ATLANTA, Nov. 5, 2014 /PRNewswire/ -- Gray Television,
Inc. ("Gray," "we," "us" or "our") (NYSE: GTN and GTN.A) today
announced results of operations for the three-month period (the
"third quarter of 2014") and nine-month period ended September 30, 2014. Revenue for both the
third quarter of 2014 and the just-concluded nine-month period set
new records for the Company. In addition, our revenue was at
the high end of the range of our previously issued guidance of
$128.0 million to $132.0 million; our
broadcast expenses were below the range of our previously issued
guidance of $74.0 million to $75.0
million and our corporate and administrative expenses were
below the range of our previously issued guidance of $5.5 million to $6.0 million.
During the nine-month period ended September 30, 2014, we completed six
acquisitions. During the third quarter of 2014, we completed the
acquisition of WJRT-TV and WTVG-TV, which serve the Flint-Saginaw-Bay City,
Michigan, and Toledo, Ohio,
television markets, respectively (the "SJL Acquisition"). The
stations acquired in the SJL Acquisition contributed $2.0 million of revenue and $0.9 million of broadcast expense to our results
for the third quarter of 2014. These amounts were not considered in
developing our previously issued guidance for the third quarter of
2014. The financial results of all other acquisitions completed
during the nine-month period ended September
30, 2014 had been considered in connection with our
previously issued guidance.
For the third quarters and nine-month periods ended September 30, 2014 and 2013, our revenue,
broadcast expense, corporate and administrative expense, net income
and certain non-GAAP cash flow amounts were as follows:
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2014
|
|
2013
|
|
%
Change
|
|
2014
|
|
2013
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (less agency
commissions):
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$ 131,702
|
|
$ 88,288
|
|
49 %
|
|
$ 330,248
|
|
$ 250,742
|
|
32 %
|
Political
|
$ 22,029
|
|
$ 1,377
|
|
1500 %
|
|
$ 33,437
|
|
$ 2,769
|
|
1108 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
(1):
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast
|
$ 73,218
|
|
$ 53,516
|
|
37 %
|
|
$ 199,604
|
|
$ 158,817
|
|
26 %
|
Corporate and
administrative
|
$ 5,271
|
|
$ 4,470
|
|
18 %
|
|
$ 21,618
|
|
$ 13,587
|
|
59 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$ 13,940
|
|
$ 7,073
|
|
97 %
|
|
$ 16,808
|
|
$ 13,087
|
|
28 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Cash Flow
(2):
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast Cash
Flow
|
$ 58,429
|
|
$ 34,603
|
|
69 %
|
|
$ 129,578
|
|
$ 91,419
|
|
42 %
|
Broadcast Cash Flow
Less
|
|
|
|
|
|
|
|
|
|
|
|
Cash Corporate
Expenses
|
$ 53,885
|
|
$ 30,388
|
|
77 %
|
|
$ 110,766
|
|
$ 79,551
|
|
39 %
|
Free Cash
Flow
|
$ 25,309
|
|
$ 13,319
|
|
90 %
|
|
$ 41,644
|
|
$ 27,021
|
|
54 %
|
|
(1) Excludes
depreciation, amortization and gain 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.
|
Highlights:
- We achieved record revenue for both the third quarter of 2014
and nine-month period ended September 30,
2014, as a result of increased revenue at our preexisting
stations, as well as the addition of revenue from our Acquired
Stations (defined below).
- Between October 31, 2013 and
September 30, 2014, we completed
eight acquisitions in which we acquired the operations of 19
television stations (the "Acquired Stations"). We are
successfully integrating the Acquired Stations into our station
group.
- Our only currently pending acquisitions are as follows:
(1) the acquisition of KKHD-LD and the programming of KJCT-TV in
Grand Junction, Colorado (2) the
programming of KXJB-TV in Fargo, North
Dakota and (3) the acquisition of KMTF-TV in Helena, Montana. The total consideration
remaining to be paid for these acquisitions is approximately
$3.7 million. We anticipate
closing these transactions in the fourth quarter of 2014.
- Corporate and administrative expense for the third quarter of
2014 included non-recurring expenses of $0.6
million of legal and other professional expenses associated
with our completed and pending acquisitions.
- For the periods ended September 30,
2014 and December 31, 2013,
our total leverage ratio calculated on a trailing eight quarter
basis under the terms of our senior credit facility was 6.3 and
5.7, respectively.
Comments on Results of Operations for the Three-Month Period
Ended September 30,
2014:
Revenue As Reported.
Total revenue increased $43.4
million, or 49%, to $131.7
million for the third quarter of 2014 compared to the third
quarter of 2013. For the third quarters of 2014 and 2013, the
Acquired Stations accounted for approximately $28.2 million and $0.0
million of our total revenue, respectively.
The principal components of our revenue for the third quarter of
2014 compared to the third quarter of 2013 were as follows:
- Local advertising revenue increased $13.3 million, or 27%, to $62.0 million.
- National advertising revenue increased $2.6 million, or 19%, to $16.2 million.
- Local and national advertising revenue combined increased
$15.9 million, or 25%, to
$78.2 million.
- Internet advertising revenue increased $1.0 million, or 15%, to $7.4 million.
- Political advertising revenue increased $20.7 million, or 1500%, to $22.0 million.
- Retransmission consent revenue increased $10.5 million, or 115%, to $19.7 million.
- Other revenue increased $2.6
million, or 142%, to $4.4
million.
- Consulting revenue decreased $7.1
million to $0.0 million.
Political advertising revenue increased due to increased
advertising by political candidates, political parties and special
interest groups in the "on year" of the two-year election cycle.
Retransmission consent revenue increased primarily due to increased
subscriber rates. During the third quarter of 2013, we
recognized a one-time payment of $7.1
million as incentive consulting revenue associated with a
now-expired consulting agreement. We did not recognize any
consulting revenue in the third quarter of 2014.
Strong demand for our advertising inventory from political
advertisers affected advertising revenue from our non-political
advertising revenue categories. Excluding revenue
attributable to the Acquired Stations and political advertisers,
our five largest advertising categories on a combined local and
national basis by customer type for the third quarter of 2014
demonstrated the following changes in revenue during the third
quarter of 2014 compared to the third quarter of 2013:
- automotive decreased 3%;
- medical increased less than 1%;
- restaurant decreased 8%;
- communications decreased 15%; and
- furniture and appliances decreased 16%.
Revenue on a Combined Historical Basis.
In order to provide more meaningful period over period
comparisons, we also present herein certain historical revenue and
broadcast expense information on a "Combined Historical Basis."
Combined Historical Basis reflects financial results that
have been prepared by adding Gray's historical revenue and
broadcast expenses with the historical revenue and broadcast
expenses of each of the Acquired Stations from January 1, 2013 (the beginning of the earliest
period presented), but it does not include any adjustments for
other events attributable to the acquisitions.
On a Combined Historical Basis, total revenue increased
$19.5 million, or 16%, to
$139.4 million in the third quarter
of 2014 as compared to the third quarter of 2013.
On a Combined Historical Basis, the principal components of
revenue for the third quarter of 2014 compared to the third quarter
of 2013 were approximately as follows:
- Local advertising revenue decreased $0.9
million, or 1%, to $66.3
million.
- National advertising revenue decreased $1.6 million, or 8%, to $17.2 million.
- Local and national advertising revenue combined decreased
$2.4 million, or 3%, to $83.5 million reflecting, in part, the strong
demand on advertising inventory from political advertisers.
- Internet advertising revenue increased $0.4 million, or 5%, to $7.5 million.
- Political advertising revenue increased $21.3 million, or 1184%, to $23.1 million.
- Retransmission consent revenue increased $7.0 million, or 51%, to $20.9 million.
- Other revenue increased $0.4
million, or 10%, to $4.4
million.
- Consulting revenue decreased $7.1
million to $0.0 million.
Broadcast Operating Expenses As Reported.
Broadcast expenses (before depreciation, amortization and loss
on disposal of assets) increased $19.7
million, or 37%, to $73.2
million for the third quarter of 2014 compared to the third
quarter of 2013. For the third quarters of 2014 and 2013, the
Acquired Stations accounted for approximately $15.8 million and $0.0
million of our total broadcast expenses,
respectively.
- Compensation expense increased $9.6
million due primarily to the net of the following:
- Salary expense increased $7.6
million resulting primarily from the addition of personnel
at the Acquired Stations.
- Incentive compensation increased $1.0
million.
- Healthcare costs increased $0.3
million reflecting increased claim activity.
- Non-cash stock-based compensation increased $0.3 million. Broadcast non-cash
stock-based compensation expense increased due to the grant of
restricted common stock to certain employees in 2014.
- Pension expense decreased $0.6
million.
- Non-compensation expense increased $10.1
million due primarily to the following:
- Network affiliation fees increased $3.4
million reflecting in part, increased fees payable to the
ABC network under our affiliation agreements that renewed January
1, 2014.
- National sales representation fees increased $1.2 million due to commissions paid on increased
revenue.
- Syndicated programming costs, software license fees, consulting
fees expense and other professional fees also increased.
Broadcast Operating Expenses on a Combined Historical
Basis.
On a Combined Historical Basis, broadcast expenses (before
depreciation, amortization and loss (gain) on disposal of assets)
increased $4.7 million, or 6%, to
$78.2 million for the third quarter
of 2014 compared to the third quarter of 2013.
Corporate Operating Expenses As Reported.
Corporate and administrative expenses (before depreciation,
amortization and loss on disposal of assets) increased $0.8 million, or 18%, to $5.3 million.
- Non-compensation expense increased $0.6
million primarily due to increases in legal and other
professional fees associated with our completed and pending
acquisitions.
- Compensation expense increased $0.2
million primarily due to increases in non-cash stock-based
compensation and routine increases in salary expense.
Comments on Results of Operations for the Nine-Month Period
Ended September 30,
2014:
Revenue as Reported.
Total revenue increased $79.5
million, or 32%, to $330.2
million for the nine months ended September 30, 2014 compared to the nine months
ended September 30, 2013. For the
nine months ended September 30, 2014
and 2013, the Acquired Stations accounted for approximately
$40.7 million and $0.0 million of our total revenue,
respectively.
The principal components of our revenue for the nine months
ended September 30, 2014 compared to
the nine months ended September 30,
2013 were as follows:
- Local advertising revenue increased $23.7 million, or 16%, to $169.8 million.
- National advertising revenue increased $2.3 million, or 5%, to $44.3 million.
- Local and national advertising revenue combined increased
$26.0 million, or 14%, to
$214.1 million.
- Internet advertising revenue increased $2.2 million, or 12%, to $20.7 million.
- Political advertising revenue increased $30.7 million, or 1108%, to $33.4 million.
- Retransmission consent revenue increased $25.2 million, or 89%, to $53.5 million.
- Other revenue increased $2.6
million, or 42%, to $8.6
million.
- Consulting revenue decreased $7.1
million to $0.0 million.
Political advertising revenue reflected increased advertising by
political candidates, political parties and special interest groups
during the "on year" of the two-year political advertising cycle.
Retransmission consent revenue increased primarily due to increased
subscriber rates. Local and national advertising revenue in the
nine months ended September 30, 2014
benefited from approximately $3.8
million earned from the broadcast of the 2014 Winter Olympic
Games on our then fourteen NBC affiliated stations. There was no
corresponding Olympic Games advertising revenue during the nine
months ended September 30, 2013.
Local and national advertising revenue included the broadcast of
the 2014 Super Bowl on our then five FOX channels, which earned us
approximately $0.2 million, a
decrease of approximately $0.9
million compared to the broadcast of the 2013 Super Bowl on
our then 20 CBS channels that earned us approximately $1.1 million. As noted in our discussion of our
revenue for the third quarter of 2014, we recorded a one-time
payment of $7.1 million during 2013
as incentive consulting revenue associated with a now-expired
consulting agreement.
Strong demand for our advertising inventory from political
advertisers affected advertising revenue from our non-political
advertising revenue categories. Excluding revenue attributable to
the Acquired Stations and political advertisers, our five largest
advertising categories on a combined local and national basis by
customer type for the nine-month period ended September 30, 2014 demonstrated the following
changes in revenue during the nine-month period ended September 30, 2014 compared to the nine-month
period ended September 30, 2013:
- automotive increased 4%;
- medical increased 5%;
- restaurant decreased 11%;
- communications decreased 8%; and
- furniture and appliances decreased 10%.
Revenue on a Combined Historical Basis.
On a Combined Historical Basis, total revenue increased
$50.0 million, or 15%, to
$393.9 million for the nine months
ended September 30, 2014 compared to
the nine months ended September 30,
2013.
On a Combined Historical Basis, the principal components of
revenue for the nine months ended September
30, 2014 compared to the nine months ended September 30, 2013 were approximately as
follows:
- Local advertising revenue increased $4.3
million, or 2%, to $205.2
million.
- National advertising revenue decreased $4.3 million, or 8%, to $52.8 million.
- Local and national advertising revenue combined decreased
$0.1 million, or 0%, to $257.9 million reflecting, in part, the strong
demand on advertising inventory from political advertisers.
- Internet advertising revenue increased $1.5 million, or 7%, to $22.0 million.
- Political advertising revenue increased $33.5 million, or 975%, to $37.0 million.
- Retransmission consent revenue increased $22.5 million, or 55%, to $63.7 million.
- Other revenue decreased $0.4
million, or 3%, to $13.4
million.
- Consulting revenue decreased $7.1
million to $0.0 million.
Broadcast Operating Expenses As Reported.
Broadcast expenses (before depreciation, amortization and loss
(gain) on disposal of assets) increased $40.8 million, or 26%, to $199.6 million for the nine-month period ended
September 30, 2014 compared to the
nine-month period ended September 30,
2013. For the nine months ended September 30, 2014 and 2013, the Acquired
Stations accounted for approximately $25.3
million and $0.0 million of
our total broadcast expenses, respectively.
- Compensation expense increased $19.2
million due primarily to the net of the following:
- Non-cash paid-time-off increased $3.9
million reflecting the non-cash increase in expense for
paid-time-off due to a change in our employee benefit policy. This
non-cash charge is a non-recurring charge.
- Salary expense increased $16.2
million resulting primarily from the addition of personnel
at the Acquired Stations.
- Healthcare costs increased $1.1
million reflecting increased claim activity.
- Non-cash stock-based compensation increased $1.2 million. Broadcast non-cash
stock-based compensation expense increased due to the grant of
restricted common stock to certain employees in 2014.
- Pension expense decreased $1.8
million.
- Non-compensation expense increased $21.6
million due primarily to the net of the following:
- Network affiliation fees increased $7.9
million reflecting, in part, increased fees payable to the
ABC network under our affiliation agreements that renewed January
1, 2014.
- National sales representation fees increased $1.8 million due to commissions paid on increased
revenue.
- Programming costs, software license fees, consulting fees, bad
debt expense and other professional fees also increased.
Broadcast Operating Expenses on a Combined Historical
Basis.
On a Combined Historical Basis, broadcast expenses (before
depreciation, amortization and loss (gain) on disposal of assets)
increased $18.5 million, or 8%, to
$236.3 million for the nine-month
period ended September 30, 2014
compared to the nine-month period ended September 30, 2013.
Corporate Operating Expenses As Reported.
Corporate and administrative expenses (before depreciation,
amortization and loss (gain) on disposal of assets) increased
$8.0 million, or 59%, to $21.6 million.
- Non-compensation expense increased $6.2
million primarily due to increases in legal and other
professional fees of $5.7 million
associated with our completed and pending acquisitions.
- Compensation expense increased $1.8
million primarily due to increases in non-cash stock-based
compensation expenses and routine increases in salary expense.
Detailed table of operating results:
Gray Television,
Inc.
|
Selected Operating
Data (Unaudited)
|
(in thousands except
for net income per share data)
|
|
|
|
Three Months
Ended
|
|
September
30,
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
Revenue (less agency
commissions)
|
$ 131,702
|
|
$ 88,288
|
Operating expenses
before depreciation, amortization
|
|
|
|
and loss on disposal
of assets, net:
|
|
|
|
Broadcast
|
73,218
|
|
53,516
|
Corporate and
administrative
|
5,271
|
|
4,470
|
Depreciation
|
8,228
|
|
6,024
|
Amortization of
intangible assets
|
3,823
|
|
9
|
Loss on disposals of
assets, net
|
6
|
|
49
|
Operating
expenses
|
90,546
|
|
64,068
|
Operating
income
|
41,156
|
|
24,220
|
Other income
(expense):
|
|
|
|
Miscellaneous income
(expense), net
|
11
|
|
-
|
Interest
expense
|
(18,619)
|
|
(12,656)
|
Income before income
tax
|
22,548
|
|
11,564
|
Income tax
expense
|
8,608
|
|
4,491
|
Net income
|
$ 13,940
|
|
$ 7,073
|
|
|
|
|
Basic per share
information:
|
|
|
|
Net income
|
$ 0.24
|
|
$ 0.12
|
Weighted-average
shares outstanding
|
57,863
|
|
57,713
|
|
|
|
|
Diluted per share
information:
|
|
|
|
Net income
|
$ 0.24
|
|
$ 0.12
|
Weighted-average
shares outstanding
|
58,394
|
|
58,078
|
|
|
|
|
Political advertising
revenue (less agency commissions)
|
$ 22,029
|
|
$ 1,377
|
Gray Television,
Inc.
|
Selected Operating
Data (Unaudited)
|
(in thousands except
for net income per share data)
|
|
|
|
Nine Months
Ended
|
|
September
30,
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
Revenue (less agency
commissions)
|
$ 330,248
|
|
$ 250,742
|
Operating
expenses before depreciation, amortization
|
|
|
|
and loss (gain) on
disposal of assets, net:
|
|
|
|
Broadcast
|
199,604
|
|
158,817
|
Corporate and
administrative
|
21,618
|
|
13,587
|
Depreciation
|
21,598
|
|
17,762
|
Amortization of
intangible assets
|
5,291
|
|
40
|
Loss (gain) on
disposals of assets, net
|
385
|
|
(56)
|
Operating
expenses
|
248,496
|
|
190,150
|
Operating
income
|
81,752
|
|
60,592
|
Other income
(expense):
|
|
|
|
Miscellaneous income,
net
|
14
|
|
-
|
Interest
expense
|
(49,718)
|
|
(37,790)
|
Loss from early
extinguishment of debt
|
(4,897)
|
|
-
|
Income before income
tax expense
|
27,151
|
|
22,802
|
Income tax
expense
|
10,343
|
|
9,715
|
Net income
|
$ 16,808
|
|
$ 13,087
|
|
|
|
|
Basic per share
information:
|
|
|
|
Net income
|
$ 0.29
|
|
$ 0.23
|
Weighted-average
shares outstanding
|
57,857
|
|
57,600
|
|
|
|
|
Diluted per share
information:
|
|
|
|
Net income
|
$ 0.29
|
|
$ 0.23
|
Weighted-average
shares outstanding
|
58,330
|
|
57,907
|
|
|
|
|
Political advertising
revenue (less agency commissions)
|
$ 33,437
|
|
$ 2,769
|
Other Financial Data:
|
September 30,
2014
|
|
December 31,
2013
|
|
(in
thousands)
|
|
|
|
|
Cash
|
$
79,807
|
|
$
13,478
|
Long-term debt
including current portion
|
$
1,306,470
|
|
$
842,874
|
Borrowing
availability under our senior credit facility
|
$
40,000
|
|
$
30,000
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2014
|
|
2013
|
|
(in
thousands)
|
|
|
|
|
Net cash provided by
operating activities
|
$
88,404
|
|
$
51,590
|
Net cash used in
investing activities
|
(477,066)
|
|
(19,603)
|
Net cash provided by
financing activities
|
454,991
|
|
266
|
Net increase in
cash
|
$
66,329
|
|
$
32,253
|
Guidance for the Three Months Ending December 31, 2014
(the "fourth quarter of 2014"):
We currently anticipate that our results of operations (which
include the expected results of operations of Excalibur
Broadcasting, LLC, a variable interest entity whose results are
consolidated with those of Gray in accordance with GAAP (as defined
below)) for the fourth quarter of 2014, will be within the ranges
presented in the table below. These estimates do not include any
impact from any pending acquisitions.
|
|
Low
End
|
|
%
Change
|
|
High
End
|
|
%
Change
|
|
|
|
|
Guidance
for
|
|
From
|
|
Guidance
for
|
|
From
|
|
Actual
|
|
|
the
Fourth
|
|
Actual
Fourth
|
|
the
Fourth
|
|
Actual
Fourth
|
|
Fourth
|
|
|
Quarter
of
|
|
Quarter
of
|
|
Quarter
of
|
|
Quarter
of
|
|
Quarter
of
|
Selected operating
data:
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2013
|
|
|
(dollars in
thousands)
|
OPERATING
REVENUE:
|
|
|
|
|
|
|
|
|
|
|
Revenue (less agency
commissions)
|
|
$ 171,000
|
|
79 %
|
|
$ 174,000
|
|
82 %
|
|
$ 95,556
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
(before depreciation,
amortization and
|
|
|
|
|
|
|
|
|
|
gain on disposals of
assets):
|
|
|
|
|
|
|
|
|
|
|
Broadcast
|
|
$ 84,500
|
|
44 %
|
|
$ 86,500
|
|
48 %
|
|
$ 58,594
|
Corporate and
administrative
|
|
$ 6,200
|
|
0 %
|
|
$ 6,500
|
|
4 %
|
|
$ 6,223
|
|
|
|
|
|
|
|
|
|
|
|
OTHER SELECTED
DATA:
|
|
|
|
|
|
|
|
|
|
|
Political advertising
revenue
|
|
|
|
|
|
|
|
|
|
|
(less agency
commissions)
|
|
$ 46,000
|
|
2415 %
|
|
$ 47,000
|
|
2470 %
|
|
$ 1,829
|
Comments on Fourth Quarter 2014 Guidance:
Fourth Quarter of 2014 on an "As Reported
Basis."
Based on our current forecasts for the fourth quarter of 2014,
we anticipate the following changes from the three-month period
ended December 31, 2013 (the "fourth
quarter of 2013") as outlined below. Our total revenue estimates
for the fourth quarter of 2014 include approximately $47.4 million of revenue estimated to be
contributed collectively by the Acquired Stations.
Revenue.
- We believe our fourth quarter of 2014 local advertising
revenue, excluding political advertising revenue, will increase by
approximately 28% to 32%.
- We expect our fourth quarter of 2014 national advertising
revenue, excluding political advertising revenue, will increase by
approximately 20% to 25%.
- We anticipate our fourth quarter of 2014 internet advertising
revenue, excluding political advertising revenue, will increase by
approximately 5% to 7%.
- We believe our fourth quarter of 2014 retransmission consent
revenue will increase by approximately 88%, or $10.1 million, to $21.6
million.
Operating expenses (before depreciation, amortization and
gain on disposal of assets).
Our total broadcast operating expense estimates for the fourth
quarter of 2014 include approximately $21.4
million of broadcast operating expense estimated to be
incurred collectively by the Acquired Stations.
The anticipated increase in corporate and administrative expense
for the fourth quarter 2014 compared to the fourth quarter of 2013
is expected to be due primarily to increases in incentive
compensation and legal fees.
Fourth Quarter of 2014 on a "Combined Historical
Basis".
Based on our current forecasts for the fourth quarter of 2014,
we anticipate the following changes from the Combined Historical
Basis fourth quarter of 2013 as outlined below.
Revenue:
- We believe our fourth quarter of 2014 total revenue will
increase by approximately 35% to 37%.
- We believe our fourth quarter of 2014 local advertising
revenue, excluding political advertising revenue, will decrease
slightly by low single digits.
- We expect our fourth quarter of 2014 national advertising
revenue, excluding political advertising revenue, will decrease
slightly by low single digits.
- These anticipated results of local and national advertising
revenue, excluding political advertising reflect, in part, the
strong demand for our available advertising inventory from
political advertisers during the fourth quarter of 2014.
- We anticipate our fourth quarter of 2014 internet advertising
revenue, excluding political advertising revenue, will be generally
consistent with our 2013 results.
- We believe our fourth quarter of 2014 political revenue will
range between $46.0 million and $47.0
million bringing anticipated full year 2014 political
revenue to range between $83.0 million and
$84.0 million. Our fourth quarter of 2013 political revenue
was approximately $2.7 million.
- We believe our fourth quarter of 2014 retransmission consent
revenue will increase by approximately 35% to approximately
$21.6 million.
Operating expenses (before depreciation, amortization and
gain on disposal of assets) on a Combined Historical
Basis:
Our total broadcast operating expenses for the fourth quarter of
2014 are anticipated to increase from the fourth quarter of 2013 on
a Combined Historical Basis by approximately $6.7 million. This increase reflects
expected increases in network affiliation fees of $2.7 million (reflecting, in part, increased fees
payable to the ABC network for our affiliation agreements that
renewed January 1, 2014) and an increase of approximately
$2.0 million in national sales
representative commissions expected to be payable in the fourth
quarter of 2014 on anticipated political revenue.
Revenue (less agency commissions) by Category:
The table below presents our revenue (less agency commissions)
or "net revenue" by type for the three-month and nine-month periods
ended September 30, 2014 and 2013,
respectively (dollars in thousands):
|
|
Three Months Ended
September 30,
|
|
|
2014
|
|
2013
|
|
|
|
|
Percent
|
|
|
|
Percent
|
|
|
Amount
|
|
of
Total
|
|
Amount
|
|
of
Total
|
Revenue (less
agency commissions):
|
|
|
|
|
|
|
Local
|
|
$ 62,029
|
|
47.1%
|
|
$ 48,728
|
|
55.2%
|
National
|
|
16,158
|
|
12.3%
|
|
13,585
|
|
15.4%
|
Internet
|
|
7,431
|
|
5.6%
|
|
6,476
|
|
7.3%
|
Political
|
|
22,029
|
|
16.7%
|
|
1,377
|
|
1.6%
|
Retransmission
consent
|
|
19,674
|
|
14.9%
|
|
9,165
|
|
10.4%
|
Other
|
|
4,381
|
|
3.4%
|
|
1,814
|
|
2.1%
|
Consulting
|
|
-
|
|
0.0%
|
|
7,143
|
|
8.0%
|
Total
|
|
$ 131,702
|
|
100.0%
|
|
$ 88,288
|
|
100.0%
|
|
|
Nine Months Ended
September 30,
|
|
|
2014
|
|
2013
|
|
|
|
|
Percent
|
|
|
|
Percent
|
|
|
Amount
|
|
of
Total
|
|
Amount
|
|
of
Total
|
Revenue (less
agency commissions):
|
|
|
|
|
|
|
Local
|
|
$ 169,751
|
|
51.4%
|
|
$ 146,025
|
|
58.2%
|
National
|
|
44,332
|
|
13.4%
|
|
42,061
|
|
16.8%
|
Internet
|
|
20,676
|
|
6.3%
|
|
18,439
|
|
7.4%
|
Political
|
|
33,437
|
|
10.1%
|
|
2,769
|
|
1.1%
|
Retransmission
consent
|
|
53,450
|
|
16.2%
|
|
28,253
|
|
11.3%
|
Other
|
|
8,602
|
|
2.6%
|
|
6,052
|
|
2.4%
|
Consulting
|
|
-
|
|
0.0%
|
|
7,143
|
|
2.8%
|
Total
|
|
$ 330,248
|
|
100.0%
|
|
$ 250,742
|
|
100.0%
|
The aggregate internet revenues presented above are derived
from: (i) direct internet revenue and (ii) internet-related
commercial time sales.
Non-GAAP Terms
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, operating cash flow as defined in Gray's credit
facility ("Operating Cash Flow") and Free Cash Flow. These
non-GAAP amounts are used by us to approximate the amount used to
calculate a key financial performance covenant contained in our
debt agreements.
Broadcast Cash Flow is defined as net income plus corporate and
administrative expenses, loss from early extinguishment of debt,
broadcast non-cash stock based compensation, depreciation and
amortization (including amortization of intangible assets and
program broadcast rights), any loss on disposal of assets, any
miscellaneous expense, interest expense, any income tax expense,
non-cash 401(k) expense, less any gain on disposal of assets, any
miscellaneous income, any income tax benefits, payments for program
broadcast obligations and network compensation revenue.
Broadcast Cash Flow Less Cash Corporate Expense is defined
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, non-cash 401(k) expense less any
gain on disposal of assets, any miscellaneous income, any income
tax benefits, payments for program broadcast obligations and
network compensation revenue.
Free Cash Flow is defined 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, non-cash 401(k) expense, pension expense less any gain on
disposal of assets, any miscellaneous income, any income tax
benefits, payments for program broadcast obligations, network
compensation revenue, contributions to pension plans, interest
expense (net of amortization of deferred financing costs and
amortization of original issue discount on our debt), capital
expenditures (net of any insurance proceeds) and the payment of
income taxes (net of any refunds received).
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.
Reconciliations:
Reconciliation of net income to the non-GAAP terms (dollars in
thousands):
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net income
|
$ 13,940
|
|
$ 7,073
|
|
$ 16,808
|
|
$ 13,087
|
Adjustments to
reconcile from net income to
|
|
|
|
|
|
|
|
Broadcast Cash
Flow Less Cash Corporate Expenses:
|
|
|
|
|
|
|
|
Depreciation
|
8,228
|
|
6,024
|
|
21,598
|
|
17,762
|
Amortization of
intangible assets
|
3,823
|
|
9
|
|
5,291
|
|
40
|
Non-cash stock based
compensation
|
981
|
|
255
|
|
4,032
|
|
1,719
|
Loss (gain) on
disposals of assets, net
|
6
|
|
49
|
|
385
|
|
(56)
|
Miscellaneous
(income) expense, net
|
(11)
|
|
-
|
|
(14)
|
|
-
|
Interest
expense
|
18,619
|
|
12,656
|
|
49,718
|
|
37,790
|
Loss from early
extinguishment of debt
|
-
|
|
-
|
|
4,897
|
|
-
|
Income tax
expense
|
8,608
|
|
4,491
|
|
10,343
|
|
9,715
|
Amortization of
program broadcast rights
|
3,309
|
|
2,829
|
|
9,227
|
|
8,492
|
Common stock
contributed to 401(k) plan
|
|
|
|
|
|
|
|
excluding corporate
401(k) contributions
|
6
|
|
7
|
|
18
|
|
21
|
Network compensation
revenue recognized
|
(122)
|
|
(156)
|
|
(343)
|
|
(470)
|
Payments for program
broadcast rights
|
(3,502)
|
|
(2,849)
|
|
(11,194)
|
|
(8,549)
|
Corporate and
administrative expenses excluding
|
|
|
|
|
|
|
|
depreciation,
amortization of intangible assets and
|
|
|
|
|
|
|
|
non-cash stock based
compensation
|
4,544
|
|
4,215
|
|
18,812
|
|
11,868
|
Broadcast Cash
Flow
|
58,429
|
|
34,603
|
|
129,578
|
|
91,419
|
Corporate and
administrative expenses excluding
|
|
|
|
|
|
|
|
depreciation,
amortization of intangible assets and
|
|
|
|
|
|
|
|
non-cash stock based
compensation
|
(4,544)
|
|
(4,215)
|
|
(18,812)
|
|
(11,868)
|
Broadcast Cash
Flow Less Cash Corporate Expenses
|
53,885
|
|
30,388
|
|
110,766
|
|
79,551
|
Pension
expense
|
1,518
|
|
2,156
|
|
4,611
|
|
6,464
|
Contributions to
pension plans
|
(1,996)
|
|
(1,082)
|
|
(4,713)
|
|
(3,686)
|
Interest
expense
|
(18,619)
|
|
(12,656)
|
|
(49,718)
|
|
(37,790)
|
Amortization of
deferred financing costs
|
764
|
|
412
|
|
2,158
|
|
1,235
|
Amortization of
original issue (premium) or discount on Notes
|
(215)
|
|
69
|
|
(647)
|
|
206
|
Purchase of property
and equipment
|
(9,996)
|
|
(5,953)
|
|
(20,452)
|
|
(18,441)
|
Income taxes paid,
net of refunds
|
(32)
|
|
(15)
|
|
(361)
|
|
(518)
|
Free Cash
Flow
|
$ 25,309
|
|
$ 13,319
|
|
$ 41,644
|
|
$ 27,021
|
See the previous page for the definition of Non-GAAP terms.
The Company
We are a television broadcast company headquartered in
Atlanta, Georgia, that owns and/or
operates television stations and leading digital assets in markets
throughout the United States. Upon completion of all pending
transactions, we will own and/or operate television stations in 44
television markets broadcasting 139 program streams including 76
affiliates of the Big Four networks (ABC, CBS, NBC and FOX).
At that time, our owned and/or operated stations will include 26
channels affiliated with the CBS Network, 24 channels affiliated
with the NBC Network, 16 channels affiliated with the ABC Network
and 10 channels affiliated with the FOX Network. We will then
own and/or operate the number-one ranked television station in 29
of those 44 markets and the number-one or number-two ranked
television station operations in 40 of those 44 markets. We
reach approximately 8.1 percent 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 fourth quarter of 2014 or other periods,
future expenses, the completion of pending acquisitions 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 November 5, 2014. 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, 2013 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 5,
2014. The call will begin at 10:00 AM
Eastern Time. The live dial-in number is 1 (800)
499-4035 and the confirmation code is 3796251. The call will
be webcast live and available for replay at www.gray.tv. The
taped replay of the conference call will be available at 1 (888)
203-1112, Confirmation Code: 3796251 until December 5, 2014.
SOURCE Gray Television, Inc.