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

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

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

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

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (mark one) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED December 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 juri ...

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 ...

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 September 30, 2021 None 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 ...

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)