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Note 1 - Description of Business and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] |
1. | Description of Business and Summary of Significant Accounting Policies
Overview. We are a multimedia company headquartered in Atlanta, Georgia. We are the nation’s largest owner of top-rated local television stations and digital assets in the United States. Our television stations serve 113 television markets that collectively reach approximately 36 percent of US television households. This portfolio includes 79 markets with the top-rated television station and 102 markets with the first and/or second highest rated television station. We also own video program companies Raycom Sports, Tupelo Media Group, PowerNation Studios, as well as the studio production facilities Assembly Atlanta and Third Rail Studios. Investments in Broadcasting, Production and Technology Companies. We have investments in several television, production and technology companies. We account for all material investments in which we have significant influence over the investee under the equity method of accounting. Upon initial investment, we record equity method investments at cost. The amounts initially recognized are subsequently adjusted for our appropriate share of the net earnings or losses of the investee. We record any investee losses up to the carrying amount of the investment plus advances and loans made to the investee, and any financial guarantees made on behalf of the investee. We recognize our share in earnings and losses of the investee as miscellaneous (expense) income, net in our consolidated statements of operations. Investments are also increased by contributions made to and decreased by the distributions from the investee. The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. Investments in non-public businesses that do not have readily determinable pricing, and for which the Company does not have control or does not exert significant influence, are carried at cost less impairments, if any, plus or minus changes in observable prices for those investments. During each of the years ended December 31, 2023 and 2022, we determined that several of our investments were impaired and we recorded an impairment expense of $29 million and $18 million, respectively. No impairments were recorded in the year ended December 31, 2021. Gains or losses resulting from changes in the carrying value of these investments are included as miscellaneous expense, net in our consolidated statements of operations. These investments are reported together as a non-current asset on our consolidated balance sheets. Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our actual results could differ materially from these estimated amounts. Our most significant estimates are our allowance for credit losses in receivables, valuation of goodwill and intangible assets, amortization of program rights and intangible assets, pension costs, income taxes, employee medical insurance claims, useful lives of property and equipment and contingencies. Allowance for Credit Losses. We are exposed to credit risk primarily through sales of broadcast and digital advertising with a variety of direct and agency-based advertising customers, retransmission consent agreements with multichannel video program distributors and program production sales and services. We recorded expenses for this allowance of $21 million, $1 million and $4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our allowance for credit losses is an estimate of expected losses over the remaining contractual life of our receivables based on an ongoing analysis of collectability, historical collection experience, current economic and industry conditions and reasonable and supportable forecasts. The allowance is calculated using a historical loss rate applied to the current aging analysis. We may also apply an additional allowance when warranted by specific facts and circumstances. We generally write off account receivable balances when the customer files for bankruptcy or when all commonly used methods of collection have been exhausted. During 2023, our credit losses included amounts written-off of $17 million for the full amount owed to us by Diamond Sports Group, LLC (“Diamond”), a counterparty to certain contracts with us, as a result of Diamond’s voluntary Chapter 11 bankruptcy proceedings. On February 23, 2023, we, certain of our subsidiaries and a wholly-owned special purpose subsidiary (the “SPV”), entered into a three-year $300 million revolving accounts receivable securitization facility (the “Securitization Facility”) with Wells Fargo Bank, N.A., as administrative agent, and certain third-party financial institutions (the “Purchasers”). The Securitization Facility permits the SPV to draw up to a total of $300 million, subject to the outstanding amount of the receivables pool and other factors. The Securitization Facility matures on February 23, 2026, and is subject to customary termination events related to transactions of this type. The sale of receivables from the SPV is accounted for in the Company’s financial statements as a "true-sale" under Accounting Standards Codification ("ASC") Topic 860. Under the Securitization Facility, the SPV sells to the Purchasers certain receivables, including all rights, title, and interest in the related receivables (“Sold Receivables”). The parties intend that the conveyance of accounts receivables to the Purchasers, for the ratable benefit of the Purchasers will constitute a purchase and sale of receivables and not a pledge for security. The SPV has guaranteed to each Purchaser the prompt payment of Sold Receivables, and to secure the prompt payment and performance of such guaranteed obligations, the SPV has granted a security interest to the Purchasers in all assets of the SPV. In our capacity as servicer under the Securitization Facility, we are responsible for administering and collecting receivables and have made customary representations, warranties, covenants and indemnities. We do not record a servicing asset or liability since the estimated fair value of the servicing of the receivables approximates the servicing income. We also provided a performance guarantee for the benefit of the Purchasers. The Securitization Facility is subject to interest charges, at the adjusted one-month Secured Overnight Financing Rate (“SOFR”) plus a margin (100 basis points) on the amount of the outstanding facility. The SPV was required to pay an upfront fee and a commitment fee in connection with the Securitization Facility. Servicing fee income recognized during 2023, was not material. The SPV is a separate legal entity with its own separate creditors who will be entitled to access the SPV’s assets before the assets become available to us. As a result, the SPV’s assets are not available to pay our creditors or any of our subsidiaries, although collections from the receivables in excess of amounts required to repay the Purchasers under the Securitization Facility and other creditors of the SPV may be remitted to us. The proceeds of the Securitization Facility are classified as operating activities in our Consolidated Statement of Cash Flows. Cash received from collections of Sold Receivables is used by the SPV to fund additional purchases of receivables on a revolving basis or to return all or any portion of outstanding capital of the Purchasers. Subsequent collections on the pledged receivables, which have not been sold, will be classified as operating cash flows at the time of collection. The amount sold to the Purchasers was $300 million at December 31,2023, which was derecognized from the Consolidated Balance Sheets. As collateral against sold receivables, the SPV maintains a certain level of unsold receivables, which was $296 million at December 31, 2023. Total receivables sold under the Securitization Facility were $596 million for the year ended December 31, 2023. Pursuant to the Securitization Facility, we recognized a charge of $9 million in 2023 that represents the discount on the accounts receivable balance transferred to the SPV. This discount is included in our loss on disposal of assets in our Consolidated Statements of Operations. The following table provides a roll-forward of the allowance for credit losses. The allowance is deducted from the amortized cost basis of accounts receivable in our consolidated balance sheets (in millions):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |
Beginning balance |  | $ | 16 |  |  | $ | 16 |
Provision for credit losses |  |  | 21 |  |  |  | 1 |
Amounts written off |  |  | (20 | ) |  |  | (1 | )
Ending balance |  | $ | 17 |  |  | $ | 16 |
Program Broadcast Rights. We have two types of syndicated television program contracts: first run programs and off network reruns. First run programs are programs such as Wheel of Fortune and off network reruns are programs such as The Big Bang Theory. First run programs have not been produced at the time the contract to air such programming is signed, and off network rerun programs have already been produced. We record an asset and corresponding liability for payments to be made only for the current year of first run programming and for the entire contract period for off network programming. Only an estimate of the payments anticipated to be made in the year following the balance sheet date of first run program contracts are recorded on the current balance sheet, because the programs for the later years of the contract period have not been produced or delivered. The total license fee payable under a program license agreement allowing us to broadcast programs is recorded at the beginning of the license period and is charged to operating expense over the period that the programs are broadcast. The portion of the unamortized balance expected to be charged to operating expense in the succeeding year is classified as a current asset, with the remainder classified as a non-current asset. The liability for license fees payable under program license agreements is classified as current or long-term, in accordance with the payment terms of the various license agreements. Property and Equipment. Property and equipment are recorded at cost, or in the case of acquired businesses, at fair value. Depreciation is computed principally by the straight-line method. The following table lists the components of property and equipment by major category (dollars in millions):
|  |  |  |  |  |  |  |  |  | Estimated |
|  | December 31, |  |  | Useful Lives |
|  | 2023 |  |  | 2022 |  |  | (in years) |
Property and equipment, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | $ | 368 |  |  | $ | 290 |  |  |  |  |  |  |
Buildings and improvements |  |  | 868 |  |  |  | 477 |  |  |  | 7 | to | 40 |
Equipment |  |  | 1,082 |  |  |  | 1,027 |  |  |  | 3 | to | 20 |
Construction in progress |  |  | 81 |  |  |  | 362 |  |  |  |  |  |  |
|  |  | 2,399 |  |  |  | 2,156 |  |  |  |  |  |  |
Accumulated depreciation |  |  | (798 | ) |  |  | (690 | ) |  |  |  |  |  |
Total |  | $ | 1,601 |  |  | $ | 1,466 |  |  |  |  |  |  |
Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. The cost of any assets divested, sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is reflected in income or expense for the period. We incurred costs to build public infrastructure within the Assembly Atlanta project. Pursuant to the Purchase and Sale Agreement between us and the Doraville Community Improvement District (the “CID”), we receive cash reimbursements for the transfer of specific infrastructure projects to the CID and for other construction costs previously incurred. During 2023, we received a total of $64 million in cash proceeds from the CID. We received $46 million for the infrastructure assets constructed and for which ownership has or will be transferred to the CID, and $18 million in proceeds for construction costs incurred but where no transfer of ownership occurred. These proceeds were recognized in our Consolidated Statement of Cash Flows as follows: $8 million was included in the line item for change in deferred revenue, as a component of our net cash provided by operating activities; $38 million was included in the line item for proceeds from asset sales and $18 million was included in the line item for reimbursement of development costs, each as a component of our net cash used by investment activities. The following tables provide additional information related to gain on disposal of assets, net included in our consolidated statements of operations and purchases of property and equipment included in our consolidated statements of cash flows (in millions):
|  | Year ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
(Loss) Gain on disposal of assets, net: |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from sale of television stations and other assets |  | $ | 60 |  |  | $ | 4 |  |  | $ | 478 |
Proceeds from FCC Repack |  |  | - |  |  |  | 7 |  |  |  | 11 |
Net book value of assets disposed |  |  | (73 | ) |  |  | (9 | ) |  |  | (531 | )
Non-cash loss on divestitures |  |  | 1 |  |  |  | - |  |  |  | - |
Securitization Facility |  |  | (9 | ) |  |  | - |  |  |  | - |
Total |  | $ | (21 | ) |  | $ | 2 |  |  | $ | (42 | )
Purchase of property and equipment: |  |  |  |  |  |  |  |  |  |  |  |
Recurring purchases - operations |  | $ | 107 |  |  | $ | 170 |  |  | $ | 90 |
Assembly Atlanta project |  |  | 240 |  |  |  | 264 |  |  |  | 109 |
Repack |  |  | 1 |  |  |  | 2 |  |  |  | 8 |
Total |  | $ | 348 |  |  | $ | 436 |  |  | $ | 207 |
Deferred Loan Costs. Loan acquisition costs are amortized over the life of the applicable indebtedness using a straight-line method that approximates the effective interest method. These debt issuance costs related to a recognized debt liability are presented in our balance sheets as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Debt issuance costs associated with line-of-credit arrangements are included in other assets on our balance sheets, and amortized over the life of the line-of-credit arrangement. Asset Retirement Obligations. We own office equipment, broadcasting equipment, leasehold improvements and transmission towers, some of which are located on, or are housed in, leased property or facilities. At the conclusion of several of these leases we are obligated to dismantle, remove and otherwise properly dispose of and remediate the facility or property. We estimate our asset retirement obligations based upon the net present value of the cash flows of the costs expected to be incurred. Asset retirement obligations are recognized as a non-current liability and as a component of the cost of the related asset. Changes to our asset retirement obligations resulting from revisions to the timing or the amount of the original undiscounted cash flow estimates are recognized as an increase or decrease in the carrying amount of the asset retirement obligation and the related asset retirement cost is capitalized as part of the related property, plant or equipment. Changes in asset retirement obligations resulting from accretion of the net present value of the estimated cash flows are recognized as operating expenses. We recognize depreciation expense of the capitalized cost over the estimated life of the lease. Our estimated obligations are due at varying times through 2062. The liability recognized for our asset retirement obligations was $4 million as of each of December 31, 2023 and 2022, and included in other liabilities on our balance sheets. During the years ended December 31, 2023, 2022 and 2021, expenses related to our asset retirement obligations were not material. Concentration of Credit Risk. We sell advertising airtime on our broadcasts and advertising space on our websites to national and local advertisers within the geographic areas in which we operate. Credit is extended based on an evaluation of the customer’s financial condition, and generally advance payment is not required, except for political advertising. Credit losses are provided for in the financial statements and consistently have been within our expectations that are based upon our prior experience. We derived a material portion of our non-political broadcast advertising revenue from advertisers in a limited number of industries, particularly the services sector, comprising financial, legal and medical advertisers, and the automotive industry. The services sector has become an increasingly important source of advertising revenue over the past few years. During the years ended December 31, 2023, 2022 and 2021 approximately 27%, 28% and 29%, respectively, of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to the services sector. During the years ended December 31, 2023, 2022 and 2021 approximately 20%, 17% and 17%, respectively, of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to automotive customers. Although our revenues can be affected by changes within our customer base, we believe this risk is in part mitigated due to the fact that no one customer accounted for in excess of 5% of our broadcast advertising revenue in any of these periods. Furthermore, we believe that our large geographic operating area partially mitigates the potential effect of regional economic impacts. Earnings Per Share. We compute basic earnings per share by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the relevant period. The weighted-average number of common shares outstanding does not include restricted shares. These shares, although classified as issued and outstanding, are considered contingently returnable until the restrictions lapse and, in accordance with U.S. GAAP, are not included in the basic earnings per share calculation until the shares vest. Diluted earnings per share is computed by including all potentially dilutive common shares, including restricted shares and shares underlying stock options, in the diluted weighted-average shares outstanding calculation, unless their inclusion would be antidilutive. The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding for the years ended December 31, 2023, 2022 and 2021 (in millions):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Weighted average shares outstanding, basic |  |  | 92 |  |  |  | 92 |  |  |  | 95 |
Weighted average shares underlying stock options and restricted shares |  |  | - |  |  |  | 1 |  |  |  | - |
Weighted average shares outstanding, diluted |  |  | 92 |  |  |  | 93 |  |  |  | 95 |
Valuation of Broadcast Licenses, Goodwill and Other Intangible Assets. We have acquired a significant portion of our assets in acquisition transactions. Among the assets acquired in these transactions were broadcast licenses issued by the FCC, goodwill and other intangible assets. For broadcast licenses acquired prior to January 1, 2002, we recorded their respective values using a residual method (analogous to “goodwill”) where the excess of the purchase price paid in the acquisition over the fair value of all identified tangible and intangible assets acquired was attributed to the broadcast license. This residual basis approach generally produces higher valuations of broadcast licenses when compared to applying an income method as discussed below. For broadcast licenses acquired after December 31, 2001, we record their respective values using an income approach. Under this approach, a broadcast license is valued based on analyzing the estimated after-tax discounted future cash flows of the acquired station, assuming an initial hypothetical start-up operation maturing into an average performing station in a specific television market and giving consideration to other relevant factors such as the technical qualities of the broadcast license and the number of competing broadcast licenses within that market. For television stations acquired after December 31, 2001, we allocate the residual value of the station to goodwill. When renewing broadcast licenses, we incur regulatory filing fees and legal fees. We expense these fees as they are incurred. Goodwill represents the excess of acquisition cost over the fair value of assets acquired, identifiable intangible assets, less liabilities assumed in business combination transactions. Goodwill is tested for impairment on an annual basis (at year end) or between annual tests if events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. Other intangible assets that we have acquired include network affiliation agreements, retransmission agreements, advertising contracts, client lists, talent contracts and leases. Although each of our stations is affiliated with at least one broadcast network, we believe that the value of a television station is derived primarily from the attributes of its broadcast license rather than its network affiliation agreement. As a result, we allocate only minimal values to our network affiliation agreements. We classify our other intangible assets as finite-lived intangible assets. The amortization period of our other intangible assets is equal to the shorter of their estimated useful life or contract period, including expected extensions thereof. When renewing other intangible asset contracts, we incur legal fees that are expensed as incurred. Impairment Testing of Indefinite-Lived Intangible Assets. We test for impairment of our indefinite-lived intangible assets on an annual basis on December 31. However, if certain triggering events occur, we test for impairment when such events occur. For purposes of testing goodwill for impairment, our broadcast television stations as a whole, and each of our production companies, is considered a separate reporting unit. In the performance of our annual assessment of goodwill for impairment, we have the option to qualitatively assess whether it is more likely than not that a reporting unit has been impaired. As part of this qualitative assessment, we evaluate the relative impact of factors that are specific to the reporting units as well as industry, regulatory and macroeconomic factors that could affect the significant inputs used to determine the fair value of the assets. We also consider the significance of the excess fair value over the carrying value reflected in prior quantitative assessments and the changes to each reporting unit’s carrying value since the last impairment test. If we conclude that it is more likely than not that a reporting unit is impaired, or if we elect not to perform the optional qualitative assessment, we will determine the fair value of the reporting unit and compare that to the net book value of the reporting unit. If the fair value is less than the net book value, we will record an impairment to goodwill for the amount of the difference, limited to the amount of goodwill included in the reporting unit. To estimate the fair value of our reporting units for a quantitative assessment, we utilize a discounted cash flow model supported by a market multiple approach. We believe that a discounted cash flow analysis is the most appropriate methodology to test the recorded value of long-term assets with a demonstrated long-lived/enduring franchise value. We believe the results of the discounted cash flow and market multiple approaches provide reasonable estimates of the fair value of our reporting units because these approaches are based on our actual results and reasonable estimates of future performance, and also take into consideration a number of other factors deemed relevant by us including, but not limited to, expected future market revenue growth, market revenue shares and operating profit margins. We have historically used these approaches in determining the value of our reporting units. We also consider a market multiple approach to corroborate our discounted cash flow analysis. We believe that this methodology is consistent with the approach that a strategic market participant would utilize if they were to value one of our reporting units. In the performance of our annual assessment of broadcast licenses for impairment, we have the option to qualitatively assess whether it is more likely than not that these assets are impaired. When evaluating our broadcast licenses for impairment, the qualitative assessment is done at the individual television station level. If we conclude that it is more likely than not that one of our broadcast licenses is impaired, we will perform a quantitative assessment by comparing the fair value of the broadcast license to its carrying value. If the fair value is greater than the asset’s recorded value, no impairment expense is recorded. If the fair value does not exceed the asset’s recorded value, we record an impairment expense equal to the amount that the asset’s recorded value exceeded the asset’s fair value. We use the income method to estimate the fair value of all broadcast licenses, irrespective of whether they were initially recorded using the residual or income methods. For further discussion of our goodwill, broadcast licenses and other intangible assets, see Note 13 “Goodwill and Intangible Assets.” Accumulated Other Comprehensive Loss. Our accumulated other comprehensive loss balances as of December 31, 2023 consist of adjustments to our pension asset, the fair value of our interest rate caps and the related income tax effects. Our comprehensive loss for the year ended December 31, 2023 consisted of adjustments to our pension asset, the fair value of our Interest Rate Caps and the related income tax effect of each. Our comprehensive income for the year ended December 31, 2022, consisted of the adjustment of the fair value of our pension liability and the related income tax effects. As of December 31, 2023 and 2022, the balances were as follows (in millions):
|  | December 31, |
|  | 2023 |  |  | 2022 |
Items included in accumulated other comprehensive loss: |  |  |  |  |  |  |  |
Adjustment to pension liability |  | $ | (7 | ) |  | $ | (16 | )
Adjustment to fair value of interest rate caps |  |  | (23 | ) |  |  | - |
Income tax benefit |  |  | (7 | ) |  |  | (4 | )
Accumulated other comprehensive loss |  | $ | (23 | ) |  | $ | (12 | )
Recent Accounting Pronouncements. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The purpose of this amendment was to improve disclosures related to reportable segments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Currently we do not expect that the implementation of these changes will have a material effect on our financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The purpose of this amendment was to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Currently we do not expect that the implementation of these changes will have a material effect on our financial statements. In addition to the accounting standards described above, certain amounts in the consolidated statements of operations and cash flows have also been reclassified to conform to the current presentation.

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