Sinclair, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. Sinclair operates local television stations and networks, Tennis Channel and related businesses, and other media and non-media investments. Its 2023 reportable segments were local media and tennis; regional sports networks were no longer consolidated after Diamond Sports Group’s 2022 deconsolidation.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $3.134 billion | $3.928 billion |
| Operating income (loss) | $(331) million | $3.980 billion |
| Net income (loss) attributable to Sinclair | $(291) million | $2.652 billion |
| Basic and diluted earnings (loss) per share | $(4.46) | $37.54 |
| Cash flow from operating activities | $235 million | $799 million |
| Capital expenditures | $92 million | $105 million |
- Revenue mix and changes: Local media revenue was $2.866 billion, down 10%. Distribution revenue declined 3% to $1.491 billion, primarily due to subscriber losses; advertising revenue fell 19% to $1.236 billion, mainly because 2022 was an election year. Political advertising was 4% of local media advertising revenue in 2023, versus 22% in 2022. Tennis revenue rose 5% to $228 million.
- Segment results: Local media operating income declined to $227 million from $591 million, a margin of about 7.9% versus 18.5%. Tennis operating income was $50 million, down from $52 million, on revenue of $228 million.
- Profit and unusual items: The 2023 operating loss included a $495 million accrual for the Diamond Sports litigation settlement and a $10 million adjustment to the prior deconsolidation gain. FY2022 operating income included a $3.357 billion gain from deconsolidating Diamond Sports, making the headline year-over-year earnings comparison unusually large and not representative of underlying operating trends. The 2023 income tax benefit was $358 million, including a $212 million valuation-allowance release related to interest-expense carryforwards.
- Cash flow: Operating cash flow decreased by $564 million, which management attributed primarily to lower political-advertising and distributor collections, as well as the partial-period impact of the deconsolidation. Investing activities provided $52 million; financing activities used $509 million. Cash and cash equivalents ended the year at $662 million.
- Debt and liquidity: Total debt was $4.175 billion, including $2.676 billion of variable-rate debt. Interest expense was $305 million. Sinclair reported net working capital of about $372 million and approximately $650 million of available borrowing capacity. The revolver had no borrowings at year-end; the filing states the 4.5x first-lien leverage maintenance covenant was not then applicable because revolver utilization was below its trigger. Estimated interest due over the next 12 months was $298 million.
- Balance sheet: Total assets were $6.085 billion and total liabilities were $5.864 billion; shareholders’ equity was $221 million. Cash declined from $884 million at year-end 2022.
Material changes, outlook and risks
- Structure and comparability: The June 2023 reorganization placed local media in Sinclair Broadcast Group, LLC and moved Tennis Channel and other specified assets to Sinclair Ventures. Sinclair states the reorganization did not affect its consolidated financial statements, but SBG’s 2023 results include only five months of activity for transferred assets. FY2022 consolidated results include only two months of Diamond Sports activity before deconsolidation; reported revenue and profit comparisons therefore require care.
- Diamond Sports settlement: Sinclair accrued $495 million in 2023 for a settlement under which it agreed to pay Diamond Sports in exchange for dismissal and release of the litigation claims. The bankruptcy court indicated approval on February 26, 2024, subject to completion of definitive documentation. Sinclair said the payment would be funded with cash at Ventures and/or STG, and/or a loan backed by Ventures. The company agreed to provide transition services and said it did not admit fault or wrongdoing.
- Management outlook: Sinclair expects existing cash, local media operating cash flow and revolver capacity to cover local media debt service, capital expenditures and working capital needs for the next 12 months; it likewise expects cash and operating cash flow to cover Tennis and other businesses’ needs. Management cautioned that economic, geopolitical and subscriber trends could affect liquidity and borrowing access. Expected 2024 capital expenditures are $110–$117 million for Sinclair and $107–$114 million for SBG.
- Capital returns and debt actions: Sinclair paid $1.00 per share in dividends in 2023 and declared a $0.25 quarterly dividend in February 2024. It repurchased about 8.8 million Class A shares for $153 million in 2023. STG repurchased $64 million principal of debt for $49 million and recorded a gain on extinguishment; it also repurchased $27 million principal of Term Loan B-2 for $25 million in January 2024.
- Key risks: Cord-cutting and distributor subscriber declines, retransmission and network-affiliation negotiations, advertising cyclicality and competition from streaming and digital platforms could pressure revenue. Higher interest rates affect substantial variable-rate borrowings; a 1% rate increase was estimated to add $27 million to annual interest expense, before the swap’s effects. Other disclosed exposures include pending antitrust and FCC matters, broadcast ownership regulation, customer concentration, impairment risk, and future cybersecurity incidents. The company reported no material cybersecurity incidents during 2023 but described a 2021 ransomware attack that caused an estimated $20 million unrecovered net loss to date.
Most important facts for investors to verify
- Completion of definitive settlement documentation, the final $495 million payment and its funding source, and any changes to the Diamond management-services arrangement.
- Underlying local media performance excluding election-year comparisons, including distributor subscriber trends, retransmission rates and programming-cost increases.
- Debt maturities, borrowing availability, covenant headroom, refinancing terms and sensitivity to floating interest rates.
- Whether 2024 political advertising and operating cash flow support management’s liquidity expectations and planned capital spending.
- Developments in the remaining antitrust, FCC and license-renewal matters, and any tax or impairment consequences from the company’s restructuring and Diamond-related events.