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Gray Television Inc. Reports Operating Results (10-Q)

November 08, 2010 | About:
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10qk

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Gray Television Inc. (GTN) filed Quarterly Report for the period ended 2010-09-30.

Gray Television Inc. has a market cap of $105.34 million; its shares were traded at around $2.05 with and P/S ratio of 0.39. GTN is in the portfolios of Mario Gabelli of GAMCO Investors, Columbia Wanger of Columbia Wanger Asset Management.

Highlight of Business Operations:

Revenue. Total revenue increased $18.9 million, or 28%, to $85.3 million in the 2010 three-month period due primarily to increased political advertising revenue and also due to increases in local, national and internet advertising revenues, retransmission consent revenue, production and other revenue and consulting revenue. Local advertising revenues increased approximately $3.1 million, or 8%, to $44.3 million. National advertising revenues increased approximately $1.5 million, or 12%, to $14.3 million. Internet advertising revenues increased $0.4 million, or 14%, to $3.3 million. Local, national and internet advertising revenue increased due to increased

Corporate and administrative expenses. Corporate and administrative expenses (before depreciation, amortization and gain on disposal of assets) increased $0.1 million, or 2%, to $3.4 million in the 2010 three-month period. The increase was due primarily to an increase in payroll expense of $0.5 million, partially offset by a decrease in relocation expense of $0.2 million and consulting expense of $0.1 million. The increase in payroll expense was due primarily to an increase of $0.7 million in accrued bonus compensation for certain executive officers, resulting from the revenues discussed above, partially offset by a decrease in non-cash stock-based compensation expense of $0.3 million. We recorded non-cash stock-based compensation expense during the three-month periods ended September 30, 2010 and 2009 of $57,000 and $346,000, respectively. Non-cash stock-based compensation expense decreased due to the majority of our outstanding stock options becoming fully vested. Relocation expense decreased due to the relocation of certain employees in 2009 three-month period, while no similar relocations took place in the 2010 three-month period. Consulting expense decreased due to the expiration, on December 31, 2009, of a consulting agreement with our former Chairman.

Revenue. Total revenue increased $38.6 million, or 20%, to $231.5 million in the 2010 nine-month period due primarily to increased political advertising revenue and also due to increased local, national and internet advertising revenue, retransmission consent revenue, production and other revenue and consulting revenue. These increases were partially offset by decreased network compensation revenue. Local advertising revenue increased approximately $10.0 million, or 8%, to $133.7 million. National advertising revenue increased approximately $4.0 million, or 11%, to $42.0 million. Internet advertising revenue increased $1.3 million, or 16%, to $9.5 million. Local, national and internet advertising revenue increased due to increased spending by advertisers in an improving economic environment. Advertising revenue categories by customer type, excluding political advertising, demonstrating significant improvement during the nine-month period ended September 30, 2010 compared to the nine-month period ended September 30, 2009 were: automotive, increasing 38%; financial and insurance services, increasing 16%; medical services, increasing 16%; supermarkets, increasing 12%; and home improvement, increasing 5%. Revenue categories reflecting period over period declines were: paid programming, decreasing 17%; communications, decreasing 10%; and restaurants, decreasing 8%. Net advertising revenue associated with the broadcast of the 2010 Super Bowl on our seventeen CBS-affiliated stations approximated $860,000 which was an increase from our approximately $750,000 of Super Bowl revenues earned in 2009 on our ten NBC-affiliated stations. In addition, results in the 2010 nine-month period benefited from approximately $2.8 million of net revenues earned from the broadcast of the 2010 Winter Olympic Games on our NBC-affiliated stations. There was no corresponding broadcast of Olympic Games during the 2009 nine-month period. Political advertising revenue increased $19.4 million, or 386%, to $24.4 million, reflecting increased advertising from political candidates during the on year of the two-year political advertising cycle. Retransmission consent revenue increased $2.1 million, or 17%, to $14.0 million due to the improved terms of our retransmission contracts compared to those in effect during

Broadcast expenses. Broadcast expenses (before depreciation, amortization and gain on disposal of assets) increased $6.5 million, or 5%, to $143.5 million in the 2010 nine-month period, due primarily to increases in payroll expense of $5.2 million, national sales representation expense of $1.4 million, employee benefit expense of $0.1 million and market research expense of $0.2 million, partially offset by decreases in electricity expense of $0.4 million and bad debt expense of $0.4 million. Payroll expense increased primarily due to increases in sales and certain other accrued incentive compensation of $4.7 million due to the increase in advertising revenue discussed above. National sales representation expense is equal to a certain percentage of our national sales revenue (including certain political advertising revenue) and increases as this revenue increases. Employee benefit expense increased due to an increase in pension expense of $0.7 million which was largely offset by a decrease in health care expense of $0.6 million. Bad debt expense decreased primarily due to an improvement in the quality of our accounts receivable balances. We attribute this to an improving economy and an increased focus on collections. Electricity expenses decreased due to the discontinuance of our analog broadcasts.

Corporate and administrative expenses. Corporate and administrative expenses (before depreciation, amortization and gain on disposal of assets) decreased $0.8 million, or 7%, to $10.1 million for the 2010 nine-month period. The decrease was due primarily to a decrease in relocation expense of $0.6 million, consulting expense of $0.4 million and legal expense of $0.5 million partially offset by an increase in payroll expense of $1.0 million. Relocation expense decreased due to the relocation of certain employees in 2009 nine-month period, while no similar relocations took place in the 2010 nine-month period. Consulting expense decreased due to the expiration, on December 31, 2009, of a consulting agreement with our former Chairman. Legal expense decreased due to a decrease in the number of retransmission consent revenue contracts being negotiated in the current period compared to the comparable period of the prior year. The increase in payroll expense was due primarily to an increase in bonus compensation expense partially offset by a decrease in non-cash stock-based compensation. Bonus compensation expense increased due to the payment of $1.05 million in bonuses to certain executive officers. In addition, bonus compensation expense increased $0.7 million reflecting the accrual of certain incentive compensation for certain executive officers in the third quarter of 2010 resulting from the increase in revenues discussed above. No bonus payments had been made to or accrued for these individuals in 2009. Non-cash stock-based compensation expense decreased $0.8 million due to the majority of our outstanding stock options becoming fully vested. We recorded non-cash stock-based compensation expense during the nine-month periods ended September 30, 2010 and 2009 of $274,000 and $1,044,000, respectively.

Excluding accrued interest, the amount outstanding under our senior credit facility as of September 30, 2010 was $498.4 million comprised of a term loan balance of $487.3 million and a long-term accrued facility fee of $11.1 million. Excluding accrued interest, the amount outstanding under our senior credit facility as of December 31, 2009 was $810.1 million comprised of a term loan balance of $791.8 million and a long-term accrued facility fee of $18.3 million. Our long-term accrued facility fee is due and payable December 31, 2014 coincident with the maturity date of our term loan. Under the revolving loan portion of our senior credit facility, the maximum borrowing availability, subject to covenant restrictions, was $40.0 million and $50.0 million as of September 30, 2010 and December 31, 2009, respectively. The amount that we can draw under our revolving loan is limited by the restrictive covenants in our senior credit facility. As of September 30, 2010 and December 31, 2009, we could have drawn $40.0 million and $31.7 million, respectively, of the maximum availability under the revolving loan. As of September 30, 2010 and December 31, 2009, we were in compliance with all covenants required under our debt agreements.

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