Sinclair, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis provides qualitative and quantitative information about Sinclair's and SBG's financial performance and condition and should be read in conjunction with Sinclair's and SBG's consolidated financial statements and the accompanying notes to those statements. This discussion consists of the following sections: Summary of Significant Events — financial events during the three months ended March 31, 2024 and through the date this Report on Form 10-Q is filed. Results of Operations — an analysis of Sinclair's and SBG's revenues and expenses for the three months ended March 31, 2024 and 2023. Liquidity and Capital Resources — a discussion of Sinclair's and SBG's primary sources of liquidity and an analysis of Sinclair's and SBG's cash flows from or used in operating activities, investing activities, and financing activities during the three months ended March 31, 2024. SUMMARY OF SIGNIFICANT EVENTS Content and Distribution • In January 2024, Sinclair announced a comprehensive multi-year distribution agreement with Verizon for carriage on FiOS TV, covering Tennis Channel and SBG's local television stations in 10 markets. • In January 2024, Sinclair renewed its distribution agreement with the National Content & Technology Cooperative ("NCTC") that allows NCTC's member companies to opt into a multi-year retransmission consent agreement for SBG's owned and operated stations and includes an agreement for Tennis Channel. • In January 2024, SBG and FOX Corporation reached an agreement for a multi-year renewal of all FOX affiliations in SBG markets, including where SBG provides sales and other services under JSAs or MSAs. • In March 2024, Sinclair reached a comprehensive, multiyear distribution agreement with Charter Communications, Inc. for continued carriage of Tennis Channel and SBG’s owned local broadcast stations. • In May 2024, Sinclair reached a comprehensive, multiyear distribution agreement with Cox Communications, Inc. for continued carriage of Tennis Channel and SBG’s owned local broadcast stations. Corporate Social Responsibility • To date in 2024, SBG's newsrooms have won a total of 47 journalism awards. • In March 2024, Sinclair launched Sinclair Cares: Supporting Children’s Literacy, a partnership with Reading Is Fundamental, the nation’s leading children’s literacy nonprofit, to create awareness around children’s literacy challenges and help get books into the hands of children across the U.S. through a virtual book drive. • In April 2024, WBFF FOX 45, Baltimore's #1 ranked news outlet and the David D. Smith Family Foundation donated $50 thousand and $100 thousand, respectively, to the Maryland Tough Baltimore Strong Key Bridge Fund. • In April 2024, Sinclair published its 2023 Corporate Social Responsibility report, detailing the Company's achievements and progress in its social responsibility journey. • In April 2024, Sinclair held its second annual Sinclair Day of Service, whereby all employees were encouraged to volunteer that day for charitable causes. Over 1,300 employees volunteered a total of more than 3,700 hours that day. NextGen Broadcasting (ATSC 3.0) • In April 2024, Sinclair announced the launch of its Broadspan datacasting platform to enable data distribution capability across all current Sinclair NextGen Broadcast (ATSC 3.0) markets where it serves as the host station. Edgio, Inc., a leading content delivery network, will become the Company's first NextGen commercial partner. 51 Table of Contents • In 2024, Sinclair, in coordination with other broadcasters, and led by BitPath, its joint venture with another broadcaster, has deployed NextGen TV, powered by ATSC 3.0, in the market below. This brings the total number of our markets in which NextGen TV has been deployed to 44: Month Market Number of Stations Company Stations April 2024 Portland, ME 5 WGME (CBS), WPFO (a) (FOX) (a) The license and programming assets for this station are currently owned by a third party. SBG provides certain non-programming related sales, operational, and administrative services to this station pursuant to a service agreement, such as a JSA and SSA. Financing, Capital Allocation, and Shareholder Returns • In January 2024, STG purchased $27 million aggregate principal amount of the Term Loan B-2 for consideration of $25 million and during the first quarter of 2024 we repaid $34 million across all tranches of the Term Loan B in scheduled principal payments. • In February 2024, Sinclair declared a quarterly dividend of $0.25 per share and in May 2024, Sinclair declared a quarterly dividend of $0.25 per share. Other Events • In January 2024, Sinclair announced that it has agreed, subject to Sinclair and DSG completing definitive documentation, 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 and on March 1, 2024, the court approved the settlement. The settlement terms include Sinclair’s cash payment to DSG of $495 million. Additionally, under the terms of the settlement, Sinclair will provide transition services to DSG to allow DSG to become a self-standing entity going forward. An initial payment of $50 million was made in March 2024, which was funded by Ventures, and the remaining $445 million was paid in April 2024, of which $347 million was paid by STG and $98 million was paid by Ventures. • In May 2024, Jason Smith was promoted to Executive Vice Chairman from his former position of Vice President, Chief of Staff. 52 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS SINCLAIR, INC. RESULTS OF OPERATIONS Any references to the second, third, or fourth quarters are to the three months ended June 30, September 30, or December 31, respectively, for the year being discussed. As of March 31, 2024, we had two reportable segments for accounting purposes, local media and tennis. Seasonality / Cyclicality The operating results of our local media segment are usually subject to cyclical fluctuations from political advertising. In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising expenditures preceding local and national elections. Additionally, every four years, political spending is usually elevated further due to advertising expenditures preceding the presidential election. Also, the second and fourth quarter operating results are usually higher than the first and third quarters' because advertising expenditures are increased in anticipation of certain seasonal and holiday spending by consumers. The operating results of our tennis segment are usually subject to cyclical fluctuations due to the amount and significance of tournaments that take place in the respective quarters during the year. The first and fourth quarter operating results are usually higher than the second and third quarters' because of the amount and significance of tournaments that are played during those periods. Operating Data The following table sets forth our consolidated operating data for the periods presented (in millions): Three Months Ended March 31, 2024 2023 Media revenues $ 792 $ 766 Non-media revenues 6 7 Total revenues 798 773 Media programming and production expenses 408 398 Media selling, general and administrative expenses 196 191 Depreciation and amortization expenses 63 65 Amortization of program contract costs 19 22 Non-media expenses 12 12 Corporate general and administrative expenses 58 58 Loss on asset dispositions and other, net of impairment — 6 Operating income $ 42 $ 21 Net income attributable to Sinclair $ 23 $ 185 53 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Local Media Segment The following table sets forth our revenue and expenses for our local media segment for the periods presented (in millions): Three Months Ended March 31, Percent Change Increase / (Decrease) 2024 2023 Revenue: Distribution revenue $ 384 $ 381 1% Core advertising revenue 284 293 (3)% Political advertising revenue 24 3 n/m Other media revenues 35 28 25% Media revenues (a) $ 727 $ 705 3% Operating Expenses: Media programming and production expenses $ 383 $ 371 3% Media selling, general and administrative expenses (b) 183 175 5% Depreciation and amortization expenses 58 59 (2)% Amortization of program contract costs 19 22 (14)% Corporate general and administrative expenses 41 32 28% Non-media expenses 2 6 (67)% Gain on asset dispositions and other, net of impairment — (1) n/m Operating income $ 41 $ 41 —% Interest expense including amortization of debt discount and deferred financing costs $ 76 $ 74 3% Other income, net $ 31 $ 12 n/m n/m - not meaningful (a) Includes $2 million and $1 million for the three months ended March 31, 2024 and 2023, respectively, of intercompany revenue related to certain services provided to the tennis segment, which is eliminated in consolidation. (b) Includes $2 million and $1 million for the three months ended March 31, 2024 and 2023, respectively, of intercompany expense related to certain services provided by other, which is eliminated in consolidation. Revenue Distribution revenue. Distribution revenue, which represents payments from Distributors for our broadcast signals, increased $3 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in contractual rates, partially offset by a decrease in subscribers. Core advertising revenue. Core advertising revenue decreased $9 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to decreases across certain advertising categories, most notably entertainment and medical, which decreased $5 million and $2 million, respectively. Political advertising revenue. Political advertising revenue increased $21 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to 2024 being a political year, compared to 2023 which was a non-political year. Other media revenues. Other media revenues increased $7 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase related to providing certain services under management services agreements. 54 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS The following table sets forth our primary types of programming and their approximate percentages of advertising revenue for the periods presented: Percent of Advertising Revenue for the Three Months Ended March 31, 2024 2023 Syndicated/Other programming 38% 37% Local news 29% 28% Network programming 16% 16% Sports programming 14% 16% Paid programming 3% 3% The following table sets forth our affiliate percentages of advertising revenue for the periods presented: Percent of Advertising Revenue for the Three Months Ended March 31, # of Channels 2024 2023 ABC 40 28% 27% FOX 55 22% 26% CBS 30 23% 20% NBC 25 12% 11% CW 46 5% 5% MNT 40 4% 4% Other 403 6% 7% Total 639 Expenses Media programming and production expenses. Media programming and production expenses increased $12 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in fees pursuant to network affiliation agreements as a result of increased contractual rates. Media selling, general and administrative expenses. Media selling, general and administrative expenses increased $8 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in trade related expenses. Depreciation and amortization expenses. Depreciation and amortization expenses decreased $1 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to assets retired during 2023. Amortization of program contract costs. The amortization of program contract costs decreased $3 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily related to reduced programming renewal costs. Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses. Non-media expenses. Non-media expenses decreased $4 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily related to decreased expenses associated with our broadcast technology related initiatives. Other income, net. During the three months ended March 31, 2024, we recognized $26 million in proceeds related to the sale of certain broadcast related assets and $4 million in interest income. Interest expense including amortization of debt discount and deferred financing costs. Interest expense increased $2 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to increased interest expense related to our variable rate debt resulting from higher interest rates. 55 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Tennis Segment The following table sets forth our revenue and expenses for our tennis segment for the periods presented (in millions): Three Months Ended March 31, Percent Change Increase / (Decrease) 2024 2023 Revenue: Distribution revenue $ 52 $ 45 16% Core advertising revenue 10 9 11% Other media revenues 1 1 —% Media revenues 63 55 15% Operating Expenses: Media programming and production expenses 25 22 14% Media selling, general and administrative expenses (a) 12 10 20% Depreciation and amortization expenses 5 5 —% Corporate general and administrative expenses 1 — n/m Operating income $ 20 $ 18 11% n/m - not meaningful (a) Includes $2 million and $1 million for the three months ended March 31, 2024 and 2023, respectively, of intercompany expense related to certain services provided by the local media segment, which is eliminated in consolidation. Revenue Distribution revenue. Distribution revenue, which is generated through fees received from Distributors for the right to distribute Tennis Channel, increased $7 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in subscribers as a result of increased carriage that occurred during the second quarter of 2023 and the first quarter of 2024. Core advertising revenue. Core advertising revenue is primarily generated from sales of commercial time within Tennis Channel programming. Core advertising revenue increased $1 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in the number of tournaments aired in the current period versus the prior period. Expenses Media programming and production expenses. Media programming and production expenses increased $3 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in production related employee compensation costs. Media selling, general and administrative expenses. Media selling, general and administrative expenses increased $2 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in expenses related to certain services provided by the local media segment, which is eliminated in consolidation. Corporate general and administrative expenses. See explanation under Corporate and Unallocated Expenses. 56 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Other The following table sets forth our revenues and expenses for our non-broadcast digital and internet solutions, technical services, and non-media investments (collectively, other) for the periods presented (in millions): Three Months Ended March 31, Percent Change Increase / (Decrease) 2024 2023 Revenue: Media revenues (a) $ 6 $ 9 (33)% Non-media revenues (b) $ 9 $ 8 13% Operating Expenses: Media expenses (c) $ 5 $ 14 (64)% Non-media expenses (d) $ 12 $ 6 100% Loss on asset dispositions and other, net of impairment $ — $ 7 n/m Operating loss $ (3) $ (12) (75)% Income from equity method investments $ 15 $ 31 (52)% n/m - not meaningful (a) Media revenues for the three months ended March 31, 2024 and 2023 include $2 million and $1 million, respectively, of intercompany revenue related to certain services and sales provided to the local media segment, which is eliminated in consolidation. (b) Non-media revenues for the three months ended March 31, 2024 and 2023 include $3 million and $1 million, respectively, of intercompany revenue related to certain services and sales provided to the local media segment, which is eliminated in consolidation. (c) Media expenses for the three months ended March 31, 2023 include $1 million of intercompany expense primarily related to certain services provided by the local media segment, which is eliminated in consolidation. (d) Non-media expenses for the three months ended March 31, 2024 include $2 million of intercompany expense related to certain services and sales provided by the local media segment, which is eliminated in consolidation. Revenue. Media revenues decreased $3 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to the sale of our Stadium Network ("Stadium"). Non-media revenues increased $1 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in sales within our consolidated real estate investments. Expenses. Media expenses decreased $9 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to the sale of Stadium. Non-media expenses increased $6 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in expenses related to our technical services business. Income from equity method investments. During the three months ended March 31, 2024 and 2023, we recognized a gain of $17 million on the sale of two of our investments and a gain of $33 million on the sale of two of our real estate investments, respectively, which is included in income from equity method investments in our consolidated statements of operations. 57 Table of Contents SINCLAIR, INC. RESULTS OF OPERATIONS Corporate and Unallocated Expenses The following table presents our corporate and unallocated expenses for the periods presented (in millions): Three Months Ended March 31, Percent Change Increase/ (Decrease) 2024 2023 Corporate general and administrative expenses $ 58 $ 58 —% Income tax benefit $ 4 $ 204 n/m n/m - not meaningful Corporate general and administrative expenses. The table above and the explanation that follows cover total consolidated corporate general and administrative expenses. Corporate general and administrative expenses remained flat for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to a $5 million increase in employee compensation costs, partially offset by a $3 million decrease in legal, consulting, and regulatory costs, primarily related to the litigation discussed under Note 5. Commitments and Contingencies within Sinclair's Consolidated Financial Statements. Income tax benefit. The effective tax rate for the three months ended March 31, 2024, was a benefit of 18.3% as compared to a benefit of 1870.7% during the same period in 2023. The decrease in the effective tax rate for the three months ended March 31, 2024, when compared to the same period in 2023, is primarily due to a release of the 2023 valuation allowance on deferred tax assets relating to deductibility of interest expense under the IRC Section 163(j) as a result of the change in the tax classification of the legal entity owning the Diamond Sports business because of the exit of the sole minority investor. 58 Table of Contents SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS Any references to the second, third, or fourth quarters are to the three months ended June 30, September 30, or December 31, respectively, for the year being discussed. As of March 31, 2024, SBG had one reportable segment for accounting purposes, local media. Seasonality / Cyclicality The operating results of SBG's local media segment are usually subject to cyclical fluctuations from political advertising. In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising expenditures preceding local and national elections. Additionally, every four years, political spending is usually elevated further due to advertising expenditures preceding the presidential election. Also, the second and fourth quarter operating results are usually higher than the first and third quarters' because advertising expenditures are increased in anticipation of certain seasonal and holiday spending by consumers. Operating Data The following table sets forth SBG's consolidated operating data for the periods presented (in millions): Three Months Ended March 31, 2024 2023 Media revenues $ 727 $ 766 Non-media revenues — 7 Total revenues 727 773 Media programming and production expenses 383 398 Media selling, general and administrative expenses 183 191 Depreciation and amortization expenses 58 65 Amortization of program contract costs 19 22 Non-media expenses 2 12 Corporate general and administrative expenses 41 58 Loss on asset dispositions and other, net of impairment — 6 Operating income $ 41 $ 21 Net income attributable to SBG $ 5 $ 185 Local Media Segment Refer to Local Media Segment above under Sinclair, Inc.'s Results of Operations for a discussion of SBG's local media segment, which is the same as Sinclair's local media segment for all of the three months ended March 31, 2024 and 2023. 59 Table of Contents SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS Other The following table sets forth SBG's revenues and expenses for tennis, non-broadcast digital and internet solutions, technical services, and non-media investments (collectively, other) for the period presented, prior to the Reorganization (in millions): Three Months Ended March 31, 2023 Revenue: Distribution revenue $ 45 Core advertising revenue 15 Other media revenues 4 Media revenues (a) $ 64 Non-media revenues (b) $ 8 Operating Expenses: Media expenses (c) $ 46 Non-media expenses $ 6 Loss on asset dispositions and other, net of impairment $ 7 Operating income $ 6 Income from equity method investments $ 31 (a) Media revenues for the three months ended March 31, 2023 include $1 million of intercompany revenue related to certain services and sales provided to the local media segment, which is eliminated in consolidation. (b) Non-media revenues for the three months ended March 31, 2023 include $1 million of intercompany revenue related to certain services and sales provided to the local media segment, which is eliminated in consolidation. (c) Media expenses for the three months ended March 31, 2023 include $1 million of intercompany expense primarily related to certain services provided by the local media segment, which is eliminated in consolidation. The revenue and expense items noted above for the three months ended March 31, 2023 represent activity prior to the Reorganization which occurred June 1, 2023, thus there is no activity presented for periods subsequent to May 31, 2023. See Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies within SBG's Consolidated Financial Statements. Corporate and Unallocated Expenses The following table presents SBG's corporate and unallocated expenses for the periods presented (in millions): Three Months Ended March 31, Percent Change Increase/ (Decrease) 2024 2023 Corporate general and administrative expenses $ 41 $ 58 (29)% Income tax benefit $ 9 $ 204 n/m n/m - not meaningful Corporate general and administrative expenses. The table above and the explanation that follows cover total consolidated corporate general and administrative expenses. Corporate general and administrative expenses decreased by $17 million for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to a decrease in legal, consulting, and regulatory costs. Income tax benefit. The effective tax rate for the three months ended March 31, 2024, was a benefit of 383.5% as compared to a benefit of 1870.7% during the same period in 2023. The decrease in the effective tax rate for the three months ended March 31, 2024, when compared to the same period in 2023, is primarily due to a release of the 2023 valuation allowance on deferred tax assets relating to deductibility of interest expense under the IRC Section 163(j) as a result of the change in the tax classification of the legal entity owning the Diamond Sports business because of the exit of the sole minority investor. 60 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Liquidity and Capital Resources As of March 31, 2024, Sinclair had net working capital of approximately $441 million, including $655 million in cash and cash equivalent balances, and $650 million of available borrowing capacity. Cash on hand, cash generated by Sinclair's operations, and borrowing capacity under the Bank Credit Agreement are used as Sinclair's primary sources of liquidity. As of March 31, 2024, SBG had net working capital of approximately $51 million, including $337 million in cash and cash equivalent balances, and $650 million of available borrowing capacity. Cash on hand, cash generated by SBG's operations, and borrowing capacity under the Bank Credit Agreement are used as SBG's primary sources of liquidity. The Bank Credit Agreement includes a financial maintenance covenant, the first lien leverage ratio (as defined in the Bank Credit Agreement), which requires such ratio not to exceed 4.5x, measured as of the end of each fiscal quarter. As of March 31, 2024, the STG first lien leverage ratio was below 4.5x. Under the Bank Credit Agreement, a financial maintenance covenant is only applicable if 35% or more of the capacity (as a percentage of total commitments) under the revolving credit facility, measured as of the last day of each fiscal quarter, is utilized under the revolving credit facility as of such date. Since there was no utilization under the revolving credit facility as of March 31, 2024, STG was not subject to the financial maintenance covenant under the Bank Credit Agreement. The Bank Credit Agreement contains other restrictions and covenants with which STG was in compliance as of March 31, 2024. During the three months ended March 31, 2024, STG purchased $27 million aggregate principal amount of the Term Loan B-2, due September 30, 2026, for consideration of $25 million. During the three months ended March 31, 2024, Sinclair and SBG entered into agreements which increased estimated contractual amounts owed for network programming rights by $1,569 million which have terms that extend into 2027. There were no other material changes to Sinclair's or SBG's contractual cash obligations as of March 31, 2024. Sinclair and SBG anticipate that existing cash and cash equivalents, cash flow from the local media segment's operations, and borrowing capacity under the Bank Credit Agreement will be sufficient to satisfy the local media segment's debt service obligations, capital expenditure requirements, and working capital needs for the next twelve months. Sinclair anticipates that existing cash and cash equivalents and cash flow from the tennis segment and other's operations will be sufficient to satisfy the tennis segment and other's debt service obligations, capital expenditure requirements, the DSG settlement, and working capital needs for the next twelve months. However, certain factors, including but not limited to the war in Ukraine, conflict in the Middle East, and other geopolitical matters, natural disasters, and pandemics, and their resulting effect on the economy, Sinclair's and SBG's advertisers, and Sinclair's and SBG's Distributors and their subscribers, could affect Sinclair's and SBG's liquidity and first lien leverage ratio which could affect Sinclair's and SBG's ability to access the full borrowing capacity under the Bank Credit Agreement. In addition to the sources described above, Sinclair and SBG may rely upon various sources for long-term liquidity needs, such as but not limited to, the issuance of long-term debt, the issuance of Sinclair equity, for Sinclair only, the issuance of Ventures equity or debt, or other instruments convertible into or exchangeable for Sinclair equity, or the sale of assets. However, there can be no assurance that additional financing or capital or buyers of assets will be available, or that the terms of any transactions will be acceptable or advantageous to Sinclair or SBG. In January 2024, Sinclair announced that it has agreed, subject to Sinclair and DSG completing definitive documentation, 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 and on March 1, 2024, the court approved the settlement. The settlement terms include Sinclair’s cash payment to DSG of $495 million. Additionally, under the terms of the settlement, Sinclair will provide transition services to DSG to allow DSG to become a self-standing entity going forward. An initial payment of $50 million was made in March 2024 and the remaining $445 million was paid in April 2024. Of the total $495 million settlement amount paid, $347 million was paid by STG and $148 million was paid by Ventures. 61 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Sinclair, Inc. Sources and Uses of Cash The following table sets forth Sinclair's cash flows for the periods presented (in millions): Three Months Ended March 31, 2024 2023 Net cash flows (used in) from operating activities $ (4) $ 62 Cash flows from (used in) investing activities: Acquisition of property and equipment $ (21) $ (20) Purchases of investments (3) (33) Distributions and proceeds from investments 77 8 Other, net 1 1 Net cash flows from (used in) investing activities $ 54 $ (44) Cash flows used in financing activities: Repayments of notes payable, commercial bank financing, and finance leases $ (34) $ (9) Dividends paid on Class A and Class B Common Stock (16) (18) Repurchase of outstanding Class A Common Stock — (53) Repurchase of redeemable subsidiary preferred equity — (190) Distributions to noncontrolling interests, net (2) (4) Other, net (5) (5) Net cash flows used in financing activities $ (57) $ (279) Operating Activities Net cash flows used in Sinclair's operating activities increased during the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in production and overhead costs and a decrease in cash collections from Distributors, partially offset by an increase in cash collections related to political revenue. Investing Activities Net cash flows from Sinclair's investing activities increased during the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in distributions and proceeds from investments and a decrease in purchases of investments. Financing Activities Net cash flows used in Sinclair's financing activities decreased during the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to the repurchase of outstanding Common Stock and the redeemable subsidiary preferred equity in the prior period, partially offset by an increase in the repayment of debt in the current period. Sinclair declared a quarterly dividend of $0.25 per share in February 2024 and $0.25 per share in May 2024. Future dividends on Sinclair's shares of common stock, if any, will be at the discretion of Sinclair's Board of Directors and will depend on several factors including Sinclair's results of operations, cash requirements and surplus, financial condition, covenant restrictions, and other factors that Sinclair's Board of Directors may deem relevant. 62 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Sinclair Broadcast Group, LLC Sources and Uses of Cash The following table sets forth SBG's cash flows for the periods presented (in millions): Three Months Ended March 31, 2024 2023 Net cash flows from operating activities $ 17 $ 62 Cash flows from (used in) investing activities: Acquisition of property and equipment $ (22) $ (20) Purchases of investments — (33) Distributions and proceeds from investments 26 8 Other, net 1 1 Net cash flows from (used in) investing activities $ 5 $ (44) Cash flows used in financing activities: Repayments of notes payable, commercial bank financing, and finance leases $ (34) $ (9) Dividends paid on Old Sinclair Class A and Class B Common Stock — (18) Repurchase of outstanding Old Sinclair Class A Common Stock — (53) Repurchase of redeemable subsidiary preferred equity — (190) Distributions to noncontrolling interests, net (2) (4) Contributions from member, net 32 — Other, net — (5) Net cash flows used in financing activities $ (4) $ (279) Operating Activities Net cash flows from SBG's operating activities decreased during the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in production and overhead costs and a decrease in cash collections from Distributors, partially offset by an increase in cash collections related to political revenue, as well as the impact of the Reorganization, as discussed in Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies within SBG's Consolidated Financial Statements. Investing Activities Net cash flows from SBG's investing activities increased during the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to a decrease in purchases of investments as a result of the Reorganization, as discussed in Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies within SBG's Consolidated Financial Statements , offset by an increase in distributions and proceeds from investments in the current period. Financing Activities Net cash flows used in SBG's financing activities decreased during the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to an increase in net contributions from member as a result of the Reorganization, as discussed in Company Reorganization under Note 1. Nature of Operations and Summary of Significant Accounting Policies within SBG's Consolidated Financial Statements, in the current period and the repurchase of outstanding Old Sinclair Common Stock and the redeemable subsidiary preferred equity and payments of dividends on Old Sinclair Common Stock in the prior period, partially offset by an increase in the repayment of debt in the current period. 63 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES There were no changes to the critical accounting policies and estimates from those disclosed in Critical Accounting Policies and Estimates under Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the year ended December 31, 2023. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes from the quantitative and qualitative discussion about market risk previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.