SINCLAIR BROADCAST GROUP INC, 10-Q filed on 09 Nov 20
v3.20.2
Cover Page - shares
9 Months Ended
Sep. 30, 2020
Nov. 05, 2020
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2020  
Document Transition Report false  
Entity File Number 000-26076  
Entity Registrant Name SINCLAIR BROADCAST GROUP, INC.  
Entity Incorporation, State or Country Code MD  
Entity Tax Identification Number 52-1494660  
Entity Address, Address Line One 10706 Beaver Dam Road  
Entity Address, City or Town Hunt Valley  
Entity Address, State or Province MD  
Entity Address, Postal Zip Code 21030  
City Area Code 410  
Local Phone Number 568-1500  
Title of 12(b) Security Class A Common Stock, par value $ 0.01 per share  
Trading Symbol SBGI  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0000912752  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Class A Common Stock    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding   49,252,898
Class B Common Stock    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding   24,727,682
v3.20.2
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 632,000 $ 1,333,000
Accounts receivable, net of allowance for doubtful accounts of $4 and $8, respectively 1,108,000 1,132,000
Income taxes receivable 248,000 103,000
Prepaid sports rights 335,000 113,000
Prepaid expenses and other current assets 218,000 232,000
Total current assets 2,541,000 2,913,000
Property and equipment, net 814,000 765,000
Operating lease assets 206,000 223,000
Deferred tax assets 259,000 0
Restricted cash 1,000 0
Goodwill 2,092,000 4,716,000
Indefinite-lived intangible assets 163,000 158,000
Definite-lived intangible assets, net 5,747,000 7,977,000
Other assets 660,000 618,000
Total assets [1] 12,483,000 17,370,000
Current liabilities:    
Accounts payable and accrued liabilities 466,000 782,000
Current portion of notes payable, finance leases, and commercial bank financing 72,000 71,000
Current portion of operating lease liabilities 38,000 38,000
Current portion of program contracts payable 111,000 88,000
Other current liabilities 287,000 155,000
Total current liabilities 974,000 1,134,000
Notes payable, finance leases, and commercial bank financing, less current portion 12,391,000 12,367,000
Operating lease liabilities, less current portion 203,000 217,000
Program contracts payable, less current portion 34,000 39,000
Deferred tax liabilities 0 407,000
Other long-term liabilities 364,000 434,000
Total liabilities [1] 13,966,000 14,598,000
Commitments and contingencies (See Note 5)
Redeemable noncontrolling interests 194,000 1,078,000
Shareholders' equity:    
Additional paid-in capital 711,000 1,011,000
Retained (deficit) earnings (2,438,000) 492,000
Accumulated other comprehensive loss (11,000) (2,000)
Total Sinclair Broadcast Group shareholders’ (deficit) equity (1,737,000) 1,502,000
Noncontrolling interests 60,000 192,000
Total (deficit) equity (1,677,000) 1,694,000
Total liabilities, redeemable noncontrolling interests, and equity 12,483,000 17,370,000
Class A Common Stock    
Shareholders' equity:    
Common Stock 1,000 1,000
Class B Common Stock    
Shareholders' equity:    
Common Stock 0 0
Customer relationships, net    
Current assets:    
Definite-lived intangible assets, net 4,384,000 5,979,000
Other definite-lived intangible assets, net    
Current assets:    
Definite-lived intangible assets, net 1,363,000 1,998,000
Consolidated VIEs    
Current assets:    
Cash and cash equivalents 37,000 39,000
Accounts receivable, net of allowance for doubtful accounts of $4 and $8, respectively 89,000 39,000
Prepaid sports rights 10,000 10,000
Prepaid expenses and other current assets 7,000 6,000
Total current assets 143,000 94,000
Property and equipment, net 17,000 15,000
Operating lease assets 6,000 8,000
Definite-lived intangible assets, net 55,000 93,000
Total assets 237,000 228,000
Current liabilities:    
Other current liabilities 35,000 19,000
Notes payable, finance leases, and commercial bank financing, less current portion 11,000 15,000
Operating lease liabilities, less current portion 5,000 6,000
Program contracts payable, less current portion 4,000 7,000
Other long-term liabilities 14,000 1,000
Total liabilities $ 69,000 $ 48,000
[1]
Our consolidated total assets as of September 30, 2020 and December 31, 2019 include total assets of variable interest entities (VIEs) of $237 million and $228 million, respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of September 30, 2020 and December 31, 2019 include total liabilities of VIEs of $53 million and $27 million, respectively, for which the creditors of the VIEs have no recourse to us. See Note 8. Variable Interest Entities.
v3.20.2
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2020
Dec. 31, 2019
Accounts receivable, allowance for doubtful accounts $ 4 $ 8
Class A Common Stock    
Common Stock, par value (USD per share) $ 0.01 $ 0.01
Common Stock, shares authorized (shares) 500,000,000 500,000,000
Common Stock, shares issued (shares) 49,170,850 66,830,110
Common Stock, shares outstanding (shares) 49,170,850 66,830,110
Class B Common Stock    
Common Stock, par value (USD per share) $ 0.01 $ 0.01
Common Stock, shares authorized (shares) 140,000,000 140,000,000
Common Stock, shares issued (shares) 24,727,682 24,727,682
Common Stock, shares outstanding (shares) 24,727,682 24,727,682
Consolidated VIEs    
Non-recourse liabilities $ 53 $ 27
v3.20.2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
REVENUES:        
Revenues $ 1,539 $ 1,125 $ 4,431 $ 2,618
OPERATING EXPENSES:        
Media programming and production expenses 1,077 560 2,288 1,215
Media selling, general and administrative expenses 212 185 608 510
Amortization of program contract costs 19 22 63 68
Non-media expenses 18 42 69 120
Depreciation of property and equipment 25 24 75 69
Corporate general and administrative expenses 30 237 111 317
Amortization of definite-lived intangible and other assets 149 96 449 183
Impairment of goodwill and definite-lived intangible assets 4,264 0 4,264 0
Gain on asset dispositions and other, net of impairment (39) (35) (99) (57)
Total operating expenses 5,755 1,131 7,828 2,425
Operating (loss) income (4,216) (6) (3,397) 193
OTHER INCOME (EXPENSE):        
Interest expense including amortization of debt discount and deferred financing costs (157) (129) (502) (237)
Gain on extinguishment of debt 0 0 5 0
Loss from equity method investments (10) (12) (23) (38)
Other income, net 169 3 169 12
Total other income (expense), net 2 (138) (351) (263)
Loss before income taxes (4,214) (144) (3,748) (70)
INCOME TAX BENEFIT 847 95 805 88
NET (LOSS) INCOME (3,367) (49) (2,943) 18
Net income attributable to the redeemable noncontrolling interests (19) (11) (51) (11)
Net loss (income) attributable to the noncontrolling interests 130 0 113 (3)
NET (LOSS) INCOME ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP $ (3,256) $ (60) $ (2,881) $ 4
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP:        
Basic earnings per share (USD per share) $ (43.53) $ (0.65) $ (35.17) $ 0.05
Diluted earnings per share (USD per share) $ (43.53) $ (0.65) $ (35.17) $ 0.05
Basic weighted average common shares outstanding (shares) 74,810 92,086 81,922 92,050
Diluted weighted average common and common equivalent shares outstanding (shares) 74,810 92,086 81,922 93,271
Media revenues        
REVENUES:        
Revenues $ 1,519 $ 1,070 $ 4,353 $ 2,465
Non-media revenues        
REVENUES:        
Revenues $ 20 $ 55 $ 78 $ 153
v3.20.2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net (loss) income $ (3,367) $ (49) $ (2,943) $ 18
Share of other comprehensive loss of equity method investments 0 0 (9) 0
Comprehensive (loss) income (3,367) (49) (2,952) 18
Comprehensive income attributable to the redeemable noncontrolling interests (19) (11) (51) (11)
Comprehensive loss (income) attributable to the noncontrolling interests 130 0 113 (3)
Comprehensive (loss) income attributable to Sinclair Broadcast Group $ (3,256) $ (60) $ (2,890) $ 4
v3.20.2
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS - USD ($)
$ in Millions
Total
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Noncontrolling Interests
Class A Common Stock
Class A Common Stock
Common Stock
Class B Common Stock
Class B Common Stock
Common Stock
BALANCE at Dec. 31, 2018 $ 0                
Increase (Decrease) in Temporary Equity                  
Issuance of redeemable subsidiary preferred equity, net of issuance costs 985                
Noncontrolling interest issued or acquired 380                
Distributions to redeemable noncontrolling interests (14)                
Net income (loss) 11                
BALANCE at Sep. 30, 2019 1,362                
BALANCE (shares) at Dec. 31, 2018             68,897,723   25,670,684
BALANCE at Dec. 31, 2018 1,600 $ 1,121 $ 518 $ (1) $ (39)   $ 1   $ 0
Increase (Decrease) in Stockholders' Equity                  
Dividends declared and paid on Class A and Class B Common Stock (55)   (55)            
Class B Common Stock converted into Class A Common Stock (shares)             643,002   (643,002)
Class B Common Stock converted into Class A Common Stock 0                
Repurchases of Class A Common Stock (shares)             (3,993,194)    
Repurchases of Class A Common Stock (125) (125)              
Class A Common Stock issued pursuant to employee benefit plans (shares)             1,515,606    
Class A Common Stock issued pursuant to employee benefit plans 32 32              
Noncontrolling interest issued or acquired 231       231        
Distributions to noncontrolling interests, net (15)       (15)        
Net (loss) income 7   4   3        
BALANCE (shares) at Sep. 30, 2019             67,063,137   25,027,682
BALANCE at Sep. 30, 2019 1,675 1,028 467 (1) 180   $ 1   $ 0
BALANCE at Jun. 30, 2019 0                
Increase (Decrease) in Temporary Equity                  
Issuance of redeemable subsidiary preferred equity, net of issuance costs 985                
Noncontrolling interest issued or acquired 380                
Distributions to redeemable noncontrolling interests (14)                
Net income (loss) 11                
BALANCE at Sep. 30, 2019 1,362                
BALANCE (shares) at Jun. 30, 2019             67,032,088   25,027,682
BALANCE at Jun. 30, 2019 1,529 1,024 545 (1) (40)   $ 1   $ 0
Increase (Decrease) in Stockholders' Equity                  
Dividends declared and paid on Class A and Class B Common Stock (18)   (18)            
Class A Common Stock issued pursuant to employee benefit plans (shares)             31,049    
Class A Common Stock issued pursuant to employee benefit plans 4 4              
Noncontrolling interest issued or acquired 231       231        
Distributions to noncontrolling interests, net (11)       (11)        
Net (loss) income (60)   (60)            
BALANCE (shares) at Sep. 30, 2019             67,063,137   25,027,682
BALANCE at Sep. 30, 2019 1,675 1,028 467 (1) 180   $ 1   $ 0
BALANCE at Dec. 31, 2019 1,078                
Increase (Decrease) in Temporary Equity                  
Noncontrolling interest issued or acquired 22                
Distributions to noncontrolling interests, net (32)                
Distributions to redeemable noncontrolling interests (378)                
Redemption of redeemable noncontrolling interests (547)                
Net income (loss) 51                
BALANCE at Sep. 30, 2020 194                
BALANCE (shares) at Dec. 31, 2019           66,830,110 66,830,110 24,727,682 24,727,682
BALANCE at Dec. 31, 2019 1,694 1,011 492 (2) 192   $ 1   $ 0
Increase (Decrease) in Stockholders' Equity                  
Dividends declared and paid on Class A and Class B Common Stock (49)   (49)            
Repurchases of Class A Common Stock (shares)             (19,418,934)    
Repurchases of Class A Common Stock (343) (343)              
Class A Common Stock issued pursuant to employee benefit plans (shares)             1,759,674    
Class A Common Stock issued pursuant to employee benefit plans 43 43              
Noncontrolling interest issued or acquired 0                
Distributions to noncontrolling interests, net (19)       (19)        
Distributions to redeemable noncontrolling interests 0                
Redemption of redeemable noncontrolling interests 0                
Other comprehensive loss (9)     (9)          
Net (loss) income (2,994)   (2,881)   (113)        
BALANCE (shares) at Sep. 30, 2020           49,170,850 49,170,850 24,727,682 24,727,682
BALANCE at Sep. 30, 2020 (1,677) 711 (2,438) (11) 60   $ 1   $ 0
BALANCE at Jun. 30, 2020 510                
Increase (Decrease) in Temporary Equity                  
Noncontrolling interest issued or acquired 22                
Distributions to noncontrolling interests, net (7)                
Redemption of redeemable noncontrolling interests (350)                
Net income (loss) 19                
BALANCE at Sep. 30, 2020 194                
BALANCE (shares) at Jun. 30, 2020             53,342,336   24,727,682
BALANCE at Jun. 30, 2020 1,811 787 832 (11) 202   $ 1   $ 0
Increase (Decrease) in Stockholders' Equity                  
Dividends declared and paid on Class A and Class B Common Stock (14)   (14)            
Repurchases of Class A Common Stock (shares)             (4,274,004)    
Repurchases of Class A Common Stock (82) (82)              
Class A Common Stock issued pursuant to employee benefit plans (shares)             102,518    
Class A Common Stock issued pursuant to employee benefit plans 6 6              
Noncontrolling interest issued or acquired 0                
Distributions to noncontrolling interests, net (12)       (12)        
Redemption of redeemable noncontrolling interests 0                
Net (loss) income (3,386)   (3,256)   (130)        
BALANCE (shares) at Sep. 30, 2020           49,170,850 49,170,850 24,727,682 24,727,682
BALANCE at Sep. 30, 2020 $ (1,677) $ 711 $ (2,438) $ (11) $ 60   $ 1   $ 0
v3.20.2
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (Parenthetical) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Class A Common Stock        
Dividends declared per share (USD per share) $ 0.20 $ 0.20 $ 0.60 $ 0.60
Dividends paid per share (USD per share) 0.2 0.2 0.6 0.6
Class B Common Stock        
Dividends declared per share (USD per share) 0.2 0.2 0.6 0.6
Dividends paid per share (USD per share) $ 0.2 $ 0.2 $ 0.6 $ 0.6
v3.20.2
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net (loss) income $ (2,943) $ 18
Adjustments to reconcile net (loss) income to net cash flows from operating activities:    
Impairment of goodwill and definite-lived intangible assets 4,264 0
Depreciation of property and equipment 75 69
Amortization of definite-lived intangible and other assets 449 183
Amortization of program contract costs 63 68
Amortization of sports programming rights 1,028 193
Stock-based compensation 39 26
Deferred tax benefit (660) (51)
Gain on asset dispositions and other, net of impairment (101) (50)
Loss from equity method investments 23 38
Distributions from investments 26 4
Sports programming rights payments (1,124) (118)
Gain on extinguishment of debt (5) 0
Measurement adjustment gain on variable payment obligations (168) 0
Change in assets and liabilities, net of acquisitions:    
Decrease in accounts receivable 24 63
Decrease (increase) in prepaid expenses and other current assets 4 (56)
(Decrease) increase in accounts payable and accrued and other current liabilities (106) 210
Net change in net income taxes payable/receivable (145) (73)
Decrease in program contracts payable (70) (72)
Increase in other long-term liabilities 120 3
Other, net 46 39
Net cash flows from operating activities 839 494
CASH FLOWS USED IN INVESTING ACTIVITIES:    
Acquisition of property and equipment (130) (96)
Acquisition of business, net of cash acquired (7) (9,006)
Spectrum repack reimbursements 72 50
Proceeds from the sale of assets 36 0
Purchases of investments (85) (431)
Other, net 16 6
Net cash flows used in investing activities (98) (9,477)
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:    
Proceeds from notes payable and commercial bank financing 947 9,453
Repayments of notes payable, commercial bank financing, and finance leases (945) (715)
Proceeds from the issuance of redeemable subsidiary preferred equity, net 0 985
Repurchase of outstanding Class A Common Stock (343) (125)
Dividends paid on Class A and Class B Common Stock (49) (55)
Dividends paid on redeemable subsidiary preferred equity (32) (10)
Redemption of redeemable subsidiary preferred equity (547) 0
Debt issuance costs (7) (182)
Distributions to noncontrolling interests, net (19) (30)
Distributions to redeemable noncontrolling interests (378) 0
Other, net (68) 1
Net cash flows (used in) from financing activities (1,441) 9,322
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH (700) 339
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period 1,333 1,060
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period $ 633 $ 1,399
v3.20.2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations

Sinclair Broadcast Group, Inc. (the Company) is a diversified television media company with national reach and a strong focus on providing high-quality content on our local television stations, regional sports networks, and digital platforms. The content, distributed through our broadcast platform and third-party platforms, consists of programming provided by third-party networks and syndicators, local news, college and professional sports, and other original programming produced by us. Additionally, we own digital media products that are complementary to our extensive portfolio of television station related digital properties. Outside of our media related businesses, we operate technical services companies focused on supply and maintenance of broadcast transmission systems as well as research and development for the advancement of broadcast technology, and we manage other non-media related investments.

As of September 30, 2020, we had two reportable segments for accounting purposes, broadcast and local sports. The broadcast segment consists primarily of our 190 broadcast television stations in 88 markets, which we own, provide programming and operating services pursuant to agreements commonly referred to as local marketing agreements (LMAs), or provide sales services and other non-programming operating services pursuant to other outsourcing agreements (such as joint sales agreements (JSAs) and shared services agreements (SSAs)). These stations broadcast 627 channels as of September 30, 2020. For the purpose of this report, these 190 stations and 627 channels are referred to as "our" stations and channels. The local sports segment consists primarily of 21 regional sports network brands (the Acquired RSNs), the Marquee Sports Network (Marquee) joint venture, and a 20% equity interest in the Yankee Entertainment and Sports Network, LLC (YES Network). We refer to the Acquired RSNs and Marquee as "the RSNs." The RSNs and YES Network own the exclusive rights to air, among other sporting events, the games of professional sports teams.
Principles of Consolidation
 
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries, including the operating results of the RSNs acquired on August 23, 2019, as discussed in Note 2. Acquisitions and Dispositions of Assets, and VIEs for which we are the primary beneficiary. Noncontrolling interests represent a minority owner’s proportionate share of the equity in certain of our consolidated entities. Noncontrolling interests which may be redeemed by the holder, and the redemption is outside of our control, are presented as redeemable noncontrolling interests. All intercompany transactions and account balances have been eliminated in consolidation.

We consolidate VIEs when we are the primary beneficiary. We are the primary beneficiary of a VIE when we have the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and have the obligation to absorb losses or the right to receive returns that would be significant to the VIE. See Note 8. Variable Interest Entities for more information on our VIEs.

Investments in entities over which we have significant influence but not control are accounted for using the equity method of accounting. Income from equity method investments represents our proportionate share of net income generated by equity method investees.
Interim Financial Statements
 
The consolidated financial statements for the three and nine months ended September 30, 2020 and 2019 are unaudited. In the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of equity and redeemable noncontrolling interests, and consolidated statements of cash flows for these periods as adjusted for the adoption of recent accounting pronouncements discussed below.
 
As permitted under the applicable rules and regulations of the Securities and Exchange Commission (SEC), the consolidated financial statements do not include all disclosures normally included with audited consolidated financial statements and, accordingly, should be read together with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. The consolidated statements of operations presented in the accompanying consolidated financial statements are not necessarily representative of operations for an entire year.
Equity Investments
 
We measure our investments, excluding equity method investments, at fair value or, in situations where fair value is not readily determinable, we have the option to value investments at cost plus observable changes in value less impairment. Investments accounted for utilizing the measurement alternative were $26 million, net of $7 million of cumulative impairments, as of September 30, 2020 and $28 million, net of $7 million of cumulative impairments, as of December 31, 2019. There were no adjustments to the carrying amount of investments accounted for utilizing the measurement alternative for the three and nine months ended September 30, 2020 and the three months ended September 30, 2019. We recorded a $2 million impairment related to one investment for the nine months ended September 30, 2019, which is included in other income, net in our consolidated statements of operations.

YES Network Investment. On August 29, 2019, an indirect subsidiary of Diamond Sports Group, LLC (DSG), an indirect wholly-owned subsidiary of the Company, acquired a 20% equity interest in YES Network for cash consideration of $346 million as part of a consortium led by Yankee Global Enterprises. We account for our investment in the YES Network as an equity method investment, which is recorded within other assets in our consolidated balance sheets, and in which our proportionate share of the net income generated by the investment is included within loss from equity method investments in our consolidated statements of operations. During the three and nine months ended September 30, 2020, we recorded a loss of $3 million and income of $3 million, respectively, related to our investment. During both the three and nine months ended September 30, 2019, we recorded income of $1 million related to our investment. There were no impairment charges resulting from our interim impairment assessment of our investment in the YES Network for the quarter ended September 30, 2020.
Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities. Actual results could differ from those estimates.

The impact of the outbreak of the novel coronavirus (COVID-19) continues to create significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could further materially impact our estimates related to, but not limited to, revenue recognition, goodwill and intangible assets, program contract costs, sports programming rights, and income taxes. As a result, many of our estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements.
Recent Accounting Pronouncements

In June 2016, the FASB issued amended guidance on the accounting for credit losses on financial instruments. Among other provisions, this guidance introduces a new impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a forward-looking “expected loss” model that will replace the current “incurred loss” model that will generally result in the earlier recognition of allowances for losses. We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, with the capitalized implementation costs of a hosting arrangement that is a service contract expensed over the term of the hosting arrangement. We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.

In October 2018, the FASB issued guidance for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety, as currently required in generally accepted accounting principles (GAAP). We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.

In March 2019, the FASB issued guidance which requires that an entity test a film or license agreement within the scope of Subtopic 920-350 for impairment at the film group level, when the film or license agreement is predominantly monetized with other films and/or license agreements. We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements. See Broadcast Television Programming below for further information on our accounting for television program contracts.

In December 2019, the FASB issued guidance which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. We early adopted this guidance during the third quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. The guidance was effective for all entities immediately upon issuance of the update and may be applied prospectively to applicable transactions existing as of or entered into from the date of adoption through December 31, 2022. We are currently evaluating the impact of this guidance, if elected, but do not expect a material impact on our consolidated financial statements.
Broadcast Television Programming

We have agreements with rights holders for the rights to television programming over contract periods, which generally run from one to seven years. Contract payments are made in installments over periods that are generally equal to or shorter than the contract period. Pursuant to accounting guidance for the broadcasting industry, an asset and a liability for the rights acquired and obligations incurred under a license agreement are reported on the balance sheet when the cost of each program is known or reasonably determinable, the program material has been accepted by the licensee in accordance with the conditions of the license agreement, and the program is available for its first showing or telecast. The portion of program contracts which becomes payable within one year is reflected as a current liability in the accompanying consolidated balance sheets.
The rights to this programming are reflected in the accompanying consolidated balance sheets at the lower of unamortized cost or fair value. Program contract costs are amortized on a straight-line basis except for contracts greater than three years which are amortized utilizing an accelerated method. Program contract costs estimated by management to be amortized in the succeeding year are classified as current assets. Payments of program contract liabilities are typically made on a scheduled basis and are not affected by amortization or fair value adjustments.
 
Fair value is determined utilizing a discounted cash flow model based on management’s expectation of future advertising revenues, net of sales commissions, to be generated by the program material. We assess our program contract costs on a quarterly basis to ensure the costs are recorded at the lower of unamortized cost or fair value.
Sports Programming Rights

We have multi-year program rights agreements that provide the Company with the right to produce and telecast professional live sports games within a specified territory in exchange for a rights fee. A prepaid asset is recorded for rights acquired related to future games upon payment of the contracted fee. The assets recorded for the acquired rights are classified as current or non-current based on the period when the games are expected to be aired. Liabilities are recorded for any program rights obligations that have been incurred but not yet paid at period end. We amortize these programing rights as an expense over each season based upon contractually stated rates. Amortization is accelerated in the event that the stated contractual rates over the term of the rights agreement results in an expense recognition pattern that is inconsistent with the projected growth of revenue over the contractual term.

On March 12, 2020, the National Basketball Association (NBA), the National Hockey League (NHL) and Major League Baseball (MLB) suspended or delayed the start of their seasons as a result of the COVID-19 pandemic. On that date, the Company suspended the recognition of amortization expense associated with prepaid program rights agreements with teams within these leagues. Amortization expense resumed for the NBA, NHL, and MLB over the modified seasons when the games commenced during the third quarter of 2020.

Certain rights agreements with professional teams contain provisions which require the rebate of rights fees paid by the Company if a contractually minimum number of live games are not delivered. Rights fees paid in advance of expense recognition, inclusive of any contractual rebates due to the Company, are included within prepaid sports rights in our consolidated balance sheets.
Non-cash Investing and Financing Activities

Non-cash transactions related to finance lease obligations were $6 million during the nine months ended September 30, 2020. Leased assets obtained in exchange for new operating lease liabilities were $10 million during both the nine months ended September 30, 2020 and 2019. Non-cash transactions related to sports rights were $22 million during the nine months ended September 30, 2020.
Revenue Recognition

The following table presents our revenue disaggregated by type and segment (in millions):
For the three months ended September 30, 2020
Broadcast
 
Local sports
 
Other
 
Eliminations
 
Total
Distribution revenue
$
356

 
$
597

 
$
50

 
$

 
$
1,003

Advertising revenue
344

 
124

 
31

 
1

 
500

Other media, non-media, and intercompany revenues
34

 
6

 
24

 
(28
)
 
36

Total revenues
$
734

 
$
727

 
$
105

 
$
(27
)
 
$
1,539

 
 
 
 
 
 
 
 
 
 
For the three months ended September 30, 2019
Broadcast
 
Local sports
 
Other
 
Eliminations
 
Total
Distribution revenue
$
340

 
$
306

 
$
33

 
$

 
$
679

Advertising revenue
302

 
43

 
32

 
(1
)
 
376

Other media, non-media, and intercompany revenue
19

 
3

 
64

 
(16
)
 
70

Total revenues
$
661

 
$
352

 
$
129

 
$
(17
)
 
$
1,125

 
 
 
 
 
 
 
 
 
 
For the nine months ended September 30, 2020
Broadcast
 
Local sports
 
Other
 
Eliminations
 
Total
Distribution revenue
$
1,059

 
$
1,959

 
$
150

 
$

 
$
3,168

Advertising revenue
861

 
182

 
92

 

 
1,135

Other media, non-media, and intercompany revenues
106

 
14

 
96

 
(88
)
 
128

Total revenues
$
2,026

 
$
2,155

 
$
338

 
$
(88
)
 
$
4,431

 
 
 
 
 
 
 
 
 
 
For the nine months ended September 30, 2019
Broadcast
 
Local sports
 
Other
 
Eliminations
 
Total
Distribution revenue
$
995

 
$
306

 
$
97

 
$

 
$
1,398

Advertising revenue
904

 
43

 
78

 
(1
)
 
1,024

Other media, non-media, and intercompany revenues
40

 
3

 
179

 
(26
)
 
196

Total revenues
$
1,939

 
$
352

 
$
354

 
$
(27
)
 
$
2,618



Distribution Revenue. We generate distribution revenue through fees received from multi-channel video programming distributors (MVPDs) and virtual MVPDs (vMVPDs, and together with MVPDs, "Distributors") for the right to distribute our stations, RSNs, and other properties. Distribution arrangements are generally governed by multi-year contracts and the underlying fees are based upon a contractual monthly rate per subscriber. These arrangements represent licenses of intellectual property; revenue is recognized as the signal or network programming is provided to our customers (as usage occurs) which corresponds with the satisfaction of our performance obligation. Revenue is calculated based upon the contractual rate multiplied by an estimated number of subscribers. Our customers will remit payments based upon actual subscribers a short time after the conclusion of a month, which generally does not exceed 120 days. Historical adjustments to subscriber estimates have not been material.

Certain of our distribution arrangements contain provisions that require the Company to deliver a minimum number of live professional sports games or tournaments during a defined period which usually corresponds with a calendar year. If the minimum threshold is not met, we may be obligated to refund a portion of the distribution fees received if shortfalls are not cured within a specified period of time. Our ability to meet these requirements is primarily driven by the delivery of games by the professional sports leagues. The Company has not historically paid any material rebates under these contractual provisions as it is unusual for there to be an event which is significant enough to preclude the Company from meeting or exceeding these thresholds. The COVID-19 pandemic has resulted in significant disruptions to the normal operations of the professional sports leagues resulting in delays and uncertainty with respect to regularly scheduled games. Decisions made by the leagues during the second quarter of 2020 regarding the timing and format of the revised 2020 seasons have resulted, in some cases, in our inability to meet these minimum requirements and the need to reduce revenue based upon estimated rebates due to our distribution customers. These estimated rebates will be recognized over the measurement period of the rebate which is the year ended December 31, 2020. For the three and nine months ended September 30, 2020, we reduced revenue by, and accrued corresponding rebates to Distributors of $128 million and $252 million, respectively. See Subsequent Events within Note 1. Nature of Operations and Summary of Significant Accounting Policies.

Advertising Revenue. We generate advertising revenue primarily from the sale of advertising spots/impressions within our broadcast television, RSN, and digital platforms.

In accordance with ASC 606, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) distribution arrangements which are accounted for as a sales/usage based royalty.

Deferred Revenue. We record deferred revenue when cash payments are received or due in advance of our performance, including amounts which are refundable. Deferred revenue was $75 million and $54 million as of September 30, 2020 and December 31, 2019, respectively. Deferred revenue recognized during the nine months ended September 30, 2020 and 2019, included in the deferred revenue balance as of December 31, 2019 and 2018, was $45 million and $65 million, respectively.

For the three months ended September 30, 2020, three customers accounted for 17%, 15%, and 12%, respectively, of our total revenues. For the nine months ended September 30, 2020, three customers accounted for 19%, 17%, and 12%, respectively, of our total revenues. For the three months ended September 30, 2019, three customers accounted for 17%, 14%, and 11%, respectively, of our total revenues. For the nine months ended September 30, 2019, two customers accounted for 14% and 12%, respectively, of our total revenues. As of September 30, 2020, three customers accounted for 18%, 16%, and 13%, respectively, of our accounts receivable, net. For purposes of this disclosure, a single customer may include multiple entities under common control.
Impairment of Goodwill and Definite-Lived Intangible Assets

Our RSNs included in the local sports segment have been negatively impacted by the recent loss of two Distributors. In addition, our existing Distributors are experiencing elevated levels of subscriber erosion which we believe is influenced, in part, by shifting consumer behaviors resulting from media fragmentation, the current economic environment, the COVID 19 pandemic and related uncertainties. Most of these factors are also expected to have a negative impact on future projected revenue and margins of our RSNs. As a result of these factors, we performed an impairment test of the RSN reporting units' goodwill and long-lived asset groups during the quarter ending September 30, 2020.

The long-lived asset impairment test requires a comparison of undiscounted cash flows expected to be generated over the useful life of an asset group to the carrying value of the asset group. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We have concluded that each of our RSNs individually qualify as an asset group and therefore the test was performed at each RSN level accordingly. We estimated the projected undiscounted cash flows over the remaining useful life of each asset group. The more significant inputs used in determining our estimate of the projected cash flows included future revenue growth and projected margins. We identified 10 RSNs which had carrying values in excess of the future undiscounted cash flows; and therefore, for these RSNs an impairment loss was measured as the amount by which the carrying value of each asset group exceeded the fair value of each asset group. The calculated impairment was then allocated to the long-lived assets within the asset group, which primarily consists of definite lived intangible assets, based upon relative fair value.

The fair value of the asset groups, reporting units and definite lived intangible assets were determined based upon a discounted cash flow analysis which uses the present value of projected cash flows. The projected cash flows were based upon our estimates of future revenues and margins, among other inputs. The discount rates used in the valuation were based on a weighted-average cost of capital determined from relevant market comparisons and taking into consideration the risk specifically associated with our asset groups and underlying assets. Terminal values were determined based upon the final year of projected cash flows which reflected our estimate of stable perpetual growth. The more sensitive inputs used in the discounted cash flow analysis include projected revenue and margins, as well as the discount rates used to calculate the present value of future cash flows. Projected revenue was based on the consideration of historical experience of the business, market data surrounding subscriber projections and advertising growth, our ability to retain existing customers and our ability to obtain new customers. Our revenue projections could be negatively impacted by the further loss of key Distributors, inability to obtain new or retain existing Distributors on terms similar to those expiring, greater than expected consumer migration away from traditional linear Distributors, or our inability to successfully develop alternative revenue streams, among other factors. Our future margins may also be affected by our inability to renew sports rights agreements on terms favorable to us.

During the three months ended September 30, 2020, we recorded a non-cash impairment charge on customer relationships of $1,218 million and other definite-lived intangible assets of $431 million, included within impairment of goodwill and definite-lived intangible assets in our consolidated statements of operations. As of September 30, 2020, the remaining balance of the customer relationship intangible asset was $3,756 million and the aggregate remaining balance of the other definite-lived intangible assets was $673 million. After the recognition of these impairments, there were no asset groups which have a heightened risk of further impairment because the projected undiscounted cash flows of the individual asset groups were substantially greater than their carrying values. However, significant deterioration in the factors described above could result in future material impairments.

The remaining customer relationships and other definite-lived intangible assets will both be amortized over a remaining weighted average useful life of 11 years on a straight-line basis.

We tested the RSN reporting units' goodwill for impairment on an interim basis by comparing the fair value of each of the RSN reporting units to their revised carrying value after adjustments were made related to the impairments of the asset groups, as described above. To the extent that the carrying value of the respective reporting units exceeded the fair value, a goodwill impairment charge was recorded. The fair value of the reporting units was determined based upon a discounted cash flow analysis, as described above.

For the quarter ended September 30, 2020, the carrying value exceeded the fair value of all reporting units. We recorded a non-cash goodwill impairment charge of $2,615 million, included within impairment of goodwill and definite-lived intangible assets in our consolidated statements of operations. As of September 30, 2020, there was no remaining goodwill within our local sports segment.

Based upon these events, we performed a qualitative impairment assessment related to our broadcast reporting unit, concluding it was not more likely than not that an impairment existed.
Income Taxes

Our income tax provision for all periods consists of federal and state income taxes.  The tax provision for the three and nine months ended September 30, 2020 and 2019 is based on the estimated effective tax rate applicable for the full year after taking into account discrete tax items and the effects of the noncontrolling interests. We provide a valuation allowance for deferred tax assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized.  In evaluating our ability to realize net deferred tax assets, we consider all available evidence, both positive and negative, including our past operating results, tax planning strategies and forecasts of future taxable income.  In considering these sources of taxable income, we must make certain judgments that are based on the plans and estimates used to manage our underlying businesses on a long-term basis.  A valuation allowance has been provided for deferred tax assets related to limitations on interest expense deductibility, and certain state net operating loss (NOL) carryforwards and other state attributes. During three and nine months ended September 30, 2020, we increased our valuation allowance by $215 million and $219 million, respectively. The increase in valuation allowance was primarily due to the change in judgment in the realizability of certain deferred tax assets relating to the reduction in forecasts of future taxable income. See further discussion under Impairment of Goodwill and Definite-Lived Intangible Assets under Note 1. Nature of Operations and Summary of Significant Accounting Policies within our Consolidated Financial Statements.

Our effective income tax rate for the three and nine months ended September 30, 2020 approximated the statutory rate. During the three and nine months ended September 30,2020, we recorded a $68 million and an $83 million, respectively, discrete benefit as a result of the CARES Act allowing for the estimated 2020 federal net operating loss to be carried back to pre-2018 years when the federal tax rate was 35%.

Our effective income tax rate for the three months ended September 30, 2019 was greater than the statutory rate primarily due to a $34 million benefit related to a change in the treatment of the gain from the sale of certain broadcast spectrum in connection with the Broadcast Incentive Auction and a $16 million benefit related to a release of valuation allowance on certain state net operating losses. Our effective income tax rate for the nine months ended September 30, 2019 was greater than the statutory rate primarily due to a $34 million benefit related to a change in the treatment of the gain from the sale of certain broadcast spectrum in connection with the Broadcast Incentive Auction, $18 million federal tax credits related to investments in sustainability initiatives, and a $16 million benefit related to a release of valuation allowance on certain state net operating losses.

We believe it is reasonably possible that our liability for unrecognized tax benefits related to continuing operations could be reduced by up to $6 million in the next twelve months, as a result of expected statute of limitations expirations, the application of limits under available state administrative practice exceptions, and the resolution of examination issues and settlements with federal and certain state tax authorities. In August 2020, we received an approval from the Joint Committee on Taxation of a settlement agreement with the Internal Revenue Service with respect to the audit of our 2013-2015 federal income tax returns. There was no material impact on our financial statements as a result of this settlement.
Share Repurchase Program

On August 4, 2020, the Board of Directors authorized an additional $500 million share repurchase authorization in addition to the previous repurchase authorization of $1 billion. There is no expiration date and currently, management has no plans to terminate this program. During the three and nine months ended September 30, 2020, we repurchased approximately 4 million shares for $82 million and 19 million shares for $343 million, respectively. As of September 30, 2020, the total remaining purchase authorization was $880 million.
Subsequent Events    
 
In November 2020, our Board of Directors declared a quarterly dividend of $0.20 per share, payable on December 15, 2020 to holders of record at the close of business on December 1, 2020.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how it has already impacted, and will impact, its advertisers, Distributors, and agreements with professional sports leagues. While the NBA, NHL, and MLB were able to complete modified season schedules during 2020, there can be no assurance that the MLB, NBA, or NHL will complete full or abbreviated seasons in the future. As of November 9, 2020, both the NBA and NHL have announced that their 2020-2021 seasons are currently on hold with delayed starts likely to be announced later this year. Any reduction in the number of games played by the leagues may have an adverse impact on our operations and cash flows. The Company is currently unable to predict the full extent that the COVID-19 pandemic will have on its financial condition, results of operations, and cash flows in future periods due to numerous uncertainties.
Reclassifications
 
Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current year's presentation.
v3.20.2
ACQUISITIONS AND DISPOSITIONS OF ASSETS
9 Months Ended
Sep. 30, 2020
Business Combinations [Abstract]  
ACQUISITIONS AND DISPOSITIONS OF ASSETS ACQUISITIONS AND DISPOSITIONS OF ASSETS:

Acquisitions

RSN Acquisition. In May 2019, DSG entered into a definitive agreement to acquire controlling interests in 21 Regional Sports Network brands and Fox College Sports (collectively, the Acquired RSNs), from The Walt Disney Company (Disney) for $9.6 billion plus certain adjustments. On August 23, 2019 we completed the acquisition for an aggregate preliminary purchase price, including cash acquired, and subject to an adjustment based upon finalization of working capital, net debt, and other adjustments, of $9,817 million, accounted for as a business combination under the acquisition method of accounting. The acquisition provides an expansion to our premium sports programming including the exclusive regional distribution rights to 42 professional teams consisting of 14 MLB teams, 16 NBA teams, and 12 NHL teams. The Acquired RSNs are reported within our local sports segment. See Note 7. Segment Data.

The transaction was funded through a combination of debt financing raised by DSG and Sinclair Television Group, Inc. (STG), and redeemable subsidiary preferred equity.

The following table summarizes the fair value of acquired assets, assumed liabilities, and noncontrolling interests of the Acquired RSNs (in millions):
Cash and cash equivalents
$
824

Accounts receivable, net
606

Prepaid expenses and other current assets
175

Property and equipment, net
25

Customer relationships, net
5,439

Other definite-lived intangible assets, net
1,286

Other assets
52

Accounts payable and accrued liabilities
(181
)
Other long-term liabilities
(396
)
Goodwill
2,615

Fair value of identifiable net assets acquired
$
10,445

Redeemable noncontrolling interests
(380
)
Noncontrolling interests
(248
)
Gross purchase price
$
9,817

Purchase price, net of cash acquired
$
8,993


The final purchase price allocation presented above is based upon management's estimates of the fair value of the acquired assets, assumed liabilities, and noncontrolling interest using valuation techniques including income and cost approaches. The fair value estimates are based on, but not limited to, projected revenue, projected margins, and discount rates used to present value future cash flows. The adjustments made to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed and did not result in material changes to the amortization expense recorded in previous quarters.

The definite-lived intangible assets of $6,725 million are primarily comprised of customer relationships, which represent existing advertiser relationships and contractual relationships with Distributors of $5,439 million, the fair value of contracts with sports teams of $1,271 million, and tradenames/trademarks of $15 million. The intangible assets will be amortized over a weighted average useful life of 2 years for tradenames/trademarks, 13 years for customer relationships, and 12 years for contracts with sports teams on a straight-line basis. The fair value of the sports team contracts will be amortized over the respective contract term. Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, as well as expected future synergies. We estimate that $2.4 billion of goodwill, which represents our interest in the Acquired RSNs, will be deductible for tax purposes. Refer to Impairment of Goodwill and Definite-Lived Intangible Assets within Note 1. Nature of Operations and Summary of Significant Accounting Policies for discussion of the impairment of the acquired goodwill and definite-lived intangible assets during the third quarter of 2020.

In connection with the acquisition, we recognized $0.4 million and $4 million for the three and nine months ended September 30, 2020, respectively, and $85 million and $94 million for the three and nine months ended September 30, 2019, respectively, of transaction costs that we expensed as incurred and classified as corporate general and administrative expenses in our consolidated statements of operations. Revenue and operating loss, excluding the effects of intercompany expenses, of the Acquired RSNs included in our consolidated statements of operations were $673 million and $4,435 million, respectively, for the three months ended September 30, 2020. Revenue and operating loss, excluding the effects of intercompany expenses, of the Acquired RSNs included in our consolidated statements of operations were $2,076 million and $3,830 million, respectively, for the nine months ended September 30, 2020. Revenue and operating income, excluding the effects of intercompany expenses and the transaction costs above, of the Acquired RSNs included in our consolidated statements of operations were $352 million and $46 million, respectively, for both the three and nine months ended September 30, 2019.

Pro Forma Information. The table below sets forth unaudited pro forma results of operations, assuming that the RSN Acquisition, along with transactions necessary to finance the acquisition, occurred at the beginning of the period presented (in millions, except per share data):
 
Three Months Ended 
 September 30, 2019
 
Nine Months Ended 
 September 30, 2019
Total revenue
$
1,632

 
$
5,067

Net income
$
9

 
$
434

Net (loss) income attributable to Sinclair Broadcast Group
$
(41
)
 
$
274

Basic earnings per share attributable to Sinclair Broadcast Group
$
(0.44
)
 
$
2.98

Diluted earnings per share attributable to Sinclair Broadcast Group
$
(0.44
)
 
$
2.94



This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments, and is not indicative of what our results would have been had we operated the Acquired RSNs for the period presented because the pro forma results do not reflect expected synergies. The pro forma adjustments reflect depreciation expense and amortization of intangible assets related to the fair value of the assets acquired and any adjustments to interest expense to reflect the debt financing of the transactions, if applicable. Depreciation and amortization expense are higher than amounts recorded in the historical financial statements of the acquirees due to the fair value adjustments recorded in purchase accounting.

Other Acquisitions.  During the nine months ended September 30, 2020, we completed the acquisition of the license asset and certain non-license assets of a radio station for $7 million, reported within our broadcast segment. The acquisition was completed using cash on hand. In June 2020, we entered into an agreement to acquire the license assets and certain non-license assets of two television stations for $9 million. The transaction closed during the fourth quarter of 2020, was completed using cash on hand, and will be reported within our broadcast segment.

Dispositions

Broadcast Sales. In January 2020, we agreed to sell the license and non-license assets of WDKY-TV in Lexington, KY and certain non-license assets associated with KGBT-TV in Harlingen, TX for an aggregate purchase price of $36 million. The KGBT-TV transaction closed during the first quarter of 2020 and we recorded a gain of $8 million which is included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations. The WDKY-TV transaction closed during the third quarter of 2020 and we recorded a gain of $21 million which is included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations.

Broadcast Incentive Auction. Congress authorized the Federal Communications Commission (FCC) to conduct so-called "incentive auctions" to auction and re-purpose broadcast television spectrum for mobile broadband use. Pursuant to the auction, television broadcasters submitted bids to receive compensation for relinquishing all or a portion of their rights in the television spectrum of their full-service and Class A stations. Low power stations were not eligible to participate in the auction and are not protected and therefore may be displaced or forced to go off the air as a result of the post-auction repacking process.

In the repacking process associated with the auction, the FCC has reassigned some stations to new post-auction channels. We do not expect reassignment to new channels to have a material impact on our coverage. We have received notification from the FCC that 100 of our stations have been assigned to new channels. Legislation has provided the FCC with a $3 billion fund to reimburse reasonable costs incurred by stations that are reassigned to new channels in the repack. We expect that the reimbursements from the fund will cover the majority of our expenses related to the repack. We recorded gains related to reimbursements for spectrum repack costs incurred of $20 million and $72 million for the three and nine months ended September 30, 2020, respectively, and $28 million and $50 million for the three and nine months ended September 30, 2019, respectively, which are included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations. Capital expenditures related to the spectrum repack were $13 million and $54 million for the three and nine months ended September 30, 2020, respectively, and $16 million and $41 million for the three and nine months ended September 30, 2019, respectively.
v3.20.2
NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING:

Bank Credit Agreements

Each of STG’s and DSG’s bank credit agreements (the Bank Credit Agreements) provide a $650 million five-year revolving credit facility, whereby STG’s revolving credit facility (the STG Revolving Credit Facility) is priced at LIBOR plus 2.00% and DSG’s revolving credit facility (the DSG Revolving Credit Facility and, together with the STG Revolving Credit Facility, the Revolving Credit Facilities) is priced at LIBOR plus 3.00%, subject to decrease if the specified first lien leverage ratio (as defined in the respective Bank Credit Agreements) is less than or equal to certain levels.  On March 17, 2020, we drew $648 million and $225 million under the STG Revolving Credit Facility and the DSG Revolving Credit Facility, respectively, as a precautionary measure given the COVID-19 pandemic.  During the quarter ended June 30, 2020, the Company fully repaid the amounts outstanding under each of the Revolving Credit Facilities.

The Bank Credit Agreements each include a financial maintenance covenant, the first lien leverage ratio (as defined in the respective Bank Credit Agreements), which requires such applicable ratio not to exceed 4.5x and 6.25x, measured as of the end of each fiscal quarter, for STG and DSG, respectively. The respective financial maintenance covenant is only applicable if 35% or more of the capacity (as a percentage of total commitments) under the respective revolving credit facility, measured as of the last day of each quarter, is utilized under such revolving credit facility as of such date. Since there was no utilization under either of the Revolving Credit Facilities as of September 30, 2020, neither STG nor DSG was subject to the respective financial maintenance covenant under their applicable Bank Credit Agreement. As of September 30, 2020, the STG first lien leverage ratio was below 4.5x and the DSG first lien leverage ratio exceeded 6.25x. We expect that the DSG first lien leverage ratio will remain above 6.25x for at least the next 12 months, which will restrict our ability to utilize the full DSG Revolving Credit Facility.  We do not currently expect to have more than 35% of the capacity of the DSG Revolving Credit Facility outstanding as of any quarterly measurement date during the next twelve months, therefore we do not expect DSG will be subject to the financial maintenance covenant.  The Bank Credit Agreements contain other restrictions and covenants which the respective entities were in compliance with as of September 30, 2020.

STG Notes

On May 21, 2020, we purchased $2.5 million aggregate principal amount of STG's 5.875% Notes due 2026 (the STG 5.875% Notes) in open market transactions for consideration of $2.3 million. The STG 5.875% Notes acquired in May 2020 were canceled immediately following their acquisition. We recognized a gain on extinguishment of the STG 5.875% Notes of $0.2 million for the nine months ended September 30, 2020. As of September 30, 2020, the balance of the STG 5.875% Notes, net of deferred financing costs, was $344 million.

DSG Notes

In March 2020 and June 2020, we purchased a total of $15 million aggregate principal amount of DSG's 6.625% Notes due 2027 (the DSG 6.625% Notes) in open market transactions for consideration of $10 million. The DSG 6.625% Notes acquired in March 2020 and June 2020 were canceled immediately following their acquisition. We recognized a gain on extinguishment of the DSG 6.625% Notes of $5 million for the nine months ended September 30, 2020.

On June 10, 2020, we exchanged $66.5 million aggregate principal amount of the DSG 6.625% Notes for cash payments of $10 million, including accrued but unpaid interest, and $31 million aggregate principal amount of newly issued senior secured notes, which bear interest at a rate of 12.750% per annum and mature on December 1, 2026 (the DSG 12.750% Secured Notes and, together with the DSG 6.625% Notes and DSG's 5.375% Senior Secured Notes due 2026, the DSG Notes). As of September 30, 2020, the balance of the DSG 6.625% Notes, net of deferred financing costs, was $1,709 million and the balance of the DSG 12.750% Secured Notes was $55 million, inclusive of a $24 million premium.

Prior to August 15, 2022, we may redeem the DSG 12.750% Secured Notes, in whole or in part, at any time or from time to time, at a price equal to 100% of the principal amount of the applicable DSG 12.750% Secured Notes plus accrued and unpaid interest, if any, to the date of redemption, plus a ‘‘make-whole’’ premium (assuming for purposes of the calculation of such “make-whole” premium that interest were to accrue on the DSG 12.750% Secured Notes at a rate for such “make-whole” period equal to 5.375% per annum). Beginning on August 15, 2022, we may redeem the DSG 12.750% Secured Notes, in whole or in part, at any time or from time to time at certain redemption prices, plus accrued and unpaid interest, if any, to the date of redemption. In addition, on or prior to August 15, 2022, we may redeem up to 40% of the DSG 12.750% Secured Notes using the proceeds of certain equity offerings. If the notes are redeemed during the twelve-month period beginning August 15, 2022, 2023, and 2024 and thereafter, then the redemption prices for the DSG 12.750% Secured Notes are 102.688%, 101.344%, and 100%, respectively.

DSG’s obligations under the DSG 12.750% Secured Notes are jointly and severally guaranteed by Diamond Sports Intermediate Holdings LLC (DSIH), DSG’s direct parent, and certain wholly-owned subsidiaries of DSIH. The DSG 12.750% Secured Notes are not guaranteed by the Company, STG, or any of STG’s subsidiaries.

Accounts receivable securitization facility

On September 23, 2020 (the Closing Date), the Company's and DSG's indirect wholly-owned subsidiary, Diamond Sports Finance SPV, LLC (DSPV), entered into a $250 million accounts receivable securitization facility (the A/R Facility) which matures on September 23, 2023, in order to enable DSG to raise incremental funding for the ongoing business needs of DSG and its subsidiaries.

The A/R Facility was entered into pursuant to a Loan and Security Agreement (the Loan Agreement), dated September 23, 2020, among DSPV, as borrower, the persons from time to time party thereto, as lenders (the Lenders), and Fox Sports Net, LLC (FSN), a wholly-owned direct subsidiary of DSG, as initial servicer, Credit Suisse AG, New York Branch, as administrative agent and Wilmington Trust, National Association, as collateral agent, paying agent and account bank. The Lenders will provide certain loans, which loans will be secured by certain accounts receivable (Pool Receivables) purchased by DSPV pursuant to a Purchase and Sale Agreement (the Purchase Agreement, and together with the Loan Agreement, the A/R Agreements), dated September 23, 2020, among FSN, certain indirect wholly owned subsidiaries of DSG identified therein as originators (the Originators) and DSPV as purchaser, pursuant to which the Originators will sell certain accounts receivable to DSPV and FSN will continue to service such accounts receivable.

The maximum funding availability under the A/R Facility is $250 million, subject to borrowing base and certain other restrictions. The amount of actual availability under the A/R Facility is subject to change based on the level of eligible receivables sold by the Originators to DSPV and certain reserves. Eligibility of the receivables is determined by a variety of factors, including, but not limited to, credit ratings of the Originators’ customers, customer concentration levels, and certain characteristics of the accounts receivable being transferred. In addition, subsequent to November 1, 2020, the total commitment under the A/R Facility will be the lesser of $250 million and the sum of the lowest aggregate loan balance since November 1, 2020 plus $50 million.

Borrowings under the A/R Facility generally bear interest at a rate per annum equal to LIBOR, which is subject to an interest rate floor of 0% per annum, plus 4.97% or, if the aggregate outstanding principal amount of loans is less than $125 million on or after November 1, 2020, 5.47%. We are required to pay a commitment fee on unutilized commitments under the A/R Facility.

We may voluntarily prepay outstanding loans or terminate commitments under the A/R Facility at any time without premium or penalty, other than customary breakage costs with respect to LIBOR rate loans, except (1) any voluntary prepayment (x) from the proceeds of a voluntary repurchase in accordance with the Purchase Agreement by any Originator of any Pool Receivables on or prior to the date that is 18 months after the Closing Date or (y) from the proceeds of a new accounts receivable financing entered into by DSPV or an affiliate thereof and requiring the purchase of Pool Receivables from DSPV after the date that is 18 months after the Closing Date but on or prior to the date that is 36 months after the Closing Date or (2) certain terminations of commitments on or prior to the date that is 18 months after the Closing Date, shall in each case be subject to a prepayment premium of 1.00% of the principal amount of the loans prepaid or commitments terminated, as the case may be.

DSPV, FSN, and the Originators provide customary representations and covenants under the A/R Agreements. Receivables in the A/R Facility are subject to certain eligibility criteria, concentration limits and reserves. The Loan Agreement provides for certain events of default upon the occurrence of which the administrative agent may declare the facility’s termination date to have occurred and declare the outstanding loan and all other obligations of DSPV to be due and payable. The Purchase Agreement provides for certain early amortization events upon the occurrence of which DSPV may terminate the sale and contribution of accounts receivable and related assets thereunder, including an early amortization event which would occur upon Consolidated EBITDA (as defined in the DSG Bank Credit Agreement as in effect at such time) of DSIH and its restricted subsidiaries under the DSG Bank Credit Agreement, less Consolidated Interest Expense (as defined in the DSG Bank Credit Agreement as in effect at such time) of DSIH and its restricted subsidiaries under the DSG Bank Credit Agreement, being less than zero as of the last day of any fiscal quarter (measured on a trailing four fiscal quarter basis).

As of September 30, 2020, the balance of the loans under the A/R Facility was $74 million and the balance of the receivables held by DSPV as part of the A/R Facility was $124 million, included in accounts receivable, net in our consolidated balance sheets. On October 22, 2020, the A/R Facility provided additional funding of $122 million, bringing the outstanding balance of the loans under the A/R Facility to $196 million.

The performance by the Originators of their respective obligations under the A/R Facility is guaranteed by FSN pursuant to a performance guaranty by FSN in favor of Credit Suisse AG, New York Branch, as administrative agent under the Loan Agreement.

Notes payable and finance leases to affiliates

The current portion of notes payable, finance leases, and commercial bank financing in our consolidated balance sheets includes finance leases to affiliates of $2 million as of both September 30, 2020 and December 31, 2019. Notes payable, finance leases, and commercial bank financing, less current portion, in our consolidated balance sheets includes finances leases to affiliates of $7 million and $9 million as of September 30, 2020 and December 31, 2019, respectively.

Debt of variable interest entities and guarantees of third-party debt

STG jointly, severally, unconditionally, and irrevocably guaranteed $51 million and $57 million of debt of certain third parties as of September 30, 2020 and December 31, 2019, respectively, of which $17 million and $20 million, net of deferred financing costs, related to consolidated VIEs that are included in our consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively. These guarantees primarily relate to the debt of Cunningham Broadcasting Corporation (Cunningham) as discussed under Cunningham Broadcasting Corporation within Note 9. Related Person Transactions. We have determined that, as of September 30, 2020, it is not probable that we would have to perform under any of these guarantees.
v3.20.2
REDEEMABLE NONCONTROLLING INTERESTS
9 Months Ended
Sep. 30, 2020
Temporary Equity Disclosure [Abstract]  
REDEEMABLE NONCONTROLLING INTERESTS REDEEMABLE NONCONTROLLING INTERESTS:

We account for redeemable noncontrolling interests in accordance with ASC 480, Distinguishing Liabilities from Equity, and classify them as mezzanine equity in our consolidated balance sheets because their possible redemption is outside of the control of the Company. Our redeemable non-controlling interests consist of the following:

Redeemable Subsidiary Preferred Equity. On August 23, 2019, Diamond Sports Holdings LLC (DSH), an indirect parent of DSG and indirect wholly-owned subsidiary of the Company, issued preferred equity (the Redeemable Subsidiary Preferred Equity).

On January 21, 2020, we redeemed 200,000 units of the Redeemable Subsidiary Preferred Equity for an aggregate redemption price equal to $200 million plus accrued and unpaid dividends, representing 100% of the unreturned capital contribution with respect to the units redeemed, plus accrued and unpaid dividends with respect to the units redeemed up to, but not including, the redemption date, and after giving effect to any applicable rebates.

In August 2020, we redeemed 350,000 units of the Redeemable Subsidiary Preferred Equity for an aggregate redemption price equal to $350 million, representing 100% of the unreturned capital contribution with respect to the units redeemed, plus $4 million in accrued and unpaid dividends, with respect to the units redeemed up to, but not including, the redemption date, for a total redemption amount of $354 million.

Dividends accrued during the three and nine months ended September 30, 2020 were $7 million and $32 million, respectively, and during both the three and nine months ended September 30, 2019 were $10 million and are reflected in net income attributable to the redeemable noncontrolling interests in our consolidated statements of operations. The dividends paid in cash accrue at a rate equal to 1-month LIBOR (with a 0.75% floor) plus 7.5%, which is 0.5% lower than the rate payable if the dividends were paid-in-kind during the quarter. The dividends accrued for the third quarter were paid in cash in September 2020. Dividends accrued during the three months ended March 31, 2020 of $13 million were paid-in-kind and added to the liquidation preference. In June 2020, we redeemed units of the Redeemable Subsidiary Preferred Equity for an aggregate redemption price equal to $13 million.

The balance of the Redeemable Subsidiary Preferred Equity as of September 30, 2020 was $170 million, net of issuance costs.

Subsidiary Equity Put Right. A noncontrolling equity holder of one of our subsidiaries had the right to sell their interest to the Company at a fair market sale value of $376 million, plus any undistributed income, which was exercised and settled in January 2020.

A noncontrolling equity holder of one of our subsidiaries has the right to sell their interest to the Company at any time during the 30-day period following September 30, 2025. The initial value of this redeemable noncontrolling interest was recorded at $22 million.
v3.20.2
COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES:

Sports Programming Rights

We are contractually obligated to make payments to purchase sports programming rights. The following table presents our annual non-cancellable commitments relating to our local sports segment's sports programming rights agreements as of September 30, 2020. These commitments assume that sports teams fully deliver the contractually committed games, and do not reflect the impact of rebates expected to be paid by the teams.
(in millions)
 
2020 (remainder)
$
515

2021
1,820

2022
1,575

2023
1,525

2024
1,457

2025 and thereafter
8,281

Total
$
15,173



Other Liabilities

In connection with the RSN Acquisition, we assumed certain fixed payment obligations which are payable through 2027. We recorded these obligations in purchase accounting at estimated fair value. As of September 30, 2020, $57 million was recorded within other current liabilities and $100 million was recorded within other long-term liabilities in our consolidated balance sheets. Interest expense of $2 million and $6 million was recorded for the three and nine months ended September 30, 2020, respectively and $0.5 million was recorded for both the three and nine months ended September 30, 2019.

In connection with the RSN Acquisition, we assumed certain variable payment obligations which are payable through 2030. These contractual obligations are based upon the excess cash flow of certain RSNs. We recorded these obligations in purchase accounting at estimated fair value. As of September 30, 2020, $20 million was recorded within other current liabilities and $44 million was recorded within other long-term liabilities in our consolidated balance sheets. These obligations are measured as the amount of cash that would be paid under the terms of the contracts if they were to settle at each reporting date. Total measurement adjustment gains of $168 million for both the three and nine months ended September 30, 2020 were recorded within other income, net in our consolidated statements of operations. The measurement adjustment gains were a result of a decrease in the projected excess cash flows of the related RSNs, as further discussed in Impairment of Goodwill and Definite-Lived Intangible Assets under Note 1. Nature of Operations and Summary of Significant Accounting Policies . For further information, see Note 10. Fair Value Measurements.

Litigation
 
We are a party to lawsuits, claims, and regulatory matters from time to time in the ordinary course of business. Actions currently pending are in various stages and no material judgments or decisions have been rendered by hearing boards or courts in connection with such actions. Except as noted below, we do not believe the outcome of these matters, individually or in the aggregate, will have a material effect on the Company's financial statements. 

FCC Litigation Matters

On December 21, 2017, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) proposing a $13 million fine for alleged violations of the FCC's sponsorship identification rules by the Company and certain of its subsidiaries. We filed a response disputing the Commission's findings and the proposed fine.

On July 19, 2018, the FCC released a Hearing Designation Order (HDO) to commence a hearing before an Administrative Law Judge (ALJ) with respect to the Company’s proposed acquisition of Tribune. The HDO asked the ALJ to determine (i) whether Sinclair was the real party in interest to the sale of WGN-TV, KDAF(TV), and KIAH(TV), (ii) if so, whether the Company engaged in misrepresentation and/or lack of candor in its applications with the FCC and (iii) whether consummation of the overall transaction would be in the public interest and compliance with the FCC’s ownership rules. The Company maintains that the overall transaction and the proposed divestitures complied with the FCC’s rules, and strongly rejects any allegation of misrepresentation or lack of candor. The Merger Agreement was terminated by Tribune on August 9, 2018, on which date the Company subsequently filed a letter with the FCC to withdraw the merger applications and have them dismissed with prejudice and filed with the ALJ a Notice of Withdrawal of Applications and Motion to Terminate Hearing (Motion). On August 10, 2018, the FCC's Enforcement Bureau filed a responsive pleading with the ALJ stating that it did not oppose dismissal of the merger applications and concurrent termination of the hearing proceeding. The ALJ granted the Motion and terminated the hearing on March 5, 2019. As part of a discussion initiated by the Company to respond to allegations raised in the HDO, the FCC’s Media Bureau sent the Company a letter of inquiry.

On May 22, 2020, the FCC released an Order and Consent Decree pursuant to which the Company agreed to pay $48 million to resolve the FCC’s investigation of the allegations raised in the HDO, the matters covered by the NAL, and a retransmission related matter. The Company submitted the $48 million payment on August 19, 2020. As part of the consent decree, the Company also agreed to implement a 4-year compliance plan. Two petitions were filed on June 8, 2020 seeking reconsideration of the Order and Consent Decree. The Company filed an opposition to the petitions on June 18, 2020, and the petitions remain pending. For the nine months ended September 30, 2020, we recorded an expense of $2.5 million for the above legal matters, which is reflected within selling, general, and administrative expenses in our consolidated statements of operations.

On September 1, 2020, one of the individuals who filed a petition for reconsideration of the Order and Consent Decree filed a petition to deny the license renewal application of WBFF(TV), Baltimore, MD, and the license renewal applications of two other Baltimore, MD stations with which the Company has a JSA or LMA, Deerfield Media station WUTB(TV) and Cunningham station WNUV(TV). The Company filed an opposition to the petition on October 1, 2020, and the petition remains pending.

On September 2, 2020, the FCC adopted a Memorandum Opinion and Order and Notice of Apparent Liability for Forfeiture (NAL) against the licensees of several stations with whom the Company has LMAs, JSAs, and/or SSAs in response to a complaint regarding those stations’ retransmission consent negotiations. The NAL proposed a $0.5 million penalty for each station, totaling $9 million. The licensees filed a response to the NAL on October 15, 2020, asking the Commission to dismiss the proceeding or, alternatively, to reduce the proposed forfeiture to $25,000 per station. The Company is not a party to that proceeding and cannot predict whether or how the proceeding will affect the Company’s financial statements. However, we accrued an expense for the above legal matters during the three months ended September 30, 2020, as we consolidate these stations as VIEs.

Other Litigation Matters

On November 6, 2018, the Company agreed to enter into a proposed consent decree with the Department of Justice (DOJ). This consent decree resolves the Department of Justice’s investigation into the sharing of pacing information among certain stations in some local markets. The DOJ filed the consent decree and related documents in the U.S. District Court for the District of Columbia on November 13, 2018.  The U.S. District Court for the District of Columbia entered the consent decree on May 22, 2019. The consent decree is not an admission of any wrongdoing by the Company and does not subject Sinclair to any monetary damages or penalties. The Company believes that even if the pacing information was shared as alleged, it would not have impacted any pricing of advertisements or the competitive nature of the market. The consent decree requires the Company to adopt certain antitrust compliance measures, including the appointment of an Antitrust Compliance Officer, consistent with what the Department of Justice has required in previous consent decrees in other industries. The consent decree also requires the Company's stations not to exchange pacing and certain other information with other stations in their local markets, which the Company’s management has already instructed them not to do.

The Company is aware of twenty-two putative class action lawsuits that were filed against the Company following published reports of the DOJ investigation into the exchange of pacing data within the industry. On October 3, 2018, these lawsuits were consolidated in the Northern District of Illinois. The consolidated action alleges that the Company and thirteen other broadcasters conspired to fix prices for commercials to be aired on broadcast television stations throughout the United States and engaged in unlawful information sharing, in violation of the Sherman Antitrust Act. The consolidated action seeks damages, attorneys’ fees, costs and interest, as well as injunctions against adopting practices or plans that would restrain competition in the ways the plaintiffs have alleged. Defendants in this action filed a motion to dismiss the consolidated action, but that motion was denied. The Company believes the lawsuits are without merit and intends to vigorously defend itself against all such claims.

On August 9, 2018, Edward Komito, a putative Company shareholder, filed a class action complaint in the United States District Court for the District of Maryland (the "District of Maryland") against the Company, Christopher Ripley and Lucy Rutishauser, which action is now captioned In re Sinclair Broadcast Group, Inc. Securities Litigation, case No. 1:18-CV-02445-CCB (the "Securities Action"). On March 1, 2019, lead counsel in the Securities Action filed an amended complaint, adding David Smith and Steven Marks as defendants, and alleging that defendants violated the federal securities laws by issuing false or misleading disclosures concerning (a) the Merger prior to the termination thereof; and (b) the DOJ investigation concerning the alleged exchange of pacing information. The Securities Action seeks declaratory relief, money damages in an amount to be determined at trial, and attorney’s fees and costs. On May 3, 2019, Defendants filed a motion to dismiss the amended complaint, which motion was opposed by lead plaintiff. On February 4, 2020, the Court issued a decision granting the motion to dismiss in part and denying the motion to dismiss in part. On February 18, 2020, plaintiffs filed a motion for reconsideration or, in the alternative, to certify dismissal as final and appealable. Defendants filed an opposition to this motion. On July 20, 2020, the Court issued a decision denying plaintiffs’ motion and dismissing the remaining claims (which the Court previously had not dismissed in its February 4, 2020 decision) based on lack of standing. The plaintiffs did not appeal this decision, and the Securities Action therefore has concluded.

In addition, beginning in late July 2018, Sinclair received letters from two putative Company shareholders requesting that the Board of Directors of the Company investigate whether any of the Company’s officers and directors committed nonexculpated breaches of fiduciary duties in connection with, or gross mismanagement with respect to: (i) seeking regulatory approval of the Tribune Merger and (ii) the HDO, and the allegations contained therein. A committee consisting of independent members of the board of directors has been formed to respond to these demands (the "Special Litigation Committee"). The members of the Special Litigation Committee are Martin R. Leader, Larry E. McCanna, and the Honorable Benson Everett Legg, with Martin Leader as its designated Chair.

On November 29, 2018, putative Company shareholder Fire and Police Retiree Health Care Fund, San Antonio filed a shareholder derivative complaint in the District of Maryland against the members of the Company’s Board of Directors, Mr. Ripley, and the Company (as a nominal defendant), which action is captioned Fire and Police Retiree Health Care Fund, San Antonio v. Smith, et al., Case No. 1:18-cv-03670-RDB (the "San Antonio Action"). On December 26, 2018, putative Company shareholder Teamsters Local 677 Health Services & Insurance Plan filed a shareholder derivative complaint in the Circuit Court of Maryland for Baltimore County (the "Circuit Court") against the members of the Company’s Board of Directors, Mr. Ripley, and the Company (as a nominal defendant), which action is captioned Teamsters Local 677 Health Services & Insurance Plan v. Friedman, et al., Case No. 03-C-18-12119 (the "Teamsters Action"). A defendant in the Teamsters Action removed the Teamsters action to the District of Maryland, and the plaintiff in that case has moved to remand the case back to the Circuit Court. That motion is fully briefed and awaiting decision. On December 21, 2018, putative Company shareholder Norfolk County Retirement System filed a shareholder derivative complaint in the District of Maryland against the members of the Company’s Board of Directors, Mr. Ripley, and the Company (as a nominal defendant), which action is captioned Norfolk County Retirement System v. Smith, et al., Case No. 1:18-cv-03952-RDB (the "Norfolk Action," and together with the San Antonio Action and the Teamsters Action, the "Derivative Actions"). The plaintiffs in each of the Derivative Actions allege breaches of fiduciary duties by the defendants in connection with (i) seeking regulatory approval of the Tribune Merger and (ii) the HDO, and the allegations contained therein. The plaintiffs in the Derivative Actions seek declaratory relief, money damages to be awarded to the Company in an amount to be determined at trial, corporate governance reforms, equitable or injunctive relief, and attorney’s fees and costs. Additionally, the plaintiffs in the Teamsters and Norfolk Actions allege that the defendants were unjustly enriched, in the form of their compensation as directors and/or officers of the Company, in light of the alleged breaches of fiduciary duty, and seek restitution to be awarded to the Company. These allegations are the subject matter of the review being conducted by the Special Litigation Committee, as noted above. On April 30, 2019, the Special Litigation Committee moved to dismiss and, in the alternative, to stay the San Antonio and Norfolk Actions, which motion was opposed by the plaintiffs. The Company and the remaining individual defendants joined in this motion. On October 23, 2019, the court granted the plaintiff’s motion in the Teamsters Action to remand that action back to the Circuit Court. On December 9, 2019, the court denied defendants’ motions to dismiss and, in the alternative, to stay the San Antonio and Norfolk Actions without prejudice, subject to potential renewal following limited discovery.

On July 20, 2020, the parties to the Derivative Actions executed a Stipulation and Agreement of Settlement, Compromise and Release (the “Settlement Stipulation”) reflecting the terms of the settlement of the Derivative Actions (the “Settlement”), which Settlement is subject to final approval by the District Court of Maryland. In connection with the Settlement, (a) the Company’s Board of Directors has agreed to implement a series of corporate governance measures (as described in Exhibit A to the Settlement Stipulation); (b) defendants’ insurers will pay $20.5 million into a settlement fund, which, after a deduction for an award of fees and expenses to plaintiffs’ counsel in an amount to be determined by the Court, will be paid to the Company; (c) the Board of Directors will designate an aggregate amount of $5 million of the settlement fund to be used, over a period of five years, for the implementation and operation of the corporate governance measures and certain compliance programs in connection with an FCC consent decree that was previously announced on May 6, 2020; and (d) the Company’s Executive Chairman David D. Smith will forgo, cancel, or return a grant of SARs of 638,298 shares of Sinclair Class A common stock that was awarded to him in February 2020. In exchange for the consideration described above, and subject to final court approval, the Derivative Actions will be dismissed and defendants will be released of any claims relating to the Tribune Merger or the HDO (provided that the release will not include the Securities Action). On July 23, 2020, and pursuant to the Settlement, the Teamsters Action was voluntarily dismissed. Also on July 23, 2020, the plaintiffs in the Norfolk Action and the San Antonio Action filed the settlement papers with the District of Maryland and moved for preliminary approval of the Settlement as fair, reasonable, and adequate, and providing for notice to shareholders of the Settlement. On August 6, 2020, the court entered an order preliminarily approving the settlement and providing for notice of a final settlement hearing to be held on October 27, 2020. On October 27, 2020, the court held the final settlement hearing and indicated that the court would review the submissions and issue a written decision. Defendants have not admitted any liability or wrongdoing in connection with the Settlement and have entered into the Settlement to avoid the costs, risks, distraction, and uncertainties of continued litigation.
v3.20.2
EARNINGS PER SHARE
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
EARNINGS PER SHARE EARNINGS PER SHARE:
 
The following table reconciles income (numerator) and shares (denominator) used in our computations of basic and diluted earnings per share for the periods presented (in millions, except share amounts which are reflected in thousands):

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2020
 
2019
 
2020
 
2019
Income (Numerator)
 
 
 
 
 
 
 
Net (loss) income
$
(3,367
)
 
$
(49
)
 
$
(2,943
)
 
$
18

Net income attributable to the redeemable noncontrolling interests
(19
)
 
(11
)
 
(51
)
 
(11
)
Net loss (income) attributable to the noncontrolling interests
130

 

 
113

 
(3
)
Numerator for basic and diluted earnings per common share available to common shareholders
$
(3,256
)
 
$
(60
)
 
$
(2,881
)
 
$
4

 
 
 
 
 
 
 
 
Shares (Denominator)
 

 
 

 
 
 
 
Basic weighted-average common shares outstanding
74,810

 
92,086

 
81,922

 
92,050

Dilutive effect of stock-settled appreciation rights and outstanding stock options

 

 

 
1,221

Diluted weighted-average common and common equivalent shares outstanding
74,810

 
92,086

 
81,922

 
93,271



The following table shows the weighted-average stock-settled appreciation rights and outstanding stock options (in thousands) that are excluded from the calculation of diluted earnings per common share as the inclusion of such shares would be anti-dilutive:

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2020
 
2019
 
2020
 
2019
Weighted-average stock-settled appreciation rights and outstanding stock options excluded
3,456

 
1,349

 
3,406

 
317


v3.20.2
SEGMENT DATA
9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
SEGMENT DATA SEGMENT DATA:
 
We measure segment performance based on operating income (loss). We have two reportable segments: broadcast and local sports. Our broadcast segment, previously referred to as our local news and marketing services segment, provides free over-the-air programming to television viewing audiences and includes stations in 88 markets located throughout the continental United States. Our local sports segment, previously referred to as our sports segment, provides viewers with live professional sports content and includes 23 regional sports network brands. Other and corporate are not reportable segments but are included for reconciliation purposes. Other primarily consists of original networks and content, including Tennis, non-broadcast digital and internet solutions, technical services, and other non-media investments. Corporate costs primarily include our costs to operate as a public company and to operate our corporate headquarters location. All of our businesses are located within the United States.
Segment financial information is included in the following tables for the periods presented (in millions):
As of September 30, 2020
 
Broadcast
 
Local sports
 
Other & Corporate
 
Eliminations
 
Consolidated
Assets
 
$
4,673

 
$
6,211

 
$
1,641

 
$
(42
)
 
$
12,483


For the three months ended September 30, 2020
 
Broadcast
 
Local sports
 
Other & Corporate
 
Eliminations
 
Consolidated
Revenue
 
$
734

 
$
727

 
$
105

 
$
(27
)
(b)
$
1,539

Depreciation of property and equipment and amortization of definite-lived intangibles and other assets
 
60

 
109

 
6

 
(1
)
 
174

Amortization of sports programming rights (a)
 

 
632

 

 

 
632

Amortization of program contract costs
 
19

 

 

 

 
19

Corporate general and administrative expenses
 
25

 
3

 
2

 

 
30

(Gain) loss on asset dispositions and other, net of impairment
 
(41
)
 

 
2

 

 
(39
)
Impairment of goodwill and definite-lived intangible assets
 

 
4,264

 

 

 
4,264

Operating income (loss)
 
221

 
(4,450
)
 
10

 
3

 
(4,216
)
Interest expense including amortization of debt discount and deferred financing costs
 
2

 
111

 
48

 
(4
)
 
157

Loss from equity method investments
 

 
(2
)
 
(8
)
 

 
(10
)

For the three months ended September 30, 2019
 
Broadcast
 
Local sports
 
Other & Corporate
 
Eliminations
 
Consolidated
Revenue
 
$
661

 
$
352

 
$
129

 
$
(17
)
(b)
$
1,125

Depreciation of property and equipment and amortization of definite-lived intangibles and other assets
 
61

 
54

 
6

 
(1
)
 
120

Amortization of sports programming rights (a)
 

 
193

 

 

 
193

Amortization of program contract costs
 
22

 

 

 

 
22

Corporate general and administrative expenses
 
23

 
92

 
123

 
(1
)
 
237

Gain on asset dispositions and other, net of impairment
 
(29
)
 

 
(6
)
 

 
(35
)
Operating income (loss)
 
154

 
(56
)
 
(102
)
 
(2
)
 
(6
)
Interest expense including amortization of debt discount and deferred financing costs
 
1

 
73

 
58

 
(3
)
 
129

Income (loss) from equity method investments
 

 
1

 
(13
)
 

 
(12
)


For the nine months ended September 30, 2020
 
Broadcast
 
Local sports
 
Other & Corporate
 
Eliminations
 
Consolidated
Revenue
 
$
2,026

 
$
2,155

 
$
338

 
$
(88
)
(b)
$
4,431

Depreciation of property and equipment and amortization of definite-lived intangibles and other assets
 
178

 
328

 
19

 
(1
)
 
524

Amortization of sports programming rights (a)
 

 
1,028

 

 

 
1,028

Amortization of program contract costs
 
63

 

 

 

 
63

Corporate general and administrative expenses
 
95

 
7

 
9

 

 
111

(Gain) loss on asset dispositions and other, net of impairment
 
(101
)
 

 
2

 

 
(99
)
Impairment of goodwill and definite-lived intangible assets
 

 
4,264