1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries and VIEs for which we are the primary beneficiary. Noncontrolling interests 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.

Discontinued Operations

In accordance with Financial Accounting Standards Board’s (FASB) guidance on reporting assets held for sale, we reported the results of operations of our stations in Lansing, Michigan (WLAJ-TV) and Providence, Rhode Island (WLWC-TV), as discontinued operations in the consolidated statements of operations. Discontinued operations have not been segregated in the consolidated statements of cash flows and, therefore, amounts for certain captions will not agree with the accompanying consolidated statements of operations. The operating results of WLAJ-TV, which was sold effective March 1, 2013 for $14.4 million, and WLWC-TV, which was sold effective April 1, 2013 for $13.8 million, are not included in our consolidated results of operations from continuing operations for the three and nine months ending September 30, 2013. Total revenues for WLAJ-TV and WLWC-TV, which are included in discontinued operations for the nine months ending September 30, 2013, were $0.6 million and $1.6 million, respectively. Total income before taxes for WLAJ-TV and WLWC-TV, which are included in discontinued operations for the nine months ending September 30, 2013, are $0.2 million and $0.4 million, respectively. The resulting gain on the sale of these stations in 2013 was negligible. Basic and diluted earnings per share from discontinued operations was less than $0.01 per share for the quarter ended September 30, 2013.

Assets Held for Sale

As discussed in Note 3. Commitments and Contingencies - Pending Acquisitions, we expect to sell the license and certain related assets of our stations in Tampa, FL - WTTA (MNT), and Colorado Springs, CO — KXRM (FOX) / KXTU (CW).

In accordance with Financial Accounting Standards Board’s (FASB) guidance on reporting assets held for sale, we reported our assets and liabilities related to WTTA and KXRM/KXTU as held for sale in the accompanying consolidated balance sheet as of September 30, 2014. We expect the sale of the stations will occur in the fourth quarter of 2014. The results of operations of these stations are included within the results from continuing operations as the criteria for classification as discontinued operations was not met.

As of September 30, 2014, the major classes of assets and liabilities of the group reported as held for sale on the accompanying condensed consolidated balance sheet are shown below:

	September 30, 2014
Assets:
Program contract costs	$	3,626
Property and equipment	4,744
Goodwill	7,924
Broadcast licenses	45
Definite-lived intangible assets	24,509
Assets held for sale	$	40,848
Liabilities:
Program contracts payable	$	4,310
Liabilities held for sale	$	4,310

Interim Financial Statements

The consolidated financial statements for the three and nine months ended September 30, 2014 and 2013 are unaudited. In the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income, consolidated statement of equity (deficit) and consolidated statements of cash flows for these periods as adjusted for the adoption of recent accounting pronouncements discussed below.

As permitted under the applicable rules and regulations of the Securities and Exchange Commission (SEC), the consolidated financial statements do not include all disclosures normally included with audited consolidated financial statements and, accordingly, should be read together with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC. The consolidated statements of operations presented in the accompanying consolidated financial statements are not necessarily representative of operations for an entire year.

Variable Interest Entities

In determining whether we are the primary beneficiary of a VIE for financial reporting purposes, we consider whether we have the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether we have the obligation to absorb losses or the right to receive returns that would be significant to the VIE. We consolidate VIEs when we are the primary beneficiary. The assets of each of our consolidated VIEs can only be used to settle the obligations of the VIE. All the liabilities are non-recourse to us except for certain debt of VIEs which we guarantee.

As of September 30, 2014, certain of our stations provide programming, sales and managerial services pursuant to LMAs to six of the Cunningham stations: WNUV-TV, WRGT-TV, WVAH-TV, WMYA-TV, WTTE-TV, and WDBB-TV (collectively, the Cunningham LMA Stations). We pay LMA fees to Cunningham and also reimburse all operating expenses. We also have executed acquisition agreements to buy the license assets of these television stations which includes the FCC license and certain other assets used to operate the station (License Assets). Our applications to acquire these FCC license related assets are pending FCC approval. We also perform sales and other non-programming support services to two other stations owned by Cunningham (acquired in November 2013) pursuant to joint sales agreements (JSAs) and shared services agreements (SSAs). We have purchase options to acquire the license assets of these stations. We own the majority of the non-license assets of these Cunningham stations and we have guaranteed the debt related to the stations. We have determined that these stations are VIEs and that based on the terms of the agreements and the significance of our investment in the stations, we are the primary beneficiary of the variable interests because, subject to the ultimate control of the licensees, we have the power to direct the activities which significantly impact the economic performance of the VIEs through the services we provide and we absorb losses and returns that would be considered significant to the VIEs.

On July 31, 2014, we terminated the LMA with WTAT (FOX) in Charleston, SC and sold to Cunningham, the license owner of WTAT, the non-license assets related to this station. We no longer have any continuing involvement in the operations of this station. Up until third quarter of 2014, we had consolidated Cunningham Broadcasting Corporation (parent entity), in addition to their stations that we perform services for, as we had previously determined that it was a VIE because it had insufficient equity at risk. As of September 30, 2014, we concluded that Cunningham Broadcasting Corporation was no longer a VIE given its significant equity at risk in assets that we have no involvement with, and deconsolidated this entity, along with WTAT and WYZZ, a station that Cunningham acquired from us in November, with which we have no continuing involvement. As a result of the deconsolidation, we recorded the difference between the proceeds received from Cunningham for the sale of WTAT and WYZZ to additional paid in capital in the consolidated balance sheet, as well as reflected the noncontrolling interest deficit of the remaining Cunningham VIEs which represents their significant cumulative distributions made to Cunningham that were previously eliminated in consolidation. See Note 6. Related Person Transactions for more information on our arrangements with Cunningham. The net revenues of the stations which we consolidated were $26.0 million and $25.9 million for the three months ended September 30, 2014 and 2013, respectively. The net revenues of the stations which we consolidate were $82.5 million and $80.3 million for the nine months ended September 30, 2014 and 2013, respectively. The fees paid between us and Cunningham pursuant to these arrangements are eliminated in consolidation. See Changes in the Rules of Television Ownership and Joint Sale Agreements in Note 3. Commitment and Contingencies for discussion of recent changes in FCC rules related to JSAs.

We have certain LMAs and outsourcing agreements, including certain JSAs and SSAs, with certain other license owners under which we provide certain non-programming related sales, operational and administrative services, and programming for these LMAs. The terms of the agreements vary, but generally have initial terms of over five years with several optional renewal terms. We own the majority of the non-license assets of these stations and in certain cases have guaranteed the debt of the licensee. We also have purchase options to buy the assets of the licensees. We have determined that these licensees (19 and 13 licenses as of September 30, 2014 and 2013, respectively) are VIEs, and, based on the terms of the agreements and the significance of our investment in the stations, we are the primary beneficiary of the variable interests because, subject to the ultimate control of the licensees, we have the power to direct the activities which significantly impact the economic performance of the VIE through the services we provide and because we absorb losses and returns that would be considered significant to the VIEs. The net revenues of these stations which we consolidate were $42.9 million and $31.9 million for the three months ended September 30, 2014 and 2013, respectively. The net revenues of these stations which we consolidate were $124.7 million and $90.1 million for the nine months ended September 30, 2014 and 2013, respectively. The fees paid between us and other license owners pursuant to these arrangements are eliminated in consolidation. See Changes in the Rules of Television Ownership and Joint Sale Agreements in Note 3. Commitment and Contingencies for discussion of recent changes in FCC rules related to JSAs.

As of the dates indicated, the carrying amounts and classification of the assets and liabilities of the VIEs mentioned above which have been included in our consolidated balance sheets for the periods presented (in thousands):

	September 30, 2014		December 31, 2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,891	$	4,916
Accounts receivable	17,426		18,468
Current portion of program contract costs	12,207		10,725
Prepaid expenses and other current assets	1,627		247
Total current assets	34,151		34,356

PROGRAM CONTRACT COSTS, less current portion	6,786		5,075
PROPERTY AND EQUIPMENT, net	10,389		11,081
GOODWILL	800		6,357
BROADCAST LICENSES	16,860		16,768
DEFINITE-LIVED INTANGIBLE ASSETS, net	90,702		97,496
OTHER ASSETS	1,212		22,935
Total assets	$	160,900	$	194,068
LIABILITIES
CURRENT LIABILITIES:
Accounts payable	$	892	$	86
Accrued liabilities	3,969		2,536
Current portion of notes payable, capital leases and commercial bank financing	3,484		5,731
Current portion of program contracts payable	10,502		11,552
Total current liabilities	18,847		19,905

LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion	27,553		49,850
Program contracts payable, less current portion	9,933		6,597
Long term liabilities	9,705		10,838
Total liabilities	$	66,038	$	87,190

The amounts above represent the consolidated assets and liabilities of the VIEs described above, for which we are the primary beneficiary, and have been aggregated as they all relate to our broadcast business. Excluded from the amounts above are payments made to the Cunningham VIEs under the LMAs, a portion of which is treated as a prepayment of the purchase price of the stations, and capital leases between us and Cunningham VIEs which are eliminated in consolidation. The total cumulative payments made under these LMAs as of September 30, 2014 and December 31, 2013, which are excluded from liabilities above, were $33.5 million and $32.4 million, respectively. The total capital lease liabilities excluded from above were $8.7 and $11.2 as of September 30, 2014 and as of December 31, 2013, respectively. Also excluded from the amounts above are liabilities associated with the certain LMAs and outsourcing agreements and purchase options with certain VIEs totaling $67.2 million and $59.9 million as of September 30, 2014 and December 31, 2013, respectively, as these amounts are eliminated in consolidation. The risk and reward characteristics of the VIEs are similar.

We have investments in other real estate ventures and investment companies which are considered VIEs. However, we do not participate in the management of these entities including the day-to-day operating decisions or other decisions which would allow us to control the entity, and therefore, we are not considered the primary beneficiary of these VIEs. We account for these entities using the equity or cost method of accounting.

The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary as of September 30, 2014 and December 31, 2013 was $24.2 million and $26.7 million, respectively, which are included in other assets in the consolidated balance sheets. Our maximum exposure is equal to the carrying value of our investments. The income and loss related to these investments are recorded in income from equity and cost method investments in the consolidated statement of operations. We recorded income of $2.2 million and $3.1 million in the three and nine months ended September 30, 2014 and $0.7 million and $1.4 million in the three and nine months ended September 30 2013, respectively.

Recent Accounting Pronouncements

In April 2014, the FASB issued new guidance that changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of and represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. Under the revised guidance, it is less likely for any future sales of assets, asset groups, or stations to be considered discontinued operations because such sales would need to represent a strategic shift and have a major effect on our future operations. Historically, under the previous guidance, sales of minor components of our business were required to be classified as discontinued operations. We early adopted this new guidance effective July 1, 2014. If this guidance were effective for the 2013 discontinued operations discussed in Discontinued Operations, then the sale of those stations would not have met the criteria under the new guidance.

In May 2014, the FASB issued new guidance on revenue recognition for revenue from contracts with customers. 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 will replace most existing revenue recognition guidance when it becomes effective. This new standard is effective for annual reporting periods beginning after December 15, 2016. Early application is not permitted and the standard permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the impact of this requirement on our financial statements.

In August 2014, the FASB issued guidance on disclosure of uncertainties about an entity’s ability to continue as a going concern. The new standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are currently evaluating the impact of this requirement on our financial statements.

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.

Restricted Cash

During 2014 and 2013, we entered into certain definitive agreements to purchase assets of certain stations discussed in Pending Acquisitions in Note 3. Commitment and Contingencies, which required certain deposits to be made into escrow accounts. As of September 30, 2014 and December 31, 2013, we held $104.3 million and $11.4 million, respectively, in restricted cash classified as noncurrent related to the amounts held in escrow for these acquisitions. Included in restricted cash as of September 30, 2014, are the proceeds from the sale of WHTM of $83.2 million, which is held in escrow for the pending acquisitions.

Revenue Recognition

Total revenues include: (i) cash and barter advertising revenues, net of agency commissions; (ii) retransmission consent fees; (iii) network compensation; (iv) other broadcast revenues and (v) revenues from our other operating divisions.

Advertising revenues, net of agency commissions, are recognized in the period during which time spots are aired.

Our retransmission consent agreements contain both advertising and retransmission consent elements. We have determined that our retransmission consent agreements are revenue arrangements with multiple deliverables. Advertising and retransmission consent deliverables sold under our agreements are separated into different units of accounting at fair value. Revenue applicable to the advertising element of the arrangement is recognized similar to the advertising revenue policy noted above. Revenue applicable to the retransmission consent element of the arrangement is recognized over the life of the agreement.

Network compensation revenue is recognized over the term of the contract. All other revenues are recognized as services are provided.

Share Repurchase Program

On October 28, 1999, we announced a $150.0 million share repurchase program, which was renewed on February 6, 2008. On March 20, 2014, the Board of Directors authorized an additional $150.0 million share repurchase authorization. There is no expiration date, and currently management has no plans to terminate this program. For the nine months ended September 30, 2014, we have purchased approximately 3.9 million shares for $108.5 million. For the three months ended September 30, 2014, we purchased 1.0 million shares for $26.1 million. As of September 30, 2014, the total remaining authorization was $159.0 million. In October 2014, we purchased an additional 0.9 million shares for $24.2 million.

Income Taxes

Our income tax provision for all periods consists of federal and state income taxes. The tax provision for the three and nine months ended September 30, 2014 and 2013 is based on the estimated effective tax rate applicable for the full year after taking into account discrete tax items and the effects of the noncontrolling interests. 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. A valuation allowance has been provided for deferred tax assets related to a substantial portion of our available state net operating loss (NOL) 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.

Our effective income tax rate for the three and nine months ended September 30, 2014 was less than the statutory rate primarily due to a reduction in liability for unrecognized tax benefits of $11.0 million in the third quarter, as a result of statute of limitations expiration.

Our effective income tax rate for the three months and nine months ended September 30, 2013 was lower than the statutory rate primarily due to: 1) a release of a valuation allowance related to state NOL carryforwards, of $5.3 million, net of taxes, due to a law change in a state tax jurisdiction, effective for years beginning after December 31, 2014, which we expect will significantly increase the forecasted future taxable income attributable to that state and result in utilization of the state NOL carryforwards and 2) a $2.2 million adjustment to the income tax provision upon finalization of the 2012 federal income tax return, primarily related to higher than originally projected available income tax deductions.

We believe it is reasonably possible that our liability for unrecognized tax benefits related to continuing operations could be reduced by up to $7.8 million, in the next twelve months, as a result of expected statute of limitations expirations, the application of limits under available state administrative practice exceptions, and the resolution of examination issues and settlements with federal and certain state tax authorities.

Reclassifications

Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s presentation.