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Gray Reports Third Quarter Operating Results

November 4, 2021 6:00 AM

ATLANTA, Nov. 04, 2021 (GLOBE NEWSWIRE) -- Gray Television, Inc. (“Gray,” “we,” “us” or “our”) (NYSE: GTN) today announced financial results for the third quarter ended September 30, 2021. We experienced strong momentum in the first nine months of 2021 and we believe it will continue throughout the remainder of the year. Key financial results were as follows:

Selected Operating Data (unaudited), dollars in millions:
Three Months Ended September 30,
% Change % Change
2021 to 2021 to
2021 2020 2020 2019 2019
Revenue (less agency commissions):
Broadcasting$581 $593 (2)% $501 16%
Production companies 20 11 82% 16 25%
Total revenue$601 $604 0% $517 16%
Political advertising revenue$9 $128 (93)% $22 (59)%
Operating expenses (1):
Broadcasting$384 $326 18% $316 22%
Production companies$13 $8 63% $13 0%
Corporate and administrative$32 $15 113% $14 129%
Net (loss) income attributable to common stockholders$(30) $109 (128)% $46 (165)%
Non-GAAP Cash Flow (2):
Broadcast Cash Flow$204 $271 (25)% $192 6%
Broadcast Cash Flow Less Cash Corporate Expenses$175 $260 (33)% $180 (3)%
Free Cash Flow (2)$(5) $139 (104)% $92 (105)%
Nine Months Ended September 30,
% Change % Change
2021 to 2021 to
2021 2020 2020 2019 2019
Revenue (less agency commissions):
Broadcasting$1,648 $1,557 6% $1,481 11%
Production companies 44 32 38% 62 (29)%
Total revenue$1,692 $1,589 6% $1,543 10%
Political advertising revenue$24 $185 (87)% $30 (20)%
Operating expenses (1):
Broadcasting$1,099 $985 12% $986 11%
Production companies$39 $32 22% $57 (32)%
Corporate and administrative$75 $47 60% $83 (10)%
Net income attributable to common stockholders$22 $147 (85)% $46 (52)%
Non-GAAP Cash Flow (2):
Broadcast Cash Flow$555 $575 (3)% $500 11%
Broadcast Cash Flow Less Cash Corporate Expenses$489 $536 (9)% $424 15%
Free Cash Flow (2)$107 $259 (59)% $165 (35)%

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

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

Three Months Ended September 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)$232 39% $188 31% $44 23%
National 60 10% 49 8% 11 22%
Political 9 2% 128 21% (119) (93)%
Retransmission consent 266 44% 217 36% 49 23%
Production companies 20 3% 11 2% 9 82%
Other 14 2% 11 2% 3 27%
Total $601 100% $604 100% $(3) 0%
Combined local and national revenue
("Total Core Revenue") $292 49% $237 39% $55 23%

Operating expenses (before
depreciation, amortization and
loss (gain) on disposal of assets):
Broadcasting:
Station expenses$229 60% $200 62% $29 15%
Retransmission expense 154 40% 125 38% 29 23%
Transaction Related Expenses - 0% - 0% -
Non-cash stock-based compensation 1 0% 1 0% - 0%
Total broadcasting expense$384 100% $326 100% $58 18%
Production companies expense$13 $8 $5 63%
Corporate and administrative:
Corporate expenses$19 60% $10 66% $9 90%
Transaction Related Expenses 11 34% 1 7% 10 1000%
Non-cash stock-based compensation 2 6% 4 27% (2) (50)%
Total corporate and
administrative expense$32 100% $15 100% $17 113%

Results of Operations for the Nine-Months Ended September 30, 2021, dollars in millions:

Nine Months Ended September 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)$657 39% $549 34% $108 20%
National 174 10% 136 9% 38 28%
Political 24 1% 185 12% (161) (87)%
Retransmission consent 755 45% 650 41% 105 16%
Production companies 44 3% 32 2% 12 38%
Other 38 2% 37 2% 1 3%
Total$1,692 100% $1,589 100% $103 6%
Combined local and national revenue
("Total Core Revenue")$831 49% $685 43% $146 21%

Operating expenses (before
depreciation, amortization and
(gain) loss on disposal of assets):
Broadcasting:
Station expenses$654 60% $610 62% $44 7%
Retransmission expense 444 40% 371 38% 73 20%
Transaction Related Expenses - 0% - 0% -
Non-cash stock-based compensation 1 0% 4 0% (3) (75)%
Total broadcasting expense$1,099 100% $985 100% $114 12%
Production companies expense$39 $32 $7 22%
Corporate and administrative:
Corporate expenses$47 63% $38 81% $9 24%
Transaction Related Expenses 19 25% 1 2% 18 1800%
Non-cash stock-based compensation 9 12% 8 17% 1 13%
Total corporate and
administrative expense$75 100% $47 100% $28 60%

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 Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Transaction Related Expenses:
Broadcasting$- $- $- $-
Corporate and administrative 11 1 19 1
Miscellaneous expense - - 7 -
Total Transaction Related Expenses$11 $1 $26 $1
Total non-cash stock-based compensation$3 $5 $10 $12

Taxes:

During the 2021 and 2020 nine-month periods, we made aggregate federal and state income tax payments of approximately $129 million and $50 million, respectively. In the third quarter of 2021 we made income tax payments of approximately $72 million related to the Quincy Divestiture. During the remainder of 2021, we anticipate making income tax payments (net of refunds) of approximately $18 million that will include approximately $17 million related to the Flint Divestiture. 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. We therefore 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.

Detailed table of operating results:

Gray Television, Inc.
Selected Operating Data (Unaudited)
(in millions, except for net income per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenue (less agency commissions):
Broadcasting$581 $593 $1,648 $1,557
Production companies 20 11 44 32
Total revenue (less agency commissions) 601 604 1,692 1,589
Operating expenses before depreciation, amortization
and loss (gain) on disposal of assets, net:
Broadcasting 384 326 1,099 985
Production companies 13 8 39 32
Corporate and administrative 32 15 75 47
Depreciation 26 27 76 69
Amortization of intangible assets 28 26 81 78
Loss (gain) on disposals of assets, net 51 (10) 46 (23)
Operating expenses 534 392 1,416 1,188
Operating income 67 212 276 401
Other (expense) income:
Miscellaneous (expense), net (1) (2) (7) (5)
Interest expense (48) (45) (143) (143)
Income before income taxes 18 165 126 253
Income tax expense 35 43 65 67
Net (loss) income (17) 122 61 186
Preferred stock dividends 13 13 39 39
Net (loss) income attributable to common stockholders$(30) $109 $22 $147
Basic per share information:
Net (loss) income attributable to common stockholders$(0.32) $1.15 $0.23 $1.52
Weighted-average shares outstanding 95 95 94 97
Diluted per share information:
Net (loss) income attributable to common stockholders$(0.32) $1.14 $0.23 $1.52
Weighted-average shares outstanding 95 96 95 97

Guidance for the Three-Months Ending December 31, 2021:

Based on our current forecasts for the fourth quarter of 2021, we anticipate changes from the fourth quarter of 2020, excluding the pending Meredith Transaction, as outlined below:

Other Financial Data, in millions:

Nine Months Ended September 30,
2021 2020
Net cash provided by operating activities$283 $488
Net cash used in investing activities (664) (129)
Net cash used in financing activities (70) (104)
Net (decrease) increase in cash$(451) $255
As of
September 30, 2021 December 31, 2020
Cash$322 $773
Long-term debt, including current portion$3,981 $3,974
Borrowing availability under Revolving Credit Facility$299 $200
Series A Perpetual Preferred Stock$650 $650

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 completion of the Meredith Transaction, 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 third quarter operating results on November 4, 2021. The call will begin at 11:00 AM Eastern Time. The live dial-in number is 1 (855) 493-3489 and the confirmation code is 8366927. 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: 8366927 until December 4, 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, we supplement our 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 September 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
September 30,
2021 2020 2019
Net (loss) income$(17) $122 $59
Adjustments to reconcile from net (loss) income to
Free Cash Flow:
Depreciation 26 27 20
Amortization of intangible assets 28 26 29
Non-cash stock-based compensation 3 5 5
Loss (gain) on disposal of assets, net 51 (10) (14)
Miscellaneous expense, net 1 2 -
Interest expense 48 45 57
Income tax expense 35 43 23
Amortization of program broadcast rights 9 9 10
Payments for program broadcast rights (9) (9) (9)
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation 29 11 12
Broadcast Cash Flow 204 271 192
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation (29) (11) (12)
Broadcast Cash Flow Less Cash Corporate Expenses 175 260 180
Contributions to pension plans (4) (3) (3)
Interest expense (48) (45) (57)
Amortization of deferred financing costs 3 3 3
Preferred stock dividends (13) (13) (13)
Common stock dividends (8) - -
Purchase of property and equipment (1) (22) (19) (29)
Reimbursements of property and equipment purchases 3 5 15
Income taxes paid, net of refunds (2) (91) (49) (4)
Free Cash Flow$ (5) $ 139 $ 92

(1) Excludes approximately $11 million related to the purchase of land in Doraville, Georgia.(2) Includes approximately $72 million of income tax payments related to the Quincy Divestiture.

Reconciliation of Non-GAAP Terms, in millions:

Nine Months Ended
September 30,
2021 2020 2019
Net income$61 $186 $85
Adjustments to reconcile from net income to
Free Cash Flow:
Depreciation 76 69 60
Amortization of intangible assets 81 78 86
Non-cash stock-based compensation 10 12 10
Non-cash 401(k) expense 1 - -
Loss (gain) on disposal of assets, net 46 (23) (27)
Miscellaneous expense (income), net 7 5 (4)
Interest expense 143 143 173
Income tax expense 65 67 44
Amortization of program broadcast rights 26 28 30
Payments for program broadcast rights (27) (29) (33)
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation 66 39 76
Broadcast Cash Flow 555 575 500
Corporate and administrative expenses before
depreciation, amortization of intangible assets and
non-cash stock-based compensation (66) (39) (76)
Broadcast Cash Flow Less Cash Corporate Expenses 489 536 424
Contributions to pension plans (4) (3) (3)
Interest expense (143) (143) (173)
Amortization of deferred financing costs 9 9 9
Preferred stock dividends (39) (39) (39)
Common stock dividends (23) - -
Purchase of property and equipment (1) (63) (70) (73)
Reimbursements of property and equipment purchases 10 19 32
Income taxes paid, net of refunds (2) (129) (50) (12)
Free Cash Flow$ 107 $ 259 $ 165

(1) Excludes approximately $91 million related to the purchase of land in Doraville, Georgia.(2) Includes approximately $72 million of income tax payments related to the Quincy Divestiture.

Reconciliation of Net (Loss) 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 Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Net (loss) income$(17) $122 $61 $186
Adjustments to reconcile from net income to
Adjusted EBITDA:
Depreciation 26 27 76 69
Amortization of intangible assets 28 26 81 78
Non-cash stock-based compensation 3 5 10 12
Loss (gain) on disposal of assets, net 51 (10) 46 (23)
Miscellaneous expense, net 1 2 7 5
Interest expense 48 45 143 143
Income tax expense 35 43 65 67
Total 175 260 489 537
Add: Transaction Related Expenses (1) 11 1 19 1
Adjusted EBITDA$ 186 $ 261 $ 508 $ 538
Net (loss) income attributable to common stockholders$(30) $109 $22 $147
Add: Transaction Related Expenses and non-cash
stock-based compensation 14 6 29 13
Less: Income tax expense related to Transaction Related
Expenses and non-cash stock-based compensation (4) (2) (7) (3)
Net (loss) income attributable to common stockholders - excluding
Transaction Related Expenses and non-cash stock-based
compensation$(20) $113 $44 $157
Net (loss) income attributable to common stockholders per common share,
diluted - excluding Transaction Related Expenses and non-cash
stock-based compensation$(0.21) $1.18 $0.46 $1.62
Diluted weighted-average shares outstanding 95 96 95 97

(1) Excludes $7 million of Transaction Related Expenses included in miscellaneous (expense) income, net for the nine-month period ended September 30, 2021.

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

Eight Quarters Ended
September 30, 2021
Net income $566
Adjustments to reconcile from net income to operating cash flow as
defined in our Senior Credit Agreement:
Depreciation 192
Amortization of intangible assets 215
Non-cash stock-based compensation 32
Gain disposals of assets, net (9)
Interest expense 387
Loss from early extinguishment of debt 12
Income tax expense 230
Amortization of program broadcast rights 78
Common stock contributed to 401(k) plan 12
Payments for program broadcast rights (79)
Pension gain (3)
Contributions to pension plans (7)
Adjustments for unrestricted subsidiaries 1
Adjustments for stations acquired or divested, financings and expected
synergies during the eight quarter period 120
Transaction Related Expenses 36
Operating Cash Flow as defined in our Senior Credit Agreement $ 1,783
Operating Cash Flow as defined in our Senior Credit Agreement,
divided by two $ 892
September 30, 2021
Adjusted Total Indebtedness:
Total outstanding principal, including current portion $4,035
Cash (322)
Adjusted Total Indebtedness, Net of All Cash $ 3,713
Total Leverage Ratio, Net of All Cash 4.16

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Source: Gray Television, Inc.

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