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

November 09, 2009 | About:
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10qk

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Gray Television Inc. (GTN) filed Quarterly Report for the period ended 2009-09-30.

Gray Television Inc. has a market cap of $89.15 million; its shares were traded at around $2.08 with and P/S ratio of 0.27.

Highlight of Business Operations:

Revenue. Total revenue decreased $16.2 million, or 20%, to $66.4 million in the 2009 three-month period due primarily to decreased local, national and political advertising revenues and decreased production and other revenue. These decreases were partially offset by increased retransmission consent revenue and consulting revenue in the current period. Retransmission consent revenue increased $3.6 million, or 466%, to $4.3 million reflecting the more profitable terms of our recently renewed contracts. Consulting revenue increased to $0.3 million due to a new agreement for our consulting services entered into with Young Broadcasting, Inc. This consulting agreement was effective August 10, 2009. We anticipate that we will provide certain consulting services to Young Broadcasting, Inc. through December 31, 2012 in exchange for annual payments of $2.2 million. Local advertising revenues decreased approximately $5.1 million, or 11%, to $41.1 million. National advertising revenues decreased approximately $4.8 million, or 27%, to $12.8 million. Local and national advertising revenue decreased due to reduced spending by advertisers due to the current economic recession. Historically, our industrys largest advertiser category has been the automotive industry. The current recession has significantly reduced the automotive industrys advertising expenditures. In the 2009 three-month period, automotive advertising revenue decreased approximately 33% compared to the 2008 three-month period. In addition, during the 2008 three-month period we earned a total of $3.4 million of net revenue from local and national advertisers during the broadcast of the 2008 Summer Olympics on our ten NBC stations. There are no Olympic Game broadcasts during 2009. Political advertising revenues decreased $10.0 million, or 76%, to $3.1 million in the 2009 three-month period reflecting decreased advertising from political candidates during the off year of the two-year political advertising cycle. Production and other revenue decreased $0.1 million, or 6%, to $1.7 million in the 2009 three-month period.

Broadcast expenses. Broadcast expenses (before depreciation, amortization and gain on disposal of assets) decreased $3.7 million, or 7%, to $46.2 million in the 2009 three-month period due primarily to a reduction in compensation expense of $1.3 million, professional service expenses of $1.1 million, facility fees of $0.4 million and syndicated programming expense of $0.3 million. Compensation expense decreased primarily due to a reduction in the number of employees. As of September 30, 2009 and 2008, we employed 2,202 and 2,313 full and part-time employees, respectively, in our broadcast operations. Professional service expenses decreased primarily due to lower national representation fees, which are paid based upon a percentage of our national revenue. Facility fees decreased primarily due to lower electricity expense resulting from the discontinuance of our analog broadcasts.

profitable terms of our recently renewed contracts. Consulting revenue increased to $0.3 million due to a new agreement for our consulting services entered into with Young Broadcasting, Inc. Local advertising revenue decreased approximately $17.8 million, or 13%, to $123.7 million. National advertising revenue decreased approximately $14.3 million, or 27%, to $38.0 million. Local and national advertising revenue decreased due to reduced spending by advertisers in the current economic recession. Historically, our industrys largest advertiser category has been the automotive industry. The current recession has significantly reduced the automotive industrys advertising expenditures. Our 2009 nine-month period automotive advertising revenue decreased approximately 41% compared to the prior year period. In addition, during the 2008 nine-month period we earned a total of $3.4 million of net revenue from local and national advertisers during the broadcast of the 2008 Summer Olympics on our ten NBC stations. There are no Olympic Game broadcasts during 2009. The negative effects of the recession were partially offset by increased advertising during the 2009 Super Bowl. Net advertising revenue associated with the broadcast of the 2009 Super Bowl on our ten NBC affiliated stations approximated $750,000, which was an increase from the approximate $130,000 of Super Bowl revenues earned in 2008 on our then six FOX affiliated channels. Internet advertising revenue decreased $0.4 million, or 5%, to $8.2 million for the 2009 nine-month period due to the same factors affecting our local and national advertising revenue but to a lesser extent. Political advertising revenue decreased $16.1 million, or 76%, to $5.0 million for the 2009 nine-month period reflecting decreased advertising from political candidates during the off year of the two-year political advertising cycle. Production and other revenue decreased $0.8 million, or 14%, to $5.2 million for the 2009 nine-month period.

Broadcast expenses. Broadcast expenses (before depreciation, amortization and gain on disposal of assets) decreased $11.4 million, or 8%, to $137.0 million in the 2009 nine-month period due primarily to a reduction in compensation expense of $5.8 million, professional service expense of $1.8 million, facility fees of $0.7 million, supply fees of $0.6 million and syndicated programming expense of $0.4 million. Compensation expense decreased primarily due to a reduction in the number of employees. As of September 30, 2009 and 2008, we employed 2,202 and 2,313 full and part-time employees, respectively, in our broadcast operations. Professional service expense decreased primarily due to lower national representation fees, which are paid based upon a percentage of our national revenue. Facility fees decreased primarily due to lower electricity expense resulting from the discontinuance of our analog broadcasts. Supply fees decreased due to lower gasoline costs and improved controls on supply purchases.

Corporate and administrative expenses. Corporate and administrative expenses (before depreciation, amortization and gain on disposal of assets) increased $0.9 million, or 9%, to $10.9 million for the 2009 nine-month period. The increase was due primarily to an increase in relocation expense of $0.6 million, an increase in legal expense of $0.5 million and an increase in severance expense of $0.1 million. These increases were partially offset by a decrease in market research consulting expense of $0.4 million. We currently believe the relocation cost incurred in the 2009 period will not recur in future years to the same extent as 2009. Also, approximately $0.4 million of the increased legal costs was attributable to the negotiation and documentation of our new retransmission consent agreements and such cost is not anticipated to recur in future years to the same extent. During the 2009 nine-month period and the 2008 nine-month period, we recorded non-cash stock-based compensation expense of $1.0 million and $1.1 million, respectively.

The amount outstanding under our senior credit facility as of September 30, 2009 and December 31, 2008 was $793.8 million and $800.4 million, respectively, comprised solely of the term loan. Under the revolving loan of our amended senior credit facility, the maximum credit available under the facility is $50.0 million. The amount that we can draw upon the revolving loan is limited by the restrictive covenants of our senior credit facility. As of September 30, 2009 and December 31, 2008, we could have drawn $29.2 million and $12.3 million, respectively, of the $50 million maximum amount under the revolving loan.

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