Gray Reports Operating Results for the Three Months and Six Months Ended June 30, 2007

Gray Reports Operating Results for the Three Months and Six Months Ended June 30, 2007

ATLANTA, Aug. 6 /PRNewswire-FirstCall/ -- Gray Television, Inc. ("Gray", "we" or "us") (NYSE:GTN) today announced results from operations for the three months ("second quarter") and six months ended June 30, 2007 as compared to the three months and six months ended June 30, 2006.

Refinancing Completed:

On March 19, 2007, we completed the refinancing of our senior credit facility. We used funds from the new senior credit facility to fund the payoff of all outstanding amounts under our former senior credit facility. During the second quarter, we drew additional amounts under the new credit facility to fund the redemption of all of our 9.25% Senior Subordinated Notes due 2011 ("9.25% Notes") and our Series C Preferred Stock.

Comments on As Reported Results of Operations for the Three Months Ended June 30, 2007:

For the three months ended June 30, 2007 and 2006, we did not complete any acquisitions or disposals of properties; therefore, the following comments are on our "as reported" results.

Revenues.

On an as reported basis, total net revenue for all stations decreased $1.6 million, or 2%, to $79.8 million due primarily to decreased political advertising revenues and decreased national advertising revenues partially offset by increased local advertising revenue in the current year.

       On an as reported basis, political advertising revenues decreased $2.1       million, or 44%, to $2.6 million reflecting the influence of the 2006       elections.        On an as reported basis, local advertising revenue increased $1.7       million, or 3%, to $54.3 million and national advertising revenue       decreased $1.5 million, or 7%, to $19.9 million.    Operating expenses.  

On an as reported basis, total broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $3.5 million, or 8%, to $49.0 million.

       Operation of our digital second channels is attributed for $1.0       million of the overall increase and reflects the expansion of the       number of digital second channels to 39 as of June 30, 2007.        The remaining $2.5 million of the overall increase is attributable to       the operation of our primary channels and reflects routine increases       in payroll, programming and promotion.        Total aggregate broadcast expenses (before depreciation, amortization       and loss on disposal of assets) for all the primary channels and all       the digital second channels was approximately 1% less than       management's operating targets for the three months ended June 30,       2007.   

On an as reported basis, corporate and administrative expenses, before depreciation, amortization and loss on disposal of assets increased $0.7 million, or 23%, to $3.6 million due primarily to incremental increases in news research &/or consulting expense, legal expense and non-cash stock based compensation expense. We recorded non-cash stock based compensation expense during the three months ended June 30, 2007 and 2006 of $310,000 and $193,000, respectively.

Comments on Results of Operations for the Six Months Ended June 30, 2007:

Due to the significance of WNDU to our results of operations, Gray's pro forma broadcast results for the six months ended June 30, 2006 have been presented to include the results of WNDU as if the station had been acquired on January 1, 2006. The acquisition of WNDU did not significantly affect corporate and administrative expenses. Therefore, corporate and administrative expenses are presented on an "as reported" basis.

Revenues.

On a pro forma(1) basis, total net revenue for all stations decreased $2.8 million, or 2%, to $149.4 million due primarily to decreased political advertising revenues and decreased national advertising revenues partially offset by increased local advertising revenue in the current year.

       On a pro forma(1)  basis, political advertising revenues decreased       $2.9 million, or 43%, to $3.7 million reflecting the influence of the       2006 elections.        On a pro forma(1)  basis, local advertising revenue increased $2.2       million, or 2%, to $103.0 million and national advertising revenue       decreased $2.2 million, or 6%, to $37.0 million.    Operating expenses.  

On a pro forma(1) basis, total broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $5.2 million, or 6%, to $97.9 million.

       On a pro forma(1)  basis, operation of our digital second channels is       attributed for $2.0 million of the overall increase and reflects the       expansion of the number of digital second channels to 39 as of June       30, 2007.        On a pro forma(1)  basis, the remaining $3.2 million of the overall       increase is attributable to the operation of our primary channels and       reflects routine increases in payroll, programming and promotion.        On a pro forma(1)  basis, total aggregate broadcast expenses (before       depreciation, amortization and loss on disposal of assets) for all the       primary channels and all the digital second channels was approximately       1% less than management's operating targets for the six months ended       June 30, 2007.   

On an as reported basis, corporate and administrative expenses, before depreciation, amortization and loss on disposal of assets increased $1.0 million, or 15%, to $7.6 million due primarily to incremental increases in news research &/or consulting expense, legal expense and non-cash stock based compensation expense. We recorded non-cash stock based compensation expense during the six months ended June 30, 2007 and 2006 of $830,000 and $391,000, respectively.

   Other Financial Data on an "as reported" basis:                                               June 30, 2007  December 31, 2006                                                       (in thousands)    Cash                                            $3,378         $4,741   Total debt(2)                                  928,500        851,654   Preferred stock                                      -         37,451   Available credit under senior credit facility   96,500         97,000                                                   Six Months Ended June 30,                                                    2007           2006                                                       (in thousands)    Net cash provided by operating activities       $5,012        $40,519   Net cash used in investing activities          (18,228)      (103,610)   Net cash provided by financing activities       11,583         61,217    

We repurchased 647,800 shares of our common stock for $5.5 million during the first quarter of 2007 at an average price per share of $8.49. We repurchased 4,100 shares of our common stock for $32,000 during the second quarter of 2006 at an average price per share of $7.82. No similar purchases were made during the second quarter of the current year or the first quarter of the prior year. The repurchased common stock is held in treasury.

On March 19, 2007, we completed the previously announced refinancing of our senior credit facility. The new senior credit facility consists of a $100 million revolving credit facility and a $925 million institutional term loan facility. We used borrowings from the new senior credit facility to fund the payoff of all outstanding amounts under our former senior credit facility, to pay fees and expenses relating to the refinancing and for other general corporate purposes. In connection with this refinancing, we incurred fees of approximately $3.2 million and recorded a loss on early extinguishment of debt expense of $6.5 million in the first quarter of 2007.

On April 18, 2007, we drew $275 million on our senior credit facility to redeem all of our then outstanding 9.25% Notes, pay applicable redemption premiums, pay accrued interest and pay fees and expenses related to the redemption. As a result of the redemption of the 9.25% Notes, we recorded a loss on early extinguishment of debt of approximately $16.4 million during the second quarter of 2007.

On May 22, 2007, we drew $40 million to redeem all of our outstanding Series C Preferred Stock at its liquidation value plus accrued and unpaid dividends. We completed the redemption upon paying $37.9 million as liquidation value of the Series C Preferred Stock and $429,000 in accrued dividends. The funds remaining from the $40 million draw were used to pay down debt balances under the revolver portion of the senior credit facility.

                           Gray Television, Inc.                    Selected Operating Data (Unaudited)          (in thousands except for per share data and percentages)                                                            As Reported                                                        Three Months Ended                                                             June 30,                                                                         %                                                    2007       2006    Change    Revenues (less agency commissions)             $79,750    $81,391     (2)%   Operating expenses before depreciation,    amortization and loss on disposal of    assets, net:     Broadcast                                     49,048     45,538      8 %     Corporate and administrative                   3,584      2,916     23 %   Depreciation and amortization of    intangible assets                              10,117      9,022     12 %   Loss on disposals of assets, net                   119        189    (37)%                                                   62,868     57,665      9 %   Operating income                                16,882     23,726    (29)%   Other income (expense):     Miscellaneous income, net                        449         59    661 %     Interest expense                             (16,525)   (16,656)    (1)%     Loss on early extinguishment of debt         (16,361)         -   Income (loss) before income tax                (15,555)     7,129   Income tax expense (benefit)                    (5,613)     2,809   Net income (loss)                               (9,942)     4,320   Preferred dividends (includes accretion    of issuance cost of $418 and $22, respectively)   847        815   Net income (loss) available to    common stockholders                          $(10,789)    $3,505    Basic per share information:     Net income (loss) available to      common stockholders                          $(0.23)     $0.07     Weighted average shares outstanding           47,688     48,791     (2)%    Diluted per share information:     Net income (loss) available to      common stockholders                          $(0.23)     $0.07     Weighted average shares outstanding           47,688     48,791     (2)%    Political revenue    (less agency commission)                       $2,634     $4,706    (44)%                              Gray Television, Inc.                    Selected Operating Data (Unaudited)          (in thousands except for per share data and percentages)                                  As Reported                 Pro Forma(1)                               Six Months Ended           Six Months Ended                                   June 30,                   June 30,                                                %                         %                            2007      2006   Change    2007      2006  Change    Revenues (less agency    commissions)          $149,431  $149,626    0 %  $149,431  $152,211  (2)%   Operating expenses    before depreciation,    amortization and loss on    disposal of assets, net:     Broadcast              97,866    90,602    8 %    97,866    92,742   6 %     Corporate and      administrative         7,645     6,660   15 %     7,645     6,660  15 %   Depreciation and    amortization of    intangible assets       19,892    17,350   15 %    19,892    18,018  10 %   Loss on disposals of    assets, net                116       271  (57)%       116       271 (57)%                           125,519   114,883    9 %   125,519   117,691   7 %   Operating income         23,912    34,743  (31)%    23,912    34,520 (31)%   Other income (expense):     Miscellaneous      income, net              807       405   99 %       807       405  99 %     Interest expense      (33,797)  (32,123)   5 %   (33,797)  (32,548)  4 %     Loss on early      extinguishment      of debt              (22,853)     (110)         (22,853)     (110)   Income (loss) before income    tax benefit            (31,931)    2,915          (31,931)    2,267   Income tax    expense (benefit)      (11,475)    1,149          (11,475)      911   Net income (loss)       (20,456)    1,766          (20,456)    1,356   Preferred dividends    (includes accretion of    issuance cost of $439,    $44, $439, $44,    respectively)            1,626     1,629            1,626     1,629   Net income (loss)    available to common    stockholders          $(22,082)     $137         $(22,082)    $(273)    Basic per share information:     Net income (loss)      available to common      stockholders          $(0.46)       $-           $(0.46)   $(0.01)     Weighted average      shares outstanding    47,711    48,767   (2)%    47,711    48,767  (2)%    Diluted per share information:     Net income (loss)      available to common      stockholders          $(0.46)       $-           $(0.46)   $(0.01)     Weighted average      shares outstanding    47,711    48,782   (2)%    47,711    48,767  (2)%    Political revenue (less    agency commission)      $3,730    $6,482  (42)%    $3,730    $6,562 (43)%      Guidance for the Third Quarter of 2007  

We currently anticipate that our broadcasting results of operations for the three months ended September 30, 2007 will approximate the ranges presented in the table below.

                                            %                 %                                  2007    Change    2007    Change                                Guidance   From   Guidance   From                                  Low     Actual    High    Actual   Actual   Selected operating date:       Range    2006     Range    2006     2006                                           (dollars in thousands)    OPERATING REVENUES:     Revenues (less agency      commissions)              $74,000    (8)%    $75,500    (6)%   $80,592    OPERATING EXPENSES:   (before depreciation, amortization    and other expenses)     Broadcast                  $49,000     3 %    $49,250     4 %   $47,456     Corporate and      administrative             $3,600     3 %     $3,700     6 %    $3,481    OTHER SELECTED DATA:     Broadcast political revenues     (less agency commissions)     $600               $700           $10,595      Expense for non-cash      contributions to 401(k) plan $575               $600              $570      Expense for corporate non-cash      stock based compensation     $275               $300              $191     Comments on Guidance  

The total revenue results anticipated for the third quarter of 2007 reflect the incremental decline in political revenues and continued softness in non-political national advertising. Local non-political advertising is currently anticipated to increase in the 7% to 10% range.

The incremental costs of the digital second channels discussed above account for approximately $1.0 million of the expected increase in total broadcast operating expenses before depreciation, amortization and loss on disposal of assets.

With respect to our digital second channels for the full year of 2007, we currently anticipate the total operating costs, before depreciation, amortization and loss on disposal of assets, of our digital second channels will increase approximately $4.3 million to a total of $9.5 million. This expected increase reflects the impact of expanding digital second channel operations to a total of 40 channels by December 31, 2007 compared to operating six digital second channels at January 1, 2006.

We currently anticipate that the total operating costs of our primary channels for the full year of 2007 will increase less than $1.0 million over the pro forma results for the full year of 2006 and that the majority of this increase is attributable to the non-recurring expense of installing a uniform sales billing system at all of our television stations.

Estimated corporate expenses for the third quarter of 2007 are expected to be similar to those of the third quarter of 2006. For the full year of 2007, we currently anticipate that total corporate expense will be below the $15.1 million of corporate expense reported for 2006.

Conference Call Information

We will host a conference call to discuss our second quarter operating results on August 6, 2007. The call will begin at 11:00 AM Eastern Time. The live dial-in number is 1 (800) 811-8830 and the confirmation code is 2171149. 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: 2171149 until September 6, 2007.

   Reconciliations:   Reconciliation of net income (loss) to the Non-GAAP terms (in thousands):                                                                 As Reported                                                           Three Months Ended                                                                 June 30,                                                               2007     2006    Net income (loss)                                        $(9,942)  $4,320     Adjustments to reconcile to Broadcast Cash Flow Less      Cash Corporate Expenses:       Depreciation and amortization of intangible assets    10,117    9,022       Amortization of non-cash stock based compensation        310      193       (Gain) loss on disposals of assets, net                  119      189       Miscellaneous (income) expense, net                     (449)     (59)       Interest expense                                      16,525   16,656       Loss on early extinguishment of debt                  16,361        -       Income tax expense (benefit)                          (5,613)   2,809       Amortization of program broadcast rights               3,803    3,500       Common stock contributed to 401(k) plan        excluding corporate 401(k) contributions                582      554       Network compensation revenue recognized                 (196)    (360)       Network compensation per network affiliation agreement    78      524       Payments for program broadcast rights                 (3,882)  (3,484)   Broadcast Cash Flow Less Cash Corporate Expenses          27,813   33,864       Corporate and administrative expenses excluding        amortization of non-cash stock based compensation     3,274    2,723   Broadcast Cash Flow                                      $31,087  $36,587                                              As Reported          Pro Forma(1)                                         Six Months Ended    Six Months Ended                                            June 30,              June 30,                                          2007      2006       2007     2006    Net income (loss)                   $(20,456)   $1,766  $(20,456)  $1,356     Adjustments to reconcile to      Broadcast Cash Flow Less      Cash Corporate Expenses:       Depreciation and amortization of        intangible assets                19,892    17,350    19,892   18,018       Amortization of non-cash stock        based compensation                  830       391       830      391       (Gain) loss on disposals of        assets, net                         116       271       116      271       Miscellaneous (income) expense,        net                                (807)     (405)     (807)    (405)       Interest expense                  33,797    32,123    33,797   32,548       Loss on early extinguishment of        debt                             22,853       110    22,853      110       Income tax expense (benefit)     (11,475)    1,149   (11,475)     911       Amortization of program broadcast        rights                            7,596     6,804     7,596    6,804       Common stock contributed to 401(k)        plan excluding corporate 401(k)        contributions                     1,200     1,126     1,200    1,126       Network compensation revenue        recognized                         (385)     (581)     (385)    (581)       Network compensation per network        affiliation agreement               157     1,048       157    1,048       Payments for program broadcast        rights                           (7,687)   (6,770)   (7,687)  (6,770)   Broadcast Cash Flow Less Cash    Corporate Expenses                   45,631    54,382    45,631   54,827       Corporate and administrative        expenses excluding amortization        of non-cash stock based        compensation                      6,815     6,269     6,815    6,269    Broadcast Cash Flow                 $52,446   $60,651   $52,446  $61,096     Non-GAAP Terms  

This press release includes the non-GAAP financial measure of Broadcast Cash Flow and Broadcast Cash Flow Less Cash Corporate Expenses. These non- GAAP amounts are used by Gray to approximate the amount used to calculate a key financial performance covenant as defined in our senior credit facility. Broadcast Cash Flow is defined as operating income, plus corporate expense, depreciation and amortization (including amortization of program broadcast rights), non-cash compensation and (gain) loss on disposal of assets and cash payments received or receivable under network affiliation agreements less payments for program broadcast obligations, less network compensation revenue and less income (loss) from discontinued operations, net of income taxes. Corporate expenses (excluding depreciation, amortization and non-cash stock based compensation) are deducted from Broadcast Cash Flow to calculate "Broadcast Cash Flow Less Cash Corporate Expenses". These non-GAAP terms are used 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 (loss) calculated in accordance with GAAP.

   Notes   (1) The pro forma presentation gives effect to the results of operations       for the acquisition of television station WNDU, South Bend, IN on       March 3, 2006 as if the station had been acquired on January 1, 2006.    (2) Total debt as of December 31, 2006 does not include $653,000 of       unamortized debt discount on our 9.25% Notes.  The 9.25% Notes were       redeemed on April 18, 2007.    Gray Television, Inc.  

Gray Television, Inc. is a television broadcast company headquartered in Atlanta, GA. We currently operate 36 television stations serving 30 markets. Each of the stations are affiliated with either CBS (17 stations), NBC (10 stations), ABC (8 stations) or FOX (1 station). In addition, we currently operate 39 digital second channels including 1 ABC, 5 Fox, 8 CW and 16 MyNetworkTV affiliates plus 7 local news/weather channels and 2 "independent" channels in certain of our existing markets. We intend to start an additional local news/weather channel during the third quarter of 2007 in one of our existing markets.

Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act

The comments on our current expectations of operating results for the third quarter of 2007 and other future events are "forward looking statements" for purposes of the Private Securities Litigation Reform Act of 1995. Actual results of operations are subject to a number of risks and uncertainties and may differ materially from the current expectations discussed in this press release. All information set forth in this release and its attachments is as of August 6, 2007. We do not intend, and undertake no duty, to update this information to reflect future events or circumstances. Information about potential factors that could affect our business and financial results and cause actual results to differ materially from those in the 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, 2006 which is on file with the SEC and available at the SEC's website at www.sec.gov.

First Call Analyst:
FCMN Contact: dottie@gray.tv

Source: Gray Television, Inc.

CONTACT: Bob Prather, President and Chief Operating Officer,
+1-404-266-8333, or Jim Ryan, Senior V. P. and Chief Financial Officer,
+1-404-504-9828, both of Gray Television, Inc.

Web site: http://www.gray.tv/

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