treasury Stock | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Madison Square Garden Sports Corp. Stockholders’ Equity | | Non - redeemable Noncontrolling Interests | | Total Equity |
Balance as of December 31, 2020 | | $ | 249 | | | $ | 15,432 | | | $ | (147,585) | | | $ | (133,986) | | | $ | (2,119) | | | $ | (268,009) | | | $ | 2,881 | | | $ | (265,128) | |
Net income (loss) | | — | | | — | | | — | | | 5,468 | | | — | | | 5,468 | | | (373) | | | 5,095 | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 57 | | | 57 | | | — | | | 57 | |
Comprehensive income (loss) | | — | | | — | | | — | | | — | | | — | | | 5,525 | | | (373) | | | 5,152 | |
Share-based compensation | | — | | | 3,867 | | | — | | | — | | | — | | | 3,867 | | | — | | | 3,867 | |
| | | | | | | | | | | | | | | | |
Common stock issued under stock incentive plans | | — | | | (43) | | | 851 | | | — | | | — | | | 808 | | | — | | | 808 | |
| | | | | | | | | | | | | | | | |
Adjustments to noncontrolling interests | | — | | | 71 | | | — | | | — | | | — | | | 71 | | | (71) | | | — | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Balance as of March 31, 2021 | | $ | 249 | | | $ | 19,327 | | | $ | (146,734) | | | $ | (128,518) | | | $ | (2,062) | | | $ | (257,738) | | | $ | 2,437 | | | $ | (255,301) | |
| | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
MADISON SQUARE GARDEN SPORTS CORP. |
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued) |
(Unaudited) |
(in thousands) |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 |
| | Common Stock Issued | | Additional Paid-In Capital | | Treasury Stock | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Loss | | Total Madison Square Garden Sports Corp. Stockholders’ Equity | | Non - redeemable Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
Balance as of December 31,2019 | | $ | 249 | | | $ | 2,833,867 | | | $ | (185,893) | | | $ | 43,163 | | | $ | (33,070) | | | $ | 2,658,316 | | | $ | 20,361 | | | $ | 2,678,677 | | | $ | 66,223 | |
Net loss | | — | | | — | | | — | | | (118,029) | | | — | | | (118,029) | | | (590) | | | (118,619) | | | (22,447) | |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (19,537) | | | (19,537) | | | — | | | (19,537) | | | — | |
Comprehensive loss | | — | | | — | | | — | | | — | | | — | | | (137,566) | | | (590) | | | (138,156) | | | (22,447) | |
Share-based compensation | | — | | | 15,163 | | | — | | | — | | | — | | | 15,163 | | | — | | | 15,163 | | | — | |
Tax withholding associated with shares issued for equity-based compensation | | — | | | (183) | | | — | | | — | | | — | | | (183) | | | — | | | (183) | | | — | |
Common stock issued under stock incentive plans | | — | | | (374) | | | 374 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Adjustments to noncontrolling interests | | — | | | (1,424) | | | — | | | — | | | — | | | (1,424) | | | 1,424 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Noncontrolling interest non-cash acquisition | | — | | | 20,262 | | | 17,453 | | | — | | | — | | | 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 | | $ | 249 | | | $ | 2,850,372 | | | $ | (168,066) | | | $ | (74,866) | | | $ | (52,607) | | | $ | 2,555,082 | | | $ | 21,195 | | | $ | 2,576,277 | | | $ | 23,000 | |
| | | | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
MADISON SQUARE GARDEN SPORTS CORP. |
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued) |
(Unaudited) |
(in thousands) |
| | | | | | | | | | | | | | | | |
| | Nine Months Ended March 31, 2021 |
| | Common Stock Issued | | Additional Paid-In Capital | | Treasury Stock | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Madison Square Garden Sports Corp. Stockholders’ Equity | | Non - redeemable Noncontrolling Interests | | Total Equity |
Balance as of June 30, 2020 | | $ | 249 | | | $ | 5,940 | | | $ | (167,431) | | | $ | (43,605) | | | $ | (2,139) | | | $ | (206,986) | | | $ | 3,551 | | | $ | (203,435) | |
Net loss | | — | | | — | | | — | | | (63,574) | | | — | | | (63,574) | | | (1,479) | | | (65,053) | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 77 | | | 77 | | | — | | | 77 | |
Comprehensive loss | | — | | | — | | | — | | | — | | | — | | | (63,497) | | | (1,479) | | | (64,976) | |
Share-based compensation | | — | | | 26,193 | | | — | | | — | | | — | | | 26,193 | | | — | | | 26,193 | |
Tax withholding associated with shares issued for equity-based compensation | | — | | | (11,023) | | | — | | | (2,868) | | | — | | | (13,891) | | | — | | | (13,891) | |
Common stock issued under stock incentive plans | | — | | | (1,418) | | | 20,697 | | | (18,471) | | | — | | | 808 | | | — | | | 808 | |
| | | | | | | | | | | | | | | | |
Adjustments to noncontrolling interests | | — | | | (365) | | | — | | | — | | | — | | | (365) | | | 365 | | | — | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Balance as of March 31, 2021 | | $ | 249 | | | $ | 19,327 | | | $ | (146,734) | | | $ | (128,518) | | | $ | (2,062) | | | $ | (257,738) | | | $ | 2,437 | | | $ | (255,301) | |
| | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
MADISON SQUARE GARDEN SPORTS CORP. |
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued) |
(Unaudited) |
(in thousands) |
| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended March 31, 2020 |
| | Common Stock Issued | | Additional Paid-In Capital | | Treasury Stock | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Loss | | Total Madison Square Garden Sports Corp. Stockholders’ Equity | | Non - redeemable Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
Balance as of June 30, 2019 | | $ | 249 | | | $ | 2,845,961 | | | $ | (207,790) | | | $ | 29,003 | | | $ | (46,923) | | | $ | 2,620,500 | | | $ | 18,260 | | | $ | 2,638,760 | | | $ | 67,627 | |
Net loss | | — | | | — | | — | | | (103,869) | | | — | | | (103,869) | | | (1,663) | | | (105,532) | | | (23,851) | |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (5,684) | | | (5,684) | | | — | | | (5,684) | | | — | |
Comprehensive loss | | — | | | — | | | — | | | — | | | — | | | (109,553) | | | (1,663) | | | (111,216) | | | (23,851) | |
Share-based compensation | | — | | | 51,230 | | | — | | | — | | | — | | | 51,230 | | | — | | | 51,230 | | | — | |
Tax withholding associated with shares issued for equity-based compensation | | — | | | (26,447) | | | — | | | — | | | — | | | (26,447) | | | — | | | (26,447) | | | — | |
Common stock issued under stock incentive plans | | — | | | (22,271) | | | 22,271 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | |
Adjustments to noncontrolling interests | | — | | | (1,424) | | | — | | | — | | | — | | | (1,424) | | | 1,424 | | | — | | | — | |
Contribution from noncontrolling interest holders | | — | | | — | | | — | | | — | | | — | | | — | | | 3,709 | | | 3,709 | | | — | |
Distributions to noncontrolling interest holders | | — | | | — | | | — | | | — | | | — | | | — | | | (535) | | | (535) | | | — | |
Noncontrolling interest non-cash acquisition | | — | | | 20,262 | | | 17,453 | | | — | | | — | | | 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 | | $ | 249 | | | $ | 2,850,372 | | | $ | (168,066) | | | $ | (74,866) | | | $ | (52,607) | | | $ | 2,555,082 | | | $ | 21,195 | | | $ | 2,576,277 | | | $ | 23,000 | |
| | | | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. |
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All amounts included in the following Notes to Consolidated Financial Statements are presented in thousands, except per share data or as otherwise noted.
Note 1. Description of Business and Basis of Presentation
Description of Business
Madison Square Garden Sports Corp., formerly The Madison Square Garden Company (together with its subsidiaries, the “Company” or “MSG Sports”) owns and operates a portfolio of assets featuring some of the most recognized teams in all of sports, including the New York Knickerbockers (“Knicks”) of the National Basketball Association (“NBA”) and the New York Rangers (“Rangers”) of the National Hockey League (“NHL”). Both the Knicks and the Rangers play their home games in Madison Square Garden Arena (“The Garden”). The Company’s other professional franchises include two development league teams — the Hartford Wolf Pack of the American Hockey League (“AHL”) and the Westchester Knicks of the NBA G League (“NBAGL”). These professional sports franchises are collectively referred to herein as the “sports teams.” In addition, the Company owns Knicks Gaming, an esports franchise that competes in the NBA 2K League, as well as a controlling interest in Counter Logic Gaming (“CLG”), a North American esports organization. The Company also operates two professional sports team performance centers — the Madison Square Garden Training Center in Greenburgh, NY and the CLG Performance Center in Los Angeles, CA. CLG and Knicks Gaming are collectively referred to herein as the “esports teams,” and together with the sports teams, the “teams.”
The Company operates and reports financial information in one segment. The Company’s decision to report in one segment is based upon its internal organizational structure; the manner in which its operations are managed; the criteria used by the Company’s Executive Chairman, its Chief Operating Decision Maker (“CODM”), to evaluate segment performance. The Company’s CODM reviews total company operating results to assess overall performance and allocate resources.
The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc. (“MSG Networks”). All the outstanding common stock of the Company was distributed to MSG Networks shareholders (the “MSGS Distribution”) on September 30, 2015.
On April 17, 2020 (the “MSGE Distribution Date”), the Company distributed all of the outstanding common stock of Madison Square Garden Entertainment Corp. (formerly MSG Entertainment Spinco, Inc. and referred to herein as “MSG Entertainment”) to its stockholders (the “MSGE Distribution”). MSG Entertainment owns, directly or indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment. In the MSGE Distribution, (a) each holder of the Company’s Class A common stock received one share of MSG Entertainment Class A common stock, par value $0.01 per share, for every share of the Company’s Class A common stock held of record as of the close of business, New York City time, on April 13, 2020 (the “Record Date”), and (b) each holder of the Company’s Class B common stock received one share of MSG Entertainment Class B common stock, par value $0.01 per share, for every share of the Registrant’s Class B common stock held of record as of the close of business, New York City time, on the Record Date.
Basis of Presentation
The accompanying unaudited consolidated interim financial statements (referred to as the “Financial Statements” herein) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP“) and Article 10 of Regulation S-X of the SEC for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 (“fiscal year 2020”). The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. The dependence of MSG Sports on revenues from its NBA and NHL sports teams generally means it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year. However, on March 11 and 12, 2020, the NBA and NHL, respectively, suspended their 2019-20 seasons due to COVID-19. In July and August 2020, the NBA and NHL, respectively, resumed their seasons. As a result, the Company recognized certain revenues that otherwise would have been recognized during the third and fourth quarter of fiscal year 2020 during the first quarter of fiscal year 2021. In addition, on December 16, 2020 and January 14, 2021, respectively, the Knicks and Rangers resumed playing their home games at The Garden as part of the 2020-21 seasons. Due to the delayed start of the 2020-21 NBA and NHL seasons, the Company recognized certain revenues during the third quarter of fiscal year 2021 and will recognize certain revenues during the fourth quarter of fiscal year 2021, that otherwise would have been recognized during the second and third quarters of fiscal year 2021, respectively.
MADISON SQUARE GARDEN SPORTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)