SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Policies)

3 Months Ended

Mar. 31, 2014

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

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

Discontinued Operations

Discontinued Operations

In accordance with Financial Accounting Standards Board’s (FASB) guidance on reporting assets held for sale, we reported the financial position and results of operations of our stations in Lansing, Michigan (WLAJ-TV) and Providence, Rhode Island (WLWC-TV), as assets and liabilities held for sale in the accompanying consolidated balance sheets and discontinued operations consolidated statements of operations. Discontinued operations have not been segregated in the consolidated statements of cash flows and, therefore, amounts for certain captions will not agree with the accompanying consolidated balance sheets and consolidated statements of operations. The operating results of WLAJ-TV, which was sold effective March 1, 2013 for $14.4 million, and WLWC-TV, which was sold effective April 1, 2013 for $13.8 million, are not included in our consolidated results of operations from continuing operations for the three months ending March 31, 2013. Total revenues for WLAJ-TV and WLWC-TV, which are included in discontinued operations for the three months ending March 31, 2013, were $0.6 million and $1.6 million, respectively. Total income before taxes for WLAJ-TV and WLWC-TV, which are included in discontinued operations for the three months ending March 31, 2013 are $0.2 million and $0.4 million, respectively. The resulting gain on the sale of these stations in 2013 was negligible. Basic and diluted earnings per share from discontinued operations was less than $0.01 per share for the quarter ended March 31, 2013.

Assets Held of Sale

Assets Held of Sale

As discussed in Note 3. Commitments and Contingencies - Pending Acquisitions, we expect to sell the license and certain related assets of our stations in Birmingham, AL - WABM (MNT), Harrisburg/Lancaster/Lebanon/York, PA - WHP (CBS), Charleston, SC - WMMP (MNT) and assets related to our LMAs to provide services to Harrisburg/Lancaster/Lebanon/York, PA — WLYH (CW) and Charleston, SC — WTAT (FOX).

In accordance with Financial Accounting Standards Board’s (FASB) guidance on reporting assets held for sale, we reported our assets and liabilities related to WABM, WHP, WMMP, WLYH, and WTAT as held for sale in the accompanying consolidated balance sheet as of March 31, 2014. We expect the sale of the stations will occur in the third quarter of 2014. The results of operations of these stations are included within the results from continuing operations as the criteria for classification as discontinued operations was not met.

As of March 31, 2014, the major classes of assets and liabilities of the group reported as held for sale and included in other current assets and other current liabilities on the accompanying condensed consolidated balance sheet are shown below:

	March 31, 2014
Assets:
Accounts receivable	$	5,701
Program contract costs	1,902
Other current assets	302
Property and equipment	11,798
Goodwill	42,153
Broadcast licenses	3,583
Definite-lived intangible assets	32,470
Assets held for sale	$	97,909
Liabilities:
Accounts payable and accrued liabilities	$	1,272
Program contracts payable	2,912
Capital leases payable	5,640
Other liabilities	511
Liabilities held for sale	$	10,335

Variable Interest Entities

Variable Interest Entities

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

We have entered into LMAs to provide programming, sales and managerial services for seven television stations of Cunningham Broadcasting Company (Cunningham), the license owner of these television stations as of December 31, 2013. 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 these television stations which includes the FCC license and certain other assets used to operate the station (License Assets). Our applications to acquire these FCC license related assets are pending FCC approval. We also perform sales and other non-programming support services to two other stations owned by Cunningham (acquired in November 2013) pursuant to joint sales agreements (JSAs) and shared services agreements (SSAs). We have purchase options to acquire the license assets of these stations. We own the majority of the non-license assets of these nine Cunningham stations and we have guaranteed the debt of Cunningham. We have determined that Cunningham and these nine stations are VIEs and that based on the terms of the agreements, the significance of our investment in the stations and our guarantee of the debt of Cunningham, we are the primary beneficiary of the variable interests because, subject to the ultimate control of the licensees, we have the power to direct the activities which significantly impact the economic performance of the VIEs through the services we provide pursuant to the LMAs, and other outsourcing agreements, and we absorb losses and returns that would be considered significant to Cunningham. See Note 5. Related Person Transactions for more information on our arrangements with Cunningham. The net revenues of these stations which we consolidate were $27.8 million and $24.6 million for the three months ended March 31, 2014 and 2013, respectively. The fees paid between us and Cunningham pursuant to these arrangements are eliminated in consolidation. See Changes in the Rules of Television Ownership and Joint Sale Agreements in Note 3. Commitment and Contingencies for discussion of recent changes in FCC rules related to JSAs.

We have certain outsourcing agreements, including certain JSAs and SSAs, with certain other license owners under which we provide certain non-programming related sales, operational and administrative services. The terms of the agreements vary, but generally have initial terms of over five years with several optional renewal terms. We own the majority of the non-license assets of these stations and in certain cases have guaranteed the debt of licensee. We also have purchase options to buy the assets of the licensees. We have determined that these licensees (18 and 10 licenses as of March 31, 2014 and 2013, respectively) are VIEs, and, based on the terms of the agreements and the significance of our investment in the stations, we are the primary beneficiary of the variable interests because, subject to the ultimate control of the licensees, we have the power to direct the activities which significantly impact the economic performance of the VIE through the sales and managerial services we provide and because we absorb losses and returns that would be considered significant to the VIEs. The net revenues of these stations which we consolidate were $38.7 million and $24.2 million for the three months ended March 31, 2014 and 2013, respectively. The fees paid between us and other license owners pursuant to these arrangements are eliminated in consolidation. See Changes in the Rules of Television Ownership and Joint Sale Agreements in Note 3. Commitment and Contingencies for discussion of recent changes in FCC rules related to JSAs.

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

	March 31, 2014		December 31, 2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	7,401	$	4,916
Accounts receivable	17,833		18,468
Current portion of program contract costs	8,111		10,725
Prepaid expenses and other current assets	467		247
Assets held for sale	3,944		—
Total current assets	37,756		34,356

PROGRAM CONTRACT COSTS, less current portion	4,883		5,075
PROPERTY AND EQUIPMENT, net	10,579		11,081
GOODWILL	6,357		6,357
BROADCAST LICENSES	14,828		16,768
DEFINITE-LIVED INTANGIBLE ASSETS, net	93,975		97,496
OTHER ASSETS	23,988		22,935
Total assets	$	192,366	$	194,068

LIABILITIES
CURRENT LIABILITIES:
Accounts payable	$	—	$	86
Accrued liabilities	1,990		2,536
Current portion of notes payable, capital leases and commercial bank financing	5,731		5,731
Current portion of program contracts payable	8,103		11,552
Total current liabilities	15,824		19,905

LONG-TERM LIABILITIES:
Notes payable, capital leases and commercial bank financing, less current portion	48,392		49,850
Program contracts payable, less current portion	5,326		6,597
Long term liabilities	10,563		10,838
Total liabilities	$	80,105	$	87,190

The amounts above represent the consolidated assets and liabilities of the VIEs described above, for which we are the primary beneficiary, and have been aggregated as they all relate to our broadcast business. Excluded from the amounts above are payments made to Cunningham under the LMAs 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 payments made under these LMAs as of March 31, 2014 and December 31, 2013, which are excluded from liabilities above, were $33.4 million and $32.4 million, respectively. The total capital lease liabilities excluded from above were $11.2 million as of March 31, 2014 and December 31, 2013, respectively. Also excluded from the amounts above are liabilities associated with the certain outsourcing agreements and purchase options with certain VIEs totaling $58.9 million and $59.9 million as of March 31, 2014 and December 31, 2013, respectively, as these amounts are eliminated in consolidation. The risk and reward characteristics of the VIEs are similar.

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

The carrying amounts of our investments in these VIEs for which we are not the primary beneficiary as of March 31, 2014 and December 31, 2013 was $25.1 million and $26.7 million, respectively, which are included in other assets in the consolidated balance sheets. Our maximum exposure is equal to the carrying value of our investments. The income and loss related to these investments are recorded in income from equity and cost method investments in the consolidated statement of operations. We recorded income of $0.2 million and $0.4 million in the three months ended March 31, 2014 and 2013, respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In April 2014, the FASB issued new guidance that changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of and represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. The revised guidance will become effective for annual fiscal periods beginning after December 15, 2014. Under the revised guidance, we expect that it will be less likely for any future sales of assets, asset groups, or stations to be considered discontinued operations because such sales would need to represent a strategic shift and have a major effect on our future operations. Historically, under the previous guidance, sales of minor components of our business were required to be classified as discontinued operations.

Use of Estimates

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

Restricted Cash

During 2013, we entered into certain definitive agreements to purchase the assets of pending acquisitions, which required certain deposits to be made into escrow accounts. As of March 31, 2014 and December 31, 2013, we held $12.4 million and $11.4 million, respectively, in restricted cash classified as noncurrent related to the amounts held in escrow for these acquisitions.

Revenue Recognition

Revenue Recognition

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

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

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

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

Share Repurchase Program

Share Repurchase Program

On October 28, 1999, we announced a $150.0 million share repurchase program, which was renewed on February 6, 2008. On March 20, 2014, the Board of Directors authorized an additional $150.0 million share repurchase authorization. There is no expiration date and currently, management has no plans to terminate this program. For the three months ended March 31, 2014, we have purchased approximately 2.9 million shares for $82.4 million. As of March 31, 2014, the total remaining authorization was $185.1 million.

Income Taxes

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, 2014 and 2013 is based on the estimated effective tax rate applicable for the full year after taking into account discrete tax items and the effects of the noncontrolling interests. We provide a valuation allowance for deferred tax assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. In evaluating our ability to realize net deferred tax assets, we consider all available evidence, both positive and negative, including our past operating results, tax planning strategies and forecasts of future taxable income. In considering these sources of taxable income, we must make certain judgments that are based on the plans and estimates used to manage our underlying businesses on a long-term basis. A valuation allowance has been provided for deferred tax assets related to a substantial portion of our available state net operating loss (NOL) carryforwards, based on past operating results, expected timing of the reversals of existing temporary book/tax basis differences, alternative tax strategies and projected future taxable income.

Our effective income tax rate for the three months ended March 31, 2014 and 2013 approximated the statutory rate.

We believe it is reasonably possible that our liability for unrecognized tax benefits related to continuing operations could be reduced by up to $10.5 million, in the next twelve months, as a result of expected statute of limitations expirations, the application of limits under available state administrative practice exceptions, and the resolution of examination issues and settlements with federal and certain state tax authorities.

Reclassifications

Reclassifications

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