2. ACQUISITIONS

Four Points

Effective January 1, 2012, we completed the acquisition of the broadcast assets of 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. This acquisition provides expansion into additional markets and increases value based on the synergies we can achieve.

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 an incremental Term B Loan commitment under our amended Bank Credit Agreement plus a $20.0 million cash escrow previously paid in September 2011.

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

Prepaid expenses and other current assets	$	456
Program contract costs	3,731
Property and equipment	34,578
Broadcast licenses	10,658
Definite-lived intangible assets	93,800
Other assets	548
Accrued liabilities	(381		)
Program contracts payable	(5,157		)
Fair value of identifiable net assets acquired	138,233
Goodwill	60,843
Total	$	199,076

The final 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 $9.8 million, and other intangible assets of $17.1 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. Certain measurement period adjustments have been made since the initial allocation in the first quarter of 2012, which were not material to the consolidated financial statements.

Prior to the acquisition, since October 1, 2011, we provided sales, programming and management services to the stations pursuant to an 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.

The results of operations for the three and nine months ended September 30, 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 statements of operations, were $17.9 million and $4.4 million for the three months ended September 30, 2013, respectively, and $54.3 million and $14.0 million for the nine months ended September 30, 2013, respectively. Net broadcast revenues and operating income of the Four Points stations included in our consolidated statements of operations, were $18.7 million and $4.1 million for the three months ended September 30, 2012, respectively, and $52.9 million and $11.6 million for the nine months ended September 30, 2012, respectively. These amounts exclude the operations of WLWC-TV, which was sold effective April 1, 2013 and are classified as discontinued operations in the consolidated statements of operations. See Note 1. Nature of Operations and Summary of Significant Accounting Policies. Net broadcast revenues and operating income (loss) of WLWC-TV were $1.4 million and $0.2 million for the nine months ended September 30, 2013, respectively. Net broadcast revenues and operating income (loss) of WLWC-TV were $1.4 million and $(0.2) million, respectively, for the three months ended September 30, 2012 and $4.1 million and $0.1 million for the nine months ended September 30, 2012, respectively.

Freedom

Effective April 1, 2012, we completed the acquisition of the broadcast assets of 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. This acquisition provides expansion into additional markets and increases value based on the synergies we can achieve.

We paid Freedom $385.0 million plus a working capital adjustment of $0.3 million. The acquisition was financed with a draw under a $157.5 million incremental Term Loan A and a $192.5 million incremental Term B Loan commitment under our amended Bank Credit Agreement, plus a $38.5 million cash escrow previously paid in November 2011.

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

Prepaid expenses and other current assets	$	373
Program contract costs	3,520
Property and equipment	54,109
Broadcast licenses	10,424
Definite-lived intangible assets	140,963
Other assets	278
Accrued liabilities	(589		)
Program contracts payable	(3,404		)
Fair value of identifiable net assets acquired	205,674
Goodwill	179,609
Total	$	385,283

The final 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 $93.1 million, the decaying advertiser base of $25.1 million, and other intangible assets of $22.8 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 life of 16 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. Certain measurement period adjustments have been made since the initial allocation in the second quarter of 2012, which were not material to the consolidated financial statements.

Prior to the acquisition, since December 1, 2011, we provided sales, programming and management services to the stations pursuant to an LMA. During that period, we funded the working capital needs of the stations, which totaled $1.5 million as of December 31, 2011 and $9.6 million as of April 1, 2012, the date of acquisition, and was reflected as cash flows used in operating activities within the consolidated statement of cash flows for those periods. This working capital is not reflected in the purchase price allocation presented above.

The results of operations for the nine months ended September 30, 2012 includes the results of the Freedom stations since April 1, 2012. Net broadcast revenues and operating income of the Freedom stations included in our consolidated statements of operations, were $26.2 million and $6.7 million for the three months ended September 30, 2013, respectively, and $79.9 million and $20.8 million for the nine months ended September 30, 2013, respectively. Net broadcast revenues and operating income of the Freedom stations included in our consolidated statements of operations, were $26.8 million and $5.0 million for the three months ended September 30, 2012, respectively, and $52.5 million and $14.0 million for the nine months ended September 30, 2012, respectively. These amounts exclude the operations of WLAJ-TV, which was sold effective, January 1, 2013 and are classified as discontinued operations in the consolidated statements of operations. See Note 1. Nature of Operations and Summary of Significant Accounting Policies. Net broadcast revenues and operating income of WLAJ-TV were $0.7 million and $0.1 million for the nine months ended September 30, 2013, respectively. Net broadcast revenues and operating loss of WLAJ-TV were $1.1 million and $0.2 million, respectively, for the three months ended September 30, 2012 and $2.1 million and zero for the nine months ended September 30, 2012, respectively. Additionally, during the first quarter 2012, prior to the acquisition, we recorded net broadcast revenues of $10.0 million related to the Freedom LMAs.

Newport

Effective December 1, 2012, we completed the acquisition of certain broadcast assets of Newport Television (Newport). The acquired assets relate to the following seven stations in six markets along with the respective network affiliation or program service arrangements: WKRC (CBS) in Cincinnati, OH; WOAI (NBC) in San Antonio, TX; WHP (CBS) in Harrisburg/Lancaster/Lebanon/York, PA; WPMI (NBC) and WJTC (IND) in Mobile, AL/Pensacola, FL; KSAS (FOX) in Wichita/Hutchinson, KS; and WHAM (ABC) in Rochester, NY. We also acquired Newport’s rights under the local marketing agreements with WLYH (CW) in Harrisburg, PA and KMTW (MNT) in Wichita, KS, as well as options to acquire the license assets. This acquisition provides expansion into additional markets and increases value based on the synergies we can achieve.

We paid Newport $460.5 million in cash, less a working capital adjustment of $1.3 million. We financed the $460.5 million purchase price, less the $41.3 million in escrow with the net proceeds from the 6.125% Notes issued in October 2012.

Our right to acquire certain of the license assets of WPMI and WJTC in Mobile, AL was assigned to Deerfield and Deerfield acquired these assets effective December 1, 2012 for $6.0 million. Additionally, Deerfield acquired the license assets of WHAM in Rochester, NY effective February 1, 2013 for $6.0 million, using borrowings under its bank credit facility. Prior to Deerfield’s acquisition of the assets of WHAM, the assets were owned by Newport. Concurrent with the acquisition of WKRC in Cincinnati, OH and WOAI in San Antonio, TX from Newport, we sold to Deerfield the license assets of two of our existing stations located in Cincinnati, OH (WSTR MNT) and San Antonio, TX (KMYS CW) for a total of $10.7 million. Deerfield financed these purchases with third party bank financing which we have guaranteed. We have assignable purchase option agreements with Deerfield to acquire the license assets upon FCC approval and operate the stations pursuant to shared services and joint sales agreements with Deerfield. We consolidate the license assets owned by Deerfield because the licensee companies are VIEs and we are the primary beneficiary. Prior to Deerfield acquiring the license assets of WHAM in Rochester, NY on February 1, 2013, we operated the station pursuant to a shared services and joint sales agreement with Newport. We consolidated the license assets owned by Newport from December 1, 2012 to January 31, 2013 because the licensee company was a VIE and the Company is the primary beneficiary. See Variable Interest Entities in Note 1. Nature of Operations and Summary of Significant Accounting Policies. The purchase of the license assets by Deerfield in February 2013 was accounted for as a transaction between parties under common control.

Under the acquisition method of accounting, the results of the acquired operations are included in the financial statements of the Company beginning December 1, 2012. The initial purchase price has been allocated to the acquired assets and assumed liabilities based on estimated fair values. The initial purchase price allocated includes $460.5 million paid for certain broadcast assets of the seven stations from Newport and the rights under the LMAs with the two other stations, $6.0 million paid by Deerfield for the license assets of WPMI and WJTC and $6.0 million paid by Deerfield for the license assets of WHAM, and $0.2 million of noncontrolling interests related to the WLYH VIE, less a working capital adjustment of $1.3 million. The sale of the license assets of WSTR in Cincinnati, OH and KMYS in San Antonio, TX was considered a transaction between parties under common control and therefore was not included in the purchase price allocation. 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, including the assets owned by VIEs, is summarized as follows (in thousands):

Prepaid expenses and other current assets	$	1,390
Program contract costs	10,378
Property and equipment	53,883
Broadcast licenses	15,581
Definite-lived intangible assets	240,013
Other assets	1,097
Accrued liabilities	(3,928		)
Program contracts payable	(11,634		)
Fair value of identifiable net assets acquired	306,780
Goodwill	164,621
Total	$	471,401

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 $176.0 million, the decaying advertiser base of $23.7 million, and other intangible assets of $40.3 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 preliminary 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. Certain measurement period adjustments have been made since the initial allocation in the fourth quarter of 2012, which were not material to our consolidated financial statements.

Net broadcast revenues and operating income of the Newport stations included in our consolidated statements of operations, were $36.1 million and $5.5 million for the three months ended September 30, 2013, respectively, and $109.3 million and $25.3 million for the nine months ended September 30, 2013, respectively.

Fisher Communications

Effective August 8, 2013, we completed the acquisition of all of the outstanding common stock of Fisher Communications, Inc. (Fisher). We paid $373.2 million to the shareholders of the Fisher common stock, representing $41.0 per common share. We financed the total purchase price with cash on hand. Fisher owns certain broadcast assets related to the following twenty-two stations, and four radio stations in 8 markets along with the respective network affiliation or program service arrangements: KOMO (ABC) and KUNS (Univision) in Seattle-Tacoma, WA; KATU (ABC), KUNP(Univision), and KUNP-LP (Univision) in Portland, OR; KLEW (CBS) in Spokane, WA; KBOI (CBS) and KYUU-LD (CW) in Boise, ID; KVAL (CBS), KCBY (CBS), KPIC (CBS), KMTR (NBC), KMCB (NBC), and KTCW (NBC) in Eugene, OR; KIMA (CBS), KEPR (CBS), KUNW-CD (Univision), and KVVK-CD (Univision), in Yakima/Pasco/Richland/Kennewick, WA; KBAK (CBS) and KBFX-CD (FOX) in Bakersfield, CA; as well as KIDK (CBS/FOX) and KXPI (FOX) in Idaho Falls/Pocatello, ID. The four radio stations acquired are: KOMO (AM/FM), KPLZ (FM) and KVI (AM) in the Seattle/Tacoma, WA market. This acquisition provides expansion into additional markets and increases value based on the synergies we can achieve.

The results of the acquired operations are included in the financial statements of the Company beginning on August 8, 2013. Under the acquisition method of accounting, the initial purchase price has been allocated to the acquired assets and assumed liabilities based on estimated fair values. The allocation reflects the consolidation of net assets of the third party which owns the license and related assets of KMTR in Eugene, OR, which we have consolidated, as the licensee is considered to be a VIE and we are the primary beneficiary of the variable interests. Additionally, another third party that performs certain services pursuant to outsourcing agreement to our stations in Idaho Falls, ID (KIDK and KXPI), has exercised an existing purchase option to purchase the broadcast assets of the two stations for $5.9 million. These assets have been classified as assets held for sale in the initial purchase price allocation and in our consolidated balance sheet as of September 30, 2013. Also included in the liabilities assumed are obligations under a noncontributory supplemental retirement program that covers former members of management of Fisher. The program was frozen in 2005 and does not include any active employees. The estimated projected benefit obligation at the acquisition date was $23.5 million, based on an estimated discount rate of 3.6%. Fisher had funded the obligation with annuity contracts and life insurance policies, which Fisher was the owner and beneficiary. Included in the assets acquired are the estimated fair value based on the cash value of the annuity contracts and cash surrender value of the life insurance policies, totaling $17.9 million. The purchase price allocation is preliminary pending a final determination of the fair values of the assets and liabilities. The allocated fair value of acquired assets and assumed liabilities is summarized as follows (in thousands):

Cash	$	13,531
Accounts Receivable	29,962
Prepaid expenses and other current assets	2,079
Program contract costs	10,954
Property and equipment	48,616
Broadcast licenses	11,058
Definite-lived intangible assets	156,332
Other assets	24,632
Assets Held for Sale	5,900
Accounts payable and accrued liabilities	(20,342		)
Program contracts payable	(10,954		)
Deferred Tax Liability	(50,416		)
Other long-term liabilities	(25,482		)
Fair value of identifiable net assets acquired	195,870
Goodwill	177,326
Total	$	373,196

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 $100.6 million, the decaying advertiser base of $15.0 million, and other intangible assets of $40.8 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 life of 15 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 deductible for tax purposes will be approximately $19.5 million.

The results of operations for the three and nine months ended September 30, 2013 includes the results of the Fisher stations since August 8, 2013. Net broadcast revenues and operating income of the Fisher stations included in our consolidated statements of operations, were $25.9 million and $8.2 million for the three and nine months ended September 30, 2013. Post-acquisition, we recognized $4.3 million of severance expense related to certain Fisher executives and employees that have been or will be terminated who had existing agreements in place prior to close.

Pro Forma Information

The following table sets forth unaudited pro forma results of continuing operations for the three and nine months ended September 30, 2012, assuming that the acquisitions of the Freedom, Newport, and Fisher stations discussed above, along with transactions necessary to finance the acquisitions, occurred at the beginning of the annual period presented (in thousands, except per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Total revenues	$	354,545	$	335,849	$	1,030,175	$	972,305
Net Income	$	28,380	$	29,877	$	57,487	$	84,146
Net Income attributable to Sinclair Broadcast Group	$	28,071	$	29,733	$	57,072	$	84,139
Basic and diluted earnings per share attributable to Sinclair Broadcast Group	$	0.28	$	0.37	$	0.70	$	1.04

The results of operations of the Four Points stations were included in our consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012. The results of operations, of all of the aforementioned acquired stations, were included in our consolidated statement of operations for the three and nine months ended September 30, 2013.

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 businesses since the beginning of the annual period presented. 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 transactions, exclusion of nonrecurring financing and transaction related costs, alignment of accounting policies and the related tax effects of the adjustments. The pro forma revenues exclude the revenues of WLAJ-TV, which are classified as discontinued operations in the consolidated statements of operations. Total revenues of WLAJ-TV, which are excluded from the pro forma results above for the nine months ended September 30, 2013 were $1.0 million.

Other Acquisitions

We acquired five other television stations during the year ended December 31, 2012 in three markets. The initial purchase price allocated includes $45.1 million paid for certain broadcast assets of these stations, less working capital adjustments of $0.7 million, and $4.4 million of non-controlling interests related to, and amounts paid by certain VIEs for the license assets of certain of these stations owned by VIEs that we consolidate. In addition to the Fisher acquisition, we acquired eight television stations during the first nine months of 2013 in six markets, which four of the six markets were acquired from Cox Media Group in May 2013. Additionally, two of the eight stations were acquired in one market from TTBG LLC (TTBG) on September 30, 2013. The initial purchase price allocated includes $136.9 million paid for certain broadcast assets of these stations, less working capital adjustments of $4.4 million, plus $3.1 million paid by Deerfield for the license assets of certain of these stations owned by VIEs that we consolidate. We allocated the total purchase price of these within the respective years, as follows (in thousands):

	2013			2012
Prepaid expenses and other current assets	$	1,991		$	160
Program contract costs	7,594			1,638
Property and equipment	35,439			16,545
Broadcast licenses	1,611			2,679
Definite-lived intangible assets	48,049			22,546
Accrued liabilities	(2,086		)	(1,178		)
Program contracts payable	(7,625		)	(4,252		)
Fair value of identifiable net assets acquired	84,973			38,138
Goodwill	50,674			10,661
Total	$	135,647		$	48,799

In December 2012, we acquired the license assets of WTTA-TV in Tampa/St. Petersburg, Florida from Bay Television, Inc. (Bay TV). Prior to December 1, 2012, we performed sales, programming and other management services to the station pursuant to an LMA which was terminated upon closing. As discussed in Note 6. Related Person Transactions, our controlling shareholders own a controlling interest in Bay TV. As this was considered a transaction between entities under common control, the acquisition method of accounting was not applied, and the assets acquired were recorded at their historical cost basis and the difference between the purchase price and the historical cost basis of the assets of $23.6 million, net of taxes of $15.6 million, was recorded as a reduction in additional paid-in capital. A substantial portion of the purchase price will be deductible for tax purposes in future periods. Net broadcast revenues and operating income of these stations, included in our consolidated statements of operations were $29.5 million and $6.7 million for the three months ended September 30, 2013, respectively, and $47.0 million and $10.5 million for the nine months ended September 30, 2013, respectively.

In conjunction with all acquisitions in 2012 and 2013, we incurred transaction costs of approximately $3.5 million, which are reported in general and administrative expenses in the accompanying consolidated statements of operations, as incurred. For the three and nine months ended September 30, 2013, such costs totaled $0.1 million and $1.0 million, respectively. For the three and nine months ended September 30, 2012, there were $0.4 and $0.9 million, respectively. These costs were not included in the pro forma amounts above as they are nonrecurring in nature.