NOTES TO UNAUDITED 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 March 31, 2021, we had two reportable segments for accounting purposes, broadcast and local sports. The broadcast segment consists primarily of our 186 broadcast television stations in 87 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 joint sales agreements (JSAs) and shared services agreements (SSAs)). These stations broadcast 628 channels as of March 31, 2021. For the purpose of this report, these 186 stations and 628 channels are referred to as "our" stations and channels. The local sports segment consists primarily of our Bally Sports network brands (the Bally RSNs), the Marquee Sports Network (Marquee) joint venture and a minority equity interest in the Yankee Entertainment and Sports Network, LLC (YES Network). We refer to the Bally RSNs and Marquee as "the RSNs". The RSNs and YES Network own the exclusive rights to air, among other sporting events, the games of professional sports teams in designated local viewing areas.
Principles of Consolidation
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries, and VIEs for which we are the primary beneficiary. Noncontrolling 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 9. 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 generated by equity method investees.
Interim Financial Statements
The consolidated financial statements for the three months ended March 31, 2021 and 2020 are unaudited. In the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of equity (deficit) and redeemable noncontrolling interests, and consolidated statements of cash flows for these periods as adjusted for the adoption of recent accounting pronouncements discussed below.
As permitted under the applicable rules and regulations of the Securities and Exchange Commission (SEC), the consolidated financial statements do not include all disclosures normally included with audited consolidated financial statements and, accordingly, should be read together with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC. The consolidated statements of operations presented in the accompanying consolidated financial statements are not necessarily representative of operations for an entire year.
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 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.
Broadcast Television Programming
We have agreements with multi-channel video programming distributors (MVPDs) and virtual MVPDs (vMVPDs, and together with MVPDs, "Distributors") for the rights to television programming over contract periods, which generally run from one to seven years. Contract payments are made in installments over terms that are generally equal to or shorter than the contract period. Pursuant to accounting guidance for the broadcasting industry, an asset and a liability for the rights acquired and obligations incurred under a license agreement are reported on the balance sheet 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.
During the three months ended March 31, 2020, the National Basketball Association (NBA), the National Hockey League (NHL), and Major League Baseball (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 contractual minimum number of live games are not delivered. As of March 31, 2021, we have estimated rebates due from teams of $42 million which we expect to receive in the second quarter of 2021. The actual amount of rebates to be received will vary depending on changes in the final game counts of each leagues' respective season. 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.
Non-cash Investing and Financing Activities
Non-cash transactions related to finance lease obligations were $6 million during the three months ended March 31, 2020. Leased assets obtained in exchange for new operating lease liabilities were $3 million and $8 million during the three months ended March 31, 2021 and 2020, respectively.
Revenue Recognition
The following table presents our revenue disaggregated by type and segment (in millions):
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For the three months ended March 31, 2021
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Broadcast
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Local sports
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Other
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Eliminations
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Total
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Distribution revenue
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$
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361
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$
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698
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$
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50
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$
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—
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$
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1,109
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Advertising revenue
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267
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65
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40
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(1)
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371
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Other media, non-media, and intercompany revenues
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37
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5
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18
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(29)
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31
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Total revenues
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$
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665
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$
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768
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$
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108
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$
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(30)
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$
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1,511
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For the three months ended March 31, 2020
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Broadcast
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Local sports
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Other
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Eliminations
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Total
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Distribution revenue
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$
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355
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$
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752
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$
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49
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$
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—
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$
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1,156
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Advertising revenue
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310
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55
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35
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—
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400
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Other media, non-media, and intercompany revenues
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36
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5
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44
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(32)
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53
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Total revenues
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$
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701
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$
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812
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$
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128
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$
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(32)
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$
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1,609
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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. Prior to the COVID-19 pandemic, the Company had 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 season and decisions made by the NHL and NBA during the fourth quarter of 2020 and first quarter of 2021 regarding the timing and format of their revised 2020-2021 seasons have resulted, in some cases, in our inability to meet these minimum game requirements and the need to reduce revenue based upon estimated rebates due to our distribution customers. Accrued rebates as of March 31, 2021 and December 31, 2020 were $268 million and $420 million, respectively. The decrease in accrued rebates during the three-month period ending March 31, 2021 includes $133 million of payments and $19 million of adjustments related primarily to increases in estimated game counts. As of March 31, 2021, $183 million is reflected in other current liabilities and $85 million is reflected in other long-term liabilities in our consolidated balance sheets. We expect these rebates to be paid during 2021 and 2022. There were no rebates accrued during the three-month period ending March 31, 2021. 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.
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.
Deferred Revenue. 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 in our consolidated balance sheets based on the timing of when we expect to satisfy our performance obligations. Deferred revenue was $233 million as of both March 31, 2021 and December 31, 2020, of which $179 million and $184 million, respectively, was reflected in other long-term liabilities in our consolidated balance sheets. Deferred revenue recognized during the three months ended March 31, 2021 and 2020, included in the deferred revenue balance as of December 31, 2020 and 2019, was $17 million and $30 million, respectively.
On November 18, 2020, the Company and Diamond Sports Group, LLC (DSG) entered into an enterprise-wide commercial agreement with Bally's Corporation (Bally's), including providing certain branding integrations in our RSNs, broadcast networks and other properties. These branding integrations include naming rights associated with the majority of our RSNs (other than Marquee). 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 three months ended March 31, 2021. See Note 3. Other Assets for more information.
For the three months ended March 31, 2021, three customers accounted for 20%, 19%, and 15%, respectively, of our total revenues. For the three months ended March 31, 2020, three customers accounted for 20%, 17%, and 12%, respectively, of our total revenues. As of March 31, 2021, three customers accounted for 20%, 17%, and 15%, respectively, of our accounts receivable, net. For purposes of this disclosure, a single customer may include multiple entities under common control.
Income Taxes
Our income tax provision for all periods consists of federal and state income taxes. The tax provision for the three months ended March 31, 2021 and 2020 is based on the estimated effective tax rate applicable for the full year after taking into account discrete tax items and the effects of the noncontrolling interests. 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. 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.
Our effective income tax rate for the three months ended March 31, 2021 was less than the statutory rate primarily due to substantially magnified impact of discrete items as a result of small pre-tax income. Our effective income tax rate for the three months ended March 31, 2020 was less than the statutory rate primarily due to $27 million of federal tax credits related to investments in sustainability initiatives and a $13 million discrete benefit as a result of the CARES Act allowing for the 2020 federal net operating loss to be carried back to pre-2018 years when the federal tax rate was 35%.
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.
Share Repurchase Program
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. As of March 31, 2021, the total remaining purchase authorization was $880 million.
Subsequent Events
In May 2021, our Board of Directors declared a quarterly dividend of $0.20 per share, payable on June 15, 2021 to holders of record at the close of business on June 1, 2021.
Other than those noted in Note 3. Other Assets and Note 4. Notes Payable, Finance Leases, and Commercial Bank Financing, no other subsequent events were noted.
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 began their season on time in April 2021 under 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.
Reclassifications
Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current year's presentation.
2. ACQUISITIONS AND DISPOSITIONS OF ASSETS:
Acquisitions. In February 2021, we acquired ZypMedia for approximately $7 million in cash. The acquired assets and liabilities were recorded at fair value as of the closing date of the transaction.
Dispositions. In February 2021, we sold two of our television broadcast stations, WDKA-TV in Paducah, KY, and KBSI-TV in Cape Girardeau, MO, for an aggregate purchase price of $28 million. We recorded a gain of $12 million which is included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations.
Broadcast Incentive Auction. In 2012, Congress authorized the Federal Communications Commission (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.
In March 2016, the FCC began the repacking process associated with the auction, in which the FCC 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 spectrum repack costs incurred of $14 million and $24 million for the three months ended March 31, 2021 and 2020, respectively, which are included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations. Capital expenditures related to the spectrum repack were $4 million and $21 million for the three months ended March 31, 2021 and 2020, respectively.
3. OTHER ASSETS:
Other assets as of March 31, 2021 and December 31, 2020 consisted of the following (in millions):
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As of March 31,
2021
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As of December 31,
2020
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Equity method investments
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$
|
492
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$
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451
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Other investments
|
575
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|
|
450
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Post-retirement plan assets
|
48
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44
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Other
|
107
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|
113
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Total other assets
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$
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1,222
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$
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1,058
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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 periods ended March 31, 2021 and December 31, 2020, none of our investments were individually significant.
YES Network Investment. 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 included within income (loss) from equity method investments in our consolidated statements of operations. During the three months ended March 31, 2021 and 2020, we recorded income of $13 million and $5 million, respectively, related to our investment.
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.
As of March 31, 2021 and December 31, 2020, we held $88 million and $68 million, respectively, in equity securities which are classified as level 1 securities in the fair value hierarchy. During the three months ended March 31, 2021 and 2020 we recognized fair value adjustment gains of $20 million and losses of $1 million, respectively, associated with these securities, which are reflected in other income, net in our consolidated statements of operations. Investments accounted for utilizing the measurement alternative were $22 million, net of $7 million of cumulative impairments, as of March 31, 2021, and $26 million, net of $7 million of cumulative impairments, as of December 31, 2020. There were no adjustments to the carrying amount of investments accounted for utilizing the measurement alternative for the three months ended March 31, 2021 or 2020.
On November 18, 2020, we entered into a commercial agreement with Bally's. As part of this agreement, 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. These investments are reflected at fair value within our financial statements. For the three months ended March 31, 2021 we recorded an increase in value of $103 million which is reflected in other income, net in our consolidated statements of operations. The value of these investments was $435 million and $332 million as of March 31, 2021 and December 31, 2020, respectively. See Note 11. Fair Value Measurements for further discussion.
In April 2021, we made an incremental investment of $93 million in Bally's in the form of non-voting perpetual warrants. These warrants are convertible into 1.7 million shares of Bally's common stock at an exercise price of $0.01 per share, subject to certain adjustments.
4. NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING:
Bank Credit Agreements
Each of the bank credit agreements of Sinclair Television Group, Inc. (STG), a wholly owned subsidiary of the Company, and DSG (collectively, the Bank Credit Agreements) include a financial maintenance covenant, the first lien leverage ratio (as defined in the respective Bank Credit Agreements), which requires such applicable ratio not to exceed 4.5x and 6.25x, measured as of the end of each fiscal quarter, for STG and DSG, respectively. The respective financial maintenance covenant is only applicable if 35% or more of the capacity (as a percentage of total commitments) under the respective revolving credit facility, measured as of the last day of each quarter, is utilized under such revolving credit facility as of such date. Since there was no utilization under either of the revolving credit facilities as of March 31, 2021, neither STG nor DSG was subject to the respective financial maintenance covenant under their applicable Bank Credit Agreement. As of March 31, 2021, the STG first lien leverage ratio was below 4.5x and the DSG first lien leverage ratio exceeded 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 Bank Credit Agreements contain other restrictions and covenants with which the respective entities were in compliance as of March 31, 2021.
On April 1, 2021, STG amended the STG Bank Credit Agreement to raise term loans in an aggregate principal amount of $740 million (STG Term Loan B-3), the proceeds of which were used to refinance a portion of STG's term loan maturing in January 2024. The STG Term Loan B-3 matures in April 2028 and bears interest at LIBOR (or successor rate) plus 3.00%.
Accounts receivable securitization facility
On September 23, 2020, the Company's and DSG's indirect wholly-owned subsidiary, Diamond Sports Finance SPV, LLC (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 the local sports segment.
The outstanding balance under the A/R Facility was $173 million and $177 million as of March 31, 2021 and December 31, 2020, respectively. Accounts receivable held by DSPV were $229 million and $228 million as of March 31, 2021 and December 31, 2020, respectively.
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.
Notes payable and finance leases to affiliates
The current portion of notes payable, finance leases, and commercial bank financing in our consolidated balance sheets includes finance leases to affiliates of $2 million as of March 31, 2021 and December 31, 2020. Notes payable, finance leases, and commercial bank financing, less current portion, in our consolidated balance sheets includes finances leases to affiliates of $6 million as of March 31, 2021 and December 31, 2020. See Note 10. Related Person Transactions for further discussion.
Debt of variable interest entities and guarantees of third-party debt
STG jointly, severally, unconditionally, and irrevocably guaranteed $48 million and $49 million of debt of certain third parties as of March 31, 2021 and December 31, 2020, respectively, of which $15 million and $16 million, net of deferred financing costs, related to consolidated VIEs that are included in our consolidated balance sheets as of March 31, 2021 and December 31, 2020, respectively. These guarantees primarily relate to the debt of Cunningham Broadcasting Corporation (Cunningham) as discussed under Cunningham Broadcasting Corporation within Note 10. Related Person Transactions. We have determined that, as of March 31, 2021, it is not probable that we would have to perform under any of these guarantees.
5. 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, Diamond Sports Holdings LLC (DSH), an indirect parent of DSG and indirect wholly-owned subsidiary of the Company, issued preferred equity (the Redeemable Subsidiary Preferred Equity).
Dividends accrued during the three months ended March 31, 2021 and 2020 were $4 million and $13 million, respectively, and are reflected in net income attributable to the redeemable noncontrolling interests in our consolidated statements of operations. The dividends paid in cash accrue at a rate equal to 1-month LIBOR (with a 0.75% floor) plus 7.5%, which is 0.5% lower than the rate payable if the dividends were paid-in-kind during the quarter.
The balance of the Redeemable Subsidiary Preferred Equity was $170 million, net of issuance costs, as of both March 31, 2021 and December 31, 2020.
Subsidiary Equity Put Right. A noncontrolling equity holder of one of our subsidiaries has the right to sell their interest to the Company at any time during the 30-day period following September 30, 2025. The value of this redeemable noncontrolling interest was $18 million and $20 million as of March 31, 2021 and December 31, 2020, respectively.
6. 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 our local sports segment's sports programming rights agreements as of March 31, 2021. 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 (remainder)
|
$
|
1,233
|
|
|
2022
|
1,655
|
|
|
2023
|
1,608
|
|
|
2024
|
1,540
|
|
|
2025
|
1,420
|
|
|
2026 and thereafter
|
7,008
|
|
|
Total
|
$
|
14,464
|
|
Other Liabilities
In connection with our acquisition of the Bally RSNs, we assumed certain fixed payment obligations which are payable through 2027. We recorded these obligations in purchase accounting at estimated fair value. As of March 31, 2021 and December 31, 2020, $31 million was recorded within other current liabilities and $98 million and $97 million, respectively, was recorded within other long-term liabilities in our consolidated balance sheets. Interest expense of $2 million was recorded for both the three months ended March 31, 2021 and 2020.
In connection with our acquisition of the Bally RSNs, we assumed certain variable payment obligations which are payable through 2030. These contractual obligations are based upon the excess cash flow of certain Bally RSNs. We recorded these obligations in purchase accounting at estimated fair value. As of March 31, 2021 and December 31, 2020, $14 million and $12 million, respectively, was recorded within other current liabilities and $41 million was 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 loss of $1 million for the three months ended March 31, 2021 within other income, net in our consolidated statements of operations.
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 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 a Hearing Designation Order, 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.
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 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 DOJ’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.
7. EARNINGS PER SHARE:
The following table reconciles income (numerator) and shares (denominator) used in our computations of basic and diluted earnings per share for the periods presented (in millions, except share amounts which are reflected in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
Income (Numerator)
|
|
|
|
|
|
|
|
|
Net income
|
$
|
26
|
|
|
$
|
151
|
|
|
|
|
|
|
Net income attributable to the redeemable noncontrolling interests
|
(4)
|
|
|
(20)
|
|
|
|
|
|
|
Net income attributable to the noncontrolling interests
|
(34)
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic and diluted (loss) earnings per common share available to common shareholders
|
$
|
(12)
|
|
|
$
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares (Denominator)
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares outstanding
|
74,389
|
|
|
90,609
|
|
|
|
|
|
|
Dilutive effect of stock-settled appreciation rights and outstanding stock options
|
—
|
|
|
617
|
|
|
|
|
|
|
Diluted weighted-average common and common equivalent shares outstanding
|
74,389
|
|
|
91,226
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
Weighted-average stock-settled appreciation rights and outstanding stock options excluded
|
1,703
|
|
|
2,814
|
|
|
|
|
|
8. 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 services segment, provides free over-the-air programming to television viewing audiences and includes stations in 87 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 Bally RSNs, Marquee, and our investment 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 periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
Broadcast
|
|
Local sports
|
|
Other & Corporate
|
|
Eliminations
|
|
Consolidated
|
|
Assets
|
|
$
|
4,800
|
|
|
$
|
6,222
|
|
|
$
|
2,121
|
|
|
$
|
(11)
|
|
|
$
|
13,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2021
|
|
Broadcast
|
|
Local sports
|
|
Other & Corporate
|
|
Eliminations
|
|
Consolidated
|
|
Revenue
|
|
$
|
665
|
|
|
$
|
768
|
|
|
$
|
108
|
|
|
$
|
(30)
|
|
(a)
|
$
|
1,511
|
|
|
Depreciation of property and equipment and amortization of definite-lived intangibles and other assets
|
|
62
|
|
|
84
|
|
|
8
|
|
|
(1)
|
|
|
153
|
|
|
Amortization of sports programming rights
|
|
—
|
|
|
552
|
|
|
—
|
|
|
—
|
|
|
552
|
|
|
Amortization of program contract costs
|
|
21
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
23
|
|
|
Corporate general and administrative expenses
|
|
55
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
61
|
|
|
(Gain) loss on asset dispositions and other, net of impairment
|
|
(14)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
63
|
|
|
(41)
|
|
|
13
|
|
|
—
|
|
|
35
|
|
|
Interest expense including amortization of debt discount and deferred financing costs
|
|
1
|
|
|
108
|
|
|
45
|
|
|
(3)
|
|
|
151
|
|
|
Income (loss) from equity method investments
|
|
—
|
|
|
13
|
|
|
(4)
|
|
|
—
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2020
|
|
Broadcast
|
|
Local sports
|
|
Other & Corporate
|
|
Eliminations
|
|
Consolidated
|
|
Revenue
|
|
$
|
701
|
|
|
$
|
812
|
|
|
$
|
128
|
|
|
$
|
(32)
|
|
(a)
|
$
|
1,609
|
|
|
Depreciation of property and equipment and amortization of definite-lived intangibles and other assets
|
|
58
|
|
|
110
|
|
|
6
|
|
|
—
|
|
|
174
|
|
|
Amortization of sports programming rights
|
|
—
|
|
|
391
|
|
|
—
|
|
|
—
|
|
|
391
|
|
|
Amortization of program contract costs
|
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
Corporate general and administrative expenses
|
|
44
|
|
|
2
|
|
|
3
|
|
|
—
|
|
|
49
|
|
|
Gain on asset dispositions and other, net of impairment
|
|
(32)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32)
|
|
|
Operating income (loss)
|
|
152
|
|
|
165
|
|
|
19
|
|
|
(9)
|
|
|
327
|
|
|
Interest expense including amortization of debt discount and deferred financing costs
|
|
1
|
|
|
123
|
|
|
59
|
|
|
(3)
|
|
|
180
|
|
|
Income (loss) from equity method investments
|
|
—
|
|
|
6
|
|
|
(12)
|
|
|
—
|
|
|
(6)
|
|
(a)Includes $27 million and $24 million for the three months ended March 31, 2021 and 2020, respectively, of revenue and selling, general, and administrative expenses, respectively, for services provided by broadcast to local sports and other, which are eliminated in consolidation.
9. 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 a prior 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 the dates presented, were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
2021
|
|
As of December 31,
2020
|
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
$
|
45
|
|
|
$
|
64
|
|
|
|
|
|
|
|
Accounts receivable, net
|
57
|
|
|
70
|
|
|
Prepaid sports rights
|
46
|
|
|
2
|
|
|
Other current assets
|
4
|
|
|
5
|
|
|
Total current assets
|
152
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
15
|
|
|
16
|
|
|
Operating lease assets
|
6
|
|
|
6
|
|
|
Goodwill and indefinite-lived intangible assets
|
15
|
|
|
15
|
|
|
Definite-lived intangible assets, net
|
52
|
|
|
54
|
|
|
Other assets
|
1
|
|
|
1
|
|
|
Total assets
|
$
|
241
|
|
|
$
|
233
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
$
|
45
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, finance leases and commercial bank financing, less current portion
|
9
|
|
|
10
|
|
|
Operating lease liabilities, less current portion
|
5
|
|
|
5
|
|
|
Program contracts payable, less current portion
|
3
|
|
|
4
|
|
|
Other long-term liabilities
|
11
|
|
|
17
|
|
|
Total liabilities
|
$
|
73
|
|
|
$
|
76
|
|
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 the above, were $125 million and $131 million as of March 31, 2021 and December 31, 2020, 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 March 31, 2021, 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 4. Notes Payable, Finance Leases, 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 $83 million and $75 million as of March 31, 2021 and December 31, 2020, respectively. Our maximum exposure is equal to the carrying value of our investments. The income and loss related to equity method investments and other investments are recorded in income (loss) from equity method investments and other income, net, respectively, in our consolidated statements of operations. We recorded losses of $4 million and $12 million for the three months ended March 31, 2021 and 2020, respectively, related to these investments.
10. 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 our 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 $1 million for both the three months ended March 31, 2021 and 2020. For further information, see Note 4. Notes Payable, Finance Leases, and Commercial Bank Financing.
Charter Aircraft. We lease aircraft owned by certain controlling shareholders. For all leases, we incurred expenses of less than $1 million for both the three months ended March 31, 2021 and 2020.
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 the Cunningham Stations pursuant to LMAs or JSAs and SSAs. See Note 9. Variable Interest Entities, for further discussion of the scope of services provided under these types of arrangements. As of March 31, 2021, we have jointly and severally, unconditionally, and irrevocably guaranteed $40 million of Cunningham's debt, of which $8 million, net of $0.3 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 $55 million and $54 million as of March 31, 2021 and December 31, 2020, respectively. The remaining aggregate purchase price of these stations, net of prepayments, as of both March 31, 2021 and December 31, 2020, was approximately $54 million. 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 $3 million and $2 million for the three months ended March 31, 2021 and 2020, respectively.
The agreements with KBVU-TV/KCVU-TV, KRNV-DT/KENV-DT, WBSF-TV, WEMT-TV, WGTU-TV/WGTQ-TV, WPFO-TV, and WYDO-TV expire between 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 $36 million and $39 million for the three months ended March 31, 2021 and 2020, 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 less than $0.1 million for both the three months ended March 31, 2021 and 2020.
Leased property by real estate ventures
Certain of our real estate ventures have entered into leases with entities owned by members of the Smith Family. Total rent received under these leases was $0.2 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.
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 $1 million for both the three months ended March 31, 2021 and 2020.
We have 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 $8 million for the three months ended March 31, 2021 and $7 million for the three months ended March 31, 2020.
We have a minority interest in a sports marketing company, which we account for as an equity method investment. We made payments to this business for marketing services totaling $3 million for the three months ended March 31, 2021.
Sports Programming Rights
As of March 31, 2021, affiliates of six professional teams have non-controlling equity interests in certain of our RSNs. These agreements expire on various dates during the years ended 2025 through 2032. The Company paid $120 million, net of rebates, for the three months ended March 31, 2021 and $70 million for the three months ended March 31, 2020 under sports programming rights agreements covering the broadcast of regular season games 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 less than $0.1 million, consisting of salary and bonus, for both the three months ended March 31, 2021 and 2020, and was granted a restricted stock award with respect to 2,239 and 355 shares, vesting over two years, for the three months ended March 31, 2021 and 2020, respectively. 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 less than $0.1 million, consisting of salary and bonus, for both the three months ended March 31, 2021 and 2020. 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 received total compensation of less than $0.1 million, consisting of salary, for the three months ended March 31, 2021.
11. 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 for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
Level 1:
|
|
|
|
|
|
|
|
|
Investments in equity securities
|
$
|
88
|
|
|
$
|
88
|
|
|
$
|
68
|
|
|
$
|
68
|
|
|
STG:
|
|
|
|
|
|
|
|
|
Money market funds
|
495
|
|
|
495
|
|
|
448
|
|
|
448
|
|
|
Deferred compensation assets
|
46
|
|
|
46
|
|
|
42
|
|
|
42
|
|
|
Deferred compensation liabilities
|
38
|
|
|
38
|
|
|
36
|
|
|
36
|
|
|
DSG:
|
|
|
|
|
|
|
|
|
Money market funds
|
160
|
|
|
160
|
|
|
292
|
|
|
292
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 (a):
|
|
|
|
|
|
|
|
|
STG:
|
|
|
|
|
|
|
|
|
5.875% Senior Unsecured Notes due 2026
|
348
|
|
|
356
|
|
|
348
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
|
5.500% Senior Unsecured Notes due 2030
|
500
|
|
|
487
|
|
|
500
|
|
|
520
|
|
|
5.125% Senior Unsecured Notes due 2027
|
400
|
|
|
391
|
|
|
400
|
|
|
408
|
|
|
4.125% Senior Secured Notes due 2030
|
750
|
|
|
723
|
|
|
750
|
|
|
770
|
|
|
Term Loan B
|
1,119
|
|
|
1,107
|
|
|
1,119
|
|
|
1,107
|
|
|
Term Loan B-2
|
1,281
|
|
|
1,258
|
|
|
1,284
|
|
|
1,264
|
|
|
|
|
|
|
|
|
|
|
|
DSG:
|
|
|
|
|
|
|
|
|
12.750% Senior Secured Notes due 2026
|
31
|
|
|
27
|
|
|
31
|
|
|
28
|
|
|
6.625% Senior Unsecured Notes due 2027
|
1,744
|
|
|
921
|
|
|
1,744
|
|
|
1,056
|
|
|
5.375% Senior Secured Notes due 2026
|
3,050
|
|
|
2,196
|
|
|
3,050
|
|
|
2,483
|
|
|
Term Loan
|
3,251
|
|
|
2,243
|
|
|
3,259
|
|
|
2,884
|
|
|
Accounts Receivable Securitization Facility
|
173
|
|
|
173
|
|
|
177
|
|
|
177
|
|
|
|
|
|
|
|
|
|
|
|
Debt of variable interest entities
|
16
|
|
|
16
|
|
|
17
|
|
|
17
|
|
|
Debt of non-media subsidiaries
|
17
|
|
|
17
|
|
|
17
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and warrants (b)
|
435
|
|
|
435
|
|
|
332
|
|
|
332
|
|
(a)Amounts are carried in our consolidated balance sheets net of debt discount, premium, and deferred financing cost, which are excluded in the above table, of $176 million and $183 million as of March 31, 2021 and December 31, 2020, respectively.
(b)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. During the three months ended March 31, 2021 we recorded $103 million of fair value adjustments related to these interests. The fair value of the warrants is 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 Other Investments under Note 3. Other Assets for further discussion.
The following table summarizes the changes in financial liabilities measured at fair value on a recurring basis and categorized as Level 3 under the fair value hierarchy for the three months ended March 31, 2021 (in millions):
|
|
|
|
|
|
|
|
|
Options and Warrants
|
|
Fair value at December 31, 2020
|
$
|
332
|
|
|
|
|
|
|
|
|
Measurement adjustments
|
103
|
|
|
Fair value at March 31, 2021
|
$
|
435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:
STG is the primary obligor under the STG Bank Credit Agreement, 5.875% Notes, 5.125% Notes, 5.500% Notes, and 4.125% Secured Notes (collectively, the Notes are referred to as the "STG Notes"). Our Class A Common Stock and Class B Common Stock as of March 31, 2021, were obligations or securities of the Company and not obligations or securities of STG. The Company is a guarantor under the STG Bank Credit Agreement, 5.875% Notes, 5.125% Notes, 5.500% Notes, and 4.125% Secured Notes. As of March 31, 2021, our consolidated total debt, net of deferred financing costs and debt discounts, of $12,540 million included $4,401 million related to STG and its subsidiaries of which the Company guaranteed $4,363 million.
The Company, KDSM, LLC, a wholly-owned subsidiary of the Company, 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 the Company, 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 the Company, STG, KDSM, LLC and the guarantor subsidiaries, the direct and indirect non-guarantor subsidiaries of the Company and the eliminations necessary to arrive at our information on a consolidated basis.
These statements are presented in accordance with the disclosure requirements under SEC Regulation S-X, Rule 3-10.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 2021
(in millions) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
504
|
|
|
$
|
4
|
|
|
$
|
433
|
|
|
$
|
—
|
|
|
$
|
941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
546
|
|
|
512
|
|
|
—
|
|
|
1,058
|
|
|
Other current assets
|
4
|
|
|
54
|
|
|
389
|
|
|
597
|
|
|
(73)
|
|
|
971
|
|
|
Total current assets
|
4
|
|
|
558
|
|
|
939
|
|
|
1,542
|
|
|
(73)
|
|
|
2,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
1
|
|
|
31
|
|
|
691
|
|
|
106
|
|
|
(25)
|
|
|
804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in equity of consolidated subsidiaries
|
528
|
|
|
3,519
|
|
|
—
|
|
|
—
|
|
|
(4,047)
|
|
|
—
|
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
1
|
|
|
3
|
|
|
—
|
|
|
4
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
2,081
|
|
|
10
|
|
|
—
|
|
|
2,091
|
|
|
Indefinite-lived intangible assets
|
—
|
|
|
—
|
|
|
136
|
|
|
14
|
|
|
—
|
|
|
150
|
|
|
Definite-lived intangible assets, net
|
—
|
|
|
—
|
|
|
1,224
|
|
|
4,316
|
|
|
(40)
|
|
|
5,500
|
|
|
Other long-term assets
|
180
|
|
|
1,720
|
|
|
271
|
|
|
1,701
|
|
|
(2,259)
|
|
|
1,613
|
|
|
Total assets
|
$
|
713
|
|
|
$
|
5,828
|
|
|
$
|
5,343
|
|
|
$
|
7,692
|
|
|
$
|
(6,444)
|
|
|
$
|
13,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
22
|
|
|
$
|
138
|
|
|
$
|
206
|
|
|
$
|
176
|
|
|
$
|
(73)
|
|
|
$
|
469
|
|
|
Current portion of long-term debt
|
—
|
|
|
13
|
|
|
5
|
|
|
41
|
|
|
(1)
|
|
|
58
|
|
|
Other current liabilities
|
1
|
|
|
1
|
|
|
121
|
|
|
272
|
|
|
—
|
|
|
395
|
|
|
Total current liabilities
|
23
|
|
|
152
|
|
|
332
|
|
|
489
|
|
|
(74)
|
|
|
922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
700
|
|
|
4,335
|
|
|
32
|
|
|
8,448
|
|
|
(1,033)
|
|
|
12,482
|
|
|
Investment in deficit of consolidated subsidiaries
|
1,256
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,256)
|
|
|
—
|
|
|
Other long-term liabilities
|
12
|
|
|
115
|
|
|
1,462
|
|
|
585
|
|
|
(1,448)
|
|
|
726
|
|
|
Total liabilities
|
1,991
|
|
|
4,602
|
|
|
1,826
|
|
|
9,522
|
|
|
(3,811)
|
|
|
14,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
188
|
|
|
—
|
|
|
188
|
|
|
Total Sinclair Broadcast Group (deficit) equity
|
(1,278)
|
|
|
1,226
|
|
|
3,517
|
|
|
(2,107)
|
|
|
(2,637)
|
|
|
(1,279)
|
|
|
Noncontrolling interests in consolidated subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
89
|
|
|
4
|
|
|
93
|
|
|
Total liabilities, redeemable noncontrolling interests, and equity
|
$
|
713
|
|
|
$
|
5,828
|
|
|
$
|
5,343
|
|
|
$
|
7,692
|
|
|
$
|
(6,444)
|
|
|
$
|
13,132
|
|
CONDENSED CONSOLIDATING 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 CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(in millions) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
|
Net revenue
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
705
|
|
|
$
|
818
|
|
|
$
|
(39)
|
|
|
$
|
1,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media programming and production expenses
|
—
|
|
|
1
|
|
|
348
|
|
|
684
|
|
|
(10)
|
|
|
1,023
|
|
|
Selling, general and administrative expenses
|
3
|
|
|
58
|
|
|
166
|
|
|
74
|
|
|
(27)
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and other operating expenses
|
—
|
|
|
2
|
|
|
74
|
|
|
105
|
|
|
(2)
|
|
|
179
|
|
|
Total operating expenses
|
3
|
|
|
61
|
|
|
588
|
|
|
863
|
|
|
(39)
|
|
|
1,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
(3)
|
|
|
(34)
|
|
|
117
|
|
|
(45)
|
|
|
—
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in (loss) earnings of consolidated subsidiaries
|
(45)
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
(43)
|
|
|
—
|
|
|
Interest expense
|
(3)
|
|
|
(42)
|
|
|
(1)
|
|
|
(111)
|
|
|
6
|
|
|
(151)
|
|
|
Other income (expense)
|
20
|
|
|
5
|
|
|
(12)
|
|
|
123
|
|
|
(3)
|
|
|
133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income
|
(28)
|
|
|
51
|
|
|
(13)
|
|
|
12
|
|
|
(40)
|
|
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)
|
19
|
|
|
7
|
|
|
(15)
|
|
|
(2)
|
|
|
—
|
|
|
9
|
|
|
Net (loss) income
|
(12)
|
|
|
24
|
|
|
89
|
|
|
(35)
|
|
|
(40)
|
|
|
26
|
|
|
Net income attributable to the redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(4)
|
|
|
Net income attributable to the noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(34)
|
|
|
—
|
|
|
(34)
|
|
|
Net (loss) income attributable to Sinclair Broadcast Group
|
$
|
(12)
|
|
|
$
|
24
|
|
|
$
|
89
|
|
|
$
|
(73)
|
|
|
$
|
(40)
|
|
|
$
|
(12)
|
|
|
Comprehensive (loss) income
|
$
|
(12)
|
|
|
$
|
24
|
|
|
$
|
89
|
|
|
$
|
(27)
|
|
|
$
|
(40)
|
|
|
$
|
34
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2020
(in millions) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sinclair
Broadcast
Group, Inc.
|
|
Sinclair
Television
Group, Inc.
|
|
Guarantor
Subsidiaries
and KDSM,
LLC
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Sinclair
Consolidated
|
|
Net revenue
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
739
|
|
|
$
|
893
|
|
|
$
|
(47)
|
|
|
$
|
1,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media programming and production expenses
|
—
|
|
|
—
|
|
|
328
|
|
|
516
|
|
|
(16)
|
|
|
828
|
|
|
Selling, general and administrative expenses
|
3
|
|
|
44
|
|
|
168
|
|
|
67
|
|
|
(23)
|
|
|
259
|
|
|
Depreciation, amortization and other operating expenses
|
—
|
|
|
1
|
|
|
51
|
|
|
147
|
|
|
(4)
|
|
|
195
|
|
|
Total operating expenses
|
3
|
|
|
45
|
|
|
547
|
|
|
730
|
|
|
(43)
|
|
|
1,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
(3)
|
|
|
(21)
|
|
|
192
|
|
|
163
|
|
|
(4)
|
|
|
327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of consolidated subsidiaries
|
129
|
|
|
173
|
|
|
—
|
|
|
—
|
|
|
(302)
|
|
|
—
|
|
|
Interest expense
|
(3)
|
|
|
(55)
|
|
|
(1)
|
|
|
(127)
|
|
|
6
|
|
|
(180)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income
|
(2)
|
|
|
(2)
|
|
|
(9)
|
|
|
8
|
|
|
(3)
|
|
|
(8)
|
|
|
Total other income (expense)
|
124
|
|
|
116
|
|
|
(10)
|
|
|
(119)
|
|
|
(299)
|
|
|
(188)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)
|
2
|
|
|
29
|
|
|
(6)
|
|
|
(13)
|
|
|
—
|
|
|
12
|
|
|
Net income
|
123
|
|
|
124
|
|
|
176
|
|
|
31
|
|
|
(303)
|
|
|
151
|
|
|
Net income attributable to the redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(20)
|
|
|
—
|
|
|
(20)
|
|
|
Net income attributable to the noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
—
|
|
|
(8)
|
|
|
Net income attributable to Sinclair Broadcast Group
|
$
|
123
|
|
|
$
|
124
|
|
|
$
|
176
|
|
|
$
|
3
|
|
|
$
|
(303)
|
|
|
$
|
123
|
|
|
Comprehensive income
|
$
|
123
|
|
|
$
|
124
|
|
|
$
|
176
|
|
|
$
|
31
|
|
|
$
|
(303)
|
|
|
$
|
151
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(in millions) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
$
|
(18)
|
|
|
$
|
30
|
|
|
$
|
113
|
|
|
$
|
(332)
|
|
|
$
|
1
|
|
|
$
|
(206)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
—
|
|
|
—
|
|
|
(14)
|
|
|
(7)
|
|
|
1
|
|
|
(20)
|
|
|
Acquisition of businesses, net of cash acquired
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
Spectrum repack reimbursements
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
Proceeds from the sale of assets
|
—
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
Purchases of investments
|
(2)
|
|
|
(10)
|
|
|
(13)
|
|
|
(24)
|
|
|
—
|
|
|
(49)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
(1)
|
|
|
4
|
|
|
—
|
|
|
3
|
|
|
Net cash flows (used in) from investing activities
|
(2)
|
|
|
(10)
|
|
|
12
|
|
|
(27)
|
|
|
1
|
|
|
(26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and commercial bank financing
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
Repayments of notes payable, commercial bank financing and finance leases
|
—
|
|
|
(3)
|
|
|
(2)
|
|
|
(21)
|
|
|
—
|
|
|
(26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid on Class A and Class B Common Stock
|
(15)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15)
|
|
|
Dividends paid on redeemable subsidiary preferred equity
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(30)
|
|
|
—
|
|
|
(30)
|
|
|
Distributions to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
Increase (decrease) in intercompany payables
|
49
|
|
|
29
|
|
|
(118)
|
|
|
42
|
|
|
(2)
|
|
|
—
|
|
|
Other, net
|
(14)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14)
|
|
|
Net cash flows from (used in) financing activities
|
20
|
|
|
26
|
|
|
(120)
|
|
|
(9)
|
|
|
(2)
|
|
|
(85)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
—
|
|
|
46
|
|
|
5
|
|
|
(368)
|
|
|
—
|
|
|
(317)
|
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period
|
—
|
|
|
458
|
|
|
—
|
|
|
804
|
|
|
—
|
|
|
1,262
|
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period
|
$
|
—
|
|
|
$
|
504
|
|
|
$
|
5
|
|
|
$
|
436
|
|
|
$
|
—
|
|
|
$
|
945
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2020
(in millions) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
$
|
(115)
|
|
|
$
|
(40)
|
|
|
$
|
154
|
|
|
$
|
(37)
|
|
|
$
|
(1)
|
|
|
$
|
(39)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS USED IN INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
—
|
|
|
(5)
|
|
|
(41)
|
|
|
(4)
|
|
|
4
|
|
|
(46)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spectrum repack reimbursements
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
Proceeds from the sale of assets
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
Purchases of investments
|
(1)
|
|
|
(2)
|
|
|
(12)
|
|
|
(10)
|
|
|
—
|
|
|
(25)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
1
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
6
|
|
|
Net cash flows used in investing activities
|
—
|
|
|
(7)
|
|
|
(11)
|
|
|
(9)
|
|
|
4
|
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and commercial bank financing
|
—
|
|
|
648
|
|
|
—
|
|
|
225
|
|
|
—
|
|
|
873
|
|
|
Repayments of notes payable, commercial bank financing and finance leases
|
—
|
|
|
(7)
|
|
|
(1)
|
|
|
(12)
|
|
|
—
|
|
|
(20)
|
|
|
Repurchase of outstanding Class A Common Stock
|
(176)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(176)
|
|
|
Dividends paid on Class A and Class B Common Stock
|
(18)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of redeemable subsidiary preferred equity
|
—
|
|
|
—
|
|
|
—
|
|
|
(198)
|
|
|
—
|
|
|
(198)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(3)
|
|
|
Distributions to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(378)
|
|
|
—
|
|
|
(378)
|
|
|
Increase (decrease) in intercompany payables
|
310
|
|
|
(111)
|
|
|
(142)
|
|
|
(54)
|
|
|
(3)
|
|
|
—
|
|
|
Other, net
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
—
|
|
|
(9)
|
|
|
Net cash flows from (used in) financing activities
|
115
|
|
|
530
|
|
|
(143)
|
|
|
(428)
|
|
|
(3)
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
—
|
|
|
483
|
|
|
—
|
|
|
(474)
|
|
|
—
|
|
|
9
|
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period
|
—
|
|
|
357
|
|
|
3
|
|
|
973
|
|
|
—
|
|
|
1,333
|
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period
|
$
|
—
|
|
|
$
|
840
|
|
|
$
|
3
|
|
|
$
|
499
|
|
|
$
|
—
|
|
|
$
|
1,342
|
|