What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-10 · 170 added, 136 removed, 213 unchanged (59% of the section changed)

2 unchanged sentences

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 — financial events during the three months ended June 30, 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 and six months ended June 30, 2024 and 2023.

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.

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• To date in 2024, SBG's newsrooms have won a total of 176 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.

• In April 2024, WBFF FOX 45 and the David D.

Smith Family Foundation donated $50 thousand and $100 thousand, respectively, to the Maryland Tough Baltimore Strong Key Bridge Fund.

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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.

• 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.

• In June 2024, Sinclair partnered with Feeding America to coordinate Sinclair Cares:

Summer Hunger Relief, an awareness and fundraising campaign to help provide meals to children and families across the U.S.

in the summer.

• In July 2024, Sinclair awarded scholarships to 12 university students as a part of its annual Diversity Scholarship program.

NextGen Broadcast (ATSC 3.0)

• 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 two markets below.

This brings the total number of our markets in which NextGen TV has been deployed to 45:

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April 2024 Portland, ME 5 WGME (CBS), WPFO (a) (FOX)

June 2024 Myrtle Beach, SC 4 WPDE (ABC)

(a) The license and programming assets for this station are currently owned by a third party.

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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.

• 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.

• In May 2024, Sinclair declared a quarterly dividend of $0.25 per share and in August 2024, Sinclair declared a quarterly dividend of $0.25 per share.

• In January 2024, Sinclair announced that it had agreed 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 included Sinclair’s cash payment to DSG of $495 million.

Additionally, under the terms of the settlement, Sinclair would 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.

• In May 2024, Jason Smith was promoted to Executive Vice Chairman of the Company from his former position of Vice President, Chief of Staff.

SINCLAIR, INC.

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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.

Any references to the first, third, or fourth quarters are to the three months ended March 31, September 30, or December 31, respectively, for the year being discussed.

As of June 30, 2024, we had two reportable segments for accounting purposes, local media and tennis.

Seasonality / Cyclicality

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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.

The operating results of our tennis segment are usually subject to cyclical fluctuations due to the number 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 number and significance of tournaments that are played during those periods.

Operating Data

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Media revenues $ 819 $ 761 $ 1,611 $ 1,527

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Depreciation and amortization expenses 63 73 126 138

Amortization of program contract costs 19 22

Amortization of program costs 18 19 37 41

Non-media expenses 13 9 25 21

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Loss on asset dispositions and other, net of impairment 2 5 2 11

Operating income $ 42 $ 21

Net income attributable to Sinclair

Operating income (loss) $ 64 $ (3) $ 106 $ 18

Net income (loss) attributable to Sinclair

$ 17 $ (89) $ 40 $ 96

SINCLAIR, INC.

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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)

Three Months Ended June 30, Percent Change Increase / (Decrease) Six Months Ended June 30, Percent Change Increase / (Decrease)

2024 2023 2024 2023

Distribution revenue $ 384 $ 372 3% $ 768 $ 753 2%

Core advertising revenue 285 287 (1)% 569 580 (2)%

Political advertising revenue 24 3 n/m

Political advertising revenue 40 6 n/m 64 9 n/m

Other media revenues 41 34 21% 76 62 23%

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Depreciation and amortization expenses 58 67 (13)% 116 126 (8)%

Amortization of program contract costs 19 22 (14)%

Amortization of program costs 18 19 (5)% 37 41 (10)%

Corporate general and administrative expenses 29 46 (37)% 70 78 (10)%

Non-media expenses 2 3 (33)% 4 9 (56)%

Gain on asset dispositions and other, net of impairment — (1) n/m

Operating income $ 41 $ 41 —%

Gain on asset dispositions and other, net of impairment — (2) n/m — (3) n/m

Operating income $ 83 $ 22 n/m $ 124 $ 63 97%

Interest expense including amortization of debt discount and deferred financing costs $ 76 $ 76 —% $ 152 $ 150 1%

Other income, net $ 31 $ 12 n/m

Gain on extinguishment of debt $ — $ 11 n/m $ 1 $ 11 (91)%

Other income, net $ 2 $ 21 (90)% $ 33 $ 33 —%

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(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.

(a) Includes $3 million and $5 million for the three and six months ended June 30, 2024, respectively, and $1 million and $2 million for the three and six months ended June 30, 2023, respectively, of intercompany revenue related to certain services provided to the tennis segment, which is eliminated in consolidation.

(b) Includes $3 million and $5 million for the three and six months ended June 30, 2024, respectively, and $2 million and $3 million for the three and six months ended June 30, 2023, respectively, of intercompany expense related to certain services provided by other, which is eliminated in consolidation.

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.

Distribution revenue, which represents payments from Distributors for our broadcast signals, increased $12 million or 3% and $15 million or 2% for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023.

Contractual rate increases favorably impacted period-over-period distribution revenue by mid-teen percentages for both the three and six months ended June 30, 2024, respectively, which was offset by a decrease in subscribers by low double-digit percentages for both periods, respectively.

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.

Core advertising revenue decreased $2 million for the three months ended June 30, 2024, when compared to the same period in 2023.

Core advertising revenue decreased $11 million for the six months ended June 30, 2024, when compared to the same period in 2023, with no particular product/services category dominating the variance.

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.

Political advertising revenue increased $34 million and $55 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to 2024 being a presidential political year, compared to 2023 which was an off-year election cycle, and therefore only had a small number of political races and correspondingly less political advertising spend.

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.

Other media revenues increased $7 million and $14 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase related to providing

SINCLAIR, INC.

RESULTS OF OPERATIONS

certain services under management services agreements.

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,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Syndicated/Other programming 41% 40% 39% 38%

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Percent of Advertising Revenue for the

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

# of Channels 2024 2023 2024 2023

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NBC 25 14% 12% 13% 12%

CW 46 5% 5% 5% 5%

MNT 40 4% 4% 4% 4%

Other 402 6% 7% 7% 6%

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 programming and production expenses increased $13 million and $25 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods 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.

Media selling, general and administrative expenses increased $3 million for the three months ended June 30, 2024, when compared to the same period in 2023, primarily due to an increase in third-party fulfillment costs from our digital business as a result of increased digital revenues.

Media selling, general and administrative expenses increased $11 million for the six months ended June 30, 2024, when compared to the same period in 2023, primarily due to a $4 million increase in third-party fulfillment cost from our digital business as a result of increased digital revenues, a $2 million increase in national sale commissions, and a $1 million increase in trade related expenses.

Amortization of program costs.

The amortization of program costs decreased $1 million and $4 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily related to reduced programming renewal costs.

Corporate general and administrative expenses.

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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.

Non-media expenses decreased $1 million and $5 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily related to decreased expenses associated with our broadcast technology related initiatives.

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.

Interest expense remained flat for the three months ended June 30, 2024, when compared to the same period in 2023.

Interest expense increased $2 million for the six months ended June 30, 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.

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RESULTS OF OPERATIONS

Other income, net.

During the six months ended June 30, 2024, we recognized a $26 million gain related to the sale of certain broadcast related assets and $8 million in interest income.

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)

Three Months Ended June 30, Percent Change Increase / (Decrease) Six Months Ended June 30, Percent Change Increase / (Decrease)

2024 2023 2024 2023

Distribution revenue $ 51 $ 46 11% $ 103 $ 91 13%

Core advertising revenue 14 14 —% 24 23 4%

Other media revenues 1 1 —%

Other media revenues 2 — n/m 3 1 n/m

Media revenues 67 60 12% 130 115 13%

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Depreciation and amortization expenses 6 5 20% 11 10 10%

Corporate general and administrative expenses 1 — n/m

Corporate general and administrative expenses — — n/m 1 — n/m

Operating income $ 1 $ 3 (67)% $ 21 $ 21 —%

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(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.

(a) Includes $3 million and $5 million for the three and six months ended June 30, 2024, respectively, and $1 million and $2 million for the three and six months ended June 30, 2023, respectively, of intercompany expense related to certain services provided by the local media segment, which is eliminated in consolidation.

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.

Distribution revenue, which is generated through fees received from Distributors for the right to distribute Tennis Channel, increased $5 million or 11% and $12 million or 13% for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023.

Contractual rate increases favorably impacted period-over-period distribution revenue by low double-digit percentages for both the three and six months ended June 30, 2024, respectively, and subscriber increases favorably impacted period-over-period distribution revenue by high-teen percentages for both periods, respectively, which was due to carriage agreements with new Distributors in the second quarter of 2023 and first quarter of 2024.

This increase in subscribers was offset by a decrease in subscribers from existing Distributors of mid-teen percentages for both periods, respectively.

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.

Core advertising revenue remained flat for the three months ended June 30, 2024, when compared to the same period in 2023.

Core advertising revenue increased $1 million for the six months ended June 30, 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.

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 programming and production expenses increased $3 million and $6 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase in live production expenses related to an increase in the number of tournaments aired in the current periods versus the prior periods.

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RESULTS OF OPERATIONS

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.

Media selling, general and administrative expenses increased $5 million and $7 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase in expenses related to certain services provided by the local media segment, which is eliminated in consolidation, and employee compensation cost.

Corporate general and administrative expenses.

See explanation under Corporate and Unallocated Expenses.

SINCLAIR, INC.

RESULTS OF OPERATIONS

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)

Three Months Ended June 30, Percent Change Increase / (Decrease) Six Months Ended June 30, Percent Change Increase/(Decrease)

2024 2023 2024 2023

Media revenues (a) $ 9 $ 6 50% $ 15 $ 15 —%

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Non-media expenses (d) $ 12 $ 7 71% $ 24 $ 13 85%

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)%

Operating loss $ — $ (12) n/m $ (3) $ (24) (88)%

Income (loss) from equity method investments $ 78 $ (1) n/m $ 93 $ 30 n/m

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(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.

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.

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.

(a) Media revenues for the three and six months ended June 30, 2024 include $3 million and $5 million, respectively, and for the three and six months ended June 30, 2023 include $2 million and $3 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 and six months ended June 30, 2024 and 2023 include $1 million and $4 million, respectively, and for the three and six months ended June 30, 2023 include $1 million and $2 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 and six months ended June 30, 2023 include $1 million and $2 million, respectively, 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 and six months ended June 30, 2024 include $1 million and $3 million, respectively, and for the three and six months ended June 30, 2023 include $1 million and $2 million, respectively, of intercompany expense related to certain services and sales provided by the local media segment, which is eliminated in consolidation.

Media revenues increased $3 million for the three months ended June 30, 2024, when compared to the same period in 2023, primarily due to an increase in advertising revenue related to our digital initiatives.

Media revenues remained flat for the six months ended June 30, 2024, when compared to the same period in 2023.

Non-media revenues increased $3 million and $4 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase in broadcast equipment sales.

Media expenses decreased $6 million and $15 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to the sale of our Stadium Network.

Non-media expenses increased $5 million and $11 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to an increase in expenses related to our technical services business and an increase in expenses associated with higher broadcast equipment sales.

Income (loss) from equity method investments.

During the three and six months ended June 30, 2024, we recognized gains of $78 million and $93 million, respectively, related to the sale of one of our investments, which is included in income (loss) from equity method investments in our consolidated statements of operations.

During the six months ended June 30, 2023 we recognized a gain of $33 million on the sale of two of our real estate investments, which is included in income (loss) from equity method investments in our consolidated statements of operations.

SINCLAIR, INC.

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The following table presents our corporate and unallocated expenses for the periods presented (in millions):

Three Months Ended March 31, Percent Change

Three Months Ended June 30, Percent

Increase/ (Decrease) Six Months Ended June 30, Percent

Increase/ (Decrease)

2024 2023 2024 2023

Corporate general and administrative expenses $ 50 $ 62 (19)% $ 108 $ 120 (10)%

Income tax benefit $ 4 $ 204 n/m

Income tax (provision) benefit $ (5) $ 20 n/m $ (1) $ 224 n/m

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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.

Corporate general and administrative expenses decreased $12 million for both the three and six months ended June 30, 2024, when compared to the same periods in 2023, primarily due to a 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.

Income tax (provision) benefit.

The effective tax rate for the three months ended June 30, 2024, was a provision of 19.0% as compared to a benefit of 18.9% during the same period in 2023.

The change from benefit to provision is primarily due to a book loss in 2023 compared to book income in 2024.

The effective tax rate for the six months ended June 30, 2024, was a provision of 1.7% as compared to a benefit of 189.3% during the same period in 2023.

The decrease in the effective tax rate for the six months ended June 30, 2024, as 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 DSG business because of the exit of the sole minority investor.

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.

Any references to the first, third, or fourth quarters are to the three months ended March 31, September 30, or December 31, respectively, for the year being discussed.

As of June 30, 2024, SBG had one reportable segment for accounting purposes, local media.

Seasonality / Cyclicality

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Media revenues $ 750 $ 740 $ 1,477 $ 1,506

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Depreciation and amortization expenses 58 70 116 135

Amortization of program contract costs 19 22

Amortization of program costs 18 19 37 41

Non-media expenses 2 7 4 19

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Operating income $ 77 $ 4 $ 118 $ 25

Net income attributable to SBG $ 5 $ 185

Net income (loss) attributable to SBG $ 2 $ (101) $ 7 $ 84

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.

SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS

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,

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 periods presented, prior to the Reorganization (in millions):

Three Months Ended June 30, Six Months Ended June 30,

Distribution revenue $ 31 $ 76

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Media expenses (c) $ 38 $ 84

Non-media expenses $ 6

Non-media expenses (d) $ 4 $ 10

Loss on asset dispositions and other, net of impairment $ 5 $ 12

Operating income $ 6

Operating loss $ (4) $ —

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.

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.

(a) Media revenues for the three and six months ended June 30, 2023 include $2 million and $3 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 six months ended June 30, 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 six months ended June 30, 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 both the three and six months ended June 30, 2023 include $1 million of intercompany expense related to certain services and sales provided by the local media segment, which is eliminated in consolidation.

The revenue and expense items noted above for the three and six months ended June 30, 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.

SINCLAIR BROADCAST GROUP, LLC RESULTS OF OPERATIONS

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

Three Months Ended June 30, Percent

Increase/ (Decrease) Six Months Ended June 30, Percent

Increase/ (Decrease)

2024 2023 2024 2023

Corporate general and administrative expenses $ 35 $ 58 (40)% $ 76 $ 116 (34)%

Income tax benefit $ 9 $ 204 n/m

Income tax benefit $ 1 $ 26 (96)% $ 10 $ 230 (96)%

n/m - not meaningful

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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.

Corporate general and administrative expenses decreased by $23 million and $40 million for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to a decrease in legal, consulting, and regulatory costs, primarily related to the litigation discussed under Note 5.

Commitments and Contingencies within SBG's Consolidated Financial Statements.

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 effective tax rate for the three months ended June 30, 2024, was a benefit of 38.5% as compared to a benefit of 21.5% during the same period in 2023.

The increase in the effective tax rate for the three months ended June 30, 2024, as compared to the same period in 2023, is primarily due to accrual of interest income attributable to prior years’ pending income tax refund claims.

The effective tax rate for the six months ended June 30, 2024, was a benefit of 1717.7% as compared to a benefit of 169.9% during the same period in 2023.

The increase in the effective tax rate for the six months ended June 30, 2024, as compared to the same period in 2023, is primarily due to accrual of interest income attributable to prior years’ pending income tax refund claims.

The effective income tax rate for the three months ended June 30, 2023 was less than the statutory rate 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 DSG business because of the exit of the sole minority investor.

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.

As of June 30, 2024, Sinclair had net working capital of approximately $536 million, including $378 million in cash and cash equivalent balances, and $228 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.

As of June 30, 2024, SBG had net working capital of approximately $158 million, including $52 million in cash and cash equivalent balances, and $228 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.

The bank credit agreement of Sinclair Television Group, Inc.

("STG"), a wholly-owned subsidiary of SBG (the "Bank Credit Agreement"), includes a financial maintenance covenant, the first lien leverage ratio (as defined in the Bank Credit Agreement), which requires such ratio not to exceed 4.5x, measured as of the end of each fiscal quarter, which 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 June 30, 2024, STG was not subject to the financial maintenance covenant under the Bank Credit Agreement.

As of June 30, 2024, the STG first lien leverage ratio was above 4.5x, which effectively reduces STG's borrowing capacity under the revolving credit facility from $650 million to $228 million.

The Bank Credit Agreement contains other restrictions and covenants with which STG was in compliance as of June 30, 2024.

During the six months ended June 30, 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 six months ended June 30, 2024, Sinclair and SBG entered into agreements which increased estimated contractual amounts owed for network programming rights by $1,573 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 June 30, 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.

Sinclair anticipates that existing cash and cash equivalents and cash flow from SBG, the tennis segment and other's operations will be sufficient to satisfy SBG's, the tennis segment and other's debt service obligations, capital expenditure requirements, 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.

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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.

In January 2024, Sinclair announced that it had agreed 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 included Sinclair’s cash payment to DSG of $495 million.

Additionally, under the terms of the settlement, Sinclair would 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 the first quarter of 2024 and the remaining $445 million was paid in the second quarter of 2024.

Of the total $495 million settlement amount paid, $347 million was paid by STG and $148 million was paid by Ventures.

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The following table sets forth Sinclair's cash flows for the periods presented (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net cash flows (used in) from operating activities $ (306) $ 80 $ (310) $ 142

Cash flows from (used in) investing activities:

Cash flows from investing activities:

Acquisition of property and equipment $ (23) $ (20) $ (44) $ (40)

2 unchanged sentences

Other, net 1 3 2 4

Net cash flows from (used in) investing activities $ 54 $ (44)

Net cash flows from investing activities $ 56 $ 173 $ 110 $ 129

Cash flows used in financing activities:

7 unchanged sentences

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.

Net cash flows used in Sinclair's operating activities increased during both the three and six months ended June 30, 2024, when compared to the same periods in 2023, primarily due to the payment of the DSG settlement, 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.

Net cash flows from Sinclair's investing activities decreased during the three months ended June 30, 2024, when compared to the same period in 2023, primarily due to a decrease in distributions and proceeds from investments and an increase in purchases of investments.

Net cash flows from Sinclair's investing activities decreased during the six months ended June 30, 2024, when compared to the same period in 2023, primarily due to a decrease in the distributions and proceeds from 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.

Net cash flows used in Sinclair's financing activities decreased during the three months ended June 30, 2024, when compared to the same period in 2023, primarily due to the repurchase of outstanding Common Stock in the prior period and a decrease in the repayment of debt in the current period.

Net cash flows used in Sinclair's financing activities decreased during the six months ended June 30, 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.

LIQUIDITY AND CAPITAL RESOURCES

Sinclair declared a quarterly dividend of $0.25 per share in May 2024 and $0.25 per share in August 2024.

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,

Net cash flows from operating activities $ 17 $ 62

Cash flows from (used in) investing activities:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net cash flows (used in) from operating activities $ (329) $ 60 $ (312) $ 122

Cash flows (used in) from investing activities:

Acquisition of property and equipment $ (22) $ (21) $ (44) $ (41)

2 unchanged sentences

Other, net 1 3 2 4

Net cash flows from (used in) investing activities $ 5 $ (44)

Cash flows used in financing activities:

Net cash flows (used in) from investing activities $ (23) $ 174 $ (18) $ 130

Cash flows from (used in) financing activities:

Repayments of notes payable, commercial bank financing, and finance leases $ (9) $ (28) $ (43) $ (37)

3 unchanged sentences

Distributions to noncontrolling interests, net (3) (3) (5) (7)

Contributions from member, net 32 —

Contributions from (distributions to) member, net 79 (360) 111 (360)

Other, net — 2 — (3)

Net cash flows used in financing activities $ (4) $ (279)

Net cash flows from (used in) financing activities $ 67 $ (489) $ 63 $ (768)

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.

Net cash flows used in SBG's operating activities increased during both the three and six months ended June 30, 2024, when compared to the same periods in 2023, primarily due to the payment of the DSG settlement, 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.

Net cash flows used in SBG's investing activities increased during the three months ended June 30, 2024, when compared to the same period in 2023, primarily due to the $193 million A/R Facility principal payment received from DSPV in the prior period.

Net cash flows used in SBG's investing activities increased during the six months ended June 30, 2024, when compared to the same period in 2023, primarily due to the $193 million A/R Facility principal payment received from DSPV in the prior period, offset by a decrease in the 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 .

LIQUIDITY AND CAPITAL RESOURCES

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.

Net cash flows from SBG's financing activities increased during the three months ended June 30, 2024, when compared to the same period in 2023, primarily due to a decrease in the repayment of debt and an increase in net contributions from member as a result of the Reorganization, as discussed in Company Reorganization under Note 1.

Net cash flows from SBG's financing activities increased during the six months ended June 30, 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, dividends paid on Old Sinclair Class A and Class B Common Stock, and the repurchase of the redeemable subsidiary preferred equity in the prior period.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis