Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) Q4 2021 Earnings Conference Call February 23, 2022 9:00 AM ET Corporate Participants Billie-Jo McIntire - Director, Investor Relations Lucy Rutishauser - Executive Vice President and Chief Financial Officer Chris Ripley - President and Chief Executive Officer Rob Weisbord - President of Broadcast and Chief Operating Officer Conference Call Participants Dan Kurnos - Benchmark Steven Cahall - Wells Fargo Lance Vitanza - Cowen David Hamburger - Morgan Stanley David ...

SINCLAIR 1 F o u r t h Q u a r t e r 2 0 2 1 C o n f e r e n c e C a l l F e b r u a r y 2 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, th ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Q3 2021 unaudited financials show improved net loss, decreased assets and liabilities, and reduced operating cash [CONSOLIDATED BALANCE SHEETS](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) The balance sheets reflect changes in assets, liabilities, and shareholders' deficit over the period - Total assets decreased from **$13,382 million** at December 31, 2020, to **$12,845 million** at September 30, 2021[13](index=13&type=chunk) - Total liabilities decreased from **$14,377 million** to **$14,211 million**, and total shareholders' deficit increased from **$(1,274) million** to **$(1,613) million**[13](index=13&type=chunk) Consolidated Balance Sheet Summary | Metric | As of Sep 30, 2021 (in millions) | As of Dec 31, 2020 (in millions) | Change (in millions) | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------- | | Cash and cash equivalents | $1,058 | $1,259 | $(201) | | Total current assets | $2,792 | $3,217 | $(425) | | Total assets | $12,845 | $13,382 | $(537) | | Total current liabilities | $1,140 | $1,034 | $106 | | Total liabilities | $14,211 | $14,377 | $(166) | | Total Sinclair Broadcast Group shareholders' deficit | $(1,613) | $(1,274) | $(339) | [CONSOLIDATED STATEMENTS OF OPERATIONS](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The statements detail revenues, operating expenses, and net income/loss for the periods presented - For the nine months ended September 30, 2021, net loss attributable to Sinclair Broadcast Group was **$(325) million**, a significant improvement from **$(2,881) million** in the prior year, largely due to the absence of a goodwill impairment charge[16](index=16&type=chunk) Consolidated Statements of Operations Summary | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total revenues | $1,535 | $1,539 | $4,658 | $4,431 | | Total operating expenses | $1,462 | $5,755 | $4,728 | $7,828 | | Operating income (loss) | $73 | $(4,216) | $(70) | $(3,397) | | Net income (loss) attributable to Sinclair Broadcast Group | $19 | $(3,256) | $(325) | $(2,881) | | Basic earnings (loss) per share | $0.25 | $(43.53) | $(4.33) | $(35.17) | [CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) The statements present net income/loss and other comprehensive income/loss components for the periods - For the nine months ended September 30, 2021, the company reported a comprehensive loss attributable to Sinclair Broadcast Group of **$(319) million**, a substantial improvement compared to the **$(2,890) million** loss in the same period of 2020[18](index=18&type=chunk) Consolidated Statements of Comprehensive Income Summary | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net income (loss) | $17 | $(3,367) | $(285) | $(2,943) | | Comprehensive income (loss) attributable to Sinclair Broadcast Group | $20 | $(3,256) | $(319) | $(2,890) | [CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY%20(DEFICIT)%20AND%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) The statements track changes in equity, deficit, and redeemable noncontrolling interests, including dividends - The company's total deficit attributable to Sinclair Broadcast Group increased from **$(1,185) million** at December 31, 2020, to **$(1,560) million** at September 30, 2021, primarily due to net losses and dividend payments[21](index=21&type=chunk) - Dividends declared and paid on Class A and Class B Common Stock for the nine months ended September 30, 2021, totaled **$46 million**[21](index=21&type=chunk) Consolidated Statements of Equity (Deficit) Summary | Metric | As of Dec 31, 2020 (in millions) | As of Sep 30, 2021 (in millions) | Change (in millions) | | :----------------------------------------- | :------------------------------- | :------------------------------- | :------------------- | | Total Sinclair Broadcast Group shareholders' deficit | $(1,986) | $(2,357) | $(371) | | Total deficit | $(1,185) | $(1,560) | $(375) | [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The statements summarize cash flows from operating, investing, and financing activities, showing overall cash changes - For the nine months ended September 30, 2021, net cash flows from operating activities decreased to **$235 million** from **$839 million** in the prior year[26](index=26&type=chunk) - Net cash used in investing activities increased to **$231 million**, and net cash used in financing activities decreased to **$205 million**[26](index=26&type=chunk) - Overall, there was a net decrease in cash, cash equivalents, and restricted cash of **$201 million**[26](index=26&type=chunk) Consolidated Statements of Cash Flows Summary | Metric | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | Change (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Net cash flows from operating activities | $235 | $839 | $(604) | | Net cash flows used in investing activities | $(231) | $(98) | $(133) | | Net cash flows used in financing activities | $(205) | $(1,441) | $1,236 | | Net decrease in cash, cash equivalents, and restricted cash | $(201) | $(700) | $499 | | Cash, cash equivalents, and restricted cash, end of period | $1,061 | $633 | $428 | [NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS](index=11&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes provide detailed disclosures on accounting policies, financial instruments, and significant events [1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the company's business segments, revenue types, and significant accounting policies - The company operates two reportable segments: broadcast (185 stations in 86 markets, 632 channels) and local sports (Bally Sports network brands, Marquee Sports Network joint venture, and a minority equity interest in YES Network)[29](index=29&type=chunk) - The COVID-19 pandemic continues to create significant uncertainty, impacting estimates related to revenue recognition, goodwill, intangible assets, program contract costs, sports programming rights, and income taxes, requiring increased judgment[36](index=36&type=chunk) Revenue by Type | Revenue Type | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Distribution revenue | $1,053 | $1,003 | $3,240 | $3,168 | | Advertising revenue | $446 | $500 | $1,308 | $1,135 | | Other media, non-media, and intercompany revenues | $36 | $36 | $110 | $128 | | **Total revenues** | **$1,535** | **$1,539** | **$4,658** | **$4,431** | [2. ACQUISITIONS AND DISPOSITIONS OF ASSETS](index=17&type=section&id=2.%20ACQUISITIONS%20AND%20DISPOSITIONS%20OF%20ASSETS) This section details the company's asset acquisitions and dispositions, including related gains and cash impacts - Acquired ZypMedia for approximately **$7 million in cash** in February 2021[58](index=58&type=chunk) - Sold two television broadcast stations (WDKA-TV, KBSI-TV) for **$28 million**, recognizing a **$12 million gain** for the nine months ended September 30, 2021[59](index=59&type=chunk) - Recorded gains related to reimbursements for spectrum repack costs of **$22 million** for the nine months ended September 30, 2021, and **$72 million** for the nine months ended September 30, 2020[63](index=63&type=chunk) [3. OTHER ASSETS](index=18&type=section&id=3.%20OTHER%20ASSETS) This section describes the composition and changes in other assets, including equity and other investments - The company's other assets increased to **$1,358 million** as of September 30, 2021, from **$1,058 million** at December 31, 2020, primarily driven by growth in other investments, including an incremental **$93 million investment in Bally's**[66](index=66&type=chunk)[72](index=72&type=chunk) - Recorded income from the YES Network investment of **$29 million** for the nine months ended September 30, 2021, compared to **$3 million income** in the prior year[68](index=68&type=chunk) Other Assets Composition | Other Assets (in millions) | As of Sep 30, 2021 | As of Dec 31, 2020 | | :------------------------- | :----------------- | :----------------- | | Equity method investments | $504 | $451 | | Other investments | $678 | $450 | | Post-retirement plan assets | $51 | $44 | | Other | $125 | $113 | | **Total other assets** | **$1,358** | **$1,058** | [4. NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING](index=19&type=section&id=4.%20NOTES%20PAYABLE,%20FINANCE%20LEASES,%20AND%20COMMERCIAL%20BANK%20FINANCING) This section details the company's debt structure, leverage ratios, and financing arrangements - STG's first lien leverage ratio was below **4.5x**, while DSG's exceeded **6.25x** as of September 30, 2021, but neither was subject to financial maintenance covenants due to low revolving credit facility utilization[73](index=73&type=chunk) - STG amended its Bank Credit Agreement on April 1, 2021, raising **$740 million** in new term loans (STG Term Loan B-3) to refinance existing debt, maturing in April 2028[74](index=74&type=chunk) - Diamond Sports Group (DSG) has experienced operating losses since Q2 2020 due to Distributor losses, subscriber churn, and COVID-19, and expects continued losses[77](index=77&type=chunk) [5. REDEEMABLE NONCONTROLLING INTERESTS](index=20&type=section&id=5.%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) This section describes the nature and changes in redeemable noncontrolling interests, classified as mezzanine equity - Redeemable noncontrolling interests, classified as mezzanine equity, totaled **$194 million** as of September 30, 2021[80](index=80&type=chunk)[83](index=83&type=chunk) - Dividends accrued on Redeemable Subsidiary Preferred Equity were **$11 million** for the nine months ended September 30, 2021, with Q2 and Q3 dividends paid-in-kind[81](index=81&type=chunk) Redeemable Noncontrolling Interests Summary | Metric | As of Sep 30, 2021 (in millions) | As of Dec 31, 2020 (in millions) | | :--------------------------------- | :------------------------------- | :------------------------------- | | Redeemable Subsidiary Preferred Equity | $178 | $170 | | Subsidiary Equity Put Right | $16 | $20 | | **Total Redeemable Noncontrolling Interests** | **$194** | **$190** | [6. COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=6.%20COMMITMENTS%20AND%20CONTINGENCIES) This section outlines significant contractual commitments, including sports programming rights, and pending legal matters - The company has significant non-cancellable sports programming rights commitments totaling **$13,879 million** as of September 30, 2021, extending through 2026 and thereafter[85](index=85&type=chunk)[86](index=86&type=chunk) - Facing twenty-two putative class action lawsuits alleging conspiracy to fix prices for commercials, with discovery to be completed by December 30, 2022, and class certification briefing by May 15, 2023[94](index=94&type=chunk) Sports Programming Rights Commitments | Year | Sports Programming Rights Commitments (in millions) | | :---------------- | :---------------------------------- | | 2021 (remainder) | $488 | | 2022 | $1,697 | | 2023 | $1,651 | | 2024 | $1,585 | | 2025 | $1,450 | | 2026 and thereafter | $7,008 | | **Total** | **$13,879** | [7. EARNINGS PER SHARE](index=23&type=section&id=7.%20EARNINGS%20PER%20SHARE) This section presents basic and diluted earnings per share calculations for the reported periods - Basic and diluted earnings per common share attributable to Sinclair Broadcast Group for the nine months ended September 30, 2021, was a loss of **$(4.33)**, a significant improvement from **$(35.17)** in the prior year[96](index=96&type=chunk) Earnings Per Share Summary | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Numerator for basic and diluted earnings (loss) per common share available to common shareholders (in millions) | $19 | $(3,256) | $(325) | $(2,881) | | Basic weighted-average common shares outstanding (in thousands) | 75,472 | 74,810 | 75,068 | 81,922 | | Diluted earnings (loss) per share | $0.25 | $(43.53) | $(4.33) | $(35.17) | [8. SEGMENT DATA](index=24&type=section&id=8.%20SEGMENT%20DATA) This section provides financial performance data for the company's broadcast and local sports reportable segments - The company operates two reportable segments: broadcast and local sports[97](index=97&type=chunk) - For the nine months ended September 30, 2021, the broadcast segment reported operating income of **$294 million**, while the local sports segment reported an operating loss of **$(368) million**[99](index=99&type=chunk) Segment Performance (9 Months Ended Sep 30, 2021) | Segment (9 Months Ended Sep 30, 2021) | Revenue (in millions) | Operating Income (Loss) (in millions) | | :------------------------------------ | :-------------------- | :------------------------------------ | | Broadcast | $2,053 | $294 | | Local sports | $2,365 | $(368) | | Other & Corporate | $345 | $5 | | Eliminations | $(105) | $(1) | | **Consolidated** | **$4,658** | **$(70)** | Segment Performance (9 Months Ended Sep 30, 2020) | Segment (9 Months Ended Sep 30, 2020) | Revenue (in millions) | Operating Income (Loss) (in millions) | | :------------------------------------ | :-------------------- | :------------------------------------ | | Broadcast | $2,026 | $455 | | Local sports | $2,155 | $(3,885) | | Other & Corporate | $338 | $38 | | Eliminations | $(88) | $(5) | | **Consolidated** | **$4,431** | **$(3,397)** | [9. VARIABLE INTEREST ENTITIES](index=26&type=section&id=9.%20VARIABLE%20INTEREST%20ENTITIES) This section explains the company's consolidation of Variable Interest Entities and related financial impacts - The company consolidates Variable Interest Entities (VIEs) where it has the power to direct activities significantly impacting economic performance and the obligation to absorb losses or right to receive significant returns[101](index=101&type=chunk) - Investments in VIEs where the company is not the primary beneficiary had a carrying amount of **$187 million** as of September 30, 2021, with maximum exposure limited to this carrying value[106](index=106&type=chunk) VIE Metrics | VIE Metrics (in millions) | As of Sep 30, 2021 | As of Dec 31, 2020 | | :------------------------ | :----------------- | :----------------- | | Total assets | $214 | $233 | | Total liabilities | $96 | $76 | [10. RELATED PERSON TRANSACTIONS](index=28&type=section&id=10.%20RELATED%20PERSON%20TRANSACTIONS) This section details transactions with related parties, including leases, debt guarantees, and programming rights payments - Leases with entities owned by controlling shareholders resulted in **$4 million** in payments for both the nine months ended September 30, 2021 and 2020[108](index=108&type=chunk) - Guaranteed **$38 million** of Cunningham Broadcasting Corporation's debt as of September 30, 2021, with **$7 million** related to consolidated Cunningham VIEs[110](index=110&type=chunk) - Paid **$377 million** for sports programming rights to affiliates of six professional teams for the nine months ended September 30, 2021[121](index=121&type=chunk) [11. FAIR VALUE MEASUREMENTS](index=31&type=section&id=11.%20FAIR%20VALUE%20MEASUREMENTS) This section describes the fair value hierarchy and measurements for various financial assets and liabilities - Fair value hierarchy levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), Level 3 (unobservable inputs reflecting company assumptions)[124](index=124&type=chunk) - Level 3 investments in equity securities (warrants and options from Bally's) had a fair value of **$354 million** as of September 30, 2021, with a fair value adjustment gain of **$22 million** for the nine months ended September 30, 2021[126](index=126&type=chunk)[127](index=127&type=chunk) Fair Value Measurements Summary | Category | As of Sep 30, 2021 (in millions) | As of Dec 31, 2020 (in millions) | | :----------------------------------------- | :------------------------------- | :------------------------------- | | **Level 1 Assets:** | | | | Investments in equity securities | $5 | $68 | | Money market funds | $554 | $740 | | **Level 2 Liabilities (Fair Value):** | | | | STG Senior Unsecured Notes | $1,252 | $1,286 | | STG Senior Secured Notes | $735 | $770 | | STG Term Loans | $2,350 | $3,471 | | DSG Senior Secured Notes | $23 | $28 | | DSG Senior Unsecured Notes | $772 | $1,056 | | DSG Term Loan | $2,021 | $2,884 | | Accounts Receivable Securitization Facility | $183 | $177 | | Debt of variable interest entities | $13 | $17 | | Debt of non-media subsidiaries | $17 | $17 | | **Level 3 Assets:** | | | | Investments in equity securities | $354 | $332 | [12. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS](index=33&type=section&id=12.%20CONDENSED%20CONSOLIDATING%20FINANCIAL%20STATEMENTS) This section provides condensed consolidating financial statements and details on debt guarantees - As of September 30, 2021, consolidated total debt, net of deferred financing costs and debt discounts, of **$12,530 million** included **$4,389 million** related to STG and its subsidiaries, of which the Company guaranteed **$4,354 million**[128](index=128&type=chunk) - The Company, KDSM, LLC, and STG's wholly-owned subsidiaries (guarantor subsidiaries) fully and unconditionally guarantee all of STG's obligations, jointly and severally[129](index=129&type=chunk) [13. SUBSEQUENT EVENTS](index=42&type=section&id=13.%20SUBSEQUENT%20EVENTS) This section reports significant events occurring after the reporting period, including dividends and a ransomware attack - Declared a quarterly dividend of **$0.20 per share**, payable December 15, 2021[150](index=150&type=chunk) - Identified a ransomware attack on October 17, 2021, encrypting servers, disrupting networks, and indicating data exfiltration[151](index=151&type=chunk) - Investigation is ongoing, and material impact on business, operations, or financial results is currently unpredictable[151](index=151&type=chunk) - On November 5, 2021, the company purchased and amended the A/R Facility, increasing its maximum limit from **$250 million to $400 million** and extending the maturity date to September 23, 2024, to enhance flexibility for Diamond Sports Group[152](index=152&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=43&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides a comprehensive overview of the company's financial performance, condition, and outlook [FORWARD-LOOKING STATEMENTS](index=43&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines various forward-looking statements and associated risks, including COVID-19, industry, and regulatory factors - COVID-19 risks include potential suspension/cancellation of sports seasons, inability to obtain rebates for fewer games, loss of advertising revenue, and increased cybersecurity/operational risks from remote work[156](index=156&type=chunk) - Industry risks involve subscriber churn due to technological changes and OTT platforms, unpredictable appeal of programming, and challenges in renewing media rights agreements[156](index=156&type=chunk)[160](index=160&type=chunk) - Regulatory risks include impacts from FCC's National Broadband Plan, spectrum repacking, and potential changes in ownership or retransmission consent regulations[158](index=158&type=chunk) [Summary of Significant Events](index=47&type=section&id=Summary%20of%20Significant%20Events) This section summarizes key corporate events, including divestitures, media rights extensions, and a recent ransomware attack - Completed divestiture of Seattle radio stations in September 2021[170](index=170&type=chunk) - Tennis Channel extended its media rights agreement with Wimbledon through 2036 and launched international streaming services[172](index=172&type=chunk) - Experienced a ransomware attack on October 17, 2021, causing server encryption, network disruption, and data exfiltration[178](index=178&type=chunk) - Investigation is ongoing, and potential material impact on business, operations, or financial results is uncertain[178](index=178&type=chunk) [RESULTS OF OPERATIONS](index=49&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, including segment-specific revenues, expenses, and operating results - Operating results are subject to cyclical fluctuations from political advertising (higher in even-numbered years) and seasonality (Q2 and Q4 typically higher for advertising)[181](index=181&type=chunk) - Local sports segment results fluctuate with MLB, NBA, and NHL seasons, typically higher in Q2 and Q3[182](index=182&type=chunk) Results of Operations Summary | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total revenues | $1,535 | $1,539 | $4,658 | $4,431 | | Operating income (loss) | $73 | $(4,216) | $(70) | $(3,397) | | Net income (loss) attributable to Sinclair Broadcast Group | $19 | $(3,256) | $(325) | $(2,881) | [The Impact of COVID-19 on our Results of Operations](index=50&type=section&id=The%20Impact%20of%20COVID-19%20on%20our%20Results%20of%20Operations) This section details the specific impacts of the COVID-19 pandemic on broadcast advertising and local sports distribution revenues - Broadcast advertising revenue decreased in Q3 2021 compared to Q3 2020, primarily due to the absence of political advertising in 2021[185](index=185&type=chunk) - Local sports distribution revenue increased in Q3 2021 due to decreases in accrued rebates, partially offset by subscriber erosion and three Distributors dropping carriage in 2020[186](index=186&type=chunk) - COVID-19 has heightened risks of workforce illness, wage inflation, difficulty finding qualified employees, and potential future workforce reductions[187](index=187&type=chunk) [BROADCAST SEGMENT](index=51&type=section&id=BROADCAST%20SEGMENT) This section analyzes the financial performance of the broadcast segment, including revenue and expense trends - Advertising revenue decreased by **$61 million (18%)** for the three months and **$31 million (4%)** for the nine months ended September 30, 2021, primarily due to a **decrease in political advertising revenue ($94 million and $143 million, respectively)** compared to 2020[190](index=190&type=chunk) - Media programming and production expenses increased by **$70 million (7%)** for the nine months ended September 30, 2021, mainly due to an **$80 million increase in network affiliation fees**[192](index=192&type=chunk) Broadcast Segment Performance | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Distribution revenue | $372 | $356 | $1,096 | $1,059 | | Advertising revenue | $283 | $344 | $830 | $861 | | Media revenues | $701 | $734 | $2,053 | $2,026 | | Operating income | $126 | $221 | $294 | $455 | [LOCAL SPORTS SEGMENT](index=53&type=section&id=LOCAL%20SPORTS%20SEGMENT) This section analyzes the financial performance of the local sports segment, including revenue and expense trends - Distribution revenue increased by **$38 million (2%)** for the nine months ended September 30, 2021, primarily due to a **$17 million reduction in accrued rebates**, partially offset by subscriber churn and Distributor losses[200](index=200&type=chunk) - Advertising revenue increased by **$163 million (90%)** for the nine months ended September 30, 2021, due to a **higher number of games played** compared to the COVID-19 impacted 2020 season[201](index=201&type=chunk) - Media programming and production expenses increased by **$1,003 million (80%)** for the nine months ended September 30, 2021, driven by an **$884 million increase in sports rights amortization** due to more games played[203](index=203&type=chunk) Local Sports Segment Performance | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Distribution revenue | $633 | $597 | $1,997 | $1,959 | | Advertising revenue | $118 | $124 | $345 | $182 | | Media revenue | $759 | $727 | $2,365 | $2,155 | | Operating loss | $(39) | $(4,450) | $(368) | $(3,885) | [OTHER](index=55&type=section&id=OTHER) This section details the financial performance of other media and non-media operations, including revenue and expenses - Non-media revenue decreased by **$51 million (56%)** for the nine months ended September 30, 2021, primarily due to lower broadcast equipment sales and the sale of Triangle[210](index=210&type=chunk) - Media expenses increased by **$60 million (31%)** for the nine months ended September 30, 2021, related to owned networks and digital initiatives[211](index=211&type=chunk) Other Segment Performance | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Media revenues | $106 | $83 | $305 | $247 | | Non-media revenues | $11 | $22 | $40 | $91 | | Operating (loss) income | $(9) | $11 | $15 | $46 | [CORPORATE AND UNALLOCATED EXPENSES](index=56&type=section&id=CORPORATE%20AND%20UNALLOCATED%20EXPENSES) This section details corporate general and administrative expenses, interest expense, and other unallocated items - Corporate general and administrative expenses increased by **$21 million** for the nine months ended September 30, 2021, primarily due to a **$22 million increase in employee compensation costs**, including severance[213](index=213&type=chunk) - Interest expense decreased by **$36 million** for the nine months ended September 30, 2021, due to lower LIBOR and debt refinancing, partially offset by the A/R Facility[215](index=215&type=chunk) - Other income, net, decreased by **$110 million** for the nine months ended September 30, 2021, primarily due to a **$168 million measurement adjustment gain** on variable payment obligations recognized in Q3 2020[217](index=217&type=chunk) Corporate and Unallocated Expenses Summary | Metric | 3 Months Ended Sep 30, 2021 (in millions) | 3 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Corporate general and administrative expenses | $35 | $30 | $132 | $111 | | Interest expense including amortization of debt discount and deferred financing costs | $155 | $157 | $466 | $502 | | Other (expense) income, net | $(4) | $169 | $59 | $169 | | Income tax benefit | $91 | $847 | $169 | $805 | [LIQUIDITY AND CAPITAL RESOURCES](index=58&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's cash position, working capital, debt covenants, and post-period financing activities - As of September 30, 2021, the company had **$1,058 million** in cash and cash equivalents and **$1,652 million** in net working capital[223](index=223&type=chunk) - The STG first lien leverage ratio was below **4.5x**, and the DSG first lien leverage ratio exceeded **6.25x** as of September 30, 2021; however, neither was subject to financial maintenance covenants due to less than **35% utilization** of revolving credit facilities[224](index=224&type=chunk) - Post-period, the A/R Facility was amended to increase the maximum facility limit to **$400 million** and extend the maturity date to September 23, 2024, to provide greater flexibility to Diamond Sports Group[152](index=152&type=chunk)[227](index=227&type=chunk) [Sources and Uses of Cash](index=59&type=section&id=Sources%20and%20Uses%20of%20Cash) This section analyzes the company's cash flows from operating, investing, and financing activities - Operating cash flows decreased primarily due to higher payments for sports rights, production, and Distributor rebate payments[230](index=230&type=chunk) - Financing cash flows decreased due to lower debt repayments, fewer Class A Common Stock repurchases, and reduced redemptions of Redeemable Subsidiary Preferred Equity compared to 2020[232](index=232&type=chunk) Cash Flow Activities Summary | Cash Flow Activity | 9 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2020 (in millions) | Change (in millions) | | :----------------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Net cash flows from operating activities | $235 | $839 | $(604) | | Net cash flows used in investing activities | $(231) | $(98) | $(133) | | Net cash flows used in financing activities | $(205) | $(1,441) | $1,236 | [CONTRACTUAL CASH OBLIGATIONS](index=60&type=section&id=CONTRACTUAL%20CASH%20OBLIGATIONS) This section details the company's significant contractual cash obligations, particularly for program rights and content - During the nine months ended September 30, 2021, estimated contractual amounts owed for program rights and content increased across all future periods, totaling an additional **$643 million**[234](index=234&type=chunk) - Contractual amounts owed for program rights and content increased by **$26 million** for the remainder of 2021, **$245 million** for 2022-2023, **$215 million** for 2024-2025, and **$157 million** for 2026 and thereafter[234](index=234&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=60&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section highlights critical accounting policies and estimates, noting the ongoing impact of the COVID-19 pandemic - There were no material changes to critical accounting policies and estimates from the Annual Report on Form 10-K for the year ended December 31, 2020[236](index=236&type=chunk) - The COVID-19 pandemic continues to introduce significant uncertainty, impacting estimates related to revenue recognition, goodwill, intangible assets, sports programming rights, and income taxes, requiring increased judgment and carrying higher variability[237](index=237&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=60&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, 2020 - No material changes to market risk disclosures from the Annual Report on Form 10-K for the year ended December 31, 2020[238](index=238&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=61&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and internal control over financial reporting as of September 30, 2021, concluding they were effective at a reasonable assurance level [Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting](index=61&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures%20and%20Internal%20Control%20over%20Financial%20Reporting) This section describes management's evaluation of disclosure controls and internal control over financial reporting - Management, under CEO and CFO supervision, evaluated disclosure controls and procedures and internal control over financial reporting as of September 30, 2021[240](index=240&type=chunk) - Disclosure controls and procedures are designed to provide reasonable assurance of timely and accurate reporting of information required under the Exchange Act[241](index=241&type=chunk) - Internal control over financial reporting aims to provide reasonable assurance regarding the reliability of financial reporting and GAAP compliance[242](index=242&type=chunk) [Assessment of Effectiveness of Disclosure Controls and Procedures](index=61&type=section&id=Assessment%20of%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) This section presents the CEO and CFO's conclusion on the effectiveness of disclosure controls and procedures - CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2021[243](index=243&type=chunk) [Changes in Internal Control over Financial Reporting](index=61&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes to internal control over financial reporting during the quarter - No material changes in internal control over financial reporting during the quarter ended September 30, 2021[244](index=244&type=chunk) [Limitations on the Effectiveness of Controls](index=62&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) This section acknowledges the inherent limitations of control systems, providing only reasonable assurance - Control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations such as faulty judgments, simple errors, circumvention, and management override[246](index=246&type=chunk) - Controls may become inadequate over time due to changing conditions or deteriorating compliance[246](index=246&type=chunk) [PART II. OTHER INFORMATION](index=62&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=62&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various lawsuits, claims, and regulatory matters in the ordinary course of business - The company is a party to lawsuits, claims, and regulatory matters in the ordinary course of business, with no material judgments rendered[248](index=248&type=chunk) - Further discussion on pending lawsuits is provided in Note 6. Commitments and Contingencies[248](index=248&type=chunk) [ITEM 1A. RISK FACTORS](index=62&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to previously disclosed risk factors, except for an updated discussion on information technology security breaches - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2020, except for an updated discussion on information technology security breaches[249](index=249&type=chunk) - On October 17, 2021, the company identified a ransomware attack that encrypted servers, disrupted networks, and indicated data exfiltration[250](index=250&type=chunk)[251](index=251&type=chunk) - The investigation is ongoing, and the material impact is currently unpredictable[250](index=250&type=chunk)[251](index=251&type=chunk) - Cyber attacks pose risks of unauthorized disclosure, data loss, operational interruptions, significant financial losses, reputational damage, litigation, and regulatory fines, which may not be fully covered by insurance[254](index=254&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=63&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities or use of proceeds to report - None[255](index=255&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=63&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities to report - None[256](index=256&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=63&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) There were no mine safety disclosures to report - None[257](index=257&type=chunk) [ITEM 5. OTHER INFORMATION](index=63&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information required to be disclosed in this item - None[258](index=258&type=chunk) [ITEM 6. EXHIBITS](index=64&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including various agreements and certifications - Includes Amended and Restated Loan and Security Agreement (June 25, 2021), First Amendment to Loan and Security Agreement (September 15, 2021), Assignment and Acceptance Agreement (November 5, 2021), and Omnibus Amendment to Amended and Restated Loan Agreement & Purchase Agreement (November 5, 2021)[260](index=260&type=chunk) - Certifications by Christopher S. Ripley (CEO) and Lucy Rutishauser (CFO) pursuant to Rule 13a-14(a) and Rule 13a-14(b) of the Exchange Act are filed as exhibits[260](index=260&type=chunk) [SIGNATURE](index=65&type=section&id=SIGNATURE) The report was duly signed on November 9, 2021, by the Senior Vice President/Chief Accounting Officer - Report signed on November 9, 2021, by David R. Bochenek, Senior Vice President/Chief Accounting Officer[263](index=263&type=chunk)[265](index=265&type=chunk)

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) Q3 2021 Earnings Conference Call November 3, 2021 9:00 AM ET Company Participants Lucy Rutishauser – Executive Vice President and Chief Financial Officer Billie-Jo McIntire – Director, Investor Relations Chris Ripley – President and Chief Executive Officer Conference Call Participants Dan Kurnos – Benchmark Steven Cahall – Wells Fargo David Hamburger – Morgan Stanley Aaron Watts – Deutsche Bank Lance Vitanza – Cowen Operator Good morning, ladies and gentlemen, an ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Presents unaudited consolidated financial statements and accompanying notes for the periods ended June 30, 2021 and 2020 [CONSOLIDATED BALANCE SHEETS](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Presents the company's financial position, detailing assets, liabilities, and equity (deficit) as of June 30, 2021, compared to December 31, 2020 Consolidated Balance Sheet Highlights | Metric | As of June 30, 2021 (in millions) | As of December 31, 2020 (in millions) | Change (in millions) | % Change | Key Balance Sheet Figures | Metric | As of June 30, 2021 (in millions) | As of December 31, 2020 (in millions) | - **Total assets decreased** by **$602 million**, or **4.5%**, from **$13,382 million** at December 31, 2020, to **$12,780 million** at June 30, 2021[12](index=12&type=chunk) - **Total liabilities decreased** by **$235 million**, or **1.6%**, from **$14,377 million** at December 31, 2020, to **$14,142 million** at June 30, 2021[12](index=12&type=chunk) - **Total deficit increased** by **$367 million**, or **31.0%**, from **$(1,185) million** at December 31, 2020, to **$(1,552) million** at June 30, 2021[12](index=12&type=chunk) [CONSOLIDATED STATEMENTS OF OPERATIONS](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Details the company's revenues, expenses, and net income (loss) for the three and six months ended June 30, 2021 and 2020 Consolidated Statements of Operations Highlights | Metric | 3 Months Ended June 30, 2021 (in millions) | 3 Months Ended June 30, 2020 (in millions) | Change (in millions) | % Change | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | Change (in millions) | % Change | - **Total revenues increased** by **$329 million** (**25.6%**) for the three months ended June 30, 2021, and by **$231 million** (**8.0%**) for the six months ended June 30, 2021, compared to the prior year periods[15](index=15&type=chunk) - **Operating income shifted to a loss of $(178) million** for the three months ended June 30, 2021, from an **income of $492 million** in the prior year, and to a **loss of $(143) million** for the six months ended June 30, 2021, from an **income of $819 million** in the prior year[15](index=15&type=chunk) - **Net income attributable to Sinclair Broadcast Group shifted to a loss of $(332) million** for the three months ended June 30, 2021, from an **income of $252 million** in the prior year, and to a **loss of $(344) million** for the six months ended June 30, 2021, from an **income of $375 million** in the prior year[15](index=15&type=chunk) - **Basic (loss) earnings per share** was **$(4.41)** for the three months ended June 30, 2021, compared to **$3.13** in the prior year, and **$(4.59)** for the six months ended June 30, 2021, compared to **$4.39** in the prior year[15](index=15&type=chunk) [CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Details net (loss) income and other comprehensive (loss) income for Sinclair Broadcast Group for the three and six months ended June 30, 2021 and 2020 Consolidated Statements of Comprehensive Income Highlights | Metric | 3 Months Ended June 30, 2021 (in millions) | 3 Months Ended June 30, 2020 (in millions) | Change (in millions) | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | Change (in millions) | - **Comprehensive (loss) income attributable to Sinclair Broadcast Group** was **$(335) million** for the three months ended June 30, 2021, a **decrease** from **$243 million** in the prior year[17](index=17&type=chunk) - For the six months ended June 30, 2021, **comprehensive (loss) income attributable to Sinclair Broadcast Group** was **$(339) million**, a **decrease** from **$366 million** in the prior year[17](index=17&type=chunk) [CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY%20(DEFICIT)%20AND%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) Outlines changes in shareholders' equity (deficit) and redeemable noncontrolling interests for the six months ended June 30, 2021 and 2020 Sinclair Broadcast Group Shareholders' Deficit | Metric | As of Dec 31, 2020 (in millions) | As of Jun 30, 2021 (in millions) | Change (in millions) | - The **accumulated deficit increased** from **$(1,986) million** at December 31, 2020, to **$(2,360) million** at June 30, 2021, primarily due to net losses[21](index=21&type=chunk) - **Dividends declared and paid** on Class A and Class B Common Stock totaled **$(30) million** for the six months ended June 30, 2021[21](index=21&type=chunk) - **Class A Common Stock issued** pursuant to employee benefit plans added **$19 million** to additional paid-in capital for the six months ended June 30, 2021[21](index=21&type=chunk) [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes cash generated from or used in operating, investing, and financing activities for the six months ended June 30, 2021 and 2020 Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | Change (in millions) | - **Net cash flows used in operating activities** was **$(12) million** for the six months ended June 30, 2021, a **significant decrease** from **$334 million** generated in the prior year period[25](index=25&type=chunk) - **Net cash flows used in investing activities increased** to **$(141) million** for the six months ended June 30, 2021, from **$(71) million** in the prior year period[25](index=25&type=chunk) - **Net cash flows used in financing activities decreased** to **$(141) million** for the six months ended June 30, 2021, from **$(974) million** in the prior year period[25](index=25&type=chunk) - The **net decrease in cash, cash equivalents, and restricted cash** was **$(294) million** for the six months ended June 30, 2021, compared to a **decrease** of **$(711) million** in the prior year period[25](index=25&type=chunk) [NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS](index=11&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Provides detailed explanations and disclosures supporting the unaudited consolidated financial statements, covering accounting policies, business operations, financial instruments, and material events [1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Details Sinclair Broadcast Group's operations in broadcast and local sports, accounting policies, and the ongoing impact of COVID-19 on financial estimates - The company operates two reportable segments: broadcast (**185** TV stations in **86** markets) and local sports (Bally Sports network brands, Marquee joint venture, and minority interest in YES Network)[28](index=28&type=chunk) - COVID-19 continues to create significant uncertainty, impacting estimates related to revenue recognition, goodwill, intangible assets, program contract costs, sports programming rights, and income taxes[35](index=35&type=chunk) Revenue Disaggregation by Type and Segment | Revenue Type | 3 Months Ended June 30, 2021 (in millions) | 3 Months Ended June 30, 2020 (in millions) | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | - Accrued rebates to Distributors due to unfulfilled minimum game requirements from the COVID-19 pandemic **decreased** from **$420 million** at December 31, 2020, to **$188 million** at June 30, 2021, with **$202 million** paid and **$30 million** adjusted due to increased estimated game counts[45](index=45&type=chunk) - The Board of Directors authorized an additional **$500 million** share repurchase program on August 4, 2020, with **$880 million** remaining as of June 30, 2021[53](index=53&type=chunk) - A quarterly dividend of **$0.20** per share was declared in August 2021, payable on September 15, 2021[54](index=54&type=chunk) [2. ACQUISITIONS AND DISPOSITIONS OF ASSETS](index=16&type=section&id=2.%20ACQUISITIONS%20AND%20DISPOSITIONS%20OF%20ASSETS) Details the company's acquisition of ZypMedia, sale of broadcast stations and Triangle Sign & Service, LLC, and Broadcast Incentive Auction reimbursements - Acquired ZypMedia for approximately **$7 million** in cash in February 2021[57](index=57&type=chunk) - Sold two television broadcast stations (WDKA-TV and KBSI-TV) for an aggregate of **$28 million**, recognizing a **$12 million gain** for the six months ended June 30, 2021[58](index=58&type=chunk) - Sold controlling interest in Triangle Sign & Service, LLC for **$12 million** in June 2021, recognizing a **$6 million gain**[59](index=59&type=chunk) - Recorded **gains of $18 million** for the six months ended June 30, 2021, related to reimbursements for spectrum repack costs from the FCC's Broadcast Incentive Auction[61](index=61&type=chunk) [3. OTHER ASSETS](index=17&type=section&id=3.%20OTHER%20ASSETS) Provides a breakdown of other assets, including equity method investments like YES Network and other investments such as Bally's common stock warrants and options Other Assets Breakdown | Category | As of June 30, 2021 (in millions) | As of December 31, 2020 (in millions) | - **Income from equity method investments**, primarily the YES Network, was **$19 million** for the six months ended June 30, 2021, **up from $7 million** in the prior year[65](index=65&type=chunk) - **Held $550 million in investments measured at fair value** as of June 30, 2021, recognizing a **fair value adjustment gain of $56 million** for the six months ended June 30, 2021[67](index=67&type=chunk) - Received warrants and options to acquire Bally's common stock as part of a commercial agreement, with an incremental investment of **$93 million** in Bally's non-voting perpetual warrants in April 2021[68](index=68&type=chunk)[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) Details the company's debt structure, including bank credit agreements for STG and DSG, financial covenants, accounts receivable securitization, and third-party debt guarantees - **STG's first lien leverage ratio** was **below 4.5x**, while **DSG's exceeded 6.25x** as of June 30, 2021. Neither was subject to the financial maintenance covenant due to low revolving credit facility utilization[70](index=70&type=chunk) - STG amended its Bank Credit Agreement in April 2021 to raise **$740 million** in Term Loan B-3, maturing in April 2028, to refinance a portion of existing debt[71](index=71&type=chunk) - The **Accounts Receivable Securitization Facility** (A/R Facility) had an outstanding balance of **$183 million** as of June 30, 2021, with a total commitment of **$216 million**[73](index=73&type=chunk)[219](index=219&type=chunk) - **STG guaranteed $46 million** of debt of certain third parties as of June 30, 2021, including **$14 million** related to consolidated VIEs[76](index=76&type=chunk) [5. REDEEMABLE NONCONTROLLING INTERESTS](index=19&type=section&id=5.%20REDEEMABLE%20NONCONTROLLING%20INTERESTS) Explains the classification and components of redeemable noncontrolling interests, including Redeemable Subsidiary Preferred Equity and a Subsidiary Equity Put Right - **Redeemable Subsidiary Preferred Equity balance** was **$174 million** as of June 30, 2021, net of issuance costs[79](index=79&type=chunk) - **Dividends accrued on Redeemable Subsidiary Preferred Equity** were **$8 million** for the six months ended June 30, 2021[78](index=78&type=chunk) - A **Subsidiary Equity Put Right** had a value of **$15 million** as of June 30, 2021[79](index=79&type=chunk) [6. COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=6.%20COMMITMENTS%20AND%20CONTINGENCIES) Details significant contractual obligations, including sports programming rights and variable payment obligations, and ongoing legal and regulatory matters Annual Non-Cancellable Sports Programming Rights Commitments (as of June 30, 2021) | Year | Commitments (in millions) | - **Total sports programming rights commitments** were **$14,028 million** as of June 30, 2021[81](index=81&type=chunk) - **Variable payment obligations** from the Bally RSNs acquisition were **$53 million** as of June 30, 2021, with measurement adjustment **losses of $3 million** for the six months ended June 30, 2021[83](index=83&type=chunk) - **Accrued $8 million in additional expenses for FCC legal matters** during the three months ended June 30, 2021, related to consolidated VIEs[87](index=87&type=chunk) - The company is defending against twenty-two putative class action lawsuits alleging conspiracy to fix prices for commercials, with discovery to be completed by July 1, 2022[89](index=89&type=chunk) [7. EARNINGS PER SHARE](index=22&type=section&id=7.%20EARNINGS%20PER%20SHARE) Provides a reconciliation of numerator and denominator for basic and diluted earnings per share, identifying anti-dilutive shares Earnings Per Share Reconciliation | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | - **Basic weighted-average common shares outstanding** were **75,331 thousand** for the three months ended June 30, 2021, **down from 80,425 thousand** in the prior year[91](index=91&type=chunk) - **1,802 thousand weighted-average stock-settled appreciation rights and outstanding stock options were excluded** from diluted EPS calculation for the three months ended June 30, 2021, as their inclusion would be anti-dilutive[91](index=91&type=chunk) [8. SEGMENT DATA](index=23&type=section&id=8.%20SEGMENT%20DATA) Presents financial information disaggregated by broadcast and local sports segments, along with 'Other & Corporate' for reconciliation - The company's two reportable segments are broadcast and local sports, with performance measured based on **operating income (loss)**[92](index=92&type=chunk) Segment Financial Information | Segment | Assets (as of June 30, 2021, in millions) | Revenue (3 Months Ended June 30, 2021, in millions) | Operating Income (Loss) (3 Months Ended June 30, 2021, in millions) | Revenue (6 Months Ended June 30, 2021, in millions) | Operating Income (Loss) (6 Months Ended June 30, 2021, in millions) | - **Broadcast segment operating income increased** by **27%** to **$105 million** for the three months ended June 30, 2021, but **decreased** by **28%** to **$168 million** for the six months ended June 30, 2021, compared to the prior year periods[93](index=93&type=chunk)[94](index=94&type=chunk) - **Local sports segment operating income shifted to a loss of $(288) million** for the three months ended June 30, 2021, and a **loss of $(329) million** for the six months ended June 30, 2021, from income in the prior year periods[93](index=93&type=chunk)[94](index=94&type=chunk) [9. VARIABLE INTEREST ENTITIES](index=25&type=section&id=9.%20VARIABLE%20INTEREST%20ENTITIES) Explains the company's consolidation of certain VIEs, primarily television stations and regional sports networks, where it acts as the primary beneficiary - The company consolidates VIEs, such as certain television stations and regional sports networks (e.g., Marquee), where it is the primary beneficiary due to its power to direct activities and absorb significant losses/returns[96](index=96&type=chunk)[97](index=97&type=chunk) Consolidated VIEs Assets and Liabilities | Category | As of June 30, 2021 (in millions) | As of December 31, 2020 (in millions) | - **Total assets of consolidated VIEs** were **$219 million** as of June 30, 2021, and **total liabilities were $70 million**[98](index=98&type=chunk) - All liabilities of consolidated VIEs are non-recourse to the company, except for the debt of certain VIEs[99](index=99&type=chunk) - **Investments in other VIEs**, where the company is not the primary beneficiary, totaled **$89 million** as of June 30, 2021, with **related losses of $12 million** for the six months ended June 30, 2021[101](index=101&type=chunk) [10. RELATED PERSON TRANSACTIONS](index=27&type=section&id=10.%20RELATED%20PERSON%20TRANSACTIONS) Details various transactions with related parties, including controlling shareholders, Cunningham Broadcasting, Atlantic Automotive, real estate ventures, and equity method investees - **Lease payments to entities owned by controlling shareholders** were **$2 million** for the six months ended June 30, 2021[103](index=103&type=chunk) - **Guaranteed $39 million of Cunningham Broadcasting Corporation's debt** as of June 30, 2021, and **paid Cunningham $5 million** for services under agreements for the six months ended June 30, 2021[105](index=105&type=chunk)[107](index=107&type=chunk) - **Consolidated revenues included $72 million** for the six months ended June 30, 2021, related to Cunningham Stations[109](index=109&type=chunk) - **YES Network, an equity method investee, paid the company $2 million** for management services for the six months ended June 30, 2021[113](index=113&type=chunk) - **Paid $24 million for production services** to mobile production businesses (equity method investees) and **$9 million for marketing services** to a sports marketing company (equity method investee) for the six months ended June 30, 2021[114](index=114&type=chunk)[115](index=115&type=chunk) - **Paid $258 million for sports programming rights** to professional teams with non-controlling equity interests in certain RSNs for the six months ended June 30, 2021[116](index=116&type=chunk) [11. FAIR VALUE MEASUREMENTS](index=29&type=section&id=11.%20FAIR%20VALUE%20MEASUREMENTS) Outlines the fair value hierarchy (Level 1, 2, and 3) for financial assets and liabilities, presenting their carrying and fair values - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[119](index=119&type=chunk) Fair Value of Financial Assets and Liabilities | Category | Carrying Value (June 30, 2021, in millions) | Fair Value (June 30, 2021, in millions) | Carrying Value (December 31, 2020, in millions) | Fair Value (December 31, 2020, in millions) | - **Investments in equity securities categorized as Level 3** (unobservable inputs) had a fair value of **$384 million** as of June 30, 2021, and **$332 million** as of December 31, 2020[122](index=122&type=chunk) - A **fair value adjustment loss of $51 million** was recorded for Level 3 options and warrants for the three months ended June 30, 2021, while a **gain of $52 million** was recorded for the six months ended June 30, 2021[122](index=122&type=chunk)[123](index=123&type=chunk) [12. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS](index=31&type=section&id=12.%20CONDENSED%20CONSOLIDATING%20FINANCIAL%20STATEMENTS) Provides condensed consolidating financial statements for Sinclair Broadcast Group, STG, guarantor, and non-guarantor subsidiaries, illustrating financial relationships and debt guarantees - **Sinclair Broadcast Group guarantees $4,358 million of STG's total debt of $4,395 million** as of June 30, 2021[124](index=124&type=chunk) - Guarantor subsidiaries (STG, KDSM, LLC, and STG's wholly-owned subsidiaries) fully and unconditionally guarantee STG's obligations[125](index=125&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=39&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's perspective on financial performance and condition, including forward-looking statements, significant events, segment results, liquidity, and capital resources [FORWARD-LOOKING STATEMENTS](index=39&type=section&id=FORWARD-LOOKING%20STATEMENTS) Outlines various risks and uncertainties that could materially impact future results, categorized into COVID-19, industry, company-specific, and general risks - COVID-19 risks include potential cancellation of sports seasons, inability to obtain rebates from sports teams, need to reimburse Distributors, loss of advertising revenue, and potential impairment charges[148](index=148&type=chunk) - Industry risks encompass business conditions of advertisers, performance of programming providers, subscriber churn due to OTT platforms, loss of appeal of sports programming, and challenges in renewing media rights agreements[148](index=148&type=chunk)[150](index=150&type=chunk) - Company-specific risks include ability to attract advertising, service debt obligations, implement content management systems, renegotiate retransmission consent, and integrate acquired businesses[151](index=151&type=chunk) - General risks involve changes in national/regional economies, loss of consumer confidence, tax law changes, competitor activities, and natural disasters/pandemics[153](index=153&type=chunk) [Summary of Significant Events and Financial Highlights](index=43&type=section&id=Summary%20of%20Significant%20Events%20and%20Financial%20Highlights) Summarizes key transactions, content developments, distribution agreements, NEXTGEN TV deployment, and financing activities, highlighting strategic initiatives - **Completed divestiture of KGBT license assets** in May 2021 and interests in Triangle Sign & Service, LLC for **$12 million** in June 2021[162](index=162&type=chunk) - **Lotus Communications Corporation agreed to acquire Seattle radio stations for approximately $18 million**, subject to FCC approval[162](index=162&type=chunk) - Launched the new Bally Sports app in April 2021, offering enhanced functionality for authenticated users[162](index=162&type=chunk) - Signed a multi-year enterprise partnership with Operative Media to consolidate ad sales and entered into a distribution deal with Samsung TV for various content[162](index=162&type=chunk) - Deployed NEXTGEN TV in six additional markets, bringing the total to **17**, and CAST.ERA expects to launch a next-generation broadcast solution utilizing **5G** cloud and AI technology[166](index=166&type=chunk) - Amended the STG Bank Credit Agreement in April 2021 to raise **$740 million** in Term Loan B-3 for refinancing[167](index=167&type=chunk) - **Declared quarterly cash dividends of $0.20** per share in May and August 2021[167](index=167&type=chunk) [RESULTS OF OPERATIONS](index=46&type=section&id=RESULTS%20OF%20OPERATIONS) Detailed analysis of consolidated and segment-specific operating results, including revenues, expenses, and operating income (loss), focusing on COVID-19 impact and key drivers [Seasonality / Cyclicality](index=46&type=section&id=Seasonality%20%2F%20Cyclicality) Operating results are subject to cyclical fluctuations from political advertising and seasonal patterns, with local sports segment results based on league seasons, all impacted by COVID-19 - Broadcast segment operating results are subject to cyclical fluctuations from political advertising (higher in even-numbered years) and seasonal/holiday spending (higher in Q2 and Q4)[169](index=169&type=chunk) - Local sports segment operating results fluctuate based on the timing and overlap of MLB, NBA, and NHL seasons (typically higher in Q2 and Q3)[170](index=170&type=chunk) - COVID-19 pandemic disrupted usual seasonality and cyclicality in 2020 and may continue to do so in 2021, except for political advertising[170](index=170&type=chunk) [Operating Data](index=46&type=section&id=Operating%20Data) Presents consolidated operating data, including media and non-media revenues, various expenses, operating (loss) income, and net (loss) income attributable to Sinclair Broadcast Group Consolidated Operating Data | Metric | 3 Months Ended June 30, 2021 (in millions) | 3 Months Ended June 30, 2020 (in millions) | Change (in millions) | % Change | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | Change (in millions) | % Change | - **Total revenues increased** by **$329 million** (**25.6%**) for the three months ended June 30, 2021, and by **$231 million** (**8.0%**) for the six months ended June 30, 2021, compared to the prior year periods[171](index=171&type=chunk) - **Operating income shifted to a loss of $(178) million** for the three months ended June 30, 2021, and a **loss of $(143) million** for the six months ended June 30, 2021, from income in the prior year periods[171](index=171&type=chunk) - **Net (loss) income attributable to Sinclair Broadcast Group** was **$(332) million** for the three months ended June 30, 2021, and **$(344) million** for the six months ended June 30, 2021[171](index=171&type=chunk) [The Impact of COVID-19 on our Results of Operations](index=47&type=section&id=The%20Impact%20of%20COVID-19%20on%20our%20Results%20of%20Operations) COVID-19 continues to significantly impact operations, leading to increased broadcast advertising revenue and local sports advertising/distribution revenue due to more games played - **Broadcast segment advertising revenue increased** in Q2 2021 due to improved advertising spending trends as economic recovery continued[173](index=173&type=chunk) - **Local sports segment advertising and distribution revenue increased** in Q2 2021, primarily driven by a higher number of games played compared to 2020, and **decreases** in accrued rebates to Distributors[174](index=174&type=chunk) - MLB began its 2021 season on time with a full schedule, and NBA/NHL announced full schedules for their 2021-2022 seasons, but future game completion remains uncertain[174](index=174&type=chunk) - The company's business is designated as essential, but COVID-19 has disrupted operations, with potential for future facility disruptions and workforce illness[175](index=175&type=chunk) [BROADCAST SEGMENT](index=48&type=section&id=BROADCAST%20SEGMENT) Broadcast segment experienced revenue growth from distribution and advertising, partially offset by decreased political advertising, with increased operating expenses from network affiliation fees and employee compensation Broadcast Segment Revenue and Operating Income | Metric | 3 Months Ended June 30, 2021 (in millions) | 3 Months Ended June 30, 2020 (in millions) | % Change | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | % Change | - **Broadcast distribution revenue increased** by **$14 million** (**4%**) for the three months and **$21 million** (**3%**) for the six months ended June 30, 2021, primarily due to increased contractual rates[178](index=178&type=chunk) - **Advertising revenue increased** by **$72 million** (**35%**) for the three months and **$30 million** (**6%**) for the six months ended June 30, 2021, driven by growth in automotive, services, and entertainment, partially offset by a **$14 million decrease** in political advertising for the three months[179](index=179&type=chunk)[180](index=180&type=chunk) - **Media programming and production expenses increased** by **$25 million** (**8%**) for the three months and **$46 million** (**7%**) for the six months ended June 30, 2021, mainly due to higher network affiliation fees[183](index=183&type=chunk) - **Media selling, general and administrative expenses increased** by **$20 million** (**16%**) for the three months and **$21 million** (**8%**) for the six months ended June 30, 2021, including **$8 million** in FCC penalties incurred by consolidated VIEs[184](index=184&type=chunk) [LOCAL SPORTS SEGMENT](index=51&type=section&id=LOCAL%20SPORTS%20SEGMENT) Local sports segment saw significant increases in advertising and distribution revenue due to more games and reduced rebates, but media programming expenses rose sharply from sports rights amortization Local Sports Segment Revenue and Operating Income (Loss) | Metric | 3 Months Ended June 30, 2021 (in millions) | 3 Months Ended June 30, 2020 (in millions) | % Change | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | % Change | - **Distribution revenue increased** by **$56 million** (**9%**) for the three months and **$2 million** (**0%**) for the six months ended June 30, 2021, driven by reduced accrued rebates and Marquee's full activity, partially offset by subscriber erosion and Distributor drops[192](index=192&type=chunk) - **Advertising revenue surged by $159 million** (**5,300%**) for the three months and **$169 million** (**291%**) for the six months ended June 30, 2021, primarily due to a higher number of games played[193](index=193&type=chunk) - **Media programming and production expenses increased by $917 million** (**1,798%**) for the three months and **$1,097 million** (**208%**) for the six months ended June 30, 2021, mainly due to an **$824 million increase** in sports rights amortization expense[195](index=195&type=chunk) - **Depreciation and amortization expenses decreased by $31 million** (**28%**) for the three months and **$57 million** (**26%**) for the six months ended June 30, 2021, due to lower intangible asset values from 2020 impairment[197](index=197&type=chunk) [OTHER](index=53&type=section&id=OTHER) The 'Other' segment saw media revenue increase from owned networks and digital initiatives, while non-media revenue decreased due to lower broadcast equipment sales, with corresponding expense changes Other Segment Revenue and Operating Income | Metric | 3 Months Ended June 30, 2021 (in millions) | 3 Months Ended June 30, 2020 (in millions) | % Change | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | % Change | - **Media revenue increased by $29 million** (**37%**) for the three months and **$35 million** (**21%**) for the six months ended June 30, 2021, driven by owned networks and digital initiatives[203](index=203&type=chunk) - **Non-media revenue decreased by $13 million** (**50%**) for the three months and **$40 million** (**58%**) for the six months ended June 30, 2021, primarily due to **decreased** broadcast equipment sales[203](index=203&type=chunk) - **Media expenses increased by $33 million** (**56%**) for the three months and **$27 million** (**21%**) for the six months ended June 30, 2021, related to owned networks and digital initiatives[204](index=204&type=chunk) - **Non-media expenses decreased by $8 million** (**36%**) for the three months and **$24 million** (**43%**) for the six months ended June 30, 2021, due to lower costs of goods associated with reduced equipment sales[204](index=204&type=chunk) [CORPORATE AND UNALLOCATED EXPENSES](index=54&type=section&id=CORPORATE%20AND%20UNALLOCATED%20EXPENSES) Corporate general and administrative expenses increased, interest expense decreased, other income fluctuated due to fair value adjustments, and income tax benefit increased from federal tax credits Corporate and Unallocated Expenses | Metric | 3 Months Ended June 30, 2021 (in millions) | 3 Months Ended June 30, 2020 (in millions) | % Change | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | % Change | - **Corporate general and administrative expenses increased by $4 million** (**13%**) for the three months and **$16 million** (**20%**) for the six months ended June 30, 2021, primarily due to group insurance and employee compensation costs[206](index=206&type=chunk) - **Interest expense decreased by $5 million** (**3%**) for the three months and **$34 million** (**10%**) for the six months ended June 30, 2021, due to lower LIBOR and refinancing[208](index=208&type=chunk) - **Other income, net, decreased by $65 million** for the three months ended June 30, 2021, but **increased by $63 million** for the six months ended June 30, 2021, primarily due to fair value adjustments of investments[210](index=210&type=chunk) - **Income tax benefit for the three months ended June 30, 2021, was 17.4%** (vs. **16.5%** provision in 2020), and for the six months was **20.6%** (vs. **9.1%** provision in 2020), driven by federal tax credits and valuation allowance adjustments[211](index=211&type=chunk)[212](index=212&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=56&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Discusses the company's liquidity, including net working capital, cash, borrowing capacity, cash flow changes, contractual obligations, and critical accounting estimates - As of June 30, 2021, the company had **net working capital of approximately $1,621 million** and **$964 million in cash and cash equivalents**[216](index=216&type=chunk) - The **STG first lien leverage ratio** was **below 4.5x**, and the **DSG first lien leverage ratio exceeded 6.25x** as of June 30, 2021, but neither was subject to financial maintenance covenants due to low revolving credit facility utilization[217](index=217&type=chunk) - The **Accounts Receivable Securitization Facility** had a total commitment of **$216 million** and an outstanding balance of **$183 million** as of June 30, 2021[219](index=219&type=chunk) - The company anticipates existing cash, cash flow from operations, and borrowing capacity will be sufficient for debt service, capital expenditures, and working capital for the next **12** months, but COVID-19 poses risks to liquidity[220](index=220&type=chunk) [Sources and Uses of Cash](index=57&type=section&id=Sources%20and%20Uses%20of%20Cash) Net cash flows from operating activities decreased, investing activities used more cash, and financing activities used less cash compared to the prior year Cash Flow Summary | Cash Flow Activity | 6 Months Ended June 30, 2021 (in millions) | 6 Months Ended June 30, 2020 (in millions) | Change (in millions) | - **Net cash flows from operating activities decreased from $373 million** (**3** months 2020) to **$194 million** (**3** months 2021) and from **$334 million** (**6** months 2020) to **$(12) million** (**6** months 2021)[222](index=222&type=chunk)[223](index=223&type=chunk) - **Net cash flows used in investing activities increased to $(141) million** for the six months ended June 30, 2021, from **$(71) million** in the prior year period[222](index=222&type=chunk)[224](index=224&type=chunk) - **Net cash flows used in financing activities decreased to $(141) million** for the six months ended June 30, 2021, from **$(974) million** in the prior year period[222](index=222&type=chunk)[225](index=225&type=chunk) [CONTRACTUAL CASH OBLIGATIONS](index=58&type=section&id=CONTRACTUAL%20CASH%20OBLIGATIONS) Estimated contractual amounts owed for program rights and content increased across various future periods during the six months ended June 30, 2021 - **Estimated contractual amounts owed for program rights and content increased by $40 million** for the remainder of 2021, **$159 million** for 2022-2023, **$128 million** for 2024-2025, and **$97 million** for 2026 and thereafter, as of June 30, 2021[227](index=227&type=chunk) - No other material changes to contractual cash obligations occurred during the six months ended June 30, 2021[228](index=228&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=58&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) No changes to critical accounting policies, but COVID-19 continues to introduce significant uncertainty, impacting estimates related to revenue, goodwill, intangibles, sports rights, 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, 2020[229](index=229&type=chunk) - COVID-19 continues to create significant uncertainty, impacting estimates for revenue recognition, goodwill, intangible assets, sports programming rights, and income taxes, requiring increased judgment and carrying higher variability[230](index=230&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=57&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes to quantitative and qualitative disclosures about market risk since the Annual Report on Form 10-K for the year ended December 31, 2020 - **No material changes to quantitative and qualitative disclosures about market risk** from the Annual Report on Form 10-K for the year ended December 31, 2020[231](index=231&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=58&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management evaluated disclosure controls and internal control over financial reporting as effective, with no material changes during the quarter, acknowledging inherent limitations - **Disclosure controls and procedures were evaluated as effective** at the reasonable assurance level as of June 30, 2021[236](index=236&type=chunk) - **No material changes in internal control over financial reporting occurred** during the quarter ended June 30, 2021[237](index=237&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and have inherent limitations, including potential for errors, circumvention, or management override[239](index=239&type=chunk) [PART II. OTHER INFORMATION](index=60&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=60&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 in Note 6 - **The company is a party to lawsuits, claims, and regulatory matters** in the ordinary course of business[84](index=84&type=chunk)[242](index=242&type=chunk) - **No material judgments or decisions have been rendered** by hearing boards or courts in connection with such actions[84](index=84&type=chunk)[242](index=242&type=chunk) - Refer to Note 6. Commitments and Contingencies within the Consolidated Financial Statements for discussion related to certain pending lawsuits[242](index=242&type=chunk) [ITEM 1A. RISK FACTORS](index=61&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 - **No material changes to the risk factors previously disclosed** in the Annual Report on Form 10-K for the year ended December 31, 2020[243](index=243&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=61&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered sales of equity securities or use of proceeds to report for the period - None[244](index=244&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=61&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities to report for the period - None[245](index=245&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=61&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) No mine safety disclosures to report for the period - None[246](index=246&type=chunk) [ITEM 5. OTHER INFORMATION](index=61&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information to report for the period - None[247](index=247&type=chunk) [ITEM 6. EXHIBITS](index=61&type=section&id=ITEM%206.%20EXHIBITS) Lists exhibits filed with the Form 10-Q, including employment agreements, CEO/CFO certifications, and consolidated financial statements in iXBRL format List of Exhibits | Exhibit Number | Description | |---|---| | 10.1* | Amendment No. 4 to Amended and Restated Employment Agreement by and between Sinclair Broadcast Group, Inc. and Barry M. Faber, dated February 21, 2020. | | 10.2* | Amendment No. 5 to Amended and Restated Employment Agreement by and between Sinclair Broadcast Group, Inc. and Barry M. Faber, dated May 21, 2021. | | 31.1** | Certification by Christopher S. Ripley, as Chief Executive Officer of Sinclair Broadcast Group, Inc., pursuant to Rule 13a-14(a) of the Exchange Act (15 U.S.C. § 7241). | | 31.2** | Certification by Lucy Rutishauser, as Chief Financial Officer of Sinclair Broadcast Group, Inc., pursuant to Rule 13a 14(a) of the Exchange Act (15 U.S.C. § 7241). | | 32.1** | Certification by Christopher S. Ripley, as Chief Executive Officer of Sinclair Broadcast Group, Inc., pursuant to Rule 13a-14(b) of the Exchange Act and § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C § 1350). | | 32.2** | Certification by Lucy Rutishauser, as Chief Financial Officer of Sinclair Broadcast Group, Inc., pursuant to Rule 13a 14(b) of the Exchange Act and § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C § 1350). | | 101* | The Company's Consolidated Financial Statements and related Notes for the quarter ended June 30, 2021 from this Quarterly Report on Form 10-Q, formatted in iXBRL (Inline eXtensible Business Reporting Language).* | | 104 | Cover Page Interactive Data File (included in Exhibit 101). | [SIGNATURE](index=62&type=section&id=SIGNATURE) The Form 10-Q report was duly signed on behalf of Sinclair Broadcast Group, Inc. by David R. Bochenek, Senior Vice President/Chief Accounting Officer, on August 9, 2021 - **The report was signed by David R. Bochenek**, Senior Vice President/Chief Accounting Officer, on August 9, 2021[252](index=252&type=chunk)[254](index=254&type=chunk)

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) Q2 2021 Earnings Conference Call August 4, 2021 9:30 AM ET Company Participants Lucy Rutishauser – Executive Vice President and Chief Financial Officer Billie-Jo McIntire – Director-Investor Relations Chris Ripley – President and Chief Executive Officer Rob Weisbord – President-Broadcast and Chief Advertising Revenue Officer Conference Call Participants Dan Kurnos – Benchmark Company Steven Cahall – Wells Fargo David Hamburger – Morgan Stanley Aaron Watts – Deuts ...

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 March 31, 2021 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) (State or other ...

Financial Data and Key Metrics Changes - The company's media revenues for Q1 2021 decreased by 5% compared to Q1 2020, primarily due to the absence of political revenue and the sale of three stations [40] - Adjusted EBITDA for the consolidated company declined to $182 million, down 22% from the previous year, but exceeded guidance [42][46] - The first quarter consolidated adjusted free cash flow was $9 million, approximately $117 million better than the low end of the guidance range [47] Business Line Data and Key Metrics Changes - Core advertising revenues, excluding the three sold stations, increased almost 1% year-over-year, better than expectations of a mid-single-digit decline [41] - Local sports media revenues declined by 5% compared to the first quarter of the previous year, impacted by lower distribution revenue and higher subscriber churn [43] - Local sports adjusted EBITDA for Q1 was $9 million, down from the prior year but beat guidance by over $60 million [45] Market Data and Key Metrics Changes - The advertising market showed improvement, with core ad revenues finishing flattish compared to the pro forma first quarter of 2020 and 2019 [10] - April 2021 saw a significant increase in advertising revenues, up over 70% compared to April 2020, and only low-single digits down from April 2019 [11] - The auto industry is facing supply constraints, which may impact advertising spending in upcoming quarters [12] Company Strategy and Development Direction - The company is focusing on direct-to-consumer opportunities for regional sports content, aiming to fill the void left by traditional distributors [22][24] - Sinclair is enhancing its programming through partnerships, such as with Bally's, to improve non-game programming and increase advertising yields [59] - The company is exploring monetization opportunities through ATSC 3.0 technology, which could unlock significant revenue potential [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the core advertising market, particularly in services and sports betting categories [12] - The company is cautiously optimistic about Q2 2021, expecting slightly down performance against 2019 benchmarks but positive trends in April and May [84] - Management highlighted the importance of viewer engagement and the potential for increased monetization through interactive programming and gamification [27] Other Important Information - The company announced the appointment of Laurie Beyer as its first female director, reflecting its commitment to diversity [21] - Sinclair's cash at the end of the quarter was $941 million, with total debt at $12.540 billion and net leverage at 6.4x [48][49] Q&A Session Summary Question: Can you provide insights on direct-to-consumer strategy and advertising yield improvements? - Management acknowledged a change in tone regarding direct-to-consumer opportunities, emphasizing the potential for increased engagement and monetization through digital platforms [58] - The partnership with Bally's is expected to enhance non-game programming and improve advertising yields without significant financial risk [59][60] Question: What is the status of negotiations with distributors and the impact on timing? - Management confirmed that they have direct-to-consumer rights for most teams and are in discussions to enhance those rights, with plans to launch in the first half of 2022 [65] Question: Can you discuss the implications of subscriber trends and the Cox renewal? - Management noted slight improvements in subscriber trends, with expectations of mid-single-digit declines for broadcast and high-single-digit declines for RSNs [87] Question: What are the expected cost savings from programming contract renewals? - Management indicated that they aim to variabilize costs in renewals, aligning interests with teams and potentially reducing fixed costs [75] Question: How does the company plan to utilize free cash flow moving forward? - Management stated that the focus remains on de-leveraging, increasing long-term value, and reinvesting in the company [70] Question: What feedback has been received regarding the new Bally Sports app? - Early feedback on the Bally Sports app has been positive, with significant engagement and plans for further monetization opportunities [100]

[PART I](index=7&type=section&id=PART%20I) This section outlines the company's business operations, risk factors, and essential legal and property disclosures [ITEM 1. BUSINESS](index=7&type=section&id=ITEM%201.%20BUSINESS) Sinclair Broadcast Group is a diversified television media company with broadcast and local sports segments, navigating content, technology, and regulatory challenges [Company Overview](index=7&type=section&id=Company%20Overview) Sinclair Broadcast Group is a diversified national television media company founded in 1986, headquartered in Hunt Valley, Maryland - Sinclair Broadcast Group, Inc. is a diversified television media company with national reach, focusing on high-quality content across local television stations, regional and national sports networks, and digital platforms[19](index=19&type=chunk) - The company was founded in 1986 and its principal executive offices are located in Hunt Valley, Maryland[20](index=20&type=chunk) [Segments](index=7&type=section&id=Segments) The company operates through broadcast and local sports segments, alongside other diverse business units - As of December 31, 2020, Sinclair has two reportable segments: broadcast and local sports. Other businesses, including owned networks, original content, digital and internet services, technical services, and non-media investments, are grouped into the 'other' segment for reconciliation[21](index=21&type=chunk) [Broadcast Segment](index=7&type=section&id=Broadcast%20Segment) The broadcast segment operates 188 stations across 88 markets, offering diverse programming and generating revenue from advertising and distribution fees - The broadcast segment consists of **188 stations in 88 markets**, broadcasting **628 channels**, including **240 affiliated with primary networks** (FOX, ABC, CBS, NBC, CW, MNT) and **388 with other programming services**[22](index=22&type=chunk) - The segment is one of the nation's largest producers of local news, generating over **2,500 hours per week at 130 stations in 82 markets**, and was awarded **356 journalism awards in 2020**[24](index=24&type=chunk) - Revenue is primarily derived from advertising sales and fees from multi-channel video programming distributors (MVPDs) and virtual MVPDs (vMVPDs) for channel distribution rights[25](index=25&type=chunk) Broadcast Segment Network Affiliations (as of Dec 31, 2020) | Affiliation | Number of Channels | Number of Markets | Expiration Dates | | :---------- | :----------------- | :---------------- | :--------------- | | ABC | 40 | 30 | August 31, 2022 | | FOX | 57 | 42 | December 31, 2023| | CBS | 31 | 24 | Oct 31, 2023 - Dec 31, 2024 | | NBC | 25 | 17 | December 31, 2021| | CW | 48 | 37 | Aug 31, 2021 - Aug 31, 2024 | | MNT | 39 | 32 | August 31, 2021 | | Total Major Network Affiliates | 240 | | | [Local Sports Segment](index=12&type=section&id=Local%20Sports%20Segment) The local sports segment includes regional sports networks and a minority interest in YES Network, broadcasting professional sports games and holding exclusive long-term media rights - The local sports segment includes regional sports networks (RSNs) acquired from Disney in August 2019, a joint venture with the Chicago Cubs (Marquee Sports Network), and a minority equity interest in the YES Network[33](index=33&type=chunk) - The RSNs and YES Network broadcast approximately **2,270 professional sports games** and produced **12,200 hours of new content in 2020** (reduced due to COVID-19), reaching about **52 million subscribers nationally** (excluding YES Network)[34](index=34&type=chunk) - The RSNs hold exclusive long-term agreements with **16 MLB teams, 17 NBA teams, and 12 NHL teams**, and will be rebranded as Bally Sports networks[34](index=34&type=chunk)[35](index=35&type=chunk) [Other Segments](index=13&type=section&id=Other%20Segments) Other segments encompass owned networks, digital services, technical services, and non-media investments, diversifying the company's offerings - Owned Networks and Content: Includes Tennis Channel, Tennis Magazine, Tennis.com, and various networks like Comet, CHARGE!, TBD, and Stadium. Internally developed content includes Ring of Honor (ROH) wrestling, The National Desk, and Full Measure with Sharyl Attkisson[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - Digital and Internet: Operates STIRR (a free, ad-supported streaming app with over **6 million downloads**), Compulse Integrated Marketing (a digital agency), DataSphere Technologies (marketing services for small businesses), and NewsON (a local news app)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - Technical Services: Subsidiaries like Acrodyne Technical Services, Dielectric, and ONE Media 3.0 provide broadcast transmission system services, research and development for NEXTGEN TV, and partnerships for its deployment[44](index=44&type=chunk) - Non-media Investments: Includes private equity, mezzanine financing, and real estate investments such as Triangle Sign and Service, Jefferson Park land development, sustainability initiatives, and apartment complexes[45](index=45&type=chunk) [Customers](index=14&type=section&id=Customers) Three major customers individually accounted for over 10% of consolidated revenue in 2020 - In 2020, three customers (AT&T, Charter Communications, and Comcast) individually exceeded **10% of consolidated revenue** for the broadcast and local sports segments[46](index=46&type=chunk) [Operating Strategy](index=14&type=section&id=Operating%20Strategy) The company employs a multi-faceted operating strategy focused on programming, cost control, local market development, and technological innovation [Programming to Attract Viewership](index=14&type=section&id=Programming%20to%20Attract%20Viewership) The company strategically programs local news, network content, and live sports to attract viewers and satisfy advertisers - The company targets programming to attract viewership, meet community needs, and satisfy advertisers by offering local news, popular network/syndicated content, and live sports[47](index=47&type=chunk)[48](index=48&type=chunk) - RSNs plan to invest in popular sports programming and technologies to enhance viewer experience, including customized camera angles, audio tracks, social media integration, and statistics overlays[50](index=50&type=chunk)[51](index=51&type=chunk) [News Initiatives](index=14&type=section&id=News%20Initiatives) Local news is a core mission, complemented by national desks and investigative teams, to serve communities and attract advertisers - Local news is a core mission, serving communities with relevant information and attracting advertisers; **34% of stations' net time sales in 2020 were from local news**[52](index=52&type=chunk) - National news desk and Capitol Hill bureau provide broader context and accountability reporting, including programs like 'Connect to Congress' and 'Full Measure with Sharyl Attkisson'[54](index=54&type=chunk)[55](index=55&type=chunk) - Launched 'The National Desk' in January 2021 on **68 stations** and STIRR, offering commentary-free news from local and national perspectives. The company also has a national investigative team of **15 journalists** and over **30 local investigative reporters**[56](index=56&type=chunk)[57](index=57&type=chunk) [Sports Programming](index=15&type=section&id=Sports%20Programming) Live sports programming, including exclusive rights to major league teams, is a key driver of viewership and advertising revenue - Live sports remain highly popular, attracting loyal fans and desirable demographics for advertisers, often being the most-watched programming in local markets[60](index=60&type=chunk) - Through RSNs and YES Network, the company controls media rights for **16 MLB, 17 NBA, and 12 NHL teams**, reaching approximately **52 million subscribers nationally**[61](index=61&type=chunk) - Tennis Channel holds telecast rights for major tennis tournaments (US Open, Wimbledon, etc.) and offers content via Tennis.com and Tennis Channel Plus[62](index=62&type=chunk) [Control of Operating and Programming Costs](index=16&type=section&id=Control%20of%20Operating%20and%20Programming%20Costs) The company maintains disciplined cost management, leveraging national reach to negotiate favorable programming prices and improve margins - The company employs a disciplined approach to managing programming acquisition and operating costs, leveraging its national reach (**39% of the country**) to negotiate favorable programming prices[64](index=64&type=chunk) - RSNs manage programming rights costs to improve margins, balancing the portfolio to mitigate risks from losing team rights and emphasizing high-quality, low-cost production with technological advancements[65](index=65&type=chunk) [Developing Local Franchises](index=16&type=section&id=Developing%20Local%20Franchises) The company focuses on strengthening local sales forces to grow revenues through increased market share and multi-platform marketing solutions - Focuses on developing a strong local sales force (**600 marketing consultants, 90 local sales managers**) to grow local revenues by increasing market share, developing new business, and offering multi-platform marketing solutions[66](index=66&type=chunk) [Attract and Retain High Quality Management](index=16&type=section&id=Attract%20and%20Retain%20High%20Quality%20Management) Success is driven by attracting and retaining skilled managers through competitive compensation and internal career growth opportunities - Success is attributed to attracting and retaining highly-skilled managers through competitive compensation (base salary, long-term incentives, cash bonuses) and promoting internal career growth[67](index=67&type=chunk) [Multi-Channel Broadcasting](index=16&type=section&id=Multi-Channel%20Broadcasting) The company utilizes FCC rules to offer multiple digital channels, exploring diverse programming formats for profit and community service - Utilizes FCC rules allowing additional digital channels within allocated spectrum, providing viewers with **441 multi-channels as of December 31, 2020**, and exploring alternative programming formats for higher profits and community service[68](index=68&type=chunk) [Distribution Agreements](index=16&type=section&id=Distribution%20Agreements) The company secures distribution agreements with MVPDs and OTT providers to generate retransmission revenue and expand content reach - Maintains distribution agreements with MVPDs and OTT distributors, generating meaningful revenue streams from retransmission rights, and aims to expand these agreements leveraging local news, sports, and entertainment content[69](index=69&type=chunk) [Improvement and Maintenance of Our Distribution Platforms](index=16&type=section&id=Improvement%20and%20Maintenance%20of%20Our%20Distribution%20Platforms) Subsidiaries are vital for maintaining broadcast infrastructure and supporting the deployment of NEXTGEN TV technology - Acrodyne and Dielectric subsidiaries are crucial for servicing and manufacturing broadcast infrastructure, ensuring high-quality, uninterrupted content and supporting the buildout of NEXTGEN TV infrastructure[70](index=70&type=chunk) [Developing New Business](index=17&type=section&id=Developing%20New%20Business) The company develops new business models, including digital platforms and DTC/OTT initiatives, to expand revenue streams and audience engagement - Develops new business models, including online, mobile text messaging, social media advertising, and audience extension services, alongside traditional broadcasting[71](index=71&type=chunk) - Expands digital distribution platforms with a video management system for broadcast-to-digital streaming, dynamic ad replacement, and DTC/OTT initiatives like STIRR[72](index=72&type=chunk) - RSNs aim to maximize advertising revenue through non-game programming, multiplatform offerings, and capitalizing on legalized sports betting for increased ad spend and viewer engagement[74](index=74&type=chunk)[76](index=76&type=chunk) [Strategic Realignment of Media Portfolio](index=17&type=section&id=Strategic%20Realignment%20of%20Media%20Portfolio) The company regularly evaluates media acquisitions, dispositions, and content development for accretive opportunities that scale existing assets - Routinely reviews potential media acquisitions, dispositions, swaps, and original content development, focusing on disciplined, accretive opportunities that complement and scale existing television stations and RSNs[77](index=77&type=chunk) [Digital and Internet Initiatives](index=17&type=section&id=Digital%20and%20Internet%20Initiatives) Digital properties serve as innovative extensions of the core broadcast business, competing for diverse digital and advertising revenues - Digital properties like Compulse, STIRR, Datasphere, and NewsOn are innovative extensions of the core broadcast business, competing for digital, internet, network, and print revenues[78](index=78&type=chunk) [Development of Next Generation Wireless Platform](index=17&type=section&id=Development%20of%20Next%20Generation%20Wireless%20Platform) The company invests in NEXTGEN TV (ATSC 3.0) to merge broadcast and broadband content, enabling advanced data distribution and targeted advertising - Invests in NEXTGEN TV (ATSC 3.0), a new broadcast transmission standard merging broadcast and broadband content, enabling data distribution (text, audio, video, software) beyond traditional video[79](index=79&type=chunk)[80](index=80&type=chunk) - Partnerships (e.g., Cast.era with SK Telecom, BitPath with Nexstar) aim to develop broadcasting solutions, cloud infrastructure, targeted advertising, and deploy NEXTGEN TV capabilities, with launches in **12 markets by January 2021**[80](index=80&type=chunk)[81](index=81&type=chunk) [Monetization of Certain Intellectual Property Rights](index=18&type=section&id=Monetization%20of%20Certain%20Intellectual%20Property%20Rights) The company plans to monetize NEXTGEN TV-related patents through direct licensing, third-party agents, or patent pools - Developed NEXTGEN TV-related patents through ONE Media, LLC joint venture, with plans to monetize them directly, through third-party agents, or via a patent pool for licensing to equipment manufacturers[82](index=82&type=chunk) [Federal Regulation of Television Broadcasting](index=19&type=section&id=Federal%20Regulation%20of%20Television%20Broadcasting) Television broadcasting is subject to extensive FCC regulation covering licenses, ownership, content, and operational agreements - The ownership, operation, and sale of television stations are subject to FCC jurisdiction under the Communications Act of 1934, which includes assigning frequencies, issuing licenses, and regulating content and ownership[84](index=84&type=chunk) [License Grant and Renewal](index=19&type=section&id=License%20Grant%20and%20Renewal) Television stations operate under FCC licenses granted for eight-year terms, subject to renewal and potential petitions to deny - Television stations operate under FCC licenses granted for maximum eight-year terms, subject to renewal. While renewals are common, there's no guarantee, and petitions to deny can be filed[86](index=86&type=chunk)[87](index=87&type=chunk) - All of Sinclair's most recent license renewal applications were granted for the maximum term. A petition to deny the renewal of WBFF(TV) and two other Baltimore stations (WUTB(TV), WNUV(TV)) is currently pending[88](index=88&type=chunk) [Ownership Matters](index=19&type=section&id=Ownership%20Matters) FCC approval is required for ownership changes, with rules on national reach, local ownership, and foreign investment impacting operational flexibility - FCC approval is required for license assignments or transfers of control, considering factors like compliance with ownership limits, licensee 'character', and foreign ownership restrictions (generally **20% direct, 25% parent without approval**)[89](index=89&type=chunk)[91](index=91&type=chunk) - The Smith family holds approximately **81.1% of common voting rights**. The company's articles of incorporation limit alien ownership and allow repurchase of shares to comply[92](index=92&type=chunk) - The FCC's 2017 Ownership Order on Reconsideration, which eliminated radio/television and newspaper/broadcast cross-ownership rules, was vacated and remanded by the Third Circuit, with an appeal pending before the Supreme Court. Pre-2018 rules remain in effect[93](index=93&type=chunk) - The national television viewing audience reach cap is **39%**, with a UHF discount currently in effect (half of UHF station households counted). Sinclair's current reach is approximately **25% with the UHF discount**[94](index=94&type=chunk)[95](index=95&type=chunk) - Local television ownership rules generally permit two stations in the same market only if there's no digital overlap or if only one is a top-four rated station and the market has at least eight independent full-power stations. The Supreme Court is reviewing changes to these rules[96](index=96&type=chunk) [Local Marketing and Outsourcing Agreements](index=21&type=section&id=Local%20Marketing%20and%20Outsourcing%20Agreements) The company utilizes LMAs and other outsourcing agreements, which are subject to FCC attribution rules and ongoing legal challenges - The company uses Local Marketing Agreements (LMAs) and other outsourcing agreements (JSAs, SSAs) where it provides programming, sales, and operational services to other stations. Grandfathered LMAs (pre-Nov 5, 1996) are currently exempt from attribution rules[97](index=97&type=chunk) - The FCC's JSA attribution rule (requiring attribution if a party sells >**15% of advertising time** for another station in the same market) was reinstated after a Third Circuit decision, with a Supreme Court appeal pending. Termination or modification of LMAs/JSAs could adversely affect business[98](index=98&type=chunk) [Antitrust Regulation](index=21&type=section&id=Antitrust%20Regulation) The Department of Justice has increased scrutiny on television industry ownership concentration, particularly regarding outsourcing agreements - The Department of Justice (DOJ) has increased scrutiny of the television industry regarding ownership concentration, including LMAs and outsourcing agreements. Sinclair received three civil investigative demands (CIDs) from the DOJ in January 2019 related to JSAs and is cooperating[99](index=99&type=chunk)[100](index=100&type=chunk) [Satellite Carriage](index=22&type=section&id=Satellite%20Carriage) Satellite carriers are required to provide local TV signals, with provisions for good-faith negotiation and distant signal licenses made permanent - The Satellite Home Viewer Act (SHVA) and its extensions allow satellite carriers to provide local TV signals and require them to carry all local signals that assert carriage rights. STELAR sunsetted in 2019, but good-faith negotiation and distant signal license provisions were made permanent[101](index=101&type=chunk) [Must-Carry / Retransmission Consent](index=22&type=section&id=Must-Carry%20%2F%20Retransmission%20Consent) Broadcasters elect between 'must-carry' and 'retransmission consent' for cable carriage, with Sinclair opting for retransmission consent for all stations - Broadcasters make triennial elections for 'must-carry' (demanding carriage on cable) or 'retransmission consent' (negotiating fees for carriage). Sinclair has elected retransmission consent for all its stations[102](index=102&type=chunk) - FCC rules prohibit joint retransmission consent negotiations for non-commonly owned stations in the same market. A proposed rulemaking to examine 'totality of the circumstances test' for good-faith negotiations is pending[102](index=102&type=chunk)[103](index=103&type=chunk) [Network Non-Duplication / Syndicated Exclusivity / Territorial Exclusivity](index=22&type=section&id=Network%20Non-Duplication%20%2F%20Syndicated%20Exclusivity%20%2F%20Territorial%20Exclusivity) FCC rules allow local stations to demand blackouts of duplicate network or syndicated programming on distant signals, subject to potential modification - FCC rules allow local stations to demand blackouts of duplicate network or syndicated programming carried on 'distant signals' by cable operators, though exceptions exist. A pending rulemaking may eliminate or modify these rules[104](index=104&type=chunk) [Digital Television](index=23&type=section&id=Digital%20Television) FCC rules permit DTV channels for various services, requiring at least one free video channel and a fee on subscription-based ancillary services - FCC rules permit DTV channels for various services (HDTV, multiple SDTV, audio, data), requiring at least one free video channel and a **5% fee on gross revenues** from subscription-based or third-party ancillary services[105](index=105&type=chunk) [Programming and Operations](index=23&type=section&id=Programming%20and%20Operations) Broadcasters must serve the 'public interest' through responsive programming, record-keeping, and compliance with various content regulations - Broadcasters must serve the 'public interest' by presenting programming responsive to community needs, maintaining records, and complying with rules on political advertising, sponsorship identification, indecency, children's programming, and emergency alerts[106](index=106&type=chunk) [Other Pending Matters](index=23&type=section&id=Other%20Pending%20Matters) Congress and the FCC are considering new laws and policies that could impact broadcast operations, ownership, and profitability, including NEXTGEN TV deployment - Congress and the FCC are considering new laws and policies that could affect broadcast operations, ownership, and profitability, including technological innovations and competition from DTC offerings and internet services[107](index=107&type=chunk)[109](index=109&type=chunk) - The FCC authorized voluntary deployment of NEXTGEN TV, with rules taking effect in 2018 and further guidance in 2020. A petition for declaratory ruling on simulcast streams is pending[108](index=108&type=chunk) - The FCC's 'incentive auctions' reassigned some stations to new channels, with reimbursements from a **$3 billion fund**. Sinclair's stations have transitioned, and the 2018 Quadrennial Regulatory Review of ownership rules is pending[110](index=110&type=chunk)[111](index=111&type=chunk) [Other Considerations](index=24&type=section&id=Other%20Considerations) The summary of federal regulation is not exhaustive, with additional FCC and federal agency rules governing various business aspects - The summary of federal regulation is not exhaustive; additional FCC and federal agency regulations govern political broadcasts, advertising, equal employment opportunity, and other business matters[112](index=112&type=chunk) [Environmental Regulation](index=24&type=section&id=Environmental%20Regulation) The company may face environmental liabilities from past hazardous substance use, with potential future compliance costs or new regulations - The company may face environmental liabilities from past or nearby hazardous substance use at its facilities. While currently in substantial compliance, future compliance costs or new regulations (e.g., climate change) could increase[113](index=113&type=chunk) [Competition](index=24&type=section&id=Competition) Stations and RSNs face intense competition for audience and advertising revenue from diverse media platforms and larger companies - Stations and RSNs compete for audience share and advertising revenue with other TV stations, cable networks, and diverse media including OTT, video-on-demand, radio, newspapers, and digital platforms[114](index=114&type=chunk)[117](index=117&type=chunk) - Competition factors include program popularity, advertising rates, market size, demographic makeup, and the effectiveness of sales forces. The company believes its management, network affiliations, and local program acceptance provide competitive advantages[115](index=115&type=chunk)[120](index=120&type=chunk)[126](index=126&type=chunk) - RSNs face competition for telecast rights from national/regional cable networks, 'superstations', and internet distributors, with some competitors having advantages due to ownership by sports teams or leagues[118](index=118&type=chunk) [Human Capital](index=26&type=section&id=Human%20Capital) The company employs approximately 11,600 individuals, committed to a safe, ethical, and inclusive workplace with competitive compensation and wellness programs - As of December 31, 2020, the company had approximately **11,600 employees**, with about **2,000 represented by labor unions**[127](index=127&type=chunk) - Committed to a safe, ethical, and harassment-free workplace, supported by governance policies, a code of business conduct, and employee safety programs. Values diversity and inclusion, with broad outreach programs and mandatory diversity training[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - Regularly gathers employee feedback to improve experience and foster engagement, including a Remote Work Survey during COVID-19, and promotes innovation through initiatives like the Innovation Summit[131](index=131&type=chunk)[132](index=132&type=chunk) - Prioritizes employee health, safety, and wellness with affordable healthcare, improved paid time off, expanded sick leave, and an employee assistance program. Implemented strict COVID-19 safety protocols[133](index=133&type=chunk)[134](index=134&type=chunk) - Compensation includes market-competitive pay, 401(k) with increased match, employee stock purchase plan, healthcare, and life/disability insurance. Increased minimum hourly wage to **$15** and provided COVID-19 relief funds[135](index=135&type=chunk) [Protection of the Environment](index=27&type=section&id=Protection%20of%20the%20Environment) The company promotes environmental awareness, participates in sustainability initiatives, and invests in energy-efficient broadcast infrastructure - The company's digital content business has minimal environmental impact. It promotes environmental awareness through news, participates in sustainability initiatives (e.g., LED lighting, recycling), and installed over **100 energy-efficient TV transmitters**[136](index=136&type=chunk) [Available Information](index=28&type=section&id=Available%20Information) The company provides public access to its SEC filings and reports on its website, ensuring compliance with disclosure requirements - The company uses its website (www.sbgi.net) as a source of information, providing annual, quarterly, and current reports (10-K, 10-Q, 8-K) free of charge, and complies with SEC disclosure requirements[138](index=138&type=chunk) [ITEM 1A. RISK FACTORS](index=28&type=page&id=ITEM%201A.%20RISK%20FACTORS) The company faces numerous risks that could materially affect its business, financial condition, and results of operations [Risks relating to our operations](index=28&type=section&id=Risks%20relating%20to%20our%20operations) Operational risks include COVID-19 impacts, acquisition integration challenges, subscriber declines, intense competition, and cybersecurity threats - The COVID-19 pandemic has significantly impacted advertising and distribution revenue due to suspended sports seasons and reduced consumer spending, leading to potential impairment charges on goodwill and intangible assets[140](index=140&type=chunk)[142](index=142&type=chunk) - Strategic acquisitions and investments, such as the Acquired RSNs, increase leverage and debt service requirements, posing risks like integration challenges, failure to achieve synergies, and assumption of unexpected liabilities[146](index=146&type=chunk)[147](index=147&type=chunk) - A decline in Distributor subscribers or a shift to services that exclude the company's programming networks could materially adversely affect revenues, as seen with **high single-digit subscriber falls for Acquired RSNs in 2020**[150](index=150&type=chunk)[152](index=152&type=chunk) - Inability to renegotiate distribution agreements on comparable or more favorable terms, or requirements to share revenue with affiliated networks, could decrease distribution revenues[153](index=153&type=chunk) - Intense, wide-ranging competition for viewers and advertisers from other programming networks, OTT services, mobile media, and large companies with greater financial resources could impact viewership and advertising revenues[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - New technologies (e.g., more channels, digital recording) and changes in ratings methodologies (e.g., Nielsen's issues due to COVID-19) may reduce advertising revenues and increase operating costs[158](index=158&type=chunk) - Dependence on unpredictable programming appeal and increasing programming costs (network and syndicated) can negatively affect business and results of operations, especially during weak advertising markets[161](index=161&type=chunk)[162](index=162&type=chunk) - Changes in retransmission consent regulations, including pending FCC rulemakings on 'good faith' negotiations and exclusivity rules, could adversely affect distribution revenues[163](index=163&type=chunk)[167](index=167&type=chunk) - Theft or misappropriation of intellectual property (programming, technology, digital content) can negatively impact revenues and operations. Litigation to enforce IP rights is costly and distracting[168](index=168&type=chunk)[169](index=169&type=chunk) - Cybersecurity risks, incidents, data privacy breaches, and IT failures could disrupt operations, lead to improper disclosure of information, damage reputation, and incur significant remediation costs[172](index=172&type=chunk) - Labor disputes, legislation, and union activity (affecting ~**2,000 employees**) could lead to strikes, production delays, increased costs, and reduced profit margins, impacting advertising revenues[173](index=173&type=chunk) - Economic environment effects, including subscriber erosion and the COVID-19 pandemic, led to a **$4,264 million non-cash impairment charge** on goodwill and definite-lived intangible assets in 2020 for the local sports segment[174](index=174&type=chunk) - Claims may be brought against the company for content posted on its internet services (websites, social platforms) by users, leading to costly defense and diversion of management attention[176](index=176&type=chunk) [Risks related to our concentrated voting stock ownership](index=35&type=section&id=Risks%20related%20to%20our%20concentrated%20voting%20stock%20ownership) The Smith family's concentrated voting power controls shareholder matters and could trigger debt obligations upon significant divestitures - The Smith family holds approximately **81.1% of common stock voting rights**, controlling most matters submitted to a shareholder vote, including director elections and corporate transactions, potentially leading to actions not in the interest of other security holders[177](index=177&type=chunk) - Significant divestitures by the Smiths could reduce their voting control below **51%**, potentially triggering debt buyback offers, defaults under credit agreements, or termination rights for LMAs and other outsourcing agreements with Cunningham Broadcasting Corporation[179](index=179&type=chunk) [Risks relating to our broadcast segment](index=36&type=section&id=Risks%20relating%20to%20our%20broadcast%20segment) The broadcast segment faces risks from advertising volatility, programming costs, loss of network affiliations, regulatory fines, and ownership rule changes - Broadcast advertising revenue is highly volatile, influenced by factors like automotive/services advertising levels, political advertising cycles (**27% of revenue in 2020**), economic health, programming popularity, and competition from other media[181](index=181&type=chunk)[182](index=182&type=chunk) - Purchasing television programming in advance based on revenue expectations carries risks; if actual revenues are lower, the company could experience losses, impacting security value[185](index=185&type=chunk)[186](index=186&type=chunk) - Internally originated programming requires large upfront investment, and its commercial success is unpredictable, depending on public acceptance and competition, which could lead to losses[187](index=187&type=chunk) - Loss of network affiliations or inability to renegotiate favorable terms could result in losing significant programming, requiring costly replacement content, and reducing revenues[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - Risk of investigations or fines from governmental authorities (e.g., FCC indecency, children's programming, sponsorship identification violations) due to live news or third-party content, potentially delaying license renewals. In 2020, the company paid **$48 million** to resolve FCC matters[191](index=191&type=chunk)[192](index=192&type=chunk) - Federal regulation limits operating flexibility, requiring FCC approval for licenses, renewals, and acquisitions. Non-renewal or delayed approvals could lead to revenue loss[194](index=194&type=chunk) - FCC's multiple ownership rules (National Ownership Rule, UHF discount, Local Television Ownership Rule) and federal antitrust regulation may limit ability to operate multiple stations, reduce revenue, or prevent cost reductions. Supreme Court decisions are pending on some rules[195](index=195&type=chunk)[196](index=196&type=chunk) - If required to terminate or modify LMAs, JSAs, and other outsourcing agreements, the company could face loss of revenues, increased costs, losses on investments, and termination penalties[201](index=201&type=chunk) - Investment in new technology initiatives, such as NEXTGEN TV, may not result in usable technology or monetizable intellectual property, leading to potential loss of investment[205](index=205&type=chunk) [Risks relating to our local sports segment](index=41&type=section&id=Risks%20relating%20to%20our%20local%20sports%20segment) The local sports segment is vulnerable to media rights non-renewal, distributor losses, content criteria failures, joint venture risks, and team popularity fluctuations - Media rights agreements with professional sports teams have varying durations; inability to renew on acceptable terms or loss of rights (e.g., due to outbidding, teams forming own networks, or league decisions on digital rights) could adversely affect revenues and operations[206](index=206&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - Success of the local sports segment heavily depends on distribution revenue from Distributors and OTT providers. Loss of major Distributors (e.g., Dish, YouTube TV, Hulu in 2019-2020) or renewal on less favorable terms can materially impact revenues[210](index=210&type=chunk)[211](index=211&type=chunk) - Failure to meet content criteria (e.g., minimum professional event telecasts) in distribution agreements can lead to fee reductions, rebates, or termination. COVID-19 disruptions in 2020 led to **$420 million in revenue reductions** and accrued rebates[212](index=212&type=chunk) - Joint venture arrangements for RSNs are subject to operational risks, including impasses on decisions, inconsistent goals among partners, partner bankruptcy, mandatory capital expenditures, and exit rights requiring the company to purchase interests[217](index=217&type=chunk)[218](index=218&type=chunk) - The local sports segment's success is substantially dependent on the popularity and on-field success of MLB, NBA, and NHL teams whose media rights are controlled. Declining popularity or failure to reach post-season play can negatively impact viewership and advertising revenues[220](index=220&type=chunk) - Advertising revenue volatility in the local sports segment is influenced by the success of automotive/service industries, economic health, programming/team popularity, new rating methodologies, and competition from other media[221](index=221&type=chunk)[224](index=224&type=chunk) - Labor disputes (player strikes, lockouts) in professional sports leagues could prevent airing of scheduled games, decreasing revenues, and potentially obligating the company to make payments to teams despite disruptions[225](index=225&type=chunk)[226](index=226&type=chunk) - The RSNs may need to obtain FCC-regulated licenses for video distribution uplinks and downlinks upon termination of existing transition services agreements, with no guarantee of FCC consent[227](index=227&type=chunk) [Risks relating to our debt](index=47&type=section&id=Risks%20relating%20to%20our%20debt) Substantial debt levels pose risks to servicing obligations, cash flow for investments, and vulnerability to economic conditions and covenant breaches - The company has a substantial debt level of **$12,551 million at December 31, 2020**, compared to a shareholders' deficit of **$1,185 million**, posing risks to debt servicing, cash flow for investments, and vulnerability to adverse economic conditions[229](index=229&type=chunk)[230](index=230&type=chunk) - Inability to generate sufficient cash flow to service debt obligations could force the company to reduce investments, dispose of assets, seek additional capital, or restructure debt, which may not be successful[231](index=231&type=chunk)[232](index=232&type=chunk) - Despite current debt levels, the company and its subsidiaries can incur substantially more debt, further exacerbating financial risks, as existing debt instruments have qualifications and exceptions to restrictions on additional debt[234](index=234&type=chunk) - Variable rate debt (approximately **$5,839 million at Dec 31, 2020**) exposes the company to interest rate risk; a **1% increase in rates would raise interest expense by $57 million**[235](index=235&type=chunk)[387](index=387&type=chunk) - Covenants in financing agreements limit actions that could increase security value (e.g., restrictions on debt, dividends, asset sales, mergers) and may require actions that decrease value, potentially leading to default and acceleration of debt[236](index=236&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) - A failure to comply with debt covenants could trigger cross-default provisions, accelerating amounts due and potentially leading to foreclosure on secured assets or bankruptcy[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Issuance of equity to third parties in RSN subsidiaries could cause existing subsidiary guarantors of DSG notes to cease being wholly-owned, substantially decreasing their total assets, net income, and attributable EBITDA, adversely affecting ability to meet DSG note obligations[243](index=243&type=chunk) - Joint venture agreements may contain provisions requiring cash payments (e.g., purchasing partners' equity interests at pre-determined prices), which would reduce available cash and ability to repay debt obligations[244](index=244&type=chunk)[245](index=245&type=chunk) [General risk factors](index=51&type=section&id=General%20risk%20factors) Adverse financial and economic conditions can negatively impact the company's industry, business, and financial results - Adverse financial and economic conditions can negatively impact the company's industry, business, and financial results, affecting advertising revenue (especially from automotive and service industries), asset divestiture values, business partnerships, and access to capital[246](index=246&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=51&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments from the SEC - There are no mine safety disclosures to report[250](index=250&type=chunk) [ITEM 2. PROPERTIES](index=51&type=section&id=ITEM%202.%20PROPERTIES) The company owns and leases various facilities across the U.S., including offices, studios, sales offices, and tower/transmitter sites, all believed to be in good operating condition and adequate for current business operations - The company owns and leases offices, studios, sales offices, and tower/transmitter sites throughout the U.S., strategically located for maximum signal coverage[248](index=248&type=chunk) - All properties are considered to be in good operating condition, subject to normal wear and tear, and adequate for current business operations, with no single property representing a material amount of total properties[248](index=248&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=51&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in various lawsuits, claims, and regulatory matters in the ordinary course of business, with no material judgments or decisions rendered to date - The company is a party to lawsuits, claims, and regulatory matters in the ordinary course of business, currently in various stages with no material judgments or decisions rendered[249](index=249&type=chunk) - Further discussion of certain pending lawsuits can be found in Note 13. Commitments and Contingencies within the Consolidated Financial Statements[249](index=249&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=51&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) The company has no disclosures related to mine safety - There are no mine safety disclosures to report[250](index=250&type=chunk) [PART II](index=53&type=section&id=PART%20II) This section covers the company's common equity market, selected financial data, management's discussion, and internal controls [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=53&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Sinclair's Class A Common Stock is traded on NASDAQ under 'SBGI', while Class B Common Stock is not publicly traded. The company intends to pay regular quarterly dividends, subject to Board discretion and financial performance. Stock performance showed a cumulative total return of **110.82% from 2015-2020**, lagging the NASDAQ Composite and Telecommunications Indices. The company repurchased approximately **19 million shares of Class A Common Stock for $343 million in 2020** [Common Stock Market and Holders](index=53&type=section&id=Common%20Stock%20Market%20and%20Holders) Class A Common Stock is listed on NASDAQ, while Class B Common Stock is not publicly traded, with a limited number of record holders - Class A Common Stock is listed on NASDAQ under 'SBGI'. Class B Common Stock is not publicly traded[252](index=252&type=chunk) - As of February 25, 2021, there were approximately **40 shareholders of record** for Class A Common Stock[253](index=253&type=chunk) [Dividends](index=53&type=section&id=Dividends) The company intends to pay regular quarterly dividends, subject to Board discretion, financial performance, and covenant restrictions - The company intends to pay regular quarterly dividends, with future dividends at the discretion of the Board of Directors, based on financial results, cash requirements, and covenant restrictions[254](index=254&type=chunk) - In February 2021, a quarterly cash dividend of **$0.20 per share** was declared[255](index=255&type=chunk) [Comparative Stock Performance](index=54&type=section&id=Comparative%20Stock%20Performance) The company's stock performance from 2015-2020 showed a cumulative return of **110.82%**, lagging broader market and telecommunications indices Comparative Stock Performance (December 31, 2015 = 100.00) | Company/Index/Market | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | | :------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Sinclair Broadcast Group, Inc. | 100.00 | 104.84 | 121.50 | 86.67 | 111.83 | 110.82 | | NASDAQ Composite Index | 100.00 | 108.87 | 141.13 | 137.12 | 187.44 | 271.64 | | NASDAQ Telecommunications Index | 100.00 | 112.56 | 135.96 | 125.10 | 158.73 | 192.30 | [Stock Repurchases](index=54&type=section&id=Stock%20Repurchases) The company did not repurchase any stock during the quarter ended December 31, 2020 - For the quarter ended December 31, 2020, there were no stock repurchases[258](index=258&type=chunk) [ITEM 6. SELECTED FINANCIAL DATA](index=55&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) The selected consolidated financial data highlights a significant operating loss and net loss in 2020, primarily due to a substantial impairment of goodwill and definite-lived intangible assets. Total revenues increased in 2020, driven by media revenues, while total debt remained high. Basic and diluted EPS were negative in 2020, contrasting with positive figures in prior years Selected Statements of Operations Data (In millions, except per share data) | Statements of Operations Data: | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------- | :--- | :--- | :--- | :--- | :--- | | Media revenues | $5,843 | $4,046 | $2,919 | $2,567 | $2,521 | | Non-media revenues | 100 | 194 | 136 | 69 | 102 | | Total revenues | 5,943 | 4,240 | 3,055 | 2,636 | 2,623 | | Operating (loss) income | (2,772) | 470 | 660 | 737 | 602 | | Net (loss) income attributable to Sinclair Broadcast Group | (2,414) | 47 | 341 | 576 | 245 | | Basic earnings per share | (30.20) | 0.52 | 3.38 | 5.77 | 2.62 | | Diluted earnings per share | (30.20) | 0.51 | 3.35 | 5.72 | 2.60 | | Dividends declared per share | 0.80 | 0.80 | 0.74 | 0.72 | 0.71 | Selected Balance Sheet Data (In millions) | Balance Sheet Data: | 2020 | 2019 | 2018 | 2017 | 2016 | | :---------------------------- | :----- | :----- | :----- | :----- | :----- | | Cash and cash equivalents | $1,259 | $1,333 | $1,060 | $681 | $260 | | Total assets | $13,382| $17,370| $6,572 | $6,784 | $5,963 | | Total debt | $12,551| $12,438| $3,893 | $4,049 | $4,204 | | Redeemable noncontrolling interests | $190 | $1,078 | $— | $— | $— | | Total (deficit) equity | $(1,185)| $1,694 | $1,600 | $1,534 | $558 | [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=56&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides an in-depth analysis of Sinclair's financial performance, condition, and operational results, including an executive overview, critical accounting policies, and detailed segment-level performance. It highlights the significant impact of the COVID-19 pandemic on seasonality and financial outcomes, particularly the impairment charges in the local sports segment. The discussion also covers liquidity, capital resources, and contractual obligations, emphasizing the company's ability to manage debt and fund operations amidst market uncertainties [Executive Overview](index=57&type=section&id=Executive%20Overview) Sinclair is a diversified media company focused on broadcast and local sports, pursuing strategic partnerships, NEXTGEN TV deployment, and managing distribution agreements - Sinclair is a diversified television media company with broadcast and local sports as its two reportable segments, complemented by other businesses like owned networks, digital services, and technical services[265](index=265&type=chunk)[266](index=266&type=chunk) - Key events in 2020-2021 include a strategic partnership with Bally's for sports betting technology, the sale of two stations, acquisition of Zyp Media, and the launch of 'The National Desk' news service[271](index=271&type=chunk)[272](index=272&type=chunk)[274](index=274&type=chunk) - Distribution agreements were renewed with FOX, ViacomCBS, Comcast, and Verizon, but three major Distributors (Dish, YouTube TV, Hulu) dropped carriage of RSNs in 2019-2020[274](index=274&type=chunk) - Significant progress in NEXTGEN TV deployment, with launches in **12 markets by January 2021**, and the formation of the Cast.era joint venture with SK Telecom[278](index=278&type=chunk) - Financing activities included redeeming **$550 million of Redeemable Subsidiary Preferred Equity**, repurchasing **$343 million of Class A Common Stock**, and issuing **$750 million in senior secured notes**[279](index=279&type=chunk)[280](index=280&type=chunk) - Industry trends include declining traditional MVPD subscribers (offset by vMVPD growth), consolidation among Distributors, record political advertising in 2020, and the FCC permitting multi-channel broadcasts[285](index=285&type=chunk) [Critical Accounting Policies and Estimates](index=63&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statement preparation involves significant estimates for revenue, goodwill, program costs, and taxes, with increased uncertainty due to COVID-19 - The preparation of financial statements requires significant estimates and judgments, particularly for revenue recognition, goodwill and intangible assets, program contract costs, sports programming rights, income taxes, and variable interest entities[286](index=286&type=chunk)[287](index=287&type=chunk) - The COVID-19 pandemic introduces significant uncertainty, impacting estimates and assumptions, requiring increased judgment and carrying higher variability and volatility[288](index=288&type=chunk) - Revenue recognition for advertising is based on delivery of spots/impressions, with deferrals for ratings shortfalls. Distribution revenue is recognized as signals are provided, based on contractual rates and estimated subscribers[289](index=289&type=chunk)[290](index=290&type=chunk) - Goodwill and indefinite-lived intangible assets are evaluated for impairment annually or more frequently. A **$4,264 million non-cash impairment charge** was recorded in Q3 2020 for the local sports segment due to subscriber erosion and COVID-19 impacts[292](index=292&type=chunk)[295](index=295&type=chunk) - Program contract costs are amortized over the period of economic benefit, with fair value assessments based on future advertising revenues. Sports programming rights are amortized over each season, with amortization suspended during COVID-19 related game delays[297](index=297&type=chunk)[298](index=298&type=chunk)[482](index=482&type=chunk) - Deferred tax assets and liabilities are recognized based on temporary differences. A valuation allowance is provided for deferred tax assets if realization is not probable, with a significant increase in 2020 due to reduced future operating income and RSN impairment[299](index=299&type=chunk)[300](index=300&type=chunk) - The company consolidates Variable Interest Entities (VIEs) where it is the primary beneficiary, having power to direct activities and absorbing significant losses/returns. This includes certain third-party licensees and RSN joint ventures[302](index=302&type=chunk) [Results of Operations](index=66&type=section&id=Results%20of%20Operations) The company's operating results in 2020 were significantly impacted by the COVID-19 pandemic, disrupting usual seasonality and leading to a consolidated operating loss of **$(2,772) million**, primarily due to a **$4,264 million impairment charge** in the local sports segment. Despite this, total revenues increased to **$5,943 million**, driven by higher media revenues, particularly political advertising in the broadcast segment and the full-year inclusion of Acquired RSNs. Expenses also rose, notably media programming and production costs. The company anticipates increased distribution and advertising revenue in 2021, contingent on sports season completion and macroeconomic recovery [Seasonality / Cyclicality](index=66&type=section&id=Seasonality%20%2F%20Cyclicality) Operating results are subject to cyclical political advertising and seasonal fluctuations, further disrupted by the COVID-19 pandemic - Broadcast segment operating results are subject to cyclical fluctuations from political advertising (higher in even-numbered years, especially presidential election years like 2020) and seasonal advertising increases in Q2 and Q4[307](index=307&type=chunk) - Local sports segment results fluctuate based on MLB, NBA, and NHL seasons, with Q2 and Q3 typically higher. However, COVID-19 disrupted usual seasonality in 2020 and may continue to do so in 2021[308](index=308&type=chunk) [Consolidated Operating Data](index=66&type=section&id=Consolidated%20Operating%20Data) Consolidated operating data reflects significant revenue growth in 2020, alongside a substantial operating loss driven by impairment charges Consolidated Operating Data (In millions) | | 2020 | 2019 | 2018 | | :------------------------------------------ | :--- | :--- | :--- | | Media revenues | $5,843 | $4,046 | $2,919 | | Non-media revenues | 100 | 194 | 136 | | Total revenues | 5,943 | 4,240 | 3,055 | | Media programming and production expenses | 2,735 | 2,073 | 1,191 | | Media selling, general and administrative expenses | 832 | 732 | 630 | | Depreciation and amortization expenses | 674 | 424 | 280 | | Amortization of program contract costs | 86 | 90 | 101 | | Non-media expenses | 91 | 156 | 122 | | Corporate general and administrative expenses | 148 | 387 | 111 | | Impairment of goodwill and definite-lived intangible assets | 4,264 | — | — | | Gain on asset dispositions and other, net of impairment | (115) | (92) | (40) | | Operating (loss) income | $(2,772) | $470 | $660 | | Net (loss) income attributable to Sinclair Broadcast Group | $(2,414) | $47 | $341 | [The Impact of COVID-19 on our Results of Operations](index=66&type=section&id=The%20Impact%20of%20COVID-19%20on%20our%20Results%20of%20Operations) COVID-19 negatively impacted advertising and distribution revenues, leading to rebates and an impairment charge, with future impacts remaining uncertain - COVID-19 negatively impacted broadcast advertising revenue in 2020 due to lower local and national net sales, partially offset by a **$334 million increase in political advertising**[312](index=312&type=chunk)[318](index=318&type=chunk) - Local sports segment advertising revenue decreased in Q2 2020 due to postponed NBA, NHL, and MLB seasons, but increased in Q3 with event resumptions. Distribution revenue was negatively impacted by subscriber erosion and three Distributors dropping RSN carriage, leading to **$420 million in rebates**[313](index=313&type=chunk)[499](index=499&type=chunk) - The company's business was designated essential, but facilities experienced temporary disruptions. The full extent of COVID-19's future impact on financial condition, results, and cash flows remains uncertain[314](index=314&type=chunk)[511](index=511&type=chunk) [Broadcast Segment](index=68&type=section&id=Broadcast%20Segment) The broadcast segment saw revenue growth in 2020 driven by political advertising and higher distribution rates, despite increased programming expenses Broadcast Segment Revenue and Expenses (In millions) | | 2020 | 2019 | 2018 | Percent Change '20 vs.'19 | Percent Change '19 vs.'18 | | :------------------------------------------ | :--- | :--- | :--- | :------------------------ | :------------------------ | | Distribution revenue | $1,414 | $1,341 | $1,186 | 5% | 13% | | Advertising revenue | 1,364 | 1,268 | 1,484 | 8% | (15)% | | Other media revenue | 144 | 81 | 45 | 78% | 80% | | Media revenues | $2,922 | $2,690 | $2,715 | 9% | (1)% | | Operating income | $789 | $546 | $751 | 45% | (27)% | - Distribution revenue increased by **$73 million in 2020 (5% YoY)** due to higher rates, partially offset by subscriber decreases. Advertising revenue increased by **$96 million in 2020 (8% YoY)** primarily due to a **$334 million increase in political advertising**, offsetting COVID-19 related declines in other categories[317](index=317&type=chunk)[318](index=318&type=chunk) - Media programming and production expenses increased by **$84 million in 2020 (7% YoY)** due to higher network affiliation fees, partially offset by decreases in advertising, employee compensation, and travel costs due to COVID-19[324](index=324&type=chunk) Broadcast Segment Advertising Revenue by Programming Type (Excluding Digital) | Programming Type | 2020 | 2019 | 2018 | | :---------------------- | :--- | :--- | :--- | | Local news | 34% | 33% | 34% | | Syndicated/Other programming | 27% | 29% | 28% | | Network programming | 24% | 24% | 25% | | Sports programming | 12% | 11% | 10% | | Paid programming | 3% | 3% | 3% | [Local Sports Segment](index=71&type=section&id=Local%20Sports%20Segment) The local sports segment's revenue increased significantly in 2020 due to the full-year inclusion of Acquired RSNs, but was offset by a major impairment charge Local Sports Segment Revenue and Expenses (In millions) | | 2020 | 2019 (b) | | :------------------------------------------ | :--- | :------- | | Distribution revenue | $2,472 | $1,029 | | Advertising revenue | 196 | 103 | | Other media revenue | 18 | 7 | | Media revenue | $2,686 | $1,139 | | Media programming and production expenses | $1,361 | $769 | | Media selling, general and administrative expenses | 243 | 90 | | Depreciation and amortization expenses | 410 | 157 | | Corporate general and administrative | 10 | 93 | | Impairment of goodwill and definite-lived intangible assets | 4,264 | — | | Operating (loss) income | $(3,602) | $30 | | Income from equity method investments | $6 | $18 | | Other income, net | $160 | $10 | - Media revenue increased to **$2,686 million in 2020 from $1,139 million in 2019**, primarily due to the full-year inclusion of Acquired RSNs. Distribution revenue was reduced by **$420 million in 2020** due to rebates from lower professional sports game counts caused by COVID-19[335](index=335&type=chunk) - Advertising revenue decreased in Q2 2020 but increased to **$124 million in Q3 2020** with the resumption of sports events. Media programming and production expenses increased to **$1,361 million in 2020**, mainly from amortization of sports programming rights[336](index=336&type=chunk)[337](index=337&type=chunk) - A total impairment loss of **$4,264 million** was recorded in 2020 for goodwill and definite-lived intangible assets in the local sports segment[340](index=340&type=chunk) [Other Segment](index=73&type=section&id=Other%20Segment) The 'Other' segment experienced media revenue growth from owned networks, while non-media revenue declined due to reduced broadcast equipment sales Other Segment Revenue and Expenses (In millions) | | 2020 | 2019 | 2018 | Percent Change '20 vs.'19 | Percent Change '19 vs.'18 | | :------------------------------------------ | :--- | :--- | :--- | :------------------------ | :------------------------ | | Distribution revenue | $199 | $130 | $113 | 53% | 15% | | Advertising revenue | 131 | 110 | 75 | 19% | 47% | | Other media revenues | 7 | 13 | 16 | (46)% | (19)% | | Media revenues | $337 | $253 | $204 | 33% | 24% | | Non-media revenues | $114 | $217 | $146 | (47)% | 49% | | Operating income (loss) | $65 | $26 | $(78) | (150)% | (133)% | | Loss from equity method investments | $(42) | $(53) | $(61) | (21)% | (13.1)% | - Media revenue increased by **$84 million in 2020 (33% YoY)** due to higher distribution and advertising revenue from owned networks. Non-media revenue decreased by **$103 million in 2020 (47% YoY)** due to reduced broadcast equipment sales as the FCC's spectrum repack process wound down[347](index=347&type=chunk) - Media expenses decreased by **$3 million in 2020 (1% YoY)**, while non-media expenses decreased by **$70 million (42% YoY)** primarily due to lower cost of goods related to broadcast equipment sales[348](index=348&type=chunk) [Corporate and Unallocated Expenses](index=74&type=section&id=Corporate%20and%20Unallocated%20Expenses) Corporate expenses decreased in 2020 due to lower legal costs, while interest expense rose due to acquisition financing Corporate and Unallocated Expenses (In millions) | | 2020 | 2019 | 2018 | Percent Change '20 vs.'19 | Percent Change '19 vs.'18 | | :------------------------------------------ | :--- | :--- | :--- | :------------------------ | :------------------------ | | Corporate general and administrative expenses | $148 | $387 | $111 | (62)% | 249% | | Interest expense including amortization of debt discount and deferred financing costs | $656 | $422 | $292 | 55% | 45% | | Loss on extinguishment of debt | $(10) | $(10) | $— | —% | n/m | | Other income, net | $325 | $6 | $3 | n/m | 100% | | Income tax benefit | $720 | $96 | $36 | 650% | 167% | | Net income attributable to redeemable noncontrolling interests | $(56) | $(48) | $— | 17% | n/m | | Net loss (income) attributable to noncontrolling interests | $71 | $(10) | $(5) | (810)% | 100% | - Corporate general and administrative expenses decreased by **$239 million in 2020 (62% YoY)**, primarily due to a **$258 million decrease in legal, consulting, and regulatory costs** related to litigation and the RSN acquisition[351](index=351&type=chunk) - Interest expense increased by **$234 million in 2020 (55% YoY)** due to acquisition-related financing for Acquired RSNs being outstanding for the full year, partially offset by refinancing activities and lower LIBOR[354](index=354&type=chunk) - Other income, net, increased by **$319 million in 2020**, driven by a **$158 million increase in investment value** and a **$159 million measurement adjustment gain** on variable payment obligations from the RSN acquisition[357](index=357&type=chunk) - Income tax benefit increased to **$720 million in 2020**, resulting in an effective tax rate of **22.9%**, primarily due to the RSN impairment charge and a **$61 million benefit from the CARES Act** allowing federal net operating loss carryback[358](index=358&type=chunk)[628](index=628&type=chunk) [Liquidity and Capital Resources](index=75&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, Sinclair had **$2,183 million in net working capital** and **$1,259 million in cash**. The company's primary liquidity sources are cash on hand, operating cash flows, and borrowing capacity under Bank Credit Agreements and the A/R Facility. Key financing activities in 2020 included establishing a **$250 million A/R Facility**, repaying revolving credit facilities, issuing **$750 million in secured notes**, and redeeming **$550 million of Redeem

Financial Data and Key Metrics Changes - The fourth quarter media revenues reached $986 million, exceeding guidance by $25 million, driven by record political ad revenue of $204 million, which was $10 million higher than expected [29][30] - Adjusted EBITDA for the quarter was $408 million, a $132 million increase year-over-year, surpassing expectations due to higher advertising revenues and lower costs [30][35] - Total company media revenues for the year were $5.843 billion, with adjusted EBITDA of $1.888 billion, down 12% compared to the prior year pro forma [35][36] Business Line Data and Key Metrics Changes - Local sports media revenues for Q4 were $531 million, $257 million lower than the prior year, primarily due to $168 million in distributor rebates accrued [31][34] - Local sports adjusted EBITDA was $209 million for the quarter, $26 million below guidance due to additional distributor rebate accruals [34] - Broadcast and other segments saw media revenues of $986 million, with adjusted EBITDA of $408 million, reflecting strong political advertising and better-than-expected core advertising revenues [29][30] Market Data and Key Metrics Changes - Pro forma distribution revenues increased by 8% year-over-year despite mid single-digit subscriber churn [30] - Core advertising revenues showed improvement, with automotive advertising up 38.5% quarter-over-quarter [88] - The company anticipates continued elevated subscriber churn and challenges in the distribution market due to the pandemic [39][41] Company Strategy and Development Direction - The company is focusing on gamification initiatives, including a partnership with Bally's for sports betting, which is expected to enhance viewer engagement and revenue [10][19] - Plans to launch a new Bally's sports app in spring 2021 to provide a personalized viewing experience [16][17] - The company is transitioning RSN operations to a new state-of-the-art facility, which will allow for the operation of up to 50 RSN channels [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges posed by COVID-19, including uncertainty in subscriber churn and league schedules [16][38] - The company remains optimistic about advertising recovery as economic indicators improve and vaccinations roll out [88][90] - Management expects to exceed budgeted first-quarter revenue numbers from an advertising perspective, driven by a strong recovery in the economy [88] Other Important Information - The company donated over $1 million and helped raise an additional $30 million for charitable causes during the pandemic [13] - The company has $880 million remaining on its share buyback authorization, having retired 21% of its shares outstanding last year [58] Q&A Session Summary Question: What are the assumptions regarding distribution and retransmission? - Management noted that the only significant retransmission renewal this year is with DISH, and they are managing expectations around distributor renewals [46][48] Question: How is the company addressing churn and capital allocation? - The company is building in high single-digit churn for Diamond and mid-single-digit churn for broadcast, while also considering share buybacks and future investment opportunities [57][58] Question: What is the strategy for Bally's partnership and RSN performance? - The strategy involves deep integration with Bally's to drive user engagement and the expectation of achieving performance targets for user thresholds [62] - Management indicated that the RSNs are expected to have a range of EBITDA expectations due to various moving parts and uncertainties [63]