Atlanta Braves (BATRK) - 2023 Q2 - Quarterly Report

Part I – Financial Information Financial Statements The financial statements detail the company's financial position and performance, highlighting decreased equity and a net loss Condensed Combined Balance Sheets The balance sheets show increased assets and liabilities, leading to a decrease in total equity as of June 30, 2023 Condensed Combined Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total Assets | $1,509,102 | $1,490,661 | | Cash and cash equivalents | $130,537 | $150,664 | | Total current assets | $264,129 | $267,378 | | Total Liabilities | $1,287,220 | $1,191,151 | | Total current liabilities | $220,165 | $240,911 | | Long-term debt | $531,490 | $467,160 | | Total Equity | $221,882 | $299,510 | Condensed Combined Statements of Operations The statements of operations show a shift from net earnings to a net loss for both periods, despite revenue growth Statement of Operations Summary (in thousands) | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | H1 2023 (in thousands) | H1 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $270,123 | $250,325 | $301,095 | $271,855 | | Baseball Revenue | $254,935 | $236,918 | $272,496 | $246,758 | | Mixed-Use Development Revenue | $15,188 | $13,407 | $28,599 | $25,097 | | Operating Income (Loss) | $19,467 | $27,561 | ($29,790) | ($18,679) | | Net Earnings (Loss) | ($28,913) | $63,699 | ($86,889) | $40,664 | Condensed Combined Statements of Cash Flows The cash flow statements indicate a sharp decrease in operating cash flow and a shift to cash used in investing activities Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,892 | $98,028 | | Net cash provided by (used in) investing activities | ($29,590) | $34,264 | | Net cash provided by (used in) financing activities | $3,455 | ($104,434) | | Net increase (decrease) in cash | $9,757 | $27,858 | Notes to Condensed Combined Financial Statements The notes provide critical details on the financial statements, including the Split-Off, debt, player contracts, and segment performance - The Split-Off from Liberty Media was completed on July 18, 2023, after the reporting period, creating Atlanta Braves Holdings, Inc. as a new public company. The financial statements are prepared on a combined basis of the historical assets and liabilities attributed to the Liberty Braves Group[25][26][28] - The company faces a significant contingency related to the Diamond Sports Group bankruptcy. ANLBC may be required to repay up to $34.2 million in payments received prior to the filing and could lose future revenue if the broadcasting agreement is rejected, which would also necessitate a write-down of $24.4 million in receivables[103] - As of June 30, 2023, the company has long-term employment contract commitments, primarily for players, totaling $1.018 billion, with $225.8 million payable in the remainder of 2023[99] Segment Revenue and Adjusted OIBDA (Six Months Ended June 30, in thousands) | Segment | Revenue 2023 (in thousands) | Revenue 2022 (in thousands) | Adj. OIBDA 2023 (in thousands) | Adj. OIBDA 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Baseball | $272,496 | $246,758 | $1,878 | $10,581 | | Mixed-Use Development | $28,599 | $25,097 | $19,319 | $16,397 | | Total | $301,095 | $271,855 | $11,013 | $22,841 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting revenue growth offset by rising operating costs, leading to declining Adjusted OIBDA, with sufficient liquidity Results of Operations Total revenue increased across segments, but operating income and Adjusted OIBDA declined due to rising baseball operating costs - Baseball revenue increased by $17.3 million for the six months ended June 30, 2023, driven by higher ticket demand, attendance, and two additional home games compared to the prior year[128] - Baseball operating costs rose by $36.4 million for the six-month period, primarily due to a $13.2 million increase in player salaries and a $7.5 million increase in MLB revenue sharing expenses[132] - Mixed-Use Development revenue grew by $3.5 million for the six-month period, mainly from increased rental income due to new leases and higher tenant recoveries[131] Adjusted OIBDA Change (Six Months Ended June 30, 2023 vs 2022, in thousands) | Segment | H1 2023 Adj. OIBDA (in thousands) | H1 2022 Adj. OIBDA (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Baseball | $1,878 | $10,581 | ($8,703) | | Mixed-Use Development | $19,319 | $16,397 | $2,922 | | Corporate and Other | ($10,184) | ($4,137) | ($6,047) | | Total | $11,013 | $22,841 | ($11,828) | Liquidity and Capital Resources The company maintains sufficient liquidity through cash, operating cash flow, and credit facilities to fund projected uses, including player contracts and capital expenditures - The company's primary uses of cash are debt service and capital expenditures, funded by cash on hand and cash from operations[148] - Projected uses of cash include payments for long-term player employment agreements, real estate investments, and debt service[149] - The company has access to significant liquidity through multiple credit facilities, including the MLB League Wide Credit Facility ($125 million capacity), the MLB Facility Fund Revolver ($43.1 million capacity), and the TeamCo Revolver ($150 million capacity)[151][152][154] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate exposure on variable debt, managed through a mix of fixed and variable rates and swaps Debt Structure by Interest Rate Type (as of June 30, 2023) | Debt Type | Principal Amount (in millions) | Weighted Avg. Interest Rate | | :--- | :--- | :--- | | Floating Rate Debt | $50.2 million | 6.7% | | Fixed Rate Debt | $492.6 million | 4.4% | Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[158] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[159] Part II – Other Information Legal Proceedings This section refers to Note 7 of the financial statements for details on legal proceedings, including the Diamond Sports Group bankruptcy - The report directs readers to Note 7 of the financial statements for details on legal proceedings[160] Risk Factors The company incorporates by reference risk factors from its S-4 Registration Statement, pertaining to business operations and the recent Split-Off - Risk factors are not detailed in this 10-Q but are incorporated by reference from the company's S-4 Registration Statement (File No. 333-268922)[161] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities or use of proceeds in the quarter[162] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the fiscal quarter - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter[162] Exhibits This section lists the exhibits filed with the Quarterly Report, including reorganization agreements and certifications - A list of exhibits filed with the report is provided, including agreements related to the Split-Off and required SEC certifications[163][164][165]