Gray Reports Operating Results for the Three Months and Year Ended December 31, 2007

Gray Reports Operating Results for the Three Months and Year Ended December 31, 2007

ATLANTA, March 13 /PRNewswire-FirstCall/ -- Gray Television, Inc. ("Gray," "we" or "us") (NYSE:GTN) today announced results from operations for the three months ("fourth quarter") and year ended December 31, 2007 as compared to the three months and year ended December 31, 2006.

Comments on As Reported Results of Operations for the Three Months Ended December 31, 2007:

For the three months ended December 31, 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 $17.6 million, or 17%, to $84.3 million due primarily to decreased political advertising revenues partially offset by increased local advertising revenue and national advertising revenue in the current period.

      On an as reported basis:       Political advertising revenues decreased $23.0 million, or 90%, to $2.6      million reflecting the influence of the 2006 elections.       Local advertising revenue increased $3.1 million, or 6%, to $54.2      million and national advertising revenue increased $0.8 million, or 4%,      to $21.2 million.       Internet advertising revenue increased $0.7 million, or 36%, to $2.7      million and retransmission consent revenue increased $0.5 million, or      112%, to $1.0 million. In our previous disclosures, we had included      internet advertising revenue with local advertising revenue and      retransmission consent revenue was included with production and other      revenue. We are now presenting internet advertising revenue and      retransmission consent revenue separately.     Operating expenses.  

On an as reported basis, total broadcast expenses (before depreciation, amortization and loss on disposal of assets) decreased $1.2 million, or 2%, to $52.2 million. The decrease primarily reflects reduced national sales representative commissions on the reduced political revenues.

On an as reported basis, corporate and administrative expenses, before depreciation, amortization and loss on disposal of assets, decreased $1.4 million, or 29%, to $3.5 million due primarily to incremental decrease in legal expense and non-cash stock based compensation expense. We recorded non- cash stock based compensation expense for the three months ended December 31, 2007 and 2006 of $134,000 and $511,000, respectively.

Comments on Results of Operations for the Year Ended December 31, 2007:

Due to the significance of WNDU to our results of operations, Gray's pro forma broadcast results for the year ended December 31, 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 $27.4 million, or 8%, to $307.3 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 $35.0 million, or 82%, to $7.8      million reflecting the influence of the 2006 elections.       Local advertising revenue increased $6.7 million, or 3%, to $200.7      million and national advertising revenue decreased $1.8 million, or 2%,      to $77.4 million.       Internet advertising revenue increased $1.9 million, or 25%, to $9.5      million and retransmission consent revenue increased $0.9 million, or      56%, to $2.4 million. In our previous disclosures, we had included      internet advertising revenue with local advertising revenue and      retransmission consent revenue was included with production and other      revenue.  We are now presenting internet advertising revenue and      retransmission consent revenue separately.     Operating expenses.  

On a pro forma(1) basis, total broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $6.0 million, or 3%, to $199.7 million.

      On a pro forma(1) basis, operation of our digital second channels is      attributed for $3.1 million of the overall increase and reflects the      expansion of the number of digital second channels to 40 as of December      31, 2007.       On a pro forma(1) basis, the remaining $2.9 million of the overall      increase is attributable to the operation of our primary channels and      reflects routine increases in payroll, programming and promotion.    

On an as reported basis, corporate and administrative expenses, before depreciation, amortization and loss on disposal of assets, remained consistent with that of the prior year at $15.1 million. We recorded non-cash stock based compensation expense during the year ended December 31, 2007 and 2006 of $1.2 million and $1.1 million, respectively.

Internet Initiatives:

We have continued to expand our internet initiatives in each of our markets. Our focus has been to expand local content to attract traffic to our web sites.

This strong revenue growth reflects the significantly increased traffic to our websites as illustrated below by the aggregate page views reported by our web sites in 2007 compared to 2006.

               Gray Websites - Aggregate Page Views                                                 Year Ended December 31,                                                                      %                                              2007       2006       Change                                                (in millions)   Total Aggregate Page Views (including    video plays and cell phone page views)    424.4       251.9        68%    Video Plays Only                            32.5        13.5       141%    Cell Phone Page Views Only                  25.6         7.7       232%    

We attribute the increase in our web traffic to increased posting of local content and to increased public awareness of our sites as the result of our on-air promotion of our sites.

The aggregate internet revenues discussed above are derived from two sources. The first source is advertising or sponsorship opportunities directly on our web sites. We call this "direct internet revenue." The other source is television advertising time purchased by our clients to directly promote their involvement in our web sites. We refer to this internet revenue source as "internet related commercial time sales."

In the future we anticipate our direct internet revenue will grow at a significantly faster pace relative to our internet related commercial time sales.

   Other Financial Data on an "as reported" basis (in thousands):                                         December 31, 2007   December 31, 2006    Cash                                       $15,338              $4,741   Total debt(2)                              925,000             851,654   Preferred stock                                  -              37,451   Available credit under senior credit    facility                                  100,000              97,000                                                    Year Ended December 31,                                                2007                2006    Net cash provided by operating activities  $28,360             $79,860   Net cash used in investing activities      (25,662)           (129,305)   Net cash provided by financing activities    7,899              44,871    

For the year ended December 31, 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 year ended December 31, 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.

   A detailed table of operating results follows.                                Gray Television, Inc.                      Selected Operating Data (Unaudited)           (in thousands, except for per share data and percentages)                                                       As Reported                                                   Three Months Ended                                                      December 31,                                                                         %                                                2007         2006      Change    Revenues (less agency commissions)         $84,272     $101,920      (17)%   Operating expenses before depreciation,    amortization and loss on disposal of     assets, net:      Broadcast                                52,238       53,444       (2)%      Corporate and administrative              3,513        4,956      (29)%   Depreciation and amortization of    intangible assets                           9,335        9,698       (4)%   (Gain) loss on disposals of assets, net       (370)         528     (170)%                                               64,716       68,626       (6)%   Operating income                            19,556       33,294      (41)%   Other income (expense):      Miscellaneous income (expense), net         (13)         181     (107)%      Interest expense                        (16,580)     (17,123)      (3)%   Income (loss) before income tax              2,963       16,352   Income tax expense                           1,478        7,765   Net income                                   1,485        8,587   Preferred dividends (includes accretion    of issuance cost of $0 and $21,    respectively)                                   -          778   Net income available to common    stockholders                               $1,485       $7,809    Basic per share information:      Net income available to common       stockholders                             $0.03        $0.16      Weighted average shares outstanding      47,969       48,040        0 %    Diluted per share information:      Net income available to common       stockholders                             $0.03        $0.16      Weighted average shares outstanding      48,034       48,076        0 %    Political revenue (less agency    commission)                                $2,627      $25,605      (90)%                               Gray Television, Inc.                     Selected Operating Data (Unaudited)          (in thousands, except for per share data and percentages)                                                         As Reported                                                        Years Ended                                                        December 31,                                                                         %                                               2007         2006       Change    Revenues (less agency commissions)        $307,288     $332,137       (7)%   Operating expenses before depreciation,    amortization and loss on disposal of    assets, net:      Broadcast                               199,687      191,502        4 %      Corporate and administrative             15,090       15,097        0 %   Depreciation and amortization of    intangible assets                          39,383       36,526        8 %   (Gain) loss on disposals of assets, net       (248)       1,021     (124)%                                              253,912      244,146        4 %   Operating income                            53,376       87,991      (39)%   Other income (expense):      Miscellaneous income, net                   972          677       44 %      Interest expense                        (67,189)     (66,787)       1 %      Loss on early extinguishment of debt    (22,853)        (347)   Income (loss) before income tax benefit    (35,694)      21,534   Income tax expense (benefit)               (12,543)       9,823   Net income (loss)                          (23,151)      11,711   Preferred dividends (includes accretion    of issuance cost of $439, $111, $439,    $111, respectively)                         1,626        3,247   Net income (loss) available to common    stockholders                             $(24,777)      $8,464    Basic per share information:      Net income (loss) available to common       stockholders                            $(0.52)       $0.17      Weighted average shares outstanding      47,788       48,408       (1)%    Diluted per share information:      Net income (loss) available to common       stockholders                            $(0.52)       $0.17      Weighted average shares outstanding      47,788       48,425       (1)%    Political revenue (less agency    commission)                                $7,808      $42,682      (82)%                                                          Pro Forma(1)                                                       Years Ended                                                       December 31,                                                                         %                                               2007         2006       Change    Revenues (less agency commissions)        $307,288     $334,722       (8)%   Operating expenses before depreciation,    amortization and loss on disposal of    assets, net:      Broadcast                               199,687      193,639        3 %      Corporate and administrative             15,090       15,097        0 %   Depreciation and amortization of    intangible assets                          39,383       37,194        6 %   (Gain) loss on disposals of assets, net       (248)       1,021     (124)%                                              253,912      246,951        3 %   Operating income                            53,376       87,771      (39)%   Other income (expense):      Miscellaneous income, net                   972          677       44 %      Interest expense                        (67,189)     (67,212)       0 %      Loss on early extinguishment of debt    (22,853)        (347)   Income (loss) before income tax benefit    (35,694)      20,889   Income tax expense (benefit)               (12,543)       9,588   Net income (loss)                          (23,151)      11,301   Preferred dividends (includes accretion    of issuance cost of $439, $111, $439,    $111, respectively)                         1,626        3,247   Net income (loss) available to common    stockholders                             $(24,777)      $8,054    Basic per share information:      Net income (loss) available to common       stockholders                            $(0.52)       $0.17      Weighted average shares outstanding      47,788       48,408       (1)%    Diluted per share information:      Net income (loss) available to common       stockholders                            $(0.52)       $0.17      Weighted average shares outstanding      47,788       48,425       (1)%    Political revenue (less agency    commission)                                $7,808      $42,762      (82)%      Guidance for the First Quarter of 2008:  

We currently anticipate that our broadcasting results of operations for the three months ending March 31, 2008 (the "first quarter") will approximate the ranges presented in the table below.

                                             %                 %                                   2008    Change    2008    Change                                 Guidance   From   Guidance   From                                   Low     Actual    High    Actual   Actual     Selected operating data:     Range     2007    Range     2007     2007                                   (in thousands, except for percentages)    OPERATING REVENUES:      Revenues (less agency       commissions)               $69,700      0 %  $70,500      1 %  $69,681    OPERATING EXPENSES:   (before depreciation,    amortization    and other expenses)      Broadcast                  $49,800      2 %  $50,500      3 %  $48,818      Corporate and       administrative             $3,600    (11)%   $3,900     (4)%   $4,061    OTHER SELECTED DATA:      Broadcast political       revenues      (less agency commissions)   $2,500            $2,600            $1,097       Expense for non-cash       contributions to 401(k)       plan                         $575              $625              $671       Expense for corporate       non-cash stock based       compensation                 $275              $350              $520     Comments on Guidance:  

The total revenue results anticipated for the first quarter of 2008 reflect the incremental increase in political revenues. Local non-political advertising for first quarter 2008 is currently anticipated to be comparable to the results for 2007. National non-political advertising revenue is currently anticipated to be down 3% to 5% in the first quarter of 2008 compared to first quarter 2007. Internet revenue for the first quarter of 2008 is currently anticipated to increase approximately 20% over the first quarter of 2007.

The increase in broadcast operating expenses, before depreciation, amortization and loss on disposal of assets, primarily reflects routine increases in payroll costs. For the full year of 2008, broadcast operating expenses, before depreciation, amortization and loss on disposal of assets are currently anticipated to increase less than 3% over full year 2007 results with national sales representative commissions on anticipated political revenue being a significant component of any overall increase.

Revenue on an "as reported" basis by quarter (in thousands):

In our previous disclosures, we had included internet advertising revenue with local advertising revenue and retransmission consent revenue was included with production and other revenue. We are now presenting internet advertising revenue and retransmission consent revenue separately. The table below presents our expanded disclosure by quarter for 2007 and 2006 (in thousands):

                                    2007 Fiscal Quarters Ended        2007                                                                     Fiscal                               March 31  June 30 Sept. 30  Dec. 31    Year   Revenues:      Local                     $46,697  $52,009  $47,761  $54,219  $200,686      National                   17,093   19,862   19,237   21,173    77,365      Internet                    2,058    2,267    2,505    2,676     9,506      Political                   1,097    2,634    1,450    2,627     7,808      Retransmission consent        454      488      501      993     2,436      Production and other        2,094    2,294    1,951    2,380     8,719      Network compensation          188      196      180      204       768         Total                  $69,681  $79,750  $73,585  $84,272  $307,288                                      2006 Fiscal Quarters Ended         2006                                                                     Fiscal                              March 31  June 30 Sept. 30  Dec. 31     Year   Revenues:      Local                    $44,902  $50,387  $45,942   $51,117  $192,348      National                  17,202   21,382   19,508    20,400    78,492      Internet                   1,620    2,231    1,794     1,962     7,607      Political                  1,776    4,706   10,595    25,605    42,682      Retransmission consent       365      339      390       469     1,563      Production and other       2,149    1,986    2,104     2,117     8,356      Network compensation         220      360      259       250     1,089         Total                 $68,234  $81,391  $80,592  $101,920  $332,137    

The aggregate internet revenues presented above are derived from two sources. The first source is advertising or sponsorship opportunities directly on our web sites. We call this "direct internet revenue." The other source is television advertising time purchased by our clients to directly promote their involvement in our web sites. We refer to this internet revenue source as "internet related commercial time sales."

Conference Call Information:

We will host a conference call to discuss our fourth quarter operating results on March 13, 2008. The call will begin at 10:00 AM Eastern Time. The live dial-in number is 1 (888) 211-4495 and the confirmation code is 9283465. 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 until April 12, 2008. The confirmation code for the taped replay is 9283465.

   Reconciliations:   Reconciliation of net income (loss) to the Non-GAAP terms (in thousands):                                                           As Reported                                                       Three Months Ended                                                           December 31,                                                     2007              2006    Net income                                       $1,485            $8,587     Adjustments to reconcile to Broadcast       Cash Flow Less Cash Corporate Expenses:        Depreciation and amortization of         intangible assets                           9,335             9,698        Amortization of non-cash stock based         compensation                                  134               511        (Gain) loss on disposals of assets, net       (370)              528        Miscellaneous (income) expense, net             13              (181)        Interest expense                            16,580            17,123        Income tax expense                           1,478             7,765        Amortization of program broadcast rights     3,849             3,803        Common stock contributed to 401(k) plan         excluding corporate 401(k) contributions      400               556        Network compensation revenue recognized       (204)             (250)        Network compensation per network         affiliation agreement                          66               539        Payments for program broadcast rights       (2,594)           (4,482)   Broadcast Cash Flow Less Cash Corporate    Expenses                                        30,172            44,197       Corporate and administrative expenses        excluding amortization of non-cash        stock based compensation                     3,379             4,445   Broadcast Cash Flow                             $33,551           $48,642                                            As Reported         Pro Forma(1)                                          Year Ended          Year Ended                                         December 31,        December 31,                                        2007      2006      2007      2006    Net income                         $(23,151)  $11,711  $(23,151)  $11,301     Adjustments to reconcile to      Broadcast Cash Flow Less Cash      Corporate Expenses:       Depreciation and amortization        of  intangible assets           39,383    36,526    39,383    37,194       Amortization of non-cash stock        based compensation               1,248     1,092     1,248     1,092       (Gain) loss on disposals of        assets, net                       (248)    1,021      (248)    1,021       Miscellaneous (income), net        (972)     (677)     (972)     (677)       Interest expense                 67,189    66,787    67,189    67,212       Loss on early extinguishment        of debt                         22,853       347    22,853       347       Income tax expense (benefit)    (12,543)    9,823   (12,543)    9,588       Amortization of program        broadcast rights                15,194    14,234    15,194    14,234       Common stock contributed to        401(k) plan excluding corporate        401(k) contributions             2,150     2,234     2,150     2,234       Network compensation revenue        recognized                        (768)   (1,089)     (768)   (1,089)       Network compensation per network        affiliation agreement              301     2,216       301     2,216       Payments for program broadcast        rights                         (14,101)  (14,839)  (14,101)  (14,839)   Broadcast Cash Flow Less Cash    Corporate Expenses                  96,535   129,386    96,535   129,834       Corporate and administrative        expenses excluding        amortization of non-cash        stock based compensation        13,842    14,005    13,842    14,005   Broadcast Cash Flow                $110,377  $143,391  $110,377  $143,839     See the definition of Non-GAAP terms below.    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 first quarter of 2008 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 March 13, 2008. 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 was filed with the SEC and is 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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