-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WgnNBSAYR3LymZd80RQxis0imhXQRPn/2dLunvTK6BWtssqLwDg0QO0ZP7mJdDWd 44cuEJ3gyEaOFc0JXCc5CQ== 0001104659-08-068511.txt : 20081106 0001104659-08-068511.hdr.sgml : 20081106 20081106115059 ACCESSION NUMBER: 0001104659-08-068511 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081106 DATE AS OF CHANGE: 20081106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SINCLAIR BROADCAST GROUP INC CENTRAL INDEX KEY: 0000912752 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 521494660 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26076 FILM NUMBER: 081165941 BUSINESS ADDRESS: STREET 1: 10706 BEAVER DAM ROAD CITY: HUNT VALLEY STATE: MD ZIP: 21030 BUSINESS PHONE: 4105681500 MAIL ADDRESS: STREET 1: 10706 BEAVER DAM ROAD CITY: HUNT VALLEY STATE: MD ZIP: 21030 10-Q 1 a08-25593_110q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
	x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended September 30, 2008

OR

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to .

COMMISSION FILE NUMBER: 000-26076

SINCLAIR BROADCAST GROUP, INC.

(Exact name of Registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)		52-1494660 (I.R.S. Employer Identification No.)

10706 Beaver Dam Road Hunt Valley, Maryland 21030 (Address of principal executive offices, zip code)

(410) 568-1500

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Title of each class

Number of shares outstanding as of

November 3, 2008

Class A Common Stock

46,660,156

Class B Common Stock

34,453,859

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SINCLAIR BROADCAST GROUP, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2008

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS	3

	CONSOLIDATED BALANCE SHEETS	3

	CONSOLIDATED STATEMENTS OF OPERATIONS	4

	CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY	5

	CONSOLIDATED STATEMENTS OF CASH FLOWS	6

	NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	33

ITEM 4.	CONTROLS AND PROCEDURES	34

PART II. OTHER INFORMATION		35

ITEM 1.	LEGAL PROCEEDINGS	35

ITEM 1A.	RISK FACTORS	35

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35

ITEM 6.	EXHIBITS	36

SIGNATURE		37

EXHIBIT INDEX		38

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	As of September 30, 2008				As of December 31, 2007
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	11,646			$	20,980
Accounts receivable, net of allowance for doubtful accounts of $3,148 and $3,882, respectively	103,210				127,891
Affiliate receivable	59				15
Current portion of program contract costs	68,007				50,276
Income taxes receivable	19,214				16,228
Prepaid expenses and other current assets	9,818				13,448
Deferred barter costs	2,962				2,026
Deferred tax assets	7,752				7,752
Total current assets	222,668				238,616

PROGRAM CONTRACT COSTS, less current portion	29,003				32,683
PROPERTY AND EQUIPMENT, net	359,289				284,551
GOODWILL, net	1,016,028				1,010,594
BROADCAST LICENSES, net	402,844				401,130
DEFINITE-LIVED INTANGIBLE ASSETS, net	191,232				192,733
OTHER ASSETS	84,662				64,348
Total assets	$		2,305,726		$		2,224,655

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	4,687			$	3,732
Accrued liabilities	70,555				82,374
Current portion of notes payable, capital leases and commercial bank financing	58,209				42,950
Current portion of notes and capital leases payable to affiliates	2,069				3,839
Current portion of program contracts payable	105,434				90,208
Deferred barter revenues	2,968				2,143
Total current liabilities	243,922				225,246

LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion	1,303,747				1,274,386
Notes payable and capital leases to affiliates, less current portion	32,312				23,174
Program contracts payable, less current portion	80,973				79,985
Deferred tax liabilities	345,608				313,364
Other long-term liabilities	51,971				52,659
Total liabilities	2,058,533				1,968,814

MINORITY INTEREST IN CONSOLIDATED ENTITIES	17,014				3,067

SHAREHOLDERS’ EQUITY:
Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 50,459,659 and 52,830,025 shares issued and outstanding, respectively	505				528
Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 34,453,859 shares issued and outstanding, respectively, convertible into Class A Common Stock	345				345
Additional paid-in capital	601,552				614,156
Accumulated deficit	(370,539			)	(360,324			)
Accumulated other comprehensive loss	(1,684			)	(1,931			)
Total shareholders’ equity	230,179				252,774
Total liabilities and shareholders’ equity	$		2,305,726		$		2,224,655

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data) (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
REVENUES:
Station broadcast revenues, net of agency commissions	$	150,119		$	149,425		$	474,758		$	456,972
Revenues realized from station barter arrangements	14,562			14,786			45,048			44,218
Other operating divisions’ revenues	13,510			12,488			38,657			18,841
Total revenues	178,191			176,699			558,463			520,031

OPERATING EXPENSES:
Station production expenses	38,959			35,741			118,226			109,556
Station selling, general and administrative expenses	33,867			33,711			102,498			101,357
Expenses recognized from station barter arrangements	12,760			13,317			40,394			39,995
Amortization of program contract costs and net realizable value adjustments	21,744			29,172			63,247			73,528
Other operating divisions’ expenses	13,397			11,227			40,076			18,852
Depreciation of property and equipment	11,700			10,554			33,812			32,660
Corporate general and administrative expenses	5,919			5,497			20,123			18,888
Amortization of definite-lived intangible assets and other assets	4,606			4,546			13,692			13,032
Gain on asset exchange	(2,163		)	—			(2,163		)	—
Impairment of goodwill	—			—			1,626			—
Total operating expenses	140,789			143,765			431,531			407,868
Operating income	37,402			32,934			126,932			112,163

OTHER INCOME (EXPENSE):
Interest expense and amortization of debt discount and deferred financing costs	(19,075		)	(21,897		)	(58,759		)	(74,166		)
Interest income	224			89			599			2,178
(Loss) gain from sale of assets	(3		)	(30		)	48			(38		)
Gain (loss) from extinguishment of debt	432			(68		)	146			(30,716		)
Gain from derivative instruments	—			1,897			999			1,300
Gain (loss) from equity and cost method investments	658			711			(118		)	(181		)
Other income, net	1,441			268			2,832			944
Total other expense	(16,323		)	(19,030		)	(54,253		)	(100,679		)
Income from continuing operations before income taxes	21,079			13,904			72,679			11,484
INCOME TAX PROVISION	(9,386		)	(4,327		)	(31,342		)	(2,317		)
Income from continuing operations	11,693			9,577			41,337			9,167
DISCONTINUED OPERATIONS:
(Loss) income from discontinued operations, net of related income tax provision of $187, $436, $232 and $176, respectively	(38		)	324			9			542
NET INCOME	$	11,655		$	9,901		$	41,346		$	9,709

BASIC AND DILUTED EARNINGS PER COMMON SHARE:
Earnings per share from continuing operations	$	0.14		$	0.11		$	0.48		$	0.11
Earnings per share from discontinued operations	$	—		$	—		$	—		$	0.01
Earnings per share	$	0.14		$	0.11		$	0.48		$	0.11
Weighted average common shares outstanding	86,158			87,175			86,951			86,816
Weighted average common and common equivalent shares outstanding	86,158			87,227			86,955			86,949
Dividends declared per share	$	0.20		$	0.15		$	0.60		$	0.45

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

(In thousands) (Unaudited)

	Class A Common Stock			Class B Common Stock		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity

BALANCE, December 31, 2007	$	528		$	345	$	614,156		$	(360,324	)	$	(1,931	)	$	252,774
Dividends declared on Class A and Class B Common Stock	—			—		—			(51,561		)	—			(51,561		)
Class A Common Stock issued pursuant to employee benefit plans	4			—		3,614			—			—			3,618
Tax benefit on employee stock awards	—			—		34			—			—			34
Amortization of net periodic pension benefit costs	—			—		—			—			247			247
Repurchase of 2,741,145 shares of Class A Common Stock	(27		)	—		(16,252		)	—			—			(16,279		)
Net income	—			—		—			41,346			—			41,346
BALANCE, September 30, 2008	$	505		$	345	$	601,552		$	(370,539	)	$	(1,684	)	$	230,179

Other comprehensive income:
Net income	$	—		$	—	$	—		$	41,346		$	—		$	41,346
Amortization of net periodic pension benefit costs	—			—		—			—			247			247
Comprehensive income	$	—		$	—	$	—		$	41,346		$	247		$	41,593

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

	Nine Months Ended September 30,
	2008			2007
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income	$	41,346		$	9,709
Adjustments to reconcile net income to net cash flows from operating activities:
Amortization of debt discount, net of debt premium	2,412			1,904
Depreciation of property and equipment	34,004			32,964
Gain on asset exchange	(2,163		)	—
Recognition of deferred revenue	(24,058		)	(13,939		)
Accretion of capital leases	648			693
Loss from equity and cost method investments	118			181
(Gain) loss on sale of property	(48		)	38
Gain from derivative instruments	(999		)	(1,300		)
Impairment of intangibles	1,626			—
Amortization of definite-lived intangible assets and other assets	13,692			13,319
Amortization of program contract costs and net realizable value adjustments	63,247			73,686
Amortization of deferred financing costs	3,044			2,337
Stock-based compensation	5,454			3,129
Excess tax benefits on employee stock awards	(34		)	(1,851		)
Loss on extinguishment of debt, non-cash portion	1,160			3,431
Amortization of derivative instruments	(423		)	691
Amortization of net periodic pension benefit costs	144			178
Deferred tax provision related to operations	30,984			15,850
Deferred tax provision related to discontinued operations	—			955
Net effect of change in deferred barter revenues and deferred barter costs	(111		)	(173		)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease in accounts receivable, net	25,677			11,912
Increase in income taxes receivable	(2,986		)	(11,438		)
Decrease in prepaid expenses and other current assets	3,840			4,153
(Increase) decrease in other assets	(1,410		)	489
Increase in accounts payable and accrued liabilities	6,382			4,706
Decrease in other long-term liabilities	(1,028		)	(3,164		)
(Decrease) increase in minority interest	(2,059		)	151
Dividends and distributions from equity and cost method investees	1,146			1,577
Payments on program contracts payable	(61,111		)	(59,062		)
Real estate held for development and sale	(398		)	—
Net cash flows from operating activities	138,096			91,126
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of property and equipment	(21,684		)	(13,881		)
Consolidation of variable interest entity	1,328			—
Purchase of alarm monitoring contracts	(6,080		)	—
Payments for acquisition of television stations	(17,123		)	—
Payments for acquisitions of other operating divisions’ companies	(53,487		)	(34,075		)
Dividends and distributions from cost method investees	1,575			583
Investments in equity and cost method investees	(31,183		)	(111		)
Proceeds from the sale of assets	177			678
Loans to affiliates	(136		)	(118		)
Proceeds from loans to affiliates	135			118
Net cash flows used in investing activities	(126,478		)	(46,806		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	233,227			725,216
Repayments of notes payable, commercial bank financing and capital leases	(192,996		)	(793,214		)
Repurchase of Class A Common Stock	(16,279		)	—
Proceeds from exercise of stock options, including excess tax benefits of $34 and $1,851, respectively	—			13,379
Dividends paid on Class A and Class B Common Stock	(49,874		)	(36,534		)
Payments for deferred financing costs	(520		)	(6,983		)
Proceeds from derivative terminations	8,001			—
Repayments of notes and capital leases to affiliates	(2,511		)	(3,149		)
Net cash flows used in financing activities	(20,952		)	(101,285		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(9,334		)	(56,965		)
CASH AND CASH EQUIVALENTS, beginning of period	20,980			67,408
CASH AND CASH EQUIVALENTS, end of period	$	11,646		$	10,443

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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SINCLAIR BROADCAST GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 variable interest entities for which we are the primary beneficiary. Minority interest represents a minority owner’s proportionate share of the equity in certain of our consolidated entities. All significant intercompany transactions and account balances have been eliminated in consolidation.

Discontinued Operations

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we have reported the results of operations of WGGB-TV in Springfield, Massachusetts as assets and liabilities held for sale in the accompanying consolidated statements of operations. Discontinued operations have not been segregated in the consolidated statements of cash flows; therefore, amounts for certain captions will not agree with the accompanying consolidated statements of operations. The operating results of WGGB-TV are not included in our consolidated results from continuing operations for the three and nine months ended September 30, 2008 and 2007. See Note 8. Discontinued Operations, for additional information.

Interim Financial Statements

The consolidated financial statements for the three and nine months ended September 30, 2008 and 2007 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 presentation of the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows for these periods.

As permitted under the applicable rules and regulations of the Securities and Exchange Commission, 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, 2007 filed with the Securities and Exchange Commission. The consolidated statements of operations presented in the accompanying consolidated financial statements are not necessarily representative of operations for an entire year.

Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement). This FSP requires issuers of convertible debt instruments that may be settled in cash upon conversion to account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. Issuers will need to determine the carrying value of just the liability portion of the debt by measuring the fair value of a similar liability (including any embedded features other than the conversion option) that does not have an associated equity component. The excess of the initial proceeds received from the debt issuance and the fair value of the liability component should be recorded as a debt discount with the offset recorded to equity. The discount will be amortized to interest expense using the interest method over the life of a similar liability that does not have an associated equity component. Transaction costs incurred with third parties shall be allocated between the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively, with the debt issuance costs amortized to interest expense. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is not permitted. This statement should be applied retrospectively to all periods presented as of the beginning of the first period presented with an offsetting adjustment to the opening balance of retained earnings. In 2009, we will record the impact of this FSP retrospectively by recording additional interest expense on our 3% Convertible Senior Notes, due 2027 of approximately $6.4 million for the year ended December 31, 2007 and approximately $9.9 million for the year ended December 31, 2008. We expect to record additional interest expense of approximately $12.1 million and $4.5 million in the years ended December 31, 2009 and 2010, respectively.

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No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,’ to Certain Convertible Instruments, and FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The Issue requires that an entity: (a) apply the guidance in this issue to its first fiscal year beginning after December 15, 2008; (b) recognize the effect of the change retrospectively, with the cumulative effect of the change recognized as an adjustment to the opening balance of retained earnings for the earliest period presented; and (c) include disclosures as required for a change in accounting principle by FASB Statement No. 154. We do not expect the impact of this issue to have a material effect on our consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. This FSP clarifies that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities as defined in EITF 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128 and should therefore be included in the computation of earnings per share. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. In addition, all prior period earnings per share data shall be adjusted retrospectively. We are currently evaluating the impact of this FSP on our consolidated financial statements.

In June 2008, the EITF issued Issue No. 07-5, Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity’s Own Stock. This Issue requires that an entity use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. This Issue is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We are currently evaluating the impact of this Issue on our consolidated financial statements.

In September 2008, the EITF reached a consensus for exposure on Issue No. 08-6, Equity Method Investment Accounting Considerations. This Issue addresses the accounting for equity method investments as a result of the accounting changes prescribed by FAS 141(R) and FAS 160. The Issue includes clarification on the following: (a) transaction costs should be included in the initial carrying value of the equity method investment; (b) an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment need only be performed as part of any other-than-temporary impairment evaluation of the equity method investment as a whole and does not need to be performed annually; (c) the equity method investee’s issuance of shares should be accounted for as the sale of a proportionate share of the investment, which may result in a gain or loss in income, and d) a gain or loss should not be recognized when changing the method of accounting for an investment from the equity method to the cost method. This Issue will be effective for fiscal years beginning in 2009. We are currently evaluating the impact of this issue on our consolidated 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.

Acquisitions

In February 2008, we acquired the non-licensed assets of KFXA-TV in Cedar Rapids, Iowa for $17.0 million, net of cash acquired, and the right to purchase licensed assets, pending FCC approval, for $1.9 million. Our CBS affiliate in Cedar Rapids, KGAN-TV, provides sales and other non-programming related services to KFXA-TV pursuant to an outsourcing agreement. We have determined that based on the terms of the outsourcing agreement, the KFXA-TV licensed asset entity is a variable interest entity and that we are the primary beneficiary of variable interests. As a result, we consolidate the assets and liabilities of the non-licensed and licensed assets of KFXA-TV.

In March 2008, we acquired a 50% equity interest in Bay Creek South, LLC (Bay Creek). Bay Creek is a land development venture that primarily includes residential and commercial unimproved and improved land surrounding two golf courses on Virginia’s eastern shore. In conjunction with the equity investment, we purchased certain of Bay Creek’s outstanding debt that was used to finance improvements to and the development of land in the venture. Our total cash, debt and equity investment in Bay Creek, including transaction costs, was $35.2 million, net of cash acquired. Approximately $0.8 million of the $35.2 million investment was funded through the conversion of an existing bridge loan to a portion of the 50% equity interest. Based on our role as the day-to-day manager and our ability to control all major decisions of the venture, the accounts of Bay Creek are included in our consolidated balance sheet. Approximately $11.8 million of debt was assumed by us through the consolidation of Bay Creek; however, this debt was subsequently paid down to a zero balance at March 31, 2008. As of September 30, 2008, approximately $49.0 million of property, equipment, land inventory and intangibles were included in property and equipment, net in our consolidated balance sheet. Bay Creek is not material to our consolidated financial statements and we expect to finalize the purchase price allocation by the first quarter of 2009. Our cash investment is shown in the consolidated statement of cash flows as payments for acquisitions of other operating divisions’ companies.

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In June 2008, we acquired Jefferson Park Development, LLC (Jefferson Park) for $19.0 million. Jefferson Park is a mixed use land development project located in Frederick County, Maryland, a suburb of Washington, D.C. We consolidate the assets and liabilities of Jefferson Park as a result of our control over its operations.

In June 2008, we entered into an asset purchase agreement with Raycom Media, Inc. (Raycom) to acquire WTVR-TV, a CBS affiliate, in Richmond-Petersburg, Virginia for $85.0 million and simultaneously sell the license assets of WRLH-TV, a FOX affiliate, in Richmond, Virginia to an unrelated third party. In August 2008, the U.S. Department of Justice-Antitrust Division declined the approval of the acquisition of WTVR-TV due to a Consent Decree between Raycom and the Department of Justice (DOJ). Under the Consent Decree, which was entered into by Raycom to obtain DOJ approval of its earlier acquisition of three television stations from Lincoln Financial Media, any potential sale of WTVR could be rejected unilaterally by the DOJ without cause. Notwithstanding the action of the DOJ, we believe that this proposed transaction would not have violated the anit-trust laws. However, it appears that the acquisition of WTVR and the sale of the license assets of WRLH will not occur. We will continue to explore our rights under the asset purchase agreement with Raycom.

Investments

From time to time, we make equity and debt investments in non-broadcast assets. During first quarter 2008, we made a $6.0 million cash investment in Patriot Capital II, LP (Patriot Capital). Patriot Capital provides structured debt and mezzanine financing to small businesses. After the $6.0 million cash investment, our remaining unfunded commitment to Patriot Capital is $14.0 million. As of September 30, 2008, we made new investments of $23.2 million and add-on cash investments of $2.0 million primarily in real estate ventures. As of the filing date, in fourth quarter 2008, we made additional investments of $3.8 million in various real estate ventures.

Nonmonetary Asset Exchanges

In 2009, television broadcasters are required to cease transmitting their signals using the existing analog spectrum and begin transmitting in digital. This government mandate was established so that the analog frequencies can be freed up for use by public safety communications such as police, fire and emergency rescue. In 2004, Sprint Nextel Corporation (Nextel) also agreed to relocate its airwaves to end interference between its cellular signals and the wireless signals used by the country’s public safety agencies. As part of this agreement, the FCC granted Nextel the right to a certain spectrum within the 1.9 GHz band that is currently used by television broadcasters (the analog spectrum). Accordingly, Nextel has entered into agreements with several of our stations to exchange our existing analog equipment for comparable digital equipment. As equipment is exchanged and placed in service, we will record a gain to the extent that the fair market value of the equipment received exceeds the carrying amount of the equipment relinquished. The equipment will be recorded at the estimated fair market value and will be depreciated over a useful life of 8 years. In the third quarter of 2008, we recorded a gain of $2.2 million.

Goodwill Impairment

SFAS No. 142, Goodwill and Other Intangible Assets requires that goodwill be tested for impairment at the reporting unit level at least annually. We test for impairment by comparing the book value of our reporting units, including goodwill, to the estimated fair value of our reporting units. We estimate the fair value of our reporting units using a combination of observed earnings multiples, discounted cash flow models and appraisals. During the three months ended September 30, 2008, we did not record an impairment. During the nine months ended September 30, 2008, certain events led us to test our goodwill associated with an other operating division company, Acrodyne Communications, Inc. As a result of this testing, we recorded a $1.6 million impairment charge in our consolidated statements of operations.

Property and Equipment

As of September 30, 2008, approximately $94.1 million of our $359.3 million of net property and equipment consisted of real estate held for development and sale or for investment.

Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income, requires that entities present comprehensive income, which is the sum of net income and other comprehensive income, for each of the periods presented in the consolidated financial statements. Comprehensive income was $11.7 million and $10.0 million for the three months ended September 30, 2008 and 2007, respectively and $41.6 million and $9.9 million for the nine months ended September 30, 2008 and 2007, respectively.

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Reclassifications

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

2. STOCK-BASED COMPENSATION:

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 three and nine months ended September 30, 2008, we recorded compensation expense of $0.1 million and $2.5 million, respectively, related to these awards. We did not issue any subsidiary stock awards during the nine months ended September 30, 2007. This expense reduced our consolidated income, but had no effect on our consolidated cash flows. These awards have no effect on the shares used in our basic and diluted earnings per share.

On April 1, 2008, 350,000 stock-settled appreciation rights (SARs) were granted to David Smith, our President and Chief Executive Officer, pursuant to the 1996 Long-Term Incentive Plan. The SARs have a 10-year term and vest immediately. The base value of each SAR is $8.94 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 $0.5 million. We valued the SARs using the Black-Scholes model and the following assumptions:

Risk-free interest rate	4.25	%
Expected life	10 years
Expected volatility	46.10	%
Annual dividend yield	9.23	%

For the nine months ended September 30, 2008, we recorded expense of $0.5 million related to this grant. This expense reduced our consolidated income but had no effect on our consolidated cash flows.

3. COMMITMENTS AND CONTINGENCIES:

Litigation

We are a party to lawsuits and claims from time to time in the ordinary course of business. Actions currently pending are in various preliminary stages. After reviewing developments to date with legal counsel, our management is of the opinion that the outcome of our pending and threatened matters will not have a material adverse effect on our consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows.

FCC License Renewals

In April 2008, the FCC granted the license renewal application of WUXP-TV in Nashville, Tennessee. In July 2008, the FCC granted the renewal application of WVTV-TV in Milwaukee, Wisconsin. In August 2008, the FCC granted the renewal applications of WGME-TV in Portland, Maine; WMSN-TV in Madison, Wisconsin; WSYT-TV in Syracuse, New York; WUTV-TV in Buffalo, New York; WYZZ-TV in Peoria, Illinois; and WSTR-TV in Cincinnati, Ohio.

Under FCC rules, we have continuing authority to operate each of these stations for which we have a pending renewal application until the FCC takes final action on that application.

Other FCC Adjudicatory Proceedings

On October 12, 2004, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) in the amount of $7,000 per station to virtually every FOX station, including the 15 FOX affiliates presently licensed to us, the four FOX affiliates programmed by us and one FOX affiliate we sold in 2005. The NAL alleged that the stations broadcast indecent material contained in an episode of a FOX network program that aired on April 7, 2003. We, as well as other parties including the FOX network, filed oppositions to the NAL. On February 22, 2008, the FCC released an order assessing a $7,000 per station forfeiture against thirteen FOX stations, including KDSM-TV in Des Moines, Iowa, WZTV-TV in Nashville, Tennessee and WVAH-TV in Charleston, West Virginia, which we program pursuant to a Local Marketing Agreement (LMA). We did not pay the forfeiture for our stations. On March 24, 2008, we joined the FOX network and other FOX affiliates in filing a petition for reconsideration of the forfeiture order. On April 4, 2008, the FCC returned the petition without consideration based on the alleged failure to comply with a procedural rule. On

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April 21, 2008, we joined the FOX network and other FOX affiliates in seeking reconsideration of the FCC’s April 4, 2008 decision to return the petition for reconsideration. On April 4, 2008, the DOJ, on behalf of the FCC, sued several of the stations that had not paid the forfeiture amounts assessed by the FCC, including the two stations we own and WVAH-TV. Our stations and WVAH-TV paid the forfeiture assessments in April 2008. The proceedings initiated by the DOJ have been dismissed. The FOX network has agreed to indemnify its affiliates for the full amount of the forfeiture assessment paid.

4. SUPPLEMENTAL CASH FLOW INFORMATION:

During the nine months ended September 30, 2008 and 2007, our supplemental cash flow information was as follows (in thousands):

	Nine Months Ended September 30,
	2008		2007

Income taxes paid related to continuing operations	$	2,973	$	57
Income tax refunds received related to continuing operations	$	72	$	59
Income tax refunds received related to sale of discontinued operations	$	—	$	157
Interest paid	$	58,848	$	82,101
Premium payments related to extinguishment of debt	$	13	$	27,285
Debt assumed in conjunction with the acquisition of other operating divisions’ companies	$	—	$	7,400

Non-cash barter and trade expense are presented in the consolidated statements of operations. Non-cash transactions related to capital lease obligations were $10.0 million and less than $0.1 million for the nine months ended September 30, 2008 and 2007, respectively.

5. DERIVATIVE INSTRUMENTS:

We enter into derivative instruments primarily to reduce the impact of changing interest rates on our floating rate debt and to reduce the impact of changing fair market values on our fixed rate debt.

As of December 31, 2007, we had two remaining derivative instruments. Both of these instruments were interest rate swap agreements. One of these swap agreements, with a notional amount of $180.0 million and an expiration date of March 15, 2012, was accounted for as a fair value hedge in accordance with SFAS 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133); therefore, any changes in its fair market value are reflected as an adjustment to the carrying value of our 8.0% Senior Subordinated Notes, due 2012, which was the underlying debt being hedged. The interest we paid on the $180.0 million swap was variable based on the three-month LIBOR plus 2.28% and the interest we received was fixed at 8.0%. The other interest rate swap, with a notional amount of $120.0 million and an expiration date of March 15, 2012, was undesignated as a fair value hedge in 2006 due to a reassignment of the counterparty; therefore, any subsequent changes in the fair market value are reflected as an adjustment to income. The interest we paid on the $120.0 million swap was variable based on the three-month LIBOR plus 2.35% and the interest we received was fixed at 8.0%.

In February 2008, the counterparty to our swap agreements, elected to change the termination dates of the $180.0 million and $120.0 million swaps to March 25, 2008 and March 26, 2008, respectively. We received a termination fee of $3.2 million from the counterparty for the early termination of the $120.0 million swap. After the removal of the related $2.4 million derivative asset from our consolidated balance sheet, the resulting $0.8 million, along with $0.2 million of interest was recorded in gain from derivative instruments. We received a termination fee of $4.8 million from the counterparty for the early termination of the $180.0 million swap. In accordance with SFAS 133, the carrying value of the underlying debt was adjusted to reflect the $4.8 million termination fee and that amount is treated as a premium on the underlying debt that was being hedged and is amortized over its remaining life as a reduction to interest expense. The total termination fees received of $8.0 million are included in the cash flows from financing activities section of the consolidated statement of cash flows for the nine months ended September 30, 2008.

As of September 30, 2008, we had no derivative instruments other than embedded derivatives related to contingent cash interest features in our 4.875% Convertible Senior Notes, due 2018 and 3.0% Convertible Senior Notes, due 2027, which had negligible fair values.

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6. EARNINGS PER SHARE:

The following table reconciles income (numerator) and shares (denominator) used in our computations of earnings per share for the three and nine months ended September 30, 2008 and 2007 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2008			2007		2008		2007
Income (Numerator)
Income from continuing operations and numerator for diluted earnings per common share from continuing operations	$	11,693		$	9,577	$	41,337	$	9,167
(Loss) income from discontinued operations, including gain on sale of broadcast assets related to discontinued operations, net of taxes	(38		)	324		9		542
Numerator for diluted earnings per common share	$	11,655		$	9,901	$	41,346	$	9,709

Shares (Denominator)
Weighted-average common shares outstanding	86,158			87,175		86,951		86,816
Dilutive effect of outstanding stock options and restricted stock	—			52		4		133
Weighted-average common and common equivalent shares outstanding	86,158			87,227		86,955		86,949

We apply the treasury stock method to measure the dilutive effect of our outstanding stock options and restricted stock awards and include the respective common share equivalents in the denominator of the diluted EPS computation. For the three months ended September 30, 2008, our outstanding stock options and restricted stock awards were anti-dilutive; therefore, they were not included in the computation of diluted EPS. For the three and nine months ended September 30, 2008 and 2007, our 4.875% Convertible Senior Notes, due 2018, our 6.0% Convertible Debentures, due 2012, our 3.0% Convertible Senior Notes, due 2027 and our outstanding SARs were anti-dilutive; therefore, they were not included in the computation of diluted EPS. As of the filing date, in fourth quarter 2008, we repurchased 3.8 million shares of Class A Common Stock for $13.3 million, including transaction costs.

7. RELATED PERSON TRANSACTIONS:

David, Frederick, Duncan and Robert Smith (collectively, the controlling shareholders) are brothers and hold substantially all of the Class B Common Stock. During each of the periods presented in the accompanying consolidated financial statements, we engaged in transactions with them, their immediate family members and/or entities in which they have substantial interests (collectively, affiliates).

Certain assets used by us and our operating subsidiaries are leased from Cunningham Communications, Inc., Keyser Investment Group, Gerstell Development Limited Partnership and Beaver Dam, LLC (entities owned by the controlling shareholders). Lease payments made to these entities were $1.3 million for each of the three months ended September 30, 2008 and 2007. Lease payments made to these entities were $3.6 million and $4.0 million for the nine months ended September 30, 2008 and 2007, respectively.

In January 1999, we entered into a LMA with Bay Television, Inc. (Bay TV), which owns the television station WTTA-TV in Tampa, Florida. Our controlling shareholders own a substantial portion of the equity of Bay TV. The LMA provides that we deliver television programming to Bay TV, which broadcasts the programming in return for a monthly fee to Bay TV of $143,500. We must also make an annual payment equal to 50% of the adjusted annual broadcast cash flow of the station (as defined in the LMA) that is in excess of $1.7 million. The additional payment is reduced by 50% of the adjusted broadcast cash flow of the station that was below zero in prior calendar years until that amount is recaptured. An additional payment of $1.5 million was made during the nine months ended September 30, 2008 related to the excess adjusted broadcast cash flow for the year ended December 31, 2007. Lease payments made to Bay TV were $0.4 million for each of the three months ended September 30, 2008 and 2007 and $1.3 million for each of the nine months ended September 30, 2008 and 2007. We received $0.1 million for each of the three months ended September 30, 2008 and 2007 and $0.4 million for each of the nine months ended September 30, 2008 and 2007 from Bay TV for certain equipment leases.

We sold advertising time to and purchased vehicles and related vehicle services from Atlantic Automotive Corporation (Atlantic Automotive), a holding company which owns automobile dealerships and an automobile leasing company. David D. Smith, our President and Chief Executive Officer, has a controlling interest in, and is a member of the Board of Directors of Atlantic

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Automotive. Our stations in Baltimore, Maryland and Norfolk, Virginia received payments for advertising time from Atlantic Automotive totaling $0.1 million and $0.5 million for the three and nine months ended September 30, 2008, respectively. We received payments for advertising time from Atlantic Automotive totaling $0.2 million and $0.4 million for the three and nine months ended September 30, 2007, respectively. We paid $0.2 million and $0.7 million for vehicles and related vehicle services from Atlantic Automotive for the three and nine months ended September 30, 2008, respectively. We paid $0.2 million and $0.7 million for vehicles and related vehicle services from Atlantic Automotive for the three and nine months ended September 30, 2007, respectively.

Basil A. Thomas, a member of our Board of Directors, is the father of Steven A. Thomas, a partner and founder of Thomas & Libowitz, P.A. (Thomas & Libowitz), a law firm providing legal services to us on an ongoing basis. Basil A. Thomas also serves as a member of the board of directors of Thomas & Libowitz. We paid fees of $0.2 million and $0.1 million to Thomas & Libowitz for the three months ended September 30, 2008 and 2007, respectively. For the nine months ended September 30, 2008 and 2007, we paid fees of $0.8 million and $0.5 million to Thomas & Libowitz, respectively.

From time to time, we charter aircraft owned by certain controlling shareholders. We did not incur expenses related to aircraft for the three months ended September 30, 2008. We incurred $0.1 million for the nine months ended September 30, 2008 and less than $0.1 million for each of the three and nine months ended September 30, 2007.

In April 2008, we extended four of our LMAs with Cunningham Broadcasting Corporation (Cunningham) pursuant to which we will continue to provide programming to Cunningham to air on WTAT-TV in Charleston, South Carolina, WVAH-TV in Charleston, West Virginia, WRGT-TV in Dayton, Ohio and WMYA-TV in Anderson, South Carolina. We made payments to Cunningham under LMA agreements of $1.9 million for each of the three months ended September 30, 2008 and 2007, respectively and $5.7 million and $5.8 million for the nine months ended September 30, 2008 and 2007, respectively.

In September 2008, AP Management Company, the management company of Patriot Capital, entered into a lease agreement with Skylar Development LLC (Skylar), a subsidiary of one of our real estate ventures. The office space lease is for a term of five years and one month commencing on October 1, 2008.

As of September 30, 2008, Frederick Smith funded $0.2 million of his investment commitment of $0.5 million to Patriot Capital.

8. DISCONTINUED OPERATIONS:

WGGB Disposition

On July 31, 2007, we entered into an agreement to sell WGGB-TV, including the FCC license, to an unrelated third party for $21.2 million in cash. The FCC approved the transfer of the broadcast license and the sale was completed on November 1, 2007. We recorded $1.1 million, net of $0.5 million tax provision, as gain from discontinued operations in our consolidated statements of operations for the year ended December 31, 2007. The net cash proceeds were used in the normal course of operations and for capital expenditures.

Accounts receivable related to WGGB-TV is included in the accompanying consolidated balance sheets, net of allowance for doubtful accounts, for all periods presented. This is because we continue to own the rights to collect the amounts due to us through the closing date of the non-license television broadcast assets. As of September 30, 2008, there were no outstanding accounts receivable related to our discontinued operations. Accounts receivable related to our discontinued operations was $0.1 million (net of allowance of less than $0.1 million) as of December 31, 2007.

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9. SEGMENT DATA:

We have one reportable operating segment, “Broadcast”, that is disclosed separately from our corporate and other business activities. “Corporate and Other” primarily includes our costs to operate as a public company and to operate our corporate headquarters location, our investment activity and our other operating divisions’ activities. Currently, our other operating divisions primarily earn revenues from information technology staffing, consulting and software development; transmitter manufacturing; sign design and fabrication; regional security alarm operating and bulk acquisitions; and real estate ventures. Transactions between our operating segment and “Corporate and Other” are not material.

Financial information for our operating segment is included in the following tables for the three and nine months ended September 30, 2008 and 2007 (in thousands):

For the three months ended September 30, 2008	Broadcast		Corporate and Other			Consolidated
Revenue	$	164,681	$	13,510		$	178,191
Depreciation of property and equipment	10,735		965			11,700
Amortization of definite-lived intangible assets and other assets	4,274		332			4,606
Amortization of program contract costs and net realizable value adjustments	21,744		—			21,744
General and administrative overhead expenses	1,735		4,184			5,919
Operating income (loss)	42,837		(5,435		)	37,402
Income from equity and cost method investments	—		658			658

For the three months ended September 30, 2007	Broadcast		Corporate and Other			Consolidated
Revenue	$	164,211	$	12,488		$	176,699
Depreciation of property and equipment	10,039		515			10,554
Amortization of definite-lived intangible assets and other assets	4,216		330			4,546
Amortization of program contract costs and net realizable value adjustments	29,172		—			29,172
General and administrative overhead expenses	1,286		4,211			5,497
Operating income (loss)	36,827		(3,893		)	32,934
Income from equity and cost method investments	—		711			711

For the nine months ended September 30, 2008	Broadcast		Corporate and Other			Consolidated
Revenue	$	519,806	$	38,657		$	558,463
Depreciation of property and equipment	31,199		2,613			33,812
Amortization of definite-lived intangible assets and other assets	12,795		897			13,692
Amortization of program contract costs and net realizable value adjustments	63,247		—			63,247
Impairment of goodwill	—		1,626			1,626
General and administrative overhead expenses	5,301		14,822			20,123
Operating income (loss)	148,566		(21,634		)	126,932
Loss from equity and cost method investments	—		(118		)	(118		)

For the nine months ended September 30, 2007	Broadcast		Corporate and Other			Consolidated
Revenue	$	501,190	$	18,841		$	520,031
Depreciation of property and equipment	31,071		1,589			32,660
Amortization of definite-lived intangible assets and other assets	12,702		330			13,032
Amortization of program contract costs and net realizable value adjustments	73,528		—			73,528
General and administrative overhead expenses	4,785		14,103			18,888
Operating income (loss)	128,488		(16,325		)	112,163
Loss from equity and cost method investments	—		(181		)	(181		)

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10. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:

Sinclair Television Group, Inc. (STG), a wholly-owned subsidiary of Sinclair Broadcast Group, Inc. (SBG), is the primary obligor under our existing Bank Credit Agreement, as amended and the 8.0% Senior Subordinated Notes, due 2012. Our Class A Common Stock, Class B Common Stock, the 6.0% Convertible Debentures, due 2012, the 4.875% Convertible Senior Notes, due 2018 and the 3.0% Convertible Senior Notes, due 2027 remain obligations or securities of SBG and are not obligations or securities of STG.

SBG, KDSM, LLC, a wholly-owned subsidiary of SBG, and STG’s wholly-owned subsidiaries (guarantor subsidiaries), have fully and unconditionally guaranteed all of STG’s obligations. Those guarantees are joint and several. There are certain contractual restrictions on the ability of SBG, STG or KDSM, LLC to obtain funds from their subsidiaries in the form of dividends or loans.

The following condensed consolidating financial statements present the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows of SBG, STG, KDSM, LLC and the guarantor subsidiaries, the direct and indirect non-guarantor subsidiaries of SBG and the eliminations necessary to arrive at our information on a consolidated basis. These statements are presented in accordance with the disclosure requirements under Securities and Exchange Commission Regulation S-X, Rule 3-10.

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CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2008

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated

Cash	$	—		$	4,111		$	419		$	7,116		$	—		$	11,646
Accounts and other receivables	4,625			207			114,102			8,560			(5,011		)	122,483
Other current assets	971			2,326			79,285			6,680			(723		)	88,539
Total current assets	5,596			6,644			193,806			22,356			(5,734		)	222,668

Property and equipment, net	14,157			1,527			241,067			122,008			(19,470		)	359,289

Investment in consolidated subsidiaries	831,891			1,287,808			—			—			(2,119,699		)	—
Other long-term assets	68,897			163,843			31,362			54,377			(204,814		)	113,665
Total other long-term assets	900,788			1,451,651			31,362			54,377			(2,324,513		)	113,665

Acquired intangible assets	—			1,900			1,538,699			66,645			2,860			1,610,104

Total assets	$	920,541		$	1,461,722		$	2,004,934		$	265,386		$	(2,346,857	)	$	2,305,726

Accounts payable and accrued liabilities	$	24,263		$	6,953		$	34,874		$	56,387		$	(47,235	)	$	75,242
Current portion of long-term debt	879			20,938			1,711			37,428			(678		)	60,278
Other current liabilities	—			—			107,788			614			—			108,402
Total current liabilities	25,142			27,891			144,373			94,429			(47,913		)	243,922

Long-term debt	632,227			617,177			69,139			146,996			(129,480		)	1,336,059
Other liabilities	18,163			24,909			502,254			2,751			(52,511		)	495,566
Total liabilities	675,532			669,977			715,766			244,176			(229,904		)	2,075,547

Common stock	849			—			10			762			(771		)	850
Additional paid-in capital	601,553			404,499			861,101			130,270			(1,395,871		)	601,552
(Accumulated deficit) retained earnings	(357,393		)	388,458			428,529			(107,485		)	(722,648		)	(370,539		)
Accumulated other comprehensive (loss) income	—			(1,212		)	(472		)	(2,337		)	2,337			(1,684		)
Total shareholders’ equity	245,009			791,745			1,289,168			21,210			(2,116,953		)	230,179
Total liabilities and shareholders’ equity	$	920,541		$	1,461,722		$	2,004,934		$	265,386		$	(2,346,857	)	$	2,305,726

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CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2007

(in thousands)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated

Cash	$	—		$	14,478		$	2,599		$	3,903		$	—		$	20,980
Accounts and other receivables	3,258			21			133,429			10,969			(3,543		)	144,134
Other current assets	2,005			6,508			60,621			5,092			(724		)	73,502
Total current assets	5,263			21,007			196,649			19,964			(4,267		)	238,616

Property and equipment, net	5,979			1,462			247,403			53,777			(24,070		)	284,551

Investment in consolidated subsidiaries	872,910			1,349,054			—			—			(2,221,964		)	—
Other long-term assets	48,899			101,721			35,682			27,519			(116,790		)	97,031
Total other long-term assets	921,809			1,450,775			35,682			27,519			(2,338,754		)	97,031

Acquired intangible assets	—			—			1,533,038			62,857			8,562			1,604,457

Total assets	$	933,051		$	1,473,244		$	2,012,772		$	164,117		$	(2,358,529	)	$	2,224,655

Accounts payable and accrued liabilities	$	21,968		$	10,039		$	46,516		$	52,152		$	(44,569	)	$	86,106
Current portion of long-term debt	1,462			5,000			2,798			38,022			(493		)	46,789
Other current liabilities	—			—			92,144			207			—			92,351
Total current liabilities	23,430			15,039			141,458			90,381			(45,062		)	225,246

Long-term debt	630,747			583,301			68,969			79,782			(65,239		)	1,297,560
Other liabilities	11,906			22,307			451,984			2,267			(39,389		)	449,075
Total liabilities	666,083			620,647			662,411			172,430			(149,690		)	1,971,881

Common stock	873			—			10			762			(772		)	873
Additional paid-in capital	614,155			543,295			1,005,266			88,370			(1,636,930		)	614,156
(Accumulated deficit) retained earnings	(348,060		)	310,673			345,645			(96,612		)	(571,970		)	(360,324		)
Accumulated other comprehensive (loss) income	—			(1,371		)	(560		)	(833		)	833			(1,931		)
Total shareholders’ equity	266,968			852,597			1,350,361			(8,313		)	(2,208,839		)	252,774
Total liabilities and shareholders’ equity	$	933,051		$	1,473,244		$	2,012,772		$	164,117		$	(2,358,529	)	$	2,224,655

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated

Net revenue	$	—		$	—		$	165,201		$	16,191		$	(3,201	)	$	178,191

Program and production	—			202			40,966			72			(2,281		)	38,959
Selling, general and administrative	3,921			1,583			33,017			1,337			(72		)	39,786
Depreciation, amortization and other operating expenses	493			148			46,597			15,186			(380		)	62,044
Total operating expenses	4,414			1,933			120,580			16,595			(2,733		)	140,789

Operating (loss) income	(4,414		)	(1,933		)	44,621			(404		)	(468		)	37,402

Equity in earnings of subsidiaries	15,932			13,806			—			—			(29,738		)	—
Interest income	273			2,647			(1		)	376			(3,071		)	224
Interest expense	(8,549		)	(8,371		)	(1,722		)	(3,980		)	3,547			(19,075		)
Other income (expense)	459			6,478			(5,748		)	664			675			2,528
Total other income (expense)	8,115			14,560			(7,471		)	(2,940		)	(28,587		)	(16,323		)

Income tax benefit (provision)	8,233			3,618			(23,188		)	1,951			—			(9,386		)
Income from discontinued operations, net of taxes	—			—			(38		)	—			—			(38		)
Net income (loss)	$	11,934		$	16,245		$	13,924		$	(1,393	)	$	(29,055	)	$	11,655

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated

Net revenue	$	—		$	—		$	164,829		$	14,586		$	(2,716	)	$	176,699

Program and production	—			430			37,412			—			(2,101		)	35,741
Selling, general and administrative	4,134			1,175			33,068			881			(50		)	39,208
Depreciation, amortization and other operating expenses	495			97			56,470			12,141			(387		)	68,816
Total operating expenses	4,629			1,702			126,950			13,022			(2,538		)	143,765

Operating (loss) income	(4,629		)	(1,702		)	37,879			1,564			(178		)	32,934

Equity in earnings of subsidiaries	16,866			19,174			—			—			(36,040		)	—
Interest income	294			516			34			41			(796		)	89
Interest expense	(8,341		)	(11,217		)	(1,517		)	(2,173		)	1,351			(21,897		)
Other income (expense)	1,208			6,851			(4,903		)	67			(445		)	2,778
Total other income (expense)	10,027			15,324			(6,386		)	(2,065		)	(35,930		)	(19,030		)

Income tax benefit (provision)	4,517			2,101			(12,412		)	1,467			—			(4,327		)
Income from discontinued operations, net of taxes	—			—			324			—			—			324
Net income (loss)	$	9,915		$	15,723		$	19,405		$	966		$	(36,108	)	$	9,901

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated

Net revenue	$	—		$	—		$	521,587		$	46,173		$	(9,297	)	$	558,463

Program and production	—			701			124,168			166			(6,809		)	118,226
Selling, general and administrative	14,176			4,807			100,311			3,519			(192		)	122,621
Depreciation, amortization and other operating expenses	1,488			424			143,785			45,052			(65		)	190,684
Total operating expenses	15,664			5,932			368,264			48,737			(7,066		)	431,531

Operating (loss) income	(15,664		)	(5,932		)	153,323			(2,564		)	(2,231		)	126,932

Equity in earnings of subsidiaries	68,618			79,740			—			—			(148,358		)	—
Interest income	826			6,086			5			758			(7,076		)	599
Interest expense	(25,520		)	(26,058		)	(5,167		)	(10,631		)	8,617			(58,759		)
Other income (expense)	474			17,296			(15,537		)	1,044			630			3,907
Total other income (expense)	44,398			77,064			(20,699		)	(8,829		)	(146,187		)	(54,253		)

Income tax benefit (provision)	13,528			5,445			(51,941		)	1,626			—			(31,342		)
Income from discontinued operations, net of taxes	—			—			9			—			—			9
Net income (loss)	$	42,262		$	76,577		$	80,692		$	(9,767	)	$	(148,418	)	$	41,346

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated

Net revenue	$	—		$	—		$	503,028		$	25,419		$	(8,416	)	$	520,031

Program and production	—			1,127			114,969			—			(6,540		)	109,556
Selling, general and administrative	13,885			4,288			99,226			3,013			(167		)	120,245
Depreciation, amortization and other operating expenses	1,523			267			156,473			21,092			(1,288		)	178,067
Total operating expenses	15,408			5,682			370,668			24,105			(7,995		)	407,868

Operating (loss) income	(15,408		)	(5,682		)	132,360			1,314			(421		)	112,163

Equity in earnings of subsidiaries	31,304			67,459			—			—			(98,763		)	—
Interest income	1,022			2,544			36			68			(1,492		)	2,178
Interest expense	(20,392		)	(47,175		)	(4,613		)	(5,153		)	3,167			(74,166		)
Other income (expense)	2,353			(3,806		)	(25,250		)	(942		)	(1,046		)	(28,691		)
Total other income (expense)	14,287			19,022			(29,827		)	(6,027		)	(98,134		)	(100,679		)

Income tax benefit (provision)	11,438			19,219			(35,423		)	2,449			—			(2,317		)
Income from discontinued operations, net of taxes	—			—			542			—			—			542
Net income (loss)	$	10,317		$	32,559		$	67,652		$	(2,264	)	$	(98,555	)	$	9,709

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
NET CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES	$	(6,340	)	$	(9,323	)	$	154,815		$	(1,502	)	$	446		$	138,096
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
Acquisition of property and equipment	(53		)	(409		)	(19,535		)	(1,687		)	—			(21,684		)
Consolidation of variable interest entity	—			—			—			1,328			—			1,328
Purchase of alarm monitoring contracts	—			—			—			(6,080		)	—			(6,080		)
Payments for acquisition of television stations	—			(17,123		)	—			—			—			(17,123		)
Payment for acquisition of other operating divisions’ companies	—			—			—			(53,487		)	—			(53,487		)
Distributions from investments	860			—			—			715			—			1,575
Investments in equity and cost method investees	(6,244		)	—			—			(24,939		)	—			(31,183		)
Proceeds from sale of assets	3			—			174			—			—			177
Loans to affiliates	(136		)	—			—			—			—			(136		)
Proceeds from loans to affiliates	135			—			—			—			—			135
Net cash flows used in investing activities	(5,435		)	(17,532		)	(19,361		)	(84,150		)	—			(126,478		)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	—			220,891			—			12,336			—			233,227
Repayments of notes payable, commercial bank financing and capital leases	(12,166		)	(170,509		)	(152		)	(10,169		)	—			(192,996		)
Repurchase of Class A Common Stock	(16,279		)	—			—			—			—			(16,279		)
Dividends paid on Class A and Class B Common Stock	(50,319		)	—			—			—			445			(49,874		)
Payments for deferred financing costs	—			—			—			(520		)	—			(520		)
Proceeds from derivative terminations	—			8,001			—			—			—			8,001
Repayments of notes and capital leases to affiliates	(579		)	—			(1,932		)	—			—			(2,511		)
Increase (decrease) in intercompany payables	91,118			(41,895		)	(135,550		)	87,218			(891		)	—
Net cash flows from (used in) financing activities	11,775			16,488			(137,634		)	88,865			(446		)	(20,952		)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	—			(10,367		)	(2,180		)	3,213			—			(9,334		)
CASH AND CASH EQUIVALENTS, beginning of period	—			14,478			2,599			3,903			—			20,980
CASH AND CASH EQUIVALENTS, end of period	$	—		$	4,111		$	419		$	7,116		$	—		$	11,646

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
NET CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES	$	(21,605	)	$	(59,497	)	$	172,162		$	(1,011	)	$	1,077		$	91,126
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of property and equipment	(53		)	(686		)	(12,567		)	(575		)	—			(13,881		)
Payment for acquisition of other operating divisions’ companies	—			—			—			(34,075		)	—			(34,075		)
Investments in equity and cost method investees	(111		)	—			—			—			—			(111		)
Distributions from investments	583			—			—			—			—			583
Proceeds from the sale of assets	—			—			678			—			—			678
Loans to affiliates	(118		)	—			—			—			—			(118		)
Proceeds from loans to affiliates	118			—			—			—			—			118
Net cash flows from (used in) investing activities	419			(686		)	(11,889		)	(34,650		)	—			(46,806		)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	345,000			370,000			9			10,207			—			725,216
Repayments of notes payable, commercial bank financing and capital leases	(140		)	(792,556		)	(128		)	(390		)	—			(793,214		)
Proceeds from exercise of stock options	13,379			—			—			—			—			13,379
Dividends paid on Class A and Class B Common Stock	(36,882		)	—			—			—			348			(36,534		)
Payments for deferred financing costs	(6,738		)	(131		)	—			(114		)	—			(6,983		)
Repayments of notes and capital leases to affiliates	(848		)	—			(2,301		)	—			—			(3,149		)
(Decrease) increase in intercompany payables	(292,585		)	423,825			(156,777		)	26,962			(1,425		)	—
Net cash flows from (used in) financing activities	21,186			1,138			(159,197		)	36,665			(1,077		)	(101,285		)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	—			(59,045		)	1,076			1,004			—			(56,965		)
CASH AND CASH EQUIVALENTS, beginning of period	—			62,252			2,788			2,368			—			67,408
CASH AND CASH EQUIVALENTS, end of period	$	—		$	3,207		$	3,864		$	3,372		$	—		$	10,443

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report includes or incorporates forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us, including, among other things, the following risks:

General risks

· the impact of changes in national and regional economies including the possibility of an extended recession;

· the activities of our competitors;

· terrorist acts of violence or war and other geopolitical events;

Industry risks

· the business conditions of our advertisers, including the impact of the economy on their businesses and their ability to purchase advertising;

· competition with other broadcast television stations, radio stations, multi-channel video programming distributors (MVPDs) and internet and broadband content providers serving in the same markets;

· labor disputes and other union activity;

· availability and cost of programming;

· the effects of governmental regulation of broadcasting or changes in those regulations and court actions interpreting those regulations, including ownership regulations, indecency regulations, retransmission regulations, political advertising restrictions and regulations;

· the continued viability of networks and syndicators that provide us with programming content;

· the February 17, 2009 mandatory transition from analog to digital over-the-air broadcasting, including the impact the transition will have on television ratings;

· the broadcasting community’s ability to adopt and to accept a viable mobile digital television strategy and platform;

· competition related to the potential implementation of regulations requiring MVPDs to carry low power television stations’ programming;

Risks specific to us

· the effectiveness of our management;

· our ability to attract and maintain local and national advertising;

· our ability to successfully renegotiate retransmission consent agreements;

· our ability to service our outstanding debt;

· our ability to renew our FCC licenses;

· our ability to maintain our affiliation agreements with our networks;

· the popularity of syndicated programming we purchase and network programming that we air;

· successful integration of outsourcing and news share agreements;

· the strength of ratings for our local news broadcasts including our news sharing arrangements;

· changes in the makeup of the population in the areas where our stations are located;

· the success of our multi-channel broadcasting initiatives strategy execution including mobile digital television;

· the results of prior year tax audits by taxing authorities; and

· our ability to identify and consummate investments in attractive non-television assets and to achieve anticipated returns on our investments.

Other matters set forth in this report and our other reports filed with the Securities and Exchange Commission, including the Risk Factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2007 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, may also cause actual results in the future to differ materially from those described in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur.

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The following table sets forth certain operating data for the three and nine months ended September 30, 2008 and 2007:

STATEMENTS OF OPERATIONS DATA

(in thousands, except for per share data) (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Statement of Operations Data:
Net broadcast revenues (a)	$	150,119		$	149,425		$	474,758		$	456,972
Revenues realized from station barter arrangements	14,562			14,786			45,048			44,218
Other operating divisions’ revenues	13,510			12,488			38,657			18,841
Total revenues	178,191			176,699			558,463			520,031

Station production expenses	38,959			35,741			118,226			109,556
Station selling, general and administrative expenses	33,867			33,711			102,498			101,357
Expenses recognized from station barter arrangements	12,760			13,317			40,394			39,995
Amortization of program contract costs and net realizable value adjustments	21,744			29,172			63,247			73,528
Depreciation and amortization expenses (b)	16,306			15,100			47,504			45,692
Other operating divisions’ expenses	13,397			11,227			40,076			18,852
Corporate general and administrative expenses	5,919			5,497			20,123			18,888
Gain on asset exchange	(2,163		)	—			(2,163		)	—
Impairment of goodwill	—			—			1,626			—
Operating income	37,402			32,934			126,932			112,163

Interest expense and amortization of debt discount and deferred financing costs	(19,075		)	(21,897		)	(58,759		)	(74,166		)
Interest income	224			89			599			2,178
(Loss) gain from sale of assets	(3		)	(30		)	48			(38		)
Gain (loss) from extinguishment of debt	432			(68		)	146			(30,716		)
Gain from derivative instruments	—			1,897			999			1,300
Gain (loss) from equity and cost method investees	658			711			(118		)	(181		)
Other income, net	1,441			268			2,832			944
Income from continuing operations before income taxes	21,079			13,904			72,679			11,484
Income tax provision	(9,386		)	(4,327		)	(31,342		)	(2,317		)
Income from continuing operations	11,693			9,577			41,337			9,167
Discontinued Operations:
(Loss) income from discontinued operations, net of related income taxes	(38		)	324			9			542
Net income	$	11,655		$	9,901		$	41,346		$	9,709

Basic and Diluted Earnings Per Common Share:
Earnings per share from continuing operations	$	0.14		$	0.11		$	0.48		$	0.11
Earnings per share from discontinued operations	$	—		$	—		$	—		$	0.01
Earnings per share	$	0.14		$	0.11		$	0.48		$	0.11
Dividends declared per share	$	0.20		$	0.15		$	0.60		$	0.45

Balance Sheet Data:	September 30, 2008		December 31, 2007

Cash and cash equivalents	$	11,646	$	20,980
Total assets	$	2,305,726	$	2,224,655
Total debt (c)	$	1,396,337	$	1,344,349
Total shareholders’ equity	$	230,179	$	252,774

(a) “Net broadcast revenues” is defined as station broadcast revenues, net of agency commissions.

(b) Depreciation and amortization includes depreciation of property and equipment and amortization of definite-lived intangible assets and other assets.

(c) “Total debt” is defined as notes payable, capital leases and commercial bank financing, including the current and long-term portions thereof.

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The following Management’s Discussion and Analysis provides qualitative and quantitative information about our financial performance and condition and should be read in conjunction with our consolidated financial statements and the accompanying notes to those statements. This discussion consists of the following sections:

Executive Overview – financial highlights since June 30, 2008;

Recent Accounting Pronouncements – a description of new accounting pronouncements that apply to us;

Results of Operations – an analysis of our revenues and expenses for the three and nine months ended September 30, 2008 and 2007, including comparisons between quarters and expectations for the fourth quarter 2008; and

Liquidity and Capital Resources – an analysis of our cash flows from or used in operating activities, investing activities and financing activities and an update of our debt repurchases during the quarter.

EXECUTIVE OVERVIEW

Third Quarter 2008 Highlights

· In July 2008, we entered into a news share agreement in which WHO-TV owned by Local TV, LLC, will produce a newscast to air on KDSM-TV in Des Moines, Iowa;

· In August 2008, we repurchased 2.7 million shares of Class A Common Stock for $16.3 million, including transaction costs;

· During the third quarter 2008, we repurchased in the open market $22.3 million face value of our 8.0% Senior Subordinated Notes, due 2012 and $12.0 million of our 6.0% Convertible Debentures, due 2012;

· During the third quarter 2008, we made new investments of $10.0 million and add-on cash investments of $0.5 million primarily in real estate ventures; and

· Excluding political, local revenues decreased 1.7% and national revenues decreased 13.7% in the third quarter 2008 versus the third quarter 2007, as current negative financial and economic conditions have severely impacted advertising spending levels.

Other Highlights

· In October 2008, we received a $17.2 million federal income tax cash refund;

· As of the filing date, in fourth quarter 2008, we repurchased in the open market $1.0 million face value of our 8.0% Senior Subordinated Notes, due 2012;

· As of the filing date, in fourth quarter 2008, we made additional investments of $3.8 million in various real estate ventures; and

· As of the filing date, in fourth quarter 2008, we repurchased 3.8 million shares of Class A Common Stock for $13.3 million, including transaction costs.

RECENT ACCOUNTING PRONOUNCEMENTS

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In June 2008, the Emerging Issues Task Force (EITF) issued Issue No. 08-4, Transition Guidance for Conforming Changes to Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios. The Issue provides transition guidance for changes made to Issue 98-5 resulting from the issuance of EITF Issue No. 00-27, Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,’ to Certain Convertible Instruments, and FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The Issue requires that an entity: (a) apply the guidance in this issue to its first fiscal year beginning after December 15, 2008; (b) recognize the effect of the change retrospectively, with the cumulative effect of the change recognized as an adjustment to the opening balance of retained earnings for the earliest period presented; and (c) include disclosures as required for a change in accounting principle by FASB Statement No. 154. We do not expect the impact of this issue to have a material effect on our consolidated financial statements.

RESULTS OF OPERATIONS

In general, this discussion is related to the results of our continuing operations, except for discussions regarding our cash flows, which also include the results of our discontinued operations. Unless otherwise indicated, references in this discussion and analysis to the third quarter of 2008 and 2007 refer to the three months ended September 30, 2008 and 2007, respectively. Additionally, any references to the first, second or fourth quarter are to the three months ended March 31, June 30 and December 31, respectively, for the year being discussed.

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Operating Results

The following table presents our revenues from continuing operations, net of agency commissions, for the three and nine months ended September 30, 2008 and 2007 (in millions):

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2008		2007		Percent Change	2008		2007		Percent Change
Local revenues:
Non-political	$	84.8	$	86.3	(1.7)%	$	275.7	$	270.9	1.8%
Political	1.6		0.5		(a)	4.2		0.7		(a)
Total local	86.4		86.8		(0.5)%	279.9		271.6		3.1%

National revenues:
Non-political	38.9		45.1		(13.7)%	129.6		137.2		(5.5)%
Political	7.1		0.6		(a)	11.3		2.1		(a)
Total national	46.0		45.7		0.7%	140.9		139.3		1.1%

Other revenues	17.7		16.9		4.7%	54.0		46.1		17.1%
Total net broadcast revenues	$	150.1	$	149.4	0.5%	$	474.8	$	457.0	3.9%

(a) Political revenue is not comparable from year to year due to cyclicality of elections. See Political Revenues below for more information.

Net broadcast revenues. From a revenue category standpoint, the third quarter 2008, when compared to the same period in 2007, was impacted by an increase in advertising revenues generated from the political, fast food, food-grocery and media sectors. These increases were offset by decreases in the retail, movies, restaurants, paid programming and home products sectors. Automotive, our single largest category, representing 18.2% of the quarter’s net time sales, was down 15.4% for the three months ended September 30, 2008 compared to the same period in 2007.

The following table presents our time sales revenue from continuing operations, net of agency commissions, by network affiliates for the three and nine months ended September 30, 2008 and 2007 (dollars in millions):

	# of	Percent of Sales for the nine months ended	For the three months ended September 30,				Percent	For the nine months ended September 30,				Percent
	Stations	September 30, 2008	2008		2007		Change	2008		2007		Change
FOX	20	43.6%	$	57.7	$	57.7	—%	$	192.3	$	181.3	6.1%
ABC	9	20.9%	27.7		27.3		1.5%	83.5		85.6		(2.5)%
MyNetworkTV	17	18.6%	24.6		25.9		(5.0)%	76.0		77.0		(1.3)%
The CW	9	13.1%	17.3		18.0		(3.9)%	55.0		56.0		(1.8)%
CBS	2	2.9%	3.9		2.6		50.0%	10.6		7.7		37.7%
NBC	1	0.8%	1.1		0.8		37.5%	3.0		2.7		11.1%
Digital (a)	4	0.1%	0.1		0.2		(50.0)%	0.4		0.6		(33.3)%
Total	62		$	132.4	$	132.5	(0.1)%	$	420.8	$	410.9	2.4%

(a) Three television stations are broadcasting MyNetworkTV programming and one television station is broadcasting independent programming on a second digital signal in accordance with FCC rules.

Political Revenues. Political revenues increased by $7.6 million to $8.7 million for the third quarter 2008 when compared to the same period in 2007. For the nine months ended September 30, 2008, political revenues increased by $12.7 million to $15.5 million when compared to the same period in 2007. Political revenues are typically lower in non-election years such as 2007 and have been helped in 2008 by the presidential election. We expect political advertising revenues to reach record levels this year compared to the 2004 presidential election year political spending.

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Local Revenues. Our revenues from local advertisers, excluding political revenues, were down $1.5 million for the three months ended September 30, 2008 when compared to 2007. For the nine months ended September 30, 2008, local advertisers, excluding political revenues, were up $4.8 million when compared to the same period in 2007. The decrease of revenues for the three months ended September 30, 2008, when compared to 2007, was primarily due to current negative financial and economic conditions which have impeded advertising spending levels offset by $1.2 million in revenues from our stations in Cedar Rapids, Iowa including KFXA –TV, acquired in February 2008, and KGAN-TV which was previously accounted for as an outsourcing agreement. The increase of revenues for the nine months ended September 30, 2008, when compared to 2007, was primarily due to $3.8 million related to our stations in Cedar Rapids. Our FOX stations’ local news and strong network prime-time continued to grow our revenues during the first six months of the year with flat performance in the third quarter. We continue to provide an enhanced sales training course for all of our salespeople with a focus on local revenue sales. We expect to continue these efforts throughout 2008.

National Revenues. Our revenues from national advertisers, excluding political revenues, were down $6.2 million for the three months ended September 30, 2008 when compared to 2007. For the nine months ended September 30, 2008, national advertisers, excluding political revenues, were down $7.6 million when compared to the same period in 2007. The decrease in revenues was lessened by the abovementioned effects of KFXA-TV and KGAN-TV, our stations in Cedar Rapids. The overall decrease in revenues is primarily due to current negative financial and economic conditions which have impeded advertising spending levels. Automotive companies have reduced advertising budgets in response to earlier in the year record-high oil prices and declines in SUV and truck sales, and current period economic uncertainty. We expect this trend to continue throughout 2008 and into 2009. In addition, over the past few years, national revenues have trended downward. Advertisers like automotive continue to reduce their advertising budgets and shift portions of their advertising budgets away from spot television into non-traditional media, in-store promotions and product placement in network shows and we believe these trends will continue in the future.

Other Revenues. Our other revenues consist primarily of revenues from retransmission consent agreements with multi-channel video programming distributors, network compensation, production revenues and revenues from our outsourcing agreements. Our retransmission consent agreements, including the advertising component, generated $17.9 million in total broadcast revenues during the third quarter 2008 compared with $17.3 million during the same period in 2007. This growth trend is the result of our ability to monetize our existing relationships as cable providers struggle with increased competition from alternative video delivery providers and have begun to recognize the value of our digital and high definition signals and local and other programming. Pursuant to EITF 00-21, Revenue Arrangements with Multiple Deliverables, during the third quarter 2008, $13.3 million of the total $17.9 million in revenues generated from our retransmission consent agreements is included in other revenues, while the remaining $4.6 million is included in net time sales. During the third quarter 2007, $12.2 million of the total $17.3 million in revenues generated from our retransmission consent agreements is included in other revenues, while the remaining $5.1 million is included in net time sales. We expect to continue to generate revenues from retransmission consent agreements at terms as favorable as or more favorable than our existing agreements upon expiration of those agreements. Our retransmission consent agreements include automatic annual fee escalators.

For the nine months ended September 30, 2008, $39.8 million of the total $56.2 million in revenues generated from our retransmission consent agreements are included in other revenues, while the remaining $16.4 million is included in net time sales. For the nine months ended September 30, 2007, $33.0 million of the total $42.9 million in revenues generated from our retransmission consent agreements are included in other revenues, while the remaining $9.9 million is included in net time sales.

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The following table presents our significant expense categories for the three and nine months ended September 30, 2008 and 2007 (in millions):

	For the Three Months Ended September 30,							For the Nine Months Ended September 30,
	2008		2007			Percent Change Increase/ (Decrease)		2008			2007			Percent Change Increase/ (Decrease)

Station production expenses	$	39.0	$	35.7		9.2	%	$	118.2		$	109.6		7.8	%
Station selling, general and administrative expenses	$	33.9	$	33.7		0.6	%	$	102.5		$	101.4		1.1	%
Amortization of program contract costs and net realizable value adjustments	$	21.7	$	29.2		(25.7	)%	$	63.2		$	73.5		(14.0	)%
Corporate general and administrative expenses	$	5.9	$	5.5		7.3	%	$	20.1		$	18.9		6.3	%
Gain on asset exchange	$	2.2	$	—		100.0	%	$	2.2		$	—		100.0	%
Impairment of goodwill	$	—	$	—		—	%	$	1.6		$	—		100.0	%
Interest expense	$	19.1	$	21.9		(12.8	)%	$	58.8		$	74.2		(20.8	)%
Gain (loss) from extinguishment of debt	$	0.4	$	(0.1	)	500.0	%	$	0.1		$	(30.7	)	100.3	%
Gain from derivative instruments	$	—	$	1.9		(100.0	)%	$	1.0		$	1.3		(23.1	)%
Gain (loss) from equity and cost method investments	$	0.7	$	0.7		—	%	$	(0.1	)	$	(0.2	)	(50.0	)%
Income tax provision	$	9.4	$	4.3		118.6	%	$	31.3		$	2.3		1,260.9	%

Station production expenses. Station production expenses increased during the third quarter 2008 compared to the same period in 2007. Excluding Cedar Rapids, there were increases in news expenses of $1.0 million, engineering expenses of $0.6 million, costs related to LMAs and outsourcing agreements of $0.2 million, production expenses of $0.2 million and programming expenses of $0.2 million. In addition, there were $1.3 million in costs related to our stations in Cedar Rapids including KFXA –TV, acquired in February 2008, and KGAN-TV which was previously accounted for as an outsourcing agreement. These increases were partially offset by decreases in promotion expenses of $0.2 million.

Station production expenses increased for the nine months ended September 30, 2008 compared to the same period in 2007. Excluding Cedar Rapids, there were increases in news expenses of $3.3 million, engineering expenses of $1.2 million, programming expenses of $0.7 million, rating service expenses of $0.6 million, production expenses of $0.6 million, costs related to LMAs and outsourcing agreements of $0.3 million, on-air operations of $0.1 million and other expenses of $0.1 million. In addition, there were $3.0 million in costs related to our stations in Cedar Rapids. These increases were partially offset by decreases in promotion expenses of $0.7 million and music license fees of $0.6 million.

Station selling, general and administrative expenses. Station selling, general and administrative expenses increased during the third quarter 2008 compared to same period in 2007. Excluding Cedar Rapids, there were increases in general and administrative expenses of $0.1 million and other expenses of $0.1 million offset by a decrease in sales expenses of $0.8 million. Selling, general and administrative expenses related to our stations in Cedar Rapids were $0.8 million.

Station selling, general and administrative expenses increased for the nine months ended September 30, 2008 compared to the same period in 2007. Excluding Cedar Rapids, there was an increase in traffic costs of $0.3 million. There were $2.1 million in expenses related to our stations in Cedar Rapids offset by decreases in sales costs of $0.7 million, general and administrative expenses of $0.5 million and other expenses of $0.1 million.

We expect fourth quarter 2008 station production and station selling, general and administrative expenses, excluding barter, to trend higher than our third quarter 2008 results but lower than our fourth quarter 2007 results.

Amortization of program contract costs. The amortization of program contract costs decreased during the third quarter 2008 compared to the same period in 2007 primarily due to a decrease in write-downs of our program contract costs of $6.6 million and program amortization of $0.9 million. The amortization of program contract costs decreased during the nine months ended September 30, 2008 compared to the same period in 2007 primarily due to decreases of $5.5 million in write-downs of our program contract costs and program amortization of $4.8 million. We expect program contract amortization to trend higher in fourth quarter 2008 compared to third quarter 2008.

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Corporate general and administrative expenses. Corporate general and administrative expenses represent the costs to operate our corporate headquarters location. Such costs include, among other things, corporate departmental salaries, bonuses, fringe benefits and other compensation, directors’ and officers’ insurance, health and other insurance, rent, telephone, consulting fees, legal, accounting, director fees and strategic development initiatives. Corporate departments include executive, treasury, finance and accounting, human resources, technology, corporate relations, legal, sales, engineering, operations and purchasing.

Corporate general and administrative expenses increased in the third quarter 2008 when compared to the same period in 2007 due to increases in compensation expenses including stock based awards of $0.2 million and professional and other fees of $0.2 million.

Corporate general and administrative expenses increased for the nine months ended September 30, 2008 when compared to the same period in 2007 due to increases in compensation expenses including stock-based awards of $1.2 million and professional and other fees of $0.3 million. These increases were partially offset by decreases in insurance costs of $0.2 million and shareholder service expenses of $0.1 million.

We expect corporate overhead expenses to increase in fourth quarter 2008 compared to third quarter 2008.

Gain on asset exchange . For the nine months ended September 30, 2008, we recognized a non-cash gain of $2.2 million from the exchange of equipment under agreements with Sprint Nextel Corporation.

Impairment of goodwill. In second quarter 2008, we recorded an impairment of $1.6 million related to goodwill associated with Acrodyne Communications, Inc. See Note 1. Summary of Significant Accounting Policies in the notes to our consolidated financial statements for more information.

Interest expense. Interest expense has been decreasing since 2004, primarily due to refinancings we have undertaken; specifically in 2007 when certain debt was replaced with a lower cost LIBOR based Term Loan and 3.0% Convertible Senior Notes, due 2027. The decrease during the third quarter 2008 compared to the same period in 2007 and the year to date numbers is primarily due to the partial redemption of the 8.0% Senior Subordinated Notes, due 2012 (the 8.0% Notes) on July 10, 2008, August 7, 2008, and August 13, 2008. In addition, a decrease in LIBOR has lowered interest expense on our Revolving Credit Facility and Term Loans and we had other partial redemptions of the 8.0% Notes during the earlier part of 2008. The partial redemption of our 6.0% Convertible Debentures, due 2012 (the 6.0% Notes) during the later part of the quarter had a minimal effect on interest expense.

We expect interest expense to increase in fourth quarter 2008 compared to third quarter 2008.

Gain (loss) from extinguishment of debt. During the third quarter of 2008, we repurchased, in the open market, $22.3 million face value of the 8.0% Notes and $12.0 million face value of the 6.0% Notes, resulting in an overall gain of $0.4 million from extinguishment of debt. In August 2007, we partially redeemed our 8.0% Notes, which resulted in a $0.1 million loss from extinguishment of debt.

For the nine months ended September 30, 2008, we partially redeemed our 8.0% Notes, which resulted in a $0.3 million gain from extinguishment of debt and 6.0% Notes, resulting in a loss of $0.2 million from extinguishment of debt. For the nine months ended September 30, 2007, we redeemed our 8.75% Notes, which resulted in a $15.7 million loss from extinguishment of debt and we partially redeemed our 8.0% Notes, which resulted in a $15.0 million loss from extinguishment of debt. For further information see Liquidity and Capital Resources.

Gain from derivative instruments. We record gains and losses related to certain of our derivative instruments not treated as hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The fair value of our derivative instruments is primarily based on the anticipated future interest rate curves at the end of each period. In March 2008, we terminated one of our interest rate swap agreements with a notional amount of $120.0 million and received a cash payment termination fee of $3.2 million from our counterparty. The gain from our derivative instruments during 2008 when compared to 2007 is due to normal market fluctuations and the termination of the interest rate swap agreement.

Gain (loss) from equity and cost method investments. During the nine months ended September 30, 2008, we recorded a loss of $1.1 million related to our venture capital investments. The loss was partially offset by a profit of $0.3 million related to certain real estate ventures and a distribution of $0.7 million from a direct investment in a privately held small business. During the nine months ended September 30, 2007, we recorded an impairment of $1.0 million related to one of our direct investments in a privately held small business and a loss of $0.3 million related to that investment. These losses were primarily offset by income of $1.1 million related to our venture capital investments.

Income tax provision. The effective tax rate for the three and nine months ended September 30, 2008 was a provision of 44.5% and 43.1%, respectively, as compared to a provision of 31.1% and 20.2% for the same periods in 2007, respectively. The increase in the effective tax rate is primarily because in 2007 the provision was reduced as a result of discrete items including: (1) the release of tax and related interest reserves of $4.0 million related to statute expirations; (2) an increase in the valuation allowance of $1.1 million

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related to a change in judgment with respect to the realizability of certain deferred tax assets; and (3) a reduction in our state net operating loss valuation allowance of $1.5 million related to new tax legislation.

Other Operating Divisions’ Revenue and Expense

The following table presents other operating divisions’ revenue and expenses related to G1440 Holdings, Inc. (G1440), an information technology staffing, consulting and software development company, Acrodyne Communications, Inc. (Acrodyne), a manufacturer of television transmissions systems, Triangle Sign & Service, LLC (Triangle), a sign designer and fabricator, Alarm Funding Associates, LLC (Alarm Funding), a regional security alarm operating and bulk acquisition company and real estate ventures, for the three and nine months ended September 30, 2008 and 2007 (in millions):

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2008		2007		‘08 vs. ‘07	2008		2007		‘08 vs. ‘07
Revenues:
G1440	$	2.7	$	2.5	8.0%	$	8.5	$	7.1	19.7	%
Acrodyne	$	1.9	$	1.3	46.2%	$	4.2	$	3.0	40.0	%
Triangle	$	6.5	$	8.6	(24.4)%	$	20.1	$	8.6	133.7	%
Alarm Funding	$	0.8	$	—	100.0%	$	1.8	$	—	100.0	%
Real Estate Ventures	$	1.6	$	0.1	1,500.0%	$	4.1	$	0.1	4,000.0	%

Expenses:
G1440	$	2.7	$	2.5	8.0%	$	8.7	$	7.3	19.2	%
Acrodyne	$	1.8	$	1.7	5.9%	$	4.7	$	4.5	4.4	%
Triangle	$	5.9	$	7.0	(15.7)%	$	18.0	$	7.0	157.1	%
Alarm Funding	$	0.6	$	—	100.0%	$	1.6	$	—	100.0	%
Real Estate Ventures	$	2.4	$	—	100.0%	$	7.1	$	—	100.0	%

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2008, we had $11.6 million in cash and cash equivalent balances and a negative working capital of approximately $21.3 million. Our working capital reduction of $34.6 million since December 31, 2007 is primarily the result of the use of operating cash flow for investments in certain real estate ventures and private investment funds. Cash generated by our operations and availability under our Revolver are used as our primary source of liquidity. We anticipate that cash flow from our operations and borrowings under the Revolver will be sufficient to continue paying dividends under our current policy and to satisfy our debt service obligations, capital expenditure requirements, certain strategic investments and working capital needs. Our dividend policy could be adjusted with an unfavorable change in current tax rates and because of the deterioration in the economy. During the third quarter 2008, we repurchased on the open market $22.3 million face value of the 8.0% Notes and $12.0 million face value of the 6.0% Notes. As of September 30, 2008, we had drawn $91.9 million on our Revolver and $76.7 million of current borrowing capacity was available. Due to the Lehman Brothers Holdings, Inc. (Lehman Brothers) bankruptcy, Lehman Brothers has not been funding their $6.4 million pro rata share under our $175.0 million committed revolving line of credit.

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Sources and Uses of Cash

The following table sets forth our cash flows for the three and nine months ended September 30, 2008 and 2007 (in millions):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2008			2007			2008			2007
Net cash flows from operating activities	$	48.3		$	50.5		$	138.1		$	91.1

Cash flows from (used in) investing activities:
Acquisition of property and equipment	$	(7.1	)	$	(3.9	)	$	(21.7	)	$	(13.9	)
Payments for acquisition of television stations	—			—			(17.1		)	—
Consolidation of variable interest entity	—			—			1.3			—
Payments for acquisitions of other operating divisions’ companies	—			(18.1		)	(53.5		)	(34.1		)
Purchase of alarm monitoring contracts	(3.8		)	—			(6.1		)	—
Dividends and distributions from equity and cost method investees	—			—			1.6			0.6
Investments in equity and cost method investees	(10.5		)	(0.1		)	(31.2		)	(0.1		)
Proceeds from sale of assets	—			0.7			0.2			0.7
Other	—			(0.2		)	—			—
Net cash flows used in investing activities	$	(21.4	)	$	(21.6	)	$	(126.5	)	$	(46.8	)

Net cash flows (used in) from financing activities:
Proceeds from notes payable, commercial bank financing and capital leases	$	89.3		$	53.5		$	233.2		$	725.2
Repayments of notes payable, commercial bank financing and capital leases	(80.8		)	(67.1		)	(193.0		)	(793.2		)
Repurchase of Class A Common Stock	(16.3		)	—			(16.3		)	—
Payments for deferred financing costs	(0.2		)	(0.2		)	(0.5		)	(7.0		)
Proceeds from exercise of stock options	—			0.1			—			13.4
Dividends paid on Class A and Class B Common Stock	(17.4		)	(13.0		)	(49.9		)	(36.5		)
Proceeds from derivative terminations	—			—			8.0			—
Other	(0.8		)	(1.0		)	(2.5		)	(3.2		)
Net cash flows used in financing activities	$	(26.2	)	$	(27.7	)	$	(21.0	)	$	(101.3	)

Operating Activities

Net cash flows from operating activities decreased during the third quarter 2008 compared to the same period in 2007. We received $3.0 million less in cash receipts from customers, net of cash payments to vendors for operating expenses and other working capital cash activities and paid $1.6 million more in program payments for the third quarter 2008 compared to the same period in 2007. These amounts were partially offset by paying $2.5 million less in interest payments.

Net cash flows from operating activities increased during the nine months ended September 30, 2008 compared to the same period in 2007. During 2008, we paid $27.2 million less for the extinguishment of debt due to the full redemption of the 8.75% Notes and the partial redemption of the 8.0% Notes in the first nine months of 2007. Additionally, we paid $23.3 million less in interest payments and received $2.4 million more in receipts from customers, net of cash payments to vendors for operating expenses and other working capital cash activities for the nine months ended September 30, 2008 compared to the same period in 2007. These amounts were partially offset by paying $3.1 million more in taxes, net of tax refunds, $2.0 million more in program payments and receiving $0.4 million less in distributions on our investments from equity and cost method investees for the nine months ended September 30, 2008 compared to the same period in 2007.

In October 2008, we received a $17.2 million federal income tax cash refund.

We expect program payments to increase in the fourth quarter 2008 compared to third quarter 2008.

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Investing Activities

Net cash flows used in investing activities decreased during the third quarter 2008 compared to the same period in 2007. During the third quarter 2008, we paid $18.1 million less than third quarter 2007 related to our acquisitions of non-television assets. This amount was partially offset by additional equity investments of $10.4 million in other real estate ventures, $3.8 million in alarm monitoring contracts purchased by Alarm Funding, which we acquired in November 2007, an increase in capital expenditures of $3.2 million and a decrease in proceeds from the sale of assets of $0.7 million during the third quarter 2008 as compared to the same period in 2007.

Net cash flows used in investing activities increased during the nine months ended September 30, 2008 compared to the same period in 2007. During the nine months ended September 30, 2008, we paid $19.4 million more for acquisitions of non-television assets compared to the same period in 2007. During the nine months ended September 30, 2008, we paid $34.4 million, net of cash acquired, related to our acquisition of Bay Creek South, LLC and $19.0 million related to our acquisition of Jefferson Park Development, LLC. During the nine months ended September 30, 2007, we paid $16.0 million, net of cash acquired, related to our acquisition of Triangle and $18.1 million related to our acquisition of real estate ventures. Additionally, during the nine months ended September 30, 2008, we paid $17.1 million, net of cash acquired, for the acquisition of the non-license assets of KFXA-TV in Cedar Rapids, Iowa. We made equity investments of $6.2 million and $25.0 million in private investment funds and real estate ventures, respectively. Finally, there was an increase in capital expenditures of $7.8 million and we purchased $6.1 million of alarm monitoring contracts during the nine months ended September 30, 2008.

The investments we have made in real estate reflect our strategy to maximize value for our shareholders. We believe that the depressed real estate market and tight credit market allows us to invest in what we believe to be under-valued non-television assets to drive future cash flows. In addition, we continue to explore strategic opportunities in our core television broadcast business. For fourth quarter 2008, we anticipate incurring lower capital expenditures than incurred in the third quarter 2008. We expect to fund such capital expenditures with cash generated from operating activities and borrowings under our Bank Credit Agreement.

Financing Activities

On February 5, 2008, our Board of Directors renewed its authorization to repurchase up to $150.0 million of our Class A Common Stock on the open market or through private transactions.

On February 6, 2008, the Board of Directors approved an increase to our quarterly dividend to 20.0 cents per share from 17.5 cents per share.

Net cash flows used in financing activities decreased in the third quarter of 2008 compared to the same period in 2007. Our debt issuances, net of debt repayments to non-affiliates were $8.5 million in the third quarter 2008 compared to debt repayments, net of debt issuances of $13.6 million during the same period in 2007. These amounts were partially offset by $16.3 million of repurchased Class A Common Stock and $4.4 million more paid for common stock dividends.

Net cash flows used in financing activities decreased in the nine months ended September 30, 2008 compared to the same period in 2007. Our debt issuances, net of debt repayments to non-affiliates in the nine months ended September 30, 2008, were $40.2 million compared to debt repayments, net of debt issuances of $68.0 million during the same period in 2007. In addition, we received $8.0 million in proceeds from derivative termination fees and paid $6.5 million less in financing costs in the third quarter 2008 as compared to the same period in 2007. These amounts were partially offset by $16.3 million paid for the repurchase of Class A Common Stock, $13.4 million less in proceeds received from the exercise of stock options and paying $13.4 million more for common stock dividends during the nine months ended September 30, 2008, as compared to the same period in 2007.

Seasonality/Cyclicality

Our operating results are usually subject to seasonal fluctuations. Usually, the second and fourth quarter operating results are higher than the first and third quarters because advertising expenditures are increased in anticipation of certain seasonal and holiday spending by consumers. The current negative financial and economic conditions may effect the usual seasonal fluctuations.

Our operating results are usually subject to fluctuations from political advertising. In even years, political spending is usually significantly higher than in odd years due to advertising expenditures preceding local and national elections. Additionally, every four years, political spending is elevated further due to advertising expenditures preceding the presidential election.

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CONTRACTUAL CASH OBLIGATIONS

During first quarter 2008, we repurchased on the open market $15.4 million face value of the 8.0% Notes.

During first quarter 2008, we made a $6.0 million cash investment in Patriot Capital. Patriot Capital provides structured debt and mezzanine financing to small businesses. After the $6.0 million cash investment, our remaining unfunded commitment to Patriot Capital is $14.0 million.

During the third quarter 2008, we repurchased on the open market $22.3 million face value of the 8.0% Notes and $12.0 million face value of the 6.0% Notes. From time to time, we may repurchase additional outstanding debt on the open market. As of September 30, 2008, the face amount of the 8.0% Notes was $225.7 million and the face amount of the 6.0% Notes was $141.2 million.

As of the filing date, in fourth quarter 2008, we repurchased on the open market $1.0 million face value of the 8.0% Notes.

There were no other material changes outside the ordinary course of business to our contractual cash obligations disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates. We enter into derivative instruments primarily to reduce the impact of changing interest rates on our floating rate debt and to reduce the impact of changing fair market values on our fixed rate debt. We account for our derivative instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133).

As of December 31, 2007, we had two remaining derivative instruments. Both of these instruments were interest rate swap agreements. One of these swap agreements, with a notional amount of $180.0 million and an expiration date of March 15, 2012, was accounted for as a fair value hedge in accordance with SFAS 133; therefore, any changes in its fair market value are reflected as an adjustment to the carrying value of our 8.0% Senior Subordinated Notes, due 2012, which was the underlying debt being hedged. The interest we paid on the $180.0 million swap was variable based on the three-month LIBOR plus 2.28% and the interest we received was fixed at 8.0%. The other interest rate swap, with a notional amount of $120.0 million and an expiration date of March 15, 2012, was undesignated as a fair value hedge in 2006 due to a reassignment of the counterparty; therefore, any subsequent changes in the fair market value are reflected as an adjustment to income. The interest we paid on the $120.0 million swap was variable based on the three-month LIBOR plus 2.35% and the interest we received was fixed at 8.0%.

As of September 30, 2008 and after the termination of the above mentioned interest rate swap, $452.5 million or approximately 34.2% of the face value of our debt excluding capital lease obligations effectively pays interest at a floating rate.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2008. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2008, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, as defined in Rules 132-15(f) and 15d-15(f) under the Exchange Act, during or subsequent to the quarter ended September 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

The following section represents an update to risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2007 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.

The effects of the economic environment could require us to record an asset impairment of goodwill and FCC licenses.

Statement of Financial Accounting standards No. 142, Goodwill and Other Intangible Assets (SFAS 142) requires companies to analyze goodwill and certain other intangible assets for impairment. SFAS 142 establishes a method of testing goodwill and FCC licenses for impairment on an annual basis, or on an interim basis if an event occurs that would reduce the fair value of a reporting unit below its carrying value.

We test our goodwill and FCC licenses for impairment. To perform this test, we estimate the fair values of our station assets and liabilities using a combination of observed prices paid for similar assets and liabilities, discounted cash flow models and appraisals. We make certain critical estimates about the future revenue growth rates within each of our markets as well as the discount rates that would be used by market participants in an arms-length transaction. If these growth rates decline or if the discount rate increases, our goodwill and/or FCC licenses could be impaired. These growth rates may be affected by a continued drag in advertising spending if perceived to be permanent in nature, an inability to successfully renegotiate retransmission consent agreements and the lack of future revenues from mobile television. An impairment of some or all of the value of these assets could result in a material effect on the consolidated statements of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes repurchases of our stock in the quarter ended and year to date September 30, 2008:

Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as a Part of a Publicly Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under The Program (in millions)
Class A Common Stock: (2)
07/01/08 – 07/31/08	—	$	—	—	$	—
08/01/08 – 08/31/08	2,741,145	$	5.94	2,741,145	$	133.7
09/01/08 – 09/30/08	—	$	—		$	—

(1) All repurchases were made in open-market transactions.

(2) On October 28, 1999, we announced a share repurchase program. On February 6, 2008, the Board of Directors renewed its authorization to repurchase up to $150.0 million of our Class A Common Stock. There is no expiration date for this program and currently, management has no plans to terminate this program.

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ITEM 6. EXHIBITS

Exhibit Number		Description

31.1		Certification by David D. Smith, as Chairman and Chief Executive Officer of Sinclair Broadcast Group, Inc., pursuant to § 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241).

31.2		Certification by David B. Amy, as Chief Financial Officer of Sinclair Broadcast Group, Inc., pursuant to § 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241).

32.1		Certification by David D. Smith, as Chairman and Chief Executive Officer of Sinclair Broadcast Group, Inc., pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C § 1350).

32.2		Certification by David B. Amy, as Chief Financial Officer of Sinclair Broadcast Group, Inc., pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C § 1350).

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized on the 6^th day of November 2008.

	SINCLAIR BROADCAST GROUP, INC.


	By:	/s/ David R. Bochenek
		David R. Bochenek
		Vice President/Chief Accounting Officer

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EXHIBIT INDEX

Exhibit Number		Description

31.1		Certification by David D. Smith, as Chairman and Chief Executive Officer of Sinclair Broadcast Group, Inc., pursuant to § 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241).

31.2		Certification by David B. Amy, as Chief Financial Officer of Sinclair Broadcast Group, Inc., pursuant to § 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241).

32.1		Certification by David D. Smith, as Chairman and Chief Executive Officer of Sinclair Broadcast Group, Inc., pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C § 1350).

32.2		Certification by David B. Amy, as Chief Financial Officer of Sinclair Broadcast Group, Inc., pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C § 1350).

EX-31.1 2 a08-25593_1ex31d1.htm EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, David D. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sinclair Broadcast Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

A) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

B) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

C) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

D) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

A) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

B) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 6, 2008

			/s/ David D. Smith
		Signature:	David D. Smith
			Chief Executive Officer

EX-31.2 3 a08-25593_1ex31d2.htm EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, David B. Amy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sinclair Broadcast Group, Inc.;

B) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 6, 2008

			/s/ David B. Amy
		Signature:	David B. Amy
			Chief Financial Officer

EX-32.1 4 a08-25593_1ex32d1.htm EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Sinclair Broadcast Group, Inc. (the “Company”) for the period ending September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David D. Smith, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David D. Smith

David D. Smith
Chief Executive Officer
November 6, 2008

EX-32.2 5 a08-25593_1ex32d2.htm EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Sinclair Broadcast Group, Inc. (the “Company”) for the period ending September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David B. Amy, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David B. Amy

David B. Amy
Chief Financial Officer
November 6, 2008

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