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Gray Reports Second Quarter Operating Results

August 5, 2021 6:30 AM

ATLANTA, Aug. 05, 2021 (GLOBE NEWSWIRE) -- Gray Television, Inc. (“Gray,” “we,” “us” or “our”) (NYSE: GTN) today announced financial results for the second quarter ended June 30, 2021. We experienced strong momentum in the first half of 2021 that we believe will continue throughout the remainder of the year. Key financial results were as follows:

Selected Operating Data (unaudited), dollars in millions:
Three Months Ended June 30,
% Change % Change
2021 to 2021 to
2021 2020 2020 2019 2019
Revenue (less agency commissions):
Broadcasting$ 537 $ 449 20% $ 499 8%
Production companies10 2 400% 9 11%
Total revenue$ 547 $ 451 21% $ 508 8%
Political advertising revenue$ 6 $ 21 (71)% $ 5 20%
Operating expenses (1):
Broadcasting$ 354 $ 324 9% $ 314 13%
Production companies$ 9 $ 5 80% $ 9 0%
Corporate and administrative$ 25 $ 17 47% $ 21 19%
Net income$ 39 $ 11 255% $ 44 (11)%
Non-GAAP cash flow (2):
Broadcast Cash Flow$ 183 $ 123 49% $ 185 (1)%
Broadcast Cash Flow Less
Cash Corporate Expenses$ 161 $ 108 49% $ 166 (3)%
Free Cash Flow$ 34 $ 35 (3)% $ 69 (51)%
Six Months Ended June 30,
% Change % Change
2021 to 2021 to
2021 2020 2020 2019 2019
Revenue (less agency commissions):
Broadcasting$ 1,067 $ 964 11% $ 980 9%
Production companies24 21 14% 46 (48)%
Total revenue$ 1,091 $ 985 11% $ 1,026 6%
Political advertising revenue$ 15 $ 57 (74)% $ 8 88%
Operating expenses (1):
Broadcasting$ 715 $ 659 8% $ 670 7%
Production companies$ 26 $ 24 8% $ 44 (41)%
Corporate and administrative$ 43 $ 32 34% $ 69 (38)%
Net income$ 78 $ 64 22% $ 26 200%
Non-GAAP cash flow (2):
Broadcast Cash Flow$ 351 $ 304 15% $ 308 14%
Broadcast Cash Flow Less
Cash Corporate Expenses$ 314 $ 276 14% $ 244 29%
Free Cash Flow$ 112 $ 120 (7)% $ 73 53%

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

Results of Operations for the Second Quarter of 2021, dollars in millions:

Three Months Ended June 30,
2021 2020 Amount Percent
Percent Percent Increase Increase
Amount of Total Amount of Total (Decrease) (Decrease)
Revenue (less agency commissions):
Local (including internet/digital/mobile)$ 222 41% $ 162 36% $ 60 37%
National 57 10% 36 8% 21 58%
Political 6 1% 21 5% (15) (71)%
Retransmission consent 242 44% 220 49% 22 10%
Production companies 10 2% 2 0% 8 400%
Other 10 2% 10 2% - 0%
Total$ 547 100% $ 451 100% $ 96 21%
Combined local and national revenue
("Total Core Revenue")$ 279 51% $ 198 44% $ 81 41%

Three Months Ended June 30,
2021 2020 Amount Percent
Percent Percent Increase Increase
Amount of Total Amount of Total (Decrease) (Decrease)
Operating expenses (before
depreciation, amortization and gain on disposal of assets):
Broadcasting:
Station expenses$ 209 59% $ 199 62% $ 10 5%
Retransmission expense 144 41% 124 38% 20 16%
Transaction Related Expenses - 0% - 0% -
Non-cash stock-based compensation 1 0% 1 0% - 0%
Total broadcasting expense$ 354 100% $ 324 100% $ 30 9%
Production companies expense$ 9 $ 5 $ 4 80%
Corporate and administrative:
Corporate expenses$ 15 60% $ 15 88% $ - 0%
Transaction Related Expenses 7 28% - 0% 7
Non-cash stock-based compensation 3 12% 2 12% 1 50%
Total corporate and
administrative expense$ 25 100% $ 17 100% $ 8 47%

Results of Operations for the Six-Month Period Ended June 30, 2021, dollars in millions:

Six Months Ended June 30,
2021 2020 Amount Percent
Percent Percent Increase Increase
Amount of Total Amount of Total (Decrease) (Decrease)
Revenue (less agency commissions):
Local (including internet/digital/mobile)$ 425 39% $ 361 37% $ 64 18%
National 114 10% 87 9% 27 31%
Political 15 1% 57 6% (42) (74)%
Retransmission consent 489 45% 433 44% 56 13%
Production companies 24 2% 21 2% 3 14%
Other 24 3% 26 2% (2) (8)%
Total$ 1,091 100% $ 985 100% $ 106 11%
Total Core Revenue$ 539 49% $ 448 46% $ 91 20%

Six Months Ended June 30,
2021 2020 Amount Percent
Percent Percent Increase Increase
Amount of Total Amount of Total (Decrease) (Decrease)
Operating expenses (before
depreciation, amortization and gain on disposal of assets):
Broadcasting:
Station expenses$ 425 60% $ 410 62% $ 15 4%
Retransmission expense 289 40% 246 37% 43 17%
Transaction Related Expenses - 0% - 0% -
Non-cash stock-based compensation 1 0% 3 1% (2) (67)%
Total broadcasting expense$ 715 100% $ 659 100% $ 56 8%
Production companies expense$ 26 $ 24 $ 2 8%
Corporate and administrative:
Corporate expenses$ 29 67% $ 28 88% $ 1 4%
Transaction Related Expenses 8 19% - 0% 8
Non-cash stock-based compensation 6 14% 4 12% 2 50%
Total corporate and
administrative expense$ 43 100% $ 32 100% $ 11 34%

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 Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Transaction Related Expenses:
Broadcasting$- $- $- $-
Corporate and administrative7 - 8 -
Miscellaneous expense, net7 - 7 -
Total Transaction Related Expenses$14 $- $15 $-
Total non-cash stock-based compensation$4 $3 $7 $7

Taxes:

During the 2021 and 2020 six-month periods, we made aggregate federal and state income tax payments of approximately $38 million and $1 million, respectively. During the remainder of 2021, we anticipate making income tax payments (excluding pending refunds) of approximately $12 million. We have approximately $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. As a result, we believe that these federal operating loss carryforwards will be fully utilized. Additionally, we have an aggregate of approximately $567 million of various state operating loss carryforwards, of which we expect that approximately half will be utilized.

Other Financial Data:

As of
June 30, December 31,
2021 2020
(in millions)
Cash$ 785 $ 773
Long-term debt$ 3,979 $ 3,974
Series A Perpetual Preferred Stock$ 650 $ 650
Borrowing availability under Revolving Credit Facility$ 299 $ 200
Six Months Ended June 30,
2021 2020
(in millions)
Net cash provided by operating activities$ 238 $ 307
Net cash used in investing activities (177) (59)
Net cash used in financing activities (49) (81)
Net increase in cash$ 12 $ 167

Detailed Table of Operating Results:

Gray Television, Inc.
Selected Operating Data (Unaudited)
(in millions, except for per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Revenue (less agency commissions):
Broadcasting$ 537 $ 449 $ 1,067 $ 964
Production companies 10 2 24 21
Total revenue (less agency commissions) 547 451 1,091 985
Operating expenses before depreciation, amortization
and gain on disposal of assets, net:
Broadcasting 354 324 715 659
Production companies 9 5 26 24
Corporate and administrative 25 17 43 32
Depreciation 25 21 50 42
Amortization of intangible assets 27 26 53 52
Gain on disposal of assets, net (1) (7) (5) (13)
Operating expenses 439 386 882 796
Operating income 108 65 209 189
Other expense:
Miscellaneous expense, net (7) (2) (6) (3)
Interest expense (47) (46) (95) (98)
Income before income taxes 54 17 108 88
Income tax expense 15 6 30 24
Net income 39 11 78 64
Preferred stock dividends 13 13 26 26
Net income (loss) attributable to common stockholders$ 26 $ (2) $ 52 $ 38
Basic per share information:
Net income (loss) attributable to common stockholders$ 0.27 $ (0.02) $ 0.55 $ 0.39
Weighted-average shares outstanding 95 97 94 98
Diluted per share information:
Net income (loss) attributable to common stockholders$ 0.27 $ (0.02) $ 0.55 $ 0.39
Weighted-average shares outstanding 95 97 95 98

Guidance for the Three-Months Ending September 30, 2021:

Before the impact of the Quincy Transaction (and related divestures under the Allen Transaction), our Local, National, and together, our Total Core Revenue are anticipated to exceed the third quarter of 2019, the most recent non-political and pre-pandemic year, by low single digit percentage increases.

Based on our current forecasts for the third quarter of 2021, we anticipate changes from the third quarter of 2020 (excluding the Quincy Transaction, discussed below), as outlined below:

• Revenue, less agency commissions:

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

On August 2, 2021, we completed the Quincy Transaction (and related divestitures under the Allen Transaction). We currently expect that the addition of Quincy will have the following incremental effects on our broadcasting revenue and broadcasting operating expenses (before depreciation, amortization and (gain) loss on disposal of assets, net), as outlined below:

• Third quarter of 2021:

• Fourth quarter of 2021:

Our Corporate expenses (before depreciation, amortization and (gain) loss on disposal of assets, net) in the third and fourth quarters of 2021 are not currently expected to be materially impacted by the acquisition of Quincy other than anticipated Transaction Related Expenses and related realization of synergies.

The Company

Gray Television, headquartered in Atlanta, Georgia, is the largest owner of top-rated local television stations and digital assets in the United States. Upon its anticipated acquisition of the television stations of Meredith Corporation, Gray will become the nation’s second largest television broadcaster, with television stations serving 113 markets that reach approximately 36 percent of US television households. The pro forma portfolio includes 79 markets with the top-rated television station and 101 markets with the first and/or second highest rated television station according to Comscore’s audience measurement data. Gray also owns video program production, marketing, and digital businesses including Raycom Sports, Tupelo Honey, and RTM Studios, the producer of PowerNation programs and content and is the majority owner of Swirl Films.

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, macroeconomic trends, 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 second quarter operating results on August 5, 2021. The call will begin at 10:00 AM Eastern Time. The live dial-in number is 1(855) 493-3489 and the confirmation code is 1176873. 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 and the confirmation code is 1176873, until September 5, 2021.

Gray Contacts

Web site: www.gray.tv

Hilton H. Howell, Jr., Executive Chairman and Chief Executive Officer, (404) 266-5513

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 June 30, 2019. 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 June 30,
2021 2020 2019
Net income$ 39 $ 11 $ 44
Adjustments to reconcile from net income to
Free Cash Flow:
Depreciation 25 21 20
Amortization of intangible assets 27 26 28
Non-cash stock-based compensation 3 3 2
Gain on disposal of assets, net (1) (7) (3)
Miscellaneous expense (income), net 7 2 (1)
Interest expense 47 46 58
Income tax expense 15 6 18
Amortization of program broadcast rights 8 10 10
Payments for program broadcast rights (9) (10) (10)
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation 22 15 19
Broadcast Cash Flow 183 123 185
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation (22) (15) (19)
Broadcast Cash Flow Less Cash Corporate Expenses 161 108 166
Interest expense (47) (46) (58)
Amortization of deferred financing costs 3 3 3
Preferred stock dividends (13) (13) (13)
Common stock dividends (7) - -
Purchases of property and equipment (1) (28) (24) (26)
Reimbursements of property and equipment purchases 3 8 5
Income taxes paid, net of refunds (38) (1) (8)
Free Cash Flow$ 34 $ 35 $ 69

(1) Excludes approximately $80 million related to the purchase of land in Doraville, Georgia.

Reconciliation of Non-GAAP Terms, in millions:

Six Months Ended June 30,
2021 2020 2019
Net income$ 78 $ 64 $ 26
Adjustments to reconcile from net income to
Free Cash Flow:
Depreciation 50 42 40
Amortization of intangible assets 53 52 57
Non-cash stock-based compensation 7 7 5
Non-cash 401(k) expense 1 - -
Gain on disposal of assets, net (5) (13) (13)
Miscellaneous expense (income), net 6 3 (4)
Interest expense 95 98 116
Income tax expense 30 24 21
Amortization of program broadcast rights 17 19 20
Payments for program broadcast rights (18) (20) (24)
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation 37 28 64
Broadcast Cash Flow 351 304 308
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation (37) (28) (64)
Broadcast Cash Flow Less Cash Corporate Expenses 314 276 244
Interest expense (95) (98) (116)
Amortization of deferred financing costs 6 6 6
Preferred stock dividends (26) (26) (26)
Common stock dividends (15) - -
Purchases of property and equipment (1) (41) (51) (44)
Reimbursements of property and equipment purchases 7 14 17
Income taxes paid, net of refunds (38) (1) (8)
Free Cash Flow$ 112 $ 120 $ 73

(1) Excludes approximately $80 million related to the purchase of land in Doraville, Georgia.

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 Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Net income$ 39 $ 11 $ 78 $ 64
Adjustments to reconcile from net income to
Adjusted EBITDA:
Depreciation 25 21 50 42
Amortization of intangible assets 27 26 53 52
Non-cash stock-based compensation 4 3 7 7
Gain on disposal of assets, net (1) (7) (5) (13)
Miscellaneous expense, net 7 2 6 3
Interest expense 47 46 95 98
Income tax expense 15 6 30 24
Total 163 108 314 277
Add: Transaction Related Expenses (1) 7 - 8 -
Adjusted EBITDA$ 170 $ 108 $ 322 $ 277
Net income (loss) attributable to common stockholders$ 26 $ (2) $ 52 $ 38
Add: Transaction Related Expenses and non-cash
stock-based compensation 18 3 22 7
Less: Income tax expense related to Transaction Related
Expenses and non-cash stock-based compensation (5) (1) (6) (2)
Net income attributable to common stockholders - excluding Transaction Related Expenses and non-cash stock-based compensation$ 39 $- $ 68 $ 43
Net income attributable to common stockholders common per share, diluted - excluding Transaction Related Expenses and non-cash stock-based compensation$ 0.41 $- $ 0.72 $ 0.44
Diluted weighted-average common shares outstanding 95 97 95 98

(1) Excludes $7 million of Transaction Related Expenses included in miscellaneous expense, net for the three and six-month periods ended June 30, 2021, respectively.

Reconciliation of Total Leverage Ratio, Net of All Cash, dollars in millions:

Eight Quarters
Ended
June 30, 2021
Net income$ 642
Adjustments to reconcile from net income to Operating Cash Flow as
defined in our Senior Credit Agreement:
Depreciation 186
Amortization of intangible assets 216
Non-cash stock-based compensation 33
Gain on disposal of assets, net (74)
Interest expense 397
Loss on early extinguishment of debt 12
Income tax expense 218
Amortization of program broadcast rights 74
Common stock contributed to 401(k) plan 12
Payments for program broadcast rights (80)
Pension benefit (2)
Contributions to pension plans (6)
Adjustments for unrestricted subsidiaries 1
Adjustments for stations acquired or divested, financings and expected synergies during the eight quarter period 1
Transaction Related Expenses 26
Operating Cash Flow as defined in our Senior Credit Agreement$ 1,656
Operating Cash Flow as defined in our Senior Credit Agreement, divided by two$ 828
June 30, 2021
Adjusted Total Indebtedness:
Total outstanding principal$ 4,035
Letters of credit outstanding 1
Cash (785)
Adjusted Total Indebtedness, Net of All Cash$ 3,251
Total Leverage Ratio, Net of All Cash3.92

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Source: Gray Television, Inc.

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