Sinclair Broadcast Group(SBGI) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Presents unaudited consolidated financial statements and accompanying notes for the periods ended June 30, 2021 and 2020 CONSOLIDATED BALANCE SHEETS 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] - 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] - 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] CONSOLIDATED STATEMENTS OF OPERATIONS 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] - 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] - 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] - 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] CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 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] - 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] CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS 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] - Dividends declared and paid on Class A and Class B Common Stock totaled $(30) million for the six months ended June 30, 2021[21] - 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] CONSOLIDATED STATEMENTS OF CASH FLOWS 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] - 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] - 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] - 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] NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 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 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] - 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] 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] - 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] - A quarterly dividend of $0.20 per share was declared in August 2021, payable on September 15, 2021[54] 2. ACQUISITIONS AND DISPOSITIONS OF ASSETS 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] - 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] - Sold controlling interest in Triangle Sign & Service, LLC for $12 million in June 2021, recognizing a $6 million gain[59] - 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] 3. OTHER ASSETS 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] - 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] - 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][69] 4. NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING 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] - 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] - 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][219] - STG guaranteed $46 million of debt of certain third parties as of June 30, 2021, including $14 million related to consolidated VIEs[76] 5. REDEEMABLE NONCONTROLLING INTERESTS 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] - Dividends accrued on Redeemable Subsidiary Preferred Equity were $8 million for the six months ended June 30, 2021[78] - A Subsidiary Equity Put Right had a value of $15 million as of June 30, 2021[79] 6. COMMITMENTS AND CONTINGENCIES 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] - 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] - Accrued $8 million in additional expenses for FCC legal matters during the three months ended June 30, 2021, related to consolidated VIEs[87] - 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] 7. EARNINGS PER SHARE 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] - 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] 8. SEGMENT DATA 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] 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][94] - 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][94] 9. VARIABLE INTEREST ENTITIES 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][97] 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] - All liabilities of consolidated VIEs are non-recourse to the company, except for the debt of certain VIEs[99] - 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] 10. RELATED PERSON TRANSACTIONS 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] - 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][107] - Consolidated revenues included $72 million for the six months ended June 30, 2021, related to Cunningham Stations[109] - YES Network, an equity method investee, paid the company $2 million for management services for the six months ended June 30, 2021[113] - 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][115] - 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] 11. FAIR VALUE MEASUREMENTS 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] 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] - 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][123] 12. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS 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] - Guarantor subsidiaries (STG, KDSM, LLC, and STG's wholly-owned subsidiaries) fully and unconditionally guarantee STG's obligations[125] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's perspective on financial performance and condition, including forward-looking statements, significant events, segment results, liquidity, and capital resources FORWARD-LOOKING STATEMENTS 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] - 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][150] - Company-specific risks include ability to attract advertising, service debt obligations, implement content management systems, renegotiate retransmission consent, and integrate acquired businesses[151] - General risks involve changes in national/regional economies, loss of consumer confidence, tax law changes, competitor activities, and natural disasters/pandemics[153] Summary of Significant Events and Financial Highlights 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] - Lotus Communications Corporation agreed to acquire Seattle radio stations for approximately $18 million, subject to FCC approval[162] - Launched the new Bally Sports app in April 2021, offering enhanced functionality for authenticated users[162] - 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] - 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] - Amended the STG Bank Credit Agreement in April 2021 to raise $740 million in Term Loan B-3 for refinancing[167] - Declared quarterly cash dividends of $0.20 per share in May and August 2021[167] RESULTS OF OPERATIONS 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 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] - 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] - COVID-19 pandemic disrupted usual seasonality and cyclicality in 2020 and may continue to do so in 2021, except for political advertising[170] Operating Data 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] - 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] - 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] The Impact of COVID-19 on our Results of Operations 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] - 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] - 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] - The company's business is designated as essential, but COVID-19 has disrupted operations, with potential for future facility disruptions and workforce illness[175] BROADCAST SEGMENT 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] - 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][180] - 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] - 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] LOCAL SPORTS SEGMENT 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] - 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] - 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] - 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] 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] - 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] - 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] - 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] CORPORATE AND UNALLOCATED EXPENSES 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] - 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] - 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] - 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][212] LIQUIDITY AND CAPITAL RESOURCES 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] - 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] - 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] - 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] Sources and Uses of Cash 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][223] - 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][224] - 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][225] CONTRACTUAL CASH OBLIGATIONS 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] - No other material changes to contractual cash obligations occurred during the six months ended June 30, 2021[228] CRITICAL ACCOUNTING POLICIES AND ESTIMATES 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] - 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] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] ITEM 4. CONTROLS AND PROCEDURES 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] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2021[237] - Management acknowledges that control systems provide only reasonable, not absolute, assurance and have inherent limitations, including potential for errors, circumvention, or management override[239] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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][242] - No material judgments or decisions have been rendered by hearing boards or courts in connection with such actions[84][242] - Refer to Note 6. Commitments and Contingencies within the Consolidated Financial Statements for discussion related to certain pending lawsuits[242] ITEM 1A. RISK FACTORS 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] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No unregistered sales of equity securities or use of proceeds to report for the period - None[244] ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities to report for the period - None[245] ITEM 4. MINE SAFETY DISCLOSURES No mine safety disclosures to report for the period - None[246] ITEM 5. OTHER INFORMATION No other information to report for the period - None[247] ITEM 6. EXHIBITS 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 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][254]