Gray Television, Inc. (“Gray,” “we,” “us” or “our”) (NYSE:
GTN) today announces record results of operations for the
three-months ended September 30, 2018, including record revenue,
net income and Broadcast Cash Flow (a non-GAAP financial measure,
defined below). Our diluted net income per share for the third
quarter of 2018 was $0.70.
Financial Highlights, Selected Operating Data and Other
Recent Developments:
- Record Third Quarter Revenue, Net Income and Broadcast Cash
Flow - Our revenue, net income and Broadcast Cash Flow for the
third quarter of 2018 were all record results. Our revenue was
$279.3 million, increasing $60.3 million, or 28%, from the third
quarter of 2017, and was our best all-time quarterly revenue. Our
net income was $61.9 million, increasing $46.6 million, or 304%,
from the third quarter of 2017, and was our all-time best third
quarter net income. Our Broadcast Cash Flow was $134.6 million,
increasing $54.7 million, or 69%, from the third quarter of 2017,
and was also our all-time best quarterly result.
- Political Revenue – Our political advertising revenue was $48.0
million for the third quarter of 2018, consistent with our recently
updated guidance. For comparison, after giving effect to stations
acquired and divested since January 1, 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. Our
political advertising revenue for the third quarter of 2018 was 17%
greater than that of the third quarter of 2014, on this adjusted
basis.
- Retransmission Revenue, Expense and Net - Our gross
retransmission revenue for the third quarter of 2018 was $91.6
million, and our retransmission expense was $41.4 million.
Therefore, our retransmission revenue, net of retransmission
expense, was $50.2 million for the third quarter of 2018. We
currently anticipate that for calendar year 2018, gross
retransmission revenue will be approximately $354.0 million to
$356.0 million and retransmission revenue net of retransmission
expense, will be approximately $188.0 million to $190.0
million.
- Total Leverage Ratio, Net of all Cash - As of September 30,
2018, our total leverage ratio, as defined in our senior credit
facility, was 3.51 times on a trailing eight-quarter basis after
netting our total cash balance of $550.9 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 including divestitures of stations
due to market overlaps, upon completion we will own and/or operate
television stations and leading locally focused digital platforms
in 92 markets broadcasting approximately 400 separate programming
streams, including over 150 affiliates of the ABC/NBC/CBS/FOX
networks. The combined entity will own number-one or number-two
ranked stations in 85 of the 92 markets. 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, as part
of the merger, we plan to acquire businesses that provide sports
marketing, production and digital signage services, which should
result in our becoming a more diversified media company. The
consummation of the transaction is subject to the satisfaction or
waiver of certain customary closing conditions, including approval
from the Federal Communications Commission and the expiration or
early termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
We anticipate that the transaction will be completed later in the
fourth quarter of 2018.
- Financing for Pending Merger with
Raycom – In connection with our acquisition of Raycom Media, we
expect to enter into an amendment and restatement of our senior
credit facility, pursuant to which we would borrow $1.4
billion of additional secured term loan financing. In addition, we
expect, through a new special purpose wholly-owned subsidiary of
Gray (“Escrow Issuer”), to assume $750.0 million in aggregate
principal amount of 7% senior unsecured notes due 2027, upon
consummation of the Raycom Merger. We expect to use the net
proceeds of the term loan, notes and other sources, to finance the
acquisition and pay related fees and expenses.
Selected Operating Data (unaudited) |
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Three Months Ended September 30, |
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% Change |
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% Change |
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2018 to |
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2018 to |
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2018 |
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2017 |
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2017 |
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2016 |
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2016 |
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(dollars in thousands) |
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Revenue (less agency commissions): |
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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Total |
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$ |
279,310 |
|
|
$ |
218,977 |
|
|
28 |
% |
|
|
$ |
204,490 |
|
|
37 |
% |
|
Political |
|
$ |
48,018 |
|
|
$ |
4,005 |
|
|
1099 |
% |
|
|
$ |
22,272 |
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|
116 |
% |
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Operating expenses (1)(3): |
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Broadcast |
|
$ |
145,091 |
|
|
$ |
139,542 |
|
|
4 |
% |
|
|
$ |
120,683 |
|
|
20 |
% |
|
Corporate and administrative |
|
$ |
11,041 |
|
|
$ |
8,330 |
|
|
33 |
% |
|
|
$ |
7,217 |
|
|
53 |
% |
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|
|
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|
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|
|
|
|
|
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Net
income (loss) |
|
$ |
61,886 |
|
|
$ |
15,316 |
|
|
304 |
% |
|
|
$ |
(213 |
) |
|
29154 |
% |
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Non-GAAP Cash Flow (2): |
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|
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|
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|
|
|
|
|
|
|
|
|
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Broadcast Cash Flow (3) |
|
$ |
134,560 |
|
|
$ |
79,824 |
|
|
69 |
% |
|
|
$ |
84,206 |
|
|
60 |
% |
|
Broadcast Cash Flow Less Cash Corporate Expenses
(3) |
|
$ |
124,821 |
|
|
$ |
72,670 |
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|
72 |
% |
|
|
$ |
77,956 |
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|
60 |
% |
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Free Cash Flow |
|
$ |
72,861 |
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|
$ |
38,145 |
|
|
91 |
% |
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|
$ |
29,495 |
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|
147 |
% |
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|
|
Nine Months Ended September 30, |
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% Change |
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% Change |
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2018 to |
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2018 to |
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2018 |
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2017 |
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|
2017 |
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2016 |
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|
2016 |
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(dollars in thousands) |
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Revenue (less agency commissions): |
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|
|
|
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Total |
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$ |
755,912 |
|
|
$ |
649,119 |
|
|
16 |
% |
|
|
$ |
574,846 |
|
|
31 |
% |
|
Political |
|
$ |
71,863 |
|
|
$ |
9,034 |
|
|
695 |
% |
|
|
$ |
41,576 |
|
|
73 |
% |
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|
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Operating expenses (1)(3): |
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|
|
|
|
|
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|
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|
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Broadcast |
|
$ |
436,664 |
|
|
$ |
406,781 |
|
|
7 |
% |
|
|
$ |
346,518 |
|
|
26 |
% |
|
Corporate and administrative |
|
$ |
30,134 |
|
|
$ |
24,472 |
|
|
23 |
% |
|
|
$ |
31,407 |
|
|
(4 |
)% |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
122,536 |
|
|
$ |
96,382 |
|
|
27 |
% |
|
|
$ |
26,439 |
|
|
363 |
% |
|
|
|
|
|
|
|
|
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Non-GAAP Cash Flow (2): |
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Broadcast Cash Flow (3) |
|
$ |
320,515 |
|
|
$ |
243,304 |
|
|
32 |
% |
|
|
$ |
229,437 |
|
|
40 |
% |
|
Broadcast Cash Flow Less Cash Corporate Expenses
(3) |
|
$ |
293,866 |
|
|
$ |
222,060 |
|
|
32 |
% |
|
|
$ |
200,937 |
|
|
46 |
% |
|
Free Cash Flow |
|
$ |
164,718 |
|
|
$ |
130,622 |
|
|
26 |
% |
|
|
$ |
79,640 |
|
|
107 |
% |
|
(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 Third Quarter of
2018
Revenue (less agency commissions).
The table below presents our revenue (less agency commissions)
by type for the third quarter of 2018 and 2017 (dollars in
thousands):
|
|
Three Months Ended September 30, |
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2018 |
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|
2017 |
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|
Amount |
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|
Percent |
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|
|
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|
|
|
Percent |
|
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|
|
|
|
Percent |
|
|
Increase |
|
|
Increase |
|
|
|
Amount |
|
|
of Total |
|
|
Amount |
|
|
of Total |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue (less agency commissions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Local (including internet/digital/mobile) |
|
$ |
106,929 |
|
|
38 |
.3% |
|
|
$ |
110,033 |
|
|
50 |
.2% |
|
|
$ |
(3,104 |
) |
|
(3 |
)% |
|
National |
|
|
29,199 |
|
|
10 |
.5% |
|
|
|
31,027 |
|
|
14 |
.2% |
|
|
|
(1,828 |
) |
|
(6 |
)% |
|
Political |
|
|
48,018 |
|
|
17 |
.2% |
|
|
|
4,005 |
|
|
1 |
.8% |
|
|
|
44,013 |
|
|
1099 |
% |
|
Retransmission consent |
|
|
91,603 |
|
|
32 |
.8% |
|
|
|
70,150 |
|
|
32 |
.0% |
|
|
|
21,453 |
|
|
31 |
% |
|
Other |
|
|
3,561 |
|
|
1 |
.2% |
|
|
|
3,762 |
|
|
1 |
.8% |
|
|
|
(201 |
) |
|
(5 |
)% |
|
Total |
|
$ |
279,310 |
|
|
100 |
.0% |
|
|
$ |
218,977 |
|
|
100 |
.0% |
|
|
$ |
60,333 |
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
Total revenue increased $60.3 million, or 28%, to $279.3 million
for the third quarter of 2018 compared to the third quarter of
2017. Total revenue increased primarily as a result of increased
political advertising revenue due to 2018 being the “on-year” of
the two-year election cycle and increased retransmission consent
revenue, due primarily to increased retransmission consent
rates.
Broadcast Operating
Expenses.
Broadcast operating expenses (before depreciation, amortization
and gain or loss on disposal of assets) increased $5.5 million, or
4%, to $145.1 million for the third quarter of 2018 compared to the
third quarter of 2017. The increase reflects, in part, the
following:
- Non-compensation expense increased $7.1 million, or 10%, in the
2018 period primarily as the result of increased retransmission
expense of $6.7 million, or 19%, to $41.4 million offset by
decreases in agency commissions of $0.6 million and other
professional services of $0.6 million in the third quarter of
2018.
- Compensation expense decreased $1.6 million in the 2018 period,
primarily due to reductions in staffing. Non-cash stock-based
compensation expenses were $0.3 million and $0.4 million in the
third quarters of 2018 and 2017, respectively.
Corporate and Administrative Operating
Expenses.
Corporate and administrative expenses (before depreciation,
amortization and gain or loss on disposal of assets) increased $2.7
million, or 33%, to $11.0 million in the third quarter of 2018 as
compared to the third quarter of 2017. The increase reflects, in
part, the following:
- Non-compensation expense increased $2.2 million in the 2018
period, primarily due to increased professional fees related to
acquisition activities. Professional fees related to acquisition
activities were $2.4 million in the third quarter of 2018.
- Compensation expense increased $0.5 million in the 2018 period,
primarily due to increases in incentive compensation costs.
Non-cash stock-based amortization expenses were $1.3 million and
$1.2 million in the third quarters of 2018 and 2017,
respectively.
Taxes.
We made aggregate federal and state tax payments, net of
refunds, of $14.8 million in the third quarter of 2018 compared to
$0.3 million in the third quarter of 2017.
Results of Operations for the Nine-Months Ended
September 30, 2018
Revenue (less agency commissions).
The table below presents our revenue (less agency commissions)
by type for the nine-month periods ended September 30, 2018 and
2017 (dollars in thousands):
|
|
Nine Months Ended September 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) |
|
$ |
325,319 |
|
|
43 |
.0% |
|
|
$ |
330,547 |
|
|
50 |
.9% |
|
|
$ |
(5,228 |
) |
|
(2 |
)% |
|
National |
|
|
83,584 |
|
|
11 |
.1% |
|
|
|
86,822 |
|
|
13 |
.4% |
|
|
|
(3,238 |
) |
|
(4 |
)% |
|
Political |
|
|
71,863 |
|
|
9 |
.5% |
|
|
|
9,034 |
|
|
1 |
.4% |
|
|
|
62,829 |
|
|
695 |
% |
|
Retransmission consent |
|
|
262,461 |
|
|
34 |
.7% |
|
|
|
207,094 |
|
|
31 |
.9% |
|
|
|
55,367 |
|
|
27 |
% |
|
Other |
|
|
12,685 |
|
|
1 |
.7% |
|
|
|
15,622 |
|
|
2 |
.4% |
|
|
|
(2,937 |
) |
|
(19 |
)% |
|
Total |
|
$ |
755,912 |
|
|
100 |
.0% |
|
|
$ |
649,119 |
|
|
100 |
.0% |
|
|
$ |
106,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue increased $106.8 million, or 16%, to $755.9
million for the nine-months ended September 30, 2018 compared to
the nine-months ended September 30, 2017. Total revenue increased
primarily as a result of increased political advertising revenue
due to 2018 being the “on-year” of the two-year election cycle and
increased retransmission consent revenue, due primarily to
increased retransmission consent rates. Local and national
advertising revenue decreased 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 $29.9 million, or
7%, to $436.7 million for the nine-months ended September 30, 2018
compared to the nine-months ended September 30, 2017. The increase
reflects, in part, the following:
- Non-compensation expenses increased by $26.7 million, or 13%,
in the 2018 period, primarily as the result of increased
retransmission expense of $21.5 million, or 21%, to $122.3 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 expenses increased $3.2 million, or 2%, in the
2018 period. Including the effect of a $0.5 million adjustment
related to forfeitures, our non-cash stock-based compensation
expenses were $1.5 million and $1.1 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 $5.7
million, or 23%, to $30.1 million in the nine-months ended
September 30, 2018 compared to the nine-months ended September 30,
2017. The increase reflects, in part, the following:
- Non-compensation expenses increased $4.5 million, primarily due
to an increase of $4.1 million of professional fees related to
acquisition activities. Professional fees related to acquisition
activities were $6.2 million in the 2018 period.
- Compensation expense increased $1.2 million, primarily due to
increased incentive compensation costs. Non-cash stock-based
amortization expenses were $3.5 million and $3.2 million in the
2018 and 2017 periods, respectively.
Gain or Loss on Disposal of Assets.
We reported gains on disposals of assets of $5.2 million in the
nine-months ended September 30, 2018, compared to $75.1 million in
the nine-months ended September 30, 2017. 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 nine-months ended September 30, 2017, 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.
We made aggregate federal and state income tax payments, net of
refunds, of approximately $26.8 million in the nine-months ended
September 30, 2018, compared to $1.2 million in the nine-months
ended September 30, 2017. During the remainder of 2018, we
anticipate making income tax payments (net of refunds) of
approximately $13.0 million.
Detailed table of operating results
Gray Television, Inc. |
|
Selected Operating Data (Unaudited) |
|
(in
thousands except for net income per share data) |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (less agency commissions) |
|
$ |
279,310 |
|
|
$ |
218,977 |
|
|
$ |
755,912 |
|
|
$ |
649,119 |
|
Operating expenses
before depreciation, amortization and (gain) or loss on disposal of
assets, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast
(1) |
|
|
145,091 |
|
|
|
139,542 |
|
|
|
436,664 |
|
|
|
406,781 |
|
Corporate
and administrative (1) |
|
|
11,041 |
|
|
|
8,330 |
|
|
|
30,134 |
|
|
|
24,472 |
|
Depreciation |
|
|
13,350 |
|
|
|
13,085 |
|
|
|
40,587 |
|
|
|
38,555 |
|
Amortization of
intangible assets |
|
|
4,998 |
|
|
|
6,460 |
|
|
|
15,587 |
|
|
|
18,684 |
|
(Gain) loss on disposal
of assets, net |
|
|
(3,572 |
) |
|
|
1,660 |
|
|
|
(5,187 |
) |
|
|
(75,139 |
) |
Operating expenses |
|
|
170,908 |
|
|
|
169,077 |
|
|
|
517,785 |
|
|
|
413,353 |
|
Operating income |
|
|
108,402 |
|
|
|
49,900 |
|
|
|
238,127 |
|
|
|
235,766 |
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous income, net (1) |
|
|
930 |
|
|
|
152 |
|
|
|
2,192 |
|
|
|
407 |
|
Interest
expense |
|
|
(25,104 |
) |
|
|
(24,207 |
) |
|
|
(74,185 |
) |
|
|
(71,189 |
) |
Loss from
early extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,851 |
) |
Income before income
tax |
|
|
84,228 |
|
|
|
25,845 |
|
|
|
166,134 |
|
|
|
162,133 |
|
Income tax expense |
|
|
22,342 |
|
|
|
10,529 |
|
|
|
43,598 |
|
|
|
65,751 |
|
Net income |
|
$ |
61,886 |
|
|
$ |
15,316 |
|
|
$ |
122,536 |
|
|
$ |
96,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic per share
information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
0.71 |
|
|
$ |
0.21 |
|
|
$ |
1.39 |
|
|
$ |
1.34 |
|
Weighted-average shares outstanding |
|
|
87,765 |
|
|
|
71,636 |
|
|
|
88,191 |
|
|
|
71,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted per share
information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
0.70 |
|
|
$ |
0.21 |
|
|
$ |
1.38 |
|
|
$ |
1.33 |
|
Weighted-average shares outstanding |
|
|
88,565 |
|
|
|
72,454 |
|
|
|
88,810 |
|
|
|
72,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Political advertising
revenue (less agency commissions) |
|
$ |
48,018 |
|
|
$ |
4,005 |
|
|
$ |
71,863 |
|
|
$ |
9,034 |
|
(1) Amounts in 2017 have been reclassified to give effect to the
implementation of ASU 2017-07
Other Financial Data
|
|
September 30, 2018 |
|
|
December 31, 2017 |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
550,932 |
|
|
$ |
462,399 |
|
Long-term debt
including current portion |
|
$ |
1,800,234 |
|
|
$ |
1,837,428 |
|
Borrowing availability
under our senior credit facility |
|
$ |
100,000 |
|
|
$ |
100,000 |
|
|
|
Nine Months Ended September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities |
|
$ |
186,174 |
|
|
$ |
114,346 |
|
Net cash used in
investing activities |
|
|
(33,473 |
) |
|
|
(336,334 |
) |
Net cash (used in)
provided by financing activities |
|
|
(64,168 |
) |
|
|
69,653 |
|
Net increase (decrease)
in cash |
|
$ |
88,533 |
|
|
$ |
(152,335 |
) |
|
|
|
|
|
|
|
|
|
Guidance for the Three-Months Ending December 31,
2018
Based on our current forecasts for the quarter ending December
31, 2018 (the “fourth quarter of 2018”), and excluding the
anticipated results and closing costs of any pending transactions,
we anticipate changes from the quarter ended December 31, 2017 (the
“fourth quarter of 2017”) as outlined below:
|
|
Low End |
|
|
% Change |
|
|
High End |
|
|
% Change |
|
|
|
|
|
|
|
Guidance for |
|
|
From |
|
|
Guidance for |
|
|
From |
|
|
|
|
|
|
|
the Fourth |
|
|
Fourth |
|
|
the Fourth |
|
|
Fourth |
|
|
Fourth |
|
|
|
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) |
|
$ |
319,000 |
|
|
37 |
% |
|
|
$ |
325,000 |
|
|
39 |
% |
|
|
$ |
233,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(before depreciation, amortization and gain on
disposals of assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
|
$ |
155,000 |
|
|
3 |
% |
|
|
$ |
158,000 |
|
|
5 |
% |
|
|
$ |
150,782 |
|
Corporate and administrative |
|
$ |
11,500 |
|
|
62 |
% |
|
|
$ |
13,500 |
|
|
90 |
% |
|
|
$ |
7,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER SELECTED DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Political advertising revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(less agency commissions) |
|
$ |
81,000 |
|
|
985 |
% |
|
|
$ |
82,000 |
|
|
999 |
% |
|
|
$ |
7,464 |
|
(1) Amounts in 2017 have been reclassified to give effect to the
implementation of ASU 2017-07.
Comments on Fourth Quarter of 2018
Guidance:
Unless specifically mentioned, our comments exclude the
anticipated results and closing costs of pending transactions, in
particular the Raycom Merger, during the fourth quarter of
2018.
Revenue.
Based on our current forecasts for the fourth quarter of 2018,
we anticipate the following changes from the fourth quarter of
2017:
- We believe our fourth quarter of 2018 local advertising revenue
(including internet/digital/mobile) will change to be within a
range of approximately $115.0 million to $116.0 million,
representing a -4% to -5% change. We believe our fourth quarter of
2018 national advertising revenue will change to be within a range
of approximately $28.0 million to $29.0 million, representing a -9%
to -12% change. These declines in local and national advertising
revenue are consistent with inventory displacement as a result of
increased demand from political advertising customers.
- We believe our fourth quarter of 2018 political advertising
revenue will be within a range of approximately $81.0 million to
$82.0 million. After giving effect to stations acquired and
divested since January 1, 2014, we earned $79.6 million of
political advertising revenue in the fourth quarter of 2014 which
was the most recent non-presidential election year. We currently
anticipate calendar year 2018 political advertising revenue will be
within a range of approximately $152.9 million to $153.9 million,
compared to $144.8 million for calendar year 2014, on that same
basis.
- We believe that our gross retransmission revenue for calendar
year 2018 will be within a range of approximately $354.0 million to
$356.0 million and retransmission revenue net of retransmission
expense will be within a range of approximately $188.0 million to
$190.0 million. We believe our fourth quarter of 2018
retransmission consent revenue will be within a range of
approximately $92.0 million to $94.0 million.
Broadcast Operating Expenses (before depreciation,
amortization and gain or loss on disposal of assets,
net).
For the fourth 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
$7.5 million to $8.0 million to within a range of approximately
$43.0 million to $44.0 million.
Corporate and Administrative Operating Expenses (before
depreciation, amortization and gain or loss on disposal of assets,
net).
For the fourth quarter of 2018, we anticipate our corporate and
administrative operating expense will increase to within a range of
approximately $12.5 million to $13.5 million, primarily
attributable to increases in professional services fees.
The Company
Currently, we own and/or operate television stations in 57
television markets broadcasting over 200 separate programming
streams, including over 100 affiliates of the CBS/NBC/ABC/FOX
networks. Based on the consolidated results of the four Nielsen
“sweeps” periods in 2017 our stations achieved the number-one or
number-two ranking in both overall audience and news audience in
all 57 of our 57 markets. We have entered into an agreement to
combine with Raycom Media, Inc. in a transformational transaction.
Following the consummation of the acquisition, the combined company
will own leading television stations and digital platforms serving
92 markets. The combined company will also include video program
production, marketing, and digital businesses including Raycom
Sports, Tupelo-Raycom, and RTM Studios, the producer of PowerNation
programs and content. For further information, please visit
www.gray.tv.
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 fourth 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 third quarter
operating results on November 6, 2018. 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 5589529. 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: 5589529 until December 6, 2018.
Gray Contacts
Web site: www.gray.tv
Hilton H. Howell, Jr., Chairman, President and
Chief Executive Officer, 404-266-5512
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 January 1, 2016 (the beginning of the earliest period
presented) through September 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 October 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 |
|
|
|
September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
Net
income (loss) |
|
$ |
61,886 |
|
|
$ |
15,316 |
|
|
$ |
(213 |
) |
Adjustments to reconcile from net income (loss) to |
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
13,350 |
|
|
|
13,085 |
|
|
|
11,494 |
|
Amortization of intangible assets |
|
|
4,998 |
|
|
|
6,460 |
|
|
|
4,235 |
|
Non-cash
stock based compensation |
|
|
1,645 |
|
|
|
1,531 |
|
|
|
1,271 |
|
(Gain)
loss on disposal of assets, net |
|
|
(3,572 |
) |
|
|
1,660 |
|
|
|
354 |
|
Miscellaneous (income) loss, net (1) |
|
|
(930 |
) |
|
|
(152 |
) |
|
|
10 |
|
Interest
expense |
|
|
25,104 |
|
|
|
24,207 |
|
|
|
27,926 |
|
Loss from
early extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
31,987 |
|
Income
tax expense |
|
|
22,342 |
|
|
|
10,529 |
|
|
|
797 |
|
Amortization of program broadcast rights |
|
|
5,309 |
|
|
|
5,209 |
|
|
|
4,817 |
|
Common
stock contributed to 401(k) plan excluding corporate 401(k)
contributions |
|
|
- |
|
|
|
1 |
|
|
|
7 |
|
Payments
for program broadcast rights |
|
|
(5,311 |
) |
|
|
(5,176 |
) |
|
|
(4,729 |
) |
Corporate
and administrative expenses before depreciation, amortization of
intangible assets and non-cash stock based compensation |
|
|
9,739 |
|
|
|
7,154 |
|
|
|
6,250 |
|
Broadcast Cash
Flow (1) |
|
|
134,560 |
|
|
|
79,824 |
|
|
|
84,206 |
|
Corporate
and administrative expenses before depreciation, amortization of
intangible assets and non-cash stock based compensation |
|
|
(9,739 |
) |
|
|
(7,154 |
) |
|
|
(6,250 |
) |
Broadcast Cash
Flow Less Cash Corporate Expenses (1) |
|
|
124,821 |
|
|
|
72,670 |
|
|
|
77,956 |
|
Contributions to pension plans |
|
|
(2,500 |
) |
|
|
- |
|
|
|
(1,405 |
) |
Interest
expense |
|
|
(25,104 |
) |
|
|
(24,207 |
) |
|
|
(27,926 |
) |
Amortization of deferred financing costs |
|
|
1,157 |
|
|
|
1,157 |
|
|
|
1,397 |
|
Amortization of original issue premium on senior notes |
|
|
(153 |
) |
|
|
(153 |
) |
|
|
(194 |
) |
Purchase
of property and equipment |
|
|
(14,979 |
) |
|
|
(11,011 |
) |
|
|
(19,763 |
) |
Reimbursements of property and equipment purchases |
|
|
4,392 |
|
|
|
- |
|
|
|
- |
|
Income
taxes paid, net of refunds |
|
|
(14,773 |
) |
|
|
(311 |
) |
|
|
(570 |
) |
Free Cash
Flow |
|
$ |
72,861 |
|
|
$ |
38,145 |
|
|
$ |
29,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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:
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
Net
income |
|
$ |
122,536 |
|
|
$ |
96,382 |
|
|
$ |
26,439 |
|
Adjustments to reconcile from net income to |
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
40,587 |
|
|
|
38,555 |
|
|
|
34,237 |
|
Amortization of intangible assets |
|
|
15,587 |
|
|
|
18,684 |
|
|
|
12,365 |
|
Non-cash
stock based compensation |
|
|
5,016 |
|
|
|
4,303 |
|
|
|
3,827 |
|
(Gain)
loss on disposal of assets, net |
|
|
(5,187 |
) |
|
|
(75,139 |
) |
|
|
(66 |
) |
Miscellaneous income, net (1) |
|
|
(2,192 |
) |
|
|
(407 |
) |
|
|
(619 |
) |
Interest
expense |
|
|
74,185 |
|
|
|
71,189 |
|
|
|
73,470 |
|
Loss from
early extinguishment of debt |
|
|
- |
|
|
|
2,851 |
|
|
|
31,987 |
|
Income
tax expense |
|
|
43,598 |
|
|
|
65,751 |
|
|
|
19,109 |
|
Amortization of program broadcast rights |
|
|
15,913 |
|
|
|
15,444 |
|
|
|
14,026 |
|
Common
stock contributed to 401(k) plan excluding corporate 401(k)
contributions |
|
|
- |
|
|
|
16 |
|
|
|
21 |
|
Payments
for program broadcast rights |
|
|
(16,177 |
) |
|
|
(15,569 |
) |
|
|
(13,859 |
) |
Corporate
and administrative expenses before depreciation, amortization of
intangible assets and non-cash stock based compensation |
|
|
26,649 |
|
|
|
21,244 |
|
|
|
28,500 |
|
Broadcast Cash
Flow (1) |
|
|
320,515 |
|
|
|
243,304 |
|
|
|
229,437 |
|
Corporate
and administrative expenses before depreciation, amortization of
intangible assets and non-cash stock based compensation |
|
|
(26,649 |
) |
|
|
(21,244 |
) |
|
|
(28,500 |
) |
Broadcast Cash
Flow Less Cash Corporate Expenses (1) |
|
|
293,866 |
|
|
|
222,060 |
|
|
|
200,937 |
|
Contributions to pension plans |
|
|
(2,500 |
) |
|
|
(624 |
) |
|
|
(3,038 |
) |
Interest
expense |
|
|
(74,185 |
) |
|
|
(71,189 |
) |
|
|
(73,470 |
) |
Amortization of deferred financing costs |
|
|
3,472 |
|
|
|
3,466 |
|
|
|
3,664 |
|
Amortization of original issue premium on senior notes |
|
|
(458 |
) |
|
|
(458 |
) |
|
|
(626 |
) |
Purchase
of property and equipment |
|
|
(34,894 |
) |
|
|
(21,426 |
) |
|
|
(33,238 |
) |
Reimbursements of property and equipment purchases |
|
|
6,238 |
|
|
|
- |
|
|
|
- |
|
Income
taxes paid, net of refunds |
|
|
(26,821 |
) |
|
|
(1,207 |
) |
|
|
(14,589 |
) |
Free Cash
Flow |
|
$ |
164,718 |
|
|
$ |
130,622 |
|
|
$ |
79,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
|
|
September 30,
2018 |
|
|
|
|
|
|
Net
income |
|
$ |
420,321 |
|
Adjustments to reconcile from net income to operating cash flow as
defined in our Senior Credit Agreement: |
|
|
|
|
Depreciation |
|
|
104,246 |
|
Amortization of intangible assets |
|
|
44,890 |
|
Non-cash stock-based compensation |
|
|
14,593 |
|
(Gain) loss on disposals of assets, net |
|
|
(78,992 |
) |
Interest expense |
|
|
193,210 |
|
Loss from early extinguishment of debt |
|
|
2,851 |
|
Income tax expense |
|
|
(767 |
) |
Amortization of program broadcast rights |
|
|
41,921 |
|
Common stock contributed to 401(k) plan |
|
|
24 |
|
Payments for program broadcast rights |
|
|
(42,159 |
) |
Pension expense |
|
|
(1,232 |
) |
Contributions to pension plans |
|
|
(5,634 |
) |
Adjustments for stations acquired or divested,
financings and expected synergies during the eight quarter
period |
|
|
22,293 |
|
Professional fees related to acquisitions and
divestitures |
|
|
8,065 |
|
Operating Cash Flow as defined in our Senior Credit
Agreement |
|
$ |
723,630 |
|
Operating Cash Flow as defined in our Senior Credit
Agreement, divided by two |
|
$ |
361,815 |
|
|
|
|
|
|
|
|
September 30,
2018 |
|
Adjusted Total Indebtedness: |
|
|
|
|
Total outstanding principal, including current
portion |
|
$ |
1,820,026 |
|
Capital leases and other debt |
|
|
669 |
|
Cash |
|
|
(550,932 |
) |
Adjusted Total Indebtedness, Net of All Cash |
|
$ |
1,269,763 |
|
|
|
|
|
|
Total Leverage Ratio, Net of All Cash |
|
|
3.51 |
|
|
|
|
|
|
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