Gray Reports Record Operating Results for the Three and Nine-Month Periods Ended September 30, 2015

Gray Reports Record Operating Results for the Three and Nine-Month Periods Ended September 30, 2015

ATLANTA, Nov. 3, 2015 /PRNewswire/ -- Gray Television, Inc. ("Gray," "we," "us" or "our") (NYSE: GTN and GTN.A) today announced results of operations for the three and nine-month periods ended September 30, 2015. Gray achieved record revenue during the three and nine-month periods ended September 30, 2015, and Gray's free cash flow per diluted weighted average share was $0.22 and $0.96, respectively, and net income per diluted weighted average share was $0.09 and $0.36, respectively. Excluding the special charges discussed below relating to the termination of certain national sales representation agreements and transaction costs relating to our closed and pending acquisitions, our net income per diluted weighted average share was approximately $0.18 and $0.45 for the three and nine-month periods ended September 30, 2015, respectively.

Highlights:


-- Record Revenue - We achieved record revenue of $151.1 million and $427.9
million for the three-month and nine-month periods ended September 30,
2015, respectively. In addition, our retransmission revenue reached new
record levels of $39.3 million and $112.5 million for the same periods.
-- Total Leverage Ratio - As of September 30, 2015, our total leverage
ratio, as defined under the terms of our senior credit facility, was 4.9
times on a trailing eight-quarter basis, netting all cash on our balance
sheet against our debt balance.
-- Acquisitions - As previously announced, between July 1 and September 1,
2015, we added seven television stations in four markets to our
operations. The aggregate purchase price for these stations was
approximately $184.4 million, all of which was funded from cash on hand.
-- Schurz and Related Transactions Announced - On September 14, 2015, we
announced that we have agreed to acquire all of the television and radio
stations of Schurz Communications, Inc. (the "Schurz Acquisition") for
approximately $442.5 million including working capital. On October 1,
2015, we announced the sale of certain television stations to facilitate
regulatory approvals for the Schurz Acquisition, and we simultaneously
announced the acquisition of two new television stations as part of
those divestiture transactions. On November 2, 2015, we announced that
we have reached agreements with three radio broadcasters to divest the
Schurz radio stations to those third-parties upon closing the Schurz
Acquisition.
-- Transaction Costs - In connection with the acquisitions discussed above,
we incurred professional expenses of approximately $3.8 million and $4.5
million for the three and nine-month periods ended September 30, 2015,
respectively. These expenses are included in our corporate and
administrative operating expenses. We did not include the majority of
these expenses in our previously issued guidance for the third quarter
of 2015 because we could not predict those expenses at the time we
issued that guidance.
-- Termination of National Sales Agreements - On August 31, 2015, we
announced that effective on January 1, 2016, we will terminate nearly
all of our remaining national advertising sales representation
agreements. We anticipate expense savings due to the termination of
these agreements of approximately $8.0 million to $9.0 million beginning
in 2016, with net savings continuing thereafter. We recorded a charge of
approximately $6.1 million to our third quarter 2015 broadcast operating
expenses to reflect the anticipated termination fees. We did not include
this charge to expenses in our previously issued guidance for the third
quarter of 2015 because we had not then decided to terminate those
agreements.




Selected Operating Data on As-Reported Basis:
---------------------------------------------


Three Months Ended September 30,
--------------------------------

% Change % Change

2015 to 2015 to

2015 2014 2014 2013 2013
---- ---- ---- ---- ----

(dollars in thousands, except per share data)

Revenue (less agency commissions):

Total $151,102 $131,702 15 % $88,288 71 %

Political $4,594 $22,029 (79)% $1,377 234 %


Operating expenses (1):

Broadcast $98,921 $73,218 35 % $53,516 85 %

Corporate and administrative $10,022 $5,271 90 % $4,470 124 %


Net income $6,609 $13,940 (53)% $7,073 (7)%


Non-GAAP Cash Flow (2):

Broadcast Cash Flow $52,667 $58,429 (10)% $34,603 52 %

Broadcast Cash Flow Less

Cash Corporate Expenses $43,434 $53,885 (19)% $30,388 43 %

Free Cash Flow $15,609 $25,309 (38)% $13,319 17 %


Free Cash Flow Per Share:

Basic $0.22 $0.44 $0.23

Diluted $0.22 $0.43 $0.23


Nine Months Ended September 30,
-------------------------------

% Change % Change

2015 to 2015 to

2015 2014 2014 2013 2013
---- ---- ---- ---- ----

(dollars in thousands, except per share data)

Revenue (less agency commissions):

Total $427,869 $330,248 30 % $250,742 71 %

Political $7,950 $33,437 (76)% $2,769 187 %


Operating expenses (1):

Broadcast $272,213 $199,604 36 % $158,817 71 %

Corporate and administrative $23,313 $21,618 8 % $13,587 72 %


Net income $24,314 $16,808 45 % $13,087 86 %


Non-GAAP Cash Flow (2):

Broadcast Cash Flow $156,635 $129,578 21 % $91,419 71 %

Broadcast Cash Flow Less

Cash Corporate Expenses $135,652 $110,766 22 % $79,551 71 %

Free Cash Flow $64,988 $41,644 56 % $27,021 141 %


Free Cash Flow Per Share:

Basic $0.97 $0.72 $0.47

Diluted $0.96 $0.71 $0.47


(1) Excludes depreciation, amortization, and loss on disposal of assets.

(2) See definition of non-GAAP terms and reconciliation of the non-GAAP amounts to net income included elsewhere herein.








Selected Operating Data on Combined Historical Basis (3):
---------------------------------------------------------


Three Months Ended September 30,
--------------------------------

% Change % Change

2015 to 2015 to

2015 2014 2014 2013 2013
---- ---- ---- ---- ----

(dollars in thousands, except per share data)

Revenue (less agency commissions):

Total $155,065 $152,073 2 % $129,871 19 %

Political $4,940 $25,231 (80)% $1,816 172 %


Operating expenses (1):

Broadcast $100,964 $85,602 18 % $80,203 26 %

Corporate and administrative $10,022 $5,271 90 % $4,470 124 %


Net income $8,276 $16,370 (49)% $12,646 (35)%


Non-GAAP Cash Flow (2):

Broadcast Cash Flow $58,913 $65,668 (10)% $48,911 20 %

Broadcast Cash Flow Less

Cash Corporate Expenses $49,680 $61,124 (19)% $44,696 11 %

Operating Cash Flow as defined in

the Senior Credit Facility $47,958 $63,634 (25)% $49,501 (3)%

Free Cash Flow $22,616 $35,241 (36)% $24,387 (7)%


Free Cash Flow Per Share:

Basic $0.32 $0.61 $0.42

Diluted $0.31 $0.60 $0.42


Nine Months Ended September 30,
-------------------------------

% Change % Change

2015 to 2015 to

2015 2014 2014 2013 2013
---- ---- ---- ---- ----

(dollars in thousands, except per share data)

Revenue (less agency commissions):

Total $454,016 $429,022 6 % $373,424 22 %

Political $8,468 $40,468 (79)% $4,086 107 %


Operating expenses (1):

Broadcast $289,435 $258,573 12 % $237,647 22 %

Corporate and administrative $23,313 $21,618 8 % $13,587 72 %


Net income $31,297 $40,654 (23)% $29,648 6 %


Non-GAAP Cash Flow (2):

Broadcast Cash Flow $169,966 $175,882 (3)% $134,105 27 %

Broadcast Cash Flow Less

Cash Corporate Expenses $148,983 $157,070 (5)% $122,237 22 %

Operating Cash Flow as defined in

the Senior Credit Facility $154,388 $162,662 (5)% $134,511 15 %

Free Cash Flow $83,266 $87,649 (5)% $58,730 42 %


Free Cash Flow Per Share:

Basic $1.24 $1.51 $1.02

Diluted $1.23 $1.50 $1.01


(1) Excludes depreciation, amortization, and loss on disposal of assets.

(2) See definition of non-GAAP terms and reconciliation of the non-GAAP amounts to net income included elsewhere herein.

(3) See the following discussion, "Effects of Acquisitions on Our Results of Operations", for definition of this term.




Effects of Acquisitions on Our Results of Operations

Since October 1, 2013, we have completed 16 acquisition transactions and two divestiture transactions. These transactions have added a net total of 31 television stations in 20 television markets, including 15 new television markets, to our operations. On July 1, 2015, we completed the following five acquisition transactions that added six television stations to our operations:


-- KOSA-TV (CBS) in Odessa, Texas;
-- KMVT-TV (CBS) and KSVT-LD (FOX) in Twin Falls, Idaho;
-- Certain non-licensed assets including programming streams of WFXS-TV
(FOX) in Wausau, Wisconsin, whose programming streams are now broadcast
on our digital low power television station in Wausau, WZAW-LD;
-- WAGM-TV (CBS/FOX) in Presque Isle, Maine; and
-- Certain non-licensed assets including programming streams of KVTV-TV
(CBS) in Laredo, Texas, whose programming streams are now broadcast on
our digital low power television station in Laredo, KYLX-LD.
On September 1, 2015, we announced and completed the initial phase of our acquisition of KCRG-TV (ABC) in Cedar Rapids, Iowa (the "Cedar Rapids Acquisition") by acquiring certain non-licensed assets of that television station and entering into a local programming and marketing agreement (the "LMA") with the licensee. We completed the remaining phases of the Cedar Rapids Acquisition and terminated the LMA on November 1, 2015.

Collectively, we herein refer to the stations acquired on July 1, 2015 and the Cedar Rapids Acquisition as the "2015 Acquired Stations." During 2014, we completed seven acquisitions, which transactions collectively added a total of 22 television stations and 12 markets (10 new markets) at various times during that year, and we refer to the stations acquired in those acquisitions as the "2014 Acquired Stations." During the fourth quarter of 2013, we completed two acquisition transactions that together added five television stations in four markets (three in new markets), and we refer to the stations acquired in those acquisitions as the "2013 Acquired Stations." Unless the context of the following discussions requires otherwise, we refer to the 2015 Acquired Stations, the 2014 Acquired Stations and the 2013 Acquired Stations, collectively, as the "Acquired Stations."

Due to the significant effect the Acquired Stations have had on our results of operations, and in order to provide more meaningful period over period comparisons, we also present herein certain financial information on a "Combined Historical Basis." Combined Historical Basis reflects financial results that have been compiled by adding Gray's historical revenue and broadcast expenses to the historical revenue and broadcast expenses of the Acquired Stations as if they had been acquired on January 1, 2013 (the beginning of the earliest period presented), but it does not include any adjustments for other events attributable to the acquisitions, except that "Combined Historical Free Cash Flow" gives effect to the financings related to acquisitions completed in 2014 and 2013, as if the financing occurred on January 1, 2013.

Results of Operations for the Third Quarter of 2015:

Revenue (less agency commissions) on As-Reported Basis.

The table below presents our revenue (less agency commissions) or "net revenue" by type for the three-month periods ended September 30, 2015 and 2014, respectively (dollars in thousands):



Three Months Ended September 30,
--------------------------------

2015 2014
---- ----

Percent Percent

Amount of Total Amount of Total
------ -------- ------ --------

Revenue (less agency commissions):

Local $76,734 50.8% $62,029 47.1%

National 20,889 13.8% 16,158 12.3%

Internet 7,238 4.8% 7,431 5.6%

Political 4,594 3.0% 22,029 16.7%

Retransmission consent 39,329 26.0% 19,674 14.9%

Other 2,318 1.6% 4,381 3.4%

Total $151,102 100.0% $131,702 100.0%
======== ===== ======== =====


Total revenue increased $19.4 million, or 15%, to $151.1 million for the third quarter of 2015 compared to the third quarter of 2014. Revenue from the 2015 Acquired Stations and 2014 Acquired Stations accounted for approximately $43.0 million and $24.2 million of our total revenue for the third quarters of 2015 and 2014, respectively.

Our revenue increased primarily due to the additional revenue from the 2015 Acquired Stations and 2014 Acquired Stations and increases in retransmission consent revenue due to increased retransmission consent rates. These increases were offset in part, by decreases in political advertising revenue which decreased due to 2015 being the "off year" of the two-year election cycle.

The principal types of revenue for the third quarter of 2015 compared to the third quarter of 2014 were as follows:


-- Local advertising revenue increased $14.7 million, or 24%, to $76.7
million.
-- National advertising revenue increased $4.7 million, or 29%, to $20.9
million.
-- Internet advertising revenue decreased $0.2 million, or 3%, to $7.2
million.
-- Political advertising revenue decreased $17.4 million, or 79%, to $4.6
million.
-- Retransmission consent revenue increased $19.7 million, or 100%, to
$39.3 million.
-- Other revenue decreased $2.1 million, or 47%, to $2.3 million.
Within our local and national advertising revenue categories, and excluding revenue from the 2015 Acquired Stations and 2014 Acquired Stations, our five largest customer categories experienced the following changes during the third quarter of 2015 compared to the third quarter of 2014:


-- Automotive increased 12%;
-- Medical increased 18%;
-- Restaurant increased 13%;
-- Furniture and appliances increased 21%; and
-- Communications increased 11%.
Revenue on Combined Historical Basis.

On a Combined Historical Basis, total revenue increased $3.0 million, or 2%, to $155.1 million in the third quarter of 2015 compared to the third quarter of 2014. On a Combined Historical Basis, the principal types of revenue for the third quarter of 2015 compared to the third quarter of 2014 were approximately as follows:


-- Local advertising revenue increased $6.5 million, or 9%, to $77.8
million.
-- National advertising revenue increased $2.0 million, or 10%, to $22.6
million.
-- Internet advertising revenue decreased $0.3 million, or 3%, to $7.4
million.
-- Political advertising revenue decreased $20.3 million, or 80%, to $4.9
million.
-- Retransmission consent revenue increased $17.5 million, or 78%, to $39.9
million.
-- Other revenue decreased $2.5 million, or 51%, to $2.4 million.
Within our local and national advertising revenue categories, and including the 2015 Acquired Stations and 2014 Acquired Stations, our five largest customer categories experienced the following changes in revenue for the third quarter of 2015 compared to the third quarter of 2014:


-- Automotive increased 17%;
-- Medical increased 21%;
-- Restaurant increased 14%;
-- Furniture and appliances increased 29%; and
-- Communications increased 26%.
Broadcast Operating Expenses on As-Reported Basis.

Broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $25.7 million, or 35%, to $98.9 million for the third quarter of 2015 compared to the third quarter of 2014. The 2015 Acquired Stations and 2014 Acquired Stations accounted for approximately $24.0 million and $12.7 million of our total broadcast expenses for the third quarters of 2015 and 2014, respectively.


-- Non-compensation expense increased $19.8 million primarily due to
network program fees that increased $12.7 million reflecting increased
fees payable to networks under our affiliation agreements renewed in
2014, as well as the commencement, in the first quarter of 2015, of
network program fees payable to CBS. National sales commissions
increased $5.3 million primarily as a result of the $6.1 million charge
resulting from our decision to terminate nearly all of our remaining
national advertising sales representation agreements effective on
January 1, 2016. All other operating expenses increased as a result of
the 2015 Acquired Stations and 2014 Acquired Stations.
-- Compensation expense increased by $5.9 million, primarily as a result of
$5.5 million in additional salary expense and bonus accruals primarily
from the added compensation expenses from the 2015 Acquired Stations and
2014 Acquired Stations. These added costs were offset, in part, by a
decrease in $0.5 million in employee retirement expense. Non-cash share
based compensation expenses were $0.2 million in the third quarter of
2015 compared to $0.3 million in the third quarter of 2014.
Broadcast Operating Expenses on Combined Historical Basis.

On a Combined Historical Basis, broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $15.4 million, or 18%, to $101.0 million for the third quarter of 2015 compared to the third quarter of 2014. The increase reflects, in part, the following:


-- Network program fees increased $11.8 million consistent with the growth
of retransmission consent revenue under our network affiliation
agreements renewed in 2014, as well as the commencement in the first
quarter of 2015, of network program fees payable to CBS. National sales
commissions increased $5.0 million primarily as a result of the $6.1
million charge resulting from our decision to terminate nearly all of
our remaining national advertising sales representation agreements
effective on January 1, 2016. These increases were offset, in part, by
decreases in other programming fees, news services and promotions that
together decreased by approximately $1.0 million.
-- Compensation expense increased by approximately $0.1 million in the
third quarter of 2015 compared to the third quarter of 2014. Non-cash
share based compensation expenses were $0.2 million in the third quarter
of 2015 compared to $0.3 million in the third quarter of 2014.
Corporate and Administrative Operating Expenses on As-Reported Basis.

Corporate and administrative expenses (before depreciation, amortization and loss on disposal of assets) increased $4.8 million, or 90%, to $10.0 million in the third quarter of 2015 as compared to the third quarter of 2014. The increase reflects, in part, the following:


-- Non-compensation expense increased $3.9 million in the 2015 three-month
period primarily due to professional fees related to the acquisition of
the 2015 Acquired Stations compared to professional fees incurred in the
2014 three-month period related to acquisition of the 2014 Acquired
Stations.
-- Compensation expense increased $0.9 million primarily due to increases
in incentive compensation and relocation costs offset, in part, by
reductions in employee retirement expenses. Non-cash share based
compensation expenses were $0.8 million in the third quarter of 2015
compared to $0.7 million in the third quarter of 2014.
Results of Operations for the Nine-Months Ended September 30, 2015:

Revenue (less agency commissions) on As-Reported Basis.

The table below presents our revenue (less agency commissions) or "net revenue" by type for the nine-months ended September 30, 2015 and 2014, respectively (dollars in thousands):



Nine Months Ended September 30,
-------------------------------

2015 2014
---- ----

Percent Percent

Amount of Total Amount of Total
------ -------- ------ --------

Revenue (less agency commissions):

Local $221,118 51.7% $169,751 51.4%

National 57,605 13.5% 44,332 13.4%

Internet 20,810 4.9% 20,676 6.3%

Political 7,950 1.9% 33,437 10.1%

Retransmission consent 112,489 26.3% 53,450 16.2%

Other 7,897 1.7% 8,602 2.6%

Total $427,869 100.0% $330,248 100.0%
======== ===== ======== =====


Total revenue increased $97.6 million, or 30%, to $427.9 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. Revenue from the 2015 Acquired Stations and 2014 Acquired Stations accounted for approximately $109.9 million and $29.4 million of our total revenue for the nine months ended September 30, 2015 and 2014, respectively.

Our revenue increased primarily due to the additional revenue from the 2015 Acquired Stations and 2014 Acquired Stations and increases in retransmission consent revenue due to increased retransmission consent rates. These increases were offset in part, by decreases in political advertising revenue due to 2015 being the "off year" of the two-year election cycle.

The principal types of revenue for the nine-months ended September 30, 2015 compared to the nine-months ended September 30, 2014 were as follows:


-- Local advertising revenue increased $51.4 million, or 30%, to $221.1
million.
-- National advertising revenue increased $13.3 million, or 30%, to $57.6
million.
-- Internet advertising revenue increased $0.1 million, or 1%, to $20.8
million.
-- Political advertising revenue decreased $25.5 million, or 76%, to $8.0
million.
-- Retransmission consent revenue increased $59.0 million, or 110%, to
$112.5 million.
-- Other revenue decreased $0.7 million, or 8%, to $7.9 million.
Within our local and national advertising revenue categories, and excluding revenue from the 2015 Acquired Stations and 2014 Acquired Stations, our five largest customer categories experienced the following changes during the nine-months ended September 30, 2015 compared to the nine-months ended September 30, 2014:


-- Automotive increased 2%;
-- Medical increased 10%;
-- Restaurant increased 5%;
-- Furniture and appliances increased 11%; and
-- Communications decreased 2%.
Revenue on Combined Historical Basis.

On a Combined Historical Basis, total revenue increased $25.0 million, or 6%, to $454.0 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. On a Combined Historical Basis the principal types of revenue for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 were approximately as follows:


-- Local advertising revenue increased $12.3 million, or 6%, to $232.4
million.
-- National advertising revenue increased $2.7 million, or 4%, to $66.1
million.
-- Internet advertising revenue decreased $1.2 million, or 5%, to $21.3
million.
-- Political advertising revenue decreased $32.0 million, or 79%, to $8.5
million.
-- Retransmission consent revenue increased $48.9 million, or 72%, to
$116.9 million.
-- Other revenue decreased $5.7 million, or 39%, to $8.9 million.
Within our local and national advertising revenue categories, and including the 2015 Acquired Stations and 2014 Acquired Stations, our five largest customer categories experienced the following changes in revenue during the nine-months ended September 30, 2015 compared to the nine-months ended September 30, 2014:


-- Automotive increased 6%;
-- Medical increased 13%;
-- Restaurant increased 8%;
-- Furniture and appliances increased 15%; and
-- Communications increased 12%.
Broadcast Operating Expenses on As-Reported Basis.

Broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $72.6 million, or 36%, to $272.2 million for the nine-months ended September 30, 2015 compared to the nine-months ended September 30, 2014. The 2015 Acquired Stations and the 2014 Acquired Stations accounted for approximately $63.0 million and $15.6 million of our total broadcast expenses for the nine months ended September 30, 2015 and 2014, respectively.


-- Non-compensation expense increased $51.0 million primarily due to
network affiliation fees that increased $38.5 million reflecting
increased fees payable to networks under our affiliation agreements
renewed in 2014, as well as, the commencement in the first quarter of
2015, of network program fees payable to CBS. Other programming costs
increased $1.7 million. National sales commissions increased $5.1
million primarily as a result of the $6.1 million charge resulting from
our decision to terminate nearly all of our remaining national
advertising sales representation agreements effective on January 1,
2016.
-- Compensation expense increased $21.6 million primarily from the added
compensation expenses from the 2015 Acquired Stations and 2014 Acquired
Stations. Non-cash share based compensation expenses were $0.7 million
in the nine-months ended September 30, 2015 compared to $1.2 million in
the nine-months ended September 30, 2014.
Broadcast Operating Expenses on Combined Historical Basis.

On a Combined Historical Basis, broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $30.9 million, or 12%, to $289.4 million for the nine-months ended September 30, 2015 compared to the nine-months ended September 30, 2014. The increase reflects, in part, the following:


-- Network program fees increased $34.3 million consistent with the growth
of the related retransmission consent revenue under our network
affiliation agreements renewed in 2014, as well as the commencement in
the first quarter of 2015, of network program fees payable to CBS.
National sales commissions increased $4.1 million primarily as a result
of the $6.1 million charge resulting from our decision to terminate
nearly all of our remaining national advertising sales representation
agreements effective on January 1, 2016. These increases were partially
offset by decreases in programming fees, news services, trade expense
and other professional fees that together decreased by approximately
$4.1 million.
-- Compensation expense decreased $2.0 million, primarily as a result of a
$3.8 million non-recurring non-cash charge in 2014 incurred to implement
changes to our paid-time-off policy. Non-cash share based compensation
expenses were $0.7 million in the nine-months ended September 30, 2015,
compared to $1.2 million in the nine-months ended September 30, 2014.
Corporate and Administrative Operating Expenses on As-Reported Basis.

Corporate and administrative expenses (before depreciation, amortization and loss on disposal of assets) increased $1.7 million, or 8%, to $23.3 million in the nine-months ended September 30, 2015 compared to the nine-months ended September 30, 2014. The net increase reflects, in part, the following:


-- Non-compensation expense decreased primarily as a result of a decrease
in professional fees related to our acquisitions. In the nine-months
ended September 30, 2015, these fees totaled $4.5 million compared to
$5.7 million in the nine-months ended September 30, 2014.
-- Compensation expense increased $2.0 million primarily due to increases
in incentive compensation, relocation costs and routine increases in
salary expense. Non-cash share based compensation expenses were $2.3
million in the nine-months ended September 30, 2015 compared to $2.8
million in the nine-months ended September 30, 2014.
Detailed table of operating results:



Gray Television, Inc.

Selected Operating Data (Unaudited)

(in thousands except for net income per share data)


Three Months Ended Nine Months Ended

September 30, September 30,
------------- -------------


2015 2014 2015 2014
---- ---- ---- ----


Revenue (less agency commissions) $151,102 $131,702 $427,869 $330,248

Operating expenses before depreciation, amortization

and loss on disposal of assets, net:

Broadcast 98,921 73,218 272,213 199,604

Corporate and administrative 10,022 5,271 23,313 21,618

Depreciation 9,354 8,228 26,906 21,598

Amortization of intangible assets 3,213 3,823 8,715 5,291

Loss on disposal of assets, net 248 6 562 385

Operating expenses 121,758 90,546 331,709 248,496
------- ------ ------- -------

Operating income 29,344 41,156 96,160 81,752

Other income (expense):

Miscellaneous income, net 28 11 102 14

Interest expense (18,645) (18,619) (55,762) (49,718)

Loss from early extinguishment of debt - - - (4,897)
--- --- --- ------

Income before income tax 10,727 22,548 40,500 27,151

Income tax expense 4,118 8,608 16,186 10,343
----- ----- ------ ------

Net income $6,609 $13,940 $24,314 $16,808
====== ======= ======= =======


Basic per share information:

Net income $0.09 $0.24 $0.36 $0.29
===== ===== ===== =====

Weighted-average shares outstanding 71,638 57,863 67,215 57,857
====== ====== ====== ======


Diluted per share information:

Net income $0.09 $0.24 $0.36 $0.29
===== ===== ===== =====

Weighted-average shares outstanding 72,341 58,394 67,824 58,330
====== ====== ====== ======


Political advertising revenue (less agency commissions) $4,594 $22,029 $7,950 $33,437


Revenue related to Olympic broadcasts (less agency

commissions) $ - $ - $ - $3,778






Other Financial Data:



September 30, 2015 December 31, 2014
------------------ -----------------

(in thousands)


Cash $81,169 $30,769

Long-term debt
including
current
portion $1,235,753 $1,236,401

Borrowing
availability
under our
senior credit
facility $50,000 $50,000


Nine Months Ended September
30,

2015 2014
---- ----

(in thousands)


Net cash
provided by
operating
activities $82,718 $88,404

Net cash used
in investing
activities (199,635) (477,066)

Net cash
provided by
financing
activities 167,317 454,991
-------

Net increase in
cash $50,400 $66,329
======= =======






Guidance for the Three Months Ending December 31, 2015 (the "fourth quarter of 2015"):

We currently anticipate that our results of operations for the fourth quarter of 2015 will be within the ranges presented in the table below. This guidance does not include the anticipated results of the announced but not yet completed Schurz Acquisition and related transactions.



Low End % Change High End % Change

Guidance for From Guidance for From Actual

the Fourth Actual Fourth the Fourth Actual Fourth Fourth

Quarter of Quarter of Quarter of Quarter of Quarter of

Selected operating data: 2015 2014 2015 2014 2014
------------------------ ---- ---- ---- ---- ----

(dollars in thousands)

OPERATING REVENUE:

Revenue (less agency commissions) $162,000 (9)% $164,000 (8)% $177,886


OPERATING EXPENSES

(before depreciation, amortization and

gain on disposals of assets):

Broadcast $99,000 15 % $102,000 18 % $86,386

Corporate and administrative $9,000 19 % $10,000 32 % $7,585


OTHER SELECTED DATA:

Political advertising revenue

(less agency commissions) $5,000 (90)% $6,000 (88)% $48,538




Comments on Fourth Quarter 2015 Guidance:

Revenue on As-Reported Basis.

Based on our current forecasts for the fourth quarter of 2015, we anticipate the following changes from the three-months ended December 31, 2014 (the "fourth quarter of 2014") as outlined below. Our total revenue estimates for the fourth quarter of 2015 include approximately $14.1 million of revenue estimated to be contributed by the 2015 Acquired Stations.


-- We believe our fourth quarter of 2015 local advertising revenue,
excluding political advertising revenue, will increase from the fourth
quarter of 2014 by approximately 10% to 12%.
-- We believe our fourth quarter of 2015 national advertising revenue,
excluding political advertising revenue, will increase from the fourth
quarter of 2014 by approximately 13% to 15%.
-- Consistent with the "off year" of the two-year election cycle, we
believe our fourth quarter of 2015 political advertising revenue will
decrease from the fourth quarter of 2014 by approximately 85%.
-- We believe our fourth quarter of 2015 retransmission consent revenue
will increase from the fourth quarter of 2014 by approximately 83% to
$39.1 million.
Broadcast Operating Expenses (before depreciation, amortization and gain on disposal of assets) on As-Reported Basis.

For the fourth quarter of 2015, we anticipate our broadcast operating expenses will increase from the fourth quarter of 2014, reflecting anticipated increases in payroll and related employee benefits. We anticipate that our broadcast operating expenses will also reflect increases in network fees of approximately $12.3 million. Operating expenses to be incurred collectively by the 2015 Acquired Stations in the fourth quarter of 2015 are expected to be approximately $6.1 million. For the fourth quarter of 2014, the 2014 Acquired Stations reported $22.4 million of broadcast operating expense.

Corporate and Administrative Operating Expenses (before depreciation, amortization and gain on disposal of assets) on As-Reported Basis.

For the fourth quarter of 2015, we anticipate our corporate and administrative operating expense will increase to approximately $9.5 million, reflecting an anticipated increase of approximately $3.5 million of acquisition related expenses from the fourth quarter of 2014. In addition, assuming the Schurz Acquisition is closed in the fourth quarter of 2015, we currently estimate that we would incur an additional $5.0 million to $7.0 million of acquisition related fees and expenses.

Fourth Quarter of 2015 on Combined Historical Basis.

Based on our current forecasts for the fourth quarter of 2015, we anticipate the following changes from the Combined Historical Basis for the fourth quarter of 2014 as outlined below. For the purposes hereof, our Combined Historical Basis for the fourth quarter of 2014 has been adjusted to give effect to both the 2015 Acquired Stations and the 2014 Acquired Stations.

Revenue on Combined Historical Basis:


-- We believe our fourth quarter of 2015 total revenue will decrease by
approximately 15% to 17%, to approximately $162.0 million to $164.0
million, as a result of the "off year" of the two-year election cycle.
-- We believe our fourth quarter of 2015 local advertising revenue,
excluding political advertising revenue, will increase by approximately
3% to 5%, to approximately $85.0 million.
-- We believe our fourth quarter of 2015 national advertising revenue,
excluding political advertising revenue, will decrease by approximately
2% to 3%, to approximately $24.0 million.
-- Consistent with the "off year" of the two year election cycle, we
believe our fourth quarter of 2015 political advertising revenue will
decrease from the fourth quarter of 2014 by approximately 86%.
-- We believe our fourth quarter of 2015 retransmission consent revenue
will increase by approximately 72%, or $16.1 million, to approximately
$39.1 million.
Broadcast Operating Expenses (before depreciation, amortization and gain or loss on disposal of assets) on Combined Historical Basis:

Our total broadcast operating expenses for the fourth quarter of 2015 are anticipated to increase from the fourth quarter of 2014 by approximately $5.5 million to $99.5 million. This increase primarily reflects an expected increase of $11.8 million in network affiliation expense to approximately $18.5 million for the fourth quarter of 2015 offset, in part, by decreases in national sales commissions and other professional fees. Consistent with our strategy, and the realization of our operating synergies, we believe that our Combined Historical Basis broadcast compensation costs will be unchanged in the fourth quarter of 2015, compared to the fourth quarter of 2014.

Non-GAAP Terms

From time to time, Gray supplements its financial results prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") by disclosing the non-GAAP financial measures Broadcast Cash Flow, Broadcast Cash Flow Less Cash Corporate Expenses, operating cash flow as defined in Gray's 2014 senior credit facility ("Operating Cash Flow") and Free Cash Flow. These non-GAAP amounts are used by us to approximate the amount used to calculate a key financial performance covenant contained in our debt agreements. These non-GAAP amounts may also be provided on an As-Reported Basis as well as a Combined Historical Basis.

Broadcast Cash Flow is defined as net income plus loss on early extinguishment of debt, corporate and administrative expenses, broadcast non-cash stock based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense, less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast obligations and network compensation revenue.

Broadcast Cash Flow Less Cash Corporate Expenses is defined as net income plus loss from early extinguishment of debt, non-cash stock based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast obligations and network compensation revenue.

Operating Cash Flow is defined in Gray's 2014 senior credit facility as defined as net income plus loss from early extinguishment of debt, non-cash stock based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast obligations, network compensation revenue, plus pension expense but less cash contributions to pension plans.

Free Cash Flow is defined as net income plus loss on early extinguishment of debt, non-cash stock based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, amortization of deferred financing costs, any income tax expense, non-cash 401(k) expense, pension expense less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast obligations, network compensation revenue, contributions to pension plans, amortization of original issue discount on our debt, capital expenditures (net of any insurance proceeds) and the payment of income taxes (net of any refunds received).

These non-GAAP terms are not defined in GAAP and our definitions may differ from, and therefore not be comparable to, similarly titled measures used by other companies, thereby limiting their usefulness. Such terms are used by management 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 and cash flows reported in accordance with GAAP.

Reconciliation on As-Reported Basis - Quarter:

Reconciliation of net income to the non-GAAP terms, in thousands:



Three Months Ended

September 30,
-------------

2015 2014 2013
---- ---- ----

Net income $6,609 $13,940 $7,073

Adjustments to reconcile from net income to

Broadcast Cash Flow Less Cash Corporate Expenses:

Depreciation 9,354 8,228 6,024

Amortization of intangible assets 3,213 3,823 9

Non-cash stock based compensation 1,009 981 255

Loss on disposal of assets, net 248 6 49

Miscellaneous income, net (28) (11) -

Interest expense 18,645 18,619 12,656

Income tax expense 4,118 8,608 4,491

Amortization of program broadcast rights 3,677 3,309 2,829

Common stock contributed to 401(k) plan

excluding corporate 401(k) contributions 6 6 7

Network compensation revenue recognized - (122) (156)

Payments for program broadcast rights (3,417) (3,502) (2,849)

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock based compensation 9,233 4,544 4,215
----- ----- -----

Broadcast Cash Flow 52,667 58,429 34,603

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock based compensation (9,233) (4,544) (4,215)
------ ------ ------

Broadcast Cash Flow Less Cash Corporate Expenses 43,434 53,885 30,388

Pension expense - 1,518 2,156

Contributions to pension plans (2,483) (1,996) (1,082)

Interest expense (18,645) (18,619) (12,656)

Amortization of deferred financing costs 799 764 412

Amortization of original issue (premium) discount

on 7 1/2% senior notes due 2020 (215) (215) 69

Purchase of property and equipment (6,854) (9,996) (5,953)

Income taxes paid, net of refunds (427) (32) (15)

Free Cash Flow $15,609 $25,309 $13,319
======= ======= =======




Reconciliation on As-Reported Basis - Year to Date:

Reconciliation of net income to the non-GAAP terms, in thousands:



Nine Months Ended

September 30,
-------------

2015 2014 2013
---- ---- ----

Net income $24,314 $16,808 $13,087

Adjustments to reconcile from net income to

Broadcast Cash Flow Less Cash Corporate Expenses:

Depreciation 26,906 21,598 17,762

Amortization of intangible assets 8,715 5,291 40

Non-cash stock based compensation 3,011 4,032 1,719

Loss (gain) on disposal of assets, net 562 385 (56)

Miscellaneous income, net (102) (14) -

Interest expense 55,762 49,718 37,790

Loss from early extinguishment of debt - 4,897 -

Income tax expense 16,186 10,343 9,715

Amortization of program broadcast rights 10,837 9,227 8,492

Common stock contributed to 401(k) plan

excluding corporate 401(k) contributions 19 18 21

Network compensation revenue recognized - (343) (470)

Payments for program broadcast rights (10,558) (11,194) (8,549)

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock based compensation 20,983 18,812 11,868

Broadcast Cash Flow $156,635 $129,578 $91,419

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock based compensation (20,983) (18,812) (11,868)

Broadcast Cash Flow Less Cash Corporate Expenses $135,652 $110,766 $79,551

Pension expense 4,190 4,611 6,464

Contributions to pension plans (3,916) (4,713) (3,686)

Interest expense (55,762) (49,718) (37,790)

Amortization of deferred financing costs 2,396 2,158 1,235

Amortization of original issue (premium) discount

on 7 1/2% senior notes due 2020 (647) (647) 206

Purchase of property and equipment (15,250) (20,452) (18,441)

Income taxes paid, net of refunds (1,675) (361) (518)

Free Cash Flow $64,988 $41,644 $27,021
======= ======= =======




Reconciliation on Combined Historical Basis - Quarter:

Reconciliation of net income to the non-GAAP terms, in thousands:



Three Months Ended

September 30,
-------------

2015 2014 2013
---- ---- ----


Net income $8,276 $17,033 $10,804

Adjustments to reconcile from net income to Broadcast Cash

Flow Less Cash Corporate Expenses:

Depreciation 9,611 9,492 8,723

Amortization of intangible assets 3,213 3,940 430

Non-cash stock-based compensation 1,009 981 255

Loss on disposal of assets, net 248 6 49

Miscellaneous expense (income), net (32) (11) -

Interest expense 18,645 18,914 18,877

Income tax expense 4,118 10,005 5,054

Amortization of program broadcast rights 3,677 3,309 2,829

Common stock contributed to 401(k) plan

excluding corporate 401(k) contributions 6 6 7

Network compensation revenue recognized - (122) (156)

Payments for program broadcast rights (3,417) (3,502) (2,849)

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock-based compensation 9,233 4,544 4,215

Other 4,326 1,073 673
-----

Broadcast Cash Flow 58,913 65,668 48,911

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock-based compensation (9,233) (4,544) (4,215)
------ ------ ------

Broadcast Cash Flow Less Cash Corporate Expenses 49,680 61,124 44,696

Pension expense - 1,518 2,156

Contributions to pension plans (2,483) (1,996) (1,082)

Other 761 2,988 3,731
--- ----- -----

Operating Cash Flow as defined in Senior Credit Agreement 47,958 63,634 49,501

Interest expense (18,645) (18,914) (18,877)

Amortization of deferred financing costs 799 764 412

Amortization of net original issue discount (premium)

on 7 1/2% senior notes due 2020 (215) (215) 69

Purchase of property and equipment (6,854) (9,996) (6,703)

Income taxes paid, net of refunds (427) (32) (15)
--- ---

Free Cash Flow $22,616 $35,241 $24,387
======= ======= =======




Reconciliation on Combined Historical Basis - Year to Date:

Reconciliation of net income to the non-GAAP terms, in thousands:



Nine Months Ended

September 30,
-------------

2015 2014 2013
---- ---- ----


Net income $31,297 $37,667 $23,062

Adjustments to reconcile from net income to Broadcast Cash

Flow Less Cash Corporate Expenses:

Depreciation 28,510 27,585 26,106

Amortization of intangible assets 8,804 6,000 1,297

Non-cash stock-based compensation 3,011 4,032 1,719

Loss (gain) on disposal of assets, net 562 385 (56)

Miscellaneous expense (income), net (37) 3,122 4,378

Interest expense 55,946 55,711 56,013

Loss from early extinguishment of debt - 4,897 -

Income tax expense 16,186 13,464 11,390

Amortization of program broadcast rights 10,837 9,227 8,492

Common stock contributed to 401(k) plan

excluding corporate 401(k) contributions 19 18 21

Network compensation revenue recognized - (343) (470)

Payments for program broadcast rights (10,558) (11,194) (8,549)

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock-based compensation 20,983 18,812 11,868

Other 4,406 6,499 (1,166)
----- ----- ------

Broadcast Cash Flow 169,966 175,882 134,105

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock-based compensation (20,983) (18,812) (11,868)
------- ------- -------

Broadcast Cash Flow Less Cash Corporate Expenses 148,983 157,070 122,237

Pension expense 4,190 4,611 6,464

Contributions to pension plans (3,916) (4,713) (3,686)

Other 5,131 5,694 9,496
----- ----- -----

Operating Cash Flow as defined in Senior Credit Agreement 154,388 162,662 134,511

Interest expense (55,946) (55,711) (56,013)

Amortization of deferred financing costs 2,396 2,158 1,235

Amortization of net original issue discount (premium)

on 7 1/2% senior notes due 2020 (647) (647) 206

Purchase of property and equipment (15,250) (20,452) (20,691)

Income taxes paid, net of refunds (1,675) (361) (518)
---- ----

Free Cash Flow $83,266 $87,649 $58,730
======= ======= =======




The Company

We are a television broadcast company headquartered in Atlanta, Georgia, that owns and operates television stations and leading digital assets in markets throughout the United States. Upon the consummation of all announced transactions (including announced divestitures), we will own and/or operate television stations in 50 television markets that broadcast over 175 program streams including 35 channels affiliated with the CBS Network, 26 channels affiliated with the NBC Network, 19 channels affiliated with the ABC Network and 14 channels affiliated with the FOX Network. We will then own the number-one ranked television station in 40 of those 50 markets and the number-one or number-two ranked television station operations in 49 of those 50 markets. At that time, our stations will reach approximately 9.4 percent of total United States television households.

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

This press release contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and the federal securities laws. These "forward-looking statements" are not statements of historical facts, and may include, among other things, statements regarding our current expectations and beliefs of operating results for the fourth quarter of 2015 or other periods, the impact of recently completed transactions, future expenses, the completion of pending transactions and other future events. Actual results are subject to a number of risks and uncertainties and may differ materially from the current expectations and beliefs discussed in this press release. All information set forth in this release is as of November 3, 2015. We do not intend, and undertake no duty, to update this information to reflect future events or circumstances. Information about certain potential factors that could affect our business and financial results and cause actual results to differ materially from those expressed or implied in any 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, 2014 and may be contained in reports subsequently filed with the U.S. Securities and Exchange Commission (the "SEC") and available at the SEC's website at www.sec.gov.

Conference Call Information

Gray Television, Inc. will host a conference call to discuss its third quarter operating results on November 3, 2015. The call will begin at 11:00 AM Eastern Time. The live dial-in number is 1 (888) 572-7033 and the confirmation code is 1413155. 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: 1413155 until December 3, 2015.

Web site: www.gray.tv



SOURCE Gray Television, Inc.

Gray Television, Inc.

CONTACT: For information contact: Hilton Howell, President and Chief Executive Officer, (404) 266-5512; Kevin Latek, Senior Vice President, Business Affairs, (404) 504-9828; Jim Ryan, Senior Vice President and Chief Financial Officer, (404) 266-8333

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


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