10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2012

OR

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

10706 Beaver Dam Road

Hunt Valley, Maryland 21030

(Address of principal executive office, 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such file). 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 o	Accelerated filer x
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 share 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 May 3, 2012
Class A Common Stock	52,255,511
Class B Common Stock	28,933,859

SINCLAIR BROADCAST GROUP, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2012

TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION		3
ITEM 1.	FINANCIAL STATEMENTS	3
	CONSOLIDATED BALANCE SHEETS	3
	CONSOLIDATED STATEMENTS OF OPERATIONS	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5
	CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS	7
	NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 4.	CONTROLS AND PROCEDURES	30
PART II. OTHER INFORMATION		32
ITEM 1.	LEGAL PROCEEDINGS	32
ITEM 1A.	RISK FACTORS	32
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	32
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	32
ITEM 4.	MINE SAFETY DISCLOSURES	32
ITEM 5.	OTHER INFORMATION	32
ITEM 6.	EXHIBITS	33
SIGNATURE		34
EXHIBIT INDEX		35

2

PART 1. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED BALANCE SHEETS

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

	As of March 31, 2012			As of December 31, 2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	26,802		$	12,967
Accounts receivable, net of allowance for doubtful accounts of $2,805 and $3,008, respectively	136,242			132,915
Affiliate receivable	835			252
Income taxes receivable	—			225
Current portion of program contract costs	32,452			38,906
Prepaid expenses and other current assets	18,757			17,274
Deferred barter costs	2,661			2,238
Deferred tax assets	4,515			4,940
Total current assets	222,264			209,717
PROGRAM CONTRACT COSTS, less current portion	13,471			15,584
PROPERTY AND EQUIPMENT, net	314,434			281,521
RESTRICTED CASH	38,729			58,726
GOODWILL	728,306			660,117
BROADCAST LICENSES	58,142			47,002
DEFINITE-LIVED INTANGIBLE ASSETS, net	266,695			175,341
OTHER ASSETS	129,204			123,409
Total assets (a)	$	1,771,245		$	1,571,417
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	4,941		$	8,872
Accrued liabilities	101,739			79,698
Income taxes payable	10,016			—
Current portion of notes payable, capital leases and commercial bank financing	36,237			38,195
Current portion of notes and capital leases payable to affiliates	3,105			3,014
Current portion of program contracts payable	59,713			63,825
Deferred barter revenues	2,652			1,978
Total current liabilities	218,403			195,582
LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion	1,312,127			1,148,271
Notes payable and capital leases to affiliates, less current portion	15,729			16,545
Program contracts payable, less current portion	23,753			27,625
Deferred tax liabilities	241,620			247,552
Other long-term liabilities	46,824			47,204
Total liabilities (a)	1,858,456			1,682,779
COMMITMENTS AND CONTINGENCIES (See Note 3)
EQUITY (DEFICIT):
SINCLAIR BROADCAST GROUP SHAREHOLDERS’ EQUITY (DEFICIT):
Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 52,239,805 and 52,022,086 shares issued and outstanding, respectively	522			520
Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 28,933,859 and 28,933,859 shares issued and outstanding, respectively, convertible into Class A Common Stock	289			289
Additional paid-in capital	620,855			617,375
Accumulated deficit	(714,740		)	(734,511		)
Accumulated other comprehensive loss	(4,744		)	(4,848		)
Total Sinclair Broadcast Group shareholders’ deficit	(97,818		)	(121,175		)
Noncontrolling interests	10,607			9,813
Total deficit	(87,211		)	(111,362		)
Total liabilities and equity (deficit)	$	1,771,245		$	1,571,417

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

(a)Our consolidated total assets as of March 31, 2012 and December 31, 2011 include total assets of variable interest entities (VIEs) of $44.0 million and $33.5 million, respectively, which can only be used to settle the obligations of the VIEs.  Our consolidated total liabilities as of March 31, 2012 and December 31, 2011 include total liabilities of the VIEs of $13.5 million and $14.4 million, respectively, for which the creditors of the VIEs have no recourse to us.  See Note 1. Summary of Significant Accounting Policies.

3

SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Three Months Ended March 31,
	2012			2011
REVENUES:
Station broadcast revenues, net of agency commissions	$	192,204		$	155,961
Revenues realized from station barter arrangements	17,684			17,222
Other operating divisions revenues	13,948			9,426
Total revenues	223,836			182,609
OPERATING EXPENSES:
Station production expenses	60,203			42,345
Station selling, general and administrative expenses	36,129			30,562
Expenses recognized from station barter arrangements	16,257			15,727
Amortization of program contract costs and net realizable value adjustments	14,280			12,618
Other operating divisions expenses	12,290			7,963
Depreciation of property and equipment	9,489			8,060
Corporate general and administrative expenses	9,367			8,664
Amortization of definite-lived intangible assets	5,899			4,796
Impairment of goodwill, intangible and other assets	—			398
Total operating expenses	163,914			131,133
Operating income	59,922			51,476
OTHER INCOME (EXPENSE):
Interest expense and amortization of debt discount and deferred financing costs	(27,387		)	(29,167		)
Loss from extinguishment of debt	(335		)	(924		)
Income from equity and cost method investments	1,276			11
Gain on insurance settlement	19			1,723
Other income, net	452			365
Total other expense	(25,975		)	(27,992		)
Income from continuing operations before income taxes	33,947			23,484
INCOME TAX PROVISION	(4,806		)	(8,250		)
Income from continuing operations	29,141			15,234
DISCONTINUED OPERATIONS:
Loss from discontinued operations, includes income tax provision of $67 and $107, respectively	(67		)	(107		)
NET INCOME	29,074			15,127
Net loss attributable to the noncontrolling interests	285			152
NET INCOME ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP	$	29,359		$	15,279
Dividends declared per share	$	0.12		$	0.12
BASIC AND DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP:
Earnings per share from continuing operations	$	0.36		$	0.19
Earnings per share	$	0.36		$	0.19
Weighted average common shares outstanding	80,852			80,367
Weighted average common and common equivalent shares outstanding	81,127			80,690
AMOUNTS ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP COMMON SHAREHOLDERS:
Income from continuing operations, net of tax	$	29,426		$	15,386
Loss from discontinued operations, net of tax	(67		)	(107		)
Net income	$	29,359		$	15,279

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

4

SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)

	Three months ended March 31,
	2012		2011
Net income	$	29,074	$	15,127
Amortization of net periodic pension benefit costs, net of taxes	104		41
Comprehensive income	29,178		15,168
Comprehensive loss attributable to the noncontrolling interests	285		152
Comprehensive income attributable to Sinclair Broadcast Group	$	29,463	$	15,320

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

5

SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2012

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

	Sinclair Broadcast Group Shareholders
	Class A Common Stock			Class B Common Stock			Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Noncontrolling			Total Equity
	Shares	Values		Shares	Values		Capital		Deficit			Loss			Interests			(Deficit)
BALANCE, December 31, 2011	52,022,086	$	520	28,933,859	$	289	$	617,375	$	(734,511	)	$	(4,848	)	$	9,813		$	(111,362	)
Dividends declared on Class A and Class B Common Stock	—	—		—	—		—		(9,588		)	—			—			(9,588		)
Class A Common Stock issued pursuant to employee benefit plans	217,719	2		—	—		3,289		—			—			—			3,291
Tax benefit on share based awards	—	—		—	—		191		—			—			—			191
Distributions to noncontrolling interests	—	—		—	—		—		—			—			(88		)	(88		)
Issuance of subsidiary share awards	—	—		—	—		—		—			—			392			392
Consolidation of variable interest entity	—	—		—	—		—		—			—			775			775
Amortization of net periodic pension benefit costs, net of taxes	—	—		—	—		—		—			104			—			104
Net income	—	—		—	—		—		29,359			—			(285		)	29,074
BALANCE, March 31, 2012	52,239,805	$	522	28,933,859	$	289	$	620,855	$	(714,740	)	$	(4,744	)	$	10,607		$	(87,211	)

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

6

SINCLAIR BROADCAST GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

	Three Months Ended March 31,
	2012			2011
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income	$	29,074		$	15,127
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation of property and equipment	9,630			8,125
Recognition of deferred revenue	(4,788		)	(3,728		)
Impairment of goodwill, intangible and other assets	—			398
Amortization of definite-lived intangible and other assets	5,899			4,797
Amortization of program contract costs and net realizable value adjustments	14,280			12,618
Deferred tax (benefit) provision	(5,984		)	5,918
Change in assets and liabilities, net of acquisitions:
Decrease in accounts receivable, net	8,370			7,579
Decrease in income taxes receivable	225			—
Increase in prepaid expenses and other current assets	(9,153		)	(139		)
Decrease (increase) in other assets	395			(531		)
Increase in accounts payable and accrued liabilities	21,135			17,358
Increase in income taxes payable	10,016			2,218
(Decrease) increase in other long-term liabilities	(88		)	40
Payments on program contracts payable	(16,620		)	(18,771		)
Other, net	5,092			3,948
Net cash flows from operating activities	67,483			54,957
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of property and equipment	(6,736		)	(6,085		)
Payments for acquisitions of television stations	(205,622		)	—
Purchase of alarm monitoring contracts	(3,035		)	(1,755		)
Decrease in restricted cash	20,000			5,058
Distributions from equity and cost method investees	—			832
Investments in equity and cost method investees	(5,503		)	(8,064		)
Proceeds from the sale of assets	—			26
Proceeds from insurance settlement	19			1,736
Loans to affiliates	(500		)	(61		)
Proceeds from loans to affiliates	417			89
Net cash flows used in investing activities	(200,960		)	(8,224		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	184,482			128,333
Repayments of notes payable, commercial bank financing and capital leases	(23,529		)	(61,714		)
Proceeds from exercise of stock options, including excess tax benefits of share based payments of $0.2 million and $0.6 million, respectively	279			1,737
Dividends paid on Class A and Class B Common Stock	(9,588		)	(9,591		)
Payments for deferred financing costs	(3,519		)	(4,282		)
Proceeds from Class A Common Stock sold by variable interest entity	—			1,808
Noncontrolling interests distributions	(88		)	(39		)
Repayments of notes and capital leases to affiliates	(725		)	(852		)
Net cash flows from financing activities	147,312			55,400
NET INCREASE IN CASH AND CASH EQUIVALENTS	13,835			102,133
CASH AND CASH EQUIVALENTS, beginning of period	12,967			21,974
CASH AND CASH EQUIVALENTS, end of period	$	26,802		$	124,107

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

7

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

Interim Financial Statements

The consolidated financial statements for the three months ended March 31, 2012 and 2011 are unaudited.  In the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income and consolidated statements of cash flows for these periods as adjusted for the adoption of recent accounting pronouncements discussed below.

As permitted under the applicable rules and regulations of the Securities and Exchange Commission (SEC), the consolidated financial statements do not include all disclosures normally included with audited consolidated financial statements and, accordingly, should be read together with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC.  The consolidated statements of operations presented in the accompanying consolidated financial statements are not necessarily representative of operations for an entire year.

Variable Interest Entities

In determining whether we are the primary beneficiary of a VIE for financial reporting purposes, we consider whether we have the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether we have the obligation to absorb losses or the right to receive returns that would be significant to the VIE.  We consolidate VIEs when we are the primary beneficiary.  The assets of our consolidated VIEs can only be used to settle the obligations of the VIE.  All the liabilities, including debt held by our VIEs, are non-recourse to us.  However, our senior secured credit facility (Bank Credit Agreement) contains cross-default provisions with the VIE debt of Cunningham Broadcasting Corporation (Cunningham).  See Note 6, Related Person Transactions for more information.

We have entered into Local Marketing Agreements (LMAs) to provide programming, sales and managerial services for television stations of Cunningham, the license owner of seven television stations as of March 31, 2012.  We pay LMA fees to Cunningham and also reimburse all operating expenses.  We also have an acquisition agreement in which we have a purchase option to buy the license assets of the television stations which includes the Federal Communications Commission (FCC) license and certain other assets used to operate the station (License Assets).  Our applications to acquire the FCC licenses are pending approval.  We own the majority of the non-license assets of the Cunningham stations and our Bank Credit Agreement contain certain cross-default provisions with Cunningham whereby a default by Cunningham caused by insolvency would cause an event of default under our Bank Credit Agreement.  We have determined that the Cunningham stations are VIEs and that based on the terms of the agreements, the significance of our investment in the stations and the cross-default provisions with our Bank Credit Agreement, we are the primary beneficiary of the variable interests because we have the power to direct the activities which significantly impact the economic performance of the VIE through the sales and managerial services we provide and we absorb losses and returns that would be considered significant to Cunningham.  See Note 6, Related Person Transactions for more information on our arrangements with Cunningham.  Included in the accompanying consolidated statements of operations for each of the three months ended March 31, 2012 and 2011 are net revenues of $23.3 million, respectively, that relate to LMAs with Cunningham.

We have outsourcing agreements with certain other license owners, under which we provide certain non-programming related sales, operational and administrative services.  We pay a fee to the license owners based on a percentage of broadcast cash flow and we reimburse all operating expenses.  We also have a purchase option to buy the License Assets.  For the same reasons noted above regarding the LMAs with Cunningham, we have determined that the outsourced license station assets are VIEs and we are the primary beneficiary.  Included in the accompanying consolidated statements of operations for the three months ended March 31, 2012 and 2011 are net revenues of $3.7 million and $3.1 million, respectively, that relate to these arrangements.

8

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

	As of March 31,2012		As of December 31, 2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,867	$	2,739
Accounts receivable	6		—
Income taxes receivable	86		142
Current portion of program contract costs	380		413
Prepaid expenses and other current assets	118		99
Total current asset	3,457		3,393
PROGRAM CONTRACT COSTS, less current portion	1,564		271
PROPERTY AND EQUIPMENT, net	6,502		6,658
GOODWILL	6,357		6,357
BROADCAST LICENSES	4,691		4,208
DEFINITE-LIVED INTANGIBLE ASSETS, net	8,136		6,601
OTHER ASSETS	13,243		5,980
Total assets	$	43,950	$	33,468
LIABILITIES
CURRENT LIABILITIES:
Accounts payable	$	15	$	37
Accrued liabilities	204		315
Current portion of notes payable, capital leases and commercial bank financing	8,337		11,074
Current portion of program contracts payable	339		373
Total current liabilities	8,895		11,799
LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion	2,381		2,411
Program contracts payable, less current portion	2,199		173
Total liabilities	$	13,475	$	14,383

The amounts above represent the consolidated assets and liabilities of the VIEs related to our LMAs with Cunningham and outsourcing agreements, for which we are the primary beneficiary, and have been aggregated as they all relate to our broadcast business.  Excluded from the amounts above are payments made to Cunningham under the LMA which are treated as a prepayment of the purchase price of the stations and capital leases between us and Cunningham which are eliminated in consolidation.  The total payment made under these LMAs as of March 31, 2012 and December 31, 2011, which are excluded from liabilities above, were $25.4 million and $22.7 million, respectively.  The total capital lease assets excluded from above for each of the three months ended March 31, 2012 and the year ended December 31, 2011 were $11.8 million, respectively.  The risk and reward characteristics of the VIEs are similar.

In the fourth quarter of 2011, we began providing sales, programming and management services to the eight stations owned by Freedom Communications (Freedom) pursuant to an LMA.  We have determined that the Freedom stations are VIEs based on the terms of the agreements.  We are not the primary beneficiary because the owner of the stations has the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs.  In the consolidated statements of operations for the three months ended March 31, 2012 are net revenues of $10.0 million and station production expenses of $7.8 million related to the Freedom LMAs.  Effective April 1, 2012, we completed the acquisition of these stations and the LMA was terminated.

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

The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary for the periods presented (in thousands):

	As of March 31, 2012				As of December  31, 2011
	Carrying amount		Maximum exposure		Carrying amount		Maximum exposure
Investments in real estate ventures	$	14,060	$	14,060	$	8,009	$	8,009
Investments in investment companies	26,193		26,193		26,276		26,276
Total	$	40,253	$	40,253	$	34,285	$	34,285

9

The carrying amounts above are included in other assets in the consolidated balance sheets.  The income and loss related to these investments are recorded in income from equity and cost method investments in the consolidated statement of operations.  We recorded income of $1.4 million and less than $0.1 million in the quarters ended March 31, 2012 and 2011, respectively.

Our maximum exposure is equal to the carrying value of our investments.  Our unfunded commitments related to private equity investment funds totaled $10.9 million as of March 31, 2012 and December 31, 2011.

Recent Accounting Pronouncements

In May 2011, the FASB issued new guidance for fair value measurements.  The purpose of the new guidance is to have a consistent definition of fair value between U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).  Many of the amendments to GAAP are not expected to have a significant impact on practice; however, the new guidance does require new and enhanced disclosure about fair value measurements.  The amendments are effective for interim and annual periods beginning after December 15, 2011 and should be applied prospectively.  This guidance did not have a material impact on our consolidated financial statements but we have included the additional quantitative and qualitative disclosures required for our Level 3 fair value measurements beginning with the quarter ended March 31, 2012.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities.  Actual results could differ from those estimates.

Restricted Cash

Upon entering into definitive agreements to purchase assets of Four Points Media Group LLC (Four Points) and Freedom in September 2011 and November 2011, respectively, we were required to deposit 10% of the purchase price for each acquisition into an escrow account.  Effective January 1, 2012, we closed the asset acquisition of Four Points for $200.0 million and used $20.0 million of restricted cash towards the asset acquisition.  As of March 31, 2012, $38.5 million of restricted cash classified as noncurrent relates to the amount held in escrow for the acquisition of Freedom, which closed effective April 1, 2012.

Additionally, under the terms of certain lease agreements, as of March 31, 2012 and December 31, 2011, we were required to hold $0.2 million of restricted cash related to the removal of analog equipment from some of our leased towers.

Revenue Recognition

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

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

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

Income Taxes

Our income tax provision for all periods consists of federal and state income taxes.  The tax provision for the three months ended March 31, 2012 and 2011 is based on the estimated effective tax rate applicable for the full year after taking into account discrete tax items and the effects of the noncontrolling interests.

Our effective income tax rate for the three months ended March 31, 2011 approximated the statutory rate. Our effective income tax rate for the three months ended March 31, 2012 was lower than the statutory rate primarily due to a release of $7.7 million of valuation allowance related to certain deferred tax assets of Cunningham, one of our consolidated VIEs, as the weight of all available evidence now supports full realization of those deferred tax assets.

10

Reclassifications

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

2.ACQUISITIONS

Four Points

Effective January 1, 2012, we completed the previously announced acquisition of the broadcast assets of Four Points Media Group LLC (Four Points), which we had previously operated pursuant to a LMA since October 1, 2011.  The acquired assets consist of the following seven stations in four markets along with the respective network affiliation or program service arrangements: KUTV (CBS) and KMYU (MNT / This TV) in Salt Lake City / St. George, UT; KEYE (CBS) in Austin, TX; WTVX (CW), WTCN (MNT) and WWHB (Azteca) in West Palm Beach / Fort Pierce / Stuart, FL; and WLWC (CW) in Providence, RI / New Bedford, MA.  The Four Points acquisition will extend our national reach.

We paid Four Points $200.0 million in cash, less a working capital adjustment of $0.9 million.  The acquisition was financed with a $180.0 million draw under a recently raised incremental Term B Loan commitment under our amended Bank Credit Agreement plus a $20 million cash escrow previously paid.

Under the acquisition method of accounting, the results of the acquired operations are included in the consolidated financial statements of the Company beginning January 1, 2012.  The initial purchase price has been allocated to the acquired assets and assumed liabilities based on estimated fair values.  The purchase price allocation is preliminary pending a final determination of the fair values of the assets and liabilities.  The initial allocated fair value of acquired assets and assumed liabilities is summarized as follows (in thousands):

Prepaid expenses and other current assets	$	320
Program contract costs	4,118
Property and equipment	34,513
Broadcast licenses	10,658
Definite-lived intangible assets	90,099
Other assets	548
Accrued liabilities	(524		)
Program contracts payable	(5,524		)
Fair value of identifiable net assets acquired	134,208
Goodwill	64,868
Total	$	199,076

The preliminary allocation presented above is based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches.  In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and estimated discount rates.  The amount allocated to definite-lived intangible assets represents the estimated fair values of network affiliations of $66.9 million, the decaying advertiser base of $9.4 million, and other intangible assets of $13.8 million.  These intangible assets will be amortized over the estimated remaining useful lives of 15 years for network affiliations, 10 years for the decaying advertiser base and a weighted average of 14 years for the other intangible assets.  Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives.  Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and noncontractual relationships, as well as expected future synergies.  We expect that goodwill will be deductible for tax purposes.  The initial purchase price allocation is based upon all information available to us at the present time and is subject to change, and such changes could be material.

Prior to the acquisition, since October 1, 2011, we provided sales, programming and management services to the stations pursuant to the LMA.  During that period, we funded the working capital needs of the stations, which totaled $8.1 million as of December 31, 2011 and was reflected as cash flows used in operating activities within the consolidated statement of cash flows for that period.  This working capital is not reflected in the purchase price allocation presented above.

In connection with the acquisition, we incurred a total of $0.7 million of costs primarily related to legal and other professional services, which were expensed as incurred.  For the three months ended March 31, 2012, $0.3 million of such costs were included in corporate general and administrative expenses in the consolidated statement of operations.  See Note 4. Notes Payable and Commercial Bank Financing for information related to financing costs associated with the incremental borrowing used to fund the acquisition.

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The results of operations for the three months ended March 31, 2012 include the results of the Four Points stations since January 1, 2012.  Net broadcast revenues and operating income of the Four Points stations included in our consolidated statement of operations for the three months ended March 31, 2012 were $17.8 million and $4.5 million, respectively.

The following table sets forth unaudited pro forma results of operations, assuming that the above acquisition, along with transactions necessary to finance the acquisition, occurred on January 1, 2011 (in thousands, except per share data):

	For the Three Months Ended March 31,
	2012		2011
Total revenues	$	223,836	$	198,411
Net income	$	29,287	$	15,712
Net income attributable to Sinclair Broadcast Group	$	29,572	$	15,864
Basic and diluted earnings per common share attributable to Sinclair Broadcast Group	$	0.37	$	0.20

This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments, and is not necessarily indicative of what our results would have been had we operated the business since January 1, 2011.  The pro forma adjustments reflect depreciation expense, amortization of intangibles and amortization of program contract costs related to the fair value adjustments of the assets acquired, additional interest expense related to the financing of the transaction, exclusion of nonrecurring financing and transaction related costs and the related tax effects of the adjustments.

Subsequent event

Effective April 1, 2012, we completed the previously announced acquisition of the broadcast assets of Freedom Communications (Freedom), which we had previously operated pursuant to a LMA since December 1, 2011. The acquired assets consist of the following eight stations in seven markets along with the respective network affiliation or program service arrangements: WPEC (CBS) in West Palm Beach, FL; WWMT (CBS) in Grand Rapids/Kalamazoo/Battle Creek, MI;  WRGB (CBS) and WCWN (CW) in Albany, NY; WTVC (ABC) in Chattanooga, TN; WLAJ (ABC) in Lansing, MI; KTVL (CBS) in Medford-Klamath Falls, OR; and KFDM (CBS) in Beaumont/Port Arthur/Orange, TX.  The Freedom acquisition will extend our national reach.

We paid Freedom $385.0 million, which is subject to a post close working capital adjustment.  We financed the acquisition and a portion of the closing costs with a draw under a recently raised $157.5 million incremental Term Loan A and a $192.5 million incremental Term B Loan commitment under our amended Bank Credit Facility, plus a $38.5 million cash escrow previously paid in November 2011.

Prior to the acquisition, since December 1, 2011, we provided sales, programming and management services to the stations pursuant to the LMA.  During that period, we funded the working capital needs of the stations, which totaled $9.6 million as of March 31, 2012 and was reflected as cash flows used in operating activities within the consolidated statement of cash flows for that period.

Due to the limited time since the acquisition date and the filing of our Quarterly Report on Form 10-Q for the three months ended March 31, 2012, the initial accounting for the business combination is incomplete at this time.  As a result, we are unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired and resulting from the transaction, including the information required for intangible assets and goodwill.  Also, because the initial accounting for the transaction is incomplete, we are unable to provide the supplemental pro forma revenue and earnings of the combined entity.  We will include this information in our Quarterly Report on Form 10-Q for the six months ended June 30, 2012.

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 stages and no material judgments or decisions have been rendered by hearing boards or courts in connection with such actions.  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.

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Various parties have filed petitions to deny our applications for the following stations’ license renewals:  WXLV-TV, Winston-Salem, North Carolina; WMYV-TV, Greensboro, North Carolina; WLFL-TV, Raleigh/Durham, North Carolina; WRDC-TV, Raleigh/Durham, North Carolina; WLOS-TV, Asheville, North Carolina, WMMP-TV, Charleston, South Carolina; WTAT-TV, Charleston, South Carolina; WMYA-TV, Anderson, South Carolina; WICS-TV and WICD-TV in Springfield/Champaign, Illinois and WCGV-TV and WVTV-TV in Milwaukee, Wisconsin.  The FCC is in the process of considering the renewal applications and we believe the petitions have no merit.

4.NOTES PAYABLE AND COMMERCIAL BANK FINANCING

In January 2012, we drew $180.0 million of the incremental Term Loan B to fund the asset acquisition of Four Points, which closed January 1, 2012.  In addition, in April 2012, we drew $157.5 million of the incremental Term Loan A and $192.5 million of the incremental Term Loan B under our senior secured credit facility to fund the asset acquisition of Freedom, which closed April 1, 2012.  During the three months ended March 31, 2012, we repaid the $12.0 million we had previously drawn on our revolver, and as of March 31, 2012 we had no amounts drawn on our revolver.

5.EARNINGS PER SHARE

The following table reconciles income (numerator) and shares (denominator) used in our computations of earnings per share for the periods presented (in thousands):

	Three Months Ended March 31,
	2012			2011
Income (Numerator)
Income from continuing operations	$	29,141		$	15,234
Income impact of assumed conversion of the 4.875% Notes, net of taxes	45			42
Net loss attributable to noncontrolling interests included in continuing operations	285			152
Numerator for diluted earnings per common share from continuing operations available to common shareholders	29,471			15,428
Loss from discontinued operations, net of taxes	(67		)	(107		)
Numerator for diluted earnings available to common shareholders	$	29,404		$	15,321
Shares (Denominator)
Weighted-average common shares outstanding	80,852			80,367
Dilutive effect of stock-settled appreciation rights, restricted stock awards and outstanding stock options	21			69
Dilutive effect of 4.875% Notes	254			254
Weighted-average common and common equivalent shares outstanding	81,127			80,690

Potentially dilutive securities representing 1.5 million and 4.2 million shares of common stock for the three months ended March 31, 2012 and 2011, respectively, were excluded from the computation of diluted earnings per common share for these periods because their effect would have been antidilutive.  The decrease in potentially dilutive securities is primarily related to the full redemption of our 6.0% Convertible Debentures (6.0% Notes) in April 2011.  The net income per share amounts are the same for Class A and Class B Common Stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

6.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 and some of our Class A Common Stock.  We engaged in the following transactions with them and/or entities in which they have substantial interests.

Related Person Leases.  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 $1.1 million for each of the three months ended March 31, 2012 and 2011.

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Bay TV.  In January 1999, we entered into a LMA with Bay Television, Inc. (Bay TV), which owns the television station WTTA-TV in Tampa/St. Petersburg, Florida market.  Our controlling shareholders own a substantial portion of the equity of Bay TV.  Payments made to Bay TV were $1.8 million and $0.8 million for the three months ended March 31, 2012 and 2011, respectively.

Cunningham Broadcasting Corporation.  We have options from trusts established by Carolyn C. Smith, a parent of our controlling shareholders, for the benefit of her grandchildren that will grant us the right to acquire, subject to applicable FCC rules and regulations, 100% of the capital stock of Cunningham Broadcasting Corporation (Cunningham) or 100% of the capital stock or assets of Cunningham’s individual subsidiaries.  As of March 31, 2012 Cunningham was the owner-operator and FCC licensee of: WNUV-TV, Baltimore, Maryland; WRGT-TV, Dayton, Ohio; WVAH-TV, Charleston, West Virginia; WTAT-TV, Charleston, South Carolina; WMYA-TV, Anderson, South Carolina; WTTE-TV, Columbus, Ohio; and WDBB-TV, Birmingham, Alabama (collectively the Cunningham Stations).

In addition to the option agreement, we entered into five-year LMAs (with five-year renewal terms at our option) with Cunningham pursuant to which we provide programming to Cunningham for airing on the Cunningham Stations.

On October 28, 2009, we entered into amendments and/or restatements of the following agreements between Cunningham and us: (i) the LMAs, (ii) option agreements to acquire Cunningham stock and (iii) certain acquisition or merger agreements relating to the Cunningham Stations.  Such amendments and/or restatements became effective on November 5, 2009.

In consideration of the new terms of the LMAs, options and other agreements, beginning on January 1, 2010 and ending on July 1, 2012, we are obligated to pay Cunningham the sum of approximately $29.1 million in 10 quarterly installments of $2.75 million and one quarterly payment of approximately $1.6 million, which amounts will be used to pay off Cunningham’s bank credit facility and which amounts will be credited toward the purchase price for each Cunningham station.  An additional $3.9 million will be paid in two installments on July 1, 2012 and October 1, 2012 as an additional LMA fee.  The aggregate purchase price of the television stations, $78.5 million pursuant to certain acquisition or merger agreements, will be decreased by each payment made by us to Cunningham up to $29.1 million in the aggregate, pursuant to the foregoing transactions with Cunningham as such payments are made.  Beginning on January 1, 2013, we will be obligated to pay Cunningham an annual LMA fee for the television stations equal to the greater of (i) 3% of each station’s annual net broadcast revenue and (ii) $5.0 million.  The amended or restated LMAs and option agreements have been approved pursuant to our related person transaction policy.

We continue to reimburse Cunningham for 100% of its operating costs, as well as pay Cunningham a monthly payment of $50,000 through December 2012.  In accordance with the effective date of the abovementioned amendments and/or restatements, the $50,000 monthly payment no longer reduces the option exercise price.

We made payments to Cunningham under these LMA and other agreements of $3.9 million and $4.2 million for the three months ended March 31, 2012 and 2011, respectively.  For each of the three months ended March 31, 2012 and 2011, Cunningham Stations provided us with approximately $23.3 million of total revenue.  The financial statements for Cunningham are included in our consolidated financial statements for all periods presented.  Our Bank Credit Agreement contains certain cross-default provisions with certain material third-party licenses.  As of March 31, 2012, Cunningham was the sole material third-party licensee.

Atlantic Automotive.  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 Automotive.  We received payments for advertising totaling less than $0.1 million for each of the three months ended March 31, 2012 and 2011.  We paid $0.2 million for vehicles and related vehicle services from Atlantic Automotive for each of the three months ended March 31, 2012 and 2011.

Thomas & Libowitz P.A.  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.  We paid fees of $0.2 million and $0.1 million to Thomas & Libowitz during the three months ended March 31, 2012 and 2011, respectively.

Charter Aircraft.  From time to time, we charter aircraft owned by certain controlling shareholders.  We incurred $0.1 million and less than $0.1 million for the three months ended March 31, 2012 and 2011, respectively, related to these arrangements.

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7.SEGMENT DATA:

We measure segment performance based on operating income (loss).  Our broadcast segment includes stations in 45 markets, of which 11 markets are operated pursuant to LMAs, located predominately in the eastern, mid-western and southern United States.  Our other operating divisions segment primarily earned revenues from sign design and fabrication; regional security alarm operating and bulk acquisitions and real estate ventures.  All of our other operating divisions are located within the United States.  Corporate costs primarily include our costs to operate as a public company and to operate our corporate headquarters location.  Corporate is not a reportable segment.  We had approximately $170.8 million and $168.7 million of intercompany loans between the broadcast segment, operating divisions segment and corporate as of March 31, 2012 and 2011, respectively.  We had $5.0 million and $4.8 million in intercompany interest expense related to intercompany loans between the broadcast segment, other operating divisions segment and corporate for the three months ended March 31, 2012, and 2011, respectively.  Intercompany loans and interest expense are excluded from the tables below.  All other intercompany transactions are immaterial.

Financial information for our operating segments are included in the following tables for the periods presented (in thousands).

For the three months ended March 31, 2012	Broadcast		Other Operating Divisions			Corporate			Consolidated
Revenue	$	209,888	$	13,948		$	—		$	223,836
Depreciation of property and equipment	8,699		407			383			9,489
Amortization of definite-lived intangible assets and other assets	4,567		1,332			—			5,899
Amortization of program contract costs and net realizable value adjustments	14,280		—			—			14,280
General and administrative overhead expenses	7,903		611			853			9,367
Operating income (loss)	61,830		(672		)	(1,236		)	59,922
Interest expense	—		854			26,533			27,387
Income from equity and cost method investments	—		1,276			—			1,276
Assets	1,501,147		234,950			35,148			1,771,245

For the three months ended March 31, 2011	Broadcast		Other Operating Divisions		Corporate			Consolidated
Revenue	$	173,183	$	9,426	$	—		$	182,609
Depreciation of property and equipment	7,345		310		405			8,060
Amortization of definite-lived intangible assets and other assets	3,955		841		—			4,796
Amortization of program contract costs and net realizable value adjustments	12,618		—		—			12,618
Impairment of goodwill, intangible and other assets	398		—		—			398
General and administrative overhead expenses	7,632		282		750			8,664
Operating income (loss)	52,628		8		(1,160		)	51,476
Interest expense	—		627		28,540			29,167
Income from equity and cost method investments	—		11		—			11

8.FAIR VALUE MEASUREMENTS:

Accounting guidance provides for valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).  A fair value hierarchy using three broad levels prioritizes the inputs to valuation techniques used to measure fair value.  The following is a brief description of those three levels:

·Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

·Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

·Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

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The carrying value and fair value of our notes, debentures, program contracts payable and non-cancelable commitments for the periods presented (in thousands):

	March 31, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
4.875% Convertible Senior Notes due 2018	$	5,685	$	5,685	$	5,685	$	5,685
3.0% Convertible Senior Notes due 2027	5,400		5,400		5,400		5,400
8.375% Senior Notes due 2018	234,594		258,167		234,512		246,884
9.25% Senior Second Lien Notes due 2017	489,403		557,500		489,052		549,690
Term Loan A	112,844		111,997		115,000		112,700
Term Loan B	394,348		399,924		217,002		221,700
Cunningham Bank Credit Facility	8,225		8,292		10,967		11,100
Active program contracts payable	83,466		73,162		91,450		88,699
Future program liabilities (a)	135,285		114,260		125,075		105,166

(a)Future program liabilities reflect a license agreement for program material that is not yet available for its first showing or telecast and is, therefore, not recorded as an asset or liability on our balance sheet.  The carrying value reflects the undiscounted future payments.

The fair value of our 8.375% Senior Notes due 2018 (the 8.375% Notes) and 9.25% Senior Second Lien Notes due 2017 (the 9.25% Notes) is determined using quoted prices using Level 2 hierarchy inputs described above.  The carrying value of our 3.0% and 4.875% Notes approximates their fair value using Level 3 hierarchy inputs.  Our Term Loan A, Term Loan B and Cunningham’s bank credit facility are fair valued using Level 2 hierarchy inputs.

Our estimates of the fair value of active program contracts payable and future program liabilities were based on discounted cash flows using Level 3 inputs described above.  The discount rate represents an estimate of a market participants’ return and risk applicable to program contracts.  The discount rate used to determine the fair value of active and future program liabilities was 8.00% as of March 31, 2012 and December 31, 2011.  Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement.

9.CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:

Sinclair Television Group, Inc. (STG), a wholly-owned subsidiary and the television operating subsidiary of Sinclair Broadcast Group, Inc. (SBG), is the primary obligor under the Bank Credit Agreement, the 8.375% Notes and the 9.25% Notes.  Our Class A Common Stock, Class B Common Stock, the 4.875% Notes and the 3.0% Notes, as of March 31, 2012, were obligations or securities of SBG and not obligations or securities of STG.  SBG was the obligor of the 6.0% Notes until they were fully redeemed in 2011.  SBG is a guarantor under the Bank Credit Agreement, the 9.25% Notes and the 8.375% Notes.  As of March 31, 2012 our consolidated total debt of $1,367.2 million included $1,281.3 million of debt related to STG and its subsidiaries of which SBG guaranteed $1,231.2 million.

SBG, KDSM, LLC, a wholly-owned subsidiary of SBG, and STG’s wholly-owned subsidiaries (guarantor subsidiaries), have fully and unconditionally guaranteed, subject to certain customary automatic release provisions, 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 comprehensive income 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 SEC Regulation S-X, Rule 3-10.

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CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2012

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
Cash	$	—		$	17,311		$	980		$	8,511		$	—		$	26,802
Accounts receivable, net	40			623			131,415			5,346			(347		)	137,077
Other current assets	383			3,505			51,212			3,569			(284		)	58,385
Total current assets	423			21,439			183,607			17,426			(631		)	222,264
Property and equipment, net	7,851			9,195			203,127			100,819			(6,558		)	314,434
Investment in consolidated subsidiaries	—			758,910			—			—			(758,910		)	—
Restricted cash	—			38,506			223			—			—			38,729
Other long-term assets	86,356			360,943			14,924			113,475			(433,023		)	142,675
Total other long-term assets	86,356			1,158,359			15,147			113,475			(1,191,933		)	181,404
Acquired intangible assets	—			—			996,027			74,153			(17,037		)	1,053,143
Total assets	$	94,630		$	1,188,993		$	1,397,908		$	305,873		$	(1,216,159	)	$	1,771,245
Accounts payable and accrued liabilities	$	331		$	41,099		$	59,891		$	8,210		$	(2,851	)	$	106,680
Current portion of long-term debt	435			15,181			642			19,979			—			36,237
Current portion of affiliate long-term debt	1,032			—			2,073			321			(321		)	3,105
Other current liabilities	—			—			72,121			260			—			72,381
Total current liabilities	1,798			56,280			134,727			28,770			(3,172		)	218,403
Long-term debt	12,738			1,217,534			37,312			44,543			—			1,312,127
Affiliate long-term debt	7,129			—			8,600			252,118			(252,118		)	15,729
Dividends in excess of investment in consolidated subsidiaries	119,573			—			—			—			(119,573		)	—
Other liabilities	51,210			2,152			458,959			63,010			(263,134		)	312,197
Total liabilities	192,448			1,275,966			639,598			388,441			(637,997		)	1,858,456
Common stock	811			—			10			—			(10		)	811
Additional paid-in capital	620,855			(261		)	404,886			54,155			(458,780		)	620,855
Accumulated (deficit) earnings	(714,740		)	(83,705		)	355,735			(137,117		)	(134,913		)	(714,740		)
Accumulated other comprehensive (loss) income	(4,744		)	(3,007		)	(2,321		)	394			4,934			(4,744		)
Total Sinclair Broadcast Group (deficit) equity	(97,818		)	(86,973		)	758,310			(82,568		)	(588,769		)	(97,818		)
Noncontrolling interests in consolidated subsidiaries	—			—			—			—			10,607			10,607
Total liabilities and equity (deficit)	$	94,630		$	1,188,993		$	1,397,908		$	305,873		$	(1,216,159	)	$	1,771,245

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CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2011

(in thousands)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
Cash	$	—		$	188		$	313		$	12,466		$	—		$	12,967
Accounts receivable, net	60			348			126,590			6,308			(139		)	133,167
Other current assets	2,430			2,561			55,855			3,021			(284		)	63,583
Total current assets	2,490			3,097			182,758			21,795			(423		)	209,717
Property and equipment, net	8,234			7,783			171,749			100,362			(6,607		)	281,521
Investment in consolidated subsidiaries	—			575,848			—			—			(575,848		)	—
Restricted cash	—			58,503			223			—			—			58,726
Other long-term assets	86,186			353,929			17,209			99,683			(418,014		)	138,993
Total other long-term assets	86,186			988,280			17,432			99,683			(993,862		)	197,719
Acquired intangible assets	—			—			826,175			70,492			(14,207		)	882,460
Total assets	$	96,910		$	999,160		$	1,198,114		$	292,332		$	(1,015,099	)	$	1,571,417
Accounts payable and accrued liabilities	$	1,499		$	30,888		$	51,119		$	7,555		$	(2,491	)	$	88,570
Current portion of long-term debt	420			14,450			589			22,736			—			38,195
Current portion of affiliate long-term debt	998			—			2,016			210			(210		)	3,014
Other current liabilities	—			—			65,431			372			—			65,803
Total current liabilities	2,917			45,338			119,155			30,873			(2,701		)	195,582
Long-term debt	12,811			1,055,446			37,502			42,512			—			1,148,271
Affiliate long-term debt	7,405			—			9,140			246,552			(246,552		)	16,545
Dividends in excess of investment in consolidated subsidiaries	143,857			—			—			—			(143,857		)	—
Other liabilities	51,095			2,222			457,003			58,222			(246,161		)	322,381
Total liabilities	218,085			1,103,006			622,800			378,159			(639,271		)	1,682,779
Common stock	809			—			10			—			(10		)	809
Additional paid-in capital	617,375			7,755			264,413			54,304			(326,472		)	617,375
Accumulated (deficit) earnings	(734,511		)	(108,558		)	313,269			(140,581		)	(64,130		)	(734,511		)
Accumulated other comprehensive (loss) income	(4,848		)	(3,043		)	(2,378		)	450			4,971			(4,848		)
Total Sinclair Broadcast Group shareholders’ (deficit) equity	(121,175		)	(103,846		)	575,314			(85,827		)	(385,641		)	(121,175		)
Noncontrolling interests in consolidated subsidiaries	—			—			—			—			9,813			9,813
Total liabilities and equity (deficit)	$	96,910		$	999,160		$	1,198,114		$	292,332		$	(1,015,099	)	$	1,571,417

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
Net revenue	$	—		$	—		$	210,208		$	15,674		$	(2,046	)	$	223,836
Program and production	—			8			61,891			76			(1,772		)	60,203
Selling, general and administrative	853			13,631			29,918			1,195			(101		)	45,496
Depreciation, amortization and other operating expenses	383			351			43,108			14,342			31			58,215
Total operating expenses	1,236			13,990			134,917			15,613			(1,842		)	163,914
Operating (loss) income	(1,236		)	(13,990		)	75,291			61			(204		)	59,922
Equity in earnings of consolidated subsidiaries	30,191			51,860			—			—			(82,051		)	—
Interest expense	(340		)	(24,764		)	(1,219		)	(6,244		)	5,180			(27,387		)
Other income (expense)	600			(283		)	23			1,201			(129		)	1,412
Total other income (expense)	30,451			26,813			(1,196		)	(5,043		)	(77,000		)	(25,975		)
Income tax benefit (provision)	144			8,125			(21,247		)	8,172			—			(4,806		)
Loss from discontinued operations	—			(67		)	—						—			(67		)
Net income (loss)	29,359			20,881			52,848			3,190			(77,204		)	29,074
Net loss attributable to the noncontrolling interests	—			—			—			—			285			285
Net income (loss) attributable to Sinclair Broadcast Group	$	29,359		$	20,881		$	52,848		$	3,190		$	(76,919	)	$	29,359
Comprehensive income	$	29,178		$	20,985		$	52,848		$	3,190		$	(77,029	)	$	29,178

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2011

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
Net revenue	$	—		$	—		$	173,459		$	11,396		$	(2,246	)	$	182,609
Program and production	—			307			43,984			94			(2,040		)	42,345
Selling, general and administrative	754			7,628			30,111			829			(96		)	39,226
Depreciation, amortization and other operating expenses	405			135			39,468			9,522			32			49,562
Total operating expenses	1,159			8,070			113,563			10,445			(2,104		)	131,133
Operating (loss) income	(1,159		)	(8,070		)	59,896			951			(142		)	51,476
Equity in earnings of consolidated subsidiaries	17,402			35,323			—			—			(52,725		)	—
Interest expense	(1,958		)	(25,489		)	(1,232		)	(5,545		)	5,057			(29,167		)
Gain on sales of securities	—			—			—			391			(391		)	—
Other income (expense)	100			5,435			(4,640		)	394			(114		)	1,175
Total other income (expense)	15,544			15,269			(5,872		)	(4,760		)	(48,173		)	(27,992		)
Income tax benefit (provision)	894			8,245			(17,739		)	350			—			(8,250		)
Loss from discontinued operations	—			(107		)	—			—			—			(107		)
Net income (loss)	15,279			15,337			36,285			(3,459		)	(48,315		)	15,127
Net loss attributable to the noncontrolling interests	—			—			—			—			152			152
Net income (loss) attributable to Sinclair Broadcast Group	$	15,279		$	15,337		$	36,285		$	(3,459	)	$	(48,163	)	$	15,279
Comprehensive income	$	15,168		$	15,378		$	36,285		$	(3,459	)	$	(48,204	)	$	15,168

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(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 FROM (USED IN) OPERATING ACTIVITIES	$	256		$	(22,191	)	$	85,987		$	1,682		$	1,749		$	67,483
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of property and equipment	—			(1,741		)	(4,675		)	(320		)	—			(6,736		)
Payments for acquisitions of television stations	—			—			(205,622		)	—			—			(205,622		)
Purchase of alarm monitoring contracts	—			—			—			(3,035		)	—			(3,035		)
Decrease in restricted cash	—			20,000			—			—			—			20,000
Investment in equity and cost method investees	—			—			—			(5,503		)	—			(5,503		)
Proceeds from insurance settlement	—			—			19			—			—			19
Loans to affiliates	(44		)	(456		)	—			—			—			(500		)
Proceeds from loans to affiliates	64			353			—			—			—			417
Net cash flows from (used in) investing activities	20			18,156			(210,278		)	(8,858		)	—			(200,960		)
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	—			178,200			—			6,282			—			184,482
Repayments of notes payable, commercial bank financing and capital leases	(100		)	(16,252		)	(128		)	(7,049		)	—			(23,529		)
Proceeds from share based awards	279			—			—			—			—			279
Dividends paid on Class A and Class B Common Stock	(9,718		)	—			—			—			130			(9,588		)
Payments for deferred financing costs	—			(3,519		)	—			—			—			(3,519		)
Distributions to noncontrolling interests	—			—			—			(88		)	—			(88		)
Repayment of notes and capital leases to affiliates	(242		)	—			(483		)	—			—			(725		)
Increase (decrease) in intercompany payables	9,505			(137,271		)	125,569			4,076			(1,879		)	—
Net cash flows (used in) from financing activities	(276		)	21,158			124,958			3,221			(1,749		)	147,312
NET DECREASE IN CASH AND CASH EQUIVALENTS	—			17,123			667			(3,955		)	—			13,835
CASH AND CASH EQUIVALENTS, beginning of period	—			188			313			12,466			—			12,967
CASH AND CASH EQUIVALENTS, end of period	$	—		$	17,311		$	980		$	8,511		$	—		$	26,802

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2011

(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	$	(2,759	)	$	(6,823	)	$	68,570		$	(2,745	)	$	(1,286	)	$	54,957
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
Acquisition of property and equipment	—			(4,580		)	(1,394		)	(111		)	—			(6,085		)
Purchase of alarm monitoring contracts	—			—			—			(1,755		)	—			(1,755		)
Distributions from investments	—			—			—			832			—			832
Investment in equity and cost method investees	(2,000		)	—			—			(6,064		)	—			(8,064		)
Decrease in restricted cash	—			5,058			—			—			—			5,058
Proceeds from sales of assets	—			—			26			—			—			26
Proceeds from sale of securities	—			—			—			1,808			(1,808		)	—
Proceeds from insurance settlement	—			—			1,736			—			—			1,736
Loans to affiliates	(61		)	—			—			—			—			(61		)
Proceeds from loans to affiliates	89			—			—			—			—			89
Net cash flows (used in) from investing activities	(1,972		)	478			368			(5,290		)	(1,808		)	(8,224		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	—			124,719			—			3,614			—			128,333
Repayments of notes payable, commercial bank financing and capital leases	(86		)	(55,467		)	(99		)	(6,062		)	—			(61,714		)
Proceeds from exercise of stock options, including excess tax benefits of share based payments	1,737			—			—			—			—			1,737
Proceeds from Class A Common Stock sold by variable interest entity	—			—			—			—			1,808			1,808
Payments for deferred financing costs	—			(4,216		)	—			(66		)	—			(4,282		)
Distributions to noncontrolling interest	—			—			—			(39		)	—			(39		)
Dividends paid on Class A and Class B Common Stock	(9,684		)	—			—			—			93			(9,591		)
Repayment of notes and capital leases to affiliates	(210		)	—			(642		)	—			—			(852		)
Increase (decrease) in intercompany payables	12,974			45,149			(68,954		)	9,638			1,193			—
Net cash flows from (used in) financing activities	4,731			110,185			(69,695		)	7,085			3,094			55,400
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			103,840			(757		)	(950		)	—			102,133
CASH AND CASH EQUIVALENTS, beginning of period	—			5,071			1,022			15,881			—			21,974
CASH AND CASH EQUIVALENTS, end of period	$	—		$	108,911		$	265		$	14,931		$	—		$	124,107

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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 Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) and 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 and credit and capital markets;

·consumer confidence;

·the potential impact of changes in tax law;

·the activities of our competitors;

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

·natural disasters that impact our advertisers and our stations;

Industry risks

·the business conditions of our advertisers particularly in the automotive and service industries;

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

·availability and cost of programming and the continued volatility of networks and syndicators that provide us with programming content;

·the effects of the Federal Communications Commission’s (FCC’s) National Broadband Plan and the auctioning and potential reallocation of our broadcasting spectrum;

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

·labor disputes and legislation and other union activity associated with film, acting, writing and other guilds and professional sports leagues;

·the broadcasting community’s ability to develop a viable mobile digital broadcast television (mobile DTV) strategy and platform and the consumer’s appetite for mobile television;

·the operation of low power devices in the broadcast spectrum, which could interfere with our broadcast signals;

·the impact of reverse network compensation payments charged by networks pursuant to their affiliation agreements with broadcasters requiring compensation for network programming;

·the effects of new ratings system technologies including “people meters” and “set-top boxes,” and the ability of such technologies to be a reliable standard that can be used by advertisers;

·the impact of new FCC rules requiring broadcast stations to publish, among other information, political advertising rates online;

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

Risks specific to us

·the effectiveness of our management;

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

·our ability to service our debt obligations and operate our business under restrictions contained in our financing agreements;

·our ability to successfully renegotiate retransmission consent agreements;

·our ability to renew our FCC licenses;

·our ability to obtain FCC approval for the purchase of any future acquisitions, as well as, in certain cases, customary antitrust clearance for any future acquisitions;

·our ability to successfully integrate any acquired businesses;

·our ability to maintain our affiliation and programming service agreements with our networks and program service providers and at renewal, to successfully negotiate these agreements with favorable terms;

·our ability to effectively respond to technology affecting our industry and to increasing competition from other media

23

providers;

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

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

·the successful execution of our multi-channel broadcasting initiatives including mobile DTV; and

·the results of prior year tax audits by taxing authorities.

Other matters set forth in this report and other reports filed with the Securities and Exchange Commission, including the Risk Factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011 may also cause actual results in the future to differ materially from those described in the forward-looking statements.  However, additional factors and risks not currently known to us or that we currently deem immaterial may also cause actual results in the future to differ materially from those described in the forward-looking statements.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which it is made.  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.

The following table sets forth certain operating data for the periods presented:

STATEMENTS OF OPERATIONS DATA

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

	Three Months Ended March 31,
	2012			2011
Statement of Operations Data:
Net broadcast revenues (a)	$	192,204		$	155,961
Revenues realized from station barter arrangements	17,684			17,222
Other operating divisions revenues	13,948			9,426
Total revenues	223,836			182,609
Station production expenses	60,203			42,345
Station selling, general and administrative expenses	36,129			30,562
Expenses recognized from station barter arrangements	16,257			15,727
Amortization of program contract costs and net realizable value adjustments	14,280			12,618
Depreciation and amortization expenses (b)	15,388			12,856
Impairment of goodwill, intangible and other assets	—			398
Other operating divisions expenses	12,290			7,963
Corporate general and administrative expenses	9,367			8,664
Operating income	59,922			51,476
Interest expense and amortization of debt discount and deferred financing costs	(27,387		)	(29,167		)
Loss from extinguishment of debt	(335		)	(924		)
Income from equity and cost method investees	1,276			11
Gain on insurance settlement	19			1,723
Other income, net	452			365
Income from continuing operations before income taxes	33,947			23,484
Income tax provision	(4,806		)	(8,250		)
Income from continuing operations	29,141			15,234
Discontinued operations:
Loss from discontinued operations, net of taxes	(67		)	(107		)
Net income	29,074			15,127
Net loss attributable to the noncontrolling interests	285			152
Net income attributable to Sinclair Broadcast Group	$	29,359		$	15,279
Basic and Diluted Earnings Per Common Share Attributable to Sinclair Broadcast Group:
Earnings per share from continuing operations	$	0.36		$	0.19
Earnings per share	$	0.36		$	0.19

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	March 31, 2012			December 31, 2011
Balance Sheet Data:
Cash and cash equivalents	$	26,802		$	12,967
Total assets	$	1,771,245		$	1,571,417
Total debt (c)	$	1,367,198		$	1,206,025
Total equity (deficit)	$	(87,211	)	$	(111,362	)

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

(b)Depreciation and amortization includes depreciation and amortization 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.

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 events since December 31, 2011;

Results of Operations — an analysis of our revenues and expenses for the three months ended March 31, 2012 and 2011, including comparisons between quarters and expectations for the three months ended June 30, 2012.

Liquidity and Capital Resources — a discussion of our primary sources of liquidity, an analysis of our cash flows from or used in operating activities, investing activities and financing activities and an update of our debt refinancings during the three months ended March 31, 2012.

EXECUTIVE OVERVIEW

First Quarter 2012 Events

·In January, we closed the asset acquisition of Four Points Media Group LLC (Four Points) for $200.0 million, and financed the acquisition with a $180.0 million draw under a recently raised incremental Term Loan B commitment under our amended Bank Credit Agreement plus a $20.0 million cash escrow previously paid; and

·In February, our Board of Directors declared a quarterly dividend of $0.12 per share.

Other Events

·On April 2, 2012, we closed the asset acquisition of Freedom Communications (Freedom) for $385.0 million, and financed the acquisition with a draw under a recently raised $157.5 million incremental Term loan A and a $192.5 million incremental Term loan B under our amended Bank Credit Agreement plus a $38.5 million escrow previously paid.

·In May, our Board of Directors declared a quarterly dividend of $0.12 per share.

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.  The results of the acquired stations from Four Points are included in our results of our continuing operations as of January 1, 2012, the acquisition date.  Unless otherwise indicated, references in this discussion and analysis to the first quarter of 2012 and 2011 refer to the three months ended March 31, 2012 and 2011, respectively.  Additionally, any references to the second, third or fourth quarter are to the three months ended June 30, September 30, and December 31, respectively, for the year being discussed.  We have two reportable segments, “broadcast” and “other operating divisions” that are disclosed separately from our corporate activities.

SEASONALITY/CYCLICALITY

Our operating results are usually subject to seasonal fluctuations.  Usually, the second and fourth quarter operating results are higher than first and third quarters because advertising expenditures are increased in anticipation of certain seasonal and holiday spending by consumers.

Our operating results are usually subject to fluctuations from political advertising.  In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising expenditures preceding local and national elections.

25

Additionally, every four years, political spending is usually elevated further due to advertising expenditures preceding the presidential election.

BROADCAST SEGMENT

Broadcast Revenue

The following table presents our revenues from continuing operations, net of agency commissions, for the periods presented (in millions):

	For the Three Months Ended March 31,
	2012		2011		Percent Change
Local revenues:
Non-political	$	152.2	$	120.8	26.0	%
Political	0.6		0.2			(a)
Total local	152.8		121.0		26.3	%
National revenues:
Non-political	36.4		34.6		5.2	%
Political	3.0		0.4			(a)
Total national	39.4		35.0		12.6	%
Total net broadcast revenues	$	192.2	$	156.0	23.2	%

(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.  Net broadcast revenues increased $36.2 million when comparing the first quarter 2012 to the same period in 2011, of which $18.4 million was related to stations acquired during the first quarter 2012.  Additionally, revenues earned pursuant to the Local Marketing Agreement (LMA) with the Freedom stations during the first quarter 2012 included $2.2 million for management services performed and $7.8 million of pass-through costs.  The remaining increase was due to increases in advertising revenues generated from the automotive, political, medical and media sectors, partially offset by decreases in the telecommunications, pharmacy-cosmetics, entertainment and fast food sectors.  Excluding the stations acquired in the first quarter 2012, automotive, which typically is our largest category, represented 21.3% of the quarter’s net time sales and was up 2.0% in the first quarter 2012 compared to the same period in 2011.

From a network affiliation or program service arrangement perspective, the following table sets forth our affiliate percentages of net time sales for the periods presented:

	# of	Percent of Net Time Sales for the Three months ended March 31,				Net Time Sales Percent
	Stations (a)	2012		2011		Change
FOX	20	42.9	%	49.3	%	(4.4	)%
ABC	9	17.7	%	18.4	%	5.6	%
MyNetworkTV	18	15.6	%	15.6	%	10.4	%
The CW	13	12.1	%	13.1	%	1.5	%
CBS	4	10.5	%	2.6	%	339.1	%
NBC	1	0.6	%	0.5	%	28.8	%
Digital	(b)	0.5	%	0.5	%	7.6	%
Azteca	1	0.1	%	—	%	—	%
Total	66

(a)During the fourth quarter of 2011, we entered into a definitive agreement to purchase the assets of Freedom.  As of March 31, 2012, we were operating the Freedom stations pursuant to a LMA.  We closed on the acquisition of the Freedom stations effective April 1, 2012.  The Freedom stations include the following network affiliations, which are not reflected in the station totals above: CBS (5 stations), ABC (2 stations) and The CW (1 station).  The net time sales of the Freedom stations are not included in our revenues for the three months ended March 31, 2012.  We recognized $10.0 million in net broadcast revenues and $7.8 million of station production expenses related to services performed pursuant to the LMA.  The stations’ net time sales will be included in our revenues beginning April 1, 2012.

(b)We broadcast programming from network affiliations or program service arrangements with TheCoolTV, The Country Network, CBS (rebroadcasted content from other primary channels within the same markets), The CW, MyNetworkTV, This TV, LATV, Azteca, Telemundo and Estrella on additional channels through our stations’ second and third digital signals.

26

Political Revenues.  Political revenues increased by $3.0 million to $3.6 million for the first quarter 2012 when compared to the same period in 2011, of which $0.4 million was related to the stations acquired during the first quarter 2012.  Political revenues are typically lower in non-election years such as 2011 and have increased in 2012 due to the presidential election.

Local Revenues.  Excluding political revenues, our local broadcast revenues, which include local times sales, retransmission revenues and other local revenues, were up $31.4 million for the first quarter 2012 when compared to the same period in 2011, of which $9.8 million related to the stations acquired in the first quarter 2012.  Additionally, revenues earned pursuant to the LMA with the Freedom stations during the first quarter 2012 included $2.2 million for management services performed and $7.8 million of pass-through costs.  The remaining increase is due to an increase in advertising spending particularly in the automotive, media and medical sectors and an increase in retransmission revenues from MVPDs.  These increases were partially offset by a decrease due to a change in networks for the Super Bowl programming from FOX to NBC.

National Revenues.  Excluding political revenues, our national broadcast revenues, which include national time sales and other national revenues, were up $1.8 million for the first quarter 2012 when compared to the same period in 2011, of which $4.4 million related to the stations acquired in the first quarter 2012.  The partially offsetting decrease is due to a decrease in advertising spending by the telecommunication, drugs and cosmetics and automotive sectors.

Broadcast Expenses

The following table presents our significant expense categories in our broadcast segment for the periods presented (in millions):

	For the Three Months Ended March 31,				Percent Change (Increase/
	2012		2011		(Decrease))
Station production expenses	$	60.2	$	42.3	42.3	%
Station selling, general and administrative expenses	$	36.1	$	30.6	18.0	%
Amortization of program contract costs and net realizable value adjustments	$	14.3	$	12.6	13.5	%
Corporate general and administrative expenses	$	7.9	$	7.6	3.9	%
Gain on insurance settlement	$	—	$	1.7	(100.0	)%
Impairment of goodwill, intangible and other assets	$	—	$	0.4	(100.0	)%

Station production expenses.  Station production expenses increased $17.9 million during the first quarter 2012 compared to the same period in 2011, of which $5.6 million related to the stations acquired in the first quarter 2012 and $7.8 million of expenses pursuant to the LMA with the Freedom stations during the first quarter 2012.  The remaining increase is primarily due to an increase in compensation expense, an increase in fees pursuant to network affiliation agreements and increased rating service fees due to annual scheduled rate increases.

We expect station production expenses in second quarter 2012 to increase compared to first quarter 2012.

Station selling, general and administrative expenses. Station selling, general and administrative expenses increased $5.5 million during the first quarter 2012 compared to the same period in 2011, of which $4.2 million related to the stations acquired in the first quarter 2012. The remaining increase is primarily due to an increase in compensation expense related to an increase in employee and management bonuses, increased local and national sales commission costs, increased building rent expense and increased group insurance costs.

We expect station selling, general and administrative expenses in second quarter 2012 to increase compared to first quarter 2012.

Amortization of program contract costs and net realizable value adjustments.  The amortization of program contract costs increased during the first quarter 2012 compared to the same period in 2011.  This increase is primarily due to entering into new contracts and the effect of stations acquired in the first quarter 2012.  We expect program contract amortization to trend higher in second quarter 2012 compared to first quarter 2012.

Corporate general and administrative expenses.  See explanation under Corporate and Unallocated Expenses.

Gain on insurance settlement.  During 2010, our building for WCGV-TV and WVTV-TV in Milwaukee, Wisconsin flooded due to massive storms.  In the first quarter 2011, we recognized a gain on insurance settlement of $1.7 million related to repairing the building and replacing certain equipment.

Impairment of goodwill, intangible and other assets.  During first quarter of 2011, we recorded impairments of $0.4 million related to our broadcast licenses.  There were no impairments in the first quarter 2012.

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OTHER OPERATING DIVISIONS SEGMENT

Triangle Sign & Service, LLC. (Triangle), a sign designer/fabricator, Alarm Funding Associates, LLC (Alarm Funding), a regional security alarm operating and bulk acquisition company, real estate ventures, and other nominal businesses make up our other operating divisions segment.  Revenues for our other operating divisions increased $4.5 million to $13.9 million during the first quarter 2012 compared to $9.4 million during the same period in 2011.  The increase is primarily due to acquisitions of new alarm monitoring contracts for Alarm Funding and increased revenues due to the Ring of Honor wrestling franchise we purchased in the second quarter of 2011.  Expenses of our other operating divisions include operating expenses, depreciation and amortization and applicable other income (expense) items such as interest expense, which increased $5.1 million to $14.9 million during the first quarter 2012 compared to $9.8 million during the same period in 2011.  This increase was in correlation with the increase in revenue activity.

A portion of the operating results of Alarm Funding were previously included in discontinued operations in the beginning of 2011 in our consolidated results of operations.  It is no longer our intent to divest a portion of Alarm Funding and therefore all of the operations and net assets of Alarm Funding have been classified as continuing operations in our consolidated financial statement as of March 31, 2012 and 2011.

Income from Equity and Cost Method Investments.  Results of our equity and cost method investments in private investment funds and real estate ventures are included in income from equity and cost method investments in our consolidated statements of operations.  During the quarter ended March 31, 2012, we recorded income of $1.0 million related to our real estate ventures and income of $0.2 million related to certain private investment funds.  During the quarter ended March 31, 2011, we recorded income of $0.3 million related to our real estate ventures and a loss of $0.3 million related to certain private investment funds.

CORPORATE AND UNALLOCATED EXPENSES

	For the Three Months Ended March 31,						Percent Change (Increase/
	2012			2011			(Decrease))
Corporate general and administrative expenses	$	0.9		$	0.8		12.5	%
Interest expense	$	26.5		$	28.5		(7.0	)%
Loss from extinguishment of debt	$	(0.3	)	$	(0.9	)	(66.7	)%
Income tax provision	$	(4.8	)	$	(8.2	)	(41.5	)%

Corporate general and administrative expenses.  We allocate most of our corporate general and administrative expenses to the broadcast segment.  The explanation that follows combines the corporate general and administrative expenses found in the Broadcast Segment section with the corporate general and administrative expenses found in this section, Corporate and Unallocated Expenses.  These results exclude general and administrative costs from our other operating divisions segment which are included in our discussion of expenses in the Other Operating Divisions Segment section.

Corporate general and administrative expenses increased in first quarter 2012 compared to the same period in 2011.  This is primarily due to an increase in transaction costs due to our recent acquisitions.

We expect corporate general and administrative expenses to decrease in the second quarter 2012 compared to first quarter 2012.

Interest expense.  Interest expense has decreased primarily due to the amendments to our Bank Credit Agreement in 2011 offset by additional interest on our incremental borrowing for our Four Points acquisition and approximately $1.0 million of interest expense recorded in the first quarter of 2012 primarily related to fees paid for the undrawn commitment for the Freedom acquisition.  In first quarter 2011, we amended our Bank Credit Agreement and our interest rate was reduced, however, $2.8 million in costs associated with the amendment were expensed as interest.  Additionally, we fully extinguished our 6.0% Notes in the second quarter 2011.  We expect interest expense to increase in second quarter 2012 compared to first quarter 2012 as a result of closing on the acquisition of the Freedom stations.

Loss from extinguishment of debt.   During the first quarter 2012, we drew down on our incremental borrowing for the Four Points acquisition and wrote off a portion of our deferred financing costs and discount on the Term Loan B, resulting in a loss of $0.3 million from extinguishment of debt.  In first quarter 2011, we amended our Bank Credit Agreement and paid down a portion of our Term Loan B resulting in a loss of $0.9 million from extinguishment of debt.

Income tax provision.  The effective tax rate for the three months ended March 31, 2012 including the effects of the noncontrolling interest was a provision of 14.0% as compared to a provision of 34.9% during the same period in 2011.  The decrease in the effective tax rate for the three months ended March 31, 2012 as compared to the same period in 2011 is primarily due to a release

28

of $7.7 million of valuation allowance related to certain deferred tax assets of Cunningham, one of our consolidated variable interest entities (VIEs), as the weight of all available evidence now supports full realization of those deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2012, we had $26.8 million in cash and cash equivalent balances and net working capital of approximately $3.9 million.  Cash generated by our operations and borrowing capacity under the Bank Credit Agreement are used as our primary source of liquidity.  As of March 31, 2012, we had $97.5 million of borrowing capacity available on our Revolving Credit Facility.  We anticipate that existing cash and cash equivalents, cash flow from our operations and borrowing capacity under the Revolving Credit Facility and incremental term loan capacity of $500.0 million, in addition to the $350.0 million of incremental term loans borrowed in April 2012 to fund the asset acquisition of Freedom, will be sufficient to satisfy our debt service obligations, capital expenditure requirements and working capital needs for the next twelve months.  For our long-term liquidity needs, in addition to the sources described above, we may rely upon the issuance of long-term debt, the issuance of equity or other instruments convertible into or exchangeable for equity, or the sale of non-core assets.  However, there can be no assurance that additional financing or capital or buyers of our non-core assets will be available, or that the terms of any transactions will be acceptable or advantageous to us.

We drew $180.0 million of the additional term loans to fund the acquisition of the station assets of Four Points, which closed in January 2012 and drew the remaining $350.0 million of the additional term loans to fund the acquisition of the station assets of Freedom, which closed on April 1, 2012.  As of March 31, 2012, we had no amounts drawn on our revolver.

Sources and Uses of Cash

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

	For the Three Months Ended March 31,
	2012			2011
Net cash flows from operating activities	$	67.5		$	55.0
Cash flows (used in) from investing activities:
Acquisition of property and equipment	$	(6.7	)	$	(6.1	)
Acquisition of television stations	(205.6		)	—
Decrease in restricted cash	20.0			5.1
Dividends and distributions from cost method investees	—			0.8
Purchase of alarm monitoring contracts	(3.0		)	(1.8		)
Investments in equity and cost method investees	(5.5		)	(8.1		)
Other	(0.2		)	1.9
Net cash flows used in investing activities	$	(201.0	)	$	(8.2	)
Cash flows from (used in) financing activities:
Proceeds from notes payable, commercial bank financing and capital leases	$	184.5		$	128.3
Repayments of notes payable, commercial bank financing and capital leases	(23.5		)	(61.7		)
Payments for deferred financing costs	(3.5		)	(4.3		)
Dividends paid on Class A and Class B Common Stock	(9.6		)	(9.6		)
Other	(0.6		)	2.7
Net cash flows from financing activities	$	147.3		$	55.4

Operating Activities

Net cash flows from operating activities increased during the first quarter 2012 compared to the same period in 2011.  During 2012, we received more cash receipts from customers, net of cash payments to vendors, in addition to a decrease in cash paid for interest and a decrease in program payments.

We expect program payments and net interest to increase in the second quarter 2012 compared to the first quarter 2012 as a result of closing on the acquisition of the Freedom stations.

Investing Activities

Net cash flows used in investing activities increased during the first quarter 2012 compared to the same period in 2011.  This increase is primarily due to $205.6 million in payments for acquisitions of television stations, as well as an increase in purchases of

29

alarm monitoring contracts, partially offset by the use of the restricted cash held in escrow for the Four Points acquisition.  This was also slightly offset by a decrease of incremental contributions in our equity and cost method investments.

In second quarter 2012, we anticipate incurring more capital expenditures than incurred in the first quarter 2012.

Financing Activities

Net cash flows from financing activities increased in the first quarter 2012 compared to the same period in 2011.  In January 2012, we drew $180.0 million of incremental Term Loan B to fund the asset acquisition of Four Points, which closed in January 2012.  In February 2012 and May 2012, our Board of Directors declared a quarterly common stock dividend of $0.12 per share.  Future dividends on our common shares, if any, will be at the discretion of our Board of Directors and will depend on several factors including our results of operations, cash requirements and surplus, financial condition, covenant restrictions and other factors that the Board of Directors may deem relevant.

CONTRACTUAL CASH OBLIGATIONS

As of March 31, 2012, our contractual cash obligations increased from what was previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011 primarily due to changes in our debt.  As disclosed above under Liquidity and Capital Resources, during first quarter 2012, we drew $180.0 million of additional term loans to fund the asset acquisition of Four Points, which closed in January 2012.

Additionally, amounts presented under contractual cash obligations disclosed in our Annual Report on Form 10-K, related to potential obligations due pursuant to the LMA with Freedom, are no longer due because the LMA was terminated April 1, 2012, concurrent with the acquisition of those stations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the quantitative and qualitative discussion about market risk previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the design and effectiveness of our disclosure controls and procedures and our internal control over financial reporting as of March 31, 2012.

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 provide reasonable assurance 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 provide reasonable assurance 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.

The term “internal control over financial reporting,” as defined in Rules 13a-15d-15(f) under the Exchange Act, means a process designed by, or under the supervision of our Chief Executive and Chief Financial Officers and effected by our Board of Directors, management and other personnel, 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 (GAAP) and includes those policies and procedures that:

·pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets;

30

·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and expenditures are being made in accordance with authorizations of management or our Board of Directors; and

·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material adverse effect on our financial statements.

Assessment of Effectiveness of Disclosure Controls and Procedures

Based on the evaluation of our disclosure controls and procedures as of March 31, 2012, 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 have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

We are a party to lawsuits and claims from time to time in the ordinary course of business.  Actions currently pending are in various stages and no material judgments or decisions have been rendered by hearing boards or courts in connection with such actions.  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.

ITEM 1A.  RISK FACTORS

There have been no material changes to the Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2011.

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

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

None.

ITEM 5.  OTHER INFORMATION

None.

32

ITEM 6.  EXHIBITS

Exhibit Number	Description
10.1	Stock Appreciation Right Agreement between Sinclair Broadcast Group, Inc., and David D. Smith dated March 9, 2012.
31.1	Certification by David D. Smith, as Chairman and Chief Executive Officer of Sinclair Broadcast Group, Inc., pursuant to Rule 13a-14(a) of the Exchange Act (15 U.S.C. § 7241).
31.2	Certification by David B. Amy, as Chief Financial Officer of Sinclair Broadcast Group, Inc., pursuant to Rule 13a-14(a) of the Exchange Act (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 Rule 13a-14(b) of the Exchange Act and § 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 Rule 13a-14(b) of the Exchange Act and § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C § 1350).
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase

*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

33

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 9th day of May 2012.

SINCLAIR BROADCAST GROUP, INC.
By:	/s/ David R. Bochenek
	David R. Bochenek
	Vice President/Chief Accounting Officer
	(Authorized Officer and Chief Accounting Officer)

34

EXHIBIT INDEX

Exhibit Number	Description
10.1	Stock Appreciation Right Agreement between Sinclair Broadcast Group, Inc., and David D. Smith dated March 9, 2012.
31.1	Certification by David D. Smith, as Chairman and Chief Executive Officer of Sinclair Broadcast Group, Inc., pursuant to Rule 13a-14(a) of the Exchange Act (15 U.S.C. § 7241).
31.2	Certification by David B. Amy, as Chief Financial Officer of Sinclair Broadcast Group, Inc., pursuant to Rule 13a-14(a) of the Exchange Act (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 Rule 13a-14(b) of the Exchange Act and § 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 Rule 13a-14(b) of the Exchange Act and § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C § 1350).
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase

*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

35

EX-10.1

Exhibit 10.1

SINCLAIR BROADCAST GROUP, INC.

STOCK APPRECIATION RIGHT AGREEMENT

THIS STOCK APPRECIATION RIGHT AGREEMENT (this “Agreement”) is made and entered into as of this 9th day of March, 2012 (the “Grant Date”) between Sinclair Broadcast Group, Inc., a Maryland corporation (the “Company”), and David D. Smith (“Smith”).

RECITALS

WHEREAS, the Company had adopted the 1996 Long-Term Incentive Plan of Sinclair Broadcast Group, Inc. (the “Plan”) to reward certain key individuals for making contributions to the Company and its subsidiaries by enabling them to acquire shares of Class A Common Stock, par value $.01 per share (“Common Stock”), of the Company; and

WHEREAS, the Company desires to grant to Smith stock-settled compensation based on the appreciation in value of four hundred thousand (400,000) shares of Common Stock (the “SARs”) pursuant to the Plan and upon the terms and subject to the conditions hereinafter set forth.

AGREEMENTS

NOW, THEREFORE, IN CONSIDERATION OF the foregoing premises, the parties to this Agreement agree as follows:

1.Grant of SARs.  Subject to the terms and conditions set forth in this Agreement, the Company hereby grants to Smith the fully vested right to receive Common Stock of the Company equal in value to the difference between the SARs’ base value of Eleven Dollars and Sixty-Eight Cents ($11.68) per SAR, which is the fair market value of one share of Common Stock on the date of grant under the Plan, and the per share closing price of the Company’s Common Stock on the date of exercise.

2.Relationship to Plan.  The SARs are issued in accordance with and subject to all of the terms, conditions, and provisions of the Plan, as amended from time to time and administrative interpretations thereunder, if any, which have been adopted by the Committee thereunder and are in effect on the date hereof.  Except as defined herein or otherwise stated, capitalized terms shall have the same meanings ascribed to them under the Plan.

3.Termination of SARs.  The SARs hereby granted shall terminate and be of no force and effect with respect to any shares of Common Stock not previously acquired by Smith on the tenth (10th) anniversary of the Grant Date.

4.Exercise of SARs.  Subject to the limitations herein and in the Plan, the SARs may be exercised with respect to the shares of Common Stock, in whole or in part, at any time on

or prior to the tenth (10th) anniversary of the Grant Date, regardless of Smith’s service status, by written notice to the Company at its principal executive office.  Notwithstanding any contrary provision of this Agreement or the Plan, the exercise price of a SAR shall not be less than the fair market value of the Common Stock on the date of grant under the Plan.

5.Transferability.  The SARs shall not be transferable except by will or by the laws of descent and distribution.  During Smith’s lifetime, the SARs may be exercised only by Smith.  No assignment or transfer of the SARs, whether voluntary or involuntary, by operation of law or otherwise, except a transfer by will or by the laws of descent or distribution, shall vest in the assignee or transferee any interest or right whatsoever in the SARs.

6.No Rights as Stockholder.  Smith shall not have any rights as a stockholder of the Company with respect to any of the shares subject to the SARs, except to the extent that such shares shall have been acquired by and transferred to Smith.

7.Dissolution or Merger.  Upon the dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the surviving corporation, or a transaction in which another individual or entity becomes the owner of fifty percent (50%) or more of the total combined voting power of all classes of stock of the Company, the unexercised portion of the SARs shall terminate, but Smith shall have the right to exercise the unexercised portion of the SARs immediately prior to such event.

8.Withholding for Tax Purposes.  Any amount of Common Stock that is payable or transferable to Smith hereunder may be reduced by any amount or amounts which the Company is required to withhold under the then applicable provisions of the Internal Revenue Code of 1986, as amended, or its successors, or any other federal, state, or local tax withholding requirement.  If Smith does not elect to satisfy withholding requirements in this fashion, the issuance of the shares of Common Stock transferable to Smith hereunder shall be contingent upon Smith’s satisfaction of any withholding obligations that may apply and Smith’s presentation of evidence satisfactory to the Board that such withholding obligations have been satisfied.

9.Notice.  Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail.  Any notice required or permitted to be delivered hereunder will be deemed to be delivered on the date that it is personally delivered or, whether actually received or not, on the third (3rd) business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address that such person has heretofore specified by written notice delivered in accordance herewith.  The Company or Smith may change, at any time and from time to time, by written notice to the other, the address that it or he had therefore specified for receiving notices.

2

Until changed in accordance herewith, the Company and Smith specify their respective addresses as set forth below:

Company:	Sinclair Broadcast Group, Inc.
	10706 Beaver Dam Road
	Cockeysville, Maryland 21030
	Attn:   David B. Amy,
	Executive Vice President
with copy to:	Sinclair Broadcast Group, Inc.
	10706 Beaver Dam Road
	Cockeysville, Maryland 21030
	Attn:   Executive Vice President/General Counsel
Smith:	David D. Smith
	c/o Sinclair Broadcast Group, Inc.
	10706 Beaver Dam Road
	Cockeysville, Maryland 21030

10.Amendment.  Notwithstanding any other provision hereof, this Agreement may not be supplemented or amended from time to time without the written consent of Smith and the Company.

11.Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland applicable to agreements made and to be performed entirely in Maryland.

12.Counterparts.  This Agreement may be executed in multiple counterparts.  The Company and Smith may sign any number of copies of this Agreement.  Each signed copy shall be an original, but all of them together represent the same agreement.

[REST OF PAGE LEFT INTENTIONALLY BLANK

– SIGNATURES ON FOLLOWING PAGE]

3

IN WITNESS WHEREOF, the Company and Smith have caused this Agreement to be executed as of the date first above written.

WITNESS:		SINCLAIR BROADCAST GROUP, INC.
	By:		(SEAL)
	Name:	David B. Amy
	Title:	Executive Vice President
			(SEAL)
		David D. Smith

4

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.

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:	May 9, 2012
			/s/ David D. Smith
		Signature:	David D. Smith
			Chief Executive Officer

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.;

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.

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:	May 9, 2012
			/s/ David B. Amy
		Signature:	David B. Amy
			Chief Financial Officer

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 March 31, 2012 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

May 9, 2012

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 March 31, 2012 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

May 9, 2012

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
CONSOLIDATED STATEMENTS OF CASH FLOWS
Proceeds from share based awards, excess tax benefits	$ 0.2	$ 0.6

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income	$ 29,074	$ 15,127
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation of property and equipment	9,630	8,125
Recognition of deferred revenue	(4,788)	(3,728)
Impairment of goodwill, intangible and other assets		398
Amortization of definite-lived intangible and other assets	5,899	4,797
Amortization of program contract costs and net realizable value adjustments	14,280	12,618
Deferred tax (benefit) provision	(5,984)	5,918
Change in assets and liabilities, net of acquisitions:
Decrease in accounts receivable, net	8,370	7,579
Decrease in income taxes receivable	225
Increase in prepaid expenses and other current assets	(9,153)	(139)
Decrease (increase) in other assets	395	(531)
Increase in accounts payable and accrued liabilities	21,135	17,358
Increase in income taxes payable	10,016	2,218
(Decrease) increase in other long-term liabilities	(88)	40
Payments on program contracts payable	(16,620)	(18,771)
Other, net	5,092	3,948
Net cash flows from operating activities	67,483	54,957
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of property and equipment	(6,736)	(6,085)
Payments for acquisitions of television stations	(205,622)
Purchase of alarm monitoring contracts	(3,035)	(1,755)
Decrease in restricted cash	20,000	5,058
Distributions from equity and cost method investees		832
Investments in equity and cost method investees	(5,503)	(8,064)
Proceeds from the sale of assets		26
Proceeds from insurance settlement	19	1,736
Loans to affiliates	(500)	(61)
Proceeds from loans to affiliates	417	89
Net cash flows used in investing activities	(200,960)	(8,224)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	184,482	128,333
Repayments of notes payable, commercial bank financing and capital leases	(23,529)	(61,714)
Proceeds from exercise of stock options, including excess tax benefits of share based payments of $0.2 million and $0.6 million, respectively	279	1,737
Dividends paid on Class A and Class B Common Stock	(9,588)	(9,591)
Payments for deferred financing costs	(3,519)	(4,282)
Proceeds from Class A Common Stock sold by variable interest entity		1,808
Noncontrolling interests distributions	(88)	(39)
Repayments of notes and capital leases to affiliates	(725)	(852)
Net cash flows from financing activities	147,312	55,400
NET INCREASE IN CASH AND CASH EQUIVALENTS	13,835	102,133
CASH AND CASH EQUIVALENTS, beginning of period	12,967	21,974
CASH AND CASH EQUIVALENTS, end of period	$ 26,802	$ 124,107

XML

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012		Dec. 31, 2011
CURRENT ASSETS:
Cash and cash equivalents	$ 26,802		$ 12,967
Accounts receivable, net of allowance for doubtful accounts of $2,805 and $3,008, respectively	136,242		132,915
Affiliate receivable	835		252
Income taxes receivable			225
Current portion of program contract costs	32,452		38,906
Prepaid expenses and other current assets	18,757		17,274
Deferred barter costs	2,661		2,238
Deferred tax assets	4,515		4,940
Total current assets	222,264		209,717
PROGRAM CONTRACT COSTS, less current portion	13,471		15,584
PROPERTY AND EQUIPMENT, net	314,434		281,521
RESTRICTED CASH	38,729		58,726
GOODWILL	728,306		660,117
BROADCAST LICENSES	58,142		47,002
DEFINITE-LIVED INTANGIBLE ASSETS, net	266,695		175,341
OTHER ASSETS	129,204		123,409
Total assets	1,771,245	[1]	1,571,417	[1]
CURRENT LIABILITIES:
Accounts payable	4,941		8,872
Accrued liabilities	101,739		79,698
Income taxes payable	10,016
Current portion of notes payable, capital leases and commercial bank financing	36,237		38,195
Current portion of notes and capital leases payable to affiliates	3,105		3,014
Current portion of program contracts payable	59,713		63,825
Deferred barter revenues	2,652		1,978
Total current liabilities	218,403		195,582
LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion	1,312,127		1,148,271
Notes payable and capital leases to affiliates, less current portion	15,729		16,545
Program contracts payable, less current portion	23,753		27,625
Deferred tax liabilities	241,620		247,552
Other long-term liabilities	46,824		47,204
Total liabilities	1,858,456	[1]	1,682,779	[1]
COMMITMENTS AND CONTINGENCIES (See Note 3)
SINCLAIR BROADCAST GROUP SHAREHOLDERS' EQUITY (DEFICIT):
Additional paid-in capital	620,855		617,375
Accumulated deficit	(714,740)		(734,511)
Accumulated other comprehensive loss	(4,744)		(4,848)
Total Sinclair Broadcast Group shareholders' deficit	(97,818)		(121,175)
Noncontrolling interests	10,607		9,813
Total deficit	(87,211)		(111,362)
Total liabilities and equity (deficit)	1,771,245		1,571,417
Class A Common Stock
SINCLAIR BROADCAST GROUP SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock	522		520
Class B Common Stock
SINCLAIR BROADCAST GROUP SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock	$ 289		$ 289

[1] Our consolidated total assets as of March 31, 2012 and December 31, 2011 include total assets of variable interest entities (VIEs) of $44.0 million and $33.5 million, respectively, which can only be used to settle the obligations of the VIEs. Our consolidated total liabilities as of March 31, 2012 and December 31, 2011 include total liabilities of the VIEs of $13.5 million and $14.4 million, respectively, for which the creditors of the VIEs have no recourse to us. See Note 1. Summary of Significant Accounting Policies.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Net income	$ 29,074	$ 15,127
Amortization of net periodic pension benefit costs, net of taxes	104	41
Comprehensive income	29,178	15,168
Comprehensive loss attributable to the noncontrolling interests	285	152
Comprehensive income attributable to Sinclair Broadcast Group	$ 29,463	$ 15,320

XML

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (USD $) In Thousands, except Share data, unless otherwise specified	Total USD ($)	Additional Paid-In Capital USD ($)	Accumulated Deficit USD ($)	Accumulated Other Comprehensive Loss USD ($)	Noncontrolling Interests USD ($)	Class A Common Stock	Class A Common Stock Common Stock USD ($)	Class B Common Stock	Class B Common Stock Common Stock USD ($)
BALANCE at Dec. 31, 2011	$ (111,362)	$ 617,375	$ (734,511)	$ (4,848)	$ 9,813		$ 520		$ 289
BALANCE (in shares) at Dec. 31, 2011						52,022,086	52,022,086	28,933,859	28,933,859
Increase (Decrease) in Stockholders' Equity
Dividends declared on Class A and Class B Common Stock	(9,588)		(9,588)
Class A Common Stock issued pursuant to employee benefit plans	3,291	3,289					2
Class A Common Stock issued pursuant to employee benefit plans (in shares)							217,719
Tax benefit on share based awards	191	191
Distributions to noncontrolling interests	(88)				(88)
Issuance of subsidiary share awards	392				392
Consolidation of variable interest entity	775				775
Amortization of net periodic pension benefit costs, net of taxes	104			104
Net income	29,074		29,359		(285)				0
BALANCE at Mar. 31, 2012	$ (87,211)	$ 620,855	$ (714,740)	$ (4,744)	$ 10,607		$ 522		$ 289
BALANCE (in shares) at Mar. 31, 2012						52,239,805	52,239,805	28,933,859	28,933,859

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 2,805,000	$ 3,008,000
Total assets of variable interest entities (in dollars)	44,000,000	33,500,000
Total liabilities of variable interest entities (in dollars)	$ 13,500,000	$ 14,400,000
Class A Common Stock
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares authorized	500,000,000	500,000,000
Common Stock, shares issued	52,239,805	52,022,086
Common Stock, shares outstanding	52,239,805	52,022,086
Class B Common Stock
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares authorized	140,000,000	140,000,000
Common Stock, shares issued	28,933,859	28,933,859
Common Stock, shares outstanding	28,933,859	28,933,859

XML

FAIR VALUE MEASUREMENTS:

3 Months Ended

Mar. 31, 2012

FAIR VALUE MEASUREMENTS:

FAIR VALUE MEASUREMENTS:

8.FAIR VALUE MEASUREMENTS:

Accounting guidance provides for valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).  A fair value hierarchy using three broad levels prioritizes the inputs to valuation techniques used to measure fair value.  The following is a brief description of those three levels:

·Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

·Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

·Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The carrying value and fair value of our notes, debentures, program contracts payable and non-cancelable commitments for the periods presented (in thousands):

	March 31, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
4.875% Convertible Senior Notes due 2018	$	5,685	$	5,685	$	5,685	$	5,685
3.0% Convertible Senior Notes due 2027	5,400		5,400		5,400		5,400
8.375% Senior Notes due 2018	234,594		258,167		234,512		246,884
9.25% Senior Second Lien Notes due 2017	489,403		557,500		489,052		549,690
Term Loan A	112,844		111,997		115,000		112,700
Term Loan B	394,348		399,924		217,002		221,700
Cunningham Bank Credit Facility	8,225		8,292		10,967		11,100
Active program contracts payable	83,466		73,162		91,450		88,699
Future program liabilities (a)	135,285		114,260		125,075		105,166

(a)Future program liabilities reflect a license agreement for program material that is not yet available for its first showing or telecast and is, therefore, not recorded as an asset or liability on our balance sheet.  The carrying value reflects the undiscounted future payments.

The fair value of our 8.375% Senior Notes due 2018 (the 8.375% Notes) and 9.25% Senior Second Lien Notes due 2017 (the 9.25% Notes) is determined using quoted prices using Level 2 hierarchy inputs described above.  The carrying value of our 3.0% and 4.875% Notes approximates their fair value using Level 3 hierarchy inputs.  Our Term Loan A, Term Loan B and Cunningham’s bank credit facility are fair valued using Level 2 hierarchy inputs.

Our estimates of the fair value of active program contracts payable and future program liabilities were based on discounted cash flows using Level 3 inputs described above.  The discount rate represents an estimate of a market participants’ return and risk applicable to program contracts.  The discount rate used to determine the fair value of active and future program liabilities was 8.00% as of March 31, 2012 and December 31, 2011.  Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement.

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 03, 2012 Class A Common Stock	May 03, 2012 Class B Common Stock
Entity Listings
Entity Registrant Name	SINCLAIR BROADCAST GROUP INC
Entity Central Index Key	0000912752
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		52,255,511	28,933,859
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1

XML

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:

3 Months Ended

Mar. 31, 2012

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:

9.CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:

Sinclair Television Group, Inc. (STG), a wholly-owned subsidiary and the television operating subsidiary of Sinclair Broadcast Group, Inc. (SBG), is the primary obligor under the Bank Credit Agreement, the 8.375% Notes and the 9.25% Notes.  Our Class A Common Stock, Class B Common Stock, the 4.875% Notes and the 3.0% Notes, as of March 31, 2012, were obligations or securities of SBG and not obligations or securities of STG.  SBG was the obligor of the 6.0% Notes until they were fully redeemed in 2011.  SBG is a guarantor under the Bank Credit Agreement, the 9.25% Notes and the 8.375% Notes.  As of March 31, 2012 our consolidated total debt of $1,367.2 million included $1,281.3 million of debt related to STG and its subsidiaries of which SBG guaranteed $1,231.2 million.

SBG, KDSM, LLC, a wholly-owned subsidiary of SBG, and STG’s wholly-owned subsidiaries (guarantor subsidiaries), have fully and unconditionally guaranteed, subject to certain customary automatic release provisions, 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 comprehensive income 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 SEC Regulation S-X, Rule 3-10.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2012

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
Cash	$	—		$	17,311		$	980		$	8,511		$	—		$	26,802
Accounts receivable, net	40			623			131,415			5,346			(347		)	137,077
Other current assets	383			3,505			51,212			3,569			(284		)	58,385
Total current assets	423			21,439			183,607			17,426			(631		)	222,264
Property and equipment, net	7,851			9,195			203,127			100,819			(6,558		)	314,434
Investment in consolidated subsidiaries	—			758,910			—			—			(758,910		)	—
Restricted cash	—			38,506			223			—			—			38,729
Other long-term assets	86,356			360,943			14,924			113,475			(433,023		)	142,675
Total other long-term assets	86,356			1,158,359			15,147			113,475			(1,191,933		)	181,404
Acquired intangible assets	—			—			996,027			74,153			(17,037		)	1,053,143
Total assets	$	94,630		$	1,188,993		$	1,397,908		$	305,873		$	(1,216,159	)	$	1,771,245
Accounts payable and accrued liabilities	$	331		$	41,099		$	59,891		$	8,210		$	(2,851	)	$	106,680
Current portion of long-term debt	435			15,181			642			19,979			—			36,237
Current portion of affiliate long-term debt	1,032			—			2,073			321			(321		)	3,105
Other current liabilities	—			—			72,121			260			—			72,381
Total current liabilities	1,798			56,280			134,727			28,770			(3,172		)	218,403
Long-term debt	12,738			1,217,534			37,312			44,543			—			1,312,127
Affiliate long-term debt	7,129			—			8,600			252,118			(252,118		)	15,729
Dividends in excess of investment in consolidated subsidiaries	119,573			—			—			—			(119,573		)	—
Other liabilities	51,210			2,152			458,959			63,010			(263,134		)	312,197
Total liabilities	192,448			1,275,966			639,598			388,441			(637,997		)	1,858,456
Common stock	811			—			10			—			(10		)	811
Additional paid-in capital	620,855			(261		)	404,886			54,155			(458,780		)	620,855
Accumulated (deficit) earnings	(714,740		)	(83,705		)	355,735			(137,117		)	(134,913		)	(714,740		)
Accumulated other comprehensive (loss) income	(4,744		)	(3,007		)	(2,321		)	394			4,934			(4,744		)
Total Sinclair Broadcast Group (deficit) equity	(97,818		)	(86,973		)	758,310			(82,568		)	(588,769		)	(97,818		)
Noncontrolling interests in consolidated subsidiaries	—			—			—			—			10,607			10,607
Total liabilities and equity (deficit)	$	94,630		$	1,188,993		$	1,397,908		$	305,873		$	(1,216,159	)	$	1,771,245

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2011

(in thousands)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
Cash	$	—		$	188		$	313		$	12,466		$	—		$	12,967
Accounts receivable, net	60			348			126,590			6,308			(139		)	133,167
Other current assets	2,430			2,561			55,855			3,021			(284		)	63,583
Total current assets	2,490			3,097			182,758			21,795			(423		)	209,717
Property and equipment, net	8,234			7,783			171,749			100,362			(6,607		)	281,521
Investment in consolidated subsidiaries	—			575,848			—			—			(575,848		)	—
Restricted cash	—			58,503			223			—			—			58,726
Other long-term assets	86,186			353,929			17,209			99,683			(418,014		)	138,993
Total other long-term assets	86,186			988,280			17,432			99,683			(993,862		)	197,719
Acquired intangible assets	—			—			826,175			70,492			(14,207		)	882,460
Total assets	$	96,910		$	999,160		$	1,198,114		$	292,332		$	(1,015,099	)	$	1,571,417
Accounts payable and accrued liabilities	$	1,499		$	30,888		$	51,119		$	7,555		$	(2,491	)	$	88,570
Current portion of long-term debt	420			14,450			589			22,736			—			38,195
Current portion of affiliate long-term debt	998			—			2,016			210			(210		)	3,014
Other current liabilities	—			—			65,431			372			—			65,803
Total current liabilities	2,917			45,338			119,155			30,873			(2,701		)	195,582
Long-term debt	12,811			1,055,446			37,502			42,512			—			1,148,271
Affiliate long-term debt	7,405			—			9,140			246,552			(246,552		)	16,545
Dividends in excess of investment in consolidated subsidiaries	143,857			—			—			—			(143,857		)	—
Other liabilities	51,095			2,222			457,003			58,222			(246,161		)	322,381
Total liabilities	218,085			1,103,006			622,800			378,159			(639,271		)	1,682,779
Common stock	809			—			10			—			(10		)	809
Additional paid-in capital	617,375			7,755			264,413			54,304			(326,472		)	617,375
Accumulated (deficit) earnings	(734,511		)	(108,558		)	313,269			(140,581		)	(64,130		)	(734,511		)
Accumulated other comprehensive (loss) income	(4,848		)	(3,043		)	(2,378		)	450			4,971			(4,848		)
Total Sinclair Broadcast Group shareholders’ (deficit) equity	(121,175		)	(103,846		)	575,314			(85,827		)	(385,641		)	(121,175		)
Noncontrolling interests in consolidated subsidiaries	—			—			—			—			9,813			9,813
Total liabilities and equity (deficit)	$	96,910		$	999,160		$	1,198,114		$	292,332		$	(1,015,099	)	$	1,571,417

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
Net revenue	$	—		$	—		$	210,208		$	15,674		$	(2,046	)	$	223,836
Program and production	—			8			61,891			76			(1,772		)	60,203
Selling, general and administrative	853			13,631			29,918			1,195			(101		)	45,496
Depreciation, amortization and other operating expenses	383			351			43,108			14,342			31			58,215
Total operating expenses	1,236			13,990			134,917			15,613			(1,842		)	163,914
Operating (loss) income	(1,236		)	(13,990		)	75,291			61			(204		)	59,922
Equity in earnings of consolidated subsidiaries	30,191			51,860			—			—			(82,051		)	—
Interest expense	(340		)	(24,764		)	(1,219		)	(6,244		)	5,180			(27,387		)
Other income (expense)	600			(283		)	23			1,201			(129		)	1,412
Total other income (expense)	30,451			26,813			(1,196		)	(5,043		)	(77,000		)	(25,975		)
Income tax benefit (provision)	144			8,125			(21,247		)	8,172			—			(4,806		)
Loss from discontinued operations	—			(67		)	—						—			(67		)
Net income (loss)	29,359			20,881			52,848			3,190			(77,204		)	29,074
Net loss attributable to the noncontrolling interests	—			—			—			—			285			285
Net income (loss) attributable to Sinclair Broadcast Group	$	29,359		$	20,881		$	52,848		$	3,190		$	(76,919	)	$	29,359
Comprehensive income	$	29,178		$	20,985		$	52,848		$	3,190		$	(77,029	)	$	29,178

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2011

(in thousands) (unaudited)

	Sinclair Broadcast Group, Inc.			Sinclair Television Group, Inc.			Guarantor Subsidiaries and KDSM, LLC			Non- Guarantor Subsidiaries			Eliminations			Sinclair Consolidated
Net revenue	$	—		$	—		$	173,459		$	11,396		$	(2,246	)	$	182,609
Program and production	—			307			43,984			94			(2,040		)	42,345
Selling, general and administrative	754			7,628			30,111			829			(96		)	39,226
Depreciation, amortization and other operating expenses	405			135			39,468			9,522			32			49,562
Total operating expenses	1,159			8,070			113,563			10,445			(2,104		)	131,133
Operating (loss) income	(1,159		)	(8,070		)	59,896			951			(142		)	51,476
Equity in earnings of consolidated subsidiaries	17,402			35,323			—			—			(52,725		)	—
Interest expense	(1,958		)	(25,489		)	(1,232		)	(5,545		)	5,057			(29,167		)
Gain on sales of securities	—			—			—			391			(391		)	—
Other income (expense)	100			5,435			(4,640		)	394			(114		)	1,175
Total other income (expense)	15,544			15,269			(5,872		)	(4,760		)	(48,173		)	(27,992		)
Income tax benefit (provision)	894			8,245			(17,739		)	350			—			(8,250		)
Loss from discontinued operations	—			(107		)	—			—			—			(107		)
Net income (loss)	15,279			15,337			36,285			(3,459		)	(48,315		)	15,127
Net loss attributable to the noncontrolling interests	—			—			—			—			152			152
Net income (loss) attributable to Sinclair Broadcast Group	$	15,279		$	15,337		$	36,285		$	(3,459	)	$	(48,163	)	$	15,279
Comprehensive income	$	15,168		$	15,378		$	36,285		$	(3,459	)	$	(48,204	)	$	15,168

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(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 FROM (USED IN) OPERATING ACTIVITIES	$	256		$	(22,191	)	$	85,987		$	1,682		$	1,749		$	67,483
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of property and equipment	—			(1,741		)	(4,675		)	(320		)	—			(6,736		)
Payments for acquisitions of television stations	—			—			(205,622		)	—			—			(205,622		)
Purchase of alarm monitoring contracts	—			—			—			(3,035		)	—			(3,035		)
Decrease in restricted cash	—			20,000			—			—			—			20,000
Investment in equity and cost method investees	—			—			—			(5,503		)	—			(5,503		)
Proceeds from insurance settlement	—			—			19			—			—			19
Loans to affiliates	(44		)	(456		)	—			—			—			(500		)
Proceeds from loans to affiliates	64			353			—			—			—			417
Net cash flows from (used in) investing activities	20			18,156			(210,278		)	(8,858		)	—			(200,960		)
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	—			178,200			—			6,282			—			184,482
Repayments of notes payable, commercial bank financing and capital leases	(100		)	(16,252		)	(128		)	(7,049		)	—			(23,529		)
Proceeds from share based awards	279			—			—			—			—			279
Dividends paid on Class A and Class B Common Stock	(9,718		)	—			—			—			130			(9,588		)
Payments for deferred financing costs	—			(3,519		)	—			—			—			(3,519		)
Distributions to noncontrolling interests	—			—			—			(88		)	—			(88		)
Repayment of notes and capital leases to affiliates	(242		)	—			(483		)	—			—			(725		)
Increase (decrease) in intercompany payables	9,505			(137,271		)	125,569			4,076			(1,879		)	—
Net cash flows (used in) from financing activities	(276		)	21,158			124,958			3,221			(1,749		)	147,312
NET DECREASE IN CASH AND CASH EQUIVALENTS	—			17,123			667			(3,955		)	—			13,835
CASH AND CASH EQUIVALENTS, beginning of period	—			188			313			12,466			—			12,967
CASH AND CASH EQUIVALENTS, end of period	$	—		$	17,311		$	980		$	8,511		$	—		$	26,802

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2011

(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	$	(2,759	)	$	(6,823	)	$	68,570		$	(2,745	)	$	(1,286	)	$	54,957
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
Acquisition of property and equipment	—			(4,580		)	(1,394		)	(111		)	—			(6,085		)
Purchase of alarm monitoring contracts	—			—			—			(1,755		)	—			(1,755		)
Distributions from investments	—			—			—			832			—			832
Investment in equity and cost method investees	(2,000		)	—			—			(6,064		)	—			(8,064		)
Decrease in restricted cash	—			5,058			—			—			—			5,058
Proceeds from sales of assets	—			—			26			—			—			26
Proceeds from sale of securities	—			—			—			1,808			(1,808		)	—
Proceeds from insurance settlement	—			—			1,736			—			—			1,736
Loans to affiliates	(61		)	—			—			—			—			(61		)
Proceeds from loans to affiliates	89			—			—			—			—			89
Net cash flows (used in) from investing activities	(1,972		)	478			368			(5,290		)	(1,808		)	(8,224		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from notes payable, commercial bank financing and capital leases	—			124,719			—			3,614			—			128,333
Repayments of notes payable, commercial bank financing and capital leases	(86		)	(55,467		)	(99		)	(6,062		)	—			(61,714		)
Proceeds from exercise of stock options, including excess tax benefits of share based payments	1,737			—			—			—			—			1,737
Proceeds from Class A Common Stock sold by variable interest entity	—			—			—			—			1,808			1,808
Payments for deferred financing costs	—			(4,216		)	—			(66		)	—			(4,282		)
Distributions to noncontrolling interest	—			—			—			(39		)	—			(39		)
Dividends paid on Class A and Class B Common Stock	(9,684		)	—			—			—			93			(9,591		)
Repayment of notes and capital leases to affiliates	(210		)	—			(642		)	—			—			(852		)
Increase (decrease) in intercompany payables	12,974			45,149			(68,954		)	9,638			1,193			—
Net cash flows from (used in) financing activities	4,731			110,185			(69,695		)	7,085			3,094			55,400
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			103,840			(757		)	(950		)	—			102,133
CASH AND CASH EQUIVALENTS, beginning of period	—			5,071			1,022			15,881			—			21,974
CASH AND CASH EQUIVALENTS, end of period	$	—		$	108,911		$	265		$	14,931		$	—		$	124,107

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
REVENUES:
Station broadcast revenues, net of agency commissions	$ 192,204	$ 155,961
Revenues realized from station barter arrangements	17,684	17,222
Other operating divisions revenues	13,948	9,426
Total revenues	223,836	182,609
OPERATING EXPENSES:
Station production expenses	60,203	42,345
Station selling, general and administrative expenses	36,129	30,562
Expenses recognized from station barter arrangements	16,257	15,727
Amortization of program contract costs and net realizable value adjustments	14,280	12,618
Other operating divisions expenses	12,290	7,963
Depreciation of property and equipment	9,489	8,060
Corporate general and administrative expenses	9,367	8,664
Amortization of definite-lived intangible assets	5,899	4,796
Impairment of goodwill, intangible and other assets		398
Total operating expenses	163,914	131,133
Operating income	59,922	51,476
OTHER INCOME (EXPENSE):
Interest expense and amortization of debt discount and deferred financing costs	(27,387)	(29,167)
Loss from extinguishment of debt	(335)	(924)
Income from equity and cost method investments	1,276	11
Gain on insurance settlement	19	1,723
Other income, net	452	365
Total other expense	(25,975)	(27,992)
Income from continuing operations before income taxes	33,947	23,484
INCOME TAX PROVISION	(4,806)	(8,250)
Income from continuing operations	29,141	15,234
DISCONTINUED OPERATIONS:
Loss from discontinued operations, includes income tax provision of $67 and $107, respectively	(67)	(107)
NET INCOME	29,074	15,127
Net loss attributable to the noncontrolling interests	285	152
NET INCOME ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP	29,359	15,279
Dividends declared per share (in dollars per share)	$ 0.12	$ 0.12
BASIC AND DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP:
Earnings per share from continuing operations (in dollars per share)	$ 0.36	$ 0.19
Earnings per share (in dollars per share)	$ 0.36	$ 0.19
Weighted average common shares outstanding (in shares)	80,852	80,367
Weighted average common and common equivalent shares outstanding (in shares)	81,127	80,690
AMOUNTS ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP COMMON SHAREHOLDERS:
Income from continuing operations, net of tax	29,426	15,386
Loss from discontinued operations, net of tax	(67)	(107)
Net income	$ 29,359	$ 15,279

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COMMITMENTS AND CONTINGENCIES:

3 Months Ended

Mar. 31, 2012

COMMITMENTS AND CONTINGENCIES:

COMMITMENTS AND CONTINGENCIES:

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 stages and no material judgments or decisions have been rendered by hearing boards or courts in connection with such actions.  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.

Various parties have filed petitions to deny our applications for the following stations’ license renewals:  WXLV-TV, Winston-Salem, North Carolina; WMYV-TV, Greensboro, North Carolina; WLFL-TV, Raleigh/Durham, North Carolina; WRDC-TV, Raleigh/Durham, North Carolina; WLOS-TV, Asheville, North Carolina, WMMP-TV, Charleston, South Carolina; WTAT-TV, Charleston, South Carolina; WMYA-TV, Anderson, South Carolina; WICS-TV and WICD-TV in Springfield/Champaign, Illinois and WCGV-TV and WVTV-TV in Milwaukee, Wisconsin.  The FCC is in the process of considering the renewal applications and we believe the petitions have no merit.

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ACQUISITIONS

3 Months Ended

Mar. 31, 2012

ACQUISITIONS

ACQUISITIONS

2.ACQUISITIONS

Four Points

Effective January 1, 2012, we completed the previously announced acquisition of the broadcast assets of Four Points Media Group LLC (Four Points), which we had previously operated pursuant to a LMA since October 1, 2011.  The acquired assets consist of the following seven stations in four markets along with the respective network affiliation or program service arrangements: KUTV (CBS) and KMYU (MNT / This TV) in Salt Lake City / St. George, UT; KEYE (CBS) in Austin, TX; WTVX (CW), WTCN (MNT) and WWHB (Azteca) in West Palm Beach / Fort Pierce / Stuart, FL; and WLWC (CW) in Providence, RI / New Bedford, MA.  The Four Points acquisition will extend our national reach.

We paid Four Points $200.0 million in cash, less a working capital adjustment of $0.9 million.  The acquisition was financed with a $180.0 million draw under a recently raised incremental Term B Loan commitment under our amended Bank Credit Agreement plus a $20 million cash escrow previously paid.

Under the acquisition method of accounting, the results of the acquired operations are included in the consolidated financial statements of the Company beginning January 1, 2012.  The initial purchase price has been allocated to the acquired assets and assumed liabilities based on estimated fair values.  The purchase price allocation is preliminary pending a final determination of the fair values of the assets and liabilities.  The initial allocated fair value of acquired assets and assumed liabilities is summarized as follows (in thousands):

Prepaid expenses and other current assets	$	320
Program contract costs	4,118
Property and equipment	34,513
Broadcast licenses	10,658
Definite-lived intangible assets	90,099
Other assets	548
Accrued liabilities	(524		)
Program contracts payable	(5,524		)
Fair value of identifiable net assets acquired	134,208
Goodwill	64,868
Total	$	199,076

The preliminary allocation presented above is based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches.  In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and estimated discount rates.  The amount allocated to definite-lived intangible assets represents the estimated fair values of network affiliations of $66.9 million, the decaying advertiser base of $9.4 million, and other intangible assets of $13.8 million.  These intangible assets will be amortized over the estimated remaining useful lives of 15 years for network affiliations, 10 years for the decaying advertiser base and a weighted average of 14 years for the other intangible assets.  Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives.  Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and noncontractual relationships, as well as expected future synergies.  We expect that goodwill will be deductible for tax purposes.  The initial purchase price allocation is based upon all information available to us at the present time and is subject to change, and such changes could be material.

Prior to the acquisition, since October 1, 2011, we provided sales, programming and management services to the stations pursuant to the LMA.  During that period, we funded the working capital needs of the stations, which totaled $8.1 million as of December 31, 2011 and was reflected as cash flows used in operating activities within the consolidated statement of cash flows for that period.  This working capital is not reflected in the purchase price allocation presented above.

In connection with the acquisition, we incurred a total of $0.7 million of costs primarily related to legal and other professional services, which were expensed as incurred.  For the three months ended March 31, 2012, $0.3 million of such costs were included in corporate general and administrative expenses in the consolidated statement of operations.  See Note 4. Notes Payable and Commercial Bank Financing for information related to financing costs associated with the incremental borrowing used to fund the acquisition.

The results of operations for the three months ended March 31, 2012 include the results of the Four Points stations since January 1, 2012.  Net broadcast revenues and operating income of the Four Points stations included in our consolidated statement of operations for the three months ended March 31, 2012 were $17.8 million and $4.5 million, respectively.

The following table sets forth unaudited pro forma results of operations, assuming that the above acquisition, along with transactions necessary to finance the acquisition, occurred on January 1, 2011 (in thousands, except per share data):

	For the Three Months Ended March 31,
	2012		2011
Total revenues	$	223,836	$	198,411
Net income	$	29,287	$	15,712
Net income attributable to Sinclair Broadcast Group	$	29,572	$	15,864
Basic and diluted earnings per common share attributable to Sinclair Broadcast Group	$	0.37	$	0.20

This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments, and is not necessarily indicative of what our results would have been had we operated the business since January 1, 2011.  The pro forma adjustments reflect depreciation expense, amortization of intangibles and amortization of program contract costs related to the fair value adjustments of the assets acquired, additional interest expense related to the financing of the transaction, exclusion of nonrecurring financing and transaction related costs and the related tax effects of the adjustments.

Subsequent event

Effective April 1, 2012, we completed the previously announced acquisition of the broadcast assets of Freedom Communications (Freedom), which we had previously operated pursuant to a LMA since December 1, 2011. The acquired assets consist of the following eight stations in seven markets along with the respective network affiliation or program service arrangements: WPEC (CBS) in West Palm Beach, FL; WWMT (CBS) in Grand Rapids/Kalamazoo/Battle Creek, MI;  WRGB (CBS) and WCWN (CW) in Albany, NY; WTVC (ABC) in Chattanooga, TN; WLAJ (ABC) in Lansing, MI; KTVL (CBS) in Medford-Klamath Falls, OR; and KFDM (CBS) in Beaumont/Port Arthur/Orange, TX.  The Freedom acquisition will extend our national reach.

We paid Freedom $385.0 million, which is subject to a post close working capital adjustment.  We financed the acquisition and a portion of the closing costs with a draw under a recently raised $157.5 million incremental Term Loan A and a $192.5 million incremental Term B Loan commitment under our amended Bank Credit Facility, plus a $38.5 million cash escrow previously paid in November 2011.

Prior to the acquisition, since December 1, 2011, we provided sales, programming and management services to the stations pursuant to the LMA.  During that period, we funded the working capital needs of the stations, which totaled $9.6 million as of March 31, 2012 and was reflected as cash flows used in operating activities within the consolidated statement of cash flows for that period.

Due to the limited time since the acquisition date and the filing of our Quarterly Report on Form 10-Q for the three months ended March 31, 2012, the initial accounting for the business combination is incomplete at this time.  As a result, we are unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired and resulting from the transaction, including the information required for intangible assets and goodwill.  Also, because the initial accounting for the transaction is incomplete, we are unable to provide the supplemental pro forma revenue and earnings of the combined entity.  We will include this information in our Quarterly Report on Form 10-Q for the six months ended June 30, 2012.

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RELATED PERSON TRANSACTIONS

3 Months Ended

Mar. 31, 2012

RELATED PERSON TRANSACTIONS

RELATED PERSON TRANSACTIONS

6.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 and some of our Class A Common Stock.  We engaged in the following transactions with them and/or entities in which they have substantial interests.

Related Person Leases.  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 $1.1 million for each of the three months ended March 31, 2012 and 2011.

Bay TV.  In January 1999, we entered into a LMA with Bay Television, Inc. (Bay TV), which owns the television station WTTA-TV in Tampa/St. Petersburg, Florida market.  Our controlling shareholders own a substantial portion of the equity of Bay TV.  Payments made to Bay TV were $1.8 million and $0.8 million for the three months ended March 31, 2012 and 2011, respectively.

Cunningham Broadcasting Corporation.  We have options from trusts established by Carolyn C. Smith, a parent of our controlling shareholders, for the benefit of her grandchildren that will grant us the right to acquire, subject to applicable FCC rules and regulations, 100% of the capital stock of Cunningham Broadcasting Corporation (Cunningham) or 100% of the capital stock or assets of Cunningham’s individual subsidiaries.  As of March 31, 2012 Cunningham was the owner-operator and FCC licensee of: WNUV-TV, Baltimore, Maryland; WRGT-TV, Dayton, Ohio; WVAH-TV, Charleston, West Virginia; WTAT-TV, Charleston, South Carolina; WMYA-TV, Anderson, South Carolina; WTTE-TV, Columbus, Ohio; and WDBB-TV, Birmingham, Alabama (collectively the Cunningham Stations).

In addition to the option agreement, we entered into five-year LMAs (with five-year renewal terms at our option) with Cunningham pursuant to which we provide programming to Cunningham for airing on the Cunningham Stations.

On October 28, 2009, we entered into amendments and/or restatements of the following agreements between Cunningham and us: (i) the LMAs, (ii) option agreements to acquire Cunningham stock and (iii) certain acquisition or merger agreements relating to the Cunningham Stations.  Such amendments and/or restatements became effective on November 5, 2009.

In consideration of the new terms of the LMAs, options and other agreements, beginning on January 1, 2010 and ending on July 1, 2012, we are obligated to pay Cunningham the sum of approximately $29.1 million in 10 quarterly installments of $2.75 million and one quarterly payment of approximately $1.6 million, which amounts will be used to pay off Cunningham’s bank credit facility and which amounts will be credited toward the purchase price for each Cunningham station.  An additional $3.9 million will be paid in two installments on July 1, 2012 and October 1, 2012 as an additional LMA fee.  The aggregate purchase price of the television stations, $78.5 million pursuant to certain acquisition or merger agreements, will be decreased by each payment made by us to Cunningham up to $29.1 million in the aggregate, pursuant to the foregoing transactions with Cunningham as such payments are made.  Beginning on January 1, 2013, we will be obligated to pay Cunningham an annual LMA fee for the television stations equal to the greater of (i) 3% of each station’s annual net broadcast revenue and (ii) $5.0 million.  The amended or restated LMAs and option agreements have been approved pursuant to our related person transaction policy.

We continue to reimburse Cunningham for 100% of its operating costs, as well as pay Cunningham a monthly payment of $50,000 through December 2012.  In accordance with the effective date of the abovementioned amendments and/or restatements, the $50,000 monthly payment no longer reduces the option exercise price.

We made payments to Cunningham under these LMA and other agreements of $3.9 million and $4.2 million for the three months ended March 31, 2012 and 2011, respectively.  For each of the three months ended March 31, 2012 and 2011, Cunningham Stations provided us with approximately $23.3 million of total revenue.  The financial statements for Cunningham are included in our consolidated financial statements for all periods presented.  Our Bank Credit Agreement contains certain cross-default provisions with certain material third-party licenses.  As of March 31, 2012, Cunningham was the sole material third-party licensee.

Atlantic Automotive.  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 Automotive.  We received payments for advertising totaling less than $0.1 million for each of the three months ended March 31, 2012 and 2011.  We paid $0.2 million for vehicles and related vehicle services from Atlantic Automotive for each of the three months ended March 31, 2012 and 2011.

Thomas & Libowitz P.A.  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.  We paid fees of $0.2 million and $0.1 million to Thomas & Libowitz during the three months ended March 31, 2012 and 2011, respectively.

Charter Aircraft.  From time to time, we charter aircraft owned by certain controlling shareholders.  We incurred $0.1 million and less than $0.1 million for the three months ended March 31, 2012 and 2011, respectively, related to these arrangements.

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NOTES PAYABLE AND COMMERCIAL BANK FINANCING

3 Months Ended

Mar. 31, 2012

NOTES PAYABLE AND COMMERCIAL BANK FINANCING

NOTES PAYABLE AND COMMERCIAL BANK FINANCING

4.NOTES PAYABLE AND COMMERCIAL BANK FINANCING

In January 2012, we drew $180.0 million of the incremental Term Loan B to fund the asset acquisition of Four Points, which closed January 1, 2012.  In addition, in April 2012, we drew $157.5 million of the incremental Term Loan A and $192.5 million of the incremental Term Loan B under our senior secured credit facility to fund the asset acquisition of Freedom, which closed April 1, 2012.  During the three months ended March 31, 2012, we repaid the $12.0 million we had previously drawn on our revolver, and as of March 31, 2012 we had no amounts drawn on our revolver.

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2012

EARNINGS PER SHARE

EARNINGS PER SHARE

5.EARNINGS PER SHARE

The following table reconciles income (numerator) and shares (denominator) used in our computations of earnings per share for the periods presented (in thousands):

	Three Months Ended March 31,
	2012			2011
Income (Numerator)
Income from continuing operations	$	29,141		$	15,234
Income impact of assumed conversion of the 4.875% Notes, net of taxes	45			42
Net loss attributable to noncontrolling interests included in continuing operations	285			152
Numerator for diluted earnings per common share from continuing operations available to common shareholders	29,471			15,428
Loss from discontinued operations, net of taxes	(67		)	(107		)
Numerator for diluted earnings available to common shareholders	$	29,404		$	15,321
Shares (Denominator)
Weighted-average common shares outstanding	80,852			80,367
Dilutive effect of stock-settled appreciation rights, restricted stock awards and outstanding stock options	21			69
Dilutive effect of 4.875% Notes	254			254
Weighted-average common and common equivalent shares outstanding	81,127			80,690

Potentially dilutive securities representing 1.5 million and 4.2 million shares of common stock for the three months ended March 31, 2012 and 2011, respectively, were excluded from the computation of diluted earnings per common share for these periods because their effect would have been antidilutive.  The decrease in potentially dilutive securities is primarily related to the full redemption of our 6.0% Convertible Debentures (6.0% Notes) in April 2011.  The net income per share amounts are the same for Class A and Class B Common Stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

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SEGMENT DATA:

3 Months Ended

Mar. 31, 2012

SEGMENT DATA:

SEGMENT DATA:

7.SEGMENT DATA:

We measure segment performance based on operating income (loss).  Our broadcast segment includes stations in 45 markets, of which 11 markets are operated pursuant to LMAs, located predominately in the eastern, mid-western and southern United States.  Our other operating divisions segment primarily earned revenues from sign design and fabrication; regional security alarm operating and bulk acquisitions and real estate ventures.  All of our other operating divisions are located within the United States.  Corporate costs primarily include our costs to operate as a public company and to operate our corporate headquarters location.  Corporate is not a reportable segment.  We had approximately $170.8 million and $168.7 million of intercompany loans between the broadcast segment, operating divisions segment and corporate as of March 31, 2012 and 2011, respectively.  We had $5.0 million and $4.8 million in intercompany interest expense related to intercompany loans between the broadcast segment, other operating divisions segment and corporate for the three months ended March 31, 2012, and 2011, respectively.  Intercompany loans and interest expense are excluded from the tables below.  All other intercompany transactions are immaterial.

Financial information for our operating segments are included in the following tables for the periods presented (in thousands).

For the three months ended March 31, 2012	Broadcast		Other Operating Divisions			Corporate			Consolidated
Revenue	$	209,888	$	13,948		$	—		$	223,836
Depreciation of property and equipment	8,699		407			383			9,489
Amortization of definite-lived intangible assets and other assets	4,567		1,332			—			5,899
Amortization of program contract costs and net realizable value adjustments	14,280		—			—			14,280
General and administrative overhead expenses	7,903		611			853			9,367
Operating income (loss)	61,830		(672		)	(1,236		)	59,922
Interest expense	—		854			26,533			27,387
Income from equity and cost method investments	—		1,276			—			1,276
Assets	1,501,147		234,950			35,148			1,771,245

For the three months ended March 31, 2011	Broadcast		Other Operating Divisions		Corporate			Consolidated
Revenue	$	173,183	$	9,426	$	—		$	182,609
Depreciation of property and equipment	7,345		310		405			8,060
Amortization of definite-lived intangible assets and other assets	3,955		841		—			4,796
Amortization of program contract costs and net realizable value adjustments	12,618		—		—			12,618
Impairment of goodwill, intangible and other assets	398		—		—			398
General and administrative overhead expenses	7,632		282		750			8,664
Operating income (loss)	52,628		8		(1,160		)	51,476
Interest expense	—		627		28,540			29,167
Income from equity and cost method investments	—		11		—			11

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CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
CONSOLIDATED STATEMENTS OF OPERATIONS
Loss from discontinued operations, income tax provision	$ 67	$ 107

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

3 Months Ended

Mar. 31, 2012

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

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

Interim Financial Statements

The consolidated financial statements for the three months ended March 31, 2012 and 2011 are unaudited.  In the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income and consolidated statements of cash flows for these periods as adjusted for the adoption of recent accounting pronouncements discussed below.

As permitted under the applicable rules and regulations of the Securities and Exchange Commission (SEC), the consolidated financial statements do not include all disclosures normally included with audited consolidated financial statements and, accordingly, should be read together with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC.  The consolidated statements of operations presented in the accompanying consolidated financial statements are not necessarily representative of operations for an entire year.

Variable Interest Entities

In determining whether we are the primary beneficiary of a VIE for financial reporting purposes, we consider whether we have the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether we have the obligation to absorb losses or the right to receive returns that would be significant to the VIE.  We consolidate VIEs when we are the primary beneficiary.  The assets of our consolidated VIEs can only be used to settle the obligations of the VIE.  All the liabilities, including debt held by our VIEs, are non-recourse to us.  However, our senior secured credit facility (Bank Credit Agreement) contains cross-default provisions with the VIE debt of Cunningham Broadcasting Corporation (Cunningham).  See Note 6, Related Person Transactions for more information.

We have entered into Local Marketing Agreements (LMAs) to provide programming, sales and managerial services for television stations of Cunningham, the license owner of seven television stations as of March 31, 2012.  We pay LMA fees to Cunningham and also reimburse all operating expenses.  We also have an acquisition agreement in which we have a purchase option to buy the license assets of the television stations which includes the Federal Communications Commission (FCC) license and certain other assets used to operate the station (License Assets).  Our applications to acquire the FCC licenses are pending approval.  We own the majority of the non-license assets of the Cunningham stations and our Bank Credit Agreement contain certain cross-default provisions with Cunningham whereby a default by Cunningham caused by insolvency would cause an event of default under our Bank Credit Agreement.  We have determined that the Cunningham stations are VIEs and that based on the terms of the agreements, the significance of our investment in the stations and the cross-default provisions with our Bank Credit Agreement, we are the primary beneficiary of the variable interests because we have the power to direct the activities which significantly impact the economic performance of the VIE through the sales and managerial services we provide and we absorb losses and returns that would be considered significant to Cunningham.  See Note 6, Related Person Transactions for more information on our arrangements with Cunningham.  Included in the accompanying consolidated statements of operations for each of the three months ended March 31, 2012 and 2011 are net revenues of $23.3 million, respectively, that relate to LMAs with Cunningham.

We have outsourcing agreements with certain other license owners, under which we provide certain non-programming related sales, operational and administrative services.  We pay a fee to the license owners based on a percentage of broadcast cash flow and we reimburse all operating expenses.  We also have a purchase option to buy the License Assets.  For the same reasons noted above regarding the LMAs with Cunningham, we have determined that the outsourced license station assets are VIEs and we are the primary beneficiary.  Included in the accompanying consolidated statements of operations for the three months ended March 31, 2012 and 2011 are net revenues of $3.7 million and $3.1 million, respectively, that relate to these arrangements.

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

	As of March 31,2012		As of December 31, 2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,867	$	2,739
Accounts receivable	6		—
Income taxes receivable	86		142
Current portion of program contract costs	380		413
Prepaid expenses and other current assets	118		99
Total current asset	3,457		3,393
PROGRAM CONTRACT COSTS, less current portion	1,564		271
PROPERTY AND EQUIPMENT, net	6,502		6,658
GOODWILL	6,357		6,357
BROADCAST LICENSES	4,691		4,208
DEFINITE-LIVED INTANGIBLE ASSETS, net	8,136		6,601
OTHER ASSETS	13,243		5,980
Total assets	$	43,950	$	33,468
LIABILITIES
CURRENT LIABILITIES:
Accounts payable	$	15	$	37
Accrued liabilities	204		315
Current portion of notes payable, capital leases and commercial bank financing	8,337		11,074
Current portion of program contracts payable	339		373
Total current liabilities	8,895		11,799
LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion	2,381		2,411
Program contracts payable, less current portion	2,199		173
Total liabilities	$	13,475	$	14,383

The amounts above represent the consolidated assets and liabilities of the VIEs related to our LMAs with Cunningham and outsourcing agreements, for which we are the primary beneficiary, and have been aggregated as they all relate to our broadcast business.  Excluded from the amounts above are payments made to Cunningham under the LMA which are treated as a prepayment of the purchase price of the stations and capital leases between us and Cunningham which are eliminated in consolidation.  The total payment made under these LMAs as of March 31, 2012 and December 31, 2011, which are excluded from liabilities above, were $25.4 million and $22.7 million, respectively.  The total capital lease assets excluded from above for each of the three months ended March 31, 2012 and the year ended December 31, 2011 were $11.8 million, respectively.  The risk and reward characteristics of the VIEs are similar.

In the fourth quarter of 2011, we began providing sales, programming and management services to the eight stations owned by Freedom Communications (Freedom) pursuant to an LMA.  We have determined that the Freedom stations are VIEs based on the terms of the agreements.  We are not the primary beneficiary because the owner of the stations has the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs.  In the consolidated statements of operations for the three months ended March 31, 2012 are net revenues of $10.0 million and station production expenses of $7.8 million related to the Freedom LMAs.  Effective April 1, 2012, we completed the acquisition of these stations and the LMA was terminated.

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

The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary for the periods presented (in thousands):

	As of March 31, 2012				As of December  31, 2011
	Carrying amount		Maximum exposure		Carrying amount		Maximum exposure
Investments in real estate ventures	$	14,060	$	14,060	$	8,009	$	8,009
Investments in investment companies	26,193		26,193		26,276		26,276
Total	$	40,253	$	40,253	$	34,285	$	34,285

The carrying amounts above are included in other assets in the consolidated balance sheets.  The income and loss related to these investments are recorded in income from equity and cost method investments in the consolidated statement of operations.  We recorded income of $1.4 million and less than $0.1 million in the quarters ended March 31, 2012 and 2011, respectively.

Our maximum exposure is equal to the carrying value of our investments.  Our unfunded commitments related to private equity investment funds totaled $10.9 million as of March 31, 2012 and December 31, 2011.

Recent Accounting Pronouncements

In May 2011, the FASB issued new guidance for fair value measurements.  The purpose of the new guidance is to have a consistent definition of fair value between U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).  Many of the amendments to GAAP are not expected to have a significant impact on practice; however, the new guidance does require new and enhanced disclosure about fair value measurements.  The amendments are effective for interim and annual periods beginning after December 15, 2011 and should be applied prospectively.  This guidance did not have a material impact on our consolidated financial statements but we have included the additional quantitative and qualitative disclosures required for our Level 3 fair value measurements beginning with the quarter ended March 31, 2012.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities.  Actual results could differ from those estimates.

Restricted Cash

Upon entering into definitive agreements to purchase assets of Four Points Media Group LLC (Four Points) and Freedom in September 2011 and November 2011, respectively, we were required to deposit 10% of the purchase price for each acquisition into an escrow account.  Effective January 1, 2012, we closed the asset acquisition of Four Points for $200.0 million and used $20.0 million of restricted cash towards the asset acquisition.  As of March 31, 2012, $38.5 million of restricted cash classified as noncurrent relates to the amount held in escrow for the acquisition of Freedom, which closed effective April 1, 2012.

Additionally, under the terms of certain lease agreements, as of March 31, 2012 and December 31, 2011, we were required to hold $0.2 million of restricted cash related to the removal of analog equipment from some of our leased towers.

Revenue Recognition

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

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

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

Income Taxes

Our income tax provision for all periods consists of federal and state income taxes.  The tax provision for the three months ended March 31, 2012 and 2011 is based on the estimated effective tax rate applicable for the full year after taking into account discrete tax items and the effects of the noncontrolling interests.

Our effective income tax rate for the three months ended March 31, 2011 approximated the statutory rate. Our effective income tax rate for the three months ended March 31, 2012 was lower than the statutory rate primarily due to a release of $7.7 million of valuation allowance related to certain deferred tax assets of Cunningham, one of our consolidated VIEs, as the weight of all available evidence now supports full realization of those deferred tax assets.

Reclassifications

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