Company Quick10K Filing
Quick10K
Sinclair Broadcast Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$61.18 91 $5,580
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-05-03 Enter Agreement, Regulation FD, Exhibits
8-K 2019-01-25 Officers, Exhibits
8-K 2018-11-07 Earnings, Exhibits
8-K 2018-08-29 Other Events, Exhibits
8-K 2018-08-09 Leave Agreement, Other Events, Exhibits
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-06-07 Shareholder Vote
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-05-08 Enter Agreement, Other Events
8-K 2018-02-28 Earnings, Exhibits
8-K 2018-02-06 Other Events
LHCG LHC Group 3,620
WTM White Mountains Insurance Group 3,060
USAC USA Compression Partners 1,650
RVI Retail Value 621
NWFL Norwood Financial 205
ETON Eton Pharmaceuticals 131
RHYTH Rhythmone 0
DCAC Danielsorate Advisory Company 0
NCAP Northsight Capital 0
OFFLP Ceres Orion 0
SBGI 2019-03-31
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 sarschrisripley02262019.htm
EX-10.2 sarsdavidsmith02262019.htm
EX-10.3 rsaagreementpac7.htm
EX-31.1 a2019q110-qexhibit311.htm
EX-31.2 a2019q110-qexhibit312.htm
EX-32.1 a2019q110-qexhibit321.htm
EX-32.2 a2019q110-qexhibit322.htm

Sinclair Broadcast Group Earnings 2019-03-31

SBGI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
(Mark One)
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2019
 
OR
 
o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to                       .
 
COMMISSION FILE NUMBER: 000-26076
 
SINCLAIR BROADCAST GROUP, INC.
(Exact name of Registrant as specified in its charter)
 
 
Maryland
(State or other jurisdiction of
Incorporation or organization)
 
52-1494660
(I.R.S. Employer Identification No.)
 
10706 Beaver Dam Road
Hunt Valley, Maryland 21030
(Address of principal executive office, zip code)
 
(410) 568-1500
(Registrant’s telephone number, including area code)
 
None
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x
 
No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such file).
Yes x
 
No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (check one): 
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o
 
No x

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Class A Common Stock, par value $ 0.01 per share
 
SBGI
 
The NASDAQ Stock Market LLC

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
    
 
 
Number of shares outstanding as of
Title of each class
 
5/6/2019
Class A Common Stock
 
65,826,328
Class B Common Stock
 
25,527,682


Table of Contents

SINCLAIR BROADCAST GROUP, INC.
 
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2019
 
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
 

3

Table of Contents

SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data) (Unaudited) 
 
As of March 31,
2019
 
As of December 31,
2018
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
975,347

 
$
1,060,330

Accounts receivable, net of allowance for doubtful accounts of $1,763 and $2,379, respectively
581,226

 
598,597

Current portion of program contract costs
42,092

 
64,247

Prepaid expenses and other current assets
84,337

 
60,732

Total current assets
1,683,002

 
1,783,906

Program contract costs, less current portion
9,369

 
11,217

Property and equipment, net
687,217

 
683,134

Operating lease assets
193,792

 

Goodwill
2,123,902

 
2,123,902

Indefinite-lived intangible assets
158,364

 
158,222

Definite-lived intangible assets, net
1,584,021

 
1,626,880

Other assets
194,541

 
184,831

Total assets (a)
$
6,634,208

 
$
6,572,092

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued liabilities
$
376,287

 
$
413,227

Income taxes payable
24,738

 
23,314

Current portion of notes payable, finance leases and commercial bank financing
42,193

 
42,564

Current portion of operating lease liabilities
22,779

 

Current portion of program contracts payable
73,583

 
93,480

Total current liabilities
539,580

 
572,585

Notes payable, finance leases and commercial bank financing, less current portion
3,840,952

 
3,849,891

Operating lease liabilities, less current portion
193,970

 

Program contracts payable, less current portion
45,445

 
50,060

Deferred tax liabilities
414,873

 
413,253

Other long-term liabilities
80,235

 
85,983

Total liabilities (a)
5,115,055

 
4,971,772

Commitments and contingencies (See Note 5)


 


 
 

 
 

Shareholders' Equity:
 

 
 

Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 66,241,852 and 68,897,723 shares issued and outstanding, respectively
662

 
689

Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 25,527,682 and 25,670,684 shares issued and outstanding, respectively, convertible into Class A Common Stock
255

 
257

Additional paid-in capital
1,038,332

 
1,121,054

Retained earnings
520,936

 
517,620

Accumulated other comprehensive loss
(784
)
 
(784
)
Total Sinclair Broadcast Group shareholders’ equity
1,559,401

 
1,638,836

Noncontrolling interests
(40,248
)
 
(38,516
)
Total equity
1,519,153

 
1,600,320

Total liabilities and equity
$
6,634,208

 
$
6,572,092

 
The accompanying notes are an integral part of these unaudited consolidated financial statements. 
 

(a)
Our consolidated total assets as of March 31, 2019 and December 31, 2018 include total assets of variable interest entities (VIEs) of $124.2 million and $127.6 million, respectively, which can only be used to settle the obligations of the VIEs.  Our consolidated total liabilities as of March 31, 2019 and December 31, 2018 include total liabilities of VIEs of $17.5 million and $22.3 million, respectively, for which the creditors of the VIEs have no recourse to us.  See Note 8. Variable Interest Entities.

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Table of Contents

SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data) (Unaudited) 
 
Three Months Ended 
 March 31,
 
2019
 
2018
REVENUES:
 

 
 

Media revenues
$
673,364

 
$
643,651

Non-media revenues
48,739

 
21,701

Total revenues
722,103

 
665,352

 
 
 
 
OPERATING EXPENSES:
 

 
 

Media production expenses
319,044

 
288,549

Media selling, general and administrative expenses
159,923

 
146,899

Amortization of program contract costs and net realizable value adjustments
23,937

 
26,950

Non-media expenses
39,300

 
21,223

Depreciation of property and equipment
23,020

 
27,325

Corporate general and administrative expenses
27,726

 
24,596

Amortization of definite-lived intangible and other assets
43,464

 
43,605

Gain on asset dispositions and other, net of impairment
(7,909
)
 
(21,109
)
Total operating expenses
628,505

 
558,038

Operating income
93,598

 
107,314

 
 
 
 
OTHER INCOME (EXPENSE):
 

 
 

Interest expense and amortization of debt discount and deferred financing costs
(54,626
)
 
(69,742
)
Loss from equity method investments
(13,637
)
 
(12,587
)
Other income, net
2,195

 
3,381

Total other expense, net
(66,068
)
 
(78,948
)
Income before income taxes
27,530

 
28,366

INCOME TAX (PROVISION) BENEFIT
(4,759
)
 
15,628

NET INCOME
22,771

 
43,994

Net income attributable to the noncontrolling interests
(1,099
)
 
(871
)
NET INCOME ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP
$
21,672

 
$
43,123

 
 
 
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP:
 

 
 

Basic earnings per share
$
0.23

 
$
0.42

Diluted earnings per share
$
0.23

 
$
0.42

Weighted average common shares outstanding
92,302

 
101,899

Weighted average common and common equivalent shares outstanding
93,218

 
102,917


The accompanying notes are an integral part of these unaudited consolidated financial statements.


5

Table of Contents

SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands) (Unaudited)
 
 
Three Months Ended 
 March 31,
 
2019
 
2018
Net income
$
22,771

 
$
43,994

Comprehensive income
22,771

 
43,994

Comprehensive income attributable to the noncontrolling interests
(1,099
)
 
(871
)
Comprehensive income attributable to Sinclair Broadcast Group
$
21,672

 
$
43,123

 
The accompanying notes are an integral part of these unaudited consolidated financial statements.


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Table of Contents

SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands) (Unaudited)
 
 
Three Months Ended March 31, 2018
 
Sinclair Broadcast Group Shareholders
 
 
 
 
 
Class A
Common Stock
 
Class B
Common Stock
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total Equity
 
Shares
 
Values
 
Shares
 
Values
 
 
 
 
 
BALANCE, December 31, 2017
76,071,145

 
$
761

 
25,670,684

 
$
257

 
$
1,320,298

 
$
248,845

 
$
(1,423
)
 
$
(34,372
)
 
$
1,534,366

Cumulative effect of adoption of new accounting standards

 

 

 

 

 
2,100

 

 

 
2,100

Dividends declared and paid on Class A and Class B Common Stock ($0.18 per share)

 

 

 

 

 
(18,392
)
 

 

 
(18,392
)
Class A Common Stock issued pursuant to employee benefit plans
438,429

 
4

 

 

 
12,134

 

 

 

 
12,138

Distributions to noncontrolling interests, net

 

 

 

 

 

 

 
(2,663
)
 
(2,663
)
Net income

 

 

 

 

 
43,123

 

 
871

 
43,994

BALANCE, March 31, 2018
76,509,574

 
$
765

 
25,670,684

 
$
257

 
$
1,332,432

 
$
275,676

 
$
(1,423
)
 
$
(36,164
)
 
$
1,571,543

 
The accompanying notes are an integral part of these unaudited consolidated financial statements.


7

Table of Contents

SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands) (Unaudited)
 
 
Three Months Ended March 31, 2019
 
Sinclair Broadcast Group Shareholders
 
 
 
 
 
Class A
Common Stock
 
Class B
Common Stock
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total Equity
 
Shares
 
Values
 
Shares
 
Values
 
 
 
 
 
BALANCE, December 31, 2018
68,897,723

 
$
689

 
25,670,684

 
$
257

 
$
1,121,054

 
$
517,620

 
$
(784
)
 
$
(38,516
)
 
$
1,600,320

Dividends declared and paid on Class A and Class B Common Stock ($0.20 per share)

 

 

 

 

 
(18,356
)
 

 

 
(18,356
)
Class B Common Stock converted into Class A Common Stock
143,002

 
2

 
(143,002
)
 
(2
)
 

 

 

 

 

Repurchases of Class A Common Stock
(3,493,194
)
 
(35
)
 

 

 
(104,950
)
 

 

 

 
(104,985
)
Class A Common Stock issued pursuant to employee benefit plans
694,321

 
6

 

 

 
22,228

 

 

 

 
22,234

Distributions to noncontrolling interests, net

 

 

 

 

 

 

 
(2,831
)
 
(2,831
)
Net income

 

 

 

 

 
21,672

 

 
1,099

 
22,771

BALANCE, March 31, 2019
66,241,852

 
$
662

 
25,527,682

 
$
255

 
$
1,038,332

 
$
520,936

 
$
(784
)
 
$
(40,248
)
 
$
1,519,153

 
The accompanying notes are an integral part of these unaudited consolidated financial statements.


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Table of Contents

SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (Unaudited)
 
 
Three Months Ended March 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income
$
22,771

 
$
43,994

Adjustments to reconcile net income to net cash flows from operating activities:
 

 
 

Depreciation of property and equipment
23,020

 
27,325

Amortization of definite-lived intangible and other assets
43,464

 
43,605

Amortization of program contract costs and net realizable value adjustments
23,937

 
26,950

Stock-based compensation
10,819

 
6,956

Deferred tax provision (benefit)
2,075

 
(16,342
)
Gain on asset dispositions and other, net of impairment
(8,020
)
 
(20,324
)
Loss from equity method investments
13,637

 
12,703

Change in assets and liabilities, net of acquisitions:
 

 
 

Decrease in accounts receivable
15,987

 
26,504

Increase in prepaid expenses and other current assets
(23,236
)
 
(18,353
)
Decrease in accounts payable and accrued liabilities
(17,642
)
 
(8,473
)
Net change in net income taxes payable/receivable
1,424

 
241

     Decrease in program contracts payable
(24,448
)
 
(28,492
)
Other, net
15,887

 
4,649

Net cash flows from operating activities
99,675

 
100,943

 
 
 
 
CASH FLOWS USED IN INVESTING ACTIVITIES:
 

 
 

Acquisition of property and equipment
(29,008
)
 
(22,219
)
Payments for debt and equity investments
(25,725
)
 
(7,750
)
Distributions from equity method investees
695

 
9,162

Other, net
6,883

 
(143
)
Net cash flows used in investing activities
(47,155
)
 
(20,950
)
 
 
 
 
CASH FLOWS USED IN FINANCING ACTIVITIES:
 

 
 

Repayments of notes payable, commercial bank financing and finance leases
(11,062
)
 
(16,950
)
Dividends paid on Class A and Class B Common Stock
(18,356
)
 
(18,392
)
Repurchase of outstanding Class A Common Stock
(104,985
)
 

Other, net
(3,100
)
 
(2,296
)
Net cash flows used in financing activities
(137,503
)
 
(37,638
)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
(84,983
)
 
42,355

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period
1,060,330

 
995,940

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period
$
975,347

 
$
1,038,295


The accompanying notes are an integral part of these unaudited consolidated financial statements.


9

Table of Contents

SINCLAIR BROADCAST GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
1.              NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
Nature of Operations

Sinclair Broadcast Group, Inc. (the Company) is a diversified television broadcasting company with national reach and a strong focus on providing high-quality content on our local television stations and digital platforms. The content, distributed through our broadcast platform, consists of programming provided by third-party networks and syndicators, local news, and other original programming produced by us. We also distribute our original programming, and owned and operated network affiliates, on other third-party platforms. 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 March 31, 2019, our broadcast distribution platform is a single reportable segment for accounting purposes. It consists primarily of our broadcast television stations, 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)), to 191 stations in 89 markets. These stations broadcast 605 channels as of March 31, 2019. For the purpose of this report, these 191 stations and 605 channels are referred to as “our” stations and channels.

Principles of Consolidation
 
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries and variable interest entities (VIEs) for which we are the primary beneficiary.  Noncontrolling interest represents a minority owner’s proportionate share of the equity in certain of our consolidated entities.  All intercompany transactions and account balances have been eliminated in consolidation.

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.

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.

Interim Financial Statements
 
The consolidated financial statements for the three months ended March 31, 2019 and 2018 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 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, 2018 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.


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Table of Contents

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 $22.9 million, net of $1.6 million of cumulative impairments, as of March 31, 2019 and $24.5 million as of December 31, 2018. For the three months ended March 31, 2019, we recorded a $1.6 million impairment related to one investment accounted for utilizing the measurement alternative, which is reflected in other income, net in our consolidated statements of operations. For the three months ended March 31, 2018, there were no adjustments to the carrying amount of investments accounted for utilizing the measurement alternative.

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.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued new guidance related to accounting for leases, Accounting Standards Codification Topic 842 (ASC 842). We adopted the new guidance on January 1, 2019 using the modified retrospective approach and the optional transition method. Under this adoption method, comparative prior periods were not adjusted and continue to be reported in accordance with our historical accounting policy. We elected to apply the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carryforward our historical assessments of whether contracts are, or contain, leases and lease classification. The primary impact of adopting this standard was the recognition of $215.2 million of operating lease liabilities and $196.1 million of operating lease assets, upon adoption. The adoption did not have a material impact on how we account for finance leases. See Note 4. Leases for more information regarding our leasing arrangements.

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. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. We are currently evaluating the impact of this guidance 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 GAAP). The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, applied retrospectively. Early adoption is permitted. We are currently evaluating the impact of this guidance 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. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.


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Table of Contents

Revenue Recognition

The following table presents our revenue disaggregated by type and segment (in thousands):
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
 
Broadcast
 
Other
 
Total
 
Broadcast
 
Other
 
Total
Advertising revenue
$
287,850

 
$
20,202

 
$
308,052

 
$
298,912

 
$
17,416

 
$
316,328

Distribution revenue
319,998

 
32,167

 
352,165

 
287,125

 
27,235

 
314,360

Other media and non-media revenues
10,653

 
51,233

 
61,886

 
9,855

 
24,809

 
34,664

Total revenues
$
618,501

 
$
103,602

 
$
722,103

 
$
595,892

 
$
69,460

 
$
665,352



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

Distribution Revenue. The Company generates distribution revenue through fees received from multi-channel video programming distributors (MVPDs) and virtual MVPDs for the right to distribute our stations and other properties on their respective distribution 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 Revenues. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. Deferred revenues were $75.1 million and $83.3 million as of March 31, 2019 and December 31, 2018, respectively. Deferred revenues recognized during the three months ended March 31, 2019 and 2018 that were included in the deferred revenues balance as of December 31, 2018 and 2017 were $38.2 million and $23.2 million, respectively.

Income Taxes

Our income tax provision for all periods consists of federal and state income taxes.  The tax provision for the three months ended March 31, 2019 and 2018 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 a substantial portion of our available state net operating loss (NOL) carryforwards, based on past operating results, expected timing of the reversals of existing temporary book/tax basis differences, alternative tax strategies, and projected future taxable income.

Our effective income tax rate for the three months ended March 31, 2019 was less than the statutory rate primarily due to $4.7 million of federal tax credits related to investments in sustainability initiatives offset by a $2.5 million increase in liability for unrecognized tax benefits. Our effective income tax rate for the three months ended March 31, 2018 was less than the statutory rate primarily due to a $21.3 million permanent tax benefit recognized from an IRS tax ruling on the treatment of the gain realized during the quarter from the sale of certain broadcast spectrum in connection with the Broadcast Incentive Auction.

We believe it is reasonably possible that our liability for unrecognized tax benefits related to continuing operations could be reduced by up to $3.5 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.


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Table of Contents

Share Repurchase Program

On September 6, 2016, the Board of Directors authorized a $150.0 million share repurchase authorization. On August 9, 2018, the Board of Directors authorized an additional $1.0 billion share repurchase authorization. There is no expiration date and currently, management has no plans to terminate this program.  For the three months ended March 31, 2019, we repurchased approximately 3.5 million shares of Class A Common Stock for $105.0 million. As of March 31, 2019, the total remaining purchase authorization was $763.1 million. During April 2019, we repurchased an additional 0.5 million shares of Class A Common Stock for $20.0 million.

Subsequent Events    
 
In May 2019, our Board of Directors declared a quarterly dividend of $0.20 per share, payable on June 17, 2019 to holders of record at the close of business on May 31, 2019.

In May 2019, we announced the acquisition of certain regional sports networks. See Pending Acquisitions under Note 2. Acquisitions and Dispositions of Assets for further discussion.

Reclassifications
 
Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current year's presentation.


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Table of Contents

2.              ACQUISITIONS AND DISPOSITIONS OF ASSETS:

Pending Acquisitions

In May 2019, Diamond Sports Group, LLC (Diamond), an indirect wholly-owned subsidiary of the Company, entered into a definitive agreement with The Walt Disney Company (Disney) to acquire the equity interests in 21 Regional Sports Networks and Fox College Sports (collectively the RSNs), which were acquired by Disney in its acquisition of Twenty-First Century Fox, Inc., for a purchase price of $9.6 billion, subject to certain adjustments. Completion of the transaction is subject to customary closing conditions, including the approval of the U.S. Department of Justice (DOJ).

We expect to capitalize Diamond with $1.4 billion in cash equity, comprised of a combination of approximately $0.7 billion of cash on hand and a contribution of $0.7 billion in the form of new fully committed debt at Sinclair Television Group, Inc (STG). In addition, the purchase price will be funded with $1.0 billion of fully committed privately-placed preferred equity of a newly-formed indirect wholly-owned subsidiary of the Company and an indirect parent of Diamond. The remainder of the purchase price will be funded by $8.2 billion of fully committed secured and unsecured debt incurred by Diamond. The transaction will be treated as an asset sale for tax purposes, with the Company receiving a full step-up in basis.

The secured and unsecured debt incurred by Diamond will be guaranteed by Diamond’s direct parent and certain wholly-owned subsidiaries of Diamond, and secured by certain assets of Diamond and the guarantors. However, the secured and unsecured debt incurred by Diamond will not be guaranteed by the Company, STG, or any of STG’s subsidiaries. In connection with the preferred equity, the Company will provide a guarantee of collection of distributions from Diamond. The newly committed debt at STG will be guaranteed by the Company, certain other subsidiaries of the Company, and certain subsidiaries of STG, and secured by certain assets of STG and the guarantors, consistent with existing terms loans under the existing bank credit facility.

Termination of Material Definitive Agreement

In August 2018, we received a termination notice from Tribune Media Company (Tribune), terminating the Agreement and Plan of Merger entered into on May 8, 2017, between the Company and Tribune (Merger Agreement), which provided for the acquisition by the Company of all of the outstanding shares of Tribune Class A common stock and Tribune Class B common stock (Merger). See Litigation under Note 5. Commitments and Contingencies for further discussion on our pending litigation related to the Tribune acquisition. For the three months ended March 31, 2018, we recognized $21.7 million of costs in connection with this acquisition, which included $4.7 million primarily related to legal and other professional services, that we expensed as incurred and classified as corporate general and administrative expenses on our consolidated statements of operations; and $17.0 million related to ticking fees, which was recorded as interest expense on our consolidated statements of operations.

Dispositions

Broadcast Incentive Auction. Congress authorized the 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 its 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.

For the three months ended March 31, 2018, we recognized a gain of $83.3 million which is included within gain loss on asset dispositions and other, net of impairment on our consolidated statements of operations. This gain relates to the auction proceeds associated with one market where the underlying spectrum was vacated during the first quarter of 2018. The results of the auction are not expected to produce any material change in operations of the Company as there is no change in on air operations.

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 $2.75 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. During the first quarter 2019 and 2018, we recorded a gain of $8.0 million and $0.8 million, respectively, related to reimbursements for spectrum repack costs incurred, which are recorded within gain on asset dispositions and other, net of impairment on our consolidated financial statements. For the three months ended March 31, 2019 and 2018, capital expenditures related to the spectrum repack were $12.7 million and $3.4 million, respectively.


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3.              NOTES PAYABLE AND COMMERCIAL BANK FINANCING:

Notes payable and finance leases to affiliates

The current portion of notes payable, finance leases, and commercial bank financing on our consolidated balance sheets includes finance leases to affiliates of $1.9 million as of both March 31, 2019 and December 31, 2018. Notes payable, finance leases, and commercial bank financing, less current portion, on our consolidated balance sheets includes long-term finance leases to affiliates of $10.2 million and $10.6 million as of March 31, 2019 and December 31, 2018, respectively.

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

We jointly, severally, unconditionally, and irrevocably guarantee $74.6 million and $76.5 million of debt of certain third parties as of March 31, 2019 and December 31, 2018, respectively, of which $23.4 million and $24.4 million, net of deferred financing costs, related to consolidated VIEs is included on our consolidated balance sheets as of March 31, 2019 and December 31, 2018, 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 March 31, 2019 and December 31, 2018, it is not probable that we would have to perform under any of these guarantees.

Bank Credit Agreement

On April 30, 2019, we paid in full the remaining principal balance of $91.5 million of Term Loan A-2 debt under the Bank Credit Agreement, due July 31, 2021.

4.              LEASES:

As described in Note 1. Nature of Operations and Summary of Significant Accounting Policies, we adopted new lease accounting guidance effective January 1, 2019.
 
We determine if a contractual arrangement is a lease at inception. Our lease arrangements provide the Company the right to utilize certain specified tangible assets for a period of time in exchange for consideration. Our leases primarily relate to building space, tower space, and equipment. We do not separate non-lease components from our building and tower leases for the purposes of measuring our lease liabilities and assets. Our leases consist of operating leases and finance leases which are presented separately within our consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

We recognize a lease liability and a right of use asset at the lease commencement date based on the present value of the future lease payments over the lease term discounted using our incremental borrowing rate. Implicit interest rates within our lease arrangements are rarely determinable. Right of use assets also include, if applicable, prepaid lease payments and initial direct costs, less incentives received.

We recognize operating lease expense on a straight-line basis over the term of the lease within operating expenses. Expense associated with our finance leases consists of two components, including interest on our outstanding finance lease obligations and amortization of the related right of use assets. The interest component is recorded in interest expense, and amortization of the finance lease asset is recognized on a straight-line basis over the term of the lease in depreciation of property and equipment.

Our leases do not contain any material residual value guarantees or material restrictive covenants. Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances.


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The following table presents lease expense we have recorded within our consolidated statements of operations for the three months ended March 31, 2019 (in thousands):
 
Three Months Ended March 31, 2019
Finance lease expense:
 
Amortization of finance lease asset
$
719

Interest on lease liabilities
914

Total finance lease expense
1,633

Operating lease expense (a)
9,938

Total lease expense
$
11,571

 
(a)
Includes variable lease expense of $1.1 million and short term lease expense of $0.3 million.

The following table summarizes our outstanding operating and finance lease obligations as of March 31, 2019 (in thousands):
 
Operating Leases
 
Finance Leases
 
Total
2019
$
25,059

 
$
6,068

 
$
31,127

2020
31,392

 
7,938

 
39,330

2021
29,368

 
7,908

 
37,276

2022
26,572

 
7,166

 
33,738

2023
25,147

 
7,138

 
32,285

Thereafter
162,163

 
21,218

 
183,381

Total undiscounted obligations
299,701

 
57,436

 
357,137

Less imputed interest
(82,952
)
 
(16,293
)
 
(99,245
)
Present value of lease obligations
$
216,749

 
$
41,143

 
$
257,892



Future minimum payments under operating leases as of December 31, 2018 were as follows (in thousands):
2019
$
32,108

2020
31,287

2021
29,547

2022
26,702

2023
24,325

2024 and thereafter
157,816

Total
$
301,785



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The following table summarizes supplemental balance sheet information related to leases as of March 31, 2019 (in thousands, except years):
 
Operating Leases
 
Finance Leases
 
Lease assets, non-current
$
193,792

 
$
16,151

(a)
 
 
 
 
 
Lease liabilities, current
$
22,779

 
$
4,478

 
Lease liabilities, non-current
193,970

 
36,665

 
Total lease liabilities
$
216,749

 
$
41,143

 
 
 
 
 
 
Weighted average remaining term (in years)
10.94

 
7.74

 
Weighted average discount rate
5.6
%
 
9.0
%
 
 
(a)
Finance lease assets are reflected in property and equipment, net.

The following table presents other information related to leases for the three months ended March 31, 2019 (in thousands):
 
Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
7,218

Operating cash flows from finance leases
993

Financing cash flows from finance leases
1,101

Leased assets obtained in exchange for new lease liabilities
4,127



5.              COMMITMENTS AND CONTINGENCIES:

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. 

On December 21, 2017, the FCC issued a Notice of Apparent Liability for Forfeiture proposing a $13.4 million fine for alleged violations of the FCC's sponsorship identification rules by the Company and certain of its subsidiaries. Based on a review of the current facts and circumstances, management has provided for what is believed to be a reasonable estimate of the loss exposure for this matter. We have responded to dispute the Commission's findings and the proposed fine; however, we cannot predict the outcome of any potential FCC action related to this matter. We do not believe that the ultimate outcome of this matter will have a material effect on the Company's financial statements.

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 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 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.


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The Company is aware of twenty-two putative class action lawsuits filed in United States District Court against the Company. Most of these lawsuits were also brought against other broadcasters and other defendants, including, in certain cases, unidentified “John Doe” defendants. The lawsuits allege that the defendants conspired to fix prices for commercials to be aired on broadcast television stations throughout the United States, in violation of the Sherman Antitrust Act, and, in one case, state consumer protection and tort laws. The lawsuits seek 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. The lawsuits followed published reports of a DOJ investigation last year into the exchange of pacing data within the industry. The Company believes the class action lawsuits are without merit and intends to vigorously defend itself against all such claims.

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 directed the FCC's Media Bureau to hold in abeyance all other pending applications and amendments thereto related to the proposed Merger with Tribune until the issues that are the subject of the HDO have been resolved with finality.  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. We cannot predict whether or how the issues raised in the now-terminated HDO might impact the Company's ability to acquire additional TV stations in the future.

On August 9, 2018, Tribune filed a complaint (the "Tribune Complaint") in the Court of Chancery of the State of Delaware against the Company, which action is captioned Tribune Media Company v. Sinclair Broadcast Group, Inc, Case No. 2018-0593-JTL. The Tribune Complaint alleges that the Company breached the Merger Agreement by, among other things, failing to use its reasonable best efforts to secure regulatory approval of the Merger, and that such breach resulted in the failure of the Merger to obtain regulatory approval and close. The Tribune Complaint seeks declaratory relief, money damages in an amount to be determined at trial (but which the Tribune Complaint suggests could be in excess $1 billion), and attorney's fees and costs. On August 29, 2018, the Company filed its Answer, Affirmative Defenses, and Verified Counterclaim to the Verified Complaint. In its counterclaim, the Company alleges that Tribune breached the Merger Agreement and seeks declaratory relief, money damages in an amount to be determined at trial, and attorneys' fees and costs. Sinclair believes that the allegations in the Tribune Complaint are without merit and intends to vigorously defend against such allegations.

On August 9, 2018, Edward Komito, a putative Company shareholder, filed a class action complaint (the “Initial 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. The Company believes that the allegations in the Securities Action are without merit and intends to vigorously defend against the allegations.

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.


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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. The Company and the remaining individual defendants joined in this motion.


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6.              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 thousands):

 
Three Months Ended 
 March 31,
 
2019
 
2018
Income (Numerator)
 
 
 
Net income
$
22,771

 
$
43,994

Net income attributable to noncontrolling interests
(1,099
)
 
(871
)
Numerator for basic and diluted earnings per common share available to common shareholders
$
21,672

 
$
43,123

 
 
 
 
Shares (Denominator)
 

 
 

Weighted-average common shares outstanding
92,302

 
101,899

Dilutive effect of stock-settled appreciation rights and outstanding stock options
916

 
1,018

Weighted-average common and common equivalent shares outstanding
93,218

 
102,917



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 
 March 31,
 
2019
 
2018
Weighted-average stock-settled appreciation rights and outstanding stock options excluded
950

 
500




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7.              SEGMENT DATA:
 
We measure segment performance based on operating income (loss).  Our broadcast segment includes stations in 89 markets located throughout the continental United States. Other primarily consists of original networks and content, non-broadcast digital and internet solutions, technical services, and other non-media investments. All of our businesses are located within the United States.  Corporate costs primarily include our costs to operate as a public company and to operate our corporate headquarters location.  Other and Corporate are not reportable segments but are included for reconciliation purposes. 

We had $3.7 million and $3.8 million in intercompany interest expense related to intercompany loans between the broadcast segment, other, and corporate for the three months ended March 31, 2019 and 2018, respectively.
 
Segment financial information is included in the following tables for the periods presented (in thousands):
For the three months ended March 31, 2019
 
Broadcast
 
Other
 
Corporate
 
Consolidated
Revenue
 
$
618,501

 
$
103,602

 
$

 
$
722,103

Depreciation of property and equipment and amortization of definite-lived intangibles and other assets
 
62,681

 
3,784

 
19

 
66,484

Amortization of program contract costs and net realizable value adjustments
 
23,937

 

 

 
23,937

Corporate general and administrative expenses
 
25,760

 
157

 
1,809

 
27,726

(Gain) loss on asset dispositions and other, net of impairment
 
(8,020
)
 
213

 
(102
)
 
(7,909
)
Operating income (loss)
 
95,227

 
97

 
(1,726
)
 
93,598

Interest expense
 
1,482

 
192

 
52,952

 
54,626

(Loss) income from equity method investments
 

 
(13,708
)
 
71

 
(13,637
)
Assets
 
4,873,179

 
789,114

 
971,915

 
6,634,208

For the three months ended March 31, 2018
 
Broadcast
 
Other
 
Corporate
 
Consolidated
Revenue
 
$
595,892

 
$
69,460

 
$

 
$
665,352

Depreciation of property and equipment and amortization of definite-lived intangibles and other assets
 
63,870

 
7,040

 
20

 
70,930

Amortization of program contract costs and net realizable value adjustments
 
26,950

 

 

 
26,950

Corporate general and administrative expenses
 
21,744

 
255

 
2,597

 
24,596

(Gain) loss on asset dispositions and other, net of impairment
 
(84,100
)
(b)
62,991

(a)

 
(21,109
)
Operating income (loss)
 
176,166

(b)
(66,235
)
(a)
(2,617
)
 
107,314

Interest expense
 
1,372

 
202

 
68,168

 
69,742

(Loss) income from equity method investments
 

 
(14,360
)
 
1,773

 
(12,587
)
 

(a)
Includes a $63.0 million impairment to the carrying value of a consolidated real estate venture.

(b)
Includes a gain of $83.3 million related to the auction proceeds. See Note 2. Acquisitions and Dispositions of Assets.



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8.              VARIABLE INTEREST ENTITIES: 

Certain of our stations provide services to other station owners within the same respective market through agreements, such as LMAs, where we provide programming, sales, operational, and administrative services, and JSAs and SSAs, where we provide non-programming, sales, operational, and administrative services.  In certain cases, we have also entered into purchase agreements or options to purchase the license related assets of the licensee.  We typically own the majority of the non-license assets of the stations, and in some cases where the licensee acquired the license assets concurrent with our acquisition of the non-license assets of the station, we have provided guarantees to the bank for the licensee’s acquisition financing.  The terms of the agreements vary, but generally have initial terms of over five years with several optional renewal terms. Based on the terms of the agreements and the significance of our investment in the stations, we are the primary beneficiary when, subject to the ultimate control of the licensees, we have the power to direct the activities which significantly impact the economic performance of the VIE through the services we provide and we absorb losses and returns that would be considered significant to the VIEs.  The fees paid between us and the licensees pursuant to these arrangements are eliminated in consolidation.  Several of these VIEs are owned by a related party, Cunningham. 

In February 2019, we entered into a joint venture with an affiliate of the Chicago Cubs to establish and operate Marquee Sports Network (MSN).  MSN simultaneously entered into a long term telecast rights agreement with the Chicago Cubs, providing MSN with the rights to air certain live game telecasts and other content, which we guarantee. Pursuant to a management services agreement, we are responsible for several key functions of MSN, which most notably includes affiliate and advertising sales services. We have determined that we will consolidate MSN because it is a variable interest entity and we are the primary beneficiary.

The carrying amounts and classification of the assets and liabilities of the VIEs mentioned above, which have been included in our consolidated balance sheets as of the dates presented, were as follows (in thousands):
 
 
As of March 31,
2019
 
As of December 31,
2018
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
10,000

 
$

Accounts receivable
16,177

 
28,276

Other current assets
4,612

 
6,773

Total current assets
30,789

 
35,049

 
 
 
 
Program contract costs, less current portion
1,726

 
2,058

Property and equipment, net
8,263

 
5,346

Goodwill and indefinite-lived intangible assets
15,064

 
15,064

Definite-lived intangible assets, net
65,956

 
67,680

Other assets
2,374

 
2,374

Total assets
$
124,172

 
$
127,571

 
 
 
 
LIABILITIES
 

 
 

Current liabilities:
 

 
 

Other current liabilities
$
14,249

 
$
18,298

 
 
 
 
Notes payable, finance leases and commercial bank financing, less current portion
18,262

 
19,278

Program contracts payable, less current portion
7,687

 
8,474

Other long-term liabilities
650

 
650

Total liabilities
$
40,848

 
$
46,700


 

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The amounts above represent the consolidated assets and liabilities of the VIEs described above, for which we are the primary beneficiary, and have been aggregated as they all relate to our broadcast business. Total liabilities associated with certain outsourcing agreements and purchase options with certain VIEs, which are excluded from the above, were $125.3 million and $124.5 million as of March 31, 2019 and December 31, 2018, respectively, as these amounts are eliminated in consolidation.  The assets of each of these consolidated VIEs can only be used to settle the obligations of the VIE.  As of March 31, 2019, all of the liabilities are non-recourse to us except for the debt of certain VIEs. See Debt of variable interest entities and guarantees of third-party debt under Note 3. Notes Payable and Commercial Bank Financing for further discussion. The risk and reward characteristics of the VIEs are similar.

Other VIEs 

We have several investments in entities which are considered VIEs. However, we do not participate in the management of these entities, including the day-to-day operating decisions or other decisions which would allow us to control the entity, and therefore, we are not considered the primary beneficiary of these VIEs.
 
The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary were $71.3 million as of both March 31, 2019 and December 31, 2018. Our maximum exposure is equal to the carrying value of our investments. The income and loss related to equity method investments and other investments are recorded in (loss) income from equity method investments and other income, net, respectively, on our consolidated statements of operations.  We recorded losses of $13.1 million and $9.0 million for the three months ended March 31, 2019 and 2018, respectively.

9.              RELATED PERSON TRANSACTIONS:
 
Transactions with our controlling shareholders
 
David, Frederick, J. Duncan, and Robert Smith (collectively, the controlling shareholders) are brothers and hold substantially all of our Class B Common Stock and some of our Class A Common Stock.  We engaged in the following transactions with them and/or entities in which they have substantial interests.
 
Leases.  Certain assets used by us and our operating subsidiaries are leased from entities owned by the controlling shareholders.  Lease payments made to these entities were $0.9 million and $1.4 million for the three months ended March 31, 2019 and 2018, respectively.
 
Charter Aircraft.  We lease aircraft owned by certain controlling shareholders. For all leases, we incurred expenses of $0.5 million and $0.4 million for the three months ended March 31, 2019 and 2018, respectively.

Cunningham Broadcasting Corporation
 
Cunningham owns a portfolio of television stations, including: WNUV-TV Baltimore, Maryland; WRGT-TV Dayton, Ohio; WVAH-TV Charleston, West Virginia; WMYA-TV Anderson, South Carolina; WTTE-TV Columbus, Ohio; WDBB-TV Birmingham, Alabama; WBSF-TV Flint, Michigan; WGTU-TV/WGTQ-TV Traverse City/Cadillac, Michigan; WEMT-TV Tri-Cities, Tennessee; WYDO-TV Greenville, North Carolina; KBVU-TV/KCVU-TV Eureka/Chico-Redding, California; WPFO-TV Portland, Maine; and KRNV-DT/KENV-DT Reno, Nevada/Salt Lake City, Utah (collectively, the Cunningham Stations). Certain of our stations provide services to these Cunningham Stations pursuant to LMAs or JSAs and SSAs. See Note 8. Variable Interest Entities, for further discussion of the scope of services provided under these types of arrangements. As of March 31, 2019, we have jointly and severally, unconditionally, and irrevocably guaranteed $49.1 million of Cunningham's debt, of which $9.8 million, net of $0.7 million deferred financing costs, relates to the Cunningham VIEs that we consolidate.
 
The voting stock of the Cunningham Stations is owned by an unrelated party. All of the non-voting stock is owned by trusts for the benefit of the children of our controlling shareholders.  We consolidate certain subsidiaries of Cunningham with which we have variable interests through various arrangements related to the Cunningham Stations.


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The services provided to WNUV-TV, WMYA-TV, WTTE-TV, WRGT-TV and WVAH-TV are governed by a master agreement which has a current term that expires on July 1, 2023 and there are two additional 5-year renewal terms remaining with final expiration on July 1, 2033. We also executed purchase agreements to acquire the license related assets of these stations from Cunningham, which grant us the right to acquire, and grant Cunningham the right to require us to acquire, subject to applicable FCC rules and regulations, 100% of the capital stock or the assets of these individual subsidiaries of Cunningham. Pursuant to the terms of this agreement we are obligated to pay Cunningham an annual fee for the television stations equal to the greater of (i) 3% of each station’s annual net broadcast revenue or (ii) $5.0 million. The aggregate purchase price of these television stations increases by 6% annually. A portion of the fee is required to be applied to the purchase price to the extent of the 6% increase. The cumulative prepayments made under these purchase agreements were $48.3 million and $47.4 million as of March 31, 2019 and December 31, 2018, respectively. The remaining aggregate purchase price of these stations, net of prepayments, as of both March 31, 2019 and December 31, 2018, was approximately $53.6 million. Additionally, we provide serv