NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:  Nature of Operations  Principles of Consolidation  Variable Interest Entities  32    Sinclair Broadcast Group  Sinclair Broadcast Group, Inc. is a diversified television broadcasting company that owns or provides certain programming,  operating or sales services to television stations pursuant to broadcasting licenses that are granted by the Federal Communications  Commission (the FCC or Commission). We currently own, provide programming and operating services pursuant to local  marketing agreements (LMAs) or provide, or are provided, sales services pursuant to outsourcing agreements to 58 television  stations in 35 markets. For the purpose of this report, these 58 stations are referred to as “our” stations. Our broadcast group is  a single reportable segment for accounting purposes and includes the following network affiliations: FOX (20 stations);  MyNetworkTV (16 stations; not a network affiliation, however is branded as such); ABC (9 stations); The CW (10 stations); CBS  (2 stations) and NBC (1 station). In addition, certain stations broadcast programming on second and third digital signals through  network affiliation or program service arrangements with TheCoolTV, The Country Network, MyNetworkTV, This TV and  Estrella TV. The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries  and variable interest entities (VIEs) for which we are the primary beneficiary. Noncontrolling interest represents a minority  owner’s proportionate share of the equity in certain of our consolidated entities. All intercompany transactions and account  balances have been eliminated in consolidation. In June 2009, the Financial Accounting Standards Board (FASB) issued amended guidance on the consolidation of variable  interest entities (VIEs). The intent of this guidance is to improve financial reporting by enterprises involved with VIEs and to  provide more relevant and reliable information to users of financial statements. The new guidance requires a number of new  disclosures and we are required to perform ongoing reassessments of whether we are the primary beneficiary of a VIE for  financial reporting purposes. For us, this guidance was effective as of January 1, 2010.  In determining whether we are the primary beneficiary of a VIE for financial reporting purposes, we consider whether we have  the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether we  have the obligation to absorb losses or the right to receive returns that would be significant to the VIE. We consolidate VIEs  when we are the primary beneficiary. The assets of our consolidated VIEs can only be used to settle the obligations of the VIE. All the liabilities including debt held by our VIEs are non-recourse to us. However, the VIE debt of Cunningham Broadcasting  Corporation (Cunningham) contains cross-default provisions under our senior secured credit facility (Bank Credit Agreement). See  Note 11. Related Person Transactions  for more information. We have entered into LMAs to provide programming, sales and managerial services for television stations of Cunningham, the  license owner of six television stations as of December 31, 2010. In February 2011, we entered into another LMA agreement with  Cunningham for WDBB-TV, in Birmingham, Alabama. We pay LMA fees to Cunningham and also reimburse all operating  expenses. We also have an acquisition agreement in which we have a purchase option to buy the license assets of the television  stations which includes the FCC license and certain other assets used to operate the station (License Assets). Our applications to  acquire the Federal Communications Commission (FCC) licenses are pending approval. We have determined that the  Cunningham stations are VIEs and that based on the terms of the agreements, we are the primary beneficiary of the variable  interests because we have the power to direct the activities which significantly impact the economic performance of the VIE  through the sales and managerial services we provide and we absorb losses and returns that would be considered significant to  Cunningham. See  Note 11. Related Person Transactions  for more information on our arrangements with Cunningham. Included in  the accompanying consolidated statements of operations for the years ended December 31, 2010, 2009 and 2008 are net revenues  of $118.5 million, $100.9 million and $109.7 million, respectively, that relate to LMAs. We have outsourcing agreements with other license owners, which we provide certain non-programming related sales,  operational and administrative services. We pay a fee to the license owner based on a percentage of broadcast cash flow and we  reimburse all operating expenses. We also have a purchase option to buy the License Assets. For the same reasons noted above  regarding the LMA, we have determined that the outsourced license station assets are VIEs and we are the primary beneficiary.