ATLANTA, Aug. 7, 2018 /PRNewswire/ -- Gray
Television, Inc. ("Gray," "we," "us" or "our") (NYSE: GTN and
GTN.A) today announces record results of operations for the
three-months ended June 30, 2018,
including record revenue and Broadcast Cash Flow (a non-GAAP
financial measure, defined below). Our net income per diluted share
for the second quarter of 2018 was $0.46.
Financial Highlights, Selected Operating Data and Other
Recent Developments:
- Record Second Quarter Revenue and Broadcast Cash
Flow - Our revenue for the second quarter of 2018 was an
all-time record of $250.3 million,
increasing $23.7 million, or 10%,
from the second quarter of 2017. Our net income for the second
quarter of 2018 was $40.7 million and
our Broadcast Cash Flow was an all-time record of $108.3 million for the second quarter of 2018,
increasing $15.2 million, or 16%,
from the second quarter of 2017.
- Political Revenue – Our second quarter of 2018 political
advertising revenue was $18.1
million, exceeding the high-end of our guidance range of
$15.0 million. After giving effect to
stations acquired and divested since 2014, we earned $16.5 million of political advertising revenue in
the second quarter of 2014 which was the most recent
non-presidential election year. Our political advertising revenue
for the second quarter of 2018 was 9% greater than that of the
second quarter of 2014.
- Retransmission Revenue, Expense and Net - Our second
quarter of 2018 gross retransmission revenue was $85.3 million, and our second quarter 2018
retransmission expense was $39.2
million. Our retransmission revenue, net of retransmission
expense, was $46.1 million for the
second quarter of 2018, exceeding the high end of our guidance by
approximately $0.6 million. We
currently anticipate that for calendar year 2018, gross
retransmission revenue will be approximately $350.0 million to $353.0
million and retransmission revenue, net of retransmission
expense, will be approximately $182.0
million to $184.0
million.
- Total Leverage Ratio, Net of all Cash - As of
June 30, 2018, our total leverage
ratio, as defined in our senior credit facility, was 3.91 times on
a trailing eight-quarter basis, netting our total cash balance of
$510.6 million.
- Pending Merger with Raycom Media - On
June 23, 2018, we entered into a merger agreement with, among
others, Raycom Media, Inc. Giving effect to the merger and prior to
divestitures of stations due to market overlaps, we expect to own
and/or operate 142 full-power television stations serving 92
markets. Upon completion, we expect to reach approximately
24 percent of U.S. television households through nearly 400
separate program streams including approximately 165 affiliates of
the ABC/NBC/CBS/FOX networks, and over 100 affiliates of the CW,
MyNetwork, and MeTV networks. These stations were ranked number-one
in all day Nielsen ratings in 62 of the combined markets and
number-one or number-two in 92% of the combined markets. In
addition to high quality television stations, we also expect to
acquire additional Raycom businesses that provide sports marketing,
production and digital signage services, resulting in our becoming
a more diversified media company. The consummation of the
transaction is subject to the satisfaction or waiver of certain
customary conditions, including, approval from the Federal
Communications Commission, the expiration or early termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act, the absence of any legal impediments to the
merger, and customary third-party consents. We anticipate that the
transaction will be completed during the fourth quarter of
2018.
Selected Operating
Data (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
%
Change
|
|
|
|
%
Change
|
|
|
|
|
|
2018
to
|
|
|
|
2018
to
|
|
2018
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
(dollars in
thousands)
|
Revenue (less agency
commissions):
|
|
|
|
|
|
|
|
|
|
Total
|
$
250,344
|
|
$226,681
|
|
10 %
|
|
$196,633
|
|
27 %
|
Political
|
$
18,070
|
|
$
3,708
|
|
387 %
|
|
$
9,649
|
|
87 %
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
(1)(3):
|
|
|
|
|
|
|
|
|
|
Broadcast
|
$
141,919
|
|
$133,683
|
|
6 %
|
|
$ 117,299
|
|
21 %
|
Corporate and
administrative
|
$
10,833
|
|
$
8,432
|
|
28 %
|
|
$
8,520
|
|
27 %
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
40,705
|
|
$
70,561
|
|
(42)%
|
|
$
17,662
|
|
130 %
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP cash flow
(2):
|
|
|
|
|
|
|
|
|
|
Broadcast Cash
Flow(3)
|
$
108,270
|
|
$
93,077
|
|
16 %
|
|
$
79,307
|
|
37 %
|
Broadcast Cash Flow
Less
|
|
|
|
|
|
|
|
|
|
Cash Corporate
Expenses(3)
|
$
98,672
|
|
$
85,746
|
|
15 %
|
|
$
71,753
|
|
38 %
|
Free Cash
Flow
|
$
58,524
|
|
$
55,883
|
|
5 %
|
|
$
25,928
|
|
126 %
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
%
Change
|
|
|
|
%
Change
|
|
|
|
|
|
2018
to
|
|
|
|
2018
to
|
|
2018
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
(dollars in
thousands)
|
Revenue (less agency
commissions):
|
|
|
|
|
|
|
|
|
|
Total
|
$
476,602
|
|
$430,142
|
|
11 %
|
|
$ 370,356
|
|
29 %
|
Political
|
$
23,845
|
|
$
5,029
|
|
374 %
|
|
$
19,304
|
|
24 %
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
(1)(3):
|
|
|
|
|
|
|
|
|
|
Broadcast
|
$
291,573
|
|
$267,239
|
|
9 %
|
|
$ 225,835
|
|
29 %
|
Corporate and
administrative
|
$
19,093
|
|
$
16,142
|
|
18 %
|
|
$
24,190
|
|
(21)%
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
60,650
|
|
$
81,066
|
|
(25)%
|
|
$
26,652
|
|
128 %
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP cash flow
(2):
|
|
|
|
|
|
|
|
|
|
Broadcast Cash
Flow(3)
|
$
185,954
|
|
$163,456
|
|
14 %
|
|
$ 145,244
|
|
28 %
|
Broadcast Cash Flow
Less
|
|
|
|
|
|
|
|
|
|
Cash Corporate
Expenses(3)
|
$
169,045
|
|
$149,390
|
|
13 %
|
|
$ 122,980
|
|
37 %
|
Free Cash
Flow
|
$
91,857
|
|
$
92,477
|
|
(1)%
|
|
$
50,144
|
|
83 %
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes depreciation,
amortization and (gain) loss 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.
|
(3) Amounts in 2017 and 2016
have been reclassified to give effect to the implementation of
Accounting Standards Update 2017-07, Compensation – Retirement
Benefits (Topic 715) – Improving the Presentation of
Net Periodic Pension Cost and Net Postretirement Benefit Cost
("ASU 2017-07").
|
Results of
Operations for the Second Quarter of 2018
|
Revenue (less
agency commissions).
|
The table below
presents our revenue (less agency commissions) by type for the
second quarter of 2018 and 2017 (dollars in thousands):
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
Amount
|
|
Percent
|
|
|
|
|
Percent
|
|
|
|
Percent
|
|
Increase
|
|
Increase
|
|
|
Amount
|
|
of
Total
|
|
Amount
|
|
of
Total
|
|
(Decrease)
|
|
(Decrease)
|
Revenue (less
agency commissions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Local (including
internet/digital/mobile)
|
|
$
112,921
|
|
45.1%
|
|
$
117,917
|
|
52.0%
|
|
$
(4,996)
|
|
(4)%
|
National
|
|
29,873
|
|
11.9%
|
|
30,981
|
|
13.7%
|
|
(1,108)
|
|
(4)%
|
Political
|
|
18,070
|
|
7.2%
|
|
3,708
|
|
1.6%
|
|
14,362
|
|
387 %
|
Retransmission
consent
|
|
85,307
|
|
34.1%
|
|
69,371
|
|
30.6%
|
|
15,936
|
|
23 %
|
Other
|
|
4,173
|
|
1.7%
|
|
4,704
|
|
2.1%
|
|
(531)
|
|
(11)%
|
Total
|
|
$
250,344
|
|
100.0%
|
|
$
226,681
|
|
100.0%
|
|
$
23,663
|
|
10 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue increased $23.7
million, or 10%, to $250.3
million for the second quarter of 2018 compared to the
second quarter of 2017. Total revenue increased primarily as a
result of increased retransmission consent revenue, due primarily
to increased retransmission consent rates, and increased political
advertising revenue due to 2018 being the "on-year" of the two-year
election cycle.
Broadcast Operating Expenses.
Broadcast
operating expenses (before depreciation, amortization and gain or
loss on disposal of assets) increased $8.2
million, or 6%, to $141.9
million for the second quarter of 2018. The increase
reflects, in part, the following:
- Non-compensation expense increases of $6.5 million, or 10%, in the 2018 period
primarily as the result of increased retransmission expense of
$5.4 million, or 16%, to $39.2 million in the second quarter of 2018 and
increases in professional fees.
- Compensation expense increases of $1.7
million in 2018, primarily due to routine increases in
compensation and severance costs. Including the effect of a
$0.5 million adjustment related to
forfeitures of equity incentive awards, we did not incur any
non-cash stock-based compensation expenses in the second quarter of
2018. In the second quarter of 2017, our non-cash stock-based
compensation expenses were $0.4
million.
Corporate and Administrative Operating
Expenses.
Corporate and administrative expenses (before
depreciation, amortization and gain or loss on disposal of assets)
increased $2.4 million, or 28%, to
$10.8 million in the second quarter
of 2018. The increase reflects, in part, the following:
- Non-compensation expense increases of $2.1 million, primarily due to an increase of
$1.9 million of professional fees
related to acquisition activities. Professional fees related to
acquisition activities were $3.7
million in the second quarter of 2018.
- Compensation expense increases of $0.3
million, primarily due to increases in incentive
compensation costs. Non-cash stock-based amortization expenses were
$1.2 million and $1.1 million in the second quarters of 2018 and
2017, respectively.
Taxes.
During the second quarter of 2018, we
made aggregate federal and state income tax payments of
approximately $3.6 million.
Results of
Operations for the Six-Month Period Ended June 30,
2018
|
Revenue (less
agency commissions).
|
The table below
presents our revenue (less agency commissions) by type for the
six-month periods ended June 30, 2018 and 2017 (dollars in
thousands):
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
Amount
|
|
Percent
|
|
|
|
|
Percent
|
|
|
|
Percent
|
|
Increase
|
|
Increase
|
|
|
Amount
|
|
of
Total
|
|
Amount
|
|
of
Total
|
|
(Decrease)
|
|
(Decrease)
|
Revenue (less
agency commissions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Local (including
internet/digital/mobile)
|
|
$
218,390
|
|
45.8%
|
|
$
220,514
|
|
51.3%
|
|
$
(2,124)
|
|
(1)%
|
National
|
|
54,385
|
|
11.4%
|
|
55,795
|
|
13.0%
|
|
(1,410)
|
|
(3)%
|
Political
|
|
23,845
|
|
5.0%
|
|
5,029
|
|
1.2%
|
|
18,816
|
|
374 %
|
Retransmission
consent
|
|
170,858
|
|
35.9%
|
|
136,944
|
|
31.8%
|
|
33,914
|
|
25 %
|
Other
|
|
9,124
|
|
1.9%
|
|
11,860
|
|
2.7%
|
|
(2,736)
|
|
(23)%
|
Total
|
|
$
476,602
|
|
100.0%
|
|
$
430,142
|
|
100.0%
|
|
$
46,460
|
|
11 %
|
Total revenue increased $46.5
million, or 11%, to $476.6
million for the six-months ended June
30, 2018 compared to the six-months ended June 30, 2017. Total revenue increased primarily
as a result of increased retransmission consent revenue, due
primarily to increased retransmission consent rates, and increased
political advertising revenue due to 2018 being the "on-year" of
the two-year election cycle. Local and national advertising revenue
decreased only slightly, in spite of the $2.3 million of revenue we earned from the
broadcast of the 2018 Super Bowl on our NBC-affiliated stations,
compared to $0.6 million that we
earned from the broadcast of the 2017 Super Bowl on our
FOX-affiliated stations. In addition, revenue from the broadcast of
the 2018 Winter Olympic Games on our NBC-affiliated stations was
approximately $5.5 million.
Broadcast Operating Expenses.
Broadcast
operating expenses (before depreciation, amortization and gain or
loss on disposal of assets) increased $24.3
million, or 9%, to $291.6
million for the six-months ended June
30, 2018. The increase reflects, in part, the following:
- Non-compensation expense increases of $19.6 million, or 15%, in the 2018 period,
primarily as the result of increased retransmission expense of
$14.9 million, or 23%, to
$80.9 million in 2018 and net
increases in several other expense categories including programming
and other professional fees. Our programming costs related to the
2018 Winter Olympic Games were $1.5
million.
- Compensation expense increases of $5.0
million in the 2018 period, primarily due to routine
increases in compensation and severance costs. Including the effect
of a $0.5 million adjustment related
to forfeitures, our non-cash stock-based compensation expenses were
$1.2 million and $0.7 million in the 2018 and 2017 periods,
respectively.
Corporate and Administrative Operating
Expenses.
Corporate and administrative expenses
(before depreciation, amortization and gain or loss on disposal of
assets) increased $3.0 million, or
18%, to $19.1 million for the 2018
period. The increase reflects, in part, the following:
- Non-compensation expense increases of $2.4 million, primarily due to an increase of
$2.0 million of professional fees
related to acquisition activities. Professional fees related to
acquisition activities were $3.8
million in the 2018 period.
- Compensation expense increases of $0.6
million, primarily due to increased incentive compensation
costs. Non-cash stock-based amortization expenses were $2.2 million and $2.1
million in the 2018 and 2017 periods, respectively.
(Gain) Loss on Disposal of Assets.
During the
2018 period, we reported gains on disposals of assets of
$1.6 million compared to $76.8 million in the 2017 period. On June 1, 2017, we tendered two of our broadcast
licenses and made other modifications to our broadcast spectrum
related to our participation in the FCC's broadcast spectrum
auction. Our proceeds from this auction were $90.8 million and the cost of the assets disposed
was $13.1 million.
Loss from Early Extinguishment of Debt.
In the
2017 period, we recorded a loss from early extinguishment of debt
of approximately $2.9 million related
to the amendment and restatement of our senior credit facility.
Taxes.
During the 2018 period, we made
aggregate federal and state income tax payments of approximately
$12.0 million. During the remainder
of 2018, we anticipate making income tax payments (net of refunds)
of approximately $23.9 million.
Detailed Table of
Operating Results
|
|
Gray Television,
Inc.
|
Selected Operating
Data (Unaudited)
|
(in thousands except
for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Revenue (less agency
commissions)
|
$
250,344
|
|
$ 226,681
|
|
$ 476,602
|
|
$ 430,142
|
Operating expenses
before depreciation, amortization
|
|
|
|
|
|
|
|
and gain on disposal
of assets, net:
|
|
|
|
|
|
|
|
Broadcast
(1)
|
141,919
|
|
133,683
|
|
291,573
|
|
267,239
|
Corporate and
administrative (1)
|
10,833
|
|
8,432
|
|
19,093
|
|
16,142
|
Depreciation
|
13,543
|
|
12,841
|
|
27,237
|
|
25,470
|
Amortization of
intangible assets
|
5,153
|
|
6,657
|
|
10,589
|
|
12,224
|
Gain on disposals of
assets, net
|
(794)
|
|
(77,326)
|
|
(1,615)
|
|
(76,799)
|
Operating
expenses
|
170,654
|
|
84,287
|
|
346,877
|
|
244,276
|
Operating
income
|
79,690
|
|
142,394
|
|
129,725
|
|
185,866
|
Other income
(expense):
|
|
|
|
|
|
|
|
Miscellaneous income,
net (1)
|
702
|
|
162
|
|
1,262
|
|
255
|
Interest
expense
|
(24,831)
|
|
(23,791)
|
|
(49,081)
|
|
(46,982)
|
Loss from early
extinguishment of debt
|
-
|
|
(311)
|
|
-
|
|
(2,851)
|
Income before income
tax expense
|
55,561
|
|
118,454
|
|
81,906
|
|
136,288
|
Income tax
expense
|
14,856
|
|
47,893
|
|
21,256
|
|
55,222
|
Net income
|
$
40,705
|
|
$
70,561
|
|
$
60,650
|
|
$
81,066
|
|
|
|
|
|
|
|
|
Basic per share
information:
|
|
|
|
|
|
|
|
Net income
|
$
0.46
|
|
$
0.98
|
|
$
0.69
|
|
$
1.13
|
Weighted-average
shares outstanding
|
87,765
|
|
71,821
|
|
88,408
|
|
71,849
|
|
|
|
|
|
|
|
|
Diluted per share
information:
|
|
|
|
|
|
|
|
Net income
|
$
0.46
|
|
$
0.97
|
|
$
0.68
|
|
$
1.12
|
Weighted-average
shares outstanding
|
88,305
|
|
72,501
|
|
88,937
|
|
72,510
|
|
|
|
|
|
|
|
|
Political advertising
revenue (less agency commissions)
|
$
18,070
|
|
$
3,708
|
|
$
23,845
|
|
$
5,029
|
|
|
|
|
|
|
|
|
(1) Amounts in 2017 have been
reclassified to give effect to the implementation of ASU
2017-07.
|
Other Financial
Data:
|
|
As
of
|
|
June
30,
|
|
December
31,
|
|
2018
|
|
2017
|
|
(in
thousands)
|
|
|
|
|
Cash
|
$
510,577
|
|
$
462,399
|
Long-term debt,
including current portion
|
$
1,836,229
|
|
$
1,837,428
|
Borrowing
availability under our revolving credit facility
|
$
100,000
|
|
$
100,000
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
(in
thousands)
|
|
|
|
|
Net cash provided by
operating activities
|
$
97,452
|
|
$
59,144
|
Net cash used in
investing activities
|
(22,106)
|
|
(413,217)
|
Net cash (used in)
provided by financing activities
|
(27,168)
|
|
71,244
|
Net increase
(decrease) in cash
|
$
48,178
|
|
$
(282,829)
|
Guidance for the
Three-Months Ending September 30, 2018
|
Based on our current
forecasts for the quarter ending September 30, 2018 (the "third
quarter of 2018") and excluding the anticipated results of any
pending transactions, we anticipate the changes from the quarter
ended September 30, 2017 (the "third quarter of 2017") as outlined
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
End
|
|
|
|
High
End
|
|
|
|
|
|
|
Guidance
for
|
|
% Change
From
|
|
Guidance
for
|
|
% Change
From
|
|
|
|
|
the
Third
|
|
Third
|
|
the
Third
|
|
Third
|
|
Third
|
|
|
Quarter
of
|
|
Quarter
of
|
|
Quarter
of
|
|
Quarter
of
|
|
Quarter
of
|
Selected operating
data:
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2017
|
|
|
(dollars in
thousands)
|
OPERATING
REVENUE:
|
|
|
|
|
|
|
|
|
|
|
Revenue (less agency
commissions)
|
|
$ 270,000
|
|
23 %
|
|
$ 280,000
|
|
28 %
|
|
$218,977
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
(1)
|
|
|
|
|
|
|
|
|
|
|
(before depreciation,
amortization and
|
|
|
|
|
|
|
|
|
|
(gain) loss on
disposal of assets):
|
|
|
|
|
|
|
|
|
|
|
Broadcast
|
|
$ 145,000
|
|
4 %
|
|
$ 148,000
|
|
6 %
|
|
$139,542
|
Corporate and
administrative
|
|
$
10,000
|
|
20 %
|
|
$
11,000
|
|
32 %
|
|
$
8,330
|
|
|
|
|
|
|
|
|
|
|
|
OTHER SELECTED
DATA:
|
|
|
|
|
|
|
|
|
|
|
Political advertising
revenue
|
|
|
|
|
|
|
|
|
|
|
(less agency
commissions)
|
|
$
41,000
|
|
924 %
|
|
$
45,000
|
|
1024 %
|
|
$
4,005
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts in 2017 have been
reclassified to give effect to the implementation of ASU
2017-07.
|
Comments on Third Quarter of 2018 Guidance
Revenue.
Based on our current forecasts for the
third quarter of 2018, we anticipate the following changes from the
third quarter of 2017:
- We believe our third quarter of 2018 local advertising revenue
(including internet/digital/mobile) will change to be within a
range of approximately $107.0 million
to $110.0 million, representing a -3%
to +0% change.
- We believe our third quarter of 2018 national advertising
revenue will change to be within a range of approximately
$28.5 million to $29.5 million, representing a -8% to -5%
change.
- We believe our third quarter of 2018 political advertising
revenue will be within a range of approximately $41.0 million to $45.0
million. After giving effect to stations acquired and
divested since 2014, we earned $41.1
million of political advertising revenue in the third
quarter of 2014 which was the most recent non-presidential election
year. We estimate that our political advertising revenue for the
third quarter of 2018 will be equal to or as much as +9% greater
than that of the third quarter of 2014.
- We anticipate that our gross retransmission revenue for
calendar year 2018 will be within a range of approximately
$350.0 million to $353.0 million and net retransmission revenue
will be within a range of approximately $182.0 million to $184.0
million. We believe our third quarter of 2018 retransmission
consent revenue will be within a range of approximately
$90.0 million to $92.0 million.
Broadcast Operating Expenses (before depreciation,
amortization and gain or loss on disposal of assets,
net).
For the third quarter of 2018, we anticipate that
our broadcast operating expenses will increase primarily due to
retransmission expense which we expect to increase by a range of
approximately $6.3 million to
$7.3 million to within a range of
approximately $41.0 million to
$42.0 million.
Corporate and Administrative Operating Expenses (before
depreciation, amortization and gain or loss on
disposal of assets).
For the third quarter of
2018, we anticipate our corporate and administrative operating
expense will increase to within a range of approximately
$10.0 million to $11.0 million, primarily attributable to
increases in professional services fees. We anticipate that costs
related to our pending acquisitions, and in particular the Raycom
merger, will be approximately $2.0
million to $3.0 million in the
third quarter.
The Company
We are a television broadcast company headquartered in
Atlanta, Georgia, that owns and
operates over 100 television stations across 57 television markets
that collectively broadcast over 200 program streams including over
100 channels affiliated with the CBS/NBC/ABC/FOX television
networks. Our portfolio includes the number-one or number-two
ranked television station for both overall audience and news
audience in all 57 of our 57 markets, which collectively cover
approximately 10.4% of total United
States television households.
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 third quarter of 2018 or other periods, 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. 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,
2017 and may be contained in reports subsequently filed with
the U.S. Securities and Exchange Commission (the "SEC") and
available at the SEC's website at www.sec.gov.
Conference Call Information
We will host a conference
call to discuss our second quarter operating results on
August 7, 2018. The call will begin
at 10:00:00 A.M. Eastern Time. The
live dial-in number is 1(855) 493-3489 and the confirmation code is
4239649. 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: 4239649 until
September 4, 2018.
Effects of Acquisitions and Divestitures on Our Results of
Operations and Non-GAAP Terms
From January 1, 2016 (the beginning of the earliest
period presented) through June 30,
2018, we completed eight acquisition transactions and one
divestiture transaction. As more fully described in our 2017 Form
10-K filed with the Securities and Exchange Commission and in our
other prior disclosures, these transactions added a net total of 21
television stations to our operations. We refer to these
transactions, collectively, as the "Acquisitions."
From time to time, Gray supplements its financial results
prepared in accordance with accounting principles generally
accepted in the United States of
America ("GAAP") by disclosing the non-GAAP financial
measures Broadcast Cash Flow, Broadcast Cash Flow Less Cash
Corporate Expenses, Free Cash Flow, Operating Cash Flow as defined
in the Senior Credit Agreement and Total Leverage Ratio and 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 plus loss from early
extinguishment of debt, 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 and non-cash 401(k)
expense, 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 plus loss from 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, and non-cash 401(k) expense, less
any gain on disposal of assets, any miscellaneous income, any
income tax benefits and any payments for program broadcast
rights.
We define Free Cash Flow as net income plus loss from 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, amortization of deferred
financing costs, any income tax expense and non-cash 401(k)
expense, less any gain on disposal of assets, any miscellaneous
income, any income tax benefits, payments for program broadcast
rights, contributions to pension plans, amortization of original
issue premium on our debt, purchases of property and equipment (net
of reimbursements) and the payment of income taxes (net of any
refunds received).
We define Operating Cash Flow as defined in our Senior Credit
Agreement as net income plus loss from 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, interest
expense, any income tax expense, non-cash 401(k) expense and trade
expense less any gain on disposal of assets, any income tax
benefits, payments for program broadcast rights, trade 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 the Acquisitions as if they had been acquired
or divested, respectively, on April 1,
2016. 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 at 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.
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. 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.
These non-GAAP terms are not defined in GAAP and our definitions
may differ from, and therefore 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, in
thousands – Quarter:
|
|
|
|
Three Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Net income
|
$
40,705
|
|
$
70,561
|
|
$
17,662
|
Adjustments to
reconcile from net income to
|
|
|
|
|
|
Free Cash
Flow:
|
|
|
|
|
|
Depreciation
|
13,543
|
|
12,841
|
|
11,617
|
Amortization of
intangible assets
|
5,153
|
|
6,657
|
|
4,242
|
Non-cash stock-based
compensation
|
1,214
|
|
1,434
|
|
1,272
|
(Gain) loss on
disposals of assets, net
|
(794)
|
|
(77,326)
|
|
1,228
|
Miscellaneous income,
net (1)
|
(702)
|
|
(163)
|
|
(101)
|
Interest
expense
|
24,831
|
|
23,791
|
|
24,269
|
Loss from early
extinguishment of debt
|
-
|
|
311
|
|
-
|
Income tax
expense
|
14,856
|
|
47,893
|
|
11,897
|
Amortization of
program broadcast rights
|
5,258
|
|
5,013
|
|
4,813
|
Common stock
contributed to 401(k) plan
|
|
|
|
|
|
excluding corporate
401(k) contributions
|
-
|
|
8
|
|
7
|
Payments for program
broadcast rights
|
(5,392)
|
|
(5,274)
|
|
(5,153)
|
Corporate and
administrative expenses excluding
|
|
|
|
|
|
depreciation,
amortization of intangible assets and
|
|
|
|
|
|
non-cash stock-based
compensation
|
9,598
|
|
7,331
|
|
7,554
|
Broadcast Cash
Flow (1)
|
108,270
|
|
93,077
|
|
79,307
|
Corporate and
administrative expenses excluding
|
|
|
|
|
|
depreciation,
amortization of intangible assets and
|
|
|
|
|
|
non-cash stock-based
compensation
|
(9,598)
|
|
(7,331)
|
|
(7,554)
|
Broadcast Cash
Flow Less Cash Corporate Expenses (1)
|
98,672
|
|
85,746
|
|
71,753
|
Contributions to
pension plans
|
-
|
|
-
|
|
(1,113)
|
Interest
expense
|
(24,831)
|
|
(23,791)
|
|
(24,269)
|
Amortization of
deferred financing costs
|
1,158
|
|
1,158
|
|
1,196
|
Amortization of net
original issue premium on
|
|
|
|
|
|
senior
notes
|
(152)
|
|
(152)
|
|
(216)
|
Purchases of property
and equipment
|
(13,635)
|
|
(6,438)
|
|
(7,544)
|
Reimbursements of
property and equipment purchases
|
909
|
|
-
|
|
-
|
Income taxes paid,
net of refunds
|
(3,597)
|
|
(640)
|
|
(13,879)
|
Free Cash
Flow
|
$
58,524
|
|
$
55,883
|
|
$
25,928
|
|
|
|
|
|
|
(1) Amounts in 2017 and 2016
have been reclassified to give effect to the implementation of ASU
2017-07.
|
Reconciliation, in
thousands – Year to Date:
|
|
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Net income
|
$
60,650
|
|
$
81,066
|
|
$
26,652
|
Adjustments to
reconcile from net income to
|
|
|
|
|
|
Free Cash
Flow:
|
|
|
|
|
|
Depreciation
|
27,237
|
|
25,470
|
|
22,743
|
Amortization of
intangible assets
|
10,589
|
|
12,224
|
|
8,130
|
Non-cash stock based
compensation
|
3,371
|
|
2,772
|
|
2,556
|
(Gain) loss on
disposals of assets, net
|
(1,615)
|
|
(76,799)
|
|
(420)
|
Miscellaneous income,
net (1)
|
(1,262)
|
|
(255)
|
|
(630)
|
Interest
expense
|
49,081
|
|
46,982
|
|
45,544
|
Loss from early
extinguishment of debt
|
-
|
|
2,851
|
|
-
|
Income tax
expense
|
21,256
|
|
55,222
|
|
18,312
|
Amortization of
program broadcast rights
|
10,604
|
|
10,235
|
|
9,209
|
Common stock
contributed to 401(k) plan
|
|
|
|
|
|
excluding corporate
401(k) contributions
|
-
|
|
15
|
|
14
|
Payments for program
broadcast rights
|
(10,866)
|
|
(10,393)
|
|
(9,130)
|
Corporate and
administrative expenses excluding
|
|
|
|
|
|
depreciation,
amortization of intangible assets and
|
|
|
|
|
|
non-cash stock-based
compensation
|
16,909
|
|
14,066
|
|
22,264
|
Broadcast Cash
Flow (1)
|
185,954
|
|
163,456
|
|
145,244
|
Corporate and
administrative expenses excluding
|
|
|
|
|
|
depreciation,
amortization of intangible assets and
|
|
|
|
|
|
non-cash stock-based
compensation
|
(16,909)
|
|
(14,066)
|
|
(22,264)
|
Broadcast Cash
Flow Less Cash Corporate Expenses (1)
|
169,045
|
|
149,390
|
|
122,980
|
Contributions to
pension plans
|
-
|
|
(624)
|
|
(1,633)
|
Interest
expense
|
(49,081)
|
|
(46,982)
|
|
(45,544)
|
Amortization of
deferred financing costs
|
2,315
|
|
2,309
|
|
2,267
|
Amortization of net
original issue premium on
|
|
|
|
|
|
senior
notes
|
(305)
|
|
(305)
|
|
(432)
|
Purchases of property
and equipment
|
(19,915)
|
|
(10,415)
|
|
(13,475)
|
Reimbursements of
property and equipment purchases
|
1,846
|
|
-
|
|
-
|
Income taxes paid,
net of refunds
|
(12,048)
|
|
(896)
|
|
(14,019)
|
Free Cash
Flow
|
$
91,857
|
|
$
92,477
|
|
$
50,144
|
|
|
|
|
|
|
(1) Amounts in 2017 and 2016
have been reclassified to give effect to the implementation of ASU
2017-07.
|
Reconciliation of
Total Leverage Ratio, Net of All Cash, in thousands except for
ratio:
|
|
|
|
|
|
Eight Quarters
Ended
|
|
|
June 30,
2018
|
|
|
|
Net income
|
|
$
358,223
|
Adjustments to
reconcile from net income to operating cash flow as
|
|
|
defined in our
Senior Credit Agreement:
|
|
|
Depreciation
|
|
102,390
|
Amortization of
intangible assets
|
|
44,127
|
Non-cash stock-based
compensation
|
|
14,220
|
(Gain) loss on
disposal of assets, net
|
|
(75,066)
|
Interest
expense
|
|
196,032
|
Loss from early
extinguishment of debt
|
|
34,838
|
Income tax (benefit)
expense
|
|
(22,312)
|
Amortization of
program broadcast rights
|
|
41,429
|
Common stock
contributed to 401(k) plan
|
|
31
|
Payments for program
broadcast rights
|
|
(41,577)
|
Pension
expense
|
|
(931)
|
Contributions to
pension plans
|
|
(4,539)
|
Adjustments for
stations acquired or divested, financings and expected
|
|
|
synergies during the
eight quarter period
|
|
35,951
|
Professional fees
related to acquisitions and divestitures
|
|
6,182
|
Operating Cash
Flow as defined in our Senior Credit Agreement
|
|
$
688,998
|
Operating Cash
Flow as defined in our Senior Credit Agreement,
|
|
|
divided by
two
|
|
$
344,499
|
|
|
|
|
|
June 30,
2018
|
Adjusted Total
Indebtedness:
|
|
|
Total outstanding
principal, including current portion
|
|
$
1,857,026
|
Capital leases and
other debt
|
|
691
|
Cash
|
|
(510,577)
|
Adjusted Total
Indebtedness, Net of All Cash
|
|
$
1,347,140
|
|
|
|
Total Leverage
Ratio, Net of All Cash
|
|
3.91
|
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SOURCE Gray Television