SINCLAIR BROADCAST GROUP
2013 ANNUAL REPORT
These past two years have been extraordinary for our Company. Our efforts to lead industry consolidation and push for
technological advances are helping to redefine the future of television broadcasting and unlock a spectrum of opportunities.
As the television broadcast industry completes what may be its last major consolidation, we recognize that our portfolio of strong
network affiliates and expanded reach enable us to launch, distribute and monetize content, whether ours or others, in ways we
could not two years ago. And for you that should translate into value creation.
AsAs I look to future possibilities, it is important to understand the past. The television broadcast industry was a highly fragmented
group of owners with three major broadcast networks dominating the airwaves and providing the majority of the U.S. in-home
video entertainment. Over the years, the broadcast paradigm remained relatively unchanged even as new video ventures emerged
and grew into dominant businesses. Companies, such as the large cable, satellite and telecommunications multi-video program
distributors, through the proliferation of cable networks, began offering competing video content, major sporting events and
off-net
off-network syndicated television shows. More recently, ‘over-the-top’ technologies, such as Netflix, ROKU, Apple, YouTube video
and Google, have emerged, offering consumers a greater array of options to enjoy video entertainment. As these businesses
continue to grow, we need to be on the forefront of growing our Company towards achieving competitive equilibrium through
increased operating leverage, consolidation and relevant ownership rules.
To that end, we have spent the past couple of years building a platform that only a handful of broadcasters can boast. When we
announced the acquisitions of the Four Points stations in September 2011, followed shortly thereafter by the Freedom television
station group, we highlighted the value that can be unlocked by allowing stations to consolidate, compete and better serve the
public. In 2013, we added another 63 stations primarily through the acquisitions of certain Cox Media and Titan stations, and the
acquisitions of the Barrington Broadcasting and Fisher Communications television stations. You also recognized the value
consolidation
consolidation creates. Since our first announcement in 2011 and through year-end 2013, our stock rose 410%, over 7x the 56%
return posted by the S&P 500 in the same period. The consolidation has re-energized our industry and reaffirmed the importance
we serve in our local communities. However, in my opinion, the real growth has yet to begin.
Our increased reach and scale well-positions us to strategically provide a platform to launch complementary businesses and strategic
partnerships to grow our business long term. Consider programming content. Including stations not yet closed, we produce over
1,700 hours per week of original content in the form of local news, programming which is highly desired by our viewers and which
serves a valuable and critical public service. Our pending acquisition of Allbritton Communications, which includes News Channel
8, a local cable news network operating in conjunction with WJLA-TV, its Washington, D.C. ABC affiliate, provides us with the
oppoopportunity to offer new and expanded news services in our 71 pro forma news markets. Using our 39% reach of the country, we
plan to expand Allbritton’s hybrid news structure: a long form news format wrapped around local news and a national platform out
of Washington, D.C. With our coverage and local market reach, we will be able to develop any number of local news stories and
elevate them to a national audience by virtue of the cable network, allowing what would have been a 30 second story on our local
television station to be fully developed with broad reach through the cable network. We believe no other cable network is producing
this kind of content today.
Expanding our local news distribution is but one opportunity to use our platform to serve our communities. The production of
local sports coverage is another way we are diversifying our content offerings. For many years, we have aired local high school
games and related sports shows. Recent ratings data highlight that viewers are increasingly watching such local programming. As
an example, an October 2013 local high school football game on our JSA partner’s CW station (KMYS) in San Antonio, Texas that
aired during prime-time had higher ratings than our FOX station’s broadcast of Major League Baseball’s American League
Championship
Championship Series Game 5, as well as our NBC station’s Network programming in that same market and time period. We believe
that such local content is underrepresented and that local broadcasters, with their local focus, are perfect to fill that void. The
addition of such niche local programming could increase the underlying value of the stations.
We believe that there is also an opportunity to partner with other broadcasters with meaningful viewer reach to create original
content and distribute it on a national scale to rival cable networks. When I think about the cable networks, which deliver fractions
of the broadcast audience, but whose enterprises are valued at 2-3 multiple turns higher than broadcast, then I ask why we are not
in their business. After all, we have the advantage of leveraging our broadcast platform and existing audience share to brand such
an endeavor. Content creation and delivery through a cable network, and the corresponding online and mobile distribution of such
content,
content, is a natural extension of what we do every day, and we must consider entering that business if we are to compete with the
increasing fragmentation of the market and audience through non-broadcast alternatives.
For Sinclair, it is not just about how we can expand our content offerings but also how we can assist others in delivering their
content and data to mass audiences; after all, that is the definition of broadcast. We believe a change to a flexible use transmission
standard will not only enable television broadcasters to compete effectively by increasing our data throughput, facilitating sharing
agreements within markets, and allowing for additional complementary businesses to the current broadcast model, but is also
necessary for the next level of technical innovation of ultra-high definition (“4K”) television.
I am pleased to report that the creation of a new standard is underway. Although the U.S. Standards Committee is working on
developing the ATSC 3.0 standard, there is a possibility it may not reach the marketplace since in its current form does not serve
broadcasters’ needs. We believe the fastest path to market will be for the broadcast industry to develop its own transmission
standard. While consumer adoption remains two to three years away, we believe that the standard change will have long-term
positive implications for our industry’s business models, for the government through the fees and taxes it would receive, for
consumers who would have an alternative to out-of-control data fees, and for shareholders through potential increased value.
consumers who
We believe we are fundamentally changing how we interact with viewers and businesses in our communities and one need look no
further than our digital interactive platform. Still in its infancy stages, we are making great strides to increase engagement and move
our consumers through all of our platforms – television, websites, social media, and mobile applications – reflecting the changing
landscape of how media and news are consumed. In 2013, our digital interactive revenues increased 143%. Recently, we made an
investment in Timeline Labs, which specializes in proprietary tools that discover, measure, and display trending social content in real
timetime in such a way as to allow these items to be incorporated into live newscasts and our digital assets. Given the anticipated growth
in social media and its ability to drive our key news dayparts, we intend to continue evaluating other such investments and
acquisitions of digital-centric companies to ensure we are properly positioned to capture and react to changing viewer trends.
While we turn our attention to strategizing for the future, we must not ignore daily operations. For 2013, a non-election year, we
posted record-breaking results, reflecting solid operating fundamentals. Net broadcast revenues grew 32.3% for a record $1.218
billion, EBITDA1 by 14.2% to $470.8 million, and our free cash flow2 to $263.4 million, on an actual basis. While I am extremely
pleased with the results and the dedication of the employees to build Sinclair into a $6.3 billion enterprise, we expect 2014 to be
even better. This year will be driven by the Super Bowl on the FOX Broadcast Network, the winter Olympics on NBC, a mid-term
politicalpolitical election year, expected mid-single digit percent growth in our largest advertising category of automotive, and growth in
digital interactive and retransmission revenues. In fact, if all announced station acquisitions were in our full year results for 2014,
we estimate our free cash flow would be approximately $440 million, a powerful return story.
Unfortunately, the strong fundamentals have recently been over shadowed by what we believe to be market overreaction to
industry-wide issues regarding efforts of third parties to use our content without compensating us and potential joint sales
agreement rule changes. The pressure on our recent stock price has provided us the opportunity to put a portion of the free cash
flow to work through a share repurchase program for up to $100 million, demonstrating our confidence in the long term outlook
of our Company and allowing us to benefit from the market’s current discounted view on broadcast to enhance capital returns.
InnInnovating, leading, and creating. As one of the largest owner/operators of television stations in the country, we take our
leadership position very seriously. With our first-mover culture, we recognize our ability to reshape our industry’s future, and the
creation and distribution of original content. We intend to leverage our reach and scale, form strategic partnerships, and advance
technology to better compete with other forms of media and emerging technologies, which are less regulated and less restricted in
growing their businesses. I am proud of the Company we have built and look forward to the spectrum of opportunities available
to us.
WWe thank you, our employees and our shareholders, for your continued support and look forward to our future successes.
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.
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TABLE OF CONTENTS
Televisions Broadcasting
Forward-Looking Statements
Selected Financial Data
Managements’s Discussion And Analysis of Financial Condition And Results of Operations
Quantitative And Qualitative Disclosures About Market Risk
Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities
Controls And Procedures
Consolidated Balance Sheets
Consolidated Statements Of Operations
Consolidated Statements Of Comprehensive Income
Consolidated Statements Of Equity (Deficit)
Notes To The Consolidated Financial Statements
Report Of Independent Registered Public Accounting Firm
2
8
10
11
28
29
31
34
35
36
37
41
87
TELEVISION BROADCASTING
Markets and Stations
As of December 31, 2013, we own and operate, provide programming services to, provide sales services to or have agreed to
acquire the following television stations:
Stations
in
2
Market Stations
KOMO
KUNS
KOMO
KUNS
WTTA
1
Channel Status (b)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
JSA/SSA(h)
LMA(g)
O&O
O&O
JSA/SSA(h)
O&O
LMA(g)
JSA/SSA(h)
O&O
O&O
JSA/SSA(h)
O&O
O&O
O&O
JSA/SSA(h)
O&O
O&O
JSA/SSA(h)
O&O
LMA(g)
Primary
Primary
Second
Second
Primary
Primary
Second
Primary
Second
Primary
Primary
Second
Second
Primary
Primary
Second
Primary
Primary
Second
Primary
Primary
Primary
Second
Second
Third
Primary
Primary
Primary
Second
Primary
Primary
Primary
Second
Primary
Primary
Primary
Second
Second
Primary
Primary
Second
Primary
Primary
Second
Primary
Primary
Primary
Second
Second
Primary
Primary
Second
Second
Network/
Program Service
Arrangement (c)
ABC
Univision
This TV
MundoFox
MNT
CW
Zuus Country
ABC
Zuus Country
ABC
Univision
ME TV
MundoFox
FOX
MNT
Zuus Country
CW
MNT
Zuus Country
FOX
MNT
CW
This TV
Bounce Network
Zuus Country
FOX
MNT
CW
Zuus Country
ABC
FOX
CW
This TV and MNT
CBS
MNT
NBC
MNT
CBS
CW
MNT
Zuus Country
CBS
MNT
CW
NBC
FOX
CW
Zuus Country
Live Well Network
ABC
MNT
MNT
Zuus Country
Station
Rank in
Market (d)
3 of 9
8 of 9
Expiration
Date of FCC
License
2/01/15
7 of 9
2/01/13 (f)
6 of 7
4/01/14
4 of 7
2/01/14
1 of 8
8 of 8
2/01/15
2/01/15
4 of 7
6 of 7
5 of 7
6 of 7
3 of 6
5 of 6
6 of 6
4 of 7
5 of 7
6 of 7
2 of 7
4 of 7
5 of 7
1 of 8
7 of 8
8 of 8
7 of 9
8 of 9
1 of 7
5 of 7
3 of 6
4 of 6
5 of 6
8/01/15
8/01/15
12/01/04 (e)
12/01/04 (e)
10/01/04 (e)
10/01/12 (e)
10/01/12 (f)
8/01/13 (f)
8/01/13 (f)
8/01/21
10/01/13 (f)
10/01/05 (e)
10/01/13 (e)
10/01/14
10/01/14
10/01/14
12/01/13 (f)
12/01/05 (e)
10/01/13 (f)
10/01/21
8/01/14
8/01/14
8/01/14
3 of 7
5 of 7
12/01/04 (e)
12/01/04 (e)
WUCW
WUCW
KDNL
KDNL
KATU
KUNP/
KUNP-LD
KATU
KUNP
WPGH
WPMY
WPGH
WLFL
WRDC
WLFL
WBFF
WUTB
WNUV
WBFF
WUTB
WBFF
WZTV
WUXP
WNAB
WNAB
WSYX
WTTE
WWHO
WSYX
KUTV
KMYU
KENV(j)
KUTV
KMYU
WVTV
WCGV
WCGV
WKRC
WSTR
WKRC
WOAI
KABB
KMYS
KABB
WOAI
WLOS
WMYA
WLOS
WMYA
Market
Seattle/Tacoma,
Washington
Market
Rank (a)
13
Tampa/St. Petersburg,
Florida
Minneapolis/St. Paul,
Minnesota
St. Louis, Missouri
Portland, Oregon
14
15
21
22
Pittsburgh, Pennsylvania
23
Raleigh/Durham, North
24
Carolina
Baltimore, Maryland
27
Nashville, Tennessee
29
Columbus, Ohio
32
Salt Lake City/St. George,
33
Utah
Milwaukee, Wisconsin
Cincinnati, Ohio
San Antonio, Texas
34
35
36
1
1
3
2
2
3
3
3
3
2
2
3
Asheville, North Carolina/
Greenville/Spartanburg
/Anderson, South
Carolina
37
2
2 Sinclair Broadcast Group
Market
West Palm Beach/Fort
Pierce, Florida
Market
Rank (a)
38
Grand
Rapids/Kalamazoo,
Michigan
Austin, Texas
Oklahoma City,
Oklahoma
Las Vegas, Nevada
Harrisburg/Lancaster/
Lebanon/York,
Pennsylvania
39
40
41
42
43
Birmingham, Alabama
44
Norfolk, Virginia
Greensboro/Winston-
Salem/Highpoint,
North Carolina
Buffalo, New York
Fresno/Visalia,
California
Richmond, Virginia
Albany, New York
Mobile, Alabama/
Pensacola, Florida
Lexington, Kentucky
Dayton, Ohio
45
46
52
55
57
58
59
63
64
Stations
in
Market Stations
4
1
1
2
2
2
3
1
2
2
3
1
2
4
1
2
WPEC
WTVX
WTCN-CA
WWHB-CA
WPEC
WPEC
WTVX
WTVX
WWMT
WWMT
KEYE
KEYE
KOKH
KOCB
KOKH
KVMY
KVCW
KVMY
KVCW
KVCW
WHP
WLYH
WHP
WLYH
WTTO
WABM
WDBB
WTTO
WDBB
WTVZ
WTVZ
WXLV
WMYV
WXLV
WUTV
WNYO
WUTV
KMPH/
KMPH-CD
KFRE
KMPH
KFRE
WRLH
WRLH
WRGB
WCWN
WRGB
WCWN
WEAR
WPMI
WJTC
WFGX
WEAR
WPMI
WDKY
WKEF
WRGT
WRGT
Status (b)
O&O
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
O&O
O&O
O&O
O&O
O&O
O&O
O&O
JSA/SSA(h)
JSA/SSA(h)
O&O
O&O
O&O
LMA(g)
Network/
Program Service
Arrangement (c)
CBS
CW
MNT
Azteca(k)
CBS
Weather Radar
Azteca(k)
MNT
CBS
CW
CBS
Telemundo
FOX
CW
Zuus Country
MNT
CW
Estrella TV
This TV
Zuus Country
CBS
CW
MNT
Live Well Network
CW
MNT
CW
Zuus Country
Zuus Country
MNT
Zuus Country
ABC
MNT
Zuus Country
FOX
MNT
Zuus Country
FOX
CW
This TV
Estrella TV
FOX
This TV and MNT
CBS
CW
This TV
CBS
ABC
NBC
IND
MNT
Zuus Country
Weather Nation
FOX
ABC
FOX
MNT and This TV
Channel
Primary
Primary
Primary
Primary
Second
Third
Second
Third
Primary
Second
Primary
Second
Primary
Primary
Second
Primary
Primary
Second
Second
Third
Primary
Primary
Second
Second
Primary
Primary
Primary
Second
Second
Primary
Second
Primary
Primary
Second
Primary
Primary
Second
Primary
Primary
Second
Second
Primary
Second
Primary
Primary
Second
Second
Primary
Primary
Primary
Primary
Second
Second
Primary
Primary
Primary
Second
Station
Rank in
Market (d)
3 of 6
5 of 6
6 of 6
Not
available
Expiration
Date of FCC
License
2/01/13 (f)
2/01/13 (f)
2/01/13 (f)
2/01/13 (f)
1 of 6
10/01/13(f)
3 of 6
8/01/14
4 of 7
5 of 7
5 of 6
6 of 6
6/01/14
6/01/14
10/01/14
10/01/14
2 of 7
5 of 7
8/01/15
8/01/07(e)
5 of 7
6 of 7
5 of 7
4/01/05 (e)
4/01/21
4/01/21
6 of 7
10/01/12 (f)
4 of 6
5 of 6
4 of 6
6 of 6
12/01/04 (e)
12/01/04 (e)
6/01/15
6/01/15
3 of 11
12/01/14
7 of 11
12/01/14
12/01/14
4 of 6
10/01/12 (f)
1 of 6
5 of 6
6/01/15
6/01/15
2 of 7
4 of 7
5 of 7
7 of 7
2/01/13 (f)
4/01/13 (e)
2/01/13 (f)
2/01/13 (f)
3 of 8
3 of 5
4 of 5
8/01/13 (f)
10/01/13 (f)
10/01/05 (e)
2013 Annual Report 3
Market
Charleston/Huntington,
West Virginia
Market
Rank (a)
65
Stations
in
Market
2
Stations
WCHS
WVAH
WVAH
Channel
Primary
Primary
Second
Status (b)
O&O
LMA(g)
Network/
Program Service
Arrangement (c)
ABC
FOX
Zuus Country
Station
Rank in
Market (d)
2 of 6
4 of 6
Expiration
Date of FCC
License
10/01/12 (f)
10/01/04 (e)
KSAS/
KOCW/
KAAS/
KAAS-LP/
KSAS-LP
KMTW
KSAS
KMTW
WSMH
WEYI
WBSF
WSMH
WEYI
WBSF
WEYI
KDSM
KDSM
KLEW
KPTM
KXVO
KPTM
KXVO
KPTM
WNWO
WNWO
WACH
WHAM
WUHF
WHAM
WGME
WPFO
KBSI
WDKA
KBSI
WDKA
WMSN
WMSN
WICS/
WICD
WRSP/
WCCU
WBUI
WICS
WRSP
WCCU
WBUI
WSTM
WTVH
WSTQ-LP
WSTM
WSTM
KGBT
KGBT
WTVC
WTVC
Primary
O&O
FOX
4 of 6
6/01/14
Primary
Second
Second
Primary
Primary
Primary
Second
Second
Second
Third
Primary
Second
Primary
Primary
Primary
Second
Second
Third
Primary
Second
Primary
Primary
Primary
Second
Primary
Primary
Primary
Primary
Second
Second
Primary
Second
Primary
LMA(g)
O&O
JSA/SSA(h)
JSA/SSA(h)
O&O
O&O
O&O
LMA(g)
O&O
O&O
JSA/SSA(h)
JSA/SSA(i)
O&O
JSA/SSA(h)
O&O
LMA(g)
O&O
O&O
MNT
Antenna TV
Zuus Country
FOX
NBC
CW
Zuus Country
CW
NBC
Bounce Network
FOX
Zuus Country
CBS
FOX
CW
This TV and MNT
This TV
Estrella TV
NBC
Retro TV
FOX
ABC
FOX
CW
CBS
FOX
FOX
MNT
MNT
Zuus Country
FOX
Zuus Country
ABC
Primary
JSA/SSA(h)
FOX
Primary
Second
Second
Second
Second
Primary
Primary
Primary
Second
Third
Primary
Second
Primary
Second
JSA/SSA(h)
O&O
JSA/SSA(h)
O&O
O&O
O&O
CW
Zuus Country
ME TV
ME TV
This TV
NBC
CBS
CW
CW
Local News &
Weather
CBS
Inmigrante TV
ABC
This TV
6 of 6
6/01/14
3 of 6
4 of 6
5 of 6
10/01/13(f)
10/01/21
10/01/21
4 of 6
2/01/14
Not available 10/01/14
6/01/14
6/01/06(e)
4 of 7
5 of 7
3 of 6
10/01/21
4 of 6
2 of 5
4 of 5
2 of 6
4 of 6
4 of 6
5 of 6
12/01/20
6/01/15
6/01/15
4/01/15
4/01/07(f)
2/01/14
8/01/21
4 of 5
12/01/13 (f)
3 of 6
4 of 6
12/01/05 (e)
12/01/13 (f)
12/01/13 (f)
6 of 6
12/01/13 (f)
2 of 6
3 of 6
6 of 6
6/01/15
6/01/15
6/01/15
5 of 16
8/01/14
1 of 6
8/01/13 (f)
Wichita/Hutchinson Plus,
67
6
Kansas
Flint/Saginaw/Bay City,
68
3
Michigan
Des Moines, Iowa
Spokane, Washington
Omaha, Nebraska
Toledo, Ohio
Columbia, South Carolina
Rochester, New York
Portland, Maine
Cape Girardeau, Missouri/
Paducah, Kentucky
Madison, Wisconsin
Springfield/Champaign/
Decatur, Illinois
72
73
74
76
77
78
80
81
83
84
1
1
2
1
1
2
2
2
1
5
Syracuse, New York
85
3
Harlingen/Weslaco/
86
Brownsville/McAllen,
Texas
Chattanooga, Tennessee
87
1
1
4 Sinclair Broadcast Group
Market
Rank (a)
89
Stations
in
Market
2
Market
Colorado Springs,
Colorado
Cedar Rapids, Iowa
El Paso, Texas
Charleston, South
Carolina
90
91
95
Myrtle Beach/Florence,
102
South Carolina
Johnstown/Altoona,
Pennsylvania
Tallahassee, Florida
Reno, Nevada
Boise, Idaho
Peoria/Bloomington,
Illinois
Traverse City/Cadillac,
Michigan
103
106
107
110
117
119
2
2
2
2
1
1
3
2
1
4
Eugene, Oregon
121
6
Yakima/Pasco/Richland/
124
4
Kennewick,
Washington
Bakersfield, California
127
Amarillo, Texas
130
Columbia/Jefferson City,
138
Missouri
2
2
1
Channel Status (b)
Primary
Primary
Second
Second
Primary
Primary
Second
Primary
Primary
Second
Second
Third
Primary
Primary
Second
Primary
Primary
Second
Second
Primary
Second
Primary
Second
Primary
Primary
Primary
Second
Second
Second
Primary
Primary
Primary
Second
Primary
O&O
O&O
O&O
JSA/SSA(h)
O&O
JSA/SSA(i)
LMA(g)
O&O
O&O
LMA(g)
O&O
O&O
JSA/SSA(h)
O&O
LMA(g)
O&O
O&O
JSA/SSA(i)
O&O
Network/
Program Service
Arrangement (c)
FOX
CW
CW
MundoFox
CBS
FOX
Zuus Country
FOX
CBS
Retro TV
This TV and MNT
Tele-Romantica
FOX
MNT
Zuus Country
ABC
CW
Local News &
Weather
CW
NBC
ME TV
NBC
Zuus Country
NBC
FOX
MNT
Retro TV
ME TV
This TV
CBS
CW
ABC
CW
NBC
Primary
JSA/SSA(h)
Second
Second
Primary
O&O
ABC
ABC
NBC
CBS
Station
Rank in
Market (d)
4 of 6
5 of 6
Expiration
Date of FCC
License
4/01/14
4/01/14
3 of 4
4 of 4
3 of 6
4 of 6
4 of 6
5 of 6
2 of 6
5 of 6
2/01/14
2/01/14
8/01/14
8/01/14
12/01/04 (e)
12/01/04 (e)
12/01/20
12/01/20
2 of 5
8/01/15
3 of 6
2/01/13 (f)
2 of 6
4 of 6
5 of 6
10/01/14
10/01/14
10/01/14
2 of 6
6 of 6
3 of 6
10/01/14
10/01/14
12/01/21
2 of 4
10/01/21
4 of 4
10/01/21
1 of 5
2/01/15
Primary
JSA/SSA(h)
NBC
3 of 5
2/01/15
Second
Second
Primary
O&O
This TV
CW
CBS
1 of 6
2/01/15
Primary
O&O
Univision
5 of 6
2/01/15
Second
Primary
Primary
Second
Primary
Primary
Second
Second
Primary
O&O
O&O
O&O
O&O
O&O
CW
CBS
FOX
This TV
ABC
CW
CW
ABC
CBS
2 of 6
5 of 6
12/01/14
12/01/14
2 of 8
Not
available
8/01/14
10/01/14
1 of 6
2/01/14
Stations
KXRM
KXTU-LD
KXRM
KXTU-LD
KGAN
KFXA
KFXA
KFOX
KDBC
KFOX
KDBC
KDBC
WTAT
WMMP
WMMP
WPDE
WWMB
WPDE
WWMB
WJAC
WJAC
WTWC
WTWC
KRNV
KRXI
KAME
KRXI
KAME
KRNV
KBOI
KYUU-LD
WHOI
WHOI
WPBN/
WTOM
WGTU/
WGTQ
WPBN/
WTOM
WGTU/
WGTQ
KVAL/
KCBY/
KPIC
KMTR/
KMCB/
KTCW
KVAL
KMTR
KIMA/
KEPR
KUNW-CD/
KVVK-CD
KIMA
KBAK
KBFX-CD
KBFX-CD
KVII
KVIH
KVII
KVIH
KRCG
2013 Annual Report 5
Market
Medford, Oregon
Market
Rank (a)
140
Stations
in
Market
1
Beaumont, Texas
141
Sioux City, Iowa
147
Albany, Georgia
Steubenville, Ohio/
Wheeling, West
Virginia
Quincy, Illinois/
Hannibal,Missouri/
Keokuk, Iowa
Marquette, Michigan
Ottumwa, Iowa/
Kirksville, Missouri
151
157
170
180
201
2
4
1
1
1
1
1
Total television stations
149
Stations
KTVL
KTVL
KFDM
KBTV
KFDM
KBTV
KMEG
KPTH/
KPTP-LD/
KBVK-LP
KMEG
KPTH
WFXL
WFXL
WTOV
WTOV
KHQA
KHQA
WLUC
WLUC
KTVO
KTVO
Channel Status (b)
Primary
Second
Primary
Primary
Second
Second
Primary
Primary
Second
Second
Primary
Second
Primary
Second
Primary
Second
Primary
Second
Primary
Second
O&O
O&O
JSA/SSA(h)
JSA/SSA(h)
O&O
O&O
O&O
O&O
O&O
O&O
Network/
Program Service
Arrangement (c)
CBS
CW
CBS
FOX
CW
Bounce Network
CBS
FOX
Station
Rank in
Market (d)
2 of 4
1 of 6
3 of 6
3 of 6
4 of 6
Expiration
Date of FCC
License
2/01/15
8/01/14
8/01/06 (e)
2/01/14
2/01/14
Azteca
This TV and MNT
FOX
Bounce Network
NBC
ME TV
CBS
ABC
NBC
FOX
ABC
CBS
3 of 6
4/01/21
1 of 4
10/01/13 (f)
2 of 5
2/01/14
1 of 5
10/01/21
1 of 3
2/01/14
(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 September 2013.
(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. “JSA/SSA” 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,
2013 is as follows:
Network/
Program Service
Arrangement
FOX
CBS
ABC
NBC
CW
MNT
Univision
Azteca
Expiration Date
Of the 39 agreements, eight agreements expire on June 30, 2014, one agreement
expires on June 30, 2015, one agreement expires on June 30, 2016, five
agreements expire on June 30, 2017 and twenty-four agreements expire on
December 31, 2017.
Of the 25 agreements, two agreements expire on June 30, 2015, one agreement
expires on December 31, 2015, five agreements expire on January 31, 2016, seven
agreements expire on February 29, 2016, one agreement expires on March 3,
2016, two agreements expire on June 2, 2016, one agreement on August 31, 2016,
one agreement expires December 31, 2016, two agreements expire on April 29,
2017 and three agreements expire on December 31, 2018
Of the 19 agreements, two agreements expire on August 31, 2014, one agreement
expires on December 31, 2014, nine agreements expire on August 31, 2015, one
agreement expires on December 31, 2015, three agreements expire on
December 31, 2017, and three agreements expire on December 31, 2018
Of the 16 agreements, nine agreements expire on December 31, 2015, two
agreements expire on January 1, 2016, one agreement expires on
January 1, 2017 and four agreements expire on December 31, 2017
Of the 23 agreements, sixteen expire on August 31, 2016, and seven expire at end
of the 2015/2016 season.
All 20 agreements expire in the Fall of 2015
All five agreements expire on December 31, 2014
Agreement expired on February 8, 2013 (k)
6 Sinclair Broadcast Group
(d) The first number represents the rank of each station in its market and is based upon the November 2013 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 2013. This information is provided to us in a summary report by
Franco Research Group.
(e) 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.
(f) We timely filed applications for renewal of these licenses with the FCC. We are currently waiting for FCC approval.
(g) The license assets for these stations are currently owned by a third party. We operate these stations under local marketing agreements.
(h) The license and programming assets for this station are currently owned by a third party. We operate this station under an outsourcing
agreement with the third party to provide certain non-programming related sales, operational and administrative services to these stations.
(i) 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 license and program assets
of these stations and to program and control each station’s operations.
(j) KENV-TV is licensed in the Salt Lake City/St. George, Utah DMA, however, the station is a satellite of KRNV-TV in the Reno, Nevada
MDA
(k) The station is continuing to operate under the existing affiliation agreement with Azteca on a temporary basis while we negotiate a new
affiliation agreement.
2013 Annual Report 7
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 potential impact of changes in tax law;
the activities of our competitors;
terrorist acts of violence or war and other geopolitical events;
natural disasters that impact our advertisers and our stations;
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 such 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 auctioning and
potential reallocation 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 (including regulations relating to Joints Sales Agreements (JSA) and
Shared Services Agreements (SSA)), indecency regulations, retransmission fee regulations and political or other
advertising restrictions;
labor disputes and legislation and other union activity associated with film, acting, writing and other guilds and
professional sports leagues;
the broadcasting community’s ability to create and adopt a new transmission standard, as well as 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 impact of reverse network compensation payments charged by networks pursuant to their affiliation agreements with
broadcasters requiring compensation for network programming;
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;
the impact of new FCC rules requiring broadcast stations to publish, among other information, political advertising rates
online;
changes in the makeup of the population in the areas where stations are located;
8 Sinclair Broadcast Group
Risks specific to us
the effectiveness of our management;
our ability to attract and maintain local and national advertising;
our ability to service our debt obligations and operate our business under restrictions contained in our financing
agreements;
our ability to successfully renegotiate retransmission consent agreements;
our ability to renew our FCC licenses;
our ability to obtain FCC approval for any future acquisitions, as well as, in certain cases, customary antitrust clearance
for any future acquisitions;
our ability to successfully integrate any acquired businesses;
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;
our ability to effectively respond to technology affecting our industry and to increasing competition from other media
providers;
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;
the successful execution of our multi-channel broadcasting initiatives including mobile DTV; and
the results of prior year tax audits by taxing authorities.
Other matters set forth in this report and other reports filed with the Securities and Exchange Commission (SEC), including
the Risk Factors set forth in Item 1A of this report 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 speak only as of the date on
which they are 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, events described in the forward-
looking statements discussed in this report might not occur.
2013 Annual Report 9
SELECTED FINANCIAL DATA
The selected consolidated financial data for the years ended December 31, 2013, 2012, 2011, 2010 and 2009 have been derived
from our audited consolidated financial statements.
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 annual report on Form 10-K.
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
Station production expenses
Station selling, general and administrative
expenses
Expenses recognized from station barter
arrangements
Depreciation and amortization (b)
Amortization of program contract costs and net
realizable value adjustments
Other operating divisions expenses
Corporate general and administrative expenses
Loss(gain) on asset dispositions
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 (d)
Income (loss) from equity and cost method
investees
Gain on insurance settlement
Other income, net
Income (loss) from continuing operations before
income taxes
Income tax (provision) benefit
Income (loss) from continuing operations
Discontinued operations:
Income (loss) from discontinued operations, net
of related income taxes
Net income (loss)
Net (income) loss attributable to noncontrolling
interests
Net income (loss) attributable to Sinclair
Broadcast Group
2013
2012
2011
2010
2009
$
1,217,504
$
920,593
$
648,002
$
655,836
$
555,110
88,680
56,947
1,363,131
86,905
54,181
1,061,679
72,773
44,513
765,288
75,210
36,598
767,644
58,182
43,698
656,990
385,104
255,556
178,612
154,133
142,415
249,732
171,279
123,938
127,091
122,833
77,349
141,374
80,925
48,109
53,126
3,392
—
324,020
(162,937)
(58,421)
621
199
2,026
105,508
(41,249)
64,259
79,834
85,172
60,990
46,179
33,391
—
—
329,278
(128,553)
(335)
9,670
47
2,233
212,340
(67,852)
144,488
65,742
51,103
52,079
39,486
28,310
—
398
225,620
(106,128)
(4,847)
3,269
1,742
1,717
121,373
(44,785)
76,588
67,083
55,141
60,862
30,916
26,800
—
4,803
240,815
(116,046)
(6,266)
(4,861)
344
1,865
115,851
(40,226)
75,625
48,119
65,247
73,087
45,520
25,632
(4,945 )
249,799
(110,717 )
(80,021 )
18,465
354
11
1,448
(170,460 )
32,512
(137,948 )
11,558
75,817
$
465
144,953
$
(411)
76,177
$
(577)
75,048
$
(81 )
(138,029 )
$
(2,349)
(287)
(379)
1,100
2,335
$
73,468
$
144,666
$
75,798
$
76,148
$
(135,694 )
Earnings (Loss) Per Common Share
Attributable to Sinclair Broadcast Group:
Basic earnings (loss) per share from continuing
operations
Basic earnings (loss) per share
Diluted earnings (loss) per share from continuing
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
10 Sinclair Broadcast Group
$
$
$
$
$
$
$
$
$
0.66
0.79
0.66
0.78
0.60
$
$
$
$
$
1.78
1.79
1.78
1.78
1.54
$
$
$
$
$
0.95
0.94
0.95
0.94
0.48
$
$
$
$
$
0.96
0.95
0.95
0.94
0.43
$
$
$
$
$
(1.70 )
(1.70 )
(1.70 )
(1.70 )
—
280,104
4,147,472
3,034,040
405,704
$
22,865
$ 2,729,697
$ 2,273,379
(100,053)
$
$
12,967
$ 1,571,417
$ 1,206,025
(111,362)
$
$
21,974
$ 1,485,924
$ 1,212,065
(157,082)
$
$
23,224
$ 1,590,029
$ 1,366,308
(202,222)
$
(a)
(b)
(c)
(d)
Net broadcast revenues is defined as broadcast revenues, net of agency commissions.
Depreciation and amortization includes depreciation and amortization of property and equipment and amortization of definite-lived
intangible assets and other assets.
Total debt is defined as notes payable, capital leases and commercial bank financing, including the current and long-term portions.
During the year ended December 31, 2013, we recognized a loss on extinguishment of debt of $59.4 million related to the
amendments of our Bank Credit Agreement in April and October 2013 and redemption of 9.25% Notes in October 2013, partially
offset by a $1.0 million gain on extinguishment from our 3.0% Notes, resulting in a $58.4 loss from extinguishment of debt.
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 2013, 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 2013, 2012 and 2011, including
comparisons between years and certain expectations for 2014; 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 one reportable operating segment (broadcast), which includes our television and radio stations and is reported
separately from our other operating divisions and corporate activities. The results of our other operating divisions consist
primarily of revenues and expenses earned from sign design and fabrication; regional security alarm operating and bulk
acquisitions; manufacturing and service of television broadcast antennas and transmitters; and real estate ventures.
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 8.375% Notes, the 6.125% Notes, the 5.375% Notes and 6.375% Notes. SBG is a
guarantor under the Bank Credit Agreement, the 8.375% Notes, the 6.125% Notes, the 5.375% Notes and 6.375% Notes. Our
Class A Common Stock and Class B Common Stock remain obligations or securities of SBG and not obligations or securities of
STG. SBG was the obligor of the 6.0% Notes and the 9.25% Notes until they were fully redeemed in 2011 and 2013,
respectively.
2013 Annual Report 11
EXECUTIVE OVERVIEW
2013 Events
Acquisitions / Divestments:
In March 2013, we closed the sale of the assets of WLWC-TV (CW) in Providence, Rhode Island to an unrelated third
party for $13.8 million. The related results from operations, net of related income taxes, have been reclassified from
income from continuing operations and reflected as net income from discontinued operations
In April 2013, we closed the sale of the assets of WLAJ-TV (ABC) in Lansing, MI to an unrelated third party for $14.4
million. The related results from operations, net of related income taxes, have been reclassified from income from
continuing operations and reflected as net income from discontinued operations;
Effective May 1, 2013, we completed the acquisition of certain stock and/or broadcast assets of four television stations,
located in four markets, owned by Cox Media Group for $99.0 million, less $4.3 million of working capital adjustments,
and less $0.4 million paid by Deerfield Media, Inc. (Deerfield) for the purchase of the license assets of one other station
for which we provide sales and other non-programming support services pursuant to shared services and joint sales
agreements;
In June 2013, we acquired the assets of Dielectric from SPX Corporation, for an immaterial purchase price. Dielectric is
the nation’s largest manufacturer of broadcast television, radio and wireless antennas, transmission lines, and RF
systems;
In July 2013, we entered into a definitive agreement to purchase the stock of Perpetual Corporation and the equity
interest of Charleston Television, LLC, both owned and controlled by the Allbritton family (Allbritton), for an aggregate
purchase price of $985.0 million. The Allbritton stations consist of seven ABC network affiliated television stations and
NewsChannel 8, a 24-hour cable/satellite news network covering the Washington D.C. metropolitan area. The
transaction is expected to close late in the second quarter of 2014, subject to approval of the FCC, antitrust clearance,
and other customary closing conditions. We expect to fund the purchase price at closing through additional borrowings
under our bank credit facility. Additionally, to comply with FCC local television ownership rules, we expect to sell the
license and certain related assets of existing stations in Birmingham, AL — WABM (MNT) and WTTO (CW),
Harrisburg/Lancaster/Lebanon/York, PA — WHP (CBS), and Charleston, SC — WMMP (MNT) and to provide sales
and other non-programming support services to each of these stations pursuant to customary shared services and joint
sales agreements;
Effective August 8, 2013, we completed the merger with Fisher Communications, Inc. for an acquisition price of $373.2
million. Fisher owned twenty television stations in eight markets, plus two simulcasts, and four radio stations in the
Seattle market;
In September 2013, we entered into a definitive agreement to purchase the broadcast assets of eight television stations
owned by New Age Media located in three markets, for an aggregate purchase price of $90.0 million. The transaction is
expected to close in the second quarters of 2014, subject to approval of the FCC, and other customary closing
conditions. We expect to fund the purchase price through cash on hand or a delayed draw under our bank credit
agreement. Additionally, Wilkes/Barre/Scranton, PA — WSWB, Tallahassee, FL — WTLH and WTLF and Gainesville,
FL — WMBW will be purchased by a third party; we will continue to provide sales and other non-programming support
services to each of these stations, pursuant to customary share services and joint sales agreements;
Effective September and October 2013, we completed the acquisition of nine stations for $115.3 million. The acquired
stations were part of a definitive agreement entered into with TTBG in June 2013;
In October 2013, we acquired the stock of the entity which owns KDBC (FOX) in El Paso, Texas for $21.0 million. A
third party continues to provide sales and other related services pursuant to a JSA;
In October 2013, we completed the purchase of the non-license assets of WPFO (FOX) in Portland, Maine for $13.6
million and entered into agreement to provide sales and other non-programming support services to the station;
In November 2013, we closed on the acquisition of the non-license assets of KRNV in Reno, Nevada for $26.0 million
and entered into agreements to provide sales and other non-programming support services to the station; and
Effective November 2013, we completed the acquisition of broadcast assets of eighteen television stations owned by
Barrington Broadcast Group, LLC and entered into agreements to operate or provide sales services for another six
stations, for an aggregate purchase price of $370.0 million, which includes $7.5 million paid by certain third parties for
the license assets of four stations. Due to FCC ownership conflict rules, we sold our station in Syracuse, NY (WSYT)
and assigned our rights under an LMA to provide services to WNYS, to an unrelated third party for $15.0 million. We
also sold our station in Peoria, IL (WYZZ) to Cunningham for $22.0 million.
12 Sinclair Broadcast Group
Other:
Effective January 1, 2013, we entered into a six-year affiliation agreement with the CBS Network on its Portland, ME
and Cedar Rapids, IA affiliates, expiring December 31, 2018;
In February 2013, our Board of Directors declared a quarterly dividend of $0.15 per share which was paid on March 15,
2013, to the holders of record at the close of business on March 1, 2013;
In February 2013, we announced a strategic initiative creating a small market television group. Also in February 2013,
we announced that Steven J. Pruett would join our senior management team as Chief Operating Officer;
In February 2013, we entered into a retransmission consent agreement with DirecTV for continued carriage in all of our
markets and our next major MVPD that comes up for renewal is Charter Communications in March 2014;
In April 2013, we issued $600.0 million aggregate principal amount of 5.375% Notes. The 5.375% Notes were priced at
100% of their par value and will bear interest at a rate of 5.375% per annum payable semi-annually on April 1 and
October 1, commencing on October 1, 2013. The 5.375% Notes mature April 1, 2021 and are guaranteed by Sinclair
and certain of its subsidiaries. See Liquidity and Capital Resources for more information;
In April 2013, we filed registration statements on Form S-4 with the SEC to register the 6.125% Notes and the 5.375%
Notes. Exchange offers were launched on May 23, 2013 to exchange the unregistered notes for notes registered under
the Securities Act of 1933. The exchange offers were completed on June 28, 2013 with 100.0% of the 6.125% Notes
and 5.375% Notes tendered;
In April 2013, we entered into an amendment and restatement of our Bank Credit Agreement. We refinanced our
existing facility and replaced the existing term loans under the facility with a new $500.0 million term loan A facility
(Term Loan A), maturing April 2018 and priced at LIBOR plus 2.25%; and a $400.0 million term loan B facility (Term
Loan B), maturing April 2020 and priced at LIBOR plus 2.25% with a LIBOR floor of 0.75%. In addition, Sinclair
replaced its existing revolving line of credit with a new $100.0 million revolving line of credit maturing April 2018 and
priced at LIBOR plus 2.25%. This new amendment also provides for increased incremental loan capacity, increased
television station acquisition capacity and increased flexibility with restrictive covenants. See Note 4 Notes Payable and
Commercial Bank Financing in of consolidated financial statements for more information.;
In April 2013, we announced that we will begin broadcasting mobile-capable signals over 10 stations in nine markets
over the next six months. Cunningham, one of our consolidated variable interest entities, currently provides mobile
signals on two stations, WSYX-TV and WTTE-TV in Columbus, Ohio;
In April 2013, our Board of Directors declared a quarterly dividend of $0.15 per share payable on June 14, 2013, to the
holders of record at the close of business on May 31, 2013;
In April 2013, we commenced a public offering of 18.0 million shares of Class A common stock. The offering was
priced at $27.25 per share on May 1, 2013 and closed on May 7, 2013. Net proceeds of $472.9 million were used to fund
acquisitions in the third quarter 2013.
In August 2013, our Board of Directors declared a quarterly dividend of $0.15 per share, payable on September 13, 2013,
to the holders of record at the close of business on August 30, 2013;
In September 2013, 100% of the outstanding 4.875% Notes, representing principal of $5.7 million, were converted into
388,632 shares of Class A Common Stock, as permitted under the indenture;
In October 2013, we issued $350.0 million aggregate principal amount of 6.375% Notes. The 6.375% Notes were priced
at 100% of their par value and will bear interest at a rate of 6.375% per annum payable semi-annually on May 1 and
November 1, commencing May 1, 2014. The 6.375% Notes mature on November 1, 2021 and are guaranteed by Sinclair
and certain of its subsidiaries. See Note 4 Notes Payable and Commercial Bank Financing in our consolidated financial
statements for more information;
In October 2013, we used the proceeds from the issuance of the 6.375% Notes along with cash on hand to redeem the
$500 million aggregate principal amount of 9.25% Notes;
In October 2013, we amended our bank credit agreement (October Amendment). Pursuant to the October Amendment,
we raised an additional $450 million of incremental loans, which consisted of $200 million in incremental delayed draw
term loan A loans, maturing April 2018 and priced at LIBOR plus 2.25%; and $250.0 million in incremental term loan B
loans, maturing April 2020 and priced at LIBOR plus 2.25% with a LIBOR floor of 0.75%. In addition, we obtained an
additional $57.5 million of capacity under our revolving line of credit maturing April 2018. The terms loans are expected
to be used to fund acquisitions and for general corporate purposes. We also amended certain other terms of our Bank
Credit Agreement. See Note 4. Notes Payable and Commercial Bank Financing for more information.
In October 2013, 100% of the outstanding 3.0% Notes, representing principal of $5.4 million, were converted and
settled fully in cash for $10.5 million, as permitted under the indenture; and
In November 2013, our Board of Directors declared a quarterly dividend of $0.15 per share, payable on December 13,
2013, to the holders of record at the close of business on November 29, 2013;
2013 Annual Report 13
2014 Events
In January 2014, we exchanged 99.7% of our 6.375% Senior Unsecured Notes due 2021 for 6.375% Senior Notes due
2021 registered under the Securities Act of 1933.
In February 2014, we entered into an agreement for a $0.5 million investment, purchasing Series A Preferred Units of
Timeline Labs, and anticipates utilizing their products on 15 of our news-producing stations. Timeline Labs specializes
in proprietary tools that discover, measure, and display trending social content in real time in such a way as to allow
these items to be incorporated into live newscasts and shows.
In February 2014, Sinclair Broadcast Group, Inc. (the “Company”) announced that, effective April 2, 2014, David B.
Amy would be promoted to the position of Executive Vice President and Chief Operating Officer, and Christopher
Ripley would become the Company’s Chief Financial Officer.
Industry Trends
Political advertising increases in even-numbered years, such as 2012, due to the advertising expenditures from candidates
running in local and national elections and issue-related advertiser spending. In every fourth year, such as 2012, political
advertising is usually elevated further due to presidential elections;
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;
Retransmission consent rules provide a mechanism for broadcasters to seek payment from 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;
We, as well as a number of other broadcasters, have joined and worked together in organizations such as the NAB
(along with OMVC now merged), M500 and the MCV to focus on efforts to accelerate the nationwide availability of
mobile DTV and other advanced digital distribution services and work through the many programming, advertising,
distribution and aggregation opportunities. There is potential for broadcasters to create an additional revenue stream by
providing their signals to a wide variety of mobile / portable devices (tablets, laptops, smartphones, etc.) as well as
through other multi-channel / multi-platform initiatives;
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 and to compete with other internet sites and smart phone and
tablet device applications and other social media outlets;
Seasonal advertising increases occur 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
Sources of Revenues and Costs
Our operating revenues are derived from local and national advertisers and, to a much lesser extent, from political advertisers.
We also generate local revenues from our retransmission consent agreements with MVPDs. Our revenues from local advertisers
have seen a continued upward trend, with the exception of 2008 and 2009 when non-political revenues fell due to the economic
recession. 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.
14 Sinclair Broadcast Group
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,
and investments. 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, legal factors and other various qualitative
factors.
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, 2013, we had $1,380.1 million of goodwill,
$101.0 million in broadcast licenses, and $1,127.8 million in definite-lived intangibles. We perform our annual impairment tests
for goodwill and broadcast licenses at the beginning of the fourth quarter each year.
In 2011, we early adopted the accounting guidance related to the annual goodwill impairment assessment, which allowed us, to
first qualitatively assess whether it is more likely than not that goodwill has been impaired. As part of our qualitative assessment
for goodwill impairment, we consider the following factors related to the reporting units, where applicable:
Significant changes in the macroeconomic conditions;
Significant changes in the regulatory environment;
Significant changes in the operating model, management, products and services, customer base, cost structure
and/or margin trends;
Comparison of current and prior year operating performance and forecast trends for future operating performance;
and
The excess of the fair value over carrying value of the reporting units determined in prior quantitative assessments.
If we conclude that it is more likely than not that a reporting unit is impaired, we will apply the quantitative two-step method
for goodwill. Prior to 2011, the annual impairment test for goodwill was performed using the quantitative two-step method for all
reporting units. Our quantitative assessment for goodwill consists of estimating the fair value of our reporting units, using a
combination of a market approach, using recent comparable market transactions and estimated market multiples, and an income
approach, using a discounted cash flow model. The key assumptions used to determine the fair value of our reporting units to
test our goodwill for impairment consist of discount rates, revenue and expense growth rates and comparable business multiples.
The projected growth rates are based on our internal forecast of future performance, historical trends, and projected long-range
inflation and long-term industry projections. 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. For goodwill, if we determine that the fair value of the reporting unit is less than the
carrying value, we then perform the second step 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 to determine
the implied fair value. An impairment charge will be recognized only when the implied fair value of a reporting unit’s goodwill is
less than its carrying amount.
2013 Annual Report 15
We early adopted the recent accounting guidance related to the annual indefinite-lived intangible asset impairment test, which
allowed us, beginning with our 2012 indefinite-lived intangible impairment test, to first qualitatively assess whether it is more likely
than not that an indefinite-lived intangible asset has been impaired. As part of our qualitative assessment for indefinite-lived
intangible assets, we consider the following factors related to the indefinite-lived intangible asset, where applicable:
Significant changes in cost factors that could affect the inputs used to determine the fair value of the indefinite-lived
intangible asset;
Significant changes in the legal or regulatory environment;
Significant changes in management, key personnel, strategy or customers that could affect the inputs used to
determine the fair value of the indefinite-lived intangible asset;
Significant changes in the industry and/or market;
Significant changes in macroeconomic conditions;
Comparison of current and prior year operating performance and forecast trends for future operating performance;
and
The excess of the fair value over carrying value of the indefinite-lived intangible assets determined in prior
quantitative assessments.
If we conclude that it is more likely than not that an indefinite-lived intangible asset is impaired, we will calculate the fair market
value of the indefinite-lived intangible asset and compare to the book value. Prior to 2012, the annual impairment test for our
indefinite-lived intangibles, broadcast licenses, involved a quantitative assessment in which we estimated the fair market value of
our broadcast licenses and compared to the book value. We estimated the fair market value of our broadcast licenses using a
discounted cash flow model. The key assumptions used to determine the fair value of our broadcast licenses consist of discount
rates, normalized market share, normalized profit margin, expected future growth rates and estimated start-up costs. We then
compared the estimated fair market value to the book value of these assets to determine if impairment exists. For the broadcast
licenses, if the fair value is less than book value, we would record the resulting impairment.
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 segment management views, manages and evaluates our
stations on a market basis. Furthermore, in our markets where we operate or provide services to more than one station, 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.
Based on the annual qualitative assessment for goodwill impairment performed in 2013, we concluded that it was more likely
than not that the fair values of all reporting units would sufficiently exceed their carrying value and thus it was not necessary to
perform the quantitative two-step method. Based on the results of our annual qualitative assessment for goodwill impairment
performed in 2013, we concluded that we would need to perform a quantitative “Step 1” test for three of our markets which had
aggregate goodwill of $79.5 million as of October 1, 2012, the date of our annual impairment test. These markets had a decrease
in operating results for the past few years and therefore, we estimated the fair value of these reporting units based on a market
approach and income approach. For all three markets, the fair value of the reporting unit exceeded the respective carrying value
by more than 10%. For all our other reporting units, we concluded based on the qualitative assessment that it was more likely
than not that the fair values of these reporting units would sufficiently exceed their carrying values and it was not necessary to
perform the quantitative two-step method.
For the year ended December 31, 2012, an increase in our discount rate and/or a decrease in our multiple of 10% would not
have resulted in goodwill impairment. Based on the annual qualitative assessment for goodwill impairment performed in 2011, we
concluded that it was more likely than not that the fair values of all reporting units would sufficiently exceed their carrying value
and thus it was not necessary to perform the quantitative two-step method. The qualitative factors for our reporting units
reviewed during our annual assessments, with the exception of the three markets in which we performed a quantitative
assessment in 2012, indicated stable or improving margins and favorable or stable forecasted economic conditions including
stable discount rates and comparable or improving business multiples. Additionally, the results of prior quantitative assessments
supported significant excess fair value over carrying value of our reporting units.
Based on the annual qualitative assessment for broadcast license impairment performed in 2013 and 2012, we concluded that it
was more likely than not that the fair values of all broadcast licenses would sufficiently exceed their carrying values and thus it was
not necessary to perform a quantitative test. The qualitative factors for our broadcast licenses indicated an increase in market
revenues, consistent expected market growth rates, stable market shares and stable cost factors from 2011 through 2013. We
recorded a $0.4 million interim impairment charge in the first quarter of 2011 due to an anticipated increase in construction costs
for one of our stations as a result of converting to full power. As a result of our annual impairment test for broadcast licenses in
2011, under which we applied the required quantitative test, we concluded that impairment did not exist.
16 Sinclair Broadcast Group
We believe we have made reasonable estimates and utilized appropriate assumptions to evaluate whether it was more likely than
not that the fair value of our reporting units and broadcast licenses was less than their carrying values. If future results are not
consistent with our assumptions and estimates, including future events such as a deterioration of market conditions or significant
increases in discount rates, we could be exposed to impairment charges in the future. 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.
For all other long-lived assets, including fixed assets and definite-lived intangibles, we assess recoverability of the assets
whenever events or changes in circumstances indicate that the net book value of the assets may not be recoverable. If we
conclude that such triggering event has occurred, we perform a two-step quantitative test to first assess whether the asset is
recoverable by comparing the sum of undiscounted cash flows of the asset group to the carrying value of the asset group,
including goodwill. If the sum of undiscounted cash flows is less than the carrying value of the asset group, we then measure and
allocate the amount of impairment to record for each of the assets in the asset group by comparing the respective fair value of the
assets to their carrying values. We did not have any indicators of impairment of our long-lived assets in 2011, 2012 or 2013.
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 2013 and 2012, we recorded $0.6 million and $1.3 million of impairment on equity method investments, respectively. No
impairment of our equity or cost method investments was recorded 2011.
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.
Some of our retransmission consent agreements contain both advertising and retransmission consent elements that are paid in
cash. We have determined that these 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 over the life of the
agreement.
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, 2013 and 2012, we recorded $99.0 million and $69.3 million, respectively, in program contract assets and $125.6
million and $104.4 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. 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 impacted 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, 2013 and 2012, we recorded $312.8 million and $235.4
million, respectively, in net deferred tax liabilities. We provide a valuation allowance for deferred tax assets if we determine that it
is more likely than not that some or all of the deferred tax assets will not be realized. 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
judgments that are based on the plans and estimates used to manage our underlying businesses on a long-term basis. A valuation
allowance has been provided for deferred tax assets related to a substantial portion of our available state net operating loss
carryforwards, 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.
2013 Annual Report 17
Recent Accounting Pronouncements
In July 2012, the FASB issued new guidance for testing indefinite-lived intangible assets for impairment. The new guidance
allows companies to perform a qualitative assessment to determine whether further impairment testing of indefinite-lived
intangible assets is necessary, similar to the approach now applied to goodwill. Companies can first determine based on certain
qualitative factors whether it is “more likely than not” (a likelihood of more than 50 percent) that an indefinite-lived intangible
asset is impaired. The new standard is intended to reduce the cost and complexity of testing indefinite-lived intangible assets for
impairment. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after
September 30, 2012 and early adoption is permitted. We adopted this new guidance in the fourth quarter of 2012 when
completing our annual impairment analysis. This guidance impacted how we perform our annual impairment testing for
indefinite-lived intangible assets and changed our related disclosures for 2012; however, it does not have an impact on our
consolidated financial statements as the guidance does not impact the timing or amount of any resulting impairment charges.
In February 2013, the FASB issued new guidance requiring disclosure of items reclassified out of accumulated other
comprehensive income (AOCI). This new guidance requires entities to present (either on the face of the income statement or in
the notes) the effects on the line items of the income statement for amounts reclassified out of AOCI. The new guidance is
effective for annual and interim periods beginning after December 15, 2012. This guidance does not have a material impact on
our financial statements.
In July 2013, the FASB issued new guidance requiring new disclosure of unrecognized tax benefit, or a portion of an
unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a
similar tax loss, or a tax credit carryforward. If a company does not have: (i) a net operating loss carryforward; (ii) a similar tax
loss; or (iii) a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle
any additional income taxes that would result from the disallowance of a tax position or the entity does not intend to use the
deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and
should not be combined with deferred tax assets. The authoritative guidance is effective for fiscal years and the interim periods
within those fiscal years beginning on or after December 15, 2013 and should be applied on a prospective basis. We do not expect
this requirement to have a material impact on our 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 The results of the acquired stations from Freedom Communications
(Freedom) as of April 1, 2012, Newport Television (Newport) as of December 1, 2012 (acquisition date), Cox Media Group (Cox)
as of May 1, 2013 (acquisition date), Fisher Communications (Fisher) as of August 8, 2013, TTBG as of October 1, 2013,
Barrington as of November 22, 2013, and six other television stations during the year ended 2012 and 2013 are included in our
results of our continuing operations. In 2012, we determined that the operating results of WLAJ-TV, which was one of the
stations acquired in the Freedom acquisition, and WLWC-TV, which was one of the stations acquired in the Four Points
acquisition, should be accounted for as discontinued operations and therefore the results are not included in our consolidated
results of continuing operations year ended December 31, 2013. Unless otherwise indicated, references in this discussion and
analysis to 2013, 2012 and 2011 are to our fiscal years ended December 31, 2013, 2012 and 2011, 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 one reportable segment, “broadcast” that is disclosed separately
from our other operating division and corporate activities.
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.
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 usually elevated further due to advertising expenditures preceding the
presidential election.
18 Sinclair Broadcast Group
Operating Data
The following table sets forth certain of our operating data from continuing operations for the years ended December 31, 2013,
2012 and 2011 (in millions). For definitions of terms, see the footnotes to the table in Item 6. 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
Other operating divisions expenses
Corporate general and administrative expenses
Loss on asset dispositions
Impairment of goodwill, intangible and other assets
Operating income
Net income attributable to Sinclair Broadcast Group
BROADCAST SEGMENT
Broadcast Revenues
Years Ended December 31,
2012
2011
2013
$
$
$
1,217.5
88.7
56.9
1,363.1
385.1
249.7
77.3
222.4
48.1
53.1
3.4
—
324.0
73.5
$
$
$
920.6
86.9
54.2
1061.7
255.5
171.3
79.8
146.2
46.2
33.4
—
—
329.3
144.7
$
$
$
648.0
72.8
44.5
765.3
178.6
123.9
65.7
103.3
39.5
28.3
—
0.4
225.6
75.8
The following table presents our revenues from continuing operations, net of agency commissions, for the three years ended
December 31, 2013, 2012 and 2011 (in millions):
Local revenues:
Non-political
Political
Total local
National revenues:
Non-political
Political
Total national
Total net broadcast
revenues
2013
2012
2011
‘13 vs. ‘12
‘12 vs. ‘11
Percent Change
$
$
954.5
1.5
956.0
251.2
10.3
261.5
$
643.5
12.9
656.4
180.2
84.0
264.2
498.7
2.5
501.2
141.0
5.8
146.8
48.3%
(a)
45.6%
39.4%
(a)
(1.0%)
$
1,217.5
$
920.6
$
648.0
32.3%
29.0%
(a)
31.0%
27.8%
(a)
80.0%
42.1%
(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 2013 net time sales, which include the advertising
portion of our local and national broadcast revenues, were automotive (25.2%), services (16.6%), retail / department
stores(6.1%), schools (5.5%), medical (5.3%) and fast food (5.1%). No other advertising category accounted for more than 5.0%
of our net time sales in 2013. No advertiser accounted for more than 1.5% of our consolidated revenue in 2013. We conduct
business with thousands of advertisers.
Our primary types of programming and their approximate percentages of 2013 net time sales were syndicated programming
(33.4%), network programming (27.8%), local news (26.2%), sports programming (8.0%) and direct advertising programming
(4.6%).
2013 Annual Report 19
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, 2013 and 2012:
Percent of Net Time Sales for the
Twelve Months Ended December 31,
2012
2013
2011
31.2%
19.1%
21.3%
10.3%
9.8%
6.1%
1.7%
0.5%
36.9%
19.5%
18.6%
12.5%
10.7%
1.0%
0.7%
0.1%
47.4%
20.5%
3.0%
15.8%
12.4%
0.5%
0.4%
n/a
Net Time Sales
Percent Change
‘13 vs. ‘12
2.4%
18.6%
38.5%
(0.2%)
10.4%
n/m
n/m
n/m
‘12 vs. ‘11
9.6%
33.1%
786.2%
11.0%
22.0%
169.7%
110.8%
110.8%
# of
Stations(a)
39
19
25
20
23
16
(b)
7
149
FOX
ABC
CBS
MyNetworkTV
The CW
NBC
Digital
Other
Total
n/m - Not meaningful
n/a - Not applicable
(a)
(b)
During 2013, we acquired or entered into outsourcing agreements to provide certain non-programming related sales, operational and
administrative services to 63 stations with the following network affiliation or program service arrangements: CBS (ten stations in the
third quarter and four in the fourth quarter), FOX (two stations in the second quarter, three in the third quarter and eight in the
fourth quarter), NBC (two stations in the second quarter, three in the third quarter and eight in the fourth quarter), ABC (two stations
in the third quarter and six in the fourth quarter), CW (one station in the third quarter and seven the fourth quarter), Univision (five
stations in the third quarter), and MyNetworkTV (two stations in the second quarter). We reclassified the results of operations of
WLAJ-TV, an ABC station acquired in the second quarter of 2012 and WLWC-TV a CW station acquired in the first quarter of 2012,
as discontinued operations as discussed in Note 1. Summary of Significant Accounting Policies and therefore the net time sales of WLAJ-TV
and WLWC-TV are not included in the percentages above and are excluded from the number of stations.
We broadcast programming from network affiliations or program service arrangements with CBS (rebroadcasted content from other
primary channels within the same markets), The CW, MyNetworkTV, This TV, ME TV, Retro TV, Weather Radar, Weather Nation,
Live Well Network, Antenna TV, Bounce Network, Retro TV, Zuus Country, Azteca, Tele-Romantica, Inmigrante TV, MundoFox,
Telemundo and Estrella TV on additional channels through our stations’ second and third digital signals.
Net Broadcast Revenues. Net broadcast revenues increased $296.9 million in 2013 when compared to 2012, of which $326.7
million was related to stations acquired during 2013. The remaining decrease was due to decreases in advertising revenues
generated from the political, direct response and school sectors. These decreases were partially offset by an increase in
retransmission revenues from multichannel video programming distributors (MVPD) and increases in advertising revenues
generated from the automotive, food-grocery/other, and services sectors. Excluding the stations acquired in 2013, automotive,
which typically is our largest category, represented 25.1% of net time sales for the year ended December 31, 2013.
Net broadcast revenues increased $272.6 million in 2012 when compared to 2011, of which $164.2 million was related to
stations acquired during 2012. Additionally, revenues earned pursuant to the LMA with the Freedom stations during the first
quarter of 2012 included $2.2 million for management services performed and $7.8 million of pass-through costs. The remaining
increase was due to increases in advertising revenues generated from the political, direct response and beer / wine sectors. These
increases were partially offset by decreases in the internet, soft drinks, movies and drugs / cosmetic sectors. Excluding the
stations acquired in 2012, automotive, which typically is our largest category, represented 20.3% of net time sales for the year
ended December 31, 2012.
Political Revenues. Political revenues, which include time sales from political advertising, decreased by $85.1 million to $11.8
million for 2013 when compared to 2012. Political revenues increased by $88.6 million to $96.9 million for 2012 when compared
to 2011. Political revenues are typically higher in election years such as 2012 and 2010. Accordingly, we expect political revenues
to increase in 2014 from 2013 levels.
Local Revenues. Excluding political revenues, our local broadcast revenues, which include local times sales, retransmission
revenues and other local revenues, were up $311.0 million for 2013 when compared to 2012, of which $250.9 million related to
the stations acquired in 2013. The remaining increase is due to an increase in advertising spending particularly in the automotive,
services, and grocery/other sectors and an increase in retransmission revenues from MVPDs. These increases were partially offset
by a decrease due to a decline in advertising revenues from the restaurants, schools and retail/department stores sectors.
Excluding political revenues, our local broadcast revenues, which include local times sales, retransmission revenues and other
local revenues, were up $144.8 million for 2012, compared to 2011, of which $112.1 million was related to the stations acquired in
2012. The remaining increase is due to an increase in advertising spending particularly in the automotive and direct response
sectors and an increase in retransmission revenues from MVPDs. These increases were partially offset by declines in advertising
20 Sinclair Broadcast Group
revenues from the schools, fast food and services sectors and a change in networks for the Super Bowl programming from FOX
to NBC as we had 20 FOX stations compared to one NBC station at the time when the Super Bowl aired in February 2012.
National Revenues. Our national broadcast revenues, excluding political revenues, which include national time sales and other
national revenues, were up $71.0 million for 2013 when compared to 2012, of which $70.2 million related to the stations acquired
in 2013. The remaining increase was due to increases in advertising revenues generated from the automotive, media and
restaurants sectors. These increases were partially offset by a decline in advertising revenues in the fast food, other and movie
sectors. Excluding political revenues, our national broadcast revenues increased $39.2 million for 2012 when compared to 2011,
of which $38.5 million related to the stations acquired in 2012. The remaining increase was due to increases in advertising
revenues generated from the direct response and services sectors.
Broadcast Expenses
The following table presents our significant operating expense categories for the years ended December 31, 2013, 2012 and
2011 (in millions):
Station production expenses
Station selling, general and administrative
expenses
Amortization of program contract costs
and net realizable value adjustments
Corporate general and administrative
expenses
Impairment of goodwill, intangible and
other assets
Depreciation and amortization expenses
2013
385.1
249.7
80.9
47.3
—
133.1
$
$
$
$
$
$
2012
255.5
171.3
61.0
28.9
—
77.5
$
$
$
$
$
$
Percent Change
(Increase/(Decrease))
‘13 vs. ‘12
50.7%
‘12 vs. ‘11
43.1%
2011
178.6
123.9
45.8%
52.1
32.6%
24.8
63.7%
38.3%
17.1%
16.5%
0.4
44.6
—
71.7%
(100.0%)
73.8%
$
$
$
$
$
$
Station production expenses. Station production expenses increased $129.6 million during 2013 compared to 2012, of which $107.2
million related to the stations acquired in 2013 and 2012. The remaining increases for the year were primarily due to an increase in
fees pursuant to network affiliation agreements and increased compensation expense, including incentive compensation.
Station production expenses increased $76.9 million during 2012 compared to 2011. This increase was primarily due to an
increase in fees pursuant to network affiliation agreements, increased compensation expense (including amounts related to the
Four Points and Freedom stations pursuant to the LMAs prior to acquisition, which were pass-through costs), increased
promotional advertising expenses and increased rating service fees due to annual scheduled rate increases. Additionally, news
profit share expenses increased due to better news performance which resulted in higher payments to our news share partners.
Station selling, general and administrative expenses. Station selling, general and administrative expenses increased $78.4 million during
2013 compared to 2012, of which $75.4 million related to the stations acquired in 2013 and 2012. The remaining increases for the
year were primarily due to an increase in compensation expense, including incentive compensation, partially offset by lower
national sales commissions.
Station selling, general and administrative expenses increased $47.4 million during 2012 compared to 2011, of which $38.4
million related to the stations acquired in 2012. The remaining increases for the year were primarily due to an increase in national
sales commissions and increased compensation expense, including incentive compensation.
Amortization of program contract costs and net realizable value adjustments. The amortization of program contract costs increased $19.9
million during 2013 compared to 2012, of which $14.8 million related to the stations acquired in 2013 and 2012. The remaining
increase is due to higher programming costs.
The amortization of program contract costs increased $8.9 million during 2012 compared to 2011. $7.1 million of this increase
was due primarily to stations acquired in 2012. The remaining increase is due to higher programming costs.
Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses
Impairment of goodwill, intangible and other assets. We completed our annual test of goodwill and broadcast licenses for impairment
in fourth quarter 2013, 2012 and 2011. We recorded no impairment in 2013 and 2012. During 2011, we recorded impairments of
$0.4 million related to our broadcast licenses.
2013 Annual Report 21
Depreciation and amortization expenses. Depreciation of property and equipment and amortization of definite-lived intangibles and
other assets increased $55.6 million during 2013 compared 2012, of which $57.3 million related to the stations acquired in 2013
and 2012. Depreciation and amortization expenses increased $32.9 million during 2012 compared to 2011. This increase was
primarily due to stations being acquired in 2012.
OTHER OPERATING DIVISIONS REVENUE AND EXPENSE
The following table presents our other operating divisions revenue and expenses which is comprised of the following for the
years ended December 31, 2013, 2012 and 2011 (in millions): 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;
real estate ventures and other nominal businesses.
Revenues:
Triangle
Alarm Funding
Real Estate Ventures
Other
Expenses: (a)
Triangle
Alarm Funding
Real Estate Ventures
Other
2013
2012
2011
‘13 vs. ‘12
‘12 vs. ‘11
Percent Change
$
$
$
$
$
$
$
$
26.8
18.3
7.4
4.3
24.6
9.1
7.2
7.2
$
$
$
$
$
$
$
$
26.5
16.0
9.3
2.4
25.9
12.9
12.6
4.6
$
$
$
$
$
$
$
$
23.1
12.8
7.1
1.5
21.8
12.7
9.6
2.7
1.1%
14.4%
(20.4%)
79.2%
(5.0%)
(29.5%)
(42.9%)
56.5%
14.7%
25.0%
31.0%
60.0%
18.8%
1.6%
31.3%
70.4%
(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 and non-cash stock-based compensation expense
related to issuances of subsidiary stock awards.
The year over year increases in Triangle’s revenue and expenses during 2013 compared to 2012 and 2012 compared to 2011
was primarily due to increases in sales volume due to new service contracts. The increases in Alarm Funding’s revenue and
expenses during 2013 compared to 2012 and 2012 compared to 2011 were primarily due to the acquisition of new alarm
monitoring contracts. Revenues and expenses decreased for our consolidated real estate ventures over the same periods due to a
decrease in leasing activity for operating real estate properties and sales of property under development in 2013 compared to
2012. As of December 31, 2013, we held $82.3 million of real estate for development and sale. The increases in revenue and
expenses during 2013 compared to 2012 for Other were primarily due to the acquisition of Dielectric, LLC during 2013.
Income (loss) from Equity and Cost Method Investments. As of December 31, 2013 and 2012, the carrying value of our investments in
private equity funds and real estate ventures, accounted for under the equity or cost method, was $23.2 million and $71.3 million
in 2013 and $27.3 million and $65.9 million in 2012, respectively. Results of our equity and cost method investments in private
investment funds and real estate ventures are included in income from equity and cost method investments in our consolidated
statements of operations. During 2013, we recorded income of $2.0 million related to certain private investment funds and a loss
of $1.4 million related to our real estate ventures. During 2012, we recorded income of $2.2 million related to certain private
investment funds and income of $7.4 million related to our real estate ventures, including a $7.9 million gain on the sale of three
of our real estate ventures, partially offset by a $0.9 million impairment charge related to one of our real estate ventures. During
2011, we recorded income of $2.3 million related to certain private equity funds and income of $1.0 million related to our real
estate ventures, including a $1.1 million gain on sale of one of our real estate ventures.
22 Sinclair Broadcast Group
CORPORATE AND UNALLOCATED EXPENSES
Corporate general and administrative
expenses
Interest expense
Loss from extinguishment of debt
Income tax provision
n/m — not meaningful
2013
2012
2011
Percent Change
(Increase/(Decrease))
‘12 vs. ‘11
‘13 vs. ‘12
$
$
$
$
4.5
159.7
58.4
41.2
$
$
$
$
2.8
125.3
0.3
67.9
$
$
$
$
2.4
102.4
4.8
44.8
60.7%
27.5%
n/m
(39.3%)
16.7%
22.4%
(93.8%)
51.6%
Corporate general and administrative expenses. We allocate most of our corporate general and administrative expenses to the
broadcast segment. The explanation that follows combines corporate general and administrative expenses found in the Broadcast
Segment section 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 our
discussion of expenses in the Other Operating Divisions Segment section.
Combined corporate general and administrative expenses increased to $51.8 million in 2013 from $31.7 million in 2012. This is
primarily due to an increase in transaction costs due to our recent acquisitions, an increase in higher health insurance costs, due to
increased employee headcount from acquisitions, and higher compensation expense, including incentive compensation.
Combined corporate general and administrative expenses increased to $31.7 million in 2012 from $27.2 million in 2011. This is
primarily due to an increase in transaction costs due to our recent acquisitions, an increase in higher health insurance costs and
higher employee incentive / performance bonuses.
We expect corporate general and administrative expenses to increase in 2014 compared to 2013.
Interest expense. Interest expense increased in 2013 compared to 2012 primarily due to the issuance of $500 million of 6.125%
Notes in the fourth quarter 2012, the incremental borrowings on our Term Loan A and Term Loan B under our Bank Credit
Agreement for our acquisitions in 2013, the issuance of $600.0 million of 5.375% Notes in the second quarter of 2013, and the
issuance of $350.0 million of 6.375% Notes in the fourth quarter of 2013. Interest expense was partially offset by a decrease due
to the redemption of our 9.25% Notes, our 4.875% Notes and our 3.0% Notes in the fourth quarter of 2013.
Interest expense increased in 2012 compared to 2011 primarily due to the incremental borrowings on our Term Loan A and
Term Loan B under our Bank Credit Agreement for our acquisitions in 2012, the issuance of $500.0 million of 6.125% notes in
the fourth quarter of 2012, as well as financing costs of $6.3 million related to the amendment of our Bank Credit Agreement,
which were incurred in 2012. The increase in interest was partially offset by a decrease due to the full extinguishment of our 6.0%
Notes in the second quarter of 2011.
We expect interest expense to decrease in 2014 compared to 2013 when excluding the financing of pending acquisitions.
Loss from extinguishment of debt. We recognized a loss on extinguishment of debt of $59.4 million related to the amendments of
our Bank Credit Agreement in April and October 2013 and redemption of 9.25% Notes in October 2013, partially offset by a $1.0
million gain on extinguishment from our 3.0% Notes, resulting in a $58.4 loss from extinguishment of debt for the year ended
December 31, 2013.
During the year ended December 31, 2012, we drew down on our incremental borrowings under the Bank Credit Agreement
and wrote off a portion of our deferred financing costs and debt discount on the Term Loan B, resulting in a loss of $0.3 million
from extinguishment of debt. During the year ended December 31, 2011, we amended our Bank Credit Agreement and paid
down a portion of our Term Loan B, completed the redemption of all $70.0 million of the remaining 6.0% Notes and
repurchased certain of our 8.375% Notes, resulting in a loss of $4.8 million from extinguishment of debt.
Income tax (provision) benefit. The 2013 income tax provision for our pre-tax income from continuing operations (including the
effects of the noncontrolling interest) of $103.2 million resulted in an effective tax rate of 40.0%. The 2012 income tax provision
for our pre-tax income from continuing operations (including the effects of the noncontrolling interest) of $212.1 million resulted
in an effective tax rate of 32.0%. The increase in the effective tax rate from 2012 to 2013 is primarily due to the following items:
1) greater expenses of consolidated VIEs in 2013 that are treated as pass-through entities for income tax purposes; and 2) a 2012
release of valuation allowance of $7.7 million related to certain deferred tax assets of Cunningham, one of our consolidated VIEs,
as the weight of all available evidence supports realization of the deferred tax assets. The valuation allowance release
2013 Annual Report 23
determination was based primarily on the sufficiency of forecasted taxable income necessary to utilize NOLs expiring in years
2022 — 2029. This VIE files separate income tax returns. Any resulting tax liabilities are nonrecourse to us and we are not
entitled to any benefit resulting from the deferred tax assets of the VIE.
The 2012 income tax provision for our pre-tax income from continuing operations (including the effects of the non-controlling
interest) of $212.1 million resulted in an effective tax rate of 32.0%. The 2011 income tax provision for our pre-tax income from
continuing operations (including the effects of the non-controlling interest) of $121.0 million resulted in an effective tax rate of
37.0%. The decrease in the effective tax rate from 2011 to 2012 is primarily due to the release of valuation allowance in 2012 of
$7.7 million related to certain deferred tax assets of Cunningham, one of our consolidated VIEs, as discussed above.
As of December 31, 2013, we had a net deferred tax liability of $312.8 million as compared to a net deferred tax liability of
$235.4 million as of December 31, 2012. The increase primarily relates to an increase in deferred tax liabilities resulting from the
2013 stock acquisitions with greater book basis in intangible and fixed assets.
As of December 31, 2013, we had $16.9 million of gross unrecognized tax benefits. Of this total, $15.6 million (net of federal
effect on state tax issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect our
effective tax rates from continuing operations. As of December 31, 2012, we had $26.0 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. We recognized $1.2 million and $1.5 million of income tax
expense for interest related to uncertain tax positions for the years ended December 31, 2013 and 2012, respectively. See Note 9.
Income Taxes in the Notes to our Consolidated Financial Statements for further information.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2013, we had $280.1 million in cash and cash equivalent balances and net positive working capital of
approximately $354.5 million. Cash generated by our operations and borrowing capacity under the Bank Credit Agreement are
used as our primary sources of liquidity. As of December 31, 2013, we had no amounts drawn on our Revolving Credit Facility
and $154.5 million of borrowing capacity available. We anticipate that existing cash and cash equivalents, cash flow from our
operations and borrowing capacity under the Revolving Credit Facility and general uncommitted incremental term loan capacity
of $200.0 million under our Bank Credit Agreement will be sufficient to satisfy our debt service obligations, capital expenditure
requirements and working capital needs for the next twelve months. We anticipate raising additional funds for our pending
acquisitions. 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 April 9, 2013, we entered into an amendment and restatement (the Amendment) of our Bank Credit Agreement. Pursuant
to the Amendment, we refinanced the existing facility and replaced the existing term loans under the facility with a new $500.0
million term loan A facility (Term Loan A), maturing April 2018 and priced at LIBOR plus 2.25%; and a $400.0 million term loan
B facility (Term Loan B), maturing April 2020 and priced at LIBOR plus 2.25% with a LIBOR floor of 0.75%. $445.0 million of
the Term Loan A was drawn on a delayed basis in October 2013.
In addition, we replaced our existing revolving line of credit with a new $100.0 million revolving line of credit maturing
April 2018 and priced at LIBOR plus 2.25%. The proceeds from the term loans, along with cash on hand, was used to fund
acquisitions and for general corporate purposes.
In October 2013, we further amended certain terms of our Bank Credit Agreement. Pursuant to this amendment, we increased
the capacity of Term Loan A from $500 million to $700 million and increased the capacity of Term Loan B from $400 million to
$650 million through an incremental Term Loan B loan of $250.0 million, which was drawn in October 2013. The incremental
Term Loan B of $250.0 million was used to fund fourth quarter acquisitions, the redemption of the 9.25% Notes and for general
corporate purposes. We also increased the capacity of our revolving line of credit from $100.0 million to $157.5 million maturing
in April 2018. Additional terms of the amendment are as follows:
We increased our ratio of our First Lien Indebtedness from 3.50 times EBITDA to 3.75 times EBITDA for the period
January 1, 2015 through maturity of the agreement.
We increase our threshold for determining material third-party licensees from 5% to 10%
Other amended terms provided us with increased television station acquisition capacity, more flexibility under the other
restrictive covenants and prepayments of the existing term loans.
24 Sinclair Broadcast Group
In May 2013, we issued 18.0 million shares of Class A Common Stock for net proceeds of $472.9 million. The net proceeds
were used to fund acquisitions in the third quarter 2013.
In April 2013, we issued $600.0 million of 5.375% Notes, which bear interest at a rate of 5.375% per annum and mature on
April 1, 2021, pursuant to an indenture dated April 2, 2013 (the 5.375% Indenture). The 5.375% Notes were priced at 100% of
their par value and interest is payable semi-annually on April 1 and October 1, commencing on October 1, 2013. Prior to April 1,
2016, we may redeem the 5.375% 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 5.375% Notes plus accrued and unpaid interest, if any, to the redemption date, plus a “make-whole”
premium as set forth in the 5.375% Indenture. Beginning on April 1, 2016, we may redeem some or all of the 5.375% Notes at
any time or from time to time at a redemption price set forth in the 5.375% Indenture. In addition, on or prior to April 1, 2016,
we may redeem up to 35% of the 5.375% Notes using proceeds of certain equity offerings. Upon the sale of certain of our assets
or certain changes of control, the holders of the 5.375% Notes may require us to repurchase some or all of the notes. The net
proceeds from the offering of the 5.375% Notes were used to pay down outstanding indebtedness under our bank credit facility.
In September 2013, 100% of the outstanding 4.875% Notes, representing aggregate principal of $5.7 million, were converted
into 388,632 shares of Class A Common Stock, as permitted under the indenture, resulting in an increase in additional paid-in
capital of $7.3 million, net of income taxes.
In October 2013, we issued $350.0 million in senior unsecured notes, which bear interest at a rate of 6.375% Notes per annum
and mature on November 1, 2021, pursuant to an indenture dated October 11, 2013 (the 6.375% Indenture). The 6.375% Notes
were priced at 100% of their par value and interest is payable semi-annually on May 1 and November 1, commencing on May 1,
2014. Prior to November 1, 2016, we may redeem the 6.375% 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 Notes plus accrued and unpaid interest, if any, to the date of redemption, plus
a “make-whole” premium as set forth in the 6.375% Indenture. In addition, on or prior to November 1, 2016, we may redeem up
to 35% of the 6.375% 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 6.375% Notes may require us to repurchase some or all of the notes. The proceeds from
the offering of the 6.375% Notes were used to partially fund the redemption of the 9.25% Notes, as discussed further below.
Effective October 12, 2013, we redeemed all of the outstanding 9.25% Notes, representing $500.0 million in aggregate principal
amount. Upon the redemption, along with the principal, we paid the accrued and unpaid interest and a make whole premium of
$25.4 million, for a total of $546.1 million paid to noteholders. We recorded a loss on extinguishment of $43.1 million in the
fourth quarter of 2013 related to this redemption.
In October 2013, 100% of the outstanding 3.0% Notes, representing aggregate principal of $5.4 million, were converted and
settled fully in cash of $10.5 million, as permitted under the indenture. As the original terms of the indenture included a cash
conversion feature, the effective settlement of the liability and equity components were accounted for separately. The redemption
of the liability component to resulted in a $1.0 million gain on extinguishment, and the redemption of the equity component was
recorded as a reduction in additional paid-in capital, net of taxes.
2013 Annual Report 25
Sources and Uses of Cash
The following table sets forth our cash flows for the years ended December 31, 2013, 2012 and 2011 (in millions):
Net cash flows from operating activities
Cash flows from (used in) investing activities:
Acquisition of property and equipment
Payments for acquisitions of television stations
Proceeds from the sale of broadcast assets
Payments for acquisitions of assets of other operating divisions
Purchase of alarm monitoring contracts
(Increase) decrease in restricted cash
Investments in equity and cost method investees
Investment in marketable securities
Other, net
Net cash flows (used in) from 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
Proceeds from the sale of Class A Common Stock
Dividends paid on Class A and Class B common stock
Payments for deferred financing costs
Noncontrolling distributions contributions
Other, net
Net cash flows from (used in) financing activities
Operating Activities
2013
2012
2011
160.6
$
237.5
$
148.5
(43.4)
(1,006.1)
49.7
(4.7)
(23.7)
(11.5)
(10.8)
(11.6)
10.9
(1,051.2)
$
$
(44.0)
(1,135.3)
—
—
(12.5)
58.5
(24.1)
(1.5)
9.6
(1,149.3)
$
$
(35.8 )
—
—
—
(8.9 )
(53.4 )
(11.6 )
(4.9 )
2.4
(112.2 )
$
$
$
$
2,278.3
$
1,247.2
$
151.7
(1,509.8)
472.9
(56.8)
(27.7)
(10.3)
1.3
1,147.9
$
$
(179.3)
—
(123.9)
(18.7)
(1.1)
(2.5)
921.7
$
(150.4 )
—
(38.4 )
(5.5 )
(0.6 )
(2.1 )
(45.3 )
Net cash flows from operating activities decreased during the year ended December 31, 2013 compared to the same period in
2012. During 2013, we had higher program payments, higher cash payments to vendors, and higher compensation expenses
which are primarily due to our acquisitions since the same period in 2012, partially offset by higher cash receipts from customers.
Net cash flows from operating activities increased during the year ended December 31, 2012 compared to the same period in
2011. During 2012, we received more cash receipts from customers, net of cash payments to vendors, partially offset by higher
interest and tax payments and the $25.0 million payments to FOX pursuant to the agreements entered into during the second
quarter of 2012.
Investing Activities
Net cash flows used in investing activities decreased during the year ended December 31, 2013 compared to the same period in
2012. This increase is primarily due to $1,006.1 million in payments for acquisitions of television stations during 2013 compared
to $1,135.3 million during 2012, the proceeds from sales of certain television stations during 2013, and lower investments in
equity and cost investees. This increase was partially offset by higher purchases of alarm monitoring contracts and an increase in
restricted cash for pending acquisitions.
Net cash flows used in investing activities increased during the year ended December 31, 2012 compared to the same period in
2011. This increase is due to $1,135.3 million in payments for acquisitions of television stations, additional investment in equity
investees, higher capital expenditures and the purchases of alarm monitoring contracts. This increase was partially offset by the
use of the restricted cash held in escrow for our acquisitions and distributions received upon sale of three of our equity method
investments during 2012.
In 2014, we anticipate incurring higher capital expenditures than incurred in 2013.
26 Sinclair Broadcast Group
Financing Activities
Net cash flows from financing activities increased during the year ended December 31, 2013 compared to the same period in
2012. The increase is primarily due to issuing $600.0 million and $350.0 million of 5.375% and 6.375% Notes, respectively, and
$250.0 million net proceeds from our Bank Credit Agreement, $472.9 proceeds received from our offering of Class A common
stock, decreases in dividends paid from $1.54 per share during 2012 to $0.60 per share during 2013, and increases in loans by our
consolidated variable interest entities. This increase is partially offset by redemption of our 9.375% Notes and increased
payments for deferred financing costs.
Net cash flows from financing activities increased during the year ended December 31, 2012 compared to the same period in
2011. During 2012, we drew $530.0 million of incremental term loans to fund the asset acquisitions of both Four Points and
Freedom, which closed in January 2012 and April 2012, respectively. We also issued $500.0 million of Senior Unsecured Notes
and used the proceeds to fund the acquisitions in the fourth quarter. This was slightly offset by higher stock dividends paid in
2012 totaling $1.54 per share, which included the $1.00 per share special dividend paid in December, versus $0.48 per share in
2011, as well as, $13.2 million more in payments for deferred financing costs related to the incremental borrowings in 2012.
During 2012, our Board of Directors declared a quarterly dividend of $0.12 per share in the months of February and May,
which were paid in March and June, and $0.15 per share in the months of August and November, which were paid in
September and December. A special cash dividend of $1.00 per share was also declared in November 2012, which was paid in
December, for total dividend payments of $1.54 per share for the year ended December 31, 2012. During 2013, our Board of
Directors declared a quarterly dividend of $0.15 per share in the months of February, April, August and November, which were
paid in March, June, September and December, respectively, for total dividend payments of $0.60 per share for the year ended
December 31, 2013. In February 2014, our Board of Directors declared a quarterly dividend of $0.15 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. Under our Bank Credit Agreement, in certain circumstances, we may make up to $200.0 million in unrestricted annual
cash payments including but not limited to dividends, of which $50.0 million may carry over to the next year.
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, 2013 and the future periods in
which such obligations are expected to be settled in cash (in millions):
CONTRACTUAL OBLIGATIONS RELATED TO CONTINUING OPERATIONS (a)
Notes payable, capital leases and
commercial bank financing (c), (d)
Notes and capital leases payable to
affiliates (c)
Operating leases
Program content (e)
Programming services (f)
LMA and outsourcing agreements (g)
Investments and loan commitments (h)
Other (i)
Total contractual cash obligations
Total
2014
2015-2016
2017-2018
2019 and
thereafter (b)
$
3,829.2
$
155.9
$
423.7
$
874.5
$
2,375.1
32.0
86.2
736.5
101.6
2.2
17.0
34.5
4,839.2
$
4.5
13.3
223.6
42.9
0.7
17.0
4.7
462.6
$
8.5
22.8
346.1
29.9
1.2
—
6.5
838.7
$
6.0
19.2
158.9
19.7
0.3
—
5.6
1,084.2
$
13.0
30.9
7.9
9.1
—
—
17.7
2,453.8
$
(a)
(b)
Excluded from this table are $16.9 million of accrued unrecognized tax benefits. Due to inherent uncertainty, we cannot make
reasonable estimates of the amount and period payments will be made.
Includes a one-year estimate of $8.9 million in payments related to contracts that automatically renew. We have not calculated
potential payments for years after 2019.
2013 Annual Report 27
(c)
(d)
(e)
(f)
(g)
(h)
(i)
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 $1.2 billion of our $3.0 billion total face value of debt as of December 31, 2013.
During 2013 issued $600.0 million and $350.0 million of 5.375% and 6.375% Notes, and $250.0 million net proceeds from our Bank
Credit Agreement. Additionally, during 2013, we redeemed $500.0 million of 9.25% Notes, $5.4 million of 3% Notes, and $5.7 million
of 4.875% Notes. Also, included in these amounts are $55.6 million of debt of our variable interest entities.
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. 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.
Includes obligations related to rating service fees, music license fees, market research, weather and news services.
Excluded from the table are estimated amounts due pursuant to LMAs and outsourcing agreements where we consolidate the
counterparty. The fees that we are required to pay under these agreements total $6.9 million, $10.9 million, $2.9 million and $4.1
million for the periods 2014, 2015-2016, 2017-2018 and 2019 and thereafter, respectively. Certain station related operating expenses
are paid by the licensee and reimbursed by us under the LMA agreements. Certain of these expenses that are in connection with
contracts are included in table above.
Commitments to contribute capital or provide loans to Allegiance Capital, LP, Sterling Ventures Partners, LP, Patriot Capital II, LP
and Patriot III, LP.
Other includes obligations post-retirement benefits, maintenance and support, other corporate contracts and other long term
liabilities.
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, 2013, 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 6. Notes Payable and Commercial Bank Financing, in the Notes to our Consolidated
Financial Statements. As of December 31, 2013, we did not have any outstanding derivative instruments.
We are exposed to risk from the changing interest rates of our variable rate debt, primarily related to our Bank Credit
Agreement. For the year ended December 31, 2013, interest expense on our term loans and revolver related to our Bank Credit
Agreement was $27.3 million. We estimate that adding 1.0% to respective interest rates would result in an increase in our interest
expense of $7.4 million for the year ended December 31, 2013. We also have $86.3 million of variable rate debt associated with
our other operating divisions. We estimate that adding 1.0% to respective interest rates would result in $0.7 million of additional
interest expense for the year ended December 31, 2013. Our consolidated VIEs have $55.6 million of variable rate debt
associated with the stations that we provide services to pursuant to LMAs and other outsourcing arrangements. We estimate that
adding 1.0% to respective interest rates would an increase interest expense of the VIEs by $0.3 million for the year ended
December 31, 2013.
28 Sinclair Broadcast Group
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.
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Low
$
$
$
$
$
$
$
$
20.29
29.94
34.04
35.73
High
12.95
11.33
12.56
12.92
$
$
$
$
$
$
$
$
12.82
19.61
23.92
31.35
Low
11.06
7.92
9.41
10.39
As of February 24, 2014, there were approximately 58 shareholders of record of our common stock. This number does not
include beneficial owners holding shares through nominee names.
Dividend Policy
During 2012, our Board of Directors declared a quarterly dividend of $0.12 per share in the months of February and May,
which were paid in March and June, and $0.15 per share in the months of August and November, which were paid in
September and December. A special cash dividend of $1.00 per share was also declared in November 2012, which was paid in
December, for total dividend payments of $1.54 per share for the year ended December 31, 2012. During 2013, our Board of
Directors declared a quarterly dividend of $0.15 per share in the months of February, April, August and November, which were
paid in March, June, September and December, respectively, for total dividend payments of $0.60 per share for the year ended
December 31, 2013. In February 2014, our Board of Directors declared a quarterly dividend of $0.15 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. Under our Bank Credit Agreement, in certain circumstances, we may make up to $200.0 million in unrestricted annual
cash payments including but not limited to dividends, of which $50.0 million may carry over to the next year. Under the
indentures governing our 8.375% Senior Notes, due 2018 (the 8.375% Notes), our 6.125% Notes, due 2022 (the 6.125% Notes),
our 5.375% Notes, due 2021 (the 5.375% Notes) and our 6.375% Notes, due 2021 (the 6.375% 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 2013, we did not repurchase any shares of Class A Common Stock or other equity securities of Sinclair.
2013 Annual Report 29
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, 2008 through December 31, 2013. The
performance graph assumes that an investment of $100 was made in the Class A Common Stock and in each Index on
December 31, 2008 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
12/31/08
100.00
100.00
100.00
12/31/09
130.00
144.88
137.81
12/31/10
278.09
170.58
148.84
12/31/11
404.72
171.30
131.52
12/31/12
517.91
199.99
136.58
12/31/13
1,505.96
283.39
189.00
30 Sinclair Broadcast Group
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, 2013.
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 our
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.
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, 2013, 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, 2013 based on the criteria set forth
in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(1992 framework) (COSO). Based on our assessment, management has concluded that, as of December 31, 2013, our internal
control over financial reporting was effective based on those criteria.
Management has excluded the assets, liabilities and operations of the television stations acquired from Cox Media Group LLC,
Fisher Communications, Barrington Broadcasting LLC, TTBG LLC as well as WUTB-TV, KDBC-TV, KENV-TV, KRNV-TV,
WPFO-TV from its assessment of internal control over financial reporting as of December 31, 2013 because these television
stations were acquired by the Company in a purchase business combination during 2013. These assets acquired represent 7% of
total assets as of December 31, 2013 and 11% of total revenues for the year ended December 31, 2013.
The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
2013 Annual Report 31
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, 2013, 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.
32 Sinclair Broadcast Group
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CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
As of December 31,
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $3,379 and $3,091, respectively
Affiliate receivable
Current portion of program contract costs
Prepaid expenses and other current assets
Assets held for sale
Deferred barter costs
Total current assets
PROGRAM CONTRACT COSTS, less current portion
PROPERTY AND EQUIPMENT, net
RESTRICTED CASH
GOODWILL
BROADCAST LICENSES
DEFINITE-LIVED INTANGIBLE ASSETS, net
OTHER ASSETS
Total assets (a)
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
Liabilities held for sale
Deferred barter revenues
Deferred tax liabilities
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 (a)
COMMITMENTS AND CONTINGENCIES (See Note 10)
EQUITY (DEFICIT):
2013
2012
$
$
$
$
280,104
308,974
182
74,324
30,599
—
3,688
697,871
22,865
183,480
416
56,581
7,404
30,357
3,345
304,448
24,708
596,071
11,747
1,380,082
101,029
1,127,755
208,209
4,147,472
12,767
439,713
225
1,074,032
85,122
623,406
189,984
$ 2,729,697
13,989
182,185
2,504
46,346
2,367
90,933
—
3,319
1,738
343,381
2,966,402
18,925
34,681
311,041
67,338
3,741,768
$
10,086
143,731
9,939
47,622
1,704
88,015
2,397
3,499
607
307,600
2,210,866
13,187
16,341
233,465
48,291
2,829,750
SINCLAIR BROADCAST GROUP SHAREHOLDERS’ EQUITY (DEFICIT):
Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 74,145,569 and 52,332,012 shares
741
523
issued and outstanding, respectively
Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 26,028,357 and 28,933,859 shares
260
289
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 interests
Total equity (deficit)
Total liabilities and equity (deficit)
1,094,918
(696,996)
(2,553)
396,370
9,334
405,704
4,147,472
600,928
(713,697)
(4,993)
(116,950)
16,897
(100,053)
$ 2,729,697
$
The accompanying notes are an integral part of these consolidated financial statements.
(a) Our consolidated total assets as of December 31, 2013 and 2012 include total assets of variable interest entities (VIEs) of $194.1 million and $107.9 million,
respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of December 31, 2013 and 2012 include total
liabilities of the VIEs of $31.6 million and $7.9 million, respectively, for which the creditors of the VIEs have no recourse to us. See Note 1: Nature of
Operations and Summary of Significant Accounting Policies.
34 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands, except per share data)
2013
2012
2011
REVENUES:
Station broadcast revenues, net of agency commissions
Revenues realized from station barter arrangements
Other operating divisions revenues
Total revenues
$
$
1,217,504
88,680
56,947
1,363,131
$
920,593
86,905
54,181
1,061,679
648,002
72,773
44,513
765,288
178,612
123,938
65,742
52,079
39,486
32,874
28,310
18,229
(18)
398
539,650
225,638
(106,128)
(4,847)
3,269
1,742
1,699
(104,265)
121,373
(44,785)
76,588
(411)
76,177
(379)
75,798
0.48
0.95
0.94
0.95
0.94
80,217
80,532
385,104
249,732
77,349
80,925
48,109
70,554
53,126
70,820
3,392
—
1,039,111
324,020
(162,937 )
(58,421 )
621
199
2,026
(218,512 )
105,508
(41,249 )
64,259
11,558
75,817
(2,349 )
73,468
0.60
0.66
0.79
0.66
0.78
93,207
93,845
$
$
$
$
$
$
255,556
171,279
79,834
60,990
46,179
47,073
33,391
38,099
(7 )
—
732,394
329,285
(128,553 )
(335 )
9,670
47
2,226
(116,945 )
212,340
(67,852 )
144,488
465
144,953
(287 )
144,666
1.54
1.78
1.79
1.78
1.78
81,020
81,310
$
$
$
$
$
$
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 and other assets
Loss (gain) on asset dispositions
Impairment of goodwill, intangible and other assets
Total operating expenses
Operating income
OTHER INCOME (EXPENSE):
Interest expense and amortization of debt discount and deferred financing
costs
Loss from extinguishment of debt
Income (loss) from equity and cost method investments
Gain on insurance settlement
Other income (loss), net
Total other expense
Income from continuing operations before income taxes
INCOME TAX PROVISION
Income from continuing operations
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, includes income tax benefit
(provision) of $10,806, ($663) and ($477), respectively
NET INCOME
Net (income) attributable to the noncontrolling interests
NET INCOME ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP
Dividends declared per share
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR
BROADCAST GROUP:
Basic earnings per share from continuing operations
Basic earnings per share
Diluted earnings per share from continuing operations
Diluted earnings per share
Weighted average common shares outstanding
Weighted average common and common equivalent shares outstanding
AMOUNTS ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP
COMMON SHAREHOLDERS:
Income from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
$
$
$
$
$
$
$
$
61,910
11,558
73,468
$
$
144,201
465
144,666
$
$
76,209
(411)
75,798
The accompanying notes are an integral part of these consolidated financial statements.
2013 Annual Report 35
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands)
2013
2012
2011
Net income
Amortization of net periodic pension benefit costs, net of taxes
Adjustments to pension obligations, net of taxes
Unrealized gain on investments, net of taxes
Comprehensive income
Comprehensive (income) loss attributable to the noncontrolling interests
Comprehensive income attributable to Sinclair Broadcast Group
$
$
75,817
(392 )
2,571
261
78,257
(2,349 )
75,908
$
$
144,953
(145 )
—
—
144,808
(287 )
144,521
$
$
76,177
(934 )
—
—
75,243
(379 )
74,864
The accompanying notes are an integral part of these consolidated financial statements
36 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands, except share data)
BALANCE,
December 31, 2010
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
Class A Common Stock
sold by variable
interest entity
6% Notes converted into
Class A Common
Stock
Tax benefit on share
based awards
Distributions to
noncontrolling
interests
Issuance of subsidiary
share awards
Purchase of subsidiary
shares from
noncontrolling
interests
Amortization of net
periodic pension
benefit costs, net of
taxes
Net income
BALANCE,
December 31, 2011
Sinclair Broadcast Group Shareholders
Class A
Common Stock
Shares
Value
Class B
Common Stock
Shares
Value
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
controlling
Interests
Total
Equity
(Deficit)
50,284,052
$ 503
30,083,819
$ 301
$ 609,640
$
(771,953)
$
(3,914)
$ 8,341
$ (157,082)
—
—
—
—
—
(38,356)
586,759
5
—
—
5,826
1,149,960
12
(1,149,960)
(12)
—
—
1,315
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,808
30
734
—
—
—
—
—
—
(663)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(38,356)
—
—
—
—
—
(270)
3,201
5,831
—
1,808
30
734
(270)
3,201
(1,838)
(2,501)
—
—
—
—
—
—
—
—
—
—
—
75,798
(934)
—
—
379
(934)
76,177
52,022,086
$ 520
28,933,859
$ 289
$
617,375
$
(734,511)
$
(4,848)
$
9,813
$ (111,362)
The accompanying notes are an integral part of these consolidated financial statements
2013 Annual Report 37
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands, except share data)
Sinclair Broadcast Group Shareholders
Class A
Common Stock
Shares
Value
Class B
Common Stock
Shares
Value
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
controlling
Interests
Total
Equity
(Deficit)
52,022,086
$ 520
28,933,859
$ 289
$ 617,375
$
(734,511)
$
(4,848)
$ 9,813
$ (111,362)
—
—
—
—
—
(123,852)
309,926
—
—
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,102
(23,638)
271
—
—
—
1,818
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(123,852)
—
—
—
5,105
(23,638)
271
(1,142)
(1,142)
707
707
9,050
9,050
(1,818)
—
52,332,012
$ 523
28,933,859
$ 289
$
600,928
$
(713,697)
$
(4,993)
$ 16,897
$ (100,053)
The accompanying notes are an integral part of these consolidated financial statements.
—
—
—
144,666
(145)
—
—
287
(145)
144,953
BALANCE,
December 31, 2011
Dividends declared on
Class A and Class B
Common Stock
Class A Common Stock
issued pursuant to
employee benefit
plans
Purchase of assets from
entity under
common control
Tax benefit on share
based awards
Distributions to
noncontrolling
interests
Issuance of subsidiary
share awards
Consolidation of
variable interest
entity
Purchase of subsidiary
shares from
noncontrolling
interests
Amortization of net
periodic pension
benefit costs, net of
taxes
Net income
BALANCE,
December 31, 2012
38 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands, except share data)
BALANCE,
December 31, 2012
Dividends declared on
Class A and Class B
Common Stock
Issuance of common
stock, net of
issuance costs
Class B Common Stock
converted into
Class A Common
Stock
Redemption of 3%
Convertible
Debentures, net of
taxes
4.875% Convertible
Debentures
converted into
Class A Common
Stock, net of taxes
Class A Common Stock
issued pursuant to
employee benefit
plans
Tax benefit on share
based awards
Distributions to non-
controlling interests
Issuance of subsidiary
share awards
Class A Common Stock
sold by variable
interest entities, net
of taxes
Other comprehensive
income
Net income
BALANCE,
December 31, 2013
Sinclair Broadcast Group Shareholders
Class A
Common Stock
Shares
Value
Class B
Common Stock
Shares
Value
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
controlling
Interests
Total
Equity
(Deficit)
52,332,012
$ 523
28,933,859
$ 289
$ 600,928
$
(713,697)
$
(4,993)
$ 16,897
$ (100,053)
—
—
18,000,000
180
—
—
—
—
472,733
—
(56,767)
2,905,502
29
(2,905,502)
(29)
—
—
—
—
—
(5,100)
338,632
3
569,423
—
—
—
—
—
—
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,599
10,299
521
—
—
7,008
—
—
—
—
—
—
—
—
—
—
—
—
(56,767)
—
472,913
—
—
—
(5,100)
—
—
—
8,602
10,235
521
(10,256)
(10,256)
344
344
—
2,440
—
—
—
2,349
7,008
2,440
75,817
—
—
—
—
—
—
—
—
—
—
73,468
74,145,569
$ 741
26,028,357
$ 260
$ 1,094,918
$
(696,996)
$
(2,553)
$
9,334
$ 405,704
The accompanying notes are an integral part of these consolidated financial statements.
2013 Annual Report 39
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands)
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation of property and equipment
Impairment of goodwill, intangible and other assets
Amortization of definite-lived intangible assets
Amortization of program contract costs and net realizable value adjustments
Loss on extinguishment of debt, non-cash portion
Deferred tax provision
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
(Increase) in accounts receivable, net
Decrease in income taxes receivable
Increase in prepaid expenses and other current assets
Increase in other assets
Increase in accounts payable and accrued liabilities
(Decrease) increase in income taxes payable
(Decrease) increase in other long-term liabilities
Payments on program contracts payable
Original debt issuance discount paid
Other, net
Net cash flows from operating activities
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of property and equipment
Payments for acquisitions of television stations
Proceeds from the sale of broadcast assets
Payments for acquisitions of assets of other operating divisions
Purchase of alarm monitoring contracts
(Increase) decrease in restricted cash
Distributions from equity and cost method investees
Investments in equity and cost method investees
Investment in marketable securities
Other, net
Net cash flows (used in) from 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
Redemption of 3% convertible notes
Proceeds from the sale of Class A Common Stock
Dividends paid on Class A and Class B Common Stock
Payments for deferred financing costs
Proceeds from Class A Common Stock sold by variable interest entity
Noncontrolling interests distributions
Repayments of notes and capital leases to affiliates
Other, net
Net cash flows from (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of year
CASH AND CASH EQUIVALENTS, end of year
$
2013
2012
2011
$
75,817 $
144,953 $
76,177
70,554
—
70,820
80,925
33,049
22,518
(90,635 )
—
8,295
(3,686 )
7,954
(4,937 )
(16,178 )
(90,080 )
(23,766 )
19,927
160,577
(43,388 )
(1,006,144 )
49,738
(4,650 )
(23,721 )
(11,522 )
5,258
(10,767 )
(11,604 )
5,559
(1,051,241 )
48,871
—
38,671
61,943
335
8,313
(23,225 )
—
(8,360 )
(23,200 )
35,885
9,150
(3,941 )
(70,061 )
—
18,141
237,475
(43,986 )
(1,135,348 )
—
—
(12,454 )
58,501
9,590
(24,052 )
(1,493 )
(42 )
(1,149,284 )
2,278,293
(1,509,760 )
(10,500 )
472,913
(56,767 )
(27,724 )
10,908
(10,256 )
(1,959 )
2,755
1,147,903
257,239
22,865
280,104 $
1,247,255
(179,356 )
—
—
(123,852 )
(18,707 )
—
(1,142 )
(2,882 )
391
921,707
9,898
12,967
22,865 $
33,153
398
18,229
52,079
4,985
43,972
(11,616 )
74
(10,449 )
(1,247 )
8,878
(780 )
913
(67,319 )
(13,785 )
14,851
148,513
(35,835 )
—
—
(3,072 )
(8,850 )
(53,445 )
3,798
(11,577 )
(4,911 )
1,644
(112,248 )
151,733
(150,447 )
—
—
(38,356 )
(5,483 )
1,808
(610 )
(3,210 )
(707 )
(45,272 )
(9,007 )
21,974
12,967
The accompanying notes are an integral part of these consolidated financial statements.
40 Sinclair Broadcast Group
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 Communication
Commission (the FCC or Commission). We owned and provided programming and operating services pursuant to local
marketing agreements (LMAs) or provided or were provided sales services pursuant to outsourcing agreements to 149 television
stations in 71 markets, as of December 31, 2013. For the purpose of this report, these 149 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 (39 stations); CBS (25 stations); ABC (19 stations); NBC (16 stations); The CW (23 stations); MyNetworkTV (20 stations;
not a network affiliation; however, it is branded as such); Univision (5 stations), Azteca (1 station) and one independent station.
In addition, certain stations broadcast programming on second and third digital signals through network affiliation or program
service arrangements with CBS, ABC, and NBC (certain signals are rebroadcasted content from other primary channels within the
same market), FOX, The CW, MyNetworkTV, This TV, ME TV, Weather Radar, Weather Nation, Live Well Network, Antenna
TV, Bounce Network, Zuus Country Network, Retro TV, Estrella TV, MundoFox, Tele-Romantica, Inmigrante TV, Azteca and
Telemundo.
Principles of Consolidation
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries
and 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.
Discontinued Operations
In accordance with Financial Accounting Standards Board’s (FASB) guidance on reporting assets held for sale, we reported the
financial position and results of operations of our stations in Lansing, Michigan (WLAJ-TV) and Providence, Rhode Island
(WLWC-TV), as assets and liabilities held for sale in the accompanying consolidated balance sheets and consolidated statements
of operations. Discontinued operations have not been segregated in the consolidated statements of cash flows and, therefore,
amounts for certain captions will not agree with the accompanying consolidated balance sheets and consolidated statements of
operations. WLAJ-TV was recently acquired in the second quarter of 2012 in connection with the acquisition of the television
stations from Freedom Communications (Freedom). WLWC-TV was recently acquired in the first quarter of 2012 in connection
with the acquisition of the television stations from Four Points Media Group LLC (Four Points). See Note 2. Acquisitions for more
information. In October 2012, we entered into an agreement to sell all the assets of WLAJ-TV to an unrelated third party for
$14.4 million. In January 2013, we entered into an agreement to sell the assets of WLWC-TV to an unrelated third party for $13.8
million. The operating results of WLAJ-TV, which was sold effective March 1, 2013, and WLWC-TV, which was sold effective
April 1, 2013, are not included in our consolidated results of operations from continuing operations for the year ended
December 31, 2013. Total revenues for WLAJ-TV and WLWC-TV, which are included in discontinued operations for the year
ending December 31, 2013, were $0.6 million and $1.6 million, respectively. Total revenues of WLAJ-TV and WLWC-TV, which
are included in discontinued operations for the year ending December 31, 2012, are $3.7 million and $6.3 million, respectively.
Total income before taxes for WLAJ-TV and WLWC-TV, which are included in discontinued operations for the year ending
December 31, 2013, are $0.2 million and $0.4 million, respectively, and total income(loss) before taxes of WLAJ-TV and WLWC-
TV, which are included in discontinued operations for the year ending December 31, 2012, are $0.9 million and $0.2 million,
respectively. The resulting gain on the sale of these stations in 2013 was negligible.
Additionally, we recognized a $11.2 million income tax benefit during the year ended December 31, 2013, attributable to the
adjustment of certain liabilities for unrecognized tax benefits related to discontinued operations. See Note 9. Income Taxes for
further information.
Variable Interest Entities
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
2013 Annual Report 41
when we are the primary beneficiary. The assets of each of our consolidated VIEs can only be used to settle the obligations of
the VIE. All the liabilities are non-recourse to us except for certain debt of VIEs which we guarantee. See Note 6. Notes Payable
and Commercial Bank Financing for more information.
We have entered into LMAs to provide programming, sales and managerial services for seven television stations of
Cunningham Broadcasting Company (Cunningham), the license owner of these television stations as of December 31, 2013. 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 these television stations which includes the FCC license and certain other
assets used to operate the station (License Assets). Our applications to acquire these FCC license related assets are pending FCC
approval. We also perform sales and other non-programming support services to two other stations owned by Cunningham
(acquired in November 2013) pursuant to joint sales agreements (JSAs) and shared services agreements (SSAs). We have
purchase options to acquire the license assets of these stations. We own the majority of the non-license assets of these nine
Cunningham stations and we have guaranteed the debt of Cunningham. We have determined that Cunningham and these nine
stations are VIEs and that based on the terms of the agreements, the significance of our investment in the stations and our
guarantee of the debt of Cunningham, we are the primary beneficiary of the variable interests because, subject to the ultimate
control of the licensees, we have the power to direct the activities which significantly impact the economic performance of the
VIEs through the services we provide pursuant to the LMAs, and other outsourcing agreements, 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, 2013, 2012 and 2011 are net revenues of $107.6 million, $105.5 million and $90.3 million, respectively, which
relates to LMAs with Cunningham.
We have certain outsourcing agreements, including certain joint sales and shared services agreements, with certain other license
owners, under which we provide certain non-programming related sales, operational and administrative services. The terms of
the agreements vary, but generally have initial terms of over five years with several optional renewal terms. We own the majority
of the non-license assets of these stations and in certain cases have guaranteed the debt of licensee (see Note 6. Notes Payable and
Commercial Bank Financing). We also have purchase options to buy the assets of the licensees. We have determined that these
licensees (18 and 10 licensees as of December 31, 2013 and 2012) are VIEs, and, based on the terms of the agreements and the
significance of our investment in the stations, we are the primary beneficiary of the variable interests because, subject to the
ultimate control of the licensees, 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 because we absorb losses and returns that would be
considered significant to the VIEs. Included in the accompanying consolidated statements of operations for the years ended
December 31, 2013, 2012 and 2011 are net revenues of $128.2 million, $49.1 million and $11.9 million, respectively which relates
to these arrangements.
42 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, 2013 and 2012 were as follows (in thousands):
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable
Current portion of program contract costs
Prepaid expenses and other current 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
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
Long term liabilities
Total liabilities
2013
2012
$
$
$
4,916
18,468
10,725
247
34,356
5,075
11,081
6,357
16,768
97,496
22,935
194,068
2013
86
2,536
5,731
11,552
19,905
49,850
6,597
10,838
87,190
$
3,805
110
6,113
218
10,246
1,484
10,806
6,357
14,927
51,368
12,723
107,911
2012
15
186
2,123
8,991
11,315
20,238
2,080
—
33,633
$
$
$
$
The amounts above represent the consolidated assets and liabilities of the VIEs described above, for which we are the primary
beneficiary, and have been aggregated as they all relate to our broadcast business. Excluded from the amounts above are
payments made to Cunningham under the LMA which are treated as a prepayment of the purchase price of the stations and
capital leases between us and Cunningham which are eliminated in consolidation. The total payment made under these LMAs as
of December 31, 2013 and 2012, which are excluded from liabilities above, were $32.4 million and $29.8 million, respectively.
The total capital lease assets excluded from above were $11.2 million and $11.7 million, respectively for the years ended
December 31, 2013 and 2012, respectively. During the year ended December 31, 2013, Cunningham sold a portion of its
investment in our Class A Common Stock which is eliminated in consolidation and excluded from assets shown above, for $7.0
million, net of income taxes and has been reflected as an increase in additional paid in capital in the consolidated balance sheet.
Also excluded from the amounts above are liabilities associated with the certain outsourcing agreements and purchase options
with certain VIEs totaling $59.9 million and $36.2 million as of December 31, 2013 and December 31, 2012, respectively, as these
amounts are eliminated in consolidation. The risk and reward characteristics of the VIEs are similar.
In the fourth quarter of 2011, we began providing sales, programming and management services to the Freedom stations
pursuant to a LMA. Effective April 1, 2012, we completed the acquisition of the Freedom stations and the LMA was terminated.
We determined that the Freedom stations were VIEs during the period of the LMA based on the terms of the agreement. We
were not the primary beneficiary because the owner of the stations had the power to direct the activities of the VIEs that most
significantly impacted the economic performance of the VIEs. In the consolidated statements of operations for the year ended
December 31, 2012 are net broadcast revenues of $10.0 million and station production expenses of $7.8 million related to the
Freedom LMAs, and for the year ended December 31, 2011 are net revenues of $10.8 million and station production expenses of
$7.7 million related to the Four Points and Freedom LMAs.
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 would allow
2013 Annual Report 43
us to control the entity, and therefore, we are not considered the primary beneficiary of these VIEs. We account for these entities
using the equity or cost method of accounting.
The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary as of December 31, 2013
and 2012 was $26.7 million and $31.0 million, respectively, which are included in other assets in the consolidated balance sheets.
Our maximum exposure is equal to the carrying value of our investments. The income and loss related to these investments are
recorded in income from equity and cost method investments in the consolidated statement of operations. We recorded income
of $2.1 million, $6.4 million and $2.8 million for the years ended December 31, 2013, 2012 and 2011, respectively, related to these
investments.
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.
Recent Accounting Pronouncements
In July 2012, the FASB issued new guidance for testing indefinite-lived intangible assets for impairment. The new guidance
allows companies to perform a qualitative assessment to determine whether further impairment testing of indefinite-lived
intangible assets is necessary, similar to the approach now applied to goodwill. Companies can first determine based on certain
qualitative factors whether it is “more likely than not” (a likelihood of more than 50 percent) that an indefinite-lived intangible
asset is impaired. The new standard is intended to reduce the cost and complexity of testing indefinite-lived intangible assets for
impairment. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after
September 30, 2012 and early adoption is permitted. We adopted this new guidance in the fourth quarter of 2012 when
completing our annual impairment analysis. This guidance impacted how we perform our annual impairment testing for
indefinite-lived intangible assets and changed our related disclosures for 2012; however, it does not have an impact on our
consolidated financial statements as the guidance does not impact the timing or amount of any resulting impairment charges.
In February 2013, the FASB issued new guidance requiring disclosure of items reclassified out of accumulated other
comprehensive income (AOCI). This new guidance requires entities to present (either on the face of the income statement or in
the notes) the effects on the line items of the income statement for amounts reclassified out of AOCI. The new guidance is
effective for annual and interim periods beginning after December 15, 2012. This guidance did not have a material impact on our
financial statements.
In July 2013, the FASB issued new guidance requiring new disclosure of unrecognized tax benefit, or a portion of an
unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a
similar tax loss, or a tax credit carryforward. If a company does not have: (i) a net operating loss carryforward; (ii) a similar tax
loss; or (iii) a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle
any additional income taxes that would result from the disallowance of a tax position or the entity does not intend to use the
deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and
should not be combined with deferred tax assets. The authoritative guidance is effective for fiscal years and the interim periods
within those fiscal years beginning on or after December 15, 2013 and should be applied on a prospective basis. We do not expect
this guidance to have a material impact on our financial statements.
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
Under the terms of certain lease agreements, as of December 31, 2013 and December 31, 2012, we were required to hold $0.2
million of restricted cash related to the removal of analog equipment from some of our leased towers.
Additionally, during 2013, we entered into definitive agreements to purchase the assets of pending acquisitions. We were
required to deposit 10% of the purchase price for each acquisition into an escrow account. As of December 31, 2013, we held
$11.4 million in restricted cash classified as noncurrent related to the amount held in escrow for these acquisitions.
44 Sinclair Broadcast Group
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.
A rollforward of the allowance for doubtful accounts for the years ended December 31, 2013, 2012 and 2011 is as follows (in
thousands):
Balance at beginning of period
Charged to expense
Net write-offs
Balance at end of period
Programming
2013
2012
2011
$
$
3,091
1,802
(1,514 )
3,379
$
$
3,008
1,141
(1,058 )
3,091
$
$
3,242
751
(985 )
3,008
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. 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 costs 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.
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. 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.
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.
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.
2013 Annual Report 45
Other Assets
Other assets as of December 31, 2013 and 2012 consisted of the following (in thousands):
Equity and cost method investments
Unamortized costs related to debt issuances
Other
Total other assets
2013
2012
$
$
98,385
46,150
63,674
208,209
$
$
94,924
40,260
54,800
189,984
We have equity and cost method investments primarily in private investment funds and real estate ventures. 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, 2013, 2012, and 2011, none of our investments were significant individually or in the aggregate.
As of December 31, 2013 and 2012, our unfunded commitments related to private equity investment funds totaled $17.0
million and $8.9 million, respectively.
When factors indicate that there may be a decrease in value of an equity or cost method investment, we assess whether a loss in
value has occurred related to the investment. 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, 2011 we recorded no impairments. For the year ended December 31, 2012, we recorded
impairments of $1.3 million related to two of our investments. For the year ended December 31, 2013, we recorded impairments
of $0.6 million related to two of our investments. The impairments are recorded in the income (loss) from equity and cost method
investees in our consolidated statement of operations.
Unamortized costs related to debt issuances represent direct costs incurred to obtain long-term financing and are amortized to
interest expense over the term of the related debt using the effective interest method. Previously capitalized debt financing costs
are expensed and included in loss on extinguishment of debt if we determine that there has been a substantial modification of the
related debt.
The increase in other, in the table above, in 2013 was primarily due to acquisitions of marketable securities by our consolidated
variable interest entities.
Impairment of Intangible and Long-Lived Assets
We assess annually, in the fourth quarter, whether goodwill and indefinite-lived intangible assets are impaired. Additionally,
impairment assessments may be performed on an interim basis when events or changes in circumstances indicate that impairment
potentially exists. We aggregate our stations by market for purposes of our goodwill and license impairment testing. We believe
that our markets are most representative of our broadcast reporting units because segment management views, manages and
evaluates our stations on a market basis. Furthermore, in our markets, where we operate or provide services to more than one
station, certain costs of operating the stations are shared including the use of buildings and equipment, the sales force and
administrative personnel. In our assessment of goodwill for impairment we first determined, based upon a qualitative assessment,
whether it is more likely than not a reporting unit has been impaired. Our qualitative assessment includes, but is not limited to,
assessing the changes in macroeconomic conditions, regulatory environment, industry and market conditions, and the specific
financial performance of the reporting units, as well as any other events or circumstances specific to the reporting units. If we
conclude that it is more likely than not that a reporting unit is impaired, we will apply the quantitative two-step method. 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. 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 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 to determine the implied fair value. An impairment charge will be recognized only when the
implied fair value of a reporting unit’s goodwill is less than its carrying amount.
For our annual impairment test for indefinite-lived intangibles, broadcast licenses, we applied a qualitative assessment to assess
whether it is more likely than not that a broadcast license is impaired. Our qualitative assessment for indefinite-lived intangible
asset impairment includes, but it not limited to, review of operating results, assessing the changes in macroeconomic conditions,
cost factors, regulatory environment, industry and market conditions, and other events and circumstances that could affect the
46 Sinclair Broadcast Group
significant inputs used to determine the fair value of our broadcast license assets. When evaluating our broadcast licenses for
impairment, the qualitative assessment is done at the unit of accounting level, each station’s broadcast license, and we aggregate
the broadcast licenses for each market because the broadcast licenses within the market are complementary and together enhance
the single broadcast license of each station. If we conclude that it is more likely than not that one of our broadcast licenses is
impaired, we will calculate the fair value of the broadcast license in accordance with the quantitative test for indefinite-lived
intangible assets. If a quantitative test is performed, we use the income approach method. The income approach method involves
a discounted cash flow 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. We will compare the fair value of the broadcast licenses, at a market level, 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 5. Goodwill and
Other Intangible Assets, for more information.
Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2013 and 2012 (in thousands):
Compensation and employee health insurance
Interest
Deferred revenue
Other accruals relating to operating expenses (a)
Total accrued liabilities
2013
2012
44,800
25,133
20,128
92,124
182,185
$
$
32,099
18,885
14,734
78,013
143,731
$
$
(a) Included in other accruals relating to operating expenses as of December 31, 2012 is $25.0 million which was paid to Fox in
April 2013 as discussed further in Network Affiliation Agreements and Program Service Agreements under Note 10. Commitments and
Contingencies.
We expense these activities when incurred.
Income Taxes
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 that it is more
likely than not that some or all of the deferred tax assets will not be realized. 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 judgments that are
based on the plans and estimates used to manage our underlying businesses on a long-term basis. As of December 31, 2013, a
valuation allowance has been provided for deferred tax assets related to a substantial amount of our available state net operating
loss carryforwards, 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. 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. The resolution of audits is unpredictable and could result in tax liabilities that are significantly higher or lower than for
what we have provided.
2013 Annual Report 47
Supplemental Information — Statements of Cash Flows
During 2013, 2012 and 2011, we had the following cash transactions (in thousands):
Income taxes paid related to continuing operations
Income tax refunds received related to continuing operations
Interest paid
2013
2012
2011
$
$
$
26,037
4,414
147,083
$
$
$
46,964
194
110,973
$
$
$
897
5
98,643
Non-cash transactions related to capital lease obligations were $10.4 million, $0.3 million and $2.3 million for the years ended
December 31, 2013, 2012 and 2011, respectively. The non-cash conversion of the 4.875% Notes was $8.6 million, net of taxes
for the year ended December 31, 2013.
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 over the life of the agreement.
Network compensation revenue is recognized over the term of the contract. All other significant revenues are recognized as
services are provided.
Advertising Expenses
Promotional advertising expenses are recorded in the period when incurred and are included in station production and other
operating division expenses. Total advertising expenses from continuing operations, net of advertising co-op credits, were $15.4
million, $12.2 million and $8.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Financial Instruments
Financial instruments, as of December 31, 2013 and 2012, consisted of cash and cash equivalents, trade accounts receivable,
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 6. Notes Payable and Commercial Bank Financing, for additional information
regarding the fair value of notes payable.
Post-retirement Benefits
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, 2013 and 2012, we held a
liability of $1.9 million and $5.5 million, respectively, representing the underfunded status of our defined benefit pension plan.
In connection with acquisition of Fisher Communications, Inc. (Fisher) in 2013 (see Note 2. Acquisitions), we assumed a
nonqualified noncontributory supplemental retirement program (Fisher SERP) that was originally established for former
executives of Fisher. No new participants have been admitted to this program since 2001 and the benefits of active participants
were frozen in 2005. The program participants do not include any active employees. The Fisher SERP required continued
employment or disability through the date of expected retirement, unless involuntarily terminated. The cost of the program is
accrued over the average expected future lifetime of the participants. While the nonqualified plan is unfunded, but Fisher had
made investments in annuity contracts and life insurance policies on the lives of certain individual participants to assist in future
payment of retirement benefits. The Company is the owner and beneficiary of the annuity contracts and life insurance policies;
accordingly, the cash value of the annuity contracts and the cash surrender value of the life insurance policies are reported at fair
value as assets in our consolidated balance sheet and any appreciation value is included in other income in our consolidated
statement of operations. The carrying value of the annuity contracts and life insurance policies was $18.2 million as of
December 31, 2013.
48 Sinclair Broadcast Group
As of December 31, 2013, the estimated projected benefit obligation of Fisher SERP was $22.0 million, of which $1.5 million is
included in accrued expenses in the consolidated balance sheet and the $20.5 million is included in other long-term liabilities.
During the year ended December 31, 2013, since acquiring Fisher, we made $0.5 million in benefit payments, recognized $0.4
million of periodic pension expense, reported in other expenses in the consolidated statement of operations, and $0.2 million of
actuarial gains through other comprehensive income.
At December 31, 2013 the projected benefit obligation was measured using a 4.51% discount rate. We estimated its discount
rate, in consultation with our independent actuaries, based on a yield curve constructed from a portfolio of high quality bonds for
which the timing and amount of cash outflows approximate the estimated payouts of the plan.
We estimate that benefits expected to be paid to participants under the Fisher SERP as follows (in thousands):
2014
2015
2016
2017
2018
Next 5 years
Reclassifications
December 31,
2013
$
$
1,489
1,601
1,686
1,624
1,580
7,366
15,346
Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s
presentation.
2. ACQUISITIONS
Four Points
Effective January 1, 2012, we completed the acquisition of the broadcast assets of Four Points, which we had previously
operated pursuant to a LMA since October 1, 2011. The acquired assets consist of the following seven stations in four markets
along with the respective network affiliation or program service arrangements: KUTV (CBS) and KMYU (MNT / This TV) in
Salt Lake City / St. George, UT; KEYE (CBS) in Austin, TX; WTVX (CW), WTCN (MNT) and WWHB (Azteca) in West Palm
Beach / Fort Pierce / Stuart, FL; and WLWC (CW) in Providence, RI / New Bedford, MA. This acquisition provides expansion
into additional markets and increases value based on the synergies we can achieve.
We paid Four Points $200.0 million in cash, less a working capital adjustment of $0.9 million. The acquisition was financed
with a $180.0 million draw under an incremental Term B Loan commitment under our amended Bank Credit Agreement plus a
$20.0 million cash escrow previously paid in September 2011.
Under the acquisition method of accounting, the results of the acquired operations are included in the financial statements of
the Company beginning January 1, 2012. The purchase price has been allocated to the acquired assets and assumed liabilities
based on estimated fair values. The allocated fair value of acquired assets and assumed liabilities is summarized as follows (in
thousands):
Prepaid expenses and other current assets
Program contract costs
Property and equipment
Broadcast licenses
Definite-lived intangible assets
Other assets
Accrued liabilities
Program contracts payable
Fair value of identifiable net assets acquired
Goodwill
Total
$
$
456
3,731
34,578
10,658
93,800
548
(381)
(5,157)
138,233
60,843
199,076
2013 Annual Report 49
The final allocation presented above is based upon management’s estimate of the fair values using valuation techniques
including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair
value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and
estimated discount rates. The amount allocated to definite-lived intangible assets represents the estimated fair values of network
affiliations of $66.9 million, the decaying advertiser base of $9.8 million, and other intangible assets of $17.1 million. These
intangible assets will be amortized over the estimated remaining useful lives of 15 years for network affiliations, 10 years for the
decaying advertiser base and a weighted average of 14 years for the other intangible assets. Acquired property and equipment will
be depreciated on a straight-line basis over the respective estimated remaining useful lives. Goodwill is calculated as the excess of
the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits
expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce
and noncontractual relationships, as well as expected future synergies. We expect that goodwill will be deductible for tax
purposes. Certain measurement period adjustments have been made since the initial allocation in the first quarter of 2012, which
were not material to the consolidated financial statements.
Prior to the acquisition, since October 1, 2011, we provided sales, programming and management services to the stations
pursuant to an LMA. During that period, we funded the working capital needs of the stations, which totaled $8.1 million as of
December 31, 2011 and was reflected as cash flows used in operating activities within the consolidated statement of cash flows
for that period. This working capital is not reflected in the purchase price allocation presented above.
The results of operations for the years ended December 31, 2013 and 2012 include the results of the Four Points stations since
January 1, 2012. Net broadcast revenues and operating income of the Four Points stations included in our consolidated
statements of operations, were $73.7 million and $70.0 million for the years ended December 31, 2013 and 2012, respectively and
$19.8 million and $17.3 million for the years ended December 31, 2013 and 2012, respectively. These amounts exclude the
operations of WLWC-TV which are classified as discontinued operations in the consolidated statements of operations. See Note
1. Nature of Operations and Summary of Significant Accounting Policies. Net broadcast revenues and operating losses of WLWC-TV were
$1.4 million and $0.2 million, respectively, for the year ended December 31, 2013 and $5.5 million and $0.2 million, respectively,
for the year ended December 31, 2012. Additionally, during the year ended December 31, 2011, prior to the acquisition, we
recorded net broadcast revenues of $8.8 million related to the Four Points LMA.
Freedom
Effective April 1, 2012, we completed the acquisition of the broadcast assets of Freedom, which we had previously operated
pursuant to a LMA since December 1, 2011. The acquired assets consist of the following eight stations in seven markets along
with the respective network affiliation or program service arrangements: WPEC (CBS) in West Palm Beach, FL; WWMT (CBS) in
Grand Rapids/Kalamazoo/Battle Creek, MI; WRGB (CBS) and WCWN (CW) in Albany, NY; WTVC (ABC) in Chattanooga,
TN; WLAJ (ABC) in Lansing, MI; KTVL (CBS) in Medford-Klamath Falls, OR; and KFDM (CBS) in Beaumont/Port
Arthur/Orange, TX. This acquisition provides expansion into additional markets and increases value based on the synergies we
can achieve.
We paid Freedom $385.0 million plus a working capital adjustment of $0.3 million. The acquisition was financed with a draw
under a $157.5 million incremental Term Loan A and a $192.5 million incremental Term B Loan commitment under our
amended Bank Credit Agreement, plus a $38.5 million cash escrow previously paid in November 2011.
Under the acquisition method of accounting, the results of the acquired operations are included in the financial statements of
the Company beginning April 1, 2012. The purchase price has been allocated to the acquired assets and assumed liabilities based
on estimated fair values. The allocated fair value of acquired assets and assumed liabilities is summarized as follows (in
thousands):
Prepaid expenses and other current assets
Program contract costs
Property and equipment
Broadcast licenses
Definite-lived intangible assets
Other assets
Accrued liabilities
Program contracts payable
Fair value of identifiable net assets acquired
Goodwill
Total
50 Sinclair Broadcast Group
$
$
373
3,520
54,109
10,424
140,963
278
(589)
(3,404)
205,674
179,609
385,283
The final allocation presented above is based upon management’s estimate of the fair values using valuation techniques
including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair
value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and
estimated discount rates. The amount allocated to definite-lived intangible assets represents the estimated fair values of network
affiliations of $93.1 million, the decaying advertiser base of $25.1 million, and other intangible assets of $22.8 million. These
intangible assets will be amortized over the estimated remaining useful lives of 15 years for network affiliations, 10 years for the
decaying advertiser base and a weighted average life of 16 years for the other intangible assets. Acquired property and equipment
will be depreciated on a straight-line basis over the respective estimated remaining useful lives. Goodwill is calculated as the
excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future
economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including
assembled workforce and noncontractual relationships, as well as expected future synergies. We expect that goodwill will be
deductible for tax purposes. Certain measurement period adjustments have been made since the initial allocation in the second
quarter of 2012, which were not material to the consolidated financial statements
Prior to the acquisition, since December 1, 2011, we provided sales, programming and management services to the stations
pursuant to an LMA. During that period, we funded the working capital needs of the stations, which totaled $1.5 million as of
December 31, 2011 and $9.6 million as of March 31, 2012 and was reflected as cash flows used in operating activities within the
consolidated statement of cash flows for those periods. This working capital is not reflected in the purchase price allocation
presented above.
The results of operations for the years ended December 31, 2013 and 2012 includes the results of the Freedom stations since
April 1, 2012. Net broadcast revenues and operating income of the Freedom stations included in our consolidated statements of
operations, were $108.6 million and $91.0 million for the years ended December 31, 2013 and 2012, respectively, and$29.4 million
and $32.5 million for the years ended December 31 2013, and 2012, respectively. These amounts exclude the operations of
WLAJ-TV which are classified as discontinued operations in the consolidated statements of operations. See Note 1. Nature of
Operations and Summary of Significant Accounting Policies. Net broadcast revenues and operating losses of WLAJ-TV were $0.7 million
and $0.1 million, respectively, for the year ended December 31, 2013 and $3.8 million and $0.9 million, respectively, for the year
ended December 31, 2012. Additionally, during the first quarter 2012 and year ended December 31, 2011, prior to the
acquisition, we recorded net broadcast revenues of $10.0 million and $2.0 million, respectively, related to the Freedom LMA.
Newport
Effective December 1, 2012, we completed the acquisition of certain broadcast assets of Newport Television (Newport). The
acquired assets relate to the following seven stations in six markets along with the respective network affiliation or program
service arrangements: WKRC
in
Harrisburg/Lancaster/Lebanon/York, PA; WPMI (NBC) and WJTC (IND) in Mobile, AL/Pensacola, FL; KSAS (FOX) in
Wichita/Hutchinson, KS; and WHAM (ABC) in Rochester, NY. We also acquired Newport’s rights under the local marketing
agreements with WLYH (CW) in Harrisburg, PA and KMTW (MNT) in Wichita, KS, as well as options to acquire the license
assets. This acquisition provides expansion into additional markets and increases value based on the synergies we can achieve.
in San Antonio, TX; WHP
in Cincinnati, OH; WOAI
(NBC)
(CBS)
(CBS)
We paid Newport $460.5 million in cash, less a working capital adjustment of $1.0 million. We financed the $460.5 million
purchase price, less the $41.3 million in escrow with the net proceeds from the 6.125% Notes issued in October 2012. See Note 6.
Notes Payable and Commercial Bank Financing for more information.
Our right to acquire certain of the license assets of WPMI and WJTC in Mobile, AL was assigned to a third party, who acquired
these assets effective December 1, 2012 for $6.0 million. Additionally, a third party acquired the license assets of WHAM in
Rochester, NY from Newport effective February 1, 2013 for $6.0 million. Concurrent with the acquisition of WKRC in
Cincinnati, OH and WOAI in San Antonio, TX from Newport, we sold the license assets of two of our existing stations located
in Cincinnati, OH (WSTR MNT) and San Antonio, TX (KMYS CW) for a total of $10.7 million to third parties. All of the
aforementioned third party licensees are part of the Deerfield Media group of companies (Deerfield), which are under common
ownership. Deerfield financed these purchases with third party bank financing which we have guaranteed. See Note 6. Notes
Payable and Commercial Bank Financing for more information. We provide non-programming related sales, operational and
administrative services to these stations pursuant to certain outsourcing agreements and we have assignable purchase options with
these licensees to acquire the license assets upon FCC approval. We consolidate the license assets of these stations because the
licensee companies are VIEs and we are the primary beneficiary. Prior to Deerfield acquiring the license assets of WHAM in
Rochester, NY on February 1, 2013, we provided non-programming related sales, operational and administrative services to the
station pursuant to certain outsourcing agreements with Newport. We consolidated the license assets owned by Newport from
December 1, 2012 to January 31, 2013 because the licensee company was a VIE and the Company was the primary beneficiary.
See Variable Interest Entities in Note 1. Nature of Operations and Summary of Significant Accounting Policies. The purchase of the license
assets by Deerfield in February 2013 was accounted for as a transaction between parties under common control.
2013 Annual Report 51
Under the acquisition method of accounting, the results of the acquired operations are included in the financial statements of
the Company beginning December 1, 2012. The initial purchase price has been allocated to the acquired assets and assumed
liabilities based on estimated fair values. The initial purchase price allocated includes $460.5 million paid for certain broadcast
assets of the seven stations from Newport and the rights under the LMAs with the two other stations, $6.0 million paid by
Deerfield for the license assets of WPMI and WJTC and $6.0 million paid by third parties for the license assets of WHAM, and
$0.2 million of noncontrolling interests related to the WLYH VIE, less a working capital adjustment of $1.3 million. The sale of
the license assets of WSTR in Cincinnati, OH and KMYS in San Antonio, TX was considered a transaction between parties under
common control and therefore was not included in the purchase price allocation. The final allocated fair value of acquired assets
and assumed liabilities, including the assets owned by VIEs, is summarized as follows (in thousands):
Prepaid expenses and other current assets
Program contract costs
Property and equipment
Broadcast licenses
Definite-lived intangible assets
Other assets
Accrued liabilities
Program contracts payable
Fair value of identifiable net assets acquired
Goodwill
Total
$
$
1,390
10,378
53,883
15,581
240,013
1,097
(3,928)
(11,634)
306,780
164,621
471,401
The final allocation presented above is based upon management’s estimate of the fair values using valuation techniques
including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair
value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and
estimated discount rates. The amount allocated to definite-lived intangible assets represents the estimated fair values of network
affiliations of $176.0 million, the decaying advertiser base of $23.7 million, and other intangible assets of $40.3 million. These
intangible assets will be amortized over the estimated remaining useful lives of 15 years for network affiliations, 10 years for the
decaying advertiser base and a weighted average of 14 years for the other intangible assets. Acquired property and equipment will
be depreciated on a straight-line basis over the respective estimated remaining useful lives. Goodwill is calculated as the excess of
the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits
expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce
and noncontractual relationships, as well as expected future synergies. We expect that goodwill will be deductible for tax
purposes. Certain measurement period adjustments have been made since the initial allocation in the fourth quarter of 2012,
which were not material to our consolidated financial statements.
The results of operations for the year ended December 31, 2012 include the results of the Newport stations since December 1,
2012. Net broadcast revenues and operating income of the Newport stations included in our consolidated statements of
operations, were $149.0 million and $11.7 million for the years ended December 31, 2013 and 2012, respectively, and $35.8
million and $2.9 million for the years ended December 31, 2013 and 2012, respectively.
Fisher Communications
Effective August 8, 2013, we completed
the outstanding common stock of Fisher
the acquisition of all of
Communications, Inc. (Fisher). We paid $373.2 million to the shareholders of the Fisher common stock, representing $41.0 per
common share. We financed the total purchase price with cash on hand. Fisher owns certain broadcast assets related to the
following twenty-two stations, and four radio stations in 8 markets along with the respective network affiliation or program
service arrangements: KOMO (ABC) and KUNS (Univision) in Seattle-Tacoma, WA; KATU (ABC), KUNP(Univision), and
KUNP-LP (Univision) in Portland, OR; KLEW (CBS) in Spokane, WA; KBOI (CBS) and KYUU-LD (CW) in Boise, ID; KVAL
(CBS), KCBY (CBS), KPIC (CBS), KMTR (NBC), KMCB (NBC), and KTCW (NBC) in Eugene, OR; KIMA (CBS), KEPR
(CBS), KUNW-CD (Univision), and KVVK-CD (Univision), in Yakima/Pasco/Richland/Kennewick, WA; KBAK (CBS) and
KBFX-CD (FOX) in Bakersfield, CA; as well as KIDK (CBS/FOX) and KXPI (FOX) in Idaho Falls/Pocatello, ID. The four
radio stations are: KOMO (AM/FM), KPLZ (FM) and KVI (AM) in the Seattle/Tacoma, WA market. This acquisition provides
expansion into additional markets and increases value based on the synergies we can achieve.
The results of the acquired operations are included in the financial statements of the Company beginning on August 8, 2013.
Under the acquisition method of accounting, the initial purchase price has been allocated to the acquired assets and assumed
liabilities based on estimated fair values. The allocation reflects the consolidation of net assets of the third party which owns the
license and related assets of KMTR in Eugene, OR, which we have consolidated, as the licensee is considered to be a VIE and we
are the primary beneficiary of the variable interests. Additionally, another third party that performs certain services pursuant to an
outsourcing agreement to our stations in Idaho Falls, ID (KIDK and KXPI), exercised an existing purchase option to purchase
52 Sinclair Broadcast Group
the broadcast assets of the two stations for $6.3 million, which closed in November 2013. The assets of these stations were
classified as assets held for sale in the initial purchase price allocation. The purchase price allocation is preliminary pending a final
determination of the fair values of the assets and liabilities. The allocated fair value of acquired assets and assumed liabilities is
summarized as follows (in thousands):
Cash
Accounts receivable
Prepaid expenses and other current assets
Program contract costs
Property and equipment
Broadcast licenses
Definite-lived intangible assets
Other assets
Assets held for sale
Accounts payable and accrued liabilities
Program contracts payable
Deferred tax liability
Other long-term liabilities
Fair value of identifiable net assets acquired
Goodwill
Total
$
$
13,531
29,962
19,337
10,968
48,616
11,058
155,073
8,348
6,339
(20,384)
(10,977)
(51,024)
(22,127)
198,720
174,476
373,196
The preliminary allocation presented above is based upon management’s estimate of the fair values using valuation techniques
including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair
value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and
estimated discount rates. The amount allocated to definite-lived intangible assets represents the estimated fair values of network
affiliations of $100.6 million, the decaying advertiser base of $15.0 million, and other intangible assets of $39.5 million. These
intangible assets will be amortized over the estimated remaining useful lives of 15 years for network affiliations, 10 years for the
decaying advertiser base and a weighted average life of 15 years for the other intangible assets. Acquired property and equipment
will be depreciated on a straight-line basis over the respective estimated remaining useful lives. Goodwill is calculated as the
excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future
economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including
assembled workforce and noncontractual relationships, as well as expected future synergies. We expect that goodwill deductible
for tax purposes will be approximately $11.1 million. The initial purchase price allocation is based upon all information available
to us at the present time and is subject to change, and such changes could be material. Certain measurement period adjustments
have been made since the initial allocation in the third quarter of 2013, which were not material to our consolidated financial
statements.
The results of operations for the year ended December 31, 2013 includes the results of the Fisher stations since August 8, 2013.
Net broadcast revenues and operating income of the Fisher stations included in our consolidated statements of operations, were
$79.1 million and $19.1 million for the year ended December 31, 2013. Post-acquisition, we recognized $4.3 million of severance
expense related to certain Fisher executives and employees that have been or will be terminated who had existing agreements in
place prior to close.
Barrington
Effective November 22, 2013, we completed the acquisition of the broadcast assets of Barrington Broadcasting Company, LLC
for $370.0 million, less working capital of $2.4 million, and entered into agreements to operate or provide sales and administrative
services to another five stations. The purchase price includes $7.5 million paid by third parties for the license related assets of
certain stations. The acquired assets relate to the following twenty four stations located in fifteen markets along with the
respective network affiliation or program service arrangements: WEYI (NBC) and WBSF (CW) in Flint/Saginaw/Bay
City/Midland, MI; WNWO (NBC) in Toledo, OH; WACH (FOX) in Columbia, SC; WSTM (NBC), WTVH (CBS) and WSTQ
(CW) in Syracuse, NY; KGBT (CBS) in Harlingen/Weslaco/Brownsville/McAllen, TX; KXRM (FOX) and KXTU (CW) in
Colorado Springs, CO; WPDE
in
Peoria/Bloomington, IL; WPBN/WTOM (NBC), and WGTU/WGTQ (ABC) in Traverse City/Cadillac, MI; KVII (ABC) and
KVIH (ABC) in Amarillo, TX; KRCG (CBS) in Columbia/Jefferson City, MO; WFXL (FOX) in Albany, GA; KHQA (CBS) in
Quincy, IL/Hannibal, MO/Keokuk, IA; WLUC (NBC) in Marquette, MI; and KTVO (ABC) in Ottumwa, IA/Kirksville, MO.
in Myrtle Beach/Florence, SC; WHOI
(ABC) and WWMB
(ABC)
(CW)
Concurrent with the Barrington acquisition, due to FCC conflict ownership rules, we sold our station, WSYT (FOX), and
assigned its LMA with WNYS-TV (MNT), in Syracuse, NY to a third party for $15 million less, and recognized a loss on sale of
approximately $3.3 million. We also sold our station, WYZZ (FOX) in Peoria, IL, which currently receives non-programming
related sales, operational and administrative services from Nexstar Broadcasting pursuant to certain outsourcing agreements, to
Cunningham for $22.0 million. Although we have no continuing involvement in the operations of this station, because
2013 Annual Report 53
Cunningham is a consolidated VIE and we have a purchase plan option to acquire these assets from Cunningham, the assets of
WYZZ were not derecognized and the transaction was accounted for a transaction between parties under common control. Thus
no gain or loss has been recognized in the consolidated statement of operations for sale of WYZZ.
The results of the acquired operations are included in the financial statements of the Company beginning on November 22,
2013. Under the acquisition method of accounting, the initial purchase price has been allocated to the acquired assets and
assumed liabilities based on estimated fair values. The allocation reflects the consolidation of net assets of the third party
licensees which own the license and related assets of WEYI and WBSF in Flint, MI, WWMB in Myrtle Beach, SC and
WGTU/WGTQ in Traverse City, MI, which we have consolidated, as the licensees are considered to be VIEs and we are the
primary beneficiary of the variable interests. The purchase price allocation is preliminary pending a final determination of the fair
values of the assets and liabilities. The allocated fair value of acquired assets and assumed liabilities is summarized as follows (in
thousands):
Prepaid expenses and other current assets
Program contract costs
Property and equipment
Broadcast licenses
Definite-lived intangible assets
Accounts payable and accrued liabilities
Program contracts payable
Other long-term liabilities
Fair value of identifiable net assets acquired
Goodwill
Total
$
$
681
3,813
67,519
719
220,535
(2,725)
(3,813)
(65)
286,664
81,022
367,686
The preliminary allocation presented above is based upon management’s estimate of the fair values using valuation techniques
including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair
value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and
estimated discount rates. The amount allocated to definite-lived intangible assets represents the estimated fair values of network
affiliations of $99.3 million, the decaying advertiser base of $43.8 million, and other intangible assets of $77.4 million. These
intangible assets will be amortized over the estimated remaining useful lives of 15 years for network affiliations, 10 years for the
decaying advertiser base and a weighted average life of 14 years for the other intangible assets. Acquired property and equipment
will be depreciated on a straight-line basis over the respective estimated remaining useful lives. Goodwill is calculated as the
excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future
economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including
assembled workforce and noncontractual relationships, as well as expected future synergies. We expect that goodwill will be
deductible for tax purposes. The initial purchase price allocation is based upon all information available to us at the present time
and is subject to change, and such changes could be material.
The results of operations for the year ended December 31, 2013 includes the results of the Barrington stations since
November 22, 2013. Net broadcast revenues and operating income of the Barrington stations included in our consolidated
statements of operations, were $16.9 million and $4.1 million for the year ended December 31, 2013.
Pro Forma Information
The following table sets forth unaudited pro forma results of operations, assuming that the above acquisitions, along with
transactions necessary to finance the acquisitions, occurred at the beginning of the year preceding the year of acquisition. The pro
forma results exclude acquisitions presented under Other Acquisitions below, as they were deemed not material both individually
and in the aggregate. The 2011 period does not include the pro forma effects of the 2013 acquisitions, and as such will not
provide comparability to the 2012 and 2013 pro forma periods presented in the following table (in thousands, except per share
data):
Total revenues
Net Income
Net Income attributable to Sinclair Broadcast Group
Basic and diluted earnings per share attributable to Sinclair Broadcast Group
2013
1,580,883
56,657
54,308
0.58
$
$
$
$
$
$
$
$
(Unaudited)
2012
1,513,975
153,807
153,370
1.89
$
$
$
$
2011(a)
1,028,168
77,899
77,370
0.96
(a) The unaudited pro forma information above has been revised from what was filed in the Company's Form 10-K filed March 3,
2014 due to an immaterial typographical error whereby the 2012 amounts from the 2012 Form 10-K were inadvertently reflected in
the 2011 column.
54 Sinclair Broadcast Group
This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase
price and other acquisition accounting adjustments, and is not indicative of what our results would have been had we operated the
businesses since the beginning of the annual period presented because the pro forma results do not reflect expected synergies.
The pro forma adjustments reflect depreciation expense, amortization of intangibles and amortization of program contract costs
related to the fair value adjustments of the assets acquired, additional interest expense related to the financing of the transactions,
exclusion of nonrecurring financing and transaction related costs, alignment of accounting policies and the related tax effects of
the adjustments. Depreciation and amortization expense are higher than amounts recorded in the historical financial statements
of the acquirees due to the fair value adjustments recorded for long-lived tangibles and intangible assets in purchase accounting.
The pro forma revenues exclude the revenues of WLAJ-TV and WLWC-TV which are classified as discontinued operations in the
consolidated statements of operations.
In connection with these acquisitions, for the years ended December 31, 2013, 2012, and 2011, we incurred a total of $2.8
million, $1.2 million, and $0.6 million, respectively, of costs primarily related to legal and other professional services,, which we
expensed as incurred and classified as corporate general and administrative expenses in the consolidated statements of operations.
These costs were not included in the pro forma amounts above as they are nonrecurring in nature.
Other Acquisitions
We acquired five other television stations during the year ended December 31, 2012 in three markets. The initial purchase price
allocated includes $45.1 million paid for certain broadcast assets of these stations, less working capital adjustments of $0.7 million,
and $4.4 million of non-controlling interests related to, and amounts paid by certain VIEs for the license assets of certain of these
stations owned by VIEs that we consolidate. In addition to the Fisher and Barrington acquisitions, we acquired nineteen television
stations during the year ended December 31, 2013 in ten markets, of which five station in four of the ten markets were acquired
from Cox Media Group in May 2013. Additionally, ten of the nineteen stations were acquired in four markets from TTBG LLC
(TTBG) during September 2013 and October 2013. The initial purchase price allocated includes $272.7 million paid for certain
broadcast assets of these stations, working capital of $9.5 million, and $0.7 million paid by certain VIEs for the license assets of
certain of these stations owned by VIEs that we consolidate. We allocated the total purchase price of these within the respective
years, as follows (in thousands):
Accounts receivable
Prepaid expenses and other current assets
Program contract costs
Property and equipment
Deferred tax asset
Broadcast licenses
Definite-lived intangible assets
Accrued liabilities
Program contracts payable
Other long term liabilities
Fair value of identifiable net assets acquired
Goodwill
Total
2013
2012
$
$
8,226
5,217
6,182
54,148
3,888
3,736
147,191
(3,926 )
(6,331 )
(10,300 )
208,031
74,847
282,878
$
$
—
160
1,638
16,545
—
2,679
22,546
(1,178 )
(4,252 )
—
38,138
10,661
48,799
The definite-lived intangible assets in the table above, will be amortized over the remaining useful lives of 15 years for network
affiliations, 10 years for decaying advertiser base, and a weighted average of 14 years for the other intangible assets. In conjunction
with these acquisitions, for the years ended December 31, 2013 and 2012, we incurred transaction costs of approximately $0.6
million and $0.7 million respectively, which are reported in general and administrative expenses in the accompanying consolidated
statements of operations for the years ended December 31, 2013 and 2012, respectively. Net broadcast revenues for the year
ended December 31, 2013 related to stations acquired in 2013 were $52.4 million. Net broadcast revenues for the years ended
December 31, 2013 and 2012 related to the stations acquired in 2012 were $21.5 million and $5 million, respectively.
In December 2012, we acquired the license assets of WTTA-TV in Tampa/St. Petersburg, Florida from Bay Television, Inc.
(Bay TV). Prior to December 1, 2012, we performed sales, programming and other management services to the station pursuant
to an LMA which was terminated upon closing. As discussed in Note 11. Related Person Transactions, our controlling shareholders
own a controlling interest in Bay TV. As this was considered a transaction between entities under common control, the
acquisition method of accounting was not applied, and the assets acquired were recorded at their historical cost basis and the
difference between the purchase price and the historical cost basis of the assets of $23.6 million, net of taxes of $15.6 million, was
recorded as a reduction in additional paid-in capital. A substantial portion of the purchase price will be deductible for tax
purposes in future periods.
2013 Annual Report 55
3. 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, 2013, 8,682,809 shares (including forfeited shares) were available for
future grants. We have not issued any options subsequent to accelerating the vesting in 2005.
The following is a summary of changes in outstanding stock options:
Outstanding at December 31, 2012
2013 Activity:
Granted
Exercised
Cancelled
Outstanding at December 31, 2013
Options
Weighted-Average
Exercise Price
129,500
$
—
(100,000 )
(17,000 )
12,500
11.73
—
11.86
11.71
10.75
Exercisable
129,500
—
—
—
12,500
Weighted-Average
Exercise Price
$
11.73
—
—
—
10.75
RSAs. RSAs are granted to employees pursuant to the LTIP. RSAs issued in 2013, 2012 and 2011 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. Unvested RSAs are entitled to dividends. The fair value assumes the value of the stock on the grant date.
The following is a summary of changes in unvested restricted stock:
Unvested shares at December 31, 2012
2013 Activity:
Granted
Vested
Forfeited
Unvested shares at December 31, 2013
RSAs
Weighted-Average
Price
158,500
$
314,000
(102,500 )
—
370,000
11.79
14.19
11.84
—
13.81
For the years ended December 31, 2013, 2012 and 2011, we recorded compensation expense of $2.7 million, $1.2 million and
$1.0 million, respectively. The majority of the unrecognized compensation expense of $2.5 million, as of December 31, 2013, will
be recognized in 2014.
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.
56 Sinclair Broadcast Group
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, 2013,
2012 and 2011:
Risk-free interest rate
Expected life
Expected volatility
Weighted average volatility
Annual dividend yield
Weighted average dividend yield
2013
0.1%
3 months
37%-60%
44%
1.8%-4.7%
4.2%
2012
0.1%
3 months
38%-53%
44%
4.3%-6.7%
5.2%
2011
0.4%
3 months
38%-67%
51%
3.8%-6.6%
5.4%
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 with short-term
maturities that approximate the expected life of the options of three months. The expected volatility is based on our historical
stock prices over the previous three month 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, 2013, 2012 and 2011
was $0.3 million, $0.2 million and $0.1 million, respectively. Less than 0.1 million shares were issued to employees during the year
ended December 31, 2013.
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, 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 1 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, 2013, 2012 and 2011, we recorded
$3.1 million, $1.6 million and $1.3 million, respectively, of compensation expense related to the Match.
SARs. On February 5, 2013, 500,000 SARs were granted to David Smith, our President and Chief Executive Officer, pursuant
to the LTIP. The base value of each SAR is $14.21 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 $3.2 million. On March 9, 2012, 400,000 SARs were granted to David Smith,
our President and Chief Executive Officer, pursuant to the LTIP. The base value of each SAR is $11.68 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 $2.0 million. On
March 22, 2011, 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 $12.07 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 $2.2 million. The SARs have a 10-year term and vest immediately. We valued the SARs
using the Black-Scholes model and the following assumptions:
Risk-free interest rate
Expected life
Expected volatility
Annual dividend yield
The following is a summary of the changes in SARS:
2013
0.9%
5 years
73%
4.3%
2012
0.9%
5 years
73%
5.2%
2011
3.6%
10 years
68%
2.3%
Outstanding at December 31, 2012
2013 Activity:
Granted
Exercised
Outstanding SARs at December 31, 2013
SARs
900,000
Weighted-
Average Price
$ 12.72
500,000
—
1,400,000
14.21
—
$ 13.25
2013 Annual Report 57
For the years ended December 31, 2013, 2012 and 2011, we recorded compensation expense, at the grant date, of $3.2 million,
$2.0 million and $2.2 million, respectively, related to these grants. In 2011, David Smith exercised 650,000 of his then outstanding
SARs for 237,947 shares. During 2013, 2012 and 2011, outstanding SARs increased the weighted average shares outstanding for
purposes of determining dilutive earnings per share. As of December 31, 2013, 1,400,000 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/or
appraisals. These stock awards vest immediately. For the years ended December 31, 2013, 2012 and 2011, we recorded
compensation expense of $0.3 million, $0.7 and $2.9 million, respectively, related to these awards. 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 2013,
each non-employee director received 6,250 shares and in 2012 and 2011, each non-employee director received 5,000 shares,
respectively. On June 6, 2013, we granted 31,250 shares that had a fair value of $24.30 per share. On June 14, 2012 and June 3,
2011, we granted 25,000 shares that had a fair value of $8.12 per share, 25,000 shares that had a fair value of $9.39 per share,
respectively. The fair value assumes the closing value of the stock on the date of grant. We recorded expense of $0.8 million,
$0.2 million and $0.2 million for each of the years ended December 31, 2013, 2012 and 2011. 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.
4. PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is generally 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
Acquired property and equipment as discussed in Note 2. Acquisitions, is depreciated on a straight-line basis over the respective
estimated remaining useful lives.
Property and equipment consisted of the following as of December 31, 2013 and 2012 (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
2013
2012
$
$
37,517
67,037
168,441
572,851
50,210
19,453
23,443
81,602
17,078
1,037,632
(441,561 )
596,071
$
$
33,932
56,419
135,162
425,823
41,134
18,362
20,634
79,126
18,274
828,866
(389,153)
439,713
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, $3.5 million and $3.8 million for the years ended December 31, 2013, 2012 and 2011, respectively.
58 Sinclair Broadcast Group
5. GOODWILL, BROADCAST LICENSES AND OTHER INTANGIBLE ASSETS:
Goodwill, which arises from the purchase price exceeding the assigned value of the net assets of an acquired business,
represents the value attributable to unidentifiable intangible elements being acquired. Goodwill totaled $1,380.1 million and
$1,074.0 million at December 31, 2013 and 2012, respectively. The change in the carrying amount of goodwill related to
continuing operations was as follows (in thousands):
Broadcast
Other
Operating
Divisions
Consolidated
Balance at December 31, 2011
Goodwill
Accumulated impairment losses
$
Acquisition of television stations (a)
Reclassification of goodwill to assets held for sale (b)
Balance at December 31, 2012 (c)
Goodwill (a)
Accumulated impairment losses
Acquisition of television stations (a)
Sale of broadcast assets (d)
Measurement period adjustments related to 2012 acquisitions
(e)
Balance at December 31, 2013 (c)
Goodwill
Accumulated impairment losses
$
1,070,202
(413,573 )
656,629
425,822
(11,907 )
1,484,117
(413,573 )
1,070,544
330,309
(14,724 )
(9,535 )
1,790,167
(413,573 )
1,376,594
$
$
3,488
—
3,488
—
—
3,488
—
3,488
—
—
—
3,488
—
3,488
$
$
1,073,690
(413,573)
660,117
425,822
(11,907)
1,487,605
(413,573)
1,074,032
330,309
(14,724)
(9,535)
1,793,655
(413,573)
1,380,082
(a) In 2013 and 2012, we acquired goodwill as a result of acquisitions as discussed in Note 2. Acquisitions.
(b) In 2012, we reclassified goodwill to assets held for sale as a result of the pending sales of WLAJ-TV in Lansing,
Michigan, and WLWC-TV in Providence, Rhode Island as discussed in Discontinued Operations under Note 1. Nature of
Operations and Summary of Significant Accounting Policies
(c) Approximately $6.4 million of goodwill relates to consolidated VIEs as of December 31, 2013 and 2012.
(d) Amounts relate to the sale of WSYT (FOX) (including certain assets of WNYS (MNT), which we performed service
to under an LMA) in Syracuse, NY, in connection with the acquisition of stations from Barrington, as discussed in
Note 2. Acquisitions.
(e) Amounts relate to immaterial measurement period adjustments related to 2012 acquisitions.
As of December 31, 2013 and 2012, the carrying amount of our broadcast licenses related to continuing operations was as
follows (in thousands):
Beginning balance
Acquisition of television stations (a)
Sale of broadcast assets (e)
Measurement period adjustments related to 2012 acquisitions (d)
Reclassification of broadcast license to assets held for sale (b)
Ending balance (c)
2013
2012
$
$
85,122
15,514
(25 )
418
—
101,029
$
$
47,002
38,924
—
—
(804 )
85,122
(a) In 2013, we acquired broadcast licenses as a result of acquisitions as discussed in Note 2. Acquisitions.
(b) In 2012, we reclassified the broadcast license of WLAJ-TV in Lansing, Michigan and WLWC-TV in Providence,
Rhode Island to assets held for sale as discussed in Discontinued Operations under Note 1. Nature of Operations and
Summary of Significant Accounting Policies.
2013 Annual Report 59
(c) Approximately $16.8 million and $14.9 million of broadcast licenses relate to consolidated VIEs as of December 31,
2013 and 2012, respectively.
(d) Amounts relate to immaterial measurement period adjustments related to 2012 acquisitions, as discussed in Note 2.
Acquisitions
(e) Amounts relate to the sale of WSYT (FOX) (including certain assets of WNYS (MNT), which we performed service
to under an LMA) in Syracuse, NY, in connection with the acquisition of stations from Barrington, as discussed in
Note 2. Acquisitions.
We did not have any indicators of impairment in any interim period in 2013 or 2012 and therefore did not perform interim
impairment tests for goodwill or broadcast licenses during those periods. We performed our annual impairment tests for goodwill
and indefinite-lived intangibles in the fourth quarter of 2013 and 2012 and we did not recognize any impairment as a result of our
qualitative and/or quantitative assessments. In 2013, we concluded based on our qualitative assessment that it was more likely
than not that the fair values of the reporting units would sufficiently exceed their carrying values and it was unnecessary to
perform the quantitative two-step method. Based on the results of our annual qualitative assessment for goodwill impairment
performed in 2012, we concluded that we would need to perform a quantitative “Step 1” test for three of our markets which had
aggregate goodwill of $79.5 million as of October 1, 2012, the date of our annual impairment test. These markets had a decrease
in operating results for the past few years and therefore, we estimated the fair value of these reporting units based on a market
approach and income approach. For all three markets, the fair value of the reporting unit exceeded the respective carrying value
by more than 10%. For all our other reporting units, we concluded based on the qualitative assessment that it was more likely
than not that the fair values of these reporting units would sufficiently exceed their carrying values and it was not necessary to
perform the quantitative two-step method.
We did not have any indicators of impairment in the first, second or third quarters of 2011 and therefore did not perform
interim impairment tests for goodwill during those periods. In the first quarter 2011, we recorded an impairment charge of $0.4
million for our broadcast licenses due to anticipated increase in costs for one of our stations as a result of converting to full
power. We performed our annual impairment tests in the fourth quarter of 2011, and did not recognize any impairment as a
result of the assessments. Based on the annual qualitative assessment for goodwill impairment performed in 2011, we concluded
that it was more likely than not that the fair values of all reporting units would sufficiently exceed their carrying value and thus it
was not necessary to perform the quantitative two-step method.
The qualitative factors for our reporting units reviewed during our annual assessments, with the exception of the three markets
in which we performed a quantitative assessment in 2012, indicated stable or improving margins and favorable or stable
forecasted economic conditions including stable discount rates and comparable or improving business multiples. Additionally, the
results of prior quantitative assessments supported significant excess fair value over carrying value of our reporting units.
The carrying value, fair value and impairment loss of the broadcast licenses which were impaired during 2011 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
Unobservabl
e
Inputs
(Level 3)
Total
Impairment
Losses
$
1,265 $
—
$
—
$
1,265
$
398
Description
Year Ended December 31, 2011
Broadcast licenses (a)
(a) The fair value above represents the fair value of the broadcast licenses that were impaired in 2011 and written down to
fair value. It excludes carrying values of $45.7 million related to broadcast licenses as of December 31, 2011, which were
not impaired and had fair values in excess of carrying value.
The key assumptions used to determine the fair value of our broadcast licenses consist of discount rates, estimated market
revenues, normalized market share, normalized profit margin, and estimated start-up costs. The qualitative factors for our
broadcast licenses indicated an increase in market revenues, stable market shares and stable cost factors. The revenue, expense
and growth rates used in determining the fair value of our broadcast licenses remained constant or increased slightly from 2012 to
2013. The growth rates are based on market studies, industry knowledge and historical performance. The discount rates used to
determine the fair value of our broadcast licenses did not change significantly over the last three years. The discount rate is based
60 Sinclair Broadcast Group
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 following table shows the gross carrying amount and accumulated amortization of definite-lived intangibles related to
continuing operations (in thousands):
Amortized intangible assets:
Network affiliation (a)
Decaying advertiser base (b)
Other (c)
Total
Amortized intangible assets:
Network affiliation
Decaying advertiser base
Other (d)
Total
As of December 31, 2013
Gross Carrying Amount
Accumulated
Amortization
Net
$
$
869,535
260,454
389,769
1,519,758
$
$
(195,037 ) $
(135,978 )
(60,988 )
(392,003 ) $
674,498
124,476
328,781
1,127,755
As of December 31, 2012
Gross Carrying Amount
Accumulated
Amortization
Net
$
$
580,929
178,094
195,103
954,126
$
$
(160,166 ) $
(121,919 )
(48,635 )
(330,720 ) $
420,763
56,175
146,468
623,406
(a) The increase in network affiliation assets includes amounts from acquisitions of $279.0 million and $343.0 million in
2013 and 2012, respectively. See Note 2. Acquisitions for more information.
(b) The increase in decaying advertiser base includes amounts from acquisitions of $84.3 million and $56.9 million in
2013 and 2012, respectively.
(c) The increase in other intangible assets includes the amounts from acquisitions of $159.5 million and $79.4 million in
2013 and 2012, respectively. See Note 2. Acquisitions for more information.
Definite-lived intangible assets and other assets subject to amortization are being amortized on a straight-line basis over their
estimated useful lives which generally range from 5 to 25 years. The total weighted average useful life of all definite-lived
intangible assets and other assets subject to amortization acquired as a result of the acquisitions discussed in Note 2. Acquisitions is
14 years. The amortization expense of the definite-lived intangible assets for the years ended December 31, 2013, 2012 and 2011
was $70.8 million, $38.1 million and $18.2 million, respectively. 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
were no impairment charges recorded for the years ended December 31, 2013, 2012 and 2011.
The following table shows the estimated amortization expense of the definite-lived intangible assets for the next five years (in
thousands):
For the year ended December 31, 2014
For the year ended December 31, 2015
For the year ended December 31, 2016
For the year ended December 31, 2017
For the year ended December 31, 2018
Thereafter
$
$
97,242
96,845
96,275
95,696
86,313
655,384
1,127,755
2013 Annual Report 61
6. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
Bank Credit Agreement
In January 2012, we drew $180.0 million of the incremental Term Loan B under our Bank Credit Agreement to fund the asset
acquisition of Four Points, which closed January 1, 2012. In addition, in April 2012, we drew $157.5 million of the incremental
Term Loan A and $192.5 million of the incremental Term Loan B under our Bank Credit Agreement to fund the asset acquisition
of Freedom, which closed April 1, 2012. As of December 31, 2012, we had $48.0 million drawn on our revolver.
On April 9, 2013, we entered into an amendment and restatement (the Amendment) of our credit agreement (as amended, the
Bank Credit Agreement). Pursuant to the Amendment, we refinanced the existing facility and replaced the existing term loans
under the facility with a new $500.0 million term loan A facility (Term Loan A), maturing April 2018 (which included a $445.0
million delayed draw of the Term Loan A that was drawn on in October 2013) and priced at LIBOR plus 2.25%; and a $400.0
million term loan B facility (Term Loan B), maturing April 2020 and priced at LIBOR plus 2.25% with a LIBOR floor of 0.75%.
In addition, we replaced our existing revolving line of credit with a new $100.0 million revolving line of credit maturing April
2018 and priced at LIBOR plus 2.25%. The proceeds from the term loans, along with cash on hand and/or a borrowings under
the revolving line of credit, were used to fund acquisitions.
In October 2013, we further amended certain terms of our Bank Credit Agreement. Pursuant to the agreement, we increased
the capacity of Term Loan A from $500 million to $700 million through a $200.0 million delayed draw tranche and increased the
capacity of Term Loan B from $400 million to $650 million. We drew $250.0 million of the incremental Term Loan B in October
2013 which was used to fund fourth quarter acquisitions, the redemption of the 9.25% Senior Secured Second Lien Notes and for
general corporate purposes. We also increased the capacity of our revolving line of credit from $100.0 million to $157.5 million
maturing in April 2018. We also amended certain terms of the Bank Credit Agreement. The final terms of the amendment are as
follows:
We increased our ratio of our First Lien Indebtedness from 3.50 times EBITDA to 3.75 times EBITDA for the period
January 1, 2015 through maturity of the agreement.
Other amended terms provided us with increased television station acquisition capacity, more flexibility under the other
restrictive covenants and prepayments of the existing term loans.
Interest expense related to the Bank Credit Agreement, including the revolver, on our consolidated statement of operations was
$27.3 million, $35.7 million and $19.6 million for the years ended December 31, 2013, 2012 and 2011, respectively. Included in
these amounts were debt refinancing costs of $2.4 million, $6.3 million and $6.1 million for the years ended December 31, 2013
and 2012, and 2011 respectively, in accordance with debt modification accounting guidance that applied to the amendments. In
connection with the amendments, we capitalized $14.9 million and $2.3 million as deferred financing costs, which are included in
other assets in our consolidated financial statements during the years ended December 31, 2013 and 2012, respectively. The
weighted average effective interest rate of the Term Loan B for the years ended December 31, 2013 and 2012 was 3.29% and
4.40%, respectively. The weighted average effective interest rate of the Term Loan A for the years ended December 31, 2013 and
2012 was 2.51% and 2.53%, respectively.
Our Bank Credit Agreement contains certain cross-default provisions with certain material third-party licensees, defined as any
party that owns the license assets of one or more television stations for which we provided services to pursuant to LMAs and/or
other outsourcing agreements and those stations provide 10% or more of our aggregate broadcast cash flows. A default by a
material third-party licensee under our agreements with such parties, including a default caused by insolvency, would cause an
event of default under our Bank Credit Agreement. As of December 31, 2013, there were no material third party licensees as
defined in our Bank Credit Agreement.
Our Bank Credit Agreement and indentures governing our outstanding notes contain a number of covenants that, among other
things, restrict our ability and our subsidiaries’ ability to incur additional indebtedness, pay dividends, incur liens, engage in
mergers or consolidations, make acquisitions, investments or disposals and engage in activities with affiliates. In addition, under
the Bank Credit Agreement, we are required to satisfy specified financial ratios. As of December 31, 2013, we were in compliance
with all financial ratios and covenants.
Substantially all of our stock in our wholly-owned subsidiaries has been pledged as security for the Bank Credit Agreement.
6.375% Senior Notes, due 2021
On October 11, 2013, we issued $350.0 million in senior unsecured notes, which bear interest at a rate of 6.375% per annum
and mature on November 1, 2021 (the 6.375% Notes), pursuant to an indenture dated October 11, 2013 (the 6.375% Indenture).
62 Sinclair Broadcast Group
The 6.375% Notes were priced at 100% of their par value and interest is payable semi-annually on May 1 and November 1,
commencing on May 1, 2014. Prior to November 1, 2016, we may redeem the 6.375% 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 Notes plus accrued and unpaid interest, if any, to the
date of redemption, plus a “make-whole” premium as set forth in the 6.375% Indenture. In addition, on or prior to November 1,
2016, we may redeem up to 35% of the 6.375% Notes using the proceeds of certain equity offerings. If we sell certain of our
assets or experience specific kinds of changes of control, holder of the 6.375% Notes may require us to repurchase some or all of
the Notes. Upon the sale of certain of our assets or certain changes of control, the holders of the 6.375% Notes may require us
to repurchase some or all of the notes. The proceeds from the offering of the 6.375% Notes were used to partially fund the
redemption of the 9.25% Senior Secured Second Lien Notes, Due 2017 (the 9.25% Notes), as discussed further below.
Concurrent with entering into an indenture for the 6.375% Notes in October 2013, we also entered into a registration rights
agreement requiring us to complete an offer of an exchange of the 6.375% Notes for registered securities with the Securities and
Exchange Commission (the SEC) by July 8, 2014. We filed a registration statement on Form S-4 with the SEC on December 6,
2013, which became effective on December 19, 2013. An exchange offer was launched on December 19, 2013 to exchange the
unregistered 6.375% Notes with the holders for 6.375% Notes registered under the Securities Act of 1933. The exchange offer
was completed on January 24, 2014 with 99.7% of the $350.0 million 6.375% Senior Unsecured Notes due 2021 tendered in the
exchange offer.
Interest expense was $4.9 million for the year ended December 31, 2013. The weighted average effective interest rate for the
6.375% Notes was 6.375% for the year ended December 31, 2013.
5.375% Senior Unsecured Notes, due 2021
On April 2, 2013, we issued $600.0 million of senior unsecured notes, which bear interest at a rate of 5.375% per annum and
mature on April 1, 2021 (the 5.375% Notes), pursuant to an indenture dated April 2, 2013 (the 5.375% Indenture). The 5.375%
Notes were priced at 100% of their par value and interest is payable semi-annually on April 1 and October 1, commencing on
October 1, 2013. Prior to April 1, 2016, we may redeem the 5.375% 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 5.375% Notes plus accrued and unpaid interest, if any, to the redemption
date, plus a “make-whole” premium as set forth in the 5.375% Indenture. Beginning on April 1, 2016, we may redeem some or
all of the 5.375% Notes at any time or from time to time at a redemption price set forth in the 5.375% Indenture. In addition, on
or prior to April 1, 2016, we may redeem up to 35% of the 5.375% Notes using proceeds of certain equity offerings. Upon the
sale of certain of our assets or certain changes of control, the holders of the 5.375% Notes may require us to repurchase some or
all of the notes. The net proceeds from the offering of the 5.375% Notes were used to pay down outstanding indebtedness under
our bank credit facility. Concurrent with entering into an indenture for the 5.375% Notes in April 2013, we also entered into a
registration rights agreement requiring us to complete an offer of an exchange of the 5.375% Notes for registered securities with
the Securities and Exchange Commission (the SEC) by December 28, 2013. We filed a registration statement on Form S-4 with
the SEC on April 4, 2013, which became effective on April 16, 2013. An exchange offer was launched on May 23, 2013 to
exchange the unregistered 5.375% Notes with the holders for 5.375% Notes registered under the Securities Act of 1933. The
exchange offer was completed on June 28, 2013 with 100% of the $600.0 million 5.375% Senior Unsecured Notes due 2021
tendered in the exchange offer.
Interest expense was $24.1 million for the year ended December 31, 2013. The weighted average effective interest rate for the
5.375% Notes was 5.375% for the year ended December 31, 2013.
6.125% Senior Unsecured Notes, due 2022
On October 12, 2012, we issued $500.0 million of senior unsecured notes, which bear interest at a rate of 6.125% per annum
and mature on October 1, 2022 (the 6.125% Notes), pursuant to an indenture dated October 12, 2012 (the 2012 Indenture). The
6.125% Notes were priced at 100% of their par value and interest is payable semi-annually on April 1 and October 1,
commencing on April 1, 2013. Prior to October 1, 2017, we may redeem the 6.125% 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 6.125% Notes plus accrued and unpaid interest, if any,
to the redemption date, plus a “make-whole” premium as set forth in the 2012 Indenture. Beginning on October 1, 2017, we may
redeem some or all of the 6.125% Notes at any time or from time to time at a redemption price set forth in the 2012 Indenture.
In addition, on or prior to October 1, 2015, we may redeem up to 35% of the 6.125% Notes using proceeds of certain equity
offerings. Upon the sale of certain of our assets or certain changes of control, the holders of the 6.125% Notes may require us to
repurchase some or all of the notes. The net proceeds from the offering of the 6.125% Notes were used to pay down outstanding
indebtedness under the revolving credit facility under our Bank Credit Agreement and fund certain acquisitions as described
under Note 2. Acquisitions, and for general corporate purposes. Concurrent with entering into the 2012 Indenture, we also entered
into a registration rights agreement requiring us to complete an offer of an exchange of the 6.125% Notes for registered securities
with the Securities and Exchange Commission (the SEC) by July 8, 2013. We filed a registration statement on Form S-4 with the
SEC on April 4, 2013 which became effective on April 16, 2013. An exchange offer was launched on May 23, 2013 to exchange
the unregistered 6.125% Notes with the holders for 6.125% Notes registered under the Securities Act of 1933. The exchange
2013 Annual Report 63
offer was completed on June 28, 2013 with 100.0% of the $500.0 million 6.125% Senior Unsecured Notes due 2022 tendered in
the exchange offer
Interest expense was $30.5 million for the year ended December 31, 2013. The weighted average effective interest rate for the
6.125% Notes was 6.125% for the year ended December 31, 2013.
8.375% Senior Unsecured Notes, due 2018
On October 4, 2010, we issued $250.0 million aggregate principal amount of senior unsecured notes, which bear interest at a
rate of 8.375% per annum and mature on October 15, 2018 (the 8.375% Notes), pursuant to an indenture dated as of October 4,
2010 (the 2010 Indenture). The 8.375% were issued at 98.567% of their par value and interest is payable semi-annually on April
15 and October 15 of each year, commencing on 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 2010 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 2010
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. Upon the sale of certain of our assets or certain changes of
control, the holders of the 8.375% Notes may require us to repurchase some or all of the 8.375% Notes. Concurrent to entering
into the 2010 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.
In 2011, we repurchased, in the open market, $12.5 million principal amount of the 8.375% Notes. We recognized a loss on
these extinguishments of $0.3 million. As of December 31, 2012, the principal amount of the outstanding 8.375% Notes was
$237.5 million.
Interest expense was $20.3 million, $20.2 million and $21.0 million for the years ended December 31, 2013, 2012 and 2011,
respectively. The weighted average effective interest rate of the 8.375% Notes, including amortization of its bond discount, was
8.65% for the years ended December 31, 2013 and 2012, respectively.
9.25% Senior Secured Second Lien Notes, Due 2017
Effective October 12, 2013, we redeemed all of the outstanding 9.25% Senior Secured Second Lien Notes, representing $500.0
million in aggregate principal amount. Upon the redemption, along with the principal, we paid the accrued and unpaid interest
and a make whole premium of $25.4 million, for a total of $546.1 million paid to noteholders. We recorded a loss on
extinguishment of $43.1 million in the fourth quarter of 2013 related to this redemption, which included the write-off of the
unamortized deferred financing costs of $9.5 million and debt discount of $8.2 million.
Interest expense was $37.3 million, $47.7 million and $47.6 for the years ended December 31, 2013, 2012 and 2011,
respectively. The weighted average effective interest rate for the 9.25% Notes, including the amortization of its bond discount,
was 9.74% for the year ended December 31, 2012.
4.875% Convertible Senior Notes, due 2018 and 3.0% Convertible Senior Notes, Due 2027
In September 2013, 100% of the outstanding 4.875% Convertible Senior Notes, due in 2018 (the 4.875% Notes), representing
aggregate principal of $5.7 million, were converted into 388,632 shares of Class A Common Stock, as permitted under the
indenture, resulting in an increase in additional paid-in capital of $8.6 million, net of $2.4 million of taxes.
In October 2013, 100% of the outstanding 3.0% Convertible Senior Notes, due in 2027 (the 3.0% Notes), representing
aggregate principal of $5.4 million, were converted and settled fully in cash of $10.5 million, as permitted under the indenture. As
the original terms of the indenture included a cash conversion feature, the effective settlement of the liability and equity
components were accounted for separately. The redemption of the liability component to result in a $1.0 million gain on
extinguishment, and the redemption of the equity component was recorded as a $5.1 million reduction in additional paid-in
capital, net of $0.9 million of taxes.
Other Operating Divisions Debt
Other operating divisions debt includes the debt of our consolidated subsidiaries with non-broadcast related operations. This
debt is non-recourse to us. Interest was paid on this debt at rates typically ranging from LIBOR plus 2.5% to a fixed 6.50%
64 Sinclair Broadcast Group
during 2013. During 2013, 2012 and 2011, interest expense on this debt was $3.2 million, $3.1 million and $3.7 million,
respectively.
Debt of Variable Interest Entities
Our consolidated VIEs have $55.6 million in outstanding debt for which the proceeds were used to purchase the license assets
of certain stations. See Note 1. Nature of Operations and Summary of Significant Accounting Policies and Note 2. Acquisitions for more
information. The credit agreement and term loans of these VIEs bear interest of LIBOR plus 2.50%. We have jointly and
severally, unconditionally and irrevocably guaranteed the debt of the VIEs, as a primary obligor, including the payment of all
unpaid principal of and interest on the loans.
For the year ended December 31, 2013 and 2012, the interest expense relating to the debt of our VIEs which was jointly and
severally, unconditionally and irrevocably guaranteed was $1.2 million and $0.1 million, respectively. During the year ended
December 31, 2012 and 2011, one of our VIEs had debt outstanding that was non-recourse to us and that debt was repaid in full
on October 1, 2012. The interest expense for the year ended December 31, 2012 and 2011 related to that debt was $0.3 million
and $1.0 million, respectively.
Summary
Notes payable, capital leases and the Bank Credit Agreement consisted of the following as of December 31, 2013 and 2012 (in
thousands):
Bank Credit Agreement, Term Loan A
Bank Credit Agreement, Term Loan B
Revolving Credit Facility
9.25% Senior Secured Second Lien Notes, due 2017
8.375% Senior Unsecured Notes, due 2018
6.375% Senior Unsecured Notes, due 2021
5.375% Senior Unsecured Notes, due 2021
6.125% Senior Unsecured Notes, due 2022
4.875% Convertible Senior Notes, due 2018
3.0% Convertible Senior Notes, due 2027
Debt of variable interest entities
Debt of variable interest entities (non-recourse)
Other operating divisions debt (all non-recourse)
Capital leases
Total outstanding principal
Plus: Accretion on 4.875% Convertible Senior Notes, due 2018
Less: Discount on Bank Credit Agreement, Term Loan B
Less: Discount on 9.25% Senior Secured Second Lien Notes, due 2017
Less: Discount on 8.375% Senior Unsecured Notes, due 2018
Less: Current portion
Net carrying value of long-term debt
2013
2012
$
$
500,000
646,375
—
—
237,530
350,000
600,000
500,000
—
—
30,231
25,350
86,263
42,946
3,018,695
—
(3,642 )
—
(2,305 )
(46,346 )
2,966,402
$
$
263,875
587,656
48,000
500,000
237,530
—
—
500,000
5,685
5,400
19,950
—
65,663
43,364
2,277,123
332
(6,807 )
(9,483 )
(2,677 )
(47,622 )
2,210,866
Indebtedness under the notes payable, capital leases and the Bank Credit Agreement as of December 31, 2013 matures as
follows (in thousands):
Notes and Bank
Credit
Agreement
2014
2015
2016
2017
2018
2019 and thereafter
Total minimum payments
Less: Discount on Term Loan B
Less: Discount on 8.375% Senior Unsecured Notes, due 2018
Less: Amount representing future interest
$
$
41,449 $
106,849
93,986
90,113
565,076
2,078,299
2,975,772
(3,642 )
(2,305 )
—
Capital Leases
8,137
5,435
5,039
5,078
5,120
44,204
73,013
—
—
(30,090 )
42,923
2,969,825 $
Total
49,586
112,284
99,025
95,191
570,196
2,122,503
3,048,785
(3,642 )
(2,305 )
(30,090 )
3,012,748
$
$
2013 Annual Report 65
As of December 31, 2013, our broadcast segment had 28 capital leases with non-affiliates, including 25 tower leases, two
building leases and one software lease; our other operating divisions segment had five capital equipment leases and corporate has
one building lease. All of our tower leases will expire within the next 18 years and the building leases will expire within the next 3
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.
7. PROGRAM CONTRACTS:
Future payments required under program contracts as of December 31, 2013 were as follows (in thousands):
2014
2015
2016
2017
2018
Total
Less: Current portion
Long-term portion of program contracts payable
$
$
90,933
16,803
8,693
5,626
3,559
125,614
(90,933)
34,681
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 $22.6 million. In addition, we have entered into non-cancelable
commitments for future program rights aggregating to $163.8 million as of December 31, 2013.
8. 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 2013, 2,905,502 Class B Common Stock shares were converted into Class A Common Stock
shares. There were no Class B Common Stock shares converted into Class A Common Stock shares in 2012.
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 $200.0 million in unrestricted annual cash
payments including but not limited to dividends, of which $50.0 million may carry over to the next year. Under the indentures
governing the 8.375% Notes, 6.125% Notes, 5.375% Notes and 6.375% 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.
In April 2013, we commenced a public offering of 18.0 million shares of Class A common stock. The offering was priced at
$27.25 per share on May 1, 2013 and closed on May 7, 2013. The net proceeds of $472.9 million were used to fund 2013
acquisitions and for general corporate purposes.
During 2012, our Board of Directors declared a quarterly dividend of $0.12 per share in the months of February and May,
which were paid in March and June, and $0.15 per share in the months of August and November, which were paid in
September and December. A special cash dividend of $1.00 per share was also declared in November 2012, which was paid in
December, for total dividend payments of $1.54 per share for the year ended December 31, 2012. During 2013, our Board of
Directors declared a quarterly dividend of $0.15 per share in the months of February, April, August and November, which were
paid in March, June, September and December, respectively. Total dividend payments for the year ended December 31, 2013
were $0.60 per share. In February 2014, our Board of Directors declared a quarterly dividend of $0.15 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
66 Sinclair Broadcast Group
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.
9. INCOME TAXES:
The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2013, 2012 and 2011 (in
thousands):
Provision for income taxes - continuing operations
(Benefit) provision for income taxes - discontinued operations
Current:
Federal
State
Deferred:
Federal
State
2013
2012
2011
$
$
$
$
41,249
(10,806 )
30,443
16,229
(8,305 )
7,924
20,214
2,305
22,519
30,443
$
$
$
$
67,852
663
68,515
56,106
4,095
60,201
9,151
(837 )
8,314
68,515
$
$
$
$
44,785
477
45,262
678
1,055
1,733
41,361
2,168
43,529
45,262
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision from
continuing operations:
Federal statutory rate
Adjustments-
State income taxes, net of federal tax benefit
Non-deductible expenses
Domestic Production Activities Deduction
Effect of consolidated VIEs
Change in state tax laws and rates
Other
Effective income tax rate
2013
2012
2011
35.0%
8.3%
1.4%
(3.8)%
3.7%
(5.5)%
0.9%
40.0%
35.0%
(0.4%)
0.3%
(1.4%)
(3.4%)
0.2%
1.7%
32.0%
35.0%
1.9%
0.4%
—
(0.7%)
0.5%
(0.1%)
37.0%
For the year ended December 31, 2013 we recorded $3.4 million of income tax provision related to expenses of our
consolidated VIEs that are treated as pass-through entities for income tax purposes. Included in state income taxes above are
deferred income tax effects related to certain acquisitions and intercompany mergers. Additionally, during the year ended
December 31, 2013 we recorded $2.0 million of additional benefit related to domestic production activities deduction upon filing
the 2012 federal income tax return.
For the year ended December 31, 2012, the taxes on consolidated VIEs include a release of $7.7 million of valuation allowance
related to certain deferred tax assets of Cunningham, one of our consolidated VIEs, as the weight of all available evidence
supports realization of the deferred tax assets. This assessment was based primarily on the sufficiency of forecasted taxable
income necessary to utilize net operating loss carryforwards expiring in years 2022 — 2029. This VIE files separate income tax
returns. Any resulting tax liabilities are nonrecourse to us, and we are not entitled to any benefit resulting from the deferred tax
assets of the VIE.
2013 Annual Report 67
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, 2013 and 2012 were as follows (in thousands):
Current and Long-Term Deferred Tax Assets:
Net operating and capital 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 & equipment, net
Contingent interest obligations
Other
Total deferred tax liabilities
Net tax liabilities
2013
2012
$
$
$
$
5,027
63,051
27,652
3,451
35,677
134,858
(51,062 )
83,796
$
$
(20,395 ) $
(270,008 )
(52,514 )
(51,621 )
(2,037 )
(396,575 )
(312,779 ) $
5,738
66,990
29,170
5,871
33,803
141,572
(59,407 )
82,165
(13,090 )
(216,505 )
(25,359 )
(52,388 )
(10,213 )
(317,555 )
(235,390 )
Our remaining federal and state capital and net operating losses will expire during various years from 2014 to 2033, and some
of them are subject to annual limitations under the Internal Revenue Code Section 382 and similar state provisions.
As discussed in Note 1. Income taxes, we establish valuation allowances in accordance with the guidance related to accounting for
income taxes. As of December 31, 2013, a valuation allowance has been provided for deferred tax assets related to a substantial
portion of our available state net operating loss carryforwards 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, 2013, we decreased our valuation allowance by $8.3 million from $59.4 million. The
reduction in valuation allowance was primarily due to a law change in a state tax jurisdiction, effective for years beginning after
December 31, 2014, which we expect will significantly increase the forecasted future taxable income attributable to that state and
result in utilization of the state NOL carryforwards. During the year ended December 31, 2012, we decreased out valuation
allowance by $19.7 million, from $79.1 million. The reduction in valuation allowance was primarily due to the settlement of
several audits, which resulted in the utilization of certain state net operating loss carryforwards which were previously fully
reserved, as well as due to changes in estimates of apportionment for certain states. During the year ended December 31, 2011,
we increased our valuation allowance by $1.6 million, from $77.6 million. The change in valuation allowance was primarily due to
the creation of additional state net operating loss carryforwards.
As of December 31, 2013 and 2012, we had $16.9 million and $26.0 million of gross unrecognized tax benefits, respectively.
Of this total, for the years ended December 31, 2013 and 2012, $15.6 and $15.0 million from respective continuing operations
(net of federal effect on state tax issues) and $6.8 million for the year ended December 31, 2012 from discontinued operations
(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.
The following table summarizes the activity related to our accrued unrecognized tax benefits (in thousands):
Balance at January 1,
Reductions 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,
2013
2012
2011
$
$
$
25,965
(8,928 )
693
(847 )
—
16,883
$
$
26,088
(123)
—
—
—
25,965
$
26,125
(127 )
90
—
—
26,088
In addition, we recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. We
recognized $1.2 million, $1.5 million and $1.3 million of income tax expense for interest related to uncertain tax positions for the
years ended December 31, 2013, 2012 and 2011, respectively.
68 Sinclair Broadcast Group
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, these accruals are
adjusted as necessary. 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.
As previously discussed under Discontinued Operations within Note 1. Nature of Operations and Summary of Significant Accounting
Policies, during the year ended December 31, 2013, we reduced our liability for unrecognized tax benefits by $11.2 million related
to discontinued operations. During the third quarter of 2013, we concluded that it was more likely than not that our previously
unrecognized state tax position would be sustained upon review of the state tax authority, based on new information obtained
during the period, resulting in a reduction in the liability of $6.1 million. The remaining $5.1 million reduction in the second
quarter of 2013, was the result of application of limits under an available state administrative practice exception.
We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. All of our 2010 and subsequent
federal and state tax returns remain subject to examination by various tax authorities. Some of our pre-2010 federal and state tax
returns may also be subject to examination. We do not anticipate the resolution of these matters will result in a material change to
our consolidated financial statements. In addition, we believe it is reasonably possible that our liability for unrecognized tax
benefits related to continuing operations could be reduced by up to $8.3 million, in the next twelve months, as a result of
expected statute of limitations expirations, the application of limits under available state administrative practice exceptions, and
the resolution of examination issues and settlements with federal and certain state tax authorities.
In April, 2013, we entered into a settlement agreement with the Internal Revenue Service’s Appeals Office with respect to our
2006 and 2007 federal income tax returns. There was no material impact on our financial statements as a result of this settlement.
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 or our LMA partners’ 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
Springfield, Illinois; WBFF-TV, Baltimore, Maryland; KGAN-TV, Cedar Rapids, Iowa; WTTE-TV, Columbus, Ohio; WRGT-
TV, Dayton, Ohio; WVAH-TV, Charleston / Huntington, West Virginia; WCGV-TV, Milwaukee, Wisconsin; WTTO-TV,
Birmingham, AL; KXVO-TV, Omaha, NE (acquired on October 1, 2013); WNAB-TV, Nashville, TN; WPMI-TV, Mobile, AL;
WWHO-TV, Chillicothe, OH and WUTB-TV in Baltimore, MD. 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 40 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, 2013, 2012 and 2011 was approximately $10.3 million, $6.7 million and $3.9 million, respectively.
Future minimum payments under the leases are as follows (in thousands):
2014
2015
2016
2017
2018
2019 and thereafter
$
$
13,318
11,846
10,924
10,188
9,012
30,959
86,247
As of December 31, 2013, we had outstanding letters of credit totaling $3.1 million.
2013 Annual Report 69
Network Affiliation Agreements
On May 14, 2012, the Company and the licensees of stations to which we provide services, representing 20 affiliates of Fox
Broadcast Company (FOX), extended the network affiliation agreements with FOX from the existing term of December 31, 2012
to December 31, 2017. Concurrently, we entered into an assignable option agreement with Fox Television Stations, Inc. (FTS)
giving us or our assignee the right to purchase substantially all the assets of the WUTB station (Baltimore, MD) owned by FTS,
which has a program service arrangement with MyNetworkTV, for $2.7 million. In October 2012, we exercised our option and
purchased the assets of WUTB effective June 1, 2013. As part of this transaction, we also granted options to FTS to purchase the
assets of televisions stations we own in up to three out of four designated markets, which options expired unexercised. In the
second quarter of 2012, we paid $25.0 million to FOX pursuant to the agreements and we recorded $50.0 million in other assets
and $25.0 million of other accrued liabilities within the consolidated balance sheet, representing the additional obligation due to
FOX which was paid in the second quarter of 2013. The $50.0 million asset is being amortized through the current term of the
affiliation agreement ending on December 31, 2017. Approximately $8.9 million and $5.6 million of amortization expense has
been recorded in the consolidated statement of operations during the years ended December 31, 2013 and 2012. In addition, we
are required to pay to FOX programming payments under the terms of the affiliation agreements. These payments are recorded
in station production expenses as incurred.
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. In some cases, we own the non-license assets used by the stations we operate under 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 of a favorable return on our original investments.
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 penalties 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. On July 7, 2011, the Third Circuit
upheld the FCC’s local television ownership rules. On December 5, 2011, we joined with a number of other parties on a Petition
70 Sinclair Broadcast Group
for a Writ of Certiorari filed with the Supreme Court requesting that the Court overrule the decision of the Third Circuit. That
request remains pending before the Supreme Court.
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.
Pending Acquisitions
In July 2013, we entered into a definitive agreement to purchase the stock of Perpetual Corporation and the equity interest of
Charleston Television, LLC, both owned and controlled by the Allbritton family (Allbritton), for an aggregate purchase price of
$985.0 million. The Allbritton stations consist of seven ABC Network affiliates and NewsChannel 8, a 24-hour cable/satellite
news network covering the Washington D.C. metropolitan area. The transaction is expected to close late in the second quarter of
2014, subject to approval of the FCC, antitrust clearance, and other customary closing conditions. We expect to fund the
purchase price at closing through additional borrowings under our bank credit facility. Additionally, to comply with FCC local
television ownership rules, we expect to sell the license and certain related assets of existing stations in Birmingham, AL - WABM
(MNT) and WTTO (CW), Harrisburg/Lancaster/Lebanon/York, PA - WHP (CBS), and Charleston, SC - WMMP (MNT) and to
provide sales and other non-programming support services to each of these stations pursuant to customary shared services and
joint sales agreements.
In September 2013, we entered into a definitive agreement to purchase the broadcast assets of eight television stations owned
by New Age Media located in three markets, for an aggregate purchase price of $90.0 million. The transaction is expected to close
in the second quarters of 2014, subject to approval of the FCC and other customary closing conditions. We expect to fund the
purchase price through cash on hand or a delayed draw under our bank credit agreement. Additionally, Wilkes/Barre/Scranton,
PA — WSWB, Tallahassee, FL — WTLH and WTLF and Gainesville, FL — WMBW will be purchased by a third party; we will
continue to provide sales and other non-programming support services to each of these stations, pursuant to customary share
services and joint sales agreements.
11. RELATED PERSON TRANSACTIONS:
Transactions with our controlling shareholders. David, Frederick, J. 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.
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 $5.2 million, $4.7 million and $4.4 million for the years ended
December 31, 2013, 2012 and 2011, respectively.
Bay TV. In January 1999, we entered into an LMA with Bay TV, which owns the television station WTTA-TV in the Tampa /
St. Petersburg, Florida market. Each of our controlling shareholders owns a substantial portion of the equity of Bay TV and
collectively they have a controlling interest. On December 1, 2012, we purchased substantially all of the assets of Bay TV for
$40.0 million. Our board of directors obtained a fairness opinion on the purchase price from a third party valuation firm.
Concurrent with the acquisition, our LMA with Bay TV was terminated. Payments made to Bay TV were $2.9 million and $2.2
million for the years ended December 31, 2012 and 2011, respectively. The LMA with Bay TV has been approved pursuant to
the current related person transaction policy.
2013 Annual Report 71
Charter Aircraft. From time to time, we charter aircraft owned by certain controlling shareholders. We incurred expenses of
$0.9 million, $0.6 million and $0.2 million during the years ended December 31, 2013, 2012 and 2011, respectively.
Capital leases payable related to the aforementioned relationships consisted of the following as of December 31, 2013 and 2012
(in thousands):
Capital lease for building, interest at 8.54%
Capital leases for building and tower, interest at 7.93%
Capital leases for building, interest at 8.11%
Capital leases for broadcasting tower facilities, interest at 9.0%
Capital leases for broadcasting tower facilities, interest at 10.5%
Less: Current portion
2013
2012
$
$
6,267
1,106
8,141
860
4,918
21,292
(2,367)
18,925
$
$
7,405
1,221
—
1,275
4,990
14,891
(1,704 )
13,187
Capital leases payable related to the aforementioned relationships as of December 31, 2013 mature as follows (in thousands):
2014
2015
2016
2017
2018
2019 and thereafter
Total minimum payments due
Less: Amount representing interest
$
$
4,388
4,402
4,138
4,102
1,880
13,045
31,955
(10,631 )
21,324
Cunningham Broadcasting Corporation. As of December 31, 2013, 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; WTTE-TV Columbus, Ohio; WDBB-TV Birmingham, Alabama; WBSF-
TV Flint, Michigan; and WGTU-TV/WGTQ-TV Traverse City/Cadillac, Michigan (collectively, the Cunningham Stations) and
WYZZ Peoria/Bloomington, IL.
During the first quarter of 2013, the estate of Carolyn C. Smith, a parent of our controlling shareholders, distributed all of the
non-voting stock owned by the estate to our controlling shareholders, and a portion was repurchased by Cunningham for $1.7
million in the aggregate. As of December 31, 2013, our controlling shareholders own approximately 4.4% of the total capital
stock of Cunningham, none of which have voting rights. The remaining amount of non-voting stock is owned by trusts
established for the benefit of the children of our controlling shareholders. The estate of Mrs. Smith currently owns all of the
voting stock. The sale of the voting stock by the estate to an unrelated party is pending approval of the FCC. We have options
from the trusts, which grant us the right to acquire, subject to applicable FCC rules and regulations, 100% of the voting and
nonvoting stock of Cunningham. We also have options from each of Cunningham’s subsidiaries, which are the FCC licensees of
the Cunningham stations, which grant us the right to acquire, and grant Cunningham the right to require us to acquire, subject to
applicable FCC rules and regulations, 100% of the capital stock or the assets of Cunningham’s individual subsidiaries.
In addition to the option agreements, certain of our stations provide programming, sales and managerial services pursuant to
LMAs to seven of their stations: WNUV-TV, WRGT-TV, WVAH-TV, WTAT-TV, WMYA-TV, WTTE-TV, and WDBB-TV
(collectively, the Cunningham LMA Stations). Each of these LMAs has a current term that expires on July 1, 2016 and there are
three additional 5-year renewal terms remaining with final expiration on July 1, 2031.
Effective November 5, 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 the Cunningham LMA Stations.
Pursuant to the terms of the LMAs, options and other agreements, beginning on January 1, 2010 and ending on July 1, 2012,
we were 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 were used to pay down Cunningham’s bank credit facility
and which amounts were credited toward the purchase price for each Cunningham station. An additional $1.2 million was paid
on July 1, 2012 and another installment of $2.75 million was paid on October 1, 2012 as an additional LMA fee and was used to
pay off the remaining balance of Cunningham’s bank credit facility. The aggregate purchase price of the television stations, which
was originally $78.5 million pursuant to certain acquisition or merger agreements subject to 6% annual increases, was decreased by
72 Sinclair Broadcast Group
each payment made by us to Cunningham, through 2012, 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 are 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, of which a portion of this fee will be credited toward the purchase price to the extent of the annual 6% increase.
The remaining purchase price as of December 31, 2013 was approximately $57.1 million. Additionally, we reimburse
Cunningham for 100% of its operating costs, and paid Cunningham a monthly payment of $50,000 through December 2012 as an
LMA fee.
We made payments to Cunningham under these LMAs and other agreements with the Cunningham LMA Stations of $9.8
million, $15.7 million and $16.6 million for the years ended December 31, 2013, 2012 and 2011, respectively. For the year ended
December 31, 2013, 2012 and 2011, Cunningham LMA Stations provided us with approximately $107.6 million, $105.5 million
and $90.3 million, respectively, of total revenue. The financial statements for Cunningham are included in our consolidated
financial statements for all periods presented.
In November 2013, concurrent with our acquisition of the Barrington stations, Cunningham acquired the license related assets
of WBSF-TV and WGTU-TV/WGTQ-TV, which was funded by bank debt, for which we have provided a guarantee. We
provide certain non-programming related sales, operational and administrative services to these stations pursuant to certain
outsourcing agreements. The agreements for WBSF-TV and WGTU-TV/WGTQ-TV expire in November 2021 and
August 2015, respectively, and each have renewal provisions for successive eight year periods. Under these arrangements, we
earned $0.6 million from the services we perform for these stations. As we consolidate the licensees as VIEs, the amounts we
earn under the arrangements are eliminated in consolidation and the gross revenues of the stations are reported within our
consolidated statement of operations. For the December 31, 2013, our consolidated revenues include $0.7 million related to these
stations.
Also, concurrent with the Barrington acquisition, we also sold our station, WYZZ (FOX) in Peoria, IL, which currently receives
non-programming related sales, operational and administrative services from Nexstar Broadcasting pursuant to certain
outsourcing agreements, to Cunningham for $22 million. Although we have no continuing involvement in the operations of this
station, because Cunningham is a consolidated VIE and we have a purchase plan option to acquire these assets from
Cunningham, the assets of WYZZ were not derecognized and the transaction was accounted for a transaction between parties
under common control and thus no gain or loss has been recognized in the consolidated statement of operations
During October 2013, we purchased the outstanding membership interests of KDBC-TV from Cunningham for $21.2 million,
plus a working capital adjustment of $0.2 million. See Other Acquisitions within Note 2. Acquisitions, for further information.
Atlantic Automotive Corporation. We sold advertising time to and purchased vehicles and related vehicle services from Atlantic
Automotive Corporation (Atlantic Automotive), a holding company that 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 $0.2 million, $0.1 million and $0.2 million
during the years ended December 31, 2013, 2012 and 2011, respectively. We paid $1.1 million, $1.8 million and $1.1 million for
vehicles and related vehicle services from Atlantic Automotive during the years ended December 31, 2013, 2012 and 2011,
respectively. Additionally, in August 2011, Atlantic Automotive entered into an office lease agreement with Towson City Center,
LLC (Towson City Center), a subsidiary of one of our real estate ventures. Atlantic Automotive paid $1.0 million in rent during
the year ended December 31, 2013.
Leased property by real estate ventures. Certain of our real estate ventures have entered into leases with entities owned by David
Smith to lease restaurant space. There are leases for three restaurants in a building owned by one of our consolidated real estate
ventures in Baltimore, MD. Total rent received under these leases was $0.5 million, $0.3 million and $0.1 million for the years
ended December 31, 2013, 2012 and 2011. There is also one lease for a restaurant in a building owned by one of our real estate
ventures, accounted for under the equity method, in Towson, MD. This investment received $0.2 million in rent pursuant to the
lease for the year ended December 31, 2013.
Thomas & Libowitz, P.A. 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, is the son of a former member of the Board of Directors, Basil A.
Thomas. We paid fees of $1.6 million, $1.0 million and $0.5 million to Thomas & Libowitz during 2013, 2012 and 2011,
respectively.
2013 Annual Report 73
12. EARNINGS PER SHARE:
The following table reconciles income (numerator) and shares (denominator) used in our computations of earnings per share
for the years ended December 31, 2013, 2012 and 2011 (in thousands):
Income (Numerator)
Income from continuing operations
Income impact of assumed conversion of the 4.875% Notes, net of taxes
Net (income) attributable to noncontrolling interests included in continuing
operations
Numerator for diluted earnings per common share from continuing operations
available to common shareholders
Income (loss) from discontinued operations, net of taxes
Numerator for diluted earnings available to common shareholders
$
$
Shares (Denominator)
Weighted-average common shares outstanding
Dilutive effect of outstanding stock settled appreciation rights, restricted stock
awards and stock options
Dilutive effect of 4.875% Notes
Weighted-average common and common equivalent shares outstanding
2013
2012
2011
64,259
—
$
144,488
180
$
(2,349 )
(287 )
61,910
11,558
73,468
$
144,381
465
144,846
$
93,207
638
—
93,845
81,020
36
254
81,310
76,588
180
(379)
76,389
(411)
75,978
80,217
61
254
80,532
Potentially dilutive securities representing zero shares, 1.5 million and 1.1 million shares of common stock for the years ended
December 31, 2013, 2012 and 2011, 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 2013 compared to 2012 of potentially
dilutive securities is primarily related to the increase of stock price in 2013. The increase in 2012 compared to 2011 of potentially
dilutive securities is primarily related to the issuance of new stock settled appreciation rights in 2012. The net earnings 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). Excluding discontinued operations, our broadcast
segment includes stations in 71 markets located throughout the continental United States. The operating results of WLAJ-TV and
WLWC-TV, which were sold effective March 1, 2013 and April 1, 2013, respectively, are classified as discontinued operations and
are not included in our consolidated results of continuing operations for the years ended 2013 and 2012. Our other operating
divisions primarily consist of sign design and fabrication; regional security alarm operating and bulk acquisitions; manufacturing
and service of broadcast antennas and transmitters and real estate ventures. 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. Other Operating Divisions and Corporate are not reportable segments but are included for reconciliation
purposes. We had approximately $171.9 million and $171.2 million of intercompany loans between the broadcast segment, other
operating divisions and corporate as of December 31, 2013 and 2012, respectively. We had $20.0 million in intercompany interest
expense related to intercompany loans between the broadcast segment, other operating divisions and corporate for the both years
ended December 31, 2013, and 2012, and $19.7 million in interest expense in 2011. All other intercompany transactions are
immaterial.
74 Sinclair Broadcast Group
Financial information for our operating segments is included in the following tables for the years ended December 31, 2013,
2012 and 2011 (in thousands):
For the year ended December 31, 2013
Revenue
Depreciation of property and equipment
Amortization of definite-lived intangible assets and other
assets
Amortization of program contract costs and net realizable
value adjustments
General and administrative overhead expenses
Operating income (loss)
Interest expense
Income from equity and cost method investments
Goodwill
Assets
Capital expenditures
Broadcast
Other
Operating
Divisions
Corporate
Consolidated
$
1,306,187
67,320
$
56,944
1,891
$
—
1,343
$
1,363,131
70,554
65,786
80,925
47,272
329,312
—
—
1,376,594
3,493,603
37,665
5,034
—
1,350
555
3,251
621
3,488
294,921
4,994
—
70,820
—
4,504
(5,847 )
159,686
—
—
376,726
2,700
80,925
53,126
324,020
162,937
621
1,380,082
4,165,250
45,359
For the year ended December 31, 2012
Revenue
Depreciation of property and equipment
Amortization of definite-lived intangible assets and other
assets
Amortization of program contract costs and net realizable
value adjustments
General and administrative overhead expenses
Operating income (loss)
Interest expense
Income from equity and cost method investments
Goodwill
Assets
Capital expenditures
Broadcast
Other
Operating
Divisions
Corporate
Consolidated
$
1,007,498
44,054
$
54,181
1,496
$
—
1,523
$
1,061,679
47,073
33,701
60,990
28,854
333,164
—
—
1,070,544
2,436,537
35,161
4,398
—
1,697
491
3,282
9,670
3,488
284,583
2,341
—
38,099
—
2,840
(4,377 )
125,271
—
—
8,577
6,484
60,990
33,391
329,278
128,553
9,670
1,074,032
2,729,697
43,986
For the year ended December 31, 2011
Revenue
Depreciation of property and equipment
Amortization of definite-lived intangible assets and other
Broadcast
$
720,775
29,929
$
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
Income from equity and cost method investments
14,643
52,079
398
24,760
230,679
—
—
Other
Operating
Divisions
Corporate
Consolidated
44,513
1,323
$
—
1,622
$
765,288
32,874
3,586
—
—
1,158
(1,041 )
2,528
3,269
—
18,229
—
—
2,392
(4,018 )
103,600
—
52,079
398
28,310
225,620
106,128
3,269
2013 Annual Report 75
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 programming
commitments as of December 31, 2013 and 2012 were as follows (in thousands):
Level 2:
9.25% Senior Second Lien Notes due 2017
8.375% Senior Notes due 2018
6.375% Senior Unsecured Notes due 2021
6.125% Senior Unsecured Notes due 2022
5.375% Senior Unsecured Notes due 2021
Term Loan A
Term Loan B
Debt of variable interest entities
Debt of other operating divisions
2013
2012
Carrying Value
Fair Value
Carrying Value
Fair Value
$
$
—
235,225
350,000
500,000
600,000
500,000
642,734
55,581
86,263
$
—
259,547
360,938
497,525
582,078
495,000
641,205
55,581
86,263
$
490,517
234,853
—
500,000
—
263,875
580,850
19,950
65,666
552,500
265,886
—
533,125
—
262,556
589,125
19,950
65,666
Not included in the table above are the fair values and carrying values for our 4.875% Notes and 3.0% Notes as of 2012, which
we believe their fair values approximate their carrying values based on discounted cash flows using Level 3 inputs described
above. The 4.875% Notes and 3.0% Notes were redeemed in full during 2013.
Additionally, Cunningham, one of our consolidated VIEs has certain investments in securities that are recorded at fair value
using Level 1 inputs described above. As of December 31, 2013 and 2012, $18.1 million and $6.4 million were included in other
assets in our consolidated balance sheets.
76 Sinclair Broadcast Group
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), is the primary obligor under the Bank Credit Agreement, the 5.375% Notes, 6.125% Notes, 8.375% Notes,
and 6.375% Notes (issued October 2013). Our Class A Common Stock and Class B Common Stock as of December 31, 2013,
were obligations or securities of SBG and not obligations or securities of STG. SBG is a guarantor under the Bank Credit
Agreement, the 5.375% Notes, 6.125% Notes, 8.375% Notes, and 6.375% Notes. As of September 30, 2013, our consolidated
total debt of $2,475 million included $2,380.6 million of debt related to STG and its subsidiaries of which SBG guaranteed
$2,338.4 million.
SBG, KDSM, LLC, a wholly-owned subsidiary of SBG, and STG’s wholly-owned subsidiaries (guarantor subsidiaries), have
fully and unconditionally guaranteed, subject to certain customary automatic release provisions, 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.
2013 Annual Report 77
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2013
(In thousands)
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Broadcast
Group, Inc.
$
Cash
Accounts and other receivables
Other current assets
Total current assets
— $
59
5,500
5,559
237,974 $
818
25,887
264,679
28,594 $
281,822
67,279
377,695
13,536 $
27,479
16,391
57,406
Sinclair
Consolidated
280,104
309,156
108,611
697,871
— $
(1,022 )
(6,446 )
(7,468 )
Property and equipment, net
5,017
13,561
454,917
130,019
(7,443 )
596,071
Investment in consolidated
subsidiaries
Restricted cash — long term
Other long-term assets
Total other long-term assets
Goodwill and other intangible assets
Total assets
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
Other liabilities
Total liabilities
363,231
—
78,849
442,080
2,508,058
11,524
503,674
3,023,256
4,179
223
62,435
66,837
—
—
132,840
132,840
(2,875,468 )
—
(544,881 )
(3,420,349 )
—
11,747
232,917
244,664
—
452,656 $
—
3,301,496 $
2,486,794
3,386,243 $
214,325
534,590 $
(92,253 )
(3,527,513 ) $
2,608,866
4,147,472
234 $
556
51,781 $
37,335
126,245 $
1,007
17,914 $
7,448
— $
—
1,294
3,529
5,613
529
4,972
45,172
56,286
—
—
89,116
2,793,334
—
23,645
2,906,095
1,073
87,612
215,937
35,709
13,984
610,491
876,121
1,003
9,645
36,010
136,830
294,919
145,828
613,587
(1,003 )
(2,292 )
(3,295 )
—
(294,950 )
(412,076 )
(710,321 )
Total Sinclair Broadcast Group equity
(deficit)
Noncontrolling interests in
consolidated subsidiaries
Total liabilities and equity (deficit)
396,370
395,401
2,510,122
(88,331 )
(2,817,192 )
—
452,656 $
$
—
—
3,301,496 $
3,386,243 $
9,334
534,590 $
—
(3,527,513 ) $
78 Sinclair Broadcast Group
196,174
46,346
2,367
98,494
343,381
2,966,402
18,925
413,060
3,741,768
396,370
9,334
4,147,472
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2012
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Cash
Accounts and other receivables
Other current assets
Assets held for sale
Total current assets
$
— $
152
2,821
—
2,973
7,230 $
907
2,342
—
10,479
199 $
175,837
56,522
30,357
262,915
15,436 $
7,622
9,028
—
32,086
Sinclair
Consolidated
22,865
183,896
67,330
30,357
304,448
— $
(622 )
(3,383 )
—
(4,005 )
Property and equipment, net
6,315
8,938
321,873
113,454
(10,867 )
439,713
Investment in consolidated subsidiaries
Restricted cash — long term
Other long-term assets
Total other long-term assets
Goodwill and other intangible assets
Total assets
Accounts payable and accrued liabilities
Current portion of long-term debt
Current portion of affiliate long-term debt
Other current liabilities
Liabilities held for sale
Total current liabilities
$
$
—
—
84,055
84,055
1,636,504
2
375,687
2,012,193
1,956
223
60,114
62,293
—
—
112,757
112,757
(1,638,460 )
—
(429,862 )
(2,068,322 )
—
225
202,751
202,976
—
—
93,343 $ 2,031,610 $ 2,353,727 $
1,706,646
153,961
412,258 $
(78,047 )
1,782,560
(2,161,241 ) $ 2,729,697
326 $
483
1,102
—
—
1,911
61,165 $
31,113
—
—
—
92,278
83,049 $
800
602
96,288
2,397
183,136
9,379 $
15,226
433
8,871
—
33,909
(102 ) $
—
(433 )
(3,099 )
—
(3,634 )
153,817
47,622
1,704
102,060
2,397
307,600
Long-term debt
Affiliate long-term debt
Dividends in excess of investment in consolidated
subsidiaries
Other liabilities
Total liabilities
12,502
6,303
2,088,586
—
178,869
10,708
210,293
—
2,509
2,183,373
36,705
6,884
—
491,845
718,570
73,073
267,521
—
103,007
477,510
—
(267,521 )
2,210,866
13,187
(178,869 )
(309,972 )
(759,996 )
—
298,097
2,829,750
Total Sinclair Broadcast Group shareholders’
(deficit) equity
Noncontrolling interests in consolidated
subsidiaries
Total liabilities and equity (deficit)
$
(116,950 )
(151,763 )
1,635,157
(82,149 )
(1,401,245 )
(116,950 )
—
—
93,343 $ 2,031,610 $ 2,353,727 $
—
16,897
412,258 $
—
16,897
(2,161,241 ) $ 2,729,697
2013 Annual Report 79
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE
INCOME
FOR THE YEAR ENDED DECEMBER 31, 2013
(In thousands)
Net revenue
Sinclair
Broadcast
Group, Inc.
$ —
Sinclair
Television
Group, Inc.
$ —
Guarantor
Subsidiaries
and KDSM,
LLC
1,296,736
$
Non-
Guarantor
Subsidiaries Eliminations
$ 123,017
$
(56,622 ) $
Sinclair
Consolidated
1,363,131
Program and production
Selling, general and administrative
Depreciation, amortization and other operating
expenses
Total operating expenses
15
3,733
1,307
5,055
357
48,363
3,105
51,825
391,410
241,548
275,889
908,847
50,950
9,132
71,319
131,401
(57,628 )
82
(471 )
(58,017 )
385,104
302,858
351,149
1,039,111
Operating (loss) income
(5,055 )
(51,825 )
387,889
(8,384 )
1,395
324,020
Equity in earnings of consolidated subsidiaries
Interest expense
Other income (expense)
Total other (expense) income
97,138
(1,083 )
4,633
100,688
309,388
(152,174 )
(59,033 )
98,181
1,009
(4,965 )
245
(3,711 )
—
(25,624 )
5,361
(20,263 )
(407,535 )
20,909
(6,781 )
(393,407 )
—
(162,937 )
(55,575 )
(218,512 )
Income tax benefit
Income from discontinued operations, net of
taxes
Net income (loss)
Net loss attributable to the noncontrolling
interests
Net income (loss) attributable to Sinclair
Broadcast Group
Comprehensive income
(22,165 )
47,645
(73,266 )
2,637
3,900
(41,249 )
—
73,468
11,063
105,064
495
311,407
—
(26,010 )
—
(388,112 )
11,558
75,817
—
—
—
(2,349 )
—
(2,349 )
$ 73,468
$ 78,257
$ 105,064
$ 107,243
$
$
311,407
311,407
$ (28,359 )
$ (28,098 )
$ (388,112 ) $
$ (390,552 ) $
73,468
78,257
80 Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE
INCOME
FOR THE YEAR ENDED DECEMBER 31, 2012
(In thousands)
Net revenue
Program and production
Selling, general and administrative
Depreciation, amortization and other operating
expenses
Total operating expenses
Operating (loss) income
Equity in earnings (losses) of consolidated
subsidiaries
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 interests
Net (loss) income attributable to Sinclair Broadcast
Sinclair
Broadcast
Group, Inc.
—
$
Sinclair
Television
Group, Inc.
$
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
(11,376 ) $ 1,061,679
— $ 1,008,146
$ 64,909
$
Guarantor
Subsidiaries
and KDSM,
LLC
—
2,853
1,523
4,376
322
28,762
1,890
30,974
263,802
168,540
213,681
646,023
1,400
6,082
55,802
63,284
(9,968 )
(1,567 )
(728 )
(12,263 )
255,556
204,670
272,168
732,394
(4,376 )
(30,974 )
362,123
1,625
887
329,285
144,620
(1,317 )
5,245
148,548
494
—
144,666
—
194,686
(118,491 )
38,677
114,872
41,709
(269 )
125,338
—
(123 )
(4,840 )
(39,781 )
(44,744 )
(118,519 )
734
199,594
—
—
(24,780 )
8,690
(16,090 )
8,464
—
(6,001 )
(287 )
(339,183 )
20,875
(1,223 )
(319,531 )
—
—
(318,644 )
—
—
(128,553 )
11,608
(116,945 )
(67,852 )
465
144,953
(287 )
Group
Comprehensive income
$ 144,666
$ 144,808
$
$
125,338 $
125,193 $
199,594
199,594
$
$
(6,288 ) $
(6,288 ) $
(318,644 ) $
(318,499 ) $
144,666
144,808
2013 Annual Report 81
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE
INCOME
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands)
Net revenue
Sinclair
Broadcast
Group, Inc.
$ —
Sinclair
Television
Group, Inc.
$ —
Guarantor
Subsidiaries
and KDSM,
LLC
$ 721,936
Non-
Guarantor
Subsidiaries Eliminations
(8,943 )
$ 52,295
$
Sinclair
Consolidated
$ 765,288
Program and production
Selling, general and administrative
Depreciation, amortization and other operating
expenses
Total operating expenses
—
2,396
1,622
4,018
1,298
25,160
688
27,146
185,038
121,391
160,414
466,843
338
3,765
46,618
50,721
(8,062 )
(464 )
(552 )
(9,078 )
178,612
152,248
208,790
539,650
Operating (loss) income
(4,018 )
(27,146 )
255,093
1,574
135
225,638
Equity in earnings of consolidated subsidiaries
Interest expense
Gain on Sales of Securities
Other income (expense)
Total other income (expense)
Income tax (provision) benefit
Loss from discontinued operations, net of taxes
Net income (loss)
Net loss attributable to the noncontrolling
interests
Net income (loss) attributable to Sinclair
Broadcast Group
Comprehensive income
83,354
(3,285 )
—
1,781
81,850
(2,034 )
—
75,798
134,996
(94,556 )
—
35,255
75,695
29,783
(411 )
77,921
—
(4,931 )
—
(36,160 )
(41,091 )
(75,449 )
—
138,553
—
(23,978 )
391
1,560
(22,027 )
2,915
—
(17,538 )
(218,350 )
20,622
(391 )
(573 )
(198,692 )
—
—
(198,557 )
—
(106,128 )
—
1,863
(104,265 )
(44,785 )
(411 )
76,177
—
—
—
(379 )
—
(379 )
$ 75,798
$ 75,243
$ 77,921
$ 76,987
$ 138,553
$ 138,553
$ (17,917 )
$ (17,917 )
$
$
(198,557 )
(197,623 )
$ 75,798
$ 75,243
82 Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2013
(In thousands)
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES:
Acquisition of property and equipment
Payments for acquisitions of television stations
Proceeds from the sale of broadcast assets
Payments for acquisitions of assets of other
operating divisions
Purchase of alarm monitoring contracts
(Increase) decrease in restricted cash
Investments in equity and cost method investees
Distributions from equity and cost method
investees
Investment in marketable securities
Other, net
Net cash flows (used in) from 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
Proceeds from the sale of Class A Common Stock
Dividends paid on Class A and Class B common
stock
Payments for deferred financing costs
Noncontrolling interest distributions
(contributions)
Increase (decrease) in intercompany payables
Other, net
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
$ (37,107 )
$ (264,925 ) $
444,680 $
(40,414 ) $
58,343 $
160,577
—
—
—
—
—
—
1,655
—
—
(7 )
1,648
(2,700 )
—
—
—
—
(11,522 )
—
—
—
—
(14,222 )
(35,659 )
(998,664 )
71,738
—
—
—
—
—
—
50
(962,535 )
(5,029 )
(50,480 )
21,000
(4,650 )
(23,721 )
—
3,603
(10,767 )
(696 )
5,516
(65,224 )
—
2,189,753
—
88,540
(482 )
472,913
(1,473,898 )
—
(1,069 )
—
(34,311 )
—
(56,767 )
—
—
(371,331 )
(8,874 )
35,459
—
(27,724 )
—
(178,240 )
—
509,891
—
—
—
548,139
(820 )
546,250
—
—
(10,256 )
59,765
—
103,738
—
43,000
(43,000)
(43,388 )
(1,006,144 )
49,738
—
—
—
—
—
(10,908)
—
(10,908)
—
—
—
—
—
—
(58,333)
10,898
(47,435)
(4,650 )
(23,721 )
(11,522 )
5,258
(10,767 )
(11,604 )
5,559
(1,051,241 )
2,278,293
(1,509,760 )
472,913
(56,767 )
(27,724 )
(10,256 )
—
1,204
1,147,903
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning
of period
CASH AND CASH EQUIVALENTS, end of
period
$
—
—
—
230,744
28,395
(1,900 )
7,230
199
15,436
—
—
257,239
22,865
$
237,974 $
28,594 $
13,536 $
— $
280,104
2013 Annual Report 83
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2012
(In thousands)
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS FROM (USED IN) INVESTING
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
$
(4,038 ) $
(56,760 ) $
282,446 $
12,999 $
2,828 $
237,475
ACTIVITIES:
Acquisition of property and equipment
Payments for acquisitions of television stations
Purchase of alarm monitoring contracts
Decrease (increase) in restricted cash
Distributions from investments
Investments in equity and cost method investees
Investment in debt securities
Proceeds from sale of assets
Other, net
Net cash flows (used in) from investing
396
—
—
—
836
(2,000 )
—
—
(94 )
(4,057 )
(1,127,848 )
—
58,501
—
—
—
10,700
—
(37,635 )
—
—
—
—
—
10
42
(2,690 )
(18,200 )
(12,454 )
—
8,754
(22,052 )
(1,493 )
—
—
—
10,700
—
—
—
—
—
(10,700 )
—
(43,986 )
(1,135,348 )
(12,454 )
58,501
9,590
(24,052 )
(1,493 )
10
(52 )
activities
(862 )
(1,062,704 )
(37,583 )
(48,135 )
—
(1,149,284 )
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
Proceeds from share based awards
Dividends paid on Class A and Class B Common
Stock
Payments for deferred financing costs
Noncontrolling interest distributions
(contributions)
Repayments of notes and capital leases to
affiliates
Increase (decrease) in intercompany payables
Net cash flows from (used in) financing
activities
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning
of period
CASH AND CASH EQUIVALENTS, end of
—
1,201,275
—
45,980
(419 )
391
(154,989 )
—
(586 )
—
(23,362 )
—
(125,100 )
—
—
(17,660 )
—
—
—
—
—
(998 )
131,026
—
97,880
(1,884 )
(242,507 )
—
(1,047 )
(1,142 )
—
17,677
—
—
—
1,248
—
1,247,255
(179,356 )
391
(123,852 )
(18,707 )
—
(1,142 )
—
(4,076 )
(2,882 )
—
4,900
1,126,506
(244,977 )
38,106
(2,828 )
921,707
—
—
7,042
188
(114 )
2,970
313
12,466
—
—
9,898
12,967
period
$
— $
7,230 $
199 $
15,436 $
— $
22,865
84 Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands)
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
Increase in restricted cash
Distributions from investments
Investments in equity and cost method
investees
Investment in debt securities
Payments for acquisitions of assets of other
operating divisions
Proceeds from sale of assets
Proceeds from sale of securities
Proceeds from insurance settlement
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
Proceeds from share based awards
Purchase of subsidiary shares from
noncontrolling interests
Dividends paid on Class A and Class B
Common Stock
Payments for deferred financing costs
Proceeds from Class A Common Stock sold by
variable interest entity
Noncontrolling interest distributions
Repayments of notes and capital leases to
affiliates
Increase (decrease) in intercompany payables
Net cash flows from (used in) financing
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Sinclair
Consolidated
$
(10,424 ) $
(65,150 ) $
225,516 $
704 $
(2,133) $
148,513
—
—
—
—
(4,000 )
—
—
—
—
—
(194 )
199
(3,995 )
(3,503 )
—
(53,445 )
—
—
—
—
—
—
—
(212 )
—
(57,160 )
(30,950 )
—
—
—
—
—
—
59
—
1,739
—
—
(29,152 )
(1,382 )
(8,850 )
—
3,798
(7,577 )
(4,911 )
(3,072 )
10
1,808
—
—
43
(20,133 )
—
136,719
—
15,014
(57,120 )
1,794
(70,234 )
—
(432 )
—
—
—
(38,820 )
—
—
(5,417 )
—
—
—
—
—
—
—
—
—
(22,661 )
—
(2,501 )
—
(66 )
—
(610 )
(869 )
109,434
—
56,359
(2,341 )
(194,300 )
—
26,838
—
—
—
—
—
—
—
—
(1,808)
—
—
—
(1,808)
—
—
—
—
464
—
1,808
—
—
1,669
(35,835 )
(8,850 )
(53,445 )
3,798
(11,577 )
(4,911 )
(3,072 )
69
—
1,739
(406 )
242
(112,248 )
151,733
(150,447 )
1,794
(2,501 )
(38,356 )
(5,483 )
1,808
(610 )
(3,210 )
—
activities
14,419
117,427
(197,073 )
16,014
3,941
(45,272 )
NET DECREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning
of period
CASH AND CASH EQUIVALENTS, end of
—
—
(4,883 )
(709 )
(3,415 )
5,071
1,022
15,881
—
—
(9,007 )
21,974
period
$
—
$
188
$
313 $
12,466 $
— $
12,967
2013 Annual Report 85
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
(in thousands, except per share data)
For the Quarter Ended
Total revenues, net
Operating income
Income from continuing operations
Income 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
Operating income
Income from continuing operations
(Loss) income 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
03/31/13
06/30/13
09/30/13
12/31/13
282,618 $
63,656 $
16,515 $
355 $
16,997 $
314,154 $
84,280 $
12,956 $
5,103 $
17,826 $
338,644 $
72,798 $
30,551 $
6,100 $
36,342 $
427,715
103,286
4,237
—
2,303
0.20 $
0.14 $
0.30 $
0.21 $
0.19 $
0.37 $
0.20 $
0.14 $
0.30 $
0.21 $
0.19 $
0.36 $
0.02
0.02
0.02
0.02
03/31/12
06/30/12
09/30/12
12/31/12
222,375 $
59,895 $
29,126 $
(51 ) $
29,360 $
251,074 $
71,887 $
30,131 $
(1 ) $
30,058 $
258,713 $
78,399 $
26,479 $
(126 ) $
26,246 $
329,517
119,097
58,752
643
59,002
0.36 $
0.37 $
0.33 $
0.36 $
0.37 $
0.33 $
0.36 $
0.37 $
0.33 $
0.36 $
0.37 $
0.32 $
0.72
0.73
0.72
0.73
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
86 Sinclair Broadcast Group
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
To the Board of Directors and Shareholders of Sinclair Broadcast Group, Inc.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of equity
(deficit), of comprehensive 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, 2013 and December 31, 2012, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control
- Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for these financial statements, 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 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 audits 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 audit 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.
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.
The operations of the television stations acquired during 2013 from Cox Media Group LLC, Fisher Communications Inc,
Barrington Broadcasting LLC and TTBG LLC as well as the operations of WUTB-TV, KDBC-TV, KENV-TV, KRNV-TV and
WPFO-TV were excluded from Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A
and our audit of internal control over financial reporting represent 7% of total assets and 11% of total revenues, respectively, of
the related consolidated financial statement amounts as of and for the year ended December 31, 2013.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 3, 2014
2013 Annual Report 87
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TELEVISION STATION MANAGEMENT
Each of our stations or markets has a general manager and a group manager. The group managers are responsible for managing a number of
stations and in some cases are also the general managers for a station or market. Below is a list of our group managers and general managers as
well as the station or market for which they serve as the general manager.
GROUP MANAGERS
Ann H. Ellis
William J. Fanshawe
Alan B. Frank
Doug E. Gealy
Daniel J. Hoffman
GENERAL MANAGERS
Jonathan P. Lawhead
Daniel P. Mellon
David F. Schwartz
John T. Seabers
Darren J. Shapiro
Allison Aldridge – Columbia, South Carolina
Lisa Barhorst – Dayton, Ohio
Teresa Burgess – Bakersfield, California
Becky Butcher – Flint/Saginaw/Bay City, Michigan
Robert Butterfield – West Palm Beach/Fort Pierce, Florida
Glen Callanan – Cedar Rapids, Iowa
Amie Chapman – Reno, Nevada
Terry Cole – Mobile, Alabama-Pensacola, Florida
Chad Conklin – Flint/Saginaw/Bay City, Michigan
John Connors – Asheville, North Carolina-
Greenville/Spartanburg/Anderson, South Carolina
Harold Cooper – Charleston/Huntington, West Virginia
Ronna Corrente – Lexington, Kentucky
Mike Costa – Chattanooga, Tennessee
Kent Crawford – Salt Lake City/St. George, Utah
Steve Dant – Colorado Springs, Colorado
John Dittmeier – Tallahassee, Florida
James Doty – Johnstown/Altoona, Pennsylvania
Janene Drafs – Seattle/Tacoma, Washington
Larry Forsgren – Madison, Wisconsin
Rix Garey – Beaumont, Texas
Terry Gaughan – Milwaukee, Wisconsin
Chris Geiger – Syracuse, New York
Steven Genett – Richmond, Virginia
Arthur Hasson – Harrisburg/Lancaster/Lebanon/York, Pennsylvania
Kevin Hayes – El Paso, Texas
Brenda Holloway – Albany, Georgia
Billy Huggins – Myrtle Beach/Florence, South Carolina
John Hummel – Raleigh/Durham, North Carolina
Tom Humpage – Portland, Maine
Rob Jamros – Marquette, Michigan
Tom Keeler – Harlingen/Weslaco/Brownsville/McAllen, Texas
Carol Kellum – Ottumwa, Iowa-Kirksville, Missouri
Kingsley Kelley – Medford, Oregon
Jim Lapiana – Pittsburgh, Pennsylvania
Jay C. Lowe – Birmingham, Alabama
Jim Lutton – Grand Rapids/Kalamazoo, Michigan
Nick Magnini – Buffalo, New York
Dominic Mancuso – Nashville, Tennessee
Tim Mathis – Springfield/Champaign/Decatur, Illinois
Scott McBride – Springfield/Champaign/Decatur, Illinois
Jeff McCallister – Norfolk, Virginia
Jeff McCausland – Wichita/Hutchinson Plus, Kansas
Tim McCoy – Steubenville, Ohio-Wheeling, West Virginia
Jeff Miller – Omaha, Nebraska
Mary Margaret Nelms – Charleston, South Carolina
Vince Nelson – Albany, New York
Noreen Parker – Tampa/St. Petersburg, Florida
Jack Peck – Fresno/Visalia, California
Paula Peden – Minneapolis/St. Paul, Minnesota
David Praga – Spokane, Washington
Don Pratt – Boise, Idaho
Thom Pritz – Amarillo, Texas
Michael Pumo – West Palm Beach/Fort Pierce, Florida
Dean Radla – San Antonio, Texas
Greg Raschio – Eugene, Oregon
John Rossi – Oklahoma City, Oklahoma
Jill Saarela – Traverse City/Cadillac, Michigan
Chuck Samuels – Rochester, New York
Steve Scollard – Sioux City, Iowa
Mike Smythe – Cape Girardeau, Missouri-Paducah, Kentucky
Audra Swain – Las Vegas, Nevada
John Tamerlano – Portland, Oregon
Thomas Tipton – St. Louis, Missouri
Chris Topf – Toledo, Ohio
Bobby Totsch – Mobile, Alabama-Pensacola, Florida
Jon Van Ness – Columbia/Jefferson City, Missouri
Amy Villarreal – Austin, Texas
Mike Wilson – Des Moines, Iowa
Laura Wolfe – Quincy, Illinois-Hannibal, Missouri-Keokuk, Iowa
2013 Annual Report 89