Madison Square Garden Sports (MSGS) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Madison Square Garden Sports Corp.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), cash flows, equity, and detailed notes, for periods ended December 31, 2021, and June 30, 2021 Consolidated Balance Sheets The consolidated balance sheets show the company's financial position as of December 31, 2021, compared to June 30, 2021, with increased total assets and liabilities, and a slight decrease in total equity | Metric (in thousands) | Dec 31, 2021 | Jun 30, 2021 | Change | % Change | | :-------------------- | :----------- | :----------- | :----- | :------- | | Total Current Assets | $218,555 | $185,246 | $33,309 | 18.0% | | Total Assets | $1,349,421 | $1,309,939 | $39,482 | 3.0% | | Total Current Liabilities | $451,798 | $368,278 | $83,520 | 22.7% | | Total Liabilities | $1,559,031 | $1,511,805 | $47,226 | 3.1% | | Total Equity | $(209,610) | $(201,866) | $(7,744) | -3.8% | Consolidated Statements of Operations The consolidated statements of operations show a significant turnaround from net loss to net income for the three months and a substantial reduction in net loss for the six months ended December 31, 2021, driven by increased revenues | Metric (in thousands) | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Revenues | $289,581 | $28,771 | $260,810 | 906.5% | | Operating Income (Loss) | $35,919 | $(38,406) | $74,325 | NM | | Net Income (Loss) | $15,198 | $(41,133) | $56,331 | NM | | EPS (Basic) | $0.65 | $(1.68) | $2.33 | NM | | Metric (in thousands) | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Revenues | $308,375 | $85,809 | $222,566 | 259.4% | | Operating Income (Loss) | $981 | $(65,810) | $66,791 | NM | | Net Income (Loss) | $(1,687) | $(70,148) | $68,461 | 97.6% | | EPS (Basic) | $(0.02) | $(2.86) | $2.84 | 99.3% | Consolidated Statements of Comprehensive Income (Loss) The consolidated statements of comprehensive income (loss) reflect a shift from comprehensive loss to income for the three months and a significant reduction in loss for the six months ended December 31, 2021, mirroring net income trends | Metric (in thousands) | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Net income (loss) | $15,198 | $(41,133) | $56,331 | NM | | Other comprehensive income, net of income taxes | $22 | $10 | $12 | 120.0% | | Comprehensive income (loss) | $15,220 | $(41,123) | $56,343 | NM | | Metric (in thousands) | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Net income (loss) | $(1,687) | $(70,148) | $68,461 | 97.6% | | Other comprehensive income, net of income taxes | $44 | $20 | $24 | 120.0% | | Comprehensive income (loss) | $(1,643) | $(70,128) | $68,485 | 97.7% | Consolidated Statements of Cash Flows The consolidated statements of cash flows show significant improvement in operating cash flow, shifting from outflow to inflow for the six months ended December 31, 2021, while financing activities moved to a net outflow | Metric (in thousands) | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Net cash provided by (used in) operating activities | $24,030 | $(21,633) | $45,663 | NM | | Net cash used in investing activities | $(627) | $(141) | $(486) | -344.7% | | Net cash (used in) provided by financing activities | $(39,879) | $11,363 | $(51,242) | NM | | Net decrease in cash, cash equivalents and restricted cash | $(16,476) | $(10,411) | $(6,065) | -58.3% | | Cash, cash equivalents and restricted cash at end of period | $55,560 | $80,262 | $(24,702) | -30.8% | Consolidated Statements of Equity The consolidated statements of equity detail changes in stockholders' equity, including net income/loss, other comprehensive income, share-based compensation, and noncontrolling interest adjustments for periods ended December 31, 2021 and 2020 | Metric (in thousands) | Dec 31, 2021 | Sep 30, 2021 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Madison Square Garden Sports Corp. Stockholders' Equity | $(212,090) | $(234,417) | $22,327 | | Total Equity | $(209,610) | $(232,184) | $22,574 | | Metric (in thousands) | Dec 31, 2021 | Jun 30, 2021 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Madison Square Garden Sports Corp. Stockholders' Equity | $(212,090) | $(204,308) | $(7,782) | | Total Equity | $(209,610) | $(201,866) | $(7,744) | Notes to Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, covering business description, accounting policies, revenue recognition, leases, debt, and related party transactions, offering crucial context Note 1. Description of Business and Basis of Presentation MSG Sports owns and operates professional sports teams, including the Knicks and Rangers, as a single segment, significantly impacted by COVID-19 disruptions, though capacity restrictions eased by May 2021 - MSG Sports owns and operates the New York Knicks (NBA), New York Rangers (NHL), two development league teams (Hartford Wolf Pack, Westchester Knicks), and esports franchises (Knicks Gaming, Counter Logic Gaming)[34] - The company operates and reports financial information in one segment, with the Executive Chairman acting as the Chief Operating Decision Maker (CODM)[34] - COVID-19 materially impacted revenues in fiscal year 2021 due to suspended/delayed seasons, fewer games, and initial fan prohibitions at The Garden, though full capacity was permitted from May 2021 (with restrictions) and August 2021 (with vaccine proof)[39][41][43][47] Note 2. Accounting Policies This note outlines the company's accounting policies, including consolidation principles, use of estimates, and adoption of new pronouncements, with no material impact from recent changes - The consolidated financial statements include Madison Square Garden Sports Corp. and its subsidiaries, including CLG, where the Company holds a controlling voting interest[50] - Management uses estimates and assumptions for various financial statement items, including valuation of receivables, goodwill, intangible assets, and deferred taxes, which are evaluated on an ongoing basis[51][52] - The company adopted ASU No. 2019-12, Income Taxes (Topic 740), at the beginning of fiscal year 2022, with no material impact on its consolidated financial statements[53] Note 3. Revenue Recognition Revenue recognition details are provided, disaggregating revenues by type and outlining contract balances, with significant increases in event-related, media rights, and sponsorship revenues due to COVID-19 recovery Disaggregation of Revenue (in thousands) | Revenue Type | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Event-related | $109,074 | $— | $112,944 | $— | | Media rights | $112,308 | $22,306 | $118,894 | $72,495 | | Sponsorship, signage and suite licenses | $58,534 | $3,995 | $61,704 | $6,945 | | League distributions and other | $9,665 | $2,470 | $14,833 | $6,369 | | Total Revenues | $289,581 | $28,771 | $308,375 | $85,809 | Contract Balances (in thousands) | Contract Balance | Dec 31, 2021 | Jun 30, 2021 | | :----------------- | :----------- | :----------- | | Receivables from contracts with customers, net | $48,993 | $30,834 | | Contract assets, current | $12,053 | $9,604 | | Deferred revenue, including non-current portion | $208,129 | $162,628 | - Revenue recognized for the six months ended December 31, 2021, relating to the deferred revenue balance as of June 30, 2021, was $62,758 thousand[62] Note 4. Computation of Earnings (Loss) per Common Share This note reconciles weighted-average shares for basic and diluted EPS calculations, highlighting the dilutive effect of share-based compensation plans Weighted-Average Shares Outstanding (in thousands) | Metric | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic | 24,261 | 24,144 | 24,217 | 24,103 | | Diluted | 24,373 | 24,144 | 24,217 | 24,103 | | Dilutive effect of shares issuable under share-based compensation plans | 112 | — | — | — | Note 5. Team Personnel Transactions Team personnel transactions resulted in a net credit for the three months and reduced net provisions for the six months ended December 31, 2021, compared to the prior year Team Personnel Transactions (in thousands) | Period | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net provisions | $(302) | $2,839 | $425 | $13,712 | Note 6. Cash, Cash Equivalents and Restricted Cash This note summarizes cash, cash equivalents, and restricted cash balances, showing a decrease in total cash and equivalents at December 31, 2021, compared to June 30, 2021 Cash, Cash Equivalents and Restricted Cash (in thousands) | Metric | Dec 31, 2021 | Jun 30, 2021 | | :----- | :----------- | :----------- | | Cash and cash equivalents | $54,815 | $64,902 | | Restricted cash | $745 | $7,134 | | Total cash, cash equivalents and restricted cash | $55,560 | $72,036 | - Restricted cash as of December 31, 2021, primarily included cash deposited in an escrow account[72] Note 7. Leases The company's lease obligations primarily cover executive offices and The Garden for its sports teams, with operating lease costs significantly increasing due to resumed full contractual payments for Arena License Agreements - The company's leases primarily consist of executive offices and the Arena License Agreements for The Garden, which allow the Knicks and Rangers to play home games until June 30, 2055[73][76] - The Sublease Agreement for principal executive offices was extended to October 31, 2024, leading to a non-cash addition of $1,244 thousand to right-of-use assets and operating lease liabilities[74] Operating Lease Costs (in thousands) | Lease Cost Type | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost (Direct operating expenses) | $27,860 | $2,308 | $29,267 | $2,398 | | Operating lease cost (Selling, general and administrative expenses) | $613 | $611 | $1,224 | $1,222 | | Total lease cost | $28,514 | $2,946 | $30,568 | $3,671 | - Maturities of operating lease liabilities as of December 31, 2021, total $2,316,392 thousand in future lease payments, with a weighted average remaining lease term of 33.1 years and a weighted average discount rate of 7.13%[87][84] Note 8. Goodwill and Intangible Assets The company's annual impairment tests for goodwill and indefinite-lived intangible assets in Q1 FY2022 identified no impairment, with goodwill at $226.955 million and indefinite-lived assets at $112.144 million - Goodwill carrying amount as of December 31, 2021, and June 30, 2021, was $226,955 thousand, with no impairment identified in the annual test[88] Indefinite-Lived Intangible Assets (in thousands) | Asset Type | Dec 31, 2021 | | :---------------------- | :----------- | | Sports franchises | $111,064 | | Photographic related rights | $1,080 | | Total | $112,144 | Amortizable Intangible Assets, Net (in thousands) | Asset Type | Dec 31, 2021 | Jun 30, 2021 | | :------------------ | :----------- | :----------- | | Trade names | $268 | $498 | | Non-compete agreements | $280 | $520 | | Other intangibles | $617 | $677 | | Total | $1,165 | $1,695 | - Amortization expense for intangible assets was $265 thousand for both the three months ended December 31, 2021 and 2020, and $530 thousand for both the six months ended December 31, 2021 and 2020[89] Note 9. Fair Value Measurements This note details fair value measurements for the company's financial instruments, including cash equivalents and debt, with Level I for money market/time deposits and Level II for debt, all approximating fair values Assets Measured at Fair Value (in thousands) | Asset Type | Fair Value Hierarchy | Dec 31, 2021 | Jun 30, 2021 | | :---------------- | :------------------- | :----------- | :----------- | | Money market account | I | $12,419 | $33,820 | | Time deposits | I | $35,005 | $5,000 | | Total | | $47,424 | $38,820 | Carrying Value and Fair Value of Financial Instruments (in thousands) | Liability Type | Dec 31, 2021 Carrying Value | Dec 31, 2021 Fair Value | Jun 30, 2021 Carrying Value | Jun 30, 2021 Fair Value | | :------------- | :-------------------------- | :---------------------- | :-------------------------- | :---------------------- | | Debt, current | $30,000 | $30,000 | $30,000 | $30,000 | | Long-term debt | $330,000 | $330,000 | $355,000 | $355,000 | Note 10. Commitments and Contingencies The company's commitments primarily involve employment agreements and future lease payments, and while a defendant in lawsuits, management does not anticipate a material adverse effect from their resolution - Commitments primarily consist of obligations under employment agreements with professional sports teams' personnel and future lease payments (see Note 7)[94] - The company is a defendant in various lawsuits, but management does not believe their resolution will have a material adverse effect[95] Note 11. Debt This note details the company's debt structure, including amended Knicks and Rangers Revolving Credit Facilities extended to December 2026, the termination of Knicks Holdings facility, and an NHL advance agreement, with total outstanding debt of $330 million as of December 31, 2021 - The 2021 Knicks Revolving Credit Facility was amended and restated, providing up to $275,000 thousand, maturing December 14, 2026, with an outstanding balance of $220,000 thousand as of December 31, 2021[99][100] - The 2021 Rangers Revolving Credit Facility was amended and restated, providing up to $250,000 thousand, maturing December 14, 2026, with an outstanding balance of $110,000 thousand as of December 31, 2021[109][110] - The 2020 Knicks Holdings Revolving Credit Facility was terminated on December 14, 2021[105] - Rangers LLC received a $30,000 thousand advance from the NHL under the 2021 Rangers NHL Advance Agreement, bearing 3.00% interest, with an outstanding balance of $30,000 thousand as of December 31, 2021[115][116] Note 12. Benefit Plans This note outlines the company's defined benefit pension and defined contribution plans, detailing net periodic benefit costs and expenses for the three and six months ended December 31, 2021 Net Periodic Benefit Cost for MSGS Pension Plans (in thousands) | Component | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :---------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Interest cost | $31 | $60 | $62 | $120 | | Recognized actuarial loss | $33 | $10 | $66 | $20 | | Total Net periodic benefit cost | $64 | $70 | $128 | $140 | Expenses Related to Savings Plans (in thousands) | Period | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Expenses | $899 | $506 | $1,838 | $1,104 | Note 13. Share-based Compensation Share-based compensation expense decreased for the three and six months ended December 31, 2021, partly due to a prior-year one-time equity award cancellation, with vested RSUs valued at $38.828 million Share-based Compensation Expense (in thousands) | Period | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Expense | $7,354 | $15,981 | $12,205 | $22,326 | - The decrease in share-based compensation expense in 2021 is partly due to a $7,400 thousand expense recognized in 2020 from the cancellation of a one-time equity award[126] - The fair value of RSUs that vested during the six months ended December 31, 2021, was $38,828 thousand[127] Note 14. Stock Repurchase Program The company's board authorized a $525 million Class A Common Stock repurchase program in September 2015, with $259.639 million remaining available as of December 31, 2021, and no repurchases during the six months ended December 31, 2021 and 2020 - The company has a $525,000 thousand Class A Common Stock repurchase program authorized in September 2015[132] - As of December 31, 2021, $259,639 thousand of availability remained under the stock repurchase authorization[133] - No share repurchase activities occurred during the six months ended December 31, 2021, or 2020[133] Note 15. Related Party Transactions The company engages in various related party transactions with MSG Entertainment and Dolan family entities, including Arena License Agreements, media rights, and sponsorship sales, with significant increases in both revenues and expenses for the three and six months ended December 31, 2021 - The Dolan family group beneficially owns 100% of Class B Common Stock and approximately 3.1% of Class A Common Stock, representing about 70.6% of aggregate voting power[135] - Key related party agreements include Arena License Agreements, media rights agreements, sponsorship sales and service representation agreements, and a Transition Services Agreement (TSA) with MSG Entertainment[136] Related Party Revenues and Operating Expenses (in thousands) | Metric | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $70,131 | $14,369 | $77,378 | $23,430 | | Corporate general and administrative expenses, net | $11,755 | $8,237 | $21,354 | $19,880 | | Costs associated with Sponsorship sales and service representation agreements | $5,735 | $2,322 | $8,468 | $4,680 | | Costs associated with Arena License Agreements | $39,056 | $2,494 | $41,016 | $2,854 | Note 16. Income Taxes Income tax expense for the three months ended December 31, 2021, was $17.115 million with a 53% effective rate, while the six months saw a $4.054 million benefit with a 71% effective rate due to share-based awards - Income tax expense for the three months ended December 31, 2021, was $17,115 thousand, with an effective tax rate of 53%[146] - Income tax benefit for the six months ended December 31, 2021, was $4,054 thousand, with an effective tax rate of 71%, influenced by $752 thousand of excess tax benefit on share-based payment awards[147] - The City of New York commenced an audit of state income tax returns for fiscal years 2016 and 2017, but the company does not expect material changes[150] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting COVID-19's impact, substantial improvements in operating and net income, liquidity, capital resources, and critical accounting policies Introduction This introduction sets the context for the MD&A, noting the company's structure after the MSG Entertainment distribution and its operation as a single segment - After the MSGE Distribution on April 17, 2020, the company operates and reports financial information in one segment[157][158] Factors Affecting Results of Operations The COVID-19 pandemic significantly impacted operations, leading to suspended seasons and fan prohibitions, and while restrictions eased, management acknowledges potential long-term effects on fan attendance and discretionary spending - COVID-19 disruptions materially impacted revenues in fiscal year 2021 due to suspended/delayed NBA and NHL seasons, fewer games, and initial fan prohibitions at The Garden[159][160][161][162] - Effective May 19, 2021, and August 17, 2021, The Garden was permitted to host guests at full capacity, subject to restrictions including vaccination proof[163][168] - Management is unable to predict longer-term effects of COVID-19, with fan attendance potentially impacted by variants, reduced tourism, and public hesitancy, which could lead to declines in discretionary spending on sporting events[169] Results of Operations The company saw substantial improvement in operating results for the three and six months ended December 31, 2021, driven by significant revenue increases from COVID-19 recovery, shifting from operating loss to income despite higher expenses Key Financial Highlights (in thousands) | Metric | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Change | % Change | | :----- | :-------------------------- | :-------------------------- | :----- | :------- | | Revenues | $289,581 | $28,771 | $260,810 | NM | | Direct operating expenses | $192,847 | $16,661 | $176,186 | NM | | Selling, general and administrative expenses | $59,600 | $48,909 | $10,691 | 22% | | Operating income (loss) | $35,919 | $(38,406) | $74,325 | NM | | Net income (loss) attributable to Madison Square Garden Sports Corp.'s stockholders | $15,845 | $(40,625) | $56,470 | NM | | Metric | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change | % Change | | :----- | :-------------------------- | :-------------------------- | :----- | :------- | | Revenues | $308,375 | $85,809 | $222,566 | NM | | Direct operating expenses | $201,425 | $56,447 | $144,978 | NM | | Selling, general and administrative expenses | $103,328 | $91,905 | $11,423 | 12% | | Operating income (loss) | $981 | $(65,810) | $66,791 | NM | | Net income (loss) attributable to Madison Square Garden Sports Corp.'s stockholders | $(560) | $(69,042) | $68,482 | 99% | - Revenue increases were driven by: pre/regular season ticket-related revenues (+$100,802 thousand for 3 months, +$104,484 thousand for 6 months), local media rights fees (+$50,871 thousand for 3 months, +$49,107 thousand for 6 months), league distributions (+$44,790 thousand for 3 months, +$3,575 thousand for 6 months), suite license fees (+$34,349 thousand for 3 months, +$34,613 thousand for 6 months), and sponsorship/signage revenues (+$20,190 thousand for 3 months, +$20,146 thousand for 6 months)[176] - Direct operating expenses increased primarily due to higher team personnel compensation (+$91,147 thousand for 3 months, +$77,685 thousand for 6 months), other team operating expenses (+$36,423 thousand for 3 months, +$35,752 thousand for 6 months), and operating lease costs for games at The Garden (+$25,459 thousand for 3 months, +$26,770 thousand for 6 months)[183] - Adjusted operating income improved by $74,683 thousand for the three months and $64,306 thousand for the six months ended December 31, 2021, reflecting the revenue recovery partially offset by increased operating expenses[197] Liquidity and Capital Resources The company's liquidity is supported by cash, credit facilities, and operating cash flow, with $54.8 million in cash and $195 million available borrowing capacity as of December 31, 2021, deemed sufficient for foreseeable operations - Primary liquidity sources are cash and cash equivalents, available borrowing capacity under credit facilities, and cash flow from operations[199] - As of December 31, 2021, the company had $54,800 thousand in Cash and cash equivalents and $195,000 thousand of additional available borrowing capacity under existing credit facilities[204] - Net cash provided by operating activities for the six months ended December 31, 2021, was $24,030 thousand, a significant improvement from a net cash outflow of $21,633 thousand in the prior year[208] - Net cash used in financing activities for the six months ended December 31, 2021, was $39,879 thousand, compared to net cash provided of $11,363 thousand in the prior year, due to additional borrowings in the prior year and a partial repayment on the 2021 Rangers Credit Agreement in the current year[210] Seasonality of Our Business The company typically earns disproportionate revenues in the second and third fiscal quarters due to its NBA and NHL teams, though COVID-19 disruptions in 2020 shifted some FY2020 revenues to Q1 FY2021 - The company typically earns a disproportionate share of revenues in the second and third fiscal quarters due to its NBA and NHL sports teams[211] - COVID-19 disruptions in 2020 caused certain revenues that would have been recognized in Q3/Q4 FY2020 to be recognized in Q1 FY2021[211] Recently Issued Accounting Pronouncements and Critical Accounting Policies This section refers to Note 2 for accounting pronouncements and discusses annual impairment testing for goodwill and indefinite-lived intangible assets, confirming no impairment in Q1 FY2022 - The company performed its annual impairment test of goodwill and identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2022, with no impairments identified[213][216][218] - Goodwill impairment testing is performed at the reporting unit level, which is the same as or one level below the operating segment, and involves a qualitative assessment or quantitative analysis[214] - Identifiable indefinite-lived intangible assets, such as sports franchises and photographic related rights, are tested annually for impairment using a qualitative assessment or quantitative analysis[217] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on floating-rate credit facility borrowings, where a 100 basis point increase would raise annual interest expense by approximately $3.3 million on $330 million outstanding debt - The company has potential interest rate risk exposure related to outstanding borrowings under its credit facilities, which bear interest at a floating rate[222] - As of December 31, 2021, total borrowings outstanding under credit facilities were $330 million[223] - A hypothetical 100 basis point increase in floating interest rates would increase annual interest expense by approximately $3.3 million[223] Item 4. Controls and Procedures The company's management concluded that disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal control over financial reporting during the quarter - The company's disclosure controls and procedures were effective as of December 31, 2021[224] - No material changes occurred in the company's internal control over financial reporting during the quarter ended December 31, 2021[225] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various lawsuits, but management believes their resolution will not have a material adverse effect - The company is a defendant in various lawsuits[228] - Management does not believe the resolution of these lawsuits will have a material adverse effect on the company[228] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has a $525 million Class A Common Stock repurchase program, with approximately $260 million remaining as of December 31, 2021, and no repurchase activity during the three months ended December 31, 2021 - The company has a $525 million Class A Common Stock share repurchase program authorized in September 2015[229] - Approximately $260 million remained available under the authorization as of December 31, 2021[229] - No share repurchase activity occurred during the three months ended December 31, 2021[229] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including employment agreements, credit agreement amendments, certifications, and financial statements in iXBRL format - Exhibits include employment agreements for key executives (Victoria Mink, Andrew Lustgarten, James L. Dolan)[231] - Amendments to the credit agreements for New York Knicks, LLC and New York Rangers, LLC are filed as exhibits[231] - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are included[231]