ATLANTA, May 10 /PRNewswire-FirstCall/ -- Gray
Television, Inc. ("we," "us" or "our") (NYSE: GTN) today
announced results from operations for the three month period
("first quarter") ended March 31,
2010 as compared to the three month period ended
March 31, 2009.
Highlights:
For the three month period ended March
31, 2010, our total net revenue and broadcast expenses were
as follows:
|
Three Months Ended
March 31,
|
|
|
2010
|
2009
|
%
Change
|
|
|
(in thousands
except for percentages)
|
|
|
|
|
|
|
|
Revenues (less agency
commissions)
|
$
70,482
|
$
61,354
|
15 %
|
|
|
|
|
|
|
|
Operating expenses
(before depreciation, amortization and gain
on disposal of
assets):
|
|
|
|
|
|
Broadcast expense
|
$
47,567
|
$
45,654
|
4 %
|
|
|
|
|
|
|
|
Corporate and
administrative expense
|
$
2,922
|
$
4,046
|
(28)%
|
|
|
|
|
|
|
While we continue to operate our business in a challenging
environment, our operating results from the first quarter of 2010
exceeded our initial forecasts. We experienced improvements
in our core local and national advertising revenue as well as other
major revenue categories in the first quarter of 2010 compared to
the first quarter of 2009. We believe we are well positioned
to benefit from expected increases in political advertising in
2010. While our revenues have increased, we continue to focus
on controlling our operating costs.
During 2010, we have also taken a number of actions designed to
further strengthen our balance sheet. On March 31, 2010, we amended our senior credit
facility. This amendment modified our leverage ratio covenant
and certain other terms of our senior credit facility and allowed
for additional financial and covenant flexibility. In order
to obtain this amendment, we incurred loan issuance costs of
approximately $4.4 million, including
legal and professional fees. These fees were funded from our
existing cash balances. As a result of this amendment, we
recorded a loss from early extinguishment of debt of $0.3 million. We were in compliance with
all financial covenants as of March 31,
2010.
On April 29, 2010, we issued
$365.0 million of second lien notes
due 2015 (the "Notes") in a transaction exempt from the
registration requirements of the Securities Act of 1933. We
used the net proceeds from the issuance of the Notes to, among
other things, repay $300.0 million in
principal outstanding under our senior credit facility. With the
completion of these transactions, and under the terms of the
recently amended senior credit facility, we were able to reduce the
total cost of borrowings under our senior credit facility from an
effective interest rate of LIBOR plus 8.50% to an effective rate of
LIBOR plus 4.25% as of April 29,
2010, achieve additional financial and covenant flexibility,
and eliminate certain fees thereunder.
Also on April 29, 2010, we
repurchased approximately $60.7
million in face amount of our Series D perpetual preferred
stock, and $14.9 million in accrued
dividends thereon, in exchange for $50.0
million in cash, using net proceeds from the offering of
Notes, and the issuance of 8.5 million shares of our common stock.
As a result of that exchange, we reduced the liquidation
amount of our outstanding Series D perpetual preferred stock to
$39.3 million, and reduced the
accrued dividends thereon to $9.6
million, as of April 29,
2010.
Comments on Results of Operations for the Three Month Period
Ended March 31, 2010:
Revenues.
Total revenues increased $9.1
million, or 15%, to $70.5
million for the three months ended March 31, 2010 compared to the three months ended
March 31, 2009 reflecting increased
local, national, internet and political advertising revenue,
retransmission revenue and other revenue. Local, national and
internet advertising revenue increased due to increased spending by
advertisers in an improving economic environment. Political
advertising revenues increased due to increased advertising from
political candidates and special interest groups. Net advertising
revenue associated with the broadcast of the 2010 Super Bowl on our
seventeen CBS-affiliated stations approximated $860,000 which was an increase from our
approximate $750,000 of Super Bowl
revenues earned in 2009 on our ten NBC-affiliated stations. In
addition, the 2010 three month period benefited from approximately
$2.8 million of net revenues earned
from the broadcast of the 2010 Winter Olympic Games on our
NBC-affiliated stations. There was no corresponding broadcast of
Olympic Games during the three months ended March 31, 2009. Retransmission revenue increased
due to the improved terms of our retransmission contracts compared
to those of the three months ended March 31,
2009. We continued to earn consulting revenue from our
agreement with Young Broadcasting, Inc.
The principal components of our revenue were as follows:
Local advertising revenue increased $4.2
million, or 11%, to $43.5
million.
National advertising revenue increased $1.1 million, or 8%, to $14.0 million.
Internet advertising revenue increased $0.5 million, or 20%, to $3.1 million.
Political advertising revenue increased $1.8 million, or 176%, to $2.8 million.
Retransmission advertising revenue increased $1.0 million, or 27%, to $4.6 million.
Production and other revenue increased $0.1 million, or 5%, to $1.9 million.
Consulting revenue from our agreement with Young Broadcasting,
Inc. was $0.6 million in the first
quarter of 2010.
Advertising from the automotive sector improved significantly,
increasing by 43% in the first quarter of 2010 when compared to the
three months ended March 31, 2009.
Other categories demonstrating significant improvement in
advertising revenues during the first quarter of 2010 compared to
the three months ended March 31, 2009
were: supermarkets, increasing 27%; financial and insurance
services, increasing 23%; medical services, increasing 16%; and
legal services, increasing 15%.
Operating expenses.
Broadcast expenses (before depreciation, amortization and gain
on disposal of assets) increased $1.9
million, or 4%, to $47.6
million. This increase was due primarily to increases in
compensation expense of $1.4 million
and non-compensation expense of $0.5
million. Compensation expense increased primarily due
to increases in sales incentive compensation of $0.7 million due to the increase in net
advertising revenue discussed above and an increase in pension
expense of $0.3 million. As of
March 31, 2010 and 2009, we employed
2,172 and 2,218 full and part-time employees, respectively, in our
broadcast operations. Since December
31, 2007, we have decreased the total number of employees in
our broadcast operations by 253 persons, a decrease of 10.4%.
Non-compensation related expenses increased primarily due to
an increase in sales related costs of $0.5
million, which were attributable to the increased net
advertising revenue discussed above. The increase in sales
related costs were partially offset by a decrease in electricity
expenses due to the discontinuance of our analog broadcasts.
Corporate and administrative expenses (before depreciation,
amortization and gain on disposal of assets) decreased $1.1 million, or 28%, to $2.9 million due primarily to decreased
compensation and legal expenses. Compensation expense decreased due
to a decrease in relocation expenses of $0.4
million and non-cash stock-based compensation of
$0.2 million. We incurred expenses
related to the relocation of several general managers during the
three months ended March 31, 2009 due
to routine personnel changes. We did not have similar
expenses in the three months ended March 31,
2010. We recorded non-cash stock-based compensation expense
during the three month periods ended March
31, 2010 and 2009 of $155,000
and $353,000, respectively. We
incurred higher legal fees during the three months ended
March 31, 2009 due to our
renegotiation of many of our retransmission consent contracts.
These negotiations were largely completed in 2009 and, as a result,
our legal fees decreased $0.3 million
for the three months ended March 31,
2010 compared to the three months ended March 31, 2009.
Internet Initiatives:
We are currently operating web, mobile and desktop applications
in all of our markets. We have focused on expanding the
applicable local content on our websites to drive increased
traffic. Our website page view data for the three months ended
March 31, 2010 compared to the three
months ended March 31, 2009 is as
follows:
|
Gray Websites -
Data
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
%
|
|
|
2010
|
2009
|
Change
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Advertising impressions
generated
|
649
|
601
|
8 %
|
|
|
Mobile page views
|
31
|
19
|
63 %
|
|
|
Total page views (including mobile
page views)
|
230
|
186
|
24 %
|
|
|
|
|
|
|
We attribute the increase in our website traffic to increased
posting of local content and public awareness of our websites
resulting from our on-air promotion of our websites.
Our aggregate internet revenues are derived from two sources.
The first source is advertising or sponsorship opportunities
directly on our websites. We call this "direct internet revenue."
The other revenue source is television advertising time
purchased by our clients to directly promote their involvement in
our websites. We refer to this internet revenue source as
"internet-related commercial time sales."
We anticipate our direct internet revenue will grow at a faster
pace in the future relative to our internet-related commercial time
sales.
|
Other Financial Data:
|
|
|
As
of
|
|
|
March
31,
|
December
31,
|
|
|
2010
|
2009
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Cash
|
$
13,664
|
$
16,000
|
|
|
Long-term debt, including current
portion
|
789,789
|
791,809
|
|
|
Long-term accrued facility
fee
|
24,245
|
18,307
|
|
|
Preferred stock(1)
|
93,687
|
93,386
|
|
|
Borrowing availability under our
senior credit facility
|
40,000
|
31,681
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2010
|
2009
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
$
6,986
|
$
(1,296)
|
|
|
Net cash used in investing
activities
|
(3,185)
|
(5,469)
|
|
|
Net cash used in financing
activities
|
(6,137)
|
(9,027)
|
|
|
Net decrease in cash
|
$
(2,336)
|
$
(15,792)
|
|
(1) As of March 31, 2010, preferred stock does not include
unaccreted original issuance costs and accrued preferred
stock dividends of $6.3 million and $23.2 million, respectively. As
of December
31, 2009,
preferred stock does not include unaccreted original issuance costs
and accrued
preferred stock dividends of $6.6 million and $18.9 million,
respectively.
|
|
|
|
|
|
|
Detailed table of operating
results:
|
|
|
Gray Television,
Inc.
|
|
|
Selected Operating
Data (Unaudited)
|
|
|
(in thousands
except for per share data and percentages)
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
|
|
%
|
|
|
2010
|
2009
|
Change
|
|
|
|
|
|
|
|
Revenues (less agency
commissions)
|
$
70,482
|
$
61,354
|
15 %
|
|
|
Operating expenses:
|
|
|
|
|
|
Operating expenses
before depreciation, amortization and
gain on disposal
of assets, net:
|
47,567
|
45,654
|
4 %
|
|
|
Corporate and
administrative
|
2,922
|
4,046
|
(28)%
|
|
|
Depreciation
|
7,975
|
8,261
|
(3)%
|
|
|
Amortization of intangible
assets
|
122
|
149
|
(18)%
|
|
|
Gain on disposals of assets,
net
|
(44)
|
(1,522)
|
(97)%
|
|
|
58,542
|
56,588
|
3 %
|
|
|
Operating income
|
11,940
|
4,766
|
151 %
|
|
|
Other income (expense):
|
|
|
|
|
|
Miscellaneous
income, net
|
39
|
12
|
225 %
|
|
|
Interest
expense
|
(19,611)
|
(10,113)
|
94 %
|
|
|
Loss from early
extinguishment of debt
|
(349)
|
(8,352)
|
(96)%
|
|
|
Loss before income tax
benefit
|
(7,981)
|
(13,687)
|
(42)%
|
|
|
Income tax benefit
|
(3,238)
|
(4,767)
|
(32)%
|
|
|
Net loss
|
(4,743)
|
(8,920)
|
(47)%
|
|
|
Preferred dividends (including
accretion of issuance cost of $301 and $301,
respectively)
|
4,551
|
4,051
|
12 %
|
|
|
Net loss available to common
stockholders
|
$
(9,294)
|
$
(12,971)
|
(28)%
|
|
|
|
|
|
|
|
Basic and diluted per share
information:
|
|
|
|
|
|
Net loss available
to common stockholders
|
$
(0.19)
|
$
(0.27)
|
(30)%
|
|
|
Weighted-average
shares outstanding
|
48,565
|
48,489
|
0 %
|
|
|
|
|
|
|
|
Political revenue (less agency
commission)
|
$
2,783
|
$
1,009
|
176 %
|
|
|
|
|
|
|
|
Guidance for the Three Months Ending June 30, 2010
(the "Second Quarter of 2010")
We currently anticipate that our broadcasting
results of operations for the three month period ending June
30, 2010 will approximate the ranges presented in the table
below.
|
|
|
Three Months Ended
June 30,
|
|
|
2010
|
%
Change
|
2010
|
%
Change
|
|
|
|
Guidance
|
From
|
Guidance
|
From
|
|
|
|
Low
|
Actual
|
High
|
Actual
|
Actual
|
|
|
Selected operating
data:
|
Range
|
2009
|
Range
|
2009
|
2009
|
|
|
(dollars in
thousands)
|
|
|
OPERATING REVENUES:
|
|
|
|
|
|
|
|
Revenues (less
agency
commissions)
|
$
73,000
|
12 %
|
$
74,000
|
14 %
|
$
65,057
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
(before depreciation, amortization and
other expenses)
|
|
|
|
|
|
|
|
Broadcast
|
$
47,500
|
5 %
|
$
48,000
|
6 %
|
$
45,167
|
|
|
Corporate and
administrative
|
$
3,200
|
(11)%
|
$
3,500
|
(3)%
|
$
3,592
|
|
|
|
|
|
|
|
|
|
Other selected data:
|
|
|
|
|
|
|
|
Political
advertising revenues (less agency commissions)
|
$
5,000
|
431 %
|
$
5,500
|
484 %
|
$
942
|
|
|
|
|
|
|
|
|
Comments on Guidance:
Net Revenue.
Based on our current forecast, we currently believe our second
quarter of 2010 local revenue, excluding political revenue, will
increase from the three months ended June
30, 2009 (the "second quarter of 2009") by approximately 6%.
We currently believe our second quarter of 2010 national revenue,
excluding political revenue, will increase from the second quarter
of 2009 by approximately 6%.
We anticipate our second quarter of 2010 internet revenue will
increase from the second quarter of 2009 by approximately 16%.
We anticipate our second quarter of 2010 political advertising
revenue will increase to approximately $5.5
million.
We anticipate that our retransmission consent revenues during
the second quarter of 2010 will increase approximately $0.5 million, to a total of approximately
$4.4 million, reflecting the
successful retransmission negotiations concluded in 2009 and 2010.
We estimate our consulting revenue will increase to $0.6 million for the second quarter of 2010.
Broadcast Operating Expense (before depreciation,
amortization and gain/loss on disposal of assets).
The anticipated increase in broadcast operating expense for the
second quarter 2010 compared to the second quarter of 2009 is due
primarily to modest anticipated increases in base compensation
expense, commissions associated with higher anticipated revenue and
increased pension expense.
Corporate and Administrative Expense (before depreciation,
amortization and gain/loss on disposal of assets).
The anticipated decrease in corporate expense for the second
quarter of 2010 compared to the second quarter of 2009 is due
primarily to an expected decrease in non-cash stock-based
compensation and legal expenses.
|
Net Revenue by Category:
The table below presents our net revenue by type for
the three month periods ended March 31, 2010 and 2009, respectively (dollars in
thousands):
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2010
|
2009
|
|
|
|
Percent
|
|
Percent
|
|
|
Amount
|
of
Total
|
Amount
|
of
Total
|
|
|
Broadcasting net
revenues:
|
|
|
|
|
|
|
Local
|
$
43,511
|
61.7%
|
$
39,286
|
64.0%
|
|
|
National
|
13,951
|
19.8%
|
12,875
|
21.0%
|
|
|
Internet
|
3,072
|
4.4%
|
2,564
|
4.2%
|
|
|
Political
|
2,783
|
3.9%
|
1,009
|
1.6%
|
|
|
Retransmission
consent
|
4,639
|
6.6%
|
3,640
|
5.9%
|
|
|
Production and
other
|
1,932
|
2.7%
|
1,842
|
3.0%
|
|
|
Network
compensation
|
44
|
0.1%
|
138
|
0.3%
|
|
|
Consulting
revenue
|
550
|
0.8%
|
-
|
0.0%
|
|
|
Total
|
$
70,482
|
100.0%
|
$
61,354
|
100.0%
|
|
|
|
|
|
|
|
The aggregate internet revenues presented above are derived
from: (i) direct internet revenue and (ii) internet related
commercial time sales.
Conference Call Information
Gray Television, Inc. will host a conference call to discuss its
first quarter operating results on May 10,
2010. The call will begin at 11:00 AM Eastern Time. The live dial-in
number is 1-877-741-4241 and the confirmation code is 7649421.
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 1-888-203-1112, Confirmation Code: 7649421 until
June 9, 2010.
|
Reconciliation:
Reconciliation of
net loss to the non-GAAP terms:
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2010
|
2009
|
|
|
(in
thousands)
|
|
|
Net loss
|
$
(4,743)
|
$
(8,920)
|
|
|
Adjustments to
reconcile from net loss to Broadcast Cash Flow Less
|
|
|
|
|
Cash
Corporate Expenses:
|
|
|
|
|
Depreciation
|
7,975
|
8,261
|
|
|
Amortization of
intangible assets
|
122
|
149
|
|
|
Non-cash
stock-based compensation
|
155
|
353
|
|
|
Gain on disposals
of assets, net
|
(44)
|
(1,522)
|
|
|
Miscellaneous
(income) expense, net
|
(39)
|
(12)
|
|
|
Interest
expense
|
19,611
|
10,113
|
|
|
Loss on early
extinguishment of debt
|
349
|
8,352
|
|
|
Income tax
benefit
|
(3,238)
|
(4,767)
|
|
|
Amortization of
program broadcast rights
|
3,853
|
3,770
|
|
|
Common stock
contributed to 401(k) plan excluding corporate 401(k)
contributions
|
7
|
(41)
|
|
|
Network
compensation revenue recognized
|
(44)
|
(138)
|
|
|
Network
compensation per network affiliation agreement
|
(16)
|
30
|
|
|
Payments for
program broadcast rights
|
(3,875)
|
(3,856)
|
|
|
Broadcast Cash Flow Less Cash
Corporate Expenses
|
20,073
|
11,772
|
|
|
Corporate and
administrative expenses excluding amortization of non-cash
stock-based compensation
|
2,767
|
3,693
|
|
|
Broadcast Cash Flow
|
$
22,840
|
$
15,465
|
|
|
|
|
|
Non-GAAP Terms
This press release includes the non-GAAP financial measure of
Broadcast Cash Flow and Broadcast Cash Flow Less Cash Corporate
Expenses. These non-GAAP amounts are used by us to
approximate the amount used to calculate a key financial
performance covenant contained in our senior credit facility.
Broadcast Cash Flow is defined as operating income plus
corporate expense, depreciation and amortization (including
amortization of program broadcast rights), impairment, non-cash
compensation and (gain) loss on disposal of assets and cash
payments received or receivable under network affiliation
agreements, less payments for program broadcast obligations and
less network compensation revenue, net of income taxes.
Corporate expenses (excluding depreciation, amortization and
non-cash stock-based compensation) are deducted from Broadcast Cash
Flow to calculate "Broadcast Cash Flow Less Cash Corporate
Expenses." These non-GAAP terms are used 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 loss and cash flows reported in accordance with GAAP.
The Company
Gray Television, Inc. is a television broadcast company
headquartered in Atlanta, GA.
Gray currently operates 36 television stations serving 30
markets. Each of the stations are affiliated with either CBS
(17 stations), NBC (10 stations), ABC (8 stations) or FOX (1
station). In addition, we currently operate 39 digital second
channels including 1 ABC, 4 FOX, 7 CW, 18 MyNetworkTV, 2 Universal
Sports Network affiliates and 7 local news/weather channels in
certain of its existing markets.
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 current expectations and beliefs of
operating results for the second quarter of 2010 or other periods,
internet strategies, future expenses 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 and its attachments is as of
May 10, 2010. We do not intend,
and undertake no duty, to update this information to reflect future
events or circumstances. 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, 2009 and in subsequently filed
reports, which are filed with the U.S. Securities and Exchange
Commission (the "SEC") and available at the SEC's website at
www.sec.gov.
SOURCE Gray Television, Inc.