SINCLAIR BROADCAST GROUP, INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001 Commission file number: 000-26076

SINCLAIR BROADCAST GROUP, INC.

(Exact name of Registrant as specified in its charter)

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

10706 Beaver Dam Road
Hunt Valley, MD 21030
(Address of principal executive offices)
(410) 568-1500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act:

Class A common stock, par value $.01 per share

Series D preferred stock, par value $.01 per share

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 ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this report, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Based on the closing sales price of $13.20 per share as of March 20, 2002, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $562.1 million.

As of March 20, 2002, there were 42,581,845 shares of class A common stock, $.01 par value; 42,778,035 shares of class B common stock $.01 par value, and 3,450,000 shares of series D preferred stock, $.01 par value, convertible into 7,561,644 shares of class A common stock at a conversion price of $22.813 per share, of the registrant issued and outstanding.

In addition, 2,000,000 shares of $200 million aggregate liquidation value of 11.625% High Yield Trust Offered Preferred Securities of Sinclair Capital, a subsidiary trust of Sinclair Broadcast Group, Inc., are issued and outstanding.

Documents Incorporated by Reference

Portions of the definitive proxy statement to be delivered to shareholders in connection with the 2002 annual meeting of shareholders are incorporated by reference into Part III.

PART I

FORWARD-LOOKING STATEMENTS

This report includes or incorporates forward-looking statements. 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 impact of changes in national and regional economies,

• the continuing impact of the terrorist attacks of September 11, 2001,

• our ability to service our outstanding debt,

• pricing fluctuations in local and national advertising,

• changes in the makeup of the population in the areas where our stations are located,

• the activities of our competitors,

• the popularity of our programming, and

• the effects of governmental regulation of broadcasting.

Other matters set forth in this report, including the risk factors set forth in Item 7 of this report, or in the documents incorporated by reference may also cause actual results in the future to differ materially from those described in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

ITEM 1. BUSINESS

We are a diversified television broadcasting company that owns, provides programming and operating services pursuant to local marketing agreements (“LMAs”) or provides sales services pursuant to outsourcing agreements to more television stations than all but one other commercial broadcasting group in the United States. We currently own, provide programming and operating services pursuant to LMAs or provide sales services to 63 television stations in 40 markets. We currently have duopolies where we own and operate two stations in ten markets; own and operate a station and provide programming and operating services to a second station in nine markets; own a station and provide or are provided sales, operational and managerial services to a second station in two markets.

We have a mid-size market focus and 47 of our 63 stations are located in television designated market areas (“DMAs”) that rank between the 13^th and 75^th largest in the United States. Our television station group is diverse in network affiliation with 20 stations affiliated with FOX, 20 with The WB, eight with ABC, six with UPN, four with NBC and three with CBS. Two stations are not affiliated with any network.

We underwent rapid and significant growth from 1991 to 2000, most of which occurred prior to the end of 1999. Since 1991, we have increased the number of television stations we own or provide services to from three television stations to 63 television stations. Prior to September 1999, we also owned, operated and/or programmed up to 52 radio stations in ten markets. We sold all of our interest in radio stations in 1999 and 2000.

In January 1999, we acquired approximately 35% of Acrodyne Communications, Inc., a publicly held company, that manufactures UHF transmitters for the television industry. Along with this investment, Sinclair hired a team of highly qualified individuals to develop the next generation of UHF digital transmitters. We have since licensed this technology to Acrodyne and they are manufacturing most of our digital transmitters. Since Acrodyne is currently solely reliant on us for this business and has sustained significant losses in 2001, we have written off our entire investment and loans to Acrodyne. (See “Notes to Consolidated Financial Statements”.)

In November 1999, we acquired an 89.6% equity interest in G1440, Inc. (“G1440”), which is a single-source, end-to-end eBusiness solutions provider in developing web-based applications and an application service provider. G1440 provides a variety of services and products which include a homebuilder application, an immigration tracking tool application and a procurement application.

We are a Maryland corporation formed in 1986. Our principal offices are located at 10706 Beaver Dam Road, Hunt Valley, MD 21030, and our telephone number is (410) 568-1500.

TELEVISION BROADCASTING

Markets and Stations

We own and operate, provide programming services to, provide sales services to, or have agreed to acquire the following television stations:

Market

Market Rank (a)

Stations

Status (b)

Channel

Affiliation

Number of Commercial Stations in the Market (c)

Station Rank (d)

Expiration Date of FCC License

Minneapolis/St. Paul, Minnesota

KMWB

O&O

4/1/06

Tampa, Florida

WTTA

LMA

2/1/05

Sacramento, California

KOVR

O&O

CBS

12/1/06

Pittsburgh, Pennsylvania

WPGH

O&O

FOX

8/1/07

WCWB

O&O

8/1/07

St. Louis, Missouri

KDNL

O&O

ABC

2/1/06

Baltimore, Maryland

WBFF

O&O

FOX

10/1/04

WNUV

LMA

10/1/04

Indianapolis, Indiana

WTTV

O&O

8/1/05

WTTK

O&O

(e)

8/1/05

Raleigh-Durham, North Carolina

WLFL

O&O

12/1/04

WRDC

O&O

UPN

12/1/04

Nashville, Tennessee

WZTV

O&O

FOX

8/1/05

WUXP

O&O

UPN

8/1/05

Kansas City, Missouri

KSMO

O&O

2/1/06

Cincinnati, Ohio

WSTR

O&O

10/1/05

Milwaukee, Wisconsin

WCGV

O&O

UPN

12/1/05

WVTV

O&O

12/1/05

Columbus, Ohio

WSYX

O&O

ABC

10/1/05

WTTE

LMA

FOX

10/1/05

Greenville/Spartanburg/ Anderson, South Carolina Asheville, North Carolina

WBSC

LMA

(f)

12/1/04

WLOS

O&O

ABC

12/1/04

San Antonio, Texas

KABB

O&O

FOX

8/1/06

KRRT

O&O

8/1/06

Birmingham, Alabama

WTTO

O&O

4/1/05

WABM

O&O

UPN

4/1/05

WDBB

LMA

(g)

4/1/05

Norfolk, Virginia

WTVZ

O&O

10/1/04

Greensboro/Winston-Salem, Salem/Highpoint, North Carolina

WXLV

O&O

ABC

12/1/04

WUPN

O&O

UPN

12/1/04

Oklahoma City, Oklahoma

KOCB

O&O

6/1/06

KOKH

O&O

FOX

6/1/06

Buffalo, New York

WUTV

O&O

FOX

6/1/07

WNYO

O&O

6/1/07

Las Vegas, Nevada

KVWB

O&O

10/1/06

KFBT

O&O

IND

(h)

10/1/06

Richmond, Virginia

WRLH

O&O

FOX

10/1/04

Dayton, Ohio

WKEF

O&O

NBC

10/1/05

WRGT

LMA

FOX

10/1/05

Charleston and Huntington, West Virginia

WCHS

O&O

ABC

10/1/04

WVAH

LMA

FOX

10/1/04

Mobile, Alabama and Pensacola, Florida

WEAR

O&O

ABC

2/1/05

WFGX

LMA

IND

(h)

2/1/05

Flint/Saginaw/Bay City, Michigan

WSMH

O&O

FOX

10/1/05

Lexington, Kentucky

WDKY

O&O

FOX

8/1/05

Des Moines, Iowa

KDSM

O&O

FOX

2/1/06

Rochester, New York

WUHF

LMA

(i)

FOX

6/1/07

Paducah, Kentucky/ Cape Girardeau, Missouri

KBSI

O&O

FOX

2/1/06

WDKA

LMA

8/1/05

Portland, Maine

WGME

O&O

CBS

4/1/07

Market

Market Rank (a)

Stations

Status (b)

Channel

Affiliation

Number of Commercial Stations in the Market (c)

Station Rank (d)

Expiration Date of FCC License

Syracuse, New York

WSYT

O&O

FOX

6/1/07

WNYS

LMA

6/1/07

Springfield/Champaign, Illinois

WICS

O&O

NBC

12/1/05

WICD

O&O

NBC

(j)

12/1/05

Madison, Wisconsin

WMSN

O&O

FOX

12/1/05

Cedar Rapids, Iowa

KGAN

O&O

CBS

2/1/06

Tri-Cities, Tennessee

WEMT

O&O

FOX

8/1/05

Springfield, Massachusetts

105

WGGB

O&O

ABC

4/1/07

Charleston, South Carolina

108

WMMP

O&O

UPN

12/1/04

WTAT

LMA

FOX

12/1/04

Tallahassee, Florida

113

WTWC

O&O

NBC

2/1/05

WTXL

OSA

(k)

ABC

n/a

Peoria/Bloomington, Illinois

116

WYZZ

O&O

(l)

FOX

12/1/05

(a) Rankings are based on the relative size of a station’s designated marketing area (“DMA”) among the 211 generally recognized DMAs in the United States as estimated by Nielsen as of November 2001.

(b) “O & O” refers to stations that we own and operate. “LMA” refers to stations to which we provide programming services pursuant to a local marketing agreement. “OSA” refers to stations to which we provide sales services pursuant to outsourcing agreements.

(c) Represents the estimated number of television stations designated by Nielsen as “local” to the DMA, excluding public television stations and stations that do not meet the minimum Nielsen reporting standards (weekly cumulative audience of at least 0.1%) for the Monday-Sunday, 7:00 a.m. to 1:00 a.m. time period as of November 2001.

(d) The rank of each station in its market is based upon the November 2001 Nielsen estimates of the percentage of persons tuned to each station in the market from 7:00 a.m. to 1:00 a.m., Monday-Sunday.

(e) WTTK, a satellite of WTTV under the Federal Communications Commission (“FCC”) rules, simulcasts all of the programming aired on WTTV and the station rank applies to the combined viewership of these stations.

(f) The license assets for this station are currently owned by Cunningham Broadcasting Corporation (formerly Glencairn, Ltd.) or one of its subsidiaries and we intend to acquire these assets upon FCC approval. The FCC recently dismissed our application to acquire the license of this station and we have filed a motion for reconsideration of that decision.

(g) WDBB simulcasts the programming broadcast on WTTO pursuant to a local marketing agreement.

(h) “IND” or “Independent” refers to a station that is not affiliated with any of ABC, CBS, NBC, FOX, WB, or UPN.

(i) We have an application pending to acquire the license assets of this station upon FCC approval.

(j) WICD, a satellite of WICS under the FCC rules, simulcasts all of the programming aired on WICS and the station rank applies to the combined viewership of these stations.

(k) Sinclair has entered into a five-year outsourcing agreement with Media Venture Management, Inc., owner of WTXL-TV, to provide certain non-programming related sales, operational and managerial services for WTXL-TV. Sinclair and Media Venture Management, Inc. have recently responded to a complaint that was filed with the FCC alleging an unauthorized transfer of control of WTXL-TV.

(l) Sinclair has entered into a seven-year outsourcing agreement with Nexstar Broadcasting of Peoria, LLC under which Nexstar’s CBS affiliate WMBD-TV provides certain non-programming related sales, operational and managerial services to WYZZ-TV. Sinclair continues to own all of the assets of WYZZ-TV and to program and control the station’s operation.

Operating Strategy

Our operating strategy includes the following elements:

Programming to Attract Viewership. We seek to target our programming offerings to attract viewership, particularly in the 18 to 49 year-old age bracket. In pursuit of this strategy we seek to obtain, at attractive prices, popular syndicated programming that is complementary to each station’s network programming. We also seek to broadcast live local sporting events. Moreover, we produce and broadcast local news at 29 of the television stations that we own, and provide with programming and operating services or provide with sales services in 24 separate markets. In addition, 40 of our 63 stations are affiliated with the FOX or WB network, and we believe these affiliations with these new and growing networks will further our goal of expanding viewership in the 18 to 49 year-old age bracket. Our programming strategy on our FOX, WB, UPN and independent stations also includes “counter programming,” which consists of broadcasting programs that are alternatives to the types of programs being shown concurrently on competing stations.

Developing Local Franchises. We believe that the greatest opportunity for a sustainable and growing customer base lies within our local communities. We have therefore focused on developing a strong local sales force at each of our television stations. We have added approximately one hundred new sales people to our television station group over the last two years. For the year ended December 31, 2001, 58% of our time sales were local. Our goal is to shift our revenue mix so that 75% of our time sales are derived in the local markets by 2006.

Control of Operating and Programming Costs. By employing a disciplined approach to managing programming acquisition and other costs, we have been able to achieve operating margins that we believe are

among the highest in the television broadcast industry. We believe our national reach of nearly 25% of the country provides the opportunity to purchase high quality programming and a strong position to negotiate with program providers. Moreover, we emphasize control of each of our stations’ programming and operating costs through program-specific profit analysis, detailed budgeting, tight control over staffing levels and detailed long-term planning models.

Utilization of Local Marketing Agreements and Duopolies. We have sought to increase our revenues and improve our margins by providing programming services pursuant to an LMA to a second station in selected DMAs where we already own one station or by owning two stations in a single DMA. We believe that we can attain growth in operating cash flow through the utilization of such duopolies. Duopolies allow us to improve our competitive position with respect to a demographic sector and to realize significant economies of scale in marketing, programming, overhead and capital expenditures. We also believe that these arrangements assist stations whose operations may have been marginally profitable to continue to air popular programming and contribute to diversity of programming in their respective DMAs. As a result of the FCC’s revision of its duopoly rules in 1999 to permit the ownership of up to two television stations in a DMA under certain circumstances, we have recently acquired several stations that we had been programming pursuant to LMAs. We own duopolies in 10 markets and operate a second station pursuant to an LMA in nine markets. We currently are permitted under the FCC’s revised duopoly rules to establish new duopolies in the Minneapolis, Tampa, Indianapolis and Sacramento markets, if suitable acquisitions can be identified and negotiated under acceptable terms. In certain markets where we currently program stations pursuant to LMAs, revised new duopoly rules would prevent us from continuing the LMA. We have challenged the application of these rules to our stations, and a court appeal regarding this challenge is pending. See “Risk Factors — The FCC’s ownership restrictions limit our ability to operate multiple television stations, and recent changes in these rules may threaten our existing strategic approach to certain television markets”.

Use of Outsourcing Agreements. In addition to our LMAs and duopolies, we have entered into two (and intend to seek opportunities for additional) outsourcing agreements in which our stations provide or are provided with various non-programming related services such as sales, operational and managerial services to or by other stations. We believe this structure will allow stations to achieve operational efficiencies and economies of scale, which should otherwise improve broadcast cash flows and competitive positions. In October 2001, our NBC affiliate, WTWC-TV in Tallahassee, Florida entered into a five-year outsourcing agreement with Media Venture Management, Inc.’s ABC affiliate, WTXL-TV, Tallahassee, Florida, under which WTWC-TV provides services to WTXL-TV. Effective December 1, 2001, we entered into a seven-year outsourcing agreement with Nexstar Broadcasting of Peoria, LLC under which Nexstar’s CBS affiliate WMBD-TV, Peoria, Illinois, will provide services to WYZZ-TV, our station in the Peoria/Bloomington market. We will continue to seek additional opportunities for entering into outsourcing agreements in the future.

Strategic Realignment of Station Portfolio. In anticipation of the possible relaxation of the television ownership multiple rules, including changes in the national ownership cap, the duopoly rules, and newspaper/ television cross-ownership rules as well as the recent court decision vacating the cable/television cross-ownership rules, we are re-examining our television station group portfolio. Our objective is to build our local franchises in the markets we deem strategic and divest or swap our non-strategic stations. In order to achieve our objective and to prepare us for the expected rule changes, we have retained Bear, Stearns & Co. Inc. to review our station group make-up, advise us on market opportunities which could strengthen our competitive position, make recommendations on markets we should exit, if any, and bring together potential sellers and buyers. In connection with this process, we routinely review and conduct investigations of potential television station acquisitions, dispositions and station swaps. At any given time, we may be in discussions with one or more station owners. At this time, we have not entered into any agreements or understandings with respect to any transaction and there can be no assurance that any transactions will be completed.

Local News. We believe that the production and broadcasting of local news is an important link to the community and an aid to the station’s efforts to expand its viewership. In addition, local news programming can provide access to advertising sources targeted specifically to local news viewers. We carefully assess the anticipated benefits and costs of producing local news prior to introduction at one of our stations because a significant investment in capital equipment is required and substantial operating expenses are incurred in introducing, developing and producing local news programming. We also continuously review the performance of our existing news operations to make sure that they are economically viable. We currently provide local news programming at 29 of the television stations we own or program located in 24 separate markets. The possible introduction of local news at our other stations is reviewed periodically and we have recently expanded our news programming in some of the markets in which we own or program a second station. We can produce news programming in these markets at relatively low cost per hour of programming and the programming serves the local community by providing additional news outlets in these markets, some of which are broadcast at different

times. During 2001, we discontinued an unprofitable news operation in two of our markets, started news operations in one market and expanded news operations in another market. On March 12, 2001, we commenced a three-hour morning news block on WBFF-TV in Baltimore, the second entry of our FOX affiliates into the morning news arena, and in March 2001 launched a half-hour nighttime news block in Des Moines, IA. We are currently exploring the economic benefits that can be realized by centrally providing a portion of the news to existing and/or new news operations.

Popular Sporting Events. Our WB and UPN affiliated and independent stations generally face fewer restrictions on broadcasting live local sporting events than do their competitors that are affiliates of FOX, ABC, NBC and CBS, which are required to broadcast a greater number of hours of programming supplied by the networks. At some of our stations we have been able to acquire the local television broadcast rights for certain sporting events, including NBA basketball, Major League Baseball, NFL football, NHL hockey, ACC basketball, Big Ten football and basketball, and SEC football. We seek to expand our sports broadcasting in DMAs only as profitable opportunities arise. In addition, our stations that are affiliated with FOX, ABC, NBC and CBS broadcast certain Major League Baseball games, NFL football games and NHL hockey games as well as other popular sporting events.

Attract and Retain High Quality Management. We believe that much of our success is due to our ability to attract and retain highly skilled and motivated managers at both the corporate and local station levels. A significant portion of the compensation available to regional, group general managers, sales managers and other station managers is based on their exceeding certain operating results. We also provide some of our corporate and station managers with deferred compensation plans offering options to acquire class A common stock.

Community Involvement. Each of our stations actively participates in various community activities and offers many community services. Our activities include broadcasting programming of local interest and sponsorship of community and charitable events. We also encourage our station employees to become active members of their communities and to promote involvement in community and charitable affairs. We believe that active community involvement by our stations provides our stations with increased exposure in their respective DMAs and ultimately increases viewership and advertising support.

SINCLAIR VENTURES INVESTMENT STRATEGY

Although we have continued to see a dramatic decrease in the value of Internet-related and wireless businesses that began in 2000, we continue to explore opportunities for television broadcasters to work with these businesses to increase their profitability and to use the resources of the Internet and wireless outlets to enhance the offerings and value of our broadcast stations. Currently we hold an 89.6% equity interest in G1440 which is a single-source, end-to-end eBusiness solutions provider in developing web-based applications and an application service provider. G1440 provides a variety of services and products which include a homebuilder application, an immigration tracking tool application and a procurement application.

In furtherance of our Internet strategy, we routinely review and conduct investigations of potential Internet-related and wireless opportunities. When we believe a favorable opportunity exists, we seek to enter into discussions with the owners of Internet-related and wireless businesses regarding the possibility of an acquisition, equity investment or barter transaction. At any given time, we may be in discussions with one or more parties. We cannot be assured that any of these or other negotiations will lead to definitive agreements, or if agreements were reached that any transactions would be consummated.

ACQUISITIONS AND DISPOSITIONS

LMA Acquisitions. In January 2002 we acquired the licenses and related assets of a number of stations which we had previously been programming pursuant to LMAs. These acquisitions and the prices paid for the licenses and related assets were as follows:

Glencairn/WPTT, Inc. Acquisition

On November 15, 1999, SBG entered into an agreement to purchase substantially all of the assets of television station WCWB-TV, Channel 22, Pittsburgh, Pennsylvania, with the owner of that television station WPTT, Inc. In December 2001, we received FCC approval and on January 7, 2002, we closed on the purchase of the FCC license and related assets of WCWB-TV for a purchase price of $18.8 million.

On November 15, 1999, we entered into five separate plans and agreements of merger, pursuant to which we would acquire through merger with subsidiaries of Cunningham Broadcasting Corporation (formerly Glencairn, Ltd.), television broadcast stations WABM-TV, Birmingham, Alabama, KRRT-TV, San Antonio, Texas, WVTV-TV, Milwaukee, Wisconsin, WRDC-TV, Raleigh, North Carolina, and WBSC-TV (formerly WFBC-TV),

Anderson, South Carolina. The consideration for these mergers is the issuance to Cunningham of shares of Class A Common voting stock of Sinclair. The total value of the shares to be issued in consideration for all the mergers is $7.7 million. In December 2001, we received FCC approval on all the transactions except for WBSC-TV (see below). Accordingly, on February 1, 2002, we closed on the purchase of the FCC license and related assets of WABM-TV, KRRT-TV, WVTV-TV and WRDC-TV.

WBSC LMA. The license assets of WBSC-TV Greenville/Spartansburg/Anderson, South Carolina, are currently owned by Cunningham and we intend to acquire these assets upon FCC approval. The FCC recently denied our application to acquire the license for this station based on the “eight voices test” and we have filed a motion for reconsideration of that decision.

Mission Acquisition

Pursuant to our merger with Sullivan Broadcast Holdings, Inc. which was effective July 1, 1998, we acquired options to acquire television broadcast station WUXP-TV in Nashville, Tennessee from Mission Broadcasting I, Inc. and television broadcast station WUPN-TV in Greensboro, North Carolina from Mission Broadcasting II, Inc. On November 15, 1999, we exercised our option to acquire both of the foregoing stations. In December 2001, we received FCC approval and in January 2002, we closed on the purchase of the FCC licenses and related assets of WUXP-TV and WUPN-TV for the assumption of notes aggregating $4.2 million and $0.1 million of cash. Prior to closing, we programmed these stations pursuant to an LMA.

Sullivan Acquisition

In December 2001, we received FCC approval to acquire 100% of the stock of Sullivan Broadcasting Company II, Inc. and Sullivan Broadcasting Company IV, Inc. which, in the aggregate, owned the FCC license and related assets of six television stations. In January 2002, we completed the purchase of the FCC license and related assets of WZTV-TV, WUTV-TV, WXLV-TV, WRLH-TV, WMSN-TV and KOKH-TV. Prior to closing, we programmed these stations pursuant to LMAs. As consideration for the purchase of the FCC license and related assets of KOKH, we eliminated a note receivable due from Sullivan IV in the amount of principal and interest of $16.6 million.

WUHF Acquisition

In December 1999, we entered into a stock purchase agreement with BS&L Broadcasting, Inc. (“BS&L”) and its sole shareholder to acquire the stock of BS&L, the licensee of WUHF-TV, Rochester, New York. BS&L acquired the license of WUHF-TV from Sullivan II. One of the conditions to our acquisition of the stock of BS&L is the receipt of FCC approval. We have filed an application with the FCC to acquire the license of WUHF-TV. Since July 1998, we have programmed WUHF-TV pursuant to a local marketing agreement.

WNYO Acquisition

In August 2000, we entered into an agreement to purchase the stock of Grant Television, the owner of WNYO-TV in Buffalo, New York, for a purchase price of $51.5 million. In October 2000, we completed the stock acquisition of Grant, obtaining the non-license assets of WNYO-TV and began programming the television station under a time brokerage agreement. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcast assets and other intangible assets for $2.9 million, $3.8 million and $39.8 million, respectively. In December 2001, we received FCC approval and on January 25, 2002, we completed the purchase of the FCC license and related assets of WNYO-TV for a purchase price of $3.2 million in cash and the assumption of a note payable of $3.5 million.

Other

In January 2002, the Rainbow/PUSH Coalition filed with the U.S. Court of Appeals for the D.C. Circuit a Notice of Appeal of the FCC’s Memorandum Opinion and Order approving certain of the acquisitions described above. The stations affected by the Notice of Appeal are WNUV-TV, WTTE-TV, WRGT-TV, WTAT-TV, WVAH-TV, KOKH-TV, KRRT-TV, WVTV-TV, WRDC-TV, WABM-TV, WBSC-TV, WCWB-TV, WLOS-TV and KABB-TV. In February 2002 we filed a Motion for Leave to Intervene, which has been granted by the court. No dates have been set for briefs or oral argument.

FEDERAL REGULATION OF TELEVISION BROADCASTING

The ownership, operation and sale of television stations are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act of 1934, as amended (“Communications Act”). Among other things, the FCC assigns frequency bands for broadcasting; determines the particular frequencies, locations and

operating power of stations; issues, renews, revokes and modifies station licenses; regulates equipment used by stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; and has the power to impose penalties for violations of its rules or the Communications Act.

The following is a brief summary of certain provisions of the Communications Act, the Telecommunications Act of 1996 (“the 1996 Act”) and specific FCC regulations and policies. Reference should be made to the Communications Act, the 1996 Act, FCC rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of broadcast stations.

License Grant and Renewal

Television stations operate pursuant to broadcasting licenses that are granted by the FCC for maximum terms of eight years and are subject to renewal upon application to the FCC. During certain periods when renewal applications are pending, petitions to deny license renewals can be filed by interested parties, including members of the public. The FCC will generally grant a renewal application if it finds:

• that the station has served the public interest, convenience and necessity;

• that there have been no serious violations by the licensee of the Communications Act or the rules and regulations of the FCC; and

• that there have been no other violations by the licensee of the Communications Act or the rules and regulations of the FCC that, when taken together, would constitute a pattern of misconduct.

All of the stations that we currently own and operate or provide programming services to pursuant to LMAs, are presently operating under regular licenses, which expire as to each station on the dates set forth under “Television Broadcasting” above. Although renewal of a license is granted in the vast majority of cases even when petitions to deny are filed, there can be no assurance that the licenses of a station will be renewed.

Ownership Matters

General. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast license without the prior approval of the FCC. In determining whether to permit the assignment or transfer of control of, or the grant or renewal of, a broadcast license, the FCC considers a number of factors pertaining to the licensee, including compliance with various rules limiting common ownership of media properties, the “character” of the licensee and those persons holding “attributable” interests in that licensee, and compliance with the Communications Act’s limitations on alien ownership.

To obtain the FCC’s prior consent to assign a broadcast license or transfer control of a broadcast license, appropriate applications must be filed with the FCC. If the application involves a “substantial change” in ownership or control, the application must be placed on public notice for a period of approximately 30 days during which petitions to deny the application may be filed by interested parties, including members of the public. If the application does not involve a “substantial change” in ownership or control, it is a “pro forma” application. The “pro forma” application is not subject to petitions to deny or a mandatory waiting period, but is nevertheless subject to having informal objections filed against it. If the FCC grants an assignment or transfer application, interested parties have approximately 30 days from public notice of the grant to seek reconsideration or review of the grant. Generally, parties that do not file initial petitions to deny or informal objections against the application face difficulty in seeking reconsideration or review of the grant. The FCC normally has approximately an additional 10 days to set aside such grant on its own motion. When passing on an assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an assignment or transfer to any party other than the assignee or transferee specified in the application.

The FCC generally applies its ownership limits to “attributable” interests held by an individual, corporation, partnership or other association. In the case of corporations holding, or through subsidiaries controlling, broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation’s stock (or 20% or more of such stock in the case of insurance companies, investment companies and bank trust departments that are passive investors) are generally attributable. In August 1999, the FCC revised its attribution and multiple ownership rules, and adopted the equity-debt-plus rule that causes certain creditors or investors to be attributable owners of a station. Under this rule, a major programming supplier (any programming supplier that provides more than 15% of the station’s weekly programming hours) or same-market media entity will be an attributable owner of a station if the supplier or same-market media entity holds debt or equity, or both, in the station that is greater than 33% of the value of the station’s total debt plus equity. For purposes of this rule, equity includes all stock, whether voting or non-voting, and equity held by insulated limited partners in partnerships. Debt includes all liabilities whether long-term or short-term. In addition, under new

ownership rules, LMAs are now attributable where a licensee owns a television station and programs a television station in the same market.

The Communications Act prohibits the issuance of broadcast licenses to, or the holding of a broadcast license by, any corporation of which more than 20% of the capital stock is owned of record or voted by non-U.S. citizens or their representatives or by a foreign government or a representative thereof, or by any corporation organized under the laws of a foreign country (collectively, aliens). The Communications Act also authorizes the FCC, if the FCC determines that it would be in the public interest, to prohibit the issuance of a broadcast license to, or the holding of a broadcast license by, any corporation directly or indirectly controlled by any other corporation of which more than 25% of the capital stock is owned of record or voted by aliens. The FCC has issued interpretations of existing law under which these restrictions in modified form apply to other forms of business organizations, including partnerships.

As a result of these provisions, the licenses granted to our subsidiaries by the FCC could be revoked if, among other restrictions imposed by the FCC, more than 25% of our stock were directly or indirectly owned or voted by aliens. Sinclair and its subsidiaries are domestic corporations, and the members of the Smith family (who together hold over 90% of the common voting rights of Sinclair) are all United States citizens. The amended and restated Articles of Incorporation of Sinclair (“the amended certificate”) contain limitations on alien ownership and control that are substantially similar to those contained in the Communications Act. Pursuant to the amended certificate, Sinclair has the right to repurchase alien-owned shares at their fair market value to the extent necessary, in the judgment of its board of directors, to comply with the alien ownership restrictions.

Radio/Television Cross-Ownership Rule. The FCC’s radio/television cross-ownership rule (the “one to a market” rule) generally permits a party to own a combination of up to two television stations and six radio stations depending on the number of independent media voices in the market.

Local Television/Cable Cross Ownership Rule. On February 19, 2002, the U.S. Court of Appeals for the D.C. Circuit vacated the FCC rules prohibiting the common ownership of a television station and a cable system that serve the same local market.

Broadcast/Daily Newspaper Cross-Ownership Rule. The FCC’s rules prohibit the common ownership of a radio or television broadcast station and a daily newspaper in the same market. On September 20, 2001, the FCC released an Order and Notice of Proposed Rule Making in which it seeks comments on whether the broadcast/daily newspaper cross-ownership rule should be retained, modified or eliminated.

Dual Network Rule. In May 2001, the FCC amended its dual network rule to permit the four major television networks — ABC, CBS, NBC and FOX — to own, operate, maintain or control the UPN and/or The WB television network. The four major networks are still prohibited, absent a waiver, from merging with each other.

Antitrust Regulation. The Department of Justice (“DOJ”) and the Federal Trade Commission have increased their scrutiny of the television industry since the adoption of the 1996 Act, and have reviewed matters related to the concentration of ownership within markets (including LMAs) even when the ownership or LMA in question is permitted under the laws administered by the FCC or by FCC rules and regulations. The DOJ takes the position that an LMA entered into in anticipation of a station’s acquisition with the proposed buyer of the station constitutes a change in beneficial ownership of the station which, if subject to filing under the Hart-Scott-Rodino Anti Trust Improvements Act (“HSR”) Act, cannot be implemented until the waiting period required by that statute has ended or been terminated.

Expansion of our broadcast operations on both a local and national level will continue to be subject to the FCC’s ownership rules and any changes the FCC or Congress may adopt. Concomitantly, any further relaxation of the FCC’s ownership rules may increase the level of competition in one or more of the markets in which our stations are located, more specifically to the extent that any of our competitors may have greater resources and thereby be in a superior position to take advantage of such changes.

National Ownership Rule. The U.S. Court of Appeals for the D.C. Circuit recently remanded to the FCC its decision not to alter the rule that no individual or entity may have an attributable interest in television stations reaching more than 35% of the national television viewing audience. Under this rule, which currently remains in effect pending the FCC’s review thereof as mandated by the court, where an individual or entity has an attributable interest in more than one television station in a DMA, the percentage of the national television viewing audience encompassed within that DMA is only counted once. Historically, VHF stations have shared a larger portion of the market than UHF stations. Therefore, only half of the households in the market area of any UHF station are included when calculating whether an entity or individual owns television stations reaching more than 35% of the national television viewing audience. All but eight of the stations owned and operated by us, or to which we

provide programming services, are UHF. Upon completion of all pending acquisitions and dispositions, we will reach approximately 25% of U.S. television households or 15% taking into account the FCC’s UHF discount.

Duopoly Rule. Under the FCC’s 1999 local television ownership rules, a party may own two television stations in adjoining DMA’s, even if there is Grade B overlap between the two stations’ signals and generally may own two stations in the same market:

• if there is no Grade B overlap between the stations; or

• if the market containing both the stations contains at least eight separately-owned full-power television stations (the “eight voices test”) and not more than one station is among the top-four rated stations in the market.

In addition, a party may request a waiver of the rule to acquire a second station in the market if the station to be acquired is economically distressed or not yet constructed and there is no party who does not own a local television station who would purchase the station for a reasonable price.

Petitions for reconsideration of the 1999 revision of the duopoly, including a petition submitted by us, were recently denied by the FCC in a Report and Order reaffirming the eight voices test. We have filed a Petition for Review of this action in the U.S. Court of Appeals for the D.C. Circuit. On June 21, 2001, the U.S. Court of Appeals for the D.C. Circuit granted our Motion for Stay of the requirement that we divest of certain LMAs by August 6, 2001, pending the court’s review of the FCC rule limiting the number of stations that television broadcasters can own in a market. We submitted a written brief to the Court during the third quarter 2001 and oral arguments occurred during the first quarter of 2002.

Local Marketing Agreements

A number of television stations, including certain of our stations, have entered into what have commonly been referred to as local marketing agreements or LMAs. While these agreements may take varying forms, one typical type of LMA is a programming agreement between two separately owned television stations serving the same market, whereby the licensee of one station programs substantial portions of the broadcast day and sells advertising time during such program segments on the other licensee’s station subject to ultimate editorial and other controls being exercised by the latter licensee. The licensee of the station which is being substantially programmed by another entity must maintain complete responsibility for and control over the programming, financing, personnel and operations of its broadcast station and is responsible for compliance with applicable FCC rules and policies. If the FCC were to find that the owners/licensees of the stations with which we have LMAs failed to maintain control over their operations as required by FCC rules and policies, the licensee of the LMA station and/or Sinclair could be fined or set for hearing, the outcome of which could be a monetary forfeiture or, under certain circumstances, loss of the applicable FCC license.

In the past, a licensee could own one station and program and provide other services to another station pursuant to an LMA in the same market because LMAs were not considered attributable interests. However, under the 1999 duopoly rules, LMAs are now attributable where a licensee owns a television station and programs more than 15% of the weekly broadcast time of another television station in the same market. The new rules provide that LMAs entered into on or after November 5, 1996 had until August 5, 2001 to come into compliance with the new ownership rules. LMAs entered into before November 5, 1996 are grandfathered until the conclusion of the FCC’s 2004 biennial review. In certain cases, parties with grandfathered LMAs, may be able to rely on the circumstances at the time the LMA was entered into in advancing any proposal for co-ownership of the station. We currently program 12 television stations pursuant to LMAs. (We recently acquired 14 of the stations that we had programmed pursuant to an LMA). Of these 12 stations, we have filed an application with the FCC to acquire two of the stations pursuant to an LMA, three of the LMAs are not subject to divestiture because they involve stations which Sinclair could own under the new duopoly rules, but either has decided not to acquire at this time or has no right to acquire, four LMAs (including the LMA for one of the stations we have applied to acquire) were entered into before November 5, 1996, and four LMAs were entered into on or after November 5, 1996 (although we believe a valid position exists that one of these four LMAs was effectively entered into prior to November 5, 1996). Petitions for reconsideration of the new duopoly rules, including a petition submitted by us, were denied by the FCC in a Report and Order reaffirming the eight voices test. We filed a Petition for Review of the FCC’s order adopting the duopoly rules in the U.S. Court of Appeals for the D.C. Circuit. On June 21, 2001, the U.S. Court of Appeals for the D.C. Circuit granted our motion for stay of the requirement that we divest the four LMAs entered into on or after November 5, 1996 by August 5, 2001, pending the court’s review of a FCC rule limiting the number of stations that television broadcasters can own in a market. We submitted a written brief to the Court during the third quarter of 2001 and an oral argument was held on January 14, 2002. On December 10, 2001 the FCC issued a decision which, among other things, granted a number of Sinclair and Cunningham applications and dismissed our application to acquire the license of one of the stations (WBSC-TV) we program pursuant to a pre-

November 5, 1996 LMA as not meeting the requirements for ownership under the new duopoly rules. We have filed a motion for reconsideration of this dismissal. In January 2002, the Rainbow/PUSH Coalition filed with the U.S. Court of Appeals for the D.C. Circuit an appeal of the FCC’s decision. The stations affected by the Notice of Appeals are WNUV-TV, WTTE-TV, WRGT-TV, WTAT-TV, WVAH-TV, KOKH-TV, KRRT-TV, WVTV-TV, WRDC-TV, WABM-TV, WBSC-TV, WCWB-TV, WLOS-TV and KABB-TV. No dates have been set for briefs or oral argument. We cannot predict the outcome of the appeal.

The Satellite Home Viewer Act (“SHVA”)

In 1988, Congress enacted SHVA which enabled satellite carriers to provide broadcast programming to those satellite subscribers who were unable to obtain broadcast network programming over-the-air. SHVA did not permit satellite carriers to retransmit local broadcast television signals directly to their subscribers. The Satellite Home Viewer Improvement Act of 1999 (“SHVIA”) revised SHVA to reflect changes in the satellite and broadcasting industry. This legislation allows satellite carriers to provide local television signals by satellite within a station market, and effective January 1, 2002, required satellite carriers to carry all local signals in any market where it carries any local signals. On or before July 1, 2001, SHVIA required all television stations to elect to exercise certain “must carry” or “retransmission consent” rights in connection with their carriage by satellite carriers. We have entered into agreements granting the two primary satellite carriers retransmission consent to carry all of our stations (with one exception involving one of the carriers).

Must-Carry/Retransmission Consent

Pursuant to the Cable Act of 1992, television broadcasters are required to make triennial elections to exercise either certain “must-carry” or “retransmission consent” rights in connection with their carriage by cable systems in each broadcaster’s local market. By electing the must-carry rights, a broadcaster demands carriage on a specified channel on cable systems within its Designated Market Area, in general as defined by the Nielsen DMA Market and Demographic Rank Report of the prior year. These must-carry rights are not absolute, and their exercise is dependent on variables such as:

• the number of activated channels on a cable system,

• the location and size of a cable system, and

• the amount of programming on a broadcast station that duplicates the programming of another broadcast station carried by the cable system.

Therefore, under certain circumstances, a cable system may decline to carry a given station. Alternatively, if a broadcaster chooses to exercise retransmission consent rights, it can prohibit cable systems from carrying its signal or grant the appropriate cable system the authority to retransmit the broadcast signal for a fee or other consideration. In October 1999, we elected must-carry or retransmission consent with respect to each of our stations based on our evaluation of the respective markets and the position of our owned or programmed station(s) within the market. Our stations continue to be carried on all pertinent cable systems, and we do not believe that our elections have resulted in the shifting of our stations to less desirable cable channel locations. Many of the agreements we have negotiated for cable carriage are short term, subject to month-to-month extensions. We are currently evaluating whether to elect must-carry or retransmission consent, which election must be made later this year.

The FCC recently determined not to apply must-carry rules to require cable companies to carry both the analog and digital signals of local broadcasters during the DTV transition period between 2002 and 2006 when television stations will be broadcasting both signals. As a result of this decision by the FCC, cable customers in our broadcast markets may not receive the station’s digital signal.

Syndicated Exclusivity/Territorial Exclusivity

The FCC’s syndicated exclusivity rules allow local broadcast television stations to demand that cable operators black out syndicated non-network programming carried on “distant signals” (i.e., signals of broadcast stations, including so-called “superstations,” which serve areas substantially removed from the cable system’s local community). The FCC’s network non-duplication rules allow local broadcast network television affiliates to require that cable operators black out duplicating network programming carried on distant signals. However, in a number of markets in which we own or program stations affiliated with a network, a station that is affiliated with the same network in a nearby market is carried on cable systems in our market. This is not in violation of the FCC’s network non-duplication rules. However, the carriage of two network stations on the same cable system could result in a decline of viewership adversely affecting the revenues of our owned or programmed stations. The FCC recently announced that stations need only broadcast on their digital channel during primetime hours and need only cover their community of license during the DTV transition period.

Digital Television

The FCC has taken a number of steps to implement digital television (“DTV”) broadcasting services. The FCC has adopted an allotment table that provides all authorized television stations with a second channel on which to broadcast a DTV signal. The FCC has attempted to provide DTV coverage areas that are comparable to stations’ existing service areas. The FCC has ruled that television broadcast licensees may use their digital channels for a wide variety of services such as high-definition television, multiple standard definition television programming, audio, data, and other types of communications, subject to the requirement that each broadcaster provide at least one free video channel equal in quality to the current technical standard and further subject to the requirement that broadcasters pay a fee of 5% of gross revenues on all DTV subscription services.

DTV channels are generally located in the range of channels from channel 2 through channel 51. The FCC required that affiliates of ABC, CBS, FOX and NBC in the top 10 television markets begin digital broadcasting by May 1, 1999 and that affiliates of these networks in markets 11 through 30 begin digital broadcasting by November 1999. All other commercial stations are required to begin digital broadcasting by May 1, 2002. The majority of our stations are required to commence digital operations by May 1, 2002. Applications for digital facilities for all of our stations were filed by November 1, 1999. The FCC also created a procedure allowing stations to apply for up to a six month extension of the May 1, 2002 deadline. We recently filed applications for extensions due to technical limitations for 32 of our stations. There can be no assurance that we will receive such extensions or that we will be able to commence digital operations by the time required under any such extensions. The FCC’s plan calls for the DTV transition period to end in the year 2006, at which time the FCC expects that television broadcasters will cease non-digital broadcasting and return one of their two channels to the government, allowing that spectrum to be recovered for other uses. The FCC has been authorized by Congress to extend the December 31, 2006 deadline for reclamation of a television station’s non-digital channel if, in any given case:

• one or more television stations affiliated with ABC, CBS, NBC or FOX in a market is not broadcasting digitally, and the FCC determines that such stations have “exercised due diligence” in attempting to convert to digital broadcasting, or

• less than 85% of the television households in the station’s market subscribe to a multichannel video service (cable, wireless cable or direct-to-home broadcast satellite television (“DBS”) that carries at least one digital channel from each of the local stations in that market, or

• less than 85% of the television households in the market can receive digital signals off the air using either a set-top converter box for an analog television set or a new DTV television set.

Congress directed the FCC to auction channels 60-69 for commercial and public safety services and the planned auction of these channels is scheduled for June 19, 2002. The government is considering a proposal to further delay this action, perhaps until at least 2004. Five of our television stations currently operate their analog facilities on channels between 60-69. Although not required to return these channels until the end of the DTV transition period (December 31, 2006), the FCC is encouraging broadcasters to consider surrendering these analog channels sooner. For purposes of the return of these channels, the FCC requested that Congress enact legislation which would establish December 31, 2006 as a date certain without regard to, as is currently the case, whether or not the 85% digital penetration referred to above has been achieved. We cannot predict the outcome of these changes.

Congress directed the FCC to auction the remaining non-digital channels by September 30, 2002 even though they are not to be reclaimed by the government until at least December 31, 2006. If any of the auctioned channels are authorized for DTV use, broadcasters are permitted to bid on such channels in cities with populations greater than 400,000. The FCC has initiated separate proceedings to consider the surrender of existing television channels and how these frequencies will be used after they are eventually recovered from broadcasters. The FCC envisions that these frequencies will be used for a variety of wireless and broadcast-type applications including two-way interactive services and services using COFDM technology.

Implementation of digital television will also impose substantial additional costs on television stations because of the need to replace equipment and because some stations will need to operate at higher utility costs. There can be no assurance that our television stations will be able to increase revenue to offset such costs. The FCC has proposed imposing new public interest requirements on television licensees in exchange for their receipt of DTV channels.

Restrictions on Broadcast Advertising

Advertising of cigarettes and certain other tobacco products on broadcast stations has been banned for many years. Various states also restrict the advertising of alcoholic beverages and certain members of Congress are currently contemplating legislation to place restrictions on the advertisement of such alcoholic beverage products.

FCC rules also restrict the amount and type of advertising which can appear in programming broadcast primarily for an audience of children twelve years old and younger.

The Communications Act and FCC rules also place restrictions on the broadcasting of advertisements by legally qualified candidates for elective office. Among other things,

• stations must provide “reasonable access” for the purchase of time by legally qualified candidates for federal office,

• stations must provide “equal opportunities” for the purchase of equivalent amounts of comparable broadcast time by opposing candidates for the same elective office, and

• during the 45 days preceding a primary or primary run-off election and during the 60 days preceding a general or special election, legally qualified candidates for elective office may be charged no more than the station’s “lowest unit charge” for the same class of advertisement, length of advertisement, and daypart.

We cannot predict the effect of legislation on our station’s advertising revenues. During March 2002, legislation passed in Congress and was signed into law by the President that revised the laws regarding the rates charged by television stations to legally qualified candidates for office and the rules regarding “soft money” advertising and advocacy advertising by labor unions and corporations. We cannot predict the effect of such legislation on our stations’ advertising revenues. Immediately upon passage, a constitutional challenge was filed.

Programming and Operation

General. The Communications Act requires broadcasters to serve the “public interest.” The FCC has relaxed or eliminated many of the more formalized procedures it had developed in the past to promote the broadcast of certain types of programming responsive to the needs of a station’s community of license. FCC licensees continue to be required, however, to present programming that is responsive to the needs and interests of their communities, and to maintain certain records demonstrating such responsiveness. Complaints from viewers concerning a station’s programming may be considered by the FCC when it evaluates renewal applications of a licensee, although such complaints may be filed at any time and generally may be considered by the FCC at any time. Stations also must pay regulatory and application fees, and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identifications, obscene and indecent broadcasts, and technical operations, including limits on radio frequency radiation.

Equal Employment Opportunities. During 2000, the FCC adopted rules to require broadcast licensees to create equal employment opportunity outreach programs and maintain records and make filings with the FCC evidencing such efforts. In January 2001, the United States Court of Appeals for the District of Columbia Circuit vacated these rules. The FCC subsequently issued a Public Notice suspending the outreach and record-keeping aspects of the rules. On December 21, 2001, the FCC released a Second Notice of Proposed Rule Making which proposes a new broadcast equal employment opportunity rule. Comments on this proposal are due in mid-April 2002.

Children’s Television Programming. Television stations are required to broadcast a minimum of three hours per week of “core” children’s educational programming, which the FCC defines as programming that

• has the significant purpose of servicing the educational and informational needs of children 16 years
of age and under;

• is regularly scheduled, weekly and at least 30 minutes in duration; and

• is aired between the hours of 7:00 a.m. and 10:00 p.m. Furthermore, “core” children’s educational programs, in order to qualify as such, are required to be identified as educational and informational programs over the air at the time they are broadcast, and are required to be identified in the children’s programming reports required to be placed quarterly in stations’ public inspection files and filed quarterly with the FCC.

Additionally, television stations are required to identify and provide information concerning “core” children’s programming to publishers of program guides. The FCC is considering whether or not to require the use of the digital broadcast spectrum for the broadcast of additional amounts of “core” children’s programming.

Television Program Content. The television industry has developed a ratings system that has been approved by the FCC that is designed to provide parents with information regarding the content of the programming being aired. Furthermore, the FCC requires certain television sets to include the so-called “V-chip,” a computer chip that allows blocking of rated programming.

Video Description. In order to make television programming more accessible to persons with visual disabilities, the Commission has adopted new rules requiring broadcast stations to make critical details of emergency information accessible to such persons. In addition, affiliates of ABC, CBS, NBC and FOX in the top 25 television markets (based on Nielsen DMA rankings) will be required to provide a minimum of 50 hours per calendar quarter of video description of either primetime or children’s programming by April 1, 2002. We believe our four stations affected by the April 1, 2002 deadline will be able to meet this obligation using programming containing video descriptions provided by FOX, CBS and ABC.

Pending Matters

The Congress and the FCC have under consideration, and in the future may consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation, ownership and profitability of our broadcast stations, result in the loss of audience share and advertising revenues for our broadcast stations, and affect our ability to acquire additional broadcast stations or finance such acquisitions. In addition to the changes and proposed changes noted above, such matters may include, for example, the license renewal process, spectrum use fees, political advertising rates, potential restrictions on the advertising of certain products (beer, wine and hard liquor, for example), and the rules and policies with respect to equal employment opportunity.

Other matters that could affect our broadcast properties include technological innovations and developments generally affecting competition in the mass communications industry, such as direct television broadcast satellite service, Class A television service, the continued establishment of wireless cable systems and low power television stations, digital television technologies, the Internet and the advent of telephone company participation in the provision of video programming service.

Other Considerations

The foregoing summary does not purport to be a complete discussion of all provisions of the Communications Act or other congressional acts or of the regulations and policies of the FCC. For further information, reference should be made to the Communications Act, the 1996 Act, other congressional acts, and regulations and public notices promulgated from time to time by the FCC. There are additional regulations and policies of the FCC and other federal agencies that govern political broadcasts, advertising, equal employment opportunity, and other matters affecting our business and operations.

ENVIRONMENTAL REGULATION

Prior to our ownership or operation of our facilities, substances or waste that are or might be considered hazardous under applicable environmental laws may have been generated, used, stored or disposed of at certain of those facilities. In addition, environmental conditions relating to the soil and groundwater at or under our facilities may be affected by the proximity of nearby properties that have generated, used, stored or disposed of hazardous substances. As a result, it is possible that we could become subject to environmental liabilities in the future in connection with these facilities under applicable environmental laws and regulations. Although we believe that we are in substantial compliance with such environmental requirements, and have not in the past been required to incur significant costs in connection therewith, there can be no assurance that our costs to comply with such requirements will not increase in the future. We presently believe that none of our properties have any condition that is likely to have a material adverse effect on our financial condition or results of operations.

COMPETITION

Our television stations compete for audience share and advertising revenue with other television stations in their respective DMAs, as well as with other advertising media, such as radio, newspapers, magazines, outdoor advertising, transit advertising, Internet, yellow page directories, direct mail, satellite and local cable and wireless cable systems. Some competitors are part of larger organizations with substantially greater financial, technical and other resources than we have.

Television Competition. Competition in the television broadcasting industry occurs primarily in individual DMAs. Generally, a television broadcasting station in one DMA does not compete with stations in other DMAs. Our television stations are located in highly competitive DMAs. In addition, certain of our DMAs are overlapped by both over-the-air and cable carriage of stations in adjacent DMAs, which tends to spread viewership and advertising expenditures over a larger number of television stations.

Broadcast television stations compete for advertising revenues primarily with other broadcast television stations, radio stations, cable channels and cable system operators serving the same market, as well as with newspapers, the Internet, yellow page directories and outdoor advertising opportunities. Traditional network programming generally achieves higher household audience levels than FOX, WB and UPN programming and syndicated programming aired by our independent station. This can be attributed to a combination of factors,

including the traditional networks’ efforts to reach a broader audience, generally better signal carriage available when broadcasting over VHF channels 2 through 13 versus broadcasting over UHF channels 14 through 69 and the higher number of hours of traditional network programming being broadcast weekly. However, greater amounts of advertising time are available for sale during FOX, UPN and WB programming and non-network syndicated programming, and as a result we believe that our programming typically achieves a share of television market advertising revenues greater than its share of the market’s audience.

Television stations compete for audience share primarily on the basis of program popularity, which has a direct effect on advertising rates. A large amount of a station’s prime time programming is supplied by FOX, ABC, NBC and CBS, and to a lesser extent WB and UPN. In those periods, our affiliated stations are largely dependent upon the performance of the networks’ programs in attracting viewers. Non-network time periods are programmed by the station primarily with syndicated programs purchased for cash, cash and barter, or barter-only, and also through self-produced news, public affairs, live local sporting events, and other entertainment programming.

Television advertising rates are based upon factors which include the size of the DMA in which the station operates, a program’s popularity among the viewers that an advertiser wishes to attract, the number of advertisers competing for the available time, the demographic makeup of the DMA served by the station, the availability of alternative advertising media in the DMA including radio, cable, newspapers and yellow page directories, the aggressiveness and knowledge of sales forces in the DMA and development of projects, features and programs that tie advertiser messages to programming. We believe that our sales and programming strategies allow us to compete effectively for advertising within our DMAs.

Other factors that are material to a television station’s competitive position include signal coverage, local program acceptance, network affiliation, audience characteristics and assigned broadcast frequency. Historically, our UHF broadcast stations have suffered a competitive disadvantage in comparison to stations with VHF broadcast frequencies. This historic disadvantage has gradually declined through:

• carriage on cable systems, and in certain markets, direct broadcast satellite,

• improvement in television receivers,

• improvement in television transmitters,

• wider use of all channel antennae,

• increased availability of programming, and

• the development of new networks such as FOX, WB and UPN.

The broadcasting industry is continuously faced with technical changes and innovations, competing entertainment and communications media, changes in labor conditions, and governmental restrictions or actions of federal regulatory bodies, including the FCC, any of which could possibly have a material effect on a television station’s operations and profits. For instance, the FCC has established Class A television service for qualifying low power television stations. A low power television station that qualifies for Class A has certain rights currently accorded to full-power television stations, which may allow them to compete more effectively with full power stations. We cannot predict the effect of increased competition from Class A television stations in markets where we have full-power television stations.

There are sources of video service other than conventional television stations, the most common being cable television, which can increase competition for a broadcast television station by bringing into its market distant broadcasting signals not otherwise available to the station’s audience, serving as a distribution system for national satellite-delivered programming and other non-broadcast programming originated on a cable system and selling advertising time to local advertisers. Other principal sources of competition include home video exhibition and Direct Broadcast Satellite services and multichannel multipoint distribution services (“MMDS”). DBS and cable operators in particular are competing more aggressively than in the past for advertising revenues in our TV stations’ markets. This competition could adversely affect our stations’ revenues and performance in the future.

In addition, SHVIA could also have an adverse effect on our broadcast stations’ audience share and advertising revenue because it may allow satellite carriers to provide the signal of distant stations with the same network affiliation as our stations to more television viewers in our markets than would have been permitted under previous law. The legislation also allows satellite carriers to provide local television signals by satellite within a station market.

Moreover, technology advances and regulatory changes affecting programming delivery through fiber optic telephone lines and video compression could lower entry barriers for new video channels and encourage the development of increasingly specialized “niche” programming. Telephone companies are permitted to provide video distribution services via radio communication, on a common carrier basis, as “cable systems” or as “open video systems,” each pursuant to different regulatory schemes. We are unable to predict what other video technologies might be considered in the future, or the effect that technological and regulatory changes will have on

the broadcast television industry and on the future profitability and value of a particular broadcast television station.

We are currently exploring whether or not television broadcasting will be enhanced significantly by the development and increased availability of DTV technology. This technology has the potential to permit us to provide viewers multiple channels of digital television over each of our existing standard channels, to provide certain programming in a high definition television format and to deliver various forms of data, including data on the Internet, to PCs and handheld devices. These additional capabilities may provide us with additional sources of revenue as well as additional competition.

While DTV technology is currently available in a large number of viewing markets, a successful transition from the current analog broadcast format to a digital format may take many years. We cannot assure you that our efforts to take advantage of the new technology will be commercially successful.

We also compete for programming, which involves negotiating with national program distributors or syndicators that sell first-run and rerun packages of programming. Our stations compete for exclusive access to those programs against in-market broadcast station competitors for syndicated products. Cable systems generally do not compete with local stations for programming, although various national cable networks from time to time have acquired programs that would have otherwise been offered to local television stations. Public broadcasting stations generally compete with commercial broadcasters for viewers but not for advertising dollars.

Historically, the cost of programming has increased because of an increase in the number of new independent stations and a shortage of quality programming. However, we believe that over the past five years program prices generally have stabilized or fallen on a per station basis, but aggregate programming costs have risen as we have attempted to improve the quality of our stations’ programming line-ups.

We believe we compete favorably against other television stations because of our management skill and experience, our ability historically to generate revenue share greater than our audience share, our network affiliations and our local program acceptance. In addition, we believe that we benefit from the operation of multiple broadcast properties, affording us certain non-quantifiable economies of scale and competitive advantages in the purchase of programming.

EMPLOYEES

As of December 31, 2001, we had approximately 3,301 employees. With the exception of approximately 275 employees at eight of our television stations, none of our employees are represented by labor unions under any collective bargaining agreement. We have not experienced any significant labor problems and consider our overall labor relations to be good.

ITEM 2. PROPERTIES

Generally, each of our stations has facilities consisting of offices, studios and tower sites. Transmitter and tower sites are located to provide maximum signal coverage of our stations’ markets. The following is a summary of our principal owned and leased real properties as we believe that no one property represents a material amount of the total properties owned or leased.

	OWNED	LEASED
Office and Studio Building	599,000 sq. ft	374,000 sq. ft
Office and Studio Land	72 acres	——
Transmitter Building Site	73,000 sq. ft	28,000 sq. ft
Transmitter and Tower Land	1,315 acres	265 acres

We believe that all of our properties, both owned and leased, are generally in good operating condition, subject to normal wear and tear, and are suitable and adequate for our current business operations.

ITEM 3. LEGAL PROCEEDINGS

Lawsuits and claims are filed against us from time to time in the ordinary course of business. These actions are in various preliminary stages and no judgments or decisions have been rendered by hearing boards or courts. We do not believe that these actions, individually or in the aggregate, will have a material adverse affect on our financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our stockholders during the fourth quarter of 2001.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our class A common stock is listed for trading on the NASDAQ stock market under the symbol SBGI. The following table sets forth for the periods indicated the high and low sales prices on the NASDAQ stock market.

2000	High		Low
First Quarter	$	12.438	$	7.750
Second Quarter	11.375		7.000
Third Quarter	13.750		9.750
Fourth Quarter	10.938		8.125

2001	High		Low
First Quarter	$	13.063	$	7.000
Second Quarter	10.550		4.950
Third Quarter	11.250		7.560
Fourth Quarter	9.740		6.960

As of February 28, 2002, there were approximately 87 stockholders of record of our common stock. This number does not include beneficial owners holding shares through nominee names. Based on information available to us, we believe we have more than 5,000 beneficial owners of our class A common stock.

We generally have not paid a dividend on our common stock and do not expect to pay dividends on our common stock in the foreseeable future. Our 1998 bank credit agreement, as amended, and some of our subordinated debt instruments generally prohibit us from paying dividends on our common stock. Under the indentures governing our 8% senior subordinated notes due 2012, 8.75% senior subordinated notes due 2011, 9% senior subordinated notes due 2007 and 8.75% senior subordinated notes due 2007, we are not permitted to pay dividends on our common stock unless certain specified conditions are satisfied, including that

• no event of default then exists under the indenture or certain other specified agreements relating to our indebtedness and

• we, after taking account of the dividend, are in compliance with certain net cash flow requirements contained in the indenture. In addition, under certain of our senior unsecured debt, the payment of dividends is not permissible during a default thereunder.

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data for the years ended December 31, 2001, 2000, 1999, 1998 and 1997 have been derived from our audited consolidated financial statements. The consolidated financial statements for the years ended December 31, 2001, 2000 and 1999 are included elsewhere in this report.

The information below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements included elsewhere in this report.

STATEMENT of OPERATIONS DATA

(dollars in thousands, except per share data)

	Years Ended December 31,
	2001			2000			1999			1998			1997
Statement of Operations Data:
Net broadcast revenues (a)	$	646,444		$	727,017		$	670,252		$	564,727		$	407,410
Barter revenues	56,912			57,351			63,387			59,697			42,468
Other revenues	6,925			4,494			—			—			—
Total revenues	710,281			788,862			733,639			624,424			449,878
Operating costs (b)	320,553			329,489			283,334			220,538			153,935
Expenses from barter arrangements	50,591			51,300			57,561			54,067			38,114
Depreciation and amortization (c)(d)	274,668			246,660			220,625			173,799			135,581
Stock-based compensation	1,584			1,801			2,494			2,908			1,410
Impairment and write down charge of long-lived assets	16,229			—			—			—			—
Restructuring costs	3,836			—			—			—			—
Contract termination costs	5,135			—			—			—			—
Cumulative adjustment for change in assets held for sale	—			619			—			—			—
Operating income	37,685			158,993			169,625			173,112			120,838
Interest expense (d)	(143,574		)	(152,219		)	(181,569		)	(141,704		)	(99,493		)
Subsidiary trust minority interest expense (e)	(23,890		)	(23,890		)	(23,890		)	(23,923		)	(19,205		)
Gain (loss) on sale of broadcast assets	204			—			(418		)	1,232			—
Unrealized (loss) gain on derivative instrument	(32,220		)	(296		)	15,747			(9,050		)	—
Loss related to investments	(7,616		)	(16,764		)	(504		)	—			—
Interest and other income	4,217			3,217			3,990			6,694			2,231
Income (loss) before income taxes	(165,194		)	(30,959		)	(17,019		)	6,361			4,371
Benefit (provision) for income taxes	51,682