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Gray Reports Record Operating Results

February 25, 2021 6:30 AM

ATLANTA, Feb. 25, 2021 (GLOBE NEWSWIRE) -- Gray Television, Inc. (“Gray,” “we,” “us” or “our”) (NYSE: GTN) today announced financial results for the fourth quarter ended December 31, 2020. Despite the impact of the novel coronavirus and its disease (collectively, “COVID-19”) on economic activity, our strong political revenues, prudent cost management, strategic sales initiatives and training, and focused management at every level during the last three quarters of 2020, and especially the fourth quarter of 2020, resulted in record operating results for the fourth quarter and the full-year. Key financial results are as follows:

Selected Operating Data (unaudited):
Three Months Ended December 31,
2020 2019 % Change2020 to2019 2018 % Change2020 to2018
(dollars in millions)
Revenue (less agency commissions):
Broadcasting$763 $554 38% $328 133%
Production companies 29 25 16% -
Total revenue$792 $579 37% $328 141%
Political advertising revenue$245 $38 545% $83 195%
Operating expenses (1):
Broadcasting$355 $339 5% $160 122%
Production companies$20 $17 18% $-
Corporate and administrative$18 $21 (14)% $11 64%
Net income$224 $94 138% $88 155%
Non-GAAP Cash Flow (2):
Broadcast Cash Flow$424 $229 85% $172 147%
Broadcast Cash Flow Less Cash Corporate Expenses$409 $212 93% $163 151%
Free Cash Flow$300 $108 178% $98 206%
Year Ended December 31,
2020 2019 % Change2020 to2019 2018 % Change2020 to2018
(dollars in millions)
Revenue (less agency commissions):
Broadcasting$2,320 $2,035 14% $1,084 114%
Production companies 61 87 (30)% -
Total revenue$2,381 $2,122 12% $1,084 120%
Political advertising revenue$430 $68 532% $155 177%
Operating expenses (1):
Broadcasting$1,340 $1,325 1% $596 125%
Production companies$52 $74 (30)% $-
Corporate and administrative$65 $104 (38)% $41 59%
Net income$410 $179 129% $211 94%
Non-GAAP Cash Flow (2):
Broadcast Cash Flow$999 $729 37% $493 103%
Broadcast Cash Flow Less Cash Corporate Expenses$945 $636 49% $457 107%
Free Cash Flow$559 $273 105% $263 113%

(1) Excludes depreciation, amortization and gain on disposal of assets, net.(2) See definition of non-GAAP terms and a reconciliation of the non-GAAP amounts to net income included herein.

Results of Operations for the Fourth Quarter of 2020

Three Months Ended December 31,
2020 2019 Amount Percent
Percent Percent Increase Increase
Amount of Total Amount of Total (Decrease) (Decrease)
(dollars in millions)
Revenue (less agency commissions):
Local (including internet/digital/mobile) $222 28% $243 42% $(21) (9)%
National 62 8% 67 12% (5) (7)%
Political 245 31% 38 7% 207 545%
Retransmission consent 217 27% 195 34% 22 11%
Production companies 29 4% 25 4% 4 16%
Other 17 2% 11 1% 6 55%
Total $792 100% $579 100% $213 37%
Total local and national revenue
combined ("Total Core Revenue") $284 36% $310 54% $(26) (8)%

OPERATING EXPENSES (before
depreciation, amortization and
gain on disposal of assets, net):
Broadcasting:
Station expenses $230 65% $223 66% $7 3%
Retransmission expense 125 35% 107 32% 18 17%
Transaction Related Expenses - 0% 7 2% (7)
Non-cash stock-based compensation - 0% 2 0% (2)
Total broadcasting expense $355 100% $339 100% $16 5%
Production companies expense $20 $17 $3 18%
Corporate and administrative:
Corporate expenses $13 73% $17 81% $(4) (24)%
Transaction Related Expenses 1 5% - 0% 1
Non-cash stock-based compensation 4 22% 4 19% - 0%
Total corporate and
administrative expense $18 100% $21 100% $(3) (14)%

Results of Operations for the Year Ended December 31, 2020

Year Ended December 31,
2020 2019 Amount Percent
Percent Percent Increase Increase
Amount of Total Amount of Total (Decrease) (Decrease)
(dollars in millions)
Revenue (less agency commissions):
Local (including internet/digital/mobile) $771 32% $898 42% $(127) (14)%
National 198 8% 229 11% (31) (14)%
Political 430 18% 68 3% 362 532%
Retransmission consent 867 36% 796 38% 71 9%
Production companies 61 3% 87 4% (26) (30)%
Other 54 3% 44 2% 10 23%
Total $2,381 100% $2,122 100% $259 12%
Total Core Revenue $969 40% $1,127 53% $(158) (14)%

OPERATING EXPENSES (before
depreciation, amortization and
gain on disposal of assets, net):
Broadcasting:
Station expenses $839 63% $855 65% $(16) (2)%
Retransmission expense 496 37% 420 32% 76 18%
Transaction Related Expenses - 0% 45 3% (45)
Non-cash stock-based compensation 5 0% 5 0% - 0%
Total broadcasting expense $1,340 100% $1,325 100% $15 1%
Production companies expense $52 $74 $(22) (30)%
Corporate and administrative:
Corporate expenses $53 81% $59 56% $(6) (10)%
Transaction Related Expenses 1 2% 34 33% (33) (97)%
Non-cash stock-based compensation 11 17% 11 11% - 0%
Total corporate and
administrative expense $65 100% $104 100% $(39) (38)%

Transaction Related Expenses

From time to time, we have incurred incremental expenses (“Transaction Related Expenses”) that were specific to acquisitions, divestitures and financing activities, including but not limited to legal and professional fees, severance and incentive compensation and contract termination fees. In addition, we have recorded certain non-cash stock-based compensation expenses. These expenses are summarized as follows (in millions):

Three Months Ended December 31, Year Ended December 31,
2020 2019 2020 2019
Transaction Related Expenses:
Broadcasting $ - $ 7 $ - $ 45
Corporate Administrative 1 - 1 34
Total Transaction Related Expenses: $ 1 $7 $ 1 $79
Total non-cash stock-based compensation $4 $6 $16 $16

Taxes

During 2020 and 2019, we made aggregate federal and state income tax payments (net of refunds) of $70 million and $23 million, respectively. During 2021, we anticipate making income tax payments (net of refunds) within a range of $21 million to $23 million. As of December 31, 2020, we have $204 million of federal operating loss carryforwards, which expire during the years 2023 through 2037. We expect to have federal taxable income in the carryforward periods, therefore we believe that it is more likely than not that these federal operating loss carryforwards will be fully utilized. Additionally, we have an aggregate of $567 million of various state operating loss carryforwards, of which we expect that approximately half will be utilized.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020, and permits net operating loss (“NOL”) carryforwards and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. We will continue to monitor and assess the impact the CARES Act may have on our business, financial condition, results of operations and cash flows.

Detailed Table of Operating Results

Gray Television, Inc.
Selected Operating Data (Unaudited)
(in millions, except for net income per share data)
Three Months Ended Year Ended
December 31, December 31,
2020 2019 2020 2019
Revenue (less agency commissions)
Broadcasting$763 $554 $2,320 $2,035
Production companies 29 25 61 87
Total revenue (less agency commissions) 792 579 2,381 2,122
Operating expenses before depreciation, amortization and gain on
disposal of assets, net:
Broadcasting 355 339 1,340 1,325
Production companies 20 17 52 74
Corporate and administrative 18 21 65 104
Depreciation 27 20 96 80
Amortization of intangible assets 27 29 105 115
Gain on disposal of assets, net (6) (27) (29) (54)
Operating expenses 441 399 1,629 1,644
Operating income 351 180 752 478
Other (expense) income:
Miscellaneous (expense) income, net - - (5) 4
Interest expense (48) (54) (191) (227)
Loss on early extinguishment of debt (12) - (12) -
Income before income tax 291 126 544 255
Income tax expense 67 32 134 76
Net income 224 94 410 179
Preferred stock dividends 13 13 52 52
Net income attributable to common stockholders$211 $81 $358 $127
Basic per share information:
Net income attributable to common stockholders$2.24 $0.82 $3.73 $1.28
Weighted-average shares outstanding 94 99 96 99
Diluted per share information:
Net income attributable to common stockholders$2.22 $0.81 $3.69 $1.27
Weighted-average shares outstanding 95 100 97 100

Other Financial Data

As of December 31,
2020 2019
(in millions)
Cash$773 $212
Long-term debt, including current portion$3,974 $3,697
Series A perpetual preferred stock$650 $650
Borrowing availability under senior credit facility$200 $200
Year Ended December 31,
2020 2019
(in millions)
Net cash provided by operating activities$652 $385
Net cash used in investing activities (211) (2,656)
Net cash provided by financing activities 120 1,064
Net increase (decrease) in cash$561 $(1,207)

Amendment to 2019 Senior Credit Facility

On February 19, 2021, we amended our senior credit facility. The amendment, among other things: (i) increases availability under the revolving credit facility from $200 million to $300 million; (ii) extends the maturity date of borrowings under the revolving credit facility to January 2, 2026; and (iii) modifies certain terms relating to the implementation of a LIBOR replacement rate.

Guidance for the Three-Months Ending March 31, 2021

Based on our current forecasts for the quarter ending March 31, 2021 (the “first quarter of 2021”), we anticipate changes from the quarter ended March 31, 2020 (the “first quarter of 2020”), as outlined below:

• Revenue:

• Operating Expenses (before depreciation, amortization and gain/loss on disposal of assets, net):

The Company

We are a television broadcast company headquartered in Atlanta, Georgia. We are the largest owner of top-rated local television stations and digital assets in the United States (“U.S.”). Gray currently owns and/or operates television stations and leading digital properties in 94 television markets that collectively reach approximately 24% of U.S. television households. During 2020, our stations were ranked first in 70 markets, and ranked first and/or second in 86 markets, as calculated by Comscore, Inc.’s audience measurement service. We also own video program production, marketing, and digital businesses including Raycom Sports, Tupelo-Raycom, and RTM Studios, the producer of PowerNation programs and content, which we refer to collectively as our “production companies.”

Cautionary Statements for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act

This press release contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the federal securities laws. These “forward-looking statements” are not statements of historical facts, and may include, among other things, statements regarding our estimates, expectations, intentions, projections, and beliefs of operating results for future periods, the impact of COVID-19 on our future operating results, future income tax payments, pending transactions and other future events. Actual results are subject to a number of risks and uncertainties and may differ materially from the current expectations and beliefs discussed in this press release. All information set forth in this release is as of the date hereof. We do not intend, and undertake no duty, to update this information to reflect future events or circumstances. As such, caution should be taken to not place undue reliance on forward-looking statements. Information about certain potential factors that could affect our business and financial results and cause actual results to differ materially from those expressed or implied in any forward-looking statements are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2020, and may be contained in reports subsequently filed with the U.S. Securities and Exchange Commission and available at www.sec.gov.

Conference Call Information

We will host a conference call to discuss our fourth quarter operating results on February 25, 2021. The call will begin at 11:00 a.m. Eastern Time. The live dial-in number is 1-855-493-3489 and the confirmation code is 9756347. The call will be webcast live and available for replay at www.gray.tv. The taped replay of the conference call will be available at 1-855-859-2056, Confirmation Code is 9756347 until March 24, 2021.

Gray Contacts

Web site: www.gray.tv

Hilton H. Howell, Jr., Executive Chairman and Chief Executive Officer, 404-266-5512

Pat LaPlatney, President and Co-Chief Executive Officer, 334-206-1400

Jim Ryan, Executive Vice President and Chief Financial Officer, 404-504-9828

Kevin P. Latek, Executive Vice President, Chief Legal and Development Officer, 404-266-8333

Effects of Acquisitions and Divestitures on Our Results of Operations and Non-GAAP Terms

From time to time, Gray supplements its financial results prepared in accordance with GAAP by disclosing the non-GAAP financial measures Broadcast Cash Flow, Broadcast Cash Flow Less Cash Corporate Expenses, Operating Cash Flow as defined in the Senior Credit Agreement, Free Cash Flow, Adjusted EBITDA and Total Leverage Ratio, Net of All Cash. These non-GAAP amounts are used by us to approximate amounts used to calculate key financial performance covenants contained in our debt agreements and are used with our GAAP data to evaluate our results and liquidity.

We define Broadcast Cash Flow as net income or loss plus loss on early extinguishment of debt, non-cash corporate and administrative expenses, non-cash stock-based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense, Broadcast Transactions Related Expenses and broadcast other adjustments less any gain on disposal of assets, any miscellaneous income, any income tax benefits and payments for program broadcast rights.

We define Broadcast Cash Flow Less Cash Corporate Expenses as net income or loss plus loss on early extinguishment of debt, non-cash stock-based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense, Transaction Related Expenses and other adjustments less any gain on disposal of assets, any miscellaneous income, any income tax benefits and payments for program broadcast rights.

We define Operating Cash Flow as defined in our Senior Credit Agreement as net income or loss plus loss on early extinguishment of debt, non-cash stock-based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense, Transaction Related Expenses, other adjustments, certain pension expenses, synergies and other adjustments less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast rights, pension income and contributions to pension plans.

Operating Cash Flow as defined in our Senior Credit Agreement gives effect to the revenue and broadcast expenses of all completed acquisitions and divestitures as if they had been acquired or divested, respectively, on December 31, 2018. It also gives effect to certain operating synergies expected from the acquisitions and related financings and adds back professional fees incurred in completing the acquisitions. Certain of the financial information related to the acquisitions has been derived from, and adjusted based on, unaudited, un-reviewed financial information prepared by other entities, which Gray cannot independently verify. We cannot assure you that such financial information would not be materially different if such information were audited or reviewed and no assurances can be provided as to the accuracy of such information, or that our actual results would not differ materially from this financial information if the acquisitions had been completed on the stated date. In addition, the presentation of Operating Cash Flow as defined in the Senior Credit Agreement and the adjustments to such information, including expected synergies resulting from such transactions, may not comply with GAAP or the requirements for pro forma financial information under Regulation S-X under the Securities Act of 1933.

We define Free Cash Flow as net income or loss plus loss on early extinguishment of debt, non-cash stock-based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, any income tax expense, non-cash 401(k) expense, Transactions Related Expenses, broadcast other adjustments, certain pension expenses, synergies, other adjustments and amortization of deferred financing costs less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast rights, pension income, contributions to pension plans, preferred dividends, purchase of property and equipment (net of reimbursements) and income taxes paid (net of any refunds received).

We define Adjusted EBITDA as net income or loss, plus loss on early extinguishment of debt, non-cash stock-based compensation, depreciation and amortization of intangible assets, any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense, Transaction Related Expenses less any gain on disposal of assets, any miscellaneous income and any income tax benefits.

Our Total Leverage Ratio, Net of All Cash is determined by dividing our Adjusted Total Indebtedness, Net of All Cash, by our Operating Cash Flow as defined in our Senior Credit Agreement, divided by two. Our Adjusted Total Indebtedness, Net of All Cash, represents the total outstanding principal of our long-term debt, plus certain other obligations as defined in our Senior Credit Agreement, less all cash (excluding restricted cash). Our Operating Cash Flow, as defined in our Senior Credit Agreement, divided by two, represents our average annual Operating Cash Flow as defined in our Senior Credit Agreement for the preceding eight quarters.

We define Transaction Related Expenses as incremental expenses incurred specific to acquisitions and divestitures, including but not limited to legal and professional fees, severance and incentive compensation, and contract termination fees. We present certain line-items from our selected operating data, net of Transaction Related Expenses, in order to present a more meaningful comparison between periods of our operating expenses and our results of operations.

These non-GAAP terms are not defined in GAAP and our definitions may differ from, and therefore may not be comparable to, similarly titled measures used by other companies, thereby limiting their usefulness. Such terms are used by management in addition to, and in conjunction with, results presented in accordance with GAAP and should be considered as supplements to, and not as substitutes for, net income and cash flows reported in accordance with GAAP.

Reconciliation of Non-GAAP Terms, in millions:

Three Months Ended
December 31,
2020 2019 2018
Net income$224 $94 $88
Adjustments to reconcile from net income to
Free Cash Flow:
Depreciation 27 20 13
Amortization of intangible assets 27 29 5
Non-cash stock-based compensation 4 6 2
Gain on disposal of assets, net (6) (27) (11)
Miscellaneous expense, net - - (3)
Interest expense 48 54 32
Loss on early extinguishment of debt 12 - -
Income tax expense 67 32 33
Amortization of program broadcast rights 10 9 6
Non-cash 401(k) expense 6 5 4
Payments for program broadcast rights (10) (10) (6)
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation 15 17 9
Broadcast Cash Flow 424 229 172
Corporate and administrative expenses excluding
depreciation, amortization of intangible assets and
non-cash stock-based compensation (15) (17) (9)
Broadcast Cash Flow Less Cash Corporate Expenses 409 212 163
Interest expense (48) (54) (32)
Amortization of deferred financing costs 2 2 1
Preferred stock dividends (13) (13) -
Purchase of property and equipment (40) (37) (35)
Reimbursements of property and equipment purchases 10 9 8
Income taxes paid, net of refunds (20) (11) (7)
Free Cash Flow$ 300 $ 108 $ 98

Reconciliation of Non-GAAP Terms, in millions:

Year Ended
December 31,
2020 2019 2018
Net income$410 $179 $211
Adjustments to reconcile from net income to
Free Cash Flow:
Depreciation 96 80 54
Amortization of intangible assets 105 115 21
Non-cash stock-based compensation 16 16 7
Gain on disposal of assets, net (29) (54) (17)
Miscellaneous expense (income), net 5 (4) (6)
Interest expense 191 227 107
Loss on early extinguishment of debt 12 - -
Income tax expense 134 76 77
Amortization of program broadcast rights 38 39 21
Non-cash 401(k) expense 6 5 4
Payments for program broadcast rights (39) (43) (22)
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation 54 93 36
Broadcast Cash Flow 999 729 493
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation (54) (93) (36)
Broadcast Cash Flow Less Cash Corporate Expenses 945 636 457
Contributions to pension plans (3) (3) (2)
Interest expense (191) (227) (107)
Amortization of deferred financing costs 11 11 5
Preferred stock dividends (52) (52) -
Purchase of property and equipment (110) (110) (70)
Reimbursements of property and equipment purchases 29 41 14
Income taxes paid, net of refunds (70) (23) (34)
Free Cash Flow$ 559 $ 273 $ 263

Reconciliation of Net Income to Adjusted EBITDA and the Effect of Transaction Related Expenses and Certain Non-cash Expenses, in millions except for per share information:

Three Months Ended Year Ended
December 31, December 31,
2020 2019 2020 2019
Net income$224 $94 $410 $179
Adjustments to reconcile from net income to
Adjusted EBITDA:
Depreciation 27 20 96 80
Amortization of intangible assets 27 29 105 115
Non-cash stock-based compensation 4 6 16 16
Gain on disposal of assets, net (6) (27) (29) (54)
Miscellaneous expense (income), net - - 5 (4)
Interest expense 48 54 191 227
Loss on early extinguishment of debt 12 - 12 -
Income tax expense 67 32 134 76
Total 403 208 940 635
Add: Transaction Related Expenses 1 7 1 79
Adjusted EBITDA$ 404 $ 215 $ 941 $ 714
Net income attributable to common stockholders$211 $81 $358 $127
Add: Transaction Related Expenses and non-cash
stock-based compensation 5 13 17 95
Less: Income tax expense related to Transaction Related
Expenses and non-cash stock-based compensation (1) (3) (4) (24)
Net income attributable to common stockholders - excluding
Transaction Related Expenses and non-cash stock-based
compensation$215 $91 $371 $198
Net income attributable to common stockholders per common share,
diluted - excluding Transaction Related Expenses and non-cash
stock-based compensation$2.26 $0.91 $3.82 $1.98
Diluted weighted-average shares outstanding 95 100 97 100

Reconciliation of Total Leverage Ratio, Net of All Cash, in millions except for ratio:

Eight Quarters Ended
December 31, 2020
Net income $ 589
Adjustments to reconcile from net income to operating cash flow as
defined in our Senior Credit Agreement:
Depreciation 176
Amortization of intangible assets 220
Non-cash stock-based compensation 31
Gain on disposal of assets, net (83)
Interest expense 418
Loss on early extinguishment of debt 12
Income tax expense 210
Amortization of program broadcast rights 77
Common stock contributed to 401(k) plan 11
Payments for program broadcast rights (85)
Pension benefit (1)
Contributions to pension plan (6)
Adjustments for stations acquired or divested, financings and expected
synergies during the eight quarter period 3
Transaction Related Expenses 81
Operating Cash Flow, as defined in our Senior Credit Agreement $ 1,653
Operating Cash Flow, as defined in our Senior Credit Agreement,
divided by two $ 826
December 31, 2020
Adjusted Total Indebtedness:
Total outstanding principal, including current portion $ 4,035
Cash (773)
Adjusted Total Indebtedness, Net of All Cash $ 3,262
Total Leverage Ratio, Net of All Cash 3.95

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Source: Gray Television, Inc.

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