TABLE OF CONTENTS
Television Marketing and Stations
Forward-Looking Statements
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
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)
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2
6
8
9
22
23
24
26
27
28
29
32
33
79
2015 Annual Report 1
Television Markets and Stations
As of December 31, 2015, we own and operate or provide programming and/or sales and other shared services to television
stations in the following 79 markets:
Market
Rank(a)
Number of
Channels
Market
Washington, DC
Seattle / Tacoma, WA
Minneapolis / St. Paul, MN
St. Louis, MO
Pittsburgh, PA
Portland, OR
Raleigh / Durham, NC
Baltimore, MD
Nashville, TN
Columbus, OH
San Antonio, TX
Salt Lake City, UT
Milwaukee, WI
Cincinnati, OH
Asheville, NC / Anderson, SC /
Greenville-Spartanburg, SC
West Palm Beach / Fort Pierce, FL
Austin, TX
Las Vegas, NV
Grand Rapids / Kalamazoo, MI
Norfolk, VA
Oklahoma City, OK
Harrisburg / Lancaster / Lebanon /
York, PA
Birmingham, AL
Greensboro / High Point /
Winston Salem, NC
Providence, RI / New Bedford, MA
Buffalo, NY
Fresno / Visalia, CA
Wilkes Barre / Scranton, PA
Richmond, VA
Little Rock / Pine Bluff, AR
Mobile, AL / Pensacola, FL
Albany, NY
Tulsa, OK
Lexington, KY
Dayton, OH
Wichita / Hutchinson, KS
2 Sinclair Broadcast Group
7
14
15
21
23
24
25
26
29
31
32
34
35
36
37
38
39
40
41
42
43
44
45
46
52
53
54
55
56
57
58
59
60
63
64
65
Stations(b)
WJLA
KOMO, KUNS
WUCW
KDNL
WPGH, WPNT
KATU, KUNP
WLFL, WRDC
WBFF, WNUV(d), WUTB(e)
WZTV, WUXP, WNAB(e)
WSYX, WTTE(d), WWHO(e)
KABB, KMYS(e), WOAI
KUTV, KMYU, KENV
WVTV, WCGV
WKRC, WSTR(e)
WLOS, WMYA(d)
Network
Affiliation(c)
ABC
ABC, Univision
CW
ABC
FOX, MNT
ABC, Univision
CW, MNT
FOX, CW, MNT
FOX, MNT, CW
ABC, FOX, CW
FOX, CW, NBC
MNT, CBS, NBC
CW, MNT
CBS, MNT, CW
ABC, MNT
WPEC, WTVX, WTCN-CA
CBS, CW, MNT
KEYE
KSNV, KVCW
WWMT
WTVZ
KOKH, KOCB
WHP
WXLV, WMYV
WJAR
WUTV, WNYO
KMPH, KFRE
CBS
NBC, CW, MNT
CBS, CW
MNT
FOX, CW
CBS, MNT
ABC, CW, MNT
ABC, MNT
NBC
FOX, MNT
FOX, CW
13
WBMA,WTTO, WDBB(d),
WABM
WOLF(d), WQMY(d),
FOX, MNT, CW
WSWB(e)
WRLH
KATV
WEAR, WPMI(e), WJTC(e),
WFGX
WRGB, WCWN
KTUL
WDKY
FOX, MNT
ABC
ABC, NBC, IND, MNT
CBS, CW
ABC
FOX
WKEF, WRGT(d)
ABC, FOX, MNT
17
KAAS, KSAS, KOCW, KMTW(d)
FOX, MNT
3
5
3
3
6
8
5
9
9
8
5
6
5
5
7
9
2
6
3
3
6
3
6
3
6
6
9
3
3
9
6
3
3
6
Market
Charleston / Huntington, WV
Green Bay / Appleton, WI
Roanoke / Lynchburg, VA
Flint / Saginaw / Bay City, MI
Des Moines / Ames, IA
Spokane, WA
Omaha, NE
Rochester, NY
Toledo, OH
Columbia, SC
Portland, ME
Madison, WI
Cape Girardeau, MO / Paducah, KY
Syracuse, NY
Champaign / Springfield / Decatur, IL
Harlingen / Weslaco / Brownsville /
McAllen, TX
Chattanooga, TN
Cedar Rapids, IA
Savannah, GA
El Paso, TX
Charleston, SC
Myrtle Beach / Florence, SC
Johnstown / Altoona, PA
Reno, NV
Boise, ID
Tallahassee, FL
Peoria / Bloomington, IL
Traverse City / Cadillac, MI
Eugene, OR
Macon, GA
Yakima / Pasco / Richland /
Kennewick, WA
Bakersfield, CA
Amarillo, TX
Columbia / Jefferson City, MO
Medford, OR
Beaumont, TX
Sioux City, IA
Albany, GA
Wheeling, WV / Steubenville, OH
Gainesville, FL
Market
Rank(a)
Number of
Channels
67
68
69
71
72
73
74
76
77
78
80
81
82
84
85
86
88
90
91
92
94
102
104
106
107
108
117
118
119
120
123
126
131
138
140
142
149
152
157
162
6
4
3
9
3
3
6
6
3
3
5
3
6
6
13
3
6
6
3
6
3
5
3
8
6
5
3
12
16
3
12
6
6
3
3
6
8
3
3
6
Stations(b)
WCHS, WVAH
WLUK, WCWF
WSET
Network
Affiliation(c)
ABC, FOX
FOX, CW
ABC
WEYI(e), WSMH, WBSF(e)
NBC, FOX, CW
KDSM
KLEW
KPTM, KXVO(d)
WHAM(e), WUHF
WNWO
WACH
WGME, WPFO(e)
WMSN
KBSI, WDKA(d)
WSTM, WTVH(e)
WICD, WICS, WRSP(e),
WCCU(e), WBUI(e)
FOX
CBS
FOX, CW, MNT
ABC, FOX, CW
NBC
FOX
CBS, FOX
FOX
FOX, MNT
NBC, CBS, CW
ABC, FOX, CW
KGBT
CBS
WTVC , WFLI
KGAN, KFXA(e)
WTGS
KDBC, KFOX
WCIV
WPDE, WWMB(d)
WJAC
ABC, CW, FOX, MNT
CBS, FOX
FOX
CBS, FOX, MNT
MNT, ABC
ABC, CW
NBC
KRNV(e), KRXI, KAME(d)
NBC, FOX, MNT
KBOI
WTWC, WTLF(e)
WHOI(f)
WPBN, WTOM, WGTU(e),
WGTQ(e)
KVAL, KCBY, KPIC(g),
KMTR(e), KMCB(e), KTCW(e)
WGXA
KEPR, KIMA, KVVK-CD,
KUNW-CD
KBAK
KVII, KVIH
KRCG
KTVL
KFDM, KBTV(e)
KMEG(e), KPTH
WFXL
WTOV
CBS, CW
NBC, CW, FOX
ABC, CW
NBC, ABC
CBS, NBC, CW
FOX, ABC
CBS, CW, Univision
CBS, FOX
ABC, CW
CBS
CBS, CW
CBS, FOX, CW
CBS, FOX, MNT
FOX
NBC, FOX
WGFL(d), WNBW(e)
CBS, NBC, MNT
2015 Annual Report 3
Market
Quincy, IL / Hannibal, MO / Keokuk, IA
Marquette, MI
Ottumwa, IA / Kirksville, MO
Market
Rank(a)
Number of
Channels
170
180
200
3
3
3
Total Television Channels
444
Stations(b)
KHQA
WLUC
KTVO
Network
Affiliation(c)
CBS, ABC
NBC, FOX
ABC, CBS
(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 2015.
(b) We have a total of 12 other low powered stations, in certain markets which expand our signal by simulcasting our content throughout the
market.
(c) We broadcast programming from the following providers on our channels:
Affiliation
ABC
CBS
NBC
FOX
MNT
CW
Univision
Number of
Channels
32
29
Number of
Markets
25
24
23
47
34
44
6
16
37
29
33
3
Expiration Dates (1)(2)
December 31, 2017 through December 31, 2020
April 29, 2017 through December 31, 2021
February 29, 2016 through December 31, 2017
February 12, 2016 through December 31, 2017
August 31, 2016
August 31, 2021
December 31, 2014
Total Major Network Affiliates
215
Affiliation
Antenna TV
Azteca
Bounce Network
COMET
Decades
Estrella TV
Get TV
Grit
Heartland
Independent programming
Me TV
MundoFox
Retro TV
Telemundo
This TV
News & Weather
Zuus Country
Number of
Channels
18
3
Number of
Markets
14
2
4
68
1
2
26
54
1
1
14
3
4
1
11
10
8
4
61
1
2
26
46
1
1
12
2
4
1
9
8
8
Expiration Dates (1)(2)
September 1, 2013 through January 1, 2019
August 31, 2016 through February 28, 2018
August 31, 2019
October 30, 2018 through January 14, 2019
May 31, 2018
June 1, 2015 through September 30, 2015
June 30, 2017
December 31, 2019
October 31, 2015
N/A
February 29, 2016 through March 1, 2019
September 30, 2015 through December 31, 2016
December 31, 2014 through January 7, 2017
December 31, 2016
November 1, 2014 through December 31, 2015
December 31, 2016
September 30, 2014
Total Other Affiliates
229
Total Television Channels
444
(1) 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. If the affiliation agreement expires, we may continue to operate under the
existing affiliation agreement on a temporary basis while we negotiate a new affiliation agreement.
4 Sinclair Broadcast Group
(2) ASN became a 24/7 sports network in January 2016 and is currently carried in 15 markets.
(d) The license assets for these stations are currently owned by third parties. We provide programming, sales, operational and administrative services
to these stations pursuant to certain service agreements, such as LMAs.
(e) The license and programming assets for these stations are currently owned by third parties. We provide certain non-programming related sales,
operational and administrative services to these stations pursuant to service agreements, such as joint sales and shared services agreements.
(f) The license and programming assets for this station is currently owned by us. A third party provides certain non-programming related sales,
operational and administrative services to this station pursuant to service agreements, such as joint sales and shared services agreements.
(g) We provide programming, sales, operational, and administrative services to this station, of which 50% is owned by a third party.
2015 Annual Report 5
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; and
•
cybersecurity.
Industry risks
•
•
•
•
the business conditions of our advertisers particularly in the automotive and service industries;
competition with other broadcast television stations, radio stations, multi-channel video programming distributors (MVPDs),
internet and broadband content providers and other print and media outlets serving in the same markets;
the performance of networks and syndicators that provide us with programming content, as well as the performance of
internally originated programming;
the availability and cost of programming from networks and syndicators, as well as the cost of internally originated
programming;
• our relationships with networks and their strategies to distribute their programming via means other than their local television
•
•
•
•
•
•
•
•
•
•
•
•
affiliates, such as over-the-top (OTT) content;
the effects of the Federal Communications Commission’s (FCC’s) National Broadband Plan and incentive auction and the
potential repacking of our broadcasting spectrum within a limited timeframe;
the potential for additional governmental regulation of broadcasting or changes in those regulations and court actions
interpreting those regulations, including ownership regulations limiting over-the-air television's ability to compete effectively
(including regulations relating to Joint Sales Agreements (JSA) and Shared Services Agreements (SSA), and the national
ownership cap), arbitrary enforcement of indecency regulations, retransmission consent 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 develop and adopt a viable mobile digital broadcast television (mobile DTV) strategy
and platform, such as the adoption of ATSC 3.0 broadcast standard, and the consumer’s appetite for mobile television;
the impact of programming payments charged by networks pursuant to their affiliation agreements with broadcasters requiring
compensation for network programming;
the effects of declining live/appointment viewership as reported through rating systems and local television efforts to adopt
and receive credit for same day viewing plus viewing on-demand thereafter;
changes in television rating measurement methodologies that could negatively impact audience results;
the ability of local MVPD's to coordinate and determine local advertising rates as a consortium;
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;
the operation of low power devices in the broadcast spectrum, which could interfere with our broadcast signals;
the impact of FCC and Congressional efforts to limit the ability of a television station to negotiate retransmission consent
agreements for the same-market stations it does not own and other FCC efforts which may restrict a television station's
retransmission consent negotiations;
• OTT technologies and their potential impact on cord-cutting; and
•
the impact of MVPD’s offering “skinny” programming bundles that may not include television broadcast stations.
6 Sinclair Broadcast Group
Risks specific to us
the effectiveness of our management;
•
• our ability to attract and maintain local, national, and network advertising and successfully participate in new sales channels
such as programmatic advertising through business partnership ventures and the development of technology;
• our ability to service our debt obligations and operate our business under restrictions contained in our financing agreements;
• our ability to successfully implement and monetize our own content management system (CMS) designed to provide our
viewers significantly improved content via the internet and other digital platforms;
• our ability to successfully renegotiate retransmission consent agreements;
• our ability to renew our FCC licenses;
• our limited 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 identify media business investment opportunities and to successfully integrate any acquired businesses, as well as
the success of our digital initiatives in a competitive environment, such as the investment in the re-launch of Circa;
• 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 strength of ratings for our local news broadcasts including our news sharing arrangements;
the successful execution of our program development and multi-channel broadcasting initiatives including American Sports
Network (ASN), COMET, and other original programming, and 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), 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.
2015 Annual Report 7
SELECTED FINANCIAL DATA
The selected consolidated financial data for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 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:
Media revenues (a)
Revenues realized from station barter arrangements
Other non-media revenues
$
Total revenues
Media production expenses
Media 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 non-media expenses
Corporate general and administrative expenses
Research and development
Loss (gain) on asset dispositions
Operating income
Interest expense and amortization of debt discount and
deferred financing costs
Loss from extinguishment of debt
Income from equity and cost method investees
Other income, net
Income from continuing operations before income taxes
Income tax provision
Income from continuing operations
Discontinued operations:
Income (loss) from discontinued operations, net of related
income taxes
Net income
Net income attributable to noncontrolling interests
Net income attributable to Sinclair Broadcast Group
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
Dividends declared per share
Balance Sheet Data:
Cash and cash equivalents
Total assets (d)
Total debt (c)(d)
Total equity (deficit)
8 Sinclair Broadcast Group
$
$
$
$
$
$
$
$
$
$
2015
2014
2013
2012
2011
(174,862 )
(162,937 )
(128,553 )
(106,128 )
2,011,946 $
111,337
95,853
2,219,136
733,199
431,728
93,204
264,887
1,784,641 $
122,262
69,655
1,976,558
578,687
372,220
107,716
228,787
1,219,091 $
88,680
55,360
1,363,131
386,646
251,294
77,349
141,374
$
922,161
86,905
52,613
1,061,679
257,494
172,628
79,834
85,172
124,619
71,803
64,246
12,436
278
422,736
(191,447 )
—
964
1,540
233,793
(57,694 )
176,099
106,629
55,615
62,495
6,918
(37,160 )
494,651
80,925
45,005
53,126
—
3,392
324,020
60,990
42,892
33,391
—
(7 )
329,285
(14,553 )
2,313
4,998
312,547
(97,432 )
215,115
(58,421 )
621
2,225
105,508
(41,249 )
64,259
(335 )
9,670
2,273
212,340
(67,852 )
144,488
—
176,099
(4,575 )
171,524 $
—
215,115
(2,836 )
212,279 $
11,558
75,817
(2,349 )
73,468
$
465
144,953
(287 )
144,666
$
1.81 $
1.81 $
1.79 $
1.79 $
0.66 $
2.19 $
2.19 $
2.17 $
2.17 $
0.63 $
0.66
0.79
0.66
0.78
0.60
$
$
$
$
$
1.78
1.79
1.78
1.78
1.54
$
$
$
$
$
648,662
72,773
43,853
765,288
179,408
124,582
65,742
51,501
52,079
38,046
28,310
—
—
225,620
(4,847 )
3,269
3,459
121,373
(44,785 )
76,588
(411)
76,177
(379)
75,798
0.95
0.94
0.95
0.94
0.48
149,972 $
5,432,315 $
3,854,360 $
499,678 $
17,682 $
5,410,328 $
3,886,872 $
405,343 $
280,104 $
4,103,417 $
2,989,985 $
405,704 $
22,865 $
12,967
2,690,768 $ 1,538,722
2,234,450 $ 1,173,330
(100,053 ) $ (111,362)
(a) Media revenues is defined as broadcast revenues, net of agency commissions, retransmission fees, and other media related revenues.
(b) Depreciation and amortization includes depreciation and amortization of property and equipment and amortization of definite-lived
intangible assets and other assets.
(c) Total debt is defined as notes payable, capital leases and commercial bank financing, including the current and long-term portions.
(d) The asset and debt balances for all years reflect the reclassification of debt issuance costs as discussed in Recent Accounting Pronouncements
within Note 1. Nature of Operations and Summary of Significant Accounting Policies within the Consolidated Financial Statements.
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 2015, 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 2015, 2014 and 2013, including
comparisons between years and certain expectations for 2016; 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.” Our broadcast segment is comprised of all of our television stations.
We also earn revenues from our original networks, original content, digital and internet services, technical services, and non-media
investments. These businesses are included within "Other". Corporate and unallocated expenses primarily include our costs to
operate as a public company and to operate our corporate headquarters location. Other and Corporate are not reportable segments.
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 6.125% Notes, the 5.375% Notes, 6.375% Notes, and 5.625% Notes. SBG is a guarantor under
all of these debt instruments. 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 9.25% Notes and the 8.375% Notes until they were fully redeemed in 2013
and 2014, respectively.
EXECUTIVE OVERVIEW
2015 Events
•
In February 2015, our Board of Directors declared a quarterly dividend of $0.165 per share, payable March 13, 2015 to the
holders of record at the close of business on February 27, 2015.
• During the second quarter of 2015, we signed a multi-year retransmission consent agreement with COX Communications
covering over 3.3 million subscribers and a 3-year retransmission consent agreement renewal with Suddenlink covering over 0.8
million subscribers.
• During the second quarter of 2015, American Sports Network (ASN) reached a multi-year agreement with the Atlantic 10
Conference (A-10) to annually televise at least 52 A-10 events across seven sports, an agreement with AMA Pro Racing to offer
syndicated network television coverage of AMA Track Events, and an agreement with Minor League Baseball to televise a
weekly game throughout the summer.
In April 2015, we raised $350.0 million of incremental term B loans and amended certain terms under our existing bank credit
facility. The loans mature July 2021 and were issued at a discount of 99.875% of par value.
In May 2015, our Board of Directors declared a quarterly dividend of $0.165 per share, payable on June 12, 2015 to the holders
of record at the close of business on June 1, 2015.
•
•
2015 Annual Report 9
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
In May 2015, Ring of Honor signed a national broadcast deal with Destination America, part of Discovery Communications,
to televise events over twenty-six weeks.
In June 2015, we announced a Memorandum of Understanding with Pearl TV and Samsung Electronics America to work
collaboratively to support the development and implementation of the new Advanced Television Systems Committee (ATSC)
3.0 standard.
In June 2015, we announced the formation of a joint venture with The Tornante Company that will acquire, create, develop,
produce, and distribute first-run syndicated television programming.
In June 2015, we invested in ExtendTV (rebranded as Zypmedia), the leading programmatic media-buying platform for local
digital advertising.
In July 2015, American Sports Network (ASN) announced an agreement with Millennium Dancesport Championships to
televise “The Dancesport League” on ASN.
In July 2015, we renewed affiliation agreements with the CBS Network covering 16 markets. The new agreements are effective
in 2015 and 2016 as current affiliation agreements expire and run for five years to 2020 and 2021.
In July 2015, we renewed affiliation agreements with the CW Network covering 23 owned markets. At the same time, CW
renewed affiliation agreements with another 9 markets for which Sinclair provides sales and other services. These agreements
are effective August 2016 and expire in 2021.
In July 2015, we announced the October 2015 launch of our Sunday morning national news show “Full Measure with Sharyl
Attkisson."
In August 2015, our Board of Directors declared a quarterly dividend of $0.165 per share, payable on September 15, 2015 to
the holders of record at the close of business on September 1, 2015.
In September 2015, we were granted authority by the Federal Communications Commission (FCC) to operate an experimental
facility in Washington D.C. and Baltimore markets to implement a Single Frequency Network (SFN) using the base elements of
the new ATSC 3.0 transmission standard.
In September 2015, ASN entered into a sublicense agreement with ESPN to televise college football and basketball games for
the Mid-American Conference (MAC) and college basketball games for the American Athletic Conference (The American),
both beginning in the 2015 academic year.
In September 2015, ASN entered into agreements with several top collegiate hockey conferences to broadcast as many as 30
total games per year.
In September 2015, we announced the creation of a news segment called, "Connect to Congress", a multimedia initiative that
enables Members of Congress in our news markets to communicate with their constituents on a regular basis.
In September 2015, we closed on the acquisition of certain non-license assets of WDSI (FOX) and WFLI (CW) in
Chattanooga, Tennessee, from New Age Media.
In October 2015, we premiered, together with Metro-Goldwyn-Mayer (MGM), COMET, the first-ever 24 hour/7 day per week
science fiction multi-channel network.
In October 2015, the Company entered into a definitive agreement to acquire KFXL (FOX) and KHGI, KHGI-LD, KWNB
and KWNB-LD (ABC), in Lincoln, Nebraska for $31.25 million. The transaction, subject to bankruptcy court and FCC
approval and subject to standard closing conditions, is expected to close in early 2016. We expect to fund the acquisition with
cash on hand in the first quarter of 2016.
2016 Events
•
•
•
•
•
•
In December 2015, we announced that we will re-launch "Circa," an independent digital news site targeted at the younger
demographic, in April 2016.
In January 2016, we closed on the previously announced purchase of the assets of KUQI (FOX), KTOV-LP (MNT) and
KXPX-LP (Retro TV) in Corpus Christi, Texas for $9.3 million.
In January 2016, we entered into a definitive agreement to purchase the stock of Tennis Channel for $350.0 million. The
transaction is expected to close in the first quarter 2016, subject to anti-trust approval, and other customary closing conditions.
In February 2016, we announced a $500,000 broadcast diversity scholarship fund to help minority students finance their
undergraduate studies related to television broadcasting or journalism.
In February 2016, we completed the acquisition of the broadcast assets of WSBT (CBS) in South Bend-Elkhart, Indiana,
owned by Schurz Communications, Inc., and sold the broadcast assets of WLUC (NBC and FOX) in Marquette, Michigan to
Gray Television, Inc.
In February 2016, our Board of Directors declared a quarterly dividend of $0.165 per share, payable on March 18, 2016 to the
holders of record at the close of business on March 7, 2016.
10 Sinclair Broadcast Group
Industry Trends
• Political spending is significantly higher in the even-number years due to the cyclicality of political elections. In addition, every
four years, political spending is typically elevated further due to the advertising related to the presidential election.
• 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.
• 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.
• 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.
Sources of Revenues
Our operating revenues are derived from local and national advertisers and, to a much lesser extent, from political advertisers and
digital platforms. We also generate local revenues from our retransmission consent agreements with MVPDs. 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 advertisers transacted through our rep firm 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.
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 goodwill and intangible assets, program contract costs, and income taxes. 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 consider the following accounting policies to be the most critical as they are important to our financial condition and results of
operations, and require significant judgment and estimates on the part of management in their application. 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 within
the Consolidated Financial Statements.
Valuation of Goodwill and Intangible Assets. At least annually, we periodically evaluate our goodwill and broadcast licenses 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. As of
December 31, 2015, our consolidated balance sheet includes $1,927.1 million and $132.5 million of goodwill and broadcast licenses,
respectively, related to our Broadcast segment.
2015 Annual Report 11
Both our annual goodwill and broadcast license impairment assessments begin with qualitatively assessing whether it is more-likely-
than-not that the respective asset has been impaired. If we conclude that it is more-likely-than-not that a reporting unit or broadcast
license is impaired, we apply the quantitative assessment, which involves comparing the estimated fair value of the reporting unit or
broadcast license to its respective carrying value. See Impairment of Goodwill, Intangibles and Other Long-Lived Assets within Note 1. Nature of
Operations and Summary of Significant Accounting Policies within the Consolidated Statement of Operations for further discussion of the significant
judgments and estimates inherent in both qualitatively assessing whether impairment may exist and estimating the fair values of the
reporting units and broadcast licenses. See Note 6. Goodwill, Broadcast Licenses and Other Intangible Assets within the Consolidated Financial
Statements for the results of our annual impairment tests during the years ended December 31, 2015, 2014 and 2013.
For our annual goodwill impairment tests in 2015, 2014 and 2013, we concluded that it was more-likely-than-not that goodwill was not
impaired based on our qualitative assessments. For our annual impairment tests for broadcast licenses in 2015, 2014, and 2013, we
concluded that it was more-likely-than-not that broadcast licenses were not impaired based on our qualitative assessments, except for
broadcast licenses with an aggregate carrying value of $15.3 million in 2015 and $38.1 million in 2014 for which we performed the
quantitative assessments. During 2014 we recorded $3.2 million of impairment, which was recorded in amortization of definite-lived
intangibles and other assets in our consolidated statement of operations, primarily as a result of declines in projected future market
revenues related to the radio broadcast licenses. During 2015, the results of our quantitative tests of broadcast licenses indicated that the
aggregate fair values of those licenses exceeds the respective carrying values by approximately 30%.
We believe we have made reasonable estimates and utilized appropriate assumptions to evaluate whether it was more-likely-than-not
that the fair values of our reporting units and broadcast licenses were 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.
Program Contract Costs. As discussed under Programming within Note 1. Nature of Operations and Summary of Significant Accounting Policies
within the Consolidated Financial Statements, we record an asset and corresponding liability for programming rights when 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. These costs are expensed over the period in which
an economic benefit is expected to be derived. To ensure the related assets for the programming rights are reflected in the consolidated
balance sheets at the lower of unamortized cost or estimated net realizable value (NRV), management estimates future advertising
revenue, net of sales commissions, to be generated by the remaining program material available under the contract terms. Management’s
judgment is required in determining the timing of expense for these costs, which is dependent on the economic benefit expected to be
generated from the program and may significantly differ from the timing of related payments under the contractual obligation. If our
estimates of future advertising revenues decline, amortization expense could be accelerated or NRV adjustments may be required.
Income Tax. As discussed under Income Taxes within Note 1. Nature of Operations and Summary of Significant Accounting Policies within the
Consolidated Financial Statements, 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, 2015 and 2014, 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. Future changes in operating and/or taxable income or other changes in facts and
circumstances could significantly impact the ability to realize our deferred tax assets which could have a material effect on our
consolidated financial statements.
Management periodically performs a comprehensive review of our tax positions and we record a liability for unrecognized tax benefits
when such tax positions do not meet the “more-likely-than-not” threshold. Significant judgment is required in determining whether a tax
position meets the more-likely-than-not threshold, and it is based on a variety of facts and circumstances, including interpretation of the
relevant federal and state income tax codes, regulations, case law and other authoritative pronouncements. Based on this analysis, the
status of ongoing audits and the expiration of applicable statute of limitations, liabilities are adjusted as necessary. The resolution of
audits is unpredictable and could result in tax liabilities that are significantly higher or lower than for what we have provided. See Note 10.
Income Taxes within the Consolidated Financial Statements, for further discussion of accrued unrecognized tax benefits.
12 Sinclair Broadcast Group
Variable Interest Entities. As discussed under Variable Interest Entities within Note 1. Nature of Operations and Summary of Significant
Accounting Policies within the Consolidated Financial Statements, we have determined that certain third-party licensees of stations for which we
perform services pursuant to arrangements, including LMAs and JSAs/SSAs, are VIEs and we are the primary beneficiary of those
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 services we provide and because we absorb losses and returns that would be
considered significant to the VIEs. Determining whether an entity is a VIE and whether we are the primary beneficiary of the variable
interests requires judgment which is based on quantitative and qualitative factors that indicate whether or not we are absorbing a majority
of the entity’s economic risks or receiving a majority of the entity’s economic rewards, based on the terms of the arrangements with the
entity.
Recent Accounting Pronouncements
See Recent Accounting Pronouncements within Note 1. Nature of Operations and Summary of Significant Accounting Policies within the Consolidated
Financial Statements for discussion on recent accounting policies and impact 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 during the years ended 2013, 2014, and 2015
are included in our results of our continuing operations for the years ended 2013, 2014, and 2015 from their respective dates of
acquisition. See Note 2. Acquisitions within the Consolidated Financial Statements for further discussion of stations acquired. Additionally, the
results of certain television stations that were sold and classified as discontinued operations are not included in the results of our
continuing operations for the period. See Discontinued Operations under Note 3. Disposition of Assets and Discontinued Operations within the
Consolidated Financial Statements for further discussion of excluded stations. Unless otherwise indicated, references in this discussion and
analysis to 2015, 2014 and 2013 are to our fiscal years ended December 31, 2015, 2014 and 2013, 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 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.
2015 Annual Report 13
Operating Data
The following table sets forth certain of our operating data from continuing operations for the years ended December 31, 2015,
2014 and 2013 (in millions). For definitions of terms, see the footnotes to the table in Item 6. Selected Financial Data.
Media revenues
Revenues realized from station barter arrangements
Other non-media revenues
Total revenues
Media production expenses
Media selling, general and administrative expenses
Expenses recognized from station barter arrangements
Depreciation and amortization
Other non-media expenses
Corporate general and administrative expenses
Research and development
Loss (gain) on asset dispositions
Operating income
Net income attributable to Sinclair Broadcast Group
BROADCAST SEGMENT
Revenues
Years Ended December 31,
2014
2013
2015
2,011.9 $
111.3
95.9
2,219.1
733.2
431.7
93.2
389.5
71.8
64.3
12.4
0.3
422.7 $
171.5 $
1,784.6 $
122.3
69.7
1,976.6
578.7
372.2
107.7
335.5
55.6
62.5
6.9
(37.2)
494.7 $
212.3 $
1,219.1
88.7
55.3
1,363.1
386.5
251.3
77.3
222.3
45.0
53.1
—
3.4
324.2
73.5
$
$
$
The following table presents our media revenues from continuing operations, net of agency commissions, for the years ended
December 31, 2015, 2014 and 2013 (in millions):
Local revenues:
Non-political
Political
Total local
National revenues:
Non-political
Political
Total national
Total media revenues
2015
2014
2013
‘15 vs. ‘14
‘14 vs. ‘13
Percent Change
$
$
1,627.6 $
9.7
1,637.3
353.3
16.1
369.4
2,006.7 $
1,341.5 $
22.3
1,363.8
309.2
109.5
418.7
1,782.5 $
954.5
1.5
956.0
251.2
10.3
261.5
1,217.5
21.3 %
(a)
20.1 %
14.3 %
(a)
(11.8 %)
12.6 %
40.5 %
(a)
42.7 %
23.1 %
(a)
60.1 %
46.4 %
(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 2015 net time sales, which include the advertising portion
of our local and national broadcast revenues, were automotive (25.5%), services (16.7%), medical (6.9%), retail/department stores
(5.7%), and furniture (5.2%). No other advertising category accounted for more than 5.0% of our net time sales in 2015. No advertiser
accounted for more than 0.8% of our consolidated revenue in 2015. We conduct business with thousands of advertisers.
Our primary types of programming and their approximate percentages of 2015 net time sales were local news (29.6%), syndicated
programming (29.3%), network programming (28.8%), sports programming (8.3%), direct advertising programming (3.8%) and kids
(0.2%).
14 Sinclair Broadcast Group
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, 2015 and 2014:
# of
Channels(a)
32
47
29
23
44
34
235
444
Percent of Net Time Sales for the
Twelve Months Ended December 31,
2013
2014
2015
28.7 %
25.9 %
17.7 %
11.7 %
8.0 %
6.5 %
1.5 %
25.7 %
27.3 %
20.0 %
9.4 %
8.5 %
7.8 %
1.4 %
19.1 %
31.2 %
21.3 %
6.1 %
9.8 %
10.3 %
2.2 %
Net Time Sales
Percent Change
‘15 vs. ‘14
12.5%
(3.8%)
(10.3%)
25.7%
(4.3%)
(14.7%)
16.3%
‘14 vs. ‘13
93.5%
25.3%
34.2%
120.3%
24.1%
8.3%
(13.0%)
ABC
FOX
CBS
NBC
CW
MNT
Other (b)
Total
(a) See Television Markets and Stations within Item 1. Business for further channel details. We have acquired a significant number of
television stations during 2015, 2014, and 2013, with a variety of network affiliations. This acquisition activity affects the year-
over-year comparability of revenue by affiliation. See Note 2. Acquisitions within the Consolidated Financial Statements for further
discussion of stations acquired.
(b) We broadcast other programming from the following providers on our channels including: Antenna TV, Azteca, Bounce
Network, COMET, Decades, Estrella TV, Get TV, Grit, Heartland, Me TV, MundoFox, Retro TV, Telemundo, This TV, News
& Weather, Univision and Zuus Country.
Media Revenues. Media revenues increased $224.2 million in 2015 when compared to 2014, of which $220.5 million was related to
stations not included in the same period in 2014. The remaining increase was due to an increase in retransmission revenues from MVPD
and increases in advertising revenues generated from the services, medical, and furniture sectors. These increases were partially offset by
a decrease in advertising revenues generated from the political, schools, and fast food sectors. Excluding the stations acquired in 2015,
automotive, which typically is our largest category, represented 25.5% of net time sales for the year ended December 31, 2015.
Media revenues increased $565.0 million in 2014 when compared to 2013, of which $457.9 million was related to stations not included
in the same period in 2014. The remaining increase was due to an increase in retransmission revenues from MVPD and increases in
advertising revenues generated from the political, medical and furniture sectors. These increases were partially offset by a decrease in
advertising revenues generated from the direct response, retail-department stores, and restaurants-other sectors. Excluding the stations
acquired in 2014, automotive, which typically is our largest category, represented 22.7% of net time sales for the year ended
December 31, 2014.
Political Revenues. Political revenues, which include time sales from political advertising, decreased by $106.0 million to $25.8 million for
2015 when compared to 2014. Political revenues increased by $120.0 million to $131.8 million for 2014 when compared to 2013. Political
revenues are typically higher in election years such as 2014. Accordingly, we expect political revenues to increase significantly in 2016, a
presidential election year, from 2015 levels.
Local Revenues. Excluding political revenues, our local media revenues, which include local times sales, retransmission revenues, digital,
and other local revenues, were up $286.1 million for 2015 when compared to 2014, of which $176.7 million was related to the stations
not included in the same period in 2014. The remaining increase is due to an increase in advertising spending particularly in the
entertainment, direct response, and home products 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 automotive, fast food, and schools sectors. Excluding
political revenues, our local media revenues were up $387.0 million for 2014 when compared to 2013, of which $345.0 million related to
the stations acquired in 2014. The remaining increase is due to an increase in advertising spending particularly in the medical, religion,
and home products 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 schools, direct response and fast food sectors.
National Revenues. Our national media revenues, excluding political revenues, which include national time sales and other national
revenues, were up $44.1 million for 2015 when compared to 2014, of which $44.1 million was related to the stations not included in the
same period in 2014. The remaining increase was due to an increase in advertising revenues generated from the
pharmaceutical/cosmetics, retail/department stores, and furniture sectors. These increases were partially offset by a decrease in
advertising revenues in the telecommunications, paid programs, and automotive sectors. Excluding political revenues, our national media
revenues increased $58.0 million for 2014 when compared to 2013, of which $77.7 million related to the stations acquired in 2014. The
2015 Annual Report 15
remaining decrease was due to decreases in advertising revenues generated from the direct response, automotive, and food-grocery/other
sectors. These decreases were partially offset by an
in the services, schools and
increase
pharmaceutical/cosmetics sectors.
in advertising revenues
Expenses
The following table presents our significant operating expense categories for the years ended December 31, 2015, 2014 and 2013
(in millions):
Media production expenses
Media selling, general and administrative expenses
Amortization of program contract costs and net
realizable value adjustments
Corporate general and administrative expenses
Depreciation and amortization expenses
$
$
$
$
$
2015
2014
2013
714.1 $
427.2 $
124.6
$
55.8 $
251.7 $
572.2 $
369.6 $
106.6
$
55.8 $
218.5 $
385.1
249.7
80.9
47.3
133.1
Percent Change
(Increase/(Decrease))
‘15 vs. ‘14
‘14 vs. ‘13
24.8%
48.6 %
15.6%
16.9%
(2.8%)
15.2%
48.0 %
31.8 %
20.1 %
64.2 %
Media production expenses. Media production expenses increased $141.9 million during 2015 compared to 2014, of which $93.0 million
related to the stations not included in the same period in 2014. The remaining increases for the year were primarily due to increases in
fees pursuant to network affiliation agreements, increased costs related to sports programming content and increased compensation
expense.
Media production expenses increased $187.1 million during 2014 compared to 2013, of which $158.9 million related to stations not
included in the same period of 2013. This increase was primarily due to increases in fees pursuant to network affiliation agreements,
increased compensation expense and increased costs related to sports programming content.
Media selling, general and administrative expenses. Media selling, general and administrative expenses increased $57.6 million during 2015
compared to 2014, of which $41.6 million related to stations not included in the same period in 2014. The remaining increases for the
year were primarily due to an increase in information technology infrastructure costs, increased compensation expense, increased
insurance costs, increased digital interactive costs and a $9.3 million charge related to settling the benefit obligation of an inherited
pension plan.
Media selling, general and administrative expenses increased $119.9 million during 2014 compared to 2013, of which $111.7 million
related to the stations not included in the same period in 2013. The remaining increases for the year were primarily due to an increase in
information technology infrastructure costs and compensation expense, partially offset by a decrease in digital interactive expenses.
Amortization of program contract costs and net realizable value adjustments. The amortization of program contract costs increased $18.0 million
during 2015 compared to 2014, of which $5.7 million related to the stations not included in the same period of 2014. The remaining
increase is due to expanding high quality film content across our broadcast platform.
The amortization of program contract costs increased $25.7 million during 2014 compared to 2013, of which $16.6 million related to
the stations not included in the same period of 2013. The remaining increase is due to higher programming costs.
Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses.
Depreciation and amortization expenses. Depreciation of property and equipment and amortization of definite-lived intangibles and other
assets increased $33.2 million during 2015 compared 2014, of which $36.0 million related to the stations not included in the same period
of 2014. Depreciation and amortization expenses increased $85.4 million during 2014 compared to 2013, of which $87.3 million related
to a station not included in the same period of 2013.
16 Sinclair Broadcast Group
OTHER
Media revenues, media production expenses, and media selling, general, and administrative expense. The media revenue included within Other
primarily relates to original networks and content, as well as our digital and internet businesses. For the years ended December 31, 2015,
2014, and 2013, we recorded revenue of $5.2 million, $2.1 million, and $1.6 million, respectively. The year over year increases in media
revenues primarily relate to increases in revenue from our sports network. For the years ended December 31, 2015, 2014, and 2013, we
recorded expenses of $23.6 million, $9.1 million, and $3.1 million, respectively. Our expenses relate to the programming and production,
general and administrative, depreciation and amortization and applicable other income and expense related to the operations of our
network and content businesses. The year over year increases primarily relate to general and administrative costs related to the start-up
of these businesses and production costs of new programming. See Item 1. Business. for a further discussion of these businesses.
Other non-media revenues and expenses. The following table presents our other non-media revenues and expenses for the years ended
December 31, 2015, 2014 and 2013 (in millions):
Revenues:
Investments in real estate ventures
Investments in private equity
Technical services
Expenses: (a)
Investments in real estate ventures
Investments in private equity
Technical services
2015
2014
2013
‘15 vs. ‘14
‘14 vs. ‘13
Percent Change
$
$
$
$
$
$
23.2 $
62.5 $
10.2 $
25.7 $
56.7 $
11.2 $
7.9 $
53.9 $
7.4 $
14.9 $
43.9 $
9.3 $
7.4
45.0
2.9
14.9
38.7
4.7
193.7 %
16.0 %
37.8 %
72.5 %
29.2 %
20.4 %
6.8 %
19.8 %
155.2 %
—
13.4 %
97.9 %
(a) Comprises total expenses of the entity including general and administrative, depreciation and amortization and
applicable other income and expense items such as interest expense and non-cash stock-based compensation expense
related to issuances of subsidiary stock awards.
Investments in real estate ventures. We have controlling interests in certain real estate investments owned by Keyser Capital which
we consolidate. For the year ended December 31, 2015, revenues from the investments increased $15.3 million compared to
2014, of which $15.2 million related to real estate development projects. For the year ended December 31, 2015, expenses from
these investments increased $10.8 million compared to 2014, of which $9.9 million related to real estate development projects.
For the year ended December 31, 2014, revenues from these investments increased $0.5 million compared to 2013, which
primarily related to real estate development projects.
Investments in private equity. We have controlling interests in certain private equity investments owned by Keyser Capital, which
we consolidate, including Triangle, a sign designer and fabricator, and Alarm Funding, a regional security alarm operating and
bulk acquisition company. For the year ended December 31, 2015, revenues from investments in private equity increased $8.6
million compared to 2014, primarily relating to an increase in transaction volume from our sign and alarm businesses. For the
year ended December 31, 2015, expenses from investments in private equity increased $12.8 million compared to 2014, of
which $8.0 million related to increased transaction volume from our sign and alarm businesses.
For the year ended December 31, 2014, revenues from investments in private equity increased $8.9 million compared to 2013,
primarily relating to an increase in transaction volume from our sign and alarm business. For the year ended December 31,
2014, expenses from investments in private equity increased $5.2 million compared to 2013, of which $7.2 million related to
increased transaction volume from our sign and alarm businesses.
Technical Services. We own certain subsidiaries which service and support broadcast transmitters, and design and manufacture
broadcast systems. See Item 1. Business for a further discussion of these businesses. For the year ended December 31, 2015,
revenues and expenses related to Technical Services increased $2.8 million and $1.9 million, respectively, compared to 2014. For
the year ended December 31, 2014 revenues and expenses related to Technical increased $4.5 million and $4.6 million,
respectively compared to 2013. The increases in both revenues and expenses related to Technical for both 2015 and 2014 are
due to increased transaction volume.
Research and development expenses. Our research and development expenses relate to our costs to create Next Gen. See Development of Next
Generation Broadcast Platforms (Next Gen) under Operating Strategy under Item 1. Business for further discussion of this initiative. For the years
2015 Annual Report 17
ending December 31, 2015 and 2014, research and development costs related to ONE Media, LLC were $12.4 million, and $6.9 million,
respectively.
Income from Equity and Cost Method Investments. As of December 31, 2015 and 2014, the carrying value of our investments in private
equity and real estate ventures, accounted for under the equity or cost method, was $20.8 million and $84.6 million in 2015 and $23.6
million and $71.8 million in 2014, respectively. Results of our equity and cost method investments in private equity investments and real
estate ventures are included in income from equity and cost method investments in our consolidated statements of operations. During
2015, we recorded income of $3.6 million related to certain private equity investments and a loss of $2.7 million related to our real estate
ventures, which included an impairment charge of $6.0 million related to one of our real estate ventures. During 2014 we recorded
income of $3.1 million related to certain private investment funds and a loss of $1.0 million related to our real estate ventures. During
2013, we recorded income of $2.0 million related to certain private equity funds and income of $1.4 million related to our real estate
ventures.
CORPORATE AND UNALLOCATED EXPENSES
Corporate general and administrative expenses
Interest expense
Loss from extinguishment of debt
Income tax provision
$
$
$
$
2015
2014
2013
5.4 $
186.5 $
— $
57.7 $
5.3 $
170.8 $
14.6 $
97.4 $
4.5
159.7
58.4
41.2
Percent Change
(Increase/(Decrease))
‘14 vs. ‘13
‘15 vs. ‘14
7.7%
28.6%
7.0%
9.2%
(75.0%)
(100.0%)
136.4%
(40.8%)
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 divisions which are included in our discussion of expenses in the Other section.
Combined corporate general and administrative expenses increased to $64.2 million in 2015 from $62.5 million in 2014. Combined
corporate general and administrative expenses increased to $62.5 million in 2014 from $53.1 million in 2013.
We expect corporate general and administrative expenses to increase in 2016 compared to 2015 due to expected increases in
interest rates and financing a portion of all or any new acquisitions with debt.
Interest expense. Interest expense increased in 2015 compared to 2014 primarily due to the issuance of $550.0 million of 5.625% Notes
in 2014 and incremental borrowings on our Bank Credit Agreement. The increase in interest expense was partially offset by a decrease in
interest expense due to the redemption of 8.375% Notes during 2014. See Note 7. Notes Payable and Commercial Bank Financing within the
Consolidated Financial Statements for further discussion.
Interest expense increased in 2014 compared to 2013 primarily due to the issuance of $550.0 million of 5.625% Notes and incremental
borrowings on our Term Loan A, Term Loan B, and revolving credit facility under our Bank Credit Agreement during 2014; and the
issuance of $600.0 million of 5.375% Notes and the issuance of $350.0 million of 6.375% Notes in 2013. The increase in interest
expense was partially offset by a decrease in interest expense due to the redemption of 8.375% Notes during 2014; and the redemption
of our 9.25% Notes, 4.875% Notes and 3.0% Notes in 2013.
We expect interest expense to increase in 2016 compared to 2015 as a result of a full year of interest expenses related to the
amendment and restatement of our term loans in 2015 as discussed in Note. 7 Notes Payable and Commercial Bank Financing within the
Consolidated Financial Statements and borrowings for our pending acquisitions discussed in Note 11. Commitments and Contingencies within the
Consolidated Financial Statements.
Loss from extinguishment of debt. We recognized a loss on extinguishment of debt of $14.6 million for the year ended December 31, 2014
related to the redemption of the 8.375% Notes in October 2014.
18 Sinclair Broadcast Group
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 million loss from extinguishment of debt.
During the year ended December 31, 2013, we drew down 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.
Income tax (provision) benefit. The 2015 income tax provision for our pre-tax income from continuing operations (including the effects of
noncontrolling interest) of $229.2 million resulted in an effective tax rate of 25.2%. The 2014 income tax provision for our pre-tax
income from continuing operations (including the effects of the noncontrolling interest) of $309.7 million resulted in an effective tax rate
of 31.5%. The decrease in the effective tax rate from 2014 to 2015 is primarily due to a $12.6 million benefit related to the realization of
a capital loss from the 2015 sale of the stock of a subsidiary.
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 decrease in the effective tax rate from 2013 to 2014 is primarily
due to the following items: 1) remeasurement of deferred state tax liabilities caused by intercompany mergers and changes in estimates
of apportionment in certain states resulting in a $8.2 million benefit in 2014 compared to a $7.0 million expense in 2013; 2) $10.8 million
reduction in liability for unrecognized tax benefits in 2014 as a result of statute of limitations expiration; partially offset by 3) greater
benefit of state law changes in 2013.
As of December 31, 2015, we had a net deferred tax liability of $585.1 million as compared to a net deferred tax liability of $608.9
million as of December 31, 2014. The decrease primarily relates to: 1) an increase in deferred tax assets resulting from the realization of
a capital loss from the sale of the stock of a subsidiary and 2) a decrease in net deferred tax liabilities associated with book-to-tax
differences attributable to contingent interest obligations.
As of December 31, 2015, we had $3.3 million of gross unrecognized tax benefits. Of this total, $2.6 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 rate from
continuing operations. As of December 31, 2014, we had $7.1 million of gross unrecognized tax benefits. Of this total, $6.4 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 rate from continuing operations. We recognized $0.2 million and $0.7 million of income tax expense for interest related
to uncertain tax positions for the years ended December 31, 2015 and 2014, respectively. See Note 10. Income Taxes in the Consolidated
Financial Statements for further information.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2015, we had $150.0 million in cash and cash equivalent balances, net working capital of approximately $166.8
million, and $482.9 million remaining borrowing capacity under our revolving credit facility. Cash generated by our operations and
borrowing capacity under the Bank Credit Agreement are used as our primary sources of liquidity. We anticipate that existing cash and
cash equivalents, cash flow from our operations and borrowing capacity under the revolving credit facility will be sufficient to satisfy our
debt service obligations, capital expenditure requirements and working capital needs for the next twelve months. For our long-term
liquidity needs, in addition to the sources described above, we may rely upon the issuance of long-term debt, the issuance of equity or
other instruments convertible into or exchangeable for equity, or the sale of non-core assets. However, there can be no assurance that
additional financing or capital or buyers of our non-core assets will be available, or that the terms of any transactions will be acceptable
or advantageous to us.
In April 2015, we amended and restated our existing Bank Credit Agreement raising an additional $350.0 million of incremental term
loan B commitments. See Bank Credit Agreement within Note 7. Notes Payable and Commercial Bank Financing within the Consolidated Financial
Statements for further discussion.
On March 20, 2014, the Board of Directors authorized an additional $150.0 million share repurchase authorization, in addition to the
$150.0 million previously authorized. There is no expiration date, and currently management has no plans to terminate this program. For
the year ended December 31, 2015, we have purchased approximately 1.1 million shares for $28.8 million. As of December 31, 2015, the
total remaining authorization was $105.5 million.
2015 Annual Report 19
Sources and Uses of Cash
The following table sets forth our cash flows for the years ended December 31, 2015, 2014 and 2013 (in millions):
Net cash flows from operating activities
Cash flows used in investing activities:
Acquisition of property and equipment
Payments for acquisitions of television stations
Proceeds from the sale of broadcast assets
Purchase of alarm monitoring contracts
(Increase) Decrease in restricted cash
Investments in equity and cost method investees
Distributions from equity and cost method investees
Proceeds from termination of life insurance policies
Other, net
Net cash flows used in investing activities
Cash flows from 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
Repurchase of outstanding Class A Common Stock
Payments for deferred financing costs
Noncontrolling distributions contributions
Other, net
Net cash flows (used in) from financing activities
Operating Activities
2015
2014
2013
400.7 $
430.5 $
160.6
(91.4 ) $
(81.5 ) $
(17.0 )
23.7
(39.2 )
(3.7 )
(44.7 )
21.7
—
(0.7 )
(1,485.0 )
176.7
(27.7 )
11.6
(8.1 )
3.9
17.0
(4.3 )
(43.4 )
(1,006.1 )
49.7
(23.7 )
(11.5 )
(10.8 )
5.3
—
(10.7 )
(151.3 ) $
(1,397.4 ) $
(1,051.2 )
382.9 $
(395.2 )
—
(62.7 )
(28.8 )
(3.9 )
(9.9 )
0.5
(117.1 ) $
1,500.7 $
(582.7 )
—
(61.1 )
(133.2 )
(16.6 )
(8.2 )
5.6
704.5 $
2,278.3
(1,509.8 )
472.9
(56.8 )
—
(27.7 )
(10.3 )
1.3
1,147.9
$
$
$
$
$
Net cash flows from operating activities decreased during the year ended December 31, 2015 compared to the same period in 2014.
This decrease is primarily due to higher program payments, interest payments, and income taxes, compared to the same period in 2014,
offset by an increase in cash received from customers. The increase in cash received from customers and higher interest and program
payments is primarily related to stations acquired in the second half of 2014.
Net cash flows from operating activities increased during the year ended December 31, 2014 compared to the same period in 2013.
The increase was due to higher cash receipts from customers, which is primarily due to our acquisitions since the same period in 2013.
The increase was partially offset by higher program payments, higher cash payments to vendors, and higher compensation expenses.
Investing Activities
Net cash flows used in investing activities decreased during the year ended December 31, 2015, compared to the same period in 2014.
This decrease is primarily due to fewer acquisitions of broadcast assets, partially offset by higher capital expenditures, a decrease in
proceeds from the sale of broadcast assets, increase in the purchase of alarm contracts, and an increase in equity and cost method
investments.
Net cash flows used in investing activities increased during the year ended December 31, 2014 compared to the same period in 2013.
This increase is primarily due to $1,485.0 million in payments for the acquisition of television stations during 2014 compared to $1,006.1
million during 2013. See Note. 2 Acquisitions for discussion of stations acquired during those periods. The increase was also caused by
higher capital expenditures and purchases of alarm monitoring contracts during 2014. The increase was partially offset by $176.7 million
20 Sinclair Broadcast Group
in sales of broadcast assets during 2014 compared to $49.7 million in 2013. See Note 3. Disposition of Assets and Discontinued Operations in
the Consolidated Financial Statements for discussion the sale of broadcast assets during the periods. The increase was also offset by proceeds
from insurance settlements and the release of cash deposits for station acquisitions in 2014.
Financing Activities
Net cash flows from financing activities decreased during the year ended December 31, 2015, compared to the same period in 2014,
due primarily to a decrease in net proceeds from notes payable from less activity in 2015 compared to 2014, partially offset by lower
financing costs and less repurchases of Class A Common Stock.
Net cash flows from financing activities decreased during the year ended December 31, 2014, compared to the same period in 2013.
The decrease is primarily related to the $133.2 million repurchase of Class A Common Stock and higher dividend payments during 2014
and the $472.9 million proceeds from issuance of Class A Common Stock in 2013. The decrease is partially offset by higher issuance of
debt, net of redemptions, in the 2014 compared to 2013.
During 2014, our Board of Directors declared a quarterly dividend of $0.15 per share in the months of February and April, which
were paid in March and June. In August and November our Board of Directors declared a quarterly dividend of $0.165 per share, which
were paid in September and December. Total dividend payments for the year ended December 31, 2014 were $0.63 per share. During
2015, our Board of Directors declared a quarterly dividend of $0.165 per share in the months of February, May, August and November,
which were paid in March, June, September and December, respectively. Total dividend payments for the year ended December 31, 2015
were $0.66 per share. In February 2016, our Board of Directors declared a quarterly dividend of $0.165 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, 2015 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 (b), (c)
Notes and capital leases payable to affiliates (b)
$
Operating leases
Program content (d)
Programming services (e)
Investments and loan commitments (f)
Other (g)
Total contractual cash obligations
$
Total
2016
2017-2018 2019-2020
2021 and
thereafter
$
4,877.4
29.2
102.9
1,257.0
140.3
22.1
120.5
6,549.4 $
$
339.0
5.1
18.9
385.5
58.4
22.1
11.6
840.6 $
$
666.7
7.9
28.5
583.3
58.2
—
19.5
1,364.1 $
$
944.4
6.1
22.4
246.1
18.1
—
17.5
1,254.6 $
2,927.3
10.1
33.1
42.1
5.6
—
71.9
3,090.1
(a) Excluded from this table are $3.3 million of accrued unrecognized tax benefits. Due to inherent uncertainty, we cannot make
reasonable estimates of the amount and period payments will be made.
2015 Annual Report 21
(b) Includes interest on debt and capital leases. Estimated interest on our variable rate debt has been calculated at an effective
weighted interest rate of 3.31%. Variable rate debt represents $1.8 billion of our $3.9 billion total face value of debt as of
December 31, 2015.
(c) See Note 7. Notes Payable and Commercial Bank Financing within the Consolidated Financial Statements for further discussion of the
changes to notes payable, capital leases, and commercial bank financing during 2015.
(d) 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.
(e) Includes obligations related to rating service fees, music license fees, market research, weather and news services.
(f) Commitments to contribute capital to various non-media private equity investments.
(g) Other includes obligations related to post-retirement benefits, maintenance and support, other corporate contracts, other long-
term liabilities, and LMA and outsourcing agreements. 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 $3.3 million, $1.6 million, $0.7 million and $0.2 million for the periods 2016, 2017-2018, 2019-2020 and 2021
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.
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, 2015,
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 7. Notes Payable and Commercial Bank Financing within the Consolidated Financial Statements, for further
discussion. As of December 31, 2015, 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, 2015, interest expense on our term loans and revolver related to our Bank Credit Agreement was $53.8
million. We estimate that adding 1.0% to respective interest rates would result in an increase in our interest expense of $17.6 million for
the year ended December 31, 2015. We also have $121.0 million of variable rate debt associated with our other non-media related
investments. We estimate that adding 1.0% to respective interest rates would result in $1.0 million of additional interest expense for the
year ended December 31, 2015. Our consolidated VIEs have $26.7 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 result in an increase interest expense of the VIEs by $0.3 million for the year ended December 31, 2015.
22 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.
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$
$
$
$
32.43 $
32.03 $
30.23 $
35.89 $
Low
24.20
27.52
24.04
24.80
High
$
$
$
$
36.74 $
34.75 $
35.90 $
29.95 $
Low
24.42
25.12
25.48
23.94
As of February 19, 2016, there were approximately 50 shareholders of record of our Class A common stock. This number does
not include beneficial owners holding shares through nominee names.
Dividend Policy
During 2014, our Board of Directors declared a quarterly dividend of $0.15 per share in the months of February and April, which
were paid in March and June. In August and November our Board of Directors declared a quarterly dividend of $0.165 per share, which
were paid in September and December. Total dividend payments for the year ended December 31, 2014 were $0.63 per share. During
2015, our Board of Directors declared a quarterly dividend of $0.165 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, 2015
were $0.66 per share. In February 2016, our Board of Directors declared a quarterly dividend of $0.165 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, there are certain terms that may restrict our ability to make dividend payments. See Note 9. Common Stock within
the Consolidated Financial Statements for further discussion.
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, 2010 through December 31, 2015. The performance graph assumes that
an investment of $100 was made in the Class A Common Stock and in each Index on December 31, 2010 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
12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015
515.16
199.95
128.91
423.67
188.78
133.34
541.54
166.19
128.06
145.54
100.53
89.84
100.00
100.00
100.00
186.24
116.92
91.94
2015 Annual Report 23
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Sinclair Broadcast Group, Inc., the NASDAQ Composite Index
and the NASDAQ Telecommunications Index
$600
$500
$400
$300
$200
$100
$0
12/10
12/11
12/12
12/13
12/14
12/15
Sinclair Broadcast Group, Inc.
NASDAQ Composite
NASDAQ Telecommunications
*$100 invested on 12/31/10 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
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, 2015.
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
24 Sinclair Broadcast Group
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, 2015, 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, 2015 based on the criteria set forth in
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (COSO). Based on our assessment, management has concluded that, as of December 31, 2015, our internal control over
financial reporting was effective based on those criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2015 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the quarter ended December 31, 2015, 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.
2015 Annual Report 25
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 $4,495 and $4,246, respectively
Current portion of program contract costs
Income taxes receivable
Prepaid expenses and other current assets
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
CURRENT LIABILITIES:
Accounts payable and accrued liabilities
Current portion of notes payable, capital leases and commercial bank financing
Current portion of notes payable and capital leases payable to affiliates
Current portion of program contracts payable
Deferred barter revenues
Total current liabilities
LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion
Notes payable and capital leases to affiliates, less current portion
Program contracts payable, less current portion
Deferred tax liabilities
Other long-term liabilities
Total liabilities (a)
COMMITMENTS AND CONTINGENCIES (See Note 11)
EQUITY:
SINCLAIR BROADCAST GROUP SHAREHOLDERS’ EQUITY:
Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 68,792,483 and 69,578,899 shares
issued and outstanding, respectively
Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 25,928,357 and 25,928,357 shares
issued and outstanding, respectively, convertible into Class A Common Stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total Sinclair Broadcast Group shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
2015
2014
149,972 $
424,608
91,466
823
26,903
7,991
701,763
18,996
717,137
3,725
1,931,093
132,465
1,751,570
175,566
5,432,315 $
251,313 $
164,184
3,166
108,260
8,080
535,003
3,669,160
17,850
56,921
585,072
68,631
4,932,637
17,682
383,503
88,198
3,314
27,842
5,626
526,165
38,531
752,538
—
1,964,553
135,075
1,818,263
175,203
5,410,328
260,848
113,116
2,625
104,922
5,806
487,317
3,754,822
16,309
60,605
608,932
77,000
5,004,985
688
696
259
962,726
(437,029 )
(834 )
525,810
(26,132 )
499,678
5,432,315 $
259
979,202
(545,820 )
(6,455 )
427,882
(22,539 )
405,343
5,410,328
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
(a) Our consolidated total assets as of December 31, 2015 and 2014 include total assets of variable interest entities (VIEs) of $152.4 million and $163.3 million,
respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of December 31, 2015 and 2014 include total liabilities
of the VIEs of $35.6 million and $30.0 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.
26 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(in thousands)
2015
2014
2013
REVENUES:
Media revenues
Revenues realized from station barter arrangements
Other non-media revenues
Total revenues
OPERATING EXPENSES:
Media production expenses
Media selling, general and administrative expenses
Expenses recognized from station barter arrangements
Amortization of program contract costs and net realizable value adjustments
Other non-media expenses
Depreciation of property and equipment
Corporate general and administrative expenses
Amortization of definite-lived intangible and other assets
Research and development
Loss (gain) on asset dispositions
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 from equity and cost method investments
Other income, net
Total other expense
Income from continuing operations before income taxes
INCOME TAX PROVISION
Income from continuing operations
DISCONTINUED OPERATIONS:
Income from discontinued operations
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
$
2,011,946 $
111,337
95,853
2,219,136
1,784,641 $
122,262
69,655
1,976,558
733,199
431,728
93,204
124,619
71,803
103,433
64,246
161,454
12,436
278
1,796,400
422,736
(191,447 )
—
964
1,540
(188,943 )
233,793
(57,694 )
176,099
—
176,099
(4,575 )
171,524 $
0.66 $
1.81 $
1.81 $
1.79 $
1.79 $
95,003
95,728
578,687
372,220
107,716
106,629
55,615
103,291
62,495
125,496
6,918
(37,160 )
1,481,907
494,651
(174,862 )
(14,553 )
2,313
4,998
(182,104 )
312,547
(97,432 )
215,115
—
215,115
(2,836 )
212,279 $
0.63 $
2.19 $
2.19 $
2.17 $
2.17 $
97,114
97,819
171,524 $
—
171,524 $
212,279 $
—
212,279 $
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
1,219,091
88,680
55,360
1,363,131
386,646
251,294
77,349
80,925
45,005
70,554
53,126
70,820
—
3,392
1,039,111
324,020
(162,937 )
(58,421 )
621
2,225
(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
61,910
11,558
73,468
2015 Annual Report 27
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(in thousands)
Net income
Amortization of net periodic pension benefit costs, net of taxes
Adjustments to pension obligations, net of taxes
Pension settlement
Unrealized gain on investments, net of taxes
Comprehensive income
Comprehensive (income) loss attributable to the noncontrolling interests
Comprehensive income attributable to Sinclair Broadcast Group
2015
2014
2013
$
$
176,099 $
190
621
4,810
—
181,720
(4,575 )
177,145 $
215,115 $
173
(3,814 )
—
285
211,759
(2,836 )
208,923 $
75,817
(392 )
2,571
—
261
78,257
(2,349 )
75,908
The accompanying notes are an integral part of these consolidated financial statements.
28 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(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)
—
—
—
338,632
569,423
—
—
—
—
—
—
3
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(5,100)
8,599
10,229
521
—
—
7,008
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(56,767)
—
472,913
—
—
—
—
—
—
(5,100)
8,602
10,235
521
(10,256)
(10,256)
344
344
—
—
2,349
7,008
2,440
75,817
—
73,468
2,440
—
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.
2015 Annual Report 29
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(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)
74,145,569
$ 741
26,028,357
$ 260
$ 1,094,918
$
(696,996)
$
(2,553)
$ 9,334
$ 405,704
—
—
—
—
100,000
1
(100,000)
(4,876,121)
(48)
209,451
—
—
—
—
—
2
—
—
—
—
—
—
—
—
—
—
—
—
(1)
—
—
—
—
—
—
—
—
—
(133,109)
11,510
1,365
—
4,518
—
—
(61,103)
—
—
—
—
—
—
—
212,279
—
—
—
—
—
—
(546)
(3,356)
—
—
(61,103)
—
—
—
—
—
(133,157)
11,512
1,365
(6,936)
(6,936)
(27,773)
(23,801)
—
2,836
(3,356)
215,115
69,578,899
$ 696
25,928,357
$ 259
$
979,202
$
(545,820)
$
(6,455)
$ (22,539)
$ 405,343
BALANCE,
December 31, 2013
Dividends declared on
Class A and Class B
Common Stock
Class B Common Stock
converted into Class A
Common Stock
Repurchases of Class A
Common Stock
Class A Common Stock
issued pursuant to
employee benefit plans
Tax benefit on share
based awards
Distributions to non-
controlling interests
Deconsolidation of
variable interest entity
Other comprehensive
income
Net income
BALANCE,
December 31, 2014
The accompanying notes are an integral part of these consolidated financial statements.
30 Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(in thousands, except share data)
BALANCE,
December 31, 2014
Dividends declared on
Class A and Class B
Common Stock
Repurchase of Class A
Common Stock
Class A Common Stock
issued pursuant to
employee benefit plans
Tax benefit on share
based awards
Distributions to non-
controlling interests, net
Issuance of subsidiary
stock awards
Other comprehensive
income
Net income
BALANCE,
December 31, 2015
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)
69,578,899
$ 696
25,928,357
$ 259
$ 979,202
$
(545,820)
$
(6,455)
$ (22,539)
$ 405,343
—
(1,107,887)
—
(11)
321,471
—
—
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(28,812)
11,624
712
—
—
—
—
—
(62,733)
—
—
—
—
—
—
171,524
5,621
—
—
—
—
—
—
—
—
—
—
—
(62,733)
(28,823)
11,627
712
(9,918)
(9,918)
1,750
—
4,575
1,750
5,621
176,099
68,792,483
$ 688
25,928,357
$ 259
$
962,726
$ (437,029)
$
(834)
$ (26,132)
$ 499,678
The accompanying notes are an integral part of these consolidated financial statements.
2015 Annual Report 31
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(in thousands)
2015
2014
2013
$
176,099 $
215,115 $
75,817
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation of property and equipment
Amortization of definite-lived intangible assets
Amortization of program contract costs and net realizable value adjustments
Loss on extinguishment of debt, non-cash portion
Stock-based compensation
Deferred tax (benefit) provision
Loss (gain) on the sale of assets
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Increase in accounts receivable
Net change in net income taxes payable/receivable
(Increase) decrease in prepaid expenses and other current assets
(Decrease) increase in accounts payable and accrued liabilities
Payments on program contracts payable
Original debt issuance discount paid
Real estate held for development and sale
Other, net
Net cash flows from operating activities
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment
Payments for acquisitions of television stations, net of cash acquired
Proceeds from the sale of broadcast assets
Purchase of alarm monitoring contracts
(Increase) decrease in restricted cash
Investments in equity and cost method investees
Proceeds from termination of life insurance policies
Investment in marketable securities
Distributions from cost method investees
Other, net
Net cash flow used in investing activities
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases
Repayments of notes payable, commercial bank financing and capital leases
Proceeds from the sale of Class A Common Stock
Repurchase of outstanding Class A Common Stock
Dividends paid on Class A and Class B Common Stock
Payments for deferred financing costs
Noncontrolling interests distributions
Other, net
Net cash flows (used in) from financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of year
103,433
161,454
124,619
—
18,315
(28,446 )
278
(38,666 )
3,203
(3,474 )
(18,134 )
(109,057 )
—
(2,674 )
13,745
400,695
(91,421 )
(17,011 )
23,650
(39,185 )
(3,725 )
(44,715 )
—
—
21,749
(653 )
(151,311 )
382,887
(395,147 )
—
(28,823 )
(62,733 )
(3,847 )
(9,918 )
487
(117,094 )
132,290
17,682
149,972 $
103,291
125,496
106,629
4,605
14,296
(818 )
(37,160 )
(44,253 )
8,253
(2,215 )
53,312
(93,682 )
(3,583 )
(20,683 )
1,851
430,454
(81,458 )
(1,485,039 )
176,675
(27,701 )
11,616
(8,104 )
17,042
(925 )
3,869
(3,331 )
(1,397,356 )
1,500,720
(582,764 )
—
(133,157 )
(61,103 )
(16,590 )
(8,184 )
5,558
704,480
(262,422 )
280,104
17,682 $
70,554
70,820
80,925
33,049
10,573
22,518
3,392
(90,635 )
(4,937 )
8,295
7,954
(90,080 )
(23,766 )
(10,768 )
(3,134 )
160,577
(43,388 )
(1,006,144 )
49,738
(23,721 )
(11,522 )
(10,767 )
—
(11,604 )
5,258
909
(1,051,241 )
2,278,293
(1,509,760 )
472,913
—
(56,767 )
(27,724 )
(10,256 )
1,204
1,147,903
257,239
22,865
280,104
CASH AND CASH EQUIVALENTS, end of year
$
The accompanying notes are an integral part of these consolidated financial statements.
32 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 (JSAs and SSAs) to 163 stations in 79 markets which
broadcast 444 channels, as of December 31, 2015. For the purpose of this report, these 163 stations and 444 channels are referred to as
“our” stations and channels.
Principles of Consolidation
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries and
variable interest entities (VIEs) for which we are the primary beneficiary. Noncontrolling interest represents a minority owner’s
proportionate share of the equity in certain of our consolidated entities. All intercompany transactions and account balances have been
eliminated in consolidation.
Variable Interest Entities
In determining whether we are the primary beneficiary of a VIE for financial reporting purposes, we consider whether we have the
power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether we have the
obligation to absorb losses or the right to receive returns that would be significant to the VIE. We consolidate VIEs when we are the
primary beneficiary. The assets of 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.
Third-party station licensees. Certain of our stations provide services to other station owners within the same respective market, such as
LMAs, where we provide programming, sales, operational and administrative services, and JSAs and SSAs, where we provide non-
programming, sales, operational and administrative services. In certain cases, we have also entered into purchase agreements or options
to purchase, the license related assets of the licensee. We typically own the majority of the non-license assets of the stations and in some
cases where the licensee acquired the license assets concurrent with our acquisition of the non-license assets of the station, we have
provided guarantees to the bank for the licensee’s acquisition financing. The terms of the agreements vary, but generally have initial
terms of over five years with several optional renewal terms. As of December 31, 2015 and 2014, we have concluded that 37 of these
licensees are VIEs, respectively. 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 services we provide and because we absorb
losses and returns that would be considered significant to the VIEs. Several of these VIEs are owned by a related party, Cunningham
Broadcasting Corporation (Cunningham). See Note 12. Related Person Transactions for more information about the arrangements with
Cunningham. The net revenues of the stations which we consolidate were $284.4 million, $286.3 million and $235.8 million for the years
ended December 31, 2015, 2014, and 2013, respectively. The fees paid between us and the licensees pursuant to these arrangements are
eliminated in consolidation. See Changes in the Rules of Television Ownership and Joint Sale Agreements within Note 11. Commitments and
Contingencies for discussion of recent changes in FCC rules related to JSAs.
Up until third quarter of 2014, we had consolidated Cunningham (parent entity), in addition to their stations that we perform services
for, as we had previously determined that it was a VIE because it had insufficient equity at risk. As of September 30, 2014, we
concluded that Cunningham was no longer a VIE given its significant equity at risk in assets that we have no involvement with, and
deconsolidated this entity, along with WTAT and WYZZ, stations that Cunningham acquired from us in July 2014 and November 2013,
respectively, with which we have no continuing involvement. As a result of the deconsolidation, we recorded the difference between the
proceeds received from Cunningham for the sale of WTAT and WYZZ to additional paid in capital in the consolidated balance sheet, as
well as reflected the noncontrolling interest deficit of the remaining Cunningham VIEs which represents their significant cumulative
distributions made to Cunningham (parent entity) that were previously eliminated in consolidation.
2015 Annual Report 33
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, 2015 and 2014 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:
Accounts payable and accrued liabilities
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
Other long-term liabilities
Total liabilities
2015
2014
$
490 $
21,719
13,287
331
35,827
4,541
7,609
787
17,599
79,086
6,924
152,373 $
1,240 $
3,687
12,627
17,554
24,594
13,679
8,067
63,894 $
$
$
$
491
19,521
9,544
297
29,853
6,922
9,716
787
16,935
96,732
2,376
163,321
1,365
3,659
9,714
14,738
28,640
10,161
8,739
62,278
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 payments made under these LMAs as of December 31, 2015 and
2014, which are excluded from liabilities above, were $37.6 million and $34.4 million, respectively. The total capital lease liabilities, net of
capital lease assets, excluded from the above were $4.5 million and $4.3 million, respectively for the years ended December 31, 2015 and
2014, respectively. Also excluded from the amounts above are liabilities associated with the certain outsourcing agreements and purchase
options with certain VIEs totaling $72.5 million and $78.1 million as of December 31, 2015 and December 31, 2014, respectively, as
these amounts are eliminated in consolidation. The risk and reward characteristics of the VIEs are similar.
Other investments. 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 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, 2015 and
2014 was $18.1 million and $22.7 million, respectively, are included in other assets in the consolidated balance sheets. See Other Assets
below for more information related to our equity and cost method investments. 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 $7.7 million, $2.2 million and $2.1 million for the years ended
December 31, 2015, 2014 and 2013, respectively, related to these investments.
34 Sinclair Broadcast Group
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 May 2014, the Financial Accounting Standards Board (FASB) issued guidance on revenue recognition for revenue from contracts
with customers. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of
promised goods or services to customers and will replace most existing revenue recognition guidance when it becomes effective. The
new standard was to be effective for annual reporting periods beginning after December 15, 2016. In August 2015, the FASB decided to
defer the effective date by one year to the annual reporting period beginning after December 15, 2017, however, early adoption as of the
original effective date will be permitted. The standard permits the use of either the retrospective or cumulative effect transition method.
We are currently evaluating the impact of this guidance on our financial statements.
In August 2014, the FASB issued guidance on disclosure of uncertainties about an entity’s ability to continue as a going concern.
The new standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods
thereafter. We are currently evaluating the impact of this new guidance on our financial statements.
In February 2015, the FASB issued new guidance that amends the current consolidation guidance on the determination of whether
an entity is a variable interest entity. This new standard is effective for the interim and annual periods beginning after December 15,
2015. We are currently evaluating the impact of this new guidance on our financial statements.
In April 2015, the FASB issued guidance related to the presentation of debt issuance costs in the balance sheet. The guidance requires
costs paid to third parties that are directly attributable to issuing a debt instrument to be presented as a direct deduction from the
carrying value of the debt as opposed to an asset. The new standard is effective for the annual reporting periods beginning after
December 15, 2015 with early adoption permitted, and is required to be applied retrospectively. We applied the change in accounting as
of June 30, 2015 with retrospective application to prior periods. As such, within our consolidated balance sheet as of December 31,
2014, we have decreased the amounts previously reported as other assets and notes payable, capital leases and commercial bank
financing, less current portion by $41.8 million. The change in accounting principle does not have an impact on our statements of
operations or cash flows.
In September 2015, the FASB issued guidance on the recognition of measurement period adjustments in connection with business
combinations. The new standard eliminates the requirement to restate prior period financial statements for measurement period
adjustments and now requires the cumulative impact of a measurement period adjustment, including the impact on prior periods, be
recognized in the reporting period in which the adjustment is identified. The new standard also requires an entity to present separately on
the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item
that would have been recorded in previous reporting periods if the adjustments had been recognized as of the acquisition date. We have
early adopted this guidance effective September 30, 2015. We made certain immaterial measurement period adjustments related to prior
period acquisitions during the year ended December 31, 2015. See Note 2. Acquisitions for more information. The impact of the
adoption did not have a material impact on our financial statements.
In November 2015, FASB issued guidance requiring all deferred tax assets and liabilities, and any related valuation allowance, to be
classified as noncurrent on the classified statement of financial position. We early adopted the guidance and applied the change in
accounting as of December 31, 2015 with retrospective application to prior periods. As such, within our consolidated balance sheet as
of December 31, 2014, we reclassified $6.7 million of deferred tax liabilities from current to long-term. The change in accounting
principle does not have an impact on our statements of operations or cash flows.
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.
2015 Annual Report 35
Restricted Cash
During 2015, we entered into certain definitive agreements to purchase certain stations discussed in under Pending Acquisitions in Note
11. Commitments and Contingencies, which required certain deposits to be made in escrow accounts. As of December 31, 2015, we had $3.7
million restricted cash classified as noncurrent related to the amounts held in escrow for these acquisitions.
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, 2015, 2014 and 2013 is as follows (in
thousands):
Balance at beginning of period
Charged to expense
Net write-offs
Balance at end of period
Programming
2015
2014
2013
$
$
4,246 $
1,292
(1,043 )
4,495 $
3,379 $
2,186
(1,319 )
4,246 $
3,091
1,802
(1,514 )
3,379
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 and two-year contracts, amortization of program contract costs is computed
using an accelerated method. Program contract costs are amortized on a straight-line basis for one and two-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 the accounting guidance for the broadcasting industry. 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.
36 Sinclair Broadcast Group
We broadcast certain customers’ advertising in exchange for equipment, merchandise and services. The estimated fair value of the
equipment, merchandise or services received is recorded as deferred barter costs and the corresponding obligation to broadcast
advertising is recorded as deferred barter revenues. The deferred barter costs are expensed or capitalized as they are used, consumed or
received and are included in station production expenses and station selling, general and administrative expenses, as applicable. Deferred
barter revenues are recognized as the related advertising is aired and are recorded in revenues realized from station barter arrangements.
Other Assets
Other assets as of December 31, 2015 and 2014 consisted of the following (in thousands):
Equity and cost method investments
Unamortized costs related to debt issuances
Other
Total other assets
2015
2014
116,031 $
3,663
55,872
175,566 $
107,847
5,274
62,082
175,203
$
$
We have equity and cost method investments primarily in private equity investments 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, 2015, 2014 and 2013, none of our investments were significant individually or in the aggregate.
As of December 31, 2015 and 2014, our unfunded commitments related to private equity investment funds totaled $22.1 million and
$15.6 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, 2015, we recorded a $6.0 million impairment charge related to one real estate investment. For the year ended December
31, 2014, we there were no impairment charges recorded. 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 investments
in our consolidated statement of operations.
Unamortized costs related to debt issuances represents direct costs related to our revolving credit facility and is amortized to interest
expense over the term of the debt using the effective interest method. As discussed in Recent Accounting Pronouncements in this note above,
unamortized costs related to our other debt issuances is recorded as a direct deduction from the carrying value of the debt recorded as
liability. 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.
Impairment of Goodwill, Intangibles and Other 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 broadcast licenses 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 determine, based upon a qualitative assessment, whether it is more-likely-than-
not a reporting unit has been impaired. As part of this qualitative assessment, for each reporting unit, we weigh the relative impact of
factors that are specific to the reporting unit as well as industry and macroeconomic factors. The reporting unit specific factors that we
consider include current and forecasted financial performance, the significance of the excess fair value over carrying value in prior
quantitative assessments, and any changes to the reporting units’ carrying amounts since the most recent impairment tests. We also
consider whether there were any significant changes in the regulatory environment and business climate of the industry, and whether
there were any negative pressures on growth rates and discount rates.
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, we determine the fair value of the reporting unit and compare that fair value to the net book value of the reporting unit. The
2015 Annual Report 37
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 based on our internal forecast of future performance, as well
as discount rates that are 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. 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 apply a qualitative assessment to assess whether it
is more-likely-than-not that broadcast licenses of a market are impaired. As part of this qualitative assessment, for each market, we
weigh the relative impact of factors that are specific to the market as well as industry and macroeconomic factors that could affect the
significant inputs used to determine the fair value of our broadcast license assets. The market specific factors that we consider include
recent market projections from both independent and internal sources for advertising revenue and operating costs, estimated normal
market share and capital expenditures, as well as the significance of the excess fair value over carrying value in prior quantitative
assessments. We also consider whether there were any significant changes in the regulatory environment and business climate of the
industry, and whether there were any negative pressures on growth rates and discount rates. When evaluating our broadcast licenses for
impairment, the qualitative assessment is done at the market level 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 perform a quantitative assessment by comparing the aggregate fair value of the broadcast licenses
in the market to the respective carrying values. We apply the income approach, using a Greenfield method, to estimate the fair values of
the broadcast licenses. The income approach method involves a discounted cash flow model that incorporates several variables,
including, but not limited to, market revenues and long-term growth projections, estimated market share for the typical participant
without a network affiliation 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 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. 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 6. Goodwill, Broadcast Licenses and Other Intangible Assets, for
more information.
Accounts Payable and Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2015 and 2014 (in thousands):
Compensation and employee health insurance
Interest
Deferred revenue
Programming related obligations
Other accruals relating to operating expenses
Total accounts payable and accrued liabilities
We expense these activities when incurred.
38 Sinclair Broadcast Group
2015
2014
65,364 $
32,788
24,837
54,381
73,943
251,313 $
56,871
33,347
27,037
70,344
73,249
260,848
$
$
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, 2015 and 2014, 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. Future changes in operating and/or taxable income or other changes in facts and circumstances could significantly
impact the ability to realize our deferred tax assets which could have a material effect on our consolidated financial statements.
Management periodically performs a comprehensive review of our tax positions and we record a liability for unrecognized tax benefits
when such tax positions do not meet the “more-likely-than-not” threshold. Significant judgment is required in determining whether a tax
position meets the “more-likely-than-not” threshold, and it is based on a variety of facts and circumstances, including interpretation of
the relevant federal and state income tax codes, regulations, case law and other authoritative pronouncements. Based on this analysis, the
status of ongoing audits and the expiration of applicable statute of limitations, liabilities are adjusted as necessary. The resolution of
audits is unpredictable and could result in tax liabilities that are significantly higher or lower than for what we have provided. See Note 10.
Income Taxes, for further discussion of accrued unrecognized tax benefits.
Supplemental Information — Statements of Cash Flows
During 2015, 2014 and 2013, 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
2015
2014
2013
106,979 $
196 $
182,425 $
100,986 $
1,407 $
157,349 $
26,037
4,414
147,083
$
$
$
Non-cash transactions related to capital lease obligations were $2.8 million and $10.4 million for the years ended December 31, 2015,
and 2013, respectively. There were no non-cash transactions related to capital lease obligations for the year ended December 31, 2014.
The non-cash conversion of the 4.875% Notes into Class A Common Stock was $8.6 million, net of taxes for the year ended
December 31, 2014.
Revenue Recognition
Total revenues include: (i) cash and barter advertising revenues, net of agency commissions; (ii) retransmission consent fees;
(iii) network compensation; (iv) other media revenues and (v) revenues from our other businesses.
Advertising revenues, net of agency commissions, are recognized in the period during which advertisements are placed.
Some of our retransmission consent agreements contain both advertising and retransmission consent elements. We have determined
that these 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.
2015 Annual Report 39
Share Repurchase Program
On October 28, 1999, we announced a $150.0 million share repurchase program, which was renewed on February 6, 2008. On
March 20, 2014, the Board of Directors authorized an additional $150.0 million share repurchase authorization. There is no expiration
date, and currently management has no plans to terminate this program. For the year ended December 31, 2015, we have purchased
approximately 1.1 million shares for $28.8 million. As of December 31, 2015, the total remaining authorization was $105.5 million.
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 $23.9 million, $21.3
million and $15.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Financial Instruments
Financial instruments, as of December 31, 2015 and 2014, 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 7. Notes Payable and Commercial Bank Financing, for additional information regarding the fair value of
notes payable.
Post-retirement Benefits
During the fourth quarter of 2015, we fully settled the benefit obligation of our pension plan. We relieved our benefit obligation via
lump sum distributions and/or the purchase of annuity contracts. Upon settlement we recorded $9.3 million of pension expense,
including the recognition of $8.0 million of unamortized actuarial loses which was recorded in accumulated other comprehensive
income, and $4.6 million of pension liability, representing the underfunded status of our defined pension plan, which was included
within other long-term liabilities within our consolidated balance sheet.
In connection with the 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.
While the nonqualified plan is unfunded, 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 carrying value of the annuity contracts and life
insurance policies was $2.2 million and $2.4 million as of December 31, 2015 and 2014, respectively, which was included in other assets
in our consolidated balance sheet.
As of December 31, 2015, the estimated projected benefit obligation was $22.4 million, of which $1.8 million is included in accrued
expenses in the consolidated balance sheet and the $20.6 million is included in other long-term liabilities. During the years ended
December 31, 2015 and 2014, we made $1.5 million and $2.1 million in benefit payments, recognized $0.9 million and $1.0 million of
periodic pension expense, reported in other expenses in the consolidated statement of operations, and $1.0 million of actuarial gains and
$3.2 million of actuarial losses through other comprehensive income, respectively.
At December 31, 2015, the projected benefit obligation was measured using a 4.11% discount rate compared to a discount rate of
3.69% for the year ended December 31, 2014. 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.
40 Sinclair Broadcast Group
We estimate that benefits expected to be paid to participants under the Fisher SERP as follows (in thousands):
2016
2017
2018
2019
2020
Next 5 years
$
December 31,
1,791
1,717
1,649
1,587
1,535
7,089
Reclassifications
Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s
presentation.
2. ACQUISITIONS:
During the years ended December 31, 2015, 2014 and 2013, we acquired certain assets related to a total of 88 television stations in 49
markets, in the aggregate, for an aggregate purchase price of $2,466.6 million plus working capital of $55.7 million, which is comprised
of 1 station in 1 market in 2015 for a purchase price of $15.5 million; 22 stations in 15 markets in 2014 for an aggregate purchase price
of $1,434.5 million plus working capital of $47.3 million; and 65 stations in 33 markets in 2013 for a purchase price $1,016.6 million plus
working capital of $8.4 million. All of these acquisitions provide expansion into additional markets and increases value based on the
synergies we can achieve. The following summarizes the material acquisition activity during the years ended December 31, 2014 and
2013:
2014 Acquisitions
Allbritton. Effective August 1, 2014, we completed the acquisition of all of the outstanding common stock of Perpetual Corporation
and equity interest of Charleston Television, LLC (together the “Allbritton Companies”) for $985.0 million plus working capital of $50.1
million. The Allbritton Companies owned and operated nine television stations in the following seven markets, all of which were
affiliated with ABC: Washington, DC; Birmingham, AL; Harrisburg, PA; Little Rock / Pine Bluff, AR; Tulsa, OK; Roanoke / Lynchburg,
VA; and Charleston, SC. Also included in the purchase was NewsChannel 8, a 24-hour cable/satellite news network covering the
Washington, D.C. metropolitan area. We financed the total purchase price with proceeds from the issuance of 5.625% senior unsecured
notes, a draw on our amended bank credit agreement, and cash on hand. See Note 7. Notes Payable and Commercial Bank Financing. In
connection with the acquisition, we sold the acquired assets related to the Harrisburg, PA station effective September 1, 2014. See Note
3. Disposition of Assets and Discontinued Operations for further discussion.
MEG Stations. Effective December 19, 2014, we completed the acquisition of four television stations in three markets from Media
General, Inc. (MEG Stations) for a purchase price of $207.5 million less working capital of $1.6 million. The acquired stations are
located in the following markets: Providence, RI / New Bedford, MA; Green Bay / Appleton, WI; and Savannah, GA. We financed the
purchase price with cash on hand and borrowing under our revolving credit facility. Simultaneously, we sold to Media General, our
television stations in Tampa, FL and Colorado Springs, CO. See Note 3. Disposition of Assets and Discontinued Operations for further
discussion. We financed the purchase price, net of the proceeds received from the sale of those stations, with borrowings under our
revolving credit facility.
KSNV. Effective November 1, 2014, we completed the acquisition of certain of assets of KSNV (NBC) in Las Vegas, NV from
Intermountain West Communications Company (Intermountain West) for $118.5 million less working capital of $0.2 million. In
conjunction with the purchase, we assumed the rights under the affiliation agreement with NBC and swapped our KVMY call letters for
the KSNV call letters. We financed the total purchase price with cash on hand and borrowings under our revolving credit facility.
Other 2014 Acquisitions. During the year ended December 31, 2014, we acquired certain assets related to eight other television stations
in the following four markets: Wilkes Barre / Scranton, PA; Tallahassee, FL; Gainesville, FL; and Macon, GA. The purchase price for
these stations was $123.5 million less working capital of $1.1 million which was financed with cash on hand and borrowings under our
revolving credit facility.
2015 Annual Report 41
2013 Acquisitions
Barrington. Effective November 22, 2013, we completed the acquisition of certain assets of Barrington Broadcasting Company, LLC
(Barrington) for $370.0 million, less working capital of $2.3 million, which related to twenty-four stations in the following fifteen
markets: Flint/Saginaw/Bay City/Midland, MI; Toledo, OH; Columbia, SC; Syracuse, NY; Harlingen/Weslaco/Brownsville/McAllen,
TX; Colorado Springs, CO; Myrtle Beach/Florence, SC; Peoria/Bloomington, IL; Traverse City/Cadillac, MI; Amarillo, TX;
Columbia/Jefferson City, MO; Albany, GA; Quincy, IL/Hannibal, MO/Keokuk, IA; Marquette, MI; and Ottumwa, IA/Kirksville, MO.
Concurrent with the purchase, we entered into certain agreements with third parties to provide certain operational services to five of the
stations. The purchase price includes $7.5 million paid by third parties for the license related assets these certain stations. We financed
the purchase price with borrowings under our bank credit facility.
Fisher. Effective August 8, 2013, we completed the acquisition of all of the outstanding common stock of 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 owned and/or operated twenty-two television stations in the following eight markets: Seattle-Tacoma, WA;
Portland, OR; Spokane, WA; Boise, ID; Eugene, OR; Yakima/Pasco/Richland/Kennewick, WA; Bakersfield, CA; and Idaho
Falls/Pocatello, ID. Also included in the purchase were the assets of four radio stations in the Seattle/Tacoma, WA market.
Other 2013 Acquisitions. During the year ended December 31, 2013, we acquired nineteen other television stations in the following eight
markets: Baltimore, MD; Fresno / Visalia, CA; Omaha, NE; Portland, ME; El Paso, TX; Johnstown / Altoona, PA; Reno, NV; Sioux
City, IA; and Wheeling, WV / Steubenville, OH. The purchase price of $272.7 million plus working capital of $10.8 million includes
$0.7 million paid by certain VIEs for the license assets of certain of these stations owned by VIEs that we consolidate.
The following tables summarize the allocated fair value of acquired assets and assumed liabilities, including the net assets of
consolidated VIEs (in thousands):
MEG
Stations
KSNV
Allbritton
Other
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
— $
476
1,954
23,462
675
125,925
—
—
(2,085 )
(1,914 )
—
—
148,493
57,398
— $
67
482
8,300
—
70,375
—
—
(277 )
(481 )
—
(1,200 )
77,266
41,024
38,542 $
19,890
1,204
46,600
13,700
564,100
20,352
83,200
(8,351 )
(1,140 )
(261,291 )
(17,263 )
499,543
535,694
Total 2014
acquisitions
38,542
20,512
6,201
86,714
14,600
848,315
21,852
83,200
(11,856 )
— $
79
2,561
8,352
225
87,915
1,500
—
(1,143 )
(2,554 )
—
—
96,935
25,501
(6,089 )
(261,291 )
(18,463 )
822,237
659,617
$
205,891
$
118,290
$
1,035,237
$
122,436
$
1,481,854
42 Sinclair Broadcast Group
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
Less: fair value of non-controlling interest
Total
Fisher
Barrington
Other
Total 2013
acquisitions
$
$
13,531 $
29,485
19,133
11,427
73,968
29,771
166,034
9,284
6,339
(20,127 )
(10,977 )
(74,177 )
(23,384 )
230,307
143,942
(1,053 )
373,196 $
— $
—
681
4,011
73,621
719
220,253
—
—
(2,725 )
(3,813 )
—
(65 )
292,682
75,004
—
367,686 $
— $
8,226
5,217
6,050
67,034
4,395
169,438
1,394
—
(3,926 )
(6,331 )
(2,304 )
(10,550 )
238,643
45,538
—
284,181 $
13,531
37,711
25,031
21,488
214,623
34,885
555,725
10,678
6,339
(26,778 )
(21,121 )
(76,481 )
(33,999 )
761,632
264,484
(1,053 )
1,025,063
The allocations presented above are 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 purchase
prices have been allocated to the acquired assets and assumed liabilities based on estimated fair values.
During the year ended December 31, 2015, we made certain measurement period adjustments to the initial purchase accounting for the
acquisitions in 2014, resulting in reclassifications between certain noncurrent assets and noncurrent liabilities, including a decrease to
property and equipment of approximately $12.5 million, a decrease to broadcast licenses of $3.4 million, an increase to definite-lived
intangible assets of $58.3 million, and a decrease to goodwill of $42.2 million, as well as a corresponding decrease to depreciation of $0.7
million and a decrease to amortization of $0.7 million during the year ended December 31, 2015.
The intangible assets will be amortized over the estimated remaining useful lives of 15 years for network affiliations and 10-15 years
for the customer relationships. 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. Other intangible assets will be amortized over the respective weighted average useful lives ranging from 14 to 15 years.
2015 Annual Report 43
The following tables summarize the amounts allocated to definite-lived intangible assets representing the estimated fair values and
estimated goodwill deductible for tax purposes (in thousands):
Network affiliations
Customer relationships
Other intangible assets
Fair value of identifiable definite-lived intangible assets
acquired
Estimated goodwill deductible for tax purposes
MEG
Stations
$
56,925
45,500
23,500
KSNV
44,775
25,600
—
$
Allbritton
356,900
207,200
—
Other
27,575
44,800
15,540
$
Total 2014
acquisitions
486,175
323,100
39,040
125,925
57,398
$
$
70,375
41,024
$
$
564,100
—
$
$
87,915
25,501
$
$
848,315
123,923
$
$
$
Network affiliations
Customer relationships
Other intangible assets
Fair value of identifiable definite-lived intangible assets acquired
Estimated goodwill deductible for tax purposes
Fisher
Barrington
Other
$
117,499
18,110
30,425
$
103,245
41,939
75,069
$
99,805
19,992
49,641
Total 2013
acquisitions
320,549
80,041
155,135
166,034
10,765
$
$
$
220,253
75,004
169,438
111,208
$
$
555,725
196,977
$
$
$
The following tables summarize the results of the acquired operations included in the financial statements of the Company
beginning on the acquisition date of each acquisition as listed above (in thousands):
Revenues
MEG Stations
KSNV
Allbritton
Barrington
Fisher
Other stations acquired in:
2014
2013
Total net broadcast revenues
Operating Income
MEG Stations
KSNV
Allbritton
Barrington
Fisher
Other stations acquired in:
2014
2013
Total operating income
2015
2014
2013
69,275 $
32,471
231,300
154,279
183,667
42,470
140,208
853,670 $
2,299 $
5,972
106,258
173,013
184,534
9,172
139,521
620,769 $
—
—
—
16,927
79,078
—
52,440
148,445
2015
2014
2013
15,246 $
7,206
39,550
24,435
27,086
8,451
23,068
145,042 $
1,010 $
2,108
26,914
34,875
26,940
1,569
26,487
119,903 $
—
—
—
4,096
19,019
—
12,007
35,122
$
$
$
$
In connection with the 2014 and 2013 acquisitions, for the years ended December 31, 2014 and 2013, we incurred a total of $5.7
million, and $2.8 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.
44 Sinclair Broadcast Group
Pro Forma Information
The following table sets forth unaudited pro forma results of operations, assuming that the 2014 and 2013 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 the 2014 and 2013 acquisitions presented under Other above, as they were deemed not material both individually and in
the aggregate (in thousands, except per share data):
Total revenues
Net Income
Net Income attributable to Sinclair Broadcast Group
Basic earnings per share attributable to Sinclair Broadcast Group
Diluted earnings per share attributable to Sinclair Broadcast Group
(Unaudited)
2014
2013
2,150,124 $
189,174 $
186,338 $
1.92 $
1.90 $
1,838,167
41,323
38,974
0.42
0.42
$
$
$
$
$
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, and exclusion of nonrecurring
financing and transaction related costs. 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 and net income exclude the results of the stations acquired in 2014 or 2013 that were subsequently
sold, as discussed above and in Note 3. Disposition of Assets and Discontinued Operations.
3. DISPOSITION OF ASSETS AND DISCONTINUED OPERATIONS:
Discontinued Operations
The operating results of our television stations in Lansing, MI (WLAJ-TV), which was sold effective March 1, 2013 for $14.4 million,
and Providence, RI (WLWC-TV), which was sold effective April 1, 2013 for $13.8 million, are not included in our consolidated results of
operations from continuing operations for the year ended December 31, 2013 and were classified as discontinued operations. Total
revenues and income before taxes 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, and $0.2 million and $0.4 million, respectively. The resulting gain on the sale of
these stations in 2013 was negligible. In 2014, the FASB issued new guidance that changes the criteria for determining which disposals
can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued
operation is defined as a disposal of a component or group of components that is disposed of and represents a strategic shift that has,
or will have, a major effect on an entity’s operations and financial results. We early adopted this new guidance in 2014. If this guidance
were effective for the above discontinued operations, then the sale of those television stations would not have met the criteria under the
new guidance.
We recognized an $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 10. Income Taxes for further information.
Dispositions related to station acquisitions
As discussed in Note 2. Acquisitions, we completed the acquisition of certain broadcast assets from Media General. Simultaneously, in
December 2014, we sold to Media General the broadcast assets of WTTA in Tampa, FL and KXRM/KXTU in Colorado Springs, CO
for $93.1 million less working capital of $0.6 million. For the year ended December 31, 2014, we recognized a $39.0 million gain on sale
related to WTTA.
Concurrent with the acquisition of the Allbritton companies discussed in Note 2. Acquisitions, due to FCC multiple ownership rules, we
sold WHTM in Harrisburg/Lancaster/York, PA to Media General in September 2014 for $83.4 million, less working capital of $0.2
million and the non-license assets of WTAT in Charleston, SC to Cunningham for $14.0 million, effective August 1, 2014. WHTM was
acquired from the Allbritton companies and assets of WHTM were classified as assets held for sale in the Allbritton purchase price
allocation. We did not recognize a gain or loss on this transaction. Prior to the sale of WTAT, we operated the station under an LMA
2015 Annual Report 45
and purchase agreement with Cunningham. This sale was accounted for as a transaction between parties under common control. See
Note 12. Related Person Transactions for further discussion.
Concurrent with the Barrington acquisition, due to FCC multiple ownership rules, we sold our station, WSYT (FOX), and assigned its
LMA with WNYS (MNT), in Syracuse, NY to a third party for $15.0 million, and recognized a loss on sale of $3.3 million. We also sold
our station, WYZZ (FOX) in Peoria, IL, which receives non-programming related sales, operational and administrative services from
Nexstar Broadcasting pursuant to certain outsourcing agreements, to Cunningham for $22.0 million. This sale was accounted for as a
transaction between parties under common control. See Note 12. Related Person Transactions for further discussion.
Concurrent with the Fisher acquisition discussed in Note 2. Acquisitions, a third party that performed certain services pursuant to an
outsourcing agreement to the station that we acquired, KIDK and KXPI in Idaho Falls, ID, exercised an existing purchase option to
purchase 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 Fisher purchase price allocation. See Note 2. Acquisitions for further discussion.
The dispositions of the above assets did not meet the criteria for classification as discontinued operations, therefore the results of
operations are included in continuing operations in our consolidated statements of operations.
Assets Held for Sale
As of December 31, 2014, we classified the assets and liabilities of Triangle Sign & Service, LLC (Triangle) as held for sale, however it
is no longer our intent to divest of Triangle and therefore the assets and liabilities are not classified as held for sale as of December 31,
2015. The results of operations related to Triangle are included within the results of continuing operations as the criteria for
classification as discontinued operations were not met.
4. STOCK-BASED COMPENSATION PLANS:
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. Under the LTIP, we have issued restricted stock
awards (RSAs), stock grants to our non-employee directors, stock-settled appreciation rights (SARs) and stock options. A total of
14,000,000 shares of Class A Common Stock are reserved for awards under this plan. As of December 31, 2015, 7,753,059 shares
(including forfeited shares) were available for future grants. Additionally, we have the following arrangements that involve stock-based
compensation: employer matching contributions (the Match) for participants in our 401(k) plan, an employee stock purchase plan
(ESPP), and subsidiary stock awards. Stock-based compensation expense has no effect on our consolidated cash flows. For the years
ended December 31, 2015, 2014 and 2013, we recorded stock-based compensation of $18.0 million, $13.9 million and $10.6 million,
respectively. Below is a summary of the key terms and methods of valuation of our stock-based compensation awards:
RSAs. RSAs issued in 2015, 2014 and 2013 have certain restrictions that lapse over two years at 50% 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 closing value of the stock on the measurement date.
The following is a summary of changes in unvested restricted stock:
Unvested shares at December 31, 2014
2015 Activity:
Granted
Vested
Forfeited
Unvested shares at December 31, 2015
RSAs
229,700 $
101,050
(192,850 )
—
137,900
Weighted-Average
Price
18.71
24.93
16.89
—
25.81
For the years ended December 31, 2015, 2014 and 2013, we recorded compensation expense of $5.3 million, $3.2 million and $2.7
million, respectively. The majority of the unrecognized compensation expense of $1.1 million as of December 31, 2015 will be
recognized in 2016. During 2015, RSAs increased the weighted average shares outstanding for purposes of determining dilutive earnings
per share.
46 Sinclair Broadcast Group
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 unrestricted shares of Class A Common Stock. In 2015, 2014 and 2013, we issued
20,000 shares, 12,000 shares and 31,250 shares, respectively. We recorded expense of $0.6 million, $0.4 million and $0.8 million for each
of the years ended December 31, 2015, 2014 and 2013, respectively, which was based on the average share price of the stock on the date
of grant. 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.
SARs. During the years ended December 31, 2015, 2014 and 2013, 310,000, 200,000 and 500,000 SARs were granted with base values
per share of $24.93, $27.86 and $14.21, respectively, to our President and Chief Executive Officer. The SARs have a 10-year term and
vest immediately. The base value of each SAR is equal the closing price of our Class A Common Stock on the grant date. For the years
ended December 31, 2015, 2014 and 2013, we recorded compensation expense equal to the estimated fair value at the grant date, of $2.6
million, $2.6 million and $3.2 million, respectively. We valued the SARs using the Black-Scholes model and the following assumptions:
Risk-free interest rate
Expected years until exercise
Expected volatility
Annual dividend yield
2015
2014
2013
1.3 %
1.5 %
0.9 %
5 years
5 years
5 years
47 %
2.7 %
65 %
2.2 %
73 %
4.3 %
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for U.S. Treasury zero coupon
separate trading of registered interest and principal securities, commonly known as STRIPS, that approximate the expected life of the
options. The expected volatility is based on our historical stock prices over a period equal to the expected life of the options. The
annual dividend yield is based on the annual dividend per share divided by the share price on the grant date.
The following is a summary of the 2015 activity:
Outstanding at December 31, 2014
2015 Activity:
Granted
Exercised
Outstanding SARs at December 31, 2015
SARs
1,600,000 $
310,000
—
1,910,000
Weighted-
Average Price
15.08
24.93
—
16.68
The aggregate intrinsic value of the 1,910,000 outstanding as of December 31, 2015 was $30.3 million, and the outstanding SARs
have a weighted average remaining contractual life of 6.41 years as of December 31, 2015. During 2015, 2014 and 2013, outstanding
SARs increased the weighted average shares outstanding for purposes of determining dilutive earnings per share.
Options. Effective April 1, 2014, we entered into an employment agreement with our Chief Financial Officer, to grant annually on each
December 31, an option to purchase 125,000 shares of Class A Common Stock beginning December 31, 2014 through December 31,
2021. Upon grant, the stock options are immediately exercisable. The maximum aggregate intrinsic value that can be earned under the
arrangement cannot exceed $20 million. The stock options are granted with an exercise price equal to the closing price of the stock on
the date of grant and have a 10 year contractual life.
Outstanding at December 31, 2014
2015 Activity:
Granted
Exercised
Outstanding Options at December 31, 2015
Options
125,000 $
125,000
—
250,000
Weighted-
Average Price
27.36
32.54
—
29.95
Since the stock options are fully vested upon grant and requisite service must be satisfied to receive the award, we estimate the fair
value of each of the options to be issued in the future and recognize the compensation expense over the period until the actual grant
date. The fair value of each award is remeasured each period until the actual grant with the ultimate cumulative expense equaling the
grant date fair value of the award. During the years ended December 31, 2015 and 2014, we recorded $0.8 million and $1.5 million of
2015 Annual Report 47
stock-based compensation expense related to this arrangement, respectively, based on estimated fair values of each of the options, of
which $0.8 million and $1.1 million were attributable to the options granted on December 31, 2015 and 2014, respectively.
We value the stock options using the Black-Scholes pricing model. We used the following inputs to the model to value the options
granted on December 31, 2015 and 2014, which have an exercise price of $32.54 and $27.36 per share, respectively:
Risk-free interest rate
Expected years to exercise
Expected volatility
Annual dividend yield
2015
2014
1.9 %
1.8 %
5 years
5 years
42.1 %
2.0 %
47.6 %
2.3 %
The risk-free interest rate is based on the U.S. Treasury yield curve, in effect at the time of grant, for U.S. Treasury STRIPS that
approximate the expected life of the options. The expected volatility is based on our historical stock prices over a period equal to
the expected life of the options. The annual dividend yield is based on the annual dividend per share divided by the share price on
the grant date.
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, 2015, 2014 and 2013, we recorded $6.2 million,
$5.2 million and $3.1 million, respectively, of stock-based compensation expense related to the Match. A total of 3,000,000 shares of
Class A Common Stock are reserved for matches under the plan. As of December 31, 2015, 598,739 shares were available for future
grants.
ESPP. The ESPP allows eligible employees to purchase Class A Common Stock at 85% of the lesser of the fair value of the common
stock as of the first day of the quarter and as of the last day of that quarter, subject to certain limits as defined in the ESPP. The stock-
based compensation expense recorded related to the ESPP for the years ended December 31, 2015, 2014 and 2013 was $0.7 million, $0.7
million and $0.3 million, respectively. A total of 2,200,000 shares of Class A Common Stock are reserved for awards under the plan. As
of December 31, 2015, 132,383 shares were available for future grants.
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, 2015, 2014 and 2013, we recorded compensation expense of $1.8 million,
$0.2 million and $0.3 million, respectively, related to these awards which increase noncontrolling interest equity. These awards have no
effect on the shares used in our basic and diluted earnings per share.
48 Sinclair Broadcast Group
5. 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, 2015 and 2014 (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
2015
2014
60,678 $
91,106
210,597
667,454
85,411
22,693
47,402
84,474
34,666
1,304,481
(587,344 )
717,137 $
55,269
113,514
192,478
684,176
70,402
19,091
37,726
81,625
18,774
1,273,055
(520,517 )
752,538
$
$
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 added a $2.8 million capital lease in the quarter ended December
31, 2015. We recorded capital lease depreciation expense of $3.9 million, $3.7 million and $4.0 million for the years ended December 31,
2015, 2014 and 2013, respectively.
2015 Annual Report 49
6. 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 $1,931.1 million and $1,964.6 million at
December 31, 2015 and 2014, respectively. The change in the carrying amount of goodwill related to continuing operations was as
follows (in thousands):
Balance at December 31, 2013
Goodwill
Accumulated impairment losses
Acquisition of television stations (a)
Sale of broadcast assets (d)
Deconsolidation of variable interest entities (b)
Measurement period adjustments related to 2013 acquisitions
Assets held for sale (e)
Balance at December 31, 2014 (c)
Goodwill (a)
Accumulated impairment losses
Acquisition of television stations (a)
Measurement period adjustments related to 2014 acquisitions
Change in assets held for sale (e)
Balance at December 31, 2015 (c)
Goodwill
Accumulated impairment losses
Broadcast
Other
Consolidated
$
1,790,167 $
(413,573 )
1,376,594
701,854
(26,731 )
(21,357 )
(66,320 )
—
2,377,613
(413,573 )
1,964,040
5,802
(42,237 )
—
3,488 $
—
3,488
—
—
—
—
(2,975 )
513
—
513
—
—
2,975
1,793,655
(413,573 )
1,380,082
701,854
(26,731 )
(21,357 )
(66,320 )
(2,975 )
2,378,126
(413,573 )
1,964,553
5,802
(42,237 )
2,975
2,341,178
(413,573 )
1,927,605 $
$
3,488
—
3,488 $
2,344,666
(413,573 )
1,931,093
(a)
In 2015 and 2014, we acquired goodwill as a result of acquisitions as discussed in Note 2. Acquisitions.
(b) In 2014, we deconsolidated certain variable interest entities and the amounts relate to WYZZ in Peoria, IL and WTAT in Charleston,
SC, as discussed in Variable Interest Entities within Note 1. Nature of Operations and Summary of Significant Accounting Policies.
(c) Approximately $0.8 million of goodwill relates to consolidated VIEs as of December 31, 2015 and 2014.
(d) Amounts relate to the 2014 sale of WTTA in Tampa, FL and KXRM/KXTU in Colorado Springs, CO. See Note 3. Disposition of Assets
and Discontinued Operations for further discussion on the sale of these stations.
(e) We concluded that the assets of Triangle were no longer classified as assets held for sale. See Note 3. Disposition of Assets and Discontinued
Operations for further discussion.
We did not have any indicators of impairment in any interim period in 2015, 2014, or 2013, and therefore did not perform interim
impairment tests for goodwill during those periods. We performed our annual impairment tests for goodwill in the fourth quarter of
2015 and 2014 and as a result of our qualitative assessment we concluded based on our qualitative assessment of goodwill 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.
The qualitative factors for our reporting units reviewed during our annual assessments, 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.
50 Sinclair Broadcast Group
As of December 31, 2015 and 2014, 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
Impairment charge
Measurement period adjustments related to 2014 acquisitions
Deconsolidation of variable interest entities (b)
Ending balance (c)
2015
2014
135,075
992
(175 )
—
(3,427 )
—
132,465
101,029
18,027
(45 )
(3,240 )
19,355
(51 )
135,075
(a)
In 2015 and 2014, we acquired broadcast licenses as a result of acquisitions as discussed in Note 2. Acquisitions.
(b) In 2014, we deconsolidated certain variable interest entities and the amounts relate to WYZZ in Peoria, IL and WTAT in Charleston,
SC, as discussed in Variable Interest Entities within Note 1. Nature of Operations and Summary of Significant Accounting Policies.
(c) Approximately $17.6 million and $16.9 million of broadcast licenses relate to consolidated VIEs as of December 31, 2015 and 2014,
respectively.
We did not have any indicators of impairment for broadcast licenses in any interim period in 2015, and therefore did not perform
interim impairment tests during those periods. We performed our annual impairment tests for indefinite-lived intangibles in the fourth
quarter of 2015 and as a result of our qualitative and quantitative assessments we recorded no impairment. We performed our annual
impairment tests for indefinite-lived intangibles in the fourth quarter of 2014 and as a result of our qualitative and/or quantitative
assessments we recorded $3.2 million in impairment, included with amortization of $113.4 million within the consolidated statement of
operations, related to broadcast licenses with a carrying value of $21.1 million, compared to their estimated fair value of $17.9 million, as
a result of a decrease in the projected future market revenues related to our radio broadcast licenses in Seattle, WA.
The key assumptions used to determine the fair value of our broadcast licenses consisted primarily of significant unobservable inputs
(Level 3 fair value inputs), including 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 2014 to 2015. 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 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.
2015 Annual Report 51
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)
Customer Relationships (a)
Other (b)
Total
Amortized intangible assets:
Network affiliation (a)
Customer Relationships (a)
Other (b)
Total
As of December 31, 2015
Gross Carrying
Value
Accumulated
Amortization
Net
1,378,425
806,727
193,594
2,378,746
(343,729 )
(225,176 )
(58,271 )
(627,176 )
1,034,696
581,551
135,323
1,751,570
As of December 31, 2014
Gross Carrying
Value
Accumulated
Amortization
Net
1,396,792
749,292
174,442
2,320,526
(257,526 )
(177,453 )
(67,284 )
(502,263 )
1,139,266
571,839
107,158
1,818,263
(a) Changes between the gross carrying value from December 31, 2014 to December 31, 2015, relate to the acquisition of stations in 2015
and measurement period adjustments related to 2014 acquisitions as discussed in Note 2. Acquisitions.
(b) The increase in other intangible assets is primarily due to the purchase of additional alarm monitoring contracts of $39.2 million,
partially offset by measurement period adjustments as discussed in Note 2. Acquisitions.
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 and other assets for the years ended December 31, 2015, 2014 and 2013 was $161.5 million,
$125.5 million and $70.8 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, 2015, 2014 and 2013.
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, 2016
For the year ended December 31, 2017
For the year ended December 31, 2018
For the year ended December 31, 2019
For the year ended December 31, 2020
Thereafter
52 Sinclair Broadcast Group
152,011
149,683
148,350
148,201
147,890
1,005,435
1,751,570
7. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
Bank Credit Agreement
We have a syndicated credit facility which includes both revolving credit and issued term loans (Bank Credit Agreement). During the
years ended December 31, 2015, 2014 and 2013, the Bank Credit Agreement has been restated and amended several times to provide
incremental financing to the acquisitions as discussed under Note 2. Acquisitions. As of December 31, 2015, $1,676.7 million, net of $12.9
million and $3.6 million deferred financing costs and debt discounts, respectively, of aggregate borrowings were outstanding under the
Bank Credit Agreement, which consists of the following:
Term Loan A. As of December 31, 2015, $312.1 million of term loans maturing in April 2018 which bear interest at LIBOR plus
2.25% (Term Loan A) were outstanding, net of $1.5 million in deferred financing costs. On July 31, 2014, the most recent amendment
to the Bank Credit Agreement, $327.7 million of Term Loan A was converted into revolving commitments. As of December 31, 2014,
$348.1 million of Term Loan A was outstanding.
Term Loan B. As of December 31, 2015, $1,364.6 million of term loans, net of $11.4 million deferred financing costs and debt
discounts of $3.6 million, were outstanding. On April 30, 2015, we amended and restated our bank credit agreement to raise an
additional $350.0 million of incremental term loan B commitments. Including the incremental borrowings, these term loans consist of 1)
$650.0 million original principal maturing in April 2020, bearing interest at LIBOR plus 2.25% with a 0.75% floor and 2) $750.0 million
amended principal maturing July 2021, bearing interest at LIBOR plus 2.75% with a 0.75% LIBOR floor. As of December 31, 2014,
$1,035.9 million of Term Loan B, net of debt discounts of $4.0 million, was outstanding.
Revolving Credit Facility. As of December 31, 2015 and 2014, our total commitments under the revolving credit facility (Revolver) were
$485.2 million. The Revolver matures in April 2018 and bears interest at LIBOR plus 2.25%. We incur a commitment fee on undrawn
capacity of 0.5%. On July 31, 2014, $327.7 million of Term Loan A was converted into revolving commitments. As of December 31,
2015, there were no outstanding borrowings and $2.3 million of letters of credit were issued under the Revolver. The remaining
borrowing capacity under the Revolver was $482.9 million and $144.1 million as of December 31, 2015 and 2014, respectively.
Interest expense related to the Bank Credit Agreement, including the Revolver, in our consolidated statements of operations was $53.8
million, $38.7 million and $27.3 million for the years ended December 31, 2015, 2014 and 2013, respectively. Included in these amounts
were amortization of debt refinancing costs of $2.2 million, $3.8 million and $2.4 million for the years ended December 31, 2015, 2014
and 2013 respectively, in accordance with debt modification accounting guidance that applied to the amendments. Additionally, we
capitalized $3.6 million, $3.8 million and $14.9 million as deferred financing costs, during the years ended December 31, 2015, 2014 and
2013, respectively. Deferred financing costs are classified within our notes payable and commercial bank financing within our
consolidated balance sheet, except for deferred financing costs related to our Revolver as discussed in Other Assets within Note 1. Nature of
Operations and Summary of Significant Accounting Policies. The weighted average effective interest rate of the Term Loan B for the years
ended December 31, 2015 and 2014 was 3.54% and 3.30%, respectively. The weighted average effective interest rate of the Term Loan
A for the years ended December 31, 2015 and 2014 was 2.47% and 2.38%, respectively. The weighted average effective interest rate of
the Revolver for the year ended December 31, 2015 was 2.38%.
Our Bank Credit Agreement, as well as indentures governing our outstanding notes as described below, contains a number of
covenants that, among other things, restrict our ability and our subsidiaries’ ability to incur additional indebtedness with certain
exceptions, pay dividends (See Note 9. Common Stock), 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 maintain a ratio of
First Lien Indebtedness of 4.0 times EBITDA. As of December 31, 2015, we were in compliance with all financial ratios and covenants.
Our Bank Credit Agreement also 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 pursuant to LMAs and/or other
outsourcing agreements and those stations provide 20% 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, 2015, there were no material third party licensees as defined in our Bank Credit
Agreement.
Substantially all of our stock in our wholly-owned subsidiaries has been pledged as security for the Bank Credit Agreement.
2015 Annual Report 53
5.625% Senior Unsecured Notes, due 2024
On July 23, 2014, we issued $550.0 million in senior unsecured notes, which bear interest at a rate of 5.625% per annum and mature
on August 1, 2024 (the 5.625% Notes), pursuant to an indenture dated July 23, 2014 (the 5.625% Indenture). The 5.625% Notes were
priced at 100% of their par value and interest is payable semi-annually on February 1 and August 1, commencing on February 1, 2015.
Prior to August 1, 2019, we may redeem the 5.625% 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 5.625% Notes plus accrued and unpaid interest, if any, to the date of redemption, plus a “make-whole”
premium as set forth in the 5.625% Indenture. In addition, on or prior to August 1, 2019, we may redeem up to 35% of the 5.625%
Notes, using proceeds of certain equity offerings. If we sell certain of our assets or have certain changes of control, the holders of the
5.625% Notes may require us to repurchase some or all of the notes. The proceeds from the offering of the 5.625% Notes, together
with borrowings under our Bank Credit Agreement and cash on hand, were used to finance the acquisition of the Allbritton companies
effective August 1, 2014. Concurrent with entering into the 5.625% Indenture in July 2013, we also entered into a registration rights
agreement requiring us to file a registration statement covering an offer to exchange of the 5.625% Notes for registered securities with
the Securities and Exchange Commission (the SEC) which we completed in April 2015.
Interest expense was $30.9 million and $13.6 million for the years ended December 31, 2015 and 2014, respectively. Interest expense
for 2015 includes $0.5 million in amortization of deferred financing costs. The weighted average effective interest rate for the 5.625%
Notes was 5.830% for the year ended December 31, 2015.
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). 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, 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.
Interest expense was $22.3 million, $22.4 million and $4.9 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Interest expense for 2015 includes $0.6 million in amortization of deferred financing costs. The weighted average effective interest rate
for the 6.375% Notes was 6.590% for the year ended December 31, 2015.
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. If we sell certain of our assets or experience specific kinds
of changes of control, 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.
Interest expense was $32.3 million for both the years ended December 31, 2015 and 2014, and $24.1 million for the year ended
December 31, 2013. Interest expense for 2015 includes $0.9 million in amortization of deferred financing costs. The weighted average
effective interest rate for the 5.375% Notes was 5.580% for the year ended December 31, 2015.
54 Sinclair Broadcast Group
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
could have redeemed up to 35% of the 6.125% Notes using proceeds of certain equity offerings. If we sell certain of our assets or
experience specific kinds of changes of control, 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.
Interest expense was $30.6 million for both the years ended December 31, 2015 and 2014, and $30.5 million for the year ended
December 31, 2013. Interest expense for 2015 includes $0.7 million in amortization of deferred financing costs. The weighted average
effective interest rate for the 6.125% Notes was 6.310% for the year ended December 31, 2015.
8.375% Senior Unsecured Notes, due 2018
Effective October 15, 2014, we redeemed all of the outstanding 8.375% Senior Notes due 2018, representing $237.5 million aggregate
principal amount of Notes as of October 15, 2014. Upon the redemption, along with the principal, we paid the accrued and unpaid
interest and a make whole premium of $9.9 million, for a total of $257.4 million paid to note holders. We recorded a loss on
extinguishment of $14.6 million in the fourth quarter of 2014 related to this redemption.
Interest expense, including amortization of deferred financing costs was $16.0 million and $20.3 million for the years ended
December 31, 2014 and 2013, 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, including amortization of deferred financing costs was $37.3 million for the year ended December 31, 2013.
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 income 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 results 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 taxes.
Debt of other non-media subsidiaries
Debt of our consolidated subsidiaries related to our non-media private equity investment and real estate ventures 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% during 2015. During 2015, 2014 and
2013, interest expense on this debt was $3.8 million, $3.1 million and $3.2 million, respectively.
2015 Annual Report 55
Debt of variable interest entities
Our consolidated VIEs have $26.3 million, net of $0.4 million deferred financing costs, in outstanding debt for which the proceeds
were used to purchase the license assets of certain stations. See Variable Interest Entities under Note 1. Nature of Operations and Summary of
Significant Accounting Policies and Note 2. Acquisitions for more information. The credit agreements and term loans of these VIEs each 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 years ended December 31, 2015, 2014 and 2013, the interest expense relating to the debt of our VIEs which was jointly and
severally, unconditionally and irrevocably guaranteed was $1.7 million, $2.2 million and $1.2 million, respectively.
Summary
Notes payable, capital leases and the Bank Credit Agreement consisted of the following as of December 31, 2015 and 2014 (in
thousands):
Bank Credit Agreement, Term Loan A
Bank Credit Agreement, Term Loan B
Revolving credit facility
6.375% Senior Unsecured Notes, due 2021
5.375% Senior Unsecured Notes, due 2021
6.125% Senior Unsecured Notes, due 2022
5.625% Senior Unsecured Notes, due 2024
Debt of variable interest entities
Debt of other non-media subsidiaries
Capital leases
Total outstanding principal
Less: Discount on Bank Credit Agreement, Term Loan B
Less: Deferred financing costs
Less: Current portion
Net carrying value of long-term debt
2015
2014
$
313,620 $
1,379,626
—
350,000
600,000
500,000
550,000
26,682
120,969
34,774
3,875,671
(3,618 )
(38,709 )
(164,184 )
3,669,160 $
$
348,073
1,039,876
338,000
350,000
600,000
500,000
550,000
30,167
118,822
38,836
3,913,774
(3,992 )
(41,844 )
(113,116 )
3,754,822
Indebtedness under the notes payable, capital leases and the Bank Credit Agreement as of December 31, 2015 matures as follows (in
thousands):
2016
2017
2018
2019
2020
2021 and thereafter
Total minimum payments
Less: Discount on Bank Credit Agreement, Term Loan B
Less: Deferred financing cost
Less: Amount representing future interest
Net carrying value of debt
Notes and Bank
Credit
Agreement
Capital Leases
Total
$
162,445 $
79,101
243,105
14,545
615,440
2,726,261
3,840,897
(3,618 )
(38,709 )
—
$
3,798,570 $
4,792 $
4,819
4,846
4,957
4,704
33,089
57,207
—
—
(22,433 )
34,774 $
167,237
83,920
247,951
19,502
620,144
2,759,350
3,898,104
(3,618 )
(38,709 )
(22,433 )
3,833,344
As of December 31, 2015, we had 28 capital leases with non-affiliates; including 24 broadcast tower leases and four other non-media
equipment leases. All of our tower leases will expire within the next 16 years and the equipment leases expire within the next 4 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 information related to our affiliate notes and capital leases, see Note 12. Related Person Transactions.
56 Sinclair Broadcast Group
8. PROGRAM CONTRACTS:
Future payments required under program contracts as of December 31, 2015 were as follows (in thousands):
2016
2017
2018
2019
2020
2021 and thereafter
Total
Less: Current portion
Long-term portion of program contracts payable
$
$
108,260
22,946
14,270
9,850
7,562
2,293
165,181
108,260
56,921
Each future period’s 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 months lag. Included in the current portion
amounts are payments due in arrears of $26.6 million. In addition, we have entered into non-cancelable commitments for future
program rights aggregating to $139.6 million as of December 31, 2015.
9. 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. Substantially all of the Class B Common Stock is
held by David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith who entered into a stockholders’ agreement pursuant
to which they have agreed to vote for each other as candidates for election to our board of directors until December 31, 2025. 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 2015, no Class B Common Stock shares were converted into Class A Common Stock
shares. During 2014, 100,000 Class B Common Stock shares were converted into Class A Common Stock shares.
Our Bank Credit Agreement and some of our subordinated debt instruments have restrictions on our ability to pay dividends. Under
our Bank Credit Agreement, in certain circumstances, we may make unrestricted cash payments as long as our first lien indebtedness
ratio does not exceed 3.75 to 1.00. Once our first lien indebtedness ratio exceeds 3.75 to 1.00, we have the ability to 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, as long as we are in compliance with our first lien indebtedness ratio under the Bank Credit Agreement of 4.00 to 1.00. In
addition, we have an aggregate basket of up to $250.0 million, as long as we are in compliance with our first lien indebtedness ratio of
4.00 to 1.00, and an aggregate basket of $50.0 million, as long as no Event of Default has occurred. Under the indentures governing the
6.125% Notes, 5.375% Notes, 6.375% Notes and 5.625% 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 into account 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.
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 2014, our Board of Directors declared a quarterly dividend of $0.15 per share in the months of February and April, which
were paid in March and June. In August and November our Board of Directors declared a quarterly dividend of $0.165 per share, which
2015 Annual Report 57
were paid in September and December. Total dividend payments for the year ended December 31, 2014 were $0.63 per share. During
2015, our Board of Directors declared a quarterly dividend of $0.165 per share in the months of February, May, August and November,
which were paid in March, June, September and December, respectively. Total dividend payments for the year ended December 31, 2015
were $0.66 per share. In February 2016, our Board of Directors declared a quarterly dividend of $0.165 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.
On October 28, 1999, we announced a $150.0 million share repurchase program, which was renewed on February 6, 2008. On March
20, 2014, the Board of Directors authorized an additional $150.0 million share repurchase authorization. There is no expiration date and
currently, management has no plans to terminate this program. During 2015, we repurchased approximately 1.1 million shares of Class A
Common Stock for approximately $28.8 million on the open market including transaction costs. As of December 31, 2015, the total
remaining authorization was $105.5 million.
10. INCOME TAXES:
The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2015, 2014 and 2013 (in
thousands):
Provision for income taxes - continuing operations
Benefit for income taxes - discontinued operations
Current:
Federal
State
Deferred:
Federal
State
2015
2014
2013
$
$
$
$
57,694 $
—
57,694 $
80,420 $
5,720
86,140
(26,637 )
(1,809 )
(28,446 )
57,694 $
97,432 $
—
97,432 $
92,609 $
5,641
98,250
3,170
(3,988 )
(818 )
97,432 $
41,249
(10,806 )
30,443
16,229
(8,305 )
7,924
20,214
2,305
22,519
30,443
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 (1)
Non-deductible items (2)
Domestic Production Activities Deduction
Effect of consolidated VIEs (3)
Change in state tax laws and rates
Changes in unrecognized tax benefits (4)
Basis in stock of subsidiaries (5)
Federal R&D Credit
Other
Effective income tax rate
2015
2014
2013
35.0%
35.0%
35.0%
0.6%
1.2%
(3.9%)
1.4%
(0.3%)
(1.9%)
(5.5%)
(1.1%)
(0.3%)
25.2%
(0.1%)
3.4%
(3.2%)
0.8%
(0.1%)
(3.4%)
—
—
(0.9%)
31.5%
8.3%
1.4%
(3.8%)
3.7%
(5.5%)
0.8%
—
—
0.1%
40.0%
(1) Included in state income taxes are deferred income tax effects related to certain acquisitions and/or intercompany mergers.
58 Sinclair Broadcast Group
(2) Included in 2014 is the current income taxes related to the taxable gain on sale of WHTM’s assets in Harrisburg, PA, which we acquired with
the stock purchase of the Allbritton Companies in the same year. There was no book gain on this sale. Since a deferred tax liability was not
established for the excess of book basis over tax basis of goodwill, a deferred tax benefit does not offset the current tax expense.
(3) Certain of our consolidated VIEs incur expenses that are not attributable to non-controlling interests because we absorb certain related losses
of the VIEs. These expenses are not tax-deductible by us, and since these VIEs are treated as pass-through entities for income tax purposes,
deferred income tax benefits are not recognized.
(4) During the year ended December 31, 2015 and 2014, we recorded a $5.7 million and $10.8 million benefit, respectively, related to the release
of liabilities for unrecognized tax benefits as a result of expiration of the applicable statute of limitations. See table below which summarizes
the activity related to our accrued unrecognized tax benefits.
(5) During the year ended December 31, 2015, we recorded a $12.6 million benefit related to the realization of a capital loss upon the sale of the
stock of a subsidiary.
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, 2015 and 2014 were as follows (in thousands):
Deferred Tax Assets:
Net operating and capital losses:
Federal
State
Goodwill and intangible assets
Other
Valuation allowance for deferred tax assets
Total deferred tax assets
Deferred Tax Liabilities:
Goodwill and intangible assets
Property & equipment, net
Contingent interest obligations
Other
Total deferred tax liabilities
Net deferred tax liabilities
2015
2014
$
$
$
14,884 $
65,822
33,979
37,812
152,497
(58,333 )
94,164 $
2,384
67,430
44,175
27,677
141,666
(58,896 )
82,770
(561,812 ) $
(543,628 )
(76,106 )
(30,575 )
(10,743 )
(679,236 )
$
(585,072 ) $
(72,819 )
(40,941 )
(34,314 )
(691,702 )
(608,932 )
Our remaining federal and state capital and net operating losses (NOL) will expire during various years from 2016 to 2035, and some
of them are subject to annual limitations under the Internal Revenue Code Section 382 and similar state provisions. As discussed in
Income taxes under Note 1. Nature of Operations and Summary of Significant Accounting Policies, we establish valuation allowances in accordance
with the guidance related to accounting for income taxes. As of December 31, 2015, 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, 2015, we decreased our valuation allowance by $0.6 million to $58.3 million.
The reduction in valuation allowance was primarily due to changes in estimates of apportionment for certain states. During the year
ended December 31, 2014, we increased our valuation allowance by $7.8 million to $58.9 million. The change in valuation allowance was
primarily due to intercompany mergers, effective December 31, 2014, which we expect will decrease the utilization of the state NOL
carryforwards. 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.
As of December 31, 2015 and 2014, we had $3.3 million and $7.1 million of gross unrecognized tax benefits, respectively. Of this
total, for the years ended December 31, 2015 and 2014, $2.6 and $6.4 million from respective continuing 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.
2015 Annual Report 59
The following table summarizes the activity related to our accrued unrecognized tax benefits (in thousands):
Balance at January 1,
Additions (reductions) related to prior year tax positions
Additions 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,
2015
2014
2013
7,138 $
1,458
472
(1,517 )
(4,294 )
3,257 $
16,883 $
—
1,450
(2,910 )
(8,285 )
7,138 $
25,965
(8,928 )
693
(847 )
—
16,883
$
$
In addition, we recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. We
recognized $0.2 million, $0.7 million, and $1.2 million of income tax expense for interest related to uncertain tax positions for the
years ended December 31, 2015, 2014 and 2013, respectively.
As previously discussed under Discontinued Operations within Note 3. Disposition of Assets and Discontinued Operations, 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 a 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 2012 and subsequent federal
and state tax returns remain subject to examination by various tax authorities. Some of our pre-2012 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 $1.0 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.
11. 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 none of our pending and threatened matters
are material.
Various parties have filed petitions to deny our applications or applications of licensees that we provide services to under LMAs 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; WCIV-
TV, Charleston, South Carolina (formerly WMMP-TV); WMYA-TV, Anderson, South Carolina; WICS-TV Springfield, Illinois; WBFF-
TV, Baltimore, Maryland; WTTE-TV, Columbus, Ohio; WRGT-TV, Dayton, Ohio; WVAH-TV, Charleston / Huntington, West Virginia;
WCGV-TV, Milwaukee, Wisconsin; and WTTO-TV in Birmingham, AL. 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 44 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, 2015, 2014 and 2013 was approximately $21.7 million, $19.4 million and $10.3 million, respectively.
60 Sinclair Broadcast Group
Future minimum payments under the leases are as follows (in thousands):
2016
2017
2018
2019
2020
2021 and thereafter
$
18,944
15,909
12,542
11,716
10,648
33,144
$ 102,903
Changes in the Rules on Television Ownership
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.
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 subsequent quadrennial reviews. 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 that the 1999 local
television ownership rule was arbitrary and capricious and remanded the rule to the FCC. Currently, three of our LMAs are
grandfathered under the local television ownership rule because they were entered into prior to November 5, 1996 and we believe that
the remainder are subject to the stay imposed by the D.C. Circuit. If the FCC were to eliminate the grandfathering of these three LMAs,
or the D.C. Circuit were to lift its stay, we would have to terminate or modify these LMAs. In connection with our acquisition of the
Allbritton station in Charleston, the FCC has taken the position that the stay granted by the D.C. Circuit Court of Appeals allowing the
continuation of an LMA between us and Cunningham relating to WTAT-TV in that market was no longer effective. In response to this,
we terminated our LMA with WTAT-TV, effective on the acquisition of the Allbritton Companies, and other financial relationships
between us and WTAT-TV were severed (other than a short-term transition services agreement, a sublease of tower space and a lease of
certain transmission facilities). Cunningham purchased the non-license assets of WTAT-TV for $14.0 million.
In 2003, the FCC revised its ownership rules, including the local television ownership rule. The effective date of the 2003 ownership
rules was stayed by the U. S. Court of Appeals for the Third Circuit and the rules were remanded to the FCC. Because the effective date
of the 2003 ownership rules had been stayed and, in connection with the adoption of those rules, the FCC concluded the 1999
rules could not be justified as necessary in the public interest, 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.
On November 15, 1999, we entered into a plan and agreement of merger to acquire through merger WMYA-TV in Anderson, South
Carolina from Cunningham, but that transaction was denied by the FCC. In light of the change in the 2003 ownership rules, 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 the 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. The Rainbow/PUSH Coalition (‘‘Rainbow/PUSH’’) filed a petition to deny these five applications and to revoke all of
our licenses on the grounds that such acquisition would violate the local television ownership rules. The FCC dismissed our applications
in light of the stay of the 2003 ownership rules and also denied the Rainbow/PUSH petition. 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 U. S. Court of
Appeals for 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. Both the
applications and the associated petition to deny are still pending. We believe the Rainbow/PUSH petition is without merit. On
2015 Annual Report 61
February 8, 2008, we filed a petition with the U.S. Court of Appeals for the D.C. Circuit requesting that the Court direct the FCC to take
final action on these applications and cease its use of the 1999 local television ownership rule that it re-adopted as the permanent rule in
2008. In July 2008, the D.C. Circuit transferred the case to the U.S. Court of Appeals for the Ninth Circuit, and we filed a petition with
the D.C. Circuit challenging that decision, which 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 our petition seeking final FCC action on our applications with the
petitions challenging the FCC’s current ownership rules and transferred the proceedings to the Third Circuit. In December 2008, we
agreed voluntarily with the parties to the proceeding to dismiss the petition seeking final FCC action on the applications.
On March 12, 2014, the FCC issued a public notice on the processing of broadcast television applications proposing sharing
arrangements and contingent interests. The public notice indicated that the FCC will closely scrutinize any broadcast assignment or
transfer application that proposes that two or more stations in the same market will enter into an agreement to share facilities, employees
and/or services or to jointly acquire programming or sell advertising including through a JSA, LMA or similar agreement and enter into
an option, right of first refusal, put /call arrangement or other similar contingent interest, or a loan guarantee. We cannot now predict
what actions the FCC may require in connection with the processing of applications for FCC consent to future transactions. In addition,
on April 15, 2014, the FCC issued an order amending its multiple ownership rules to provide that, where two television stations are
located in the same market, and a party with an attributable interest in one station sells more than 15% of the ad time per week of the
other station, the party selling such ad time shall be treated as if it had an attributable ownership interest in the second station. The
imputed ownership interest would be evaluated to determine whether it complies with the FCC’s ownership rules that limit the number
of stations in which parties may hold attributable interests. The amended rule also requires that every JSA contain certain certifications
that the licensee maintains ultimate control of the station subject to such contract, that such JSAs be filed with the Commission and
made available for public review, and that JSAs that existed on the effective date of the new rule have two years to be terminated,
amended or otherwise come into compliance with the new rules. The new rule is the subject of an appeal to the United States Court of
Appeals for the District of Columbia Circuit. We cannot predict the outcome of that appeal. Among other things, the new JSA rule
could limit our future ability to create duopolies or other two-station operations in certain markets. Under the Satellite Television
Extension and Localism Act Reauthorization (STELAR), Congress extended the period of time for parties to preexisting JSAs to come
into compliance with the new rules, until December 19, 2016. On December 18, 2015, Congress passed and the President signed Public
Law No. 114-113, which included a provision that grandfathered preexisting JSAs, effective as of March 31, 2014, for a 10 year period, or
until October 1, 2025. We cannot predict whether we will be able to terminate or restructure such arrangements prior to October 1,
2025, on terms that are as advantageous to us as the current arrangements. The revenues of these JSA arrangements we earned during
the years ended December 31, 2015 and 2014 were $46.8 million and $48.8 million, respectively.
In its Order approving the Allbritton transaction, the FCC expressed concerns regarding an LMA that had existed between Sinclair
and Cunningham in the Charleston market, and that it believed Sinclair apparently violated the local TV ownership rule with respect to
its continued operation of that LMA. The same agreement that governs the Charleston LMA also governs LMAs between Sinclair and
Cunningham in three other markets. The existence of the Charleston LMA was repeatedly disclosed to the Commission over many
years, during which Sinclair relied on a June 20, 2001, Stay Order issued by the United States Court of Appeals for the District of
Columbia Circuit, which specifically stated that “the time for Sinclair to come into compliance with the Commission’s ‘eight voices
standard’ is hereby stayed pending further order of the court.” No further order has been issued by the Court with respect to that stay.
Sinclair has submitted a memorandum of counsel to the FCC with regard to the LMA and its reliance on the Court’s Stay Order. We
cannot predict what steps, if any, the FCC will take in the future with respect to the now terminated Charleston LMA.
In connection with the Allbritton acquisition, we agreed to surrender for cancellation the FCC licenses of WMMP, Charleston, SC,
WCFT, Tuscaloosa, AL, and WJSU, Anniston, AL, all ABC affiliates, by September 29, 2014 and to terminate the Charleston LMA. In
August 2014, we entered into an agreement to sell the license and related assets of WMMP to Howard Stirk Holdings II, LLC for $0.05
million, subject to the approval of the FCC, and other customary closing conditions. In September 2014, we entered into two other
agreements to sell the licenses and related assets of WCFT and WJSU to Howard Stirk Holdings II LLC for $0.05 million per station,
subject to the approval of the FCC, and other customary closing conditions. The FCC applications requested waiver or an extension of
the September 29, 2014 deadline. The FCC granted the WCFT, WJSU and WMMP assignment applications on December 4, 2014. We
sold the license and related assets to a third party on February 27, 2015. Subsequent, to the sale we retained the ABC network affiliation
service agreements.
If we are required to terminate or modify our LMAs or JSAs, 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 and JSAs. If
certain of these arrangements are no longer permitted, we could 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.
62 Sinclair Broadcast Group
Termination penalties. If the FCC requires us to modify or terminate existing LMAs or JSAs before the terms of the agreements
expire, or under certain circumstances, we elect not to extend the terms of the agreements, we may be forced to pay
termination penalties under the terms of some of our agreements. Any such termination penalties could be material.
Pending Acquisitions
In October 2015, we entered into a definitive agreement to acquire KUQI (FOX), KTOV-LP (MNT) and KXPX-LP (Retro TV) in
Corpus Christi, Texas from High Maintenance, LLC for $9.3 million. We completed the acquisition in January 2016. The acquisition was
funded with cash on hand.
In October 2015, we entered into a definitive agreement to purchase the broadcast assets of WBST (CBS) in South Bend-Elkhart,
Indiana, owned by Schurz Communications, Inc., and to sell the broadcast assets of WLUC (NBC and FOX) in Marquette, Michigan to
Gray Television, Inc. We completed the station swap in February 2016.
In October, the Company entered into a definitive agreement to acquire KFXL (FOX) and KHGI, KHGI-LD, KWNB and KWNB-
LD (ABC), in Lincoln, Nebraska for $31.3 million, subject to customary closing conditions. We expect to fund the acquisition with cash
on hand in early 2016.
In January 2016, we entered into a definitive agreement to purchase the stock of Tennis Channel for $350.0 million. The transaction is
expected to close in the first quarter of 2016, subject to customary closing conditions. The Company expects to fund the purchase price
at closing, through cash on hand and a draw on the Company's revolving line of credit.
2015 Annual Report 63
12. 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 entities owned by the controlling shareholders. Lease
payments made to these entities were $5.1 million for both the years ended December 31, 2015 and 2014, and $5.2 million for the year
ended December 31, 2013.
In September 2015, we were granted authority by the Federal Communications Commission (FCC) to operate an experimental facility
in the Washington D.C. and Baltimore markets to implement a Single Frequency Network (SFN) using the base elements of the new
ATSC 3.0 transmission standard. In conjunction with this experimental facility, Cunningham Communications, Inc. will be providing
tower space without charge.
Capital leases payable related to the aforementioned relationships consisted of the following as of December 31, 2015 and 2014 (in
thousands):
Capital lease for building, interest at 8.54%
Capital leases for building, interest at 7.93%
Capital leases for building, interest at 8.11%
Capital leases for broadcasting tower facilities, interest at 8.0%
Capital leases for broadcasting tower facilities, interest at 9.0%
Capital leases for broadcasting tower facilities, interest at 10.5%
Less: Current portion
2015
2014
3,508 $
679
7,432
2,749
1,958
4,690
21,016
(3,166 )
17,850 $
4,972
932
7,843
390
—
4,797
18,934
(2,625 )
16,309
$
$
Capital leases payable related to the aforementioned relationships as of December 31, 2015 mature as follows (in thousands):
2016
2017
2018
2019
2020
2021 and thereafter
Total minimum payments due
Less: Amount representing interest
$
$
5,070
5,061
2,868
2,978
3,093
10,172
29,242
(8,226 )
21,016
Charter Aircraft. From time to time, we charter aircraft owned by certain controlling shareholders. We incurred expenses of $1.4
million, $1.5 million and $0.9 million during the years ended December 31, 2015, 2014 and 2013, respectively.
Cunningham Broadcasting Corporation
As of December 31, 2015, Cunningham was the owner-operator and FCC licensee of: WNUV-TV Baltimore, Maryland; WRGT-TV
Dayton, Ohio; WVAH-TV Charleston, West Virginia; 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), as well as WTAT-TV Charleston, South Carolina, and WYZZ Peoria/Bloomington, IL.
64 Sinclair Broadcast Group
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. During the second quarter of 2014, Cunningham purchased the remaining amount of non-voting stock from the controlling
shareholders for an aggregate purchase price of $2.0 million. 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 also had options from the trusts, which
granted us the right to acquire, subject to applicable FCC rules and regulations, 100% of the voting and nonvoting stock of
Cunningham, up until September 30, 2014, when these options were terminated. As discussed under Note 1. Nature of Operations and
Summary of Significant Accounting Policies, during the third quarter of 2014, we deconsolidated Cunningham Broadcasting Corporation as we
determined it was no longer a variable interest entity. We continue to consolidate certain of its subsidiaries with which we continue to
have variable interests through various arrangements related to the Cunningham Stations discussed further below.
As of December 31, 2015, certain of our stations provide programming, sales and managerial services pursuant to LMAs for six of
the Cunningham Stations: WNUV-TV, WRGT-TV, WVAH-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. We also executed purchase agreements to acquire the license related assets of these
stations from Cunningham, 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 these individual subsidiaries of Cunningham. Our
applications to acquire these license related assets are pending FCC approval. The LMA and purchase agreement with WTAT-TV was
terminated concurrent with Cunningham’s purchase of the non-license assets of this station from us for $14.0 million, effective
August 1, 2014. We no longer have any continuing involvement in the operations of this station.
Pursuant to the provisions of the LMAs, options and other agreements, beginning on January 1, 2013, we were 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 to
the purchase price. Additionally, we reimburse these Cunningham LMA Stations for 100% of their operating costs. In July 2014,
concurrent with the termination of the LMA with WTAT-TV the total LMA fee for the remaining Cunningham LMA Stations was
reduced by $4.7 million to remove the fee associated with WTAT-TV. The remaining aggregate purchase price of the Cunningham LMA
Stations was approximately $53.6 million as of December 31, 2015. We made payments to Cunningham under our LMAs with these
stations of $8.8 million, $10.8 million and $9.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. For the years
ended December 31, 2015, 2014 and 2013, Cunningham LMA Stations provided us with approximately $101.8 million, $103.5 million,
and $107.6 million, respectively, of total revenue.
In November 2013, concurrent with our acquisition, of the Barrington stations discussed in Note 2. Acquisitions, 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 with WBSF-TV and WGTU-TV/WGTQ-TV expire in November 2021 and
August 2023, respectively, and each has renewal provisions for successive eight year periods. Under these arrangements, we earned $5.8
million, $6.0 million and $0.6 million from the services we perform for these stations for the years ended December 31, 2015, 2014, and
2013, respectively. 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 years ended December 31,
2015, 2014 and 2013, our consolidated revenues include $7.7 million, $7.8 million and $0.7 million related to these stations, respectively.
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 an outsourcing agreement, to
Cunningham for $22.0 million.
In July 2014, concurrent with the Allbritton acquisition we terminated the LMA with WTAT (FOX) in Charleston, SC and sold to
Cunningham the non-license assets related to this station. Although we have no continuing involvement in the operations of these
stations, because we had consolidated Cunningham Broadcasting Corporation (the parent company) up until September 2014 (see
Variable Interest Entities under Note 1. Nature of Operations and Summary of Significant Accounting Policies), the assets of WYZZ were not
derecognized and the transaction were accounted for as transactions between consolidated entities, and the resulting gains on sale were
not recognized. Upon deconsolidation of Cunningham Broadcasting Corporation, the difference between proceeds received for the sale
of WYZZ and WTAT and the carrying values of the net assets, which was previously eliminated in consolidation, was reflected as an
increase to additional paid in capital in the consolidated balance sheet.
During October 2013, we purchased the outstanding membership interests of KDBC-TV (CBS) in El Paso, TX 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.
2015 Annual Report 65
During January 2016, Cunningham entered into a promissory note to borrow $19.5 million from us. The note bears interest at a fixed
rate of 5.0% per annum (the 5.0% Notes), which is payable quarterly, commencing March 31, 2016. The note matures in January 2021,
with additional one year renewal periods upon our approval. Cunningham may redeem the 5.0% 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 terms of the loan agreement.
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 $0.4 million for both the years ended December 31, 2015 and 2014, and $0.2 million during
the year ended December 31, 2013. We paid $1.1 million for vehicles and related vehicle services from Atlantic Automotive during the
year ended December 31, 2013. No payments for vehicles or vehicles related services from Atlantic Automotive during the years ended
December 31, 2015 and 2014. Additionally, Atlantic Automotive leases office space owned by one of our consolidated real estate
ventures in Towson, MD. Atlantic Automotive paid $1.2 million in rent during the year ended December 31, 2015, and $1.0 million in
rent during both years ended December 31, 2014 and 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 $0.6 million for the year ended December 31, 2015, and $0.5 million for both the years ended December 31, 2014
and 2013. Additionally, there is also one lease for a restaurant in a building owned by one of our real estate ventures in Towson, MD.
Total rent received under this lease was $0.3 million for both the years ended December 31, 2015 and 2014, and $0.2 million for the year
ended December 31, 2013.
Payments for services provided by these three restaurants to us was less than $0.1 million for the years ended December 31, 2015,
2014 and 2013.
Thomas & Libowitz, P.A.
Thomas & Libowitz P.A. (Thomas & Libowitz), is a law firm founded by Steven A. Thomas, which provides legal services to us on an
ongoing basis. Steven A. Thomas is the son of Basil A. Thomas, a former member of our Board of Directors, who resigned during
2013. We paid fees of $1.6 million for the year ended December 31, 2013.
66 Sinclair Broadcast Group
13. 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, 2015, 2014 and 2013 (in thousands):
Income (Numerator)
Income from continuing operations
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 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
Weighted-average common and common equivalent shares outstanding
2015
2014
2013
$
$
176,099 $
(4,575 )
171,524
—
171,524 $
95,003
725
95,728
215,115 $
(2,836 )
212,279
—
212,279 $
97,114
705
97,819
64,259
(2,349 )
61,910
11,558
73,468
93,207
638
93,845
Potentially dilutive securities which would have an anti-dilutive effect were 0.1 million, 0.3 million, and zero shares for the years ended
December 31, 2015, 2014 and 2013, respectively. 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.
14. SEGMENT DATA:
We measure segment performance based on operating income (loss). Excluding discontinued operations, our broadcast segment
includes stations in 79 markets located throughout the continental United States. The operating results of stations classified as
discontinued operations as disclosed in Note 3. Dispositions of Assets and Discontinued Operations are not included in our consolidated results
of continuing operations for the year ended December 31, 2013. Other primarily consist of original networks and content, digital and
internet solutions, technical services and other non-media investments. All of our businesses included in Other 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 and Corporate are not reportable segments but are included for reconciliation purposes.
We had approximately $226.2 million and $172.3 million of intercompany loans between broadcast, other and corporate as of
December 31, 2015 and 2014, respectively. We had $23.1 million, $20.7 million, and $20.0 million in intercompany interest expense
related to intercompany loans between the broadcast, other and corporate for the years ended December 31, 2015, 2014 and 2013,
respectively. All other intercompany transactions are immaterial.
2015 Annual Report 67
Financial information for our operating segments is included in the following tables for the years ended December 31, 2015, 2014 and
2013 (in thousands):
For the year ended December 31, 2015
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
Research and development
Operating income (loss)
Interest expense
Income from equity and cost method investments
Goodwill
Assets
Capital expenditures
For the year ended December 31, 2014
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
Research and development
Operating income (loss)
Interest expense
Income from equity and cost method investments
Goodwill
Assets
Capital expenditures
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
68 Sinclair Broadcast Group
Broadcast
Other
Corporate
$
2,118,021 $
99,616
101,115 $
2,753
— $
Consolidated
2,219,136
103,433
1,064
152,049
9,405
—
161,454
124,619
55,848
—
451,015
—
—
1,927,705
4,838,531
74,902
—
2,952
12,436
(21,800 )
4,955
964
3,388
415,278
8,909
—
5,446
—
(6,479 )
186,492
—
—
178,506
7,610
124,619
64,246
12,436
422,736
191,447
964
1,931,093
5,432,315
91,421
Broadcast
Other
Corporate
$
1,904,776 $
99,823
71,782 $
2,350
— $
Consolidated
1,976,558
103,291
1,118
118,654
6,842
—
125,496
106,629
55,837
—
511,783
—
—
1,964,041
4,940,870
78,865
—
1,315
6,918
(10,671 )
4,042
2,313
512
355,832
2,593
—
5,343
—
(6,461 )
170,820
—
—
113,626
—
106,629
62,495
6,918
494,651
174,862
2,313
1,964,553
5,410,328
81,458
Broadcast
Other
Corporate
$
1,306,187 $
67,320
56,944 $
1,891
— $
Consolidated
1,363,131
70,554
1,343
65,786
80,925
47,272
329,312
—
—
5,034
—
1,350
555
3,251
621
—
70,820
—
4,504
(5,847 )
159,686
—
80,925
53,126
324,020
162,937
621
15. 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 and debentures as of December 31, 2015 and 2014 were as follows (in thousands):
Level 2:
6.375% Senior Unsecured Notes due 2021
6.125% Senior Unsecured Notes due 2022
5.625% Senior Unsecured Notes due 2024
5.375% Senior Unsecured Notes due 2021
Term Loan A
Term Loan B
Revolving credit facility
Debt of variable interest entities
Debt of other non-media related subsidiaries
2015
2014
Carrying Value
Fair Value
Carrying Value
Fair Value
$
350,000 $
500,000
550,000
600,000
313,620
1,376,007
—
26,682
120,969
367,325 $
512,500
539,000
605,658
308,916
1,365,461
—
26,682
120,969
350,000 $
500,000
550,000
600,000
348,073
1,035,883
338,000
30,167
118,822
355,800
503,475
532,813
595,068
341,982
1,029,997
338,000
30,167
118,822
16. 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, the 5.625% Notes, 6.125% Notes, and
6.375% Notes. Our Class A Common Stock and Class B Common Stock as of December 31, 2015, 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, 5.625% Notes,
6.125% Notes, and 6.375% Notes. As of December 31, 2015, our consolidated total debt of $3,854.4 million included $3,730.0 million
of debt related to STG and its subsidiaries of which SBG guaranteed $3,678.2 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 comprehensive income, 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.
2015 Annual Report 69
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2015
(in thousands)
Sinclair
Broadcast
Group,
Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
— $
—
3,648
3,648
115,771 $
1,775
5,172
122,718
235 $
390,142
99,118
489,495
33,966 $
33,949
23,278
91,193
Sinclair
Consolidated
149,972
424,608
127,183
701,763
—
$
(1,258 )
(4,033 )
(5,291 )
2,884
20,336
559,042
143,667
(8,792 )
717,137
497,262
52,128
—
—
—
555,922 $
3,430,434
673,915
—
—
—
4,247,403 $
4,179
110,507
1,926,814
114,841
1,602,454
4,807,332 $
(3,931,875 )
—
140,910
4,279
17,624
206,975
604,648 $ (4,782,990 ) $
(779,173 )
—
—
(57,859 )
104 $
—
1,651
—
1,755
49,428 $
57,640
—
—
107,068
179,156 $
1,611
1,311
103,627
285,705
27,462 $
106,358
456
12,713
146,989
(4,837 ) $
(1,425 )
(252 )
—
(6,514 )
—
1,857
26,500
30,112
3,594,218
—
28,866
3,730,152
32,743
14,240
1,060,211
1,392,899
42,199
366,042
171,102
726,332
—
(364,289 )
(576,055 )
(946,858 )
525,810
517,251
3,414,433
(91,703 )
(3,839,981 )
—
198,287
1,931,093
132,465
1,751,570
5,432,315
251,313
164,184
3,166
116,340
535,003
3,669,160
17,850
710,624
4,932,637
525,810
—
555,922 $
—
—
4,247,403 $
4,807,332 $
(29,981 )
604,648 $ (4,782,990 ) $
3,849
(26,132 )
5,432,315
$
Cash and cash equivalents
Accounts and other receivables
Other current assets
Total current assets
Property and equipment, net
Investment in consolidated subsidiaries
Other long-term assets
Goodwill
Broadcast licenses
Definite-lived 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
Total Sinclair Broadcast Group equity
Noncontrolling interests in consolidated
subsidiaries
Total liabilities and equity
70 Sinclair Broadcast Group
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2014
(in thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
Cash and cash equivalents
$
Accounts and other receivables
Other current assets
Total current assets
— $
—
5,741
5,741
3,394 $
164
12,996
16,554
1,749 $
359,486
98,751
459,986
12,539 $
25,111
19,225
56,875
Sinclair
Consolidated
17,682
383,503
124,980
526,165
— $
(1,258 )
(11,733 )
(12,991 )
Property and equipment, net
3,949
17,554
569,372
168,762
(7,099 )
752,538
Investment in consolidated subsidiaries
Other long-term assets
Goodwill
Broadcast Licenses
Definite-lived 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
395,225
65,988
—
—
—
470,903 $
3,585,037
555,877
—
—
—
4,175,022 $
3,978
134,454
1,963,254
118,115
1,698,919
4,948,078 $
—
128,247
1,299
16,960
184,441
556,584 $
(3,984,240 )
(670,832 )
—
—
(65,097 )
(4,740,259 ) $
—
213,734
1,964,553
135,075
1,818,263
5,410,328
541 $
529
46,083 $
42,953
201,102 $
1,302
26,802 $
68,332
(13,680 ) $
—
1,464
—
2,534
—
3,508
36,979
43,021
—
—
89,036
3,638,286
—
28,856
3,756,178
1,182
100,979
304,565
34,338
12,802
1,010,101
1,361,806
1,026
9,749
105,909
82,198
319,901
169,935
677,943
(1,047 )
—
(14,727 )
—
(319,902 )
(499,334 )
(833,963 )
260,848
113,116
2,625
110,728
487,317
3,754,822
16,309
746,537
5,004,985
Total Sinclair Broadcast Group equity
Noncontrolling interests in consolidated
subsidiaries
Total liabilities and equity
$
427,882
418,844
3,586,272
(94,632 )
(3,910,484 )
427,882
—
470,903 $
—
—
4,175,022 $
4,948,078 $
(26,727 )
556,584 $
4,188
(4,740,259 ) $
(22,539 )
5,410,328
2015 Annual Report 71
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2015
(in thousands)
Net revenue
$
— $
— $
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
2,076,851 $
Non-
Guarantor
Subsidiarie
s
221,633 $
Eliminations
Sinclair
Consolidated
2,219,136
(79,348 ) $
Media production expenses
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
4,441
1,065
5,506
—
58,543
3,779
62,322
725,037
418,885
82,450
14,272
(74,288 )
(167 )
733,199
495,974
433,690
1,577,612
131,373
228,095
(2,680 )
(77,135 )
567,227
1,796,400
Operating (loss) income
(5,506 )
(62,322 )
499,239
(6,462 )
(2,213 )
422,736
Equity in earnings of consolidated
subsidiaries
Interest expense
Other income (expense)
Total other income (expense)
Income tax benefit (provision)
Net income (loss)
Net income attributable to the
noncontrolling interests
Net income (loss) attributable to Sinclair
Broadcast Group
Comprehensive income (loss)
170,104
(382 )
4,765
174,487
2,543
171,524
343,183
(180,166 )
(151 )
162,866
81,626
182,170
195
(4,658 )
269
(4,194 )
(146,331 )
348,714
—
(30,022 )
(2,379 )
(32,401 )
4,468
(34,395 )
(513,482 )
23,781
—
(489,701 )
—
(491,914 )
—
(191,447 )
2,504
(188,943 )
(57,694 )
176,099
—
—
—
(4,914 )
339
(4,575 )
$
$
$
171,524
181,720 $
$
182,170
187,791 $
$
348,714
351,760 $
(39,309 ) $
(491,575 ) $
(39,309 ) $
(500,242 ) $
171,524
181,720
72 Sinclair Broadcast Group
Equity in earnings of consolidated
subsidiaries
Interest expense
Other income (expense)
Total other income (expense)
Income tax benefit (provision)
Net income (loss)
Net income attributable to the
noncontrolling interests
Net income (loss) attributable to Sinclair
Broadcast Group
Comprehensive income (loss)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2014
(in thousands)
Net revenue
$
— $
— $
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
1,870,408 $
Non-
Guarantor
Subsidiaries
Eliminations
192,616 $
(86,466 ) $
Sinclair
Consolidated
1,976,558
Media production expenses
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
4,320
1,068
5,388
76
57,799
573,725
359,880
86,266
14,795
5,425
63,300
367,514
1,301,119
96,265
197,326
(81,380 )
(2,079 )
(1,767 )
(85,226 )
Operating (loss) income
(5,388 )
(63,300 )
569,289
(4,710 )
(1,240 )
578,687
434,715
468,505
1,481,907
494,651
—
(174,862 )
(7,242 )
(182,104 )
(97,432 )
215,115
211,782
(573 )
4,377
215,586
2,081
212,279
373,228
(163,347 )
(14,651 )
195,230
83,897
215,827
(201 )
(4,869 )
998
(4,072 )
(185,193 )
380,024
—
(27,364 )
2,024
(25,340 )
1,783
(28,267 )
(584,809 )
21,291
10
(563,508 )
—
(564,748 )
—
—
—
(2,836 )
—
(2,836 )
$
$
$
212,279
211,759 $
$
215,827
213,284 $
$
380,024
378,926 $
(31,103 ) $
(564,748 ) $
(27,982 ) $
(564,228 ) $
212,279
211,759
2015 Annual Report 73
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
(56,622 ) $
Sinclair
Consolidated
1,363,131
Media production expenses
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
123,017 $
52,492
10,694
68,215
131,401
(57,628 )
82
(471 )
(58,017 )
386,646
304,420
348,045
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 income (expense)
Income tax benefit (provision)
Income from discontinued operations, net
of tax
Net income (loss)
Net income attributable to the
noncontrolling interests
Net income (loss) attributable to Sinclair
Broadcast Group
Comprehensive income (loss)
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 )
(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 ) $
(388,112 ) $
(28,098 ) $
(390,552 ) $
73,468
78,257
74 Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2015
(in thousands)
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS (USED IN) FROM
INVESTING ACTIVITIES:
Acquisition of property and equipment
Payments for acquisition of television
stations
Purchase of alarm monitoring contracts
Proceeds from sale of broadcast assets
Investments in equity and cost method
investees
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
Dividends paid on Class A and Class B
Common Stock
Repurchase of outstanding Class A
Common Stock
Payments for deferred financing cost
Noncontrolling interests distributions
Increase (decrease) in intercompany
payables
Other, net
Net cash flows (used in) from
financing activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
beginning of period
CASH AND CASH EQUIVALENTS, end
of period
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
$
(3,759 ) $
(133,595 ) $
530,768
$
(16,864 ) $
24,145
$
400,695
—
—
—
—
(6,605 )
(84,079 )
(2,586 )
1,849
(91,421 )
—
—
—
(17,011 )
—
23,650
(27 )
575
—
(39,185 )
—
(35,690 )
17,645
—
—
—
—
—
(17,011 )
(39,185 )
23,650
(44,715 )
17,371
—
4,598
(8,998 )
(5,447 )
4,598
(21,050 )
(76,892 )
(59,816 )
1,849
(151,311 )
—
349,562
—
33,325
(528 )
(382,691 )
(1,286 )
(10,642 )
(62,733 )
(28,823 )
—
—
—
—
(3,604 )
—
—
—
—
—
—
—
(243 )
(9,918 )
—
—
—
—
—
—
382,887
(395,147 )
(62,733 )
(28,823 )
(3,847 )
(9,918 )
89,319
1,926
303,755
—
(452,897 )
85,953
(1,207 )
(368 )
(26,130 )
136
—
487
(839 )
267,022
(455,390 )
98,107
(25,994 )
(117,094 )
—
—
112,377
(1,514 )
21,427
3,394
1,749
12,539
—
—
132,290
17,682
$
—
$
115,771
$
235
$
33,966
$
—
$
149,972
2015 Annual Report 75
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2014
(in thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
$
(26,528 ) $
(147,940 ) $
628,103
$
(35,694 ) $
12,513
$
430,454
—
—
—
—
—
—
—
1,000
(8,864 )
(71,152 )
(2,722 )
1,280
(81,458 )
—
—
—
11,525
—
17,042
—
(1,485,039 )
—
176,675
91
—
—
392
—
(27,701 )
—
—
(8,104 )
—
(1,779 )
—
—
—
—
—
—
—
(1,485,039 )
(27,701 )
176,675
11,616
(8,104 )
17,042
(387 )
1,000
19,703
(1,379,033 )
(40,306 )
1,280
(1,397,356 )
—
1,466,500
507
33,713
(556 )
(574,584 )
(1,028 )
(6,596 )
(61,103 )
(133,157 )
—
—
218,081
2,263
—
—
(16,590 )
—
(981,669 )
—
—
—
—
—
—
725,678
(1,072 )
—
—
(8,184 )
51,703
4,367
—
—
—
(13,793 )
—
—
—
—
1,500,720
(582,764 )
(61,103 )
(133,157 )
(16,590 )
(8,184 )
—
5,558
25,528
(106,343 )
724,085
75,003
(13,793 )
704,480
—
—
(234,580 )
(26,845 )
(997 )
237,974
28,594
13,536
—
—
(262,422 )
280,104
$
—
$
3,394
$
1,749
$
12,539
$
—
$
17,682
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS (USED IN) FROM
INVESTING ACTIVITIES:
Acquisition of property and equipment
Payments for acquisition of television
stations
Purchase of alarm monitoring contracts
Proceeds from sale of broadcast assets
Decrease in restricted cash
Investments in equity and cost method
investees
Proceeds from insurance settlement
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
Dividends paid on Class A and Class B
Common Stock
Repurchase of outstanding Class A
Common Stock
Payments for deferred financing costs
Noncontrolling interest distributions
Increase (decrease) in intercompany payables
Other, net
Net cash flows (used in) from financing
activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
beginning of period
CASH AND CASH EQUIVALENTS, end of
period
76 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 (USED IN) FROM
INVESTING ACTIVITIES:
Acquisition of property and equipment
Payments for acquisition of television
stations
Purchase of alarm monitoring contracts
Proceeds from sale of broadcast assets
Decrease in restricted cash
Investments in equity and cost method
investees
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
Increase (decrease) in intercompany
payables
Other, net
Net cash flows (used in) from
financing activities
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
beginning of period
CASH AND CASH EQUIVALENTS, end
of period
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
—
—
—
—
—
—
1,648
(2,700 )
(35,659 )
(5,029 )
—
(43,388 )
—
—
—
(11,522 )
—
—
(998,664 )
—
71,738
—
—
50
(50,480 )
(23,721 )
21,000
—
(10,767 )
3,773
43,000
—
(43,000 )
—
—
(10,908 )
(1,006,144 )
(23,721 )
49,738
(11,522 )
(10,767 )
(5,437 )
1,648
(14,222 )
(962,535 )
(65,224 )
(10,908 )
(1,051,241 )
—
2,189,753
—
88,540
(482 )
(1,473,898 )
(1,069 )
(34,311 )
472,913
(56,767 )
—
—
—
—
(27,724 )
—
—
—
—
—
(371,331 )
(8,874 )
(178,240 )
—
548,139
(820 )
—
—
—
(10,256 )
59,765
—
—
—
—
—
—
—
(58,333 )
10,898
2,278,293
(1,509,760 )
472,913
(56,767 )
(27,724 )
(10,256 )
—
1,204
35,459
509,891
546,250
103,738
(47,435 )
1,147,903
—
—
230,744
28,395
(1,900 )
7,230
199
15,436
—
—
257,239
22,865
$
— $
237,974 $
28,594 $
13,536 $
—
$
280,104
2015 Annual Report 77
QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
(in thousands, except per share data)
For the Quarter Ended
Total revenues, net
Operating income
Net income
Net income attributable to Sinclair Broadcast Group
Basic earnings per common share
Diluted earnings per common share
For the Quarter Ended
Total revenues, net
Operating income
Net income
Net income attributable to Sinclair Broadcast Group
Basic earnings per common share
Diluted earnings per common share
3/31/2015
6/30/2015
9/30/2015
12/31/2015
504,775 $
554,167 $
548,404 $
84,547
$
114,340
$
24,836
$
24,282
$
0.26
$
0.25
$
46,399
$
45,787
$
0.48
$
0.48
$
99,606
$
44,034
$
43,255
$
0.46
$
0.45
$
611,790
124,243
60,830
58,200
0.62
0.61
3/31/2014
6/30/2014
9/30/2014
12/31/2014
412,648 $
455,136 $
494,956 $
81,000
$
103,039
$
101,663
$
27,657
$
27,158
$
0.27
$
0.27
$
41,601
$
41,335
$
0.43
$
0.42
$
48,768
$
48,341
$
0.50
$
0.49
$
613,818
208,949
97,089
95,445
0.99
0.98
$
$
$
$
$
$
$
$
$
$
$
$
78 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
comprehensive income, of equity, 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, 2015 and December 31, 2014, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2015 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, 2015, based on criteria established in Internal Control -
Integrated Framework (2013) 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.
Baltimore, Maryland
February 26, 2016
2015 Annual Report 79
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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 each general manager.
Jonathan P. Lawhead
Daniel P. Mellon
David F. Schwartz
John T. Seabers
GROUP MANAGERS
Ann H. Ellis
William J. Fanshawe
Alan B. Frank
Daniel J. Hoffman
James C. Killen
GENERAL MANAGERS/STATION MANAGERS
Pat Baldwin – Tulsa, Oklahoma
Lisa Barhorst – Dayton, Ohio
Robert Berry – Yakima/Pasco/Richland/Kennewick, Washington
Matthew Bowman – Greensboro/Highpoint/Winston-Salem,
North Carolina
Bill Bradley – Harrisburg/Lancaster/Lebanon/York, Pennsylvania
Teresa Burgess – Bakersfield, California
Tom Burke – Minneapolis/St. Paul, Minnesota
Robert Butterfield – West Palm Beach/Fort Pierce, Florida
John Cadman – Wilkes-Barre/Scranton, Pennsylvania
Glen Callanan – Cedar Rapids, Iowa
Amie Chapman – Reno, Nevada
Amy Collins – Syracuse, New York
Chad Conklin – Flint/Saginaw/Bay City, Michigan
Greg Conner – Columbia, South Carolina
John Connors – Asheville, North Carolina/Anderson, South Carolina-
Greenville-Spartanburg, South Carolina
Ronna Corrente – Lexington, Kentucky
Mike Costa – Chattanooga, Tennessee
Kent Crawford – Salt Lake City, Utah
Cory Culleton – Gainesville, Florida
Tony D’Angelo – Columbus, Ohio
John DeSimone – Madison, Wisconsin
John Dittmeier – Tallahassee, Florida
James Doty – Johnstown/Altoona, Pennsylvania
Janene Drafs – Seattle/Tacoma, Washington
Charity Freeman – Toledo, Ohio
Terry Gaughan – Milwaukee, Wisconsin
Deb Gay – Albany, Georgia
Linda Guerrero Deicla – Harlingen/Weslaco/Brownsville/
McAllen, Texas
Todd Harrison – Traverse City/Cadillac, Michigan
Kevin Hayes – El Paso, Texas
Paula Hayward – Beaumont, Texas
Billy Huggins – Myrtle Beach/Florence, South Carolina
John Hummel – Raleigh/Durham, North Carolina
Tom Humpage – Portland, Maine
Tom Hurley – Corpus Christi, Texas
JR Jackson – Eugene, Oregon
George Kayes – Roanoke/Lynchburg, Virginia
Kingsley Kelley – Medford, Oregon
Carol Kellum – Ottumwa, Iowa/Kirksville, Missouri
Eric Land – Birmingham, Alabama
Jim Lapiana – Pittsburgh, Pennsylvania
Karen Lincoln – Macon-Albany, Georgia
Rick Lipps – Champaign/Springfield/Decatur, Illinois
Jay C. Lowe – Mobile, Alabama/Pensacola, Florida
Jim Lutton – Grand Rapids/Kalamazoo, Michigan
Nick Magnini – Buffalo, New York
Jeff McCallister – Norfolk, Virginia
Tim McCoy – Wheeling, West Virginia/Steubenville, Ohio
Sharon Merrell – Quincy, Illinois/Hannibal, Missouri/
Keokuk, Iowa
Jeff Miller – Omaha, Nebraska
Mary Margaret Nelms – Charleston, South Carolina
Vince Nelson – Albany, New York
John Nizamis – South Bend-Elkhart, Indiana
Noreen Parker – Nashville, Tennessee
Jack Peck – Fresno/Visalia, California
Tim Perry – Richmond, Virginia
David Praga – Spokane-Yakima/Pasco/Richland/Kennewick,
Washington
Michael Pumo – West Palm Beach/Fort Pierce, Florida
Dean Radla – San Antonio, Texas
Chuck Reid – Wichita/Hutchinson, Kansas
Mark Rose – Little Rock/Pine Bluff, Arkansas
John Rossi – Oklahoma City, Oklahoma
Chuck Samuels – Rochester, New York
Steve Scollard – Sioux City, Iowa
Daniel Stellmon – Spokane, Washington
Audra Swain – Las Vegas, Nevada
John Tamerlano – Portland, Oregon
Thomas Tipton – St. Louis, Missouri-Cape Girardeau, Missouri/
Paducah, Kentucky
Bobby Totsch – Mobile, Alabama/Pensacola, Florida
Robert Truman – Boise, Idaho
Victor Vetters – Providence, Rhode Island/
New Bedford, Massachusetts
Amy Villarreal – Austin, Texas
Tim Walsh – Savannah, Georgia
Mike Wilson – Des Moines/Ames, Iowa
Laura Wolf – Amarillo, Texas
Elizabeth Worsham – Columbia/Jefferson City, Missouri
Jay Zollar – Green Bay/Appletovn, Wisconsin