Company Quick10K Filing
Sinclair Broadcast
Price42.30 EPS0
Shares93 P/E230
MCap3,952 P/FCF8
Net Debt10,993 EBIT167
TEV14,945 TEV/EBIT90
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-03
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-07
10-K 2012-12-31 Filed 2013-03-12
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-02
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-03-04
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-04
10-Q 2010-03-31 Filed 2010-05-06
10-K 2009-12-31 Filed 2010-03-05
8-K 2020-05-12 Other Events, Exhibits
8-K 2020-05-06 Earnings, Exhibits
8-K 2020-03-17 Other Events
8-K 2020-03-02 Earnings
8-K 2020-02-26 Earnings, Exhibits
8-K 2020-01-27 Other Events
8-K 2019-11-27 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-11-18 Officers, Exhibits
8-K 2019-11-06 Earnings, Exhibits
8-K 2019-08-23 Enter Agreement, M&A, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2019-08-13 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-08-07 Earnings, Exhibits
8-K 2019-08-02 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-11 Earnings, Exhibits
8-K 2019-06-06 Shareholder Vote
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-05-03 Enter Agreement, Regulation FD, Exhibits
8-K 2019-02-27 Earnings, 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

SBGI 10Q Quarterly Report

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 ex-101sarschrisripley0.htm
EX-10.2 ex-102sarsdavesmith022.htm
EX-10.3 ex-103sarslucyrutishau.htm
EX-10.4 ex-104sarsformofagreem.htm
EX-31.1 a2020q110-qexhibit311.htm
EX-31.2 a2020q110-qexhibit312.htm
EX-32.1 a2020q110-qexhibit321.htm
EX-32.2 a2020q110-qexhibit322.htm

Sinclair Broadcast Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2016128402012201420172020
Assets, Equity
1.20.90.70.40.2-0.12012201420172020
Rev, G Profit, Net Income
10.06.02.0-2.0-6.0-10.02012201420172020
Ops, Inv, Fin

Document
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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, 2020
 
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: 000-26076
 
SINCLAIR BROADCAST GROUP, INC.
(Exact name of Registrant as specified in its charter)
 
 
Maryland
 
52-1494660
(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 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 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
 
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).
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. 
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 
Emerging 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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
 
No

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
 
May 8, 2020
Class A Common Stock
 
55,394,945
Class B Common Stock
 
24,727,682



SINCLAIR BROADCAST GROUP, INC.
 
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2020
 
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
 

3


SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data) (Unaudited) 
 
As of March 31,
2020
 
As of December 31,
2019
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
1,342

 
$
1,333

Accounts receivable, net of allowance for doubtful accounts of $5 and $8, respectively
1,100

 
1,132

Income taxes receivable
137

 
103

Prepaid sports rights
338

 
113

Prepaid expenses and other current assets
152

 
232

Total current assets
3,069

 
2,913

Property and equipment, net
786

 
765

Operating lease assets
226

 
223

Goodwill
4,716

 
4,716

Indefinite-lived intangible assets
158

 
158

Customer relationships, net
5,853

 
5,979

Other definite-lived intangible assets, net
1,961

 
1,998

Other assets
591

 
618

Total assets (a)
$
17,360

 
$
17,370

 
 
 
 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, AND EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued liabilities
$
526

 
$
782

Current portion of notes payable, finance leases, and commercial bank financing
71

 
71

Current portion of operating lease liabilities
41

 
38

Current portion of program contracts payable
69

 
88

Other current liabilities
133

 
155

Total current liabilities
840

 
1,134

Notes payable, finance leases, and commercial bank financing, less current portion
13,231

 
12,367

Operating lease liabilities, less current portion
216

 
217

Program contracts payable, less current portion
35

 
39

Deferred tax liabilities
429

 
407

Other long-term liabilities
431

 
434

Total liabilities (a)
15,182

 
14,598

Commitments and contingencies (See Note 5)


 


Redeemable noncontrolling interests
522

 
1,078

Shareholders' equity:
 

 
 

Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 58,352,497 and 66,830,110 shares issued and outstanding, respectively
1

 
1

Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 24,727,682 and 24,727,682 shares issued and outstanding, respectively, convertible into Class A Common Stock

 

Additional paid-in capital
864

 
1,011

Retained earnings
596

 
492

Accumulated other comprehensive loss
(2
)
 
(2
)
Total Sinclair Broadcast Group shareholders’ equity
1,459

 
1,502

Noncontrolling interests
197

 
192

Total equity
1,656

 
1,694

Total liabilities, redeemable noncontrolling interests, and equity
$
17,360

 
$
17,370

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

(a)
Our consolidated total assets as of March 31, 2020 and December 31, 2019 include total assets of variable interest entities (VIEs) of $212 million and $228 million, respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of both March 31, 2020 and December 31, 2019 include total liabilities of VIEs of $27 million for which the creditors of the VIEs have no recourse to us. See Note 8. Variable Interest Entities.

4


SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except share and per share data) (Unaudited) 
 
Three Months Ended 
 March 31,
 
2020
 
2019
REVENUES:
 

 
 

Media revenues
$
1,574

 
$
673

Non-media revenues
35

 
49

Total revenues
1,609

 
722

 
 
 
 
OPERATING EXPENSES:
 

 
 

Media programming and production expenses
828

 
319

Media selling, general and administrative expenses
210

 
160

Amortization of program contract costs and net realizable value adjustments
23

 
24

Non-media expenses
30

 
39

Depreciation of property and equipment
24

 
23

Corporate general and administrative expenses
49

 
28

Amortization of definite-lived intangible and other assets
150

 
43

Gain on asset dispositions and other, net of impairment
(32
)
 
(8
)
Total operating expenses
1,282

 
628

Operating income
327

 
94

 
 
 
 
OTHER INCOME (EXPENSE):
 

 
 

Interest expense including amortization of debt discount and deferred financing costs
(180
)
 
(54
)
Gain from extinguishment of debt
2

 

Loss from equity method investments
(6
)
 
(14
)
Other (expense) income, net
(4
)
 
2

Total other expense, net
(188
)
 
(66
)
Income before income tax
139

 
28

INCOME TAX BENEFIT (PROVISION)
12

 
(5
)
NET INCOME
151

 
23

Net income attributable to the redeemable noncontrolling interests
(20
)
 

Net income attributable to the noncontrolling interests
(8
)
 
(1
)
NET INCOME ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP
$
123

 
$
22

 
 
 
 
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP:
 

 
 

Basic earnings per share
$
1.36

 
$
0.23

Diluted earnings per share
$
1.35

 
$
0.23

Weighted average common shares outstanding (in thousands)
90,609

 
92,302

Weighted average common and common equivalent shares outstanding (in thousands)
91,226

 
93,218


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


5


SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions) (Unaudited)
 
Three Months Ended 
 March 31,
 
2020
 
2019
Net income
$
151

 
$
23

Comprehensive income
151

 
23

Comprehensive income attributable to the redeemable noncontrolling interests
(20
)
 

Comprehensive income attributable to the noncontrolling interests
(8
)
 
(1
)
Comprehensive income attributable to Sinclair Broadcast Group
$
123

 
$
22

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


6


SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except share and per share data) (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

 
$
1

 
25,670,684

 
$

 
$
1,121

 
$
517

 
$
(1
)
 
$
(38
)
 
$
1,600

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

 

 

 

 

 
(18
)
 

 

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

 

 
(143,002
)
 

 

 

 

 

 

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

 

 

 
(105
)
 

 

 

 
(105
)
Class A Common Stock issued pursuant to employee benefit plans
694,321

 

 

 

 
22

 

 

 

 
22

Distributions to noncontrolling interests, net

 

 

 

 

 

 

 
(3
)
 
(3
)
Net income

 

 

 

 

 
22

 

 
1

 
23

BALANCE, March 31, 2019
66,241,852

 
$
1

 
25,527,682

 
$

 
$
1,038

 
$
521

 
$
(1
)
 
$
(40
)
 
$
1,519

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


7


SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(in millions, except share and per share data) (Unaudited) 
 
Three Months Ended March 31, 2020
 
 
 
 
Sinclair Broadcast Group Shareholders
 
 
 
 
 
Redeemable Noncontrolling Interests
 
 
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, 2019
$
1,078

 
 
66,830,110

 
$
1

 
24,727,682

 
$

 
$
1,011

 
$
492

 
$
(2
)
 
$
192

 
$
1,694

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

 
 

 

 

 

 

 
(19
)
 

 

 
(19
)
Repurchases of Class A Common Stock

 
 
(9,957,297
)
 

 

 

 
(176
)
 

 

 

 
(176
)
Class A Common Stock issued pursuant to employee benefit plans

 
 
1,479,684

 

 

 

 
29

 

 

 

 
29

Distributions to noncontrolling interests, net

 
 

 

 

 

 

 

 

 
(3
)
 
(3
)
Distributions to redeemable noncontrolling interests
(378
)
 
 

 

 

 

 

 

 

 

 

Redemption of redeemable noncontrolling interests
(198
)
 
 

 

 

 

 

 

 

 

 

Net income
20

 
 

 

 

 

 

 
123

 

 
8

 
131

BALANCE, March 31, 2020
522

 
 
58,352,497

 
$
1

 
24,727,682

 
$

 
$
864

 
$
596

 
$
(2
)
 
$
197

 
$
1,656

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

8


SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) (Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES:
 

 
 

Net income
$
151

 
$
23

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

 
 

Depreciation of property and equipment
24

 
23

Amortization of definite-lived intangible and other assets
150

 
43

Amortization of program contract costs and net realizable value adjustments
23

 
24

Stock-based compensation
17

 
11

Deferred tax benefit
22

 
2

Gain on asset disposition and other, net of impairment
(32
)
 
(8
)
Loss from equity method investments
6

 
14

Distributions from investments
24

 
1

Amortization of sports programming rights
391

 

Sports programming rights payments
(612
)
 

Gain on extinguishment of debt
(2
)
 

Change in assets and liabilities, net of acquisitions:
 

 
 

Decrease in accounts receivable
34

 
16

Decrease (increase) in prepaid expenses and other current assets
44

 
(23
)
Decrease in accounts payable and accrued and other current liabilities
(240
)
 
(18
)
Net change in net income taxes payable/receivable
(34
)
 
1

Decrease in program contracts payable
(23
)
 
(24
)
Other, net
18

 
14

Net cash flows (used in) from operating activities
(39
)
 
99

CASH FLOWS USED IN INVESTING ACTIVITIES:
 

 
 

Acquisition of property and equipment
(46
)
 
(29
)
   Spectrum repack reimbursements
24

 
8

Proceeds from the sale of assets
18

 

Purchases of investments
(25
)
 
(28
)
Other, net
6

 
2

Net cash flows used in investing activities
(23
)
 
(47
)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
 

 
 

Proceeds from notes payable and commercial bank financing
873

 

Repayments of notes payable, commercial bank financing, and finance leases
(20
)
 
(11
)
Repurchase of outstanding Class A Common Stock
(176
)
 
(105
)
Dividends paid on Class A and Class B Common Stock
(18
)
 
(18
)
Redemption of redeemable subsidiary preferred equity
(198
)
 

Distributions to noncontrolling interests, net
(3
)
 
(2
)
Distributions to redeemable noncontrolling interests
(378
)
 

Other, net
(9
)
 
(1
)
Net cash flows from (used in) financing activities
71

 
(137
)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
9

 
(85
)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period
1,333

 
1,060

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period
$
1,342

 
$
975


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

9


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

As of March 31, 2020, we had two reportable segments for accounting purposes, local news and marketing services and sports. The local news and marketing services segment consists primarily of our 191 broadcast television stations in 89 markets, which we own, provide programming and operating services pursuant to agreements commonly referred to as local marketing agreements (LMAs), or provide sales services and other non-programming operating services pursuant to other outsourcing agreements (such as joint sales agreements (JSAs) and shared services agreements (SSAs)). These stations broadcast 631 channels as of March 31, 2020. For the purpose of this report, these 191 stations and 631 channels are referred to as "our" stations and channels. The sports segment consists primarily of 21 regional sports network brands (the Acquired RSNs), the Marquee Sports Network (Marquee), and a 20% equity interest in the Yankee Entertainment and Sports Network, LLC (YES Network). We refer to the Acquired RSNs and Marquee as "the RSNs." The RSNs and YES Network, on a combined basis, own the exclusive rights to air, among other sporting events, the games of 44 professional sports teams and the RSNs are renegotiating rights with one team.

Principles of Consolidation
 
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries, including the operating results of the regional sports networks acquired on August 23, 2019, as discussed in Note 2. Acquisitions and Dispositions of Assets, and variable interest entities (VIEs) for which we are the primary beneficiary. Noncontrolling interests represent a minority owner’s proportionate share of the equity in certain of our consolidated entities. Noncontrolling interests which may be redeemed by the holder, and the redemption is outside of our control, are presented as redeemable noncontrolling interests. All intercompany transactions and account balances have been eliminated in consolidation.

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

Investments in entities over which we have significant influence but not control are accounted for using the equity method of accounting. Income from equity method investments represents our proportionate share of net income generated by equity method investees.

Interim Financial Statements
 
The consolidated financial statements for the three months ended March 31, 2020 and 2019 are unaudited. In the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of equity and redeemable noncontrolling interests, and consolidated statements of cash flows for these periods as adjusted for the adoption of recent accounting pronouncements discussed below.
 
As permitted under the applicable rules and regulations of the Securities and Exchange Commission (SEC), the consolidated financial statements do not include all disclosures normally included with audited consolidated financial statements and, accordingly, should be read together with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. The consolidated statements of operations presented in the accompanying consolidated financial statements are not necessarily representative of operations for an entire year.

10



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 $38 million, net of $7 million of cumulative impairments, as of March 31, 2020 and $28 million, net of $7 million of cumulative impairments, as of December 31, 2019. There were no adjustments to the carrying amount of investments accounted for utilizing the measurement alternative for the three months ended March 31, 2020 and a $2 million impairment related to one investment for the three months ended March 31, 2019, which is reflected in other income (expense), net in our consolidated statements of operations.

YES Network Investment. On August 29, 2019, an indirect subsidiary of Diamond Sports Group, LLC (DSG), an indirect wholly-owned subsidiary of the Company, acquired a 20% equity interest in YES Network for cash consideration of $346 million as part of a consortium led by Yankee Global Enterprises. We account for our investment in the YES Network as an equity method investment, which is recorded within other assets in our consolidated balance sheets, and in which our proportionate share of the net income generated by the investment is represented within loss from equity method investments in our consolidated statements of operations. During the three months ended March 31, 2020, we recorded income of $5 million related to our investment.

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.

As of March 31, 2020, the impact of the outbreak of the novel coronavirus (COVID-19) continues to create significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could materially impact our estimates related to, but not limited to, revenue recognition, goodwill and intangible assets, program contract costs, sports programming rights, and income taxes. As a result, many of our estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements.

Recent Accounting Pronouncements

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

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

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

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


11


In December 2019, the FASB issued guidance which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.

In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The guidance is effective for all entities as of March 12, 2020 and may be applied prospectively through December 31, 2022. We are currently evaluating the impact of this guidance on our consolidated financial statements, if elected.

Broadcast Television Programming

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

Sports Programming Rights

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

On March 12, 2020, the NBA and NHL suspended their seasons as a result of the COVID-19 pandemic. On this date, the Company suspended the recognition of amortization expense associated with program rights agreements with teams within these leagues. Amortization expense will resume over the modified seasons when the games commence. The timing and format of the remaining 2019-2020 NBA and NHL seasons is uncertain. On March 12, 2020, MLB also announced the delay of the 2020 regular season. This delay did not have a material effect on amortization expense for the three months ended March 31, 2020 as the season has not yet commenced; however, the season delay will impact the timing and potentially the amount of amortization recognized in future periods.

Certain rights agreements with professional teams contain provisions which require the rebate of rights fees paid by the Company if a contractually minimum number of live games are not delivered. As of March 31, 2020, the Company has not recorded any receivables associated with these rebate provisions.


12


Revenue Recognition

The following table presents our revenue disaggregated by type and segment (in millions):
For the three months ended March 31, 2020
Local News and Marketing Services
 
Sports
 
Other
 
Eliminations
 
Total
Distribution revenue
$
355

 
$
752

 
$
49

 
$

 
$
1,156

Advertising revenue
310

 
55

 
35

 

 
400

Other media, non-media, and intercompany revenues
36

 
5

 
44

 
(32
)
 
53

Total revenues
$
701

 
$
812

 
$
128

 
$
(32
)
 
$
1,609

 
 
 
 
 
 
 
 
 
 
For the three months ended March 31, 2019
Local News and Marketing Services
 
Sports
 
Other
 
Eliminations
 
Total
Distribution revenue
$
320

 
$

 
$
32

 
$

 
$
352

Advertising revenue
288

 

 
20

 

 
308

Other media, non-media, and intercompany revenue
11

 

 
55

 
(4
)
 
62

Total revenues
$
619

 
$

 
$
107

 
$
(4
)
 
$
722



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

Certain of our distribution arrangements contain provisions that require the Company to deliver a minimum number of live professional sports games or tournaments during a defined period which usually corresponds with a calendar year. If the minimum threshold is not met, we may be obligated to refund a portion of the distribution fees received if shortfalls are not cured within a specified period of time. Our ability to meet these requirements is primarily driven by the delivery of games by the professional sports leagues. The Company has not historically paid any material rebates under these contractual provisions as it is unusual for there to be an event which is significant enough to preclude the Company from meeting or exceeding these thresholds. The COVID-19 pandemic has resulted in significant disruptions to the normal operations of the professional sports leagues resulting in delays and uncertainty with respect to regularly scheduled games. Decisions made by the leagues regarding the timing and format of the revised 2020 seasons may result in our inability to meet these minimum requirements and the need to reduce revenue based upon estimated rebates due to our distribution customers.

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

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

Deferred Revenue. We record deferred revenue when cash payments are received or due in advance of our performance, including amounts which are refundable. Deferred revenue was $45 million and $54 million as of March 31, 2020 and December 31, 2019, respectively. Deferred revenue recognized during the three months ended March 31, 2020 and 2019 that was included in the deferred revenue balance as of December 31, 2019 and 2018 was $30 million and $38 million, respectively.

For the three months ended March 31, 2020, three customers accounted for 20%, 17%, and 12%, respectively, of our total revenues and 19%, 17%, and 12%, respectively, of our accounts receivable, net. For purposes of this disclosure, a single customer may include multiple entities under common control.


13


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, 2020 and 2019 is based on the estimated effective tax rate applicable for the full year after taking into account discrete tax items and the effects of the noncontrolling interests. We provide a valuation allowance for deferred tax assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized.  In evaluating our ability to realize net deferred tax assets, we consider all available evidence, both positive and negative, including our past operating results, tax planning strategies and forecasts of future taxable income.  In considering these sources of taxable income, we must make certain judgments that are based on the plans and estimates used to manage our underlying businesses on a long-term basis.  A valuation allowance has been provided for deferred tax assets related to 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, 2020 was less than the statutory rate primarily due to $27 million of federal tax credits related to investments in sustainability initiatives and a $13 million discrete benefit as a result of the CARES Act allowing for the estimated 2020 federal net operating loss to be carried back to pre-2018 years when the federal tax rate was 35%. Our effective income tax rate for the three months ended March 31, 2019 was less than the statutory rate primarily due to $5 million of federal tax credits related to investments in sustainability initiatives partially offset by a $3 million increase in liability for unrecognized tax benefits.

We believe it is reasonably possible that our liability for unrecognized tax benefits related to continuing operations could be reduced by up to $4 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.

Share Repurchase Program

On August 9, 2018, the Board of Directors authorized a $1 billion share repurchase authorization, in addition to the previous repurchase authorization of $150 million. There is no expiration date and currently, management has no plans to terminate this program.  We repurchased approximately 10 million shares for $176 million during the three months ended March 31, 2020. As of March 31, 2020, the total remaining purchase authorization was $547 million. As of May 8, 2020, we repurchased an additional 3.1 million shares of Class A Common Stock for $47 million during the second quarter.

Subsequent Events    
 
In May 2020, our Board of Directors declared a quarterly dividend of $0.20 per share, payable on June 15, 2020 to holders of record at the close of business on June 1, 2020.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how it has and will impact its advertisers, distributors, and professional sports leagues. While the Company did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, the Company expects the effect of the COVID-19 pandemic to intensify during the three month period ended June 30, 2020. The Company is currently unable to predict the extent of the impact that the COVID-19 pandemic will have on its financial condition, results of operations and cash flows in future periods due to numerous uncertainties.

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


14


2.              ACQUISITIONS AND DISPOSITIONS OF ASSETS:

Acquisitions

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

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

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

Accounts receivable, net
606

Prepaid expenses and other current assets
175

Property and equipment, net
25

Customer relationships, net
5,439

Other definite-lived intangible assets, net
1,286

Other assets
52

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

Fair value of identifiable net assets acquired
$
10,445

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

Purchase price, net of cash acquired
$
8,993


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

The definite-lived intangible assets of $