Gray Television, Inc. (“Gray,” “we,” “us” or “our”) (NYSE:
GTN and GTN.A) today announces record operating revenues
for the three-months ended March 31, 2019.
Financial Highlights and Selected Operating
Data:
- Record First Quarter Revenue - Our revenue for the first
quarter of 2019 was $518 million, increasing $292 million, or 129%,
from the first quarter of 2018. During the first quarter of 2019,
revenue attributable to the Raycom Merger (as defined below) was
$280 million. Furthermore, on a Combined Historical Basis (as
defined below) excluding the $13 million of advertising revenue
attributable to the Winter Olympics in the first quarter of 2018,
our first quarter local and national advertising revenue grew by $7
million from the year-earlier period, representing a 3%
increase. Our guidance for the second quarter of 2019 reflects
continued revenue growth resulting from both the Raycom Merger and
organic growth in our businesses.
- Operating Results and Effect of Transaction Expenses. Our
net loss attributable to common stockholders for the first quarter
of 2019 was $31 million, and our net loss per common share was
$0.31. During the first quarter of 2019, in connection with the
Raycom Merger, we incurred $18 million of incentive and severance
compensation, $28 million in third-party contract termination fees
and $22 million of professional fees. Excluding these transaction
related costs, and using a blended statutory tax rate, our net
income attributable to common stockholders for the first quarter of
2019 would have been our best first quarter ever, of approximately
$27 million, and our diluted net income per common share would have
been approximately $0.27. Our Broadcast Cash Flow (a non-GAAP
financial measure, defined below) for the first quarter of 2019 was
$123 million, and was our best first quarter ever.
- Total Leverage Ratio - As of March 31, 2019, our total leverage
ratio, as defined in our senior credit facility, was 4.86 times on
a trailing eight-quarter basis, netting our total cash balance of
$225 million.
Other Highlights and Recent Developments:
- Merger with Raycom Media, Inc. – On January 2, 2019, we
completed our merger with Raycom Media, Inc. (“Raycom”), the
related acquisitions of stations KYOU-TV and WUPV-TV, and the
divestiture of stations in eight markets in order to facilitate
regulatory approval due to market overlaps. We refer to these
transactions and the divestiture of WSWG-TV on December 31, 2018,
collectively as the “Raycom Merger”. As a result of the Raycom
Merger, we acquired television stations in 34 new markets. In
addition to the high quality television stations acquired as part
of the Raycom Merger, we also acquired businesses that provide
sports marketing and production services that we believe has
resulted in us becoming a more diversified media company.
- Financing for the Raycom Merger - In connection with the Raycom
Merger, we completed several financing transactions:
- On November 16, 2018, we completed the offering of $750.0
million of 7.0% unsecured notes due 2027 (the “2027 Notes”) by our
special purpose wholly-owned subsidiary. We assumed all obligations
of the 2027 Notes upon completion of the Raycom Merger on January
2, 2019.
- On January 2, 2019:
- We amended our senior credit facility, pursuant to which we
borrowed $1.4 billion of additional secured term loan financing and
increased our un-drawn revolving credit facility to $200.0
million,
- We issued $650.0 million of our 8.0% Series A Perpetual
Preferred Stock, and
- We issued 11.5 million shares of our common stock valued at
$169.5 million.
- United Acquisition - On May 1, 2019, we completed the
acquisition of the assets of WWNY-TV (CBS) and WNYF-CD (FOX) in
Watertown, New York (DMA 178) and KEYC-TV (CBS/FOX) in Mankato,
Minnesota (DMA 199) from United Communications, Inc. (the “United
Acquisition”) for $45.0 million. We began operating those stations
on March 1, 2019 under a local programming and marketing agreement.
As a result of the acquisition, we increased the total number of
our markets to 93.
- Charlottesville Transactions - On February 28, 2019, we entered
into an agreement to acquire the assets of WVIR-TV (NBC) in the
Charlottesville, Virginia market (DMA 183) from Waterman
Broadcasting Corporation for $12.0 million, using cash on hand.
Also on February 28, 2019, in order to facilitate regulatory
approval due to market overlaps, we entered into an agreement to
divest our current television stations in that market, WCAV-TV
(CBS/FOX) and WVAW-TV (ABC) for $25.0 million in cash to Lockwood
Broadcasting, Inc. We expect to complete these transactions later
in the second quarter of 2019. We refer to these transactions
collectively as the “Charlottesville Transactions.”
Combined Historical Basis Information
From January 1, 2017 through March 31, 2019, we completed 6
acquisition transactions and 2 divestiture transactions, including
the Raycom Merger. Due to the significant effect that these
transactions have had on our results of operations, and in order to
provide more meaningful period over period comparisons, we present
certain financial information below on a “Combined Historical
Basis” (or “CHB”). Our Combined Historical Basis presentation
reflects financial results that have been compiled by adding Gray’s
historical revenue, broadcast expenses and corporate and
administrative expenses to the historical revenue, broadcast
expenses and corporate and administrative expenses of the net
stations acquired in those acquisitions, including the Raycom
Merger, and subtracting the historical revenues and broadcast
expenses of divested stations as if all stations had been acquired
or divested, respectively, on January 1, 2017, the beginning of the
earliest period that CHB information is presented herein. For
more information on CHB, see “Effects of Acquisitions and
Divestitures on Our Results of Operations and Non-GAAP Terms” at
the end of this release.
Selected Operating Data (unaudited):
|
|
As Reported Basis |
|
Three Months Ended March 31, |
|
|
|
|
|
|
% Change |
|
|
|
|
% Change |
|
|
|
|
|
|
|
2019 to |
|
|
|
|
2019 to |
|
|
2019 |
|
|
2018 |
|
2018 |
|
|
2017 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
Revenue (less agency
commissions): |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
518 |
|
|
$ |
226 |
|
129 |
% |
|
$ |
203 |
|
155 |
% |
Broadcast |
$ |
481 |
|
|
$ |
226 |
|
113 |
% |
|
$ |
203 |
|
137 |
% |
Political |
$ |
3 |
|
|
$ |
6 |
|
(50 |
)% |
|
$ |
1 |
|
200 |
% |
Production companies |
$ |
37 |
|
|
$ |
- |
|
100 |
% |
|
$ |
- |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
(1)(3): |
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
$ |
356 |
|
|
$ |
150 |
|
137 |
% |
|
$ |
134 |
|
166 |
% |
Production companies |
$ |
35 |
|
|
$ |
- |
|
100 |
% |
|
$ |
- |
|
100 |
% |
Corporate and administrative |
$ |
48 |
|
|
$ |
8 |
|
500 |
% |
|
$ |
8 |
|
500 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable
to common shareholders |
$ |
(31 |
) |
|
$ |
20 |
|
(255 |
)% |
|
$ |
11 |
|
(382 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Cash Flow (2): |
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast Cash Flow (3) |
$ |
123 |
|
|
$ |
78 |
|
58 |
% |
|
$ |
70 |
|
76 |
% |
Broadcast Cash Flow Less |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Corporate Expenses (3) |
$ |
77 |
|
|
$ |
70 |
|
10 |
% |
|
$ |
64 |
|
20 |
% |
Free Cash Flow (4) |
$ |
16 |
|
|
$ |
33 |
|
(52 |
)% |
|
$ |
37 |
|
(57 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Historical Basis |
|
Three Months Ended March 31, |
|
|
|
|
|
% Change |
|
|
|
% Change |
|
|
|
|
|
2019 to |
|
|
|
2019 to |
|
2019 |
|
2018 |
|
2018 |
|
2017 |
|
2017 |
|
|
|
(dollars in millions) |
Revenue (less agency
commissions): |
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
518 |
|
$ |
484 |
|
7 |
% |
|
$ |
458 |
|
13 |
% |
Broadcast |
$ |
481 |
|
$ |
449 |
|
7 |
% |
|
$ |
423 |
|
14 |
% |
Political |
$ |
3 |
|
$ |
9 |
|
(67 |
)% |
|
$ |
2 |
|
50 |
% |
Production companies |
$ |
37 |
|
$ |
35 |
|
6 |
% |
|
$ |
35 |
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
(1)(3): |
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
$ |
356 |
|
$ |
300 |
|
19 |
% |
|
$ |
288 |
|
24 |
% |
Production companies |
$ |
35 |
|
$ |
33 |
|
6 |
% |
|
$ |
33 |
|
6 |
% |
Corporate and administrative |
$ |
48 |
|
$ |
17 |
|
182 |
% |
|
$ |
13 |
|
269 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Cash Flow (2): |
|
|
|
|
|
|
|
|
|
|
|
Broadcast Cash Flow |
$ |
125 |
|
$ |
154 |
|
(19 |
)% |
|
$ |
143 |
|
(13 |
)% |
Broadcast Cash Flow Less Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Expenses (3) |
$ |
79 |
|
$ |
138 |
|
(43 |
)% |
|
$ |
131 |
|
(40 |
)% |
Operating Cash Flow as defined in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the 2019 Senior Credit Facility (3) |
$ |
101 |
|
$ |
158 |
|
(36 |
)% |
|
$ |
150 |
|
(33 |
)% |
Free Cash Flow |
$ |
27 |
|
$ |
71 |
|
(62 |
)% |
|
$ |
73 |
|
(63 |
)% |
(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 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”). |
(4) |
Amounts for the three months ended March 31, 2018, and related
percentage changes from prior periods, are per the Company’s
Current Report on Form 8-K/A, furnished to the SEC on May 9,
2018. |
Results of Operations for the First Quarter of
2019
Revenue (less agency commissions) on As-Reported
Basis.
The table below presents our revenue (less agency commissions)
on an as-reported basis by type for the first quarter of 2019 and
2018 (dollars in millions):
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
|
Amount |
|
Percent |
|
|
|
Percent |
|
|
|
Percent |
|
Increase |
|
Increase |
|
Amount |
|
of Total |
|
Amount |
|
of Total |
|
(Decrease) |
|
(Decrease) |
Revenue (less agency
commissions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local (including internet/digital/mobile) |
$ |
211 |
|
40.7 |
% |
|
$ |
105 |
|
46.5 |
% |
|
$ |
106 |
|
|
101 |
% |
National |
50 |
|
9.7 |
% |
|
24 |
|
10.6 |
% |
|
26 |
|
|
108 |
% |
Political |
3 |
|
0.6 |
% |
|
6 |
|
2.7 |
% |
|
(3 |
) |
|
(50 |
)% |
Retransmission consent |
204 |
|
39.4 |
% |
|
86 |
|
38.1 |
% |
|
118 |
|
|
137 |
% |
Production companies |
37 |
|
7.1 |
% |
|
- |
|
0.0 |
% |
|
37 |
|
|
100 |
% |
Other |
13 |
|
2.5 |
% |
|
5 |
|
2.1 |
% |
|
8 |
|
|
160 |
% |
Total |
$ |
518 |
|
100.0 |
% |
|
$ |
226 |
|
100.0 |
% |
|
$ |
292 |
|
|
129 |
% |
On January 2, 2019, we completed the Raycom Merger.
Collectively, the stations and production companies acquired, net
of divestitures, accounted for $280 million of the increase in our
total revenue for the first quarter of 2019. Including the revenue
attributable to these stations, revenue increased due to increases
in retransmission revenue. Local and national advertising revenue
increased, in part, due to the $5 million of revenue we earned from
the broadcast of the 2019 Super Bowl on our CBS-affiliated
stations, compared to $2 million that we earned from the broadcast
of the 2018 Super Bowl on our NBC-affiliated stations. This
increase was offset due to no revenue from Olympic broadcasts in
2019, compared to $6 million from the broadcast of the 2018 Winter
Olympic Games on our NBC-affiliated stations.
Revenue (less agency commissions) on Combined Historical
Basis.
On a Combined Historical Basis, total revenue increased $34
million to $518 million in the first quarter of 2019 compared to
$484 million in the first quarter of 2018. On a Combined Historical
Basis, the changes in revenue for the first quarter of 2019
compared to the first quarter of 2018 were approximately as
follows:
- Local advertising revenue (including internet/digital/mobile)
decreased $3 million, or 1%, to $211 million.
- National advertising revenue decreased $3 million, or 6%, to
$50 million.
- Political advertising revenue decreased $6 million, or 67%, to
$3 million.
- Retransmission consent revenue increased $42 million, or 26%,
to $204 million.
- Production company revenue increased $2 million, or 6%, to $37
million.
- Other revenue increased $2 million, or 18%, to $13
million.
Local and national advertising revenue declined, in part,
because there was no revenue from Olympic broadcasts in 2019,
compared to $13 million from the broadcast of the 2018 Winter
Olympic Games on our NBC-affiliated stations.
Operating Expenses (before depreciation, amortization
and gain or loss on disposal of assets) on
As-Reported Basis.
Broadcast operating expenses increased $206 million, or 137%, to
$356 million for the first quarter of 2019 compared to the first
quarter of 2018.
The Raycom Merger accounted for nearly all of the increase in
broadcast operating expenses for the first quarter of 2019.
Including the broadcast operating expenses attributable to these
stations, significant changes in our total broadcast operating
expenses included:
- Non-compensation expense increased $125 million, or 156%, in
the first quarter of 2019 compared to the first quarter of 2018.
This increase was due largely to an increase in retransmission
expense of $62 million and professional fees of $34 million. The
remaining increase was due primarily to increases in programming
expense and licensing fees. Non-compensation expenses also included
acquisition related charges of $28 million for the termination of
certain national sales representation agreements related to the
Raycom Merger.
- Compensation expense increased $81 million, or 117%, in the
first quarter of 2019 when compared to the first quarter of 2018.
Compensation expenses also included acquisition related expenses of
approximately $8 million primarily due to incentive compensation
and severance costs related to the Raycom Merger.
Production company operating expenses, related to the production
companies acquired in the Raycom Merger, were $35 million in the
first quarter of 2019. Non-compensation expenses were $28 million,
of which the primary components included the costs for the rights
to broadcast sporting events of $23 million and professional
services of $3 million. Total compensation expenses were $7
million.
Operating Expenses (before depreciation, amortization
and gain or loss on disposal of assets) on Combined Historical
Basis.
On a Combined Historical Basis, broadcast operating expenses
increased $56 million, or 19%, to $356 million in the first quarter
of 2019 compared to the first quarter of 2018. The increase
reflects, in part, the following:
- Retransmission expense increased $19 million, or 22%, to $104
million in the first quarter of 2019 compared to the first quarter
of 2018 consistent with increases in retransmission consent
revenue. Professional services expense increased $25 million or
147% to $41 million primarily as a result of $28 million of costs
incurred to terminate sales representation agreements related to
the Raycom Merger.
- Compensation expense increased by approximately $11 million, or
8%, in the first quarter of 2019 compared to the first quarter of
2018. Compensation expenses also included acquisition related
charges of $8 million for incentive compensation and severance
costs related to the Raycom Merger.
On a Combined Historical Basis, production company operating
expenses increased $2 million, or 6%, to $35 million in the first
quarter of 2019 compared to the first quarter of 2018. The increase
reflects, primarily, increased costs for the rights to broadcast
sporting events.
Corporate and Administrative Expenses on As-Reported
Basis.
Corporate and administrative expenses increased $40 million, or
500%, to $48 million in the first quarter of 2019 as compared to
the first quarter of 2018. The increase reflects the following:
• Non-compensation expense increased by
$25 million, to $29 million primarily as a result of $22 million of
professional fees related to the Raycom Merger.
• Compensation expense increased $15
million, to $19 million, primarily due to $10 million of incentive
compensation and severance compensation related to the elimination
of redundant positions related to the Raycom Merger.
Corporate and Administrative Expenses on Combined
Historical Basis.
On a Combined Historical Basis, corporate and administrative
expenses increased $31 million, or 182%, to $48 million in the
first quarter of 2019 as compared to the first quarter of 2018. The
increase reflects the following:
• Non-compensation expense increased by
$22 million, to $29 million primarily as a result of $22 million of
professional fees related to the Raycom Merger.
• Compensation expense increased $9
million to $19 million, primarily due to $10 million of incentive
compensation and severance compensation related to the elimination
of redundant positions related to the Raycom Merger.
Taxes.
During the first quarter of 2019, we made no federal or state
income tax payments. During the remainder of 2019, we anticipate
making income tax payments (net of refunds) of approximately $13
million.
Gray Television, Inc. |
Selected Operating Data (Unaudited) |
(in millions except for net (loss) income per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
|
|
|
|
|
|
Revenue (less agency
commissions) |
|
|
|
|
|
Broadcasting |
$ |
481 |
|
|
$ |
226 |
|
Production companies |
37 |
|
|
- |
|
Total revenue (lesss agency commissions) |
518 |
|
|
226 |
|
Operating expenses before
depreciation, amortization and gain on disposal of assets,
net: |
|
|
|
|
|
Broadcast |
356 |
|
|
150 |
|
Production companies |
35 |
|
|
- |
|
Corporate and administrative |
48 |
|
|
8 |
|
Depreciation |
20 |
|
|
14 |
|
Amortization of intangible
assets |
29 |
|
|
5 |
|
Gain on disposal of assets,
net |
(10 |
) |
|
(1 |
) |
Operating expenses |
478 |
|
|
176 |
|
Operating income |
40 |
|
|
50 |
|
Other income (expense): |
|
|
|
|
|
Miscellaneous income, net |
3 |
|
|
- |
|
Interest expense |
(58 |
) |
|
(24 |
) |
(Loss) income before income
taxes |
(15 |
) |
|
26 |
|
Income tax expense |
3 |
|
|
6 |
|
Net (loss) income |
(18 |
) |
|
20 |
|
Preferred stock dividends |
13 |
|
|
- |
|
Net (loss) income attributable
to common stockholders |
$ |
(31 |
) |
|
$ |
20 |
|
|
|
|
|
|
|
Basic per common share
information: |
|
|
|
|
|
Net (loss) income |
$ |
(0.31 |
) |
|
$ |
0.22 |
|
Weighted-average shares outstanding |
99 |
|
|
89 |
|
|
|
|
|
|
|
Diluted per common share
information: |
|
|
|
|
|
Net (loss) income |
$ |
(0.31 |
) |
|
$ |
0.22 |
|
Weighted-average shares outstanding |
99 |
|
|
90 |
|
Other Financial Data:
|
As of |
|
March 31, |
|
December 31, |
|
2019 |
|
2018 |
|
|
|
(in millions) |
|
|
|
|
|
|
Cash |
$ |
225 |
|
|
$ |
667 |
|
Restricted cash |
$ |
- |
|
|
$ |
752 |
|
Long-term debt including
current portion |
$ |
3,896 |
|
|
$ |
2,549 |
|
Borrowing availability under
Senior Credit Facility |
$ |
200 |
|
|
$ |
100 |
|
|
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
|
|
|
(in millions) |
|
|
|
|
|
|
Net cash provided by operating
activities |
$ |
24 |
|
|
$ |
15 |
|
Net cash used in investing
activities |
(2,562 |
) |
|
(8 |
) |
Net cash provided by (used in)
financing activities |
1,344 |
|
|
(26 |
) |
Net decrease in cash and
restricted cash |
$ |
(1,194 |
) |
|
$ |
(19 |
) |
|
|
|
|
|
|
Guidance for the Second Quarter Ending June 30,
2019
Based on our current forecasts for the quarter ending June 30,
2019 (the “second quarter of 2019”), we anticipate the changes from
the quarter ended June 30, 2018 (the “second quarter of 2018”) as
outlined below:
As Reported Basis: |
|
Three Months Ending June 30, |
|
|
Low End |
|
% Change |
|
High End |
|
% Change |
|
|
|
|
Guidance |
|
From |
|
Guidance |
|
From |
|
|
|
|
for |
|
As-Reported |
|
for |
|
As-Reported |
|
As-Reported |
|
|
the Second |
|
Second |
|
the Second |
|
Second |
|
Second |
|
|
Quarter of |
|
Quarter of |
|
Quarter of |
|
Quarter of |
|
Quarter of |
Selected operating data: |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
OPERATING REVENUE
(less agency commissions): |
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
|
$ |
495 |
|
98 |
% |
|
$ |
504 |
|
102 |
% |
|
$ |
250 |
Production companies |
|
$ |
7 |
|
100 |
% |
|
$ |
8 |
|
100 |
% |
|
$ |
- |
Total revenue |
|
$ |
502 |
|
101 |
% |
|
$ |
512 |
|
105 |
% |
|
$ |
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
(before depreciation, amortization and gain or loss on
disposals of assets): |
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
|
$ |
318 |
|
124 |
% |
|
$ |
320 |
|
125 |
% |
|
$ |
142 |
Production companies |
|
$ |
8 |
|
100 |
% |
|
$ |
9 |
|
100 |
% |
|
$ |
- |
Corporate and administrative |
|
$ |
18 |
|
64 |
% |
|
$ |
21 |
|
91 |
% |
|
$ |
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER SELECTED DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
Political advertising revenue |
|
|
|
|
|
|
|
|
|
|
|
|
(less agency commissions) |
|
$ |
3 |
|
(83 |
)% |
|
$ |
4 |
|
(78 |
)% |
|
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Historical Basis: |
|
Three Months Ending June 30, |
|
|
Low End |
|
% Change |
|
High End |
|
% Change |
|
|
|
|
Guidance |
|
From |
|
Guidance |
|
From |
|
|
|
|
for |
|
CHB |
|
for |
|
CHB |
|
CHB |
|
|
the Second |
|
Second |
|
the Second |
|
Second |
|
Second |
|
|
Quarter of |
|
Quarter of |
|
Quarter of |
|
Quarter of |
|
Quarter of |
Selected operating data: |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
OPERATING REVENUE
(less agency commissions): |
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
|
$ |
495 |
|
0 |
% |
|
$ |
504 |
|
2 |
% |
|
$ |
493 |
Production companies |
|
$ |
7 |
|
(22 |
)% |
|
$ |
8 |
|
(11 |
)% |
|
$ |
9 |
Total revenue |
|
$ |
502 |
|
0 |
% |
|
$ |
512 |
|
2 |
% |
|
$ |
503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
(before depreciation, amortization and gain or loss on
disposals of assets): |
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
|
$ |
318 |
|
8 |
% |
|
$ |
320 |
|
9 |
% |
|
$ |
295 |
Production companies |
|
$ |
8 |
|
(11 |
)% |
|
$ |
9 |
|
0 |
% |
|
$ |
9 |
Corporate and administrative |
|
$ |
18 |
|
0 |
% |
|
$ |
21 |
|
17 |
% |
|
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER SELECTED DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
Political advertising revenue |
|
|
|
|
|
|
|
|
|
|
|
|
(less agency commissions) |
|
$ |
3 |
|
(90 |
)% |
|
$ |
4 |
|
(87 |
)% |
|
$ |
31 |
Comments on Second Quarter of 2019
Guidance:
Revenue (less agency commissions) On As-Reported
Basis.
Based on our current forecasts for the second quarter of 2019,
we anticipate the following changes from the second quarter of 2018
as outlined below:
- We believe our second quarter of 2019 local advertising revenue
(including internet/digital/mobile) will change to be within a
range of approximately $223 million to $228 million, or +98% to
+102%.
- We believe our second quarter of 2019 national advertising
revenue will change to be within a range of approximately $55
million to $56 million, or +84% to 88%.
- We believe our second quarter of 2019 political revenue will be
within a range of approximately $3 million to $4 million.
- We believe our second quarter of 2019 retransmission consent
revenue will be within a range of approximately $205 million to
$206 million.
Revenue (less agency
commissions) on Combined Historical
Basis.
- We believe our second quarter of 2019 total revenue will be
within a range of approximately $502 million to $512 million (or
increase approximately +0% to +2% from $503 million in the second
quarter of 2018).
- We believe our second quarter of 2019 local advertising revenue
(including internet/digital/mobile) will be within a range of
approximately $223 million to $228 million (or decrease
approximately -2% to +0% from $228 million in the second quarter of
2018).
- We believe our second quarter of 2019 national advertising
revenue will be within a range of approximately $55 million to $56
million (or decrease approximately -9% to -8% from $60 million in
the second quarter of 2018).
- We believe our second quarter of 2019 political advertising
revenue will be within a range of approximately $3 million to $4
million. Our political advertising revenue was approximately $31
million in the second quarter of 2018 and approximately $6 million
in the second quarter of 2017.
- We believe our second quarter of 2019 retransmission consent
revenue will be within a range of approximately $205 million to
$206 million (or increase approximately +26% to +27% from $162
million in the second quarter of 2018).
Broadcast Operating Expenses (before depreciation,
amortization and gain or loss on disposal of assets, net) on
As-Reported Basis.
For the second quarter of 2019, we anticipate our broadcast
operating expenses will increase from the second quarter of 2018,
primarily reflecting the impact of the Raycom Merger.
Broadcast Operating Expenses (before depreciation,
amortization and gain or loss on disposal of assets) on Combined
Historical Basis.
Our total broadcast operating expenses for the second quarter of
2019 are anticipated to increase from the second quarter of 2018 by
a range of approximately $23 million to $25 million (or increase
approximately +8% to +9% from $295 million in the second quarter of
2018).
This increase reflects an expected increase in retransmission
expense by a range of approximately $22 million to $23 million (or
increase approximately +26% to +28% from $83 million in the second
quarter of 2018).
In addition, broadcast expenses in the second quarter of 2019
are anticipated to include approximately $1 million of transaction
related expenses associated with the Raycom Merger primarily
reflecting severance or other transaction related compensation.
Corporate and Administrative Operating Expenses (before
depreciation, amortization and gain or loss on disposal of assets)
on As-Reported Basis.
For the second quarter of 2019, we anticipate our corporate and
administrative operating expense will increase between
approximately $7 million and $10 million from the second quarter of
2018, primarily reflecting the Raycom Merger.
Corporate and Administrative Operating Expenses (before
depreciation, amortization and gain or loss on disposal of assets)
on Combined Historical Basis.
Our total corporate and administrative operating expenses for
the second quarter of 2019 are anticipated to be approximately the
same as, or increase slightly from, the second quarter of 2018 on a
Combined Historical Basis.
In addition, corporate and administrative operating expenses in
the second quarter of 2019 are anticipated to include between $1
million and $2 million of transaction related expenses associated
with the Raycom Merger primarily reflecting severance or other
transaction related compensation.
The Company
We are a television broadcast company headquartered in Atlanta,
Georgia. Upon the completion of the Raycom Merger on January 2,
2019, we became the largest owner of top-rated local television
stations and digital assets in the United States. Currently, we own
television stations in 93 television markets broadcasting almost
400 separate program streams including approximately 150 affiliates
of the ABC Network (“ABC”), the NBC Network (“NBC”), the CBS
Network (“CBS”) and the FOX Network (“FOX”). We refer to these
major broadcast networks collectively as the “Big Four” networks.
Our television stations ranked first or second among all local
television stations in 87 of our 93 markets between December, 2017
and November, 2018. Our station portfolio reaches approximately 24%
of total United States television households. We also own video
program production, marketing, and digital businesses including
Raycom Sports, Tupelo-Raycom, and RTM Studios, the producer of
PowerNation programs and content.
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 2019 or other periods, future income tax
payments, the expected closing date of our Charlottesville
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, 2018 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 first quarter
operating results on May 8, 2019. The call will begin at 11:30 a.m.
Eastern Time. The live dial-in number is 1-855-493-3489 and the
confirmation code is 8275179. 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: 8275179 until June 8, 2019.
Gray Contacts
Web site: www.gray.tv
Hilton H. Howell, Jr., Executive Chairman and
Chief Executive Officer, 404-266-5512
Pat LaPlatney, President and Co-Chief Executive
Officer, 334-206-1400
Jim Ryan, Executive Vice President and Chief
Financial Officer, 404-504-9828
Kevin P. Latek, Executive Vice President, Chief
Legal and Development Officer, 404-266-8333
Effects of Acquisitions and Divestitures on Our Results
of Operations and Non-GAAP Terms
From October 31, 2013, through March 31, 2019, we completed 24
acquisition transactions and 5 divestiture transactions. As more
fully described in our Form 10-Q to be filed with the Securities
and Exchange Commission today and in our prior disclosures, these
transactions added television stations in 62 new television markets
to our operations. We refer to the stations acquired in the 34 new
markets added, and nine stations divested, in connection with, the
Raycom Merger completed on January 2, 2019 as the “Raycom
Acquisitions” and, collectively with the television stations we
acquired in 2017 (the “2017 Acquisitions”) as the “Acquisitions” or
the “Acquired Stations.”
Due to the significant effect that the Acquisitions have had on
our results of operations, and in order to provide more meaningful
period over period comparisons, we present herein certain financial
information on a “Combined Historical Basis” (or “CHB”). Unless
otherwise defined, Combined Historical Basis reflects financial
results that have been compiled by adding Gray’s historical
revenue, broadcast expenses and corporate and administrative
expenses to the historical revenue, broadcast expenses and
corporate and administrative expenses of the Acquisitions and the
net stations acquired in the Raycom Acquisitions and subtracting
the historical revenues and broadcast expenses of divested
stations, and the financing transactions for the Raycom Merger, as
if they had been acquired or divested, respectively, on January 1,
2017, the beginning of the earliest period that CHB information is
presented.
Combined Historical Basis financial information does not include
any adjustments for other events attributable to the Acquisitions.
Certain of the Combined Historical Basis financial information has
been derived from, and adjusted based on, unaudited, unreviewed
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 the Combined Historical Basis financial
information if the Acquisitions had been completed at the stated
date. In addition, the presentation of Combined Historical Basis
may not comply with accounting principles generally accepted in the
United States of America (“GAAP”) or the requirements for proforma
financial information under Regulation S-X under the Securities
Act. Gray is providing the second quarter of 2019 guidance on a
Combined Historical Basis estimates which incorporate certain
non–GAAP financial measures that are dependent on financial results
that are not yet determinable with certainty. Therefore, we are
unable to present a quantitative reconciliation of the estimated
non-GAAP financial measures to their most directly comparable GAAP
financial measures because such information is not available and
management cannot reliably estimate all of the necessary components
of such GAAP measures without unreasonable effort or expense. In
addition, we believe such reconciliations would imply a degree of
precision that would be confusing or misleading to investors.
From time to time, Gray supplements its financial results
prepared in accordance with GAAP by disclosing the non-GAAP
financial measures Broadcast Cash Flow, Broadcast Cash Flow Less
Cash Corporate Expenses, Free Cash Flow, Operating Cash Flow as
defined in the Senior Credit Agreement and Total Leverage Ratio,
Net of All Cash. These non-GAAP amounts are used by us to
approximate amounts used to calculate key financial performance
covenants contained in our debt agreements and are used with our
GAAP data to evaluate our results and liquidity.
We define Broadcast Cash Flow as net income 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 January 1, 2017. 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 (excluding restricted cash). Our Operating
Cash Flow as defined in our Senior Credit Agreement, divided by
two, represents our average annual Operating Cash Flow as defined
in our Senior Credit Agreement for the preceding eight
quarters.
These non-GAAP terms are not defined in GAAP and our definitions
may differ from, and therefore may not be comparable to, similarly
titled measures used by other companies, thereby limiting their
usefulness. Such terms are used by management in addition to, and
in conjunction with, results presented in accordance with GAAP and
should be considered as supplements to, and not as substitutes for,
net income and cash flows reported in accordance with GAAP.
Reconciliation of Non-GAAP Terms on As Reported Basis,
in millions:
|
|
Three Months
Ended |
|
March 31, |
|
2019 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(18 |
) |
|
$ |
20 |
|
|
$ |
10 |
|
Adjustments to reconcile from net income to Broadcast Cash
Flow: |
|
|
|
|
|
|
|
|
Depreciation |
20 |
|
|
14 |
|
|
13 |
|
Amortization of intangible assets |
29 |
|
|
5 |
|
|
6 |
|
Non-cash stock-based compensation |
3 |
|
|
2 |
|
|
1 |
|
Gain on disposal of assets, net |
(10 |
) |
|
(1 |
) |
|
- |
|
Miscellaneous income, net (1) |
(3 |
) |
|
- |
|
|
- |
|
Interest expense |
58 |
|
|
24 |
|
|
23 |
|
Loss from early extinguishment of debt |
- |
|
|
- |
|
|
3 |
|
Income tax expense |
3 |
|
|
6 |
|
|
7 |
|
Amortization of program broadcast rights |
10 |
|
|
5 |
|
|
6 |
|
Payments for program broadcast rights |
(14 |
) |
|
(5 |
) |
|
(5 |
) |
Common stock contributed to 401(k) plan |
- |
|
|
- |
|
|
- |
|
Corporate and administrative expenses excluding |
|
|
|
|
|
|
|
|
depreciation, amortization of intangible assets
and |
|
|
|
|
|
|
|
|
non-cash stock-based compensation (1) |
45 |
|
|
8 |
|
|
6 |
|
Broadcast Cash
Flow |
123 |
|
|
78 |
|
|
70 |
|
Corporate and administrative expenses excluding |
|
|
|
|
|
|
|
|
depreciation, amortization of intangible assets
and |
|
|
|
|
|
|
|
|
non-cash stock-based compensation (1) |
(46 |
) |
|
(8 |
) |
|
(6 |
) |
Broadcast Cash Flow
Less Cash Corporate Expenses |
77 |
|
|
70 |
|
|
64 |
|
Contributions to pension plans |
- |
|
|
- |
|
|
(1 |
) |
Interest expense |
(58 |
) |
|
(24 |
) |
|
(23 |
) |
Amortization of deferred financing costs |
3 |
|
|
1 |
|
|
1 |
|
Amortization of net original issue premium on |
|
|
|
|
|
|
|
|
5.875% senior notes due 2026 |
- |
|
|
- |
|
|
- |
|
Purchases of property and equipment |
(18 |
) |
|
(6 |
) |
|
(4 |
) |
Reimbursements of property and equipment purchases |
12 |
|
|
1 |
|
|
- |
|
Income taxes paid, net of refunds (2) |
- |
|
|
(9 |
) |
|
- |
|
Free Cash Flow
(2) |
$ |
16 |
|
|
$ |
33 |
|
|
$ |
37 |
|
(1) |
Amounts in 2017 have been reclassified to give effect to the
implementation of ASU 2017-07. |
(2) |
Amounts for the three months ended March 31, 2018, are per the
Company’s Current Report on Form 8-K/A, furnished to the SEC on May
9, 2018. |
Reconciliation of Non-GAAP Terms on Combined Historical
Basis, in millions:
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
(18 |
) |
|
$ |
20 |
|
|
$ |
7 |
|
Adjustments to reconcile from net income to Broadcast Cash
Flow: |
|
|
|
|
|
|
|
|
Depreciation |
20 |
|
|
22 |
|
|
21 |
|
Amortization of intangible assets |
29 |
|
|
31 |
|
|
32 |
|
Non-cash stock-based compensation |
3 |
|
|
2 |
|
|
1 |
|
Loss (gain) on disposals of assets, net |
(10 |
) |
|
(1 |
) |
|
(2 |
) |
Miscellaneous income, net |
(4 |
) |
|
(1 |
) |
|
- |
|
Interest expense |
58 |
|
|
58 |
|
|
58 |
|
Loss from early extinguishment of debt |
- |
|
|
- |
|
|
3 |
|
Income tax expense |
3 |
|
|
5 |
|
|
7 |
|
Amortization of program broadcast rights |
10 |
|
|
10 |
|
|
10 |
|
Common stock contributed to 401(k) plan excluding corporate
401(k) contributions |
- |
|
|
- |
|
|
- |
|
Payments for program broadcast rights |
(14 |
) |
|
(10 |
) |
|
(10 |
) |
Corporate and administrative expenses excluding depreciation,
amortization of intangible assets
and non-cash stock-based compensation |
46 |
|
|
16 |
|
|
12 |
|
Other |
2 |
|
|
2 |
|
|
4 |
|
Broadcast Cash
Flow |
125 |
|
|
154 |
|
|
143 |
|
Corporate and administrative expenses excluding depreciation,
amortization of intangible assets and non-cash
stock-based compensation |
(46 |
) |
|
(16 |
) |
|
(12 |
) |
Broadcast Cash Flow
Less Cash Corporate Expenses |
79 |
|
|
138 |
|
|
131 |
|
Contributions to pension plans |
- |
|
|
- |
|
|
(1 |
) |
Transaction costs and synergies |
22 |
|
|
20 |
|
|
20 |
|
Operating Cash Flow as
defined in Senior Credit Agreement |
101 |
|
|
158 |
|
|
150 |
|
Interest expense |
(58 |
) |
|
(58 |
) |
|
(58 |
) |
Amortization of deferred financing costs |
3 |
|
|
3 |
|
|
3 |
|
Amortization of net original issue premium on |
|
|
|
|
|
|
|
|
5.875% senior notes due 2026 |
- |
|
|
- |
|
|
- |
|
Preferred dividends |
(13 |
) |
|
(13 |
) |
|
(13 |
) |
Purchase of property and equipment |
(18 |
) |
|
(11 |
) |
|
(9 |
) |
Reimbursements of property and equipment purchases |
12 |
|
|
1 |
|
|
|
|
Income taxes paid, net of refunds |
- |
|
|
(9 |
) |
|
- |
|
Free Cash
Flow |
$ |
27 |
|
|
$ |
71 |
|
|
$ |
73 |
|
Reconciliation of Total Leverage Ratio, Net of All Cash,
in millions except for ratio:
|
Eight Quarters Ended |
|
|
March 31, 2019 |
|
Operating Cash Flow as
defined in our Senior Credit Agreement: |
|
|
Net income |
$ |
443 |
|
Adjustments to reconcile from net income (loss) to Operating |
|
|
Cash Flow as defined in our Senior Credit Agreement: |
|
|
Depreciation |
113 |
|
Amortization of intangible assets |
69 |
|
Non-cash stock-based compensation |
16 |
|
(Gain) loss on disposal of assets, net |
(101 |
) |
Miscellaneous (income) expense, net |
(2 |
) |
Interest expense |
236 |
|
Loss from early extinguishment of debt |
1 |
|
Income tax (benefit) expense |
4 |
|
Amortization of program broadcast rights |
47 |
|
Common stock contributed to 401(k) plan |
4 |
|
Payments for program broadcast rights |
(52 |
) |
Pension expense |
(1 |
) |
Contributions to pension plans |
(5 |
) |
Adjustments for stations acquired or divested, financings and
expected synergies during the eight quarter
period |
737 |
|
Professional fees related to acquisitions and divestitures |
31 |
|
Operating Cash Flow as
defined in our Senior Credit Agreement |
$ |
1,540 |
|
Operating Cash Flow as
defined in our Senior Credit Agreement, divided by
two |
$ |
770 |
|
|
|
|
|
March 31, 2019 |
|
Adjusted Total
Indebtedness: |
|
|
Total outstanding principal, including current portion |
$ |
3,967 |
|
Capital leases and other debt |
- |
|
Cash |
(225 |
) |
Adjusted Total
Indebtedness, Net of All Cash |
$ |
3,742 |
|
Total Leverage Ratio,
Net of All Cash |
4.86 |
|
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