o Total advertising revenues for the quarter were record highs, up almost 60% over 2021 or up 31% adjusting for the cyber incident o Record total advertising revenues of $1.57 billion, up 23%, driven by strong political results $975 Note: Guidance as provided on the Company's November 2, 2022 Earnings Call Note: Sinclair Broadcast Group Media Revenues and Adjusted EBITDA outlook comparisons are to prior year Pro Forma Media Revenues and Pro Forma Adjusted EBITDA that exclude Diamond as if deconsolidation oc ...

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) Q3 2022 Earnings Conference Call November 28, 2022 9:00 AM ET Company Participants Billie Jo McIntire - Associate Vice President of Investor Relations, Sinclair Chris Ripley - President and Chief Executive Officer, Sinclair Rob Weisbord - President of Broadcast and Chief Operating Officer, Sinclair Scott Shapiro - Chief Financial Officer and Chief Operating Officer, Diamond Sports Conference Call Participants Avi Steiner - JPMorgan David Hamburger - Morgan Stanle ...

[Front Matter](index=1&type=section&id=Front%20Matter) [FORM 10-Q Details](index=1&type=section&id=FORM%2010-Q%20Details) This section details the filing information for the Quarterly Report on Form 10-Q for Sinclair Broadcast Group, Inc. for the period ended September 30, 2022, confirming its status as a large accelerated filer - The filing is a Quarterly Report on Form 10-Q for the period ended September 30, 2022[1](index=1&type=chunk) - Sinclair Broadcast Group, Inc. is registered under Commission File Number **000-26076**[2](index=2&type=chunk) Registrant Status | Status | Checkmark | | :---------------------- | :-------- | | Large accelerated filer | ☒ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | | Smaller reporting company | ☐ | | Emerging growth company | ☐ | [Securities Registered](index=1&type=section&id=Securities%20Registered) The company's Class A Common Stock is registered on The NASDAQ Stock Market LLC under the trading symbol SBGI Securities Registered Pursuant to Section 12(b) of the Act | Title of each class | Trading Symbol | Name of each exchange on which registered | | :-------------------------------- | :------------- | :---------------------------------------- | | Class A Common Stock, par value $0.01 per share | SBGI | The NASDAQ Stock Market LLC | [Registrant Status](index=1&type=section&id=Registrant%20Status) The registrant has filed all required reports in the preceding 12 months and has been subject to filing requirements for the past 90 days, also submitting all required Interactive Data Files - The registrant has filed all required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days[3](index=3&type=chunk)[4](index=4&type=chunk) - The registrant has electronically submitted every Interactive Data File required by Rule 405 of Regulation S-T during the preceding 12 months[4](index=4&type=chunk)[5](index=5&type=chunk) - The registrant is not a shell company[6](index=6&type=chunk)[7](index=7&type=chunk) [Shares Outstanding](index=2&type=section&id=Shares%20Outstanding) As of November 4, 2022, the company had 45,850,774 shares of Class A Common Stock and 23,775,056 shares of Class B Common Stock outstanding Shares Outstanding as of November 4, 2022 | Class of Stock | Number of Shares Outstanding | | :----------------- | :--------------------------- | | Class A Common Stock | 45,850,774 | | Class B Common Stock | 23,775,056 | [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes, highlighting the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) effective March 1, 2022 [CONSOLIDATED BALANCE SHEETS](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) The consolidated balance sheets show a significant decrease in total assets and liabilities from December 31, 2021, to September 30, 2022, primarily due to the deconsolidation of DSIH, with shareholder's equity shifting from a deficit to a positive balance Consolidated Balance Sheet Highlights (in millions) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :---------------------- | :----------------- | :----------------- | | Total assets | $6,605 | $12,541 | | Total liabilities | $5,775 | $14,050 | | Total equity (deficit) | $640 | $(1,706) | - The decrease in total assets and liabilities is largely attributable to the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) effective March 1, 2022[14](index=14&type=chunk)[15](index=15&type=chunk)[35](index=35&type=chunk) [CONSOLIDATED STATEMENTS OF OPERATIONS](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The consolidated statements of operations reflect a substantial gain on deconsolidation of subsidiary for the nine months ended September 30, 2022, leading to significant net income compared to a net loss in the prior year, with revenues decreasing due to the deconsolidation of the local sports segment Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $843 | $1,535 | $2,968 | $4,658 | | Operating income (loss) | $154 | $73 | $3,727 | $(70) | | Gain on deconsolidation of subsidiary | $— | $— | $(3,357) | $— | | Net income (loss) attributable to Sinclair Broadcast Group | $21 | $19 | $2,597 | $(325) | | Basic earnings (loss) per share | $0.32 | $0.25 | $36.59 | $(4.33) | - A gain of **$3,357 million** was recognized on the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) for the nine months ended September 30, 2022[17](index=17&type=chunk)[36](index=36&type=chunk) [CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) The consolidated statements of comprehensive income show a significant increase in comprehensive income attributable to Sinclair Broadcast Group for the nine months ended September 30, 2022, primarily driven by the net income reported Consolidated Statements of Comprehensive Income Highlights (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $29 | $17 | $2,639 | $(285) | | Comprehensive income (loss) attributable to Sinclair Broadcast Group | $21 | $20 | $2,600 | $(319) | [CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY%20(DEFICIT)%20AND%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) Shareholders' equity transitioned from a deficit of $(2,460) million at December 31, 2021, to retained earnings of $84 million at September 30, 2022, largely due to the net income from the deconsolidation of a subsidiary, with the company also repurchasing Class A Common Stock and paying dividends Consolidated Statements of Equity Highlights (in millions) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :----------------------------------------- | :----------------- | :----------------- | | Retained earnings (accumulated deficit) | $84 | $(2,460) | | Total Sinclair Broadcast Group shareholders' equity (deficit) | $706 | $(1,770) | - For the nine months ended September 30, 2022, the company repurchased **4,547,370 shares** of Class A Common Stock for **$114 million**[23](index=23&type=chunk) - Dividends declared and paid on Class A and Class B Common Stock totaled **$53 million** for the nine months ended September 30, 2022[23](index=23&type=chunk) [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash flows from operating activities increased significantly for the nine months ended September 30, 2022, primarily due to the deconsolidation of DSIH, while investing and financing activities both resulted in net outflows driven by debt repayments and share repurchases Consolidated Statements of Cash Flows Highlights (in millions) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :----------------------------- | :----------------------------- | | Net cash flows from operating activities | $458 | $235 | | Net cash flows used in investing activities | $(352) | $(231) | | Net cash flows used in financing activities | $(318) | $(205) | | Net decrease in cash, cash equivalents, and restricted cash | $(212) | $(201) | | Cash, cash equivalents, and restricted cash, end of period | $607 | $1,061 | - Operating cash flows increased due to partial period payments for production, overhead, distributor rebates, and sports rights, partially offset by reduced cash collections from distributors and advertisers, all stemming from the DSIH deconsolidation[228](index=228&type=chunk)[229](index=229&type=chunk) - Financing cash outflows increased due to Class A Common Stock repurchases (**$114 million**), redemption of STG's Term Loan B-1, STG 5.875% Notes, and partial redemption of STG 5.125% Notes, partially offset by proceeds from Term Loan B-4 issuance[233](index=233&type=chunk) [NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS](index=12&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide detailed explanations of the company's operations, significant accounting policies, and the impact of key events such as the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH), covering revenue recognition, income taxes, share repurchases, acquisitions, debt, and related party transactions [1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines Sinclair Broadcast Group's business as a diversified media company, primarily focusing on its broadcast segment, detailing the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) on March 1, 2022, which significantly altered the company's segment reporting and financial structure, and summarizing key accounting policies - Sinclair Broadcast Group is a diversified media company with a primary focus on its broadcast segment, consisting of **185 broadcast television stations** in **86 markets**[30](index=30&type=chunk)[31](index=31&type=chunk) - Effective March 1, 2022, Diamond Sports Intermediate Holdings LLC (DSIH), which comprised the local sports segment, was deconsolidated from the company's financial statements due to a change in governance structure and loss of voting control[31](index=31&type=chunk)[35](index=35&type=chunk) - Upon deconsolidation, the company recognized a pre-tax gain of approximately **$3,357 million**[36](index=36&type=chunk) [2. ACQUISITIONS AND DISPOSITIONS OF ASSETS](index=17&type=section&id=2.%20ACQUISITIONS%20AND%20DISPOSITIONS%20OF%20ASSETS) The company recorded gains from FCC spectrum repack reimbursements, which partially offset capital expenditures related to channel reassignments, with these reimbursements covering the majority of incurred repack costs Spectrum Repack Reimbursements and Capital Expenditures (in millions) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :----------------------------- | :------------------------------ | :----------------------------- | | Gains from reimbursements | $1 | $3 | $3 | $22 | | Capital expenditures related to repack | $0.1 | $1 | $1 | $10 | [3. OTHER ASSETS](index=17&type=section&id=3.%20OTHER%20ASSETS) Other assets decreased significantly from December 31, 2021, to September 30, 2022, primarily due to the deconsolidation of DSIH, which impacted equity method investments, with the company also holding other investments measured at fair value or NAV, and a note receivable from DSIH Other Assets (in millions) | Asset Category | As of Sep 30, 2022 | As of Dec 31, 2021 | | :------------------------ | :----------------- | :----------------- | | Equity method investments | $131 | $517 | | Other investments | $418 | $567 | | Note receivable | $193 | $— | | Total other assets | $949 | $1,408 | - The investment in DSIH was reflected at a nominal fair value upon deconsolidation on March 1, 2022, and no equity method loss was recorded as the carrying value is zero[65](index=65&type=chunk) - The company holds a note receivable of approximately **$193 million** from Diamond Sports Finance SPV, LLC (DSPV), an indirect subsidiary of DSIH, as of September 30, 2022[69](index=69&type=chunk) [4. NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING](index=18&type=section&id=4.%20NOTES%20PAYABLE,%20FINANCE%20LEASES,%20AND%20COMMERCIAL%20BANK%20FINANCING) Sinclair Television Group, Inc. (STG) refinanced debt by raising $750 million in Term B-4 Loans, maturing on April 21, 2029, using proceeds to repay existing Term Loan B-1 and redeem senior notes, and also repurchased and canceled $118 million of STG 5.125% senior notes due 2027 - STG raised **$750 million** in Term B-4 Loans, maturing April 21, 2029, to refinance Term Loan B-1 and redeem STG 5.875% senior notes due 2026[72](index=72&type=chunk)[130](index=130&type=chunk) - The company repurchased and canceled **$118 million** aggregate principal amount of STG 5.125% senior notes due 2027 for **$104 million**, recognizing a gain on extinguishment of **$13 million**[73](index=73&type=chunk)[131](index=131&type=chunk) - The debt of DSIH was deconsolidated from the balance sheet as part of the Deconsolidation[74](index=74&type=chunk) [5. REDEEMABLE NONCONTROLLING INTERESTS](index=19&type=section&id=5.%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) Redeemable noncontrolling interests primarily consist of Redeemable Subsidiary Preferred Equity, which accrued dividends of $3 million and $9 million for the three and nine months ended September 30, 2022, respectively, with a subsidiary equity put right related to DSIH being deconsolidated Redeemable Subsidiary Preferred Equity (in millions) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :------------------ | :----------------- | :----------------- | | Balance, net of costs | $190 | $181 | | Liquidation preference | $194 | $185 | - Dividends accrued to the Redeemable Subsidiary Preferred Equity were **$3 million** and **$9 million** for the three and nine months ended September 30, 2022, respectively[79](index=79&type=chunk) - A redeemable noncontrolling interest related to DSIH's subsidiary equity put right was deconsolidated as part of the DSIH deconsolidation[81](index=81&type=chunk) [6. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=6.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in various legal and regulatory matters, including pending FCC litigation regarding sponsorship identification rules, retransmission consent negotiations, and children's television programming limitations, with an accrual of $3.4 million made for potential fines related to children's programming violations - The company agreed to pay **$48 million** to resolve FCC matters related to sponsorship identification rules, a Tribune acquisition investigation, and a retransmission matter in May 2020[85](index=85&type=chunk) - An accrual of **$8 million** was included in consolidated financial statements for additional expenses related to FCC forfeiture orders against consolidated VIEs for retransmission consent negotiations in 2021[87](index=87&type=chunk) - As of September 30, 2022, the company accrued **$3.4 million** for a proposed FCC fine related to violations of commercial matter limitations in children's television programming[88](index=88&type=chunk) [7. EARNINGS PER SHARE](index=22&type=section&id=7.%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per share attributable to Sinclair Broadcast Group increased significantly for the nine months ended September 30, 2022, primarily due to the net income resulting from the deconsolidation gain Earnings Per Common Share Attributable to Sinclair Broadcast Group | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic earnings (loss) per share | $0.32 | $0.25 | $36.59 | $(4.33) | | Diluted earnings (loss) per share | $0.32 | $0.25 | $36.59 | $(4.33) | | Basic weighted average common shares outstanding (in thousands) | 69,907 | 75,472 | 70,981 | 75,068 | | Diluted weighted average common and common equivalent shares outstanding (in thousands) | 69,907 | 75,516 | 70,985 | 75,068 | [8. SEGMENT DATA](index=22&type=section&id=8.%20SEGMENT%20DATA) Following the deconsolidation of the local sports segment on March 1, 2022, the company now reports one reportable segment: broadcast, which saw increased operating income for both the three and nine months ended September 30, 2022, compared to the prior year - For the quarter ended September 30, 2022, the company had one reportable segment: broadcast; prior to deconsolidation, it had two: broadcast and local sports[92](index=92&type=chunk) Broadcast Segment Operating Income (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating income | $152 | $126 | $367 | $294 | - The local sports segment's activity is only reflected for two months in the nine months ended September 30, 2022, due to the deconsolidation[95](index=95&type=chunk)[97](index=97&type=chunk) [9. VARIABLE INTEREST ENTITIES](index=25&type=section&id=9.%20VARIABLE%20INTEREST%20ENTITIES) The company consolidates certain broadcast stations as Variable Interest Entities (VIEs) where it is the primary beneficiary, providing programming, sales, and administrative services, with regional sports networks previously consolidated as VIEs no longer included after the DSIH deconsolidation - The company consolidates VIEs where it has the power to direct activities significantly impacting economic performance and absorbs losses or receives significant returns, primarily through Local Marketing Agreements (LMAs) and Joint Sales Agreements (JSAs) with broadcast stations[99](index=99&type=chunk) VIE Assets and Liabilities (in millions) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :-------------- | :----------------- | :----------------- | | Total assets | $113 | $217 | | Total liabilities | $26 | $72 | - The assets of consolidated VIEs can only be used to settle their own obligations, and most liabilities are non-recourse to the company, except for debt of certain VIEs[102](index=102&type=chunk) [10. RELATED PERSON TRANSACTIONS](index=26&type=section&id=10.%20RELATED%20PERSON%20TRANSACTIONS) The company engages in various transactions with its controlling shareholders and related entities, including leases, charter aircraft services, and agreements with Cunningham Broadcasting Corporation, with post-deconsolidation transactions with DSIH, such as management services and a note receivable, also detailed - Lease payments to entities owned by controlling shareholders were **$5 million** for the nine months ended September 30, 2022[106](index=106&type=chunk) - The company guarantees **$33 million** of Cunningham Broadcasting Corporation's debt, a related entity where non-voting stock is owned by trusts for the benefit of controlling shareholders' children[109](index=109&type=chunk)[110](index=110&type=chunk) - The Broadcast segment recorded **$49 million** of revenue for management services provided to DSG (a DSIH subsidiary) for the nine months ended September 30, 2022, with a portion of fees deferred[118](index=118&type=chunk) [11. FAIR VALUE MEASUREMENTS](index=29&type=section&id=11.%20FAIR%20VALUE%20MEASUREMENTS) This note details the fair value measurements of financial assets and liabilities, categorized into Level 1, Level 2, and Level 3 inputs, highlighting significant changes including the deconsolidation of DSG's debt and fair value adjustments to investments in equity securities, particularly warrants and options related to Bally's Corporation Fair Value of Financial Assets and Liabilities (in millions) | Category | Asset/Liability | As of Sep 30, 2022 (Fair Value) | As of Dec 31, 2021 (Fair Value) | | :------- | :-------------- | :------------------------------ | :------------------------------ | | Level 1 | Investments in equity securities | $5 | $5 | | Level 1 | Deferred compensation assets | $38 | $48 | | Level 1 | STG Money market funds | $467 | $265 | | Level 2 | Investments in equity securities | $59 | $114 | | Level 2 | STG 5.500% Senior Notes due 2030 | $359 | $489 | | Level 3 | Investments in equity securities | $152 | $282 | - The debt of DSG was deconsolidated from the balance sheet as part of the DSIH deconsolidation[128](index=128&type=chunk) - Fair value adjustment losses of **$0.2 million** and **$130 million** were recorded for the three and nine months ended September 30, 2022, respectively, related to warrants and options to acquire common equity in Bally's Corporation[131](index=131&type=chunk) [12. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS](index=31&type=section&id=12.%20CONDENSED%20CONSOLIDATING%20FINANCIAL%20STATEMENTS) This note provides condensed consolidating financial statements for SBG, STG, KDSM, LLC, guarantor subsidiaries, and non-guarantor subsidiaries, detailing the allocation of assets, liabilities, operations, and cash flows across these entities, highlighting STG as the primary obligor for significant debt and SBG as a guarantor - STG is the primary obligor for the Bank Credit Agreement and various senior notes, with SBG and its guarantor subsidiaries providing full and unconditional guarantees[133](index=133&type=chunk)[134](index=134&type=chunk) - As of September 30, 2022, consolidated total debt, net of deferred financing costs and debt discounts, was **$4,269 million**, with **$4,253 million** related to STG and its subsidiaries, of which **$4,222 million** was guaranteed by SBG[133](index=133&type=chunk) [13. SUBSEQUENT EVENTS](index=39&type=section&id=13.%20SUBSEQUENT%20EVENTS) In November 2022, the Board of Directors declared a quarterly dividend of $0.25 per share, payable on December 15, 2022 - A quarterly dividend of **$0.25 per share** was declared in November 2022, payable on December 15, 2022[155](index=155&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=40&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance and condition, highlighting the impact of the DSIH deconsolidation, segment-specific results, liquidity, and capital resources, also discussing forward-looking statements and critical accounting policies [FORWARD-LOOKING STATEMENTS](index=40&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines various risks and uncertainties that could impact the company's future results, including those related to COVID-19, industry conditions, regulatory changes, company-specific factors, and general economic conditions, emphasizing that actual results may differ materially from forward-looking statements - Forward-looking statements are subject to risks including COVID-19 impacts (e.g., reduced consumer spending, supply chain disruptions, wage inflation), industry risks (e.g., subscriber churn, programming costs, network strategies), regulatory risks (e.g., FCC rules, retransmission consent), and company-specific risks (e.g., debt obligations, technology deployment, acquisition integration)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - The war in Ukraine and cybersecurity incidents are also identified as general risks that could affect operations[164](index=164&type=chunk) [Summary of Significant Events](index=42&type=section&id=Summary%20of%20Significant%20Events) Key events include the expansion of NewsON, new creative partnerships, a multi-year ABC network affiliation agreement, and continued deployment of NEXTGEN TV in additional markets, with the company also repurchasing Class A Common Stock and increasing its quarterly cash dividend - NewsON, the company's streaming service for local news, added **13 CBS local stations**, expanding coverage to over **250 stations** and **92% of U.S. households**[170](index=170&type=chunk) - The company announced a multi-year ABC network affiliation agreement with Disney Media & Entertainment Distribution covering **30 markets**[170](index=170&type=chunk) - NEXTGEN TV (ATSC 3.0) was deployed in **12 additional markets** in 2022, bringing the total to **34 markets**[171](index=171&type=chunk) - For the nine months ended September 30, 2022, the company repurchased approximately **five million shares** of Class A Common Stock for **$114 million**[173](index=173&type=chunk) - Quarterly cash dividend increased by **25%** over 2021 dividends to **$0.25 per share**[174](index=174&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) The company's operating results were significantly impacted by the deconsolidation of the local sports segment, with the broadcast segment showing revenue growth driven by political advertising and increased contractual rates, while overall consolidated revenues decreased due to the absence of the local sports segment for most of the period [Seasonality / Cyclicality](index=44&type=section&id=Seasonality%20/%20Cyclicality) The broadcast segment experiences cyclical fluctuations from political advertising, with higher spending in even-numbered years, while the former local sports segment also had seasonal fluctuations based on professional sports league schedules - Broadcast segment operating results are subject to cyclical fluctuations from political advertising, with significantly higher spending in even-numbered years[176](index=176&type=chunk) - The former local sports segment's operating results were subject to cyclical fluctuations based on MLB, NBA, and NHL seasons, typically higher in the second and third quarters[177](index=177&type=chunk) [Operating Data](index=44&type=section&id=Operating%20Data) Consolidated total revenues decreased for both the three and nine months ended September 30, 2022, compared to 2021, primarily due to the deconsolidation of the local sports segment, however, operating income and net income attributable to Sinclair Broadcast Group saw substantial increases for the nine-month period due to the deconsolidation gain Consolidated Operating Data (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $843 | $1,535 | $2,968 | $4,658 | | Operating income (loss) | $154 | $73 | $3,727 | $(70) | | Net income (loss) attributable to Sinclair Broadcast Group | $21 | $19 | $2,597 | $(325) | - The gain on deconsolidation of subsidiary was **$3,357 million** for the nine months ended September 30, 2022[178](index=178&type=chunk) [The Impact of COVID-19 on our Results of Operations](index=45&type=section&id=The%20Impact%20of%20COVID-19%20on%20our%20Results%20of%20Operations) The COVID-19 pandemic continues to create uncertainty, impacting operations, workforce, and potentially leading to wage inflation and difficulties in finding qualified employees, though the company's business is designated as essential, allowing continued service - The national state of emergency related to COVID-19 remains in effect, creating significant uncertainty and disruption[179](index=179&type=chunk) - COVID-19 has disrupted operations, heightened the risk of workforce illness, and contributed to wage inflation and difficulty in finding qualified employees[180](index=180&type=chunk) [BROADCAST SEGMENT](index=45&type=section&id=BROADCAST%20SEGMENT) The broadcast segment experienced revenue growth for both the three and nine months ended September 30, 2022, driven by increased political advertising and contractual rates for distribution, with operating income also increasing significantly Broadcast Segment Revenue and Operating Income (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Distribution revenue | $381 | $372 | $1,158 | $1,096 | | Advertising revenue | $339 | $283 | $937 | $830 | | Media revenues | $753 | $701 | $2,206 | $2,053 | | Operating income | $152 | $126 | $367 | $294 | - Advertising revenue increased by **$56 million** (**20% YoY**) for the three months and **$107 million** (**13% YoY**) for the nine months, primarily due to a **$77 million** and **$139 million** increase in political advertising revenue, respectively[184](index=184&type=chunk) - Media programming and production expenses increased by **$15 million** (**4% YoY**) for the three months and **$44 million** (**4% YoY**) for the nine months, mainly due to higher network affiliation agreement fees[187](index=187&type=chunk) [LOCAL SPORTS SEGMENT](index=48&type=section&id=LOCAL%20SPORTS%20SEGMENT) The local sports segment, comprising Bally RSNs, Marquee, and a minority interest in YES Network, was deconsolidated on March 1, 2022, resulting in no reportable activity for this segment for the three months ended September 30, 2022, and significantly reduced activity for the nine-month period compared to the prior year - The local sports segment was deconsolidated on March 1, 2022, resulting in no reportable activity for the three months ended September 30, 2022[192](index=192&type=chunk)[194](index=194&type=chunk)[196](index=196&type=chunk) Local Sports Segment Revenue and Operating Loss (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Media revenue | $— | $759 | $482 | $2,365 | | Operating loss | $— | $(39) | $(4) | $(368) | - Income from equity method investments for the local sports segment was **$10 million** for the nine months ended September 30, 2022, primarily from the YES Network[193](index=193&type=chunk)[201](index=201&type=chunk) [OTHER](index=49&type=section&id=OTHER) The 'Other' segment, including owned networks, digital solutions, and technical services, saw a decrease in media revenue for the three months but an increase for the nine months, driven by digital advertising initiatives, while non-media revenue decreased due to the sale of Triangle Sign & Service, LLC and winding down of the FCC's repack process Other Segment Revenue and Operating Income (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Media revenues | $95 | $106 | $335 | $305 | | Non-media revenues | $8 | $11 | $33 | $40 | | Operating income (loss) | $8 | $(9) | $18 | $15 | - Media revenue decreased by **$11 million** (**10% YoY**) for the three months due to owned networks' distribution revenue, but increased by **$30 million** (**10% YoY**) for the nine months due to digital advertising initiatives[206](index=206&type=chunk) - Income from equity method investments increased by **$33 million** and **$50 million** for the three and nine months, respectively, primarily due to the sale of one of the company's investments[208](index=208&type=chunk) [CORPORATE AND UNALLOCATED EXPENSES](index=50&type=section&id=CORPORATE%20AND%20UNALLOCATED%20EXPENSES) Corporate general and administrative expenses decreased due to lower legal, consulting, and regulatory costs, and reduced employee compensation, while interest expense significantly decreased due to the DSIH deconsolidation, and other income (expense), net, fluctuated due to fair value changes in investments Corporate and Unallocated Expenses (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Corporate general and administrative expenses | $30 | $35 | $115 | $132 | | Interest expense including amortization of debt discount and deferred financing costs | $59 | $155 | $228 | $466 | | Other income (expense), net | $10 | $(4) | $(155) | $59 | | Income tax (provision) benefit | $(109) | $91 | $(756) | $169 | - Corporate G&A expenses decreased by **$5 million** (**14% YoY**) for the three months due to lower legal, consulting, and regulatory costs, and by **$17 million** (**13% YoY**) for the nine months due to reduced employee compensation[209](index=209&type=chunk)[210](index=210&type=chunk) - Interest expense decreased by **$96 million** (**62% YoY**) for the three months and **$238 million** (**51% YoY**) for the nine months, primarily due to the deconsolidation of DSG interest expense[212](index=212&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=52&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains strong liquidity with $875 million in net working capital and $607 million in cash, having refinanced debt, repurchased Class A Common Stock, and expects existing cash, operations, and borrowing capacity to meet short-term needs, with long-term liquidity potentially involving debt issuance, equity, or asset sales - As of September 30, 2022, the company had net working capital of approximately **$875 million**, including **$607 million** in cash and cash equivalents[219](index=219&type=chunk) - The STG first lien leverage ratio was below **4.5x** as of September 30, 2022, and the company was not subject to the financial maintenance covenant as the revolving credit facility was not utilized[220](index=220&type=chunk) - Total debt was **$4,269 million** as of September 30, 2022, including **$43 million** in current debt, following the deconsolidation of DSIH's debt[223](index=223&type=chunk) - The company anticipates existing cash, cash flow from operations, and borrowing capacity under the Bank Credit Agreement will be sufficient for the next twelve months[225](index=225&type=chunk) [Sources and Uses of Cash](index=53&type=section&id=Sources%20and%20Uses%20of%20Cash) Net cash flows from operating activities increased for both the three and nine months ended September 30, 2022, primarily due to the DSIH deconsolidation, while investing and financing activities both resulted in net cash outflows Cash Flows (in millions) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash flows from operating activities | $251 | $247 | $458 | $235 | | Net cash flows used in investing activities | $(23) | $(90) | $(352) | $(231) | | Net cash flows used in financing activities | $(41) | $(64) | $(318) | $(205) | [Operating Activities](index=53&type=section&id=Operating%20Activities) Net cash flows from operating activities increased for both the three and nine months ended September 30, 2022, primarily due to the partial period of payments for production, overhead, distributor rebates, and sports rights following the DSIH deconsolidation - Net cash flows from operating activities increased due to the partial period of payments for production and overhead costs, distributor rebate payments, and sports rights as a result of the DSIH deconsolidation[228](index=228&type=chunk)[229](index=229&type=chunk) [Investing Activities](index=53&type=section&id=Investing%20Activities) Net cash flows used in investing activities decreased for the three months ended September 30, 2022, primarily due to lower investment purchases, while for the nine-month period, the increase in cash used was primarily due to the DSIH deconsolidation, partially offset by increased distributions from investments - Net cash flows used in investing activities decreased for the three months ended September 30, 2022, primarily due to lower purchases of investments[230](index=230&type=chunk) - For the nine months, the increase in cash used was primarily due to the DSIH deconsolidation, partially offset by increased distributions from investments and decreased purchases of investments[231](index=231&type=chunk) [Financing Activities](index=54&type=section&id=Financing%20Activities) Net cash flows used in financing activities decreased for the three months ended September 30, 2022, due to lower distributions to noncontrolling interests, but increased for the nine months due to Class A Common Stock repurchases and debt redemptions, partially offset by new Term Loan B-4 proceeds - Net cash flows used in financing activities decreased for the three months ended September 30, 2022, primarily due to decreased distributions to noncontrolling interests, partially offset by Class A Common Stock repurchases[232](index=232&type=chunk) - For the nine months, cash used in financing activities increased due to Class A Common Stock repurchases, redemption of STG's Term Loan B-1, STG 5.875% Notes, and partial redemption of STG 5.125% Notes, partially offset by proceeds from Term Loan B-4 issuance[233](index=233&type=chunk) - A quarterly dividend of **$0.25 per share** was declared in August and November 2022, representing a **25% increase** over 2021 dividends[234](index=234&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=54&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) There were no material changes to critical accounting policies and estimates from the prior Annual Report on Form 10-K, however, the ongoing COVID-19 pandemic and the war in Ukraine continue to introduce significant uncertainty, requiring increased judgment in estimates related to revenue recognition, goodwill, intangible assets, and income taxes - No material changes to critical accounting policies and estimates were made from the Annual Report on Form 10-K for the year ended December 31, 2021[235](index=235&type=chunk) - The COVID-19 pandemic and the war in Ukraine continue to create significant uncertainty, requiring increased judgment and carrying a higher degree of variability and volatility in estimates for revenue recognition, goodwill, intangible assets, and income taxes[236](index=236&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=54&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) There have been no material changes to the quantitative and qualitative disclosures about market risk since the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to market risk disclosures have occurred since the Annual Report on Form 10-K for the year ended December 31, 2021[237](index=237&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=54&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures and internal control over financial reporting as of September 30, 2022, concluding that disclosure controls were effective at a reasonable assurance level, with no material changes to internal control over financial reporting occurring during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022[238](index=238&type=chunk)[241](index=241&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[242](index=242&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and have inherent limitations[243](index=243&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=56&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various lawsuits and claims in the ordinary course of business, with no material judgments rendered, and further details on pending lawsuits are provided in Note 6 to the Consolidated Financial Statements - The company is a party to lawsuits and claims in the ordinary course of business, with no material judgments rendered[246](index=246&type=chunk) - Further discussion on certain pending lawsuits is available in Note 6. Commitments and Contingencies[246](index=246&type=chunk) [ITEM 1A. RISK FACTORS](index=56&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2021[247](index=247&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=56&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased 489,051 shares of Class A Common Stock during the quarter ended September 30, 2022, under a publicly announced program, with $704 million remaining authorized for repurchases as of September 30, 2022 Class A Common Stock Repurchases (Quarter Ended September 30, 2022) | Period | Total Number of Shares Purchased | Average Price Per Share | | :---------------- | :------------------------------- | :---------------------- | | 07/01/22 - 07/31/22 | 422,018 | $20.60 | | 08/01/22 - 08/31/22 | 67,033 | $21.83 | | 09/01/22 - 09/30/22 | — | $— | - All repurchases were made in open-market transactions under an SEC Rule 10b5-1 plan[248](index=248&type=chunk) - As of September 30, 2022, the total remaining purchase authorization under the share repurchase program was **$704 million**[249](index=249&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=56&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[250](index=250&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=56&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) There were no mine safety disclosures required for the reported period - No mine safety disclosures were reported[251](index=251&type=chunk) [ITEM 5. OTHER INFORMATION](index=56&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information was reported in this section - No other information was reported[252](index=252&type=chunk) [ITEM 6. EXHIBITS](index=57&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and the company's consolidated financial statements in iXBRL format - Exhibits include certifications by the CEO (Christopher S. Ripley) and CFO (Lucy Rutishauser) pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[253](index=253&type=chunk) - The company's Consolidated Financial Statements and related Notes for the quarter ended September 30, 2022, are filed in iXBRL format as Exhibit 101[253](index=253&type=chunk) [SIGNATURE](index=58&type=section&id=SIGNATURE) The report was duly signed on November 9, 2022, by David R. Bochenek, Senior Vice President/Chief Accounting Officer, on behalf of Sinclair Broadcast Group, Inc. - The report was signed on November 9, 2022, by David R. Bochenek, Senior Vice President/Chief Accounting Officer[256](index=256&type=chunk)[258](index=258&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . COMMISSION FILE NUMBER: 000-26076 SINCLAIR BROADCAST GROUP, INC. (Exact name of Registrant as specified in its charter) Maryland 52-1494 ...

SINCLAIR 1 S e c o n d Q u a r t e r 2 0 2 2 C o n f e r e n c e C a l l A U G U S T 3 , 2 0 2 2 Chris Ripley President & Chief Executive Officer Lucy Rutishauser EVP, Chief Financial Officer Rob Weisbord Chief Operating Officer President of Broadcast NON-GAAP FINANCIAL MEASURES 2 This presentation contains certain financial measures, including Adjusted EBITDA and Adjusted Free Cash Flow, which are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP") (collectively, the "non ...

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) Q2 2022 Earnings Conference Call August 3, 2022 9:00 AM ET Company Participants Lucy Rutishauser - EVP & CFO Billie Jo McIntire - Director of IR Christopher Ripley - President & CEO Robert Weisbord - COO & President, Broadcast Steven Zenker - VP, IR Conference Call Participants Daniel Kurnos - The Benchmark Company Steven Cahall - Wells Fargo Securities Aaron Watts - Deutsche Bank Barton Crockett - Rosenblatt Securities Edward Reily - EF Hutton David Hamburger - ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2022 [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents the unaudited consolidated financial statements of Sinclair Broadcast Group, Inc. for the quarter ended March 31, 2022, including balance sheets, statements of operations, comprehensive income, equity, and cash flows. It also includes detailed notes explaining accounting policies, significant events like the deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH), segment data, and related party transactions [CONSOLIDATED BALANCE SHEETS](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time ASSETS (in millions) | ASSETS (in millions) | As of March 31, 2022 | As of December 31, 2021 | | :--------------------- | :------------------- | :---------------------- | | Cash and cash equivalents | $521 | $816 | | Accounts receivable, net | $620 | $1,245 | | Total current assets | $1,467 | $2,471 | | Property and equipment, net | $715 | $833 | | Customer relationships, net | $504 | $3,904 | | Total assets | $6,662 | $12,541 | LIABILITIES & EQUITY (in millions) | LIABILITIES & EQUITY (in millions) | As of March 31, 2022 | As of December 31, 2021 | | :--------------------------------- | :------------------- | :---------------------- | | Accounts payable and accrued liabilities | $392 | $655 | | Total current liabilities | $603 | $1,202 | | Notes payable, finance leases, and commercial bank financing, less current portion | $4,362 | $12,271 |\ | Total liabilities | $5,775 | $14,050 | | Total Sinclair Broadcast Group shareholders' equity (deficit) | $765 | $(1,770) | | Total equity (deficit) | $703 | $(1,706) | - **Total assets decreased significantly** from **$12,541 million** at December 31, 2021, to **$6,662 million** at March 31, 2022, **primarily due to the deconsolidation** of Diamond Sports Intermediate Holdings LLC (DSIH)[14](index=14&type=chunk)[15](index=15&type=chunk)[31](index=31&type=chunk) - **Total liabilities also saw a substantial reduction** from **$14,050 million** to **$5,775 million**, **largely attributable to the DSIH deconsolidation**[14](index=14&type=chunk)[15](index=15&type=chunk)[31](index=31&type=chunk) - **Shareholders' equity shifted** from a **deficit of $(1,770) million** to a **positive $765 million**, reflecting the financial impact of the **DSIH deconsolidation** and net income[14](index=14&type=chunk)[21](index=21&type=chunk) [CONSOLIDATED STATEMENTS OF OPERATIONS](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This statement details the company's revenues, expenses, and net income over a specific period (in millions, except per share data) | (in millions, except per share data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $1,288 | $1,511 | | Total operating (gains) expenses | $(2,178) | $1,476 | | Operating income | $3,466 | $35 | | Income before income taxes | $3,303 | $17 | | NET INCOME | $2,616 | $26 | | NET INCOME (LOSS) ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP | $2,587 | $(12) | | Basic earnings (loss) per share | $35.85 | $(0.16) | | Diluted earnings (loss) per share | $35.84 | $(0.16) | - **Total revenues decreased by $223 million** (**14.7%**) year-over-year, from **$1,511 million** in Q1 2021 to **$1,288 million** in Q1 2022, **primarily due to the deconsolidation** of the local sports segment[16](index=16&type=chunk)[31](index=31&type=chunk)[188](index=188&type=chunk) - **Operating income dramatically increased** from **$35 million** in Q1 2021 to **$3,466 million** in Q1 2022, **driven by a $3,357 million gain** on the **deconsolidation** of a subsidiary[16](index=16&type=chunk)[32](index=32&type=chunk)[202](index=202&type=chunk) - **Net income attributable to Sinclair Broadcast Group swung from a loss of $(12) million** in Q1 2021 to a **net income of $2,587 million** in Q1 2022, **largely due to the deconsolidation gain**[16](index=16&type=chunk) - **Diluted EPS improved significantly** from **$(0.16)** in Q1 2021 to **$35.84** in Q1 2022[16](index=16&type=chunk) [CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) This statement presents net income and other comprehensive income components, reflecting total non-owner changes in equity (in millions) | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------ | :-------------------------------- | :-------------------------------- | | Net income | $2,616 | $26 | | Share of other comprehensive income of equity method investments | $3 | $8 | | Comprehensive income | $2,619 | $34 | | Comprehensive income (loss) attributable to Sinclair Broadcast Group | $2,590 | $(4) | - **Comprehensive income attributable to Sinclair Broadcast Group increased substantially** from a **loss of $(4) million** in Q1 2021 to an **income of $2,590 million** in Q1 2022, mirroring the net income trend[17](index=17&type=chunk) [CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY%20(DEFICIT)%20AND%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) This statement tracks changes in shareholders' equity and noncontrolling interests over the reporting period (in millions, except share data) | (in millions, except share data) | As of December 31, 2021 | As of March 31, 2022 | | :------------------------------- | :---------------------- | :------------------- | | Redeemable Noncontrolling Interests | $197 | $184 | | Total Sinclair Broadcast Group Shareholders' Equity (Deficit) | $(1,770) | $765 | | Noncontrolling Interests | $64 | $(62) | | Total Equity (Deficit) | $(1,706) | $703 | - The company's equity position **significantly improved**, moving from a **total deficit of $(1,706) million** at December 31, 2021, to a **positive total equity of $703 million** at March 31, 2022[21](index=21&type=chunk) - This **improvement was primarily driven by the net income of $2,587 million** for the quarter, which offset dividends paid and share repurchases[21](index=21&type=chunk) - **Repurchased 2,472,485 shares** of Class A Common Stock for **$68 million** during the three months ended March 31, 2022[21](index=21&type=chunk) [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This statement categorizes cash flows into operating, investing, and financing activities, showing changes in cash position (in millions) | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------ | :-------------------------------- | :-------------------------------- | | Net cash flows from (used in) operating activities | $70 | $(206) | | Net cash flows used in investing activities | $(266) | $(26) | | Net cash flows used in financing activities | $(102) | $(85) | | NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $(298) | $(317) | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period | $521 | $945 | - **Net cash flows from operating activities improved significantly**, moving from a **use of $(206) million** in Q1 2021 to a **generation of $70 million** in Q1 2022, **mainly due to** lower payments for production, overhead, distributor rebates, and sports rights following the **DSIH deconsolidation**[24](index=24&type=chunk)[216](index=216&type=chunk) - **Net cash flows used in investing activities increased from $(26) million** in Q1 2021 to **$(266) million** in Q1 2022, **primarily due to the deconsolidation** of subsidiary cash of **$(315) million**, partially offset by increased distributions from investments[24](index=24&type=chunk)[217](index=217&type=chunk) - **Net cash flows used in financing activities increased from $(85) million** in Q1 2021 to **$(102) million** in Q1 2022, **mainly due to** Class A Common Stock **repurchases of $68 million** in the current period[24](index=24&type=chunk)[218](index=218&type=chunk) [NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS](index=12&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations of accounting policies, significant events, and financial statement line items [1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines Sinclair Broadcast Group's business, which includes diversified television media with broadcast stations and, prior to March 1, 2022, regional sports networks. It details the principles of consolidation, the significant deconsolidation of Diamond Sports Intermediate Holdings LLC (DSIH) effective March 1, 2022, and key accounting policies for revenue recognition, programming rights, and income taxes. The deconsolidation resulted in a $3,357 million gain - Sinclair Broadcast Group operates **185 broadcast television stations** in **86 markets**, broadcasting **634 channels** as of March 31, 2022[27](index=27&type=chunk) - **Effective March 1, 2022**, Diamond Sports Intermediate Holdings LLC (DSIH), representing the local sports segment, was **deconsolidated** from the Company's financial statements due to a change in governance structure, resulting in a **$3,357 million gain** before income taxes[31](index=31&type=chunk)[32](index=32&type=chunk) Revenue Disaggregated by Type and Segment (in millions) | For the three months ended March 31, 2022 | Broadcast | Local sports | Other | Eliminations | Total | | :---------------------------------------- | :-------- | :----------- | :---- | :----------- | :---- | | Distribution revenue | $392 | $433 | $48 | $— | $873 | | Advertising revenue | $282 | $44 | $68 | $(23) | $371 | | Other media, non-media, and intercompany revenues | $47 | $5 | $18 | $(26) | $44 | | Total revenues | $721 | $482 | $134 | $(49) | $1,288 | For the three months ended March 31, 2021 | For the three months ended March 31, 2021 | Broadcast | Local sports | Other | Eliminations | Total | | :---------------------------------------- | :-------- | :----------- | :---- | :----------- | :---- | | Distribution revenue | $361 | $698 | $50 | $— | $1,109 | | Advertising revenue | $267 | $65 | $40 | $(1) | $371 | | Other media, non-media, and intercompany revenues | $37 | $5 | $18 | $(29) | $31 | | Total revenues | $665 | $768 | $108 | $(30) | $1,511 | - Deferred revenue was **$230 million** as of March 31, 2022, **down from $235 million** as of December 31, 2021[46](index=46&type=chunk) - For Q1 2022, three customers **accounted for 17%**, **17%**, and **14%** of total revenues, respectively[47](index=47&type=chunk) - **Repurchased approximately 2 million shares** of Class A Common Stock for **$68 million** during Q1 2022, with **$751 million remaining authorization**[52](index=52&type=chunk) [2. ACQUISITIONS AND DISPOSITIONS OF ASSETS](index=16&type=section&id=2.%20ACQUISITIONS%20AND%20DISPOSITIONS%20OF%20ASSETS) This note details the company's activities related to the Broadcast Incentive Auction and spectrum repack. Sinclair recorded gains from reimbursements for repack costs and proceeds from asset sales - **Recorded gains of $1 million** and **$14 million** for Q1 2022 and Q1 2021, respectively, related to reimbursements for spectrum repack costs[55](index=55&type=chunk) - **Capital expenditures for the spectrum repack were $1 million** in Q1 2022 and **$4 million** in Q1 2021[55](index=55&type=chunk) [3. OTHER ASSETS](index=17&type=section&id=3.%20OTHER%20ASSETS) This note provides a breakdown of other assets, including equity method investments, other investments, and a note receivable. It highlights the accounting for DSIH as an equity method investment post-deconsolidation and fair value adjustments for other investments Other Assets (in millions) | Other Assets (in millions) | As of March 31, 2022 | As of December 31, 2021 | | :------------------------- | :------------------- | :---------------------- | | Equity method investments | $135 | $517 | | Other investments | $505 | $567 | | Note receivable | $163 | $— | | Total other assets | $1,015 | $1,408 | - **Post-deconsolidation**, the equity ownership interest in DSIH is accounted for under the equity method, with a **fair value determined to be nominal** as of March 1, 2022[59](index=59&type=chunk) - **Recognized a fair value adjustment loss of $56 million** for Q1 2022, **compared to a gain of $125 million** for Q1 2021, related to other investments[61](index=61&type=chunk) - A **note receivable of approximately $163 million** from Diamond Sports Finance SPV, LLC (DSPV) is recorded within other assets as of March 31, 2022, following the **deconsolidation**[63](index=63&type=chunk) [4. NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING](index=19&type=section&id=4.%20NOTES%20PAYABLE,%20FINANCE%20LEASES,%20AND%20COMMERCIAL%20BANK%20FINANCING) This note details the company's debt structure, including the Bank Credit Agreement of Sinclair Television Group, Inc. (STG) and guarantees of third-party obligations. It emphasizes that DSIH's debt was deconsolidated from the company's balance sheet - **STG's first lien leverage ratio was below 4.5x** as of March 31, 2022, and the **financial maintenance covenant was not applicable** due to no utilization of the revolving credit facility[65](index=65&type=chunk) - **Debt of DSIH was deconsolidated** from the Company's balance sheet as part of the **Deconsolidation**[66](index=66&type=chunk) - STG **guaranteed $38 million** of debt of certain third parties as of March 31, 2022, **including $9 million** related to consolidated VIEs[68](index=68&type=chunk) [5. REDEEMABLE NONCONTROLLING INTERESTS](index=20&type=section&id=5.%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) This note describes the company's redeemable noncontrolling interests, primarily consisting of Redeemable Subsidiary Preferred Equity and a Subsidiary Equity Put Right. It details the dividends accrued and the impact of the DSIH deconsolidation on these interests - **Redeemable Subsidiary Preferred Equity balance**, net of issuance costs, was **$184 million** as of March 31, 2022, **up from $181 million** at December 31, 2021[72](index=72&type=chunk) - **Dividends accrued on Redeemable Subsidiary Preferred Equity were $3 million** for Q1 2022, **paid-in-kind** and **added to liquidation preference**[71](index=71&type=chunk) - A **subsidiary equity put right, valued at $16 million** as of December 31, 2021, was **deconsolidated as part of the DSIH transaction**[73](index=73&type=chunk) [6. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=6.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's various commitments and contingencies, including other liabilities, ongoing litigation, and regulatory matters. It highlights the impact of the DSIH deconsolidation on certain payment obligations and details FCC and antitrust litigation - **Prior to deconsolidation**, other liabilities **included fixed payment obligations** (**$32 million** current, **$71 million** long-term as of Dec 31, 2021) and **variable payment obligations** (**$8 million** current, **$23 million** long-term as of Dec 31, 2021)[74](index=74&type=chunk)[75](index=75&type=chunk) - **FCC litigation includes pending petitions** for reconsideration of a **$48 million** consent decree and a **petition to deny license renewal applications** for certain Baltimore stations[78](index=78&type=chunk)[79](index=79&type=chunk) - An **accrual of $8 million** for additional expenses was **recorded during 2021** related to an FCC forfeiture order against licensees of certain VIEs consolidated by the company[80](index=80&type=chunk) - The **company is a defendant in twenty-two putative class action lawsuits alleging conspiracy to fix advertising prices**, with **discovery to be completed by December 30, 2022**[83](index=83&type=chunk) [7. EARNINGS PER SHARE](index=22&type=section&id=7.%20EARNINGS%20PER%20SHARE) This note provides the reconciliation of income and shares used in the computation of basic and diluted earnings per share, highlighting the significant increase in EPS for Q1 2022 (in millions, except share amounts in thousands) | (in millions, except share amounts in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------------------- | :-------------------------------- | :-------------------------------- | | Numerator for basic and diluted earnings (loss) per common share available to common shareholders | $2,587 | $(12) | | Basic weighted-average common shares outstanding | 72,164 | 74,389 | | Diluted weighted-average common and common equivalent shares outstanding | 72,176 | 74,389 | | Basic earnings (loss) per share | $35.85 | $(0.16) | | Diluted earnings (loss) per share | $35.84 | $(0.16) | - Weighted-average stock-settled appreciation rights and outstanding stock options **excluded from diluted EPS calculation (anti-dilutive)** were **2,545 thousand** in Q1 2022, **up from 1,703 thousand** in Q1 2021[84](index=84&type=chunk) [8. SEGMENT DATA](index=23&type=section&id=8.%20SEGMENT%20DATA) This note presents financial information by reportable segment: broadcast and local sports (prior to deconsolidation). It also includes 'Other and Corporate' for reconciliation, detailing revenues, expenses, and operating income for each segment - The company **operates two reportable segments**: broadcast (**185 stations** in **86 markets**) and local sports (Bally RSNs, Marquee, YES Network, prior to March 1, 2022 **deconsolidation**)[85](index=85&type=chunk) Segment Operating Income (Loss) (in millions) | Segment | Q1 2022 Operating Income (Loss) | Q1 2021 Operating Income (Loss) | | :------ | :------------------------------ | :------------------------------ | | Broadcast | $97 | $63 | | Local sports | $(4) | $(41) | | Other & Corporate | $3,372 | $13 | | Consolidated | $3,466 | $35 | - **Broadcast segment revenue increased from $665 million** in Q1 2021 to **$721 million** in Q1 2022, while **local sports segment revenue decreased from $768 million to $482 million due to deconsolidation**[87](index=87&type=chunk) - **Other & Corporate operating income saw a substantial increase to $3,372 million** in Q1 2022, **primarily driven by the gain on deconsolidation of subsidiary**[87](index=87&type=chunk)[89](index=89&type=chunk) [9. VARIABLE INTEREST ENTITIES](index=25&type=section&id=9.%20VARIABLE%20INTEREST%20ENTITIES) This note details the company's involvement with Variable Interest Entities (VIEs), including those it consolidates (primarily broadcast stations) and those it does not (e.g., DSIH post-deconsolidation). It outlines the criteria for primary beneficiary determination and the financial impact of VIEs on the consolidated balance sheets - The company **consolidates VIEs where it is the primary beneficiary**, typically broadcast stations under LMAs, JSAs, or SSAs, and previously certain regional sports networks[91](index=91&type=chunk)[92](index=92&type=chunk) Consolidated VIE Assets and Liabilities (in millions) | (in millions) | As of March 31, 2022 | As of December 31, 2021 | | :------------ | :------------------- | :---------------------- | | Total assets | $118 | $217 | | Total liabilities | $26 | $72 | - **Post-deconsolidation**, DSIH is considered a VIE for which the company is not the primary beneficiary, with the **carrying amount of the investment being zero** and **no obligation for additional financial support**[96](index=96&type=chunk) - The **carrying amounts of investments in VIEs** for which the company is not the primary beneficiary were **$171 million** as of March 31, 2022[96](index=96&type=chunk) [10. RELATED PERSON TRANSACTIONS](index=26&type=section&id=10.%20RELATED%20PERSON%20TRANSACTIONS) This note details various transactions with related parties, including controlling shareholders, Cunningham Broadcasting Corporation, Atlantic Automotive Corporation, and DSIH. It covers leases, management services agreements, and sports programming rights, highlighting the financial impact of these relationships - **Lease payments to entities owned by controlling shareholders were $2 million** for Q1 2022, **up from $1 million** in Q1 2021[97](index=97&type=chunk) - **Guaranteed $36 million** of Cunningham Broadcasting Corporation's debt as of March 31, 2022[99](index=99&type=chunk) - **Consolidated revenues include $34 million** for Q1 2022 and **$36 million** for Q1 2021 related to services provided to Cunningham Stations[103](index=103&type=chunk) - **Under a management services agreement with DSG** (DSIH subsidiary), the **broadcast segment recorded $28 million** of revenue for Q1 2022, with a **portion deferred as part of the DSIH transaction**[108](index=108&type=chunk) - **Received a $50 million payment from DSPV during Q1 2022 related to the A/R facility note receivable**[109](index=109&type=chunk) - **Paid $61 million** for Q1 2022 and **$120 million** for Q1 2021 under sports programming rights agreements with affiliates of professional teams, **net of rebates, prior to the DSIH deconsolidation**[114](index=114&type=chunk) [11. FAIR VALUE MEASUREMENTS](index=29&type=section&id=11.%20FAIR%20VALUE%20MEASUREMENTS) This note provides a detailed breakdown of financial assets and liabilities measured at fair value, categorized by Level 1, Level 2, and Level 3 inputs. It highlights the fair value adjustments for investments, particularly warrants and options related to Bally's Corporation Fair Value of Financial Assets and Liabilities (in millions) | Category | As of March 31, 2022 (Carrying Value / Fair Value) | As of December 31, 2021 (Carrying Value / Fair Value) | | :------- | :------------------------------------------------- | :---------------------------------------------------- | | Level 1: Investments in equity securities | $6 / $6 | $5 / $5 | | Level 1: Money market funds (STG) | $400 / $400 | $265 / $265 | | Level 2: Investments in equity securities | $92 / $92 | $114 / $114 | | Level 2: STG Senior Notes (various) | $348-$1,268 / $339-$1,229 | $348-$1,271 / $357-$1,239 | | Level 3: Investments in equity securities | $226 / $226 | $282 / $282 | - **Recorded a fair value adjustment loss of $56 million** for Q1 2022 (**compared to a gain of $103 million** in Q1 2021) **related to warrants and options to acquire common equity in Bally's Corporation**[122](index=122&type=chunk)[123](index=123&type=chunk) - The **fair value of Bally's warrants is derived from quoted trading prices adjusted for a 16% discount for lack of marketability (DLOM)**[122](index=122&type=chunk) [12. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS](index=32&type=section&id=12.%20CONDENSED%20CONSOLIDATING%20FINANCIAL%20STATEMENTS) This note provides condensed consolidating financial statements for Sinclair Broadcast Group, Inc. (SBG), Sinclair Television Group, Inc. (STG), KDSM, LLC, guarantor subsidiaries, and non-guarantor subsidiaries. These statements illustrate the financial position, operations, and cash flows on a consolidating basis, particularly relevant due to STG being the primary obligor under certain debt agreements and SBG acting as a guarantor - **STG is the primary obligor** under the **Bank Credit Agreement and STG Notes**, with **SBG and guarantor subsidiaries providing full and unconditional guarantees**[124](index=124&type=chunk)[125](index=125&type=chunk) - As of March 31, 2022, **consolidated total debt, net of deferred financing costs and debt discounts, was $4,398 million**, with **$4,381 million** related to STG and its subsidiaries, of which the Company **guaranteed $4,344 million**[124](index=124&type=chunk) [13. SUBSEQUENT EVENTS](index=39&type=section&id=13.%20SUBSEQUENT%20EVENTS) This note details significant events that occurred after March 31, 2022, including a distribution agreement with Charter Communications, refinancing of debt, and a dividend declaration - **Reached a distribution agreement with Charter Communications, Inc. on April 14, 2022, for continued carriage of local broadcast stations and Tennis Channel**[140](index=140&type=chunk) - On April 21, 2022, **STG raised $750 million** in **Term B-4 Loans to refinance outstanding Term Loan B and redeem 5.875% Senior Notes due 2026, also extending $612.5 million of revolving commitments to April 2027**[141](index=141&type=chunk)[142](index=142&type=chunk) - **Declared a quarterly dividend of $0.25 per share** in May 2022, **payable on June 15, 2022, representing a 25% increase over 2021 dividends**[143](index=143&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=40&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance and condition, including forward-looking statements, a summary of significant events, detailed results of operations by segment, and an analysis of liquidity and capital resources. It highlights the impact of the DSIH deconsolidation and other strategic initiatives [FORWARD-LOOKING STATEMENTS](index=40&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines potential risks and uncertainties that could impact future financial results and operations - The **report contains forward-looking statements subject to risks related to COVID-19** (e.g., advertising loss, supply chain disruption, workforce impact), **industry factors** (e.g., subscriber churn, programming costs, network strategies), **regulatory changes** (e.g., FCC rules, ownership limits), and **company-specific challenges** (e.g., debt obligations, content monetization, retransmission consent renegotiations)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) [Summary of Significant Events](index=43&type=section&id=Summary%20of%20Significant%20Events) This section highlights key corporate actions and developments impacting the company's financial position and operations - **Deconsolidated Diamond Sports Intermediate Holdings, LLC (DSIH) effective March 1, 2022**, following a governance structure modification, which is **expected to provide DSIH with approximately $1 billion of liquidity enhancement over five years**[158](index=158&type=chunk) - **Tejas Networks to acquire approximately 65%** of Saankhya Labs Private Ltd., in which ONE Media 3.0, LLC (a Sinclair subsidiary) holds a **49% interest**[158](index=158&type=chunk) - **Launched new programs** 'The Rally' and 'Live on the Line, Powered by BetMGM' on Bally Sports networks and app in January 2022[158](index=158&type=chunk) - **Renewed extended market and digital distribution rights agreement with the NBA in January 2022**, **allowing Bally RSNs to offer streaming content for 16 NBA teams**[160](index=160&type=chunk) - **Deployed NEXTGEN TV (ATSC 3.0) in seven additional markets** in 2022, **bringing the total to 29 markets**[167](index=167&type=chunk) - **Repurchased approximately 2 million shares** of Class A Common Stock for **$68 million** in Q1 2022, and an **additional 1 million shares for $26 million since March 31, 2022**[168](index=168&type=chunk) - **Declared a quarterly cash dividend of $0.25 per share** in February and May 2022, a **25% increase over 2021 dividends**[168](index=168&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing revenues, expenses, and operating income across its segments - **Operating results are subject to cyclical fluctuations from political advertising** (**higher in even-numbered years**) and **seasonality of sports leagues** (**Q2 and Q3 typically higher for local sports**)[170](index=170&type=chunk)[171](index=171&type=chunk) Consolidated Operating Data (in millions) | (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------ | :-------------------------------- | :-------------------------------- | | Total revenues | $1,288 | $1,511 | | Operating income | $3,466 | $35 | | Net income (loss) attributable to Sinclair Broadcast Group | $2,587 | $(12) | - The **COVID-19 pandemic continues to create uncertainty, impacting estimates related to revenue recognition, goodwill, intangible assets, program contract costs, sports programming rights, and income taxes**[173](index=173&type=chunk)[174](index=174&type=chunk) [BROADCAST SEGMENT](index=48&type=section&id=BROADCAST%20SEGMENT) The broadcast segment experienced revenue growth driven by increased contractual rates for distribution and a rise in political advertising. Operating expenses also increased, primarily due to network affiliation fees and digital business fulfillment costs Broadcast Segment Revenue and Expenses (in millions) | (in millions) | Q1 2022 | Q1 2021 | Percent Change | | :------------ | :------ | :------ | :------------- | | Distribution revenue | $392 | $361 | 9% | | Advertising revenue | $282 | $267 | 6% | | Other media revenues | $47 | $37 | 27% | | Media revenues | $721 | $665 | 8% | | Media programming and production expenses | $350 | $337 | 4% | | Media selling, general and administrative expenses | $156 | $141 | 11% | | Operating income | $97 | $63 | 54% | - **Distribution revenue increased by $31 million** (**9%**) **due to higher contractual rates**, partially offset by a **decrease in subscribers**[177](index=177&type=chunk) - **Advertising revenue increased by $15 million** (**6%**), **primarily driven by a $13 million increase in political advertising revenue in 2022**[178](index=178&type=chunk) - **Media programming and production expenses increased by $13 million** (**4%**) **due to higher network affiliation agreement fees**[181](index=181&type=chunk) - **Media selling, general and administrative expenses increased by $15 million** (**11%**) **due to an $8 million increase in third-party fulfillment costs for digital business and a $6 million increase in IT costs**[182](index=182&type=chunk) [LOCAL SPORTS SEGMENT](index=50&type=section&id=LOCAL%20SPORTS%20SEGMENT) The local sports segment's results reflect only two months of activity in Q1 2022 due to the deconsolidation of DSIH on March 1, 2022. This led to significant year-over-year decreases in both revenues and expenses, making direct comparisons difficult Local Sports Segment Revenue and Expenses (in millions) | (in millions) | Q1 2022 | Q1 2021 | Percent Change | | :------------ | :------ | :------ | :------------- | | Distribution revenue | $433 | $698 | (38)% | | Advertising revenue | $44 | $65 | (32)% | | Media revenue | $482 | $768 | (37)% | | Media programming and production expenses | $376 | $657 | (43)% | | Operating loss | $(4) | $(41) | (90)% | | Income from equity method investments | $10 | $13 | (23)% | - The **decrease in revenue and expenses for the local sports segment is primarily due to the deconsolidation of DSIH on March 1, 2022**, meaning **Q1 2022 includes only two months of activity compared to a full quarter in Q1 2021**[188](index=188&type=chunk) - **Operating loss for the local sports segment improved from $(41) million** in Q1 2021 to **$(4) million** in Q1 2022, **despite the revenue decline, due to the reduced expense base post-deconsolidation**[187](index=187&type=chunk) - **Income from equity method investments, primarily from the YES Network, decreased from $13 million** in Q1 2021 to **$10 million** in Q1 2022[194](index=194&type=chunk) [OTHER](index=52&type=section&id=OTHER) The 'Other' segment, encompassing owned networks, digital solutions, technical services, and non-media investments, saw an increase in media revenue driven by digital initiatives and owned networks, while non-media revenue decreased due to a prior asset sale. Media expenses increased in line with digital growth Other Segment Revenue and Expenses (in millions) | (in millions) | Q1 2022 | Q1 2021 | Percent Change | | :------------ | :------ | :------ | :------------- | | Media revenues | $120 | $92 | 30% | | Non-media revenues | $14 | $16 | (13)% | | Media expenses | $89 | $64 | 39% | | Non-media expenses | $14 | $18 | (22)% | | Operating income | $18 | $16 | 13% | | Income (loss) from equity method investments | $2 | $(4) | (150)% | - **Media revenue increased by $28 million** (**30%**) **due to growth in digital initiatives and owned networks**[198](index=198&type=chunk) - **Non-media revenue decreased by $2 million** (**13%**) **due to the sale of Triangle Sign & Service, LLC in Q2 2021**[198](index=198&type=chunk) - **Media expenses increased by $25 million** (**39%**) **primarily related to digital initiatives**[199](index=199&type=chunk) [CORPORATE AND UNALLOCATED EXPENSES](index=53&type=section&id=CORPORATE%20AND%20UNALLOCATED%20EXPENSES) Corporate and unallocated expenses saw a decrease in general and administrative costs due to reduced employee compensation and legal fees. Interest expense also declined due to the DSIH deconsolidation. However, other (expense) income, net, significantly decreased due to fair value adjustments of investments, and the income tax provision increased due to higher pre-tax income Corporate and Unallocated Expenses (in millions) | (in millions) | Q1 2022 | Q1 2021 | Percent Change | | :------------ | :------ | :------ | :------------- | | Corporate general and administrative expenses | $47 | $61 | (23)% | | Gain on deconsolidation of subsidiary | $(3,357) | $— | n/m | | Interest expense | $115 | $151 | (24)% | | Other (expense) income, net | $(60) | $124 | (148)% | | Income tax (provision) benefit | $(687) | $9 | (7733)% | | Net income attributable to the noncontrolling interests | $(25) | $(34) | (26)% | - **Corporate general and administrative expenses decreased by $14 million** (**23%**), **primarily due to an $11 million decrease in employee compensation and a $4 million decrease in legal, consulting, and regulatory costs**[201](index=201&type=chunk) - **Interest expense decreased by $36 million** (**24%**), **mainly due to the decrease in DSG interest expense following the DSIH deconsolidation**[203](index=203&type=chunk) - **Other (expense) income, net, decreased by $184 million** (**148%**), **primarily due to a $78 million decrease in the fair value of certain investments in Q1 2022 compared to a $122 million increase in Q1 2021**[205](index=205&type=chunk) - The **effective income tax rate for Q1 2022 was a provision of 20.8%**, **compared to a benefit of 53.8%** in Q1 2021, **due to the substantially greater impact of 2021 discrete items on low pre-tax income**[206](index=206&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=54&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity is supported by cash on hand, operating cash flows, and borrowing capacity under the Bank Credit Agreement. Net working capital was $864 million as of March 31, 2022. The deconsolidation of DSIH significantly reduced total debt. The company anticipates sufficient liquidity for the next twelve months but acknowledges potential impacts from external factors - **Net working capital was approximately $864 million** as of March 31, 2022, **including $521 million in cash and cash equivalents**[209](index=209&type=chunk) - **STG's first lien leverage ratio was below 4.5x** as of March 31, 2022, and the **financial maintenance covenant was not applicable**[210](index=210&type=chunk) - **Total debt was $4,398 million** as of March 31, 2022, **including $36 million in current debt**, a **significant reduction due to the deconsolidation of DSIH debt**[211](index=211&type=chunk) - **Anticipates existing cash, operating cash flow, and Bank Credit Agreement borrowing capacity will be sufficient for debt service, capital expenditures, and working capital needs for the next twelve months**[213](index=213&type=chunk) - **Future dividends of $0.25 per share were declared in February and May 2022**, a **25% increase over 2021 dividends**[219](index=219&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=56&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) There were no changes to critical accounting policies and estimates from the prior Annual Report on Form 10-K. However, the impact of COVID-19 and the war in Ukraine continues to introduce significant uncertainty and increased judgment in estimates related to revenue recognition, goodwill, intangible assets, and income taxes - **No changes to critical accounting policies and estimates from the Annual Report on Form 10-K for the year ended December 31, 2021**[220](index=220&type=chunk) - The **COVID-19 pandemic and the war in Ukraine continue to create significant uncertainty, impacting estimates related to revenue recognition, goodwill, intangible assets, and income taxes, requiring increased judgment and carrying higher variability**[221](index=221&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=56&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) There have been no material changes to the quantitative and qualitative disclosures about market risk since the Annual Report on Form 10-K for the year ended December 31, 2021 - **No material changes to market risk disclosures from the Annual Report on Form 10-K for the year ended December 31, 2021**[222](index=222&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=56&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and internal control over financial reporting as of March 31, 2022. They concluded that disclosure controls and procedures were effective at a reasonable assurance level, and there were no material changes to internal control over financial reporting during the quarter - **Disclosure controls and procedures were evaluated as effective at the reasonable assurance level** as of March 31, 2022[223](index=223&type=chunk)[227](index=227&type=chunk) - **No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022**[228](index=228&type=chunk) - **Management acknowledges that control systems provide only reasonable, not absolute, assurance and can be subject to inherent limitations such as faulty judgment, simple error, circumvention, or management override**[229](index=229&type=chunk) [PART II. OTHER INFORMATION](index=57&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional disclosures including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=57&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various lawsuits and claims in the ordinary course of business, with no material judgments rendered. Specific details on pending litigation are referenced in Note 6, Commitments and Contingencies - The **company is a party to lawsuits, claims, and regulatory matters in the ordinary course of business**, with **no material judgments rendered**[231](index=231&type=chunk) [ITEM 1A. RISK FACTORS](index=57&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - **No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021**[232](index=232&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=58&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section summarizes the repurchases of Class A Common Stock during the quarter ended March 31, 2022, under the company's publicly announced share repurchase program Class A Common Stock Repurchases (Q1 2022) | Period | Total Number of Shares Purchased | Average Price Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | | :---------------- | :------------------------------- | :---------------------- | :----------------------------------------------------------------------- | | 01/01/22 - 01/31/22 | 1,111,375 | $27.49 | 1,111,375 | | 02/01/22 - 02/28/22 | 946,494 | $27.64 | 946,494 | | 03/01/22 - 03/31/22 | 414,616 | $27.40 | 414,616 | - **Total of 2,472,485 Class A Common Stock shares repurchased for $68 million during Q1 2022**[21](index=21&type=chunk)[234](index=234&type=chunk) - As of March 31, 2022, the **remaining authorization** under the share repurchase program was **$751 million**[234](index=234&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=58&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities reported - **No defaults upon senior securities**[235](index=235&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=58&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) No mine safety disclosures were reported - **No mine safety disclosures**[236](index=236&type=chunk) [ITEM 5. OTHER INFORMATION](index=58&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information was reported in this section - **No other information**[237](index=237&type=chunk) [ITEM 6. EXHIBITS](index=58&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including indentures, certifications by the CEO and CFO, and the company's consolidated financial statements in iXBRL format - **Includes Indenture for Diamond Sports Group, LLC, certifications by CEO and CFO (Rule 13a-14(a) and § 906 of Sarbanes-Oxley Act), and consolidated financial statements in iXBRL format**[238](index=238&type=chunk) [SIGNATURE](index=59&type=section&id=SIGNATURE) The report is duly signed on behalf of Sinclair Broadcast Group, Inc. by David R. Bochenek, Senior Vice President/Chief Accounting Officer, on May 10, 2022 - **Report signed by David R. Bochenek, Senior Vice President/Chief Accounting Officer, on May 10, 2022**[240](index=240&type=chunk)[242](index=242&type=chunk)

Financial Data and Key Metrics Changes - The deconsolidation of Diamond resulted in a non-cash gain of approximately $3.4 billion, primarily due to Diamond's net liability position at the time of deconsolidation [14] - Adjusted EBITDA for the quarter grew 14% over the first quarter of last year, exceeding guidance [49] - Earnings per share for the quarter, excluding Diamond and other adjustments, was $1.23 per share [49] - Adjusted free cash flow was $176 million for the quarter, growing by $48 million year-over-year [49] - Total debt at the end of the first quarter was $4.4 billion, with a first-lien indebtedness ratio of 2.9 times [51] Business Line Data and Key Metrics Changes - Media revenues for the quarter were up 9% year-over-year, driven by higher distribution and political ad revenues [46] - Distribution revenues increased by 7% compared to last year, primarily due to favorable revenue from virtual distributors [47] - Core advertising increased by 3% in the first quarter compared to the same period last year [47] - Total advertising revenues increased by 7% over last year [47] Market Data and Key Metrics Changes - Political advertising is tracking above expectations, with a record mid-term election spend anticipated for 2022 [37] - The company expects total advertising revenue to be up in the high-single-digit to low-teen percent range for the second quarter compared to the previous year [54] Company Strategy and Development Direction - The company is focused on monetizing its investment portfolio, which has generated an approximate 24% average rate of return since 2014 [21] - Sinclair is committed to increasing transparency around its assets like Tennis Channel, NewsOn, and Compulse360, which are expected to carry meaningful upside [24] - The company is exploring new revenue streams through NextGen technology, including data delivery as a service [31] Management's Comments on Operating Environment and Future Outlook - Management is monitoring inflation and its potential impact on advertiser spending but has not seen significant softening yet [57] - The company expects to exceed core revenue levels from 2018 and 2019, despite some crowd-out effects from political advertising [62] - Management remains optimistic about the advertising environment and believes that those who continue to advertise during economic downturns emerge stronger [100] Other Important Information - The company launched a battery recycling pilot and reduced printed paper accounts by approximately 90% as part of its ESG initiatives [28][29] - The company has resumed its stock buyback program, repurchasing nearly 1.5 million shares since February [52] Q&A Session Summary Question: What is the pacing for core advertising in the second quarter? - Management is currently monitoring inflation but has not seen results of softening yet, and core guidance is expected to exceed revenues from 2018 and 2019 [57] Question: Can you update on net retransmission fees after the Charter renewal? - The overall net retrans guide for this year will still be low single digits, despite exceeding expectations on the Charter renewal [58] Question: What is the strength of advertising categories? - Reliance on auto advertising has been mitigated by strength in service, retail, and food categories, which remain strong [69] Question: Will free cash flow guidance be provided for the year? - Management is considering providing future ranges for free cash flow, which was previously offered pre-pandemic [80] Question: How does the deconsolidation impact share repurchase capacity? - The deconsolidation is an accounting change that does not affect the company's fundamentals, and there is a strong appetite for share repurchases [96]

Financial Performance & Outlook - First quarter Broadcast and Other media revenue increased and was at the high end of guidance range[16] - Total advertising revenue for the second quarter is tracking ahead of both 2018 and 2019, the last pre-pandemic years[16] - The company expects 2022 to be a record-breaking year for political advertising in a mid-term election year[16, 36] - Second quarter 2022 media revenue is expected to be up 4% to 7% versus the second quarter of 2021, ranging from $822 million to $840 million[32] - Second quarter 2022 Adjusted EBITDA is expected to be down versus the second quarter of 2021, ranging from $153 million to $170 million[32] - Second quarter 2022 Adjusted Free Cash Flow is projected to be $246 million to $266 million, or $3.46 to $3.74 per share[32] Strategic Initiatives & Investments - Sinclair was required to deconsolidate Diamond Sports Group (DSG), resulting in a $3.4 billion non-cash gain[7] - Compulse is expected to reach $100 million in sales in 2022[11, 37] - The company estimates the Fair Market Value (FMV) of its investment portfolio at approximately $18 per share, generating an Internal Rate of Return (IRR) of approximately 24% since 2014[9] - The company is piloting the first commercial datacasting use of NextGen technology in the U S[13, 36]

Operations and Market Presence - As of December 31, 2021, Sinclair Broadcast Group operates 185 stations across 86 markets, broadcasting a total of 634 channels, including 238 affiliated with major networks such as FOX, ABC, CBS, NBC, CW, and MyNetworkTV[21]. - The company owns and operates 634 television channels across various networks, including 238 major network affiliates and 396 other affiliates[30]. - The regional sports networks (RSNs) broadcast approximately 5,000 professional sports games and produce around 25,700 hours of new content annually, reaching approximately 47 million subscribers nationally[33]. - The RSNs have exclusive long-term agreements with 16 MLB teams, 17 NBA teams, and 12 NHL teams, enhancing their market presence[33]. - The National Desk program launched in January 2021 airs on 76 stations in 65 markets, providing comprehensive national and regional news coverage[55]. - The company has a national investigative team of 15 journalists and plans to expand its investigative reporting capabilities[56]. - As of December 31, 2021, 56% of net time sales were local, up from 60% in 2020, indicating a focus on developing local franchises[65]. Revenue Generation and Advertising - The broadcast segment generates revenue primarily from advertising sales and fees from multi-channel video programming distributors (MVPDs) and over-the-top (OTT) distributors, with a focus on delivering significant audiences in key demographics[24]. - Political advertising significantly influences operating results, with higher spending observed in even-numbered years, particularly during presidential election cycles[25]. - The company has relationships with three major customers—DirecTV, Charter Communications, and Comcast—that each exceed 10% of consolidated revenue, indicating a significant reliance on these partnerships[45]. - Advertising rates are influenced by market size, program popularity, and competition among advertisers, which can affect revenue generation[120]. - Political advertising represented 4% of advertising revenue in 2021, compared to 27% in 2020, highlighting significant volatility based on election cycles[199]. - The company relies heavily on automotive and services advertising, which historically constitutes a large portion of advertising revenue[199]. - The company faces risks related to the volatility of advertising revenue, which can impact debt repayment and overall business value[198]. Digital Strategy and Technology - Sinclair aims to enhance its digital presence by selling digital advertisements on third-party platforms and providing digital content to non-linear devices[24]. - The company generates revenue from Compulse, a marketing technology firm, by licensing its platform and executing digital media initiatives[40]. - The digital properties, including Compulse and STIRR, are extensions of the core broadcast business, allowing competition for digital and internet revenues[80]. - The company invests in technologies to improve viewer experience, including virtual, augmented, and mixed reality capabilities for sports content[50]. - STIRR, the company's ad-supported streaming app, saw a 25% increase in total downloads to approximately 8 million, with average viewing time growing to over 61 minutes per session[39]. - The primary streaming subscription product is expected to launch in the first half of 2022, offering content currently broadcasted on RSNs on a subscription basis[74]. - The company has secured DTC rights for five MLB teams as part of its strategy to leverage DTC rights for streaming games and affiliated content[73]. Financial Performance and Challenges - The company borrowed approximately $8.2 billion for the acquisition of RSNs in August 2019, significantly increasing its leverage and debt service requirements[156]. - Subscriber numbers for the Acquired RSNs (excluding YES Network) fell by high single digits percent during the year ended December 31, 2021, on a same Distributor basis[158]. - The financial impact of COVID-19 could negatively affect the company's future ability to pay dividends and comply with financial covenants[158]. - The decline in Distributor service subscribers has accelerated, impacting revenues and leading to potential losses in distribution revenue[161]. - Increased programming costs and viewer preferences are unpredictable and may negatively affect the company's results of operations[171]. - The company may experience losses if actual revenues fall below expectations due to high upfront programming costs[202]. - Future changes in retransmission consent regulations could adversely affect the company's business and financial condition[173]. Regulatory and Compliance Issues - The company is subject to federal regulations that govern the ownership and operation of television stations, including compliance with media ownership limits[90]. - The FCC's proposed rulemaking on local television ownership rules seeks to evaluate the necessity of current regulations in light of competition, with public comments closed on October 1, 2021[111]. - The company must obtain FCC approval for new licenses and renewals, which are critical for operations and revenue generation[213]. - The company is subject to investigations and fines from governmental authorities, which could negatively impact financial condition and operations[209]. - The Department of Justice closed its investigation into the company's JSAs without action as of July 1, 2021[100]. Corporate Social Responsibility and Employee Engagement - In 2021, the company received 300 journalism awards, including 77 regional Emmy awards, highlighting its commitment to local news and community engagement[140]. - The company raised over $38 million in 2021 for non-profit organizations and local disaster relief, including direct donations of more than $600,000[141]. - The company has established a Diversity Scholarship Fund, distributing over $100,000 to students from underrepresented minority groups since its inception[142]. - The company increased its minimum hourly wage to $15 for all applicable employees, enhancing its compensation offerings[139]. - The company has implemented safety protocols during the COVID-19 pandemic, allowing many employees to work remotely while ensuring safety for those who cannot[138]. - As of December 31, 2021, the company employed approximately 11,500 employees, with about 1,800 represented by labor unions[129]. Cybersecurity and Operational Risks - The cybersecurity incident on October 17, 2021, resulted in a loss of approximately $63 million in advertising revenue and $11 million in mitigation costs[185]. - The estimated unrecoverable net loss from the cyber incident is approximately $24 million, exceeding the limits of the company's insurance policies[186]. - The company has experienced a cybersecurity breach that may affect financial performance and operational results[183]. - The company relies on its information technology systems for efficient operations, and any failures could disrupt business processes[184]. - The company may incur significant costs related to litigation for intellectual property infringement claims[182]. - The company is vulnerable to intellectual property theft, which could negatively impact revenue from legitimate content sales and distribution[179].