Sinclair Broadcast Group(SBGI) - 2022 Q3 - Quarterly Report

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