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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 September 30, 2020
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to
Commission File Number: 001-39245
msge-20200930_g1.jpg
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
(Exact name of registrant as specified in its charter) 
Delaware 84-3755666
(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 ☐ 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 filerAccelerated filer
Non-accelerated filerSmaller 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 October 30, 2020:
Class A Common Stock par value $0.01 per share —19,613,212 
Class B Common Stock par value $0.01 per share —4,529,517 



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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
INDEX TO FORM 10-Q
 
 Page





Table of Contents


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30,
2020
June 30,
2020
(Unaudited) 
ASSETS
Current Assets:
Cash and cash equivalents$925,779 $906,555 
Restricted cash27,807 17,749 
Short-term investments38,888 337,192 
Accounts receivable, net63,710 57,184 
Net related party receivables45,043 23,062 
Prepaid expenses62,191 62,127 
Other current assets15,647 22,633 
Total current assets1,179,065 1,426,502 
Investments in nonconsolidated affiliates50,982 52,622 
Property and equipment, net1,739,755 1,646,115 
Right-of-use lease assets208,779 220,328 
Amortizable intangible assets, net147,542 150,426 
Indefinite-lived intangible assets63,801 63,801 
Goodwill74,309 74,309 
Other assets122,005 85,103 
Total assets$3,586,238 $3,719,206 
See accompanying notes to consolidated and combined financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except per share data)
September 30,
2020
June 30,
2020
(Unaudited)
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Accounts payable$7,734 $17,258 
Net related party payables, current18,844 18,418 
Current portion of long-term debt, net of deferred financing costs5,398 5,429 
Accrued liabilities:
Employee related costs44,544 68,837 
Other accrued liabilities106,131 125,452 
Operating lease liabilities, current53,356 53,388 
Collections due to promoters12,987 31,879 
Deferred revenue202,008 189,308 
Total current liabilities451,002 509,969 
Long-term debt, net of deferred financing costs26,845 28,126 
Operating lease liabilities, noncurrent164,279 174,219 
Defined benefit and other postretirement obligations25,633 26,132 
Other employee related costs14,259 15,591 
Collections due to promoters, noncurrent10,394  
Deferred tax liabilities, net12,632 12,450 
Other liabilities80,190 78,279 
Total liabilities785,234 844,766 
Commitments and contingencies (see Note 10)
Redeemable noncontrolling interests17,298 20,600 
Madison Square Garden Entertainment Corp. Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,613 and 19,493 shares outstanding as of September 30, 2020 and June 30, 2020, respectively
196 195 
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of September 30, 2020 and June 30, 2020
45 45 
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of September 30, 2020 and June 30, 2020
  
Additional paid-in capital2,757,155 2,751,318 
Treasury stock, at cost, no shares as of September 30, 2020 and June 30, 2020
  
Retained earnings52,091 141,936 
Accumulated other comprehensive loss(37,554)(51,857)
Total Madison Square Garden Entertainment Corp. stockholders’ equity2,771,933 2,841,637 
Nonredeemable noncontrolling interests11,773 12,203 
Total equity2,783,706 2,853,840 
Total liabilities, redeemable noncontrolling interests and equity$3,586,238 $3,719,206 

See accompanying notes to consolidated and combined financial statements.
2


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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
 Three Months Ended
September 30,
20202019
Revenues (a)
$14,378 $177,963 
Operating expenses:
Direct operating expenses (b)
34,159 131,522 
Selling, general and administrative expenses (c)
60,325 87,767 
Depreciation and amortization26,582 26,820 
Restructuring charges19,927  
Operating loss(126,615)(68,146)
Other income (expense):
Loss in equity method investments(1,696)(1,473)
Interest income295 7,315 
Interest expense(409)(1,105)
Miscellaneous income, net34,224 7,031 
32,414 11,768 
Loss from operations before income taxes(94,201)(56,378)
Income tax expense(163)(185)
Net loss(94,364)(56,563)
Less: Net loss attributable to redeemable noncontrolling interests
(3,889)(636)
Less: Net income (loss) attributable to nonredeemable noncontrolling interests(630)40 
Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(89,845)$(55,967)
Basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders$(3.69)$(2.33)
Weighted-average number of common shares outstanding:
Basic and diluted (d)
24,334 23,992 
_________________
(a)Includes revenues from related parties of $4,018 and $6,475 for the three months ended September 30, 2020 and 2019, respectively.
(b)Includes net charges from related parties of $81 and $16,209 for the three months ended September 30, 2020 and 2019, respectively.
(c)Includes net charges to related parties of $(11,883) and $(33,563) for the three months ended September 30, 2020 and 2019, respectively.
(d)On April 17, 2020 (the “Entertainment Distribution Date”), 23,992 common shares were distributed to Madison Square Garden Sports Corp. (“MSG Sports,” formerly known as The Madison Square Garden Company) stockholders as of April 13, 2020. This share amount is being utilized for the calculation of basic and diluted loss per common share attributable to Madison Square Garden Entertainment Corp.’s stockholders for the three months ended September 30, 2019 because the Company was a wholly-owned subsidiary of MSG Sports prior to the Entertainment Distribution Date.
See accompanying notes to consolidated and combined financial statements.
3


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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
Three Months Ended
September 30,
20202019
Net loss$(94,364)$(56,563)
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
$352 $339 
Amortization of prior service credit included in net periodic benefit cost
 352  339 
Cumulative translation adjustments
13,951 (10,018)
Other comprehensive income (loss), before income taxes
14,303 (9,679)
Income tax expense related to items of other comprehensive income (loss)  
Other comprehensive income (loss), net of income taxes14,303 (9,679)
Comprehensive loss(80,061)(66,242)
Less: Comprehensive loss attributable to redeemable noncontrolling interests
(3,889)(636)
Less: Comprehensive income (loss) attributable to nonredeemable noncontrolling interests
(630)40 
Comprehensive loss attributable to Madison Square Garden Entertainment Corp.’s stockholders$(75,542)$(65,646)

See accompanying notes to consolidated and combined financial statements.

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

Three Months Ended
September 30,
20202019
Cash flows from operating activities:
Net loss$(94,364)$(56,563)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization26,582 26,820 
Provision for deferred income taxes182 113 
Share-based compensation expense11,529 10,085 
Loss in equity method investments1,696 1,473 
Purchase accounting adjustments associated with leases924 2,276 
Unrealized gain on equity investments with readily determinable fair value(33,658)(5,293)
Provision for doubtful accounts692 1,060 
Other non-cash adjustments(244)164 
Change in assets and liabilities:
Accounts receivable, net(7,218)(11,886)
Receivables from related parties, net of payables (21,555)(14,780)
Prepaid expenses and other assets(2,537)(7,482)
Accounts payable(9,524)1,593 
Accrued and other liabilities(40,323)(5,092)
Collections due to promoters, including noncurrent portion(8,498)(2,108)
Deferred revenue11,822 40,518 
Operating lease right-of-use assets and lease liabilities653 (69)
Net cash used in operating activities$(163,841)$(19,171)
Cash flows from investing activities:
Capital expenditures$(112,058)$(86,360)
Purchase of short-term investments (106,063)
Proceeds from maturity of short-term investment300,000 106,587 
Proceeds from sale of nonconsolidated affiliate 18,000 
Cash received for notes receivable6,328 750 
Other investing activities60 476 
Net cash provided by (used in) investing activities$194,330 $(66,610)
See accompanying notes to consolidated and combined financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)



Three Months Ended
September 30,
20202019
Cash flows from financing activities:
Taxes paid in lieu of shares issued for equity-based compensation$(5,971)$ 
Noncontrolling interest holders’ capital contribution 200 2,000 
Principal repayment on long-term debt(1,250)(2,500)
Net transfers from (to) Madison Square Garden Sports Corp. and its subsidiaries (34,786)
Net cash used in financing activities$(7,021)$(35,286)
Effect of exchange rates on cash, cash equivalents and restricted cash5,814 (1,950)
Net increase (decrease) in cash, cash equivalents and restricted cash29,282 (123,017)
Cash, cash equivalents and restricted cash at beginning of period
924,304 1,092,065 
Cash, cash equivalents and restricted cash at end of period$953,586 $969,048 
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid$76,358 $39,592 
Share-based compensation capitalized in property and equipment$866 $1,250 

See accompanying notes to consolidated and combined financial statements.

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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands)
Three Months Ended September 30, 2020
Common
Stock
Issued
Additional
Paid-In
Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Total Madison Square Garden Entertainment Corp. Stockholders’ EquityNon -
redeemable
Noncontrolling
Interests
Total EquityRedeemable
Noncontrolling
Interests
Balance as of June 30, 2020$240 $2,751,318 $141,936 $(51,857)$2,841,637 $12,203 $2,853,840 $20,600 
Net loss— — (89,845)— (89,845)(630)(90,475)(3,889)
Other comprehensive income— — — 14,303 14,303 — 14,303 — 
Comprehensive loss— — — — (75,542)(630)(76,172)(3,889)
Share-based compensation
— 11,808 — — 11,808 — 11,808 
Accretion of put options— — — — — — — 587 
Tax withholding associated with shares issued for equity-based compensation
1 (5,971)— — (5,970)— (5,970)— 
Contributions from noncontrolling interest holders
— — — — — 200 200 — 
Balance as of September 30 2020$241 $2,757,155 $52,091 $(37,554)$2,771,933 $11,773 $2,783,706 $17,298 
Three Months Ended September 30, 2019
MSG Sports’
Investment
Accumulated
Other
Comprehensive Loss
Total Company Divisional EquityNon -
redeemable
Noncontrolling
Interests
Total Divisional EquityRedeemable
Noncontrolling
Interests
Balance as of June 30, 2019$2,618,971 $(46,923)$2,572,048 $13,790 $2,585,838 $67,627 
Net income (loss)(55,967)— (55,967)40 (55,927)(636)
Other comprehensive loss— (9,679)(9,679)— (9,679)— 
Comprehensive income (loss)
— — (65,646)40 (65,606)(636)
Net decrease in Madison Square Garden Sports Corp. Investment(23,452)— (23,452)— (23,452)— 
Contributions from noncontrolling interest holders
— — — 1,709 1,709 — 
Balance as of September 30, 2019$2,539,552 $(56,602)$2,482,950 $15,539 $2,498,489 $66,991 
See accompanying notes to consolidated and combined financial statements.

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

Note 1. Description of Business and Basis of Presentation
Description of Business
Madison Square Garden Entertainment Corp. (together with its subsidiaries, the “Company” or “MSG Entertainment”), is a leader in live experiences comprised of iconic venues; marquee entertainment content; popular dining and nightlife offerings; and a premier music festival. Utilizing the Company’s powerful brands and live entertainment expertise, the Company delivers unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences. The Company’s portfolio of venues includes: Madison Square Garden (“The Garden”), Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, and The Chicago Theatre. 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, pending necessary approvals. The Company also includes the original production, the Christmas Spectacular Starring the Radio City Rockettes (“Christmas Spectacular”), as well as Boston Calling Events, LLC (“BCE”), the entertainment production company that owns and operates the Boston Calling Music Festival, and Tao Group Holdings LLC (“Tao Group Hospitality”), a hospitality group with globally-recognized entertainment dining and nightlife brands.
The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns The Garden, Hulu Theater at Madison Square Garden and The Chicago Theatre. In addition, the Company leases Radio City Music Hall and the Beacon Theatre in New York City. Additionally, Tao Group Hospitality operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in New York, Las Vegas, Los Angeles, Chicago, Australia, and Singapore.
The Company, formerly named MSG Entertainment Spinco, Inc., was incorporated on November 21, 2019 as a direct, wholly owned subsidiary of Madison Square Garden Sports Corp. (“MSG Sports” or “Former Parent”), formerly known as The Madison Square Garden Company. On March 31, 2020, MSG Sports’ board of directors approved the distribution of all the outstanding common stock of MSG Entertainment to MSG Sports’ stockholders (the “Entertainment Distribution”), which occurred on the Entertainment Distribution Date. See Note 1 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for more information regarding the Entertainment Distribution.
Following the Entertainment Distribution on April 17, 2020, the Company has two reportable segments (the Entertainment business and the Tao Group Hospitality business) as a result of certain changes in the financial information that is provided to its Chief Operating Decision Maker (“CODM”). Additionally, as part of the Entertainment Distribution, the Company has entered into various agreements with MSG Sports as detailed in Note 17.
Basis of Presentation
The Company reports on a fiscal year basis ending on June 30th. In these consolidated and combined financial statements, the years ended on June 30, 2021 and 2020 are referred to as “Fiscal Year 2021,” and “Fiscal Year 2020,” respectively.
Subsequent to the Entertainment Distribution, the Company’s balance sheets as of September 30, 2020 and June 30, 2020 and for the statement of operations for the three months ended September 30, 2020 are presented on a consolidated basis, as the Company became a standalone public company on April 17, 2020. The Company’s financial statements prior to April 17, 2020 that are included in the results of operations for the year ended June 30, 2020 were prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of MSG Sports (“combined financial statements”). These financial statements reflect the combined historical results of operations, financial position and cash flows of the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) and Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin Topic 1-B, Allocation of Expenses and Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity, and Article 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 Standards Codification, also referred to as the “Codification” or “ASC.”
See Note 1 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for more information regarding the assumptions underlying the combined financial statements and additional details on the preparation of such combined financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Management believes that the assumptions underlying the combined financial statements, including the assumptions regarding allocating general corporate expenses, are reasonable. Nevertheless, the combined financial statements may not include all of the actual expenses that would have been incurred by the Company and may not reflect its combined results of operations, financial position, and cash flows had it been a stand-alone company during the periods presented. Actual costs that would have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company is unable to quantify the amounts that it would have recorded during the historical periods on a stand-alone basis as it is not practicable to do so. See Note 17 for more information regarding allocations of certain costs from the Company to MSG Sports.
Unaudited Interim Financial Statements
The accompanying interim consolidated and combined financial statements have been prepared in accordance with GAAP for interim financial information and the instruction of Rule 10-01 of Regulation S-X, and should be read in conjunction with the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K. The consolidated and combined financial statements as of September 30, 2020 and for the three months ended September 30, 2020 and 2019 presented herein are unaudited; however, in the opinion of management, the financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. The Company’s dependence on revenues from the Christmas Spectacular generally means it earns a disproportionate share of its revenues in the second quarter of the its fiscal year. In addition, the Company’s operating results in Fiscal Year 2020 and the first quarter of Fiscal Year 2021 were negatively impacted due to the COVID-19 pandemic.
Impact of the COVID-19 Pandemic
The Company’s operations and operating results have been, and continue to be, materially impacted by the COVID-19 pandemic and actions taken in response by governmental authorities and certain professional sports leagues. As of the date of this Quarterly Report on Form 10-Q, virtually all of the Entertainment business’ operations have been suspended and Tao Group Hospitality is operating at significantly reduced capacity and demand. It is not clear when we will be permitted or able to resume normal business operations.
As a result of government mandated assembly limitations and closures, our performance venues were closed in mid-March, and, subject to limited exceptions, such as the use of The Garden as an early voting and election day poll site and our virtual residency featuring Phish’s Trey Anastasio live from the Beacon Theatre, events are currently prohibited at The Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall and the Beacon Theatre. Although events are permitted at The Chicago Theatre, current government mandated capacity restrictions and other safety requirements make it economically unfeasible to do so. All events at our venues have been postponed or canceled through at least December 2020 and will likely be impacted into 2021. We are not recognizing revenue from those events and, while events are being rescheduled into calendar year 2021, it is unclear whether and to what extent those events will take place. We are actively monitoring government regulations and guidance, and when such regulations permit, and there is an opportunity to reopen our venues for events safely and on economically feasible terms, we expect that we would do so. The impact to our operations has also included the 2020 Boston Calling Music Festival, which had been slated for Memorial Day weekend, and was canceled. In addition, in August 2020, the Company announced that it canceled the 2020 production of the Christmas Spectacular.
The Company has long-term arena license agreements (the “Arena License Agreements”) with MSG Sports that require the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”) and the New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”) to play their home games at The Garden.
In March, the NBA and the NHL announced that their 2019-20 seasons were suspended, and subsequently announced in June and May, respectively, plans for a return to play in the designated cities of Orlando for the NBA and Edmonton and Toronto for the NHL. With The Garden closed by government mandate, MSG Sports made no payments under the Arena License Agreements for the period following the Entertainment Distribution through September 30, 2020. Even though the NBA recently announced its 2020-21 season is expected to begin on December 22, 2020 and the NHL has stated it is targeting a January 1, 2021 start date for its 2020-21 season, government and league mandated restrictions remain in effect and may still be in effect at the time those seasons commence. No assurances can be made that games will be played at The Garden or, if games are played at The Garden, whether those games will be played with fans in attendance. Even if fans are permitted to attend, capacity restrictions, use limitations and social distancing requirements are expected to remain in place and may affect the payments we receive under the Arena License Agreements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Due to government actions taken in response to the COVID-19 pandemic, virtually all of Tao Group Hospitality’s venues were closed for approximately three months starting in mid-March, and Avenue and Vandal in New York were permanently closed in April and June, respectively. Tao Group Hospitality has resumed limited operations at certain venues, subject to significant regulatory requirements, including limits on capacity, curfews and social distancing requirements for outdoor and indoor dining. As of September 30, 2020, sixteen of Tao Group Hospitality’s venues were open for outdoor dining and/or limited capacity indoor dining (the majority of these venues also offered delivery and/or takeout), while twelve venues remained closed.
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;
payments under the Arena License Agreements;
sponsorships, suite licenses and in-venue advertising;
the 2020 production of the Christmas Spectacular; and
the 2020 Boston Calling Music Festival.
The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance. As a result, we have taken several actions to improve our financial flexibility, reduce operating costs and preserve liquidity.
We have revised our processes and construction schedule for MSG Sphere, providing for a substantially reduced spend in Fiscal Year 2021 and a lengthened timetable that enables the Company to preserve cash in the near-term. We now expect to open MSG Sphere in Las Vegas in calendar year 2023;
In connection with our extended construction timeline, we have reduced our expected near-term spending on technology and content development for MSG Sphere;
At the end of May 2020, we ended all financial support that was previously provided for certain event-level employees at the Company’s performance venues, and as a result virtually all venue employees, approximately 6,000 in total, are effectively furloughed;
At the end of March 2020, Tao Group Hospitality eliminated essentially all of its venue line staff and manager positions, with limited numbers of employees returning as operations slowly resume. In August, Tao Group Hospitality reduced its corporate workforce;
In August 2020, we reduced our regular full-time workforce by approximately 350 positions;
We have implemented and are continuing to pursue additional comprehensive cost reduction measures, including terminating certain third-party services, negotiating reduced rates and/or reduced service levels with third parties, and pursuing targeted savings and reductions in spending on marketing and travel and entertainment, and deferring or limiting non-essential operating or other discretionary expenses;
We have successfully negotiated certain relief and deferral of cash payments from landlords and other vendors. Conversations with third parties are ongoing as we continue to pursue additional options, some of which may or may not be successful; and
In November, MSG National Properties, LLC (“MSG National Properties”) and certain of our subsidiaries entered into a five-year $650,000 senior secured term loan facility.
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. 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. In addition, in connection with the amendment, MSG Entertainment Group, LLC entered into a guarantee agreement, which also included a minimum liquidity requirement for MSG Entertainment Group, LLC. See Note 12 for more information regarding the amendment to the Tao Senior Credit Agreement. If recovery from the
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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 debt covenant waivers could trigger a violation of these covenants and lead to default and acceleration of all of its outstanding debt, which could have a material adverse effect on Tao Group Hospitality and the Company.
See Note 1 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for impairment charges recorded by the Company for Tao Group Hospitality in Fiscal Year 2020. There was no impairment charge recorded by the Company for the three months ended September 30, 2020. However, the duration and impact of the COVID-19 pandemic may result in future impairment charges that management will evaluate as facts and circumstances evolve over time. Refer to Note 7 and Note 9 for further detail of the Company’s intangible assets, long-lived assets and goodwill.
Note 2. Accounting Policies
Principles of Consolidation and Combination
For the periods prior to the Entertainment Distribution, the combined financial statements include assets and liabilities that were historically held at Former Parent’s corporate level but were specifically identifiable or otherwise attributable to the Company. All intercompany transactions between the Company and Former Parent have been included in the combined financial statements as components of MSG Sports’ investment. Expenses related to corporate allocations prior to the Entertainment Distribution were considered to be effectively settled in the combined financial statements at the time the transaction was recorded, with the offset recorded against MSG Sports’ investment. All significant intracompany transactions and accounts within the Company's consolidated and combined financial statements have been eliminated.
After the Entertainment Distribution, the consolidated financial statements of the Company include the accounts of Madison Square Garden Entertainment Corp. and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In addition, the consolidated and combined financial statements of the Company include the accounts from Tao Group Hospitality and BCE, in which the Company has controlling voting interests. The Company’s consolidation criteria are 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 consolidated balance sheets, and the other stockholders’ portion of net earnings (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to redeemable or nonredeemable noncontrolling interests in the accompanying consolidated and combined statements of operations and consolidated and combined statements of comprehensive income (loss), respectively.
See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K regarding the classification of redeemable noncontrolling interests of Tao Group Hospitality and the elimination of three-month lag in the consolidation of Tao Group Hospitality in Fiscal Year 2020.

Use of Estimates
The preparation of the accompanying consolidated and combined financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, investments, goodwill, intangible assets, other long-lived assets, tax accruals and other liabilities. In addition, estimates are used in revenue recognition, income tax, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of contingent consideration and noncontrolling interests resulting from business combination transactions. Management believes its use of estimates in the financial statements to be reasonable.
Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses. ASU No. 2016-13 replaced the incurred loss impairment methodology in previous GAAP with a methodology that requires the reflection of expected credit losses and consideration of a broader range of reasonable and supportable information to determine credit loss estimates at inception. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC Topic 326 to provide an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, FASB issued ASU No. 2019-11 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 requires 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 was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
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. Most of the disclosure requirements in ASU No. 2018-13 are required to be applied on a retrospective basis except for the guidance related to (i) unrealized gains and losses included in other comprehensive income, (ii) disclosure related to range and weighted average Level 3 unobservable inputs and (iii) narrative disclosure requirements on measurement uncertainty, which are required to be applied on a prospective basis. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
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. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of the standard did not have an impact on the Company’s consolidated financial statements. However, to the extent future costs incurred in a cloud computing arrangement are capitalizable, the corresponding amortization will be included in “Direct operating expenses” or “Selling, general and administrative expenses” in the consolidated statements of operations depending on the nature of the related arrangement, rather than “Depreciation and amortization.”
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In November 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. ASU No. 2018-17 amends the variable interest entities (“VIE”) guidance to align the evaluation of a decision maker’s or service provider’s fee in assessing a variable interest with the guidance in the primary beneficiary test. Specifically, indirect interests held by a related party that is under common control are to be considered on a proportionate basis, rather than in their entirety, when assessing whether the fee qualifies as a variable interest. The proportionate basis approach is consistent with the treatment of indirect interests held by a related party under common control when evaluating the primary beneficiary of a VIE. When a decision maker or service provider has an interest in a related party, regardless of whether they are under common control, they 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. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
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. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
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. This standard was adopted by the Company in the first quarter of Fiscal Year 2021 in connection with the adoption of ASU No. 2016-13 discussed above. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
In November 2019, the FASB issued ASU No. 2019-08, Compensation — Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements — Share-Based Consideration Payable to a 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. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this ASU clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC Topic 321 immediately before applying or upon discontinuing the equity method. In addition, the amendments clarify the accounting for certain forward contracts and purchased options accounted for under ASC Topic 815. This standard was adopted by the Company in the first quarter of Fiscal Year 2021. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU eliminates certain exceptions to the general approach in ASC Topic 740 and includes methods of simplification to the existing guidance. The new guidance is effective for the Company in the first quarter of fiscal year 2022, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. 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 consolidated financial statements.
Note 3. Revenue Recognition
Contracts with Customers
See Note 4 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for more information regarding the details of the Company’s revenue recognition. All revenue recognized in the consolidated and combined statements of operations is considered to be revenue from contracts with customers in accordance with ASC Topic 606 except for $748 of sublease revenue, which is accounted for in accordance with ASC Topic 842 for the three months ended September 30, 2020. For the three months ended September 30, 2020 and 2019, the Company did not have any material impairment losses on receivables or contract assets arising from contracts with customers.
Disaggregation of Revenue
The following table disaggregates the Company’s revenue by major source and reportable segment based upon the timing of transfer of goods or services to the customer, in accordance with ASC Subtopic 606-10-50-5, for the three months ended September 30, 2020 and 2019:
Three Months ended
September 30, 2020
EntertainmentTao Group
Hospitality
EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$727 $5,660 $ $6,387 
Sponsorship, signage and suite licenses (b)
2,460 72 (232)2,300 
Other (c)
3,620 1,489 (166)4,943 
Total revenues from contracts with customers$6,807 $7,221 $(398)$13,630 

Three Months ended
September 30, 2019
EntertainmentTao Group
Hospitality
EliminationsTotal
Event-related and entertainment dining and nightlife offerings (a)
$82,714 $52,341 $(13)$135,042 
Sponsorship, signage and suite licenses (b)
35,438 184 (217)35,405 
Other (c)
1,500 6,092 (76)7,516 
Total revenues from contracts with customers$119,652 $58,617 $(306)$177,963 

_________________
(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.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(b)See Note 4 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for further details on the pattern of recognition of sponsorship, signage and suite license revenues.
(c)Primarily consists of (i) revenues from sponsorship sales and representation agreements with MSG Sports, (ii) advertising commission revenue from MSG Networks Inc. (“MSG Networks”), and (ii) Tao Group Hospitality’s managed venue revenues.
In addition to the disaggregation of the Company’s revenue by major source based upon the timing of transfer of goods or services to the customer disclosed above, the following table disaggregates the Company’s consolidated and combined revenues by type of goods or services in accordance with the required entity-wide disclosure requirements of FASB ASC Subtopic 280-10-50-38 to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic 606-10-50-5 for the three months ended September 30, 2020 and 2019:
Three Months ended
September 30, 2020
EntertainmentTao Group
Hospitality
EliminationsTotal
Ticketing and venue license fee revenues (a)
$730 $ $ $730 
Sponsorship and signage, suite, and advertising commission revenues5,859  (232)5,627 
Revenues from entertainment dining and nightlife offerings (b)
 7,221 (166)7,055 
Food, beverage and merchandise revenues    
Other218   218 
Total revenues from contracts with customers$6,807 $7,221 $(398)$13,630 

Three Months ended
September 30, 2019
EntertainmentTao Group
Hospitality
EliminationsTotal
Ticketing and venue license fee revenues (a)
$61,147 $ $ $61,147 
Sponsorship and signage, suite, and advertising commission revenues38,145  (217)37,928 
Revenues from entertainment dining and nightlife offerings (b)
 58,617 (13)58,604 
Food, beverage and merchandise revenues16,271   16,271 
Other 4,089  (76)4,013 
Total revenues from contracts with customers$119,652 $58,617 $(306)$177,963 
_________________
(a)Amounts include ticket sales, including other ticket-related revenue, and venue license fees from the Company’s events such as (i) concerts, (ii) the presentation of the Christmas Spectacular, and (iii) other live entertainment and sporting events.
(b)Primarily consist of revenues from (i) entertainment dining and nightlife offerings and (ii) venue management agreements.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets. The following table provides information about contract balances from the Company’s contracts with customers as of September 30, 2020 and June 30, 2020.
September 30,June 30,
20202020
Receivables from contracts with customers, net (a)
$66,426 $59,828 
Contract assets, current (b)
2,651 3,850 
Deferred revenue, including non-current portion (c)
204,934 193,112 
_________________
(a)Receivables from contracts with customers, which are reported in Accounts receivable, net and Net related party receivables in the Company’s consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of September 30, 2020 and June 30, 2020, the Company’s receivables from contracts with customers above included $2,716 and $2,644, respectively, related to various related parties. See Note 17 for further details on related party arrangements.
(b)Contract assets, which are reported as Other current assets in the Company’s consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to customers, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional.
(c)Deferred revenue primarily relates to the Company’s receipt of consideration from customers in advance of the Company’s transfer of goods or services to those customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. Revenue recognized for the three months ended September 30, 2020 relating to the deferred revenue balance as of June 30, 2020 was $2,060.
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 September 30, 2020. This primarily relates to performance obligations under sponsorship and suite license arrangements that have original expected durations longer than one year. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
Fiscal Year 2021 (remainder)$7,518 
Fiscal Year 2022114,639 
Fiscal Year 202379,299 
Fiscal Year 202454,419 
Fiscal Year 202543,162 
Thereafter68,128 
$367,165 
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 4. Restructuring Charges
The Company’s operations have been disrupted since March 2020 due to the COVID-19 pandemic. As a direct response to this disruption, on August 4, 2020, the Company implemented cost savings initiatives in order to streamline operations and preserve liquidity. These measures included a reduction in full-time workforce of approximately 350 employees. For the three months ended September 30, 2020, the Company recorded a total of $19,927 for restructuring charges related to termination benefits provided to employees and these are reflected in restructuring charges in the accompanying consolidated and combined statements of operations.
The Company’s restructuring accrual activity through September 30, 2020 is as follows:
June 30, 2020$ 
Restructuring charges19,927 
Payments(15,138)
September 30, 2020$4,789 
Note 5. Cash, Cash Equivalents and Restricted Cash
The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.
As of
September 30,
2020
June 30,
2020
September 30,
2019
June 30,
2019
Captions on the consolidated balance sheets:
Cash and cash equivalents$925,779 $906,555 $958,993 $1,082,055 
Restricted cash (a)
27,807 17,749 10,055 10,010 
Cash, cash equivalents and restricted cash on the consolidated and combined statements of cash flows
$953,586 $924,304 $969,048 $1,092,065 
_________________
(a)See Note 2 to the Company’s audited consolidated and combined financial statements and notes thereto for the year ended June 30, 2020 included in the Company’s Annual Report on Form 10-K for more information regarding the nature of restricted cash. In addition, the restricted cash balance as of September 30, 2020 included a deposit in a reserve account of approximately $9,800 associated with credit facilities of Tao Group Hospitality. See Note 12 for further details on the amendment to the Tao Senior Credit Agreement in August 2020.
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MADISON SQUARE GARDEN ENTERTAINMENT CORP.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Note 6. Investments in Nonconsolidated Affiliates
The Company’s investments in 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 PercentageInvestment
September 30, 2020
Equity method investments:
SACO Technologies Inc. (“SACO”)30 %