10-Q 1 sbgi-20240331.htm 10-Q sbgi-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2024
 
OR
 
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to                       .
 
COMMISSION FILE NUMBER:
333-271072 (Sinclair, Inc.)
000-26076 (Sinclair Broadcast Group, LLC)

Sinclair, Inc.
Sinclair Broadcast Group, LLC
(Exact name of Registrant as specified in its charter)
 
Maryland 
92-1076143 (Sinclair, Inc.)
Maryland 
52-1494660 (Sinclair Broadcast Group, LLC)
(State or other jurisdiction of Incorporation or organization)(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)
 
Securities registered by Sinclair, Inc. pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, par value $ 0.01 per shareSBGIThe NASDAQ Stock Market LLC

Securities registered by Sinclair Broadcast Group, LLC pursuant to Section12(b) of the Act: None

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.
Sinclair, Inc.
Yes No
Sinclair Broadcast Group, LLC
Yes No

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).
Sinclair, Inc.
Yes No
Sinclair Broadcast Group, LLC
Yes No

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.
Sinclair, Inc.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
Sinclair Broadcast Group, LLC
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
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.
Sinclair, Inc.
Sinclair Broadcast Group, LLC

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Sinclair, Inc.
Yes No
Sinclair Broadcast Group, LLC
YesNo

As of May 6, 2024, there were 42,402,724 shares of Sinclair, Inc. Class A Common Stock outstanding and 23,775,056 shares of Sinclair, Inc. Class B Common Stock outstanding.



GENERAL

This combined report on Form 10-Q is filed by both Sinclair, Inc. ("Sinclair") and Sinclair Broadcast Group, LLC ("SBG"). Certain information contained in this document relating to SBG is filed by Sinclair and separately by SBG. SBG makes no representation as to information relating to Sinclair or its subsidiaries, except as it may relate to SBG and its subsidiaries. References in this report to "we," "us," "our," the "Company," and similar terms refer to Sinclair and its consolidated subsidiaries, including SBG, unless context indicates otherwise. As described under Company Reorganization in Note 1. Nature of Operations and Summary of Significant Accounting Policies within Sinclair's Consolidated Financial Statements below, upon consummation of the Reorganization (as defined therein) on June 1, 2023, Sinclair became the successor issuer to Sinclair Broadcast Group, Inc. ("Old Sinclair"), which, immediately following the Reorganization, was converted into a limited liability company. SBG files reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act") solely to comply with Section 1018(a) of the indenture governing the 5.125% Senior Notes due 2027 of Sinclair Television Group, Inc. ("STG"), a wholly-owned subsidiary of SBG. References to SBG herein may also include its predecessor, Old Sinclair, as context indicates.

FORWARD-LOOKING STATEMENTS

This report includes or incorporates forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act, and the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties, and assumptions about us, including, among other things, the following risks. All risk factors are deemed to be related to both Sinclair and its subsidiaries, including SBG. Any risks only applicable to Sinclair are denoted as such.

Industry risks

The business conditions of our advertisers, particularly in the political, automotive, and service categories;
the performance of networks and syndicators that provide us with programming content, as well as the performance of internally originated programming;
subscriber churn due to the impact of technological changes, the proliferation of over-the-top ("OTT") direct to consumer platforms, and economic conditions on consumers desire to pay for subscription services;
the loss of appeal of our local news, network content, syndicated program content, and sports programming, which may be unpredictable;
the availability and cost of programming from networks and syndicators, as well as the cost of internally originated programming;
for Sinclair, the availability and cost of rights to air professional tennis tournaments;
our relationships with networks and their strategies to distribute their programming via means other than their local television affiliates, such as OTT or direct-to-consumer content;
labor disputes and legislation and other union activity associated with film, acting, writing, and other guilds;
the broadcasting community's ability to develop and adopt a viable mobile digital broadcast television ("mobile DTV") strategy and platform, such as the adoption of a next generation broadcast standard ("NextGen TV"), and the consumer's appetite for mobile television;
the impact of programming payments charged by networks pursuant to their affiliation agreements with broadcasters requiring compensation for network programming;
the effects of declining live/appointment viewership as reported through rating systems and local television efforts to adopt and receive credit for same day viewing plus viewing on-demand thereafter;
changes in television rating measurement methodologies that could negatively impact audience results;
the ability of local multi-channel video programming distributors ("MVPD") and virtual MVPDs ("vMVPD," and together with MVPDs, "Distributors") to coordinate and determine local advertising rates as a consortium;
the lack of our ability to negotiate directly with vMVPD's for the distribution of much of our content;
the operation of low power devices in the broadcast spectrum, which could interfere with our broadcast; and
the impact of Distributors and OTTs offering "skinny" programming bundles that may not include television broadcast stations or other programming that we distribute.



Regulatory risks

The Federal Communications Commission ("FCC") task force appointed to help ensure a smoother roll-out of NextGen TV could impact business-use cases for the NextGen TV technology and the timeframe for the discontinuance of ATSC 1.0;
the potential for additional governmental regulation of broadcasting or changes in those regulations and court actions interpreting those regulations, including ownership regulations limiting over-the-air television's ability to compete effectively (including regulations relating to joint sales agreements ("JSA"), shared services agreements ("SSA"), cross ownership rules, the national ownership cap and the UHF discount), arbitrary enforcement of indecency regulations, retransmission consent regulations, and political or other advertising restrictions, such as payola rules;
the impact of FCC and Congressional efforts which may restrict a television station's retransmission consent negotiations;
the impact of FCC rules requiring broadcast stations to publish, among other information, political advertising rates online;
our ability to obtain regulatory approval for transactions related to FCC licenses;
the potential impact from changes in industry ownership and multicast rules;
our ability to execute on our initiatives and goals related to environmental, social and governance ("ESG") matters and the increasing legal and regulatory focus on ESG by numerous jurisdictions with varying requirements; and
the impact of foreign government rules related to digital and online assets.

Risks specific to us

The settlement agreement with Diamond Sports Group, LLC ("DSG") could have a material adverse effect on Sinclair and SBG's financial condition and results of operations;
our ability to attract and maintain local, national, and network advertising and successfully participate in new sales channels such as programmatic and addressable advertising through business partnership ventures and the development of technology;
our ability to service our debt obligations and operate our business under restrictions contained in our financing agreements;
our use of derivative financial instruments to reduce interest rate risk may result in added volatility in the amount of interest expense recorded within our financial results and the amount of cash interest paid;
our ability to successfully implement and monetize our own content management system designed to provide our viewers significantly improved content via the internet and other digital platforms;
our ability to successfully renegotiate retransmission consent and distribution agreements for our existing and any acquired businesses with favorable terms;
the ability of stations which we consolidate, but do not negotiate on their behalf, to successfully renegotiate retransmission consent and affiliation fees (cable network fees) agreements and comply with laws and regulations that apply to them;
our ability to renew our FCC licenses;
our ability to identify investment opportunities;
our ability to successfully integrate any acquired businesses, as well as the success of our new content and distribution initiatives in a competitive environment, including CHARGE!, TBD, Comet, The Nest, other original programming, mobile DTV, FAST channels, and direct-to-consumer platforms;
our ability to maintain our affiliation and programming service agreements with our networks and program service providers and, at renewal, to successfully negotiate these agreements with favorable terms;
our ability to generate synergies and leverage new revenue opportunities;
changes in the makeup of the population in the areas where our stations are located;
our ability to effectively respond to technology affecting our industry;
our ability to deploy NextGen TV nationwide, including the ability and appetite of manufacturers to install the technology within their products, as well as monetize the associated technology;
the strength of ratings for our local news broadcasts including our news sharing arrangements;
risks associated with the use of artificial intelligence by us and third parties, including our use in the operations of our business;
the results of prior year tax audits by taxing authorities;
for Sinclair, our ability to execute on our investment and growth strategies related to our subsidiary Sinclair Ventures, LLC ("Ventures"); and
our ability to monetize our investments in real estate, venture capital and private equity holdings, and direct strategic investments in companies.



General risks

The impact of changes in national and regional economies and credit and capital markets;
loss of consumer confidence;
the potential impact of changes in tax law;
the activities of our competitors;
geopolitical conditions, including the war in Ukraine, conflicts in the Middle East, and international trade sanctions, could negatively impact global supply prices and disrupt supply chain levels, which could negatively impact the operations of us, our customers', our vendors', and our Distributors';
natural disasters and pandemics (such as the outbreak and worldwide spread of COVID-19) that impact our employees, Distributors, advertisers, suppliers, stations, and networks; and
cybersecurity incidents, data privacy, and other information technology failures have, and in the future may, adversely affect us and disrupt our operations.

Other matters set forth in this report, including the Risk Factors set forth in Item 1A of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023, may also cause actual results in the future to differ materially from those described in the forward-looking statements. However, additional factors and risks not currently known to us or that we currently deem immaterial may also cause actual results in the future to differ materially from those described in the forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In light of these risks, uncertainties, and assumptions, events described in the forward-looking statements discussed in this report might not occur.



PART I. FINANCIAL INFORMATION



SINCLAIR, INC.
 SINCLAIR BROADCAST GROUP, LLC

FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2024
 
TABLE OF CONTENTS
 
     
     
     
     
     
     
 
  
  
     
     
     
     
     
     
     
  
  
  
  
2

3

ITEM 1. FINANCIAL STATEMENTS

This report includes the Consolidated Financial Statements of Sinclair and SBG in Item 1A and Item 1B, respectively.

ITEM 1A.  FINANCIAL STATEMENTS OF SINCLAIR, INC.
4

SINCLAIR, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data) (Unaudited)
 As of March 31,
2024
As of December 31,
2023
ASSETS  
Current assets:  
Cash and cash equivalents$655 $662 
Accounts receivable, net of allowance for doubtful accounts of $4 as of both periods
642 616 
Income taxes receivable7 8 
Prepaid expenses and other current assets177 189 
Total current assets1,481 1,475 
Property and equipment, net720 715 
Operating lease assets139 142 
Goodwill2,082 2,082 
Indefinite-lived intangible assets150 150 
Customer relationships, net352 369 
Other definite-lived intangible assets, net389 410 
Other assets725 742 
Total assets (a)$6,038 $6,085 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, AND EQUITY  
Current liabilities:  
Accounts payable and accrued liabilities$854 $913 
Current portion of notes payable, finance leases, and commercial bank financing37 36 
Current portion of operating lease liabilities22 21 
Current portion of program contracts payable57 76 
Other current liabilities70 57 
Total current liabilities1,040 1,103 
Notes payable, finance leases, and commercial bank financing, less current portion4,112 4,139 
Operating lease liabilities, less current portion148 152 
Program contracts payable, less current portion11 14 
Deferred tax liabilities258 252 
Other long-term liabilities200 204 
Total liabilities (a)5,769 5,864 
Commitments and contingencies (See Note 5)
Shareholders' equity:  
Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 42,305,323 and 39,737,682 shares issued and outstanding, respectively
1 1 
Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 23,775,056 and 23,775,056 shares issued and outstanding, respectively, convertible into Class A Common Stock
  
Additional paid-in capital554 517 
Accumulated deficit(227)(234)
Accumulated other comprehensive income5 1 
Total Sinclair shareholders' equity
333 285 
Noncontrolling interests(64)(64)
Total equity269 221 
Total liabilities and equity$6,038 $6,085 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
(a)     Our consolidated total assets as of March 31, 2024 and December 31, 2023 include total assets of variable interest entities ("VIE") of $78 million and $85 million, respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of March 31, 2024 and December 31, 2023 include total liabilities of VIEs of $16 million and $17 million, respectively, for which the creditors of the VIEs have no recourse to us. See Note 8. Variable Interest Entities.
5

SINCLAIR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except share and per share data) (Unaudited) 
 Three Months Ended 
 March 31,
 20242023
REVENUES:  
Media revenues$792 $766 
Non-media revenues6 7 
Total revenues798 773 
OPERATING EXPENSES:  
Media programming and production expenses408 398 
Media selling, general and administrative expenses196 191 
Amortization of program contract costs19 22 
Non-media expenses12 12 
Depreciation of property and equipment25 24 
Corporate general and administrative expenses58 58 
Amortization of definite-lived intangible assets38 41 
Loss on asset dispositions and other, net of impairment 6 
Total operating expenses756 752 
Operating income42 21 
OTHER INCOME (EXPENSE):  
Interest expense including amortization of debt discount and deferred financing costs(76)(74)
Gain on extinguishment of debt1  
Income from equity method investments14 31 
Other income, net40 11 
Total other expense, net(21)(32)
Income (loss) before income taxes21 (11)
INCOME TAX BENEFIT4 204 
NET INCOME25 193 
Net loss attributable to the redeemable noncontrolling interests 4 
Net income attributable to the noncontrolling interests(2)(12)
NET INCOME ATTRIBUTABLE TO SINCLAIR$23 $185 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR:  
Basic earnings per share$0.35 $2.65 
Diluted earnings per share$0.35 $2.64 
Basic weighted average common shares outstanding (in thousands)64,156 69,744 
Diluted weighted average common and common equivalent shares outstanding (in thousands)64,403 69,864 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
6

SINCLAIR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions) (Unaudited)
 Three Months Ended 
 March 31,
 20242023
Net income$25 $193 
Unrealized gain (loss) on interest rate swap, net of tax4 (3)
Comprehensive income29 190 
Comprehensive loss attributable to the redeemable noncontrolling interests 4 
Comprehensive income attributable to the noncontrolling interests(2)(12)
Comprehensive income attributable to Sinclair$27 $182 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7

SINCLAIR, INC.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(in millions, except share and per share data) (Unaudited)
Three Months Ended March 31, 2023
 
Sinclair Shareholders
  
 Redeemable Noncontrolling InterestsClass A
Common Stock
Class B
Common Stock
Additional
Paid-In
Capital
Retained EarningsAccumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Total 
Equity
 SharesValuesSharesValues
BALANCE, December 31, 2022$194 45,847,879 $1 23,775,056 $ $624 $122 $1 $(67)$681 
Dividends declared and paid on Class A and Class B Common Stock ($0.25 per share)
— — — — — — (18)— — (18)
Repurchases of Class A Common Stock— (3,583,213)— — — (53)— — — (53)
Class A Common Stock issued pursuant to employee benefit plans— 2,095,836 — — — 31 — — — 31 
Repurchase of redeemable subsidiary preferred equity(190)— — — — — — — — — 
Distributions to noncontrolling interests— — — — — — — — (4)(4)
Other comprehensive loss— — — — — — — (3)— (3)
Net (loss) income(4)— — — — — 185 — 12 197 
BALANCE, March 31, 2023$ 44,360,502 $1 23,775,056 $ $602 $289 $(2)$(59)$831 

 The accompanying notes are an integral part of these unaudited consolidated financial statements.
8

SINCLAIR, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except share and per share data) (Unaudited)
Three Months Ended March 31, 2024
 
Sinclair Shareholders
  
 Class A
Common Stock
Class B
Common Stock
Additional
Paid-In
Capital
Accumulated DeficitAccumulated
Other
Comprehensive
 Income
Noncontrolling
Interests
Total Equity
 SharesValuesSharesValues
BALANCE, December 31, 202339,737,682 $1 23,775,056 $ $517 $(234)$1 $(64)$221 
Dividends declared and paid on Class A and Class B Common Stock ($0.25 per share)
— — — — — (16)— — (16)
Class A Common Stock issued pursuant to employee benefit plans2,567,641 — — — 37 — — — 37 
Distributions to noncontrolling interests— — — — — — — (2)(2)
Other comprehensive income— — — — — — 4 — 4 
Net income— — — — — 23 — 2 25 
BALANCE, March 31, 202442,305,323 $1 23,775,056 $ $554 $(227)$5 $(64)$269 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
9

SINCLAIR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) (Unaudited)
 Three Months Ended March 31,
 20242023
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES:  
Net income$25 $193 
Adjustments to reconcile net income to net cash flows (used in) from operating activities:  
Amortization of definite-lived intangible and other assets38 41 
Depreciation of property and equipment25 24 
Amortization of program contract costs19 22 
Stock-based compensation27 23 
Deferred tax provision (benefit)4 (207)
Loss on asset dispositions and other, net of impairment 6 
Income from equity method investments(14)(31)
(Income) loss from investments(27)2 
Distributions from investments1 28 
Gain on extinguishment of debt(1) 
Change in assets and liabilities, net of acquisitions:  
(Increase) decrease in accounts receivable(27)4 
Increase in prepaid expenses and other current assets(3)(42)
(Decrease) increase in accounts payable and accrued and other current liabilities(35)21 
Net change in net income taxes payable/receivable(8) 
Decrease in program contracts payable(22)(23)
Other, net(6)1 
Net cash flows (used in) from operating activities(4)62 
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:  
Acquisition of property and equipment(21)(20)
Purchases of investments(3)(33)
Distributions and proceeds from investments77 8 
Other, net1 1 
Net cash flows from (used in) investing activities54 (44)
CASH FLOWS USED IN FINANCING ACTIVITIES:  
Repayments of notes payable, commercial bank financing, and finance leases(34)(9)
Repurchase of outstanding Class A Common Stock (53)
Dividends paid on Class A and Class B Common Stock(16)(18)
Repurchase of redeemable subsidiary preferred equity (190)
Distributions to noncontrolling interests, net(2)(4)
Other, net(5)(5)
Net cash flows used in financing activities(57)(279)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(7)(261)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period662 884 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period$655 $623 

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

10

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

Sinclair, Inc. ("Sinclair") is a diversified media 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 and third-party platforms, consists of programming provided by third-party networks and syndicators, local news, other original programming produced by us and our owned networks and professional sports. Additionally, we own digital media companies that are complementary to our extensive portfolio of television station related digital properties and we have interests in, own, manage, and/or operate technical and software services companies, research and development companies for the advancement of broadcast technology, and other media and non-media related businesses and assets, including real estate, venture capital, private equity, and direct investments.

For the quarter ended March 31, 2024, we had two reportable segments: local media and tennis. The local media segment consists primarily of our 185 broadcast television stations in 86 markets, which we own, provide programming and operating services pursuant to agreements commonly referred to as local marketing agreements ("LMA"), or provide sales services and other non-programming operating services pursuant to other outsourcing agreements (such as joint sales agreements ("JSA") and shared services agreements ("SSA")). These stations broadcast 639 channels as of March 31, 2024. For the purpose of this report, these 185 stations and 639 channels are referred to as "our" stations and channels. The tennis segment consists of Tennis Channel, a cable network which includes coverage of many of tennis' top tournaments and original professional sports and tennis lifestyle shows; Tennis Channel International streaming service; Tennis Channel Plus streaming service; T2 FAST, a 24-hours a day free ad-supported streaming television channel; and Tennis.com.

Principles of Consolidation
 
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries, 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.

Company Reorganization

On April 3, 2023, the company formerly known as Sinclair Broadcast Group, Inc., a Maryland corporation ("Old Sinclair"), entered into an Agreement of Share Exchange and Plan of Reorganization (the "Share Exchange Agreement") with Sinclair, and Sinclair Holdings, LLC, a Maryland limited liability company ("Sinclair Holdings"). The purpose of the transactions contemplated by the Share Exchange Agreement was to effect a holding company reorganization in which Sinclair would become the publicly-traded parent company of Old Sinclair.

Effective at 12:00 am Eastern U.S. time on June 1, 2023 (the "Share Exchange Effective Time"), pursuant to the Share Exchange Agreement and Articles of Share Exchange filed with the Maryland State Department of Assessments and Taxation, the share exchange between Sinclair and Old Sinclair was completed (the "Share Exchange"). In the Share Exchange, (i) each share or fraction of a share of Old Sinclair's Class A common stock, par value $0.01 per share ("Old Sinclair Class A Common Shares"), outstanding immediately prior to the Share Exchange Effective Time was exchanged on a one-for-one basis for an equivalent share of Sinclair's Class A common stock, par value $0.01 per share ("Sinclair Class A Common Shares"), and (ii) each share or fraction of a share of Old Sinclair's Class B common stock, par value $0.01 per share ("Old Sinclair Class B Common Shares"), outstanding immediately prior to the Share Exchange Effective Time was exchanged on a one-for-one basis for an equivalent share of Sinclair’s Class B common stock, par value $0.01 per share ("Sinclair Class B Common Shares").

11

SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Immediately following the Share Exchange Effective Time, Old Sinclair converted from a Maryland corporation to a Maryland limited liability company named Sinclair Broadcast Group, LLC ("SBG"). On the day following the Share Exchange Effective Time (June 2, 2023), Sinclair Holdings became the intermediate holding company between Sinclair and SBG, and SBG transferred certain of its assets (the "Transferred Assets") to Ventures, a new indirect wholly-owned subsidiary of Sinclair. We refer to the Share Exchange and the related steps described above collectively as the "Reorganization." The Transferred Assets included technical and software services companies, intellectual property for the advancement of broadcast technology, and other media and non-media related businesses and assets including real estate, venture capital, private equity, and direct investments, as well as Compulse, a marketing technology and managed services company, and Tennis Channel and related assets. As a result of the Reorganization, the local media segment assets are owned and operated by SBG and the assets of the tennis segment and the Transferred Assets are owned and operated by Ventures.

At the Share Exchange Effective Time, Sinclair's articles of incorporation and bylaws were amended and restated to be the same in all material respects as the existing articles of incorporation and bylaws of Old Sinclair immediately prior to the Share Exchange. As a result, the Sinclair Class A Common Shares confer upon the holders thereof the same rights with respect to Sinclair that the holders of the Old Sinclair Class A Common Shares had with respect to Old Sinclair, and the Sinclair Class B Common Shares confer upon the holders thereof the same rights with respect to Sinclair that the holders of the Old Sinclair Class B Common Shares had with respect to Old Sinclair. Sinclair's Board of Directors, including its committees, and senior management team immediately after the Share Exchange were the same as Old Sinclair's immediately before the Share Exchange.

The Reorganization is considered transactions between entities under common control and as SBG and Ventures are both subsidiaries of Sinclair, there was no impact on the consolidated financial statements of Sinclair.

Interim Financial Statements
 
The consolidated financial statements for the three months ended March 31, 2024 and 2023 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.
 
As permitted under the applicable rules and regulations of the Securities and Exchange Commission (the "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, 2023 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.

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 October 2021, the FASB issued guidance to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice. ASU 2021-08 requires that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if it had originated the contracts. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We adopted this guidance during the first quarter of 2023. The impact of the adoption did not have a material impact on our consolidated financial statements.

In November 2023, the FASB issued guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, applied retrospectively. Early adoption is permitted. We are currently evaluating the impact of this guidance.
12

SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In December 2023, the FASB issued guidance to enhance the transparency and decision usefulness of income tax disclosures, requiring annual disclosure of consistent categories and greater disaggregation of information in the rate reconciliation table; additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate); income taxes paid disaggregated by jurisdiction; and income or loss before income tax disaggregated between foreign and domestic. The guidance is effective for annual periods beginning after December 15, 2024, applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this guidance.

Broadcast Television Programming

We have agreements with programming syndicators for the rights to television programming over contract periods, which generally run from one to three years. Contract payments are made in installments over terms 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.

Hedge Accounting

We entered into an interest rate swap effective February 7, 2023 and terminating on February 28, 2026 in order to manage a portion of our exposure to variable interest rates. The swap agreement has a notional amount of $600 million, bears a fixed interest rate of 3.9%, and we receive a floating rate of interest based on the Secured Overnight Financing Rate ("SOFR").

We have determined that the interest rate swap meets the criteria for hedge accounting. The initial value of the interest rate swap and any changes in value in subsequent periods is included in accumulated other comprehensive income, with a corresponding change recorded in assets or liabilities depending on the position of the swap. Gains or losses on the monthly settlement of the interest rate swap are reflected in interest expense in our consolidated statements of operations. Cash flows related to the interest rate swap are classified as operating activities in our consolidated statements of cash flows. See Interest Rate Swap within Note 3. Notes Payable, Finance Leases, and Commercial Bank Financing for further discussion.

Non-cash Investing and Financing Activities

Leased assets obtained in exchange for new operating lease liabilities were $2 million and $3 million for the three months ended March 31, 2024 and 2023, respectively. Leased assets obtained in exchange for new finance lease liabilities were $7 million for the three months ended March 31, 2024. Non-cash investing activities included property and equipment purchases of $5 million and $6 million for the three months ended March 31, 2024 and 2023, respectively.
13

SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition

The following table presents our revenue disaggregated by type and segment (in millions):
For the three months ended March 31, 2024Local MediaTennisOtherEliminationsTotal
Distribution revenue$384 $52 $ $ $436 
Core advertising revenue284 10 6 (3)297 
Political advertising revenue24    24 
Other media, non-media, and intercompany revenues35 1 9 (4)41 
Total revenues$727 $63 $15 $(7)$798 
For the three months ended March 31, 2023Local MediaTennisOtherEliminationsTotal
Distribution revenue$381 $45 $ $ $426 
Core advertising revenue293 9 6 (2)306 
Political advertising revenue3    3 
Other media, non-media, and intercompany revenues28 1 11 (2)38 
Total revenues$705 $55 $17 $(4)$773 

Distribution Revenue. We have agreements with multi-channel video programming distributors ("MVPD") and virtual MVPDs ("vMVPD," and together with MVPDs, "Distributors"). We generate distribution revenue through fees received from these Distributors for the right to distribute our stations 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.

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

Political Advertising Revenue. We generate political advertising revenue primarily from the sale of political advertising spots/impressions within our broadcast television 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. We classify deferred revenue as either current in other current liabilities or long-term in other long-term liabilities in our consolidated balance sheets based on the timing of when we expect to satisfy our performance obligations. Deferred revenue was $187 million and $178 million as of March 31, 2024 and December 31, 2023, respectively, of which $119 million and $124 million, respectively, was reflected in other long-term liabilities in our consolidated balance sheets. Deferred revenue recognized during the three months ended March 31, 2024 and 2023, included in the deferred revenue balance as of December 31, 2023 and 2022, was $18 million and $19 million, respectively.

For the three months ended March 31, 2024, two customers accounted for 11% and 11%, respectively, of our total revenues. For the three months ended March 31, 2023, two customers accounted for 11% and 10%, respectively, of our total revenues. As of March 31, 2024, four customers accounted for 12%, 11%, 10%, and 10%, respectively, of our accounts receivable, net. As of December 31, 2023, two customers accounted for 10% and 10%, respectively, of our accounts receivable, net. For purposes of this disclosure, a single customer may include multiple entities under common control.

14

SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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, 2024 and 2023 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, current and cumulative losses, 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 amount of our available state net operating loss carryforwards based on past operating results, expected timing of the reversals of existing temporary basis differences, alternative tax strategies, and projected future taxable income.

Our effective income tax rate for the three months ended March 31, 2024 was greater than the statutory rate primarily due to an immaterial $7.5 million correcting adjustment related to the accrual of interest income attributable to prior years’ pending income tax refund claims. Our effective income tax rate for the three months ended March 31, 2023, was greater than the statutory rate primarily due to a release of valuation allowance on deferred tax assets relating to deductibility of interest expense under the IRC Section 163(j) as a result of the change in the tax classification of the legal entity owning the Diamond Sports business because of the exit of the sole minority investor.

We do not believe that our liability for unrecognized tax benefits would be materially impacted, in the next twelve months, as a result of the 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.

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

Subsequent Events

In May 2024, our Board of Directors declared a quarterly dividend of $0.25 per share, payable on June 17, 2024 to holders of record at the close of business on June 3, 2024.

2.              OTHER ASSETS:

Other assets as of March 31, 2024 and December 31, 2023 consisted of the following (in millions):

 As of March 31,
2024
As of December 31,
2023
Equity method investments$113 $128 
Other investments368 387 
Income tax receivable140 131 
Post-retirement plan assets47 45 
Other57 51 
Total other assets$725 $742 

15

SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Equity Method Investments

We have a portfolio of investments, including our investment in Diamond Sports Intermediate Holdings LLC ("DSIH"), and also a number of entities that are primarily focused on the development of real estate and other media and non-media businesses. No investments were individually significant for the periods presented.

Diamond Sports Intermediate Holdings LLC. We account for our equity interest in DSIH under the equity method of accounting. As of March 1, 2022, we reflected the investment in DSIH at fair value, which was determined to be nominal. For the three months ended March 31, 2024 and 2023, we recorded no equity method loss related to the investment because the carrying value of the investment is zero and we are not obligated to fund losses incurred by DSIH.

Other 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. Additionally, certain investments are measured at net asset value ("NAV").

As of March 31, 2024 and December 31, 2023, we held $155 million and $162 million, respectively, in investments measured at fair value. As of March 31, 2024 and December 31, 2023, we held $174 million and $189 million, respectively, in investments measured at NAV. We recognized a fair value adjustment gain of $2 million for the three months ended March 31, 2024 and a fair value adjustment loss of $1 million for the three months ended March 31, 2023 associated with these investments, which are reflected in other income, net in our consolidated statements of operations. As of March 31, 2024 and December 31, 2023, our unfunded commitments related to our investments valued using the NAV practical expedient totaled $73 million and $74 million, respectively.

Investments accounted for utilizing the measurement alternative were $39 million and $36 million as of March 31, 2024 and December 31, 2023, respectively. There were no adjustments to the carrying amount of investments accounted for utilizing the measurement alternative for either of the three months ended March 31, 2024 and the three months ended March 31, 2023.

Note Receivable

We were party to an Accounts Receivable Securitization Facility ("A/R Facility"), held by Diamond Sports Finance SPV, LLC ("DSPV"), an indirect wholly-owned subsidiary of DSIH. On May 10, 2023, DSPV paid the Company approximately $199 million, representing the aggregate outstanding principal amount of the loans under the A/R Facility, accrued interest, and outstanding fees and expenses. The A/R Facility was terminated on March 14, 2024.

3.              NOTES PAYABLE, FINANCE LEASES, AND COMMERCIAL BANK FINANCING:

Bank Credit Agreement and Notes

The bank credit agreement of Sinclair Television Group, Inc. ("STG"), a wholly-owned subsidiary of SBG (the "Bank Credit Agreement"), includes a financial maintenance covenant, the first lien leverage ratio (as defined in the Bank Credit Agreement), which requires such ratio not to exceed 4.5x, measured as of the end of each fiscal quarter. As of March 31, 2024, the STG first lien leverage ratio was below 4.5x. Under the Bank Credit Agreement, a financial maintenance covenant is only applicable if 35% or more of the capacity (as a percentage of total commitments) under the revolving credit facility, measured as of the last day of each fiscal quarter, is utilized under the revolving credit facility as of such date. Since there was no utilization under the revolving credit facility as of March 31, 2024, STG was not subject to the financial maintenance covenant under the Bank Credit Agreement. The Bank Credit Agreement contains other restrictions and covenants with which STG was in compliance as of March 31, 2024.

During the three months ended March 31, 2024, we repurchased $27 million aggregate principal amount of the Term Loan B-2, due September 30, 2026, for consideration of $25 million. The portions of the Term Loan B-2 purchased were canceled immediately following their acquisition. We recognized a gain on extinguishment of the Term Loan B-2 of $1 million for the three months ended March 31, 2024.

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SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 March 31, 2024 and December 31, 2023. Notes payable, finance leases, and commercial bank financing, less current portion, in our consolidated balance sheets includes finances leases to affiliates of $11 million and $5 million as of March 31, 2024 and December 31, 2023, respectively. See Note 9. Related Person Transactions.

Debt of Variable Interest Entities and Guarantees of Third-Party Obligations

STG jointly, severally, unconditionally, and irrevocably guaranteed $2 million of debt of certain third parties as of both March 31, 2024 and December 31, 2023, all of which related to consolidated VIEs and is included in our consolidated balance sheets as of both March 31, 2024 and December 31, 2023. We provide a guarantee of certain obligations of a regional sports network subject to a maximum annual amount of $117 million with annual escalations of 4% for the next five years. We have determined that, as of March 31, 2024, it is not probable that we would have to perform under any of these guarantees.

Interest Rate Swap

We entered into an interest rate swap effective February 7, 2023 and terminates on February 28, 2026 in order to manage a portion of our exposure to variable interest rates. The swap agreement has a notional amount of $600 million, bears a fixed interest rate of 3.9%, and we receive a floating rate of interest based on SOFR. See Hedge Accounting within Note 1. Nature of Operations and Summary of Significant Accounting Policies for further discussion. As of March 31, 2024 and December 31, 2023, the fair value of the interest rate swap was an asset of $7 million and $1 million, respectively, which are recorded in other assets in our consolidated balance sheets.

4.              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 Diamond Sports Group, LLC ("DSG") and indirect wholly-owned subsidiary of the Company, issued preferred equity (the "Redeemable Subsidiary Preferred Equity").

On February 10, 2023, we purchased the remaining 175,000 units of the Redeemable Subsidiary Preferred Equity for an aggregate purchase price of $190 million, representing 95% of the sum of the remaining unreturned capital contribution of $175 million, and accrued and unpaid dividends up to, but not including, the date of purchase.

Dividends accrued during the three months ended March 31, 2023 were $3 million and are reflected in net loss attributable to the redeemable noncontrolling interests in our consolidated statements of operations. Dividends accrued during the three months ended March 31, 2023 were paid-in-kind and added to the liquidation preference, which was partially offset by certain required cash tax distributions.

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SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 our financial statements. 

FCC Litigation Matters

On May 22, 2020, the Federal Communications Commission ("FCC") released an Order and Consent Decree pursuant to which the Company agreed to pay $48 million to resolve the matters covered by a Notice of Apparent Liability for Forfeiture ("NAL") issued in December 2017 proposing a $13 million fine for alleged violations of the FCC's sponsorship identification rules by the Company and certain of its subsidiaries, the FCC's investigation of the allegations raised in the Hearing Designation Order issued in connection with the Company's proposed acquisition of Tribune, 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.

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 Broadcasting Corporation ("Cunningham") station WNUV(TV). The Company filed an opposition to the petition on October 1, 2020. On January 18, 2024, a motion was filed to request substitution of the petitioner, who is deceased. On January 29, 2024, the Company filed (1) an opposition to the motion for substitution and (2) a motion to dismiss the petition to deny the renewal applications. An opposition was filed to the motion to dismiss on February 5, 2024, and the Company timely filed its reply on February 13, 2024, and the matter remains pending.

On September 2, 2020, the FCC adopted a Memorandum Opinion and Order and 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 FCC to dismiss the proceeding or, alternatively, to reduce the proposed forfeiture to $25,000 per station. On July 28, 2021, the FCC issued a forfeiture order in which the $0.5 million penalty was upheld for all but one station. A Petition for Reconsideration of the forfeiture order was filed on August 7, 2021. On March 14, 2022, the FCC released a Memorandum Opinion and Order and Order on Reconsideration, reaffirming the forfeiture order and dismissing (and in the alternative, denying) the Petition for Reconsideration. The Company is not a party to this forfeiture order; however, our consolidated financial statements include an accrual of additional expenses of $8 million for the above legal matters during the year ended December 31, 2021, as we consolidate these stations as VIEs.

On September 21, 2022, the FCC released an NAL against the licensees of a number of stations, including 83 Company stations and several stations with whom the Company has LMAs, JSAs, and/or SSAs, for violation of the FCC's limitations on commercial matter in children's television programming related to KidsClick network programming distributed by the Company in 2018. The NAL proposed a fine of $2.7 million against the Company, and fines ranging from $20,000 to $26,000 per station for the other licensees, including the LMA, JSA, and/or SSA stations, for a total of $3.4 million. As of March 31, 2024, we have accrued $3.4 million. On October 21, 2022, the Company filed a written response seeking reduction of the proposed fine amount, and the matter remains pending.

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SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 DOJ'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 the Company 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 DOJ 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 had 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. The Court denied the defendants' motion to dismiss on November 6, 2020. Discovery commenced shortly after that and is continuing. Under the current schedule set by the Court, fact discovery is scheduled to close 90 days after a Special Master completes his review of the plaintiffs' objections to the defendant's privilege claims. That privilege review is ongoing. On August 18, 2023, the defendants filed objections to the Special Master’s First Report and Recommendations with the Court. The Court overruled the defendants’ objections on January 31, 2024. The Special Master has not indicated when he expects to complete his privilege review. On December 8, 2023, the Court granted final approval of the settlements the plaintiffs had reached with four of the original defendants (CBS, Fox, Cox Media, and ShareBuilders), who agreed to pay a total of $48 million to settle the plaintiffs' claims against them. The Company and the other non-settling defendants continue to believe the lawsuits are without merit and intend to vigorously defend themselves against all such claims.

On July 19, 2023, as part of the ongoing bankruptcy proceedings of DSG, an independently managed and unconsolidated subsidiary of Sinclair, DSG and its wholly-owned subsidiary, Diamond Sports Net, LLC, filed a complaint (the "Diamond Litigation"), under seal, in the United States Bankruptcy Court for the Southern District of Texas naming certain subsidiaries of Sinclair, including SBG and STG, David D. Smith, Sinclair's Executive Chairman, Christopher S. Ripley, Sinclair's President and Chief Executive Officer, Lucy A. Rutishauser, Sinclair's Executive Vice President & Chief Financial Officer, and Scott Shapiro, Sinclair's Executive Vice President, Corporate Development and Strategy, as defendants.

In the complaint, plaintiffs challenge a series of transactions involving SBG and certain of its subsidiaries, on the one hand, and DSG and its subsidiaries, on the other hand, since SBG acquired the former Fox Sports regional sports networks from The Walt Disney Company in August 2019. The complaint alleges, among other things, that the management services agreement (the "MSA") entered into by STG and DSG was not fair to DSG and was designed to benefit STG and SBG; that the Bally's Corporation ("Bally's") transaction in November 2020 through which Bally's acquired naming rights to certain regional sports networks was not fair to DSG and was designed to benefit STG and SBG; and that certain distributions made by DSG that were used to pay down preferred equity of DSH, were inappropriate and were conducted at a time when DSG was insolvent. The complaint alleges that SBG and its subsidiaries (other than DSG and its subsidiaries) received payments or indirect benefits of approximately $1.5 billion as a result of the alleged misconduct. The complaint asserts a variety of claims, including certain fraudulent transfers of assets, unlawful distributions and payments, breaches of contracts, unjust enrichment and breaches of fiduciary duties. The plaintiffs are seeking, among other relief, avoidance of fraudulent transfers and unlawful distributions, and unspecified monetary damages to be determined.

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SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
On January 17, 2024, Sinclair announced that it had agreed, subject to definitive documentation and final court approval, to a global settlement and release of all claims associated with the Diamond Litigation, which settlement includes an amendment to the MSA. On March 1, 2024, the court approved the settlement. Sinclair has entered into the settlement, without admitting any fault or wrongdoing. The settlement terms include, among other things, DSG’s dismissal with prejudice of its $1.5 billion litigation against Sinclair and all other defendants, along with the full and final satisfaction and release of all claims in that litigation against all defendants, including Sinclair and its subsidiaries, in exchange for Sinclair’s cash payment to DSG of $495 million. Additionally, under the terms of the settlement, Sinclair will provide transition services to DSG to allow DSG to become a self-standing entity going forward. During the first quarter of 2024, we paid $50 million related to the settlement and as of March 31, 2024, we have accrued $445 million, exclusive of any potential offsetting benefits to be received, related to the above matter, which is recorded within accounts payable and accrued liabilities in our consolidated balance sheets. The final settlement payment was made on April 30, 2024 and of the total $495 million settlement amount paid, $347 million was paid by STG and $148 million was paid by Ventures.

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 millions, except share amounts which are reflected in thousands):
 Three Months Ended 
 March 31,
 20242023
Income (Numerator)  
Net income$25 $193 
Net loss attributable to the redeemable noncontrolling interests 4 
Net income attributable to the noncontrolling interests(2)(12)
Numerator for basic and diluted earnings per common share available to common shareholders$23 $185 
Shares (Denominator)  
Basic weighted-average common shares outstanding64,156 69,744 
Dilutive effect of stock-settled appreciation rights and outstanding stock options247 120 
Diluted weighted-average common and common equivalent shares outstanding64,403 69,864 

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,
 20242023
Weighted-average stock-settled appreciation rights and outstanding stock options excluded5,120 3,645 

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SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
7.              SEGMENT DATA:
 
During the period ended June 30, 2023 we modified our segment reporting to align with the new organizational structure of the Company discussed within Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies. The segment information within the comparative periods presented has been recast to reflect this new presentation. During the period ended March 31, 2024, we measured segment performance based on operating income (loss). For the quarter ended March 31, 2024, we had two reportable segments, local media and tennis. Our local media segment includes our television stations, original networks and content and provides these through free over-the-air programming to television viewing audiences for stations in markets located throughout the continental United States, as well as distributes the content of these stations to MVPDs for distribution to their customers in exchange for contractual fees. See Revenue Recognition under Note 1. Nature of Operations and Summary of Significant Accounting Policies for further detail. Our tennis segment provides viewers coverage of many of tennis' top tournaments and original professional sport and tennis lifestyle shows. Other and corporate are not reportable segments but are included for reconciliation purposes. Other primarily consists of non-broadcast digital and internet solutions, technical services, and non-media investments. Corporate costs primarily include our costs to operate as a public company and to operate our corporate headquarters location. All our businesses are located within the United States. As a result of the Reorganization, the local media segment assets are owned and operated by SBG, the assets of the tennis segment are owned and operated by Ventures, and the other Transferred Assets, which are included in other and corporate, are owned and operated by Ventures.

Segment financial information is included in the following tables for the periods presented (in millions):
As of March 31, 2024Local MediaTennisOther & CorporateEliminationsConsolidated
Assets$4,733 $300 $1,008 $(3)$6,038 
For the three months ended March 31, 2024Local MediaTennisOther & CorporateEliminationsConsolidated
Revenue$727 $63 $15 $(7)(a)$798 
Depreciation of property and equipment and amortization of definite-lived intangibles and other assets58 5 1 (1)63 
Amortization of program contract costs19    19 
Corporate general and administrative expenses41 1 16  58 
Operating income (loss)41 20 (19) 42 
Interest expense including amortization of debt discount and deferred financing costs76    76 
Income from equity method investments (1)15  14 
For the three months ended March 31, 2023Local MediaTennisOther & CorporateEliminationsConsolidated
Revenue$705 $55 $17 $(4)(a)$773 
Depreciation of property and equipment and amortization of definite-lived intangibles and other assets59 5 2 (1)65 
Amortization of program contract costs22    22 
Corporate general and administrative expenses32  26  58 
(Gain) loss on asset dispositions and other, net of impairment(1) 7  6 
Operating income (loss)41 18 (38) 21 
Interest expense including amortization of debt discount and deferred financing costs74    74 
Income from equity method investments  31  31 
(a)Includes $2 million and $1 million for the three months ended March 31, 2024 and 2023, respectively, of revenue for services provided by other to local media, which is eliminated in consolidation.

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SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.

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 millions):
 
 As of March 31,
2024
As of December 31,
2023
ASSETS  
Current assets:  
Accounts receivable, net$20 $23 
Other current assets2 3 
Total current assets22 26 
Property and equipment, net10 11 
Goodwill and indefinite-lived intangible assets15 15 
Definite-lived intangible assets, net31 33 
Total assets$78 $85 
LIABILITIES  
Current liabilities:  
Other current liabilities$13 $14 
Notes payable, finance leases and commercial bank financing, less current portion6 6 
Other long-term liabilities3 3 
Total liabilities$22 $23 
 
The amounts above represent the combined assets and liabilities of the VIEs described above, for which we are the primary beneficiary. Total liabilities associated with certain outsourcing agreements and purchase options with certain VIEs, which are excluded from the above, were $130 million as of both March 31, 2024 and December 31, 2023, 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, 2024, 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 Obligations under Note 3. Notes Payable, Finance Leases, 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.
 
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SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary were $171 million and $192 million as of March 31, 2024 and December 31, 2023, respectively, and are included in other assets in our consolidated balance sheets. See Note 2. Other Assets for more information related to our equity investments. 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 income from equity method investments and other income, net, respectively, in our consolidated statements of operations. We recorded a loss of $1 million for the three months ended March 31, 2024 and a gain of $35 million for the three months ended March 31, 2023 related to these investments.

We hold substantially all the equity of DSIH and provide certain management and general and administrative services to DSIH. However, it was determined that we are not the primary beneficiary because we lack the ability to control the activities that most significantly drive the economics of the business. The carrying amount of our investment in DSIH is zero and there is no obligation for us to provide additional financial support.

We were also party to the A/R Facility held by an indirect wholly-owned subsidiary of DSIH which had a maturity date of September 23, 2024. The A/R Facility was terminated on March 14, 2024. See Note Receivable within Note 2. Other Assets.

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 $2 million for both the three months ended March 31, 2024 and 2023. For further information, see Note 3. Notes Payable, Finance Leases, and Commercial Bank Financing.

Charter Aircraft. We lease aircraft owned by certain controlling shareholders. For all leases, we incurred expenses of less than $0.1 million for the three months ended March 31, 2023.

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; KRNV-DT/KENV-DT Reno, Nevada/Salt Lake City, Utah; and KTXD-TV in Dallas, Texas (collectively, the "Cunningham Stations"). Certain of our stations provide services to the 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.
 
All the non-voting stock of the Cunningham Stations 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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SINCLAIR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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, 2028 and there is one additional five-year renewal term 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)