FROM ONE TO MANY
2010 A N N U A L R E PO R T
LETTER
TO OUR
SHAREHOLDERS
What a difference a year makes. When I wrote to you a
year ago, our nation was struggling to overcome one of the
worst recessions since the Great Depression. A year later,
the economy is in recovery, advertising spending is on the
upswing, and our Company enjoyed over an 18% net
broadcast revenue growth rate in 2010; growth which
came from multiple fronts. While this is all good news, we
are still not back to our pre-recession advertising revenue
levels, leading us to believe that our core business can
grow even in the upcoming 2011 non-election year. True,
the strength in our key advertising categories and the
improving economy are reasons we are optimistic about
our long term prospects, but we are equally enthusiastic
about potential benefits to be realized by pairing our "one-
to-many" consumer reach with new technological
opportunities and alternate uses of our broadcast
spectrum.
But first, let me review our 2010 financial performance
and the positive improvements we are experiencing. I am
pleased to report that in 2010, our net broadcast revenues
grew 18.2%, for an increase of $100.8 million as compared
to 2009. Included in that performance was $42.0 million
of political campaign and issue advertising; a record-
setting year for us, representing a 2% increase over the
2008 presidential election year and a 34.9% increase over
2006. We believe the Congressional change of control, the
emergence of the Tea Party and increasing citizen activism
will result in political advertising being a growth category
for us for years to come. Current third party estimates call
for 2012 political ad spending to increase 8% over 2010's
levels. Growth in advertising by the auto sector was
another category where we enjoyed meaningful returns,
up 36.9% in 2010. While auto as a percent of our total
times sales increased from 15.2% in 2009 to 17.9% in
2010, it is still well below the 21% pre-recession
contribution levels. Current forecasts are for U.S. new
vehicle sales to
in 2011 to
approximately 12.9 million units sold, which we expect to
result in increased advertising by the auto manufacturers
and local dealer groups.
increase nearly 12%
On the expense side, we continue to manage our costs
using the same discipline that you have come to expect
from us over the years. The revenue growth coupled with
moderate expense growth helped drive our EBITDA1 in
2010 to the highest level it has been in the past 10 years,
based on our current portfolio of stations. In other words,
you would need to look back to the year 2000 to find
EBITDA higher than the $276.1 million we reported in
2010. As compared to 2009, this was a 45.1% increase,
representing a margin of 36.0%, as compared to 29.0% in
2009.
Looking ahead to 2011, there are two significant cash flow
changes we expect. First, we are estimating a decline in
our programming cash payments by approximately $21
million due to a shift to more first-run and barter
syndicated shows. Adding to expenses, however, will be
higher network programming licensing fees. While some
may view these license fees as a negative to the business,
we believe they may actually benefit broadcasters in
multiple ways. First, it is our expectation that the money
paid by the affiliates to the networks will be invested in
higher quality programming that will further drive ratings
and ultimately grow revenues. More importantly, the
sharing of the retransmission revenue stream between the
networks and its affiliates underscores the value of the
programming that each brings to the multi-video program
distributors ("MVPDs") such as cable, satellite and
telephone video providers. It is estimated that the
MVPDs spend approximately $30 billion a year to acquire
programming. Broadcast programming, which consists of
highly popular network prime-time and sports
programming, affiliate local news and syndicated product,
receives
these programming
expenditures even though broadcast television represents
approximately 40% to 50% of the viewing audience. We
believe that having the networks' and the affiliates'
interests aligned in terms of retransmission consent
compensation will help the industry to move to our goal of
achieving equilibrium with regard to the programming
payments made by the MVPDs.
than 10% of
less
The network/affiliate relationship is one based in mutual
benefit. The network brings premier programming to the
local affiliate and the affiliate uses its local presence to
help promote and clear the network's shows, in turn
making the product more valuable to both parties. This
model has a long tradition of success, which is why we
believe the networks are recommitting to their affiliates.
In the past year, we have extended our affiliation
agreements with the FOX Network (20 stations) and the
ABC Network (9 stations), and are in discussions for an
extension with the CW Network (10 stations). We have
also extended our programming service arrangement with
MyNetworkTV (16 stations).
The increases in retransmission revenues, political
advertising, and the core business contributed not only to
our top-line performance, but to our free cash flow
generation2. In 2010, we generated $160.4 million of free
cash, of which $34.6 million was returned to our
shareholders in the form of a $0.43 per share special
dividend, representing an approximate 5.3% dividend
yield when declared. As you may recall, Sinclair had been
a regularly paying dividend company prior to the
recession. Given the confidence in our future cash flow
and growth prospects, our Board of Directors reinstated
our dividend policy in 2011 and declared a $0.12 quarterly
dividend per share, representing annualized shareholder
distributions of almost $40 million.
The strength of our performance was evident not only in
our peak EBITDA and free cash flow, but in our balance
sheet as well. Last year, we continued our focus of
refinancing our near term debt maturities and reducing
our leverage. We successfully issued $250 million in
8.375% 8-year notes which were used to redeem our 8.0%
senior subordinated notes due 2012. We also applied $58
million of our free cash to tender for a portion of our 6.0%
convertible bonds and prepaid $60 million of our bank
debt. As a result, our next meaningful debt maturity does
not occur until 2016. In total, we reduced debt, net of
cash on hand, by $93 million during 2010 and reported
our lowest total net leverage in the past 15 years. We are
pleased to report that our equity performance was just as
notable. In 2010, investors once again took note of our
Company's improving financial performance and lower
risk profile. In response, our stock increased 103% for the
year. Coupled with the 5.3% dividend yield, we generated
a 108.3% total return for shareholders, as compared to the
various program formats on our secondary digital tier
including TheCoolTV and The Country Network, both
music television networks; Estrella TV, a Spanish language
network; ThisTV, featuring movies; and MyNetworkTV's
syndicated program offering.
There is no question that the consumer media landscape is
evolving. But with it comes opportunities for us to grow
and offer a broader array of solutions for our customers
and increased levels of engagement with our viewers. This
past year we launched our digital interactive new media
strategy, whose goal it is to provide local businesses
another means of engaging consumers using non-
traditional media outlets including mobile devices and
social media through the Internet. Among our product
offerings are Mobi Deals, Hey It's Half Off, loyalty
programs and mobile website and design development.
As we look to 2011 and beyond, we are very encouraged by
the improving economy and increased advertising demand
by the auto and political categories, areas which we expect
will drive our revenue growth, free cash flow and,
therefore, potential dividend returns. We feel confident in
the strength of the network/affiliate model, and are
especially excited about the long term prospects of a
mobile digital television service, a product that we
anticipate will change the industry and the way consumers
watch television. So despite the economic downturn and
the yet-to-come killer Internet app, we had our best
EBITDA performance and credit profile in a decade. We
believe that broadcast television with its "one-to-many"
mass audience reach, quality programming, and strong
branding capabilities will remain now and for years to
come as the dominant and most powerful advertising and
entertainment medium. We are confident in our future,
our adaptability, and our relevance to meet consumer and
business needs in this ever-changing digital world.
We thank you, our shareholders, for your continued
support and look forward to our future successes.
Sincerely,
David D. Smith
Chairman, President and CEO
1 A reconciliation of EBITDA to net
income can be found on our website:
www.sbgi.net.
2 A reconciliation of free cash flow to
net income can be found on our
website: www.sbgi.net.
S&P 500 which yielded 12.8%. Despite these returns, we
are still trading at a discount to our pre-recession
enterprise multiple and stock price.
The challenge for us going-forward is how best to put our
significant free cash flow to use in order to generate
meaningful returns for our shareholders. As such, in
addition to the recently declared $0.12 quarterly dividend
per share, we have earmarked up to $36.5 million in 2011
to reinvest in our television operations in such projects as
equipment upgrades and high-definition newscasts which
will provide us either a market competitive edge or
operating efficiencies. We also recently negotiated with
our banks to reduce our borrowing costs and provide more
flexibility for us to use our cash flow, including the ability
to distribute up to $100 million per year to shareholders
and to pursue television acquisitions should the
opportunity arise. In 2011, we anticipate monetizing some
of our non-broadcast investments producing positive
returns which will create additional free cash for us.
On the technology front, the industry continues to work
towards a mobile television offering. This past year, the
Open Mobile Video Coalition ("OMVC") conducted field
trials and consumer feedback was extremely positive.
Results reflected that consumers watched broadcast
television on mobile devices in a variety of locations such
as in the workplace and while commuting and running
errands. Afternoon daytime (12pm to 5pm) was the most
watched daypart and local broadcast news the most
watched program on the mobile devices.
In 2010, we joined the Mobile500 Alliance, a voluntary
coalition of leading television broadcasters reaching 92%
of the U.S. television households. The Mobile500's goal is
to "create a vibrant new growth industry…that serves the
public
interest…and delivers a new generation of
affordable mobile television services to consumers." To
fully appreciate the potential of a mobile television service,
one should consider the evolution of the telephone, which
began as a land-based system and transformed into a
mobile cellular service. Today, over 85% of the U.S.
population has a mobile phone, many of these which are
capable of downloading video, games and music. We view
the future of broadcast television as heading down a
similar path whereby mobile television devices, such as
smart phones and video tablets, become as commonplace
as the in-home fixed television set. We believe the
broadcast industry's offering of video and entertainment
products is unquestionably superior to any other service
available to the market. Not only do we offer real-time,
wide screen, high quality video, but we have the most
highly-rated and popular shows to offer such as local news,
sports, and network programs. On the technology front,
we believe our broadcast infrastructure provides the most
efficient and robust delivery system compared to the
wireless phone companies, which rely on a system of small
cellular towers that deliver video on a one-to-one basis.
Their delivery system often results in a low-quality picture
and inefficiencies whereby the greater the traffic on the
network, the greater the picture degradation and buffering
issues. We believe there is no amount of additional
spectrum that can mitigate this problem. Broadcasters, on
the other hand, using our over-the-air spectrum, can
provide a signal that simultaneously covers the entire
market from one transmission location. This "one-to-
many" mass audience reach means that we are not subject
to the same network traffic concerns that plague the
telephone and Internet delivery platforms, resulting in a
high quality, low cost consumer experience.
While the industry initiates the mobile TV model, we
continue to find alternative ways to use our spectrum
while serving the public interest. Currently, we broadcast
TABLE OF CONTENTS
Television Broadcasting
Forward-Looking Statements
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Equity (Deficit)
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Reports of Independent Registered Public Accounting Firms:
Consolidated Financial Statements
Group Managers / General Managers
2
5
6
7
23
23
25
26
27
30
31
32
70
72
74
TELEVISION BROADCASTING
Markets and Stations
We own and operate, provide programming services to, provide sales services to or have agreed to acquire the following
television stations:
Market
Tampa/St. Petersburg,
Florida
Minneapolis/St. Paul,
Minnesota
St. Louis, Missouri
Pittsburgh, Pennsylvania
Raleigh/Durham, North
Carolina
Baltimore, Maryland
Market
Rank (a)
14
15
21
24
25
26
Nashville, Tennessee
29
Cincinnati, Ohio
Columbus, Ohio
Milwaukee, Wisconsin
Asheville, North Carolina/
Greenville/Spartanburg/
Anderson, South
Carolina
San Antonio, Texas
Birmingham, Alabama
Las Vegas, Nevada
Norfolk, Virginia
33
34
35
36
37
40
42
43
2 Sinclair Broadcast Group
Stations
WTTA
WTTA
WUCW
WUCW
WUCW
KDNL
KDNL
KDNL
WPGH
WPMY
WPGH
WPMY
WLFL
WRDC
WLFL
WRDC
WBFF
WNUV
WBFF
WBFF
WNUV
WZTV
WUXP
WNAB
WUXP
WNAB
WSTR
WSTR
WSYX
WTTE
WSYX
WTTE
WCGV
WVTV
WCGV
WLOS
WMYA
WLOS
WMYA
WMYA
KABB
KMYS
KABB
KMYS
WTTO
WABM
WDBB
WTTO
WABM
WDBB
KVMY
KVCW
KVMY
KVCW
KVCW
WTVZ
WTVZ
WTVZ
Status (b)
LMA(e)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LMA(g)
O&O
O&O
OSA(h)
O&O
O&O
LMA(g)
O&O
O&O
O&O
LMA(g)
O&O
O&O
O&O
O&O
LMA
O&O
O&O
O&O
Channel
Primary
Second
Primary
Second
Third
Primary
Second
Third
Primary
Primary
Second
Second
Primary
Primary
Second
Second
Primary
Primary
Second
Third
Second
Primary
Primary
Primary
Second
Second
Primary
Second
Primary
Primary
Second
Second
Primary
Primary
Second
Primary
Primary
Second
Second
Third
Primary
Primary
Second
Second
Primary
Primary
Primary
Second
Second
Second
Primary
Primary
Second
Second
Third
Primary
Second
Third
Network/
Program Service
Arrangement (c)
MNT
TheCoolTV
CW
TheCoolTV
The Country Network
ABC
TheCoolTV
The Country Network
FOX
MNT
The Country Network
TheCoolTV
CW
MNT
The Country Network
TheCoolTV
FOX
CW
This TV
The Country Network
TheCoolTV
FOX
MNT
CW
TheCoolTV
The Country Network
MNT
TheCoolTV
ABC
FOX
This TV and MNT
TheCoolTV
MNT
CW
The Country Network
ABC
MNT
MNT
TheCoolTV
The Country Network
FOX
CW
The Country Network
TheCoolTV
CW
MNT
CW
The Country Network
TheCoolTV
The Country Network
MNT
CW
Estella TV
This TV
The Country Network
MNT
TheCoolTV
The Country Network
Station
Rank in
Market (d)
7 of 9
Expiration
Date of FCC
License
2/01/13
6 of 7
4/01/14
4 of 7
2/01/14
4 of 7
6 of 7
8/01/15
8/01/15
5 of 8
6 of 8
12/01/04 (f)(m)
12/01/04 (f)(m)
4 of 6
5 of 6
10/01/04 (f)(m)
10/01/12
4 of 9
5 of 9
6 of 9
5 of 6
2 of 7
4 of 7
5 of 9
6 of 9
3 of 8
6 of 8
3 of 7
5 of 7
8/01/13
8/01/13
8/01/13
10/01/13
10/01/13
10/01/05 (f)(m)
12/01/05 (f)(m)
12/01/13
12/01/04 (f)(m)
12/01/04 (f)(m)
8/01/14
8/01/14
5 of 8
6 of 8
5 of 8 (i)
4/01/05 (f)(m)
4/01/13
4/01/13
6 of 7
5 of 7
10/01/14
10/01/14
6 of 7
10/01/12
Market
Oklahoma City, Oklahoma
Market
Rank (a)
45
Greensboro/Winston-
Salem/Highpoint, North
Carolina
Buffalo, New York
Richmond, Virginia
Mobile, Alabama/
Pensacola, Florida
Dayton, Ohio
Lexington, Kentucky
Charleston/Huntington,
West Virginia
Flint/Saginaw/Bay City,
Michigan
Des Moines, Iowa
Portland, Maine
Cape Girardeau, Missouri/
Paducah, Kentucky
Rochester, New York
Syracuse, New York
47
51
57
60
62
63
64
69
73
77
80
81
82
Springfield/Champaign,
84
Illinois
Madison, Wisconsin
Cedar Rapids, Iowa
85
88
Charleston, South Carolina
98
Stations
KOKH
KOCB
KOKH
KOCB
WXLV
WMYV
WXLV
WMYV
WUTV
WNYO
WUTV
WNYO
WRLH
WRLH
WRLH
WEAR
WFGX
WFGX
WFGX
WKEF
WRGT
WKEF
WRGT
WDKY
WDKY
WCHS
WVAH
WCHS
WVAH
WSMH
WSMH
WSMH
KDSM
KDSM
KDSM
WGME
WGME
KBSI
WDKA
KBSI
WDKA
WDKA
WUHF
WUHF
WSYT
WNYS
WSYT
WNYS
WICS
WICD
WICS
WICD
WMSN
WMSN
WMSN
KGAN
KFXA
KGAN
KFXA
WTAT
WMMP
WMMP
WMMP
Status (b)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LMA(g)
O&O
O&O
LMA(g)
O&O
O&O
O&O
O&O
LMA
O&O(j)
O&O
LMA
O&O
O&O
O&O
O&O
OSA(l)
LMA(g)
O&O
Channel
Primary
Primary
Second
Second
Primary
Primary
Second
Second
Primary
Primary
Second
Second
Primary
Second
Third
Primary
Primary
Second
Third
Primary
Primary
Second
Second
Primary
Second
Primary
Primary
Second
Second
Primary
Second
Third
Primary
Second
Third
Primary
Second
Primary
Primary
Second
Second
Third
Primary
Second
Primary
Primary
Second
Second
Primary
Primary
Second
Second
Primary
Second
Third
Primary
Primary
Second
Second
Primary
Primary
Second
Third
Network/
Program Service
Arrangement (c)
FOX
CW
The Country Network
TheCoolTV
ABC
MNT
The Country Network
TheCoolTV
FOX
MNT
The Country Network
TheCoolTV
FOX
This TV and MNT
TheCoolTV
ABC
This TV and MNT
TheCoolTV
The Country Network
ABC
FOX
TheCoolTV
This TV and MNT
FOX
TheCoolTV
ABC
FOX
TheCoolTV
The Country Network
FOX
TheCoolTV
The Country Network
FOX
TheCoolTV
The Country Network
CBS
TheCoolTV
FOX
MNT
MNT
TheCoolTV
The Country Network
FOX
TheCoolTV
FOX
MNT
The Country Network
TheCoolTV
ABC
ABC
The Country Network
TheCoolTV
FOX
TheCoolTV
The Country Network
CBS
FOX
TheCoolTV
The Country Network
FOX
MNT
TheCoolTV
The Country Network
Station
Rank in
Market (d)
4 of 8
5 of 8
Expiration
Date of FCC
License
6/01/14
6/01/14
4 of 7
5 of 7
12/01/04 (f)(m)
12/01/04 (f)(m)
4 of 7
6 of 7
6/01/15
6/01/15
4 of 6
10/01/12
2 of 8
6 of 8
2/01/13
2/01/13
2 of 5
4 of 5
10/01/13
10/01/05 (f)(m)
3 of 8
2 of 6
4 of 6
8/01/13
10/01/12
10/01/04 (f)(m)
4 of 6
10/01/13
4 of 6
2/01/14
2 of 6
4 of 6
5 of 6
4/01/15
2/01/14
8/01/13
not available
6/01/15
4 of 6
5 of 6
6/01/15
6/01/15
2 of 6
2 of 6 (k)
12/01/05 (f)(m)
12/01/13
4 of 6
12/01/13
3 of 5
4 of 5
2/01/06 (f)(m)
2/01/14
4 of 6
5 of 6
12/01/04 (f)(m)
12/01/04 (f)
2010 Annual Report 3
Market
Tallahassee, Florida
Market
Rank (a)
105
Peoria/Bloomington,
116
Illinois
Stations
WTWC
WTWC
WTWC
WYZZ
WYZZ
WYZZ
Channel
Primary
Second
Third
Primary
Second
Third
Status (b)
O&O
O&O(j)
Network/
Program Service
Arrangement (c)
NBC
TheCoolTV
The Country Network
FOX
TheCoolTV
The Country Network
Station
Rank in
Market (d)
3 of 6
Expiration
Date of FCC
License
2/01/13
not available
12/01/13
a) Rankings are based on the relative size of a station’s designated market area (DMA) among the 210 generally recognized DMAs in the
United States as estimated by Nielsen as of November 2010.
b)
“O & O” refers to stations that we own and operate. “LMA” refers to stations to which we provide programming services pursuant to a
local marketing agreement. “OSA” refers to stations to which we provide or receive sales services pursuant to an outsourcing agreement.
c) When we negotiate the terms of our network affiliations or program service arrangements, we negotiate on behalf of all of our stations
affiliated with that entity simultaneously. This results in substantially similar terms for our stations, including the expiration date of the
network affiliations or program service arrangements. A summary of these expiration dates for our primary channels as of December 31,
2010 is as follows:
Network/
Program Service
Arrangement
FOX
MNT
ABC
CW
CBS
NBC
Expiration Date
All 20 agreements expire on December 31, 2012
All 16 agreements expire in the Fall of 2014
All 8 agreements expire on August 31, 2015
All 10 agreements expire on August 31, 2011
Both agreements expire on December 31, 2012
Agreement expires on December 31, 2016
d) The first number represents the rank of each station in its market and is based upon the November 2010 Nielsen estimates of the
percentage of persons tuned into each station in the market from 6:00 a.m. to 2:00 a.m., Monday through Sunday. The second number
represents the estimated number of television stations designated by Nielsen as “local” to the DMA, excluding public television stations
and stations that do not meet the minimum Nielsen reporting standards (weekly cumulative audience of at least 0.1%) for the Monday
through Sunday 6:00 a.m. to 2:00 a.m. time period as of November 2010. This information is provided to us in a summary report by
Franco Research Group.
e) The license assets for this station are currently owned by Bay Television, Inc., a related party. See Note 11. Related Person Transactions, in the
Notes to our Consolidated Financial Statements for more information.
f) We, or subsidiaries of Cunningham Broadcasting Company (Cunningham), timely filed applications for renewal of these licenses with the
FCC. Unrelated third parties have filed petitions to deny or informal objections against such applications. We opposed the petitions to
deny and the informal objections and those applications are pending. See Note 10. Commitments and Contingencies, in the Notes to our
Consolidated Financial Statements for more information.
g) The license assets for these stations are currently owned by a subsidiary of Cunningham.
h) We have entered into an outsourcing agreement with the unrelated third party owner of WNAB-TV to provide certain non-programming
related sales, operational and administrative services to WNAB-TV. On July 21, 2005, we filed with the FCC an application to acquire the
license television broadcast assets of WNAB-TV in Nashville, Tennessee. The Rainbow/PUSH Coalition (“Rainbow/PUSH”) filed a
petition to deny that application and also requested that the FCC initiate a hearing to investigate whether WNAB-TV was improperly
operated with WZTV-TV and WUXP-TV, two of our stations also located in Nashville. The FCC is in the process of considering the
transfer of the broadcast license and we believe the Rainbow/PUSH petition has no merit.
i) WDBB-TV simulcasts the programming broadcast on WTTO-TV pursuant to a programming services agreement. The station rank
applies to the combined viewership of these stations. In fourth quarter 2010, the FCC approved Cunningham’s acquisition of WDBB’s
license assets. In February 2011, Cunningham acquired the license assets and we will continue to operate WDBB pursuant to a LMA
agreement.
j) We have entered into outsourcing agreements with unrelated third parties, under which the unrelated third parties provide certain non-
programming related sales, operational and managerial services to these stations. We continue to own all of the assets of these stations and
to program and control each station’s operations.
k) WICD-TV, a satellite of WICS-TV under FCC rules, simulcasts all of the programming aired on WICS-TV except the news broadcasts.
WICD-TV airs its own news broadcasts. The station rank applies to the combined viewership of these stations.
4 Sinclair Broadcast Group
l) On February 1, 2008, we entered into an outsourcing agreement with the unrelated third party owner of KFXA-TV to provide certain non-
programming related sales, operational and administrative services to KFXA-TV. During 2008, we entered into an agreement with an
unrelated third party for the right to acquire the FCC license of KFXA-TV in Cedar Rapids, Iowa, pending FCC approval.
m) We timely filed applications for renewal of these licenses with the FCC. Unrelated third parties have filed informal objections against the
stations based on alleged violations of either the FCC’s sponsorship identification or indecency rules.
FORWARD-LOOKING STATEMENTS
This report includes or incorporates forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the U.S. Private
Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us,
including, among other things, the following risks:
General risks
•
•
•
•
the impact of changes in national and regional economies and credit and capital markets;
consumer confidence;
the activities of our competitors;
terrorist acts of violence or war and other geopolitical events;
Industry risks
•
•
•
•
•
•
•
•
•
the business conditions of our advertisers particularly in the automotive and service industries;
competition with other broadcast television stations, radio stations, multi-channel video programming distributors
(MVPDs), internet and broadband content providers and other print and media outlets serving in the same markets;
availability and cost of programming and the continued volatility of networks and syndicators that provide us with
programming content;
the effects of the Federal Communications Commission’s (FCC’s) National Broadband Plan and the potential
reclamation of some of our broadcasting spectrum;
the effects of governmental regulation of broadcasting or changes in those regulations and court actions interpreting
those regulations, including ownership regulations, indecency regulations, retransmission regulations and political or
other advertising restrictions;
labor disputes and legislation and other union activity;
the broadcasting community’s ability to develop a viable mobile digital broadcast television (mobile DTV) strategy and
platform and the consumer’s appetite for mobile television;
the operation of low power devices in the broadcast spectrum, which could interfere with our broadcast signals;
the effects of new ratings system technologies including “people meters” and “set-top boxes”, and the ability of such
technologies to be a reliable standard that can be used by advertisers;
Risks specific to us
•
•
•
•
•
•
•
•
•
•
•
•
the effectiveness of our management;
our ability to attract and maintain local and national advertising;
our ability to service our substantial debt obligations and operate our business under restrictions contained in our
financing agreement;
our ability to successfully renegotiate retransmission consent agreements;
our ability to renew our FCC licenses;
our ability to maintain our affiliation and programming service agreements with our networks and program service
providers and at renewal, to successfully negotiate these agreements with favorable terms;
the impact of reverse network compensation payments made by us to networks pursuant to our affiliation agreements
requiring compensation for network programming and the resulting negative effect on our operating results;
the popularity of syndicated programming we purchase and network programming that we air;
the strength of ratings for our local news broadcasts including our news sharing arrangements;
changes in the makeup of the population in the areas where our stations are located;
the successful execution of our multi-channel broadcasting initiatives including mobile DTV; and
the results of prior year tax audits by taxing authorities.
2010 Annual Report 5
Other matters set forth in this report and other reports filed with the Securities and Exchange Commission, including the Risk
Factors set forth in Item 1A of our Form 10-K for the year ended December 31, 2010 may also cause actual results in the future to
differ materially from those described in the forward-looking statements. However, additional factors and risks not currently
known to us or that we currently deem immaterial may also cause actual results in the future to differ materially from those
described in the forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements,
which speaks only as of the date on which it is made. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking statements discussed in this report might not occur.
SELECTED FINANCIAL DATA
The selected consolidated financial data for the years ended December 31, 2010, 2009 and 2008 have been derived from our
audited consolidated financial statements. The consolidated financial statements for the years ended December 31, 2010, 2009
and 2008 are included elsewhere in this report.
The information below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements included elsewhere in this report.
STATEMENTS OF OPERATIONS DATA
(In thousands, except per share data)
For the Years Ended December 31,
Statements of Operations Data:
Net broadcast revenues (a)
Revenues realized from station barter arrangements
Other operating divisions revenues
Total revenues
2010
2009
2008
2007
2006
$ 655,378
75,210
36,598
767,186
$ 554,597
58,182
43,698
656,477
$ 639,163
59,877
55,434
754,474
$ 622,643
61,790
33,667
718,100
$ 627,075
54,537
24,610
706,222
Station production expenses
Station selling, general and administrative expenses
Expenses recognized from station barter
arrangements
Depreciation and amortization (b)
Other operating divisions expenses
Corporate general and administrative expenses
Gain on asset exchange
Impairment of goodwill, intangible and other assets
Operating income (loss)
Interest expense and amortization of debt discount
and deferred financing cost
(Loss) gain from extinguishment of debt
(Loss) income from equity and cost investees
Other income, net
Income (loss) from continuing operations before
income taxes
Income tax (provision) benefit
Income (loss) from continuing operations
Discontinued operations:
(Loss) income from discontinued operations, net
of related income taxes
Gain on sale of discontinued operations, net of
related income taxes
Net income (loss)
Net loss (income) attributable to noncontrolling
interest
Net income (loss) attributable to Sinclair
154,133
127,091
67,083
116,003
30,916
26,800
—
4,803
240,357
(116,046)
(6,266)
(4,861)
2,667
115,851
(40,226)
75,625
142,415
122,833
48,119
138,334
45,520
25,632
(4,945)
249,799
(111,230)
(80,021)
18,465
354
1,972
(170,460)
32,512
(137,948)
158,965
136,142
53,327
147,527
59,987
26,285
(3,187)
463,887
(288,459)
(87,634)
5,451
(2,703)
3,461
(369,884)
121,362
(248,522)
148,707
140,026
55,662
157,178
33,023
24,334
—
—
159,170
(102,228)
(30,716)
601
6,305
33,132
(16,163)
16,969
144,236
137,995
49,358
153,399
24,193
22,795
—
15,589
158,657
(115,217)
(904)
6,338
6,117
54,991
(6,589)
48,402
(577)
(81)
(141)
1,219
3,701
—
$ 75,048
—
$ (138,029)
—
$ (248,663)
1,065
$ 19,253
1,774
53,877
$
1,100
2,335
2,133
(279)
100
Broadcast Group
$ 76,148
$ (135,694)
$ (246,530)
$ 18,974
$
53,977
6 Sinclair Broadcast Group
For the Years Ended December 31,
Earnings (Loss) Per Common Share
Attributable to Sinclair Broadcast Group:
Basic earnings (loss) per share from continuing
operations
Basic (loss) earnings per share from discontinued
operations
Basic earnings (loss) per share
Diluted earnings (loss) per share from continuing
operations
Diluted (loss) earnings per share from discontinued
operations
Diluted earnings (loss) per share
Dividends declared per share
Balance Sheet Data:
Cash and cash equivalents
Total assets
Total debt (c)
Total (deficit) equity
2010
2009
2008
2007
2006
$
$
$
$
$
$
$
0.96
$
(1.70)
$
(2.87)
(0.01)
0.95
0.95
(0.01)
0.94
0.430
$
$
$
$
$
$
—
(1.70)
$
$
—
(2.87)
(1.70)
$
(2.87)
—
(1.70)
—
$
$
$
—
(2.87)
0.800
$
$
$
$
$
$
$
0.19
0.03
0.22
0.19
0.03
0.22
0.625
$
$
$
$
$
$
$
0.57
0.06
0.63
0.57
0.06
0.63
0.450
$
$
$
$
21,974
1,485,924
1,212,065
(157,082)
$
$
$
$
23,224
1,590,029
1,366,308
(202,222)
$
$
$
$
16,470
1,816,407
1,362,278
(58,700)
$
$
$
$
20,980
2,224,187
1,320,417
269,581
$
67,408
$ 2,271,580
$ 1,413,623
267,329
$
(a) Net broadcast revenues is defined as broadcast revenues, net of agency commissions.
(b) Depreciation and amortization includes amortization of program contract costs and net realizable value adjustments, depreciation and amortization of
property and equipment and amortization of definite-lived intangible assets and other assets.
(c)
Total debt is defined as notes payable, capital leases and commercial bank financing, including the current and long-term portions.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis provides qualitative and quantitative information about our financial
performance and condition and should be read in conjunction with our consolidated financial statements and the accompanying
notes to those statements. This discussion consists of the following sections:
Executive Overview – a description of our business, financial highlights from 2010, information about industry trends and sources of
revenues and operating costs;
Critical Accounting Policies and Estimates – a discussion of the accounting policies that are most important in understanding the
assumptions and judgments incorporated in the consolidated financial statements and a summary of recent accounting
pronouncements;
Results of Operations – a summary of the components of our revenues by category and by network affiliation or program service
arrangement, a summary of other operating data and an analysis of our revenues and expenses for 2010, 2009 and 2008, including
comparisons between years and certain expectations for 2011; and
Liquidity and Capital Resources – a discussion of our primary sources of liquidity, an analysis of our cash flows from or used in
operating activities, investing activities and financing activities, a discussion of our dividend policy and a summary of our
contractual cash obligations and off-balance sheet arrangements.
We have two reportable operating segments, “broadcast” and “other operating divisions” that are disclosed separately from our
corporate activities. Our broadcast segment includes our stations. Our other operating divisions segment primarily earned
revenues in 2010 from sign design and fabrication; regional security alarm operating and bulk acquisitions; and real estate
ventures. In addition to the revenues noted in 2010, in 2009, our other operating divisions segment earned revenues from
information technology staffing, consulting and software development; and transmitter manufacturing. Corporate and
unallocated expenses primarily include our costs to operate as a public company and to operate our corporate headquarters
location. Corporate is not a reportable segment.
STG, included in the broadcast segment and a wholly owned subsidiary of Sinclair Broadcast Group, Inc. (SBG), is the primary
obligor under our Bank Credit Agreement, the 9.25% Notes and the 8.375% Notes and was the primary obligor under the 8.0%
Senior Subordinated Notes, due 2012 (the 8.0% Notes ) until they were fully redeemed in 2010. Our Class A Common Stock,
Class B Common Stock, the 6.0% Notes, the 4.875% Convertible Senior Notes due 2018 (the 4.875% Notes) and the 3.0%
2010 Annual Report 7
Convertible Senior Notes due 2027 (the 3.0% Notes) remain obligations and securities of SBG and are not obligations or
securities of STG. SBG is a guarantor under the Bank Credit Agreement, the 9.25% Notes and the 8.375% Notes.
EXECUTIVE OVERVIEW
2010 Events
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In January, we entered into a one-year retransmission consent agreement with Mediacom for continued carriage of the
signals of 22 stations owned and/or operated by us in 15 markets; In December, we entered into a further renewal of
our retransmission consent agreement with Mediacom for a term expiring January 1, 2013;
In February, we entered into an agreement for carriage of TheCoolTV, a music video provider on certain of our stations’
secondary digital signal;
In February, we entered into a network affiliation agreement effective September 1, 2010 with The CW for KMYS-TV
in San Antonio, Texas, expiring August 31, 2011. KMYS-TV switched from MyNetworkTV to The CW on the effective
date;
In February, we purchased at par approximately $12.3 million and $14.3 million of the 3.0% and 4.875% Notes,
respectively, pursuant to tender offers;
In March, we entered into a renewal of nine ABC network affiliation agreements which represents all of our ABC
affiliates, effective January 1, 2010 and expiring August 31, 2015;
In April, we prepaid $25.0 million of the Bank Credit Agreement’s Term Loan B;
In May, the put right period for the 3.0% Notes expired and holders representing $10.0 million of the notes exercised
their put rights. Holders of the remaining $5.4 million of 3.0% Notes can exercise put rights again in May 2017;
In August, we entered into an agreement with The Country Network, a country music video network, to air on 34 of our
stations’ second or third digital signal;
In August, we entered into an amendment of our Bank Credit Agreement. Under the amendment we paid down $35.0
million of the outstanding $305.0 million balance of our Term Loan B and repriced the remaining outstanding amount
of $270.0 million;
In September, we repurchased, in the open market, $17.0 million of the 4.875% Notes;
In October, we issued $250.0 million of 8.375% Notes;
In October, we received $8.4 million in federal tax refunds;
In October, we purchased approximately $58.0 million and $175.7 million of 6.0% and 8.0% Notes, respectively,
pursuant to tender offers;
In November, our Board of Directors declared a $0.43 per share common stock dividend paid in December 2010;
In November, we redeemed all of the remaining $49.0 million of 8.0% Notes;
In December, we renewed our FOX affiliation agreements, which were due to expire on March 2012, until December
31, 2012. We also entered into a programming licensing agreement with the FOX network which allows the Company to
enter into retransmission consent agreements with distributors for the remainder of the affiliation agreement;
• Excluding political, local revenues have increased 13.0% and national revenues have increased 8.9% during 2010 versus
2009 as advertising levels and retransmission revenues have gained momentum. Production, selling and general and
administrative expenses combined have increased 6.0% over the same period primarily due to higher revenues and
commissions; and
• Political revenues increased 2.2% compared to 2008 and 34.9% compared to 2006.
2011 Events
•
•
•
•
•
•
In January, the put right period for the 4.875% Notes expired and no holders of the remaining $5.7 million outstanding
exercised put rights. There are no further put rights through final maturity on July 15, 2018;
In January, we extended our program service arrangement with MyNetworkTV until Fall 2014;
In January, we entered into a multi-year retransmission consent agreement with Bright House Networks, LLC for the
carriage of six of the stations owned and/or operated by us in four markets;
In February, our Board of Directors reinstated a quarterly common stock dividend of $0.12 per share;
In February, we entered into a multi-year retransmission consent agreement with Time Warner Cable for continued
carriage of 28 of the stations owned and /or operated by us in 17 markets;
In February, revenue related to the Super Bowl, which aired on our 20 FOX affiliates was $6.2 million, a 26.5% increase
from revenue generated in 2008, the last time FOX aired the Super Bowl;
8 Sinclair Broadcast Group
•
•
In February, we disclosed our intention to refinance a portion of and to amend certain terms of the Bank Credit
Agreement; and
In March, we reached an agreement-in-principle with Comcast Corporation for a multi-year retransmission consent
agreement for the continued carriage of 36 stations in 22 markets owned and/or operated by us or to which we provide
sales services.
Industry Trends
• Political advertising increases in even-numbered years, such as 2010, due to the advertising expenditures from candidates
running in local and national elections. In addition, political revenue has consistently risen between presidential election
or mid-term election years such as from 2004 to 2008 or from 2006 to 2010, respectively. In every fourth year, such as
2008, political advertising is usually elevated further due to presidential elections. However, due to the contentious mid-
term elections our political revenues in 2010 not only exceeded 2006 results, but exceeded 2008 presidential election year
revenues as well;
• The FCC has permitted broadcast television stations to use their digital spectrum for a wide variety of services including
multi-channel broadcasts. The FCC “must carry” rules only apply to a station’s primary digital stream;
• A number of other broadcasters, including Sinclair, have joined together in organizations such as the OMVC, M500 and
the MCV to focus on efforts to accelerate the nationwide availability of mobile DTV service and work through
programming, distribution and aggregation opportunities. There is potential for broadcasters to create an additional
revenue stream by providing their signals to mobile devices as well as through other multi-channel initiatives;
• Retransmission consent rules provide a mechanism for broadcasters to seek payment from multi-channel video
programming distributors (MVPDs) who carry broadcasters’ signals. Recognition of the value of the programming
content provided by broadcasters, including local news and other programming and network programming all in HD has
generated increased local revenues;
• Automotive-related advertising is a significant portion of our total net revenues in all periods presented and these
revenues trended downward in most of 2009 due to the economic turmoil. However, this sector has dramatically
trended upward in 2010 and into 2011 as of the date of this filing, due to improved economic conditions;
• Many broadcasters are enhancing/upgrading their websites to use the internet to deliver rich media content, such as
•
newscasts and weather updates, to attract advertisers;
Seasonal advertising increases in the second and fourth quarters due to the anticipation of certain seasonal and holiday
spending by consumers;
• Broadcasters have found ways to increase returns on their news programming initiatives while continuing to maintain
•
locally produced content through the use of news sharing arrangements;
Station outsourcing arrangements are becoming more common as broadcasters seek out ways to improve revenues and
margins;
• Advertising revenue related to the Olympics occurs in even numbered years and the Super Bowl is aired on a different
network each year. Both of these popularly viewed events can have an impact on our advertising revenues; and
• Compensation from networks to their affiliates in exchange for broadcasting of network programming has halted.
Networks now require compensation from broadcasters for the use of network programming.
Sources of Revenues and Costs
Our operating revenues are derived from local and national advertisers and, to a much lesser extent, from political advertisers.
From 2006 to 2010, we began to generate new local revenues from our retransmission consent agreements. Our revenues from
local advertisers had seen a continued upward trend until 2008 and 2009 when non-political revenues fell from 2007 due to the
economic recession. We saw an increase in local revenues in 2010. Revenues from national advertisers have continued to trend
downward when measured as a percentage of total broadcast revenues. We believe this trend is the result of our focus on
increasing local advertising revenues as a percentage of total advertising revenues, combined with a decrease in overall spending
by national advertisers and an increase in the number of competitive media outlets providing national advertisers multiple
alternatives in which to advertise their goods or services. Our efforts to mitigate the effect of these increasingly competitive
media outlets for national advertisers include continuing our efforts to increase local revenues and developing innovative sales and
marketing strategies to sell traditional and non-traditional services to our advertisers including the success of multi-channel digital
initiatives together with mobile DTV. In addition, our revenue success is dependent on the success and advertising spending
levels of the automotive industry.
2010 Annual Report 9
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This discussion and analysis of our financial condition and results of operations is based on our consolidated financial
statements which have been prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets,
liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our
estimates including those related to bad debts, program contract costs, intangible assets, income taxes, property and equipment,
investments and derivative contracts. We base our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. These estimates have been consistently applied for
all years presented in this report and in the past we have not experienced material differences between these estimates and actual
results. However, because future events and their effects cannot be determined with certainty, actual results could differ from our
estimates and such differences could be material.
We have identified the policies below as critical to our business operations and to the understanding of our results of
operations. For a detailed discussion of the application of these and other accounting policies, see Note 1. Nature of Operations and
Summary of Significant Accounting Policies, in the Notes to our Consolidated Financial Statements.
Valuation of Goodwill, Long-Lived Assets, Intangible Assets and Equity and Cost Method Investments. We periodically evaluate our
goodwill, broadcast licenses, long-lived assets, intangible assets and equity and cost method investments for potential impairment
indicators. Our judgments regarding the existence of impairment indicators are based on estimated future cash flows, market
conditions, operating performance of our stations and legal factors. Future events could cause us to conclude that impairment
indicators exist and that the net book value of long-lived assets, intangible assets and equity and cost method investments is
impaired. Any resulting impairment loss could have a material adverse impact on our consolidated balance sheets and
consolidated statements of operations.
We have determined our broadcast licenses to be indefinite-lived intangible assets in accordance with the accounting guidance
for goodwill and other intangible assets, which requires such assets along with our goodwill to be tested for impairment on an
annual basis or more often when certain triggering events occur. As of December 31, 2010, we had $660.0 million of goodwill,
$47.4 million in broadcast licenses, and $184.7 million in definite-lived intangibles. We test our broadcast licenses and goodwill by
estimating the fair market value of the broadcast licenses, or the fair value of our reporting units in the case of goodwill, using a
combination of quoted market prices, observed earnings/cash flow multiples paid for comparable television stations, discounted
cash flow models and appraisals. We then compare the estimated fair market value to the book value of these assets to determine
if an impairment exists. We aggregate our stations by market for purposes of our goodwill and license impairment testing and we
believe that our markets are most representative of our broadcast reporting units because we view, manage and evaluate our
stations on a market basis. Furthermore, in our markets operated as duopolies, certain costs of operating the stations are shared
including the use of buildings and equipment, the sales force and administrative personnel. Our discounted cash flow model is
based on our judgment of future market conditions within each designated marketing area, as well as discount rates that would be
used by market participants in an arms-length transaction. Future events could cause us to conclude that market conditions have
declined or discount rates have increased to the extent that our broadcast licenses and/or goodwill could be impaired. Any
resulting impairment loss could have a material adverse impact on our consolidated balance sheets, consolidated statements of
operations and consolidated statements of cash flows. Based on assessments performed during the year ended December 31,
2010, we recorded $4.8 million of impairment on our broadcast licenses and other assets, and during the years ended December
31, 2009 and 2008 we recorded $249.8 million and $463.9 million, respectively, in impairment losses on our goodwill, broadcast
licenses and other assets. The impairment charge taken in 2008 was primarily due to the severe economic downturn during the
fourth quarter, and as a result, we made downward revisions to forecasted cash flows, cash flow multiples and growth rates. Of
the $249.8 million in impairment recorded in 2009, we recorded $130.1 million in the first quarter of 2009. We performed an
interim impairment test in the first quarter of 2009 due to the severe economic downturn and continued decrease in our market
capitalization. Accordingly, we made further revisions to our forecasted cash flows, cash flow multiples, and discount rates. The
impairment charge taken during the fourth quarter of 2009 was primarily due to the continued deterioration of the economy
which resulted in further decreases in our forecasted cash flows and increases in our discount rates. The $4.8 million impairment
charge recorded in 2010 was primarily the result of additional cash outflows for increased signal strength necessary to maintain
competitive market positions.
The implied value of our broadcast goodwill is calculated using a discounted cash flow model for 4 years and estimating the
terminal value of the reporting units using a multiple of cash flows. The value of our broadcast licenses is calculated using a
discounted cash flow model for eight years and estimating the terminal value based on the constant growth model and a
compound annual growth rate.
10 Sinclair Broadcast Group
The key assumptions used to determine the fair value of our reporting units to test our goodwill for impairment and to
determine the fair value of our broadcast licenses consist of discount rates, revenue and expense growth rates, constant growth
rates and comparable business multiples. The revenue and expense growth rates used in our goodwill impairment testing and the
revenue, expense and constant growth rates used in determining the fair value of our broadcast licenses have decreased slightly
from 2009 to 2010. However, the baseline cash flows to which these growth rates were applied have increased due to a stronger
than expected recovery in revenue in 2010. The growth rates are based on market studies, industry knowledge and historical
performance.
The discount rates used to determine the fair value of our reporting units to test our goodwill for impairment and to determine
the fair value of our broadcast licenses have slightly decreased from 2009 to 2010. The discount rate is based on a number of
factors including market interest rates, a weighted average cost of capital analysis based on the target capital structure for a
television station, and includes adjustments for market risk and company specific risk. The decrease in the discount rate is
primarily due to a slight decrease in the general cost of equity in 2010.
The comparable business multiple used to determine the fair value of our reporting units to test our goodwill for impairment
has not changed from 2009 to 2010. Due to the lack of data from comparable sales transactions in the past two years, we
estimated the multiple that would most likely be paid for a mature, cash flowing television station in the current marketplace.
After taking the effect of the above mentioned impairment, as of December 31, 2010, all of our reporting units tested for
goodwill impairment had fair values that were greater than the carrying value by more than 10%.
For the year ended December 31, 2010, an increase in our discount rate of 10% and/or a decrease in our multiple of 10%
would not result in a goodwill impairment. An increase in our discount rate of greater than 89% or a decrease in our multiple of
greater than 39% would likely cause reporting units to fail our Step 1 test for goodwill impairment and could lead to goodwill
impairment.
When factors indicate that there may be a decrease in value of an equity or cost method investment, we assess that investment
and determine whether a loss in value has occurred. If that loss is deemed to be other than temporary an impairment loss is
recorded. For any investments that indicate a potential impairment, we estimate the fair value of those investments using
discounted cash flow models, unrelated third party valuations or industry comparables, based on the various facts available to us.
During 2010, we recorded $6.7 million of impairment on equity method investments. No impairment of our equity or cost
method investments was recorded in 2009 or 2008.
Revenue Recognition. Advertising revenues, net of agency commissions, are recognized in the period during which commercials
are aired. All other revenues are recognized as services are provided. The revenues realized from station barter arrangements are
recorded as the programs are aired at the estimated fair value of the advertising airtime given in exchange for the program rights.
Our retransmission consent agreements contain both advertising and retransmission consent elements that are paid in cash.
We have determined that our agreements are revenue arrangements with multiple deliverables. Advertising and retransmission
consent deliverables sold under our agreements are separated into different units of accounting based on fair value. Revenue
applicable to the advertising element of the arrangement is recognized consistent with the advertising revenue policy noted above.
Revenue applicable to the retransmission consent element of the arrangement is recognized ratably over the life of the agreement.
Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts for estimated losses resulting from extending
credit to our customers that are unable to make required payments. If the economy and/or the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required. For example, a 10% increase in the balance of our allowance for doubtful accounts as of December 31, 2010, would
increase bad debt expense by approximately $0.3 million. The allowance for doubtful accounts was $3.2 million and $2.9 million
as of December 31, 2010 and 2009, respectively.
Program Contract Costs. We have agreements with distributors for the rights to televise programming over contract periods,
which generally run from one to seven years. Contract payments are made in installments over terms that are generally equal to
or shorter than the contract period. Each contract is recorded as an asset and a liability at an amount equal to its gross cash
contractual commitment when the license period begins and the program is available for its first showing. The portion of
program contracts which become payable within one year is reflected as a current liability in the consolidated balance sheets. As
of December 31, 2010 and 2009, we recorded $45.7 million and $60.2 million, respectively, in program contract assets and $97.9
million and $140.4 million, respectively, in program contract liabilities.
The programming rights are reflected in the consolidated balance sheets at the lower of unamortized cost or estimated net
realizable value (NRV). Estimated NRVs are based on management’s expectation of future advertising revenue, net of sales
commissions, to be generated by the remaining program material available under the contract terms. In conjunction with our
2010 Annual Report 11
NRV analysis of programming rights reflected in our consolidated balance sheets, we perform similar analysis on future
programming rights yet to be reflected in our consolidated balance sheets and establish allowances when future payments exceed
the estimated NRV. Amortization of program contract costs is generally computed using a four-year accelerated method or a
straight-line method, depending on the length of the contract. Program contract costs estimated by management to be amortized
within one year are classified as current assets. Program contract liabilities are typically paid on a scheduled basis and are not
reflected by adjustments for amortization or estimated NRV. If our estimate of future advertising revenues declines, then
additional write downs to NRV may be required.
Income Tax. We recognize deferred tax assets and liabilities based on the differences between the financial statements carrying
amounts and the tax bases of assets and liabilities. As of December 31, 2010 and 2009, we recorded $9.7 million and $7.3 million,
respectively, in deferred tax assets and $210.3 million and $169.5 million, respectively, in deferred tax liabilities. We provide a
valuation allowance for deferred tax assets if we determine, based on the weight of all available evidence, that it is more likely than
not that some or all of the deferred tax assets will not be realized. As of December 31, 2010, valuation allowances have been
provided for a substantial amount of our available state net operating losses. Management periodically performs a comprehensive
review of our tax positions and accrues amounts for tax contingencies. Based on these reviews, the status of ongoing audits and
the expiration of applicable statute of limitations, accruals are adjusted as necessary in accordance with income tax accounting
guidance.
Recent Accounting Pronouncements
In September 2009, the Financial Accounting Standards Board (FASB) ratified the Emerging Issues Task Force’s (EITF’s)
amended guidance on accounting for revenue arrangements with multiple deliverables. The amended guidance allows the use of
an estimated selling price for the undelivered units of accounting in transactions in which vendor-specific objective evidence
(VSOE) or third-party evidence (TPE) does not exist. The amended guidance no longer allows the use of the residual method
when allocating arrangement consideration between the delivered and undelivered units of accounting if VSOE and TPE of
selling price does not exist for all units of accounting. Entities are required to estimate the selling price of the deliverables, when
VSOE and TPE are not available, and then allocate the consideration based on the relative selling prices of the deliverables. This
guidance also requires additional disclosures including the amount of revenue recognized each reporting period and the amount
of deferred revenue as of the end of each reporting period under this guidance. This guidance is effective for revenue
arrangements entered into or materially modified in fiscal years beginning after June 15, 2010 and should be applied on a
prospective basis. We do not believe that this guidance will have a material impact on our consolidated financial statements.
In January 2010, the FASB amended the guidance on fair value measurements and disclosures to add two new disclosure
provisions to the current fair value disclosure guidance, including (1) details of transfers in and out of level 1 and level 2
measurements, and (2) gross presentation of activity within the level 3 roll forward. The guidance also amends two existing fair
value disclosure requirements so that entities are required to disclose (1) the valuation techniques and inputs used to develop fair
value measurements for assets and liabilities that are measured at fair value on both a recurring basis and nonrecurring basis in
periods subsequent to initial recognition and (2) fair value measurement disclosures for each class of assets and liabilities. A class
is defined as a subset of assets or liabilities within a line item in the statement of financial position. The guidance is for interim
and annual reporting periods beginning after December 15, 2009, except for the changes to the level 3 roll forward which are
effective for fiscal years beginning after December 15, 2010. We added the required disclosures under this guidance to our
consolidated financial statements.
In November 2010, the FASB ratified the EITF’s amended guidance with respect to goodwill impairment. The amended
guidance requires that step two of the goodwill impairment test be performed if the carrying amount of a reporting unit is zero or
negative and it is more likely than not that a goodwill impairment exists based on any adverse qualitative factors including an
evaluation of the triggering circumstances noted in the guidance. The change is effective for fiscal years and interim changes
within those years beginning after December 15, 2010. We do not believe that this guidance will have a material impact on our
consolidated financial statements.
RESULTS OF OPERATIONS
In general, this discussion is related to the results of our continuing operations, except for discussions regarding our cash flows,
which also include the results of our discontinued operations. Unless otherwise indicated, references in this discussion to 2010,
2009 and 2008 are to our fiscal years ended December 31, 2010, 2009 and 2008, respectively. Additionally, any references to the
first, second, third or fourth quarters are to the three months ended March 31, June 30, September 30 and December 31,
respectively, for the year being discussed. We have two reportable segments, “broadcast” and “other operating divisions” that
are disclosed separately from our corporate activities.
12 Sinclair Broadcast Group
Seasonality/Cyclicality
Our operating results are usually subject to seasonal fluctuations. Usually, the second and fourth quarter operating results are
higher than the first and third quarters because advertising expenditures are increased in anticipation of certain seasonal and
holiday spending by consumers. The negative financial and economic conditions effected the usual seasonal fluctuations in 2009.
In 2010, as the economy started to stabilize and recover, our seasonal fluctuations returned to normal.
Our operating results are usually subject to fluctuations from political advertising. In even numbered years, political spending is
usually significantly higher than in odd numbered years due to advertising expenditures preceding local and national elections.
Additionally, every four years, political spending is elevated further due to advertising expenditures preceding the presidential
election. Due to the contentious mid-term elections our political revenues in 2010 not only exceeded 2006 results, but exceeded
2008 presidential election year revenues as well.
BROADCAST SEGMENT
Operating Data
The following table sets forth certain of our operating data from continuing operations for the years ended December 31, 2010,
2009 and 2008 (in millions). For definitions of terms, see the footnotes to the table in Selected Financial Data.
Net broadcast revenues
Revenues realized from station barter arrangements
Other operating divisions revenues
Total revenues
Station production expenses
Station selling, general and administrative expenses
Expenses recognized from station barter arrangements
Depreciation and amortization
Gain on asset exchange
Other operating divisions expenses
Corporate general and administrative expenses
Impairment of goodwill, intangible and other assets
Operating income (loss)
Net income (loss) attributable to Sinclair Broadcast Group
$
$
$
Broadcast Revenues
2010
655.4
75.2
36.6
767.2
154.1
127.1
67.1
116.0
—
30.9
26.8
4.8
240.4
76.1
$
$
Years Ended December 31,
2009
554.6
58.2
43.7
656.5
142.4
122.8
48.1
138.4
(4.9)
45.5
25.6
249.8
(111.2)
(135.7)
$
$
$
$
2008
639.2
59.9
55.4
754.5
159.0
136.1
53.3
147.6
(3.2)
60.0
26.3
463.9
(288.5)
(246.5)
The following table presents our revenues from continuing operations, net of agency commissions, for the three years ended
December 31, 2010, 2009 and 2008 (in millions):
$
Local revenues:
Non-political
Political
Total local
National revenues:
Non-political
Political
Total national
Total net broadcast revenues
$
2010
2009
2008
’10 vs. ‘09
’09 vs. ‘08
Percent Change
463.6
12.8
476.4
149.8
29.2
179.0
655.4
$
$
410.2
2.3
412.5
137.5
4.6
142.1
554.6
$
$
431.4
11.0
442.4
166.7
30.1
196.8
639.2
13.0%
(a)
15.5%
8.9%
(a)
26.0%
18.2%
(4.9%)
(a)
(6.8%)
(17.5%)
(a)
(27.8%)
(13.2%)
(a) Political revenue is not comparable from year to year due to the cyclicality of elections. See Political Revenues below for more
information.
Our largest categories of advertising and their approximate percentages of 2010 net time sales, which includes the advertising
portion of our local and national revenues, were automotive (17.9%), professional services (15.5%), political (8.0%), schools
2010 Annual Report 13
(7.7%) and fast food (6.2%). No other advertising category accounted for more than 5.0% of our net time sales in 2010. No
advertiser accounted for more than 1.0% of our consolidated revenue in 2010. We conduct business with thousands of
advertisers.
Our primary types of programming and their approximate percentages of 2010 net time sales were syndicated programming
(41.1%), network programming (25.2%), news (20.0%), sports programming (7.4%) and direct advertising programming (6.3%).
From a network affiliation or program service arrangement perspective, the following table sets forth our affiliate percentages
of net time sales for the years ended December 31, 2010 and 2009:
FOX
ABC
MyNetworkTV
The CW
CBS
NBC
Digital
Total
# of
Stations
20
9
16
10
2
1
(a)
58
Percent of Net Time Sales for the
Twelve Months Ended December 31,
2010
2009
45.5%
21.9%
15.8%
13.0%
3.0%
0.7%
0.1%
45.0%
20.0%
17.1%
14.2%
2.8%
0.7%
0.2%
Net Time Sales
Percent Change
’10 vs. ‘09
17.7%
27.4%
7.4%
6.3%
23.4%
8.3%
12.5%
’09 vs. ‘08
(19.0%)
(25.6%)
(13.8%)
(20.3%)
(16.9%)
(21.9%)
22.3%
(a) We broadcast programming from network affiliations or program service arrangements with TheCoolTV, The Country Network,
MyNetworkTV, This TV and Estrella on 69 channels through our stations’ second and third digital signals.
Net Broadcast Revenues. From a revenue category standpoint, 2010 when compared to 2009 was impacted by increases in most of
the advertising sectors as the country’s economic conditions in general began to strengthen. Automotive, our largest category in
2010, was up 36.9% compared to 2009 as automotive dealers and manufacturers increased spending in response to an increase in
auto sales.
From a revenue category standpoint, 2009 when compared to 2008 was impacted by decreases in virtually all of the advertising
sectors. However, during the later half of the year, we did see a positive trend in increased advertising spending which continued
through the end of the year. Services was our largest category in 2009; however, during the fourth quarter we began to see a trend
back towards the historical norm of automotive advertising representing our largest category as automotive dealers and
manufacturers increased spending. During 2009, automotive revenues were helped by the government’s “Cash for Clunkers”
program, however, our net times sales from the automotive sector were down 33.6% for 2009 compared to 2008.
Political Revenues. Political revenues, which include time sales from political advertising, increased by $35.1 million to $42.0
million for 2010 when compared to 2009. Political revenues are typically higher in election years such as 2010. A contentious
mid-term election, resulted in 2010 political spending exceeding 2008’s $41.1 million. Political revenues were only $6.9 million in
2009 due to the absence of significant elections. We expect political revenues to decrease in 2011 from 2010 levels.
Local Revenues. Excluding political revenues, our local broadcast revenues, which include local times sales, retransmission
revenues and other local revenues, were up $53.4 million for 2010, compared to 2009. The increase is due to an increase in
advertising spending particularly in the automotive sector and an increase in retransmission revenues from MVPDs. Excluding
political revenues, our local broadcast revenues were down $21.2 million for 2009 when compared to 2008. This decrease was
primarily due to negative financial and economic conditions, which impeded 2009 advertising spending levels, as well as, a
decrease due to a change in networks for the Super Bowl programming from FOX to NBC. These decreases were offset by an
increase in revenues from retransmission consent agreements with MVPDs.
National Revenues. Our national broadcast revenues, excluding political revenues, which include national time sales and other
national revenues, were up $12.3 million for 2010 when compared to 2009. Over the past few years, national revenues have
trended downward; however, our 2010 results were up. This was primarily due to the amplified decline in 2009 from the effects
of the recent recession and a rebound in advertising spending in 2010 along with the assistance from an improved automotive
sector. Excluding political revenues, our national broadcast revenues were down $29.2 million for 2009 when compared to 2008.
This decrease was partially due to negative financial and economic conditions, which impeded 2009 advertising spending levels.
14 Sinclair Broadcast Group
Broadcast Expenses
The following table presents our significant operating expense categories for the years ended December 31, 2010, 2009 and
2008 (in millions):
2010
154.1
$
2009
142.4
$
2008
159.0
$
Percent Change
(Increase/(Decrease))
’10 vs. ‘09
8.2%
’09 vs. ‘08
(10.4%)
$
127.1
$ 122.8
$ 136.1
3.5%
(9.8%)
$
60.9
$
73.1
$
84.4
(16.7%)
(13.4%)
$
$
23.7
—
$
$
8.6
4.9
$
$
7.3
3.2
175.6%
(100.0%)
17.8%
53.1%
Station production expenses
Station selling, general and
administrative expenses
Amortization of program
contract costs and net
realizable value adjustments
Corporate general and
administrative expenses
Gain on asset exchange
Impairment of goodwill,
intangible and other assets
$
4.8
$
249.6
$ 462.3
(98.1%)
(46.0%)
Station production expenses. Station production expenses for 2010 increased compared to 2009. This increase was primarily due to
an increase in fees pursuant to network affiliation agreements, increased promotional advertising expenses, increased
compensation expense and increased maintenance costs to remove analog equipment. Additionally, news profit share expenses
increased due to increased news performance which resulted in higher payments to our news share partner pursuant to news
share arrangements with another broadcaster. These increases were partially offset by a decrease in electric expense due to the
digital signal conversion in June 2009 and cessation of analog transmission.
Station production expenses for 2009 decreased compared to 2008. This decrease was primarily due to lower compensation
expense and electric expenses due to the digital signal conversion in June 2009 and cessation of analog transmission. Additionally,
promotional advertising decreased due to our revised media-spending plan.
Station selling, general and administrative expenses. Station selling, general and administrative expenses increased for 2010 compared
to 2009. This increase was primarily due to higher national sales representative and local commissions costs due to an increase in
sales and increased non-income based tax expenses. These increases were partially offset by decreased trade transaction expense
and bad debt expense.
Station selling, general and administrative expenses decreased for 2009 compared to 2008. This decrease was primarily due to
lower compensation expense and local commissions and national rep commissions savings due to lower revenues in 2009
compared to 2008.
We expect 2011 station production and station selling, general and administrative expenses, excluding barter, to trend higher
than our 2010 results.
Amortization of program contract costs and net realizable value adjustments. The amortization of program contract costs decreased
during 2010 compared to 2009 and 2009 compared to 2008. Over the past few years, we have entered into barter arrangements
for short-term program contracts which are less expensive and result in lower contract cost amortization. We expect program
contract amortization to trend lower in 2011 compared to 2010.
Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses
Gain on asset exchange. During 2009 and 2008, we recognized a non-cash gain of $4.9 million and $3.2 million, respectively, from
the exchange of equipment under agreements with Sprint Nextel Corporation and in association with the FCC’s decision to allow
Sprint Nextel Corporation to utilize our vacated analog spectrum in exchange for the new digital equipment. We received all
applicable equipment pursuant to the agreement in 2009.
Impairment of goodwill, intangible and other assets. We completed our annual test of goodwill and broadcast licenses for impairment
in fourth quarter 2010, 2009 and 2008. Due to the severity of the economic downturn and the decrease of our market
capitalization, we also tested our goodwill and broadcast licenses for impairment during the first quarter 2009. See Note 4.
Goodwill, Broadcast Licenses and Other Intangible Assets, in the Notes to our Consolidated Financial Statements. During 2010, we
recorded impairments of $4.8 million related to our broadcast licenses and other assets. During 2009, we recorded impairments
2010 Annual Report 15
of $164.2 million and $80.4 million related to our goodwill and broadcast licenses and other assets, respectively. During 2008, we
recorded impairments of $270.4 million and $191.8 million related to our broadcast licenses and goodwill, respectively.
OTHER OPERATING DIVISIONS SEGMENT REVENUE AND EXPENSE
The following table presents our other operating divisions segment revenue and expenses related to Triangle Signs & Services,
LLC (Triangle), a sign designer and fabricator, Alarm Funding Associates, LLC. (Alarm Funding), a regional security alarm
operating and bulk acquisition company, G1440 Holdings, Inc. (G1440), an information technology staffing, consulting and
software development company, Acrodyne Communications, Inc. (Acrodyne), a manufacturer of television transmissions systems,
and real estate ventures and other nominal businesses for the years ended December 31, 2010, 2009, and 2008 (in millions):
Revenues:
G1440
Acrodyne
Triangle
Alarm Funding
Real Estate Ventures and
2010
2009
2008
’10 vs. ‘09
’09 vs. ‘08
Percent Change
$
$
$
$
—
—
19.1
10.0
$
$
$
$
6.7
4.2
20.4
6.7
$
$
$
$
10.9
7.7
28.9
2.7
(100.0%)
(100.0%)
(6.4%)
49.3%
(38.5%)
(45.5%)
(29.4%)
148.1%
other
$
7.5
$
5.7
$
5.2
31.6%
9.6%
Expenses: (a)
G1440
Acrodyne
Triangle
Alarm Funding
Real Estate Ventures and
$
$
$
$
—
—
19.8
8.0
$
$
$
$
8.5
6.8
20.6
5.8
$
$
$
$
11.4
9.5
27.0
2.9
(100.0%)
(100.0%)
(3.9%)
37.9%
other
$
9.8
$
8.5
$
13.6
15.3%
(25.4%)
(28.4%)
(23.7%)
100.0%
(37.5%)
(a) Comprises total expenses of the entity including other operating divisions expenses, depreciation and amortization and applicable
other income (expense) items such as interest expense.
G1440 was sold in fourth quarter 2009 and Acrodyne closed its business September 30, 2009.
The decreases in Triangle’s results for the year ended December 31, 2010 are primarily due to a decline in order volume in the
early part of 2010; however, in later half of 2010 sales were up compared to the same period in 2009 as the economy improved.
The increases in Alarm Funding’s results are primarily due to the acquisition of new alarm monitoring contracts and the
expansion of sales efforts.
Revenues have increased for our consolidated real estate ventures due to the ramp up of leasing activity for properties
previously being developed. As of December 31, 2010, we held $52.6 million of real estate for development and sale and $49.7
million in equity method investments in real estate ventures.
(Loss) Income from Equity and Cost Method Investments. Results of our equity and cost method investments in private investment
funds and real estate ventures are included in (loss) income from equity and cost method investments in our consolidated
statements of operations. During 2010, we determined three of our investments were impaired, primarily due to decreases in the
underlying values of our real estate investments, and we recorded impairments totaling $6.7 million. Additionally, during 2010, we
recorded losses of $1.7 million related to other real estate ventures and income of $3.6 million related to certain private
investment funds. During 2009, we recorded income of $0.4 million primarily related to certain private investment funds. During
2008, we recorded a loss of $1.0 million related to certain private investment funds and a loss of $2.8 million related to our real
estate ventures. The losses were partially offset by a distribution of $0.7 million from a direct investment in a privately held small
business.
16 Sinclair Broadcast Group
CORPORATE AND UNALLOCATED EXPENSES
Percent Change
(Increase/(Decrease))
2010
2009
2008
’10 vs. ‘09
’09 vs. ‘08
Corporate general and
administrative expenses
Interest expense
(Loss) gain from extinguishment
of debt
Income tax (provision) benefit
$
$
$
$
2.2
114.1
(6.3)
(40.2)
$
$
$
$
16.0
78.5
18.5
32.5
$
$
17.7
86.6
$
5.5
$ 121.4
(86.3%)
45.4%
(134.1%)
(223.7%)
(9.6%)
(9.4%)
236.4%
(73.2%)
Corporate general and administrative expenses In conjunction with our recent debt restructuring activities, we re-examined our
corporate overhead cost allocation methodologies and made applicable changes to the way we allocate costs resulting in greater
overhead absorption by our broadcast segment. This allocation change resulted in more corporate general and administrative
expenses allocated to the Broadcast Segment, thus increasing that segment’s corporate general and administrative expenses for 2010
accordingly. Therefore, rather than examining the yearly costs on a segment basis, we will examine the cost variance on an overall
basis. The results that follow combine the corporate general and administrative expenses found in the Broadcast Segment with the
corporate general and administrative expenses found in this section, Corporate and Unallocated Expenses. These results exclude
general and administrative costs from our other operating divisions segment which are included in the expenses discussed in the
Other Operating Divisions Segment section.
2010
2009
2008
’10 vs. ‘09
’09 vs. ‘08
Percent Change
(Increase/(Decrease))
Combined:
Broadcast Segment and Corporate
and Unallocated Expenses-
corporate general and
administrative expenses
$
25.9
$
24.6
$
25.0
5.3%
(1.6%)
Combined corporate general and administrative expenses increased to $25.9 million in 2010 from $24.6 million in 2009. This is
primarily due to a 2010 increase in compensation expense including an increase in executive bonuses and stock-based
compensation related to stock-settled appreciation rights. The increases were partially offset by a reduction in health and other
insurance costs as well as accounting and legal fees.
Combined corporate general and administrative expenses decreased to $24.6 million in 2009 from $25.0 million in 2008. This is
primarily due to a 2009 decrease in compensation expense and stock-based compensation due to cost cutting efforts.
We expect corporate general and administrative expenses to increase in 2011 compared to 2010.
Interest expense. Interest expense has increased primarily due to the debt refinancings in fourth quarter 2009 and during 2010.
As part of these comprehensive debt refinancings, we issued new 9.25% Notes in fourth quarter 2009, amended and restated our
Bank Credit Agreement in fourth quarter 2009 and issued new 8.375% Notes in fourth quarter 2010, all of which accrue interest
at higher rates than the debt replaced. Additionally, in the third quarter 2010, we further amended our Bank Credit Agreement.
Our interest rate was reduced, however, certain costs amounting to $3.7 million associated with the amendment were expensed as
interest. These increases were partially offset by the redemption or partial redemption of our 8.0% Notes, a portion of our 6.0%
Notes in fourth quarter 2010, and our 3.0% Notes and 4.875% Notes. (See Liquidity and Capital Resources below for more
information).
The decrease in interest expense in 2009 compared to 2008 was primarily due to a decrease in LIBOR, lowering our interest
expense in 2009 on our Bank Credit Agreement. In addition, open market purchases during the first half of 2009 of our 6.0%
Notes, 4.875% Notes and 3.0% Notes and partial extinguishment of the 3.0% Notes and 4.875% Notes pursuant to tender offers
closed in fourth quarter 2009 lowered interest expense in 2009.
We expect interest expense to decrease in 2011 compared to 2010.
(Loss) gain from extinguishment of debt. During 2010, through a combination of tender offers, the exercise of holder put rights, and
open market repurchases, we redeemed $64.1 million, $31.3 million and $22.3 million of our 6.0% Notes, 4.875% Notes and 3.0%
Notes, respectively, resulting in a loss on extinguishment of $3.2 million, $0.5 million and $0.1 million, respectively. Additionally,
we made a prepayment on our Term Loan B in second quarter 2010 and amended our Term Loan B in third quarter 2010,
resulting in a loss of $3.1 million from extinguishment of debt. During fourth quarter, we redeemed $224.7 million in principal
amount of our 8.0% Notes resulting in a gain of $0.7 million from extinguishment of debt.
2010 Annual Report 17
During 2009, we redeemed $266.6 million and $106.5 million face value of the 3.0% Notes and 4.875% Notes, respectively,
resulting in a gain of $0.4 million and $0.2 million, respectively, from extinguishment of debt. We repurchased, in the open
market, $1.0 million face value of the 6.0% Notes and $50.7 million face value of the 3.0% Notes, resulting in a gain of $0.4
million and $18.5 million, respectively, from extinguishment of debt.
During 2008, we repurchased, in the open market, $38.7 million face value of the 8.0% Notes, $18.1 million face value of the
6.0% Notes and $6.5 million face value of the 4.875% Notes, resulting in a gain of $5.5 million from extinguishment of debt.
Income tax (provision) benefit. The 2010 income tax provision for our pre-tax income from continuing operations (including the
effects of the noncontrolling interest) of $117.0 million resulted in an effective tax rate of 34.4%. The 2009 income tax benefit
for our pre-tax loss from continuing operations (including the effects of the noncontrolling interest) of $168.1 million resulted in
an effective tax rate of 19.3%. The increase in the absolute value of the effective tax rate from 2010 to 2009 is primarily
attributable to more impairments in 2009 relating to assets that are not deductible for income tax purposes.
As of December 31, 2010, we had a net deferred tax liability of $200.7 million as compared to a net deferred tax liability of
$162.2 million as of December 31, 2009. The increase primarily relates to: 1) an increase in net deferred tax liabilities associated
with book and tax differences attributable to the amortization and impairment of intangible and FCC license assets and 2) a
decrease in deferred tax assets associated with the utilization of federal net operating losses.
The 2009 income tax benefit for our pre-tax loss from continuing operations (including the effects of the noncontrolling
interest) of $168.1 million resulted in an effective tax rate of 19.3%. The 2008 income tax benefit for our pre-tax loss from
continuing operations (including the effects of the noncontrolling interest) of $367.8 million resulted in an effective tax rate of
33.0%. The decrease in the effective tax rate benefit from 2008 to 2009 is primarily attributable to more impairments in 2009
relating to assets that are not deductible for income tax purposes.
As of December 31, 2009, we had a net deferred tax liability of $162.2 million as compared to a net deferred tax liability of
$195.0 million as of December 31, 2008. The decrease primarily relates to: 1) a decrease in net deferred tax liabilities associated
with book and tax differences attributable to the amortization and impairment of intangible and FCC license assets and 2) an
increase in deferred tax assets associated with the generation of 2009 federal net operating losses; partially offset by an increase in
deferred tax liabilities associated with book and tax differences attributable to contingent convertible debt instruments.
As of December 31, 2010, we had $26.1 million of gross unrecognized tax benefits. Of this total, $15.1 million (net of federal
effect on state tax issues) and $6.8 million (net of federal effect on state tax issues) represent the amounts of unrecognized tax
benefits that, if recognized, would favorably affect our effective tax rates from continuing operations and discontinued operations,
respectively. As of December 31, 2009, we had $26.1 million of gross unrecognized tax benefits. Of this total, $15.0 million (net
of federal effect on state tax issues) and $6.8 million (net of federal effect on state tax issues) represent the amounts of
unrecognized tax benefits that, if recognized, would favorably affect our effective tax rates from continuing operations and
discontinued operations, respectively. See Note 9. Income Taxes in the Notes to our Consolidated Financial Statements for further
information.
We recognized $1.0 million and $1.1 million of income tax expense for interest related to uncertain tax positions for the years
ended December 31, 2010 and 2009, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2010, we had $22.0 million in unrestricted cash and cash equivalent balances and working capital of
approximately $31.3 million, excluding restricted cash. Cash generated by our operations and availability under the Revolving
Credit Facility are used as our primary source of liquidity. As of December 31, 2010, we had $135.9 million of borrowing capacity
available on our Revolving Credit Facility. We anticipate that existing cash and cash equivalents, cash flow from our operations
and borrowing capacity under the Revolving Credit Facility will be sufficient to satisfy our debt service obligations, capital
expenditure requirements and working capital needs for the next twelve months. For our long-term liquidity needs, in addition to
the sources described above, we may rely upon the issuance of long-term debt, the issuance of equity or other instruments
convertible into or exchangeable for equity, or the sale of non-core assets. However, there can be no assurance that additional
financing or capital or buyers of our non-core assets will be available, or that the terms of any transactions will be acceptable or
advantageous to us.
On January 26, 2010, we commenced tender offers to purchase for cash any and all of the outstanding 3.0% and 4.875% Notes
at 100% of the face value of such notes. The tender offers expired February 23, 2010 and approximately $12.3 million and $14.3
million principal amount of the 3.0% and 4.875% Notes, respectively, were tendered and purchased. On May 17, 2010, the put
right period for the 3.0% Notes expired and holders representing $10.0 million in principal amount of the 3.0% Notes exercised
18 Sinclair Broadcast Group
their put rights. Holders of the remaining $5.4 million principal amount of 3.0% Notes can exercise put rights again in May 2017.
As of December 31, 2010, the face amount of the outstanding 4.875% Notes was $5.7 million. As of December 31, 2010, we
held $5.1 million in restricted cash to pay holders of the 4.875% Notes if they exercised their put rights on January 15, 2011. In
January 2011, the put option was not exercised, however, pursuant to our Bank Credit Agreement, the $5.1 million in restricted
cash must remain restricted and be used within 120 days towards reducing our overall debt balance. The 4.875% Notes mature
on July 15, 2018.
On August 19, 2010, we entered into an amendment of our Bank Credit Agreement. Under the Amendment, we paid down
$35.0 million of the outstanding $305.0 million balance under the Term Loan B and repriced the remaining $270.0 million
outstanding. The final terms of the Amendment are as follows:
• The Term Loan B bears interest at LIBOR plus 4.00% with a 1.5% LIBOR floor and will continue to amortize
principal at a rate of 0.25% per quarter commencing on March 31, 2011, continuing until the scheduled final payment
on October 29, 2015 with 94.19% due at maturity or upon earlier termination of the Term Loan B pursuant to the
terms in the Bank Credit Agreement.
• We have the right to prepay the Term Loan B at any time; provided, however, that if we prepay, reprice downward or
otherwise refinance all or any portion of the Term Loan B prior to August 19, 2011, then we will be required to pay
the Term Loan B lenders a prepayment premium equal to 1.00% of the aggregate amount prepaid, repriced or
otherwise refinanced. Any prepayments on the Term Loan B are deducted from the scheduled final payment due on
October 29, 2015.
• Provision for an additional incremental term loan capacity up to $100.0 million.
• The terms of the Revolving Credit Facility were not materially effected by the Amendment.
On September 20, 2010, we commenced tender offers to purchase for cash up to $60.0 million of the outstanding 6.0% Notes
and any and all of the outstanding 8.0% Notes. We offered to purchase the 6.0% Notes at a purchase price of $987.50 per $1,000
principal amount plus accrued and unpaid interest. We offered to purchase the 8.0% Notes at a purchase price of $1,002.50 per
$1,000 principal amount, if tendered within the first ten business days of the tender offer period or $972.50 per $1,000 principal
amount if tendered after such time, plus accrued and unpaid interest. The tender offers expired on October 19, 2010 and
approximately, $58.0 million and $175.7 million principal amount of the 6.0% and 8.0% Notes, respectively, were tendered and
purchased. The net proceeds from the offering of the 8.375% Notes, discussed below, were used to fund these tender offers. We
redeemed the remaining $49.0 million of the 8.0% Notes on November 19, 2010 at a purchase price of 100% of the principal
amount plus accrued and unpaid interest. As of December 31, 2010, the face amount of the outstanding 6.0% Notes was $70.0
million.
On October 4, 2010, we issued $250.0 million aggregate principal amount of 8.375% Notes due October 15, 2018 at 98.567%
of their par value. Interest on the 8.375% Notes will be paid on April 15 and October 15 of each year, beginning April 15, 2011.
Prior to October 15, 2014, we may redeem the 8.375% Notes in whole or in part, at any time or from time to time at a price equal
to 100% of the principal amount of the 8.375% Notes plus accrued and unpaid interest, plus a “make-whole premium” as set
forth in the Indenture.
In February 2011, we disclosed our intention to refinance a portion of and to amend certain terms of the Bank Credit
Agreement.
2010 Annual Report 19
Our ability to finance working capital needs, capital expenditures and general corporate needs from the public and private
markets, as well as the associated cost of funding is dependent, in part, on our credit ratings. During 2010, in conjunction with
the Amendment of the Bank Credit Agreement, the 8.375% Notes issuance, and the 6.0% and 8.0% Notes tenders, both Moody’s
Investor Services (Moody’s) and Standard & Poor’s Ratings Services (S&P) raised our credit ratings. The 6.0% Notes are not
rated. As of the filing date, our credit ratings, as assigned by Moody’s and S&P were:
Corporate Credit
8.375% Notes
4.875% and 3.0% Notes
9.25% Notes
Bank Credit Agreement
Moody’s
Ba3
B2
B2 (a)
Ba3
Baa3
S&P
BB-
B
B (b)
BB-
BB+
(a) The 3.0% Notes have not been rated by Moody’s; this rating reflects the rating for the 4.875% Notes.
(b) The 4.875% Notes have not been rated by S&P; this rating reflects the rating for the 3.0% Notes.
There can be no assurance that our credit ratings will remain at these levels or will not be downgraded in the future, in some
cases for reasons beyond our control.
Sources and Uses of Cash
The following table sets forth our cash flows for the years ended December 31, 2010, 2009 and 2008 (in millions):
$
$
Net cash flows from operating activities
Cash flows from (used in) investing activities:
Acquisition of property and equipment
Payments for acquisition of television stations
Consolidation of variable interest entity
Payments for acquisitions of other operating divisions
companies
Decrease (increase) in restricted cash
Dividends and distributions from cost method
investees
Purchase of alarm monitoring contracts
Investments in equity and cost method investees
Other
Net cash flows from (used in) investing activities
$
2010
155.0
(11.7)
—
—
—
59.6
0.9
(10.1)
(7.2)
0.4
31.9
2009
105.4
(7.7)
—
—
—
(64.9)
1.5
(12.3)
(10.6)
0.2
(93.8)
$
$
$
$
$
2008
211.8
(25.2)
(17.1)
1.3
(53.5)
—
1.6
(7.7)
(42.0)
0.3
(142.3)
$
Cash flows (used in) from financing activities:
Proceeds from notes payable, commercial bank
financing and capital leases
Repayments of notes payable, commercial bank
financing and capital leases
Repurchase of Class A Common Stock
Payments for deferred financing costs
Dividends paid on Class A and Class B Common
Stock
Proceeds from derivative terminations
Purchase of subsidiary shares from noncontrolling
interest
Noncontrolling interests distributions
Other
Net cash flows used in financing activities
$
20 Sinclair Broadcast Group
$
283.9
$
980.9
$
274.6
(427.4)
—
(7.0)
(34.2)
—
—
(0.3)
(3.1)
(188.1)
(931.6)
(1.5)
(28.8)
(16.0)
—
(5.0)
—
(2.8)
(4.8)
$
(255.6)
(29.8)
(0.5)
(66.7)
8.0
—
(0.6)
(3.4)
(74.0)
$
Net cash flows from operating activities increased during the year ended December 31, 2010 compared to the same period in
2009. During 2010, we received more cash receipts from customers, net of cash payments to vendors, however, we paid more
interest and program payments. In 2010, we received larger tax refunds than in 2009.
Net cash flows from operating activities decreased during the year ended December 31, 2009 compared to the same period in
2008. During 2009, we received less cash receipts from customers, net of cash payments to venders for operating expenses and
working capital cash activities and received less in tax refunds. In 2009, we made a payment of original issuance discount
associated with our 3.0% Notes. These decreases to operating cash were partially offset by less interest and tax payments in 2009.
We expect program payments to decrease in 2011 compared to 2010. We expect net interest expense to decrease in 2011
compared to 2010.
With the exception of restricted cash, net cash flows used in investing activities decreased slightly during the year ended
December 31, 2010 compared to the same period in 2009. We decreased our investment in restricted cash in order to use the
cash to pay for redemptions of the 3.0% and 4.875% Notes through a combination of tender offers, put rights and open market
purchases.
With the exception of restricted cash, net cash flows used in investing activities decreased during the year ended December 31,
2009 compared to the same period in 2008. In 2009, we focused our cash use towards debt and stock redemptions in the first
quarter and conservation of cash during the second, third and fourth quarters instead of new investment opportunities. We
purchased no other operating divisions companies or television stations during 2009. We decreased our equity investments and
capital expenditures. In addition, we increased the purchase of alarm monitoring contracts in 2009 as that business continued to
grow. Finally, the increase in 2009 in restricted cash was primarily related to the cash collateral account associated with the 3.0%
and 4.875% Notes.
In 2011, we anticipate incurring more capital expenditures than incurred in 2010.
Financing Activities
Net cash flows used in financing activities increased during the year ended December 31, 2010 compared to the same period in
2009. During 2010, we purchased $117.7 million principal amount of our 3.0% Notes, 4.875% Notes and 6.0% Notes pursuant
to a combination of tender offers, put rights and open market purchases. We reduced our Term Loan B by $60.0 million through
a combination of an early repayment and the amendment of our Bank Credit Agreement in 2010. In addition, we fully
extinguished the outstanding $224.7 million principal amount of 8.0% Notes in 2010. During 2010, we issued $250.0 million in
principal amount of our 8.375% Notes.
Net cash flows used in financing activities decreased during the year ended December 31, 2009 compared to the same period in
2008. We had more debt proceeds than debt repayments in 2009 compared to 2008 primarily due to the cash required to be held
in the cash collateral account associated with the 3.0% and 4.875% Notes. In addition, the volume of proceeds and repayment
activity was greater in 2009 compared to 2008 as well as the payments made for deferred financing costs due to the refinancings
that occurred in the fourth quarter of 2009.
From time to time, we may repurchase additional outstanding debt and stock on the open market. We expect to fund any
repurchases with cash generated from operating activities and in some cases, borrowings under our Revolving Credit Facility.
We ceased paying our cash dividend after the first quarter of 2009, however, in November 2010, our Board of Directors
declared a $0.43 per share common stock dividend paid in December 2010. In February 2011, our Board of Directors reinstated
a quarterly common stock dividend of $0.12 per share. Future dividends on our common shares, if any, will be at the discretion
of our Board of Directors and will depend on several factors including our results of operations, cash requirements and surplus,
financial condition, covenant restrictions and other factors that the Board of Directors may deem relevant. Under the terms of
the Bank Credit Agreement, in certain circumstances we may make up to $40.0 million in unrestricted cash payments including
but not limited to dividends and other strategic investments.
2010 Annual Report 21
Contractual Obligations
We have various contractual obligations which are recorded as liabilities in our consolidated financial statements. Other items,
such as certain purchase commitments and other executory contracts are not recognized as liabilities in our consolidated financial
statements but are required to be disclosed. For example, we are contractually committed to acquire future programming and
make certain minimum lease payments for the use of property under operating lease agreements.
The following table reflects a summary of our contractual cash obligations as of December 31, 2009 and the future periods in
which such obligations are expected to be settled in cash (in thousands):
CONTRACTUAL OBLIGATIONS RELATED TO CONTINUING OPERATIONS (a)
Total
2011
2012-2013
2014-2015
2016 and
thereafter (b)
Notes payable, capital leases and
commercial bank financing (c), (d)
$
1,748.7
$
95.8
$
265.8
$
419.7
$
967.4
Notes and capital leases payable to
affiliates (c)
Operating leases
Employment contracts
Program content (e)
Programming services (f)
Maintenance and support
Other operating contracts
LMA and outsourcing agreements (g)
Investments and loan commitments (h)
Total contractual cash obligations
$
34.9
22.8
13.8
284.8
106.5
1.8
4.8
2.9
14.9
2,235.9
$
5.4
3.9
8.6
111.4
39.9
1.6
0.6
0.9
14.9
283.0
$
9.9
6.9
4.8
142.8
43.1
0.2
1.0
1.3
—
475.8
$
6.8
5.8
0.4
30.6
16.1
—
0.8
0.2
—
480.4
$
12.8
6.2
—
—
7.4
—
2.4
0.5
—
996.7
(a) Excluded from this table are $26.1 million of accrued unrecognized tax benefits. Due to inherent uncertainty, we can not make
reasonable estimates of the amount and period payments will be made.
(b) Includes a one-year estimate of $7.3 million in payments related to contracts that automatically renew. We have not calculated
potential payments for years after 2016.
(c)
Includes interest on fixed rate debt and capital leases. Estimated interest on our recourse variable rate debt has been excluded.
Recourse variable rate debt represents $270.0 million of our $1.2 billion total face value of debt as of December 31, 2010.
(d) During 2010, we repurchased $22.3 million, $31.3 million, $64.1 million and $224.7 million of our 3.0% Notes, 4.875% Notes, 6.0%
Notes and 8.0% Notes, respectively. As of December 31, 2010, the outstanding face amount of the 3.0% Notes, 4.875% Notes, 6.0%
Notes and 8.0% Notes was $5.4 million, $5.7 million, $70.0 million and zero, respectively.
(e) Our Program content includes contractual amounts owed through the expiration date of the underlying agreement for active and
future program contracts, network programming and additional advertising inventory in various dayparts, including prime-time and
NFL programming. Active program contracts are included in the balance sheet as an asset and liability while future program
contracts are excluded until the cost is known, the program is available for its first showing or telecast and the licensee has accepted
the program. Industry protocol typically enables us to make payments for program contracts on a three-month lag, which differs
from the contractual timing within the table. Network programming agreements may include variable fee components such as
subscriber levels, which in certain circumstances have been estimated and reflected in the table.
(f)
Includes obligations related to rating service fees, music license fees, market research, weather and news services.
(g) Certain LMAs require us to reimburse the licensee owner their operating costs. Certain outsourcing agreements require us to pay a
fee to another station for providing non-programming services. The amount will vary each month and, accordingly, these amounts
were estimated through the date of the agreements’ expiration, based on historical cost experience. Excluded from the table are
estimated amounts due pursuant to LMAs and outsourcing agreements where we consolidate the counterparty, as well as,
prepayments towards purchase options to acquire the counterparty. These amounts totaled $18.1 million, $25.0 million, $13.9 million
and $3.8 million for the periods 2011, 2012-2013, 2014-2015 and 2016 and thereafter, respectively.
(h) Commitments to contribute capital or provide loans to Allegiance Capital, LP, Sterling Ventures Partners, LP and Patriot Capital II,
LP.
22 Sinclair Broadcast Group
Off Balance Sheet Arrangements
Off balance sheet arrangements as defined by the SEC means any transaction, agreement or other contractual arrangement to
which an entity unconsolidated with the registrant is a party, under which the registrant has: obligations under certain guarantees
or contracts; retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangements; obligations
under certain derivative arrangements; and obligations arising out of a material variable interest in an unconsolidated entity. As of
December 31, 2010, we do not have any material off balance sheet arrangements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates. At times we enter into derivative instruments primarily for the
purpose of reducing the impact of changing interest rates on our floating rate debt and to reduce the impact of changing fair
market values on our fixed rate debt. See Note 8. Derivative Instruments and Note 5. Notes Payable and Commercial Bank Financing, in
the Notes to our Consolidated Financial Statements.
On August 19, 2010, we entered into an amendment of our Bank Credit Agreement. Under the Amendment, we paid down
$35.0 million of the outstanding $305.0 million balance under the Term Loan B and repriced the remaining $270.0 million
outstanding. As of December 31, 2010, we had $270.0 million outstanding under our Term Loan B and no amount drawn on our
Revolving Credit Facility. The Term Loan B will initially bear interest at LIBOR plus 4.0% with a 1.5% LIBOR floor. Any
outstanding amounts accrue interest with a variable rate and therefore increases our risk to increases from interest rates. During
2010, the three-month LIBOR rate slightly increased.
We are exposed to risk from a change in interest rates to the extent we are required to refinance existing fixed rate indebtedness
at rates higher than those prevailing at the time the existing indebtedness was incurred. The fair value of the 4.875% Notes, 3.0%
Notes, 6.0% Notes, 8.375% Notes and 9.25% Notes combined was $884.9 million as of December 31, 2010. We estimate that
adding 1.0% to prevailing interest rates would result in a decrease in fair value of these notes by $42.3 million as of December 31,
2010. Generally, the fair market value of these notes will decrease as interest rates rise and increase as interest rates fall.
Under certain circumstances, we have contingent cash interest features related to the 3.0% Notes and the 4.875% Notes. The
contingent cash interest feature for both issuances were embedded derivatives which have negligible fair values.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures and Internal Control over Financial
Reporting
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer,
evaluated the design and effectiveness of our disclosure controls and procedures and our internal control over financial reporting
as of December 31, 2010.
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means
controls and other procedures of a company that are designed to provide reasonable assurance that information required to be
disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
2010 Annual Report 23
The term “internal control over financial reporting,” as defined in Rules 13a-15d-15(f) under the Exchange Act, means a
process designed by, or under the supervision of our Chief Executive and Chief Financial Officers and effected by our Board of
Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (GAAP)
and includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with GAAP and that our receipts and expenditures are being made in accordance with authorizations of
management or our Board of Directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material adverse effect on our financial statements.
Assessment of Effectiveness of Disclosure Controls and Procedures
Based on the evaluation of our disclosure controls and procedures as of December 31, 2010, our Chief Executive Officer and
Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable
assurance level.
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
assessed the effectiveness of our internal control over financial reporting as of December 31, 2010 based on the criteria set forth in
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on our assessment, management has concluded that, as of December 31, 2010, our internal control over financial
reporting was effective based on those criteria.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2010 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) during the quarter ended December 31, 2010, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and
procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more
people, or by management’s override of the control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the
degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
24 Sinclair Broadcast Group
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
As of December 31,
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Current portion of restricted cash
Accounts receivable, net of allowance for doubtful accounts of $3,242 and $2,932,
$
respectively
Affiliate receivable
Current portion of program contract costs
Income taxes receivable
Prepaid expenses and other current assets
Deferred barter costs
Deferred tax assets
Total current assets
PROGRAM CONTRACT COSTS, less current portion
PROPERTY AND EQUIPMENT, net
RESTRICTED CASH, less current portion
GOODWILL
BROADCAST LICENSES
DEFINITE-LIVED INTANGIBLE ASSETS, net
OTHER ASSETS
Total assets
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable
Accrued liabilities
Income taxes payable
Current portion of notes payable, capital leases and commercial bank financing
Current portion of notes payable and capital leases payable to affiliates
Current portion of program contracts payable
Deferred barter revenues
Total current liabilities
LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion
Notes payable and capital leases to affiliates, less current portion
Program contracts payable, less current portion
Deferred tax liabilities
Other long-term liabilities
Total liabilities
EQUITY (DEFICIT):
SINCLAIR BROADCAST GROUP SHAREHOLDERS’ EQUITY (DEFICIT):
Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 50,284,052
and 47,375,437 shares issued and outstanding, respectively
Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 30,083,819
and 32,453,859 shares issued and outstanding, respectively, convertible into
Class A Common Stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total Sinclair Broadcast Group shareholders’ deficit
Noncontrolling interest
Total deficit
Total liabilities and equity (deficit)
2010
21,974
5,058
121,283
88
37,000
—
6,064
3,156
9,658
204,281
8,729
272,231
223
660,017
47,375
184,652
108,416
1,485,924
5,952
68,071
298
19,556
3,196
68,301
2,522
167,896
1,169,740
19,573
29,593
210,335
45,869
1,643,006
$
$
$
2009
23,224
27,667
106,792
69
43,741
8,073
6,130
2,825
7,277
225,798
16,417
296,227
37,216
660,017
51,988
193,405
108,961
1,590,029
3,746
60,523
—
40,632
2,995
91,995
2,810
202,701
1,297,964
24,717
48,448
169,527
48,894
1,792,251
$
$
503
474
301
609,640
(771,953)
(3,914)
(165,423)
8,341
(157,082)
1,485,924
$
325
605,340
(813,876)
(4,213)
(211,950)
9,728
(202,222)
1,590,029
$
The accompanying notes are an integral part of these consolidated financial statements.
2010 Annual Report 25
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(In thousands, except per share data)
REVENUES:
Station broadcast revenues, net of agency commissions
Revenues realized from station barter arrangements
Other operating divisions revenues
Total revenues
OPERATING EXPENSES:
Station production expenses
Station selling, general and administrative expenses
Expenses recognized from station barter arrangements
Amortization of program contract costs and net realizable value adjustments
Other operating divisions expenses
Depreciation of property and equipment
Corporate general and administrative expenses
Amortization of definite-lived intangible assets
Gain on asset exchange
Impairment of goodwill, intangible and other assets
Total operating expenses
Operating income (loss)
OTHER INCOME (EXPENSE):
Interest expense and amortization of debt discount and deferred financing
costs
(Loss) gain from extinguishment of debt
(Loss) income from equity and cost method investments
Other income, net
Total other expense
Income (loss) from continuing operations before income taxes
INCOME TAX (PROVISION) BENEFIT
Income (loss) from continuing operations
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of related income tax provision of
($77), ($350) and ($358), respectively
NET INCOME (LOSS)
Net loss attributable to the noncontrolling interest
NET INCOME (LOSS) ATTRIBUTABLE TO SINCLAIR BROADCAST
GROUP
Dividends declared per share
EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO
SINCLAIR BROADCAST GROUP:
Basic earnings (loss) per share from continuing operations
Basic loss per share from discontinued operations
Basic earnings (loss) per share
Diluted earnings (loss) per share from continuing operations
Diluted loss per share from discontinued operations
Diluted earnings (loss) per share
Weighted average common shares outstanding
Weighted average common and common equivalent shares outstanding
AMOUNTS ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP
COMMON SHAREHOLDERS:
Income (loss) from continuing operations, net of tax
Loss from discontinued operations, net of tax
Net income (loss)
2010
2009
2008
$ 655,378
75,210
36,598
767,186
$ 554,597
58,182
43,698
656,477
$ 639,163
59,877
55,434
754,474
154,133
127,091
67,083
60,862
30,916
36,307
26,800
18,834
—
4,803
526,829
240,357
(116,046)
(6,266)
(4,861)
2,667
(124,506)
115,851
(40,226)
75,625
(577)
75,048
1,100
76,148
0.43
0.96
(0.01)
0.95
0.95
(0.01)
0.94
80,245
83,606
$
$
$
$
$
$
$
$
142,415
122,833
48,119
73,087
45,520
42,892
25,632
22,355
(4,945)
249,799
767,707
(111,230)
(80,021)
18,465
354
1,972
(59,230)
(170,460)
32,512
(137,948)
(81)
(138,029)
2,335
158,965
136,142
53,327
84,422
59,987
44,765
26,285
18,340
(3,187)
463,887
1,042,933
(288,459)
(87,634)
5,451
(2,703)
3,461
(81,425)
(369,884)
121,362
(248,522)
(141)
(248,663)
2,133
$ (135,694)
—
$
$ (246,530)
0.80
$
$
$
$
$
$
$
(1.70)
—
(1.70)
(1.70)
—
(1.70)
79,981
79,981
$
$
$
$
$
$
(2.87)
—
(2.87)
(2.87)
—
(2.87)
85,794
85,794
$
$
76,725
(577)
76,148
$ (135,613)
(81)
$ (135,694)
$ (246,389)
(141)
$ (246,530)
The accompanying notes are an integral part of these consolidated financial statements.
26 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(In thousands)
Sinclair Broadcast Group Shareholders
Class A
Common
Stock
528
$
Class B
Common
Stock
$ 345
Additional
Paid-In
Capital
$ 631,621
Accumulated
Deficit
$ (364,049)
Accumulated
Other
Comprehensive
Loss
$
(1,931)
Noncontrolling
Interests
3,067
$
Total
Equity
(Deficit)
$269,581
—
(67,603)
—
4
—
—
—
—
—
—
—
—
—
—
4,021
—
—
—
(8)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(67,603)
—
2,479
4,025
2,479
10,989
10,989
1,900
1,900
—
(8)
(1,564)
—
(1,564)
BALANCE, December 31, 2007
Dividends declared on Class
A and Class B Common
Stock
Class A Common Stock
issued pursuant to
employee benefit plans
Issuance of subsidiary stock
awards
Contributions from
noncontrolling interest, net
of distributions
Consolidation of variable
interest entity
Tax provision on employee
stock awards
Change in pension funded
status and amortization of
net periodic pension
benefit costs, net of taxes
Repurchase of 6,722,310
shares of Class A Common
Stock
Net loss
BALANCE, December 31, 2008
$
(67)
—
465
—
—
345
$
(29,769)
—
$ 605,865
—
(246,530)
$ (678,182)
—
—
(3,495)
—
(2,133)
16,302
(29,836)
(248,663)
$ (58,700)
$
$
The accompanying notes are an integral part of these consolidated financial statements.
2010 Annual Report 27
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(In thousands)
Sinclair Broadcast Group Shareholders
Class A
Common
Stock
465
$
Class B
Common
Stock
$ 345
Additional
Paid-In
Capital
$ 605,865
Accumulated
Deficit
$ (678,182)
Accumulated
Other
Comprehensive
Loss
$
(3,495)
Noncontrolling
Interests
16,302
$
Total
Equity
(Deficit)
(58,700)
$
4
20
—
—
(15)
—
—
—
1,378
(20)
—
—
—
—
—
—
—
(220)
(1,439)
—
(244)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
26
1,382
—
26
(4,807)
(5,027)
—
(1,454)
542
—
542
(244)
—
—
474
—
—
325
$
—
—
$ 605,340
—
(135,694)
$ (813,876)
(718)
—
(4,213)
$
—
(2,335)
9,728
(718)
(138,029)
$ (202,222)
$
BALANCE, December 31, 2008
Class A Common Stock
issued pursuant to
employee benefit plans
Class B Common Stock
converted into Class A
Common Stock
Contribution from
noncontrolling interests,
net of distributions
Purchase of subsidiary shares
from noncontrolling
interest
Repurchase of 1,536,633
shares of Class A Common
Stock
Removal of noncontrolling
interest deficit related to
disposition of other
operating divisions
companies
Tax provision on employee
stock awards
Change in pension funded
status and amortization of
net periodic pension
benefit costs, net of taxes
Net (loss) income
BALANCE, December 31, 2009
$
The accompanying notes are an integral part of these consolidated financial statements.
28 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(In thousands)
Sinclair Broadcast Group Shareholders
Class A
Common
Stock
474
$
Class B
Common
Stock
$ 325
Additional
Paid-In
Capital
$ 605,340
Accumulated
Deficit
$ (813,876)
Accumulated
Other
Comprehensive
Loss
$
(4,213)
Noncontrolling
Interests
9,728
$
—
5
24
—
—
—
—
(24)
—
—
—
(34,225)
4,423
—
—
(123)
—
—
—
—
—
—
—
—
—
—
—
—
(287)
—
Total
Equity
(Deficit)
$ (202,222)
(34,225)
4,428
—
(287)
(123)
BALANCE, December 31, 2009
Dividends declared on Class
A and Class B Common
Stock
Class A Common Stock
issued pursuant to
employee benefit plans
Class B Common Stock
converted into Class A
Common Stock
Distributions to
noncontrolling interests
Tax provision on employee
stock awards
Change in pension funded
status and amortization of
net periodic pension
benefit costs, net of taxes
Net income (loss)
BALANCE, December 31, 2010
$
—
—
503
—
—
301
$
—
—
$ 609,640
—
76,148
$ (771,953)
299
—
(3,914)
$
—
(1,100)
8,341
299
75,048
$ (157,082)
$
The accompanying notes are an integral part of these consolidated financial statements.
2010 Annual Report 29
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(In thousands)
2010
2009
2008
Net income (loss)
$
75,048
$
(138,029)
$
(248,663)
Change in pension funded status and amortization of
net periodic pension benefit costs, net of taxes
Comprehensive income (loss)
Comprehensive loss attributable to the noncontrolling
interest
Comprehensive income (loss) attributable to Sinclair
299
75,347
1,100
(718)
(138,747)
2,335
(1,564)
(250,227)
2,133
Broadcast Group
$
76,447
$
(136,412)
$
(248,094)
The accompanying notes are an integral part of these consolidated financial statements.
30 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(In thousands)
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net (loss) income to net cash flows from operating
2010
2009
2008
$
75,048
$ (138,029)
$ (248,663)
activities:
Amortization of debt discount, net of debt premium
Depreciation of property and equipment
Recognition of deferred revenue
Impairment of goodwill, intangible and other assets
Amortization of definite-lived intangible assets
Amortization of program contract costs and net realizable value
adjustments
Loss (gain) on extinguishment of debt, non-cash portion
Original debt issuance discount paid
Deferred tax provision (benefit)
Changes in assets and liabilities, net of effects of acquisitions and
dispositions:
(Increase) decrease in accounts receivable, net
Decrease (increase) in income taxes receivable
Increase in accounts payable and accrued liabilities
(Increase) decrease in other assets and liabilities
Payments on program contracts payable
Other, net
Net cash flows from operating activities
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of property and equipment
Consolidation of variable interest entity
Purchase of alarm monitoring contracts
Payments for acquisition of television stations
Payments for acquisitions of other operating divisions companies
Decrease (increase) in restricted cash
Dividends and distributions from equity and cost method investees
Investments in equity and cost method investees
Proceeds from the sale of assets
Proceeds from insurance settlements
Loans to affiliates
Proceeds from loans to affiliates
Net cash flows from (used in) investing activities
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases
Repayments of notes payable, commercial bank financing and capital leases
Purchase of subsidiary shares from noncontrolling interests
Repurchase of Class A Common Stock
Dividends paid on Class A and Class B Common Stock
Payments for deferred financing costs
Proceeds from derivative terminations
Noncontrolling interests (distributions) contributions
Repayments of notes and capital leases to affiliates
Net cash flows used in financing activities
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of year
CASH AND CASH EQUIVALENTS, end of year
$
4,963
36,563
(25,967)
4,803
18,834
60,862
5,525
(14,393)
38,636
(14,491)
8,073
33,312
6
(88,992)
12,179
154,961
(11,694)
—
(10,106)
—
—
59,602
894
(7,224)
110
372
(136)
117
31,935
283,930
(427,421)
—
—
(34,225)
(7,020)
—
(287)
(3,123)
(188,146)
(1,250)
23,224
21,974
10,286
43,217
(25,512)
249,799
22,355
73,087
(18,465)
(18,176)
(24,949)
823
(5,739)
12,654
6,778
(82,184)
(509)
105,436
(7,693)
—
(12,291)
—
—
(64,883)
1,501
(10,601)
126
—
(162)
157
(93,846)
980,875
(931,566)
(5,000)
(1,454)
(16,038)
(28,815)
—
26
(2,864)
(4,836)
6,754
16,470
23,224
$
$
13,404
45,027
(29,416)
463,887
18,340
84,422
2,000
—
(121,077)
22,884
13,938
14,465
5,937
(82,285)
8,908
211,771
(25,169)
1,328
(7,675)
(17,123)
(53,487)
—
1,575
(41,971)
199
—
(178)
179
(142,322)
274,643
(255,597)
—
(29,836)
(66,683)
(524)
8,001
(637)
(3,326)
(73,959)
(4,510)
20,980
16,470
The accompanying notes are an integral part of these consolidated financial statements.
2010 Annual Report 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
Sinclair Broadcast Group, Inc. is a diversified television broadcasting company that owns or provides certain programming,
operating or sales services to television stations pursuant to broadcasting licenses that are granted by the Federal Communications
Commission (the FCC or Commission). We currently own, provide programming and operating services pursuant to local
marketing agreements (LMAs) or provide, or are provided, sales services pursuant to outsourcing agreements to 58 television
stations in 35 markets. For the purpose of this report, these 58 stations are referred to as “our” stations. Our broadcast group is
a single reportable segment for accounting purposes and includes the following network affiliations: FOX (20 stations);
MyNetworkTV (16 stations; not a network affiliation, however is branded as such); ABC (9 stations); The CW (10 stations); CBS
(2 stations) and NBC (1 station). In addition, certain stations broadcast programming on second and third digital signals through
network affiliation or program service arrangements with TheCoolTV, The Country Network, MyNetworkTV, This TV and
Estrella TV.
Principles of Consolidation
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries
and variable interest entities (VIEs) for which we are the primary beneficiary. Noncontrolling interest represents a minority
owner’s proportionate share of the equity in certain of our consolidated entities. All intercompany transactions and account
balances have been eliminated in consolidation.
Variable Interest Entities
In June 2009, the Financial Accounting Standards Board (FASB) issued amended guidance on the consolidation of variable
interest entities (VIEs). The intent of this guidance is to improve financial reporting by enterprises involved with VIEs and to
provide more relevant and reliable information to users of financial statements. The new guidance requires a number of new
disclosures and we are required to perform ongoing reassessments of whether we are the primary beneficiary of a VIE for
financial reporting purposes. For us, this guidance was effective as of January 1, 2010.
In determining whether we are the primary beneficiary of a VIE for financial reporting purposes, we consider whether we have
the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether we
have the obligation to absorb losses or the right to receive returns that would be significant to the VIE. We consolidate VIEs
when we are the primary beneficiary. The assets of our consolidated VIEs can only be used to settle the obligations of the VIE.
All the liabilities including debt held by our VIEs are non-recourse to us. However, the VIE debt of Cunningham Broadcasting
Corporation (Cunningham) contains cross-default provisions under our senior secured credit facility (Bank Credit Agreement).
See Note 11. Related Person Transactions for more information.
We have entered into LMAs to provide programming, sales and managerial services for television stations of Cunningham, the
license owner of six television stations as of December 31, 2010. In February 2011, we entered into another LMA agreement with
Cunningham for WDBB-TV, in Birmingham, Alabama. We pay LMA fees to Cunningham and also reimburse all operating
expenses. We also have an acquisition agreement in which we have a purchase option to buy the license assets of the television
stations which includes the FCC license and certain other assets used to operate the station (License Assets). Our applications to
acquire the Federal Communications Commission (FCC) licenses are pending approval. We have determined that the
Cunningham stations are VIEs and that based on the terms of the agreements, we are the primary beneficiary of the variable
interests because we have the power to direct the activities which significantly impact the economic performance of the VIE
through the sales and managerial services we provide and we absorb losses and returns that would be considered significant to
Cunningham. See Note 11. Related Person Transactions for more information on our arrangements with Cunningham. Included in
the accompanying consolidated statements of operations for the years ended December 31, 2010, 2009 and 2008 are net revenues
of $118.5 million, $100.9 million and $109.7 million, respectively, that relate to LMAs.
We have outsourcing agreements with other license owners, which we provide certain non-programming related sales,
operational and administrative services. We pay a fee to the license owner based on a percentage of broadcast cash flow and we
reimburse all operating expenses. We also have a purchase option to buy the License Assets. For the same reasons noted above
regarding the LMA, we have determined that the outsourced license station assets are VIEs and we are the primary beneficiary.
32 Sinclair Broadcast Group
As of the dates indicated, the carrying amounts and classification of the assets and liabilities of the VIEs mentioned above
which have been included in our consolidated balance sheets as of December 31, 2010 and 2009 were as follows (in thousands):
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Income taxes receivable
Current portion of program contract costs
Prepaid expenses and other current assets
Deferred tax assets
Total current asset
PROGRAM CONTRACT COSTS, less current portion
PROPERTY AND EQUIPMENT, net
GOODWILL
BROADCAST LICENSES
DEFINITE-LIVED INTANGIBLE ASSETS, net
OTHER ASSETS
Total assets
CURRENT LIABILITIES:
LIABILITIES
Accounts payable
Accrued liabilities
Income taxes payable
Current portion of notes payable, capital leases and commercial bank financing
Current portion of program contracts payable
Total current liabilities
LONG-TERM LIABILITIES:
$
$
$
Notes payable, capital leases and commercial bank financing, less current portion
Program contracts payable, less current portion
Deferred tax liabilities
Total liabilities
$
2010
2009
5,319
—
480
105
—
5,904
491
7,461
6,357
4,183
6,959
914
32,269
37
773
44
11,056
649
12,559
13,484
190
—
26,233
$
$
$
$
4,127
33
430
129
27
4,746
649
8,239
6,357
4,320
7,393
213
31,917
37
774
—
11,039
576
12,426
24,540
444
218
37,628
The amounts above represent the consolidated assets and liabilities of the VIEs related to our LMA and outsourcing
agreements and have been aggregated as they all relate to our broadcast business. In addition the risk and reward characteristics
of the VIEs are similar.
Under the previously applicable accounting guidance for consolidation, we had determined that we had a variable interest in
four real estate ventures and that we were the primary beneficiary of those VIEs and should consolidate the assets and liabilities
of those entities. However, under the new accounting guidance for consolidation which was effective January 1, 2010, we no
longer consider one of these investments to be a VIE since the investment does not meet the VIE criteria under the new
accounting guidance. We still consolidate the assets and liabilities of this entity pursuant to other accounting guidance based on
voting-interests. Under the new accounting guidance for consolidation, we no longer consider ourselves the primary beneficiary
of the other three real estate ventures since, as the manager of the venture, the other partner holds the power to direct activities
that significantly impact the economic performance of the VIE and can participate in returns that would be considered significant
to the VIE. The effect of this change is not material to our consolidated financial statements.
We have investments in other real estate ventures and investment companies which are considered VIEs. However, we do not
participate in the management of these entities including the day-to-day operating decisions or other decisions which allow us to
control the entity, and therefore, we are not considered the primary beneficiary of the VIE. We account for these entities using
the equity or cost method of accounting.
2010 Annual Report 33
The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary as of December 31, 2010
and 2009 are as follows (in thousands):
Investments in real estate ventures
Investments in investment
companies
Total
2010
Carrying
amount
7,769
$
24,872
32,641
$
Maximum
exposure
7,769
24,872
32,641
$
$
2009
Carrying
amount
8,796
Maximum
exposure
8,796
$
21,108
29,904
21,108
29,904
$
$
$
The carrying amounts above are included in other assets in the consolidated balance sheets. The income and loss related to
these investments are recorded in (loss) income from equity and cost method investments in the consolidated statement of
operations. We recorded income of $2.1 million, a loss of $0.6 million and $4.4 million for the years ended December 31, 2010,
2009 and 2008, respectively. As of December 31, 2010 and December 31, 2009, our unfunded commitments totaled $14.9 million
and $16.8 million, respectively.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities. Actual results
could differ from those estimates.
Nonmonetary Asset Exchanges
In 2004, Sprint Nextel Corporation (Nextel) agreed to relocate its airwaves to end interference between its cellular signals and
the wireless signals used by the country’s public safety agencies. As part of this agreement, the FCC granted Nextel the right to a
certain spectrum within the 1.9 GHz band that was used by television broadcasters for electronic news gathering. Accordingly,
Nextel entered into agreements with several of our stations to exchange our existing analog equipment for comparable digital
equipment. As equipment was exchanged and placed in service, we recorded a gain to the extent that the fair market value of the
equipment received exceeds the carrying amount of the equipment relinquished. The equipment is recorded at the estimated fair
market value and is depreciated over a useful life of eight years. For the year ended December 31, 2009 and 2008, we recorded a
gain of $4.9 million and $3.2 million, respectively, for the equipment received. We received all applicable equipment pursuant to
the agreement in 2009.
Recent Accounting Pronouncements
In September 2009, the FASB ratified the Emerging Issues Task Force’s (EITF’s) amended guidance on accounting for revenue
arrangements with multiple deliverables. The amended guidance allows the use of an estimated selling price for the undelivered
units of accounting in transactions in which vendor-specific objective evidence (VSOE) or third-party evidence (TPE) does not
exist. The amended guidance no longer allows the use of the residual method when allocating arrangement consideration
between the delivered and undelivered units of accounting if VSOE and TPE of selling price does not exist for all units of
accounting. Entities are required to estimate the selling price of the deliverables, when VSOE and TPE are not available, and
then allocate the consideration based on the relative selling prices of the deliverables. This guidance also requires additional
disclosures including the amount of revenue recognized each reporting period and the amount of deferred revenue as of the end
of each reporting period under this guidance. This guidance is effective for revenue arrangements entered into or materially
modified in fiscal years beginning after June 15, 2010 and should be applied on a prospective basis. We do not believe that this
guidance will have a material impact on our consolidated financial statements.
In January 2010, the FASB amended the guidance on fair value measurements and disclosures to add two new disclosure
provisions to the current fair value disclosure guidance, including (1) details of transfers in and out of level 1 and level 2
measurements, and (2) gross presentation of activity within the level 3 roll forward. The guidance also amends two existing fair
value disclosure requirements so that entities are required to disclose (1) the valuation techniques and inputs used to develop fair
value measurements for assets and liabilities that are measured at fair value on both a recurring basis and nonrecurring basis in
periods subsequent to initial recognition and (2) fair value measurement disclosures for each class of assets and liabilities. A class
is defined as a subset of assets or liabilities within a line item in the statement of financial position. The guidance is for interim
and annual reporting periods beginning after December 15, 2009, except for the changes to the level 3 roll forward which are
effective for fiscal years beginning after December 15, 2010. We added the required disclosures under this guidance to our
consolidated financial statements.
34 Sinclair Broadcast Group
In November 2010, the FASB ratified the EITF’s amended guidance with respect to goodwill impairment. The amended
guidance requires that step two of the goodwill impairment test be performed if the carrying amount of a reporting unit is zero or
negative and it is more likely than not that a goodwill impairment exists based on any adverse qualitative factors including an
evaluation of the triggering circumstances noted in the guidance. The change is effective for fiscal years and interim changes
within those years beginning after December 15, 2010. We do not believe that this guidance will have a material impact on our
consolidated financial statements.
2009 Retrospective Application of New Accounting Standards
In December 2007, the FASB issued accounting guidance that requires the recognition of a noncontrolling interest (minority
interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income
attributable to the noncontrolling interest is included in consolidated net income on the face of the statement of operations. The
new guidance was effective for financial statements issued after December 15, 2008. We applied the requirements of this
guidance retrospectively to our consolidated financial statements resulting in a change to the presentation of loss attributable to
noncontrolling interest and net income (loss) attributable to Sinclair Broadcast Group on the face of the income statement for the
year ended December 31, 2008.
In May 2008, the FASB issued new accounting guidance that requires issuers of convertible debt instruments that may be
settled in cash upon conversion to account for the liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. Issuers were required to determine
the carrying value of just the liability portion of the debt by measuring the fair value of a similar liability (including any embedded
features other than the conversion option) that does not have an associated equity component. The excess of the initial proceeds
received from the debt issuance and the fair value of the liability component are recorded as a debt discount with the offset
recorded to equity. The discount is amortized to interest expense using the interest method over the life of a similar liability that
does not have an associated equity component. Transaction costs incurred with third parties shall be allocated between the
liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity
issuance costs, respectively, with the debt issuance costs amortized to interest expense. This guidance was effective for financial
statements issued after December 15, 2008. In 2009, we recorded the impact of this guidance retrospectively by recording
additional interest expense on our 3.0% Convertible Senior Notes, due 2027 (the 3.0% Notes) related to the amortization of the
debt discount and deferred financing costs of approximately $9.9 million for the year ended December 31, 2008. As of December
31, 2008, accumulated deficit increased, net of taxes, $8.8 million and additional paid in capital increased $17.5 million as a result
of the retrospective impact of this guidance. In addition, the adjusted net income attributable to Sinclair Broadcast Group for the
year ended December 31, 2008 decreased $5.0 million, with a resulting decrease to earnings per share of $0.06. For the year
ended December 31, 2009, the application of this new guidance increased our net loss attributable to Sinclair Broadcast Group
approximately $8.7 million and resulted in an approximate increase to loss per share of $0.11.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash
equivalents.
Restricted Cash
In October 2009, we established a cash collateral account with the proceeds from the sale of 9.25% Senior Secured Second
Lien Notes due 2017 (the 9.25% Notes). The cash collateral account restricted the use of cash therein to repurchase the 3.0%
Notes and our 4.875% Convertible Senior Notes due 2018 (the 4.875% Notes) upon, or prior to, the expiration of the put periods
for such notes in May 2010 and January 2011, respectively. Upon expiration of such put periods, the unused cash is released to us
to be used for general corporate purposes. During 2010, we used $53.6 million of restricted cash to redeem the 3.0% and 4.875%
Notes. See Note 5. Notes Payable and Commercial Bank Financing for more information. As of December 31, 2010, we held $5.1
million in the restricted cash collateral account to be used for the redemption of the remaining $5.7 million aggregate principal
amount of the 4.875% Notes. As of December 31, 2010, primarily all of the restricted cash classified as current related to the
January 2011 put option. In January 2011, the put option was not exercised, however, pursuant to our Bank Credit Agreement
the cash must be used within 120 days towards reducing our overall debt balance.
Additionally, under the terms of certain lease agreements, as of December 31, 2010, we are required to hold $0.2 million of
restricted cash related to the removal of analog equipment from some of our leased towers. As of December 31, 2009, we were
required to hold $0.5 million of restricted cash related to the removal of analog tower equipment.
2010 Annual Report 35
Accounts Receivable
Management regularly reviews accounts receivable and determines an appropriate estimate for the allowance for doubtful
accounts based upon the impact of economic conditions on the merchant’s ability to pay, past collection experience and such
other factors which, in management’s judgment, deserve current recognition. In turn, a provision is charged against earnings in
order to maintain the appropriate allowance level.
Programming
We have agreements with distributors for the rights to television programming over contract periods, which generally run from
one to seven years. Contract payments are made in installments over terms that are generally equal to or shorter than the contract
period. Pursuant to accounting guidance for the broadcasting industry, an asset and a liability for the rights acquired and
obligations incurred under a license agreement are reported on the balance sheet where the cost of each program is known or
reasonably determinable, the program material has been accepted by the licensee in accordance with the conditions of the license
agreement and the program is available for its first showing or telecast. The portion of program contracts which becomes payable
within one year is reflected as a current liability in the accompanying consolidated balance sheets.
The rights to this programming are reflected in the accompanying consolidated balance sheets at the lower of unamortized cost
or estimated net realizable value. Estimated net realizable values are based on management’s expectation of future advertising
revenues, net of sales commissions, to be generated by the program material. With the exception of one-year contracts
amortization of program contract costs is computed using either a four-year accelerated method or based on usage, whichever
method results in the earliest recognition of amortization for each program. Program contract cost are amortized on a straight-
line basis for one-year contracts. Program contract costs estimated by management to be amortized in the succeeding year are
classified as current assets. Payments of program contract liabilities are typically made on a scheduled basis and are not affected
by adjustments for amortization or estimated net realizable value.
Barter Arrangements
Certain program contracts provide for the exchange of advertising airtime in lieu of cash payments for the rights to such
programming. The revenues realized from station barter arrangements are recorded as the programs are aired at the estimated fair
value of the advertising airtime given in exchange for the program rights. Program service arrangements are accounted for as
station barter arrangements, however, network affiliation programming is excluded from these calculations. Revenues are
recorded as revenues realized from station barter arrangements and the corresponding expenses are recorded as expenses
recognized from station barter arrangements. In conjunction with the 2009 termination of our MyNetworkTV affiliation
agreements described in Note 10. Commitments and Contingencies, in September 2009 our relationship with MyNetworkTV changed
to a program service arrangement and is accounted for as a station barter arrangement.
We broadcast certain customers’ advertising in exchange for equipment, merchandise and services. The estimated fair value of
the equipment, merchandise or services received is recorded as deferred barter costs and the corresponding obligation to
broadcast advertising is recorded as deferred barter revenues. The deferred barter costs are expensed or capitalized as they are
used, consumed or received and are included in station production expenses and station selling, general and administrative
expenses, as applicable. Deferred barter revenues are recognized as the related advertising is aired and are recorded in revenues
realized from station barter arrangements.
Other Assets
Other assets as of December 31, 2010 and 2009 consisted of the following (in thousands):
Equity and cost method investments
Unamortized costs related to debt issuances
Other
Total other assets
2010
76,275
30,017
2,124
108,416
$
$
2009
75,176
30,913
2,872
108,961
$
$
We have equity and cost method investments primarily in private investment funds and real estate ventures. These investments
are included in our other operating divisions segment. In the event that one or more of our investments are significant, we are
required to disclose summarized financial information. For the years ended December 31, 2010, 2009, and 2008, none of our
investments were significant individually or in the aggregate.
36 Sinclair Broadcast Group
When factors indicate that there may be a decrease in value of an equity or cost method investment, we assess that investment
and determine whether a loss in value has occurred. If that loss is deemed to be other than temporary, an impairment loss is
recorded accordingly. For any investments that indicate a potential impairment, we estimate the fair values of those investments
using discounted cash flow models, unrelated third party valuations or industry comparables, based on the various facts available
to us. For the year ended December 31, 2010, we recorded impairments of $6.7 million related to three of our investments. The
impairments are recorded in the gain (loss) from equity and cost method investees in our consolidated statement of operations.
No impairment was recorded for the years ended December 31, 2009 or 2008.
In addition to our equity and cost method investments mentioned above, we hold one loan in a real estate venture. During
2008, we reserved 100% of the loan through a $3.9 million charge to other operating divisions expense in our consolidated
statements of operations.
Impairment of Intangible and Long-Lived Assets
The accounting guidance for goodwill and other intangible assets requires that goodwill and indefinite-lived intangible assets be
tested for impairment at least annually. The guidance prescribes a two-step method for determining goodwill impairment. In the
first step, the Company determines the fair value of the reporting unit and compares that fair value to the net book value of the
reporting unit. The fair value of the reporting unit is determined using various valuation techniques, including quoted market
prices, observed earnings /cash flow multiples paid for comparable television stations and discounted cash flow models. If the
net book value of the reporting unit were to exceed the fair value, we would then perform the second step of the impairment test,
which requires allocation of the reporting unit’s fair value to all of its assets and liabilities in a manner similar to a purchase price
allocation, with any residual fair value being allocated to goodwill. An impairment charge will be recognized only when the
implied fair value of a reporting unit’s goodwill is less than its carrying amount. Broadcast licenses are analyzed at the market
level. When evaluating whether a broadcast license is impaired, we compare the fair value of the broadcast licenses to the carrying
amount of those same broadcast licenses. If the carrying amount of the broadcast licenses exceeds the fair value, then an
impairment loss is recorded to the extent that the carrying value of the broadcast licenses exceeds the fair value.
We periodically evaluate our long-lived assets for impairment and continue to evaluate them as events or changes in
circumstances indicate that the carrying amount of such assets may not be fully recoverable. We evaluate the recoverability of
long-lived assets by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated
with them. At the time that such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not
sufficient to recover the carrying value of such assets, the assets are tested for impairment by comparing their estimated fair value
to the carrying value. We typically estimate fair value using discounted cash flow models and appraisals. See Note 4. Goodwill and
Other Intangible Assets, for more information.
Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2010 and 2009 (in thousands):
Compensation and employee insurance
Interest
Other accruals relating to operating expenses
Deferred revenue
Total accrued liabilities
We expense these activities when incurred.
Income Taxes
2010
16,637
13,528
29,027
8,879
68,071
$
$
2009
13,989
16,653
20,093
9,788
60,523
$
$
We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and
the tax bases of assets and liabilities. We provide a valuation allowance for deferred tax assets if we determine, based on the
weight of all available evidence, that it is more likely than not that some or all of the deferred tax assets will not be realized. As of
December 31, 2010, valuation allowances have been provided for a substantial amount of our available state net operating losses.
Management periodically performs a comprehensive review of our tax positions and accrues amounts for tax contingencies.
Based on these reviews, the status of ongoing audits and the expiration of applicable statute of limitations, accruals are adjusted as
necessary in accordance with income tax accounting guidance.
2010 Annual Report 37
Supplemental Information – Statements of Cash Flows
During 2010, 2009 and 2008, we had the following cash transactions (in thousands):
Income taxes paid related to continuing operations
Income tax refunds received related to continuing operations
Income tax refunds received related to discontinued
operations
Interest paid
2010
1,211
8,435
$
$
$
—
$ 110,833
2009
537
2,975
$
$
$
—
$ 61,266
2008
$
3,477
$ 11,810
$
5,501
$ 73,041
Non-cash barter and trade expense are presented in the consolidated statements of operations. Non-cash transactions related
to capital lease obligations were $1.4 million, $2.3 million and $10.0 million for the years ended December 31, 2010, 2009 and
2008, respectively.
Revenue Recognition
Total revenues include: (i) cash and barter advertising revenues, net of agency commissions; (ii) retransmission consent fees; (iii)
network compensation; (iv) other broadcast revenues and (v) revenues from our other operating divisions.
Advertising revenues, net of agency commissions, are recognized in the period during which time spots are aired.
Our retransmission consent agreements contain both advertising and retransmission consent elements. We have determined
that our retransmission consent agreements are revenue arrangements with multiple deliverables. Advertising and retransmission
consent deliverables sold under our agreements are separated into different units of accounting at fair value. Revenue applicable
to the advertising element of the arrangement is recognized similar to the advertising revenue policy noted above. Revenue
applicable to the retransmission consent element of the arrangement is recognized ratably over the life of the agreement.
Network compensation revenue is recognized ratably over the term of the contract. All other significant revenues are
recognized as services are provided.
Advertising Expenses
Advertising expenses are recorded in the period when incurred and are included in station production expenses. Total
advertising expenses from continuing operations, net of advertising co-op credits, were $6.2 million, $3.9 million and $7.6 million
for the years ended December 31, 2010, 2009 and 2008, respectively.
Financial Instruments
Financial instruments, as of December 31, 2010 and 2009, consisted of cash and cash equivalents, trade accounts receivable,
notes receivable (which are included in other current assets), derivatives, accounts payable, accrued liabilities and notes payable.
The carrying amounts approximate fair value for each of these financial instruments, except for the notes payable. See Note 5.
Notes Payable and Commercial Bank Financing, for additional information regarding the fair value of notes payable.
Pension
We are required to recognize the funded status (i.e., the difference between the fair value of plan assets and the projected
benefit obligations) of our pension plan in our consolidated financial statements. As of December 31, 2010 and 2009, we held a
liability of $3.2 million and $3.9 million, respectively, representing the under funded status of our defined benefit pension plan.
Reclassifications
Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s
presentation.
38 Sinclair Broadcast Group
2. STOCK-BASED COMPENSATION PLANS:
Description of Awards
We have seven types of stock-based compensation awards: compensatory stock options (options), restricted stock awards
(RSAs), an employee stock purchase plan (ESPP), employer matching contributions (the Match) for participants in our 401(k)
plan, stock-settled appreciation rights (SARs), subsidiary stock awards and stock grants to our non-employee directors. Stock-
based compensation expense has no effect on our consolidated cash flows. Below is a summary of the key terms and methods of
valuation of our stock-based compensation awards:
Options. In June 1996, our Board of Directors adopted, upon approval of the shareholders by proxy, the 1996 Long-Term
Incentive Plan (LTIP). The purpose of the LTIP is to reward key individuals for making major contributions to our success and
the success of our subsidiaries and to attract and retain the services of qualified and capable employees. Options granted pursuant
to the LTIP must be exercised within 10 years following the grant date. A total of 14,000,000 shares of Class A Common Stock
are reserved for awards under this plan. As of December 31, 2010, 10,335,259 shares (including forfeited shares) were available
for future grants.
The following is a summary of changes in outstanding stock options:
Outstanding at December 31, 2009
2010 Activity:
Granted
Exercised
Forfeited
Outstanding at December 31, 2010
Options
389,500
—
—
(89,000)
300,500
Weighted-Average
Exercise Price
10.74
$
Exercisable
389,500
Weighted-Average
Exercise Price
$
10.74
—
—
10.51
10.81
$
—
—
—
300,500
—
—
—
10.81
$
RSAs. RSAs are granted to employees pursuant to the LTIP. RSAs issued in 2010 have certain restrictions that lapse over two
years at 50% and 50%, respectively. RSAs issued prior to 2010 have certain restrictions that lapse over three years at 25%, 25%
and 50%, respectively. As the restrictions lapse, the Class A Common Stock may be freely traded on the open market. We
awarded 173,000 RSAs that had a fair value of $5.75 per share and 95,500 RSAs that had a fair value of $8.94 per share on March
12, 2010 and April 1, 2008, respectively. The fair value assumes the value of the stock on the trading date immediately prior to the
grant date. No RSAs were granted in 2009. In 2010 and 2009, 51,625 and 57,750, respectively, RSAs vested. As of December
31, 2010, 220,750 shares were unvested. For the years ended December 31, 2010, 2009 and 2008, we recorded expense of $0.8
million, $0.6 million and $0.6 million, respectively. RSAs are included in basic earnings (loss) per share upon grant date.
ESPP. In March 1998, the Board of Directors adopted, subject to approval of the shareholders, the ESPP. The ESPP
provides our employees with an opportunity to become shareholders through a convenient arrangement for purchasing shares of
Class A Common Stock. On the first day of each payroll deduction period, each participating employee receives options to
purchase a number of shares of our common stock with money that is withheld from his or her paycheck. The number of shares
available to the participating employee is determined at the end of the payroll deduction period by dividing the total amount of
money withheld during the payroll deduction period by the exercise price of the options (as described below). Options granted
under the ESPP to employees are automatically exercised to purchase shares on the last day of the payroll deduction period unless
the participating employee has, at least thirty days earlier, requested that his or her payroll contributions stop. Any cash
accumulated in an employee’s account for a period in which an employee elects not to participate is distributed to the employee.
The initial exercise price for options under the ESPP is 85% of the lesser of the fair market value of the common stock as of
the first day of the quarter and as of the last day of that quarter. No participant can purchase more than $25,000 worth of our
common stock over all payroll deduction periods ending during the same calendar year. We value the stock options under the
ESPP using the Black-Scholes option pricing model, which incorporates the following assumptions as of December 31, 2010,
2009 and 2008:
Risk-free interest rate
Expected life
Expected volatility
Annual dividend yield
2010
0.29%
91 days
78.86%
0.00%
2009
0.28%
91 days
137.40%
0.00%
2008
1.36%
91 days
117.70%
15.22%
2010 Annual Report 39
We use the Black-Scholes model as opposed to a lattice pricing model because employee exercise patterns are not relevant to
this plan. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life is
based on the approximate number of days in the quarter assuming the option was issued on the first day of the quarter. The
expected volatility is based on our historical stock prices over the previous 90-day period. The annual dividend yield is based on
the annual dividend per share divided by the share price on the grant date.
The stock-based compensation expense recorded related to the ESPP for the years ended December 31, 2010, 2009 and 2008
was $0.2 million, $0.3 million and $0.2 million, respectively. Less than 0.2 million shares were issued to employees during the year
ended December 31, 2010.
Match. The Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and Trust (the 401(k) Plan) is available as a benefit for
our eligible employees. Contributions made to the 401(k) Plan include an employee elected salary reduction amount, company-
matching contributions (the Match) and an additional discretionary amount determined each year by the Board of Directors. The
Match and any additional discretionary contributions may be made using our Class A Common Stock if the Board of Directors so
chooses. Typically, we make the Match using our Class A Common Stock.
The value of the Match is based on the level of elective deferrals into the 401(k) plan. The amount of shares of our Class A
Common Stock used to make the Match is determined using the closing price on or about March 1st of each year for the previous
calendar year’s Match. The Match is discretionary and is equal to a maximum of 50% of elective deferrals by eligible employees,
capped at 4% of the employee’s total cash compensation. For the years ended December 31, 2010, 2009 and 2008, we recorded
$1.5 million, zero and $2.0 million, respectively, of compensation expense related to the Match. We did not make a 401(k) plan
Match in 2009.
SARs. On March 12, 2010, 300,000 SARs were granted to David Smith, our President and Chief Executive Officer, pursuant
to the LTIP. The base value of each SAR is $5.75 per share, which was the closing price of our Class A Common Stock on the
grant date. The SARs had a grant date fair value of $1.6 million. On April 1, 2008, 350,000 SARs were granted to David Smith,
pursuant to the LTIP. The base value of each SAR is $8.94 per share, which was the closing price of our Class A Common Stock
on the grant date. The SARs had a grant date fair value of $0.5 million. No SARs were granted in 2009. The SARs have a 10-
year term and vest immediately. As of December 31, 2010, 850,000 SARs were outstanding. We valued the SARs using the
Black-Scholes model and the following assumptions:
Risk-free interest rate
Expected life
Expected volatility
Annual dividend yield
2010
3.85%
10 years
110.38%
0.00%
2008
4.25%
10 years
46.10%
9.23%
For the years ended December 31, 2010 and 2008, we recorded compensation expense of $1.6 million and $0.5 million,
respectively, related to these grants. During 2009 and 2008, these SARs had no effect on the shares used in our basic and diluted
loss per share. During 2010, SARs had a dilutive effect on our earnings per share. In 2011, David Smith exercised 650,000 of his
SARs for 237,947 shares. As of February 28, 2011, 200,000 SARs were outstanding.
Subsidiary Stock Awards. From time to time, we grant subsidiary stock awards to employees. The subsidiary stock is typically in
the form of a membership interest in a consolidated limited liability company, not traded on a public exchange and valued based
on the estimated fair value of the subsidiary. Fair value is typically estimated using discounted cash flow models and appraisals.
These stock awards vest immediately. For the year ended December 31, 2008, we recorded compensation expense of $2.5 million
related to these awards. We did not issue any subsidiary stock awards in 2010 or 2009. These awards have no effect on the shares
used in our basic and diluted earnings per share.
Stock Grants to Non-Employee Directors. In addition to directors fees paid, on the date of each of our annual meetings of
shareholders, each non-employee director receives a grant of shares of Class A Common Stock pursuant to the LTIP. In 2010,
2009 and 2008, each non-employee director received 5,000 shares, respectively. On June 3, 2010, June 4, 2009 and May 15, 2008,
we granted 25,000 shares that had a fair value of $6.61 per share, 25,000 shares that had a fair value of $2.09 per share and 25,000
shares that had a fair value of $9.28 per share, respectively. The fair value assumes the closing value of the stock on the date of
grant. We recorded an expense of $0.2 million, less than $0.1 million and $0.2 million on the date of grant for the years ended
December 31, 2010, 2009 and 2008, respectively. Additionally, these shares are included in the total shares outstanding, which
results in a dilutive effect on our basic and diluted earnings (loss) per share.
40 Sinclair Broadcast Group
3. PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed under the straight-line
method over the following estimated useful lives:
Buildings and improvements
Station equipment
Office furniture and equipment
Leasehold improvements
Automotive equipment
Property and equipment under capital leases
10 - 30 years
5 - 10 years
5 - 10 years
Lesser of 10 - 30 years or lease term
3 - 5 years
Lease term
Property and equipment consisted of the following as of December 31, 2010 and 2009 (in thousands):
Land and improvements
Real estate held for development and sale
Buildings and improvements
Station equipment
Office furniture and equipment
Leasehold improvements
Automotive equipment
Capital leased assets
Construction in progress
Less: accumulated depreciation
2010
20,183
54,474
93,514
341,022
44,735
15,336
12,040
79,259
3,005
663,568
(391,337)
272,231
$
$
2009
20,060
52,049
91,396
345,809
44,120
15,286
12,006
80,483
1,368
662,577
(366,350)
296,227
$
$
Capital leased assets are related to building, tower and equipment leases. Depreciation related to capital leases is included in
depreciation expense in the consolidated statements of operations. We recorded capital lease depreciation expense of $4.0
million, $4.7 million and $5.3 million for the years ended December 31, 2010, 2009 and 2008, respectively.
4. GOODWILL, BROADCAST LICENSES AND OTHER INTANGIBLE ASSETS:
Goodwill and broadcast licenses are required to be tested for impairment at least annually. We test our broadcast licenses and
goodwill annually during the fourth quarter each year and between annual evaluations if events occur or circumstances change
that indicate that the fair value of our reporting units or licenses may be below their carrying amount. We did not have any
indicators of impairment in the first, second or third quarters of 2010 and therefore did not perform impairment tests for those
periods. We performed our annual impairment test in the fourth quarter of 2010.
When evaluating whether goodwill is impaired, we aggregate our stations by market for purposes of our goodwill impairment
testing. We believe that our markets are most representative of our broadcast reporting units because we view, manage and
evaluate our stations on a market basis. Furthermore, in our markets operated as duopolies, certain costs of operating the stations
are shared including the use of buildings and equipment, the sales force and administrative personnel. We then compare the fair
value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. We
estimate the fair market value of our reporting units using a combination of quoted market prices, observed earnings/cash flow
multiples paid for comparable television stations, and discounted cash flow models. Our discounted cash flow model is based on
our judgment of future market conditions within each designated market area, as well as discount rates that would be used by
market participants in an arms-length transaction. If the carrying amount of a reporting unit exceeds its fair value, then the
amount of the impairment loss must be measured. The impairment loss is calculated by comparing the implied fair value of
reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the
reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value
of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment
loss is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.
2010 Annual Report 41
When evaluating our broadcast licenses for impairment, the testing is done at the unit of accounting level using the income
approach method. The income approach method involves an eight-year model that incorporates several variables, including, but
not limited to, discounted cash flows of a typical market participant, market revenue and long term growth projections, estimated
market share for the typical participant and estimated profit margins based on market size and station type. The model also
assumes outlays for capital expenditures, future terminal values, an effective tax rate assumption and a discount rate based on the
weighted-average cost of capital of the television broadcast industry.
The impairment charge taken during the year ended December 31, 2008 was primarily due to the severe economic downturn
during the fourth quarter and, as a result, we made further revisions to our forecasted cash flows, cash flow multiples and
discount rates. Broadcast licenses were impaired in 31 of 35 markets. We recorded goodwill impairment in four markets
including Flint/Saginaw/Bay City, Michigan; Las Vegas, Nevada; Springfield/Champaign, Illinois and St. Louis, Missouri.
During the year ended December 31, 2008, certain events led us to test our goodwill associated with an other operating division
company, Acrodyne Communications, Inc. As a result of this testing, we recorded a $1.6 million impairment charge in our
consolidated statements of operations. There was no impairment related to our other operating division companies for the years
ended December 31, 2010 and 2009.
We recorded an impairment charge in the first quarter of 2009 based on an interim impairment test performed as a result of the
severe economic downturn and continued decrease in our market capitalization. As a result of this test, we recorded $69.5 million
and $60.6 million in impairment charges related to our goodwill and broadcast licenses, respectively, in the first quarter of 2009.
Broadcast licenses were impaired in 28 of 35 markets. The fair value of the broadcast licenses was $85.3 million. We recorded
goodwill impairment in three markets including Cedar Rapids, Iowa; Charleston, West Virginia; and Madison, Wisconsin.
The impairment charge taken during the fourth quarter of 2009 was primarily due to the continued deterioration of the
economy and further revisions to our forecasted cash flows, cash flow multiples and discount rates. As a result of this test, we
recorded $94.7 million and $24.3 million in impairment charges related to our goodwill and broadcast licenses, respectively, in the
fourth quarter of 2009. Broadcast licenses were impaired in 18 of 35 markets. We recorded goodwill impairment in two markets
including Buffalo, New York; and Pensacola, Florida.
As a result of our 2010 annual impairment test, we recorded an impairment charge related to our broadcast licenses of $4.6
million. Broadcast licenses were impaired in 7 of 35 markets and were primarily the result of additional cash outflows for
increased signal strength necessary to maintain competitive market positions. The fair value of the broadcast licenses was $55.5
million. There was no impairment to goodwill in 2010.
The carrying value, fair value and impairment loss of the goodwill and broadcast licenses which were impaired during 2010 and
2009 were as follows (in thousands):
Fair Value Measurements Using
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
Carrying Value
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Impairment
Losses
$
14,850
$
—
$
—
$
14,850
$
4,613
$
$
$
$
55,762
51,542
$
$
20,094
112,415
$
$
—
—
—
—
$
$
$
$
—
—
—
—
$ 55,762
$ 51,542
$
$
164,171
80,434
$ 20,094
$ 112,415
$
$
191,840
270,422
Description
Year Ended December 31, 2010
Broadcast licenses (a)
Year Ended December 31, 2009
Goodwill of markets which were
impaired during the year (b)
Broadcast licenses (a)
Year Ended December 31, 2008
Goodwill of markets which were
impaired during the year (b)
Broadcast licenses (a)
(a) The fair value above represents the fair value of the broadcast licenses that were impaired in 2010, 2009 and 2008 and recorded to fair
value. It excludes carrying values of $32.5 million, $0.4 million and $20.0 million related to broadcast licenses as of December 31,
2010, 2009 and 2008, respectively, which were not impaired during those years and had fair values in excess of carrying value.
42 Sinclair Broadcast Group
(b) The fair value above represents the implied fair value of the goodwill assigned to the five impaired markets in 2009 and four impaired
markets in 2008 for which we were required to calculate this amount. It excludes carrying values related to goodwill of $604.2 million
and $804.1 million at December 31, 2009 and 2008, respectively, for which we were not required to calculate the fair value.
The key assumptions used to determine the fair value of our reporting units to test our goodwill for impairment and to
determine the fair value of our broadcast licenses consist of discount rates, revenue and expense growth rates, constant growth
rates and comparable business multiples. The revenue and expense growth rates used in our goodwill impairment testing and the
revenue, expense and constant growth rates used in determining the fair value of our broadcast licenses have decreased slightly
from 2009 to 2010. However, the baseline cash flows to which these growth rates are applied have increased due to a stronger
than expected recovery in revenue in 2010. The growth rates are based on market studies, industry knowledge and historical
performance.
The discount rates used to determine the fair value of our reporting units to test our goodwill for impairment and to determine
the fair value of our broadcast licenses have slightly decreased from 2009 to 2010. The discount rate is based on a number of
factors including market interest rates, a weighted average cost of capital analysis based on the target capital structure for a
television station, and includes adjustments for market risk and company specific risk. The minimal decrease in the discount rate
is primarily due to a slight decrease in the general cost of equity in 2010.
The comparable business multiple used to determine the fair value of our reporting units to test our goodwill for impairment
has not changed from 2009 to 2010 due to the lack of data from sales transactions in the market in the past two years. It is an
estimate of the multiple that would most likely be paid for a mature, cash flowing television station in the current marketplace.
As of December 31, 2010 and 2009, the carrying amount of our broadcast licenses related to continuing operations was as
follows (in thousands):
Beginning balance
Broadcast license impairment charge (a)
Ending balance (b)
As of December 31,
2010
51,988
(4,613)
47,375
$
$
2009
132,422
(80,434)
51,988
$
$
(a)
In 2010 and 2009, an impairment of $0.2 million and $4.5 million, respectively, was recorded against purchase option assets
included in other assets in the consolidated balance sheet. These purchase options give us the right to purchase the license assets
of certain stations.
(b) Approximately $4.2 million and $4.3 million of broadcast licenses relate to consolidated VIEs as of December 31, 2010 and
2009, respectively.
The change in the carrying amount of goodwill related to continuing operations was as follows (in thousands):
Balance as of January 1,
Accumulated impairment losses
Impairment losses (a)
Balance as of December 31,
Goodwill
Accumulated impairment losses
$
2010
1,073,590
(413,573)
660,017
—
$
2009
1,073,590
(249,402)
824,188
(164,171)
1,073,590
(413,573)
660,017
$
1,073,590
(413,573)
660,017
$
(a) In 2009, all of the goodwill impairment charge related to our broadcast segment.
Definite-lived intangible assets and other assets subject to amortization are being amortized on a straight-line basis over periods
of 5 to 25 years. We analyze specific definite-lived intangibles for impairment when events occur that may impact their value in
accordance with the respective accounting guidance for long-lived assets. There was no impairment charge recorded for the years
ended December 31, 2010 and 2009, respectively.
2010 Annual Report 43
The following table shows the gross carrying amount and accumulated amortization of intangibles and estimated amortization
related to continuing operations (in thousands):
As of December 31, 2010
As of December 31, 2009
Weighted
Average
Amortization
Period
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Amortized intangible assets:
Network affiliation
Decaying advertiser base
Other
Total
25 years
15 years
15 years
$
$
245,025
122,375
97,200 (a)
464,600
$ (132,013)
(111,675)
(36,260)
$ (279,948)
$
$
245,160
122,375
86,983 (a)
454,518
$
(122,718)
(106,248)
(32,147)
$ (261,113)
(a) During 2010 and 2009, we purchased $10.2 million and $15.2 million, respectively, in additional alarm monitoring contracts.
The amortization expense of the definite-lived intangible assets and other assets for the years ended December 31, 2010, 2009
and 2008 was $18.8 million, $22.4 million and $18.3 million, respectively. The following table shows the estimated amortization
expense of the definite-lived intangible assets and other assets for the next five years (in thousands):
For the year ended December 31, 2011
For the year ended December 31, 2012
For the year ended December 31, 2013
For the year ended December 31, 2014
For the year ended December 31, 2015
Thereafter
$
$
17,952
16,796
14,877
12,552
12,349
110,126
184,652
5. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
Bank Credit Agreement
On October 29, 2009, concurrently with the closing of the offering of the 9.25% Notes we entered into the Bank Credit
Agreement by amending and restating the previous bank credit agreement. On August 19, 2010, we entered into an amendment
(the Amendment) of our Bank Credit Agreement. The final terms of the Bank Credit Agreement, as amended, are set forth
below:
• A six-year term loan facility (Term Loan B) of $330.0 million. Under the Amendment, we paid down $35.0 million of
the outstanding $305.0 million balance under the Term Loan B and repriced the remaining $270.0 million outstanding.
The Term Loan B bears interest at LIBOR plus 4.00% with a 1.5% LIBOR floor and will continue to amortize
principal at a rate of 0.25% per quarter commencing on March 31, 2011, continuing until the scheduled final payment
on October 29, 2015 with 94.19% due at maturity or upon earlier termination of the Term Loan B pursuant to the
terms in the Bank Credit Agreement.
• We have the right to prepay the Term Loan B at any time; provided, however, that if we prepay, reprice downward or
otherwise refinance all or any portion of the Term Loan B prior to August 19, 2011, then we will be required to pay
the Term Loan B lenders a prepayment premium equal to 1.00% of the aggregate amount prepaid, repriced or
otherwise refinanced. Any prepayments on the Term Loan B are deducted from the scheduled final payment due on
October 29, 2015.
• An amended and restated revolving credit facility (the Revolving Credit Facility). Under the terms of the Revolving
Credit Facility, $60.5 million in existing commitments will remain in place under the revolving credit facility pricing in
the previous bank credit agreement, which as of December 31, 2010 was LIBOR plus 0.75% and will expire June
2011. In addition, $75.4 million in commitments were extended until December 31, 2013 at a price of LIBOR plus
4.00% with a 2.0% LIBOR floor. We have the right to prepay the Revolving Credit Facility at any time without
prepayment penalty. As of December 31, 2010, we did not have any amounts drawn under the Revolving Credit
Facility.
• Provision for additional incremental term loan capacity up to $100.0 million.
The Bank Credit Agreement is collateralized by $1,001.8 million of our tangible and intangible assets.
44 Sinclair Broadcast Group
During 2010, debt refinancing costs of $3.6 million were recorded to interest expense in our consolidated statement of
operations in accordance with debt modification accounting guidance that applied to the amendment. Interest expense, excluding
the debt refinancing costs, was $19.9 million, $8.5 million and $14.1 million for the years ended December 31, 2010, 2009 and
2008, respectively.
The weighted average interest rate of the Term Loan B for the years ended December 31, 2010 and 2009 was 6.86% and
6.96%, respectively.
In February 2011, we disclosed our intention to refinance a portion of and to amend certain terms of the Bank Credit
Agreement.
8.0% Senior Subordinated Notes, Due 2012
From March 2002 through May 29, 2003, we issued $650.0 million aggregate principal amount of 8.0% Senior Subordinated
Notes, due 2012 (the 8.0% Notes). Interest on the 8.0% Notes was paid semiannually on March 15 and September 15 of each
year, beginning September 15, 2002. The 8.0% Notes were issued under an indenture among us, certain of our subsidiaries (the
guarantors) and the trustee.
In addition to partial redemptions in 2007, during 2008, we repurchased, in the open market, $38.8 million of the 8.0% Notes at
face value. As a result of these redemptions, we recorded a gain from extinguishment of debt of $0.4 million for the year ended
December 31, 2008. We did not repurchase any 8.0% Notes in 2009.
On September 20, 2010, we commenced a tender offer to purchase for cash any and all of the outstanding 8.0% Notes. We
offered to purchase the 8.0% Notes at a purchase price of $1,002.50 per $1,000 principal amount, if tendered within the first ten
business days of the tender offer period or $972.50 per $1,000 principal amount if tendered after such time, plus accrued and
unpaid interest. The tender offers expired October 19, 2010 and approximately $175.7 million principal amount of the 8.0%
Notes were tendered and purchased. On November 19, 2010, we completed the redemption of the remaining $49.0 million
outstanding of 8.0% Notes. These Notes were redeemed for cash at a redemption price of 100% of the principal amount of the
Notes plus accrued and unpaid interest. The redemption of the Notes was effected in accordance with the terms of the indenture
governing the Notes and was funded from the net proceeds of the 8.375% Senior Unsecured Notes, due 2018 (8.375% Notes)
offering described below and available cash on hand. As a result of these redemptions, we recorded a gain from extinguishment
of debt of $0.7 million for the year ended December 31, 2010.
Interest expense was $13.9 million, $17.6 million and $19.4 million for the years ended December 31, 2010, 2009 and 2008,
respectively.
The weighted average interest rate for the 8.0% Notes including the amortization of its bond premium was 7.88% and 7.83%
for the years ended December 31, 2010 and 2009, respectively.
6.0% Convertible Debentures, Due 2012
On June 15, 2005, we completed an exchange of our Series D Convertible Exchangeable Preferred Stock (the Preferred Stock)
into 6.0 % Convertible Debentures, due 2012 (the 6.0% Notes). The 6.0% Notes mature September 15, 2012, and bear interest at
a rate of 6.0% per annum, payable quarterly on each March 15, June 15, September 15 and December 15, beginning September
15, 2005. The 6.0% Notes are convertible into Class A Common Stock at the option of the holders at a conversion price of
$22.813 per share, subject to adjustment. The difference in the carrying amount of the Preferred Stock and the fair value of the
6.0% Notes was recorded as a $31.7 million discount on the 6.0% Notes and is being amortized over the life of the 6.0% Notes
using the effective interest method.
During 2009 and 2008, we redeemed, on the open market, $1.0 million and $18.1 million principal amount of the 6.0% Notes.
In connection with these redemptions, we recorded a gain from extinguishment of debt of $0.4 million and $2.2 million for the
years ended December 31, 2009 and 2008, respectively.
During 2010, we repurchased, on the open market, $6.1 million in principal amount of the 6.0% Notes. On September 20,
2010, we commenced tender offers to purchase for cash up to $60.0 million in principal amount of the outstanding 6.0% Notes.
We offered to purchase the 6.0% Notes at a purchase price of $987.50 per $1,000 principal amount plus accrued and unpaid
interest. The tender offer expired October 19, 2010 and approximately $58.0 million of the 6.0% Notes were tendered and
purchased. The net proceeds from the offering of the 8.375% Notes described below and cash on hand were used to fund this
tender offer.
2010 Annual Report 45
Interest expense was $10.6 million, $11.6 million, and $9.0 million for the years ended December 31, 2010, 2009 and 2008,
respectively.
The weighted average interest rate for the 6.0% Notes including the amortization of its bond discount was 8.96% and 8.65%
for the years ended December 31, 2010 and 2009, respectively.
9.25% Senior Secured Second Lien Notes, Due 2017
On October 29, 2009, we issued $500.0 million aggregate principal amount of the 9.25% Notes that mature on November 1,
2017, pursuant to an indenture, dated as of October 29, 2009 (the Indenture). The 9.25% Notes were priced at 97.264% of their
par value and accrue interest at a rate of 9.25% beginning on the issue date. Interest on the 9.25% Notes is paid on May 1 and
November 1 of each year, beginning May 1, 2010. Prior to November 1, 2013, we may redeem the 9.25% Notes in whole, but
not in part, at any time at a price equal to 100% of the principal amount of the 9.25% Notes plus accrued and unpaid interest,
plus a “make-whole premium” as set forth in the Indenture. Beginning on November 1, 2013, we may redeem some or all of the
9.25% Notes at any time or from time to time at the redemption prices set forth in the Indenture. In addition, on or prior to
November 1, 2012, we may redeem up to 35.0% of the 9.25% Notes using the proceeds of certain equity offerings. Upon the
sale of certain of our assets or certain changes of control, the holders of the 9.25% Notes may require us to repurchase some or
all of the 9.25% Notes. The 9.25% Notes are collateralized by $1,001.8 million of our tangible and intangible assets.
The weighted average interest rate for the 9.25% Notes including the amortization of its bond discount was 9.71% and 9.72%
for the years ended December 31, 2010 and 2009, respectively.
Interest expense was $47.3 million and $8.3 million for the years ended December 31, 2010 and 2009, respectively.
8.375% Senior Unsecured Notes, due 2018
On October 4, 2010, we issued $250.0 million aggregate principal amount of 8.375% Notes due October 15, 2018 at 98.567%
of their par value pursuant to an indenture, dated as of October 4, 2010 (the Indenture). Interest on the 8.375% Notes will be
paid on April 15 and October 15 of each year, beginning April 15, 2011. Prior to October 15, 2014, we may redeem the 8.375%
Notes in whole or in part, at any time or from time to time at a price equal to 100% of the principal amount of the 8.375% Notes
plus accrued and unpaid interest, plus a “make-whole premium” as set forth in the Indenture. Beginning on October 15, 2014,
we may redeem some or all of the 8.375% Notes at any time or from time to time at the redemption prices set forth in the
Indenture. In addition, on or prior to October 15, 2013, we may redeem up to 35% of the 8.375% Notes using the proceeds of
certain equity offerings. Upon certain changes of control, we must offer to purchase the 8.375% Notes at a price equal to 101%
of the face amount of the Notes plus accrued and unpaid interest. The net proceeds from the offering of the 8.375% Notes were
used to fund the tender offers for our 6.0% and 8.0% Notes described above. Concurrent to entering into the Indenture we also
entered into a registration rights agreement requiring us to complete an offer of an exchange of the 8.375% Notes for registered
securities with the SEC by July 1, 2011. The 8.375% Notes registration became effective on November 23, 2010.
The weighted average interest rate of the 8.375% Notes for the year ended December 31, 2010 was 8.45%.
Interest expense was $5.1 million for the year ended December 31, 2010.
4.875% Convertible Senior Notes, Due 2018 and 3.0% Convertible Senior Notes, Due 2027
Any holder of the 4.875% Notes may surrender all or any portion of their notes for a conversion into our Class A Common
Stock at any time. As of December 31, 2010, the conversion price of the 4.875% Notes was $22.37 per share and the number of
Class A Common Stock that would be delivered upon conversion was 254,128. The 4.875% Notes bore cash interest at an
annual rate of 4.875% until January 15, 2011 and now bear cash interest at an annual rate of 2.00% from January 15, 2011 through
maturity. The principal amount of the 4.875% Notes will accrete to 125.66% of the original par amount from January 15, 2011 to
maturity. As of January 15, 2011, no put rights were exercised for the 4.875% Notes and the put right expired.
Upon certain conditions, the 3.0% Notes are convertible into cash and, in certain circumstances, shares of Class A Common
Stock at any time on or before November 15, 2026. Holders of the 3.0% Notes will have the right on May 15, 2017 and May 15,
2022, or any other such date to be determined by us at a repurchase price payable in cash equal to the aggregate principal amount
plus accrued and unpaid interest (including contingent cash interest), if any, through the repurchase date. As of December 31,
2010, the conversion price of the 3.0% Notes was $18.99 per share and the number of Class A Common Stock that would be
delivered upon conversion was 284,360.
During 2008, we redeemed, on the open market, $6.5 million of the 4.875% Notes. We recorded a $2.8 million gain on
extinguishment of debt related to this redemption for the year ended December 31, 2008.
46 Sinclair Broadcast Group
During 2009, we commenced tender offers at 98% of the face value of the Notes and purchased $266.6 million and $106.5
million of the 3.0% Notes and 4.875% Notes, respectively. Additionally, during 2009, we redeemed, on the open market, $50.7
million of the 3.0% Notes. We recorded $18.9 million and $0.2 million gain from extinguishment on the 3.0% Notes and 4.875%
Notes, respectively for the year ended December 31, 2009.
During the first quarter of 2010, we completed tender offers to purchase for cash any and all of the outstanding 3.0% Notes
and 4.875% Notes at 100% of the face value of such notes. We redeemed approximately $12.3 million and $14.3 million of the
3.0% and 4.875% Notes, respectively. During the second quarter of 2010, the put right period for the 3.0% Notes expired and
holders representing $10.0 million in principal amount of the 3.0% Notes exercised their put rights. During the third quarter of
2010, we redeemed $17.0 million of the 4.875% Notes in a private transaction.
The weighted average interest rate for the 4.875% Notes was 4.875% for the year ended December 31, 2009. The effective
interest rate on the liability portion of the 3.0% Notes at December 31, 2009 was 6.35%.
Interest expense for the 4.875% Notes was $1.0 million, $6.2 million and $7.3 million for the years ended December 31, 2010,
2009 and 2008, respectively. Interest expense for the 3.0% Notes was $0.5 million, $15.5 million and $20.5 million, respectively.
Cunningham Bank Credit Facility
Cunningham, one of our consolidated VIEs, holds a $33.5 million term loan facility originally entered into on March 20, 2002,
with an unrelated third party. Primarily all of Cunningham’s assets are collateral for its term loan facility, which is non-recourse.
On June 5, 2009, the administrative agent under Cunningham’s bank credit facility declared an event of default under the facility
for failure to timely deliver certain annual financial statements as required. As of such date, a rate of interest of LIBOR plus
5.0%, which rate includes a 2.0% default rate of interest, was instituted on all outstanding borrowings under the Cunningham
bank credit facility. On June 30, 2009, the default was waived and the termination date of the Cunningham bank credit facility
was extended to July 31, 2009, subject to certain conditions, including maintaining the default interest rate. On July 31, 2009, the
Cunningham bank credit facility was further extended to October 30, 2009. The extension required that Cunningham make $0.2
million principal payments on its term loan facility as of the first day of each of August, September and October with the balance
due on October 30, 2009. To avoid any potential bankruptcy of Cunningham, the lenders under Cunningham’s existing credit
facility indicated their willingness to replace such credit facility with a new credit facility, which was conditioned upon
Cunningham’s demonstration that it can repay the outstanding principal balance due under the facility within three years maturing
on October 1, 2012. The interest rate of the new credit facility is LIBOR plus 4.5% with a 2.0% floor. As a result, Cunningham
asked us to restructure certain of its arrangements with us, including the LMAs. See Note 11. Related Person Transactions for more
information.
Our Bank Credit Agreement contains certain cross-default provisions with certain material third-party licensees. As of
December 31, 2010, Cunningham was the sole material third party licensee as defined in our Bank Credit Agreement. A default
by a material third-party licensee including a default caused by insolvency would cause an event of default under our Bank Credit
Agreement.
For the years ended December 31, 2010, 2009 and 2008, the interest expense relating to Cunningham’s term loan facility was
$1.7 million, $1.8 million and $2.0 million, respectively.
Other Operating Divisions Segment Debt
Other operating divisions segment debt includes the debt of our consolidated subsidiaries with non-broadcast related
operations. This debt is non-recourse. Interest is paid on this debt at rates typically ranging from LIBOR plus 2.75% to a fixed
6.11% during 2010. During 2010, 2009 and 2008, interest expense on this debt was $4.3 million, $3.8 million and $1.0 million,
respectively.
2010 Annual Report 47
Summary
Notes payable, capital leases and the Bank Credit Agreement consisted of the following as of December 31, 2010 and 2009 (in
thousands):
Bank Credit Agreement, Term Loan B
Cunningham Term Loan Facility (non-recourse)
8.0% Senior Subordinated Notes, due 2012
6.0% Convertible Debentures, due 2012
9.25% Senior Secured Second Lien Notes, due 2017
4.875% Convertible Senior Notes, due 2018
8.375% Senior Unsecured Notes, due 2018
3.0% Convertible Senior Notes, due 2027
Capital leases
Other operating divisions segment debt (all non-recourse)
Plus: Premium on 8.0% Senior Subordinated Notes, due 2012
Less: Discount on Bank Credit Agreement, Term Loan B
Less: Discount on 6.0% Convertible Debentures, due 2012
Less: Discount on 9.25% Senior Secured Second Lien Notes, due 2017
Less: Discount on 8.375% Senior Unsecured Notes, due 2018
Less: Discount on 3.0% Convertible Notes, due 2027
Less: Current portion
2010
$ 270,000
21,933
—
70,035
500,000
5,685
250,000
5,400
43,689
48,000
1,214,742
—
(5,648)
(4,015)
(12,276)
(3,507)
—
(19,556)
$ 1,169,740
$
2009
330,000
32,900
224,663
134,121
500,000
37,016
—
27,667
43,592
37,756
1,367,715
2,734
(6,449)
(11,639)
(13,481)
—
(284)
(40,632)
$ 1,297,964
Indebtedness under the notes payable, capital leases and the Bank Credit Agreement as of December 31, 2010 matures as
follows (in thousands):
2011
2012
2013
2014
2015
2016 and thereafter
Total minimum payments
Less: Discount on Term Loan B
Less: Discount on 6.0% Convertible Debentures, due 2012
Less: Discount on 9.25% Senior Secured Second Lien Notes,
due 2017
Less: Discount on 8.375% Senior Unsecured Notes, due 2018
Less: Amount representing interest
$
Notes and Bank
Credit
Agreement
18,713
113,078
4,134
17,243
256,800
762,544
1,172,512
(5,648)
(4,015)
(12,276)
Capital Leases
$
4,946
5,090
5,218
5,359
5,406
59,418
85,437
—
—
—
$
Total
23,659
118,168
9,352
22,602
262,206
821,962
1,257,949
(5,648)
(4,015)
(12,276)
(3,507)
(1,459)
1,145,607
$
—
(41,748)
43,689
$
(3,507)
(43,207)
$ 1,189,296
Substantially all of our stock in our wholly-owned subsidiaries has been pledged as security for the Bank Credit Agreement.
As of December 31, 2010, our broadcast segment had 28 capital leases with non-affiliates, including 26 tower leases and two
building leases; our other operating divisions segment had 2 capital equipment leases and corporate has one building lease. All of
our tower leases will expire within the next 22 years and the building lease will expire within the next 7 years. Most of our leases
have 5-10 year renewal options and it is expected that these leases will be renewed or replaced within the normal course of
business. For more information related to our affiliate notes and capital leases, see Note 11. Related Person Transactions.
We filed a $500.0 million universal shelf registration statement with the SEC which became effective April 22, 2009 and expires
March 8, 2012. We may use the universal shelf registration statement to issue common and preferred equity, debt securities and
securities convertible into equity.
48 Sinclair Broadcast Group
6. PROGRAM CONTRACTS:
Future payments required under program contracts as of December 31, 2010 were as follows (in thousands):
2011
2012
2013
2014
2015 and thereafter
Total
Less: Current portion
Long-term portion of program contracts payable
$
$
68,301
17,776
10,477
1,215
125
97,894
(68,301)
29,593
Each future periods’ film liability includes contractual amounts owed, however, what is contractually owed does not necessarily
reflect what we are expected to pay during that period. While we are contractually bound to make the payments reflected in the
table during the indicated periods, industry protocol typically enables us to make film payments on a three-month lag. Included in
the current portion amounts are payments due in arrears of $18.5 million. In addition, we have entered into non-cancelable
commitments for future program rights aggregating $88.5 million as of December 31, 2010.
We perform a net realizable value calculation quarterly for each of our program contract costs in accordance with FASB
guidance on Financial Reporting for Broadcasters. We utilize sales information to estimate the future revenue of each
commitment and measure that amount against the commitment. If the estimated future revenue is less than the amount of the
commitment, a loss is recorded in amortization of program contract costs and net realizable value adjustments in the consolidated
statements of operations.
7. COMMON STOCK:
Holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to ten
votes per share, except for votes relating to “going private” and certain other transactions. The Class A Common Stock and the
Class B Common Stock vote together as a single class, except as otherwise may be required by Maryland law, on all matters
presented for a vote. Holders of Class B Common Stock may at any time convert their shares into the same number of shares of
Class A Common Stock. During 2010 and 2009, 2,370,040 and 2,000,000, respectively, Class B Common Stock shares were
converted into Class A Common Stock shares.
Our Bank Credit Agreement and some of our subordinated debt instruments have restrictions on our ability to pay dividends.
Under our Bank Credit Agreement, in certain circumstances, we may make up to $40.0 million in unrestricted annual cash
payments including but not limited to dividends. Under the indentures governing the 9.25% Notes and 8.375% Notes, we are
restricted from paying dividends on our common stock unless certain specified conditions are satisfied, including that:
•
•
no event of default then exists under the indenture or certain other specified agreements relating to our
indebtedness; and
after taking into account the dividends payment, we are within certain restricted payment requirements contained in
the indenture.
In addition, under certain of our debt instruments, the payment of dividends is not permissible during a default thereunder.
No dividend payments were made in 2009. In November 2010, our Board of Directors declared a $0.43 per share common
stock dividend. The dividend was paid on December 15, 2010 to holders of record on December 1, 2010. In February 2011, our
Board of Directors reinstated our dividend policy, declaring a quarterly common stock dividend of $0.12 per share.
On February 5, 2008, our Board of Directors renewed its authorization to repurchase up to $150.0 million of the Class A
Common Stock on the open market or through private transactions. During 2009, we repurchased approximately 1.5 million
shares of Class A Common Stock for approximately $1.5 million on the open market, including transaction cost. We did not
repurchase any shares of Class A Common Stock during 2010.
2010 Annual Report 49
8. DERIVATIVE INSTRUMENTS:
We enter into derivative instruments primarily to reduce the impact of changing interest rates on our floating rate debt and to
reduce the impact of changing fair market values on our fixed rate debt.
In February 2008, the counterparty to our then existing interest rate swap agreements, elected to change the termination dates
of the $180.0 million and $120.0 million swaps from March 15, 2012 to March 25, 2008 and March 26, 2008, respectively. We
received a termination fee of $3.2 million from the counterparty for the early termination of the $120.0 million swap. After the
removal of the related $2.4 million derivative asset from our consolidated balance sheet, the resulting $0.8 million, along with $0.2
million of interest was recorded in gain from derivative instruments in the consolidated statements of operations. We received a
termination fee of $4.8 million from the counterparty for the early termination of the $180.0 million swap. The carrying value of
the underlying debt was adjusted to reflect the $4.8 million termination fee and that amount was treated as a premium on the
underlying debt that was being hedged and is amortized over its remaining life as a reduction to interest expense. The total
termination fees received of $8.0 million are included in the cash flows from financing activities section of the consolidated
statement of cash flows for the year ended December 31, 2008.
As of December 31, 2010, we have embedded derivatives related to contingent cash interest features in our 4.875% Notes and
3.0% Notes, which had negligible fair values.
9. INCOME TAXES:
The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2010, 2009 and 2008 (in
thousands):
Provision (benefit) for income taxes - continuing
operations
Provision for income taxes - discontinued operations
Current:
Federal
State
Deferred:
Federal
State
2010
40,226
77
40,303
1,263
596
1,859
37,010
1,434
38,444
40,303
$
$
$
$
2009
2008
$
$
$
$
(32,512)
350
(32,162)
(7,882)
669
(7,213)
(25,598)
649
(24,949)
(32,162)
$ (121,363)
358
$ (121,005)
$
76
(4)
72
(115,587)
(5,490)
(121,077)
$ (121,005)
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision from
continuing operations:
Federal income tax (benefit) provision at statutory rate
Adjustments-
State income taxes, net of federal effect
Non-deductible expense items
Basis in subsidiaries stock
Other
Provision (benefit) for income taxes
2010
35.0%
1.5%
(0.1%)
(2.1%)
0.1%
34.4%
2009
(35.0%)
(0.3%)
18.0%
(2.3%)
0.3%
(19.3%)
2008
(35.0%)
(1.3%)
3.9%
—%
(0.6%)
(33.0%)
The non-deductible expense items include the tax effect of $27.9 million and $5.4 million of non-deductible goodwill
impairment for the years ended December 31, 2009 and 2008, respectively, and $0.1 million, $2.0 million and $8.3 million of non-
deductible FCC license impairment for the years ended December 31, 2010, 2009 and 2008, respectively.
50 Sinclair Broadcast Group
We recorded a deferred tax benefit of $2.5 million and $3.8 million during the years ended December 31, 2010 and 2009,
respectively, related to the recovery of historical losses attributable to the basis in stock of certain subsidiaries.
Temporary differences between the financial reporting carrying amounts and the tax bases of assets and liabilities give rise to
deferred taxes. Total deferred tax assets and deferred tax liabilities as of December 31, 2010 and 2009 were as follows (in
thousands):
Current and Long-Term Deferred Tax Assets:
2010
2009
Net operating losses:
Federal
State
Broadcast licenses
Intangibles
Other
Valuation allowance for deferred tax assets
Total deferred tax assets
Current and Long-Term Deferred Tax Liabilities:
Broadcast licenses
Intangibles
Property and equipment, net
Contingent interest obligations
Other
Total deferred tax liabilities
Net tax liabilities
$
$
$
$
4,063
83,229
24,782
8,669
32,235
152,978
(77,559)
75,419
(9,199)
(191,658)
(19,019)
(52,212)
(4,008)
(276,096)
(200,677)
$
$
$
$
17,430
81,578
31,725
11,774
33,093
175,600
(76,834)
98,766
(9,814)
(173,836)
(24,424)
(51,044)
(1,898)
(261,016)
(162,250)
Our remaining federal and state net operating losses will expire during various years from 2011 to 2030.
We establish valuation allowances in accordance with the guidance related to accounting for income taxes. In evaluating our
ability to realize net deferred tax assets, we consider all available evidence, both positive and negative, including our past operating
results, tax planning strategies and forecasts of future taxable income. In considering these sources of taxable income, we must
make certain assumptions and judgments that are based on the plans and estimates used to manage our underlying businesses. A
valuation allowance has been provided for deferred tax assets based on past operating results, expected timing of the reversals of
existing temporary book/tax basis differences, alternative tax strategies and projected future taxable income. Although realization
is not assured for the remaining deferred tax assets, we believe it is more likely than not that they will be realized in the future.
During the year ended December 31, 2010, we increased our valuation allowance by $0.7 million. The change in valuation
allowance was primarily due to state net operating losses. During the year ended December 31, 2009, we decreased our valuation
allowances by $8.0 million. The change in valuation allowance was primarily due to the removal of the fully valued federal net
operating losses related to the closure of a subsidiary.
As of December 31, 2010 and 2009, we had $26.1 million of gross unrecognized tax benefits. Of this total, $15.1 million (net
of federal effect on state tax issues) and $6.8 million (net of federal effect on state tax issues) represent the amounts of
unrecognized tax benefits that, if recognized, would favorably affect our effective tax rates from continuing operations and
discontinued operations, respectively.
The following table summarizes the activity related to our accrued unrecognized tax benefits (in thousands):
Balance at January 1,
(Reductions) increases related to prior years tax
position
Increases related to current year tax positions
Reductions related to settlements with taxing
authorities
Reductions related to expiration of the applicable
statute of limitations
Balance at December 31,
2010
2009
2008
$
26,148
$
26,088
$
27,972
(210)
187
—
146
104
(76)
$
—
26,125
$
(114)
26,148
$
(1,017)
167
(501)
(533)
26,088
2010 Annual Report 51
In addition, we recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. We
recognized $1.0 million, $1.1 million and $1.4 million of income tax expense for interest related to uncertain tax positions for the
years ended December 31, 2010, 2009 and 2008, respectively.
Management periodically performs a comprehensive review of our tax positions and accrues amounts for tax contingencies.
Based on these reviews, the status of on-going audits and the expiration of applicable statute of limitations, these accruals are
adjusted as necessary. The resolution of audits is unpredictable and could result in tax liabilities that are significantly higher or
lower than for what we have provided. Amounts accrued for these tax matters are included in the table above and long-term
liabilities in our consolidated balance sheets. We believe that adequate accruals have been provided for all years.
We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. All of our 2007 and subsequent
federal and state tax returns remain subject to examination by various tax authorities. Some of our pre-2007 federal and state tax
returns may also be subject to examination. In addition, our 2006 and 2007 federal tax returns are currently under audit, and
several of our subsidiaries are currently under state examinations for various years. We do not anticipate the resolution of these
matters will result in a material change to our consolidated financial statements. In addition, it is reasonably possible that various
statutes of limitations could expire by December 31, 2011. We do not expect such expirations, if any, would significantly change
our unrecognized tax benefits over the next twelve months.
10. COMMITMENTS AND CONTINGENCIES:
Litigation
We are a party to lawsuits and claims from time to time in the ordinary course of business. Actions currently pending are in
various stages and no material judgments or decisions have been rendered by hearing boards or courts in connection with such
actions. After reviewing developments to date with legal counsel, our management is of the opinion that the outcome of our
pending and threatened matters will not have a material adverse effect on our consolidated balance sheets, consolidated
statements of operations or consolidated statements of cash flows.
Various parties have filed petitions to deny our applications for the following stations’ license renewals: WXLV-TV, Winston-
Salem, North Carolina; WMYV-TV, Greensboro, North Carolina; WLFL-TV, Raleigh/Durham, North Carolina; WRDC-TV,
Raleigh/Durham, North Carolina; WLOS-TV, Asheville, North Carolina, WMMP-TV, Charleston, South Carolina; WTAT-TV,
Charleston, South Carolina; WMYA-TV, Anderson, South Carolina; WICS-TV and WICD-TV in Springfield/Champaign, Illinois
and WCGV-TV and WVTV-TV in Milwaukee, Wisconsin. The FCC is in the process of considering the renewal applications and
we believe the petitions have no merit.
Operating Leases
We have entered into operating leases for certain property and equipment under terms ranging from one to 15 years. The rent
expense from continuing operations under these leases, as well as certain leases under month-to-month arrangements, for the
years ended December 31, 2010, 2009 and 2008 was approximately $3.7 million, $4.1 million and $4.3 million, respectively.
Future minimum payments under the leases are as follows (in thousands):
2011
2012
2013
2014
2015
2016 and thereafter
$
$
3,854
3,615
3,304
3,199
2,550
6,246
22,768
We had no material outstanding letters of credit as of December 31, 2010.
52 Sinclair Broadcast Group
Network Affiliation Agreements and Program Service Arrangements
Our 58 television stations that we own and operate, or to which we provide programming services or sales services, are
affiliated as follows: FOX (20 stations); MyNetworkTV (16 stations; not a network affiliation, however is branded as such); ABC
(9 stations); The CW (10 stations); CBS (2 stations) and NBC (1 station). The networks produce and distribute programming in
exchange for each station’s commitment to air the programming at specified times and for commercial announcement time
during programming. In addition, certain stations broadcast programming on second and third digital signals through network
affiliation or program service arrangements with TheCoolTV, the Country Network, MyNetworkTV, This TV and Estrella TV.
The non-renewal or termination of any of our other network affiliation agreements or program service arrangements would
prevent us from being able to carry applicable programming. This loss of programming would require us to obtain replacement
programming, which may involve higher costs and which may not be as attractive to our target audiences, resulting in reduced
revenues. Upon the termination of any of the above affiliation agreements or program service arrangements, we would be
required to establish a new affiliation agreement or program service arrangement with another party or operate as an independent
station. At such time and if applicable, the remaining value of a network affiliation asset could become impaired and we would be
required to write down the value of the asset to its estimated fair value. As of December 31, 2010, the net book value of network
affiliation assets was $113.0 million.
On February 9, 2009, MyNetworkTV announced that it was moving to a new program services model pursuant to which it
would obtain for its affiliates popular programming that has previously aired on other networks, rather than continuing to provide
first-run programming as is generally the case in a typical network model. MyNetworkTV advised us that in connection with this
change to what it refers to as a "hybrid" model, it believes it had the right to terminate all of its existing affiliate agreements and
negotiate new agreements for this programming service with the television stations that have been MyNetworkTV affiliates. On
March 3, 2009, we received notice from MyNetworkTV claiming that it had ceased to exist as a network and therefore, was
terminating each of our affiliation agreements effective September 26, 2009. On March 25, 2009, each of our subsidiaries that
owned or operated stations which were affiliated with MyNetworkTV entered into an agreement, effective September 28, 2009
with a party related to MyNetworkTV to provide such stations with programming during the following year for the time periods
previously programmed by MyNetworkTV, excluding programming for Saturday night. This programming agreement is
accounted for as a station barter arrangement. The amortization related to our network affiliation intangible assets associated
with MyNetworkTV stations was accelerated during 2009, resulting in zero asset balances remaining as of September 30, 2009.
On January 24, 2011, our MyNetworkTV program service arrangement was extended until the fall of 2014. The program service
arrangement gives us the ability to exercise early cancellation options beginning in 2012.
On October 30, 2009, our affiliation agreements of the stations owned, programmed and/or to which we provide services that
are affiliated with the CW were extended for an additional year to August 31, 2011.
On February 12, 2010, we entered into a network affiliation agreement with The CW, expiring on August 31, 2011. Effective
April 26, 2010 KMYS-TV in San Antonio, Texas switched from MyNetworkTV to the CW.
On March 25, 2010, we agreed to terms on a renewal of the ABC network affiliation agreements, expiring August 31, 2015.
Pursuant to the terms we are required to pay fees to ABC for network programming.
On December 21, 2010, we entered into a renewal of our FOX affiliation agreements, expiring December 31, 2012. Pursuant
to the terms we are required to pay fees to FOX for network programming.
Changes in the Rules on Television Ownership and Local Marketing Agreements
Certain of our stations have entered into what have commonly been referred to as local marketing agreements or LMAs. One
typical type of LMA is a programming agreement between two separately owned television stations serving the same market,
whereby the licensee of one station programs substantial portions of the broadcast day and sells advertising time during such
programming segments on the other licensee’s station subject to the latter licensee’s ultimate editorial and other controls. We
believe these arrangements allow us to reduce our operating expenses and enhance profitability.
If we are required to terminate or modify our LMAs, our business could be affected in the following ways:
Losses on investments. As part of our LMA arrangements, we own the non-license assets used by the stations with which
we have LMAs. If certain of these LMA arrangements are no longer permitted, we would be forced to sell these assets,
restructure our agreements or find another use for them. If this happens, the market for such assets may not be as good
as when we purchased them and, therefore, we cannot be certain that we will recoup our original investments.
2010 Annual Report 53
Termination penalties. If the FCC requires us to modify or terminate existing LMAs before the terms of the LMAs expire,
or under certain circumstances, we elect not to extend the terms of the LMAs, we may be forced to pay termination
penalties under the terms of some of our LMAs. Any such termination penalty could be material.
The following paragraphs discuss various proceedings relevant to our LMAs.
In 1999, the FCC established a new local television ownership rule. LMAs fell under this rule, however the rule grandfathered
LMAs that were entered into prior to November 5, 1996, and permitted the applicable stations to continue operations pursuant to
the LMAs until the conclusion of the FCC’s 2004 biennial review. The FCC stated it would conduct a case-by-case review of
grandfathered LMAs and assess the appropriateness of extending the grandfathering periods. The FCC did not initiate any review
of grandfathered LMAs in 2004 or as part of its 2006 quadrennial review. We do not know when, or if, the FCC will conduct any
such review of grandfathered LMAs. For LMAs executed on or after November 5, 1996, the FCC required compliance with the
1999 local television ownership rule by August 6, 2001. We challenged the 1999 rules in the U.S. Court of Appeals for the D.C.
Circuit (D.C. Circuit), resulting in the exclusion of post-November 5, 1996 LMAs from the 1999 rules. In 2002, the D.C. Circuit
ruled in Sinclair Broadcast Group, Inc. v. F.C.C., 284 F.3d 114 (D.C. Cir. 2002) that the 1999 local television ownership rule was
arbitrary and capricious and sent the rule back to the FCC for further refinement.
In 2003, the FCC revised its ownership rules, including the local television ownership rule; however the U. S. Court of Appeals
for the Third Circuit (Third Circuit) did not enable the 2003 rules to become effective and sent the 2003 rules back to the FCC
for further refinement. Due to the court decisions, the FCC concluded the 1999 rules could not be justified as necessary in the
public interest and as a result, we took the position that an issue exists regarding whether the FCC has any current legal right to
enforce any rules prohibiting the acquisition of television stations. Several parties, including us, filed petitions with the Supreme
Court of the United States seeking review of the Third Circuit decision, but the Supreme Court denied the petitions in June 2005.
In July 2006, the FCC released a Further Notice of Proposed Rule Making seeking comment on how to address the issues
raised by the Third Circuit’s decision. In January 2008, the FCC released an order containing ownership rules that re-adopted the
1999 rules. On February 29, 2008, several parties, including us, separately filed petitions for review in a number of federal
appellate courts challenging the 1999 rules. Those petitions were consolidated in the U.S. Court of Appeals for the Ninth Circuit
(Ninth Circuit) and in November 2008, transferred by the Ninth Circuit to the Third Circuit where the proceedings are still
pending.
On November 15, 1999, we entered into an agreement to acquire WMYA-TV (formerly WBSC-TV) in Anderson, South
Carolina from Cunningham Broadcasting Corporation (Cunningham), but that transaction was denied by the FCC. Since none of
the FCC rule changes ever became effective, we filed a petition for reconsideration with the FCC and amended our application to
acquire the license of WMYA-TV. We also filed applications in November 2003 to acquire the license assets of, at that time, the
remaining five Cunningham stations: WRGT-TV, Dayton, Ohio; WTAT-TV, Charleston, South Carolina; WVAH-TV,
Charleston, West Virginia; WNUV-TV, Baltimore, Maryland; and WTTE-TV, Columbus, Ohio. Rainbow/PUSH filed a petition
to deny these five applications and to revoke all of our licenses. The FCC dismissed our applications and denied the
Rainbow/PUSH petition due to the abovementioned 2003 Third Circuit decision. Rainbow/PUSH filed a petition for
reconsideration of that denial and we filed an application for review of the dismissal. In 2005, we filed a petition with the D. C.
Circuit requesting that the Court direct the FCC to take final action on our applications, but that petition was dismissed. On
January 6, 2006, we submitted a motion to the FCC requesting that it take final action on our applications. The applications and
the associated petition to deny are still pending. We believe the Rainbow/PUSH petition is without merit. On February 8, 2008,
we filed a petition with the D.C. Circuit requesting that the Court direct the FCC to act on our applications and cease its use of
the 1999 rules. In July 2008, the D.C. Circuit transferred the case to the Ninth Circuit, and we filed a petition with the D.C.
Circuit challenging that decision; however, it was denied. We also filed with the Ninth Circuit a motion to transfer that case back
to the D.C. Circuit. In November 2008, the Ninth Circuit consolidated and sent our petition seeking final FCC action on our
applications to the Third Circuit. In December 2008, we agreed voluntarily with the parties to our proceeding to dismiss our
petition seeking final FCC action on our applications.
11. RELATED PERSON TRANSACTIONS:
David, Frederick, Duncan and Robert Smith (collectively, the controlling shareholders) are brothers and hold substantially all of
the Class B Common Stock and some of our Class A Common Stock. We engaged in the following transactions with them
and/or entities in which they have substantial interests.
Related Person Leases. Certain assets used by us and our operating subsidiaries are leased from Cunningham Communications
Inc., Keyser Investment Group, Gerstell Development Limited Partnership and Beaver Dam, LLC (entities owned by the
controlling shareholders). Lease payments made to these entities were $4.5 million, $4.7 million and $4.8 million for the years
ended December 31, 2010, 2009 and 2008, respectively.
54 Sinclair Broadcast Group
Bay TV. In January 1999, we entered into a LMA with Bay Television, Inc. (Bay TV), which owns the television station
WTTA-TV in the Tampa/St. Petersburg, Florida market. Our controlling shareholders own a substantial portion of the equity of
Bay TV. Payments made to Bay TV were $1.7 million, $3.0 million and $3.2 million for the years ended December 31, 2010, 2009
and 2008. We received $0.5 million for each of the years ended December 31, 2010, 2009 and 2008 from Bay TV for certain
equipment leases which expired on November 1, 2010.
Notes and capital leases payable to affiliates consisted of the following as of December 31, 2010 and 2009 (in thousands):
Capital lease for building, interest at 7.93%
Capital lease for building, interest at 8.54%
Capital leases for broadcasting tower facilities, interest at 9.0%
Capital leases for broadcasting tower facilities, interest at 10.5%
Liability payable to affiliate for local marketing agreement, interest at 7.69%
Capital leases for building and tower, interest at 7.93%
Less: Current portion
2010
520
9,273
1,975
5,065
4,600
1,336
22,769
(3,196)
19,573
$
$
2009
1,312
10,025
4,033
5,074
5,913
1,355
27,712
(2,995)
24,717
$
$
Notes and capital leases payable to affiliates as of December 31, 2010 mature as follows (in thousands):
2011
2012
2013
2014
2015
2016 and thereafter
Total minimum payments due
Less: Amount representing interest
$
$
5,372
4,931
5,028
3,406
3,371
12,827
34,935
(12,166)
22,769
Cunningham Broadcasting Corporation. We have options from trusts established by Carolyn C. Smith, a parent of our controlling
shareholders, for the benefit of her grandchildren that will grant us the right to acquire, subject to applicable FCC rules and
regulations, 100% of the capital stock of Cunningham Broadcasting Corporation (Cunningham) or 100% of the capital stock or
assets of Cunningham’s individual subsidiaries. As of December 31, 2010 Cunningham was the owner-operator and FCC licensee
of: WNUV-TV, Baltimore, Maryland; WRGT-TV, Dayton, Ohio; WVAH-TV, Charleston, West Virginia; WTAT-TV,
Charleston, South Carolina; WMYA-TV, Anderson, South Carolina; and WTTE-TV, Columbus, Ohio. In 2011, Cunningham
acquired WDBB-TV, in Birmingham, Alabama.
In addition to the option agreement, we entered into five-year LMA agreements (with five-year renewal terms at our option)
with Cunningham pursuant to which we provide programming to Cunningham for airing on WNUV-TV, WRGT-TV, WVAH-
TV, WTAT-TV, WMYA-TV and WTTE-TV. In February 2011, we entered into a LMA agreement for WDBB-TV.
On October 28, 2009 we entered into amendments and /or restatements of the following agreements between Cunningham
and us: (i) the LMAs, (ii) option agreements to acquire Cunningham stock and (iii) certain acquisition or merger agreements
relating to television stations owned by Cunningham (Cunningham stations). Such amendments and/or restatements were
effective at the expiration of the tender offers for the 3.0% Notes and 4.875% Notes on November 5, 2009.
In consideration of the new terms of the LMAs and other agreements and the extension options, beginning on January 1, 2010
and ending on July 1, 2012, we are obligated to pay Cunningham the sum of approximately $29.1 million in 10 quarterly
installments of $2.75 million and one quarterly payment of approximately $1.6 million, which amounts will be used to pay off
Cunningham’s bank credit facility and which amounts will be credited toward the purchase price for each Cunningham Station.
An additional $3.9 million will be paid in two installments on July 1, 2012 and October 1, 2012 as an additional LMA fee. The
aggregate purchase price of the television stations, $78.5 million pursuant to certain acquisition or merger agreements, will be
decreased by each payment made by us to Cunningham up to $29.1 million in the aggregate, pursuant to the foregoing
transactions with Cunningham as such payments are made. Beginning on January 1, 2013, we will be obligated to pay
Cunningham an annual LMA fee for the television stations equal to the greater of (i) 3% of each station’s annual net broadcast
revenue and (ii) $5.0 million.
2010 Annual Report 55
We continue to reimburse Cunningham for 100% of its operating costs. In addition, we continue to pay Cunningham a
monthly payment of $50,000 through December 2012. In accordance with the effective date of the abovementioned agreements,
the $50,000 monthly payment no longer reduces the option exercise price.
We made payments to Cunningham under these LMA and other agreements of $17.3 million, $6.5 million and $8.0 million for
the years ended December 31, 2010, 2009 and 2008, respectively. For the year ended December 31, 2010, 2009 and 2008,
Cunningham’s stations provided us with approximately $94.3 million, $80.4 million and $90.0 million, respectively, of total
revenue. The financial statements for Cunningham are included in our consolidated financial statements for all periods presented.
Our Bank Credit Agreement contains certain cross-default provisions with certain material third-party licenses. As of December
31, 2010, Cunningham was the sole material third-party licensee. The amended or restated LMAs and option agreements have
been approved pursuant to our related person transaction policy.
Cunningham accounts for income taxes and deferred taxes using the separate return method and those amounts are
consolidated into our income taxes and deferred taxes, which are also calculated using the separate return method. For the years
ended December 31, 2010, 2009 and 2008, Cunningham’s benefit for income taxes was $0.9 million, $0.9 million and $1.3 million,
respectively. As of December 31, 2010 and 2009, Cunningham’s deferred tax liabilities were $0.5 million and $0.3 million,
respectively. There were no deferred tax assets as of December 31, 2010 and 2009.
In fourth quarter 2010, the FCC approved Cunningham’s acquisition of WDBB-TV license assets. In February 2011,
Cunningham acquired the license assets and we will continue to operate WDBB pursuant to a LMA..
Atlantic Automotive. We sold advertising time to and purchased vehicles and related vehicle services from Atlantic Automotive
Corporation (Atlantic Automotive), a holding company which owns automobile dealerships and an automobile leasing company.
David D. Smith, our President and Chief Executive Officer, has a controlling interest in, and is a member of the Board of
Directors of Atlantic Automotive. We received payments for advertising totaling $0.3 million, $0.3 million and $0.6 million
during the years ended December 31, 2010, 2009 and 2008, respectively. We paid $0.8 million, $0.4 million and $0.9 million for
vehicles and related vehicle services from Atlantic Automotive during the years ended December 31, 2010, 2009 and 2008,
respectively.
Allegiance Capital Limited Partnership. In August 1999, we made an investment in Allegiance Capital Limited Partnership
(Allegiance), a small business investment company. Our controlling shareholders and our Executive Vice President/Chief
Financial Officer are also investors in Allegiance. Allegiance Capital Management Corporation (ACMC) is the general partner.
An employee of ours is a non-controlling shareholder of ACMC. ACMC controls all decision making, investing and management
of operations of Allegiance in exchange for a monthly management fee based on actual expenses incurred which currently
averages approximately less than $0.1 million and which is paid by the limited partners. We did not make any contributions into
Allegiance during 2010 or 2009. Allegiance did not make any distributions to us during 2010 or 2009. As of December 31, 2010,
our remaining unfunded commitment was $5.3 million.
Thomas & Libowitz, P.A. Basil A. Thomas, a member of our Board of Directors, is the father of Steven A. Thomas, a partner
and founder of Thomas & Libowitz, P.A. (Thomas & Libowitz), a law firm providing legal services to us on an ongoing basis.
We paid fees of $0.5 million, $1.7 million and $1.0 million to Thomas & Libowitz during 2010, 2009 and 2008, respectively.
During 2007, Steven A. Thomas received, in lieu of cash payment for certain legal fees, an ownership percentage in two of our
real estate investments and one of our private equity investments. The fair value of the three ownership interests was $0.1 million
as of the dates the investments were made.
Charter Aircraft. From time to time, we charter aircraft owned by certain controlling shareholders. We incurred less than $0.1
million during the years ended December 31, 2010 and 2009, and $0.1 million during the year ended December 31, 2008 related
to these arrangements.
Other Leases. In September 2008, AP Management Company, the management company of Patriot Capital II, L.P., a small
business investment company in which we have made investments, entered into a five-year office lease agreement with Skylar
Development LLC, a subsidiary of one of our real estate ventures.
In October 2009, Bagby’s Bistro, LLC, a company owned by David Smith and one of his sons, entered into a restaurant lease
agreement with Skylar Development, LLC (Skylar), a subsidiary of one of our real estate ventures.
Other. One of our controlling shareholders, Frederick Smith, holds an investment in Patriot Capital II, L.P. Qualified
employees, directors and officers have been approved to invest in entities we have an interest in pursuant to the current related
person transaction policy.
56 Sinclair Broadcast Group
12. EARNINGS (LOSS) PER SHARE:
The following table reconciles income (loss) (numerator) and shares (denominator) used in our computations of earnings (loss)
per share for the years ended December 31, 2010, 2009 and 2008 (in thousands):
Income (loss) (Numerator)
Income (loss) from continuing operations
Income impact of assumed conversion of the 4.875%
Notes, net of taxes
Income impact of assumed conversion of the 6.0%
Notes, net of taxes
Net loss attributable to noncontrolling interests
included in continuing operations
Numerator for diluted earnings (loss) per common
share from continuing operations available to
common shareholders
Loss from discontinued operations, net of taxes
Numerator for diluted earnings (loss) available to
2010
2009
2008
$
75,625
$ (137,948)
$ (248,522)
166
2,521
1,100
79,412
(577)
—
—
2,335
—
—
2,133
(135,613)
(81)
(246,389)
(141)
common shareholders
$
78,835
$
(135,694)
$
(246,530)
Shares (Denominator)
Weighted-average common shares outstanding
Dilutive effect of stock-settled appreciation rights
Dilutive effect of 4.875% Notes
Dilutive effect of 6.0% Notes
Weighted-average common and common equivalent
shares outstanding
80,245
37
254
3,070
83,606
79,981
—
—
—
79,981
85,794
—
—
—
85,794
Potentially dilutive securities representing 1.4 million, 9.9 million and 30.9 million shares of common stock for the years ended
December 31, 2010, 2009 and 2008, respectively, were excluded from the computation of diluted earnings (loss) per common
share for these periods because their effect would have been antidilutive. The decrease in 2010 compared to 2009 of potentially
dilutive securities is primarily related to the partial redemption of our 3.0% Notes and the inclusion of the 4.875% Notes and
6.0% Notes in dilutive earnings (loss) per share. The decrease in 2009 compared to 2008 of potentially dilutive securities is
primarily related to the partial redemption of our 3.0% and 4.875% Notes. The net income (loss) per share amounts are the same
for Class A and Class B Common Stock because the holders of each class are legally entitled to equal per share distributions
whether through dividends or in liquidation.
13. SEGMENT DATA:
We measure segment performance based on operating income (loss). Our broadcast segment includes stations in 35 markets
located predominately in the eastern, mid-western and southern United States. Our 2010 other operating divisions segment
primarily earned revenues from sign design and fabrication; regional security alarm operating and bulk acquisitions and real estate
ventures. In addition to the revenues noted in 2010, in 2009 and 2008, our other operating divisions segment earned revenues
from information technology staffing, consulting and software development and transmitter manufacturing. All of our other
operating divisions are located within the United States. Corporate costs primarily include our costs to operate as a public
company and to operate our corporate headquarters location. Corporate is not a reportable segment. In 2010, in conjunction
with our debt restructurings, we re-examined our corporate overhead cost allocation methodologies and made applicable changes
to the way we allocate costs resulting in greater overhead absorption by the broadcast segment. This allocation change resulted in
approximately $14.5 million in more corporate general and administrative expenses allocated to the broadcast segment for the
year ended December 31, 2010, than what would have been allocated pursuant to prior year’s methodology. We had
approximately $167.3 million and $161.9 million of intercompany loans between the broadcast segment, operating divisions
segment and corporate as of December 31, 2010 and 2009, respectively. We had $19.3 million, $22.9 million and $9.9 million in
intercompany interest expense related to intercompany loans between the broadcast segment, other operating divisions segment
and corporate for the years ended December 31, 2010, 2009 and 2008, respectively. Intercompany loans and interest expense are
excluded from the tables below. All other intercompany transactions are immaterial.
2010 Annual Report 57
Financial information for our operating segments is included in the following tables for the years ended December 31, 2010,
2009 and 2008 (in thousands):
For the year ended December 31, 2010
Revenue
Depreciation of property and equipment
Amortization of definite-lived intangible assets
Amortization of program contract costs and
net realizable value adjustments
Impairment of goodwill, intangible and other
assets
General and administrative overhead expenses
Operating income (loss)
Interest expense
Loss from equity and cost method investments
Goodwill
Assets
Capital expenditures
$
Broadcast
730,588
33,260
15,974
Other
Operating
Divisions
36,598
1,291
2,860
$
$
Corporate
—
1,756
—
$
Consolidated
767,186
36,307
18,834
60,862
—
—
60,862
4,803
23,685
243,839
—
—
656,629
1,232,332
9,859
—
918
478
1,943
(4,861)
3,388
242,033
1,835
—
2,197
(3,960)
114,103
—
—
11,559
—
4,803
26,800
240,357
116,046
(4,861)
660,017
1,485,924
11,694
$
Broadcast
612,758
39,982
20,228
Other
Operating
Divisions
43,719
1,035
2,127
$
For the year ended December 31, 2009
Revenue
Depreciation of property and equipment
Amortization of definite-lived intangible assets
Amortization of program contract costs and
net realizable value adjustments
Impairment of goodwill, intangible and other
assets
General and administrative overhead expenses
Operating loss
Interest expense
Income from equity and cost method
investments
Goodwill
Assets
Capital expenditures
73,087
249,556
8,607
(86,885)
—
—
656,629
1,357,826
5,724
For the year ended December 31, 2008
Revenue
Depreciation of property and equipment
Amortization of definite-lived intangible assets
Amortization of program contract costs and
net realizable value adjustments
Impairment of goodwill and broadcast licenses
General and administrative overhead expenses
Operating loss
Interest expense
Loss from equity and cost method investments
$
Broadcast
699,040
41,947
17,063
84,422
462,261
7,288
(258,889)
—
—
58 Sinclair Broadcast Group
$
Corporate
—
1,875
—
$
Consolidated
656,477
42,892
22,355
—
73,087
243
15,986
(18,376)
78,549
—
—
5,646
42
249,799
25,632
(111,230)
80,021
354
660,017
1,590,029
7,693
$
Corporate
—
1,974
—
$
Consolidated
754,474
44,765
18,340
—
—
17,723
(20,114)
86,609
—
84,422
463,887
26,285
(288,459)
87,634
(2,703)
—
—
1,039
(5,969)
1,472
354
3,388
226,557
1,927
Other
Operating
Divisions
55,434
844
1,277
$
—
1,626
1,274
(9,456)
1,025
(2,703)
14. FAIR VALUE MEASUREMENTS:
Accounting guidance provides for valuation techniques, such as the market approach (comparable market prices), the income
approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or
replacement cost). A fair value hierarchy using three broad levels prioritizes the inputs to valuation techniques used to measure
fair value. The following is a brief description of those three levels:
• Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These
include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active.
• Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The carrying value and fair value of our notes, debentures, program contracts payable and non-cancelable commitments as of
December 31, 2010 and 2009 were as follows (in thousands):
8.0% Notes
6.0% Notes
4.875% Notes
3.0% Notes
8.375% Notes
9.25% Notes
Term Loan B
Cunningham Bank Credit
Facility
Active program contracts
payable
Future program liabilities (a)
Total fair value
$
2010
Carrying Value
—
$
66,019
5,685
5,400
246,493
487,724
264,352
$
Fair Value
—
70,385
5,685
5,400
258,750
544,690
273,240
2009
Carrying Value
225,488
$
122,482
37,016
27,383
—
486,519
323,551
$
Fair Value
220,731
111,991
36,091
27,044
—
518,125
314,306
21,933
22,452
32,900
32,900
97,894
88,510
1,284,010
89,145
72,823
$ 1,342,570
140,443
70,038
1,465,820
$
124,951
56,202
1,442,341
$
(a) Future program liabilities reflect a license agreement for program material that is not yet available for its first showing or telecast and
is, therefore, not recorded as an asset or liability on our balance sheet.
Our notes, except the 3.0% and 4.875% Notes are fair valued using Level 1 hierarchy inputs described above. The carrying
value of our 3.0% and 4.875% Notes approximates their fair value. Our Term Loan B and Cunningham’s bank credit facility are
fair valued using Level 2 hierarchy inputs described above.
Our estimates of active program contracts payable and future program liabilities were based on discounted cash flows using
Level 3 inputs described above. The discount rate represents an estimate of a market participants return and risk applicable to
program contracts.
2010 Annual Report 59
15. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Sinclair Television Group, Inc. (STG), a wholly-owned subsidiary and the television operating subsidiary of Sinclair Broadcast
Group, Inc. (SBG), was the primary obligor under the Bank Credit Agreement, and the 8.0% Notes as of December 31, 2009.
STG is the primary obligor under the Bank Credit Agreement, the 8.375% Notes and the 9.25% Notes and was the primary
obligor under the 8.0% Notes until they were fully redeemed in 2010. Our Class A Common Stock, Class B Common Stock, the
6.0% Notes, the 4.875% Notes and the 3.0% Notes remain obligations or securities of SBG and are not obligations or securities
of STG. SBG is a guarantor under the Bank Credit Agreement, the 9.25% Notes and the 8.375% Notes. As of December 31,
2010 our consolidated total debt of $1,212.1 million included $1,050.6 million of debt related to STG and its subsidiaries of which
SBG guaranteed $998.6 million.
SBG, KDSM, LLC, a wholly-owned subsidiary of SBG, and STG’s wholly-owned subsidiaries (guarantor subsidiaries), have
fully and unconditionally guaranteed all of STG’s obligations. Those guarantees are joint and several. There are certain
contractual restrictions on the ability of SBG, STG or KDSM, LLC to obtain funds from their subsidiaries in the form of
dividends or loans.
The following condensed consolidating financial statements present the consolidated balance sheets, consolidated statements of
operations and consolidated statements of cash flows of SBG, STG, KDSM, LLC and the guarantor subsidiaries, the direct and
indirect non-guarantor subsidiaries of SBG and the eliminations necessary to arrive at our information on a consolidated basis.
These statements are presented in accordance with the disclosure requirements under SEC Regulation S-X, Rule 3-10.
60 Sinclair Broadcast Group
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2010
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
Cash
Restricted cash - current
Accounts and other receivables
Other current assets
Total current assets
Property and equipment, net
Investment in consolidated subsidiaries
Restricted cash – long term
Other long-term assets
Total other long-term assets
Acquired intangible assets
$
—
—
43
1,477
1,520
9,856
—
—
79,184
79,184
—
$
$
5,071
5,058
99
5,492
15,720
$
1,022
—
115,615
46,231
162,868
2,669
169,260
609,737
—
318,137
927,874
—
223
10,207
10,430
—
829,884
15,881
—
5,765
2,962
24,608
97,219
—
—
89,956
89,956
64,694
$
—
—
(151)
(284)
(435)
$
21,974
5,058
121,371
55,878
204,281
(6,773)
272,231
(609,737)
—
(380,339)
(990,076)
—
223
117,145
117,368
(2,534)
892,044
Total assets
$ 90,560
$ 946,263
$ 1,172,442
$ 276,477
$ (999,818)
$ 1,485,924
Accounts payable and accrued liabilities
Current portion of long-term debt
Current portion of affiliate long-term debt
Other current liabilities
Total current liabilities
$
512
363
870
—
1,745
$
19,733
3,300
—
—
23,033
$
Long-term debt
Affiliate long-term debt
Dividends in excess of investment in
consolidated subsidiaries
Other liabilities
Total liabilities
Common stock
Additional paid-in capital
Accumulated (deficit) earnings
Accumulated other comprehensive loss
Total Sinclair Broadcast Group
shareholders’ (deficit) equity
Noncontrolling interest in consolidated
subsidiaries
Total liabilities and equity (deficit)
$
79,091
8,403
122,994
43,750
255,983
804
609,640
(771,953)
(3,914)
995,269
—
—
1,709
1,020,011
—
123,695
(195,049)
(2,394)
46,734
391
2,326
70,428
119,879
38,098
11,170
—
394,192
563,339
10
445,577
165,316
(1,800)
$
8,110
15,502
113
693
24,418
57,282
224,207
—
47,154
353,061
282
78,637
(154,656)
(847)
$
(1,066)
—
(113)
—
(1,179)
$
74,023
19,556
3,196
71,121
167,896
—
(224,207)
(122,994)
(201,008)
(549,388)
(292)
(647,909)
184,389
5,041
1,169,740
19,573
—
285,797
1,643,006
804
609,640
(771,953)
(3,914)
(165,423)
(73,748)
609,103
(76,584)
(458,771)
(165,423)
—
90,560
—
$ 946,263
—
$ 1,172,442
—
$ 276,477
8,341
$ (999,818)
8,341
$ 1,485,924
2010 Annual Report 61
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2009
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
Cash
Restricted cash - current
Accounts and other receivables
Other current assets
Total current assets
Property and equipment, net
Investment in consolidated subsidiaries
Restricted cash – long term
Other long-term assets
Total other long-term assets
Acquired intangible assets
$
—
—
232
639
871
11,597
—
—
62,183
62,183
—
$
$
10,364
27,667
6,014
2,558
46,603
$
217
—
110,733
54,546
165,496
2,135
194,139
691,578
36,732
273,806
1,002,116
—
484
26,272
26,756
—
838,998
12,643
—
4,045
2,513
19,201
95,437
—
—
58,342
58,342
57,512
$
—
—
(6,090)
(283)
(6,373)
$
23,224
27,667
114,934
59,973
225,798
(7,081)
296,227
(691,578)
—
(295,225)
(986,803)
—
37,216
125,378
162,594
8,900
905,410
Total assets
$ 74,651
$ 1,050,854
$ 1,225,389
$ 230,492
$ (991,357)
$ 1,590,029
Accounts payable and accrued liabilities
Current portion of long-term debt
Current portion of affiliate long-term debt
Other current liabilities
Total current liabilities
$
Long-term debt
Affiliate long-term debt
Dividends in excess of investment in
consolidated subsidiaries
Other liabilities
Total liabilities
Common stock
Additional paid-in capital
Accumulated (deficit) earnings
Accumulated other comprehensive loss
Total Sinclair Broadcast Group
shareholders’ (deficit) equity
Noncontrolling interest in consolidated
subsidiaries
Total liabilities and equity (deficit)
$
2,886
27,695
753
—
31,334
161,848
9,272
59,402
24,745
286,601
799
605,340
(813,876)
(4,213)
$
$
20,742
—
—
—
20,742
1,037,467
—
—
1,979
1,060,188
—
279,664
(286,414)
(2,584)
32,200
289
2,242
94,229
128,960
37,747
15,445
—
352,567
534,719
10
670,863
21,904
(2,107)
$
19,373
12,648
136
576
32,733
60,902
192,097
—
37,148
322,880
282
41,824
(131,677)
(2,817)
$
(10,932)
—
(136)
—
(11,068)
—
(192,097)
(59,402)
(149,570)
(412,137)
(292)
(992,351)
396,187
7,508
$
64,269
40,632
2,995
94,805
202,701
1,297,964
24,717
—
266,869
1,792,251
799
605,340
(813,876)
(4,213)
(211,950)
(9,334)
690,670
(92,388)
(588,948)
(211,950)
—
74,651
—
$ 1,050,854
—
$ 1,225,389
—
$ 230,492
9,728
$ (991,357)
9,728
$ 1,590,029
62 Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
Net revenue
$
—
$
—
$
731,756
$
45,351
$
(9,921)
$
767,186
Program and production
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
2,205
1,756
3,961
893
23,530
518
24,941
161,746
125,106
179,345
466,197
Operating (loss) income
(3,961)
(24,941)
265,559
369
3,597
37,022
40,988
4,363
(8,875)
(547)
164
(9,258)
154,133
153,891
218,805
526,829
(663)
240,357
Equity in earnings of consolidated
subsidiaries
Interest expense
Other income (expense)
Total other income (expense)
Income tax benefit (provision)
Loss from discontinued operations,
net of taxes
Net income (loss)
Net loss attributable to the
noncontrolling interest
Net income (loss) attributable to
Sinclair Broadcast Group
85,974
(13,611)
1,666
74,029
6,080
—
76,148
—
136,815
(95,089)
33,389
75,115
—
(5,204)
(36,048)
(41,252)
—
(22,334)
(7,026)
(29,360)
(222,789)
20,192
(441)
(203,038)
—
(116,046)
(8,460)
(124,506)
31,654
(84,073)
6,113
—
(40,226)
(577)
81,251
—
—
140,234
—
(18,884)
—
(203,701)
(577)
75,048
—
—
1,100
1,100
$
76,148
$
81,251
$
140,234
$
(18,884)
$
(202,601)
$
76,148
2010 Annual Report 63
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
Net revenue
$
—
$
—
$
613,875
$
52,278
$
(9,676)
$
656,477
Program and production
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
16,249
17,893
34,142
721
8,701
541
9,963
149,528
119,779
427,559
696,866
Operating (loss) income
(34,142)
(9,963)
(82,991)
480
4,334
38,250
43,064
9,214
—
1,805
(27,346)
(699)
(26,240)
(8,314)
(598)
(7,416)
(16,328)
142,415
148,465
476,827
767,707
6,652
(111,230)
216,730
(24,443)
25,478
530
218,295
—
59
(80,021)
20,732
(59,230)
(101,049)
844
(36,454)
32,611
(104,048)
(115,681)
21,853
(35,828)
23,523
(106,133)
—
—
(5,871)
(35,233)
(41,104)
2,577
7,749
10,421
11,765
—
32,512
(81)
(135,694)
—
(108,347)
—
(113,674)
—
(5,261)
—
224,947
(81)
(138,029)
—
—
—
—
2,335
2,335
$ (135,694)
$ (108,347)
$
(113,674)
$
(5,261)
$
227,282
$
(135,694)
Equity in losses of consolidated
subsidiaries
Interest income
Interest expense
Other income (expense)
Total other (expense) income
Income tax benefit
Loss from discontinued operations,
net of taxes
Net (loss) income
Net loss attributable to the
noncontrolling interest
Net (loss) income attributable to
Sinclair Broadcast Group
64 Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
Net revenue
$
—
$
—
$ 701,455
$
65,970
$
(12,951)
$
754,474
Program and production
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
18,147
1,974
20,121
1,002
6,429
582
8,013
167,043
133,650
614,451
915,144
219
4,631
98,822
103,672
(9,299)
(430)
5,712
(4,017)
158,965
162,427
721,541
1,042,933
Operating loss
(20,121)
(8,013)
(213,689)
(37,702)
(8,934)
(288,459)
Equity in losses of consolidated
subsidiaries
Interest income
Interest expense
Other income (expense)
Total other expense
Income tax benefit
(Loss) income from discontinued
operations, net of taxes
Net loss
Net loss attributable to the
noncontrolling interest
Net (loss) income attributable to Sinclair
(187,454)
1,081
(43,754)
21,174
(208,953)
(172,429)
8,892
(34,374)
27,134
(170,777)
—
9
(6,885)
(39,655)
(46,531)
—
1,181
(15,098)
(1,939)
(15,856)
359,883
(10,420)
12,477
(1,248)
360,692
—
743
(87,634)
5,466
(81,425)
15,308
5,195
87,923
12,936
—
121,362
(358)
(214,124)
—
(173,595)
217
(172,080)
—
(40,622)
—
351,758
(141)
(248,663)
—
—
—
—
2,133
2,133
Broadcast Group
$ (214,124)
$ (173,595)
$ (172,080)
$
(40,622)
$
353,891
$
(246,530)
2010 Annual Report 65
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2010
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
$
(25,213)
$
(76,450)
$ 265,706
$
(5,729)
$
(3,353)
$ 154,961
—
—
—
709
(2,000)
—
(136)
117
—
(3,686)
—
59,342
—
—
—
—
—
—
(6,173)
—
260
—
—
110
—
—
372
(1,835)
(10,106)
—
185
(5,224)
—
—
—
—
investing activities
(1,310)
55,656
(5,431)
(16,980)
—
—
—
—
—
—
—
—
—
—
(11,694)
(10,106)
59,602
894
(7,224)
110
(136)
117
372
31,935
—
332
—
—
—
3,021
3,353
—
—
—
(427,421)
(34,225)
(7,020)
(287)
(3,123)
—
(188,146)
(1,250)
23,224
$
21,974
—
264,068
—
19,862
—
283,930
(103,878)
(302,350)
(317)
(20,876)
(34,557)
—
—
(7,016)
—
(753)
—
—
—
—
—
(2,370)
—
(4)
(287)
—
165,711
60,799
(256,783)
27,252
26,523
15,501
(259,470)
25,947
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS (USED IN) FROM
INVESTING ACTIVITIES:
Acquisition of property and equipment
Purchase of alarm monitoring contracts
Decrease in restricted cash
Distributions from investments
Investments in equity and cost method
investees
Proceeds from sale of assets
Loans to affiliates
Proceeds from loans to affiliates
Proceeds from insurance settlement
Net cash flows (used in) from
CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES:
Proceeds from notes payable,
commercial bank financing and
capital leases
Repayments of notes payable,
commercial bank financing and
capital leases
Dividends paid on Class A and Class B
Common Stock
Payments for deferred financing costs
Distributions from noncontrolling
interests
Repayments of notes and capital leases
to affiliates
Increase (decrease) in intercompany
payables
Net cash flows from (used in)
financing activities
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
beginning of period
CASH AND CASH EQUIVALENTS,
end of period
$
—
—
—
(5,293)
10,364
805
217
3,238
12,643
$
5,071
$
1,022
$
15,881
$
66 Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2009
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
$
(56,248)
$
(3,833)
$ 171,883
$
(1,364)
$
(5,002)
$ 105,436
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES:
Acquisition of property and equipment
Purchase of alarm monitoring contracts
Increase in restricted cash
Distributions from investments
Investments in equity and cost method
investees
Proceeds from sale of assets
Loans to affiliates
Proceeds from loans to affiliates
Net cash flows used in investing
activities
CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES:
Proceeds from notes payable,
commercial bank financing and
capital leases
Repayments of notes payable,
commercial bank financing and
capital leases
Purchase of subsidiary shares from
noncontrolling interest
Repurchase of Class A Common Stock
Dividends paid on Class A and Class B
Common Stock
Payments for deferred financing costs
Contributions to noncontrolling
interests
Repayments of notes and capital leases
to affiliates
Increase (decrease) in intercompany
(43)
—
—
—
(3,333)
—
(162)
157
(1,215)
—
(64,399)
—
—
—
—
—
(4,508)
—
(484)
—
—
126
—
—
(1,927)
(12,291)
—
1,501
(7,268)
—
—
—
(3,381)
(65,614)
(4,866)
(19,985)
—
946,184
—
34,691
(378,183)
(536,100)
(447)
(16,836)
—
(1,454)
(16,193)
—
—
(648)
—
—
—
(28,278)
—
—
—
—
—
—
—
(2,216)
(5,000)
—
—
(537)
26
—
payables
456,107
(311,643)
(164,366)
15,055
Net cash flows from (used in)
financing activities
59,629
70,163
(167,029)
27,399
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
beginning of period
CASH AND CASH EQUIVALENTS,
end of period
$
—
—
—
716
9,649
(12)
227
6,050
6,594
$
10,365
$
215
$
12,644
$
—
—
—
—
—
—
—
—
—
—
—
—
—
155
—
—
—
4,847
5,002
—
—
—
(7,693)
(12,291)
(64,883)
1,501
(10,601)
126
(162)
157
(93,846)
980,875
(931,566)
(5,000)
(1,454)
(16,038)
(28,815)
26
(2,864)
—
(4,836)
6,754
16,470
$
23,224
2010 Annual Report 67
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2008
(In thousands)
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES:
Acquisition of property and equipment
Consolidation of variable interest entity
Purchase of alarm monitoring contracts
Payments for acquisition of television
stations
Payment for acquisition of other
operating divisions companies
Distributions from investments
Investments in equity and cost method
investees
Proceeds from the sale of assets
Loans to affiliates
Proceeds from loans to affiliates
Net cash flows used in investing
activities
CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES:
Proceeds from notes payable,
commercial bank financing and
capital leases
Repayments of notes payable,
commercial bank financing and
capital leases
Repurchase of Class A Common Stock
Dividends paid on Class A and Class B
Common Stock
Payments for deferred financing costs
Proceeds from derivative terminations
Distributions to noncontrolling interest
Repayments of notes and capital leases
to affiliates
Increase (decrease) in intercompany
payables
Net cash flows from (used in)
financing activities
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
$
(23,968)
$
(2,756)
$ 243,780
$
(5,058)
$
(227)
$ 211,771
(57)
—
—
—
—
860
(6,244)
3
(178)
179
(561)
—
—
(17,123)
—
—
—
—
—
—
(22,269)
—
—
—
—
—
—
196
—
—
(2,282)
1,328
(7,675)
—
(53,487)
715
(35,727)
—
—
—
(5,437)
(17,684)
(22,073)
(97,128)
—
—
—
—
—
—
—
—
—
—
—
(25,169)
1,328
(7,675)
(17,123)
(53,487)
1,575
(41,971)
199
(178)
179
(142,322)
—
257,173
—
17,470
—
274,643
(24,778)
(29,836)
(67,128)
—
—
—
(722)
(216,608)
—
(207)
—
(14,004)
—
—
—
8,001
—
—
—
—
—
—
(2,604)
—
(524)
—
(637)
—
151,869
(32,955)
(221,268)
102,572
29,405
15,611
(224,079)
104,877
—
—
445
—
—
—
—
(218)
227
—
—
—
(255,597)
(29,836)
(66,683)
(524)
8,001
(637)
(3,326)
—
(73,959)
(4,510)
20,980
$
16,470
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
beginning of period
CASH AND CASH EQUIVALENTS,
end of period
$
—
—
—
(4,829)
(2,372)
14,478
2,599
2,691
3,903
$
9,649
$
227
$
6,594
$
68 Sinclair Broadcast Group
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
(in thousands, except per share data)
For the Quarter Ended
03/31/10
06/30/10
09/30/10
12/31/10
Total revenues, net
Impairment of goodwill, intangible and other
assets
Loss on extinguishment of debt
Operating income
Income from continuing operations
Loss from discontinued operations
Net income attributable to Sinclair Broadcast
Group
Basic earnings per common share from
continuing operations attributable to Sinclair
Broadcast Group
Basic earnings per common share attributable to
Sinclair Broadcast Group
Diluted earnings per common share from
continuing operations attributable to Sinclair
Broadcast Group
Diluted earnings per common share attributable
to Sinclair Broadcast Group
For the Quarter Ended
Total revenues, net
Impairment of goodwill, intangible and other
assets
Gain (loss) on extinguishment of debt
Operating (loss) income
(Loss) income from continuing operations
(Loss) income from discontinued operations
Net (loss) income attributable to Sinclair
Broadcast Group
Basic and diluted (loss) earnings per common
share from continuing operations attributable
to Sinclair Broadcast Group
Basic and diluted (loss) earnings per common
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
share attributable to Sinclair Broadcast Group
$
(1.06)
169,628
—
(289)
46,227
11,060
(66)
11,520
0.14
0.14
0.14
0.14
$
$
$
$
$
$
$
$
$
$
$
185,551
$
186,452
$
225,555
—
(149)
56,691
17,020
(68)
17,273
0.22
0.22
0.21
0.21
$
$
$
$
$
$
$
$
$
$
—
(3,939)
56,095
14,213
(68)
14,276
0.18
0.18
0.18
0.18
$
$
$
$
$
$
$
$
$
$
4,803
(1,889)
81,344
33,332
(375)
33,079
0.42
0.41
0.41
0.40
03/31/09
06/30/09
09/30/09
12/31/09
154,738
130,098
18,986
(106,707)
(87,039)
(108)
(85,655)
(1.06)
$
$
$
$
$
$
$
$
$
158,272
$
160,127
—
—
25,824
2,695
(109)
2,783
0.04
0.04
$
$
$
$
$
$
$
$
243
—
35,733
15,855
245
14,938
0.18
0.19
$
$
$
$
$
$
$
$
$
183,340
119,458
(521)
(66,080)
(69,459)
(109)
(67,760)
(0.85)
(0.85)
2010 Annual Report 69
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A Common Stock is listed for trading on the NASDAQ stock market under the symbol SBGI. Our Class B
Common Stock is not traded on a public trading market or quotation system. The following tables set forth for the periods
indicated the high and low closing sales prices on the NASDAQ stock market for our Class A Common Stock.
2010
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2009
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
5.78
7.79
7.38
8.47
High
3.86
2.12
3.81
5.03
$
$
$
$
$
$
$
$
Low
4.63
5.33
5.39
7.12
Low
0.89
1.04
1.07
2.95
$
$
$
$
$
$
$
$
As of February 28, 2011, there were approximately 82 shareholders of record of our common stock. This number does not
include beneficial owners holding shares through nominee names.
Dividend Policy
In February 2009, we decided it was prudent to suspend the dividend due to the negative economic climate. Amid
improvements in general economic conditions and in our performance, in November 2010, our Board of Directors declared a
$0.43 per share common stock dividend payable on December 15, 2010 to holders of record on December 1, 2010. In February
2011, our Board of Directors reinstated our dividend policy, declaring a quarterly common stock dividend of $0.12 per share.
Future dividends on our common shares, if any, will be at the discretion of our Board of Directors and will depend on several
factors including our results of operations, cash requirements and surplus, financial condition, covenant restrictions and other
factors that the Board of Directors may deem relevant. The Class A Common Stock and Class B Common Stock holders have
the same rights related to dividends. Our Bank Credit Agreement and some of our debt instruments contain restrictions on our
ability to pay dividends. Under our Bank Credit Agreement, in certain circumstances we may make up to $40.0 million in
unrestricted annual cash payments including but not limited to dividends. Under the indentures governing our 9.25% Second
Lien Notes, due 2017 (the 9.25% Notes) and our 8.375% Senior Notes, due 2018 (the 8.375% Notes), we are restricted from
paying dividends on our common stock unless certain specified conditions are satisfied, including that:
•
•
no event of default then exists under each indenture or certain other specified agreements relating to our
indebtedness; and
after taking account of the dividends payment, we are within certain restricted payment requirements contained in
each indenture.
In addition, under certain of our debt instruments, the payment of dividends is not permissible during a default thereunder.
Issuer Purchases of Equity Securities
During the fourth quarter 2010, we repurchased, pursuant to a tender offer, $58.0 million in principal amount of the 6.0%
Convertible Subordinated Debentures, due 2012 (the 6.0% Notes).
70 Sinclair Broadcast Group
Comparative Stock Performance
The following line graph compares the yearly percentage change in the cumulative total shareholder return on our Class A
Common Stock with the cumulative total return of the NASDAQ Composite Index and the cumulative total return of the
NASDAQ Telecommunications Index (an index containing performance data of radio and television broadcast companies and
communication equipment and accessories manufacturers) from December 31, 2005 through December 31, 2010. The
performance graph assumes that an investment of $100 was made in the Class A Common Stock and in each Index on December
31, 2005 and that all dividends were reinvested. Total shareholder return is measured by dividing total dividends (assuming
dividend reinvestment) plus share price change for a period by the share price at the beginning of the measurement period.
Company/Index/Market
Sinclair Broadcast Group, Inc.
NASDAQ Telecommunications
Index
NASDAQ Composite Index
12/31/05
100.00
12/31/06
120.18
12/31/07
99.05
12/31/08
43.67
12/31/09
56.77
12/31/10
121.45
100.00
100.00
131.50
111.74
146.22
124.67
85.43
73.77
118.25
107.12
129.78
125.93
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Sinclair Broadcast Group, Inc., the NASDAQ Composite Index
and the NASDAQ Telecommunications Index
$160
$140
$120
$100
$80
$60
$40
$20
$0
12/05
12/06
12/07
12/08
12/09
12/10
Sinclair Broadcast Group, Inc.
NASDAQ Composite
NASDAQ Telecommunications
*$100 invested on 12/31/05 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
2010 Annual Report 71
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS:
CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors and Shareholders of Sinclair Broadcast Group, Inc.
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of equity
(deficit) and other comprehensive (loss) income, and of cash flows present fairly, in all material respects, the financial position of
Sinclair Broadcast Group, Inc. and its subsidiaries (the Company) at December 31, 2010 and December 31, 2009 and the results
of their operations and their cash flows for each of the two years in the period ended December 31, 2010 in conformity with
accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement
schedule listed in Item 15(a) for the two years ended December 31, 2010, presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company's management is responsible for these financial statements and financial statement
schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting appearing
under Item 9A. Our responsibility is to express opinions on these financial statements, the financial statement schedule, and on
the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audits of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for
noncontrolling interests and convertible debt instruments that may be settled in cash upon conversion in 2009 and changed its
method of accounting for variable interest entities in 2010.
We have also audited the adjustments to the 2008 consolidated financial statements to retrospectively apply the change in
accounting for noncontrolling interests and convertible debt instruments that may be settled in cash upon conversion, as
described in Note 1. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to
audit, review, or apply any procedures to the 2008 consolidated financial statements of the Company other than with respect to
the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2008 consolidated financial
statements taken as a whole.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Baltimore, Maryland
March 4, 2011
72 Sinclair Broadcast Group
The Board of Directors and Shareholders of Sinclair Broadcast Group, Inc.
We have audited, before the effects of the adjustments to retrospectively apply the changes in accounting described in Note 1, the
consolidated statements of operations, equity (deficit), comprehensive income (loss) and cash flows for the year ended December
31, 2008 of Sinclair Broadcast Group, Inc. (the 2008 financial statements before the effects of the adjustments discussed in Note
1 are not presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the 2008 financial statements referred to above, before the effects of the adjustments to retrospectively apply the
changes in accounting described in Note 1, present fairly, in all material respects, the consolidated results of Sinclair Broadcast
Group, Inc’s operations and its cash flows for the year ended December 31, 2008, in conformity with U.S. generally accepted
accounting principles.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the changes in
accounting described in Note 1 and, accordingly, we do not express an opinion or any other form of assurance about whether
such adjustments are appropriate and have been properly applied. Those adjustments were audited by PricewaterhouseCoopers
LLP.
Ernst & Young LLP
Baltimore, Maryland
March 3, 2009
2010 Annual Report 73
GROUP MANAGERS / GENERAL MANAGERS
Group Manager
William J. Fanshawe
• Baltimore, Maryland
• Norfolk, Virginia
Group Manager
Alan B. Frank
• Pittsburgh, Pennsylvania
• Rochester, New York
• Tampa/St. Petersburg, Florida
General Managers
• Mary Margaret Johnson –
Charleston, South Carolina
• Mike Wilson – Des Moines, Iowa
• Audra Swain – Las Vegas, Nevada
• Kerry Johnson – Cedar Rapids,
Iowa and Madison, Wisconsin
• David Ford – Milwaukee,
Wisconsin
• Philip Waterman – Minneapolis-St.
•
Paul, Minnesota
John Rossi – Oklahoma City,
Oklahoma
• Steven Genett – Richmond,
Virginia
John Seabers – San Antonio, Texas
•
General Managers
•
Jay C. Lowe – Birmingham,
Alabama
• Nick Magnini – Buffalo, New
York
• Harold Cooper – Charleston/
Huntington, West Virginia
• Chad Conklin –
Flint/Saginaw/Bay City,
Michigan
• Dominic Mancuso – Nashville,
•
Tennessee
John Hummel – Raleigh/Durham,
North Carolina
• Rochester, New York
• Don O’Connor – Syracuse, New
•
York
John Dittmeier – Tallahassee,
Florida
Group Manager
Daniel P. Mellon
• Columbus, Ohio
• Greensboro/Highpoint/Winston-
Salem, North Carolina
Peoria/Bloomington, Illinois
•
General Managers
•
John V. Connors – Asheville,
North Carolina-
Greenville/Spartanburg/
Anderson, South Carolina
• Thomas L. Tipton – Cape
Girardeau, Missouri-Paducah,
Kentucky and St. Louis,
Missouri
Jonathan P. Lawhead – Cincinnati,
Ohio
•
• Dean Ditmer – Dayton, Ohio
• Michael C. Brickey – Lexington,
Kentucky
• Terry Cole – Mobile, Alabama-
Pensacola, Florida
• Tom Humpage – Portland, Maine
• Tim Mathis –
Springfield/Champaign, Illinois
74 Sinclair Broadcast Group
OFFICERS
David D. Smith
President & Chief Executive
Officer
Frederick G. Smith
Vice President
J. Duncan Smith
Vice President
David B. Amy
Executive Vice President,
Chief Financial Officer
David R. Bochenek
Vice President,
Chief Accounting Officer
Barry M. Faber
Executive Vice President,
General Counsel
Lucy A. Rutishauser
Vice President,
Corporate Finance & Treasurer
Donald H. Thompson
Vice President,
Human Resources
Thomas I. Waters, III
Vice President, Purchasing
OTHER OPERATING
DIVISIONS
W. Gary Dorsch
President, Keyser Capital, LLC
BOARD OF DIRECTORS
David D. Smith
Chairman of the Board,
President & Chief Executive
Officer
Frederick G. Smith
Vice President
J. Duncan Smith
Vice President, Secretary
Robert E. Smith
Director
Daniel C. Keith
President and Founder of the
Cavanaugh Group, Inc.
Martin R. Leader
Director
Lawrence E. McCanna
Director
Basil A. Thomas
Director
TELEVISION DIVISION
Steven M. Marks
Vice President,
Chief Operating Officer
M. William Butler
Vice President,
Programming & Promotion
Robert F. Malandra
Vice President,
Finance Television
Delbert R. Parks III
Vice President,
Engineering & Operations
David F. Schwartz
Vice President, Sales
Gregg L. Siegel
Vice President, National Sales
Robert D. Weisbord
Vice President, New Media
ANNUAL MEETING
The Annual Meeting of
stockholders will be held at
Sinclair Broadcast Group's
corporate offices,
10706 Beaver Dam Road
Hunt Valley, MD 21030
Thursday, June 2, 2011 at
10:00am.
INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers, LLP
100 East Pratt Street
Suite 1900
Baltimore, MD 21202-1096
TRANSFER AGENT &
REGISTRAR
Questions regarding stock
certificates, change of address,
or other stock transfer account
matters may be directed to:
American Stock Transfer &
Trust Company, LLC
Operations Center
6201 15th Ave.
Brooklyn, NY 11219
Toll Free: 1-800-937-5449
Email: info@amstock.com
Website: www.amstock.com
FORM 10-K,
ANNUAL REPORT
A copy of the Company's 2010
Form 10-K, as filed with the
Securities and Exchange
Commission, is available at no
charge on the Company's
website www.sbgi.net or upon
written request to:
Lucy A. Rutishauser
VP, Corporate Finance &
Treasurer
Sinclair Broadcast Group, Inc.
10706 Beaver Dam Road
Hunt Valley, MD 21030
Phone: 410-568-1500
E-mail: investor@sbgi.net
COMMON STOCK
The Company's Class A
Common Stock trades on the
Nasdaq Global Select Market
tier of the NasdaqSM Stock
Market under the symbol SBGI.
SINCLAIR
BROADCAST
GROUP,
INC.
FROM ONE TO MANY
2010 A N N U A L R E PO R T