NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
Sinclair Broadcast Group, Inc. (the Company) is a diversified television media company with national reach and a strong focus on providing high-quality content on our local television stations, regional sports networks, and digital platforms. The content, distributed through our broadcast platform and third-party platforms, consists of programming provided by third-party networks and syndicators, local news, college and professional sports, and other original programming produced by us. Additionally, we own digital media products that are complementary to our extensive portfolio of television station related digital properties. 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, 2020, we had two reportable segments for accounting purposes, broadcast and local sports. The broadcast segment consists primarily of our 188 broadcast television stations in 88 markets, 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 JSAs and SSAs). These stations broadcast 628 channels as of December 31, 2020. For the purpose of this report, these 188 stations and 628 channels are referred to as “our” stations and channels. The local sports segment consists primarily of our regional sports network brands, Marquee, and a minority equity interest in the YES Network. The RSNs and YES Network own the exclusive rights to air, among other sporting events, the games of professional sports teams.
Principles of Consolidation
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries, including the operating results of the Acquired RSNs acquired on August 23, 2019, as discussed in Note 2. Acquisitions and Dispositions of Assets, and VIEs for which we are the primary beneficiary. Noncontrolling interests represent a minority owner’s proportionate share of the equity in certain of our consolidated entities. Noncontrolling interests which may be redeemed by the holder, and the redemption is outside of our control, are presented as redeemable noncontrolling interests. All intercompany transactions and account balances have been eliminated in consolidation.
We consolidate VIEs when we are the primary beneficiary. We are 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 14. Variable Interest Entities for more information on our VIEs.
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 or loss generated by equity method investees.
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.
The impact of the outbreak of the novel coronavirus (COVID-19) continues to create significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could further materially impact our estimates related to, but not limited to, revenue recognition, goodwill and intangible assets, program contract costs, sports programming rights, and income taxes. As a result, many of our estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued new guidance related to accounting for leases, Accounting Standards Codification (ASC) Topic 842. We adopted the new guidance on January 1, 2019 using the modified retrospective approach and the optional transition method. Under this adoption method, comparative prior periods were not adjusted and continue to be reported in accordance with our historical accounting policy. We elected to apply the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carryforward our historical assessments of whether contracts are, or contain, leases and lease classification. The primary impact of adopting this standard was the recognition of $215 million of operating lease liabilities and $196 million of operating lease assets. The adoption did not have a material impact on how we account for finance leases. See Note 8. Leases for more information regarding our leasing arrangements.
In June 2016, the FASB issued amended guidance on the accounting for credit losses on financial instruments. Among other provisions, this guidance introduces a new impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a forward-looking “expected loss” model that will replace the current “incurred loss” model that will generally result in the earlier recognition of allowances for losses. We adopted this guidance during the first quarter of 2020. 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. We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact 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 generally accepted accounting principles (GAAP). We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.
In March 2019, the FASB issued guidance which requires that an entity test a film or license agreement within the scope of Subtopic 920-350 for impairment at the film group level, when the film or license agreement is predominantly monetized with other films and/or license agreements. We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued guidance which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. We early adopted this guidance during the third quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.
In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. The guidance was effective for all entities immediately upon issuance of the update and may be applied prospectively to applicable transactions existing as of or entered into from the date of adoption through December 31, 2022. We are currently evaluating the impact of this guidance, if elected, but do not expect a material impact on our consolidated financial statements.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Accounts Receivable
We regularly review accounts receivable and determine 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, 2020, 2019, and 2018 is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Balance at beginning of period
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
3
|
|
Charged to expense
|
2
|
|
|
9
|
|
|
5
|
|
Net write-offs
|
(5)
|
|
|
(3)
|
|
|
(6)
|
|
Balance at end of period
|
$
|
5
|
|
|
$
|
8
|
|
|
$
|
2
|
|
As of December 31, 2020, three customers accounted for 19%, 17%, and 15%, respectively, of our accounts receivable, net. As of December 31, 2019, three customers accounted for 24%, 15%, and 11%, respectively, of our accounts receivable, net. For purposes of this disclosure, a single customer may include multiple entities under common control.
Broadcast Television Programming
We have agreements with programming syndicators 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 when the cost of each program is known or reasonably determinable, the program material has been accepted by the licensee in accordance with the conditions of the license agreement, and the program is available for its first showing or telecast. 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 fair value. Program contract costs are amortized on a straight-line basis except for contracts greater than three years which are amortized utilizing an accelerated method. 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 amortization or fair value adjustments.
Fair value is determined utilizing a discounted cash flow model based on management’s expectation of future advertising revenues, net of sales commissions, to be generated by the program material. We assess our program contract costs on a quarterly basis to ensure the costs are recorded at the lower of unamortized cost or fair value.
Sports Programming Rights
We have multi-year program rights agreements that provide the Company with the right to produce and telecast professional live sports games within a specified territory in exchange for a rights fee. A prepaid asset is recorded for rights acquired related to future games upon payment of the contracted fee. The assets recorded for the acquired rights are classified as current or non-current based on the period when the games are expected to be aired. Liabilities are recorded for any program rights obligations that have been incurred but not yet paid at period end. We amortize these programming rights as an expense over each season based upon contractually stated rates. Amortization is accelerated in the event that the stated contractual rates over the term of the rights agreement results in an expense recognition pattern that is inconsistent with the projected growth of revenue over the contractual term.
On March 12, 2020, the NBA, NHL, and MLB suspended or delayed the start of their seasons as a result of the COVID-19 pandemic. On that date, the Company suspended the recognition of amortization expense associated with prepaid program rights agreements with teams within these leagues. Amortization expense resumed for the NBA, NHL, and MLB over the modified seasons when the games commenced during the third quarter of 2020. The NBA and NHL also delayed the start of their 2020-2021 seasons until December 22, 2020 and January 13, 2021, respectively; sports rights expense associated with these seasons will be recognized over the modified term of these seasons.
Certain rights agreements with professional teams contain provisions which require the rebate of rights fees paid by the Company if a contractually minimum number of live games are not delivered. As a result of the COVID-19 pandemic, the number of games played in the 2019-2020 NBA and NHL seasons and the 2020 MLB season were less than the contractual minimum number of games to be delivered. The resulting reduction in sports rights expense was recognized over the term of the modified seasons. Rights fees paid in advance of expense recognition, inclusive of any contractual rebates due to the Company, are included within prepaid sports rights in our consolidated balance sheets.
Impairment of Goodwill, Indefinite-lived Intangible Assets, and Other Long-lived Assets
We evaluate our goodwill and indefinite lived intangible assets for impairment annually in the fourth quarter, or more frequently, if events or changes in circumstances indicate that an impairment may exist. Our goodwill has been allocated to, and is tested for impairment at, the reporting unit level. A reporting unit is an operating segment or a component of an operating segment to the extent that the component constitutes a business for which discrete financial information is available and regularly reviewed by management. Components of an operating segment with similar characteristics are aggregated when testing goodwill for impairment.
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 the 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 evaluate our long-lived assets for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We evaluate the recoverability of long-lived assets by comparing the carrying amount of the assets within an asset group to the estimated undiscounted future cash flows associated with the asset group. An asset group represents the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets. At the time that such evaluations indicate that the future undiscounted cash flows are not sufficient to recover the carrying value of the asset group, an impairment loss is determined by comparing the estimated fair value of the asset group to the carrying value. We estimate fair value using an income approach involving the performance of a discounted cash flow analysis.
Our RSNs included in the local sports segment have been negatively impacted by the recent loss of three Distributors. In addition, our existing Distributors are experiencing elevated levels of subscriber erosion which we believe is influenced, in part, by shifting consumer behaviors resulting from media fragmentation, the current economic environment, the COVID 19 pandemic and related uncertainties. Most of these factors are also expected to have a negative impact on future projected revenues and margins of our RSNs. As a result of these factors, we performed an impairment test of the RSN reporting units' goodwill and long-lived asset groups during the third quarter of 2020 which resulted in a non-cash impairment charge on goodwill of $2,615 million, customer relationships of $1,218 million and other definite-lived intangible assets of $431 million, included within impairment of goodwill and definite-lived intangible assets in our consolidated statements of operations. 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 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. See Note 6. Other Assets for more information.
We recorded an impairment charge of $60 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 on asset dispositions and other, net of impairment within our 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.
Accounts Payable and Accrued Liabilities
Accrued liabilities consisted of the following as of December 31, 2020 and 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Compensation and employee benefits
|
$
|
131
|
|
|
$
|
136
|
|
Interest
|
127
|
|
|
154
|
|
Programming related obligations
|
183
|
|
|
191
|
|
Legal, litigation, and regulatory
|
2
|
|
|
186
|
|
Accounts payable and other operating expenses
|
90
|
|
|
115
|
|
Total accounts payable and accrued liabilities
|
$
|
533
|
|
|
$
|
782
|
|
We expense these activities when incurred.
Income Taxes
We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We provide a valuation allowance for deferred tax assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. In evaluating our ability to realize net deferred tax assets, we consider all available evidence, both positive and negative, including our past operating results, tax planning strategies, current and cumulative losses, 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, 2020, a valuation allowance has been provided for deferred tax assets related to certain temporary basis differences, interest expense carryforwards under the Internal Revenue Code (IRC) Section 163(j) and a substantial amount of our available state net operating loss carryforwards based on past operating results, expected timing of the reversals of existing temporary basis differences, alternative tax strategies and projected future taxable income. As of December 31, 2019, a valuation allowance was provided for deferred tax assets related to a substantial amount of our available state net operating loss carryforwards based on past operating results, including the RSN impairment, expected timing of the reversals of existing temporary 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 if such tax positions are more likely than not to be sustained upon examination based on their technical merits,
including the resolution of any appeals or litigation processes. Significant judgment is required in determining whether positions taken are more likely than not to be sustained, 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 12. Income Taxes, for further discussion of accrued unrecognized tax benefits.
Supplemental Information — Statements of Cash Flows
During the years ended December 31, 2020, 2019, and 2018, we had the following cash transactions (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Income taxes paid
|
$
|
11
|
|
|
$
|
32
|
|
|
$
|
17
|
|
Income tax refunds
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Interest paid
|
$
|
634
|
|
|
$
|
283
|
|
|
$
|
285
|
|
Non-cash investing activities included property and equipment purchases of $6 million, $10 million, and $11 million for the years ended December 31, 2020, 2019, and 2018, respectively, and the transfer of an asset for property of $7 million for the year ended December 31, 2020. During the year ended December 31, 2020 the Company entered into a commercial agreement with Bally's and received equity interests in the business with a value of $199 million. See Note 6. Other Assets and Note 18. Fair Value Measurements for further discussion. Non-cash transactions related to sports rights were $22 million for the year ended December 31, 2020.
Revenue Recognition
The following table presents our revenue disaggregated by type and segment for the years ended December 31, 2020, 2019, and 2018 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2020
|
Broadcast
|
|
Local sports
|
|
Other
|
|
Eliminations
|
|
Total
|
Distribution revenue
|
$
|
1,414
|
|
|
$
|
2,472
|
|
|
$
|
199
|
|
|
$
|
—
|
|
|
$
|
4,085
|
|
Advertising revenue
|
1,364
|
|
|
196
|
|
|
131
|
|
|
(2)
|
|
|
1,689
|
|
Other media, non-media, and intercompany revenue
|
144
|
|
|
18
|
|
|
121
|
|
|
(114)
|
|
|
169
|
|
Total revenues
|
$
|
2,922
|
|
|
$
|
2,686
|
|
|
$
|
451
|
|
|
$
|
(116)
|
|
|
$
|
5,943
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2019
|
Broadcast
|
|
Local sports
|
|
Other
|
|
Eliminations
|
|
Total
|
Distribution revenue
|
$
|
1,341
|
|
|
$
|
1,029
|
|
|
$
|
130
|
|
|
$
|
—
|
|
|
$
|
2,500
|
|
Advertising revenue
|
1,268
|
|
|
103
|
|
|
110
|
|
|
(1)
|
|
|
1,480
|
|
Other media, non-media, and intercompany revenue
|
81
|
|
|
7
|
|
|
230
|
|
|
(58)
|
|
|
260
|
|
Total revenues
|
$
|
2,690
|
|
|
$
|
1,139
|
|
|
$
|
470
|
|
|
$
|
(59)
|
|
|
$
|
4,240
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
Broadcast
|
|
Local sports
|
|
Other
|
|
Eliminations
|
|
Total
|
Distribution revenue
|
$
|
1,186
|
|
|
$
|
—
|
|
|
$
|
113
|
|
|
$
|
—
|
|
|
$
|
1,299
|
|
Advertising revenue
|
1,484
|
|
|
—
|
|
|
75
|
|
|
—
|
|
|
1,559
|
|
Other media, non-media, and intercompany revenue
|
45
|
|
|
—
|
|
|
162
|
|
|
(10)
|
|
|
197
|
|
Total revenues
|
$
|
2,715
|
|
|
$
|
—
|
|
|
$
|
350
|
|
|
$
|
(10)
|
|
|
$
|
3,055
|
|
Distribution Revenue. We generate distribution revenue through fees received from Distributors for the right to distribute our stations, RSNs, and other properties. 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 or network programming 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 120 days. Historical adjustments to subscriber estimates have not been material.
Certain of our distribution arrangements contain provisions that require the Company to deliver a minimum number of live professional sports games or tournaments during a defined period which usually corresponds with a calendar year. If the minimum threshold is not met, we may be obligated to refund a portion of the distribution fees received if shortfalls are not cured within a specified period of time. Our ability to meet these requirements is primarily driven by the delivery of games by the professional sports leagues. The Company has not historically paid any material rebates under these contractual provisions as it is unusual for there to be an event which is significant enough to preclude the Company from meeting or exceeding these thresholds. The COVID-19 pandemic has resulted in significant disruptions to the normal operations of the professional sports leagues resulting in delays and uncertainty with respect to regularly scheduled games. Decisions made by the leagues during the second quarter of 2020 regarding the timing and format of the revised 2020 seasons and decisions made by the NHL and NBA during the fourth quarter of 2020 regarding the timing and format of their revised 2020-2021 seasons have resulted, in some cases, in our inability to meet these minimum requirements and the need to reduce revenue based upon estimated rebates due to our distribution customers. These estimated rebates were recognized over the measurement period of the rebate which is the year ended December 31, 2020. For the year ended December 31, 2020, we reduced revenue by, and accrued corresponding rebates to Distributors of $420 million, which is expected to be paid over 2021 and 2022. See Subsequent Events within Note 1. Nature of Operations and Summary of Significant Accounting Policies.
Advertising Revenue. We generate advertising revenue primarily from the sale of advertising spots/impressions within our broadcast television, RSN, 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.
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 revenue when cash payments are received or due in advance of our performance, including amounts which are refundable. We classify deferred revenue as either current in other current liabilities or long-term in other long-term liabilities within our consolidated balance sheets based on the timing of when we expect to satisfy our performance obligations. Deferred revenue was $233 million, $54 million, and $83 million as of December 31, 2020, 2019, and 2018, respectively, of which $184 million as of December 31, 2020 was reflected in other long-term liabilities in our consolidated balance sheets. Deferred revenue recognized during the year ended December 31, 2020 and 2019 that was included in the deferred revenue balance as of December 31, 2019 and 2018 was $49 million and $76 million, respectively.
On November 18th, 2020, we entered into a commercial agreement with Bally’s Corporation where we will provide certain branding integrations in our RSNs, broadcast networks and other properties. These branding integrations include naming rights associated with the majority of our RSNs. The initial term of this arrangement is 10 years and we expect to begin performing under this arrangement in 2021. The Company received non-cash consideration initially valued at $199 million which is reflected as a contract liability and will be recognized as revenue as the performance obligations under the arrangement are satisfied. No revenue was recognized under this arrangement during the year ended December 31, 2020. See Note 6. Other Assets for more information.
For the year ended December 31, 2020, three customers accounted for 18%, 17%, and 12%, respectively, of our total revenues. For the year ended December 31, 2019 three customers accounted for 16%, 13%, and 10%, respectively, of our total revenues. For purposes of this disclosure, a single customer may include multiple entities under common control.
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 $23 million, $25 million, and $19 million for the years ended December 31, 2020, 2019, and 2018, respectively.
Financial Instruments
Financial instruments, as of December 31, 2020 and 2019, 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 18. 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, 2020, the estimated projected benefit obligation was $21 million, of which $2 million is included in accrued expenses and $19 million is included in other long-term liabilities in our consolidated balance sheets. At December 31, 2020, the projected benefit obligation was measured using a 2.10% discount rate compared to a discount rate of 3.04% for the year ended December 31, 2019. For each of the years ended December 31, 2020 and 2019, we made $2 million in benefit payments and recognized $2 million of actuarial losses through other comprehensive income. For each of the years ended December 31, 2020 and 2019, we recognized $1 million of periodic pension expense, reported in other income, net in our 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, 2020, the assets and liabilities included in our consolidated balance sheets related to deferred compensation plans were $42 million and $36 million, respectively.
Reclassifications
Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s presentation.
Subsequent Events
The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how it has already impacted, and will impact, its advertisers, Distributors, and agreements with professional sports leagues. While the NBA, NHL, and MLB were able to complete modified season schedules during 2020, there can be no assurance that the MLB, NBA, or NHL will complete full or abbreviated seasons in the future. The NBA and NHL delayed the start of their 2020-2021 seasons until December 22, 2020 and January 13, 2021, respectively, however both under reduced game counts. The MLB has announced that they expect their 2021 season to begin on time in April 2021 and contain a full game schedule. The NBA and NHL have not announced their 2021-2022 season schedules yet. Any reduction in the number of games played by the leagues may have an adverse impact on our operations and cash flows. The Company is currently unable to predict the full extent that the COVID-19 pandemic will have on its financial condition, results of operations, and cash flows in future periods due to numerous uncertainties.
2. ACQUISITIONS AND DISPOSITIONS OF ASSETS:
During the years ended December 31, 2020 and 2019, we acquired certain businesses for an aggregate purchase price, net of cash acquired, of $9 billion, including working capital adjustments and other adjustments.
The following summarizes the material acquisition activity during the years ended December 31, 2020 and 2019:
2020 Acquisitions
During the year ended December 31, 2020, we completed the acquisition of the license asset and certain non-license assets of a radio station for $7 million and the license assets and certain non-license assets of two television stations for $9 million. The acquisitions were completed using cash on hand.
2019 Acquisitions
RSN Acquisition. In May 2019, DSG entered into a definitive agreement to acquire controlling interests in 21 Regional Sports Network brands and Fox College Sports (collectively, the Acquired RSNs), from Disney for $9.6 billion plus certain adjustments. On August 23, 2019, we completed the acquisition (the RSN Acquisition) for an aggregate purchase price, including cash acquired, and subject to an adjustment based upon finalization of working capital, net debt, and other adjustments, of $9,817 million, accounted for as a business combination under the acquisition method of accounting. The RSN Acquisition provides an expansion to our premium sports programming including the exclusive regional distribution rights to 42 professional teams consisting of 14 MLB teams, 16 NBA teams, and 12 NHL teams. The Acquired RSNs are reported within our local sports segment. See Note 17. Segment Data.
The transaction was funded through a combination of debt financing raised by DSG and STG, as described in Note 7. Notes Payable and Commercial Bank Financing, and redeemable subsidiary preferred equity, as described in Note 10. Redeemable Noncontrolling Interests.
The following table summarizes the fair value of acquired assets, assumed liabilities, and noncontrolling interests of the Acquired RSNs (in millions):
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
824
|
|
Accounts receivable, net
|
606
|
|
Prepaid expenses and other current assets
|
175
|
|
Property and equipment, net
|
25
|
|
Customer relationships, net
|
5,439
|
|
Other definite-lived intangible assets, net
|
1,286
|
|
Other assets
|
52
|
|
Accounts payable and accrued liabilities
|
(181)
|
|
Other long-term liabilities
|
(396)
|
|
Goodwill
|
2,615
|
|
Fair value of identifiable net assets acquired
|
$
|
10,445
|
|
Redeemable noncontrolling interests
|
(380)
|
|
Noncontrolling interests
|
(248)
|
|
Gross purchase price
|
$
|
9,817
|
|
Purchase price, net of cash acquired
|
$
|
8,993
|
|
The final purchase price allocation presented above is based upon management's estimates of the fair value of the acquired assets, assumed liabilities, and noncontrolling interest at the time of acquisition using valuation techniques including income and cost approaches. The fair value estimates are based on, but not limited to, projected revenue, projected margins, and discount rates used to present value future cash flows. The adjustments made to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed and did not result in material changes to the amortization expense recorded in previous quarters.
The definite-lived intangible assets of $6,725 million are primarily comprised of customer relationships, which represent existing advertiser relationships and contractual relationships with Distributors of $5,439 million, the fair value of contracts with sports teams of $1,271 million, and tradenames/trademarks of $15 million. The intangible assets will be amortized over a weighted average useful life of 2 years for tradenames/trademarks, 13 years for customer relationships, and 12 for contracts with sports teams on a straight-line basis. The fair value of the sports team contracts will be amortized over the respective contract term. Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, as well as expected future synergies. We estimate that $2.4 billion of goodwill, which represents our interest in the Acquired RSNs, will be deductible for tax purposes. See Note 5. Goodwill, Indefinite-Lived Intangible Assets, and Other Intangible Assets for discussion of the impairment of the acquired goodwill and definite-lived intangible assets during the year ended December 31, 2020.
Financial Results of Acquisitions
The following tables summarize the results of the net revenues and operating (loss) income included in the financial statements of the Company beginning on the acquisition date of each acquisition as listed below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Revenues:
|
|
|
|
|
|
RSN
|
$
|
2,562
|
|
|
$
|
1,139
|
|
|
|
Other acquisitions in 2020
|
3
|
|
|
—
|
|
|
|
Total net revenues
|
$
|
2,565
|
|
|
$
|
1,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Operating (Loss) Income:
|
|
|
|
|
|
RSN (a)
|
$
|
(3,585)
|
|
|
$
|
70
|
|
|
|
Other acquisitions in 2020
|
(2)
|
|
|
—
|
|
|
|
Total operating (loss) income
|
$
|
(3,587)
|
|
|
$
|
70
|
|
|
|
(a)Operating (loss) income for the years ended December 31, 2020 and 2019 includes transaction costs discussed below and excludes $98 million and $35 million selling, general, and administrative expenses, respectively, for services provided by broadcast to local sports, which are eliminated in consolidation.
In connection with the 2020 and 2019 acquisitions, for the years ended December 31, 2020, and 2019, we recognized $5 million and $96 million, respectively, of transaction costs which we expensed as incurred and classified as corporate general and administrative expenses in our consolidated statements of operations.
Pro Forma Information
The following table sets forth unaudited pro forma results of operations, assuming that the RSN Acquisition, along with transactions necessary to finance the acquisition, occurred at the beginning of the year preceding the year of acquisition (in millions, except per data share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
2019
|
|
2018
|
|
|
Total revenues
|
$
|
6,689
|
|
|
$
|
6,874
|
|
|
|
Net income
|
$
|
328
|
|
|
$
|
732
|
|
|
|
Net income attributable to Sinclair Broadcast Group
|
$
|
130
|
|
|
$
|
524
|
|
|
|
Basic earnings per share attributable to Sinclair Broadcast Group
|
$
|
1.41
|
|
|
$
|
5.20
|
|
|
|
Diluted earnings per share attributable to Sinclair Broadcast Group
|
$
|
1.39
|
|
|
$
|
5.16
|
|
|
|
This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments, and is not indicative of what our results would have been had we operated the Acquired RSNs 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 the acquiree due to the fair value adjustments recorded for long-lived tangible and intangible assets in purchase accounting.
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 the outstanding shares of Tribune Class A common stock and Tribune Class B common stock (Merger). On January 27, 2020, the Company and Nexstar, which acquired Tribune in September 2019, agreed to settle the Tribune Complaint. See Litigation under Note 13. Commitments and Contingencies for further discussion on our settlement with Nexstar.
For the year ended December 31, 2018 we incurred $100 million of costs in connection with this acquisition, of which $21 million primarily related to legal and other professional services, that we expensed as incurred and classified as corporate general and administrative expenses in our consolidated statements of operations; and $79 million of 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 in our consolidated statements of operations.
Dispositions
Broadcast Sales. In January 2020, we agreed to sell the license and non-license assets of WDKY-TV in Lexington, KY and certain non-license assets associated with KGBT-TV in Harlingen, Texas for an aggregate purchase price of $36 million. The KGBT-TV transaction closed during the first quarter of 2020 and we recorded a gain of $8 million which is included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations. The WDKY-TV transaction closed during the third quarter of 2020 and we recorded a gain of $21 million which is included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations.
Broadcast Incentive Auction. Congress authorized the FCC to conduct so-called "incentive auctions" to auction and re-purpose broadcast television spectrum for mobile broadband use. Pursuant to the auction, television broadcasters submitted bids to receive compensation for relinquishing all or a portion of their 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.
For the year ended December 31, 2018, we recognized a gain of $83 million, which was included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations and was related to the auction proceeds associated with one market where the underlying spectrum was vacated during the first quarter of 2018. The results of the auction are not expected to produce any material change in operations of the Company as there is no change in on air operations.
In the repacking process associated with the auction, the FCC has reassigned some stations to new post-auction channels. We do not expect reassignment to new channels to have a material impact on our coverage. We have received notification from the FCC that 100 of our stations have been assigned to new channels. Legislation has provided the FCC with a $3 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. We recorded gains related to reimbursements for the spectrum repack costs incurred of $90 million, $62 million, and $6 million for the years ended December 31, 2020, 2019, and 2018, respectively, which are recorded within gain on asset dispositions and other, net of impairment in our consolidated statements of operations. For the years ended December 31, 2020, 2019, and 2018, capital expenditures related to the spectrum repack were $61 million, $66 million, and $31 million, respectively.
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, 2020, 2,309,855 shares were available for future grants. Additionally, we have the following arrangements that involve stock-based compensation: employer matching contributions (the Match) for participants in our 401(k) plan, an employee stock purchase plan (ESPP), and subsidiary stock awards. Stock-based compensation expense has no effect on our consolidated cash flows. For the years ended December 31, 2020, 2019, and 2018, we recorded stock-based compensation of $51 million, $33 million, and $26 million, respectively. Below is a summary of the key terms and methods of valuation of our stock-based compensation awards:
RSAs. RSAs issued in 2020, 2019, and 2018 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
RSAs
|
|
Weighted-Average Price
|
Unvested shares at December 31, 2019
|
136,543
|
|
|
$
|
32.80
|
|
2020 Activity:
|
|
|
|
Granted
|
831,228
|
|
|
28.21
|
|
Vested
|
(520,655)
|
|
|
28.81
|
|
Forfeited
|
(5,407)
|
|
|
28.89
|
|
Unvested shares at December 31, 2020
|
441,709
|
|
|
$
|
28.86
|
|
For the years ended December 31, 2020, 2019, and 2018, we recorded compensation expense of $23 million, $9 million, and $5 million, respectively. The majority of the unrecognized compensation expense of $18 million as of December 31, 2020 will be recognized in 2021.
Stock Grants to Non-Employee Directors. In addition to fees paid in cash to our non-employee directors, 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 63,600 shares in 2020, 24,000 shares in 2019, and 20,000 shares in 2018. We recorded expense of $1 million for each of the years ended December 31, 2020, 2019, and 2018, 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 with vesting periods ranging from zero to four years. 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, 2020, 2019, and 2018, we recorded compensation expense of $6 million, $4 million, and $3 million, respectively.
The following is a summary of the 2020 activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs
|
|
Weighted-Average Price
|
Outstanding SARs at December 31, 2019
|
2,080,032
|
|
|
$
|
20.14
|
|
2020 Activity:
|
|
|
|
Granted
|
1,763,828
|
|
|
28.83
|
|
Forfeited
|
(638,298)
|
|
(a)
|
28.20
|
|
Outstanding SARs at December 31, 2020
|
3,205,562
|
|
|
$
|
23.32
|
|
(a)In connection with the settlement of certain litigation as discussed in Note 13. Commitments and Contingencies, David Smith agreed to forego, cancel, and return his February 2020 grant of a SAR award of 638,298 shares of Class A Common Stock..
The aggregate intrinsic value of the 3,205,562 SARs outstanding as of December 31, 2020 was $28 million and the outstanding SARs have a weighted average remaining contractual life of 5 years as of December 31, 2020.
Valuation of SARS. Our SARs were valued using the Black-Scholes pricing model utilizing the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Risk-free interest rate
|
1.2% - 1.6%
|
|
2.5
|
%
|
|
2.6
|
%
|
Expected years to exercise
|
5 years
|
|
5 years
|
|
5 years
|
Expected volatility
|
35.0
|
%
|
|
33.8
|
%
|
|
36.2
|
%
|
Annual dividend yield
|
2.4% - 2.9%
|
|
2.5
|
%
|
|
2.1% - 2.2%
|
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.
Options. As of December 31, 2020, there were options outstanding to purchase 375,000 shares of Class A Common Stock. These options are fully vested and have a weighted average exercise price of $31.08, a weighted average remaining contractual term of 5 years, and an aggregate intrinsic value of $1 million. There was no grant, exercise, or forfeiture activity during the year ended December 31, 2020. There was no expense recognized during the years ended December 31, 2020, 2019, and 2018.
During 2019 and 2018, 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 number of our Class A Common shares granted under the Match is determined based upon the closing price on or about March 1st of each year for the previous calendar year’s Match. For the years ended December 31, 2020, 2019, and 2018, we recorded $19 million, $17 million, and $16 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, 2020, 3,575,958 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 was $3 million of the year ended December 31, 2020, and $1 million for each of the years ended December 31, 2019 and 2018. A total of 3,200,000 shares of Class A Common Stock are reserved for awards under the plan. As of December 31, 2020, 175,890 shares were available for future purchases.
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
|
|
10 - 30 years
|
Operating equipment
|
|
5 - 10 years
|
Office furniture and equipment
|
|
5 - 10 years
|
Leasehold improvements
|
|
Lesser of 10 - 30 years or lease term
|
Automotive equipment
|
|
3 - 5 years
|
Property and equipment under finance leases
|
|
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, 2020 and 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Land and improvements
|
$
|
74
|
|
|
$
|
75
|
|
Real estate held for development and sale
|
25
|
|
|
26
|
|
Buildings and improvements
|
307
|
|
|
293
|
|
Operating equipment
|
939
|
|
|
781
|
|
Office furniture and equipment
|
123
|
|
|
114
|
|
Leasehold improvements
|
59
|
|
|
36
|
|
Automotive equipment
|
66
|
|
|
64
|
|
Finance lease assets
|
59
|
|
|
53
|
|
Construction in progress
|
36
|
|
|
116
|
|
|
1,688
|
|
|
1,558
|
|
Less: accumulated depreciation
|
(865)
|
|
|
(793)
|
|
|
$
|
823
|
|
|
$
|
765
|
|
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 $2,092 million and $4,716 million at December 31, 2020 and 2019, respectively. The change in the carrying amount of goodwill was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast
|
|
Local sports
|
|
Other
|
|
Consolidated
|
Balance at December 31, 2018
|
$
|
2,055
|
|
|
—
|
|
|
$
|
69
|
|
|
$
|
2,124
|
|
|
|
|
|
|
|
|
|
Acquisition (a)
|
—
|
|
|
2,615
|
|
|
6
|
|
|
2,621
|
|
Assets held for sale (b)
|
(29)
|
|
|
—
|
|
|
—
|
|
|
(29)
|
|
Balance at December 31, 2019
|
$
|
2,026
|
|
|
$
|
2,615
|
|
|
$
|
75
|
|
|
$
|
4,716
|
|
|
|
|
|
|
|
|
|
Assets held for sale
|
(9)
|
|
|
—
|
|
|
—
|
|
|
(9)
|
|
Impairment
|
—
|
|
|
(2,615)
|
|
|
—
|
|
|
(2,615)
|
|
Balance at December 31, 2020
|
$
|
2,017
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
2,092
|
|
(a)See Note 2. Acquisitions and Dispositions of Assets for discussion of acquisitions made during 2019.
(b)Assets held for sale as of December 31, 2019 were sold during the year ended December 31, 2020. See Note 2. Acquisitions and Dispositions of Assets for discussion of dispositions during 2020.
During the year ended December 31, 2020, we recorded a $2,615 million goodwill impairment charge related to our regional sports networks included within the local sports segment based upon an interim impairment test performed during the three-month period ended September 30, 2020. See Impairment of Goodwill and Definite-Lived Intangible Assets below for additional discussion surrounding this impairment charge. Our accumulated goodwill impairment as of December 31, 2020 and 2019 was $3,029 million and $414 million, respectively.
For our annual goodwill impairment tests related to our broadcast and other reporting units in 2020, 2019, and 2018, 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. For one reporting unit in 2019, we elected to perform a quantitative assessment and concluded that its fair value significantly exceeded the carrying value. 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 2019 or 2018, and therefore did not perform interim impairment tests for goodwill during those periods.
As of December 31, 2020 and 2019, the carrying amount of our indefinite-lived intangible assets was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast
|
|
Other
|
|
Consolidated
|
Balance at December 31, 2018 (a)
|
$
|
131
|
|
|
$
|
27
|
|
|
$
|
158
|
|
Balance at December 31, 2019 (a) (b)
|
$
|
131
|
|
|
$
|
27
|
|
|
$
|
158
|
|
Acquisition / Disposition (c)
|
13
|
|
|
—
|
|
|
13
|
|
Balance at December 31, 2020 (a) (b)
|
$
|
144
|
|
|
$
|
27
|
|
|
$
|
171
|
|
(a)Our indefinite-lived intangible assets in our broadcast segment relate to broadcast licenses and our indefinite-lived intangible assets in other relate to trade names.
(b)Approximately $14 million of indefinite-lived intangible assets relate to consolidated VIEs as of December 31, 2020 and 2019.
(c)See Note 2. Acquisitions and Dispositions of Assets for discussion of acquisitions made during 2020.
We did not have any indicators of impairment for our indefinite-lived intangible assets in any interim period in 2020 or 2019, and therefore did not perform interim impairment tests during those periods. We performed our annual impairment tests for indefinite-lived intangibles in 2020 and 2019 and as a result of our qualitative assessments, we recorded no impairment.
The following table shows the gross carrying amount and accumulated amortization of definite-lived intangibles (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net
|
Amortized intangible assets:
|
|
|
|
|
|
Customer relationships (a)
|
$
|
5,329
|
|
|
$
|
(1,043)
|
|
|
$
|
4,286
|
|
|
|
|
|
|
|
Network affiliation
|
1,438
|
|
|
(775)
|
|
|
663
|
|
Favorable sports contracts (a)
|
840
|
|
|
(174)
|
|
|
666
|
|
Other (a)
|
35
|
|
|
(26)
|
|
|
9
|
|
Total other definite-lived intangible assets, net (b)
|
$
|
2,313
|
|
|
$
|
(975)
|
|
|
$
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net
|
Amortized intangible assets:
|
|
|
|
|
|
Customer relationships (c)
|
$
|
6,548
|
|
|
$
|
(569)
|
|
|
$
|
5,979
|
|
|
|
|
|
|
|
Network affiliation (c)
|
1,441
|
|
|
(689)
|
|
|
752
|
|
Favorable sports contracts (c)
|
1,271
|
|
|
(43)
|
|
|
1,228
|
|
Other
|
46
|
|
|
(28)
|
|
|
18
|
|
Total other definite-lived intangible assets, net (b)
|
$
|
2,758
|
|
|
$
|
(760)
|
|
|
$
|
1,998
|
|
(a)As of December 31, 2020, we recorded a total impairment loss relating to customer relationships and favorable sports contracts of $1,218 million and $431 million, respectively, which is reflected as a reduction within the Gross Carrying Value column.
(b)Approximately $54 million and $93 million of definite-lived intangible assets relate to consolidated VIEs as of December 31, 2020 and 2019, respectively.
(c)As a result of our 2019 acquisitions, we acquired $6,725 million of definite-lived assets as discussed in Note 2. Acquisitions and Dispositions of Assets.
Definite-lived intangible assets and other assets subject to amortization are being amortized on a straight-line basis over their estimated useful lives. The definite-lived intangible assets are amortized over a weighted average useful life of 13 years for customer relationships, 15 years for network affiliations, and 12 years for favorable sports contracts. The total weighted average useful life of definite-lived intangible assets and other assets subject to amortization acquired as a result of the acquisitions, as discussed in Note 2. Acquisitions and Dispositions of Assets, is 13 years. The amortization expense of the definite-lived intangible and other assets for the years ended December 31, 2020, 2019, and 2018 was $703 million, $370 million, and $175 million, respectively, of which $131 million and $43 million for the years ended December 31, 2020 and 2019 is associated with the amortization of favorable sports contracts and is presented within media programming and production expenses in our statements of operations.
The following table shows the estimated annual amortization expense of the definite-lived intangible assets for the next five years and thereafter (in millions):
|
|
|
|
|
|
2021
|
$
|
559
|
|
2022
|
542
|
|
2023
|
530
|
|
2024
|
517
|
|
2025
|
505
|
|
2026 and thereafter
|
2,971
|
|
|
$
|
5,624
|
|
Impairment of Goodwill and Definite-Lived Intangible Assets
In conjunction with the interim third quarter impairment testing related to our RSNs discussed below, during the year ended December 31, 2020, we recorded a non-cash impairment charge associated with customer relationships and other definite-lived intangible assets of $1,218 million and $431 million, respectively, included in impairment of goodwill and definite-lived intangible assets in our consolidated statements of operations. After the recognition of these impairments there were no asset groups which have a heightened risk of impairment because the projected undiscounted cash flows of the individual asset groups were substantially greater than their carrying values. However, significant deterioration in the factors described below could result in future material impairments. There were no impairment charges recorded for the years ended December 31, 2019 and 2018.
The Company performed an interim goodwill and long-lived asset impairment test during the three-month period ending September 30, 2020. Our RSNs, included in the local sports segment, have been negatively impacted by the recent loss of certain distributors. In addition, our existing distributors are experiencing elevated levels of subscriber erosion which we believe is influenced, in part, by shifting consumer behaviors resulting from media fragmentation, the current economic environment, the COVID 19 pandemic, and related uncertainties. Most of these factors are also expected to have a negative impact on future projected revenue and margins of our RSNs.
The long-lived asset impairment test requires a comparison of undiscounted cash flows expected to be generated over the useful life of an asset group to the carrying value of the asset group. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We evaluated each of our RSNs individually as asset groups. We estimated the projected undiscounted cash flows over the remaining useful life of each asset group. The more sensitive inputs used in the undiscounted cash flow analysis include projected revenues and margins. We identified 10 RSNs which had carrying values in excess of the future undiscounted cash flows. For these RSNs, an impairment loss was measured as the amount by which the carrying value of the asset group exceeded the fair value. The calculated impairment was then allocated to the long-lived assets within the asset group, which primarily consists of definite lived intangible assets, based upon relative fair value.
The fair value of the asset groups, reporting units and definite lived intangible assets were determined based upon a discounted cash flow analysis which uses the present value of projected cash flows. The projected cash flows were based upon our estimates of future revenues and margins, among other inputs. The discount rates used in the valuation were based on a weighted-average cost of capital determined from relevant market comparisons and taking into consideration the risk specifically associated with our asset groups and underlying assets. Terminal values were determined based upon the final year of projected cash flows which reflected our estimate of stable perpetual growth. The more sensitive inputs used in the discounted cash flow analysis include projected revenues and margins, as well as the discount rates used to calculate the present value of future cash flows. Projected revenue was based on the consideration of historical experience of the business, market data surrounding subscriber projections and advertising growth, our ability to retain existing customers and our ability to obtain new customers. Our revenue projections could be negatively impacted by the further loss of key distributors, inability to obtain new or retain existing distributors on terms similar to those expiring, greater than expected consumer migration away from traditional linear distributors, or our inability to successfully develop alternative revenue streams, among other factors. Our future margins may also be affected by our inability to renew sports rights agreements on terms favorable to us.
We tested the RSN reporting units' goodwill for impairment on an interim basis by comparing the fair value of each of the RSN reporting units to their revised carrying value after adjustments were made related to the impairments of the asset groups, as described above. To the extent that the carrying value of the respective reporting units exceeded the fair value, a goodwill impairment charge was recorded. The fair value of the reporting units was determined based upon a discounted cash flow analysis, as described above. We recorded a non-cash goodwill impairment charge of $2,615 million, included in impairment of goodwill and definite-lived intangible assets in our consolidated statements of operations. As of December 31, 2020, there was no remaining goodwill within our local sports segment and the remaining balance of the customer relationship intangible asset was $3,679 million and the aggregate remaining balance of the other definite-lived intangible assets was $671 million within our local sports segment.
6. OTHER ASSETS:
Other assets as of December 31, 2020 and 2019 consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Equity method investments
|
$
|
451
|
|
|
$
|
459
|
|
Other investments
|
450
|
|
|
52
|
|
Post-retirement plan assets
|
44
|
|
|
38
|
|
|
|
|
|
Other
|
113
|
|
|
69
|
|
Total other assets
|
$
|
1,058
|
|
|
$
|
618
|
|
Equity Method Investments
We have a portfolio of investments, including our investment in the YES Network and entities that are primarily focused on the development of real estate, sustainability initiatives, and other non-media businesses. For the years ended December 31, 2020, 2019, and 2018, 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 from equity method investments in 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 millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Revenues, net
|
$
|
611
|
|
|
$
|
386
|
|
|
$
|
145
|
|
Operating income (loss)
|
$
|
147
|
|
|
$
|
47
|
|
|
$
|
(58)
|
|
Net income (loss)
|
$
|
23
|
|
|
$
|
13
|
|
|
$
|
(82)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Current assets
|
$
|
493
|
|
|
$
|
369
|
|
Noncurrent assets
|
$
|
4,219
|
|
|
$
|
4,056
|
|
Current liabilities
|
$
|
410
|
|
|
$
|
118
|
|
Noncurrent liabilities
|
$
|
2,327
|
|
|
$
|
2,313
|
|
YES Network Investment. On August 29, 2019, an indirect subsidiary of DSG, an indirect wholly-owned subsidiary of the Company, acquired a minority equity interest in the YES Network for cash consideration of $346 million as part of a consortium led by Yankee Global Enterprises. We account for our investment in the YES Network as an equity method investment, which is recorded within other assets in our consolidated balance sheets, and in which our proportionate share of the net income generated by the investment is represented within loss from equity method investments in our consolidated statements of operations. We recorded income of $6 million and $16 million related to our investment for the years ended December 31, 2020 and December 31, 2019, respectively. We did not identify any other than temporary impairments associated with our investment in the YES Network during the years ended December 31, 2020 and 2019,
Other Investments
We measure 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.
At December 31, 2020 and 2019, we held $68 million and $2 million of investments in equity securities which are classified as level 1 securities in the fair value hierarchy. During the years ended December 31, 2020 and 2019 we recognized fair value adjustments associated with these securities of $24 million and $0.1 million which is reflected in other income, net in our consolidated statements of operations. See Note 18. Fair Value Measurements for further information. Investments accounted for utilizing the measurement alternative were $26 million, net of $7 million of cumulative impairments, as of December 31, 2020, and $28 million, net of $7 million of cumulative impairments, as of December 31, 2019. We recorded a $7 million impairment related to two investments for the year ended December 31, 2019, which is reflected in other income, net in our consolidated statements of operations.
On November 18, 2020, we entered into a commercial agreement with Bally's Corporation. As part of this arrangement, we received warrants to acquire up to 8.2 million shares of Bally's Common stock for a penny per share, of which 3.3 million are exercisable upon meeting certain performance metrics. We also received options to purchase up to 1.6 million shares of Bally's common stock with exercise prices between $30 and $45 per share, exercisable after four years. The initial value associated with the warrants was $199 million. These financial instruments are reflected at fair value within our financial statements. For the year ended December 31, 2020 we recorded an increase in value of $133 million which is reflected in other income, net in our consolidated statements of operations. The value of these investments was $332 million as of December 31, 2020. See Note 18. Fair Value Measurements for further discussion.
As of December 31, 2020 and 2019, our unfunded commitments related to certain equity investments totaled $98 million and $32 million, respectively.
7. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
Notes payable, finance leases, and commercial bank financing (including finance leases to affiliates) consisted of the following as of December 31, 2020 and 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
STG Bank Credit Agreement:
|
|
|
|
Term Loan B-1, due January 3, 2024 (a)
|
$
|
1,119
|
|
|
$
|
1,329
|
|
Term Loan B-2, due September 30, 2026
|
1,284
|
|
|
1,297
|
|
|
|
|
|
DSG Bank Credit Agreement:
|
|
|
|
Term Loan, due August 24, 2026
|
3,259
|
|
|
3,291
|
|
|
|
|
|
STG Notes:
|
|
|
|
5.625% Unsecured Notes, due August 1, 2024 (a)
|
—
|
|
|
550
|
|
5.875% Unsecured Notes, due March 15, 2026
|
348
|
|
|
350
|
|
5.125% Unsecured Notes, due February 15, 2027
|
400
|
|
|
400
|
|
5.500% Unsecured Notes, due March 1, 2030
|
500
|
|
|
500
|
|
4.125% Senior Secured Notes, due December 1, 2030 (a)
|
750
|
|
|
—
|
|
DSG Notes:
|
|
|
|
12.750% Senior Secured Notes, due December 1, 2026 (b)
|
31
|
|
|
—
|
|
5.375% Senior Secured Notes, due August 15, 2026
|
3,050
|
|
|
3,050
|
|
6.625% Unsecured Notes, due August 15, 2027 (b)
|
1,744
|
|
|
1,825
|
|
DSG Accounts Receivable Securitization Facility (c)
|
177
|
|
|
—
|
|
Debt of variable interest entities
|
17
|
|
|
21
|
|
Debt of non-media subsidiaries
|
17
|
|
|
18
|
|
Finance leases
|
30
|
|
|
27
|
|
Finance leases - affiliate
|
8
|
|
|
11
|
|
Total outstanding principal
|
12,734
|
|
|
12,669
|
|
Less: Deferred financing costs and discounts
|
(183)
|
|
|
(231)
|
|
Less: Current portion
|
(56)
|
|
|
(69)
|
|
Less: Finance leases - affiliate, current portion
|
(2)
|
|
|
(2)
|
|
Net carrying value of long-term debt
|
$
|
12,493
|
|
|
$
|
12,367
|
|
(a)On December 4, 2020, we issued $750 million aggregate principal amount of the STG 4.125% Secured Notes, the net proceeds of which were used, plus cash on hand, to redeem $550 million aggregate principal amount of the STG 5.625% Notes, as well as repay $200 million of STG's Term Loan B-1, as more fully described below under STG Notes.
(b)On June 10, 2020, we exchanged a portion of principal of the DSG 6.625% Notes for cash payment and the newly issued 12.750% Secured Notes, as more fully described below under DSG Notes.
(c)We entered into the A/R Facility on September 23, 2020, as more fully described below under Accounts Receivable Securitization Facility.
Debt under the STG Bank Credit Agreement, DSG Bank Credit Agreement, notes payable, A/R Facility, and finance leases as of December 31, 2020 matures as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and
Bank Credit Agreements
|
|
Finance Leases
|
|
|
|
Total
|
2021
|
$
|
53
|
|
|
$
|
8
|
|
|
|
|
$
|
61
|
|
2022
|
57
|
|
|
8
|
|
|
|
|
65
|
|
2023
|
224
|
|
|
7
|
|
|
|
|
231
|
|
2024
|
1,165
|
|
|
6
|
|
|
|
|
1,171
|
|
2025
|
62
|
|
|
5
|
|
|
|
|
67
|
|
2026 and thereafter
|
11,135
|
|
|
19
|
|
|
|
|
11,154
|
|
Total minimum payments
|
12,696
|
|
|
53
|
|
|
|
|
12,749
|
|
Less: Deferred financing costs, discounts, and premiums
|
(183)
|
|
|
—
|
|
|
|
|
(183)
|
|
|
|
|
|
|
|
|
|
Less: Amount representing future interest
|
—
|
|
|
(15)
|
|
|
|
|
(15)
|
|
Net carrying value of debt
|
$
|
12,513
|
|
|
$
|
38
|
|
|
|
|
$
|
12,551
|
|
Interest expense in our consolidated statements of operations was $656 million, $422 million, and $292 million for the years ended December 31, 2020, 2019, and 2018, respectively. Interest expense included amortization of deferred financing costs, debt discounts, and premiums of $31 million, $17 million, and $8 million for the years ended December 31, 2020, 2019, and 2018, respectively, and ticking fees and the write-off of previously capitalized debt issuance costs associated with the Tribune acquisition, which was subsequently terminated, of $79 million for the year ended December 31, 2018.
The stated and weighted average effective interest rates on the above obligations are as follows, for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Effective Rate
|
|
|
Stated Rate
|
|
2020
|
|
2019
|
STG Bank Credit Agreement:
|
|
|
|
|
|
|
Term Loan B
|
|
LIBOR plus 2.25%
|
|
2.94%
|
|
4.62%
|
Term Loan B-2
|
|
LIBOR plus 2.50%
|
|
3.29%
|
|
4.36%
|
Revolving Credit Facility (a)
|
|
LIBOR plus 2.00%
|
|
—%
|
|
—%
|
DSG Bank Credit Agreement:
|
|
|
|
|
|
|
Term Loan
|
|
LIBOR plus 3.25%
|
|
4.21%
|
|
5.31%
|
Revolving Credit Facility (b)
|
|
LIBOR plus 3.00%
|
|
—%
|
|
—%
|
DSG Accounts Receivable Securitization Facility (c)
|
|
LIBOR plus 4.97%
|
|
4.77%
|
|
—%
|
STG Notes:
|
|
|
|
|
|
|
5.625% Unsecured Notes
|
|
5.63%
|
|
5.83%
|
|
5.83%
|
5.875% Unsecured Notes
|
|
5.88%
|
|
6.09%
|
|
6.09%
|
5.125% Unsecured Notes
|
|
5.13%
|
|
5.33%
|
|
5.33%
|
5.500% Unsecured Notes
|
|
5.50%
|
|
5.66%
|
|
5.66%
|
4.125% Secured Notes
|
|
4.13%
|
|
4.31%
|
|
—%
|
DSG Notes:
|
|
|
|
|
|
|
12.750% Secured Notes
|
|
12.75%
|
|
11.95%
|
|
—%
|
5.375% Secured Notes
|
|
5.38%
|
|
5.73%
|
|
5.73%
|
6.625% Unsecured Notes
|
|
6.63%
|
|
7.00%
|
|
7.00%
|
(a)We incur a commitment fee on undrawn capacity of 0.25%, 0.375%, or 0.50% if our first lien indebtedness ratio is less than or equal to 2.75x, less than or equal to 3.0x but greater than 2.75x, or greater than 3.0x, respectively. The STG Revolving Credit Facility is priced at LIBOR plus 2.00%, subject to decrease if the specified first lien leverage ratio (as defined in the STG Bank Credit Agreement) is less than or equal to certain levels. As of December 31, 2020 and December 31, 2019, there were no outstanding borrowings, $1 million in letters of credit outstanding, and $649 million available under the STG Revolving Credit Facility. See STG Bank Credit Agreement below for further information.
(b)We incur a commitment fee on undrawn capacity of 0.25%, 0.375%, or 0.50% if our first lien indebtedness ratio is less than or equal to 3.25x, less than or equal to 3.75x but greater than 3.25x, or greater than 3.75x, respectively. The DSG Revolving Credit Facility is priced at LIBOR plus 3.00%, subject to decrease if the specified first lien leverage ratio (as defined in the DSG Bank Credit Agreement) is less than or equal to certain levels. As of December 31, 2020 and December 31, 2019, there were no outstanding borrowings, no letters of credit outstanding, and $650 million available under the DSG Revolving Credit Facility. See DSG Bank Credit Agreement below for further information.
(c)Borrowings under the A/R Facility generally bear interest at a rate per annum equal to LIBOR, which is subject to an interest rate floor of 0.00% per annum, plus 4.97% or, if the aggregate outstanding principal amount of loans is less than $125 million on or after November 1, 2020, 5.47%.
We recorded $19 million of debt issuance costs and a $25 million original issuance premium during the year ended December 31, 2020, $222 million of debt issuance costs and original issuance discounts during the year ended December 31, 2019, and $1 million of debt issuance costs during the year ended December 31, 2018. Debt issuance costs and original issuance discounts and premiums are presented as a direct deduction from, or addition to, the carrying amount of an associated debt liability, except for debt issuance costs related to our STG Revolving Credit Facility, DSG Revolving Credit Facility, and A/R Facility which are presented within other assets in our consolidated balance sheets.
STG Bank Credit Agreement
We have a syndicated credit facility which includes both revolving credit and issued term loans (the STG Bank Credit Agreement).
On August 13, 2019, we issued a seven-year incremental term loan facility in an aggregate principal amount of $600 million (the STG Term Loan B-2b) with an original issuance discount of $3 million, which bears interest at LIBOR plus 2.50%. The proceeds from the Term Loan B-2b were used, together with cash on hand, to redeem, at par value, $600 million aggregate principal amount of STG's 5.375% Senior Notes due 2021 (the STG 5.375% Notes). We recognized a loss on the extinguishment of the STG 5.375% Notes of $2 million for the year ended December 31, 2019.
On August 23, 2019, we amended and restated the STG Bank Credit Agreement which provided additional operating flexibility and revisions to certain restrictive covenants. Concurrent with the amendment, we raised a seven-year incremental term loan facility of $700 million (the STG Term Loan B-2a, and, together with the STG Term Loan B-2b, the STG Term Loan B-2) with an original issuance discount of $4 million, which bears interest at LIBOR plus 2.50%.
The STG Term Loan B-2 amortizes in equal quarterly installments in an aggregate amount equal to 1% of the original amount of such term loans, with the balance being payable on the maturity date.
Additionally, in connection with the amendment, we replaced STG's existing revolving credit facility with a new $650 million five-year revolving credit facility (the STG Revolving Credit Facility), priced at LIBOR plus 2.00%, subject to decrease if the specified first lien leverage ratio (as defined in the STG Bank Credit Agreement) is less than or equal to certain levels, which includes capacity for up to $50 million of letters of credit and for borrowings of up to $50 million under swingline loans. On December 4, 2020, we entered into an amendment to the STG Bank Credit Agreement to extend the maturity date of the STG Revolving Credit Facility to December 4, 2025. On March 17, 2020, we drew $648 million under the STG Revolving Credit Facility as a precautionary measure given the COVID-19 pandemic. During the second quarter of 2020, we fully repaid the amount outstanding under the STG Revolving Credit Facility.
The STG Bank Credit Agreement includes a financial maintenance covenant, the first lien leverage ratio (as defined in the STG Bank Credit Agreements), which requires such applicable ratio not to exceed 4.5x, measured as of the end of each fiscal quarter. The financial maintenance covenant is only applicable if 35% or more of the capacity (as a percentage of total commitments) under the STG Revolving Credit Facility, measured as of the last day of each quarter, is utilized under the STG Revolving Credit Facility as of such date. Since there was no utilization under the STG Revolving Credit Facility as of December 31, 2020, STG was not subject to the financial maintenance covenant under the STG Bank Credit Agreement. As of December 31, 2020, the STG first lien leverage ratio was below 4.5x. The STG Bank Credit Agreement contains other restrictions and covenants which we were in compliance with as of December 31, 2020.
STG Notes
On November 27, 2019, we issued $500 million of senior notes, which bear interest at a rate of 5.500% per annum and mature on March 1, 2030 (the STG 5.500% Notes). The net proceeds of the STG 5.500% Notes were used, plus cash on hand, to redeem $500 million aggregate principal amount of STG's 6.125% senior unsecured notes due 2022 (the STG 6.125% Notes) for a redemption price, including the outstanding principal amount of the STG 6.125% Notes, accrued and unpaid interest, and a make-whole premium, of $510 million. We recognized a loss on the extinguishment of the STG 6.125% Notes of $8 million for the year ended December 31, 2019.
Prior to December 1, 2024, we may redeem the STG 5.500% Notes, in whole or in part, at any time or from time to time at a price equal to 100% of the principal amount of the STG 5.500% Notes plus accrued and unpaid interest, if any, to the redemption date, plus a “make-whole” premium. In addition, on or prior to December 1, 2022, we may redeem up to 40% of the STG 5.500% Notes using the proceeds of certain equity offerings. Beginning on December 1, 2024, we may redeem some or all of the STG 5.500% Notes at any time or from time to time at certain redemption prices, plus accrued and unpaid interest, if any, to the date of redemption. If the notes are redeemed during the twelve-month period beginning December 1, 2024, 2025, 2026, and 2027 and thereafter, then the redemption prices for the STG 5.500% Notes are 102.750%, 101.833%, 100.917%, and 100%, respectively. Upon the sale of certain of STG’s assets or certain changes of control, the holders of the STG 5.500% Notes may require us to repurchase some or all of the STG 5.500% Notes.
STG’s obligations under the STG 5.500% Notes are guaranteed, jointly and severally, on a senior unsecured basis, by the Company and each wholly-owned subsidiary of STG or the Company that guarantees the STG Bank Credit Agreement and rank equally with all of STG’s other senior unsecured debt.
On May 21, 2020, we purchased $2.5 million aggregate principal amount of STG's 5.875% senior unsecured notes due 2026 (the STG 5.875% Notes) in open market transactions for consideration of $2.3 million. The STG 5.875% Notes acquired in May 2020 were canceled immediately following their acquisition. We recognized a gain on extinguishment of the STG 5.875% Notes of $0.2 million for the year ended December 31, 2020.
On December 4, 2020, we issued $750 million aggregate principal amount of senior secured notes, which bear interest at a rate of 4.125% per annum and mature on December 1, 2030 (the STG 4.125% Secured Notes). The net proceeds of the STG 4.125% Secured Notes were used, plus cash on hand, to redeem $550 million aggregate principal amount of STG's 5.625% senior unsecured notes due 2024 (the STG 5.625% Notes) for a redemption price, including the outstanding principal amount of the STG 5.625% Notes, accrued and unpaid interest, and a call premium, of $571 million and to prepay $200 million outstanding under the STG Term Loan B-1. We recognized a loss on extinguishment of the STG 5.625% Notes and prepayment of the STG Term Loan B-1 of $15 million for the year ended December 31, 2020.
Prior to December 1, 2025, we may redeem the STG 4.125% Secured Notes, in whole or in part, at any time or from time to time at a price equal to 100% of the principal amount of the STG 4.125% Secured Notes plus accrued and unpaid interest, if any, to the redemption date, plus a “make-whole” premium. In addition, on or prior to December 1, 2023, we may redeem up to 40% of the STG 4.125% Secured Notes using the proceeds of certain equity offerings. Beginning on December 1, 2025, we may redeem some or all of the STG 4.125% Secured Notes at any time or from time to time at certain redemption prices, plus accrued and unpaid interest, if any, to the date of redemption. If the notes are redeemed during the twelve-month period beginning December 1, 2025, 2026, 2027, and 2028 and thereafter, then the redemption prices for the STG 4.125% Secured Notes are 102.063%, 101.375%, 100.688%, and 100%, respectively. Upon the sale of certain of STG’s assets or certain changes of control, we may be required to repurchase some or all of the STG 4.125% Secured Notes.
STG’s obligations under the STG 4.125% Secured Notes are secured on a first-lien basis by substantially all tangible and intangible personal property of STG and each wholly-owned subsidiary of STG or the Company that guarantees the STG Bank Credit Agreement (the Guarantors) and on a pari passu basis with all of STG's and the Guarantor's existing and future debt that is secured by a first-priority lien on the collateral securing the STG 4.125% Secured Notes, including the debt under the STG Bank Credit Agreement, subject to permitted liens and certain other exceptions.
Upon issuance, the STG 5.875% Notes and STG 5.125% Notes were redeemable up to 35%. We may redeem 100% of these 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 these notes may require us to repurchase some or all of the outstanding notes.
DSG Bank Credit Agreement
On August 23, 2019, DSG and Diamond Sports Intermediate Holdings LLC (DSIH), an indirect wholly owned subsidiary of the Company and an indirect parent of DSG, entered into a credit agreement (the DSG Bank Credit Agreement). Pursuant to the DSG Bank Credit Agreement, DSG raised a seven-year $3,300 million aggregate amount term loan (the DSG Term Loan), with an original issuance discount of $17 million, which bears interest at LIBOR plus 3.25%.
The DSG Term Loan amortizes in equal quarterly installments in an aggregate amount equal to 1% of the original amount of such term loan, with the balance being payable on the maturity date. Following the end of each fiscal year, beginning with the fiscal year ending December 31, 2020, we are required to prepay the DSG Term Loan in an aggregate amount equal to (a) 50% of excess cash flow for such fiscal year if the first lien leverage ratio is greater than 3.75 to 1.00, (b) 25% of excess cash flow for such fiscal year if the first lien leverage ratio is greater than 3.25 to 1.00 but less than or equal to 3.75 to 1.00, and (c) 0% of excess cash flow for such fiscal year if the first lien leverage ratio is equal to or less than 3.25 to 1.00.
Additionally, in connection with the DSG Bank Credit Agreement, DSG obtained a $650 million five-year revolving credit facility (the DSG Revolving Credit Facility, and, together with the DSG Term Loan, the DSG Credit Facilities), priced at LIBOR plus 3.00%, subject to reduction based on a first lien net leverage ratio, which includes capacity for up to $50 million of letters of credit and for borrowings of up to $50 million under swingline loans. On March 17, 2020, we drew $225 million under the DSG Revolving Credit Facility as a precautionary measure given the COVID-19 pandemic. During the second quarter of 2020, we fully repaid the amount outstanding under the DSG Revolving Credit Facility.
The DSG Bank Credit Agreement includes a financial maintenance covenant, the first lien leverage ratio (as defined in the DSG Bank Credit Agreements), which requires such applicable ratio not to exceed 6.25x, measured as of the end of each fiscal quarter. The financial maintenance covenant is only applicable if 35% or more of the capacity (as a percentage of total commitments) under the DSG Revolving Credit Facility, measured as of the last day of each quarter, is utilized under the DSG Revolving Credit Facility as of such date. Since there was no utilization under the DSG Revolving Credit Facility as of December 31, 2020, DSG was not subject to the financial maintenance covenant under the DSG Bank Credit Agreement. As of December 31, 2020, the DSG first lien leverage ratio was above 6.25x. We expect that the DSG first lien leverage ratio will remain above 6.25x for at least the next 12 months, which will restrict our ability to utilize the full DSG Revolving Credit Facility. We do not currently expect to have more than 35% of the capacity of the DSG Revolving Credit Facility outstanding as of any quarterly measurement date during the next twelve months, therefore we do not expect DSG will be subject to the financial maintenance covenant. The DSG Bank Credit Agreement contains other restrictions and covenants which we were in compliance with as of December 31, 2020.
DSG's obligations under the DSG Bank Credit Agreement are (i) jointly and severally guaranteed by DSIH and DSG’s direct and indirect, existing and future wholly-owned domestic restricted subsidiaries, subject to certain exceptions, and (ii) secured by first-priority lien on substantially all tangible and intangible assets (whether now owned or hereafter arising or acquired) of DSG and the guarantors, subject to certain permitted liens and other agreed upon exceptions. The DSG Credit Facilities are not guaranteed by the Company, STG, or any of STG’s subsidiaries.
DSG Notes
On August 2, 2019, DSG issued $3,050 million principal amount of senior secured notes, which bear interest at a rate of 5.375% per annum and mature on August 15, 2026 (the DSG 5.375% Secured Notes), and issued $1,825 million principal amount of senior notes, which bear interest at a rate of 6.625% per annum and mature on August 15, 2027 (the DSG 6.625% Notes). The proceeds of the DSG 5.375% Secured Notes and DSG 6.625% Notes were used, in part, to fund the RSN Acquisition.
In March 2020 and June 2020, we purchased a total of $15 million aggregate principal amount of the DSG's 6.625% Notes in open market transactions for consideration of $10 million. The DSG 6.625% Notes acquired in March 2020 and June 2020 were canceled immediately following their acquisition. We recognized a gain on extinguishment of the DSG 6.625% Notes of $5 million for year ended December 31, 2020.
On June 10, 2020, we exchanged $66.5 million aggregate principal amount of the DSG 6.625% Notes for cash payments of $10 million, including accrued but unpaid interest, and $31 million aggregate principal amount of newly issued senior secured notes, which bear interest at a rate of 12.750% per annum and mature on December 1, 2026 (the DSG 12.750% Secured Notes)
Prior to August 15, 2022, we may redeem the DSG Notes, in whole or in part, at any time or from time to time, at a price equal to 100% of the principal amount of the applicable DSG Notes plus accrued and unpaid interest, if any, to the date of redemption, plus a ‘‘make-whole’’ premium. Beginning on August 15, 2022, we may redeem the DSG Notes, in whole or in part, at any time or from time to time at certain redemption prices, plus accrued and unpaid interest, if any, to the date of redemption. In addition, on or prior to August 15, 2022, we may redeem up to 40% of each series of the DSG Notes using the proceeds of certain equity offerings. If the notes are redeemed during the twelve-month period beginning August 15, 2022, 2023, and 2024 and thereafter, then the redemption prices for the DSG 5.375% Secured Notes are 102.688%, 101.344%, and 100%, respectively, the redemption prices for the DSG 6.625% Notes are 103.313%, 101.656%, and 100%, respectively, and the redemption prices for the DSG 12.750% Secured Notes are 102.688%, 101.344%, and 100%, respectively.
DSG’s obligations under the DSG Notes are jointly and severally guaranteed by DSIH, DSG’s direct parent, and certain wholly-owned subsidiaries of DSIH. The RSNs wholly-owned by DSIH and its subsidiaries will also jointly and severally guarantee the Issuers' obligations under the DSG Notes. The DSG Notes are not guaranteed by the Company, STG, or any of STG’s subsidiaries.
Accounts Receivable Securitization Facility
On September 23, 2020 (the Closing Date), the Company's and DSG's indirect wholly-owned subsidiary, DSPV, entered into a $250 million accounts receivable securitization facility (the A/R Facility) which matures on September 23, 2023, in order to enable DSG to raise incremental funding for the ongoing business needs of DSG and its subsidiaries.
The A/R Facility was entered into pursuant to a Loan and Security Agreement (the Loan Agreement), dated September 23, 2020, among DSPV, as borrower, the persons from time to time party thereto, as lenders (the Lenders), and Fox Sports Net, LLC (FSN), a wholly-owned direct subsidiary of DSG, as initial servicer, Credit Suisse AG, New York Branch, as administrative agent and Wilmington Trust, National Association, as collateral agent, paying agent and account bank. The Lenders will provide certain loans, which loans will be secured by certain accounts receivable (Pool Receivables) purchased by DSPV pursuant to a Purchase and Sale Agreement (the Purchase Agreement, and together with the Loan Agreement, the A/R Agreements), dated September 23, 2020, among FSN, certain indirect wholly owned subsidiaries of DSG identified therein as originators (the Originators) and DSPV as purchaser, pursuant to which the Originators will sell certain accounts receivable to DSPV and FSN will continue to service such accounts receivable.
The maximum funding availability under the A/R Facility is the lesser of $250 million and the sum of the lowest aggregate loan balance since November 1, 2020 plus $50 million. The amount of actual availability under the A/R Facility is subject to change based on the level of eligible receivables sold by the Originators to DSPV and certain reserves. Eligibility of the receivables is determined by a variety of factors, including, but not limited to, credit ratings of the Originators’ customers, customer concentration levels, and certain characteristics of the accounts receivable being transferred. As of December 31, 2020, the total commitment was $227 million.
Borrowings under the A/R Facility generally bear interest at a rate per annum equal to LIBOR, which is subject to an interest rate floor of 0.00% per annum, plus 4.97% or, if the aggregate outstanding principal amount of loans is less than $125 million on or after November 1, 2020, 5.47%. We are required to pay a commitment fee on unutilized commitments under the A/R Facility.
We may voluntarily prepay outstanding loans or terminate commitments under the A/R Facility at any time without premium or penalty, other than customary breakage costs with respect to LIBOR rate loans, except (1) any voluntary prepayment (x) from the proceeds of a voluntary repurchase in accordance with the Purchase Agreement by any Originator of any Pool Receivables on or prior to the date that is 18 months after the Closing Date or (y) from the proceeds of a new accounts receivable financing entered into by DSPV or an affiliate thereof and requiring the purchase of Pool Receivables from DSPV after the date that is 18 months after the Closing Date but on or prior to the date that is 36 months after the Closing Date or (2) certain terminations of commitments on or prior to the date that is 18 months after the Closing Date, shall in each case be subject to a prepayment premium of 1.00% of the principal amount of the loans prepaid or commitments terminated, as the case may be.
DSPV, FSN, and the Originators provide customary representations and covenants under the A/R Agreements. Receivables in the A/R Facility are subject to certain eligibility criteria, concentration limits and reserves. The Loan Agreement provides for certain events of default upon the occurrence of which the administrative agent may declare the facility’s termination date to have occurred and declare the outstanding loan and all other obligations of DSPV to be due and payable. The Purchase Agreement provides for certain early amortization events upon the occurrence of which DSPV may terminate the sale and contribution of accounts receivable and related assets thereunder, including an early amortization event which would occur upon Consolidated EBITDA (as defined in the DSG Bank Credit Agreement as in effect at such time) of DSIH and its restricted subsidiaries under the DSG Bank Credit Agreement, less Consolidated Interest Expense (as defined in the DSG Bank Credit Agreement as in effect at such time) of DSIH and its restricted subsidiaries under the DSG Bank Credit Agreement, being less than zero as of the last day of any fiscal quarter (measured on a trailing four fiscal quarter basis).
As of December 31, 2020, the balance of the loans under the A/R Facility was $177 million and the balance of the receivables held by DSPV as part of the A/R Facility was $228 million, included in accounts receivable, net in our consolidated balance sheets.
The performance by the Originators of their respective obligations under the A/R Facility is guaranteed by FSN pursuant to a performance guaranty by FSN in favor of Credit Suisse AG, New York Branch, as administrative agent under the Loan Agreement.
DSG's ability to make scheduled payments on its debt obligations depends on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, competitive, legislative, regulatory and other factors beyond its control. The impact of the outbreak of COVID-19 continues to create significant uncertainty and disruption in the global economy and financial markets. Further, DSG’s success is dependent upon the existence and terms of its agreements with distributors, OTT and other streaming providers. We anticipate DSG’s existing cash and cash equivalents, cash flow from our operations, and borrowing capacity will be sufficient to satisfy its debt service obligations, capital expenditure requirements, and working capital needs for the next twelve months. However, certain factors, including but not limited to, the severity and duration of the COVID-19 pandemic and resulting effect on the economy, our advertisers, distributors, and their subscribers, could affect DSG’s liquidity and ability to maintain a level of cash flows from operating activities sufficient to permit DSG to pay the principal, premium, if any, and interest on its debt.
Debt of variable interest entities and guarantees of third-party debt
We jointly, severally, unconditionally, and irrevocably guarantee $49 million and $57 million of debt of certain third parties as of December 31, 2020 and 2019, respectively, of which $16 million and $20 million, net of deferred financing costs, related to consolidated VIEs is included in our consolidated balance sheets as of December 31, 2020 and 2019, respectively. These guarantees primarily relate to the debt of Cunningham as discussed under Cunningham Broadcasting Corporation within Note 15. Related Person Transactions. The credit agreements and term loans of these VIEs each bear interest of LIBOR plus 2.50%. As of December 31, 2020, we have determined that it is not probable that we would have to perform under any of these guarantees.
Finance leases
For more information related to our finance leases and affiliate finance leases see Note 8. Leases and Note 15. Related Person Transactions, respectively.
8. LEASES:
As described in Note 1. Nature of Operations and Summary of Significant Accounting Policies, we adopted new lease accounting guidance effective January 1, 2019.
We determine if a contractual arrangement is a lease at inception. Our lease arrangements provide the Company the right to utilize certain specified tangible assets for a period of time in exchange for consideration. Our leases primarily relate to building space, tower space, and equipment. We do not separate non-lease components from our building and tower leases for the purposes of measuring our lease liabilities and assets. Our leases consist of operating leases and finance leases which are presented separately in our consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
We recognize a lease liability and a right of use asset at the lease commencement date based on the present value of the future lease payments over the lease term discounted using our incremental borrowing rate. Implicit interest rates within our lease arrangements are rarely determinable. Right of use assets also include, if applicable, prepaid lease payments and initial direct costs, less incentives received.
We recognize operating lease expense on a straight-line basis over the term of the lease within operating expenses. Expense associated with our finance leases consists of two components, including interest on our outstanding finance lease obligations and amortization of the related right of use assets. The interest component is recorded in interest expense and amortization of the finance lease asset is recognized on a straight-line basis over the term of the lease in depreciation of property and equipment.
Our leases do not contain any material residual value guarantees or material restrictive covenants. Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances.
The following table presents lease expense we have recorded in our consolidated statements of operations for the years ended December 31, 2020 and December 31, 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Finance lease expense:
|
|
|
|
Amortization of finance lease asset
|
$
|
3
|
|
|
$
|
3
|
|
Interest on lease liabilities
|
4
|
|
|
4
|
|
Total finance lease expense
|
7
|
|
|
7
|
|
Operating lease expense (a)
|
64
|
|
|
47
|
|
Total lease expense
|
$
|
71
|
|
|
$
|
54
|
|
(a)Includes variable lease expense of $7 million and $5 million for the years ended December 31, 2020 and 2019, respectively, and short-term lease expense of $1 million for both the years ended December 31, 2020 and 2019.
The following table summarizes our outstanding operating and finance lease obligations as of December 31, 2020 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
2021
|
$
|
46
|
|
|
$
|
8
|
|
|
$
|
54
|
|
2022
|
36
|
|
|
8
|
|
|
44
|
|
2023
|
32
|
|
|
7
|
|
|
39
|
|
2024
|
26
|
|
|
6
|
|
|
32
|
|
2025
|
24
|
|
|
5
|
|
|
29
|
|
2026 and thereafter
|
142
|
|
|
19
|
|
|
161
|
|
Total undiscounted obligations
|
306
|
|
|
53
|
|
|
359
|
|
Less imputed interest
|
(74)
|
|
|
(15)
|
|
|
(89)
|
|
Present value of lease obligations
|
$
|
232
|
|
|
$
|
38
|
|
|
$
|
270
|
|
The following table summarizes supplemental balance sheet information related to leases as of December 31, 2020 and December 31, 2019 (in millions, except lease term and discount rate):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Operating Leases
|
|
Finance Leases
|
|
Operating Leases
|
|
Finance Leases
|
|
Lease assets, non-current
|
$
|
197
|
|
|
$
|
17
|
|
(a)
|
$
|
223
|
|
|
$
|
14
|
|
(a)
|
|
|
|
|
|
|
|
|
|
Lease liabilities, current
|
34
|
|
|
5
|
|
|
38
|
|
|
5
|
|
|
Lease liabilities, non-current
|
198
|
|
|
33
|
|
|
217
|
|
|
33
|
|
|
Total lease liabilities
|
$
|
232
|
|
|
$
|
38
|
|
|
$
|
255
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term (in years)
|
9.39
|
|
8.39
|
|
9.55
|
|
7.18
|
|
Weighted average discount rate
|
5.7
|
%
|
|
8.4
|
%
|
|
5.7
|
%
|
|
8.8
|
%
|
|
(a)Finance lease assets are reflected in property and equipment, net in our consolidated balance sheets.
The following table presents other information related to leases for the years ended December 31, 2020 and December 31, 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
Operating cash flows from operating leases
|
$
|
55
|
|
|
$
|
38
|
|
Operating cash flows from finance leases
|
$
|
3
|
|
|
$
|
4
|
|
Financing cash flows from finance leases
|
$
|
5
|
|
|
$
|
5
|
|
Leased assets obtained in exchange for new operating lease liabilities
|
$
|
20
|
|
|
$
|
35
|
|
Leased assets obtained in exchange for new finance lease liabilities
|
$
|
6
|
|
|
$
|
—
|
|
9. PROGRAM CONTRACTS:
Future payments required under television program contracts as of December 31, 2020 were as follows (in millions):
|
|
|
|
|
|
2021
|
$
|
92
|
|
2022
|
16
|
|
2023
|
9
|
|
2024
|
4
|
|
2025
|
1
|
|
|
|
Total
|
122
|
|
Less: Current portion
|
92
|
|
Long-term portion of program contracts payable
|
$
|
30
|
|
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 $24 million. In addition, we have entered into non-cancelable commitments for future television program rights aggregating to $91 million as of December 31, 2020.
10. REDEEMABLE NONCONTROLLING INTERESTS:
We account for redeemable noncontrolling interests in accordance with ASC 480, Distinguishing Liabilities from Equity, and classify them as mezzanine equity in our consolidated balance sheets because their possible redemption is outside of the control of the Company. Our redeemable non-controlling interests consist of the following:
Redeemable Subsidiary Preferred Equity. On August 23, 2019, DSH, an indirect parent of DSG and indirect wholly-owned subsidiary of the Company, issued preferred equity (the Redeemable Subsidiary Preferred Equity) for $1,025 million.
The Redeemable Subsidiary Preferred Equity is redeemable by the holder in the following circumstances (1) in the event of a change of control with respect to DSH, the holder will have the right (but not the obligation) to require the redemption of the securities at a per unit amount equal to the liquidation preference per share plus accrued and unpaid dividends (2) in the event of the sale of new equity interests in DSG or direct and indirect subsidiaries to the extent of proceeds received and (3) beginning on August 23, 2027, so long as any Redeemable Subsidiary Preferred Equity remains outstanding, the holder, subject to certain minimum holding requirements, or investors holding a majority of the outstanding Redeemable Subsidiary Preferred Equity, may compel DSH and DSG to initiate a process to sell DSG and/or conduct an initial public offering.
We may redeem some or all of the Redeemable Subsidiary Preferred Equity from time to time thereafter at a price equal to $1,000 per unit plus the amount of dividends per unit previously paid in kind (the Liquidation Preference), multiplied by the applicable premium as follows (presented as a percentage of the Liquidation Preference): (i) on or after November 22, 2019 until February 19, 2020: 100%; (ii) on or after February 20, 2020 until August 22, 2020: 102%; (iii) on or after August 23, 2020 but prior to August 23, 2021: at a customary "make-whole" premium representing the present value of 103% plus all required dividend payments due on such Redeemable Subsidiary Preferred Equity through August 23, 2021; (iv) on or after August 23, 2021 until August 22, 2022: 103%; (v) on or after August 23, 2022 until August 22, 2023: 101%; and (vi) August 23, 2023 and thereafter: 100%, in each case, plus accrued and unpaid dividends.
The Redeemable Subsidiary Preferred Equity accrues an initial quarterly dividend commencing on August 23, 2019 equal to 1-Month LIBOR (with a 0.75% floor) plus 7.5% (8% if paid in kind) per annum on the sum of (i) $1,025 million (the Aggregate Liquidation Preference) plus (ii) the amount of aggregate accrued and unpaid dividends as of the end of the immediately preceding dividend accrual period, payable, at DSH's election, in cash or, to the extent not paid in cash, by automatically increasing the Aggregate Liquidation Preference, whether or not such dividends have been declared and whether or not there are profits, surplus, or other funds legally available for the payment of dividends. The Redeemable Subsidiary Preferred Equity dividend rate is subject to rate step-ups of 0.5% per annum, beginning on August 23, 2022; provided that, and subject to other applicable increases in the dividend rate described below, the cumulative dividend rate will be capped at 1-Month LIBOR plus 10.5% per annum until (a) on February 23, 2028, the Redeemable Subsidiary Preferred Equity dividend rate will increase by 1.50% with further increases of 0.5% on each six month anniversary thereafter and (b) the Redeemable Subsidiary Preferred Equity dividend rate will increase by 2% if we do not redeem the Redeemable Subsidiary Preferred Equity, to the extent elected by holders of the Redeemable Subsidiary Preferred Equity, upon a change of control; provided, in each case, that the cumulative dividend rate will be capped at 1-Month LIBOR plus 14% per annum.
Subject to limited exceptions, DSH shall not, and shall not permit its subsidiaries, directly or indirectly, to pay a dividend or make a distribution, unless DSH applies 75% of the amount of such dividend or distribution payable to DSH or its subsidiaries (with the amount payable calculated on a pro rata basis based on their direct or indirect common equity ownership by DSH) to make an offer to the holders of Redeemable Subsidiary Preferred Equity to redeem the Redeemable Subsidiary Preferred Equity (subject to certain redemption restrictions) at a price equal to 100% of the Liquidation Preference of such Redeemable Subsidiary Preferred Equity, plus accrued and unpaid dividends.
During the years ended December 31, 2020 and 2019, we redeemed 550,000 and 300,000 units, respectively, of the Redeemable Subsidiary Preferred Equity for an aggregate redemption price equal to $550 million and $300 million, respectively, plus accrued and unpaid dividends, representing 100% of the unreturned capital contribution with respect to the units redeemed, plus accrued and unpaid dividends with respect to the units redeemed up to, but not including, the redemption date, and after giving effect to any applicable rebates.
Dividends accrued during the years ended December 31, 2020 and 2019 were $36 million and $33 million, respectively, and are reflected in net income attributable to the redeemable noncontrolling interests in our consolidated statements of operations. The balance of the Redeemable Subsidiary Preferred Equity, net of issuance costs, was $170 million and $700 million as of December 31, 2020 and 2019, respectively.
In connection with the Redeemable Subsidiary Preferred Equity, the Company provides a guarantee of collection of distributions.
Subsidiary Equity Put Right. A noncontrolling equity holder of one of our subsidiaries had the right to sell its interest to the Company at a fair market sale value of $376 million, plus any undistributed income, which was exercised and settled in January 2020.
A noncontrolling equity holder of one of our subsidiaries has the right to sell its interest to the Company at any time during the 30-day period following September 30, 2025. The initial value of this redeemable noncontrolling interest was recorded at $22 million.
11. 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 2020, no Class B Common Stock shares were converted into Class A Common Stock shares. During 2019, 943,002 Class B Common Stock shares were converted into Class A Common Stock shares.
Our Bank Credit Agreements and some of our subordinate debt instruments have restrictions on our ability to pay dividends on our common stock unless certain specific conditions are satisfied, including but not limited to:
•no event of default then exists under each indenture or certain other specified agreements relating to our debt; and
•after taking into account the dividends payment, we are within certain restricted payment requirements contained in each indenture.
During 2020 and 2019, 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. Total dividend payments for both the year ended December 31, 2020 and 2019 were $0.80 per share. In February 2021, 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 August 4, 2020, the Board of Directors authorized an additional $500 million share repurchase authorization in addition to the previous repurchase authorization of $1 billion. There is no expiration date and currently, management has no plans to terminate this program. For the year ended December 31, 2020, we repurchased approximately 19 million shares of Class A Common Stock for $343 million. As of December 31, 2020, the total remaining repurchase authorization was $880 million.
12. INCOME TAXES:
The (benefit) provision for income taxes consisted of the following for the years ended December 31, 2020, 2019, and 2018 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Current (benefit) provision for income taxes:
|
|
|
|
|
|
Federal
|
$
|
(126)
|
|
|
$
|
(89)
|
|
|
$
|
59
|
|
State
|
9
|
|
|
(2)
|
|
|
8
|
|
|
(117)
|
|
|
(91)
|
|
|
67
|
|
Deferred benefit for income taxes:
|
|
|
|
|
|
Federal
|
(584)
|
|
|
(4)
|
|
|
(69)
|
|
State
|
(19)
|
|
|
(1)
|
|
|
(34)
|
|
|
(603)
|
|
|
(5)
|
|
|
(103)
|
|
Benefit for income taxes
|
$
|
(720)
|
|
|
$
|
(96)
|
|
|
$
|
(36)
|
|
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Federal statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
Adjustments:
|
|
|
|
|
|
Valuation allowance (a)
|
(6.1)
|
%
|
|
(237.1)
|
%
|
|
0.7
|
%
|
State income taxes, net of federal tax benefit (b)
|
4.0
|
%
|
|
56.6
|
%
|
|
(8.8)
|
%
|
Net operating loss carryback (c)
|
1.9
|
%
|
|
—
|
%
|
|
—
|
%
|
Federal tax credits (d)
|
1.7
|
%
|
|
(684.6)
|
%
|
|
(19.9)
|
%
|
Noncontrolling interest (e)
|
0.7
|
%
|
|
(138.9)
|
%
|
|
(0.3)
|
%
|
Change in unrecognized tax benefits (f)
|
(0.2)
|
%
|
|
72.2
|
%
|
|
—
|
%
|
Effect of consolidated VIEs (g)
|
(0.1)
|
%
|
|
46.3
|
%
|
|
1.6
|
%
|
Stock-based compensation
|
(0.1)
|
%
|
|
(15.9)
|
%
|
|
0.5
|
%
|
Spectrum sales (h)
|
—
|
%
|
|
(386.7)
|
%
|
|
(5.8)
|
%
|
Nondeductible items (i)
|
—
|
%
|
|
192.7
|
%
|
|
0.4
|
%
|
Capital loss carryback (j)
|
—
|
%
|
|
(26.0)
|
%
|
|
—
|
%
|
Federal tax reform (k)
|
—
|
%
|
|
—
|
%
|
|
(1.4)
|
%
|
Other
|
0.1
|
%
|
|
(3.0)
|
%
|
|
0.3
|
%
|
Effective income tax rate
|
22.9
|
%
|
|
(1,103.4)
|
%
|
|
(11.7)
|
%
|
(a)Our 2020 income tax provision includes a $192 million addition related to an increase in valuation allowance primarily due to the change in judgement in the realizability of certain deferred tax assets resulting from the reduction in forecast of future operating income and the RSN impairment. Our 2019 income tax provision included a $16 million benefit related to a release of valuation allowance on certain state net operating losses where utilization was expected as a result of a business combination.
(b)Included in state income taxes are deferred income tax effects related to certain acquisitions, intercompany mergers and/or impact of changes in apportionment.
(c)Our 2020 provision includes a $61 million benefit as result of the CARES Act allowing for the 2020 federal net operating loss to be carried back to the pre-2018 years when the federal tax rate was 35%.
(d)Our 2020, 2019, and 2018 income tax provisions include a benefit of $42 million, $57 million, and $58 million, respectively, related to investments in sustainability initiatives whose activities qualify for federal income tax credits through 2021.
(e)Our 2020 and 2019 income tax provisions include a $23 million and a $12 million benefit, respectively, related to noncontrolling interest of various partnerships.
(f)Our 2020 and 2019 income tax provisions include a $5 million and $4 million additions, respectively, related to tax positions of prior tax years.
(g)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.
(h)Our 2019 income tax provision includes a benefit of $34 million related to the treatment of the gain from the sale of certain broadcast spectrum in connection with the Broadcast Incentive Auction.
(i)Our 2019 income tax provision includes a $17 million addition primarily related to regulatory costs, executive compensation and other not tax-deductible expenses.
(j)Our 2019 income tax provision includes a $2 million benefit related to capital losses that will be carried back to the pre-2018 tax years when the federal tax rate was 35%.
(k)Our 2018 income tax provision includes a non-recurring benefit of $4 million to reflect the effect of the Tax Reform enacted on December 22, 2017.
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, 2020 and 2019 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Deferred Tax Assets:
|
|
|
|
Net operating losses:
|
|
|
|
Federal
|
$
|
22
|
|
|
$
|
22
|
|
State
|
130
|
|
|
92
|
|
Goodwill and intangible assets
|
9
|
|
|
10
|
|
Basis in DSH
|
834
|
|
|
—
|
|
Tax Credits
|
67
|
|
|
—
|
|
Settlement and other accruals
|
7
|
|
|
39
|
|
Other
|
46
|
|
|
28
|
|
|
1,115
|
|
|
191
|
|
Valuation allowance for deferred tax assets
|
(252)
|
|
|
(65)
|
|
Total deferred tax assets
|
$
|
863
|
|
|
$
|
126
|
|
|
|
|
|
Deferred Tax Liabilities:
|
|
|
|
Goodwill and intangible assets
|
$
|
(402)
|
|
|
$
|
(415)
|
|
Property & equipment, net
|
(221)
|
|
|
(90)
|
|
|
|
|
|
Other
|
(43)
|
|
|
(28)
|
|
Total deferred tax liabilities
|
(666)
|
|
|
(533)
|
|
Net deferred tax assets (liabilities)
|
$
|
197
|
|
|
$
|
(407)
|
|
At December 31, 2020, the Company had approximately $106 million and $2.9 billion of gross federal and state net operating losses, respectively. Those losses will expire during various years from 2021 to 2040, and some of them are subject to annual limitations under the IRC 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, 2020, a valuation allowance has been provided for deferred tax assets related to certain temporary basis differences, interest expense carryforwards under the IRC Section 163(j) and a substantial portion of our available state net operating loss carryforwards based on past operating results, expected timing of the reversals of existing temporary basis differences, alternative tax strategies, current and cumulative losses, 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, 2020, we increased our valuation allowance by $187 million to $252 million. The increase in valuation allowance was primarily due to the change in judgement in the realizability of certain deferred tax assets resulting from changes in our forecast of future operating income and the RSN impairment. During the year ended December 31, 2019, we decreased our valuation allowance by $1 million to $65 million. The decrease in valuation allowance was primarily due to the change in the realizability of certain state deferred tax assets as a result of a business combination in 2019.
The following table summarizes the activity related to our accrued unrecognized tax benefits (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Balance at January 1,
|
$
|
11
|
|
|
$
|
7
|
|
|
$
|
7
|
|
Additions related to prior year tax positions
|
5
|
|
|
4
|
|
|
—
|
|
Additions related to current year tax positions
|
3
|
|
|
—
|
|
|
2
|
|
Reductions related to prior year tax positions
|
(1)
|
|
|
—
|
|
|
(1)
|
|
Reductions related to settlements with taxing authorities
|
(4)
|
|
|
—
|
|
|
—
|
|
Reductions related to expiration of the applicable statute of limitations
|
(3)
|
|
|
—
|
|
|
(1)
|
|
Balance at December 31,
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
7
|
|
We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Our 2017 and 2018 federal tax returns are currently under audit, and several of our subsidiaries are currently under state examinations for various years. Certain of our 2016 and subsequent federal and/or state tax returns remain subject to examination by various tax authorities. 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.
In August 2020, we received an approval from the Joint Committee on Taxation of a settlement agreement with the Internal Revenue Service with respect to the audit of our 2013 - 2015 federal income tax returns. There was no material impact on our financial statements as a result of this settlement.
13. COMMITMENTS AND CONTINGENCIES:
Sports Programming Rights
We are contractually obligated to make payments to purchase sports programming rights. The following table presents our annual non-cancellable commitments relating to the local sports segment's sports programming rights agreements as of December 31, 2020. These commitments assume that sports teams fully deliver the contractually committed games, and do not reflect the impact of rebates expected to be paid by the teams.
|
|
|
|
|
|
(in millions)
|
|
2021
|
$
|
1,820
|
|
2022
|
1,575
|
|
2023
|
1,525
|
|
2024
|
1,457
|
|
2025
|
1,370
|
|
2026 and thereafter
|
6,912
|
|
Total
|
$
|
14,659
|
|
Other Liabilities
In connection with the RSN Acquisition, we assumed certain fixed payment obligations which are payable through 2027. We recorded these obligations in purchase accounting at estimated fair value. As of December 31, 2020 and December 31, 2019, $31 million and $56 million, respectively, were recorded within other current liabilities and $97 million and $145 million, respectively, were recorded within other long-term liabilities in our consolidated balance sheets. Interest expense of $8 million and $4 million was recorded for the years ended December 31, 2020 and 2019, respectively.
In connection with the RSN Acquisition, we assumed certain variable payment obligations which are payable through 2030. These contractual obligations are based upon the excess cash flow of certain RSNs. We recorded these obligations in purchase accounting at estimated fair value. As of December 31, 2020 and December 31, 2019, $12 million and $34 million, respectively, were recorded within other current liabilities and $41 million and $205 million, respectively, were recorded within other long-term liabilities in our consolidated balance sheets. These obligations are measured at the present value of the estimated amount of cash to be paid over the term of the contracts. We recorded a measurement adjustment gain of $159 million for the year ended December 31, 2020, recorded within other income, net in our consolidated statements of operations. The measurement adjustment gain was a result of a decrease in the projected excess cash flows of the related RSNs, as further discussed in Note 5. Goodwill, Indefinite-Lived Intangible Assets, and Other Intangible Assets.
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.
FCC Litigation Matters
On December 21, 2017, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) proposing a $13 million fine for alleged violations of the FCC's sponsorship identification rules by the Company and certain of its subsidiaries. We filed a response disputing the Commission's findings and the proposed fine.
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 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. The ALJ granted the Motion and terminated the hearing on March 5, 2019.
On May 22, 2020, the FCC released an Order and Consent Decree pursuant to which the Company agreed to pay $48 million to resolve the matters covered by the NAL, the FCC’s investigation of the allegations raised in the HDO, and a retransmission related matter. The Company submitted the $48 million payment on August 19, 2020. As part of the consent decree, the Company also agreed to implement a 4-year compliance plan. Two petitions were filed on June 8, 2020 seeking reconsideration of the Order and Consent Decree. The Company filed an opposition to the petitions on June 18, 2020, and the petitions remain pending. For the year ended December 31, 2020, we recorded an expense of $2.5 million for the above legal matters, which is reflected within selling, general, and administrative expenses in our consolidated statements of operations.
On September 1, 2020, one of the individuals who filed a petition for reconsideration of the Order and Consent Decree filed a petition to deny the license renewal application of WBFF(TV), Baltimore, MD, and the license renewal applications of two other Baltimore, MD stations with which the Company has a JSA or LMA, Deerfield Media station WUTB(TV) and Cunningham station WNUV(TV). The Company filed an opposition to the petition on October 1, 2020, and the petition remains pending.
On September 2, 2020, the FCC adopted a Memorandum Opinion and Order and Notice of Apparent Liability for Forfeiture (NAL) against the licensees of several stations with whom the Company has LMAs, JSAs, and/or SSAs in response to a complaint regarding those stations’ retransmission consent negotiations. The NAL proposed a $0.5 million penalty for each station, totaling $9 million. The licensees filed a response to the NAL on October 15, 2020, asking the Commission to dismiss the proceeding or, alternatively, to reduce the proposed forfeiture to $25,000 per station. The Company is not a party to that proceeding and cannot predict whether or how the proceeding will affect the Company’s financial statements. However, we accrued an expense for the above legal matters during the year ending December 31, 2020, as we consolidate these stations as VIEs.
Other Litigation Matters
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 U.S. District Court for the District of Columbia entered the consent decree on May 22, 2019. 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's 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 that were filed against the Company following published reports of the DOJ investigation into the exchange of pacing data within the industry. On October 3, 2018, these lawsuits were consolidated in the Northern District of Illinois. The consolidated action alleges that the Company and thirteen other broadcasters conspired to fix prices for commercials to be aired on broadcast television stations throughout the United States and engaged in unlawful information sharing, in violation of the Sherman Antitrust Act. The consolidated action seeks 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 Court denied the Defendants’ motion to dismiss on November 6, 2020. Since then, the Plaintiffs have served the Defendants with written discovery requests, and the Court has set a pretrial schedule requiring discovery to be completed by July 1, 2022, and briefing on class certification to be completed by November 14, 2022. The Company believes the lawsuits are without merit and intends to vigorously defend itself against all such claims.
On August 9, 2018, Edward Komito, a putative Company shareholder, filed a class action 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 Litigation, case No. 1:18-CV-02445-CCB (the Securities Action). On March 1, 2019, lead counsel in the Securities Action filed an amended complaint, adding David Smith and Steven Marks as defendants, and alleging that defendants violated the federal securities laws by issuing false or misleading disclosures concerning (a) the Merger prior to the termination thereof; and (b) the DOJ investigation concerning the alleged exchange of pacing information. The Securities Action seeks declaratory relief, money damages in an amount to be determined at trial, and attorney’s fees and costs. On May 3, 2019, Defendants filed a motion to dismiss the amended complaint, which motion was opposed by lead plaintiff. On February 4, 2020, the Court issued a decision granting the motion to dismiss in part and denying the motion to dismiss in part. On February 18, 2020, plaintiffs filed a motion for reconsideration or, in the alternative, to certify dismissal as final and appealable. Defendants filed an opposition to this motion. On July 20, 2020, the Court issued a decision denying plaintiffs’ motion and dismissing the remaining claims (which the Court previously had not dismissed in its February 4, 2020 decision) based on lack of standing. The plaintiffs did not appeal this decision, and the Securities Action therefore has concluded.
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, with Martin Leader as its designated Chair.
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. On April 30, 2019, the Special Litigation Committee moved to dismiss and, in the alternative, to stay the San Antonio and Norfolk Actions, which motion was opposed by the plaintiffs. The Company and the remaining individual defendants joined in this motion. On October 23, 2019, the court granted the plaintiff’s motion in the Teamsters Action to remand that action back to the Circuit Court. On December 9, 2019, the court denied defendants’ motions to dismiss and, in the alternative, to stay the San Antonio and Norfolk Actions without prejudice, subject to potential renewal following limited discovery.
On July 20, 2020, the parties to the Derivative Actions executed a Stipulation and Agreement of Settlement, Compromise and Release (the Settlement Stipulation) reflecting the terms of the settlement of the Derivative Actions (the Settlement), subject to final approval by the Court (which approval subsequently was obtained). In connection with the Settlement, (a) the Company’s Board of Directors agreed to implement a series of corporate governance measures (as described in Exhibit A to the Settlement Stipulation); (b) defendants’ insurers agreed to pay $20.5 million into a settlement fund, which, after a deduction for an award of fees and expenses to plaintiffs’ counsel in an amount determined by the Court, was paid to the Company; (c) the Board of Directors agreed to designate an aggregate amount of $5 million of the settlement fund to be used, over a period of five years, for the implementation and operation of the corporate governance measures and certain compliance programs in connection with an FCC consent decree that was previously announced on May 6, 2020; and (d) the Company’s Executive Chairman David D. Smith agreed to forgo, cancel, or return a grant of SARs of 638,298 shares of Sinclair Class A Common Stock that was awarded to him in February 2020. In exchange for the consideration described above, the Settlement provided that the Derivative Actions would be dismissed and defendants would be released of any claims relating to the Tribune Merger or the HDO (provided that the release will not include the Securities Action). Defendants did not admit any liability or wrongdoing in connection with the Settlement and entered into the Settlement to avoid the costs, risks, distraction, and uncertainties of continued litigation. On July 23, 2020, and pursuant to the Settlement, the Teamsters Action was voluntarily dismissed. Also on July 23, 2020, the plaintiffs in the Norfolk Action and the San Antonio Action filed the settlement papers with the District of Maryland and moved for preliminary approval of the Settlement as fair, reasonable, and adequate, and providing for notice to shareholders of the Settlement. On August 6, 2020, the court entered an order preliminarily approving the settlement and providing for notice of a final settlement hearing to be held on October 27, 2020. On October 27, 2020, the court held the final settlement hearing. On November 20, 2020, the court issued an opinion and entered a Final Order and Judgment approving the Settlement and the Settlement Stipulation (with a modification of the fees to be awarded to plaintiffs’ counsel). Accordingly, the Derivative Actions have concluded.
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 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 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.
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, were filed before the U.S. Court of Appeals for the Third Circuit. On September 23, 2019, the court vacated and remanded the Ownership Order on Reconsideration. Petitions for rehearing en banc were filed by the FCC and industry intervenors (including the Company) on November 7, 2019. The Third Circuit denied the petitions for rehearing on November 20, 2019 and the court’s mandate issued on November 29, 2019. On April 17, 2020, the FCC and industry intervenors filed petitions for writ of certiorari with the Supreme Court, which petitions were granted on October 2, 2020. The briefing schedule concluded on January 12, 2021, and oral argument was heard on January 19, 2021. We cannot predict the outcome of the 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 certain of its ownership rules 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 began on April 29, 2019, and reply comments were due by May 29, 2019. We cannot predict the outcome of the rulemaking proceeding. Changes to these rules could impact our ability to make radio or television station acquisitions.
14. 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.
We are party to a joint venture associated with Marquee. Marquee is party to a long term telecast rights agreement which provides the rights to air certain live game telecasts and other content, which we guarantee. In connection with the RSN Acquisition, we became party to a joint venture associated with one other regional sports network. We participate significantly in the economics and have the power to direct the activities which significantly impact the economic performance of these regional sports networks, including sales and certain operational services. We consolidate these regional sports networks because they are variable interest entities and we are the primary beneficiary.
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, 2020 and 2019 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
64
|
|
|
$
|
39
|
|
Accounts receivable, net
|
70
|
|
|
39
|
|
Prepaid sports rights
|
2
|
|
|
10
|
|
Other current assets
|
5
|
|
|
6
|
|
|
|
|
|
Total current asset
|
141
|
|
|
94
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
16
|
|
|
15
|
|
Operating lease assets
|
6
|
|
|
8
|
|
Goodwill and indefinite-lived intangible assets
|
15
|
|
|
15
|
|
|
|
|
|
Definite-lived intangible assets, net
|
54
|
|
|
93
|
|
Other assets
|
1
|
|
|
3
|
|
Total assets
|
$
|
233
|
|
|
$
|
228
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Current liabilities:
|
|
|
|
Other current liabilities
|
$
|
40
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, finance leases, and commercial bank financing, less current portion
|
10
|
|
|
15
|
|
Operating lease liabilities, less current portion
|
5
|
|
|
6
|
|
Program contracts payable, less current portion
|
4
|
|
|
7
|
|
Other long term liabilities
|
17
|
|
|
1
|
|
Total liabilities
|
$
|
76
|
|
|
$
|
48
|
|
The amounts above represent the consolidated assets and liabilities of the VIEs described above, for which we are the primary beneficiary. Total liabilities associated with certain outsourcing agreements and purchase options with certain VIEs, which are excluded from above, were $131 million and $127 million as of December 31, 2020 and December 31, 2019, 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, 2020, 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.
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 were $75 million and $71 million as of December 31, 2020 and 2019, 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 from equity method investments and other income, net, respectively, in our consolidated statements of operations. We recorded losses of $38 million, $50 million, and $45 million for the years ended December 31, 2020, 2019, and 2018, respectively, related to these investments.
15. 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 million for each of the years ended December 31, 2020, 2019, and 2018.
Finance leases payable related to the aforementioned relationships were $8 million, net of $2 million interest, and $11 million, net of $3 million interest, as of December 31, 2020 and 2019, respectively. The finance leases mature in periods through 2029. For further information on finance 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 million for the year ended December 31, 2020 and $2 million for each of the years ended December 31, 2019 and 2018.
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 14. Variable Interest Entities, for further discussion of the scope of services provided under these types of arrangements. As of December 31, 2020, we have jointly, severally, unconditionally, and irrevocably guaranteed $41 million of Cunningham debt, of which $8 million, net of $0.4 million deferred financing costs, relates to the Cunningham VIEs that we consolidate.
The voting stock of Cunningham is owned by an unrelated party. 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.
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 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 $54 million and $51 million as of December 31, 2020 and 2019, respectively. The remaining aggregate purchase price of these stations, net of prepayments, was $54 million for both the years ended December 31, 2020 and 2019. Additionally, we provide services to WDBB-TV pursuant to an LMA, which expires April 22, 2025, and have a purchase option to acquire for $0.2 million. We paid Cunningham, under these agreements, $8 million for each of the years ended December 31, 2020 and 2019 and $10 million for the year ended December 31, 2018.
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 November 2021 and December 2028, and certain stations have renewal provisions for successive eight-year periods.
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 in our consolidated statements of operations. Our consolidated revenues include $157 million, $155 million, and $171 million for the years ended December 31, 2020, 2019, and 2018, respectively, related to the Cunningham Stations.
We have 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 June 2022. Under the agreement, Cunningham paid us an initial fee of $1 million and pays us $0.2 million annually for master control services plus the cost to maintain and repair the equipment. In addition, we have an agreement with Cunningham to provide a news share service with the Johnstown, PA station for an annual fee of $1 million that expires in December 2021.
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 each of the years ended December 31, 2020, 2019, and 2018.
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 $1 million for each of the years ended December 31, 2020, 2019, and 2018.
Equity method investees
YES Network. In August 2019, YES Network, an equity method investee, entered into a management services agreement with the Company, in which the Company provides certain services for an initial term that expires on August 29, 2025. The agreement will automatically renew for two 2-year renewal terms, with a final expiration on August 29, 2029. Pursuant to the terms of the agreement, the YES Network paid us a management services fee of $5 million and $2 million for the years ended December 31, 2020 and 2019, respectively.
In conjunction with the RSN Acquisition on August 23, 2019, as discussed in Note 2. Acquisitions and Dispositions of Assets, we assumed a minority interest in certain mobile production businesses, which we account for as equity method investments. We made payments to these businesses for production services totaling $19 million and $12 million for the years ended December 31, 2020 and 2019, respectively.
Programming rights
As of December 31, 2020, affiliates of six professional teams have non-controlling equity interests in certain of our RSNs. These agreements expire on various dates during the fiscal years ended 2025 through 2032. The Company paid $168 million, net of rebates, for the year ended December 31, 2020 and $73 million for the year ended December 31, 2019 under sports programming rights agreements covering the broadcast of regular season games to professional teams who have non-controlling equity interests in certain of our RSNs.
Employees
Jason Smith, an employee of the Company, is the son of Frederick Smith, a Vice President of the Company and a member of the Company's Board of Directors. Jason Smith received total compensation of $0.2 million, consisting of salary and bonus, for each of the years ended December 31, 2020, 2019, and 2018, and was granted a RSA with respect to 355 shares, vesting over two years, for the year ended December 31, 2020. Amberly Thompson, an employee of the Company, is the daughter of Donald Thompson, Executive Vice President and Chief Human Resources Officer of the Company. Amberly Thompson received total compensation of $0.2 million, consisting of salary and bonus, for each of the years ended December 31, 2020 and 2019, and $0.1 million, consisting of salary and bonus, for the year ended December 31, 2018. Edward Kim, an employee of the company, is the brother-in-law of Christopher Ripley, President and Chief Executive Officer of the Company. Edward Kim was hired during the year ended December 31, 2020, with a base salary of $0.2 million, and received total compensation for the year of $0.1 million, consisting of salary.
16. 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, 2020, 2019, and 2018 (in millions, except share amounts which are reflected in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Income (Numerator)
|
|
|
|
|
|
Net (loss) income
|
$
|
(2,429)
|
|
|
$
|
105
|
|
|
$
|
346
|
|
Net income attributable to the redeemable noncontrolling interests
|
(56)
|
|
|
(48)
|
|
|
—
|
|
Net loss (income) attributable to the noncontrolling interests
|
71
|
|
|
(10)
|
|
|
(5)
|
|
Numerator for basic and diluted earnings per common share available to common shareholders
|
$
|
(2,414)
|
|
|
$
|
47
|
|
|
$
|
341
|
|
|
|
|
|
|
|
Shares (Denominator)
|
|
|
|
|
|
Basic weighted-average common shares outstanding
|
79,924
|
|
|
92,015
|
|
|
100,913
|
|
Dilutive effect of stock settled appreciation rights and outstanding stock options
|
—
|
|
|
1,170
|
|
|
805
|
|
Diluted weighted-average common and common equivalent shares outstanding
|
79,924
|
|
|
93,185
|
|
|
101,718
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Weighted-average stock-settled appreciation rights and outstanding stock options excluded
|
3,288
|
|
|
238
|
|
|
1,325
|
|
17. SEGMENT DATA:
We measure segment performance based on operating income (loss). We have two reportable segments: broadcast and local sports. Our broadcast segment, previously referred to as our local news and marketing service segment, provides free over-the-air programming to television viewing audiences and includes stations in 88 markets located throughout the continental United States. Our local sports segment, previously referred to as our sports segment, provides viewers with live professional sports content and includes our regional sports network brands, Marquee, and a minority equity interest in the YES Network. Other and corporate are not reportable segments but are included for reconciliation purposes. Other primarily consists of original networks and content, including Tennis, non-broadcast digital and internet solutions, technical services, and other non-media investments. Corporate costs primarily include our costs to operate as a public company and to operate our corporate headquarters location. All of our businesses are located within the United States.
Segment financial information is included in the following tables for the years ended December 31, 2020, 2019, and 2018 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
Broadcast
|
|
Local sports
|
|
Other & Corporate
|
|
Eliminations
|
|
Consolidated
|
Goodwill
|
|
$
|
2,017
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
2,092
|
|
Assets
|
|
4,908
|
|
|
6,620
|
|
|
1,867
|
|
|
(13)
|
|
|
13,382
|
|
Capital expenditures
|
|
101
|
|
|
24
|
|
|
32
|
|
|
—
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
Broadcast
|
|
Local sports
|
|
Other & Corporate
|
|
Eliminations
|
|
Consolidated
|
Goodwill
|
|
$
|
2,026
|
|
|
$
|
2,615
|
|
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
4,716
|
|
Assets
|
|
4,866
|
|
|
11,258
|
|
|
1,271
|
|
|
(25)
|
|
|
17,370
|
|
Capital expenditures
|
|
150
|
|
|
9
|
|
|
9
|
|
|
(12)
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2020
|
|
Broadcast
|
|
Local sports
|
|
Other & Corporate
|
|
Eliminations
|
|
Consolidated
|
Revenue
|
|
$
|
2,922
|
|
|
$
|
2,686
|
|
|
$
|
451
|
|
|
$
|
(116)
|
|
(e)
|
$
|
5,943
|
|
Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets
|
|
239
|
|
|
410
|
|
|
27
|
|
|
(2)
|
|
|
674
|
|
Amortization of sports programming rights (a)
|
|
—
|
|
|
1,078
|
|
|
—
|
|
|
—
|
|
|
1,078
|
|
Amortization of program contract costs
|
|
83
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
86
|
|
Corporate general and administrative expenses
|
|
119
|
|
|
10
|
|
|
19
|
|
|
—
|
|
|
148
|
|
(Gain) loss on asset dispositions and other, net of impairment
|
|
(118)
|
|
(b)
|
—
|
|
|
3
|
|
|
—
|
|
|
(115)
|
|
Impairment of goodwill and definite-lived intangible assets
|
|
—
|
|
|
4,264
|
|
|
—
|
|
|
—
|
|
|
4,264
|
|
Operating income (loss)
|
|
789
|
|
(b)
|
(3,602)
|
|
|
47
|
|
|
(6)
|
|
|
(2,772)
|
|
Interest expense including amortization of debt discount and deferred financing costs
|
|
5
|
|
|
460
|
|
|
203
|
|
|
(12)
|
|
|
656
|
|
Income (loss) from equity method investments
|
|
—
|
|
|
6
|
|
|
(42)
|
|
|
—
|
|
|
(36)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2019
|
|
Broadcast
|
|
Local sports
|
|
Other & Corporate
|
|
Eliminations
|
|
Consolidated
|
Revenue
|
|
$
|
2,690
|
|
|
$
|
1,139
|
|
|
$
|
470
|
|
|
$
|
(59)
|
|
(e)
|
$
|
4,240
|
|
Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets
|
|
246
|
|
|
157
|
|
|
22
|
|
|
(1)
|
|
|
424
|
|
Amortization of sports programming rights (a)
|
|
—
|
|
|
637
|
|
|
—
|
|
|
—
|
|
|
637
|
|
Amortization of program contract costs
|
|
90
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
Corporate general and administrative expenses
|
|
144
|
|
|
93
|
|
|
151
|
|
|
(1)
|
|
|
387
|
|
Gain on asset dispositions and other, net of impairment
|
|
(62)
|
|
(b)
|
—
|
|
|
(30)
|
|
|
—
|
|
|
(92)
|
|
Operating income (loss)
|
|
546
|
|
(b)
|
30
|
|
|
(98)
|
|
|
(8)
|
|
|
470
|
|
Interest expense including amortization of debt discount and deferred financing costs
|
|
5
|
|
|
200
|
|
|
230
|
|
|
(13)
|
|
|
422
|
|
Income (loss) from equity method investments
|
|
—
|
|
|
18
|
|
|
(53)
|
|
|
—
|
|
|
(35)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
|
Broadcast
|
|
Local sports
|
|
Other & Corporate
|
|
Eliminations
|
|
Consolidated
|
Revenue
|
|
$
|
2,715
|
|
|
$
|
—
|
|
|
$
|
350
|
|
|
$
|
(10)
|
|
|
$
|
3,055
|
|
Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets
|
|
252
|
|
|
—
|
|
|
29
|
|
|
(1)
|
|
|
280
|
|
Amortization of program contract costs
|
|
101
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
101
|
|
Corporate general and administrative overhead expenses
|
|
100
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
111
|
|
(Gain) loss on asset dispositions and other, net of impairment
|
|
(100)
|
|
(c)
|
—
|
|
|
60
|
|
(d)
|
—
|
|
|
(40)
|
|
Operating income (loss)
|
|
751
|
|
(c)
|
—
|
|
|
(88)
|
|
(d)
|
(3)
|
|
|
660
|
|
Interest expense including amortization of debt discount and deferred financing costs
|
|
6
|
|
|
—
|
|
|
301
|
|
|
(15)
|
|
|
292
|
|
Loss from equity method investments
|
|
—
|
|
|
—
|
|
|
(61)
|
|
|
—
|
|
|
(61)
|
|
(a)The amortization of sports programming rights is included within media programming and production expenses on our consolidated statements of operations.
(b)Includes gains of $90 million and $62 million for the years ended December 31, 2020 and 2019, respectively, related to reimbursements for the spectrum repack costs. See Note 2. Acquisitions and Dispositions of Assets.
(c)Includes a gain of $83 million related to the auction proceeds. See Note 2. Acquisitions and Dispositions of Assets.
(d)Includes a $60 million impairment to the carrying value of a consolidated real estate venture. See Note 1. Nature of Operations and Summary of Significant Accounting Policies.
(e)Includes $100 million and $35 million of revenue for the years ended December 31, 2020 and 2019, respectively, for services provided by broadcast to local sports and other, which are eliminated in consolidation.
18. FAIR VALUE MEASUREMENTS:
Accounting guidance provides for valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). A fair value hierarchy using three broad levels prioritizes the inputs to valuation techniques used to measure fair value. The following is a brief description of those three levels:
•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The following table sets forth the carrying value and fair value of our financial assets and liabilities as of December 31, 2020 and 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
Level 1:
|
|
|
|
|
|
|
|
Investments in equity securities
|
$
|
68
|
|
|
$
|
68
|
|
|
$
|
2
|
|
|
$
|
2
|
|
STG:
|
|
|
|
|
|
|
|
Money market funds
|
448
|
|
|
448
|
|
|
354
|
|
|
354
|
|
Deferred compensation assets
|
42
|
|
|
42
|
|
|
36
|
|
|
36
|
|
Deferred compensation liabilities
|
36
|
|
|
36
|
|
|
33
|
|
|
33
|
|
DSG:
|
|
|
|
|
|
|
|
Money market funds
|
292
|
|
|
292
|
|
|
559
|
|
559
|
|
|
|
|
|
|
|
|
Level 2 (a):
|
|
|
|
|
|
|
|
STG:
|
|
|
|
|
|
|
|
5.875% Senior Unsecured Notes due 2026
|
348
|
|
|
358
|
|
|
350
|
|
|
368
|
|
5.625% Senior Unsecured Notes due 2024 (b)
|
—
|
|
|
—
|
|
|
550
|
|
|
566
|
|
5.500% Senior Unsecured Notes due 2030
|
500
|
|
|
520
|
|
|
500
|
|
|
511
|
|
5.125% Senior Unsecured Notes due 2027
|
400
|
|
|
408
|
|
|
400
|
|
|
411
|
|
4.125% Senior Secured Notes due 2030 (b)
|
750
|
|
|
770
|
|
|
—
|
|
|
—
|
|
Term Loan B (b)
|
1,119
|
|
|
1,107
|
|
|
1,329
|
|
|
1,326
|
|
Term Loan B-2
|
1,284
|
|
|
1,264
|
|
|
1,297
|
|
|
1,300
|
|
|
|
|
|
|
|
|
|
DSG:
|
|
|
|
|
|
|
|
12.750% Senior Secured Notes due 2026 (c)
|
31
|
|
|
28
|
|
|
—
|
|
|
—
|
|
6.625% Senior Unsecured Notes due 2027 (c)
|
1,744
|
|
|
1,056
|
|
|
1,825
|
|
|
1,775
|
|
5.375% Senior Secured Notes due 2026
|
3,050
|
|
|
2,483
|
|
|
3,050
|
|
|
3,085
|
|
Term Loan
|
3,259
|
|
|
2,884
|
|
|
3,292
|
|
|
3,284
|
|
Accounts Receivable Securitization Facility (d)
|
177
|
|
|
177
|
|
|
—
|
|
|
—
|
|
Debt of variable interest entities
|
17
|
|
|
17
|
|
|
21
|
|
|
21
|
|
Debt of non-media subsidiaries
|
17
|
|
|
17
|
|
|
18
|
|
|
18
|
|
|
|
|
|
|
|
|
|
Level 3:
|
|
|
|
|
|
|
|
Options and warrants (e)
|
332
|
|
|
332
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)Amounts are carried in our consolidated balance sheets net of debt discount, premium, and deferred financing costs, which are excluded in the above table, of $183 million and $231 million as of December 31, 2020 and 2019, respectively.
(b)On December 4, 2020, we issued $750 million aggregate principal amount of the STG 4.125% Secured Notes, the net proceeds of which were used, plus cash on hand, to redeem $550 million aggregate principal amount of the STG 5.625% Notes, as well as repay $200 million of STG's Term Loan B-1. See Note 7. Notes Payable and Commercial Bank Financing for additional information.
(c)On June 10, 2020, we exchanged $66.5 million aggregate principal amount of the DSG 6.625% Notes for cash payments of $10 million, including accrued but unpaid interest, and $31 million aggregate principal amount of the newly issued DSG 12.750% Secured Notes. See Note 7. Notes Payable and Commercial Bank Financing for additional information.
(d)We entered into the A/R Facility on September 23, 2020. As of December 31, 2020, the balance of the loans under the A/R Facility was $177 million. See Note 7. Notes Payable and Commercial Bank Financing for additional information.
(e)On November 18, 2020, we entered into a commercial agreement with Bally's and received warrants and options to acquire common equity in the business. These financial instruments were determined to have an initial value of $199 million. During the year ended December 31, 2020 we recorded $133 million of fair value adjustments related to these interests. The fair value of the warrants are primarily derived from the quoted trading prices of the underlying common equity adjusted for a 25% discount for lack of marketability (DLOM). The fair value of the options is derived utilizing the Black Scholes valuation model. The most significant inputs include the trading price of the underlying common stock, the exercise price of the options, which range from $30 to $45 per share, and a DLOM of 25%. There are certain restrictions surrounding the sale and ownership of common stock and the Company has agreed not to sell any shares beneficially owned prior to the first anniversary of the agreement. The Company is also precluded from owning more than 4.9% of the outstanding common shares of Bally's, inclusive of shares obtained through the exercise of the warrants and options described above. See Note 6. Other Assets for further discussion.
The following table summarizes the changes in financial assets measured at fair value on a recurring basis and categorized as Level 3 under the fair value hierarchy (in millions):
|
|
|
|
|
|
|
Options and Warrants
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2019
|
$
|
—
|
|
Acquisition
|
199
|
|
Measurement adjustments
|
133
|
|
Fair value at December 31, 2020
|
$
|
332
|
|
19. CONDENSED CONSOLIDATING 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 STG's Bank Credit Agreement, 5.875% unsecured notes, 5.125% unsecured notes, 5.500% unsecured notes and 4.125% secured notes. Our Class A Common Stock and Class B Common Stock as of December 31, 2020, were obligations or securities of SBG and not obligations or securities of STG. SBG is a guarantor under STG's Bank Credit Agreement, 5.875% unsecured notes, 5.125% unsecured notes, 5.500% unsecured notes, and 4.125% secured notes. As of December 31, 2020, our consolidated total debt of $12,551 million included $4,405 million of debt related to STG and its subsidiaries of which SBG guaranteed $4,366 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.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2020
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group,
Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
458
|
|
|
$
|
—
|
|
|
$
|
801
|
|
|
$
|
—
|
|
|
$
|
1,259
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
558
|
|
|
502
|
|
|
—
|
|
|
1,060
|
|
Other current assets
|
7
|
|
|
46
|
|
|
372
|
|
|
560
|
|
|
(87)
|
|
|
898
|
|
Total current assets
|
7
|
|
|
504
|
|
|
930
|
|
|
1,863
|
|
|
(87)
|
|
|
3,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
1
|
|
|
33
|
|
|
706
|
|
|
109
|
|
|
(26)
|
|
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in equity of consolidated subsidiaries
|
430
|
|
|
3,549
|
|
|
—
|
|
|
—
|
|
|
(3,979)
|
|
|
—
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
Goodwill
|
—
|
|
|
—
|
|
|
2,082
|
|
|
10
|
|
|
—
|
|
|
2,092
|
|
Indefinite-lived intangible assets
|
—
|
|
|
—
|
|
|
156
|
|
|
15
|
|
|
—
|
|
|
171
|
|
Definite-lived intangible assets, net
|
—
|
|
|
—
|
|
|
1,256
|
|
|
4,409
|
|
|
(41)
|
|
|
5,624
|
|
Other long-term assets
|
139
|
|
|
1,718
|
|
|
280
|
|
|
1,569
|
|
|
(2,254)
|
|
|
1,452
|
|
Total assets
|
$
|
577
|
|
|
$
|
5,804
|
|
|
$
|
5,410
|
|
|
$
|
7,978
|
|
|
$
|
(6,387)
|
|
|
$
|
13,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
19
|
|
|
$
|
70
|
|
|
$
|
247
|
|
|
$
|
284
|
|
|
$
|
(87)
|
|
|
$
|
533
|
|
Current portion of long-term debt
|
—
|
|
|
13
|
|
|
5
|
|
|
41
|
|
|
(1)
|
|
|
58
|
|
Other current liabilities
|
1
|
|
|
2
|
|
|
134
|
|
|
306
|
|
|
—
|
|
|
443
|
|
Total current liabilities
|
20
|
|
|
85
|
|
|
386
|
|
|
631
|
|
|
(88)
|
|
|
1,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
700
|
|
|
4,337
|
|
|
33
|
|
|
8,460
|
|
|
(1,037)
|
|
|
12,493
|
|
Investment in deficit of consolidated subsidiaries
|
1,118
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,118)
|
|
|
—
|
|
Other long-term liabilities
|
12
|
|
|
121
|
|
|
1,445
|
|
|
710
|
|
|
(1,438)
|
|
|
850
|
|
Total liabilities
|
1,850
|
|
|
4,543
|
|
|
1,864
|
|
|
9,801
|
|
|
(3,681)
|
|
|
14,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
190
|
|
|
—
|
|
|
190
|
|
Total Sinclair Broadcast Group (deficit) equity
|
(1,273)
|
|
|
1,261
|
|
|
3,546
|
|
|
(2,098)
|
|
|
(2,710)
|
|
|
(1,274)
|
|
Noncontrolling interests in consolidated subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
4
|
|
|
89
|
|
Total liabilities, redeemable noncontrolling interests, and equity
|
$
|
577
|
|
|
$
|
5,804
|
|
|
$
|
5,410
|
|
|
$
|
7,978
|
|
|
$
|
(6,387)
|
|
|
$
|
13,382
|
|
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2019
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
357
|
|
|
$
|
3
|
|
|
$
|
973
|
|
|
$
|
—
|
|
|
1,333
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
561
|
|
|
571
|
|
|
—
|
|
|
1,132
|
|
Other current assets
|
5
|
|
|
41
|
|
|
264
|
|
|
188
|
|
|
(50)
|
|
|
448
|
|
Total current assets
|
5
|
|
|
398
|
|
|
828
|
|
|
1,732
|
|
|
(50)
|
|
|
2,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
1
|
|
|
31
|
|
|
659
|
|
|
96
|
|
|
(22)
|
|
|
765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in consolidated subsidiaries
|
2,270
|
|
|
3,558
|
|
|
—
|
|
|
—
|
|
|
(5,828)
|
|
|
—
|
|
Goodwill
|
—
|
|
|
—
|
|
|
2,091
|
|
|
2,625
|
|
|
—
|
|
|
4,716
|
|
Indefinite-lived intangible assets
|
—
|
|
|
—
|
|
|
144
|
|
|
14
|
|
|
—
|
|
|
158
|
|
Definite-lived intangible assets
|
—
|
|
|
—
|
|
|
1,426
|
|
|
6,598
|
|
|
(47)
|
|
|
7,977
|
|
Other long-term assets
|
82
|
|
|
1,611
|
|
|
279
|
|
|
618
|
|
|
(1,749)
|
|
|
841
|
|
Total assets
|
$
|
2,358
|
|
|
$
|
5,598
|
|
|
$
|
5,427
|
|
|
$
|
11,683
|
|
|
$
|
(7,696)
|
|
|
$
|
17,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
142
|
|
|
$
|
109
|
|
|
$
|
286
|
|
|
$
|
296
|
|
|
$
|
(51)
|
|
|
$
|
782
|
|
Current portion of long-term debt
|
—
|
|
|
27
|
|
|
4
|
|
|
41
|
|
|
(1)
|
|
|
71
|
|
Other current liabilities
|
—
|
|
|
1
|
|
|
133
|
|
|
147
|
|
|
—
|
|
|
281
|
|
Total current liabilities
|
142
|
|
|
137
|
|
|
423
|
|
|
484
|
|
|
(52)
|
|
|
1,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
700
|
|
|
4,348
|
|
|
32
|
|
|
8,317
|
|
|
(1,030)
|
|
|
12,367
|
|
Other liabilities
|
13
|
|
|
53
|
|
|
1,418
|
|
|
547
|
|
|
(934)
|
|
|
1,097
|
|
Total liabilities
|
855
|
|
|
4,538
|
|
|
1,873
|
|
|
9,348
|
|
|
(2,016)
|
|
|
14,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
1,078
|
|
|
—
|
|
|
1,078
|
|
Total Sinclair Broadcast Group equity
|
1,503
|
|
|
1,060
|
|
|
3,554
|
|
|
1,069
|
|
|
(5,684)
|
|
|
1,502
|
|
Noncontrolling interests in consolidated subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
188
|
|
|
4
|
|
|
192
|
|
Total liabilities, redeemable noncontrolling interests, and equity
|
$
|
2,358
|
|
|
$
|
5,598
|
|
|
$
|
5,427
|
|
|
$
|
11,683
|
|
|
$
|
(7,696)
|
|
|
$
|
17,370
|
|
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2020
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
Net revenue
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
3,081
|
|
|
$
|
2,946
|
|
|
$
|
(184)
|
|
|
$
|
5,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media programming and production expenses
|
—
|
|
|
3
|
|
|
1,284
|
|
|
1,519
|
|
|
(71)
|
|
|
2,735
|
|
Selling, general and administrative
|
18
|
|
|
122
|
|
|
658
|
|
|
279
|
|
|
(97)
|
|
|
980
|
|
Impairment of goodwill and definite-lived intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
4,264
|
|
|
—
|
|
|
4,264
|
|
Depreciation, amortization and other operating expenses
|
2
|
|
|
8
|
|
|
211
|
|
|
525
|
|
|
(10)
|
|
|
736
|
|
Total operating expenses
|
20
|
|
|
133
|
|
|
2,153
|
|
|
6,587
|
|
|
(178)
|
|
|
8,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
(20)
|
|
|
(33)
|
|
|
928
|
|
|
(3,641)
|
|
|
(6)
|
|
|
(2,772)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in (loss) earnings of consolidated subsidiaries
|
(2,409)
|
|
|
877
|
|
|
—
|
|
|
—
|
|
|
1,532
|
|
|
—
|
|
Interest expense
|
(13)
|
|
|
(191)
|
|
|
(3)
|
|
|
(474)
|
|
|
25
|
|
|
(656)
|
|
Other income (expense)
|
27
|
|
|
4
|
|
|
(41)
|
|
|
303
|
|
|
(14)
|
|
|
279
|
|
Total other (expense) income
|
(2,395)
|
|
|
690
|
|
|
(44)
|
|
|
(171)
|
|
|
1,543
|
|
|
(377)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
1
|
|
|
51
|
|
|
3
|
|
|
665
|
|
|
—
|
|
|
720
|
|
Net (loss) income
|
(2,414)
|
|
|
708
|
|
|
887
|
|
|
(3,147)
|
|
|
1,537
|
|
|
(2,429)
|
|
Net income attributable to the redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(56)
|
|
|
—
|
|
|
(56)
|
|
Net loss attributable to the noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
71
|
|
Net (loss) income attributable to Sinclair Broadcast Group
|
$
|
(2,414)
|
|
|
$
|
708
|
|
|
$
|
887
|
|
|
$
|
(3,132)
|
|
|
$
|
1,537
|
|
|
$
|
(2,414)
|
|
Comprehensive (loss) income
|
$
|
(2,414)
|
|
|
$
|
707
|
|
|
$
|
887
|
|
|
$
|
(3,154)
|
|
|
$
|
1,537
|
|
|
$
|
(2,437)
|
|
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2019
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
Net revenue
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
2,841
|
|
|
$
|
1,487
|
|
|
$
|
(123)
|
|
|
$
|
4,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media programming and production expenses
|
—
|
|
|
—
|
|
|
1,238
|
|
|
894
|
|
|
(59)
|
|
|
2,073
|
|
Selling, general and administrative
|
147
|
|
|
147
|
|
|
663
|
|
|
202
|
|
|
(40)
|
|
|
1,119
|
|
Depreciation, amortization and other operating expenses
|
—
|
|
|
(20)
|
|
|
278
|
|
|
334
|
|
|
(14)
|
|
|
578
|
|
Total operating expenses
|
147
|
|
|
127
|
|
|
2,179
|
|
|
1,430
|
|
|
(113)
|
|
|
3,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
(147)
|
|
|
(92)
|
|
|
662
|
|
|
57
|
|
|
(10)
|
|
|
470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of consolidated subsidiaries
|
165
|
|
|
577
|
|
|
—
|
|
|
—
|
|
|
(742)
|
|
|
—
|
|
Interest expense
|
(5)
|
|
|
(216)
|
|
|
(4)
|
|
|
(216)
|
|
|
19
|
|
|
(422)
|
|
Other income (expense)
|
2
|
|
|
(7)
|
|
|
(53)
|
|
|
24
|
|
|
(5)
|
|
|
(39)
|
|
Total other income (expense)
|
162
|
|
|
354
|
|
|
(57)
|
|
|
(192)
|
|
|
(728)
|
|
|
(461)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)
|
32
|
|
|
66
|
|
|
(21)
|
|
|
19
|
|
|
—
|
|
|
96
|
|
Net income (loss)
|
47
|
|
|
328
|
|
|
584
|
|
|
(116)
|
|
|
(738)
|
|
|
105
|
|
Net income attributable to the redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(48)
|
|
|
—
|
|
|
(48)
|
|
Net income attributable to the noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
—
|
|
|
(10)
|
|
Net income (loss) attributable to Sinclair Broadcast Group
|
$
|
47
|
|
|
$
|
328
|
|
|
$
|
584
|
|
|
$
|
(174)
|
|
|
$
|
(738)
|
|
|
$
|
47
|
|
Comprehensive income (loss)
|
$
|
47
|
|
|
$
|
327
|
|
|
$
|
584
|
|
|
$
|
(116)
|
|
|
$
|
(738)
|
|
|
$
|
104
|
|
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2018
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
Net revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,856
|
|
|
$
|
293
|
|
|
$
|
(94)
|
|
|
$
|
3,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media programming and production expenses
|
—
|
|
|
—
|
|
|
1,131
|
|
|
141
|
|
|
(81)
|
|
|
1,191
|
|
Selling, general and administrative
|
10
|
|
|
100
|
|
|
613
|
|
|
20
|
|
|
(2)
|
|
|
741
|
|
Depreciation, amortization and other operating expenses
|
—
|
|
|
5
|
|
|
258
|
|
|
207
|
|
|
(7)
|
|
|
463
|
|
Total operating expenses
|
10
|
|
|
105
|
|
|
2,002
|
|
|
368
|
|
|
(90)
|
|
|
2,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
(10)
|
|
|
(105)
|
|
|
854
|
|
|
(75)
|
|
|
(4)
|
|
|
660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of consolidated subsidiaries
|
348
|
|
|
724
|
|
|
—
|
|
|
—
|
|
|
(1,072)
|
|
|
—
|
|
Interest expense
|
—
|
|
|
(285)
|
|
|
(4)
|
|
|
(18)
|
|
|
15
|
|
|
(292)
|
|
Other income (expense)
|
2
|
|
|
(2)
|
|
|
(58)
|
|
|
—
|
|
|
—
|
|
|
(58)
|
|
Total other income (expense)
|
350
|
|
|
437
|
|
|
(62)
|
|
|
(18)
|
|
|
(1,057)
|
|
|
(350)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)
|
2
|
|
|
90
|
|
|
(62)
|
|
|
6
|
|
|
—
|
|
|
36
|
|
Net income (loss)
|
342
|
|
|
422
|
|
|
730
|
|
|
(87)
|
|
|
(1,061)
|
|
|
346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(5)
|
|
Net income (loss) attributable to Sinclair Broadcast Group
|
$
|
342
|
|
|
$
|
422
|
|
|
$
|
730
|
|
|
$
|
(92)
|
|
|
$
|
(1,061)
|
|
|
$
|
341
|
|
Comprehensive income (loss)
|
$
|
347
|
|
|
$
|
422
|
|
|
$
|
730
|
|
|
$
|
(87)
|
|
|
$
|
(1,065)
|
|
|
$
|
347
|
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2020
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
NET CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES
|
$
|
(119)
|
|
|
$
|
(75)
|
|
|
$
|
864
|
|
|
$
|
875
|
|
|
$
|
3
|
|
|
$
|
1,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
—
|
|
|
(8)
|
|
|
(130)
|
|
|
(26)
|
|
|
7
|
|
|
(157)
|
|
Acquisition of businesses, net of cash acquired
|
—
|
|
|
—
|
|
|
(16)
|
|
|
—
|
|
|
—
|
|
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of assets
|
—
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
36
|
|
Purchases of investments
|
(43)
|
|
|
(8)
|
|
|
(43)
|
|
|
(45)
|
|
|
—
|
|
|
(139)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spectrum repack reimbursements
|
—
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
—
|
|
|
90
|
|
Other, net
|
1
|
|
|
—
|
|
|
(2)
|
|
|
28
|
|
|
—
|
|
|
27
|
|
Net cash flows (used in) from investing activities
|
(42)
|
|
|
(16)
|
|
|
(65)
|
|
|
(43)
|
|
|
7
|
|
|
(159)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and commercial bank financing
|
—
|
|
|
1,398
|
|
|
—
|
|
|
421
|
|
|
—
|
|
|
1,819
|
|
Repayments of notes payable, commercial bank financing and finance leases
|
—
|
|
|
(1,434)
|
|
|
(4)
|
|
|
(301)
|
|
|
—
|
|
|
(1,739)
|
|
Dividends paid on Class A and Class B Common Stock
|
(63)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of outstanding Class A Common Stock
|
(343)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(343)
|
|
Dividends paid on redeemable subsidiary preferred equity
|
—
|
|
|
—
|
|
|
—
|
|
|
(36)
|
|
|
—
|
|
|
(36)
|
|
Redemption of subsidiary preferred equity
|
—
|
|
|
—
|
|
|
—
|
|
|
(547)
|
|
|
—
|
|
|
(547)
|
|
Debt issuance costs
|
—
|
|
|
(11)
|
|
|
—
|
|
|
(8)
|
|
|
—
|
|
|
(19)
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(32)
|
|
|
—
|
|
|
(32)
|
|
Distributions to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(383)
|
|
|
—
|
|
|
(383)
|
|
Increase (decrease) in intercompany payables
|
565
|
|
|
239
|
|
|
(798)
|
|
|
4
|
|
|
(10)
|
|
|
—
|
|
Other, net
|
2
|
|
|
—
|
|
|
—
|
|
|
(119)
|
|
|
—
|
|
|
(117)
|
|
Net cash flows from (used in) financing activities
|
161
|
|
|
192
|
|
|
(802)
|
|
|
(1,001)
|
|
|
(10)
|
|
|
(1,460)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
—
|
|
|
101
|
|
|
(3)
|
|
|
(169)
|
|
|
—
|
|
|
(71)
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period
|
—
|
|
|
357
|
|
|
3
|
|
|
973
|
|
|
—
|
|
|
1,333
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period
|
$
|
—
|
|
|
$
|
458
|
|
|
$
|
—
|
|
|
$
|
804
|
|
|
$
|
—
|
|
|
$
|
1,262
|
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2019
(In million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
NET CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES
|
$
|
(5)
|
|
|
$
|
(210)
|
|
|
$
|
734
|
|
|
$
|
396
|
|
|
$
|
1
|
|
|
$
|
916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
—
|
|
|
(4)
|
|
|
(152)
|
|
|
(11)
|
|
|
11
|
|
|
(156)
|
|
Acquisition of businesses, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,999)
|
|
|
—
|
|
|
(8,999)
|
|
Proceeds from the sale of assets
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Purchases of investments
|
(6)
|
|
|
(39)
|
|
|
(54)
|
|
|
(353)
|
|
|
—
|
|
|
(452)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spectrum repack reimbursements
|
—
|
|
|
—
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
62
|
|
Other, net
|
—
|
|
|
3
|
|
|
(1)
|
|
|
5
|
|
|
—
|
|
|
7
|
|
Net cash flows (used in) from investing activities
|
(6)
|
|
|
(40)
|
|
|
(145)
|
|
|
(9,350)
|
|
|
11
|
|
|
(9,530)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and commercial bank financing
|
—
|
|
|
1,793
|
|
|
—
|
|
|
8,163
|
|
|
—
|
|
|
9,956
|
|
Repayments of notes payable, commercial bank financing and finance leases
|
—
|
|
|
(1,213)
|
|
|
(4)
|
|
|
(19)
|
|
|
—
|
|
|
(1,236)
|
|
Proceeds from the issuance of redeemable subsidiary preferred equity, net
|
—
|
|
|
—
|
|
|
—
|
|
|
985
|
|
|
—
|
|
|
985
|
|
Dividends paid on Class A and Class B Common Stock
|
(73)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73)
|
|
Dividends paid on redeemable subsidiary preferred equity
|
—
|
|
|
—
|
|
|
—
|
|
|
(33)
|
|
|
—
|
|
|
(33)
|
|
Repurchases of outstanding Class A Common Stock
|
(145)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(145)
|
|
Redemption of redeemable subsidiary preferred equity
|
—
|
|
|
—
|
|
|
—
|
|
|
(297)
|
|
|
—
|
|
|
(297)
|
|
Debt issuance costs
|
—
|
|
|
(25)
|
|
|
—
|
|
|
(174)
|
|
|
—
|
|
|
(199)
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(27)
|
|
|
—
|
|
|
(27)
|
|
Distributions to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(5)
|
|
Increase (decrease) in intercompany payables
|
227
|
|
|
(905)
|
|
|
(601)
|
|
|
1,291
|
|
|
(12)
|
|
|
—
|
|
Other, net
|
2
|
|
|
(5)
|
|
|
—
|
|
|
(36)
|
|
|
—
|
|
|
(39)
|
|
Net cash flows from (used in) financing activities
|
11
|
|
|
(355)
|
|
|
(605)
|
|
|
9,848
|
|
|
(12)
|
|
|
8,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
—
|
|
|
(605)
|
|
|
(16)
|
|
|
894
|
|
|
—
|
|
|
273
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period
|
—
|
|
|
962
|
|
|
19
|
|
|
79
|
|
|
—
|
|
|
1,060
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period
|
$
|
—
|
|
|
$
|
357
|
|
|
$
|
3
|
|
|
$
|
973
|
|
|
$
|
—
|
|
|
$
|
1,333
|
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2018
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
NET CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES
|
$
|
(9)
|
|
|
$
|
(253)
|
|
|
$
|
936
|
|
|
$
|
(40)
|
|
|
$
|
13
|
|
|
647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
—
|
|
|
(7)
|
|
|
(98)
|
|
|
(4)
|
|
|
4
|
|
|
(105)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spectrum repack reimbursements
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Proceeds from the sale of assets
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Purchases of investments
|
(2)
|
|
|
(14)
|
|
|
(29)
|
|
|
(3)
|
|
|
—
|
|
|
(48)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
6
|
|
|
—
|
|
|
3
|
|
|
18
|
|
|
—
|
|
|
27
|
|
Net cash flows from (used in) investing activities
|
4
|
|
|
(21)
|
|
|
(116)
|
|
|
11
|
|
|
4
|
|
|
(118)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and commercial bank financing
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Repayments of notes payable, commercial bank financing and finance leases
|
—
|
|
|
(148)
|
|
|
(4)
|
|
|
(15)
|
|
|
—
|
|
|
(167)
|
|
Debt issuance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid on Class A and Class B Common Stock
|
(74)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(74)
|
|
Repurchase of outstanding Class A Common Stock
|
(221)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(221)
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
(9)
|
|
Increase (decrease) in intercompany payables
|
297
|
|
|
738
|
|
|
(1,117)
|
|
|
100
|
|
|
(18)
|
|
|
—
|
|
Other, net
|
3
|
|
|
—
|
|
|
(3)
|
|
|
2
|
|
|
1
|
|
|
3
|
|
Net cash flows from (used in) financing activities
|
5
|
|
|
590
|
|
|
(1,124)
|
|
|
81
|
|
|
(17)
|
|
|
(465)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
—
|
|
|
316
|
|
|
(304)
|
|
|
52
|
|
|
—
|
|
|
64
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period
|
—
|
|
|
646
|
|
|
323
|
|
|
27
|
|
|
—
|
|
|
996
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period
|
$
|
—
|
|
|
$
|
962
|
|
|
$
|
19
|
|
|
$
|
79
|
|
|
$
|
—
|
|
|
$
|
1,060
|
|
QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
(In millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
3/31/2020
|
|
6/30/2020
|
|
9/30/2020
|
|
12/31/20
|
Total revenues
|
$
|
1,609
|
|
|
$
|
1,283
|
|
|
$
|
1,539
|
|
|
$
|
1,512
|
|
Operating income (loss)
|
$
|
327
|
|
|
$
|
492
|
|
|
$
|
(4,216)
|
|
|
$
|
625
|
|
Net income (loss)
|
$
|
151
|
|
|
$
|
273
|
|
|
$
|
(3,367)
|
|
|
$
|
514
|
|
Net income (loss) attributable to Sinclair Broadcast Group
|
$
|
123
|
|
|
$
|
252
|
|
|
$
|
(3,256)
|
|
|
$
|
467
|
|
Basic earnings (loss) per common share
|
$
|
1.36
|
|
|
$
|
3.13
|
|
|
$
|
(43.53)
|
|
|
$
|
6.32
|
|
Diluted earnings (loss) per common share
|
$
|
1.35
|
|
|
$
|
3.12
|
|
|
$
|
(43.53)
|
|
|
$
|
6.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
3/31/2019
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/19
|
Total revenues
|
$
|
722
|
|
|
$
|
771
|
|
|
$
|
1,125
|
|
|
$
|
1,622
|
|
Operating income (loss)
|
$
|
93
|
|
|
$
|
106
|
|
|
$
|
(6)
|
|
|
$
|
277
|
|
Net income (loss)
|
$
|
23
|
|
|
$
|
43
|
|
|
$
|
(49)
|
|
|
$
|
88
|
|
Net income (loss) attributable to Sinclair Broadcast Group
|
$
|
21
|
|
|
$
|
42
|
|
|
$
|
(60)
|
|
|
$
|
44
|
|
Basic earnings (loss) per common share
|
$
|
0.23
|
|
|
$
|
0.46
|
|
|
$
|
(0.65)
|
|
|
$
|
0.47
|
|
Diluted earnings (loss) per common share
|
$
|
0.23
|
|
|
$
|
0.45
|
|
|
$
|
(0.65)
|
|
|
$
|
0.47
|
|