Gray Reports Operating Results for the Three Months and Nine Months Ended September 30, 2007

Gray Reports Operating Results for the Three Months and Nine Months Ended September 30, 2007

ATLANTA, Nov. 7 /PRNewswire-FirstCall/ -- Gray Television, Inc. ("Gray," "we" or "us") (NYSE:GTN) today announced results from operations for the three months ("third quarter") and nine months ended September 30, 2007 as compared to the three months and nine months ended September 30, 2006.

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

For the three months ended September 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 $7.0 million, or 9%, to $73.6 million due primarily to decreased political advertising revenues and decreased national advertising revenues partially offset by increased local advertising revenue in the current period.

       On an as reported basis, political advertising revenues decreased $9.1       million, or 86%, to $1.5 million reflecting the influence of the 2006       elections.        On an as reported basis, local advertising revenue increased $2.5       million, or 5%, to $50.3 million and national advertising revenue       decreased $0.3 million, or 1%, to $19.2 million.    Operating expenses.  

On an as reported basis, total broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $2.1 million, or 4%, to $49.6 million.

       Operation of our digital second channels is attributed for $0.5       million of the overall increase and reflects the expansion of the       number of digital second channels to 39 as of September 30, 2007.        The remaining $1.6 million of the overall increase is attributable to       the operation of our primary channels and reflects routine increases       in payroll.        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 equal to management's       operating targets for the three months ended September 30, 2007.   

On an as reported basis, corporate and administrative expenses, before depreciation, amortization and loss on disposal of assets, increased $0.5 million, or 13%, to $3.9 million due primarily to incremental increases in news research and/or consulting expense, legal expense and non-cash stock based compensation expense. We recorded non-cash stock based compensation expense for the three months ended September 30, 2007 and 2006 of $285,000 and $191,000, respectively.

Comments on Results of Operations for the Nine Months Ended September 30, 2007:

Due to the significance of WNDU to our results of operations, Gray's pro forma broadcast results for the nine months ended September 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 $9.8 million, or 4%, to $223.0 million due primarily to decreased political advertising revenues and decreased national advertising revenues partially offset by increased local advertising revenue in the current period.

       On a pro forma(1)  basis, political advertising revenues decreased       $12.0 million, or 70%, to $5.2 million reflecting the influence of the       2006 elections.        On a pro forma(1)  basis, local advertising revenue increased $4.8       million, or 3%, to $153.3 million and national advertising revenue       decreased $2.5 million, or 4%, to $56.2 million.    Operating expenses.  

On a pro forma(1) basis, total broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $7.3 million, or 5%, to $147.4 million.

   On a pro forma(1)  basis, operation of our digital second channels is   attributed for $2.6 million of the overall increase and reflects the   expansion of the number of digital second channels to 39 as of   September 30, 2007.    On a pro forma(1)  basis, the remaining $4.7 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   equal to management's operating targets for the nine months ended   September 30, 2007.   

On an as reported basis, corporate and administrative expenses, before depreciation, amortization and loss on disposal of assets, increased $1.4 million, or 14%, to $11.6 million due primarily to incremental increases in news research and/or consulting expense, legal expense and non-cash stock based compensation expense. We recorded non-cash stock based compensation expense during the nine months ended September 30, 2007 and 2006 of $1,115,000 and $581,000, respectively.

   Other Financial Data on an "as reported" basis:                                               September 30,       December 31,                                                  2007              2006                                                       (in thousands)    Cash                                            $1,233             $4,741   Total debt(2)                                  925,000            851,654   Preferred stock                                      -             37,451   Available credit under senior credit facility  100,000             97,000                                                Nine Months Ended September 30,                                                    2007               2006                                                       (in thousands)    Net cash provided by operating activities      $11,919            $60,444   Net cash used in investing activities          (22,575)          (117,085)   Net cash provided by financing activities        7,148             51,483    

For the nine months ended September 30, 2007, we repurchased 647,800 shares of our common stock for $5.5 million at an average price per share of $8.49. For the nine months ended September 30, 2006, we repurchased 902,200 shares of our common stock for $5.6 million at an average price per share of $6.21. The repurchased common stock is held in treasury.

                           Gray Television, Inc.                    Selected Operating Data (Unaudited)          (in thousands except for per share data and percentages)                                                       As Reported                                                   Three Months Ended                                                     September 30,                                                                     %                                                   2007     2006   Change    Revenues (less agency commissions)            $73,585  $80,592   (9)%   Operating expenses before depreciation,    amortization and loss on disposal    of assets, net:     Broadcast                                    49,583   47,456    4 %     Corporate and administrative                  3,932    3,481   13 %   Depreciation and amortization of    intangible assets                             10,156    9,478    7 %   Loss on disposals of assets, net                    5      221  (98)%                                                  63,676   60,636    5 %   Operating income                                9,909   19,956  (50)%   Other income (expense):     Miscellaneous income, net                       177       91   95 %     Interest expense                            (16,812) (17,542)  (4)%     Loss on early extinguishment of debt              -     (237)   Income (loss) before income tax                (6,726)   2,268   Income tax expense (benefit)                   (2,546)     909   Net income (loss)                              (4,180)   1,359   Preferred dividends    (includes accretion of issuance    cost of $0 and $47, respectively)                  -      840   Net income (loss) available    to common stockholders                       $(4,180)    $519    Basic per share information:     Net income (loss) available      to common stockholders                      $(0.09)   $0.01     Weighted average shares outstanding          47,760   48,072   (1)%    Diluted per share information:     Net income (loss) available      to common stockholders                      $(0.09)   $0.01     Weighted average shares outstanding          47,760   48,072   (1)%    Political revenue (less agency commission)     $1,450  $10,595  (86)%                              Gray Television, Inc.                    Selected Operating Data (Unaudited)          (in thousands except for per share data and percentages)                                As Reported               Pro Forma(1)                            Nine Months Ended          Nine Months Ended                              September 30,               September 30,                                              %                          %                          2007      2006   Change    2007      2006   Change    Revenues (less    agency commissions) $223,015  $230,216   (3)%  $223,015  $232,801   (4)%   Operating expenses    before  depreciation,    amortization and    loss on disposal of    assets, net:     Broadcast           147,449   138,058    7 %   147,449   140,195    5 %     Corporate and      administrative      11,577    10,140   14 %    11,577    10,140   14 %   Depreciation and    amortization of    intangible assets     30,048    26,828   12 %    30,048    27,496    9 %   Loss on disposals of    assets, net              122       493  (75)%       122       493  (75)%                         189,196   175,519    8 %   189,196   178,324    6 %   Operating income       33,819    54,697  (38)%    33,819    54,477  (38)%   Other income    (expense):     Miscellaneous      income, net            984       496   98 %       984       496   98 %     Interest expense    (50,610)  (49,664)   2 %   (50,610)  (50,089)   1 %     Loss on early      extinguishment of      debt               (22,853)     (347)         (22,853)     (347)   Income (loss) before    income tax benefit   (38,660)    5,182          (38,660)    4,537   Income tax expense    (benefit)            (14,021)    2,058          (14,021)    1,823   Net income (loss)     (24,639)    3,124          (24,639)    2,714   Preferred dividends    (includes accretion     of issuance cost of     $439, $91, $439, $91,     respectively)         1,626     2,469            1,626     2,469   Net income (loss)    available to common    stockholders        $(26,265)     $655         $(26,265)     $245    Basic per share    information:     Net income (loss)      available to common      stockholders        $(0.55)    $0.01           $(0.55)    $0.01     Weighted average      shares outstanding  47,728    48,532   (2)%    47,728    48,532   (2)%    Diluted per share    information:     Net income (loss)      available to common      stockholders        $(0.55)    $0.01           $(0.55)    $0.01     Weighted average      shares outstanding  47,728    48,543   (2)%    47,728    48,543   (2)%    Political revenue    (less agency     commission)          $5,181   $17,077  (70)%    $5,181   $17,157  (70)%       Guidance for the Fourth Quarter of 2007  

We currently anticipate that our broadcasting results of operations for the three months ending December 31, 2007 (the "fourth quarter") will approximate the ranges presented in the table below.

                                        %                   %                           2007       Change     2007     Change                         Guidance      From    Guidance    From    Selected               Low        Actual     High     Actual     Actual     operating data:      Range        2006      Range     2006       2006                                        (dollars in thousands)   OPERATING REVENUES:    Revenues (less agency     commissions)         $82,500      (19)%  $84,000      (18)%  $101,920    OPERATING EXPENSES:    (before depreciation,     amortization and     other expenses)      Broadcast           $52,250       (2)%  $53,000       (1)%   $53,444      Corporate and       administrative      $3,800      (23)%   $3,900      (21)%    $4,956    OTHER SELECTED DATA:   Broadcast political    revenues   (less agency    commissions)           $2,100              $2,200              $25,605    Expense for non-cash    contributions to    401(k) plan              $575                $600                 $568    Expense for corporate    non-cash stock based    compensation             $100                $150                 $511      Comments on Guidance  

The total revenue results anticipated for the fourth quarter of 2007 reflect the incremental decline in political revenues. Local non-political advertising is currently anticipated to increase between 5% and 8%. While we anticipate continuing relative softness in non-political national advertising, we do expect modest growth in the low to mid-single digit range in the fourth quarter of 2007 compared to the comparable period in 2006. Estimates of net political revenue in the fourth quarter do not include any significant amounts relating to potential political advertising for the early 2008 primary elections. At present, we can not predict what impact, if any, political advertising for the early 2008 primary elections may have on our fourth quarter results.

The total operating costs, before depreciation, amortization and loss on disposal of assets, anticipated for the fourth quarter of 2007 will be less than the results for the comparable period in 2006 reflecting savings on national sales representatives' commissions due to cyclically lower net political revenues.

Conference Call Information

We will host a conference call to discuss our third quarter operating results on November 7, 2007. The call will begin at 9:30 AM Eastern Time. The live dial-in number is 1 (800) 839-7875 and the confirmation code is 5491426. 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: 5491426 until December 6, 2007.

   Reconciliations:   Reconciliation of net income (loss) to the Non-GAAP terms (in thousands):                                                          As Reported                                                      Three Months Ended                                                         September 30,                                                     2007              2006   Net income (loss)                              $(4,180)           $1,359    Adjustments to reconcile to Broadcast     Cash Flow Less Cash Corporate Expenses:      Depreciation and amortization of       intangible assets                           10,156             9,478      Amortization of non-cash stock based       compensation                                   285               191      Loss on disposals of assets, net                  5               221      Miscellaneous (income) expense, net            (177)              (91)      Interest expense                             16,812            17,542      Loss on early extinguishment of debt              -               237      Income tax expense (benefit)                 (2,546)              909      Amortization of program broadcast rights      3,750             3,628      Common stock contributed to 401(k) plan       excluding corporate 401(k) contributions       550               552      Network compensation revenue recognized        (180)             (258)      Network compensation per network affiliation       agreement                                       78               629      Payments for program broadcast rights        (3,821)           (3,587)   Broadcast Cash Flow Less Cash    Corporate Expenses                             20,732            30,810     Corporate and administrative expenses      excluding amortization of non-cash stock      based compensation                            3,647             3,290   Broadcast Cash Flow                            $24,379           $34,100                                              As Reported       Pro Forma(1)                                        Nine Months Ended  Nine Months Ended                                          September 30,      September 30,                                          2007     2006      2007     2006   Net income (loss)                    $(24,639)  $3,124  $(24,639)  $2,714    Adjustments to reconcile to     Broadcast Cash Flow Less     Cash Corporate Expenses:      Depreciation and amortization of       intangible assets                  30,048   26,828    30,048   27,496      Amortization of non-cash stock based       compensation                        1,115      581     1,115      581      Loss on disposals of assets, net       122      493       122      493      Miscellaneous (income) expense, net   (984)    (496)     (984)    (496)      Interest expense                    50,610   49,664    50,610   50,089      Loss on early extinguishment       of debt                            22,853      347    22,853      347      Income tax expense (benefit)       (14,021)   2,058   (14,021)   1,823      Amortization of program broadcast       rights                             11,345   10,432    11,345   10,432      Common stock contributed to 401(k)       plan excluding corporate 401(k)       contributions                       1,750    1,679     1,750    1,679      Network compensation revenue       recognized                           (564)    (839)     (564)    (839)      Network compensation per network       affiliation agreement                 235    1,677       235    1,677      Payments for program broadcast       rights                            (11,507) (10,357)  (11,507) (10,357)   Broadcast Cash Flow Less Cash    Corporate Expenses                    66,363   85,191    66,363   85,639     Corporate and administrative      expenses excluding amortization      of non-cash stock based      compensation                        10,462    9,559    10,462    9,559   Broadcast Cash Flow                   $76,825  $94,750   $76,825  $95,198      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 us 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 40 digital second channels including 1 ABC, 5 Fox, 8 CW and 16 MyNetworkTV affiliates plus 8 local news/weather channels and 2 "independent" channels in certain 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 fourth 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 is as of November 7, 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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