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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
________________________
(Mark One)
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017
OR
 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to
Commission File Number: 1-36900
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12035280&doc=18
(Exact name of registrant as specified in its charter) 
Delaware
 
47-3373056
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
_______________________ 
Two Penn Plaza
New York, NY 10121
(212) 465-6000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
_______________________

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. þ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
 
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
Emerging growth company
o
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 þ No
Number of shares of common stock outstanding as of January 31, 2018:  
Class A Common Stock par value $0.01 per share
 —
19,025,439

Class B Common Stock par value $0.01 per share
 —
4,529,517




Table of Contents



THE MADISON SQUARE GARDEN COMPANY
INDEX TO FORM 10-Q
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 
 
December 31,
2017
 
June 30,
2017
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
1,125,647

 
$
1,238,114

Restricted cash
 
23,332

 
34,000

Accounts receivable, net
 
119,158

 
102,085

Net related party receivables
 
1,524

 
2,714

Prepaid expenses
 
44,132

 
23,358

Other current assets
 
41,475

 
49,458

Total current assets
 
1,355,268

 
1,449,729

Investments and loans to nonconsolidated affiliates
 
247,586

 
242,287

Property and equipment, net
 
1,235,133

 
1,159,271

Amortizable intangible assets, net
 
256,892

 
256,975

Indefinite-lived intangible assets
 
174,850

 
166,850

Goodwill
 
392,621

 
380,087

Other assets
 
51,921

 
57,554

Total assets
 
$
3,714,271

 
$
3,712,753

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
 
Current Liabilities:
 
 
 
 
Accounts payable
 
$
38,416

 
$
24,084

Net related party payables
 
21,197

 
17,576

Current portion of long-term debt, net of deferred financing costs
 
436

 

Accrued liabilities:
 
 
 
 
Employee related costs
 
69,651

 
138,858

Other accrued liabilities
 
184,131

 
191,344

Deferred revenue
 
390,056

 
390,180

Total current liabilities
 
703,887

 
762,042

Long-term debt, net of deferred financing costs
 
105,464

 
105,433

Defined benefit and other postretirement obligations
 
44,919

 
52,997

Other employee related costs
 
27,894

 
29,399

Deferred tax liabilities, net
 
80,324

 
196,436

Other liabilities
 
72,287

 
65,955

Total liabilities
 
1,034,775

 
1,212,262

Commitments and contingencies (see Note 9)
 

 

Redeemable noncontrolling interests
 
77,819

 
80,630

The Madison Square Garden Company Stockholders’ Equity:
 
 
 
 
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,025 and 19,014 shares outstanding as of December 31, 2017 and June 30, 2017, respectively
 
204

 
204

Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of December 31, 2017 and June 30, 2017
 
45

 
45

Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of December 31, 2017 and June 30, 2017
 

 

Additional paid-in capital
 
2,838,120

 
2,832,516

Treasury stock, at cost, 1,422 and 1,433 shares as of December 31, 2017 and June 30, 2017, respectively
 
(242,495
)
 
(242,077
)
Retained earnings (accumulated deficit)
 
27,693

 
(148,410
)
Accumulated other comprehensive loss
 
(39,449
)
 
(34,115
)
Total The Madison Square Garden Company stockholders’ equity
 
2,584,118

 
2,408,163

Nonredeemable noncontrolling interests
 
17,559

 
11,698

Total equity
 
2,601,677

 
2,419,861

Total liabilities, redeemable noncontrolling interests and equity
 
$
3,714,271

 
$
3,712,753


See accompanying notes to consolidated financial statements.

1


Table of Contents

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
 
 
Three Months Ended
 
Six Months Ended
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
Revenues (a)
 
$
536,302

 
$
445,150

 
$
781,517

 
$
626,845

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Direct operating expenses (b)
 
311,881

 
266,673

 
435,617

 
378,080

Selling, general and administrative expenses (c)
 
121,440

 
94,260

 
227,878

 
171,281

Depreciation and amortization
 
30,544

 
25,966

 
61,090

 
52,076

Operating income
 
72,437

 
58,251

 
56,932

 
25,408

Other income (expense):
 
 
 
 
 
 
 
 
Earnings (loss) in equity method investments
 
(2,608
)
 
(1,188
)
 
2,117

 
(2,182
)
Interest income (d)
 
5,378

 
2,692

 
9,764

 
5,091

Interest expense
 
(3,798
)
 
(491
)
 
(7,509
)
 
(901
)
Miscellaneous income (expense)
 
(250
)
 
1,405

 
(250
)
 
1,405

 
 
(1,278
)
 
2,418

 
4,122

 
3,413

Income from operations before income taxes
 
71,159

 
60,669

 
61,054

 
28,821

Income tax benefit (expense)
 
116,832

 
(3,248
)
 
116,070

 
(314
)
Net income
 
187,991

 
57,421

 
177,124

 
28,507

Less: Net income (loss) attributable to redeemable noncontrolling interests
 
(767
)
 

 
133

 

Less: Net loss attributable to nonredeemable noncontrolling interests
 
(855
)
 
(305
)
 
(1,515
)
 
(593
)
Net income attributable to The Madison Square Garden Company’s stockholders
 
$
189,613

 
$
57,726

 
$
178,506

 
$
29,100

 
 
 
 
 
 
 
 
 
Basic earnings per common share attributable to The Madison Square Garden Company’s stockholders
 
$
8.03

 
$
2.41

 
$
7.57

 
$
1.21

Diluted earnings per common share attributable to The Madison Square Garden Company’s stockholders
 
$
7.96

 
$
2.39

 
$
7.48

 
$
1.20

Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
23,621

 
23,971

 
23,594

 
24,013

Diluted
 
23,813

 
24,143

 
23,861

 
24,192

_________________
(a) 
Include revenues from related parties of $41,131 and $39,040 for the three months ended December 31, 2017 and 2016, respectively, and $77,041 and $72,881 for the six months ended December 31, 2017 and 2016, respectively.
(b) 
Include net charges from related parties of $425 and $475 for the three months ended December 31, 2017 and 2016, respectively, and $571 and $689 for the six months ended December 31, 2017 and 2016, respectively.
(c) 
Include net charges to related parties of $(1,186) and $(1,616) for the three months ended December 31, 2017 and 2016, respectively, and $(2,624) and $(3,204) for the six months ended December 31, 2017 and 2016, respectively.
(d) 
Includes interest income from nonconsolidated affiliates of $2,154 and $1,114 for the three months ended December 31, 2017 and 2016, respectively, and $3,317 and $1,979 for the six months ended December 31, 2017 and 2016, respectively.

See accompanying notes to consolidated financial statements.

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Table of Contents

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)
 
 
Three Months Ended
 
Six Months Ended
 
 
December 31,
 
December 31,
 
 
2017
 
2016
 
2017
 
2016
Net income
 
 
 
$
187,991

 
 
 
$
57,421

 
 
 
$
177,124

 
 
 
$
28,507

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
 
$
280

 
 
 
$
344

 
 
 
$
620

 

 
$
688

 

Amortization of prior service credit included in net periodic benefit cost
 
(6
)
 
274

 
(13
)
 
331

 
(18
)
 
602

 
(25
)
 
663

Cumulative translation adjustments
 
 
 
2,277

 
 
 

 
 
 
2,277

 
 
 

Net changes related to available-for-sale securities
 
 
 
(7,443
)
 
 
 
3,433

 
 
 
(8,213
)
 
 
 
10,175

Other comprehensive income (loss), before income taxes
 
 
 
(4,892
)
 
 
 
3,764

 

 
(5,334
)
 
 
 
10,838

Reversal of income tax expense related to items of other comprehensive income
 
 
 

 
 
 
3,126

 
 
 

 
 
 

Other comprehensive income (loss), net of income taxes
 
 
 
(4,892
)
 
 
 
6,890

 
 
 
(5,334
)
 
 
 
10,838

Comprehensive income
 
 
 
183,099

 
 
 
64,311

 

 
171,790

 
 
 
39,345

Less: Comprehensive income (loss) attributable to redeemable noncontrolling interests
 
 
 
(767
)
 
 
 

 
 
 
133

 
 
 

Less: Comprehensive loss attributable to nonredeemable noncontrolling interests
 
 
 
(855
)
 
 
 
(305
)
 
 
 
(1,515
)
 
 
 
(593
)
Comprehensive income attributable to The Madison Square Garden Company’s stockholders
 
 
 
$
184,721

 
 
 
$
64,616

 
 
 
$
173,172

 
 
 
$
39,938


See accompanying notes to consolidated financial statements.


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Table of Contents

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
 
Six Months Ended
 
 
December 31,
 
 
2017
 
2016
Cash flows from operating activities:
 
 
 
 
Net income
 
$
177,124

 
$
28,507

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
61,090

 
52,076

Provision for (benefit from) deferred income taxes
 
(116,112
)
 
314

Share-based compensation expense
 
26,816

 
20,098

Loss (earnings) in equity method investments
 
(2,117
)
 
2,182

Purchase accounting adjustments associated with rent-related intangibles and deferred rent
 
2,280

 

Other non-cash expense
 
1,133

 
90

Change in assets and liabilities, net of acquisitions:
 
 
 
 
Accounts receivable, net
 
(16,896
)
 
(14,792
)
Net related party receivables
 
1,190

 
2,397

Prepaid expenses and other assets
 
(2,637
)
 
(1,602
)
Accounts payable
 
14,544

 
12,549

Net related party payables
 
3,621

 
996

Accrued and other liabilities
 
(85,407
)
 
(31,930
)
Deferred revenue
 
(1,362
)
 
39,047

Net cash provided by operating activities
 
63,267

 
109,932

Cash flows from investing activities:
 
 
 
 
Capital expenditures, net of acquisitions
 
(127,684
)
 
(21,766
)
Payments for acquisition of assets
 
(6,000
)
 
(1,000
)
Payments to acquire available-for-sale securities
 

 
(23,222
)
Payments for acquisition of businesses, net of cash acquired
 
(8,288
)
 
(13,468
)
Investments and loans to nonconsolidated affiliates
 
(3,000
)
 
(3,235
)
Loan payments received
 
2,600

 

Cash paid for notes receivable
 
(1,500
)
 

Net cash used in investing activities
 
(143,872
)
 
(62,691
)
Cash flows from financing activities:
 
 
 
 
Repurchases of common stock
 
(11,830
)
 
(72,277
)
Proceeds from stock option exercises
 

 
7

Taxes paid in lieu of shares issued for equity-based compensation
 
(12,232
)
 
(7,034
)
Distributions to noncontrolling interest holders
 
(3,750
)
 

Payment of contingent consideration
 
(4,000
)
 

Payments for financing costs
 
(62
)
 
(1,909
)
Net cash used in financing activities
 
(31,874
)
 
(81,213
)
Effect of exchange rates on cash and cash equivalents
 
12

 

Net decrease in cash and cash equivalents
 
(112,467
)
 
(33,972
)
Cash and cash equivalents at beginning of period
 
1,238,114

 
1,444,317

Cash and cash equivalents at end of period
 
$
1,125,647

 
$
1,410,345

Non-cash investing and financing activities:
 
 
 
 
Investments and loans to nonconsolidated affiliates
 
$
14

 
$
322

Capital expenditures incurred but not yet paid
 
5,764

 
2,961

Accrued earn-out liability and other contingencies
 
4,504

 

Acquisition of assets not yet paid
 
3,000

 


See accompanying notes to consolidated financial statements.

4


Table of Contents

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(in thousands) 
 
 
Common
Stock
Issued
 
Additional
Paid-In
Capital
 
Treasury
Stock
 
Retained Earnings (Accumulated Deficit)
 
Accumulated
Other
Comprehensive
Loss
 
Total The Madison Square Garden Company Stockholders Equity
 
Non -
redeemable
Noncontrolling
Interests
 
Total Equity
 
Redeemable
Noncontrolling
 Interests
Balance as of June 30, 2017
 
$
249

 
$
2,832,516

 
$
(242,077
)
 
$
(148,410
)
 
$
(34,115
)
 
$
2,408,163

 
$
11,698

 
$
2,419,861

 
$
80,630

Change in accounting policy related to share-based forfeiture rates
 

 
2,403

 

 
(2,403
)
 

 

 

 

 

Net income (loss)
 

 

 

 
178,506

 

 
178,506

 
(1,515
)
 
176,991

 
133

Other comprehensive loss
 

 

 

 

 
(5,334
)
 
(5,334
)
 

 
(5,334
)
 

Comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
173,172

 
(1,515
)
 
171,657

 
133

Share-based compensation
 

 
26,845

 

 

 

 
26,845

 

 
26,845

 

Tax withholding associated with shares issued for equity-based compensation
 

 
(12,232
)
 

 

 

 
(12,232
)
 

 
(12,232
)
 

Common stock issued under stock incentive plans
 

 
(11,412
)
 
11,412

 

 

 

 

 

 

Repurchases of common stock
 

 

 
(11,830
)
 

 

 
(11,830
)
 

 
(11,830
)
 

Distributions to noncontrolling interest holders
 

 

 

 

 

 

 
(806
)
 
(806
)
 
(2,944
)
Noncontrolling interests from acquisition
 

 

 

 

 

 

 
8,182

 
8,182

 

Balance as of December 31, 2017
 
$
249

 
$
2,838,120

 
$
(242,495
)
 
$
27,693

 
$
(39,449
)
 
$
2,584,118

 
$
17,559

 
$
2,601,677

 
$
77,819


See accompanying notes to consolidated financial statements.


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Table of Contents

THE MADISON SQUARE GARDEN COMPANY
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Continued)
(Unaudited)
(in thousands) 
 
 
Common Stock Issued
 
Additional
Paid-In
Capital
 
Treasury
Stock
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total The Madison Square Garden Company Stockholders Equity
 
Non -
redeemable
Noncontrolling
Interests
 
Total Equity
Balance as of June 30, 2016
 
$
249

 
$
2,806,352

 
$
(101,882
)
 
$
(75,687
)
 
$
(42,611
)
 
$
2,586,421

 
$

 
$
2,586,421

Net income (loss)
 

 

 

 
29,100

 

 
29,100

 
(593
)
 
28,507

Other comprehensive income
 

 

 

 

 
10,838

 
10,838

 

 
10,838

Comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
39,938

 
(593
)
 
39,345

Exercise of stock options
 

 
(39
)
 
46

 

 

 
7

 

 
7

Share-based compensation
 

 
20,175

 

 

 

 
20,175

 

 
20,175

Tax withholding associated with shares issued for equity-based compensation
 

 
(5,702
)
 
(1,332
)
 

 

 
(7,034
)
 

 
(7,034
)
Common stock issued under stock incentive plans
 

 
(8,630
)
 
8,630

 

 

 

 

 

Repurchases of common stock
 

 

 
(72,277
)
 

 

 
(72,277
)
 

 
(72,277
)
Noncontrolling interests from acquisition
 

 

 

 

 

 

 
11,394

 
11,394

Balance as of December 31, 2016
 
$
249

 
$
2,812,156

 
$
(166,815
)
 
$
(46,587
)
 
$
(31,773
)
 
$
2,567,230

 
$
10,801

 
$
2,578,031


See accompanying notes to consolidated financial statements.

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Table of Contents

THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All amounts included in the following Notes to Consolidated Financial Statements are presented in thousands, except per share data or as otherwise noted.
Note 1. Description of Business and Basis of Presentation
Description of Business
The Madison Square Garden Company (together with its subsidiaries, the “Company” or “Madison Square Garden”) is a live sports and entertainment business. The Company classifies its business interests into two reportable segments: MSG Entertainment and MSG Sports. MSG Entertainment includes live entertainment events such as concerts, family shows, performing arts and special events, which are presented or hosted in the Company’s diverse collection of venues along with live offerings through TAO Group Holdings LLC (“TAO Group”) and Boston Calling Events LLC (“BCE”). TAO Group is a hospitality group with globally-recognized entertainment dining and nightlife brands: TAO, Marquee, Lavo, Avenue, The Stanton Social, Beauty & Essex and Vandal. BCE produces New England’s premier Boston Calling Music Festival. MSG Entertainment also includes the Company’s original productions — the Christmas Spectacular Starring the Radio City Rockettes (the “Christmas Spectacular”) and the New York Spectacular Starring the Radio City Rockettes (the “New York Spectacular”). MSG Sports includes the Company’s professional sports franchises: the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”), the New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”), the New York Liberty (the “Liberty”) of the Women’s National Basketball Association (the “WNBA”), the Hartford Wolf Pack of the American Hockey League (the “AHL”) and the Westchester Knicks of the NBA Gatorade League (the “NBAGL”). The MSG Sports segment also includes other live sporting events, including professional boxing, college basketball, college hockey, professional bull riding, mixed martial arts, esports, tennis and college wrestling, all of which the Company promotes, produces and/or presents. In July 2017, the Company acquired a controlling interest in Counter Logic Gaming (“CLG”), a premier North American esports organization, which is now part of the MSG Sports segment.
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 Madison Square Garden Arena (“The Garden”) and The Theater at Madison Square Garden in New York City, the Forum in Inglewood, CA and The Chicago Theatre in Chicago. In addition, the Company leases Radio City Music Hall and the Beacon Theatre in New York City, and has a booking agreement with respect to the Wang Theatre in Boston. Additionally, TAO Group operates various restaurants, nightlife and hospitality venues under long-term leases and management contracts in New York, Las Vegas, Los Angeles, Australia and Singapore.
The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc. (“MSG Networks”), formerly known as The Madison Square Garden Company. On September 11, 2015, MSG Networksboard of directors approved the distribution of all the outstanding common stock of Madison Square Garden to MSG Networks’ stockholders (the “Distribution”), which occurred on September 30, 2015. See Note 1 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 for more information regarding the Distribution to its common stockholders.
Basis of Presentation
The accompanying unaudited consolidated interim financial statements (referred to as the “Financial Statements” herein) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2017. The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year. The dependence of the MSG Sports segment on revenues from its NBA and NHL sports teams generally means it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year. The dependence of the MSG Entertainment segment on revenues from the Christmas Spectacular generally means it earns a disproportionate share of its revenues in the second quarter of the Company’s fiscal year.

7



Table of Contents
THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 2. Accounting Policies
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of The Madison Square Garden Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In addition, the consolidated financial statements of the Company include the accounts from TAO Group, BCE and CLG, 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, BCE and CLG are consolidated with the equity owned by other shareholders shown as redeemable or nonredeemable noncontrolling interests in the accompanying consolidated balance sheets, and the other shareholders’ 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 statements of operations and consolidated statements of comprehensive income, respectively. See Note 2 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 for more information regarding the classification of redeemable noncontrolling interests of TAO Group. In addition, TAO Group’s results are reported on a three-month lag basis and TAO Group reports on a fiscal year reflecting the retail-based calendar (containing 4-4-5 week calendar quarters). Accordingly, the Company’s results for the three and six months ended December 31, 2017 include TAO Group’s operating results from June 26, 2017 to September 24, 2017 and March 27, 2017 to September 24, 2017, respectively.
Use of Estimates
The preparation of the accompanying 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, revenue sharing expense (net of escrow), luxury tax expense, income tax expense, 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 are 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 factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.
Summary of Significant Accounting Policies
The following is an update to the Company’s Summary of Significant Accounting Policies disclosed in its Annual Report on Form 10-K for the year ended June 30, 2017:
Revenue Recognition
Deferred revenue reported in the accompanying consolidated balance sheets as of December 31, 2017 and June 30, 2017 includes amounts due to the third-party promoters of $50,414 and $72,400, respectively.
Foreign Currency Translation
The consolidated financial statements are presented in U.S. Dollars. Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. Dollars at exchange rates in effect at the balance sheet date. Operating results of non-U.S. subsidiaries are translated at weighted-average exchange rates during the year which approximate the rates in effect at the transaction dates. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive income (loss) as changes in cumulative translation adjustments in the accompanying consolidated balance sheet.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. ASU No. 2016-07 eliminates the requirement for an investor to retrospectively apply the equity method when an investment that it had accounted for by another method qualifies for use of the equity method. This standard was adopted by the Company prospectively in the first quarter of fiscal year 2018. The adoption of the standard did not have an impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting. ASU No. 2016-09, among other things, (i) requires the income tax effects of all awards to be recognized in the statement of operations when the awards vest or are settled, (ii) allows an employer to repurchase more of an employee’s shares for tax withholding purposes than currently allowable, without triggering liability accounting, and provides companies with the option to make a policy election to account for forfeitures as they occur, and (iii) requires companies to present excess tax benefits as operating activity rather than as financing activity on the statement of cash flows. This standard was adopted by the Company in the first quarter of fiscal year 2018. In connection with the Company’s election to record forfeitures as they occur, the Company used the modified retrospective transition method and recorded a cumulative effect of $2,403, which was an increase in beginning accumulated deficits with the offset by an equal increase in additional paid in capital. In addition, the Company prospectively adopted the provision regarding the presentation of excess tax benefits in the statement of cash flows, which did not result in a change in the net cash provided by operating activities for the six months ended December 31, 2017 because the Company currently maintains a 100% valuation allowance on its deferred tax asset.
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU No. 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This standard does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the changes are considered non-substantive. This standard was early adopted by the Company prospectively in the first quarter of fiscal year 2018. 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 May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in FASB Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. ASC Topic 606, among other things, (i) is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and (ii) requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU No. 2014-09 for all entities by one year. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue versus Net), which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard under ASU No. 2014-09. ASU No. 2016-08 clarifies how an entity should identify the unit of accounting (i.e. the specified good or service) for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the principle in ASU No 2014-09 for determining whether a good or service is separately identifiable from other promises in the contract and, therefore, should be accounted for separately. ASU No. 2016-10 also clarifies that entities are not required to identify promised goods or services that are immaterial in the context of the contract and allows entities to elect to account for shipping and handling activities as a fulfillment cost rather than as an additional promised service. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients, which clarifies the following aspects in ASU No. 2014-09: collectability, presentation of sales taxes and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed contracts at

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(Continued)


transition, and technical correction. In December, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and requires entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. ASC Topic 606 and the related updates will be effective for the Company beginning in the first quarter of fiscal year 2019 using one of two retrospective application methods. The Company’s evaluation of the impact this standard will have on its consolidated financial statements is ongoing. Based on the review to date, the Company believes that the adoption of the new standard will impact the quarterly and annual recognition for certain revenue streams. While the Company has made substantial progress in concluding the appropriate treatment for most of its revenue streams, the review is ongoing for a few remaining revenue streams. The Company has not decided whether the retrospective or modified retrospective method will be used in adopting the new standard.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This standard, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income and (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. Early adoption is not permitted with the exception of certain provisions related to the presentation of other comprehensive income. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in FASB ASC Topic 840, Leases. ASU No. 2016-02, among other things, (i) requires lessees to account for leases as either finance leases or operating leases and generally requires all leases to be recorded on the balance sheet, including those leases classified as operating leases under previous accounting guidance, through the recognition of right-of-use assets and corresponding lease liabilities, and (ii) requires extensive qualitative and quantitative disclosures about leasing activities. The accounting applied by a lessor is largely unchanged from that applied under previous accounting guidance. This standard will be effective for the Company beginning in the first quarter of fiscal year 2020 and is required to be applied using the modified retrospective approach for all leases existing as of the effective date. Early adoption is permitted; however, the Company currently does not plan to adopt this standard early. The Company’s evaluation of the impact this standard will have on its consolidated financial statements is ongoing. Based on efforts to date, the adoption of the standard will result in the recognition of right of use assets and lease liabilities related to the Company’s operating leases.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that will require the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates. For most financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which will generally result in the earlier recognition of credit losses on financial instruments. This standard will be effective for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. ASU No. 2016-16 requires entities to recognize income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash. The primary purpose of ASU No. 2016-18 is to reduce the diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. This standard will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This standard will be effective retrospectively for the Company beginning in the first quarter of fiscal year 2019, and will result in a change to the Company’s presentation of net cash provided by (used in) operating activities in the statement of cash flows for the impact of changes in restricted cash balances. Early adoption is permitted in any interim or annual period.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The primary purpose of this ASU is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses, which will affect many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019 and is required to be applied prospectively. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. ASU No. 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard will be effective for the Company beginning in the first quarter of fiscal year 2021 and is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU No. 2017-07 requires employers to disaggregate the service cost component from the other components of net benefit cost and disclose by line item the amount of net benefit cost that is included in the statement of operations or capitalized in assets. The standard requires employers to report the service cost component in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period and to report other components of net benefit cost separately and outside the subtotal of operating income. The standard also allows only the service cost component to be eligible for capitalization. This standard will be effective for the Company beginning in the first quarter of fiscal year 2019. The guidance requires application on a retrospective basis for the presentation of the service cost component and the other components of net benefit cost in the statements of operations and on a prospective basis for the capitalization of the service cost component of net benefit cost in assets. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. For the three months ended December 31, 2017, net periodic pension and other postretirement employee benefit cost reported within operating income totaled to $1,031, of which $53 represented service cost. For the six months ended December 31, 2017, net periodic pension and other postretirement employee benefit cost reported within operating income totaled to $2,093, of which $105 represented service cost.

Note 3. Acquisitions
On July 28, 2017, the Company acquired a 65% controlling interest in CLG, a premier North American esports organization. CLG’s results of operations since the acquisition date, which are included in the Company’s consolidated statements of operations for the three and six months ended December 31, 2017, were not material. Pro forma information is not provided since the acquisition was not material when compared with the Company’s consolidated financial statements.
On November 20, 2017, the Company acquired a 100% controlling interest in Obscura Digital (“Obscura”), a creative studio, globally-recognized for its work in designing and developing next-generation immersive experiences. Obscura’s results of operations since the acquisition date, which are included in the Company’s consolidated statements of operations for the three and six months ended December 31, 2017, were not material. Pro forma information is not provided since the acquisition was not material when compared with the Company’s consolidated financial statements. In addition, the Obscura financial results of operations will be reflected in the MSG Entertainment segment. Any costs incurred by Obscura that are associated with the Company’s venue development initiatives will be reported in “Corporate and Other.”

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(Continued)


Note 4. Computation of Earnings per Common Share
The following table presents a reconciliation of weighted-average shares used in the calculations of basic and diluted earnings per common share attributable to the Company’s stockholders (“EPS”).  
 
 
Three Months Ended
 
Six Months Ended
 
 
December 31,
 
December 31,
 
 
2017
 
2016
 
2017
 
2016
Weighted-average shares (denominator):
 
 
 
 
 
 
 
 
Weighted-average shares for basic EPS
 
23,621

 
23,971

 
23,594

 
24,013

Dilutive effect of shares issuable under share-based compensation plans
 
192

 
172

 
267

 
179

Weighted-average shares for diluted EPS
 
23,813

 
24,143

 
23,861

 
24,192

  Anti-dilutive shares
 
19

 
7

 
10

 
6

Note 5. Team Personnel Transactions
Direct operating expenses in the accompanying consolidated statements of operations include net provisions for transactions relating to players on the Company’s sports teams for waiver/contract termination costs and a player trade (“Team Personnel Transactions”). Team Personnel Transactions were $2,758 and $980 for the three months ended December 31, 2017 and 2016, respectively, and $2,858 and $5,990 for the six months ended December 31, 2017 and 2016, respectively.
Note 6. Investments and Loans to Nonconsolidated Affiliates
The Company’s investments and loans to nonconsolidated affiliates which are accounted for under the equity method and cost method of accounting in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures, and ASC Topic 325, Investments - Other, respectively, consisted of the following:
 
 
Ownership Percentage
 
Investment
 
Loan (a)
 
 
Total
December 31, 2017
 
 
 
 
 
 
 
 
 
Equity method investments:
 
 
 
 
 
 
 
 
 
Azoff MSG Entertainment LLC (“AMSGE”)
 
50
%
 
$
107,496

 
$
97,500

 
 
$
204,996

Tribeca Enterprises LLC (“Tribeca Enterprises”)
 
50
%
 
11,535

 
17,892

(b) 
 
29,427

Other
 
50
%
 
2,638

 

 
 
2,638

Cost method investments
 
 
 
10,525

 

 
 
10,525

Total investments and loans to nonconsolidated affiliates
 
 
 
$
132,194

 
$
115,392

 
 
$
247,586

 
 
 
 
 
 
 
 
 
 
June 30, 2017
 
 
 
 
 
 
 
 
 
Equity method investments:
 
 
 
 
 
 
 
 
 
AMSGE
 
50
%
 
$
104,024

 
$
97,592

(c) 
 
$
201,616

Brooklyn Bowl Las Vegas, LLC (“BBLV”)
 
(d) 

 

 
2,662

(e) 
 
2,662

Tribeca Enterprises
 
50
%
 
12,864

 
14,370

(b) 
 
27,234

Cost method investments
 
 
 
10,775

 

 
 
10,775

Total investments and loans to nonconsolidated affiliates
 
 
 
$
127,663

 
$
114,624

 
 
$
242,287

_________________
(a) 
In connection with the Company’s investments in AMSGE and Tribeca Enterprises, the Company provides $100,000 and $17,500 revolving credit facilities to these entities, respectively. Pursuant to their terms, the AMSGE and Tribeca Enterprises revolving credit facilities will terminate on September 20, 2020 and June 30, 2021, respectively.

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(b) 
Includes outstanding payments-in-kind (“PIK”) interest of $1,392 and $870 as of December 31, 2017 and June 30, 2017, respectively. PIK interest owed does not reduce availability under the revolving credit facility.
(c) 
Represents the outstanding loan balance, inclusive of amounts due to the Company for interest of $92 as of June 30, 2017.
(d) 
As of June 30, 2017, the Company was entitled to receive back its capital, which was 74% of BBLV’s total capital, plus a preferred return, after which the Company would own a 20% interest in BBLV. As of December 31, 2017, the Company now owns a 35% interest in BBLV with no preferred return, as a result of an amendment to the BBLV’s operating agreement.
(e) 
Represents the outstanding loan balance, inclusive of amounts due to the Company for interest of $62 as of June 30, 2017. In December 2017, in connection with the amendment of the BBLV’s operating agreement, the Company received a payment of $2,662, which represented the outstanding loan principal and accrued interest balance. In addition, the Company recognized interest income of $938 for the three and six months ended December 31, 2017, which was received in connection with the repayment of the loan receivable since the loan balance was on a nonaccrual status.
See Note 9 for more information regarding a legal matter associated with AMSGE.
 
 
 
 
 
 
 
 
 
Note 7. Property and Equipment
As of December 31, 2017 and June 30, 2017, property and equipment consisted of the following assets: 
 
 
December 31,
2017
 
June 30,
2017
Land
 
$
177,855

 
$
91,678

Buildings
 
1,112,527

 
1,110,366

Leasehold improvements
 
177,679

 
176,786

Equipment
 
315,903

 
292,935

Aircraft
 
38,090

 
38,090

Furniture and fixtures
 
50,045

 
49,622

Construction in progress
 
37,848

 
22,880

 
 
1,909,947

 
1,782,357

Less accumulated depreciation and amortization
 
(674,814
)
 
(623,086
)
 
 
$
1,235,133

 
$
1,159,271

The increase in gross property and equipment during the six months ended December 31, 2017 was primarily due to the purchase of land in London. The purchase price of the land was $79,518 (£60,000), excluding transactional taxes of $20,661 (£15,590). The transactional taxes include a value-added tax of $15,904 (£12,000), which the Company expects to recover and is included in other current assets in the accompanying consolidated balance sheet as of December 31, 2017.
Depreciation and amortization expense on property and equipment was $25,532 and $24,350 for the three months ended December 31, 2017 and 2016, respectively, and $51,544 and $48,844 for the six months ended December 31, 2017 and 2016, respectively.

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Note 8. Goodwill and Intangible Assets
The carrying amounts of goodwill, by reportable segment, as of December 31, 2017 and June 30, 2017 are as follows: 
 
 
December 31,
2017
 
June 30,
2017
MSG Entertainment
 
$
165,666

 
$
161,900

MSG Sports
 
226,955

 
218,187

 
 
$
392,621

 
$
380,087

The net increase in the carrying amounts of goodwill, as compared to June 30, 2017, primarily reflects: (i) purchase price allocations for the CLG and Obscura acquisitions in the MSG Sports segment and MSG Entertainment segment, respectively, and (ii) measurement period adjustments for certain assets and liabilities for the TAO Group acquisition in the MSG Entertainment segment.
During the first quarter of fiscal year 2018, the Company performed its annual impairment test of goodwill and determined that there were no impairments of goodwill identified for any of its reporting units.
The Company’s indefinite-lived intangible assets as of December 31, 2017 and June 30, 2017 are as follows:
 
 
December 31,
2017
 
June 30,
2017
Sports franchises (MSG Sports segment)
 
$
109,429

 
$
101,429

Trademarks (MSG Entertainment segment)
 
62,421

 
62,421

Photographic related rights (MSG Sports segment)
 
3,000

 
3,000

 
 
$
174,850

 
$
166,850

The increase in the carrying amount of indefinite-lived intangible assets in MSG Sports segment reflects a franchise fee associated with CLG’s membership in the “League of Legends” North American League Championship Series.
During the first quarter of fiscal year 2018, the Company performed its annual impairment test of identifiable indefinite-lived intangible assets and determined that there were no impairments identified.
The Company’s intangible assets subject to amortization are as follows: 
December 31, 2017
 
Gross
 
Accumulated
Amortization
 
Net
Trade names
 
$
101,830

 
$
(3,792
)
 
$
98,038

Venue management contracts
 
79,000

 
(3,042
)
 
75,958

Favorable lease assets
 
54,253

 
(3,249
)
 
51,004

Season ticket holder relationships
 
50,032

 
(42,539
)
 
7,493

Non-compete agreements
 
11,400

 
(1,243
)
 
10,157

Festival rights
 
9,080

 
(1,108
)
 
7,972

Other intangibles
 
10,417

 
(4,147
)
 
6,270

 
 
$
316,012

 
$
(59,120
)
 
$
256,892


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June 30, 2017
 
Gross
 
Accumulated
Amortization
 
Net
Trade names
 
$
98,530

 
$
(1,003
)
 
$
97,527

Venue management contracts
 
79,000

 
(761
)
 
78,239

Favorable lease assets
 
54,253

 
(812
)
 
53,441

Season ticket holder relationships
 
50,032

 
(40,871
)
 
9,161

Non-compete agreements
 
9,000

 
(261
)
 
8,739

Festival rights
 
9,080

 
(739
)
 
8,341

Other intangibles
 
4,217

 
(2,690
)
 
1,527

 
 
$
304,112

 
$
(47,137
)
 
$
256,975

Amortization expense for intangible assets, excluding the amortization of favorable lease assets of $1,218 for the three months ended December 31, 2017, which is reported in rent expense, was $5,012 and $1,616 for the three months ended December 31, 2017 and 2016, respectively. For the six months ended December 31, 2017 and 2016, amortization expense for intangible assets, excluding the amortization of favorable lease assets of $2,437 for the six months ended December 31, 2017, which is reported in rent expense, was $9,546 and $3,232, respectively. The increases in amortization expense reflects the purchase accounting adjustments for the TAO Group, CLG and Obscura acquisitions.
Note 9. Commitments and Contingencies
Commitments
As more fully described in Note 8 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017, the Company’s commitments consist primarily of (i) the MSG Sports segment’s obligations under employment agreements that the Company has with its professional sports teams’ personnel that are generally guaranteed regardless of employee injury or termination, (ii) long-term noncancelable operating lease agreements primarily for entertainment venues, and corporate offices, and (iii) revolving credit facilities provided by the Company to AMSGE and Tribeca Enterprises (see Note 6). The Company did not have any material changes in its contractual obligations since the end of fiscal year 2017 other than activities in the ordinary course of business.
In connection with the TAO Group and CLG acquisitions, the Company has accrued contingent consideration as part of the purchase price allocation. See Note 10 for further details of the amount recorded in the accompanying consolidated balance sheet as of December 31, 2017. In addition, see Note 10 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 regarding the principal repayments required under the TAO Group’s senior secured term loan facility.
Legal Matters
The Company owns 50% of AMSGE, which in turn owns a majority interest in Global Music Rights, LLC (“GMR”). GMR is primarily a performance rights organization, whose business includes obtaining the right to license the public performance rights of songs composed by leading songwriters. GMR engaged in negotiations with the Radio Music Licensing Committee (“RMLC”), which represents over ten thousand commercial radio stations. On November 18, 2016, RMLC filed a complaint against GMR in the United States District Court for the Eastern District of Pennsylvania alleging that GMR is violating Section 2 of the Sherman Antitrust Act and seeking an injunction, requiring, among other things, that GMR issue radio stations licenses for GMR’s repertory, upon request, at a rate set through a judicial rate-making procedure, that GMR offer “economically viable alternatives to blanket licenses,” and that GMR offer only licenses for songs which are fully controlled by GMR. GMR and RLMC agreed to an interim license arrangement through September 30, 2017, which has been extended through March 31, 2018. GMR has advised the Company that it believes that the RMLC Complaint is without merit and is vigorously defending itself. On January 20, 2017, GMR filed a motion to dismiss or to transfer venue, asserting that the Eastern District of Pennsylvania is not a proper venue for the matter, lacks personal jurisdiction of GMR and that in any event the complaint fails to state a claim. On December 6, 2016, GMR filed a complaint against RMLC in the United States District Court for the Central District of California, alleging that RMLC operates as an illegal cartel that unreasonably restrains trade in violation of Section 1 of the Sherman Antitrust Act and California state law, and seeking an injunction restraining RMLC and its co-conspirators from enforcing or establishing agreements that unreasonably restrict competition for public performance licenses. The judge in the

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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Central District of California denied RMLC’s motion to dismiss GMR’s claim for lack of ripeness and, on the basis that the two cases involve similar facts, stayed the California action in order to assess the status of the Pennsylvania case. On July 21, 2017, RMLC filed a preliminary injunction motion in the United States District Court for the Eastern District of Pennsylvania to extend the duration of the interim licenses which GMR had granted to certain radio stations. The district court determined that the jurisdictional matter should be decided prior to addressing the motion for preliminary injunction and referred the jurisdictional questions to the Magistrate Judge in the United States District Court Eastern District of Pennsylvania. On November 29, 2017, the Magistrate Judge issued a report and recommendation that personal jurisdiction was not appropriate over GMR in the Eastern District of Pennsylvania and recommending the dismissal of the RMLC’s action without prejudice. The RMLC has filed objections to the Magistrate Judge’s report and recommendation.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Note 10. Fair Value Measurements
The following table presents the Company’s assets that are measured at fair value on a recurring basis, which include cash equivalents and available-for-sale securities: 
 
 
Fair Value Hierarchy
 
December 31,
2017
 
June 30,
2017
Assets:
 
 
 
 
 
 
Commercial Paper
 
I
 
$
105,307

 
$
105,476

Money market accounts
 
I
 
174,774

 
102,884

Time deposits
 
I
 
811,450

 
1,007,302

Available-for-sale securities
 
I
 
24,638

 
32,851

Total assets measured at fair value
 
 
 
$
1,116,169

 
$
1,248,513

All assets listed above are classified within Level I of the fair value hierarchy as they are valued using observable inputs that reflect quoted prices for identical assets in active markets. The carrying amounts of the Company’s commercial paper, money market accounts and time deposits approximate fair value due to their short-term maturities.
The carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:
 
 
December 31, 2017
 
June 30, 2017
 
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
Assets
 
 
 
 
 
 
 
 
Notes receivable, including interest accruals
 
$
4,114

 
$
4,114

 
$
2,610

 
$
2,610

Available-for-sale securities (a)
 
24,638

 
24,638

 
32,851

 
32,851

Liabilities
 
 
 
 
 
 
 
 
Long-term debt, including current portion (b)
 
$
110,000

 
$
108,826

 
$
110,000

 
$
110,091

_________________
(a) 
Aggregate cost basis for available-for-sale securities, including transaction costs, was $23,222 as of December 31, 2017. The unrealized gain recorded in accumulated other comprehensive loss was $1,416 as of December 31, 2017. The fair value of the available-for-sale securities is determined based on quoted market prices in an active market at the New York Stock Exchange, which is classified within Level I of the fair value hierarchy.

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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


(b) 
On January 31, 2017, TAO Group Intermediate Holdings LLC (“TAOIH”), TAO Group Operating LLC (“TAOG”) and certain of its subsidiaries entered into a $110,000 senior secured five-year term loan facility. The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable.
Contingent Consideration Liabilities
In connection with the TAO Group acquisition (see Note 3 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 for further details), the Company recorded certain contingent consideration liabilities at fair value as part of the preliminary purchase price allocation. The fair value was estimated using a Monte-Carlo simulation model which included significant unobservable Level III inputs such as projected financial performance over the earn-out period (five years) along with estimates for market volatility and the discount rate applicable to potential cash payouts. As of December 31, 2017 and June 30, 2017, the fair value of contingent consideration liabilities in connection with the TAO Group acquisition was $7,900.
In connection with the CLG acquisition, the Company may be required to make future payments for deferred and contingent consideration up to a total of $9,150 based upon the achievement of certain specified objectives during the three years following the transaction as defined under the membership interest purchase agreement. The Company recorded $6,586 as the initial fair value of deferred and contingent consideration liabilities as part of the preliminary purchase price allocation. The fair values of these deferred and contingent consideration liabilities were estimated using weighted probabilities of achievement for the possible objective and earn-out events and adjusted for a discount rate applicable to the deferred and potential cash payouts. During the six months ended December 31, 2017, the Company made a payment of $4,000 as one of the objectives for contingent consideration was achieved. As of December 31, 2017, the fair value of deferred and contingent consideration liabilities was $2,586.
Note 11. Credit Facilities

Knicks Revolving Credit Facility
On September 30, 2016, New York Knicks, LLC (“Knicks LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “Knicks Credit Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $200,000 with a term of five years (the “Knicks Revolving Credit Facility”) to fund working capital needs and for general corporate purposes.
The Knicks Revolving Credit Facility requires Knicks LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of December 31, 2017, Knicks LLC was in compliance with this financial covenant.
All borrowings under the Knicks Revolving Credit Facility are subject to the satisfaction of certain customary conditions. Borrowings bear interest at a floating rate, which at the option of Knicks LLC may be either (i) a base rate plus a margin ranging from 0.00% to 0.125% per annum or (ii) LIBOR plus a margin ranging from 1.00% to 1.125% per annum. Knicks LLC is required to pay a commitment fee ranging from 0.20% to 0.25% per annum in respect of the average daily unused commitments under the Knicks Revolving Credit Facility. The Knicks Revolving Credit Facility was undrawn as of December 31, 2017.
All obligations under the Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the Knicks LLC’s membership rights in the NBA and (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S. national broadcast agreements.
Subject to customary notice and minimum amount conditions, Knicks LLC may voluntarily prepay outstanding loans under the Knicks Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). Knicks LLC is required to make mandatory prepayments in certain circumstances, including without limitation if the maximum available amount under the Knicks Revolving Credit Facility is greater than 350% of qualified revenues.

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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


In addition to the financial covenant described above, the Knicks Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative covenants and events of default. The Knicks Credit Agreement contains certain restrictions on the ability of Knicks LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Knicks Credit Agreement, including the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the Knicks Credit Agreement; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any Knicks LLC’s collateral.
Knicks Unsecured Credit Facility
On September 30, 2016, Knicks LLC entered into an unsecured revolving credit facility with a lender for an initial maximum credit amount of $15,000 and a 364-day term (the “Knicks Unsecured Credit Facility”). Knicks LLC renewed this facility with the lender on the same terms effective as of September 29, 2017. This facility was undrawn as of December 31, 2017.
Rangers Revolving Credit Facility
On January 25, 2017, New York Rangers, LLC (“Rangers LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “Rangers Credit Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $150,000 with a term of five years (the “Rangers Revolving Credit Facility”) to fund working capital needs and for general corporate purposes.
The Rangers Revolving Credit Facility requires Rangers LLC to comply with a debt service ratio of 1.5:1.0 over a trailing four quarter period. As of December 31, 2017, Rangers LLC was in compliance with this financial covenant. All borrowings under the Rangers Revolving Credit Facility are subject to the satisfaction of certain customary conditions.
Borrowings bear interest at a floating rate, which at the option of Rangers LLC may be either (i) a base rate plus a margin ranging from 0.125% to 0.50% per annum or (ii) LIBOR plus a margin ranging from 1.125% to 1.50% per annum. Rangers LLC is required to pay a commitment fee ranging from 0.375% to 0.625% per annum in respect of the average daily unused commitments under the Rangers Revolving Credit Facility. The Rangers Revolving Credit Facility was undrawn as of December 31, 2017.
All obligations under the Rangers Revolving Credit Facility are secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i) Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S. and Canadian national broadcast agreements, and (iii) revenues to be paid to Rangers LLC pursuant to local media contracts.
Subject to customary notice and minimum amount conditions, Rangers LLC may voluntarily prepay outstanding loans under the Rangers Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Eurocurrency loans). Rangers LLC is required to make mandatory prepayments in certain circumstances, including without limitation if the maximum available amount under the Rangers Revolving Credit Facility is less than 17% of qualified revenues.
In addition to the financial covenant described above, the Rangers Credit Agreement and the related security agreement contain certain customary representations and warranties, affirmative covenants and events of default. The Rangers Credit Agreement contains certain restrictions on the ability of Rangers LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the Rangers Credit Agreement, including the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the Rangers Credit Agreement; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any of Rangers LLC’s assets securing the obligations under the Rangers Revolving Credit Facility.

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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


TAO Credit Facilities
On January 31, 2017, TAOIH, TAOG, and certain of its subsidiaries entered into a credit and guaranty agreement with a syndicate of lenders providing for a senior secured term loan facility of $110,000 with a term of five years (the “TAO Term Loan Facility”) to fund, in part, the acquisition of TAO Group and a senior secured revolving credit facility of up to $12,000 with a term of five years (the “TAO Revolving Credit Facility,” and together with the TAO Term Loan Facility, the “TAO Credit Facilities”) for working capital and general corporate purposes of TAOG. The TAO Credit Facilities were obtained without recourse to MSG or any of its affiliates (other than TAOIH and its subsidiaries).
The TAO Credit Facilities require TAOIH (i) to maintain, for the relevant TAO entities, a minimum consolidated liquidity of $5,000 at all times, (ii) to comply with a maximum total net leverage ratio of 4.00:1.00 initially and stepping down over time to 2.50:1.00 by the first quarter of calendar year 2021 and through the remainder of the term of the TAO Credit Facilities, and (iii) to comply with a minimum fixed charge coverage ratio of 1.50:1.00 initially and stepping down over time to 1.15:1.00 by the second quarter of calendar year 2021 and through the remainder of the term of the TAO Credit Facilities. TAOIH was in compliance with the financial covenants of the TAO Credit Facilities as of September 24, 2017 (the most recent date at which compliance was assessed under the TAO Credit Facilities). The TAO Revolving Credit Facility was undrawn as of December 31, 2017.
The TAO entities under the TAO Credit Facilities are also subject to certain limitations with respect to making capital expenditures based upon the total net leverage ratio and other factors. The restrictions on capital expenditures are subject to certain “carry-forward” provisions and other customary carve-outs.
All borrowings under the TAO Credit Facilities are subject to the satisfaction of certain customary conditions, including compliance with a maximum leverage multiple, accuracy of representations and warranties and absence of a default or event of default. Borrowings bear interest at a floating rate, which at the option of TAOG may be either (i) a base rate plus a margin ranging from 6.50% to 7.00% per annum or (ii) LIBOR plus a margin ranging from 7.50% to 8.00% per annum. TAOG is required to pay a commitment fee of 0.50% per annum in respect of the average daily unused commitments under the TAO Revolving Credit Facility. The interest rate on the TAO Credit Facilities as of September 24, 2017 was 9.25%. TAO Group made interest payments under the TAO Term Loan Facility of $2,580 and $5,098 for the three and six months ended September 24, 2017 (the period for which TAO Group’s operating results are recorded in the Company’s consolidated statements of operations for the three and six months ended December 31, 2017).
All obligations under the TAO Credit Facilities are secured by a first lien security interest in substantially all of the applicable TAO entities’ assets, including, but not limited to, a pledge of all of the capital stock of substantially all of TAOIH’s wholly-owned domestic subsidiaries and 65% of the voting capital stock, and 100% of the non-voting capital stock, of each of its first-tier foreign subsidiaries.
Subject to customary notice and minimum amount conditions, TAOG may voluntarily prepay outstanding loans under the TAO Credit Facilities at any time, in whole or in part (subject to customary breakage costs with respect to LIBOR loans) with premiums due in respect of prepayments of the TAO Term Loan Facility or permanent reduction under the TAO Revolving Credit Facility, in each case, starting at 5.0% initially and stepping down to 0% after three years. Beginning March 31, 2018, TAOG is required to make scheduled amortization payments under the TAO Term Loan Facility in consecutive quarterly installments equal to $688 per quarter initially, stepping up over time to $4,125 per quarter by March 31, 2021 and through the final maturity date of the TAO Term Loan Facility with the final balance payable on such maturity date. TAOG is also required to make mandatory prepayments under the TAO Credit Facilities in certain circumstances, including, without limitation, 75% of excess cash flow, with a step-down to 50% when the total net leverage ratio is less than 2.00:1.00.
The TAO Credit Facilities contain certain restrictions on the ability of TAOG to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the TAO Credit Facilities, including, without limitation, the following: (i) incurring additional indebtedness; (ii) creating liens on assets; (iii) making distributions, dividends and other restricted payments; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; (vi) making investments; and (vii) prepaying certain indebtedness.
See Note 10 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 for more information regarding the Company’s debt maturities for the TAO Term Loan Facility.

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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Deferred Financing Costs
The following table summarizes the presentation of the TAO Term Loan Facility, and the related deferred financing costs in the accompanying consolidated balance sheets as of December 31, 2017 and June 30, 2017.
 
 
December 31, 2017
 
 
TAO Term Loan Facility
 
Deferred Financing Costs
 
Total
Current portion of long-term debt, net of deferred financing costs
 
$
1,375

 
$
(939
)
 
$
436

Long-term debt, net of deferred financing costs
 
108,625

 
(3,161
)
 
105,464

Total
 
$
110,000

 
$
(4,100
)
 
$
105,900

 
 
 
 
 
 
 
 
 
June 30, 2017
 
 
TAO Term Loan Facility
 
Deferred Financing Costs
 
Total
Current portion of long-term debt, net of deferred financing costs
 
$

 
$

 
$

Long-term debt, net of deferred financing costs
 
110,000

 
(4,567
)
 
105,433

Total
 
$
110,000

 
$
(4,567
)
 
$
105,433


The following table summarizes deferred financing costs, net of amortization, related to the Knicks Revolving Credit Facility, Knicks Unsecured Credit Facility, Rangers Revolving Credit Facility, and TAO Revolving Credit Facility as reported on the accompanying consolidated balance sheets as of December 31, 2017 and June 30, 2017.
 
 
December 31,
2017
 
June 30,
2017
Other current assets
 
$
778

 
$
806

Other assets
 
2,296

 
2,784

Note 12. Pension Plans and Other Postretirement Benefit Plan
See Note 11 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 for more information regarding the Company’s defined benefit pension plans (“Pension Plans”), postretirement benefit plan (“Postretirement Plan”), Madison Square Garden 401(k) Savings Plan and the MSG Sports & Entertainment, LLC Excess Savings Plan (collectively, the “Savings Plans”), and Madison Square Garden 401(k) Union Plan (the “Union Savings Plan”).

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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Defined Benefit Pension Plans and Postretirement Benefit Plan
Components of net periodic benefit cost for the Pension Plans and Postretirement Plan recognized in direct operating expenses and selling, general and administrative expenses in the accompanying consolidated statements of operations for the three and six months ended December 31, 2017 and 2016 are as follows: 

 
 
Pension Plans
 
Postretirement Plan
 
 
Three Months Ended
 
Three Months Ended
 
 
December 31,
 
December 31,
 
 
2017
 
2016
 
2017
 
2016
Service cost
 
$
21

 
$
23

 
$
32

 
$
34

Interest cost
 
1,374

 
1,240

 
51

 
40

Expected return on plan assets
 
(721
)
 
(596
)
 

 

Recognized actuarial loss
 
280

 
344

 

 

Amortization of unrecognized prior service credit
 

 

 
(6
)
 
(13
)
Net periodic benefit cost
 
$
954

 
$
1,011

 
$
77

 
$
61

 
 
Pension Plans
 
Postretirement Plan
 
 
Six Months Ended
 
Six Months Ended
 
 
December 31,
 
December 31,
 
 
2017
 
2016
 
2017
 
2016
Service cost
 
$
42

 
$
46

 
$
63

 
$
68

Interest cost
 
2,613

 
2,480

 
90

 
81

Expected return on plan assets
 
(1,317
)
 
(1,192
)
 

 

Recognized actuarial loss
 
620

 
688

 

 

Amortization of unrecognized prior service credit
 

 

 
(18
)
 
(25
)
Net periodic benefit cost
 
$
1,958

 
$
2,022

 
$
135

 
$
124


Defined Contribution Pension Plans
For the three and six months ended December 31, 2017 and 2016, expenses related to the Savings Plans and Union Savings Plan included in the accompanying consolidated statements of operations are as follow:
Savings Plans
 
Union Savings Plan
Three Months Ended
 
Six Months Ended
 
Three Months Ended
 
Six Months Ended
December 31,
 
December 31,
 
December 31,
 
December 31,
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
$
1,919

 
$
1,984

 
$
4,142

 
$
3,946

 
$
55

 
$
28

 
$
80

 
$
50

Note 13. Share-based Compensation
See Note 12 to the consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 for more information regarding the Company’s 2015 Employee Stock Plan (the “Employee Stock Plan”) and its 2015 Stock Plan for Non-Employee Directors.

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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


For the three months ended December 31, 2017 and 2016, share-based compensation expense was recognized in the consolidated statements of operations as a component of direct operating expenses or selling, general and administrative expenses and was $13,912 and $11,743, respectively. For the six months ended December 31, 2017 and 2016, share-based compensation expense was $26,816 and $20,098, respectively.
Upon the adoption of ASU No. 2016-09, the Company elected to account for forfeitures as they occur on a prospective basis effective July 1, 2017, rather than estimating expected forfeitures as was required under the prior guidance. See “Note 2. Accounting PoliciesRecently Issued Accounting Pronouncements” for further discussion on the impact from the adoption of ASU 2016-09.
In addition, for the Company’s stock option awards, the Company applies the fair value recognition provisions of ASC Topic 718 “Compensation — Stock Compensation”. ASC Topic 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company determines the fair value as of the grant date. For awards with graded vesting conditions, the values of the awards are determined by valuing all vesting tranches in the aggregate as one award using an average expected term. For stock options, the Black-Scholes option pricing model considers, among other factors, the expected life of the award and the expected volatility of the Company’s stock price.
The Company determines its assumptions for the Black-Scholes option-pricing model in accordance with ASC Topic 718 and SEC Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based Payment” based on the following:
The expected term of stock options is estimated using the simplified method.
The expected risk-free interest rate is based on the U.S. Treasury interest rate which term is consistent with the expected term of the stock options.
The expected volatility is based on the historical volatility of the Company’s stock price.
In December 2007, the SEC staff issued SAB No. 110, “Certain Assumptions Used In Valuation Methods — Expected Term”. SAB No. 110 allows companies to continue to use the simplified method, as defined in SAB No. 107, to estimate the expected term of stock options under certain circumstances. The simplified method for estimating expected term uses the mid-point between the vesting term and the contractual term of the stock option. The Company has analyzed the circumstances in which the use of the simplified method is allowed. The Company has opted to use the simplified method for stock options the Company granted in fiscal year 2018 because management believes that the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

Restricted Stock Units Award Activity
The following table summarizes activity related to holders (including the Company’s and MSG Networks’ employees) of the Company’s restricted stock units and performance restricted stock units, collectively referred to as “RSUs,” for the six months ended December 31, 2017:
 
Number of
 
Weighted-Average
Fair Value 
Per Share At
Date of Grant
 
Nonperformance
Based
Vesting
RSUs
 
Performance
Based
Vesting
RSUs
 
Unvested award balance, June 30, 2017
208

 
464

 
$
172.78

  Granted
103

 
180

 
$
211.15

Vested
(88
)
 
(249
)
 
$
176.90

Forfeited
(8
)
 
(127
)
 
$
183.20

Unvested award balance, December 31, 2017
215

 
268

 
$
189.51


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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


The fair value of RSUs that vested during the six months ended December 31, 2017 was $74,582. RSUs granted under the Employee Stock Plan were net share-settled to cover the required statutory tax withholding obligations. To fulfill the employees’ statutory minimum tax withholding obligations for the applicable income and other employment taxes, 57 of these RSUs, with an aggregate value of $12,232 were retained by the Company and reflected as financing activity in the accompanying consolidated statement of cash flows for the six months ended December 31, 2017.
The fair value of RSUs that vested during the six months ended December 31, 2016 was $15,209. The weighted-average fair value per share at grant date of RSUs granted during the six months ended December 31, 2016 was $170.98.
Stock Options Award Activity
The following table summarizes activity related to a holder of the Company’s stock options for the six months ended December 31, 2017:
 
Number of
 
Weighted-Average Exercise Price Per Share
 
Weighted-Average Remaining Contractual Term (In Years)
 
Aggregate Intrinsic Value
 
Nonperformance Based Vesting Options
 
Performance Based Vesting Options
 
 
 
Balance as of June 30, 2017

 

 
$

 
 
 
$

Granted
94

 

 
$
210.13

 
 
 
 
Balance as of December 31, 2017
94

 

 
$
210.13

 
9.96

 
$
68

Exercisable as of December 31, 2017

 

 
$

 

 
$

During the six months ended December 31, 2017, the Company granted 94 stock options that vest ratably over three years and are being expensed on a straight-line basis over the vesting period of the stock options. The maximum contractual term is 10 years. The Company calculated the fair value of these options on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted-average grant-date fair value of $53.29.
The following are key assumptions used to calculate the weighted-average grant-date fair value of stock options:
Expected term
6 years

Expected volatility
20.38
%
Risk-free interest rate
2.22
%
Note 14. Stock Repurchase Program
On September 11, 2015, the Company’s board of directors authorized the repurchase of up to $525,000 of the Company’s Class A Common Stock once the shares of the Company’s Class A Common Stock began “regular way” trading on October 1, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors.
During the six months ended December 31, 2017, the Company repurchased 56 shares of Class A Common Stock for a total cost of $11,685, including commissions and fees. These acquired shares have been classified as treasury stock in the accompanying consolidated balance sheet as of December 31, 2017. As of December 31, 2017, the Company had $259,639 of availability remaining under its stock repurchase authorization.

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THE MADISON SQUARE GARDEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)


Note 15. Accumulated Other Comprehensive Loss
The following table details the components of accumulated other comprehensive loss:
 
Pension Plans and
Postretirement
Plan (a)
 
Cumulative Translation Adjustments
 
Unrealized Gain on Available-for-sale
Securities
 
Accumulated
Other
Comprehensive
Loss
Balance as of June 30, 2017
$
(39,408
)
 
$

 
$
5,293

 
$
(34,115
)
Other comprehensive income (loss) before reclassifications, before income taxes

 
2,277

 
(8,213
)
 
(5,936
)
Amounts reclassified from accumulated other comprehensive loss, before income taxes
602

 

 

 
602

Other comprehensive income (loss)
602

 
2,277

 
(8,213
)
 
(5,334
)
Balance as of December 31, 2017
$
(38,806
)
 
$
2,277

 
$
(2,920
)
 
$
(39,449
)
 
 
 
 
 
 
 
 
Balance as of June 30, 2016
$
(42,611
)