T H I N KI N G
O U T S I DE
T H E
BOX
2 0 1 8 A N N U A L R E P O R T
Letter to our Shareholders
Dear Fellow Shareholders,
As I write this letter, I have never been more optimistic about the strength and future of our company. Over the past year, we have continued to demonstrate our
place at the forefront of the industry as we identify new avenues for growth and revenue, and defy expectations of what a broadcaster can do. Th e results speak
for themselves, and I am happy to report that we currently have what we believe to be the strongest balance sheet in our company’s history. With approximately
half of our revenue now coming from subscription-based services and a dedicated distribution staff , we are well poised to continue building on this upward
trend, providing visibility and consistency in our results going forward. Th e fundamentals of our company are more than just fi nancially strong, they also
represent the culmination of years of thinking outside the box that has strategically positioned Sinclair Broadcast Group to capitalize on the ever-changing
trends in our industry.
Th inking Outside the Box
Since our founding in 1971, Sinclair has been defi ned by our commitment to expanding access to broadcast television and quality programming. Th is has been
our guiding principle throughout. With a focus on connecting people with content everywhere and reaching further than what is expected of our industry, we
have proven ourselves to be the forgers of television’s future path. Th inking outside the box might sound like a clichéd mantra, but the brilliant minds on our
team have breathed new life into its meaning. We have met the challenges our industry faces head-on, oft en taking a leadership role and establishing new best
practices that become the industry norm. As we think about our company in the context of a rapidly changing industry, it becomes clear that our commitment
to innovation has always been our key diff erentiator.
A Year of Growth for Sinclair
Over the past twelve months, we have further distinguished ourselves from our competition and have become a technological leader among broadcasters and
sought-aft er partners. Th is virtue has been recognized by prime global leaders such as South Korea’s SK Telecom, arguably one of the world’s leading tech-
forward mobile companies, and Samsung’s Harman International Industries. We are also now in a joint venture with one of the most visible, iconic sports
franchises in the world, the Chicago Cubs. By aligning the Sinclair name with these partners, mainstays in their respective industries, we are positioning Sinclair
alongside peers outside of the broadcast industry box. Th ere is no doubt these partnerships make for an incredibly bright future for all involved.
Even in the face of growing digital competition and ad-free premium services, broadcasters remain an equally important brand-building tool. Th e 2018
U.S. midterm elections should put to rest questions about television’s future and its everlasting power in American society. Th e elections also allowed us to
showcase a perfect example of the cash fl ow generation capability of our business, where signifi cant dollars from political advertising that fl owed into our
stations ultimately fl owed to our bottom line, spurring our November announcement of an 11% increase to our regular quarterly dividend. Every other year,
the political category swells and, with it, our cash fl ow generation. With Presidential campaigning for the 2020 elections already underway, we expect an even
more signifi cant boost in cash fl ow in the coming election year.
We were very disappointed in the termination of the planned Tribune Media Company merger and continue to maintain that we were completely candid,
transparent and honest with the FCC during its review of our proposed acquisition of Tribune. We nonetheless remained focused on creating shareholder value
and, subsequently and through February 2019, deployed $326 million to repurchase 11% of our total shares outstanding.
As we continue to charge ahead into the future of broadcast, Sinclair’s commitment to out-of-the-box thinking will further diversify the company and redefi ne
expectations for what is possible in the industry.
Survey of the Broadcast Landscape
For years, outdated and onerous regulations stifl ed the broadcast industry, slowing innovation and growth at a time when new players like Facebook and
Google entered the fray. Th e Federal Communications Commission (FCC) made reforming these rules a focus of 2018, and it started to provide much needed
relief for the industry. From a regulatory standpoint, our industry achieved some certainty and can begin to commit to longer-term planning. For instance, the
FCC’s ultra-high frequency (UHF) discount, which was reinstated in 2017, survived a challenge in the U.S. Court of Appeals for the District of Columbia. Th e
FCC also completed its modernization of several ownership rules aft er decades of industry-wide eff orts to convince them that reform was essential to the future
of broadcasting. Finally, aft er many years of our active role in technology reform, the FCC made eff ective the adoption of ATSC 3.0, a new and transformative
television broadcast transmission standard.
While concerns around multichannel video programming distributors (MVPDs) and the traditional cable bundle persist, our industry is in a prime position
to reestablish our value proposition. Broadcasters continue to have room for substantial growth in retransmission consent fees because our industry remains
undercompensated by distributors compared to other programmers, especially considering the audiences we attract. Additionally, the emergence of over-the-
top (OTT) virtual MVPDs that need broadcast content to establish their subscriber base has opened new monetization paths for us and eliminated most of
the impact of “cord cutting” by traditional MVPD subscribers.
Shift s in consumer habits show no signs of slowing. Th is past year we saw consumers continue to pivot away from traditional viewing habits stationed on a single
television set, toward more fl exible streaming consumption on portable devices and with an on-demand preference. While this may seem problematic on the
surface, we believe our industry with its mass audiences demanding our “must have” programming, evolving technology and prime content, is poised to benefi t
from the shift s. Such a benefi t can be seen, for example, in the amount of “cord shaving,” rather than cord cutting, which MVPD subscribers are doing. Cord
shaving eliminates certain cable channels from the packages they pay for, but does not aff ect broadcast stations’ presence in their lineups.
Additionally, recent publicly-available data from Nielsen shows that over-the-air (OTA) TV homes continue to grow, now representing 14 percent of all U.S.
TV homes. In fact, the number of OTA homes is up nearly 50 percent over the last eight years. What we are learning is that while people continue to opt for
OTT services, they still have a desire to have access to live, linear television. While we do lose subscription revenue from homes that completely cut the cord,
unlike cable channels, we benefi t from such homes through advertising sales. OTA homes continue to depend on local broadcasters for various content, and as
a result generally watch more broadcast television than MVPD subscribers due to having fewer choices, making them a lucrative audience. Such over-indexing
is particularly noticeable for our OTA broadcast emerging networks. As more OTT services come online and ATSC 3.0 is launched, we expect the value of
broadcast television to grow signifi cantly. Not only are we prepared to capitalize on strong OTA viewers, but we are positioning ourselves as leading partners in
the OTT space for both consumers and advertisers.
It’s the Content
While we’ve celebrated our achievements, we have not allowed ourselves to become complacent. Th e same drive that made us one of the nation’s leading
broadcasters is also powering the next chapter of our Company’s legacy. Reaching far outside the broadcast box, we have made investments and changes that
we expect will solidify our bottom line for years to come. As consumer habits change, so too has our company, and we have set a new standard for what a 21st
century broadcaster should look like. From what our audiences watch, where they watch, and how they watch, the future of Sinclair has never been brighter.
Our mission to connect people with content everywhere is now a reality.
We continue to see dominance in local news and sports. Th e incredible work carried out by our talented journalists across the country remains our most
valuable asset. Our 2,500 hours per week of news content in 2018 resulted in winning almost 350 awards, making us one of the most honored broadcasters
in the country. Our local content and credibility remains unmatched. To further enrich our content, we invested more resources into investigative reporting,
expanding our team of journalists. We have also used our platform to engage audiences on important topics of the day, including a focus on the nation’s opioid
crisis. Our news storytelling has further been enhanced with our extensive drone images that are adding perspective and unique visualizations.
When it comes to sports, we continue to provide outstanding, industry-leading content. From local high school sports to Stadium and Tennis Channel, our
activities and brands continue to distinguish us. One of the biggest sports media stories of 2019 to date has been our partnership with the Chicago Cubs
to launch Marquee Sports Network in 2020, a Chicago-area regional sports network. Th is content, however, is only as important as our ability to broadly
disseminate it in a method that makes sense to the modern audience, and 2018 has seen Sinclair venture further outside-the-box than ever before.
Outside the Broadcast Box
We recognized long ago that viewing habits were changing, and even though more and more people cut their cable cords, there remains a growing appetite
for live, local, linear content alongside subscription-based services like Netfl ix and Hulu. Th e recent launch of our free, ad-supported OTT service, STIRR,
addresses this demand and is off to a positive start. STIRR off ers a robust library of national news, sports, entertainment, and digital-fi rst channels, including a
variety of video on demand (VoD) content. As part of our commitment to being forward-thinking, we developed a fi rst-of-its-kind local channel that integrates
STIRR with a viewer’s location, creating a highly targeted way to present local content, particularly local news. Meanwhile, CompulseOTT, launched in 2018,
allows our marketing teams to sell into the fast-growing connected TV universe. Th e combination of content and targeted sales gives our customer base a
unique set of marketing platforms to reach the audiences most likely to respond to their message.
Bringing Advertisers Along for the Ride
Th ese technological advances have completely changed how and what we sell to our advertisers. We now off er a one-stop shop for advertisers and will continue
to integrate technology to ensure that we make it easy to transact with us and for consumers to fi nd us. Th rough our local television stations, national and
network sales teams, and digital agencies of Compulse and Datasphere, we serve advertiser messages on a variety of platforms including OTA, OTT, smart TVs,
MVPDs, and digital properties. By focusing on multiple platforms, we are able to maximize distribution, while competing for advertising dollars with MVPDs
and online platforms. Advertisers now have access to category specialists, integrated campaigns and full, 360-degree marketing services, not just simple spot ads.
Furthermore, ATSC 3.0 will enable advertisers partnering with us to address their target audience on personal devices.
Next Generation
In 2018, the FCC’s approval of ATSC 3.0, the Next Generation broadcasting standard, became eff ective, and without the work of our Company, this technology
would still be hypothetical, not something currently being deployed. For many years, Sinclair’s leaders have been recognized time and again by industry peers for
their work on 3.0, the highest and best use of our spectrum that can be ultimately integrated with 5G. Th anks to our leadership, the industry, including some of
the biggest names in broadcast, has coalesced around the standard and supported our 3.0 deployment eff orts. In 2019, we are actively engaged in deploying 3.0
in 20 to 30 of our markets and look forward to working with our programming and distribution partners to make this deployment a reality.
We kicked off 2018 with hiring a president for Spectrum Co, a consortium between Sinclair, Nexstar, and other broadcasters that will lead 3.0 eff orts moving
forward. We also launched strategic technical partnerships, including a joint venture with SK Telecom, which will allow us to collaborate on convergence of
OTT, 5G and OTA technologies to support hybrid business solutions. Th rough our memorandum of understanding with Harman and SK Telecom, we are
focused on co-developing an advanced automotive platform based on 3.0 for various in-vehicle infotainment and soft ware services.
Similarly, our investment in and partnership with India-based Saankhya Labs has accomplished two important goals. First, it completed the design and
development of the fi rst ATSC 3.0 mobile chipset that supports the mainstream global TV standards. Th e compact design and low power operation make it
a perfect receiving device for mobile and portable applications. Samsung Foundry will begin producing the chip in volume in 2019. Second, our partnership
with Saankhya has helped make inroads to seed interest in Next Gen TV in India. Th e promise of this technology in India cannot be overstated—this will
greatly enhance connectivity in a country where roughly 25% of persons have internet access, opening a massive new market for Sinclair, which is more than
three times larger than the U.S. market.
Meanwhile, Dielectric, our antenna and radio-frequency transmission solutions company, is currently immersed in handling most of the industry’s spectrum
repack needs with 3.0-ready equipment.
Looking Ahead
Th e evolving media landscape will continue to test us, but Sinclair has a legacy of transforming challenges into opportunities. Our entrepreneurial spirit remains
undeterred by the industry and will be our greatest asset as we explore uncharted territory alongside innovative tech companies. As we further scale projects
to combat continued fragmentation in the sector, Sinclair’s activity in adjacencies across cable, digital and RSNs puts us in a unique position to defi ne best
practices for the industry. With the 2020 U.S. elections on the horizon, Sinclair expects to continue to capitalize on political advertisers that choose television
as a preferred medium to reach large swaths of voters. Beyond politics, we expect television to emerge this year with increased branding power across multiple
platforms. We have the history and proven track record of success, but most importantly we have a vision and the creative thinkers and technical ability to
execute on it. 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 Disclosure About Market Risk
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Controls and Procedures
Consolidated Balance Sheet
Consolidated Statement of Operations
Consolidated Statement of Comprehensive Income
Consolidated Statement of Equity
Consolidated Statement of Cash Flow
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2
6
8
11
27
28
30
32
33
34
35
38
39
82
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Television Markets and Stations
As of December 31, 2018, we own and operate or provide programming and/or sales and other shared services to television
stations in the following 89 markets:
Market
Rank
(a)
6
13
15
21
22
24
25
26
27
30
31
34
35
36
37
38
39
40
41
43
44
45
46
49
52
53
54
56
57
58
59
61
62
63
64
65
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
Las Vegas, NV
Austin, TX
Harrisburg / Lancaster / Lebanon /
York, PA
Birmingham / Tuscaloosa, AL
Norfolk, VA
Oklahoma City, OK
Greensboro / High Point / Winston
Salem, NC
Grand Rapids / Kalamazoo, MI
Buffalo, NY
Providence, RI / New Bedford, MA
Fresno / Visalia, CA
Richmond, VA
Little Rock / Pine Bluff, AR
Mobile, AL / Pensacola, FL
Albany, NY
Tulsa, OK
Wilkes Barre / Scranton, PA
Lexington, KY
Dayton, OH
Flint / Saginaw / Bay City, MI
(cid:21)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
Number
of
Channels
4
6
4
4
10
7
7
8
9
Stations
WJLA
KOMO, KUNS
WUCW
KDNL
KATU, KUNP, KUNP-LD
WPGH, WPNT
WLFL, WRDC
WBFF, WNUV(c), WUTB(d)
WZTV, WNAB(d), WUXP
KUTV, KMYU, KJZZ,
KENV(d)
KABB, WOAI, KMYS(d)
WSYX, WTTE(c), WWHO(d)
WKRC, WSTR(d)
WVTV
WPEC, WTVX, WTCN-CA,
WWHB-CA
WLOS, WMYA(c)
KSNV, KVCW
KEYE
WHP
WBMA-LD, WDBB(c), WTTO,
WABM
WTVZ
KOKH, KOCB
WXLV, WMYV
WWMT
WUTV, WNYO
WJAR
KMPH, KMPH-CD, KFRE
WRLH
KATV
WEAR, WPMI(d), WFGX,
WJTC(d)
WRGB, WCWN
KTUL
WOLF(c), WSWB(d), WQMY(c)
WDKY
WKEF, WRGT(d)
WSMH, WEYI(d), WBSF(d)
Network
Affiliation (b)
ABC
ABC
CW
ABC
ABC
FOX, MNT
CW, MNT
FOX, CW, MNT
FOX, CW, MNT
CBS, MNT, IND
FOX, NBC, CW
ABC, FOX, CW, MNT
CBS, CW, MNT
CW, MNT
CBS, CW, MNT
ABC, MNT
NBC, CW, MNT
CBS
CBS, CW, MNT
ABC, CW, MNT
MNT
FOX, CW
ABC, MNT
CBS, CW
FOX, MNT
NBC
FOX, CW
FOX, MNT
ABC
ABC, NBC, MNT, IND
CBS, CW
ABC
FOX, CW, MNT
FOX
ABC, FOX, MNT
FOX, NBC, CW
9
8
9
7
3
12
8
8
2
3
14
4
6
7
3
7
4
12
4
4
11
7
4
10
4
8
10
Market
Green Bay / Appleton, WI
Roanoke / Lynchburg, VA
Omaha, NE
Charleston / Huntington, WV
Toledo, OH
Columbia, SC
Des Moines, IA
Wichita / Hutchinson, KS
Spokane, WA
Harlingen / Weslaco / Brownsville /
McAllen, TX
Rochester, NY
Syracuse, NY
Champaign / Springfield /
Decatur, IL
Chattanooga, TN
Portland, ME
El Paso, TX
Madison, WI
Cedar Rapids, IA
Paducah, KY/ Cape Girardeau, MO
Savannah, GA
Charleston, SC
Myrtle Beach / Florence, SC
South Bend-Elkhart, IN
Boise, ID
Tri-Cities, TN-VA
Johnstown / Altoona, PA
Greenville / New Bern /
Washington, NC
Reno, NV
Lincoln and Hasting-Kearney, NE
Tallahassee, FL
Peoria / Bloomington, IL
Macon, GA
Yakima / Pasco / Richland /
Kennewick, WA
Traverse City / Cadillac, MI
Bakersfield, CA
Eugene, OR
Corpus Christi, TX
Amarillo, TX
Market
Rank
(a)
67
68
69
70
71
74
75
76
77
78
80
81
82
83
84
85
86
87
88
93
94
95
99
100
102
106
107
109
111
112
113
118
119
120
122
123
128
131
(cid:3)
(cid:3)
(cid:3)
Number
of
Channels
7
4
7
7
4
4
4
Stations
WLUK, WCWF
WSET
KPTM, KXVO(c)
WCHS, WVAH(d)
WNWO
WACH
KDSM
KSAS, KOCW, KAAS, KAAS-LP,
KSAS-LP, KMTW(c)
KLEW
KGBT
WHAM(d), WUHF
WTVH(d), WSTM, WSTQ-LP
WICS, WICD, WCCU(d), WRSP(d),
WBUI(d)
WTVC, WFLI(d)
WGME, WPFO(d)
KDBC, KFOX
WMSN
KGAN, KFXA(d)
KBSI, WDKA
WTGS
WCIV
WPDE, WWMB(c)
WSBT
KBOI, KYUU-LD
WEMT(d), WCYB
WJAC
Network
Affiliation (b)
FOX, CW
ABC
FOX, CW, MNT
ABC, FOX
NBC
FOX
FOX
FOX, MNT
CBS
CBS
ABC, FOX, CW
CBS, NBC, CW
ABC, FOX, CW
ABC, FOX, CW, MNT
CBS, FOX
CBS, FOX, MNT
FOX
CBS, FOX
FOX, MNT
FOX
ABC, MNT
ABC, CW
CBS, FOX
CBS, CW Plus
FOX, NBC, CW
NBC
WCTI, WYDO(d)
ABC, FOX
KRXI, KRNV(d), KAME(c)
KHGI, KHGI-LD, KWNB, KHGI-
CD, KWNB-LD, KFXL
WTWC, WTLF(d)
WHOI
WGXA
KIMA, KEPR, KUNW-CD,
KVVK-CD, KORX-CD
WGTU(d), WGTQ(d), WPBN,
WTOM,
KBAK, KBFX-CD
KVAL, KCBY, KPIC(e), KMTR(d),
KMCB(d), KTCW(d)
KSCC, KTOV-LP, KXPX-LP
KVII, KVIH
FOX, NBC, MNT
ABC, FOX
NBC, FOX, CW Plus
Comet
ABC, FOX
CBS, CW Plus
ABC, NBC
CBS, FOX
CBS, NBC, CW Plus
FOX, MNT
ABC, CW Plus
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:22)(cid:3)
18
3
3
7
7
17
7
6
7
4
7
7
4
3
7
2
7
7
4
8
9
11
7
1
3
18
11
7
18
3
8
(cid:3)
(cid:3)
Market
Chico-Redding, CA
Medford, OR
Columbia / Jefferson City, MO
Beaumont / Port Arthur / Orange,
TX
Sioux City, IA
Albany, GA
Gainesville, FL
Wheeling, WV / Steubenville, OH
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
132
135
136
140
149
152
157
162
164
165
174
185
195
196
200
13
4
4
7
15
4
8
3
6
4
3
3
10
3
3
605
Stations
KRCR, KCVU(d), KRVU-LD,
KUCO-LP, KKTF-LD
KTVL
KRCG
Network
Affiliation (b)
ABC, FOX, MNT
CBS, CW Plus
CBS
KFDM, KBTV(d)
CBS, FOX, CW Plus
KMEG(d), KPTH, KBVK-LP,
KPTP-LD
WFXL
WGFL(c),WNBW(d),
WYME-CD(c)
WTOV
KECI, KCFW
KTXS, KTES-LD
KHQA
KTVM
KAEF, KBVU(d), KECA-LD,
KEUV-LP
KTXE-LD
KTVO
CBS, FOX, MNT
FOX
CBS, NBC, MNT
NBC, FOX
NBC
ABC, CW Plus
ABC, CBS
NBC
ABC, FOX, CW, MNT
ABC, CW
ABC, CBS
(a)(cid:3) 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 2018.
(b)(cid:3) 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
39
24
240
Number of
Markets
30
25
36
43
32
17
Expiration Dates (1)
August 31, 2022
April 30, 2020 through December 31, 2021
August 31, 2019 through August 31, 2021
December 31, 2019 through December 31, 2020
August 31, 2019
December 31, 2021
(cid:23)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
Affiliation
Antenna TV
Azteca
Bounce Network
CHARGE!
Comet
Estrella TV
Get TV
Grit
Independent programming
Me TV
Movies!
Stadium
TBD
Telemundo
This TV
Unimas
Univision
Weather
Total Other Affiliates
Total Television Channels
Number of
Channels
Number of
Markets
20
2
1
57
75
1
5
1
2
15
6
48
65
1
4
1
5
4
22
3
1
65
90
1
5
1
2
18
7
53
75
1
5
1
9
6
365
605
Expiration Dates (1)
January 1, 2019 through January 1, 2021
February 28, 2018 through August 31, 2020
August 31, 2019
(2)
(2)
September 30, 2017
June 30, 2017
December 31, 2019
N/A
February 28, 2018 through August 31, 2021
November 1, 2019 through November 18, 2019
December 31, 2022
(2)
December 31, 2019
November 1, 2014 through December 31, 2015
December 31, 2019
December 31, 2019
December 31, 2017
(1)(cid:3) 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)(cid:3) An owned and operated network, which is carried on our multi-cast distribution platform.
(c)(cid:3) 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)(cid:3) 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)(cid:3) We provide programming, sales, operational, and administrative services to this station, of which 50% is owned by a third party.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:24)(cid:3)
(cid:3)
(cid:3)
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;
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consumer confidence;
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the potential impact of changes in tax law;
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the activities of our competitors;
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terrorist acts of violence or war and other geopolitical events;
• (cid:3) natural disasters that impact our advertisers and our stations; and
• (cid:3)
cybersecurity.
Industry risks
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the business conditions of our advertisers particularly in the political, automotive, and service categories;
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;
• (cid:3) our relationships with networks and their strategies to distribute their programming via means other than their local
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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), cross
ownership rules, 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 potential impact from elimination of rules prohibiting mergers of the four major television networks;
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;
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• (cid:3) Over-the-top (OTT) technologies and their potential impact on cord-cutting;
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the impact of MVPDs, virtual MVPDs (vMVPDs), and OTTs offering “skinny” programming bundles that may not
include television broadcast stations or other programming that we distribute; and
fluctuations in advertising rates and availability of inventory.
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Risks specific to us
the effectiveness of our management;
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• (cid:3) 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;
• (cid:3) our ability to service our debt obligations and operate our business under restrictions contained in our financing
agreements;
• (cid:3) 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;
• (cid:3) our ability to successfully renegotiate retransmission consent and affiliation fees (cable network fees) agreements;
• (cid:3) our ability to secure distribution of our programming to a wide audience;
• (cid:3) our ability to renew our FCC licenses;
• (cid:3) our limited ability to obtain FCC approval for any future acquisitions, as well as, in certain cases, customary antitrust
clearance for any future acquisitions;
• (cid:3) our exposure to any wrongdoing by those outside the Company, but which could affect our business or pending
acquisitions;
• (cid:3) our ability to identify media business investment opportunities and to successfully integrate any acquired businesses, as
well as the success of our new content and distribution initiatives in a competitive environment, including CHARGE!,
TBD, Comet, STIRR, Circa, other original programming, and mobile DTV;
• (cid:3) 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;
• (cid:3) our ability to effectively respond to technology affecting our industry and to increasing competition from other media
providers;
• (cid:3) our ability to deploy a nationwide of next generation broadcast platforms network (NextGen);
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the strength of ratings for our local news broadcasts including our news sharing arrangements; 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.
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SELECTED FINANCIAL DATA
The selected consolidated financial data for the years ended December 31, 2018, 2017, 2016, 2015, and 2014 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,
2018
2017
2016
2015
2014
Statements of Operations Data:
Media revenues (a), (b)
Non-media revenues
Total revenues
$ 2,918,727
$ 2,566,936
$ 2,520,676
$ 2,030,079
$ 1,799,187
136,354
3,055,081
69,279
2,636,215
101,834
2,622,510
95,853
2,125,932
69,655
1,868,842
Media production expenses (b)
1,191,016
1,064,144
Media selling, general and administrative expenses
Depreciation and amortization (c)
Amortization of program contract costs and net realizable
value adjustments
Non-media expenses
Corporate general and administrative expenses
(Gain) loss on asset dispositions and other, net of
impairment
Operating income
629,919
280,088
100,899
122,491
111,070
533,537
275,925
955,604
501,589
282,324
733,199
431,728
264,887
578,687
372,220
228,787
115,523
127,880
124,619
106,629
75,199
113,253
84,733
73,556
84,239
64,246
62,533
62,495
(40,063)
659,661
(278,872)
737,506
(6,029)
602,853
278
422,736
(37,160)
494,651
Interest expense and amortization of debt discount and
deferred financing costs
(291,976)
(212,315)
(211,143)
(191,447)
(174,862)
Loss from extinguishment of debt
—
(1,404)
(23,699)
(Loss) income from equity method investments
(60,831)
(14,307)
906
Other income, net
Income before income taxes
Income tax benefit (provision)
Net income
3,369
310,223
35,775
345,998
9,264
518,744
75,360
594,104
3,973
372,890
(122,128)
250,762
—
709
1,795
233,793
(57,694)
176,099
(14,553)
2,313
4,998
312,547
(97,432)
215,115
Net income attributable to noncontrolling interests
(4,757)
(18,091)
(5,461)
(4,575)
(2,836)
Net income attributable to Sinclair Broadcast Group
$
341,241
$
576,013
$
245,301
$
171,524
$
212,279
(cid:27)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
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Earnings Per Common Share Attributable to Sinclair
Broadcast Group:
Basic earnings per share
Diluted earnings per share
Dividends declared per share
Balance Sheet Data:
Cash and cash equivalents
Total assets
Total debt (d)
Total equity
$
$
3.38
3.35
$ 0.74
$
$
$
5.77 $
5.72 $
0.72 $
2.62 $
2.60 $
0.71 $
1.81 $
1.79 $
0.66 $
2.19
2.17
0.63
681,326 $
259,984 $
$ 1,060,330 $
17,682
$ 6,572,092 $ 6,784,470 $ 5,963,168 $ 5,432,315 $ 5,410,328
$ 3,892,455 $ 4,048,650 $ 4,203,848 $ 3,854,360 $ 3,886,872
405,343
$ 1,600,320 $ 1,534,366 $
149,972 $
557,936 $
499,678 $
(a)(cid:3) Media revenues include advertising revenue, distribution revenue, and other media related revenues.
(b)(cid:3) Depreciation and amortization includes depreciation and amortization of property and equipment and amortization of definite-
lived intangible assets and other assets.
(c)(cid:3) Total debt is defined as notes payable, capital leases, and commercial bank financing, including the current and long-term portions.
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(cid:3)
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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 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 2018, 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 2018, 2017, and 2016, including
comparisons between years and certain expectations for 2019; 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 and a strong focus on using our spectrum to bring together
content providers, advertisers, and consumers on various 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 owned 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.
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Summary of Significant Events and Financial Highlights from 2018
Television and Digital Content
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In January 2018, the Company entered into multi-year affiliation renewals with ABC that extend affiliations across all Sinclair
stations to 2022. Additionally, ABC renewed affiliations with certain third-parties that the Company provides sales and other
services to under a joint sales agreement
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 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 the Company provides sales and other services to under a joint sales agreement.
In June 2018, the FAA granted the Company permission to fly our newsgathering unmanned aircraft systems (UAS) beyond
daylight operations, a restriction which most UAS operators are subject.
In August 2018, the Company launched CompulseOTT, a new over-the-top advertising platform exclusively focused on OTT
advertising which will offer advertisers commercials in :15 and :30 second lengths on leading OTT distribution platforms such
as Roku, AppleTV, gaming consoles, SmartTV’s, and streaming sticks.
• (cid:3) Sinclair’s newsrooms, dedicated to impactful journalism with a local focus, won 338 awards in 2018, including two National
RTDNA Edward R. Murrow Awards at Circa and KOMO-TV awarded in May; 45 Regional RTDNA Edward R. Murrow
Awards by 21 newsrooms; and 84 Emmy's at 23 newsrooms.
• (cid:3) The Company produced and/or aired 93 debates during the 2018 election cycle, including hosting debates for US Senate,
House of Representatives, Gubernatorial, Mayor, County Executive, City and County Council, and Attorney General races.
• (cid:3)
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In January 2019, the Company launched STIRR, a free, ad-supported streaming service that will include access to some of the
most popular national news, sports, entertainment and digital first channels, a robust video on demand library and a new local
channel featuring programming based on a user's location, ensuring that viewers can still access the local news and lifestyle
programming that is relevant to their everyday life.
In January 2019, the Company and the licensees of stations to which the Company provides services, and NBC entered into
multi-year renewals of NBC affiliates in 13 markets, including KTVM and KDBZ in Butte/Bozeman MT, KMTR, KTCW and
KMCB in Eugene OR, WEYI in Flint/Saginaw/Bay City MI, WNBW in Gainesville FL, KECI and KCFW in Missoula MT,
WPMI in Mobile AL/Pensacola FL, WJAR in Providence RI, WOAI in San Antonio TX, WSTM in Syracuse NY, WTWC in
Tallahassee FL, WNWO in Toledo OH, WPBN and WTOM in Traverse City/Cadillac MI, and WCYB in Tri-Cities TN-VA.
In February 2019, the Company and the licensees of stations to which the Company provides services, and FOX Broadcasting
Company entered into amendments to multi-year renewals of the 26 FOX affiliations that were previously renewed as part of
the agreement entered in May 8, 2018, revising certain aspects of such agreements and waiving any termination rights the
parties may have had with respect to such agreements.
In February 2019, the Company and the Chicago Cubs (the Cubs) announced the formation of a joint venture that will own
and operate Marquee Sports Network (Marquee), a regional sports network (RSN) based in Chicago, Illinois. Marquee will be
the Chicago-region’s exclusive network for fans to view live Cubs games beginning with the 2020 Major League Baseball season
and will also feature exclusive Cubs content and other local sports programming. In addition to the execution of the joint
venture agreement, the Cubs simultaneously entered into a long-term rights agreement with Marquee.
Broadcast Distribution
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In January 2018, the Company entered into a multi-year retransmission renewal with Verizon Fios for the carriage of Sinclair
stations on its platforms.
In April 2018, the Company entered into a multi-year retransmission renewal with Cox for the carriage of Sinclair stations,
Tennis Channel, and Sinclair’s national networks on its platforms.
In August 2018, the Company entered into a multi-year retransmission renewal with Altice for the carriage of the Company's
stations, Tennis Channel, and the Company's national networks on its Optimum and Suddenlink owned systems.
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In October 2018, the Company entered a distribution agreement for its ABC, CBS, FOX and NBC affiliates to be re-launched
on Sony’s Playstation Vue where PlayStation Vue carries local channels, and announced that Playstation Vue will also be
launching Tennis Channel and the Company's 24-hour science fiction channel, Comet.
In December 2018, the Company and the DISH Network (DISH) entered into a multi-year agreement for the continued
carriage of the Company’s broadcast television stations and Tennis Channel on DISH's direct broadcast satellite platform and
additional carriage of one of Sinclair's emerging networks. The companies also agreed to carriage of Sinclair-owned networks,
including Tennis Channel, on DISH's Sling TV.
• (cid:3)
In January 2019, the Company entered into a multi-year retransmission renewal with Mediacom for the carriage of the
Company's stations, Tennis Channel, and the Company's emerging networks on its systems.
ATSC 3.0
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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, the Company 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, the Company, Nexstar, Univision and American Tower announced the first domestic deployment of the
NextGen TV standard and a single frequency network in Dallas, TX. The deployment will involve multiple stations, NextGen
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.
In April 2018, India based OTT/Cloud solutions company Gaian Solutions, the Company, and our subsidiary ONE Media 3.0,
LLC signed an MOU to work together to create a Next Generation Broadcast Platform to support the Company's ATSC 3.0
vision and plan to deploy a proof of concept.
In January, ONE Media 3.0, LLC, a subsidiary of the Company, and Saankhya Labs in collaboration with VeriSilicon and
Samsung Foundry announced the completed design and development of a mobile chip die that supports ATSC 3.0 and other
global standards. The compact design and low power operation make it a perfect receive device for mobile and portable
applications. Reference designs are underway that will be used with cell phones and tablet devices.
In January, the Company and SK Telecom announced a joint venture agreement to lead the next-generation, hybrid wireless
market in the U.S. and globally. The two companies will collaborate on technologies and services that will bring together
mobile-wireless, including 5G, and over-the-air wireless to support hybrid business solutions.
In January, the Company, SK Telecom and Harman signed a Memorandum of Understanding to jointly develop and
commercialize digital broadcasting network-based automotive electronics technology for global markets.
Financing and Shareholder Returns
• (cid:3) On September 6, 2016, the Board of Directors authorized a $150.0 million share repurchase authorization. On August 9, 2018,
the Board of Directors authorized an additional $1.0 billion share repurchase authorization. There is no expiration date and
currently, management has no plans to terminate this program. During 2018, we repurchased an additional 7.8 million shares
for $220.9 million. During 2019, we repurchased an additional 3.5 million shares for $105.0 million as of March 1, 2019.
• (cid:3) For the year ended December 31, 2018, we paid dividends of $0.74 per share, including an increase from $0.18 to $0.20 in the
fourth quarter of 2018. In February 2019, we declared a quarterly cash dividend of $0.20 per share.
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Other Legal and Regulatory
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In July 2018, the FCC released an HDO to commence a hearing before an ALJ with respect to the Company’s proposed
acquisition of Tribune. In August 2018, Sinclair received a termination notice of its Merger Agreement from Tribune. In
response, Sinclair withdrew with prejudice its FCC application to acquire Tribune and filed with the ALJ a notice of withdrawal
of the applications and motion to terminate the hearing. In September, the FCC's Enforcement Bureau notified the ALJ that it
did not oppose the termination of the hearing. The motion remains pending at the office of the ALJ. See Note 11. Commitments
and Contingencies within the Consolidated Financial Statements for further discussion.
In August 2018, Tribune filed a lawsuit against Sinclair in the Delaware Chancery Court for breach of contract. On August 29,
2018, Sinclair filed its Answer, Affirmative Defenses, and Verified Counterclaim to the Verified Complaint filed by Tribune in
the Delaware Court of Chancery. See Note 11. Commitments and Contingencies within the Consolidated Financial Statements for further
discussion.
In August 2018, a putative Sinclair shareholder, filed a class action complaint alleging that the Company and other defendants
violated the federal securities laws by issuing false or misleading disclosures concerning the Merger prior to the termination
thereof. See Note 11. Commitments and Contingencies within the Consolidated Financial Statements for further discussion.
• (cid:3) During the third quarter of 2018, twenty-two putative class action lawsuits were filed against the Company and other
broadcasters alleging that the defendants conspired to fix prices for commercials to be aired on broadcast television stations
throughout the United States, in violation of the Sherman Antitrust Act, and, in one case, state consumer protection and tort
laws. See Note 11. Commitments and Contingencies within the Consolidated Financial Statements for further discussion.
• (cid:3) On November 6, 2018, the Company and a number of other broadcasters agreed to enter into a proposed consent decree with
the Department of Justice (DOJ). This consent decree resolves the Department of Justice’s investigation into the sharing of
pacing information among certain stations in some local markets. The DOJ filed the consent decree and related documents in
the U.S. District Court for the District of Columbia on November 13, 2018. The consent decree is not an admission of any
wrongdoing by the Company, and does not subject Sinclair to any monetary damages or penalties. See Note 11. Commitments and
Contingencies within the Consolidated Financial Statements for further discussion.
Other Events
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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 April 2018, Sinclair Vice President of Advanced Technology, Mark Aitken, was awarded the 2018 NAB Television
Engineering Achievement Award for his leadership in the development of Next Gen TV and the Company's Chief Revenue
Officer, Rob Weisbord, was honored with the Technology Leadership Award, one of the most highly recognized tech awards in
the TV industry, presented by the industry publications, Broadcasting & Cable and TV Technology to executives who have
become outstanding tech leaders.
In May 2018, the Company awarded its Broadcast Diversity Scholarship to seven applicants, distributing over $30,000 in
financial assistance to students demonstrating a promising future in the broadcast industry.
In June 2018, at the Company's Annual Shareholders' Meeting, the Company's shareholder's re-elected its eight Directors and
ratified the appointment of PricewaterhouseCoopers as the Company's independent registered public accounting firm for the
fiscal year ending December 31, 2018.
In June 2018, Brian Bark joined the Company as Vice President / Chief Information Officer, responsible for the Company's
workplace technology strategy.
In July 2018, the Company's stations News 3 (KSNV) and the CW Las Vegas (KVCW) were named “2018 St. Jude Dream
Home Station of the Year” for their successful campaign to raise $850,000 for St. Jude Children’s Research Hospital and the
giveaway of a home.
In August 2018, the Company's station, KRCR in Redding CA, partnered with the Salvation Army to aid short- and long-term
disaster relief efforts for the victims of the Carr fire, with a mission to raise money to provide evacuees with basic necessities.
The Company and viewers in our markets combined to contribute more than $400,000 to the fundraising effort.
In September 2018, the Company held a coordinated "Stand Strong for the Carolina's" relief-effort, in which the Company and
viewers in our markets combined to contribute $240,000 to the Salvation Army, who was helping victims of Hurricane
Florence in North Carolina and the surrounding impacted region.
(cid:20)(cid:23)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
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(cid:3)
• (cid:3)
• (cid:3)
• (cid:3)
In October 2018, the Company held a coordinated "Stand Strong for the Gulf Coast" relief-effort, in which Sinclair and
viewers in our markets combined to contribute more than $85,000 to the Salvation Army, who was helping victims of
Hurricane Michael in the Florida Panhandle and the surrounding impacted region.
In 2018, the Company donated a total of $150,000 to support the Salvation Army's disaster relief work related to the California
wildfires, Hurricane Florence and Hurricane Michael.
In January 2019, the Board of Directors voted to increase the size of the board from eight to nine members and named the
Honorable Benson Everett Legg to serve as its newest member.
Industry Trends
• (cid:3) 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.
• (cid:3) 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.
• (cid:3) 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.
• (cid:3) 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.
• (cid:3) Seasonal advertising increases occur in the second and fourth quarters due to the anticipation of certain seasonal and holiday
spending by consumers.
• (cid:3) 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.
• (cid:3) 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.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:20)(cid:24)(cid:3)
(cid:3)
(cid:3)
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 revenue recognition, 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.
Revenue Recognition. As discussed in Revenue Recognition under Note 1. Nature of Operations and Summary of Significant Accounting Policies
within the Consolidated Financial Statements, we generate advertising revenue primarily from the sale of advertising spots/impressions on
our broadcast television and digital platforms. Advertising revenue is recognized in the period in which the advertising spots/impressions
are delivered. In arrangements where we provide audience ratings guarantees; to the extent that there is a ratings shortfall, we will defer a
proportionate amount of revenue until the ratings shortfall is settled through the delivery of additional advertising. The term of our
advertising arrangements is generally less than one year and the timing between when an advertisement is aired and when payment is due
is not significant. In certain circumstances, we require customers to pay in advance; payments received in advance of satisfying our
performance obligations are reflected as deferred revenue.
The Company generates distribution revenue through fees received from MVPDs, vMVPDs, and OTT providers for the right to
distribute our broadcast channels and cable networks on their distribution platforms. Distribution arrangements are generally governed
by multi-year contracts and the underlying fees are based upon a contractual monthly rate per subscriber. These arrangements represent
licenses of intellectual property; revenue is recognized as the signal is provided to our customers (as usage occurs) which corresponds
with the satisfaction of our performance obligation. Revenue is calculated based upon the contractual rate multiplied by an estimated
number of subscribers. Our customers will remit payments based upon actual subscribers a short time after the conclusion of a month,
which generally does not exceed 90 days. Historical adjustments to subscriber estimates have not been material.
Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each
performance obligation based on its relative standalone selling price which is generally based on the prices charged to customers.
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, 2018, our
consolidated balance sheet includes $2,123.9 million and $158.2 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 if a quantitative
assessment is deemed necessary.
For our annual goodwill impairment tests in 2018, 2017, and 2016, 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 2018 and 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, as a result of our qualitative and quantitative
assessments, we concluded that is was more-likely-than-not that these assets were not impaired.
(cid:20)(cid:25)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
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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 program is available
for its first showing or telecast. These costs are expensed over the period in which an economic benefit is expected to be derived. To
ensure the related assets for the programming rights are reflected in the consolidated balance sheets at the lower of unamortized cost or
estimated net realizable value (NRV), management estimates future advertising revenue, net of sales commissions, to be generated by the
remaining program material available under the contract terms. Management’s judgment is required in determining the timing of expense
for these costs, which is dependent on the economic benefit expected to be generated from the program and may significantly differ
from the timing of related payments under the contractual obligation. If our estimates of future advertising revenues decline,
amortization expense could be accelerated or NRV adjustments may be required.
Income Tax. As discussed 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, 2018, 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 10.
Income Taxes within the Consolidated Financial Statements, for further discussion of accrued unrecognized tax benefits.
Variable Interest Entities (VIEs). As discussed in Note 12. Variable Interest Entities 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 13. 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.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:20)(cid:26)(cid:3)
(cid:3)
(cid:3)
RESULTS OF OPERATIONS
In general, this discussion is related to the results of operations. The results of the acquired stations are included in our results of
operations 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 2018, 2017,
and 2016 are to our fiscal years ended December 31, 2018, 2017, and 2016, 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, 2018, 2017, and 2016 (in
millions). For definitions of terms, see the footnotes to the table in Selected Financial Data.
Media revenues (a) (b)
Other non-media revenues
Total revenues
Media production expenses (a)
Media selling, general and administrative expenses (a)
Depreciation and amortization
Non-media expenses
Corporate general and administrative expenses
Gain on asset dispositions and other, net of impairments
Operating income
Net income attributable to Sinclair Broadcast Group
Years Ended December 31,
2018
2017
2016
2,918.7 $
136.4
3,055.1
1,191.0
629.9
381.0
122.5
111.1
(40.1)
659.7 $
2,566.9 $
69.3
2,636.2
1,064.1
533.5
391.5
75.2
113.3
(278.9)
737.5 $
2,520.7
101.8
2,622.5
955.6
501.6
410.1
84.7
73.6
(6.0)
602.9
341.2
$
576.0
$
245.3
$
$
$
(a)(cid:3) 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!, TBD, 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.
(b)(cid:3) See Revenue Recognition under Note 1. Nature of Operations and Summary of Significant Accounting Policies within the Consolidated Financial
Statements for a discussion of the adoption of the new accounting principles for revenue recognition.
(cid:20)(cid:27)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
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BROADCAST SEGMENT
The following table sets forth our revenue and expenses for our broadcast segment, for the years ended December 31, 2018, 2017, and
2016 (in millions):
2018
2017
2016
‘18 vs.‘17
‘17 vs.‘16
Percent Change
Increase / (Decrease)
$
$
$
$
$
$
$
$
1,484.2 $
1,185.8
44.7
2,714.7 $
1,315.0 $
1,032.8
45.8
2,393.6 $
1,480.2
890.6
46.2
2,417.0
12.9%
14.8%
(2.4)%
13.4%
1,081.4 $
529.3 $
$
100.9
100.2 $
251.4 $
963.7 $
470.0 $
115.5
$
101.7 $
244.4 $
874.1
466.2
127.9
67.0
247.1
12.2%
12.6%
(12.6)%
(1.5)%
2.9%
(11.2)%
16.0%
(0.9)%
(1.0)%
10.3%
0.8%
(9.7)%
51.8%
(1.1)%
(100.0) $
(225.8) $
(4.6 )
(55.7)%
n/m
Revenue:
Advertising revenue
Distribution revenue
Other media revenue
Media revenues
Operating Expenses:
Media production expenses
Media selling, general and administrative
Amortization of program contract costs and net
realizable value adjustments
Corporate general and administrative expenses
Depreciation and amortization expenses
(Gain) on asset dispositions and other, net of
impairment
n/m — not meaningful
Revenues
Advertising revenue. Advertising revenue increased $169.2 million in 2018, when compared to 2017. The increase is primarily related to
an increase in political advertising revenue of $221.2 million, as 2018 is a political year and $32.9 million related to stations not included
in the same period in 2017. These increases were partially offset by decreases in certain categories, notably $37.5 million in automotive,
$20.2 million in food, $18.1 million in home products, and $7.4 million in schools due to political crowding out, the Super Bowl being
carried on fewer of our stations than in the prior year, and the Olympics which is carried on NBC.
Advertising revenue decreased $165.2 million in 2017, when compared to the same period in 2016. These decreases primarily related to
a $169.7 million decrease in political advertising, as 2016 was a political year, and decreases in certain categories, notably a $9.3 million
decrease in schools. The decreases were partially offset by $16.9 million related to stations not included in the same period in 2016.
The following table sets forth our primary types of programming and their approximate percentages of advertising revenue, excluding
digital revenue, for the periods presented:
Local news
Syndicated/Other programming
Network programming
Sports programming
Paid programming
Percent of Advertising Revenue for the
Twelve Months Ended December 31,
2017
31.8%
30.1%
24.9%
9.7%
3.5%
2016
31.6%
30.1%
25.4%
9.5%
3.4%
2018
33.6%
28.3%
24.9%
10.2%
3.0%
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:20)(cid:28)(cid:3)
(cid:3)
(cid:3)
The following table sets forth our affiliate percentages of advertising revenue for the years ended December 31, 2018, 2017, and 2016:
ABC
FOX
CBS
NBC
CW
MNT
Other (b)
Total
# of
Channels (a)
Percent of Advertising Revenue for the
Twelve Months Ended December 31,
2018
2017
2016
41
59
30
24
47
39
365
605
28.4 %
23.5 %
20.3 %
16.1 %
6.2 %
4.2 %
1.3 %
29.0%
25.2%
19.7%
12.5%
6.9%
5.2%
1.5%
27.9%
24.2%
20.3%
14.2%
7.0%
5.1%
1.3%
(a)(cid:3) See Television Markets and Stations for further detail on our channels. We acquired certain television stations during 2017 and 2016,
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)(cid:3) We broadcast other programming from the following providers on our channels including: Antenna TV, Azteca, Bounce Network,
CHARGE!, Comet, Estrella TV, Get TV, Grit, Me TV, Movies!, Nevada Sports Network, Stadium, TBD, Telemundo, This TV,
UniMas, Univision, and Weather.
Distribution revenue. Distribution revenue increased $153.0 million in 2018 when compared to the same period in 2017. Distribution
revenue related to stations not included in the same period in 2017 was $28.1 million. The remaining increase was primarily due to
increase in rates, partially offset by a decrease in subscribers.
Distribution revenue increased $142.2 million in 2017 when compared to the same period in 2016. Distribution revenue related to
stations not included in the same period in 2017 was $13.8 million. The remaining increase was primarily due to an increase in rates,
partially offset by a decrease in subscribers.
(cid:21)(cid:19)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
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Expenses
Media production expenses. Media production expenses increased $117.7 million during 2018 compared to 2017. The increase is primarily
related to $25.5 million from stations not included in the same period in 2017, $107.6 million from increases in fees pursuant to network
affiliation agreements, and a $12.2 million increase in employee compensation cost and retirement benefits. These increases were partially
offset by a $16.9 million decrease in fees related to rating services, and other decreases in marketing and advertising cost, production cost,
and outside services.
Media production expenses increased $89.6 million during 2017 compared to 2016, of which $19.4 million related to stations not
included in the same period of 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 selling, general and administrative expenses. Media selling, general and administrative expenses increased $59.3 million during 2018
compared to 2017. The increase is primarily due to $13.4 million of expenses related to stations not included in the same period in 2017,
a $10.6 million increase in third-party fulfillment costs from our digital business, a $9.4 million increase related to employee
compensation cost and retirement benefits, a $8.7 million increase in information technology costs, a $12.2 million increase in certain
costs related to higher advertising sales, such as commissions and transaction processing costs.
Media selling, general and administrative expenses increased $3.8 million during 2017 compared to 2016. The increase is 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.
Amortization of program contract costs and net realizable value adjustments. The amortization of program contract costs decreased $14.6
million during 2018 compared to 2017. The decrease is primarily due to $10.7 million of expenses related to the timing of amortization
on long term contracts and decreases in program renewal costs, and a $6.0 million decrease due to expired program contracts. The
decreases were partially offset by $1.8 million of amortization related to stations not included in the same period of 2017.
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.
Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses.
Depreciation and amortization expenses. Depreciation of property and equipment and amortization of definite-lived intangibles and other
assets increased $7.0 million during 2018 compared 2017, primarily related to $11.9 million of depreciation and amortization related to
stations not included in the same period of 2017, partially offset by $5.5 million of depreciation and amortization related to assets retired
during 2018.
Depreciation of property and equipment and amortization of definite-lived intangibles and other assets decreased $2.7 million during
2017 compared to 2016 primarily related to assets becoming fully depreciated, which is greater than the added depreciation from capital
expenditures. The decrease was partially offset by $6.0 million related to a station not included in the same period of 2016.
Gain on asset dispositions and other, net of impairments. During the years ended 2018 and 2017, our broadcast segment recorded a gain on
asset dispositions and other, net of impairments of $100.0 million and $225.8 million respectively. The gains primarily related to $83.3
million and $225.3 million of gains recognized in 2018 and 2017, respectively, related to the broadcast incentive auction. We also
recorded a $5.8 million gain in 2018 related to reimbursements for the spectrum repack. See Broadcast Incentive Auction within Note 2.
Acquisitions and Dispositions of Assets for further discussion of the broadcast incentive auction and spectrum repack.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:21)(cid:20)(cid:3)
(cid:3)
(cid:3)
OTHER
The following table sets forth our revenues and expenses for our owned networks and content, non-broadcast digital and internet
solutions, technical services, and non-media investments (Other) for the periods presented (in millions):
Revenue:
Advertising revenue
Distribution revenue
Other media revenues
Media revenues
Non-media revenues
Operating Expenses:
Media expenses
Non-media expenses
Corporate general and administrative expenses
Loss (gain) on asset dispositions and other, net of
impairments
(Loss) income from equity method investments
n/m — not meaningful
2018
2017
2016
‘18 vs.‘17
‘17 vs.‘16
Percent Change
(Increase/(Decrease))
$
$
$
$
$
$
$
$
75.5 $
112.9
15.7
204.1 $
136.4 $
210.2 $
122.5 $
0.9 $
$
60.0
(60.8) $
54.4 $
107.0
11.9
173.3 $
69.3 $
28.2
65.4
10.1
103.7
101.8
38.8%
5.5%
31.9%
17.8%
96.8%
163.9 $
75.2 $
1.0 $
116.9
84.7
2.5
28.2%
62.9%
(10.0)%
(53.1) $
(14.3) $
(1.4)
0.9
n/m
n/m
92.9%
63.6%
17.8%
67.1%
(31.9)%
40.2%
(11.2)%
(60.0)%
n/m
n/m
Media revenues and expenses. Media revenue included within Other primarily relates to our owned networks, content, and non-broadcast
digital businesses. Media revenue increased $30.8 million during 2018 compared to 2017. The increase is primarily related to a $20.2
million increase in advertising revenue mostly related to the expansion of our non-broadcast digital initiatives and certain owned
networks, and a $5.6 million increase in Tennis distribution revenues. Media revenue increased by $69.6 million during 2017 compared to
2016. The increase is primarily related to a $41.4 million increase in distribution revenues from MVPDs for Tennis, a $12.4 million
increase in advertising revenue from certain owned networks, and a $11.3 million increase from our non-broadcast digital and internet
businesses.
Media expenses included within Other primarily relates to the media production expenses and media selling, general and administrative
expenses related to the operations of our owned networks, content, and non-broadcast digital businesses. Media expenses increased
$46.3 million during 2018 when compared to 2017. The increase is primarily related to a $36.1 million increase to selling, general and
administrative cost related to our non-broadcast digital initiatives and certain owned networks and a $5.2 million increase to program and
production expenses related to certain owned networks. Media expenses increased $47.0 million during 2017 when compared to 2016.
The increase is primarily related a $23.0 million increase from Tennis, which was acquired during the first quarter of 2016, a $15.2 million
increase to selling, general and administrative cost related to our new non-broadcast digital and internet initiatives, and $1.6 million
increase to program and productions costs related to the start-up of certain owned networks and content.
Non-media revenues and expenses. Non-media revenue included within Other primarily relates to our broadcast technical businesses and
consolidated investments in real estate and other business ventures. Non-media revenue increased $67.1 million during 2018 when
compared to 2017. The increase is primarily related to a $68.7 million increase in broadcast equipment sales, partially offset by a $7.8
million decrease due to the sale of a consolidated investment in an alarm monitoring business in March 2017. Non-media revenue
decreased $32.5 million during 2017 when compared to 2016. The decrease in revenue is primarily due to the sale of a consolidated
investment in an alarm monitoring business in early March 2017, partially offset by increases in revenues related to an increase in
broadcast equipment sales.
(cid:21)(cid:21)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
Non-media expenses included within Other primarily relates to our broadcast technical businesses and consolidated investments in real
estate and other business ventures. Additionally, non-media expenses include costs to develop the ATSC 3.0. Non-media expenses
increased $47.3 million during 2018 when compared to 2017. The increase in expenses is primarily related to a $43.7 million increase in
costs associated with an increased volume of broadcast equipment sales. Non-media expenses decreased $9.5 million during 2017 when
compared to 2016. The decrease in expenses is primarily due to the sale of a consolidated investment in an alarm monitoring business in
early March 2017, partially offset by an increases in revenues related to an increase in broadcast equipment sales and an increase in
research and development costs related to ONE Media.
Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses.
Loss (gain) on asset dispositions and other, net of impairments. During the year ended 2018, we recorded a non-cash impairment of $59.6
million related to a real estate development project, which is reflected in gain on asset dispositions and other, net of impairments within
our statements of operations. 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 other, net of impairments, and net income attributable to the noncontrolling interests, respectively, on the
consolidated statement of operations.
Loss from equity investments. Losses from equity investments for the year ended December 31, 2018 increased by $46.5 million when
compared to 2017. Losses from equity investments for the year ended December 31, 2017 increased by $15.2 million when compared to
2016. The increase for both 2018 and 2017 is primarily related to investments in sustainability initiatives.
CORPORATE AND UNALLOCATED EXPENSES
The following table presents our corporate and unallocated expenses for the years ended December 31, 2018, 2017, and 2016 (in
millions):
Corporate general and administrative expenses
Interest expense
Loss from extinguishment of debt
Income tax benefit (provision)
$
$
$
$
111.1 $
292.0 $
— $
35.8 $
113.3 $
212.3 $
1.4 $
75.4 $
73.6
211.1
23.7
(122.1)
(1.9)%
37.5 %
n/m
(52.5)%
53.9 %
0.6 %
(94.1)%
n/m
2018
2017
2016
‘18 vs. ‘17
‘17 vs. ‘16
Percent Change
(Increase/(Decrease))
n/m — not meaningful
Corporate general and administrative expenses. We allocate most of our corporate general and administrative expenses to the broadcast
segment. The table above and the explanation that follows covers total consolidated corporate general and administrative expenses.
Corporate general and administrative expenses decreased in total by $2.2 million in 2018 compared to 2017 primarily related to a $6.8
million decrease to employee compensation cost primarily due to one-time bonuses paid in 2017 as a result of the tax law change,
partially offset by an increase of $5.5 million to group insurance cost.
Corporate general and administrative expenses increased in total by $39.7 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.
We expect corporate general and administrative expenses to decrease in 2019 compared to 2018 primarily as a result of lower
professional and legal fees.
Interest expense. The table above and explanations that follows cover total consolidated interest expense. Interest expense increased by
$79.7 million in 2018 compared to 2017. The increase is primarily related to $78.5 million in ticking fees and the write-off of previously
capitalized debt issuance costs associated with the Tribune acquisition which was subsequently terminated and increased interest expense
of $9.0 million for term loans primarily related to year-over-year increases in LIBOR. The increases were partially offset by a $6.4 million
decrease related to debt financing fees expensed in 2017 related to the amendment of certain terms and extension of the maturity date
of Term Loan B under the existing Bank Credit Agreement.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:21)(cid:22)(cid:3)
(cid:3)
(cid:3)
Interest expense increased by $1.2 million in 2017 compared to 2016 primarily due to $6.4 million in debt financing fees expensed
related to the amendment in January 2017 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) in August 2016 and the offering of $400.0 million of senior unsecured notes bearing a more favorable interest rate of 5.125%
(the 5.125% Notes) in August 2016.
Excluding the one-time payment of the ticking fees for financing commitments for the terminated merger with Tribune, we expect
interest expense to increase in 2019 compared to 2018 due to increases in LIBOR.
Loss from extinguishment of debt. 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.
Income tax benefit (provision). The 2018 income tax benefit for our pre-tax income (including the effects of noncontrolling interest) of
$305.5 million resulted in an effective tax rate of (11.7)%. 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 increase in the effective tax rate from 2017 to
2018 is primarily due to the 2017 tax benefit of the impact of 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% under Tax Cuts and Jobs Act (Tax Reform) exceeding the tax benefits of the
greater 2018 federal tax credits, lower 2018 federal tax rate, and lower 2018 state taxes due to the impact of a change in apportionment
on certain state deferred tax liabilities.
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 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 Tax Reform.
As of December 31, 2018, we had a net deferred tax liability of $413.3 million as compared to a net deferred tax liability of $515.2
million as of December 31, 2017. The decrease primarily relates to a reduction in deferred tax liabilities for the book-to-tax basis
differences on the indefinite-lived intangibles sold in the Broadcast Incentive Auction.
As of December 31, 2018, we had $6.6 million of gross unrecognized tax benefits. Of this total, $6.1 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, 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. We
recognized $0.3 million and $0.6 million of income tax expense for interest related to uncertain tax positions for the years ended
December 31, 2018 and 2017, respectively. See Note 10. Income Taxes within the Consolidated Financial Statements for further
information.
(cid:21)(cid:23)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
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LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2018, we had net working capital of approximately $1,211.3 million, including $1,060.3 million in cash and cash
equivalent balances. As of December 31, 2018, we also had $484.6 million of remaining borrowing capacity under our revolving credit
facility. Cash generated by our operations and borrowing capacity under the Bank Credit Agreement are used as our primary sources of
liquidity.
We anticipate that existing cash and cash equivalents, cash flow from our operations, and borrowing capacity under the revolving credit
facility will be sufficient to satisfy our debt service obligations, capital expenditure requirements, and working capital needs for the next
twelve months. For our long-term liquidity needs, in addition to the sources described above, we may rely upon the issuance of long-
term debt, the issuance of equity or other instruments convertible into or exchangeable for equity, or the sale of non-core assets.
However, there can be no assurance that additional financing or capital or buyers of our non-core assets will be available, or that the
terms of any transactions will be acceptable or advantageous to us.
For the year ended December 31, 2018, 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, 2018, 2017, and 2016 (in millions):
Net cash flows from operating activities
Cash flows (used in) from 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 investees
Distributions from equity method investees
Spectrum auction proceeds
Loan to affiliates
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
Payments for deferred financing costs
Distributions to noncontrolling interests
Other, net
Net cash flows (used in) from financing activities
2018
2017 (a)
2016 (a)
647.4 $
431.4 $
611.6
(105.1 ) $
—
1.6
—
(35.8)
22.8
—
—
(1.7)
(118.2 ) $
4.3 $
(166.8)
—
(74.6)
(220.9)
(0.9)
(8.9)
3.0
(464.8 ) $
(83.8) $
(271.3)
195.2
(5.7)
(55.1)
12.2
310.8
19.5
(7.2)
114.6 $
166.8 $
(340.1)
487.9
(71.4)
(30.3)
(0.7)
(22.4)
—
189.8 $
(94.5)
(425.7)
17.2
(40.2)
(51.2)
6.8
—
(19.5)
(2.4)
(609.5)
1,024.9
(674.4)
—
(65.9)
(136.3)
(35.5)
(10.5)
2.1
104.4
$
$
$
$
$
(a) See Recent Accounting Pronouncements within Note 1. Nature of Operations and Summary of Significant Accounting Policies for a discussion of
the adoption of new accounting principles related to the classification of certain cash receipts and cash payments.
(cid:3)
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(cid:3)
(cid:3)
Operating Activities
Net cash flows from operating activities increased during the year ended December 31, 2018 compared to the same period in 2017.
This change is primarily due to an increase in cash received from customers driven from an increase in political advertising and
distribution revenue.
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.
Investing Activities
Net cash flows from investing activities decreased during the year ended December 31, 2018, compared to the same period in 2017.
This decrease is primarily due to the proceeds received in 2017 from the spectrum auction and the sale of Alarm. This decrease was
partially offset by the decrease of cash paid related to the acquisition of businesses.
Net cash flows used in investing activities increased during the year ended December 31, 2017, compared to the same period in 2016.
This increase is primarily due to the proceeds received from the spectrum auction, the sale of Alarm, a decrease in amounts paid for the
acquisition of businesses, and a decrease in capital expenditures.
Financing Activities
Net cash flows from financing activities decreased during the year ended December 31, 2018, compared to the same period in 2017.
The decrease is primarily due to a higher volume Class A Common Stock repurchases in 2018 and the proceeds received from the public
offering of Class A Common Stock during the first quarter of 2017.
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.
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, 2018 and the future periods in which
such obligations are expected to be settled in cash (in millions):
CONTRACTUAL OBLIGATIONS (a)
Total
2019
2020-2021 2022-2023
2024 and
thereafter
Notes payable, capital leases and commercial bank
financing (b)
Operating leases
Program content (c)
Programming services (d)
Other (e)
Total contractual cash obligations
$
$
$
4,959.2
301.8
1,623.1
315.8
139.7
7,339.6 $
$
247.7
32.1
553.7
126.8
47.5
1,007.8 $
$
1,108.0
60.9
791.8
115.3
24.1
2,100.1 $
$
837.8
51.0
277.6
62.2
33.6
1,262.2 $
2,765.7
157.8
—
11.5
34.5
2,969.5
(a)(cid:3) Excluded from the table above are $6.6 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.
(cid:21)(cid:25)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
(b)(cid:3) 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 4.59% as of December 31, 2018. Variable rate debt
represents $1.5 billion of our $3.9 billion total face value of debt as of December 31, 2018. See Note 7. Notes Payable and Commercial
Bank Financing within the Consolidated Financial Statements for further discussion of the changes to notes payable, capital leases, and
commercial bank financing during 2018 and Note 13. Related Person Transactions within the Consolidated Financial Statements for further
discussion of related parties.
(c)(cid:3) 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)(cid:3) Includes obligations related to rating service fees, music license fees, market research, weather, and news services.
(e)(cid:3) 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 $5.9 million, $7.9 million, $0.4
million for the periods 2019, 2020-2021, and 2022-2023, 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.
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, 2018,
we do not have any material off balance sheet arrangements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates. At times we enter into derivative instruments primarily for the purpose
of reducing the impact of changing interest rates on our floating rate debt and to reduce the impact of changing fair market values on
our fixed rate debt. See Note 7. Notes Payable and Commercial Bank Financing within the Consolidated Financial Statements for further
discussion. As of December 31, 2018, 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, 2018, interest expense on our term loans and revolver related to our Bank Credit Agreement was $63.6
million. We estimate that adding 1.0% to respective interest rates would result in an increase in our interest expense of $14.9 million for
the year ended December 31, 2018. We also have $19.6 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 $0.2 million of additional interest expense for the
year ended December 31, 2018. Our consolidated VIEs have $25.3 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 $0.3 million for the year ended December 31, 2018.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:21)(cid:26)(cid:3)
(cid:3)
(cid:3)
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.
As of February 25, 2018, there are approximately 45 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.
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, 2013 through December 31, 2018. The performance graph assumes that
an investment of $100 was made in the Class A Common Stock and in each Index on December 31, 2013 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.
12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018
82.45
165.84
130.76
115.59
172.11
130.48
99.73
133.19
106.61
78.23
114.62
102.75
95.13
122.81
100.20
100.00
100.00
100.00
Company/Index/Market
Sinclair Broadcast Group, Inc.
NASDAQ Composite Index
NASDAQ Telecommunications Index
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(cid:7)(cid:21)(cid:19)
(cid:7)(cid:19)
(cid:20)(cid:21)(cid:18)(cid:20)(cid:22)
(cid:20)(cid:21)(cid:18)(cid:20)(cid:23)
(cid:20)(cid:21)(cid:18)(cid:20)(cid:24)
(cid:20)(cid:21)(cid:18)(cid:20)(cid:25)
(cid:20)(cid:21)(cid:18)(cid:20)(cid:26)
(cid:20)(cid:21)(cid:18)(cid:20)(cid:27)
(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)
(cid:49)(cid:36)(cid:54)(cid:39)(cid:36)(cid:52)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:72)
(cid:49)(cid:36)(cid:54)(cid:39)(cid:36)(cid:52)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
(cid:13)(cid:7)(cid:20)(cid:19)(cid:19)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:20)(cid:22)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:91)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:86)(cid:17)
(cid:41)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:20)(cid:17)
Stock Repurchases
The following table summarizes repurchases of our stock in the quarter ended December 31, 2018:
Total Number of
Shares Purchased (a)
Average Price Per
Share
Total Number of
Shares Purchased
as Part of a
Publicly
Announced
Program
Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the
Program (in
millions)
2,817,686 $
1,074,118 $
2,233,706 $
28.44
29.68
28.19
2,817,686 $
1,074,118 $
2,233,706 $
963.0
931.0
868.0
Period
Class A Common Stock : (b)
10/01/18 – 10/31/18
11/01/18 – 11/30/18
12/01/18 – 12/31/18
(a)(cid:3) All repurchases were made in open-market transactions.
(b)(cid:3) On September 6, 2016, the Board of Directors authorized a $150.0 million share repurchase authorization. On August 9, 2018, the
Board of Directors authorized an additional $1.0 billion share repurchase authorization. There is no expiration date and currently,
management has no plans to terminate this program. As of December 31, 2018, the remaining authorization under the program
was $868.0 million.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:21)(cid:28)(cid:3)
(cid:3)
(cid:3)
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, 2018.
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:
• (cid:3) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
our assets;
• (cid:3) 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
• (cid:3) 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, 2018, 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, 2018 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, 2018, our internal control over
financial reporting was effective based on those criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
(cid:22)(cid:19)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
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, 2018, 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.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:22)(cid:20)(cid:3)
(cid:3)
(cid:3)
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 $2,379 and $2,590, 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
Definite-lived intangible assets, net
Other assets
Total assets (a)
LIABILITIES AND EQUITY
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 program contracts payable
Total current liabilities
Notes payable, capital leases and commercial bank financing, less current portion
Program contracts payable, less current portion
Deferred tax liabilities
Other long-term liabilities
Total liabilities (a)
Commitments and contingencies (See Note 11)
$
$
Shareholders' Equity:
Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 68,897,723 and
76,071,145 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 other comprehensive loss
Total Sinclair Broadcast Group shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
$
2018
2017
1,060,330 $
—
598,597
64,247
—
60,732
1,783,906
11,217
683,134
—
2,123,902
158,222
1,626,880
184,831
6,572,092 $
413,227 $
—
23,314
42,564
93,480
572,585
3,849,891
50,060
413,253
85,983
4,971,772
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
161,049
108,053
726,349
3,887,601
41,909
515,236
79,009
5,250,104
689
761
257
1,121,054
517,620
(784)
1,638,836
(38,516)
1,600,320
6,572,092 $
257
1,320,298
248,845
(1,423)
1,568,738
(34,372)
1,534,366
6,784,470
The accompanying notes are an integral part of these consolidated financial statements.
(a)(cid:3) Our consolidated total assets as of December 31, 2018 and 2017 include total assets of variable interest entities (VIEs) of $127.6
million and $130.6 million, respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total
liabilities as of December 31, 2018 and 2017 include total liabilities of the VIEs of $22.3 million and $27.0 million, respectively, for
which the creditors of the VIEs have no recourse to us. See Note 12. Variable Interest Entities.
(cid:22)(cid:21)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016
(In thousands, except per share data)
REVENUES:
Media revenues (a)
Non-media revenues
Total revenues
2018
2017
2016
$
2,918,727 $
136,354
3,055,081
2,566,936 $
69,279
2,636,215
2,520,676
101,834
2,622,510
OPERATING EXPENSES:
Media production expenses
Media selling, general and administrative expenses
Amortization of program contract costs and net realizable value adjustments
Non-media expenses
Depreciation of property and equipment
Corporate general and administrative expenses
Amortization of definite-lived intangible and other assets
Gain on asset dispositions and other, net of impairment
Total operating expenses
Operating income
OTHER INCOME (EXPENSE):
t
Interest expense and amortization of debt discount and deferred financing
Loss from extinguishment of debt
(Loss) income from equity 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 $
1,191,016
629,919
100,899
122,491
105,240
111,070
174,848
(40,063)
2,395,420
659,661
(291,976)
—
(60,831)
3,369
(349,438)
310,223
35,775
345,998
(4,757)
341,241 $
1,064,144
533,537
115,523
75,199
97,103
113,253
178,822
(278,872)
1,898,709
737,506
(212,315)
(1,404)
(14,307)
9,264
(218,762)
518,744
75,360
594,104
(18,091)
576,013 $
955,604
501,589
127,880
84,733
98,529
73,556
183,795
(6,029 )
2,019,657
602,853
(211,143 )
(23,699 )
906
3,973
(229,963 )
372,890
(122,128 )
250,762
(5,461 )
245,301
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
$
$
3.38 $
3.35 $
100,913
101,718
5.77 $
5.72 $
99,844
100,789
2.62
2.60
93,567
94,433
The accompanying notes are an integral part of these consolidated financial statements.
(a)(cid:3) See Revenue Recognition within Note 1. Nature of Operations and Summary of Significant Accounting Policies for a discussion of the adoption
of the new accounting principles for revenue recognition.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:22)(cid:22)(cid:3)
(cid:3)
(cid:3)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016
(In thousands)
Net income
Adjustments to post-retirement obligations, net of taxes
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Sinclair Broadcast Group
2018
2017
2016
345,998 $
639
346,637
(4,757)
341,880 $
594,104 $
(616)
593,488
(18,091)
575,397 $
250,762
27
250,789
(5,461)
245,328
$
$
The accompanying notes are an integral part of these consolidated financial statements
(cid:22)(cid:23)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016
(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
BALANCE,
December 31, 2015
Cumulative effect of
adoption of new
accounting standard
Dividends declared
and paid on Class A
and Class B
Common Stock
($0.71 per share)
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
—
—
—
—
431
1,833
—
—
—
—
257,673
2
(257,673)
(2 )
—
—
(4,892,461)
(48)
—
—
(136,235)
—
16,769
400,512
—
—
4
—
—
—
—
—
—
—
—
—
—
—
(65,909)
—
—
—
—
—
—
—
—
—
—
—
—
—
2,264
—
(65,909)
—
—
—
(136,283)
—
16,773
(10,722 )
(10,722)
1,346
1,346
—
—
—
—
—
—
—
—
—
245,301
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.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:22)(cid:24)(cid:3)
(cid:3)
(cid:3)
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016
(In thousands, except share data)
BALANCE,
December 31, 2016
Issuance of
common stock, net
of issuance costs
Dividends declared
and paid on Class
A and Class B
Common Stock
($0.72 per share)
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
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)
—
—
18,091
(616)
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.
(cid:22)(cid:25)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016
(In thousands, except share data)
BALANCE,
December 31, 2017
Cumulative effect
of adoption of new
accounting standard
Dividends declared
and paid on Class A
and Class B
Common Stock
($0.74 per share)
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, 2018
Sinclair Broadcast Group Shareholders
Class A
Common Stock
Class B
Common Stock
Shares
Values
Shares
Values
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total Equity
76,071,145
$ 761
25,670,684
$ 257
$
1,320,298
$ 248,845
$
(1,423) $
(34,372) $ 1,534,366
—
—
—
—
—
2,100
—
—
(7,761,529)
(78)
588,107
6
—
—
—
—
—
—
—
—
—
—
—
(74,566)
(220,811)
—
21,567
—
—
—
—
—
—
—
—
—
2,100
—
—
(74,566)
(220,889)
—
21,573
(8,901)
(8,901)
—
—
—
—
—
—
—
—
—
—
—
341,241
639
—
—
4,757
639
345,998
68,897,723
$ 689
25,670,684
$ 257
$
1,121,054
$ 517,620
$
(784) $
(38,516) $
1,600,320
The accompanying notes are an integral part of these consolidated financial statements.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:22)(cid:26)(cid:3)
(cid:3)
(cid:3)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016
(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
Stock-based compensation
Deferred tax (benefit) provision
Gain on asset dispositions, net of impairment
Loss (income) from equity method investments
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 in accounts payable and accrued liabilities
Payments on program contracts payable
Other, net
Net cash flows from operating activities
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
Acquisition of property and equipment
Acquisition of businesses, net of cash acquired
Spectrum auction proceeds
Proceeds from the sale of assets
Purchase of alarm monitoring contracts
Investments in equity investees
Distributions from equity method investees
Loans to affiliates
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
Repurchase of outstanding Class A Common Stock
Dividends paid on Class A and Class B Common Stock
Payments for deferred financing costs
Distributions to noncontrolling interests
Other, net
Net cash flows (used in) from financing activities
NET INCREASE IN CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH,
beginning of year
2018
2017 (a)
2016 (a)
345,998 $
594,104 $
250,762
105,240
174,848
100,899
—
26,516
(102,621)
(19,325)
60,831
(36,680)
48,703
(9,905)
23,666
(107,983)
37,231
647,418
(105,061)
—
—
1,616
—
(35,805)
22,834
—
(1,795)
(118,211)
4,317
(166,785)
—
(220,889)
(74,566)
(922)
(8,901)
2,929
(464,817)
64,390
97,103
178,822
115,523
1,404
15,886
(159,462)
(278,608)
14,307
(41,908)
(43,374)
(9,409)
34,857
(111,470)
23,638
431,413
(83,812)
(271,273)
310,802
195,209
(5,682)
(55,129)
12,178
19,500
(7,209)
114,584
166,797
(340,108)
487,883
(30,287)
(71,364)
(731)
(22,416)
(15)
189,759
735,756
98,529
183,795
127,880
23,699
16,939
6,118
(6,029)
(906)
(71,718)
18,814
(969)
60,086
(111,506)
16,096
611,590
(94,465)
(425,657)
—
17,202
(40,206)
(51,247)
6,786
(19,500)
(2,441)
(609,528)
1,024,912
(674,439)
—
(136,283)
(65,909)
(35,505)
(10,464)
2,113
104,425
106,487
995,940
260,184
153,697
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of year
$
1,060,330 $
995,940 $
260,184
The accompanying notes are an integral part of these consolidated financial statements.
(a) See Recent Accounting Pronouncements within Note 1. Nature of Operations and Summary of Significant Accounting Policies for a discussion of
the adoption of new accounting principles related to the classification of certain cash receipts and cash payments.
(cid:22)(cid:27)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
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 and a strong focus on using our
spectrum to bring together content providers, advertisers, and consumers on various 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, 2018, 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 605 channels as of December 31, 2018. For the purpose of this report, these 191 stations and
605 channels are referred to as “our” stations and channels.
Principles of Consolidation
The consolidated financial statements include our accounts and those of subsidiaries which we control 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.
Investments in entities over which we have significant influence but not control are accounted for using the equity method of
accounting. Income from equity method investments represents our proportionate share of net income generated by equity method
investees.
We consolidate VIEs when we are the primary beneficiary. We are the the primary beneficiary of a VIE when we have the power to
direct the activities of the VIE that most significantly impact the economic performance of the VIE and have the obligation to absorb
losses or the right to receive returns that would be significant to the VIE. See Note 12. Variable Interest Entities for more information on
our VIEs.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and
expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities. Actual results could differ
from those estimates.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on revenue recognition for revenue from contracts
with customers, Accounting Standards Codification Topic 606 (ASC 606). 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 replaced most existing revenue
recognition guidance when it became 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. We adopted this guidance retrospectively during the first quarter of 2018.
The impact of the adoption did not have a material impact on our station advertising or distribution revenue. Under the new standard,
certain barter revenue and expense related to syndicated programming is no longer recognized. See Revenue Recognition below for more
information on the adoption.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:22)(cid:28)(cid:3)
(cid:3)
(cid:3)
In January 2016, the FASB issued new guidance which addresses certain aspects of recognition, measurement, presentation, and
disclosure 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. We adopted this guidance during the first quarter of 2018. The impact of the adoption did not have a material
impact on our financial statements. Upon adoption of this guidance, we recorded a cumulative effect adjustment to retained earnings of
$2.1 million within our consolidated statement of equity. See Note 6. Other Assets for more information on our equity investments.
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. We adopted the optional transition method as well as the package of
practical expedients on January 1, 2019. The adoption of this standard is expected to result in an increase of total assets and total
liabilities on our consolidated balance sheets of less than 5%. We do not expect a material impact on our consolidated statements of
operations.
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. 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 changes during the period in the total of cash, cash equivalents, and amounts generally described as
restricted cash or restricted cash equivalents. We adopted this guidance retrospectively during the first quarter of 2018. The following
table presents the effects of adoption on our consolidated financial statements for the comparative periods presented (in thousands):
For the years ended
December 31, 2017
December 31, 2016
Net cash flows from operating activities
Net cash flow from (used in) investing
activities
Net cash flow from financing activities
As
Reported
Adjustment
(a)
As
Adjusted
As
Reported
$
431,104 $
(198,025 )
309 $ 431,413 $ 591,766 $
(606,003)
114,584
312,609
As
Adjustment
(b)
Adjusted
19,824 $ 611,590
(609,528)
(3,525)
188,263
1,496
189,759
124,249
(19,824)
104,425
(a)(cid:3) Adjustment primarily relates to restricted cash received as discussed under Broadcast Incentive Auction under 2018 Dispositions within
Note 2. Acquisitions and Dispositions of Assets.
(b)(cid:3) Adjustment primarily relates to the $19.8 million prepayment penalty related to the redemption of our 6.375 Senior Unsecured
Notes in August 2016.
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 adopted this
guidance during the first quarter of 2018. The impact of the adoption did not have a material impact on our consolidated financial
statements.
In August 2018, the FASB issued guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting
arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-
use software, with the capitalized implementation costs of a hosting arrangement that is a service contract expensed over the term of the
hosting arrangement. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, applied
either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. We
are currently evaluating the impact of this guidance on our consolidated financial statements.
In October 2018, the FASB issued guidance for determining whether a decision-making fee is a variable interest. The amendments
require organizations to consider indirect interests held through related parties under common control on a proportional basis rather
than as the equivalent of a direct interest in its entirety (as currently required in GAAP). The new standard is effective for interim and
annual reporting periods beginning after December 15, 2019, applied retrospectively. Early adoption is permitted. We are currently
evaluating the impact of this guidance on our consolidated financial statements.
(cid:23)(cid:19)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
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, 2018, 2017, and 2016 is as follows (in
thousands):
Balance at beginning of period
Charged to expense
Net write-offs
Balance at end of period
Programming
2018
2017
2016
$
$
2,590 $
5,814
(6,025)
2,379 $
2,124 $
2,837
(2,371)
2,590 $
4,495
1,974
(4,345)
2,124
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.
Impairment of Goodwill, Intangibles, and Other 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.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:23)(cid:20)(cid:3)
(cid:3)
(cid:3)
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 that 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 it 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.
When factors indicate that there may be a decrease in value of an equity method investment, we assess whether a loss in value has
occurred. If that loss is deemed to be other than temporary, an impairment loss is recorded accordingly. For any equity method
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. See Note 6. Other Assets for more
information.
We recorded an impairment charge of $59.6 million for the year ended December 31, 2018 to adjust one of our consolidated real
estate development projects to fair value less costs to sell based upon a pending sale transaction. This impairment is reflected in (gain)
loss on asset dispositions and other, net of impairment within out statements of operations The fair value of the real estate investment
was determined based on both observable and unobservable inputs, including the expected sales price as supported by a discounted cash
flow model.
(cid:23)(cid:21)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
Accounts Payable and Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2018 and 2017 (in thousands):
Compensation and employee benefits
Interest
Deferred revenue
Programming related obligations
Accounts payable and other accruals relating to operating expenses
Total accounts payable and accrued liabilities
2018
2017
99,884 $
42,450
83,270
79,685
107,938
413,227 $
87,003
42,794
49,522
89,728
101,356
370,403
$
$
We expense these activities when incurred and recognize deferred revenue when earned.
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, 2018 and 2017, a valuation allowance has been provided
for deferred tax assets related to a substantial amount of our available state net operating loss carryforwards based on past operating
results, expected timing of the reversals of existing temporary book/tax basis differences, alternative tax strategies and projected future
taxable income. Future changes in operating and/or taxable income or other changes in facts and circumstances could significantly
impact the ability to realize our deferred tax assets which could have a material effect on our consolidated financial statements.
Management periodically performs a comprehensive review of our tax positions and we record a liability for unrecognized tax benefits
when such tax positions do not meet the “more-likely-than-not” threshold. Significant judgment is required in determining whether a tax
position meets the “more-likely-than-not” threshold, and it is based on a variety of facts and circumstances, including interpretation of
the relevant federal and state income tax codes, regulations, case law and other authoritative pronouncements. Based on this analysis, the
status of ongoing audits and the expiration of applicable statute of limitations, liabilities are adjusted as necessary. The resolution of
audits is unpredictable and could result in tax liabilities that are significantly higher or lower than for what we have provided. See Note 10.
Income Taxes, for further discussion of accrued unrecognized tax benefits.
The Company recognized the estimated income tax effects of the Tax Cut and Jobs Act in the 2017 financial statements in accordance
with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, in the
reporting period in which the Tax Act was enacted. As of December 31, 2018, the Company has completed its accounting for the tax
effects of enactment of the Tax Act. The Company has recognized a benefit of $4.3 million from adjustments to the provisional
amounts recorded at December 31, 2017 related to the revaluation of deferred balances resulting from the reduction of the corporate
income tax rate from 35% to 21%. This adjustment has been recorded as a component of income tax expense from continuing
operations.
Supplemental Information — Statements of Cash Flows
During the years ended December 31, 2018, 2017, and 2016, we had the following cash transactions (in thousands):
Income taxes paid
Income tax refunds
Interest paid
2018
2017
2016
$
$
$
16,928 $
413 $
284,691 $
128,168 $
1,508 $
203,800 $
108,347
12,193
191,117
Non-cash investing activities included property and equipment purchases of $10.6 million, $9.5 million, and $5.9 million for the years
ended December 31, 2018, 2017, and 2016, respectively.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:23)(cid:22)(cid:3)
(cid:3)
(cid:3)
Revenue Recognition
On January 1, 2018, we adopted ASC 606 using the retrospective adoption method. The following table presents the effects of
adoption on our consolidated financial statements for the comparative periods presented (in thousands):
For the years ended
December 31, 2017
December 31, 2016
As
Reported
Adoption
of ASC 606
As
Adjusted
As
Reported
Adoption
of ASC 606
As
Adjusted
Revenues realized from station barter arrangements (a)
Expenses realized from barter arrangements (b)
Operating income
Net income
Basic EPS
Diluted EPS
$
$
$
$
$
$
120,963
$
98,973 $
737,506 $
576,013 $
5.77 $
5.72 $
(97,903) $
(97,903) $
— $
— $
— $
— $
$ 135,566
23,060
$ (114,439) $
1,070 $ 116,954 $ (114,439) $
737,506 $ 602,853 $
576,013 $ 245,301 $
2.62 $
2.60 $
5.77 $
5.72 $
21,127
2,515
— $ 602,853
— $ 245,301
2.62
— $
2.60
— $
(a)(cid:3) The remaining balance in the "as adjusted" column relates to trade revenue, which was unaffected by the adoption and has been
reclassified to media revenue.
(b)(cid:3) The remaining balance in the "as adjusted" column relates to trade expense, which was unaffected by the adoption and has been
reclassified to media production expense.
The following table presents our revenue disaggregated by type and segment (in thousands):
For the year ended December 31, 2018
Advertising revenue
Distribution revenue
Other media and non-media revenues
Total revenues
For the year ended December 31, 2017
Advertising revenue
Distribution revenue
Other media and non-media revenues
Total revenues
For the year ended December 31, 2016
Advertising revenue
Distribution revenue
Other media and non-media revenues
Total revenues
Broadcast
Other
Total
1,484,188 $
1,185,800
44,675
2,714,663 $
75,539 $
112,827
152,052
340,418 $
1,559,727
1,298,627
196,727
3,055,081
Broadcast
Other
Total
1,314,999 $
1,032,838
45,804
2,393,641 $
54,402 $
107,012
81,160
242,574 $
1,369,401
1,139,850
126,964
2,636,215
Broadcast
Other
Total
1,480,157 $
890,554
46,274
2,416,985 $
28,176 $
65,382
111,967
205,525 $
1,508,333
955,936
158,241
2,622,510
$
$
$
$
$
$
Advertising Revenue. We generate advertising revenue primarily from the sale of advertising spots/impressions on our broadcast
television and digital platforms. Advertising revenue is recognized in the period in which the advertising spots/impressions are delivered.
In arrangements where we provide audience ratings guarantees, to the extent that there is a ratings shortfall, we will defer a proportionate
amount of revenue until the ratings shortfall is settled through the delivery of additional advertising. The term of our advertising
arrangements is generally less than one year and the timing between when an advertisement is aired and when payment is due is not
significant. In certain circumstances, we require customers to pay in advance; payments received in advance of satisfying our
performance obligations are reflected as deferred revenue.
Distribution Revenue. We generate distribution revenue through fees received from MVPDs, vMVPDs, and OTT providers for the right
to distribute our broadcast channels and cable networks on their distribution platforms. Distribution arrangements are generally
governed by multi-year contracts and the underlying fees are based upon a contractual monthly rate per subscriber. These arrangements
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represent licenses of intellectual property; revenue is recognized as the signal is provided to our customers (as usage occurs) which
corresponds with the satisfaction of our performance obligation. Revenue is calculated based upon the contractual rate multiplied by an
estimated number of subscribers. Our customers will remit payments based upon actual subscribers a short time after the conclusion of
a month, which generally does not exceed 90 days. Historical adjustments to subscriber estimates have not been material.
Practical Expedients and Exemptions. We expense sales commissions when incurred because the period of benefit for these costs is one
year or less. These costs are recorded within media selling, general and administrative expenses. In accordance with ASC 606, we do not
disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii)
distribution arrangements which are accounted for as a sales/usage based royalty.
Arrangements with Multiple Performance Obligations. Our contracts with customers may include multiple performance obligations. For such
arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price, which is generally based
on the prices charged to customers.
Deferred Revenues. We record deferred revenues when cash payments are received or due in advance of our performance, including
amounts which are refundable. Deferred revenues were $83.3 million, $49.5 million, and $31.7 million as of December 31, 2018, 2017,
and 2016, respectively. The increase in deferred revenues was primarily driven by amounts received or due in advance of satisfying our
performance obligations, offset by $38.8 million and $22.3 million of revenues recognized that were included in the deferred revenues
balance as of December 31, 2017 and 2016, respectively.
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 $19.2 million, $20.6 million, and $18.5 million for the years
ended December 31, 2018, 2017, and 2016, respectively.
Financial Instruments
Financial instruments, as of December 31, 2018 and 2017, 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 16. Fair Value Measurements for additional information regarding the fair value of notes payable.
Post-retirement Benefits
We maintain a supplemental executive retirement plan (SERP) which we inherited upon the acquisition of certain stations. As of
December 31, 2018, the estimated projected benefit obligation was $19.2 million, of which $1.6 million is included in accrued expenses
in the consolidated balance sheet and $17.6 million is included in other long-term liabilities. At December 31, 2018, the projected benefit
obligation was measured using a 4.11% discount rate compared to a discount rate of 3.46% for the year ended December 31, 2017.
During the years ended December 31, 2018 and 2017, we made $1.7 million and $1.8 million in benefit payments and recognized $1.3
million of actuarial gains and $1.0 million of actuarial losses through other comprehensive income, respectively. For both years ended
December 31, 2018 and 2017, we recognized $0.8 million of periodic pension expense, reported in other expense in the consolidated
statements of operations.
We also maintain other post-retirement plans provided to certain employees. The plans are voluntary programs that primarily allow
participants to defer eligible compensation and they may also qualify to receive a discretionary match on their deferral. As of December
31, 2018, the assets and liabilities included on our consolidated balance sheet related to deferred compensation plans were $26.0 million
and $24.1 million, respectively.
Reclassifications
Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s presentation.
Subsequent Events
In February 2019, we announced a joint venture with the Chicago Cubs (Cubs) that will own and operate Marquee Sports Network, a
regional sports network based in Chicago, Illinois. Marquee will be the Chicago-region’s exclusive network for fans to view live Cubs
games beginning with the 2020 Major League Baseball season and will also feature exclusive Cubs content and other local sports
programming.
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2. ACQUISITIONS AND DISPOSITIONS OF ASSETS:
During the years ended December 31, 2017 and 2016, we acquired certain businesses for an aggregate purchase price of $689.4 million
plus working capital of $3.4 million.
The following summarizes the material acquisition activity during the years ended December 31, 2017 and 2016:
2017 Acquisitions
Bonten. On September 1, 2017, we acquired the stock of Bonten Media Group Holdings, Inc. (Bonten) and Cunningham Broadcasting
Corporation (Cunningham) acquired the membership interest of Esteem Broadcasting LLC for an aggregate purchase price of $240.0
million plus a working capital adjustment, excluding cash acquired, of $2.2 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 with 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
$
$
14,536
699
988
27,295
161,936
425
3,609
(8,846)
(988)
(66,158)
(12,265)
121,231
120,921
242,152
The final 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.
During the year ended December 31, 2018, 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 goodwill of $1.5 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, including assembled workforce and noncontractual relationships, as well as expected future
synergies. We expect that goodwill deductible for tax purposes will be approximately $5.6 million.
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.
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2016 Acquisitions
Tennis Channel. In March 2016, we acquired all of the outstanding common stock of Tennis Channel, 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 Channel is reported within Other within Note
15. Segment Data.
The following table summarizes the allocated fair value of acquired assets and assumed liabilities of Tennis Channel (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.
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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
Total net media revenues
Operating Income (Loss)
Bonten
Tennis Channel
Other acquisitions in:
2017
2016
Total operating income
2018
2017
2016
100,971 $
143,047
30,907 $
132,584
17,979
81,003
343,000 $
11,108
66,698
241,297 $
—
84,040
—
49,186
133,226
2018
2017
2016
21,479 $
14,887
(2,035)
25,523
59,854 $
7,448 $
19,420
(89 )
18,392
45,171 $
—
(1,990)
—
18,311
16,321
$
$
$
$
In connection with the 2017 and 2016 acquisitions, for the years ended December 31, 2017, and 2016, we incurred $1.1 million and
$1.4 million, respectively, of costs primarily related to legal, regulatory, 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 Channel 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 and Other 2016 Acquisitions above, as they are not material both
individually and in the aggregate (in thousands, except per data share):
Unaudited
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
$
$
$
$
$
2016
2017
2,692,890 $ 2,720,735
252,902
247,441
2.64
2.62
597,054 $
578,963 $
5.80 $
5.74 $
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 Bonten for the
period presented because the pro forma results do not reflect expected synergies. The pro forma adjustments reflect depreciation
expense and amortization of intangible assets related to the fair value adjustments of the assets acquired and any adjustments to interest
expense to reflect the debt financing of the transactions. Depreciation and amortization expense are higher than amounts recorded in the
historical financial statements of acquiree due to the fair value adjustments recorded for long-lived tangible and intangible assets in
purchase accounting.
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Termination of Material Definitive Agreement.
In August 2018, we received a termination notice from Tribune Media Company (Tribune), terminating the Agreement and Plan of
Merger entered into on May 8, 2017, between the Company and Tribune (Merger Agreement), which provided for the acquisition by the
Company of all of the outstanding shares of Tribune Class A common stock and Tribune Class B common stock (Merger). See
Litigation and other legal matters under Note 11. Commitments and Contingencies for further discussion on our pending litigation related to
the Tribune acquisition. As part of the termination, we withdrew with prejudice our Federal Communication Commission (FCC)
application to acquire Tribune and terminated all of the divestiture agreements entered into in anticipation of the Merger, as discussed in
Assets and Liabilities Held for Sale below.
For the years ended December 31, 2018 and 2017, we incurred $99.8 million and $20.5 million, respectively, of costs in connection
with this acquisition. These amounts included $21.3 million in 2018 and $20.5 million in 2017 primarily related to legal and other
professional services, which we expensed as incurred and classified as corporate general and administrative expenses on our consolidated
statements of operations; and $78.5 million in 2018 in ticking fees and the write-off of previously capitalized debt issuance costs
associated with the Tribune acquisition which was subsequently terminated, which are recorded as interest expense on our consolidated
statements of operations.
2018 Dispositions
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. We received total proceeds of $310.8 million from the auction which was classified as restricted
cash in the consolidated balance sheet as of December 31, 2017.
For the years ended December 31, 2018 and 2017, we recognized a gain of $83.3 million and $225.3 million, respectively, which was
included within (gain) loss on asset dispositions and other, net of impairment within our consolidated statements of operations. These
gains relate to the auction proceeds associated with three markets where the underlying spectrum was vacated during the first quarter of
2018 and fourth quarter of 2017. 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 100 of
our stations have been assigned to new channels. Legislation has provided the FCC with a $2.75 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. During 2018, capital expenditures paid related to the spectrum repack were $31.1
million. During 2018, we recorded a $5.8 million gain related to reimbursements for the spectrum repack, which are recorded within
gain on asset dispositions and other, net of impairments on the consolidated financial statements.
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 other, net of impairments and net income attributable to
the noncontrolling interest, respectively, on the consolidated statement of operations.
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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, 2018, 5,780,061shares 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, 2018, 2017, and
2016, we recorded stock-based compensation of $26.5 million, $18.5 million, and $16.9 million, respectively. Below is a summary of the
key terms and methods of valuation of our stock-based compensation awards:
RSAs. RSAs issued in 2018, 2017, and 2016 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, resulting 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, 2017
2018 Activity:
Granted
Vested
Forfeited
Unvested shares at December 31, 2018
RSAs
152,180 $
237,593
(101,385)
(8,073)
280,315 $
Weighted-Average
Price
33.04
34.95
32.66
35.36
34.73
For the years ended December 31, 2018, 2017, and 2016, we recorded compensation expense of $5.2 million, $3.2 million, and $2.8
million, respectively. The majority of the unrecognized compensation expense of $4.5 million as of December 31, 2018 will be
recognized in 2019.
Stock Grants to Non-Employee Directors. In addition to directors fees paid, on the date of each 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 2018, 2017, and
2016. We recorded expense of $0.6 million, $0.7 million, and $0.6 million for each of the years ended December 31, 2018, 2017, and
2016, 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 over the base value of
each SAR over the term of the award. The SARs have a 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, 2018, 2017, and 2016, we recorded
compensation expense of $3.2 million, $6.6 million, and $4.0 million, respectively.
The following is a summary of the 2018 activity:
Outstanding SARs at December 31, 2017
2018 Activity:
Granted
Outstanding SARs at December 31, 2018
SARs
Weighted-
Average Price
2,610,000 $
450,000
3,060,000 $
22.65
33.80
24.29
The aggregate intrinsic value of the 3,060,000 outstanding as of December 31, 2018 was $16.6 million and the outstanding SARs
have a weighted average remaining contractual life of 5.87 years as of December 31, 2018. During 2018, 2017, and 2016, outstanding
SARs increased the weighted average shares outstanding for purposes of determining dilutive earnings per share.
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(cid:3)
(cid:3)
(cid:3)
Options. As of December 31, 2018, 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 and a weighted average remaining contractual term of 7
years. As of December 31, 2018, there was no aggregate intrinsic value for the options outstanding. There was no grant, exercise, or
forfeiture activity during the year ended December 31, 2018. We recognized compensation expense of $0.4 million during the year ended
December 31, 2016. There was no expense recognized during the years ended December 31, 2018 and 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
2018
2.6 %
5 years
36.2 %
2.1% - 2.2%
2017
2.1%
5 years
37.0%
2.0%
2016
1.2% - 1.9%
5 years
37.5% - 42.1%
2.1%
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 2018, 2017, and 2016, 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 with a match calculation
(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, 2018, 2017, and 2016, we recorded $16.4 million, $7.3 million, and $6.9
million, respectively, of stock-based compensation expense related to the Match. A total of 7,000,000 shares of Class A Common Stock
are reserved for matches under the plan. As of December 31, 2018, 4,029,061 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, 2018, 2017, and 2016 was $1.2 million, $1.0
million, $0.9 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, 2018, 681,640 shares were available for future purchases.
Subsidiary Stock Awards. From time to time, we grant subsidiary stock awards to employees. The subsidiary stock is typically in the
form of a membership interest in a consolidated limited liability company, not traded on a public exchange and valued based on the
estimated fair value of the subsidiary. Fair value is typically estimated using discounted cash flow models and/or appraisals. These stock
awards vest immediately. For the years ended December 31, 2018 and 2017, we recorded no compensation expense related to these
awards. For the year ended December 31, 2016, we recorded compensation expense of $1.3 million 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.
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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, 2018 and 2017 (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
2018
2017
$
$
76,501 $
34,645
278,649
744,294
107,536
24,115
62,663
53,401
71,461
1,453,265
(770,131)
683,134 $
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
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 $3.1 million for the
year ended December 31, 2018 and $4.2 million for both the years ended December 31, 2017 and 2016.
(cid:24)(cid:21)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
5. GOODWILL, INDEFINITE-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 $2,123.9 million and $2,124.0 million at
December 31, 2018 and 2017, respectively. The change in the carrying amount of goodwill was as follows (in thousands):
Balance at December 31, 2016
$
1,933,831 $
56,915 $
Broadcast
Other
Consolidated
1,990,746
Acquisitions (a)
Measurement period adjustments related to prior year acquisitions
Disposition of assets (a)
Balance at December 31, 2017 (b)
119,426
153
—
2,053,410
13,966
154
(412)
70,623
133,392
307
(412)
2,124,033
Measurement period adjustments related to prior year acquisitions
Balance at December 31, 2018 (b)
1,369
$
2,054,779
$
(1,500)
69,123
$
(131)
2,123,902
(a)(cid:3) See Note 2. Acquisitions and Dispositions of Assets for discussion of acquisitions and divestitures made during 2017.
(b)(cid:3) Approximately $0.8 million of goodwill relates to consolidated VIEs as of December 31, 2018 and 2017.
For our annual goodwill impairment tests in 2018, 2017, and 2016, 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 2018, 2017, or 2016, and therefore did not perform interim impairment tests for goodwill during those periods. Our
accumulated goodwill impairment as of December 31, 2018 and 2017 was $413.6 million.
As of December 31, 2018 and 2017, the carrying amount of our indefinite-lived intangible assets was as follows (in thousands):
Balance at December 31, 2016
Acquisitions (a)
Disposition of assets (a)
Balance at December 31, 2017 (b)
Disposition of assets (a)
Balance at December 31, 2018 (b) (c)
$
$
132,906 $
425
(1,411)
131,920
(1,149)
130,771 $
Broadcast
Other
Consolidated
156,306
4,476
(1,411)
159,371
(1,149)
158,222
23,400 $
4,051
—
27,451
—
27,451 $
(a)(cid:3) See Note 2. Acquisitions and Dispositions of Assets for discussion of acquisitions and divestitures made during 2018 and 2017.
(b)(cid:3) Approximately $14.3 million of indefinite-lived intangible assets relate to consolidated VIEs as of December 31, 2018 and 2017.
(c)(cid:3) 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 2018 or 2017, and
therefore did not perform interim impairment tests during those periods. We performed our annual impairment tests for indefinite-lived
intangibles in 2018 and 2017 and as a result of our qualitative assessments, we recorded no impairment. In 2016, as a result of our
qualitative and quantitative assessments, we recorded no impairment.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:24)(cid:22)(cid:3)
(cid:3)
(cid:3)
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, 2018
Gross
Carrying
Value
Accumulated
Amortization
Net
1,451,600 $
1,113,134
33,417
2,598,151 $
(604,470) $
(340,805)
(25,996)
(971,271) $
847,130
772,329
7,421
1,626,880
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
$
$
$
$
(a)(cid:3) Changes between the gross carrying value from December 31, 2017 to December 31, 2018, relate to certain fully amortized
intangible assets which were retired in 2018.
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 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, 2018, 2017, and 2016 was
$174.8 million, $178.8 million, and $183.8 million, respectively. We analyze specific definite-lived intangibles for impairment when events
occur that may impact their value in accordance with the respective accounting guidance for long-lived assets. There were no impairment
charges recorded for the years ended December 31, 2018, 2017, and 2016.
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, 2019
For the year ended December 31, 2020
For the year ended December 31, 2021
For the year ended December 31, 2022
For the year ended December 31, 2023
Thereafter
(cid:24)(cid:23)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
$
$
173,508
172,945
171,902
168,135
159,236
781,154
1,626,880
(cid:3)
(cid:3)
6. OTHER ASSETS:
Other assets as of December 31, 2018 and 2017 consisted of the following (in thousands):
Equity method investments
Other equity investments
Post-retirement plan assets
Other
Total other assets
Equity Method Investments
2018
2017
72,371 $
44,625
28,081
39,754
184,831 $
123,923
45,222
22,659
49,841
241,645
$
$
We have a portfolio of investments in entities that are primarily focused on the development of real estate, sustainability initiatives, and
other non-media businesses. For the years ended December 31, 2018, 2017, and 2016 none of our investments were individually
significant.
Summarized Financial Information. As described under Principles of Consolidation within Note 1. Nature of Operations and Summary of Significant
Accounting Policies, we record our proportionate share of net income generated by equity method investees in (loss) income from equity
method investments within our consolidated statements of operations. The summarized results of operations and financial position of
the investments accounted for under the equity method are as follows (in thousands):
For the years ended December 31,
Revenues, net
Operating (loss) income
Net loss
As of December 31,
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Other Equity Investments
2018
2017
2016
$
$
$
145,253 $
(58,359) $
(81,596) $
115,054 $
(17,470 ) $
(41,926 ) $
82,524
7,804
(2,285)
2018
2017
$
$
$
$
27,961 $
710,831 $
52,527 $
543,604 $
31,602
777,619
27,864
550,260
As discussed in Note 1. Nature of Operations and Summary of Significant Accounting Policies, we adopted ASU 2016-01 during the first
quarter of 2018. This standard requires the measurement of our investments, excluding equity method investments, at fair value or, in
situations where fair value is not readily determinable, we have the option to value investments at cost plus observable changes in value
less impairment. We had $24.5 million of investments accounted for utilizing the measurement alternative as of December 31, 2018. For
the year ended December 31, 2018, we recorded a $10.0 million impairment related to one investment accounted for utilizing the
measurement alternative, which is reflected in other income, net in our consolidated statements of operations.
As of December 31, 2018 and 2017, our unfunded commitments related to certain equity investments totaled $28.9 million and $10.7
million, respectively.
Post-retirement Plan Assets
Post-retirement plan assets primarily consist of the cash surrender value of life insurance policies and mutual funds. See Post-retirement
Benefits within Note 1. Nature of Operations and Summary of Significant Accounting Policies for further discussion of the Company's post-
retirement plans.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:24)(cid:24)(cid:3)
(cid:3)
(cid:3)
7. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
Notes payable, capital leases, and commercial bank financing (including capital leases to affiliates) consisted of the following as of
December 31, 2018 and 2017 (in thousands):
2018
2017
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 non-media subsidiaries
Capital leases
Capital leases - affiliate
Total outstanding principal
Less: Deferred financing costs and discount
Less: Current portion
Less: Capital leases - affiliate, current portion
Net carrying value of long-term debt
$
$
— $
95,892
1,342,600
600,000
500,000
550,000
350,000
400,000
25,281
19,577
29,562
12,524
3,925,436
(32,981)
(40,634)
(1,930)
3,849,891 $
117,370
113,327
1,356,300
600,000
500,000
550,000
350,000
400,000
29,614
25,238
31,696
14,152
4,087,697
(39,047 )
(159,382 )
(1,667 )
3,887,601
Indebtedness under the Bank Credit Agreement, notes payable, and capital leases as of December 31, 2018 matures as follows (in
thousands):
2019
2020
2021
2022
2023
2024 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
Capital Leases -
Affiliate
Total
$
38,065 $
36,631
682,363
521,871
14,663
2,589,757
3,883,350
(32,981)
—
3,850,369 $
5,110 $
4,847
4,861
4,744
4,819
18,754
43,135
—
(13,573)
29,562 $
2,978 $
3,093
3,046
2,441
2,319
2,290
16,167
—
(3,643)
12,524 $
46,153
44,571
690,270
529,056
21,801
2,610,801
3,942,652
(32,981)
(17,216)
3,892,455
Interest expense on the consolidated statements of operations was $292.0 million, $212.3 million, and $211.1 million for the years
ended December 31, 2018, 2017, and 2016, respectively. Interest expense included $7.5 million, $7.7 million, and $10.8 million in
amortization of deferred financing costs and debt discount for the years ended December 31, 2018, 2017, and 2016, respectively,
and $78.5 million in ticking fees and the write-off of previously capitalized debt issuance costs associated with the Tribune
acquisition which was subsequently terminated, for the year ended December 31, 2018.
(cid:24)(cid:25)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
The stated and weighted average effective interest rates on the above obligations are as follows:
Bank credit agreement:
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 2.00%
5.38%
6.13%
5.63%
5.88%
5.13%
Weighted Average Effective Rate
2018
4.12%
4.34%
—%
5.58%
6.31%
5.83%
6.09%
5.33%
2017
3.30%
3.32%
—%
5.58%
6.31%
5.83%
6.09%
5.33%
(a)(cid:3) LIBOR plus 2.0% if our first lien indebtedness ratio is less than 1.5x.
(b)(cid:3) As of December 31, 2018 and 2017, 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 $0.7 million and $0.8 million letters of credit under the revolver as of December 31, 2018 and 2017,
respectively. There were no borrowings under the revolver during the years ended December 31, 2018 and 2017.
We capitalized $0.9 million, $0.5 million, and $2.0 million as deferred financing costs during the years ended December 31, 2018, 2017,
and 2016, 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
in our consolidated balance sheets.
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 at which we 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.
Bank Credit Agreement
We have a syndicated credit facility which includes both revolving credit and issued term loans (Bank Credit Agreement). During the
year ended December 31, 2017, the Bank Credit Agreement was amended to provide additional operational flexibility. 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 as loss on extinguishment of debt.
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 9. Common Stock for further details. As
of December 31, 2018, we were in compliance with all financial ratios and covenants.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:24)(cid:26)(cid:3)
(cid:3)
(cid:3)
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, 2018, there were no material third party licensees as defined in our Bank Credit
Agreement.
Substantially all of our stock in our wholly-owned subsidiaries has been pledged as security for the Bank Credit Agreement.
Debt of variable interest entities and guarantees of third-party debt
We jointly, severally, unconditionally, and irrevocably guarantee $76.5 million and $74.0 million of debt of certain third parties as of
December 31, 2018 and 2017, respectively, of which $24.4 million and $29.3 million, net of deferred financing costs, related to
consolidated VIEs is included on our consolidated balance sheets as of December 31, 2018 and 2017, respectively. These guarantees
primarily relate to the debt of Cunningham as discussed under Cunningham Broadcasting Corporation within Note 13. Related Person
Transactions. 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, 2018 and 2017 was 4.87% and 3.59%,
respectively. We have determined that as of December 31, 2018 and 2017, it is not probable that we would have to perform under any
of these guarantees.
Debt of non-media subsidiaries
Debt of our consolidated subsidiaries related to our non-media private equity investments and real estate ventures is non-recourse to
us. Interest was paid on this debt at a fixed 3.88% during 2018. The weighted average effective interest rate for the debt of other non-
media subsidiaries for the years ended December 31, 2018 and 2017 was 3.94% and 4.31%, respectively.
Capital leases
Our capital leases with non-affiliates related primarily to broadcast towers. All of our tower leases will expire within the next 14 years
and it is expected that these leases will be renewed or replaced within the normal course of business. For more information related to
our affiliate capital leases, see Note 13. Related Person Transactions.
8. PROGRAM CONTRACTS:
Future payments required under program contracts as of December 31, 2018 were as follows (in thousands):
2019
2020
2021
2022
2023
Total
Less: Current portion
Long-term portion of program contracts payable
$
$
93,480
17,245
14,434
11,458
6,923
143,540
(93,480)
50,060
Each future period’s film liability includes contractual amounts owed, but 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 $23.6 million. In addition, we have entered into non-cancelable commitments for future program
rights aggregating to $70.8 million as of December 31, 2018.
(cid:24)(cid:27)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
9. COMMON STOCK:
Holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to ten votes
per share, except for votes relating to “going private” and certain other transactions. Substantially all of the Class B Common Stock is
held by David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith who entered into a stockholders’ agreement pursuant
to which they have agreed to vote for each other as candidates for election to our board of directors until December 31, 2025. The
Class A Common Stock and the Class B Common Stock vote together as a single class, except as otherwise may be required by Maryland
law, on all matters presented for a vote. Holders of Class B Common Stock may at any time convert their shares into the same number
of shares of Class A Common Stock. During 2018 and 2017, no 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:
• (cid:3) no event of default then exists under each indenture or certain other specified agreements relating to our indebtedness;
• (cid:3)
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 2018 and 2017, our Board of Directors declared a quarterly dividend in the months of February, May, August, and November
which were paid in March, June, September, and December, respectively. The quarterly dividend per share was increased from $0.18 to
$0.20 in November 2018. Total dividend payments for the years ended December 31, 2018 and 2017 were $0.74 and $0.72 per share,
respectively. In February 2019, our Board of Directors declared a quarterly dividend of $0.20 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 September 6, 2016 the Board of Directors approved a $150.0 million share repurchase program. On August 9, 2018, the Board of
Directors approved an additional $1.0 billion share repurchase authorization. There is no expiration date and currently, management has
no plans to terminate this program. For the year ended December 31, 2018, we have repurchased approximately 7.8 million shares of
Class A Common Stock for $220.9 million. As of December 31, 2018, the total remaining repurchase authorization was $868.0 million.
From January 1, 2019 through March 1, 2019, we repurchased an additional 3.5 million shares of Class A Common Stock for $105.0
million. As of March 1, 2019, the total remaining repurchase authorization was $763.1 million.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:24)(cid:28)(cid:3)
(cid:3)
(cid:3)
10. INCOME TAXES:
The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2018, 2017, and 2016 (in
thousands):
Current provision for income taxes:
Federal
State
Deferred (benefit) provision for income taxes:
Federal
State
(Benefit) provision for income taxes
2018
2017
2016
$
$
58,785 $
8,061
66,846
(68,802)
(33,819)
(102,621)
(35,775) $
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
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision:
Federal statutory rate
Adjustments:
Federal tax credits (a)
State income taxes, net of federal tax benefit (b)
Non-deductible items (c)
Effect of consolidated VIEs (d)
Federal tax reform (e)
Domestic production activities deduction
Other
Effective income tax rate
2018
2017
2016
21.0 %
35.0 %
35.0 %
(19.9 )%
(9.0 )%
(4.9 )%
1.6 %
(1.4 )%
— %
0.9 %
(11.7 )%
(2.2)%
5.0 %
1.5 %
1.0 %
(54.3)%
(1.7)%
0.6 %
(15.1)%
(0.4 )%
0.2 %
1.0 %
1.2 %
— %
(3.4 )%
(0.3 )%
33.3 %
(a)(cid:3) During the years ended December 31, 2018 and 2017, we recorded a benefit of $58.2 million and $8.3 million, respectively, related
to investments in sustainability initiatives whose activities qualify for federal income tax credits through 2021.
(b)(cid:3) Included in state income taxes are deferred income tax effects related to certain acquisitions, intercompany mergers and/or impact
of changes in apportionment.
(c)(cid:3) Our 2018 income tax provision includes a $17.7 million permanent benefit recognized from an IRS tax ruling on the treatment of
the gain from the sale of certain broadcast spectrum in connection with the Broadcast Incentive Auction, as discussed in Note 2.
Acquisitions and Dispositions of Assets.
(d)(cid:3) Certain of our consolidated VIEs incur expenses that are not attributable to non-controlling interests because we absorb certain
related losses of the VIEs. These expenses are not tax-deductible by us, and since these VIEs are treated as pass-through entities
for income tax purposes, deferred income tax benefits are not recognized.
(e)(cid:3) Our 2018 and 2017 income tax provisions include a non-recurring benefit of $4.3 million and $272.1 million, respectively, to reflect
the effect of the U.S. Tax Cuts and Jobs Act (Tax Reform) enacted on December 22, 2017.
(cid:25)(cid:19)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
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, 2018 and 2017 were as follows (in thousands):
Deferred Tax Assets:
Net operating 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
2018
2017
$
$
$
$
28,630 $
74,339
12,587
47,361
162,917
(65,887)
97,030 $
(427,339) $
(80,461)
(2,483)
(510,283)
(413,253) $
34,861
75,754
14,389
33,462
158,466
(62,865)
95,601
(514,776)
(80,630)
(15,431)
(610,837)
(515,236)
At December 31, 2018, the Company had approximately $136.3 million and $1.5 billion of gross federal and state net operating losses,
respectively. Those losses will expire during various years from 2019 to 2038, 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, 2018, 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, 2018, we increased our valuation allowance by $3.0 million to $65.9 million. The increase in valuation allowance was
primarily due to uncertainty in the realizability of a state deferred tax asset generated by a subsidiary in 2018. 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 was provided.
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 prior year tax positions
Reductions related to settlements with taxing authorities
Reductions related to expiration of the applicable statute of limitations
Balance at December 31,
2018
2017
2016
$
$
7,237 $
120
1,600
(453)
(436)
(1,493)
6,575 $
4,739 $
2,019
610
—
(131)
—
7,237 $
3,257
420
2,053
—
—
(991)
4,739
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 2015 and
subsequent federal and/or state tax returns remain subject to examination by various tax authorities. Some of our pre-2015 federal
and/or 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 do not believe that our liability for unrecognized tax benefits would be
materially impacted, 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.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:25)(cid:20)(cid:3)
(cid:3)
(cid:3)
11. COMMITMENTS AND CONTINGENCIES:
Litigation
We are a party to lawsuits, claims, and regulatory matters 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. Except as noted below, we do not believe the outcome of these matters, individually or in the aggregate, will have a
material effect on the Company's financial statements.
On December 21, 2017, the FCC issued a Notice of Apparent Liability for Forfeiture proposing a $13.4 million fine for alleged
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.
On November 6, 2018, the Company agreed to enter into a proposed consent decree with the Department of Justice (DOJ). This
consent decree resolves the Department of Justice’s investigation into the sharing of pacing information among certain stations in some
local markets. The DOJ filed the consent decree and related documents in the U.S. District Court for the District of Columbia on
November 13, 2018. The consent decree is not an admission of any wrongdoing by the Company, and does not subject Sinclair to any
monetary damages or penalties. The Company believes that even if the pacing information was shared as alleged, it would not have
impacted any pricing of advertisements or the competitive nature of the market. The consent decree requires the Company to adopt
certain antitrust compliance measures, including the appointment of an Antitrust Compliance Officer, consistent with what the
Department of Justice has required in previous consent decrees in other industries. The consent decree also requires the Company
stations not to exchange pacing and certain other information with other stations in their local markets, which the Company’s
management has already instructed them not to do.
The Company is aware of twenty-two putative class action lawsuits filed in United States District Court against the Company. Most of
these lawsuits were also brought against other broadcasters and other defendants, including, in certain cases, unidentified “John Doe”
defendants. The lawsuits allege that the defendants conspired to fix prices for commercials to be aired on broadcast television stations
throughout the United States, in violation of the Sherman Antitrust Act, and, in one case, state consumer protection and tort laws. The
lawsuits seek damages, attorneys’ fees, costs and interest, as well as injunctions against adopting practices or plans that would restrain
competition in the ways the plaintiffs have alleged. The lawsuits followed published reports of a DOJ investigation last year into the
exchange of pacing data within the industry. The Company believes the class action lawsuits are without merit and intends to vigorously
defend itself against all such claims.
On July 19, 2018, the FCC released a Hearing Designation Order (HDO) to commence a hearing before an Administrative Law Judge
(ALJ) with respect to the Company’s proposed acquisition of Tribune. The HDO directed the FCC's Media Bureau to hold in abeyance
all other pending applications and amendments thereto related to the proposed Merger with Tribune until the issues that are the subject
of the HDO have been resolved with finality. The HDO asked the ALJ to determine (i) whether Sinclair was the real party in interest to
the sale of WGN-TV, KDAF(TV), and KIAH(TV), (ii) if so, whether the Company engaged in misrepresentation and/or lack of candor
in its applications with the FCC and (iii) whether consummation of the overall transaction would be in the public interest and compliance
with the FCC’s ownership rules. The Company maintains that the overall transaction and the proposed divestitures complied with the
FCC’s rules, and strongly rejects any allegation of misrepresentation or lack of candor. The Merger Agreement was terminated by
Tribune on August 9, 2018, on which date the Company subsequently filed a letter with the FCC to withdraw the merger applications
and have them dismissed with prejudice and filed with the ALJ a Notice of Withdrawal of Applications and Motion to Terminate
Hearing (Motion). On August 10, 2018, the FCC's Enforcement Bureau filed a responsive pleading with the ALJ stating that it did not
oppose dismissal of the merger applications and concurrent termination of the hearing proceeding. Action on the Motion remains
pending. We cannot predict how the ALJ will act on the Motion or the timing for completion or the outcome of the ALJ hearing. While
review of the issues raised by the HDO remains pending, the Company's ability to acquire additional TV stations may be impacted.
(cid:25)(cid:21)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
On August 9, 2018, Tribune filed a complaint (the "Tribune Complaint") in the Court of Chancery of the State of Delaware against
the Company, which action is captioned Tribune Media Company v. Sinclair Broadcast Group, Inc, Case No. 2018-0593-JTL. The
Tribune Complaint alleges that the Company breached the Merger Agreement by, among other things, failing to use its reasonable best
efforts to secure regulatory approval of the Merger, and that such breach resulted in the failure of the Merger to obtain regulatory
approval and close. The Tribune Complaint seeks declaratory relief, money damages in an amount to be determined at trial (but which
the Tribune Complaint suggests could be in excess $1 billion), and attorney's fees and costs. On August 29, 2018, the Company filed its
Answer, Affirmative Defenses, and Verified Counterclaim to the Verified Complaint. In its counterclaim, the Company alleges that
Tribune breached the Merger Agreement and seeks declaratory relief, money damages in an amount to be determined at trial, and
attorneys ' fees and costs. Sinclair believes that the allegations in the Tribune Complaint are without merit and intends to vigorously
defend against such allegations.
On August 9, 2018, Edward Komito, a putative Company shareholder, filed a class action complaint (the “Initial Complaint”) in the
United States District Court for the District of Maryland (the "District of Maryland") against the Company, Christopher Ripley and Lucy
Rutishauser, which action is now captioned In re Sinclair Broadcast Group, Inc. Securities Ligitation, case No. 1:18-CV-02445-CCB (the
"Securities Action"). The Initial Complaint in the Securities Action alleges that defendants violated the federal securities laws by issuing
false or misleading disclosures concerning the Merger prior to the termination thereof. The Initial Complaint seeks declaratory relief,
money damages in an amount to be determined at trial, and attorney’s fees and costs. On December 10, 2018, the District of Maryland
appointed lead plaintiff's counsel in the Securities Action. Pursuant to a scheduling order entered by the court on December 20, 2018, as
amended, lead counsel in the Securities Action will file an amended complaint on or before March 1, 2019. The Company believes that
the allegations in the Komito Complaint are without merit and intends to vigorously defend against the allegations.
In addition, beginning in late July 2018, Sinclair received letters from two putative Company shareholders requesting that the board of
directors of the Company investigate whether any of the Company’s officers and directors committed nonexculpated breaches of
fiduciary duties in connection with, or gross mismanagement with respect to: (i) seeking regulatory approval of the Tribune Merger and
(ii) the HDO, and the allegations contained therein. A committee consisting of independent members of the board of directors has been
formed to respond to these demands (the Special Litigation Committee). The members of the Special Litigation Committee are Martin
R. Leader, Larry E. McCanna, and the Honorable Benson Everett Legg.
On November 29, 2018, putative Company shareholder Fire and Police Retiree Health Care Fund, San Antonio filed a shareholder
derivative complaint in the District of Maryland against the members of the Company’s board of directors, Mr. Ripley, and the Company
(as a nominal defendant), which action is captioned Fire and Police Retiree Health Care Fund, San Antonio v. Smith, et al., Case No.
1:18-cv-03670-RDB (the “San Antonio Action”). On December 26, 2018, putative Company shareholder Teamsters Local 677 Health
Services & Insurance Plan filed a shareholder derivative complaint in the Circuit Court of Maryland for Baltimore County (the “Circuit
Court”) against the members of the Company’s board of directors, Mr. Ripley, and the Company (as a nominal defendant), which action
is captioned Teamsters Local 677 Health Services & Insurance Plan v. Friedman, et al., Case No. 03-C-18-12119 (the “Teamsters
Action”). A defendant in the Teamsters Action removed the Teamsters action to the District of Maryland, and the plaintiff in that case
has moved to remand the case back to the Circuit Court. That motion is fully briefed and awaiting decision. On December 21, 2018,
putative Company shareholder Norfolk County Retirement System filed a shareholder derivative complaint in the District of Maryland
against the members of the Company’s board of directors, Mr. Ripley, and the Company (as a nominal defendant), which action is
captioned Norfolk County Retirement System v. Smith, et al., Case No. 1:18-cv-03952-RDB (the “Norfolk Action,” and together with the
San Antonio Action and the Teamsters Action, the “Derivative Actions”). The plaintiffs in each of the Derivative Actions allege
breaches of fiduciary duties by the defendants in connection with (i) seeking regulatory approval of the Tribune Merger and (ii) the
HDO, and the allegations contained therein. The plaintiffs in the Derivative Actions seek declaratory relief, money damages to be
awarded to the Company in an amount to be determined at trial, corporate governance reforms, equitable or injunctive relief, and
attorney’s fees and costs. Additionally, the plaintiffs in the Teamsters and Norfolk Actions allege that the defendants were unjustly
enriched, in the form of their compensation as directors and/or officers of the Company, in light of the alleged breaches of fiduciary
duty, and seek restitution to be awarded to the Company. These allegations are the subject matter of the review being conducted by the
Special Litigation Committee, as noted above.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:25)(cid:22)(cid:3)
(cid:3)
(cid:3)
Operating Leases
We have entered into operating leases for certain property and equipment under terms ranging from less than one year to 25 years .
The rent expense under these leases, as well as certain leases under month-to-month arrangements, for the years ended December 31,
2018, 2017, and 2016 was approximately $34.5 million, $28.7 million, and $26.0 million, respectively.
Future minimum payments under the leases are as follows (in thousands):
2019
2020
2021
2022
2023
2024 and thereafter
$
$
32,108
31,287
29,547
26,702
24,325
157,816
301,785
Changes in the Rules of 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 that made certain LMAs attributable. The FCC adopted policies
to grandfather 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 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
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 that 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.
(cid:25)(cid:23)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
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 existing 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. On
November 20, 2017, the FCC released an Ownership Order on Reconsideration that, among other things, eliminated the JSA attribution
rule. The rule changes adopted in the Ownership Order on Reconsideration became effective on February 7, 2018. Petitions for Review
of the Ownership Order on Reconsideration, including the elimination of the JSA attribution rule, are currently pending in a
consolidated proceeding before the U.S. Court of Appeals for the Third Circuit. We cannot predict the outcome of this proceeding. If
we are required to terminate or modify our LMAs or JSAs, our business could be adversely affected in several ways, including loss of
revenues, increased costs, losses on investments, and termination penalties.
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. A Petition for
Review of the UHF Discount Order on Reconsideration was filed in the U.S. Court of Appeals for the D.C. Circuit on May 12, 2017.
The court dismissed the Petition for Review on July 25, 2018. 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 the rulemaking
proceeding. With the application of the UHF discount counting all our present stations we reach approximately 25% of U.S.
households. Changes to the national ownership cap could limit our ability to make television station acquisitions.
On December 13, 2018, the FCC released a Notice of Proposed Rulemaking to initiate the 2018 Quadrennial Regulatory Review of
the FCC’s broadcast ownership rules. The NPRM seeks comment on whether the Local Radio Ownership Rule, the Local Television
Ownership Rule, and the Dual Network Rule continue to be necessary in the public interest or whether they should be modified or
eliminated. With respect to the Local Television Ownership Rule specifically, among other things, the NPRM seeks comment on
possible modifications to the rule’s operation, including the relevant product market, the numerical limit, the top-four prohibition; and
the implications of multicasting, satellite stations, low power stations and the next generation standard. In addition, the NPRM examines
further several diversity related proposals raised in the last quadrennial review proceeding. The public comment period will begin 60 days
after publication of the NPRM in the Federal Register, which publication not yet occurred. We cannot predict the outcome of the
rulemaking proceeding. Changes to these rules could impact our ability to make radio or television station acquisitions.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:25)(cid:24)(cid:3)
(cid:3)
(cid:3)
12. VARIABLE INTEREST ENTITIES:
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.
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, 2018 and 2017 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
LIABILITIES
Current liabilities:
Other current liabilities
Notes payable, capital leases and commercial bank financing, less current portion
Program contracts payable, less current portion
Other long term liabilities
Total liabilities
2018
2017
28,276 $
6,773
35,049
2,058
5,346
15,064
67,680
2,374
127,571 $
19,566
8,937
28,503
822
6,215
15,064
74,442
5,601
130,647
18,298 $
23,564
19,278
8,474
650
46,700 $
23,217
11,213
650
58,644
$
$
$
$
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. The total capital lease liabilities, net of capital lease
assets, which are excluded from the above, were $4.5 million, for both years ended December 31, 2018 and 2017. Total liabilities
associated with certain outsourcing agreements and purchase options with certain VIEs, which are excluded from above, were $124.5
million and $116.5 million as of December 31, 2018 and December 31, 2017, respectively, as these amounts are eliminated in
consolidation. The assets of each of these consolidated VIEs can only be used to settle the obligations of the VIE. As of
December 31, 2018, all of the liabilities are non-recourse to us except for the debt of certain VIEs. See Debt of variable interest entities and
guarantees of third-party debt under Note 7. Notes Payable and Commercial Bank Financing for further discussion. The risk and reward
characteristics of the VIEs are similar.
(cid:25)(cid:25)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
Other VIEs
We have several investments in entities 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.
The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary as of December 31, 2018 and
2017 was $71.3 million and $115.7 million, respectively, and are included in other assets in our consolidated balance sheets. See Note 6.
Other Assets for more information related to our equity investments. Our maximum exposure is equal to the carrying value of our
investments. The income and loss related to equity method investments and other equity investments are recorded in (loss) income from
equity method investments and other income, net, respectively, in our consolidated statements of operations. We recorded losses of
$45.1 million and $5.3 million for the years ended December 31, 2018 and 2017, respectively, and income of $2.5 million for the year
ended December 31, 2016, related to these investments.
13. 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 $5.0 million for the year ended December 31, 2018 and $5.1 million for both the years ended
December 31, 2017 and 2016.
Capital leases payable related to the aforementioned relationships were $12.5 million, net of $3.6 million interest, and $14.2 million, net
of $4.9 million interest, as of December 31, 2018 and 2017, respectively. The capital leases mature in periods through 2029. For further
information on capital leases to affiliates, see Note 7. Notes Payable and Commercial Bank Financing.
Charter Aircraft. We lease aircraft owned by certain controlling shareholders. For all leases, we incurred expenses of $1.7 million, $1.9
million, and $1.4 million for the years ended December 31, 2018, 2017, and 2016, respectively.
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; WEMT-TV Tri-Cities, Tennessee; WYDO-TV
Greenville, North Carolina; KBVU-TV/KCVU-TV Eureka/Chico-Redding, California; WPFO-TV Portland, Maine; and KRNV-
DT/KENV-DT Reno, Nevada/Salt Lake City, Utah (collectively, the Cunningham Stations). Certain of our stations provide services to
these Cunningham Stations pursuant to LMAs or JSAs and SSAs. See Note 12. Variable Interest Entities, for further discussion of the
scope of services provided under these types of arrangements. As of December 31, 2018, we have jointly, severally, unconditionally, and
irrevocably guaranteed $50.3 million of Cunningham debt, of which $10.0 million, net of $0.7 million deferred financing costs, relates to
the Cunningham VIEs that we consolidate, as discussed further below.
The voting stock of the Cunningham Stations was owned by the estate of Carolyn C. Smith, the mother of our controlling
shareholders, until January 2018, when the voting stock was purchased by an unrelated party after receiving FCC approval. 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, as discussed
further below.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:25)(cid:26)(cid:3)
(cid:3)
(cid:3)
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
or (ii) $5.0 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 cumulative prepayments made under these purchase agreements
were $47.4 million and $44.0 million as of December 31, 2018 and 2017, respectively. The remaining aggregate purchase price of these
stations, net of prepayments, as of both December 31, 2018 and 2017 was approximately $53.6 million. Additionally, we provide services
to WDBB-TV pursuant to an LMA, which expires April 22, 2025, and a purchase option to acquire for $0.2 million. We paid
Cunningham, under these agreements, $10.0 million, $9.1 million, and $8.9 million for the years ended December 31, 2018, 2017, and
2016, respectively.
The agreements with KBVU-TV/KCVU-TV, KRNV-DT/KENV-DT, WBSF-TV, WEMT-TV, WGTU-TV/WGTQ-TV, WPFO-TV,
and WYDO-TV expire between December 2020 and August 2025, and certain stations have renewal provisions for successive eight year
periods. Cunningham assumed the joint sales agreement under which we provide services to WEMT-TV, WYDO-TV, and KBVU-
TV/KCVU-TV in September 2017 with the acquisition of the membership interest of Esteem Broadcasting LLC in connection with our
acquisition of Bonten Media Group, as discussed in Note 2. Acquisitions and Dispositions of Assets.
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 on our consolidated statement of operations. Our consolidated revenues include $171.0
million, $124.8 million, and $114.9 million for the years ended December 31, 2018, 2017, and 2016, respectively, related to the
Cunningham Stations.
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 Cunningham has 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. In August 2016, we entered into an agreement, expiring in October 2021, with Cunningham to provide a news
share service with the Johnstown, PA station beginning in October 2016 for an annual fee of $1.0 million.
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 $0.2 million for the year ended
December 31, 2018 and $0.6 million for the years ended December 31, 2017 and 2016.
Leased property by real estate ventures
Certain of our real estate ventures have entered into leases with entities owned by members of the Smith Family. Total rent received
under these leases was $0.7 million, $0.6 million, and $1.0 million for the years ended December 31, 2018, 2017, and 2016, respectively.
Other transactions with equity method investees
In 2018, 120 Sports Holding, LLC (120 Sports), an equity method investee, entered into a convertible promissory note to borrow
$3.75 million from us, maturing on July 30, 2021. The note bears interest at a fixed rate of 6.0% per annum.
(cid:25)(cid:27)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
14. 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, 2018, 2017, and 2016 (in thousands):
Income (Numerator)
Net income
Net income attributable to noncontrolling interests
Numerator for diluted earnings available to common shareholders
2018
2017
2016
$
$
345,998 $
(4,757)
341,241 $
594,104 $
(18,091)
576,013 $
250,762
(5,461)
245,301
Shares (Denominator)
Weighted-average common shares outstanding
Dilutive effect of outstanding stock settled appreciation rights and stock
Weighted-average common and common equivalent shares outstanding
i
100,913
805
101,718
99,844
945
100,789
93,567
866
94,433
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
2018
2017
2016
1,325
450
556
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:25)(cid:28)(cid:3)
(cid:3)
(cid:3)
15. SEGMENT DATA:
We measure segment performance based on operating income (loss). Our broadcast segment, includes stations in 89 markets located
throughout the continental United States. Other primarily consists of owned 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 $155.8 million and $159.8 million of intercompany loans between broadcast, other and corporate as of
December 31, 2018 and 2017, respectively. We had $15.3 million, $18.5 million, and $24.4 million in intercompany interest expense
related to intercompany loans between broadcast, other, and corporate for the years ended December 31, 2018, 2017 and 2016,
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, 2018, 2017, and
2016 (in thousands):
Broadcast
$
2,714,663
97,703
Other
Corporate
$
340,418
7,461
$
Consolidated
3,055,081
105,240
— $
76
153,720
21,128
—
174,848
100,899
100,241
(99,977) (d)
751,341 (d)
5,734
—
2,054,779
4,797,420
94,812
—
913
—
9,916
100,899
111,070
60,032
(c)
(81,805) (c)
803
(60,831)
69,123
720,704
5,155
(118)
(9,875)
285,439
—
—
1,053,968
5,094
(40,063)
659,661
291,976
(60,831)
2,123,902
6,572,092
105,061
Broadcast
$
2,393,641 $
88,751
242,574
7,368
$
Other
Corporate
Consolidated
2,636,215
97,103
— $
984
155,640
23,182
—
178,822
115,523
101,680
(225,770)
724,110
5,285
—
2,053,410
5,267,986
63,163
—
1,009
(53,102) (b)
24,943 (b)
1,835
(14,307)
70,623
769,919
5,546
—
10,564
—
(11,547)
205,195
—
—
746,565
15,103
115,523
113,253
(278,872)
737,506
212,315
(14,307)
2,124,033
6,784,470
83,812
For the year ended December 31, 2018
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
(Gain) loss on asset dispositions and other, net of
impairment
Operating income (loss)
Interest expense
Loss from equity method investments
Goodwill
Assets
Capital expenditures
For the year ended December 31, 2017
Revenue (a)
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
(Gain) loss on asset dispositions and other, net of
impairment
Operating income (loss)
Interest expense
Loss from equity method investments
Goodwill
Assets
Capital expenditures
(cid:26)(cid:19)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
For the year ended December 31, 2016
Revenue (a)
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
(Gain) loss on asset dispositions and other, net of
impairment
Operating income (loss)
Interest expense
Income from equity method investments
Broadcast
$
2,416,985 $
91,573
205,525 $
5,772
Other
Corporate
— $
Consolidated
2,622,510
98,529
1,184
155,479
28,316
—
183,795
127,880
67,035
(4,647)
639,422
5,641
—
—
2,459
(1,427)
(31,258)
6,371
906
—
4,062
45
(5,311)
199,131
—
127,880
73,556
(6,029)
602,853
211,143
906
(a)(cid:3) Revenue has been adjusted for the adoption of ASC 606. See Note 1. Nature of Operations and Summary of Significant Accounting Policies
(b)(cid:3) Includes a gain on the sale of Alarm of $53.0 million, of which $12.3 million was attributable to noncontrolling interests.
(c)(cid:3) Includes a $59.6 million impairment to the carrying value of a consolidated real estate venture. See Note 1. Nature of Operations and
Summary of Significant Accounting Policies.
(d)(cid:3) Includes a gain of $83.3 million related to the auction proceeds. See Note 2. Acquisitions and Dispositions of Assets.
16. FAIR VALUE MEASUREMENTS:
Accounting guidance provides for valuation techniques, such as the market approach (comparable market prices), the income approach
(present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement
cost). A fair value hierarchy using three broad levels prioritizes the inputs to valuation techniques used to measure fair value. The
following is a brief description of those three levels:
• (cid:3) Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
• (cid:3) 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.
• (cid:3) Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The following table sets forth the face value and fair value of our notes and debentures as of December 31, 2018 and 2017 (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 (b)
Term Loan A-2
Term Loan B
Debt of variable interest entities
Debt of non-media subsidiaries
2018
2017
Face Value (a)
Fair Value
Face Value (a)
Fair Value
500,000 $
350,000
550,000
600,000
400,000
—
95,892
1,342,600
25,281
19,577
503,750 $
326,375
515,625
598,500
353,000
—
92,057
1,275,470
25,281
19,577
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
(a)(cid:3) Amounts are carried on our consolidated balance sheets net of debt discount and deferred financing costs, which are excluded in
the above table, of $33.0 million and $39.0 million as of December 31, 2018 and 2017, respectively.
(b)(cid:3) Term Loan A-1 debt matured in April 2018.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:26)(cid:20)(cid:3)
(cid:3)
(cid:3)
17. 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, 2018, 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, 2018, our consolidated total debt of $3,892.5 million included $3,843.5 million of
debt related to STG and its subsidiaries of which SBG guaranteed $3,831.0 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.
(cid:26)(cid:21)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2018
(In thousands)
Sinclair
Broadcast
Group,
Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Cash and cash equivalents
Accounts and other receivables
Other current assets
Total current assets
$
— $
—
3,235
3,235
961,963 $
—
5,548
967,511
19,648 $
530,543
103,111
653,302
78,719 $
68,054
37,157
183,930
Eliminations
Sinclair
Consolidated
— $ 1,060,330
598,597
—
124,979
(24,072)
1,783,906
(24,072)
Property and equipment, net
754
31,773
593,755
70,223
(13,371)
683,134
Investment in consolidated subsidiaries
Other long-term assets
Goodwill
Indefinite-lived intangible assets
Definite-lived intangible assets
1,604,234
31,002
—
—
—
3,654,263
851,170
—
—
—
4,179
119,187
2,120,035
143,924
1,608,748
Total assets
$ 1,639,225 $ 5,504,717 $ 5,243,130 $
—
—
(5,262,676)
196,048
165,064
(970,375)
2,123,902
—
3,867
158,222
—
14,298
70,409
1,626,880
(52,277)
507,791 $ (6,322,771) $ 6,572,092
Accounts payable and accrued liabilities $
Current portion of long-term debt
Other current liabilities
Total current liabilities
100 $
—
—
100
78,814 $
31,135
—
109,949
273,444 $
4,100
107,051
384,595
85,875 $
7,842
9,743
103,460
(25,006) $
(513)
—
(25,519)
413,227
42,564
116,794
572,585
Long-term debt
Other liabilities
Total liabilities
—
289
389
3,775,489
40,132
3,925,570
36,551
1,169,184
1,590,330
381,913
173,197
658,570
(344,062)
(833,506)
(1,203,087)
3,849,891
549,296
4,971,772
Total Sinclair Broadcast Group equity
Noncontrolling interests in consolidated
subsidiaries
Total liabilities and equity
1,638,836
1,579,147
3,652,800
(107,825)
(5,124,122)
1,638,836
—
—
—
$ 1,639,225 $ 5,504,717 $ 5,243,130 $
(42,954)
(38,516)
4,438
507,791 $ (6,322,771) $ 6,572,092
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:26)(cid:22)(cid:3)
(cid:3)
(cid:3)
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
Accounts and other receivables
Other current assets
Total current assets
$
— $
—
—
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)
Property and equipment, net
829
31,111
586,950
132,010
(12,602)
738,298
Investment in consolidated subsidiaries
Other long-term assets
Goodwill
Indefinite-lived intangible assets
Definite-lived intangible assets
1,537,337
31,757
—
—
—
4,116,241
770,312
—
—
—
4,179
104,363
2,120,166
145,073
1,781,045
Total assets
$ 1,572,957 $ 5,569,252 $ 5,741,069 $
—
—
(5,657,757)
246,351
208,367
(868,448)
2,124,033
—
3,867
159,371
—
14,298
77,944
1,801,670
(57,319)
507,587 $ (6,606,395) $ 6,784,470
Accounts payable and accrued liabilities $
Current portion of long-term debt
Other current liabilities
Total current liabilities
1,100 $
—
—
1,100
84,326 $
148,505
—
232,831
261,266 $
3,445
180,616
445,327
36,029 $
9,645
14,281
59,955
(12,318) $
(546)
—
(12,864)
370,403
161,049
194,897
726,349
Long-term debt
Other liabilities
Total liabilities
—
3,119
4,219
3,799,987
38,282
4,071,100
39,730
1,141,266
1,626,323
381,127
187,569
628,651
(333,243)
(734,082)
(1,080,189)
3,887,601
636,154
5,250,104
Total Sinclair Broadcast Group equity
Noncontrolling interests in consolidated
subsidiaries
Total liabilities and equity
1,568,738
1,498,152
4,114,746
(82,051)
(5,530,847)
1,568,738
—
—
—
$ 1,572,957 $ 5,569,252 $ 5,741,069 $
(39,013)
(34,372)
4,641
507,587 $ (6,606,395) $ 6,784,470
(cid:26)(cid:23)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2018
(In thousands)
Net revenue
$
— $
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
7 $ 2,855,586 $
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
(93,620) $ 3,055,081
293,108 $
Media production expenses
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
9,916
2
100,251
1,130,278
613,074
141,622
19,740
(80,886)
(1,992)
1,191,016
740,989
483
10,399
4,951
105,204
257,877
2,001,229
206,980
368,342
(6,876)
(89,754)
463,415
2,395,420
Operating (loss) income
(10,399)
(105,197)
854,357
(75,234)
(3,866)
659,661
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)
348,090
(1)
1,856
349,945
724,476
(285,438)
(1,852)
437,186
(457)
(3,961)
(57,288)
(61,706)
—
(18,482)
(178)
(18,660)
(1,072,109)
15,906
—
(1,056,203)
—
(291,976)
(57,462)
(349,438)
1,695
341,241
89,852
421,841
(62,252)
730,399
6,480
(87,414)
—
(1,060,069)
35,775
345,998
—
—
—
(4,959)
202
(4,757)
$
$
$
341,241
346,637 $
$
421,841
422,480 $
$
730,399
730,399 $
(92,373) $ (1,059,867) $
(87,414) $ (1,065,465) $
341,241
346,637
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:26)(cid:24)(cid:3)
(cid:3)
(cid:3)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2017
(In thousands)
Net revenue (a)
$
— $
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
— $ 2,507,183 $
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
(80,882) $ 2,636,215
Media production expenses
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
9,204
—
102,930
1,013,035
522,039
984
10,188
6,250
109,180
131,880
1,666,954
209,914 $
124,044
14,800
51,461
190,305
(72,935)
(2,183)
1,064,144
646,790
(2,800)
(77,918)
187,775
1,898,709
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
(88)
1,678
581,544
793,620
(205,107)
5,077
593,590
(16)
(4,586)
(5,790)
(10,392)
—
(21,643)
(7,412)
(29,055)
(1,373,558)
19,109
—
(1,354,449)
—
(212,315)
(6,447)
(218,762)
4,657
576,013
100,473
584,883
(30,171)
799,666
401
(9,045)
—
(1,357,413)
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
(a) See Revenue Recognition within Note 1. Nature of Operations and Summary of Significant Accounting Policies for a discussion of the adoption of
the new accounting principles for revenue recognition.
(cid:26)(cid:25)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
(In thousands)
Net revenue (a)
$
— $
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
— $ 2,476,669 $
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
(108,190) $ 2,622,510
254,031 $
Media production expenses
Selling, general and administrative
Depreciation, amortization and other
operating expenses
Total operating expenses
—
4,062
1,064
5,126
—
70,503
920,715
489,882
135,511
10,804
(100,622)
(106)
955,604
575,145
7,331
77,834
360,550
1,771,147
121,986
268,301
(2,023)
(102,751)
488,908
2,019,657
Operating (loss) income
(5,126)
(77,834)
705,522
(14,270)
(5,439)
602,853
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
463,598
(198,893)
(22,867)
241,838
220
(4,481)
715
(3,546)
—
(32,521)
(281)
(32,802)
(708,398)
24,990
—
(683,408)
—
(211,143)
(18,820)
(229,963)
2,472
245,301
99,148
263,152
(231,504)
470,472
7,756
(39,316)
—
(688,847)
(122,128)
250,762
—
—
—
(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
(a) See Revenue Recognition within Note 1. Nature of Operations and Summary of Significant Accounting Policies for a discussion of the adoption of
the new accounting principles for revenue recognition.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:26)(cid:26)(cid:3)
(cid:3)
(cid:3)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2018
(In thousands)
NET CASH FLOWS (USED IN)
FROM OPERATING ACTIVITIES
CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES:
Acquisition of property and
equipment
Proceeds from sale of assets
Investments in equity investees
Distributions from equity method
investees
Other, net
Net cash flows from (used in)
investing activities
CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES:
Proceeds from notes payable,
commercial bank financing and
capital leases
Repayments of notes payable,
commercial bank financing and
capital leases
Dividends paid on Class A and
Class B Common Stock
Repurchase of outstanding Class A
Common Stock
Payments for deferred financing cost
Distributions to noncontrolling
interests
Increase (decrease) in intercompany
payables
Other, net
Net cash flows from (used in)
financing activities
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
$
(8,542) $
(252,615) $
936,385
$
(40,533) $
12,723
647,418
(1)
—
(2,587)
4,728
1,670
(6,592)
—
(1,975)
—
(12,091)
(98,201)
1,616
(27,960)
—
8,626
(3,914)
—
(3,283)
18,106
—
3,647
—
—
—
—
(105,061)
1,616
(35,805)
22,834
(1,795)
3,810
(20,658)
(115,919)
10,909
3,647
(118,211)
—
—
(74,566)
(220,889)
—
—
—
—
4,317
(148,505)
(3,554)
(15,120)
—
—
—
—
—
—
—
—
—
—
(922)
(8,901)
—
394
—
—
—
—
4,317
(166,785)
(74,566)
(220,889)
(922)
(8,901)
297,256
2,931
737,911
—
(1,117,417)
(3,230)
100,440
1,802
(18,190)
1,426
—
2,929
4,732
589,406
(1,124,201)
81,616
(16,370)
(464,817)
NET INCREASE (DECREASE) IN
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH, beginning of
period
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH, end of period $
—
—
316,133
(303,735)
51,992
645,830
323,383
26,727
—
—
64,390
995,940
—
$
961,963
$
19,648
$
78,719
$
—
$
1,060,330
(cid:26)(cid:27)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2017 (a)
(In thousands)
NET CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
CASH FLOWS FROM (USED IN)
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 investees
Distributions from equity method
investees
Spectrum auction proceeds
Other, net
Net cash flows from (used in)
investing activities
CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES:
Proceeds from notes payable,
commercial bank financing and capital
leases
Repayments of notes payable,
commercial bank financing and capital
leases
Proceeds from 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
Distributions to noncontrolling interests
Increase (decrease) in intercompany
payables
Other, net
Net cash flows from (used in)
financing activities
NET INCREASE IN CASH, CASH
EQUIVALENTS, AND RESTRICTED
CASH
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH,
beginning of period
CASH, CASH EQUIVALENTS, AND
RESTRICTD CASH, end of period
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
$
(8,659) $
(180,966 ) $
600,070
$
12,424
$
8,544
$
431,413
(130)
(14,973 )
(68,475)
(2,930)
2,696
(83,812)
—
—
—
(946)
5,857
—
740
(8,308 )
—
—
(720 )
—
—
11,551
(262,965)
—
568
(20,701)
—
310,802
—
—
(5,682)
194,641
(32,762)
6,321
—
—
—
—
—
—
—
—
—
(271,273)
(5,682)
195,209
(55,129)
12,178
310,802
12,291
5,521
(12,450 )
(40,771)
159,588
2,696
114,584
—
159,669
—
7,128
—
166,797
(1,858)
(213,919 )
(3,381)
(121,270)
320
(340,108)
487,883
(71,364)
(30,287)
—
—
—
—
—
(425 )
—
—
—
—
—
—
(381,344)
108
660,911
713
(242,402)
(1,008)
—
—
—
(306)
(22,416)
(25,605)
172
—
—
—
—
—
(11,560)
—
487,883
(71,364)
(30,287)
(731)
(22,416)
—
(15)
3,138
606,949
(246,791)
(162,297)
(11,240)
189,759
—
—
413,533
312,508
9,715
232,297
10,875
17,012
—
—
735,756
260,184
$
—
$
645,830
$
323,383
$
26,727
$
—
$
995,940
(a) See Recent Accounting Pronouncements within Note 1. Nature of Operations and Summary of Significant Accounting Policies for a discussion of
the adoption of new accounting principles related to the classification of certain cash receipts and cash payments.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:26)(cid:28)(cid:3)
(cid:3)
(cid:3)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016 (a)
(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 assets
Investments in equity investees
Other, net
Net cash flows (used in) from
investing activities
CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES:
Proceeds from notes payable,
commercial bank financing and capital
leases
Repayments of notes payable,
commercial bank financing and capital
leases
Dividends paid on Class A and Class B
Common Stock
Repurchases of outstanding Class A
Common Stock
Payments for deferred financing costs
Distributions to noncontrolling
interests
Increase (decrease) in intercompany
payables
Other, net
Net cash flows from (used in)
financing activities
NET INCREASE (DECREASE) IN
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH,
beginning of period
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH, end of period
Sinclair
Broadcast
Group, Inc.
Sinclair
Television
Group, Inc.
Guarantor
Subsidiaries
and KDSM,
LLC
Non-
Guarantor
Subsidiaries
Eliminations
Sinclair
Consolidated
$
(11,784) $
(130,406) $
721,991
$
7,914
$
23,875
$
611,590
—
—
—
—
(2,945)
1,714
(8,006)
(82,450)
(5,009 )
1,000
(94,465)
—
—
—
(15,620)
(25,120)
(415,282)
—
8,069
(27)
3,179
(10,375 )
(40,206 )
9,133
(32,655 )
5,072
—
—
—
—
—
(425,657)
(40,206)
17,202
(51,247)
(15,155)
(1,231)
(48,746)
(486,511)
(74,040 )
1,000
(609,528)
—
995,000
—
29,912
—
1,024,912
(1,651)
(650,422)
(3,007)
(19,612 )
(65,909)
(136,283)
—
—
—
(35,254)
—
—
—
—
—
—
218,054
(1,196)
(17,778)
407
(224,551)
2,718
—
—
(251 )
(10,464 )
49,403
184
253
—
—
—
—
(674,439)
(65,909)
(136,283)
(35,505)
(10,464)
(25,128)
—
—
2,113
13,015
291,953
(224,840)
49,172
(24,875)
104,425
—
—
112,801
10,640
(16,954 )
119,496
235
33,966
—
—
106,487
153,697
$
—
$
232,297
$
10,875
$
17,012
$
—
$
260,184
(a) See Recent Accounting Pronouncements within Note 1. Nature of Operations and Summary of Significant Accounting Policies for a discussion of
the adoption of new accounting principles related to the classification of certain cash receipts and cash payments.
(cid:27)(cid:19)(cid:3)(cid:122)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:79)(cid:68)(cid:76)(cid:85)(cid:3)(cid:37)(cid:85)(cid:82)(cid:68)(cid:71)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)
(cid:3)
(cid:3)
(cid:3)
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
Total revenues, net (b)
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
3/31/2018
6/30/2018
9/30/2018
12/31/2018
665,352 $
107,314 $
43,994 $
43,123 $
0.42 $
0.42 $
730,143 $
131,583 $
29,310 $
28,042 $
0.27 $
0.27 $
766,261 $
157,810 $
65,000 $
63,875 $
0.63 $
0.62 $
893,325
262,954
207,694
206,201
2.12
2.10
3/31/2017
6/30/2017
9/30/2017
For the Quarter Ended
626,936 $
157,629 $
70,703 $
57,202 $
0.62 $
0.61 $
652,235 $
118,849 $
46,035 $
44,645 $
0.43 $
0.43 $
12/31/2017 (a)
712,512
357,581
444,800
443,529
4.36
4.32
644,532 $
103,447 $
32,566 $
30,637 $
0.30 $
0.30 $
(a)(cid:3) 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 Incentive 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 10. Income Taxes.
(b)(cid:3) See Revenue Recognition within Note 1. Nature of Operations and Summary of Significant Accounting Policies for a discussion of the adoption
of the new accounting principles for revenue recognition.
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:122)(cid:3)(cid:27)(cid:20)(cid:3)
(cid:3)
(cid:3)
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 (the
“Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income,
equity, and cash flows for each of the three years in the period ended December 31, 2018, 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, 2018, 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, 2018 and 2017, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2018 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, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
revenues from contracts with customers, the manner in which it accounts for the classification and presentation of restricted cash in
the statement of cash flows, and the manner in which certain cash receipts and payments are presented in the statement of cash
flows in 2018.
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. 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.
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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, 2019
We have served as the Company’s auditor since 2009.
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TELEVISION STATION MANAGEMENT
Each of our stations or markets has a general manager and a group manager. The group managers are responsible for managing a
number of stations and in some cases are also the general managers for a station or market. Below is a list of our group managers and
general managers as well as the station or market for each general manager.
GROUP MANAGERS
Kent Crawford
Ann Ellis
William Fanshawe
Alan Frank
Daniel Hoffman
GENERAL MANAGERS
James Killen
Jonathan Lawhead
Daniel Mellon
John Seabers
Steven Marks
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
Matthew Bowman - New Bern/Greenville, North Carolina
William Bradley - Harrisburg/Lancaster/Lebanon/York,
Pennsylvania
Teresa Burgess - Bakersfield, California
Thomas Burke - Minneapolis/St. Paul, Minnesota
Robert Butterfield - West Palm Beach/Fort Pierce, Florida
Jonathan 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
Daniel Corken - Corpus Christi, Texas
Gregory Conner -Albany, Georgia
Frederick Corbus - Grand Rapids, Michigan
Kent Crawford - Salt Lake City, Utah
Cory Culleton - Gainesville, Florida/ Savannah, Georgia
Anthony D’Angelo - Columbus, Ohio
John Dittmeier - Tallahassee, Florida
James Doty - Johnstown/Altoona, Pennsylvania
Janene Drafs - Seattle/Tacoma, Washington
William Fanshawe - Baltimore, MD
Joseph Fishleigh - Asheville, North Carolina/Greenville, South
Carolina
Steven Flint - Tri-Cities, North Carolina/Tennessee/Virgina
James Hanning - Toledo, Ohio
Jennifer Hansen - Richmond, Virginia
Teresa Garfield - Chico-Redding, California
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
Thomas Humpage - Portland, Maine
JR Jackson - Eugene, Oregon
Matthew Kaplowitz - El Paso, Texas
George Kayes - Roanoke/Lynchburg, Virginia
Kingsley Kelley - Medford, Oregon
Carol Kellum - Ottumwa, Iowa/Kirksville, Missouri
Eric Krieghoff - Madison, Wisconsin
William Lanesey - Oklahoma City, Oklahoma
Eric Land - Birmingham, Alabama
James Lapiana - Pittsburgh, Pennsylvania
Jonathan Lawhead - Cincinnati, Ohio
Karen Lincoln - Macon, Georgia
Frederick Lipps - Champaign/Springfield/Decatur, Illinois
Thomas Long - Boise, Idaho
Jay Lowe - Pensacola, Florida
Nicholas Magnini - Buffalo, New York
Timothy McCoy - Wheeling, West Virginia/Steubenville, Ohio
Daniel Mellon – Arlington/Norfolk, Virginia/Washington, DC
Sharon Merrell - Quincy, Illinois/Hannibal, Missouri/
Keokuk, Iowa
Jeffrey Miller - Omaha, Nebraska
Mary Margaret Nelms - Charleston, South Carolina
Vincent Nelson - Albany, New York
John Nizamis - South Bend-Elkhart, Indiana
Noreen Parker - Nashville, Tennessee
Jack Peck - Fresno/Visalia, California
David Praga - Spokane-Yakima/Pasco/Richland/Kennewick,
Washington
Michael Pumo - West Palm Beach/Fort Pierce, Florida
Dean Radla - San Antonio, Texas
Todd Ricke - Chattanooga, Tennessee
Jennifer Rieffer - Lexington, Kentucky
Mark Rose - Little Rock/Pine Bluff, Arkansas
Charles Samuels - Rochester, New York
Shane Schwirian - Charleston/Huntington, West Virginia
John Seabers - San Antonio, Texas
Larry Strumwasser - Las Vegas, Nevada
Guyanne Taylor - Amarillo, Texas
Thomas Tipton - St. Louis, Missouri-Cape Girardeau,
Missouri/Paducah, Kentucky
RobertTotsch - 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
Steven Rohrer - Des Moines/Ames, Iowa
Elizabeth Worsham - Columbia/Jefferson City, Missouri
Jay Zollar - Green Bay/Appleton, Wisconsin
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
Douglas Martz - Senior Vice President, Ad Sales and Integrated
Partnerships
Deirdre O’Grady - Vice President, Planning and Operations
Lee Schlazer - Vice President, Distribution
Peter Steckelman - Senior Vice President, Business & Legal
Adam Ware - General Manager
Robert Whyley - Senior Vice President, Production
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Kenneth A. Solomon
President, Tennis Channel Inc.
William S. Simon
Executive Vice President,
Chief Operating Offi cer & Chief Financial
Offi cer, Tennis Channel Inc.
Adam J. Ware
General Manager, STIRR and SVP, Head of
Digital Media, Tennis Channel Inc.
Stephen R. Altshuler
President, Triangle Sign & Service LLC
Robert M. Kaye
Executive Vice President, Triangle Sign &
Service LLC
SUBSIDIARY OFFICERS & KEY
MANAGEMENT
SINCLAIR TELEVISION GROUP
Steven M. Marks
Executive Vice President,
Chief Operating Offi cer
Steven J. Pruett
Executive Vice President,
Chief TV Development Officer
Robert D. Weisbord
Senior Vice President,
Chief Revenue Offi cer
Arthur Hasson
Chief Operating Offi cer,
Sinclair Programming
I. Scott Livingston
Senior Vice President, News
Mark A. Aitken
Vice President, Advanced Technology
Harvey Arnold
Vice President, Engineering
Tammy L. Dupuy
Vice President, Programming
Scott Ehrlich
Vice President, Emerging Platform Content
Dana R. Feldman
Vice President, Promotions
David G. Howitt
Vice President, Programming
Joseph A. Koff
Vice President, Training & Development; Vice
President, Chief Operating Offi cer, Ring of
Honor Wrestling Entertainment, LLC
Jerry D. Lilly
Vice President, Operations
J.W. Linkenauger
Vice President, Advanced Advertising Support
Operations
David F. Schwartz
Vice President, Sales
Gregg L. Siegel
Vice President, National Sales
Jonathan D. Spaet
Vice President, Networks Sales & Development
OTHER SUBSIDIARIES
Kevin J. Cotlove
Vice President & General Manager of Digital
Operations, Sinclair Digital
Amit Mathur
Vice President, Product Engineering, Sinclair
Digital
J. Ryan Moore
Vice President, Digital Sales, Sinclair Digital
Andrew H. Whiteside
President, Dielectric LLC and
General Manager, Acrodyne Technical Services
LLC
Keith L. Pelletier
Vice President & General Manager, Dielectric
LLC
W. Gary Dorsch
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
Sinclair Broadcast Group, Inc.
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
Benson E. Legg
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
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
Delbert R. Parks III
Senior Vice President,
Chief Technology Offi cer
Donald H. Th ompson
Senior Vice President,
Human Resources
Brian S. Bark
Vice President, Chief Information Offi cer
Justin L. Bray
Vice President, Treasurer
Jamie C. Dembeck
Vice President, Human Resources
David B. Gibber
Vice President, Deputy General Counsel
J. Michael Kralec
Vice President, Technical Operations & Deputy
Chief Technology Offi cer
Paul E. Nesterovsky
Vice President, Tax
Lee H. Schlazer
Vice President, Distribution
Christopher S. Ripley
President & Chief Executive Offi cer
Scott H. Shapiro
Vice President, Corporate Development
Barry M. Faber
Executive Vice President,
General Counsel, Distribution &
Network Relations
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 6, 2019 at 10:00am.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers, LLP
100 East Pratt Street, Suite 2600
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: help@astfi nancial.com
Website: www.astfi nancial.com
FORM 10-K, ANNUAL REPORT
A copy of the Company’s 2018 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:
Billie Jo McIntire
Manager, Investor Relations
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.