32.3‡ | | | | | | | | | | | EXHIBIT NO.32.4‡ | | | 97.1† | | | 99.1 | | | 101101† | | The Company's Consolidated Financial Statements and related Notes for the year ended December 31, 20212023 from this Annual Report on Form 10-K, formatted in iXBRL (Inline eXtensible Business Reporting Language).** |
* Management contracts and compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 15(b) of Form 10-K.
**† Filed herewith.
***‡ In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed”"filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
(b) Exhibits The exhibits required by this Item are listed under Item 15 (a) (3).
ITEM 16. FORM 10-K SUMMARY
Not applicable.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 1st29th day of March 2022.February 2024. | | | | | | | | | | SINCLAIR, INC. | | SINCLAIR BROADCAST GROUP, INC.LLC | | | | By: | /s/ Christopher S. Ripley | | | Christopher S. Ripley | | | President and Chief Executive Officer |
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below under the heading “Signature”"Signature" constitutes and appoints Christopher S. Ripley as his true and lawful attorney-in-fact each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities to sign any or all amendments to this 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, or theirhis substitute or substitutes, each acting alone, may lawfully do or cause to be done in virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantSinclair, Inc. and Sinclair Broadcast Group, LLC and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | | Signature | | Title | | Date | | | | | | /s/ Christopher S. Ripley | | | President and Chief Executive Officer | | Christopher S. Ripley | | President and Chief Executive Officer | | March 1, 2022February 29, 2024 | | | | | | /s/ Lucy A. Rutishauser | | | | | Lucy A. Rutishauser | | Executive Vice President and Chief Financial Officer | | | Lucy A. Rutishauser | | | | March 1, 2022February 29, 2024 | | | | | | /s/ David R. Bochenek | | | Senior Vice President and Chief Accounting Officer | | David R. Bochenek | | Senior Vice President and Chief Accounting Officer | | March 1, 2022February 29, 2024 | | | | | | /s/ David D. Smith | | | Chairman of the Board and Executive Chairman | | David D. Smith | | Chairman of the Board and Executive Chairman | | March 1, 2022February 29, 2024 | | | | | | /s/ Frederick G. Smith | | | | | Frederick G. Smith | | Director (Sinclair) and Manager (SBG) | | March 1, 2022February 29, 2024 | | | | | | /s/ J. Duncan Smith | | | | | J. Duncan Smith | | Director (Sinclair) and Manager (SBG) | | March 1, 2022February 29, 2024 | | | | | | /s/ Robert E. Smith | | | | | Robert E. Smith | | Director (Sinclair) and Manager (SBG) | | March 1, 2022February 29, 2024 | | | | | | /s/ Lawrence E. McCannaLaurie R. Beyer | | | | | Laurie R. Beyer | | Director (Sinclair) and Manager (SBG) | | February 29, 2024 | | | | | | /s/ Benjamin S. Carson, Sr. | | | | | Lawrence E. McCannaBenjamin S. Carson, Sr. | | Director (Sinclair) and Manager (SBG) | | March 1, 2022 | | | | | | /s/ Daniel C. Keith | | | | | Daniel C. Keith | | Director | | March 1, 2022 | | | | | | /s/ Martin R. Leader | | | | | Martin R. Leader | | Director | | March 1, 2022February 29, 2024 | | | | | | /s/ Howard E. Friedman | | | | | Howard E. Friedman | | Director (Sinclair) and Manager (SBG) | | March 1, 2022February 29, 2024 | | | | | | /s/ Daniel C. Keith | | | | | Daniel C. Keith | | Director (Sinclair) and Manager (SBG) | | February 29, 2024 | | | | | | /s/ Benson E. Legg | | | | | Benson E. Legg | | Director (Sinclair) and Manager (SBG) | | March 1, 2022February 29, 2024 | | | | | | /s/ Laurie R. Beyer | | | | | Laurie R. Beyer | | Director | | March 1, 2022 | | | | | |
SINCLAIR, BROADCAST GROUP, INC. INDEX TO FINANCIAL STATEMENTS OF SINCLAIR, INC.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Sinclair, Broadcast Group, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Sinclair, Broadcast Group, Inc. and its subsidiaries (the “Company”"Company") as of December 31, 20212023 and 2020,2022, and the related consolidated statements of operations, comprehensive (loss) income, equity (deficit) and redeemable noncontrolling interests and of cash flows for each of the three years in the period ended December 31, 2021,2023, including the related notes (collectively referred to as the “consolidated"consolidated financial statements”statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2021,2023, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20212023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021,2023, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’scompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’scompany's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Bally's equity securitiesRevenue Recognition – Local Media Segment Advertising Revenue
As describeddiscussed in Notes 6 and 18Note 1 to the consolidated financial statements, asthe Company recorded advertising revenue of $1,236 million relating to the local media segment for the year ended December 31, 2021,2023. Advertising revenue is generated primarily from the Company has investments in Bally’s equity securitiessale of advertising spots/impressions. Advertising revenue is recognized in the form of options and warrants with a fair value of $282 million,period in which the advertising spots/impressions are categorized as level 3 investments under the fair value hierarchy. As disclosed by management, the fair value of the options is derived by management utilizing the Black Scholes valuation model. Using this model, management uses inputs related to the trading price of the underlying common stock and the exercise price of the options and applies a discount for lack of marketability. The fair value of the warrants is primarily derived from the trading price of the underlying common stock, the exercise price of the warrants and a discount for lack of marketability. The fair value of the equity securities are derived using significant inputs related to quoted trading prices of the underlying common equity and a discount for lack of marketability, which requires management to exercise judgment.delivered.
The principal considerationsconsideration for our determination that performing procedures relating to the valuation of the Bally’s equity securitieslocal media segment advertising revenue is a critical audit matter are (i) the significant judgment by management to determine the fair value of these securities, which included developing the significant assumption for discount for lack of marketability used in valuing these securities; (ii)is a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumption related to the discount for lack of marketability; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the Bally’s equity securities,revenue recognition for advertising revenue, including controls over the significant assumption.recording of advertising revenue in the period in which the advertising spots/impressions are delivered. These procedures also included, among others, readingevaluating revenue recognition for a sample of advertising transactions by obtaining taped recordings denoting the commercial agreementsas-aired advertisements and testing management’s process for determiningcomparing those ads to the fair value of the Bally’s equity securities. Testing management’s process included (i) evaluating the appropriateness of the valuation methods, (ii) testing the completenessinvoices generated and accuracy of underlying data and inputs usedcash received against revenue transactions recorded in the methods, and (iii) evaluating the reasonableness of management’s significant assumption related to the discount for lack of marketability. Professionals with specialized skill and knowledge were used to assist in evaluating whether the significant assumption related to the discount for lack of marketability used by management was reasonable considering consistency with external market data.
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP Baltimore, Maryland March 1, 2022February 29, 2024
We have served as the Company’s auditor since 2009
2009.
SINCLAIR, BROADCAST GROUP, INC. CONSOLIDATED BALANCE SHEETS (In millions, except share and per share data) | | | As of December 31, | | As of December 31, | | | 2021 | | 2020 | | 2023 | | 2022 | ASSETS | ASSETS | | | | ASSETS | | | | CURRENT ASSETS: | | | | Current Assets: | | Current Assets: | | | | Cash and cash equivalents | Cash and cash equivalents | $ | 816 | | | $ | 1,259 | | Accounts receivable, net of allowance for doubtful accounts of $7 and $5, respectively | 1,245 | | | 1,060 | | Accounts receivable, net of allowance for doubtful accounts of $4 and $5, respectively | | Income taxes receivable | Income taxes receivable | 152 | | | 230 | | Prepaid sports rights | 85 | | | 498 | | Prepaid expenses and other current assets | Prepaid expenses and other current assets | 173 | | | 170 | | Total current assets | Total current assets | 2,471 | | | 3,217 | | Property and equipment, net | Property and equipment, net | 833 | | | 823 | | Operating lease assets | Operating lease assets | 207 | | | 197 | | Deferred tax assets | 293 | | | 197 | | Restricted cash | 3 | | | 3 | | | Goodwill | | | Goodwill | | | Goodwill | Goodwill | 2,088 | | | 2,092 | | Indefinite-lived intangible assets | Indefinite-lived intangible assets | 150 | | | 171 | | Customer relationships, net | Customer relationships, net | 3,904 | | | 4,286 | | Other definite-lived intangible assets, net | Other definite-lived intangible assets, net | 1,184 | | | 1,338 | | Other assets | Other assets | 1,408 | | | 1,058 | | Total assets (a) | Total assets (a) | $ | 12,541 | | | $ | 13,382 | | | LIABILITIES , REDEEMABLE NON-CONTROLLING INTERESTS, AND EQUITY | LIABILITIES , REDEEMABLE NON-CONTROLLING INTERESTS, AND EQUITY | | | | Current liabilities: | | | | LIABILITIES , REDEEMABLE NON-CONTROLLING INTERESTS, AND EQUITY | | LIABILITIES , REDEEMABLE NON-CONTROLLING INTERESTS, AND EQUITY | | | | | Current Liabilities: | | Current Liabilities: | | | | Accounts payable and accrued liabilities | Accounts payable and accrued liabilities | $ | 655 | | | $ | 533 | | | Current portion of notes payable, finance leases, and commercial bank financing | | Current portion of notes payable, finance leases, and commercial bank financing | | Current portion of notes payable, finance leases, and commercial bank financing | Current portion of notes payable, finance leases, and commercial bank financing | 69 | | | 58 | | Current portion of operating lease liabilities | Current portion of operating lease liabilities | 35 | | | 34 | | Current portion of program contracts payable | Current portion of program contracts payable | 97 | | | 92 | | Other current liabilities | Other current liabilities | 346 | | | 317 | | Total current liabilities | Total current liabilities | 1,202 | | | 1,034 | | Notes payable, finance leases, and commercial bank financing, less current portion | Notes payable, finance leases, and commercial bank financing, less current portion | 12,271 | | | 12,493 | | Operating lease liabilities, less current portion | Operating lease liabilities, less current portion | 205 | | | 198 | | Program contracts payable, less current portion | Program contracts payable, less current portion | 21 | | | 30 | | | Deferred tax liabilities | | Other long-term liabilities | Other long-term liabilities | 351 | | | 622 | | Total liabilities (a) | Total liabilities (a) | 14,050 | | | 14,377 | | Commitments and contingencies (See Note 13) | Commitments and contingencies (See Note 13) | 0 | | 0 | Commitments and contingencies (See Note 13) | | | | Redeemable noncontrolling interests | Redeemable noncontrolling interests | 197 | | | 190 | | Shareholders' Equity: | | | | Class A Common Stock, $0.01 par value, 500,000,000 shares authorized, 49,314,303 and 49,252,671 shares issued and outstanding, respectively | 1 | | | 1 | | Class B Common Stock, $0.01 par value, 140,000,000 shares authorized, 23,775,056 and 24,727,682 shares issued and outstanding, respectively, convertible into Class A Common Stock | — | | | — | | Shareholders' equity: | | Shareholders' equity: | | | | Class A Common Stock, $0.01 par value, 500,000,000 shares authorized, 39,737,682 and 45,847,879 shares issued and outstanding, respectively | | Class B Common Stock, $0.01 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 capital | Additional paid-in capital | 691 | | | 721 | | Accumulated deficit | (2,460) | | | (1,986) | | Accumulated other comprehensive loss | (2) | | | (10) | | Total Sinclair Broadcast Group shareholders’ deficit | (1,770) | | | (1,274) | | (Accumulated deficit) retained earnings | | Accumulated other comprehensive income | | Total Sinclair shareholders’ equity | | Noncontrolling interests | Noncontrolling interests | 64 | | | 89 | | Total deficit | (1,706) | | | (1,185) | | Total equity | | Total liabilities, redeemable noncontrolling interests, and equity | Total liabilities, redeemable noncontrolling interests, and equity | $ | 12,541 | | | $ | 13,382 | |
The accompanying notes are an integral part of these consolidated financial statements. (a)Our consolidated total assets as of December 31, 20212023 and 20202022 include total assets of variable interest entities (VIEs)Variable Interest Entities ("VIEs") of $217$85 million and $233$115 million, respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of December 31, 20212023 and 20202022 include total liabilities of the VIEs of $62$17 million and $60$18 million, respectively, for which the creditors of the VIEs have no recourse to us. See Note 14. Variable Interest Entities.
SINCLAIR, BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2021, 20202023, 2022, AND 20192021 (In millions, except share and per share data) | | | 2021 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | REVENUES: | REVENUES: | | | | | | REVENUES: | | | | Media revenues | Media revenues | $ | 6,083 | | | $ | 5,843 | | | $ | 4,046 | | Non-media revenues | Non-media revenues | 51 | | | 100 | | | 194 | | Total revenues | Total revenues | 6,134 | | | 5,943 | | | 4,240 | | | OPERATING EXPENSES: | OPERATING EXPENSES: | | | | | OPERATING EXPENSES: | | OPERATING EXPENSES: | | | | | | | Media programming and production expenses | Media programming and production expenses | 4,291 | | | 2,735 | | | 2,073 | | Media selling, general and administrative expenses | Media selling, general and administrative expenses | 908 | | | 832 | | | 732 | | Amortization of program contract costs | Amortization of program contract costs | 93 | | | 86 | | | 90 | | Non-media expenses | Non-media expenses | 57 | | | 91 | | | 156 | | Depreciation of property and equipment | Depreciation of property and equipment | 114 | | | 102 | | | 97 | | Corporate general and administrative expenses | Corporate general and administrative expenses | 170 | | | 148 | | | 387 | | Amortization of definite-lived intangible and other assets | Amortization of definite-lived intangible and other assets | 477 | | | 572 | | | 327 | | Impairment of goodwill and definite-lived intangible assets | — | | | 4,264 | | | — | | Gain on asset dispositions and other, net of impairment | (71) | | | (115) | | | (92) | | Total operating expenses | 6,039 | | | 8,715 | | | 3,770 | | Operating income (loss) | 95 | | | (2,772) | | | 470 | | | Loss (gain) on deconsolidation of subsidiary | | Loss (gain) on deconsolidation of subsidiary | | Loss (gain) on deconsolidation of subsidiary | | Loss (gain) on asset dispositions and other, net of impairment | | Total operating expenses (gains) | | Operating (loss) income | | | OTHER INCOME (EXPENSE): | OTHER INCOME (EXPENSE): | | | | | | OTHER INCOME (EXPENSE): | | OTHER INCOME (EXPENSE): | | | | | Interest expense including amortization of debt discount and deferred financing costs | Interest expense including amortization of debt discount and deferred financing costs | (618) | | | (656) | | | (422) | | Loss on extinguishment of debt | (7) | | | (10) | | | (10) | | Income (loss) from equity method investments | 45 | | | (36) | | | (35) | | Other (expense) income, net | (14) | | | 325 | | | 6 | | Gain (loss) on extinguishment of debt | | Income from equity method investments | | Other expense, net | | Total other expense, net | Total other expense, net | (594) | | | (377) | | | (461) | | (Loss) income before income taxes | (Loss) income before income taxes | (499) | | | (3,149) | | | 9 | | INCOME TAX BENEFIT | 173 | | | 720 | | | 96 | | INCOME TAX BENEFIT (PROVISION) | | | NET (LOSS) INCOME | NET (LOSS) INCOME | (326) | | | (2,429) | | | 105 | | Net income attributable to the redeemable noncontrolling interests | (18) | | | (56) | | | (48) | | Net (income) loss attributable to the noncontrolling interests | (70) | | | 71 | | | (10) | | NET (LOSS) INCOME ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP | $ | (414) | | | $ | (2,414) | | | $ | 47 | | | EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP: | | | | | | | NET (LOSS) INCOME | | | NET (LOSS) INCOME | | Net loss (income) attributable to the redeemable noncontrolling interests | | Net income attributable to the noncontrolling interests | | NET (LOSS) INCOME ATTRIBUTABLE TO SINCLAIR | | | EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR: | | EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR: | | EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR: | | | | | | Basic (loss) earnings per share | Basic (loss) earnings per share | $ | (5.51) | | | $ | (30.20) | | | $ | 0.52 | | Basic (loss) earnings per share | | Basic (loss) earnings per share | | | Diluted (loss) earnings per share | | Diluted (loss) earnings per share | | Diluted (loss) earnings per share | Diluted (loss) earnings per share | $ | (5.51) | | | $ | (30.20) | | | $ | 0.51 | | Basic weighted average common shares outstanding (in thousands) | Basic weighted average common shares outstanding (in thousands) | 75,050 | | | 79,924 | | | 92,015 | | Diluted weighted average common and common equivalent shares outstanding (in thousands) | Diluted weighted average common and common equivalent shares outstanding (in thousands) | 75,050 | | | 79,924 | | | 93,185 | | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR, BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME FOR THE YEARS ENDED DECEMBER 31, 2021, 20202023, 2022, AND 20192021 (In millions) | | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | Net (loss) income | $ | (326) | | | $ | (2,429) | | | $ | 105 | | Adjustments to post-retirement obligations, net of taxes | 1 | | | (1) | | | (1) | | Share of other comprehensive gain (loss) of equity method investments | 7 | | | (7) | | | — | | Comprehensive (loss) income | (318) | | | (2,437) | | | 104 | | Comprehensive income attributable to redeemable noncontrolling interests | (18) | | | (56) | | | (48) | | Comprehensive (income) loss attributable to noncontrolling interests | (70) | | | 71 | | | (10) | | Comprehensive (loss) income attributable to Sinclair Broadcast Group | $ | (406) | | | $ | (2,422) | | | $ | 46 | |
| | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Net (loss) income | $ | (279) | | | $ | 2,701 | | | $ | (326) | | | | | | | | Adjustments to post-retirement obligations, net of taxes | — | | | 3 | | | 1 | | Share of other comprehensive gain of equity method investments | — | | | 3 | | | 7 | | Comprehensive (loss) income | (279) | | | 2,707 | | | (318) | | Comprehensive loss (income) attributable to redeemable noncontrolling interests | 4 | | | (20) | | | (18) | | Comprehensive income attributable to noncontrolling interests | (16) | | | (29) | | | (70) | | Comprehensive (loss) income attributable to Sinclair | $ | (291) | | | $ | 2,658 | | | $ | (406) | |
The accompanying notes are an integral part of these consolidated financial statementsstatements.
SINCLAIR, BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE YEARS ENDED DECEMBER 31, 2021, 20202023, 2022, AND 20192021 (In millions, except share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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, 2018 | $ | — | | | | 68,897,723 | | | $ | 1 | | | 25,670,684 | | | $ | — | | | $ | 1,121 | | | $ | 518 | | | $ | (1) | | | $ | (39) | | | $ | 1,600 | | Issuance of redeemable subsidiary preferred equity, net of issuance costs | 985 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | Dividends declared and paid on Class A and Class B Common Stock ($0.80 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (73) | | | — | | | — | | | (73) | | Class B Common Stock converted into Class A Common Stock | — | | | | 943,002 | | | — | | | (943,002) | | | — | | | — | | | — | | | — | | | — | | | — | | Repurchases of Class A Common Stock | — | | | | (4,555,487) | | | — | | | — | | | — | | | (145) | | | — | | | — | | | — | | | (145) | | Class A Common Stock issued pursuant to employee benefit plans | — | | | | 1,544,872 | | | — | | | — | | | — | | | 35 | | | — | | | — | | | — | | | 35 | | | | | | | | | | | | | | | | | | | | | | | Noncontrolling interests acquired in a business combination | 380 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 248 | | | 248 | | Distributions to noncontrolling interests, net | (38) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (27) | | | (27) | | Redemption of redeemable subsidiary preferred equity, net of fees | (297) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive loss | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | — | | | (1) | | Net income | 48 | | | | — | | | — | | | — | | | — | | | — | | | 47 | | | — | | | 10 | | | 57 | | BALANCE, December 31, 2019 | $ | 1,078 | | | | 66,830,110 | | | $ | 1 | | | 24,727,682 | | | $ | — | | | $ | 1,011 | | | $ | 492 | | | $ | (2) | | | $ | 192 | | | $ | 1,694 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Shareholders | | | | | | Redeemable Noncontrolling Interests | | | Class A Common Stock | | Class B Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Deficit | | | | Shares | | Values | | Shares | | Values | | | | | | BALANCE, December 31, 2020 | $ | 190 | | | | 49,252,671 | | | $ | 1 | | | 24,727,682 | | | $ | — | | | $ | 721 | | | $ | (1,986) | | | $ | (10) | | | $ | 89 | | | $ | (1,185) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends declared and paid on Class A and Class B Common Stock ($0.80 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (60) | | | — | | | — | | | (60) | | Class B Common Stock converted into Class A Common Stock | — | | | | 952,626 | | | — | | | (952,626) | | | — | | | — | | | — | | | — | | | — | | | — | | Repurchases of Class A Common Stock | — | | | | (2,438,585) | | | — | | | — | | | — | | | (61) | | | — | | | — | | | — | | | (61) | | Class A Common Stock issued pursuant to employee benefit plans | — | | | | 1,547,591 | | | — | | | — | | | — | | | 31 | | | — | | | — | | | — | | | 31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distributions to noncontrolling interests, net | (11) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (95) | | | (95) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive income | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 8 | | | — | | | 8 | | Net income (loss) | 18 | | | | — | | | — | | | — | | | — | | | — | | | (414) | | | — | | | 70 | | | (344) | | BALANCE, December 31, 2021 | $ | 197 | | | | 49,314,303 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 691 | | | $ | (2,460) | | | $ | (2) | | | $ | 64 | | | $ | (1,706) | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR, BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE YEARS ENDED DECEMBER 31, 2021, 20202023, 2022, AND 20192021 (In millions, except share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group Shareholders | | | | | | Redeemable Noncontrolling Interest | | | Class A Common Stock | | Class B Common Stock | | Additional Paid-In Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Equity (Deficit) | | | | 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 ($0.80 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (64) | | | — | | | — | | | (64) | | | | | | | | | | | | | | | | | | | | | | | Repurchases of Class A Common Stock | — | | | | (19,418,934) | | | — | | | — | | | — | | | (343) | | | — | | | — | | | — | | | (343) | | Class A Common Stock issued pursuant to employee benefit plans | — | | | | 1,841,495 | | | — | | | — | | | — | | | 53 | | | — | | | — | | | — | | | 53 | | Noncontrolling interests issued | 22 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distributions to noncontrolling interests, net | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (32) | | | (32) | | Distributions to redeemable noncontrolling interests | (419) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | Redemption of redeemable subsidiary preferred equity, net of fees | (547) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Other comprehensive loss | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (8) | | | — | | | (8) | | Net income (loss) | 56 | | | | — | | | — | | | — | | | — | | | — | | | (2,414) | | | — | | | (71) | | | (2,485) | | BALANCE, December 31, 2020 | $ | 190 | | | | 49,252,671 | | | $ | 1 | | | 24,727,682 | | | $ | — | | | $ | 721 | | | $ | (1,986) | | | $ | (10) | | | $ | 89 | | | $ | (1,185) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Shareholders | | | | | | Redeemable Noncontrolling Interest | | | Class A Common Stock | | Class B Common Stock | | Additional Paid-In Capital | | (Accumulated Deficit) Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | Noncontrolling Interests | | Total (Deficit) Equity | | | | Shares | | Values | | Shares | | Values | | | | | | BALANCE, December 31, 2021 | $ | 197 | | | | 49,314,303 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 691 | | | $ | (2,460) | | | $ | (2) | | | $ | 64 | | | $ | (1,706) | | | | | | | | | | | | | | | | | | | | | | | Dividends declared and paid on Class A and Class B Common Stock ($1.00 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (70) | | | — | | | — | | | (70) | | | | | | | | | | | | | | | | | | | | | | | Repurchases of Class A Common Stock | — | | | | (4,850,398) | | | — | | | — | | | — | | | (120) | | | — | | | — | | | — | | | (120) | | Class A Common Stock issued pursuant to employee benefit plans | — | | | | 1,383,974 | | | — | | | — | | | — | | | 53 | | | — | | | — | | | — | | | 53 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distributions to noncontrolling interests, net | (7) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (12) | | | (12) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive income | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 6 | | | — | | | 6 | | Deconsolidation of subsidiary | (16) | | | | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | (148) | | | (151) | | Net income | 20 | | | | — | | | — | | | — | | | — | | | — | | | 2,652 | | | — | | | 29 | | | 2,681 | | BALANCE, December 31, 2022 | $ | 194 | | | | 45,847,879 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 624 | | | $ | 122 | | | $ | 1 | | | $ | (67) | | | $ | 681 | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR, BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE YEARS ENDED DECEMBER 31, 2021, 20202023, 2022, AND 20192021 (In millions, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group Shareholders | | | | | | Redeemable Noncontrolling Interests | | | Class A Common Stock | | Class B Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Deficit | | | | Shares | | Values | | Shares | | Values | | | | | | BALANCE, December 31, 2020 | $ | 190 | | | | 49,252,671 | | | $ | 1 | | | 24,727,682 | | | $ | — | | | $ | 721 | | | $ | (1,986) | | | $ | (10) | | | $ | 89 | | | $ | (1,185) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends declared and paid on Class A and Class B Common Stock ($0.80 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (60) | | | — | | | — | | | (60) | | Class B Common Stock converted into Class A Common Stock | — | | | | 952,626 | | | — | | | (952,626) | | | — | | | — | | | — | | | — | | | — | | | — | | Repurchases of Class A Common Stock | — | | | | (2,438,585) | | | — | | | — | | | — | | | (61) | | | — | | | — | | | — | | | (61) | | Class A Common Stock issued pursuant to employee benefit plans | — | | | | 1,547,591 | | | — | | | — | | | — | | | 31 | | | — | | | — | | | — | | | 31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distributions to noncontrolling interests, net | (11) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (95) | | | (95) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive loss | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 8 | | | — | | | 8 | | Net income (loss) | 18 | | | | — | | | — | | | — | | | — | | | — | | | (414) | | | — | | | 70 | | | (344) | | BALANCE, December 31, 2021 | $ | 197 | | | | 49,314,303 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 691 | | | $ | (2,460) | | | $ | (2) | | | $ | 64 | | | $ | (1,706) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Shareholders | | | | | | Redeemable Noncontrolling Interests | | | Class A Common Stock | | Class B Common Stock | | Additional Paid-In Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income | | Noncontrolling Interests | | Total Equity | | | | Shares | | Values | | Shares | | Values | | | | | | 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 ($1.00 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (65) | | | — | | | — | | | (65) | | | | | | | | | | | | | | | | | | | | | | | Repurchases of Class A Common Stock | — | | | | (8,785,022) | | | — | | | — | | | — | | | (153) | | | — | | | — | | | — | | | (153) | | Class A Common Stock issued pursuant to employee benefit plans | — | | | | 2,674,825 | | | — | | | — | | | — | | | 46 | | | — | | | — | | | — | | | 46 | | | | | | | | | | | | | | | | | | | | | | | Distributions to noncontrolling interests, net | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (13) | | | (13) | | | | | | | | | | | | | | | | | | | | | | | Redemption, net | (190) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net (loss) income | (4) | | | | — | | | — | | | — | | | — | | | — | | | (291) | | | — | | | 16 | | | (275) | | BALANCE, December 31, 2023 | $ | — | | | | 39,737,682 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 517 | | | $ | (234) | | | $ | 1 | | | $ | (64) | | | $ | 221 | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR, BROADCAST GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021, 20202023, 2022, AND 20192021 (In millions) | | | 2021 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | CASH FLOWS FROM OPERATING ACTIVITIES: | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | Net (loss) income | Net (loss) income | $ | (326) | | | $ | (2,429) | | | $ | 105 | | Adjustments to reconcile net (loss) income to net cash flows from operating activities: | Adjustments to reconcile net (loss) income to net cash flows from operating activities: | | | | | | Adjustments to reconcile net (loss) income to net cash flows from operating activities: | | | | Impairment of goodwill and definite-lived intangible assets | — | | | 4,264 | | | — | | | Amortization of sports programming rights | | Amortization of sports programming rights | | Amortization of sports programming rights | Amortization of sports programming rights | 2,350 | | | 1,078 | | | 637 | | Amortization of definite-lived intangible and other assets | Amortization of definite-lived intangible and other assets | 477 | | | 572 | | | 327 | | Depreciation of property and equipment | Depreciation of property and equipment | 114 | | | 102 | | | 97 | | Amortization of program contract costs | Amortization of program contract costs | 93 | | | 86 | | | 90 | | Stock-based compensation | Stock-based compensation | 60 | | | 52 | | | 33 | | Deferred tax benefit | (92) | | | (604) | | | (5) | | Gain on asset disposition and other, net of impairment | (69) | | | (119) | | | (62) | | (Income) loss from equity method investments | (45) | | | 36 | | | 35 | | Loss (income) from investments | 38 | | | (152) | | | 6 | | Deferred tax (benefit) provision | | Loss (gain) on asset dispositions and other, net of impairment | | Loss (gain) on deconsolidation of subsidiary | | Income from equity method investments | | Loss from investments | | Distributions from investments | Distributions from investments | 54 | | | 27 | | | 6 | | Sports programming rights payments | Sports programming rights payments | (1,834) | | | (1,345) | | | (578) | | Rebate payments to distributors | Rebate payments to distributors | (202) | | | — | | | — | | Loss on extinguishment of debt | 7 | | | 10 | | | 10 | | Measurement adjustment gain on variable payment obligations | (15) | | | (159) | | | — | | Changes in assets and liabilities, net of acquisitions: | | | | | | (Gain) loss on extinguishment of debt | | | Changes in assets and liabilities, net of acquisitions and deconsolidation of subsidiary: | | Changes in assets and liabilities, net of acquisitions and deconsolidation of subsidiary: | | Changes in assets and liabilities, net of acquisitions and deconsolidation of subsidiary: | | | | | (Increase) decrease in accounts receivable | (Increase) decrease in accounts receivable | (187) | | | 70 | | | 70 | | (Increase) decrease in prepaid expenses and other current assets | (86) | | | 48 | | | (27) | | Increase in prepaid expenses and other current assets | | Increase (decrease) in accounts payable and accrued and other current liabilities | Increase (decrease) in accounts payable and accrued and other current liabilities | 113 | | | (3) | | | 334 | | Net change in current and long-term net income taxes payable/receivable | Net change in current and long-term net income taxes payable/receivable | (52) | | | (127) | | | (127) | | Decrease in program contracts payable | Decrease in program contracts payable | (102) | | | (96) | | | (94) | | Increase (decrease) in other long-term liabilities | 3 | | | 198 | | | (1) | | | Other, net | | Other, net | | Other, net | Other, net | 28 | | | 39 | | | 60 | | Net cash flows from operating activities | Net cash flows from operating activities | 327 | | | 1,548 | | | 916 | | CASH FLOWS USED IN INVESTING ACTIVITIES: | | | | | | CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | | CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | | | | Acquisition of property and equipment | Acquisition of property and equipment | (80) | | | (157) | | | (156) | | Acquisition of businesses, net of cash acquired | (4) | | | (16) | | | (8,999) | | | Spectrum repack reimbursements | | Spectrum repack reimbursements | | Spectrum repack reimbursements | Spectrum repack reimbursements | 24 | | | 90 | | | 62 | | Proceeds from the sale of assets | Proceeds from the sale of assets | 43 | | | 36 | | | 8 | | | Deconsolidation of subsidiary cash | | Purchases of investments | Purchases of investments | (256) | | | (139) | | | (452) | | | Distributions from investments | | | Other, net | Other, net | 27 | | | 27 | | | 7 | | Net cash flows used in investing activities | (246) | | | (159) | | | (9,530) | | CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES: | | | | | | Other, net | | Other, net | | Net cash flows from (used in) investing activities | | CASH FLOWS USED IN FINANCING ACTIVITIES: | | CASH FLOWS USED IN FINANCING ACTIVITIES: | | | | | | Proceeds from notes payable and commercial bank financing | Proceeds from notes payable and commercial bank financing | 357 | | | 1,819 | | | 9,956 | | Repayments of notes payable, commercial bank financing, and finance leases | Repayments of notes payable, commercial bank financing, and finance leases | (601) | | | (1,739) | | | (1,236) | | | Proceeds from the issuance of redeemable subsidiary preferred equity, net | — | | | — | | | 985 | | | Repurchase of outstanding Class A Common Stock | | | Repurchase of outstanding Class A Common Stock | | | Repurchase of outstanding Class A Common Stock | Repurchase of outstanding Class A Common Stock | (61) | | | (343) | | | (145) | | Dividends paid on Class A and Class B Common Stock | Dividends paid on Class A and Class B Common Stock | (60) | | | (63) | | | (73) | | Dividends paid on redeemable subsidiary preferred equity | Dividends paid on redeemable subsidiary preferred equity | (5) | | | (36) | | | (33) | | Redemption of redeemable subsidiary preferred equity | — | | | (547) | | | (297) | | Debt issuance costs | (1) | | | (19) | | | (199) | | Repurchase of redeemable subsidiary preferred equity | | | Distributions to noncontrolling interests, net | | | Distributions to noncontrolling interests, net | | | Distributions to noncontrolling interests, net | Distributions to noncontrolling interests, net | (95) | | | (32) | | | (27) | | Distributions to redeemable noncontrolling interests | Distributions to redeemable noncontrolling interests | (6) | | | (383) | | | (5) | | Other, net | Other, net | (52) | | | (117) | | | (39) | | Net cash flows (used in) from financing activities | (524) | | | (1,460) | | | 8,887 | | Net cash flows used in financing activities | | NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (443) | | | (71) | | | 273 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of year | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of year | 1,262 | | | 1,333 | | | 1,060 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of year | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of year | $ | 819 | | | $ | 1,262 | | | $ | 1,333 | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR, BROADCAST GROUP, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
Sinclair, Broadcast Group, Inc. (the Company)("Sinclair") is a diversified media company with national reach and a strong focus on providing high-quality content on our local television stations, digital platform, and, prior to the Deconsolidation (as defined below in Deconsolidation of Diamond Sports Intermediate Holdings LLC), regional sports networks, and digital platforms.networks. 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.us and our owned networks and professional sports. Additionally, we own digital media productscompanies that are complementary to our extensive portfolio of television station related digital properties. Outside of our media related businesses,properties and we have interests in, own, manage, and/or operate technical and software services companies, focused on supply and maintenance of broadcast transmission systems as well as research and development companies for the advancement of broadcast technology, and we manage other media and non-media related businesses and assets, including real estate, venture capital, private equity, and direct investments.
As of December 31, 2021,2023, we had 2two reportable segments for accounting purposes, broadcastsegments: local media and tennis. Prior to the Deconsolidation (as defined below in Deconsolidation of Diamond Sports Intermediate Holdings LLC),we had one additional reportable segment, local sports. The broadcastlocal 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 (LMAs),LMAs, or provide sales services and other non-programming operating services pursuant to other outsourcing agreements, (suchsuch as JSAs and SSAs).SSAs. These stations broadcast 634640 channels as of December 31, 2021.2023. For the purpose of this report, these 185 stations and 634640 channels are referred to as “our”"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. The local sports segment consistsconsisted primarily of ourthe Bally Sports network brands (Bally RSNs)("Bally RSNs"), the Marquee Sports Network (Marquee)("Marquee") joint venture, and a minority equity interest in the Yankee Entertainment and Sports Network, LLC ( ("YES Network). WeNetwork") through February 28, 2022. On March 1, 2022, the Bally RSNs, Marquee, and YES Network were deconsolidated from our financial statements. See Deconsolidation of Diamond Sports Intermediate Holdings LLC below. Through February 28, 2022, we refer to the Bally RSNs and Marquee as "the RSNs".RSNs." The RSNs and YES Network own the exclusive rights to air, among other sporting events, the games of professional sports teams in designated local viewing areas. 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 Acquired RSNs acquired on August 23, 2019, as discussed in Note 2. Acquisitions and Dispositions of Assets, and VIEs for which we are the primary beneficiary. Noncontrolling interests represent a minority owner’sowner'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 14. 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 (loss) from equity method investments represents our proportionate share of net income or loss 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.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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").
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 Sinclair Ventures, LLC, a new indirect wholly-owned subsidiary of Sinclair ("Ventures"). 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.
Deconsolidation of Diamond Sports Intermediate Holdings LLC
On March 1, 2022, Old Sinclair's subsidiary Diamond Sports Intermediate Holdings, LLC, and certain of its subsidiaries (collectively "DSIH") completed a series of transactions (the "Transaction"). As part of the Transaction, the governance structure of DSIH was modified including changes to the composition of its Board of Managers, resulting in the Company's loss of voting control. As a result, DSIH, whose operations represented the entirety of our local sports segment, was deconsolidated from our consolidated financial statements effective as of March 1, 2022 (the "Deconsolidation"). The consolidated statement of operations for the year ended December 31, 2022 therefore includes two months of activity related to DSIH prior to the Deconsolidation. Subsequent to February 28, 2022, the assets and liabilities of DSIH were no longer included within our consolidated balance sheets. Any discussions related to results, operations, and accounting policies associated with DSIH are referring to the periods prior to the Deconsolidation.
Upon Deconsolidation, we recognized a gain before income taxes of approximately $3,357 million, which is recorded within gain on deconsolidation of subsidiary in our consolidated statements of operations for the year ended December 31, 2022. During the year ended December 31, 2023, we recorded an adjustment to the deconsolidation gain of $10 million. Subsequent to the Deconsolidation, our equity ownership interest in DSIH is accounted for under the equity method of accounting. See Note 6. Other Assets for more information.
Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities. Actual results could differ from those estimates.
The impact of the outbreak of the novel coronavirus (COVID-19) continues to create significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could further materially impact our estimates related to, but not limited to, revenue recognition, goodwill and intangible assets, program contract costs, sports programming rights, and income taxes. As a result, many of our estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Recent Accounting Pronouncements
In June 2016, the FASB issued amended guidance on the accounting for credit losses on financial instruments. Among other provisions, this guidance introduces a new impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a forward-looking “expected loss” model that will replace the current “incurred loss” model that will generally result in the earlier recognition of allowances for losses. We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, with the capitalized implementation costs of a hosting arrangement that is a service contract expensed over the term of the hosting arrangement. We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.
In October 2018, the FASB issued guidance for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety, as currently required in generally accepted accounting principles (GAAP). We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.
In March 2019, the FASB issued guidance which requires that an entity test a film or license agreement within the scope of Subtopic 920-350 for impairment at the film group level, when the film or license agreement is predominantly monetized with other films and/or license agreements. We adopted this guidance during the first quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued guidance which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. We early adopted this guidance during the third quarter of 2020. The impact of the adoption did not have a material impact on our consolidated financial statements.
In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying GAAP to derivative contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. The guidance was effective for all entities immediately upon issuance of the update and may be applied prospectively to applicable transactions existing as of or entered into from the date of adoption through December 31, 2022. This guidance did not have an impact on our consolidated financial statements.
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 are currently evaluatingadopted this guidance during the first quarter of 2023. The impact of this guidance, but dothe adoption did not expecthave 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.
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.
Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Accounts Receivable We regularly review accounts receivable and determine an appropriate estimate for the allowance for doubtful accounts based upon the impact of economic conditions on the merchant’smerchant's ability to pay, past collection experience, and such other factors which, in management’smanagement's judgment, deserve current recognition. In turn, a provision is charged against earnings in order to maintain the appropriate allowance level.
A rollforward of the allowance for doubtful accounts for the years ended December 31, 2021, 2020,2023, 2022, and 20192021 is as follows (in millions): | | | 2021 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | Balance at beginning of period | Balance at beginning of period | $ | 5 | | | $ | 8 | | | $ | 2 | | Charged to expense | Charged to expense | 3 | | | 2 | | | 9 | | Net write-offs | Net write-offs | (1) | | | (5) | | | (3) | | Balance at end of period | Balance at end of period | $ | 7 | | | $ | 5 | | | $ | 8 | |
As of December 31, 2023, two customers accounted for 10% and 10%, respectively, of our accounts receivable, net. As of December 31, 2022, one customer accounted for 13% of our accounts receivable, net. As of December 31, 2021, three customers accounted for 15%, 15%, and 12%, respectively, of our accounts receivable, net. As of December 31, 2020, three customers accounted for 19%, 17%, and 15%, respectively, of our accounts receivable, net. For purposes of this disclosure, a single customer may include multiple entities under common control.
Broadcast Television Programming We have agreements with programming syndicators for the rights to television programming over contract periods, which generally run from one to seventhree 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.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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’smanagement's expectation of future advertising revenues, net of sales commissions, to be generated by the program material. We assess our program contract costs on a quarterly basis to ensure the costs are recorded at the lower of unamortized cost or fair value.
Sports Programming Rights
We haveDSIH has multi-year program rights agreements that provide the Companyprovided DSIH 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 relatedPrior 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 amortizeDeconsolidation, we amortized these programming rights as an expense over each season based upon contractually stated rates. Amortization iswas accelerated in the event that the stated contractual rates over the term of the rights agreement resultsresulted in an expense recognition pattern that iswas inconsistent with the projected growth of revenue over the contractual term.
On March 12, 2020, the NBA, NHL, and MLB suspended or delayed the start of their seasons as a result of the COVID-19 pandemic. On that date, the Company suspended the recognition of amortization expense associated with prepaid program rights agreements with teams within these leagues. Amortization expense resumed for the NBA, NHL, and MLB over the modified seasons when the games commenced during the third quarter of 2020. The NBA and NHL also delayed the start of their 2020-2021 seasons until December 22, 2020 and January 13, 2021, respectively; sports rights expense associated with these seasons was recognized over the modified term of these seasons.
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. The actual amount of rebates to be received will vary depending on changes in the final game counts of each league's respective season. Rights fees paid in advance of expense recognition, inclusive of any contractual rebates due to the Company, are included within prepaid sports rights in our consolidated balance sheets.
Impairment of Goodwill, Indefinite-lived Intangible Assets, and Other Long-lived Assets We evaluate our goodwill and indefinite lived intangible assets for impairment annually in the fourth quarter, or more frequently, if events or changes in circumstances indicate that an impairment may exist. Our goodwill has been allocated to, and is tested for impairment at, the reporting unit level. A reporting unit is an operating segment or a component of an operating segment to the extent that the component constitutes a business for which discrete financial information is available and regularly reviewed by management. Components of an operating segment with similar characteristics are aggregated when testing goodwill for impairment. In the performance of our annual assessment of goodwill for impairment, we have the option to qualitatively assess whether it is more likely than not that a reporting unit has been impaired. As part of this qualitative assessment, we weigh the relative impact of factors that are specific to the reporting units as well as industry, regulatory, and macroeconomic factors that could affect the significant inputs used to determine the fair value of the assets. We also consider the significance of the excess fair value over carrying value in prior quantitative assessments. If we conclude that it is more likely than not that a reporting unit is impaired, or if we elect not to perform the optional qualitative assessment, we will determine the fair value of the reporting unit and compare it to the net book value of the reporting unit. If the fair value is less than the net book value, we will record an impairment to goodwill for the amount of the difference. We estimate the fair value of our reporting units utilizing the income approach involving the performance of a discounted cash flow analysis. Our discounted cash flow model is based on our judgment of future market conditions based on our internal forecast of future performance, as well as discount rates that are based on a number of factors including market interest rates, a weighted average cost of capital analysis, and includes adjustments for market risk and company specific risk. Our indefinite-lived intangible assets consist primarily of our broadcast licenses and a trade name. For our annual impairment test for indefinite-lived intangible assets, we have the option to perform a qualitative assessment to determine whether it is more likely than not that these assets are impaired. As part of this qualitative assessment we weigh the relative impact of factors that are specific to the indefinite-lived intangible assets as well as industry, regulatory, and macroeconomic factors that could affect the significant inputs used to determine the fair value of the assets. We also consider the significance of the excess fair value over carrying value in prior quantitative assessments. When evaluating our broadcast licenses for impairment, the qualitative assessment is done at the market level because the broadcast licenses within the market are complementary and together enhance the single broadcast license of each station. If we conclude that it is more likely than not that one of our broadcast licenses is impaired, we will perform a quantitative assessment by comparing the aggregate fair value of the broadcast licenses in the market to the respective carrying values. We estimate the fair values of our broadcast licenses using the Greenfield method, which is an income approach. This method involves a discounted cash flow model that incorporates several variables, including, but not limited to, market revenues and long-term growth projections, estimated market share for the typical participant without a network affiliation, and estimated profit margins based on market size and station type. The model also assumes outlays for capital expenditures, future terminal values, an effective tax rate assumption and a discount rate based on a number of factors including market interest rates, a weighted average cost of capital analysis based on the target capital structure for a television station, and includes adjustments for market risk and company specific risk. If the carrying amount of the broadcast licenses exceeds the fair value, then an impairment loss is recorded to the extent that the carrying value of the broadcast licenses exceeds the fair value.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
We evaluate our long-lived assets, including definite-lived intangible assets, for impairment if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We evaluate the recoverability of long-lived assets by comparing the carrying amount of the assets within an asset group to the estimated undiscounted future cash flows associated with the asset group. An asset group represents the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets. At the time that such evaluations indicate that the future undiscounted cash flows are not sufficient to recover the carrying value of the asset group, an impairment loss is determined by comparing the estimated fair value of the asset group to the carrying value. We estimate fair value using an income approach involving the performance of a discounted cash flow analysis.
Our RSNs included inDuring the local sports segment were negatively impacted by the loss of three Distributors in 2020. In addition, our existing Distributors experienced elevated levels of subscriber erosion which we believe was influenced, in part, by shifting consumer behaviors resulting from media fragmentation, the current economic environment, the COVID-19 pandemic and related uncertainties. Most of these factors are also expected to have a negative impact on future projected revenues and margins of our RSNs. As a result of these factors, we performed an impairment test of the RSN reporting units' goodwill and long-lived asset groups during the third quarter of 2020 which resulted in a non-cash impairment charge for the yearyears ended December 31, 2020 on goodwill of $2,615 million, customer relationships of $1,218 million,2023, 2022, and other definite-lived intangible assets of $431 million, included within impairment of goodwill and definite-lived intangible assets in our consolidated statements of operations. During the year ended December 31, 2021, we did not identify any indicators that our definite-lived intangiblegoodwill, indefinite-lived or long-lived assets may not be recoverable. See Note 5. Goodwill, Indefinite-Lived Intangible Assets, and Other Intangible Assets for more information.
We believe we have made reasonable estimates and utilized appropriate assumptions in the performance of our impairment assessments. If future results are not consistent with our assumptions and estimates, including future events such as a deterioration of market conditions, loss of significant customers, failure to execute on DSG's DTC strategyand significant increases in discount rates, among other factors, we could be exposed to impairment charges in the future. Any resulting impairment loss could have a material adverse impact on our consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows.
When factors indicate that there may be a decrease in value of an equity method investment, we assess whether a loss in value has occurred. If that loss is deemed to be other than temporary, an impairment loss is recorded accordingly. For any equity method investments that indicate a potential impairment, we estimate the fair values of those investments using a combination of a market-based approach, which considers earnings and cash flow multiples of comparable businesses and recent market transactions, as well as an income approach involving the performance of a discounted cash flow analysis. See Note 6. Other Assets for more information.
Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following as of December 31, 20212023 and 20202022 (in millions): | | | 2021 | | 2020 | | 2023 | | 2022 | Compensation and employee benefits | Compensation and employee benefits | $ | 142 | | | $ | 131 | | Interest | Interest | 126 | | | 127 | | Programming related obligations | Programming related obligations | 227 | | | 183 | | Legal, litigation, and regulatory | 6 | | | 2 | | Legal, litigation, and regulatory (a) | | Accounts payable and other operating expenses | Accounts payable and other operating expenses | 154 | | | 90 | | Total accounts payable and accrued liabilities | Total accounts payable and accrued liabilities | $ | 655 | | | $ | 533 | |
(a)See Note 13. Commitments and Contingencies for additional information regarding the litigation accruals recorded.
We expense these activities when incurred.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Income Taxes We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. 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. As of December 31, 20212023 and 2020,2022, a valuation allowance has been provided for deferred tax assets related to certain temporary basis differences, interest expense carryforwards under the Internal Revenue Code (IRC) Section 163(j) and a substantial amount of our available state net operating loss carryforwards based on past operating results, including the RSN impairment, expected timing of the reversals of existing temporary basis differences, alternative tax strategies and projected future taxable income. Future changes in operating and/or taxable income or other changes in facts and circumstances could significantly impact the ability to realize our deferred tax assets which could have a material effect on our consolidated financial statements.
Management periodically performs a comprehensive review of our tax positions, and we record a liability for unrecognized tax benefits if such tax positions are more likely than not to be sustained upon examination based on their technical merits, including the resolution of any appeals or litigation processes. Significant judgment is required in determining whether positions taken are more likely than not to be sustained, and it is based on a variety of facts and circumstances, including interpretation of the relevant federal and state income tax codes, regulations, case law and other authoritative pronouncements. Based on this analysis, the status of ongoing audits and the expiration of applicable statute of limitations, liabilities are adjusted as necessary. The resolution of audits is unpredictable and could result in tax liabilities that are significantly higher or lower than for what we have provided. See Note 12. Income Taxes, for further discussion of accrued unrecognized tax benefits.
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 3.90%, 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 7. Notes Payable and Commercial Bank Financing for further discussion.
Supplemental Information — Statements of Cash Flows During the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, we had the following cash transactions (in millions): | | | 2021 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | Income taxes paid | Income taxes paid | $ | 16 | | | $ | 11 | | | $ | 32 | | Income tax refunds | Income tax refunds | $ | 44 | | | $ | 2 | | | $ | 2 | | Interest paid | Interest paid | $ | 583 | | | $ | 634 | | | $ | 283 | |
Non-cash investing activities included property and equipment purchases of $5 million $6 million, and $10 million for each of the years ended December 31, 2023, 2022, and 2021 2020, and 2019, respectively; the receipt of equipment with a fair value of $58 million in connection with completing the repack process as more fully described in Note 2. Acquisitions and Dispositions of Assets for the year ended December 31, 2021; and the transfer of an asset for property of $7 million for the year ended December 31, 2020.2021.
During the yearyears ended December 31, 2020 the Company entered into a commercial agreement with Bally's2022 and received equity interests in the business with a value of $199 million. See Note 6. Other Assets and Note 18. Fair Value Measurements for further discussion.Non-cash transactions related to sports rights were $22 million for the year ended December 31, 2020. During the year ended December 31, 2021, we received preferredequity shares in an investmentinvestments valued at $3 million and $6 million, respectively, in exchange for an equivalent value of advertising spots.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognition
The following table presents our revenue disaggregated by type and segment for the years ended December 31, 2021, 2020,2023, 2022, and 20192021 (in millions):
| For the year ended December 31, 2023 | | Distribution revenue | | Distribution revenue | | Distribution revenue | | Advertising revenue | | Advertising revenue | | Advertising revenue | | Other media, non-media, and intercompany revenue | | Other media, non-media, and intercompany revenue | | Other media, non-media, and intercompany revenue | | Total revenues | | Total revenues | | Total revenues | | | For the year ended December 31, 2022 | | | For the year ended December 31, 2022 | | | For the year ended December 31, 2022 | | Local media | | Tennis | | Local sports | | Other | | Eliminations | | Total | Distribution revenue | | Advertising revenue | | Other media, non-media, and intercompany revenue | | Total revenues | | | For the year ended December 31, 2021 | | For the year ended December 31, 2021 | | For the year ended December 31, 2021 | For the year ended December 31, 2021 | Broadcast | | Local sports | | Other | | Eliminations | | Total | Local media | | Tennis | | Local sports | | Other | | Eliminations | | Total | Distribution revenue | Distribution revenue | $ | 1,475 | | | $ | 2,620 | | | $ | 193 | | | $ | — | | | $ | 4,288 | | Advertising revenue | Advertising revenue | 1,106 | | | 409 | | | 217 | | | (41) | | | 1,691 | | Other media, non-media, and intercompany revenue | Other media, non-media, and intercompany revenue | 176 | | | 27 | | | 71 | | | (119) | | | 155 | | Total revenues | Total revenues | $ | 2,757 | | | $ | 3,056 | | | $ | 481 | | | $ | (160) | | | $ | 6,134 | | | For the year ended December 31, 2020 | Broadcast | | Local sports | | Other | | Eliminations | | Total | Distribution revenue | $ | 1,414 | | | $ | 2,472 | | | $ | 199 | | | $ | — | | | $ | 4,085 | | Advertising revenue | 1,364 | | | 196 | | | 131 | | | (2) | | | 1,689 | | Other media, non-media, and intercompany revenue | 144 | | | 18 | | | 121 | | | (114) | | | 169 | | Total revenues | $ | 2,922 | | | $ | 2,686 | | | $ | 451 | | | $ | (116) | | | $ | 5,943 | | | For the year ended December 31, 2019 | Broadcast | | Local sports | | Other | | Eliminations | | Total | Distribution revenue | $ | 1,341 | | | $ | 1,029 | | | $ | 130 | | | $ | — | | | $ | 2,500 | | Advertising revenue | 1,268 | | | 103 | | | 110 | | | (1) | | | 1,480 | | Other media, non-media, and intercompany revenue | 81 | | | 7 | | | 230 | | | (58) | | | 260 | | Total revenues | $ | 2,690 | | | $ | 1,139 | | | $ | 470 | | | $ | (59) | | | $ | 4,240 | |
Distribution Revenue. We generate distribution revenue through fees received from Distributors for the right to distribute our stations, RSNs,other properties, and, other properties.prior to the Deconsolidation, the RSNs. 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("as usage occurs)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. Prior to the COVID-19 pandemic, the Company had not historically paid any material rebates under these contractual provisions as it is unusual for there to be an event which is significant enough to preclude the Company from meeting or exceeding these thresholds. The COVID-19 pandemic has resulted in significant disruptions to the normal operations of the professional sports leagues resulting in delays and uncertainty with respect to regularly scheduled games. Decisions made by the leagues during the second quarter of 2020 regarding the timing and format of the revised 2020 season and decisions made by the NHL and NBA during the fourth quarter of 2020 and the first and third quarters of 2021 regarding the timing and format of their revised 2020-2021 seasons have resulted, in some cases, in our inability to meet these minimum game requirements and the need to reduce revenue based upon estimated rebates due to our Distributors. Accrued rebates as of December 31, 2021 and 2020 were $210 million and $420 million, respectively. The decrease in accrued rebates during the year ended December 31, 2021 includes $202 million of payments and $8 million of adjustments related to rebates accrued in 2020 due primarily to changes in estimated game counts. As of December 31, 2021, all rebates are reflected in other current liabilities in our consolidated balance sheets. We expect these rebates to be paid during 2022. There were no rebates accrued during the year ended December 31, 2021 that related to the 2020-2021 seasons, as we were not in a shortfall position in 2021. There can be no assurances that additional rebates will not be required if there are future postponements of the professional sports leagues, including the outcome of the current MLB lockout.
Advertising Revenue. We generate advertising revenue primarily from the sale of advertising spots/impressions within our broadcast television, RSNs,digital platforms, and, digital platforms.prior to the Deconsolidation, RSNs. Advertising revenue is recognized in the period in which the advertising spots/impressions are delivered. In arrangements where we provide audience ratings guarantees, to the extent that there is a ratings shortfall, we will defer a proportionate amount of revenue until the ratings shortfall is settled through the delivery of additional advertising. The term of our advertising arrangements is generally less than one year and the timing between when an advertisement is aired and when payment is due is not significant. In certain circumstances, we require customers to pay in advance; payments received in advance of satisfying our performance obligations are reflected as deferred revenue.
Practical Expedients and Exemptions. We expense sales commissions when incurred because the period of benefit for these costs is one year or less. These costs are recorded within media selling, general and administrative expenses. 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.
Arrangements with Multiple Performance Obligations. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price, which is generally based on the prices charged to customers.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Deferred Revenues. 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 within our consolidated balance sheets, based on the timing of when we expect to satisfy our performance obligations. Deferred revenue was $235$178 million, $233$200 million, and $54$235 million as of December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively, of which $164$124 million, $144 million, and $184$164 million as of December 31, 20212023, 2022, and 2020,2021, respectively, was reflected in other long-term liabilities in our consolidated balance sheets. Deferred revenue recognized during the years ended December 31, 20212023 and 20202022 that was included in the deferred revenue balance as of December 31, 20202022 and 20192021 was $45$50 million and $49$62 million, respectively.
On November 18, 2020,For the Companyyear ended December 31, 2023, two customers accounted for 11% and DSG entered into an enterprise-wide commercial agreement with Bally’s Corporation, including providing certain branding integrations in our RSNs, broadcast networks, and other properties. These branding integrations include naming rights associated with the majority10%, respectively, of our RSNs (other than Marquee). The initial termtotal revenues. For the year ended December 31, 2022, three customers accounted for 12%, 11%, and 10%, respectively, of this arrangement is ten years and we began performing under this arrangement in 2021. The Company received non-cash consideration initially valued at $199 million which is reflected as a contract liability and recognized as revenue as the performance obligations under the arrangement are satisfied. See Note 6. Other Assets for more information.
our total revenues. For the year ended December 31, 2021, three customers accounted for 19%, 18%, and 14%, respectively, of our total revenues. For the year ended December 31, 2020, three customers accounted for 18%, 17%, and 12%, respectively, of our total revenues. For the year ended December 31, 2019, three customers accounted for 16%, 13%, and 10%, respectively, of our total revenues. For purposes of this disclosure, a single customer may include multiple entities under common control.
Advertising Expenses Promotional advertising expenses are recorded in the period when incurred and are included in media production and other non-media expenses. Total advertising expenses, net of advertising co-op credits, were $22$8 million, $23$9 million, and $25$22 million for the years ended December 31, 2023, 2022, and 2021, 2020, and 2019.respectively.
Financial Instruments Financial instruments, as of December 31, 20212023 and 2020,2022, consisted of cash and cash equivalents, trade accounts receivable, accounts payable, accrued liabilities, stock options and warrants, and notes payable. The carrying amounts approximate fair value for each of these financial instruments, except for the notes payable. See Note 18. Fair Value Measurements for additional information regarding the fair value of notes payable.
Post-retirement Benefits We maintain a supplemental executive retirement plan (SERP) which we inherited upon the acquisition of certain stations. As of December 31, 2021,2023, the estimated projected benefit obligation was $18$14 million, of which $1 million is included in accrued expenses and $17$13 million is included in other long-term liabilities in our consolidated balance sheets. At December 31, 2021,2023, the projected benefit obligation was measured using a 2.61%4.92% discount rate compared to a discount rate of 2.10%5.20% for the year ended December 31, 2020.2022. For each of the years ended December 31, 20212023 and 2020,2022, we made $2$1 million in benefit payments. We recognized an actuarial gainsloss of $1$0.3 million and actuarial lossesgain of $2$3 million through other comprehensive income for the years ended December 31, 20212023 and 2020,2022, respectively. For each of the years ended December 31, 20212023 and 2020,2022, we recognized $1 million of periodic pension expense, reported in other (expense) income,expense, net in our consolidated statements of operations.
We also maintain other post-retirement plans provided to certain employees. The plans are voluntary programs that primarily allow participants to defer eligible compensation and they may also qualify to receive a discretionary match on their deferral. As of December 31, 2021,2023, the assets and liabilities included in our consolidated balance sheets related to deferred compensation plans were $48$45 million and $38$44 million, respectively.
Reclassifications Certain reclassifications have been made to prior years’years' consolidated financial statements to conform to the current year’syear's presentation.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS AND DISPOSITIONS OF ASSETS: During the yearsyear ended December 31, 2021, 2020, and 2019, we acquired certain businesses for an aggregate purchase price, net of cash acquired, of $9 billion,$10 million, including working capital adjustments and other adjustments. There were no acquisitions during the years ended December 31, 2023 and 2022.
The following summarizes the acquisition activity during the yearsyear ended December 31, 2021, 2020, and 2019:2021:
2021 Acquisitions
During the year ended December 31, 2021, we completed the acquisition of ZypMedia for approximately $7 million in cash. The acquired assets and liabilities were recorded at fair value as of the closing date of the transactions.
During the year ended December 31, 2021, we purchased 360IA, LLC for $5 million, with $2 million being paid in cash and the remaining to be paid in $1 million increments on each of the first three anniversaries following the closing date.
2020 Acquisitions
During the year ended December 31, 2020, we completed the acquisition of the license asset and certain non-license assets of a radio station for $7 million and the license assets and certain non-license assets of 2 television stations for $9 million. The acquisitions were completed using cash on hand.
2019 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 Disney for $9.6 billion plus certain adjustments. On August 23, 2019, we completed the acquisition (the RSN Acquisition) for an aggregate 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 RSN Acquisition provides an expansion to our premium sports programming including the exclusive regional distribution rights to 42 professional teams consisting of 14 MLB teams, 16 NBA teams, and 12 NHL teams. The Acquired RSNs are reported within our local sports segment. See Note 17. Segment Data.
The transaction was funded through a combination of debt financing raised by Diamond Sports Group, LLC (DSG) and Sinclair Television Group, Inc. (STG), as described in Note 7. Notes Payable and Commercial Bank Financing, and redeemable subsidiary preferred equity, as described in Note 10. Redeemable Noncontrolling Interests.
The following table summarizes the fair value of acquired assets, assumed liabilities, and noncontrolling interests of the Acquired RSNs (in millions):
| | | | | | Cash and cash equivalents | $ | 824 | | Accounts receivable, net | 606 | | Prepaid expenses and other current assets | 175 | | Property and equipment, net | 25 | | Customer relationships, net | 5,439 | | Other definite-lived intangible assets, net | 1,286 | | Other assets | 52 | | Accounts payable and accrued liabilities | (181) | | Other long-term liabilities | (396) | | Goodwill | 2,615 | | Fair value of identifiable net assets acquired | $ | 10,445 | | Redeemable noncontrolling interests | (380) | | Noncontrolling interests | (248) | | Gross purchase price | $ | 9,817 | | Purchase price, net of cash acquired | $ | 8,993 | |
The final purchase price allocation presented above is based upon management's estimates of the fair value of the acquired assets, assumed liabilities, and noncontrolling interest at the time of acquisition using valuation techniques including income and cost approaches. The fair value estimates are based on, but not limited to, projected revenue, projected margins, and discount rates used to present value future cash flows. The adjustments made to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed and did not result in material changes to the amortization expense recorded in previous quarters.
The definite-lived intangible assets of $6,725 million are primarily comprised of customer relationships, which represent existing advertiser relationships and contractual relationships with Distributors of $5,439 million, the fair value of contracts with sports teams of $1,271 million, and tradenames/trademarks of $15 million. The intangible assets will be amortized over a weighted average useful life of 2 years for tradenames/trademarks, 13 years for customer relationships, and 12 for contracts with sports teams on a straight-line basis. The fair value of the sports team contracts will be amortized over the respective contract term. Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, as well as expected future synergies. We estimate that $2.4 billion of goodwill, which represents our interest in the Acquired RSNs, will be deductible for tax purposes. See Note 5. Goodwill, Indefinite-Lived Intangible Assets, and Other Intangible Assets for discussion of the impairment of the acquired goodwill and definite-lived intangible assets during the year ended December 31, 2020.
Financial Results of Acquisitions
The following tables summarize the results of the net revenues and operating (loss) incomeloss included in the financial statements of the Company beginning on the acquisition date of each acquisition as listed below (in millions):
| | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | Revenues: | | | | | | Acquired RSNs | $ | 2,834 | | | $ | 2,562 | | | $ | 1,139 | | Other acquisitions in 2020 | 4 | | | 3 | | | — | | Other acquisitions in 2021 | 8 | | | — | | | — | | Total net revenues | $ | 2,846 | | | $ | 2,565 | | | $ | 1,139 | |
| | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Revenues: | | | | | | Other acquisitions in 2021 | $ | 39 | | | $ | 72 | | | $ | 8 | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | Operating (Loss) Income: | | | | | | Acquired RSNs (a) | $ | (395) | | | $ | (3,585) | | | $ | 70 | | Other acquisitions in 2020 | (9) | | | (2) | | | — | | Other acquisitions in 2021 | (45) | | | — | | | — | | Total operating (loss) income | $ | (449) | | | $ | (3,587) | | | $ | 70 | |
(a)Operating (loss) income for the years ended December 31, 2020 and 2019 includes transaction costs discussed below, and for the years ended December 31, 2021, 2020, and 2019 excludes $109 million, $98 million, and $35 million, respectively, of selling, general, and administrative expenses for services provided by broadcast to local sports, which are eliminated in consolidation.
In connection with the 2020 and 2019 acquisitions, for the years ended December 31, 2020 and 2019 we recognized $5 million and $96 million, respectively, of transaction costs which we expensed as incurred and classified as corporate general and administrative expenses in our consolidated statements of operations.
Unaudited Pro Forma Information
The following table sets forth unaudited pro forma results of operations, assuming that the RSN Acquisition, along with transactions necessary to finance the acquisition, occurred at the beginning of the year preceding the year of acquisition (in millions, except per data share):
| | | | | | | | | | | Unaudited | | | | | | 2019 | | | | | Total revenues | $ | 6,689 | | | | | | Net income | $ | 328 | | | | | | Net income attributable to Sinclair Broadcast Group | $ | 130 | | | | | | Basic earnings per share attributable to Sinclair Broadcast Group | $ | 1.41 | | | | | | Diluted earnings per share attributable to Sinclair Broadcast Group | $ | 1.39 | | | | | |
This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments, and is not indicative of what our results would have been had we operated the Acquired RSNs for the period presented because the pro forma results do not reflect expected synergies. The pro forma adjustments reflect depreciation expense and amortization of intangible assets related to the fair value adjustments of the assets acquired and any adjustments to interest expense to reflect the debt financing of the transactions. Depreciation and amortization expense are higher than amounts recorded in the historical financial statements of the acquiree due to the fair value adjustments recorded for long-lived tangible and intangible assets in purchase accounting.
| | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Operating Loss: | | | | | | Other acquisitions in 2021 | $ | (12) | | | $ | (7) | | | $ | (45) | | | | | | | |
Dispositions
2021 Dispositions. In September 2021, we sold all of our radio broadcast stations, KOMO-FM, KOMO-AM, KPLZ-FM and KVI-AM in Seattle, WA, for consideration valued at $13 million. For the year ended December 31, 2021, we recorded a net loss of $12 million related to the sale, which is included within gainloss (gain) on asset dispositions and other, net of impairment in our consolidated statements of operations, and was primarily related to the write-down of the carrying value of the assets to estimate the selling price.
In June 2021, we sold our controlling interest in Triangle Sign & Service, LLC (Triangle)("Triangle") for $12 million. We recorded a gain on the sale of Triangle of $6 million, of which $3 million was attributable to noncontrolling interests, for the year ended December 31, 2021, which is included in the gainloss (gain) on asset dispositions and other, net of impairment and net (loss) income(income) loss attributable to the noncontrolling interests, respectively, in our consolidated statements of operations.
In February 2021, we sold 2two of our television broadcast stations, WDKA-TV in Paducah, KY and KBSI-TV in Cape Girardeau, MO, for an aggregate sale price of $28 million. We recorded a gain of $12 million for the year ended December 31, 2021, which is included within gainloss (gain) on asset dispositions and other, net of impairment in our consolidated statements of operations.
2020 Dispositions. In January 2020, we agreed to sell the license and non-license assets of WDKY-TV in Lexington, KY and certain non-license assets associated with KGBT-TV in Harlingen, Texas for an aggregate purchase price of $36 million. The KGBT-TV and WDKY-TV transactions closed during the first and third quarters of 2020, respectively, and we recorded gains of $8 million and $21 million, respectively, for the year ended December 31, 2020, which are included within gain on asset dispositions and other, net of impairment in our consolidated statements of operations.
Broadcast Incentive Auction. In 2012, Congress authorized the Federal Communication Commission (FCC)FCC to conduct so-called "incentive auctions" to auction and re-purpose broadcast television spectrum for mobile broadband use. Pursuant to the auction, television broadcasters submitted bids to receive compensation for relinquishing all or a portion of their rights in the television spectrum of their full-service and Class A stations. Low power stations were not eligible to participate in the auction and are not protected and therefore may be displaced or forced to go off the air as a result of the post-auction repacking process.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In the repacking process associated with the auction, the FCC has reassigned some stations to new post-auction channels. We do not expect reassignment to new channels to have a material impact on our coverage. We have received notification from the FCC that 100 of our stations have been assigned to new channels. Legislation has provided the FCC with a $3 billion fund to reimburse reasonable costs incurred by stations that are reassigned to new channels in the repack. We expect that the reimbursements from the fund will cover the majority of our expenses related to the repack. We recorded gains related to reimbursements for the spectrum repack costs incurred of $24$8 million, $90$4 million, and $62$24 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively, which are recorded within gainloss (gain) on asset dispositions and other, net of impairment in our consolidated statements of operations. For the years ended December 31, 2021, 2020,2022 and 2019,2021, capital expenditures related to the spectrum repack were $12 million, $61$1 million and $66$12 million, respectively.
In December 2020, the FCC began a similar repacking process associated with a portion of the C-Band spectrum in order to free up this spectrum for the use of 5G wireless services. The repack iswas scheduled to be completed in two phases, the first ended on December 31, 2021 and the second will endended on December 31, 2023. WePrior to the Deconsolidation, DSG entered into an agreement with a communications provider in which wethey received equipment to complete the repack process at a maximum cost to usDSG of $15 million. ForPrior to the Deconsolidation, for the year ended December 31, 2021, we recognized a gain of $43 million, which is recorded within gainloss (gain) on asset dispositions and other, net of impairment in our consolidated statements of operations, equal to the fair value of the equipment that weDSG received of $58$58 million,, less the maximum cost to usDSG of $15 million.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. STOCK-BASED COMPENSATION PLANS: In June 1996, ourthe Board of Directors adopted, upon approval of the shareholders by proxy, the 1996 Long-Term Incentive Plan (LTIP)("LTIP"). The purpose of the LTIP is to reward key individuals for making major contributions to our success and the success of our subsidiaries and to attract and retain the services of qualified and capable employees. Under the LTIP, we have issued restricted stock awards (RSAs)("RSAs"), stock grants to our non-employee directors, stock-settled appreciation rights (SARs)("SAR"), and stock options. AIn June 2022, the Board adopted, upon approval of the shareholders by proxy, the 2022 Stock Incentive Plan ("SIP"). Upon approval of the SIP, it succeeded the LTIP and no additional awards were granted under the LTIP. All outstanding awards granted under the LTIP will remain subject to their original terms. The purpose of the SIP is to provide stock-based incentives that align the interests of employees, consultants, and outside directors with those of the stockholders of the Company by motivating its employees to achieve long-term results and rewarding them for their achievements, and to attract and retain the types of employees, consultants, and outside directors who will contribute to the Company’s long-range success.
As of December 31, 2023, a total of 19,000,00010,498,506 shares of Class A Common Stock arewere reserved for awards under this plan.the SIP. As of December 31, 2021, 7,099,2372023, 7,425,918 shares were available for future grants. Additionally, we have the following arrangements that involve stock-based compensation: employer matching contributions (the Match) for participants in our 401(k) plan, an employee stock purchase plan (ESPP)("ESPP"), and subsidiary stock awards. Stock-based compensation expense has no effect on our consolidated cash flows. For the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, we recorded stock-based compensation of $60$45 million, $51$50 million, and $33$60 million, respectively. Below is a summary of the key terms and methods of valuation of our stock-based compensation awards: Restricted Stock Awards RSAs.
RSAs issued in 2021, 2020, and 20192023 have certain restrictions that generally lapse after two years at 100% or over two years at 50% and 50%, respectively. RSAs issued in 2022 and 2021 have certain restrictions that generally lapse over two years at 50% and 50%, respectively. As the restrictions lapse, the Class A Common Stock may be freely traded on the open market. Unvested RSAs are entitled to dividends, and therefore, are included in weighted shares outstanding, resulting in a dilutive effect on basic and diluted earnings per share. The fair value assumes the closing value of the stock on the measurement date. The following is a summary of changes in unvested restricted stock: | | | | | | | | | | | | | RSAs | | Weighted-Average Price | Unvested shares at December 31, 2020 | 441,709 | | | $ | 28.86 | | 2021 Activity: | | | | Granted | 693,019 | | | 32.78 | | Vested | (615,736) | | | 33.25 | | Forfeited | (17,611) | | | 29.61 | | Unvested shares at December 31, 2021 | 501,381 | | | $ | 28.87 | |
| | | | | | | | | | | | | RSAs | | Weighted-Average Price | Unvested shares at December 31, 2022 | 477,721 | | | $ | 29.53 | | 2023 Activity: | | | | Granted | 1,440,446 | | | 15.54 | | Vested | (985,881) | | | 17.12 | | Forfeited (a) | (13,819) | | | 21.03 | | Unvested shares at December 31, 2023 | 918,467 | | | $ | 21.04 | |
(a) Forfeitures are recognized as they occur. For
We recorded compensation expense of $19 million for both of the years ended December 31, 2021, 2020,2023 and 2019, we recorded compensation expense of2022, respectively, and $21 million $23 million, and $9 million, respectively.for the year ended December 31, 2021. The majority of the unrecognized compensation expense of $6$9 million as of December 31, 20212023 will be recognized in 2022.2024. Stock Grants to Non-Employee Directors.Directors
In addition to fees paid in cash to our non-employee directors, on the date of each annual meetingsmeeting of shareholders, each non-employee director receives a grant of unrestricted shares of Class A Common Stock. We issued 80,496 shares in 2023, 60,732 shares in 2022, and 45,836 shares in 2021, 63,600 shares in 2020, and 24,000 shares in 2019.2021. We recorded expense of $2$1 million for the year ended December 31, 20212023 and $1$2 million for each of the years ended December 31, 20202022 and 2019,2021, which was based on the average share price of the stock on the date of grant. Additionally, these shares are included in the total shares outstanding, which results in a dilutive effect on our basic and diluted earnings per share.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Stock-Settled Appreciation Rights SARs.
These awards entitle holders to the appreciation in our Class A Common Stock over the base value of each SAR over the term of the award. The SARs have a 10-year term with vesting periods ranging from zero to four years. The base value of each SAR is equal to the closing price of our Class A Common Stock on the date of grant. For the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, we recorded compensation expense of $15$7 million, $6$10 million, and $4$15 million, respectively. The following is a summary of the 20212023 activity: | | | | | | | | | | | | | SARs | | Weighted-Average Price | Outstanding SARs at December 31, 2020 | 3,205,562 | | | $ | 23.32 | | 2021 Activity: | | | | Granted | 1,343,693 | | | 33.05 | | Exercised | (2,254,008) | | | 20.99 | | Outstanding SARs at December 31, 2021 | 2,295,247 | | | $ | 31.29 | |
| | | | | | | | | | | | | SARs | | Weighted-Average Price | Outstanding SARs at December 31, 2022 | 3,269,916 | | | $ | 30.16 | | 2023 Activity: | | | | Granted | 1,474,764 | | | 15.97 | | | | | | Outstanding SARs at December 31, 2023 | 4,744,680 | | | $ | 25.75 | |
As of December 31, 2021,2023, there was no aggregate intrinsic value of the SARs outstanding and the outstanding SARs have a weighted average remaining contractual life of 7 years as of.8 years.
Valuation of SARS. Our SARs were valued using the Black-Scholes pricing model utilizing the following assumptions: | | | 2021 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | Risk-free interest rate | Risk-free interest rate | 0.6 | % | | 1.2% - 1.6% | | 2.5 | % | Risk-free interest rate | 4.4 | % | | 1.6% | | 0.6% | Expected years to exercise | Expected years to exercise | 5 years | | 5 years | | 5 years | Expected years to exercise | 5 years | | 5 years | Expected volatility | Expected volatility | 48.2 | % | | 35.0 | % | | 33.8 | % | Expected volatility | 52.1 | % | | 49.6 | % | | 48.2 | % | Annual dividend yield | Annual dividend yield | 2.5 | % | | 2.4% - 2.9% | | 2.5 | % | Annual dividend yield | 6.8 | % | | 3.0% | | 2.5% |
The risk-free interest rate is based on the U.S. Treasury yield curve, in effect at the time of grant, for U.S. Treasury STRIPS that approximate the expected life of the award. The expected volatility is based on our historical stock prices over a period equal to the expected life of the award. The annual dividend yield is based on the annual dividend per share divided by the share price on the grant date.
During 2022, outstanding SARs increased the weighted average shares outstanding for purposes of determining dilutive earnings per share. Options.
Options
As of December 31, 2021,2023, there were options outstanding to purchase 375,000 shares of Class A Common Stock. These options are fully vested and have a weighted average exercise price of $31.25 and a weighted average remaining contractual term of 42 years. As of December 31, 2021,2023, there was no aggregate intrinsic value for the options outstanding. There was no grant, exercise, or forfeiture activity during the year ended December 31, 2021.2023. There was no expense recognized during the years ended December 31, 2021, 2020,2023, 2022, and 2019.2021. 401(k) Match
During 2019, outstanding SARs and options increased the weighted average shares outstanding for purposes of determining dilutive earnings per share.
401(k) Match.The Sinclair, Broadcast Group, Inc. 401(k) Profit Sharing Plan and Trust (the("the 401(k) Plan)Plan") is available as a benefit for our eligible employees. Contributions made to the 401(k) Plan include an employee elected salary reduction amount with a match calculation (The Match)(the "Match"). The Match and any additional discretionary contributions may be made using our Class A Common Stock, if the Board of Directors so chooses. Typically, we make the Match using our Class A Common Stock.
The value of the Match is based on the level of elective deferrals into the 401(k) Plan. The number of our Class A Common shares granted under the Match is determined based upon the closing price on or about March 1st of each year for the previous calendar year’s Match. ForWe recorded $17 million for each of the years ended December 31, 2021, 2020,2023 and 2019, we recorded2022 and $20 million $19 million, and $17 million, respectively,for the year ended December 31, 2021 of stock-based compensation expense related to the Match. AAs of December 31, 2023, a total of 7,000,000 shares of Class A Common Stock arewere reserved for matches under the plan. As of December 31, 2021, 2,314,0642023, 445,970 shares were available for future grants.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Employee Stock Purchase Plan The ESPP allows eligible employees to purchase Class A Common Stock at 85% of the lesser of the fair value of the common stock as of the first day of the quarter and as of the last day of that quarter, subject to certain limits as defined in the ESPP. The stock-based compensation expense recorded related to the ESPP was $1 million for the year ended December 31, 2023 and $2 million for each of the years ended December 31, 2022 and 2021, 2020, and 2019 was $2 million, $3 million, and $1 million, respectively. AAs of December 31, 2023, a total of 4,200,0005,200,000 shares of Class A Common Stock arewere reserved for awards under the plan. As of December 31, 2021, 1,097,1562023, 1,273,854 shares were available for future purchases. 4. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost, less accumulated depreciation. Depreciation is generally computed under the straight-line method over the following estimated useful lives: | | | | | | | | | Buildings and improvements | | 10 - 30 years | Operating equipment | | 5 - 10 years | Office furniture and equipment | | 5 - 10 years | Leasehold improvements | | Lesser of 10 - 30 years or lease term | Automotive equipment | | 3 - 5 years | Property and equipment under finance leases | | Lease term |
Acquired property and equipment is depreciated on a straight-line basis over the respective estimated remaining useful lives.
Property and equipment consisted of the following as of December 31, 20212023 and 20202022 (in millions): | | | 2021 | | 2020 | | 2023 | | 2022 | Land and improvements | Land and improvements | $ | 72 | | | $ | 74 | | Real estate held for development and sale | Real estate held for development and sale | 21 | | | 25 | | Buildings and improvements | Buildings and improvements | 308 | | | 307 | | Operating equipment | Operating equipment | 973 | | | 939 | | Office furniture and equipment | Office furniture and equipment | 129 | | | 123 | | Leasehold improvements | Leasehold improvements | 60 | | | 59 | | Automotive equipment | Automotive equipment | 63 | | | 66 | | Finance lease assets | Finance lease assets | 61 | | | 59 | | Construction in progress | Construction in progress | 34 | | | 36 | | | | 1,721 | | | 1,688 | | Less: accumulated depreciation | Less: accumulated depreciation | (888) | | | (865) | | | | $ | 833 | | | $ | 823 | |
5. GOODWILL, INDEFINITE-LIVED INTANGIBLE ASSETS, AND OTHER INTANGIBLE ASSETS: Goodwill, which arises from the purchase price exceeding the assigned value of the net assets of an acquired business, represents the value attributable to unidentifiable intangible elements being acquired. The change in the carrying amount of goodwill at December 31, 20212023 and 20202022 was as follows (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | Broadcast | | Local sports | | Other | | Consolidated | Balance at December 31, 2019 | $ | 2,026 | | | 2,615 | | | $ | 75 | | | $ | 4,716 | | | | | | | | | | Assets held for sale (b) | (9) | | | — | | | — | | | (9) | | Impairment | — | | | (2,615) | | | — | | | (2,615) | | Balance at December 31, 2020 | 2,017 | | | — | | | 75 | | | 2,092 | | Disposition (a) | (1) | | | — | | | (3) | | | (4) | | | | | | | | | | | | | | | | | | Balance at December 31, 2021 | $ | 2,016 | | | $ | — | | | $ | 72 | | | $ | 2,088 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Local media | | Tennis | | Other | | Consolidated | Balance at December 31, 2021 | $ | 2,016 | | | $ | 61 | | | $ | 11 | | | $ | 2,088 | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2022 | $ | 2,016 | | | $ | 61 | | | $ | 11 | | | $ | 2,088 | | Disposition | — | | | — | | | (6) | | | (6) | | | | | | | | | | | | | | | | | | Balance at December 31, 2023 | $ | 2,016 | | | $ | 61 | | | $ | 5 | | | $ | 2,082 | |
(a)Our accumulated See Note 2. Acquisitions and Dispositions of Assets for discussion of dispositions made during 2021.
(b)Assets held for salegoodwill impairment was $3,029 million as of both December 31, 2020 were sold during the year ended December 31, 2021. See Note 2. Acquisitions2023 and Dispositions of Assets for discussion of dispositions during 2021 and 2020.2022.
During the year ended December 31, 2020, we recorded a $2,615 million goodwill impairment charge related to our regional sports networks included within the local sports segment based upon an interim impairment test performed during the three-month period ended September 30, 2020. See ImpairmentTable of Goodwill and Definite-Lived Intangible Assets below for additional discussion surrounding this impairment charge. Our accumulated goodwill impairment as of December 31, 2021 and 2020 was $3,029 million, respectively.Contents
SINCLAIR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For our annual goodwill impairment tests related to our broadcastlocal media and other reporting units in 2021, 2020,2023, our other reporting units in 2022, and 2019,our local media and other reporting units in 2021, we concluded that it was more-likely-than-not that goodwill was not impaired for the reporting units in which we performed a qualitative assessment. The qualitative factors reviewed during our annual assessments indicated stable or improving margins and favorable or stable forecasted economic conditions including stable discount rates and comparable or improving business multiples. For one reporting unit in 2019, we elected to perform a quantitative assessment and concluded that its fair value significantly exceeded the carrying value. Additionally, the results of prior quantitative assessments supported significant excess fair value over carrying value of our reporting units. We did not have any indicators of impairment in any interim period in 20212023 or 2019,2022, and therefore did not perform interim impairment tests for goodwill during those periods.
F-25For our annual goodwill impairment test related to our local media reporting unit in 2022, we elected to perform a quantitative assessment and concluded that its fair value substantially exceeded its carrying value. The key assumptions used to determine the fair value of our local media reporting unit consisted primarily of significant unobservable inputs (Level 3 fair value inputs), including discount rates, estimated cash flows, profit margins, and growth rates. The discount rate used to determine the fair value of our local media reporting unit is based on a number of factors including market interest rates, a weighted average cost of capital analysis based on the target capital structure for a television broadcasting company, and includes adjustments for market risk and company specific risk. Estimated cash flows are based upon internally developed estimates and growth rates and profit margins are based on market studies, industry knowledge, and historical performance.
As of December 31, 20212023 and 2020,2022, the carrying amount of our indefinite-lived intangible assets was as follows (in millions): | | | | | | | | | | | | | | | | | | | Broadcast | | Other | | Consolidated | Balance at December 31, 2019 (a) | $ | 131 | | | $ | 27 | | | $ | 158 | | Acquisition / Disposition (c) | 13 | | | — | | | 13 | | Balance at December 31, 2020 (a) (b) | 144 | | | 27 | | | 171 | | Acquisition / Disposition (c) | (21) | | | — | | | (21) | | | | | | | | Balance at December 31, 2021 (a) (b) | $ | 123 | | | $ | 27 | | | $ | 150 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Local media | | Tennis | | Other | | Consolidated | Balance at December 31, 2021 (a) | $ | 123 | | | $ | 24 | | | $ | 3 | | | $ | 150 | | | | | | | | | | | | | | | | | | Balance at December 31, 2022 (a) (b) | $ | 123 | | | $ | 24 | | | $ | 3 | | | $ | 150 | | | | | | | | | | Balance at December 31, 2023 (a) (b) | $ | 123 | | | $ | 24 | | | $ | 3 | | | $ | 150 | |
(a)Our indefinite-lived intangible assets in our broadcastlocal media segment relate to broadcast licenses and our indefinite-lived intangible assets in our tennis segment and other relate to trade names. (b)Approximately $14 million of indefinite-lived intangible assets relate to consolidated VIEs as of December 31, 20212023 and 2020. (c)See Note 2. Acquisitions and Dispositions of Assets for discussion of acquisitions and dispositions during 2021 and 2020.2022.
We did not have any indicators of impairment for our indefinite-lived intangible assets in any interim period in 20212023 or 2020,2022, and therefore did not perform interim impairment tests during those periods. We performed our annual impairment tests for indefinite-lived intangibles in 20212023 and 20202022 and as a result of our qualitative assessments, we recorded no impairment.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table shows the gross carrying amount and accumulated amortization of definite-lived intangibles (in millions): | | | As of December 31, 2021 | | As of December 31, 2023 | | | Gross Carrying Value | | Accumulated Amortization | | Net | | Gross Carrying Value | | Accumulated Amortization | | Net | Amortized intangible assets: | Amortized intangible assets: | | | | | | Customer relationships | Customer relationships | $ | 5,323 | | | $ | (1,419) | | | $ | 3,904 | | Customer relationships | | Customer relationships | | | Network affiliation | Network affiliation | 1,436 | | | (861) | | | 575 | | Favorable sports contracts | 840 | | | (251) | | | 589 | | Network affiliation | | Network affiliation | | Other | Other | 51 | | | (31) | | | 20 | | Total other definite-lived intangible assets, net (a) | $ | 2,327 | | | $ | (1,143) | | | $ | 1,184 | | Total other definite-lived intangible assets (a) | | | Total definite-lived intangible assets | | Total definite-lived intangible assets | | Total definite-lived intangible assets | |
| | | As of December 31, 2020 | | As of December 31, 2022 | | | Gross Carrying Value | | Accumulated Amortization | | Net | | Gross Carrying Value | | Accumulated Amortization | | Net | Amortized intangible assets: | Amortized intangible assets: | | | | | | Customer relationships (b) | Customer relationships (b) | $ | 5,329 | | | $ | (1,043) | | | $ | 4,286 | | Customer relationships (b) | | Customer relationships (b) | | | Network affiliation | Network affiliation | 1,438 | | | (775) | | | 663 | | Favorable sports contracts (b) | 840 | | | (174) | | | 666 | | Network affiliation | | Network affiliation | | Other | Other | 35 | | | (26) | | | 9 | | Total other definite-lived intangible assets, net (a) | $ | 2,313 | | | $ | (975) | | | $ | 1,338 | | Total other definite-lived intangible assets (a) (b) | | | Total definite-lived intangible assets | | Total definite-lived intangible assets | | Total definite-lived intangible assets | |
(a)Approximately $47$33 million and $54$40 million of definite-lived intangible assets relate to consolidated VIEs as of December 31, 20212023 and 2020,2022, respectively. (b)AsDuring 2022, we deconsolidated $3,330 million of December 31, 2020, we recorded a total impairment loss relating to customer relationships and $585 million of favorable sports contracts of $1,218 million and $431 million, respectively, which is reflected as a reduction withinrelated to the Gross Carrying Value column.Deconsolidation.
Definite-lived intangible assets and other assets subject to amortization are being amortized on a straight-line basis over their estimated useful lives. The definite-lived intangible assets are amortized over a weighted average useful life of 1314 years for customer relationships and 15 years for network affiliations, and 12 years for favorable sports contracts.affiliations. The amortization expense of the definite-lived intangible and other assets for the years ended December 31, 2023, 2022, and 2021 2020, and 2019 was $554$166 million, $703$225 million, and $370$554 million, respectively, of which $4 million and $77 million $131 million,as of December 31, 2022 and $43 million,2021, respectively, was associated with the amortization of favorable sports contracts prior to the Deconsolidation and is presented within media programming and production expenses in our statements of operations. We analyze specific definite-lived intangibles for impairment when events occur that may impact their value in accordance with the respective accounting guidance for long-lived assets. There were no impairment charges recorded for the years ended December 31, 2023, 2022, and 2021, as there were no indicators of impairment.
The following table shows the estimated annual amortization expense of the definite-lived intangible assets for the next five years and thereafter (in millions): | | | | | | 2022 | $ | 548 | | 2023 | 530 | | 2024 | 517 | | 2025 | 507 | | 2026 | 497 | | 2027 and thereafter | 2,489 | | | $ | 5,088 | |
Impairment of Goodwill and Definite-Lived Intangible Assets
In conjunction with the interim third quarter 2020 impairment testing related to our RSNs discussed below, during the year ended December 31, 2020, we recorded a non-cash impairment charge associated with customer relationships and other definite-lived intangible assets of $1,218 million and $431 million, respectively, included in impairment of goodwill and definite-lived intangible assets in our consolidated statements of operations. After the recognition of these impairments there were no asset groups which have a heightened risk of impairment because the projected undiscounted cash flows of the individual asset groups were substantially greater than their carrying values. However, significant deterioration in the factors described below could result in future material impairments. There were no impairment charges recorded for the years ended December 31, 2021 and 2019, as there were no indicators of impairment.
The Company performed an interim goodwill and long-lived asset impairment test during the three-month period ending September 30, 2020. Our RSNs, included in the local sports segment, were negatively impacted by the loss of certain distributors. In addition, our existing distributors experienced elevated levels of subscriber erosion which we believe was influenced, in part, by shifting consumer behaviors resulting from media fragmentation, the current economic environment, the COVID 19 pandemic, and related uncertainties. These factors are also expected to have a negative impact on future projected revenue and margins of our RSNs.
The long-lived asset impairment test requires a comparison of undiscounted cash flows expected to be generated over the useful life of an asset group to the carrying value of the asset group. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We evaluated each of our RSNs individually as asset groups. We estimated the projected undiscounted cash flows over the remaining useful life of each asset group. The more sensitive inputs used in the undiscounted cash flow analysis include projected revenues and margins. We identified 10 RSNs which had carrying values in excess of the future undiscounted cash flows.For these RSNs, an impairment loss was measured as the amount by which the carrying value of the asset group exceeded the fair value. The calculated impairment was then allocated to the long-lived assets within the asset group, which primarily consists of definite lived intangible assets, based upon relative fair value. | | | | | | 2024 | $ | 149 | | 2025 | 143 | | 2026 | 141 | | 2027 | 127 | | 2028 | 101 | | 2029 and thereafter | 118 | | | $ | 779 | |
SINCLAIR, INC. The fair value of the asset groups, reporting units and definite lived intangible assets were determined based upon a discounted cash flow analysis which uses the present value of projected cash flows. The projected cash flows were based upon our estimates of future revenues and margins, among other inputs. The discount rates used in the valuation were based on a weighted-average cost of capital determined from relevant market comparisons and taking into consideration the risk specifically associated with our asset groups and underlying assets. Terminal values were determined based upon the final year of projected cash flows which reflected our estimate of stable perpetual growth. The more sensitive inputs used in the discounted cash flow analysis include projected revenues and margins, as well as the discount rates used to calculate the present value of future cash flows. Projected revenue was based on the consideration of historical experience of the business, market data surrounding subscriber projections and advertising growth, our ability to retain existing customers and our ability to obtain new customers. Our revenue projections could be negatively impacted by the further loss of key distributors, inability to obtain new or retain existing distributors on terms similar to those expiring, greater than expected consumer migration away from traditional linear distributors, or our inability to successfully execute on our DTC strategy and develop alternative revenue streams, among other factors. Our future margins may also be affected by our inability to renew sports rights agreements on terms favorable to us.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
We tested the RSN reporting units' goodwill for impairment on an interim basis by comparing the fair value of each of the RSN reporting units to their revised carrying value after adjustments were made related to the impairments of the asset groups, as described above. To the extent that the carrying value of the respective reporting units exceeded the fair value, a goodwill impairment charge was recorded. The fair value of the reporting units was determined based upon a discounted cash flow analysis, as described above. For the year ended December 31, 2020, we recorded a non-cash goodwill impairment charge of $2,615 million, included in impairment of goodwill and definite-lived intangible assets in our consolidated statements of operations. As of December 31, 2021, there was no remaining goodwill within our local sports segment and the remaining balance of the customer relationship intangible asset was $3,380 million and the aggregate remaining balance of the other definite-lived intangible assets was $589 million within our local sports segment.
6. OTHER ASSETS: Other assets as of December 31, 20212023 and 20202022 consisted of the following (in millions): | | | 2021 | | 2020 | | 2023 | | 2022 | Equity method investments | Equity method investments | $ | 517 | | | $ | 451 | | Other investments | Other investments | 567 | | | 450 | | Note receivable | | Income tax receivable | | Post-retirement plan assets | Post-retirement plan assets | 50 | | | 44 | | | Other | Other | 274 | | | 113 | | Total other assets | Total other assets | $ | 1,408 | | | $ | 1,058 | |
Equity Method Investments
We have a portfolio of investments including our investment in the YES Network anda number of entities that are primarily focused on the development of real estate sustainability initiatives, and other media and non-media businesses. Forbusinesses, our investment in DSIH (subsequent to the Deconsolidation), and an investment in the YES Network (prior to the Deconsolidation). No investments were individually significant for the years ended December 31, 2021, 2020,2023, 2022, and 2019, none of our investments were individually significant.2021.
Summarized Financial Information.accounting. As of March 1, 2022, we reflected the investment in DSIH at fair value, which was determined to be nominal. For the year ended December 31, 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. See As described under PrinciplesDeconsolidation of ConsolidationDiamond Sports Intermediate Holdings LLC within Note 1. Nature of Operations and Summary of Significant Accounting PoliciesPolicies., we record our proportionate share of net income generated by equity method investees in income (loss) from equity method investments in our consolidated statements of operations. The summarized results of operations and financial position of the investments accounted for under the equity method are as follows (in millions):
| | | | | | | | | | | | | | | | | | | For the Years Ended December 31, | | 2021 | | 2020 | | 2019 | Revenues, net | $ | 994 | | | $ | 611 | | | $ | 386 | | Operating income | $ | 316 | | | $ | 147 | | | $ | 47 | | Net income | $ | 465 | | | $ | 23 | | | $ | 13 | |
| | | | | | | | | | | | | As of December 31, | | 2021 | | 2020 | Current assets | $ | 468 | | | $ | 493 | | Noncurrent assets | $ | 4,259 | | | $ | 4,219 | | Current liabilities | $ | 184 | | | $ | 410 | | Noncurrent liabilities | $ | 2,030 | | | $ | 2,327 | |
YES Network Investment. We accountPrior to the Deconsolidation, we accounted for our investment in the YES Network as an equity method investment, which iswas recorded within other assets in our consolidated balance sheets, and in which our proportionate share of the net income generated by the investment is representedwas included within income (loss) from equity method investments in our consolidated statements of operations. We recorded income of $41 million, $6$10 million and $16$41 million related to our investment for the years ended December 31, 2022 and 2021, 2020, and 2019, respectively. We did not identify any other than temporary impairments associated with our investment in the YES Network during the years ended December 31, 2021, 2020, and 2019.
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,impairment. Additionally, certain investments are measured at net asset value (NAV)("NAV").
At December 31, 20212023 and 2020,2022, we held $402$162 million and $400$234 million, respectively, in investments measured at fair value and $147$189 million and $24$190 million, respectively, in investments measured at NAV. We recognized a fair value adjustment loss of $42$87 million, a loss of $145 million, and gainsa loss of $156 million and $2$42 million during the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively, associated with these securities, which is reflected in other (expense) income, net in our consolidated statements of operations.
Investments accounted for utilizing the measurement alternative were $36 million as of December 31, 2023 and $18 million, net of $7 million of cumulative impairments, as of December 31, 2021, and $262022. We recorded a $6 million net of $7 million of cumulative impairments, as ofimpairment related to one investment during the year ended December 31, 2020.2023, which is reflected in other expense, net in our consolidated statements of operations. We recorded no impairments related to these investments for the years ended December 31, 20212022 and 2020. We recorded a $7 million impairment related to two investments for the year ended December 31, 2019, which is reflected in other (expense) income, net in our consolidated statements of operations.2021.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS On November 18, 2020, we entered into a commercial agreement with Bally's. As part of this arrangement, we received warrants to acquire up to 8.2 million shares of Bally's Commoncommon stock for a penny per share, of which 3.3 million are exercisable upon meeting certain performance metrics. We also received options to purchase up to 1.6 million shares of Bally's common stock with exercise prices between $30 and $45 per share, exercisable after four years. In April 2021, we made an incremental investment of $93 million in Bally's in the form of non-voting perpetual warrants, convertible into 1.7 million shares of Bally's common stock at an exercise price of $0.01 per share, subject to certain adjustments. These investments are reflected at fair value within our financial statements. See Note 18. Fair Value Measurements for further discussion.
As of December 31, 20212023 and 2020,2022, our unfunded commitments related to certain equity investments totaled $111$103 million and $98$128 million, respectively, including $81$74 million and $27$88 million, respectively, related to investments measured at NAV.
Note Receivable
We are 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. Subsequent to the Deconsolidation, transactions related to the A/R Facility are no longer eliminated as intercompany transactions and, therefore, are reflected in our consolidated financial statements. 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. There was no outstanding balance as of December 31, 2023 and an outstanding balance of $193 million as of December 31, 2022, which is recorded within other assets in our consolidated balance sheets. As of December 31, 2023, the maximum aggregate commitment under the A/R Facility is $50 million and the A/R Facility has a maturity date of September 23, 2024.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7. NOTES PAYABLE AND COMMERCIAL BANK FINANCING: Notes payable, finance leases, and commercial bank financing (including finance"finance leases to affiliates)affiliates") consisted of the following as of December 31, 20212023 and 20202022 (in millions): | | | | | | | | | | | | | 2021 | | 2020 | STG Bank Credit Agreement: | | | | Term Loan B-1, due January 3, 2024 | $ | 379 | | | $ | 1,119 | | Term Loan B-2, due September 30, 2026 | 1,271 | | | 1,284 | | Term Loan B-3, due April 1, 2028 (a) | 736 | | | — | | DSG Bank Credit Agreement (b): | | | | Term Loan, due August 24, 2026 | 3,226 | | | 3,259 | | | | | | STG Notes: | | | | 5.875% Unsecured Notes, due March 15, 2026 | 348 | | | 348 | | 5.125% Unsecured Notes, due February 15, 2027 | 400 | | | 400 | | 5.500% Unsecured Notes, due March 1, 2030 | 500 | | | 500 | | 4.125% Senior Secured Notes, due December 1, 2030 | 750 | | | 750 | | DSG Notes: | | | | 12.750% Senior Secured Notes, due December 1, 2026 (b) | 31 | | | 31 | | 5.375% Senior Secured Notes, due August 15, 2026 (b) | 3,050 | | | 3,050 | | 6.625% Unsecured Notes, due August 15, 2027 | 1,744 | | | 1,744 | | DSG Accounts Receivable Securitization Facility (c) | — | | | 177 | | Debt of variable interest entities | 9 | | | 17 | | Debt of non-media subsidiaries | 17 | | | 17 | | Finance leases | 28 | | | 30 | | Finance leases - affiliate | 9 | | | 8 | | Total outstanding principal | 12,498 | | | 12,734 | | Less: Deferred financing costs and discounts | (158) | | | (183) | | Less: Current portion | (66) | | | (56) | | Less: Finance leases - affiliate, current portion | (3) | | | (2) | | Net carrying value of long-term debt | $ | 12,271 | | | $ | 12,493 | |
| | | | | | | | | | | | | 2023 | | 2022 | Bank Credit Agreement: | | | | Term Loan B-2, due September 30, 2026 (a) | $ | 1,215 | | | $ | 1,258 | | Term Loan B-3, due April 1, 2028 | 722 | | | 729 | | Term Loan B-4, due April 21, 2029 | 739 | | | 746 | | STG Notes (b): | | | | 5.125% Unsecured Notes, due February 15, 2027 | 274 | | | 282 | | 5.500% Unsecured Notes, due March 1, 2030 | 485 | | | 500 | | 4.125% Senior Secured Notes, due December 1, 2030 | 737 | | | 750 | | Debt of variable interest entities | 7 | | | 8 | | Debt of non-media subsidiaries | 15 | | | 16 | | Finance leases | 20 | | | 23 | | Finance leases - affiliate | 7 | | | 9 | | Total outstanding principal | 4,221 | | | 4,321 | | Less: Deferred financing costs and discounts | (46) | | | (56) | | Less: Current portion | (34) | | | (35) | | Less: Finance leases - affiliate, current portion | (2) | | | (3) | | Net carrying value of long-term debt | $ | 4,139 | | | $ | 4,227 | |
(a)On April 1, 2021,During the year ended December 31, 2023, STG amended the STG Bank Credit Agreement to raise term loans in anrepurchased $30 million aggregate principal amount of $740 million (STGthe Term Loan B-3), the proceedsB-2 for consideration of which were used to refinance a portion of STG's term loan maturing in January 2024, as more fully described below under STG $26 million. See Bank Credit Agreement.Agreement below. (b)On March 1, 2022, DSG completed a refinancing transaction relating toDuring the DSG Bank Credit Agreement, the DSG 5.375% Secured Notes (defined below under DSG Notes)year ended December 31, 2023, we purchased $7 million, $15 million, and the DSG 12.750% Secured Notes (defined below under DSG Notes). See Note 20. Subsequent Events for a discussion of the refinancing transaction. (c)On November 5, 2021, SBG purchased and assumed the lenders’ and the administrative agent’s rights and obligations under the DSG Accounts Receivable Facility (A/R Facility). SBG purchased the lenders’ outstanding loans and commitments under the A/R Facility by making a payment to the lenders as consideration for the purchase of the lenders’ respective rights and obligations under the A/R Facility equal to approximately $184$13 million representing 101% of the aggregate outstanding principal amount of the loans under5.125% Notes, 5.500% Notes, the A/R Facility, plus any accrued interest4.125% Notes, respectively, in open market transactions for consideration of $6 million, $8 million, and outstanding fees and expenses. Transactions related to$8 million, respectively. The STG Notes acquired during the A/R Facility are now intercompany transactions and therefore, are eliminated in consolidation.year ended December 31, 2023 were canceled immediately following their acquisition. See STG Notes below.
Debt under the STG Bank Credit Agreement, DSG Bank Credit Agreement, notes payable, and finance leases as of December 31, 20212023 matures as follows (in millions): | | | Notes and Bank Credit Agreements | | Finance Leases | | | Total | | Notes and Bank Credit Agreement | | Finance Leases | | Total | 2022 | $ | 63 | | | $ | 8 | | | | $ | 71 | | 2023 | 54 | | | 8 | | | | 62 | | 2024 | 2024 | 433 | | | 7 | | | | 440 | | 2025 | 2025 | 68 | | | 6 | | | | 74 | | 2026 | 2026 | 7,748 | | | 6 | | | | 7,754 | | 2027 and thereafter | 4,095 | | | 14 | | | | 4,109 | | 2027 | | 2028 | | 2029 and thereafter | | Total minimum payments | Total minimum payments | 12,461 | | | 49 | | | | 12,510 | | Less: Deferred financing costs, discounts, and premiums | (158) | | | — | | | | (158) | | | Less: Deferred financing costs and discounts | | Less: Amount representing future interest | Less: Amount representing future interest | — | | | (12) | | | | (12) | | Net carrying value of debt | $ | 12,303 | | | $ | 37 | | | | $ | 12,340 | | Net carrying value of total debt | |
Interest expense in our consolidated statements of operations was $618$305 million, $656$296 million, and $422$618 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively. Interest expense included amortization of deferred financing costs, debt discounts, and premiums of $30$10 million, $31$12 million, and $17$30 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The stated and weighted average effective interest rates on the above obligations are as follows, for the years ended December 31, 20212023 and 2020:2022: | | | | | | | | | | | | | | | | | | | | | | | | | Weighted Average Effective Rate | | | Stated Rate | | 2021 | | 2020 | STG Bank Credit Agreement: | | | | | | | Term Loan B | | LIBOR plus 2.25% | | 2.36% | | 2.94% | Term Loan B-2 | | LIBOR plus 2.50% | | 2.77% | | 3.29% | Term Loan B-3 | | LIBOR plus 3.00% | | 3.89% | | —% | Revolving Credit Facility (a) | | LIBOR plus 2.00% | | —% | | —% | DSG Bank Credit Agreement (b): | | | | | | | Term Loan | | LIBOR plus 3.25% | | 3.62% | | 4.21% | Revolving Credit Facility (c) | | LIBOR plus 3.00% | | —% | | —% | DSG Accounts Receivable Securitization Facility (d) | | LIBOR plus 4.97% | | —% | | 4.77% | STG Notes: | | | | | | | 5.875% Unsecured Notes | | 5.88% | | 6.09% | | 6.09% | 5.125% Unsecured Notes | | 5.13% | | 5.33% | | 5.33% | 5.500% Unsecured Notes | | 5.50% | | 5.66% | | 5.66% | 4.125% Secured Notes | | 4.13% | | 4.31% | | 4.31% | DSG Notes: | | | | | | | 12.750% Secured Notes (b) | | 12.75% | | 11.95% | | 11.95% | 5.375% Secured Notes (b) | | 5.38% | | 5.73% | | 5.73% | 6.625% Unsecured Notes | | 6.63% | | 7.00% | | 7.00% |
| | | | | | | | | | | | | | | | | | | | | | | | | Weighted Average Effective Rate | | | Stated Rate | | 2023 | | 2022 | Bank Credit Agreement: | | | | | | | Term Loan B-2 (a) | | SOFR plus 2.50% | | 7.98% | | 4.62% | Term Loan B-3 (a) | | SOFR plus 3.00% | | 8.35% | | 4.88% | Term Loan B-4 (b) | | SOFR plus 3.75% | | 9.77% | | 8.21% | Revolving Credit Facility (b) (c) | | SOFR plus 2.00% | | —% | | —% | STG Notes: | | | | | | | 5.125% Unsecured Notes | | 5.13% | | 5.33% | | 5.33% | 5.500% Unsecured Notes | | 5.50% | | 5.66% | | 5.66% | 4.125% Secured Notes | | 4.13% | | 4.31% | | 4.31% |
(a)The STG Term Loan B-2 converted to using the Secured Overnight Financing Rate ("SOFR") upon the complete phase-out of LIBOR on June 30, 2023 and was subject to customary credit spread adjustments set at the time of the rate conversion. The STG Term Loan B-3 has LIBOR to SOFR conversion terms, including the applicable credit spread adjustments, built into the existing agreement.
(a)(b)Interest rate terms on the STG Term Loan B-4 and revolving credit facility include additional customary credit spread adjustments.
(c)We incur a commitment fee on undrawn capacity of 0.25%, 0.375%, or 0.50% if our first lien indebtedness ratio (as defined in the Bank Credit Agreement) is less than or equal to 2.75x, less than or equal to 3.0x but greater than 2.75x, or greater than 3.0x, respectively. The STG Revolving Credit Facilityrevolving credit facility is priced at LIBORSOFR plus 2.00%, subject to decrease if the specified first lien leverage ratio (as defined in the STG Bank Credit Agreement) is less than or equal to certain levels. As of December 31, 20212023 and 2020,2022, there werewere no outstanding borrowings, $1 million in letters of credit outstanding, and $649 million available under the STG Revolving Credit Facility.revolving credit facility and the revolving credit facility matures on December 4, 2025. See STG Bank Credit Agreement below for further information. (b)On March 1, 2022 DSG completed a refinancing transaction relating to the DSG Bank Credit Agreement, the DSG 5.375% Secured Notes (defined below under DSG Notes) and the DSG 12.750% Secured Notes (defined below under DSG Notes). See Note 20. Subsequent Events for a discussion of the refinancing transaction.
(c)We incur a commitment fee on undrawn capacity of 0.25%, 0.375%, or 0.50% if our first lien indebtedness ratio is less than or equal to 3.25x, less than or equal to 3.75x but greater than 3.25x, or greater than 3.75x, respectively. The DSG Revolving Credit Facility is priced at LIBOR plus 3.00%, subject to decrease if the specified first lien leverage ratio (as defined in the DSG Bank Credit Agreement) is less than or equal to certain levels. As of December 31, 2021 and 2020, there were no outstanding borrowings, no letters of credit outstanding, and $228 million available under the DSG Revolving Credit Facility. See DSG Bank Credit Agreement below for further information.
(d)On November 5, 2021, SBG purchased and assumed the lenders’ and the administrative agent’s rights and obligations under the A/R Facility. SBG purchased the lenders’ outstanding loans and commitments under the A/R Facility by making a payment to the lenders as consideration for the purchase of the lenders’ respective rights and obligations under the A/R Facility equal to approximately $184 million, representing 101% of the aggregate outstanding principal amount of the loans under the A/R Facility, plus any accrued interest and outstanding fees and expenses. Transactions related to the A/R Facility are now intercompany transactions and, therefore, are eliminated in consolidation.
We recorded a $23 million original issuance discount during the year ended December 31, 2022 and $4 million of debt issuance costs and original issuance discounts during the year ended December 31, 2021, $19 million of debt issuance costs and a $25 million original issuance premium during the year ended December 31, 2020, and $222 million of debt issuance costs and original issuance discounts during the year ended December 31, 2019.2021. Debt issuance costs and original issuance discounts and premiums are presented as a direct deduction from, or addition to, the carrying amount of an associated debt liability, except for debt issuance costs related to our STG Revolving Credit Facility and DSG Revolving Credit Facility,revolving credit facility, which are presented within other assets in our consolidated balance sheets.
STG Bank Credit Agreement
We haveSTG, a wholly owned subsidiary of SBG, has a syndicated credit facility which includes both revolving credit and issued term loans (the STG Bank"Bank Credit Agreement)Agreement").
On August 13, 2019, we issued a seven-year incremental term loan facility in an aggregate principal amount of $600 million (the STG Term Loan B-2b) with an original issuance discount of $3 million, which bears interest at LIBOR plus 2.50%. The proceeds from the Term Loan B-2b were used, together with cash on hand, to redeem, at par value, $600 million aggregate principal amount of STG's 5.375% Senior Notes due 2021 (the STG 5.375% Notes). We recognized a loss on the extinguishment of the STG 5.375% Notes of $2 million for the year ended December 31, 2019.
On August 23, 2019, we amended and restated the STG Bank Credit Agreement which provided additional operating flexibility and revisions to certain restrictive covenants. Concurrent withincludes a financial maintenance covenant, the amendment, we raised a seven-year incremental term loan facility of $700 million (the STG Term Loan B-2a, and, together with the STG Term Loan B-2b, the STG Term Loan B-2) with an original issuance discount of $4 million, which bears interest at LIBOR plus 2.50%.
Additionally, in connection with the amendment, we replaced STG's existing revolving credit facility with a new $650 million five-year revolving credit facility (the STG Revolving Credit Facility), priced at LIBOR plus 2.00%, subject to decrease if the specified first lien leverage ratio (as defined in the STG Bank Credit Agreement), which requires such ratio not to exceed 4.5x, measured as of the end of each fiscal quarter. As of December 31, 2023, the STG first lien leverage ratio was below 4.5x. The financial maintenance covenant is less thanonly applicable if 35% or equal to certain levels, which includesmore of the capacity for up to $50 million(as a percentage of letterstotal commitments) under the revolving credit facility, measured as of the last day of each quarter, is utilized under the revolving credit and for borrowingsfacility as of up to $50 millionsuch date. Since there was no utilization under swingline loans. Onthe revolving credit facility as of December 4, 2020, we entered into an amendment31, 2023, STG was not subject to the STGfinancial maintenance covenant under the Bank Credit Agreement. The Bank Credit Agreement to extend the maturity datecontains other restrictions and covenants which we were in compliance with as of the STG Revolving Credit Facility to December 4, 2025.31, 2023.
On April 1, 2021, STG amended the STG Bank Credit Agreement to raise additional term loans in an aggregate principal amount of $740 million (STG ("Term Loan B-3)B-3"), with an original issuance discount of $4 million, the proceeds of which were used to refinance a portion of the STG Term Loan B-1 maturing in January 2024. The STG Term Loan B-3 matures in April 2028 and bears interest at LIBOR (or successor rate)SOFR plus 3.00%.
On April 21, 2022, STG entered into the Fourth Amendment (the "Fourth Amendment") to the Bank Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, the guarantors party thereto (the "Guarantors") and the lenders and other parties thereto.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Pursuant to the Fourth Amendment, STG raised Term B-4 Loans (as defined in the Bank Credit Agreement) in an aggregate principal amount of $750 million, which mature on April 21, 2029 (the "Term Loan B-4"). The STGTerm Loan B-4 was issued at 97% of par and bears interest, at STG’s option, at Term SOFR plus 3.75% (subject to customary credit spread adjustments) or base rate plus 2.75%. The proceeds from the Term Loan B-4 were used to refinance all of STG’s outstanding Term Loan B-1 due January 2024 and to redeem STG’s outstanding 5.875% senior notes due 2026. In addition, the maturity of $612.5 million of the total $650 million of revolving commitments under the Bank Credit Agreement were extended to April 21, 2027, with the remaining $37.5 million continuing to mature on December 4, 2025. For the year ended December 31, 2022, we capitalized an original issuance discount of $23 million associated with the issuance of the Term Loan B-4, which is reflected as a reduction to the outstanding debt balance and will be recognized as interest expense over the term of the outstanding debt utilizing the effective interest method. We recognized a loss on extinguishment of $10 million for the year ended December 31, 2022.
The Term Loan B-2, and STG Term Loan B-3, and Term Loan B-4 amortize in equal quarterly installments in an aggregate amount equal to 1% of the original amount of such term loan, with the balance being payable on the maturity date.
TheDuring the year ended December 31, 2023, STG Bank Credit Agreement includes a financial maintenance covenant, the first lien leverage ratio (as defined in the STG Bank Credit Agreements), which requires such applicable ratio not to exceed 4.5x, measured asrepurchased $30 million aggregate principal amount of the endTerm Loan B-2 for consideration of each fiscal quarter. The financial maintenance covenant is only applicable if 35% or more$26 million. SBG recognized a gain on extinguishment of $3 million for the year ended December 31, 2023.
In January 2024, STG repurchased $27 million aggregate principal amount of the capacity (as a percentageTerm Loan B-2 for consideration of total commitments) under the STG Revolving Credit Facility, measured as of the last day of each quarter, is utilized under the STG Revolving Credit Facility as of such date. Since there was no utilization under the STG Revolving Credit Facility as of December 31, 2021, STG was not subject to the financial maintenance covenant under the STG Bank Credit Agreement. As of December 31, 2021, the STG first lien leverage ratio was below 4.5x. The STG Bank Credit Agreement contains other restrictions and covenants which we were in compliance with as of December 31, 2021.$25 million.
STG Notes
On November 27, 2019,During the year ended December 31, 2022, we issued $500 million of senior notes, which bear interest at a rate of 5.500% per annum and mature on March 1, 2030 (the STG 5.500% Notes). The net proceeds of the STG 5.500% Notes were used, plus cash on hand, to redeem $500purchased $118 million aggregate principal amount of STG's 6.125% senior unsecured notes duethe 5.125% Notes in open market transactions for consideration of $104 million. The 5.125% Notes acquired during the year ended December 31, 2022 (the STG 6.125% Notes) for a redemption price, including the outstanding principal amount of the STG 6.125% Notes, accrued and unpaid interest, and a make-whole premium, of $510 million.were canceled immediately following their acquisition. We recognized a lossgain on the extinguishment of the STG 6.125%5.125% Notes of $8$13 million for the year ended December 31, 2019.2022.
Prior toDuring the year ended December 1, 2024, we may redeem the STG 5.500% Notes, in whole or in part, at any time or from time to time at a price equal to 100% of the principal amount of the STG 5.500% Notes plus accrued and unpaid interest, if any, to the redemption date, plus a “make-whole” premium. In addition, on or prior to December 1, 2022, we may redeem up to 40% of the STG 5.500% Notes using the proceeds of certain equity offerings. Beginning on December 1, 2024, we may redeem some or all of the STG 5.500% Notes at any time or from time to time at certain redemption prices, plus accrued and unpaid interest, if any, to the date of redemption. If the notes are redeemed during the twelve-month period beginning December 1, 2024, 2025, 2026, and 2027 and thereafter, then the redemption prices for the STG 5.500% Notes are 102.750%, 101.833%, 100.917%, and 100%, respectively. Upon the sale of certain of STG’s assets or certain changes of control, the holders of the STG 5.500% Notes may require us to repurchase some or all of the STG 5.500% Notes.
STG’s obligations under the STG 5.500% Notes are guaranteed, jointly and severally, on a senior unsecured basis, by the Company and each wholly-owned subsidiary of STG or the Company that guarantees the STG Bank Credit Agreement and rank equally with all of STG’s other senior unsecured debt.
On May 21, 2020,31, 2023, we purchased $2.5$7 million, $15 million, and $13 million aggregate principal amount of STG's 5.875% senior unsecured notes due 2026 (the STG 5.875% Notes)the 5.125% Notes, the 5.500% Notes, and the 4.125% Notes, respectively, in open market transactions for consideration of $2.3 million.$6 million, $8 million, and $8 million, respectively. The STG 5.875% Notes acquired in May 2020during the year ended December 31, 2023 were canceled immediately following their acquisition. We recognized a gain on extinguishment of the STG 5.875% Notes of $0.2$12 million for the year ended December 31, 2020.2023.
On December 4, 2020, we issued $750 million aggregate principal amount of senior secured notes, which bear interest at a rate of 4.125% per annum and mature on December 1, 2030 (the STG 4.125% Secured Notes). The net proceeds of the STG 4.125% Secured Notes were used, plus cash on hand, to redeem $550 million aggregate principal amount of STG's 5.625% senior unsecured notes due 2024 (the STG 5.625% Notes) for a redemption price, including the outstanding principal amount of the STG 5.625% Notes, accrued and unpaid interest, and a call premium, of $571 million and to prepay $200 million outstanding under the STG Term Loan B-1. We recognized a loss on extinguishment of the STG 5.625% Notes and prepayment of the STG Term Loan B-1 of $15 million for the year ended December 31, 2020.
Prior to December 1, 2025, we may redeem the STG 4.125% Secured Notes, in whole or in part, at any time or from time to time at a price equal to 100% of the principal amount of the STG 4.125% Secured Notes plus accrued and unpaid interest, if any, to the redemption date, plus a “make-whole” premium. In addition, on or prior to December 1, 2023, we may redeem up to 40% of the STG 4.125% Secured Notes using the proceeds of certain equity offerings. Beginning on December 1, 2025, we may redeem some or all of the STG 4.125% Secured Notes at any time or from time to time at certain redemption prices, plus accrued and unpaid interest, if any, to the date of redemption. If the notes are redeemed during the twelve-month period beginning December 1, 2025, 2026, 2027, and 2028 and thereafter, then the redemption prices for the STG 4.125% Secured Notes are 102.063%, 101.375%, 100.688%, and 100%, respectively. Upon the sale of certain of STG’s assets or certain changes of control, we may be required to repurchase some or all of the STG 4.125% Secured Notes.
STG’s obligations under the STG 4.125% Secured Notes are secured on a first-lien basis by substantially all tangible and intangible personal property of STG and each wholly-owned subsidiary of STG or the Company that guarantees the STG Bank Credit Agreement (the Guarantors) and on a pari passu basis with all of STG's and the Guarantor's existing and future debt that is secured by a first-priority lien on the collateral securing the STG 4.125% Secured Notes, including the debt under the STG Bank Credit Agreement, subject to permitted liens and certain other exceptions.
Upon issuance, the STG 5.875% Notes and STG 5.125% Notes were redeemable up to 35%. We may redeem 100% of these notes upon the date set forth in the indenture of each note. The price at which we may redeem the notesSTG Notes is set forth in the respective indenture of each note.the STG Notes. Also, if we sell certain of our assets or experience specific kinds of changes of control, the holders of these notesSTG Notes may require us to repurchase some or all of the outstanding notes.
DSG Bank Credit Agreement
On August 23, 2019, DSG and Diamond Sports Intermediate Holdings LLC (Holdings), an indirect wholly owned subsidiary of the Company and an indirect parent of DSG, entered into a credit agreement (the DSG Bank Credit Agreement). Pursuant to the DSG Bank Credit Agreement, DSG raised a seven-year $3,300 million aggregate amount term loan (the DSG Term Loan), with an original issuance discount of $17 million, which bears interest at LIBOR plus 3.25%.
The DSG Term Loan amortizes in equal quarterly installments in an aggregate amount equal to 1% of the original amount of such term loan, with the balance being payable on the maturity date. Following the end of each fiscal year, we are required to prepay the DSG Term Loan in an aggregate amount equal to (a) 50% of excess cash flow for such fiscal year if the first lien leverage ratio is greater than 3.75 to 1.00, (b) 25% of excess cash flow for such fiscal year if the first lien leverage ratio is greater than 3.25 to 1.00 but less than or equal to 3.75 to 1.00, and (c) 0% of excess cash flow for such fiscal year if the first lien leverage ratio is equal to or less than 3.25 to 1.00.
Additionally, in connection with the DSG Bank Credit Agreement, DSG obtained a $650 million five-year revolving credit facility (the DSG Revolving Credit Facility, and, together with the DSG Term Loan, the DSG Credit Facilities), priced at LIBOR plus 3.00%, subject to reduction based on a first lien net leverage ratio, which includes capacity for up to $50 million of letters of credit and for borrowings of up to $50 million under swingline loans.STG Notes.
SINCLAIR, INC. The DSG Bank Credit Agreement includes a financial maintenance covenant, the first lien leverage ratio (as defined in the DSG Bank Credit Agreements), which requires such applicable ratio not to exceed 6.25x, measured asNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Debt of the endVariable Interest Entities and Guarantees of each fiscal quarter. The financial maintenance covenant is only applicable if 35% or more of the capacity (as a percentage of total commitments) under the DSG Revolving Credit Facility, measured as of the last day of each quarter, is utilized under the DSG Revolving Credit Facility as of such date. Since there was no utilization under the DSG Revolving Credit Facility as of December 31, 2021, DSG was not subject to the financial maintenance covenant under the DSG Bank Credit Agreement. As of December 31, 2021, the DSG first lien leverage ratio was above 6.25x. We expect that the DSG first lien leverage ratio will remain above 6.25x for at least the next twelve months, which will restrict our ability to utilize the full DSG Revolving Credit Facility. We do not currently expect to have more than 35% of the capacity of the DSG Revolving Credit Facility outstanding as of any quarterly measurement date during the next twelve months, therefore we do not expect DSG will be subject to the financial maintenance covenant. The DSG Bank Credit Agreement contains other restrictions and covenants which we were in compliance with as of December 31, 2021.Third-party Obligations
DSG's obligations under the DSG Bank Credit Agreement are (i) jointly and severally guaranteed by Holdings and DSG’s direct and indirect, existing and future wholly-owned domestic restricted subsidiaries, subject to certain exceptions, and (ii) secured by first-priority lien on substantially all tangible and intangible assets (whether now owned or hereafter arising or acquired) of DSG and the guarantors, subject to certain permitted liens and other agreed upon exceptions. The DSG Credit Facilities are not guaranteed by the Company, STG, or any of STG’s subsidiaries.
On March 1, 2022, DSG completed a refinancing transaction relating to the DSG Bank Credit Agreement. See Note 20. Subsequent Events for a discussion of the refinancing transaction.
DSG Notes
On August 2, 2019, DSG issued $3,050 million principal amount of senior secured notes, which bear interest at a rate of 5.375% per annum and mature on August 15, 2026 (the DSG 5.375% Secured Notes), and issued $1,825 million principal amount of senior notes, which bear interest at a rate of 6.625% per annum and mature on August 15, 2027 (the DSG 6.625% Notes). The proceeds of the DSG 5.375% Secured Notes and DSG 6.625% Notes were used, in part, to fund the RSN Acquisition.
In March 2020 and June 2020, we purchased a total of $15 million aggregate principal amount of the DSG 6.625% Notes in open market transactions for consideration of $10 million. The DSG 6.625% Notes acquired in March 2020 and June 2020 were canceled immediately following their acquisition. We recognized a gain on extinguishment of the DSG 6.625% Notes of $5 million for year ended December 31, 2020.
On June 10, 2020, we exchanged $66.5 million aggregate principal amount of the DSG 6.625% Notes for cash payments of $10 million, including accrued but unpaid interest, and $31 million aggregate principal amount of newly issued senior secured notes, which bear interest at a rate of 12.750% per annum and mature on December 1, 2026 (the DSG 12.750% Secured Notes, and together with the DSG 5.375% Secured Notes, the DSG Existing Secured Notes, and together with the DSG 6.625% Notes, the DSG Notes).
Prior to August 15, 2022, we may redeem the DSG Notes, in whole or in part, at any time or from time to time, at a price equal to 100% of the principal amount of the applicable DSG Notes plus accrued and unpaid interest, if any, to the date of redemption, plus a ‘‘make-whole’’ premium. Beginning on August 15, 2022, we may redeem the DSG Notes, in whole or in part, at any time or from time to time at certain redemption prices, plus accrued and unpaid interest, if any, to the date of redemption. In addition, on or prior to August 15, 2022, we may redeem up to 40% of each series of the DSG Notes using the proceeds of certain equity offerings. If the notes are redeemed during the twelve-month period beginning August 15, 2022, 2023, and 2024 and thereafter, then the redemption prices for the DSG 5.375% Secured Notes are 102.688%, 101.344%, and 100%, respectively, the redemption prices for the DSG 6.625% Notes are 103.313%, 101.656%, and 100%, respectively, and the redemption prices for the DSG 12.750% Secured Notes are 102.688%, 101.344%, and 100%, respectively.
DSG’s obligations under the DSG Notes are jointly and severally guaranteed by Holdings, DSG’s direct parent, and certain wholly-owned subsidiaries of Holdings. The RSNs wholly-owned by Holdings and its subsidiaries will also jointly and severally guarantee the Issuers' obligations under the DSG Notes. The DSG Notes are not guaranteed by the Company, STG, or any of STG’s subsidiaries.
On March 1, 2022, DSG completed a refinancing transaction relating to the DSG 5.375% Secured Notes and the DSG 12.750% Secured Notes. See Note 20. Subsequent Events for a discussion of the refinancing transaction.
A/R Facility
On September 23, 2020 (the Closing Date), the Company's and DSG's indirect wholly-owned subsidiary, DSPV, entered into a $250 million A/R Facility which matures on September 23, 2023, in order to enable DSG to raise incremental funding for the ongoing business needs of DSG and its subsidiaries. On November 5, 2021, the Company purchased and assumed the lenders’ and the administrative agent’s rights and obligations under the A/R Facility by making a payment to the lenders equal to approximately $184 million, representing 101% of the aggregate outstanding principal amount of the loans under the A/R Facility, plus any accrued interest and outstanding fees and expenses. In connection therewith, the Company and DSPV entered into an omnibus amendment to the A/R Facility to provide greater flexibility to DSG, including, (i) increasing the maximum facility limit availability from up to $250 million to up to $400 million; (ii) eliminating the early amortization event related to DSG’s earnings before interest, taxes, depreciation and amortization (EBITDA), as defined in the agreement governing the A/R Facility, less interest expense covenant; (iii) extending the stated maturity date by one year from September 23, 2023 to September 23, 2024; and (iv) relaxing certain concentration limits thereby increasing the amounts of certain accounts receivable eligible to be sold. The other material terms of the A/R Facility remain unchanged. Transactions related to the A/R Facility are now intercompany transactions and, therefore, are eliminated in consolidation.
DSG's ability to make scheduled payments on its debt obligations depends on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, competitive, legislative, regulatory and other factors beyond its control. The impact of the outbreak of COVID-19 continues to create significant uncertainty and disruption in the global economy and financial markets. Further, DSG's success is dependent upon, among other things, the terms of its agreements with Distributors, OTT and other streaming providers and the successful execution of its DTC strategy. Primarily as a result of losses of Distributors, increased subscriber churn and the COVID-19 pandemic, DSG has experienced operating losses since the second quarter of 2020 and we expect it will continue to incur operating losses in future periods. DSG has taken steps to mitigate the impacts of this uncertainty, including managing its controllable costs, amending its A/R Facility and entering into a Transaction Support Agreement with the Company and certain lenders holding term loans under the DSG Bank Credit Agreement and certain holders of, or investment advisors, sub-advisors, or managers of funds or accounts that hold, the DSG Existing Secured Notes which contemplates that, among other things, DSG would obtain a new $635 million first-priority lien term loan credit facility which would mature in May 2026 and would rank first in lien priority on shared collateral ahead of DSG’s loans and/or commitments under the DSG Bank Credit Agreement and DSG Existing Secured Notes. See Note 20. Subsequent Events.
Debt of variable interest entities and guarantees of third-party debt
We jointly, severally, unconditionally, and irrevocably guarantee $39 million and $49guaranteed $2 million of debt of certain third parties as of both December 31, 20212023 and 2020, respectively,2022, all of which $9 million and $16 million, net of deferred financing costs, related to consolidated VIEs is included in our consolidated balance sheets assheets. We provide a guarantee of December 31, 2021 and 2020, respectively. These guarantees primarily relatecertain obligations of a regional sports network subject to a maximum annual amount of $117 million with annual escalations of 4% for the debt of Cunningham as discussed under Cunningham Broadcasting Corporation within Note 15. Related Person Transactions. The credit agreements and term loans of these VIEs each bear interest of LIBOR plus 2.50%.next five years. As of December 31, 2021,2023, we have determined that it is not probable that we would have to perform under any of these guarantees.
Interest Rate Swap
During the year ended December 31, 2023, 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 SOFR. See Hedge Accounting within Note 1. Nature of Operations and Summary of Significant Accounting Policies for further discussion. As of December 31, 2023, the fair value of the interest rate swap was an asset of $1 million, which is recorded in other assets in our consolidated balance sheets.
Finance leasesLeases
For more information related to our finance leases and affiliate finance leases see Note 8. Leases and Note 15. Related Person Transactions, respectively.
8. LEASES:
We determine if a contractual arrangement is a lease at inception. Our lease arrangements provide the Company the right to utilize certain specified tangible assets for a period of time in exchange for consideration. Our leases primarily relate to building space, tower space, and equipment. We do not separate non-lease components from our building and tower leases for the purposes of measuring our lease liabilities and assets. Our leases consist of operating leases and finance leases which are presented separately in our consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
We recognize a lease liability and a right of use asset at the lease commencement date based on the present value of the future lease payments over the lease term discounted using our incremental borrowing rate. Implicit interest rates within our lease arrangements are rarely determinable. Right of use assets also include, if applicable, prepaid lease payments and initial direct costs, less incentives received.
We recognize operating lease expense on a straight-line basis over the term of the lease within operating expenses. Expense associated with our finance leases consists of two components, including interest on our outstanding finance lease obligations and amortization of the related right of use assets. The interest component is recorded in interest expense and amortization of the finance lease asset is recognized on a straight-line basis over the term of the lease in depreciation of property and equipment.
Our leases do not contain any material residual value guarantees or material restrictive covenants. Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table presents lease expense we have recorded in our consolidated statements of operations for the years ended December 31, 2021, 2020,2023, 2022, and 20192021 (in millions): | | 2021 | | 2020 | | 2019 | | 2023 | | | 2023 | | 2022 | | 2021 | Finance lease expense: | Finance lease expense: | | | | | | Amortization of finance lease asset | | Amortization of finance lease asset | | Amortization of finance lease asset | Amortization of finance lease asset | $ | 3 | | | $ | 3 | | | $ | 3 | | Interest on lease liabilities | Interest on lease liabilities | 3 | | | 4 | | | 4 | | Total finance lease expense | Total finance lease expense | 6 | | | 7 | | | 7 | | Operating lease expense (a) | Operating lease expense (a) | 60 | | | 64 | | | 47 | | Total lease expense | Total lease expense | $ | 66 | | | $ | 71 | | | $ | 54 | |
(a)Includes variable lease expense of $6 million for the year ended December 31, 2023 and $7 million for each of the years ended December 31, 20212022 and 2020 and $5 million for the year ended December 31, 20192021 and short-term lease expense of $1 million for each of the yearsyear ended December 31 2021, 2020, and 2019.2021.
The following table summarizes our outstanding operating and finance lease obligations as of December 31, 20212023 (in millions): | | Operating Leases | | Finance Leases | | Total | 2022 | $ | 47 | | | $ | 8 | | | $ | 55 | | 2023 | 41 | | | 8 | | | 49 | | | Operating Leases | | | Operating Leases | | Finance Leases | | Total | 2024 | 2024 | 35 | | | 7 | | | 42 | | 2025 | 2025 | 34 | | | 6 | | | 40 | | 2026 | 2026 | 29 | | | 6 | | | 35 | | 2027 and thereafter | 121 | | | 14 | | | 135 | | 2027 | | 2028 | | 2029 and thereafter | | Total undiscounted obligations | Total undiscounted obligations | 307 | | | 49 | | | 356 | | Less imputed interest | Less imputed interest | (67) | | | (12) | | | (79) | | Present value of lease obligations | Present value of lease obligations | $ | 240 | | | $ | 37 | | | $ | 277 | |
The following table summarizes supplemental balance sheet information related to leases as of December 31, 20212023 and December 31, 20202022 (in millions, except lease term and discount rate): | | 2021 | | 2020 | | | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases | | | 2023 | | | Operating Leases | | | Operating Leases | | | Operating Leases | | Lease assets, non-current | | Lease assets, non-current | | Lease assets, non-current | Lease assets, non-current | $ | 207 | | | $ | 18 | | (a) | $ | 197 | | | $ | 17 | | (a) | $ | 142 | | | $ | | $ | 12 | | (a) | (a) | $ | 145 | | | $ | | $ | 16 | | (a) | (a) | | Lease liabilities, current | Lease liabilities, current | 35 | | | 5 | | | 34 | | | 5 | | | Lease liabilities, current | | Lease liabilities, current | | Lease liabilities, non-current | Lease liabilities, non-current | 205 | | | 32 | | | 198 | | | 33 | | | Lease liabilities, non-current | | Lease liabilities, non-current | | Total lease liabilities | | Total lease liabilities | | Total lease liabilities | Total lease liabilities | $ | 240 | | | $ | 37 | | | $ | 232 | | | $ | 38 | | | | Weighted average remaining lease term (in years) | Weighted average remaining lease term (in years) | 8.39 | | 7.71 | | 9.39 | | 8.39 | | | Weighted average remaining lease term (in years) | | | Weighted average remaining lease term (in years) | | Weighted average discount rate | Weighted average discount rate | 5.4 | % | | 7.9 | % | | 5.7 | % | | 8.4 | % | | Weighted average discount rate | | Weighted average discount rate | |
(a)Finance lease assets are reflected in property and equipment, net in our consolidated balance sheets.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table presents other information related to leases for the years ended December 31, 2021, 2020,2023, 2022, and 20192021 (in millions): | | 2021 | | 2020 | | 2019 | | 2023 | | | 2023 | | 2022 | | 2021 | Cash paid for amounts included in the measurement of lease liabilities: | Cash paid for amounts included in the measurement of lease liabilities: | | | | | | Operating cash flows from operating leases | | Operating cash flows from operating leases | | Operating cash flows from operating leases | Operating cash flows from operating leases | $ | 52 | | | $ | 55 | | | $ | 38 | | Operating cash flows from finance leases | Operating cash flows from finance leases | $ | 3 | | | $ | 3 | | | $ | 4 | | Financing cash flows from finance leases | Financing cash flows from finance leases | $ | 5 | | | $ | 5 | | | $ | 5 | | Leased assets obtained in exchange for new operating lease liabilities | Leased assets obtained in exchange for new operating lease liabilities | $ | 50 | | | $ | 20 | | | $ | 35 | | Leased assets obtained in exchange for new finance lease liabilities | Leased assets obtained in exchange for new finance lease liabilities | $ | 4 | | | $ | 6 | | | $ | — | |
9. PROGRAM CONTRACTS: Future payments required under television program contracts as of December 31, 20212023 were as follows (in millions): | 2022 | $ | 97 | | 2023 | 14 | | 2024 | 2024 | 6 | | 2025 | 2025 | 1 | | 2026 | 2026 | — | | | | Total | | | Total | | | Total | Total | 118 | | Less: Current portion | Less: Current portion | 97 | | Long-term portion of program contracts payable | Long-term portion of program contracts payable | $ | 21 | |
Each future period’s film liability includes contractual amounts owed, but what is contractually owed does not necessarily reflect what we are expected to pay during that period. While we are contractually bound to make the payments reflected in the table during the indicated periods, industry protocol typically enables us to make film payments on a three-month lag. Included in the current portion amount are payments due in arrears of $21$13 million. In addition, we have entered into non-cancelable commitments for future television program rights aggregating to $31$14 million as of December 31, 2021.2023. 10. 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, DSH,Diamond Sports Holdings, LLC ("DSH"), an indirect parent of DSG and indirect wholly-owned subsidiary of the Company, issued preferred equity (the Redeemable Subsidiary Preferred Equity) for $1,025 million.
The Redeemable Subsidiary Preferred Equity is redeemable by the holder in the following circumstances (1) in the event of a change of control with respect to DSH, the holder will have the right (but not the obligation) to require the redemption of the securities at a per unit amount equal to the liquidation preference per share plus accrued and unpaid dividends (2) in the event of the sale of new equity interests in DSG or direct and indirect subsidiaries to the extent of proceeds received and (3) beginning on August 23, 2027, so long as any Redeemable Subsidiary Preferred Equity remains outstanding, the holder, subject to certain minimum holding requirements, or investors holding a majority of the outstanding Redeemable Subsidiary Preferred Equity, may compel DSH and DSG to initiate a process to sell DSG and/or conduct an initial public offering.
We may redeem some or all of ("the Redeemable Subsidiary Preferred Equity from time to time thereafter at a price equal to $1,000 per unit plus the amount of dividends per unit previously paid in kind (the Liquidation Preference), multiplied by the applicable premium as follows (presented as a percentage of the Liquidation Preference): (i) on or after November 22, 2019 until February 19, 2020: 100%; (ii) on or after February 20, 2020 until August 22, 2020: 102%; (iii) on or after August 23, 2020 but prior to August 23, 2021: at a customary "make-whole" premium representing the present value of 103% plus all required dividend payments due on such Redeemable Subsidiary Preferred Equity through August 23, 2021; (iv) on or after August 23, 2021 until August 22, 2022: 103%; (v) on or after August 23, 2022 until August 22, 2023: 101%; and (vi) August 23, 2023 and thereafter: 100%, in each case, plus accrued and unpaid dividends.Equity").
The Redeemable Subsidiary Preferred Equity accrues an initial quarterly dividend equal to 1-Month LIBOR (with a 0.75% floor) plus 7.5% (8% if paid in kind) per annum onOn February 10, 2023, we purchased the sum of (i) $1,025 million (the Aggregate Liquidation Preference) plus (ii) the amount of aggregate accrued and unpaid dividends as of the end of the immediately preceding dividend accrual period, payable, at DSH's election, in cash or, to the extent not paid in cash, by automatically increasing the Aggregate Liquidation Preference, whether or not such dividends have been declared and whether or not there are profits, surplus, or other funds legally available for the payment of dividends. The Redeemable Subsidiary Preferred Equity dividend rate is subject to rate step-ups of 0.5% per annum, beginning on August 23, 2022; provided that, and subject to other applicable increases in the dividend rate described below, the cumulative dividend rate will be capped at 1-Month LIBOR plus 10.5% per annum until (a) on February 23, 2028, the Redeemable Subsidiary Preferred Equity dividend rate will increase by 1.50% with further increases of 0.5% on each six month anniversary thereafter and (b) the Redeemable Subsidiary Preferred Equity dividend rate will increase by 2% if we do not redeem the Redeemable Subsidiary Preferred Equity, to the extent elected by holders of the Redeemable Subsidiary Preferred Equity, upon a change of control; provided, in each case, that the cumulative dividend rate will be capped at 1-Month LIBOR plus 14% per annum.
Subject to limited exceptions, DSH shall not, and shall not permit its subsidiaries, directly or indirectly, to pay a dividend or make a distribution, unless DSH applies 75% of the amount of such dividend or distribution payable to DSH or its subsidiaries (with the amount payable calculated on a pro rata basis based on their direct or indirect common equity ownership by DSH) to make an offer to the holders of Redeemable Subsidiary Preferred Equity to redeem the Redeemable Subsidiary Preferred Equity (subject to certain redemption restrictions) at a price equal to 100% of the Liquidation Preference of such Redeemable Subsidiary Preferred Equity, plus accrued and unpaid dividends.
We redeemed no Redeemable Subsidiary Preferred Equity during the year ended December 31, 2021. During the year ended December 31, 2020, we redeemed 550,000remaining 175,000 units of the Redeemable Subsidiary Preferred Equity for an aggregate redemptionpurchase price equal to $550of $190 million plusrepresenting 95% of the sum of the remaining unreturned capital contribution of $175 million, and accrued and unpaid dividends representing 100% of the unreturned capital contribution with respect to the units redeemed, plus accrued and unpaid dividends with respect to the units redeemed up to, but not including, the redemption date of purchase. We redeemed no Redeemable Subsidiary Preferred Equity during the years ended December 31, 2022 and after giving effect to any applicable rebates.2021.
Dividends accrued during the years ended December 31, 2023, 2022, and 2021 2020, and 2019 were $14$3 million, $36$13 million, and $33$14 million, respectively, and are reflected in net (loss) income attributable to theredeemable noncontrolling interests in our consolidated statements of operations. Dividends accrued during 2023, 2022, and the 2nd, 3rd, and 4th quarters of 2021 were paid in kind and added to the liquidation preference. The balance, net of issuance costs, and the liquidation preference of the Redeemable Subsidiary Preferred Equity net of issuance costs, was $181$194 million and $170$198 million, respectively, as of December 31, 2021 and 2020, respectively.
In connection with the Redeemable Subsidiary Preferred Equity, the Company provides a guarantee of collection of distributions.
Subsidiary Equity Put Right. A noncontrolling equity holder of one of our subsidiaries had the right to sell its interest to the Company at a fair market sale value of $376 million, plus any undistributed income, which was exercised and settled in January 2020.2022.
SINCLAIR, INC. A noncontrolling equity holder of one of our subsidiaries has the right to sell its interest to the Company at any time during the 30-day period following September 30, 2025. The value of this redeemable noncontrolling interest was $16 million and $20 million as of December 31, 2021 and 2020, respectively.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. COMMON STOCK: Holders of Class A Common Stock are entitled to 1one vote per share and holders of Class B Common Stock are entitled to ten votes per share, except for votes relating to “going private” and certain other transactions. Substantially all of the Class B Common Stock is held by David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith who entered into a stockholders’ agreement pursuant to which they have agreed to vote for each other as candidates for election to our board of directorsthe Board until December 31, 2025. The Class A Common Stock and the Class B Common Stock vote together as a single class, except as otherwise may be required by Maryland law, on all matters presented for a vote. Holders of Class B Common Stock may at any time convert their shares into the same number of shares of Class A Common Stock. During 2023 and 2022, no Class B Common Stock shares were converted into Class A Common Stock shares. During 2021, 952,626 Class B Common Stock shares were converted into Class A Common Stock shares. During 2020, no Class B Common Stock shares were converted into Class A Common Stock shares.
OurThe Bank Credit AgreementsAgreement and some of our subordinate debt instruments have restrictions on our ability to pay dividends on our common stock unless certain specific conditions are satisfied, including, but not limited to:
•no event of default then exists under each indenture or certain other specified agreements relating to our debt; and •after taking into account the dividends payment, we are within certain restricted payment requirements contained in each indenture.
During 20212023 and 2020, our2022, the Board of Directors declared a quarterly dividend in the months of February, May, August, and November which were paid in March, June, September, and December, respectively. Total dividend payments for botheach of the yearyears ended December 31, 20212023 and 20202022 were $0.80$1.00 per share. In February 2022, our2024, the Board of Directors declared a quarterly dividend of $0.25 per share. Future dividends on our common shares, if any, will be at the discretion of ourthe Board of Directors and will depend on several factors including our results of operations, cash requirements and surplus, financial condition, covenant restrictions, and other factors that the Board of Directors may deem relevant. The holders of Class A Common Stock and Class B Common Stock holders have the same rights related to dividends.
On August 4, 2020, the Board of Directors authorized an additional $500 million share repurchase authorization in addition to the previous repurchase authorization of $1 billion. There is no expiration date and currently, management has no plans to terminate this program. For the year ended December 31, 2021,2023, we repurchased approximately 2.48.8 million shares of Class A Common Stock for $61$153 million. As of December 31, 2021,2023, the total remaining repurchase authorization was $819$547 million. As of February 23, 2022, we repurchased an additional 2 million shares of Class A Common Stock for $55 million since January 1, 2022. All shares were repurchased under a Rule 10b5-1 plan. 12. INCOME TAXES: The provision (benefit) provision for income taxes consisted of the following for the years ended December 31, 2021, 2020,2023, 2022, and 20192021 (in millions): | | | 2021 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | Current (benefit) provision for income taxes: | | | | | | Current provision (benefit) for income taxes: | | Current provision (benefit) for income taxes: | | | | Federal | Federal | $ | (78) | | | $ | (126) | | | $ | (89) | | State | State | 2 | | | 9 | | | (2) | | | | (76) | | | (117) | | | (91) | | Deferred benefit for income taxes: | | | | | | Deferred (benefit) provision for income taxes: | | Deferred (benefit) provision for income taxes: | | | | Federal | Federal | (93) | | | (584) | | | (4) | | State | State | (4) | | | (19) | | | (1) | | | | (97) | | | (603) | | | (5) | | Benefit for income taxes | $ | (173) | | | $ | (720) | | | $ | (96) | | (Benefit) provision for income taxes | |
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision: | | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | Federal statutory rate | 21.0 | % | | 21.0 | % | | 21.0 | % | Adjustments: | | | | | | Federal tax credits (a) | 10.6 | % | | 1.7 | % | | (684.6) | % | Net Operating Loss Carryback (b) | 7.5 | % | | 1.9 | % | | — | % | State income taxes, net of federal tax benefit (c) | (4.2) | % | | 4.0 | % | | 56.6 | % | Noncontrolling interest (d) | 2.6 | % | | 0.7 | % | | (138.9) | % | Valuation allowance (e) | (1.5) | % | | (6.1) | % | | (237.1) | % | Change in unrecognized tax benefits (f) | (1.0) | % | | (0.2) | % | | 72.2 | % | Stock-based compensation | (0.2) | % | | (0.1) | % | | (15.9) | % | Non-deductible items (g) | (0.1) | % | | — | % | | 192.7 | % | Effect of consolidated VIEs (h) | 0.1 | % | | (0.1) | % | | 46.3 | % | Spectrum sales (i) | — | % | | — | % | | (386.7) | % | Capital loss carryback (j) | — | % | | — | % | | (26.0) | % | Other | (0.1) | % | | 0.1 | % | | (3.0) | % | Effective income tax rate | 34.7 | % | | 22.9 | % | | (1,103.4) | % |
| | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Federal statutory rate | 21.0 | % | | 21.0 | % | | 21.0 | % | Adjustments: | | | | | | State income taxes, net of federal tax benefit (a) | 4.6 | % | | 2.0 | % | | (4.2) | % | Valuation allowance (b) | 30.6 | % | | 1.6 | % | | (1.5) | % | Noncontrolling interest (c) | 0.4 | % | | 0.2 | % | | 2.6 | % | Federal tax credits (d) | 0.6 | % | | (0.2) | % | | 10.6 | % | Net Operating Loss Carryback (e) | — | % | | — | % | | 7.5 | % | Other | (0.9) | % | | 0.7 | % | | (1.3) | % | Effective income tax rate | 56.3 | % | | 25.3 | % | | 34.7 | % |
(a)Our 2021, 2020, and 2019 income tax provisions include a benefit of $40 million, $42 million, and $57 million, respectively, related to investments in sustainability initiatives whose activities qualify for federal income tax credits through 2021. (b)Our 2021 and 2020 income tax provisions include a benefit of $38 million and $61 million, respectively, as result of the CARES Act allowing for the 2020 federal net operating loss to be carried back to the pre-2018 years when the federal tax rate was 35%.
(c)Included in state income taxes are deferred income tax effects related to certain acquisitions, intercompany mergers, tax elections, law changes and/or impact of changes in apportionment.
(d)(b)Our 2021, 2020, and 20192023 income tax provisions includeprovision includes a $13$212 million $23 million, and $12 million benefit, respectively,decrease related to noncontrollingthe release of valuation allowance associated with the federal interest expense carryforwards under the IRC Section 163(j). Our 2022 income tax provision includes a net $56 million addition related to an increase in valuation allowance associated with the federal interest expense carryforwards under the IRC Section 163(j) and primarily offset by a decrease in valuation allowance on certain state deferred tax assets resulting from the Deconsolidation of various partnerships.
(e)Diamond. Our 2021 income tax provision includes a net $8 million addition related to an increase in valuation allowance associated with the federal interest expense carryforwards under the IRC Section 163(j) and primarily offset by a decrease in valuation allowance on certain state deferred tax assets as a result of the changes in estimate of the state apportionment.
(c)Our 20202023, 2022, and 2021 income tax provisions include a $3 million benefit, a $9 million expense, and a $13 million benefit, respectively, related to noncontrolling interest of various partnerships. (d)Our 2021 income tax provision includes a $192benefit $40 million addition related to an increaseinvestments in valuation allowance primarily due to the change in judgement in the realizability of certain deferred tax assets resulting from the reduction in forecast of future operating income and the RSN impairment. Our 2019sustainability initiatives whose activities qualify for federal income tax provision includes a $16 million benefit related to a release of valuation allowance on certain state net operating losses where utilization was expected as a result of a business combination.credits through 2021. (f)(e)Our 2021 2020, and 2019 income tax provisions include $1 million, $5 million, and $4 million additions, respectively, related to tax positions of prior tax years.
(g)Our 2019 income tax provision includes a $17 million addition primarily related to regulatory costs, executive compensation and other not tax-deductible expenses.
(h)Certain of our consolidated VIEs incur expenses that are not attributable to non-controlling interests because we absorb certain related losses of the VIEs. These expenses are not tax-deductible by us, and since these VIEs are treated as pass-through entities for income tax purposes, deferred income tax benefits are not recognized.
(i)Our 2019 income tax provision includes a benefit of $34$38 million related to the treatmentas result of the gain fromCARES Act allowing for the sale of certain broadcast spectrum in connection with the Broadcast Incentive Auction.
(j)Our 2019 income tax provision includes a $2 million benefit related2020 federal net operating loss to capital losses that will be carried back to the pre-2018 tax years when the federal tax rate was 35%.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Temporary differences between the financial reporting carrying amounts and the tax bases of assets and liabilities give rise to deferred taxes. Total deferred tax assets and deferred tax liabilities as of December 31, 20212023 and 20202022 were as follows (in millions): | | | 2021 | | 2020 | | 2023 | | 2022 | Deferred Tax Assets: | Deferred Tax Assets: | | | | Deferred Tax Assets: | | | | Net operating losses: | Net operating losses: | | | | Net operating losses: | | | | Federal | Federal | $ | 16 | | | $ | 22 | | State | State | 120 | | | 130 | | Goodwill and intangible assets | 6 | | | 9 | | Basis in DSH | 814 | | | 834 | | IRC Section 163(j) interest expense carryforward | | Investment in Bally's securities | | Tax Credits | Tax Credits | 87 | | | 67 | | | Other | Other | 108 | | | 53 | | | | 1,151 | | | 1,115 | | Valuation allowance for deferred tax assets | Valuation allowance for deferred tax assets | (256) | | | (252) | | Total deferred tax assets | Total deferred tax assets | $ | 895 | | | $ | 863 | | | Deferred Tax Liabilities: | Deferred Tax Liabilities: | | | | Deferred Tax Liabilities: | | Deferred Tax Liabilities: | | | | | Goodwill and intangible assets | Goodwill and intangible assets | $ | (397) | | | $ | (402) | | Property & equipment, net | Property & equipment, net | (165) | | | (221) | | | Investment in DSIH | | Other | Other | (40) | | | (43) | | Total deferred tax liabilities | Total deferred tax liabilities | (602) | | | (666) | | Net deferred tax assets | $ | 293 | | | $ | 197 | | Net deferred tax liabilities | |
At December 31, 2021,2023, the Company had approximately $76$527 million and $2.6 billion$3,236 million of gross federal and state net operating losses, respectively. Except for those without an expiration date, these losses will expire during various years from 20222024 to 2041,2043, and some of them are subject to annual limitations under the IRC Section 382 and similar state provisions. As discussed in Income Taxes underwithin Note 1. Nature of Operations and Summary of Significant Accounting Policies, we establish a valuation allowancesallowance in accordance with the guidance related to accounting for income taxes. As of December 31, 2021,2023, a valuation allowance has been provided for deferred tax assets related to certain temporary basis differences interest expense carryforwards under the IRC Section 163(j) and a substantial portion 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, current and cumulative losses, and projected future taxable income. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that they will be realized in the future. During the year ended December 31, 2021,2023, we decreased our valuation allowance by $192 million to $120 million. The decrease was primarily due to the release of valuation allowance related to interest expense carryforwards under the IRC Section 163(j) offset by a change in judgement in the realizability of certain state deferred tax assets. During the year ended December 31, 2022, we increased our valuation allowance by $4$56 million to $256$312 million. The increase in valuation allowance was primarily due to uncertainty in the realizability of deferred tax assets related to interest expense carryforwards under the IRC Section 163(j), offset by a change in judgement in the realizability of certain state deferred tax assets. During the year ended December 31, 2020, we increased our valuation allowance by $187 million to $252 million. The increase in valuation allowance was primarily due to the change in judgement in the realizability of certain deferred tax assets resulting from the reduction in forecast of future operating income and the RSN impairment.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the activity related to our accrued unrecognized tax benefits (in millions): | | | 2021 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | Balance at January 1, | Balance at January 1, | $ | 11 | | | $ | 11 | | | $ | 7 | | Additions related to prior year tax positions | Additions related to prior year tax positions | 1 | | | 5 | | | 4 | | Additions related to current year tax positions | Additions related to current year tax positions | 3 | | | 3 | | | — | | Reductions related to prior year tax positions | — | | | (1) | | | — | | | Reductions related to settlements with taxing authorities | | Reductions related to settlements with taxing authorities | | Reductions related to settlements with taxing authorities | Reductions related to settlements with taxing authorities | — | | | (4) | | | — | | Reductions related to expiration of the applicable statute of limitations | Reductions related to expiration of the applicable statute of limitations | — | | | (3) | | | — | | Balance at December 31, | Balance at December 31, | $ | 15 | | | $ | 11 | | | $ | 11 | |
We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Our 20162014 through 20192020 federal tax returns are currently under audit, and several of our subsidiaries are currently under state examinations for various years. Certain of our 2017 and subsequent federal and/or state tax returns remain subject to examination by various tax authorities. We do not anticipate thethat resolution of these matters will result in a material change to our consolidated financial statements. In addition, we do not believe that our liability for unrecognized tax benefits wouldcould be materially impacted,reduced by up to $1 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.
13. COMMITMENTS AND CONTINGENCIES: Sports Programming Rights
We are contractually obligated to make payments to purchase sports programming rights. The following table presents our annual non-cancellable commitments relating to the local sports segment's sports programming rights agreements as of December 31, 2021. These commitments assume that sports teams fully deliver the contractually committed games, and do not reflect the impact of rebates expected to be paid by the teams.
| | | | | | (in millions) | | 2022 | $ | 1,819 | | 2023 | 1,773 | | 2024 | 1,707 | | 2025 | 1,573 | | 2026 | 1,373 | | 2027 and thereafter | 5,723 | | Total | $ | 13,968 | |
Other Liabilities
In connection with the RSN Acquisition, we assumed certain fixed payment obligations which are payable through 2027. We recorded these obligations in purchase accounting at estimated fair value. As of December 31, 2021 and 2020, $32 million and $31 million, respectively, was recorded within other current liabilities and $71 million and $97 million, respectively, was recorded within other long-term liabilities in our consolidated balance sheets. Interest expense of $6 million, $8 million, and $4 million was recorded for the years ended December 31, 2021, 2020, and 2019, respectively.
In connection with the RSN Acquisition, we assumed certain variable payment obligations which are payable through 2030. These contractual obligations are based upon the excess cash flow of certain RSNs. We recorded these obligations in purchase accounting at estimated fair value. As of December 31, 2021 and 2020, $8 million and $12 million, respectively, was recorded within other current liabilities and $23 million and $41 million, respectively, was recorded within other long-term liabilities in our consolidated balance sheets. These obligations are measured at the present value of the estimated amount of cash to be paid over the term of the contracts. We recorded measurement adjustment gains of $15 million and $159 million for the years ended December 31, 2021 and 2020, respectively, recorded within other (expense) income, net in our consolidated statements of operations.
Litigation We are a party to lawsuits, claims, and regulatory matters from time to time in the ordinary course of business. Actions currently pending are in various stages and no material judgments or decisions have been rendered by hearing boards or courts in connection with such actions. Except as noted below, we do not believe the outcome of these matters, individually or in the aggregate, will have a material effect on the Company's financial statements.
FCC Litigation Matters Matters.
On May 22, 2020, the FCCFederal 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)("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’sFCC'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. NaNTwo 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, 2020,2020. 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 petitionCompany 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 CommissionFCC 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.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 December 31, 2023, 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.
Other Litigation Matters. On November 6, 2018, the Company agreed to enter into a proposed consent decree with the Department of Justice (DOJ)("DOJ"). This consent decree resolves the DOJ’sDOJ'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’sCompany's management hashad already instructed them not to do.
The Company is aware of NaNtwenty-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 13thirteen 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’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’defendants' motion to dismiss on November 6, 2020. Since then,Discovery commenced shortly after that and is continuing. Under the Plaintiffs have servedcurrent schedule set by the DefendantsCourt, 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 written discovery requests,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 Court has set a pretrial schedule which now requires discoveryother non-settling defendants continue to be completed by December 30, 2022 and briefing on class certification to be completed by May 15, 2023. The Company believesbelieve the lawsuits are without merit and intendsintend to vigorously defend itselfthemselves 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.
SINCLAIR, INC. NOTES TO THE 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. 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. The cash payment will be funded by cash on hand at Ventures and STG, and/or a loan backed by Ventures. Under the terms of the settlement, Sinclair will provide transition services to DSG to allow DSG to become a self-standing entity going forward. As of December 31, 2023, we have accrued $495 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 and corporate general and administrative expenses in our consolidated statement of operations.
The settlement is subject to definitive documentation. On February 26, 2024, the court approved the settlement, subject to Sinclair and DSG completing definitive documentation.
Sinclair has entered into the settlement, without admitting any fault or wrongdoing. If the settlement does not receive final court approval, Sinclair remains committed to vigorously defending against the claims asserted in the litigation.
Changes in the Rules of Television Ownership, Local Marketing Agreements, Joint Sales Agreements, Retransmission Consent Negotiations, and National Ownership Cap
Certain of our stations have entered into what have commonly been referred to as local marketing agreements or LMAs. One typical type of LMA is a programming agreement between 2two separately owned television stations serving the same market, whereby the licensee of 1one station programs substantial portions of the broadcast day and sells advertising time during such programming segments on the other licensee’s station subject to the latter licensee’s ultimate editorial and other controls. We believe these arrangements allow us to reduce our operating expenses and enhance profitability. In 1999, the FCC established a local television ownership rule that made certain LMAs attributable. The FCC adopted policies to grandfatherexempt from attribution "legacy" LMAs that were entered into prior to November 5, 1996 and permitted the applicable stations to continue operations pursuant to the LMAs until the conclusion of the FCC’s 2004 biennial review. The FCC stated it would conduct a case-by-case review of grandfatheredlegacy LMAs and assess the appropriateness of extending the grandfatheringexemption periods. The FCC did not initiate any review of grandfatheredlegacy LMAs in 2004 or as part of its subsequent quadrennial reviews. We do not know when, or if, the FCC will conduct any such review of grandfatheredlegacy LMAs. Currently, all of our LMAs are grandfatheredexempt from attribution under the local television ownership rule because they were entered into prior to November 5, 1996. If the FCC were to eliminate the grandfathering ofexemption for these LMAs, we would have to terminate or modify these LMAs.
In September 2015, the FCC released a Notice of Proposed Rulemaking in response to a Congressional directive in STELAR to examine the “totality"totality of the circumstances test”test" for good-faith negotiations of retransmission consent. The proposed rulemaking seeks comment on new factors and evidence to consider in its evaluation of claims of bad faith negotiation, including service interruptions prior to a “marquee"marquee sports or entertainment event,”" restrictions on online access to broadcast programming during negotiation impasses, broadcasters’broadcasters' ability to offer bundles of broadcast signals with other broadcast stations or cable networks, and broadcasters’broadcasters' ability to invoke the FCC’sFCC's exclusivity rules during service interruptions. On July 14, 2016, the FCC’s Chairman at the time announced that the FCC would not, at that time, proceed to adopt additional rules governing good faith negotiations of retransmission consent but did not formally terminate the rulemaking. No formal action has yet been taken on this Proposed Rulemaking, and we cannot predict if the CommissionFCC will terminate the rulemaking or take other action.
In August 2016, the FCC completed both its 2010 and 2014 quadrennial reviews of its media ownership rules and issued an order (Ownership Order) which left most of the existing multiple ownership rules intact, but amended the rules to provide for the attribution of JSAs under certain circumstances. Certain existing JSAs were later grandfathered until 2025. On November 20, 2017, the FCC released an Ownership Order on Reconsideration that amongeliminated or revised several media ownership rules. Among other things, the Order on Reconsideration (1) eliminated the “Eight-Voices Test” that previously allowed common ownership of two stations in a single market only if eight or more independently-owned television stations would remain in the market (allowing common ownership of up to two stations in a market as long as such ownership does not violate the Top-Four Prohibition), and (3) eliminated the JSA attribution rule. The Ownership Order on Reconsideration (including elimination of the JSA attribution rule) became effective on February 7, 2018. The Ownership Order on Reconsideration was vacated and remanded by the U.S. Court of Appeals for the Third Circuit in September 2019, but the Supreme Court ultimately reversed the Third Circuit’s decision on April 1, 2021 and the Ownership Order on Reconsideration is currently in effect.became effective on June 30, 2021.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS On December 18, 2017, the CommissionFCC released a Notice of Proposed Rulemaking to examine the FCC’s national ownership cap, including the UHF discount. The UHF discount allows television station owners to discount the coverage of UHF stations when calculating compliance with the FCC’sFCC's national ownership cap, which prohibits a single entity from owning television stations that reach, in total, more than 39% of all the television households in the nation. All but 34 of the stations we currently own and operate, or to which we provide programming services are UHF. We cannot predict the outcome of the rulemaking proceeding. With the application of the UHF discount counting all our present stations we reach approximately 24% of U.S. households. Changes to the national ownership cap could limit our ability to make television station acquisitions.
On December 13, 2018, the FCC released a Notice of Proposed Rulemaking to initiate the 2018 Quadrennial Regulatory Review of the FCC’s broadcast ownership rules. The NPRM seeks comment on whether certain of its ownership rules continue to be necessary in the public interest or whether they should be modified or eliminated. With respect to the local television ownership rule specifically, among other things, the NPRM seeksNotice of Proposed Rulemaking sought comment on possible modifications to the rule’s operation, including the relevant product market, the numerical limit, the top-four prohibition;Top-Four Prohibition, and the implications of multicasting, satellite stations, low power television ("LPTV") stations and the next generationNext Generation broadcasting standard. In addition,On December 22, 2023, the NPRM examines further several diversity related proposals raisedFCC completed its 2018 Quadrennial Regulatory Review (the "2018 Ownership Order"). The 2018 Ownership Order declined to loosen or eliminate any of the existing television ownership rules and expanded the Top-Four Prohibition to multicast streams and LPTV stations, each of which were not previously considered as part of the local television ownership rules. The expanded rule prohibits a broadcaster with a top-four-rated television station from acquiring the network affiliation of another top-four rated station in the last quadrennial review proceeding.market and airing that second top-four network on a multicast stream or commonly owned LPTV station under certain circumstances. Affiliation arrangements existing as of the release of the 2018 Ownership Order that would otherwise violate the expanded Top-Four Prohibition will not be subject to divestiture, but such arrangements will not be transferrable or assignable. The public comment period began on April 29, 2019,2018 Ownership Order also revised the methodology for determining whether a station is rated among the top-four stations in the market, retained the SSA disclosure requirement, and reply comments weredeclined to attribute SSAs or JSAs. The 2018 Ownership Order’s expansion of the Top-Four Prohibition to multicast streams and LPTV stations may affect the Company’s ability to acquire programming or to sell or acquire stations due by May 29, 2019. to the need to divest grandfathered affiliations.
On July 16, 2021,December 22, 2022, the FCC extendedreleased a Public Notice to initiate the 2022 Quadrennial Regulatory Review, seeking comment deadline to September 2, 2021and extendedon the reply comment deadline to October 1, 2021.Local Radio Ownership Rule, the Local Television Ownership Rule, and the Dual Network Rule. This proceeding remains pending. We cannot predict the outcome of thethat rulemaking proceeding. Changes to these rules could impact our ability to make radio or television station acquisitions.
14. 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.
We areA subsidiary of DSIH is a party to a joint venture associated with Marquee. Marquee is party to a long term telecast rights agreement which provides the rights to air certain live game telecasts and other content, which we guarantee. In connection with the RSN Acquisition,a prior acquisition, we became party to a joint venture associated with one other regional sports network. We participateDSIH participated significantly in the economics and havehad the power to direct the activities which significantly impactimpacted the economic performance of these regional sports networks, including sales and certain operational services. We consolidateAs of December 31, 2021, we consolidated these regional sports networks because they arewere variable interest entities and we arewere the primary beneficiary. As of March 1, 2022, as a result of the Deconsolidation, we no longer consolidate these regional sports networks. See Deconsolidation of Diamond Sports Intermediate Holdings LLC within Note 1. Nature of Operations and Summary of Significant Accounting Policies.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 December 31, 20212023 and 20202022 were as follows (in millions): | | | 2021 | | 2020 | | 2023 | | 2022 | ASSETS | ASSETS | | | | ASSETS | | | | Current assets: | Current assets: | | | | Current assets: | | | | Cash and cash equivalents | $ | 43 | | | $ | 64 | | | Accounts receivable, net | Accounts receivable, net | 83 | | | 70 | | Prepaid sports rights | 2 | | | 2 | | Accounts receivable, net | | Accounts receivable, net | | | Other current assets | | Other current assets | | Other current assets | Other current assets | 4 | | | 5 | | | Total current asset | | Total current asset | | Total current asset | Total current asset | 132 | | | 141 | | | | Property and equipment, net | Property and equipment, net | 17 | | | 16 | | Operating lease assets | 5 | | | 6 | | | Property and equipment, net | | | Property and equipment, net | | | Goodwill and indefinite-lived intangible assets | | Goodwill and indefinite-lived intangible assets | | Goodwill and indefinite-lived intangible assets | Goodwill and indefinite-lived intangible assets | 15 | | | 15 | | | Definite-lived intangible assets, net | Definite-lived intangible assets, net | 47 | | | 54 | | Other assets | 1 | | | 1 | | Definite-lived intangible assets, net | | Definite-lived intangible assets, net | | | Total assets | | Total assets | | Total assets | Total assets | $ | 217 | | | $ | 233 | | | LIABILITIES | | LIABILITIES | | LIABILITIES | LIABILITIES | | | | | | | Current liabilities: | Current liabilities: | | | | Current liabilities: | | | | Other current liabilities | Other current liabilities | $ | 62 | | | $ | 40 | | | | Long-term liabilities: | | | | Long-term liabilities: | | | Long-term liabilities: | | | | | Notes payable, finance leases, and commercial bank financing, less current portion | Notes payable, finance leases, and commercial bank financing, less current portion | — | | | 10 | | Operating lease liabilities, less current portion | 4 | | | 5 | | | Program contracts payable, less current portion | Program contracts payable, less current portion | 2 | | | 4 | | Other long term liabilities | 4 | | | 17 | | Program contracts payable, less current portion | | Program contracts payable, less current portion | | Other long-term liabilities | | Total liabilities | Total liabilities | $ | 72 | | | $ | 76 | |
The amounts above represent the consolidatedcombined 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 above, were $127 million and $131$130 million as of both December 31, 20212023 and December 31, 2020, respectively,2022, 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 December 31, 2021,2023, all of the liabilities are non-recourse to us except for the debt of certain VIEs. See Debt of variable interest entitiesVariable Interest Entities and guaranteesGuarantees of third-party debtThird-party Obligations under Note 7. Notes Payable and Commercial Bank Financing for further discussion. The risk and reward characteristics of the VIEs are similar. Other VIEs
We have several investments in entities which are considered VIEs. However, we do not participate in the management of these entities, including the day-to-day operating decisions or other decisions which would allow us to control the entity, and therefore, we are not considered the primary beneficiary of these VIEs.
The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary were $175$192 million and $75$187 million as of December 31, 20212023 and 2020,2022, respectively, and are included in other assets in our consolidated balance sheets. See Note 6. 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 equity investments are recorded in income (loss) from equity method investments and other (expense) income,expense, net, respectively, in our consolidated statements of operations. We recorded a gaingains of $37$27 million, $58 million, and losses of $38 million and $50$37 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively, related to these investments.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In conjunction with the Transaction, the composition of the DSIH board of managers was modified resulting in our loss of voting control over DSIH. We hold substantially all of 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 are also party to an A/R facility held by an indirect wholly-owned subsidiary of DSIH which has a maturity date of September 23, 2024. There was no outstanding balance as of December 31, 2023 and an outstanding balance of $193 million as of December 31, 2022, which is recorded within other assets in our consolidated balance sheets. 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. As of December 31, 2023, the maximum aggregate commitment under the A/R Facility is $50 million. See Note Receivable within Note 6. Other Assets. The amounts drawn under the A/R facility represent our maximum loss exposure.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. RELATED PERSON TRANSACTIONS: Transactions with our controlling shareholdersWith Our Controlling Shareholders David, Frederick, J. Duncan, and Robert Smith (collectively, the"the controlling shareholders)shareholders") are brothers and hold substantially all of theour 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 $5$6 million for each of theboth years ended December 31, 2021, 2020,2023 and 2019.2022 and $5 million for the year ended December 31, 2021. Finance leases payable related to the aforementioned relationships were $7 million, net of $1 million interest, and $9 million, net of $1 million interest, and $8 million, net of $2 million interest, as of December 31, 20212023 and 2020,2022, respectively. The finance leases mature in periods through 2029.2030. For further information on finance leases to affiliates, see Note 7. Notes Payable and Commercial Bank Financing.
Charter Aircraft. We lease aircraft owned by certain controlling shareholders. For all leases, we incurred aggregate expenses of $0.2 million, $0.4 million and $1 million for each of the years ended December 31, 2023, 2022, and 2021, and 2020 and $2 million forrespectively.
For the year ended December 31, 2019.2023, we made a $22 million investment in a company in which certain of our controlling shareholders also hold an equity interest. Cunningham Broadcasting Corporation
Cunningham owns a portfolio of television stations, including: WNUV-TV Baltimore, Maryland; WRGT-TV Dayton, Ohio; WVAH-TV Charleston, West Virginia; WMYA-TV Anderson, South Carolina; WTTE-TV Columbus, Ohio; WDBB-TV Birmingham, Alabama; WBSF-TV Flint, Michigan; WGTU-TV/WGTQ-TV Traverse City/Cadillac, Michigan; WEMT-TV Tri-Cities, Tennessee; WYDO-TV Greenville, North Carolina; KBVU-TV/KCVU-TV Eureka/Chico-Redding, California; WPFO-TV Portland, Maine; and KRNV-DT/KENV-DT Reno, Nevada/Salt Lake City, UtahUtah; and KTXD-TV in Dallas, Texas (collectively, the Cunningham Stations). Certain of our stations provide services to these Cunningham Stations pursuant to LMAs or JSAs and SSAs. See Note 14. Variable Interest Entities, for further discussion of the scope of services provided under these types of arrangements. As of December 31, 2021, we have jointly, severally, unconditionally, and irrevocably guaranteed $37 million of Cunningham debt, of which $7 million, net of $0.2 million deferred financing costs, relates to the Cunningham VIEs that we consolidate. All of 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.
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, 20232028 and there are 2is one additional five-year renewal terms remaining with final expiration on July 1, 2033. We also executed purchase agreements to acquire the license related assets of these stations from Cunningham, which grant us the right to acquire, and grant Cunningham the right to require us to acquire, subject to applicable FCC rules and regulations, 100% of the capital stock or the assets of these individual subsidiaries of Cunningham. Pursuant to the terms of this agreement we are obligated to pay Cunningham an annual fee for the television stations equal to the greater of (i) 3% of each station’s annual net broadcast revenue or (ii) $5$6 million. The aggregate purchase price of these television stations increases by 6% annually. A portion of the fee is required to be applied to the purchase price to the extent of the 6% increase. The cumulative prepayments made under these purchase agreements were $58$65 million and $54$61 million as of December 31, 20212023 and 2020,2022, respectively. The remaining aggregate purchase price of these stations, net of prepayments, was $54 million for both the years ended December 31, 20212023 and 2020.2022. Additionally, we provide services to WDBB-TV pursuant to an LMA, which expires April 22, 2025, and have a purchase option to acquire for $0.2 million. We paid Cunningham, under these agreements, $12 million, $10 million, and $11 million for the year ended December 31, 2021 and $8 million for each of the years ended December 31, 20202023, 2022, and 2019.2021, respectively.
The agreements with KBVU-TV/KCVU-TV, KRNV-DT/KENV-DT, WBSF-TV, WDBB-TV, WEMT-TV, WGTU-TV/WGTQ-TV, WPFO-TV, and WYDO-TV expire between May 2023April 2025 and November 2029, and certain stations have renewal provisions for successive eight-year periods.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As we consolidate the licensees as VIEs, the amounts we earn or pay under the arrangements are eliminated in consolidation and the gross revenues of the stations are reported in our consolidated statements of operations. Our consolidated revenues include $144$140 million, $157$159 million, and $155$144 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively, related to the Cunningham Stations.
We have an agreement with Cunningham to provide master control equipment and provide master control services to a station in Johnstown, PA with which Cunningham has an LMA that expires in June 2022.2025. Under the agreement, Cunningham paid us an initial fee of $1 million and pays us $0.2$0.3 million annually for master control services plus the cost to maintain and repair the equipment. In addition, we have an agreement with Cunningham to provide a news share service with the Johnstown, PA station for an annual fee of $0.5$0.6 million and increasedwhich increases by 3% on each anniversary and which expires in November 2024.
Atlantic Automotive CorporationWe have multi-cast agreements with Cunningham Stations in the Eureka/Chico-Redding, California; Tri-Cities, Tennessee; Anderson, South Carolina; Baltimore, Maryland; Portland, Maine; Charleston, West Virginia; Dallas, Texas; and Greenville, North Carolina markets. In exchange for carriage of these networks in their markets, we paid $2 million, $1 million, and $2 million for the years ended December 31, 2023, 2022, and 2021, respectively, under these agreements.
MileOne Autogroup, Inc.
We sell advertising time to Atlantic Automotive Corporation (Atlantic Automotive)certain operating subsidiaries of MileOne Autogroup, Inc. ("MileOne"), a holding company that ownsincluding automobile dealerships, body shops, and an automobile leasing company. David D. Smith, our Executive Chairman, has a controlling interest in, and is a member of the Board of Directors of, Atlantic Automotive.MileOne. We received payments for advertising totaling less than $0.1 million for the year ended December 31, 2021 and $0.2 million for each of the years ended December 31, 20202023 and 2019.2022 and $0.1 million for the year December 31, 2021. Leased propertyProperty by real estate venturesReal Estate Ventures Certain of our real estate ventures have entered into leases with entities owned by members of the Smith Family. Total rent received under these leases was $1 million for each of the years ended December 31, 2021, 2020,2023, 2022, and 2019.2021.
Diamond Sports Intermediate Holdings LLC
Subsequent to February 28, 2022, we account for our equity interest in DSIH as an equity method investment.
Management Services Agreement. In 2019, we entered into a management services agreement with DSG, a wholly-owned subsidiary of DSIH, in which we provide DSG with affiliate sales and marketing services and general and administrative services. The contractual annual amount due from DSG for these services during the fiscal year ended December 31, 2023 is $78 million, which is subject to increases on an annual basis. Additionally, the agreement contains an incentive fee payable to us calculated based on certain terms contained within new or renewed distribution agreements with Distributors. As a condition to the Transaction, DSG will defer the cash payment of a portion of its management fee payable to the Company over the next four years. Pursuant to this agreement, excluding the amounts deferred as part of the Transaction, the local media segment recorded $49 million and $60 million of revenue for the years ended December 31, 2023 and 2022 related to both the contractual and incentive fees, of which $24 million was eliminated in consolidation prior to the Deconsolidation for the year ended December 31, 2022. We will not recognize the portion of deferred management fees as revenue until such fees are determined to be collectible. The terms of this agreement are subject to change depending upon the outcome of the settlement with DSG discussed in Note 13. Commitments and Contingencies.
Distributions. DSIH made distributions to DSH for tax payments on the dividends of the Redeemable Subsidiary Preferred Equity method investeesof $7 million for the year ended December 31, 2022.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note receivable. For the year ended December 31, 2023, we received payments totaling $203 million related to the note receivable associated with the A/R facility, including $199 million from DSPV on May 10, 2023, representing the aggregate outstanding principal amount of the loans under the A/R Facility, accrued interest, and outstanding fees and expenses. For the year ended December 31, 2022, we received payments totaling $60 million from DSPV and funded an additional $40 million related to the note receivable associated with the A/R facility.
We recorded revenue of $19 million and $15 million for the years ended December 31, 2023 and 2022, respectively, within other related to certain other transactions between DSIH and the Company.
Other Equity Method Investees
YES Network. In August 2019, YES Network, which was accounted for as an equity method investee,investment prior to the Deconsolidation, entered into a management services agreement with the Company, in which the Company provides certain services for an initial term that expires on August 29, 2025. The agreement will automatically renew for 2two 2-year renewal terms, with a final expiration on August 29, 2029. Pursuant to the terms of the agreement, the YES Network paid us a management services fee of $6 million, $5$1 million and $2$6 million for the years ended December 31, 2021, 2020,2022 and 2019,2021, respectively.
We haveDSIH has a minority interest in certain mobile production businesses, whichbusinesses. Prior to the Deconsolidation, we accountaccounted for these as equity method investments. WeDSIH made payments to these businesses for production services totaling $45 million, $19$5 million and $12$45 million for the years ended December 31, 2021, 2020,2022 and 2019,2021, respectively.
We have a minority interest in a sports marketing company, which we account for as an equity method investment. We made payments to this business for marketing services totaling $17$2 million for the year ended December 31, 2021.
Programming rights
As of December 31, 2021, affiliates of 6 professional teams have non-controlling equity interests in certain of our RSNs. These agreements expire on various dates during the fiscal years ended 2025 through 2032. The Company paid $424 million, $168 million, net of rebates, and $73$17 million for the years ended December 31, 2022 and 2021, 2020,respectively.
Sports Programming Rights
Affiliates of six professional teams had non-controlling equity interests in certain of DSIH's regional sports networks. DSIH paid $61 million and 2019,$424 million, net of rebates, for the years ended December 31, 2022 and 2021, respectively, under sports programming rights agreements covering the broadcast of regular season games associated with these professional teams. Prior to professional teams who have non-controlling equity intereststhe Deconsolidation, these payments were recorded in certainour consolidated statements of our RSNs.operations and cash flows.
Employees
Jason Smith, an employee of the Company, is the son of Frederick Smith, who is a Vice President of the Company and a member of the Company's Board of Directors.Board. Jason Smith received total compensation of $0.8 million, $0.6 million, and $0.2 million, consisting of salary and bonus, for the years ended December 31, 2023, 2022, and 2021, respectively, consisting of salary and bonus, and was granted 2,239 shares of restricted stock, vesting over two years, during the year ended December 31, 2021.
Ethan White, an employee of the Company, is the son-in-law of J. Duncan Smith, who is a Vice President of the Company and Secretary of the Board. Ethan White received total compensation of $0.2 million, consisting of salary and bonus, for the year ended December 31, 2023 and $0.1 million, consisting of salary and bonus, for each of the years ended December 31, 2021, 2020,2022 and 2019,2021, and was granted RSAs with respect to 2,239 and 3551,252 shares of restricted stock, vesting over two years, forduring the yearsyear ended December 31, 2021 and 2020, respectively. 2023.
Amberly Thompson, an employee of the Company, is the daughter of Donald Thompson, who is an Executive Vice President and Chief Human Resources Officer of the Company. Amberly Thompson received total compensation of $0.2 million, $0.1 million, and $0.2 million, consisting of salary and bonus, for each of the years ended December 31, 2023, 2022, and 2021, 2020, and 2019. respectively.
Edward Kim, an employee of the company, is the brother-in-law of Christopher Ripley, who is the President and Chief Executive Officer of the Company. Edward Kim received total compensation of $0.2 million, and $0.1 million, consisting of salary, for each of the years ended December 31, 2023, 2022, and 2021 and 2020,was granted 516 and 302 shares of restricted stock, vesting over two years, during the years ended December 31, 2023 and 2022, respectively.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Frederick Smith is the brother of David Smith, Executive Chairman of the Company and Chairman of the Board; J. Duncan Smith; and Robert Smith, a member of the Board. Frederick Smith received total compensation of $1 million for each of the years ended December 31, 2023, 2022, and 2021, consisting of salary, bonus, and earnings related to Frederick Smith’s participation in the Company's deferred compensation plan. J. Duncan Smith is the brother of David Smith, Frederick Smith, and Robert Smith. J. Duncan Smith received total compensation of $1 million for each of the years ended December 31, 2023, 2022, and 2021, consisting of salary and bonus.
16. EARNINGS PER SHARE: The following table reconciles income (numerator)("numerator") and shares (denominator)("denominator") used in our computations of earnings per share for the years ended December 31, 2021, 2020,2023, 2022, and 20192021 (in millions, except share amounts which are reflected in thousands): | | | 2021 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | Income (Numerator) | | | | | | Income ("Numerator") | | Income ("Numerator") | | | | Net (loss) income | Net (loss) income | $ | (326) | | | $ | (2,429) | | | $ | 105 | | Net income attributable to the redeemable noncontrolling interests | (18) | | | (56) | | | (48) | | Net (income) loss attributable to the noncontrolling interests | (70) | | | 71 | | | (10) | | Net loss (income) attributable to the redeemable noncontrolling interests | | Net income attributable to the noncontrolling interests | | Numerator for basic and diluted earnings per common share available to common shareholders | Numerator for basic and diluted earnings per common share available to common shareholders | $ | (414) | | | $ | (2,414) | | | $ | 47 | | | Shares (Denominator) | | | | | | Shares ("Denominator") | | Shares ("Denominator") | | Shares ("Denominator") | | | | | Basic weighted-average common shares outstanding | Basic weighted-average common shares outstanding | 75,050 | | | 79,924 | | | 92,015 | | Dilutive effect of stock settled appreciation rights and outstanding stock options | Dilutive effect of stock settled appreciation rights and outstanding stock options | — | | | — | | | 1,170 | | Diluted weighted-average common and common equivalent shares outstanding | Diluted weighted-average common and common equivalent shares outstanding | 75,050 | | | 79,924 | | | 93,185 | |
The net earnings per share amounts are the same for Class A and Class B Common Stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.
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.
| | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | Weighted-average stock-settled appreciation rights and outstanding stock options excluded | 1,973 | | | 3,288 | | | 238 | |
| | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Weighted-average stock-settled appreciation rights and outstanding stock options excluded | 4,425 | | | 3,370 | | | 1,973 | |
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. SEGMENT DATA: We measureDuring the year ended December 31, 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 have been recast to reflect this new presentation. During the year ended December 31, 2023, we measured segment performance based on operating income (loss). We have 2For the year ended December 31, 2023, we had two reportable segments: broadcastlocal media and tennis. Prior to the Deconsolidation on March 1, 2022, we had one additional reportable segment: local sports. Our broadcastlocal media segment previously referred to asincludes our local newstelevision stations, original networks and marketing services segment,content and provides these through free over-the-air programming to television viewing audiences and includesfor stations in 86 markets located throughout the continental United States.States, as well as distributes the content of these stations to MVPDs for distribution to their customers in exchange for contractual fees. Our tennis segment provides viewers coverage of many of tennis' top tournaments and original professional sport and tennis lifestyle shows. Prior to the Deconsolidation, our local sports segment previously referred to as our sports segment, providesprovided viewers with live professional sports content and includes our regional sports network brands,included the Bally RSNs, Marquee, and a minority equity interestour investment in the YES Network. Other and corporate are not reportable segments but are included for reconciliation purposes. Other primarily consists of original networks and content, including Tennis, non-broadcast digital and internet solutions, technical services, and other non-media investments. Corporate costs primarily include our costs to operate as a public company and to operate our corporate headquarters location. All of our businesses are located within the United States. 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 years ended December 31, 2021, 2020,2023, 2022, and 20192021 (in millions):
| As of December 31, 2021 | | Broadcast | | Local sports | | Other & Corporate | | Eliminations | | Consolidated | As of December 31, 2023 | | As of December 31, 2023 | | Local media | | Tennis | | Other & Corporate | | Eliminations | | Consolidated | Goodwill | Goodwill | | $ | 2,016 | | | $ | — | | | $ | 72 | | | $ | — | | | $ | 2,088 | | Assets | Assets | | 4,793 | | | 5,769 | | | 2,009 | | | (30) | | | 12,541 | | Capital expenditures | | 52 | | | 16 | | | 12 | | | — | | | 80 | | |
| As of December 31, 2020 | | Broadcast | | Local sports | | Other & Corporate | | Eliminations | | Consolidated | As of December 31, 2022 | | As of December 31, 2022 | | Local media | | Tennis | | Other & Corporate | | Eliminations | | Consolidated | Goodwill | Goodwill | | $ | 2,017 | | | $ | — | | | $ | 75 | | | $ | — | | | $ | 2,092 | | Assets | Assets | | 4,908 | | | 6,620 | | | 1,867 | | | (13) | | | 13,382 | | Capital expenditures | | 101 | | | 24 | | | 32 | | | — | | | 157 | | |
| For the year ended December 31, 2021 | | Broadcast | | Local sports | | Other & Corporate | | Eliminations | | Consolidated | For the year ended December 31, 2023 | | For the year ended December 31, 2023 | | Local media | | Tennis | | Other & Corporate | | Eliminations | | Consolidated | Revenue | Revenue | | $ | 2,757 | | | $ | 3,056 | | | $ | 481 | | | $ | (160) | | (c) | $ | 6,134 | | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | | 247 | | | 316 | | | 31 | | | (3) | | | 591 | | Amortization of sports programming rights (a) | | — | | | 2,350 | | | — | | | — | | | 2,350 | | Amortization of program contract costs | Amortization of program contract costs | | 76 | | | — | | | 17 | | | — | | | 93 | | Corporate general and administrative expenses | Corporate general and administrative expenses | | 147 | | | 10 | | | 13 | | | — | | | 170 | | Gain on asset dispositions and other, net of impairment | | (24) | | (b) | (43) | | (b) | (4) | | | — | | | (71) | | Loss on deconsolidation of subsidiary | | (Gain) loss on asset dispositions and other, net of impairment | | | Operating income (loss) | Operating income (loss) | | 374 | | (b) | (317) | | (b) | 39 | | | (1) | | | 95 | | Operating income (loss) | | Operating income (loss) | | Interest expense including amortization of debt discount and deferred financing costs | Interest expense including amortization of debt discount and deferred financing costs | | 4 | | | 436 | | | 192 | | | (14) | | | 618 | | Income (loss) from equity method investments | | — | | | 49 | | | (4) | | | — | | | 45 | | (Loss) income from equity method investments | | Capital expenditures | |
SINCLAIR, INC. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended December 31, 2020 | | Broadcast | | Local sports | | Other & Corporate | | Eliminations | | Consolidated | Revenue | | $ | 2,922 | | | $ | 2,686 | | | $ | 451 | | | $ | (116) | | (c) | $ | 5,943 | | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | | 239 | | | 410 | | | 27 | | | (2) | | | 674 | | Amortization of sports programming rights (a) | | — | | | 1,078 | | | — | | | — | | | 1,078 | | Amortization of program contract costs | | 83 | | | — | | | 3 | | | — | | | 86 | | Corporate general and administrative expenses | | 119 | | | 10 | | | 19 | | | — | | | 148 | | (Gain) loss on asset dispositions and other, net of impairment | | (118) | | (b) | — | | | 3 | | | — | | | (115) | | Impairment of goodwill and definite-lived intangible assets | | — | | | 4,264 | | | — | | | — | | | 4,264 | | Operating income (loss) | | 789 | | (b) | (3,602) | | | 47 | | | (6) | | | (2,772) | | Interest expense including amortization of debt discount and deferred financing costs | | 5 | | | 460 | | | 203 | | | (12) | | | 656 | | Income (loss) from equity method investments | | — | | | 6 | | | (42) | | | — | | | (36) | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended December 31, 2022 | | Local media | | Tennis | | Local sports (d) | | Other & Corporate | | Eliminations | | Consolidated | Revenue | | $ | 3,193 | | (a) | $ | 217 | | | $ | 482 | | | $ | 95 | | | $ | (59) | | (c) | $ | 3,928 | | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | | 243 | | | 21 | | | 54 | | | 7 | | | (4) | | | 321 | | Amortization of sports programming rights (e) | | — | | | — | | | 326 | | | — | | | — | | | 326 | | Amortization of program contract costs | | 90 | | | — | | | — | | | — | | | — | | | 90 | | Corporate general and administrative expenses | | 117 | | | — | | | 1 | | | 42 | | | — | | | 160 | | Gain on deconsolidation of subsidiary | | — | | | — | | | — | | | (3,357) | | (f) | — | | | (3,357) | | Gain on asset dispositions and other, net of impairment | | (17) | | (b) | — | | | — | | | (47) | | | — | | | (64) | | Operating income (loss) | | 591 | | (b) | 52 | | | (4) | | | 3,341 | | | — | | | 3,980 | | Interest expense including amortization of debt discount and deferred financing costs | | 226 | | | — | | | 72 | | | 6 | | | (8) | | | 296 | | Income from equity method investments | | — | | | — | | | 10 | | | 46 | | | — | | | 56 | | Capital expenditures | | 96 | | | 1 | | | 2 | | | 6 | | | — | | | 105 | |
| For the year ended December 31, 2019 | | Broadcast | | Local sports | | Other & Corporate | | Eliminations | | Consolidated | For the year ended December 31, 2021 | | For the year ended December 31, 2021 | | Local media | | Tennis | | Local sports | | Other & Corporate | | Eliminations | | Consolidated | Revenue | Revenue | | $ | 2,690 | | | $ | 1,139 | | | $ | 470 | | | $ | (59) | | (c) | $ | 4,240 | | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | | 246 | | | 157 | | | 22 | | | (1) | | | 424 | | Amortization of sports programming rights (a) | | — | | | 637 | | | — | | | — | | | 637 | | Amortization of sports programming rights (e) | | Amortization of program contract costs | Amortization of program contract costs | | 90 | | | — | | | — | | | — | | | 90 | | Corporate general and administrative expenses | Corporate general and administrative expenses | | 144 | | | 93 | | | 151 | | | (1) | | | 387 | | Gain on asset dispositions and other, net of impairment | Gain on asset dispositions and other, net of impairment | | (62) | | (b) | — | | | (30) | | | — | | | (92) | | Operating income (loss) | Operating income (loss) | | 546 | | (b) | 30 | | | (98) | | | (8) | | | 470 | | Interest expense including amortization of debt discount and deferred financing costs | Interest expense including amortization of debt discount and deferred financing costs | | 5 | | | 200 | | | 230 | | | (13) | | | 422 | | Income (loss) from equity method investments | Income (loss) from equity method investments | | — | | | 18 | | | (53) | | | — | | | (35) | | Capital expenditures | |
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a)Includes $52 million and $39 million for the year ended December 31, 2023 and 2022, respectively, of revenue for services provided by local media under management services agreements after the Deconsolidation, which is not eliminated in consolidation. (b)Local media includes gains of $8 million, $4 million, and $24 million related to reimbursements for spectrum repack costs for the years ended December 31, 2023, 2022, and 2021, respectively. Local sports includes $43 million related to the fair value of equipment that we received for the C-Band spectrum repack for the year ended December 31, 2021. See Note 2. Acquisitions and Dispositions of Assets. (c)Includes $26 million, and $111 million of revenue for the years ended December 31, 2022 and 2021, respectively, for services provided by local media to local sports and other and $8 million, $12 million, and $35 million for the year ended December 31, 2023, 2022, and 2021, respectively, for services provided by other to local media, which are eliminated in consolidation. (d)Represents the activity prior to the Deconsolidation on March 1, 2022. (e)The amortization of sports programming rights is included within media programming and production expenses on our consolidated statements of operations. (b)(f)Includes gains of $67 million forRepresents the year ended December 31, 2021 related to gain recognized on the fair value of equipment that we received for the C-Band spectrum repack and reimbursements for spectrum repack costs, and gains of $90 million and $62 million for the years ended December 31, 2020 and 2019, respectively, related to reimbursements for spectrum repack costs. See Note 2. Acquisitions and Dispositions of Assets.
(c)Includes $111 million, $100 million, and $35 million of revenue for the years ended December 31, 2021, 2020, and 2019, respectively, for services provided by broadcast to local sports and other, which are eliminated in consolidation.Deconsolidation.
18. FAIR VALUE MEASUREMENTS: Accounting guidance provides for valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). A fair value hierarchy using three broad levels prioritizes the inputs to valuation techniques used to measure fair value. The following is a brief description of those three levels: •Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. •Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. •Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the carryingface value and fair value of our financial assets and liabilities as of December 31, 20212023 and 20202022 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | Level 1: | | | | | | | | Investments in equity securities | $ | 5 | | | $ | 5 | | | $ | 68 | | | $ | 68 | | STG: | | | | | | | | Money market funds | 265 | | | 265 | | | 448 | | | 448 | | Deferred compensation assets | 48 | | | 48 | | | 42 | | | 42 | | Deferred compensation liabilities | 38 | | | 38 | | | 36 | | | 36 | | DSG: | | | | | | | | Money market funds | 101 | | | 101 | | | 292 | | 292 | | | | | | | | | Level 2: | | | | | | | | Investments in equity securities (a) | 114 | | | 114 | | | — | | | — | | STG (b): | | | | | | | | 5.875% Senior Unsecured Notes due 2026 | 348 | | | 357 | | | 348 | | | 358 | | | | | | | | | | 5.500% Senior Unsecured Notes due 2030 | 500 | | | 489 | | | 500 | | | 520 | | 5.125% Senior Unsecured Notes due 2027 | 400 | | | 391 | | | 400 | | | 408 | | 4.125% Senior Secured Notes due 2030 | 750 | | | 712 | | | 750 | | | 770 | | Term Loan B | 379 | | | 373 | | | 1,119 | | | 1,107 | | Term Loan B-2 | 1,271 | | | 1,239 | | | 1,284 | | | 1,264 | | Term Loan B-3 (c) | 736 | | | 722 | | | — | | | — | | | | | | | | | | DSG (b): | | | | | | | | 12.750% Senior Secured Notes due 2026 | 31 | | | 17 | | | 31 | | | 28 | | 6.625% Senior Unsecured Notes due 2027 | 1,744 | | | 490 | | | 1,744 | | | 1,056 | | 5.375% Senior Secured Notes due 2026 | 3,050 | | | 1,525 | | | 3,050 | | | 2,483 | | Term Loan | 3,226 | | | 1,484 | | | 3,259 | | | 2,884 | | Accounts Receivable Securitization Facility | — | | | — | | | 177 | | | 177 | | Debt of variable interest entities (b) | 9 | | | 9 | | | 17 | | | 17 | | Debt of non-media subsidiaries (b) | 17 | | | 17 | | | 17 | | | 17 | | | | | | | | | | Level 3: | | | | | | | | Investments in equity securities (d) | 282 | | | 282 | | | 332 | | | 332 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | Face Value | | Fair Value | | Face Value | | Fair Value | Level 1: | | | | | | | | Investments in equity securities | N/A | | $ | 6 | | | N/A | | $ | 6 | | Money market funds | N/A | | $ | 588 | | | N/A | | $ | 741 | | Deferred compensation assets | N/A | | $ | 45 | | | N/A | | $ | 41 | | Deferred compensation liabilities | N/A | | $ | 44 | | | N/A | | $ | 35 | | | | | | | | | | Level 2: | | | | | | | | Investments in equity securities (a) | N/A | | $ | 110 | | | N/A | | $ | 153 | | Interest rate swap (b) | N/A | | $ | 1 | | | N/A | | $ | — | | STG (c): | | | | | | | | 5.500% Senior Notes due 2030 | $ | 485 | | | $ | 362 | | | $ | 500 | | | $ | 347 | | 5.125% Senior Notes due 2027 | $ | 274 | | | $ | 248 | | | $ | 282 | | | $ | 230 | | 4.125% Senior Secured Notes due 2030 | $ | 737 | | | $ | 521 | | | $ | 750 | | | $ | 560 | | Term Loan B-2, due September 30, 2026 | $ | 1,215 | | | $ | 1,124 | | | $ | 1,258 | | | $ | 1,198 | | Term Loan B-3, due April 1, 2028 | $ | 722 | | | $ | 595 | | | $ | 729 | | | $ | 692 | | Term Loan B-4, due April 21, 2029 | $ | 739 | | | $ | 602 | | | $ | 746 | | | $ | 709 | | | | | | | | | | Debt of variable interest entities (c) | $ | 7 | | | $ | 7 | | | $ | 8 | | | $ | 8 | | Debt of non-media subsidiaries (c) | $ | 15 | | | $ | 15 | | | $ | 16 | | | $ | 16 | | | | | | | | | | Level 3: | | | | | | | | Investments in equity securities (d) | N/A | | $ | 46 | | | N/A | | $ | 75 | |
N/A - Not applicable
(a)Consists of unrestricted warrants to acquire marketable common equity securities. The fair value of the warrants are derived from the quoted trading prices of the underlying common equity securities less the exercise price. (b)See Hedge Accounting within Note 1. Nature of Operations and Summary of Significant Accounting Policies and Interest Rate Swap within Note 7. Notes Payable and Commercial Bank Financing. (c)Amounts are carried in our consolidated balance sheets net of debt discount premium, and deferred financing costs, which are excluded in the above table, of $158$46 million and $183$56 million as of December 31, 20212023 and 2020,2022, respectively. (c)On April 1, 2021, STG amended the STG Bank Credit Agreement to raise term loans in an aggregate principle amount of $740 million, the net proceeds of which were used to refinance a portion of the STG Term Loan B-1 maturing in January 2024. Note 7. Notes Payable and Commercial Bank Financing for additional information.
(d)On November 18, 2020, we entered into a commercial agreement with Bally's and received warrants and options to acquire common equity in the business. During the years ended December 31, 20212023, 2022, and 20202021, we recorded a fair value adjustmeadjusnttment loss of $50$29 million, loss of $112 million, and gainloss of $133$50 million, respectively, related to these interests. The fair value of the warrants is primarily derived from the quoted trading prices of the underlying common equity adjustedequity. The fair value of the options is derived utilizing the Black Scholes valuation model. The most significant inputs include the trading price of the underlying common stock and the exercise price of the options, which range from $30 to $45 per share.
The following table summarizes the changes in financial assets measured at fair value on a recurring basis and categorized as Level 3 under the fair value hierarchy (in millions): | | | | | | | Options and Warrants | Fair Value at December 31, 2021 | $ | 282 | | | | | | Measurement adjustments | (112) | | Transfer to Level 2 | (95) | | Fair Value at December 31, 2022 | 75 | | Measurement adjustments | (29) | | | | Fair Value at December 31, 2023 | $ | 46 | |
SINCLAIR, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19. SUBSEQUENT EVENTS:
On January 17, 2024, we announced that we agreed, subject to definitive documentation and final court approval, to a global settlement and release of all claims associated with the litigation filed by DSG and DSG’s wholly-owned subsidiary, Diamond Sports Net, LLC, in July 2023, which settlement includes an amendment to the management services agreement between STG and DSG.
The settlement is subject to definitive documentation, including finalization of certain transition terms, and approval by the U.S. Bankruptcy Court in Houston overseeing DSG’s chapter 11 case. A motion for a 16%approval of the settlement was filed with the court on January 23, 2024. On February 26, 2024, the court approved the settlement, subject to Sinclair and 25% discountDSG completing definitive documentation.
See Note 13. Commitments and Contingencies for lackadditional information regarding the settlement.
SINCLAIR BROADCAST GROUP, LLC
FINANCIAL STATEMENTS OF SINCLAIR BROADCAST GROUP, LLC
Report of Independent Registered Public Accounting Firm
To the Board of Managers of Sinclair Broadcast Group, LLC and to the Board of Directors of Sinclair, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Sinclair Broadcast Group, LLC and its subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, of comprehensive (loss) income, and of cash flows for each of the three years in the period ended December 31, 2023, of member’s equity (deficit) and redeemable noncontrolling interests for the year ended December 31, 2023, and of equity (deficit) and redeemable noncontrolling interests for each of the years ended December 31, 2022 and 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with thestandards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Local Media Segment Advertising Revenue
As discussed in Note 1 to the consolidated financial statements, the Company recorded advertising revenue of $1,236 million relating to the local media segment for the year ended December 31, 2023. Advertising revenue is generated primarily from the sale of advertising spots/impressions. Advertising revenue is recognized in the period in which the advertising spots/impressions are delivered.
The principal consideration for our determination that performing procedures relating to the local media segment advertising revenue is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to revenue recognition for advertising revenue, including controls over the recording of advertising revenue in the period in which the advertising spots/impressions are delivered. These procedures also included, among others, evaluating revenue recognition for a sample of advertising transactions by obtaining taped recordings denoting the as-aired advertisements and comparing those ads to the invoices generated and cash received against revenue transactions recorded in the consolidated financial statements.
/s/ PricewaterhouseCoopers LLP Baltimore, Maryland February 29, 2024
We have served as the Company’s auditor since 2009.
SINCLAIR BROADCAST GROUP, LLC CONSOLIDATED BALANCE SHEETS (In millions, except share and per share data) | | | | | | | | | | | | | As of December 31, | | 2023 | | 2022 | ASSETS | | | | Current Assets: | | | | Cash and cash equivalents | $ | 319 | | | $ | 884 | | Accounts receivable, net of allowance for doubtful accounts of $4 and $5, respectively | 568 | | | 612 | | Income taxes receivable | 7 | | | 5 | | Prepaid expenses and other current assets | 139 | | | 182 | | Total current assets | 1,033 | | | 1,683 | | Property and equipment, net | 692 | | | 728 | | Operating lease assets | 142 | | | 145 | | | | | | | | | | Goodwill | 2,016 | | | 2,088 | | Indefinite-lived intangible assets | 123 | | | 150 | | Customer relationships, net | 238 | | | 444 | | Other definite-lived intangible assets, net | 409 | | | 502 | | Other assets | 184 | | | 964 | | Total assets (a) | $ | 4,837 | | | $ | 6,704 | | | | | | LIABILITIES , REDEEMABLE NON-CONTROLLING INTERESTS, AND EQUITY | | | | Current Liabilities: | | | | Accounts payable and accrued liabilities | $ | 851 | | | $ | 397 | | | | | | Current portion of notes payable, finance leases, and commercial bank financing | 36 | | | 38 | | Current portion of operating lease liabilities | 21 | | | 23 | | Current portion of program contracts payable | 76 | | | 83 | | Other current liabilities | 50 | | | 67 | | Total current liabilities | 1,034 | | | 608 | | Notes payable, finance leases, and commercial bank financing, less current portion | 4,124 | | | 4,227 | | Operating lease liabilities, less current portion | 152 | | | 154 | | Program contracts payable, less current portion | 14 | | | 10 | | Deferred tax liabilities | 283 | | | 610 | | Other long-term liabilities | 158 | | | 220 | | Total liabilities (a) | 5,765 | | | 5,829 | | Commitments and contingencies (See Note 12) | | | | Redeemable noncontrolling interests | — | | | 194 | | SBG member's (deficit) equity: | | | | | | | | Accumulated deficit | (865) | | | — | | Accumulated other comprehensive income | 1 | | | — | | Total SBG member's deficit | (864) | | | — | | Old Sinclair shareholders' equity: | | | | Old Sinclair Class A Common Stock, $0.01 par value, 500,000,000 shares authorized and 45,847,879 shares issued and outstanding as of December 31, 2022 | — | | | 1 | | Old Sinclair Class B Common Stock, $0.01 par value, 140,000,000 shares authorized and 23,775,056 shares issued and outstanding as of December 31, 2022, convertible into Old Sinclair Class A Common Stock | — | | | — | | Additional paid-in capital | — | | | 624 | | Retained earnings | — | | | 122 | | Accumulated other comprehensive income | — | | | 1 | | Total Old Sinclair shareholders’ equity | — | | | 748 | | Noncontrolling interests | (64) | | | (67) | | Total (deficit) equity | (928) | | | 681 | | Total liabilities, redeemable noncontrolling interests, and equity | $ | 4,837 | | | $ | 6,704 | |
The accompanying notes are an integral part of these consolidated financial statements. (a)Our consolidated total assets as of December 31, 2023 and 2022 include total assets of VIEs of $85 million and $115 million, respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of December 31, 2023 and 2022 include total liabilities of the VIEs of $17 million and $18 million, respectively, for which the creditors of the VIEs have no recourse to us. See Note 13. Variable Interest Entities.
SINCLAIR BROADCAST GROUP, LLC CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021 (In millions, except share and per share data) | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | REVENUES: | | | | | | Media revenues | $ | 2,968 | | | $ | 3,894 | | | $ | 6,083 | | Non-media revenues | 10 | | | 34 | | | 51 | | Total revenues | 2,978 | | | 3,928 | | | 6,134 | | | | | | | | OPERATING EXPENSES: | | | | | | Media programming and production expenses | 1,543 | | | 1,942 | | | 4,291 | | Media selling, general and administrative expenses | 719 | | | 812 | | | 908 | | Amortization of program contract costs | 80 | | | 90 | | | 93 | | Non-media expenses | 24 | | | 44 | | | 57 | | Depreciation of property and equipment | 104 | | | 100 | | | 114 | | Corporate general and administrative expenses | 654 | | | 160 | | | 170 | | Amortization of definite-lived intangible and other assets | 148 | | | 221 | | | 477 | | | | | | | | Loss (gain) on deconsolidation of subsidiary | 10 | | | (3,357) | | | — | | Gain on asset dispositions and other, net of impairment | (2) | | | (64) | | | (71) | | Total operating expenses (gains) | 3,280 | | | (52) | | | 6,039 | | Operating (loss) income | (302) | | | 3,980 | | | 95 | | | | | | | | OTHER INCOME (EXPENSE): | | | | | | Interest expense including amortization of debt discount and deferred financing costs | (305) | | | (296) | | | (618) | | Gain (loss) on extinguishment of debt | 15 | | | 3 | | | (7) | | Income from equity method investments | 31 | | | 56 | | | 45 | | Other expense, net | (43) | | | (129) | | | (14) | | Total other expense, net | (302) | | | (366) | | | (594) | | (Loss) income before income taxes | (604) | | | 3,614 | | | (499) | | INCOME TAX BENEFIT (PROVISION) | 359 | | | (913) | | | 173 | | | | | | | | | | | | | | | | | | | | NET (LOSS) INCOME | (245) | | | 2,701 | | | (326) | | Net loss (income) attributable to redeemable noncontrolling interests | 4 | | | (20) | | | (18) | | Net (income) loss attributable to the noncontrolling interests | (16) | | | (29) | | | (70) | | NET (LOSS) INCOME ATTRIBUTABLE TO SBG | $ | (257) | | | $ | 2,652 | | | $ | (414) | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR BROADCAST GROUP, LLC CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021 (In millions) | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Net (loss) income | $ | (245) | | | $ | 2,701 | | | $ | (326) | | | | | | | | Adjustments to post-retirement obligations, net of taxes | — | | | 3 | | | 1 | | Share of other comprehensive gain of equity method investments | — | | | 3 | | | 7 | | Comprehensive (loss) income | (245) | | | 2,707 | | | (318) | | Comprehensive loss (income) attributable to redeemable noncontrolling interests | 4 | | | (20) | | | (18) | | Comprehensive income attributable to noncontrolling interests | (16) | | | (29) | | | (70) | | Comprehensive (loss) income attributable to SBG | $ | (257) | | | $ | 2,658 | | | $ | (406) | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR BROADCAST GROUP, LLC CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (In millions, except share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Old Sinclair Shareholders | | | | | | Redeemable Noncontrolling Interests | | | Class A Common Stock | | Class B Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total Deficit | | | | Shares | | Values | | Shares | | Values | | | | | | BALANCE, December 31, 2020 | $ | 190 | | | | 49,252,671 | | | $ | 1 | | | 24,727,682 | | | $ | — | | | $ | 721 | | | $ | (1,986) | | | $ | (10) | | | $ | 89 | | | $ | (1,185) | | Dividends declared and paid on Old Sinclair Class A and Class B Common Stock ($0.80 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (60) | | | — | | | — | | | (60) | | Old Sinclair Class B Common Stock converted into Old Sinclair Class A Common Stock | — | | | | 952,626 | | | — | | | (952,626) | | | — | | | — | | | — | | | — | | | — | | | — | | Repurchases of Old Sinclair Class A Common Stock | — | | | | (2,438,585) | | | — | | | — | | | — | | | (61) | | | — | | | — | | | — | | | (61) | | Old Sinclair Class A Common Stock issued pursuant to employee benefit plans | — | | | | 1,547,591 | | | — | | | — | | | — | | | 31 | | | — | | | — | | | — | | | 31 | | Distributions to noncontrolling interests, net | (11) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (95) | | | (95) | | Other comprehensive income | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 8 | | | — | | | 8 | | Net income (loss) | 18 | | | | — | | | — | | | — | | | — | | | — | | | (414) | | | — | | | 70 | | | (344) | | BALANCE, December 31, 2021 | $ | 197 | | | | 49,314,303 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 691 | | | $ | (2,460) | | | $ | (2) | | | $ | 64 | | | $ | (1,706) | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR BROADCAST GROUP, LLC CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (In millions, except share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Old Sinclair Shareholders | | | | | | Redeemable Noncontrolling Interest | | | Class A Common Stock | | Class B Common Stock | | Additional Paid-In Capital | | (Accumulated Deficit) Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | Noncontrolling Interests | | Total (Deficit) Equity | | | | Shares | | Values | | Shares | | Values | | | | | | BALANCE, December 31, 2021 | $ | 197 | | | | 49,314,303 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 691 | | | $ | (2,460) | | | $ | (2) | | | $ | 64 | | | $ | (1,706) | | Dividends declared and paid on Old Sinclair Class A and Class B Common Stock ($1.00 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (70) | | | — | | | — | | | (70) | | Repurchases of Old Sinclair Class A Common Stock | — | | | | (4,850,398) | | | — | | | — | | | — | | | (120) | | | — | | | — | | | — | | | (120) | | Old Sinclair Class A Common Stock issued pursuant to employee benefit plans | — | | | | 1,383,974 | | | — | | | — | | | — | | | 53 | | | — | | | — | | | — | | | 53 | | Distributions to noncontrolling interests, net | (7) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (12) | | | (12) | | Other comprehensive income | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 6 | | | — | | | 6 | | Deconsolidation of subsidiary | (16) | | | | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | (148) | | | (151) | | Net income | 20 | | | | — | | | — | | | — | | | — | | | — | | | 2,652 | | | — | | | 29 | | | 2,681 | | BALANCE, December 31, 2022 | $ | 194 | | | | 45,847,879 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 624 | | | $ | 122 | | | $ | 1 | | | $ | (67) | | | $ | 681 | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR BROADCAST GROUP, LLC CONSOLIDATED STATEMENT OF MEMBER'S EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS FOR THE YEAR ENDED DECEMBER 31, 2023 (In millions, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SBG Member | | | | | | Redeemable Noncontrolling Interests | | | Old Class A Common Stock | | Old Class B Common Stock | | Old Additional Paid-In Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income | | Noncontrolling Interests | | Total Member's Equity (Deficit) | | | | Shares | | Values | | Shares | | Values | | | | | | BALANCE, December 31, 2022 | $ | 194 | | | | 45,847,879 | | | $ | 1 | | | 23,775,056 | | | $ | — | | | $ | 624 | | | $ | 122 | | | $ | 1 | | | $ | (67) | | | $ | 681 | | Dividends declared and paid on Old Sinclair Class A and Class B Common Stock ($0.25 per share) | — | | | | — | | | — | | | — | | | — | | | — | | | (18) | | | — | | | — | | | (18) | | Repurchases of Old Sinclair Class A Common Stock | — | | | | (8,785,022) | | | — | | | — | | | — | | | (153) | | | — | | | — | | | — | | | (153) | | Old Sinclair Class A Common Stock issued pursuant to employee benefit plans | — | | | | 2,274,558 | | | — | | | — | | | — | | | 40 | | | — | | | — | | | — | | | 40 | | Old Sinclair Class A And Class B Common Stock converted to SBG member's equity | — | | | | (39,337,415) | | | (1) | | | (23,775,056) | | | — | | | — | | | — | | | — | | | — | | | (1) | | Deemed dividend to parent | — | | | | — | | | — | | | — | | | — | | | (511) | | | (635) | | | — | | | (1) | | | (1,147) | | Distribution to parent | — | | | | — | | | — | | | — | | | — | | | — | | | (77) | | | — | | | — | | | (77) | | Repurchase of redeemable subsidiary preferred equity | (190) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Distributions to noncontrolling interests | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (12) | | | (12) | | | | | | | | | | | | | | | | | | | | | | | Net (loss) income | (4) | | | | — | | | — | | | — | | | — | | | — | | | (257) | | | — | | | 16 | | | (241) | | BALANCE, December 31, 2023 | $ | — | | | | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | $ | (865) | | | $ | 1 | | | $ | (64) | | | $ | (928) | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR BROADCAST GROUP, LLC CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021 (In millions) | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | Net (loss) income | $ | (245) | | | $ | 2,701 | | | $ | (326) | | Adjustments to reconcile net (loss) income to net cash flows from operating activities: | | | | | | | | | | | | Amortization of sports programming rights | — | | | 326 | | | 2,350 | | Amortization of definite-lived intangible and other assets | 148 | | | 221 | | | 477 | | Depreciation of property and equipment | 104 | | | 100 | | | 114 | | Amortization of program contract costs | 80 | | | 90 | | | 93 | | Stock-based compensation | 45 | | | 50 | | | 60 | | Deferred tax (benefit) provision | (359) | | | 906 | | | (92) | | Gain on asset dispositions and other, net of impairment | (2) | | | (11) | | | (69) | | Loss (gain) on deconsolidation of subsidiary | 10 | | | (3,357) | | | — | | Income from equity method investments | (31) | | | (56) | | | (45) | | Loss from investments | 77 | | | 133 | | | 38 | | Distributions from investments | 29 | | | 87 | | | 54 | | Sports programming rights payments | — | | | (325) | | | (1,834) | | Rebate payments to distributors | — | | | (15) | | | (202) | | (Gain) loss on extinguishment of debt | (15) | | | (3) | | | 7 | | | | | | | | Changes in assets and liabilities, net of acquisitions, deconsolidation of subsidiary, and asset transfer to Ventures: | | | | | | Decrease (increase) in accounts receivable | 9 | | | 20 | | | (187) | | Decrease (increase) in prepaid expenses and other current assets | 4 | | | (96) | | | (86) | | Decrease in due from member | 43 | | | — | | | — | | Increase (decrease) in accounts payable and accrued and other current liabilities | 486 | | | (14) | | | 113 | | Net change in current and long-term net income taxes payable/receivable | (3) | | | 147 | | | (52) | | Decrease in program contracts payable | (88) | | | (103) | | | (102) | | | | | | | | Other, net | (32) | | | (2) | | | 16 | | Net cash flows from operating activities | 260 | | | 799 | | | 327 | | CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: | | | | | | Acquisition of property and equipment | (90) | | | (105) | | | (80) | | | | | | | | Spectrum repack reimbursements | 8 | | | 4 | | | 24 | | Proceeds from the sale of assets | — | | | 9 | | | 43 | | Deconsolidation of subsidiary cash | — | | | (315) | | | — | | Purchases of investments | (39) | | | (75) | | | (256) | | Distributions from investments | 204 | | | 99 | | | 26 | | | | | | | | Other, net | 1 | | | 2 | | | (3) | | Net cash flows from (used in) investing activities | 84 | | | (381) | | | (246) | | CASH FLOWS USED IN FINANCING ACTIVITIES: | | | | | | Proceeds from notes payable and commercial bank financing | — | | | 728 | | | 357 | | Repayments of notes payable, commercial bank financing, and finance leases | (85) | | | (863) | | | (601) | | Repurchase of outstanding Old Sinclair Class A Common Stock | (153) | | | (120) | | | (61) | | Dividends paid on Old Sinclair Class A and Class B Common Stock | (18) | | | (70) | | | (60) | | Dividends paid on redeemable subsidiary preferred equity | — | | | (7) | | | (5) | | Repurchase of redeemable subsidiary preferred equity | (190) | | | — | | | — | | | | | | | | | | | | | | Distributions to member | (448) | | | — | | | — | | Distributions to noncontrolling interests, net | (12) | | | (12) | | | (95) | | Distributions to redeemable noncontrolling interests | — | | | — | | | (6) | | Other, net | (3) | | | (9) | | | (53) | | Net cash flows used in financing activities | (909) | | | (353) | | | (524) | | NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (565) | | | 65 | | | (443) | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of year | 884 | | | 819 | | | 1,262 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of year | $ | 319 | | | $ | 884 | | | $ | 819 | |
The accompanying notes are an integral part of these consolidated financial statements.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
Sinclair Broadcast Group, LLC ("SBG"), a Maryland limited liability company and a wholly owned subsidiary of Sinclair, Inc. ("Sinclair"), is a diversified media company with national reach and a strong focus on providing high-quality content on SBG's local television stations, digital platform, and, prior to the Deconsolidation (as defined below in Deconsolidation of Diamond Sports Intermediate Holdings LLC), regional sports networks. The content, distributed through SBG's broadcast platform and third-party platforms, consists of programming provided by third-party networks and syndicators, local news, other original programming produced by SBG and SBG owned networks, and, prior to the Deconsolidation, college and professional sports. Additionally, prior to the Reorganization (as defined below in Company Reorganization), SBG had interests in, owned, managed, and/or operated Tennis Channel, digital media companies, 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.
As of December 31, 2023, SBG had one reportable segment: local media. Prior to the Deconsolidation (as defined below in Deconsolidation of Diamond Sports Intermediate Holdings LLC),SBG had one additional reportable segment, local sports. The local media segment consists primarily of SBG's 185 broadcast television stations in 86 markets, which SBG owns, provides programming and operating services pursuant to LMAs, or provides sales services and other non-programming operating services pursuant to other outsourcing agreements, such as JSAs and SSAs. These stations broadcast 640 channels as of December 31, 2023. For the purpose of this report, these 185 stations and 640 channels are referred to as SBG's stations and channels. The local sports segment consisted primarily of the Bally Sports network brands ("Bally RSNs"), the Marquee Sports Network ("Marquee") joint venture, and a minority equity interest in the Yankee Entertainment and Sports Network, LLC ("YES Network") through February 28, 2022. On March 1, 2022, the Bally RSNs, Marquee, and YES Network were deconsolidated from SBG's financial statements. See Deconsolidation of Diamond Sports Intermediate Holdings LLC below. Through February 28, 2022, the Bally RSNs and Marquee are referred to as "the RSNs." The RSNs and YES Network own the exclusive rights to air, among other sporting events, the games of professional sports teams in designated local viewing areas.
Principles of Consolidation The consolidated financial statements include SBG's accounts and those of SBG's wholly-owned and majority-owned subsidiaries and VIEs for which SBG is the primary beneficiary. Noncontrolling interests represent a minority owner's proportionate share of the equity in certain of SBG's consolidated entities. Noncontrolling interests which may be redeemed by the holder, and the redemption is outside of SBG's control, are presented as redeemable noncontrolling interests. All intercompany transactions and account balances have been eliminated in consolidation.
SBG consolidates VIEs when SBG is the primary beneficiary. SBG is the primary beneficiary of a VIE when SBG has 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 13. Variable Interest Entities for more information on SBG's VIEs.
Investments in entities over which SBG has significant influence but not control are accounted for using the equity method of accounting. Income from equity method investments represents SBG's proportionate share of net income or loss 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.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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"). 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. On the day following the Share Exchange Effective Time, Sinclair Holdings became the intermediate holding company between Sinclair and SBG, and SBG transferred certain of its assets (the "Transferred Assets") to Sinclair Ventures, LLC, a new indirect wholly-owned subsidiary of Sinclair ("Ventures"). 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, SBG's consolidated statement of operations the year ended December 31, 2023 includes five months of activity related to the Transferred Assets prior to the Reorganization. Subsequent to June 1, 2023, the assets and liabilities of the Transferred Assets are no longer included within SBG's consolidated balance sheets. Any discussions related to results, operations, and accounting policies associated with the Transferred Assets are referring to the periods prior to the Reorganization.
The Reorganization is considered a transaction between entities under common control and therefore the Transferred Assets were transferred from SBG to Ventures at a net book value of $1,147 million during the year ended December 31, 2023, which is recognized in SBG's consolidated statements of equity and redeemable noncontrolling interests as a dividend to SBG's parent.
Deconsolidation of Diamond Sports Intermediate Holdings LLC
On March 1, 2022, Old Sinclair's subsidiary Diamond Sports Intermediate Holdings, LLC, and certain of its subsidiaries (collectively "DSIH") completed a series of transactions (the "Transaction"). As part of the Transaction, the governance structure of DSIH was modified including changes to the composition of its Board of Managers, resulting in the SBG's loss of voting control. As a result, DSIH, whose operations represented the entirety of SBG's local sports segment, was deconsolidated from SBG's consolidated financial statements effective as of March 1, 2022 (the "Deconsolidation"). SBG's consolidated statement of operations for the year ended December 31, 2022 therefore includes two months of activity related to DSIH prior to the Deconsolidation. Subsequent to February 28, 2022, the assets and liabilities of DSIH are no longer included within SBG's consolidated balance sheets. Any discussions related to results, operations, and accounting policies associated with DSIH are referring to the periods prior to the Deconsolidation.
Upon Deconsolidation, SBG recognized a gain before income taxes of approximately $3,357 million, which is recorded within gain on deconsolidation of subsidiary in SBG's consolidated statements of operations for the year ended December 31, 2022. During the year ended December 31, 2023, we recorded an adjustment to the deconsolidation gain of $10 million. Subsequent to the Deconsolidation, SBG's equity ownership interest in DSIH is accounted for under the equity method of accounting. See Note 6. Other Assets for more information.
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.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. SBG adopted this guidance during the first quarter of 2023. The impact of the adoption did not have a material impact on SBG's 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. SBG is currently evaluating the impact of this guidance.
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. SBG is currently evaluating the impact of this guidance.
Cash and Cash Equivalents SBG consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Accounts Receivable SBG regularly reviews accounts receivable and determine an appropriate estimate for the allowance for doubtful accounts based upon the impact of economic conditions on the merchant's ability to pay, past collection experience, and such other factors which, in management's judgment, deserve current recognition. In turn, a provision is charged against earnings in order to maintain the appropriate allowance level. A rollforward of the allowance for doubtful accounts for the years ended December 31, 2023, 2022, and 2021 is as follows (in millions): | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Balance at beginning of period | $ | 5 | | | $ | 7 | | | $ | 5 | | Charged to expense | 3 | | | 4 | | | 3 | | Net write-offs | (3) | | | (6) | | | (1) | | Transferred to Ventures | (1) | | | — | | | — | | Balance at end of period | $ | 4 | | | $ | 5 | | | $ | 7 | |
As of December 31, 2023, two customers accounted for 10% and 10%, respectively, of our accounts receivable, net. As of December 31, 2022, one customer accounted for 13% of SBG's accounts receivable, net. As of December 31, 2021, three customers accounted for 15%, 15%, and 12%, respectively, of SBG's accounts receivable, net. For purposes of this disclosure, a single customer may include multiple entities under common control.
Broadcast Television Programming SBG has 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.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. SBG assesses program contract costs on a quarterly basis to ensure the costs are recorded at the lower of unamortized cost or fair value.
Sports Programming Rights
DSIH has multi-year program rights agreements that provided DSIH with the right to produce and telecast professional live sports games within a specified territory in exchange for a rights fee. Prior to the Deconsolidation, SBG amortized these rights as an expense over each season based upon contractually stated rates. Amortization was accelerated in the event that the stated contractual rates over the term of the rights agreement resulted in an expense recognition pattern that was inconsistent with the projected growth of revenue over the contractual term.
Impairment of Goodwill, Indefinite-lived Intangible Assets, and Other Long-lived Assets SBG evaluates goodwill and indefinite lived intangible assets for impairment annually in the fourth quarter, or more frequently, if events or changes in circumstances indicate that an impairment may exist. SBG's goodwill has been allocated to, and is tested for impairment at, the reporting unit level. A reporting unit is an operating segment or a component of an operating segment to the extent that the component constitutes a business for which discrete financial information is available and regularly reviewed by management. Components of an operating segment with similar characteristics are aggregated when testing goodwill for impairment. In the performance of SBG's annual assessment of goodwill for impairment, SBG has the option to qualitatively assess whether it is more likely than not that a reporting unit has been impaired. As part of this qualitative assessment, SBG weighs the relative impact of factors that are specific to the reporting units as well as industry, regulatory, and macroeconomic factors that could affect the significant inputs used to determine the fair value of the assets. SBG also considers the significance of the excess fair value over carrying value in prior quantitative assessments. If SBG concludes that it is more likely than not that a reporting unit is impaired, or if SBG elects not to perform the optional qualitative assessment, SBG will determine the fair value of the reporting unit and compare it to the net book value of the reporting unit. If the fair value is less than the net book value, SBG will record an impairment to goodwill for the amount of the difference. SBG estimates the fair value of SBG's reporting units utilizing the income approach involving the performance of a discounted cash flow analysis. SBG's discounted cash flow model is based on SBG's judgment of future market conditions based on SBG's internal forecast of future performance, as well as discount rates that are based on a number of factors including market interest rates, a weighted average cost of capital analysis, and includes adjustments for market risk and company specific risk.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SBG's indefinite-lived intangible assets consist primarily of SBG's broadcast licenses and a trade name. For SBG's annual impairment test for indefinite-lived intangible assets, SBG has the option to perform a qualitative assessment to determine whether it is more likely than not that these assets are impaired. As part of this qualitative assessment SBG weighs the relative impact of factors that are specific to the indefinite-lived intangible assets as well as industry, regulatory, and macroeconomic factors that could affect the significant inputs used to determine the fair value of the assets. SBG also considers the significance of the excess fair value over carrying value in prior quantitative assessments. When evaluating SBG's broadcast licenses for impairment, the qualitative assessment is done at the market level because the broadcast licenses within the market are complementary and together enhance the single broadcast license of each station. If SBG concludes that it is more likely than not that one of SBG's broadcast licenses is impaired, SBG will perform a quantitative assessment by comparing the aggregate fair value of the broadcast licenses in the market to the respective carrying values. SBG estimates the fair values of SBG's broadcast licenses using the Greenfield method, which is an income approach. This method involves a discounted cash flow model that incorporates several variables, including, but not limited to, market revenues and long-term growth projections, estimated market share for the typical participant without a network affiliation, and estimated profit margins based on market size and station type. The model also assumes outlays for capital expenditures, future terminal values, an effective tax rate assumption and a discount rate based on a number of factors including market interest rates, a weighted average cost of capital analysis based on the target capital structure for a television station, and includes adjustments for market risk and company specific risk. If the carrying amount of the broadcast licenses exceeds the fair value, then an impairment loss is recorded to the extent that the carrying value of the broadcast licenses exceeds the fair value.
SBG evaluates long-lived assets, including definite-lived intangible assets, for impairment if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. SBG evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets within an asset group to the estimated undiscounted future cash flows associated with the asset group. An asset group represents the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets. At the time that such evaluations indicate that the future undiscounted cash flows are not sufficient to recover the carrying value of the asset group, an impairment loss is determined by comparing the estimated fair value of the asset group to the carrying value. SBG estimates fair value using an income approach involving the performance of a discounted cash flow analysis.
During the years ended December 31, 2023, 2022, and 2021, SBG did not identify any indicators that goodwill, indefinite-lived or long-lived assets may not be recoverable. See Note 5. Goodwill, Indefinite-Lived Intangible Assets, and Other Intangible Assets for more information.
SBG believes it has made reasonable estimates and utilized appropriate assumptions in the performance of SBG's impairment assessments. If future results are not consistent with SBG's assumptions and estimates, including future events such as a deterioration of market conditions, loss of significant customers, and significant increases in discount rates, among other factors, SBG could be exposed to impairment charges in the future. Any resulting impairment loss could have a material adverse impact on SBG's consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows.
When factors indicate that there may be a decrease in value of an equity method investment, SBG assesses whether a loss in value has occurred. If that loss is deemed to be other than temporary, an impairment loss is recorded accordingly. For any equity method investments that indicate a potential impairment, SBG estimates the fair values of those investments using a combination of a market-based approach, which considers earnings and cash flow multiples of comparable businesses and recent market transactions, as well as an income approach involving the performance of a discounted cash flow analysis. See Note 6. Other Assets for more information.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following as of December 31, 2023 and 2022 (in millions): | | | | | | | | | | | | | 2023 | | 2022 | Compensation and employee benefits | $ | 93 | | | $ | 100 | | Interest | 12 | | | 11 | | Programming related obligations | 156 | | | 151 | | Legal, litigation, and regulatory (a) | 504 | | | 10 | | Accounts payable and other operating expenses | 86 | | | 125 | | Total accounts payable and accrued liabilities | $ | 851 | | | $ | 397 | |
(a)See Note 12. Commitments and Contingencies for additional information regarding the litigation accruals recorded.
We expense these activities when incurred.
Income Taxes SBG recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. SBG provides a valuation allowance for deferred tax assets if SBG determines that it is more likely than not that some or all of the deferred tax assets will not be realized. In evaluating SBG’s ability to realize net deferred tax assets, SBG considers all available evidence, both positive and negative, including SBG’s past operating results, tax planning strategies, current and cumulative losses, and forecasts of future taxable income. In considering these sources of taxable income, SBG must make certain judgments that are based on the plans and estimates used to manage SBG’s underlying businesses on a long-term basis. As of December 31, 2023 and 2022, a valuation allowance has been provided for deferred tax assets related to certain temporary basis differences, and a substantial amount of SBG’s 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. Future changes in operating and/or taxable income or other changes in facts and circumstances could significantly impact the ability to realize SBG’s deferred tax assets which could have a material effect on SBG’s consolidated financial statements.
Management periodically performs a comprehensive review of SBG’s tax positions, and SBG records a liability for unrecognized tax benefits if such tax positions are more likely than not to be sustained upon examination based on their technical merits, including the resolution of any appeals or litigation processes. Significant judgment is required in determining whether positions taken are more likely than not to be sustained, and it is based on a variety of facts and circumstances, including interpretation of the relevant federal and state income tax codes, regulations, case law and other authoritative pronouncements. Based on this analysis, the status of ongoing audits and the expiration of applicable statute of limitations, liabilities are adjusted as necessary. The resolution of audits is unpredictable and could result in tax liabilities that are significantly higher or lower than for what SBG has provided. See Note 11. Income Taxes, for further discussion of accrued unrecognized tax benefits.
Hedge Accounting
SBG entered into an interest rate swap effective February 7, 2023 and terminating on February 28, 2026 in order to manage a portion of SBG's exposure to variable interest rates. The swap agreement has a notional amount of $600 million, bears a fixed interest rate of 3.90%, and SBG receives a floating rate of interest based on the Secured Overnight Financing Rate ("SOFR").
SBG has 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 SBG's consolidated statements of operations. Cash flows related to the interest rate swap are classified as operating activities in SBG's consolidated statements of cash flows. See Interest Rate Swap within Note 7. Notes Payable and Commercial Bank Financing for further discussion.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Supplemental Information — Statements of Cash Flows During the years ended December 31, 2023, 2022, and 2021, SBG had the following cash transactions (in millions): | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Income taxes paid | $ | 5 | | | $ | 18 | | | $ | 16 | | Income tax refunds | $ | 1 | | | $ | 158 | | | $ | 44 | | Interest paid | $ | 294 | | | $ | 387 | | | $ | 583 | |
Non-cash investing activities included property and equipment purchases of $5 million for each of the years ended December 31, 2023, 2022, and 2021 and the receipt of equipment with a fair value of $58 million in connection with completing the repack process as more fully described in Note 2. Acquisitions and Dispositions of Assets for the year ended December 31, 2021.
During the years ended December 31, 2022 and 2021, SBG received equity shares in investments valued at $3 million and $6 million respectively, in exchange for an equivalent value of advertising spots.
Revenue Recognition
The following table presents SBG's revenue disaggregated by type and segment for the years ended December 31, 2023, 2022, and 2021 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended December 31, 2023 | Local media | | Other | | Eliminations | | Total | | | Distribution revenue | $ | 1,491 | | | $ | 76 | | | $ | — | | | $ | 1,567 | | | | Advertising revenue | 1,236 | | | 29 | | | (5) | | | 1,260 | | | | Other media, non-media, and intercompany revenue | 139 | | | 14 | | | (2) | | | 151 | | | | Total revenues | $ | 2,866 | | | $ | 119 | | | $ | (7) | | | $ | 2,978 | | | | | | | | | | | | | | For the year ended December 31, 2022 | Local media | | Local sports | | Other | | Eliminations | | Total | Distribution revenue | $ | 1,531 | | | $ | 433 | | | $ | 179 | | | $ | — | | | $ | 2,143 | | Advertising revenue | 1,518 | | | 44 | | | 74 | | | (22) | | | 1,614 | | Other media, non-media, and intercompany revenue | 144 | | | 5 | | | 59 | | | (37) | | | 171 | | Total revenues | $ | 3,193 | | | $ | 482 | | | $ | 312 | | | $ | (59) | | | $ | 3,928 | | | | | | | | | | | | For the year ended December 31, 2021 | Local media | | Local sports | | Other | | Eliminations | | Total | Distribution revenue | $ | 1,476 | | | $ | 2,620 | | | $ | 192 | | | $ | — | | | $ | 4,288 | | Advertising revenue | 1,230 | | | 409 | | | 93 | | | (41) | | | 1,691 | | Other media, non-media, and intercompany revenue | 181 | | | 27 | | | 67 | | | (120) | | | 155 | | Total revenues | $ | 2,887 | | | $ | 3,056 | | | $ | 352 | | | $ | (161) | | | $ | 6,134 | |
Distribution Revenue. SBG generates distribution revenue through fees received from Distributors for the right to distribute SBG's stations, other properties, and, prior to the Deconsolidation, the RSNs. 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 SBG's customers ("as usage occurs") which corresponds with the satisfaction of SBG's performance obligation. Revenue is calculated based upon the contractual rate multiplied by an estimated number of subscribers. SBG's 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.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Advertising Revenue. SBG generates advertising revenue primarily from the sale of advertising spots/impressions within SBG's broadcast television, digital platforms, and, prior to the Deconsolidation, RSNs. Advertising revenue is recognized in the period in which the advertising spots/impressions are delivered. In arrangements where SBG provides audience ratings guarantees, to the extent that there is a ratings shortfall, SBG will defer a proportionate amount of revenue until the ratings shortfall is settled through the delivery of additional advertising. The term of SBG's advertising arrangements is generally less than one year and the timing between when an advertisement is aired and when payment is due is not significant. In certain circumstances, SBG requires customers to pay in advance; payments received in advance of satisfying SBG's performance obligations are reflected as deferred revenue.
Practical Expedients and Exemptions. SBG expenses sales commissions when incurred because the period of benefit for these costs is one year or less. These costs are recorded within media selling, general and administrative expenses. In accordance with ASC 606, SBG does 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.
Arrangements with Multiple Performance Obligations. SBG's contracts with customers may include multiple performance obligations. For such arrangements, SBG allocates revenues to each performance obligation based on its relative standalone selling price, which is generally based on the prices charged to customers.
Deferred Revenues. SBG records deferred revenue when cash payments are received or due in advance of SBG's performance, including amounts which are refundable. SBG classifies deferred revenue as either current in other current liabilities or long-term in other long-term liabilities within SBG's consolidated balance sheets, based on the timing of when SBG expects to satisfy performance obligations. Deferred revenue was $171 million, $200 million, and $235 million as of December 31, 2023, 2022, and 2021, respectively, of which $124 million, $144 million, and $164 million as of December 31, 2023, 2022, and 2021, respectively, was reflected in other long-term liabilities in SBG's consolidated balance sheets. Deferred revenue recognized during the years ended December 31, 2023 and 2022 that was included in the deferred revenue balance as of December 31, 2022 and 2021 was $47 million and $62 million, respectively.
For the year ended December 31, 2023, two customers accounted for 11% and 10% of SBG's total revenues. For the year ended December 31, 2022, three customers accounted for 12%, 11%, and 10%, respectively, of SBG's total revenues. For the year ended December 31, 2021, three customers accounted for 19%, 18%, and 14%, respectively, of SBG's total revenues. For purposes of this disclosure, a single customer may include multiple entities under common control.
Advertising Expenses Promotional advertising expenses are recorded in the period when incurred and are included in media production and other non-media expenses. Total advertising expenses, net of advertising co-op credits, were $9 million, $9 million, and $22 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Financial Instruments Financial instruments, as of December 31, 2023 and 2022, consisted of cash and cash equivalents, trade accounts receivable, accounts payable, accrued liabilities, stock options, warrants, and notes payable. The carrying amounts approximate fair value for each of these financial instruments, except for the notes payable. See Note 16. Fair Value Measurements for additional information regarding the fair value of notes payable.
Post-retirement Benefits SBG maintains a supplemental executive retirement plan which was inherited upon the acquisition of certain stations. As of December 31, 2023, the estimated projected benefit obligation was $14 million, of which $1 million is included in accrued expenses and $13 million is included in other long-term liabilities in SBG's consolidated balance sheets. At December 31, 2023, the projected benefit obligation was measured using a 4.92% discount rate compared to a discount rate of 5.20% for the year ended December 31, 2022. For each of the years ended December 31, 2023 and 2022, SBG made $1 million in benefit payments. SBG recognized an actuarial loss of $0.3 million and gain of $3 million through other comprehensive income for the years ended December 31, 2023 and 2022, respectively. For each of the years ended December 31, 2023 and 2022, SBG recognized $1 million of periodic pension expense, reported in other expense, net in SBG's consolidated statements of operations.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Reclassifications Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current year's presentation.
2. ACQUISITIONS AND DISPOSITIONS OF ASSETS:
During the year ended December 31, 2021, SBG acquired certain businesses for an aggregate purchase price, net of cash acquired, of $10 million, including working capital adjustments and other adjustments. There were no acquisitions during the years ended December 31, 2023 and 2022.
The following summarizes the acquisition activity during the year ended December 31, 2021:
2021 Acquisitions
During the year ended December 31, 2021, SBG completed the acquisition of ZypMedia for approximately $7 million in cash. The acquired assets and liabilities were recorded at fair value as of the closing date of the transactions.
During the year ended December 31, 2021, SBG purchased 360IA, LLC for $5 million, with $2 million being paid in cash and the remaining to be paid in $1 million increments on each of the first three anniversaries following the closing date.
Financial Results of Acquisitions
The following tables summarize the results of the net revenues and operating loss included in the financial statements of SBG beginning on the acquisition date of each acquisition as listed below (in millions):
| | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Revenues: | | | | | | Other acquisitions in 2021 | $ | 25 | | | $ | 72 | | | $ | 8 | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Operating Loss: | | | | | | Other acquisitions in 2021 | $ | (7) | | | $ | (7) | | | $ | (45) | | | | | | | |
Dispositions
2021 Dispositions. In September 2021, SBG sold all of its radio broadcast stations, KOMO-FM, KOMO-AM, KPLZ-FM and KVI-AM in Seattle, WA, for consideration valued at $13 million. For the year ended December 31, 2021, SBG recorded a net loss of $12 million related to the sale, which is included within gain on asset dispositions and other, net of impairment in SBG's consolidated statements of operations, and was primarily related to the write-down of the carrying value of the assets to estimate the selling price.
In June 2021, SBG sold its controlling interest in Triangle Sign & Service, LLC ("Triangle") for $12 million. SBG recorded a gain on the sale of Triangle of $6 million, of which $3 million was attributable to noncontrolling interests, for the year ended December 31, 2021, which is included in the gain on asset dispositions and other, net of impairment and net (income) loss attributable to the noncontrolling interests, respectively, in SBG's consolidated statements of operations.
In February 2021, SBG sold two television broadcast stations, WDKA-TV in Paducah, KY and KBSI-TV in Cape Girardeau, MO, for an aggregate sale price of $28 million. SBG recorded a gain of $12 million for the year ended December 31, 2021, which is included within gain on asset dispositions and other, net of impairment in SBG's consolidated statements of operations.
Broadcast Incentive Auction. In 2012, Congress authorized the FCC to conduct so-called "incentive auctions" to auction and re-purpose broadcast television spectrum for mobile broadband use. Pursuant to the auction, television broadcasters submitted bids to receive compensation for relinquishing all or a portion of their rights in the television spectrum of their full-service and Class A stations. Low power stations were not eligible to participate in the auction and are not protected and therefore may be displaced or forced to go off the air as a result of the post-auction repacking process.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In the repacking process associated with the auction, the FCC has reassigned some stations to new post-auction channels. SBG does not expect reassignment to new channels to have a material impact on its coverage. SBG has received notification from the FCC that 100 of its stations have been assigned to new channels. Legislation has provided the FCC with a $3 billion fund to reimburse reasonable costs incurred by stations that are reassigned to new channels in the repack. SBG expects that the reimbursements from the fund will cover the majority of its expenses related to the repack. SBG recorded gains related to reimbursements for the spectrum repack costs incurred of $8 million, $4 million, and $24 million for the years ended December 31, 2023, 2022, and 2021, respectively, which are recorded within gain on asset dispositions and other, net of impairment in SBG's consolidated statements of operations. For the years ended December 31, 2022 and 2021, capital expenditures related to the spectrum repack were $1 million and $12 million.
In December 2020, the FCC began a similar repacking process associated with a portion of the C-Band spectrum in order to free up this spectrum for the use of 5G wireless services. The repack is scheduled to be completed in two phases, the first ended on December 31, 2021 and the second ended on December 31, 2023. Prior to the Deconsolidation, DSG entered into an agreement with a communications provider in which they received equipment to complete the repack process at a maximum cost to DSG of $15 million. Prior to the Deconsolidation, for the year ended December 31, 2021, SBG recognized a gain of $43 million, which is recorded within gain on asset dispositions and other, net of impairment in SBG's consolidated statements of operations, equal to the fair value of the equipment that DSG received of $58 million, less the maximum cost to DSG of $15 million.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. STOCK-BASED COMPENSATION PLANS:
In June 1996, Old Sinclair's Board of Directors adopted, upon approval of the shareholders by proxy, the 1996 Long-Term Incentive Plan ("LTIP"). Under the LTIP, SBG issued restricted stock awards ("RSAs"), stock grants to its non-employee directors, stock-settled appreciation rights ("SARs"), and stock options. In June 2022, Old Sinclair's Board of Directors adopted, upon approval of the shareholders by proxy, the 2022 Stock Incentive Plan ("SIP"). Upon approval of the SIP, it succeeded the LTIP and no additional awards were granted under the LTIP. All outstanding awards granted under the LTIP will remain subject to their original terms. The purpose of the SIP is to provide stock-based incentives that align the interests of employees, consultants, and outside directors with those of the stockholders of Sinclair by motivating employees to achieve long-term results and rewarding them for their achievements, and to attract and retain the types of employees, consultants, and outside directors who will contribute to SBG's long-range success. The amounts presented here represent stock-based compensation associated with employees of SBG that were awarded and issued stock of Sinclair.
Additionally, SBG has the following arrangements that involve stock-based compensation: employer matching contributions for participants in Sinclair's 401(k) plan and an employee stock purchase plan ("ESPP"). Stock-based compensation expense has no effect on SBG's consolidated cash flows. For the years ended December 31, 2023, 2022, and 2021, SBG recorded stock-based compensation of $45 million, $50 million, and $60 million, respectively. Below is a summary of the key terms and methods of valuation of SBG's stock-based compensation awards: Restricted Stock Awards
RSAs issued in 2023 have certain restrictions that generally lapse after two years at 100% or over two years at 50% and 50%, respectively. RSAs issued in 2022 and 2021 have certain restrictions that generally lapse over two years at 50% and 50%, respectively. As the restrictions lapse, the Sinclair Class A Common Stock may be freely traded on the open market. The fair value assumes the closing value of the stock on the measurement date. The following is a summary of changes in unvested restricted stock: | | | | | | | | | | | | | RSAs | | Weighted-Average Price | Unvested shares at December 31, 2022 | 477,721 | | | $ | 29.53 | | 2023 Activity: | | | | Granted | 1,438,990 | | | 15.54 | | Vested | (985,881) | | | 17.12 | | Forfeited (a) | (12,461) | | | 20.43 | | Transferred to Ventures | (84,211) | | | 15.52 | | Unvested shares at December 31, 2023 | 834,158 | | | $ | 21.62 | |
(a) Forfeitures are recognized as they occur.
SBG recorded compensation expense of $19 million for both of the years ended December 31, 2023 and 2022, respectively, and $21 million for the year ended December 31, 2021. The majority of the unrecognized compensation expense of $9 million as of December 31, 2023 will be recognized in 2024. Stock Grants to Non-Employee Directors
Prior to the Reorganization, in addition to fees paid in cash to Old Sinclair non-employee directors, on the date of each annual meeting of Old Sinclair shareholders, each Old Sinclair non-employee director received a grant of unrestricted shares of Sinclair Class A Common Stock. Old Sinclair issued 80,496 shares in 2023, 60,732 shares in 2022, and 45,836 shares in 2021. SBG recorded expense of $1 million for the year ended December 31, 2023 and $2 million for each of the years ended December 31, 2022 and 2021, which was based on the average share price of the stock on the date of grant.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Stock-Settled Appreciation Rights
These awards entitle holders to the appreciation in Sinclair's Class A Common Stock over the base value of each SAR over the term of the award. The SARs have a 10-year term with vesting periods ranging from zero to four years. The base value of each SAR is equal to the closing price of Sinclair's Class A Common Stock on the date of grant. For the years ended December 31, 2023, 2022, and 2021, SBG recorded compensation expense of $7 million, $10 million, and $15 million, respectively. The following is a summary of the 2023 activity: | | | | | | | | | | | | | SARs | | Weighted-Average Price | Outstanding SARs at December 31, 2022 | 3,269,916 | | | $ | 30.16 | | 2023 Activity: | | | | Granted | 1,474,764 | | | 15.97 | | | | | | | | | | Outstanding SARs at December 31, 2023 | 4,744,680 | | | $ | 25.75 | |
As of December 31, 2023, there was no aggregate intrinsic value of the SARs outstanding and the outstanding SARs have a weighted average remaining contractual life of 8 years.
Valuation of SARS. Our SARs were valued using the Black-Scholes pricing model utilizing the following assumptions: | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Risk-free interest rate | 4.4 | % | | 1.6 | % | | 0.6 | % | Expected years to exercise | 5 years | | 5 years | | 5 years | Expected volatility | 52.1 | % | | 49.6 | % | | 48.2 | % | Annual dividend yield | 6.8 | % | | 3.0 | % | | 2.5 | % |
The risk-free interest rate is based on the U.S. Treasury yield curve, in effect at the time of grant, for U.S. Treasury STRIPS that approximate the expected life of the award. The expected volatility is based on Sinclair's historical stock prices over a period equal to the expected life of the award. The annual dividend yield is based on Sinclair's annual dividend per share divided by Sinclair's share price on the grant date.
Options
As of December 31, 2023, there were options outstanding to purchase 375,000 shares of Sinclair Class A Common Stock. These options are fully vested and have a weighted average exercise price of $31.25 and a weighted average remaining contractual term of 2 years. As of December 31, 2023, there was no aggregate intrinsic value for the options outstanding. There was no grant, exercise, or forfeiture activity during the year ended December 31, 2023. There was no expense recognized during the years ended December 31, 2023, 2022, and 2021.
401(k) Match
The Sinclair, Inc. 401(k) Profit Sharing Plan and Trust ("the 401(k) Plan") is available as a benefit for SBG's eligible employees. Contributions made to the 401(k) Plan include an employee elected salary reduction amount with a match calculation (the "Match"). The Match and any additional discretionary contributions may be made using Sinclair's Class A Common Stock, if the Sinclair Board so chooses. Typically, the Match is made using Sinclair's Class A Common Stock. The value of the Match is based on the level of elective deferrals into the 401(k) Plan. The number of Sinclair's Class A Common shares granted under the Match is determined based upon the closing price on or about March 1st of each year for the previous calendar year’s Match. SBG recorded $17 million for each of the years ended December 31, 2023 and 2022 and $20 million for the year ended December 31, 2021 of stock-based compensation expense related to the Match. Employee Stock Purchase Plan The ESPP allows eligible employees to purchase Sinclair Class A Common Stock at 85% of the lesser of the fair value of the common stock as of the first day of the quarter and as of the last day of that quarter, subject to certain limits as defined in the ESPP. The stock-based compensation expense recorded related to the ESPP was $1 million for the year ended December 31, 2023 and $2 million for each of the years ended December 31, 2022 and 2021.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is generally computed under the straight-line method over the following estimated useful lives: | | | | | | | | | Buildings and improvements | | 10 - 30 years | Operating equipment | | 5 - 10 years | Office furniture and equipment | | 5 - 10 years | Leasehold improvements | | Lesser of 10 - 30 years or lease term | Automotive equipment | | 3 - 5 years | Property and equipment under finance leases | | Lease term |
Acquired property and equipment is depreciated on a straight-line basis over the respective estimated remaining useful lives. Property and equipment consisted of the following as of December 31, 2023 and 2022 (in millions): | | | | | | | | | | | | | 2023 | | 2022 | Land and improvements | $ | 71 | | | $ | 72 | | Real estate held for development and sale | — | | | 19 | | Buildings and improvements | 287 | | | 300 | | Operating equipment | 894 | | | 873 | | Office furniture and equipment | 142 | | | 130 | | Leasehold improvements | 45 | | | 45 | | Automotive equipment | 64 | | | 63 | | Finance lease assets | 61 | | | 61 | | Construction in progress | 93 | | | 74 | | | 1,657 | | | 1,637 | | Less: accumulated depreciation | (965) | | | (909) | | | $ | 692 | | | $ | 728 | |
5. GOODWILL, INDEFINITE-LIVED INTANGIBLE ASSETS, AND OTHER INTANGIBLE ASSETS:
Goodwill, which arises from the purchase price exceeding the assigned value of the net assets of an acquired business, represents the value attributable to unidentifiable intangible elements being acquired. The change in the carrying amount of goodwill at December 31, 2023 and 2022 was as follows (in millions): | | | | | | | | | | | | | | | | | | | Local media | | Other | | Consolidated | Balance at December 31, 2021 | $ | 2,016 | | | $ | 72 | | | $ | 2,088 | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2022 | $ | 2,016 | | | $ | 72 | | | $ | 2,088 | | Disposition | — | | | (6) | | | (6) | | | | | | | | | | | | | | Transferred to Ventures | — | | | (66) | | | (66) | | Balance at December 31, 2023 | $ | 2,016 | | | $ | — | | | $ | 2,016 | |
SBG's accumulated goodwill impairment was $3,029 million as of both December 31, 2023 and 2022.
For SBG's annual goodwill impairment tests related to its local media reporting unit in 2023, its other reporting units in 2022, and its local media and other reporting units in 2021, SBG concluded that it was more-likely-than-not that goodwill was not impaired for the reporting units in which we performed a qualitative assessment. The qualitative factors reviewed during SBG's annual assessments indicated stable or improving margins and favorable or stable forecasted economic conditions including stable discount rates and comparable or improving business multiples. Additionally, the results of prior quantitative assessments supported significant excess fair value over carrying value of SBG's reporting units. SBG did not have any indicators of impairment in any interim period in 2023 or 2022, and therefore did not perform interim impairment tests for goodwill during those periods.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For SBG's annual goodwill impairment test related to its local media reporting unit in 2022, SBG elected to perform a quantitative assessment and concluded that its fair value substantially exceeded its carrying value. The key assumptions used to determine the fair value of SBG's local media reporting unit consisted primarily of significant unobservable inputs (Level 3 fair value inputs), including discount rates, estimated cash flows, profit margins, and growth rates. The discount rate used to determine the fair value of SBG's local media reporting unit is based on a number of factors including market interest rates, a weighted average cost of capital analysis based on the target capital structure for a television broadcasting company, and includes adjustments for market risk and company specific risk. Estimated cash flows are based upon internally developed estimates and growth rates and profit margins are based on market studies, industry knowledge, and historical performance.
As of December 31, 2023 and 2022, the carrying amount of SBG's indefinite-lived intangible assets was as follows (in millions): | | | | | | | | | | | | | | | | | | | Local media | | Other | | Consolidated | Balance at December 31, 2021 (a) | $ | 123 | | | $ | 27 | | | $ | 150 | | | | | | | | | | | | | | Balance at December 31, 2022 (a) (b) | $ | 123 | | | $ | 27 | | | $ | 150 | | | | | | | | Transferred to Ventures | — | | | (27) | | | (27) | | Balance at December 31, 2023 (a) (b) | $ | 123 | | | $ | — | | | $ | 123 | |
(a)SBG's indefinite-lived intangible assets in its local media segment relate to broadcast licenses and SBG's indefinite-lived intangible assets in other relate to trade names. (b)Approximately $14 million of indefinite-lived intangible assets relate to consolidated VIEs as of December 31, 2023 and 2022.
SBG did not have any indicators of impairment for its indefinite-lived intangible assets in 2023 or 2022, and therefore did not perform interim impairment tests during those periods. SBG performed its annual impairment tests for indefinite-lived intangibles in 2023 and 2022 and as a result of its qualitative assessments, SBG recorded no impairment.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table shows the gross carrying amount and accumulated amortization of SBG's definite-lived intangibles (in millions): | | | | | | | | | | | | | | | | | | | As of December 31, 2023 | | Gross Carrying Value | | Accumulated Amortization | | Net | Amortized intangible assets: | | | | | | Customer relationships (a) | $ | 817 | | | $ | (579) | | | $ | 238 | | | | | | | | Network affiliation | $ | 1,435 | | | $ | (1,032) | | | $ | 403 | | Other | 21 | | | (15) | | | 6 | | Total other definite-lived intangible assets (a) (b) | $ | 1,456 | | | $ | (1,047) | | | $ | 409 | | | | | | | | Total definite-lived intangible assets | $ | 2,273 | | | $ | (1,626) | | | $ | 647 | |
| | | | | | | | | | | | | | | | | | | As of December 31, 2022 | | Gross Carrying Value | | Accumulated Amortization | | Net | Amortized intangible assets: | | | | | | Customer relationships (c) | $ | 1,103 | | | $ | (659) | | | $ | 444 | | | | | | | | Network affiliation | $ | 1,436 | | | $ | (948) | | | $ | 488 | | Other | 34 | | | (20) | | | 14 | | Total other definite-lived intangible assets (b) (c) | $ | 1,470 | | | $ | (968) | | | $ | 502 | | | | | | | | Total definite-lived intangible assets | $ | 2,573 | | | $ | (1,627) | | | $ | 946 | |
(a)During 2023, $142 million of customer relationships and $7 million of other definite-lived intangible assets were transferred to Ventures as part of the Reorganization, as discussed in Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies. (b)Approximately $33 million and $40 million of definite-lived intangible assets relate to consolidated VIEs as of December 31, 2023 and 2022, respectively. (c)During 2022, SBG deconsolidated $3,330 million of customer relationships and $585 million of favorable sports contracts related to the Deconsolidation. Definite-lived intangible assets and other assets subject to amortization are being amortized on a straight-line basis over their estimated useful lives. The definite-lived intangible assets are amortized over a weighted average useful life of 14 years for customer relationships and 15 years for network affiliations. The amortization expense of the definite-lived intangible and other assets for the years ended December 31, 2023, 2022, and 2021 was $148 million, $225 million, and $554 million, respectively, of which $4 million and $77 million as of December 31, 2022 and 2021, respectively, was associated with the amortization of favorable sports contracts prior to the Deconsolidation and is presented within media programming and production expenses in SBG's statements of operations. SBG analyzes specific definite-lived intangibles for impairment when events occur that may impact their value in accordance with the respective accounting guidance for long-lived assets. There were no impairment charges recorded for the years ended December 31, 2023, 2022, and 2021, as there were no indicators of impairment.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table shows the estimated annual amortization expense of the definite-lived intangible assets for the next five years and thereafter (in millions): | | | | | | 2024 | $ | 129 | | 2025 | 123 | | 2026 | 122 | | 2027 | 109 | | 2028 | 83 | | 2029 and thereafter | 81 | | | $ | 647 | |
6. OTHER ASSETS:
Other assets as of December 31, 2023 and 2022 consisted of the following (in millions): | | | | | | | | | | | | | 2023 | | 2022 | Equity method investments (a) | $ | 1 | | | $ | 113 | | Other investments (a) | — | | | 442 | | Note receivable (a) | — | | | 193 | | Income tax receivable | 131 | | | 131 | | | | | | Other | 52 | | | 85 | | Total other assets | $ | 184 | | | $ | 964 | |
(a)The note receivable, other investments, and certain of the equity method investments were transferred to Ventures as part of the Reorganization.
Equity Method Investments
Prior to the Reorganization, SBG had a portfolio of investments, including a number of entities that are primarily focused on the development of real estate and other media and non-media businesses. Subsequent to the Deconsolidation, SBG has an investment in DSIH that is accounted for under the equity method of accounting and, prior to the Deconsolidation, SBG had an investment in the YES Network. No investments were individually significant for the years ended December 31, 2023, 2022, and 2021.
Diamond Sports Intermediate Holdings LLC. Subsequent to the Deconsolidation, SBG's equity interest in DSIH is accounted for under the equity method of accounting. As of March 1, 2022, SBG reflected the investment in DSIH at fair value, which was determined to be nominal. For the year ended December 31, 2023, SBG recorded no equity method loss related to the investment because the carrying value of the investment is zero and SBG is not obligated to fund losses incurred by DSIH. See Deconsolidation of Diamond Sports Intermediate Holdings LLC within Note 1. Nature of Operations and Summary of Significant Accounting Policies.
YES Network Investment. Prior to the Deconsolidation, SBG accounted for its investment in the YES Network as an equity method investment, which was recorded within other assets in SBG's consolidated balance sheets, and in which SBG's proportionate share of the net income generated by the investment was included within income from equity method investments in SBG's consolidated statements of operations. SBG recorded income of $10 million and $41 million related to its investment for the years ended December 31, 2022 and 2021, respectively.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Other Investments
SBG's investments, excluding equity method investments, are accounted for at fair value or, in situations where fair value is not readily determinable, SBG has the option to value investments at cost plus observable changes in value, less impairment. Additionally, certain investments are measured at net asset value ("NAV").
All of the investments measured at fair value and NAV were transferred to Ventures as part of the Reorganization. As of December 31, 2022, SBG held $234 million in investments measured at fair value and $190 million in investments measured at NAV. SBG recognized a fair value adjustment loss of $73 million, a loss of $145 million, and a loss of $42 million during the years ended December 31, 2023, 2022, and 2021, respectively, associated with these securities, which is reflected in other expense, net in SBG's consolidated statements of operations.
All of the investments accounted for utilizing the measurement alternative were transferred to Ventures as part of the Reorganization. Investments accounted for utilizing the measurement alternative were $18 million, net of $7 million of cumulative impairments, as of December 31, 2022. SBG recorded a $6 million impairment related to one investment during the year ended December 31, 2023, which is reflected in other expense, net in SBG's consolidated statements of operations. SBG recorded no impairments related to these investments for the years ended December 31, 2022 and 2021.
As of December 31, 2022, SBG's unfunded commitments related to certain equity investments totaled $128 million, including $88 million related to investments measured at NAV.
Note Receivable
SBG was 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. Subsequent to the Deconsolidation, transactions related to the A/R Facility are no longer intercompany transactions and, therefore, are reflected in SBG's consolidated financial statements. There was no outstanding balance as of December 31, 2023 and an outstanding balance of $193 million as of December 31, 2022, which is recorded within other assets in SBG's consolidated balance sheets. On May 10, 2023, DSPV paid SBG 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 loans under the A/R Facility and cash received were transferred to Ventures as part of the Reorganization.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
Notes payable, finance leases, and commercial bank financing (including "finance leases to affiliates") consisted of the following as of December 31, 2023 and 2022 (in millions): | | | | | | | | | | | | | 2023 | | 2022 | Bank Credit Agreement: | | | | Term Loan B-2, due September 30, 2026 (a) | $ | 1,215 | | | $ | 1,258 | | Term Loan B-3, due April 1, 2028 | 722 | | | 729 | | Term Loan B-4, due April 21, 2029 | 739 | | | 746 | | | | | | STG Notes (b): | | | | 5.125% Unsecured Notes, due February 15, 2027 | 274 | | | 282 | | 5.500% Unsecured Notes, due March 1, 2030 | 485 | | | 500 | | 4.125% Senior Secured Notes, due December 1, 2030 | 737 | | | 750 | | Debt of variable interest entities | 7 | | | 8 | | Debt of non-media subsidiaries | — | | | 16 | | Finance leases | 20 | | | 23 | | Finance leases - affiliate | 7 | | | 9 | | Total outstanding principal | 4,206 | | | 4,321 | | Less: Deferred financing costs and discounts | (46) | | | (56) | | Less: Current portion | (34) | | | (35) | | Less: Finance leases - affiliate, current portion | (2) | | | (3) | | Net carrying value of long-term debt | $ | 4,124 | | | $ | 4,227 | |
(a)During the year ended December 31, 2023, STG repurchased $30 million aggregate principal amount of the Term Loan B-2 for consideration of $26 million. See Bank Credit Agreement below. (b)During the year ended December 31, 2023, STG purchased $7 million, $15 million, and $13 million aggregate principal amount of the 5.125% Senior Notes due 2027 (the "5.125% Notes"), the 5.500% Senior Notes due 2030 (the "5.500% Notes"), and the 4.125% Senior Secured Notes due 2030 (the "4.125% Notes" and, collectively with the 5.125% Notes and 5.500% Notes, the notes are referred to as the "STG Notes"), respectively, in open market transactions for consideration of $6 million, $8 million, and $8 million, respectively. The STG Notes acquired during the year ended December 31, 2023 were canceled immediately following their acquisition. See STG Notes below.
Debt under the Bank Credit Agreement, notes payable, and finance leases as of December 31, 2023 matures as follows (in millions): | | | | | | | | | | | | | | | | | | | Notes and Bank Credit Agreement | | Finance Leases | | Total | 2024 | $ | 31 | | | $ | 7 | | | $ | 38 | | 2025 | 28 | | | 7 | | | 35 | | 2026 | 1,204 | | | 7 | | | 1,211 | | 2027 | 292 | | | 4 | | | 296 | | 2028 | 699 | | | 2 | | | 701 | | 2029 and thereafter | 1,925 | | | 5 | | | 1,930 | | Total minimum payments | 4,179 | | | 32 | | | 4,211 | | Less: Deferred financing costs and discounts | (46) | | | — | | | (46) | | Less: Amount representing future interest | — | | | (5) | | | (5) | | Net carrying value of total debt | $ | 4,133 | | | $ | 27 | | | $ | 4,160 | |
Interest expense in SBG's consolidated statements of operationswas $305 million, $296 million, and $618 million for the years ended December 31, 2023, 2022, and 2021, respectively. Interest expense included amortization of deferred financing costs, debt discounts, and premiums of $10 million, $12 million, and $30 million for the years ended December 31, 2023, 2022, and 2021, respectively.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The stated and weighted average effective interest rates on the above obligations are as follows, for the years ended December 31, 2023 and 2022: | | | | | | | | | | | | | | | | | | | | | | | | | Weighted Average Effective Rate | | | Stated Rate | | 2023 | | 2022 | Bank Credit Agreement: | | | | | | | Term Loan B-2 (a) | | SOFR plus 2.50% | | 7.98% | | 4.62% | Term Loan B-3 (a) | | SOFR plus 3.00% | | 8.35% | | 4.88% | Term Loan B-4 (b) | | SOFR plus 3.75% | | 9.77% | | 8.21% | Revolving Credit Facility (b) (c) | | SOFR plus 2.00% | | —% | | —% | STG Notes: | | | | | | | 5.125% Unsecured Notes | | 5.13% | | 5.33% | | 5.33% | 5.500% Unsecured Notes | | 5.50% | | 5.66% | | 5.66% | 4.125% Secured Notes | | 4.13% | | 4.31% | | 4.31% |
(a)The STG Term Loan B-2 converted to using the Secured Overnight Financing Rate ("SOFR") upon the complete phase-out of LIBOR on June 30, 2023 and was subject to customary credit spread adjustments set at the time of the rate conversion. The STG Term Loan B-3 has LIBOR to SOFR conversion terms, including the applicable credit spread adjustments, built into the existing agreement. (b)Interest rate terms on the STG Term Loan B-4 and revolving credit facility include additional customary credit spread adjustments. (c)STG incurs a commitment fee on undrawn capacity of 0.25%, 0.375%, or 0.50% if the first lien indebtedness ratio (as defined in the Bank Credit Agreement) is less than or equal to 2.75x, less than or equal to 3.0x but greater than 2.75x, or greater than 3.0x, respectively. The revolving credit facility is priced at SOFR plus 2.00%, subject to decrease if the specified first lien leverage ratio (as defined in the Bank Credit Agreement) is less than or equal to certain levels. As of December 31, 2023 and 2022, there were no outstanding borrowings, $1 million in letters of credit outstanding, and $649 million available under the revolving credit facility and the revolving credit facility matures on December 4, 2025. See Bank Credit Agreement below for further information.
SBG recorded a $23 million original issuance discount during the year ended December 31, 2022 and $4 million of debt issuance costs during the year ended December 31, 2021. Debt issuance costs and original issuance discounts and premiums are presented as a direct deduction from, or addition to, the carrying amount of an associated debt liability, except for debt issuance costs related to the revolving credit facility, which are presented within other assets in SBG's consolidated balance sheets.
Bank Credit Agreement
STG, a wholly owned subsidiary of SBG, has a syndicated credit facility which includes both revolving credit and issued term loans (the "Bank Credit Agreement").
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 December 31, 2023, the STG first lien leverage ratio was below 4.5x. The 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 quarter, is utilized under the revolving credit facility as of such date. Since there was no utilization under the revolving credit facility as of December 31, 2023, 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 December 31, 2023.
On April 1, 2021, STG amended the Bank Credit Agreement to raise additional term loans in an aggregate principal amount of $740 million ("Term Loan B-3"), with an original issuance discount of $4 million, the proceeds of which were used to refinance a portion of the Term Loan B-1 maturing in January 2024. The Term Loan B-3 matures in April 2028 and bears interest at SOFR plus 3.00%.
On April 21, 2022, STG entered into the Fourth Amendment (the "Fourth Amendment") to the Bank Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, the guarantors party thereto (the "Guarantors") and the lenders and other parties thereto.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Pursuant to the Fourth Amendment, STG raised Term B-4 Loans (as defined in the Bank Credit Agreement) in an aggregate principal amount of $750 million, which mature on April 21, 2029 (the "Term Loan B-4"). The Term Loan B-4 was issued at 97% of par and bears interest, at STG’s option, at Term SOFR plus 3.75% (subject to customary credit spread adjustments) or base rate plus 2.75%. The proceeds from the Term Loan B-4 were used to refinance all of STG’s outstanding Term Loan B-1 due January 2024 and to redeem STG’s outstanding 5.875% senior notes due 2026. In addition, the maturity of $612.5 million of the total $650 million of revolving commitments under the Bank Credit Agreement were extended to April 21, 2027, with the remaining $37.5 million continuing to mature on December 4, 2025. For the year ended December 31, 2022, SBG capitalized an original issuance discount of $23 million associated with the issuance of the Term Loan B-4, which is reflected as a reduction to the outstanding debt balance and will be recognized as interest expense over the term of the outstanding debt utilizing the effective interest method. SBG recognized a loss on extinguishment of $10 million for the year ended December 31, 2022.
The Term Loan B-2, Term Loan B-3, and Term Loan B-4 amortize in equal quarterly installments in an aggregate amount equal to 1% of the original amount of such term loan, with the balance being payable on the maturity date.
During the year ended December 31, 2023, STG repurchased $30 million aggregate principal amount of the Term Loan B-2 for consideration of $26 million. SBG recognized a gain on extinguishment of $3 million for the year ended December 31, 2023.
In January 2024, STG repurchased $27 million aggregate principal amount of the Term Loan B-2 for consideration of $25 million.
STG Notes
During the year ended December 31, 2022, STG purchased $118 million aggregate principal amount of the 5.125% Notes in open market transactions for consideration of $104 million. The 5.125% Notes acquired during the year ended December 31, 2022 were canceled immediately following their acquisition. SBG recognized a gain on extinguishment of the 5.125% Notes of $13 million for the year ended December 31, 2022.
During the year ended December 31, 2023, STG purchased $7 million, $15 million, and $13 million aggregate principal amount of the 5.125% Notes, the 5.500% Notes, and the 4.125% Notes, respectively, in open market transactions for consideration of $6 million, $8 million, and $8 million, respectively. The STG Notes acquired during the year ended December 31, 2023 were canceled immediately following their acquisition. SBG recognized a gain on extinguishment of the STG Notes of $12 million for the year ended December 31, 2023.
The price at which STG may redeem the STG Notes is set forth in the respective indenture of the STG Notes. Also, if SBG sells certain assets or experiences specific kinds of changes of control, the holders of these STG Notes may require SBG to repurchase some or all of the outstanding STG Notes.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Debt of Variable Interest Entities and Guarantees of Third-party Obligations
SBG jointly, severally, unconditionally, and irrevocably guaranteed $2 million of debt of certain third parties as of both December 31, 2023 and 2022, all of which related to consolidated VIEs is included in our consolidated balance sheets. SBG provides 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. As of December 31, 2023, SBG has determined that it is not probable that SBG would have to perform under any of these guarantees.
Interest Rate Swap
During the year ended December 31, 2023, 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 SOFR. See Hedge Accounting within Note 1. Nature of Operations and Summary of Significant Accounting Policies for further discussion. As of December 31, 2023, the fair value of the interest rate swap was an asset of $1 million, which is recorded in other assets in SBG's consolidated balance sheets.
Finance Leases
For more information related to our finance leases and affiliate finance leases see Note 8. Leases and Note 14. Related Person Transactions, respectively.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8. LEASES:
SBG determines if a contractual arrangement is a lease at inception. SBG's lease arrangements provide SBG the right to utilize certain specified tangible assets for a period of time in exchange for consideration. SBG's leases primarily relate to building space, tower space, and equipment. SBG does not separate non-lease components from building and tower leases for the purposes of measuring lease liabilities and assets. SBG's leases consist of operating leases and finance leases which are presented separately in SBG's consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
SBG recognizes a lease liability and a right of use asset at the lease commencement date based on the present value of the future lease payments over the lease term discounted using SBG's incremental borrowing rate. Implicit interest rates within SBG's lease arrangements are rarely determinable. Right of use assets also include, if applicable, prepaid lease payments and initial direct costs, less incentives received.
SBG recognizes operating lease expense on a straight-line basis over the term of the lease within operating expenses. Expense associated with SBG's finance leases consists of two components, including interest on outstanding finance lease obligations and amortization of the related right of use assets. The interest component is recorded in interest expense and amortization of the finance lease asset is recognized on a straight-line basis over the term of the lease in depreciation of property and equipment.
SBG's leases do not contain any material residual value guarantees or material restrictive covenants. Some of SBG's leases include optional renewal periods or termination provisions which SBG assess at inception to determine the term of the lease, subject to reassessment in certain circumstances.
The following table presents lease expense SBG has recorded in SBG's consolidated statements of operations for the years ended December 31, 2023, 2022, and 2021 (in millions): | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Finance lease expense: | | | | | | Amortization of finance lease asset | $ | 4 | | | $ | 3 | | | $ | 3 | | Interest on lease liabilities | 2 | | | 3 | | | 3 | | Total finance lease expense | 6 | | | 6 | | | 6 | | Operating lease expense (a) | 38 | | | 41 | | | 60 | | Total lease expense | $ | 44 | | | $ | 47 | | | $ | 66 | |
(a)Includes variable lease expense of $6 million for the year ended December 31, 2023 and $7 million for each of the years ended December 31, 2022 and 2021 and short-term lease expense of $1 million for the year ended December 31 2021.
The following table summarizes SBG's outstanding operating and finance lease obligations as of December 31, 2023 (in millions): | | | | | | | | | | | | | | | | | | | Operating Leases | | Finance Leases | | Total | 2024 | $ | 31 | | | $ | 7 | | | $ | 38 | | 2025 | 30 | | | 7 | | | 37 | | 2026 | 29 | | | 7 | | | 36 | | 2027 | 28 | | | 4 | | | 32 | | 2028 | 24 | | | 2 | | | 26 | | 2029 and thereafter | 78 | | | 5 | | | 83 | | Total undiscounted obligations | 220 | | | 32 | | | 252 | | Less imputed interest | (47) | | | (5) | | | (52) | | Present value of lease obligations | $ | 173 | | | $ | 27 | | | $ | 200 | |
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes supplemental balance sheet information related to leases as of December 31, 2023 and December 31, 2022 (in millions, except lease term and discount rate): | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases | | Lease assets, non-current | $ | 142 | | | $ | 12 | | (a) | $ | 145 | | | $ | 16 | | (a) | | | | | | | | | | Lease liabilities, current | $ | 21 | | | $ | 6 | | | $ | 23 | | | $ | 6 | | | Lease liabilities, non-current | 152 | | | 21 | | | 154 | | | 26 | | | Total lease liabilities | $ | 173 | | | $ | 27 | | | $ | 177 | | | $ | 32 | | | | | | | | | | | | Weighted average remaining lease term (in years) | 7.85 | | 5.26 | | 8.68 | | 5.76 | | Weighted average discount rate | 6.2 | % | | 7.9 | % | | 5.8 | % | | 8.0 | % | |
(a)Finance lease assets are reflected in property and equipment, net in SBG's consolidated balance sheets.
The following table presents other information related to SBG's leases for the years ended December 31, 2023, 2022, and 2021 (in millions): | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Cash paid for amounts included in the measurement of lease liabilities: | | | | | | Operating cash flows from operating leases | $ | 33 | | | $ | 35 | | | $ | 52 | | Operating cash flows from finance leases | $ | 2 | | | $ | 3 | | | $ | 3 | | Financing cash flows from finance leases | $ | 7 | | | $ | 6 | | | $ | 5 | | Leased assets obtained in exchange for new operating lease liabilities | $ | 25 | | | $ | 15 | | | $ | 50 | | Leased assets obtained in exchange for new finance lease liabilities | $ | — | | | $ | 1 | | | $ | 4 | |
9. PROGRAM CONTRACTS:
Future payments required under television program contracts as of December 31, 2023 were as follows (in millions): | | | | | | 2024 | $ | 76 | | 2025 | 9 | | 2026 | 5 | | | | | | | | Total | 90 | | Less: Current portion | (76) | | Long-term portion of program contracts payable | $ | 14 | |
Each future period’s film liability includes contractual amounts owed, but what is contractually owed does not necessarily reflect what we are expected to pay during that period. While we are contractually bound to make the payments reflected in the table during the indicated periods, industry protocol typically enables us to make film payments on a three-month lag. Included in the current portion amount are payments due in arrears of $13 million. In addition, we have entered into non-cancelable commitments for future television program rights aggregating to $14 million as of December 31, 2023.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10. REDEEMABLE NONCONTROLLING INTERESTS:
SBG accounts for redeemable noncontrolling interests in accordance with ASC 480, Distinguishing Liabilities from Equity, and classifies them as mezzanine equity in SBG's consolidated balance sheets because their possible redemption is outside of the SBG's control. SBG's redeemable non-controlling interests consist of the following:
Redeemable Subsidiary Preferred Equity
On August 23, 2019, Diamond Sports Holdings, LLC ("DSH"), an indirect parent of DSG and indirect wholly-owned subsidiary of the Company, issued preferred equity ("the Redeemable Subsidiary Preferred Equity").
On February 10, 2023, SBG 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. SBG redeemed no Redeemable Subsidiary Preferred Equity during the years ended December 31, 2022 and 2021.
Dividends accrued during the years ended December 31, 2023, 2022, and 2021 were $3 million, $13 million, and $14 million, respectively, and are reflected in net loss (income) attributable to redeemable noncontrolling interests in SBG's consolidated statements of operations. Dividends accrued during 2023, 2022, and the 2nd, 3rd, and 4th quarters of 2021 were paid in kind and added to the liquidation preference. The balance, net of issuance costs, and the liquidation preference of the Redeemable Subsidiary Preferred Equity was $194 million and $198 million, respectively, as of December 31, 2022.
11. INCOME TAXES:
The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2023, 2022, and 2021 (in millions): | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Current provision (benefit) for income taxes: | | | | | | Federal | $ | 5 | | | $ | 6 | | | $ | (78) | | State | (5) | | | 3 | | | 2 | | | — | | | 9 | | | (76) | | Deferred (benefit) provision for income taxes: | | | | | | Federal | (331) | | | 868 | | | (93) | | State | (28) | | | 36 | | | (4) | | | (359) | | | 904 | | | (97) | | (Benefit) provision for income taxes | $ | (359) | | | $ | 913 | | | $ | (173) | |
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision: | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Federal statutory rate | 21.0 | % | | 21.0 | % | | 21.0 | % | Adjustments: | | | | | | State income taxes, net of federal tax benefit (a) | 4.7 | % | | 2.0 | % | | (4.2) | % | Valuation allowance (b) | 33.5 | % | | 1.6 | % | | (1.5) | % | Noncontrolling interest (c) | 0.5 | % | | 0.2 | % | | 2.6 | % | Federal tax credits (d) | 0.6 | % | | (0.2) | % | | 10.6 | % | Net Operating Loss Carryback (e) | — | % | | — | % | | 7.5 | % | Other | (0.9) | % | | 0.7 | % | | (1.3) | % | Effective income tax rate | 59.4 | % | | 25.3 | % | | 34.7 | % |
(a)Included in state income taxes are deferred income tax effects related to certain acquisitions, intercompany mergers, tax elections, law changes and/or impact of changes in apportionment. (b)SBG’s 2023 income tax provision includes a $212 million decrease related to the release of valuation allowance associated with the federal interest expense carryforwards under the IRC Section 163(j). SBG’s 2022 income tax provision includes a net $56 million addition related to an increase in valuation allowance associated with the federal interest expense carryforwards under the IRC Section 163(j) and primarily offset by a decrease in valuation allowance on certain state deferred tax assets resulting from the Deconsolidation of Diamond. SBG’s 2021 income tax provision includes a net $8 million addition related to an increase in valuation allowance associated with the federal interest expense carryforwards under the IRC Section 163(j) and primarily offset by a decrease in valuation allowance on certain state deferred tax assets as a result of the changes in estimate of the state apportionment. (c)SBG's 2023, 2022, and 2021 income tax provisions include a $3 million benefit, a $9 million expense, and a $13 million benefit, respectively, related to noncontrolling interest of various partnerships. (d)SBG's 2021 income tax provision included a benefit of $40 million related to investments in sustainability initiatives whose activities qualify for federal income tax credits through 2021. (e)SBG's 2021 income tax provision included a benefit of $38 million as result of the CARES Act allowing for the 2020 federal net operating loss to be carried back to the pre-2018 years when the federal tax rate was 35%.
Temporary differences between the financial reporting carrying amounts and the tax bases of assets and liabilities give rise to deferred taxes. Total deferred tax assets and deferred tax liabilities as of December 31, 2023 and 2022 were as follows (in millions): | | | | | | | | | | | | | 2023 | | 2022 | Deferred Tax Assets: | | | | Net operating losses: | | | | Federal | $ | 97 | | | $ | 14 | | State | 152 | | | 131 | | IRC Section 163(j) interest expense carryforward | 93 | | | 212 | | Investment in Bally's securities | 6 | | | 70 | | Tax Credits | 87 | | | 79 | | Other | 112 | | | 98 | | | 547 | | | 604 | | Valuation allowance for deferred tax assets | (113) | | | (312) | | Total deferred tax assets | $ | 434 | | | $ | 292 | | | | | | Deferred Tax Liabilities: | | | | Goodwill and intangible assets | $ | (334) | | | $ | (384) | | Property & equipment, net | (98) | | | (110) | | Investment in DSIH | (250) | | | (356) | | Other | (35) | | | (52) | | Total deferred tax liabilities | (717) | | | (902) | | Net deferred tax liabilities | $ | (283) | | | $ | (610) | |
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At December 31, 2023, SBG had approximately $462 million and $3,222 million of gross federal and state net operating losses, respectively. Except for those without an expiration date, these losses will expire during various years from 2024 to 2043, and some of them are subject to annual limitations under the IRC Section 382 and similar state provisions. As discussed in Income taxes under Note 1. Nature of Operations and Summary of Significant Accounting Policies, SBG establishes valuation allowance in accordance with the guidance related to accounting for income taxes. As of December 31, 2023, a valuation allowance has been provided for deferred tax assets related to certain temporary basis differences and a substantial portion of SBG’s available state net operating loss carryforwards based on past operating results, expected timing of the reversals of existing temporary basis differences, alternative tax strategies, current and cumulative losses, and projected future taxable income. Although realization is not assured for the remaining deferred tax assets, SBG believes it is more likely than not that they will be realized in the future. During the year ended December 31, 2023, SBG decreased its valuation allowance by $199 million to $113 million. The decrease was primarily due to the release of valuation allowance related to interest expense carryforwards under the IRC Section 163(j) offset by a change in judgement in the realizability of certain state deferred tax assets. During the year ended December 31, 2022, SBG increased its valuation allowance by $56 million to $312 million. The increase was primarily due to uncertainty in the realizability of deferred tax assets related to interest expense carryforwards under the IRC Section 163(j), offset by a change in judgement in the realizability of certain state deferred tax assets. The following table summarizes the activity related to SBG's accrued unrecognized tax benefits (in millions): | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | 2021 | Balance at January 1, | $ | 17 | | | $ | 15 | | | $ | 11 | | Additions related to prior year tax positions | — | | | 2 | | | 1 | | Additions related to current year tax positions | 1 | | | 1 | | | 3 | | Reductions related to positions transferred to Ventures | (2) | | | — | | | — | | Reductions related to settlements with taxing authorities | (2) | | | — | | | — | | Reductions related to expiration of the applicable statute of limitations | (2) | | | (1) | | | — | | Balance at December 31, | $ | 12 | | | $ | 17 | | | $ | 15 | |
As of 2023, SBG is a subsidiary of Sinclair and is subject to U.S. federal income tax as part of the consolidated return. SBG is also subject to income tax of multiple state jurisdictions. SBG’s 2014 through 2020 federal tax returns are currently under audit, and several of SBG’s subsidiaries are currently under state examinations for various years. SBG does not anticipate that resolution of these matters will result in a material change to SBG’s financial statements. In addition, SBG believes that its liability for unrecognized tax benefits could be reduced by up to $1 million, in the next twelve months, as a result of expected statute of limitations expirations and resolution of examination issues and settlements with tax authorities.
12. COMMITMENTS AND CONTINGENCIES:
Litigation SBG is 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, SBG does not believe the outcome of these matters, individually or in the aggregate, will have a material effect on SBG's 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.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 Commission 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, SBG's 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 SBG consolidates these stations as VIEs.
On September 21, 2022, the FCC released an NAL against the licensees of a number of stations, including 83 SBG stations and several stations with whom SBG 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 December 31, 2023, SBG has 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.
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.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 "DSG 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. The defendants believe the allegations in this lawsuit are without merit and intend to vigorously defend against plaintiffs' claims.
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. 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. The cash payment will be funded by cash on hand at Ventures and STG, and/or a loan backed by Ventures. Under the terms of the settlement, Sinclair will provide transition services to DSG to allow DSG to become a self-standing entity going forward. As of December 31, 2023, we have accrued $495 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 SBG's consolidated balance sheets and corporate general and administrative expenses in in SBG's consolidated statements of operations.
The settlement is subject to definitive documentation. On February 26, 2024, the court approved the settlement, subject to Sinclair and DSG completing definitive documentation.
Sinclair has entered into the settlement, without admitting any fault or wrongdoing. If the settlement does not receive final court approval, Sinclair remains committed to vigorously defending against the claims asserted in the litigation.
Changes in the Rules of Television Ownership, Local Marketing Agreements, Joint Sales Agreements, Retransmission Consent Negotiations, and National Ownership Cap
Certain of SBG's stations have entered into what have commonly been referred to as local marketing agreements or LMAs. One typical type of LMA is a programming agreement between two separately owned television stations serving the same market, whereby the licensee of one station programs substantial portions of the broadcast day and sells advertising time during such programming segments on the other licensee’s station subject to the latter licensee’s ultimate editorial and other controls. SBG believes these arrangements allow it to reduce SBG's operating expenses and enhance profitability. In 1999, the FCC established a local television ownership rule that made certain LMAs attributable. The FCC adopted policies to exempt from attribution "legacy" LMAs that were entered into prior to November 5, 1996 and permitted the applicable stations to continue operations pursuant to the LMAs until the conclusion of the FCC’s 2004 biennial review. The FCC stated it would conduct a case-by-case review of legacy LMAs and assess the appropriateness of extending the exemption periods. The FCC did not initiate any review of legacy LMAs in 2004 or as part of its subsequent quadrennial reviews. SBG does not know when, or if, the FCC will conduct any such review of legacy LMAs. Currently, all of SBG's LMAs are exempt from attribution under the local television ownership rule because they were entered into prior to November 5, 1996. If the FCC were to eliminate the exemption for these LMAs, SBG would have to terminate or modify these LMAs.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In September 2015, the FCC released a Notice of Proposed Rulemaking in response to a Congressional directive in STELAR to examine the "totality of the circumstances test" for good-faith negotiations of retransmission consent. The proposed rulemaking seeks comment on new factors and evidence to consider in its evaluation of claims of bad faith negotiation, including service interruptions prior to a "marquee sports or entertainment event," restrictions on online access to broadcast programming during negotiation impasses, broadcasters' ability to offer bundles of broadcast signals with other broadcast stations or cable networks, and broadcasters' ability to invoke the FCC's exclusivity rules during service interruptions. On July 14, 2016, the FCC’s Chairman at the time announced that the FCC would not, at that time, proceed to adopt additional rules governing good faith negotiations of retransmission consent but did not formally terminate the rulemaking. No formal action has yet been taken on this Proposed Rulemaking, and SBG cannot predict if the FCC will terminate the rulemaking or take other action.
On November 20, 2017, the FCC released an Ownership Order on Reconsideration that eliminated or revised several media ownership rules. Among other things, the Order on Reconsideration (1) retained the “Top-Four Prohibition” (which generally restricts common ownership of two top-four rated stations in a market) but introduced a process by which entities could seek a waiver of the Top-Four Prohibition on a case-by-case basis; (2) eliminated the “Eight-Voices Test” that previously allowed common ownership of two stations in a single market only if eight or more independently-owned television stations would remain in the market (allowing common ownership of up to two stations in a market as long as such ownership does not violate the Top-Four Prohibition), and (3) eliminated the JSA attribution rule. The Ownership Order on Reconsideration was vacated and remanded by the U.S. Court of Appeals for the Third Circuit in September 2019, but the Supreme Court ultimately reversed the Third Circuit’s decision on April 1, 2021 and the Ownership Order on Reconsideration became effective on June 30, 2021.
On December 18, 2017, the FCC released a Notice of Proposed Rulemaking to examine the FCC’s national ownership cap, including the UHF discount. The UHF discount allows television station owners to discount the coverage of UHF stations when calculating compliance with the FCC's national ownership cap, which prohibits a single entity from owning television stations that reach, in total, more than 39% of all the television households in the nation. All but 34 of the stations SBG currently owns and operates, or to which SBG provides programming services are UHF. SBG cannot predict the outcome of the rulemaking proceeding. With the application of the UHF discount counting all of SBG's present stations SBG reaches approximately 24% of U.S. households. Changes to the national ownership cap could limit SBG's ability to make television station acquisitions.
On December 13, 2018, the FCC released a Notice of Proposed Rulemaking to initiate the 2018 Quadrennial Regulatory Review of the FCC’s broadcast ownership rules. With respect to the local television ownership rule specifically, among other things, the Notice of Proposed Rulemaking sought comment on possible modifications to the rule’s operation, including the relevant product market, the numerical limit, the Top-Four Prohibition; and the implications of multicasting, satellite stations, low power television ("LPTV") stations and the Next Generation broadcasting standard. On December 22, 2023, the FCC completed its 2018 Quadrennial Regulatory Review (the "2018 Ownership Order"). The 2018 Ownership Order declined to loosen or eliminate any of the existing television ownership rules and expanded the Top-Four Prohibition to multicast streams and LPTV stations, each of which were not previously considered as part of the local television ownership rules. The expanded rule prohibits a broadcaster with a top-four-rated television station from acquiring the network affiliation of another top-four rated station in the market and airing that second top-four network on a multicast stream or commonly owned LPTV station under certain circumstances. Affiliation arrangements existing as of the release of the 2018 Ownership Order that would otherwise violate the expanded Top-Four Prohibition will not be subject to divestiture, but such arrangements will not be transferrable or assignable. The 2018 Ownership Order also revised the methodology for determining whether a station is rated among the top-four stations in the market, retained the SSA disclosure requirement, and declined to attribute SSAs or JSAs. The 2018 Ownership Order’s expansion of the Top-Four Prohibition to multicast streams and LPTV stations may affect the Company’s ability to acquire programming or to sell or acquire stations due to the need to divest grandfathered affiliations.
On December 22, 2022, the FCC released a Public Notice to initiate the 2022 Quadrennial Regulatory Review, seeking comment on the Local Radio Ownership Rule, the Local Television Ownership Rule, and the Dual Network Rule and the proceeding remains pending. We cannot predict the outcome of that rulemaking proceeding. Changes to these rules could impact our ability to make radio or television station acquisitions.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13. VARIABLE INTEREST ENTITIES: Certain of SBG's stations provide services to other station owners within the same respective market through agreements, such as LMAs, where SBG provides programming, sales, operational, and administrative services, and JSAs and SSAs, where SBG provides non-programming, sales, operational, and administrative services. In certain cases, SBG has also entered into purchase agreements or options to purchase the license related assets of the licensee. SBG typically owns the majority of the non-license assets of the stations, and in some cases where the licensee acquired the license assets concurrent with SBG's acquisition of the non-license assets of the station, SBG has 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 SBG's investment in the stations, SBG is the primary beneficiary when, subject to the ultimate control of the licensees, SBG has the power to direct the activities which significantly impact the economic performance of the VIE through the services SBG provides and SBG absorbs losses and returns that would be considered significant to the VIEs. The fees paid between SBG and the licensees pursuant to these arrangements are eliminated in consolidation.
A subsidiary of DSIH is a party to a joint venture associated with Marquee. Marquee is party to a long term telecast rights agreement which provides the rights to air certain live game telecasts and other content, which SBG guarantees. In connection with a prior acquisition, SBG became party to a joint venture associated with one other regional sports network. DSIH participated significantly in the economics and had the power to direct the activities which significantly impacted the economic performance of these regional sports networks, including sales and certain operational services. As of March 1, 2022, as a result of the Deconsolidation, SBG no longer consolidates these regional sports networks. See Deconsolidation of Diamond Sports Intermediate Holdings LLC within Note 1. Nature of Operations and Summary of Significant Accounting Policies.
The carrying amounts and classification of the assets and liabilities of the VIEs mentioned above which have been included in SBG's consolidated balance sheets as of December 31, 2023 and 2022 were as follows (in millions): | | | | | | | | | | | | | 2023 | | 2022 | ASSETS | | | | Current assets: | | | | | | | | Accounts receivable, net | 23 | | | 47 | | | | | | Other current assets | 3 | | | 3 | | | | | | Total current asset | 26 | | | 50 | | | | | | | | | | Property and equipment, net | 11 | | | 10 | | | | | | Goodwill and indefinite-lived intangible assets | 15 | | | 15 | | | | | | Definite-lived intangible assets, net | 33 | | | 40 | | | | | | Total assets | $ | 85 | | | $ | 115 | | | | | | LIABILITIES | | | | Current liabilities: | | | | | | | | | | | | | | | | Total current liabilities | 14 | | | 15 | | | | | | Long-term liabilities: | | | | Notes payable, finance leases, and commercial bank financing, less current portion | 6 | | | 7 | | | | | | Program contracts payable, less current portion | — | | | 1 | | Other long-term liabilities | 3 | | | 3 | | Total liabilities | $ | 23 | | | $ | 26 | |
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 above, were $130 million as of both December 31, 2023 and 2022, 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 December 31, 2023, 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 7. Notes Payable and Commercial Bank Financing for further discussion. The risk and reward characteristics of the VIEs are similar. Other VIEs
Prior to the Reorganization, SBG had several investments in entities which are considered VIEs. However, SBG did not participate in the management of these entities, including the day-to-day operating decisions or other decisions which would allow SBG to control the entity, and therefore, SBG was not considered the primary beneficiary of these VIEs. SBG's investments in these VIEs for which SBG was not the primary beneficiary were transferred to Ventures as part of the Reorganization.
The carrying amounts of SBG's investments in these VIEs for which SBG was not the primary beneficiary were $187 million as of December 31, 2022 and are included in other assets in SBG's consolidated balance sheets. The income and loss related to equity method investments and other equity investments are recorded in income from equity method investments and other expense, net, respectively, in SBG's consolidated statements of operations. SBG recorded gains of $37 million, $58 million, and $37 million for the years ended December 31, 2023, 2022, and 2021, respectively, related to these investments.
In conjunction with the Transaction, the composition of the DSIH board of managers was modified resulting in SBG's loss of voting control over DSIH. SBG holds substantially all of the equity of DSIH and provides certain management and general and administrative services to DSIH. However, it was determined that SBG is not the primary beneficiary because SBG lacks the ability to control the activities that most significantly drive the economics of the business. The carrying amount of SBG's investment in DSIH is zero and there is no obligation for SBG to provide additional financial support. Prior to the Reorganization, SBG was also party to the A/R Facility held by an indirect wholly-owned subsidiary of DSIH which had an outstanding balance of approximately $193 million as of December 31, 2022. See Note Receivable within Note 6. Other Assets. The amounts drawn under the A/R facility represent our maximum loss exposure. The loans under the A/R Facility were transferred to Ventures as part of the Reorganization.
14. RELATED PERSON TRANSACTIONS:
Transactions With SBG's Indirect Controlling Shareholders David, Frederick, J. Duncan, and Robert Smith (collectively, "the Sinclair controlling shareholders") are brothers and hold substantially all of the Sinclair Class B Common Stock and some of the Sinclair Class A Common Stock. SBG engaged in the following transactions with them and/or entities in which they have substantial interests: Leases. Certain assets used by SBG and SBG's operating subsidiaries are leased from entities owned by the Sinclair controlling shareholders. Lease payments made to these entities were $6 million for both the years ended December 31, 2023 and 2022 and $5 million for the year ended December 31, 2021. Finance leases payable related to the aforementioned relationships were $7 million, net of $1 million interest, and $9 million, net of $1 million interest, as of December 31, 2023 and 2022, respectively. The finance leases mature in periods through 2030. For further information on finance leases to affiliates, see Note 7. Notes Payable and Commercial Bank Financing.
Charter Aircraft. SBG leases aircraft owned by certain controlling shareholders. For all leases, we incurred aggregate expenses of $0.2 million, $0.4 million and $1 million for the years ended December 31, 2023, 2022, and 2021, respectively.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 SBG's stations provide services to these Cunningham Stations pursuant to LMAs or JSAs and SSAs. See Note 13. Variable Interest Entities, for further discussion of the scope of services provided under these types of arrangements. All of the non-voting stock of the Cunningham Stations is owned by trusts for the benefit of the children of the Sinclair controlling shareholders. SBG consolidates certain subsidiaries of Cunningham with which SBG has variable interests through various arrangements related to the Cunningham Stations.
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 5-year renewal terms remaining with final expiration on July 1, 2033. SBG also executed purchase agreements to acquire the license related assets of these stations from Cunningham, which grant SBG the right to acquire, and grant Cunningham the right to require SBG 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 SBG is obligated to pay Cunningham an annual fee for the television stations equal to the greater of (i) 3% of each station’s annual net broadcast revenue or (ii) $6 million. The aggregate purchase price of these television stations increases by 6% annually. A portion of the fee is required to be applied to the purchase price to the extent of the 6% increase. The cumulative prepayments made under these purchase agreements were $65 million and $61 million as of December 31, 2023 and 2022, respectively. The remaining aggregate purchase price of these stations, net of prepayments, was $54 million for both the years ended December 31, 2023 and 2022. Additionally, SBG provides services to WDBB-TV pursuant to an LMA, which expires April 22, 2025, and have a purchase option to acquire for $0.2 million. SBG paid Cunningham, under these agreements, $12 million, $10 million, and $11 million for the years ended December 31, 2023, 2022, and 2021, respectively.
The agreements with KBVU-TV/KCVU-TV, KRNV-DT/KENV-DT, WBSF-TV, WDBB-TV, WEMT-TV, WGTU-TV/WGTQ-TV, WPFO-TV, and WYDO-TV expire between April 2025 and November 2029, and certain stations have renewal provisions for successive eight-year periods.
As SBG consolidates the licensees as VIEs, the amounts SBG earns or pays under the arrangements are eliminated in consolidation and the gross revenues of the stations are reported in SBG's consolidated statements of operations. SBG's consolidated revenues include $140 million, $159 million, and $144 million for the years ended December 31, 2023, 2022, and 2021, respectively, related to the Cunningham Stations.
SBG has an agreement with Cunningham to provide master control equipment and provide master control services to a station in Johnstown, PA with which Cunningham has an LMA that expires in June 2025. Under the agreement, Cunningham paid SBG an initial fee of $1 million and pays SBG $0.3 million annually for master control services plus the cost to maintain and repair the equipment. In addition, SBG has an agreement with Cunningham to provide a news share service with the Johnstown, PA station for an annual fee of $0.6 million which increases by 3% on each anniversary and which expires in November 2024.
SBG has multi-cast agreements with Cunningham Stations in the Eureka/Chico-Redding, California; Tri-Cities, Tennessee; Anderson, South Carolina; Baltimore, Maryland; Portland, Maine; Charleston, West Virginia; Dallas, Texas; and Greenville, North Carolina markets. In exchange for carriage of these networks in their markets, SBG paid $2 million, $1 million, and $2 million for the years ended December 31, 2023, 2022, and 2021, respectively, under these agreements.
MileOne Autogroup, Inc.
SBG sells advertising time to certain operating subsidiaries of MileOne Autogroup, Inc. ("MileOne"), including automobile dealerships, body shops, and an automobile leasing company. David Smith has a controlling interest in, and is a member of the Board of Directors of, MileOne. SBG received payments for advertising totaling less than $0.1 million for each of the years ended December 31, 2023 and 2022 and $0.1 million for the year December 1, 2021.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Leased Property by Real Estate Ventures Certain of SBG's real estate ventures have entered into leases with entities owned by members of the Smith Family. Total rent received under these leases was $1 million for each of the years ended December 31, 2023, 2022, and 2021.
Sinclair, Inc.
Subsequent to the Reorganization, Sinclair is the sole member of SBG. See Company Reorganization within Note 1. Nature of Operations and Summary of Significant Accounting Policies for further discussion.
SBG recorded revenue of $5 million for the year ended December 31, 2023 within the local media segment related to sales services provided by SBG to Sinclair, and certain of its direct and indirect subsidiaries.
SBG recorded expenses of $6 million for the year ended December 31, 2023 within the local media segment related to digital advertising services provided by Sinclair, and certain of its direct and indirect subsidiaries, to SBG.
SBG made cash distributions of $554 million to Sinclair, and certain of its direct and indirect subsidiaries, for the year ended December 31, 2023.
SBG received cash payments of $72 million from Sinclair, and certain of its direct and indirect subsidiaries, for the year ended December 31, 2023.
As of December 31, 2023, SBG had a receivable from Sinclair, and certain of its direct and indirect subsidiaries, of $3 million, included within prepaid expenses and other current assets in SBG's consolidated balance sheets.
Diamond Sports Intermediate Holdings LLC
Subsequent to February 28, 2022, SBG's equity interest in DSIH is accounted for as an equity method investment.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Management Services Agreement. In 2019, SBG entered into a management services agreement with DSG, a wholly-owned subsidiary of DSIH, in which SBG provides DSG with affiliate sales and marketing services and general and administrative services. The contractual annual amount due from DSG for these services during the fiscal year ended December 31, 2023 is $78 million, which is subject to increases on an annual basis. Additionally, the agreement contains an incentive fee payable to SBG calculated based on certain terms contained within new or renewed distribution agreements with Distributors. As a condition to the Transaction, DSG will defer the cash payment of a portion of its management fee payable to SBG over the next four years. Pursuant to this agreement, excluding the amounts deferred as part of the Transaction, the local media segment recorded $49 million and $60 million of revenue for the years ended December 31, 2023 and 2022 related to both the contractual and incentive fees, of which $24 million was eliminated in consolidation prior to the Deconsolidation for the year ended December 31, 2022. SBG will not recognize the portion of deferred management fees as revenue until such fees are determined to be collectible. The terms of this agreement are subject to change depending upon the outcome of the settlement with DSG discussed in Note 12. Commitments and Contingencies.
Distributions. DSIH made distributions to DSH for tax payments on the dividends of the Redeemable Subsidiary Preferred Equity of $7 million for the year ended December 31, 2022.
Note receivable. For the year ended December 31, 2023, SBG received payments totaling $203 million related to the note receivable associated with the A/R facility, including $199 million from DSPV on May 10, 2023, representing the aggregate outstanding principal amount of the loans under the A/R Facility, accrued interest, and outstanding fees and expenses. For the year ended December 31, 2022, SBG received payments totaling $60 million from DSPV and funded an additional $40 million related to the note receivable associated with the A/R facility.
SBG recorded revenue of $11 million and $15 million for the years ended December 31, 2023 and 2022, respectively, within the local media segment and other related to certain other transactions between DSIH and SBG.
Other Equity Method Investees
YES Network. In August 2019, YES Network, which was accounted for as an equity method investment prior to the Deconsolidation, entered into a management services agreement with SBG, in which SBG provides certain services for an initial term that expires on August 29, 2025. The agreement will automatically renew for two 2-year renewal terms, with a final expiration on August 29, 2029. Pursuant to the terms of the agreement, the YES Network paid SBG a management services fee of $1 million and $6 million for the years ended December 31, 2022 and 2021, respectively.
DSIH has a minority interest in certain mobile production businesses. Prior to the Deconsolidation, SBG accounted for these as equity method investments. DSIH made payments to these businesses for production services totaling $5 million and $45 million for the years ended December 31, 2022 and 2021, respectively.
SBG has a minority interest in a sports marketing company, which SBG accounts for as an equity method investment. Payments to this business for marketing services totaling $2 million and $17 million for the years ended December 31, 2022 and 2021, respectively.
Sports Programming Rights
Affiliates of six professional teams had non-controlling equity interests in certain of DSIH's regional sports networks. DSIH paid $61 million and $424 million, net of rebates, for the years ended December 31, 2022 and 2021, respectively, under sports programming rights agreements covering the broadcast of regular season games associates with these professional teams. Prior to the Deconsolidation, these payments were recorded in SBG's consolidated statements of operations and cash flows.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Employees
Jason Smith, an employee of the SBG, is the son of Frederick Smith, who is a Vice President of SBG and a member of SBG's Board of Managers. Jason Smith received total compensation of $0.8 million, $0.6 million, and $0.2 million, consisting of salary and bonus, for the years ended December 31, 2023, 2022, and 2021, respectively, consisting of salary and bonus, and was granted 2,239 shares of restricted stock, vesting over two years, during the year December 31, 2021.
Ethan White, an employee of SBG, is the son-in-law of J. Duncan Smith, who is a Vice President of SBG and a member of SBG's Board of Managers. Ethan White received total compensation of $0.2 million, consisting of salary and bonus, for the year ended December 31, 2023 and $0.1 million, consisting of salary and bonus, for each of the years ended December 31, 2022 and 2021, and was granted 1,252 shares of restricted stock, vesting over two years, during the year ended December 31, 2023.
Amberly Thompson, an employee of the Company, is the daughter of Donald Thompson, who is an Executive Vice President and Chief Human Resources Officer of SBG. Amberly Thompson received total compensation of $0.2 million, $0.1 million, and $0.2 million, consisting of salary and bonus, for the years ended December 31, 2023, 2022, and 2021, respectively.
Edward Kim, an employee of the company, is the brother-in-law of Christopher Ripley, who is the President and Chief Executive Officer of the SBG. Edward Kim received total compensation of $0.2 million, consisting of salary, for each of the years ended December 31, 2023, 2022, and 2021 and was granted 516 and 302 shares of restricted stock, vesting over two years, during the years ended December 31, 2023 and 2022, respectively.
Frederick Smith is the brother of David Smith, Executive Chairman of SBG and a member of SBG's Board of Managers, and J. Duncan Smith. Frederick Smith received total compensation of $1 million for each of the years ended December 31, 2023, 2022, and 2021, consisting of salary, bonus, and earnings related to Frederick Smith’s participation in the Company's deferred compensation plan. J. Duncan Smith is the brother of David Smith and Frederick Smith. J. Duncan Smith received total compensation of $1 million for each of the years ended December 31, 2023, 2022, and 2021, consisting of salary and bonus.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. SEGMENT DATA:
During the year ended December 31, 2023, SBG modified its segment reporting to align with the new organizational structure of SBG discussed within Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies. The segment information within the comparative periods have been recast to reflect this new presentation. During the year ended December 31, 2023, SBG measured segment performance based on operating income (loss). For the year ended December 31, 2023, SBG had one reportable segment: local media. Prior to the Deconsolidation on March 1, 2022, SBG had one additional reportable segment: local sports. SBG's local media segment includes SBG's 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. Prior to the Deconsolidation, the local sports segment provided viewers with live professional sports content and included the Bally RSNs, Marquee, and SBG's investment in the YES Network. Other and corporate are not reportable segments but are included for reconciliation purposes. Other primarily consists of tennis, non-broadcast digital and internet solutions, technical services, and non-media investments. Corporate costs primarily include SBG's costs to operate the parent company of its subsidiaries. All of SBG's businesses are located within the United States.
Segment financial information is included in the following tables for the years ended December 31, 2023, 2022, and 2021 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2023 | | Local media | | Other & Corporate | | Eliminations | | Consolidated | Goodwill | | $ | 2,016 | | | $ | — | | | $ | — | | | $ | 2,016 | | Assets | | 4,750 | | | 87 | | | — | | | 4,837 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2022 | | Local media | | Other & Corporate | | Eliminations | | Consolidated | Goodwill | | $ | 2,016 | | | $ | 72 | | | $ | — | | | $ | 2,088 | | Assets | | 5,554 | | | 1,150 | | | — | | | 6,704 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended December 31, 2023 | | Local media | | Other & Corporate (d) | | Eliminations | | Consolidated | Revenue | | $ | 2,866 | | (a) | $ | 119 | | | $ | (7) | | (c) | $ | 2,978 | | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | | 243 | | | 10 | | | (1) | | | 252 | | | | | | | | | | | Amortization of program contract costs | | 80 | | | — | | | — | | | 80 | | Corporate general and administrative expenses | | 134 | | | 520 | | | — | | | 654 | | Loss on deconsolidation of subsidiary | | — | | | 10 | | | — | | | 10 | | (Gain) loss on asset dispositions and other, net of impairment | | (14) | | (b) | 12 | | | — | | | (2) | | Operating income (loss) | | 227 | | (b) | (529) | | | — | | | (302) | | Interest expense including amortization of debt discount and deferred financing costs | | 305 | | | — | | | — | | | 305 | | Income from equity method investments | | — | | | 31 | | | — | | | 31 | | Capital expenditures | | 86 | | | 4 | | | — | | | 90 | |
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended December 31, 2022 | | Local media | | Local sports (e) | | Other & Corporate | | Eliminations | | Consolidated | Revenue | | $ | 3,193 | | (a) | $ | 482 | | | $ | 312 | | | $ | (59) | | (c) | $ | 3,928 | | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | | 243 | | | 54 | | | 28 | | | (4) | | | 321 | | Amortization of sports programming rights (f) | | — | | | 326 | | | — | | | — | | | 326 | | Amortization of program contract costs | | 90 | | | — | | | — | | | — | | | 90 | | Corporate general and administrative expenses | | 117 | | | 1 | | | 42 | | | — | | | 160 | | Gain on deconsolidation of subsidiary | | — | | | — | | | (3,357) | | (g) | — | | | (3,357) | | Gain on asset dispositions and other, net of impairment | | (17) | | (b) | — | | | (47) | | | — | | | (64) | | Operating income (loss) | | 591 | | (b) | (4) | | | 3,393 | | | — | | | 3,980 | | Interest expense including amortization of debt discount and deferred financing costs | | 226 | | | 72 | | | 6 | | | (8) | | | 296 | | Income from equity method investments | | — | | | 10 | | | 46 | | | — | | | 56 | | Capital expenditures | | 96 | | | 2 | | | 7 | | | — | | | 105 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended December 31, 2021 | | Local media | | Local sports | | Other & Corporate | | Eliminations | | Consolidated | Revenue | | $ | 2,887 | | | $ | 3,056 | | | $ | 352 | | | $ | (161) | | (c) | $ | 6,134 | | Depreciation of property and equipment and amortization of definite-lived intangible assets and other assets | | 248 | | | 316 | | | 30 | | | (3) | | | 591 | | Amortization of sports programming rights (f) | | — | | | 2,350 | | | — | | | — | | | 2,350 | | Amortization of program contract costs | | 93 | | | — | | | — | | | — | | | 93 | | Corporate general and administrative expenses | | 148 | | | 10 | | | 12 | | | — | | | 170 | | Gain on asset dispositions and other, net of impairment | | (23) | | (b) | (43) | | (b) | (5) | | | — | | | (71) | | Operating income (loss) | | 388 | | (b) | (317) | | (b) | 24 | | | — | | | 95 | | Interest expense including amortization of debt discount and deferred financing costs | | 183 | | | 436 | | | 13 | | | (14) | | | 618 | | Income (loss) from equity method investments | | — | | | 49 | | | (4) | | | — | | | 45 | | Capital expenditures | | 52 | | | 16 | | | 12 | | | — | | | 80 | |
(a)Includes $55 million and $39 million for the year ended December 31, 2023 and 2022, respectively, of revenue for services provided by local media under management services agreements after the Deconsolidation, which is not eliminated in consolidation. (b)Local Media includes gains of $8 million, $4 million, and $24 million related to reimbursements for spectrum repack costs for the years ended December 31, 2023, 2022, and 2021, respectively. Local sports includes $43 million related to the fair value of equipment that we received for the C-Band spectrum repack for the year ended December 31, 2021. See Note 2. Acquisitions and Dispositions of Assets. (c)Includes $26 million and $111 million,of revenue for the years ended December 31, 2022 and 2021, respectively, for services provided by local media, which are eliminated in consolidation. (d)Represents the activity in tennis, non-broadcast digital and internet solutions, technical services, and non-media investments (collectively, "Other") prior to the Reorganization on June 1, 2023 and the activity in corporate prior and subsequent to the Reorganization. See Company Reorganization within Note 1. Nature of Operations and Summary of Significant Accounting Policies. (e)Represents the activity prior to the Deconsolidation on March 1, 2022. (f)The amortization of sports programming rights is included within media programming and production expenses on our consolidated statements of operations. (g)Represents the gain recognized on the Deconsolidation.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. FAIR VALUE MEASUREMENTS:
Accounting guidance provides for valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). A fair value hierarchy using three broad levels prioritizes the inputs to valuation techniques used to measure fair value. The following is a brief description of those three levels: •Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. •Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. •Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. The following table sets forth the face value and fair value of our financial assets and liabilities as of December 31, 2023 and 2022 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | 2023 | | 2022 | | Face Value | | Fair Value | | Face Value | | Fair Value | Level 1: | | | | | | | | Investments in equity securities (a) | N/A | | $ | — | | | N/A | | $ | 6 | | Money market funds | N/A | | $ | 309 | | | N/A | | $ | 741 | | Deferred compensation assets | N/A | | $ | — | | | N/A | | $ | 41 | | Deferred compensation liabilities | N/A | | $ | — | | | N/A | | $ | 35 | | | | | | | | | | Level 2: | | | | | | | | Investments in equity securities (a) (b) | N/A | | $ | — | | | N/A | | $ | 153 | | Interest rate swap (c) | N/A | | $ | 1 | | | N/A | | $ | — | | STG (d): | | | | | | | | 5.500% Senior Notes due 2030 | $ | 485 | | | $ | 362 | | | $ | 500 | | | $ | 347 | | 5.125% Senior Notes due 2027 | $ | 274 | | | $ | 248 | | | $ | 282 | | | $ | 230 | | 4.125% Senior Secured Notes due 2030 | $ | 737 | | | $ | 521 | | | $ | 750 | | | $ | 560 | | Term Loan B-2, due September 30, 2026 | $ | 1,215 | | | $ | 1,124 | | | $ | 1,258 | | | $ | 1,198 | | Term Loan B-3, due April 1, 2028 | $ | 722 | | | $ | 595 | | | $ | 729 | | | $ | 692 | | Term Loan B-4, due April 21, 2029 | $ | 739 | | | $ | 602 | | | $ | 746 | | | $ | 709 | | | | | | | | | | Debt of variable interest entities (d) | $ | 7 | | | $ | 7 | | | $ | 8 | | | $ | 8 | | Debt of non-media subsidiaries (a) (d) | $ | — | | | $ | — | | | $ | 16 | | | $ | 16 | | | | | | | | | | Level 3: | | | | | | | | Investments in equity securities (a) (e) | N/A | | $ | — | | | N/A | | $ | 75 | |
N/A - Not applicable (a)The debt of non-media subsidiaries and the investments in equity securities were transferred to Ventures as part of the Reorganization. (b)Consists of unrestricted warrants to acquire marketable common equity securities. The fair value of the warrants are derived from the quoted trading prices of the underlying common equity securities less the exercise price. (c)SBG entered into an interest rate swap effective February 7, 2023 and terminating on February 28, 2026 in order to manage a portion of SBG's exposure to variable interest rates. The swap agreement has a notional amount of $600 million, bears a fixed interest rate of 3.90%, and SBG receives a floating rate of interest based on SOFR. The fair value of the interest rate swap was an asset as of December 31, 2023. See Hedge Accounting within Note 1. Nature of Operations and Summary of Significant Accounting Policies and Interest Rate Swap within Note 7. Notes Payable and Commercial Bank Financing. (d)Amounts are carried in SBG's consolidated balance sheets net of debt discount and deferred financing costs, which are excluded in the above table, of $46 million and $56 million as of December 31, 2023 and 2022, respectively. (e)On November 18, 2020, SBG entered into a commercial agreement with Bally's and received warrants and options to acquire common equity in the business. During the years ended December 31, 2023, 2022, and 2021, SBG recorded a fair value adjustment loss of $25 million, loss of $112 million, and loss of $50 million, respectively, related to these interests. The fair value of the warrants is primarily derived from the quoted trading prices of the underlying common equity. The fair value of the options is derived utilizing the Black Scholes valuation model. The most significant inputs include the trading price of the underlying common stock, the exercise price of the options, which range from $30 to $45 per share, and a DLOM of 16% and 25% as of December 31, 2021 and 2020, respectively. There are certain restrictions surrounding the sale and ownership of common stock through the second anniversary of the agreement. share. The Company is also precluded from owning more than 4.9% of the outstanding common shares of Bally's, inclusive of shares obtained through the exercise of the warrants and options described above. See Note 6. Other Assets for further discussion.were transferred to Ventures as part of the Reorganization.
SINCLAIR BROADCAST GROUP, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the changes in financial assets measured at fair value on a recurring basis and categorized as Level 3 under the fair value hierarchy (in millions): | | | | | | | Options and Warrants | Fair value at December 31, 2019 | $ | — | | Acquisition | 199 | | | | Measurement adjustments | 133 | | Fair value at December 31, 2020 | $ | 332 | | | | | | Measurement adjustments | (50) | | Fair valueValue at December 31, 2021 | $ | 282 | | Measurement adjustments | (112) | | Transfer to Level 2 | (95) | | Fair Value at December 31, 2022 | 75 | | Measurement Adjustments | (25) | | Transfer to Ventures | (50) | | Fair Value at December 31, 2023 | $ | — | |
19. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:
Sinclair Television Group, Inc. (STG), a wholly-owned subsidiary and the television operating subsidiary of Sinclair Broadcast Group, Inc. (SBG), is the primary obligor under STG's Bank Credit Agreement, 5.875% unsecured notes, 5.125% unsecured notes, 5.500% unsecured notes, and 4.125% secured notes. Our Class A Common Stock and Class B Common Stock as of December 31, 2021, were obligations or securities of SBG and not obligations or securities of STG. SBG is a guarantor under STG's Bank Credit Agreement, 5.875% unsecured notes, 5.125% unsecured notes, 5.500% unsecured notes, and 4.125% secured notes. As of December 31, 2021, our consolidated total debt of $12,340 million included $4,385 million of debt related to STG and its subsidiaries of which SBG guaranteed $4,347 million.
SBG, KDSM, LLC, a wholly-owned subsidiary of SBG, and STG’s wholly-owned subsidiaries (guarantor subsidiaries), have fully and unconditionally guaranteed, subject to certain customary automatic release provisions, all of STG’s obligations. Those guarantees are joint and several. There are certain contractual restrictions on the ability of SBG, STG or KDSM, LLC to obtain funds from their subsidiaries in the form of dividends or loans.
The following condensed consolidating financial statements present the consolidated balance sheets, consolidated statements of operations and comprehensive income, and consolidated statements of cash flows of SBG, STG, KDSM, LLC and the guarantor subsidiaries, the direct and indirect non-guarantor subsidiaries of SBG and the eliminations necessary to arrive at our information on a consolidated basis and are provided pursuant to the terms of certain of our debt agreements. Investments in the subsidiaries of SBG, STG, KDSM, LLC and the guarantor subsidiaries, the direct and indirect non-guarantor subsidiaries of SBG are presented in each column under the equity method of accounting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. As such, these condensed consolidating financial statements should be read in conjunction with the accompanying notes to consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2021
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group, Inc. | | Sinclair Television Group, Inc. | | Guarantor Subsidiaries and KDSM, LLC | | Non- Guarantor Subsidiaries | | Eliminations | | Sinclair Consolidated | Cash and cash equivalents | $ | 2 | | | $ | 316 | | | $ | 2 | | | $ | 496 | | | $ | — | | | $ | 816 | | Accounts receivable, net | — | | | — | | | 649 | | | 596 | | | — | | | 1,245 | | Other current assets | 10 | | | 82 | | | 293 | | | 136 | | | (111) | | | 410 | | Total current assets | 12 | | | 398 | | | 944 | | | 1,228 | | | (111) | | | 2,471 | | | | | | | | | | | | | | Property and equipment, net | 1 | | | 31 | | | 664 | | | 161 | | | (24) | | | 833 | | | | | | | | | | | | | | Investment in equity of consolidated subsidiaries | 451 | | | 3,448 | | | — | | | — | | | (3,899) | | | — | | Restricted cash | — | | | — | | | — | | | 3 | | | — | | | 3 | | Goodwill | — | | | — | | | 2,081 | | | 7 | | | — | | | 2,088 | | Indefinite-lived intangible assets | — | | | — | | | 136 | | | 14 | | | — | | | 150 | | Definite-lived intangible assets, net | — | | | — | | | 1,105 | | | 4,019 | | | (36) | | | 5,088 | | Other long-term assets | 331 | | | 1,956 | | | 427 | | | 1,853 | | | (2,659) | | | 1,908 | | Total assets | $ | 795 | | | $ | 5,833 | | | $ | 5,357 | | | $ | 7,285 | | | $ | (6,729) | | | $ | 12,541 | | | | | | | | | | | | | | Accounts payable and accrued liabilities | $ | 31 | | | $ | 85 | | | $ | 295 | | | $ | 279 | | | $ | (35) | | | $ | 655 | | Current portion of long-term debt | — | | | 20 | | | 5 | | | 45 | | | (1) | | | 69 | | Other current liabilities | 2 | | | 6 | | | 155 | | | 392 | | | (77) | | | 478 | | Total current liabilities | 33 | | | 111 | | | 455 | | | 716 | | | (113) | | | 1,202 | | | | | | | | | | | | | | Long-term debt | 915 | | | 4,317 | | | 33 | | | 8,488 | | | (1,482) | | | 12,271 | | Investment in deficit of consolidated subsidiaries | 1,605 | | | — | | | — | | | — | | | (1,605) | | | — | | Other long-term liabilities | 12 | | | 69 | | | 1,426 | | | 468 | | | (1,398) | | | 577 | | Total liabilities | 2,565 | | | 4,497 | | | 1,914 | | | 9,672 | | | (4,598) | | | 14,050 | | | | | | | | | | | | | | Redeemable noncontrolling interests | — | | | — | | | — | | | 197 | | | — | | | 197 | | Total Sinclair Broadcast Group (deficit) equity | (1,770) | | | 1,336 | | | 3,443 | | | (2,644) | | | (2,135) | | | (1,770) | | Noncontrolling interests in consolidated subsidiaries | — | | | — | | | — | | | 60 | | | 4 | | | 64 | | Total liabilities, redeemable noncontrolling interests, and equity | $ | 795 | | | $ | 5,833 | | | $ | 5,357 | | | $ | 7,285 | | | $ | (6,729) | | | $ | 12,541 | |
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2020
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group, Inc. | | Sinclair Television Group, Inc. | | Guarantor Subsidiaries and KDSM, LLC | | Non- Guarantor Subsidiaries | | Eliminations | | Sinclair Consolidated | Cash and cash equivalents | $ | — | | | $ | 458 | | | $ | — | | | $ | 801 | | | $ | — | | | 1,259 | | Accounts receivable, net | — | | | — | | | 558 | | | 502 | | | — | | | 1,060 | | Other current assets | 7 | | | 46 | | | 372 | | | 560 | | | (87) | | | 898 | | Total current assets | 7 | | | 504 | | | 930 | | | 1,863 | | | (87) | | | 3,217 | | | | | | | | | | | | | | Property and equipment, net | 1 | | | 33 | | | 706 | | | 109 | | | (26) | | | 823 | | | | | | | | | | | | | | Investment in equity of consolidated subsidiaries | 430 | | | 3,549 | | | — | | | — | | | (3,979) | | | — | | Restricted cash | — | | | — | | | — | | | 3 | | | — | | | 3 | | Goodwill | — | | | — | | | 2,082 | | | 10 | | | — | | | 2,092 | | Indefinite-lived intangible assets | — | | | — | | | 156 | | | 15 | | | — | | | 171 | | Definite-lived intangible assets | — | | | — | | | 1,256 | | | 4,409 | | | (41) | | | 5,624 | | Other long-term assets | 139 | | | 1,718 | | | 280 | | | 1,569 | | | (2,254) | | | 1,452 | | Total assets | $ | 577 | | | $ | 5,804 | | | $ | 5,410 | | | $ | 7,978 | | | $ | (6,387) | | | $ | 13,382 | | | | | | | | | | | | | | Accounts payable and accrued liabilities | $ | 19 | | | $ | 70 | | | $ | 247 | | | $ | 284 | | | $ | (87) | | | $ | 533 | | Current portion of long-term debt | — | | | 13 | | | 5 | | | 41 | | | (1) | | | 58 | | Other current liabilities | 1 | | | 2 | | | 134 | | | 306 | | | — | | | 443 | | Total current liabilities | 20 | | | 85 | | | 386 | | | 631 | | | (88) | | | 1,034 | | | | | | | | | | | | | | Long-term debt | 700 | | | 4,337 | | | 33 | | | 8,460 | | | (1,037) | | | 12,493 | | Investment in deficit of consolidated subsidiaries | 1,118 | | | — | | | — | | | — | | | (1,118) | | | — | | Other liabilities | 12 | | | 121 | | | 1,445 | | | 710 | | | (1,438) | | | 850 | | Total liabilities | 1,850 | | | 4,543 | | | 1,864 | | | 9,801 | | | (3,681) | | | 14,377 | | | | | | | | | | | | | | Redeemable noncontrolling interests | — | | | — | | | — | | | 190 | | | — | | | 190 | | Total Sinclair Broadcast Group (deficit) equity | (1,273) | | | 1,261 | | | 3,546 | | | (2,098) | | | (2,710) | | | (1,274) | | Noncontrolling interests in consolidated subsidiaries | — | | | — | | | — | | | 85 | | | 4 | | | 89 | | Total liabilities, redeemable noncontrolling interests, and equity | $ | 577 | | | $ | 5,804 | | | $ | 5,410 | | | $ | 7,978 | | | $ | (6,387) | | | $ | 13,382 | |
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2021
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group, Inc. | | Sinclair Television Group, Inc. | | Guarantor Subsidiaries and KDSM, LLC | | Non- Guarantor Subsidiaries | | Eliminations | | Sinclair Consolidated | Net revenue | $ | — | | | $ | 111 | | | $ | 2,979 | | | $ | 3,251 | | | $ | (207) | | | $ | 6,134 | | | | | | | | | | | | | | Media programming and production expenses | — | | | 4 | | | 1,425 | | | 2,916 | | | (54) | | | 4,291 | | Selling, general and administrative | 12 | | | 160 | | | 715 | | | 336 | | | (145) | | | 1,078 | | Depreciation, amortization and other operating expenses | 1 | | | 8 | | | 327 | | | 341 | | | (7) | | | 670 | | Total operating expenses | 13 | | | 172 | | | 2,467 | | | 3,593 | | | (206) | | | 6,039 | | | | | | | | | | | | | | Operating (loss) income | (13) | | | (61) | | | 512 | | | (342) | | | (1) | | | 95 | | | | | | | | | | | | | | Equity in (loss) earnings of consolidated subsidiaries | (350) | | | 435 | | | — | | | — | | | (85) | | | — | | Interest expense | (13) | | | (180) | | | (3) | | | (450) | | | 28 | | | (618) | | Other (expense) income | (63) | | | 16 | | | (24) | | | 111 | | | (16) | | | 24 | | Total other (expense) income, net | (426) | | | 271 | | | (27) | | | (339) | | | (73) | | | (594) | | | | | | | | | | | | | | Income tax benefit (provision) | 25 | | | 35 | | | (44) | | | 157 | | | — | | | 173 | | Net (loss) income | (414) | | | 245 | | | 441 | | | (524) | | | (74) | | | (326) | | Net income attributable to the redeemable noncontrolling interests | — | | | — | | | — | | | (18) | | | — | | | (18) | | Net income attributable to the noncontrolling interests | — | | | — | | | — | | | (70) | | | — | | | (70) | | Net (loss) income attributable to Sinclair Broadcast Group | $ | (414) | | | $ | 245 | | | $ | 441 | | | $ | (612) | | | $ | (74) | | | $ | (414) | | Comprehensive (loss) income | $ | (414) | | | $ | 246 | | | $ | 441 | | | $ | (517) | | | $ | (74) | | | $ | (318) | |
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2020
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group, Inc. | | Sinclair Television Group, Inc. | | Guarantor Subsidiaries and KDSM, LLC | | Non- Guarantor Subsidiaries | | Eliminations | | Sinclair Consolidated | Net revenue | $ | — | | | $ | 100 | | | $ | 3,081 | | | $ | 2,946 | | | $ | (184) | | | $ | 5,943 | | | | | | | | | | | | | | Media programming and production expenses | — | | | 3 | | | 1,284 | | | 1,519 | | | (71) | | | 2,735 | | Selling, general and administrative | 18 | | | 122 | | | 658 | | | 279 | | | (97) | | | 980 | | Impairment of goodwill and definite-lived intangible assets | — | | | — | | | — | | | 4,264 | | | — | | | 4,264 | | Depreciation, amortization and other operating expenses | 2 | | | 8 | | | 211 | | | 525 | | | (10) | | | 736 | | Total operating expenses | 20 | | | 133 | | | 2,153 | | | 6,587 | | | (178) | | | 8,715 | | | | | | | | | | | | | | Operating (loss) income | (20) | | | (33) | | | 928 | | | (3,641) | | | (6) | | | (2,772) | | | | | | | | | | | | | | Equity in (loss) earnings of consolidated subsidiaries | (2,409) | | | 877 | | | — | | | — | | | 1,532 | | | — | | Interest expense | (13) | | | (191) | | | (3) | | | (474) | | | 25 | | | (656) | | Other income (expense) | 27 | | | 4 | | | (41) | | | 303 | | | (14) | | | 279 | | Total other (expense) income, net | (2,395) | | | 690 | | | (44) | | | (171) | | | 1,543 | | | (377) | | | | | | | | | | | | | | Income tax benefit | 1 | | | 51 | | | 3 | | | 665 | | | — | | | 720 | | Net (loss) income | (2,414) | | | 708 | | | 887 | | | (3,147) | | | 1,537 | | | (2,429) | | Net income attributable to the redeemable noncontrolling interests | — | | | — | | | — | | | (56) | | | — | | | (56) | | Net loss attributable to the noncontrolling interests | — | | | — | | | — | | | 71 | | | — | | | 71 | | Net (loss) income attributable to Sinclair Broadcast Group | $ | (2,414) | | | $ | 708 | | | $ | 887 | | | $ | (3,132) | | | $ | 1,537 | | | $ | (2,414) | | Comprehensive (loss) income | $ | (2,414) | | | $ | 707 | | | $ | 887 | | | $ | (3,154) | | | $ | 1,537 | | | $ | (2,437) | |
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group, Inc. | | Sinclair Television Group, Inc. | | Guarantor Subsidiaries and KDSM, LLC | | Non- Guarantor Subsidiaries | | Eliminations | | Sinclair Consolidated | Net revenue | $ | — | | | $ | 35 | | | $ | 2,841 | | | $ | 1,487 | | | $ | (123) | | | $ | 4,240 | | | | | | | | | | | | | | Media programming and production expenses | — | | | — | | | 1,238 | | | 894 | | | (59) | | | 2,073 | | Selling, general and administrative | 147 | | | 147 | | | 663 | | | 202 | | | (40) | | | 1,119 | | Depreciation, amortization and other operating expenses | — | | | (20) | | | 278 | | | 334 | | | (14) | | | 578 | | Total operating expenses | 147 | | | 127 | | | 2,179 | | | 1,430 | | | (113) | | | 3,770 | | | | | | | | | | | | | | Operating (loss) income | (147) | | | (92) | | | 662 | | | 57 | | | (10) | | | 470 | | | | | | | | | | | | | | Equity in earnings of consolidated subsidiaries | 165 | | | 577 | | | — | | | — | | | (742) | | | — | | Interest expense | (5) | | | (216) | | | (4) | | | (216) | | | 19 | | | (422) | | Other income (expense) | 2 | | | (7) | | | (53) | | | 24 | | | (5) | | | (39) | | Total other income (expense), net | 162 | | | 354 | | | (57) | | | (192) | | | (728) | | | (461) | | | | | | | | | | | | | | Income tax benefit (provision) | 32 | | | 66 | | | (21) | | | 19 | | | — | | | 96 | | Net income (loss) | 47 | | | 328 | | | 584 | | | (116) | | | (738) | | | 105 | | Net income attributable to redeemable noncontrolling interests | — | | | — | | | — | | | (48) | | | — | | | (48) | | Net income attributable to the noncontrolling interests | — | | | — | | | — | | | (10) | | | — | | | (10) | | Net income (loss) attributable to Sinclair Broadcast Group | $ | 47 | | | $ | 328 | | | $ | 584 | | | $ | (174) | | | $ | (738) | | | $ | 47 | | Comprehensive income (loss) | $ | 47 | | | $ | 327 | | | $ | 584 | | | $ | (116) | | | $ | (738) | | | $ | 104 | |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2021
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group, Inc. | | Sinclair Television Group, Inc. | | Guarantor Subsidiaries and KDSM, LLC | | Non- Guarantor Subsidiaries | | Eliminations | | Sinclair Consolidated | NET CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES | $ | (5) | | | $ | (216) | | | $ | 583 | | | $ | (46) | | | $ | 11 | | | $ | 327 | | | | | | | | | | | | | | CASH FLOWS USED IN INVESTING ACTIVITIES: | | | | | | | | | | | | Acquisition of property and equipment | — | | | (2) | | | (64) | | | (18) | | | 4 | | | (80) | | Acquisition of businesses, net of cash acquired | — | | | — | | | (4) | | | — | | | — | | | (4) | | | | | | | | | | | | | | Proceeds from the sale of assets | — | | | — | | | 34 | | | 9 | | | — | | | 43 | | Purchases of investments | (9) | | | (9) | | | (46) | | | (192) | | | — | | | (256) | | | | | | | | | | | | | | Spectrum repack reimbursements | — | | | — | | | 24 | | | — | | | — | | | 24 | | Other, net | (183) | | | — | | | (1) | | | 28 | | | 183 | | | 27 | | Net cash flows used in investing activities | (192) | | | (11) | | | (57) | | | (173) | | | 187 | | | (246) | | | | | | | | | | | | | | CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | | | | | | | | | | | | Proceeds from notes payable and commercial bank financing | — | | | 341 | | | — | | | 46 | | | (30) | | | 357 | | Repayments of notes payable, commercial bank financing and finance leases | — | | | (362) | | | (6) | | | (51) | | | (182) | | | (601) | | Dividends paid on Class A and Class B Common Stock | (60) | | | — | | | — | | | — | | | — | | | (60) | | | | | | | | | | | | | | Repurchase of outstanding Class A Common Stock | (61) | | | — | | | — | | | — | | | — | | | (61) | | Dividends paid on redeemable subsidiary preferred equity | — | | | — | | | — | | | (5) | | | — | | | (5) | | | | | | | | | | | | | | | | | | | | | | | | | | Distributions to noncontrolling interests | — | | | — | | | — | | | (95) | | | — | | | (95) | | Distributions to redeemable noncontrolling interests | — | | | — | | | — | | | (6) | | | — | | | (6) | | Increase (decrease) in intercompany payables | 333 | | | 106 | | | (518) | | | 65 | | | 14 | | | — | | Other, net | (13) | | | — | | | — | | | (40) | | | — | | | (53) | | Net cash flows from (used in) financing activities | 199 | | | 85 | | | (524) | | | (86) | | | (198) | | | (524) | | | | | | | | | | | | | | NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 2 | | | (142) | | | 2 | | | (305) | | | — | | | (443) | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period | — | | | 458 | | | — | | | 804 | | | — | | | 1,262 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period | $ | 2 | | | $ | 316 | | | $ | 2 | | | $ | 499 | | | $ | — | | | $ | 819 | |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2020
(In million)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group, Inc. | | Sinclair Television Group, Inc. | | Guarantor Subsidiaries and KDSM, LLC | | Non- Guarantor Subsidiaries | | Eliminations | | Sinclair Consolidated | NET CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES | $ | (119) | | | $ | (75) | | | $ | 864 | | | $ | 875 | | | $ | 3 | | | $ | 1,548 | | | | | | | | | | | | | | CASH FLOWS USED IN INVESTING ACTIVITIES: | | | | | | | | | | | | Acquisition of property and equipment | — | | | (8) | | | (130) | | | (26) | | | 7 | | | (157) | | Acquisition of businesses, net of cash acquired | — | | | — | | | (16) | | | — | | | — | | | (16) | | Proceeds from the sale of assets | — | | | — | | | 36 | | | — | | | — | | | 36 | | Purchases of investments | (43) | | | (8) | | | (43) | | | (45) | | | — | | | (139) | | | | | | | | | | | | | | Spectrum repack reimbursements | — | | | — | | | 90 | | | — | | | — | | | 90 | | Other, net | 1 | | | — | | | (2) | | | 28 | | | — | | | 27 | | Net cash flows used in investing activities | (42) | | | (16) | | | (65) | | | (43) | | | 7 | | | (159) | | | | | | | | | | | | | | CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | | | | | | | | | | | | Proceeds from notes payable and commercial bank financing | — | | | 1,398 | | | — | | | 421 | | | — | | | 1,819 | | Repayments of notes payable, commercial bank financing and finance leases | — | | | (1,434) | | | (4) | | | (301) | | | — | | | (1,739) | | | | | | | | | | | | | | Dividends paid on Class A and Class B Common Stock | (63) | | | — | | | — | | | — | | | — | | | (63) | | Repurchases of outstanding Class A Common Stock | (343) | | | — | | | — | | | — | | | — | | | (343) | | Dividends paid on redeemable subsidiary preferred equity | — | | | — | | | — | | | (36) | | | — | | | (36) | | Redemption of redeemable subsidiary preferred equity | — | | | — | | | — | | | (547) | | | — | | | (547) | | Debt issuance costs | — | | | (11) | | | — | | | (8) | | | — | | | (19) | | Distributions to noncontrolling interests | — | | | — | | | — | | | (32) | | | — | | | (32) | | Distributions to redeemable noncontrolling interests | — | | | — | | | — | | | (383) | | | — | | | (383) | | Increase (decrease) in intercompany payables | 565 | | | 239 | | | (798) | | | 4 | | | (10) | | | — | | Other, net | 2 | | | — | | | — | | | (119) | | | — | | | (117) | | Net cash flows from (used in) financing activities | 161 | | | 192 | | | (802) | | | (1,001) | | | (10) | | | (1,460) | | | | | | | | | | | | | | NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | — | | | 101 | | | (3) | | | (169) | | | — | | | (71) | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period | — | | | 357 | | | 3 | | | 973 | | | — | | | 1,333 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period | $ | — | | | $ | 458 | | | $ | — | | | $ | 804 | | | $ | — | | | $ | 1,262 | |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2019
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sinclair Broadcast Group, Inc. | | Sinclair Television Group, Inc. | | Guarantor Subsidiaries and KDSM, LLC | | Non- Guarantor Subsidiaries | | Eliminations | | Sinclair Consolidated | NET CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES | $ | (5) | | | $ | (210) | | | $ | 734 | | | $ | 396 | | | $ | 1 | | | $ | 916 | | | | | | | | | | | | | | CASH FLOWS USED IN INVESTING ACTIVITIES: | | | | | | | | | | | | Acquisition of property and equipment | — | | | (4) | | | (152) | | | (11) | | | 11 | | | (156) | | Acquisition of businesses, net of cash acquired | — | | | — | | | — | | | (8,999) | | | — | | | (8,999) | | Spectrum repack reimbursements | — | | | — | | | 62 | | | — | | | — | | | 62 | | Proceeds from the sale of assets | — | | | — | | | — | | | 8 | | | — | | | 8 | | Purchases of investments | (6) | | | (39) | | | (54) | | | (353) | | | — | | | (452) | | | | | | | | | | | | | | Other, net | — | | | 3 | | | (1) | | | 5 | | | — | | | 7 | | Net cash flows used in investing activities | (6) | | | (40) | | | (145) | | | (9,350) | | | 11 | | | (9,530) | | | | | | | | | | | | | | CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | | | | | | | | | | | | Proceeds from notes payable and commercial bank financing | — | | | 1,793 | | | — | | | 8,163 | | | — | | | 9,956 | | Repayments of notes payable, commercial bank financing and finance leases | — | | | (1,213) | | | (4) | | | (19) | | | — | | | (1,236) | | Proceeds from the issuance of redeemable subsidiary preferred equity, net | — | | | — | | | — | | | 985 | | | — | | | 985 | | | | | | | | | | | | | | Dividends paid on Class A and Class B Common Stock | (73) | | | — | | | — | | | — | | | — | | | (73) | | Dividends paid on redeemable subsidiary preferred equity | — | | | — | | | — | | | (33) | | | — | | | (33) | | Repurchase of outstanding Class A Common Stock | (145) | | | — | | | — | | | — | | | — | | | (145) | | Redemption of redeemable subsidiary preferred equity | — | | | — | | | — | | | (297) | | | — | | | (297) | | Debt issuance costs | — | | | (25) | | | — | | | (174) | | | — | | | (199) | | Distributions to noncontrolling interests | — | | | — | | | — | | | (27) | | | — | | | (27) | | Distributions to redeemable noncontrolling interests | — | | | — | | | — | | | (5) | | | — | | | (5) | | Increase (decrease) in intercompany payables | 227 | | | (905) | | | (601) | | | 1,291 | | | (12) | | | — | | Other, net | 2 | | | (5) | | | — | | | (36) | | | — | | | (39) | | Net cash flows from (used in) financing activities | 11 | | | (355) | | | (605) | | | 9,848 | | | (12) | | | 8,887 | | | | | | | | | | | | | | NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | — | | | (605) | | | (16) | | | 894 | | | — | | | 273 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period | — | | | 962 | | | 19 | | | 79 | | | — | | | 1,060 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period | $ | — | | | $ | 357 | | | $ | 3 | | | $ | 973 | | | $ | — | | | $ | 1,333 | |
20.17. SUBSEQUENT EVENTS:
On March 1, 2022, DSG consummated the following financing transactions (the “Transaction”):
•DSG First Lien Term Loan: $635 million of a newly funded first-priority lien term loan (the DSG First Lien Term Loan) pursuantJanuary 17, 2024, Sinclair announced that it agreed, subject to definitive documentation and final court approval, to a new first-priority lien credit agreement (theglobal settlement and release of all claims associated with the litigation filed by DSG First Lien Credit Agreement), ranking firstand DSG’s wholly-owned subsidiary, Diamond Sports Net, LLC, in lien priority on shared collateral ahead of (i) new second lien credit facilities issued in exchange for existing loans and/or commitments under the existing DSG Bank Credit Agreement, each ofJuly 2023, which will rank second in lien priority on shared collateral, (ii) 5.375% Second Lien Secured Notes due 2026 (the DSG 5.375% Second Lien Secured Notes) issued in exchange for the DSG 5.375% Secured Notes insettlement includes an exchange offer, each of which will rank second in lien priority on shared collateral and (iii) loans and/or commitments under the DSG Bank Credit Agreement and DSG 5.375% Secured Notes that do not participate in or consentamendment to the Transaction, each of which will rank third in lien priority on shared collateral.
•DSG Firstmanagement services agreement between STG and Second Lien Credit Facilities and DSG 5.375% Second Lien Secured Notes: All lenders under the DSG Bank Credit Agreement that participates in the applicable Transaction and all holders of DSG 5.375% Secured Notes that participate in an exchange offer exchanged their applicable existing debt holdings for:
•In the case of existing term loans under the DSG Bank Credit Agreement, new second-priority lien term loans (the DSG Second Lien Term Loan), with the same or substantially the same maturity, pricing and other economic terms as the existing term loans under the DSG Bank Credit Agreement, but with more restrictive covenants and other terms substantially consistent with the DSG First Lien Term Loan, at an exchange rate of $100 of DSG Second Lien Term Loans for each $100 of existing term loans under the DSG Bank Credit Agreement.
•In the case of the existing DSG Revolving Credit Facility, a new second-priority lien revolving credit facility (the DSG Second Lien Revolving Credit Facility, together with the DSG Second Lien Term Loan, the DSG Second Lien Credit Facilities, and together with the DSG First Lien Term Loan, the DSG First and Second Lien Credit Facilities) with more restrictive covenants and other terms as compared with the existing DSG Revolving Credit Facility, which terms are substantially consistent with the DSG Second Lien Term Loan other than an extended term to May 2026, and were exchanged into the DSG Second Lien Revolving Credit Facility for a principal amount equal to 35.0% of such lender’s total revolving commitments existing under the existing DSG Revolving Credit Facility. The DSG Second Lien Credit Facilities were issued pursuant to a new second-priority lien credit agreement (the “DSG Second Lien Credit Agreement,” and together with the DSG First Lien Credit Agreement, the “DSG First and Second Lien Credit Agreements”). The DSG First and Second Lien Credit Agreements and the existing DSG Bank Credit Agreement are collectively referred to as the DSG Credit Agreements.
•In the case of the DSG 5.375% Secured Notes, the DSG 5.375% Second Lien Secured Notes.
•Non-Participating Lenders under the DSG Bank Credit Agreement and DSG 5.375% Secured Notes: All loans under the DSG Bank Credit Agreement that did not participate in the Transaction (the "DSG Third Lien Term Loan") and all DSG 5.375% Secured Notes that did not participate in an exchange offer rank third in lien priority on shared collateral behind each of the DSG First and Second Lien Credit Facilities and the DSG 5.375% Second Lien Secured Notes, and certain of the covenants, events of default and related definitions in the DSG Bank Credit Agreement and the indenture governing the DSG 5.375% Secured Notes were eliminated in a manner customary for covenant strips as part of exit consents for transactions of this type.
•Redemption of DSG 12.750% Secured Notes. DSG redeemed the 12.750% Secured Notes and satisfied and discharged the indenture governing the DSG 12.750% Secured Notes. The redemption price was equal to the sum of 100% of the principal amount of the DSG 12.750% Notes outstanding plus the Applicable Premium (as defined in the indenture governing the DSG 12.750% Secured Notes), together with accrued and unpaid interest on the principal amount being redeemed up to, but not including, March 2, 2022.
Immediately following the Transactions, DSG had $3,036 million of DSG 5.375% Second Lien Notes outstanding, $14 million of DSG 5.375% Secured Notes outstanding, $635 million outstanding under the DSG First Lien Term Loan, $3,449 million outstanding under the DSG Second Lien Term Loan, and $4 million outstanding under the DSG Third Lien Term Loan. In addition, we had $227.5 million of availability under the DSG Second Lien Revolving Credit Facility.
Borrowings under the DSG First and Second Lien Credit Facilities bear interest, at a rate per annum equal to an applicable margin of 7.00% in the case of base rate DSG First Lien Term Loan borrowings or 8.00%, plus customary credit spread adjustments in the case of Term SOFR rate DSG First Lien Term Loan borrowings; at a rate per annum equal to an applicable margin of 2.25% in the case of base rate DSG Second Lien Term Loan borrowings or 3.25% plus customary credit spread adjustments in the case of Term SOFR rate DSG Second Lien Term Loan borrowings; and 2.00% in the case of base rate DSG Second Lien Revolving Credit Facility borrowings or 3.00% plus customary credit spread adjustments in the case of Term SOFR rate DSG Second Lien Revolving Credit Facility borrowings, and, in the case of the DSG Second Lien Revolving Credit Facility, subject to decrease if the specified second lien net leverage ratio is less than or equal to certain levels, in each such case over either, at our option, (a) a base rate determined by reference to the highest of (1) the “Prime Rate” last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent), (2) the federal funds effective rate plus ½ of 1% and (3) the Term SOFR (or successor) rate for a one month interest period (including the applicable credit spread adjustment) plus 1.00% or (b) the Term SOFR rate determined by reference to the interest period relevant to such borrowing, subject to a 0% interest rate floor.DSG.
The DSG Firstsettlement is subject to definitive documentation, including finalization of certain transition terms, and Second Lien Credit Agreements contain customary mandatory prepayment requirements, including with respect to excess cash flow, asset sale proceeds and proceeds from certain incurrences of indebtedness. DSG may voluntarily repay outstanding loans underapproval by the DSG First Lien Term Loan at a prepayment price equal to 100%U.S. Bankruptcy Court in Houston overseeing DSG’s chapter 11 case. A motion for approval of the principal amount ofsettlement was filed with the DSG First Lien Term Loan being prepaid plus accrued and unpaid interest, if any, tocourt on January 23, 2024. On February 26, 2024, the prepayment date plus (i) prior tocourt approved the third anniversary of the closing date of DSG First Lien Term Loan, a make-whole premium (to be defined based on the net present value, calculated on the basis of a treasury rate + 50 basis points, of the interest payments that would have otherwise been paid up to such third anniversary date) plus a prepayment charge equal to 7.0% of the principal amount so prepaid, (ii) 7.0% of the amount so prepaid, if such prepayment occurs on or after the third anniversary of the closing date of the DSG First Lien Term Loan but prior to the date that is one year prior to the maturity date of the DSG First Lien Term Loan, and (iii) 0.0%, if such prepayment occurs on or after the date that is one year prior to the maturity date of the DSG First Lien Term Loan, and in each casesettlement, subject to customary breakage costs with respect to Term SOFR rate loans.Sinclair and DSG may voluntarily repay outstanding loans under the DSG Second Lien Credit Facilities at any time without premium or penalty, other than customary breakage costs with respect to Term SOFR (or successor) loans.completing definitive documentation.
The DSG First Lien Term LoanSee Note 12. Commitments and Contingencies for additional information regarding the DSG Second Lien Term Loan both amortize in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount of such term loans (commencing with the first full fiscal quarter after the closing date thereof), with the balance being payable on the respective maturity date of such term loans.
All obligations under the DSG First Lien Term Loan are secured, subject to permitted liens and other customary exceptions, by: (i) a perfected first priority pledge of (a) all the equity interests of DSG and each wholly owned restricted subsidiary of Holdings that is directly held by Holdings, DSG or a subsidiary guarantor, (b) subject to certain exceptions, the equity held by such entities in non-wholly owned restricted subsidiaries and (c) in certain limited circumstances, the equity held by such entities in non-subsidiary joint ventures and (ii) perfected first priority security interests in substantially all tangible and intangible personal property of Holdings and the subsidiary guarantors.
All obligations under the DSG Second Lien Credit Facilities (including with respect to certain cash management services provided by lenders or agents thereunder or affiliates thereof) are secured, subject to permitted liens and other customary exceptions, by: (i) a perfected second priority pledge of (a) all the equity interests of DSG and each wholly owned restricted subsidiary of Holdings that is directly held by Holdings, DSG or a subsidiary guarantor, (b) subject to certain exceptions, the equity held by such entities in non-wholly owned restricted subsidiaries and (c) in certain limited circumstances, the equity held by such entities in non-subsidiary joint ventures and (ii) perfected second priority security interests in substantially all tangible and intangible personal property of Holdings and the subsidiary guarantors.
settlement.
The DSG First and Second Lien Credit Facilities are jointly and severally guaranteed by the guarantors party thereto, which currently includes Holdings and each of its wholly owned direct or indirect domestic subsidiaries. The DSG First and Second Lien Credit Facilities contain affirmative covenants including, among others: delivery of annual audited and quarterly unaudited financial statements; delivery of notices of defaults, material litigation and material ERISA events; submission to certain inspections; maintenance of property and customary insurance; payment of taxes; compliance with laws and regulations; a requirement that the DTC application and intellectual property developed as part of or derived from the DTC application shall be developed at and at all times be and remain owned by Holdings, DSG or guarantors and a requirement to maintain an independent board of DSG (including the selection solely by the required lenders under the DSG First Lien Term Loan of two of the independent board members). The DSG First and Second Lien Credit Facilities also contain negative covenants that, subject to certain exceptions, qualifications and “baskets,” generally limit the ability of (i) Holdings, DSG and its restricted subsidiaries to incur debt, create liens, make fundamental changes, enter into asset sales, make certain investments, pay dividends or distribute or redeem certain equity interests, prepay or redeem certain debt, enter into certain transactions with affiliates, amend the Management Agreement with Sinclair Television Group, Inc., transfer certain assets to or engage in certain types of transactions with unrestricted subsidiaries or other non-guarantor subsidiaries, transfer content rights, the DTC application and related intellectual property other than to Holdings, DSG and the guarantors, and forming and transferring assets to joint ventures and (ii) unrestricted subsidiaries to own or hold assets or engage in certain types of transactions as well as customary events of default, including relating to a change of control. The DSG First and Second Lien Credit Facilities also contain customary events of default, including relating to a change of control. If an event of default occurs, the lenders under the DSG First and Second Lien Credit Agreements will be entitled to take various actions, including the acceleration of amounts due under the DSG First and Second Lien Credit Agreements and all actions permitted to be taken by secured creditors under applicable law.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
(In millions, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | For the Quarter Ended | | 3/31/2021 | | 6/30/2021 | | 9/30/2021 | | 12/31/21 | Total revenues | $ | 1,511 | | | $ | 1,612 | | | $ | 1,535 | | | $ | 1,476 | | Operating income (loss) | $ | 35 | | | $ | (178) | | | $ | 73 | | | $ | 165 | | Net income (loss) | $ | 26 | | | $ | (328) | | | $ | 17 | | | $ | (41) | | Net (loss) income attributable to Sinclair Broadcast Group | $ | (12) | | | $ | (332) | | | $ | 19 | | | $ | (89) | | Basic (loss) earnings per common share | $ | (0.16) | | | $ | (4.41) | | | $ | 0.25 | | | $ | (1.18) | | Diluted (loss) earnings per common share | $ | (0.16) | | | $ | (4.41) | | | $ | 0.25 | | | $ | (1.18) | |
| | | | | | | | | | | | | | | | | | | | | | | | | For the Quarter Ended | | 3/31/2020 | | 6/30/2020 | | 9/30/2020 | | 12/31/20 | Total revenues | $ | 1,609 | | | $ | 1,283 | | | $ | 1,539 | | | $ | 1,512 | | Operating income (loss) | $ | 327 | | | $ | 492 | | | $ | (4,216) | | | $ | 625 | | Net income (loss) | $ | 151 | | | $ | 273 | | | $ | (3,367) | | | $ | 514 | | Net income (loss) attributable to Sinclair Broadcast Group | $ | 123 | | | $ | 252 | | | $ | (3,256) | | | $ | 467 | | Basic earnings (loss) per common share | $ | 1.36 | | | $ | 3.13 | | | $ | (43.53) | | | $ | 6.32 | | Diluted earnings (loss) per common share | $ | 1.35 | | | $ | 3.12 | | | $ | (43.53) | | | $ | 6.27 | |
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