Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of our Company, our wholly-owned and majority-owned and controlled subsidiaries, and variable interest entities (“VIEs”) for which we are the primary beneficiary.  We review all local marketing agreements (“LMAs”), shared services agreements (“SSAs”) or joint sales agreements (“JSAs”), to evaluate whether consolidation of such arrangements is required.  All intercompany accounts and transactions have been eliminated.  We conduct our business through our subsidiaries and have no operations or assets other than our investment in our subsidiaries and equity-method investments.  We operate in one reportable segment.

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.

We have a JSA and an SSA with WBDT Television, LLC (“WBDT”), a third party, for WBDT-TV in the Dayton, OH market.  Under these agreements, we provide sales and administrative services to WBDT, have an obligation to reimburse certain of WBDT’s expenses, and we are compensated through a performance-based fee structure that provides us the benefit of certain returns from the operation of WBDT-TV.

We determined that WBDT is a VIE, and as a result of the JSA and SSA we have a variable interest in WBDT.  We are the primary beneficiary of WBDT, and therefore, we consolidate WBDT within our unaudited interim consolidated financial statements.

The carrying amounts and classifications of the assets and liabilities of WBDT, which have been included in our consolidated balance sheets were as follows (in thousands):

	September 30, 2012		December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	90	$	90
Accounts receivable, net	610		789
Other assets	639		697
Total current assets	1,339		1,576
Property and equipment, net	374		419
Broadcast licenses and other intangible assets, net	7,809		7,815
Other assets	549		878
Total assets	$	10,071	$	10,688
LIABILITIES
Current liabilities:
Current portion of long-term debt	$	184	$	184
Accounts payable	965		739
Accrued expenses	30		98
Program obligations	674		904
Total current liabilities	1,853		1,925
Long-term debt, excluding current portion	460		598
Program obligations	573		980
Other liabilities	7,185		7,185
Total liabilities	$	10,071	$	10,688

The assets of our consolidated VIE can only be used to settle the obligations of the VIE, and may not be sold, or otherwise disposed of, except for assets sold or replaced with others of like kind or value.  As of September 30, 2012 and December 31, 2011, other liabilities of WBDT of $7.2 million reduce the carrying value of the entity, to reflect the fact that as of September 30, 2012 and December 31, 2011, LIN Television has an option to acquire the assets or membership interests of WBDT for an exercise price which may be less than the carrying value of the tangible and intangible net assets of WBDT.  The option is exercisable by us only in the event that the Federal Communications Commission (“FCC”) attribution rules change.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and the notes thereto.  Our actual results could differ from these estimates.  Estimates are used for the allowance for doubtful accounts in receivables, valuation of goodwill and intangible assets, amortization and impairment of program rights and intangible assets, stock-based compensation and other long-term incentive compensation arrangements, pension costs, barter transactions, income taxes, employee medical insurance claims, useful lives of property and equipment, contingencies, including shortfall funding liabilities to our joint venture with NBCUniversal Media, LLC (“NBCUniversal”), litigation and net assets of businesses acquired.

Net Earnings per Common Share

Net Earnings per Common Share

Basic earnings per share (“EPS”) is computed by dividing income attributable to common stockholders by the number of weighted-average outstanding shares of common stock.  Diluted EPS reflects the effect of the assumed exercise of stock options and vesting of restricted shares only in the periods in which such effect would have been dilutive.

The following table sets forth the computation of the common shares outstanding used in determining basic and diluted EPS (in thousands):

	Three Months EndedSeptember 30,		Nine Months EndedSeptember 30,
Denominator for EPS calculation:	2012	2011	2012	2011
Weighted-average common shares, basic	53,066	56,352	54,715	55,674
Effect of dilutive securities:
Stock options	1,287	1,079	1,274	1,311
Weighted-average common shares, diluted	54,353	57,431	55,989	56,985

We apply the treasury stock method to measure the dilutive effect of our outstanding stock option and restricted stock awards and include the respective common share equivalents in the denominator of our diluted income per common share calculation. Potentially dilutive securities representing 2.5 million shares and 2.6 million shares of common stock for the three months ended September 30, 2012 and 2011, respectively, and 1.7 million shares and 0.4 million shares of common stock for the nine months ended September 30, 2012 and 2011, respectively, were excluded from the computation of diluted income per common share for these periods because their effect would have been anti-dilutive. The net income per share amounts are the same for our class A, class B and class C common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In July 2012, there were revisions to the accounting standard for impairment tests of indefinite-lived intangible assets other than goodwill.  Under the revised standard a company can first perform a qualitative assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary.  A company can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets, and can also bypass the qualitative assessment and perform the quantitative impairment test for any indefinite-lived intangible in any period.  The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted during 2012 if a company has not yet performed its 2012 annual impairment test or issued its financial statements.  We will adopt this guidance no later than January 1, 2013, and we do not expect it to have a material impact on our financial position or results of operations.

In September 2011, there were revisions to the accounting standard for goodwill impairment tests. A company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The revisions are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We adopted this guidance effective January 1, 2012, and the adoption did not have an impact on our financial position or results of operations.

In September 2011, there were revisions to the accounting standard for reporting comprehensive income, which require presentation of the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  We elected to present this information in a separate statement included within the primary financial statements following our consolidated statement of operations.  The revisions are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and should be applied retrospectively.  We adopted this guidance effective January 1, 2012, and the adoption did not have an impact on our financial position or results of operations.

In May 2011, the fair value accounting standard was amended to change fair value measurement principles and disclosure requirements.  The key changes in measurement principles include limiting the concepts of the highest and best use and valuation premise to nonfinancial assets, providing a framework for considering whether a premium or discount can be applied in a fair value measurement, and aligning the fair value measurement of instruments classified within an entity’s stockholders’ equity with the guidance for liabilities.  Disclosures are required for all transfers between Levels 1 and 2 within the valuation hierarchy, the use of a nonfinancial asset measured at fair value if its use differs from its highest and best use, the level in the valuation hierarchy of assets and liabilities not recorded at fair value but for which fair value is required to be disclosed, and for Level 3 measurements, quantitative information about unobservable inputs used, a description of the valuation processes used, and qualitative discussion about the sensitivity of the measurements.  We adopted this guidance effective January 1, 2012, and the adoption did not have an impact on our financial position or results of operations.