NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:Nature of Operations

 Sinclair Broadcast Group, Inc. is a diversified television broadcasting company with national reach and a strong focus on using our spectrum to bring together content providers, advertisers, and consumers on various platforms. The content, distributed through our broadcast platform, consists of programming provided by third-party networks and syndicators, local news, and other original programming produced by us. We also distribute our original programming, and owned and operated network affiliates, on other third-party platforms. Additionally, we own digital media products that are complementary to our extensive portfolio of television station related digital properties. We focus on offering marketing solutions to advertisers through our television and digital platforms and digital agency services. Outside of our media related businesses, we operate technical services companies focused on supply and maintenance of broadcast transmission systems as well as research and development for the advancement of broadcast technology, and we manage other non-media related investments.

As of December 31, 2018, our broadcast distribution platform is a single reportable segment for accounting purposes. It consists primarily of our broadcast television stations, which we own, provide programming and operating services pursuant to agreements commonly referred to as local marketing agreements (LMAs), or provide sales services and other non-programming operating services pursuant to other outsourcing agreements (such as joint sales agreements (JSAs) and shared services agreements (SSAs)) to 191 stations in 89 markets. These stations broadcast 605 channels as of December 31, 2018. For the purpose of this report, these 191 stations and 605 channels are referred to as “our” stations and channels.Principles of Consolidation

The consolidated financial statements include our accounts and those of subsidiaries which we control and variable interest entities (VIEs) for which we are the primary beneficiary.  Noncontrolling interest represents a minority owner’s proportionate share of the equity in certain of our consolidated entities.  All intercompany transactions and account balances have been eliminated in consolidation.

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

We consolidate VIEs when we are the primary beneficiary. We are the the primary beneficiary of a VIE when we have the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and have the obligation to absorb losses or the right to receive returns that would be significant to the VIE. See Note 12. Variable Interest Entities for more information on our VIEs.Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of

America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities.  Actual results could differ from those estimates.Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on revenue recognition for revenue from contracts with customers, Accounting Standards Codification Topic 606 (ASC 606). This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers and replaced most existing revenue recognition guidance when it became effective.  The standard permits the use of either the retrospective or cumulative effect transition method. Since Accounting Standards Update (ASU) 2014-09 was issued, several additional ASUs have been issued and incorporated within ASC 606 to clarify various elements of the guidance. We adopted this guidance retrospectively during the first quarter of 2018. The impact of the adoption did not have a material impact on our station advertising or distribution revenue. Under the new standard, certain barter revenue and expense related to syndicated programming is no longer recognized. See Revenue Recognition below for more information on the adoption.

In January 2016, the FASB issued new guidance which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The new guidance requires entities to measure equity investments (except those accounted for under the equity method of accounting or those that resulted in consolidation of the investee) at fair value, with changes in fair value recognized in net income. We adopted this guidance during the first quarter of 2018. The impact of the adoption did not have a material impact on our financial statements. Upon adoption of this guidance, we recorded a cumulative effect adjustment to retained earnings of $2.1 million within our consolidated statement of equity. See Note 6. Other Assets for more information on our equity investments.

In February 2016, the FASB issued new guidance related to accounting for leases, which requires the assets and liabilities that arise from leases to be recognized on the balance sheet. Currently, only capital leases are recorded on the balance sheet. This update will require the lessee to recognize a lease liability equal to the present value of the lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for all leases longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election, by class of underlying asset, not to recognize lease assets and liabilities and recognize the lease expense for such leases, generally on a straight-line basis over the lease term. The new standard is effective for interim and annual reporting periods beginning after December 15, 2018. We adopted the optional transition method as well as the package of practical expedients on January 1, 2019. The adoption of this standard is expected to result in an increase of total assets and total liabilities on our consolidated balance sheets of less than 5%. We do not expect a material impact on our consolidated statements of operations.

In August 2016, the FASB issued new guidance related to the classification of certain cash receipts and cash payments. The new standard includes eight specific cash flow issues with the objective of reducing the existing diversity in practice as to how cash receipts and cash payments are represented in the statement of cash flows. In November 2016, the FASB issued new guidance related to the classification and presentation of changes in restricted cash on the statement of cash flows. This new guidance requires that the statement of cash flows explain changes during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. We adopted this guidance retrospectively during the first quarter of 2018. The following table presents the effects of adoption on our consolidated financial statements for the comparative periods presented (in thousands):

	For the years ended
	December 31, 2017							December 31, 2016
	As Reported			Adjustment (a)		As Adjusted		As Reported			Adjustment (b)			As Adjusted
Net cash flows from operating activities	$	431,104		$	309	$	431,413	$	591,766		$	19,824		$	611,590
Net cash flow from (used in) investing activities	(198,025		)	312,609		114,584		(606,003		)	(3,525		)	(609,528		)
Net cash flow from financing activities	188,263			1,496		189,759		124,249			(19,824		)	104,425

(a) Adjustment primarily relates to restricted cash received as discussed under Broadcast Incentive Auction under 2018 Dispositions within Note 2. Acquisitions and Dispositions of Assets.

(b) Adjustment primarily relates to the $19.8 million prepayment penalty related to the redemption of our 6.375 Senior Unsecured Notes in August 2016.

In January 2017, the FASB issued guidance which clarifies the definition of a business with additional guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard should be applied prospectively and is effective for interim and annual reporting periods beginning after December 15, 2017. We adopted this guidance during the first quarter of 2018. The impact of the adoption did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, with the capitalized implementation costs of a hosting arrangement that is a service contract expensed over the term of the hosting arrangement. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.

In October 2018, the FASB issued guidance for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP). The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, applied retrospectively. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.Cash and Cash EquivalentsWe consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.Accounts Receivable

Management regularly reviews accounts receivable and determines an appropriate estimate for the allowance for doubtful accounts based upon the impact of economic conditions on the merchant’s ability to pay, past collection experience, and such other factors which, in management’s judgment, deserve current recognition.  In turn, a provision is charged against earnings in order to maintain the appropriate allowance level.

A rollforward of the allowance for doubtful accounts for the years ended December 31, 2018, 2017, and 2016 is as follows (in thousands):

	2018			2017			2016
Balance at beginning of period	$	2,590		$	2,124		$	4,495
Charged to expense	5,814			2,837			1,974
Net write-offs	(6,025		)	(2,371		)	(4,345		)
Balance at end of period	$	2,379		$	2,590		$	2,124

Programming

We have agreements with distributors for the rights to television programming over contract periods, which generally run from one to seven years.  Contract payments are made in installments over terms that are generally equal to or shorter than the contract period.  Pursuant to accounting guidance for the broadcasting industry, an asset and a liability for the rights acquired and obligations incurred under a license agreement are reported on the balance sheet where the cost of each program is known or reasonably determinable, the program material has been accepted by the licensee in accordance with the conditions of the license agreement, and the program is available for its first showing or telecast. The portion of program contracts which becomes payable within one year is reflected as a current liability in the accompanying consolidated balance sheets.

The rights to this programming are reflected in the accompanying consolidated balance sheets at the lower of unamortized cost or estimated net realizable value.  With the exception of one and two-year contracts, amortization of program contract costs is computed using an accelerated method.  Program contract costs are amortized on a straight-line basis for one and two-year contracts.  Program contract costs estimated by management to be amortized in the succeeding year are classified as current assets.  Payments of program contract liabilities are typically made on a scheduled basis and are not affected by adjustments for amortization or estimated net realizable value.

Estimated net realizable values are based on management’s expectation of future advertising revenues, net of sales commissions, to be generated by the program material.  We perform a net realizable value calculation quarterly for each of our program contract costs in accordance with the accounting guidance for the broadcasting industry.  We utilize sales information to estimate the future revenue of each commitment and measure that amount against the commitment.  If the estimated future revenue is less than the amount of the commitment, a loss is recorded in amortization of program contract costs and net realizable value adjustments in the consolidated statements of operations.Impairment of Goodwill, Intangibles, and Other Assets

We evaluate our goodwill and indefinite lived intangible assets for impairment annually in the fourth quarter or more frequently, if events or changes in circumstances indicate that an impairment may exist. Our goodwill has been allocated to, and is tested for impairment at, the reporting unit level. A reporting unit is an operating segment or a component of an operating segment to the extent that the component constitutes a business for which discrete financial information is available and regularly reviewed by segment management. Components of an operating segment with similar economic characteristics are aggregated when testing goodwill for impairment.

In the performance of our annual assessment of goodwill for impairment we have the option to qualitatively assess whether it is more likely than not that a reporting unit has been impaired.  As part of this qualitative assessment we weigh the relative impact of factors that are specific to the reporting units as well as industry, regulatory, and macroeconomic factors that could affect the significant inputs used to determine the fair value of the assets. We also consider the significance of the excess fair value over carrying value in prior quantitative assessments.

If we conclude that it is more likely than not that a reporting unit is impaired, or if we elect not to perform the optional qualitative assessment, we will determine the fair value of the reporting unit and compare it to the net book value of the reporting unit. If the fair value is less than the net book value we will record an impairment to goodwill for the amount of the difference. We estimate the fair value of our reporting units utilizing a combination of a market based approach, which considers earnings and cash flow multiples of comparable businesses and recent market transactions, as well as an income approach involving the performance of a discounted cash flow analysis. Our discounted cash flow model is based on our judgment of future market conditions based on our internal forecast of future performance, as well as discount rates that are based on a number of factors including market interest rates, a weighted average cost of capital analysis, and includes adjustments for market risk and company specific risk.

Our indefinite-lived intangible assets consist primarily of our broadcast licenses and a trade name. For our annual impairment test for indefinite-lived intangible assets we have the option to perform a qualitative assessment to determine whether it is more likely than not that these assets are impaired. As part of this qualitative assessment we weigh the relative impact of factors that are specific to the indefinite-lived intangible assets as well as industry, regulatory, and macroeconomic factors that could affect the significant inputs used to determine the fair value of the assets. We also consider the significance of the excess fair value over carrying value in prior quantitative assessments. When evaluating our broadcast licenses for impairment, the qualitative assessment is done at the market level because the broadcast licenses within the market are complementary and together enhance the single broadcast license of each station. If we conclude that it is more likely than not that one of our broadcast licenses is impaired, we will perform a quantitative assessment by comparing the aggregate fair value of the broadcast licenses in the market to the respective carrying values. We estimate the fair values of our broadcast licenses using the Greenfield method, which is an income approach. This method involves a discounted cash flow model that incorporates several variables, including, but not limited to, market revenues and long term growth projections, estimated market share for the typical participant without a network affiliation, and estimated profit margins based on market size and station type. The model also assumes outlays for capital expenditures, future terminal values, an effective tax rate assumption and a discount rate based on a number of factors including market interest rates, a weighted average cost of capital analysis based on the target capital structure for a television station, and includes adjustments for market risk and company specific risk. If the carrying amount of the broadcast licenses exceeds the fair value, then an impairment loss is recorded to the extent that the carrying value of the broadcast licenses exceeds the fair value.

We periodically evaluate our long-lived assets for impairment and continue to evaluate them as events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.  We evaluate the recoverability of long-lived assets by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them.  At the time that such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are tested for impairment by comparing their estimated fair value to the carrying value.  We typically estimate fair value using discounted cash flow models and appraisals.  See Note 5.  Goodwill, Indefinite-Lived Intangible Assets and Other Intangible Assets for more information.

When factors indicate that there may be a decrease in value of an equity method investment, we assess whether a loss in value has occurred.  If that loss is deemed to be other than temporary, an impairment loss is recorded accordingly.  For any equity method investments that indicate a potential impairment, we estimate the fair values of those investments using discounted cash flow models, unrelated third-party valuations, or industry comparables, based on the various facts available to us. See Note 6. Other Assets for more information.

We recorded an impairment charge of $59.6 million for the year ended December 31, 2018 to adjust one of our consolidated real estate development projects to fair value less costs to sell based upon a pending sale transaction. This impairment is reflected in (gain) loss on asset dispositions and other, net of impairment within out statements of operations The fair value of the real estate investment was determined based on both observable and unobservable inputs, including the expected sales price as supported by a discounted cash flow model.Accounts Payable and Accrued Liabilities

Accrued liabilities consisted of the following as of December 31, 2018 and 2017 (in thousands):

	2018		2017
Compensation and employee benefits	$	99,884	$	87,003
Interest	42,450		42,794
Deferred revenue	83,270		49,522
Programming related obligations	79,685		89,728
Accounts payable and other accruals relating to operating expenses	107,938		101,356
Total accounts payable and accrued liabilities	$	413,227	$	370,403

We expense these activities when incurred and recognize deferred revenue when earned.Income Taxes

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities.  We provide a valuation allowance for deferred tax assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized.  In evaluating our ability to realize net deferred tax assets, we consider all available evidence, both positive and negative, including our past operating results, tax planning strategies and forecasts of future taxable income.  In considering these sources of taxable income, we must make certain judgments that are based on the plans and estimates used to manage our underlying businesses on a long-term basis. As of December 31, 2018 and 2017, a valuation allowance has been provided for deferred tax assets related to a substantial amount of our available state net operating loss carryforwards based on past operating results, expected timing of the reversals of existing temporary book/tax basis differences, alternative tax strategies and projected future taxable income.  Future changes in operating and/or taxable income or other changes in facts and circumstances could significantly impact the ability to realize our deferred tax assets which could have a material effect on our consolidated financial statements.

Management periodically performs a comprehensive review of our tax positions and we record a liability for unrecognized tax benefits when such tax positions do not meet the “more-likely-than-not” threshold.  Significant judgment is required in determining whether a tax position meets the “more-likely-than-not” threshold, and it is based on a variety of facts and circumstances, including interpretation of the relevant federal and state income tax codes, regulations, case law and other authoritative pronouncements.  Based on this analysis, the status of ongoing audits and the expiration of applicable statute of limitations, liabilities are adjusted as necessary.  The resolution of audits is unpredictable and could result in tax liabilities that are significantly higher or lower than for what we have provided.  See Note 10. Income Taxes, for further discussion of accrued unrecognized tax benefits.

The Company recognized the estimated income tax effects of the Tax Cut and Jobs Act in the 2017 financial statements in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the Tax Act was enacted. As of December 31, 2018, the Company has completed its accounting for the tax effects of enactment of the Tax Act.   The Company has recognized a benefit of $4.3 million from adjustments to the provisional amounts recorded at December 31, 2017 related to the revaluation of deferred balances resulting from the reduction of the corporate income tax rate from 35% to 21%.  This adjustment has been recorded as a component of income tax expense from continuing operationsSupplemental Information — Statements of Cash Flows

During the years ended December 31, 2018, 2017, and 2016, we had the following cash transactions (in thousands):

	2018		2017		2016
Income taxes paid	$	16,928	$	128,168	$	108,347
Income tax refunds	$	413	$	1,508	$	12,193
Interest paid	$	284,691	$	203,800	$	191,117

Non-cash investing activities included property and equipment purchases of $10.6 million, $9.5 million, and $5.9 million for the years ended December 31, 2018, 2017, and 2016, respectively.Revenue Recognition

On January 1, 2018, we adopted ASC 606 using the retrospective adoption method. The following table presents the effects of adoption on our consolidated financial statements for the comparative periods presented (in thousands):

	For the years ended
	December 31, 2017							December 31, 2016
	As Reported		Adoption of ASC 606			As Adjusted		As Reported		Adoption of ASC 606			As Adjusted
Revenues realized from station barter arrangements (a)	$	120,963	$	(97,903	)	$	23,060	$	135,566	$	(114,439	)	$	21,127
Expenses realized from barter arrangements (b)	$	98,973	$	(97,903	)	$	1,070	$	116,954	$	(114,439	)	$	2,515
Operating income	$	737,506	$	—		$	737,506	$	602,853	$	—		$	602,853
Net income	$	576,013	$	—		$	576,013	$	245,301	$	—		$	245,301
Basic EPS	$	5.77	$	—		$	5.77	$	2.62	$	—		$	2.62
Diluted EPS	$	5.72	$	—		$	5.72	$	2.60	$	—		$	2.60

(a) The remaining balance in the "as adjusted" column relates to trade revenue, which was unaffected by the adoption and has been reclassified to media revenue.

(b) The remaining balance in the "as adjusted" column relates to trade expense, which was unaffected by the adoption and has been reclassified to media production expense.

The following table presents our revenue disaggregated by type and segment (in thousands):

For the year ended December 31, 2018	Broadcast		Other		Total
Advertising revenue	$	1,484,188	$	75,539	$	1,559,727
Distribution revenue	1,185,800		112,827		1,298,627
Other media and non-media revenues	44,675		152,052		196,727
Total revenues	$	2,714,663	$	340,418	$	3,055,081
For the year ended December 31, 2017	Broadcast		Other		Total
Advertising revenue	$	1,314,999	$	54,402	$	1,369,401
Distribution revenue	1,032,838		107,012		1,139,850
Other media and non-media revenues	45,804		81,160		126,964
Total revenues	$	2,393,641	$	242,574	$	2,636,215
For the year ended December 31, 2016	Broadcast		Other		Total
Advertising revenue	$	1,480,157	$	28,176	$	1,508,333
Distribution revenue	890,554		65,382		955,936
Other media and non-media revenues	46,274		111,967		158,241
Total revenues	$	2,416,985	$	205,525	$	2,622,510

Advertising Revenue. We generate advertising revenue primarily from the sale of advertising spots/impressions on our broadcast television and digital platforms. Advertising revenue is recognized in the period in which the advertising spots/impressions are delivered. In arrangements where we provide audience ratings guarantees, to the extent that there is a ratings shortfall, we will defer a proportionate amount of revenue until the ratings shortfall is settled through the delivery of additional advertising. The term of our advertising arrangements is generally less than one year and the timing between when an advertisement is aired and when payment is due is not significant. In certain circumstances, we require customers to pay in advance; payments received in advance of satisfying our performance obligations are reflected as deferred revenue.

Distribution Revenue. We generate distribution revenue through fees received from MVPDs, vMVPDs, and OTT providers for the right to distribute our broadcast channels and cable networks on their distribution platforms. Distribution arrangements are generally governed by multi-year contracts and the underlying fees are based upon a contractual monthly rate per subscriber. These arrangements represent licenses of intellectual property; revenue is recognized as the signal is provided to our customers (as usage occurs) which corresponds with the satisfaction of our performance obligation. Revenue is calculated based upon the contractual rate multiplied by an estimated number of subscribers. Our customers will remit payments based upon actual subscribers a short time after the conclusion of a month, which generally does not exceed 90 days. Historical adjustments to subscriber estimates have not been material.

Practical Expedients and Exemptions. We expense sales commissions when incurred because the period of benefit for these costs is one year or less. These costs are recorded within media selling, general and administrative expenses. In accordance with ASC 606, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) distribution arrangements which are accounted for as a sales/usage based royalty.

Arrangements with Multiple Performance Obligations. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price, which is generally based on the prices charged to customers.

Deferred Revenues. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. Deferred revenues were $83.3 million, $49.5 million, and $31.7 million as of December 31, 2018, 2017, and 2016, respectively. The increase in deferred revenues was primarily driven by amounts received or due in advance of satisfying our performance obligations, offset by $38.8 million and $22.3 million of revenues recognized that were included in the deferred revenues balance as of December 31, 2017 and 2016, respectively.Advertising ExpensesPromotional advertising expenses are recorded in the period when incurred and are included in media production and other non-media expenses.  Total advertising expenses, net of advertising co-op credits, were $19.2 million, $20.6 million, and $18.5 million for the years ended December 31, 2018, 2017, and 2016, respectively.Financial InstrumentsFinancial instruments, as of December 31, 2018 and 2017, consisted of cash and cash equivalents, trade accounts receivable, accounts payable, accrued liabilities, and notes payable.  The carrying amounts approximate fair value for each of these financial instruments, except for the notes payable.  See Note 16. Fair Value Measurements for additional information regarding the fair value of notes payable.Post-retirement Benefits

We maintain a supplemental executive retirement plan (SERP) which we inherited upon the acquisition of certain stations. As of December 31, 2018, the estimated projected benefit obligation was $19.2 million, of which $1.6 million is included in accrued expenses in the consolidated balance sheet and $17.6 million is included in other long-term liabilities.  At December 31, 2018, the projected benefit obligation was measured using a 4.11% discount rate compared to a discount rate of 3.46% for the year ended December 31, 2017. During the years ended December 31, 2018 and 2017, we made $1.7 million and $1.8 million in benefit payments and recognized $1.3 million of actuarial gains and $1.0 million of actuarial losses through other comprehensive income, respectively. For both years ended December 31, 2018 and 2017, we recognized $0.8 million of periodic pension expense, reported in other expense in the consolidated statements of operations.

We also maintain other post-retirement plans provided to certain employees. The plans are voluntary programs that primarily allow participants to defer eligible compensation and they may also qualify to receive a discretionary match on their deferral. As of December 31, 2018, the assets and liabilities included on our consolidated balance sheet related to deferred compensation plans were $26.0 million and $24.1 million, respectively.ReclassificationsCertain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s presentation.