Letter to our Shareholders
Sinclair Broadcast Group, Inc.
Th e media landscape continues to evolve, and we are in the early days of charting a new course in this exciting and complex environment. We at Sinclair
embrace the technological changes that confront our industry, both envisioning and preparing for this bright future. Our pending acquisition of
Tribune Media Company and the commercialization of ATSC 3.0 provide us with new, competitive technology and distribution platforms, expanded
content off erings, and advanced marketing services that will enable us to compete and grow in this ever-changing ecosystem. As the industry leader,
we believe 2018 will be a transformational year, and you should expect us to reach further and embrace our assets, talents, and entrepreneurial spirit to
drive our industry and create value.
Th e past several years have witnessed increased competition from Internet giants entering the media space and from mega-mergers among cable,
satellite and telecom companies. Gone are the days where media was synonymous with only broadcast or cable. Today, people speak in an array of
acronyms that denote how they receive and consume video: OTT, SVOD, AVOD, vMVPD, DTC, to name but a few. Meanwhile, technology is
advancing at an exponential rate, making it easier to distribute data and content on multiple platforms. As barriers to entry dissolve, multitudes of
startups are emerging with content off erings, individualized content is fi nding an audience on social media, and online companies such as Google,
Amazon and Facebook have entered the space as they look for ways to deploy their large cash balances. All the while, broadcast television continued
to be restricted by antiquated regulatory rules premised on consumer video distribution more than a half century ago. But in 2017, the new leadership
of the Federal Communications Commission (FCC) launched a comprehensive modernization of the ownership rules aft er decades of industry-wide
eff orts to convince the FCC that ownership reform was essential to the future of broadcasting. We recognize that broadcast television is predominantly
a local business, but if we are to survive, it is imperative that we also expand our reach to enough local markets so that we can create a national footprint
from which to launch nationwide services and off erings as digital companies and networks do, but without changing our core commitment to serving
the local needs of our viewing communities. Based on these regulatory changes last year, we continued this quest, acquiring the Bonten Media Group
and its 14 TV stations. But our real transformational announcement was the pending purchase of the Tribune Media Company.
Tribune is important on many levels, allowing us to reach further. Its 42 stations in 33 markets bring our combined coverage of U.S. television households
to 72% before any required divestitures. And yet, even with this scale, our reach will still be less than that of many cable networks. But even with this
smaller footprint, we expect to aggregate and sell our local commercial ad inventory into the $50 billion network marketplace and tap those advertising
monies historically not available to broadcasters due to our limited reach.
In addition to network sales, Tribune’s WGN America cable network, along with Antenna TV and Th is TV digital networks, provide an array of
opportunities for us to off er unique content that can be monetized in multiple ways. Consider this: post Tribune, we will have eight networks, including
Tennis Channel, Comet, CHARGE!, Stadium and TBD, in which to control our path, and in some cases, launch our own direct-to-consumer off ering
that can be anchored by our most valuable asset – local news. While our strategy is not to create and produce scripted shows, which we get through
our network partners, we are interested in creating and owning non-scripted shows that are lower cost, can be streamed or syndicated, be subscription
or advertising-based, and even have merchandising and licensing opportunities. We have been very active on this front. In the past year, we launched
KidsClick, a 3-hour time block on many of our stations aimed at bringing the next generation back to broadcast and providing programmers and
advertisers an alternative platform to the long-held cable monopolies. We purchased Tennis.com and Tennis Magazine creating a multi-platform
strategy of television, print and Internet for all things tennis. And this year, we launched completely overhauled mobile and OTT apps for Tennis
Channel Plus, our subscription off ering for the country’s most passionate tennis fans. We purchased NewsON, a single app to watch live, local news
on mobile and OTT devices. Since then NewsON has grown to 15 affi liate partners reaching over 80% of the country. We transformed our American
Sports Network into a new digital network, Stadium, that brings together professional sports highlights and college games. Finally, we made minority
investments in fi rst-run programs such as Daily Mail that allow us to participate in the upside with minimal risk. Our goal with all our content is to
distribute low-cost, engaging content on multiple platforms with multiple revenue paths.
Local news continues to be the linchpin of the Company. Post Tribune and prior to any divestitures, we will produce almost 4,000 hours of local
news per week. Local news is some of our most watched and valuable content. Consumers crave information, especially when it comes to their local
communities. We have made signifi cant investments in news over the years – Full Measure with Sharyl Attkisson, Connect to Congress, Town Halls,
Circa, a national news desk, expanded newscasts, and distribution on social media, mobile and the web. Th is past year, in addition to our acquisition
of NewsON, we created a national investigative news unit consisting of more than 50 reporters, which we plan to grow to 100, to provide in-depth
stories not covered elsewhere. Our steadfast commitment to the news is refl ected in the more than 90 Regional Emmy Awards, 36 Regional Edward
R. Murrow Awards, including two “Overall Excellence” awards, 2 National Murrow Awards and 2 National Gracie Awards, and hundreds of other
awards received by our news operations.
BOARD OF DIRECTORS
David D. Smith
Chairman of the Board,
Executive Chairman
Frederick G. Smith
Vice President
J. Duncan Smith
Vice President, Secretary
Robert E. Smith
Director
Howard E. Friedman
Director
Daniel C. Keith
Director
Martin R. Leader
Director
Lawrence E. McCanna
Director
OFFICERS
David D. Smith
Executive Chairman
Frederick G. Smith
Vice President
J. Duncan Smith
Vice President
David B. Amy
Vice Chairman
Christopher S. Ripley
President & Chief Executive Offi cer
Barry M. Faber
Executive Vice President,
General Counsel, Distribution &
Network Relations
Lucy A. Rutishauser
Senior Vice President,
Chief Financial Offi cer
David R. Bochenek
Senior Vice President,
Chief Accounting Offi cer &
Corporate Controller
Doron Gorshein
Senior Vice President,
Government Relations
Rebecca J. Hanson
Senior Vice President,
Strategy & Policy
Donald H. Th ompson
Senior Vice President,
Human Resources
Justin L. Bray
Vice President, Treasurer
Jamie C. Dembeck
Vice President, Human Resources
David B. Gibber
Vice President, Deputy General Counsel
Paul E. Nesterovsky
Vice President, Tax
Lee H. Schlazer
Vice President, Distribution
Scott H. Shapiro
Vice President, Corporate Development
Th omas I. Waters, III
Vice President, Facilities & Property
ANNUAL MEETING
Th e Annual Meeting of stockholders will
be held at Sinclair Broadcast Group’s
corporate offi ces,
10706 Beaver Dam Road
Hunt Valley, MD 21030
Th ursday, June 7, 2018 at 10:00am.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers, LLP
100 East Pratt Street
Baltimore, MD 21202-1096
TRANSFER AGENT AND REGISTRAR
Questions regarding stock certifi cates,
change of address, or other stock transfer
account matters may be directed to:
American Stock Transfer & Trust
Company, LLC
Operations Center
6201 15th Ave.
Brooklyn, NY 11219
Toll Free: 1-800-937-5449
Email: info@amstock.com
Website: www.amstock.com
FORM 10-K, ANNUAL REPORT
A copy of the Company’s 2017 Form 10-K,
as fi led with the Securities and Exchange
Commission, is available, at no charge, on
the Company’s website www.sbgi.net or
upon written request to:
Justin L. Bray
VP, Treasurer
Sinclair Broadcast Group, Inc.
10706 Beaver Dam Road
Hunt Valley, MD 21030
410-568-1500
COMMON STOCK
Th e Company’s Class A Common Stock
trades on the Nasdaq Global Select Market
tier of the NasdaqSM Stock Market under
the symbol SBGI.
How we distribute our news is just as important as the content aired. Consumers demand stories where and when they want them. And so, we have
converted our newsrooms to 24/7 content centers, working closely with our digital teams. Live streaming of all our newscasts is available on our station
websites and on NewsON. We recently rolled out enhanced mobile apps, upgraded our alert features and continue to expand our engagement with
consumers on social media platforms.
Our digital teams have been busy as well with digital marketing strategies that combine with our linear strategies to change and strengthen our local
sales initiatives. Th is past year, we acquired DataSphere, a telesales operation that complements Sinclair’s digital agency, Compulse. DataSphere off ers
an integrated suite of products and platforms for automated creation of professional websites, videos, and landing pages for clients. In addition, we
recently entered a landmark commercial deal with Sorenson Media Group to sell addressable advertising via smart TVs, a fi rst-ever for any broadcaster.
Th e addressable advertising marketplace is growing rapidly and is estimated at over $2 billion by the end of 2018. Sorenson allows us to leverage their
IP technology to transform a one-to-many platform to one that allows clients to address individual viewers. Along those lines, our new mobile apps
also include dynamic ad insertion capabilities, which is important to enhancing our core business. Such digital strategies are part of the reason we grew
our digital revenues 47% in 2017.
Part of the media landscape evolution is the emergence of over-the-top (OTT) and virtual multi-channel video program distributors (vMVPDs).
While some would consider these platforms disruptors, we believe they are complementary and provide increased distribution and compensation for
our content. As an example, this year, we entered into agreements for our stations and Tennis Channel to be carried on YouTube TV, Sony Vue, Hulu,
CBS All Access, and DirecTV Now, with others still to come. As consumers evaluate the value of their traditional MVPD packages and add OTT
and vMVPD services, we are fortunate, due to the popularity of our broadcast shows, to be a part of both ecosystems. Th at means that we are agnostic
as to which platforms our content is carried on, as long as we get paid fair value for the contribution we bring to those delivery systems. While many
premium cable channels have experienced a decline in subscribers, our broad distribution has resulted in only slight declines for us. We believe as we
standup more local news and other unique and compelling content, we will increase our multi-platform opportunities and value.
Th e emergence of streaming services has only solidifi ed the symbiotic network-affi liate partnership. Th e network brings high quality programming,
while the affi liate brings local news and a local promotional platform. Th e result is “must have” content and audiences that new entrants highly desire
to launch their own services. As such, our network partners continue to enter into long term affi liation agreements, recognizing it would be diffi cult
to go it alone.
Th ere is no better example of reaching further than the Next Generation Broadcast Platform, ATSC 3.0 (NextGen). Recently, the FCC approved this
NextGen standard, making my 20-year vision and mission a reality. NextGen has the potential to revolutionize our business through fi ve major tenets:
mobility, addressability, capacity, IP connectivity, and conditional access. In short, NextGen merges linear and non-TV data services alongside over-
the-air and over-the-top, allowing a mature broadcast industry to reinvent itself into a viable competitor. Among the many emerging opportunities
are hyper-local news, weather, and traffi c; dynamic ad insertion; geographic and demographic targeted advertising; customizable content; better
measurement and analytics; the ability to talk to devices connected to the Internet; fl exibility to add streams as needed; an ultra-high defi nition
picture quality with enhanced immersive audio; and connectivity to automobiles, to name but a few of NextGen’s functionality. In addition, NextGen
provides a suite of new emergency capabilities including advanced alerting functions which can provide evacuation routes and device wake-up features.
Importantly, all of these features will be available for the fi rst time to mobile devices, allowing us to reach viewers wherever they are – including younger
audiences that are tied to their mobile screens.
Meanwhile, NextGen will allow us to use our spectrum for more than just video-formatted data as we do today. As a data-agnostic IP pipe (like the
Internet), it will also enable us to distribute text, audio and soft ware. And while our one-to-many architecture will remain a strength, we will be able to
deliver “the last mile” across a more robust system, as well as connect legacy ATSC 1.0 televisions to NextGen using hot spots and wi-fi functionality.
But that is not all. In 2017, we and other broadcasters formed the Spectrum Consortium (Spectrum Co), a joint venture that links local consortium
member television stations to form a nationwide network over which to deliver national services and create a robust video and data exchange. Th e
focus is to advance the promotion of spectrum effi ciency, innovation and monetization in today’s multi-platform environment. Among the business
possibilities are skinny bundles; connected car functionality including 3D mapping, telematics and infotainment; data wholesale models; and content
delivery networks. As I write this, we are preparing for the initial deployment of such services, as well as the transition from 1.0 to NextGen, in Dallas,
TX and exchanging our results there with other groups as they initiate service in other markets.
For NextGen to be successful, we need the support of infrastructure partners such as American Tower, which is working with us to build and deploy
the single frequency network tower infrastructure; SK Telecom, with which we have an MOU to develop with us systems to allow the convergence of
NextGen and 5G data delivery; and Saankhya Labs which is designing our NextGen receiver chip for mobile devices. We expect the implementation
and adoption of NextGen to occur over the next three years alongside the government’s broadcast spectrum repack. When completed, the country will
have a lower-cost, world class wireless IP data distribution network capable of supporting multiple business models.
Speaking of the repack, in 2017, the FCC completed its Broadcast Incentive Auction. In all, over 175 broadcasters sold some or all their spectrum to
wireless companies and over 950 television stations are scheduled to be repacked into the remaining lower UHF band through July 2020. At Sinclair,
one station we own and two to which we provide services were sold, resulting in approximately $311 million of gross proceeds, with another 98 of our
stations being repacked. Dielectric, our antenna and signal-transmission solutions company, is expected to handle many of the industry repack needs.
While our consolidation and multi-platform strategies aim to insulate us from fragmentation long term, we still need to focus on our core advertising
business, which has been fl at to growing low single-digit percentage points. We are encouraged by the potential downstream eff ect that tax reform
may have on the economy and the many small and medium sized businesses in our local markets. In addition, this year, the country will choose
new representatives in the mid-term elections. Given the recent volatility in the political landscape, we expect robust election spending. Political ad
spending and tax reform, combined with the growth of our digital businesses, new content off erings, retransmission rights agreements, and network
and addressable sales are expected to drive positive growth of our top line going forward.
Free cash fl ow is an important metric to the Company, as is maintaining balance sheet leverage at levels that allow us to acquire and invest in assets for
future growth. Th e impact of the federal statutory tax rate declining from 35% to 21% will be meaningful for these objectives. In addition, this past
year, we issued 12 million shares of equity, raising approximately $488 million of net proceeds that will help fund our prospective acquisitions and
investments.
Creating a nationwide platform will be critical to our future competitiveness. Th e acquisition of Tribune and implementation of ATSC 3.0 technology
are important paths for us to enter the many distribution, marketing, and content marketplaces awaiting our arrival. 2018 is the gateway year to our
future, and as we enter the portal, we will need to draw upon the many talented people that comprise our soon-to-be 15,000 strong workforce. We
encourage each of you to challenge the status quo and help us reach further. Transformation is never easy but if we collaborate and communicate, we
can be better together. We thank you, our employees and our shareholders, for your continued support and look forward to our future success.
David D. Smith
Chairman of the Board
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
may have on the economy and the many small and medium sized businesses in our local markets. In addition, this year, the country will choose
Consolidated Statements of Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
For NextGen to be successful, we need the support of infrastructure partners such as American Tower, which is working with us to build and deploy
the single frequency network tower infrastructure; SK Telecom, with which we have an MOU to develop with us systems to allow the convergence of
NextGen and 5G data delivery; and Saankhya Labs which is designing our NextGen receiver chip for mobile devices. We expect the implementation
and adoption of NextGen to occur over the next three years alongside the government’s broadcast spectrum repack. When completed, the country will
have a lower-cost, world class wireless IP data distribution network capable of supporting multiple business models.
Speaking of the repack, in 2017, the FCC completed its Broadcast Incentive Auction. In all, over 175 broadcasters sold some or all their spectrum to
wireless companies and over 950 television stations are scheduled to be repacked into the remaining lower UHF band through July 2020. At Sinclair,
one station we own and two to which we provide services were sold, resulting in approximately $311 million of gross proceeds, with another 98 of our
stations being repacked. Dielectric, our antenna and signal-transmission solutions company, is expected to handle many of the industry repack needs.
While our consolidation and multi-platform strategies aim to insulate us from fragmentation long term, we still need to focus on our core advertising
business, which has been fl at to growing low single-digit percentage points. We are encouraged by the potential downstream eff ect that tax reform
new representatives in the mid-term elections. Given the recent volatility in the political landscape, we expect robust election spending. Political ad
spending and tax reform, combined with the growth of our digital businesses, new content off erings, retransmission rights agreements, and network
and addressable sales are expected to drive positive growth of our top line going forward.
Free cash fl ow is an important metric to the Company, as is maintaining balance sheet leverage at levels that allow us to acquire and invest in assets for
future growth. Th e impact of the federal statutory tax rate declining from 35% to 21% will be meaningful for these objectives. In addition, this past
year, we issued 12 million shares of equity, raising approximately $488 million of net proceeds that will help fund our prospective acquisitions and
investments.
Creating a nationwide platform will be critical to our future competitiveness. Th e acquisition of Tribune and implementation of ATSC 3.0 technology
are important paths for us to enter the many distribution, marketing, and content marketplaces awaiting our arrival. 2018 is the gateway year to our
future, and as we enter the portal, we will need to draw upon the many talented people that comprise our soon-to-be 15,000 strong workforce. We
encourage each of you to challenge the status quo and help us reach further. Transformation is never easy but if we collaborate and communicate, we
can be better together. We thank you, our employees and our shareholders, for your continued support and look forward to our future success.
David D. Smith
Chairman of the Board
2
6
8
11
29
30
32
34
35
36
37
40
41
82
Television Markets and Stations
As of December 31, 2017, we own and operate or provide programming and/or sales and other shared services to television
stations in the following 89 markets:
Market
Washington, DC
Seattle / Tacoma, WA
Minneapolis / St. Paul, MN
St. Louis, MO
Portland, OR
Pittsburgh, PA
Raleigh / Durham, NC
Baltimore, MD
Nashville, TN
Salt Lake City, UT
San Antonio, TX
Columbus, OH
Cincinnati, OH
Milwaukee, WI
West Palm Beach / Fort Pierce, FL
Asheville, NC / Greenville, SC
Austin, TX
Las Vegas, NV
Oklahoma City, OK
Grand Rapids / Kalamazoo, MI
Birmingham / Tuscaloosa, AL
Harrisburg / Lancaster / Lebanon /
York, PA
Norfolk, VA
Greensboro / High Point / Winston
Salem, NC
Providence, RI / New Bedford, MA
Buffalo, NY
Fresno / Visalia, CA
Richmond, VA
Wilkes Barre / Scranton, PA
Little Rock / Pine Bluff, AR
Mobile, AL / Pensacola, FL
Albany, NY
Tulsa, OK
Lexington, KY
Market
Rank
(a)
Number of
Channels
6
12
15
21
22
24
25
26
27
30
31
34
35
36
37
38
39
40
41
43
44
45
47
48
52
53
54
55
57
58
59
60
62
63
4
6
4
4
10
7
6
7
9
9
8
9
7
6
12
8
2
8
6
3
14
3
4
7
4
7
12
4
10
4
11
7
4
4
Stations
WJLA
KOMO, KUNS
WUCW
KDNL
KATU, KUNP, KUNP-LD
WPGH, WPNT
WLFL, WRDC
WBFF, WNUV(c)
WZTV, WUXP, WNAB(d)
Network
Affiliation (b)
ABC
ABC
CW
ABC
ABC
FOX, MNT
CW, MNT
FOX, CW, MNT
FOX, CW, MNT
KUTV, KENV(d), KMYU, KJZZ
CBS, NBC, MNT, IND
KABB, WOAI, KMYS(d)
FOX, NBC, CW
WSYX, WTTE(c), WWHO(d)
ABC, FOX, CW, MNT
WKRC, WSTR(d)
WVTV, WCGV
WPEC, WTVX, WTCN-CA,
WWHB-CA
WLOS, WMYA(c)
KEYE
KSNV, KVCW
KOKH, KOCB
WWMT
WBMA-LD, WABM, WDBB(c),
WTTO
WHP
WTVZ
WXLV, WMYV
WJAR
WUTV, WNYO
KMPH-CD, KMPH, KFRE
WRLH
CBS, CW, MNT
CW, MNT
CBS, CW, MNT
ABC, MNT
CBS
NBC, CW, MNT
FOX, CW
CBS, CW
ABC, CW, MNT
CBS, CW, MNT
MNT
ABC, MNT
NBC
FOX, MNT
FOX, CW
FOX, MNT
WOLF(c), WSWB(d), WQMY(c)
FOX, CW, MNT
KATV
ABC
WEAR, WPMI(d), WFGX,
WJTC(d)
WRGB, WCWN
KTUL
WDKY
ABC, NBC, MNT, IND
CBS, CW
ABC
FOX
2 Sinclair Broadcast Group
2 • Sinclair Broadcast Group
Market
Dayton, OH
Wichita / Hutchinson, KS
Market
Rank
(a)
64
67
Des Moines, IA
68
Green Bay / Appleton, WI
Roanoke / Lynchburg, VA
Flint / Saginaw / Bay City, MI
Spokane, WA
Charleston / Huntington, WV
Omaha, NE
Rochester, NY
Columbia, SC
Toledo, OH
Portland, ME
Madison, WI
Paducah, KY/ Cape Girardeau, MO
Harlingen / Weslaco / Brownsville /
McAllen, TX
Syracuse, NY
Champaign / Springfield / Decatur, IL
Chattanooga, TN
Savannah, GA
Cedar Rapids, IA
Charleston, SC
El Paso, TX
South Bend-Elkhart, IN
Tri-Cities, TN-VA
Greenville / New Bern / Washington,
NC
Myrtle Beach / Florence, SC
Boise, ID
Reno, NV
Lincoln and Hasting-Kearney, NE
Johnstown / Altoona, PA
Tallahassee, FL
Yakima / Pasco / Richland /
Kennewick, WA
Traverse City / Cadillac, MI
Eugene, OR
Macon, GA
69
70
71
72
73
74
76
77
78
79
81
82
84
85
88
89
90
91
92
93
96
99
100
101
104
105
106
107
108
114
118
119
120
Number of
Channels
8
18
4
7
4
10
3
7
7
7
4
4
6
4
7
3
7
17
7
4
7
3
7
2
5
5
7
7
9
11
4
7
18
12
18
3
Stations
WKEF, WRGT(d)
KSAS, KOCW, KAAS, KAAS-LP,
KSAS-LP, KMTW(c)
KDSM
WLUK, WCWF
WSET
Network
Affiliation (b)
ABC, FOX, MNT
FOX, MNT
FOX
FOX, CW
ABC
WSMH, WEYI(d), WBSF(d)
FOX, NBC, CW
KLEW
WCHS, WVAH(d)
KPTM, KXVO(c)
WHAM(d), WUHF
WACH
WNWO
WGME, WPFO(d)
WMSN
KBSI, WDKA
KGBT
CBS
ABC, FOX
FOX, CW, MNT
ABC, FOX, CW
FOX
NBC
CBS, FOX
FOX
FOX, MNT
CBS
WTVH(d), WSTM, WSTQ-LP
CBS, NBC, CW
WICS, WICD, WCCU(d),
WRSP(d), WBUI(d)
ABC, FOX, CW
WTVC, WFLI(d)
ABC, FOX, CW, MNT
WTGS
KGAN, KFXA(d)
WCIV
KDBC, KFOX
WSBT
WEMT(d), WCYB
WCTI, WYDO(d)
WPDE, WWMB(c)
FOX
CBS, FOX
ABC, MNT
CBS, FOX
CBS, FOX
FOX, NBC, CW
ABC, FOX
ABC, CW
KBOI, KYUU-LD
CBS, CW Plus
KRXI, KRNV(d), KAME(c)
FOX, NBC, MNT
KHGI, KHGI-LD, KWNB,
KHGI-CD, KWNB-LD, KFXL
WJAC
ABC, FOX
NBC
WTWC, WTLF(d)
NBC, FOX, CW Plus
KIMA, KEPR, KUNW-CD,
KVVK-CD, KORX-CD
WGTU(d), WGTQ(d), WPBN,
WTOM
CBS, CW Plus
ABC, NBC
KVAL, KCBY, KPIC(e), KMTR(d),
KMCB(d), KTCW(d)
NBC, CBS, CW Plus
WGXA
ABC, FOX
2017 Annual Report 3
2017 Annual Report • 3
Market
Peoria / Bloomington, IL
Bakersfield, CA
Corpus Christi, TX
Amarillo, TX
Chico-Redding, CA
Columbia / Jefferson City, MO
Medford, OR
Beaumont / Port Arthur / Orange, TX
Sioux City, IA
Albany, GA
Wheeling, WV / Steubenville, OH
Gainesville, FL
Missoula, MT
Abilene / Sweetwater, TX
Quincy, IL / Hannibal, MO /
Keokuk, IA
Butte / Bozeman, MT
Eureka, CA
San Angelo, TX
Ottumwa, IA / Kirksville, MO
Total Television Channels
Market
Rank
(a)
Number of
Channels
122
126
128
131
132
135
136
142
148
154
158
159
164
165
172
185
195
196
200
3
7
5
8
11
4
4
7
15
4
3
7
6
4
3
3
8
3
3
601
Stations
WHOI
KBAK, KBFX-CD
KSCC, KTOV-LP, KXPX-LP
KVII, KVIH
KRCR, KCVU(d), KRVU-LD,
KUCO-LP, KKTF-LD
KRCG
KTVL
Network
Affiliation (b)
Comet
CBS, FOX
FOX, MNT
ABC, CW Plus
ABC, FOX, MNT
CBS
CBS, CW Plus
KFDM, KBTV(d)
CBS, FOX, CW Plus
KMEG(d), KBVK-LP, KPTH,
KPTP-LD
WFXL
WTOV
WNBW(d), WGFL(c),
WYME-CD(c)
KECI, KCFW
KTXS, KTES-LD
KHQA
KTVM
CBS, FOX, MNT
FOX
NBC, FOX
CBS, NBC, MNT
NBC
ABC, CW
ABC, CBS
NBC
KAEF, KBVU(d), KECA-LD,
KEUV-LP
ABC, FOX, CW, MNT
KTXE-LD
KTVO
ABC, CW
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 Media Research (Nielsen) as of September 2017.
(b) We broadcast programming from the following providers on our channels:
Affiliation
ABC
CBS
CW
FOX
MNT
NBC
Total Major Network Affiliates
Number of
Channels
41
30
47
59
40
25
242
Number of
Markets
30
25
37
43
31
18
Expiration Dates (1)
August 31, 2022
April 30, 2020 through December 31, 2021
August 31, 2019 through August 31, 2021
March 2, 2018 through December 31, 2019
August 31, 2018
December 31, 2018 through December 31, 2021
4 Sinclair Broadcast Group
4 • Sinclair Broadcast Group
Affiliation
Antenna TV
Azteca
Bounce Network
CHARGE!
Comet
CoziTV
Decades
Estrella TV
Get TV
Grit
Independent programming
Me TV
Movies!
Stadium Network
TBD
Telemundo
This TV
Unimas
Univision
Weather
Total Other Affiliates
Total Television Channels
Number of
Markets
17
2
1
54
71
2
2
1
5
3
2
16
6
43
65
1
4
1
5
4
Number of
Channels
18
3
1
62
86
3
2
1
5
3
2
19
7
48
77
1
5
1
9
6
359
601
Expiration Dates (1)
January 1, 2019 through January 1, 2021
August 31, 2017 through February 28, 2018
August 31, 2019
(2)
(2)
August 31, 2018
January 16, 2021
September 30, 2017
June 30, 2017
December 31, 2019
N/A
January 16, 2018 through September 25, 2020
November 1, 2019 through November 18, 2019
December 31, 2022
(2)
December 31, 2019
March 31, 2015 through December 31, 2015
December 31, 2018
December 31, 2018 through December 31, 2019
December 31, 2017
(1) When we negotiate the terms of our network affiliations or program service arrangements, we generally 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."
(2) An owned and operated network, which is carried on our multi-cast distribution platform.
(c) 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.
(d) 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.
(e) We provide programming, sales, operational, and administrative services to this station, of which 50% is owned by a third party.
2017 Annual Report 5
2017 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 content;
the effects of the Federal Communications Commission’s (FCC) National Broadband Plan, the impact of the repacking of
our broadcasting spectrum, as a result of the incentive auction, within a limited timeframe and funding allocated;
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), Shared Services Agreements (SSA), and the
national ownership cap), arbitrary enforcement of indecency regulations, retransmission consent regulations and political
or other advertising restrictions, such as payola rules;
the impact of FCC and Congressional efforts which may restrict a television station's retransmission consent negotiations;
the impact of FCC rules requiring broadcast stations to publish, among other information, political advertising rates
online;
the impact of foreign government rules related to digital and online assets;
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 MVPDs to coordinate and determine local advertising rates as a consortium;
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;
•
•
•
•
• Over-the-top (OTT) technologies and their potential impact on cord-cutting;
•
the impact of MVPDs, virtual MVPDs (vMVPDs), and OTTs offering “skinny” programming bundles that may not
include television broadcast stations; and
fluctuations in advertising rates and availability of inventory.
•
6 Sinclair Broadcast Group
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 and addressable 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 and affiliation fees (cable network fees) 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 exposure to any wrongdoing by those outside the Company, but which could affect our business or pending
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;
our ability to deploy a nationwide of next generation broadcast platforms network (NextGen);
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 CHARGE!,
TBD, Comet, 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.
2017 Annual Report 7
2017 Annual Report • 7
SELECTED FINANCIAL DATA
The selected consolidated financial data for the years ended December 31, 2017, 2016, 2015, 2014, and 2013 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 expenses
(Gain) loss on asset dispositions
Operating income
Interest expense and amortization of debt discount and
deferred financing costs
Loss from extinguishment of debt
(Loss) income from equity and cost method investees
Other income, net
Income from continuing operations before income taxes
Income tax benefit (provision)
Income from continuing operations
Discontinued operations:
Income from discontinued operations, net of related
income taxes
Net income
Net income attributable to noncontrolling interests
2017
2016
2015
2014
2013
$ 2,543,876 $ 2,499,549 $ 2,011,946 $ 1,784,641 $ 1,219,091
88,680
55,360
1,363,131
386,646
251,294
111,337
95,853
2,219,136
733,199
431,728
122,262
69,655
1,976,558
578,687
372,220
135,566
101,834
2,736,949
953,089
501,589
120,963
69,279
2,734,118
1,063,074
533,537
98,973
275,925
116,954
282,324
93,204
264,887
107,716
228,787
77,349
141,374
80,925
45,005
53,126
—
3,392
324,020
127,880
80,648
73,556
4,085
(6,029)
602,853
124,619
71,803
64,246
12,436
278
422,736
106,629
55,615
62,495
6,918
(37,160)
494,651
(211,143)
(23,699)
(191,447 )
—
(174,862)
(14,553)
(162,937)
(58,421)
1,735
3,144
964
1,540
2,313
4,998
621
2,225
372,890
(122,128)
250,762
233,793
(57,694 )
176,099
312,547
(97,432)
215,115
105,508
(41,249)
64,259
115,523
65,199
113,253
10,000
(278,872)
737,506
(212,315)
(1,404)
(13,919)
8,876
518,744
75,360
594,104
—
594,104
(18,091)
—
250,762
(5,461)
—
176,099
(4,575 )
—
215,115
(2,836)
11,558
75,817
(2,349)
Net income attributable to Sinclair Broadcast Group $
576,013
$
245,301
$
171,524
$
212,279
$
73,468
8 Sinclair Broadcast Group
8 • 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
$
5.77 $
5.77 $
$
5.72
5.72 $
0.72 $
2.62 $
2.62 $
2.60
$
2.60 $
0.71 $
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
Balance Sheet Data:
Cash and cash equivalents
Total assets
Total debt (c)
Total equity (deficit)
681,326 $
259,984 $
149,972 $
280,104
$
$ 6,784,470 $ 5,963,168 $ 5,432,315 $ 5,410,328 $ 4,103,417
$ 4,048,650 $ 4,203,848 $ 3,854,360 $ 3,886,872 $ 2,989,985
405,704
$ 1,534,366 $
405,343 $
499,678 $
557,936 $
17,682 $
(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.
2017 Annual Report 9
2017 Annual Report • 9
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 the with our consolidated financial statements including the
accompanying notes to those statements. This discussion consists of the following sections:
Executive Overview — a description of our business, summary of significant events and financial highlights from 2017, and information
about industry trends;
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 2017, 2016, and 2015, including
comparisons between years and certain expectations for 2018; 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.
EXECUTIVE OVERVIEW
We are a diversified television broadcasting company with national reach with a strong focus on providing high-quality content on our
local television stations and digital platforms. The content, distributed through our broadcast platform, consists of programming
provided by third-party networks and syndicators, local news, our own networks, and other original programming produced by us.
We also distribute our original programming, and owned and operated networks, on other third-party platforms. Additionally, we own
digital and internet media products that are complementary to our extensive portfolio of television station related digital properties. We
focus on offering marketing solutions to advertisers through our television and digital platforms and digital agency services. Outside of
our media related businesses, we operate technical services companies focused on supply and maintenance of broadcast transmission
systems as well as research and development for the advancement of broadcast technology, and we manage other non-media related
investments.
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, for which certain assets and results of operations are included in the Broadcast segment and which is a wholly owned subsidiary
of Sinclair Broadcast Group, Inc. (SBG), is the primary obligor under our Bank Credit Agreement, the 5.375% Notes, 5.625% Notes,
6.125% Notes, 5.125% Notes, and 5.875% 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.
2017 Annual Report 11
2017 Annual Report • 11
Summary of Significant Events and Financial Highlights from 2017
Tribune Acquisition
•
•
•
•
In May 2017, we entered into a definitive agreement to acquire the stock of Tribune Media Company (Tribune). Under the
terms of the agreement, Tribune stockholders will receive $35.00 in cash and 0.23 shares of Sinclair Class A common stock for
each share of Tribune Class A common stock and Class B common stock they own. See Pending Acquisitions under Note 2.
Acquisitions and Dispositions of Assets within the Consolidated Financial Statements for further discussion.
In June 2017, Tribune announced successful consent solicitation with respect to its 5.875% Senior Note due 2022. Tribune
received consents from holders of $1.0 billion in principal amount of Notes. See Commitment Letters and Incremental Term B
Facility related to Tribune Acquisition under Note 6. Notes Payable and Commercial Bank Financing within our Consolidated Financial
Statements for further discussion.
In October 2017, Tribune stockholders voted to approve the Company’s announced acquisition of 100% of the outstanding
shares of Tribune for the above mentioned purchase price and assumption of net debt. The Company expects to close the
acquisition in the second quarter of 2018, subject to customary closing conditions, including approval by the FCC and antitrust
clearance. See Pending Acquisitions under Note 2. Acquisitions and Dispositions of Assets within the Consolidated Financial Statements for
further discussion.
In December 2017, the Company announced that its wholly-owned subsidiary, Sinclair Television Group, Inc. (STG), secured
financing as contemplated in the financing commitment letters for $3.725 billion of new term B loans maturing 2024 and
priced at LIBOR plus 2.50%. The proceeds from the term B loans, which will be drawn at closing, are expected to be used to
purchase the outstanding shares of Tribune, refinance certain of Tribune’s existing indebtedness, pay costs and expenses
expected to be incurred in connection with the acquisition, and for general corporate purposes. See Commitment Letters and
Incremental Term B Facility related to Tribune Acquisition under Note 6. Notes Payable and Commercial Bank Financing within our
Consolidated Financial Statements for further discussion.
Other Acquisitions and Dispositions
•
•
•
•
•
In March 2017, we acquired the assets of Tennis Media Company, the owner of Tennis magazine and Tennis.com, for $8
million plus an additional $6 million earn-out potential based on certain contingencies. The transaction was funded with cash
on hand.
In March 2017, we sold Alarm Funding Associates (Alarm) for $200 million. We purchased Alarm in November 2007 and have
invested capital of approximately $10.5 million. After repayment of debt and other costs, we realized approximately $70 million
in pre-tax net cash proceeds on the sale.
In June 2017, we completed an acquisition of DataSphere Technologies, Inc. for $15.0 million which provides marketing
services to small businesses across the country and works in partnership with multiple media companies, including Sinclair.
The transaction was funded with cash on hand.
In June 2017, we completed the acquisition of NewsOn, a single app to watch live, local news on mobile and OTT devices.
NewsOn has 15 affiliate partners reaching over 80% of the country.
In September 2017, the Company closed on its purchase of the stock of Bonten Media Group Holdings, Inc. (Bonten), and
Cunningham also completed its purchase of the membership interest of Esteem Broadcasting for an aggregate purchase price
of $240 million plus working capital, excluding cash acquired, of $1.3 million. As a result of the transaction, the Company
added 14 television stations in 8 markets and Cunningham assumed the joint sales agreements under which the Company will
provide services to 4 stations. The acquisition was funded through cash on hand.
Television and Digital Content
•
•
•
•
•
In January 2017, together with Metro-Goldwyn-Mayer, we launched CHARGE!, a new 24-7 action-based network that features
more than 2,300 hours of TV series content and more than 2,000 movie titles.
In January 2017, Circa launched a new user-generated platform empowering college students to provide video content about
news and entertainment events on their campuses via widgets available on Circa’s web site and social media pages.
In February 2017, we extended our programming agreement with MyNetwork Television through the 2017-2018 broadcast
season.
In February 2017, we launched TBD, the first multiscreen TV network in the U.S. market to bring premium internet-first
content to TV homes across America. TBD includes web series, short films, fashion, comedy, lifestyle, eSports, music, and viral
content, through partnerships with creators.
In April 2017, we entered into an agreement with Silver Chalice and 120 Sports as equity partners on a new multi-platform
sports network, featuring linear broadcast and comprehensive digital offerings through the merging of 120 Sports’ live studio
12 Sinclair Broadcast Group
12 • Sinclair Broadcast Group
•
•
•
•
•
•
•
•
•
operations, Silver Chalice’s Campus Insiders’ live collegiate games, and Sinclair’s American Sports Network’s (ASN) distribution
and live collegiate games.
In May 2017, we launched KidsClick, a national multiplatform programming block geared for children that will feature robust
and age-appropriate content available on all screens, including broadcast television, online, pay TV, mobile, and OTT.
In June 2017, the Company and CBS Corporation (CBS) entered into multi-year affiliation renewals in Austin, TX, Salt Lake
City, UT, Gainesville, FL, and South Bend-Elkhart, IN; renewed the CBS All Access agreement; and agreed to be distributed on
the new YouTube TV live television service. The Company also entered into agreements with American Broadcasting
Companies, Inc. (ABC) and NBC Television Network, a division of NBCUniversal Media, LLC (NBC) for carriage of our
affiliates on YouTube TV, and with ABC for carriage on DirecTV Now.
In August 2017, the Company announced a multi-year deal with FOX Broadcasting Company (FOX) that renews station
affiliation agreements for all five of the Company's FOX Affiliations that were at the end of their terms. The affiliations
renewed were for WACH in Columbia, South Carolina; KFOX in El Paso, Texas; KRXI in Reno Nevada; WFXL in Albany,
Georgia; and WSBT in South Bend, Indiana.
In September 2017, the Company entered into a multi-year deal with CBS that renews three station affiliations that were set to
expire at the end of 2018, including KGAN in Cedar Rapids, Iowa; KGBT in Harlingen, Texas; and WGME in Portland,
Maine. In addition, CBS renewed an affiliation that was set to expire at the end of 2018 with WTVH in Syracuse, N.Y, that
Sinclair provides sales and other services to under a joint sales agreement.
In January 2018, the Company entered into multi-year affiliation renewals with ABC that extend affiliations across all Sinclair
stations to 2022. Additionally, ABC agreed to an extension of all affiliations with ABC affiliated stations that Sinclair provides
sales and other services to under joint sales agreements. Contingent upon the closing of Sinclair's acquisition of Tribune, the
ABC Television Network and Sinclair also agreed to an extension of Tribune's ABC affiliation agreements in New Orleans, LA,
Scranton-Wilkes-Barre, PA, and Moline, IL (Quad Cities) to be co-terminus with Sinclair's ABC affiliations.
In January 2018, Circa expanded its digital footprint with the debut of a video-driven, live news app, providing unique live
video covering a wide range of breaking news stories that are in-the-moment, pushing trending issues, alerting users as stories
are developing.
In January 2018, the Company and Sorenson Media Group entered into the first large-scale addressable advertising agreement
whereby the two companies will sell targeted ads via smart TVs.
In February 2018, the Company entered into a multi-year renewal with Nielsen Holdings for TV ratings services.
In February 2018, the Company entered into multi-year affiliation renewals with NBC in three markets, including KSNV in Las
Vegas, NV; WJAC in Johnstown, PA; and WTOV in Wheeling, WV. Additionally, NBC renewed an affiliation with KRNV in
Reno, NV that Sinclair provides sales and other services to under a joint sales agreement.
Broadcast Distribution
•
•
• Effective February 1, 2017, we reached an agreement in principle to renew the retransmission consent agreement with Frontier
Cable for carriage of KOMO (ABC) in Seattle, Washington, KATU (ABC) in Portland, Oregon, and Tennis Channel.
In August 2017, the Company announced an agreement for all of its ABC, CBS, FOX, NBC, and MNT affiliates to be carried
in their respective markets as YouTube TV launches in those markets. As part of this agreement, YouTube TV will also deliver
Tennis Channel and Comet to all of its members.
In October 2017, Ring of Honor expanded distribution into French-speaking Canada, on the channel Reseau des Sports,
making it available to over 2 million homes in Canada.
In October 2017, the Company entered into an agreement with Sony Vue under which Sony Vue will include the Company's
ABC, CBS, FOX, and NBC affiliate station broadcasts as well as Tennis, MyNetworkTV, and Comet on their platform.
In December 2017, the Company entered into an agreement with the National Cable Television Cooperative (“NCTC”), which
allows NCTC’s member companies to opt into a multi-year retransmission consent agreement. 86% of NCTC's members,
which are in Sinclair markets, opted into this agreement. The agreement also provides for carriage of Sinclair-owned Tennis
Channel and Comet.
In January 2018, the Company entered into a multi-year retransmission renewal with Verizon Fios for the carriage of Sinclair
stations on its platforms.
•
•
•
2017 Annual Report • 13
2017 Annual Report 13
ATSC 3.0
•
•
•
•
•
•
•
•
In March 2017, ONE Media 3.0, announced an agreement with Saankhya Labs, a leader in the development of Cognitive
Software Defined Radio chips, to accelerate the development of ATSC 3.0 chipsets, that will enable various types of consumer
devices to receive the Next Generation television standard.
In March 2017, the Company announced a Memorandum of Understanding (MOU) with Nexstar Media Group for a
consortium to promote innovation, and develop and explore products and services associated with ATSC 3.0 and monetization
opportunities such as spectrum utilization, virtual MVPD platforms, multicast channels, automotive applications, single
frequency networks, and wireless data applications, among others. In June 2017, Univision and Northwest Broadcasting joined
the consortium, bringing the current total reach of the consortium to approximately 90% of the country.
In July 2017, the Company and Nexstar reached a tentative agreement on principles to coordinate the transition of the over-
the-air delivery of ATSC 3.0 in 97 television markets. The tentative agreement includes 43 markets where both Companies own
a television station, and a plan to spearhead the transition for shared “NextGen” services in the 54 markets where only one of
the Companies owns or operates stations.
In July 2017, ONE Media entered into a definitive services agreement with Saankhya Labs for the design of a next-generation
chip for ATSC 3.0 fixed and mobile reception. The parties also agreed to an investment in Saankhya Labs to provide such chips
to the market. These agreements follow the previously announced incubation stage agreement between the parties that initiated
the design of a new software defined radio chip architecture to support the first mobile next-generation chipset.
In November 2017, the Company and our wholly-owned subsidiary, ONE Media 3.0, announced our intention to fully deploy
ATSC 3.0 on our stations nationwide pursuant to the FCC's vote to authorize use of the Next Generation TV standard. The
new digital standard will dramatically improve television pictures and sound and, for the first time, be receivable on mobile
devices, over-the-air for free. The Internet Protocol-based standard will seamlessly merge broadcast signals with Internet-based
content and also enable multiple new data transmission business opportunities for broadcasters.
In January 2018, the Company and Imagine Communications reached an agreement to collaborate on the new monetization
opportunities of ATSC 3.0 digital television technology. By providing oversight in the product development process and beta
testing for both ATSC 1.0 and 3.0 models, Sinclair will play a critical role in the development of Imagine's next-generation
business process systems for traffic, ad sales, and data analytics that allow for unit- and impression-based buys.
In January 2018, Sinclair, Nexstar, Univision and American Tower announced the first domestic deployment of the Next Gen
TV standard and a single frequency network in Dallas, TX. The deployment will involve multiple stations, Next Gen TV
program transmissions, and simulcasts on 1.0 host stations using customized channel sharing agreements. The Single Frequency
Network sites will allow us to validate the mobile, customized programming, and other data-use cases enabled by the ATSC 3.0
standard.
In January 2018, the Company and SK Telecom entered into an MOU for the development of systems to allow the
convergence of NextGen and 5G data delivery.
Financing and Shareholder Returns
•
•
In January 2017, we extended the maturity of our Term Loan B from April 9, 2020 and July 31, 2021 to January 3, 2024. In
connection with the extension, we added additional operating flexibility, including a reduction in certain pricing terms related to
the Loans and our existing revolving credit facility and revisions to certain covenant ratio requirements.
In March 2017, we sold 12.0 million shares of Class A common stock to the public at a price of $42.00 per share. The net
proceeds from the offering were approximately $487.9 million and are intended to fund future potential acquisitions and for
general corporate purposes.
• During 2017, we repurchased approximately 1.0 million shares of Class A Common Stock for approximately $30.3 million on
the open market including transaction costs. As of December 31, 2017, the total remaining authorization was $88.8 million.
For the year ended December 31, 2017, we paid dividends of $0.72 per share.
In February 2018, we declared a quarterly cash dividend of $0.18 per share.
•
•
Other Events
•
•
In January 2017, Christopher S. Ripley assumed the role of President and Chief Executive Officer for the Company; former
Sinclair President and CEO David D. Smith now serves as Executive Chairman; Lucy A. Rutishauser assumed the role of Chief
Financial Officer; and David B. Amy assumed the role of Vice Chairman.
In April 2017, the FCC issued a public notice which announced the conclusion of the National Broadband Plan Spectrum
Auction. In July 2017, we received $310.8 million of gross proceeds from the auction.
14 Sinclair Broadcast Group
14 • Sinclair Broadcast Group
•
•
• As a reflection of the Company’s commitment to and investment in local news, Sinclair’s newsrooms have been honored over
the past year with two National Edward R. Murrow Awards for KOMO in Seattle, WA and KTUL in Tulsa, OK, 36 Regional
Edward R. Murrow Awards, and 90 Regional Emmys including two for Circa for investigative reporting.
In June 2017, our shareholders re-elected the Company's eight Directors at our Annual Shareholders' Meeting. In addition,
shareholders ratified the appointment of PricewaterhouseCoopers, LLP as the Company's independent registered public
accounting firm for the fiscal year ending December 31, 2017; approved the proposed non-binding advisory vote on executive
compensation; approved the proposed triennial advisory vote for executive compensation; and approved the proposed
Executive Performance Formula and Incentive Plan.
In August 2017, the Company awarded seven young students from diverse backgrounds the annual Broadcast Diversity
Scholarship to assist them with the funds needed to help them earn college degrees in broadcast-related fields.
In September 2017, the Company held the "Standing Strong for Texas" relief effort, in which viewers in our markets
generously contributed almost $1.4 million to the Salvation Army. In addition, the Company donated $100,000, bringing the
total to almost $1.5 million.
In December 2017, the Company announced that, as a result of tax reform legislation, we will pay a $1,000 bonus to almost
9,000 full-time and part-time employees at all of our stations and subsidiaries, excluding senior level executives.
In January 2018, Rob Weisbord assumed the role of Chief Revenue Officer for the Company, a new role reflecting the
increased diversification of our business and new revenue streams we are creating.
In February 2018, Sinclair opened its Broadcast Diversity Scholarship for applications. Sinclair has distributed over $70,000 in
financial assistance to students demonstrating a promising future in the broadcast industry.
•
•
•
•
Industry Trends
•
Political spending is significantly higher in the even-numbered 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.
2017 Annual Report 15
2017 Annual Report • 15
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, income taxes, variable interest entities, and transactions with related
parties. 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 Indefinite-Lived Intangible Assets. We evaluate our goodwill and indefinite-lived intangible assets for impairment
annually, or more frequently, if events or changes in circumstances indicate an impairment may exist. As of December 31, 2017, our
consolidated balance sheet includes $2,124.0 million and $159.4 million of goodwill and indefinite-lived intangible assets, respectively.
In the performance of our annual goodwill and indefinite-lived intangible asset impairment assessments we have the option to
qualitatively assess 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 an indefinite-lived intangible asset is impaired, we apply the quantitative assessment, which involves
comparing the estimated fair value of the reporting unit or indefinite-lived intangible asset to its respective carrying value. See Impairment
of Goodwill, Intangibles and Other Long-Lived Assets under Note 1. Nature of Operations and Summary of Significant Accounting Policies within the
Consolidated Financial Statements 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 indefinite-lived intangible assets. See Note 5.
Goodwill, Indefinite-Lived Intangible Assets and Other Intangible Assets within the Consolidated Financial Statements for the results of our annual
impairment tests during the years ended December 31, 2017, 2016, and 2015.
For our annual goodwill impairment tests in 2017, 2016, and 2015, we concluded that it was more-likely-than-not that goodwill was
not impaired based on our qualitative assessments. For one reporting unit in 2016, we elected to perform a quantitative assessment and
concluded that its fair value significantly exceeded the carrying value. For our annual impairment tests for indefinite-lived intangible
assets in 2017, we concluded that it was more-likely-than-not that the assets were not impaired as a result of our qualitative assessments.
In 2016 and 2015, as a result of our qualitative and quantitative assessments, we concluded that is was more-likely-than-not that these
assets were not impaired.
We believe we have made reasonable estimates and utilized appropriate assumptions to evaluate whether the fair values of our
reporting units and indefinite-lived intangible assets 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 in Programming under 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.
16 Sinclair Broadcast Group
16 • Sinclair Broadcast Group
Income Tax. As discussed in Income Taxes under 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 basis 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, 2017 and 2016, 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 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 9.
Income Taxes within the Consolidated Financial Statements, for further discussion of accrued unrecognized tax benefits.
Variable Interest Entities. As discussed in Variable Interest Entities under 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 to pursuant to arrangements, including LMAs, JSAs, and 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.
Transactions with Related Parties. We have determined that we conduct certain business related transactions with related persons or
entities. See Note 11. Related Person Transactions within the Consolidated Financial Statements for discussion of these transactions.
Recent Accounting Pronouncements
See Recent Accounting Pronouncements under Note 1. Nature of Operations and Summary of Significant Accounting Policies within the Consolidated
Financial Statements for a discussion of recent accounting policies and their impact on our financial statements.
2017 Annual Report 17
2017 Annual Report • 17
RESULTS OF OPERATIONS
In general, this discussion is related to the results of operations. The results of the acquired stations during the years ended 2017,
2016, and 2015 are included in our results of operations for the years ended 2017, 2016, and 2015 from their respective dates of
acquisition. See Note 2. Acquisitions and Dispositions of Assets within the Consolidated Financial Statements for further discussion of stations
acquired. Unless otherwise indicated, references in this discussion and analysis to 2017, 2016, and 2015 are to our fiscal years ended
December 31, 2017, 2016, and 2015, 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.
Consolidated Operating Data
The following table sets forth certain of our consolidated operating data for the years ended December 31, 2017, 2016, and 2015 (in
millions). For definitions of terms, see the footnotes to the table in Selected Financial Data.
Years Ended December 31,
2016
2017
Media revenues (a)
Revenues realized from station barter arrangements
Other non-media revenues
Total revenues
Media production expenses (a)
Media selling, general and administrative expenses (a)
Expenses recognized from station barter arrangements
Depreciation and amortization
Other non-media expenses
Corporate general and administrative expenses
Research and development
(Gain) loss on asset dispositions
Operating income
Net income attributable to Sinclair Broadcast Group
$
$
$
2,543.9 $
121.0
69.2
2,734.1
1,063.1
533.5
99.0
391.4
65.2
113.3
10.0
(278.9)
737.5 $
576.0 $
2,499.5 $
135.6
101.8
2,736.9
953.1
501.6
117.0
410.0
80.6
73.6
4.1
(6.0)
602.9 $
245.3 $
2015
2,011.9
111.3
95.9
2,219.1
733.2
431.7
93.2
389.6
71.8
64.2
12.4
0.3
422.7
171.5
(a) Our media related revenues and expenses are primarily derived from our broadcast segment, but also from our other media related
business, including our networks and content such as Tennis Channel, Comet, CHARGE!, and non-broadcast digital properties.
The results of our broadcast segment and the other media businesses are discussed further below under Broadcast Segment and Other,
respectively.
18 Sinclair Broadcast Group
18 • Sinclair Broadcast Group
BROADCAST SEGMENT
Revenues
The following table presents our media revenues, net of agency commissions, for the years ended December 31, 2017, 2016, and 2015
(in millions):
Local revenues:
Non-political
Political
Total local
National revenues (a):
Non-political
Political
Total national
$
Total broadcast segment media revenues
$
2017
2016
2015
‘17 vs. ‘16
‘16 vs. ‘15
Percent Change
1,982.2 $
9.6
1,991.8
359.3
20.7
380.0
2,371.8 $
1,841.9 $
24.2
1,866.1
357.2
175.1
532.3
2,398.4 $
1,627.6
9.7
1,637.3
353.3
16.1
369.4
2,006.7
7.6 %
(b)
6.7 %
0.6 %
(b)
(28.6)%
(1.1)%
13.2%
(b)
14.0%
1.1%
(b)
44.1%
19.5%
(a) National revenue relates to advertising sales sourced from our national representation firm.
(b) 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 2017 net time sales, which include the advertising portion
of our local and national broadcast revenues, were automotive (25.4%), services (19.1%), medical (6.5%), and retail/department stores
(5.2%). No other advertising category accounted for more than 5.0% of our net time sales in 2017. No advertiser accounted for more
than 1.1% of our Broadcast net time sales in 2017.
Our primary types of programming and their approximate percentages of 2017 net time sales were local news (31.3%), syndicated
programming (30.9%), network programming (24.5%), sports programming (9.5%), and paid programming (3.8%).
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, 2017, 2016, and 2015:
# of
Channels (a)
41
59
30
25
47
40
359
601
Percent of Net Time Sales for the
Twelve Months Ended December 31,
2015
2016
2017
Percent Change
‘17 vs. ‘16
‘16 vs. ‘15
28.8%
25.4%
19.2%
12.4%
7.2%
5.4%
1.6%
27.1%
24.3%
19.7%
14.2%
7.3%
5.8%
1.7%
28.7%
25.9%
17.7%
11.7%
8.0%
6.5%
1.5%
6.3 %
4.5 %
(2.5)%
(12.7)%
(1.4)%
(6.9)%
(5.9)%
(5.6 )%
(6.2 )%
11.3 %
21.4 %
(8.8 )%
(10.8 )%
13.3 %
ABC
FOX
CBS
NBC
CW
MNT
Other (b)
Total
(a) See Television Markets and Stations for further detail on our channels. We acquired certain television stations during 2017, 2016, and
2015, with a variety of network affiliations. This acquisition activity affects the year-over-year comparability of revenue by
affiliation. See Note 2. Acquisitions and Dispositions of Assets 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,
CHARGE!, Comet, CoziTV, Decades, Estrella TV, Get TV, Grit, Me TV, Movies!, Stadium Network, TBD, Telemundo, This TV,
Unimas, Univision, and Weather.
2017 Annual Report 19
2017 Annual Report • 19
Media Revenues. Media revenues decreased $26.6 million in 2017 when compared to 2016, primarily related to a decrease in political net
time sales, as well as a decrease in advertising revenues generated from the schools, paid programming, direct response,
telecommunications, restaurant, medical, furniture, retail/department stores, and food-breakfast sectors. These decreases were partially
offset by an increase in retransmission and digital revenues; an increase in advertising revenues generated from the services,
pharmaceutical/cosmetics, entertainment, and automotive segments; and $36.5 million related to stations not included in the same period
in 2016.
Media revenues increased $391.7 million in 2016 when compared to 2015, of which $37.6 million was related to stations not included
in the same period in 2015. The remaining increase was primarily related to an increase in political net time sales as 2016 was a
presidential election year; an increase in retransmission and digital revenues; and an increase in advertising revenues generated from the
services, home products, automotive, direct response, media, entertainment, pharmaceutical/cosmetics, restaurant, and travel sectors.
These increases were partially offset by a decrease in advertising revenues generated from the schools, telecommunications,
retail/department stores, fast food, paid programing, and internet sectors.
Political Revenues. Political revenues, which include time sales from political advertising, decreased by $169.0 million to $30.3 million in
2017 when compared to 2016, a presidential election year. Political revenues increased by $173.5 million to $199.3 million in 2016 when
compared to 2015. Political revenues are typically higher in election years such as 2016.
Local Revenues. Excluding political revenues, our local media revenues, which include local time sales, retransmission revenues, digital,
and other local revenues, increased $140.3 million in 2017 when compared to 2016, of which $35.6 million was related to the stations not
included in the same period in 2016. The remaining increase was primarily related to an increase in retransmission and digital revenues as
well as advertising revenues generated from the services, automotive, entertainment, and fast food sectors. These increases were partially
offset by lower advertising revenues generated from the schools, paid programming, retail/department stores, direct response, furniture,
restaurants, media, and medical sectors.
Excluding political revenues, our local media revenues increased $214.3 million in 2016 when compared to 2015, of which $28.9
million related to the stations not included in the same period in 2015. The remaining increase was primarily related to an increase in
retransmission and digital revenues and an increase in advertising revenues generated from the services, media, automotive,
entertainment, furniture, and travel sectors. These increases were partially offset by lower advertising revenues generated from the
schools, retail, medical, fast food, paid programming, direct response, and pharmaceutical/cosmetics sectors.
National Revenues. Excluding political revenues, our national media revenues, which include national time sales and other national
revenues, increased $2.1 million in 2017 when compared to 2016, of which $4.2 million was related to the stations not included in the
same period in 2016. Increases in advertising revenues generated from the retail/department stores, entertainment, and media sectors
were offset by lower advertising revenues generated from the direct response, telecommunications, home products, medical, fast food,
restaurants, automotive, paid programming, schools, and furniture sectors.
Excluding political revenues, our national media revenues increased $3.9 million in 2016 when compared to 2015, of which$3.5 million
was related to the stations not included in the same period in 2015. The remaining increase was primarily related to an increase in
advertising revenues generated from the home products, direct response, medical, pharmaceutical/cosmetics, restaurants, and fast food
sectors. These increases were partially offset by lower advertising revenues generated from the telecommunications, retail, automotive,
internet, and services sectors.
20 • Sinclair Broadcast Group
20 Sinclair Broadcast Group
Expenses
The following table presents our significant operating expense categories for our broadcast segment for the years ended December 31,
2017, 2016, and 2015 (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
$
$
$
$
$
2017
2016
2015
963.7 $
470.0 $
$
115.5
101.7 $
244.4 $
874.1 $
466.2 $
127.9
$
67.0 $
247.1 $
714.1
427.2
124.6
55.8
251.7
Percent Change
(Increase/(Decrease))
‘17 vs. ‘16
‘16 vs. ‘15
10.3 %
0.8 %
(9.7)%
51.8 %
(1.1)%
22.4 %
9.1 %
2.6 %
20.1 %
(1.8)%
Media production expenses. Media production expenses increased $89.6 million during 2017 compared to 2016, of which $19.4 million
related to the stations not included in the same period in 2016. The remaining increase for the year was primarily related to increases in
fees pursuant to network affiliation agreements due to higher retransmission revenue and viewership measurement costs, partially offset
by a decrease to network inventory fees related to renewed network agreements and a decline in external news profit sharing.
Media production expenses increased $160.0 million during 2016 compared to 2015, of which $14.4 million related to stations not
included in the same period of 2015, net of dispositions. The remaining increase for the year was primarily due to increases in fees
pursuant to network affiliation agreements mainly in relation to higher retransmission revenue, further investment in original
programming content, increased costs related to sports programming content and expansion of news, an increase in costs related to
viewership measurement, and increased compensation expense.
Media selling, general and administrative expenses. Media selling, general and administrative expenses increased $3.8 million during 2017
compared to 2016. The increase was primarily due to $10.1 million of expenses related to stations not included in the same period in
2016, increased expenses related to digital offerings, and increased compensation expenses. These increases were partially offset by a
settlement with the FCC in June 2016 for the amount of $9.5 million and a decrease in national sales commissions.
Media selling, general and administrative expenses increased $39.0 million during 2016 compared to 2015, of which $6.0 million
related to the stations not included in the same period in 2015, net of dispositions. The remaining increases for the year were primarily
due to an increase in information technology infrastructure costs, increased compensation expense, increased digital interactive costs, and
a $9.3 million charge related to settling the benefit obligation of an inherited pension plan.
Amortization of program contract costs and net realizable value adjustments. The amortization of program contract costs decreased $12.4
million during 2017 compared to 2016. The decrease is primarily due to the timing of amortization on long term contracts and a
decrease in program renewal costs. The decreases were partially offset by $1.7 million of amortization related to the stations not included
in the same period of 2016 and an increase to amortization cost from new programs added since 2016.
The amortization of program contract costs increased $3.3 million during 2016 compared to 2015, of which $2.1 million related to the
stations not included in the same period of 2015, net of dispositions. The remaining increase is due to expanding high quality film
content across our broadcast spectrum.
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 decreased $2.7 million during 2017 compared 2016 primarily related to assets becoming fully depreciated, which is greater than the
added depreciation from capital expenditures. The decrease of these expenses is partially offset by $6.0 million of depreciation and
amortization related to the stations not included in the same period of 2016.
Depreciation and amortization expenses decreased $4.6 million during 2016 compared to 2015, of which $1.3 million related to a
station not included in the same period of 2015, net of dispositions.
2017 Annual Report 21
2017 Annual Report • 21
OTHER
The following table presents our media revenues and expenses, as well as other non-media revenues and expenses, for our other
business units, for the years ended December 31, 2017, 2016, and 2015 (in millions):
Media revenues
Media expenses
Other non-media
Revenues:
Investments in real estate ventures and
private equity
Technical services
Expenses: (a)
Investments in real estate ventures and
private equity
Technical services
Research and development expenses
Gain on asset dispositions
(Loss) income from equity and cost method
investments
$
$
$
$
$
$
$
$
$
2017
172.0 $
162.9 $
2016
101.2 $
114.4 $
2015
5.2
23.6
Percent Change
‘17 vs. ‘16
‘16 vs. ‘15
70.0 %
42.4 %
1,846.2 %
384.7 %
$
54.3
14.9 $
91.2
$
10.7 $
$
54.9
18.4 $
10.0 $
53.2 $
88.5
$
12.6 $
4.1 $
(6.0) $
85.7
10.2
79.9
11.2
12.4
0.3
(40.5)%
39.3 %
6.4 %
4.9 %
(38.0)%
46.0 %
143.9 %
n/m
10.8 %
12.5 %
(66.9)%
n/m
(13.9) $
1.7
$
1.0
n/m
70.0 %
(a) Comprises total expenses of the entity including general 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, and excludes equity method investment income.
n/m — not meaningful
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 non-broadcast digital and internet businesses. For the years ended
December 31, 2017, 2016, and 2015, we recorded revenue of $172.0 million, $101.2 million, and $5.2 million, respectively. The year-
over-year increases in media revenues primarily relate to an increase in distribution revenues from MVPDs for Tennis, an increase in net
time sales from our original networks, and from our non-broadcast digital and internet businesses. For the years ended December 31,
2017, 2016, and 2015, we recorded expenses of $162.9 million, $114.4 million, and $23.6 million, respectively, which is comprised of
programming and production expenses, and general and administrative expenses related to the operations of our networks, content, and
digital and internet businesses. The year-over-year increases primarily relate to Tennis, which was acquired during the first quarter of
2016, an increase to program and productions costs related to the start-up of our original networks and content, and an increase to
general and administrative cost related to our new non-broadcast digital and internet initiatives.
Other non-media revenues and expenses:
Investments in real estate ventures and private equity. We have controlling interests in certain real estate investments and private
equity investments. For the year ended December 31, 2017, revenues and expenses from these investments decreased $36.9
million and $33.6 million, respectively, compared to 2016. The decrease in revenue and expenses is primarily due to the sale of
Alarm in early March 2017.
For the year ended December 31, 2016, revenues and expenses from these investments increased $5.5 million and $8.6
million, respectively, compared to 2015. The increase to revenue was primarily related to an increase in transaction volume from
our sign and alarm businesses, partially offset by a decrease related to real estate development projects. The increase to
expenses was primarily due to an increase of $8.4 million related to transaction volume for our sign and alarm business and a
$2.6 million increase in expenses related to real estate development projects, partially offset by a decrease of expenses related to
our operating real estate investments and gain on sale of certain real estate assets.
.
22 Sinclair Broadcast Group
22 • Sinclair Broadcast Group
Technical Services. We own certain subsidiaries which provide service and support for broadcast transmitters, and design and
manufacture broadcast systems. For the year ended December 31, 2017, revenues and expenses related to Technical Services
increased $4.2 million and $5.8 million, respectively, compared to 2016. For the year ended December 31, 2016 revenues and
expenses related to Technical Services increased $0.5 million and $1.4 million, respectively, compared to 2015. The increases in
both revenues and expenses related to Technical Services for both 2017 and 2016 are due to increased transaction volume.
Research and development expenses. Our research and development expenses relate to our costs to create NextGen. For the years ended
December 31, 2017, 2016, and 2015, research and development costs related to ONE Media, LLC were $10.0 million, $4.1 million, and
$12.4 million, respectively.
Gain on asset dispositions. In March 2017, we sold Alarm for $200.0 million less working capital and transaction costs. We recognized a
gain on the sale of Alarm of $53.0 million, of which $12.3 million was attributable to non-controlling interests; included in the gain on
asset dispositions and net income attributable to the noncontrolling interests, respectively, on the consolidated statement of operations.
Income from Equity and Cost Method Investments. We recognize income from certain real estate, private equity, media, and digital ventures
which we hold as equity and cost method investments. For the year ended December 31, 2017, net income/loss from these equity and
cost method investments decreased by $15.6 million compare to 2016. The decrease is primarily related to the recognition of our
proportionate share of losses associated with investments made in 2017, accounted for under the equity method. See Note 9. Income Taxes
within the Consolidated Financial Statements for further discussion on this investment.
2017 Annual Report 23
2017 Annual Report • 23
CORPORATE AND UNALLOCATED EXPENSES
The following table presents our corporate and unallocated expenses for the years ended December 31, 2017, 2016, and 2015 (in
millions):
Corporate general and administrative expenses
Interest expense
Loss from extinguishment of debt
Income tax benefit (provision)
2017
10.6 $
205.2 $
1.4 $
75.4 $
2016
4.1 $
199.1 $
23.7 $
(122.1) $
2015
5.4
186.5
—
(57.7)
$
$
$
$
n/m — not meaningful
Percent Change
(Increase/(Decrease))
‘17 vs. ‘16
‘16 vs. ‘15
158.5 %
3.1 %
(94.1)%
n/m
(24.1)%
6.8 %
n/m
111.6 %
Corporate general and administrative expenses. We allocate most of our corporate general and administrative expenses to the broadcast
segment. The explanation that follows combines corporate general and administrative expenses found in the Broadcast Segment section
with the corporate general and administrative expenses found in this section, Corporate and Unallocated Expenses. These results exclude
general and administrative costs from our other non-media businesses and investments which are included in our discussion of expenses
in the Other section above.
Corporate general and administrative expenses increased in total by $41.1 million in 2017 compared to 2016 primarily related to legal
and consulting fees related to our completed and pending acquisitions, and spectrum auction expenses, as well as increased employee
compensation costs related to merit increases.
Corporate general and administrative expenses increased in total by $9.8 million in 2016 compared to 2015. This increase primarily
related to legal costs related to acquisitions and an increase in compensation costs related to merit increases.
We expect corporate general and administrative expenses to decrease in 2018 compared to 2017 primarily as a result of lower
outside and other legal fees.
Interest expense. The explanation that follows combines the interest expense included within the Broadcast Segment with the interest
expense found in this section, Corporate and Unallocated Expenses. Interest expense increased by $5.7 million in 2017 compared to 2016
primarily due to $6.4 million in debt financing fees expensed related to the amendment of certain terms and extension of the maturity
date of Term Loan B under the existing Bank Credit Agreement, partially offset by the net effect of the redemption of $350.0 million of
6.375% senior unsecured notes (the 6.375% Notes) and offering of $400.0 million of senior unsecured notes bearing a more favorable
interest rate of 5.125% (the 5.125% Notes), as discussed in Note 6. Notes Payable and Commercial Bank Financing within the Consolidated
Financial Statements.
Interest expense increased by $18.3 million in 2016 compared to 2015 primarily due to the issuance of $350.0 million of the 5.875%
Notes in 2016. See Note 6. Notes Payable and Commercial Bank Financing within the Consolidated Financial Statements for further discussion.
We expect interest expense to increase in 2018 compared to 2017 as a result of additional term B loans to be drawn at closing of the
anticipated Tribune acquisition, as discussed in Note 6. Notes Payable and Commercial Bank Financing within the Consolidated Financial
Statements.
Loss from extinguishment of debt. In January 2017, we entered into an amendment to our Bank Credit Agreement that includes extended
maturity for some Term Loan positions to more favorable rates. As a result, we recognized a loss on extinguishment of debt of $1.4
million. We recognized a loss on extinguishment of debt of $23.7 million for the year ended December 31, 2016 related to the
redemption of the 6.375% Notes in August 2016. See Note 6. Notes Payable and Commercial Bank Financing within the Consolidated Financial
Statements for further discussion.
Income tax benefit (provision). The 2017 income tax benefit for our pre-tax income (including the effects of noncontrolling interest) of
$500.7 million resulted in an effective tax rate of (15.1)%. The 2016 income tax provision for our pre-tax income (including the effects
of the noncontrolling interest) of $367.4 million resulted in an effective tax rate of 33.3%. The decrease in the effective tax rate from
24 Sinclair Broadcast Group
24 • Sinclair Broadcast Group
2016 to 2017 is primarily due to the re-measurement of our deferred tax assets and liabilities related to the reduction of the U.S. federal
tax rate from 35.0% to 21.0%, effective January 1, 2018, under the Tax Cuts and Jobs Act (Tax Reform) enacted on December 22, 2017.
The 2015 income tax provision for our pre-tax income (including the effects of the noncontrolling interest) of $229.2 million resulted
in an effective tax rate of 25.2%. The increase in the effective tax rate from 2015 to 2016 is primarily due to a $12.6 million benefit
related to the realization of a capital loss from the 2015 sale of stock of a subsidiary.
As of December 31, 2017, we had a net deferred tax liability of $515.2 million as compared to a net deferred tax liability of $609.3
million as of December 31, 2016. The decrease primarily relates to Tax Reform, offset partially by an increase in deferred tax liabilities
due to deferred tax provision related to transactions associated with the Broadcast Incentive Auction and the acquisition of Bonten
Media Group Holdings, Inc. in 2017. For additional information regarding the Broadcast Incentive Auction and the acquisition see Note
2. Acquisitions and Dispositions of Assets within the Consolidated Financial Statements. Also, see Note 9. Income Taxes within the Consolidated
Financial Statements for further information.
As of December 31, 2017, we had $7.2 million of gross unrecognized tax benefits. Of this total, $6.6 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. As
of December 31, 2016, we had $4.7 million of gross unrecognized tax benefits. Of this total, $3.9 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. We
recognized $0.6 million and $0.2 million of income tax expense for interest related to uncertain tax positions for the years ended
December 31, 2017 and 2016, respectively. See Note 9. Income Taxes within the Consolidated Financial Statements for further information.
2017 Annual Report 25
2017 Annual Report • 25
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2017, we had net working capital of approximately $988.4 million, including $681.3 million in cash and cash
equivalent balances, and $484.5 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 have $313.1 million in restricted cash primarily related to proceeds related to the Broadcast Spectrum Auction. See Broadcast
Incentive Auction under Note 2. Acquisitions and Dispositions of Assets within the Consolidated Financial Statements for further discussion.
In December 2017, we secured the required financing as contemplated in financing commitment letters for the financing of the
Tribune acquisition, to be drawn at closing from issuance of $3.7 billion Term B loans under the Bank Credit Agreement, which will be
amended at closing. See Commitment Letters and Incremental Term B Facility related to Tribune Acquisition under Note 6. Notes Payable and
Commercial Bank Financing within the Consolidated Financial Statements for further discussion.
In January 2017, we amended and restated our existing Term B Loan under the Bank Credit Agreement, extending the maturity date to
January 2024. See Bank Credit Agreement under Note 6. Notes Payable and Commercial Bank Financing within the Consolidated Financial Statements
for further discussion.
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.
For the year ended December 31, 2017, we were in compliance with all of the covenants related to our Bank Credit Agreement,
5.125% Notes, 5.375% Notes, 5.625% Notes, 5.875% Notes, and 6.125% Notes.
Sources and Uses of Cash
The following table sets forth our cash flows for the years ended December 31, 2017, 2016 and 2015 (in millions):
Net cash flows from operating activities
Cash flows used in investing activities:
Acquisition of property and equipment
Acquisition of businesses, net of cash acquired
Proceeds from the sale of assets
Purchase of alarm monitoring contracts
Investments in equity and cost method investees
Distributions from equity and cost method investees
Loan to affiliates
Other, net
Net cash flows used in investing activities
Cash flows from (used in) financing activities:
Proceeds from notes payable, commercial bank financing and capital leases
Repayments of notes payable, commercial bank financing and capital leases
Proceeds from 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 interest contributions
Other, net
Net cash flows from (used in) financing activities
26 Sinclair Broadcast Group
26 • Sinclair Broadcast Group
2017
2016
2015
431.1 $
591.8 $
402.9
(83.8) $
(271.3)
192.7
(5.7)
(55.1)
12.9
19.5
(7.2)
(198.0) $
166.8 $
(336.5)
487.9
(71.4)
(30.3)
(0.7)
(22.4)
(5.1)
188.3 $
(94.5) $
(425.9)
16.4
(40.2)
(51.2)
6.8
(19.5)
2.1
(606.0) $
1,024.9 $
(671.2)
—
(65.9)
(136.3)
(15.7)
(10.5)
(1.1)
124.2 $
(91.4)
(17.0)
23.7
(39.2)
(44.7)
21.7
—
(4.4)
(151.3)
382.9
(395.2)
—
(62.7)
(28.8)
(3.8)
(9.9)
(1.7)
(119.2)
$
$
$
$
$
Operating Activities
Net cash flows from operating activities decreased during the year ended December 31, 2017 compared to the same period in 2016.
This change is primarily due to a decrease in political advertising spending as 2017 was a non-election year and an increase in income
taxes paid, partially offset by the additional cash received from customers of businesses acquired during 2017.
Net cash flows from operating activities increased during the year ended December 31, 2016 compared to the same period in 2015.
This change is primarily due to an increase in cash received from customers due to businesses acquired since December 2015 and
increased political advertising spending in an election year.
Investing Activities
Net cash flows used in investing activities decreased during the year ended December 31, 2017, compared to the same period in 2016.
This decrease is primarily due to the sale of Alarm, a decrease in acquisitions, and a decrease in capital expenditures.
Net cash flows used in investing activities increased during the year ended December 31, 2016, compared to the same period in 2015.
This increase is primarily due to the acquisition of Tennis Channel.
Financing Activities
Net cash flows from financing activities increased during the year ended December 31, 2017, compared to the same period in 2016.
The increase is primarily due to the proceeds received from the public offering of Class A Common Stock during the first quarter of
2017 and a lower volume of Class A Common Stock repurchases compared to the prior year, partially offset by the repayment of notes
payable in conjunction with the sale of Alarm and proceeds from the issuance of our 5.875% Notes during the first quarter of 2016.
Net cash flows from financing activities increased during the year ended December 31, 2016, compared to the same period in 2015,
due primarily to the proceeds received from the 5.875% Notes issued in March 2016 and partially offset by the increased repurchases of
Class A Common Stock during 2016.
2017 Annual Report 27
2017 Annual Report • 27
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, 2017 and the future periods in which
such obligations are expected to be settled in cash (in millions):
CONTRACTUAL OBLIGATIONS (a)
Notes payable, capital leases and commercial bank
financing (b)
Operating leases
Program content (c)
Programming services (d)
Other (e)
Total contractual cash obligations
Total
2018
2019-2020 2021-2022
2023 and
thereafter
$
$
$
5,191.5
198.1
1,194.7
228.7
154.4
6,967.4 $
$
354.9
25.1
500.1
70.3
26.6
977.0 $
$
466.7
45.2
630.9
91.7
35.2
1,269.7 $
$
1,520.7
37.0
63.7
42.2
33.3
1,696.9 $
2,849.2
90.8
—
24.5
59.3
3,023.8
(a) Excluded from the table above are $7.2 million of accrued unrecognized tax benefits. Due to inherent uncertainty, we cannot make
reasonable estimates of the amount or the period payments will be made.
(b) Includes interest on debt and capital leases, including notes and capital leases payable to related parties. Estimated interest on our
variable rate debt has been calculated at an effective weighted interest rate of 3.61% as of December 31, 2017. Variable rate debt
represents $1.6 billion of our $4.1 billion total face value of debt as of December 31, 2017. See Note 6. 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 2017 and Note 11. Related Person Transactions within the Consolidated Financial Statements for further
discussion of related parties. Excluded from the table above is debt which we expect to assume and issue in conjunction with the
acquisition of Tribune. See Commitment Letters and Incremental Term B Facility related to Tribune Acquisition under Note 6. Notes Payable
and Commercial Bank Financing within the Consolidated Financial Statements for further discussion.
(c) 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 above.
(d)
Includes obligations related to rating service fees, music license fees, market research, weather, and news services.
(e) Other includes obligations related to post-retirement benefits, maintenance and support, other corporate contracts, other long term
liabilities, commitments to contribute capital to various non-media private equity investments, and LMA and outsourcing
agreements. Excluded from the table are estimated amounts due pursuant to LMAs and outsourcing agreements where we
consolidate the counter-party. The fees that we are required to pay under these agreements total $5.6 million, $10.6 million, $2.9
million, and $0.6 million for the periods 2018, 2019-2020, 2021-2022, and 2023 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 the table above.
28 Sinclair Broadcast Group
28 • Sinclair Broadcast Group
Off Balance Sheet Arrangements
Off balance sheet arrangements as defined by the SEC means any transaction, agreement or other contractual arrangement to which
an entity unconsolidated with the registrant is a party, under which the registrant has: obligations under certain guarantees or contracts;
retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangements; obligations under certain
derivative arrangements; and obligations arising out of a material variable interest in an unconsolidated entity. As of December 31, 2017,
we do not have any material off balance sheet arrangements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates. At times we enter into derivative instruments primarily for the purpose
of reducing the impact of changing interest rates on our floating rate debt and to reduce the impact of changing fair market values on
our fixed rate debt. See Note 6. Notes Payable and Commercial Bank Financing within the Consolidated Financial Statements for further
discussion. As of December 31, 2017, 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, 2017, interest expense on our term loans and revolver related to our Bank Credit Agreement was $54.6
million. We estimate that adding 1.0% to respective interest rates would result in an increase in our interest expense of $16.2 million for
the year ended December 31, 2017. We also have $25.2 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 $0.4 million of additional interest expense for the
year ended December 31, 2017. Our consolidated VIEs have $29.6 million of variable rate debt associated with the stations that we
provide services to pursuant to LMAs and other outsourcing arrangements. We estimate that adding 1.0% to respective interest rates
would result in an increase in our interest expense of the VIEs by $0.2 million for the year ended December 31, 2017.
2017 Annual Report 29
2017 Annual Report • 29
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
sales prices on the NASDAQ stock market for our Class A Common Stock.
2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Low
43.05 $
41.20 $
37.18 $
39.00 $
30.35
31.95
26.70
29.15
High
Low
33.60 $
33.54 $
31.70 $
34.75 $
26.35
28.16
25.70
24.15
$
$
$
$
$
$
$
$
As of February 23, 2018, there are approximately 46 shareholders of record of our Class A common stock. This number does
not include beneficial owners holding shares through nominee names.
See Note 3. Stock-Based Compensation within the Consolidated Financial Statements for discussion of our stock-based compensation
plans.
Dividend Policy
During the years ended December 31, 2017 and 2016, our Board of Directors declared a quarterly dividend in the months of
February, May, August, and November which were paid in the months of March, June, September, and December, respectively. In
February 2018, our Board of Directors declared a quarterly dividend of $0.18 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 8. Common Stock within the
Consolidated Financial Statements for further discussion.
30 Sinclair Broadcast Group
30 • Sinclair Broadcast Group
Comparative Stock Performance
The following line graph compares the yearly percentage change in the cumulative total shareholder return on our Class A Common
Stock with the cumulative total return of the NASDAQ Composite Index and the cumulative total return of the NASDAQ
Telecommunications Index (an index containing performance data of radio and television broadcast companies and communication
equipment and accessories manufacturers) from December 31, 2012 through December 31, 2017. The performance graph assumes that
an investment of $100 was made in the Class A Common Stock and in each Index on December 31, 2012 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 Composite Index
NASDAQ Telecommunications Index
12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017
336.10
242.29
184.81
100.00
100.00
100.00
290.00
187.19
150.94
276.61
173.33
140.97
227.49
162.09
145.43
290.78
141.63
141.28
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Sinclair Broadcast Group, Inc., the NASDAQ Composite Index
and the NASDAQ Telecommunications Index
$400
$350
$300
$250
$200
$150
$100
$50
$0
12/12
12/13
12/14
12/15
12/16
12/17
Sinclair Broadcast Group, Inc.
NASDAQ Composite
NASDAQ Telecommunications
*$100 invested on 12/31/12 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
2017 Annual Report 31
2017 Annual Report • 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, 2017.
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 our management, including its principal executive and
principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The term “internal control over financial reporting,” as defined in Rules 13a-15d-15(f) under the Exchange Act, means a process
designed by, or under the supervision of our Chief Executive and Chief Financial Officers and effected by our Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles (GAAP) and includes those
policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP and that our receipts and expenditures are being made in accordance with authorizations of
management or our Board of Directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material adverse effect on our financial statements.
Assessment of Effectiveness of Disclosure Controls and Procedures
Based on the evaluation of our disclosure controls and procedures as of December 31, 2017, 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, 2017 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, 2017, our internal control over
financial reporting was effective based on those criteria.
Management has excluded the televisions stations of Bonten Media Group Holdings, Inc. from its assessment of internal control over
financial reporting as of December 31, 2017 because they were acquired by the Company during 2017. These television stations are
wholly-owned subsidiaries or consolidated variable interest entities whose total assets and total revenues represent 3% and 1%,
respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2017.
The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
32 Sinclair Broadcast Group
32 • Sinclair Broadcast Group
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, 2017, 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.
2017 Annual Report 33
2017 Annual Report • 33
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
As of December 31,
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash, current
Accounts receivable, net of allowance for doubtful accounts of $2,590 and $2,124, respectively
Current portion of program contract costs
Income taxes receivable
Prepaid expenses and other current assets
Total current assets
Program contract costs, less current portion
Property and equipment, net
Restricted cash, less current portion
Goodwill
Indefinite-lived intangible assets, net
Definite-lived intangible assets, net
Notes receivable from affiliates
Other assets
Total assets (a)
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities
Deferred spectrum auction proceeds
Income taxes payable
Current portion of notes payable, capital leases and commercial bank financing
Current portion of notes payable and capital leases payable to affiliates
Current portion of program contracts payable
Total current liabilities
Long-term liabilities
Notes payable, capital leases and commercial bank financing, less current portion
Notes payable and capital leases to affiliates, less current portion
Program contracts payable, less current portion
Deferred tax liabilities
Other long-term liabilities
Total liabilities (a)
Commitments and contingencies (See Note 10)
EQUITY:
SINCLAIR BROADCAST GROUP SHAREHOLDERS’ EQUITY:
Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 76,071,145 and 64,558,207 shares
issued and outstanding, respectively
Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 25,670,684 and 25,670,684 shares
issued and outstanding, respectively, convertible into Class A Common Stock
Additional paid-in capital
Retained earnings (accumulated deficit)
Accumulated other comprehensive loss
Total Sinclair Broadcast Group shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
2017
2016
$
$
$
$
681,326 $
313,110
566,464
71,387
28,150
54,310
1,714,747
3,202
738,298
1,504
2,124,033
159,371
1,801,670
—
241,645
6,784,470 $
370,403 $
84,341
2,503
159,382
1,667
108,053
726,349
3,875,116
12,485
41,909
515,236
79,009
5,250,104
761
257
1,320,298
248,845
(1,423)
1,568,738
(34,372)
1,534,366
6,784,470 $
259,984
200
513,954
83,601
5,500
41,849
905,088
8,919
717,576
—
1,990,746
156,306
1,944,403
19,500
220,630
5,963,168
328,545
—
23,491
171,131
3,604
109,702
636,473
4,014,932
14,181
53,836
609,317
76,493
5,405,232
646
257
843,691
(255,804)
(807)
587,983
(30,047)
557,936
5,963,168
The accompanying notes are an integral part of these consolidated financial statements.
(a) Our consolidated total assets as of December 31, 2017 and 2016 include total assets of variable interest entities (VIEs) of $130.6 million and
$142.3 million, respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of December 31,
2017 and 2016 include total liabilities of the VIEs of $27.0 million and $40.9 million, respectively, for which the creditors of the VIEs have no
recourse to us. See Note 1. Nature of Operations and Summary of Significant Accounting Policies.
34 Sinclair Broadcast Group
34 • Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
(In thousands, except per share data)
2017
2016
2015
REVENUES:
Media revenues
Revenues realized from station barter arrangements
Other non-media revenues
Total revenues
$
2,543,876 $
120,963
69,279
2,734,118
2,499,549 $
135,566
101,834
2,736,949
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 expenses
(Gain) loss 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
(Loss) income from equity and cost method investments
Other income, net
Total other expense
Income before income taxes
INCOME TAX BENEFIT (PROVISION)
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
Diluted earnings per share
Weighted average common shares outstanding
Weighted average common and common equivalent shares outstanding
$
$
$
$
2,011,946
111,337
95,853
2,219,136
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
(4,575)
171,524
0.66
1,063,074
533,537
98,973
115,523
65,199
97,103
113,253
178,822
10,000
(278,872)
1,996,612
737,506
(212,315)
(1,404)
(13,919)
8,876
(218,762)
518,744
75,360
594,104
(18,091)
576,013 $
0.72 $
953,089
501,589
116,954
127,880
80,648
98,529
73,556
183,795
4,085
(6,029)
2,134,096
602,853
(211,143)
(23,699)
1,735
3,144
(229,963)
372,890
(122,128)
250,762
(5,461)
245,301 $
0.71 $
$
5.77
5.72 $
99,844
100,789
2.62
$
2.60 $
93,567
94,433
1.81
1.79
95,003
95,728
The accompanying notes are an integral part of these consolidated financial statements
2017 Annual Report 35
2017 Annual Report • 35
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015
(In thousands)
Net income
Amortization of net periodic pension benefit costs, net of taxes
Adjustments to pension obligations, net of taxes
Pension settlement
Comprehensive income
Comprehensive income attributable to the noncontrolling interests
Comprehensive income attributable to Sinclair Broadcast Group
2017
2016
2015
$
$
594,104 $
—
(616)
—
593,488
(18,091)
575,397 $
250,762 $
—
27
—
250,789
(5,461)
245,328 $
176,099
190
621
4,810
181,720
(4,575)
177,145
The accompanying notes are an integral part of these consolidated financial statement.
36 Sinclair Broadcast Group
36 • Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015
(In thousands, except share data)
Sinclair Broadcast Group Shareholders
BALANCE,
December 31, 2014
k
Dividends declared
and paid on Class A
and Class B Common
S
Repurchases of Class
A Common Stock
Class A Common
Stock issued pursuant
to employee benefit
plans
Tax benefit on share
based awards
Distributions to
noncontrolling
Issuance of subsidiary
stock awards
Other comprehensive
income
Net income
BALANCE,
December 31, 2015
Class A
Common Stock
Class B
Common Stock
Shares
Values Shares
Values
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total Equity
(Deficit)
69,578,899
$
696
25,928,357
$
259
$
979,202
$
(545,820) $
(6,455) $
(22,539 ) $
405,343
—
(62,733 )
—
—
(1,107,887 )
(11)
321,471
—
—
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(28,812)
11,624
712
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
171,524
5,621
—
—
—
—
—
(62,733)
(28,823)
11,627
712
(9,918 )
(9,918)
1,750
1,750
—
4,575
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.
2017 Annual Report 37
2017 Annual Report • 37
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
(In thousands, except share data)
Sinclair Broadcast Group Shareholders
Class A
Common Stock
Class B
Common Stock
Shares
Values
Shares
Values
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total Equity
68,792,483
$
688
25,928,357
$
259
$
962,726
$
(437,029) $
(834) $
(26,132) $
499,678
—
—
—
—
431
1,833
—
—
2,264
—
—
—
—
257,673
2
(257,673)
(2)
—
—
(4,892,461)
(48)
—
—
(136,235)
400,512
—
—
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16,769
—
—
—
—
(65,909)
—
—
—
—
—
—
245,301
—
—
—
—
—
—
—
—
—
(65,909)
—
(136,283)
—
16,773
(10,722)
(10,722)
1,346
1,346
27
—
—
5,461
27
250,762
64,558,207
$
646
25,670,684
$
257
$
843,691
$
(255,804) $
(807) $
(30,047) $
557,936
The accompanying notes are an integral part of these consolidated financial statements.
BALANCE,
December 31, 2015
Cumulative effect
of adoption of new
accounting standard
Dividends declared
and paid 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
Distributions to
noncontrolling
interests
Issuance of
subsidiary stock
awards
Other
comprehensive
income
Net income
BALANCE,
December 31, 2016
38 Sinclair Broadcast Group
38 • Sinclair Broadcast Group
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
(In thousands, except share data)
Sinclair Broadcast Group Shareholders
Class A
Common Stock
Class B
Common Stock
Shares
Values
Shares
Values
Additional
Paid-In
Capital
(Accumulated
Deficit)
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total Equity
64,558,207
$
646
25,670,684
$
257
$
843,691
$
(255,804) $
(807) $
(30,047) $
557,936
12,000,000
120
—
—
487,763
—
—
—
(997,300)
(10)
510,238
—
—
—
5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(71,364)
(30,277)
19,121
—
—
—
—
—
—
—
576,013
—
—
—
—
—
—
—
—
487,883
(71,364)
(30,287)
—
19,126
(22,416)
(22,416)
(616)
—
—
(616)
18,091
594,104
76,071,145
$
761
25,670,684
$
257
$ 1,320,298
$
248,845
$
(1,423) $
(34,372) $
1,534,366
The accompanying notes are an integral part of these consolidated financial statements.
BALANCE,
December 31, 2016
Issuance of common
stock, net of
issuance costs
Dividends declared
and paid on Class A
and Class B
Common Stock
Repurchases of
Class A Common
Stock
Class A Common
Stock issued
pursuant to
employee benefit
plans
Distributions to
noncontrolling
interests, net
Other
comprehensive
income
Net income
BALANCE,
December 31, 2017
2017 Annual Report 39
2017 Annual Report • 39
2017
2016
2015
$
594,104 $
250,762 $
176,099
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015
(In thousands)
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
(Gain) loss 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 in prepaid expenses and other current assets
Increase (decrease) in accounts payable and accrued liabilities
Payments on program contracts payable
Other, net
Net cash flows from operating activities
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment
Acquisition of businesses, net of cash acquired
Proceeds from the sale of assets
Purchase of alarm monitoring contracts
Investments in equity and cost method investees
Distributions from equity and cost method investees
Loans to affiliates
Other, net
Net cash flow used in investing activities
97,103
178,822
115,523
1,404
15,886
(159,462)
(278,608)
(41,908)
(43,374)
(9,409)
34,857
(111,470)
37,636
431,104
(83,812)
(271,273)
192,634
(5,682)
(55,129)
12,918
19,500
(7,181)
(198,025)
98,529
183,795
127,880
3,875
16,939
6,118
(6,029)
(71,718)
18,814
(969)
60,086
(111,506)
15,190
591,766
(94,465)
(425,857)
16,396
(40,206)
(51,247)
6,786
(19,500)
2,090
(606,003)
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
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 from (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of year
CASH AND CASH EQUIVALENTS, end of year
$
166,797
(336,501)
487,883
(30,287)
(71,364)
(731)
(22,416)
(5,118)
188,263
421,342
259,984
681,326 $
1,024,912
(671,215)
—
(136,283)
(65,909)
(15,681)
(10,464)
(1,111)
124,249
110,012
149,972
259,984 $
The accompanying notes are an integral part of these consolidated financial statements.
40 Sinclair Broadcast Group
40 • Sinclair Broadcast Group
103,433
161,454
124,619
—
18,315
(28,446)
278
(38,666)
3,203
(3,474)
(15,902)
(109,057)
11,071
402,927
(91,421)
(17,011)
23,650
(39,185)
(44,715)
21,749
—
(4,378)
(151,311)
382,887
(395,147)
—
(28,823)
(62,733)
(3,847)
(9,918)
(1,745)
(119,326)
132,290
17,682
149,972
SINCLAIR BROADCAST GROUP, INC.
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 with national reach with a strong focus on providing
high-quality content on our local television stations and digital platforms. The content, distributed through our broadcast platform,
consists of programming provided by third-party networks and syndicators, local news, and other original programming produced by us.
We also distribute our original programming, and owned and operated network affiliates, on other third-party platforms. Additionally, we
own digital media products that are complementary to our extensive portfolio of television station related digital properties. We focus on
offering marketing solutions to advertisers through our television and digital platforms and digital agency services. Outside of our media
related businesses, we operate technical services companies focused on supply and maintenance of broadcast transmission systems as
well as research and development for the advancement of broadcast technology, and we manage other non-media related investments.
As of December 31, 2017, our broadcast distribution platform is a single reportable segment for accounting purposes. It consists
primarily of our broadcast television stations, which we own, provide programming and operating services pursuant to agreements
commonly referred to as local marketing agreements (LMAs), or provide sales services and other non-programming operating services
pursuant to other outsourcing agreements (such as joint sales agreements (JSAs) and shared services agreements (SSAs)) to 191 stations
in 89 markets. These stations broadcast 601 channels as of December 31, 2017. For the purpose of this report, these 191 stations and
601 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.
Third-party station licensees. Certain of our stations provide services to other station owners within the same respective market through
agreements, 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. Based on the terms of the agreements and the
significance of our investment in the stations, we are the primary beneficiary when, 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 we absorb losses and returns that would be considered significant to the VIEs. The fees paid between us and the licensees pursuant
to these arrangements are eliminated in consolidation. Several of these VIEs are owned by a related party, Cunningham Broadcasting
Corporation (Cunningham). See Note 11. Related Person Transactions for more information about the arrangements with Cunningham. See
Changes in the Rules on Television Ownership under Note 10. Commitments and Contingencies for a discussion of recent changes in Federal
Communications Commission (FCC) rules related to JSAs.
2017 Annual Report 41
2017 Annual Report • 41
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, 2017 and 2016 were as follows (in thousands):
ASSETS
CURRENT ASSETS:
Accounts receivable
Other current assets
Total current asset
Program contract costs, less current portion
Property and equipment, net
Goodwill and indefinite-lived intangible assets
Definite-lived intangible assets, net
Other assets
Total assets
CURRENT LIABILITIES:
Other current liabilities
LONG-TERM LIABILITIES:
LIABILITIES
Notes payable, capital leases and commercial bank financing, less current portion
Program contracts payable, less current portion
Other long term liabilities
Total liabilities
2017
2016
19,566 $
8,937
28,503
822
6,215
15,064
74,442
5,601
130,647 $
21,879
12,076
33,955
2,468
2,996
16,475
79,509
6,871
142,274
23,564 $
18,992
23,217
11,213
650
58,644 $
19,449
14,353
12,921
65,715
$
$
$
$
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 and certain outsourcing agreements 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 and certain JSAs as of December 31, 2017 and 2016, which are excluded from liabilities above, were $44.0 million and $40.8
million, respectively. The total capital lease liabilities, net of capital lease assets, excluded from the above were $4.5 million, for both
years ended December 31, 2017 and 2016. Also excluded from the amounts above are liabilities associated with the certain outsourcing
agreements and purchase options with certain VIEs totaling $116.5 million and $74.5 million as of December 31, 2017 and
December 31, 2016, respectively, as these amounts are eliminated in consolidation. The risk and reward characteristics of the VIEs are
similar. The assets of each of these 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. The risk and reward characteristics of the VIEs are similar.
Other investments. We have several investments 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, 2017 and
2016 was $115.7 million and $117.0 million, respectively, and 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 a loss of $5.3 million for the year ended December 31, 2017, and
income of $2.5 million and $7.7 million for the years ended December 31, 2016 and 2015, respectively, related to these investments.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and
expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities. Actual results could differ
from those estimates.
42 Sinclair Broadcast Group
42 • Sinclair Broadcast Group
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
standard permits the use of either the retrospective or cumulative effect transition method. Since Accounting Standards Update (ASU)
2014-09 was issued, several additional ASUs have been issued and incorporated within ASC 606 to clarify various elements of the
guidance. The adoption of this guidance will not have a material impact on our station advertising or retransmission consent revenue. We
have determined that, under the new standard, certain barter revenue and expense related to syndicated programming will no longer be
recognized. These revenues and expenses for the years ended December 31, 2017, 2016, and 2015 were each $97.9 million, $114.4
million, and $93.2 million, respectfully. The adoption of this standard will also result in a number of incremental disclosures surrounding
our revenue transactions and policies. We plan on adopting this guidance retrospectively during the first quarter of 2018.
In January 2016, the FASB issued new guidance which address certain aspects of recognition, measurement, presentation, and disclose
of financial instruments. The new guidance requires entities to measure equity investments (except those accounted for under the equity
method of accounting or those that resulted in consolidation of the investee) at fair value, with changes in fair value recognized in net
income. The new standard is effective for the interim and annual periods beginning after December 15, 2017. We plan on adopting this
guidance during the first quarter of 2018. We do not expect the adoption will have a material impact on our financial statements.
In February 2016, the FASB issued new guidance related to accounting for leases, which requires the assets and liabilities that arise from
leases to be recognized on the balance sheet. Currently, only capital leases are recorded on the balance sheet. This update will require the
lessee to recognize a lease liability equal to the present value of the lease payments and a right-of-use asset representing its right to use
the underlying asset for the lease term for all leases longer than 12 months. For leases with a term of 12 months or less, a lessee is
permitted to make an accounting policy election, by class of underlying asset, not to recognize lease assets and liabilities and recognize
the lease expense for such leases generally on a straight-line basis over the lease term. The new standard is effective for interim and
annual reporting periods beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the impact of this
guidance on our consolidated financial statements.
In August 2016, the FASB issued new guidance related to the classification of certain cash receipts and cash payments. The new standard
includes eight specific cash flow issues with the objective of reducing the existing diversity in practice as to how cash receipts and cash
payments are represented in the statement of cash flows. We will adopt this guidance retrospectively during the first quarter of 2018.
In October 2016, the FASB issued new guidance related to the accounting for income tax consequences of intra-entity transfers of assets
other than inventory. Currently the recognition of current and deferred income taxes for an intra-entity are prohibited until the asset has
been sold to an outside party. This update requires an entity to recognize the income tax consequences of an intra-entity transfer of an
asset other than inventory when the transfer occurs. We adopted this guidance during the first quarter of 2017. The impact of the
adoption did not have a material impact on our financial statements.
In November 2016, the FASB issued new guidance related to the classification and presentation of changes in restricted cash on the
statement of cash flows. This new guidance requires that the statement of cash flows explain change during the period in the total of
cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The new standard is effective for
interim and annual reporting periods beginning after December 15, 2017. We plan on adopting this guidance retrospectively during the
first quarter of 2018.
In January 2017, the FASB issued guidance which clarifies the definition of a business with additional guidance to assist entities with
evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard should
be applied prospectively and is effective for interim and annual reporting periods beginning after December 15, 2017. We do not expect
the adoption of this guidance to have a material impact on our financial statements.
In January 2017, the FASB issued guidance which eliminates the requirement to calculate the implied fair value of goodwill to measure a
goodwill impairment charge. The new standard should be applied prospectively and is effective for interim and annual reporting periods
beginning after December 15, 2019. Early adoption is permitted. We adopted this guidance during the first quarter of 2017. The impact
of the adoption did not have a material impact on our financial statements.
2017 Annual Report 43
2017 Annual Report • 43
In May 2017, the FASB issued new guidance which relates to stock based compensation and clarifies when to account for a change to the
terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required
only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in
terms or conditions. The new standard is effective for interim and annual reporting periods beginning after December 15, 2017. Early
adoption is permitted. We adopted this guidance during the second quarter of 2017. The impact of the adoption did not have a material
impact on our financial statements.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
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, 2017, 2016, and 2015 is as follows (in
thousands):
Balance at beginning of period
Charged to expense
Net write-offs
Balance at end of period
Programming
2017
2016
2015
$
$
2,124 $
2,837
(2,371)
2,590 $
4,495 $
1,974
(4,345)
2,124 $
4,246
1,292
(1,043)
4,495
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.
44 • Sinclair Broadcast Group
44 Sinclair Broadcast Group
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.
See Recent Accounting Pronouncements above for more information about guidance that will be adopted effective January 1, 2018.
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, included in prepaid expenses and other current assets
in the consolidated balance sheets, and the corresponding obligation to broadcast advertising is recorded as deferred barter revenues,
included in accounts payable and accrued liabilities in the consolidated balance sheets. 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, 2017 and 2016 consisted of the following (in thousands):
Equity and cost method investments
Unamortized costs related to debt issuances
Deferred compensation plan assets
Other
Total other assets
2017
2016
$
$
184,255 $
3,399
20,494
33,497
241,645 $
168,572
4,936
9,906
37,216
220,630
We have equity and cost method investments primarily in private equity investments and real estate ventures. In the event one or more
of our investments are significant, we are required to disclose summarized financial information. For the years ended December 31,
2017, 2016, and 2015, none of our investments were significant individually or in the aggregate.
As of December 31, 2017 and 2016, our unfunded commitments related to certain investments accounted for under the equity or cost
method totaled $10.7 million and $13.5 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, 2017, we recorded a $3.3 million impairment charge related to three real estate investments. For the year ended
December 31, 2016, there were $2.5 million of impairment charges recorded. 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 represent costs related to our revolving credit facility. Unamortized costs related to our
other debt issuances is recorded as a direct deduction from the carrying value of the debt recorded as liability. We amortize our deferred
debt financing costs to interest expense over the term of the respective debt instruments using the effective interest method. Previously
capitalized debt financing costs are recognized as a loss on extinguishment of debt if we determine that there has been an
extinguishment of the related debt.
Impairment of Goodwill, Intangibles and Other Long-Lived Assets
We evaluate our goodwill and indefinite lived intangible assets for impairment annually in the fourth quarter or more frequently, if
events or changes in circumstances indicate that an impairment may exist. Our goodwill has been allocated to, and is tested for
impairment at the reporting unit level. A reporting unit is an operating segment or a component of an operating segment to the extent
that the component constitutes a business for which discrete financial information is available and regularly reviewed by segment
management. Components of an operating segment with similar economic characteristics are aggregated when testing goodwill for
impairment.
2017 Annual Report 45
2017 Annual Report • 45
In the performance of our annual assessment of goodwill for impairment we have the option to qualitatively assess whether it is more
likely than not a reporting unit has been impaired. As part of this qualitative assessment we weigh the relative impact of factors that are
specific to the reporting units as well as industry, regulatory, and macroeconomic factors that could affect the significant inputs used to
determine the fair value of the assets. We also consider the significance of the excess fair value over carrying value in prior quantitative
assessments.
If we conclude that it is more likely than not that a reporting unit is impaired, or if we elect not to perform the optional qualitative
assessment, we will determine the fair value of the reporting unit and compare to the net book value of the reporting unit. If the fair
value is less than the net book value we will record an impairment to goodwill for the amount of the difference. We estimate the fair
value of our reporting units utilizing a combination of a market based approach which considers earnings and cash flow multiples of
comparable businesses and recent market transactions as well as an income approach involving the performance of a discounted cash
flow analysis. Our discounted cash flow model is based on our judgment of future market conditions 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, and includes adjustments for market risk and company specific risk.
Our indefinite-lived intangible assets consist primarily of our broadcast licenses and a trade name. For our annual impairment test
for indefinite-lived intangible assets we have the option to perform a qualitative assessment to determine whether it is more likely than
not that these assets are impaired. As part of this qualitative assessment we weigh the relative impact of factors that are specific to the
indefinite-lived intangible assets as well as industry, regulatory, and macroeconomic factors that could affect the significant inputs used
to determine the fair value of the assets. We also consider the significance of the excess fair value over carrying value in prior
quantitative assessments. 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 estimate the fair
values of our broadcast licenses using the Greenfield method which is an income approach. This 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 5.
Goodwill, Indefinite-Lived Intangible
Assets and Other Intangible Assets for more information.
Accounts Payable and Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2017 and 2016 (in thousands):
Compensation and employee health insurance
Interest
Deferred revenue
Deferred barter revenue
Programming related obligations
Other accruals relating to operating expenses
Total accounts payable and accrued liabilities
We expense these activities when incurred.
46 • Sinclair Broadcast Group
46 Sinclair Broadcast Group
2017
2016
$
$
87,003 $
42,794
41,287
8,235
89,728
101,356
370,403 $
78,682
41,979
25,692
6,040
76,962
99,190
328,545
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, 2017 and 2016, 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 9.
Income Taxes, for further discussion of accrued unrecognized tax benefits.
Pursuant to the guidance within SEC Staff Accounting Bulletin No. 118 (SAB 118), as of December 31, 2017, the Company
recognized the provisional effects of the enactment of the Tax Legislation for which measurement could be reasonably estimated.
Although the Company continues to analyze certain aspects of the Tax Legislation and refine its assessment, the ultimate impact of the
Tax Legislation may differ from these estimates due to its continued analysis or further regulatory guidance that may be issued as a result
of the Tax Legislation. Pursuant to SAB 118, adjustments to the provisional amounts recorded by the Company as of December 31,
2017 that are identified within a subsequent measurement period of up to one year from the enactment date will be included as an
adjustment to tax expense from continuing operations in the period the amounts are determined. See Note 9. Income Taxes, for the effects
of this guidance.
Supplemental Information — Statements of Cash Flows
During 2017, 2016, and 2015, we had the following cash transactions (in thousands):
Income taxes paid
Income tax refunds
Interest paid
2017
2016
2015
$
$
$
128,168 $
1,508 $
203,800 $
108,347 $
12,193 $
191,117 $
106,979
196
182,425
For the year ended December 31, 2017 and 2016, non-cash investing activities include property and equipment purchases for $9.5
million and $5.9 million, respectively. Also, during 2017, we received proceeds for the Broadcast Incentive Auction which is
classified as restricted cash in the consolidated balance sheet. See Broadcast Spectrum Auction under Note 2. Acquisitions and
Dispositions of Assets for further discussion. For the year ended December 31, 2015, non-cash transactions related to capital lease
obligations were $2.8 million.
Revenue Recognition
Total revenues include: (i) station advertising revenue, net of agency commissions; (ii) barter advertising revenues; (iii) retransmission
consent fees; (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.
2017 Annual Report 47
2017 Annual Report • 47
Advertising Expenses
Promotional advertising expenses are recorded in the period when incurred and are included in media production and other non-
media expenses. Total advertising expenses, net of advertising co-op credits, were $20.6 million, $18.5 million, and $23.9 million for
the years ended December 31, 2017, 2016, and 2015, respectively.
Financial Instruments
Financial instruments, as of December 31, 2017 and 2016, consisted of cash and cash equivalents, trade accounts receivable, accounts
payable, accrued liabilities, and notes payable. The carrying amounts approximate fair value for each of these financial instruments,
except for the notes payable. See Note 6. Notes Payable and Commercial Bank Financing, for additional information regarding the fair value of
notes payable.
Post-retirement Benefits
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 losses 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.
We maintain a supplemental executive retirement plan (SERP) which we inherited upon the acquisition of certain stations. As of
December 31, 2017, the estimated projected benefit obligation was $21.5 million, of which $1.7 million is included in accrued expenses
in the consolidated balance sheet and the $19.8 million is included in other long-term liabilities. During the years ended December 31,
2017 and 2016, we made $1.8 million and $1.7 million in benefit payments, recognized $0.8 million and $0.9 million of periodic pension
expense, reported in other expenses in the consolidated statement of operations, and $1.0 million and $0.1 million of actuarial gains
through other comprehensive income, respectively.
At December 31, 2017, the projected benefit obligation was measured using a 3.46% discount rate compared to a discount rate of
3.89% for the year ended December 31, 2016. We estimated the discount rate, in consultation with our independent actuaries, based on a
yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the
estimated payouts of the plan.
We estimate that benefits expected to be paid to participants under the SERP are as follows (in thousands):
2018
2019
2020
2021
2022
Next 5 years
Reclassifications
$
December 31,
1,714
1,630
1,561
1,495
1,364
6,403
Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s presentation.
48 Sinclair Broadcast Group
48 • Sinclair Broadcast Group
2. ACQUISITIONS AND DISPOSITION OF ASSETS:
During the years ended December 31, 2017, 2016, and 2015, we acquired certain businesses for an aggregate purchase price of $704.5
million plus working capital of $2.3 million.
All of these acquisitions provide expansion of our businesses and increases value based on the synergies we can achieve. The
following summarizes the material acquisition activity during the years ended December 31, 2017, 2016, and 2015:
2017 Acquisitions
Bonten . On September 1, 2017, we acquired the stock of Bonten Media Group Holdings, Inc. (Bonten) and Cunningham acquired the
membership interest of Esteem Broadcasting (Esteem) for an aggregate purchase price of $240.0 million plus a working capital
adjustment, excluding cash acquired of $1.1 million accounted for as a business combination under the acquisition method of
accounting. As a result of the transaction we added 14 television stations in 8 markets: Tri-Cities, TN/VA; Greensville/New
Bern/Washington, NC; Chico/Redding, CA; Abilene/Sweetwater, TX; Missoula, MT; Butte/Bozeman, MT; San Angelo, TX; and
Eureka, CA. Cunningham assumed the joint sales agreements under which we will provide services to 4 additional stations. The
transaction was funded through cash on hand. The acquisition will expand our regional presence in several states where we already
operate and help us bring improvements to small market stations.
The following table summarizes the allocated fair value of acquired assets and assumed liabilities (in thousands):
Accounts receivable
Prepaid expenses and other current assets
Program contract costs
Property and equipment
Definite-lived intangible assets
Indefinite-lived intangible assets
Other assets
Accounts payable and accrued liabilities
Program contracts payable
Deferred tax liability
Other long term liabilities
Fair value of identifiable net assets acquired
Goodwill
Total purchase price, net of cash acquired
$
$
14,665
633
683
27,295
161,936
425
3,609
(8,428)
(783)
(66,158)
(12,156)
121,721
119,426
241,147
The preliminary purchase price allocation presented above is based upon management’s estimate of the fair value of the acquired
assets and assumed liabilities using valuation techniques including income, cost, and market approaches. 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
allocation is preliminary pending a final determination of the fair value of the assets and liabilities.
During the quarter ended December 31, 2017, we made certain measurement period adjustments to the initial Bonten purchase price
allocation resulting in reclassifications between certain non-current assets and liabilities, including an increase to property and equipment
of $4.3 million, a increase to definite-lived intangible assets of $4.0 million, a decrease to indefinite-lived intangible assets of $7.9 million,
and an increase to other long term liabilities of $8.7 million, and a increase to goodwill of $8.7 million.
The definite-lived intangible assets of $161.9 million is comprised of network affiliations of $53.3 million and customer
relationships of $108.6 million. These intangible assets will be amortized over a weighted average useful life of 15 and 14 years for
network affiliations and customer relationships, respectively. 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, as well as expected future synergies. We expect that goodwill deductible for tax
purposes will be approximately $5.6 million.
2017 Annual Report 49
2017 Annual Report • 49
Other 2017 Acquisitions. During 2017, we acquired certain media assets for an aggregate purchase price of $27.4 million, less
working capital of $2.7 million. The transactions were funded with cash on hand.
2016 Acquisitions
Tennis Channel. In March 2016, we acquired all of the outstanding common stock of Tennis Channel (Tennis), a cable network which
includes coverage of the top 100 tennis tournaments and original professional sport and tennis lifestyle shows, for $350.0 million plus a
working capital adjustment, excluding cash acquired, of $4.1 million accounted for as a business combination under the acquisition
method of accounting. This was funded through cash on hand and a draw on the Bank Credit Agreement. The acquisition provides an
expansion of our network business and increases value based on the synergies we can achieve. Tennis is reported within Other within
Note 13. Segment Data.
The following table summarizes the allocated fair value of acquired assets and assumed liabilities of Tennis (in thousands):
Accounts receivable
Prepaid expenses and other current assets
Property and equipment
Definite-lived intangible assets
Indefinite-lived intangible assets
Other assets
Accounts payable and accrued liabilities
Capital leases
Deferred tax liability
Other long term liabilities
Fair value of identifiable net assets acquired
Goodwill
Total purchase price, net of cash acquired
$
$
17,629
6,518
5,964
272,686
23,400
619
(7,414)
(115)
(16,991)
(1,669)
300,627
53,427
354,054
The purchase price allocation presented above is based upon management’s estimate of the fair value of the acquired assets and
assumed liabilities using valuation techniques including income, cost, and market approaches. 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 definite-lived intangible assets of $272.7 million related primarily to customer relationships, which represent existing advertiser
relationships and contractual relationships with multi-channel video programming distributors (MVPDs) and will be amortized over a
weighted average useful life of 15 years. 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, as well as expected future synergies. Goodwill will not be deductible for tax purposes.
Other 2016 Acquisitions. During the year ended December 31, 2016, we acquired certain television station related assets for an aggregate
purchase price of $72.0 million less working capital of $0.1 million. We also exchanged certain broadcast assets which had a carrying
value of $23.8 million with another broadcaster for no cash consideration, and recognized a gain on the derecognition of those broadcast
assets of $4.4 million, respectively.
2015 Acquisition
During the year ended December 31, 2015, we acquired one television station for a cash purchase price of $15.5 million, which was
financed with cash on hand.
50 • Sinclair Broadcast Group
50 Sinclair Broadcast Group
Financial Results of Acquisitions
The following tables summarize the results of the net media revenues and operating income (loss) included in the financial statements
of the Company beginning on the acquisition date of each acquisition as listed below (in thousands):
Revenues
Bonten
Tennis Channel
Other acquisitions in:
2017
2016
2015
Total net media revenues
Operating Income (Loss)
Bonten
Tennis Channel
Other acquisitions in:
2017
2016
2015
Total operating income
2017
2016
2015
30,907 $
132,584
11,108
66,698
2,102
243,399 $
— $
84,040
—
49,186
2,676
135,902 $
—
—
—
—
1,007
1,007
2017
2016
2015
7,448 $
19,420
(89 )
18,392
158
45,329 $
— $
(1,990)
—
18,311
646
16,967 $
—
—
—
—
426
426
$
$
$
$
In connection with the 2017, 2016, and 2015 acquisitions, for the years ended December 31, 2017, 2016, and 2015, we incurred $1.1
million, $1.4 million, and $0.5 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.
Pro Forma Information
The following table sets forth unaudited pro forma results of operations, assuming that Bonten and Tennis along with transactions
necessary to finance the acquisition, occurred at the beginning of the year preceding the year of acquisition. The pro forma results
exclude the acquisitions presented under Other 2017 Acquisitions, Other 2016 Acquisitions, and 2015 Acquisitions above, as they are not
material both individually and in the aggregate. The 2015 period does not include the pro forma effects of the Bonten acquisitions, and
as such will not provide comparability to the 2017 and 2016 pro forma periods presented in the following table (in thousands, except per
data share):
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
$
$
$
$
$
2017
2,790,793 $
597,370 $
579,279 $
5.80 $
5.75 $
2015
Unaudited
2016
2,835,174 $ 2,310,392
168,364
163,789
1.72
1.71
253,374 $
247,913 $
2.65 $
2.63 $
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. 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.
2017 Annual Report 51
2017 Annual Report • 51
Pending Acquisitions. In May 2017, we entered into a definitive agreement to acquire the stock of Tribune. Under the terms of the
agreement, Tribune stockholders will receive $35.00 in cash and 0.23 shares of Sinclair Class A common stock for each share of Tribune
Class A common stock and Class B common stock they own. As part of this acquisition we would assume or refinance the debt of
Tribune. Tribune owns or operates 42 television stations in 33 markets, cable network WGN America, digital multicast network Antenna
TV, minority stakes in the TV Food Network, ThisTV, and CareerBuilder, and a variety of real estate assets. Tribune’s stations consists of
14 FOX, 12 CW, 6 CBS, 3 ABC, 2 NBC, 3 MyNetworkTV affiliates, and 2 independent stations. In October 2017, Tribune shareholders
held a meeting and voted to approve the merger agreement and bondholders consented to the assignment of the notes under the change
of control. It is likely that we will need to divest of certain stations to comply with regulatory approval. In the event we have not been
able to complete all necessary divestitures by the time of the merger closing, we have filed applications at the FCC to place the stations in
a divestiture trust pending divestiture after closing. We expect the transaction will close in the second quarter of 2018, pending
customary closing conditions, including antitrust clearance and approval by the FCC. We expect to fund the purchase price through a
combination of cash on hand, fully committed debt financing, and by accessing the capital markets. In connection with this acquisition
was have incurred $20.5 million 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. See Note 6. Notes Payable and
Commercial Bank Financing for further discussion on debt financing.
2017 Dispositions
Alarm Funding Sale. In March 2017, we sold Alarm Funding Associates LLC (Alarm) for $200.0 million less working capital and
transaction costs of $5.0 million. We recognized a gain on the sale of Alarm of $53.0 million of which $12.3 million was attributable to
noncontrolling interests which is included in the gain on asset dispositions and net income attributable to the noncontrolling interest,
respectively, on the consolidated statement of operations.
Broadcast Incentive Auction. Congress authorized the FCC to conduct so-called “incentive auctions” to auction and re-purpose broadcast
television spectrum for mobile broadband use. Pursuant to the auction, television broadcasters submitted bids to receive compensation
for relinquishing all or a portion of its rights in the television spectrum of their full-service and Class A stations. Low power stations
were not eligible to participate in the auction and are not protected and therefore may be displaced or forced to go off the air as a result
of the post-auction repacking process. On April 13, 2017, the FCC issued a public notice which announced the conclusion of the
spectrum auction. In July 2017, we received $310.8 million of gross proceeds from the auction. These proceeds are reflected as restricted
cash because we directed the FCC to deposit those proceeds into qualifying trust accounts. We are limited in our ability to access this
cash for a period of time not to exceed a year.
For the period ending December 31, 2017 we recognized a gain of $225.3 million which was included within (gain) loss on asset
dispositions within our consolidated statements of operations. This gain relates to the auction proceeds associated with two markets
where the underlying spectrum was vacated during the fourth quarter of 2017. In January 2018, we vacated the remaining spectrum sold
in the broadcast incentive auction; as of December 31, 2017, we have a deferred spectrum proceeds liability of $84.3 million which we
will recognize during the first quarter of 2018. The results of the auction are not expected to produce any material change in operations
of the Company as there is no change in on air operations.
In the repacking process associated with the auction, the FCC has reassigned some stations to new post-auction channels. We do not
expect reassignment to new channels to have a material impact on our coverage. We have received notification from the FCC that 98 of
our stations have been assigned to new channels. The legislation authorizing the incentive auction provides the FCC with a $1.75 billion
fund to reimburse reasonable costs incurred by stations that are reassigned to new channels in the repack. We expect that the
reimbursements from the fund will cover the majority of our expenses related to the repack. However, we cannot predict whether the
fund will be sufficient to reimburse all of our expenses. The sufficiency of the fund is dependent upon a number of factors including the
amounts to be reimbursed to other industry participants for repacking costs. During 2018, we expect total capital expenditures related to
the spectrum repack to be $69.0 million.
52 • Sinclair Broadcast Group
52 Sinclair Broadcast Group
3. 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, 2017, 6,487,654 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, 2017, 2016, and 2015, we recorded stock-based compensation of $18.5 million, $16.9 million, and $18.0 million,
respectively. Below is a summary of the key terms and methods of valuation of our stock-based compensation awards:
RSAs. RSAs issued in 2017, 2016, and 2015 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, and
therefore, are included in weighted shares outstanding which results in a dilutive effect on basic and diluted earnings per share. 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, 2016
2017 Activity:
Granted
Vested
Unvested shares at December 31, 2017
RSAs
146,975 $
103,955
(98,750)
152,180 $
Weighted-Average
Price
29.18
33.80
28.09
33.04
For the years ended December 31, 2017, 2016, and 2015, we recorded compensation expense of $3.2 million, $2.8 million, and $5.3
million, respectively. The majority of the unrecognized compensation expense of $2.0 million as of December 31, 2017 will be
recognized in 2018.
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. We issued 20,000 shares in 2017, 2016,
and 2015. We recorded expense of $0.7 million, $0.6 million, and $0.6 million for each of the years ended December 31, 2017, 2016, and
2015, 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 per share.
Stock Appreciation Rights (SARs). These awards entitle holders to the appreciation in our Class A Common Stock stock over the base
value of each SAR over the term of the award. The SARs have 10 year term and vest immediately. The base value of each SAR is equal
to the closing price of our Class A Common Stock on the date of grant. For the years ended December 31, 2017, 2016, and 2015, we
recorded compensation expense of $6.6 million, $4.0 million, and $2.6 million, respectively.
The following is a summary of the 2017 activity:
Outstanding SARs at December 31, 2016
2017 Activity:
Granted
Exercised
Outstanding SARs at December 31, 2017
SARs
2,310,000 $
500,000
(200,000)
2,610,000 $
Weighted-Average
Price
19.23
35.70
15.78
22.65
The aggregate intrinsic value of the 2,610,000 outstanding as of December 31, 2017 was $38.6 million and the outstanding SARs
have a weighted average remaining contractual life of 6.30 years as of December 31, 2017. During 2017, 2016, and 2015, outstanding
SARs increased the weighted average shares outstanding for purposes of determining dilutive earnings per share.
2017 Annual Report 53
2017 Annual Report • 53
Options. As of December 31, 2017, there were options outstanding to purchase 375,000 shares of Class A Common Stock. These
options are fully vested and have a weighted average exercise price of $31.08, a weighted average remaining contractual term of 8 years,
and an aggregate intrinsic value of $2.5 million. There was no grant, exercise, or forfeiture activity during the year ended December 31,
2017. During the years ending December 31, 2016 and 2015, we recognized compensation expense of $0.4 million and $0.8 million,
respectively. There was no expense recognized during the year ended December 31, 2017.
Valuation of SARS and Options. Our SARs and stock options were valued using the Black-Scholes pricing model utilizing the following
assumptions:
Risk-free interest rate
Expected years to exercise
Expected volatility
Annual dividend yield
2017
2.1%
5 years
37.0%
2.0%
2016
1.2% - 1.9%
5 years
37.5% - 42.1%
2.1%
2015
1.3% - 1.9%
5 years
42.1% - 47.0%
2.0% - 2.7%
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 award. The expected volatility is based on our historical stock prices over a period equal to the
expected life of the award. The annual dividend yield is based on the annual dividend per share divided by the share price on the grant
date. During 2017, 2016, and 2015, outstanding SARs and options increased the weighted average shares outstanding for purposes of
determining dilutive earnings per share.
401(k) 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, and we match additional
discretionary amount determined each year by the Board of Directors (the Match). The Match and any additional discretionary
contributions may be made using our Class A Common Stock if the Board of Directors so chooses. Typically, we make the Match using
our Class A Common Stock.
The value of the Match is based on the level of elective deferrals into the 401(k) Plan. The amount of shares of our Class A
Common Stock used to make the Match is determined using the closing price on or about March 1st of each year for the previous
calendar year’s Match. For the years ended December 31, 2017, 2016, and 2015, we recorded $7.3 million, $6.9 million, and $6.2 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, 2017, 242,951 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, 2017, 2016, and 2015 was $1.0 million, $0.9
million, and $0.7 million, respectively. A total of 3,200,000 shares of Class A Common Stock are reserved for awards under the plan. As
of December 31, 2017, 850,876 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 year ended December 31, 2017, we recorded no compensation expense related to these
awards. For the years ended 2016 and 2015, we recorded compensation expense of $1.3 million and $1.8 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
54 • Sinclair Broadcast Group
54 Sinclair Broadcast Group
4. PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is generally computed under the straight-line
method over the following estimated useful lives:
Buildings and improvements
Station equipment
Office furniture and equipment
Leasehold improvements
Automotive equipment
Property and equipment under capital leases
10 - 30 years
5 - 10 years
5 - 10 years
Lesser of 10 - 30 years or lease term
3 - 5 years
Lease term
Acquired property and equipment as discussed in Note 2. Acquisitions and Dispositions of Assets, 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, 2017 and 2016 (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
2017
77,487 $
87,056
260,470
779,779
109,632
25,120
63,513
53,005
30,575
1,486,637
(748,339)
738,298 $
2016
73,124
90,087
239,603
702,004
101,252
24,762
56,507
84,516
30,880
1,402,735
(685,159)
717,576
$
$
Capital leased assets are related to building, tower, and equipment leases. Depreciation related to capital leases is included in
depreciation expense in the consolidated statements of operations. We recorded capital lease depreciation expense of $4.2 million for
both of the years ended December 31, 2017 and 2016 and $3.9 million for the year ended December 31, 2015.
2017 Annual Report 55
2017 Annual Report • 55
5. GOODWILL, INDEFINTE-LIVED INTANGIBLE ASSETS 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 $2,124.0 million and $1,990.7 million at
December 31, 2017 and 2016, respectively. The change in the carrying amount of goodwill was as follows (in thousands):
Balance at December 31, 2015
$
1,927,605 $
Broadcast
Other
Consolidated
1,931,093
3,488 $
Acquisitions (a)
Measurement period adjustments related to prior year acquisitions
Disposition of assets (a)
Acquisitions (a)
Measurement period adjustments related to prior year acquisitions
Disposition of assets (a)
Balance at December 31, 2017
11,626
40
(5,440)
1,933,831
119,426
153
—
$
2,053,410 $
53,427
—
—
56,915
13,966
154
(412)
70,623 $
65,053
40
(5,440)
1,990,746
133,392
307
(412)
2,124,033
(a) See Note 2. Acquisitions and Dispositions of Assets for discussion of acquisitions and divestitures made during 2017 and 2016.
(b) Approximately $0.8 million of goodwill relates to consolidated VIEs as of December 31, 2017 and 2016.
For our annual goodwill impairment tests in 2017, 2016, or 2015, we concluded that it was more-likely-than-not that goodwill was not
impaired for the reporting units in which we performed a qualitative assessment. The qualitative factors 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. We did not have any indicators of impairment in any interim period in 2017,
2016, or 2015, and therefore did not perform interim impairment tests for goodwill during those periods. Our accumulated goodwill
impairment as of December 31, 2017 and 2016 was $413.6 million.
As of December 31, 2017 and 2016, the carrying amount of our indefinite-lived intangible assets was as follows (in thousands):
Broadcast
Other
Balance at December 31, 2015
Acquisitions (a)
Disposition of assets (a)
Balance at December 31, 2016 (b)
Acquisitions (a)
Disposition of assets (a)
Balance at December 31, 2017 (b) (c)
$
$
132,465 $
2,406
(1,965)
132,906
425
(1,411)
131,920 $
Consolidated
132,465
25,806
(1,965)
156,306
4,476
(1,411)
159,371
— $
23,400
—
23,400
4,051
—
27,451 $
(a) See Note 2. Acquisitions and Dispositions of Assets for discussion of acquisitions and divestitures made during 2017 and 2016.
(b) Approximately $14.3 million and $15.7 million of indefinite-lived intangible assets relate to consolidated VIEs as of December 31,
2017 and 2016, respectively.
(c) Our indefinite-lived intangible assets in Broadcast relates to broadcast licenses and our indefinite-lived intangible assets in Other
relates to trade names.
We did not have any indicators of impairment for our indefinite-lived intangible assets in any interim period in 2017 or 2016, and
therefore did not perform interim impairment tests during those periods. We performed our annual impairment tests for indefinite-lived
intangibles in 2017 and 2016 and as a result of our qualitative assessments, we recorded no impairment.
56 Sinclair Broadcast Group
56 • Sinclair Broadcast Group
The following table shows the gross carrying amount and accumulated amortization of definite-lived intangibles (in thousands):
Amortized intangible assets:
Network affiliation (a)
Customer Relationships (a)
Other (a)
Total
Amortized intangible assets:
Network affiliation (a)
Customer Relationships (a)
Other (a)
Total
As of December 31, 2017
Gross
Carrying
Value
Accumulated
Amortization
Net
1,451,663 $
1,229,006
45,955
2,726,624 $
(514,575) $
(373,966)
(36,413)
(924,954) $
937,088
855,040
9,542
1,801,670
As of December 31, 2016
Gross
Carrying
Value
Accumulated
Amortization
Net
1,398,451 $
1,102,591
243,253
2,744,295 $
(427,484) $
(294,114)
(78,294)
(799,892) $
970,967
808,477
164,959
1,944,403
$
$
$
$
(a) Changes between the gross carrying value from December 31, 2016 to December 31, 2017, relate to acquisitions and dispositions in
2017, as discussed in Note 2. Acquisitions and Dispositions of Assets.
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 and Dispositions of
Assets is 14 years. The amortization expense of the definite-lived intangible and other assets for the years ended December 31, 2017,
2016, and 2015 was $178.8 million, $183.8 million, and $161.5 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, 2017, 2016, and 2015.
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, 2018
For the year ended December 31, 2019
For the year ended December 31, 2020
For the year ended December 31, 2021
For the year ended December 31, 2022
Thereafter
$
$
174,398
173,594
173,061
172,043
168,297
940,277
1,801,670
2017 Annual Report • 57
2017 Annual Report 57
6. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
Notes payable, capital leases, and commercial bank financing consisted of the following as of December 31, 2017 and 2016 (in
thousands):
2017
2016
Bank credit agreement:
Term Loan A-1, due April 9, 2018
Term Loan A-2, due July 31, 2021
Term Loan B, due January 3, 2024
Senior unsecured notes:
5.375% Notes, due April 1, 2021
6.125% Notes, due October 1, 2022
5.625% Notes, due August 1, 2024
5.875% Notes, due March 15, 2026
5.125% Notes, due February 15, 2027
Debt of variable interest entities
Debt of other non-media subsidiaries
Capital leases
Total outstanding principal
Less: Deferred financing costs and discount
Less: Current portion
Net carrying value of long-term debt
$
$
117,370 $
113,327
1,356,300
600,000
500,000
550,000
350,000
400,000
29,614
25,238
31,696
4,073,545
(39,047 )
(159,382 )
3,875,116 $
141,436
130,762
1,365,625
600,000
500,000
550,000
350,000
400,000
23,198
135,211
33,280
4,229,512
(43,449)
(171,131)
4,014,932
Indebtedness under the Bank Credit Agreement, notes payable, and capital leases as of December 31, 2017 matures as follows (in
thousands):
2018
2019
2020
2021
2022
2023 and thereafter
Total minimum payments
Less: Deferred financing costs and discount
Less: Amount representing future interest
Net carrying value of debt
Notes and Bank
Credit
Agreement
Capital Leases
Total
$
$
157,132 $
35,576
41,687
681,927
521,435
2,604,092
4,041,849
(39,047)
—
4,002,802 $
5,010 $
5,116
4,877
4,875
4,752
23,646
48,276
—
(16,580)
31,696 $
162,142
40,692
46,564
686,802
526,187
2,627,738
4,090,125
(39,047)
(16,580)
4,034,498
Interest expense on the consolidated statements of operations was $212.3 million, $211.1 million, and $191.4 million for the years
ended December 31, 2017, 2016, and 2015, respectively. Interest expense included $7.7 million, $10.8 million, and $9.7 million in
amortization of deferred financing costs and debt discount for the years ended December 31, 2017, 2016, and 2015, respectively.
58 Sinclair Broadcast Group
58 • Sinclair Broadcast Group
The stated and weighted average effective interest rated on the above obligations are as follows:
Bank credit agreement:
Term Loan A-1
Term Loan A-2 (a)
Term Loan B
Revolver (b)
Senior unsecured notes:
5.375% Notes
6.125% Notes
5.625% Notes
5.875% Notes
5.125% Notes
Stated Rate
LIBOR plus 2.25%
LIBOR plus 2.25%
LIBOR plus 2.25%
LIBOR plus 2.00%
5.38%
6.13%
5.63%
5.88%
5.13%
Weighted Average
Effective Rate
2017
3.29%
3.30%
3.32%
—%
5.58%
6.31%
5.83%
6.09%
5.33%
2016
2.74%
2.82%
3.53%
2.98%
5.58%
6.31%
5.83%
6.09%
5.33%
(a) LIBOR plus 2.0% if our first lien indebtedness ratio is less than 1.5x.
(b) As of December 31, 2017 and 2016, we had a $485.2 million revolving credit facility (Revolver). We incur a commitment fee
on undrawn capacity of 0.25% or 0.50% if our first lien indebtedness ratio is less than or greater than 3.0x, respectively.
There were no outstanding borrowings and $0.8 million and $1.9 million letters of credit under the revolver as of
December 31, 2017 and 2016, respectively. There were no outstanding borrowings under the revolver during the year ended
December 31, 2017.
We capitalized $0.5 million, $2.0 million, and $3.6 million as deferred financing costs during the years ended December 31, 2017,
2016, and 2015, respectively. Deferred financing costs and original issuance discounts are presented as a direct deduction from the
carrying amount of an associated debt liability, except for deferred financing costs related to our Revolver which are presented within
other assets as discussed in Note 1. Nature of Operations and Summary of Significant Accounting Policies.
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, 2017, 2016, and 2015, the Bank Credit Agreement has been amended from time to time to provide
incremental financing related to certain acquisitions discussed under Note 2. Acquisitions and Dispositions of Assets and to provide
additional operational flexibility. On July 19, 2016, we entered into an amendment to extend the maturity of a portion of the term loan
A facility and the Revolver to July 31, 2021. In connection with this amendment we incurred approximately $2.7 million of financing
costs, of which $0.3 million was expensed and the remaining was capitalized as deferred financing costs. On January 3, 2017, we entered
into an amendment to extend the maturity date of the Term Loan B from April 9, 2020 and July 31, 2021 to January 3, 2024. In
connection with this extension we added additional operating flexibility, including a reduction in certain pricing terms related to Term
Loan B and the Revolver and revisions to certain covenant ratio requirements. We incurred approximately $11.6 million of financing
costs in connection with the amendment, of which $3.4 million related to an original issuance discount, $7.7 million was expensed, $0.5
million was capitalized as a deferred financing cost, and $1.4 million of unamortized deferred financing cost was written off.
Our Bank Credit Agreement, as well as indentures governing our outstanding notes, contains covenants that, among other things,
restrict our ability and our subsidiaries’ ability to incur additional indebtedness with certain exceptions, pay dividends, incur liens, engage
in mergers or consolidations, make acquisitions, investments or disposals, and engage in activities with affiliates. In addition, under the
Bank Credit Agreement, we are required to maintain a ratio of First Lien Indebtedness. See Note 8. Common Stock for further details.
As of December 31, 2017, 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, 2017, there were no material third party licensees as defined in our Bank Credit
Agreement.
2017 Annual Report • 59
2017 Annual Report 59
Substantially all of our stock in our wholly-owned subsidiaries has been pledged as security for the Bank Credit Agreement.
Senior Unsecured Notes
Upon issuance, all of our senior unsecured notes were redeemable up to 35%. We may redeem 100% of the notes upon the date
set forth in the indenture of each note. The price which may redeem the notes is set forth in the indenture of each note. Also, if we sell
certain of our assets or experience specific kinds of changes of control, the holders of our notes may require us to repurchase some or
all of the outstanding notes.
Effective August 15, 2016, we redeemed all of the outstanding 6.375% Senior Unsecured Notes, representing $350.0 million in
aggregate principal amount. Upon the redemption, along with the principal, we paid the accrued and unpaid interest and a make whole
premium, for a total of $377.2 million paid to noteholders. We recorded a loss on extinguishment of $23.7 million in the third quarter of
2016 related to this redemption, which included the write-off of the unamortized deferred financing costs of $3.9 million and
prepayment penalty of $19.8 million.
Debt of variable interest entities
The proceeds of the outstanding debt of our consolidated VIEs 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 for more
information. 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. The credit agreements and term loans of these VIEs each
bear interest of LIBOR plus 2.50%. The weighted average effective interest rate for the debt of variable interest entities for the years
ended December 31, 2017 and 2016 was 3.59% and 3.31%, respectively.
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 3.6% to a fixed 6.5% during 2017. The weighted average
effective interest rate for the debt of other non-media subsidiaries for the years ended December 31, 2017 and 2016 was 4.31% and
6.41%, respectively.
Capital leases
Our capital leases with non-affiliates related primarily to broadcast towers. All of our tower leases will expire within the next 15
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 11. Related Person Transactions.
Commitment Letters and Incremental Term B Facility related to Tribune Acquisition
In connection with the pending acquisition of Tribune discussed in Note 2. Acquisitions and Dispositions of Assets, we entered
into financing commitment letters (Commitment Letters) with certain financial institutions for (i) a seven-year senior secured incremental
term loan B facility of up to $3.747 billion (Incremental Term Loan B Facility) and (ii) a one-year senior unsecured term loan bridge
facility of up to $785.0 million (Bridge Facility) and, together with the Incremental Term B Facility, collectively the (Facilities), convertible
into a nine-year extended term loan, for purposes of financing a portion of the cash consideration payable under the terms of the
agreement of the planned merger between the Company and Tribune (Merger Agreement) and to pay or redeem certain indebtedness of
Tribune and its subsidiaries. The Commitment Letters also contemplate certain amendments to our existing credit agreement, as
subsequently amended (Existing Credit Agreement) in connection with the Tribune Acquisition to permit the acquisition and to provide
for the Incremental Term B Facility in accordance with the terms of the Existing Credit Agreement. The Commitment Letters also
provide for the syndication of an incremental revolving credit loan facility commitment of up to $225.0 million (Incremental Revolving
Commitments) to be provided in accordance with the terms of the Existing Credit Agreement. The provision of the Incremental
Revolving Commitments is not a condition of the Incremental Term B Facility or the Bridge Facility.
The Incremental Term Loan B Facility will be subject to representations, warranties and covenants that, subject to certain agreed
modifications, will be substantially similar to those in the Existing Credit Agreement. The documentation for the Bridge Facility shall,
except as otherwise agreed, be based on and consistent with the indenture governing our 5.125% Senior Notes due 2027, dated as of
August 30, 2016, among STG and U.S. Bank National Association, as trustee (the 5.125% Indenture), and shall in any case, except as
expressly agreed, be no less favorable to us than the 5.125% Indenture.
60 Sinclair Broadcast Group
60 • Sinclair Broadcast Group
The funding of the Facilities is subject to our compliance with customary terms and conditions precedent as set forth in the
Commitment Letters, including, among others, (i) the execution and delivery by us of definitive documentation consistent with the
Commitment Letters and (ii) that the acquisition of Tribune shall have been, or substantially simultaneously with the funding under the
Facilities shall be, consummated in accordance with the terms of the Merger Agreement without giving effect to any amendments or
waivers that are material and adverse to the parties to the Commitment Letters.
In December 2017, our wholly-owned subsidiary, Sinclair Television Group, Inc., secured the required financing as contemplated in the
Commitment Letters for the financing of the Tribune acquisition, to be drawn at closing from issuance of $3.7 billion Term B loans,
maturing in 2024 and priced at LIBOR plus 2.50%, under the Bank Credit Agreement, which will be amended at closing. The proceeds
from the Term B Loans are expected to be used to purchase the outstanding shares of Tribune, refinance certain of Tribune's existing
indebtedness, pay costs and expenses expected to be incurred in connection with the acquisition, and for general corporate purposes. We
began to incur a ticking fee on undrawn amounts under the new term B loans beginning on January 12, 2018 of 1.25% for the first 30
days, 2.50% for the next 60 days, and LIBOR plus 2.50% thereafter.
In June 2017, Tribune commenced a consent solicitation, seeking consents from the holders of Tribune notes to amend certain
provisions of the indenture governing Tribune's 5.875% Senior Notes due 2022 (Tribune notes), to (i) eliminate any requirement for
Tribune to make a "Change of Control Offer," to holders of Tribune notes in connection with the transactions, (ii) clarify the treatment
under the Tribune notes of the proposed structure of the transactions and to facilitate the integration of Tribune and its subsidiaries and
the Tribune notes with and into the Company's debt capital structure, and (iii) eliminate the expense associated with producing and filing
with the SEC separate financial reports for STG, a wholly-owned subsidiary and the television operating subsidiary of the Company, as
successor issuer of the Tribune notes, if the Company or any other parent entity of the successor issuer of the Tribune notes, in its sole
discretion, provides an unconditional guarantee of the payment obligations of the successor issuer under the Tribune notes. Tribune
received the requisite consent from the holders of the Notes and executed a supplemental indenture to amend these provisions of the
Tribune indenture. The Company paid a consent fee of $8.3 million to the consenting holders of the Notes.
7. PROGRAM CONTRACTS:
Future payments required under program contracts as of December 31, 2017 were as follows (in thousands):
2018
2019
2020
2021
2022
Total
Less: Current portion
Long-term portion of program contracts payable
$
$
108,053
16,040
12,639
8,885
4,345
149,962
(108,053)
41,909
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 month lag. Included in the current portion
amount are payments due in arrears of $29.5 million. In addition, we have entered into non-cancelable commitments for future program
rights aggregating to $130.5 million as of December 31, 2017.
2017 Annual Report 61
2017 Annual Report • 61
8. COMMON STOCK:
Holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to ten votes
per share, except for votes relating to “going private” and certain other transactions. 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 2017, no Class B Common Stock shares were converted into Class A Common Stock
shares. During 2016, 257,673 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 4.25 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 4.25 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, 5.875% Notes, 5.375% Notes, 5.125% 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
On March 15 2017, we completed a public offering of 12.0 million shares of Class A common stock that was priced at $42.00 per
share. The net proceeds of $487.9 million are intended to be used to fund future potential acquisitions and for general corporate
purposes.
During 2016, our Board of Directors declared a quarterly dividend of $0.165 per share in the month of February which was paid in
March and a quarterly dividend of $0.18 per share in the months of May, August, and November, which were paid in June, September,
and December, respectively. Total dividend payments for the year ended December 31, 2016 were $0.705 per share. During 2017, our
Board of Directors declared a quarterly dividend of $0.18 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, 2017 were $0.72
per share. In February 2018, our Board of Directors declared a quarterly dividend of $0.18 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 March 20, 2014, the Board of Directors approved a $150.0 million share repurchase authorization. On September 6, 2016 the
Board of Directors approved 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, 2017, we have repurchased approximately 1.0
million shares of Class A Common Stock for $30.3 million. As of December 31, 2017, the total remaining repurchase authorization was
$88.8 million.
62 Sinclair Broadcast Group
62 • Sinclair Broadcast Group
9. INCOME TAXES:
The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2017, 2016, and 2015 (in
thousands):
Current provision for income taxes:
Federal
State
Deferred (benefit) provision for income taxes:
Federal
State
(Benefit) provision for income taxes
2017
2016
2015
$
$
77,477 $
6,625
84,102
(196,468)
37,006
(159,462)
(75,360 ) $
113,737 $
2,273
116,010
8,555
(2,437)
6,118
122,128 $
80,420
5,720
86,140
(26,637)
(1,809)
(28,446)
57,694
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision:
Federal statutory rate
Adjustments:
Federal tax reform (a)
State income taxes, net of federal tax benefit (b)
Non-deductible items
Domestic production activities deduction
Changes in unrecognized tax benefits (c)
Basis in stock of subsidiaries (d)
Federal tax credits (e)
Other
Effective income tax rate
2017
2016
2015
35.0 %
35.0 %
35.0 %
(54.3)%
5.0 %
1.5 %
(1.7)%
0.5 %
— %
(2.2)%
1.1 %
(15.1)%
— %
0.2 %
1.0 %
(3.4 )%
0.3 %
— %
(0.4)%
0.6 %
33.3 %
— %
0.6 %
1.2 %
(3.9 )%
(1.9)%
(5.5)%
(1.1)%
0.8 %
25.2 %
(a) Our 2017 income tax provision includes a non-recurring benefit of $272.1 million to reflect the estimated effect of the U.S.
Tax Cuts and Jobs Act (Tax Reform) enacted on December 22, 2017.
(b) Included in state income taxes are deferred income tax effects related to certain acquisitions and/or intercompany mergers.
(c) During the years ended December 31, 2017, 2016, and 2015, we recorded a $0.1 million, $1.0 million, and $5.7 million, respectively,
benefit related to the release of liabilities for unrecognized tax benefits as a result of expiration of the applicable statute of
limitations and settlements with taxing authorities. See table below which summarizes the activity related to our accrued
unrecognized tax benefits.
(d) 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.
(e) During the year ended December 31, 2017, we recorded a benefit of $8.3 million related to investments in sustainability initiatives
whose activities qualify for federal income tax credits. During the years ended December 31, 2017, 2016, and 2015 we recorded a
$2.5 million, $1.6 million and $1.1 million, respectively, benefit related to federal income tax credits associated with research and
development activities.
2017 Annual Report 63
2017 Annual Report • 63
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, 2017 and 2016 were as follows (in thousands):
2016
2017
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
Other
Total deferred tax liabilities
Net deferred tax liabilities
$
$
$
$
34,861 $
75,754
14,389
33,462
158,466
(62,865)
95,601 $
(514,776) $
(80,630)
(15,431)
(610,837)
(515,236) $
68,455
63,630
28,879
44,873
205,837
(51,846)
153,991
(650,139)
(80,950)
(32,219)
(763,308)
(609,317)
Our remaining federal and state capital and net operating losses will expire during various years from 2018 to 2037, 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, 2017, 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, 2017, we increased our valuation allowance by $11.1 million to $62.9 million.
The increase in valuation allowance was primarily due to the impact of Tax Reform on the federal tax effect on certain state net
operating loss carryforwards, for which a full valuation allowance is provided. During the year ended December 31, 2016, we decreased
our valuation allowance by $6.5 million to $51.8 million. The reduction in valuation allowance was primarily due to changes in estimates
of apportionment and a tax rate reduction in certain states. 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 in certain states.
The following table summarizes the activity related to our accrued unrecognized tax benefits (in thousands):
Balance at January 1,
Additions 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,
2017
2016
2015
$
$
4,739 $
2,019
610
(131)
—
7,237 $
3,257 $
420
2,053
—
(991)
4,739 $
7,138
1,458
472
(1,517)
(4,294)
3,257
We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Our 2013 through 2015 federal tax
returns are currently under audit, and several of our subsidiaries are currently under state examinations for various years. Our 2014 and
subsequent federal and state tax returns remain subject to examination by various tax authorities. Some of our pre-2014 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 $2.0 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.
64 • Sinclair Broadcast Group
64 Sinclair Broadcast Group
10. COMMITMENTS AND CONTINGENCIES:
Litigation
We are a party to lawsuits and claims from time to time in the ordinary course of business. Actions currently pending are in various
stages and no material judgments or decisions have been rendered by hearing boards or courts in connection with such actions. After
reviewing developments to date with legal counsel, our management is of the opinion that none of our pending and threatened matters
are material.
On December 21, 2017, the FCC issued a Notice of Apparent Liability for Forfeiture proposing a $13.4 million fine for violations of
the FCC's sponsorship identification rules by the Company and certain of its subsidiaries. Based on a review of the current facts and
circumstances, management has provided for what is believed to be a reasonable estimate of the loss exposure for this matter. We have
responded to dispute the Commission's findings and the proposed fine; however, we cannot predict the outcome of any potential FCC
action related to this matter. We do not believe that the ultimate outcome of this matter will have a material effect on the Company's
financial statements.
Operating Leases
We have entered into operating leases for certain property and equipment under terms ranging from one to 40 years. The rent expense
under these leases, as well as certain leases under month-to-month arrangements, for the years ended December 31, 2017, 2016, and 2015
was approximately $28.7 million, $26.0 million, and $21.7 million, respectively.
Future minimum payments under the leases are as follows (in thousands):
2018
2019
2020
2021
2022
2023 and thereafter
$
$
25,115
24,015
21,209
19,101
17,856
90,832
198,128
Changes in the Rules on Television Ownership, Local Marketing Agreements, Joint Sales Agreements, Retransmission
Consent Negotiations, and National Ownership Cap
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. Currently, all of our LMAs are grandfathered under the local television ownership rule because they were entered
into prior to November 5, 1996. If the FCC were to eliminate the grandfathering of these LMAs, we would have to terminate or modify
these LMAs.
In February 2015, the FCC issued an order implementing certain statutorily required changes to its rules governing the duty to
negotiate retransmission consent agreements in good faith. With these changes, a television broadcast station is prohibited from
negotiating retransmission consent jointly with another television station in the same market unless the “stations are directly or indirectly
under common de jure control permitted under the regulations of the Commission.” During a 2015 retransmission consent negotiation,
a MVPD filed a complaint with the FCC accusing us of violating this rule. Although we reached agreement with the MVPD, the FCC
initiated an investigation. In order to resolve the investigation and all other pending matters before the FCC's Media Bureau (including
2017 Annual Report 65
2017 Annual Report • 65
the grant of all outstanding renewals and dismissal or cancellation of all outstanding adversarial pleadings or forfeitures before the Media
Bureau), the Company, on July 29, 2016, without any admission of liability, entered into a consent decree with the FCC pursuant to
which the Company paid a settlement and agreed to be subject to ongoing compliance monitoring by the FCC for a period of 36
months.
In September 2015, the FCC released a Notice of Proposed Rulemaking in response to a Congressional directive in STELAR to
examine the “totality of the circumstances test” for good-faith negotiations of retransmission consent. The proposed rulemaking seeks
comment on new factors and evidence to consider in its evaluation of claims of bad faith negotiation, including service interruptions
prior to a “marquee sports or entertainment event,” restrictions on online access to broadcast programming during negotiation impasses,
broadcasters’ ability to offer bundles of broadcast signals with other broadcast stations or cable networks, and broadcasters’ ability to
invoke the FCC’s exclusivity rules during service interruptions. On July 14, 2016, the FCC’s Chairman at the time announced that the
FCC would not, at this time, proceed to adopt additional rules governing good faith negotiations of retransmission consent. No formal
action has yet been taken on this Proposed Rulemaking, and we cannot predict if the full Commission will agree to terminate the
Rulemaking without action..
In August 2016, the FCC completed both its 2010 and 2014 quadrennial reviews of its media ownership rules and issued an order
(Ownership Order) which left most of the existing multiple ownership rules intact, but amended the rules to provide for the attribution
of JSAs 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 advertising time per week of the other station. JSAs exiting as of March 31, 2014, were grandfathered until October 1,
2025, at which point they would have to be terminated, amended or otherwise come into compliance with the JSA attribution rule. The
revenues of these JSA arrangements we earned during the years ended December 31, 2017, 2016, and 2015 were $63.2 million, $58.6
million, and $46.8 million, respectively. The subsequent Ownership Order on Reconsideration released eliminated the JSA attribution
rule. A Petition for Review of the Order on Reconsideration, including the elimination of the JSA attribution rule, was filed in the U.S.
Court of Appeals for the Third Circuit is still pending. We cannot predict the outcome of this proceeding. If we are required to
terminate or modify our LMA's or JSA's, our business could be adversely affected in several ways, including losses on investments and
termination penalties.
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.
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.
On September 6, 2016, the FCC released the UHF Discount Order, eliminating the UHF discount. The UHF discount allowed
television station owners to discount the coverage of UHF stations when calculating compliance with the FCC’s national ownership cap,
which prohibits a single entity from owning television stations that reach, in total, more than 39% of all the television households in the
nation. All but 34 of the stations we currently own and operate, or to which we provide programming services are UHF. On April 20,
2017, the FCC acted on a Petition for Reconsideration of the UHF Discount Order and adopted the UHF Discount Order on
Reconsideration which reinstated the UHF discount, which became effective June 15, 2017 and is currently in effect. The UHF Discount
Order on Reconsideration is currently the subject of a Petition for Review filed in the U.S. Court of Appeals for the D.C. Circuit which is
still pending. On December 18, 2017, the Commission released a Notice of Proposed Rulemaking to examine the national audience
reach cap, including the UHF discount. We cannot predict the outcome of these proceedings. With the application of the UHF
discount counting all our present stations we reach approximately 25% of U.S. households. With the pending Tribune transaction, absent
divestitures, we would exceed the 39% cap, even with the application of the UHF discount. In the event we have not been able to
complete all necessary divestitures by the time of the merger closing, we have filed applications at the FCC to place the stations in a
divestiture trust pending divestiture after closing. Changes to the national ownership cap could limit our ability to make television station
acquisitions.
66 • Sinclair Broadcast Group
66 Sinclair Broadcast Group
11. RELATED PERSON TRANSACTIONS:
Transactions with our controlling shareholders
David, Frederick, J. Duncan and Robert Smith (collectively, the controlling shareholders) are brothers and hold substantially all of the
Class B Common Stock and some of our Class A Common Stock. We engaged in the following transactions with them and/or entities in
which they have substantial interests:
Leases. Certain assets used by us and our operating subsidiaries are leased from entities owned by the controlling shareholders. Lease
payments made to these entities were $5.1 million for the years ended December 31, 2017, 2016, and 2015.
Capital leases payable related to the aforementioned relationships were $14.2 million, net of $4.9 million interest, and $17.8 million, net
of $6.4 million interest, as of December 31, 2017 and 2016, respectively. The capital leases mature in periods through 2026, as follows (in
thousands):
2018
2019
2020
2021
2022
2023 and thereafter
Total minimum payments due
Less: Amount representing interest
Capital leases payable
Less: Current portion
Capital leases payable, less current portion
$
$
2,834
2,978
3,093
3,046
2,441
4,686
19,078
(4,926 )
14,152
(1,667 )
12,485
Charter Aircraft. We lease aircraft owned by certain controlling shareholders. For all leases, we incurred expenses of $1.9 million for the
year ended December 31, 2017 and $1.4 million for both the years ended December 31, 2016 and 2015.
Cunningham Broadcasting Corporation
Cunningham owns a portfolio of television stations including: 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; WGTU-TV/WGTQ-TV Traverse City/Cadillac, Michigan; and beginning in September 2017,
WEMT-TV Tri-Cities, Tennessee, WYDO-TV Greenville, North Carolina, KBVU-TV Eureka, California, KCVU-TV Chico-Redding,
California, WPFO-TV Portland, Maine, KENV-DT, Salt Lake City, Utah and KRNV-TV, Reno, Nevada (collectively, the Cunningham
Stations). Certain of our stations provide services to these Cunningham Stations pursuant to LMAs or JSAs and SSAs. See Note 1.
Nature of Operations and Summary of Significant Accounting Policies, for further discussion of the scope of services provided under
these types of arrangements. We have jointly and severally, unconditionally and irrevocably guaranteed the $45.0 million of Cunningham
debt, of which $11.9 million is consolidated through VIE arrangements.
At December 31, 2017, the estate of Carolyn C. Smith, the mother of our controlling shareholders, owned all of the voting stock of
the Cunningham Stations. The FCC approved the sale of the voting stock by the estate to an unrelated party and the transfer was
completed in January 2018. All of the non-voting stock is owned by trusts for the benefit of the children of our controlling
shareholders. We consolidate certain subsidiaries of Cunningham, with which we have variable interests through various arrangements
related to the Cunningham Stations discussed further below.
The services provided to WNUV-TV, WMYA-TV, WTTE-TV, WRGT-TV and WVAH-TV are governed by a master agreement which
has a current term that expires on July 1, 2023 and there are two additional 5-year renewal terms remaining with final expiration on
July 1, 2033. 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. Pursuant to the terms of this agreement we are obligated
to pay Cunningham an annual fee for the television stations equal to the greater of (i) 3% of each station’s annual net broadcast revenue
and (ii) $4.7 million. The aggregate purchase price of these television stations increases by 6% annually. A portion of the fee is required
to be applied to the purchase price to the extent of the 6% increase. The remaining aggregate purchase price of these stations as of
December 31, 2017 was approximately $53.6 million. Additionally, we provide services to WDBB-TV pursuant to an LMA, which expires
2017 Annual Report 67
2017 Annual Report • 67
April 22, 2025, and a purchase option to acquire for $0.2 million. We paid Cunningham under these agreements, $9.1 million, $8.9
million, and $8.8 million for the years ended December 31, 2017, 2016, and 2015, respectively.
In September 2017, Cunningham acquired the membership interest of Esteem Broadcasting in connection with our acquisition of
Bonten Media Group, as discussed in Note 2. Acquisitions and Dispositions of Assets. As a result of the transaction, Cunningham assumed
the joint sales agreement under which we will provide services to four stations; WEMT-TV, WYDO-TV, and KBVU-TV/KCVU-TV.
The agreements with KBVU-TV/KCVU-TV, WBSF-TV, WEMT-TV, WGTU-TV/WGTQ-TV, WPFO-TV, and WYDO-TV expire
in December 2020, November 2021, May 2023, August 2023, December 2023, and August 2025, respectively, and each has renewal
provisions for successive eight year periods. We earned $22.3 million, $5.4 million, and $5.8 million from the services we performed for
these stations for the years ended December 31, 2017, 2016, and 2015, respectively. As we consolidate the licensees as VIEs, the
amounts we earn or pay under the arrangements are eliminated in consolidation and the gross revenues of the stations are reported
within our consolidated statement of operations. Our consolidated revenues, related to the Cunningham Stations, include $124.8
million, $114.9 million, and $109.5 million for the years ended December 31, 2017, 2016, and 2015, respectively.
In December 2017, Cunningham repaid, in its entirety, a January 2016 promissory note to borrow $19.5 million from us which was
included within notes receivable from affiliates on our consolidated balance sheet as of December 31, 2016. Interest income from the
note receivable was $1.0 million for both years ended December 31, 2017 and 2016.
In April 2016, we entered into an agreement with Cunningham to provide master control equipment and provide master control
services to a station in Johnstown, PA with which they have an LMA that expires in April 2019. Under the agreement, Cunningham paid
us an initial fee of $0.7 million and pays us $0.2 million annually for master control services plus the cost to maintain and repair the
equipment. Also, in August 2016, we entered into an agreement, expiring October 2021, with Cunningham to provide a news share
service with their station in Johnstown, PA beginning in October 2016 for an annual fee of $1.0 million per year.
Atlantic Automotive Corporation
We sell advertising time to Atlantic Automotive Corporation (Atlantic Automotive), a holding company that owns automobile
dealerships and an automobile leasing company. David D. Smith, our Executive Chairman, has a controlling interest in, and is a member
of the Board of Directors of, Atlantic Automotive. We received payments for advertising totaling $0.6 million for both years ended
December 31, 2017 and 2016 and $0.4 million for the year ended December 31, 2015. Additionally, Atlantic Automotive leased office
space owned by one of our consolidated real estate ventures in Towson, Maryland. In May 2017, our consolidated real estate ventures
sold their investment. See Leased property by real estate ventures below for a discussion on the sale of our consolidated real estate ventures'
investment.
Atlantic Automotive paid $0.4 million, $1.1 million, and $1.2 million in rent during the years ended December 31, 2017, 2016, and
2015, respectively.
Leased property by real estate ventures
Certain of our real estate ventures have entered into leases with entities owned by David Smith to lease space. There are leases for
space in a building owned by one of our consolidated real estate ventures in Baltimore, MD. Total rent received under these leases was
$0.5 million, $0.7 million, and $0.6 million for the years ended December 31, 2017, 2016, and 2015, respectively.
One of our real estate ventures, accounted for under the equity method, owned a building in Towson, MD, which leased restaurant
space to entities owned by David D. Smith until May 2017, when the property was sold to an unrelated party. Total restaurant rent
received for this investment was less than $0.1 million, $0.4 million, and $0.3 million for the years ended December 31, 2017, 2016, and
2015 respectively.
Payments for services provided by these leases to us was less than $0.1 million for the years ended December 31, 2017, 2016, and
2015.
Other transactions with equity method investees
In 2017, we made investments totaling $20.0 million in 120 Sports LLC, a multi-platform sports network branded as Stadium, which
we account for under the equity method. We entered into a services agreement with the entity to provide certain linear distribution,
engineering, advertising, traffic, sales, and promotional services. For the year ended December 31, 2017, we did not receive any
consideration pursuant to the services agreement.
68 • Sinclair Broadcast Group
68 Sinclair Broadcast Group
12. EARNINGS PER SHARE:
The following table reconciles income (numerator) and shares (denominator) used in our computations of earnings per share for
the years ended December 31, 2017, 2016, and 2015 (in thousands):
Income (Numerator)
Net income
Net income attributable to noncontrolling interests
Numerator for diluted earnings available to common shareholders
2017
2016
2015
$
$
594,104 $
(18,091)
576,013 $
250,762 $
(5,461)
245,301 $
176,099
(4,575 )
171,524
Shares (Denominator)
Weighted-average common shares outstanding
Dilutive effect of outstanding stock settled appreciation rights and stock
options
Weighted-average common and common equivalent shares outstanding
99,844
945
100,789
93,567
866
94,433
95,003
725
95,728
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.
The following table shows the weighted-average stock-settled appreciation rights and outstanding stock options (in thousands) that are
excluded from the calculation of diluted earnings per common share as the inclusion of such shares would be anti-dilutive.
Weighted-average stock-settled appreciation rights and outstanding stock
options excluded
2017
450
2016
556
2015
131
2017 Annual Report 69
2017 Annual Report • 69
13. SEGMENT DATA:
We measure segment performance based on operating income (loss). Our broadcast segment, which is our only reportable segment,
includes stations in 89 markets located throughout the continental United States. Other primarily consists 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 $159.8 million and $233.3 million of intercompany loans between broadcast, other and corporate as of
December 31, 2017 and 2016, respectively. We had $18.5 million, $24.4 million, and $23.1 million in intercompany interest expense
related to intercompany loans between broadcast, other and corporate for the years ended December 31, 2017, 2016 and 2015,
respectively. All other intercompany transactions are immaterial.
Financial information for our reportable segment is included in the following tables for the years ended December 31, 2017, 2016,
and 2015 (in thousands):
Broadcast
$
2,490,528 $
88,751
243,590 $
7,368
Other
Corporate
Consolidated
2,734,118
97,103
— $
984
155,640
23,182
—
178,822
115,523
101,680
—
724,110
5,285
—
2,053,410
5,267,986
63,163
—
1,009
10,000
24,943
1,835
(13,664)
70,623
769,919
5,546
—
10,564
—
(11,547)
205,195
(255)
—
746,565
15,103
115,523
113,253
10,000
737,506
212,315
(13,919)
2,124,033
6,784,470
83,812
Broadcast
$
2,530,510 $
91,573
206,439 $
5,772
Other
Corporate
— $
Consolidated
2,736,949
98,529
1,184
155,479
28,316
—
183,795
127,880
67,035
—
639,422
5,641
—
1,933,831
4,815,633
78,909
—
2,459
4,085
(31,258)
6,371
1,735
56,915
866,845
8,084
—
4,062
—
(5,311)
199,131
—
—
280,690
7,472
127,880
73,556
4,085
602,853
211,143
1,735
1,990,746
5,963,168
94,465
For the year ended December 31, 2017
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, 2016
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
70 Sinclair Broadcast Group
70 • Sinclair Broadcast Group
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
14. FAIR VALUE MEASUREMENTS:
Broadcast
$
2,118,021 $
99,616
101,115 $
2,753
Other
Corporate
— $
Consolidated
2,219,136
103,433
1,064
152,049
9,405
—
161,454
124,619
55,848
—
451,015
—
—
—
2,952
12,436
(21,800)
4,955
964
—
5,446
—
(6,479)
186,492
—
124,619
64,246
12,436
422,736
191,447
964
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, 2017 and 2016 were as follows (in thousands):
Level 2:
6.125% Senior Unsecured Notes due 2022
5.875% Senior Unsecured Notes due 2026
5.625% Senior Unsecured Notes due 2024
5.375% Senior Unsecured Notes due 2021
5.125% Senior Unsecured Notes due 2027
Term Loan A-1
Term Loan A-2
Term Loan B
Debt of variable interest entities
Debt of other non-media related subsidiaries
2017
2016
Face Value (a) Fair Value Face Value (a) Fair Value
$
500,000 $
350,000
550,000
600,000
400,000
117,370
113,327
1,356,300
29,614
25,238
515,535 $
363,475
568,205
610,440
396,088
117,370
113,327
1,357,995
29,614
25,238
500,000 $
350,000
550,000
600,000
400,000
141,436
130,762
1,365,625
23,198
135,211
521,240
351,456
562,755
617,892
382,028
141,082
130,435
1,364,841
23,198
135,211
(a) Amounts are carried on our consolidated balance sheets net of debt discount and deferred financing costs, which are excluded in
the above table, of $39.0 million and $43.4 million as of December 31, 2017 and 2016, respectively.
2017 Annual Report 71
2017 Annual Report • 71
15. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Sinclair Television Group, Inc. (STG), a wholly-owned subsidiary and the television operating subsidiary of Sinclair Broadcast
Group, Inc. (SBG), is the primary obligor under the Bank Credit Agreement, the 5.375% Notes, the 5.625% Notes, 6.125% Notes,
5.875% Notes, 5.125% Notes, and until they were redeemed, the 6.375% Notes. Our Class A Common Stock and Class B Common
Stock as of December 31, 2017, 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, 5.875% Notes, 5.125% Notes, and until they were
redeemed, the 6.375% Notes. As of December 31, 2017, our consolidated total debt of $4,048.7 million included $4,022.8 million of
debt related to STG and its subsidiaries of which SBG guaranteed $3,977.8 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.
72 Sinclair Broadcast Group
72 • Sinclair Broadcast Group
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2017
(In thousands)
Sinclair
Broadcast
Group,
Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
$
$
$
Cash and cash equivalents
Restricted cash, current
Accounts and other receivables
Other current assets
Total current assets
Property and equipment, net
Investment in consolidated subsidiaries
Other long-term assets
Goodwill
Indefinite-lived intangible assets
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
— $
—
—
3,034
3,034
645,830 $
—
—
5,758
651,588
12,273 $
311,110
530,273
145,637
999,293
23,223 $
2,000
36,191
9,687
71,101
Sinclair
Consolidated
681,326
313,110
566,464
153,847
1,714,747
— $
—
—
(10,269)
(10,269)
829
31,111
586,950
132,010
(12,602)
738,298
1,537,337
31,757
—
—
—
4,116,241
770,312
—
—
—
1,572,957 $
5,569,252 $
4,179
104,363
2,120,166
145,073
1,781,045
5,741,069 $
—
208,367
3,867
14,298
77,944
507,587 $
(5,657,757)
(868,448)
—
—
(57,319)
(6,606,395) $
—
246,351
2,124,033
159,371
1,801,670
6,784,470
1,100 $
—
—
—
1,100
84,326 $
148,505
—
—
232,831
261,266 $
2,103
1,342
180,616
445,327
36,029 $
8,774
871
14,281
59,955
(12,318) $
—
(546)
—
(12,864)
—
—
3,119
4,219
3,799,987
—
38,282
4,071,100
28,493
11,237
1,141,266
1,626,323
46,636
334,491
187,569
628,651
—
(333,243)
(734,082)
(1,080,189)
1,568,738
1,498,152
4,114,746
(82,051)
(5,530,847)
370,403
159,382
1,667
194,897
726,349
3,875,116
12,485
636,154
5,250,104
1,568,738
—
$
1,572,957 $
—
5,569,252 $
—
5,741,069 $
(39,013)
507,587 $
4,641
(6,606,395) $
(34,372)
6,784,470
2017 Annual Report 73
2017 Annual Report • 73
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2016
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries Eliminations
— $
—
5,561
5,561
232,297 $
—
3,143
235,440
10,675 $
478,190
124,313
613,178
17,012 $
37,024
25,406
79,442
Sinclair
Consolidated
259,984
513,954
131,150
905,088
— $
(1,260)
(27,273)
(28,533)
1,820
17,925
570,289
131,326
(3,784)
717,576
551,250
46,586
—
—
—
605,217 $
3,614,605
819,506
—
—
—
4,687,476 $
4,179
103,808
1,986,467
140,597
1,770,512
5,189,030 $
100 $
—
1,857
—
1,957
69,118 $
55,501
—
—
124,619
231,640 $
1,851
1,514
121,972
356,977
—
169,817
4,279
15,709
233,368
633,941 $
48,860 $
113,779
2,336
13,545
178,520
(4,170,034)
(890,668)
—
—
(59,477)
(5,152,496) $
(21,173) $
—
(2,103)
(2,324)
(25,600)
—
—
15,277
17,234
3,939,463
—
31,817
4,095,899
31,014
12,663
1,190,717
1,591,371
44,455
396,957
183,418
803,350
—
(395,439)
(681,583)
(1,102,622)
—
249,049
1,990,746
156,306
1,944,403
5,963,168
328,545
171,131
3,604
133,193
636,473
4,014,932
14,181
739,646
5,405,232
587,983
591,577
3,597,659
(134,991)
(4,054,245)
587,983
—
605,217 $
—
4,687,476 $
—
5,189,030 $
(34,418)
633,941 $
$
4,371
(5,152,496) $
(30,047 )
5,963,168
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
Indefinite-lived intangible assets
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
74 Sinclair Broadcast Group
74 • Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2017
(In thousands)
Net revenue
$
— $
— $
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
2,593,623 $
Non-
Guarantor
Subsidiaries
Eliminations
(80,882) $
Sinclair
Consolidated
2,734,118
Media production expenses
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
9,204
984
10,188
—
102,930
1,011,965
522,039
6,250
109,180
219,390
1,753,394
221,377 $
124,044
14,800
62,924
201,768
(72,935)
(2,183)
(2,800)
(77,918)
1,063,074
646,790
286,748
1,996,612
Operating (loss) income
(10,188 )
(109,180)
840,229
19,609
(2,964)
737,506
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)
579,954
793,620
(88 )
1,678
581,544
4,657
576,013
(205,107)
5,077
593,590
100,473
584,883
(16)
(4,586)
(5,790)
(10,392)
(30,171)
799,666
—
(21,643)
(7,412)
(29,055)
(1,373,558)
19,109
—
(1,354,449)
401
(9,045)
—
(1,357,413)
—
(212,315)
(6,447)
(218,762)
75,360
594,104
—
—
—
(17,738)
(353)
(18,091)
$
$
576,013
$
593,488 $
584,883
$
584,267 $
799,666
$
799,666 $
(26,783) $
(1,357,766) $
(9,045) $
(1,374,888) $
576,013
593,488
2017 Annual Report 75
2017 Annual Report • 75
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
(In thousands)
Net revenue
$
— $
— $
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
2,579,284 $
Non-
Guarantor
Subsidiaries
Eliminations
265,855 $
(108,190) $
Media production expenses
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
4,062
1,064
5,126
—
70,503
7,331
77,834
918,200
489,882
465,680
1,873,762
135,511
10,804
133,810
280,125
(100,622)
(106)
(2,023)
(102,751)
Operating (loss) income
(5,126)
(77,834)
705,522
(14,270)
(5,439)
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)
244,580
(238)
3,613
247,955
2,472
245,301
463,598
(198,893)
(22,867)
241,838
99,148
263,152
220
(4,481)
715
(3,546)
(231,504)
470,472
—
(32,521)
(281)
(32,802)
7,756
(39,316)
(708,398)
24,990
—
(683,408)
—
(688,847)
—
—
—
(4,937)
(524)
(5,461)
$
$
245,301
$
250,789 $
263,152
$
263,179 $
470,472
$
470,472 $
(44,253) $
(689,371) $
(39,316) $
(694,335) $
245,301
250,789
Sinclair
Consolidated
2,736,949
953,089
575,145
605,862
2,134,096
602,853
—
(211,143)
(18,820)
(229,963)
(122,128)
250,762
76 Sinclair Broadcast Group
76 • 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, 2015
(In thousands)
Net revenue
$
— $
— $
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
2,076,851 $
Non-
Guarantor
Subsidiaries
Eliminations
221,633 $
(79,348) $
Sinclair
Consolidated
2,219,136
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
433,690
1,577,612
131,373
228,095
(74,288)
(167)
(2,680)
(77,135)
Operating (loss) income
(5,506)
(62,322)
499,239
(6,462)
(2,213)
733,199
495,974
567,227
1,796,400
422,736
—
(191,447)
2,504
(188,943)
(57,694)
176,099
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)
—
—
—
(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
2017 Annual Report 77
2017 Annual Report • 77
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2017
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
$
(8,659) $
(180,966) $
599,761
$
12,424
$
8,544
431,104
(130)
(14,973)
(68,475)
(2,930)
2,696
(83,812)
—
—
—
(8,308)
(262,965)
—
—
—
—
—
(946)
6,597
(720)
11,551
(20,701)
768
(5,682)
192,634
(32,762)
6,321
—
—
—
—
—
(271,273)
(5,682)
192,634
(55,129)
25,237
5,521
(12,450)
(351,373)
157,581
2,696
(198,025)
—
—
487,883
(71,364)
(30,287)
—
159,669
—
7,128
(213,919)
(1,865)
(120,717)
—
—
—
—
—
—
—
—
—
—
—
(22,416)
—
—
—
—
—
—
(381,344)
(1,750)
660,911
288
(242,402)
(25,605)
(2,523)
(2,184)
(11,560)
320
166,797
(336,501)
487,883
(71,364)
(30,287)
(22,416)
—
(5,849)
3,138
606,949
(246,790)
(163,794)
(11,240)
188,263
—
—
413,533
1,598
6,211
232,297
10,675
17,012
—
—
421,342
259,984
$
—
$
645,830
$
12,273
$
23,223
$
—
$
681,326
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS (USED IN) FROM
INVESTING ACTIVITIES:
Acquisition of property and equipment
Acquisition of businesses, net of cash
acquired
Purchase of alarm monitoring contracts
Proceeds from sale of assets
Investments in equity and cost method
investees
Other, net
Net cash flows (used in) from 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
Dividends paid on Class A and Class B
Common Stock
Repurchase of outstanding Class A
Common Stock
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
78 Sinclair Broadcast Group
78 • Sinclair Broadcast Group
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016
(In thousands)
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS (USED IN) FROM
INVESTING ACTIVITIES:
Acquisition of property and equipment
Acquisition of businesses, net of cash
acquired
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 (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
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
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
$
(11,784) $
(150,230) $
721,991
$
7,914
$
23,875
$
591,766
—
—
—
—
(8,006)
(82,450)
(5,009)
1,000
(94,465)
—
—
—
(415,482)
(10,375)
—
7,263
(27)
3,985
(40,206)
9,133
(32,655)
5,072
—
—
—
—
—
(425,857)
(40,206)
16,396
(51,247)
(10,624)
(2,945)
1,714
(15,620)
(21,395)
(1,231)
(45,021)
(486,711)
(74,040)
1,000
(606,003)
—
—
(65,909)
(136,283)
—
—
218,054
(2,847)
995,000
—
29,912
(650,422)
(1,633)
(19,160)
—
—
(15,430)
—
(17,778)
407
—
—
—
—
(224,551)
1,344
—
—
(251)
(10,464)
49,403
(268)
—
—
—
—
—
—
(25,128 )
253
1,024,912
(671,215)
(65,909)
(136,283)
(15,681)
(10,464)
—
(1,111)
13,015
311,777
(224,840)
49,172
(24,875 )
124,249
—
—
116,526
10,440
(16,954)
115,771
235
33,966
—
—
110,012
149,972
$
—
$
232,297
$
10,675
$
17,012
$
—
$
259,984
2017 Annual Report 79
2017 Annual Report • 79
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2015
(In thousands)
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
$
(3,759) $
(131,363) $
530,768
$
(16,864) $
24,145
$
402,927
—
—
—
—
(6,605)
(84,079)
(2,586)
1,849
—
—
—
(17,011)
—
23,650
(27)
575
—
(39,185)
—
(35,690)
17,645
—
—
—
—
—
—
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)
—
—
(3,604)
—
—
—
—
—
—
—
(243)
(9,918)
—
—
—
—
—
—
303,755
(452,897)
85,953
(2,232)
(1,207)
(368)
(26,130)
136
(62,733 )
(28,823 )
—
—
89,319
1,926
(839 )
264,790
(455,390)
98,107
(25,994)
(119,326)
—
—
112,377
(1,514)
21,427
3,394
1,749
12,539
—
—
132,290
17,682
$
—
$
115,771
$
235
$
33,966
$
—
$
149,972
(91,421)
(17,011)
(39,185)
23,650
(44,715)
17,371
382,887
(395,147)
(62,733)
(28,823)
(3,847)
(9,918)
—
(1,745)
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS (USED IN) FROM
INVESTING ACTIVITIES:
Acquisition of property and equipment
Acquisition of businesses, net of cash
acquired
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 (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
Dividends paid on Class A and Class B
Common Stock
Repurchases 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
80 Sinclair Broadcast Group
80 • Sinclair Broadcast Group
QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
(In thousands, except per share data)
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
3/31/2017
6/30/2017
9/30/2017
$
$
$
$
$
$
649,935 $
157,629 $
70,703 $
57,202 $
0.62 $
0.61 $
679,290 $
118,849 $
46,035 $
44,645 $
0.43 $
0.43 $
670,891 $
103,447 $
32,566 $
30,637 $
0.30 $
0.30 $
12/31/2017
734,002
357,581
444,800
443,529
4.36
4.32
(a) During the three months ended December 31, 2017, we recognized a gain of $225.3 million for vacating spectrum in certain
markets as discussed in Broadcast Spectrum Auction under Note 2. Acquisitions and Dispositions of Assets; and a non-recurring benefit
of $272.1 million to reflect the estimated effect of the Tax Reform as discussed in Note 9. Income Taxes.
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
3/31/2016
578,889 $
86,339 $
25,629 $
24,140 $
0.25 $
0.25 $
$
$
$
$
$
$
6/30/2016
666,534 $
129,074 $
50,600 $
49,419 $
0.52 $
0.52 $
9/30/2016
693,835 $
153,994 $
52,033 $
50,845 $
0.54 $
0.54 $
12/31/2016
797,691
233,446
122,500
120,897
1.34
1.32
2017 Annual Report 81
2017 Annual Report • 81
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Sinclair Broadcast Group, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Sinclair Broadcast Group, Inc. and its subsidiaries as of
December 31, 2017 and 2016, and the related consolidated statements of operations, of comprehensive income, of equity (deficit),
and of cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively
referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting
as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2017 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, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated 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 on page 32 of the 2017 Annual Report to
Shareholders. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. 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.
As described in the Report of Management on Internal Control over Financial Reporting, management has excluded Bonten Media
Group Holdings, Inc. from its assessment of internal control over financial reporting as of December 31, 2017 because it was
acquired by the Company in a purchase business combination during 2017. We have also excluded Bonten Media Group Holdings,
Inc. from our audit of internal control over financial reporting. Bonten Media Group Holdings, Inc. is a wholly-owned subsidiary
whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial
reporting represent 3% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended
December 31, 2017.
82 • Sinclair Broadcast Group
82 Sinclair Broadcast Group
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Baltimore, Maryland
March 1, 2018
We have served as the Company’s auditor since 2009.
2017 Annual Report 83
2017 Annual Report • 83
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.
GROUP MANAGERS
Kent Crawford
Ann H. Ellis
William J. Fanshawe
Alan B. Frank
Daniel J. Hoffman
GENERAL MANAGERS/STATION MANAGERS
James C. Killen
Jonathan P. Lawhead
Daniel P. Mellon
John T. Seabers
Allison Aldridge – Greensboro/Winston Salem, North Carolina
Pat Baldwin – Tulsa, Oklahoma
William Ballard – Myrtle Beach/Florence, South Carolina
James Baronet – Wichita/Hutchinson, Kansas
Vincent Barresi – Lincoln, Nebraska
Robert Berry – Yakima/Pasco/Richland/Kennewick, Washington
Matthew Bowman – New Bern/Greensboro/Jacksonville, 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 –Albany, California
Fred Corbus – Grand Rapids, Michigan
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
Bill Fanshawe – Baltimore, MD
Joseph Fishleigh – Ashville/Greenville, South Carolina
Charity Freeman – Toledo, Ohio
Deb Gay – Albany, Georgia
James Grilli – Dayton, Ohio
Linda Guerrero Deicla – Harlingen/Weslaco/Brownsville/
McAllen, Texas
Todd Harrison – Traverse City/Cadillac, Michigan
Paula Hayward – Beaumont, Texas
Charles Henrich Jr – Sioux City, Iowa
John Hummel – Raleigh/Durham, North Carolina
Tom Humpage – Portland, Maine
Tom Hurley – Corpus Christi, Texas
JR Jackson – Eugene, Oregon
Matthew Kaplowitz – El Paso, Texas
George Kayes – Roanoke/Lynchburg, Virginia
Kingsley Kelley – Medford, Oregon
Carol Kellum – Ottumwa, Iowa/Kirksville, Missouri
William Lanesey – Oklahoma City, Oklahoma
TENNIS VICE PRESIDENTS
Allison Bodenmann – Senior Vice President, Ad Sales
Steven Badeau – Senior Vice President, Research
David Egdes – Senior Vice President, Industry Relations
Dianne Grant – Senior Vice President, Human Resources
Brian Klein – Vice President, Finance and Controller
Thomas Kymn – Vice President, Information Technology
Eric Land – Birmingham, Alabama
Jim Lapiana – Pittsburgh, Pennsylvania
Jonathan Lawhead - Cincinnati, Ohio
Karen Lincoln – Macon, Georgia
Rick Lipps – Champaign/Springfield/Decatur, Illinois
Tom Long – Boise, Idaho
Jay C. Lowe – Mobile, Alabama/Pensacola, Florida
Nick Magnini – Buffalo, New York
Jeff McCallister – Norfolk, Virginia
Tim McCoy – Wheeling, West Virginia/Steubenville, Ohio
Dan Mellon – Arlington, Virginia/Washington, DC
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
Jennifer Rieffer – Lexington, Kentucky
Mark Rose – Little Rock/Pine Bluff, Arkansas
Chuck Samuels – Rochester, New York
Shane Schwirian – Charleston/Huntington, West Virginia
John Seabers – San Antonio, Texas
Andrew Stewart – Chico-Redding, California
Daniel Stellmon – Spokane, Washington
Larry Stumwasser – Las Vegas, Nevada
John Tamerlano – Portland, Oregon
Guyanne Taylor – Amarillo, Texas
Thomas Tipton – St. Louis, Missouri-Cape Girardeau, Missouri/
Paducah, Kentucky
Bobby Totsch – Mobile, Alabama/Pensacola, Florida
Robert Truman – Portland, Oregon
Victor Vetters – Providence, Rhode Island/ New Bedford,
Massachusetts
Amy Villarreal – Austin, Texas
Tamy Wagner – Missoula, Butte-Bozeman, Montana
Tim Walsh – Savannah, Georgia
Steven Rohrer – Des Moines/Ames, Iowa
Elizabeth Worsham – Columbia/Jefferson City, Missouri
Jay Zollar – Green Bay/Appleton, Wisconsin
Douglas Martz – Senior Vice President, Ad Sales and Integrated
Partnerships
Deirdre O’Grady – Vice President, Planning and Operations
Peter Steckelman – Senior Vice President, Business & Legal
Adam Ware – Senior Vice President, Head of Digital Media and
Business Development
Robert Whyley – Senior Vice President, Production
TECHNICAL & NON-MEDIA
W. Gary Dorsch
President, Keyser Capital LLC
William H. Kinnear, Jr.
Vice President, Keyser Capital LLC
Jerald N. Fritz
Executive Vice President, Strategic
& Legal Aff airs, ONE Media LLC
Kevin D. Gage
Executive Vice President, Chief Technology
Offi cer, ONE Media LLC
Andrew H. Whiteside
President, Dielectric LLC and
General Manager, Acrodyne Technical
Services LLC
Keith L. Pelletier
Vice President & General Manager,
Dielectric LLC
Jay S. Martin
Vice President, Sales, Dielectric LLC
John L. Schadler
Vice President, Engineering, Dielectric LLC
Stephen R. Altshuler
President, Triangle Sign & Service LLC
Robert M. Kaye
Executive Vice President, Triangle Sign &
Service LLC
Robert W. Mount
Vice President, Triangle Sign & Service LLC
BROADCAST
Steven M. Marks
Executive Vice President,
Chief Operating Offi cer,
Sinclair Television Group
Steven J. Pruett
Executive Vice President,
Chief TV Development Officer
I. Scott Livingston
Senior Vice President, News
CONTENT
Arthur Hasson
Chief Operating Offi cer,
Sinclair Programming
Joseph A. Koff ,
Vice President, Chief Operating Offi cer, Ring
of Honor Wrestling Entertainment, LLC
DIGITAL
Robert D. Weisbord
Senior Vice President,
Chief Revenue Offi cer
Delbert R. Parks III
Senior Vice President, Chief Technology Offi cer
Robert D. Weisbord
Senior Vice President, Chief Revenue Offi cer
Kevin J. Cotlove
Vice President,
Digital Operations & Content,
Sinclair Digital
Benjamin A. Miller
Vice President,
Product Development,
Sinclair Digital
J. Ryan Moore
Vice President, Digital Sales, Sinclair
Digital
NETWORKS
Todd Siegel
Vice President, Sales
Kenneth A. Solomon
President, Tennis Channel Inc.
William S. Simon
Executive Vice President, Chief Operating
Offi cer & Chief Financial Offi cer,
Tennis Channel Inc.
Mark A. Aitken
Vice President,
Advanced Technology
Harvey Arnold
Vice President, Engineering
Tammy L. Dupuy
Vice President, Programming
Dana R. Feldman
Vice President, Promotions
David G. Howitt
Vice President, Programming
Joseph A. Koff
Vice President, Training & Development
J. Michael Kralec
Vice President, Data Systems & Information
Technology Services
Jerry D. Lilly
Vice President, Operations
David F. Schwartz
Vice President, Sales Operations
Gregg L. Siegel
Vice President, National Sales
Jonathan D. Spaet
Vice President, Networks Sales & Development
OFFICERS
David D. Smith
Executive Chairman
Frederick G. Smith
Vice President
J. Duncan Smith
Vice President
David B. Amy
Vice Chairman
Christopher S. Ripley
President & Chief Executive Offi cer
Barry M. Faber
Executive Vice President,
General Counsel, Distribution &
Network Relations
Lucy A. Rutishauser
Senior Vice President,
Chief Financial Offi cer
Letter to our Shareholders
Sinclair Broadcast Group, Inc.
Th e media landscape continues to evolve, and we are in the early days of charting a new course in this exciting and complex environment. We at Sinclair
embrace the technological changes that confront our industry, both envisioning and preparing for this bright future. Our pending acquisition of
Tribune Media Company and the commercialization of ATSC 3.0 provide us with new, competitive technology and distribution platforms, expanded
content off erings, and advanced marketing services that will enable us to compete and grow in this ever-changing ecosystem. As the industry leader,
we believe 2018 will be a transformational year, and you should expect us to reach further and embrace our assets, talents, and entrepreneurial spirit to
drive our industry and create value.
Th e past several years have witnessed increased competition from Internet giants entering the media space and from mega-mergers among cable,
satellite and telecom companies. Gone are the days where media was synonymous with only broadcast or cable. Today, people speak in an array of
acronyms that denote how they receive and consume video: OTT, SVOD, AVOD, vMVPD, DTC, to name but a few. Meanwhile, technology is
advancing at an exponential rate, making it easier to distribute data and content on multiple platforms. As barriers to entry dissolve, multitudes of
startups are emerging with content off erings, individualized content is fi nding an audience on social media, and online companies such as Google,
Amazon and Facebook have entered the space as they look for ways to deploy their large cash balances. All the while, broadcast television continued
to be restricted by antiquated regulatory rules premised on consumer video distribution more than a half century ago. But in 2017, the new leadership
of the Federal Communications Commission (FCC) launched a comprehensive modernization of the ownership rules aft er decades of industry-wide
eff orts to convince the FCC that ownership reform was essential to the future of broadcasting. We recognize that broadcast television is predominantly
a local business, but if we are to survive, it is imperative that we also expand our reach to enough local markets so that we can create a national footprint
from which to launch nationwide services and off erings as digital companies and networks do, but without changing our core commitment to serving
the local needs of our viewing communities. Based on these regulatory changes last year, we continued this quest, acquiring the Bonten Media Group
and its 14 TV stations. But our real transformational announcement was the pending purchase of the Tribune Media Company.
Tribune is important on many levels, allowing us to reach further. Its 42 stations in 33 markets bring our combined coverage of U.S. television households
to 72% before any required divestitures. And yet, even with this scale, our reach will still be less than that of many cable networks. But even with this
smaller footprint, we expect to aggregate and sell our local commercial ad inventory into the $50 billion network marketplace and tap those advertising
monies historically not available to broadcasters due to our limited reach.
In addition to network sales, Tribune’s WGN America cable network, along with Antenna TV and Th is TV digital networks, provide an array of
opportunities for us to off er unique content that can be monetized in multiple ways. Consider this: post Tribune, we will have eight networks, including
Tennis Channel, Comet, CHARGE!, Stadium and TBD, in which to control our path, and in some cases, launch our own direct-to-consumer off ering
that can be anchored by our most valuable asset – local news. While our strategy is not to create and produce scripted shows, which we get through
our network partners, we are interested in creating and owning non-scripted shows that are lower cost, can be streamed or syndicated, be subscription
or advertising-based, and even have merchandising and licensing opportunities. We have been very active on this front. In the past year, we launched
KidsClick, a 3-hour time block on many of our stations aimed at bringing the next generation back to broadcast and providing programmers and
advertisers an alternative platform to the long-held cable monopolies. We purchased Tennis.com and Tennis Magazine creating a multi-platform
strategy of television, print and Internet for all things tennis. And this year, we launched completely overhauled mobile and OTT apps for Tennis
Channel Plus, our subscription off ering for the country’s most passionate tennis fans. We purchased NewsON, a single app to watch live, local news
on mobile and OTT devices. Since then NewsON has grown to 15 affi liate partners reaching over 80% of the country. We transformed our American
Sports Network into a new digital network, Stadium, that brings together professional sports highlights and college games. Finally, we made minority
investments in fi rst-run programs such as Daily Mail that allow us to participate in the upside with minimal risk. Our goal with all our content is to
distribute low-cost, engaging content on multiple platforms with multiple revenue paths.
Local news continues to be the linchpin of the Company. Post Tribune and prior to any divestitures, we will produce almost 4,000 hours of local
news per week. Local news is some of our most watched and valuable content. Consumers crave information, especially when it comes to their local
communities. We have made signifi cant investments in news over the years – Full Measure with Sharyl Attkisson, Connect to Congress, Town Halls,
Circa, a national news desk, expanded newscasts, and distribution on social media, mobile and the web. Th is past year, in addition to our acquisition
of NewsON, we created a national investigative news unit consisting of more than 50 reporters, which we plan to grow to 100, to provide in-depth
stories not covered elsewhere. Our steadfast commitment to the news is refl ected in the more than 90 Regional Emmy Awards, 36 Regional Edward
R. Murrow Awards, including two “Overall Excellence” awards, 2 National Murrow Awards and 2 National Gracie Awards, and hundreds of other
awards received by our news operations.
BOARD OF DIRECTORS
David D. Smith
Chairman of the Board,
Executive Chairman
Frederick G. Smith
Vice President
J. Duncan Smith
Vice President, Secretary
Robert E. Smith
Director
Howard E. Friedman
Director
Daniel C. Keith
Director
Martin R. Leader
Director
Lawrence E. McCanna
Director
OFFICERS
David D. Smith
Executive Chairman
Frederick G. Smith
Vice President
J. Duncan Smith
Vice President
David B. Amy
Vice Chairman
Christopher S. Ripley
President & Chief Executive Offi cer
Barry M. Faber
Executive Vice President,
General Counsel, Distribution &
Network Relations
Lucy A. Rutishauser
Senior Vice President,
Chief Financial Offi cer
David R. Bochenek
Senior Vice President,
Chief Accounting Offi cer &
Corporate Controller
Doron Gorshein
Senior Vice President,
Government Relations
Rebecca J. Hanson
Senior Vice President,
Strategy & Policy
Donald H. Th ompson
Senior Vice President,
Human Resources
Justin L. Bray
Vice President, Treasurer
Jamie C. Dembeck
Vice President, Human Resources
David B. Gibber
Vice President, Deputy General Counsel
Paul E. Nesterovsky
Vice President, Tax
Lee H. Schlazer
Vice President, Distribution
Scott H. Shapiro
Vice President, Corporate Development
Th omas I. Waters, III
Vice President, Facilities & Property
ANNUAL MEETING
Th e Annual Meeting of stockholders will
be held at Sinclair Broadcast Group’s
corporate offi ces,
10706 Beaver Dam Road
Hunt Valley, MD 21030
Th ursday, June 7, 2018 at 10:00am.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers, LLP
100 East Pratt Street
Baltimore, MD 21202-1096
TRANSFER AGENT AND REGISTRAR
Questions regarding stock certifi cates,
change of address, or other stock transfer
account matters may be directed to:
American Stock Transfer & Trust
Company, LLC
Operations Center
6201 15th Ave.
Brooklyn, NY 11219
Toll Free: 1-800-937-5449
Email: info@amstock.com
Website: www.amstock.com
FORM 10-K, ANNUAL REPORT
A copy of the Company’s 2017 Form 10-K,
as fi led with the Securities and Exchange
Commission, is available, at no charge, on
the Company’s website www.sbgi.net or
upon written request to:
Justin L. Bray
VP, Treasurer
Sinclair Broadcast Group, Inc.
10706 Beaver Dam Road
Hunt Valley, MD 21030
410-568-1500
COMMON STOCK
Th e Company’s Class A Common Stock
trades on the Nasdaq Global Select Market
tier of the NasdaqSM Stock Market under
the symbol SBGI.