STOCK-BASED COMPENSATION PLANS:

12 Months Ended

Dec. 31, 2011

STOCK-BASED COMPENSATION PLANS:

STOCK-BASED COMPENSATION PLANS:

2.STOCK-BASED COMPENSATION PLANS:

Description of Awards

We have seven types of stock-based compensation awards: compensatory stock options (options), restricted stock awards (RSAs), an employee stock purchase plan (ESPP), employer matching contributions (the Match) for participants in our 401(k) plan, stock-settled appreciation rights (SARs), subsidiary stock awards and stock grants to our non-employee directors.  Stock-based compensation expense has no effect on our consolidated cash flows.  Below is a summary of the key terms and methods of valuation of our stock-based compensation awards:

Options.  In June 1996, our Board of Directors adopted, upon approval of the shareholders by proxy, the 1996 Long-Term Incentive Plan (LTIP).  The purpose of the LTIP is to reward key individuals for making major contributions to our success and the success of our subsidiaries and to attract and retain the services of qualified and capable employees.  Options granted pursuant to the LTIP must be exercised within 10 years following the grant date.  A total of 14,000,000 shares of Class A Common Stock are reserved for awards under this plan.  As of December 31, 2011, 9,955,309 shares (including forfeited shares) were available for future grants.  We have not issued any options subsequent to accelerating the vesting in 2005.

The following is a summary of changes in outstanding stock options:

	Options		Weighted-Average Exercise Price		Exercisable	Weighted-Average Exercise Price
Outstanding at December 31, 2010	300,500		$	10.81	300,500	$	10.81
2011 Activity:
Granted	—		—		—	—
Exercised	(113,450	)	12.12		—	—
Cancelled	(8,050	)	11.09		—	—
Outstanding at December 31, 2011	179,000		$	11.69	179,000	$	11.69

RSAs.  RSAs are granted to employees pursuant to the LTIP.  RSAs issued in 2011 and 2010 have certain restrictions that lapse over two years at 50% and 50%, respectively.  RSAs issued prior to 2010 have certain restrictions that lapse over three years at 25%, 25% and 50%, respectively.  As the restrictions lapse, the Class A Common Stock may be freely traded on the open market.  Unvested RSAs are entitled to dividends.  The fair value assumes the value of the stock on the trading date immediately prior to the grant date.

The following is a summary of changed in unvested restricted stock:

	RSAs		Weighted-Average Price
Unvested shares at December 31, 2010	220,750		$	6.44
2011 Activity:
Granted	91,000		12.07
Vested	(134,250	)	6.88
Forfeited	(3,000	)	9.96
Unvested shares at December 31, 2011	174,500		$	8.97

For the years ended December 31, 2011, 2010 and 2009, we recorded compensation expense of $1.0 million, $0.8 million and $0.6 million, respectively. The majority of the unrecognized compensation expense of $0.7 million, as of December 31, 2011, will be recognized in 2012.

ESPP.  In March 1998, the Board of Directors adopted, subject to approval of the shareholders, the ESPP.  The ESPP provides our employees with an opportunity to become shareholders through a convenient arrangement for purchasing shares of Class A Common Stock.  On the first day of each payroll deduction period, each participating employee receives options to purchase a number of shares of our common stock with money that is withheld from his or her paycheck. The number of shares available to the participating employee is determined at the end of the payroll deduction period by dividing the total amount of money withheld during the payroll deduction period by the exercise price of the options (as described below). Options granted under the ESPP to employees are automatically exercised to purchase shares on the last day of the payroll deduction period unless the participating employee has, at least thirty days earlier, requested that his or her payroll contributions stop.  Any cash accumulated in an employee’s account for a period in which an employee elects not to participate is distributed to the employee.

The initial exercise price for options under the ESPP is 85% of the lesser of the fair market value of the common stock as of the first day of the quarter and as of the last day of that quarter. No participant can purchase more than $25,000 worth of our common stock over all payroll deduction periods ending during the same calendar year.  We value the stock options under the ESPP using the Black-Scholes option pricing model, which incorporates the following assumptions as of December 31, 2011, 2010 and 2009:

	2011	2010	2009
Risk-free interest rate	0.4%	0.3%	0.3%
Expected life	3 months	3 months	3 months
Expected volatility	38%-67%	64%-88%	94%-137%
Weighted average volatility	51%	77%	106%
Annual dividend yield	3.8%-6.6%	—	—
Weighted average dividend yield	5.4%	—	—

We use the Black-Scholes model as opposed to a lattice pricing model because employee exercise patterns are not relevant to this plan.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with short-term maturities that approximate the expected life of the options.  The expected life is based on the approximate number of days in the quarter assuming the option was issued on the first day of the quarter.  The expected volatility is based on our historical stock prices over the previous three month period.  The annual dividend yield is based on the annual dividend per share divided by the share price on the grant date.

The stock-based compensation expense recorded related to the ESPP for the years ended December 31, 2011, 2010 and 2009 was $0.1 million, $0.2 million and $0.3 million, respectively.  Less than 0.1 million shares were issued to employees during the year ended December 31, 2011.

Match.  The Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and Trust (the 401(k) Plan) is available as a benefit for our eligible employees.  Contributions made to the 401(k) Plan include an employee elected salary reduction amount, company-matching contributions (the Match) and an additional discretionary amount determined each year by the Board of Directors.  The Match and any additional discretionary contributions may be made using our Class A Common Stock if the Board of Directors so chooses.  Typically, we make the Match using our Class A Common Stock.

The value of the Match is based on the level of elective deferrals into the 401(k) plan.  The amount of shares of our Class A Common Stock used to make the Match is determined using the closing price on or about March 1st of each year for the previous calendar year’s Match.  The Match is discretionary and is equal to a maximum of 50% of elective deferrals by eligible employees, capped at 4% of the employee’s total cash compensation.  For the years ended December 31, 2011 and 2010, we recorded $1.3 million and $1.5 million, respectively, of compensation expense related to the Match. We did not make a 401(k) plan Match in 2009.

SARs.  On March 22, 2011, 300,000 SARs were granted to David Smith, our President and Chief Executive Officer, pursuant to the LTIP.  The base value of each SAR is $12.07 per share, which was the closing price of our Class A Common Stock on the grant date. The SARs had a grant date fair value of $2.2 million.  On March 12, 2010, 300,000 SARs were granted to David Smith, pursuant to the LTIP.  The base value of each SAR is $5.75 per share, which was the closing price of our Class A Common Stock on the grant date.  The SARs had a grant date fair value of $1.6 million.  No SARs were granted in 2009.  The SARs have a 10-year term and vest immediately.  We valued the SARs using the Black-Scholes model and the following assumptions:

	2011		2010
Risk-free interest rate	3.60	%	3.85	%
Expected life	10 years		10 years
Expected volatility	67.94	%	110.38	%
Annual dividend yield	2.27	%	0.00	%

For the years ended December 31, 2011 and 2010, we recorded compensation expense, at the grant date, of $2.2 million and $1.6 million, respectively, related to these grants.  In 2011, David Smith exercised 650,000 of his SARs for 237,947 shares.  During 2011 and 2010, these SARs increased the weighted average shares outstanding for purposes of determining dilutive earnings per share. During 2009, these SARs had no effect on the shares used in our diluted loss per share, as they were anti-dilutive.  As of December 31, 2011, 500,000 SARs were outstanding.

Subsidiary Stock Awards.  From time to time, we grant subsidiary stock awards to employees.  The subsidiary stock is typically in the form of a membership interest in a consolidated limited liability company, not traded on a public exchange and valued based on the estimated fair value of the subsidiary.  Fair value is typically estimated using discounted cash flow models and appraisals.  These stock awards vest immediately.  For the year ended December 31, 2011, we recorded compensation expense of $2.9 million related to these awards. We did not issue any subsidiary stock awards in 2010 or 2009.  During the year ended December 31, 2011, we purchased $2.5 million of subsidiary shares from noncontrolling interests.  These awards have no effect on the shares used in our basic and diluted earnings per share.

Stock Grants to Non-Employee Directors.  In addition to directors fees paid, on the date of each of our annual meetings of shareholders, each non-employee director receives a grant of shares of Class A Common Stock pursuant to the LTIP.  In 2011, 2010 and 2009, each non-employee director received 5,000 shares, respectively.  On June 3, 2011, June 3, 2010 and June 4, 2009, we granted 25,000 shares that had a fair value of $9.39 per share, 25,000 shares that had a fair value of $6.61 per share and 25,000 shares that had a fair value of $2.09 per share, respectively.  The fair value assumes the closing value of the stock on the date of grant.  We recorded an expense of $0.2 million for each of the years ended December 31, 2011 and 2010 and less than $0.1 million on the date of grant for the year ended December 31, 2009, respectively.  Additionally, these shares are included in the total shares outstanding, which results in a dilutive effect on our basic and diluted earnings (loss) per share.